Posts tagged ‘Garth Brooks’

January 27, 2012

Can a Nonprofit Return a Donor’s Gift?

Two relatively recent news events have raised the issue of nonprofit organizations returning gifts to donors:

 

  • The mainstream media wanted to know if Penn State University should return donations to donors who ask for a refund or should Penn State stick to its longstanding policy of not returning gifts. Following the Jerry Sandusky child sex-abuse scandal, the University affirmed its no-refund policy in its official talking points.

 

  • The mainstream media also took notice of a lawsuit filed by country music star Garth Brooks against INTEGRIS Canadian Valley Regional Hospital. Brooks sought the return of a $500,000 contribution. The media wondered if the Hospital should have returned the donation before things ended up in court.

 

Since much has already been said about whether gifts should be returned upon a request by a donor, I want to focus on whether a nonprofit organization can legally return a donation.

I’m not a lawyer. So, I decided to contact one. I spoke with a high-ranking state official who specializes in the regulation of nonprofit organizations. The official requested anonymity since we were discussing hypothetical situations.

Under certain circumstances, nonprofit organizations can refund a donor’s contribution. However, under other circumstances, returning a donor’s gift could result in a review by state authorities. Whether or not a situation results in state review will depend on a given state’s regulations, the impact returning the gift would have on the nonprofit, and the size of the gift in question,.

Different states have different laws and regulations governing nonprofit organizations. However, most, if not all, state rules are vague on the point of charities returning gifts. What states do recognize is that when a donor gives money to a nonprofit organization, that money is no longer the donor’s once accepted by the charity. Instead, the money is, in effect, owned by the public interest. Because nonprofit organizations exist to benefit the public interest, regulators will be concerned that gifts are used to further the public interest. Returning a donor’s gift could be contrary to the public interest. That’s the issue for regulators.

For example, a donor may want his $1 million gift returned. However, at the time of the request, the nonprofit may have already spent the money on construction of a new building. It may no longer be holding the donor’s money. And, it may not have sufficient cash on-hand to provide a refund. Or, providing a refund may substantially hurt the organization’s financial health. In such a situation, state regulators might find that returning the gift could be counter to the public interest and might move to block a refund.

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January 20, 2012

Garth Brooks Sues Hospital for Return of $500,000 Gift

The news about country-music superstar Garth Brooks this week was not about his latest appearance on stage. Instead, the big story was about his appearance in a courtroom as jury selection began in his civil lawsuit against Integris Canadian Valley Regional Hospital, Yukon, OK. Brooks is seeking the return of his $500,000 contribution since the Hospital has neglected to name a building after his late mother, as he asserts was the agreement.

Country Music Star Garth Brooks

This news story raises operational and ethical issues for all nonprofit organizations that we can explore now. As time goes on, there will be additional lessons to be learned about both fundraising and public relations. 

Despite many news reports on the subject, many of the details of the case are not clear including the timeline of events. As the trial proceeds, we’ll certainly get more information about what happened.

Here is what we know at this point:

  • Brooks contributed $500,000 to the Integris Canadian Valley Regional Hospital, his hometown hospital, in 2005.
  • Brooks filed his lawsuit in 2009. Brooks alleges breach of contract, revocation of gift/constructive trust, fraud in the inducement, and negligent misrepresentation/constructive fraud.
  • Jury selection for the civil trial began this week.
  • Beginning in late 2003 or early 2004, Brooks says that the Hospital courted his support and often discussed naming a building after his mother, even showing him mock-ups. Brooks asserts that the Hospital ultimately promised to name at least part of the facility after his mother.
  • The Hospital asserts that the gift was unconditional.
  • The Hospital has not named a building after Brooks’ mother.
  • A Hospital official says the Brooks donation has not been spent and remains in a Hospital account.

Here are some questions I have:

  • Is there a written gift agreement?
  • Do any copies of the named-building mock-ups exist?
  • If the gift was made in 2005, why hasn’t the Hospital put it to use?
  • Why didn’t the Hospital return the gift since it’s just been sitting on it for six years?

While we will certainly learn more in the coming weeks, there are already some lessons we can learn from this story: 

Gift Agreements. If Integris and Brooks had a well written gift agreement in place, it’s doubtful that the situation would have ended up in court. When a donor makes a substantial contribution, it’s a great idea to put together a gift agreement that details what is to be given by the donor and when. And, the agreement should also outline what the nonprofit is offering in return and when. In addition, the gift agreement should detail how the donation will be used, for what and when. A solid gift agreement will ensure that both sides understand the nature of the relationship. Getting everyone on the same page is essential. A gift agreement will make it more difficult for either party to deviate from the understanding and it will avoid confusion and disappointment.

Even if Integris and Brooks did not have a written gift agreement, they still might have had a verbal contract. If the existence of a verbal contract can be proven, it is just as binding as a written contract. Brooks’ claims are based either on a written gift agreement or a verbal agreement. A well written gift agreement could have avoided a lot of stress for both parties. In any event, Integris should have done everything possible to avoid a trip to court and the resulting horrible, probably costly, publicity.

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