Nonprofit Law Prof Blog

Was McCain Campaign Helped by a Nonprofit?

Th Washington Post has an interesting story about the McCain Campaign that raises the issue of whether the campaign received help from a nonprofit, Citizens Against Government Waste.  Here is an excerpt from the article:

For weeks, Republican presidential candidate John McCain had been hammered for supporting the Air Force's February decision to award a $40 billion contract for refueling tankers to Northrop Grumman and its European partner. Democrats, labor unions and others blamed the senator for a deal they say could move tens of thousands of jobs abroad.

McCain's advisers wanted to strike back against key Democratic critics. But they did not mount an expensive advertising campaign to defend the candidate's position. They called a tax-exempt nonprofit closely aligned with the senator from Arizona, seeking information and help.

. . .

"The question is: What is lobbying and what is campaign intervention?" said Frances R. Hill, a University of Miami law professor who specializes in charitable organizations. "The difficult issue that arises with these kinds of relationships, especially in election years, is whether a candidate for public office is benefiting improperly from an organization's activity."

For the entire article, see "McCain Campaign Calls; A Nonprofit Steps In" in the May 31, 2008, issue of the Washington Post.

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Air China Delivers Help to Quake Victims

Air China has flown over 331 relief missions from Beijing to Chengdu and plans to continue the missions.  The carrier has worked with the Chinese government to fly supplies in and to evacuate those in need of medical care.  The airline is also working with the Chinese Consulate in Los Angeles to coordinate shipment of U.S. aid to the devastated area.  Zhihang Chi, Air China's general manager for the Western U.S. notes that the airline shoulders a greater social responsibility because it is China's only national flag carrier.  To read the full story in PNN Online, go here.

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Advocacy and Nonprofits

The New York Times article about government attacks on the exempt status of some charities led to to a letter published today.  Submitted by Larry Ottinger, President of the Center for Lobbying in the Public Interest, the letter recommends increased public advocacy by nonprofits and suggests that funders, board members, and government officials should make advocacy a normal part of what nonprofits do.  Mr Ottinger notes, "If you're not at the policy table, you're on the table."  For the blog about the original article, go here.

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Time Change for FASB Meeting

Thanks to Jeff Mechanick for letting us know that the schedule for the FASB meeting has changed.  The Board will discuss FAS FSP 117-a (guidance on endowment funds) at 10:30 am Eastern time.  The agenda lists 45 minutes for the discussion.

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FASB to Consider Guidance for Endowment Funds

The FASB's Action Alert, posted today, announces that the FASB will "redeliberate significant issues raised by respondents to proposed FAS FSP-117a at its June 4 meeting.  The meeting is available by audio webcast (free) and telephone (.45 cents/minute).  For instructions on access to the meeting, go to instructions on the FASB website.  Handouts will be posted on the website one half hour before the meeting.  The Action Alert indicates that the meeting starts at 9:00 am but doesn't indicate which time zone. 

At the meeting the Board will consider changes to the FSP.  The Board will likely defer the effective date of the guidance to years ending after December 15, 2008 (a deferral of six months), and may make other changes.  For prior blog coverage of the FSP go here.

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NY Gala Raises $56.5 Million - Down 21% from Last Year

The downturn in the economy, layoffs on Wall Street, and the difficulties faced by hedge fund managers in the current market meant that the Robin Hood Foundation benefit was more subdued and raised less money this year than last.  A New York Times article, "Gala Auction Feels a Chill from Wall Street Slump," describes the event.  The rich and famous spent $3,000 per ticket to enjoy a lavish evening, but fewer people bid on the luxury packages in the auction and the bidding was less aggressive.  Still, event organizers were pleased at the amount raised.  As co-chair Barry Sternlicht said, "This is a New York-based kind of recession and it's not a good year for the hedge fund industry.  But we were blown away by the response."

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Concerns about a Charity's Investments

The New York Times reports concerns about whether one foundation, and family members connected with the foundation, controlled the investment management decisions of another foundation. Two articles, one focused on employee issues and one focused on the second foundation, the Mott Children's Health Center, appeared today.

