Tiger Woods’ charities raised $50 million. What now?
December 23rd, 2009, 5:00 am · Post a Comment · posted by Teri Sforza, Register staff writer
Say what you will about Tiger Woods and his latest antics.
The golf star’s OC-based nonprofit foundations raised more than $50 million and spent more than $40 million last year, and got high marks from charity watchdogs (despite criticism that glitzy golf tournaments with millions in prize booty aren’t traditional nonprofit endeavors).
Executive Greg McLaughlin’s compensation totaled $503,138, which eclipses than the average charity CEO compensation of $150,000 - but is not necessarily out of line for this sort of operation. (The No. 2 guy at the National Boy Scout Council, for example, made more than $722,000 last year.)
There are actually three nonprofits bearing Woods’ name, as far as the Internal Revenue Service is concerned, though they are perceived as one by the masses. Two have piled up assets worth more than $70 million - far exceeding what they spend in a year - but officials say there are good reasons for piling up cash, including the requirements of repaying tax-exempt bonds.
See detailed charts of finances (and copies of tax returns) below. And, without further ado, let us introduce you to:
Nonprofit No. 1: The Tiger Woods Charity Event Corp. It’s not the one you’ve heard of, but it’s the Iron Giant that raises (and spends) the most money on those glitzy events that cost tens of millions to mount. In 2008, revenues were $36.2 million, and it spent $32.7 million mounting the star-studded AT&T National Golf Tournament, Chevron World Challenge Golf Tournament, Tiger Jam Benefit Concert and Tiger Woods Learning Center Block Party. At first glance, things look good: 95 percent of spending was on programs - considered the charity’s core mission - far more than the 75 percent charity watchdogs look for here. But that’s because the cost of throwing these expensive events were counted as core program spending - part of the charity’s main mission - and there are critics of that approach.
In 2008, Tiger’s events cost $31.2 million to mount (including millions in purses for the winning golfers), and brought in $34.9 million - leaving about $3.5 million for good works. “You can certainly question the validity of calling something a charitable event when so much money goes to individuals,” Sandra Miniutti of nonprofit watchdog Charity Navigator told The Washington Post when Tiger’s tour went to Bethesda in 2007.
Foundation executive McLaughlin responded thusly: “It’s a very expensive business. If you don’t put on a nice event, you don’t get the people to come back. The goal is to run a great experience . . . and raise as much money for charity as possible.” (Peruse a tax return: tiger-woods-events-08)
Nonprofit No. 2: The Tiger Woods Foundation. This is the one you hear about, which gives out grants and scholarships seeking “to empower young people to reach their highest potential by initiating and supporting community-based programs that promote the health, education and welfare of all of America’s children,” say its tax returns.
It reported revenues of $10.6 million in 2008; expenses of $6 million; and has a nice cushy nest egg of - get this! - $45.5 million. Eighty-two percent of spending was programs, and it gets four of four possible stars from Charity Navigator. (Peruse a tax return: tw-foundation-08)
Nonprofit No. 3: The Tiger Woods Learning Center. “The proudest moment in Foundation history took place on February 10, 2006, as Tiger Woods was joined by former President Bill Clinton, First Lady of California Maria Shriver, and Southern California students, teachers and community leaders for the dedication of the Tiger Woods Learning Center (TWLC), an innovative youth-education facility located in Anaheim, California,” says the organization’s tax returns. “The much anticipated event served as the culmination of a four-year, $25 million campaign to transform Woods’ dream of creating an educational center to inspire and support the career exploration of young people.” Revenues in 2008 were $4.4 million, expenses were $3.9 million, and net assets were $25 million. It funneled 86 percent of spending into programs. (Peruse a tax return: tw-learning-center-08pdf)
Tiger Woods Foundation spokesperson Rachel Rees told us in an email that, although there are three nonprofit organizations, they are all considered support organizations of the Tiger Woods Foundation and viewed as one entity.
By the foundation’s own computations, 88 percent, 92 percent and 92 percent of spending went directly to charity over the past three fiscal years. ”To put that in perspective .92 of every $1.00 we spent went to programs,” the email says. “We are proud of the Foundation’s accomplishments and our ability to provide support to our programs through fundraising efforts. Our programs have allowed us to positively impact the lives of more than 10 million young people.”
One of the reasons net assets are so high - more than $70 million - is due to the value of hard assets (such as buildings) and cash that must be set aside as a condition of borrowing. When the Tiger Woods Learning Center was built, the Foundation sold $11 million in tax exempt bonds. As a result of covenants associated with these bonds, they are required to maintain net assets of at least $12.5 million. The rest represents event profits, short & longer term investments and future pledges. All of these funds are directed for the long-term growth of the foundation and its programs, according to McLaughlin.
And those who would quarrel with McLaughlin’s compensation, the Foundation says this: It relies on competitive market data when determining compensation for all of its employees. “We are extremely proud of all of our staff members and their commitment to furthering our mission to provide educational opportunities to youth worldwide,” the email said.
Woods announced last week that he would temporarily step away from his duties with the foundations. A message on his web site said, “Since my Dad and I created the Foundation, this work has been extremely important to me. I started the organization because I sincerely believe in giving back. There are millions of young people who have truly changed their lives through the Foundation’s programs, and millions more still counting on us for help. I am committed to them and to the Foundation’s excellent work, and I know my staff will continue these efforts during my absence.”
Wednesday, December 23, 2009
Saturday, December 19, 2009
Family Foundation Trick
According to "How Tiger Protected His Image " by By REED ALBERGOTTI, VANESSA O'CONNELL and RUSSELL ADAMS in Wall Street Journal, under Golf Digest's contract with Mr. Woods, the monthly, which is owned by Condé Nast Publications Inc., spent as much as $1 million annually on donations to the Tiger Woods Foundation, printing the charity's annual report and sponsoring many of Mr. Woods's preferred tournaments, according to a person familiar with the terms. In return, Mr. Woods agreed to contribute monthly articles on golf techniques and limit his appearances in competing publications.
The question is whether it was taxed as ordinary income as to this monetary compensation. My guess is that it is tax deductable for the both parties. Conde Nast could deduct this payment as the donation. The Foundation is probably non-profit and required to spend about 5% of the total asset on charitable activities. That 5% may count the expenses incurred in the foundation. For instance, if the foundation owns the private jet How do they distinguish such the expenses between private and non-profit purpose uses in such the small organization where probably the key employees are the family members. By the way, their salary and benefits are probably counted as that part of 5%.
If so, what about people who goes to work everyday and make themselves available to work 24/7? Those who are on the payroll and making more than $400K are payting the tax at 35% while someone like Tiger or the former president of the U.S. Bill Clinton are flying on the jet possibly owned by their own founation??? I don't know for sure whether it is true. I am a bit on the hypothetical term since I do not know and will personally not know.
But the trick could be ordinary for those super-stars. After all, how can we believe that those people are really intending to give back their success to the society???
The following is a brief explanation about private family foundation according to Save Wealth Estate:
A Private Family Foundation (PFF) is a separate entity, privately funded by you. It is created with the specific purpose of contributing to various charitable causes.
