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February 2005
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March 2005

Spitzer Ends Imus Probe


The New York Attorney General's office last night ended its inquiry into the Imus Ranch, run by radio host Don Imus.

In a letter sent to Mr. Imus last night, Gerald Rosenberg, the chief of the office's charities bureau, said, "Based on the information you submitted to the Charities Bureau, we have determined that no further inquiries concerning the Ranch are needed at this time."

Possible Abuses of Supporting Organizations

Advisors to wealth, what responsibility, moral if nothing else, do they bear for promoting charitable programs that exploit existing loopholes to benefit clients substantially while producing relatively little in social good? Do advisors simply represent the client, and their own practices, or is the provision of such advice a profession affected with the public interest? So, that one might say to a wealthy client, "Well, yes, under current law you could probably do that, but it really is not in the proper spirit of giving, and you shouldn't do it, or should at least think twice about it. What if it makes the front pages of the Wall Street Journal, or the evening news, could you defend it as "philathropy"?

ABC NEWS via COF List Serv (full text provided),

On the east fork of Wyoming's Wind River, there lies what officials call a 220-acre tax loophole: Thunderhead Ranch, valued at more than $4 million.

Personal injury lawyer Gerry Spence donated it to a special kind of charity he runs and got a big tax deduction. It's a deduction Senate Finance Committee Chairman Chuck Grassley, R-Iowa, argues should no longer be allowed because Spence continues to control the ranch and no actual money went to the needy.

"We have a regulation that you could drive a Mac truck through to avoid taxation," Grassley said.

Spence says the ranch is legitimately used for seminars he runs for trial lawyers. He would not say how much he took in a tax deduction -- "It's frankly none of your business," he said -- but by law he's entitled to deduct the full value of the ranch.

The loophole is called a "supporting organization." Created 36 years ago as a way of helping charities, supporting organizations are, Grassley says, increasingly misused by the wealthy.

The loophole allows the wealthy to donate expensive assets to these organizations while retaining control of the assets and getting a big tax break. But nothing necessarily goes to the needy.

'Parking Place for Billions of Dollars'

"Quite frankly, [it's] nothing more than a parking place for billions of dollars of assets that are not used for charitable purpose that they were intended to use for," Grassley said.

Senate investigators say the Conrad N. Hilton Fund -- named for socialite Paris Hilton's great-grandfather -- is another example.

While such charitable private foundations are required to give at least 5 percent of their income to charity, supporting organizations have no requirements.

So in 2003, when the Hilton Fund held $467 million worth of Hilton hotel stock, only a minuscule .8 percent of it went to any charitable cause. The Hilton Fund's original charitable tax deduction could have been worth the total value of the stock.

The IRS agrees that the problem is out of control and is launching a new round of audits of supporting organizations.

"We've seen instances where promoters will bring schemes to taxpayers, help them get a deduction, and then the taxpayer controls the money and even uses it to buy a beach house!" said IRS commissioner Mark Everson. "Now, that's not what Congress intended."

"It's very hard to put a figure on," said Grassley of the tax loophole benefits, "but it's billions of dollars."

Spence and the Hiltons both say they are in compliance with the law. But that law may change. Next month, Grassley will push to close the loophole and ensure tax breaks for charity actually go to charity.

Don Imus's Ranch for Sick Kids in the News

Don Imus's Ranch for Sick Kids made the front page of the Wall Street Journal, as Eliott Spitzer investigates. What the case highlights, I think, is the danger of mixing up, as social venture people so often do, plans that provide both private benefit and public good. From a legal and regulatory standpoint, there is a big difference between an investment, a personal expense, and a gift; as there is a big difference between a business, a hobby, and nonprofit. When you start blending these elements, from disparate legally distinct realms, into a new mix and calling it a charity or a social venture (where both you and the public benefit) you risk not only terministic confusion, but also hitting legal and regulatory trip wires, even if your intentions are pure.

NAACP and the IRS

From the NYTimes,

The National Association for the Advancement of Colored People is locked in a standoff with the Internal Revenue Service, preferring to risk its tax exemption rather than hand over documents for an I.R.S. review that the civil rights group contends is politically.

Politics is war by other means, and civil society is now another battle zone. "You are for us or against us" has to be one of the defining phrases in American democracy, the decline thereof. What is democracy for if not to assemble peacefully, to speak freely, to organize and to petition government for redress?  Ah well, I'm  not black, just liberal.

Nike's New Cause Related Marketing Campaign

From the good people who brought you the Yellow Bracelet, and women laboring in sweatshops, comes this,

The Nike Foundation plans to focus all of its philanthropic giving on educational, economic and other initiatives that help girls in developing countries, the nonprofit said Tuesday.

The foundation plans to give about $5 million a year to programs identified with help from other charitable organizations and United Nations groups that have experience in helping girls, foundation President Maria Eitel said.

So through the Hidden Hand of Marketing the perception of good comes out of evil, and is priced into the product. (Via COF Listserv.)

