NOTES

CHAPTER TEN

1. That many of those hailed as philanthropists in the public prints because they have financed foundations have not in their lifetimes shown any love for man in the concrete was pointed out in America's Sixty Families, p. 336; some of them ran their industrial plants under cover of machineguns in the hands of certified gangsters. If there was any philanthropic disposition shown in his lifetime by the late Henry Ford, for example, it has escaped the notice of biographers who, indeed, stress opposite inclinations and explicit expressions. If the word has any meaning at all, Ford, like many contemporaries, was as nonphilanthropic as any common man. Yet he established the largest foundation of all!

2. The Stock Exchange firm of Paine, Webber, Jackson & Curtis in its publication, Charitable Foundations, N.Y., 1956, pointed out that "Since the charitable foundation may remain under the direction of the creator either directly or indirectly, its assets may be used to complement the general financial activities of the creator while still achieving specific desirable charitable goals."

According to the Commerce Clearing House Federal Tax Service, N.Y., July 18, 1962, "Perhaps the greatest advantage [of foundations] is afforded closed corporations. Through the use of a foundation the operator of a closed corporation may be able to keep voting control of the corporation in the family after the death of the principal stockholder. Estate and gift taxes are frequently so high that sale of the stock is necessary in order to pay them, the result being that the family loses control of the corporation. However, the principal stockholder can avoid this result by granting or bequeathing nonvoting stock in the corporation to the foundation. Since such a gift or bequest is deductible for estate or gift tax purposes, the result may be that the taxes will then be small enough so that they can be satisfied out of other estate assets without selling the voting stock." All this is part of standard financial doctrine.

Representative Wright Patman cites (Tax-Exempt Foundations and Charitable Trusts: Their Impact on Our Economy, Select Committee on Small Business, House of Representatives, Government Printing Office, 1962, p. 17) broad legal opinion written by Berman & Berman, tax attorneys, in the Cleveland-Marshall Law Review to this effect:

What can be accomplished by creating a foundation:

  1. Keep control of wealth.
  2. Can keep for the donor many attributes of wealth by many means:
    1. Designating the administrative management of the foundation.
    2. Control over its investments.
    3. Appointing relatives as directors of the foundation.
    4. Foundation's assets can be used to borrow money to buy other property that does not jeopardize its purposes. Thus, foundation funds can be enhanced from the capitalization of its tax exemption.
  3. The foundation can keep income in the family.
  4. Family foundations can aid employees of the donor's business.
  5. Foundations may be the method of insuring that funds will be available for use in new ventures in business.
  6. We can avoid income from property while it is slowly being given to a foundation by a combination of a trust and the charitable foundation.
  7. We can get the 20 per cent charity deduction [now 30 per cent--F.L.] in other ways:
    1. By giving away appreciated property to the foundation, we escape a tax on the realization of a gain.
    2. We can give funds to a foundation to get charitable deduction currently in our most advantageous tax year.
    3. Very often local personal and real property taxes can be avoided.
    4. We can avoid speculative profits.
    5. We can give away valuable frozen assets, white elephant estates, residences, valuable works of art, and collections of all arts.

This general perspective of foundation purposes, as far as the record shows, was most recently prior to the Patman inquiry offered to public view in America's Sixty Families, 1937, pp. 320-73. This is basically what foundations are for, not for improving the world and its people.

A more prevalent attitude among the pseudo-knowledgeable is reflected in a report of an unidentified young sociologist quoted by Dwight Macdonald, p. 20., infra. "The French seem totally unable to understand the Ford Foundation," he wrote from Paris where he was working on a Ford-financed project. "The 'inside-dopesters' are sure of the explanation of such an otherwise incredible institution--to 'cheat' the government out of tax money. This appears to be the residue of some unfortunate American's effort to explain the relationship of our tax system to the rise of the private foundation. [Note: This thesis was set forth in America's Sixty Families, although I cannot be sure I was the "unfortunate American" who carried the tidings to France--F.L.] . . . Some suspect that these foundations are some sort of quasi-official intelligence agencies working for the State Department under cover of scientific respectability." As more recently it has been disclosed in massive detail that foundations as well as universities have widely acted as "covers" for the CIA, it appears that the young sociologist at the time he wrote still had much to learn and the French had their wits about them. Macdonald himself cogently discusses (pp. 42 and 132) the tax-evading features of the foundation and its relation to the tax laws.

