The problem with tainted money

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.


  1. jrkrideau says

    I am a graduate of a university that returned the money and rejected the doner. I prefer this.

  2. Matt G says

    I am also a graduate of an institution which accepted money ($10^8) from an *ahem* person of questionable ethics and changed its name as a thank you. A few weeks after this was announced, the donor’s name appeared in an article about business ethics (and not in a favorable way).

  3. sonofrojblake says

    following allegations of or convictions for immoral or illegal behavior

    Good luck getting anyone to donate anything on that basis.

  4. says

    I am vaguely reminded of Howard Zinn’s characterizing southern politics as a serial killer who’s really good except every week or so he kills someone and eats them. “His heart is in the right place” and “he’s improving!” Mostly they’re a good person.

  5. ridana says

    I assume the donors take tax write-offs for their charitable “gifts.” If naming rights are contractually tied to it, it’s no longer a gift, but rather becomes an ad purchase. Still deductible, but as a business expense.

    I don’t think they should ever give the money back for them to spend on some other objectionable activity, unless it was a purchase (even then, the amount refunded should be pro-rated for the ad time they got). Remove their name and keep the money.

  6. chigau (違う) says

    I figure that once I give the panhandler a couple of bucks, that $2 is theirs.
    Same deal if I give a university $2M.

  7. Dunc says

    I guess it is now mandatory to look all gift horses in the mouth.

    Just ask the Trojans.

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