Investigative report shines light on philanthropic foundation's use of offshore investments to raise money

December 7, 2018 by Bob Yirka, Phys.org report
Credit: CC0 Public Domain

Charles Piller, an investigative reporter for the journal Science, has published a News Feature piece in the latest issue of the journal outlining his findings surrounding the practice by philanthropic foundations of putting money in offshore investment accounts.

Philanthropic foundations by their very nature are not money-making ventures. Their purpose is to accept donations from individuals, groups or other entities and use the money they receive to support efforts to make the world a better place. But some of these foundations find they are unable to secure as much money in donations as they would like, so they turn to investment strategies. And some also try to maximize their return on such investments by conducting them through off-shore banks and other entities. Such arrangements allow the foundation to forgo paying taxes on investment income and to keep their investment activities private. But Piller wondered what happens when there are conflicts of interest. He found an example of one of the largest philanthropic foundations in the world—one that routinely doles out funds to curb air pollution—investing indirectly in a gas supply company that was clearly not involved in helping to clean the air.

Piller came into possession of confidential documents that have become known as the Paradise Papers, leaked documents of information from seven of the world's largest philanthropic foundations, and their investments in offshore accounts. The seven were the Bill & Melinda Gates Foundation, Wellcome Trust, the Howard Hughes Medical Institute, the Robert Wood Johnson Foundation, the William and Flora Hewlett Foundation, the David and Lucille Packard Foundation and the Gordon and Betty Moore Foundation. All except for the Gates Foundation were found to be using offshore accounts.

Piller notes that there is also the distasteful nature of investing in offshore accounts even when there are no conflicts of interest. He wonders, for example, if philanthropic organizations should be doing their utmost to avoid paying taxes intended to be used for the public good. And he suggests there is something inherently wrong with such organizations engaging in a practice alongside criminals using the same services to launder their ill-gotten gains. He suggests the time has come for those who support such foundations to demand more transparency.

Explore further: Corporate links of global health foundations may conflict with philanthropic interest

More information: Charles Piller. At arm's length, Science (2018). DOI: 10.1126/science.362.6419.1100

Related Stories

Facebook CEO $45B organization to change charity landscape

December 2, 2015

Facebook CEO Mark Zuckerberg is shaking up yet another sector—the charity world—with his surprise announcement that he and his wife will devote the bulk of their wealth, or about $45 billion, to philanthropic works.

Recommended for you

6 comments

Adjust slider to filter visible comments by rank

Display comments: newest first

TK422
4 / 5 (1) Dec 07, 2018
I don't think the charities themselves have much to hide, but I do have a theory as to what's going on here. Perhaps some executives of various charities might not want the public to know just how much they're getting paid. The way to obscure that would be to use an offshore account.

Also, the presumption is that tax law is actually quite egalitarian about what a charitable cause is. Maybe it isn't. I'm not an expert in tax law, but I do know that many laws have unintended consequences.
Anonym
3 / 5 (2) Dec 07, 2018
The sanctimonious march on! Is there really something "inherently wrong" with these charities using sophisticated investment strategies? Apparently, the researcher believes these charities are cheating the gov't out of its taxes and that harms the public good. Nonsense. The public good would frequently be better served by depriving the politicians of the means to do stupid stuff. Better to shelter the homeless and feed the hungry than to roll out another useless copy of an obsolete weapons system, like, say, an aircraft carrier.
rrwillsj
not rated yet Dec 07, 2018
In general, I agree with the sentiments expressed by the first two commentators.

However, expressing a fake horror at the abuses by politicians is hypocrisy.

If you do not want tens & hundreds of billions of tax dollars wasted on obsolete weapons systems, such as aircraft carriers?

Those logistics, research & manufacturing contracts are spread across the entire United States plus imported materials & for overseas supplies & access to port & transport facilities.

In your State, you could easily find local business or research lab that supports the military-industrial complex.

Not even considering the notorious activities hidden within the "Black Budget".

Your congresscritter votes or avoids being caught voting for or against the proposed funding. Because their perpetual election campaigns count on the kick-backs & other support from corrupt business & union leaders.

So your community? How many jobs, paychecks, neighbors, are you willing to sacrifice?
ukezi
not rated yet Dec 07, 2018
@TK422 You are right. There are a lot of charitable organizations. Like most churches. They may be good but they may be also a way to collect money for the lifestyle of the preacher.
@Anonym There is something fundamentally wrong with evading taxes. After all do you think the government will spend less if they evade or will they rise taxes on the ones that can't evade taxation? Also it's nice of thous rich people to spend money for a good cause. However they have no oversight. They can spend that however they want. If they have a soup kitchen and they don't want non-christian people they can do that. In comparison the government is at least in theory required to treat everyone equal.
@rrwillsj So your argument are the jobs that are created by stockpiling weapons? One could take that money and do something useful with it instead. Like infrastructure or education. I would recon that only a quite small part of that money is actually used for wages.
rrwillsj
not rated yet Dec 07, 2018
ukezi, it would be a wonderment if people, in general, could be counted on to do the "right" thing. Every single person has their own version of what the "right" thing is or should be,

The plutocracy is absolutely certain that they are always doing the "right" thing. Every one around them constantly reassures them of that "truth". Cause every one around them is on their payroll.

Can you honestly claim that your employees or subordinates could ever, bluntly criticize your decisions & errors of bad judgement? Especially when it becomes clear you totally screwed up?

Did you ever forgive them?

Yeah? Well neither has anyone else (real people who actually existed) in the history of the Human Race.

As for that "small part for wages"? A final product, delivered to your hands? The price you paid from inventor to designer to IPO, to raw materials to transport to manufacturer tp distributor to retail chain. All paid wages that were taxed a dozen different ways.
Captain Stumpy
not rated yet Dec 08, 2018
@TK422
Perhaps some executives of various charities might not want the public to know just how much they're getting paid. The way to obscure that would be to use an offshore account
not in the US
https://www.irs.g...sclosure

.

.

@Anonym

Is there really something "inherently wrong" with these charities using sophisticated investment strategies?

not really, except that, once they invest, the investment firm is not subject to full disclosure which is where [part of] the problem lies
that is mentioned in the Science Mag article
The lack of transparency can make it difficult for donors, grant recipients, and the public to reach their own conclusions about whether an offshore investment poses a potential conflict


interesting read
http://www.public...licy.doc

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.