Cable Guy

The opening of the Daniels Fund's new office building in Cherry Creek last November was a festive occasion. A who's who of Denver's prominent and powerful were in attendance to help christen the foundation's swank new headquarters.

Bill Daniels, the legendary cable-TV entrepreneur who created the billion-dollar fund, had personally chosen the site at First Avenue and Monroe Street before he died in 2000. A dapper ladies' man who had a fondness for luxury -- "The best is good enough for me" he often quipped -- Daniels made it clear that he wanted a first-class building. With 27,000 square feet of space encased in red brick and Indiana limestone, a pre-aged copper roof and lavish landscaping, the building mimics the expensive homes surrounding it. The interior walls are lined with cherry paneling, and skylights and Colorado rose granite give the entry a sumptuous air. Mementos of Daniels's life are prominently displayed on the walls, including his World War II navy commander's uniform and his Blue Angels flight jacket.

Daniels Fund president and CEO, former U.S. senator Hank Brown, proudly escorted visitors around the new building, praising the fund's staff for its hard work on the $14.5 million facility.

The party ended the next morning.

Brown laid off 21 of 62 staffers and closed the fund's offices in Wyoming, New Mexico and Utah in an attempt to save $2.6 million annually. The cost-cutting, however, did not include Brown or the other members of the ten-person board of directors: The CEO kept his $400,000 salary -- including a $30,000 raise instituted in June 2003 -- and the directors chose not to forgo their stipends, which can total as much as $50,000 a year.

"It was like a slap in the face to the community," says Fachon Wilson, a volunteer in the Daniels Fund's former Sheridan, Wyoming, office. "Based upon what I've been told about Bill Daniels, I can't imagine he would have approved of this."

In 1952, Dwight Eisenhower was running for president, the hydrogen bomb had just been detonated in the South Pacific, and The African Queen was the most-talked-about film.

Casper, Wyoming, was as remote from any of these developments as anywhere in the country. A sleepy oil town along the banks of the North Platte River, Casper wasn't the sort of place that ever expected to be on the cutting edge.

That was all about to change.

In the fall, a young insurance salesman by the name of Bill Daniels was on his way back to Casper from his home town of Hobbs, New Mexico. Daniels stopped in Denver to grab a sandwich, taking a seat at the counter of Murphy's, his favorite bar on Broadway. He immediately noticed a box above the bar that was showing black-and-white pictures of what seemed to be a fight. He asked the bartender what it was.


The former Golden Gloves boxing champ sat transfixed, watching a live broadcast of the Wednesday-night fights from Madison Square Garden in New York. It was being shown on Channel 2, Denver's first and only TV station. Daniels had never gone to college and had no technical background, but he knew immediately that if he could get the signal to Casper, he would have customers lined up around the block.

For the next year, the 32-year-old worked tirelessly to raise funds, acquire the technical know-how and get legal permission to broadcast Channel 2's signal into Casper via an almost unknown technology called cable. Televisions weren't even available in Casper, but once the signal went live in December 1953, they were brought into town by the truckload.

Using his sales background, Daniels took his cable show on the road, taking the magic of television to small towns across the West. He eventually relocated to Denver and in 1958 started his own company, Daniels & Associates, which brokered the sale of cable systems all over the country and helped launch other cable entrepreneurs by providing management and technical expertise in exchange for equity in the new companies. People flocked to Daniels for his vision, and -- largely because of him -- Denver eventually became home to the largest cable television companies in the United States. The industry also made Daniels one of the wealthiest men in the country.

Despite his small stature, Daniels was larger than life. He developed a reputation as a brilliant dealmaker, a legendary playboy who married four times, and a rich guy with a heart. His mansion just off Leetsdale Drive, known as Cableland, was the site of many romantic conquests and countless charity functions. When Daniels died in 2000, at age 79, he gave the 24,000-square-foot home -- complete with multiple bars, a swimming pool and cascading waterfall, and a living room big enough to host hundreds of guests -- to the City of Denver as the official mayoral residence.

