Companies Face Quandaries Over Matching-Gift Programs

By David Bank

The Wall Street Journal, February 18, 2003 original (by subscription)

The massive earthquake that killed thousands of people in the Indian state of Gujarat two years ago hit home in Silicon Valley, where Indian-born engineers make up a sizable chunk of the work force. Technology companies moved quickly to support the disaster-relief efforts.

Perhaps too quickly, some companies say now.

Cisco Systems Inc., Oracle Corp. and Sun Microsystems Inc. have suspended matching grants to the India Development and Relief Fund, of North Bethesda, Md., after receiving reports from critics both here and in India that some of the money may have gone to Hindu extremists linked to violence against Muslims during bloody riots in Gujarat last year.

A report published in November by activists in Bombay, India, accuses the IDRF of providing support to groups linked to sectarian violence. Critics of the IDRF have been spearheaded in the U.S. by the Campaign to Stop Funding Hate. "We felt a lot of people did not know what they were giving money to," says Shalini Gera, a spokeswoman for the loose-knit group whose address is a post office box in Stanford, Calif.

The IDRF, which has raised more than $10 million since 1997, says it funds only humanitarian relief and economic-development projects in India. In denouncing the report, supporters of the IDRF have attacked its critics variously as "leftists," communists," or "pan-Islamists" who have little knowledge of IDRF's relief work. The accusations are "falsehoods packaged by propagandists masquerading as concerned citizens of the world," said Vijay Pallod, an IDRF spokesman.

Amid a murky political landscape of charge and counter-charge about a charitable group's activities abroad, what are administrators of corporate matching-gift programs supposed to do? Their difficulties in sorting out the issue demonstrates the complexities companies face in disbursing hundreds of millions of charitable dollars each year.

"This has the potential to scare companies from doing this as 'too controversial,' " says Rosalie Gann, who directs Oracle's matching-gifts program. "There's no way you want any kind of controversy around philanthropy and volunteers."

A survey in 2000 of more than 1,000 companies by the Council for Advancement and Support of Education found that nearly one-quarter of companies match gifts to any group with tax-exempt status as determined by the Internal Revenue Service.

But an organization's tax status says little about its activities. Benevolence International Foundation, based in Chicago, earned tax-exempt status and qualified for matching funds from several companies until the U.S. Treasury Department put it on its list of terrorist-linked organizations last fall. The head of Benevolence International, Enaam Arnaout, this month pleaded guilty to defrauding donors by illegally buying boots and uniforms for rebel fighters in Bosnia and Chechnya. (The U.S. government dropped more serious charges that the charity had funded Osama bin Laden's al-Qaeda organization.)

Microsoft Corp., which last year matched $19.8 million in employee contributions, sent about $20,000 to Benevolence International over several years, says Bruce Brooks, its director of community affairs. Compaq, now part of Hewlett-Packard Co., matched $2,400 in gifts to Benevolence International between 1999 and 2001, an H-P spokeswoman said.

As for the IDRF, Microsoft has provided the group $55,000 since 1999. Microsoft hasn't moved to suspend the organization's eligibility because it isn't explicitly political or religious, says Mr. Brooks. "We have not gone down the path of making value judgments about our employees' choices," he says.

It isn't feasible to investigate the activities of every organization, says Roy Kaplan, president of JK Group Inc., a Princeton, N.J., service that runs matching-gift programs for many corporations. "With matching gifts of $25 or $35, how much can you invest in vetting that agency, versus just making the donation?"

Mr. Kaplan, acknowledges, however, that some companies do sometimes veto matching donations to some groups. Cisco, for example, is among many companies that don't match gifts to the Boy Scouts of America, citing their policy excluding openly gay scouts and scoutmasters. Some companies block gifts to Planned Parenthood to avoid any association with abortion; some also block funds to antiabortion groups, Mr. Kaplan says. Some companies won't match gifts to either the National Rifle Association or to pro-gun control organizations.

Watchdog organizations say charities need closer scrutiny. "If the only steps you're taking is to see whether they've been given [nonprofit] status by the IRS and to see whether they're on the terrorist list, you're not taking as many steps as you probably should," says Kyle Waide, deputy director of Charity Navigator, a nonprofit ranking service in Mahwah, N.J.

Charity Navigator (www.charitynavigator.org) lists more than 2,100 charities but hasn't ranked IDRF because the group's tax returns raised questions, Mr. Waide says. For example, the group raised $3.8 million in 2001 while spending only $15,000 on fund raising and incurring almost no other overhead fees.

" There may be an affiliate organization they have not named that serves as the operating arm for that organization." he says.

A spokesman for the IDRF says the group's overhead is low because it is run by volunteers who pay their own expenses. The spokesman also said, "We are very definite in our response that we have never funded [organizations] that have used funds for anything other than development and relief. We are not religious. We are not a sectarian organization. We are not in the business of spreading hate."

The Financial Times reported that the U.S. State Department has referred the report alleging ties between the IDRF and extremist Hindu groups to the Justice Department for investigation. A State Department official confirmed the report has been forwarded to the Justice Department for review.

The debate over the IDRF has divided Indian employees in Silicon Valley. Although Cisco has sent IDRF at least $70,000 since 1999, its own India-born employees reflect the split over the IDRF debate. On the company's internal "Masala" e-mail discussion list, some criticize the group's political links, while one employee railed against "Indians trying [to] block Indians helping Indians."

Shyam Palleti, an engineer who helped form Volunteers for India Development and Empowerment, worries that suspension of matching funds might harm future fund-raising efforts for disaster relief in India.

In 1999, when a cyclone caused major flooding, Cisco employees quickly raised nearly $129,000, including company matching, most of which went to the IDRF. When the earthquake struck Gujarat in January 2001, Cisco employees quickly raised about $750,000. Only a small amount went to IDRF because Mr. Palleti's group had developed its own network of contacts in India, though the IDRF remained a partner in the effort. "All the money went to the right projects," Mr. Palleti says.

At Oracle, some employees who donated to the IDRF after the earthquake back the company's decision to suspend matching grants. Bhaskar Ghosh, a software developer, said he gave $300. "Everybody assumed the money would go to the right place," he says. But if the IDRF did back violence in Gujarat, he says, "I don't want to support it and I would be happy if my company doesn't support it."

Write to David Bank at david.bank@wsj.com