When Gifts Get Personal

Nonprofit groups seek to clarify ethical standards for fund raisers

Msgr. John G. Woolsey, 67, spent years raising money for the Roman Catholic congregation he served. But now he

is being sued by the estate of a wealthy donor — and has been fired as pastor of his New York City church — over charges that he took for himself money that was intended to benefit St. John the Martyr Church in New York’s Upper East Side.

Monsignor Woolsey, according to the lawsuit pending in the New York State Supreme Court, persuaded a longtime parishioner, Rose Cale, to give him $100,000 in cash, which he used to buy a condominium on the New Jersey shore.

The lawsuit also alleges that the priest pocketed a portion of the $241,500 she donated to the church at his urging, and that he persuaded her to name him as sole beneficiary of her will, though she changed that provision shortly before she died last year at age 88. The New York District Attorney’s office is also looking into the case.

“We’re claiming that he used undue influence to obtain money for himself, and he usurped monies earmarked for the church,” says Brian Caplan, a New York lawyer who represents the estate of Ms. Cale. “You shouldn’t be using a position of authority to manipulate donors.”

The lawsuit also charges the Archdiocese of New York, saying that it should have done more to ensure that Ms. Cale wasn’t pressured into giving.

Monsignor Woolsey has acknowledged that he received significant personal gifts from Ms. Cale but denies any wrongdoing. Neither Monsignor Woolsey nor his lawyer responded to multiple requests for further comment, and the archdiocese declined to talk about the case while the suit is pending.

Nevertheless, the lawsuit raises thorny ethical and legal questions about how nonprofit organizations and fund raisers should deal with cases where donors decide to reward the person who solicits them in addition to — or instead of — the charitable cause that the fund raiser represents.

The Law Is Silent

Since building long-term relationships with donors often leads to fund-raising success, it is not unusual for donors to develop a strong attachment to fund raisers or financial advisers who solicit them. Most of the time the friendships do not lead to personal financial benefits for fund raisers, but many veteran charity officials and lawyers who work with nonprofit groups say they have encountered situations where fund raisers have received a substantial personal gift from a donor or been named a beneficiary of a donor’s will.

No law explicitly prevents fund raisers from accepting gifts from donors — as long as the fund raiser didn’t put undue pressure on the donor. But the ethics codes of several national fund-raising groups, such as the Association of Fundraising Professionals and the National Committee on Planned Giving, prohibit their members from seeking personal gain in any relationship with a donor. The professional groups say such prohibitions are designed to keep fund raisers from having a conflict of interest when they solicit donations.

Still, experts on fund-raising ethics say that, in some cases, fund raisers could accept a sizable personal gift with a clear conscience. For instance, if a fund raiser developed a friendship with a donor long before going to work for a charity, some experts say it might be understandable why a gift was made.

“I don’t think that you can say that there would never be an exception to this rule,” says Doug White, a Washington planned-giving consultant who chairs the ethics committee of a local planned-giving council. “When you say it’s never appropriate, the word ‘never’ raises a red flag to me. You could hypothesize a situation where taking a personal gift would be acceptable.”

In some cases, fund raisers have volunteered to turn a personal gift from a donor over to the charity where they work, while others have done so only after their employers made it clear that they could be fired if they accepted such a gift. And in other cases, fund raisers have decided to accept the money and quit their jobs.

Few charity officials speak out publicly about fund raisers who receive personal gifts, in part because they worry that publicity about such cases might prompt donors to become suspicious about a solicitor’s motives. But as charities become more aggressive in seeking big donations, some observers say it is likely that the number of personal gifts from donors to fund raisers will grow.

Contracts Are Rare

Because the law does not prohibit fund raisers from accepting personal gifts, some legal experts suggest that one way for charities to ensure that fund raisers don’t accept money from donors is to require them to sign a contract that includes a provision making it clear that all money or other gifts of value received from donors or their estates must either be rejected or turned over to the charity.

However, a Chronicle spot-check of large nonprofit institutions and charity lawyers who specialize in working with big donations found that such contracts are rare. In some cases, charities have adopted ethics policies for fund raisers that forbid acceptance of such gifts — often soon after they learn of a donor’s intention to reward a staff member.

