Archive for Monday, June 26, 2006

Billionaire Warren Buffett to begin disbursing fortune

June 26, 2006


— The world's second-richest man, Warren Buffett, became one of the world's biggest philanthropists Sunday with the announcement that he would bequeath the bulk of his roughly $44 billion fortune to the foundation established by billionaire Bill Gates and his wife.

The decision to start giving next month through annual stock donations represents a stark reversal for the investment wizard, who for years had said his wealth would be pledged to philanthropies after his death.

Buffett's gift will radically boost the resources of the Bill and Melinda Gates Foundation, which is already the world's largest philanthropy with assets of more than $29 billion.

Earlier this month, the world's richest man and Microsoft Corp. co-founder decided to give up his daily duties at the software company in 2008 to spend more time at his foundation, which is considered a leader in international public health, particularly in the fight against HIV, malaria and tuberculosis.

Gates also serves as a board member of Berkshire Hathaway Inc., Buffett's investment conglomerate, and the men socialize regularly.

The 75-year-old Berkshire chairman and CEO had been expected to leave his vast holdings of Berkshire stock largely to the Susan Thompson Buffett Foundation, begun by Buffett and his late wife. That foundation has given millions of dollars to hospitals, universities and teachers, as well as to Planned Parenthood and other abortion rights groups.

Warren Buffett, left, Melinda Gates and Bill Gates stand together on Sunday in New York, shortly after Buffett's announcement that he would begin making an annual donation to the Bill and Melinda Gates Foundation.

Warren Buffett, left, Melinda Gates and Bill Gates stand together on Sunday in New York, shortly after Buffett's announcement that he would begin making an annual donation to the Bill and Melinda Gates Foundation.

Buffett said he plans to give away 12,050,000 Class B shares of Berkshire Hathaway stock to the foundations, but he will have to convert some of his 474,998 Class A shares to complete the gifts. One Class A share, which sold for $92,100 on Friday, can be converted into 30 Class B shares, which sold for $3,071 Friday.

The gifts would be worth nearly $37 billion based on Friday's closing share price.

Investment strategy

Buffett's assistant Debbie Bosanek said Buffett would not be available to comment Sunday. But letters outlining the gifts were posted on the company's Web site, and Buffett explained his decision in an interview with a Fortune magazine editor, Carol Loomis. She has edited Buffett's annual letter to shareholders for several years.

Buffett told Fortune that he decided to start giving his money away now because he has been impressed with Bill and Melinda Gates and the work they've done through their foundation. And he decided it would be easier to give to a large foundation instead of trying to expand his own foundation.

"What can be more logical, in whatever you want done, than finding someone better equipped than you are to do it?" Buffett told the magazine. "Who wouldn't select Tiger Woods to take his place in a high-stakes golf game? That's how I feel about this decision about my money."

Andy Kilpatrick, a stockbroker who wrote "Of Permanent Value, the Story of Warren Buffett," called the announcement remarkable, but said he always expected something more to develop from the relationship between Buffett and Gates.

"It's Buffett and Gates merging in a way for charitable purposes," Kilpatrick said.

Buffett has long said limiting the spread of nuclear weapons is the greatest challenge facing mankind. And Kilpatrick said Buffett probably agrees with the Gateses' concerns about population control, disease and education.

In a statement, Bill and Melinda Gates applauded Buffett's decision.

"We are awed by our friend Warren Buffett's decision to use his fortune to address the world's most challenging inequities, and we are humbled that he has chosen to direct a large portion of it to the Bill & Melinda Gates Foundation," the couple said.

Advice to children

Buffett suggested that his children should focus their charitable resources on needs that would not be met otherwise.

"Focus the new funds and your energy on a relatively few activities in which HGB (Howard G. Buffett Foundation) can make an important difference," Buffett wrote. He included the same paragraph of advice in the letters to each of his children.

Buffett said he plans to earmark 10 million B shares for the Gates Foundation, 1 million B shares for the Susan Thompson Buffett Foundation and 350,000 shares for the three foundations run by each of his children.

Buffett plans to give each foundation 5 percent of his total pledge each year in July.

In the interview with Fortune, Buffett acknowledged that the foundations may sell off the Berkshire stock to raise cash. But Buffett said he doesn't think that will affect the price of the stock because the gifts will be spread over time.

"I would not be making the gifts if they would in any way harm Berkshire's shareholders," Buffett told Fortune. "And they won't."

