#863: The 13th Hole What a hole-in-one gone awry says about the state of charity.
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#863: The 13th Hole

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#863: The 13th Hole

#863: The 13th Hole

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KAREN DUFFIN, HOST:

I doubt they're going to let me in, but I'm going to ask.

I'm driving up to a private golf course about an hour north of Manhattan. And before they let you in, you have to stop at a guardhouse.

Hi, how are you? Hey, I am a reporter with NPR, and I'm doing a story about the 13th hole on this golf course. Is there any chance that I can just look at that hole?

UNIDENTIFIED PERSON: Umm.

DUFFIN: He goes away, asks his boss, comes back and tells me, nope, I'm sorry. You need an appointment.

OK, no problem.

UNIDENTIFIED PERSON: Sorry about that.

DUFFIN: No problem.

UNIDENTIFIED PERSON: Thank you.

DUFFIN: Thank you.

KENNY MALONE, HOST:

The reason Karen was at this golf course was because we heard that something bizarre had happened on that 13th hole. It was during a charity golf tournament back in 2010.

DUFFIN: And while I never did get into that golf course, we did manage to find someone who has not only seen that 13th hole, she was actually there during the entire incident.

How many charity golf tournaments would you say you think you've been to in your life?

PATRICIA HANNIGAN: I've probably been to, yeah, dozens of them, if not hundreds.

MALONE: This is Patricia Hannigan. She writes about golf, including charity events.

DUFFIN: And how - have any other of those that you've been to ended quite like this?

HANNIGAN: Absolutely not.

DUFFIN: Patricia tells me the day of this charity golf tournament, it was a kind of muggy day. This was August. And it started out like a normal charity golf tournament. She got there early, scoped out the crowd.

HANNIGAN: There was a group of hostesses there, and I saw them. They were a bunch of implausibly beautiful girls.

DUFFIN: Also there for the tournament...

HANNIGAN: You had the basketball players, and you had the guys who had a certain look that said hedge funder (ph) on it.

DUFFIN: She declined to describe what the hedge funder look is.

MALONE: We can assume it probably meant rich people. And that is not uncommon for a charity golf tournament. However, the basketball players is a little unusual but not for this event because this was a fundraiser for the Alonzo Mourning Family Foundation. If you do not know who Alonzo Mourning is, I'm sorry for you. He's one of the greatest basketball players of all time. He played for the Miami Heat. He's a seven-time All-Star. He won a championship.

DUFFIN: Kenny...

MALONE: You want me to stop?

DUFFIN: (Laughter) Yes.

MALONE: OK, sorry. Yeah.

DUFFIN: The event kicks off, and Patricia heads out to the course and decides she's going to spend the entire day at the 13th hole.

HANNIGAN: That 13th hole, which was the hole with a waterfall and the hole that was designated for this million-dollar shootout.

MALONE: The million-dollar shootout. Now, this is apparently a staple of rich people golf fundraisers. If you donate a little bit of extra money, then there is a designated hole where, if you get a hole in one, you win a million bucks.

DUFFIN: The odds of an amateur golfer doing that, getting a hole in one, I am told, are 12,000 to 1. But just in case it does happen, Patricia wants to be there, so she sits down at the 13th hole and starts watching.

MALONE: (Whispering) Here we have our first golfer of the day up to the tee.

DUFFIN: Golfer after golfer comes through...

MALONE: (Whispering) Oh, terrible shot.

DUFFIN: ...And does not get a hole in one.

MALONE: (Whispering) Oh, that one went into the waterfall.

DUFFIN: Patricia sits there for a very long time.

HANNIGAN: I have to say, it had been getting a little bit dull (laughter).

DUFFIN: She'd seen about seven or eight groups pass through when this one guy walks up to the tee...

HANNIGAN: And sort of seemed a little bit more like maybe a pioneer in the field. Let's put it that way.

DUFFIN: What does that mean, a pioneer in the field?

HANNIGAN: Well, that perhaps he had been doing whatever it was he was doing for quite a long time.

DUFFIN: Are we saying he's old? Is that what you're saying?

(LAUGHTER)

HANNIGAN: Oh, boy, I don't like to talk about that, but...

DUFFIN: This is the nicest way I've ever heard someone called old. But anyway, the man's name was Martin Greenberg, and he walks up to the tee...

MALONE: (Whispering) And here is Martin Greenberg, a pioneer in his field.

DUFFIN: Against all odds, Martin Greenberg hits a hole in one on the million-dollar 13th hole.

HANNIGAN: In all my playing, I've never witnessed a hole in one or even been at a tournament, I think, where anyone made a hole in one.

DUFFIN: How do people celebrate on a golf course? Do you - do people clap and scream and shout, or is that not OK?

HANNIGAN: You know, you've got the golf clap, which is kind of a restrained, constipated, let's say...

