An upcoming ruling in a protracted legal battle between Princeton University and an alumnus who claims the school misused the funds his family left it nearly 50 years ago could have repercussions for the way US colleges and other charitable groups raise and spend money from donors.
The case centres on a $35m (17m pounds) donation made in 1961 by Charles and Marie Robertson, heirs to the A&P grocery fortune, to establish an eponymous foundation. William Robertson, the couple’s son, filed a suit against the university in 2002 claiming that Princeton has failed to hold up its end of the deal since the money was given specifically to train students to work for the US government. Mr Robertson wants to be able to spend the foundation’s money somewhere else.
Princeton contends the foundation was created to support the Woodrow Wilson School of Public and International Affairs, which trains students not only for careers in the US government, but for a variety of other policy-related jobs. Princeton further argues that the initial agreement with the donors gave it final say over how the money is spent.
The judge in the case has not issued any decisions yet, but people close to the case say a ruling is imminent.
The case has crystallised a transformation in the fundraising culture of higher education, as philanthropists take a more active role in overseeing their donations.
“Many donors today are treating philanthropy as a business investment”, said Rae Goldsmith, of the Council for Advancement and Support of Education. “They want regular reports and also greater accountability. They are thinking more about donor stewardship over generations.”
Partly in response to the case, donors are increasingly drawing up contracts stipulating exactly what is required of the college, and the consequences if the contract is breached. Colleges, in turn, are sharpening policies to ensure the restrictions and conditions placed by the donor are being met.
The upcoming ruling may set a precedent by helping to define the scope of the trial, such as whether or not Princeton has a fiduciary responsibility—a duty of trust—to the foundation, and whether or not the court has the power to take the money away from the university.
“There is a growing awareness on the part of other colleges and charitable organisations that this case has potential implications for them,” according to Robert Durkee, vice-president and secretary of Princeton.
Perhaps the biggest concern for other institutions is how they interpret “donor intent.” This is central to the challenges facing charitable institutions, of balancing warm relations with donors with control over the spending of donated funds.
Ron Malone, the Robertson family’s attorney, said that colleges are typically not held accountable for the way they spend donor money. “Universities, some more than others, have a tendency to forget about specific intention of the donor, to play fast and loose, and do what they think is the best way to spend money,” he said. Anne Neal, president of the American Council of Trustees and Alumni, said: “Too many alumni donors in the past have given on the basis of a smile and a handshake. This case makes clear that donors must trust, but verify.”