Daniels's beginnings, however, were much more humble. He was born on July 1, 1920, in Greeley, where his father was a wholesale candy salesman. He was named Bill because he was born on the first day of the month, when most of the struggling family's bills were due.

When he was three, the family moved to Council Bluffs, Iowa, where his father went into the insurance business. The young Daniels began selling the Saturday Evening Post door to door when he was eight, adding other business as he grew older, including selling ice cream from the back of his bicycle. After the Depression hit, Daniels and his brother, Jack, gathered firewood outside town to keep the furnace running at home.

In 1937, Daniels's father was offered a job running a statewide insurance agency in Hobbs, New Mexico, an oil town in the southeastern corner of the state. The family quickly became a major presence in Hobbs, and Daniels spent his later teen years raising hell all over that part of New Mexico. Alarmed, and fearing that Bill might get into real trouble, his parents enrolled him in the New Mexico Military Institute in Roswell. Daniels thrived under the discipline and took up boxing.

Like other young men of his generation, Daniels was changed forever by the winds of war gathering over the Pacific Ocean. After graduating from the military institute, he enrolled in the Navy and trained to be a fighter pilot, graduating from flight school just two weeks after the Japanese attack on Pearl Harbor. Daniels shot down several Japanese fighters and helped save the lives of men on his ship -- the Intrepid -- after a kamikaze plane struck the aircraft carrier. He was later decorated for bravery. The Intrepid sits docked in the Hudson River just north of Times Square, serving as a monument and a museum.

Daniels was called up again during the Korean War, where nearly two-thirds of the men in his night-fighter squadron were either seriously injured or killed. He never liked to talk about his experiences during the war, and close friends believe his early exposure to mortality made him willing to take risks that would frighten others. It also gave the aggressive cable magnate a soft touch unusual in this Apprentice era.

When Daniels returned from Korea, he discovered that his brother, Jack, had already taken over the family insurance business in Hobbs. His father, Bob, an alcoholic, died in 1948, at the age of 54. So when the opportunity arose to sell insurance in Casper, Daniels headed north, vowing that his life would not be like his father's.

The emerging cable industry was tailor-made for Daniels. He liked underdogs, and for decades, cable was locked in battle with hostile broadcasters and regulators. Broadcast television stations saw cable as a rival that wanted to steal their programming and poach their viewers, and they leaned on lawmakers to rein in the upstart industry. Raising funding was a constant chore, as skeptical bankers questioned whether the new technology would last.

But Daniels was a one-man tour de force for cable. He had an uncanny ability to understand the new medium's potential, floating the concept of 24-hour news channels, pay-per-view movies and all-sports networks at a time when those ideas were as likely as flying a probe to Mars.

"I remember him telling me in the 1960s that one day you'd be able to buy groceries over the cable lines," says Kyla Thompson, a former Denver public-relations executive who knew Daniels for more than thirty years. "He was a true visionary."

Over three decades, Daniels & Associates became the premier brokerage for the cable-television industry, bringing together buyers and sellers and handling dozens of mergers and acquisitions. The company also contracted to run several cable systems, and Daniels was the largest owner of many of those systems, including the former Mile High Cablevision, which first brought cable to Denver. Because of Daniels, huge companies like TCI, United Cable and Jones Intercable were based here, as were the trade publications that served them. Hundreds of people came to Denver to work in the growing field, many of them lured here by Daniels himself. Sadly, in the years since Daniels's death, national companies have bought out almost all of the Denver-based cable companies.

As his wealth grew, Daniels looked for opportunities in his other passion: sports. He was the owner of the Utah Stars, which played for the now-defunct American Basketball Association and eventually went bankrupt. He also sponsored professional boxer Ron Lyle, was a minority owner of the Los Angeles Lakers and one of the most enthusiastic backers of the fledgling ESPN sports network, which most of Wall Street dismissed as an expensive pipe dream.

