Should A Donor’s Criminal Actions Tarnish a Charity?

The Leonardo DiCaprio Foundation is returning more than $1 million in donations.

Leonardo DiCaprio. Photo: Denis Makarenko / Shutterstock.com

The Leonardo DiCaprio Foundation is planning to return more than $1 million in donations and gifts, which were made with money stolen from the 1Malaysia Development Berhad fund, made by “party animal” Jho Low.

In July 2016, Low was implicated in stealing $3 billion from 1MDB, which is earmarked for developing that country.

Low and DiCaprio have been friends for years. In addition to donating a lot of money to DiCaprio’s foundation, Low helped to fund the film The Wolf of Wall Street. Upon learning about the allegations, the DiCaprio Foundation reached out to the Justice Department to see if any of the donations they received might be tainted, and then set out to return that money.

The debacle has tainted DiCaprio’s image and that of his foundation. It seems unlikely that DiCaprio or the foundation had any knowledge of the theft. It’s doubtful that either he or his financial advisers would be foolish enough to be party to such criminal activity.

But the DiCaprio Foundation debacle does raise some talking points that nonprofits and charities should be thinking about.

Are nonprofits responsible for tracking down where a donation comes from? Should the criminal activities of a donor tarnish the image of a charity to which they donate? In this case, it’s important to replace the money that was embezzled from 1MDB, but what about smaller organizations that go through similar problems? The DiCaprio Foundation can likely afford to return that $1 million or so without difficulty, but for smaller nonprofits with tighter budgets, it would be much harder to do so. Returning the money is important, but what happens if doing so puts the organization in danger of bankruptcy? Is that fair to a group that accepted a donation in good faith?

What do you think? How much due diligence should be expected of a nonprofit? What should happen if a nonprofit is found to have received criminally diverted funds? Have you ever encountered such a situation? What was the result? Please share your thoughts in the comments.

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