A mater of trust

When Earlham College got into a dispute with the Indiana Attorney General over its management of the charitable trust responsible for running Conner Prairie, which I have discussed extensively, over here, I questioned whether the actions of the AG were justified in the absence of any allegation of theft or abuse on the part of trustee. Maybe a charitable trust is not a good vehicle for good intentions.  What about a private foundation?

If the Journal Gazette is correct in this story,  something funny may be going on with the Olin B. and Desta Schwab Foundation.  Schwab created the foundation during his lifetime with several million dollars aimed to help school kids pick careers. 

The foundation had its office in Fort Wayne.  It had a board of directors, staff, ran programs with guidance counselors and gave grants to further its charitable purpose. But since Schwab’s death in 1991, its board had shrunk, its office was moved to the office of a local attorney, Richard Blaich, who Schwab put on the board of directors, and who drew up the governing documents.  The board has been trimmed down.  The staff has been fired. The foundation itself, which started out as an Indiana non-profit, is now a Nevada corporation. And most troubling, the foundation purchased a 1.5 million dollar luxury home in Nevada, and is spending $100K per year to maintain this residence, which is being used by Blaich and his family.

As the paper points out, it is entirely possible that all of this was done legally. Meaning that it was done in accordance to the governing documents.

Schwab, ironically enough was concerned with just this scenerio.:

Schwab himself, in a 1988 Journal Gazette article, said he created the foundation because he didn’t trust other people – even other charities – with the money he would be leaving behind.

“I had no one to leave it to, no obligation of heirs,” Schwab was quoted as saying. “I didn’t want to leave it in a trust for charities. …You have no idea what (bank officers) are going to do with it. I’d like to see that what I’ve accumulated goes for some good purpose rather than something I may not ascribe to if I were here.”

The outcome of his efforts, a foundation whose assets benefit primarily those who control it, would seem to contrary to his expectations. It makes you wonder if it is even possible for someone’s good intentions to be maintained after their death:

Evelyn Brody, a professor at Chicago-Kent School of Law and a national expert on tax-exempt agencies and the laws governing them, said some foundations now are designed to go out of business after a generation just to avoid situations like this one.

“There are some people that have such low expectations of the legal structure that they put sunset provisions on their organizations,” Brody said. “You have one generation of management, then you get into a situation where nobody knew the donor and what he wanted.”

This entry was posted on Monday, August 29th, 2005 at 8:11 am and is filed under Criminal Times. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.