Reports by The Washington Post in May 2003 on controversial practices by the Nature Conservancy prompted investigations of the nonprofit by Congress, the Internal Revenue Service, and the Environmental Protection Agency. To regain public trust, the organization set out to overhaul its policies, restructure its board, and reassure big donors.
In a series of articles examining the nonprofit’s questionable financial transactions, the newspaper alleged that the group was providing tax breaks to its own trustees and selling its name and logo to corporations. What’s more, the newspaper charged that the nonprofit allowed donors to get tax breaks for donating land to be preserved when it wasn’t always clear that the land was actually protected from development.
Days after the reports, Sen. Charles Grassley, a Republican from Iowa who chaired the Finance Committee, announced plans to investigate the Nature Conservancy.
The scandal shook the public’s confidence, and donations took a hit. But the quick and broad response of the Nature Conservancy’s leaders apparently averted lasting losses. The group raised $600 million in fiscal year 2014 and ranked No. 35 on The Chronicle’s most recent Philanthropy 400 list of charities that raise the most from private sources. Looking back at the scandal, Senator Grassley applauded the group for its good-faith effort at reform.
Here are the steps the organization took.
MAY 2003
The Nature Conservancy’s president, Steven McCormick, published an opinion piece in The Washington Post rebutting the newspaper’s allegations of wrongdoing.
According to internal memos obtained by the Post, the nonprofit hired lawyers, retained Edelman Public Relations, took out ads, and asked reporters from other newspapers to publish articles about successful conservation projects.
In one memo, Mr. McCormick told his staff, “As the story rolls out, we will continue our approach of answering all questions and harboring no secrets.”
JUNE
The Nature Conservancy said that future conservation deals would be created with rules that could be legally enforced. It would no longer buy or sell land in transactions involving board members, trustees, staff members, or their families; lend money to staff members; or drill for oil or gas or mine for minerals on its land.
It planned to create a panel of independent advisers to strengthen “governance, transparency, and accountability.”
It called donors to discuss their concerns and held open houses near its headquarters to solicit donor opinions.
JULY
Senator Grassley and Sen. Max Baucus, senior Democrat on the Finance Committee, sent a letter to Mr. McCormick asking for detailed information regarding allegations raised in the Post’s reporting.
At the request of the Landmark Legal Foundation, a conservative advocacy nonprofit, the Environmental Protection Agency agreed to review how the Nature Conservancy used the more than $10 million in federal grants it received from 1993 to 2002.
AUGUST
The charity created an independent advisory group to assess its governance practices and appointed as its chairman Ira Millstein, a prominent lawyer specializing in corporate-governance issues.
DECEMBER
The Internal Revenue Service started an audit of the Nature Conservancy.
JANUARY 2004
The charity, at the advisory group’s suggestion, approved a plan to restructure its governing board, creating an 11-member executive committee. At the time, the Nature Conservancy had 36 board members and was allowed under the bylaws to have up to 41 members.
MARCH
The Nature Conservancy’s independent panel issued its report, calling for the nonprofit to be more transparent about its finances, expand its conflict-of-interest policy, shrink its governing board, and prevent companies from using its logo.
Senator Grassley said “the Nature Conservancy has taken good steps by proposing much-needed reforms in governance, accountability, and transparency,” adding that his investigation showed him “there’s a need for broader reforms of charities.” His interest in broader changes eventually spurred nonprofits to join forces to promote new governance guidelines.
APRIL 2005
Mr. Millstein assessed the group’s progress, noting that “the board and management have clearly undertaken, and promise to continue to undertake, a good-faith continuous review of all of TNC’s activities and responsibilities.”
The Nature Conservancy decided the 11-member executive-committee system would not work and instead reduced the maximum size of its governing board from 41 to 21 members.
JUNE
The Senate Finance Committee issued its report. Senator Grassley praised the nonprofit’s efforts but said “my hope is that this report will encourage the Nature Conservancy to consider additional reforms.”
The Internal Revenue Service opened an investigation on tax breaks claimed in land-conservation deals.
At a hearing announcing the investigation, Mr. McCormick said, “We have come to realize that we must hold ourselves to a higher standard — one beyond mere compliance with the law and service to our mission.”
