The Curious & Murky Beginnings of the Thomas B. Fordham Foundation
Thomas B. Fordham was a Dayton industrialist who died in 1945. Fordham gained wealth as chief of General Motors’ Frigidaire Division, and then on his own providing war materiel for the great national effort during WWII. When his country called, Fordham responded as one of many who helped the Allies win the war through first the lend-lease program, and after December 8, 1941, supplying American troops with the arsenal of democracy. However, it was not until 1959 that his widow, Thelma Fordham Pruett, incorporated the Thomas B. Fordham Foundation as a private grantmaking foundation.
In Ohio, you must have three individuals that serve as trustees of a charitable foundation. And in this case, the three trustees were somewhat curious. In 1959, the three were Samuel L. Finn, the longtime attorney and friend of Thomas Fordham, his son and attorney Chester E. Finn, Sr. and Mrs. Fordham Pruett.
From 1959 until 1995 Mrs. Fordham Pruett ran the organization by herself, making donations to various local charitable endeavors. Samuel L. Finn died in 1976 and was presumably replaced on the board at that time by his grandson, Chester E. Finn, Jr.
Mrs. Fordham Pruett died in 1995 and apparently left the bulk of her estate to the foundation, swelling its bank account to the tune of $50 million. Chester E. Finn, Jr., then made the case to the remaining board members that since Mrs. Fordham Pruett did not make her wishes known to them, they were free to take the foundation in a new direction. Thus, the Thomas B. Fordham Foundation was reborn in 1997, along with eventually forming the Thomas B. Fordham Institute in 2001.
But that is the curious and murky part. Were Mrs. Fordham Pruett’s wishes really unknown? The original articles of incorporation gives us a clue and are as follows:
The members of this corporation shall not have any interest in the property or earnings of this corporation in their individual or private capacity, and prior to any dissolution of this corporation, all of its property shall be applied and used and entirely consumed for the purposes hereinbefore provided.
While this paragraph wasn’t very well drafted, remember this was intended to be a small
foundation in 1959, the meaning does seem clear. First, the members, which were the trustees, could not profit from the foundation, and second, the funds in the foundation were intended to be all given away and the foundation then dissolved.
Clearly the trustees decided to do neither. Instead, in 1996 and again in 2006 the articles of incorporation were amended. In addition, in 2001 a related organization was set up called the Thomas B. Fordham Institute.
The 1996 articles of incorporation changes made the foundation into a perpetual organization, broadened its scope of activities, and most importantly, allowed its officers and board to be compensated. And certainly it was in all in their personal financial interests to do so. By this time, Chester E. Finn, Sr. was an attorney with Porter, Wright, Morris & Arthur. Porter Wright has had the legal work for the foundation for the past twenty years along with having an attorney on the board as a paid trustee. While we were unable to obtain, and review all twenty of the tax filings for those years, a review of the fourteen years of tax returns available show legal fee payments of approximately $1.3 million from the foundation alone. We were able to identify another $160,000 in legal fees paid from the institute over a seven year period.
Chester E. Finn Jr. has served as President or President Emeritus of the Foundation over that twenty year time period. The lowest annual salary that can be found indicated that he was paid in the year 2000 when he was paid approximately $123,000 for his work. For most of those years he was paid by both the foundation and the institute and earned typically as much as $224,000 in combined income. The most recent return continues to show a salary in excess of $200,000 per year as a trustee and President Emeritus. Presumably Chester E. Finn Jr. will continue to be paid for that position for the remainder of his life. Even at an average salary of $150,000 over twenty years, which would be low, Chester E. Finn Jr. would have earned over $3 million in salary in that time period.
Mr. and Mrs. Fordham died long ago. We will probably never know for sure what their true intent was for their vast wealth. And the ones that did know for sure, their attorneys and the three member board that originally governed the foundation, have benefitted greatly by maintaining it as an ongoing concern.