Ethics of Donations Under Discussion

Fundraisers contacted at several universities this week said Harvard should consider carefully whether to accept a $1 million donation made by an agent of the Bank of Credit and Commerce International (BCCI).

Last year, Ghaith R. Pharaon, a 1965 Harvard Business School alumnus, gave his graduate alma mater as much as $1 million on the occasion of his 25th reunion. He has already paid an initial installment of $100,000, according to alumni sources.

The Saudi financier was fined $37 million last month by the Federal Reserve Bank for secretly acting on behalf of BCCI in the takeovers of American banks, and his American assets were seized by the Justice Department.

Business School officials reached yesterday declined comment on the Pharaon pledge, saying that gifts to the school are a private matter.

William H. Boardman, director of capital giving for the University, said that Harvard is conscientious in analyzing each pledge.

"Each case is analyzed individually," Boardman said. "Things are looked at very carefully at all major universities and especially here."

Indeed, administrators at other universities said this week they too examine donation sources closely. At the Massachusetts Institute of Technology (MIT), for instance, fundraiser George Ramonat said his school would "find a way to return the money," if a contribution were made under circumstances similar to the Pharaon case.

Although some fundraisers were reluctant to comment on the Harvard Business School donor, they said the situation must be considered in light of public perception.

"You would want to make a judgement as to whether the public association of the donor to the school would be detrimental in terms of its reputation, ethics and its effect on other potential donors," said Samuel F. Babbitt, senior vice-president at Brown University and director of the school's current capital campaign.

"There is an ethical issue there--there's no question about it," said W. Michael Hoffman, director of the Center for Business Ethics at Bentley College.

Given complicated ethical issues surrounding some donors, there are often ways to compromise rather than return such gifts altogether, Hoffman said.

"Maybe you ought not to name a building after him, but if the guy wants to help your cause, which you think is morally worthy, it might not be inappropriate to take the money," the ethics scholar said.

Others said the ethical line should be drawn along legal boundaries. "Unless there's something which clearly indicates that the money came from something which was clearly not legal, then the university wouldn't step in," said Frederick C. Nahm, a fundraising administrator at the University of Pennsylvania.

Lecturer on Business Administration Joseph L. Badaracco, the coordinator of the ethics curriculum at Harvard Business School, agreed.

"It's not the role of any university to make prejudgments about what courts and regulatory bodies are going to decide," Badaracco said. "In the interim, a large, generous contribution should probably be accepted."

According to Eric Wentworth of the Council for Advancement and Support to Education in Washington D.C., there are no standards for accepting gifts in higher education.

"There are no general practices for reviewing offered gifts," Wentworth said. "There is a presumption that donors have good intentions and that it's good money."

Some Pledges Turned Away

Fundraising officials who have dealt with similar situations to the Pharaon pledge said there have been instances when universities have declined money.

For example, a BCCI pledge offer to the University of Pennsylvania was turned down recently, Nahm said.

BCCI made the offer after several of its officials had been convicted of money-laundering charges in Tampa in 1990, according to Nahm.

Nahm recommended turning down the gift because the Tampa convictions indicated that there was "enough circumstantial evidence that the bank was doing wrong."

BCCI made the offer because one of the senior BCCI officials was interested in economic research at Penn, said Nahm.

At Princeton, Wall Street financier Ivan Boesky pledged money in early 1986 and was indicted later that year for insider trading, according to Ramonat, who previously worked for the school. Soon after his indictment, Princeton rejected his pledge, Ramonat said