Robertson Foundation lawsuit Q&a updated December 18, 2008
May the Robertson family control the Foundation?
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- 22. What does the Foundation’s Certificate of Incorporation say about the purpose of the Robertson Foundation
20. May the Robertson family control the Foundation?No. The Internal Revenue Code imposes several requirements to ensure that a supporting organization such as the Robertson Foundation is overseen by a public charity. In order to retain its classification as a Type I supporting organization, the Robertson Foundation must be “operated, supervised, or controlled by” Princeton University. As the Robertson family has understood for more than 45 years, Princeton’s 4-3 majority on the board makes the Foundation compliant with this requirement of federal law. In addition, Robertson family members are expressly prohibited under federal tax law from controlling the supporting organization. As descendants of a contributor, they are deemed “disqualified persons” under the tax code. Role of Fiduciaries 21. Do the University-designated trustees have an inherent conflict of interest because of their status as fiduciaries of Princeton and of the Robertson Foundation?No. Plaintiffs are claiming that members of the Robertson board appointed by Princeton University have an inherent and disabling conflict of interest solely because these individuals are also trustees or officers of the University. They make this claim despite being fully aware that the Robertson Foundation explicitly is to be “operated exclusively for the benefit of Princeton,” as William Robertson’s and Katherine Ernst’s father, Charles Robertson, personally confirmed to the IRS in 1970. [See: Question 19] They also are fully aware that federal tax law requires a supporting organization like the Robertson Foundation to be controlled by its supported organization (in this case Princeton University), and that the bylaws of the Foundation require that the University-designated trustees include the president of the University and at least two other current or former trustees of the University. Plaintiffs are trying to persuade the court that this governance structure presents a conflict of interest each and every time the University-designated trustees consider transactions such as payments from the Robertson Foundation to the University—payments that are central to fulfilling the charitable purpose of the Foundation. They argue that this “conflict” has existed during each and every year and as to nearly each and every decision since the Foundation’s inception. They argue that, because of this “inherent” conflict of interest, the University-designated trustees of the Robertson Foundation must recuse themselves from voting on any transaction between the Foundation and the University or otherwise satisfy what is known as the “entire fairness” test under governing Delaware law. Under this test, the Robertson family-designated trustees could seek review by the courts of every decision by the Foundation board with which they disagreed, and require the University-designated trustees and the University to demonstrate the “entire fairness” of every expenditure with no deference accorded to the “business judgment” of these trustees or the University. The close relationship between Princeton and the Robertson Foundation, which plaintiffs say creates this so-called “conflict,” is by definition a feature of all Type I supporting organizations. [See: Question 18; Question 19] Since the Robertson Foundation is a Type I supporting organization under federal tax regulations, Princeton is required to control the Robertson Foundation. This structure with these dual roles was explicitly agreed to by all parties at the time the Foundation was incorporated. The donor’s husband, Charles Robertson, never objected to this structure during his 20 years as an active member and president of the board; rather, Mr. Robertson understood, accepted, and endorsed this structure year after year, as did all of the Robertson family trustees for over 40 years until this litigation began in 2002. Under their conflict of interest theory, the plaintiffs want the University-designated trustees to be disqualified from decisions involving Princeton, and they want the Robertson family members to control those decisions. In addition to contravening the requirement that supported organizations must control their supporting organizations, this theory would contravene section 509(a)(3)(C) of the Internal Revenue Code which provides that supporting organizations may not be controlled by “disqualified persons”—including substantial contributors to a supporting organization and their immediate family. For an overview of a number of the key issues in this dispute, see Robertson v. Princeton -- Perspective and Context, prepared by Victoria B. Bjorklund. Ms. Bjorklund is a member of the law firm Simpson Thacher & Bartlett LLP, which, together with Lowenstein Sandler PC, serves as litigation counsel to Princeton University and the individual defendants in the Robertson litigation. Foundation Purposes 22. What does the Foundation’s Certificate of Incorporation say about the purpose of the Robertson Foundation?Paragraph 3 of the Certificate of Incorporation states that the purpose of the Robertson Foundation is to “establish or maintain and support at Princeton University, and as part of the Woodrow Wilson School, a Graduate School....” [Document: Foundation Certificate of Incorporation] From its inception, the Woodrow Wilson School has always been a school of public and international affairs. The Robertson gift allowed the School to significantly expand its graduate program. The School has never been, and never considered becoming, a vocational school narrowly focused on training students for specific positions or careers. The Certificate says that the Foundation-supported School will be a place “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.” [Document: Foundation Certificate of Incorporation] The Certificate states that the Foundation’s objective is to “strengthen the government of the United States and increase its ability and determination to defend and extend freedom throughout the world,” and that the Foundation will do this “by improving the facilities for the training and education of men and women for government service” at the Woodrow Wilson School. The Certificate allows Princeton to use funds from the Foundation not only to maintain and support the graduate program of the Woodrow Wilson School but, specifically, to provide scholarship and fellowship support for the School’s students and to provide “collateral and auxiliary services, plans and programs” that support the School. It expressly contemplates, as well, that foreign students would be educated in the Foundation-supported graduate program. [Document: Foundation Certificate of Incorporation] For an overview of a number of the key issues in this dispute, see Robertson v. Princeton -- Perspective and Context, prepared by Victoria B. Bjorklund. Ms. Bjorklund is a member of the law firm Simpson Thacher & Bartlett LLP, which, together with Lowenstein Sandler PC, serves as litigation counsel to Princeton University and the individual defendants in the Robertson litigation. Download 180.02 Kb. Share with your friends:
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