At $10 million, Fred Kaiser and Grace Borsari’s donation to a new STEM building is the largest private donation Western has received. It is also dwarfed by the more than $36 million their corporations were forced to pay after admitting to cheating on their income tax returns over eight years beginning in 1994.
“The two corporate leaders have also been long-standing partners in a single-minded desire to avoid the payment of almost all taxes including federal income taxes,” federal prosecutors wrote of the business partners, whose names the building will bear. (For more on Kaiser and Borsari’s philanthropic relationship with Western, see Who are Borsari and Kaiser?)
In accepting a 2004 deal that saw the business partners’ entwined corporations plead guilty to felony tax evasion charges and pay over $36 million to the government, the judge said his only misgiving was that Kaiser was not personally indicted. Prosecutors attributed this to the difficulty of extraditing Kaiser from Cyprus or the Bahamas where they believed him to be living at the time.
Lawyers representing Kaiser’s company pushed back on these accusations at the time, saying the corporations paid millions in federal income tax, limiting tax liability is not itself a crime, and Kaiser was not fleeing justice but traveling for work, often spending less than 120 days in the United States per year.
In a lengthy statement, Vice President of University Advancement and Western Foundation head Stephanie Bowers said the foundation was grateful “on behalf of the university” for Kaiser and Borsari’s support, and noted the plea was more than 15 years past.
“The Foundation and trustees both were aware of the old tax case and felt it was many years in the past and that Kaiser and Borsari’s outstanding support and service to Western deserved special recognition with the naming of the building after them,” she wrote. (The Western Front sought an interview with foundation officials but director of Communications and Marketing Paul Cocke provided a statement instead.)
Bowers said that prior to their latest gift, Kaiser and Borsari had donated more than $2 million to Western since 1997. Borsari has spoken about doing business in a male-dominated environment and their giving has included scholarships with a specific focus on women and “students from diverse backgrounds.”
Voicemails left with an attorney for Borsari and with a nonprofit she helps direct were unanswered. The person who answered the phone at the number listed for Borsari and Kaiser’s educational trust said the pair were out of town, but offered the number for a personal assistant to Kaiser. Three voicemails left at that number over the course of a week went unanswered, as did a follow-up voicemail at the trust seeking other means of contact.
What’s in a name?
While Western policy allows the president to name smaller campus features, the board of trustees authorizes the naming of buildings.
The policy calls it a “high honor” that may be used to recognize significant benefactors, but cannot call into serious question the public standing of the university. By providing half the fundraising for the new building, Borsari and Kaiser’s donation would appear to meet the policy definition of significant philanthropy.
While some universities sell naming rights for multi-year intervals, Western’s naming rights never expire.
Most donations to universities are small and from alumni, said Kevin McClure, an associate professor of higher education at the University of North Carolina Wilmington whose research includes higher education philanthropy.
However, faced with declining state support, public institutions are increasingly soliciting what are known as “major gifts” for large projects, such as new buildings. Coupled with increased scrutiny of donors, this has led to controversy, McClure said.
“As we know, some wealth is acquired through perfectly legal or ethical ways, and some wealth is built through exploitation or fraud,” he said.
Most institutions have donation policies but, like Western’s, they’re general, allowing decision making on a case-by-case basis, he said.
Recent controversies at other colleges have revealed donations from sex offender Jeffery Epstein at the Massachusets Institute of Technology and seen Tufts University strip the name of the Sackler family from buildings, after controversy surrounding the role of their pharmaceutical company in the opioid epidemic.
Robbe Healey, former chair of the Association of Fundraising Professionals’ ethics committee, said there are three levels of consideration for institutions: is it legal, is it ethical and is it smart?
This involves taking stakeholder feedback into consideration. While McClure said universities courting donors may seek to avoid something like a public forum that could scare them off, Healey said that, like any campus decision, there may be supportive stakeholders who voice their opinion as well.
McClure said some argue that donations are laundering reputations, but others are more focused on the good the money can provide.
Kaiser Borsari Hall will be Western’s first academic building partially funded by private investors, Manca Valum, Western Foundation senior director of Development for Strategic Initiatives, told the Front previously.
“The fact is, we need this building as quick as we can because these programs are growing,” Valum said. “We just can’t wait. These are the kinds of programs that are going to equip people to solve some of our most vexing problems that we face as a planet.”
President Sabah Randhawa told the board of trustees that in large fundraising projects, a leading gift of one-half, such as Borsari and Kasier’s, is often needed to encourage further donors.
With this in mind, Randhawa, Bowers and the dean of the College of Science and Engineering approached Kaiser and Borsari about the donation at a Viking Night event over a year ago.
Bowers added that, since securing the donation, another foundation — which only donates to projects that already have some funding — is looking at providing another $2 million.
At the end of the day, it falls on the board of trustees to balance the funding of a university, its academic goals and its place in civil society, Healey said.
This equation will evolve over time, she said, citing the disappearance of buildings named after Enron following its collapse as one of the first examples of names being removed from campuses.
Kaiser ordered money from those commissions to be wired to corporations he controlled in the Cayman Islands and Cyprus — traditional tax havens.
Borsari’s company then knowingly and illegally reported those amounts as business expenses which they could deduct from the taxes they had to pay, dodging over $19 million in taxes between 1994 and 2001.
Federal prosecutors alleged in a court filing that Kaiser’s company initially claimed the money was being transferred to a Canadian affiliate, before an IRS examiner discovered evidence of offshore wire transfers. While a former chief financial officer claimed ignorance of the offshore corporations, Kaiser’s businesses eventually produced documents prosecutors say appeared to show a basis for the transfers as intellectual property payments to Kaiser.
Prosecutors also alleged that Kaiser sought to interfere with the investigation by urging a witness to resist a grand jury subpoena for records.
While the corporations accepted a plea agreement that stipulated that they knowingly violated tax law, lawyers for Kaiser’s corporation disputed whether Kaiser had obstructed justice and said the transfers were residual commissions Kaiser was entitled to, and which were taxed in Cyprus. They also noted that the two corporations paid more than $14 million in federal taxes during the years in question and Canadian authorities were seeking to tax the disputed commission amounts.
The plea agreements means those two arguments were never tested in court.
Robert Westinghouse prosecuted the case for the federal government. When told Kaiser and Borsari are having a building named after them, he laughed.
“I’ll let my reaction speak for itself,” he said.
Westinghouse declined to comment on the specifics of the case, but said that he still remembers it more than 15 years later, which speaks to its significance. He said he recognizes the importance of donations to any university, but it’s important to have all the facts. If the university knows all the facts and decides to go ahead: “God bless ’em,” he said.
Erv Otis, a Western alumnus who worked the case as an IRS agent, also said he couldn’t comment, but that it was nice Western was getting money.
This story originated from an anonymous tip. As we follow this story and do additional reporting, feel free to contact us with relevant information about this or Western’s fundraising in general at firstname.lastname@example.org, 360-650-3162 or via mail at 516 High St. CF 222 Bellingham, WA 98225. Please use a personal email and device.