Skip to content, or skip to search.

Skip to content, or skip to search.

Warhol and Peace

ShareThis

At issue in the Hayes case was the value of the foundation's enormous cache of Warhol art. Federal law mandates that nonprofit foundations give away 5 percent of their assets. In 1994, Judge Preminger valued the collection at around $400 million, more than triple the figure the foundation was using. But most years, the foundation has valued the collection at much less than many art-world observers believe it to be worth; last year, the figure it used was $81 million. And in most years, it didn't even give away 5 percent of its own, low valuation. In 1997, for instance, it donated a total of $1.2 million, against overhead costs of $4.3 million.

What caught the attention of the attorney general's office was the foundation's "unusually high expenses," Sansverie says. Sometime in the spring, the attorney general's office contacted McCauley. He resigned from the foundation shortly afterward and decided to cooperate with the attorney general. In the end, to avoid a potentially long and costly legal dispute, the attorney general -- and, for that matter, the foundation -- willingly entered into an agreement.

Under the terms of that agreement, the foundation will appoint a new chief financial officer, who will have a more central role within the foundation than the controller did. "In the future," Sansverie says, "some of the day-to-day financial decisions being made by Mr. Gillies will be shifted to the chief financial officer."

As for why Gillies, the object of much criticism in the past, still has his job, Sansverie will say only this: "If Gillies isn't doing his job, then the directors will have to get together and fire him."

Up to now, the board has supported Gillies in his various tribulations; he's been instrumental in bringing in many of its members. Now, however, there will be at least two new independent members, drawn from the audit committee. "The committee will have three members," Sansverie says, "none of whom is an officer of the foundation. Two of the three members will be on the board of directors. The attorney general will have some informal input about who will be the type of person to sit on this committee, which will perform an ongoing watchdog role on the expenses and expenditures of the foundation. The new CFO will report both to the president of the foundation and to the audit committee."

The new agreement may curtail some of the foundation's chronic overspending -- each year, officials there routinely spend more than three dollars to give away one, the reverse of what a not-for-profit's spending-giving ratio should be -- but one important issue isn't mentioned in the agreement: the foundation's undervaluation of its art assets. "That's an IRS issue, not a state-law issue," Sansverie says. "There is no specific state statute that says a certain amount has to be given away each year."

And what if the IRS, which is said to have looked at the foundation's books only to have done nothing, decides not to step in? "I'm not saying if nothing were done we wouldn't have anything to do about it," says Sansverie. "But it would be in the most general sense. The state attorney general's office isn't in the business of enforcing a federal law."

"We've been vindicated in this process," says Gillies, "although we've never done anything but report these matters in the correct way."

But in a war that's lasted most of the nineties, one wonders if this is peace, or just a temporary truce.


Related:

Advertising
Current Issue
Subscribe to New York
Subscribe

Give a Gift

Advertising