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Published in Nonprofits

Report highlights concern over ‘tainted money’ in nonprofit sector

BY Sunday, February 16, 2020 01:00pm

Nonprofits that depend on private donations and often publicly honor major gifts are increasingly finding themselves in ethically complicated spots when donors become embroiled in scandals.

That’s according to a new report from the Grand Rapids-based Dorothy A. Johnson Center for Philanthropy

Perhaps one of the most prominent recent examples comes via the embattled Sackler family, whose members have collectively donated millions of dollars to major art institutions around the globe. In fact, the family’s patronage to institutions ranging from the Guggenheim to the Louvre may have been the only way the public would have even come across the Sackler name until recently. 

Now, the family and their pharmaceutical company, Purdue Pharma LP, are infamous for the aggressive marketing of the addictive painkiller Oxycontin, despite its known dangers, and their complicity in fueling the nation’s deadly opioid epidemic. 

The situation has left museums with Sackler-named wings and other nonprofits financially supported by the family now facing tough questions. 

Without industry-wide guidelines to help organizations navigate vetting donors and dealing with increased public scrutiny, nonprofit boards and staff members are often left flailing, said Tory Martin, director of communications and engagement at the Johnson Center.

“The question of where the money is coming from and how the money was made in the first place is becoming increasingly apparent because the need for that money is on the rise and the discrepancy between who has it and who doesn’t is becoming ever more visible,” she said. 

From a list of common ethical challenges, 40 percent of respondents to a recent survey by the Association of Fundraising Professionals identified “tainted” money from donors as an issue where more guidance and resources are needed. 

“It’s important to remember that nonprofits are between a rock and a hard place with a lot of these considerations, especially for organizations that are dealing with meeting people’s basic needs,” Martin said.

Left to their own ideals and the reliability of additional resource streams, some organizations have volunteered to refuse or return money from certain donors that they consider problematic. For example, the University of Southern California rejected a $5 million endowment in 2017 from former film producer and accused sexual predator Harvey Weinstein. The gift was meant to support female filmmakers. 

On the other hand, many organizations say they are unable to return funds once they have already been accepted. The Massachusetts Institute of Technology, Harvard University and Ohio State University all refused to return donations from financier Jeffrey Epstein after he was convicted of sex crimes. 

More locally, a lodge at Interlochen Center for the Arts in Northern Michigan was named after Epstein, who attended the camp in the 1960s and later became a donor. Interlochen renamed the lodge following Epstein’s 2007 conviction in Florida, and “all tangible donor recognition for Epstein was removed from campus,” according to a statement last year from President Trey Devey after the Epstein scandal broke. 

The issue of tainted money is not new to the nonprofit sector, according to Martin. 

“There was a great deal of conversation at the beginning of the 20th century when the first major philanthropists as we think of them like Carnegie and Rockefeller showed up and started spending all this money on libraries and church organs when they also were responsible for tremendous violence within their industrial practices,” she said. “That question of taking with one hand and giving with the other and whether philanthropic activities can clean your slate, as it were, has been a part of the conversation for forever.”

In some circles, the “cleanliness of any money gained through current, predatory capitalist practices should be considered suspect,” according to the report from the Johnson Center. 

Salvation Army founder William Booth, who died in 1912, is often quoted as saying, “the problem with tainted money is there t’aint enough,” adding that donations were “washed clean” when used for the greater good. 

However, the issue may be amplified in 2020 due to the speed at which the public consumes information through technology. The internet seems to be playing a larger role in the spread of public projections and judgment surrounding famous individuals and major donors, according to Martin. 

“We certainly can’t discount the impact of the internet and the hyper-connectedness of the world in how those conversations take place and how quickly they move,” she said. 

The debate over tainted money may be especially pertinent to West Michigan where so many buildings are named after wealthy donors, although major scandals have yet to surface locally.

“We have not seen (the issue of tainted donors) particularly rise forward as something that is a particular concern to the (West Michigan) community,” Martin said. “I think most of the conversations we’re in are still generally focused on the great generosity of the community. It almost has this other effect where because those names are so prominent, the concept of philanthropy is very familiar to people.”

Yet, the issue remains a top concern across the sector and if nonprofit organizations do start vetting donors more rigorously, it will come with a major shift in control, discipline and thinking around charitable giving and gratitude. 

“We have many, many conversations in philanthropy about the power dynamics between donors and nonprofits, but at the end of the day, donors have money and nonprofits need money,” Martin said.

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