(LAUGHTER)

MALONE: But not today. People were jumping and hugging because Martin Greenberg had just won a million dollars - or so everyone thought.

HANNIGAN: I think it was - oh, gosh, it was a couple of weeks before I really heard that something had gone a little bit awry with the award, the million-dollar prize.

(SOUNDBITE OF AARON KELLEY AND SKINNY WILLIAMS' "GROOVE SAFARI ARCHEOLOGY")

DUFFIN: Hello, and welcome to PLANET MONEY. I am Karen Duffin.

MALONE: And I'm Kenny Malone. And the thing that went a little awry on that golf course wound up pitting millionaires against millionaires and turned into a national scandal.

DUFFIN: Today on the show - how that scandal takes us to a pool of money so prone to abuse that the government gave it its very own special set of rules.

MALONE: And also how the fallout over that hole in one may just reach all the way to the White House.

(SOUNDBITE OF AARON KELLEY AND SKINNY WILLIAMS' "GROOVE SAFARI ARCHEOLOGY")

MALONE: If someone hits a hole in one in a charity golf tournament, there is a possibility Mark Gilmartin will show up.

DUFFIN: Are you, like, the only person at the charity golf tournament crying while everyone else is celebrating?

MARK GILMARTIN: (Laughter) Well, I guess in theory that's why I don't attend a lot of them because I like to cry behind closed doors.

DUFFIN: That's smart.

MALONE: Mark owns a company called Hole in One International that specializes in hole in one insurance.

GILMARTIN: We do about 10,000 to 15,000 tournaments a year, events a year.

DUFFIN: What? Really?

GILMARTIN: Yeah.

DUFFIN: That is so many more than I thought you were going to say.

GILMARTIN: Got to make a living, Karen.

MALONE: Back in 2010, Mark Gilmartin's company was hired to ensure Alonzo Mourning's golf tournament. So that day, Mark gets a phone call. There has been a hole in one. They need to verify the claim.

DUFFIN: And then there is, like, a hole in one investigation. Mark gets a video of the hole in one. He gets affidavits from people who witnessed it, including a cop whose job was to stand at the 13th hole the entire day.

GILMARTIN: For a million dollars, they have to have a law enforcement officer witness it...

DUFFIN: Wow.

GILMARTIN: ...Which they did.

MALONE: Mark also sends an investigator to the course to meet with the man who hit the hole in one, Martin Greenberg.

GILMARTIN: They escorted him out to the hole where he made a hole in one. And they asked him to identify the spot where he hit it from.

MALONE: Martin Greenberg points to the tee markers, the place you're supposed to hit the ball from. And when the investigator measures, the tee markers are 150 yards from the hole.

DUFFIN: And this is critical because the rule from the insurance company is that if the person hits from any closer than 150 yards, the insurance company does not have to pay.

GILMARTIN: It's all over our contract. It's all over the box we ship the signs in. It's on the sign itself (laughter). You know, we do everything possible to try and alert the person that's setting up that hole.

MALONE: So Mark takes all of this evidence back to what we like to imagine must be some, like, hole in one investigation lab. And he goes through the evidence, and it's like - it's looking good. Everything is checking out.

DUFFIN: But then he pulls up that video of the hole in one. And in the Hollywood version of this, this is where the ominous music would start playing.

MALONE: And Mark would look up from that video and say, my God, the yardage.

GILMARTIN: That yardage was quite a bit substantially shorter than 150 yards.

DUFFIN: The video showed Martin Greenberg hitting the hole in one from tee markers that were set at only 139 yards. But after the event when the investigator measured, those same tee markers were at 150 yards.

MALONE: That means that sometime between the actual hole in one and the hole in one investigation...

GILMARTIN: Those tee markers were moved after the event back.

DUFFIN: I have tried so hard to figure out who set up that tee and who moved it back.

MALONE: "Serial" Season 4, anybody?

DUFFIN: Sarah Koenig, call me. Sadly, I do not know because Martin and his lawyers and actually Alonzo Mourning - none of them would talk to me. And to be clear, we are not alleging that Martin Greenberg or anyone else did anything intentionally deceptive here. But here is a theory that sources have proposed to us about how this might have happened.

MALONE: A hole in one is just so rare so maybe whoever was in charge of setting up the tees was just a little too casual about it.

GILMARTIN: He might have delegated that to someone else who delegated it to someone else who forgot to tell their dog to delegate it to someone else.

DUFFIN: All right, kids, listen up - delegate (laughter)...

GILMARTIN: Yeah, exactly.

DUFFIN: Delegate clearly.

MALONE: So the tee gets set up in the wrong place, and maybe the event ends, and the golf staff innocently moves those tee markers back to 150 yards for the next day. Or maybe somebody instigates a million-dollar hole-in-one cover-up. We do not know.