Daniels's sponsorship of Lyle reveals a soft side that would eventually mean more to Denver than any of his business triumphs. In the late '60s, Lyle was serving time in prison at Cañon City for manslaughter. Daniels knew that Lyle had tremendous potential as a heavyweight boxer, and he helped him get paroled by promising him steady employment. He went on to sponsor Lyle all the way up to a big fight with Muhammad Ali in 1975.

Daniels made it clear that he was proud to help an ex-con succeed, and Lyle was one of hundreds of people who were indebted to Daniels. He was known to give $100 tips to waitresses in roadside diners and pay college tuition for employees' children. Everywhere Daniels went, it seemed he was constantly giving someone a loan or helping someone find a job.

Colorado Springs developer Steve Schuck first met Daniels in 1974, when Daniels ran unsuccessfully for the Republican nomination for governor and Schuck was running his campaign in El Paso County. "You only had to meet that guy once and you knew he was one of the most fabulous people who ever graced the earth," Schuck says.

When the real-estate market in Colorado collapsed in the late 1980s, Schuck was virtually wiped out. He and his wife lost their home and soon discovered that many of the people they knew wouldn't talk to them. Not Daniels. He loaned Schuck several million dollars so he could relaunch his business.

"I lost all my so-called friends except Bill Daniels," Schuck says. "He couldn't do enough for me. When everybody else was running away, he redoubled his efforts to help me. There was nothing in it for him financially."

Daniels also sponsored hundreds of charity fundraisers at Cableland and was a big supporter of Father Woody, the legendary priest who offered meals to the homeless at the Holy Ghost Church downtown. He even showed up to serve dinner to the poor one Christmas, spending hours talking to them.

In the late 1990s, Daniels's respiratory system started to collapse after a lifetime of heavy smoking, and he began laying the groundwork for the foundation that would be entrusted with his fortune. He had already sold off most of Daniels & Associates to employees and other investors, but he still owned several local cable systems. Once his estate was settled, he knew the foundation would immediately become one of the biggest in the West.

For more than a year, he worked on setting up the legal structure for what would be known as the Daniels Fund. He specified that 30 percent of his billion-dollar fund would go to support lower-income college students; the other 70 percent was to be divided among nine categories, including child and youth development, alcoholism and substance abuse, amateur sports, aging, developmental disabilities, equipment for physical disabilities, ethics in education, homeless and disadvantaged, and innovative education. He also ensured that his money would be spent to benefit the states where he had lived, with more than half being reserved for Colorado, 10 percent for Wyoming, 10 percent for New Mexico, 5 percent for Utah, and 10 percent for national initiatives.

"There are very few people who put the kind of thought into philanthropy that Bill Daniels did," says his longtime friend Thompson.

By early last fall, the Daniels Fund had taken big steps toward fulfilling its founder's vision. The first three classes of Daniels scholars -- nearly 400 students -- were enrolled in college, with an unheard-of retention rate of 90 percent. A five-person office was up and running in Sheridan, Wyoming, and dozens of promising students were paired with volunteers who helped steer them through the often-daunting college-application process, since most of the students' parents had never been to college.

"If you're the first one in your family to go to college, it's overwhelming," says Sheridan-based volunteer Fachon Wilson. "They don't know where to start and often fall through the cracks. The young people who were part of the program here were not from a typical white, upper-middle-class background."

The Daniels Fund had just expanded its college program to Rock Springs, Lander and Riverton, and plans were in the works to have a presence in every part of the Cowboy State.

But those plans came to a screeching halt on November 18, when the Wyoming and New Mexico offices were closed and the local staff laid off. The Fund also canceled plans for a conference center to serve nonprofits that was to be built next to the headquarters building.

Brown insists that the layoffs were necessary because the fund had administrative expenses that were far too high. Running the out-of-state offices alone cost $1.25 million per year, and Brown says shrinking the staff will save a total of $2.6 million annually, money that will flow back into non-profit programs.

"We compared ourselves to other foundations of our size, and we came up with three times as many administrative costs as similar foundations," he explains.

