haden_pomeecall_1 / Neon Tommy

June 17, 2016; Los Angeles Times

Colleges, hospitals, museums, and social service organizations all depend on a national commitment to charitable giving. A charitable gift is “designed to benefit, ameliorate, or uplift mankind mentally, morally, or physically.” It’s not for the benefit of the donor or those managing the foundations and organizations holding those funds. In return for the societal benefit of these donations, tax benefits and public honor come back to the donor. Protecting the integrity of charitable intent is critical; today, two celebrities are providing us with lessons worth studying and, perhaps, worrying about.

Pat Haden, a star quarterback, successful businessman, and current USC athletic director, became chairman of the three-member board of the George Henry Mayr Foundation in 1999. The $25 million foundation was established to “provide scholarships and pay incidental expenses for ‘deserving, needy and worthy young men and women’” who Mayr wanted to pursue “‘useful trades’ like chemistry or electrical engineering.” Haden was joined on the board by his daughter and daughter-in-law.

The L.A. Times recently took a look at the foundation under Haden’s leadership. What they found was that:

Haden, his daughter and sister-in-law together collected about $2.4 million from the foundation for part-time roles involving as little as one hour of work per week, according to the foundation’s federal tax returns for 1999 to 2014, the most recent year available. […] Half of that, about $1.2 million, went to Haden. His annual board fees have been as high as $84,000; the foundation paid him $72,725 in 2014. During Haden’s tenure on the board, donations directed to USC, where he has been athletic director for nearly six years, far outpaced the amounts given to any other school, a Times analysis of the tax records shows.

For a small foundation with no paid staff, is this behavior that crosses the line and misuses funds given for a charitable purpose, or is it just fair compensation for work done by the organization’s Board in lieu of hiring staff? Haden feels the payment was appropriate, given the work done and the skill of those performing it. But Mark Hager, an associate professor of philanthropic studies at Arizona State University, said in an email to the Times that the Mayr payments to the board would be high “even for a foundation that was giving out more than $50 million in grants each year.”

For many donors, public acknowledgement is a major benefit of their generosity. Can one fairly get that benefit without actually making a gift? Donald Trump provides us with something to chew on. In the spring, the Washington Post recently examined the 4,844 individual gifts claimed to be made by Trump in the last five years totaling over $102 million and found that not one of the gifts “was actually a personal gift of Trump’s own money.”

The largest items on the list were not cash gifts but land-conservation agreements to forgo development rights on property Trump owns. […] In California, for example, Trump agreed to an easement that prevented him from building homes on a plot of land near a golf course. But Trump kept the land, and kept making money off it. It is a driving range.

Trump included numerous gifts given by the Donald J. Trump Foundation, “which didn’t receive a personal check from Trump from 2009 through 2014, according to the most recent public tax filings. Its work is largely funded by others, although Trump decides where the gifts go.”

Two celebrities, two cases that challenge the integrity of the nonprofit sector. If we do not trust that charitable funds are used for a benefit to society, then why would donors continue to contribute, and why should charities continue to receive the benefits of tax exemption? Are Haden and Trump just anomalies, or are they the canaries in our mine?—Martin Levine