A Look at Artist Foundations

I received many comments about yesterdays post regarding the Twombly Foundation lawsuit for alleged misconduct in billing.  One of the main questions I received was do we know who the appraiser was who valued the Twombly works ("The suit said that Mr. Lerner and Mr. Saliba worked together in 2012 to have Twombly’s artwork in a separate trust appraised at a sharply inflated value of more than $1 billion.")  I do not have that information, perhaps it is listed in the lawsuit which was filed in Delaware.

Bloomberg takes a look at the rise in artist foundations along with accusations of misconduct and unjustified fees.

Bloomberg reports

How did the artistic legacies of Motherwell, Rauschenberg and Twombly turn into the gunfight at the O.K. Corral?

The philanthropic mood at some artist-endowed foundations, a fast-growing niche among charities, has given way to rancor rife with accusations of salaries too high and fees unaccounted for or unjustified. Current or former trustees of at least three foundations have embroiled the nonprofits in legal actions.

“The private foundation world is a wild, wild west,” said Trent Stamp, executive director of the Los Angeles-based Eisner Foundation and founding president of Charity Navigator, which evaluates nonprofits. “There’s an opportunity for great abuse.”

Almost half of the approximately 300 artist-endowed foundations in the U.S. were formed from 1996 to 2005, according to a study by the Aspen Institute. Assets more than tripled in that decade, and the top 127 reported having a combined $2.7 billion as of 2008.

Set up by an artist to support favorite causes, the foundation’s net worth generally comprises liquid assets and artworks. A board of directors, some appointed by the artist, oversees the operation. Donors receive a tax deduction of as much as 39.6 percent. Some of these operations focus on making grants. Others engage as well in direct charitable work such as research, public education, conservation and exhibitions.

Self-Reporting

Most private foundations play by the rules, said Pamela Mann, chairwoman of the tax-exempt organizations group of the law firm Carter Ledyard & Milburn LLP. Spotting ones that don’t isn’t easy, she said, because the Internal Revenue Service relies on self-reporting.

Red flags include high executive pay and high administrative expenses, she said. On its website, the IRS calls pay reasonable when it reflects “the value that would ordinarily be paid for like services by a like enterprise under like circumstances.”

Source: Bloomberg