Putting these together with the Nemours
Foundation
and other Do Pont foundations mentioned in earlier chapters, one finds Du Pont foundations totaling nearly $500 million.
Lundberg - The-Rich-and-the-Super-Rich-by-Ferdinand-Lundberg
This is without considering the many costly local elections in off years or parallel with the national elections.
The rising figures, often cited, are considered stupendous.
These campaign funds are supplied by the wealthy and the propertied who, it should be clear, get a manyfold return on what they pay for.
As the political parties (in default of effective popular participation) are to all practical purposes theirs, they obtain preferential treatment from government.
So it has been all down through history.
The United States is not an exceptional case.
It is a typical historical case, contrary to what the Fourth of July orators would have one believe, except that the people have been subdued through their own ineptitude.
People in the Tax Net
In 1940 there were filed 14,598,000 individual income tax returns. In 1961 61,068,000 were filed. The greatest increase took place in 1944 under the wartime tax laws; in 1945 the total stood at 49,751,000. 61
Having brought this great additional throng into the tax net under the income tax, originally an upper-class tax, does anyone believe the pubpols will ever remove the net?
By far most of these taxes are withheld from salaries and wages, earned income. In 1962 there was withheld $47. 583 billion compared with $15. 317 billion not withheld; in 1963 it was $51. 839 billion against $15. 205 billion. 62 The income tax has been transformed largely into a permanent wage tax, a Gargantuan political joke on the workers.
One often hears of tax-cheats, individuals and organizations, that are proceeded against unceremoniously by the government. As this chapter should make blindingly clear, however, the greatest tax cheat (perhaps in all history) is the United States government itself, which by means of the federal tax code stupendously cheats the vast majority of its trusting citizens on behalf of its political pets. Not only does the government do this but its prime beneficiaries daily boast to a bemused world that in the United States everyone enjoys full equality under the law. The government, of course (to give it its due), is staffed by the weird people put into office by an idiotic electorate, which is fittingly hoist by its own petard. The boobs are overwhelmed by boobs of their own choice!
The Chances of Reform
What are the chances of reforming the tax laws?
Here it must suffice to say that most experts see little prospect of reform. At most there will be further deceptive rearranging and ideological tinkering. And even if taxes were fairly apportioned, past gains would remain in the hands of the advantaged.
A colossal historical inequity like the American tax structure, a mechanism subtly fastened on a people with a view to extracting from them the produce of their labors not necessary for subsistence, is never removed by means of elections or the passage of laws. At least, it never has been thus far in history. The beneficiaries, having gone to a great deal of trouble and expense to devise and maintain this structure, are not going to stand idly by and see it dismantled. They will use every considerable power at their command to defeat all substantial reforms.
In history fantastic, capricious and arbitrary structures such as this have vanished only in some sort of climactic explosion--revolution, conquest or collapse. A far less onerous tax structure in the early American colonies was terminated not by reform but by revolution and war.
These remarks, needless to say, are purely descriptive, intended to bring out the very serious purpose underlying these laws. This earnest purpose, which is to run a vast society in a certain way for certain hereditary beneficiaries and their retainers and emulators, cannot be lightly pushed to one side, particularly when it is well wrapped in the accepted ideology of freedom. Anyone who proposed such action at this time, indeed, would be very foolish, as the populace is hardly aware-and shows no signs of wishing to be aware--that it is fastened in a straitjacket only slightly less tight than in many other ideologically unhallowed societies that could be mentioned.
Anyone who doubts that this is so may set about the task of tax reform. If he succeeds, these concluding observations will have been set at naught. And whether he fails or succeeds he will get a sound political education. 63
(Note: The reader should not suppose that this chapter is a full treatment of the tax situation. It touches only the highlights and allots no space at all to many publicly costly ludicrous oddities such as the decision allowing Kathleen Winsor to pay 25 per cent capital gains taxes for the sale of her book Forever Amber because under a tax-court ruling she was not a professional writer and had written the book "primarily because she enjoyed the research and writing which went into its composition. . . . " The interested reader should refer to sources cited and pick up enlarged bibliographies from them. He will soon see that everything in this chapter is written in a spirit of understatement.
As to the cause of it all, the socialist will murmur "capitalism. " Yet the American tax structure has no intrinsic relationship to capitalism and can, indeed, be shown as functionally inimical to it. Other capitalist countries such as England, Western Germany or Japan do not have similar tax structures. The source of the tax structure is clearly the popular electoral system and an inept electorate, which places in office smoothtalking men of a disposition to trade tax and other favors in return for personal emoluments. This the legislators do, in stages and by bits and pieces, resulting in an increasingly peculiar tax structure that may be subtly undermining the capitalist system itself.
Capitalists clearly would be paragons of unusual virtue if they did not, for inner competitive reasons, take full advantage of the fact that a politically inept public had placed into strategic offices men who are deviously accommodating on a quid pro quo basis. If capitalists--and a gullible public--were faced by a preponderance of true public men in office they would hardly seek to have written into the laws these various tax monstrosities. But the kind of electorate one finds in the existing political system is unable to insure the presence in office of a preponderance of true public men. Instead the electorate gives us people of the stripe of Senator Thomas Dodd, Congressman Adam Clayton Powell, Bobby Baker, the late Senator Robert Kerr, Judson Morhouse, Senator Everett Dirksen et al. The basic causes obviously lie out in the broad electorate. )
The over-riding problem in the United States is not economic. It is political.
Ten
PHILANTHROPIC VISTAS:
THE TAX-EXEMPT
FOUNDA TIONS
Wealthy men and women today are almost all freely labeled by the public prints as philanthropists. In such mindless parroting the word has acquired the operationally extended meaning of "wealthy person"; and "wealthy person" means, reciprocally, "philanthropist. " As hardly anybody in society is more welcome than a philanthropist, it follows that nobody is more welcome in all his beneficence than a wealthy man. By American propagandic decree the wealthy man thus has strangely been transmogrified into the quintessential cream of humanity. Simple people, the majority, accept him without reservation in this guise.
It is, furthermore, extremely rare to find the public prints, particularly the corporate press, labeling anyone other than a wealthy person as a philanthropist. Journalists now appear to make a subtle distinction between philanthropists as merely rich persons and
humanitarians as functional benefactors without money: Jane Addams, Lillian Wald, Jacob Riis, Clara Barton, Florence Nightingale.
Oddly at variance with the common perspective of the wealthy person as an overreacher of others in competition for worldly goods and power, the prevalent one is quite in harmony with the Alice-in-Wonderland treatment of contemporary affairs in public prints. As it is practiced on the American scene it is a variant of Orwellian "New- Speak," in which war means peace, peace means war, and liberation means enslavement. For the United States as much as Soviet Russia has its own "New-Speak" in which "defense against Communism" means "invasion of Vietnam" (or the Dominican Republic), Defense means attack. Patriotism means doing physical injury to someone. Inflation means prosperity. Bigness means greatness. And wealth means philanthropy. According to the public prints all is not as one might simple-mindedly suppose in the realm of wealth; contrary to reasonable supposition and statistical fact the wealthy are not endeavoring to increase their wealth but are feverishly endeavoring to give it away for good works.
The basic misinformation sedulously conveyed is this: Whatever the people's government is not taking away from the wealthy in huge tax bites is being given away to the lame, the halt, the blind, the needy, and the worthy with a lavish hand. Therefore, it seems, one should forget about the wealthy; they are not a serious factor of power in the social situation.
