Private Foundations and the Protection of Assets

Tax Analysts, Special Report
Events of the recent past, including the Foundation for New Era Philanthropy,1 the Madoff investment scandal, and the just-emerging situations involving the Stanford Financial Group and the Walsh and Greenwood investment entities,2 raise difficult and potentially fatal situations for charities who invested with those firms. Those scandals should also trigger a moment of reflection in the minds of directors, trustees, and managers of all private foundations. This is because private foundations, unlike public charities or other types of exempt organizations, are subject to a stringent, restrictive set of excise taxes that are the result of scandals a half-century old. Click on the attached pdf to read more.


1. The Foundation for New Era Philanthropy, operated by John Bennett, was a notorious Ponzi scheme. The foundation raised more than $500 million from 1,100 donors and embezzled $135 million of that amount. It operated from 1989 until its collapse in 1995.

2. The Walsh and Greenwood entities include the WG Trading Co. and WG Trading Investors LP in Greenwich, Conn., and Westridge Capital Management Inc. based in Santa Barbara, Calif. The FBI arrested Walsh and Greenwood on Feb. 25, 2009, on charges of misappropriating at least $553 million. The investors included public charities and private foundations. See Steve Stecklow, Chad Bray, and Jenny Strasburg, ‘‘Pair Lived Large on Fraud, U.S. Says,'' The Wall Street Journal, Feb. 26, 2009.

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