Engineering a Foundation’s Demise

A philanthropy that jump-started biomedical research shuts down

As a teenager in the 1960s, Ruth Whitaker Holmes remembers her father enthusiastically foretelling a time when engineers would play a vital role in devising medical cures and technologies.

An engineer trained at the Massachusetts Institute of Technology, Uncas Whitaker built an electrical connector company from a small, local business into AMP, an international corporation in Harrisburg, Pa., that now generates annual sales of $6-billion.

He had long sought to marry his craft with that of doctors and researchers. Mr. Whitaker endowed a professorship in technology and health science at his alma mater in 1967. Later on he founded a vascular institute at Boston University and gave money to start a cardiovascular research laboratory at the Cleveland Clinic. But he told family members he wanted to do more to push his vision forward.

“He was absolutely convinced that engineering had a role to play in health care,” says Ms. Holmes, who helped oversee the foundation her father created through his will in 1975 with no clearer mission than to “improve people’s lives.”

However, the philanthropic habits he practiced during his lifetime gave his survivors a clue as to how to direct the foundation, Ms. Holmes says: “When he died, we had a pretty good idea of what he would have wanted us to do with his money.”

$825-Million Awarded

Thirty-one years after Uncas Whitaker’s death, the Whitaker Foundation has become the pre-eminent North American grant maker to biomedical engineering schools and their researchers, making the most of the $825-million in grants to colleges and universities it has awarded since its creation.

It has spurred the development of 30 biomedical engineering departments at colleges and universities across the country, and directly supported dozens of researchers in the United States and Canada who have gone on to create lifesaving technologies, such as the mechanical heart pump and tools for image-guided surgery.

Now, after years of kick-starting a major academic and research field, Whitaker will shut its doors at the end of June.

When its few remaining staff members turn out the lights for the last time at the foundation’s Arlington, Va., office, they will act on the wishes of its donor, who suggested in the foundation’s papers of incorporation that its endowment be spent entirely within 40 years of his death.

Although a few large, private grant makers have decided to spend all their money in a short period of time — the John M. Olin Foundation, for instance, closed its doors in November — the practice is very rare, and most foundations are designed to operate in perpetuity. Ms. Holmes says her father wanted to avoid attaching his name to an institution that might not hew to his wishes, which could happen the longer the institution existed.

“He could not stand bureaucracy,” says Ms. Holmes. “He wanted to make sure that dollars were spent responsibly and to advance a mission — and not to create a bureaucracy.”

Even as Whitaker closes, foundation officers say they are taking several steps to guarantee that Uncas Whitaker’s legacy will continue.

While some observers wonder whether the closing of the foundation could slow down the rate of innovation among young bioengineers, foundation leaders say they have done all they can to ensure that other organizations will take bioengineering education and research to a new level.

“We’re confident that we’ve done our part, which is to get the bioengineering model off the ground,” says Peter G. Katona, the foundation’s president since 2000. “After many years of support, it’s time to see if the field can fly on its own.”

Careful Planning

Mr. Katona and other Whitaker officers say that because the foundation’s demise had been planned for 15 years and was carried out incrementally, the process of closing has been largely painless. The foundation has smoothly made the transition from a prolific grant maker to a nearly moribund operation, even as it has steadily supported the study and practice of bioengineering, by:

• Making a plan to hand out many grants in a limited number of years in order to make a lasting impact on the bioengineering field.

• Encouraging other private foundations and federal agencies involved in making similar grants, so other organizations could continue supporting programs financed by Whitaker.

• Demanding that colleges and universities match (or come close to matching) the amount that Whitaker provided, in hopes that universities would continue with their commitments long after Whitaker had closed.

• Adjusting its mix of investments in order to better control what money it had remaining.

Whitaker’s governing committee first seriously broached the topic of shutting down in 1990, when Ms. Holmes served as board chair. Mr. Whitaker’s desire for a foundation with a finite life span was one reason for the discussion. The governing committee also was troubled by the examples set by some foundations that had long outlived their donors and had drifted away from their missions.

But those weren’t the only reasons. For some time after the foundation had been formed, bioengineering remained overlooked by both the governmental and philanthropic worlds, says G. Burtt Holmes, the board chair at Whitaker (and the husband of Ruth Whitaker Holmes).

Two grant-making organizations connected to the federal government — the National Institutes of Health, in Bethesda, Md., and the National Science Foundation, in Arlington, Va. — had not yet recognized the importance of getting engineering and medicine to work together, and had been turning down grant requests for bioengineering research, he says.

“Interdisciplinary grants weren’t very common back then, so there was a gulf there we felt we had to address,” says Mr. Holmes. “The only way to deal with that was through massive spending. We had to go well beyond the typical 5-percent payout and keep our focus narrow to have the impact we wanted to have.”

Shunning Proposals

Whitaker’s officers resisted proposals to make grants overseas or to focus on cures for specific diseases, adds Mr. Katona.

The size of the foundation, which had been started by a $131-million bequest by Mr. Whitaker and his wife, Helen, determined how tight that focus had to be, says Ms. Holmes.

“We were a reasonably small foundation trying to accomplish a huge mission,” she says. “We thought we could accomplish our goals in the amount of time we set, and we did.”

The bioengineering field was on the brink of several discoveries at the time the governing committee decided to create a closure plan, which would necessitate a much-faster spending rate than the 5 percent of assets a year the foundation was giving away, Mr. Holmes says.

Advancements in fields such as molecular biology and microelectronics were pointing to the possibilities of convergence — and of important medical discoveries.

“Our timing turned out to be excellent,” says Ms. Holmes.

Some of the foundation’s admirers agree. William R. Brody, president of the Johns Hopkins University and a radiologist, says that as an electrical engineering student at MIT in the 1960s, he yearned for something akin to a bioengineering program, but none were available.

