A Disease for Our Times
While this time of year is considered “flu season” by most Americans, at least one major investment firm claims that there’s another bug going around: “affluenza.” The population most at risk? Children of the newly wealthy. The Financial Times reports that, in an effort to be a truly “full-service” broker to wealthy families (defined as those with a net worth over $100 million) Merrill Lynch is helping selected clients deal with the psychological burdens ostensibly attendant to having so much money. Scott Cooper, a Merrill Lynch “relationship manager,” says the firm is helping with “financial parenting” because its newly wealthy clients “are concerned about affluenza” in their children. Merrill has found it useful to hire psychiatrists to speak to children in their early teens about the responsibilities of wealth and the joys of philanthropy. The counselors help the children and their families with issues ranging from selecting the best schools to paying their bills to planning vacations. “Wealth can be an enhancement and a peril,” says Cooper. Many newly wealthy families fear that their children will grow up as “trust slugs,” since they haven’t faced the same incentives and challenges as the generation that actually made the money. The FT concludes that as a result, “the concept of the full-service investment banks is undergoing something of a metamorphosis.”
“Use the Form 990, Luke”
The first time around it raked in over $400 million. The second time it didn’t earn a dime. But George Lucas isn’t disappointed by the take from the re-release of Star Wars Episode One: The Phantom Menace, which hit hundreds of theaters across the country again for a one-week run in December. One hundred percent of the box-office proceeds from the re-release will be donated to charities selected by the theater owners. No word yet on whether the generosity of Lucasfilm was intended as a public apology for the annoying Jar Jar Binks character.
The IRS has put the kibosh on a controversial form of trust that had been gaining in popularity as a means of avoiding paying capital gains on highly appreciated assets. Known as “Chutzpah Trusts” due to their brazen nature, the idea behind the complex trusts is that donors donate highly appreciated assets into charitable remainder trusts with relatively short terms and high payout rates. The trusts then borrow against the assets and repay the donor quickly in capital gains free dollars. A neat trick—but not a particularly charitable one. And now, no longer a legal one.
Speaking of Chutzpah…
William Aramony already holds a special place in the Nonprofit Hall of Shame. But while the malfeasance he committed as president of the United Way of America (UWA) may have landed him seven years in the slammer and dug a public relations hole from which the UWA is still excavating itself, it doesn’t seem to have been enough to disqualify him from raking in $4.2 million in deferred compensation from the very group he defrauded. According to the New York Times, Judge Shira Scheindlin of the federal District Court of New York has ruled that UWA must pay the disgraced Aramony the money because his contract with the organization failed to include a so-called “bad boy” clause, which would have voided certain benefits to employees who defraud the employer. The Times notes that at the time the contract was negotiated and signed, Aramony was already embezzling from the group. Declining to add further insult to injury, the judge did rule that UWA did not have to pay Aramony’s legal fees.
Out of the Bunker, into the Soup Kitchen
The Great Y2K Scare was a dud, but one of the surprise consequences of this over-hyped non-event is the potential bonanza it created for nonprofits. Seeking to capitalize on the buyers’ remorse being experienced by thousands of food stockpilers, many nonprofits are offering to accept the surplus food on behalf of the hungry. Groups in Philadelphia, Detroit, Minneapolis, San Francisco, and other cities have been working with local TV stations and newspapers to get the word out that they are ready, willing, and able to accept those mega-size containers of Spam, creamed corn, and beef jerky that no longer seem quite so critical to the survival of the species. No word yet on donations of short-wave radios or excess ammunition.
What’s Good for Business
Each year the California attorney general issues a report on charitable giving in the state. This year’s report, which looked at the role of paid fundraisers in charitable solicitation campaigns, ruffled more than a few feathers and occasioned squawks of editorial indignation from newspapers across the state. Last year, according to Attorney General Bill Lockyer, for-profit fundraising firms raised $196 million for California charities. But only $85.8 million of that money—44 percent—actually made it to the charities. The San Francisco Chronicle provides further troubling details from the report: Of the 554 commercial fundraising campaigns last year, only 29 percent gave more than half of the money they raised to charity, while 27 percent gave 15 percent or less, and 4 percent gave nothing at all to the designated charities.