Instead of the wealthy, who are measurable and palpable, we are assured by approved savants that what is really involved in the social situation is something elusively unmeasurable and impalpable, discernible only to rarely subtle minds, masters of arcane and delicate methodology. These minds, more and more of late eschewing the troublesome concrete in favor of the pleasantly abstract, limn for us The Power Structure, The Establishment, The Power Brokers, and The Power Elite who face, not the poor, the exploited or the unpropertied, but The Disadvantaged, The Culturally Deprived, The Under-Privileged, The Unfortunate and The Lower Socio-Economic Strata. (All these Disadvantaged may escape their plight by climbing the golden staircase of Upward Mobility. ) Taboo entirely in the cleansed new social metaphysics are such coarse and unmannerly terms, worthy only of unwashed boors and churls, as Class and Caste, with their connotations of past and present turbulence. Very much favored is Strata, a cool and cleanly word. People are people, it seems--all pretty much the same according to democratic dogma but found in different Strata, some merely flying by choice or temperament at lower altitudes than others. And in the emerging new social metaphysics or rhetorical whitewash there are few Unemployed. In their place we have the Disemployed, even the Involuntary Leisured. There are, too, Senior Citizens in place of Old People. Persons unable to detect the difference are obviously deficient in understanding--cannot tell the difference between a war and a massive overseas police action.
"Class" is a particularly troublesome word; for one can, unless one is very careful, slip and slide on into "class warfare. " But in the elegant variance of the aseptic new terminology one can hardly make the mistake of saying "power-structure warfare," "power-elite warfare" or "lower socio-economic strata warfare. " The fashionable new terminology protects against such deplorable gaucheries. Yet the basic phenomena remain in all their harshness.
Puzzles of Philanthropy
As we are not engaged here in an embroidery upon journalistic fantasies we are confronted by a number of puzzles. To what extent are the wealthy giving their money away for good works if they are giving it away at all? This is somewhat similar to the
question faced in the last chapter: To what extent are the wealthy being taxed out of existence? And, if they are not giving wealth away, what is it that they are really doing with their numerous foundations?
As many persons are involved in all this so-called philanthropy one must not, heeding the caveats of methodological vigilantes of the Establishment, impute motivations without warrant, although the very term philanthropy (to which the Establishment methodologists oddly do not object) does already unwarrantably impute motivations. What the individual motivations are of those thousands who now transfer money to foundations one cannot say one really knows. 1 But one can trace certain indubitable nonphilanthropic effects of such activities.
The first of these is the public relations effect. The founder may have been publicly disliked, like John D. Rockefeller I, or not very well liked, like Andrew Carnegie. But the forming of foundations had the effect of altering opinion in an unsophisticated population, turning the supposed bad guy into a supposed good guy.
Just how far down in public esteem a wealthy man may sink can be seen from the following acerb vignette of John D. Rockefeller I by Ida Tarbell, writing in the widely circulated McClure's Magazine in 1905:
No candid study of his career can lead to other conclusion than that he is a victim of perhaps the ugliest . . . of all passions, that for money, money as an end. . . .
It is not a pleasant picture . . . this money-maniac secretly, patiently, eternally plotting how he may add to his wealth. Nor is the man himself pleasanter to look upon . . . portraits show . . . craftiness, cruelty, something indefinably repulsive.
Hypocrite, intriguer, freak of nature, it is not for us to say. The great public does not deal in nice psychological distinctions. . . . it says this man has for forty years lent all the power of his great ability to perpetuating and elaborating a system of illegal and unjust discrimination by common carriers. He has done this in the face of moral sentiment, in the face of loudly expressed public opinion, in the face of the law, in the face of the havoc his operations caused. . . . He has fought to prevent every attempt to regulate the wrong the system wrought, and . . . turned his craft and skill to finding secret and devious ways of securing the privileges he desired. . . .
He has turned commerce from a peaceful pursuit to war, and honeycombed it with cruel and corrupt practise; turned competition from honorable emulation to cut-throat struggle. And the man who deliberately and presently does these things calls his great organization a benefaction, and points to his church-going and charities as proof of his righteousness. To the man of straight-forward nature the two will not tally. This, he says, is supreme wrong-doing cloaked by religion. There is but one name for it-- hypocrisy.
To have blotted out of popular consciousness largely by foundational activity this once prevalent estimate has been a notable achievement in public relations engineering.
Another effect is the tax-saving benefit. Nearly all of the American foundations have come into view since the enactment of the income tax and estate tax laws: The foundations are completely exempt not only with respect to income taxes but also capital gains taxes. One does not know in each case that the founder sought to escape taxes, but common reason would indicate it. Many standard tax-advisory services explicitly point to these factors as attractive features of foundations. 2
A third effect is the corporate-control effect. Corporate control, which would otherwise be undermined by the tax laws, is preserved to perpetuity by many foundations, permitting the hereditary transmission, tax free, of vast corporate power.
A fourth effect is that the foundations extend the power of their founders very prominently into the cultural areas of education (and propaganda), science, the arts and social relations. While much that is done in these areas under foundation auspices meets judicious critical approval, it is a fact that these dispensations inevitably take the form of patronage, bestowed on approved projects, withheld from disapproved projects. Recipients of the money must be ideologically acceptable to the donors.
There is a positive record showing that by these means purely corporate elements are able to influence research and many university policies, particularly in selection of personnel. While the foundations are staunch supporters of the physical sciences, the findings of which have many profit-making applications in the corporate sphere, among the social disciplines their influence is to foster a prevailing scholastic formalism. By reason of the institutional controls that have been established, the social disciplines are largely empty or self-servingly propagandistic, as careful analyses have disclosed. 3
Whether or not these various effects were sought by the foundation creators, they are present, and the realistic observer must suppose they were what the realistic founders had in mind. (We must be particularly impressed by the frank analyses of their tax advisers. ) Via the foundations they get more mileage out of their dollars--and retain more dollars.
The Foundation Panorama
There are now so many tax-exempt foundations in the country that the number cannot be precisely ascertained.
The Foundation Directory, 1964, published by the Russell Sage Foundation, lists 15,000 foundations but says the number is increasing heavily year by year. 4 In this figure it challenges the total of 45,124 given by Representative Wright Patman, chairman of the Select Committee on Small Business of the House of Representatives. Patman's figure, the Directory holds, included civic, educational, welfare and religious organizations as well as pure foundations. 5 But the Patman investigation of the foundations in the early
1960's is the most complete available and will be cited throughout this chapter. It was focused, moreover, on the 534 largest foundations (within the Russell Sage meaning of the term) with total book-value assets exceeding $10 billion at the end of 1960.
As of early 1967, a total of 6,803 foundations in the United States had total assets of $20. 3 billion by market values (as distinct from book values), an increase of almost $6 billion in three years, according to the foundation-supported Foundation Library Center of New York, as reported in the New York Times, April 4, 1967 (32:3-4). These were record high figures, a measure of lush prosperity in Foundationland.
Total foundation assets in the period 1960-63, according to the Foundation Directory, were $14,510,765,000; so it is evident that Patman's inquiry covered most of the field. 6 Of these, $8. 161 billion were concentrated in New York; Pennsylvania came next with $853 million; then Michigan with $752. 9 million; and Texas with $744 million. New York is far in the lead here as in all other aspects of finance.
Prior to 1910 there were only eighteen American foundations, with just one exceeding $10 million. (Until 1913 there were no income taxes, until 1916 no estate taxes. ) In the next decade 76 were launched, in the 1920's 173, in the 1930's 288, in the 1940's 1,638 and in the 1950's 2,839. Of 5,050 leading foundations, 32 per cent were launched in the 1940's and 56 per cent in the 1950's. 7 In their magnitude and pervasiveness, then, the foundations are something recent, a new thing. They are plainly a reflex to the tax laws which give them exemption.
The Foundation. Directory sets forth thirteen foundations with $100 million or more in assets. ' But this listing, although impressive, is misleading because some interests have established many foundations, and small foundations in their various ways are themselves significant. Patman more revealingly shows them by groups.