DUFFIN: What we do know for sure is that someone owed Martin Greenberg a million dollars, and it was not the insurance company.

GILMARTIN: In this case, you know, we had to deny the claim based on the yardage.

DUFFIN: So was that the end of it for you? And then they picked it up from there?

GILMARTIN: Oh, no, no, no. That's never the end of it. Then the attorneys get involved, right? Then everybody starts suing everybody.

DUFFIN: And sure enough, Martin Greenberg starts suing. And this turns into a lawsuit that got so complicated, I had to make, like, a serial killer flowchart out of Post-it notes across my cubicle just to sort out how it got resolved.

MALONE: This is true. It looks like Karen is, like, about to catch the Zodiac Killer.

DUFFIN: That's next after this.

MALONE: Martin Greenberg sued the Alonzo Mourning Foundation, the event management company, the Hole In One insurance company and the company that owns the golf course, the Trump National Golf Club, the owner of which, of course, is President Donald J. Trump.

DUFFIN: And when the lawsuit dust settled, Martin Greenberg did get paid by the Alonzo Mourning Foundation and the Trump Foundation. Those private foundations just paid into Martin Greenberg's private foundation.

MALONE: But here's the thing. That improbable hole-in-one, the mysterious moving tee-marker, the hole-in-one investigators - it all could've just been, like, a wacky rich person golf story, except that actual investigators started to look into this.

(SOUNDBITE OF TV SHOW, "CNN NEWSROOM")

POPPY HARLOW: The New York attorney general has just announced a lawsuit against the Donald J. Trump Foundation. You've also got referral letters sent to the IRS and to the Federal Election Commission.

MALONE: After the break, what the New York attorney general found at the 13th hole.

DUFFIN: President Trump paid his portion of the million-dollar hole-in-one settlement from his private foundation, the Donald J. Trump Foundation.

MALONE: He opened this foundation in 1989 and has used it to donate money to all kinds of things like the United Way, the New York Police Athletic League, the Metropolitan Museum of Art.

DUFFIN: His smallest donation ever - $7 to the Boy Scouts of America. Yes, that is $7, not 7,000. And one of his biggest donations - $264,000 to something that I took Kenny to see in person.

MALONE: We're standing on a very busy corner in Manhattan on the edge of Central Park.

DUFFIN: Right. And somewhere around here is one of his biggest donations ever.

MALONE: I spy a donation? Well, I see some pigeons. I see some art.

DUFFIN: No.

MALONE: I see...

DUFFIN: Turn around.

MALONE: This giant-ass fountain?

DUFFIN: That is it. This fountain is in front of the famous Plaza Hotel. And back in 1989, Donald Trump owned the Plaza Hotel, and this fountain was crumbling. And technically, the fountain belongs to the city of New York. But they didn't want to fix it, so local businesses pitched in money, including a big donation from the Trump Foundation.

MALONE: And this is, arguably, how philanthropy is supposed to work. We agree to give private foundations a tax break. We agree to reduce our tax revenue on the promise that these philanthropists will use that money to benefit society in some way.

DUFFIN: So sure, this fountain benefited Trump's hotel, but also the rest of us, including, apparently, Kenny. Kenny Malone might be taking off his socks and wading into the fountain.

(SOUNDBITE OF WATER RUSHING)

DUFFIN: This fountain, this donation and all of Trump's donations - they are being scrutinized much more heavily now that he is president. And this is how the New York attorney general got interested in how Donald Trump settled that million-dollar hole-in-one debacle.

(SOUNDBITE OF TV SHOW, "AMANPOUR")

BARBARA UNDERWOOD: What we are alleging is that this Trump Foundation violated a number of laws of the state of New York that govern the way a foundation, a nonprofit corporation, is required to govern itself.

DUFFIN: This is the New York Attorney General Barbara Underwood on CNN talking about the lawsuit against the Trump Foundation.

(SOUNDBITE OF TV SHOW, "AMANPOUR")

UNDERWOOD: The money of that foundation was distributed for impermissible purposes - personal purposes, business purposes, political campaign purposes, rather than...

MALONE: And here is why what happened on the 13th hole, she argues, is one of those impermissible purposes. Martin Greenberg, the guy who got the hole-in-one - he sued Donald Trump's golf course, which is one of Trump's businesses. But then, Donald Trump paid the legal settlement for this hole-in-one with his tax-exempt Trump Foundation money.

DUFFIN: The attorney general claims that this is a violation that is known as self-dealing, which just means that you cannot use your pool of tax-exempt philanthropic money as your own personal or business piggy bank. There are several other charges, as well, in this lawsuit.

MALONE: Trump, by the way, denies wrongdoing here. He also declined to comment for our story.

