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Museum Sues Over Broken Promise

January 14, 1998

CHICAGO (AP) _ A couple who reneged on a $5 million pledge to the Museum of Contemporary Art have thrown the institution into a blue period.

And now the museum’s directors have made what some say is an unprecedented move _ they’re suing the promise-breakers.

``It certainly is not a comfortable situation for a museum to be in,″ said Ed Able, president of the American Association of Museums in Washington, which represents 8,000 institutions.

The dispute between the museum and a board member, real estate developer Paul Oliver-Hoffmann, began in 1990.

Oliver-Hoffmann, then chairman of the MCA’s trustees, submitted the first pledge toward constructing a new, $46 million home for the museum. He signed a letter of intent and agreed to pay the $5 million by June 30, 1997. He also agreed the commitment would be binding on the couple’s estate if the pledge was not completed during their lifetime.

Then the bickering began.

Oliver-Hoffmann’s wife, Camille, would not give details but said her husband had concerns about how the MCA spent its money.

``There was a lot that happened at that time that we never discussed because we did not want to damage the museum,″ she said Wednesday. ``I have given that museum no thought in seven years. We have never set foot in that museum since Paul resigned in 1991, and it was made abundantly clear to the entire board that my husband was departing.″

The MCA sent the couple letters each year asking for the money. The Oliver-Hoffmanns did not reply.

So museum officials sued on Dec. 31, seeking $5 million, plus interest and legal costs.

``Frankly, I don’t believe litigation is a good way to resolve problems,″ said Penny Pritzker, chairwoman of the MCA board of trustees. ``But I was unsuccessful in being able to have any kind of dialogue with the Oliver-Hoffmans. Since they had made a pledge to pay the museum, we couldn’t just say, ‘Oh well, forget it.’ We were left with no alternatives.″

The museum still managed to raise $72 million _ $22 million over its original goal.

But Pritzker said the museum relied on the pledge when it sought money from other contributors, including $50 million from a group of banks. And, she said, some trustees upped their donations as much as tenfold when they learned of the proposed $5 million gift.

Such lawsuits could become increasingly common because of a 1995 change by the Financial Accounting Standards Board, the accounting world’s rule-making body. That change calls for all nonprofit groups to record pledges as income at the time they are promised.

``If you record it and the pledge is not received you have to write it off as a bad debt,″ Able said. ``You look good in 1995 and then in 1998 you have to write off the $5 million and it throws you into a deficit situation.″

The Oliver-Hoffmans continue to collect modern art and donate their time and money to museums.

In April, Mrs. Oliver-Hoffmann became vice chairwoman of the board of trustees at the Hirshhorn Museum and Sculpture Garden in Washington.

But she worries the lawsuit may reduce those donations.

``Are we permitted to give to the National Gallery or to the Hirshhorn or to any other museum of our choice? Is that right no longer permitted us?″ Mrs. Oliver-Hoffman asked. ``If I have to spend all of my money in an expensive lawsuit, that’s naturally going to come out of my giving.″

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