As, NPQ recently noted in two articles in its spring 2007 issue, nonprofit conflicts of interest come in many forms and they are not always easy to identify. Sometimes malfeasance tips right over into verifiable criminal behavior, but more often there is a accumulation of self interested behavior—stopping just short of the criminal, perhaps, but nevertheless enormously costly both in terms of philanthropic dollars and public trust.

This article identifies a number of interconnected concerns—the problems that can occur when philanthropic dollars are tied too closely to business and personal interests through interlocking directorates, and the gaps and shortcomings of current regulatory mechanisms when it comes to spotting and addressing these complex situations.

In the case involving Hank Greenberg and the Starr Foundation, there appears to be a preponderance of evidence to indicate that significant tax exempt philanthropic resources have been deployed to wage what appears to be a personal campaign against the Sarbanes-Oxley Act  and government regulation of corporations in general. Ironically, Greenberg’s behavior could be considered by some to emblematic of the need for a stronger philanthropic regulatory environment.

This past year, the corporate world has unleashed a multi-faceted, well-financed attack on Sarbanes-Oxley aimed in particular at Section 404, which calls for corporations to have external auditors report on and certify their internal control systems. The U.S. Chamber of Commerce (the Chamber) and many others have taken aim at Sarbanes-Oxley anticipating major revisions from the next Congress, regardless of which political party’s leadership dominates.

Corporations typically resist regulation but Hank Greenberg’s relationship with the Starr Foundation represents a troubling development in which an individual with for-profit interests appears to be bankrolling a campaign against government regulations with philanthropic dollars.

The Starr Foundation is a reputable foundation more than a half century old. It has been recognized for significant strategic grantmaking to colleges and universities, public health, international relations, and most recently, New York City Mayor Michael Bloomberg’s Opportunity NYC program.[1]

But in recent years, Starr also captured some unwelcome attention in New York Attorney General Eliot Spitzer’s investigation of Starr’s board chair, Maurice “Hank” Greenberg. [2] This investigation focused on stock trading manipulations more than three decades earlier that, according to Spitzer, abused and undermined the charitable purposes and resources of the Foundation.

This was not the first time Greenberg had experienced such scrutiny. Until he was forced out due to multi-billion dollar accounting misstatements, Greenberg was the longtime CEO of the American International Group (AIG),[3] among the very largest insurance and financial services companies in the world,[4] founded by Cornelius Vander Starr. On C.V.’s death, the estate went to the Starr Foundation, which Greenberg ran.

Greenberg’s concurrent roles as one of the executors of Starr’s estate, as a director of the Starr Foundation, and as a controlling party in AIG and 3 other Starr-related businesses, were the critical factors in the charges Spitzer raised against the corporate titan. According to Spitzer’s report, Greenberg and his partners sold some of the stock in C.V. Starr’s estate to firms they controlled at artificially low prices (they subsequently resold the assets for significantly more money not much later). Because the value of the assets was to have benefited the foundation, Spitzer alleged that Greenberg and his associates had enriched themselves to the detriment of the estate and the foundation.

This was a “fundamental conflict of interest” according to Spitzer: Greenberg controlled the estate, controlled the companies buying the estate’s assets, and controlled the foundation that had been designated as the ultimate beneficiary. Having sold the assets for much less than they might have garnered in the open market Greenberg had essentially shortchanged the foundation in favor of his “personal pecuniary interests.” All told, by Spitzer’s numbers, Greenberg had shortchanged the foundation by some $6 billion.[5]

By all accounts, the multi-billionaire Greenberg was incensed by the attorney general’s charges. He was particularly vocal about the role of the foundation, noting that its assets had increased from $1 million in 1968 to $3.5 billion in 2005, during which time it had disbursed some $2 billion in grants.[6]

Eventually, Spitzer chose not to pursue criminal charges against Greenberg and eventually dropped some, but not all of the civil charges. Now that Spitzer is the state’s governor, there’s some question as to whether his successor as AG will continue to pursue Greenberg. It may well be that the regulators are done with Greenberg for now but Greenberg does not seem to be done with them.

If Greenberg had utilized the billions legitimately at his own disposal in a campaign against government regulation, he might have been bullying the system but he would not have been abusing it. But the Starr Foundation now has shown up in a major way in Greenberg’s massive anti-regulatory crusades.

