Paul C. Cabot, Jr. the scion of one of New England's oldest families, has agreed to pay restitution to the Paul & Virginia Cabot Charitable Trust, which, as a co-trustee, he drained of millions of dollars to support a lavish lifestyle, the Boston Globe reports.
The agreement with the office of Massachusetts Attorney General Thomas F. Reilly included a release of documents showing that Cabot used the foundation's assets, which are held to be distributed to charity, as his own, writing checks to make mortgage payments on a Florida property and his home in Needham, pay his taxes and credit card bills, and settle bills from his yacht and golf clubs. As part of the agreement, Cabot has agreed to sell both the Florida and Needham homes and will be barred for life from any role in a Massachusetts charity. The sanctions are the most severe ever levied against a charitable foundation in Massachusetts.
Jamie W. Katz, chief of the attorney general's Public Charities Division, said it was "unconscionable" that Cabot took so much money — $7.5 million over nine years — from a trust that his father created to benefit worthy charities. Katz's office launched its investigation after the Globe reported, as part of a series on abuses at charitable foundations in the state, that Cabot had paid himself salaries that exceeded $1 million a year from 2000 on. He even gave himself a raise in 2001 because he needed an additional $200,000 to pay for his daughter's wedding.
Bruce Hopkins, a Kansas City attorney who is a specialist in foundation law, said the multi-million-dollar settlement is unusual. "That's a large number where you're having the individuals sell property, particularly a personal residence," Hopkins said. "It strikes me that the attorney general struck a pretty hard bargain." Hopkins added that Cabot could also face sanctions by the IRS, which has the authority to tax excessive compensation and self-dealing.
As a result of the review of the Cabot Trust and other foundations, Katz said, the attorney general's office will file legislation next month designed to improve governance of the state's 22,000 public charities, which include nearly 5,000 charitable foundations. The legislation would require more diligence by trustees, give the attorney general greater authority to levy penalties, and require third-party research to ensure that compensation of officers and trustees is within reasonable boundaries.