The thirteen leaders according to the Foundation Directory are: Source
Ford Foundation
Rockefeller Foundation
Duke Endowment
John A. Hartford Foundation
W. K. Kellogg Foundation
Carnegie Corporation
Alfred P. Sloan Foundation
Moody Foundation
Rockefeller Brothers Fund
Lilly Endowment, Inc.
Pew Memorial Trust
Danforth Foundation
Commonwealth Fund
Assets
(millions)
$3,320
632
478
Pacific Tea
Kellogg cereals
Carnegie Steel
General Motors
W. L. Moody, Texas oil,
realty, newspapers and
banks 188
Standard Oil 152
Eli Lilly pharmaceuticals 151
Sun Oil Company 135
Purina cereals 126
Harkness family;
Standard Oil 125
Ford Motor
Standard Oil
Duke Power
Great Atlantic &
The inadequacy of the above listing on the side of understatement is readily shown. Patman detailed eleven out of fourteen Rockefeller-controlled foundations with aggregate assets of $1,016,440,732. These represented about one-seventh of all foundation assets. Among six in all there were four Mellon-controlled foundations, none with assets of $100 million but with aggregate assets of $160,651,388. Nine Mellon foundations, according to the Foundation Directory, held $372 million of assets. There were eight Ford-controlled foundations. Seven of these were infinitesimal in size compared with the monster Ford Foundation, which holds nearly a quarter of all foundation assets. Five Carnegie foundations had aggregate assets of $413,465,429. Out of nine Du Pont foundations six were stated to have aggregate assets of $18. 9 million, but the Alfred I. du Pont estate, set up in the form of a trust destined for The Nemours Foundation, had aggregate assets of $292 million at the end of 1962 compared with its originating valuation of slightly less than $40 million in 1935. 9
Patman in his text seriously understated the value of the Du Pont foundations as compared with the showing in his detailed table of foundation assets, which shows the Longwood Foundation, Wilmington, Delaware, alone with total assets of $122,712,483, and the Winterthur Corporation, a foundation, with assets of $32,271,151.
Putting these together with the Nemours Foundation and other Do Pont foundations mentioned in earlier chapters, one finds Du Pont foundations totaling nearly $500 million. 10
Protean Uses of Foundations
While the largest foundations and flotillas of foundations have been mentioned, size is not alone important. Smaller foundations act as conduits and control points, useful in all sorts of secret business affairs and especially in tax evasions. Nearly every large corporation and many of the large banks now have their own foundations. And small foundations often suddenly flower into huge growths.
-Among other things, as Patman found, foundations can become tax-free receptacles for capital gains. An individual or corporation may have an investment it wishes to
360
310
268
223
liquidate but which stands to incur a huge capital gain on large long-term appreciation. Payment of a capital gains tax may be avoided by turning the investment over to a foundation (no gift tax) and then having the foundation sell the investment (no capital gains tax). The foundation may now lend the entire liquid sum back to the donor at a nominal interest rate (no law requires that the foundations seek maximum earnings), or it may with the untaxed money obtain a controlling block of stock in some company the original donor wishes to control. With this control he can raise or lower the company's dividend rate, obtain power over its possibly large cash funds and management and perhaps even obtain for himself some further low-interest loans.
With low-interest loans received, a donor can make lucrative investments. He could, for example, with a loan on which he paid 1 per cent, itself tax deductible, go out and buy tax-free local government bonds paying him a tax-exempt 3 per cent.
Let its suppose that an original investment of $10 million was now valued at $100 million. If it were sold it would incur a capital gains tax of approximately $22. 5 million. But if it were all given to a foundation the foundation could sell it and pay no gains tax. Now if the foundation lends the whole sum back to the donor at 1 per cent he pays it $1 million a year. And if he makes $3 million on a tax-free investment in government bonds he keeps $2 million annually, tax free. But if he had sold the original amount he would have had only $77. 5 million after-tax capital which, invested at 5 per cent, would have brought him $3,875,000. After payment of about $2,712,500 (or 70 per cent) income tax, he would have remaining $1,162,500 annually or almost a half less than by the first procedure. It was clearly financially advantageous to filter the money through the "charitable" foundation.
If he so desires he can in fifty years build the original sum in his personal name back, all tax free. After fifty years he or his family can possess, in fee simple, $100 million in free new assets and also control the disposition of the original $100 million in the foundation, which may satisfy legal requirements by using its small income to assist crippled newsboys or homeless dogs.
But this is only a minimal sort of deal that can be arranged either once or preferably in a confusing series through the handy medium of a foundation. Patman showed that foundations can do anything that is financially possible, without any sort of public supervision or regulation. In the sphere of finance, name it and they can do it, tax free.
It is mainly because of the Protean utility of the foundation, particularly in the evasion of taxes, that nearly everyone in the community of wealth has come now to share the original insight of only a few such as the pioneering Carnegie and Rockefeller. Actually, the Rockefeller foundations appear to be the most efficiently run of the foundations, although their major function is definitely not the simple allocation of money to various ,vortby causes.
Whether they were so intended or not, the Rockefeller foundations are instrumental in keeping in being and under family control the Standard Oil empire that the Supreme Court ordered dissolved in 1911.
At the close of 1960, 7 Rockefeller-controlled foundations owned 7,891,567 shares of common stock of Standard Oil of New Jersey with a market value of $324,946,110. The same 7 foundations owned 602,126 shares of the common stock of Socony Mobil Oil Co. with a market value of $23,610,770. Two Rockefeller foundations owned 306,013 shares of Continental Oil capital stock with a market value of $17,060,224 (the Rockefeller Foundation itself held 300,000 of these shares with a market value of $16,725,000); 4 Rockefeller foundations owned 468,135 shares of Ohio Oil common stock with a market value of $17,998,495; 5 Rockefeller foundations owned 1,256,305 shares of the common stock of Standard Oil Co. of Indiana with a market value of
$59,736,991; and the Rockefeller Foundation, itself, owned 100,000 shares of the capital stock of Union Tank Car Co. with a market value of $3,100,000.
If Standard Oil Co. (New Jersey) were to attain substantial ownership in its competitors, it would certainly tend to eliminate competition and again tend toward monopoly, and engage the Department of justice in inquiry.
The use of a subterfuge--in the form of Rockefeller-controlled foundations--in effect produces the same result as if Standard Oil Co. (New Jersey) owned substantial stock interest in Continental Oil, Ohio Oil, Standard Oil Co. (Indiana), et al. 11
The Rockefellers also have stock holdings in these companies through personal trust funds, as shown by TNEC, Monograph #29, and perhaps directly.
One is impeded from ascertaining precisely what the Rockefeller interest now is in each of the Standard Oil companies through the spreading around of stock ownership in foundations, personal trusts and personal accounts. Under the law establishing the Securities and Exchange Commission, as we have noted, any holding of a publicly offered stock by any individual or enterprise in excess of 10 per cent of the issue must be reported. But, as I pointed out earlier, a man could secretly hold most of the stock in a company by having 9 per cent in his name and 9 per cent in each of various trusts. If he never changed his holdings the fact would never be reported. He could hold more by adding foundations to the scheme, although the foundation holdings would be on the public record. just what the percentage of Rockefeller ownership/control now is in any of the Standard Oil companies cannot be ascertained from the record because apparently no individual or trust owns as much as 10 per cent of any issue.
"It is a well-known fact that the Rockefeller family controls Standard Oil Co. (New Jersey), and the Rockefeller-controlled foundations own a substantial part of the corporation," Patman remarks in the same place.
