Charity Governance

DIRECTORS: YOU HAVE A DUTY OF CARE, BUT TO WHOM?

DATELINE: February 2, 2010, Chicago

We read with great interest Stephanie Rice’s article, City College Foundation Seeks Control of Assets, in the January 25, 2010 edition of the San Francisco Chronicle.  The article begins by referring to a criminal case against three former...

CHARITIES MUST WORK WITH A MAJOR DONOR WHEN THE DONOR PROPOSES A LARGE PLEDGE WITH CONDITIONS

DATELINE:  Washington, D.C., January 25, 2010

Of all the articles we have read about philanthropy during the first few weeks of the New Year, the article that has most caught our attention appeared in the Detroit Free Press.  Pistons Owner’s Estate Sued for Donation (January 20, 2010), which was penned by L.L. Brasier and brought to our attention by the Chronicle of Philanthropy.  The article focuses on an estate’s refusal to...

MISSOURI TAKES UPMIFA FOR A TEST DRIVE: DENIES STANDING TO A DONOR

Dateline: November 11, 2009, Chicago

Yesterday, the Missouri Court of Appeals (Western District, Division III) affirmed a trial court’s dismissal of lawsuit filed by a donor against a charity for lack of standing.  Hardt v. Vitae Foundation, WD 70525 (Nov. 10, 2009).  The case was properly decided.   It is worth noting because it required the court to interpret the Uniform Prudent Management of Institutional Funds Act (UPMIFA), which has swept the country almost as fast as...

NEW JERSEY ATTORNEY GENERAL BRINGS LAWSUIT IN WHAT COULD TURN OUT TO BE THE NONPROFIT CASE OF THE YEAR—PART I

DATELINE: September 29, 2009, Chicago

A little under two weeks ago, New Jersey Attorney General Anne Milgram filed sued against the trustees of the Stevens Institute of Technology, Harold J. Raveche, Lawrence Babbio, and unnamed John and Jane Does in what, if the allegations prove true, could prove to be the story of the year in the nonprofit world.  The 90-page complaint is sweeping in its allegations.  Raveche is the CEO and Babbio is the chairman of the board and a member of the executive committee.  While there have been incidents involving excess compensation, violations of the terms of restricted gifts, deception, failed investment management, and breach of the duty of care, we can't...

ANOTHER TERM THAT SHOULD GO IN PLEDGE AGREEMENTS: MORE LESSONS FROM BRANDEIS UNIVERSITY AND THE ROSE MUSEUM

DATELINE: August 5, 2009, Chicago

The ongoing controversy surrounding Brandeis University’s decision to close the Rose Art Museum continues to yield interesting tidbits.  On July 27. 2009,  Meryl Rose, Jonathan O. Lee, and Lois Foster filed lawsuit against Brandeis University in Supreme Judicial Court for Suffolk County.  The suit asks for somewhat open-ended relief.  Essentially, the court is asked to either...

EVERY DONOR SHOULD READ THE TENNESSEE APPEALS COURT DECISION IN GEORGIA O’KEEFE FOUNDATION v. FISK

DATELINE: July 27, 2009, Chicago

While we were out of the country the dispute between the Georgia O’Keefe Foundation and Fisk University over the sale of two paintings from the Fisk University collection reared its ugly head again.  This one just won’t go away, which is why our headline suggests that every donor read the Tennessee Appeals Court opinion before donating property or money to an institution on a restricted or conditional basis.  Neither the lower court nor the appeals court do a very good job distinguishing between a conditional and a restricted gift.

Recall that Fisk University is experiencing financial difficulties, sparking the attempted sale of the two paintings.  The lawsuit was commenced in 2005.  It is now 2009, meaning that for four years the litigation has been producing fees and work for lawyers, but not a dime of financial relief for Fisk University.  Most people would not want to wait more than four minutes for a paramedic to show up to administer CPR, let alone four years, but that is the predicament that Fisk University has faced.

The appeals court changed the landscape significantly with its July 14^th, 2009 ruling.  It ...

WHO IS REALLY RUNNING THE NEW YORK CITY OPERA?

DATELINE: June 21, 2009, Chicago

Robin Pogrebin of the New York Times did a bang-up job this past week when she reported on the New York City Opera’s perilous financial condition.  City Opera Tries to Hold Off the Ultimate Finale (June 17, 2009).  Her in-depth article deserves to be read by everyone who is interested in nonprofit governance.  

Quite the Mess.  The New York City Opera is in a financial mess. Pogrebin reports that the company’s endowment has dropped from $57 million in 2003 to...

CAN’T EVEN PREDICT THE FUTURE FIVE YEARS OUT: SALVATION ARMY SHOULD HAVE GONE TO COURT

DATELINE: June 15, 2009, Chicago

Over the years, we have examined a number of restricted gifts.  While we always acknowledge the right of donors to make the gifts, we also have always questioned whether such gifts are wise.  Donors are lousy at predicting the future, as we have seen time and again.  Stephanie Strom offers up Exhibit A in Plan for Dozens of Salvation Army Centers Falters (June 14, 2009).

Joan Kroc, the widow of Ray, the founder of McDonald’s, left $1.8 billion to the Salvation Army at her death in 2003.  The Salvation was instructed to go on a spending and building spree.  Kroc required the Salvation Army to build...

HOW DELICIOUS: A LAWSUIT AGAINST THE RONALD REAGAN PRESIDENTIAL FOUNDATION OVER DONOR INTENT

DATELINE: May 4, 2009, Chicago

We try not to side with conservatives or liberals in this blog.  We just call them as we see them.  We, however, have been annoyed by the conservative movement’s attempt to turn donor intent into a left-right issue.   We suspect that the conservatives have adopted that position because they believe most colleges and universities have a decidedly liberal bent.  The result has been repeated assertions that colleges and universities knowingly violate donor intent, with the implication being that they do so to pursue their liberal agendas.  At least that is the subtext of much of what we have read.

In our view, the issue has always been about the straightjacket that donors put nonprofits in when they try to tell them how to run the institution and then die.  As time passes, the institution is faced with legal restrictions that by any objective measure no longer make sense because circumstances have changed in ways that donors never foresaw.  We don’t have a solution to the problem, but we recognize it as an inevitable problem that cuts across the political and philosophical spectrum.  That is why we find the lawsuit filed by Richard Sills in the New York State lower court on November 25, 2008 both...

BRANDEIS UNIVERSITY IS ON THE RIGHT SIDE OF DISPUTE WITH DONOR’S DESCENDANT

DATELINE: May 12, 2009, Chicago

One thing is for sure, Brandies general counsel Judith R. Sizer is certainly earning her salary this year.  Sumner Kalman, the great nephew of Julius Kalman, has filed suit in Suffolk County probate court in Boston claiming that Brandeis is not honoring the terms of a gift made by Julius Kalman circa 1956.  John Hechinger, Brandeis Plan to Raze Building Sparks Donor Suit, Wall Street Journal (May 13, 2009). At the time, Brandeis built a science building and named it after Mr. Kalman, who bequeathed the funds for the building.

As happens with the passage of time, the building...