Can you ever be too polite? Yes. When funding for cultural broadcasts evaporates, art history classes are eliminated and after-school art programs are cut, strong action is necessary. Over time, occasional carelessness by well-intentioned volunteers has snowballed into an auditing and accounting catastrophe at many local museums. Financial oversight is so poor that federal law enforcement has only had the resources to investigate the larger multi-million dollar cases. Local law enforcement leaders do not even know what depreciation rates to use for art exhibits and cannot pass art accounting tests that meet international standards.
The scale of annuity fraud by Met Life and AIG shows how this can happen when museum finance committees focus more on fundraising than on financial management and quality control. Both companies systematically used museums and government agencies to sell annuities loaded with hidden fees deducted in small amounts over decades. They accomplished this with pay for play deals using tax-deductible charitable contributions that made it look like the annuity agents were generously supporting their community. In fact, these contributions of $25,000 to $50,000 secured sales commissions and bonuses that added up to millions in ill gotten gains.
The focus on fundraising by many museums is no secret. When the American Association of Museums met in Los Angeles last May, the fundraising expert advice panel advocated selecting trustees based on their fundraising contacts and not their accounting expertise.
The details of the annuity fraud cases heightened concerns that museum fundraisers have been exploiting the elderly and infirm to meet aggressive fundraising targets. Five sources have confirmed that none of the fundraising staff or volunteers at LACMA or the 10 largest museums in San Diego County has cleared their fundraising prospect lists with the county’s database of the physically and mentally infirm. This is not just careless, it is a felony. It is also a serious civil matter in California — charities which solicit bequests have fiduciary obligations to the donors who sign the bequests and are responsible for confirming that they are of sound mind and body.
This shows how the overdrive on fundraising has raised serious concerns regarding felony misconduct in soliciting charitable contributions. This has also actually damaged fundraising capabilities by prompting liability insurance rate increases. In many cases, these have been passed through to museum patrons in the form of steep admission ticket price increases. Last year, ticket prices increased 33% at the San Diego Museum of Natural History at the same time that educational programs were eliminated.
The Met Life charitable annuity fraud case and FBI charges of widespread appraisal fraud have built the foundation for museum patrons and targets of prohibited fundraising activities to improve museum management by launching a class action. However, inappropriate behavior by the armed security staff and armed law enforcement patrols have raised concerns about heavy-handed scare tactics to whitewash widespread fraud. This has ultimately painted the most aggressive fundraisers into a corner.
An effective alternative has been to report these issues to the Civil Office of the United States Postal Service, which prosecutes illegal use of the mail for charitable solicitations. While local law enforcement complains constantly about limited resources, mail volume has declined, making more Postal Service staff time available to investigate fraudulent charitable solicitations using direct mail.
If you care about art, do your part! Report inappropriate solicitations of charitable contributions or exploitation of the elderly and infirm to the Inspectors of the United States Postal Service.