The exposure of the Sackler family as the owners of the company Purdue Pharma that is responsible for creating much of the opioid epidemic by aggressively marketing those drugs has resulted in many of the institutions wondering what to do with the gifts that the Sacklers gave to them. Professor of law Terri Lynn Hegee looks at the legal issues faced by these institutions involved in distancing themselves from disgraced donors.
Charities can have the most trouble distancing themselves from tainted donors when they grant a major giver naming rights: that is, name programs or buildings after them.
When these scandals strike, charities face a dilemma – keep the money given by the now-tarnished donor or return the tainted funds. But returning the funds may be easier said than done.
Once the money is given away, it’s committed to charitable use. Returning that money just because the donor’s reputation is now sullied may get the charity in trouble with state regulators.
They can give the money back, perhaps with interest. They can suspend programs or professorships named after the donors whose names have become an embarrassing burden, perhaps with threat of litigation from the donor for not fulfilling the charity’s end of the bargain. Or, they can continue to maintain the donor’s name and face public outrage.
She argues that charitable institutions could benefit from taking pre-emptive action.
The complications that can arise from tainted donors is an incentive for charities to require “morals provisions” in naming rights agreements. These provisions let charities remove donors’ names from buildings, endowed fellowships or scholarships or return donated funds following allegations of or convictions for immoral or illegal behavior.
I think we will see more of these clauses in the future as institutions realize that the unsavory pasts of their donors are likely to come to light.