“Free Grants” Scammers Go to Slammer
The Lorain County, Ohio, prosecutor was ready to go to trial on December 5 against Larry and Carol Hensley for allegedly running a bogus “cash-free grants” program that netted nearly $500,000. Representatives from the Bascom Little Fund, Dayton Foundation, W.K. Kellogg Foundation, Nord Family Foundation, Wexner Foundation and Council on Foundations were lined up to testify.

Just minutes before trial time, the Hensleys changed their plea of innocent to no contest on charges of engaging in a pattern of corrupt activity. Sentencing will take place in late January or early February; each could receive a maximum of ten years in jail and fines up to $17,500.

According to Jonathan Rosenbaum, chief counsel of the criminal division of the Lorain County prosecutor’s office, the Hensleys’ operation was extensive and profitable. The Hensleys ran classified advertisements offering “cash-free grants” in newspapers all over the country and sent out vast numbers of flyers. In one three-month period, says Rosenbaum, the Hensleys ran up an $82,000 postage bill. Their spending paid off handsomely; according to Rosenbaum, the couple pulled in $40,000 a month when the scam was at its peak and bank deposit records suggest that they took in close to $400,000 in total.

The Hensley’s operation appears to have been a classic scam. Victims paid $39.99 for a personalized listing of foundations that were supposedly “anxious to donate money by mail to people who have genuine reasons for needing that money.” When law enforcement authorities compelled the Hensleys to stop using the mail to conduct their business, they switched to a telephone-based operation and continued their work. (See “‘Cash Free’ Grants?,” Foundation News & Commentary, September/October 2000 for background on several such scams.)

Unfortunately, the Lorain County authorities have had little luck in recovering the funds that the Hensleys collected from scam victims, other than $40,000 in cash that was seized from the couples’ home.

Mr. Hensley, 56, was nicknamed the “Sultan of Scams” by the Better Business Bureau of Cleveland, which received 23 complaints about his enterprise, named Cash-Free Enterprises. According to the Plain Dealer, Hensley has been under investigation since 1992 for various scams. One involved selling leads to nonexistent postal jobs; another was an envelope-stuffing scheme.

The Lorain County prosecution is one of a number of efforts underway nationwide to close down free-grant scams. The Council on Foundations has been working closely with the Federal Trade Commission to identify both victims and perpetrators of these schemes. Last summer and fall more than 100 Council members bundled up and forwarded thousands of examples of the letters sent to them by the victims of such scams. United States Postal Inspectors are working toward putting a cash-free grants scam based in East Windsor, New Jersey, out of business.

Although progress is being made toward shutting down these scams, they are a persistent and ever-multiplying problem. According to the Lorain County authorities, the Hensleys got the idea and the materials for their scam from a flyer from the operation in East Windsor.
—Jane Nober

Big Numbers, Part One
Would you like to double your money in a little more than one year? That’s what the Schwab Fund for Charitable Giving did.

The donor-advised fund opened for business in September 1999, and by year’s end, it had received $50 million in donations. By mid-December 2000, the fund passed the $100 million milestone.

The Schwab Fund for Charitable Giving, incorporated as a nonprofit, was set up by the Charles Schwab Corporation, one of the more recent entrants into the marketplace of donor-advised funds bearing the same names as financial services corporations.
—Jody Curtis 

Big Numbers, Part Two
Nearly 15,500 staff people work at American foundations, up from less than 8,300 ten years ago, reports the Foundation Center.

That number will likely continue to grow, according to the center, as the increases in staffing among the nation’s grantmakers didn’t keep pace with the boom in new foundation creation in the last ten years.

Another interesting finding: Although it seems logical that larger and older foundations are more likely to employ staff, this study shows that foundations located in the West and South are more likely to employ staff than their Northeastern counterparts.

Highlights of the report, Foundation Staffing: Update on Staffing Trends of Private and Community Foundations, are posted at www.fdncenter.org.
—Jody Curtis

Big Numbers, Part Three
The Ford Foundation announced its largest single grant ever on November 29: a $280 million, ten-year program to fund up to three years of graduate study anywhere in the world for fellows from Africa, the Middle East, Asia, Latin America and Russia.

The International Fellowships Program will award 350 new graduate fellowships each year, supporting a total of 3,500 fellows, selected for their leadership potential and interest in community development.

An additional $50 million grant will fund undergraduate education in the same regions.
—Paula J. Kelly

Nearly Strangled By the Dead Hand?
The Barnes Foundation near Philadelphia recently received two badly needed $500,000 grants. The first was from the J. Paul Getty Trust and Museum in Los Angeles and the other was from the Pew Charitable Trusts, the first local donor to provide aid.

The grants give the Barnes’ leaders hope that they will be able to avoid closing its art-appreciation school and world-famous collection of works by Cezanne, Renoir, Matisse and other artists.

Last summer the Barnes announced a $15 million emergency fundraising campaign. The gallery feared it would have to close forever when it exhausted its $10 million endowment. Barnes Foundation Executive Director Kimberly Camp called the situation “critical,” adding that unless additional funds came in the foundation wouldn’t be able to meet basic expenses within a year.

The Barnes can rely on about $1.7 million in ticket sales, licensing fees and other income each year, but Camp says the foundation needs a minimum of $2.5 million to operate. Eventually, the Barnes would like to increase income and build a $50 million endowment to meet its needs and expand operations.

