You've had significant discussion about economic policy. The problem I see is that, irrespective of which administration is in power, the real rich have programs that are so complicated that they are under the radar and continue, while "the rich" who are targeted by politicians are those of us who work very hard and make what I consider upper middle incomes and have an estate, consisting of some retirement money and a nice house. When I hear "roll back the tax cuts," I know I have to hold on to my wallet. You should do the same.
Here's a great article from the Boston Globe, part of a continuing series, which tells about one of the loopholes for the extremely wealthy, charitable foundations, programs that neither candidate will speak about and will likely continue even if Kerry wins.
SPOTLIGHT FOLLOW-UP
Trustees traveling in style
By Sacha Pfeiffer, Globe Staff, 4/18/2004
In Africa, few game lodges can match South Africa's Sabi Sabi for luxury. With a 6,000-bottle wine cellar and butlers who greet arriving guests with lemon-scented towels, the lodge is a draw for royalty and the exceptionally rich -- and, last year, for the trustees of one of America's largest charitable foundations.
The one-night stay at the lodge, in $1,000-plus suites, was the exclamation point for a 10-day visit by the trustees of the W. K. Kellogg Foundation to see Kellogg projects to help the poor. A small squadron of private jets whisked them from stop to stop in southern Africa. The visit cost the foundation $836,316 for 19 people -- about $44,000 each.
For America's sixth-largest foundation, such spending is routine: In 2001, Kellogg spent $266,500 for three private jets to take its trustees from Michigan to Central America. This year it plans an around-the-nation trip on charter jets.
Kellogg's travel practices, while apparently unique among large foundations, point up a larger pattern: Some of the nation's leading foundations underwrite high-end travel costs and perks that many public corporations no longer permit for their executives.
The Globe found that trustees of the Rockefeller, Ford, and MacArthur Foundations travel overseas in first-class or business-class cabins. Unlike Kellogg, they pay for spouses to go along.
In 2001, for instance, the Rockefeller Foundation moved one of its periodic board meetings from New York to a private estate it owns on Lake Como in Italy. The airfare alone for 13 board members, two finance committee members, and 11 spouses was more than $130,000 -- an average of $5,079 for each business class seat. A Rockefeller spokesman confirmed that staff members also made the trip, but would not say how many.
Kellogg president William C. Richardson defended his foundation's costly travel in Africa, saying trustee site visits are critical to the foundation's mission and grueling for the trustees. The game lodge, Richardson explained in an interview, was used for debriefing. It was also, he added, ''a good place to decompress."
James Lintott, chairman of Sterling Foundation Management in Reston, Va., which provides management services to private foundations, expressed surprise. Given the charitable purpose of foundations, Lintott said, the guidelines for trustee travel should be even more frugal than for business executives.
That would mean not flying first-class and not staying at the most expensive hotels, he said.
Since the 2001 recession, many corporations have banned or curtailed the use of business-class air travel, even for senior executives, according to the National Business Travel Association, a trade group for corporate travel managers. Kendra Thornton, a spokeswoman for the corporate travel website Orbitz for Business, agreed. Where business-class travel overseas was once the norm for companies, Thornton said, "now it's the exception."
Not so for the trustee boards of Kellogg, Ford, Rockefeller, and MacArthur.
MacArthur pays for first-class airfare for domestic and international travel, and Ford and Rockefeller for business-class on international flights longer than six hours -- for both trustees and spouses who are visiting programs underwritten by the foundations. Under IRS rules, the spousal costs must be reported as income to the trustees.
The four foundations are among the country's largest and best-known. The Ford Foundation, with $9.3 billion in assets, is the third largest. The Kellogg foundation has $5.7 billion in assets. The John D. and Catherine T. MacArthur Foundation of Chicago is the country's ninth largest, with $3.9 billion in assets. And Rockefeller is the 15th-largest foundation in the United States, with $2.8 billion in assets.
All four foundations make substantial grants overseas, mostly to organizations in poor countries in Africa, Asia, and Latin America. Such grants are normally monitored by foundation staff.
But in interviews, Kellogg's Richardson and officials of the other foundations said on-site assessments by their part-time trustees, who typically meet monthly or quarterly, are vital. ''It's not sufficient to review proposals in the boardroom . . . We want our board interacting and engaging people on the ground," said Richardson, who is the former president of Johns Hopkins University.
The Globe learned of Kellogg's extraordinary travel costs following a Spotlight Team series last year on excessive compensation, perks, and other abuses at foundations.
Kellogg, after some initial reluctance, provided the Globe with a breakdown of the costs for the March 2003 Africa visit and the October 2001 trip to Guatemala, Nicaragua, and Honduras.
