Conservancy Abandons Disputed Practices
Deals, Loans Were Questioned

By Joe Stephens and David B. Ottaway
Washington Post Staff Writers
Saturday, June 14, 2003; Page A01

The Nature Conservancy announced last night that it is permanently abandoning a range of practices, from drilling for oil to lending employees money to selling undeveloped land to its trustees as home sites.

The board's actions followed a day-long, closed-door meeting at the charity's Arlington headquarters, during which it weighed issues and criticisms raised over the past month by two U.S. senators and by some of the nonprofit organization's 1 million members.

"The actions taken today by the Conservancy's Board of Governors are significant and concrete and demonstrate the board's commitment to continuous improvement," charity spokesman Jim Petterson said in a written statement. "These steps will assure the Conservancy's supporters and partners of the organization's commitment to integrity beyond reproach, and will better equip the organization to address the world's conservation challenges."

The 52-year-old Conservancy, best known for its ads featuring the voice of actor Paul Newman, is the world's richest environmental group, with $3.3 billion in assets. The charity has 3,200 employees and operates in every state and 30 countries. It owns 2 million acres, much of it held in 1,400 nature preserves.

The board outlined its actions yesterday in a six-page statement. One of the decisions prohibits the buying or selling of land in transactions involving board members, state trustees, employees and employees' immediate families. In recent years, the Conservancy bought millions of dollars worth of land and services from board members and companies with which they were associated.

The board also decided to stop the practice of accepting charitable gifts in connection with its conservation buyer program unless the gifts are documented and explicitly part of the deal.

Under the program, the Conservancy bought raw land, attached development restrictions and then resold the land to state trustees and other supporters at greatly reduced prices. Buyers then voluntarily gave the Conservancy charitable contributions roughly equivalent to the discounts, sums that were written off from the buyers' federal income taxes. The deals generally allowed the buyers to build homes on the land.

"With respect to the specific conservation buyer transactions highlighted in recent media reports, outside tax counsel advised the Board, based on a review of documentation provided by the Conservancy, that there were no legal problems with the transactions from a federal income tax perspective," the Conservancy statement said. Nevertheless, the board decided to take action "to remove even the perception of conflict of interest or impropriety related to conservation buyer transactions."

In its actions, the board "reemphasized the well-established conclusion that development restrictions, asserted via conservation easements, have significant monetary value."

The board also voted to conduct scientific assessments of the conservation properties and to widely advertise all real estate the Conservancy offers for sale.

Another action prohibited new loans to employees. Two outstanding employee loans will be repaid within 90 days.

In recent years, the Conservancy extended housing loans to 12 of its workers, including five employees who were not charged interest. Conservancy President Steven J. McCormick received $1.5 million, at an interest rate of 4.59 percent, toward the purchase of a McLean home; his loan has been repaid. In another transaction, the Conservancy's California director, Graham Chisholm, received a no-interest $500,000 mortgage; this must be repaid in 90 days.

In addition, the board voted against authorizing any new projects to drill for oil or mine for minerals.

The Conservancy in 1999 began drilling for natural gas in Texas, under the last native breeding ground of the Attwater's prairie chicken, which it calls the most endangered bird in North America.

A report by Conservancy biologists said the drilling operation led to a "higher probability of death" for some of the birds.

The Conservancy will continue collecting natural gas on the Texas preserve.

The board decided to require additional levels of approval, sometimes by the board itself, before the Conservancy sells the use of its name and logo to private companies. In the past, the organization allowed companies to place its name on products in return for cash.

Finally, the board will hire independent outside advisers to help it review its governance and oversight policies.

The Conservancy's actions came as its activities were coming under increasing scrutiny on Capitol Hill.

Last month, after a three-day series of articles in The Washington Post, Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) and ranking Democratic member Max Baucus (Mont.) said they planned to ask the charity to account for its programs, especially the sale of raw land at reduced prices to its state trustees.

Facing public concern over its activities, the Conservancy recently suspended many of the practices that it permanently abandoned yesterday.

"This sounds like a big step in the right direction," said Peter Dobkin Hall of Harvard's Hauser Center for Nonprofit Organizations, a research group. "The donor public feels self-dealing transactions should be avoided."

The Conservancy's actions will lead to greater accountability, he said.

"Transparency, that's the name of the game," Hall said. "I hope they mean it."

Petterson said the policy changes were approved by an overwhelming majority of board members, with only "one or two nays" on several points under discussion.

"On the agenda was a wide-ranging and thorough review of some of the tools and strategies the Conservancy has pioneered or used in pursuit of its mission," the Conservancy's statement said. "That review, initiated a year ago and accelerated, in part, by recent media reports, led the Board to create some new policies. Additionally, the Board reaffirmed the importance and contribution of the Conservancy's mission, strategy and values."

2003 The Washington Post Company