Exploiting Generosity

The Washington Times (Washington, DC), October 19, 2003 | Go to article overview

Exploiting Generosity


Byline: Arnold Beichman, THE WASHINGTON TIMES

As her executioners led Madame Roland, one of the many thousands of innocent victims of the French Revolution's Reign of Terror, to the guillotine, she declaimed words that have gone down in history: " Oh, liberty, what crimes are committed in thy name."

Today, we can update that immortal statement by substituting the word "charity" for "liberty." For I have just read through exposes in Forbes Magazine and in the Boston Globe about how the founders and managers of charitable foundations are exploiting the funds, intended for distribution to the needy, for their personal use. These revelations make sickening reading especially when you realize these foundations are supposedly supervised by the Internal Revenue Service and state attorneys general.

Here's how Robert Lenzner, the Forbes editor, opens his expose with these right-between-the-eyes words:

"Do you need a fat tax break and have millions on hand? Here's a tip: Establish your own charitable foundation. If you need the money later, raid the foundation in the guise of drawing a salary as a trustee. It's perfectly legal, except for the most egregious, abusive cases."

He quotes William Josephson, an assistant attorney general in New York, as saying:

"The donors in these private foundations can't distinguish between their own money and the foundation's money."

Mr. Lenzner offers a case history of how a private charitable foundation set up by the Gary and Carlotta Biefeldt family of Peoria, Ill., paid itself 81 cents for every dollar it gave to charity. And these fees were certainly not for good performance, says the Forbes writer. Between the end of 1986 and the end of last year, the $30 million endowment had shriveled to $13 million. Regulators say that the Bielfeldt matter isn't unique among foundations. And it's no crime, either.

The Council on Foundations, which represents some 2,000 charities with a combined $300 billion in assets, says defensively that their recent survey found that 75 percent of foundations do not pay their trustees. But, Mr. Lenzner points out, the survey did not ask about other types of trustee fees. Trustees, says Mr. Josephson, the New York prosecutor, "are using substantial amounts of money to enrich themselves." There are more than 60,000 private charitable foundations in the U. …

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