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Good v. Good

We are in the early stages of a battle of the good guys against the good guys, and it isn't pretty.

The fight is about donor intent--the idea that the mostly rich people who give their money away should have the right to say how it is used. At first glance this does not seem to form the basis of a fight. After all, we expect the recipients of the money to be grateful and the donors to give to people they want to benefit. Ah, but human behavior is a complex thing. So is the law, or lack of it, and therein lies the rub. Liberalism versus conservatism also plays a role in the -struggle.

The simmering resentments between donors and donees have broken out into the public sphere in recent years, mostly in the higher-education arena, where hundreds of millions of dollars are at stake. This has led to high-profile lawsuits and the nastiness they can engender. Probably the most well-known suit is Robertson v. Princeton. In that case the heirs of Charles Robertson are claiming--among other things--that Princeton University has ignored his desire to prepare students for federal government service in foreign affairs by diverting millions of dollars of his endowment to other purposes. The fight has gotten nasty.

Randolph-Macon Women's College is now embroiled in four lawsuits that disgruntled alumna donors brought. The donors objected strenuously when the college began to admit male students. At a recent conference sponsored by the newly-formed Indiana-based Center for Excellence in Higher Education (CEHE), a panelist speaking for the donors was hotly challenged from the floor by a former trustee of the college for what was said to be her selective and distorted presentation of the facts. The tension was palpable. At the same session a panelist representing donors to Newcomb College, a unit of Tulane University in New Orleans, spoke heatedly of Tulane's abrupt dissolution of the college in the wake of Hurricane Katrina. CEHE Executive Director Frederic J. Fransen signaled the depth of donors' resentments in his summary remarks at the conference when he said, "The ivory tower is neither above nor outside the law."

One problem is that the law of donor intent is weak. Oddly, most state non-profit corporation statutes do not give donors any legal standing to enforce the terms of their gifts. That status is given to the state attorney general. But many state AGs have no staff assigned to charity law work. Those that do can't always be relied upon to sue major charitable organizations when there are huge corporate targets such as Enron to go after. Nevertheless, the law is beginning to recognize donors' interests. William Josephson, the former head of New York's Charities Bureau, says the attention of the AGs is still spotty and proposed uniform statutes are not ideal. He urges donors to rely on specific contracts that spell out in detail the terms of their gifts.

An undercurrent of the donors' rights movement is becoming more visible. The fact is most large donors are wealthy people who also tend to be conservative. Yet they fear handing over their money to the non-profits that the more liberal education establishment controls. Too many times they've seen their gifts--meant to promote capitalism and free market principles, for example--watered down or even transmuted into something else altogether.

A non-education example they cite is the Ford Foundation, which now supports programs and activities the conservative Henry Ford would never have put his name to. The result may be fewer perpetual foundations whose missions can evolve in ways the founding donors may dislike. The wealthy may prefer to "spend out" their foundations while they're still alive or require such spend-outs within 20 or 30 years of their deaths, when enough of their friends and relatives are still alive to keep tabs on their beneficiaries.

Contributing Author

Bruce D. Collins

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