For decades, the Barnes’ Merion Gallery was unknown to the general public. Then, in 1994, the paintings went on a world tour. As a result of this exposure, a greater number of tourists started coming to the gallery. The transformation from virtually invisible to world-renowned hiked up the monthly operating costs from $1,000 to $12,000.

Much of the gallery’s financial instability can be traced back to its founder, Albert C. Barnes. Barnes, who made his fortune as an eye doctor, originally established the foundation to teach the appreciation and evaluation of art.

Before his 1951 death, Barnes instilled bylaws to preserve his artistic and educational theories, stating that no works could be sold, lent or copied. Public access to the gallery was limited, and “plain people” could not be charged admission. Hence, the Merion was bound to have financial troubles.

The courts have overturned some of Barnes’ bylaws, allowing the works to go on tour and minimal admission to the gallery to be charged.
The Pew Charitable Trusts grant will help to formally assess the foundation’s artistic holdings. The two grants give the Barnes enough resources to continue fundraising while proceeding with cataloging and evaluating its collection of art. The Getty has also lent expert staff and is lobbying other donors on behalf of the Barnes.
—Julie Howard and Megan Beste

More Philanthropy News
Several philanthropy publications have launched or expanded:

Inspired Giving. Published biannually by the Greater Kansas Community Foundation, this new magazine features stories on exceptional accomplishments in the field of philanthropy. Jan Kreamer, president of the foundation, says the publication was “built on the premise that stories possess an almost magical ability to inspire.”

She hopes the stories included in Inspired Giving will, indeed, motivate readers to give more to charitable causes, too. To order: contact Carol Burton at 816/842-0944, or burton@gkccf.org.

The Nonprofit Quarterly. For five years the New England Nonprofit Quarterly was a small-circulation regional magazine, put out by Third Sector of New England. Now it has a national focus, and a new name to reflect its expanded scope. Ruth McCambridge, director of programs, says she hopes to increase circulation from around 6,000 to 20,000 within a few years. A $500,000 grant from the David and Lucile Packard Foundation will pay for hiring additional marketing and editing staff. Call 800/281-7770 or visit www.nonprofitquarterly.org to get a copy.

PhilanthropyWorksAZ. This bimonthly newsletter debuted about a year ago, aiming to cover philanthropy in Arizona (its tagline calls it “the journal of strategies and resources for Arizona’s caring communities). It is published by a for-profit consulting concern, Philanthropy Works, headed by Susan Lee Walling, editor. Content is aimed at donors, advisors to donors and nonprofit board and staff members. Subscription information is provided at www.philanthropyworks.com.

FN&C Now. Several foundations provided grants to hire an editor to write an e-mail newsletter, FN&C Now, affiliated with Foundation News & Commentary magazine. The idea is to provide timely news briefs between issues of the bimonthly FN&C. “It has no set publication schedule,” says editor Paula J. Kelly, “because our readers encouraged us to send out information as soon as we know it.” Subscriptions are free—request your very own by e-mailing fncnow@cof. org.
—Julie Howard

Fellowships Ahoy
For the first time since it was launched by Bill Drayton in 1982, Ashoka—a global nonprofit credited with pioneering the “social entrepreneur” concept—has selected four U.S. Ashoka Fellows.

The program seeks to invest in individuals with new ideas on correcting international ills by providing them with small cash infusions and links to a professional, global resource network of other international fellows.

The first U.S. fellows and the programs they’ve founded are: Van Jones, Ella Baker Center for Human Rights; Wynona Ward, “Have Justice Will Travel”; J.B. Schramm, College Summit and Carolyn Laub, Gay Straight Alliance of Northern California. Since 1982, the program has invested in more than 1,100 fellows in 38 countries around the world. For more, visit www.ashoka.org.

Similarly, in November the National Center for Nonprofit Boards (NCNB) held its fourth annual International Fellowship for Nonprofit Governance to aid developing countries in building strong nonprofit boards of directors.
—Julie Howard
(Editor’s note: For more on NCNB, see “Not Governance as Usual”.

This Dozen: Not Dirty
Bill Gates is rumored to have spent some time reading Andrew Carnegie’s Gospel of Wealth as he was thinking through his own approach to large-scale philanthropy. Not only are there lessons to be learned from philanthropists who’ve gone before, there are fascinating stories about how their wealth was created and how they give it away.

With this in mind, the Philanthropy Roundtable published a short-and-sweet (85 pages) collection of biographies of a dozen donors last October. Its title: The Foundation Builders. To order, visit www.philanthropyroundtable.org, or call 202/822-8333, fax 202/822-8325 or e-mail orders@ philanthropyroundtable.org. $25.

Consider the Guggeheims. Most of us have heard of the museum in New York, the fellowships, and maybe even the story of how a Guggenheim-backed scientist invented rocketry (it’s one of the “Great Grants” detailed on the Council on Foundations’ Web site, at www.cof.org/whatis/grants/rocket/index.htm ).

Author Martin Morse Wooster colorfully describes how Swiss-born Meyer Guggenheim (1828-1905) made his millions, starting with the classic immigrant’s tale of peddling from a pushcart. Four of his eight sons would later start foundations. After the 1906 San Francisco earthquake, one of them—Daniel—began his philanthropic career by arranging for $50,000 in cash to be hauled up and down that city and “dispersed to the unfortunate.”

All of the givers profiled are men, and all but one (Joseph Jacobs) are no longer living. The others are: Carnegie, two Rockefellers, two Mellons, Henry Ford, George Eastman, Julius Rosenwald, J. Howard Pew, J. Paul Getty and William E. Simon.
—Jody Curtis