But Kilpatrick said this announcement is still likely to prompt some people to sell Berkshire stock this morning. Kilpatrick said he doesn't think this will hurt the company in the long run especially because it might be added to the S&P; 500 index in the future, which would help the stock.

Buffett's health has been the subject of speculation. He has said a succession plan is in place at Berkshire but refuses to name a successor.

In the letters, Buffett wrote, "My doctor tells me that I am in excellent health, and I certainly feel that I am."

Berkshire owns a diverse mix of more than 60 companies, including insurance, furniture, carpet, jewelry, restaurants and utility firms. And it has major investments in such companies as H&R; Block Inc., Anheuser-Busch Cos. and Coca-Cola Co.


lunacydetector 11 years, 8 months ago

at 75, he's as old as dirt. in 2003, the average life span for a male in the united states was 74.6 years old.

most rich people become rich by a) doing something illegal, or b) screwing people over legally -which george soros defines as being amoral-which he claims to embrace, the true definition being - without moral standards or principles.

no wonder the super rich eventually lean liberal.

lunacydetector 11 years, 8 months ago

i should have said 'super rich' instead of 'rich.'

gabalotgal 11 years, 8 months ago

I think it's great that he is giving his money to charity but I also wonder if he could do as much good by giving some of the monies to those who truely need help? I know we are broke and extra money would be such a gift but I think someone who doesnt have a home would be in more need that I. Why couldnt he go to a few shelters and give a few families who truely deserve to get help some of his fortune? He would not have to give them millions just enough to get them out of a shelter into their own home enough to pay bills so they dont have to worry while they are out looking for work. and of course all has to be given with terms to complete, you can not receive any money and then just sit back and enjoy the money till it runs out then say OMG Im broke I didnt get a job what am I going to do? If the person needs to go back to school to get a degree to start on the right road then he could give them enough money to do that. I think that would put our world more on the right track. People helping people. Trust me if I had any money to give away I would look for a way to help those in shelters.

Christine Pennewell Davis 11 years, 8 months ago

yeah just go to towns around the country and find people who just need a little hand up, pay their morgage or car loan things like that, that would be a real nice thing to do and hard working people would get a break. Not to say that charaties do not help deserving people because they do.

Godot 11 years, 8 months ago

Wow, the Gates Foundation will have enough cash to be its own country.

Christine Pennewell Davis 11 years, 8 months ago

what you mean its not??? but i wanted to move to gatesville:)

Godot 11 years, 8 months ago

When the tax exempt status of charities was established in the tax code, I doubt anyone imagined that a 501(c)(3) foundation would have an asset base exceeding $100,000,000,000.

Congress needs to revisit that issue.

Christine Pennewell Davis 11 years, 8 months ago

give it to me give it to me heck I would love to just have the intrest off that amount.

Godot 11 years, 8 months ago

The more money you have, the more money you make. The KU endowment, with its nearly $100,000,000 in assets gets a yield over 16%. I imagine they could afford to take lots of risks with 100 Billion, so their return should be in the 20% range.

Imagine having $20 billion per year to spend, with a $100 billion cushion underneath you.

The Gates Foundation could fund all the K-12 education in the US if it wanted to.

Christine Pennewell Davis 11 years, 8 months ago

hey just send it my way like I said. Do you guys know anyone that would turn any of this money away? Can some one tell me just what the intrest in one year would be on that amount? I am sure I could live on it ok.

Godot 11 years, 8 months ago

"Can some one tell me just what the intrest in one year would be on that amount? I am sure I could live on it ok."

Could be as much as 20%, or $20,000,000,000. Imagine that much money being controlled by one man, with no taxes due, and with no oversight, other than by a board that he gets to hand pick.

mom_of_three 11 years, 8 months ago

Buffett also said, according to ABC News, that the money given to the Gates Foundation must be spent in the year it is donated. So there may be lots of help out to those who need it.
Maybe next time Warren Buffett is at KU, someone could suggest sharing the wealth with those who need, or a short term low interest loan. Let me know, I would like to be in the vicinity to hear the answer. But he is a very generous man.

Christine Pennewell Davis 11 years, 8 months ago

I still same DAMN my mind can not grasp that much $$$$$ and just say here you go. DAMN

paladin 11 years, 8 months ago

Sounds like he's sheltering his fortune, not giving it away. Just like Bill did.