As a distinct, legal entity, The Private Family Foundation:
1. Contributes to a charitable cause and takes a tax deduction, while relinquishing personal control over your gift.
2. Minimizes your estate tax liability.
3. Avoids capital gains tax on the sale of appreciated property contributed to the charity of your choice.
4. Provides continuing employment and activity for your family members.
5. Identifies and preserves your family name for years to come.
Special Tax Advantages
Private Family Foundations have special tax advantages, because they are considered "charitable organizations" themselves. Because of this classification, any earnings on Foundation assets are tax-exempt, and can be distribute to the charities you choose.
If established properly, a private family foundation can often avoid capital gains taxes on highly-appreciated assets (see below). In addition, interest and investment earnings that are not slapped with an income tax can instead be used to help the charities or causes you support.
Immediate Tax Benefits for You
If you have highly-appreciated assets that you're holding to avoid steep capital gains taxes, a Private Family Foundation could help. Any appreciated assets that you transfer to a Private Family Foundation can be sold by the Foundation with no capital gains taxes. This is because of the Foundation's charitable status.
Second, you can get an immediate tax deduction for any money or property to grant to the Foundation. This deduction can equal up to 30% of your adjusted gross income (20% for appreciated property). Any income tax deduction not used in your contribution year may be carried forward over the next five years.
The valuation of these deductions depends on a number of things, including original cost and the type of property being transferred. (For more information on valuation, please request the PFF Special Report.)
Estate Tax Benefits
Every dollar that you contribute to your Private Family Foundation means one less dollar that is included in your estate. Gifts that are regularly made to charities can instead be used to fund your PFF. And if you are in a higher tax bracket, that could ultimately save up to 46% in estate taxes.
Best of all, you can make such contributions to a Private Family Foundation without affecting the $12,000 annual gift tax exclusion or the current $1 million Gift Tax Credit .
Required Distributions to Charities
Private Family Foundations have certain laws they must abide by, because they are a legal entity. For instance, by law, a Private Family Foundation must distribute at least five percent (5%) of its assets each year to public charities.
Let's suppose you leave $2,000,000 to your Private Family Foundation. The IRS says you must distribute at least $100,000 (or 5%) to recognized charities in order for the Foundation to qualify for its special tax advantages. Of course, you can select a higher payout if you choose. But five percent is the absolute minimum.
The annual payout is established when you first sit down with a qualified estate attorney who has experience working with large estates. And the difference between what the assets earn (e.g. 6% per year) and the mandatory payout can be put back into the Foundation.
Employment for the Family
You may arrange for your heirs and descendants to receive salaries as "employees" of your Foundation. Simply name family members as replacement trustees to succeed you after death or resignation.
Many Foundations pay their directors using the difference between their required distributions and their annual income. If your Foundation is earning 10% annually on its assets, but only paying 5% annually to charities, the difference can be distribute for legitimate expenses, including salaries for the directors of the Foundation.
Ensuring Kids Don't Lose Out
While charities will definitely benefit from your Foundation, your children are deprived of the donated assets, after estate taxes are accounted for. To remedy this situation, some individuals also choose to establish a generation-skipping dynasty trust (like The Legacy Trust) to avoid estate taxes for up to three generations.
The Legacy Trust, which is an advanced type of dynasty trust, also acts as a shield for assets (subject to variations in state law). When properly drafted and implemented, the Legacy Trust can also help place assets outside your estate, outside the reach of creditors, judgments, malpractice and divorce.
The Legacy Trust can also provide a substantial benefit for your heirs, particularly through the use of cash-rich life insurance. After funding The Legacy Trust with annual gifts, it can purchase insurance payable to your heirs (as beneficiaries of The Legacy Trust). The children would then receive a lump-sum when you pass away, or you could have The Legacy Trust support grandchildren (or even great-grandchildren). All of these benefits are usually 100% estate tax- and income tax-free if structured properly.
Foundations and Charitable Trusts
Private Family Foundations can also be combined with Charitable Remainder and Charitable Lead Trusts. By doing so, you may able to draw a significant income for your lifetimes and earn significant tax savings, while still maintaining a large degree of control of your assets.
The question is whether it was taxed as ordinary income as to this monetary compensation. My guess is that it is tax deductable for the both parties. Conde Nast could deduct this payment as the donation. The Foundation is probably non-profit and required to spend about 5% of the total asset on charitable activities. That 5% may count the expenses incurred in the foundation. For instance, if the foundation owns the private jet How do they distinguish such the expenses between private and non-profit purpose uses in such the small organization where probably the key employees are the family members. By the way, their salary and benefits are probably counted as that part of 5%.
If so, what about people who goes to work everyday and make themselves available to work 24/7? Those who are on the payroll and making more than $400K are payting the tax at 35% while someone like Tiger or the former president of the U.S. Bill Clinton are flying on the jet possibly owned by their own founation??? I don't know for sure whether it is true. I am a bit on the hypothetical term since I do not know and will personally not know.
But the trick could be ordinary for those super-stars. After all, how can we believe that those people are really intending to give back their success to the society???
The following is a brief explanation about private family foundation according to Save Wealth Estate:
A Private Family Foundation (PFF) is a separate entity, privately funded by you. It is created with the specific purpose of contributing to various charitable causes.
As a distinct, legal entity, The Private Family Foundation:
1. Contributes to a charitable cause and takes a tax deduction, while relinquishing personal control over your gift.
2. Minimizes your estate tax liability.
3. Avoids capital gains tax on the sale of appreciated property contributed to the charity of your choice.
4. Provides continuing employment and activity for your family members.
5. Identifies and preserves your family name for years to come.
Special Tax Advantages
Private Family Foundations have special tax advantages, because they are considered "charitable organizations" themselves. Because of this classification, any earnings on Foundation assets are tax-exempt, and can be distribute to the charities you choose.
If established properly, a private family foundation can often avoid capital gains taxes on highly-appreciated assets (see below). In addition, interest and investment earnings that are not slapped with an income tax can instead be used to help the charities or causes you support.
Immediate Tax Benefits for You
If you have highly-appreciated assets that you're holding to avoid steep capital gains taxes, a Private Family Foundation could help. Any appreciated assets that you transfer to a Private Family Foundation can be sold by the Foundation with no capital gains taxes. This is because of the Foundation's charitable status.
Second, you can get an immediate tax deduction for any money or property to grant to the Foundation. This deduction can equal up to 30% of your adjusted gross income (20% for appreciated property). Any income tax deduction not used in your contribution year may be carried forward over the next five years.
The valuation of these deductions depends on a number of things, including original cost and the type of property being transferred. (For more information on valuation, please request the PFF Special Report.)
Estate Tax Benefits
Every dollar that you contribute to your Private Family Foundation means one less dollar that is included in your estate. Gifts that are regularly made to charities can instead be used to fund your PFF. And if you are in a higher tax bracket, that could ultimately save up to 46% in estate taxes.
Best of all, you can make such contributions to a Private Family Foundation without affecting the $12,000 annual gift tax exclusion or the current $1 million Gift Tax Credit .
