Endowment in the United States

Endowment in Europe: a Definition

(In the Law of France and England) The assignment or bestowment of dower to or upon a woman. (…). The providing for the officiating ministers of a church, by setting apart a certain portion of lands, etc., for their maintenance, etc. (…). IC has no reference to building or providing a site. (…). The provision itself, so made (dos ecclesiae). Comyn, Dig. “Dismes” (B). (1)

Endowment to Universities and Law Schools

IN 1856, THE ARCHDIOCESE OF NEWARK, N.J., created a college for students in need of a sound Catholic education. It was named Seton Hall, after Elizabeth Ann Seton, who was the aunt of Newark’s bishop and went on to become America’s first native-born saint. Today, a statue of the saint stands at one end of the green, not far from the school’s latest capital improvement. Completed in 1997, the large, six-story classroom building has gold-colored columns and a concave sandstone façade and hosts courses like “Law, Ethics, and Public Policy” and “Legal Foundations of Business.”

The building is named after a former student who might have benefited from such instruction. L. Dennis Kozlowski grew up in a working-class neighborhood in Newark, graduated from Seton Hall, and went on to earn more than $100 million a year in salary and benefits as CEO of Tyco International. When he was not spending exorbitant sums on parties and vacations, Kozlowski gave money in Tyco’s name to hospitals, arts centers, and charities. One of the largest gifts, $3 million, went to his alma mater and was large enough for the university to set his moniker in stone.

Until last August, when workmen dug a bronze plaque bearing Kozlowski’s name out of the transom above the building’s front doors. The CEO had been convicted two months earlier of fraud, conspiracy, and grand larceny charges for stealing nearly $150 million from Tyco and for lying about the company’s finances so that he could cash in on more than $400 million in stock options. Before being sentenced to up to 25 years in prison, he called Seton Hall’s president, Rev. Msgr. Robert Sheeran, and asked the school to take his name off the building.

Seton Hall, which has relied on an endowment of just $180 million, compared with the $9.9 billion of Princeton 45 miles down the road, is new to fundraising, but it has quickly established an unusual track record. In 1987, the financier Robert Brennan pledged $10 million to the school, which named its recreation center for him. Fourteen years later, he was imprisoned for bankruptcy fraud and money laundering convictions. In 2002, Frank Walsh, a member of Seton Hall’s board who also sat on Tyco’s board, pledged more than $5 million to the college, which dedicated a library to him. Later that year, he pleaded guilty to receiving a $20 million consulting fee without disclosing it to most of Tyco’s board or any of the company’s shareholders.

SETON HALL IS NOT THE ONLY UNIVERSITY that has come to rue a donor’s largesse. In the early 1990s, Harvard received $2 million from the Saudi Bin Laden Group, a construction conglomerate owned by relatives of the terrorist. The school came under fire after September 11, but it maintained that the company had not financed terrorism. Harvard later donated $1 million to families of the victims. In 2001, the school weathered more criticism from students, faculty, and other donors as Alfred Taubman stood trial. The former chairman of Sotheby’s, whose name appears next to President John F. Kennedy’s at a center in the School of Government, was convicted of conspiring to fix commission rates and spent 10 months in prison for his crimes. During his sentencing, Taubman’s lawyer pointed to his donations to Harvard, Brown, Michigan, and other schools as grounds for a shortened jail term. Other philanthropists headed for prison have made similar arguments.

A wave of corporate scandals has left no shortage of dubious high-profile donors. The University of Houston and University of Missouri-Columbia still have endowed professorships in the name of Kenneth Lay, the head of Enron who is awaiting trial for conspiracy to commit fraud and making false and misleading statements, among other charges. This recurring predicament prompted John Eason, a professor at Tulane University Law School, to write an article for the UC Davis Law Review, titled “Private Motive and Perpetual Conditions in Charitable Naming Gifts: When Good Names Go Bad.” Eason’s paper details how donors are causing trouble for universities, arts organizations, charities, and other institutions.