“We have a problem in our industry,” says Emil Kallina, a Baltimore lawyer who specializes in planned gifts and who is now trying to help a charity deal with a situation where one of its fund raisers received a large personal bequest from one of the organization’s donors. “Since we do not have laws to protect against this kind of thing, we need to start using employment contracts.”

Mr. Kallina says he fears that if charities don’t take steps to ensure that fund raisers cannot accept personal gifts, they will have more to worry about than losing a few donations. He believes lawmakers might move to tighten fund-raising laws if they don’t think charities and the fund raisers who represent them are acting appropriately.

A Tough Lesson

One institution that learned the hard way that it needed a binding agreement for its fund raisers was Saint Mary’s University of Minnesota. The university adopted a new policy in 1989 after a donor bequeathed $700,000 to the institution and $200,000 to Joseph P. Fleischman. Mr. Fleischman, who had been asked to leave his job as a planned-giving officer at Saint Mary’s for reasons unrelated to the bequest, accepted the money even though Saint Mary’s officials say they told him it violated the university’s ethical standards.

“Our legal counsel said there was nothing illegal about it and no evidence of undue influence, so we had to honor the will,” says Tim Burchill, executive director of the university’s Hendrickson Institute for Ethical Leadership.

Mr. Fleischman says he has no interest in talking about the gift. But he told a local newspaper shortly after receiving the gift that, by doing a “hell of a good job,” he helped the university realize a very large donation and there was no conflict of interest in taking the $200,000 gift since he had left the university before he accepted it.

Officials at Saint Mary’s disagree. They now require fund raisers to engage in an annual ritual: reading and signing copies of the university’s “Code of Ethical Conduct.”

Reading the three-page document every year helps fund raisers keep ethical standards fresh in their minds, says Mr. Burchill. But more important, the signatures give the university legal proof that fund raisers have agreed not to accept any cash or securities from donors. They are also barred from accepting any other gift worth more than $250 from donors they meet on the job. Fund raisers agree to adhere to the agreement for 18 months after they leave the university’s employ.

Facing the Consequences

The consequences of not having a written contract that prohibits fund raisers from accepting big gifts from donors can be serious, says Walter Sczudlo, general counsel of the Association of Fundraising Professionals.

Mr. Sczudlo recalls that he was contacted by officials at a university in the Southeast a few years ago who said that one of its most generous donors had pledged a bequest of more than $10-million but then changed her will. The final will left the university with only a quarter of the amount it had been promised and gave the rest to one of the university’s fund raisers.

The officials told Mr. Sczudlo that the fund raiser had decided to accept the money and immediately resigned. Mr. Sczudlo declined to name the university, donor, or fund raiser.

Mr. Sczudlo says that he was not given too many more details by the university, but he doubts that it had an employment contract with the fund raiser or any other legal tools that could help it recover the gift.

In fact, Mr. Sczudlo says, the university officials seemed reluctant to take any action. They may not have wanted to spend the money on a lawsuit that was so risky, he says. Additionally, making the matter public could have caused their donors to question whether the university’s fund raisers were out to win big gifts for themselves rather than furthering the institution’s — and donors’ — best interests.

Mr. Sczudlo says that since learning about the university’s experience and other similar cases, he and his organization have moved to strengthen the procedures by which it punishes fund raisers for violating its code of ethics. For example, the association can kick a fund raiser out of the organization and publicize that person’s name in its quarterly magazine if he or she doesn’t follow the code.

Putting Policies in Place

CARE USA, the international relief group in Atlanta, decided to put a new policy in place for its employees after it learned that two of its fund raisers were to receive about $10,000 each from a donor’s will.

Linda Burr, the charity’s national director of planned giving, says that one of the fund raisers declined the gift after the charity’s officials made it clear that accepting it would violate ethical standards. The other fund raiser, however, had left the organization before CARE officials found out about the gift, Ms. Burr says. That fund raiser accepted the money, Ms. Burr says.

Ms. Burr, who declines to name either fund raiser, says that the organization adopted a new policy this year that it hopes will prevent other such cases.

David Wheeler Newman, a Los Angeles lawyer, says one of his clients, a small liberal-arts college in California, also decided it needed a policy on personal gifts after a donor left a bequest in the mid-five-figure range to a fund raiser who had left the college six years previously. Because the fund raiser’s only relationship with the donor was as a representative of the institution, college officials thought they had legal grounds to force him to turn the gift over to their organization.