Required Distributions to Charities
Private Family Foundations have certain laws they must abide by, because they are a legal entity. For instance, by law, a Private Family Foundation must distribute at least five percent (5%) of its assets each year to public charities.
Let's suppose you leave $2,000,000 to your Private Family Foundation. The IRS says you must distribute at least $100,000 (or 5%) to recognized charities in order for the Foundation to qualify for its special tax advantages. Of course, you can select a higher payout if you choose. But five percent is the absolute minimum.
The annual payout is established when you first sit down with a qualified estate attorney who has experience working with large estates. And the difference between what the assets earn (e.g. 6% per year) and the mandatory payout can be put back into the Foundation.
Employment for the Family
You may arrange for your heirs and descendants to receive salaries as "employees" of your Foundation. Simply name family members as replacement trustees to succeed you after death or resignation.
Many Foundations pay their directors using the difference between their required distributions and their annual income. If your Foundation is earning 10% annually on its assets, but only paying 5% annually to charities, the difference can be distribute for legitimate expenses, including salaries for the directors of the Foundation.
Ensuring Kids Don't Lose Out
While charities will definitely benefit from your Foundation, your children are deprived of the donated assets, after estate taxes are accounted for. To remedy this situation, some individuals also choose to establish a generation-skipping dynasty trust (like The Legacy Trust) to avoid estate taxes for up to three generations.
The Legacy Trust, which is an advanced type of dynasty trust, also acts as a shield for assets (subject to variations in state law). When properly drafted and implemented, the Legacy Trust can also help place assets outside your estate, outside the reach of creditors, judgments, malpractice and divorce.
The Legacy Trust can also provide a substantial benefit for your heirs, particularly through the use of cash-rich life insurance. After funding The Legacy Trust with annual gifts, it can purchase insurance payable to your heirs (as beneficiaries of The Legacy Trust). The children would then receive a lump-sum when you pass away, or you could have The Legacy Trust support grandchildren (or even great-grandchildren). All of these benefits are usually 100% estate tax- and income tax-free if structured properly.
Foundations and Charitable Trusts
Private Family Foundations can also be combined with Charitable Remainder and Charitable Lead Trusts. By doing so, you may able to draw a significant income for your lifetimes and earn significant tax savings, while still maintaining a large degree of control of your assets.
Friday, December 18, 2009
Celebrity's no taxable lavish lifestyle.
Gwyneth Paltrow is on the news.
I do not have any personal connection with her. But, I hate that spoiled brat.
According to the news "Gwyneth Paltrow: Will the FTC Call About Her 'Ridiculously Lavish' Vacation?" by JEFF BERCOVICI, Goop, Paltrow's lifestyle newsletter, lavishly praises the newly-reopened La Mamounia Hotel in Marrakech, Morocco. "The Jacques Garcia designed interiors are splendid to say the least, and the hotel's gardens are out of this world, almost from a fairy tale," she writes. "The food and drinks here are elegant and delicious and with all the choices, it's easy to stay in the hotel for an entire weekend of relaxation."
Paltrow apparently acquired her familiarity with La Mamounia over Thanksgiving weekend, when she was one of several celebrity VIPs in attendance at the hotel's grand reopening festivities. (Jennifer Aniston, Salma Hayek, and Orlando Bloom were also there.)
Do Celebrities Pay?
A hotel representative declined to comment on the arrangements it made for the celebrity guests, and Paltrow's spokesman did not respond to requests for comment. But celebrity wranglers and publicists who work with A-list Hollywood talent say it's inconceivable that stars of Paltrow and Aniston's magnitude would have paid their own way on such an excursion.
"Not a chance in hell," says one booker, who asked not to be identified. "I'm sure they were comped the entire thing. If you're going to go on a holiday over Thanksgiving, you don't go somewhere you know there are going to be photographers if you're paying."
In fact, the booker adds, the real question is whether Paltrow and her friends were paid in cash, or merely received free luxury accommodations, travel, and services, such as the daily hammam treatment Paltrow enjoyed "5 minutes in a steam room, a full-body lather in Black Soap, an exfoliating rub down, a Ghassoul (Moroccan clay) body masque, and then a warm shower...Ridiculously lavish!"
Rooms at La Mamounia reportedly start at $800 per night. It's a safe bet Paltrow's room didn't overlook the parking lot.
Potential Violations
Here's the problem. Under the guidelines published last month by the FTC, a celebrity who endorses a product or service has to disclose any "material connection" to the provider -- a designation that covers not only cash compensation but also free merchandise or services. The new rules specifically target new media like e-newsletters and websites, the two formats in which Goop is published.
The guidelines read: "Although disclosure of compensation may not be required when a celebrity or expert appears in a conventional television advertisement, endorsements by these individuals in other media might warrant such disclosure."
Under the strictest reading of the new rules, bloggers or celebrities who make endorsements without disclosing material compensation are subject to fines of up to $11,000. FTC officials, however, have made it clear that such fines would be targeted mainly at advertisers and would be levied only in serious cases.
This is the example that I cannot stand celebrities especially when they do not only endorse products but also send the message and image that they care about all those little people!
Once the former president, Bill Clinton, spoke in DNC that when we become successfule and make more money, why don't we pay more tax. Yeah, President, it is easy to say that when you make millions just by engaing speeches for a few hours at a time. It is a different success story from making just hundred thousands dollar before tax by working like dogs for 24 hours and 7 days being treated not as VIP but as everybody else.
While those top of the cream don't mind raising tax on people who make just more than $350K per year, there is no talk of creating more tax brackets beyond $350K.
People who make 1 million and people who make just over $350K pay the same tax rate.
For instance, I overheard that Anderson Cooper in CNN who are definetely on the little people's sides from this public image make about $4 million per year over the contract with CNN.
What does the contract mean???
The contract means to create a company where he can expense the part of his lifesytle like those A-list celebrities???
I personally like Anderson. However, the government is about increasing tax on our household income of a few hundred thousands by working 24/7 like dogs as ordinary citizens. Meanwhile, those celebrities being treated as VIP and making not only millions but also shelting their income from tax by incorporating themselves loudly speak to support for paying more tax.
Those celeblities pretend as if they care about those little people. However, I do not feel in that way. Maybe the fastest to help those poor people might be for those top of the cream to give up their wealth to those under-priveledge??? Instead, in order to avoid paying their really equal share, they propose to increase tax on those who make just more than $350K. Those who make more than $350K and just below that amount are spending their most time at work. They might go vacation. But, they pay their vacation on their own after they pay tax.
I am also talking about those charitable foundation pretending that they are giving back to the society by expensing their lavish lifestyle as the part of tax deduction.
Here is the story I would love to distribute to as many people as we can as to this charitable trust.
This story was reported by Globe Spotlight Team reporters Beth Healy, Francie Latour, Sacha Pfeiffer, and Michael Rezendes, and editor Walter V. Robinson. It was written by Healy. Second in a series of occasional articles.
