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  • Session 4J

    Donors, Heirs, Desires and Academic Freedom: Perspective and Context Regarding Robertson v. Princeton University

    Peter G. McDonough Lorraine A. Sciarra

    Princeton University

    Nicole Bearce Albano Lowenstein Sandler PC

    June 29, 2007

    Involving nearly five years of costly litigation, an intense public relations

    campaign, and an increasingly heightened national profile, Robertson v. Princeton University is a derivative suit venued in state chancery court in Mercer County, New Jersey. The litigation involves three charitable organizations: Princeton University, the Robertson Foundation, and the Banbury Fund, Inc.1

    In 1961, Marie Robertson, wife of Princeton alumnus Charles Robertson 26,

    endowed the Robertson Foundation for the benefit of Princeton with a gift of $35 million to support the graduate program of the Woodrow Wilson School, one of the worlds leading schools of public and international affairs. Under Internal Revenue Code Section 509(a)(3), the Robertson Foundation, a Delaware not-for-profit corporation, is a Type I supporting organization and, as such, must be operated, supervised, or controlled by the supported organization, i.e., by Princeton University.

    The IRCs control requirement is satisfied by the University controlling the

    Foundations Board of Trustees, as the Foundations Certificate of Incorporation requires that the University appoint four members to its seven-person Board of Trustees, and that the Robertson family appoint the remaining three trustees. The current University-appointed trustees are Shirley Tilghman (Princetons president), Stephen Oxman (chairman of the executive committee of Princetons board of trustees), Peter Wendell (University trustee) and Thomas Kean (former New Jersey governor and chairman of the National Commission on Terrorist Attacks upon the United States, also known as the 9-11 Commission). The current family-appointed trustees are William Robertson and Katherine Ernst (children of Charles and Marie Robertson) and Robert Halligan (son-in-law of Charles Robertsons cousin). In July 2002, more than four decades after the Foundations creation, Marie Robertsons three children, together with Robert Halligan, sued Princeton University and the then University-appointed Foundation trustees. The plaintiffs are paying their 1 The Princeton defendants are represented by Roseland, N.J.s Lowenstein Sandler PC and

    New York Citys Simpson Thacher & Bartlett LLP. The Robertson plaintiffs are represented by San Franciscos Shartsis Friese LLP and the Princeton office of Saul Ewing LLP.

  • 2

    lawyers from the Banbury Fund, Inc., a private foundation controlled by the Robertson family. The plaintiffs are also using the Banbury Fund to pay their public relations firms bills. The Funds trustees/officers are plaintiffs William Robertson and Katherine Ernst, their sister Anne Meier (also a plaintiff) and the sisters spouses Robert Ernst and Walter Meier. (According to the Banbury Funds Form 990-PF submissions to the Internal Revenue Service, plaintiff William Robertson draws a salary from the Fund that exceeded $158,000 in 2005.)2 During the first two years after this suit was filed, the Banbury Funds charitable giving dropped by 86%, from an average of $2.4 million per year before the lawsuit to just $271,000 in 2004.3

    The underlying dispute originated out of the disagreement between plaintiff William Robertson and the University-appointed trustees regarding how to manage the investment of the Foundations substantial endowment, which had grown to approximately $550 million by 2002. In November 2003, the Foundation Board voted to retain the Princeton University Investment Company (PRINCO) to provide an additional layer of investment management for the Foundations assets, subject to the continued oversight of the Foundations Investment Committee and Board. William Robertson opposed the engagement of PRINCO from the outset, and the family-appointed trustees voted against PRINCOs appointment. Nonetheless, since PRINCOs appointment, the Foundations endowment has climbed to over $850 million (while, of course, funding expenditures annually).

    In their lawsuit, the plaintiffs asserted a number of claims individually and derivatively (ostensibly on behalf of the Foundation), including allegations relating to the retention of PRINCO as well as allegations that Princeton has failed to fulfill the Foundations specific mission, has never truly tried to fulfill its fiduciary duty to advance the Foundations mission, is institutionally incapable of fulfilling the Foundations mission,4 and has used Foundation assets in a manner that is inconsistent with the Foundations Certificate of Incorporation and outside the scope of the donors intent.5 Five years later, the core of this contentious litigation is the familys insistence that a New Jersey court should transform the Foundation from a supporting organization controlled by Princeton and committed to the Woodrow Wilson School graduate program into a private foundation controlled by the Robertsons, in effect severing the 45-year relationship between Princeton and the Foundation, and delivering control of the Foundations endowment to the heirs of the donor.

    2 The Banbury Funds Form 990-PF submissions to the Internal Revenue Service are available

    online at: http://www.guidestar.org/. 3 In 2005, after the Princeton defendants raised the issue of plaintiffs using charitable funds to

    pay for the litigation, the Banbury Funds non-litigation charitable giving rose to $1.45 million.

