California Endowment weighed in on Indiana--but what about other charities?

By Michael HiltzikBusiness Columnist

April 2, 2015 3:26 PM PT

In the uproar over Indiana’s “religious freedom” law and its potential to foster discrimination against LGBT individuals, one set of voices has been curiously muted: philanthropies that do business in the state or invest in Indiana companies.

Until Wednesday, that is. That’s when the $3.5-billion California Endowment informed three Indiana companies in which it has invested that it’s “profoundly troubled” by the law and by Gov. Mike Pence’s refusal “to disavow discrimination against LGBT Indianans” under the law. The three companies are pharmaceutical firm Eli Lilly & Co., healthcare insurer Anthem Inc. and Berry Plastics Group.

In letters to the companies’ CEOs, the endowment raised the specter of disinvestment: “If this refusal to address the discriminatory legal environment persists,” wrote CEO Robert K. Ross and Chief Investment Officer Ruth Wernig, “we will be compelled by both our fiduciary responsibility -- as well as our conscience -- to reconsider our investments in Indiana.”

What makes the endowment’s position telling is that philanthropic institutions have been virtually silent during the weeklong controversy over the Religious Freedom Restoration Act, or RFRA. Several public corporations, which normally avoid dabbling in social or political tussles like the plague, have spoken out against the law -- including Lilly -- or taken concrete action to show their displeasure. San Francisco-based Salesforce.com, which recently acquired an Indianapolis company, has pledged to reduce its investment in Indiana and says it already has offered some Indiana employees relocation packages.

One would expect charities devoted to serving communities facing discrimination, including LGBT residents, to leverage the millions of dollars some have invested in Indiana. Their absence from the fray is mystifying.

“We’ve been looking for any signs of philanthropies in the conversation,” says Daniel Zingale, the endowment’s senior vice president and spokesman. Only a few nonprofit organizations have weighed in. The Heritage Foundation, which is a conservative political advocacy group, has spoken out in favor of the law. The presidents of several Indiana universities, including Hanover College and Butler University, have panned the law. Missing in action is the president of Purdue, former Indiana Gov. Mitch Daniels, who has flatly refused to comment on the law or the uproar.

(It’s possible that Daniels has made his views known by proxy: Bill Oesterle, the co-founder and CEO of Angie’s List, one of the more uncompromising critic of the RFRA, was manager of Daniels’ 2004 campaign for governor, in which he won the GOP nomination over Eric Miller, one of the law’s chief promoters.)

The California Endowment’s stand on the law reflects its broader concerns as a big investor, Zingale says. “The investment committee of the board has been looking at how we can use our relationships as investors and with money managers to advance our mission,” which includes improving access to healthcare for underserved communities. In the letters to Lilly and Anthem, Ross and Wernig wrote of “the negative implications for the health and safety of employees, customers and residents of any state enacting policies allowing discrimination against LGBT people.”

Zingale said the endowment has “meaningful investments in the millions” in the three companies combined, though he couldn’t give precise figures. None of the three shows up as a direct investment in the portfolio report in the endowment’s most recent tax return, for 2013, but the holdings may fall within the hundreds of millions placed with actively-managed investment funds whose portfolios aren’t listed in detail. Zingale says all three companies “would see us as significant investors.”

That may be especially true of Anthem, with which the endowment has family ties. The charity was established in 1996 by Blue Cross of California as a condition of the latter’s transformation from a nonprofit to the for-profit company WellPoint Health Networks. WellPoint merged with Anthem in 2004, and the combined companies took on the Anthem name last year. “They’re like our biological parent,” Zingale says.

What’s yet unclear is how the endowment and other critics of the law will see the state’s efforts to “fix” it and reverse its depiction as a front-line state for bigotry. On Thursday, the Indiana Legislature passed and Pence signed a revision specifying that that the RFRA doesn’t provide a religious-belief defense for refusing to provide housing, employment, goods or services to any member of the general public on the basis of race, color, religion, ancestry, age, national origin, disability, sex, sexual orientation and gender identity. It would forbid businesses such as bakers and florists to deny service for same-sex weddings only in communities, such as Indianapolis and Bloomington, that already have local ordinances prohibiting discrimination based on sexual orientation, legal experts told the Indianapolis Star. The revision doesn’t provide blanket protection against discrimination based on sexual or gender preference.

Indiana Democrats, among others, insist that the only proper next steps are repeal of RFRA and the addition of explicit anti-discrimination provisions of state law. That’s also been the position of Oesterle, the Angie’s List CEO, who says the revision isn’t enough to reverse his decision to put a multimillon-dollar expansion of the company’s Indianapolis headquarters on hold.

“This ‘fix’ is insufficient,” he said Thursday morning. “There was no repeal of RFRA and no end to discrimination of homosexuals in Indiana.”

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