User:LT/Cox Committee report

82dCongress,2dSessionUnionCalendarNo.801---HouseReportNo.2514SELECTCOMMITTEETOINVESTIGATEFOUNDATIONSFINALREPORTOFTHESELECTCOMMITTEETOINVESTIGATEFOUNDATIONSANDOTHERORGANIZATIONS(PursuanttoH.Res.561,82dCong.)JANUARY1,1953.-CommittedtotheCommitteeoftheWholeHouseontheStateoftheUnionandorderedtobeprintedUNITEDSTATESGOVERNMENTPRINTINGOFFICE2G031WASHINGTON:1953_j.·I.----·------------·____I_.I-- SELECTCOMMITTEETOINVESTIGATEANDSTUDYEDUCATIONALANDPHILANTIROPICFOUNDATIONSANDOTIERCOMPARABLEORGANIZATIONSWHICH-AREEXEMPTFROMFEDERALINCOMETAXATIONBROOKSHAYS,ARKANSAS.ActingChairmanDONALDL.O'TOOLE,NewYorkJRClIAIIDM.SIMPSON,PennsylvaniaAIMEJ.FORAND,RhodeIslandANGIERL.UOOI)WIN,MassachusettsB.OARROI,LREECE.TcnnosseolHAnoLDM.KEELE,GeneralCounsel'THO.MASJ.FEENZY,StaffDirectorEDWARDC.KENNELL.Y,AttorneyJosrEPuC.KIO;R,DirectorofResearchMAIRYE.SEAIUIOIT,ClerkII LETTEROFTRANSMITTALHOUSEOFREPRESENTATIVES,RItashilngton,D.C.,January1,1963.I-on.RAIPR.RTBERTS,ClerkoftheIHouseofRepresentatives,IWVashington,D.0.DEARMn.CLERK:IsubmitherewiththefinalreportoftheSelectCommitteeToInvestigateFoulndationsandOtherOrganizations.BROOKSHAYS,ActingChairman.m UnionCalendarNo.80182DCONGRESSIHOUSEOFREPRESENTATIVESNREPORT£dSessionNo.2514SELECTCOMMITTEETOINVESTIGATEANDSTUDYEDUCATIONALANDPHILANTHROPICFOUNDATIONSANDOTHERCOMPARABLEORGANIZATIONSWHICHAREEXEMPTFROMFEDERALINCOMETAXATIONJANUARY1,1953.-CommittedtotheCommitteeoftheWholeHouseontheStateoftheUnionandorderedtobeprintedMr.HAYSofArkansas,actingchairmanfortheSelectCommitteeToInvestigateandStudyEducationalandPhilanthropicandOtherComparableOrganizationsWhichAreExemptFromFederalIn-comeTaxation,submittedthefollowingFINALREPORT[PursuanttoII.Res.561,82dCong.]COMMITTEEREPORTReportoftheselectcommitteecreatedbyHouseResolution561,Eighty-secondCongress,secondsession,toinvestigateandstudyeducationalandphilanthropicfoundationsandothercomparableorganizationswhichareexemptfromFederalincometaxation.1Thecommitteewassaddenedbythedeath,onDecember24,1952,ofitschairman,IIon.E..Cox,ofGeorgia.Whilehedidnothavetheopportunityofexaminingthisreportinitsfinalform,thedraftofthefirsthalfofthereportwasreadtohimbythecounselforthecommitteeontheeveningofDecember22andheapprovedit.ThedraftsubmittedtoMr.Cox,inmanuscript,wasadoptedbythecommitteealmostunchangedandisincorporatedinthisreportinpracticallytheidenticalforminwhichitwassubmittedtothechairman._------ 2REPORTOFSELECTCOMMITTEETOINVESTIGATEFOUNDATIONSThiscommitteewascreated.anditspowersanddutiesweredefinedbyHouseResolution561,Eighty-secondCongress,secondsession,adoptedApril4,1952.Bythetermsoftheresolutionthecommitteewas-authorizedanddirectedtoconductafullandcompleteinvestigationandstudyofeducationalandphilanthropicfoundationsandothercomparableorganizationswhichareexemptfromFederalincometaxationtodeterminewhichsuchfounda-tionsandorganizationsareusingtheirresourcesforpurposesotherthanthepurposesforwhichtheywereestablishedandespeciallytodeterminewhichsuchfoundationsandorganizationsareusingtheirresourcesforun-AmericanandsubversiveactivitiesorforpurposesnotintheinterestortraditionoftheUnitedStatesandtoreportnotlaterthanJanuary1,1953,totheHouseofRepre-sentatives,ortotheClerkoftheI-louseiftheHousebenottheninsession,theresultsofitsinvestigationandstudytogetherwithsuchrecommendationsasitdeemsadvisable.Thesumof$75,000wasappropriatedfortheuseofthecommitteebyHouseResolution638,Eighty-secondCongress,secondsessiononJuly2,1952.Ofthissumapproximately$25,000willbereturnedunexpended.Inthecourseofitsinvestigationthecommitteehas(1)sentques-tionnairestomorethan1,500organizations;(2)interviewedperson-allymorethan200personsdeemedtopossesspertinentinformation;(3)communicatedbyletterortelephonewithapproximately200ad-ditionalpersons,manyofwhomhaveestablishedthemselvesinposi-tionsofachievementandcompetence;(4)heardthetestimonyofsometwoscorepersons;(5)receivedthepreparedstatementsofap-proximately50otherpersonsdeemedtohavesomeknowledgeofthesubject;(6)studiedandanalyzedthousandsofpagesofanswersoffoundationssubmittedinresponsetothequestionnaires;(7)studiedtheavailableliteratureonfoundations.Thecommittee'sfindingsandrecommendationsarcbaseduponaconsiderationoftheinformationanddataassembledinthemannerandblythemethodsstated.FINDINGSANDCONCLUSIONS1.NUMBEROFFOUNDATIONS,THEIRAGGREGATECAPITALANDINCOMEThecommitteewasunabletoarriveatanydefinitefiguresrelativetothenumberoffoundations,theiraggregateresources,income,andexpenditures.The1950CumulativeListofOrganizationspublishedbytheBureauofInternalRevenuelistsmorethan30,000tax-exemptorganizations.Thenumberofthesewhichcanbeclassedasfounda-tionsvariesaccordingtothedefintionofafoundation.Estimatesrangedashighas32,500underthebroadestpossibledefinition.Forthoseorganizationshavingapermanentendowmentof$50,000ormoreandembarkeduponaprogramofphilanthropicgivingtheestimatewasslightlymorethanathousandwithtotalassetsofapproximately$2,600,000,000andexpendituresofapproximately$133,000,000in1950.Informedsourcesestimatethenumberoffoundationshavingassetsof$10,000,000tobebetween60and100.Thisestimateexcludedcolleges,universities,andreligiousorgani-zations.ThecommitteewasunabletoobtainanExecutiveorder,whichwouldhavepermittedanexaminationofthereturnsrequiredoftax-exemptorganizations.Aconstructiveeffortwhichpromises