The Billionaire Who Wasn't (51 page)

He and Feeney talked it over dozens of times over the years, at directors' meetings, on plane trips to Bermuda, and over lunch at P. J. Clarke's in Manhattan. “Having a conversation with Chuck is sort of like ‘Brownian movement,' like some kind of random stream of consciousness,” said Dale, referring to the phenomenon that minute particles, immersed in a fluid, move about randomly. “It doesn't go in a linear fashion. A sample conversation would include: ‘What we did in the Vietnam War was really terrible, we've got to help those people in Vietnam, and you know the Ford Foundation has an office there but they are old and crusty, and that's the problem with foundations getting old and crusty, we shouldn't let that happen.'”

Feeney was not persuaded by the case for a perpetual foundation. Carnegie had written in
Wealth
that the millionaire was but a trustee for the poor and that the man who died leaving behind millions would pass away “unwept, unhonored and unsung,” no matter what he said should be done with “the dross which he cannot take with him.” Feeney made clear that he was leaning toward giving
everything
away and shutting down the foundation when he was forced to go public at the time of the DFS sale in January 1997. He wrote on the margins of a draft of the press release at that time, “I
believe that people of substantial wealth potentially create problems for future generations unless they themselves accept responsibility to use their wealth during their lifetime to help worthwhile causes.”

There were compelling arguments for doing so. Organizations grew more sclerotic as they got older. Perpetual foundations could never be as flexible, fluid, opportunistic, or entrepreneurial as Atlantic had been under his guidance. If Atlantic opted for perpetuity, it would have to spend less, and there would come a time when Feeney would not be around, and the foundation would be doing things he might or might not like. Harvey Dale conceded, “Henry Ford might or might not like what the Ford Foundation is doing, wherever he happens to be, but he is not in charge.”

As the debate evolved in the months after the DFS sale, Dale advised the directors in a confidential memo what Feeney's final decision might be. “We are not confined by any requirement that Atlantic Foundation and Atlantic Trust continue in perpetuity,” he wrote. Giving could therefore be conducted at a rate higher than the 5-percent benchmark required to maintain the endowment of a foundation while guarding against inflation.

Atlantic chairman Frank Rhodes was wholly in favor of giving everything in a fixed time span, on the basis that “deferred giving is really denied giving for those who go out of reach in the meantime.” The danger with any long-life foundations, he felt, was that staff and directors might come to feel they
owned
the money. At a board meeting in Bermuda in 1998, he had broached the issue with Feeney. “What will the legacy of Atlantic Philanthropies be?” he asked him. “I'll think about that,” said Feeney.

Feeney sketched out his response on October 13, 1999, at a board meeting held in a wood-paneled library room of the Cornell Club in New York. He handed directors a 200-word memorandum on the subject of legacy that he had written in pencil and had asked Dale's secretary to type up the day before.

He posed two questions. What should be the expected life span of Atlantic Philanthropies? And could grant making be expanded to reach the desired spending level? He pointed out that most foundations were making gifts of a fraction of their assets, and this might be the reason for the slow pace in the fight against cancer, diabetes, Alzheimer's, and other major diseases. Should they increase their level of funding to help achieve the desired goal of spending down, or would this be wasteful? He pointed out that annual giving had already increased to $400 million that year alone,
which put them on the spend-down track. He proposed that this be increased to $450 million a year. This would be well over 10 percent of assets a year, double the yardstick for perpetual foundations. He concluded with a recommendation that they consider a life span for Atlantic Philanthropies of twenty to thirty years.

The board agreed “in broad principle.” “My sense is that the board would do whatever Chuck Feeney wanted it to do,” said Joel Fleishman, but most were genuinely in favor.

It was an historic document, one of Feeney's first attempts to write down on a piece of paper some of his thoughts, said Harvey Dale. “It was more catalytic than seminal. It catalyzed the conversation in the right direction.”

