Preface

• I’m sharing this to the EA Forum at a time when many orgs (like my own) are concerned about having received funds from FTX Foundation. Orgs are wondering: 
  • (a) will they be forced to return funds?
  • (b) would they feel morally obliged to voluntarily return funds?
• To my knowledge, there is no mechanism for voluntarily returning funds.
• In case such a mechanism arises, it might be helpful to think about other historical examples. This post is not trying to give a clear answer to the question of what orgs who have received funds from FTX should do.

Exec summary

• Based on this one case study, of a scenario where charities received tainted donations from a source widely criticised in the press as morally dubious, it appears that most charities kept the money (see further discussion below, as it’s not totally clear that this is the case).
• Some chose to return it; the decision to return funds seemed to be correlated with being a larger charity. 
  • Because the largest donations were to the largest charities, it turns out that most of the money granted was returned.
• “All or nothing” approach: It appears that all the charities responded by saying that they either returned (all) the money, or they didn’t return the money (at all).
• To the extent that a rationale was provided, the most common one was that the charity had already spent the money.

Background

• In Jan 2018 the Financial Times reported that two FT journalists went undercover as hostesses at the Presidents Dinner.
• The Presidents Dinner was a prestigious charity fundraising event which used to happen annually in London. It was for male guests only. It raised >£1m per year.
• The undercover investigators reported that there was widespread sexual harassment conducted by the guests towards the female hostesses working the event. This included widespread groping, and one man was reported to have exposed his penis to a hostess.
• This was in the wake of the explosion of the #metoo movement, which went viral in 2017.
• It’s useful to note that there are many ways in which this scenario was different from the FTX scenario: there was no legal pressure to return funds; there was a lot of press attention, and it was clearly about unethical fundraising practices.

How charities responded

• The below summarises reporting by The Guardian on how charities responded. My workings can be found in this spreadsheet.
• Charities decided to either return the funds, to state that they wouldn’t accept donations in the future (which implicitly means that they were keeping the funds they had already received this time) or provided no comment. 

• In cases where the donation was rejected/sent back, the donation was not large compared to the organisation’s reserves.

• Because of time constraints, I didn’t perform this analysis for charities who were not known to have rejected donations.
  • For those charities which didn’t send back the donations, based on a quick glance, and my familiarity with the charity sector, I’d say that a couple of the charities were large, but most were probably small. However the amounts donated to the smaller charities were also small. So the ratio of reserves to the size of the donation being returned may also have been as large as the items in the table above.
• The decision to return funds seemed to be correlated with being a larger charity. 
  • This is presumably because having diverse sources of funding makes it easier to reject funding on moral grounds. 
  • It may also be because wider public opinion is more important to them, because a material amount of their donations come from individual donors, whereas smaller charities are more likely to have a small number of major donors being the main sources of income, and with those funding sources it’s easier to explain decisions in a nuanced way.
• It’s not clear what is meant by “no comment”. 
  • To the extent that “no comment” denotes an active decision not to comment, it suggests that the charity probably kept the money
    • The Guardian article did not use language like “Charity XYZ could not be reached for comment”, which is distinct from “no comment” (the latter meaning that they reached the person but the person opted not to comment). 
    • I don’t know if that means that all the charities were reached but actively decided not to comment, or if charities who simply didn’t reply (e.g. because they didn’t see an email quickly enough) were also recorded as “no comment”.
    • Arguments against this being the case include the fact that a commitment not to accept future donations is fairly cheap (unless the Presidents Dinner provided funds on a recurring basis). This makes it more likely that the journalist was simply being less clear than they could have been.
    • In other words, “no comment” might just mean that the journalist reached out to the charity but the charity didn’t reply in time, but that charity had, in fact, decided to send the money back.
• “All or nothing” approach: It appears that all the charities responded by saying that they either returned (all) the money, or they didn’t return the money (at all). It appears nobody said they would return part of the money. I expect there are two drivers for this:
  • The charities might have been aiming to hold a clear, unambiguous moral stance. They might have felt that acknowledging the legitimacy of both perspectives and compromising might have appeared duplicitous
  • They might have decided there was no reason to partially return funds, given that donation was not a substantial proportion of the charity’s overall income.
  • This is speculation – the source didn’t provide enough information about the rationale for the decisions.
• To the extent that a rationale was stated, multiple charities did provide the rationale of having already spent the money as a rationale for not returning the money, and hence they implicitly believed it was legitimate not to return funds which were already spent.
• It’s unclear what happened to the returned funds. I’ve seen no sign of the thought processes that charities went through when deciding whether to return these funds. However in other cases relating to tainted donations, the consequentialist argument that it is better for the funds to be put to good use than returned is a common theme.