DUFFIN: This lawsuit is still pending. It has also been referred to the IRS and the Federal Election Commission, so we don't know what will happen. But what all of this got us curious about was this thing called a private foundation. Like, how many are there? Do other people do questionable stuff with their private foundations? Like, what are you even allowed to do with them?

MALONE: So we started looking into the laws around private foundations, and it got a little complicated. But then, we stumbled across the official podcast of the Internal Revenue Service, which is amazing.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED PERSON: The following is a fictitious discussion between Coach, the knowledgeable, straight-talking IRS revenue agent from the website...

MALONE: In case you want to hear this entire thing, this episode is titled The Wonderful World of Foundation Classification.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED ACTOR #1: (As Bert) Hey, Coach. It's been a while.

UNIDENTIFIED ACTOR #2: (As Coach) I'm glad to be back.

MALONE: Can I ask you one more question about Coach?

DUFFIN: Yeah.

MALONE: Why is he - is he a coach? What is he a coach of? Is he a tax coach? Is his name Coach? What is the...

DUFFIN: He's a tax coach for nonprofits.

MALONE: No.

DUFFIN: (Laughter) Yes, he is. Anyway, if you listen to Coach long enough, what you will learn is that private foundations are their very own category of nonprofit.

MALONE: Basically, they are defined as a type of nonprofit where you have one or a few donors putting money into a tax-exempt pool. And private foundations, the government has decided, require a bit of extra baby-sitting. Right, Coach?

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED ACTOR #2: (As Coach) Private foundations are more strictly regulated and are subject to a number of anti-abuse rules and excise taxes that don't apply to public charities.

MALONE: This extra scrutiny dates back to the 1960s, when Congress discovered that private foundations were abusing their tax-exempt status more than any other kinds of nonprofits.

DUFFIN: People were doing things like putting their money, tax-free, into their foundation, and then lending themselves that money.

MALONE: Or maybe they would put their family on the board, and then they would have a board meeting on the beach in the Bahamas.

DUFFIN: Congress was also worried that wealthy people were using their tax-exempt money to gain too much power over politics and social issues.

MALONE: And so in 1969, the government said, private foundations, you get more rules than all other nonprofits.

DUFFIN: But it is, of course, one thing to say that private foundations need more monitoring. It is another to actually have enough resources to do that monitoring.

DAVID CALLAHAN: You got 80,000 or more foundations, and then you have another 1.5 million nonprofits, all of which are filing tax returns.

MALONE: This is David Callahan. He runs a publication called Inside Philanthropy.

CALLAHAN: And you have a small - comparatively small staff of IRS officials who are supposed to keep track of all that. And so we don't really know how many of them are fully complying with the rules.

MALONE: There are actually now 109,000 private foundations, and the IRS has just 256 agents dedicated to monitoring these. The number of staff that the IRS has for monitoring all nonprofits has been trending down, and so have the number of audits they've done.

DUFFIN: The experts I talked to said, look; probably, most charities are out there doing great work.

CALLAHAN: My sense is the Trump Foundation is an outlier. On the other hand, who really knows? Because the foundations of America receive so little scrutiny.

DUFFIN: It's hard to think that the Trump Foundation would have ever been cracked down on if he hadn't run for president.

CALLAHAN: Yeah. Certainly would not have been - there would not have been scrutiny of the Trump Foundation.

DUFFIN: So if you have a private foundation, and - who knows? - maybe one day you want to run for president...

MALONE: You should probably make sure that, you know, your house is in order.

DUFFIN: Right.

MALONE: And luckily, we know exactly who can help you.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED ACTOR #1: (As Bert) Hey, Coach, our time's up. If we want to know more about this topic, what can we do?

UNIDENTIFIED ACTOR #2: (As Coach) Publication 557, Tax Exempt Status for Your Organization, has an exhaustive - some would say exhausting - discussion of foundation classifications.

(SOUNDBITE OF ANDREW DAVID PROSSER, JEZ HURST AND MARK DAVID ALLAWAY'S "COOL CUSTOMER")

DUFFIN: A huge thanks to David Fahrenthold of The Washington Post, whose excellent reporting on the Trump Foundation informed this entire story.

MALONE: You can follow PLANET MONEY on Twitter and Instagram. We are @planetmoney. We are also on Facebook.

DUFFIN: Today's episode was produced by Alissa Escarce and Sally Helm.

MALONE: Alex Goldmark is our supervising producer. Bryant Urstadt is our editor and our lodestar.

DUFFIN: Special thanks to Felicia Verna (ph) and all the people who helped me understand private foundations, including David Hammock (ph), Norm Silber (ph), Paul Fineberg (ph) and Stanley Katz (ph). I am Karen Duffin.

MALONE: I'm Kenny Malone. Thanks for listening.

(SOUNDBITE OF ANDREW DAVID PROSSER, JEZ HURST AND MARK DAVID ALLAWAY'S "COOL CUSTOMER")

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