Endowment or Inducement? – THE LEGAL DISTINCTION BETWEEN COLLEGE DONATIONS AND BRIBES

Endowment or Inducement? – THE LEGAL DISTINCTION BETWEEN COLLEGE DONATIONS AND BRIBES

10.1.2019

By Elizabeth Vulaj

Everyone says money talks, but what does the sum of $500,000 really say? According to actress Lori Loughlin, it represents a substantial college donation, yet many legal experts, attorneys, and concerned citizens around the world believe it is nothing short of a corrupt bribe. In March 2019, Lori Loughlin, along with over 30 other parents, was charged with conspiracy to commit felony mail fraud and honest services mail fraud, after it was revealed that Loughlin and her husband, fashion designer Mossimo Giannulli, paid scheme organizer William Rick Singer half a million dollars to facilitate her daughters’ guaranteed acceptance to the elite University of Southern California.¹

In April, many of the parents charged (including another prominent actress, Felicity Huffman) pleaded guilty in an effort to lessen their overall sentence, yet other defendants, including Loughlin, pleaded not guilty and now await a trial in the near future, even though no date has been set yet.² Many discussions and debates have followed since news of the scandal broke, yet one of the biggest questions people have been asking is: what is the true and legal distinction between a donation and a bribe?

First, one of the key differences lies in who receives the amount of money that the parent is prepared to give: “A donation is made to a college, while a bribe is paid to an employee who, in effect, is stealing an admissions slot, hawking it and pocketing the proceeds.”³ Second, bribes are typically offered to certain individuals (typically that includes admissions officers, deans, or proctors) themselves, whereas donations are made to the name of the school itself. Specifically in New York, bribery in the first degree is defined as when any person agrees to confer a benefit to a public servant upon the agreement or understanding that that public servant’s action or decision will be influenced by whatever sum that is given⁴ and is considered a felony, whereas it is still perfectly legal for parents to donate large sums of money to the colleges themselves and collect a tax break from it.⁵ Third, many note that bribery is more likely to guarantee what the donor wants, since it often occurs within an agreement between two parties, whereas donations “don’t guarantee admission but can serve to make a child’s application stand out.”⁶

Despite the legal differences between the two, many argue that the issue with parents making substantial donations to schools is that, while entirely legal, it still unfairly tips the balance in their favor, since colleges have begun to rely more heavily on increasing tuition rates and donations to get by, due to declines in state funding and federal research aid.⁷ And, even though “it’s true that making large donations is a relatively transparent, legal tactic . . . it speaks to the prevalence of social reproduction at these schools: a system that is designed to benefit the class they’ve traditionally served, generation after generation.”⁸ Recognizing this inequality, many Democratic lawmakers in California have tried to implement laws in an effort to crack down on the corruption in the college admissions processes in many schools across the state since the scandal. Recently, lawmakers advanced a bill that would prevent schools such as the University of California and California State University from granting special admittance to students without the approval of at least three college administrators.⁹ Other bills have also called for a ban on “preferential admissions to California colleges for students related to donors or alumni”¹⁰ and proposed eliminating tax deductions for donations to nonprofit organizations that had a part in the cheating scandal.¹¹

Bearing all this in mind, what does this mean for Lori Loughlin, especially since, unlike defendants such as Huffman, she rejected¹² prosecutors’ initial plea deal back in April and decided to plead not guilty? Reportedly, Loughlin believes she has a strong defense because when she and her husband gave money to Singer’s charity, Key Worldwide Foundation, which was later exposed as a money-laundering operation, “they thought the money would be used for a donation and to benefit the school,” and she believes a judge will recognize that.¹³ Some are not so easily convinced.

In California, bribery is defined as anything of value being given “with a corrupt intent to influence, unlawfully, the person to whom it is given.”¹⁴ While it is true that it can be difficult to prove a person’s deceptive intent when they are claiming to have made a simple donation, there are many facts in this case that indicate that Loughlin and her husband had both the knowledge and intention to utilize the money given to Singer to unlawfully bend the rules in their favor. First, reports surfaced of phone conversations between Loughlin and Singer in which Singer warned Loughlin that the IRS was investigating his foundation and he told her that “you’re probably going to get a call” and that “I have not told them anything about the girls going through the side door, through crew, ever, though they didn’t do crew to get into USC… all I told them was that you guys made a donation to our foundation to help underserved kids,”¹⁵ to which Loughlin replied, “Uh-hmm,”¹⁶ indicating her knowledge that the money was not being used as a mere helpful donation to benefit Singer’s charity or USC. Second, according to various court documents, Loughlin and her husband have also been accused of taking part in staging a photo of their eldest daughter Isabella on a rowing machine, claiming she was a skilled coxswain, even though she never participated in crew.¹⁷ If this accusation is true, it serves as even further evidence that Loughlin not only had knowledge of the overall scheme’s deceitful practices, but even participated in facilitating aspects of it herself, making the defense that she believed she was simply making a monetary contribution all that more difficult to believe. Third, with all the crackdowns that lawmakers are fighting to have implemented regarding college donations and legacy admissions in California and across the country, it may become more difficult to utilize the defense of making a gift or endowment to the school once the trial date nears.

The case has not only shed light on the college admissions process in California, but in multiple states as well, including New York. It has been reported that Singer’s charity donated over $300,000 to NYU Athletics between 2014 and 2016,¹⁸ yet NYU has not been implicated in the scandal and the school’s spokesperson, John Beckman, has called the entire case “deeply troubling.”¹⁹ Beckman also maintained that NYU Athletics does not facilitate relationships between coaches and admissions officers regarding potential candidates that they are interested in recruiting.²⁰ If this is true, and if Singer’s action regarding NYU was a mere donation with no condition or agreement that Singer or anyone he knows would directly benefit from this, it is unlikely this would be considered bribery under New York law.²¹

Whichever way a jury or a judge ends up deciding, it is clear that many people in the legal community are trying to more clearly define the difference between a donation and a bribe, and it may become tricky for defendants in the future to use that blurred line in their favor. As of now, Loughlin is not working or actively filming any future projects, and her days are filled with working on her legal defense and awaiting a trial date.²² Whatever the outcome may be, one thing is clear: the rest of America will continue to be watching.

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