A the audience settled in for
Mozart’s Cosi fan tutte at New York’s Metropolitan Opera last November, they noticed
that the text on the translation screens and the playbill thanked an important
patron for making the production possible. Every philanthropist dreams of such a
tribute. In this case, the tribute was to the past generosity of a man
preoccupied with more pressing worries: Alberto Vilar, whose passion for giving
to the arts from the millions he made investing in technology was eclipsed only
by his well-publicized financial implosion and the ripples it sent through
cultural institutions. His fall from grace culminated in spring 2005, when the
Securities and Exchange Commission charged Vilar, his business partner and their
firm with fraud and misappropriation of client funds, leaving a slew of
nonprofit organizations, including the Met, with the knowledge that they might
never receive the money from his more recent pledges, which totaled more than
$200 million.*
Such empty promises have made nonprofits wary of some very
generous pledges in the past year, and caused them to occasionally resort to
fairly unsubtle background checks. It was a surprise to Melissa Berman,
president and CEO of Rockefeller Philanthropy Advisors in New York, when she
received a call a few months ago from an administrative staffer at a
high-profile nonprofit–she declined to specify which one–conducting a reference
check on a well-known donor who had offered a large gift.
"This was a little unusual," Berman says. She does understand
the need to ask, however. "Many relationships between donors and nonprofits are
based on really heartfelt and deeply seeded commitments and values and
passions," she notes. "And all of that is great, but when it comes time for this
to be converted to a large amount of cash that’s going to be paid out over a
period of years–when the donor and nonprofit are going to have their names tied
together for a long time–then it’s time to be pretty explicit about it."
More often, questions about a potential donor’s character and
solvency come up subtly and informally in conversation among philanthropist
peers. The idea of a formal reference check is also a new one to Lewis B.
Cullman, who has been examining the facets of fund-raising through peer
pressure, matching gift strategies and other tactics for a book he is writing.
At 87, Cullman, former chairman of Cullman Ventures in New York and author of
Can’t Take It With You: The Art of
Making and Giving Money, has a long history as
the kind of patron who, along with his wife, Dorothy, develops long-term
relationships with nonprofits, a particularly desirable quality to charities in
these uncertain times. Their names turn up around New York’s cultural centers,
such as the American Museum of Natural History’s Cullman Hall of the Universe
and the New York Public Library’s Dorothy and Lewis B. Cullman Center for
Scholars and Writers. The Museum of Modern Art plans to open the Lewis B. and
Dorothy Cullman Education and Research Building this year.
TOP VIEW: The Vilars and Kozlowskis of the philanthropic world have put recipients in the sticky situation of
having to second-guess the ability of large donors to live up to pledges. Nonprofits are increasingly eager to develop long-term relationships with their
donors, but when a new pledge is made, they just might have to call friends of
the donor and ask overtly for a character reference. | If Cullman did know of a philanthropist peer who was having
financial problems, he says, "I suppose I should" be forthcoming about it. He
believes a degree of wariness may be prudent in some cases; he has certainly
seen that, as he puts it, "people who make it fast may lose it fast."
Though a long-held family fortune could also dwindle, it has been a few
quickly–sometimes dubiously–earned fortunes that have left certain nonprofits
with gaping holes in their financial statements. There was a time when a
nonprofit could wait until the gift was in hand to report it as income, but
since 1995 the Financial Accounting Standards Board has required nonprofits to
report promised gifts as income; thus their books will indicate a loss if a
pledge fails to materialize. Some organizations have instituted policy changes
because of problems. Take Vilar’s alma mater, Washington & Jefferson College in
Washington, Pa. Even as his company was falling, Vilar had reportedly promised
$18.1 million toward a new technology center; as late as summer 2003 it was
referred to in the college’s campus news as the Vilar Technology Center. The
college will not reveal what portion of the gift he provided, but the school had
to take out a loan in the form of a bond for the balance, says John Plante, vice
president for development and alumni relations, and the school is still raising
funds for the building. The college now has a rule that campaigns for new
buildings must raise 90 percent of the cost, instead of the prior 70 percent,
before it will break ground. Some nonprofits are also specifying under what circumstances they would offer
a naming opportunity, as well as what circumstances might cause them to refund
money or remove a name. A criminal conviction is one such cause. Last August,
Seton Hall University removed the name of alumnus Dennis Kozlowski, former
chairman and chief executive of Tyco International, from its business school
building and from the library’s rotunda–at his request, according to the school.
Kozlowski was convicted last June of grand larceny, securities fraud, conspiracy
and falsifying business records. The building is now called Jubilee Hall.
*Vilar’s attorney, Jeffrey
Hoffman, did not respond to questions by press time.
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