A Nebraska Supreme Court ruling is expected any day now in the case of Gilbert M. and Martha H. Hitchcock Foundation v. Kountze. The case is being watched closely by pubic interest advocates concerned about self-dealing and corruption in the world of philanthropy. (For more on this case see my previous report for CounterPunch, Foundation Wars.)
As the Nebraska Supreme Court noted in 2006, there are “multiple allegations of fraud, dishonesty, and self-dealing in this case, involving a multi-million-dollar charitable foundation of significant social and community importance.” Soon we shall see if the takeover of the Hitchcock Foundation by a rightwing cabal will be stopped by Nebraska’s highest court.
Nebraska is a fascinating place. Here you will find the nation’s only non-partisan, unicameral legislature, the birthplace of Malcolm X and the home of Warren Buffett, the world’s richest man. Kool-Aid is the official state soft drink.
Nebraska has a laissez-faire mode of regulating nonprofits and that fact certainly wasn’t lost on Warren Buffett when he decided to move most of his foundation’s assets out of Nebraska to the Bill and Melinda Gates Foundation.
The Hitchcock Foundation has been making donations to charitable, religious, and educational organizations since 1962. Gilbert Hitchcock was a U.S. Senator and founder of the Omaha-World Herald. For decades, foundation affairs were run smoothly by President Denman Kountze Jr., Martha Hitchcock’s nephew. But when Denman and his sons, Edward and Charles, raised concerns about self-dealing by others on the board, all hell broke loose. Over the last six years, several related lawsuits have been filed, two long-time board members have died, and a new cast of characters is claiming control of foundation assets.
Nebraska’s Attorney General is charged with overseeing nonprofit corporations on behalf of the public to prevent waste, fraud, and abuse. When board members sue each other, they must, by state law, give notice to the Attorney General. But when the Neely Kountze faction of the Hitchcock Foundation board filed their lawsuit, they failed to give legal notice of their action to the AG. That critical error gave the Nebraska Supreme Court grounds in 2006 on which to reverse and remand the earlier ruling of District Court Judge James Gleason.
Nevertheless, the Supreme Court ruling was virtually ignored and instead of holding a new trial, Judge Gleason essentially reinstated his 2004 decision. Nebraska Attorney General Jon Bruning could have jumped in and enforced the law at that point, but he continued to sit on his hands — strange behavior for someone who calls himself “The People’s Lawyer” on his official website.
Bruning may be too busy these days with political ladder-climbing to get involved in the messy Hitchcock affair. He briefly ran for Chuck Hagel’s U.S. Senate seat, claiming Hagel wasn’t supportive enough of Bush’s war policies. Bruning has been quoted as saying he is so tough on crime that it makes him “want to throw up sometimes.” Now he’s working to reinstate electrocution as a method of delivering the death penalty, even though the Nebraska Supreme Court ruled it to be cruel and unusual punishment.
The death of Hitchcock Foundation President Denman Kountze Jr. in 2005 left the burden of defending the family’s foundation to son Edward, who alleges in a number of lawsuits that a board faction led by his cousin Neely Kountze conspired with unscrupulous lawyers and bankers to illegally seize control of the foundation. He further alleges that foundation assets are being mismanaged and “looted” and warns that other large foundations risk a similar fate, due to the lack of regulatory oversight by state and federal officials.
According to Edward, the recipe for the foundation takeover was fairly simple: strip the elderly President of his quorum power, get control of the bank account, add a fake board member to create the illusion of a 4-3 majority, file a lawsuit, and proceed as if you’ve done nothing wrong.
The foundation is now in some kind of “twilight zone,” controlled by dubious directors while the only validly elected board member, Edward Kountze, is barred from serving. Foundation tax returns show the current seat-holders on the board of directors to be ever changing, like in some strange game of musical chairs.
W. Russell Bowie, III, for example, joined the Hitchcock board in September 2004. Less than two years later the governor appointed Bowie to a judgeship in Douglas County District Court, the same district where the Hitchcock foundation lawsuit is being litigated. Asked whether a newly appointed judge can continue to serve as a trustee on a charitable organization, the Nebraska Judicial Ethics Committee ruled the judge “should avoid service with any organization that is regularly engaged in adversary proceedings.” Despite the fact that the Hitchcock Foundation has been involved in litigation and controversy all these years, Judge Bowie refuses to step down from the Hitchcock board.
John W. Webster was added to the Hitchcock board in September 2002 and remained a trustee for four years, even though the court ruled he was not validly elected as there was no vacancy to fill. Webster’s role in the takeover of the board was pivotal because it created a fraudulent 4-3 majority. Webster knew very well how his actions would affect the balance of power when he joined the Neely Kountze faction to wrest control from President Denman Kountze Jr. Webster, after all, had served on numerous community boards, was President of the Scottish Rite Foundation of Omaha, President of the Nebraska Broadcasters Association, and served on the board of the Omaha Home for Boys along with Judge James Gleason. As a Hitchcock Foundation board member, Webster helped to funnel thousands of dollars to The Nebraska Nature Conservancy and now he serves as chairman of the Nebraska Nature Conservancy board.
The newest member, Tower Kountze, showed up on a list of trustees to gather April 22 for the foundation’s annual meeting. Tower is Neely’s son and is employed as a lobbyist for Husch Blackwell Sanders, LLP, a firm that represents several banks, including First National Bank of Omaha and its holding company, First National of Nebraska, Inc.
One of Edward Kountze’s concerns is that the foundation will be rolled into the Omaha Community Foundation, which already sits on $450 million in assets. The community foundation’s chairman, Michael McCarthy, is chairman of McCarthy Group, the billion-dollar parent company of Elections Systems & Sofware, Inc.
The community foundation’s legal counsel is Thomas Pansing of Pansing, Hogan, Ernst & Bachman, LLP. The law firm’s clients include the First National Bank of Omaha, which has been heavily involved in the Hitchcock controversy, and South Texas Land Limited Partnership. The Texas partnership lists a post office box in El Campo, Texas as its management address but shares the same administrative address as the Hitchcock Foundation at 1755 E. Locust St. in Omaha.
Neely Kountze, the new President of the Hitchcock Foundation is also General Partner of the South Texas Land Limited Partnership. John Bachman of the Pansing firm is an attorney for South Texas Land and also now holds one of the contested board seats on the Hitchcock Foundation.
There is still a related case before the Eighth Circuit U.S. Court of Appeals and other legal disputes to settle, but a sound ruling by the Nebraska Supreme Court now will go a long way towards restoring the public’s faith that there will be, as the state motto says, “Equality Before The Law.”
PAT WOLFF is a writer and researcher.