April 19, 2008
Trustee of Charitable Trust Takes Money, Goes to Jail
When trust attorney Luther Avery died in 2001, his son, Mark Avery, took over as trustee of a multi-million dollar charitable trust. The story in the San Francisco Chronicle doesn't say what the purpose of the trust was, or whether any trust funds were spent on the charitable purpose after Mark Avery took over. Instead Mr. Avery managed to spend $52 million dollars in six months, buying World War II airplanes and a fleet of fighter jets which could be used, or so his accomplice said, by foreign clients fighting rebel armies. Mr. Avery contended that he took the money as a loan and intended to repay it. Now he is under a court order to repay the money, although he'll be serving an eight-and-a-half year prison term first.
May Smith had created the charitable trust and was still alive when Mr. Avery took over. She suffered from Alzheimer's disease and died without realizing what had happened to the trust.
Thanks to Kristina Alayan for sending this story.
April 18, 2008
"Education & the Economy" Conference Scheduled for September 2008
This year's Northeast People of Color Legal Scholarship Conference will be held September 12-14, 2008 at Boston University School of Law, and there's still time to sign up either to present a work in progress or to comment on a work in progress.
These sessions provide the opportunity to present a scholarly work in progress and receive feedback, both from an assigned commentator and from the audience. This is an excellent way to develop and refine a scholarly project in a supportive environment. Work in progress submissions from junior faculty and faculty of color are particularly welcome. A project can address any subject matter and need not be limited to the conference themes (this year: Education & the Economy: The Real Lives of People of Color).
Those interested in applying to present a project should submit a working title and brief (200 word) abstract by May 15, 2008. If you are a professor willing to comment on a work in progress, please contact us with a list of appropriate subject matters. All correspondence should be sent to either Professor Fabio Arcila, Jr., at email@example.com or Professor Alafair Burke at firstname.lastname@example.org. For more details about the conference, please visit our conference website at http://www.bu.edu/law/nepoc.
April 17, 2008
Dubai Charity to Donate $1 Billion to Improve Education in World's Poorest Countries
Agence France Presse reported on Wednesday that United Arab Emirates-based charity Dubai cares is to soon launch a one-billion-dollar (627-million-euro) project to fund education in 12 of the world's poorest countries: Bangladesh, Bosnia, Chad, Comoros Islands, Djibouti, Maldives, Mauritania, Niger, Pakistan, occupied Palestinian territories, Sudan, and Yemen. Some of the money will also be going to Palestinian refugees in Lebanon and Jordan.
According to the AFP report, Dubai Cares expects the money to be spent on new schools, redeveloping existing facilities, and providing medical services and drinking water. Through this effort, the charity hopes to eventually educate one million children in these developing countries.
Nonprofits to Help Fix DC Schools
Today's Washington Post (Rhee Lists 6 Firms Eyed to Help Run 10 Campuses) reports that D.C. Public Schools Chancellor Michelle A. Rhee plans to hire up to six nonprofit educational companies to help run the city's 10 comprehensive high schools. Rhee has invited parents to meet with her tonight to discuss the proposal.
Under the terms of the proposal, the nonprofit organizations would take over one grade in the fall and then run the entire schools beginning in 2009. One of the nonprofit companies, Talent Development (based at Johns Hopkins University), currently manages 100 high schools in 15 states. In exchange for its per-student fee, Talent Development provides curricula, trains teachers, and reorganizes the school into smaller career academies that offer students more individual help and intervention. Another company, Friendship Public Charter Schools, says that its proposal to District of Columbia Public Schools (DCPS) calls for Friendship to receive total control of the schools it would run. Among other things, Friendship would hire a principal for each school, train teachers, and introduce the organization's technology theme.
Rhee has reportedly been considering for several months the option of hiring firms to solve whatever problems exist at 10 high schools and 17 elementary and middle schools where students have missed academic benchmarks on standardized tests for five consecutive years. These schools are currently undergoing "restructuring."
Rhee's current plan applies only to the high schools. She believes that the plan does not amount to a privatization of the schools since the schools would remain under DCPS control but be run in partnership with the nonprofit companies.
Report: Nonprofit Job Seekers Want For-Profit Deals
According to a report appearing in the April 15 NonProfit Times, while the current job market may be tightening, jobseekers who consider signing up with the nonprofit sector still have high expectations.
A recent survey conducted by Commongood Careers, a Boston-based nonprofit search firm, found that although job candidates wanted to find nonprofit jobs where they felt culturally connected to the organization's cause, they "still wanted the employment incentives and substantial career development characteristics of for-profit companies." In the survey of 1,750 participants, 82 percent wanted to reach an executive-level role in their careers; 70 percent responded that "salary levels" were their primary concern with nonprofit employment. Forty-five percent put "vacation policies" as a high-ranking priority when looking for a job. More than 75 percent of those surveyed thought that nonprofits "had to immediately change" their techniques in recruitment and employment.
