Local legacies uprooted

Not all the remnants of the Mahoning Valley's robust industrial heyday are rusty.

A yearlong review by the Tribune Chronicle found that 1,180 nonprofit foundations in Trumbull and Mahoning counties are worth nearly $4 billion. Many of the foundations are rooted in the Valley's industrial past.

During the area's steel baron days, it was assumed that local banks would always exist. In fact, Ohio law prohibited out-of-state banks until around 1980. The wealthy, concerned about who controls their money, often set up trusts, naming their wives, eldest children or even the banks themselves as trustees because of confidence.

Article Photos

Special to the Tribune Chronicle
Nancy Lagnese holds photographs of her monther, Helen Moran Queale, at the family farm in northern Trumbull County. Lagnese asked to not be photographed because she wants her charitable work, which she does in her mother’s name, to remain anonymous.

After all, they already did their life's worth of business with the local bank.

''There was a lot of money made in Mahoning and Trumbull counties. A lot of money,'' said Patty Brozik, president of the Community Foundation of the Mahoning Valley. ''A lot of very fine companies were started in this community.''

But eventually wives and children entrusted to oversee a family's legacy died; bank officers died or retired; and the trusts ended up with young bankers or second and third generation family members who lost interest in the local community.

It's what Brozik calls one of the area's biggest problems.

''The legacy of these foundations is what has sustained this community for the longest time,'' Brozik said. ''But we're finding that as (philanthropic) families leave the area as a result of whatever the economy, better weather, death that second and third generations are giving up on the area.''

Gordon Wean, chairman for the board of directors at the Wean Foundation, the Valley's largest privately owned and locally run foundation, knows all too well that a founder's original intent can change in time, especially when that founder's family is not vested in the community.

''What happens in an area like Warren and Youngstown, the kids of the next generation move away,'' said Wean, a Warren native.

From a one-room office during the great depression, Gordon's grandfather, Raymond John Wean, founded the Wean Engineering Company during the Great Depression in what is now the Huntington Bank building in downtown Warren. The company grew into an international success, and Raymond Wean launched the family foundation in 1949 for one major reason.

''He loved Warren and Youngstown,'' Gordon Wean said.

Over time, recipients of the foundation's $4 million in annual giving were scattered across the country as the focus drifted from the region where its founder made his fortune. In 2007, foundation representatives resolved to shift the $90-million foundation's focus back to its creator's original intent causes in Trumbull and Mahoning counties.

The Wean Foundation will still be in the hands of progeny. But in many other cases, a change in Ohio law allowing out-of-state banks to acquire local financial institutions left many trusts in the hands of bankers hundreds of miles away and without the vision or enthusiasm for how the trust would serve the community.

''It's important to have your foundations under local control not under the control of out-of-state banks,'' said James Sisek, president of Farmers Trust Company, a local bank that deals in trusts and fiduciary activities not in loans or deposits like a typical bank.

Sisek helped found the Farmers Trust Company to avoid this issue.

''We started with zero assets,'' Sisek said. ''And it was in response to, frankly, the big banks coming in and closing down the local trust departments and transferring the assets out of town where they were administered by people who didn't even know the local charities or the local families.''

That's why, while the Tribune Chronicle found 1,180 foundations in the two counties, people like Sisek believe there may be dozens more with Valley roots but addresses at out-of-town banks. With those addresses and without familiar names, they are virtually impossible to locate.

Analysis of the 990 tax forms for the 150 nonprofits that the Tribune Chronicle investigated indicates that investment fees can fall under several headings, including trustee, investment, accounting, legal, consulting and other professional fees. These fees totaled $17.7 million, more than half of what the 150 nonprofits listed as a charitable contributions.

Huntington Bank, based in Columbus, operates the foundation as its ''full trustee.'' Huntington hires itself to invest the Foundation's $7 million in assets in 2009. It charged $48,399. Its investments earned $163,879 for the foundation.

"The bank serves as trustee for a variety of different kinds of clients," said Dave Sabine, senior vice president for Huntington in Youngstown.

Sabine explained that wealthy individuals place large sums of money in foundations that carry out a charitable cause in perpetuity. When the original donor passes away, banks like Huntington, which has changed hands through mergers and acquisitions three times in Sabine's 15 years, may become a member of the board that disperses funds.

"We participate on the distribution committee, so we have an input into kind of a voting ability as to how the money is distributed," Sabine said, adding that the bank's primary role is as an investment manager.

Locally, Farmer's Trust is now worth $1.2 billion, employs 31 people and has offices in Youngstown and Howland, making it the largest trust company in the area that is not run by a bank. ''It's local, and we know our clients,'' Sisek said.

But even with a flourishing portfolio of lucrative trusts, Farmers faces challenges when it comes to investing locally generated trust money in the community.

In some cases, the purpose of the trust no longer exists. A couple of good examples are the William Swanston and Kikel Charitable foundations.

In 1921 William Swanston, a successful and philanthropic farmer from Canfield, died and left $100,000 and 100 acres of land to fund orphanages.

The U.S. stopped running orphanages and established countywide children services. There was nothing for the five local bank trustees to spend Swanston's money on, and the assets were eventually forgotten.

It was discovered in 1980 that the William Swanston Foundation had grown to an $8 million worth.

Likewise, three sisters from Youngstown made lucrative investments in IBM stock and established a trust to benefit children after their deaths in the 1990s. The sisters' money funded Tod Children's Hospital at Forum Health's Northside hospital.

Then Forum Health filed chapter 11 bankruptcy and Tod hospital ceased to exist until Akron Children's Hospital purchased it.

As Forum Health scrambled to repay investors, the Kikel Foundation's accrued interest was sought after in court by Forum Health, Akron Children's Hospital and St. Elizabeth Health Center.

During a trial, few witnesses remained who knew of the sisters' secretive affairs and intent of their foundation.

''That was one of the issues at the trial,'' Sisek said. ''What happens is you try to approximate as closely as possible what the intent of the sisters would have been, had they been around.''

The same question surrounded Swanston's legacy since orphanages also ceased to exist.

''Who gets the money?' Sisek said.

Swanston's cause and the recipient of the Kikel sisters' philanthropy were settled through a legal remedy called cy pres, translated to ''as near as possible.''

Swanston's money began to flow to various organizations across the Valley to benefit abused and neglected children. And the sisters' wealth was split between Akron Children's Mahoning Valley and St. Elizabeth Health Center.