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30 Apr 2020

Reputations in the crosshairs: Why prospect research needs to look beyond wealth indicators

Trust is under siege—again. Two decades ago, The Chronicle of Philanthropy predicted declining trust in charitable organizations, due in part because of scandals. This year, writes the Chronicle’s editor Stacy Palmer, those same issues “… have again become so serious they made our 2020 list.”  Is it a surprise? Not for anyone who’s followed negative buzz dominating news cycles. As a result, development professionals at universities, foundations and other non-profits need to expand their prospect research efforts to include more robust due diligence on potential reputation risks posed by donors.

Scandals disrupt fundraising flows

The fallout from scandals related to non-profits can have lasting consequences. Following media coverage about spending and fundraising practices at the Wounded Warrior Project in 2017, for example, the non-profit saw donations decline by more than $150 million over the following two-year period. Last year, when a UK charity sting revealed that celebrities accepted substantial checks to publicly promote non-profits, a survey found that 70% of UK adults would think twice about donating to an organization that pays famous faces for such support. And those scandals are, in fact, small in comparison to the sagas played out in the media lately—from the celebrity-fuelled college admissions scandal where bribes were disguised as charitable gifts to a variety of organizations scrambling to distance themselves from wealthy donors accused of personal or criminal misconduct.

As MarketWatch noted last fall, “Philanthropy was already in the grip of some serious soul searching, but the revelations about Jeffrey Epstein’s donations to the MIT Media Lab are forcing non-profits to take an even harder look at the ethics of how they raise money.” The director of the MIT Media Lab stepped down after The New Yorker reported that lab officials had tried to disguise convicted sex offender and disgraced financier Jeffrey Epstein’s role in acquiring $7.5 million in donations. The article said that “At MIT, some staff referred internally to Epstein as ‘Voldemort, or he who must not be named.’”

The #MeToo movement has spawned its share of scandals, including accusations that organizations accepted millions donated by New York philanthropist Michael Steinhardt, despite a pattern of sexual harassment going back decades. The New York Times notes that Steinhardt’s name graces New York University’s largest graduate school, a conservatory at the Brooklyn Botanic Garden and a gallery at the Metropolitan Museum of Art. The article reports, “While Mr. Steinhardt has been celebrated for his largess, interviews with dozens of people depict a man whose behaviour went largely unchecked for years because of his status and wealth.”

The opioid crisis has also led to some questions about ethics and charitable donations. In the past two years, at least nine universities around the world accepted donations from the Sackler Foundation. Analysis by the Associated Press shows that these charitable gifts happened at a time when the Sackler family and its company, Purdue Pharma, faced multiple lawsuits for knowingly downplaying the addictiveness of its painkiller, OxyContin.

How deeper prospect research helps identify reputation risk

Critics suggest that sizeable donations like those given by Epstein, Steinhardt and the Sackler Foundation represent a form of whitewashing—financial gifts intended to polish tarnished reputations. And charitable organizations are learning the hard way that such gifts can backfire spectacularly, putting both future financial security and reputations at risk. Yes, huge donations are attractive. Yes, they can generate buzz and inspire other donors. But universities and non-profits need to maintain—and in some cases, rebuild—trust to ensure continued support individual donors responsible for nearly 70% of gifts received. That’s where more robust prospect research using Nexis® for Development Professionals can help.

Nexis for Development Professionals brings together an unrivalled collection of sources in one place to enable thorough prospect research—from foundational basics to risk management musts. When vetting a prospect to assess risk, you can quickly see if a donor prospect (individual or company):

  • Is the subject of negative news, currently or in the past;
  • Has a criminal history, a highly litigious past or pending lawsuits;
  • Is named on sanctions lists, agency watchlists and blacklists, or Politically Exposed Persons (PEPs) lists.

By understanding the volume and context of negative news, for example, you can make informed decisions before bringing on a potentially controversial donor prospect. You can also set up alerts to monitor for emerging risk warning signs, allowing you to get ahead of negative press sooner. Likewise, checking regulator lists can help mitigate the risk that your organization might fall afoul of anti-money laundering or anti-bribery and corruption laws by accepting large donations from improperly vetted donors.

Nexis for Development Professionals can help you verify contact details, understand personal interests and identify wealth indicators so you can find likely donors. But it also empowers you to undertake deeper prospect research to safeguard against potential reputational damage—and subsequent decline in donations—should a mega donor turn into a mega disaster because of unethical conduct.  Is your current prospect research solution up to the task?

Keep exploring:

  1. Learn more about our powerful prospect research platform, Nexis® for Development Professionals.
  2. Get more tips for building better donor lists with prospect research.
  3. Share this blog with your colleagues and connections to keep the conversation going.