Delaware's Nemours Foundation At Center Of Controversy

WILMINGTON, Del. (AP) — The overseers of a $4 billion charitable trust established by the late Alfred I. duPont have deviated significantly from duPont's intentions, to the detriment of Delawareans, Attorney General Beau Biden said Monday.

In court papers filed in Florida, Delaware officials allege that trustees of the Alfred I. duPont trust have shifted the primary focus of the trust from Delaware to Florida, despite duPont's insistence that Delaware was to be the primary beneficiary of his trust.

In addition to providing annuity payments to beneficiaries of duPont's will, the trust finances the work of the Nemours Foundation, which runs the Alfred I. duPont Hospital for Children in Wilmington and other health care facilities in Delaware, Florida, New Jersey and Pennsylvania. It also operates the Nemours Mansion and Gardens in Wilmington.

Delaware officials claim that the trustees have altered the governance structure of the Nemours Foundation in a way that dilutes Delaware's influence and have shorted Delaware in distributions of trust proceeds.

Among the specific allegations, Delaware officials claim that $72 million used to renovate the Nemours Mansion and Gardens was improperly counted against Delaware's share of Nemours Foundation distributions, rather than taken off the top before distributions were made. They also claim that more than $102 million for "corporate and shared services" was attributed to Delaware's share of annual trust distributions from 2005 to 2010, compared to only $19 million attributed to the Florida for the same period, and none to Pennsylvania or New Jersey.

Delaware officials also allege that trust officials have improperly restricted public access to the Nemours Mansion and Garden by barring children under 12 and allowing no more than 48 visitors at a time on the 222-acre site, even though duPont directed that it be maintained "for the pleasure and benefit of the public."

Biden is seeking a declaratory judgment to ensure proper governance and financial accounting of the trust.

Hugh Durden, chairman of the Jacksonville, Fla.-based trust issued a prepared statement late Monday saying the allegations in Delaware's court filing are "without merit."

"We have been seeking input from the Delaware attorney general for multiple months and we welcome a dialogue with him," the statement read, adding that the trust will respond in a more comprehensive manner after reviewing Delaware's court filing.

Alfred duPont, a vice president for the DuPont Co. before moving to Florida, directed that the Nemours Foundation be a charitable organization for the care of "crippled children, but not of incurables, or the care of old men or old women, and particularly old couples, first consideration, in each instance, being given to beneficiaries who are residents of Delaware..."

Monday's court filing came in a case in which the trustees are seeking to modify the trust for tax purposes. Under the current framework, the non-charitable annuity payments to beneficiaries of duPont's will prevent the trust from qualifying for tax-exempt status for overseas investments. The trustees want to split the current trust, with one side being used for the beneficiaries of duPont's will, who receive an aggregate of about $57,000 annually, and the other side continuing to finance the Nemours Foundation.

Such a split would allow the trust to avoid about $3 million a year in foreign income taxes that could be spent in the U.S. for charitable purposes, the trustees say.

Biden's accusations "... only serve to delay the filing by the duPont trustees to split the trust in two — a move that would achieve significant tax savings which will permit even more children to receive the benefits of Alfred I. duPont's extraordinary gift," Durden said in his statement.

Delaware officials were granted permission to intervene in the case earlier this year in order to protect the state's interests. While initially expressing concerns about certain terms of the proposed trust split, they are now alleging underlying mismanagement of the trust itself.

The trust, which has been the subject of various court orders and stipulations for more than 30 years, was valued at $40 million when duPont died in 1935, but grew to $4.6 billion in 2009.

Under a 1980 agreement involving Delaware, Florida and the Nemours Foundation, the trust must give Nemours the net annual income generated by the trust, or 3 percent of its net market value, whichever is greater. The trust also cannot spend more than 50 percent of its funds outside Delaware and must maintain a $25 million contingency fund for Nemours' Delaware operations.

(© Copyright 2012 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)