The original master source for extended critical analysis of foundations is to be found in the record of hearings and exhibits under Frank P. Walsh of the Commission on Industrial Relations created by act of Congress, August 23, 1912. They are reported in Senate document 415, Vols. VIII and IX, 64th Congress, first session, Government Printing Office, 1916, pp. 7429-8480. Here for more than 1,000 pages were anticipated the broad results found to be the fact in the Patman hearings some fifty years later.

3. For a general analysis of the purely correct empty formalistic character of the so-called social sciences see, for a beginning, Knowledge for What? by one of the leading figures in the field, Robert S. Lynd (Princeton University Press, Princeton, N.J., 1939). For penetrating remarks on the uses of historiography as a propagandist part of what he calls "the American celebration," see Mills, The Power Elite, pp. 330-36, 411, and also his The Sociological Imagination, Evergreen, N.Y., 1961. "The American celebration," in general, uses the Founding Fathers, the Constitution, Daniel Boone, Washington, Jefferson and Lincoln (or whoever is handier) as a background to validate questionable features of the present, which are offered as natural (hence laudable) historical outgrowths. General Motors, thus, is nothing but a later massive institutional version of Benjamin Franklin's interest in applied science and is properly subject to solemn celebration as such. Henry Ford is Daniel Boone writ large in industry. The institutional historians are not financed by foundations to produce books titled "The American Past and Present: A Study in Frightening Contrasts."

4. Foundation Directory, p. 10.

5. Ibid., p. 11.

6. Ibid., p. 17.

7. Ibid., p. 13.

8. Ibid., p. 18.

9. Source for all except the terminal clause of this paragraph: Tax-Exempt Foundations and Charitable Trusts: Their Impact on Our Economy, Second Installment, Select Committee on Small Business, House of Representatives, October 16, 1963, p. 15. Source for concluding clause, ibid., Third Installment, March 20, 1964, p. iii. The Patman reports are issued under the above title at different dates in three installments. There is also a published transcript of hearings under title of Tax-Exempt Foundations: Their Impact on Small Business, U.S. Government Printing Office, 1964. Hereafter references to the first-mentioned series will be to Patman I, Patman II and Patman III. References to the report of hearings will be designated Patman Hearings.

10. The most comprehensive public listing of leading foundations and their financial details are found in Schedule 5, Patman I, pp. 86-113, many very large but with obscure names such as the Surdna Foundation of New York with stated assets of $60,774,209, the Max C. Fleischmann Foundation of Nevada with assets of $69,038,632, the Louis W. and Maud Hill Foundation of Minnesota with assets Of $59,542,735, etc.

11. Patman I, p. v.

12. Patman I, Schedule 2, pp. 38-46.

13. Ibid., pp. 14-15.

14. Ibid., pp. 38-46.

15. Ibid., p. v.

16. Ibid., p. 74.

17. Ibid., p. v.

18. Ibid., p. 4.

19. Ibid., p. 71.

20. Ibid., pp. 114-28.

21. Ibid., pp. 3-5.

22. Ibid., pp. 7-8.

23. Ibid., pp. 8-9.

24. Ibid., pp. 9-11.

25. Ibid., pp. 10-12.

26. Ibid., p. 12.

27. Ibid., p. 16.

28. Ibid., p. 71.

29. Ibid., pp. 129-31.

30. Ibid., pp. 74-77.

31. Ibid., p. 79.

32. Ibid.

33. Ibid., p. 80.

34. Patman II, p. 19.

35. Ibid., p. 20.

36. Ibid.

37. Ibid.

38. Ibid., p. 41.

39. Ibid., p. 43.

40. Ibid., pp. 61-88.

41. Patman III, p. 1.

42. Ibid.

43. Ibid.

44. Ibid., p. 2.

45. The foregoing assets and the quotation are cited ibid., pp. 2-3.

46. Dwight Macdonald, The Ford Foundation: The Men and the Millions, Reynal & Company, N.Y., 1956, most of which appeared originally in the New Yorker in 1955. Mr. Macdonald appends a useful but incomplete bibliography; it does not mention the voluminous report of the United States Industrial Commission, which he discusses briefly in his text (pp. 22-25) nor (necessarily) the later Patman reports. Although he lists some of the periodical literature there is more--for example, an incisively critical article by Abraham Epstein in the American Mercury, May, 1931; nor does he list congressional hearings and debate on the bill introduced in 1910 in the Senate that would have granted a federal charter of unrestricted powers to the proposed Rockefeller Foundation, which was chartered under New York laws in 1913. The federal charter plan was buried largely on the basis of a devastating analysis by Jacob Gould Schurman, president of Cornell University and a Carnegie Foundation trustee; Schurman is quoted in Patman I, p. 74.

