Generally, a charitable gift given and received for a particular specified purpose may be used for that purpose and none other. Recently, litigation arose over Princeton University's alleged misuse of an endowment associated with the Robertson Foundation, currently valued at about $900 million. The University-designated trustees of the Foundation, who made up a majority of the Foundation's board of trustees, used the gift on training students for a broad range of careers rather than careers in government services as allegedly intended by the donors, Charles and Marie Robertson, heiress to the A&P supermarket fortune, when they gave a then $35 million anonymous gift to Princeton in 1961.
Ultimately, Princeton and William S. Robertson, a Robertson Foundation trustee and the lead plaintiff, settled to the terms that Princeton would reimburse the $40 million in legal fees incurred by the Robertson family, and pay an additional $50 million, plus $11 million interest, in 2012 to a new foundation being set up by Robertson family that will support students preparing for government service, thus leaving Princeton to retain most of the assets in a new university controlled endowment after the Robertson Foundation dissolves on June 30.
Although the Robertson Family’s new foundation will only receive less than ten percent of the Robertson Foundation's assets, it sends an important message. As Rob Malone, a lawyer for the Robertson family, stated to the New York Times, “[i]n the history of philanthropy, nobody has ever before returned $100 million to a donor.” William S. Robertson agreed, stating to The Chronicle of Philanthropy, that this was “more than a slap on the wrist” and served as a message to nonprofit organizations that “donors expect them to abide by the terms of designated gifts or suffer the consequences.”
As highlighted by Malone, there are practical concerns beyond donor-intent that adversely effect these situations. Princeton, with a “1000 year view of the world” could continue to pursue appeals causing the Robertson family to spend the rest of their lives and money from their family foundation, the Banbury Fund, on litigation – a situation where no one wins. The litigation is not only a public relations liability to Princeton, but if the Robertson Family had prevailed in court, Princeton could have lost the entire endowment.
Nonprofit organizations should be careful to follow donor-intent not only to avoid the costs of litigation but also because, in the end, it is the parties who rely on these educational and charitable services who suffer. The Woodrow Wilson School of Public and International Affairs, the graduate programs that were receiving most of the Robertson Foundation financing, will not only lose the $100 million aforementioned, but also incur losses in covering Princeton’s $40 million in legal fees in excess of insurance coverage.
Please view previous posts on managing donor-intent funds, "Donor Enforcement of Charitable Gift Restrictions,” and highlights from Smithers v. St. Luke's-Roosevelt Hosp. Ctr. case regarding donor-intent, available here.
– Emily Chan