Laws Need to Better Protect Charity Trusts

To the Editor:

Thank you for giving so much editorial attention in the April 14 issue to the very important public-policy

issue of funding sources for charities held captive at banks.

All charities receiving funding from such a source should pay close attention to the Pennsylvania Superior Court’s decision in the case between the W.W. Smith Charitable Trust, where I was administrator from 1987-93, and Wachovia Corporation (“Bank Sues Philadelphia Trust in Quest for Additional Compensation”).

When John J. Soroko told your reporter that “when Mrs. Smith has asked the bank to cooperate, we have” assuredly he can’t be referring to Wachovia, but to a predecessor banking institution, the Philadelphia National Bank (later renamed CoreStates Bank), acquired by First Union (subsequently renamed Wachovia Bank).

It was with the Philadelphia National Bank that Bill Smith (donor of the W.W. Smith Charitable Trust) made his contract to help his widow, Mary L. Smith, manage the endowed philanthropy he created in his will.

The former chairman of the bank, G. Morris Dorrance, is an old family friend of the Smiths, and until recently was the institutional co-trustee of their private foundation. Mr. Dorrance knew Bill Smith — his interests, his passions, his intentions for his charitable funds. Not one of the “revolving door” representatives from North Carolina-based Wachovia knew Bill Smith.

When Mary Smith asked Philadelphia National Bank to cooperate, it did so because of this personal relationship it valued and understood. No such relationship exists today between Mrs. Smith and Wachovia, a banking institution foreign to the Philadelphia market.

In the article, Mr. Soroko defended Wachovia’s efforts to increase its fees by observing that, “We’re saying the law has been changed. We want to take advantage of it.” Certainly Wachovia wants to take advantage. It wants to fatten its bottom line, but any increased fees will come out of the pockets of charitable grant recipients.

The dispute over the Smith case shows why the United States needs “no fault portability of trusts” legislation that would allow a disgruntled, individual trustee to change an institutional trustee without odious fees or having to prove that impossible, legalistic thresholds have been breached. In instances like the W.W. Smith Charitable Trust, where the original bank relationship has been merged or sold out of existence, the violations of donor intent make the term “trust department” an oxymoron.

Bruce M. Brown
Trustee
The HBE Foundation
Devon, Pa.