Why do bad things happen to good charities? In the fundraising arena, undue influence, poor judgement and lack of courage all play a role-and that's just for starters, according to Eli Jordfald and Joyce Mitchell-Antoine.

They presented a teasingly-titled session, "Shredded Files, and Beach Homes, and Red Corvettes...Oh My!" at April's international conference of the Association of Fundraising Professionals in Vancouver. The stories, all true, went from bad to worse. But for every ethical lapse, the duo offered the guidance of written codes, the standard of personal vs. public gain, and the compelling question, "Would you want your mother to read this in the newspaper?"

Grey, black and blue

Suppose you are the CEO of a domestic violence centre, and the board chair's wife discloses to you that her husband is abusive. She offers to show police reports as proof. What should you do?

1. Call a meeting of key board members to discuss the potential crisis?
2. Confront the chair without revealing your information source and urge him to resign?
3. Keep the matter in confidence and take action?

The real CEO first confirmed the information by checking with the police. Then she called the meeting (1), and those board members confronted the chair (2). Here, said Mitchell-Antoine, the issues included the conflict between the chair's behaviour and the organization's mission; his conflict of interest as a perpetrator of the illegal behaviour that the charity seeks to end; and the need to comply with laws.

Red Corvette nightmare

In this case, the much-loved and phenomenally successful president of a public university suggested a red Corvette when he was asked what he wanted as a retirement gift. And he was serious!

The development VP recommended that the governors get the car. After the board chipped in, the funds flowed through the university foundation, which issued a tax receipt to everyone who wrote a cheque.

At the dealership, the VP purchased the car with a cheque issued by the foundation and had her picture taken behind the wheel. When local media broke the story, the board denied knowledge of the purchase.

The crisis escalated. School officials locked the fundraising staff out of their offices. Police seized the foundation's records and arrested the development VP. Gifts plummeted after photos of the arrest accompanied the story through an ever-widening media circuit.

"My ethics barometer is off the charts here," Mitchell-Antoine stated. "It violates many principles of AFP's ethical code, starting with conflict of interest, offering compensation without taxation and using donors' resources without clear documentation."

And whatever a reasonable retirement gift looks like, she added, it's clearly not a Corvette!

Ultimate gift of friendship

"Jane," development head for a veterinary college and single mother of an autistic son, developed a long personal relationship with "Minnie," a wealthy farm widow who gave generously to the college through the decades. When Minnie died, she left a good deal of money to the college and even more to Jane.

What should Jane do? Assume she didn't know about the gift in advance and hadn't influenced it, and that Minnie was competent.

Both presenters agreed that Jane's professional role takes precedence over their personal relationship. Mitchell-Antoine pointed out that the AFP the code doesn't have a clear answer for such situations. Nevertheless, the college president and the board chair told Jane she was violating the code and asked her to turn her bequest over to the college. Instead, Jane kept her bequest and resigned.

Attendees agreed with Jordfald that the best solution was for Jane to return her bequest and let the estate trustee make an independent decision about allocating the funds. Mitchell-Antoine pointed out the need to be very careful even about small, personal gifts from donors, because they add up over time.

Shredded files

In this case study, a wealthy, well-known man made a gift and demanded to remain anonymous even from the charity's CEO and board. The charity had a sensitive mission in the mental health field, so the donor may have had good reason to demand confidentiality. But the CEO demanded to know the name, citing her fiduciary responsibility.

Jordfald explained that nondisclosure provisions usually apply to unauthorized persons, not to other officials in the charity. Information created by the organization belongs to the organization, she said. The development officer was obliged to explain that the donor's name would have to be available to a limited number of the charity's officials.

However, the development officer took her confidentiality pledge to the point of shredding the files when she moved on. In a misguided attempt to maintain the donor's anonymity, she committed a much worse ethical breach by destroying her employer's property.

Beach home

Suppose that you arrange a multi-million-dollar pledge in return for naming rights to a university library. Everybody's thrilled. In gratitude, the donor offers you the use of his beach home for a week. What would you do?

Mitchell-Antoine was uneasy with this case. She cited the portion of the AFP ethical code forbidding the exploitation of a relationship for personal, rather than institutional gain. If you did accept, she warned, think about how you would handle the media's discovery of your holiday. Jordfald pointed out another stipulation in the code that required the fundraiser to declare the gift as taxable income.

Would it be different if you and your spouse stayed for a week while the donor and spouse were there as well? The audience response varied. "It's good for cultivation." "Absolutely not! What if the donor dies and leaves more money to the university? The family could accuse the fundraiser of undue influence because of the time they spent together."

"How is going out to coffee or to dinner with a donor different?" one participant wanted to know. After all, that, too, is part of building a relationship. For Jordfald, the fundraiser's ability to reciprocate makes all the difference. Most fundraisers can return a dinner out, but they can not offer holiday accommodation for a week.

Clearly, said the presenters, the lines between friendship and cultivation will blur if you work with the same individual for 15 or 20 years. For Jordfald, the guiding principle is simple: "If it doesn't feel right to you somehow, you shouldn't do it."

Joyce Mitchell-Antoine is development VP at Planned Parenthood Health Systems of Raleigh-Durham, North Carolina. Eli Jordfald is senior major gifts director at the University of North Carolina Chapel Hill.