Backhanded Charity & The Pro-Big Business Climate

"Boone Pickens, the often controversial and always colorful Texas oilman turned investor, took advantage of a temporary tax break to make a gift that propelled him into the ranks of the nation's top philanthropists last year. But what Mr. Pickens gave away with one hand he continues to control with the other.

At the end of the year, he gave $165 million to a tiny charity set up to benefit the golf program at Oklahoma State University, reaping Mr. Pickens a tax deduction. Records show that the money spent less than an hour on Dec. 30 in the account of the university's charity, O.S.U. Cowboy Golf Inc., before it was invested in a hedge fund controlled by Mr. Pickens, BP Capital Management."

Gee... Is this really charity?

'It's all his money, and he's on the investment committee' of Cowboy Golf, said Mike Holder, the university's athletic director and former golf coach, who is on the board. 'If a person's making a gift of that size, he can stipulate what he wants it invested in.'

Not according to the IRS... If Pickens is claiming a tax deduction, the gift must be given in fulfillment of the charity's mission statement that qualifies it for the not-for-profit status under Section 503 of the Internal Revenue Code.

Asked whether investing in BP Capital had been a condition of Mr. Pickens's gift, Mr. Holder said no. 'That was my decision,' he said. Lawyers said that even though Mr. Pickens still had investment power over the gift, the transaction appeared to be legal under federal law.

The key phrase is "appeared to be legal." I would challenge that legal opinion and argue that these lawyers are operating under the "it's all legal unless you get caught" theory of the case. If someone with legal standing were to seek a ruling from the IRS or the state agency that regulates that charity, we might find a different opinion and ruling.

'Sadly, it's another case of a rich man manipulating charity for his own benefit,' said Marcus Owens, a lawyer who formerly headed the division of the I.R.S. that oversees tax-exempt groups.

Why give it away to someplace that might exercise real control over it?