Higher Ed’s Dirty-Money Problem

There’s a story people tell to explain how college leaders think about money that comes from ethically dubious sources. The protagonists change, but other details stay the same.

Someone asks the leader of an institution what he or she thinks of “tainted money.”

“The only problem with tainted money,” the leader answers, “is tain’t enough of it.”

The adage was first attributed to William Booth, founder of the Salvation Army, which took donations from anyone. But Stanley N. Katz, a professor at Princeton University, remembers hearing it from Johnnetta B. Cole, a former president of Spelman and Bennett Colleges. According to a Chronicle article from 1990, Cole also clarified that “tain’t enough money in the world” that would entice her to accept a gift that allowed the donor to dictate what was taught at her college.

Last year the head of a grantmakers association said that she heard the “president of a major medical school,” whom she did not name, use almost the exact same line during a discussion about whether tobacco money should be accepted to help finance an effort to lower infant-mortality rates, given the research showing that smoking during pregnancy contributes to low birth weights.

But that line doesn’t cut it anymore. In the modern university, all sources of money, be they gifts from donors, corporate grants, or investments, can be tainted in some way. As one headline after another exposes unsavory billionaires and corrupt companies, students, faculty members, and alumni say their colleges’ sources of funding should reflect better values. They are demanding that universities take responsibility for their role in laundering wealthy philanthropists’ reputations and allowing outside influence on research.

“The intensity around this has amplified over the last nine months, starting with Varsity Blues, the Sacklers, and Epstein,” says Fritz W. Schroeder, the vice president for development and alumni relations at the Johns Hopkins University. “It is going to be with us for a period of time.”

Add to that list Mohammed bin Salman’s visits to MIT and Harvard last year and protests against investments in the fossil-fuel industry and ties to defense contractors, and it’s clear: Higher education has a financial-ethics problem that’s getting harder to ignore.

This is all happening at a time when state funding for higher education has declined and federal research grants have flatlined. Since the recession, big donors have become more important to institutions trying to grow their research enterprises, build new buildings, and expand their financial-aid packages. Meanwhile, the spotlight on economic inequality — and higher education’s role in it — is getting more intense.

“There is increasing awareness of and potential criticism of influence and wealth,” Schroeder says.

So far, despite widespread debate, college leaders have reached no consensus on what to do about tainted money. Often the choice has been, Do nothing.

But objections to sources of money that are unsavory, if not illegal, are unlikely to go away. Incidents in the museum world may offer a preview: This summer, the vice chair of the board at the Whitney Museum stepped down after artists protested his weapons-manufacturing company, whose tear-gas grenades were used at the Mexican border. In October, protesters demanded the removal of a Museum of Modern Art trustee because his asset-management firm owns $2.5 billion in debt from Puerto Rico, which is facing an economic crisis. And the art world is where protests against the Sacklers began, with the artist Nan Goldin staging demonstrations at the Metropolitan Museum of Art, the Guggenheim, and the Smithsonian.

College leaders must wrestle with a set of complex questions: Where is the line between dirty money and clean? Is there even such a thing as clean money?

These questions are at least a hundred years old. In the early 20th century, big-time philanthropy faced relatively unified opposition — in Congress, in the White House, and among the public. Famous industrialist families like the Rockefellers and the Carnegies had more wealth than anyone could conceive of and wanted to give big chunks of it away. To do that, John D. Rockefeller sought approval from Congress to create a $100-million foundation. At the time, many states capped foundations at $3 million.

But Rockefeller especially was then known mainly as a robber baron who treated workers poorly and opposed labor unions, according to Rob Reich, a political-science professor at Stanford University who wrote about the formation of the Rockefeller Foundation in his 2018 book Just Giving: Why Philanthropy is Failing Democracy and How It Can Do Better. Some politicians, including President William Taft and his predecessor President Theodore Roosevelt, saw the foundation as nothing more than an attempt by Rockefeller to “exercise a different kind of power over public life,” Reich says. Undeterred, Rockefeller chartered the foundation in New York in 1913.

The organization, meant to fund groups that would combat the root causes of social problems, became a model for large, modern foundations. To honor his wife, Rockefeller created another foundation in 1918, the Laura Spelman Rockefeller Memorial, which invested heavily in the social sciences at institutions like the University of Chicago, the Brookings Institution, Columbia, and Harvard. By funding research on economics, sociology, and political science, Katz says, these foundations influenced public life with little government oversight, just as early 19th-century politicians had feared.

Foundations, at first, were shunned by some corners of higher education. In 1925 the University of Wisconsin regents banned the university from accepting foundation money, Reich wrote in Just Giving. The ban was lifted in 1929, and decades later, the Rockefeller Foundation came to be considered a conventional research sponsor.