The National Chamber Foundation is a 501(c)(3) arm of the U.S. Chamber of Commerce with the purpose of research and public policy analysis on issues of tort reform and other issues of concern to the business sector. On the board are the likes of Edwin Feulner, founder and president of the Heritage Foundation, Al From, founder and CEO of the Democratic Leadership Council, and Herbert London, president of the Hudson Institute. Eight figure grants from a multi-billion dollar mainstream foundation to the policy arm of the Chamber of Commerce, unmatched by any other major foundation, stand out as a philanthropic anomaly.

Between 2002 and 2006, there were 17 foundation grants to the National Chamber Foundation (NCF).[7] Seven of those came from the likes of the Verizon Foundation, Publix Supermarkets, and the General Motors Foundation adding up to $2.2 million. The remaining 10 grants to NCF—adding up to a whopping $24.25 million—came from the Starr Foundation.[8] Other major mainstream private foundations of Starr’s size and reputation, even the visibly conservative ones like Bradley or Olin for example, aren’t on the list, and Starr’s contributions overwhelm the much smaller grants from a handful of corporate funders to NCF.[9]

Perhaps the Starr Foundation might simply be a fervent supporter of the NCF’s commitment against tort reform, one of Greenberg’s longtime causes; Starr also gave $500,000 in 2004 and $550,000 in 2006 to the conservative Manhattan Institute for Policy Research [10] for what seems to be its tort reform project. In light of class action suits against AIG, Greenberg once called on investors to stop purchasing government bonds in states that did not enact tort reform legislation[11] and referred to tort lawyers as “terrorists.”[12]

But the foundation’s interest in the Chamber appears to go beyond common concerns about class action litigation against corporations. The U.S. Chamber’s national apparatus has long been close to and supportive of AIG and Greenberg. Money to the National Chamber Foundation appears to flow directly and indirectly to the Chamber itself for its public policy programs and some staffing. According to review of at least three years of recent 990s, NCF apparently held and owned several million dollars worth of AIG stock. At the helm of the Chamber, Thomas J. Donohue has been consistently and vocally supportive of Greenberg and AIG even after the SEC and New York State AG investigations that led to Greenberg’s removal from the AIG board.[13]

The Chamber (a 501(c)(6) organization) and the National Chamber Foundation (a 501(c)(3)) do public policy education and, in the case of the Chamber itself, lobbying against government regulation of the business sector. According to Political Money Line (Congressional Quarterly’s Money-in-politics database), the U.S. Chamber of Commerce was the nation’s top spending lobbying entity in its last half of 2005 filings devoting $10.5 million to its Capitol Hill policy agenda (not counting an additional $10.25 million in lobbying expenditures by the U.S. Chamber of Commerce institute for Legal Reform, #4 on the list),[14] and ranked #2 for the first half of 2006 with $14.3 million in lobbying expenditures (the Chamber’s Institute for Legal Reform stood at #7 with $9.2 million).[15] In past expenditure reports, names listed as staff of the National Chamber Foundation have shown up as listed lobbyists for the U.S. Chamber of Commerce.[16]

Perhaps Starr’s distinctive support for the Chamber is simply the result of the  foundation’s ideological support of the Chamber’s anti-regulatory agenda, completely unrelated to Hank Greenberg’s having been impaled on the horns of Sarbanes-Oxley as implemented by the New York State AG and the federal Securities & Exchange Commission. But in light of Hank Greenberg’s all-out frontal assault against government regulation and Sarbanes-Oxley—as well as a desperate and generally understandable desire to resurrect his personal and professional image—the Starr Foundation grantmaking to the Chamber’s (c)(3) affiliate looks a little too focused on his personal (reputational and, as the AG’s report suggests, pecuniary) interests.

Maybe if the Starr Foundation‘s convergence with Greenberg’s personal and political ended with the grants to the National Chamber Foundation—only minimally reported in the press to date—that would be the end of the story. But it’s not.

In December 2006, something called the Committee on Capital Markets Regulation, co-chaired by the former head of the Bush administration’s Council of Economic Advisers, R. Glenn Hubbard, issued a report[17] concluding that “U.S. markets were suffering under overzealous enforcement and unwieldy rules”.[18] The lion’s share of the panel’s funding, some $500,000, came from a grant from the Starr Foundation, the remainder came from a so-called “vulture” investor named Wilbur Ross,[19] and a hedge fund manager named Kenneth Griffin, both of whom served on the committee. Starr’s lead funding role led many critics to ascribe the report, regardless of its merits, as yet one more element in Greenberg’s war against his federal and state regulatory critics, made even more dubious because of the use of tax exempt foundation resources. The word spread quickly about the report and its sponsors. Senator Christopher Dodd of Connecticut, the chair of the Senate Banking Committee, was quoted as referring to the report as the product of the “Hank Greenberg commission.”[20]

