Thursday, May 3, 2018

Big Donors Sometimes Mean Big Headaches: George Mason University, University of Chicago, and More

GMUEvery charity leader knows that big donations came come with big strings attached. But some recent disputes between donors and charities highlight how problematic those strings can become.

George Mason University, a state university, is struggling to address a controversy that has erupted over the influence that sizeable donations to its affiliated foundation by the Charles Koch Foundation and others may have given over academic decisions. According to a Washington Post report, a student group, Transparent GMU, has sued in state court seeking access to agreements between the foundation and these donors, arguing that they are covered by Virginia's open records laws. While the group filed the lawsuit over a year ago, it appears to only have received limited coverage (see, e.g., Huffington Post, Fairfax Times) before a recent court hearing.

The Charles Koch Foundation donations at issue include $10 million gift relating to the renaming of the law school for deceased Supreme Court Justice Antonin Scalia and $5 million gift to the economics department to create three new faculty positions. According to a follow-up Washington Post story, the University's president has now stated that some gift agreements "fall short of the standards of academic independence."  For example, some of the agreements included terms granting donors a right participate in faculty selection and evaluation for some economics department positions. While the lawsuit is proceeding, the University has already released some of the agreements at issue and, according to a N.Y. Times story, launched an internal inquiry. The University has also noted that those agreements, with one exception, have expired.

Additional Coverage: The Chronicle of Higher Education; Inside Higher Ed.

The University of Chicago, a private university, is facing a different but related situation. Thomas L. Pearson and twin brother Timothy R. Pearson pledged to give $100 million to the University through their family foundation to create a research institute to advance the cause of world peace. As reported by Bloomberg and student newspaper The Chicago Maroon, the foundation has now filed a lawsuit in federal court (U.S. District Court, Northern District of Oklahoma) alleging numerous breaches of the grant agreement by the University and demanding the return of the $22.9 million it has paid so far. The University is seeking to dismiss the suit, according to a Chicago Tribune report, asserting that the foundation cannot prove that it violated any of the grant agreement's terms. Additional coverage: The Chronicle of Philanthropy (subscription required); The Nonprofit Times.

While these two stories are the most prominent recent ones, there have been recent developments in two other major disputes with donors. The Legal Intelligencer (law.com) reports that last month a federal judge in Pennsylvania ruled that Foremost Industries had to fulfill its $4 million pledge to Appalachian Bible College. The College had sued to enforce its gift agreement with the company, and the court considered the College's motion for summary judgment unopposed after the company failed to file its opposition brief by the deadline set by the court. The company is now closed, which may indicate that it will be difficult for the College to collect on its judgment.

And the The Inquirer (Philadelphia) reports that the Abington School District board of directors has voted to accept a $25 million gift from billionaire Stephen Schwarzman, after rejecting an earlier gift agreement with the donor after gift stirred local controversy because of concerns about its terms and the structure of the nonprofit the board is creating to administer the donation. The controversy erupted when the board initially voted to accept the gift and its then terms, including renaming the high school for the donor, without almost no advance warning to the public and without making the gift agreement public.

Lloyd Mayer

https://lawprofessors.typepad.com/nonprofit/2018/05/big-donors-sometimes-mean-big-headaches-george-mason-university-university-of-chicago-and-more.html

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