A lawsuit filed recently by a major benefactor of Schenectady’s Ellis Hospital, near Albany, N.Y., has pushed the issue of “donor intent” into the news again.
Filed in U.S. District Court in Albany by the niece of John Belanger, who donated $2.6 million to the hospital in 1968 to support nursing education, the lawsuit claims the hospital used the money from the restricted donation to pay for general operating expenses and that the hospital trustees, by allowing this, breached their fiduciary duty to see that the money was used properly.
While I don’t know all of the details of the case, I do know more than I had ever hoped to know about donor intent, as a result of my family’s lawsuit - the largest such lawsuit in history - against Princeton University.
Donor intent is a long-established legal (and we would say moral) principle that when a charitable gift is given for a specific purpose it must be used for that purpose only. In recent years, a number of nonprofit executives across the country - many of them college and university officials, but hospital administrators and other nonprofit executives as well - have acted as if they can willingly violate this principle and suffer no consequences. Their cavalier attitudes threaten to undermine the important relationship between nonprofit organizations and their donors and could, over time, have a devastating impact on the nonprofit sector.
Our lawsuit, filed six years ago this summer, charges that Princeton officials willfully misused as much as $200 million or more (a court-supervised accounting will be required to determine the exact amount) from a charitable foundation established by my parents in 1961. That foundation, known as the Robertson Foundation, was established for an important public purpose: to prepare graduate students at Princeton’s Woodrow Wilson School of Public and International Affairs for federal government careers, particularly in foreign affairs and international relations. The lawsuit additionally charges that Princeton officials have conspired to cover up the wrongful spending.
If the Ellis Hospital and Princeton cases were the only such examples, they might be easier to ignore. But they appear to be the tip of a growing iceberg. In just the past couple of years, Tulane University, Randolph College in Virginia (formerly Randolph-Macon Woman’s College), the University of South Dakota, and the University of New Mexico have been accused of similar donor-intent violations, as have New York City’s St. Luke’s-Roosevelt Hospital and the Metropolitan Opera.
When charitable organizations violate the terms of designated gifts, they undermine public confidence in the nonprofit sector. While we are not yet at the crisis stage, recent survey data confirm the depth of the problem. An October 2007 Contribute Magazine/Harris Interactive survey of 3,040 adults showed a disturbing 59 percent more concerned today than they were a decade ago that their charitable donations are not being used effectively. A nearly equal number of respondents - 56 percent - expressed growing concern about the “misuse of funds.” Nearly half of the respondents (49 percent) were worried about “unnecessary administrative overhead.” And 46 percent said they are increasingly concerned about “fraud or theft of funds.”
These are not encouraging numbers. To restore public trust, the courts need to send a strong signal to nonprofit officials that they can be challenged and held accountable when they misuse restricted gifts.
If the courts fail to do so, many donors will think twice about supporting the nearly 1.4 million U.S. charitable organizations - food kitchens, schools, colleges and universities, animal shelters, adoption agencies, programs for at-risk children, Meals on Wheels, museums, religious institutions and so forth - whose 12.9 million employees do so much for so many people.
The day that philanthropists start believing charities are under no legal obligation to adhere to the terms of their gifts is the day many will stop giving. That would be a tragedy for the millions of Americans these charities help every year.
William Robertson, Princeton ‘72, is a philanthropist and lead plaintiff in Robertson v. Princeton, a lawsuit seeking to end Princeton University’s control of the Robertson Foundation and its endowment. More details on the lawsuit and the Robertson family’s charitable activities are available at www.robertsonvprinceton.org.