Brown also found that the fund had "triple the number of people in grant-making as most Colorado foundations" and says an outside consultant "felt we could operate more efficiently if we operated out of a central office."

Rick Cohen, executive director of the National Committee for Responsive Philanthropy, disagrees. He doesn't believe the costs were excessive, because the fund serves such a large territory with a unique mission, something most other foundations don't face. "Their expenses were not out of line," he says.

And outside consultants and economies of scale don't necessarily reflect the man whose generosity was legendary, who conducted "drive-by giving" to friends in financial trouble, who repaid the Utah Stars season-ticket holders the value of their tickets plus 8 percent interest several years after the bankruptcy -- because it was morally right, if not legally required.

"The Daniels Fund held the promise that it would adhere to the values and ethics practiced by Bill Daniels," Wyoming governor Dave Freudenthal wrote to Brown after the announcement. "I do not believe this precipitous change in direction lives up to those high standards."

But Brown, who knew Daniels well, says the philanthropist never told anyone he wanted the fund to have offices in each state. Brown says he agreed to head up the fund because he wanted to help bring Daniels's vision to fruition. "I had known Bill for more than thirty years," says Brown. "It was a wonderful opportunity to help him fulfill his legacy. It seemed like a fun thing to do to cap off my career."

In 2002, Brown resigned as president of the University of Northern Colorado to take the helm at the Daniels Fund. He soon initiated an evaluation of the fund's staffing, which eventually led to the recommendation to purge one-third of its employees.

Most of the boardmembers, also former friends of Daniels, approved the layoffs and closures. The exceptions were Diane Daniels Denish, Daniels's niece and New Mexico's lieutenant governor; and Phil Hogue, the fund's former CEO, whom Daniels personally chose and who opened the out-of-state offices before stepping down in 2002 to battle a life-threatening illness.

Further fueling anger among former employees were management salaries. Brown's compensation went from $370,000 to $400,000, and members of the board -- most of them wealthy businessmen -- kept their entitlement of $20,000 for attending all four quarterly board meetings plus $2,000 for each committee meeting they attend. A member of the board could collect more than $50,000 per year just for attending meetings -- significantly more than the $37,166 the average Colorado employee makes per year for full-time work. "Bill specifically mandated in the articles and bylaws what the compensation would be for boardmembers," Brown says. "It's comparable to other foundations this size."

Still, says Cohen, "If the Daniels Fund had decided not to pay trustee fees or cut Hank Brown's salary, they could have kept a lot of the people they laid off."

Paying foundation boardmembers is not unheard of, although almost all non-profit groups that are funded by foundations expect their boardmembers to serve for free. In Colorado, the El Pomar Foundation, the Colorado Trust and the Henry P. and Susan C. Crowell Trust offer their trustees at least $20,000 per year. However, several of the best-known foundations, including the Boettcher Foundation, the Anschutz Family Foundation, the Gates Foundation, and the Adolph Coors Foundation, do not pay trustee fees. And El Pomar's boardmembers recently gave themselves pay cuts because the foundation's endowment had shrunk due to losses in the stock market.

"There are very few nonprofits that will pay salaries to boardmembers," says Steve Graham, executive director of the Community Resource Center, which offers training to nonprofits in Colorado. "In the nonprofit world, it's considered a service to the community to serve on a board. But the kinds of folks who serve on foundation boards value their work based on what they're paid."

As the head of the largest foundation in Colorado, Brown is also by far the highest paid. The leaders of the three other top foundations -- all of them with hundreds of millions in assets -- make much less, according to the most recent Internal Revenue Service filings. William Hybl, who heads up the El Pomar Foundation in Colorado Springs, makes $277,455; Colorado Trust's John Moran is paid $235,000; and Timothy Schultz of the Boettcher Foundation makes $195,860.

According to the Chronicle of Philanthropy, the median salary for a private-foundation CEO last year was $402,821, while the heads of charities averaged $282,712. The Chronicle found that, much like the salary of their corporate CEO counterparts, the pay of many charity leaders more than doubled between 1997 and 2002, with more than four dozen non-profit executives bagging pay hikes of more than 50 percent.

