OCTOBER 07, 2020
Unfortunately, examples of donor-intention violations are legion in the world of higher education. This is why taking extra steps to safeguard your intent is so crucial (see Twelve tips for successful giving in higher education for more). The seven stories below illustrate how easy and common it is for colleges and universities to misuse philanthropic dollars.
Robert Morin and the University of New Hampshire
Robert Morin was a 1963 graduate of the University of New Hampshire who worked in the school’s Diamond Library for five decades. Thanks to a lifetime of frugality, the humble librarian had amassed an estate worth $4 million at his death. He donated the entirety of it to his alma mater, with only $100,000 earmarked for his beloved library.
Free to decide how to spend $3.9 million, the University of New Hampshire drew withering criticism for dedicating $1 million of Morin’s estate to a new video scoreboard for the school’s football stadium. Another $2.5 million funded a career center. The remaining $400,000 is still unallocated. One alumnus described these administrative decisions as “a complete disgrace to the spirit and memory of Robert Morin.”
University of New Hampshire administrators claimed that Morin had, in fact, become a football fan in the last 15 months of his life, while critics complained that the school was “deceptively connecting a fragment of Morin’s life to its football splurge.” The truth was that Morin himself had left the university free to spend the bulk of his donation however it chose.
The Robertson family and Princeton University
One of the most publicized donor-university skirmishes is the dispute between Princeton University and the Robertson family. In 1961, Marie Robertson—an heir to the A&P grocery fortune—and her husband Charles gave Princeton A&P stock worth $35 million to endow a supporting organization (the Robertson Foundation) whose purpose was to educate graduate students “for careers in government service.” The endowment’s value mushroomed to $930 million by 2007, by which time it was being used to fund most of the graduate programs in the Woodrow Wilson School of Public and International Affairs.
The Robertsons’ children concluded that Princeton was not fulfilling the terms of the endowment and filed suit. A PriceWaterhouseCoopers forensic audit of the Robertson Foundation accounts revealed that Princeton had in fact misused more than $100 million in earmarked funds. After spending nearly $90 million combined on legal fees without even going to trial, the Robertson heirs and the university reached a settlement in 2009 in which Princeton agreed to return $100 million. After the family’s legal fees were paid, a bit more than $50 million went to fund a new Robertson Foundation for Government that is independent of Princeton and allows Robertson family members to honor the donors’ original intent at other academic institutions. Princeton took the remaining funds and rolled them into its overall endowment—which now stands at an impressive $26 billion—and the original Robertson Foundation was dissolved.
Both sides claimed victory, but the $100 million returned to the Robertson family by Princeton constitutes the largest award on behalf of donor intent in history. The lead plaintiff in the suit, William Robertson, issued a statement calling the settlement “a message to nonprofit organizations of all kinds throughout our country that donors expect them to abide by the terms of the designated gifts or suffer the consequences.”
The Herzog Foundation and the University of Bridgeport
Another example of donor intent gone awry is a grant made in the 1980s by the Carl F. Herzog Foundation to the University of Bridgeport in Connecticut to endow nursing scholarships for needy students. But facing a steady enrollment decline, the university closed its nursing program in 1991 and reallocated the gift to its general endowment. When the foundation sued, the Connecticut Supreme Court upheld the university’s action because the foundation had failed to include in the gift agreement a reversionary clause indicating the gift should be returned if the nursing program was discontinued. Ironically, the school restored its nursing education program in the 2000s as enrollment increased and has now integrated its program with the Bridgeport Hospital School of Nursing.
The Pearson Family Members Foundation and the University of Chicago
In a high-profile case in early 2018, the Pearson Family Members Foundation filed a lawsuit against the University of Chicago claiming the institution failed to abide by a 2015 grant agreement. In that year the foundation committed a $100 million grant to create the Pearson Institute for the Study and Resolution of Global Conflicts in the Harris School of Public Policy.
Now Pearson family members are seeking to reclaim the $22.9 million already paid on the grant, claiming the university failed to hire a full-time institute director and high-quality faculty, develop a curriculum, or schedule an annual forum according to the timeline spelled out in a 60-page gift agreement. The university has denied the accusations in a public statement, noting, “In the short time since its formation, the institute has hosted dozens of events, enrolled more than 200 students in courses related to the study of global conflict, and fostered an engaged community of scholars.”
