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Philanthropy was already in the grip of some serious soul searching, but the revelations about Jeffrey Epstein’s donations to the MIT Media Lab are forcing nonprofits to take an even harder look at the ethics of how they raise money.
“My sense is that every nonprofit leader and board is saying, ‘What are our third rails, what are the gifts that we won’t accept?’ It’s a really difficult conversation,” said Phil Buchanan, president of the Center for Effective Philanthropy and author of “Giving Done Right.”
‘It’s not just how much money you get, but who you get it from and the values that expresses. You’re under a microscope more than ever before.’
—Michael Nilsen, spokesman for Association of Fundraising Professionals
The #MeToo movement, today’s charged political climate, and the growing public scrutiny of America’s very wealthy means institutions must vet their donors more carefully than ever. “It’s not just how much money you get, but who you get it from and the values that expresses,” said Michael Nilsen, vice president of marketing, communications and public policy at the Association of Fundraising Professionals.
“Every gift is a value extension of the donor and by extension, if the organization receives money from that person, that organization expresses those values,” he added. “You’re under a microscope more than ever before.”
The MIT Media Lab’s director resigned last week after reports that lab officials tried to conceal Epstein’s role in $7.5 million in donations, sometimes by listing them as “anonymous” or by keeping Epstein’s name out of correspondence about the gifts. (Some of the money was donated directly by Epstein; some of it was solicited by him, The New Yorker reported.)
Jeffrey Epstein’s contributions to prestigious institutions are now widely seen as attempts to maintain a veneer of respectability as he battled sexual-abuse allegations.
Epstein died by suicide last month in a Manhattan jail while awaiting trial on sex-trafficking charges. The disgraced financier was an active philanthropist, donating $6.5 million to Harvard University and millions more to many other nonprofits, both before and after he pleaded guilty in 2007 to soliciting under-age girls and registered as a sex offender. (Harvard has said previously that it spent Epstein’s money years ago and did not intend to return it.)
His contributions to prestigious institutions are now widely seen as attempts to maintain a veneer of respectability as he battled sexual-abuse allegations. He pleaded not guilty to the latest charges before his death.
MIT has hired lawyers to investigate who knew about Epstein’s donations, and will also perform an internal review of the school’s gift acceptance policies, the school’s president said in a letter to the MIT community .
Every nonprofit should ask these questions
Organizations should ask themselves four key questions about donations they’re offered, Buchanan said: Would we be embarrassed to have this support? Are we being used for an objective that’s counter to our values? Is an oil company trying to donate to an eco-conscious charity to distract the public from the environmental damage it does?
Does the donor expect the nonprofit to provide some benefit, such as a seat on its board of directors, in return for the donation?
Another consideration: Does the donor expect the nonprofit to provide some benefit, such as a seat on its board of directors, in return for the donation? And finally, What would our key constituents — in MIT’s case, that would have been faculty, alumni, staff — say if they knew about this donation?
At MIT, some staff referred internally to Epstein as “Voldemort, or he who must not be named,” the New Yorker reported. The school also sometimes listed Epstein’s donations as “anonymous” in their records, according to The New Yorker. The impulse to conceal is an obvious red flag, Buchanan said. “If your instinct is, this shouldn’t be public, then that means it’s probably not the right thing to do,” he said. (MIT did not comment for this story beyond the president’s letter.)
Managing the potential for ‘reputational damage’
MIT’s Epstein controversy is a pointed reminder to universities and other nonprofits to revisit their gift acceptance policies — and if they don’t have one, write it now, fundraising experts said.
Schools frequently have a written gift acceptance policy, and some — like this one at the University of Southern California for example — prohibit taking donations that “could damage the school’s reputation.” MIT put Epstein on a “disqualified” donor list, the New Yorker reported, which indicates that the school had protocols in place for questionable donations. (MIT’s former development director has said he followed school rules when accepting Epstein’s money .)
Universities often use teams of detective-like experts called ‘prospect researchers’ to do due diligence on potential donors.