"Our philosophy is to pay people what people at similar-sized foundations get paid," Brown says.

But Pablo Eisenberg, senior fellow at the Center for Public and Nonprofit Leadership at Georgetown University, disagrees, because, he believes, giving money away is far less stressful than heading up a company under constant pressure to turn a profit. "You don't need to pay those kinds of salaries to get good people. It's an outrageous differential in pay," he says. "These are simple lives compared to folks who work eighty hours a week running complex organizations."

"Nobody should become wealthy working in the non-profit world," agrees Graham. "Hank Brown's salary is higher than any other foundation CEO in Colorado. No one else makes anywhere near what he makes. When big corporations lay people off and raise their CEO's salary, we all shake our heads and say, 'What's going on? How are they managing that company?' There are issues of ethics and principles at the root of all this."

That questions have been raised about the ethics of the Daniels Foundation is highly ironic, considering Daniels's reputation as a man who emphasized ethics in his business dealings. In 1987, Daniels gave more than $10 million to the University of Denver to help fund the business-school building now bearing his name. He made one key demand: Every student would be required to take a business-ethics class.

In Stephen Singular's authoritative biography, Relentless: Bill Daniels and the Triumph of Cable TV, he recounts a visit Daniels made to a business class at Dartmouth College. When Daniels stepped to the podium, he carried a nicely wrapped gift under his arm. He proceeded to tell the class about business deals he had done, claiming they had all involved outrageous conflicts of interest.

Finally, one student in the back row had heard enough and challenged Daniels, asking him how he could possibly conduct business that way.

Daniels walked over to the kid and gave him the gift box, which held a pillow that read "Give me equity or give me death." Daniels then dramatically addressed the rest of the class: "What the hell is wrong with you people? There's only one person in a classroom of forty people that's ethical?"

Singular remembers being at Daniels & Associates two years ago as a series of corporate scandals dominated the news, beginning with Enron and then moving into the massive alleged fraud at Adelphia Communications. The latter's founder, John Rigas, and his family are accused of looting as much as $3 billion from the cable company; they'll stand trial later this month.

"People were saying, 'Bill would be rolling in his grave if he saw this,'" Singular says. "It was extremely important to him to try and do things the right way."

The recent appointment of Steve Schuck to the Daniels Fund board of directors has added fuel to the speculation over ethics. Schuck is still paying back the money that Daniels loaned him -- a bill Brown estimates to still be about $1 million.

Daniels's estate is separate from the foundation, but John Saeman is both the chairman of the board and the executor of the estate, leading to the ethical conundrum of whether he should be overseeing a fellow boardmember's loan repayment.

"It sure as hell is a gray zone," says a former staffer.

Schuck, however, is adamant that the two are not related. "The debt is current and is not delinquent," he says. "It will be paid when it is due. It has nothing to do with the foundation; it goes to the estate."

Even more serious questions have been raised about the fund investing $10 million in a California housing project backed by Denver developer Bill Pauls, one of the original developers of the Denver Tech Center, since Saeman holds a significant stake in the development. Under IRS rules, a boardmember who owns more than 35 percent of a business the foundation invests in would be guilty of "self-dealing" -- steering assets to the businesses of boardmembers and other insiders -- and at risk of prosecution.

Peter Droege, spokesman for the fund, says Saeman reduced his interest in Paul's project to meet the IRS guideline. "He actually did have to back out to meet that threshold," Droege says. "The board gave its approval to the investment, but under the condition that legal counsel evaluate it."

"There was full disclosure; everybody on the investment committee was fully informed of John's investment," Brown adds. "Legal counsel assured the fund there was no self-dealing, and it was approved unanimously by the board."

The Daniels Fund also took a 9.62 percent stake in Aloha Partners, a wireless company that has been spending millions buying the rights to the wireless spectrum in major cities like Los Angeles. Brown says the Daniels Fund has invested $5 million in Aloha, another endeavor in which Saeman has a large interest.