Bioengineers were on the verge of making serious medical breakthroughs, such as advances in heart-surgery technology, the CT scan, and mechanical prostheses, yet bioengineering wasn’t respected enough to gain a foothold in the university world. Researchers and teachers in the field were later given a healthy push by Whitaker, he says.

“There was a sense in the 1970s and even a bit later that biomedical engineering was not a bona fide field,” says Dr. Brody. “Most universities weren’t willing to do it, or didn’t have the money to do it. That’s where Whitaker came in. When they got going, NIH had no focus on bioengineering.”

He says that the foundation made the right decision to grant large sums of money in a short period of time.

“They wouldn’t have had that impact if they’d held that money back,” Dr. Brody says.

Shu Chien, a professor of bioengineering and medicine at the University of California at San Diego, concurs.

“Without Whitaker’s input, bioengineering still would have developed, but it would have taken 20 more years to get where we are now.”

Whitaker’s grants had a spillover effect, encouraging even colleges and universities that were not recipients of Whitaker grants to start bioengineering departments as well, says Mr. Katona.

The number of departments in the United States has more than tripled since 1991.

Besides supporting the development of bioengineering schools and the construction of buildings at some of them, Whitaker also made large grants to young scholars. In the last 15 years of its existence, Whitaker made grants totaling $275-million to encourage researchers younger than 30 to develop medical technologies.

Grants designed to encourage leadership in the laboratory, develop faculty members and textbooks, and create internships also helped build the bioengineering field, say educators.

“The strategy of focusing jointly on research and education was a wise one,” says Don P. Giddens, dean of engineering at the Georgia Institute of Technology, in Atlanta. “The real permanence would be through establishing new departments, while the grants to young researchers got people looking seriously at the field.”

Encouraging Collaboration

In the mid-1990s, Whitaker began to talk with other grant makers about the importance of its work in hopes that they would also support bioengineering once Whitaker closed.

Among those Whitaker contacted and who have since made grants for bioengineering research are the Wallace H. Coulter Foundation, in Miami, and the Howard Hughes Medical Institute, in Chevy Chase, Md.

Toward the second half of the 1990s, Whitaker’s officers began to announce its shut-down plans at scientific conferences and to leaders at universities and other foundations.

As the 1990s progressed, Whitaker took measures to more intensely manage its endowment, gradually switching the makeup of its assets from securities to corporate bonds and then, finally, to U.S. treasury bonds. During that decade’s stock boom, when the value of Whitaker’s portfolio also exploded, the foundation awarded as much as $60-million per year in grants.

“We were in an enviable position at the time,” says Mr. Katona. “We could make grants to virtually every highly rated proposal we got. We didn’t have to worry about cutoffs, as they do at NIH, because we had the money to handle all the requests.”

But all of that money created headaches for Whitaker’s leadership.

“I was really concerned that the stock market was too volatile for us to start these large programs,” Mr. Katona says. So, the foundation hired a consulting company to advise it on how to move forward with its investments.

Dealing With the IRS

In 2000 the foundation began accelerating the closing process, holding annual meetings in April to develop and then tweak a strategic plan.

Experts on closing a foundation say that it is essential to have such a plan and to understand federal tax laws that involve foundations. But the process of closing is not very complicated, says Doug Varley, a Washington lawyer.

“I tell them, ‘It’s easier than you think,’” says Mr. Varley.

Because of some actions taken by the Internal Revenue Service against private foundations in the 1960s, some foundation leaders have become wary of the closing process. At the time, the federal government enacted a penalty tax that could be as much as the entire amount of a foundation’s holdings.

“It was designed to keep foundation donors from cutting and running with their money,” says Mr. Varley.

After several private foundations in recent years asked for rulings on how to shut down, the Internal Revenue Service issued guidelines in 2002 on how to legally terminate a foundation. Grant makers that spend all their assets would have none left to tax, the guidelines say, and ones that go out of business have no obligation to continue to monitor their grants.

“It was important for the IRS to put out those guidelines because they allayed a lot of people’s fears and let them know there was no complication or risk in closing down,” says Mr. Varley.

Last Round of Grants

In 2003, Whitaker announced a final round of grants totaling $10-million. For the past three years, it has spent its energy managing grants, holding scholarly meetings, and evaluating what effect it has had on the field of bioengineering.

Some researchers have expressed concerns that by making large grants to educate students to become bioengineers, Whitaker has overwhelmed bioengineering with researchers, and not all of them will be able to find jobs, but Mr. Katona says he has few qualms.

“Occasionally, I have some worries about the future of the large number of people that we’ve helped train,” he says. “But many people are optimistic. Things are a lot different than what they were in 1991. Hughes and Coulter are making substantial grants, and the NIH has new imaging- research programs.”

Whitaker’s staff members point to numbers from the federal Bureau of Labor Statistics to back Mr. Katona’s contention.

The bureau says that the number of jobs in bioengineering will grow by 31 percent through 2012, while jobs in the U.S. economy as a whole are expected to grow by 14 percent.

More bioengineers are moving into industry, some with the help of “translational” grants from Coulter that help them take discoveries and new technologies from the university laboratory to private businesses.

“You don’t have to be in academic research solely anymore,” says Frank N. Blanchard, a Whitaker spokesman.

The formation in 2000 of the National Institute of Biomedical Imaging and Bioengineering — one of the 27 institutes in the NIH — has also opened a new door for researchers.

The agency will make $270-million in grants this year, many of them designed to help young scientists.

Ms. Holmes says that Whitaker will have one program to continue past June — a $20-million venture with the Institute of International Education, in New York, that will pay for young American bioengineers to conduct research abroad. As her father would have it, she says, the program will end in 15 years.