It looked like a high-end corporate jet, the luxurious, long-range Bombardier that landed at the Lynchburg, Va., airport on a sunny Thursday afternoon in September. But no corporate executive disembarked.
Instead, out stepped Nancy
Leigh DeMoss. She is a trustee of the Arthur S. DeMoss Foundation, a private charitable foundation whose mission is to support Christian organizations. The Globe Spotlight Team determined the foundation spent $36 million in 2001 to buy the 12-seat, transoceanic jet -- and millions more over the last two decades to own and operate two prior jets. It is the kind of extravagance that has infuriated shareholders of public companies during the corporate scandals of the past two years. Yet private planes and other big-ticket expenses go virtually unnoticed in the world of philanthropy, even though foundations are publicly subsidized through huge tax breaks for the wealthy donors who set them up. A Globe review of foundation tax returns revealed numerous instances of money earmarked for charity being used to fund travel and lavish perks for foundation trustees -- the people charged with protecting foundation assets.
In Dallas, two officers of the Carl B. and Florence E. King Foundation, established by a Texas oil man to fund educational programs, used foundation credit cards to pay for family vacations to Australia and at least six European countries.
In New York, 14 part-time paid trustees of the Herman Goldman Foundation stand to collect a total of $1.8 million in retirement benefits, thanks to a 1993 vote by the board. And at the largest foundation in Oklahoma, a $5.7 million jet has been used to ferry trustees to meetings and to shuttle a part-time consultant 43 times in the last two years from Athens, Ga., to foundation headquarters.
Larry A. Pulliam, executive vice president of the $900 million Samuel Roberts Noble Foundation in Ardmore, Okla., mused during an interview, ``Maybe the homeless people in Dallas need their soup more than our trustees need their plane.'' But, he added, ``I don't think it's valid.''
Beyond the enormous paychecks some foundation trustees take, excesses documented in a Spotlight report last month, the Globe has uncovered evidence of charitable assets being used to pay rent for plush office space and health club dues and to buy luxury cars, Persian rugs, and fine art.
Some examples:
At the King Foundation, president Carl L. Yeckel arranged for himself and his top aide to receive pensions totaling more than $1 million a year, creating an unfunded future liability that experts say could drive the $41 million foundation into insolvency, according to lawyers involved in a lawsuit against the foundation.
Oklahoma City's Kerr Foundation, established to fund local social and cultural causes, bought a $44,000 Jaguar for the personal use of foundation officials. The $28 million foundation, which also spent $616,000 to buy a headquarters building, spends twice as much money on salaries and expenses as it donates to charities.
The John & Mary R. Markle Foundation paid $837,291 in rent last year for offices at Rockefeller Plaza in midtown Manhattan, where it funds research on health care and national security. And the $53 million Pollock-Krasner Foundation, started by the widow of artist Jackson Pollock to support artists, bought a $2.3 million co-op apartment on Park Avenue in New York's exclusive upper East Side for its office.
In an interview, Pollock Foundation chairman Charles C. Bergman said the co-op purchase was a bargain compared to the $156,000 in annual rent the foundation had been paying. The foundation also spent $187,000 to renovate the new office, according to its tax returns.
At the Markle Foundation, spokesman Todd Glass said the board is looking to reduce the rent by subletting some space to other nonprofits. ``We expect to cut our rent by 50 percent in the next six months,'' he said.
Extravagant spending
Although extravagant spending is not uncommon, the vast majority of private foundations do not drain their assets this way, the Globe review found. Similarly, most foundations do not overpay trustees and foundation managers.
The exceptions, however, are many and striking. Last month, the Globe disclosed cases in which foundation executives who claimed to be working full time were taking annual salaries approaching or exceeding $1 million, while many part-time trustees were being paid tens of thousands of dollars, and sometimes hundreds of thousands, for attending a handful of meetings each year.
After the report, attorneys general in California, New York, and Massachusetts opened inquiries into the apparent abuses. In the most egregious case reported by the Globe, Paul D. Cabot Jr. of Needham paid himself $1.4 million in 2001 and $1.3 million in 2002 for overseeing a family foundation whose assets have dwindled from $14 million in the mid-1990's to $4.9 million early this year. Cabot told the Globe he gave himself a $400,000 raise in 2001 to help defray the cost of a daughter's wedding.
In exchange for the tax breaks given to people who establish private philanthropies, the law requires foundations to donate at least five percent of their assets to charity each year. ``Reasonable'' expenses are allowed, and may be deducted from the mandated 5 percent.
Such expenses can put a considerable dent in what foundations give to charity. For example, at the Kerr Foundation, endowed by a former Oklahoma senator who made his fortune in oil, nearly half the 5 percent distribution in 2001 was eaten up by administrative expenses, travel, and salaries.
Alan L. Feld, A Boston University law professor and an expert in nonprofit law, said that the pattern of spending reported by the Globe goes ``way beyond what any reasonable person would think was appropriate.''
Said Feld: ``For foundation officials to behave as if a private foundation is another pocket of their own is wrong, and it deprives the intended beneficiaries of charities what they are entitled to.... This is part of a pattern where people are treating foundation assets as a pot of money they can dip into as they wish.''
Feld, in a view echoed by other experts, said that foundation spending now goes almost unregulated, with the Internal Revenue Service and state attorneys general providing little oversight. Each year the IRS audits only about 100 of the nation's 60,000 private foundations. State regulators complain that they don't have the budget or staff to audit foundation filings.
In the rare cases when they are discovered, abuses of foundation spending rules can result in stiff penalties. If the IRS finds that foundation executives are ``self dealing,'' or taking perks that ought to be counted as part of their personal compensation, those executives can be forced to repay the funds, plus a penalty that can range from 5 to 200 percent. Foundation managers or trustees who know of abuses can also be penalized. And, in egregious cases, foundations can lose their tax-exempt status.
Public perception
If Cabot represents the extreme in compensation, then the DeMoss Foundation's jet is its match in the perks category.
Bruce Hopkins, a lawyer at the Kansas City law firm Polsinelli Shalton & Welte and an expert on foundations, said he would advise his clients not to buy a jet because it is nearly impossible to justify the cost as reasonable under IRS rules.
``It just doesn't wash,'' Hopkins said of the DeMoss jet. ``I'm confident if the IRS or a court looked at this, it simply would not hold up.''
Often, however, the IRS has no way of knowing about such purchases. Foundation assets are supposed to be listed on a depreciation schedule included with each tax return, but the Globe found that many foundations do not file the schedules.
The $444 million DeMoss foundation did file its depreciation schedule, which shows that the Bombardier - nicknamed the ``Gold Star II'' - was purchased in 2001 to replace a more modest jet. The foundation spends more than $1.5 million a year to pay the salaries of two pilots and to operate and maintain the aircraft, which the manufacturer calls an ``ultra long-range, high-speed business jet.''
According to a former foundation pilot, who asked that he not be identified, the aircraft was purchased at the request of chairman Nancy S. DeMoss, the widow of Arthur S. DeMoss, who founded a Pennsylvania mail-order life insurance company. Mrs. DeMoss wanted to make flights to remote destinations in Asia and Africa, where the foundation supports missionary work, with fewer fuel stops, the pilot said.
