Donors researched, not vetted

When the development office identifies a potential major donor, the fundraisers open up a new file, which they spend hours filling with research into the donors’ wealth, career history, philanthropic history and more. Staff members then spend months wooing donors, who may even receive a visit from a top Yale administrator.

But even after such diligence, officials may miss indicators of possible wrongdoing — because they’re not looking for it.

Amid allegations that John Mazzuto’s ’70 gift of $1.7 million in stock might have come from illegitimate sources, those who lost money when Mazzuto’s corporation declared bankruptcy have questioned whether the University should have researched Mazzuto’s financial situation more thoroughly before accepting his gift. Yale conducts what it calls “prospect research” into potential benefactors — but it does not formally vet them, focusing more on an individual’s capacity to give. And Yale’s policy is not unusual: Three development experts interviewed said universities do not delve deeply into prospective donors’ financial history, only their capacity to give.

“There would be very few donors if charitable institutions subjected their well-intended supporters to investigation,” University President Richard Levin said Friday in an e-mail from Switzerland, where he is attending the World Economic Forum. “Of course, we are aware of public information concerning our donors, but we don’t undertake investigations of their business activities as if we were the Department of Justice.”

Mazzuto is currently being investigated by the Securities and Exchange Commission and the Manhattan District Attorney’s Office for possible accounting fraud during his time as CEO at Industrial Enterprises of America — which is also when he endowed Yale’s baseball team and paid for a new practice field.

“Athletically and academically, John Mazzuto had the same dreams that all of you have,” Athletic Director Tom Beckett said at the dedication of the field. “He realized his dreams, and because of that, he chose to make Yale a better place.”

Vice President for Development Inge Reichenbach said she does not know whether Mazzuto was facing a lawsuit at the time of his gift in 2007, but she added that Yale would never accept a gift if its legitimacy were in doubt.

“With a school the size of Yale and the endowment program they have, there’s a real question of whether they could have known,” said Robert Renck, IEAM’s current CEO, who has asked Yale to return the IEAM shares Mazzuto issued to the University. “It might have been very difficult for the University to have vetted it.”

Though the University is cooperating with the authorities in their investigations, Yale will wait until the investigations are over before taking any further action, Reichenbach said.

Before asking for — or accepting — any large gifts, Yale’s Office of Development cultivates relationships with potential donors, a process that can take months or years, she said. Along with researching their biographies and history of philanthropy through publicly available records, development staff ask donors what programs they might be interested in supporting, she added.

After identifying a possible donor, researchers in the development office complete a wealth assessment and compile a short biography focusing on the donor’s personal, professional and philanthropic background, according to internal development office documents obtained by the News. As fundraisers move closer to asking the prospect for a major gift, they survey news articles to research whether his or her financial situation has changed and find out more about the prospect’s family or volunteer activities. By the time fundraisers request a donation, they use a wealth report based on the donor’s current known assets to decide what amount they will ask for.

And though development staff “use common sense” in their research, the University assumes that potential donors come to Yale with good intentions, Reichenbach said.

“The people we are engaged with — we know them as honorable people,” Reichenbach said.

That attitude is widespread among higher education development offices, three fundraising experts said.

Donors to prestigious institutions such as Yale are usually well-known in business or philanthropic circles, said Rebecca Smith Vogel, a spokeswoman for Stanford University’s development office. For the most part, she added, people who wish to donate are people of integrity.

“Most of the donors that contribute to a college are well-known to the college and friends of the college,” said Andrew Tiedemann, a spokesman for Emerson College who formerly worked in Harvard University’s development office. “Ninety-nine-point-nine percent of individuals making charitable gifts are doing it because they believe in the mission of the institution.”

When conducting research, fundraising staff examine prospective donors’ career history to determine how much they might give to the institution, said Rae Goldsmith, a vice-president of the Council for Advancement and Support of Education. The research is designed to help the institution to land a gift appropriate to the donor’s wealth and interests, Goldsmith said, not to detect wrongdoing.

“The research isn’t done for negative reasons at all,” she said.

So far, that approach seems to have been successful: Goldsmith said she knows of very few cases in which a donation has caused trouble for a university, and Vogel said she could not recall any. But when good donors go bad, Goldsmith added, the institution must handle each case individually, deciding whether to return the gift or strip a building of its name, depending on the circumstances of the gift.

When Augsburg College in Minneapolis, Minn., received a $500,000 donation from an alumnus to construct a building bearing his name in 1987, only later to discover he had a history of advocating racial purity, Augsburg administrators chose to keep the money but removed his name from the building. Instead, they established a $500,000 scholarship supporting minority students. (The donor eventually sued Augsburg for removing his name from the building, but the suit was dismissed because too much time had passed.)

But until a donor’s wrongdoing is confirmed, Goldsmith said, most institutions take a “wait and see” policy, as Reichenbach said Yale is doing.

Comments

  • Researcher in NYC

    I am a prospect researcher for a major cultural institution in NYC and I can assure you that we do include vetting of current activities and possible legal entanglements of both the donor prospect and his or her family before committing to cultivate. That information is not hard to find and furthermore, should always be a part of the examination, for reasons of which your community is now aware. In the next incarnation of the development office, which will likely suffer consequences from this public embarrassment, should take this under consideration.

  • Take Notice

    When is the YDN going to acknowledge the less than altruistic nature of John Mazzuto’s donation? I find it particularly relevant that the donation was made around the time his son, Rich Mazzuto, was admitted to the Class of 2011.

  • YDN articles not research or vetted

    How is this a story? The investigation is ongoing; he has not been proven guilty of anything. Oh, right, we’re just supposed to assume that he is. Should Yale reject gifts from anyone who is being sued? Thanks, YDN. Stellar journalism once again. Please write a factual, well-researched article when the investigation is complete. Assumptions just don’t cut it.

  • Think again

    @ #2 Take Notice

    $1.7 million is definitely not enough to get you into Yale. Gotta be like, $5 million.

  • @#2

    Classy, my friend. Not only do you assume John is guilty, but you take a potshot at his son’s legitimacy for being here. I find you particularly distasteful.