April 16, 2014
(The newest book by Doug White, a well-known expert in the fields of philanthropy and nonprofit management, is "equal parts thriller and cautionary tale," writes Daniel Matz, Foundation Web Manager at the Foundation Center. Click here for more from PND's long-running Off the Shelf series.)
What is a gift? In an ordinary sense, a gift is something — money, property, advice — given freely by one party to another without the expectation of receiving something in return. We all like gifts, and so, too, do the 1.4 million nonprofits in the United States that benefit from private donations, large and small. But in the calculus of large-scale institutional philanthropy, a gift isn't really a gift; it's a gesture with a purpose — a purpose informed, to varying degrees, by the intent of the person or institution that gave the gift. And therein, as Shakespeare might say, lies the rub.
It's no surprise that wealthy donors and foundations seek out organizations and institutions that share their own passions and interests. But what do donors really expect from a nonprofit grantee in the long run? In the performance-measured, accountability-driven world of twenty-first century philanthropy, grantee reporting is de rigueur. For most nonprofits chasing after scarce dollars (and hoping for future gifts), the willingness and ability to demonstrate that they've aligned themselves with a donor's intent goes without saying. But what happens when a donor, after many years of happy engagement with an organization or institution, begins to believe that the original intent of the gift is no longer being honored? Our intuition tells us that, at some level, gifts/grants/donations involve a leap of faith, and that when the trust between donor and recipient is compromised, the recipient is unlikely to receive additional future gifts from that donor. A donor or foundation might even go public with its disappointment in order to discourage others from making gifts to the recipient. But rarely does a foundation or donor who has become disenchanted with a recipient ask for their money back. Which raises the question: Should they be able to? And does a statute of imitations ever apply in such a situation?
Those are two of the questions Doug White, a well-known expert in the fields of philanthropy and nonprofit management, tackles in Abusing Donor Intent: The Robertson Family's Epic Lawsuit Against Princeton University. Just as White earlier explored a rogues' gallery of swindlers and incompetent trustees in Charity on Trial, here he invites the reader to look behind the curtain of privilege and wealth, this time to learn just how bad things can get when a donor and beneficiary no longer see eye-to-eye. Informed by the slow burn of a decades-old frustration, not to mention the disposition of hundreds of millions of dollars and the reputation of one of America's oldest and most respected universities, Abusing Donor Intent is equal parts thriller and cautionary tale.
For those not familiar with the story, it starts in 2002, when Bill Robertson and his siblings, heirs to the A&P supermarket fortune, sued Princeton University to claw back a gift their parents had made forty years earlier. Back in 1961 — the year of the Bay of Pigs invasion, the first human (Yuri Gargarin) in space, and the construction of the Berlin Wall — Charles Robertson (Princeton, '26) and his wife, Marie, had established a foundation with a $35 million gift to benefit Princeton's renowned Woodrow Wilson School for Public Policy and International Affairs. The Robertsons, heeding President John F. Kennedy's admonition to ask not what their country could do for them, but what they could do for their country, saw a need to foster greater interest in government service and believed the Wilson School to be the ideal place for future generations of Americans to train for careers in public service.
With trusteeship of the foundation to be shared by Princeton and the Robertson family, and the assets to be managed by the university, the foundation was set to be the cornerstone of the Wilson School's future success. And, indeed, over time the foundation's corpus grew to an almost unimaginable size; by 2008 it was estimated to be worth $850 million — and represented a significant portion of Princeton's endowment. But as the value of foundation's assets grew, so too did the Robertson family's unhappiness with the way, and to what effect, the money was being used. As the Robertson children saw things, it wasn't just that Princeton had fallen short of matching their parents' aspiration for the gift by not working hard enough to place more students in government service; it was that Princeton had intentionally used the endowment for purposes unrelated to the Wilson School, thus violating the original intent of the gift.
What did Princeton do that was so wrong? According to White, the Robertson family accused it of squandering a quarter of a billion dollars of foundation funds, with little to show for it — at least in terms of generating greater interest in government service. The family also argued that the university had allowed foundation assets to be commingled with the general university endowment and claimed that, over the life of the foundation, the university had spent a near-equal portion of the endowment on projects and activities unrelated to the Wilson School, including $13 million to complete construction of a new facility for the sociology department and a number of multimillion-dollar commitments for other university programs that, although related to public and international affairs, were not administered by the Wilson School.
For their part, Princeton officials argued that the university was a complex institution with growing needs and a number of interconnected missions. In their eyes, the foundation should not be isolated from those needs and, what's more, that it was irresponsible not to allow the university as a whole to benefit from the foundation's endowment — or to allow the purposes to which the endowment was applied to evolve over time. In the end, following a six-year battle and $90 million in legal fees (which Princeton agreed to pay), the Robertson Foundation was dissolved in 2009, with $50 million going to fund a new Robertson Foundation for Government that is independent of the university.
In the end, it's hard to say who won. White is quick to note that the new foundation makes it possible for the Robertson children to fulfill their parents' wish. At the same time, the majority of the original foundation's assets have been folded into Princeton's endowment, which stood at more than $13 billion at the end of 2013. Perhaps, says White, it's a Pyrrhic victory for both sides. The Robertson family, though free to pursue their parents' original goal, must do so with vastly diminished resources and less family cohesion than before the suit was filed. Princeton has had to publicly explain its questionable (if not unethical) conduct. And maybe the only "victory" to come out of the case is the renewed focus it has put on the phrase "donor intent" — and the fact that, even a half-century after a gift is made, a tax-exempt beneficiary (however illustrious) can be called to account for perceived violations of the donor-beneficiary relationship. That’s a lesson that donors and recipients alike would do well to take seriously.
— Daniel Matz