Only once has Rockefeller dominance ever been challenged. That was in 1929 when strong-willed Colonel Robert W. Stewart, chairman of the Standard Oil Company of Indiana, appealed to general stockholders over the heads of the Rockefellers for control of the company. In the show-down vote all the Rockefeller foundations, funds, trusts, personal holdings and holdings of old Standard Oil families were massively counted against Stewart. Ile was ignominiously snowed under.
Rockefeller family control of the giant Standard Oil flotilla is unchallenged and unchallengeable. Foundation-held stock helps insure it to perpetuity. No possible combination of financial interests under existing law could dislodge that control.
I am not suggesting that this control should be altered. I am simply stating a fact of financial-political life. One may be entirely satisfied to see the Rockefellers rather than some other group in control. But control is what is at stake. One deduces this because this is the way it is. This, one must suppose, is the way it was planned by the wily master architect of Standard Oil.
True, one could suppose that the major intent was philanthropic. It is not logically impossible that the outcome of control was unplanned. But John D. Rockefeller I, whatever else he was, was a planner. I conclude, possibly erroneously and uncharitably, the situation is the consequence of a plan that visualized the retention of control as a goal.
The Rockefeller foundations, as Patman found, are by no means unique as mechanisms for corporate control.
Two Du Pont foundations owned 6,931 shares of Christiana Securities Company worth $83. 8 million, and 358,105 shares of E. I. du Pont de Nemours worth $20. 4 million.
Six Mellon foundations held 120,294 shares of Aluminum Company worth $8. 2 million, 3,729,933 shares of Gulf Oil Corporation worth $124. 5 million and 48,750 shares of First Boston Corporation worth $3. 2 million.
The Herbert H. and Grace A. Dow Foundation owned 645,238 shares of Dow Chemical Company worth $48. 1 million. The Howard Heinz Endowment owned 314,104 shares of H. J. Heinz Company worth $42. 5 million. The Timken Foundation owned 427,760 shares of Timken Roller Bearing Company worth $20. 5 million. The Charles A. Dana Foundation held 500,000 shares of Dana Corporation worth $16 million. The Gulf Oil Foundation held all the stock of Pontiac Refining Corporation, worth $32 million.
Foundations as Untaxed Holding Companies
Foundations often serve as tax-free holding companies that maintain working control by means of 10 to 100 per cent ownership of many large corporations, the Patman inquiry made certain. But 73 foundations out of 534, including some large ones, did not report such ownership positions to the Treasury as required by law. 12
Some of the leading corporations in addition to the Standard Oil group entirely or supplementarily controlled by foundations are as follows: 13
(Asterisks mark those not reporting ownership as required by law. )
Controlled
Corporation
Kaiser Industries
Callaway Mills
Coca-Cola
George D. Roper
Midwest Oil
Eli Lilly
Kellogg
preferred
S. S. Kresge
United States Sugar
B. Altman (N. Y. )
Connecticut Railway
and Lighting
preferred
Duke Power
preferred
Ford Motor
W. T. Grant
Great Atlantic & Pacific
Tea
S. H. Kress
Untaxed
Foundation
Henry J. Kaiser Family
Foundation
*Callaway Community
Foundation
Emily and Ernest Woodruff
Foundation
Sears, Roebuck Foundation
*Standard Oil Foundation,
Inc.
Lilly Endowment, Inc.
W. K. Kellogg Foundation
W. K. Kellogg Foundation
Trust
Kresge Foundation
Chas. Stewart Mott Founda-
tion (General Motors)
Altman Foundation
Charles Ulrick and Josephine
Bay Foundation
*Duke Endowment
Percentage
of Ownership
15. 4 100. 0
15. 21 11. 77
18. 34
46. 24 common
10. 40 class B
58.
51. common
34.
48. 2 84. 59
99. 25
51. 07 common
57. 24 common
82. 02
Ford Foundation 100. class A
Grant Foundation 10. 7
*John A. Hartford Foundation
Samuel H. Kress Foundation
33. 98 common
41. 9
American Chain & Cable
Federal Cartridge
preferred
Reinsurance Corp. of
N. Y. Faberge
pref.
pref.
Electrolux
Enna Jettick
Pittsburgh Steel
preferred
Sun Oil
National Bank of
Commerce, Houston
Allen Bradley
preferred
Miller Brewing
National Lead Co. of
South America
preferred
James S. Kemper
preferred
Wieboldt Stores
preferred
Sahara Coal
preferred
Tecumseh Products
Hormel
Ralston Purina
American National
Insurance
Beaunit
Jonathan Logan
Cudahy
common
Springmaid of the West
William T. Morris Foundation
*Olin Foundation
Richardson Foundation
*Samuel Rubin Foundation
17. 8 100.
14.
100. common
100. 1st
70. 2nd
Wenner-Gren Foundation for
Anthropological Research 24. 2
Fred L. Emerson Foundation 100.
Donner Foundation 10. A
Pew Memorial Trust 21. 29
Houston Endowment 23. 4
*Allen-Bradley Foundation 64. 62
De Rance, Inc. , Milwaukee 29.
*National Lead Foundation 100.
*James S. Kemper Foundation 34. 2
*Wieboldt Foundation 90. 6
*Woods Charitable Fund 20. 7
Herrick Foundation 23.
*Hormel Foundation 11. 69
*Danforth Foundation 23. 4
*Moody Foundation 34. 55
*Rogosin Foundation 24. 5
*David Schwartz Foundation 15.
*Patrick & Anna Cudahy Fund
Springs Foundation
86. 66 B 100.
Some additional significant enterprises under foundation control
were the
following: 14
Edgewater Beach Hotel
Chicago
First National Bank ,
Ligonier, Pa.
North American Accident
Insurance
Field Enterprises
preferred
Reinsurance Corporation
of N. Y.
Cannon Mills
First Boston
*The Boston Foundation 100.
*Avalon Foundation
(Mellon) 21. 5
*Field Foundation 30.
*Field Foundation 100.
*The Richardson Foundation 14.
*Cannon Foundation 11. 69
*Sarah Mellon Scaife
Foundation 43. 33
In all, no fewer than 111 foundations were found to own more than 10 per cent of one class of stock, usually the voting stock, in one or more of 263 different important
corporations as of December 31, 1960. 15 This was a considerable number of corporations in which to exercise tax-free control even though not all of them were of the commanding size of Great Atlantic & Pacific Tea, Kresge, Ford Motor or Sun Oil. The Ford Foundation does not directly control Ford Motor, but its holding of nonvoting stock enables the Ford family, which also controls the foundation, to control the company absolutely with its own block of stock of weighted voting power.
But at the end of 1960 all 534 foundations in the study held investments in the stock of more than 2,000 corporations, assuring considerable dispersion of voting influence. 16
The point about foundation control, full or partial, is that it is tax free all the way, giving the foundational enterprise a big competitive edge over nonfoundational businesses, a facet Representative Patman was especially interested in. He cited reports from various businessmen on how they were being undercut in the market by foundation-owned enterprises.
The 534 foundations "had aggregate untaxed receipts of almost $7 billion during the period of 1951 through 1960. During the one year 1960, their total receipts were $1. 34 billion as against $554 million in 1951. I find it difficult to reconcile the withdrawal of $1 billion annually from the reach of the Treasury with the federal government's pressing need for revenue.
"During the period of 1951 through 1960, the contributions, gifts, grants, scholarships, etc. , paid out by the 534 foundations totalled $3,448,867,894 (see Schedule 3A for details)--roughly 50 per cent of their aggregate receipts of $6,981,180,819. They claimed expenses, including administrative and operating costs, of $721,199,586-- almost 10 per cent of the total receipts. " 17
The foundations in the aggregate, it is readily seen, are as prudent as the corporations in what they pay out. They pay out only about half of income, plus 10 per cent for administration, while the corporations pay out only 44 per cent. The remainder, in both cases, is used for reinvestment and growth. The capital position of the foundations over the years is thus enlarged on the basis of their tax savings. What they don't pay in taxes, it must always be remembered, must be paid in other ways--mainly by the rank-and-file, flag-waving patriots.