"I don't know who originally recommended [the investments] to the fund," says Brown, who adds that the value of the two investments together make up about 1.5 percent of the fund's total assets.

Even though the investments seem to follow legal guidelines, foundation watchdogs say allowing the fund's money to flow into such ventures is wrong because the temptation to use tax-exempt monies to enrich the portfolios of boardmembers is great.

"To me, it's self-dealing, whether or not it meets the exact definition," Cohen says.

"The IRS definition of self-dealing is so large you can drive a truck through it," says the Center for Public and Nonprofit Leadership's Eisenberg. "They don't ask what's the relationship between trustees and investment firms. It's hard to get that stuff."

But the concerns plaguing the Daniels Fund are minor compared with a series of Enron-level scandals in the philanthropic world during the past few years. The most notorious recent case was at the James Irvine Foundation in California, one of the most prominent foundations in that state. At the same time the foundation was laying off staff and cutting $20 million out of its grant program, its longtime president, Dennis Collins, was receiving $717,000 per year in total compensation. When Collins announced that he was stepping down, the foundation spent $104,000 on a farewell party and gave him $25,000 in cash for a trip around the world. Then, after he left the presidency, Collins earned more than $900,000 as a "part-time transition advisor" to the foundation. In addition, the San Jose Mercury News reported that Collins's wife, Mollie, had been hired as a consultant by several colleges and nonprofits that applied for or received grants from the foundation.

The Bielfeldt Foundation in central Illinois was revealed to have spent $21 million over seventeen years for investment advice -- all of it given by members of the Bielfeldt family. At the local United Way in Washington, D.C., it was revealed that the director had taken $1.5 million in questionable payments over more than twenty years.

Such scandals are particularly onerous because, in return for helping to support their communities, non-profit foundations are largely exempt from paying taxes. The only legal requirement is that they spend 5 percent of their funds every year -- which can include the foundation's administrative expenses.

Under federal law, the only information foundations have to publicly disclose is the salaries of top executives, where their funds are invested, and the names of recipients of much of the grant money. The IRS is in charge of monitoring the non-profit sector, which includes more than 900,000 charities and foundation assets of more than $477 billion, but the bureau has only 800 employees assigned to the task.

"It's reached a point where the IRS doesn't have the resources, staff or the will to oversee nonprofits," Eisenberg says.

State attorneys general also have the authority to investigate foundations, but they often lack the staff or political will to do so. "Foundations are one of the least-regulated entities you can think of," says the National Committee for Responsive Philanthropy's Cohen. "Even realtors have some self-regulation, because they have to have a good reputation to sell a house. What kind of regulation is there for foundations? There's no oversight. How many foundation executives have experienced a perp walk?"

As a result of the scandals, reform legislation has been introduced in Congress that would more strictly limit how foundations can spend their funds. One proposal would exclude administrative expenses from the 5 percent rule, but that idea is strongly opposed by many large foundations. The legislation is now on hold, awaiting a conference committee between the Senate and House that will meet in the next few weeks.

"I think the credibility and legitimacy of the non-profit world is at stake," says Eisenberg. "There aren't just a few bad apples -- there are a lot of bad apples in the barrel. Unless there's a crackdown, we'll see an increasing public distaste for foundations. Who knows what the consequences will be?"

Despite the layoffs and closures at the Daniels Fund, Brown insists the foundation remains committed to Wyoming, New Mexico and Utah. "In January and February, we had four different on-site visits to New Mexico," he says. "We're still doing quality work on the ground.

"What's relevant is what is the best way to serve people. Bill Daniels wanted the money to go to serve people."

However, many of those who live in neighboring states -- particularly in New Mexico, which often ranks with Mississippi for poverty levels -- doubt that the fund will be able to serve them from Denver. "The reality is, if you don't have somebody in New Mexico, you're not going to have a knowledge of what's important," says Bill Strouse, CEO of the Community Action Agency of Southern New Mexico. "My experience has been that when folks don't operate in the state, the amount of funding is not the same. I can't help but think the same thing will happen with Daniels."

