Nonprofit Finds Way To Repay Madoffaffected Donor 2009: Dear Randy

Nonprofit finds way to repay Madoffaffected donor

Dear Randy: I work for a large charity.
A longtime donor had recently wired us a considerable contribution when he learned he was financially ruined by investing with Bernard Madoff. A week or so later, the donor asked us to refund his money. I sympathize, but I don’t want to imperil our charitable status. What is the right thing to do – Name Withheld Dear Name Withheld: It would be a fine thing if you could return this recent contribution. Had your donor truly understood his circumstances – his profits were a mirage, he was a dupe, Miss California’s breasts were artificially enhanced (not strictly germane, perhaps, but it makes a pattern) – he would not have made this donation. You can’t give what you don’t have. It is not ethical to exploit his error. What constitutes “recent” is debatable. Should you return a donation made in March Six months ago Six years ago Fortunately, this is not a debate you must engage in, given how soon after receiving this gift you learned of the donor’s circumstances. Returning the money would make this situation akin to any transaction with a cooling-off period: a chance to reconsider a financial decision. Alas, such benevolence might be legally barred. Marianne M. Jennings, a professor of legal and ethical studies at Arizona State University, told me, “I cannot imagine how they could return the funds as a tax-exempt payment.” A nonprofit may spend money only for its charitable work and legitimate expenses (sometimes in the form of a gala event so opulent it would make Louis XVI blush, were he alive and capable of shame). Federal eyebrows could be raised if your group wrote a check that covered neither. Such strictures, devised to forestall charity fraud, can thwart your benign intentions in an exceptional case like this. And so you must reject this request unless your lawyers clear it. Jennings says, “This seems to be such a harsh response to a generous donor, but, as you know, sometimes the law does get in the way of ethics.” UPDATE: The group hired the donor as a consultant for a fee equal to his requested refund. Their lawyers endorsed this, providing he performs a legitimate function for a reasonable sum. Dear Randy: I was born in Korea and adopted as a baby. My birth sister in Korea contacted me to say that our father had passed away, leaving a sizable inheritance. Korean law bestows this on his children. I am unsure if he wanted me to have it – like many Koreans, he wrote no will. My birth sister said he often thought of me and wished me well. May I claim half of the inheritance, or should it all go to her She was raised among our Korean family, although by an uncle. – Anne D., Penn Valley, Pa.
Dear Ann D.: Take the money. Your father knew how his estate would be divided. He could have redirected this money but chose not to. From what your birth sister told you – and she took some trouble to do so – it sounds as if he would be pleased to do something for you. You could reach out to other relatives who knew him and who might offer more insight into his feelings.

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