Appendix B
History of the Markey Trust1

Lucille P. Markey executed her will creating the Lucille P. Markey Charitable Trust in 1975. Mrs. Markey’s wealth, which later endowed the Trust, was derived from the family of her first husband, Warren Wright. In 1888, with an initial investment of $3,500, Warren’s father, William Wright, founded the Calumet Baking Powder Company, which he built over the ensuing decades into the leading company in the industry. In the late 1920s, Warren sold Calumet to Postum (later General Foods) for about $32 million. This fortune, along with Calumet Farms, purchased by the elder Wright in 1924, was the foundation of the Wrights’ wealth, the bulk of which passed to Warren. When Warren Wright died in 1950, his estate was valued at approximately $20 million, about half of which was in securities and a quarter in oil and gas interests in seven states that would appreciate significantly in later years (Auerbach, 1994).

One of the valuable Wright-owned oil fields was the Waddell Ranch located outside of Odessa, Texas. Under typical oil lease arrangements, the lessor—in this case Gulf Oil Company—paid all costs and received seven-eighths of the proceeds, while the property owner received one-eighth. In 1925, Gulf Oil leased the Waddell Ranch for 50 years, an unusual arrangement as most oil leases were for perpetuity or for as long as the

1

The History of the Markey Trust is largely a duplicate of the same section that appeared in Funding Biomedical Research Programs: Contributions of the Markey Trust. The committee wants each of the five reports produced in this evaluation to exist independently; consequently some sections are repeated in each report.



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Evaluation of the Markey Scholars Program Appendix B History of the Markey Trust1 Lucille P. Markey executed her will creating the Lucille P. Markey Charitable Trust in 1975. Mrs. Markey’s wealth, which later endowed the Trust, was derived from the family of her first husband, Warren Wright. In 1888, with an initial investment of $3,500, Warren’s father, William Wright, founded the Calumet Baking Powder Company, which he built over the ensuing decades into the leading company in the industry. In the late 1920s, Warren sold Calumet to Postum (later General Foods) for about $32 million. This fortune, along with Calumet Farms, purchased by the elder Wright in 1924, was the foundation of the Wrights’ wealth, the bulk of which passed to Warren. When Warren Wright died in 1950, his estate was valued at approximately $20 million, about half of which was in securities and a quarter in oil and gas interests in seven states that would appreciate significantly in later years (Auerbach, 1994). One of the valuable Wright-owned oil fields was the Waddell Ranch located outside of Odessa, Texas. Under typical oil lease arrangements, the lessor—in this case Gulf Oil Company—paid all costs and received seven-eighths of the proceeds, while the property owner received one-eighth. In 1925, Gulf Oil leased the Waddell Ranch for 50 years, an unusual arrangement as most oil leases were for perpetuity or for as long as the 1 The History of the Markey Trust is largely a duplicate of the same section that appeared in Funding Biomedical Research Programs: Contributions of the Markey Trust. The committee wants each of the five reports produced in this evaluation to exist independently; consequently some sections are repeated in each report.