To show the magnitude of income for only 534 foundations, Patman points out that 7,213,000 families in 1960 had incomes of less than $2,000 each before taxes, aggregating $8. 04 billion.
People in the Tax Net
In 1940 there were filed 14,598,000 individual income tax returns. In 1961 61,068,000 were filed. The greatest increase took place in 1944 under the wartime tax laws; in 1945 the total stood at 49,751,000. 61
Having brought this great additional throng into the tax net under the income tax, originally an upper-class tax, does anyone believe the pubpols will ever remove the net?
By far most of these taxes are withheld from salaries and wages, earned income. In 1962 there was withheld $47. 583 billion compared with $15. 317 billion not withheld; in 1963 it was $51. 839 billion against $15. 205 billion. 62 The income tax has been transformed largely into a permanent wage tax, a Gargantuan political joke on the workers.
One often hears of tax-cheats, individuals and organizations, that are proceeded against unceremoniously by the government. As this chapter should make blindingly clear, however, the greatest tax cheat (perhaps in all history) is the United States government itself, which by means of the federal tax code stupendously cheats the vast majority of its trusting citizens on behalf of its political pets. Not only does the government do this but its prime beneficiaries daily boast to a bemused world that in the United States everyone enjoys full equality under the law. The government, of course (to give it its due), is staffed by the weird people put into office by an idiotic electorate, which is fittingly hoist by its own petard. The boobs are overwhelmed by boobs of their own choice!
The Chances of Reform
What are the chances of reforming the tax laws?
Here it must suffice to say that most experts see little prospect of reform. At most there will be further deceptive rearranging and ideological tinkering. And even if taxes were fairly apportioned, past gains would remain in the hands of the advantaged.
A colossal historical inequity like the American tax structure, a mechanism subtly fastened on a people with a view to extracting from them the produce of their labors not necessary for subsistence, is never removed by means of elections or the passage of laws. At least, it never has been thus far in history. The beneficiaries, having gone to a great deal of trouble and expense to devise and maintain this structure, are not going to stand idly by and see it dismantled. They will use every considerable power at their command to defeat all substantial reforms.
In history fantastic, capricious and arbitrary structures such as this have vanished only in some sort of climactic explosion--revolution, conquest or collapse. A far less onerous tax structure in the early American colonies was terminated not by reform but by revolution and war.
These remarks, needless to say, are purely descriptive, intended to bring out the very serious purpose underlying these laws. This earnest purpose, which is to run a vast society in a certain way for certain hereditary beneficiaries and their retainers and emulators, cannot be lightly pushed to one side, particularly when it is well wrapped in the accepted ideology of freedom. Anyone who proposed such action at this time, indeed, would be very foolish, as the populace is hardly aware-and shows no signs of wishing to be aware--that it is fastened in a straitjacket only slightly less tight than in many other ideologically unhallowed societies that could be mentioned.
Anyone who doubts that this is so may set about the task of tax reform. If he succeeds, these concluding observations will have been set at naught. And whether he fails or succeeds he will get a sound political education. 63
(Note: The reader should not suppose that this chapter is a full treatment of the tax situation. It touches only the highlights and allots no space at all to many publicly costly ludicrous oddities such as the decision allowing Kathleen Winsor to pay 25 per cent capital gains taxes for the sale of her book Forever Amber because under a tax-court ruling she was not a professional writer and had written the book "primarily because she enjoyed the research and writing which went into its composition. . . . " The interested reader should refer to sources cited and pick up enlarged bibliographies from them. He will soon see that everything in this chapter is written in a spirit of understatement.
As to the cause of it all, the socialist will murmur "capitalism. " Yet the American tax structure has no intrinsic relationship to capitalism and can, indeed, be shown as functionally inimical to it. Other capitalist countries such as England, Western Germany or Japan do not have similar tax structures. The source of the tax structure is clearly the popular electoral system and an inept electorate, which places in office smoothtalking men of a disposition to trade tax and other favors in return for personal emoluments. This the legislators do, in stages and by bits and pieces, resulting in an increasingly peculiar tax structure that may be subtly undermining the capitalist system itself.
Capitalists clearly would be paragons of unusual virtue if they did not, for inner competitive reasons, take full advantage of the fact that a politically inept public had placed into strategic offices men who are deviously accommodating on a quid pro quo basis. If capitalists--and a gullible public--were faced by a preponderance of true public men in office they would hardly seek to have written into the laws these various tax monstrosities. But the kind of electorate one finds in the existing political system is unable to insure the presence in office of a preponderance of true public men. Instead the electorate gives us people of the stripe of Senator Thomas Dodd, Congressman Adam Clayton Powell, Bobby Baker, the late Senator Robert Kerr, Judson Morhouse, Senator Everett Dirksen et al. The basic causes obviously lie out in the broad electorate. )
The over-riding problem in the United States is not economic. It is political.
Ten
PHILANTHROPIC VISTAS:
THE TAX-EXEMPT
FOUNDA TIONS
Wealthy men and women today are almost all freely labeled by the public prints as philanthropists. In such mindless parroting the word has acquired the operationally extended meaning of "wealthy person"; and "wealthy person" means, reciprocally, "philanthropist. " As hardly anybody in society is more welcome than a philanthropist, it follows that nobody is more welcome in all his beneficence than a wealthy man. By American propagandic decree the wealthy man thus has strangely been transmogrified into the quintessential cream of humanity. Simple people, the majority, accept him without reservation in this guise.
It is, furthermore, extremely rare to find the public prints, particularly the corporate press, labeling anyone other than a wealthy person as a philanthropist. Journalists now appear to make a subtle distinction between philanthropists as merely rich persons and
humanitarians as functional benefactors without money: Jane Addams, Lillian Wald, Jacob Riis, Clara Barton, Florence Nightingale.
Oddly at variance with the common perspective of the wealthy person as an overreacher of others in competition for worldly goods and power, the prevalent one is quite in harmony with the Alice-in-Wonderland treatment of contemporary affairs in public prints. As it is practiced on the American scene it is a variant of Orwellian "New- Speak," in which war means peace, peace means war, and liberation means enslavement. For the United States as much as Soviet Russia has its own "New-Speak" in which "defense against Communism" means "invasion of Vietnam" (or the Dominican Republic), Defense means attack. Patriotism means doing physical injury to someone. Inflation means prosperity. Bigness means greatness. And wealth means philanthropy. According to the public prints all is not as one might simple-mindedly suppose in the realm of wealth; contrary to reasonable supposition and statistical fact the wealthy are not endeavoring to increase their wealth but are feverishly endeavoring to give it away for good works.
The basic misinformation sedulously conveyed is this: Whatever the people's government is not taking away from the wealthy in huge tax bites is being given away to the lame, the halt, the blind, the needy, and the worthy with a lavish hand. Therefore, it seems, one should forget about the wealthy; they are not a serious factor of power in the social situation.
Instead of the wealthy, who are measurable and palpable, we are assured by approved savants that what is really involved in the social situation is something elusively unmeasurable and impalpable, discernible only to rarely subtle minds, masters of arcane and delicate methodology. These minds, more and more of late eschewing the troublesome concrete in favor of the pleasantly abstract, limn for us The Power Structure, The Establishment, The Power Brokers, and The Power Elite who face, not the poor, the exploited or the unpropertied, but The Disadvantaged, The Culturally Deprived, The Under-Privileged, The Unfortunate and The Lower Socio-Economic Strata. (All these Disadvantaged may escape their plight by climbing the golden staircase of Upward Mobility. ) Taboo entirely in the cleansed new social metaphysics are such coarse and unmannerly terms, worthy only of unwashed boors and churls, as Class and Caste, with their connotations of past and present turbulence. Very much favored is Strata, a cool and cleanly word. People are people, it seems--all pretty much the same according to democratic dogma but found in different Strata, some merely flying by choice or temperament at lower altitudes than others. And in the emerging new social metaphysics or rhetorical whitewash there are few Unemployed. In their place we have the Disemployed, even the Involuntary Leisured. There are, too, Senior Citizens in place of Old People. Persons unable to detect the difference are obviously deficient in understanding--cannot tell the difference between a war and a massive overseas police action.
