The Charitable Trust Unit is investigating whether the College is in violation of a New Hampshire state law that regulates conflicts of interest on nonprofit organizations' boards of directors, Terry Knowles, assistant director of the state's Charitable Trusts Unit, said in an email to The Dartmouth. The College is bound by law to disclose how members of the Board of Trustees profit from endowment investments in trustee-managed companies, according to Knowles.
Based on preliminary investigations, the College "did not appear to be complying with" the part of the law that requires nonprofits to report the fees paid to trustees after investing in their funds, Knowles said in an interview with the Valley News.
A 1996 revision to the Revised Statues Annotated law, which regulates the New Hampshire state government requires nonprofits to disclose whenever they engage in a "pecuniary benefit transaction" by investing in funds affiliated with members of their boards of directors. The College must report to the state's Charitable Trust Unit both the amount of the endowment it invests in trustee-related funds and the fee or financial benefit gained by the trustee involved, according to the law.
The law further stipulates that nonprofits must keep a list detailing "each and every pecuniary benefit transaction," which must be reported to the Charitable Trust Unit annually.
If the pecuniary benefit transaction is discovered to be greater than $5,000, the nonprofit must also publish a notice of the transaction in "a newspaper of general circulation," the law stipulates. The involved trustees must also recuse themselves from any votes regarding the monetary transaction.
The Charitable Trusts Unit is "in the process of reviewing the allegations" that the College has not been forthcoming with this information, according to Knowles.
The College is acting in accordance with the law, according to Justin Anderson, director of media relations for the College.
"Dartmouth is in full compliance with the New Hampshire pecuniary benefit law and follows all of the procedures and disclosure the law requires," Anderson said. "As required by that law, for each investment with a firm with which a member of the Board of Trustees is affiliated, the College files with the state Attorney General's Office and publishes in the Valley News a notice stating the name of the Trustee receiving pecuniary benefit, the nature of the transaction and the dollar amount of the transaction."
The College has informed the Attorney General's office that it will provide "any further information they require," he said.
Disclosure may also encourage alumni to question what Todd Zywicki '88, a petition candidate who served on the Board of Trustees from 2005 to 2009, characterized as exorbitant "Wall Street" fees that trustees earn from College endowment investments.
"I suspect that if [the College] actually disclosed the fees that [the trustees] were making off of these investments, people would be utterly shocked and appalled," he said.
Zywicki said that if the College has failed to disclose the fees provided to its alumni, the College would be displaying "insulting arrogance and an irresponsible attitude."
"Disclosure would go a long way towards bringing more transparency and accountability to those decisions to make sure they are good for the College and not just for particular people," he said.
If an organization is found to be in violation of the law, the Attorney General may bring litigation for civil penalties of up to $10,000 for each violation as well as incurred legal fees, according to the law.
If it has not done so already, the College should disclose the financial benefits trustees receive from the College's investment in their companies, according to Jim Rubens '72, the former Republican state senator who helped draft the 1996 law.
"I think this is a good opportunity for the College to provide a blanket disclosure going back to when the law became effective in 1996 and make all the required disclosures," he said. "I don't think the College will be hurt in any way by that."
Although releasing the monetary amounts may raise some questions in the Dartmouth community, transparency and compliance with the law will benefit the College and its relations with students and alumni, Rubens said.
"It then becomes incumbent on the College, should it wish to have good public relations with alumni contributor, to go above and beyond the law and stop the head scratching and explain why this is a good deal for the College," Rubens said.
The 1996 law replaced an earlier, stricter statute that forbade board members from receiving any financial benefit from their nonprofits' investments after nonprofits complained that the law impeded their ability to attract board members, Rubens said. "The law is a compromise so that people who do have these conflicts can still, at the same time, serve the College," he said. "That's a plus these relationships that create these conflicts can definitely be, and probably are, a net plus for the College."
