Buffett Recognizes Betrayal, Hospital Drains Big Endowment

While investing with billionaire Warren Buffett, Mildred and Donald Othmer were lucky enough to make a lot of money. But when they passed on from this world, they chose to have the profits earned from investing would Buffett get put back into the community. It’s plausible that they would never have imagined what was about to happen next.

It’s certainly could be called a “cautionary tale for wealthy investors who hope their gifts will make a long-term impact,” a report from the Wall Street Journal talks about the utter destruction of the hospital endowment worth $135 million that was created by the Othmers less than 20 years ago.

Buffett tells the WSJ that if Donald and Mildred were still alive, “I would think… they would feel betrayed.”

Natives of Omaha, Nebraska, the Othmers were married in 1950 in the state of New York. They chose to live modestly in Brooklyn for many decades. The Wall Street Journal wrote about it in their report “A Buffett Fortune Fades in Brooklyn.”

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Back in 1961, the Othmers each invested $25,000 into a Buffett run partnership. That same partnership was dissolved eight years later, and in return for their previous investment, they received 14,500 shares of Berkshire Hathaway. At the time, Berkshire Hathaway shares were worth $42 each. So their original stake in the company was $609,000, but if you compare it to money in 2013, it’s worth $3.9 million.

When the couple passed on from this life in the mid-1990s, the total value of their stock was worth $780 million. At today’s current share price of $178,275 per share, the market value of that stock would be worth $2.6 billion.

The couple did not have any children but they did have a desire to give back to society, so they sent the majority of their money to different charitable institutions. One such institution was the Long Island College Hospital nearby to their home. The hospital received a $135 million endowment. The Othmers wills stated that the endowment should be “held in perpetuity” meaning that it was only allowed to spend the income generated by the endowment, and none of the principal.

The Wall Street Journal article recounts:

In a series of court-approved transactions, hospital administrators repeatedly tapped the fund to serve as collateral for loans and to cover malpractice and other costs, according to court records. The transfers were permissible to keep the hospital going, the court ruled, saying that is what the Othmers would have wanted.

Now, amid protests by workers and residents, the money-losing hospital’s owners have been given permission to close it down and almost all of the Othmers’ gift is gone.

Warren Buffett was then alerted to this news by a Brooklyn resident, at which time he told the Journal, “this came as a huge surprise to me.” He wished that he knew about this issue sooner.

The couple “did not spend huge sums on themselves but instead wanted the money to go back to society. And at least one institution couldn’t wait to change the terms under which it received the money.”

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