Charity Governance

AS IS TRUE WITH MANY THINGS IN LIFE, SIZE DOESN’T MATTER: NATIONAL COMMITTEE FOR RESPONSIVE PHILANTHROPY'S STUDY DRAWS THE WRONG CONCLUSION

DATELINE:  July 25, 2009, Chicago

The National Committee for Responsive Philanthropy (NCRP) released a study claiming losses by charities in the Madoff Ponzi scheme are explained by small and  homogeneous boards.  When we see anyone talking about diversity and foundation boards these days, we see a hidden agenda.  So we want to set the record straight:  There is... 

STALIN'S COMMITTEE TO SAVE DEMOCRACY: THE INTERIM REPORT ON THE FUTURE OF THE ROSE MUSEUM COMMITTEE

DATELINE: May 5, 2009, Chicago

As reported earlier this week, we attended a panel discussion on Saturday featuring Michael Rush, the soon-to-be ex-director of Brandeis’s Rose Museum.  Rush’s contract expires next month and there are no plans to renew it, according to Rush and others.  David Itzkoff, Criticism of Interim Report on Brandeis Art Museum, N.Y. Times (May 4, 2009).

The panel discussion at Chicago’s Artropolis focused on the problems of the Rose and other museums in difficult economic times.  You may recall that on January 26 of this year Brandeis’s board of trustees announced their decision to close the Rose Museum and sell some 6,000 works of art with the hope of bringing in $350 million in needed cash.  The trustees' secretive deliberations resulted in a public uproar, forcing Brandeis to reverse course, at least in its public statements.  Plans for the sale have been put on hold and there are claims that the museum will remain open or be repositioned.  

Brandeis constituted a committee (the "Committee") to explore the future of the Rose, aptly named the Future of the Rose Committee.  On April 30, 2009, the Committee...

TALKING PAST THOSE WHO WERE ABSENT: A PANEL DISCUSSION ABOUT BRANDEIS’S ROSE MUSEUM

DATELINE: May 3, 2009, Chicago

Yesterday we attended Artropolis, the annual international art show, now held at Chicago’s Merchandise Mart.  As in past years, we came to see the art, but this year we were intrigued by one of the panel discussions.  Entitled Museums on the Line: Cutbacks, Closures and Opportunities, the panel included (i) Michael Rush, director of the Rose Museum of Art at Brandeis University; (ii) Anthony Hirschel, director of the Smart Museum at the University of Chicago; (iii) Mary Lucier, an American installation and video artist whose works have been exhibited at the San Francisco Museum of Modern Art (1995), the Los Angeles Museum of Contemporary Art (1988), Whitney Museum (1986), and many others.  Heather Pesanti, a curator at the Buffalo’s Albert-Knox Art Gallery, was an unscheduled but welcome addition to the panel.

The discussion was both fascinating and enlightening, but the panel’s composition was...

YESHIVA UNIVERSITY GETS RELIGION

DATELINE: April 14, 2009, Chicago

On January 1, 2009, Janet Frankston Lorin of Bloomberg reported that Ira M. Millstein, the corporate governance guru from Weil, Gotshal, advised Yeshiva University with respect to conflicts of interest and investing with members of the university’s board of trustees.  Millstein Letter Helped Keep Yeshiva Money on Path to Madoff.  Bloombergclaimed to have seen a letter from Millstein in which he said that Yeshiva had “followed procedures adequate to prevent either the appearance or the reality of a conflict of interest.”  According to Bloomberg, this cleared the way for the fateful investment in J. Ezra Merkin’s fund that invested its funds with Bernie Madoff.  Merkin served on Yeshiva’s investment committee.  In his letter, Millstein reportedly said, “There is no reason why the board or its committees should institute a blanket rule prohibiting members (or major donors) from doing business with Yeshiva.”  We previously pointed out that there are plenty of reasons for a blanket prohibition.

Another Wall Street corporate law firm, Sullivan & Cromwell, have now given their own verdict on Millstein’s advice.  As is typical, Sullivan & Cromwell was retained following the revelation that Yeshiva University lost somewhere around $110 million in the Madoff scandal—cash-out-of-pocket was somewhere around $14 million.  There charge was to develop governance policies that met the gold standard.  Sometime around the end of March, the Yeshiva board of trustees adopted a new conflicts-of-interest policy which was developed with the assistance of Sullivan & Cromwell.  Noach Lerman, Board of Trustees Adopts New Rules to Limit Conflict of Interests, Yeshiva Commentator (April 1, 2009).  The policy...

THE PENNSYLVANIA ATTORNEY GENERAL TAKES ACTION: CITIZENS ALLIANCE FOR BETTER NEIGHBORHOODS

DATELINE: April 9, 2009, Chicago

Last month, a federal jury convicted former Pennsylvania State Senator Vincent J. Fumo on 137 felony counts, sending him packing for what is likely to be a lengthy prison stay.  A number of the charges against Fumo centered on his abuse of Citizens Alliance for Better Neighborhoods, a Philadelphia charity that received $17 million from Peco Energy, a large utility company. Fumo extracted the payment in exchange for favorable disposition of a regulatory matter. 

Now that the multi-year investigation and trial have concluded, Pennsylvania Attorney General Tom Corbett has stepped into the...

