Possible self-dealing, conflicts of interest, and tax fraud at Knight
Approximately 20% of the Knight Foundation’s 2020 grantmaking was directed to DEI initiatives or organizations serving diverse populations, approximately the same percentage that was also awarded for “Construction” grants.
The Knight Foundation dedicated less than 9% to DEI or organizations serving diverse populations in several major spending areas, most notably “Research,” “Higher Education,” “Journalism,” and “Public Spaces.”
Read more from Diversity, equity, and inclusion at Knight, the previous post in this series analyzing DEI and accountability at the John S. and James L. Knight Foundation. Read more at knightdei.org.
In a 2015 lawsuit settled just before a jury trial, former Knight Foundation Director of Finance Elizabeth Marquardt alleged that she was wrongfully terminated by Knight after raising concerns about the organization’s accounting practices, which included an antiquated financial management system that was a “red flag for possible illicit activity” and violations of state and federal law, such as self-dealing and tax fraud.
Those violations included alleged self-dealing by Juan Martinez, the Knight Foundation’s chief financial officer. The lawsuit highlights a $75,000 grant Martinez helped secure in 2014 for Miami-Dade County’s Code for America program — a project where his wife, Miami-Dade county assistant director of regulatory and economic resources, served as a team leader. The program’s success garnered her a 30% salary increase. According to the court filing, it was a conflict he never formally declared — a violation of Knight’s own conflict of interest policy.
The foundation’s conflict of interest policy states “officers and staff may not engage or appear to engage in any activity, practice, or act that conflicts with the interests of the organization,” requires conflicts be disclosed, and officers and staff “recuse themselves from promoting or voting on grants to organizations in which they, their spouses, or other close family members have an interest.”
The conflict of interest policy gave the Knight Foundation president authority to determine the interpretation of its rules to all officers and staff and the Knight board chair authority to determine the interpretation to the president and other board trustees, creating an environment receptive to self-dealing.
According to court filings, three Knight vice presidents and its president, Ibargüen, were aware of Martinez’s undocumented conflict of interest and did not intervene in the grant.
Marquardt further alleged that Martinez directed her to improperly earmark general and administrative expenses to reach the grantmaking threshold required for the Knight Foundation to maintain its tax status. Among the charitable expenses exposed in the lawsuit and confirmed by former Knight staff was $150,000 spent on a 2015 private holiday party for the foundation at Miami’s Perez Art Museum in 2015.
Staff parties do not normally qualify as a program expense as they are not directly furthering the organization’s mission, according to Kevin Scally, Chief Relationship Officer at Charity Navigator, a leading charity assessment organization.
For more than 20 years, Knight Foundation CEO Alberto Ibargüen’s wife served on the board of trustees for the Perez Art Museum. Knight’s tax disclosures show the museum has received millions of dollars from the foundation during Ibargüen’s tenure as Knight CEO.
The Community Info Coop found other instances of potential self-dealing and conflicts of interest among the Knight Foundation’s 2020 tax filings.
Knight president Ibargüen, CFO Martinez, and 2020 board trustees William Considine, John Palfrey, Christine Amer Mayer, Adriana Cisneros, Francisco Borges, Anna Spengler Nelson, and Stephanie Bell-Rose were affiliated with grant recipients that received a total of more than $31.1 million in 2020, including organizations where some were co-founders, board members, or executives.
The Knight Foundation’s 2013 990PF — among the last to explicitly list grants awarded under the direction of a foundation’s board member — reveals how long Knight has been allowing specific conflicts of interest. In 2013, these types of grants amounted to $510,000. They included:
- Donations to a private school where a board member’s child was enrolled
- Donations to a board member’s local YMCA
- Donations to a board member’s local church
Some trustee-advised grant recipients from 2013 continued to receive grants from the Knight Foundation in 2020, including Akron Children’s Hospital, where former Knight board member William Considine was CEO, and A Better Chance, a nonprofit that places high-performing students of color in private and college preparatory schools, which was awarded $100K in 2020 to honor Maria Luisa Borges, the recently deceased mother of Knight Foundation board chair Francisco Borges.
Other Knight Foundation memorial grants include $100K to the Perez Art Museum in memory of Ibargüen’s late wife, who died from ALS in 2022. (The Knight Foundation began directing grants towards ALS research and advocacy after she was diagnosed in 2019, according to 2020 and 2021 tax filings.)
In 2020, the Knight Foundation also awarded $1.5 million to the Stephen E. Rose Legacy Foundation, or Steve Fund, an organization co-founded by Knight board member Stephanie Bell-Rose.
If the Knight Foundation’s conflict of interest policy remains unchanged, it continues to give wide latitude to Knight leaders on how to interpret it. It also includes a rule prohibiting naming facilities or programs after anyone other than John S. Knight or James L. Knight without approval by a two-thirds vote of the board of trustees.
In 2020, the Knight Foundation gave $1 million to support the construction of the “Beverly Knight Olson Children’s Hospital,” named after Knight board trustee and Knight family member Beverly Knight Olson.