Godot 11 years, 8 months ago

Interesting maneuvering. Both Gates and Buffet oppose the elimination of the death tax. Yet they have both avoided the 50% tax on their billions by "gifting" their fortunes to a behemoth of a charity, one that they conveniently control, and that will not pay taxes. Sounds like they have themselves an entity that could, one day, rival the US government in power and influence.

just_another_bozo_on_this_bus 11 years, 8 months ago

One result of repealing the estate tax is that it will drastically reduce charitable giving by the very wealthy.

Godot 11 years, 8 months ago

That may or may not be true. I am sure that both Gates and Buffett would deny that their gifts were motivated by tax avoidance; they are passionate about their charity. Buffett has a very good argument that what you say is not true: if he were to not make the gifts, his estate would total $20 billion, after paying $24 billion in taxes. Under his current gifting plan, after paying taxes on the remaining $6.6 billion, there will be "only" about $3 billion left for his heirs...assuming he has not made other arrangments that would reduce his tax bill.

Christine Pennewell Davis 11 years, 8 months ago

if you had that kinda money would you try to get out of paying all those taxes? Seems like smarts and good accountants. now if only I could pay some one to handle mine that well, oh yeah I have no money to worry about like that. darn now the intrest was what? I will take that.

meggers 11 years, 8 months ago

I'm amazed at some of these responses. The Bill and Melinda Gates Foundation has literally saved hundreds of thousands of lives through the use of childhood vaccines in third-world countries, and they are looking to save more. Their work with creating a malaria vaccine ALONE could save tens of thousands, even millions of lives, most of them being African children. The foundation also promotes and funds early learning educational opportunities for the poor in some of the most blighted areas of our nation.

There is so much this foundation does and this gift from Buffett will allow it to do even more to fight disease, poverty, hunger, illiteracy, etc. for those who need it the most.

If any of you think you need it more, hit them up for a grant. I'm just pleased that there are at least two very wealthy Americans who are willing to use their money to make a difference for the sake of humanity. If more wealthy people would do the same for TRUE philanthropic causes, the world would be in a much better state.

Bubarubu 11 years, 8 months ago

Damn that evil Buffett for doing good work with his money rather than paying a tax. He's not sheltering his estate Godot, he's reducing the size of it. I've seen the estate tax line of criticism elsewhere and I can only imagine that the reason it gets trotted out is because Buffett is rich and not a low/no-tax conservative. He's giving his money to a charity that immunizes kids, sends mosquito nets to Zambia, improves public libraries and increases access to them, and tries to get more kids to graduate from high school. Conservatives with more money than they know what to do with start think tanks and political apparatuses (think Coors and Scaife). Buffett looked around, saw the piles of money (as represented by stock certificates) and said, "how can I help people with this?" I can't help but think of Newsweek's interview with Tim LaHaye (co-author of the Left Behind series, longtime conservative activist/lobbyist) in 2004. LaHaye was asked, if the Bible is to be taken literally, then why not sell everything you have and give to the poor. He answered, "you know how much I pay in taxes?" LaHaye, with God's commandment firmly in mind, amasses great personal wealth and complains about his taxes being too high. Buffett, who is an atheist, just pledged $35 billion to an organization that fights disease and improves education and complains that his property taxes are too low. I'll throw my lot in with the latter every single time.

lunacydetector 11 years, 8 months ago

quite frankly i don't know what gates' charity has done for people. i need to see something on paper other than some fluff article about how great he and his wife is. for instance, does the charity support ddt being reintroduced to stifle malaria? how much money is spent on p.r., administration salaries and expenses, and how much actually goes to do good? how does his charity compare to other reputable charities?

...and whatever happened to 'Aid for Africa' from the 1980's? i know they supposedly were to spend the interest earned from the vast amount they raised, but you never hear about it anymore. that was one charity that was suspect.

GardenMomma 11 years, 8 months ago

The Bill & Melinda Gates Foundation donated $20 million over a five year period starting in 1999 to the Cystic Fibrosis Foundation. The CF Foundation spends 90% of its donations on research. For more information check out or read the archived article on 3/2/05 entitled "50 Years of Research, Progress, Hope."

By the way, the life expectancy of people with CF has increased from 31 years to 36.8 years in the last seven years. Mostly attributable to better treatments and available drug therapies.