FINALLY

DATELINE: April 5, 2009, Chicago

Over the last eight months we have watched closely the developments that keep rocking our financial system and Corporate America.  We have been fascinated by the one-sided debate over executive compensation.  We were particularly impressed by the letter in the New York Times from Jake DeSantis, an AIG executive vice-president, who tendered his resignation and committed to give his bonus to charity.  It wasn’t the gesture toward charity that impressed us.  It was the fact that...

IS IT TIME TO REREAD THE DECISION IN STERN V. LUCY WEBB HAYES?

DATELINE: April 1, 2009, Chicago

We can’t wait to attend a game at the new Yankee Stadium.  Our nephew owns an apartment just three blocks from the stadium, meaning that we can go a game together, and then spend the night in his guestroom.  As part of an agreement that paved the way for the new stadium, the Yankees agreed to contribute $800,000 per year in cash and $450,000 of in-kind items like game tickets to a charity that would benefit members of the community.  

According to Fernanda Santos of the N.Y. Times, a lawyer hired by the Yankees has filed a lawsuit alleging what amounts to breach of fiduciary duty against the chairman of New Yankee Stadium Community Benefits Fund, the charity established by the Yankees.  Lawyer Who Has Hired by Yankees Sues the Team's Bronx Community Charity (Mar. 31, 2009). If the allegations are true, this looks to us like...

CHICAGO ALDERMAN EDWARD BURKE SHOULD GET REAL: HE’S IN A TIZZY OVER THE ART INSTITUTE’S NEW ADMISSION FEE

DATELINE: March 18, 2009, Chicago

Chicago Alderman Edward M. Burke, the head of the Chicago City Council’s Finance Committee, is in a populist tizzy.  Fran Spielman, If Museum Prices Go Up, Water Should Be Shut Off, Chicago Sun-Times (Mar. 18, 2009).  The Art Institute of Chicago is about to open its new wing—a major, major expansion that will have people from around the world coming to Chicago to see the architecture (Renzo Piano) and the collection.  As we have come to expect, when a museum opens a major, major new wing (264,000 square feet at a cost of $280 million), admission prices go up.  The Art Institute announced a week or so ago that the price would jump from the current $12 base rate...

WILL SENATOR GRASSLEY HAND OUT TANTOS AT FUTURE SENATE FINANCE COMMITTEE HEARINGS? SEPPUKU AIN’T NO INTERMEDIATE SANCTION

No sex, no drugs, no wine, no women
No fun, no sin, no you, no wonder it's dark
Everyone around me is a total stranger
Everyone avoids me like a cyclone ranger
That's why I'm turning Japanese
I think I'm turning Japanese
I really think so
Turning Japanese
I think I'm turning Japanese
I really think so

    The Vapors, Turning Japanese

DATELINE: March 16, 2009, Chicago

Well Senator Charles Grassley is upset about the bonuses to AIG executives, as are many other people.  Senator Grassley, however, has recommended an extreme sanction, telling a radio station in Cedar Rapids, Iowa:

But I would suggest the first thing that would make me feel a little bit better toward them if they'd follow the Japanese example and come before the American people and take that deep bow and say, I'm sorry, and then either do one of two things: resign or go commit suicide.

And in the case of the Japanese, they usually commit suicide before they make any apology.

There is one kink in Senator Grassley’s proposal:  It’s hard to apology after you're dead.

We are wondering whether Senator Grassley, the charity watchdog who is always holding hearings and conducting investigations, might require the executives and directors of charities under his investigation to submit to the same sanction.  With the subpoena comes a complimentary tanto, the knife used by the Japanese samurai warriors to disembowel themselves.  But the Seppuku ritual(in America, Hara-kiri) requires more.  After the charity executive or board member cuts his abdomen, a kaishaku must finish the ritual by nearly decapitating the executive or director.  It is important to leave a small thin piece of skin in place so the head is still attached to the body.  In most cases, a Grassley staffer could serve as the kaishaku, but for particularly egregious behavior, Senator Grassley could don the ritual attire and perform the partial decapitation. 

The question: Where should the ceremony be performed?  The Senate Finance Committee’s hearing room might be nice, but our preference would be for the new Capitol Visitor Center.

Senator Grassley should introduce legislation replacing the intermediate sanctions with a mandate for Seppuku.  The sanction should be named the Ultimate Sanction.  The IRS could send the deficiency notice out in a black envelope.  Think of the dollar savings.  No expensive compensation studies.  No expert witnesses.  No lawyers.  No need to bother the courts.  All that would be needed is a couple of janitors and a bucket of bleach. 

We should note that a staffer subsequently told the Washington Post that Senator Grassley really didn't mean that the AIG executives should kill themselves.  Populism run amok.

THOU SHALL NOT INVEST AN ENDOWMENT’S ASSETS BASED ON LOCKER ROOM TALK: SENATOR GRASSLEY SPEAKS

DATELINE: March 12, 2009, Chicago

On Tuesday, Senator Charles Grassley, ranking member of the Senate Finance Committee, spoke at some sort of conference or event sponsored by a Washington, D.C. law firm.  His remarks are up on his Web site and they largely cover ground that Senator Grassley has sown before.  There, however, is...