For those trips, the costs of private jet travel rose higher still because of a foundation policy that trustees not all travel on the same aircraft -- much like the government policy that the president and vice president travel separately. Kellogg used three jets -- two Gulfstreams and a Citation -- for the Central American trip and four jets at a time for parts of the southern Africa tour. The private charter bill in Africa was $151,825 for 19 trustees.
Richardson said the practice of using separate planes simultaneously was in effect before he became president nine years ago. He said he considers it ''a good business practice."
The Sabi Sabi lodge wasn't the only five-star hotel on the trustees' African itinerary. The lodging and related meeting costs, $250,000 in all, paid for stays at five-star hotels in Johannesburg and Mozambique. Karen E. Lake, the foundation spokeswoman, said the hotels were recommended by South African intelligence officials, after the foundation expressed concern over the impending US invasion of Iraq.
For the 2001 trip to Central America, the foundation spent $266,500 for charter jets, even though commercial airlines have numerous flights to the region and between the various cities the trustees visited. For the Central American traveling party of 22, the cost of commercial airline tickets would have been little more than $40,000 at 2004 rates, according to a Globe analysis. The trip's total cost: $527,953.
Lake said the trustees' periodic domestic trips cost only about $300,000 on average. This year, the foundation plans a trip to North Carolina and Arizona, and then home to Michigan, on charter jets.
The other three foundations rely on commercial airlines for their trustees. But one of them, Rockefeller, would not provide the total costs of one expensive trip. And its spokesman initially understated the trustee-related costs of two trips.
For a 2001 trustees meeting in Bellagio, Italy, spokesman Andre Oliver put the cost at $128,001 -- not counting lodging or food -- for a group of 26 that he said included foundation president Gordon Conway, his wife, Susan, and 10 other spouses. But Oliver later said he had omitted $11,020 that represented the Conways' costs.
Oliver also said Conway and board chairman James F. Orr III and their wives visited Vietnam and Thailand in 2002 at a cost of $17,396.95. After the Globe questioned those costs, Oliver said the actual total was $28,640.
Oliver, who said the errors were inadvertent, refused to disclose the number of staff members who went on the Bellagio trip or the cost of lodging and food at the estate, which was donated to the foundation in 1959 and is normally used only for visiting scholars and conferences.
He denied that the trip was a perk for the trustees, whose annual compensation is just $9,500.
The Bellagio site was chosen, Oliver said, because it ''allows for an open exchange and quality discourse," and the setting ''allows for a special type of dialogue."
At the Ford Foundation, travel expenses for trustees decreased from $381,000 in 2001 to $170,000 last year. Alexander Wilde, the foundation's vice president for communications, said Ford pays for business class for international flights of more than six hours. Like Rockefeller, Ford pays the travel costs of accompanying spouses.
In the past three years, Ford trustees and spouses have traveled to destinations such as Russia, Nigeria, India, Vietnam, and Kenya. Of the international trips, Wilde said, ''We work our trustees pretty hard."
Board members of the Chicago-based MacArthur Foundation travel in even greater comfort: They may fly first-class and have spouses accompany them on up to two site visits a year at the foundation's expense, according to spokesman Raymond Boyer.
Recent travels included a six-day trip to Moscow in 2003, costing the foundation $73,723 in airfare, hotels, and meals for four trustees and three spouses. In 2002, a seven-day trip to Africa, with stops in Kenya, Rwanda, Uganda, and Tanzania, cost $63,137 in airfare, hotels, and meals for four trustees and one spouse.
Asked about the first-class travel and free spouse travel, Boyer said it was ''appropriate for this kind of travel for this level of intensity for this group of people" allowing trustees to arrive at their destinations ''ready to engage in their work."
Yet some major foundations with international programs don't permit high-end travel, and one foundation learned the hard way that charters can be more trouble than they're worth.
Board members of the Pew Charitable Trusts in Philadelphia, with assets of $4.1 billion, fly coach-class only. And spouses must pay their own travel costs.
In rare cases where no commercial flights were available, trustees have flown by private charter, according to Rebecca W. Rimel, Pew's president and CEO. For example, during a board visit last year to the Baja Peninsula, 10 trustees, accompanied by six spouses and four staff members, took a charter flight that cost $14,000. After an engine failed midflight, that charter had to make an emergency landing, forcing trustees to finish the trip on what Rimel described as a "converted school bus" -- an eight-hour ride.
''I've never lived that one down" Rimel said. ''It made us say to ourselves, 'If we can't get there commercially, maybe we shouldn't be going.' "
Francie Latour can be reached at flatour@globe.com.Beth Healy, Michael Rezendes, and Walter V. Robinson of the Globe staff contributed to this report.
This story ran on page A1 of the Boston Globe on 4/18/2004.
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