Dirty Money: From Rockefeller to Koch

Catholic University's decision to accept $1 million from the Charles Koch Foundation to support the study of "principled entrepreneurship" is like a modern-day reenactment of 1905's "tainted money affair."
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An illustration from an April, 1905, Puck magazine shows John D. Rockefeller "purifying" his donation to a clergy member. (Library of Congress)

Last November, the Catholic University of America announced a pledge of $1 million from the Charles Koch Foundation to support the study of “principled entrepreneurship” at the university’s new business school. As the billionaire funder of various libertarian causes and much of the Tea Party movement, Koch (along with his brother David) is not exactly a stranger to controversy. But his foundation has made gifts to many educational institutions in the past—its website lists 270 colleges and universities it supports, including more than two dozen Catholic schools—with only the occasional stir of opposition. And so he might have assumed that his gift would be met with a press release and that mild mix of gratitude and entitlement with which the public now greets most seven-figure gifts to educational and cultural institutions. After all: Who doesn’t like principled entrepreneurship?

Yet, this time, the gift to Catholic (CUA) caused more than a stir. In fact, from a significant swath of the broader Catholic community it provoked something close to outrage. As things stand today, the outcry hasn’t managed to scuttle the donation. But it has the chance to do something even more important: to renew a vital and century-long debate about the terms of philanthropy itself.

There are two reasons why Koch’s gift did not slide tranquilly into Catholic’s coffers. One is that CUA holds a unique status among American institutions of Catholic higher education; both because of CUA's national profile and because U.S. bishops founded it and sit on its board, American Catholics tend to be especially defensive about its reputation. The other is that Koch’s gift coincided with a moment of mounting confidence among Catholic progressives, who have found an ally in Pope Francis. In fact, just a little more than a week after CUA announced Koch’s donation, the Pope issued his first major public pronouncement, denouncing the “deified market,” the folly of supply-side economics, and the “new tyranny” of unfettered capitalism. Here, it seemed, was a call for principled entrepreneurship that placed Koch’s libertarianism directly in its sights.

Soon after news of the gift broke, Catholics Scholars for Worker Justice, in partnership with a progressive Christian organization, Faith in Public Life, issued a statement, signed by 50 leading Catholic educators (including several from CUA itself), expressing “serious concerns” about the donation. “While the Koch brothers lobby for sweeping deregulation of industries and markets,” they wrote, “Pope Francis has criticized trickle-down economic theories, and insists on the need for stronger oversight of global financial markets to protect workers.” The University should leave no doubt that it stands with the Holy Father. “We are concerned that by accepting such a donation you send a confusing message to Catholic students and other faithful Catholics that the Koch brothers’ anti-government, Tea Party ideology has the blessing of a university sanctioned by Catholic bishops.” They cited the Kochs’s opposition to the expansion of Medicaid, hostility to public unions, and support for global warming denialists. (They also gestured toward past allegations that Koch had meddled with academic content and faculty-hiring decisions in a prior donation to another university). An affiliated group, Faithful in America, launched an online petition urging the school to return the money; it has since collected more than 33,000 signatures.

CUA’s administration was not impressed. In a testy statement, the university brushed aside any insinuation that Koch would have—or had sought—control over hiring decisions. And it slammed the protest for its double presumption—both in determining which sorts of philanthropic gifts were worthy of respect (the educators had praised the Kochs for their cultural philanthropy even as they cast suspicions on their support for educational institutions), and in instructing Catholic University on social teachings that were far from settled. (Andrew Abela, the business school’s dean, responded to the protest by calling into question the Church’s support for public-sector unions and by arguing that, though Catholic social thought affirmed environmental stewardship, it did not insist that “if you question global warming or climate change that’s a sin.”) The campaign, the administration declared, was simply “an effort to manufacture controversy and score political points.”

In case there was any doubt about the matter, two weeks ago, Catholic’s president John Garvey and Dean Abela confirmed their decision to keep the gift in an op-ed in the Wall Street Journal. “[I]t would be an unhealthy precedent for a university to refuse support for valuable research because the money, somewhere back up the line, once belonged to a donor whose views on other subjects were unpopular within the academic community,” they declared.

