Epstein Files Highlight Reputational and Legal Risks of Problematic Benefactors

The Department of Justice’s rolling disclosures of millions of pages of documents pertaining to the FBI’s investigation of Jeffery Epstein has captured the nation’s attention. It has also attracted the intense focus of charitable organizations who may have accepted or may be in the process of soliciting or taking major gifts from wealthy benefactors with ties to Epstein. Charities returning and rejecting gifts from Epstein himself were widely reported when his deplorable conduct and subsequent legal troubles came to light more than a decade ago. But the more recent production of the Epstein files, including the files released as a result of the Epstein Files Transparency Act passed on November 19, 2025, has sent charities scrambling to search the disclosed records — both for references to the charity and its gift officers and other organization representatives and to compare donor rolls to the names of wealthy philanthropists disclosed in the files. When there is a match, a difficult assessment and calculus follow. Will the charity be sullied by evidence of solicitation of donations? Was the benefactor guilty of misdeeds? Or somehow complicit? Merely knowledgeable but guilty by silence? Or just innocently scraped up in a tangled web of business dealings (embarrassing, though lawful), personal communications, false reports, and casual references to unknowing persons? What is the potential reputational harm to the institution if a gift is retained, recognition allowed to remain, or an additional gift accepted? What is the risk of revoking recognition? For organizations whose charitable mission rests on reputation, credibility, and trust, these controversies underscore several key lessons.

Crisis Response

Some charitable organizations are finding themselves strained for resources as they review the more than three million pages of the last Epstein document release. The problem is heightened by the need to get ahead of the inevitable media reporting on Epstein’s ties to rich and famous donors. Technology can help speed up the review process, but the volume of documents released can still be challenging to manage. During these stressful times, charitable organizations can benefit from a plan and having available additional outside resources to tap in an emergency. Such a plan may include developing a standard response for inquiries from the media or donors about the naming of the charity or its benefactors in the files. A charity should draft this response carefully, and possibly involve legal counsel in the drafting, to ensure that the statements made do not expose the charity to any risk of litigation on defamation claims.

Morals Clauses

The recent Epstein productions no doubt have prompted charitable organizations to hurriedly review their gift agreements and parse their morals clauses — if they are lucky enough to have them. A morals clause — sometimes referred to as a “misconduct clause” or “bad boy provision” — is a contractual term that gives a charity the legal right to alter or revoke donor recognition if the donor engages in conduct that harms the organization’s reputation or is inconsistent with its values. It must be acknowledged that many donors resist such provisions. But can anyone doubt the increasing importance of such clauses in a media age where a donor’s scandal can blow up instantaneously into a very public crisis? Especially when reputation and credibility are so vital in cultivating and maintaining donor trust and support. One challenge is that all morals clauses are not created equal; they tend to be carefully negotiated on an individual basis, especially when it comes to large gifts. Material terms therefore can vary widely, including as to (among other things):

• Defining what triggers give the charity a right to remove recognition (from requiring a criminal conviction to flexible references to “moral conduct”)
• Specifying the recognition rights subject to removal (such as the naming of buildings or scholarships)
• Setting the process for notice and removal
• Stating remedies if removal is contested

Partly due to their being heavily negotiated, and because of the need to cover a wide variety of unknowable future events, morals clauses tend to be packed with difficult judgments. For example, a morals clause may read: “If at any time the donor fails to conduct himself or herself without due regard to public morals and decency or if the donor commits or becomes involved in any situation that materially and adversely affects the reputation of the charity, the charity shall have the right to remove donor’s recognition rights pursuant to this gift agreement.”

What are “public morals and decency”? What will a court agree “adversely affects the reputation of the charity”? What happens to the underlying gift, which may already have been fully spent or committed to a project? These issues highlight both the need to give careful consideration to the negotiating and drafting of such provisions (especially when the pressure can be considerable to accept a major gift) as well as the need to seek appropriate legal advice from experienced counsel when a problem comes to light.

If a gift agreement does not contain a morals clause, the agreement should be analyzed to determine whether the issue can be addressed in a different way. Is the charity’s current method of recognition required, or is there room for modification? Can the agreement be amended and, if so, who must consent to the amendment? Gift agreements are varied and customized, and so there may be options available to the charity, even if a morals clause was not negotiated. On the other hand, the agreement may not have any flexibility for the charity; if this is the case, then the charity risks litigation if it does not comply with the terms of the agreement.

Risks from Removing Recognition

Actions to protect an institution’s reputation — such as taking down or modifying donor recognition — can create a risk that that donor or other person with standing (such as the donor’s charitable foundation, family, or estate) may challenge the charity’s decision. With or without a morals clause, charities can face difficult decisions of whether to retain recognition for or returning large donations to donors that do not align with the organization’s values. Taking such steps can open the organization up to litigation risk over the recognition rights themselves and, in extreme cases, claims of reputational harm to the donor, including defamation-type claims. Any public statements about such actions or the donor must be crafted with extreme care. Such action may also concern other donors or potential donors, who may feel that their negotiated recognition rights may not be respected by the charity.

Conclusion

The human and legal calamity generated by Jeffery Epstein and the public disclosure of the FBI’s investigation file is unprecedented; the challenges and risks presented by dealing with problematic donors are not. And it is a problem that is only likely to grow as the great wealth transfer intersects with the rapidly increasing speed of disclosure in the information age. When presented with the myriad difficulties of problematic donors, reputation-minded charitable organizations are well-advised to think through strategies and policies in advance and to seek the guidance of experienced counsel when needed.