Before taking a donor’s money, universities are careful to conduct background checks. But once a pledge has been made, most institutions keep the paperwork short, opting for agreements that resemble thank you letters more than contracts. Many don’t mention the prospect of the relationship turning sour. “You have a very personal conversation with these people about their hopes and dreams and what they want to accomplish by making this gift,” said one fundraiser at Columbia University, which has just begun a multibillion dollar campaign. “You don’t want to insult them by saying, ‘Someday you might do something bad.’ ”

Some of education’s largest fundraisers like Harvard and the University of Michigan refuse to do much more. But Seton Hall and other schools like it have opted for a more proactive approach. When it voted to remove Brennan’s name from the school’s building, Seton Hall’s board created a naming policy that included a condition to allow for the unnaming of a building. The school won’t release the document, but other institutions are also making sure they retain the right to remove the names of donors who go astray. Central Washington University, which is gearing up for its first fund-raising campaign, plans to give donors a letter stating that the school names buildings and other “opportunities after individuals and organizations that exemplify the attributes of integrity and civic leadership.” Should those standards be violated, the letter continues, the board may “elect to remove the donor’s name from the naming opportunity.” Rutgers, which raised $615 million in a fundraising drive that ended last year, noted that it would reserve “the right to rename [a] building or facility” under “extraordinary circumstances.”

When the extraordinary happens, which seems almost ordinary these days, a university has a few options. It can return the gift—a difficult gesture for many institutions when the millions of donated dollars have already been spent on a new building or professorship. Such a move, according to Harvey Dale, director of the National Center on Philanthropy and the Law at New York University, might even be illegal. “A fiduciary for charitable beneficiaries certainly can’t divest itself of assets, particularly to turn them over to a felon,” he said. A university can keep the money and drop the name, though that might scare off potential donors, who are put off by such a unilateral forfeiture. Or it can keep the disreputable name—and maybe alienate another group. “Respect for the bad actor’s naming terms, in other words, carries its own ‘chill’ consequences,” Tulane’s Eason writes. Speaking from ample experience, Seton Hall’s President Sheeran said, “It’s never good to have a donor whose name is tainted.”

IN THE SPRING OF 1994, Seton Hall finished building what it calls the “Jewel of the Campus.” The four-story Walsh Library is three times the size of its predecessor and can accommodate twice as many students. Today, it stands opposite the Richie Regan Recreation and Athletic Center (formerly the Brennan Recreation Center) and a short walk from Jubilee Hall (formerly Kozlowski Hall). The college chose not to strip the building of Walsh’s name, noting that the decision “was based on the sum total of circumstances that surrounded Mr. Walsh’s case.” Walsh was almost as generous with his alma mater as he was with himself, giving the school close to $10 million.

That’s the spirit that Seton Hall hopes to instill in more of its alumni, as it embarks on an effort to raise $25 million for a new science and technology center. “We’ve had some bad luck in the past,” conceded the school’s spokesman. “But there are many alums within the fold who have the financial wherewithal to contribute big sums. Those are the people who would be ideal for us to name buildings after.” Perhaps. As an editorial in the campus newspaper noted, the school might do better sticking to dead saints.

By Collin Campbell.

Leontief Paradox in the International Business Landscape

Definition of Leontief Paradox in the context of U.S. international business and public trade policy: Empirical finding that U.S. exports are more labor-intensive than U.S. imports, which is contrary to the predictions of the theory of relative factor endowments.

Endowment

In Legislation

Endowment in the U.S. Code: Title 20, Chapter 8, Subchapter II

The current, permanent, in-force federal laws regulating endowment are compiled in the United States Code under Title 20, Chapter 8, Subchapter II. It constitutes “prima facie” evidence of statutes relating to Education (including endowment) of the United States. The readers can further narrow their legal research on the topic by chapter and subchapter.

Resources

Notes

This definition of Endowment is based on the The Cyclopedic Law Dictionary

Endowment

Endowment in the United States

Endowment in Europe: a Definition

Endowment to Universities and Law Schools

Leontief Paradox in the International Business Landscape

Endowment

In Legislation

Endowment in the U.S. Code: Title 20, Chapter 8, Subchapter II

Resources

Notes

See Also

Further Reading (Articles)