REPORTOFSELECTCOMMITTEETOINVESTIGATEFOUNDATIONS3tothrowmuchlightonthesequestionsisnowbeingmadebytheAmericanFoundationsInformationService,theresultsofwhichwillbepublishedin1953.Itmustbeborneinmindthatfoundationsrangeinsizefromthegiants,suchastheFordandRockefellerFoundationswithassetsofhalfabillionand300million,respectively,tothosewithno,orprac-ticallyno,permanentendowmentbutwithincomesfromannualorsporadiccontributionsofafewhundredsorafewthousandsofdollars.Thecommitteeknowsofnomannerinwhichevenareasonablyaccurateestimateoftheaggregateassets,a-nualincome,andex-pendituresoffoundationscanbeobtainedatthepresenttimewith-out(1)anExecutiveorderpermittinganexaminationofreturnsnowfiledwiththeBureauofInternalRevenue,pursuanttotheprovisionsofthetaxlaws,or(2)examinationofthesereturnsintheofficesofthevariousdirectorsofinternalrevenuewherethereturnsarefiled.Thecommitteehasreceivedestimateswhichitconsidersreliabletotheeffectthatallfoundationexpendituresaggregateonly3centsoftheannualAmericanphilanthropicdollar.2.RATEOFGROWTHOFFOUNDATIONSDespitethefactthattherearenotablefoundationsinforeigncountriesitmaybesaidthatmodernfoundationsareconfinedlargelytotheUnitedStatesandthattheyaretheproductsofthelast50years.Whiletherehasbeenatremendousgrowthinthenumbersofsmallfoundationsinthepast10yearsitisunlikelythatexistingtaxlevieswillpermitthecreationbyindividualsorfamiliesoflargefoundations(inthesensethattheFord,Rockefeller,andCarnegieFoundationsarelarge)afterthenext10or15years.Thesmallfoundationswhichhavemushroomedinthelastdecadearelargelyvehiclesforthedistributionofpermissibletax-deductiblephilan-thropiesofmodestlywell-to-doindividualsandfamilies.Thereisasignificantgroundswellintheareaofcorporationgivingwithpromiseoftheestablishmentofconsiderablenumbersofsizablefoundationstobeestablishedinthefuturebybusinesscorporations.AnothersignificantdevelopmentistobefoundinthecommunitytrustsorfoundationssuchasthoseinNewYork,Cleveland,Boston,andChicago.3.THERIOLEOFTIIEFOUNDATIONSINMODERNSOCIETYFoundation,arealmostasoldascivilization.Theywereunder-stoodandusedbytheEgyptians,theGreeks,andtheRomans.InoneformoranothertheyhaveplayedanimportantpartinthedevelopmentofthecivilizationofWesternEurope.Theyhavehadtheirupsanddowns.Theyhavebeenregulated,abolished,reestab-lished.TheyremaintodayanimportantandvitalforceinAmericanlifeandtheirinfluenceisfeltinEurope,Asia,andSouthAmerica.Whiletheimportantparttheyplayandhaveplayedinpalliativemeasures-thatis,inrelievingexistingareasofsuffering-mustnotbeoverlooked,theirdominantandmostsignificantfunctionhasbeendisplayedinsupplyingtheriskorventurecapitalexpendedinadvanc-ingthefrontiersofknowledge.Thelargefoundationsarepeculiarlywellsuitedtoplaythisroleanditisdoubtfulifanyotheragency 4REPORTOFSELECTCOMMITTEETOINVESTIGATEFOUNDATIONScouldperformtheirpartaswellastheyhaveperformedandareperformingit.Withtrainedprofessionalstaffsdrawingupontheknowledgegainedthroughdecadesofexperience,withtheabilitytoattractandholdmenofgreatcompetencebothintheirgoverningboardsandtheirstaffs,withlargesumsofmoneytobacktheirjudg-mentandwithcompletefreedomtospendthemoneyoncalculatedrisks,theyareabletodothatwhichneithergovernmentnorindi-viduals,norevensmallfoundations,couldorprobablyshouldattempt.Therecordoftheiraccomplishmentsgivesampleproofoftheirvaluetocivilization.Whiletheimpactofthefoundationsuponmodernsocietycannotbeaccuratelygaged,itissafetosaythattheyhaverenderedgreatandsignificantservicesinmanyfields.Theircontributionsinthefieldofmedicineandpublichealtharetoowellknowntorequireenumeration.Theresultsoftheircampaignsagainsthookwormandyellowfeverhavebeenrepeatedlytoldandextolleduntiltheyhavebecomealmostlegendary.Lesswellunderstoodbutofgreatimport-anceisthepartplayedbyfoundationsinraisingthelevelofeducationinourcollegesanduniversities,and,moststrikingly,ofelevatingmedicaleducationinthiscountrytoapositionofworldeminence.Inthefieldofthenaturalsciences,theircontributionhasbeenequallysignificant.Inthesedayswhenanawarenessoftheneedsfornationalsecurityisuppermostinourmindswecannotfailtoacknowl-edgeourdebttothefoundationsfortheassistanceandsupporttheyhavegiventoallbranchesofthenaturalsciences.Ofrecentyearsthefoundationshavegivenincreasingsupporttothesocialsciences,Thisareaofendeavormightbedesignatedasthestudyofman'srelationshiptoman.Whilethefieldhasoftenprovedcontroversialitisentirelypossiblethatinatimewhenman'smasteryoverthephysicalsciencesthreatenshimwithpossibleexterminationtheeventualrewardfromthepursuitofthesocialsciencesmayproveevenmoreimportantthantheaccomplishmentsinthephysicalsciences.Butthesearenottheonlyfieldsinwhichthefoundationshavegivensupportandaid.Theyhavepressedforwardinthefieldsofinternationalrelations,publicadministration,andgovernment,thehumanities,racerelations,thearts,adulteducation,recreation,andeconomics.4.PRESENTANDFUTURENEEDOFFOUNDATIONSWehavereferred,brieflytothepastaccomplishmentsoffounda-tionsandtheimportanceoftheirroleinmodern-daylife.Itappearsthatthepresentneedforfoundationsisevengreaterthanithasbeeninthepastandthatthereisgreatlikelihoodthattheneedwillproveanincreasingoneinthefuture.DespitethevastsumsbeingpouredbyGovernmentintothevariousfieldsformerlyoccupiedbyfoundationsandintofieldsinwhich-thefoundationsandGovernmentarecotenantsoratleastcoadventurers,theneedforthebasicresearchsolargelysuppliedandsupportedbythefoundationscontinuestoincrease.Everynewheadlandofhumanknowledgewhichiswonopensupnewvistastobeexplored.Aseachmountainpeakofdis-coveryisscaled,vastnewareasarelaidopentoexploration.Asidefromthepressingneeds'ofnationalsecuritythereareever-widening REPORTOFSELECTCOMMITTEETOINVESTIGATEFOUNDATIONS5andlengtheningavenuesofknowledgethatrequireresearchandstudyofthetypeandkindbestfurnishedorassistedbyfoundations.Thefoundation,onceconsideredaboontosociety,nowseemstobeavitalandessentialfactorinourprogress.Onallpointsthusfarraisedtherehasbeensuchamassofprovabledataandsuchaunanimityofopinionamonginformedpersonsthatthecommitteehasnohesitancyinpresentingitsstatementswithoutqualificationorreservationexceptwherereservationswerespecified.tnowapproachesproblemsonwhichwidelydivergentviewsareheldbyresponsibleandinformedpersons.Onsomepointsthecom-mitteehaslittledoubt;onothersconsiderable.6.CRITICISMSOFFOUNDATIONSThecommitteehasstriventogivecarefulattentiontothemajorcriticismsleveledatfoundations.Thesecriticismshavecomefrompersons,groups,andorganizationsofwidelydifferentbackgroundsandfromallpartsofthecountry.Whilesomefewcomplaintshavebeenmotivatedbypersonalgrudgesor-fancifulimaginings,thegreatproportionofthemhavecomefromwell-meaningandsincereidi-vidualsororganizationswhoseintegrity,loyalty,andpatriotismcannotbequestioned.Thecommitteehasearnestlyendeavoredtogivesympatheticconsiderationtoeverycommunication,writtenororal,tofolloweveryleadwhichofferedevenslightpromiseofrevela-tion,toacknowledgealllettersandtelegramsandtoanswerthosewhereanswerscouldbegiven.Thesecomplaintsandcriticisms,viewedbroadly,raisethefollowingquestions:1.Havefoundationfundsbeendivertedfromthepurposesestablishedbythefounders?2.TowhatextenthavefoundationsbeeninfiltratedbyCom-munistsandCommunistsympathizers?3.Havefoundationfundsbeenchanneledintothehandsofsubversiveindividualsandorganizations,and,ifso,towhatextent?4.Havefoundationssupportedorassistedpersons,organiza-tions,andprojectswhich,ifnotsubversiveintheextremesenseofthatword,tendtoweakenordiscreditthecapitalisticsystemasitexistsintheUnitedStatesandtofavorMarxistsocialism?5.Aretrusteesoffoundationsabsenteelandlordswhohavedelegatedtheirdutiesandresponsibilitiestopaidemployeesofthefoundations?6.DofoundationstendtobecontrolledbyinterlockingdirectoratescomposedprimarilyofindividualsresidingintheNorthandMiddle-AtlanticStates?7.Throughtheirpowertograntandwithholdfundshavefoundationstendedtoshiftthecenterofgravityofcollegesandotherinstitutionstoapointoutsidetheinstitutionsthemselves?8.Havefoundationsfavoredinternationalism?9.Towhat-extentarefoundationsspendingAmericanmoneyinforeigncountries?10.Dofoundationsrecognizethattheyareinthenatureofpublictrustsandarethereforeaccountabletothepublicordotheyclothetheiractivitiesinsecrecyandresentandrepulseeffortstolearnaboutthemandtheiractivities?R.Repts.,82-2,vol.4-131 (jREPORTOFSELECTCOMMITTEETOINVESTIGATEFOUNDATIONS11.Arefoundationsbeingusedasadevicebywhichthecontrolofgreatcorporationsarekeptwithinthefamilyofthefounda-tion'sfounderorcreator?12.Towhatextentarefoundationsbeingusedasadevicefortaxavoidanceandtaxevasion?Indealingwiththesequestionsthecommitteerecognizesalltooclearlythatwhichmustbeapparenttoanyintelligentobserver,namely,thatitwasallottedinsufficienttimeforthemagnitudeofitstask.Foursuccessiveroyalcommissionssatoveraperiodof18yearswhileengagedinthetaskofinvestigatingandreportingon28,880charitabletrustsexistinginEnglandwelloveracenturyago.Thiscommitteewasgivenasimilartaskanddirectedtocompleteitsworkinthelessthan6monthsremainingafterfundswereappropriatedforthework.Itisobviousthatthecommitteecouldnotinvestigatethousandsoforganizationswithinthelimitationsofthetimeallotted.Expediencycompelledfocusingattentiononasmallsegmentofthewhole.Individualattentionwasgiventoasmallnumberofthelargestfoundations,butevenhereinvestigationcouldnotbemadewiththethoroughnessthecommitteedesired.Forexample,theRockefellerFoundationalonehasmadealmost30,000grants-approx-imately6,000ofwhichwereintheformofscholarshipsawardedtoindividuals.Thecommitteehasendeavoredtomakeasthoroughasurveyastimepermitted.Itsfindingsandconclusionsmust,underthecircumstances,begeneralratherthanspecific.Ithasendeavoredtobringintothisinquirysuchinformationasitcouldassembleandtoapplytothisinformation,incompletethoughitis,itsbestjudg-ment.Withtheseobservationsthecommitteewillattempttodealwiththefollowingmajorquestionsraisedbycriticismsreceived:1.IavefoundationfundsbeendivertedfromthepurposesestablishedbythefoundersSofaraswecanascertainthereislittlebasisforthebeliefexpressedinsomequartersthatfoundationfundsarebeingdivertedfromtheirintendeduse.Therehavebeeninstancesofsuchdiversionbutwebelievethatthecriticismisunwarrantedinthemain.Ithasbeensuggestedthatthesmallerfoundations,particularlythoseestablishedtoreceivetheallowal)leannualdeductionsofanindividualorfamilyandhavingnoendowmentotherthanthataccumulatedfromyearlycontributionfromtheindividualdonororhisfamily,havesometimesbeenusedtotakecareofmembersofthefamilyoroffamilypensionersbyplacingthemonthepayrollasemployeesorbygrantingtoneedyrelativesscholarships;ifdonebyoutrightgiftoftheindividualcreatingthefoundations,thesewouldnotbedeductiblecontributions.Thatthisispossiblemustbeconceded.Thatitisawidespreadpracticeisdoubted.Neverthelessit isapossibleabusewhichshouldbeguardedagainst.Thecommitteebelievesthatpublicaccountingwouldgofartowardeliminatingsuchabuses.2.TowhatextenthavefoundationsbeeninfiltratedbyCommunistsandCommunistsympathizers?S.Havefoundationfundsbeenchanneledintothehandsofsubversiveindividualsandorganizations,and,ifso,towhatextent?Questions2and3willbeconsideredtogether.TherecanbenoreasonabledoubtconcerningtheeffortsoftheCommunistPartybothREPORTOFSELECTCOMMITTEETOINVESTIGATEFOUNDATIONS7toinfiltratethefoundationsandtomakeuse,sofarasitwaspossible,offoundationgrantstofinanceCommunistcausesandCommunistsympathizers.Thecommitteeissatisfiedthataslongas20yearsagoMoscowdecideduponaprogramofinfiltratingculturalandeduca-tionalgroupsandorganizationsinthiscountry,includingthefounda-tions.TheAmericanCommunistParty,followingtheprogramlaiddowninMoscow,wentsofarastocreateasubcommissionoftheAgit-Prop(Agitation-Propaganda)orCulturalCommissionwhichgavespecificattentiontofoundations.Theaimsweretocapturethefoundationswherepossible,andwherethisprovedimpossible,toinfiltratethemforthepurposes(1)ofdivertingtheirfundsdirectlyintoCommunisthands,and(2)procuringfinancialassistanceforprojectsandindividualsfavorabletocommunismwhiledivertingassistancefromprojectsandindividualsunfavorabletocommunism.AfewsmallfoundationsbecamethecaptivesoftheCommunistParty.HereandthereafoundationboardincludedaCommunistoraCommunistsympathizer.OccasionallyaCommunistmanagedtosecureapositiononthestaffofafoundationorastaffmemberwasdrawnintotheCommunistorbit.Ourinvestigation,hurriedbylackoftime,indicatesthatveryfewactualCommunistsorCommunistsympathizersobtainedpositionsofinfluenceinthefoundations.However,therearesomeunhappyinstanceswherethecommitteeisconvincedinfiltrationoccurred.ThereremainstheuglyunalterablefactthatAlgerHissbecamethepresidentoftheCarnegieEndowmentforInternationalPeace.Andthisdespitethefactthathisnominationandelectioncameaboutthroughtheeffortsofmenofprovenloyaltyandbroadexperienceinpublicaffairs.Sofarasthecommitteecanlearn,duringhistermaspresidentoftheCarnegieEndowment,HisstooknoofficialactiontofurthertheCommunistcause.ThereisalsotheindisputablefactthatFrederickVanderbiltFieldbecamethesecretaryoftheAmericanCounciloftheInstituteofPacificRelations.ThewholeunhappystoryoftheIPR,whichwaslargelysupportedlyfoundationfunds,hasbeensofullyrevealedbytheinvestigationoftheMcCarrancommitteethatthereisnoneedtomakefurtherreferencetoithere.Therehavebeenotherlessdramaticincidents,fewinnumberbutstartlingintheirimplications.ThattheCommunistssucceededinobtainingfromthefoundationsfinancialaidandassistancefornumer-ousmembersandsympathizersseemsconclusivetothecommittee.Intheaggregate,thenumberofsuchgrantsandtheamountsin-volvedarealarming.Proportionately,whenviewedinthelightofthetotalgrantsmade,theyaresurprisinglysmall.DespitethefactthatinallbutaveryfewcasestheseunfortunategrantsweremadepriortothetimethattheindividualgranteeswereexposedbydulyconstitutedGovernmerntagencies,theresponsibilityforproperselectionrestsuponthefoundations,nottheGovernment.Thefoundationsshouldbealerttothedangersofthissituationasaresultofthisexperience.Weareimpressedwiththefact,however,thatmostofthesemalodorousindividualswereselectedunderpoliti-calconditionsverydifferentfromthosethatnowexistandthedeci-sionsweretakeninapoliticalandemotionalclimateverydifferentfromthepresent.Therearecertainotheraspectstobeconsideredwhich,ifnotadefensetothechargeoflaxityonthepartoffoundations,offer,at 