This is a picture of the 1958 first edition of the book Foundations: Their Power and Influence by Rene A. Wormser. The man in the picture is Rene A. Wormser (It's the only I could find). Wormser was a lawyer who specialized in estate planning during his 38 years of law practice. He was a senior member of the New York law firm of Myles, Wormser & Koch. In his book he details the accounts, testimonies, and work of both himself and Congressman Brazilla Carroll Reece of the Reece Committee that scrutinized the actions and intellectual activities of the large Foundations, such as the Rockefeller Foundation, the Carnegie Foundation, and the Ford Foundation. Wormser was the general counsel to the committee and Reece was the chairman of the committee. This committee examined the outcomes of these foundations to see if their statements to the public corroborated their actions. This scrutiny was necessary because these foundations achieved their enormous wealth because they were tax-exempt. This committee was originally called The Cox Committee but was abandoned by the previous Congress due in large part to the power that these foundations wield; the names of Rockefeller, Carnegie, and Ford are highly respected. B. Carroll Reece knew that he would face many obstacles when he led the new committee with a new Congress calling his investigation The Reece Committee. In the preface to Wormser's book, Reece states these obstacles, "We knew that the influential 'liberal' press, characterized by The New York Times, the New York Herald Tribune, and the Washington Post-Times Herald, would throw its editorial power against the Committee." Reece also knew that this investigation would be the most difficult assignment of his 30 years in the Congress.
Brazilla Carroll Reece of Tennessee served in the House of Representatives for all but six years from 1921 to 1961, and he served as the Chair of the Republican National Committee from 1946 to 1948.
The main reason Reece wanted to continue what the Cox Committee had previously abandoned is that he felt the Cox Committee left several very important questions unanswered, one of which was: to what extent, if any, are the funds of the large foundations aiding and abetting Marxist tendencies in the United States and weakening the love which every American should have for his way of life? (Preface of the book). While he admits that the committee was not blind to all the Foundation's worth-while causes, his main objective was to preserve their constructive functions and to use "administrative action against the use of foundation power for political ends." Tax-exempt status means that the organization has to be non-partisan. It cannot be partisan. In other words, a foundation cannot promote a bias that leans towards a specific political ideology, otherwise you lose your tax-exempt status.
In the introduction to the book, a man named John O'Donnell, a New York Daily News columnist, wrote that the Reece Committee had the "almost impossible task" of telling "the taxpayers that the incredible was, in fact, the truth." On December 21, 1954 he wrote:
"This incredible fact was the huge fortunes piled up by such industrial giants as John D. Rockefeller, Andrew Carnegie, and Henry Ford were today being used to destroy or discredit the free-enterprise system which gave them birth." (7)
As Wormser is noted as saying, "it is not easy to investigate foundations, not even for Congress to attempt it," the same can be said about the Federal Reserve which to this day has never been audited despite former Republican Congressman Ron Paul's effort to pass a bill, "Audit the Federal Reserve" H.R. 1207, in 2009 which Democrats in the Senate later denied. The bill was proposed to enable transparency of the Fed's balance sheet that had ballooned from the 2007 Banking Crisis (which today would sink the Titanic). Where there is a concentration of power, there are even more powerful "friends," and need I say, corruption. As such, the House of Representative of the 83rd Congress created this special committee to investigate these tax-exempt organizations, and became "perhaps the most hazardous career of any committee in the history of Congress"(7). It did survive and complete its objective, however, and the main theme discovered was that these large Foundations were using the largesse for political ends:
"These dangers relate chiefly to the use of foundation funds for political ends; they arise out of the accumulation of substantial economic power and cultural influence in the hands of a class of administrators of tax-exempt funds established in perpetuity. An 'elite' has thus emerged, in control of gigantic processes, which is willing and able to shape the future of this nation and of mankind in the image of its own value concepts." (7, 8)
