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Some foundations spend lavishly on own board members

Most in U.S. pay nothing, but in some cases, fees exceed amount of gifts

May 11, 2003|By Kate Shatzkin | Kate Shatzkin,SUN STAFF

The number of foundations multiplied during the boom economy, increasing by 90 percent between 1990 and 2001. At the same time, the Internal Revenue Service staff assigned to monitor them shrank by half.

Several high-profile cases of questionable trustee fees have attracted regulators' attention - including payments of $1 million to trustees of the $6 billion Bishop Estate in Hawaii during the late 1990s. Those organizations found to have "unreasonable" fees can be forced to pay back taxes or see their exempt status threatened.

Meanwhile, foundations that grew rapidly in good times have been hit hard by the recent stock market plunge, losing 10 percent to 12 percent of their $477 billion in assets last year, according to the Foundation Center.

The Goldseker Foundation, for example, announced it would have to reduce grants by $1 million this year because of a two-year decline in assets of $26.5 million. Even so, Chairman Sheldon Goldseker said in an interview that he earns his $133,875 fee by spending at least 25 percent of his working time on foundation business. He doesn't plan to reduce it.

"I'm working just as hard, if not harder, than I worked two, three years ago," Goldseker said. "So just because the foundation has had a few down years in the investment market doesn't mean that I'm not doing my job."

Bruce R. Hopkins, a Kansas City, Mo., lawyer and author of books on foundation law, said he was troubled that the Goldsekers had full-time foundation staff members to rely on and still paid themselves high fees - while their primary jobs are elsewhere.

"He apparently thinks he's worth about $500,000 a year," Hopkins said. "If he was working full time for the foundation, could he be properly paid $500,000 for that? And the answer would probably be no."

Large foundations are more likely to pay their directors than small ones. The $2.6 billion Annie E. Casey Foundation, based in Baltimore and one of the largest in the country, pays two trustees $20,000 each. Created in 1948 by the founder of United Parcel Service, the organization focuses on disadvantaged children.

Reason for partial pay

Kent "Oz" Nelson, former chairman of Casey's board and a retired UPS chairman, said he decided to pay two directors about five years ago because the other board members were either UPS employees working for the foundation on company time, or retirees made "comfortable" by ownership of UPS stock.

"We were just trying to figure out some modest form of equity," Nelson said. "We didn't want it to be a large amount, because it's a charity."

Stiller, the Weinberg foundation trustee, referred questions about his payments to Bernard Siegel, president of the foundation.

Siegel did not respond to calls or a registered letter.

Robert W. Schaefer, executive director of the France-Merrick Foundation, said board members like the Pinkards are paid not only for their work for France-Merrick, but for participating in other organizations and community events that give them "knowledge and expertise" in foundation affairs.

By contrast, at the similarly sized Eugene B. Casey Foundation in Gaithersburg, trustees took nothing for their work in 2001. They include Betty Brown Casey, the founder's widow, who said on tax forms that she spent 25 hours a week on foundation business. The $221 million organization, which is not connected to the Annie E. Casey Foundation, also had no regular paid staff.

Some paid trustees say they give away their board compensation. Last year, Hrabowski, for example, pledged $250,000 to UMBC over five years. "Those [foundation] funds are very helpful," Hrabowski said of his France-Merrick payments. His UMBC salary was $330,720 last year.

To accommodate trustees who would give their fees away, some foundations are starting to reward board members' work by letting them make small, discretionary grants to favorite charities from foundation funds instead of being paid directly.

Paying the most

Among those who do pay trustees directly, the Goldseker Foundation paid its trustees more than any foundation in Maryland's top 10.

When he died in 1973, Morris Goldseker, who had made his fortune in Baltimore real estate, left almost all of his money and property - worth about $26 million by the time the business was liquidated - to a foundation in his name. The Goldseker Foundation has since grown markedly in size and stature, giving away $4.3 million in 2001. It also gave birth to the Baltimore Community Foundation and the Association of Baltimore Area Grantmakers.

Childless, Goldseker also put $250,000 each in trust for his nephews, Sheldon and Simon, and appointed them to run the foundation. The nephews later started several real estate ventures that develop apartments and commercial complexes.

Sheldon Goldseker said the payments he and his cousin draw for their foundation work are not only reasonable, but also less than they are entitled to under Maryland law as administrators of a trust.

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