Larry R. Nelson, the foundation's chief financial officer, sidestepped most of the Globe's questions about the jet. But in an e-mail, he said the foundation supports many causes and projects, ``most of which are overseas, many in the third world.'' The foundation's latest available tax filing, covering 2001, shows that two-thirds of its $36 million in grants went to domestic Christian ministries and churches.
Two former foundation executives said the foundation uses the jet mainly ``for charitable purposes.'' But not always: Since July, flight records tracked by the Globe show the DeMoss jet being flown routinely in and out of Palm Beach International Airport, near the foundation's headquarters, often to places where the foundation doesn't make grants. The jet has also flown to Washington, D.C., New York, Atlanta, and Scottsdale, Ariz., among other cities, and to Little Rock, where daughter Nancy Leigh DeMoss tapes a religious radio program.
In September, the daughter's trip to Lynchburg was for a speaking engagement. The jet picked her up that morning in South Bend, Ind., 20 miles from her home. In July, her mother took the jet to Orlando, Fla., a three-hour drive from her $10 million home in Palm Beach, to attend a friend's funeral. And the DeMoss grandchildren have occasionally flown on the jet, the former pilot said.
DeMoss family members - the mother and four others are trustees - refused to be interviewed for this story.
As for the Noble Foundation, Pulliam said it received an OK from its attorneys before buying its seven-seat Cessna Bravo jet. ``We talked about the public perception of this before we went ahead, that some people would say, `You're a charitable organization and you've got a plane,''' he said. ``It is a public relations issue.''
Pulliam said the foundation uses the plane to help Noble's scientists travel more efficiently from rural Ardmore to remote sites in Texas, Missouri, Kansas, and Colorado, where it funds agricultural and biotechnology programs.
After the Globe raised questions about the more than 40 flights back and forth to Athens, Ga., Pulliam said that a foundation consultant, Joe Bouton, a professor of crop and soil sciences at the University of Georgia, has been shuttling back and forth to Oklahoma on the jet twice a month over the last two years. Bouton, he said, plans to move to Oklahoma next spring.
``Using commercial airlines, it takes Dr. Bouton about 8 hours to get to Ardmore from Athens,'' including two hours driving time on each end of the trip, plus waiting time in airports, Pulliam wrote in an e-mail to the Globe. ``Using our aircraft, it takes less than three hours.''
Pulliam said buying the jet, with its annual operating costs of about $600,000, was the brainchild of the foundation's trustees. Nine of the 15 trustees are descendants of Oklahoma oil man Lloyd Noble, who started the foundation in 1945. Pulliam said the trustees, especially those who live in Atlanta, use the jet to travel to Oklahoma for trustee meetings and to monitor the foundation's farflung projects.
The use of the aircraft, both for Bouton's commuting and the trustees' flights, is ``quite appropriate,'' Pulliam said. He said the plane has never been used for nonfoundation business.
Nonetheless, in the post-Enron era, corporate executives have found it increasingly difficult to justify the purchase of aircraft, much less long-range jets like the DeMoss Bombardier, according to people who sell and lease business jets
``A big piece of owning a jet is ego,'' said Mark Stone, chief executive of Sentient Jet Inc., a Norwell company that leases jets to customers on short notice. ``A lot of corporations have sold their aircraft, because they just didn't feel that it was giving the right image to their shareholders.'' At many other foundations, executives are given luxury cars for their use. When the president of the M. B. and Edna Zale Foundation in Dallas was ready to retire in 2001, the foundation let him keep his company vehicle - a 1999 Lexus.
The sedan was part of a $325,000 retirement package given to Michael Romaine, who worked for the Zale family's jewelry company before heading their foundation, according to the foundation's current president, Leonard Krasnow. With Romaine driving off in the Lexus, the foundation bought Krasnow a 2001 Infiniti.
Reached at his retirement home in North Carolina, Romaine, 64, at first said he bought the Lexus from the foundation for $24,000. But when told what Krasnow had said, Romaine asked, ``Did they give it to me? I'd have to look it up. ... I can't remember if I bought it or not.''
The foundation's original purchase of the Lexus for him was justified, Romaine said, calling it ``a very basic car.''
A lawsuit in Texas
At the King Foundation in Dallas, Yeckel, 67, and his deputy, Thomas W. Vett, used foundation credit cards to take at least one foreign vacation a year. But it took years for anyone to discover the excessive spending. In early 2002, Yeckel's sister, Dorothy Yeckel, became suspicious of her brother's lifestyle, including his $1.5 million home and the exotic vacations he took.
Todd Amacher, the sister's lawyer, looked over the foundation's tax returns and alerted the Texas attorney general to the $1 million in compensation Yeckel was taking. Assistant Attorney General John Vinson filed suit, and ultimately a new board took control of the foundation. The suit became public last year, but the details of Yeckel and Vett's free-spending ways had not been disclosed.
During an October 24 deposition, Vett testified that he and Yeckel each used King Foundation credit cards to travel with their wives and other family members to England, Scotland, Australia, Russia, the Czech Republic, Germany, and Italy. There were also numerous trips to San Francisco and New York, according to a lawyer familiar with Vett's testimony.
The globetrotting cost the foundation an estimated $200,000 over five years, according to one person who is involved in the case. That money came straight out of the pockets of charities the foundation might otherwise have funded, because the executives counted the travel on foundation tax returns as a charitable expense.
And their foundation-subsidized lifestyle went well beyond vacations. The foundation maintained three memberships at a private downtown Dallas dining club, at a cost of more than $5,000 a year. In 2001, according to the attorney's general's lawsuit, the foundation credit cards were billed for $6,442 for restaurant bills; $23,000 for purchases in retail stores and $6,531 for health-club memberships.
Yeckel, in a brief telephone interview, declined to answer questions. An attorney for Vett said he could not discuss his client's testimony.
In other cases, relatives of those who established foundations spend the assets as if they were their own personal funds. At the $43 million Roy F. & Joann Cole Mitte Foundation in Austin, Texas, Scott Mitte began to run up personal expenses almost as soon as he took the helm of the foundation his parents founded.
Since 1999, the foundation has purchased Tony Bennett concert tickets worth $4,003, a $4,037 custom tuxedo, and six doors totaling $6,090 that were delivered to Mitte's home, according to an audit of foundation expenses. During Mitte's tenure, the foundation's spending on travel and meetings rocketed from about $50 a year in the late 1990s to $183,000 in 2001, while his compensation also leapt from $31,000 in 1999 to $220,000 in 2001.
And it paid $368,000 in legal fees last year, up from $6,689 the year before, in part to cover a legal battle between the foundation and Roy Mitte's company. Also last year, the foundation footed the bill for an out-of-court settlement with a woman who sued Mitte for alleged sexual harrassment. The foundation disclosed a $139,000 ``legal settlement'' on its 2002 tax return.