8REPORTOFSELECTCOMMITTEETOINVESTIGATEFOUNDATIONSleast,anunderstandableexplanationofwhatoccurred.Ithasbeenpointedoutthatthefoundationsoperateonthefrontiersofknowledge.Thosefoundationsgrantingfellowshipsareseekingintellectualityofthehighestorder.Ithasbeensaidinthesehearingsthatthereisnonecessarycorrelationbetweenpoliticalsagacityandscientificemi-nence,anditalsohasbeensaidthatthereisacorrelationbetweenacademiceminenceandpoliticalnaivet6.Irrespectiveofwhetherthesegeneralizationscanbetakenliterallyitmaysafelybesaidthatmanyindividualsofunusualtalent,particularlyartists,poets,novel-ists,playwrights,andmusicians,areoftennonconformists.ThatthisisapttobethecaseisillustratedbytherecordoftheJohnSimonGuggenheimMemorialFoundation.TheGuggenheimFoundationrestrictsitselftothegrantingoffellowshipstoindividuals.Thisobviouslyrendersitmorevulnerablethanthosefoundationswhichmakeallorapartoftheirgrantstoinstitutionsororganizations,fortheselatteraremoreeasilycatalogedthantheindividual,andwithgreateraccuracy.ThisgreatervulnerabilityisattestedbyanexaminationoftheGuggenheimgrants.Admittedlythisfoundationhasdoneanout-standingjobinitsselectionoffellows.Literallyscoresofitsmorethan2,000fellowshavemadeoutstandingrecords,including3Nobelprizewinners.Yetdespitethisnotablerecord,40ofitsfellowshavereceivedunfavorablementionbyestablishedgovernmentalagenciesand41additionalGuggenheimfellowshavereceived10ormorecitations;thisissufficienttorenderthem,inthecommittee'sopinion,extremelybadrisks.Thefoundations,forthemostpart,havemadenosecretoftheirmistakes,andhavestatedfranklythatinrecentyearstheyhaverecog-nizedtheincreasingneedtobeconstantlyalerttoavoidgivingun-intendedaidtosubversives.Thecommitteebelievesthatonbalancetherecordofthefounda-tionsisgood.Itbelievesthattherewasinfiltrationandthatjudg-mentsweremadewhich,inthelightofhindsight,weremistakes,butitalsobelievesthatmanyofthesemistakesweremadewithouttheknowledgeoffactswhich,whilelaterobtainable,couldnothavebeenreadilyascertainedatthetimedecisionsweretaken.Itfurtherbe-lievesthatthefoundationsarcawareoftheever-presentdangerandareexertingandwillcontinuetoexertdiligenceinavertingfurthermistakes.Whileunwillingtosaythefoundationsareblameless,thecommitteebelievestheywereguiltyprincipallyofindulgingthesamegullibilitywhichinfectedfartoomanyofourloyalandpatrioticciti-zensandthatthemistakestheymadeareunlikelytoberepeated.Thecommitteedoesnotwanttoimplythaterrorsofjudgmentcon-stitutemalfeasance.Thecommitteefeelsthatitshouldwarnfoundationsagainstwhatitconsiderstobeevidenceofawillingnesstodisregarddangersignalsasexemplifiedinthetestimonyofonewitnessgivenbeforethecom-mitteeduringthehearings.Intellectualassurance,ifpushedtoofar,maybecomeintellectualarrogancewithallthedangersitentails. REPORTOFSELECTCOMMITTEETOINVESTIGATEFOUNDATIONS94.Havefoundationssupportedorassistedpersons,organizations,andprojectswhich,ifnotsubversiveintheextremesemseoftheword,tendtoweakenordiscreditthecapitalisticsystemasitexistsintheUnitedStatesandtofavorMarxistsocialism?Thisisthecriticismmostfrequentlymadeagainstfoundationsanditistheoneurgedwiththegreatestvehemence.If,forthepurposeofthisreport,wetreattheterm"subversive"assynonymouswith"communism"or"communistic,"orasapplicabletotheapparatusofcommunism,wecandifferentiatewithgreaterexactitudebetweenthatwhichisdefinitelysubversiveandthatwhichrepresentsmerelyacriticismoftheexistingorderortheadvocacyofachangeintheeconomic-political-socialorderbyconstitutionalmethods.Hereafterweshalltreattheterm"subversive"ascharacterizingtheillegalandtheconspiratorialandasbeingdeeplyinimicaltothiscountry,itstraditionsanditswayoflife.IntheprecedingparagraphswehavediscussedtheeffortsoftheCommuniststocapture,infiltrate,andinfluencefoundations,andhaveindicatedourviewofthemeasureofsuccessorfailuretheireffortsmet.Wenowpasstothequestionofwhetherthefoundationshaveusedtheirresourcestoweaken,under-mine,ordiscredittheAmericansystemoffreeenterpriseeitherbycriticism,ridicule,orpalepraisewhileatthesametimeextollingthevirtuesofthesocialisticstate.Thetestimonydoesnotestablishthistobethecaseastothefounda-tionsystemingeneral.IthasbeenestablishedthatsomefoundationfundshavegonetothesupportoftheCommunistlineortoprovedCommunistsorCommunistsympathizers,butwherethisoccurreditisourbeliefthatitoccurredinadvertentlyorthroughthestealthanddeceitofCommlunist"infiltrees."TotheseinstancesmustbeaddedthosefewisolatedcaseswherefoundationsbecamecaptivesoftheCommunistParty.Whatweareexpressinghereisourbeliefthatthefoundations,withtheexceptionofthecaptivefoundationsnotedabove,havenotdeliberatelythrowntheirsupporttotheMarxistphilosophyandagainstwhatwehavecometoregardastheAmericansystemofcapitalisticfreeenterprise.Inrefutationofourpositionwillbecitedtheinstancesoffounda-tionsupportfortheRussianareastudiesatvariousuniversities,forthetranslationofRussianbooks,forstudiesinthesocialsciencesdeemedsocialisticbysomecritics.Wethinkthetestimonygivenbeforethecommitteemadeclearthedistinctionbetween"study"ofasubjectandthe"teaching"ofit.Theoneembracesobjectiveanalysis.Theothercontemplatestheadvocacyofprinciples.Areastudiessuchasthisshouldbemadeonlyaftermeticulousscreeningofthoseentrustedwiththetaskandunderconstantsafe-guards.Thesamereasoningmustbeappliedtothenewfieldsofinquiryinthesocialscienceswhicharereceivingthesupportoffoundations.Manyofourcitizensconfusethetern"social,"asappliedtothedisciplineofthesocialsciences,withthetenn"socialism."Andsincethesocialsciencesmaybedefinedasthestudyofman'srclation-shiptoman,theproblemofeverymanconsideringhimselfanexpertinthefieldiseverpresent.Fewindividualsfeelthemselvesqualifiedtoexpressanexpertopiniononnuclearfissionorthevalueofisotopes 