Michigan Officials Investigate Ford Foundation

By Ian Wilhelm

In a move that has generated concern in the nonprofit world, Michigan Attorney General Mike Cox has started an investigation into the Ford Foundation, saying the fund has ignored the Ford family's philanthropic wishes by reducing support for charities in the state.

Mr. Cox has also raised questions about the foundation's conflict-of-interest polices for board members and how much it pays in administrative costs, including compensation for its executives. The fund, located in New York, is incorporated in Michigan and therefore Mr. Cox has oversight responsibilities. He has asked the foundation for governance documents and information about its grant making, which the foundation has provided.

The inquiry, which started in August, primarily has focused on whether the grant maker gives enough of its $11.6-billion largess to charitable causes in Detroit and other parts of Michigan.

According to Nate Bailey, a spokesman for the attorney general's office, in the 1930s and '40s, 90 percent of the foundation's giving benefited charities in the state. Today, that amount has declined precipitously, he said.

"The foundation has drifted away from Michigan," he said. "One of our goals in this undoubtedly is to bring some of Henry Ford's money home."

But Marta L. Tellado, Ford's vice president of communications, said the foundation still provides generous support to groups in Michigan, saying that since 1996 the fund has donated $38-million to charities in the state. "We have a long and proud history of grant making in Michigan," she said. Most recently, the foundation gave $1-million to Focus Hope, a social-service charity in Detroit, to provide job training to minorities in the city. Since 1977, the group has received $5.5-million in loans and grants from Ford, said Kathy Moran, a spokeswoman for the organization. "The Ford Foundation has been really generous to us. It's been a long-standing relationship."

Original Mission

Edsel Ford -- the son of Henry Ford, the founder of the Ford Motor Company -- established the foundation in 1936. In the years that followed, the foundation primarily supported nonprofit institutions connected with the family, such as the Henry Ford Museum, in Dearborn, Mich., and the Henry Ford Hospital, in Detroit.

In 1950, the foundation broadened its mission to include fighting global poverty, supporting world peace, and promoting democracy, and did not name those groups or other causes in Michigan as a responsibility for the grant maker.

The foundation also ended its direct ties with the family. For more than two decades, there has been no member of the Ford family on the foundation's board.

Yet despite those changes, Mr. Bailey said the foundation has a "higher fiduciary responsibility" to the Michigan area because its money was generated by the famous automobile dynasty and in the least should again provide money to other nonprofit organizations with the Ford name.

"It has greatly drifted away from these programs, not sending literally a cent since the early 1970s," he said.

The Henry Ford, a Dearborn charity that today manages the Ford Museum and several other educational and cultural institutions established by the family, received its final grant payment from the foundation in 1973, said Patricia E. Moordian, president of the organization.

She said charities in the area are facing difficult fund-raising hurdles, thanks in part to financial problems at automobile manufacturers, and an infusion of Ford Foundation money is desperately needed.

"The Henry Ford is definitely supportive of the A.G.'s efforts," she said. "The need is very, very big in southeast Michigan."

But other local nonprofit officials have expressed concern about Mr. Cox's probe. While they support greater philanthropic support for their economically distressed region, they dismiss the state attorney general's investigation.

"The question is what's an appropriate investment to the state you were created in?" said Sam Singh, chief executive of the Michigan Nonprofit Association, in Lansing. "That's a question for the board to answer. To me, it's not a legal question."

Mr. Singh did say that some local charity executives and fund raisers have complained that Ford doesn't provide enough money to Michigan, but "by no means is there a groundswell of discontent."

Governance Questions

Aside from concerns about its grant making, Mr. Cox has raised questions about the Ford Foundation's giving to nonprofit organizations with connections to its board members and whether its administrative costs are excessive. The attorney general has not accused the fund of any wrongdoing, however.

In terms of its governance, "you find an interesting parallel between groups that board members had been close with and Ford Foundation grants going to those entities," said Mr. Bailey, of the state attorney general's office.

For example, since 2003 the foundation has donated at least $830,000 to the World Wildlife Fund, in Washington. During most of that period, Kathryn S. Fuller was chief executive of the environmental group and served on Ford's board of directors. (In 2004, Ms. Fuller became the foundation's chairwoman. Last year, she resigned as head of the wildlife organization.)

Ms. Tellado said all Ford board members recuse themselves from grant decisions involving charities they have worked for. In the case of the wildlife group, she said, the grant maker has supported it since 1957, and Ms. Fuller did not influence the donations.

She also dismissed Mr. Cox's concerns that the foundation's overhead costs are too high, saying that the foundation has higher administrative expenses than some other philanthropies in part because it operates 13 offices abroad.

In terms of administrative spending, Mr. Bailey specifically questioned the "six-figure salaries" of some of the foundation's executives. For instance, in 2004, the most recent year that data are currently available, Susan V. Berresford, the foundation's president, earned $684,478; its chief investment officer, Linda Strumpf, received $768,169.

While other state attorneys general have started similar investigations into foundations' expenses and governance, Mr. Cox's examination of the Ford Foundation's giving, and his urge to change it, has caused consternation among national nonprofit officials.

"Based on what we know, none of the information we've seen suggests either legal or ethical violations," said Steve Gunderson, chief executive of the Council on Foundations, a Washington association, which represents more than 2,000 philanthropies in the United States. "Because we've seen no evidence of inappropriate conduct, we're concerned that the motivations behind the inquiry are political rather than substantive."

William A. Schambra, director of the Hudson Institute's Bradley Center for Philanthropy and Civic Renewal, in Washington, also disapproved of Mr. Cox's approach, but said the Ford Foundation is partly to blame for the investigation.

"Like most of my colleagues in the foundation world, I, of course, worry when state A.G.'s start wielding political clubs like this," he said. "But I think foundations have brought it on themselves. Too much empty rhetoric about 'facilitating global-change processes' with precious little to show for it," he said.

As a result, he added, "the folks back home in the old neighborhood have even less to show for it."