Godot 11 years, 8 months ago

BUBU, you need to re-read my post. I was saying that I do not think that Buffett is doing this to avoid paying taxes, and that I think he believes in the work that will be done with the money. However, I do believe that he would much rather transfer the power of his money to a charity that he controls than give it to the government to spend. He can't control what happens with his money after he gives it to the government. So, the statement that he is not a "no taxes convservative" is hollow. He is a "no-taxes for me, but taxes for everyone else" genius.

Is he generous? Yes. Do he and Gates think that because they are geniuses that they know how to fix the world? And do they intend to go about changing the world their way, unfettered by the troublesome democratic process?

You bet.

Bubarubu 11 years, 8 months ago

According to the IRS, fewer than 2% of people will ever need to be concerned with the estate tax, and that was when the ceiling was $1M. As of this year, the ceiling is $2M that can be passed on after death without any tax liability. So this "taxes for everyone else" nonsense is just that, nonsense. Buffett is also on the record in favor of increasing his own property taxes and maintaining the dividend tax. He wants to pay taxes, he recognizes the need for taxes and the importance of wealthy people to pay more in taxes.

Second, Buffett has long said that wealth (and the accompanying privilege) should not be inherited. This donation is incredibly consistent with his public position on the tax issues. He could give 45% of his estate to his children, but he doesn't want to. He wants to ensure that his money goes to valuable causes, so he did this. This is not some loophole, some exploitation of the system. Buffett is spending his wealth in a way that is good for people and supports his beliefs. Your alternative is that he hand his fortune over to his children and he lose control of the money he earned.

Third, the option Buffett took is available to everyone who would otherwise be subject to the estate tax. Gnashing teeth because he took that option is nothing but sour grapes at someone who has a lot of money and disagrees with you politically.

Finally, your criticism of the Gates Foundation is applicable to every single charity out there. The Ford Foundation, the Heritage Foundation, the American Cancer Society, the Muscular Dystrophy Association, etc., etc., etc, are not democratic either. For that matter, neither is Microsoft or Berkshire Hathaway. Now, what does "changing the world" look like to the Gates Foundation? Treating and reducing the incidence of HIV/AIDS, handing out treated mosquito nets in Zambia to reduce the rate of malaria cases by 75% by the end of 2008 (a program administered through the Zambian government, so much for anti-democratic), raising high school graduation rates (as part of a broad coalition, including a number of large public school districts), reestablishing public library services along the Gulf Coast, and providing housing for homeless families in and around Seattle. Tell me how any of that undermines democracy. Tell me how democracy is solving any of those problems.

Bubarubu 11 years, 8 months ago

Previously I mentioned Scaife, Coors, and LaHaye, so let's add Lay to that list. You know him, the convicted chairman of Enron? He donated $1M to set up an an endowed chair at his alma mater (Mizzou) and then asked for it back to help fund his criminal defense. Actually Mizzou seems to attract that sort of thing. The Lauries, with their Wal-Mart wealth, donated $25M to Mizzou to build the new arena and then they named it after their daughter who spent $20K to get a roommate to do her homework in college. Conservatives want to preserve dynastic wealth for this sort of nonsense? No thanks. Keep the estate tax and encourage those who would be subject to it to donate their money to charitable causes.

Godot 11 years, 8 months ago

Wow, bubu surely is senstive about this.

My comments are not meant to be partisan, just an observation about the power of huge charities and foundations. Now considering that Bubu is defending Buffett and Gates by defaming Republicans, I guess I should question the political nature of Gates Foundation.

Christine Pennewell Davis 11 years, 8 months ago

who cares just give it to me then i will move to gatesville.

Bubarubu 11 years, 8 months ago

It's only defamation by comparison. The virulently political nature of the Scaife phlianthropy vs. curing disease with the Gates Foundation. Easy comparison.

As for partisanship, the estate tax (which you said Buffett was dodging and implied some sort of malice or wrongdoing) is nothing but a partisan issue. It is Republicans catering to wealthy interests with no practical value or legitimate justification. It's sad that you brought the politics into it, then made the implication that I would only defend liberals or liberal foundations and that any organization that was not virulently conservative must be liberal. The cynicism is sickening.

Godot 11 years, 8 months ago

If the estate tax only applies to 2% of the taxpayers, then why is it important? If the government needs that 2% to meet its budget, then the government should close that loophole that allows people like Gates and Buffett to give their money away and avoid the tax.

Suppose everyone in the top 2% gave their entire estates to "charity." Would the US go broke?

The estate tax is a Democrat red herring.

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