Boston Globe's probe details shady accounting

Investigative Reporters and Editors, Inc. The IRE Journal, Jul/Aug 2004

In a six-part investigative series published from Oct. 9 to Dec. 29,2003, in The Boston Globe, reporters Beth Healy,Francie Latour, Sacha Pfeiffer, Michael Rezendes and editor Walter V. Robinson unveil the widespread abuse of private charitable foundation assets by their officers and directors.

The first story/'Some Officers of Charities Steer Assets to Selves," details the shady accounting practices of Paul C. Cabot Jr., trustee of the family foundation Paul and Virginia Cabot Charitable Trust. Under Cabot's leadership, the foundation's assets dwindled from $14 million in the mid-1990s to $5 million in 2003-with much of its charitable contributions going toward Cabot's own rising salary.Tax returns reveal Cabot paid himself about $500,000 in 1998 and raised his salary to more than $1 million in 2000 to help pay for his daughter's luxurious wedding.

State attorneys general and the Internal Revenue Service regulate trusts and foundations. But, as The Globe reports,"these charitable organizations operate virtually without scrutiny." Out of the some 60,000 private charitable foundations in the United States, the 1RS audits only about 120 of them.

In reaction to The Globe series,attorneys general for Massachusetts and Connecticut launched investigations into the foundations located in their states.

In a follow-up article on Jan. 11,2004, Robinson and Marcella Bombardier! reveal that in 2001 nonprofits identified as "human service providers" only received about one in 10 foundation dollars.The rest of the donations went to well-endowed colleges and universities like Harvard, Stanford and Yale.That year, private foundations gave nearly $30 billion to charities, gifts made possible through their federal tax benefits. The Globe obtained its newest data from a commissioned study by the Foundation Center.