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... 

A COMMONFUND STUDY CONFIRMS WHAT WE SUSPECTED

DATELINE: June 25, 2009, Chicago

Today, the Commonfund released a benchmark study that provides statistics on foundation investment performance.  Two hundred Ninety (290) private and community foundations responded.  The average return on investments for the 2008 calendar year was...

INDEXING INVESTMENT PORTFOLIOS IS A COMING TREND: SOMETIMES SIMPLER IS BETTER

DATELINE: June 23, 2009, Chicago

College, university, and other endowments certainly have taken a hit during the last year.  We all know the numbers—25% to 40% declines in value.  We all know the consequences—insufficient cash flows, inability to access principal due to lock-ups, possible UBIT as a result of borrowings, and shortfalls in program funding.

But what should really be bothering investment committees is the fact that...

A FURTHER SIGN THAT THE PERCENTAGE OF THE ENDOWMENT DEVOTED TO ALTERNATIVE INVESTMENTS MAY HAVE BEEN TOO HIGH

DATELINE:  May 15, 2009, Chicago

Among the interesting developments highlighted at the ABA Tax Section meeting last week was the intersection of alternative investments, the UBIT rules, and college liquidity problems.  Over the last decade, many colleges and universities have significantly increased the percentage of their endowments devoted to alternative investments, sometimes referred to as absolute return investments—the two are not necessarily synonymous, but there is probably some overlap.  One survey of over 700 colleges and universities reported that the allocation had gone from roughly...

NONPROFITS WITH FOREIGN BANK ACCOUNTS SHOULD FILE FBAR IF THEY DON’T WANT TO BE FUBAR

DATELINE:  May 10, 2009, Chicago

We just got back from the ABA Tax Section meeting in Washington, D.C. where we spent many hours ensconced deep in the bowels of the Hyatt Regency.  No air, no light.  What a way to spend two days.

We did hear a number of interesting presentations.  Most notably, three of the presentations covered something called FBAR.  Be forewarned, tax-exempt entities should be worried about FBAR, and sooner than latter.  The critical filing deadline, which is independent of the filing deadline for the Form 990, is...

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...

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...

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...

IT WAS FUN WHILE IT LASTED: UNIVERSITY INVESTMENT POLICIES ARE GOING TO CHANGE

DATELINE:  March 1, 2009, Chicago

 

The Pennsylvania Attorney General should open an immediate investigation into the investment practices of the University of Pittsburgh and Carnegie Mellon University.   The Pittsburgh Post Gazettereported last week that combined, the two institutions had invested a $114 million through Westridge Capital Management. Jonathan D. Silver, Pitt, CMU Money Managers Arrested in Fraud: FBI Says They Misappropriated $500 Million for Lavish Lifestyles.  The proprietors of that investment firm, Stephen Walsh and Peter Greenwood were charged in Manhattan federal court with securities fraud, wire fraud and conspiracy.  The two were sued in civil court by the SEC  and the Commodity Futures Trading Commission, on allegations that the two had misappropriated more than $535 million and fraudulently solicited $1.3 billion from investors since 1996.  The University of Pittsburgh and Carnegie Mellon have brought a civil suit against the Westridge, Walsh, and Greenwood.

 

So what was the alleged scheme?  Apparently it was another Ponzi scheme.  It seems the two just...

BRANDEIS UNIVERSITY MAKES BIG MISTAKE BY ANNOUNCING SALE OF ART COLLECTION: AG SHOULD INVESTIGATE INVESTMENT POLICIES

DATELINE: January 28, 2009, Chicago

We read a brief story yesterday about the decision of Brandeis University to sell its large collection of contemporary art.  Now we have finished reading about the details of the proposed sale in the New York Times and the Boston Globe.  Randy Kennedy and Carol Vogel, Outcry Over Plan to Sell Museum’s Holding (Jan. 27, 2008); and  Geoff Edgers, Ailing Brandeis Will Shut Museum, Sell Treasured Art (Jan. 27, 2009).

The Massachusetts Attorney General already...