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CAUT Bulletin Archives

February 2003

U.S. Investigators Shed New Light on College & University Donations

Colleges and universities in the United States are finding themselves at the centre of an ethical debate following the wave of corporate scandals and criminal mischief that has swept across Wall Street.

As part of their investigation of the suspect accounting practices and off-the-books transactions of some of the country’s once-mighty corporations, U.S. officials have documented that universities and colleges have received gifts and donations worth more than $100 million from companies and executives indicted or convicted of corporate crimes.

Former WorldCom CEO Bernard Ebbers, for instance, allegedly paid $36.5 million of company cash to his alma mater, Mississippi College. Gary Winnick, chief executive of Global Crossing, who is alleged to have defrauded shareholders of billions, made major donations to Brown University. And A. Alfred Taubman, the former chairman of Sotheby’s currently serving a prison sentence for price-fixing, has given millions to Harvard University, Brown University, and the University of Michigan at Ann Arbor.

The revelations have led some faculty members, students and alumni to question whether the donations should be returned and donors’ names removed from the buildings, endowed chairs, and other projects established with their gifts.

“Taubman has abandoned the university’s standards, and his name should no longer grace the university’s property and institutions,” the editors of the Michigan Daily, a student newspaper at Ann Arbor, wrote. “Graduates of the (Alfred Taubman) College of Architecture and Urban Planning now have a felon’s name on their degrees.”

Many university administrators, however, are reluctant to upset any of their donors, even those who have been swept up in corporate scandals and criminal investigations.

Ruth Simmons, president of Brown University, flatly dismissed any thought of returning the money when pressed by students questioning the donations given by Gary Winnick.

“Should we dismiss you as a student if we determine that the money with which your tuition was paid was inappropriate?” she asked. “It’s a naive approach to say that there is clean money.”

University and college administrators are also resisting calls to change their naming policies or donation agreements to allow them to strip from the campus the names of donors who are convicted of crimes or engage in unethical behaviour.

“The thought of putting in clauses and extensive agreements with escape clauses and fine detail tends to work against good philanthropy,” Scott Nichols, dean for development and alumni affairs at Harvard Law School, told the Chronicle of Higher Education last month.

“It’s not a commercial enterprise. If you’re going to negotiate a contract, it takes on the aura of a business deal. Good bookkeeping can at times be at odds with good philanthropy.”

Officials are trotting out other excuses for keeping their controversial donations. They say gifts from individuals or companies now embroiled in scandal were often made before the donors ran into legal trouble.

Others suggest that large gifts from suspect sources are a tradition in university and college philanthropy. Stanford University is named after Leland Stanford, a ruthless and unpopular industrialist. The religion building at the University of North Carolina at Chapel Hill is named for William Laurence Saunders, reputed one-time leader of the Ku Klux Klan.

Nevertheless, a few institutions have broken ranks and decided to return gifts and remove the names of tainted donors from campus.

In December, the regents of Seton Hall University voted to change the name of the Brennan Center. The recreation building had been named after Robert E. Brennan, founder of First Jersey Securities, who was imprisoned for money laundering and bankruptcy fraud.

And earlier last year, the University of Oregon returned a $850,000 donation it had received from Jeffrey L. Grayson, former chairman of the investment company Capital Consultants. The company was forced to shut down after investigators charged it with running a Ponzi-like scheme that lost $355 million in investor funds. Grayson pleaded guilty to charges of mail fraud and assisting in the filing of a false tax return.

Still, remarkably few institutions are examining the ethical nature of the gifts they have received from questionable sources. With the U.S. economy still sputtering, many colleges and universities are extremely hesitant to give back or turn away controversial donations.

“My first response is to keep a low profile and hope the rash of business scandals quickly fades,” said Karen Boroff, dean of Seton Hall’s business school.