Regarding faculty, the University of Chicago can point to the professors it has indeed brought to the Pearson Institute (a faculty director later designated as the institute director, and three of the required four faculty members). And the university has been clear about its prerogatives: “All academic and hiring decisions are the sole purview of the university and its faculty, guided by the principle of academic freedom.” The Pearsons, however, have challenged both the timing of the hiring process and the qualifications of those brought on board, and see the dispute as ”a cautionary tale that should give pause to any…donor who is considering granting a university any amount of money.”
Roger Lindmark and St. John’s University
In another recent dispute, donor Roger Lindmark sued his alma mater, St. John’s University in Collegeville, Minnesota, demanding the return of his $300,000 gift to create a summer fellowship for rising seniors to complete a substantive research paper on corporate business ethics.
From the time the gift was finalized in 2010 until the fall of 2017, Lindmark claimed, he received only a handful of thank-you letters from scholarship recipients and no information on the research conducted. In the fall of 2017, when he demanded to see the 16 papers fellows had produced, he received only 10 of them and was shocked to see that most failed to address his specified topic. "The papers that were produced were on topics totally outside corporate business ethics," Lindmark told MPR News. "One paper was done on soil conservation. Another was done on romance in the workplace. Another one was about providing solar power energy to low-income families. Another paper was produced on wonderment in the classroom." One of Lindmark’s exhibits in court was a scholarship recipient’s five-page paper explaining why he couldn’t complete the assignment.
Lindmark ultimately lost his case in both a lower court and then, in March 2019, at the U.S District Court of Minnesota. The court ruled that Lindmark had no standing to sue on several grounds:
- The endowment he created via a gift instrument is a gift, not a contract;
- the endowment is an “institutional fund” governed by the laws of the state; and
- only the state attorney general has standing in matters involving the administration and enforcement of irrevocable charitable gifts.
Both parties contributed to this unfortunate outcome. Lindmark knew what he meant by “corporate business ethics,” but failed to spell it out clearly in the gift agreement. He also let too many years pass before demanding copies of the fellows’ work. For its part, the university provided little—if any—faculty oversight to the Lindmark Fellows to ensure that paper topics were in line with the donor’s wishes. Today, the Lindmark Fellowship website advises applicants that “the research topic of ‘professional business ethics’ is broadly construed to include ethical issues in occupations or professions.”
Even when donors clarify their wishes well, their intent may be violated by university actions they never anticipated. In 2016, Westminster College in Fulton, Missouri, petitioned a court for access to $12.6 million in restricted general endowment grants to fund its general operating budget, in violation of the donors’ original wishes for those grants. But during the hearing it came to light that Westminster’s president had already withdrawn restricted endowment funds without a court order and was in fact asking to access more money to repay the $6.3 million spent without authorization. The court grudgingly granted the college’s petition, but mandated a full payback-with-interest schedule, a policy that required approval from the Board of Trustees to access endowment funds, and the submission of Westminster’s annual independent audit statements to the state attorney general's office through the end of the 2019 fiscal year.
Jeffrey Moritz and Ohio State University
At Ohio State University, alumnus Jeffrey Moritz (the son of Michael Moritz, for whom the College of Law is named) is disputing a fee levied by the university on a $30.3 million endowment his father created in 2001. The terms of the gift were specific: all the funds were to support four chaired professorships and 30 annual law school scholarships.
In 2016, Moritz learned that OSU was distributing only 12-16 awards each year and that the endowment held only $21.9 million. OSU first claimed that the drop was entirely due to the recession, but financial reports eventually revealed that about $3 million had been taken from the Moritz fund to support the university’s development operations. The annual fee of 1 to 1.3%—which the university had begun charging in 1994—appeared nowhere in the 2001 gift agreement; the Moritz family claims the school never told them about the fee, which began to appear in gift agreements only in 2008.
The Moritzes are demanding that OSU return $3 million to the endowment, but it is unclear whether they will succeed. Both OSU and the state’s attorney general are fighting Jeffrey Moritz’s attempt to reopen his father's estate so the probate court can appoint him as administrator to enforce the original gift agreement.