10REPORTOFSELECTCOMMITTEETOINVESTIGATEFOUNDATIONSbiitmostofuswillnothesitatetoexpressouropinionsonsuchhomelysubjectsasdivorce,thecausesfortileincreaseinthecostofliving,thepsychologicaleffectofsegregation,theincreaseinjuveniledelin-quency,ortheimpactoftelevisiononthestudyhabitsofchildren.Buttheseandothersubjectswithintheorbitofthesocialsciencesarepropersubjectsforobjectivestudyandanalysisuliderconditionsofcontrolwhichgivepromiseofrevealingscientificfacts.Thecommitteeisimpressedwiththetestimonyoftlhefoundationsthattheirareaofusefulnessistosomeextentinrwhattheydescribeascontroversialfields.Inenteringthesefields,theyknowinglyinvitecriticismandtherebyassumethecalculatedrisksincidenttoexploringnewfieldsofknowledge.Theyregardsuchrisksasjustifiedbecauseofthegreatgoodthatmayevolveformankind.Thecommitteefindsnofaultwiththegeneralpolicyofthemajorfoundationsofpro-motingexperimentsdesignedtolelpmentolivepeaceablytogether,solongastheyareconductedwithdevotiontotheAmericantraditionoffreedom.Butthereareadditionalargumentsurgedinfavorofthefounda-tions'workinthesocialsciences.Manystudiesintlesefieldshavebenefitedgovernmentaswellasbusiness.Amongtlesearestudiesofournationalincome,ourmarkets,ourproductivity,ourbusinesscycles,therelationshipbetweentheproductivityoftheworkerandthestandardofliving.IthasbeeInsaidinthehearingsthatthefoundations,bothintheirconceptionandtheirwork,givesupporttothecapitalisticsystem.Itecemnsparadoxicalthatinapreviouscongressionalinvestigationin1915thefearmostfrequentlyexpressedwasthatthefoundationswouldprovetheinstrumentsofvestedwealth,privilege,andreaction,wliletodaythefearmostfrequentlyexpressedistlattheyhavebecometheenemyofthecapitalisticsystem.Inouropinionneitheroftlesefearsisjustified.6.Aretrusteesoffoundationsabsenteelandlordswhohavedelegatedtheirdutiesandresponsibilitiestopaidemployeesofthefoundations?6.DofoundationstendtobecontrolledbyinterlockingdirectoratescomposedprimarilyofindividualsresidingintheNorthandMiddle-AtlanticStates?Questions5and6maybediscussedmoreconvenientlyifgroupedtogether.'Theideathattlieofficeoftrusteeordirectorofalargefoundationisasinecureinvolvinglittlework,enormousprestige,andnotinconsiderablepowerwhichistraditionallydelegatedtothepaidmembersofthestaffseemstohaveobtainedwidespreadacceptance.Inpartthisideaistruelbutinlargerpartitisthechildofmis-information.Thepositionoftrusteeordirectorofoneofthelargefoundationsundoubtedlycarrieswithitdignityandthebadgeofachievement.'hisisduenotonlytotileprestigewhichfoundationsthemselvesenjoyin.thepublicmindb)utalsotothedistinguishedcompanyofmenwhotraditionallyhaveheldthesepositionsoftrustandresponsibility.Butthebeliefthatatrusteehasfewifanydutiesconnectedwithhisofficeiscontrarytoallthatthiscommitteehasbeenabletolearn.Itappearsthatthedutiesandresponsibilitiesoftrusteesofthelargefoundationsareoneroustothepointthattheywouldseriouslyinterferewiththeworkoftleaveragebusinessman.Asagroup,trusteesofthelargerfoundationsaremenofoutstandingachievement, REPORTOFSELECTCOMMITTEETOINVESTIGATEFOUNDATIONS11broadinterests,andprovencompetencewhohavedemonstratedtheircapabilityforandwillingnesstoassumeheavyburdensofwork.Thislatterqualificationisanimportantone,andiswellutilizedbythefoundations.SincemanyofthelargerfoundationshavetheirheadquartersinNewYorkandsinceavailabilityisanimportantconsiderationitisonlynaturalthatthegreatmajorityoftrusteesshouldcomefromNewYorkandnearbyareas.Itisalsounder-standablethattheservicesofanoutstandingmanshouldbesoughtbymorethanonefoundationandthatweshouldthereforefindanumberofindividualsservingontheboardofmorethanonefounda-tion.Despitetheseconsiderations,allofwhicharepersuasive,thecom-mitteefeelsthatawidergeographicaldistributionwouldgofartowardestablishinggreaterpublicconfidenceinthefoundationsandwoulddispelmuchofthedistrustwhichsheltersunderatraditionalfearofWallStreet.ItisalsoentirelypossiblethatasustainedsearchforqualifiedindividualsresidingwestoftheHudsonRivermightassistthefoundationstomaintainthefreshnessofapproach,flexibility,andbreadthofvisionforwhichtheyprofesstostrive.If,asthefoundationsmaintainandthecommitteebelieves,founda-tionsarepublictruststhenthepublicinitswidestsense,includingthegeographical,shouldbefairlyrepresented.Thisobservationleadsnaturallytoaquestionwhichhasgiventhecommitteesomeconcern.Sincepracticallyallfoundationtrusteesservewithoutcompensationandsincethedutiesofthetrusteesofthelargerfoundationsrequireconsiderableexpenditureoftimeandeffort,arenotfoundationtrusteeshipslargelylimitedtotheverywealthy,theretired,ortheacademiccircles?Thecommitteerecog-nizesthatthereareargumentsbothproandconwithrespecttocompensationoftrusteesbutitfeelsthatthequestionposedisworthyofconsiderationbythefoundations.Astothedelegationbytrusteesoftheirdutiesandresponsibilities,theproblemisbasicallythesameonethatconfrontsthedirectorsofabusinesscorporation.Bothmustrelyinlargemeasureupontheirstaffs.Thereisthisoneimportantdifference,intheopinionofthecommittee.Thetrusteesofapublictrustcarryaheavierburdenofresponsibilitythanthedirectorsofabusinesscorporation.Infairnessitshouldbesaidthatintheopinionofthecommitteethisprincipleisfullyrecognizedbythetrusteesoffoundationsandthattheymakeadeterminedefforttomeetthechallenge.7.Throughtheirpowertograntandwithholdfundshavefoundationstendedtoshiftthecenterofgravityofcollegesandotherinstitutionstoapointoutsidetheinstitutionsthemselves?Thllisquestionarisesfromacriticismwhichhascometothecom-mitteefrompersonswellinformedgenerallyandsituatedinpositionsfromwhichastrategicviewofthesituationcanbehad.Thecom-mitteedoesnotconsideritselfsufficientlywelladvisedonthispointtohazardaview.8.Havefoundationsfavoredinternationalism?9.TowhatextentarefoundationsspendingAmericanmoneyinforeigncountries?Questions8and9presentcommonproblemsandarediscussedtogether.Whiletheexpenditureofmoneyinforeigncountriesmight, 12REPORTOFSELECTCOMMITTEETOINVESTIGU'EFOUNDATIONSinandofitself,beconsideredevidenceofabiastowardinternational-ism,thecommitteedoesnotfeelthattillisnecessarilyso.Thosefoundationswhichhavemadesubstantialforeignexpendituresarefranklyandopenlyinfavorofinternationalcooperationalongculturalandeducationallines.TheFordFoundation,forinstance,hasmadethepromotionofpeaceoneofitsmajorobjectivesanditbelievesthiscanbestbeachievedbyinternationalcooperation.Tothatendithasappropriatedlargesumsofmoneyforassistancetocertainforeigncountriesandthebulkofthismoneyisbeingspentintlosecountrieswhereassistanceisbeinggiven.TheofficialsoftlheFordFoundationhavestatedflatlythattheybelievetheinterestsoftileUnitedStatesarebeingadvancedbytheseexpendituresandthatiftheydidnotsobelievetheywouldnotmaketheexpenditures.TheCarnegieEndowmentforInternationalPeaceiscommittedbytheverypurposeforwhichitwasfoundedtointernationalcoopera-tion.Totheextentthatitimplementsitsavowedpurposeitisinasenseinternationalist.Mr.Rockefelleroncesaidthathehadmadehismoneyallovertheworldandthathewisheditspentonbehalfofmankindthroughouttheworld.l'heRockefellerFoundationhasfollowedthefounder'sthinkinginthisrespectandapproximatelyone-thirdofitsgrantsarespentabroad.However,thethinkingbehindthesegrantsdlocsnotappeartobeinternationalistinthesenseinwhichthattermisusuallyused.ThecommitteegathersthattheRockefellerFoundationisthinkinginternationallyintermsofculture,education,andpublichealthratherthanintermsofpolitics.Thequestfortotalelimina-tionofyellowfeverhascarrieditacrossinternationalboundariesandintoothercontinents.Onceonthescentitcaresnotwherethetrailleads.Thesearebutafewinstances.Wethinkitafairstatementtosaythatactivitiesonianinternationalscaleandforeignexpendi-turesinsignificantamountsarelimitedtoonlytheverylargestofthefoundations.Someofthesmallerfoundationscrossinternationalboundariesinconnectionwiththegrantingoffellowshipsandgrants-in-nid.(Consideringthlepictureasawhole,thosefound,lionsoperatingonaninternationalscaleareveryfewinnumber,butbecausetheyarewellknownandtheirexpenditurescomparativelygreat,theattentionfocusedontheirforeignactivitiesisdisproportionate.Thosefounda-tionswhiichareconcernedwithinternationalismalongpoliticallinesappeartocentertheiractivitiesaroundprojectswhichsupporttlheGovernmentpolicyofparticipationinUnitedNationsactivities.Allfoundationsdenyparticipationinpoliticsorpoliticalpropaganda,T'lhecommitteebelievesthattheseinternationalactivitiesandforeignexpendituresoftlefoundationsaremotivatedchieflybyconsiderationofthewelfareoftheAmericanpeopleandassuchareentirelypraise-worthy.10.Dofoundationsrecognizethattheyareint(henatureofpublictrustsand(arethereforeaccountabletothepublicordotheyclothetheiractivitiesinsecrecyandresentaulrepulseeffortstolearnaboutthemandtheiractivities?Allfoundationsquestionedhave,withoutexception,statedthattheyconsiderthemselvestobepublictrusts.Atthatpointunanimityceases.Thelargerfoundationstakethepositionthataspublictrusts