When John Healy took over as chief executive officer of Atlantic Philanthropies in 2001, he found that there was a “common understanding,” though no formal resolution, that the foundation would spend down in approximately fifteen years. Healy convened a strategic workshop to focus the minds of the directors—including Chuck Feeney—on the implications. Spending down a huge philanthropy required careful long-term planning, especially for one as unique as Atlantic, which owned illiquid assets in the form of property and businesses. He brought in foundation adviser Tom Tierney to conduct a workshop on Tuesday, January 29, 2002, in Atlantic Philanthropies' twenty-first-floor offices on Park Avenue. Chuck was there along with all the board members, with the exception of Harvey Dale. Healy felt that directors would speak more freely in the absence of the formidable former president, and Feeney had agreed.

Healy made the point that the staff—now numbering about 100—could do the numbers and figure out for themselves that the foundation could not sustain itself at the rate it was going. It was damaging morale. The directors should be straight and tell them what the future held. If they were indeed spending down in fifteen years, given expected returns on capital and investments, Atlantic would have to donate between $7.2 billion and $7.5 billion—the endowment plus interest—in that time frame, and this would require careful budgeting and planning.

The endowment of Atlantic Philanthropies was meanwhile soaring, in line with the Wall Street bull market in technology stocks. When Healy took over, Atlantic Philanthropies had assets worth $3.5 billion. In 1999, unrealized gains from investments had soared to $1.675 billion on a base of $400 million. This was more than Chuck Feeney's proceeds from the sale of
the ownership in DFS two years before. In April the following year, the value of its $14.4 million investment in E*Trade rose to $500 million. General Atlantic Partners had gotten into information technology stocks early, and these showed a rate of return of 51 percent, three times higher than the 17-percent average return over twenty years for venture capital firms, according to
Venture Economics.
Out of eighty investments, General Atlantic Partners had only three losses. From 1980 to 2000, the investments showed a 29-percent rate of annual return before investment fees and commission, a staggering success rate.

Feeney and his investors had the Midas touch—everything they touched seemed to turn to gold. Which posed similar problems encountered by the Greek king Midas: What does one do with so much gold? The directors came to a firm conclusion—though again with no formal resolution—to go out of business at the earliest by 2016. “But I have to tell you, the last person to sign up to the decision, the last person, was Chuck Feeney,” said John Healy. “Why? Not because he didn't agree with the decision. But because he never wants to be in a corner from which he cannot escape. He is the quintessential entrepreneur. Entrepreneurs often value above all flexibility.” Once the decision was made, however, Chuck became “enormously enthusiastic” about it.

“Money is more worthwhile to the people in need when things are tough rather than when things are good,” Feeney explained in the New York foundation office one day, wearing a cardigan with a hole in the sleeve. “If I have $10 in my pocket, and I do something with it today, it's already producing ten dollars' worth of good. The dollar you give today can be doing good tomorrow, giving 5 percent of it doesn't do so much good.” He identified, he said, with the old Gaelic saying, “There are no pockets in a shroud.”

At their workshop the directors reviewed what the foundation had achieved. They were unanimous that the Irish university grants and research funding were Feeney's most successful initiatives: They reshaped the institutions, created the potential to reshape the country, were successful in leveraging further funds, and overall had a transforming effect. It was, said one, a “home run.” But some uncomfortable questions were aired. Chuck's support for higher education could be seen in a negative light—as elitist giving, especially in the United States. In the United States and Ireland, Atlantic had supported the haves over the have-nots, by 70 to 30 percent. On the other hand, in Vietnam, it was entirely a case of helping the have-nots.

Having agreed to a specific “sell by” date for the foundation, a number of questions arose. Where should they focus in the future for a disciplined spend-down? Where could they have the most impact? The discussion ranged over issues from aging and disadvantaged children to human rights and legalizing drugs. Feeney said little. But on each of the three occasions where he did have something to say, he mentioned biomedical research. At the end of the workshop, the eight directors at the meeting held a ballot on the issues they believed Atlantic should focus on while spending down.

