Last June, a Texas Jury convicted Carl Yeckel and Thomas Vett of breaching their fiduciary duties while officers of the Carl B. and Florence E. King Foundation in Dallas. They were ordered to repay $7.5 million they bilked from the $32 million charitable family trust over a period of years, plus pay $14 million in punitive damages. John Vinson, the assistant attorney general in charge of the case, told the press, “This is one of the worst, most egregious cases of misappropriation of charitable assets in the country.”
The King Foundation controversy is just one of a recent spate of high-profile financial scandals involving family foundation officers. While these misdeeds have spurred law enforcement agencies to increase their scrutiny of private charitable trusts, many benefactors are asking themselves—and answering uncomfortable questions about—how these types of organizations compensate their trustees.
Several months after the King Foundation ruling, Paul C. Cabot Jr., the scion of one of New England’s most revered families, agreed to repay more than $4 million to the Paul and Virginia Cabot Charitable Trust, established by his parents, as part of a deal with the Massachusetts Attorney General’s office. Cabot allegedly paid himself a million-dollar-plus salary from foundation funds to support a lavish lifestyle.
While the Cabot and King cases may seem exceptional, law enforcement officials across the country have put foundations on notice: They promise to monitor the activities of trustees more closely. “There is increased scrutiny federally, and by many states,” says Jamie W. Katz, chief of the Massachusetts Attorney General’s Public Charities Division, which investigated the Cabot case. “We are pushing very hard to bring charity compensation issues to the forefront.”
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