    4 Pls. Sole Benef. Opp. Br. at Section II.F. 5 See, e.g., Amended Complaint at paragraphs 10-13.

  • 3

    This paper provides: (1) a brief description of the Robertson Foundation and its governance structure; (2) a sense of some of the key issues in the litigation; (3) an overview of pending summary judgment motions; and (4) a list of Princetons expert witnesses. We attach the Foundations Certificate of Incorporation (Tab A); frequently asked Q & As relating to the lawsuit that appear on the Universitys website (Tab B); a white paper that clarifies frequently misreported facts regarding the litigation and highlights several issues that may affect the governance and operations of a wide variety of nonprofit organizations (Tab C); and an overview of programs, faculty and activities at the Woodrow Wilson School (Tab D).6

    1. The Robertson Foundation

    More than a decade before Marie Robertsons gift and the creation of the Robertson Foundation in 1961, Princeton University embarked upon the development of a graduate program in its School of Public and International Affairs. As described by Robert F. Goheen, Princetons President 45 years ago, in supporting the Schools graduate program the Foundation aspired to bring about the development of a whole new level of post-graduate, professional education in the Woodrow Wilson School amidst the changing requirements of a shifting world.7

    Article 3 of the Robertson Foundations Certificate of Incorporation states:

    3. This corporation is organized and shall be operated exclusively for charitable, scientific, literary, or educational purposes and for no other purpose. In furtherance of such purposes its objective is to strengthen the Government of the United States and increase its ability and determination to defend and extend freedom throughout the world by improving the facilities for the training and education of men and women for government service and to contribute, lend, pay over, or assign the income of the corporation and/or the funds or property of the corporation (any payments of principal being subject to the limitations of article 11(c) hereof) to or for the use of Princeton University for any one or more or all of the following uses:

    (a) To establish or maintain and support at Princeton

    University, and as a part of the Woodrow Wilson School, a

    6 These items are also available on the Universitys website pertaining to the Robertson lawsuit: Tab A: http://www.princeton.edu/robertson/documents/docs/Robertson_Certificate_of_Incorporation.pdf

    Tab B: http://www.princeton.edu/robertson/documents/docs/20070611-PU-Robertson-QA.doc Tab C: http://www.princeton.edu/robertson/documents/docs/Nonprofit_Forum.pdf Tab D: http://www.princeton.edu/robertson/documents/docs/WWS_Highlights.pdf

    7 June 12, 1973 Remarks by President Goheen on Unveiling of Robertson Foundation, available on the Universitys website pertaining to the Robertson lawsuit: http://www.princeton.edu/robertson/documents/docs/Pres_Goheen_remarks_6-12-73.pdf

  • 4

    Graduate School, where men and women dedicated to public service may prepare themselves for careers in government service, with particular emphasis on the education of such persons for careers in those areas of the Federal Government that are concerned with international relations and affairs;

    (b) To establish and maintain scholarships or fellowships,

    which will provide full, or partial support to students admitted to such Graduate School, whether such students are candidates for degrees, special students, or part-time students;

    (c) To provide collateral and auxiliary services, plans and

    programs in furtherance of the object and purpose above set forth, including but without limitation, internship programs, plans for public service assignments of faculty o

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Session 4J Donors, Heirs, Desires and Academic Freedom: Perspective and Context Regarding Robertson v. Princeton University Peter G. McDonough Lorraine A. Sciarra Princeton University Nicole Bearce Albano Lowenstein Sandler PC June 29, 2007 Involving nearly five years of costly litigation, an intense public relations campaign, and an increasingly heightened national profile, Robertson v. Princeton University is a derivative suit venued in state chancery court in Mercer County, New Jersey. The litigation involves three charitable organizations: Princeton University, the Robertson Foundation, and the Banbury Fund, Inc. 1 In 1961, Marie Robertson, wife of Princeton alumnus Charles Robertson ‘26, endowed the Robertson Foundation for the benefit of Princeton with a gift of $35 million to support the graduate program of the Woodrow Wilson School, one of the world’s leading schools of public and international affairs. Under Internal Revenue Code Section 509(a)(3), the Robertson Foundation, a Delaware not-for-profit corporation, is a Type I supporting organization and, as such, must be “operated, supervised, or controlled by” the supported organization, i.e., by Princeton University. The IRC’s control requirement is satisfied by the University controlling the Foundation’s Board of Trustees, as the Foundation’s Certificate of Incorporation requires that the University appoint four members to its seven-person Board of Trustees, and that the Robertson family appoint the remaining three trustees. The current University- appointed trustees are Shirley Tilghman (Princeton’s president), Stephen Oxman (chairman of the executive committee of Princeton’s board of trustees), Peter Wendell (University trustee) and Thomas Kean (former New Jersey governor and chairman of the National Commission on Terrorist Attacks upon the United States, also known as the “9- 11 Commission”). The current family-appointed trustees are William Robertson and Katherine Ernst (children of Charles and Marie Robertson) and Robert Halligan (son-in- law of Charles Robertson’s cousin). In July 2002, more than four decades after the Foundation’s creation, Marie Robertson’s three children, together with Robert Halligan, sued Princeton University and the then University-appointed Foundation trustees. The plaintiffs are paying their 1 The Princeton defendants are represented by Roseland, N.J.’s Lowenstein Sandler PC and New York City’s Simpson Thacher & Bartlett LLP. The Robertson plaintiffs are represented by San Francisco’s Shartsis Friese LLP and the Princeton office of Saul Ewing LLP.
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