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Evaluation of the Markey Scholars Program land is productive. In 1975, following the oil embargo and consequent rapid increase in oil prices, the leases expired. Through a series of court cases, Gulf fought to have the leases extended at the old 1925 rate, but eventually the Wright heirs and the other Waddell Ranch owners were victorious and the income from the new leases, which were then part of Mrs. Markey’s estate, increased dramatically. Prior to his death, Warren Wright had amply addressed the needs of his children through a trust arrangement. Lucille Wright, who subsequently married Eugene Markey, realized that her estate would go either to charity or taxes. Mrs. Markey concluded that she was not interested in leaving her money to charity as broadly defined, but rather to something that would be immediate and specific (Auerbach, 1994). Mrs. Markey’s decision to leave her estate to medical research evolved slowly. Her illnesses and those of Gene Markey stimulated her interest in research that could impact human health. Realizing that health research is a broad field, Mrs. Markey asked Louis Hector, her attorney, to explore whether something more specific could be identified to guide the work of the charity. Hector visited the Robert Wood Johnson Foundation, which was established in 1972 as a national philanthropy devoted to improving the health and health care of all Americans, and the Rockefeller University, which focuses on medical research, to learn more of their activities. After hearing of the work of both institutions, Mrs. Markey concluded that the clinical aspects of health care were covered by other institutions, and that her estate should be dedicated to the promotion of biomedical research. Because of this decision the term “basic medical research” was inserted into her will. It took her quite a while to wrap her mind around the idea of basic medical research,” says Hector, “but once she did, that was it. The money, she decided, should go for square-one stuff, to solve the most elemental and perplexing puzzles. (Fichtner, 1990). The mission of the Markey Trust, thus was “For the purposes of supporting and encouraging basic medical research” (Lucille P. Markey Charitable Trust, 1996). Although she had not previously been a generous benefactor, Mrs. Markey began to respond to solicitations from a variety of local institutions. The following anecdote reveals how her giving began with the University of Kentucky: When Dr. Roach first approached Lucille Markey in the late 1970s for a contribution toward the construction of a cancer center on the campus

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Evaluation of the Markey Scholars Program of the University of Kentucky, she said graciously, “Of course, Ben, we’ll help. We’ll give you $1,000.” In response, Gene Markey chimed in, “Dear, he doesn’t want a thousand dollars, he wants a million.” The next morning Mrs. Markey called Dr. Roach and said, “We’re going to give you one million in cash for your center.” (Auerbach, 1994:95-96). She subsequently gave a number of gifts totaling $5.25 million to the Ephraim McDowell Research Foundation to build a cancer center at the University of Kentucky. In 1984 and 1985, the Markey Trust gave nearly $8.1 million to the University of Kentucky to continue programs Mrs. Markey had initiated before her death (Lucille P. Markey Charitable Trust, 1996). In addition to settling on a substantive focus for her Trust, Mrs. Markey also determined that she did not want to create a permanent foundation that might change or drift away from her own mission. Rather, she wanted to disperse her estate quickly so that the work of the Trust would not change over time, particularly as the Trustees changed. Louis J. Hector, who became chairman of the Trust, once told The Chronicle of Higher Education that when he and Mrs. Markey were working out the details of the Trust, the heiress told him, “I want the money out there doing a job, and I think what the trustees ought to do is spend it in a reasonable amount of time and then shut down” (Nicklin, 1997). Mrs. Markey elected to limit the term of the Trust to 15 years and the number of trustees to five. Her decision was based on four guiding principles (Dickason and Neuhauser, 2000:2): She felt it was important to apply as much money as possible to achieving the Trust’s purpose in as short a time as possible. She wanted to know who would be involved in the management of the assets and distribution of her largess. She named five trustees, all of whom she knew well. Four of them were alive at her death and three continued to serve throughout the life of the Trust. She wanted her money applied to grants, not to support a permanent bureaucracy. She believed that the purpose and goals of any foundation could become obsolete over time; a time limit could help to prevent such obsolescence. When Mrs. Markey died on July 24, 1982, the Lucille P. Markey Charitable Trust was incorporated as a Florida nonprofit organization with 501(c) (3) status. The initial meeting of the Board of Trustees occurred in October 1983, and the Trust’s Miami office opened January 1, 1984. The trust completed all activities on June 15, 1997.

