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AG's charities chief to review salaries at 2 foundations

The chief of the charities division of the Massachusetts attorney general's office said yesterday that he will review the salary and benefits paid to trustees of two of the largest charitable foundations in the state and will examine the potential for conflicts of interest at law firms, among them some of the state's most prestigious, that provide management services to foundations.

Assistant Attorney General Jamie Katz said that because of the potential for excesses, his office is particularly concerned with foundation trustees who pay themselves salaries based on a percentage of a foundation's assets and income, not on the work they do.

"Our position is: Compensation should be reasonable and should be tied to some combination of surveys of comparable organizations and to the amount of effort and work done for a charity," Katz said.

He made his comments in response to a Globe Spotlight Team report on Sunday that said trustees of the Boston-based Amelia Peabody Charitable Fund are paying themselves six-figure salaries for part-time work. The salary levels are linked to the assets and income of the foundation.

The Globe also found that the five trustees at a related foundation, the Wellesley-based Amelia Peabody Foundation, paid themselves more than $1 million last year and that the foundation earlier made questionable payments to the late James D. St. Clair, including more than $300,000 in trustee fees and a $500,000 retirement benefit.

"I'm focusing on the Amelia Peabody foundations," Katz said. "We will certainly review the transactions and compensation of the trustees."

The disclosures in the Globe report provoked outrage from some who knew Peabody, a well-known philanthropist with homes in Dover and the Back Bay who died in 1984 at age 93.

"She was one of the nicest people that ever happened to the town of Dover. But there are a bunch of vultures around, and either they don't know what she was about, or it just doesn't matter to them," said James K. McGill, Jr., 74, a former member of the Dover Planning Board who said he met Peabody for the first time more than 60 years ago.

"I was sick when I found out about what was going on," McGill said. "Who knows how many thousands and thousands of dollars could have gone to charity? And what can be done about it?"

The Globe Spotlight report on the two Peabody foundations was the latest in a series of articles about abuses by trustees at foundations throughout the nation. Previous installments in the series have led to inquiries by attorneys general in five states, including Massachusetts, into allegations of unreasonable compensation, lavish perks, and conflicts of interest by foundation trustees.

Paul S. Grogan -- president of the Boston Foundation, one of the largest community foundations in New England -- said that excessive compensation, conflicts of interest, and other abuses pose a threat to nonprofit institutions throughout the region and called on the Legislature and Attorney General Thomas F. Reilly to provide greater oversight of foundation trustees who manage billions of dollars in money earmarked for charitable causes.

"We've set up these extraordinary privileges for people in the tax code that create incentives for people to make charitable gifts," Grogan said. "But when people abuse those privileges, they not only besmirch the whole enterprise of charitable giving, but also put those privileges in jeopardy."

He said institutions key to the region's economy, including research universities and teaching hospitals, depend on philanthropy and, indirectly, on the reputation and probity of trustees managing philanthropic assets. For that reason alone, he said, the Legislature should grant the attorney general's office greater resources to monitor foundations.

"If the attorney general's office had more resources, it could perhaps devote someone to more continuous scrutiny of foundation tax returns," Grogan said. "They need to be doing more sampling of the returns and, when there appears to be abuse, going after it."

He also said professionals who advise philanthropists should do more to educate them about the alternatives to establishing private foundations. Those alternatives include investing in donor-advised funds run by commercial investment houses or in community foundations, such as the Boston Foundation. The donor-advised funds allow most benefactors to direct their money to specific charities while avoiding the administrative costs associated with establishing a private foundation.

In addition, Grogan said he believes it is essential that professionals, especially lawyers, police themselves to avoid conflicts of interest.

"The legal community has to be aware that the family lawyer, like the family doctor, occupies a position of enormous faith and trust, and with that relationship comes what I think is enormous responsibility," he said. "There needs to be more self-regulation by the profession."

Foundation lawyers enjoy an especially trusted position in Massachusetts, where several prominent law firms offer a one-stop-shopping approach to foundation management. Some who track foundations have voiced concern about the potential for conflicts of interests, when an attorney as a trustee of a foundation plays a role in hiring his own firm to perform legal work, accounting work, and investment management.

Katz said that such conflicts, while perhaps an ethical concern, may be difficult to prevent under existing law. "The law is not always consistent with what experts consider are the best practices for foundations," he said.

Michael Rezendes can be reached at rezendes@globe.com. Francie Latour and Walter V. Robinson of the Globe staff contributed to this report.

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Spotlight Report The Boston Globe Spotlight Team would like to hear from readers who have information about this issue. The Spotlight telephone number is 617-929- 3208.

Confidential messages can also be left at 617-929- 7483.

The e-mail address for the Spotlight Team is spotlight@globe.com

Foundation tax returns are available for public viewing at www.guidestar.org
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