Businesses like AIG, billionaire corporate honchos like Greenberg, and business associations like the U.S. Chamber of Commerce have every right to promote political positions in which they believe. But in this case, the array of foundation and nonprofit—or potentially sham nonprofit—activity on behalf of Hank Greenberg appears to be more focused on one man’s obsessive agenda than a broader, disinterested policy position. Whether conservative or liberal, whether pro- or anti-business, philanthropy is not supposed to enrich any individual or corporation. It may not be the case here, but the confluence of actors, organizations, and foundation grants would lead many observers to believe that the Starr Foundation’s grantmaking to the National Chamber Foundation and the Committee on Capital Markets Regulation tips the scales a bit too much in the direction of Hank Greenberg’s personal and pecuniary interests.

The juggernaut of attacks on Sarbanes-Oxley oversight of the corporate sector is picking up steam, with the U.S. Chamber of Commerce releasing its own capital markets regulation report, and New York City Mayor and Democratic Senator Chuck Schumer issuing a joint statement saying that the “tough regulation” of Sarbanes-Oxley is “contributing to New York City’s loss of its competitive edge in the financial services industry to cities like London and Hong Kong.[21] It would be an embarrassment if the use of the Starr Foundation’s tax exempt millions in these ways led observers to believe that nonprofits supported the corporate world’s agenda against government oversight and enforcement.[22]

The coda to this story? The Starr Foundation recently released the results of its own internal review of Spitzer’s charges against Greenberg.[23] A three-member panel—two retired jurists plus the president and CEO of the Starr Foundation—declared that Greenberg and the other executors had “acted in good faith and prudently performed their duties.”[24]

For all an outside observer might know, the Starr Foundation’s panel report might be accurate, or it could be well-crafted whitewash. Regardless, it suggests an odd and disturbing approach to self-regulation as an alternative to government oversight and enforcement—conduct your own review and declare victory, much like the internal audit tried recently at the Smithsonian.[25].

Will Sarbanes-Oxley go down? Will in-house accountability reviews like Starr’s and the Smithsonian’s emerge as the foundation sector’s self-regulatory alternative to the application of Sarbanes-Oxley-type standards and enforcement in philanthropy? Hard to say, but as he migrated from the AG’s office to the governor’s mansion last fall, Spitzer appeared to ease up on his dogged pursuit of Greenberg and apparently his concern about corporate accountability.[26] For his part, Greenberg recruited lots of powerful friends on the Democratic side to weigh in on his behalf, including former New York State Governor Mario Cuomo, who helped coordinate a PR campaign for Greenberg.[27] Who is the new New York State Attorney General who inherits whatever might be left of Spitzer’s pursuit of the former AIG honcho? None other than the former governor’s son, ex-HUD secretary Andrew Cuomo, reportedly much less interested than his predecessor in pursuing corporate Sarbanes-Oxley-oriented corruption.[28] It remains to be seen if he will display the courage to stand up to Greenberg’s combined PR and philanthropy onslaught.


1.      See Starr Foundation well as here .

2.      Report on Breaches of Fiduciary Duty by the Executors of the Estate of Cornelius Vander Starr, December 14, 2005 (PDF).

3.      In 2005, Greenberg was forced out of AIG after being compelled by regulators to make a $1.7-billion adjustment in the firm’s book value because of faulty accounting, whose public acknowledgement resulted in a huge loss in AIG stock value—and cost Greenberg his job. Jenny Anderson, “Insurer Admits Bad Accounting in Several Deals,” the New York Times (March 31, 2005).

4.      In 2006, AIG was at its long-held 9th place ranking (in terms of revenues) in the Fortune 500 .

5.      “Greenberg Accused of Bilking $6bn”,, December 14, 2005

6.      Ira Stoll, “Greenberg Lashes Out at Spitzer, Defends His Role at Foundation ,” the New York Sun, December 16, 2005

7.      Foundation Center Online database

8.      GuideStar Grant Explorer   misses the Publix support but captures a $5,000 grant from Marathon Oil Corporation in Houston, Texas and $10,000 from the Curtis L. Carlson Family Foundation of Minneapolis, Minnesota. In 2001, Starr gave at least another $2.1 million to the National Chamber Foundation.

9.      Both GuideStar and the Foundation Center depend on reports from foundation funders. Estimates are that some half of corporate grantmaking does not occur through corporate foundations and therefore would not be reported to GuideStar or the Foundation Center.

