Friday, December 26, 2003              

Henry Ford's 'Legacy'

The quip going around nonprofit circles these days is that the Ford Foundation's support for Palestinian extremists is the one area of funding it could defend on the grounds of donor intent -- an allusion to the notorious anti-Semitism of automaker and founder Henry Ford.

But Chuck Grassley, for one, is not amused. In response to a Jewish Telegraphic Agency series detailing Ford's support for Palestinian NGOs crusading against Israel, the Iowa Republican has announced that the Senate Finance Committee will review the matter. In so doing, we hope it raises a question long overdue for Congressional scrutiny: How U.S. tax laws intended to encourage charity have had the unintended effect of spawning a foundation priesthood funded into perpetuity and insulated from public accountability.

This lack of accountability is bad enough even when it involves small foundations that stray from their benefactor's purposes. But with $10 billion in assets and offices that stretch from Santiago to Hanoi, Ford today has become a major player in international affairs -- with the potential to run afoul of U.S. interests abroad.

That's precisely what happened in Durban, South Africa, in 2001, where a U.N. conference ostensibly called to combat racism became a world stage for anti-Americanism and the crudest kind of anti-Semitic imagery. So ugly did Durban become that Secretary of State Colin Powell ordered the American delegation to return home.

In his "Funding Hate" series for the Jewish Telegraphic Agency, Edwin Black quotes some of those who had witnessed the Durban spectacle as originally guessing that the funding for all this anti-Semitic propaganda must have come from, say, Saudi Arabia. In fact, he says, much of it came from Ford. In 2000 and 2001 alone, Mr. Black notes, Ford distributed $35 million to 272 Arab and pro-Palestinian organizations -- with at least some of these millions going to those that transformed Durban into a circus.

Among the noisiest of these recipients was the Palestinian Committee for the Protection of Human Rights and the Environment (LAW), which since 1997 has received $1.1 million from Ford. Mr. Black reports that LAW's officers assumed leadership positions on the Durban steering committees that were instrumental in making the thrust of that conference an international indictment of the state of Israel.

Or take PNGO -- an umbrella group of 90 Palestinian NGOs that's also received more than $1 million from Ford. Its director is quoted as admitting that PNGO gets almost no Arab support and that Ford is its biggest funder. Yet this is the same group that denounced as "unacceptable" a U.S. government requirement that Palestinian NGOs partnering with tax-exempt American charities sign a pledge promising that no funds would ever find their way to "advocate or support terrorist activities."

After first digging in her heels, Ford President Susan Berresford acknowledged in a November 17 letter to Congressman Jerrold Nadler (D., N.Y.) that she and her colleagues at Ford "now recognize that we did not have a clear picture of the activities, organizations and people involved."

Funding for LAW, she tells us, has been cut off because of financial irregularities, and Ford is in the midst of investigating its other grantees. Not only does Ford abhor any anti-Semitism, she says, the funding that was featured in Mr. Black's series represents only a fraction of what is really a broad Ford effort to build a moderate Palestinian civil society.

Sounds good. But it's not as if this is the first time Ford has been questioned about its Middle East funding. The New York Sun reports that as far back as 1999 editors at the Jewish weekly Forward ran a story entitled "Latest Ford Foundation Grantees Would Sure Make Henry I Proud." Nothing happened. The difference today is a post-9/11 environment, where the combination of press exposure and Congressional pressure has made it harder for Ford to look the other way.

Mr. Black's articles report that State, Justice and the IRS are looking into the matter, as well they should. But Congress has a special responsibility with regard to foundations, because Congress writes the tax laws that spawned these empires. Not least of the perverse incentives here is a provision in the tax code -- one that Ford lobbied hard to preserve -- that allows foundations to count office expenses against the 5% of their assets they are required to give out each year to charity.

We hope Senator Grassley goes through with hearings, not only to find out where all that Ford money ended up in the Middle East but also to raise the larger public issue of whether the tax code is being used to subsidize attacks on American interests. Foundations are a growing part of U.S. life and are playing an ever larger role in political debate. Under current law they are also tax subsidized for eternity. Congress hasn't revisited that policy since 1981, and it's about time it did.

Updated December 26, 2003