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Usually, tales of Greek houses gone bad fall into two categories: drugs and alcohol, or hazing. The undergraduate members screw up; the old people from the national office kick them out; and then the chapter reforms five years later after the misdeeds are but a hazy memory. The national officers are, by definition, college educated adults, and they are supposed to exemplify the Greek Letter Organization’s ideals of model citizenship, so they don’t screw up much. That’s not to say that they never do, such as when the national officers of Delta Zeta sororitydecided to kick out the members of the chapter at DePauw University in order to find new pledges who would seem prettier and more sociable. How were those ladies from national to know that the members would get upset and call in the press?

Last week, several members of Alpha Kappa Alpha Sorority filed suit against its former national president, Barbara McKinzie, alleging financial misdeeds including commissioning a wax statue of herself. Alpha Kappa Alpha is the oldest Greek organization established by African-American women. It was founded in 1908, close enough to the abolition of slavery that the very idea of the children or grandchildren of slaves attending college was novel.

AKA has the money to pay, at least according to its IRS form 990. In 2007, the last year available, the sorority’s financial results show nice surplus between revenue and expenses (a surplus to the non-profit world being the equivalent of pretax income to those who pay taxes.) However, wax statues of presidents may not be the best use of its money, given that the organization has a long commitment to supporting its members with scholarships and leadership training, and providing service to the community at large. For that matter, in most fraternal and service organizations, the presidency is an unpaid position rewarded with honors and an expense account that’s just adequate enough to cover a trip to the convention and maybe one or two chapter visits.  Instead, Ms. McKinzie made $375,000 in 2007, while the sorority’s executive director, which is a paid position at AKA and most other organizations, made $107,364. Hence, the suit.

The black Greek system runs in parallel to the traditional Greek system. (In the olden days, the traditional Greek houses were all white, and some houses on some campuses continue to be, sometimes pathetically so. However, many modern Greek houses are a regular United Nations these days.) African Americans often pledge traditional Greek houses, but it is the very rare white person who ends up as a full member of a black Greek house. This has much to do with differences in purpose; the black Greek houses were formed long before integration, and were players in the civil rights struggles. They were never intended to be the social clubs that most traditional Greek houses, despite their highfalutin’ language, really are.

A fraternity or sorority’s rituals are more or less secret, despite the occasional efforts of disgruntled former members to distribute them to the world, but the finances are not. Now, as a sorority member myself, I’ll just say that the ritual is a relatively unsurprising mix of mumbo-jumbo that is vaguely embarrassing to contemplate years after graduation, but I met a lot of people in the sorority who are still among my best friends and, in fact, am having lunch with a sorority sister today. So what the heck?  But I digress. Here’s how it works: fraternal societies, whether open or closed, secret or not, are not philanthropies. Hence, dues and donations to them are not deductible from Federal income taxes. However, the societies themselves do not have to pay taxes, so they do have to file their form 990 with the IRS, and that becomes public information. In addition, most fraternal societies operate some sort of separate charitable foundation that raises money for such worthy projects as scholarships and medical research. Donations to those foundations are deductible.

But for all the idealistic language and glossy pictures of accomplished alums, groups are only as good as the people in them, and human beings are all screwed up. The college members have the excuse of immaturity when they do ridiculous things. But there is no guarantee that people will behave better after a few more birthdays.

About the Author

Ann Logue

Ann Logue is a freelance writer and consulting analyst who is fascinated by business and technology. She has a particular interest in regulatory issues and corporate governance. She is the author of "Emerging Markets for Dummies" (Wiley 2011), “Socially Responsible Investing for Dummies” (Wiley 2009), “Day Trading for Dummies” (Wiley 2007), and “Hedge Funds for Dummies” (Wiley 2006), and has written for Barron’s, Institutional Investor, and Newsweek Japan, among other publications. As an editor and ghostwriter, she worked on a book published by the International Monetary Fund and another by a Wall Street currency strategiest. She is a lecturer in finance at the University of Illinois at Chicago. Her current career follows 12 years of experience as an investment analyst. She holds a B.A. from Northwestern University, an M.B.A. from the University of Chicago, and the Chartered Financial Analyst designation. How's that for deathly dull?

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