Dirty Money: From Rockefeller to Koch

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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