The 1970s and ’80s saw new sources of controversy. Colleges felt intense pressure from students to divest from companies that did business in apartheid South Africa. Some did divest, including Brandeis and Boston Universities. Harvard did not.

In 1979, a white paper by Derek Bok, then Harvard’s president, suggested why. Universities should accept “tainted money,” he wrote, because “an institution will doubtless do more good by using such funds constructively than by forcing the donor to keep his money,” according to a Washington Post article from the time. Naming awards or buildings for a donor was simply a way of acknowledging where the money came from, not “an affirmation of his moral character,” Bok argued. For example, he said, “students who accept the designation of Rhodes scholar do not believe that they are endorsing the racial and colonial views of Cecil Rhodes.”

Bok’s assertion that dirty money could be turned into clean money was widely accepted. Stephen J. Trachtenberg, known as a prodigious fund raiser when he was president of George Washington University in the 1990s and 2000s, says there was almost no donation he wouldn’t take “unless it was coming from the devil himself.”

That position was tested when Muammar Gaddafi wanted to donate $10 million to George Washington, Trachtenberg says. The Libyan dictator was hoping for an honorary doctorate degree. When Trachtenberg heard from the embassy about the request, he decided to take an evening to think about it and talk it over with his wife.

“Francine said, Don’t go near it,” Trachtenberg says. So he didn’t. But he still wonders about that decision.

“Why is the world better because he got to keep the $10 million?” Trachtenberg says. “Couldn’t I have done more good with it?”

One of Trachtenberg’s models was Cardinal Richard Cushing, another well-known fundraiser who was the archbishop of Boston until 1970, when Trachtenberg was an administrator at Boston University. Trachtenberg remembers Cushing once saying, “Son, you sanctify money with its use.”

“His position was, you get a gift, you use it to do the Lord’s work,” Trachtenberg says. “That is a virtuous gift.”

A lot of people — students, alumni, faculty members — think that defense is out of date, thanks in part to changing perceptions of what colleges do. Benjamin Soskis, a research associate at the Urban Institute, says that the work of higher education was once taken for granted as good. Colleges were considered a “safe” place to give money — nonpolitical compared with other social enterprises. Conveniently, colleges could also absorb big donations — gifts in the tens of millions. A wealthy benefactor would get his name on a building and know that his legacy would be recognized for generations to come.

But now, colleges are seen as part of the problem. Even as many of them strive to become less elitist, scandals like the Varsity Blues scheme — when parents helped their kids cheat on admissions tests and bribed coaches for entrance to elite universities — are reinforcing skepticism about whether higher education is really contributing to the creation of a meritocracy. Colleges have always had a hard time getting away with honoring the people who pull the levers that broaden gaps between the rich and the poor, the powerful and the powerless, but now they are seen as one of the levers.

“Philanthropy is now being included in this larger debate about the nature of political economy and what’s fair,” says Soskis. He believes that higher education has always helped the wealthy stay wealthy, but he now sees “increased concern about the ways in which higher-education philanthropy is perpetuating inequalities in the system.”

When their relationships with people like the Sacklers and Epstein came to light, it appeared to be further proof that these institutions aren’t doing enough to hold people in power accountable. Some members of the Sackler family owned Purdue Pharma, which has been largely blamed for the opioid crisis. Jeffrey Epstein was a convicted sex offender when he gave or directed others to give at least $7.5 million to MIT, The New Yorker reported. He gave roughly $9 million to Harvard before his conviction, the university has said. These gifts gave him access to some of the world’s best known scientists.

The reaction to Epstein’s MIT connection also reflects critiques of power dynamics that are happening not just on college campuses but beyond. Professors at MIT argued that the university’s willingness to welcome a man who abused and trafficked young women exposed a deep, systemic sickness. This is a women’s issue, they said.

“The fact that this situation was even thinkable at MIT is profoundly disturbing, and is symptomatic of broader, more structural problems, involving gender and race, in MIT’s culture,” said a letter to Rafael Reif, the president. It was signed by more than 60 senior female faculty members. “It is time for fundamental change.”

Fundamental change is going to be complicated, but it’s unavoidable. Fund-raising professionals are fielding more requests to vet prospective donors in order to avoid ensnarement in the next controversy. They’re not doing it simply to inoculate their colleges against an embarrassing association. They’re also trying to defend the value of higher education more broadly.

“Things are not business as usual,” says Lori Hood Lawson, a fund-raising consultant who often works with colleges. “Every time something makes a headline that impacts fund raising in a negative light, the people that do prospect research tend to get more requests.”

One prospect researcher is Lindsey Nadeau, a former director of research and relationship management in the development office at George Washington, who now works at Unicef USA. These days she’s regularly asked to speak about vetting at conferences and on webinars for higher-education fund-raising officials.

