So accused billionaire fraudster Sir Allen Stanford is “the original philanthrocapitalist”, according to the cover story of the latest issue of World Finance magazine. This is surely “cover of the year” says blogger Felix Salmon, and who can disagree? Though it must contend for cover of the decade with CFO magazine, which in successive years gave its chief financial officer of the year cover slot to the CFOs of Enron and WorldCom.
In another post, Salmon goes further, noting that the outspokenly philanthropic Stanford’s alleged fraud, coming hot on the heels of the $50 billion ponzi scheme operated by another prominent philanthropist, Bernie Madoff, may reflect badly on philanthrocapitalism: “a few more stories like this, however, and philanthrocapitalism’s name – which was never all that great to begin with – will be irreversibly tarnished.”
Well, up to a point, Lord Copper. Certainly, whilst we are generally excited every time we see philanthrocapitalism enter the vernacular, we would have rather that the journalists at World Finance had found some other way to describe Stanford. So, we suspect, would they.
That said, it seems odd for Salmon to criticise by implication the many excellent philanthrocapitalists by citing these two high profile problem cases. Philanthrocapitalism is about wealthy people giving money away, and doing so in ways that are effective. This is not where Stanford or Madoff seem to have gone wrong (we don’t judge the quality of their philanthropy since neither Madoff nor Stanford appear in our book). In their cases, the fault primarily lay not in the philanthro but in the capitalism. Neither those who invested in their fund management companies nor the government regulators who were charged with overseeing them seem to have done even the most basic things right. Surely it is foolish investors who didn’t do their due diligence and regulators who were asleep on the job who deserve Salmon’s sneering criticism, not, by association with these apparent rogues, the growing movement of wealthy people who are actually trying to give back and build a better world?
Salmon posits that there may be a causal relationship between philanthropy and rogues: “generally there’s the simple fact that fast-talking and slightly sleazy rich guys, like Stanford or Roger Hamilton, seem to be irresistibly attracted to philanthropy”, presumably because it improves their public image, all the better for them to fleece trusting investors. Well, maybe. We have never claimed that philanthropists (or capitalists) are all perfect; far from it. Certainly, Madoff and Stanford would not be the world’s first dodgy donors. One of the most remarkable, who we describe in the book, is internet investor and arts philanthropist Alberto Vilar, of whom its was said “Asking Alberto for money was like offering an alcoholic a drink.” He eventually got into financial difficulties, could not honour his charitable pledges, had his name dishonourably removed from the Grand Tier of NewYork’s Metropolitan Opera House, and was arrested on charges of defrauding one of his investment clients.
But if philanthropy sometimes attracts rogues, so do, for example, religion and politics. We don’t (or shouldn’t) issue sweeping dismissals of the credibility of those core aspects of human life every time a congressman is found fiddling his expenses or a priest fiddling with his choirboys. The right response is to scrutinise thoroughly those who aspire to leadership in religion and politics, and create systems to ensure they are held to account. The same should be true of philanthrocapitalism.
To help our readers judge those who claim to be philanthrocapitalists, we conclude the book with our “good billionaire guide”. This points out that not only does a good billionaire’s philanthropy need to be effective – writing a cheque is not enough – he also has an obligation to pay his taxes and to make his money in a legitimate, non-exploitative way. This would appear to rule out Stanford and Madoff, and also makes us sceptical of the efforts of some Russian oligarchs to rebrand themselves as philanthrocapitalists.
Lastly, Salmon delivers a low blow against philanthrocapitalism when he says that, even pre-Madoff and pre-Stanford, its name “was never all that great to begin with”. Such a smear surely merits some explanation, evidence and a lively debate. We are ready. Bring it on!