A lot of people won't give panhandlers money if they think they will spend it on booze. But they will hand over their pocket change if the recipient promises to spend it on a hot meal. The panhandlers know this. So do charity fundraisers, who instinctively agree to spend contribution money on the things donors say they want. But what happens if, like the panhandler who buys a beer instead of a meal with your dollar, a local food bank spends your dollar on training instead of feeding a hungry person?
In both cases your "donor intent" was thwarted. You gave money for one reason, and the recipient used it for another. Can you sue? Clearly, you wouldn't sue a homeless person for buying a beer, but increasingly donors are using the courts to force the food bank to feed the hungry.
Such donor-intent lawsuits are a problem for non-profits because each lawsuit always gets lots of attention in a "man bites dog" sort of way, as in "Why is the do-gooder charity being sued?" And lawmakers tend to listen to donors' complaints because there are more donors than charities. The big question now is not whether charities will have to respect donor intent, but rather whether courts or lawmakers take the lead in forcing them to do so.
The courts seem to have a leg up. The most significant pending lawsuit involves Princeton University, which donors accuse of misusing more than $100 million from a special fund established in 1961 to prepare grad students for leadership positions in the federal government. The heirs of the original donor allege that Princeton is spending the money on unrelated projects. They claim that Princeton not only acted in "flagrant disregard of donor intent," but also that it tried to "fraudulently conceal" its wrongdoing when called to account for how it was spending the money.
Meanwhile, outraged listeners of Detroit's public radio station, WDET, have filed a class action lawsuit charging the station with fraud, misrepresentation and breach of implied contract because it solicited donations to support weekday music programming after it had decided to cancel all such programming in favor of news and talk programs from NPR.
The listeners want their money back unless WDET restores the music. The named plaintiffs donated from as little as $60 to as much as $1,200 to WDET, but the basis of their claim is the same as that behind the multi-million dollar Princeton University suit.
Although the law surrounding donor-intent is still evolving, public sentiment seems to be strongly in favor of the donors, even to the point of holding charity executives personally liable--and even criminally liable--for ignoring donors' wishes.
A Zogby International poll released earlier this year by the plaintiffs in the Princeton litigation found a near-unanimous 97 percent of the respondents would definitely or probably stop giving to charities that accept donations for one thing, but use them for another. Seventy-two percent thought the managers of such charities "should be held legally or criminally liable for acting in a fraudulent manner."
These numbers help explain why the Red Cross met such a barrage of criticism when it was found to have put aside fully half of the millions in contributions it received for the victims of the September 11 attacks to be used for future disasters. They also explain why Congress continues to consider a new set of charity regulations.
Unless aggrieved donors settle their lawsuits, the courts are likely to have the first word on donor intent before Congress and the state legislatures address the issue. It is unknown just how much respect they will accord the donors, but if the polls are right, it should be quite a lot.
Bruce Collins is corporate vice president and general counsel of C-SPAN, based in Washington, D.C. E-mail him at Collins@c-span.org.