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Ethics ruling hampers fund-raising efforts

by Karen A. Grava - January 22, 2007

A ruling by the state Ethics Citizen's Advisory Board last spring has had a significant and detrimental impact on corporate giving to state entities, including UConn.

The ruling interferes with the ability of all state entities but most directly with the ability of UConn, the vocational technical schools, and the other public colleges to raise private funds, by prohibiting gifts from any vendor doing business with the state agency to which it plans to give funds or from any company that employs a lobbyist.

"The original ban on gifts applied only to individual state employees," says Rachel Rubin, chief compliance officer.

"Extending it to state agencies appears to be contrary to legislative intent and severely limits our ability to raise private dollars."

Under the ruling, gifts to UConn from companies doing business with UConn are prohibited. In addition, if a company is a registered lobbyist, then it would be similarly prohibited, even if it had no contractual relationship with UConn.

In practice, the ruling prohibits gifts from nearly every major corporation in the state. It means, for example, that Pfizer, General Electric, and other major Connecticut corporations cannot contribute to UConn or any state agency or public higher education institution because they are deemed lobbyists under state law, said Rubin.

Likewise, a gift of land that United Technologies planned to give to the state to provide additional parking at Rentschler Field would not be permissible.

It means, too, for example, that Bayer, which is leaving its West Haven campus and wants to contribute equipment to various teaching institutions, could not contribute to UConn. It could contribute, perhaps, to the University of Connecticut Foundation, but that issue is murky.

The problem has arisen even though the ruling does not ban gifts to a foundation associated with a public entity such as the UConn Foundation.

It may, however, ban the foundation from passing the gifts on to the University.

In a Nov. 2 letter from Cynthia Isales, assistant general counsel to the Office of State Ethics with regard to Charter Oak State College, Isales told Cynthia Forbes at Pratt & Whitney that: "The Code of Ethics would not prohibit the Foundation, a non-state entity, from receiving funds donated by Pratt & Whitney. It would, however, prohibit the Foundation from then turning those funds over to (Charter Oak State) College."

Restricting the giving of funds from the Foundation to the University could pose a serious problem, says John Martin, president of the UConn Foundation.

Since the Foundation is a tax-exempt corporation sanctioned by the Internal Revenue Service solely to raise money on behalf of UConn, it could have difficulty justifying its tax-exempt status if it is unable to provide gifts to the University.

With regard to corporate gifts, the ethics ruling is a major problem, Martin says.

"So far, this has cost the Foundation about $7 million in gifts, and several donors have informed us that their gifts will not be released until this issue is clarified," he says.

"The ruling also is ironic, since the Legislature asked UConn as part of UConn 2000 to raise private dollars," Martin adds.

"If it stands, this ruling has the potential to shut down fund raising on our campus."

John Lippincott, president of the Council for Advancement and Support of Education, notes that the ruling is unprecedented.

"As the head of the largest association of educational institutions in the world, I feel compelled to express my concerns about the deleterious effect of this ruling on private support for public higher education in your great state," says Lippincott in a letter to Martin.

"Connecticut could be placing its state institutions at a distinct disadvantage in an increasingly competitive marketplace," he adds, noting that "Connecticut, to my knowledge, [is] the only state in the country to ban purely philanthropic gifts to institutions of higher education based on the contractual relationship of the donor to the state."

The General Assembly convened on Jan. 3, and the University is trying to resolve this issue as soon as possible.

"Many legislators understand the impact the ruling has had not only on Connecticut's public higher education institutions, but on all state agencies," says Gail Garber, the University's director of governmental relations.

"We are hopeful that the General Assembly will address this issue early in the session."

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