Miss Manners Was Right
All proper young ladies and gentlemen are taught the crucial importance of the thank-you note. Perhaps all nonprofits should be taught this lesson as well. Just ask Peter Cummings, chairman of the Detroit Symphony Orchestra. The Associated Press reports that Cummings, upon assuming the job last year, began a policy of personally writing thank-you notes to anyone who donated $500 or more to the orchestra. He must have penned a particularly gracious note to $50,000 contributor Mary Webber Parker, since she responded to the note with another $50,000 grant. Thanking her for that contribution yielded a five-year $2.5 million pledge. The lesson: Politeness pays.
Miss Manners Was Right (cont’d)
In a related story, last year 56 percent of American adults volunteered their time, according to a study released by Independent Sector—a 14 percent increase since 1995. One of the more interesting findings of the study seems to confirm what salespeople have known all along—if you want someone to do something, you’ve got to ask. While the study found varying levels of volunteerism at different age, economic, and demographic levels, 90 percent of people who were asked to do so, did.
Putting Your Wampum Where Your Mouth Is
Sensitive to the charge that their city lacks a history, Miamians were delighted by the discovery during construction of a downtown building, of an ancient Indian site. It’s no Stonehenge or King Tut’s tomb—just a ring of logs and some scraps of refuse buried in the mud. But the discovery occasioned a tremendous outpouring of enthusiasm, curiosity, civic pride, discussion, and controversy. An outpouring, that is, of pretty much everything except the one thing needed to save the Indian site: money. Developers wanted to build luxury condos on the site, occasioning howls of outrage from protestors, who hurriedly formed a “Save the Circle” committee. According to the Washington Post, the Inter-Tribal Council of the Five Civilized Tribes, a local Native American umbrella group, promptly passed one resolution to preserve “our sacred religious sites,” and another to condemn builders who would use the site “for the sake of redundant development.” The Miami-Dade County Commission stepped in with an eminent domain lawsuit that would save the site from developers as long as the fair market value of $20 million could be raised. Suddenly, the site had fewer, and less vocal, friends. According to the Post, “the protestors drifted away, leaving behind a chain-link entryway draped in signs and strips of cloth and a makeshift altar.” At the eleventh hour, county officials raised the needed money by borrowing $8 million.
The Market Giveth…
With the stock market boom stretching into yet another year, we’ve become accustomed to seeing rapid run-ups in the assets of large foundations, with some of them doubling and even tripling in size. But last November, the Annie E. Casey Foundation saw its assets double in a single day. The foundation, with assets of $1.8 billion, was endowed decades ago by the founder of United Parcel Service, and had kept about 60 percent of its assets in privately-held UPS stock. When the UPS initial public offering last year skyrocketed the share price in its first day of trading, the foundation’s assets went along for the ride, closing the day with a net worth of close to $3.5 billion. Casey Foundation CFO Rama Ramanathan is pleased, as one would expect, but sounds a cautionary note: “We were all expecting the IPO to do well, but it’s worth remembering that the gain is only on paper.”
…And the Market Taketh Away
Things are looking a little less rosy over at the Boise, Idaho-based J. A. & Kathryn Albertson Foundation, an independent foundation which has virtually all of its assets in the form of stock in Albertson’s Inc., a national chain of grocery stores. A yearlong slide in the company’s stock has ended with the foundation’s assets dropping from $1.2 billion to around $600 million, and the foundation staff have been put in the awkward position of having to send letters to grantees asking them not to reapply for funding until September at the earliest. “Some programs will be delayed, some will be suspended, and some will be scaled back, but in cases where we’ve made a signed commitment, those will continue in force,” explains spokesperson Chris D. Latter.
What to do when a donor’s testamentary intent doesn’t conform to contemporary standards? A recent case illustrates the complexities. In 1962, Jesse Coggins, a white doctor living in Maryland, bequeathed a hefty trust to Keswick Home, a Baltimore nursing home, on the condition that the money be used to help its white patients. Failing this, the money would go to the University of Maryland Hospital. Over the years, the money in the trust built up to $29 million, and Keswick, eager to get the money, complied with Coggins’ other testamentary wishes, built a new facility, and named it after Coggins. They apparently assumed that the “outdated” racial language would be ignored by the court. It was not. The Maryland court directed the money to the hospital, since Keswick could not legally use the money to benefit only its white patients. The court ruled that the donor’s intent was clear, and that the “result” was not racially discriminatory—since both Keswick’s black and white residents would suffer equally from the loss. According to the Washington Post, Keswick has appealed the decision.