Good as gold: Inheriting a trustee seat can pay rich dividends
They share no relatives, by blood or marriage. But the enormous wealth of the late Boston cotton goods dealer Seth Sprague has been as good as an inheritance for Arline Ripley Greenleaf and her family.
Greenleaf's father was an original trustee of a charitable foundation Sprague established in 1939, two years before his death. Her father, before he died, made her mother a trustee. Her mother, in turn, chose Greenleaf to succeed her in the post, which has paid her $700,000 over the last five years even though the foundation is largely managed by a bank.
And, continuing a family tradition, Greenleaf says her daughter will succeed her.
"It's an inherited thing," said Greenleaf, 79, who lives in Milton and, according to property records, also has homes in Duxbury and Maine. She is one of three elderly, well-compensated women on the four-member board who are relatives of trustees from outside the Sprague family. Sprague had no descendants.
That "inherited thing" is common practice at numerous foundations across the country, where trustee positions have become enduring sinecures for members of families who are not related to the benefactors. These hand-me-down trusteeships often go to surviving spouses, children, and grandchildren. Many have little or no foundation experience. And they are often paid handsomely for scant work.
Some experts believe making a trusteeship into a legacy of sorts can compromise a foundation's charitable mission. They say the practice, while not illegal, is ill-advised.
"It is very unfortunate when trustees and directors of foundations treat the office as if it were their own personal property," said Alan L. Feld, a Boston University law professor and specialist in nonprofit law. "Maybe the son or daughter is fully qualified. And being the son or daughter should not disqualify that person from succeeding the parent. But it ought to raise the question whether the relative is as competent as someone they might find outside."
It is also common, but not as controversial, for descendants of foundation benefactors to serve as trustees.
Boston's Amelia Peabody Charitable Fund Trust and Wellesley's Amelia Peabody Foundation -- whose boards include seven children of three former trustees, none of them related to the late Ms. Peabody -- are extreme examples of trickle-down trusteeships. But they are hardly isolated cases.
Patricia M. Dunnington serves with Arline Ripley Greenleaf as a trustee of the $55 million Seth Sprague Educational and Charitable Foundation, a New York-based fund that supports the "well-being of mankind." Dunnington succeeded her husband, Walter G. Dunnington, Jr., on the board when he died in 1999. The post has paid her an average of $123,000 annually for the last three years. A third trustee, Jacqueline de Neuflize Simpkins, is related to an original trustee, Willard Simpkins. Her pay over the last five years: $700,000.
It is unclear from foundation tax returns what duties the three women perform for their pay. The US Trust Co. of New York is the foundation's "perpetual corporate trustee, managing the investment of the foundation's assets and assisting in the distribution of funds," according to a document from US Trust. Dunnington did not return calls to her Manhattan home; nor did Simpkins, who lives in Barnstable.
Family ties have paid off, too, for Mark J. Avery, the 44-year-old son of the late Luther J. Avery, a former trustee of the $264 million May and Stanley Smith Charitable Trust of San Francisco. When Luther Avery died in 2001, his trustee seat was passed on to Mark, who also inherited his father's annual trustee pay of $400,000. Avery profits from the foundation in another way: His law firm, Avery & Associates, in Anchorage, has billed the trust $67,000 in legal work over the last five years, according to tax returns.
Reached in Alaska, Avery refused to answer questions. "I get sick and tired of people wondering about how much I get paid and why," he said.
Then there is the case of Cleveland's $55 million Eva L. and Joseph M. Bruening Foundation, established to support the poor, the elderly, and education. Three of its trustees, none of them related to the Bruenings, inherited their posts when their husbands died.
None of the three -- Marilyn Cunin, 73; E. Lorrie Robertson, 81; and Anne Boykin Blaine, 83 -- had much in the way of foundation experience. But they clearly share a belief in the importance of family ties: After becoming trustees they decided to retain their current compensation, averaging $63,000 a year, but to pay future trustees from outside their families only $6,000.
Cunin, in an interview, said she saw nothing wrong with the new fee policy. The foundation's executive director, Janet E. Narten, and its bank trustee, KeyBank in Cleveland, backed the decision, she said.
A trusteeship was similarly treated like a family heirloom at the Charles H. Dater Foundation in Cincinnati. When the lawyer who helped establish a foundation for the late Charles H. Dater died, the other trustees picked the lawyer's widow to replace him on the board. Dorothy Krone, 78, was paid $70,000 a year plus $9,500 in pension contributions last year for part-time work.
Mrs. Krone's son, Bruce Krone, is also a member of the Dater board. According to a lawsuit filed by Dater's widow that accuses the trustees of plundering the foundation's assets, Bruce Krone, a lawyer, billed the foundation substantial fees for legal and accounting services. Yet he had to pay $1,000 to a tax preparer because he did not know how to complete a foundation tax return, according to the lawsuit.
The legal infighting at the Dater foundation has produced other disclosures.
Quintin Lindsmith, the lawyer pressing the suit against the trustees, has filed a document in court detailing the work of a private investigator he hired to put Mrs. Krone under surveillance. The investigator reported that, over a four-week period, Mrs. Krone worked 90 minutes total for the foundation. According to the foundation's most recent tax return, Mrs. Krone works 15 hours a week.
In July 2002, the Ohio attorney general filed a separate lawsuit charging the Dater trustees with taking excessive compensation. Roger Ruhl, a foundation spokesman, dismissed the allegations, saying all the trustees perform substantial work that justifies their pay. His comments contradict the court document filed by Lindsmith summarizing the surveillance, which concluded that Mrs. Krone spends most of her time "engaging in the enjoyable life of a retired grandmother."
Globe Staff reporters Francie Latour and Walter V. Robinson contributed to this story. Sacha Pfeiffer can be reached at email@example.com.