Two NY City Council-Persons Indicted for Nonprofit Scam
Two N.Y. City council person aides were indicted yesterday for their fraudulent involvement with nonprofit organizations in the big apple, according to a report in today's N.Y. Times. At a press conference yesterday, the Assistant U.S. attorney indicated that a lack of nonprofit transparency contributed to the fraud and that phony nonprofits seemed to be a common modus operandi of city council people in New York:
“Without transparency and accountability in a budget process, discretionary items are ripe for abuse,” Mr. Garcia said. “Taxpayer money allocated to fake non-profit entities–organizations that do not even exist–is even more difficult to trace and more easily diverted for personal gain. This investigation will continue to take a hard look at this process, scrutinizing those allocations most vulnerable to abuse by those in position of public trust.”
Ms. Gill Hearn said a new unit set up by her office to examine nonprofits receiving city funds now has over thirty active cases.
She said the cases, “demonstrated corruption vulnerabilities that were thriving because of obscure processes and lax and non existent oversight.” She added, “Along with our colleagues at the U.S. Attorney’s Office, last year we decided to do a proactive comprehensive look at the award, allocation and tracking of council discretionary funding. In short order we discovered that our concerns were well founded. We found the council’s use of fictitious organization as a place to park millions of dollars worth of discretionary funding creating obscurity with respect to the origin, destination, purpose and benefactors of that funding.”
The charges come just days after disclosures that the office of the City Council speaker, Christine C. Quinn, had appropriated millions of dollars to nonexistent organizations, instead of routing the money to organizations favored by individual council members. The accounting sleight-of-hand allowed Council members to later tap the funds for projects without getting approval from the mayor, but no allegations have yet been brought forward that it was used to misappropriate funds. Mr. Garcia would not answer questions about whether allocation the money to fictitious organizations was a crime. Neither would he say whether Ms. Quinn was a target of the ongoing inquiry.
The indictment is available here: Download NYnonprofitindictment.pdf. At least when the nonprofit is operated to support the truly poor and needy, as in this case, there ought to be some serious sentence enhancements.
April 16, 2008
Henderson and Malani Publish "Corporate Philanthropy and the Market for Altruism"
Professors M. Todd Henderson (Chicago) and Anup Malani (Chicago) have posted a draft of their working paper, "Corporate Philanthropy and the Market for Altruism," in the SSRN Nonprofit and Philanthropy Law Abstract Journal. Here is the abstract:
The existing literature on corporate philanthropy asks why corporations engage in philanthropy. But corporations are not alone in doing good works. Non-profit charities and the government also lend a hand. Together the three sectors compete in a larger market for good deeds where individuals seek to satisfy their desire to help others. The existing literature on public goods ignores the role for-profit firms play in this market, which we call the market for altruism. Once the demand and supply for altruism is understood, asking why firms are philanthropic becomes about as meaningful as asking why Ford produces the Explorer or Apple produces the iPod Nano. Instead the question becomes how is this market different from other markets, and when are for-profit corporations best suited to supplying it. The market for altruism is special because one of the competitors - the government - also regulates competition in the remainder of the market. After analyzing the market for altruism, and explaining the comparative advantages of corporations, this paper highlights one area - tax policy - in which the government discriminates among competitors. We argue that this discrimination is not justified and propose a number of tax reforms to level the playing field and improve the efficiency of the market for altruism.
For the entire draft working paper, go to "Corporate Philanthropy and the Market for Altruism" on the SSRN Nonprofit and Philanthropy Law Abstract Journal website.
Report Says Director of Smithsonian Latino Center Violated "General Ethical Rules"
On April 15, 2008, the New York Times reported that the former director of the Smithsonian Latino Center violated ethical rules. Here is an excerpt from the article:
But a report released on Monday after an inquiry by the inspector general, A. Sprightly Ryan, said, “The evidence gathered in this investigation indicates that on multiple occasions O’Leary violated these general ethical rules as well as specific prohibitions on conduct that constitutes or appears to constitute a conflict of interest.”
The institution released the report in response to a Freedom of Information Act request from The Washington Post, said a Smithsonian spokeswoman, Linda St. Thomas.
The report also said that Ms. O’Leary, 39, solicited and accepted gifts “from prohibited sources” and used “Smithsonian resources for private gain.”