Part of the problem is that these large Foundations are unchecked by the people. In other words, there is no accountability like a "checks and balance" system that ensures the proper use of funds. And several of these large Foundations have delegated other smaller entities as beneficiaries such as "intermediaries," "clearing houses," and "retailers" which allow them the same tax-exempt status as the large Foundations, yet some with no endowment. In addition, the Reece Committee also examined secondary distributors of grant moneys which are supported by these Foundations and are used to select who ultimately receives the bulk of grant money; for example, The Social Science Research Council, The Institute of Pacific Relations, and the American Council on Education. Wormser continues in the Introduction with a quote from Mr. F. Emerson Andrews who wrote the book, Philanthropic Foundations, and who was an executive of The Russel Sage Foundation:
"Although the foundations that can now be classified as 'general research' probably do not exceed 150 in number, they control more than half the assets of all foundations and are the ones most in the public eye. To a large degree they are the leaders and standard setters for the foundation movement" (9)
It is not surprising that the IRS receives up to 100,000 applications a year for tax-exempt status. This has sprung from the increasing tax burdens on incomes and estates as a way to retain control over capital that would otherwise be lost. With that said, the primary motivation for starting a foundation is tax avoidance, not philanthropy. When you consider the capital gains tax, it would make more sense for a rich person to gift an asset like land, stocks, or other property than for him/her to liquidate his/her assets and pay a capital gains tax and have nothing left to give. The reason Henry Ford and his son Edsel created the Ford Foundation is because if they had paid estate taxes (death taxes) on their enormous fortune, they would not have had enough capital to liquidate to cover those taxes leaving control of their company to public sale. By creating their Foundation, not only did they retain control of their capital but they also maintained control over how that money would be used in philanthropy. Unfortunately, when these fabulously wealthy individuals create a foundation and receive tax-free status to promote partisan ideology, the bulk of the taxes collected from the IRS falls on the middle class.
Another motivation for starting a Foundation, although not necessarily relative to this post, is simply public relations. In an effort to redeem a despised public persona, a Foundation in that person's name can assuage public opinion to some degree. Long before our time, however, the big three Foundations, Rockefeller, Carnegie, and Ford, were also created to "glamorize" their names because these individuals were not particularly charitable.
At the end of these endeavors of creating Foundations, however, is a concentration of power much like a society similar to socialism, and as Wormser states rhetorically, "to protect ourselves against the strictures which such concentrations of power can effect, that we might have to enact legislation analogous to the Statutes of Mortmain which, centuries ago, were deemed necessary in order to prevent all England's wealth from passing into the hands of the church" (13). These dangers of a concentration of wealth and power make necessary the criticisms that such an organization may be involved in a breach of fiduciary trust despite some obvious commendable achievements; for example, the Rockefeller Foundation. There is no doubt the American people can thank the foundation for their support in medicine, science, and public health, however, this alone should not negate further scrutiny of foundation money and its purposes, namely in the fields of education, international affairs, and what is now called the "social sciences." (I elaborated on this new "discipline" of social sciences in my post on the Tavistock Institute of Human Relations. The social sciences are really about behavior science, psychology, and socially engineering the masses, and it truly is not science in the strictest sense of the word because no scientist can observe how the mind influence the body; no scientist can observe our feelings, our thoughts, and why we behave the way we do. And yet, it is in this field where the most damage to our society can be observed). If foundations are pledging their money to the public for the public's benefit in a concept called public dedication (public trusts), isn't is reasonable then that the public has a right to expect these foundations to operate with the highest degree of fiduciary responsibility, especially when the public has to pick up the slack of tax relief these Foundations and their donors enjoy?
In the Reece committee's investigation through discovery and other findings, it's main objective was to prove and expose the political activity, bias, and partisan promotion through a smokescreen of charity, "Its main contribution was to expose instances in which the promotion of political ends, favored perhaps by foundation managers, had been disguised as charitable or educational activity" (14). And their findings were numerous: In several more posts I will highlight the most important points from each chapter because the book is too large and the findings too great and important to include in just one post.
Work Cited:
Wormser, Rene A., Foundations: Their Power and influence, Devin-Adair Company, New York, NY, 1958.