The foundation's lawyer, Jeffrey T. Knebel, declined to discuss the settlement or answer questions about other foundation spending. Mitte resigned as executive director in August, 2002, when the harassment charge became public, but remains on the foundation's board of directors and serves as its senior vice president. He did not return calls from the Globe.
In a statement, the foundation said it believed its expenses were ``reasonable, appropriate, and have been greatly justified.''
Some large foundation expenses are tucked into a category on tax filings called, ``travel, conferences, and meetings.'' The IRS does not require detailed accounting for such costs. At several foundations, officials refused to provide the Globe with documentation to justify the costs, or declined to answer questions.
The $13.5 million Chiles Foundation of Portland, Ore., for example, reported spending $591,415 on travel, conferences, and meetings from 1998 through 2002, according to its tax returns. Another $128,115 was reported for ``autos and parking'' during that period, while the foundation paid $300,000 in rent for its offices. The largest beneficiary of the foundation is Boston University, where foundation chief Earle M. Chiles, 83, is a trustee.
Foundation officials turned aside Globe efforts to interview Chiles, the son of the founder. In a written note, the foundation attributed its spending to ``grant-related work'' and to periodic meetings with its investment advisers. One foundation official, Sharron D. Mathews, said in a brief telephone interview: ``If our spending is out of line, it is only the Internal Revenue Service we need to account to.''
I do not have any personal connection with her. But, I hate that spoiled brat.
According to the news "Gwyneth Paltrow: Will the FTC Call About Her 'Ridiculously Lavish' Vacation?" by JEFF BERCOVICI, Goop, Paltrow's lifestyle newsletter, lavishly praises the newly-reopened La Mamounia Hotel in Marrakech, Morocco. "The Jacques Garcia designed interiors are splendid to say the least, and the hotel's gardens are out of this world, almost from a fairy tale," she writes. "The food and drinks here are elegant and delicious and with all the choices, it's easy to stay in the hotel for an entire weekend of relaxation."
Paltrow apparently acquired her familiarity with La Mamounia over Thanksgiving weekend, when she was one of several celebrity VIPs in attendance at the hotel's grand reopening festivities. (Jennifer Aniston, Salma Hayek, and Orlando Bloom were also there.)
Do Celebrities Pay?
A hotel representative declined to comment on the arrangements it made for the celebrity guests, and Paltrow's spokesman did not respond to requests for comment. But celebrity wranglers and publicists who work with A-list Hollywood talent say it's inconceivable that stars of Paltrow and Aniston's magnitude would have paid their own way on such an excursion.
"Not a chance in hell," says one booker, who asked not to be identified. "I'm sure they were comped the entire thing. If you're going to go on a holiday over Thanksgiving, you don't go somewhere you know there are going to be photographers if you're paying."
In fact, the booker adds, the real question is whether Paltrow and her friends were paid in cash, or merely received free luxury accommodations, travel, and services, such as the daily hammam treatment Paltrow enjoyed "5 minutes in a steam room, a full-body lather in Black Soap, an exfoliating rub down, a Ghassoul (Moroccan clay) body masque, and then a warm shower...Ridiculously lavish!"
Rooms at La Mamounia reportedly start at $800 per night. It's a safe bet Paltrow's room didn't overlook the parking lot.
Potential Violations
Here's the problem. Under the guidelines published last month by the FTC, a celebrity who endorses a product or service has to disclose any "material connection" to the provider -- a designation that covers not only cash compensation but also free merchandise or services. The new rules specifically target new media like e-newsletters and websites, the two formats in which Goop is published.
The guidelines read: "Although disclosure of compensation may not be required when a celebrity or expert appears in a conventional television advertisement, endorsements by these individuals in other media might warrant such disclosure."
Under the strictest reading of the new rules, bloggers or celebrities who make endorsements without disclosing material compensation are subject to fines of up to $11,000. FTC officials, however, have made it clear that such fines would be targeted mainly at advertisers and would be levied only in serious cases.
This is the example that I cannot stand celebrities especially when they do not only endorse products but also send the message and image that they care about all those little people!
Once the former president, Bill Clinton, spoke in DNC that when we become successfule and make more money, why don't we pay more tax. Yeah, President, it is easy to say that when you make millions just by engaing speeches for a few hours at a time. It is a different success story from making just hundred thousands dollar before tax by working like dogs for 24 hours and 7 days being treated not as VIP but as everybody else.
While those top of the cream don't mind raising tax on people who make just more than $350K per year, there is no talk of creating more tax brackets beyond $350K.
People who make 1 million and people who make just over $350K pay the same tax rate.
For instance, I overheard that Anderson Cooper in CNN who are definetely on the little people's sides from this public image make about $4 million per year over the contract with CNN.
What does the contract mean???
The contract means to create a company where he can expense the part of his lifesytle like those A-list celebrities???
I personally like Anderson. However, the government is about increasing tax on our household income of a few hundred thousands by working 24/7 like dogs as ordinary citizens. Meanwhile, those celebrities being treated as VIP and making not only millions but also shelting their income from tax by incorporating themselves loudly speak to support for paying more tax.
Those celeblities pretend as if they care about those little people. However, I do not feel in that way. Maybe the fastest to help those poor people might be for those top of the cream to give up their wealth to those under-priveledge??? Instead, in order to avoid paying their really equal share, they propose to increase tax on those who make just more than $350K. Those who make more than $350K and just below that amount are spending their most time at work. They might go vacation. But, they pay their vacation on their own after they pay tax.
I am also talking about those charitable foundation pretending that they are giving back to the society by expensing their lavish lifestyle as the part of tax deduction.
Here is the story I would love to distribute to as many people as we can as to this charitable trust.
This story was reported by Globe Spotlight Team reporters Beth Healy, Francie Latour, Sacha Pfeiffer, and Michael Rezendes, and editor Walter V. Robinson. It was written by Healy. Second in a series of occasional articles.
It looked like a high-end corporate jet, the luxurious, long-range Bombardier that landed at the Lynchburg, Va., airport on a sunny Thursday afternoon in September. But no corporate executive disembarked.
Instead, out stepped Nancy
Leigh DeMoss. She is a trustee of the Arthur S. DeMoss Foundation, a private charitable foundation whose mission is to support Christian organizations. The Globe Spotlight Team determined the foundation spent $36 million in 2001 to buy the 12-seat, transoceanic jet -- and millions more over the last two decades to own and operate two prior jets. It is the kind of extravagance that has infuriated shareholders of public companies during the corporate scandals of the past two years. Yet private planes and other big-ticket expenses go virtually unnoticed in the world of philanthropy, even though foundations are publicly subsidized through huge tax breaks for the wealthy donors who set them up. A Globe review of foundation tax returns revealed numerous instances of money earmarked for charity being used to fund travel and lavish perks for foundation trustees -- the people charged with protecting foundation assets.
In Dallas, two officers of the Carl B. and Florence E. King Foundation, established by a Texas oil man to fund educational programs, used foundation credit cards to pay for family vacations to Australia and at least six European countries.