Mr. Newman told the group he did not think it had a strong legal case. “Unless there’s a policy in place about employees’ duty to turn a gift over, it’s hard to pursue,” says Mr. Newman, who declined to name the institution, the donor, or the fund raiser. “They may have been able to fight for it, but their case was substantially weaker.”

Another one of Mr. Newman’s clients, a social-services group he would not name, also faced such a quandary when a donor made a bequest to a fund raiser that was roughly equal to his annual salary. The donor also left a gift approximately five times that amount to the charity in her will.

When officials demanded that the fund raiser turn the personal gift over to the charity, “he refused,” says Mr. Newman. “They threatened to fire him, and he threatened to sue them for wrongful termination.”

In the end, the fund raiser kept the gift, was allowed to resign voluntarily, agreed not to pursue a lawsuit, and both sides walked away, Mr. Newman says. The social-services group also did not have a binding policy preventing fund raisers from receiving money from a donor, he says, so that “substantially weakened the charity’s position.”

Resorting to the Courts

Sometimes when donors give personal gifts to fund raisers and much larger contributions to the nonprofit institutions they represent, such donations can have unpleasant repercussions for the charities.

In Florida, Lucinda Bennett, a 35-year-old woman who suffers from manic depression, is suing her former minister, Keith Thomas, and the First Baptist Church of West Palm Beach. (Mr. Thomas is now the senior pastor at Cottage Hill Baptist Church, in Mobile, Ala.)

According to the complaint, Ms. Bennett first met Mr. Thomas at the West Palm Beach church in 1998, when she moved to Florida to help care for her ailing great-grandmother. The elderly woman died in 2000, leaving her $1.8-million, including the home they had shared, which was valued at $500,000. Over the following year, according to a lawsuit filed in Palm Beach Circuit Court, Mr. Thomas served as a personal counselor to Ms. Bennett.

During that time, the complaint alleges, he persuaded Ms. Bennett to stop taking her psychiatric medications and manipulated her into giving him and his family a personal gift of $60,000 — $10,000 each for himself, his wife, and their four children. Shortly thereafter, the complaint says, Mr. Thomas and other church officials talked Ms. Bennett into donating her home and the remainder of her inheritance, well over $1-million, to the church.

Within a week of signing over her assets, Ms. Bennett asked the church to return the gifts, and her family has repeatedly made the same demand, the lawsuit said. The church has refused, the lawsuit said. Ms. Bennett’s lawyer, Nathan P. Carter, says she was left without an income or health insurance when she made the gift.

The defendants asked the court to dismiss the case. While the court did dismiss the case, it said the lawsuit could move forward once Ms. Bennett is assigned an acceptable guardian. Mr. Carter says that a guardian has been identified, and he will continue to pursue the case.

Vaughn Drinkard, the Mobile, Ala., lawyer who represents Mr. Thomas, says his client “denies any improper conduct, including any type of improper manipulation of this woman. We are confident if the lawsuit is refiled, the facts will bear out Dr. Thomas’s contention.”

Appealing to the Donor

As nonprofit groups decide how best to deal with personal gifts, charity officials say it is important to keep in mind how determined some donors are to lavish financial rewards on fund raisers.

Bill Sturtevant, vice president for principal gifts at the University of Illinois Foundation, says a draft of one donor’s will he saw a few years ago included a bequest to one of the organization’s fund raisers.

Mr. Sturtevant, who declines to identify the fund raiser or the donor, said that he and the fund raiser disclosed the matter to university officials and sought legal advice.

University officials talked to both the donor and his lawyer about the matter, Mr. Sturtevant says, but the donor refused to alter his will.

Mr. Sturtevant says the foundation, which raises money for the university, has a plan to deal with that situation.

“We’ve all agreed if it comes about, the fund raiser will disclaim this gift and it will be returned to the donor’s estate.” Depending on how the will is written, he adds, the university might end up with no money at all.

Mr. Sturtevant says it is worth taking that approach so no donor ever feels that a fund raiser is approaching him or her for personal gain. But some donors might not fully appreciate the ethical strictures that guide fund raisers, he says.

“We’re involved in the relationship-building business; often donors become like family, and they want to express that through a gift or provision in their estate plan,” says Mr. Sturtevant.

“It makes it very difficult for us because of the appearance of undue influence or conflict of interest. But donors have a hard time understanding that.”