"Class" is a particularly troublesome word; for one can, unless one is very careful, slip and slide on into "class warfare. " But in the elegant variance of the aseptic new terminology one can hardly make the mistake of saying "power-structure warfare," "power-elite warfare" or "lower socio-economic strata warfare. " The fashionable new terminology protects against such deplorable gaucheries. Yet the basic phenomena remain in all their harshness.
Puzzles of Philanthropy
As we are not engaged here in an embroidery upon journalistic fantasies we are confronted by a number of puzzles. To what extent are the wealthy giving their money away for good works if they are giving it away at all? This is somewhat similar to the
question faced in the last chapter: To what extent are the wealthy being taxed out of existence? And, if they are not giving wealth away, what is it that they are really doing with their numerous foundations?
As many persons are involved in all this so-called philanthropy one must not, heeding the caveats of methodological vigilantes of the Establishment, impute motivations without warrant, although the very term philanthropy (to which the Establishment methodologists oddly do not object) does already unwarrantably impute motivations. What the individual motivations are of those thousands who now transfer money to foundations one cannot say one really knows. 1 But one can trace certain indubitable nonphilanthropic effects of such activities.
The first of these is the public relations effect. The founder may have been publicly disliked, like John D. Rockefeller I, or not very well liked, like Andrew Carnegie. But the forming of foundations had the effect of altering opinion in an unsophisticated population, turning the supposed bad guy into a supposed good guy.
Just how far down in public esteem a wealthy man may sink can be seen from the following acerb vignette of John D. Rockefeller I by Ida Tarbell, writing in the widely circulated McClure's Magazine in 1905:
No candid study of his career can lead to other conclusion than that he is a victim of perhaps the ugliest . . . of all passions, that for money, money as an end. . . .
It is not a pleasant picture . . . this money-maniac secretly, patiently, eternally plotting how he may add to his wealth. Nor is the man himself pleasanter to look upon . . . portraits show . . . craftiness, cruelty, something indefinably repulsive.
Hypocrite, intriguer, freak of nature, it is not for us to say. The great public does not deal in nice psychological distinctions. . . . it says this man has for forty years lent all the power of his great ability to perpetuating and elaborating a system of illegal and unjust discrimination by common carriers. He has done this in the face of moral sentiment, in the face of loudly expressed public opinion, in the face of the law, in the face of the havoc his operations caused. . . . He has fought to prevent every attempt to regulate the wrong the system wrought, and . . . turned his craft and skill to finding secret and devious ways of securing the privileges he desired. . . .
He has turned commerce from a peaceful pursuit to war, and honeycombed it with cruel and corrupt practise; turned competition from honorable emulation to cut-throat struggle. And the man who deliberately and presently does these things calls his great organization a benefaction, and points to his church-going and charities as proof of his righteousness. To the man of straight-forward nature the two will not tally. This, he says, is supreme wrong-doing cloaked by religion. There is but one name for it-- hypocrisy.
To have blotted out of popular consciousness largely by foundational activity this once prevalent estimate has been a notable achievement in public relations engineering.
Another effect is the tax-saving benefit. Nearly all of the American foundations have come into view since the enactment of the income tax and estate tax laws: The foundations are completely exempt not only with respect to income taxes but also capital gains taxes. One does not know in each case that the founder sought to escape taxes, but common reason would indicate it. Many standard tax-advisory services explicitly point to these factors as attractive features of foundations. 2
A third effect is the corporate-control effect. Corporate control, which would otherwise be undermined by the tax laws, is preserved to perpetuity by many foundations, permitting the hereditary transmission, tax free, of vast corporate power.
A fourth effect is that the foundations extend the power of their founders very prominently into the cultural areas of education (and propaganda), science, the arts and social relations. While much that is done in these areas under foundation auspices meets judicious critical approval, it is a fact that these dispensations inevitably take the form of patronage, bestowed on approved projects, withheld from disapproved projects. Recipients of the money must be ideologically acceptable to the donors.
There is a positive record showing that by these means purely corporate elements are able to influence research and many university policies, particularly in selection of personnel. While the foundations are staunch supporters of the physical sciences, the findings of which have many profit-making applications in the corporate sphere, among the social disciplines their influence is to foster a prevailing scholastic formalism. By reason of the institutional controls that have been established, the social disciplines are largely empty or self-servingly propagandistic, as careful analyses have disclosed. 3
Whether or not these various effects were sought by the foundation creators, they are present, and the realistic observer must suppose they were what the realistic founders had in mind. (We must be particularly impressed by the frank analyses of their tax advisers. ) Via the foundations they get more mileage out of their dollars--and retain more dollars.
The Foundation Panorama
There are now so many tax-exempt foundations in the country that the number cannot be precisely ascertained.
The Foundation Directory, 1964, published by the Russell Sage Foundation, lists 15,000 foundations but says the number is increasing heavily year by year. 4 In this figure it challenges the total of 45,124 given by Representative Wright Patman, chairman of the Select Committee on Small Business of the House of Representatives. Patman's figure, the Directory holds, included civic, educational, welfare and religious organizations as well as pure foundations. 5 But the Patman investigation of the foundations in the early
1960's is the most complete available and will be cited throughout this chapter. It was focused, moreover, on the 534 largest foundations (within the Russell Sage meaning of the term) with total book-value assets exceeding $10 billion at the end of 1960.
As of early 1967, a total of 6,803 foundations in the United States had total assets of $20. 3 billion by market values (as distinct from book values), an increase of almost $6 billion in three years, according to the foundation-supported Foundation Library Center of New York, as reported in the New York Times, April 4, 1967 (32:3-4). These were record high figures, a measure of lush prosperity in Foundationland.
Total foundation assets in the period 1960-63, according to the Foundation Directory, were $14,510,765,000; so it is evident that Patman's inquiry covered most of the field. 6 Of these, $8. 161 billion were concentrated in New York; Pennsylvania came next with $853 million; then Michigan with $752. 9 million; and Texas with $744 million. New York is far in the lead here as in all other aspects of finance.
Prior to 1910 there were only eighteen American foundations, with just one exceeding $10 million. (Until 1913 there were no income taxes, until 1916 no estate taxes. ) In the next decade 76 were launched, in the 1920's 173, in the 1930's 288, in the 1940's 1,638 and in the 1950's 2,839. Of 5,050 leading foundations, 32 per cent were launched in the 1940's and 56 per cent in the 1950's. 7 In their magnitude and pervasiveness, then, the foundations are something recent, a new thing. They are plainly a reflex to the tax laws which give them exemption.
The Foundation. Directory sets forth thirteen foundations with $100 million or more in assets. ' But this listing, although impressive, is misleading because some interests have established many foundations, and small foundations in their various ways are themselves significant. Patman more revealingly shows them by groups.
The thirteen leaders according to the Foundation Directory are: Source
Ford Foundation
Rockefeller Foundation
Duke Endowment
John A. Hartford Foundation
W. K. Kellogg Foundation
Carnegie Corporation
Alfred P. Sloan Foundation
Moody Foundation
Rockefeller Brothers Fund
Lilly Endowment, Inc.