In New York, 14 part-time paid trustees of the Herman Goldman Foundation stand to collect a total of $1.8 million in retirement benefits, thanks to a 1993 vote by the board. And at the largest foundation in Oklahoma, a $5.7 million jet has been used to ferry trustees to meetings and to shuttle a part-time consultant 43 times in the last two years from Athens, Ga., to foundation headquarters.
Larry A. Pulliam, executive vice president of the $900 million Samuel Roberts Noble Foundation in Ardmore, Okla., mused during an interview, ``Maybe the homeless people in Dallas need their soup more than our trustees need their plane.'' But, he added, ``I don't think it's valid.''
Beyond the enormous paychecks some foundation trustees take, excesses documented in a Spotlight report last month, the Globe has uncovered evidence of charitable assets being used to pay rent for plush office space and health club dues and to buy luxury cars, Persian rugs, and fine art.
Some examples:
At the King Foundation, president Carl L. Yeckel arranged for himself and his top aide to receive pensions totaling more than $1 million a year, creating an unfunded future liability that experts say could drive the $41 million foundation into insolvency, according to lawyers involved in a lawsuit against the foundation.
Oklahoma City's Kerr Foundation, established to fund local social and cultural causes, bought a $44,000 Jaguar for the personal use of foundation officials. The $28 million foundation, which also spent $616,000 to buy a headquarters building, spends twice as much money on salaries and expenses as it donates to charities.
The John & Mary R. Markle Foundation paid $837,291 in rent last year for offices at Rockefeller Plaza in midtown Manhattan, where it funds research on health care and national security. And the $53 million Pollock-Krasner Foundation, started by the widow of artist Jackson Pollock to support artists, bought a $2.3 million co-op apartment on Park Avenue in New York's exclusive upper East Side for its office.
In an interview, Pollock Foundation chairman Charles C. Bergman said the co-op purchase was a bargain compared to the $156,000 in annual rent the foundation had been paying. The foundation also spent $187,000 to renovate the new office, according to its tax returns.
At the Markle Foundation, spokesman Todd Glass said the board is looking to reduce the rent by subletting some space to other nonprofits. ``We expect to cut our rent by 50 percent in the next six months,'' he said.
Extravagant spending
Although extravagant spending is not uncommon, the vast majority of private foundations do not drain their assets this way, the Globe review found. Similarly, most foundations do not overpay trustees and foundation managers.
The exceptions, however, are many and striking. Last month, the Globe disclosed cases in which foundation executives who claimed to be working full time were taking annual salaries approaching or exceeding $1 million, while many part-time trustees were being paid tens of thousands of dollars, and sometimes hundreds of thousands, for attending a handful of meetings each year.
After the report, attorneys general in California, New York, and Massachusetts opened inquiries into the apparent abuses. In the most egregious case reported by the Globe, Paul D. Cabot Jr. of Needham paid himself $1.4 million in 2001 and $1.3 million in 2002 for overseeing a family foundation whose assets have dwindled from $14 million in the mid-1990's to $4.9 million early this year. Cabot told the Globe he gave himself a $400,000 raise in 2001 to help defray the cost of a daughter's wedding.
In exchange for the tax breaks given to people who establish private philanthropies, the law requires foundations to donate at least five percent of their assets to charity each year. ``Reasonable'' expenses are allowed, and may be deducted from the mandated 5 percent.
Such expenses can put a considerable dent in what foundations give to charity. For example, at the Kerr Foundation, endowed by a former Oklahoma senator who made his fortune in oil, nearly half the 5 percent distribution in 2001 was eaten up by administrative expenses, travel, and salaries.
Alan L. Feld, A Boston University law professor and an expert in nonprofit law, said that the pattern of spending reported by the Globe goes ``way beyond what any reasonable person would think was appropriate.''
Said Feld: ``For foundation officials to behave as if a private foundation is another pocket of their own is wrong, and it deprives the intended beneficiaries of charities what they are entitled to.... This is part of a pattern where people are treating foundation assets as a pot of money they can dip into as they wish.''
Feld, in a view echoed by other experts, said that foundation spending now goes almost unregulated, with the Internal Revenue Service and state attorneys general providing little oversight. Each year the IRS audits only about 100 of the nation's 60,000 private foundations. State regulators complain that they don't have the budget or staff to audit foundation filings.
In the rare cases when they are discovered, abuses of foundation spending rules can result in stiff penalties. If the IRS finds that foundation executives are ``self dealing,'' or taking perks that ought to be counted as part of their personal compensation, those executives can be forced to repay the funds, plus a penalty that can range from 5 to 200 percent. Foundation managers or trustees who know of abuses can also be penalized. And, in egregious cases, foundations can lose their tax-exempt status.
Public perception
If Cabot represents the extreme in compensation, then the DeMoss Foundation's jet is its match in the perks category.
Bruce Hopkins, a lawyer at the Kansas City law firm Polsinelli Shalton & Welte and an expert on foundations, said he would advise his clients not to buy a jet because it is nearly impossible to justify the cost as reasonable under IRS rules.
``It just doesn't wash,'' Hopkins said of the DeMoss jet. ``I'm confident if the IRS or a court looked at this, it simply would not hold up.''
Often, however, the IRS has no way of knowing about such purchases. Foundation assets are supposed to be listed on a depreciation schedule included with each tax return, but the Globe found that many foundations do not file the schedules.
The $444 million DeMoss foundation did file its depreciation schedule, which shows that the Bombardier - nicknamed the ``Gold Star II'' - was purchased in 2001 to replace a more modest jet. The foundation spends more than $1.5 million a year to pay the salaries of two pilots and to operate and maintain the aircraft, which the manufacturer calls an ``ultra long-range, high-speed business jet.''
According to a former foundation pilot, who asked that he not be identified, the aircraft was purchased at the request of chairman Nancy S. DeMoss, the widow of Arthur S. DeMoss, who founded a Pennsylvania mail-order life insurance company. Mrs. DeMoss wanted to make flights to remote destinations in Asia and Africa, where the foundation supports missionary work, with fewer fuel stops, the pilot said.
Larry R. Nelson, the foundation's chief financial officer, sidestepped most of the Globe's questions about the jet. But in an e-mail, he said the foundation supports many causes and projects, ``most of which are overseas, many in the third world.'' The foundation's latest available tax filing, covering 2001, shows that two-thirds of its $36 million in grants went to domestic Christian ministries and churches.
Two former foundation executives said the foundation uses the jet mainly ``for charitable purposes.'' But not always: Since July, flight records tracked by the Globe show the DeMoss jet being flown routinely in and out of Palm Beach International Airport, near the foundation's headquarters, often to places where the foundation doesn't make grants. The jet has also flown to Washington, D.C., New York, Atlanta, and Scottsdale, Ariz., among other cities, and to Little Rock, where daughter Nancy Leigh DeMoss tapes a religious radio program.
In September, the daughter's trip to Lynchburg was for a speaking engagement. The jet picked her up that morning in South Bend, Ind., 20 miles from her home. In July, her mother took the jet to Orlando, Fla., a three-hour drive from her $10 million home in Palm Beach, to attend a friend's funeral. And the DeMoss grandchildren have occasionally flown on the jet, the former pilot said.
