A Donor’s Obsession With Secrecy

Non-profit leaders are debating the merits of anonymous giving in the wake of revelations that an Irish-American businessman gave

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away more than $610-million in the past 15 years with only a handful of advisers knowing his identity.

The donor, Charles F. Feeney, went to extraordinary lengths to keep his philanthropy secret. He made a fortune by creating a global network of duty-free shops that catered to Japanese tourists — and then gave most of it away in 1984, when he transferred his share of his far-flung network of business interests to a foundation he had set up in Bermuda.

Since then, the Atlantic Foundation and the Atlantic Trust, a sister organization established in 1986, have awarded grants to support colleges, hospitals, social services, philanthropic research, and other causes in the United States, Ireland, and elsewhere.

And there is still far more money to be given away. The foundations are in the process of selling their share in Mr. Feeney’s former businesses. When that sale becomes final, the funds’ combined assets are expected to exceed $3.5-billion. By comparison, the John D. and Catherine T. MacArthur Foundation, the seventh-largest U.S. philanthropy, had assets last year of $3.1-billion.

So determined has Mr. Feeney been to protect his privacy that most of the beneficiaries of the foundation and trust had no idea who their benefactor was. Charities had to agree in writing that if they disclosed any information about the money they received through the philanthropies, they would have to return the money.

Many people hailed Mr. Feeney for his generosity and for shunning public recognition for his good works. His advisers — as well as many other experts — say anonymous donations are the most selfless form of giving. They also say that when donors make big gifts with a lot of fanfare, they often unintentionally hinder the cause they are trying to support by making others believe that the charity’s financial needs have been taken care of.

But others fear that gifts made in secrecy are more likely to be abused. For example, gifts might be drawn from the proceeds of illegitimate activities or might improperly benefit the donor’s friends or associates.

Such concerns are compounded when a grant-making institution is located outside the United States and, therefore, not subject to the U.S. laws that regulate foundation activities. In such cases, public disclosure about their finances and governance may not be required, and the ethical integrity of the board is the only bulwark against conflicts of interest and other potential abuses.

Some legal experts said that while Mr. Feeney’s operations appear to uphold high ethical standards, they were concerned that other donors might use offshore philanthropy in ways that could be improper.

Mr. Feeney broke his silence last month, when a lawsuit over the proposed sale of a portion of the duty-free business revealed that the philanthropies, not Mr. Feeney, were in fact the owners of those assets. But officials of his foundation clearly hope that they can continue operating without much further publicity. They said they would keep their long-standing policy of not accepting unsolicited grant proposals.

Mr. Feeney reportedly has little taste for luxury, and his frugal habits and disdain for the limelight have made him stand out among the ranks of American mega-donors. Having given away his fortune in 1984, Mr. Feeney, who for years had erroneously been listed among the world’s wealthiest men, now lists his net worth as less than $5-million.

Says Raymond L. Handlan, a long-time philanthropic adviser to Mr. Feeney: “He’s sometimes depicted as a recluse, which he’s not at all. He has simply wanted people to accept him as a person, and not as someone who has a lot of money.”

Mr. Feeney, in addition to supervising his business and philanthropic ventures, has also played the role of unofficial diplomat in promoting a peaceful solution to the troubles in Northern Ireland. He reportedly has contributed some $280,000 to Sinn Fein, the political wing of the Irish Republican Army. Mr. Feeney has said that no philanthropic money was involved in those gifts.

“He’s been a significant influence in the general move toward peace that we all are desperately looking for on the island,” says Edward Walsh, president of the University of Limerick in Ireland. The university has received more than $10-million from the Atlantic Foundation.

Mr. Feeney’s obsession with secrecy stemmed from his 1981 gift of $700,000 to Cornell University, his alma mater, which prompted a flood of solicitations from numerous organizations. That experience convinced him of the merits of anonymous giving.

Working with Harvey P. Dale, a New York University tax-law professor and an old friend of his, Mr. Feeney during the 1980s created several philanthropic institutions, including the two Bermuda-based funds and the Atlantic Foundation of New York.

Most recipients of Mr. Feeney’s largesse knew only that their money came from the Atlantic Philanthropic Service Company, a for-profit consulting firm in New York that billed itself as an adviser to wealthy anonymous donors. Only now is it clear that the service worked only in behalf of Mr. Feeney’s philanthropies. The company acts as the funds’ U.S. program office; a similar company in Dublin handles grant making outside the United States.

Last year the Atlantic funds gave away $140-million. Recipients over the years have included groups as varied as the Children’s Defense Fund, Dublin City University, and Mount Sinai School of Medicine in New York.

Mr. Feeney’s charitable interests have broadened considerably since the foundation’s start, when all of the roughly $7-million it awarded went to Mr. Feeney’s alma mater, Cornell University. Most of that money went to a program called the Cornell Tradition, which supplements the college loans of students who perform community service. In all, Cornell has received more than $50-million from Mr. Feeney’s foundations. Grantees include Cornell’s School of Hotel Management, the Glee Club, and the athletic department.

The funds now also make gifts to charities that deal with aging and health, children and youth, education, international human rights, and philanthropy and volunteerism.

Even with Mr. Feeney’s big secret now out in the open, the Atlantic philanthropies will continue to operate much as they always have, says Joel L. Fleishman, president of the Atlantic Philanthropic Service Company. No unsolicited grant requests will be considered — a policy that has enabled the company to get by with only two dozen employees, since none has to review piles of proposals.