This might be the end of this current controversy. But we should expect similar ones in the years to come—at least if history is any guide. We are living, we are frequently told, in a new Gilded Age. The historical parallel is carted out most often in discussions of the nation’s mounting income inequality or of the populist backlash that has accompanied the trend—phenomena that distinguished the decades bracketing the turn of the last century as well. 

The age’s more welcome associations are also invoked, with references to the flowering of modern philanthropy, the emergence of major public benefactors like John D. Rockefeller and Andrew Carnegie. In their place today we have Bill Gates and a corps of social entrepreneurs flush with tech and finance wealth and the willingness to siphon off some of it toward the public good. There is yet another hallmark of the Gilded Age, a product of these others, that also marks our own: the development of a robust public debate about the relationship between the giver, his gift, and the public’s responsibility in policing it.

* * *

In fact, the controversy at Catholic University strongly echoes another that broke at the turn of the last century and that first catapulted that debate into public prominence. It began in March 1905 with the announcement of a contribution of $100,000 by John D. Rockefeller to the American Board of Commissioners for Foreign Missions, the missionary arm of the Congregational Church. Rockefeller, the Standard Oil magnate whose ruthless pursuit of corporate consolidation was matched by his embrace of a homely Christian piety, was at the time one of the richest and most hated men in America. And so, when news of the gift spread, a faction within the denomination quickly rose up to denounce it and insist that the American Board return the money.

The faction was led by a Congregational minister from Columbus, Ohio, named Washington Gladden, who a decade before had targeted a Rockefeller gift to the University of Chicago by railing against “tainted money.” Now the phrase became the protesters’ watchword. Standard Oil, they declared, “stands before the public under repeated and recent formidable indictment in specific terms for methods which are morally iniquitous and socially destructive.” In order for the Church to serve as a “moral educator,” and to “arouse the moral reprobation of the general conscience” against its grossest offenders, it must “stand entirely clear of any implication in the evil it is set to condemn.” The acceptance of a gift from John D. Rockefeller compromised this obligation, for it involved the Board “in a relationship implying honor toward the donor.”

A committee assigned by the American Board to consider the issue defended the decision to accept Rockefeller’s donation. “For almost a century the Board has received gifts from every quarter in America, Christian and non-Christian alike. Into our treasury have also come offerings from Mahommedans, Parsees, Hindus, Buddhists and African savages,” they stated, placing the staid, Baptist corporate titan in rather exotic company. “In receiving gifts from these varied sources the Board has in no degree and in no way passed judgment on the business, religion, character or life of the donors.” Then they lay down their guiding principle, around which much of the ensuing controversy hinged. “[O]ur responsibility begins with the receipt of a gift; it then becomes our trust for which we are to be held responsible.”

Debates about “tainted money” were by no means a modern phenomenon. The Old Testament, for instance, warns against the acceptance of offerings from unclean hands—“Thou shalt not bring the hire of a whore…into the house of the Lord thy God for any vow” (Deu. 23:18)—and the rabbinic literature contains a number of debates about how to extend that injunction to everyday practice.

In the more recent past, during the antebellum period, American denominations had argued over whether to accept financial contributions from slaveholding congregants. But the topic had not received sustained attention in the United States till the rise of industrial fortunes at the end of the 19th century and the corresponding emergence of large-scale benefactions. Philanthropy became not just a resource for the public to exploit but a problem for the public to solve. As one writer noted in 1912, the time had finally arrived to look the gift horse squarely in the mouth, since you never knew if “the gift horse’s mouth may carry glanders or cholera.”

During the spring months of 1905, as the “tainted money affair” raged on, nearly every single major American religious leader, and many secular luminaries, weighed in. Some questioned Rockefeller’s moral right to the money he donated, based on his nefarious business practices. Just as a church wouldn’t accept the loot of a highway robber, it shouldn’t take in the booty of an industrial brigand. Others did not deny Rockefeller’s right to give away his fortune, but insisted that a religious institutions’ responsibility to superintend public morals trumped any particular good his gifts could accomplish.

The protest also sparked an increasingly sophisticated discussion of the power wielded by benefactors. Some had focused on whether Rockefeller’s gift came with explicit strings attached. But others pointed out that philanthropy could exert a more subtle pull. Not only would a code of “gentlemanly ethics” prohibit recipients from biting the hand that fed them, but the promise of prospective gifts would exert its own silencing effect, leading institutions away from taking positions that might alienate future benefactors.