DeMoss family members - the mother and four others are trustees - refused to be interviewed for this story.
As for the Noble Foundation, Pulliam said it received an OK from its attorneys before buying its seven-seat Cessna Bravo jet. ``We talked about the public perception of this before we went ahead, that some people would say, `You're a charitable organization and you've got a plane,''' he said. ``It is a public relations issue.''
Pulliam said the foundation uses the plane to help Noble's scientists travel more efficiently from rural Ardmore to remote sites in Texas, Missouri, Kansas, and Colorado, where it funds agricultural and biotechnology programs.
After the Globe raised questions about the more than 40 flights back and forth to Athens, Ga., Pulliam said that a foundation consultant, Joe Bouton, a professor of crop and soil sciences at the University of Georgia, has been shuttling back and forth to Oklahoma on the jet twice a month over the last two years. Bouton, he said, plans to move to Oklahoma next spring.
``Using commercial airlines, it takes Dr. Bouton about 8 hours to get to Ardmore from Athens,'' including two hours driving time on each end of the trip, plus waiting time in airports, Pulliam wrote in an e-mail to the Globe. ``Using our aircraft, it takes less than three hours.''
Pulliam said buying the jet, with its annual operating costs of about $600,000, was the brainchild of the foundation's trustees. Nine of the 15 trustees are descendants of Oklahoma oil man Lloyd Noble, who started the foundation in 1945. Pulliam said the trustees, especially those who live in Atlanta, use the jet to travel to Oklahoma for trustee meetings and to monitor the foundation's farflung projects.
The use of the aircraft, both for Bouton's commuting and the trustees' flights, is ``quite appropriate,'' Pulliam said. He said the plane has never been used for nonfoundation business.
Nonetheless, in the post-Enron era, corporate executives have found it increasingly difficult to justify the purchase of aircraft, much less long-range jets like the DeMoss Bombardier, according to people who sell and lease business jets
``A big piece of owning a jet is ego,'' said Mark Stone, chief executive of Sentient Jet Inc., a Norwell company that leases jets to customers on short notice. ``A lot of corporations have sold their aircraft, because they just didn't feel that it was giving the right image to their shareholders.'' At many other foundations, executives are given luxury cars for their use. When the president of the M. B. and Edna Zale Foundation in Dallas was ready to retire in 2001, the foundation let him keep his company vehicle - a 1999 Lexus.
The sedan was part of a $325,000 retirement package given to Michael Romaine, who worked for the Zale family's jewelry company before heading their foundation, according to the foundation's current president, Leonard Krasnow. With Romaine driving off in the Lexus, the foundation bought Krasnow a 2001 Infiniti.
Reached at his retirement home in North Carolina, Romaine, 64, at first said he bought the Lexus from the foundation for $24,000. But when told what Krasnow had said, Romaine asked, ``Did they give it to me? I'd have to look it up. ... I can't remember if I bought it or not.''
The foundation's original purchase of the Lexus for him was justified, Romaine said, calling it ``a very basic car.''
A lawsuit in Texas
At the King Foundation in Dallas, Yeckel, 67, and his deputy, Thomas W. Vett, used foundation credit cards to take at least one foreign vacation a year. But it took years for anyone to discover the excessive spending. In early 2002, Yeckel's sister, Dorothy Yeckel, became suspicious of her brother's lifestyle, including his $1.5 million home and the exotic vacations he took.
Todd Amacher, the sister's lawyer, looked over the foundation's tax returns and alerted the Texas attorney general to the $1 million in compensation Yeckel was taking. Assistant Attorney General John Vinson filed suit, and ultimately a new board took control of the foundation. The suit became public last year, but the details of Yeckel and Vett's free-spending ways had not been disclosed.
During an October 24 deposition, Vett testified that he and Yeckel each used King Foundation credit cards to travel with their wives and other family members to England, Scotland, Australia, Russia, the Czech Republic, Germany, and Italy. There were also numerous trips to San Francisco and New York, according to a lawyer familiar with Vett's testimony.
The globetrotting cost the foundation an estimated $200,000 over five years, according to one person who is involved in the case. That money came straight out of the pockets of charities the foundation might otherwise have funded, because the executives counted the travel on foundation tax returns as a charitable expense.
And their foundation-subsidized lifestyle went well beyond vacations. The foundation maintained three memberships at a private downtown Dallas dining club, at a cost of more than $5,000 a year. In 2001, according to the attorney's general's lawsuit, the foundation credit cards were billed for $6,442 for restaurant bills; $23,000 for purchases in retail stores and $6,531 for health-club memberships.
Yeckel, in a brief telephone interview, declined to answer questions. An attorney for Vett said he could not discuss his client's testimony.
In other cases, relatives of those who established foundations spend the assets as if they were their own personal funds. At the $43 million Roy F. & Joann Cole Mitte Foundation in Austin, Texas, Scott Mitte began to run up personal expenses almost as soon as he took the helm of the foundation his parents founded.
Since 1999, the foundation has purchased Tony Bennett concert tickets worth $4,003, a $4,037 custom tuxedo, and six doors totaling $6,090 that were delivered to Mitte's home, according to an audit of foundation expenses. During Mitte's tenure, the foundation's spending on travel and meetings rocketed from about $50 a year in the late 1990s to $183,000 in 2001, while his compensation also leapt from $31,000 in 1999 to $220,000 in 2001.
And it paid $368,000 in legal fees last year, up from $6,689 the year before, in part to cover a legal battle between the foundation and Roy Mitte's company. Also last year, the foundation footed the bill for an out-of-court settlement with a woman who sued Mitte for alleged sexual harrassment. The foundation disclosed a $139,000 ``legal settlement'' on its 2002 tax return.
The foundation's lawyer, Jeffrey T. Knebel, declined to discuss the settlement or answer questions about other foundation spending. Mitte resigned as executive director in August, 2002, when the harassment charge became public, but remains on the foundation's board of directors and serves as its senior vice president. He did not return calls from the Globe.
In a statement, the foundation said it believed its expenses were ``reasonable, appropriate, and have been greatly justified.''
Some large foundation expenses are tucked into a category on tax filings called, ``travel, conferences, and meetings.'' The IRS does not require detailed accounting for such costs. At several foundations, officials refused to provide the Globe with documentation to justify the costs, or declined to answer questions.
The $13.5 million Chiles Foundation of Portland, Ore., for example, reported spending $591,415 on travel, conferences, and meetings from 1998 through 2002, according to its tax returns. Another $128,115 was reported for ``autos and parking'' during that period, while the foundation paid $300,000 in rent for its offices. The largest beneficiary of the foundation is Boston University, where foundation chief Earle M. Chiles, 83, is a trustee.
Foundation officials turned aside Globe efforts to interview Chiles, the son of the founder. In a written note, the foundation attributed its spending to ``grant-related work'' and to periodic meetings with its investment advisers. One foundation official, Sharron D. Mathews, said in a brief telephone interview: ``If our spending is out of line, it is only the Internal Revenue Service we need to account to.''
Subscribe to:
Posts (Atom)