Jake Maguire got an unexpected call in December 2015. A reporter was inquiring about a $15,000 gift made earlier in the year to Community Solutions, a New York charity where Mr. Maguire works.
There was nothing unusual about the donation to the nonprofit, which works to end homelessness, except its source: Martin Shkreli, the controversial former pharmaceuticals executive. Mr. Shkreli was called perhaps “the most hated man in America” last year after his company raised the price of a drug used by AIDS and cancer patients by more than 5,500 percent. Around the time Mr. Maguire got the call, Mr. Shkreli had been charged with securities fraud for his actions at other companies.
After speaking with the reporter, Mr. Maguire, the head of communications for Community Solutions, spoke with top executives and leaders at the charity, and they took swift action, deciding to return the gift. Mr. Maguire called the reporter back, explaining that Community Solutions works with many people who depend on HIV and AIDS medicines, so it made little sense to accept a gift from someone accused of profiteering from patients.
Such situations are more common than most people at nonprofits think, experts say, and decisions about how to respond aren’t always quick or simple. When donors do things that lead to public scorn, it may be difficult to determine what kind of response is necessary, or if one is even required. Many questions come up: Should the charity return the donor’s gift? Should it keep the money, but repudiate the donor? Or should the group just stay silent?
When naming rights are involved, or when someone has made very large donations, a decision to keep or return the money is even trickier. Take Hunter College High School, a public school in New York that received $1 million for an endowment bearing Mr. Shkreli’s name in March 2015 — the biggest contribution the school has ever seen.
Looking back, the school might regret having sent out a news release with a headline calling Mr. Shkreli a “pioneering healthcare executive” when it announced the gift. (Mr. Shkreli stepped down last year from the controversial pharmaceuticals company he ran.) However, it’s keeping the money, a spokesperson told The Chronicle in an email, despite the urging of some alumni and students to return it. The funds will pay for projects like a redesigned foreign-language laboratory and college tours for rising seniors who may not be able to afford them, according to the spokesperson, who added that a “thorough review” had been undertaken by the Hunter College Foundation, alumni, and others, who decided that the best decision was to keep the money.
Although these situations can be difficult to navigate, experts say there are principles and practices that can help nonprofits that are dealing with a “tainted” donor.
Perform Due Diligence
Background checks on big donors will prevent some problems, experts say. This can include simple steps like asking donors basic questions about why they are making the gift, and doing Google and LexisNexis searches for embarrassing information about donors. Such steps are especially important when the charity doesn’t know the donor well, although any supporter can have skeletons in the closet, experts say.
Paul Dunn, a professor of business ethics at Brock University in Ontario, Canada, has analyzed many cases in which naming-rights deals came into question following a donor scandal. He advises nonprofits to ask “Who is the individual? What is the individual’s background? Why is the person making the donation?”
A complicating factor: Most fundraisers are usually thrilled to get a large gift and don’t want to complicate things, says Robert Waldman, an attorney at Venable LLP who oversees the firm’s tax-exempt clients. And some donors’ crimes or misdeeds are virtually impossible to find, he says, citing Bill Cosby as an example of someone many universities and charities probably thought was squeaky clean when they accepted gifts from him — before he was accused of sexual assault by dozens of women.
To Mr. Waldman, a donor’s behavior may be more telling. Are they unresponsive and difficult to work with? Are they asking your organization to hold on to assets for longer than usual, or to do something ethically fraught, like hiring their sibling after the donation is made?
“If they are asking you to do something that makes you a little uncomfortable, that’s usually a sign there’s an issue here,” Mr. Waldman says.
Prepare Guidelines
There’s no foolproof way to vet donors, experts say, and many nonprofit leaders are reluctant to advocate for extensive probes into a donor’s background.
But nonprofits should have written guidelines before a scandal breaks to help deal with such situations, Mr. Dunn says.
There are many variables to weigh, he says, including whether the donor’s actions are truly out of step with the charity’s mission, or who, exactly, is angry about what the supporter has done. Is it many or just a vocal few? Are the donor’s actions gaining prominent media attention? Can the nonprofit absorb a loss if it returns a gift?
Nancy Schwartz, a nonprofit communications consultant, agreed that organizations should have a crisis communication plan ready to deal with such situations. Such plans might lay out a decision tree for who is authorized to craft and approve the organization’s response, she says.
Be Open and Honest
If a nonprofit returns a gift or rescinds a public honor, it should emphasize that the organization is being accountable and transparent, and is acting in a manner compatible with its values, Ms. Schwartz says.
She points to a recent statement by Ohio University as a good example of how to handle such situations. After pressure from faculty and students, the university decided in September to remove the name of former Fox News chairman Roger Ailes from a newsroom in the communications college and return a $500,000 donation from the former news executive. The move came after allegations surfaced that Mr. Ailes sexaully harrassed many women during his career; he was fired by 20th Century Fox in the wake of the scandal.
University president Roderick McDavis said in the statement that he decided to return the gift after listening to faculty, staff, student, and alumni views on the matter and consulting with the dean of the communications college and other university leaders.
“It’s really a model for crisis communications overall,” says Ms. Schwartz, noting the statement has a measured tone, an explanation of how thoroughly the decision was considered, and an acknowledgment that the university had been “disrupted” by the controversy. It seemed heartfelt and authentic, she added.
Keeping the Money
Of course, many charities are not in a position to return a big gift. In such cases, Ms. Schwartz says, it’s best to be honest and tell supporters and others that returning a donation would undermine the organization. In such cases, Ms. Schwartz advises emphasizing the organization’s mission and the services provided by the donor’s money.
Some might choose to stay quiet if the organization is keeping a controversial donor’s money, but Ms. Schwartz advises against that. “I wouldn’t try and let it pass or see if it strays from the public limelight, because somebody else will talk about it if you don’t,” she says.
Mr. Maguire, of Community Solutions, admits it was a luxury that his group was able to absorb the loss of Mr. Shkreli’s $15,000 gift. But he adds that the organization recouped some of the money thanks to small contributions from people who praised the decision to return the donation. However, Mr. Maguire stressed that every situation is different and not every group can make the same choice.
“I think it’s important to preserve people’s ability to make those kinds of calculations,” Mr. Maguire says. “One thing you don’t want to do in the name of taking a stand is do more harm to the people you’re trying to serve than you would have otherwise.”
