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Dirty Money?

May 26, 2009

There is quite a mystery surrounding the $81.5 million donated to fifteen colleges by a donor insisting upon complete anonymity. This mysterious donor has insisted that the recipient schools make no attempt to ascertain her identity.

Recently, I was listening to an NPR interview on the subject. In the interview the “expert,” Melissa Berman, president and CEO of Rockefeller Philanthropy Advisors, hypothesized about the identity of the mystery donor. So far so good.

Then Ms. Berman mad a comment which I found exceedingly absurd. “Any institution would want to be sure they’re not accepting money that was earned criminally,”

I do not understand why the source is of any concern to recipient school. Ms. Berman seems to be making some sort of moral hazard argument. The IRS requires income to be reported “from whatever source derived” this includes criminal activities. Indeed, many “criminals” have been imprisoned for failing to report their revenue from illegal activities. Furthermore, money and property is frequently seized by law enforcement officers when the property is deemed to be related to criminal activities. I wonder if Ms. Berman objects to the government receiving forcibly taking money from individuals it deems to be criminals in order to fund its activities. If there is a moral hazard for schools then why not for the government?

It seems to me that society should prefer that money come from anonymous criminal donors. Consider the worst person imaginable, perhaps a genocidal warlord, wouldn’t it be preferable for his money to be used to educate students rather than to continue to benefit his atrocious practices? It would be quite a different story if the donor was known and would be able to infringe upon the school’s autonomy.

Fourteen of the fifteen schools that received donations were public institutions. This means that much of their funding is forcibly taken from individuals against their will. Why does Ms. Berman not object to the use of stolen funds when these funds are stolen by the government? By donating such large sums of money to these schools this philanthropist has, at least in theory, reduced the burden upon taxpayers.

The bottom line is that many minority student’s will greatly benefit from this individual’s immense generosity and we have no reason to question the source of the funds.

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