The defenders of the American Board put forward a whole host of justifications for accepting Rockefeller’s money. They argued that it made little sense to assign religious institutions the responsibility of judging the business practices of potential benefactors, a task for which they were technically ill-equipped. Others insisted that the good done with a donation removed any taint. There was also a more legalistic interpretation of the controversy. As long as Rockefeller had a legal right to the money he offered, it was the fiduciary obligation of the members of the American Board to accept a gift designated for the trust’s intended beneficiaries. A pastor of a Sioux City church took this principle even further. “If the devil himself should give me $1,000,000 to use in the Lord’s business, I’d take it and use it,” he declared. Still yet another, more radical faction aligned with the American Board’s decision from an entirely different perspective. It made little sense to reject Rockefeller’s donation, they maintained, since the action would hold out a few selected individuals for censure, when it was the entire corporate system that should be indicted. Marking some money as tainted encouraged the view that the rest was clean.

The “tainted money” affair reached its culmination at the American Board’s annual meeting, held that September in Seattle. Each side prepared resolutions. The protesters promoted one forbidding the Board from soliciting gifts “from persons whose gains have been made by methods morally reprehensible or socially injurious,” which became their primary focus once they learned that board members had been courting Rockefeller for years for a donation. The other side forwarded a resolution denying the right of the Board to discriminate among givers or to judge the character of donors. After a series of speeches back and forth, the Board decided to table both; each side could claim some measure of victory, but neither could claim absolute vindication.

And so though the “tainted money affair” did bequeath to future generations a number of important legacies—a focus, for instance, on the legal standing of the benefactor to make a gift and of the beneficiary to reject it, not to mention the “tainted money” phrase itself—many of the issues it implicated remained unresolved. Debates over whether institutions should accept donations from controversial benefactors continued to flare up over the decades, and still do to this day. Most recently, they’ve revolved around particular revelations of corporate and financial wrongdoing—whether, for instance, charities should have kept donations made by Jack Abramoff, Ken Lay or Bernie Madoff. According to a recent survey, more than a third of nonprofits consulted claimed they would not accept contributions from controversial sources (although that last term was left open to interpretation by the respondent). There has also been some high-level speculation about the coincidence of the Giving Pledge, the campaign led by Bill Gates and Warren Buffett to get billionaires to commit to giving away half of their fortunes, and the disclosures of the financial shenanigans that helped trigger the latest recession. Did the public’s acceptance of those gifts discourage a reckoning with those misdeeds?

The time is certainly ripe for another thoughtful consideration of this subject. That’s why it’s a shame that the CUA administrators missed a golden opportunity with their Journal piece. This is a topic that could have used some good, old-fashioned, scholastic rigor, but the authors showed little interest in wrestling with it. The editorial perfunctorily dismissed the protesters’ concerns about the symbolic import of the university’s acceptance of a Koch Foundation gift as “guilt by association.” And it squandered a precious paragraph trying to catch the protesters in the tangles of moral selectivity, questioning, for instance, whether they would have asked the University to return a donation from the Gates Foundation for anti-malarial research if they learned that one of foundation’s funders also supported Planned Parenthood.

That parallel doesn’t seem particularly apt, since in this case, the designated object of philanthropic funding has a strong connection to the controversial agenda of the benefactor. The other arguments marshaled by Catholic’s president and the business school dean seemed designed more to squelch the debate than to consecrate it. They did not really grapple with the relationship between a giver and his gift, or the moral responsibilities attendant on philanthropic receivership. Doing so, even if it didn’t signal a change in the university’s decision to keep the money, would have served an important purpose: It would have helped transform beneficiaries from passive receptacles into active moral agents. That transformation would have a profound effect on the practice of philanthropy and perhaps on business culture more broadly. In fact, if the Catholic University of America really does want to support principled entrepreneurship, sustaining this debate on “tainted money” might just be the best place to start.

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Benjamin Soskis is a fellow at the Center for Nonprofit Management, Philanthropy, and Policy at George Mason University. He is the co-author of The Battle Hymn of the Republic: A Biography of the Song that Marches On.

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