Thomas Reeves - Freedom and Foundation

THIS IS A BORZOI BOOK
PUBLISHED BY ALFRED A. KNOPF, INC .

First Edition
Copyright 1969 by Thomas C. Reeves
All rights reserved under International and Pan-American Copyright Conventions. Published in the United States by Alfred A. Knopf, Inc., New York, and simultaneously in Canada by Random House of Canada Limited, Toronto. Distributed by Random House, Inc., New York.
Library of Congress Catalog Card Number: 7079315

eISBN: 978-0-307-82889-7

v3.1

To Irving F. Laucks

Few shafts of light have penetrated the carefully constructed faades of Americas numerous, powerful, and exceedingly wealthy tax-exempt foundations. Highly sensitive to the public and political pressures inherent in their possession of billions of tax-exempt dollars, foundations have been loath to open their files to those seeking to explore dispassionately their motives, methods, and achievements. Some information is available. Since 1963 the Internal Revenue Service has made public a few pertinent facts through revised regulations of annual tax reports, currently no more than a few hundred of the more than 20,000 foundations issue reports on their expenditures, and New Yorks Foundation Center houses narrow data on a minority of these philanthropic bodies. Moreover, Congressman Wright Patman and his Subcommittee of the House Small Business Committee have revealed, in a series of penetrating studies, dubious financial activities to which a few foundations have been prone, while others have called attention to disturbing ties between foundations and universities and American foreign policy. There is a small formal literature on foundations, but almost all of it smacks heavily of the public-relations firm and is designed to counter charges by critics suspicious of the growing trend toward tax avoidance. A recent volume of this nature cites as its central issue the question: Does the positive record of the American philanthropic foundations justify the continuing existence of these tax-free institutions? Overall, our knowledge of foundations is extremely meager.

The tradition of secretiveness was ruptured in late 1963 when the officers of the Fund for the Republic submitted to the entreaty of a rather brash young graduate student, allowing him complete access to the foundations minutes, records, and collected papers to assist in the creation of a Ph.D. dissertation. The officials knew that they had been participants in a novel, personally exciting, and very controversial venture, and, having nothing to concealincluding a little pridethey accepted the young mans contention that the story of their efforts might be informative and instructive.

When I first saw the Funds half-ton of collected materials, it had been reduced by a fire three years earlier to a burned and water-soaked rubble. In return for being permitted to probe this mountain of memorabilia, it was agreed that I would expend every effort toward restoration of the files for their transmission to the library of Princeton University, a two-year labor which proved to be as educational as it was toilsome.

This book, an expansion of my dissertation, is not an official history, and the author accepts full responsibility for its interpretations and whatever defects and errors it may possess. It should be added that at no time did the officers and staff of the Fund greet the author with anything other than courtesy and frankness; no attempt was made to censor or alter a line. In this, as in so many other ways, the Fund, which has gone virtually unmentioned in formal foundation literature, has set an important and admirable precedent for the world of philanthropy.

Special thanks go to Paul G. Hoffman, and Jubal R. Parten for allowing me to examine relevant portions of their private papers. I am also greatly indebted to the following for providing perceptive and often trenchant commentary on this work at various stages of its development: Harry Ashmore, H. Arnold Barton, Alexander DeConde, Sigmund Diamond, W. H. Ferry, C. Warren Hollister, Wilbur Jacobs, Frank Keegan, Robert Kelley, Frank Kelly, Eulah Laucks, Joseph Lyford, Jubal Parten, Charles B. Spaulding, and Henry A. Turner. Professor A. Russell Buchanan is a great adviser, teacher, and friend. To my wife, Kathie, I owe more than I can possibly acknowledge.

This project was assisted by the Academic Research Committee of the University of California, Santa Barbara, and by the Council on Research and Creative Work of the University of Colorado.

References to certain documents, usually internal memoranda, have been abbreviated for the purpose of clarity. Full information on the files of the Fund may be found in the bibliography of the dissertation.

T.R.
COLORADO SPRINGS

T he Revenue Act of 1935, part of the New Deals effort to outflank Huey Long, was one of the most ambitious attempts in American history to redistribute wealth. Quite predictably, by levying an excess profits tax, dramatically increasing surtax rates, stepping up gift and capital stock taxes, and creating an estate tax which climbed to 70 per cent of excess over $50,000,000, the Administration sustained an almost unprecedented uproar from those influential few who managed to remain securely aloof from the ravages of the nations worst economic collapse. To William Randolph Hearst the Wealth Tax was a Communist plot, to Henry Ford a new form of destruction, a plan to get independent institutions like ours into the hands of the money lenders.

The Ford Motor Company was indeed vulnerable to such legislation. Since 1919, when the last of the minority stockholders were bought out, it had become the largest family-owned business corporation in the United States. And one of its founders deepest fears concerned the possible loss of the familys absolute authority at his death. It now appeared probable that when that day arrived diversified ownership would be necessary to meet the governments estate-tax demands. Ford firmly believed that a way out would be found somehow, by someone. We do not intend to be destroyed, he blustered.