A New York philanthropist and private assistant to billionaires, Matthew Christopher Pietras, allegedly stole thousands and thousands from his employers and donated massive sums to distinguished charities to take care of a facade of standing, wealth and generosity.
The ones schemes got here to gentle when the Metropolitan Opera changed into mindful {that a} US$10 million donation Pietras made in his personal title used finances he had allegedly pilfered from a member of the Soros circle of relatives which was once amongst his employers.
Day after today, Would possibly 30, 2025, Pietras was once discovered lifeless. An investigation into the beginning of his donations is underway.
The 40-year-old belonged to many distinguished nonprofit forums, attended galas, rubbed shoulders with elite donors, and lived a lavish way of life full of luxurious items and personal airplane shuttle. He incessantly made charitable presents beneath his personal title, and he incessantly asked public popularity for them – a convention that helped construct his character.
I analysis nonprofit fraud. Prior to now, I’ve written concerning the significance of researching charities ahead of donating to verify charitable presents don’t seem to be wasted on swindlers. The Pietras case exposes the turn facet of donor fraud.
Every now and then, folks give stolen finances or in finding different fraudulent approach to faux to present their very own cash to a valid charity. This cautionary story can remind nonprofits of the significance of testing any donors who make massive or ordinary presents.
What occurs after the fraud is uncovered
If Pietras’ crimes are confirmed, the Metropolitan Opera, Ny’s Frick Assortment and the opposite charities that won cash from Pietras will in all probability must factor refunds to the folk he swindled. Although the charity was once appearing in nice religion, it must get ready to go back the ones finances, in line with rules that pertain to fraudulent transfers.
There’s a slender exception to this rule.
When a charitable nonprofit unwittingly accepts a donation made with stolen cash and spends it ahead of the robbery is found out, a court docket might acknowledge the charity as an blameless recipient.
In felony phrases, that is referred to as the “good faith purchaser” protection.
This popularity might restrict or get rid of the charity’s felony legal responsibility to factor money back, specifically if the cash has already been spent at the charity’s undertaking, the group moderately believed the donation was once official, and giving it again to the sufferer of robbery may just considerably hurt the charity.
But when that occurs, fraudsters can’t declare a tax deduction for making that present, they usually might retroactively owe additional tax consequences.
If a charity hasn’t but spent the fraudulently given finances, a court docket may just require money back – particularly if sufferers or insurers document court cases to get well that cash.
Most often, if donations are confirmed to come back from stolen finances, the charity is also legally required to go back them. The truth that a donation was once won in nice religion doesn’t robotically permit the charity to stay the cash as soon as it’s known as stolen.
How snookered charities must reply
It’s incessantly in a charity’s easiest passion to be proactive about returning the stolen finances moderately than looking ahead to a court docket order forcing them to take action.
The Metropolitan Opera took this course. It returned the $10 million to Gregory Soros, the youngest son of billionaire investor and philanthropist George Soros, that it won the day ahead of Pietras’ scheme was once found out.
Taking that step is a great glance. However charities don’t in reality have a call as a result of they can’t temporarily spend any finances which can be known as probably stolen. When they’re caught on this felony limbo, nonprofits will have to grasp onto the finances and watch for a felony answer .
Some similarities with Madoff scandal
I imagine that the Pietras case mirrors the Bernard Madoff scandal in that each males donated to charities to burnish their social standing.
Madoff, the disgraced financier who died in jail in 2021, operated a large Ponzi scheme that deceived his purchasers with too-high-to-be-true returns after which depleted their financial savings as soon as it collapsed.
Madoff extensively utilized stolen finances to make massive charitable donations via his circle of relatives basis. His philanthropy made his faux symbol as an ace investor seem official and it expanded his get admission to to the rich folks he preyed upon.
Bernard Madoff exits federal court docket in March 2009 in New York Town, previous to being convicted of swindling tens of billions of greenbacks in a large Ponzi scheme that harmed charities in addition to particular person traders.
Mario Tama/Getty Photographs
As with Madoff, Pietras’ phantasm of generosity allegedly changed into a device for his deception, permitting him to transport conveniently a number of the rich and smartly attached whilst fending off getting stuck.
Madoff defrauded traders of an estimated $50 billion to $64 billion. The 2008 revelations about his scheme’s surprising scale shook self assurance in monetary and charitable establishments.
Within the aftermath, a lot of nonprofits that had invested their very own property with Madoff both misplaced vital sums or have been pressured to go back previous donations as a part of felony clawback efforts to compensate sufferers.
When being cautious is warranted
Charities will have to workout due diligence ahead of accepting a present. This implies they’ve an obligation to research any strangely massive donations – equivalent to person who’s the largest they’ve ever won.
Irrespective of a present’s dimension, this responsibility additionally applies when a present appears to be higher than the donor may well be moderately anticipated to find the money for.
Charities don’t wish to act like banks or lenders, which can be required to ensure the monetary property of purchasers. However they must ask questions when the cases require. Appearing in nice religion calls for charitable establishments to be moderately positive that donated finances don’t seem to be stolen.
In Pietras’ case, he reportedly started through donating sums that have been sufficiently small not to lift suspicion.
Too-good-to-be-true giving
The results of no longer exercising due diligence can also be pricey and embarrassing.
As an example, imagine what came about to Florida A&M College in Would possibly 2024, when it introduced a record-breaking $237 million present from Texas entrepreneur Gregory Gerami. The donation consisted of 14 million stocks in Gerami’s privately held Batterson Farms Corp.
An investigation later made up our minds that Gerami couldn’t find the money for to make that present and that Florida A&M had failed to test into his funds. The college’s president and different most sensible leaders have been pressured to renounce within the embarrassing fallout.
When Gregory Gerami, a tender entrepreneur, promised to present Florida A&M College in Tallahassee, Fla., a $237 million donation with cash he didn’t have, it did actual harm to the varsity and its leaders.
AP Picture/Mark Wallheiser
Asking donors laborious or even uncomfortable questions ahead of celebrating any large present can assist charities steer clear of the complications that include being deceived through fraudulent donations.
Thorough vetting on the outset guarantees {that a} celebrated present complements the charity’s paintings with out entangling it in long run disputes or detrimental exposure from a fraudulent present.
