Posted on: Sunday, February 8, 2004
Report says charity bosses given interest-free loans
Associated Press
WASHINGTON — Dozens of charities and other nonprofit groups have given their top executives and directors interest-free loans, sometimes for $250,000 or more, according to The Chronicle of Philanthropy.
At least 140 groups reported between 1998 and 2001 that they had outstanding loans to their officials, according to an analysis of tax forms by the weekly publication.
Eighteen groups made loans of at least $250,000. The largest was $2.25 million to John Rowe, the former president of the Mount Sinai Medical Center in New York.
A spokesman for the medical center, Mel Granick, said the loan, made in the late 1980s, was part of the financial package used to lure Rowe, then a tenured professor at Harvard Medical School, to New York. It helped Rowe buy a Manhattan apartment.
Granick said the loan was paid in full when Rowe left the medical center in 2000 to head the Aetna insurance company. He said Mount Sinai no longer makes such loans.
Catholic Healthcare West of San Francisco loaned $2 million to its chief executive officer, Lloyd Dean, to buy a condo overlooking San Francisco Bay, the report said.
Spokesman Mark Klein said the loan "enabled Mr. Dean to purchase a house in the San Francisco Bay area roughly equivalent to the home he had in Illinois," where he worked before taking the helm of Catholic Healthcare.
Other organizations making such loans included the National Geographic Society in Washington; Stanford University in Palo Alto, Calif.; and the Dana-Farber Cancer Institute in Boston, the article said.
The head of a coalition of charities and foundations said recently that some loans, such as those allowing newly hired executives to buy homes equivalent to those they are leaving behind, could be appropriate. But for the most part, she said, nonprofits should not be in the lending business.
"This is a question of proportionality," said Diana Aviv, president of Independent Sector. "To suggest that the only way you can get well-qualified top people to take positions is to provide lavish loans and extra benefits is something we don't believe. The vast majority of nonprofits are able to attract high-level individuals without providing lavish loans and benefits."
Some charities have run into other problems recently. The American Red Cross raised $850 million for a fund designed to help victims of the Sept. 11 terrorist attacks, but then said it would use some money for projects not directly related to Sept. 11. Facing criticism, the organization later reversed course and said the entire fund would help those affected by the attacks.
The United Way of the National Capital Area replaced its entire board of directors in 2002 after some donors withdrew from the charity's fund-raising campaign amid allegations of financial mismanagement.
Responding to a series of scandals involving corporations such as Enron and WorldCom, Congress in 2002 passed legislation banning personal loans from companies to their top officials and directors.
Senate Finance Committee Chairman Charles Grassley, R-Iowa, told the Chronicle that lawmakers should impose the same ban on nonprofits. "Families giving to charities want to support good work, not penthouse apartments for executives," he said.
