NCPA - National Center for Policy Analysis


January 19, 2005

State attorneys general have over-extended their legal authority by prosecuting cases involving private companies, foundations and nonprofit groups, says the Capital Research Center (CRC). Indeed, much of the involvement is politically or ideologically motivated.

Martin Morse Wooster, a visiting fellow at the CRC explains that class action lawsuits often produce settlements that require companies to donate to politically favored foundations. Moreover, charities and nonprofits are often unfairly targeted for financial misdoings. For example:

  • The class-action lawsuit against "big tobacco" produced a settlement which required tobacco companies to contribute to the newly established American Legacy Foundation, a fiercely anti-tobacco advocacy group.
  • In 2003, New York's Attorney General filed suit against the former chairman of Qwest; the chairman agreed to settle, but was forced to donate to the AG's own choice of nonprofits: the Girl Scouts of America and the Metropolitan Museum of Art among them.
  • Texas' Attorney General filed suit against the former president of a family charity, the Florence E. King Foundation, charging that he paid "excessive" salaries to foundation staff; the president and a former secretary were ordered to pay $10.5 million in punitive damages.
  • In Illinois, the Terra Museum was forced to name one of the Attorney General's campaign donors (who forked over $250,000 to the campaign) to its board; when the museum tried to leave Chicago, the AG threatened to file a lawsuit against them.

Nonprofit organizations are considered private organizations serving the public interest. Indeed, they have the responsibility to report their income and expenses to donors in a prompt and accessible manner. However, as private organizations, they should be able to decide how much they pay their employees. Moreover, attorneys general should get back to the business of fighting fraud, instead of imposing their ideology and political agendas on society, says the CRC.

Source: Martin Morse Wooster, "State Attorneys General: Policing of Politicizing Private Philanthropy?" Foundation Watch, Capital Research Center, October 2004.


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