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Evaluation of the Markey Scholars Program Four trustees attended the initial 1983 meeting (Dickason and Neuhauser, 2000): Laurette Heraty, who had served Mrs. Markey and her first husband, Warren Wright, in their Chicago office as a secretary since 1937. She retired from the board in 1989. Louis Hector, who was Mrs. Markey’s attorney and drafted her will. He served as a trustee of the University of Miami, Rockefeller University, and the Lincoln Center and is a member of the American Academy of Arts and Sciences. William Sutter, an attorney and expert in oil and gas leasing issues, who worked for Mr. Wright and Mrs. Markey from his Chicago office in the law firm of Hopkins and Sutter. Margaret Glass of Lexington, Kentucky, who worked so closely with Mrs. Markey over the years that she was seen as an effective custodian and interpreter of her wishes. Two additional trustees were named during the life of the Trust: George Shinn, a financial expert (elected to fill the position left vacant by the death in 1980 of Gene Markey) was president of Merrill Lynch & Co., CEO of First Boston Corporation, and a member of the Board of Governors of the New York Stock Exchange. Robert Glaser, a physician with experience in both academic medicine and philanthropy (elected in 1989 following the retirement of Laurette Heraty), was the Trust’s Director of Medical Sciences from 1984 until 1989. He was past president of the Henry J. Kaiser Family Foundation and dean of the University of Colorado Medical School and Stanford University School of Medicine. The structure and the function of the Markey Trust were guided from its inception by Louis Hector’s vision of supporting and encouraging basic medical research. This vision was consistent and unwavering throughout the duration of the trust and guided the selection of grantees, advisers, reviewers, and funding mechanisms. Dr. Glaser also played a critical role in guiding the implementation of the Markey Trust programs. In 1984, he was asked to become the director of medical sciences for the Trust. Some of his initial recommendations to the Trust included the idea of supporting basic (as opposed to targeted) research. “Medicine was going through an exciting period,” Glaser recalled. “There were new fields like structural biology and developmental biology coming along and with substantial resources such as the Trust enjoyed, they could do a very important thing by offering support that

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Evaluation of the Markey Scholars Program was flexible to people and/or programs over a period of time” (Glaser, 2002). Dr. Glaser also recommended that the Trust provide enough support to bright young people to allow them protected time to establish their research careers. His expertise and vision were to become the major force in the foundation. The Trust began distributing funds in 1984 to institutions that Mrs. Markey had supported during her lifetime. At the same time, the Trust began to plan a long-term strategy for its programs. In 1984, the Trust held a series of three “think tank” meetings with distinguished biomedical researchers in California, New York, and London. These sessions produced a number of recommendations, the most important of which was the idea of long-term financial support for postdoctoral fellows and young faculty members. In 1984 the Trust announced the creation of the Markey Scholars Awards in Biomedical Sciences, which became the Trust’s best-known program. The initial cohort of Markey Scholars was appointed in February 1985. In the fall of 1985, the initial Research Program Grants were awarded. Later, in 1988, the Trust began making what would later be classified as General Organizational Grants. Each of these award mechanisms is discussed in greater detail later. In 1985, most Trust activity ceased because of complicated litigation involving the pricing of natural gas. The litigation involved the Federal Energy Regulatory Commission, the California Public Service Commission, and a number of major oil and gas companies. The case was eventually settled in Texas courts. However, during the two years of court proceedings, the Trust funded no new research grants and was able to continue funding only for the Markey Scholars program and for a few small miscellaneous and related grants. During this hiatus, the Trustees continued to receive new grant proposals and conducted selected site visits. Moreover, the value of the Markey Estate and Trust grew substantially, benefiting from investment income as well as the continued oil and gas income. In the fall of 1987 the litigation was resolved, and the Trust resumed awarding Research Program Grants. During its 15-year lifetime, the Markey Trust gave a total of $507,151,000 to basic medical research and research training. Administrative costs amounted to $29,087,000, or approximately 5 percent of the total Trust. A recent study by the Urban Institute indicates that foundations of similar size and scope have average operating and administrative expenses of about 8 percent (Boris, et. al., 2005). Additional expenses included $10,529,000 for direct investment costs and mineral depletion costs. The total value of the Trust was $549,520,000, which included $149,565,000 in investment income (Dickason and Neuhauser, 2000).