Strouse was working with the Fund's six-person staff in Albuquerque and says there were some creative projects in the works, including a statewide help line that would refer people in need to non-profit groups.

"One of the problems we have is that there is so little philanthropy in New Mexico," says Owen Lopez, director of the McCune Charitable Foundation in Santa Fe. "What bothers me is that the powers-that-be in Denver failed to realize there is a lot more than just financial capital in philanthropy. There's also human capital.

"Just having people to sound off on things -- that's a whole different thing than just writing a check for groups that you read about on paper," he adds. "I think it's a control thing in Denver."

A former Daniels Fund employee agrees, saying the layoffs are part of a philosophical shift that centers on the role of foundations. Several of the people in Denver who were laid off had years of experience in working on issues like homelessness and early-childhood education, reflecting a modern approach to philanthropy that emphasizes targeting donations to get at the root of problems rather than just high-profile giving.

"We believed that you could take something like homelessness and make a real impact in Denver if you were strategic in how you spent money," says the source, who asked not to be named. "What we've moved to now is an approach like the El Pomar Foundation. You'll have large grants going to favored projects of boardmembers."

The shift and layoffs also cost the Daniels Fund two high-level executives, including chief operating officer Jesse King, who came from the Rockefeller Foundation and was highly regarded in the non-profit community. "Over the past year, the Daniels Fund has experienced substantial changes," King said in a written statement provided to Westword. "While my heart has remained in one place, I believe the foundation has moved to another, and as a result feel it is time to seek other challenges."

Many both inside and outside the Daniels Fund are particularly concerned with the increasingly conservative and religious makeup of the board and management. Daniels himself was an ardent Republican, but he was never involved in organized religion. Boardmember Jim Nicholson is a former chairman of the Republican National Committee and now serves as ambassador to the Vatican; chairman Saeman is a partner in asset-management firm Medallion Enterprises and a large donor to the conservative Catholic Solidarity Institute -- which until recently was headed by Droege, the Daniels Funds' newly hired vice president for communications. Droege is the former editor of the Denver Catholic Register and organizer of "Pure by Choice," an upcoming stadium event encouraging abstinence in teenagers, as well as "Silent No More," a gathering for women who've had abortions and regretted the decision.

"The facts raise the question of conservative influence," says another former employee who asked not to be named.

Brown dismisses the notion there has been a conservative coup at the Daniels Fund. "People weren't sorted out in terms of keeping their jobs based on philosophy," he says.

Droege won't be involved in determining which groups get grants, and he says the fund will never take a position on reproductive rights. "Abortion is not included in the bylaws; that will never be something the Daniels Fund is involved in," he adds.

School vouchers, however, are a different matter. Daniels specified that support for vouchers be included in the "innovative education" programs in which the fund would be involved. Droege, Saeman and Nicholson are proponents of allowing parents to use public funds to pay for private schools. And Schuck, a well-known Republican who ran unsuccessfully for governor in 1986, is also a strong proponent.

Last year the fund gave out a total of $40 million to dozens of different programs in the four states, ranging from a Montessori school in Silver City, New Mexico, to the Colorado Coalition for the Homeless. Of the total funding, between 2 percent and 3 percent went to support voucher programs, and Brown says that percentage could increase in the future.

Until last year, Jack Daniels, Bill's older brother, balanced the board's conservative tilt. A prominent New Mexico Democrat, Jack served as chairman of the board until he died, in September. His daughter, Diane Daniels Denish, is the remaining Daniels on the board.

Denish says she doesn't want to comment on the conflict-of-interest allegations against the Fund, but she's clear about her dissatisfaction with the closing of the New Mexico office.

"Uncle Bill often said, 'There's so much we can do with the touch of our fingers on a computer, but it can't replace the human touch,'" says Denish. "There's a difference between strategic philanthropy and check writing. We were a leader in philanthropy in New Mexico because we had an office here. I think that's what Bill Daniels wanted."

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