Pew Memorial Trust
Danforth Foundation
Commonwealth Fund
Assets
(millions)
$3,320
632
478
Pacific Tea
Kellogg cereals
Carnegie Steel
General Motors
W. L. Moody, Texas oil,
realty, newspapers and
banks 188
Standard Oil 152
Eli Lilly pharmaceuticals 151
Sun Oil Company 135
Purina cereals 126
Harkness family;
Standard Oil 125
Ford Motor
Standard Oil
Duke Power
Great Atlantic &
The inadequacy of the above listing on the side of understatement is readily shown. Patman detailed eleven out of fourteen Rockefeller-controlled foundations with aggregate assets of $1,016,440,732. These represented about one-seventh of all foundation assets. Among six in all there were four Mellon-controlled foundations, none with assets of $100 million but with aggregate assets of $160,651,388. Nine Mellon foundations, according to the Foundation Directory, held $372 million of assets. There were eight Ford-controlled foundations. Seven of these were infinitesimal in size compared with the monster Ford Foundation, which holds nearly a quarter of all foundation assets. Five Carnegie foundations had aggregate assets of $413,465,429. Out of nine Du Pont foundations six were stated to have aggregate assets of $18. 9 million, but the Alfred I. du Pont estate, set up in the form of a trust destined for The Nemours Foundation, had aggregate assets of $292 million at the end of 1962 compared with its originating valuation of slightly less than $40 million in 1935. 9
Patman in his text seriously understated the value of the Du Pont foundations as compared with the showing in his detailed table of foundation assets, which shows the Longwood Foundation, Wilmington, Delaware, alone with total assets of $122,712,483, and the Winterthur Corporation, a foundation, with assets of $32,271,151.
Putting these together with the Nemours Foundation and other Do Pont foundations mentioned in earlier chapters, one finds Du Pont foundations totaling nearly $500 million. 10
Protean Uses of Foundations
While the largest foundations and flotillas of foundations have been mentioned, size is not alone important. Smaller foundations act as conduits and control points, useful in all sorts of secret business affairs and especially in tax evasions. Nearly every large corporation and many of the large banks now have their own foundations. And small foundations often suddenly flower into huge growths.
-Among other things, as Patman found, foundations can become tax-free receptacles for capital gains. An individual or corporation may have an investment it wishes to
360
310
268
223
liquidate but which stands to incur a huge capital gain on large long-term appreciation. Payment of a capital gains tax may be avoided by turning the investment over to a foundation (no gift tax) and then having the foundation sell the investment (no capital gains tax). The foundation may now lend the entire liquid sum back to the donor at a nominal interest rate (no law requires that the foundations seek maximum earnings), or it may with the untaxed money obtain a controlling block of stock in some company the original donor wishes to control. With this control he can raise or lower the company's dividend rate, obtain power over its possibly large cash funds and management and perhaps even obtain for himself some further low-interest loans.
With low-interest loans received, a donor can make lucrative investments. He could, for example, with a loan on which he paid 1 per cent, itself tax deductible, go out and buy tax-free local government bonds paying him a tax-exempt 3 per cent.
Let its suppose that an original investment of $10 million was now valued at $100 million. If it were sold it would incur a capital gains tax of approximately $22. 5 million. But if it were all given to a foundation the foundation could sell it and pay no gains tax. Now if the foundation lends the whole sum back to the donor at 1 per cent he pays it $1 million a year. And if he makes $3 million on a tax-free investment in government bonds he keeps $2 million annually, tax free. But if he had sold the original amount he would have had only $77. 5 million after-tax capital which, invested at 5 per cent, would have brought him $3,875,000. After payment of about $2,712,500 (or 70 per cent) income tax, he would have remaining $1,162,500 annually or almost a half less than by the first procedure. It was clearly financially advantageous to filter the money through the "charitable" foundation.
If he so desires he can in fifty years build the original sum in his personal name back, all tax free. After fifty years he or his family can possess, in fee simple, $100 million in free new assets and also control the disposition of the original $100 million in the foundation, which may satisfy legal requirements by using its small income to assist crippled newsboys or homeless dogs.
But this is only a minimal sort of deal that can be arranged either once or preferably in a confusing series through the handy medium of a foundation. Patman showed that foundations can do anything that is financially possible, without any sort of public supervision or regulation. In the sphere of finance, name it and they can do it, tax free.
It is mainly because of the Protean utility of the foundation, particularly in the evasion of taxes, that nearly everyone in the community of wealth has come now to share the original insight of only a few such as the pioneering Carnegie and Rockefeller. Actually, the Rockefeller foundations appear to be the most efficiently run of the foundations, although their major function is definitely not the simple allocation of money to various ,vortby causes.
Whether they were so intended or not, the Rockefeller foundations are instrumental in keeping in being and under family control the Standard Oil empire that the Supreme Court ordered dissolved in 1911.
At the close of 1960, 7 Rockefeller-controlled foundations owned 7,891,567 shares of common stock of Standard Oil of New Jersey with a market value of $324,946,110. The same 7 foundations owned 602,126 shares of the common stock of Socony Mobil Oil Co. with a market value of $23,610,770. Two Rockefeller foundations owned 306,013 shares of Continental Oil capital stock with a market value of $17,060,224 (the Rockefeller Foundation itself held 300,000 of these shares with a market value of $16,725,000); 4 Rockefeller foundations owned 468,135 shares of Ohio Oil common stock with a market value of $17,998,495; 5 Rockefeller foundations owned 1,256,305 shares of the common stock of Standard Oil Co. of Indiana with a market value of
$59,736,991; and the Rockefeller Foundation, itself, owned 100,000 shares of the capital stock of Union Tank Car Co. with a market value of $3,100,000.
If Standard Oil Co. (New Jersey) were to attain substantial ownership in its competitors, it would certainly tend to eliminate competition and again tend toward monopoly, and engage the Department of justice in inquiry.
The use of a subterfuge--in the form of Rockefeller-controlled foundations--in effect produces the same result as if Standard Oil Co. (New Jersey) owned substantial stock interest in Continental Oil, Ohio Oil, Standard Oil Co. (Indiana), et al. 11
The Rockefellers also have stock holdings in these companies through personal trust funds, as shown by TNEC, Monograph #29, and perhaps directly.
One is impeded from ascertaining precisely what the Rockefeller interest now is in each of the Standard Oil companies through the spreading around of stock ownership in foundations, personal trusts and personal accounts. Under the law establishing the Securities and Exchange Commission, as we have noted, any holding of a publicly offered stock by any individual or enterprise in excess of 10 per cent of the issue must be reported. But, as I pointed out earlier, a man could secretly hold most of the stock in a company by having 9 per cent in his name and 9 per cent in each of various trusts. If he never changed his holdings the fact would never be reported. He could hold more by adding foundations to the scheme, although the foundation holdings would be on the public record. just what the percentage of Rockefeller ownership/control now is in any of the Standard Oil companies cannot be ascertained from the record because apparently no individual or trust owns as much as 10 per cent of any issue.
"It is a well-known fact that the Rockefeller family controls Standard Oil Co. (New Jersey), and the Rockefeller-controlled foundations own a substantial part of the corporation," Patman remarks in the same place.
Only once has Rockefeller dominance ever been challenged. That was in 1929 when strong-willed Colonel Robert W. Stewart, chairman of the Standard Oil Company of Indiana, appealed to general stockholders over the heads of the Rockefellers for control of the company. In the show-down vote all the Rockefeller foundations, funds, trusts, personal holdings and holdings of old Standard Oil families were massively counted against Stewart. Ile was ignominiously snowed under.
Rockefeller family control of the giant Standard Oil flotilla is unchallenged and unchallengeable. Foundation-held stock helps insure it to perpetuity. No possible combination of financial interests under existing law could dislodge that control.