47. Macdonald, p. 178. Mr. Macdonald indicated his belief, mistaken, that foundation secrecy was now all in the past. Ibid., p. 159.

48. Patman I, pp. 5-7.

49. Ibid., p. 2.

50. Ibid.

51. Patman II, p. 6.

52. Foundation Directory, 1964, p. 11.

53. Patman I, p. 51.

54. Foundation Directory, 1964, p. 29.

55. Ibid., p. 30.

56. New York Times, April 27, 1966; 28:7.

57. Ibid., September 3, 1964; 10:3-8. More recently the beneficiaries of these eight mysterious foundations were found to be the American Friends of the Middle East, "an anti-Zionist, pro-Arab, organization," and the Cuban Freedom Committee, "sponsor of 'Free Cuba Radio' and certainly the most belligerent anti-Castro radio series broadcast out of this country, whose advisory board includes several galloping right wingers." See Robert G. Sherrill, "Foundation Pipelines: The Beneficent CIA," The Nation, May 9, 1966, pp. 542-44. I would disagree that the American Friends of the Middle East is either anti-Zionist or pro-Arab; it is only pro-oil, pro-finpol.

58. Foundation Directory, p. 35.

59. Ibid., p. 17.

60. Ibid., p. 42.

61. Ibid., p. 41.

62. Macdonald, p. 169.

63. Ibid., p. 16.

64. Ibid., p. 27.

65. Ibid., p. 28.

66. Ibid., p. 29.

67. Ibid., p. 34.

68. See Kolko, The Triumph ..., passim.

69. Abraham Flexner, Funds and Foundations, Harper and Brothers, N.Y., 1952, pp. 125-41.

70. The inception and development of this report are traced by Macdonald, pp. 137-42.

71. Dwight Macdonald gives good brief accounts of all these activities in their early phases.

72. Macdonald, pp. 148-49.

73. Ibid., p. 117

74. Ibid., pp. 46-47. Flexner, in Funds and Foundations, gives an excellent historical summary of the work of the Carnegie and Rockefeller funds.

75. Macdonald, p. 81.

76. See America's Sixty Families, pp. 338-44, for an analysis of the maldistribution of medical advances and an insight into the self-serving character of much medical research on medical problems peculiar or of special interest only to the rich. That the situation is little changed in thirty years can be quickly ascertained from a recent thorough survey, Elinor Langer, "The Shame of American Medicine," The New York Review, May 26, 1966, p. 6. See particularly Langer's authoritative bibliography.

77. Lest the careful reader conclude that this deduction of finpol support on the basis of the endorsement of one man is brashly drawn from too slender a premise, let it be noticed that President Lyndon B. Johnson toward mid-1966 was given unreserved endorsement by some 100 chairmen and presidents of the largest corporations, constituting the Business Council, a private organization that periodically advises the government on what to do (New Times, May 16, 1966; 1:1). In a follow-up dispatch from Washington, the Times (May 22, 1966; IV, 6E, 1-3) reported: "The nation's big business executives, to the surprise of all, including themselves, still love Lyndon Johnson in May as they did a year ago in November. . . . They feel comfortable with him, and they see him often, as they have felt comfortable with no President in their lifetimes; not even General Eisenhower." Widely referred to as "Mr. Johnson's War," Vietnam military intervention nevertheless from the beginning had the virtually unanimous endorsement of Big Business--that is, hereditary finpolitans. In reflection of this top-level consensus neither the Republican Party nor the corporate press showed significant opposition, although the Democratic Party was inwardly torn to its vitals. Cued by the corporate press, the sketchily educated masses always, when polled, preponderantly expressed loyal support for the president, who was widely reported to be agonized at all the destruction of life he was obliged out of a high sense of dedicated duty to be responsible for. Mr. Johnson, the press made clear, suffered far more than the troops in the field or the Vietnamese people and, it is reported, tragically had to resort to copious doses of tranquilizers.

78. Patman I, pp. 133-35.

79. New York Times, August 19, 1967; 42:3.