REPORTOFSELECTCOMMITTEETOINVESTIGATEFOUNDATIONS13theyareaccountabletothepublicandthatthepublicisentitledtoknowindetailabouttheirresources,income,expenditures,personnel,andprograms.Statedinthewordsofoneoftheirtrustees"founda-tionsshouldnotonlyoperateinagoldfishbowl-theyshouldoperatewithglasspockets."Inshortthelargerfoundationsfavorpublicaccountabilityandpublicaccounting.Tothisendmostofthelargerfoundationspublishdetailedannualreportswhicharegivenwidedistributionamongthevariousmediaofmasscommunication,publiclibraries,schools,andcolleges.Ontheotherhand,manyofthesmallfoundations,particularlythosedesignedtoreceivethedeductiblecontributionsfromindividualsandprivatelyownedcorporations,opposepublicaccountingonthegroundthattheydonotNwishthepublictoknowtheamountofcon-tributionsmadebythedonorandhisfamily,orbycorporationsownedorcontrolledbythedonor.Toalesserextentmanyofthesmallerfoundationsopposepublicdisclosureoftheirexpenditures.Theyarguethatpublicdisclosureofcontributionsandexpenditureswillcausetheabandonmentofmanyofthesmallfoundationsnowinexistenceandwilldiscouragetheformationofnewsmallfoundations.Thecommitteerecognizesthatpublicdisclosureofthenamesofcontributorsandtheamountscontributedtofoundationsmightresultinanunfortunatecurbonphilanthropicgiving.Itdoesfeel,howeverthatsuchinformationshouldbemadeknowntotheBureauofInternalRevenuewhereitwouldalsobeavailabletotheappropriatecom-mitteesofCongress.Itfeelsalsothatfullplul)licdisclosureshouldbemadebysuchorganizationsofallgrantsmadesothatthepublicwillbeinapositiontodeterminewhethertax-exemptmoneysarebeingusedforthepurposesforwhichtheseorganizationswerecreated.11.Arefoundationsbeingusedasadevicebywhichthecontrolofgreatcorporationsarekeptwithinthefamilyofthefoundation'sfounderorcreator?12.Towhatextentarefoundationsbeingusedasadevicefortaxavoid-anceand(taxevasion?Thecommitteeregardsquestions11and12asmattersforthecon-siderationoftheCommitteeonWanysandMieans.Itthereforehasmadenoattempttofindtheanswerstothesequestions.WefeelthequestionsareofsufficientimportancetowarrantinquirybytheWaysandIMeansCommiitteeandthiscommitteewishestomakeitsfilesavailabletotheWaysandMeansCommlitteeifthelatterbelievestheywillbeofassistancetoit.Thecommittee'srecommendationsareasfollows:1.Publicaccountingshouldberequiredofallfoundations.Thiscanbestbeaccompllishedl)vamendmentoftheexistinglawsinsub-stantiallytheformherewithsubmittedasappendixA,towhichwedirecttheattentionoftheEighty-thirdCongress.2.ThattheWaysandMeansCommitteetakecognizanceofourfindingtliatthemaintenanceofprivatesourcesoffundsisessentialtothepropergrowthofourfreeschools,colleges,churches,founda-tions,andothercharitableinstitutions.Werespectfullysuggestthattilecommitteereexaminepertinenttaxlaws,totheendthattleymaybesodrawnastoencouragethefree-enterprisesystemwithitsre-wardsfromwhichprivateindividualsmaymakegiftstothesemerito-riousinstitutions. 14REPORTOFSELECTCOMMITTEETOINVESTIGATEFOUNDATIONSTheCommitteehasreceivedmaterialassistancefromnumerousGovernmentagencies,andespeciallyfromtheBureauofInternalRevenue,theLibraryofCongress,theCommitteeonUn-AmericanActivities,theMcCarrancommittee,theOfficeofEducation,theBankingandCurrencyCommittee,theCommitteeonLaborandEducation,andtheFederalBureauofInvestigation.Thecommitteewishestoacknowledgethecooperationaffordeditbythefoundations.Therehasbeennoinstanceofobstruction,de-layorresentmentonthepartofthefoundations.ThecommitteewasfortunateinsecuringtheservicesofHaroldM.Keele,ofChicago,asgeneralcounsel.Uponhisapprovalbythecommittee,Mr.KeelearrangedtodevotehisfulltimetothisstudyandhasrenderedanoutstandingserviceindirectingthesurveysandlegalinquiriesnecessarytocarryoutthemandateofCongress.Thecommitteeappreciateshisdevotiontothistaskandtheexcellentservicewhichhehasrendered.Thecommitteedesirestogiverecognitiontotheableandunre-mittingworkofthefollowingmembersofitsstaff:ThomasJ.Feeney,staffdirector;EdwardC.Kennelly,attorney;JosephC.Kiger,directorofresearch;MaryE.Searight,clerk;EdithM.Knight,administrativeassistant;RussellMcFarland,investigator;RogerH.MuddandWilliamH.Snape,Jr.,researchassistants;SarahJaneBillingsley,MaryL.Taylor,andiClarenceA.McGillen,Jr.,clericalassistants.Theforegoingreportisrespectfullysubmittedthis1stdayofJanuary1953.BROOKSHAYS,ActingChairman.DONALDL.O'TOOLE.AIMBJ.FORAND.RICHARDM.SIMPSON.ANGIERL.GOODWIN.B.CARROLLREECE.(Aspointedoutandstressedinthisreport,theselectcommitteehashadinsufficienttimeforthemagnitudeofitstask.AlthoughIwasunabletoattendthefullhearingIfeelcompelledtoobservethat,ifamorecomprehensivestudyisdesired,theinquirymightbecontinuedbytheEighty-thirdCongresswithprofitinviewoftheimportanceofthesubject,thefactthattax-exemptfundsinverylargeamountsarespentwithoutpublicaccountabilityorofficialsupervisionofanysort,andthat,admittedly,considerablequestionableexpenditureshavebeenmade.-B.CAnnROLREECE.)APPENDIXAANACTToprovideforpublicaccountabilitybytaxexemptorganliatlons,andotherpurposesBeitenactedbytheSenateandHouseofRepresentativesoftheUnitedofAmericainCongressassembled,ThatthisActmaybecitedisthe"PublicAccountabilityActforTax-ExemptOrganizations,"andThatSection153oftheInternalRevenueCodeisherebyamendedtoreadasfollows:"SECTION153.InformationRequiredFromCertainTax-ExemptOrganiza-tionsandCertainTrusts."(a)CznTAINTAX-EXFMPTORGANIZATIONS.-Everyorganizationdescribedinsection101(6)whichissubjecttotherequirementsofsection64(f)shall