In 1969, after the excess business holdings rules were passed, the Charles Stewart Mott Foundation had to divest some of its stock in U.S. Sugar.  The Mott Foundation did so by contributing the stock to the Mott Children's Health Center, a separate foundation established in 1939.  After the contribution the Children's Health Center held a 22% share in U.S. Sugar.

In 2005, when a share of U.S. Sugar stock was valued at $153 on the books of the Children's Health Center, the company recieved an offer to buy the company at a price of $293 a share.  A second offer, for the same amount, was made in 2007.  The company rejected both offers.

Complicating an understanding of what happened and why is the impact the rejection of the offers had on employee shareholders.  In 1983 U.S. Sugar created an employee stock ownership plan (ESOP) and the employees received stock in exchange for their interests in the company's pension plan.  Then in recent years, the company began laying off senior workers in order to compete with global sugar prices.  The senior workers received their retirement funds for as little as $194 a share, at the time the offer of $293 a share was on the table.  Although they were shareholders, the company did not tell the workers about the offers or let them vote on a decision to sell.  The workers now suspect a secret agreement between the Mott Foundation and the Children's Health Center.

The end result of the rejection of the offers is that employees are being cashed out at a depressed price, and the employees' shares are returned to the company, increasing the control of those holding the remaining shares.  In addition, the company has stopped paying dividends which means the Children's Health Center not only lost the opportunity to increase its investment funds (valued at $293 a share, its stock was worth $125 million) but also now no longer receives the dividends it depended on to sustain its charitable work.  Because U.S. Sugar is not a public company, there is no market for the stock, so the Children's Health Center is stuck with an asset that has become a poor investment.

Some former employees of U.S. Sugar have filed a lawsuit against the company.  Records of the Children's Health Center have been requested in the suit, so more information about what the charity knew and whether it acted in concert with the Mott Foundation will be coming.

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$100 Million to Support the "Girl Effect"

In developing countries, girls may be pushed out of school and into early marriages and pregnancies.  The Nike Foundation has identified what it calls the girl effect, the effect that providing girls with education and resources can have on a community.  The girl effect brings greater economic stability, less poverty, and more opportunity for economic growth.  The Nike Foundation has already devoted $36 million to projects designed to support girls in developing countries.  Now Nike, Inc. and the NoVo Foundation (co-chaired by Peter and Jennifer Buffet and funded by Warren Buffett) will team up to do a lot more.  Nike, Inc. has committed $45 million over three years, and Nike, Inc. will add another $55 million.  The Nike Foundation foundation will manage the money and the projects which seek to build more support for girls as a way to alleviate poverty.  Read more about the plans on PNNOnline and on the webpage of the NoVo Foundation.

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UPMIFA Update

Twenty-three states have now adopted UPMIFA, the Uniform Prudent Management of Institutional Funds Act, and eleven of those enactments happened this session.  The Act has passed both Houses in New Hampshire and awaits the Governor's signature there, and a few state legislatures, including California, are still considering UPMIFA this session.  For bill tracking and a legislature fact sheet see the NCCUSL website.  And for a description of the Act on this blog, go here.

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NY Legislators Concerned about Fancy Cars for Nonprofit Executives

One of the compensation perks for top executives at North Shore-Long Island Jewish Health System, in New York, is a car allowance - up to $600 a month.  As Alvin Besset, writing for Newsday, notes, the amount is not excessive and the executives and doctors pay the extra cost of driving a Porsche or a Range Rover.  But Elizabeth Moore writes, also in Newsday, that seeing hospital staff driving around in subsidized luxury cars, even on Long Island, has raised concerns, first among patients and now among state legislators.  As the economy falters, the idea that a nonprofit provides fancy cars for 80-90 members of its staff has upset members of the State Assembly's health committee.  They vowed to look into the compensation packages.  And patients were upset to learn that a treatment center would close for "cost efficiency" reasons while the nonprofit provides doctors and management with expensive cars.

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