“This was not happening four or five years ago,” Nadeau says. “I was not talking to anyone about how to vet a prospect.”

So far, colleges haven’t shown much willingness to alter their approach to questionable donations. MIT investigated its ties to the Saudis and discovered that one of the men who was reportedly in the Saudi embassy in Istanbul when the Washington Post columnist Jamal Khashoggi was murdered was also part of the crown prince’s entourage when he visited the university’s Media Lab. Still, the university decided to keep its Saudi money.

Both Harvard and MIT have investigations underway into their relationships with Epstein.

In the meantime, Harvard, calling Epstein’s crimes “egregiously repugnant,” announced in September that it is redirecting $186,000 of the nearly $9 million it got from the financier to organizations that support victims of human trafficking and sexual assault. The university has already spent the rest, and has pointed out that it received those donations before Epstein’s 2008 conviction.

Universities’ plans for their Sackler money have been varied. The family gave millions to colleges that honored them by putting their name on buildings, professorships, and academic programs. Yale, New York, and Columbia Universities said they were no longer accepting gifts from members of the Sackler family, but stopped short of returning any money. The University of Connecticut and Brown University have both said they will reroute some Sackler funds to opioid-addiction research and treatment programs. Others either haven’t commented or said they will not do anything about their Sackler connection, either because the money came before the opioid crisis or it was already spent.

But some universities are budging. Tufts University said in December that it would strip the Sackler name from various schools, programs, and funds and create a $3-million endowment to fund research and education programs meant to treat and prevent substance abuse. The university was particularly enmeshed with the family and Purdue Pharma; it even had a master’s degree in pain management where a Purdue executive gave lectures. (Some members of the family are pushing back, saying Tufts’s decision is a breach of binding commitments.)

Even on endowment investments, long a focus of student activism that was met with little campus action, there are small signs of change. In November, student activists stormed a Harvard-Yale football game to insist those universities divest from fossil fuels. Some college leaders have said they will. University of California leaders announced in September that they had sold off $150 million in fossil-fuel investments, making the university’s endowment “fossil free.” (The decision was purely financial, they said.)

So how should colleges recalibrate their standards? Lawrence Lessig, a professor at Harvard Law School, wrote a post on Medium defending Joi Ito, the former director of the MIT Media Lab, where Epstein directed money. Lessig said that he’d advised Ito to accept the gifts anonymously because it would prevent Epstein from using the MIT connection to burnish his reputation — something he was able to do anyway. In hindsight, Lessig said he was mistaken. The post was widely condemned.

Lessig laid out four different types of donors: Good people who earned their money in an innocuous way, good people who earned their money from companies whose ethics are “ambiguous,” criminal or immoral people who earned their money harmlessly, and people whose money comes from criminal or immoral means.

The truth is, Lessig said, universities accept all four types. He proposed banning the third and the fourth types, but acknowledged that people will disagree about who fits into which category.

At Harvard, the journalist Anand Giridharadas spoke to students at the Kennedy School of Government in November about his book Winners Take All: The Elite Charade of Changing the World.

Donations meant to solve a problem in society, Giridharadas said, “while doing good, are helping to entrench a power differential that is the root cause of that very problem.”

That’s an accusation colleges will have to answer. Schroeder, the development vice president at Johns Hopkins, says the work colleges do to benefit our society is more important than ever. It’s a good time for fundraisers to take a close look at their practices and make sure they will stand up to scrutiny.

“We are all taking a pause and thinking, Do we need to update or change policies in light of the changing environment?” Schroeder says. “What do we need to do in terms of training the staff about their responsibilities, and how they discern wealth for individuals they’re working with?”

Training the staff is particularly tricky. “Asking them to be the ethical, moral, and value barometer of the institution is an enormous burden for them,” he says. Ensuring that the institution has a clear sense of its values, and that the members of leadership making the ultimate decisions about gifts adhere to them, is crucial.

But as the public conversation about a rigged economy, deceptive corporate practices, and the frightening consequences of our dependence on fossil fuels grows louder, it’s harder to draw a line between honorable and ill-gotten gains. To Maribel Morey, a visiting professor at Ersta Sköndal Bräcke University College, in Stockholm, Sweden, the intensifying critiques of dirty money in higher education point to growing discomfort with capitalist inequality, and with systems that seem to reinforce it.

What does that mean for colleges and universities? More protests, more scrutiny, and more messy, public reversals of course like Tufts’s, or Lessig’s.

“It calls all of us as Americans to ask ourselves and have a shared conversation on not only what do we find objectionable, but what do we find reasonable in an economy in which we’ve taken it for granted that it’s acceptable for private industry to maximize profit,” Morey says.

“If these people should be demonized,” she asks, “Who should be celebrated?”

Audrey Williams June contributed to this article.