he Massachusetts Institute of Technology faced widespread criticism in 2019 when it became clear the university had accepted gifts from the financier and convicted sex offender Jeffrey Epstein. The right choice was obvious — the university never should have taken the money.
But the topic of “tainted money” is rarely so clear-cut. Before accepting money from some of the people on the Philanthropy 50, the Chronicle’s ranking of the donors who gave the most money in 2020, fundraisers and charitable boards would be wise to explore the gray areas.
Many philanthropists on the Chronicle‘s annual ranking of America’s biggest donors gave to advance racial justice, Covid relief, and anti-poverty efforts.
The activities of at least three donors on this year’s list have raised enough concern that some activists and ethics and fundraising experts have called for limiting their involvement with charities.
Denny Sanford (No. 10), a regular on the Philanthropy 50 who has given over $2 billion over his lifetime, raises the most obvious alarms. Sanford, whose fortune comes from his ownership of a subprime credit-card company, was investigated for possessing child pornography, according to a ProPublica report in August. Sanford has not been charged with any crimes, and his lawyers says that is a sign there was no evidence to support charges of wrongdoing.
Leon Black (No. 29), the private-equity titan, had close ties to Jeffrey Epstein, paying him $158 million for tax advice following Epstein’s 2008 conviction on child-prostitution charges. Black stepped down from running his company, Apollo Global Management, in January, and some art-world activists have called for him to give up his position as chairman of the board of the Museum of Modern Art. Black gave $20 million to support New York health care workers in 2020 and pledged $200 million in January toward achieving gender equality and empowering women.
Robert Smith (No. 28), another private-equity investor, admitted in October that he evaded millions in taxes over 15 years, but he avoided federal prosecution by agreeing to cooperate in a case against his former business partner. Smith has given $85 million in recent years to reduce or eliminate debt for students at historically Black colleges and universities. As in the case of Leon Black, some ethics and corporate-governance experts have raised questions about whether Smith should continue to chair the board at Carnegie Hall.
A fourth donor on the Philanthropy 50, George Karfunkel, a board member at Kodak, was investigated for insider trading after he donated shares to a synagogue he helped start amid an unusual spike in the shares of the company’s stock. He was ultimately cleared.
Risk of Enabling Bad Behavior
What do these facts mean if a charity is weighing a gift from one of these donors? The answer, in many cases, is to tread carefully and move slowly. “When in doubt, at least pause and consider the short- and long-term ramifications,” says Bill Stanczykiewicz, director of the Fund Raising School at the Indiana University Lilly Family School of Philanthropy.
The most obvious reason to avoid tainted money is that a nonprofit can jeopardize its reputation by associating with a bad actor. Charities also need to be wary of reputation laundering — donors who may seek to make up for bad behavior by associating with an organization with a sterling reputation.
“As nonprofit organizations, our reputations are never for sale,” Stanczykiewicz says.
A third reason — rarely considered by charity boards — is that accepting a gift from a bad actor may make that person feel enabled to be bad again. Social psychologists call this tendency the “moral-licensing loophole.”
In the case of Epstein, who committed suicide in August 2019, his many philanthropic gifts may have made him feel more entitled in his alleged abuse of teenage girls, says Patricia Illingworth, a philosophy professor at Northeastern University who often writes about the ethics of philanthropy.
“When organizations accept that money, they basically are complicit not just in the past harm, but also in future harms,” Illingworth says.
As for this year’s donors, nothing is nearly so clear. Sanford likely poses the greatest risk: If he were charged and convicted, no charity would want to associate with him.
National University, which was on track to become Sanford National University after the billionaire gave it $350 million in 2019, announced in September that it would hold off on the name change and “continue to follow this matter closely.”
Stanczykiewicz says that’s the right move. “Maybe Mr. Sanford will be cleared of the allegations, and then they can move forward,” he says. “If not, then they’ll be glad that they waited.”
Black is also a tricky case — the $158 million that he paid Epstein for tax advice has been described as surprisingly high, and it all came after Epstein’s 2008 conviction on child-prostitution charges.
In a statement provided to the Chronicle, Black called his relationship with Epstein a “grievous error” and said he planned to spend “greater time and energy with my family developing impactful philanthropic initiatives.”
Black gave Dartmouth College, his alma mater, $48 million in 2012 for a visual-arts building. A college spokesman recently told The Dartmouth it has no plans to remove his name from the building “given what we know at the moment.”
Illingworth says Black should step down from his board leadership position at the Museum of Modern Art, just as he did at his business.
“Good leaders demonstrate trustworthiness and integrity,” Illingworth says. “Although Mr. Black regrets his long relationship with Epstein and has committed to donate $200 million to promote gender equity, these actions are not enough to justify trust in his ability to make decisions for the public good.”
In Illingworth’s view, Smith’s case is the least problematic. “He settled with the IRS,” she says. “He paid the money back.”
Many others apparently agree. Smith’s new charity, the Student Freedom Initiative, which aims to reduce debt burdens for students at HBCU’s, is apparently on track to raise substantial corporate donations by the end of this month.
