Donations: From bribery to benevolence

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Last year was a tough one for philanthropy. The Guggenheim turned down a donation from the Sackler family of Purdue Pharma fame. The MIT Media Lab’s director resigned after accepting donations from Jeffrey Epstein. And the FBI’s “Operation Varsity Blues” landed Stanford and USC, among other schools, in national headlines for bribery charges against their employees. 

Donating money can be a wonderful thing. Gifts from Peter and Helen Bing help almost half of each class at Stanford study abroad, and monetary contributions both small and large power the University’s financial aid. 

For a private university of Stanford’s caliber, philanthropy is even necessary. Stanford’s $27.7 billion endowment comprises 7,000 endowed funds given to the University and invested over the years. (The University spends 5% of the endowment every year to enable research and a range of other activities that make Stanford such a desirable school.)

But when philanthropy falls short of its benevolent, humanitarian aims, it’s worth asking whether giving is always selfless.

Rob Reich, a Stanford political science professor and the author of “Just Giving: Why Philanthropy is Failing Democracy and How it Can Do Better,” says large donations can be a way to exert power.

“Big philanthropy is by definition an activity that wealthy people do,” Reich said. “It represents an exercise of power by the wealthy to convert their private wealth into some type of public influence. And anywhere in a democratic society that power is exercised, it deserves our scrutiny.”

With great financial power comes great philanthropic responsibility

A spectrum exists between bribery and benevolence, and donations fall in various places along that continuum. Operation Varsity Blues highlighted the most corrupt “donations”; former Stanford sailing coach John Vandemoer pleaded guilty to accepting a bribe, not an altruistic contribution to athletics, for a prospective Stanford student to be “recruited” to the team.

Stanford has recently been working to “codify existing practices and policies” surrounding gift acceptance, said Jon Denney ’85, the University’s vice president for development. This will include enhancing the vetting process for donations, especially in light of the Varsity Blues scandal. The specifics of Stanford’s gift-acceptance policies are not yet publicly available, but University will put forth a written donation policy soon, according to Denney and Martin Shell, Stanford’s chief external relations officer.

The University has also created a gift-acceptance committee that will weigh in when it’s difficult to decide whether to accept a donation. Denney and Shell will sit on the committee along with the vice president for business affairs and chief financial officer, a representative from the Office of the President, the vice president and general counsel, the vice president for University communication and a faculty member. Denney said the committee members are all on board but have not had to make any decisions yet.

University officials must also make sure donors don’t have excessive influence over academic affairs. 

“First and foremost, we want to make sure that any gifts we accept do not in any way interfere with the academic freedom of the institution,” Denney said.

Bad people versus dirty money

A number of issues beside bribery can taint a gift. Reich suggests thinking of problematic donations in terms of a two-by-two chart organized based on “good people” versus “bad people” and “clean money” versus “dirty money.” 

“That introduces the possibility that you have a good person who made dirty money,” Reich said. “They’re not convicted sex offenders, but the money is illicit. Or, you have bad people who made clean money.”

After being convicted of the sex trafficking of minors, the late Jeffrey Epstein seemed like a bad enough person that his donations became unwelcome. In September, Stanford acknowledged receipt of a $50,000 contribution from Epstein in 2004, four years prior to his conviction.

“This donation was directed to the Physics Department and was expended shortly thereafter,” Miranda wrote in an email to The Daily. “Given this history, there is no plan to offset the funds.”

MIT’s president promised to donate the $850,000 his university had received from Epstein foundations to charities benefitting victims of sexual abuse. The president of Harvard also said the unspent portion of Epstein’s donations there — $186,000 — would go to support human trafficking and sexual assault victims.

As a major recipient of donations from Epstein — including after criminal charges against Epstein came to light — MIT has taken steps to distance itself from the controversial philanthropist and prevent future fundraising issues. Kevin Esvelt, a biologist at the MIT Media Lab, which received the bulk of the MIT donations, released an update on his lab’s website stating that the lab will add their own new review process for donations since it no longer trusts MIT’s previous vetting structure.

Epstein hoped philanthropic work would bolster public perception of him, with his main charitable foundation wildly overstating its giving, according to The New York Times. 

“Colleges claim to use tainted money for noble ends. Does anyone believe them?” The Chronicle of Higher Education asked in December 2019, saying universities engage in “laundering wealthy philanthropists’ reputations.” Big philanthropy involves an interaction between wealthy donors and schools that court them for their money.

“Gift officers” often reach out to prospective donors first, Denney said, adding that the officers consider donors carefully based on many factors.

If Epstein represents the “bad person” portion of the chart, the Sacklers represent “dirty money.” After evidence emerged that members of the Sackler family helped stoke the opioid crisis by aggressively marketing OxyContin while downplaying the drug’s risks, their critics argued charitable donations couldn’t right the wrongs they caused. Tufts University removed the Sackler name from several of its buildings, and museums including the Guggenheim decided to stop accepting money from the family. 

Reich said that if the Sacklers were to donate to people suffering as a result of the opioid crisis, the situation would be different and the donations would be more welcome.

It is unclear whether the Sacklers donated to Stanford. Although CNN, Inside Philanthropy, The Guardian and other publications reported that they did, Stanford spokesman E.J. Miranda told The Daily he could not confirm or deny the claims.

Philanthropic influence

As public as philanthropy can be (What could be more visible than naming a building after someone?), universities treat philanthropy as private in some ways. Stanford, like other schools, does not make a list of all of its donors publicly available and does not reveal anything about individual donations unless the donor has agreed that information about their gift can be shared. Federal law allows donors to make anonymous gifts to nonprofit organizations.

“There are many individuals who consider their philanthropies to be very personal in nature,” Denney said. “We honor those wishes. It’s up to the individual to decide if he or she wishes to share the information publicly that they’ve made a gift.”

Stanford is a private university. But historically, some have questioned whether large philanthropic foundations should play a role in higher education at all. In 1925, the University of Wisconsin banned accepting money from foundations due to worries about their non-democratic nature, Reich wrote in “Just Giving.” The resolution only lasted until 1929, and since then, the University of Wisconsin has accepted donations from foundations.

Donors can designate their contributions for particular purposes. The strings attached to donations make the biggest difference, however, when gifts are large and when their influence lasts for many years.

Some of the 7,000+ funds in Stanford’s endowment date back more than 125 years, and the strings attached to them are just as old. More than 75% of Stanford’s endowment is legally restricted because when the gifts were given, they were “designated for specific purposes that cannot be changed,” according to the University. 

The rule “gives dead people power over the living,” in Reich’s words. A select group of wealthy individuals, both dead and alive, exert influence over how Stanford spends its billions today.

Contact Jasmine Kerber at jkerber ‘at’ stanford.edu.

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