Outrageous! Charity Chiselers

Nonprofit execs are getting big bucks and big perks, all on the donor’s dime.

Serving the Public Good?

When Paul C. Cabot, Jr., threw a $200,000 wedding for his daughter in 2001, the money to pay for it came from the Paul and Virginia Cabot Charitable Trust, which was established to fund worthy causes. Cabot was a trustee of the foundation and earned millions in salary from it over the years, but apparently that was not quite enough. So when his daughter's nuptials arrived, he gave himself a $360,000 raise -- money, he later admitted, he intended to put toward the posh Boca Grande, Florida, wedding.

And what about those worthy causes? According to a Boston Globe investigation, from 1998 through 2002, during which the foundation paid him more than $5 million, Cabot steered only about $2 million to charity. Ultimately he reached an agreement with the Massachusetts Attorney General's office to repay the foundation over $4 million.

The Cabot Charitable Trust is one of tens of thousands of nonprofits that have promised to serve the greater good in return for tax-free status. In other words, you and I subsidize the work of these organizations to the tune of billions of dollars in lost tax revenue; misspent resources don't serve the public good.

The high-profile scandals at companies like Enron and Tyco led Congress to pass laws that increased the transparency of corporate finances and made CEOs liable for company financial statements. While some salaries and perks are still out of control, shareholders are now demanding closer scrutiny of corporate bigwigs.

That leaves just one category of business that has managed to escape all effective oversight: the big-money world of nonprofit charities and foundations. While the vast majority of nonprofits (known as 501C3s, for the section of the tax code that covers them) aren't abusing the trust we've placed in them, an appalling number act more like not-for-profit profiteers -- with directors whose salaries consume huge chunks of their budgets, and executives siphoning off tax-free charity dollars for country-club memberships and fancy vacations.

According to The Chronicle of Philanthropy's 2005 annual survey of 226 nonprofit organizations, 61 reported more than $100,000 in "fringe benefits," and 20 staff members made over $1 million each.

People in the nonprofit world say you need to pay top dollar for top talent. Former Red Cross president and CEO Marsha J. Evans managed 36,000 employees and a $3 billion budget, for which she earned $450,000 in 2004. Fair enough.

But a lot of salaries are impossible to justify. For instance, the CEOs of six charities that are "low rated" by the watchdog group Charity Navigator -- meaning they devote less than 60 percent of their budgets to programs and services -- earn more than $350,000. That includes Wynton Marsalis, who earns about $800,000 as artistic director of New York's Jazz at Lincoln Center.

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