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Why Donating Millions Is Hard To Keep Secret

Resource type: News

Wall Street Journal |

Anonymous Gifts Are Growing, But Groups Are Under Pressure To Reveal Benefactors’ Names As anonymous giving to charities increases, it’s getting harder for donors to maintain the anonymous part. Wealthy philanthropists last year made 37 gifts of $5 million or more without publicly revealing their names. That’s up from 27 such gifts in 2006, and just 13 in 2004, according to an analysis by the Center on Philanthropy at IndianaUniversity. Such publicity-shy donors say they want to give back to their communities but avoid the headaches of a high public profile, including pushy fund-raisers, jealous relatives and even risks to their personal safety. The rise in anonymous giving comes at a time when nonprofits are coming under increased pressure to reveal the names of some of their most generous donors. Proponents of greater disclosure by charities, including some lawmakers and consumer groups, argue that keeping givers’ identities secret can mask efforts by wealthy individuals and corporations to use philanthropy as a tool of undue influence. This past summer, the University of California at Irvine revealed the source of an anonymous $20 million donation for its law school — it was billionaire real-estate developer Donald Bren — after a newspaper criticized the school for not releasing the name. And political rivals of presidential candidate Sen. Hillary Clinton have pressed her husband, former president Bill Clinton, to reveal names of anonymous donors to his foundation. Worried that forcing too much disclosure could damp charitable giving, some state lawmakers are pushing to protect donor privacy. Colorado and Georgia recently passed laws to allow certain institutions, especially publicly funded schools, to keep anonymous donors’ names private. And in Kentucky, which also has such a law, the state Supreme Court is weighing a lawsuit from a local newspaper that seeks to compel the University of Louisville Foundation to reveal the identities of 62 anonymous donors. Wealthy donors have different reasons for wanting to stay out of the limelight. Most major religions, including Christianity, Judaism and Islam, regard anonymous gifts as a more sincere or even higher form of giving compared with gifts for which the donor takes credit publicly. “If you put your name on a building, you feel a little self-conscious, a little tasteless,” says Jerome Kohlberg, the billionaire co-founder of Kohlberg Kravis Roberts. It “feels more down-to-earth, more genuine and passionate” to give without fanfare, he says. Some donors seek to remain anonymous to avoid confrontations with jealous relatives who may have other plans for the family’s wealth. Still other people fear for the personal safety of themselves and their families. In February 2007, philanthropist Ernest Rady and his family were held hostage and attacked with stun guns while an invader ransacked their La Jolla, Calif., home. Mr. Rady was targeted shortly after making several big gifts, including $60 million in 2006 to the Children’s Hospital and HealthCenter in San Diego. Robert L. Grimes, an attorney for the Rady family, says “it appears highly likely that the reason the family was targeted was the publicity” surrounding the donations. He says the family is considering making at least some future donations anonymously to try to lower their public profile. Melissa Berman, chief executive of Rockefeller Philanthropy Advisors in New York, says growing discomfort with publicity has been a boon for donor-advised funds, which allow donors to give to a charity in the name of the entity that runs the fund, often a financial-services firm. What’s more, donor-advised funds come with attractive tax breaks — up to 50% compared to a maximum 30% when giving through a private foundation. To honor requests for privacy, nonprofits are developing elaborate screens to keep unauthorized staff from accessing sensitive donor information. The University of California at San Francisco, which announced a $150 million anonymous pledge in June, assigned a number to the donor to keep the person’s name off internal databases. The donor’s name is on a slip of paper that is kept in a safe, says James W. Asp II, the university’s associate vice chancellor of development. At Miami’s New World Symphony, which received an anonymous gift of $90 million in February 2007, staff members were required to sign nondisclosure agreements promising to keep the donor’s name secret. Sometimes, word leaks out anyway. Members of Miami’s insular big-money crowd think they know who New World’s big donor is: Lin Arison, the widow of Carnival Cruise Lines founder Ted Arison. James Dubin, a partner with law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, acting as spokesman for the anonymous donor, says the secret patron “believes that if the identity of the anonymous donor comes out it will adversely affect other fund raising” for the symphony. Ms. Arison didn’t respond to requests to comment. Chuck Feeney, a co-founder of Duty Free Shoppers, anonymously committed more than $620 million in 1982 to 1996 through his Atlantic Philanthropies foundation. But over time, as the foundation giving topped $100 million a year, it became increasingly difficult to keep Mr. Feeney’s identity under wraps. “As the dollars grew, it attracted more and more attention,” says Harvey Dale, a professor of philanthropy and the law at New York University who worked hand-in-hand with Mr. Feeney to conceal his identity as the donor behind the anonymous gifts. Mr. Feeney declined to comment. Some anonymous donors turn out to be swindlers. Charities in the San Jose, Calif., area last spring say they were approached by a man operating under the name Emilio Maschino who indicated he wanted to make several donations of as large as $400,000. “Obviously we were all thrilled and enthused,” says Andrew Bales, president of Symphony Silicon Valley, one of the charities approached. “I’d be lying if I said, ‘Oh, I knew it was a scam.’ ” After receiving VIP treatment from various charities, including top seats at local performances and expensive meals, the purported donor skipped town without making any gifts, leaving a local businessman to pay his hotel bill.

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Center on Philanthropy at Indiana University