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Celebrity Death Match

Two local nonprofits battle over some of the city's biggest family fortunes.

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Imagine a bloody, bitter battle over millions of Rockefeller-family dollars that doesn't have anything to do with a Rockefeller-family divorce. Then add a nasty five-year legal squabble involving two of the city's richest, most highly regarded charities -- a money grab so unseemly that, this month, it has forced state attorney general Eliot Spitzer to jump in and take sides.

In one corner, you have the Community Service Society of New York -- the 154-year-old social-service group that dispenses $11 million a year to some of New York's poorest. In the other, the New York Community Trust -- the 76-year-old, $1.9 billion fund made up of more than 1,000 smaller charitable funds donated by some of the city's richest families. Five years ago, CSS sued the Community Trust, estimating that it deserved up to $8 million in back payments and $500,000 a year in the future from six funds set up on behalf of prominent, long-gone New Yorkers -- including Laura Spelman Rockefeller, widow of John D., and Linda Griffith, widow of Birth of a Nation director D.W. "This has been described as the Microsoft case of trusts and estates," says David R. Jones, CSS's president. "I think we're going to win it, but I don't know what kind of ancillary damage there will be."

The gripe actually dates back to 1971, when the board of the Community Trust, the largest such community foundation in the nation, took these six funds and decided it would no longer automatically give their money to CSS, even though at least a portion of each fund was originally earmarked for that charity. Unfortunately, the Community Trust failed to tell CSS about the decision in writing. "I think it's a little bizarre that they never sent a letter," says Jones. "It's like somebody stopping me in the street and saying, 'By the way, we're cutting off millions of dollars.' "

Jones himself only learned his group might be entitled to these funds in 1993, when CSS received a Chemical Bank statement with an unfamiliar account number. When CSS sued the Community Trust two years later, "we were quite surprised," says Community Trust president Lorie Slutsky. "The first time we knew about the lawsuit was when we heard about it from a Wall Street Journal reporter. It's my understanding you usually tell the people you're suing first." Slutsky's group lost the suit in Manhattan Surrogate's Court last fall but is appealing the decision: Arguments will be heard on April 14. "We have no choice," she says.

At stake is more than the fate of a few trust funds -- or even the underclass both sides aim to serve. The main issue is how long donors' specific wishes should be followed after the givers die -- and whether the group that controls these funds should have more oversight in exercising its so-called variance power. The government is certainly willing to play watchdog: On March 1, Spitzer filed an amicus brief on the case, arguing that he should be notified each time a community trust uses variance power. "We tried very hard to get the parties involved to resolve the case," says Bill Josephson, head of the attorney general's charity division. The $4 billion Starr Foundation announced in its own brief that it would stop donating to the Community Trust if it doesn't temper its variance power.

Each side admits being terrified that the fallout from this fight could affect future donations. Jones is eager to take the high road, positioning his $84 million group as a poor victim of the whims of elites. "This was essentially about taking money away from the powerless," he says. "They weren't taking money away from the Met." Slutsky, meanwhile, sees this as her group's battle for independence. "Foundations need variance power," she proclaims, "to keep charitable trusts free from the grip of the dead hand."


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