Fending Off New Sackler Money is Easier Than Returning Old Gifts

The state of Oklahoma has reached a settlement with drugmaker Purdue Pharma and its owners, the Sackler family, for US$270 million to fund opioid addiction treatment.

This first of what could become a string of settlements will surely strengthen the resolve of activists urging the arts world, universities and other charities to distance themselves from the Sacklers—who amassed a fortune after founding Purdue Pharma. In protests that double as performance art, these activists have been hurling pill bottles, shouting slogans and waving banners demanding that these institutions scrub the Sackler name from their walls. They vow to keep the pressure up until the Sacklers and their company pay for the cost of fighting opioid addiction everywhere.

The Oklahoma settlement followed announcements by two of the Sacklers’ British charitable organizations that they had frozen their grantmaking in response to the refusal of UK and US museums, art galleries and universities to accept new money from the Sacklers.

Does this mean that the family’s name will soon vanish from museums and university buildings? Probably not. As a nonprofit law scholar, I have seen that it’s much harder to sever prior arrangements with donors embroiled in scandals than it is to stop taking money from donors who are the object of public outrage.

A dilemma for charities

Charities can have the most trouble distancing themselves from tainted donors when they grant a major giver naming rights: that is, name programs or buildings after them.

That is a serious obstacle in this instance, given how the Sacklers have left their mark through donations reflected in the U.S. and Europe, such as the Metropolitan Museum of Art’s Sackler Wing and the Guggenheim’s Sackler Center for Arts Education in New York City, the Serpentine Sackler Gallery in London and the Louvre’s Sackler Wing of Oriental Antiquities in Paris.

When these scandals strike, charities face a dilemma – keep the money given by the now-tarnished donor or return the tainted funds. But returning the funds may be easier said than done.

Once the money is given away, it’s committed to charitable use. Returning that money just because the donor’s reputation is now sullied may get the charity in trouble with state regulators.

But if the gift isn’t final, that is not an obstacle.

For example, before allegations regarding sexual abuse—and even rape—by Harvey Weinstein were first reported, the disgraced former Hollywood mogul had a history of supporting feminist causes. Apparently seeking to salvage what remained of his reputation, he sped up his plans to make a $5 million donation to fund scholarships for aspiring female directors studying at the University of Southern California.

But as several bombshell exposés and lawsuits were on the verge of ending his career, a student started an online petition and called on the university to refuse Weinstein’s “blood money.” The school soon rejected the gift, thwarting Weinstein’s effort to cleanse his name through giving.

Morals provisions

The complications that can arise from tainted donors is an incentive for charities to require “morals provisions” in naming rights agreements. These provisions let charities remove donors’ names from buildings, endowed fellowships or scholarships or return donated funds following allegations of or convictions for immoral or illegal behavior.

Otherwise, nonprofits must choose among a few bad options. They can give the money back, perhaps with interest. They can suspend programs or professorships named after the donors whose names have become an embarrassing burden, perhaps with threat of litigation from the donor for not fulfilling the charity’s end of the bargain. Or, they can continue to maintain the donor’s name and face public outrage.

In 1988 Bill and Camille Cosby made a $20 million gift to Spelman College, at the time the largest individual donation ever to a historically black college. A portion of the gift was used to endow a professorship at the women’s college bearing the performer’s name.

After allegations of Bill Cosby’s sexual assaults surfaced, Spelman sought to dissociate from its long-standing relationship with the performer. Without a morals provision in place, Spelman initially had to temporarily suspend the professorship.

Eventually, Spelman worked out a permanent solution to terminate the endowed professorship and distribute the related funds to a foundation established by his wife, Camille Cosby.

It will take more than that to scrub the Cosby name from the school altogether.

What Vanderbilt did

Doing what’s morally right sometimes requires taking tough steps in terms of legal ramifications and expenses. But charities caught in this dilemma also face a cost for playing it safe by doing nothing. If prospective students or visitors stay away and other donors decide they’re better off not supporting this particular cause because of its association with a patron seen as toxic, it will be expensive no matter what they do.

Consider what happened at Vanderbilt University when it attempted in 2002 to rename “Confederate Memorial Hall,” a building which it had acquired following a merger with George Peabody College for Teachers in 1979.

Peabody had received a donation of $50,000 from the United Daughters of the Confederacy in 1933 to fund the building’s construction, with the condition that the building carry the moniker in perpetuity. After Vanderbilt publicly announced that it would remove that tribute to the Confederacy from the building’s name and walls, the organization sued to enforce the terms of its gift agreement.

In 2005, the court ordered the university to reimburse the United Daughters of the Confederacy the value of its original donation, adjusted for inflation, in exchange for the right to rebrand the building.

A decade later, anonymous donors gave Vanderbilt the $1.2 million it took to get rid of what Chancellor Nicholas S. Zeppos called “a symbol of exclusion, and a divisive contradiction of our hopes and dreams of being a truly great and inclusive university.”

Once the cost of doing nothing gets too high in the long run, charities may implement costly options to terminate the association.

That is why in my view, museums and other recipients of the drug-making family’s philanthropy could eventually redirect their donations. But that won’t happen until what they lose by honoring Sackler gift agreements becomes more exorbitant than satisfying all of the anti-Sackler movement’s demands.

Editor’s note: The widow and children of Arthur Sackler assert that they have not financially benefited from OxyContin sales and that he was not culpable for the opioid crisis. 

This is an updated version of an article originally published on August 3, 2018. This article is republished from The Conversation under a Creative Commons license. Read the original article here.