Tainted Donors: Is Their Money Tainted, Too?
Jeffrey Epstein died a convicted sex offender and pedophile who was awaiting trial on new charges in New York City. In the nonprofit sector, the contributions he made to institutions, such as Harvard University and MIT, came under the microscope for accepting funds from a person with a history such as Epstein's — a tainted donor.
More recently, Leon Black has also been under fire, specifically for his close ties to Epstein. As a result of the payments he made to Epstein, totaling $158 million given after his 2008 child prostitution conviction, the Museum of Modern Art ended its association with Black, who served on their board and was also a major donor. Dartmouth University is also under fire for the support it received from Black.
Clearly, Epstein and Black are tainted donors, but did their money make a difference in philanthropy? Despite the uproar in the sector, one has to consider if their money is also tainted. It's a valid ethical and moral question that has to get asked. In Black's case, he did seem to attempt to improve his reputation once his financial association with Epstein was discovered by pledging $200 million toward gender equality efforts and women's empowerment.
Reputation Laundering Is Nothing New
Unfortunately, as long as we've had a formal nonprofit sector, we've had donors looking to make substantial gifts to improve their image. Reputation laundering is something that has existed for a long time — it's made public relations executives wealthy — but it's also provided transformative gifts to philanthropic causes.
All you have to do is go back to the robber barons' time, and you have examples of reputation laundering. For instance, Andrew Carnegie made a fortune on steel manufacturing. Although he said that his workers could unionize and get treated fairly, they disagreed, resulting in the Homestead Strike of 1892. Still, for generations, Carnegie was considered a great philanthropist.
John D. Rockefeller created the Standard Oil Company with partners. They built it into a behemoth that controlled about 90% of the United States' oil business. Rockefeller, too, was considered for decades as a leading philanthropist. Still, the company eventually had to be broken up because it was stifling competition, considered predatory and was a monopoly.
Just these two donors alone account for significant philanthropic gifts. Rockefeller founded The Rockefeller Institute for Medical Research (now known as Rockefeller University) and the University of Chicago. He was instrumental in medical research, health training and giving to the arts. Carnegie, of course, founded Carnegie Hall and the Carnegie Institution for medical research. He also funded the World Court building in the Netherlands, the Hague Palace of Peace.
How Do We Handle Tainted Donors?
There are no cut and dry answers for tainted donors, and there are many, including the Sacklers. Although the names mentioned may be of premier institutions, the reality is that major donors (including global philanthropists) support smaller nonprofit organizations as well. So, what should you do if you find yourself facing the issue of tainted donors and the prospect of tainted money?
1. Defining the Tainted Money Problem
Because we live in a hyper-connected world that allows for instantaneous and global communication, when nonprofits face tainted donors and money, they have to get very clear about the issue. For starters, was the money made lawfully? In the case of Jeffrey Epstein himself, it's not clear how he made his money. But, other so-called tainted donors did make their money lawfully.
In short, the money may not be necessarily tainted, but the donor may. Once you clarify the situation, it's essential to consider all implications before responding hastily to quell the situation. Granted, this isn't easy to do but necessary. For example, assuming the money was earned lawfully, and the donation was an enormous and game-changing gift, in support of cancer research in children, do the funds get returned to the donor, no matter what the donor did?
2. Ethical Decision-Making
At the core, tainted donors and money are about ethics. The noise coming from the news of social media doesn't matter. However, what does matter is taking an ethical view of any so-called tainted donations. Santa Clara University in Silicon Valley created a framework for ethical decision-making, which serves as a good guide for nonprofit leaders.
Joan Harrington, director of social sector ethics, Markkula Center for Applied Ethics, published for Santa Clara University an excellent piece on applying the framework to tainted donors and money. Those activities include obtaining all the facts and weighing the tainted money against the interests of those who have a stake, including speaking to other donors, staff, people served, etc.
3. Gift Acceptance Policies
Finally, there is a measure you could do to ensure you’re as prepared as possible. These types of tainted donors and money situations usually arrive with no warning. So, the best thing you could do for your nonprofit is to ensure that you’ve got written gift acceptance policies. One element you want to ensure is that your policy includes what types or level of gifts should get reviewed by the board if any.
Another item you want to consider is when your nonprofit should include your legal counsel when accepting a gift? And because of the growing public association between tainted donors and money, what would be the processes you would take should this happen to your organization? An ounce of prevention is a pound of cure, as they say.
In conclusion, we have to take context into account in each one of these situations. For example, we have a climate change crisis happening globally. Some people believe nonprofits should not accept any money from fossil fuel companies or people associated with them. Others think that if you receive funds from religious donors or those associated with reproductive rights, it's tainted money.
As you could see, the idea of tainted donors and money could extend well beyond people such as Epstein and Black and could easily consume any nonprofit. Tainted donors and money is an important subject, and it's one nonprofits, and the sector needs to have, but it's not all cut and dry. Again, context matters.
Paul D’Alessandro, J.D., CFRE, is a vice president at Innovest. He is also the founder of High Impact Nonprofit Advisors (HNA), and D’Alessandro Inc. (DAI), which is a fundraising and strategic management consulting company. With more than 30 years of experience in the philanthropic sector, he’s the author of “The Future of Fundraising: How Philanthropy’s Future is Here with Donors Dictating the Terms.”
He has worked with hundreds of nonprofits to raise more than $1 billion dollars for his clients in the U.S. and abroad. In addition, as a nonprofit and business expert — who is also a practicing attorney — Paul has worked with high-level global philanthropists, vetting and negotiating their strategic gifts to charitable causes. Paul understands that today’s environment requires innovation and fresh thinking, which is why he launched HNA to train and coach leaders who want to make a difference in the world.