Universities often use teams of detective-like experts called “prospect researchers” to do due diligence on potential donors. These researchers try to figure out what donors may be interested in supporting with their money, and investigate a donor’s capacity to give.
Finding out that a potential donor just sold a $30 million home, for example, would indicate they might be primed to make a major contribution. Prospect researchers also ferret out any possible red flags. A school of public health may not want to accept money from someone who sits on the board of a tobacco company, for example.
Some institutions even have policies that allow a donor’s name (either a living or deceased one) to be removed from a building if the donor is “involved in activities that conflict with the community values or that bring dishonor or embarrassment to the community,” Nilsen said.
A debate that goes back to the Rockefellers and before
Accepting money from questionable sources has been a long-simmering tension in philanthropy. During the Gilded Age, churches were split on whether to take money from oil tycoon John D. Rockefeller, said Ben Soskis, research associate in the Center on Nonprofits and Philanthropy at the Urban Institute, a Washington, D.C. think tank.
‘If the devil himself should give me $1 million to use in the Lord’s business, I’d take it and use it.’
—A Sioux City pastor quoted in a 1905 newspaper article about oil tycoon John D. Rockefeller’s contributions to churches
Some gladly took the funding because they saw a distinction between the source of the money and the good they would do with it. “If the devil himself should give me $1 million to use in the Lord’s business, I’d take it and use it,” one Sioux City pastor said in a 1905 newspaper story about the controversy, Soskis told MarketWatch. But others rejected the contributions because they felt accepting Rockefeller’s money amounted to an endorsement of his monopolistic business practices.
When the question of whether to accept money relates to a donor’s criminal behavior — in Epstein’s case, sexual abuse of young women — answers tend to come easier. But lines can get blurry fast when nonprofits start examining how wealthy donors made their fortunes.
“Someone like Epstein is a figure who is pretty extreme in his misdeeds, but the sector has started to ask this question about figures who are perhaps less egregious but still have questions around them,” Soskis said.
‘What about the corporate foundation that’s connected to the for-profit prison company? Would we accept their funding?’
—Phil Buchanan, president of the Center for Effective Philanthropy and author of ’Giving Done Right.’
For example, environmental organizations are reconsidering the message it sends if they accept gifts from donors whose wealth comes from the oil or mining industries. “There’s a lot of gray space between someone convicted of a crime and business practices which are arguably detrimental to the planet, but nonprofits are increasingly having to confront that decision,” Soskis said.
Buchanan, of the Center for Effective Philanthropy, said his organization will soon stage a staff debate on who they wouldn’t be willing to accept money from. “It’s clear to me we wouldn’t take support from, or take as a client, a funder pursuing a white nationalist agenda — that’s easy,” Buchanan said.
“But what about the corporate foundation that’s connected to the for-profit prison company? Would we accept their funding, would we not?” he added. “These are questions that every nonprofit should be asking.”
A sensitive time for philanthropy
The Epstein controversy comes amid a bubbling debate about philanthropy’s role in society: Is it an unalloyed public good, or a tax-deductible strategy for bolstering wealthy donors’ reputations? As income inequality has increased, fewer middle-class households are donating to charities.
The debate mirrors a broader question about whether accumulating vast wealth is a feature or a bug of our society.
But overall giving hasn’t declined, because wealthy mega-donors are giving more than ever, according to data from Giving USA. Those donors wield immense power to pursue their own agendas while remaining accountable to no one, and critics have lined up to question that system. The debate mirrors a broader question about whether accumulating vast wealth is a feature or a bug of our society.
Jay Frost, a fundraising consultant who works with large institutions, says nonprofits should think more than ever about which donors are “aligned with their values” and reject those who aren’t. But he worries the Epstein controversy unfairly tarnishes philanthropy as a whole at a time when there is a need for resources to address the world’s most pressing issues.
“I’m really afraid that this gives an impression that this is endemic, which it’s not,” Frost said. “To say money itself is the problem is to not recognize that there is need everywhere. In the absence of philanthropy, those needs won’t be addressed.”