OPINION:
Although it’s usually not a good idea to do what Herbert Hoover did, President Trump should do to Harvard University what President Hoover did to Al Capone: hold the Ivy League university accountable for violating federal tax law. After all, one of Mr. Trump’s professed objectives is to revoke Harvard’s tax-exempt status. “We are going to be taking away Harvard’s Tax Exempt Status,” the president trumpeted on Truth Social. “It’s what they deserve!”
Hoover’s dogged pursuit of the nation’s most infamous gangster provides a road map for how Mr. Trump can do it.
Hoover is almost universally regarded as one of the worst presidents in American history. Of course, his inability to respond effectively to the economic crisis that led to the Great Depression is the reason. However, Mr. Hoover did have several noteworthy accomplishments, the most significant of which was securing a criminal conviction against Alphonse “Al” Capone.
Eliot Ness took credit for Mr. Capone’s downfall in his autobiography, “The Untouchables,” which was later adapted into a popular TV series and a Brian De Palma movie starring Kevin Costner and no less a tough guy than 007 himself, Sean Connery. Yet Hollywood never made a TV show or a blockbuster movie about Hoover, and Hoover, not Ness, deserved the credit for putting an end to the Chicago mob boss’ reign of terror.
A mere 16 days after Hoover was sworn in as the nation’s 31st president, he had a meeting at the White House with a delegation of prominent Chicagoans who wanted him to take action to quell the rampant crime and lawlessness for which Capone was largely responsible. Hoover decided on the spot that something needed to be done. He wrote in his memoir: “At once I directed that all the Federal agencies concentrate upon Capone and his allies. Our authority was limited to violations of income tax and prohibition laws. It was ironic that a man guilty of inciting hundreds of murders, in some of which he took a personal hand, had to be punished merely for failure to pay taxes on the money he had made by murder.”
Hoover instructed his attorney general to assemble a federal task force to “put Capone in jail.” Inspired by a 1927 U.S. Supreme Court decision that made income from illegal activities such as bootlegging subject to taxation, the task force recommended employing the nation’s tax laws to “get” Capone. Hoover zealously embraced the strategy.
Capone was charged with 22 counts of tax evasion. He was convicted of five charges and sentenced to 11 years in federal prison. Hoover — Herbert, not J. Edgar — got his man. Mr. Trump can “get” Harvard by embracing a similar strategy.
As almost everyone is probably aware, the Trump administration has frozen billions of dollars in federal funding for Harvard, launched multiple investigations, and threatened to cut off further funding entirely through debarment proceedings. Why? Because it insists that Harvard is violating federal civil rights laws. Harvard has responded by filing lawsuits against Mr. Trump. Although the two sides are reportedly close to a settlement, the president shouldn’t overlook Harvard’s tax law violations, which, despite little to no discussion of the subject, are as obvious as a plagiarized sentence from a Claudine Gay article.
Because Harvard is a tax-exempt 501(c)(3) organization, it hasn’t evaded paying taxes like Capone did. Still, it continues to pay Ms. Gay a $900,000 administrative salary after her resignation as the university’s president amid plagiarism allegations, and subsequent return to the faculty appears to be an egregious violation of the private inurement prohibition of the Internal Revenue Code. Sound complicated? It isn’t.
The applicable IRS regulation provides, in pertinent part: “No part of the net earnings of a section 501(c)(3) organization may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization.”
In other words, tax-exempt organizations such as Harvard are granted a privileged tax status. The prohibition against private inurement is a strict requirement mandating that no portion of a tax-exempt organization’s financial assets may benefit an insider of the organization, such as the president or a board member. The courts and the IRS have consistently ruled that any unreasonable benefit or inurement, however small, is impermissible and — this is the important point for Mr. Trump to consider — can result in the revocation of the organization’s tax-exempt status.
The most common type of private inurement is the payment of excessive compensation to insiders. Paying Ms. Gay nearly $1 million a year to teach a couple of classes and publish an occasional article is almost certainly a violation of the private inurement prohibition, especially when she earns three times as much as the $276,000 average salary of other full Harvard professors, with whom, by law, her salary must be “comparable.”
Al Capone was a murderous mobster. Hoover held him accountable by enforcing the nation’s tax laws. Harvard seems to be flouting federal civil rights and tax laws. President Trump should hold Harvard accountable by adopting Hoover’s approach to revoke Harvard’s tax-exempt status.
• Scott Douglas Gerber is the author of, most recently, “Law and Religion in Colonial America: The Dissenting Colonies” (Cambridge University Press). His novel “The Trafficker” will be published this fall.
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