I am not suggesting that this control should be altered. I am simply stating a fact of financial-political life. One may be entirely satisfied to see the Rockefellers rather than some other group in control. But control is what is at stake. One deduces this because this is the way it is. This, one must suppose, is the way it was planned by the wily master architect of Standard Oil.
True, one could suppose that the major intent was philanthropic. It is not logically impossible that the outcome of control was unplanned. But John D. Rockefeller I, whatever else he was, was a planner. I conclude, possibly erroneously and uncharitably, the situation is the consequence of a plan that visualized the retention of control as a goal.
The Rockefeller foundations, as Patman found, are by no means unique as mechanisms for corporate control.
Two Du Pont foundations owned 6,931 shares of Christiana Securities Company worth $83. 8 million, and 358,105 shares of E. I. du Pont de Nemours worth $20. 4 million.
Six Mellon foundations held 120,294 shares of Aluminum Company worth $8. 2 million, 3,729,933 shares of Gulf Oil Corporation worth $124. 5 million and 48,750 shares of First Boston Corporation worth $3. 2 million.
The Herbert H. and Grace A. Dow Foundation owned 645,238 shares of Dow Chemical Company worth $48. 1 million. The Howard Heinz Endowment owned 314,104 shares of H. J. Heinz Company worth $42. 5 million. The Timken Foundation owned 427,760 shares of Timken Roller Bearing Company worth $20. 5 million. The Charles A. Dana Foundation held 500,000 shares of Dana Corporation worth $16 million. The Gulf Oil Foundation held all the stock of Pontiac Refining Corporation, worth $32 million.
Foundations as Untaxed Holding Companies
Foundations often serve as tax-free holding companies that maintain working control by means of 10 to 100 per cent ownership of many large corporations, the Patman inquiry made certain. But 73 foundations out of 534, including some large ones, did not report such ownership positions to the Treasury as required by law. 12
Some of the leading corporations in addition to the Standard Oil group entirely or supplementarily controlled by foundations are as follows: 13
(Asterisks mark those not reporting ownership as required by law. )
Controlled
Corporation
Kaiser Industries
Callaway Mills
Coca-Cola
George D. Roper
Midwest Oil
Eli Lilly
Kellogg
preferred
S. S. Kresge
United States Sugar
B. Altman (N. Y. )
Connecticut Railway
and Lighting
preferred
Duke Power
preferred
Ford Motor
W. T. Grant
Great Atlantic & Pacific
Tea
S. H. Kress
Untaxed
Foundation
Henry J. Kaiser Family
Foundation
*Callaway Community
Foundation
Emily and Ernest Woodruff
Foundation
Sears, Roebuck Foundation
*Standard Oil Foundation,
Inc.
Lilly Endowment, Inc.
W. K. Kellogg Foundation
W. K. Kellogg Foundation
Trust
Kresge Foundation
Chas. Stewart Mott Founda-
tion (General Motors)
Altman Foundation
Charles Ulrick and Josephine
Bay Foundation
*Duke Endowment
Percentage
of Ownership
15. 4 100. 0
15. 21 11. 77
18. 34
46. 24 common
10. 40 class B
58.
51. common
34.
48. 2 84. 59
99. 25
51. 07 common
57. 24 common
82. 02
Ford Foundation 100. class A
Grant Foundation 10. 7
*John A. Hartford Foundation
Samuel H. Kress Foundation
33. 98 common
41. 9
American Chain & Cable
Federal Cartridge
preferred
Reinsurance Corp. of
N. Y. Faberge
pref.
pref.
Electrolux
Enna Jettick
Pittsburgh Steel
preferred
Sun Oil
National Bank of
Commerce, Houston
Allen Bradley
preferred
Miller Brewing
National Lead Co. of
South America
preferred
James S. Kemper
preferred
Wieboldt Stores
preferred
Sahara Coal
preferred
Tecumseh Products
Hormel
Ralston Purina
American National
Insurance
Beaunit
Jonathan Logan
Cudahy
common
Springmaid of the West
William T. Morris Foundation
*Olin Foundation
Richardson Foundation
*Samuel Rubin Foundation
17. 8 100.
14.
100. common
100. 1st
70. 2nd
Wenner-Gren Foundation for
Anthropological Research 24. 2
Fred L. Emerson Foundation 100.
Donner Foundation 10. A
Pew Memorial Trust 21. 29
Houston Endowment 23. 4
*Allen-Bradley Foundation 64. 62
De Rance, Inc. , Milwaukee 29.
*National Lead Foundation 100.
*James S. Kemper Foundation 34. 2
*Wieboldt Foundation 90. 6
*Woods Charitable Fund 20. 7
Herrick Foundation 23.
*Hormel Foundation 11. 69
*Danforth Foundation 23. 4
*Moody Foundation 34. 55
*Rogosin Foundation 24. 5
*David Schwartz Foundation 15.
*Patrick & Anna Cudahy Fund
Springs Foundation
86. 66 B 100.
Some additional significant enterprises under foundation control
were the
following: 14
Edgewater Beach Hotel
Chicago
First National Bank ,
Ligonier, Pa.
North American Accident
Insurance
Field Enterprises
preferred
Reinsurance Corporation
of N. Y.
Cannon Mills
First Boston
*The Boston Foundation 100.
*Avalon Foundation
(Mellon) 21. 5
*Field Foundation 30.
*Field Foundation 100.
*The Richardson Foundation 14.
*Cannon Foundation 11. 69
*Sarah Mellon Scaife
Foundation 43. 33
In all, no fewer than 111 foundations were found to own more than 10 per cent of one class of stock, usually the voting stock, in one or more of 263 different important
corporations as of December 31, 1960. 15 This was a considerable number of corporations in which to exercise tax-free control even though not all of them were of the commanding size of Great Atlantic & Pacific Tea, Kresge, Ford Motor or Sun Oil. The Ford Foundation does not directly control Ford Motor, but its holding of nonvoting stock enables the Ford family, which also controls the foundation, to control the company absolutely with its own block of stock of weighted voting power.
But at the end of 1960 all 534 foundations in the study held investments in the stock of more than 2,000 corporations, assuring considerable dispersion of voting influence. 16
The point about foundation control, full or partial, is that it is tax free all the way, giving the foundational enterprise a big competitive edge over nonfoundational businesses, a facet Representative Patman was especially interested in. He cited reports from various businessmen on how they were being undercut in the market by foundation-owned enterprises.
The 534 foundations "had aggregate untaxed receipts of almost $7 billion during the period of 1951 through 1960. During the one year 1960, their total receipts were $1. 34 billion as against $554 million in 1951. I find it difficult to reconcile the withdrawal of $1 billion annually from the reach of the Treasury with the federal government's pressing need for revenue.
"During the period of 1951 through 1960, the contributions, gifts, grants, scholarships, etc. , paid out by the 534 foundations totalled $3,448,867,894 (see Schedule 3A for details)--roughly 50 per cent of their aggregate receipts of $6,981,180,819. They claimed expenses, including administrative and operating costs, of $721,199,586-- almost 10 per cent of the total receipts. " 17
The foundations in the aggregate, it is readily seen, are as prudent as the corporations in what they pay out. They pay out only about half of income, plus 10 per cent for administration, while the corporations pay out only 44 per cent. The remainder, in both cases, is used for reinvestment and growth. The capital position of the foundations over the years is thus enlarged on the basis of their tax savings. What they don't pay in taxes, it must always be remembered, must be paid in other ways--mainly by the rank-and-file, flag-waving patriots.
To show the magnitude of income for only 534 foundations, Patman points out that 7,213,000 families in 1960 had incomes of less than $2,000 each before taxes, aggregating $8. 04 billion.