10.    Manhattan Institute .

11.    Ellen Kelleher and Amy Yee, “AIG Chief Playing Part in Campaign for Tort Reform,” the Financial Times (April 11, 2003)

12.    In a 2005 speech to business executives in Boston, Greenberg described lawyers opposed to tort reform as “terrorists” and characterized class-action lawsuits as a “blight” on the United States. Greenberg was prone to using dire language to describe his own travails, describing his SEC and Spitzer problem as regulators “turning ‘foot faults’ into ‘murder charges.’” Andrew Parker, “Donaldson May Bend a Little on Sarbanes-Oxley,” the Financial Times (February 11, 2005)

13.    Examples of Donohue’s encomiums are very strong statements of support for Greenberg personally: “He’s a tough guy. If you’re afraid of conflict and pressure, then you’re not going to work with Hank. He never asked you to put your money where he wouldn’t put his. He was a leader.” (Brooke A. Masters, “Greenberg As Outsider: Globe-Striding Former AIG Chief Sets Out to Rebuild an Empire”, the Washington Post (May 4, 2006). In an earlier piece of Chamber hyperbole, Donohue described the removal of Greenberg as AIG’s CEO as “a case of governance overkill that threatened to destroy the U.S. financial system”. Terence Corcoran, “Overkill in the Hunt for Imperial CEOs”, Financial Post (April 5, 2005). Elsewhere, he added, “I feel very sorry for my friend Hank Greenberg. But more than that I feel very sorry for the environment that we are creating, where people are unwilling to take risks, where capital is moving offshore, where companies are being taken public in London, not here.” Edward Alden, James Hading, and Stephanie Kirchgaessner, “Donohue Backs Greenberg on ‘Out-of-Bounds’ Officials Accounting”, the Financial Times (April 4, 2005)

14.    CQ MoneyLine

15.    CQ MoneyLine

16.    CQ MoneyLine

17.    PDF

18.    Carrie Johnson, “Report on Corporate Rules Is Assailed; Panel’s Business Ties Spark Outcry”, the Washington Post (December 1, 2006)

19.    Ross is famous for having acquired and run the company that owned the Sago Mine in West Virginia, widely considered the most dangerous mine in the nation; an explosion in the Sago Mine on January 2, 2006 resulted in the deaths of 12 miners with only one survivor (PDF ).

20.    “All-Starr Commission”, the Financial Times (December 8, 2006)

21.    “Business Pushes Back against Regulation,” AFX International Focus (March 12, 2007)

22.    By all accounts, the “Greenberg commission” had the blessings of Treasury Secretary Henry Paulson, who had spoken of its openness to rolling back much of Sarbanes-Oxley. It is no mere coincidence that Paulson was the board chair of The Nature Conservancy when its mismanagement and self-dealings led to Senate Finance Committee hearings that TNC staff feared, according to internal documents, would portray the Conservancy as an “environmental Enron” (“Image is a Sensitive Issue”, Washington Post, May 4, 2003).

23.    Starr Foundation

24.    The Starr Foundation report makes special note that the judgment of the “independent committee” was based not only on a review of the transactions regarding stock sales that the AG’s report challenged, but “on the circumstances and events surrounding the evolution of the Starr business enterprise and the steps C.V.Starr (‘Starr’) took in the final years of his life to plan for the continuation of his enterprise. The remarkable story of the Starr enterprise and Starr’s planning for its continuation informs the tasks he imposed on his Executors. This historical context—which is missing from the AG Report—is essential to understanding and evaluating the conduct of Starr’s chosen executors in entering into each of the three transactions discussed in the AG Report.”

25.    The Smithsonian Institute’s board conducted a similar internal audit recently, generally exonerating Lawrence Small for his lavish expenditures. A subsequent review by the Inspector General called the audit into question and Small resigned as charges began to mount. On the internal audit committee was the Patty Stonesifer, the president and CEO of the Bill and Melinda Gates Foundation), and on the Smithsonian board were other foundation sector heavyweights such the Smithsonian’s chair, Roger W. Sant, who chairs the board of the Summit Foundation in D.C., and Eli Broad, with his own eponymous foundation in Los Angeles.

26.    Joel Stashenko, “Spitzer, the ‘Sheriff of Wall Street’, Takes a Pro-Business Stance on Campaign Trail,” The Business Review (June 12, 2006)

27.    Jesse Westbrook, “Former Governor Leads List of Greenberg Allies,” International Herald Tribune, December 20, 2005

28.    Paul Davies, “Spitzer’s Successor May Not Follow in His Footsteps ,” Wall Street Journal, November 11, 2006,