Fact Sheet

The Issue: Whether a charitable organization, such as a college, when it accepts a gift for a specific purpose, should be able to use that gift for other purposes without the express approval of the donor, the donor's legal heirs or a court order.

Background: In 1961, Charles (Princeton ’26) and Marie H. Robertson donated 700,000 shares of A&P stock – valued at $35 million – to create a Foundation whose sole purpose, according to the Foundation charter, was to “strengthen the Government of the United States and increase its ability and determination to defend and extend freedom throughout the world by improving the facilities for the training and education of men and women for government service.” In pursuit of this, the Foundation’s money was to be used to “establish or maintain and support [at Princeton University, as part of the Woodrow Wilson School of Public and International Affairs] a Graduate School, where men and women dedicated to public service may prepare themselves for careers in government service, with particular emphasis on the education of such persons for careers in those areas of the Federal Government that are concerned with international relations and affairs.” (Composite Certificate of Incorporation of The Robertson Foundation, July 26, 1961).

The University understood from the beginning that the donors’ intent, in making the largest gift in Princeton’s history and the largest anonymous gift in the history of higher education, was to use the graduate program of the Woodrow Wilson School (WWS) to increase the flow of talented men and women into careers in government service, especially in those areas of the Federal Government that are concerned with international relations and affairs.  Now that the donors have passed away and Princeton has been caught with its hand in the Foundation’s cookie jar, however, Princeton denies that the donors intended any such thing, and even denigrates such a mission as “exceedingly narrow” and “essentially a training program for the foreign service.”  Indeed, Princeton now contends that the real mission of the Robertson Foundation is simply to support the graduate program of the WWS, and that anything that the University believes has a tendency to make the WWS and surrounding departments more “intellectually vibrant” is fair game for Foundation spending, whether the Family Trustees like it our not.

The Robertsons, placing their personal trust in the integrity of Princeton University, decided that the Board of Trustees of the Robertson Foundation would be comprised of four University-Designated Trustees and three Family-Designated Trustees.

Between 1990 and 2003, Princeton’s annual charges to the Foundation increased from $4.4 million to $23.8 million (and are more than $30 million today). During the same period, however, the School did a progressively worse job of placing Masters in Public Administration (MPA) students in the center of the Foundation’s target. Even though Princeton spent more than $195 million of the Foundation’s money during this period, it placed only 86 out of 885 MPA graduates in first jobs in the federal government in international relations. Put bluntly, each such placement cost the Foundation approximately $2.7 million per student.

As the result of discovery in the litigation, the Robertsons have learned that Princeton has diverted nearly $200 million of the Foundation’s funds to the University’s general fund and to other areas of the University such as the economics department.  In addition, Princeton has received an investment return of hundreds of millions of dollars on the money that it has saved by improperly using Foundation funds for its own needs.

The Remedy the Plaintiffs Seek: The Robertsons have asked the Court to order the Universi ty to pay back all monies that it has wrongfully diverted from the Foundation, to pay the Foundation the University’s investment return from such diversions, and to “account for all of its expenditures of Foundation funds so that the Cour t can determine whether such expenditures are consistent with the terms of the restricted gift.”  They have also as ked the Court to sever Princeton’s relationship with the Foundation so that the Foun dation’s funds will be truly dedicated to graduate education and training for government service, particularly for fede ral government careers in international affairs, as Charles and Marie Robertson always intended. In addition, they have asked the Court to reverse the university’s improper takeover of the Robertson Foundation’s investment portfolio.

Why You Should Care: 1) This is one of the largest and most closely watched “donor intent& rdquo; lawsuits in U.S. legal history and is likely to set a precedent that will affect the way all U.S. nonprofits use “ restricted” gifts. 2) Princeton’s actions and attitude, and those of certain other high-profile nonprofit institutions accused in the recent past of misusing designated contributions, have eroded public confidence in the nonprofit sector. The message here is simple: If one of America’s premier universities disregards a major donor’s wishes and instructions, why should we expect other charitable/nonprofit organizations to handle donations with greater care? 3) Princeton& rsquo;s failure to fulfill the mission of the Robertson Foundation and its misappropriation of Foundation funds has not only harmed the Robertson Family, the Robertson Foundation, and Princeton University, it also has harmed the American people by denying the federal government a potentially large pool of intelligent and talented individuals who should have been ready to step into – or at least compete for – career positions in the U.S. diplom atic corps and other departments and agencies of government involved in international relations and foreign affairs.

Case History: On July 17, 2002, the descendants of Charles and Marie Robertson and all of the Family-Designated Trustees of the Robertson Foundation filed a lawsuit against Princeton University and the University-Designated Trustees of the Robertson Foundation.

In the original complaint, the plaintiffs charged that the University-Designated Trustees of the Robertson Foundation – and through them Princeton University – have:

·      Ignored the intent of donors Charles and Marie Robertson, by failing to honor the Robertson Foundation’s sole mission (as stated above).
·      Ignored the intent of donors Charles and Marie Robertson by secretly using Robertson Foundation funds for projects unrelated to the aforementioned goal.
·      Ignored the intent of donors Charles and Marie Robertson by taking over control of the Robertson Foundation endowment, thereby commingling Robertson Foundation assets with those of the University, and again violating their express agreement with the donors.

In a subsequent amended complaint, filed in New Jersey Superior Court on November 12, 2004, the plaintiffs expanded their charges, alleging that Princeton has:

·      Wrongfully spent more than $100 million of the Robertson Foundation’s money on programs, projects, salaries, bonuses, buildings, equipment and “overhead” costs that have little or nothing to do with the Robertson Foundation mission.
·      Engaged in an elaborate cover-up scheme, involving several Princeton administrations, to hide the improper spending.
·      Similarly misused other donors’ gifts in what appears to be a systemic university-wide “pattern and practice of diverting [donations] from their intended purpose.”

In January 2006, the estimate of more than $100 million in improper spending was updated, and now stands at approximately $200 million. In two briefs asking for partial summary judgment in the case, accompanied by thousands of pages of newly released evidence, attorneys for the Robertson family disclosed that:

·    A detailed analysis of Princeton expenditures performed by PricewaterhouseCoopers placed the amount of improper spending at $207 million.  The present value of those diverted funds approximates $500 million.
·      During the 1990-2003 time period, Princeton spent more than $195 million of the Robertson Foundation’s money and 886 students completed the Foundation-funded graduate program, but only 86 of these students took “first jobs” with the federal government in areas concerned with international affairs.
·      When all program graduates are included, the picture is even worse, with the most recent Wilson School directory showing that just 5 percent of all active graduate-program alumni hold federal government jobs related to international relations. More than twice that number – 11 percent – work for foreign governments and international organizations and 44.3 percent for private corporations, the directory showed.

·          Of the $195 million-plus in Princeton expenditures during this period, just $26 million was devoted to instruction, while $32 million went to research (most of it unrelated to the Robertson Foundation mission), $50 million was spent on construction, and $83 million was used to pay administrative and overhead costs, much of it padded or bogus.