“It may be that from time to time we miss some needle in that haystack which could be really wonderful,” observes Mr. Dale. “And foundations that decide to sift through the haystack may occasionally find that wonderful needle. It suits our style not to accept unsolicited proposals and to work on a proactive basis, as we have in the past.”

Grant recipients will still be prohibited from identifying their benefactor.

“Mr. Feeney does not want expressions of gratitude or recognition of the fact that his support is being used for particular purposes of one sort or another because it makes him feel uncomfortable,” says Mr. Fleishman. “He’s a very private man. He doesn’t like the idea of people feeling indebted to him.”

He adds: “The programs are what’s important: He wants to help people do what they want to do. Our rewards, and his, are in seeing the jobs get done.”

Mr. Feeney chose a blue-ribbon board for his foundation: Led by Mr. Dale, it now includes Elizabeth McCormack, vice-chairman of the MacArthur Foundation, and Frank H.T. Rhodes, former president of Cornell University.

The fact that the board members are well-respected lawyers, educators, and business executives has gone a long way toward defusing potential concerns about Atlantic. “Knowing that Harvey Dale was involved, who does some of the best legal thinking in the country, I’m sure all the i’s were dotted and the t’s crossed,” says James J. McGovern, former top charity regulator at the Internal Revenue Service.

But widespread discussion of the issue has been hampered by the strict conditions on anonymity that accompany every grant from Atlantic. The grant maker forbids charities from disclosing any information about their anonymous grants; those that do so risk losing them altogether.

Atlantic officials reinforced that proviso in a letter faxed to grant recipients the day The New York Times published the first account of Mr. Feeney’s philanthropy. In bold-faced type the letter stated: “Our conditions that you not identify the source of the gift as A.P.S., or name The Atlantic Foundation or The Atlantic Trust publicly or to third parties, remain in force. Please let the appropriate individuals in your organization know of this continued requirement.”

That warning was effective: Few recipient charities contacted by The Chronicle agreed to discuss their anonymous grants beyond what foundation officials had disclosed themselves.

The Atlantic foundation has released a list of only a handful of its grantees, with vague information about the grant amounts. Internal foundation documents obtained by The Chronicle give a much more complete picture of the foundations’ first decade of grant making. Although foundation officials declined to vouch for the documents’ accuracy, The Chronicle has independently verified much of the information.

Some of the charities supported by the Atlantic Foundation — including the Center for Community Change, Council on Foundations, Independent Sector, National Committee for Responsive Philanthropy, and Union Institute for Public Policy — have long said that non-profit organizations must be open to public scrutiny to insure that they are accountable. Yet all those groups apparently have agreed to comply with Atlantic’s condition.

Atlantic officials said that public scrutiny is not the only way to insure accountability. “There are plenty of ways of being accountable and still being anonymous,” says Mr. Fleishman.

Mr. Dale, for his part, observes that “you can’t do both things simultaneously — allow full sunshine and give anonymously.” Atlantic’s board has found the virtues of giving anonymously to outweigh those of permitting public scrutiny, he says. But the board, Mr. Dale emphasizes, has established “a very rigorous policy on conflicts of interest.”

Atlantic’s internal documents show that institutions associated with several board members did benefit from its grants. In 1986, for example, the foundation approved a $5-million grant to set up a discretionary fund to allow Mr. Rhodes, one of its board members, who was then president of Cornell University, to support innovative activities at Cornell.

And the foundation gave New York University School of Law $2,803,200 in 1988 for its Program on Philanthropy and the Law — which Mr. Dale created that year and still directs. It has since been renamed the National Center on Philanthropy and the Law.

Mr. Dale says that gift was discussed fully and rigorously by Atlantic’s board of directors, who were aware of Mr. Dale’s prospective relationship with the program, and that he recused himself from the board’s vote on the matter. In addition, he added, the grant was reviewed by the law school’s dean and general counsel and was debated and approved by the entire law-school faculty.

“At my request, it was made clear that the program would have no impact on my income or salary,” says Mr. Dale.

Despite the Atlantic Foundation’s steps to avoid conflicts of interest, the ability of a massive philanthropic enterprise to operate in virtual secrecy for so long a time raises questions about the degree to which a donor who cherishes privacy remains accountable to the public.

Mr. Dale observes that organizations that operate in secrecy must take extra steps to insure accountability, and says that Atlantic has done so. Although not required to do so, the foundation brings in outside auditors each year to review its books, and its officers meet annually with Bermuda’s attorney general to keep him apprised of their philanthropic activities.

Although charities might wish to know more about a grant maker’s operations, they seem perfectly willing to accept anonymous gifts. “At the end of the day, if one had to choose between taking money from anonymous sources or not getting any money at all, I don’t know any charities that would decline the money,” says Leslie Lenkowsky, president of the Hudson Institute in Indianapolis.

Indeed, Mr. Handlan, who presided over the Atlantic Philanthropic Service Company from 1982 to 1993, recalls only a single case in which a prospective grantee turned down a donation because of the provision requiring anonymity.

“There are a lot of social, political, and other kinds of pressures on donors,” Mr. Handlan points out. “Anonymous gifts in some cases permit a donor to do what he or she deep down would like to do, without feeling hounded or pressured to do the same thing for similar organizations.”

Some observers hope that Mr. Feeney’s example will inspire others to emulate his secretive style of philanthropy.

“The tradition of anonymous giving has been on the wane for a variety of reasons, including the push for greater public accountability,” says Mr. Lenkowsky. “And if Mr. Feeney’s efforts will help reinvigorate that tradition, I think philanthropy will be better off.”