Can charitable donations offset despicable behavior?

By Felix Salmon
October 26, 2012
only two years on Wednesday.

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It was quite surprising when Jed Rakoff, scourge of Wall Street, sent Rajat Gupta down for only two years on Wednesday. After all, federal sentencing guidelines suggested that Gupta should get a sentence four times longer than that. And Gupta wasn’t some small-time crook grubbing for dollars with inside information, either: he did enormous damage to the reputations of central icons of our capitalist system, like McKinsey and Goldman Sachs. But for all that, said Rakoff, he is at heart a good man:

“The court can say without exaggeration that it has never encountered a defendant whose prior history suggests such an extraordinary devotion, not only to humanity writ large, but also to individual human beings in their times of need,” Judge Rakoff said.

This kind of reasoning is found outside the courthouse, too. For instance, Gary Belsky defends Lance Armstrong in New York magazine this week, on the grounds that the ends (raising lots of money for charity) justify the blood-doping means. “If you’re an obsessed sports fan”, says Belsky, then Armstrong’s actions can’t be excused. But for the rest of us, isn’t it great that he managed to use that activity to raise so much money for cancer research?

Belsky’s column is unconvincing, not least because he seems inordinately impressed by charities’ overhead ratios. Doesn’t he know that cheating on overhead ratios — which mean nothing at the best of times — is a lot easier than sports doping? Especially when it comes to a charity with as vague a mission as Livestrong (“we empower the cancer community”), just about anything can be classed a programmatic expense, rather than overhead. Still, the principle — that the scales of justice can offset despicable behavior with charitable acts — seems to be deeply ingrained.

There are limits to how far this kind of argument can be taken. The Jimmy Savile scandal in the UK, for instance, is made worse, not better, by the fact that Savile spent nearly all of his career raising huge sums of money for children’s charities. Similarly for Jerry Sandusky here in the US.

But there’s something that Gupta and Armstrong have obviously in common with other high-profile philanthropists, and that’s their wealth. Poor people, by definition, can’t give millions of dollars to charity. Neither Gupta nor Armstrong ever had to make choices between their own lifestyle and the charities they supported: neither ever had less spending money for himself because he gave so much money away.

At these levels, when you have a net worth in the eight- or nine-digit range, philanthropy starts to become a consumption good: something you spend money on in order to bolster your reputation and your place in society. That’s not necessarily the only or the primary motivation, of course. But there’s an uneven playing field here: the rich have the opportunity to offset their misdeeds with money, in the way that poorer people don’t. (Exhibit A: Martin Erzinger.)

I’ve always been suspicious of so-called “transactional philanthropy” — the kind of tit-for-tat deals where I give you $X, and you give me Y. (My name on a building, for instance.) But now Gupta and Armstrong are making a case that all charity is transactional, in a sense: it’s a kind of favor bank, which comes in very useful when you get into trouble. In the case of Gupta, for one, it seems to have saved him six years in the clink.

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