On March 22, 2003, Atlantic Philanthropies shifted direction to accommodate the new reality. Chuck Feeney and John Healy jointly presented to the board a “Legacy and Purpose” paper. The outcome of the strategic review was the closure of sixteen areas in which Atlantic had been active. There would no longer be unlimited funds for higher education, the nonprofit sector, or philanthropy groups. In the future they would focus on four strategic areas: aging, disadvantaged children and youth, population health, and reconciliation and human rights.

“What makes a foundation successful,” Healy believed, “is focus, and heavy and sustained investment in those things that you have chosen to focus on.” The “Legacy and Purpose” paper confirmed for staff that they were going out of business so they could prepare their CVs in good time. “The spend-down train has left the station,” said Healy.

The document reflected the liberalism of Atlantic Foundation's founder. It warned that in the political environment of the United States—this was the month that the U.S.-led forces invaded Iraq—there was hostility to the notion of foundations' pursuing progressive agendas, and it was only a matter of time before they attracted “unwelcome attention.”

As time went by, Feeney had become more drawn to support progressive organizations that strengthened civil society. The “Legacy and Purpose” paper declared that Atlantic Philanthropies should aim “to initiate social change, not just make grants.” Feeney had made private donations to the Democratic Party in the 1990s but did not allocate large sums to party political campaigns, as did some billionaires like George Soros. Atlantic gave money to organizations such as Amnesty International, Human Rights First and Human Rights Watch, and its contribution of $1 million was key to winning a campaign to persuade the U.S. Supreme Court in March 2005 that the death penalty for those who committed crimes when under the age of eighteen was cruel and unusual punishment and hence barred by the
Constitution. In the same year, Atlantic gave $3 million to
The NewsHour with Jim Lehrer
to support nonprofit public broadcasting.

A political junkie who reads the
Financial Times
, the
Guardian
, the London
Time
s, the
International Herald Tribune, The Economist,
and
Newsweek
everywhere he travels, Feeney strongly opposed the war in Iraq and the re-election of U.S. president George Bush in 2004. The year before, on the eve of the U.S.-led invasion of Iraq, he joined a massive protest in London organized by the Stop the War Coalition, walking unnoticed among the throngs of demonstrators from Mayfair to Hyde Park.

Winding down a foundation is rare, but there were earlier examples from which Atlantic drew lessons. Julius Rosenwald, architect of the Sears, Roe-buck empire, spent $63 million of his fortune—$700 million in today's dollars—before his death in 1932, mainly in setting up 5,400 schools for African Americans in Southern states; in accordance with his wishes, his trustees spent down the rest of his endowment by 1948. Rosenwald warned that “our immediate needs are too plain and too urgent to allow us to do the work of future generations.” It was the first major U.S. fund to deliberately spend itself out of existence. The $300-million foundation set up by real estate developer Aaron Diamond was wound down by his wife, Irene, from 1987 to 1996, after establishing the largest private AIDS research facility in the United States. Its former executive director, Vincent McGee, said the idea was to find things that could make a major impact and stick with them, rather than waste the money in a big bureaucracy. The danger, he said, was that “all foundations tended to become arrogant and intellectually corrupt.” Among other foundations, the Richard and Rhonda Goldman Fund, with over $400 million in assets, has raised grant levels to 10 percent so that it can go out of business within a decade of the death of Mr. Goldman, whose wife died in 1996. Richard Goldman told NBC television that foundations should stop acting like dinosaurs worried about their own extinction, and focus on the good they can do today.

“I'm pretty sure we will close the doors,” said Healy, who retired in April 2007 after six years as chief executive. “It is increasingly unlikely that Chuck will change his mind. I don't see the present board not being faithful to his wishes, and by and large they are all enthusiastic about spending down.”

Feeney himself felt a growing sense of urgency and moments of doubt. “I don't know if I will be alive in ten or twelve years,” he said. “I don't think it's possible for us to spend down, because when you think about it, you can't
give big chunks of money unless you do bricks-and-mortar. We are wandering around the world trying to find opportunities—the problem is we identify opportunities, and they are good but they are too small. And each time I see a project delayed it frustrates me.”