“She also violated the travel policy, particularly through repeated misuse of her Smithsonian-issued travel card,” the report said. “Finally, she also engaged in other questionable conduct that created an appearance of impropriety and could compromise public confidence in the Smithsonian.”
In a statement sent to The New York Times by e-mail on Monday, Ms. O’Leary denied that she had been reimbursed for personal expenses and said her supervisor’s office had authorized all of her travel. She said she was “proud of the Smithsonian Latino Center’s accomplishments under my direction.”
For the entire story, see "Ex-Director of Smithsonian Latino Center Solicited Gifts and Tickets, Report Says" in the April 15l, 2008, issue of the New York Times.
Uganda seeks to tax private universities
According to an online report from allafrica.com:
ThE Uganda Revenue Authority (URA) is demanding sh1.3b in corporation tax arrears from Uganda Christian University (UCU), a move that has drawn an outcry from other private universities that see themselves as the next targets. The vice chancellors have objected to the demand and urged the Government to emulate Kenya and Tanzania, where non-profit universities are exempt from corporation tax. "We the vice chancellors of the Uganda Vice Chancellors' Forum do stand in solidarity with Uganda Christian University and other not-for-profit universities in their appeal to receive exempt status from Corporation tax as a not-for-profit educational organisation with a public purpose," they said in a resolution after a meeting held on March 3, 2008.
The report discusses in broad detail the United States' approach exempting universities from taxation, as evidence of the need to maintain tax exemption for private universities.
April 15, 2008
Reforms for Nonprofit Hospitals?
Professors Jeffrey Alexander (University of Michigan), Gary J. Young (Boston University), Bryan J. Weiner (University of North Carolina), and Larry R. Hearld (University of Michigan) recently published Governance and Community Benefit: Are Nonprofit Hospitals Good Candidates for Sarbanes-Oxley Type Reforms?, Journal of Health Politics, Policy and Law 2008 33(2):199-224. Following is the abstract:
Recent investigations into the activities of nonprofit hospitals have pointed to weak or lax governance on the part of some of these organizations. As a result of these events, various federal and state initiatives are now either under way or under discussion to strengthen the governance of hospitals and other nonprofit corporations through mandatory board structures and practices. However, despite policy makers' growing interest in these types of governance reforms, there is in fact little empirical evidence to support their contribution to the effectiveness of hospital boards. The purpose of this article is to report the results of a study examining the relationship between the structure and practices of nonprofit hospital boards relative to the hospital's provision of community benefits. Our results point to modest relationships between these sets of variables, suggesting considerable limitations to what federal and state policy makers can accomplish through legislative initiatives to improve the governance of nonprofit hospitals.
Bush Building Ties With Catholics
Today's Washington Post reports that President Bush and first lady Laura Bush will this afternoon greet Pope Benedict XVI, leader of the Roman Catholic Church, after the latter's plane lands at Andrews Airforce Base. This will be the first time in his seven years in office that the President will leave the White House to receive a visiting foreign dignitary. Tomorrow, President Bush will host Benedict for a private 45-minute meeting. The meeting will be preceded by an elaborate official arrival ceremony featuring soprano Kathleen Battle singing "The Battle Hymn of the Republic." About 9,000 invited guests are expected to attend this ceremony.
The President's warm welcome for the Pope results from his goal to build strong ties with Roman Catholics. According to the Washington Post report, in an interview last week with the Eternal Word Television Network, a Catholic news outlet, President Bush opined that Pope Benedict is a significant religious and moral leader. "I [also] subscribe to his notion that . . . there's right and wrong in life, that moral relativism has a danger of undermining the capacity to have more hopeful and free societies," Bush said. "I want to honor his convictions."
The Washington Post article continues:
Building strong ties with Catholics in general -- and Benedict and his predecessor, Pope John Paul II, in particular -- has been a major element of the president's agenda since the 2000 political campaign. Former aides say his "compassionate conservative" agenda and emphasis on a "culture of life" have been shaped by the teachings of the church, while his political advisers have seen an opportunity to wrest Catholic voters from the Democratic Party.
April 14, 2008
Boston Herald Sees Communist Conspiracy in Mass. Bill to Cap Nonprofit Executive Compensation
The Boston Herald published a rather scathing editorial regarding the bill introduced in the Massachusetts legislature to limit nonprofit compensation. The editorial, entitled "A Kremlin Answer to Hospital CEO's," calls the bill overly broad and the legislators who support the bill "dim bulbs" on Beacon Hill, laughingstocks even!
But that’s not the worst of it. While hospital CEOs are obviously Montigny’s main target, the bill is written with such a broad brush that any charitable corporation with more than $1 million in revenue would be swept up in its provisions - colleges and universities, the major nonprofit health insurers.