Continue reading "Nike's New Cause Related Marketing Campaign " »

Foundations: Winning the War of Ideas

Via Cof list serv from the Stanford Social Innovation Review, "Winning the War of Ideas: Why Mainstream Liberal Foundations and the think tanks they support are Losing in the war of ideas in American politics," by Andrew Rich. (In pdf. nine pages.)

Apparently, the left outspends the right by a considerable margin, but gets less impact. The right funds overall think tank infrastructure while the left funds specific niche projects. The right has a consistent over arching narrative, or big picture, the left dissolves into a myriad of issue specific or niche-group specific intiatives competing with one another, like the workers at the Tower of Babel, in many "voices." The right markets the ideas, the left is more likely to see the study itself as the final product. More interesting is the liberal ideological bias towards fairness, moderation, objectivity and neutrality which make the funding of ideology construction, soundbites and hate-mongering seem ignoble or odious, rather than a necessary evil in our increasingly brutal society of the spectacle. You might say the right glories in it to great and important effect. Thank the corporate marketing mentality? The Leo Strauss Stiftung? Or Wealth Bondage generally? The enlightened response, I think, is art, or artfulness of a higher order - not noble lies, nor faux-scholarship, but art, particularly satire. For the faults of the right wing thinks are moral, though a bargain struck, presumably, should be a bargain kept, whether in think tanks or a bordello. The left won't win the war of words, if it is "willing to wound, afraid to strike" (Alexander Pope).

Foundations Offer Asset Protection for Criminals?

From USA Today, via Cof list serv.

White-collar criminals routinely avoid hundreds of millions of dollars in court-ordered restitution by schemes such as transferring assets to relatives, a Government Accountability Office study said Thursday.

...In the cases the GAO examined, it found that white-collar criminals used a variety of tricks to thwart collection. Among them:

Shifting bank and brokerage accounts to family trusts and foundations. Suspects did so after they were arrested but before they were sentenced.

Bodes well for conservative causes, when you think about the all the CEOs under indictment.

Vision and Philanthropy at the Bradley Center for Civic Renewal at Hudson Insitute

From Hudson Institute, via Lenore Ealy's TPE list serv, the transcript of the February 16 symposium “Vision and Philanthropy.” Symposium panelists addressed two questions in their prepared essays: What is “conservative vision,” and what can philanthropy do to support it? Panelists included: Stuart Butler, Linda Chavez, Michael Cromartie, Pete du Pont, Barbara Elliott, Steven Hayward, Roger Hertog, Heather Higgins, Peb Jackson, Robert Kagan, Leon Kass, David Keene, William Kristol, Leonard A. Leo, Heather Mac Donald, Scott McConnell, Stephen Moore, Grover Norquist, James Piereson, and Robert Woodson, Sr. .The discussion was moderated by Amy Kass. The keynote speaker was Peter Wehner, Director of Strategic Initiatives, White House, who spoke on the subject of President Bush's governing philosophy. To access the transcript directly (in PDF, 55 pages, 552 KB).

I read the transcript with interest, and admired Amy Kass for her quiet leadership - wish she would run for Congress in my district on whatever ticket, or least come here to give lecture on literature. Common ground with progressives, I think, in the panlists concern for the ugliness, crassness, and raunchiness of brand culture, and also more common ground than the conservatives might realize, in the belief that grassroots solutions are often better than bureaucratic. What struck me about the essays was how strong they were on individual freedom, and on the personal responsibility of the poor, but how weak they were on soul-making in the market, or the role of the corporation as a solvent of morality. Weakest of all, and saddest of all, there was no emphasis - and this quite familiar to me from prior conversations - on the obligations of the wealthy to those who are less fortunate. Amy Kass and her husband Leon, it struck me, were making an honest and tactful effort to hint at this point, as were others, but the theme never became focal, and no conclusions or action items were reached.

Morality is what the poor lack because they got corrupted by big gummit giving them handouts. But what has corrupted our global corporations that they pollute not only the environment but the souls of our children? And what personal responsibility will the wealthy, freed of tax requirements, take in helping the least fortunate? Easy to criticize the last generation's efforts, through government programs, but how will conservatives lead through their own efforts, with their own hands and their own money? (And what will be done with those remain thoroughly selfish, wealthy free-riders?) I wish every panelist had addressed that issue, because that is one good thing that could come from a conservative philanthropic revival. Even the poor could best be reformed by better, even a more Christian, example from from above. When we come to cases, on promoting philanthropy for the least among us from wealthy conservatives, or from progressives, I hope we will all make common cause. Maybe the next Bradley event might be a multipartisan effort to honor people who do make a difference at the grassroots, rich or poor, liberal or conservative, religious or secular. Instead of policy differences, or fighting for advantage, or crowing over vanguished enemies, maybe we can find practical projects to which many can lend a hand, forgetting our differences and finding ourselves among new friends, and feeling ourselves fellow citizens, both laterally and up and down the wealth chain. Of course that won't win elections per se, or garner tax breaks, but it would make for a better world. I have feeling that Amy Kass would make a wonderful moderator for such a real discussion of philanthropy, whether or not Grover Norquist shows up.