Federal authorities say John Wilson, a private equity executive from Lynnfield, Mass., conspired to bribe the University of Southern California water polo coach in 2013. The goal was to get his son designated as an athletic recruit and help guarantee his admission to USC — even though his son didn’t play the sport.
Announcing the charges in Boston on March 12, U.S. Attorney Andrew Lelling said Wilson made donations to The Key Worldwide Foundation, a bogus charity created by Rick Singer, a college counselor based in California at the center of the admissions scandal.
“At his direction, employees of the charity sent Singer’s clients acknowledgment letters falsely confirming that no goods or services had been exchanged for the purported donation,” Lelling said. “This enabled the parents to not only mask the true nature of the payment, but also take the tax write-off at the end of the year.”
In late 2014, prosecutors say, USC sent Wilson a gift receipt for a $100,000 donation, and Singer told him he could write it off as both a business expense and charitable contribution. “Awesome,” Wilson replied in an email.
Wilson’s son was admitted, but withdrew from the USC water polo team after his first semester. According to court documents, Wilson also sought to secure seats for his two daughters at Stanford and Harvard as recruited athletes in sports they didn’t play.
Wilson and 21 other parents charged in the college admissions scandal are scheduled to appear in federal court in Boston Friday. While allegations of bribing coaches against actresses and CEOs grab international headlines, the likely exploitation of the U.S. tax code has been largely ignored.
“We have a system that is very much geared to the super wealthy,” said Ray Madoff, a professor at Boston College Law School and the director of the Forum on Philanthropy and the Public Good. “This story really lays bare some of the uglier truths about the lack of meritocracy that occurs in a lot of these decisions."
When Wilson and at least 30 other parents got their kids into selective colleges like USC, Yale and Georgetown, U.S. taxpayers likely picked up part of the tab for the bribes they allegedly paid. It's still unclear how much the federal government lost through the $25 million scheme.
“If Wilson was able to get a 50 percent tax benefit through a combination of savings of ordinary income and capital gains from his donation, that means that Wilson paid 50 percent to get his kid into school and the rest of us paid the other 50 percent,” Madoff explained. “That should be troubling for all of us.”
At least one U.S. senator is hoping to prevent that kind of tax evasion. U.S. Sen. Ron Wyden of Oregon says the scandal has served as a wake up call. The ranking Democrat on the Senate Finance Committee is drafting legislation that would reduce tax breaks to parents who donate to schools before or during their child’s enrollment there.
“The public shouldn't have to subsidize the wealthy, big donors with the tax dollars of working class families," Wyden said.
Colleges and universities call Wyden’s idea a knee-jerk reaction that would undermine alumni giving. Matthew Hamill, senior vice president of the National Association of College and University Business Officers, has two kids in college.
"I, from time to time, make gifts to the institutions not because of any special reason other than I think they're doing a marvelous job educating my children,” Hamill said. “There’s nothing wrong with that.”
Wyden argues his proposal would not prevent parents like Hamill from giving as much as they’d like. "What we're saying here is you shouldn't get a tax break for it," he said.
Madoff says it would stifle donations to colleges.
“Denying the deductibility, I think, fails to recognize that the money committed to the universities can produce good even if the motive for doing so is less than ideal,” Madoff said.
Both the FBI and IRS say the parents scheduled to appear in court on Friday could later face additional charges for willful tax evasion because they received something in exchange for donations that were actually bribes.
Oregon Public Broadcasting’s Meerah Powell contributed to this report.
On Campus Radio will have much more on the college admissions scandal Sunday night at 8 p.m.on 89.7 WGBH.