Executive compensation is a hot button issue in both the for-profit and nonprofit world and indeed, the excess benefit regulations allow nonprofits to consider similarly situated for-profits in setting insider compensation. That is either a concession that nonprofits exist and must compete in a market economy, or an implicit acknowledgement that some (not all) nonprofits are really no different from for-profits when it comes right down to it. And then, it is also probably unfair to judge all nonprofits by reference to nonprofit hospitals. Though nonprofit hospitals have been responsible for most of the tax law relating to tax exempt organizations over the last few years, they really are lousy subjects by which to test or judge nonprofit jurisprudence. Nonprofit hospitals are so very different from any other nonprofit species that making law for the entire sector based on nonprofit hospitals probably only leads to bad law. Take the restrictive approach to "whole hospital joint ventures" for example. The joint venture revenue rulings apply to all nonprofits, though they are articulated solely with nonprofit/for-profit hospitals in mind. They make bad law, for example, with respect to a joint venture to ensure underfunded urban schools have enough computer equipment.
Anyway, the editorial makes sense in the assertion that focusing on nonprofits is unfair. Or maybe it doesn't? It seems unconvincing for nonprofits -- who wear the halo, after all -- to just point to for-profits occupying the executive compensation autobahn in justification for their own large salaries. The "everybody else is speeding too" argument never works. Maybe we expect more than that nonprofits act no better or worse than for-profits.
April 13, 2008
Gifts with Limitations Stump Universities
Sunday's New York Times contains an interesting article detailing how gifts to universities sometimes create more headaches than they were intended to. In When Strings Are Attached, Quirky Gifts Can Limit Universities, Karen W. Arensen reports on how restrictions placed by donors on endowments and other gifts sometimes leave universities unable to use the funds. According to the report, at some universities like Harvard and University of Texas, 80 percent or more of endowments are constrained by donors' wishes. Arensen reveals that interviews with college officials indicate that "while many restrictions are for broad uses like faculty chairs and student aid, others are less central to the functioning of a modern university. Some are outright quirky."
The article gives examples of some of these "quirky" restrictions -- such as a gift to Virginia Tech to grant scholarships to students from Warwick County, a county that no longer exists. Sometimes, universities end up having to seek court permission to use a gift in a manner contrary to the expressed -- but no longer practical -- intent of the donor. At other times, if the donor or his or her heirs are still living, the university can simply request permission to use the gift for a different, more relevant purpose.
Charitable Recipients of Bear Stearns Largess Must Now Look Elsewhere
The New York Times reported on April 12, 2008, that charities that once benefited greatly from corporations that did well last years (like Bear Stearns), will now have to look elsewhere and diversify their donations sources in the wake of the U.S. financial crisis. Here is an excerpt from the article:
Having come off a stellar year for donations, the charities seem to have adopted a mood more cautionary than dire. But they are looking at ways to put pressure on longtime donors and reach out to new ones even as they brace for fewer contributions directly from corporations.
Charities are generally unwilling to cut prices for benefits, even when things get grim. “We don’t like to put the events on sale,” said Stephanie Astic, whose Stephanie Astic Productions organizes fund-raisers that are largely dependent on corporate giving. “But I think everybody is starting to freak out. At the end of the day, you have to throw the net out to a wider group of people.”
. . .
Based on the rule of thumb in philanthropy — that 90 percent of the money is raised from 10 percent of the donors — the very wealthy can expect to be receiving more and more requests. Some smaller charities, without well-established connections, will probably suffer in the tighter giving environment. Perhaps the most vulnerable are those that were large recipients of Bear Stearns money.
For the entire story, see "Charities Seek Donors to Replace Wall Street" in the April 12, 2008, issue of the New York Times.
Scalia: Wall of Separation Between Church and State Not Inviolable
According to a report published in last Friday's Daily Progress (Charlottesville, VA), Supreme Court Justice Antonin Scalia on Thursday told an audience at the University of Virginia School of Law that the wall separating church and state is not inviolable.
According to Justice Scalia, the judicial system has too often gone overboard in its interpretation of the First Amendment’s establishment clause (which forbids any “law respecting an Establishment of Religion”). Justice Scalia told his audience that the courts' "guiding light" in many religious freedom cases is the neutrality principle: government cannot favor one religion over another and also cannot favor a religious group over a secular group or vice versa. Accordingly, said the Supreme Court Justice, court rulings that seek to totally separate religion and government run counter to the Constitution’s meaning.
“If you want to enact a statute that says the president can never say ‘God bless America,’ then I have no problem with that,” he said. “Just don’t tell me that the Constitution prohibits it.”