The views expressed by the author in this newsletter are not necessarily the views of the Foundation.
(THE CONTEXT: Foreign investment in the United States is burgeoning, while public consciousness of this perennial phenomenon has been raised by the prospect of Middle Eastern oil money buying large pieces of American corporations and real estate. The traditional investors in the U.S. have been the Europeans, but in recent years, nouveau investors…the Japanese, the Arabs, the Iranians…have appeared on the American horizon. An understanding of the impact of foreign money and foreign ownership is obscured by a lack of knowledge. The following article deals with an unusual investment by the Shah of Iran.)
The Pahlavi Foundation’s high rise building, under construction at 650 Fifth Avenue in New York City, would seem at first glance to be a symbolic investment in America, since the Iranians starting with a fanfare of great intentions for their bundles of petrodollars have invested so little directly into the United States.
But there is a deeper significance to the Pahlavi Building, or the Iran Building, or whatever they decide to call it, in that the structure will represent Shah Mohammad Reza Pahlavi in a role of a philanthropist investing not in just a conspicuous piece of valuable real estate, but in an American foundation. The Pahlavi Foundation, founded and headed by the Shah, has created an American offspring, the Pahlavi Foundation (New York) to own the building at Fifth Avenue and 52nd Street and to make other investments in the United States. The income from the high rise, which is expected to range between $2-million and $3-million a year, will be used to send Iranian students to American colleges and universities.
The Pahlavi Foundation (New York) was incorporated on Dec. 5, 1973 with William P. Rogers, the former U.S. Secretary of State, as one of the three founding directors. The other two directors, Frederick P. Glick and Charles A. Simmons, are attorneys in Rogers’ law firm, Rogers & Wells, which has offices in New York City and Washington, D.C. Foundation executives, interviewed in the Pahlavi Building on Pahlavi Avenue in Tehran, frankly admit that the Pahlavi Foundation (New York) was formed to prevent the exposure of the business holdings and operations of the parent foundation in Iran. U.S. laws granting charitable organizations a tax-free status also require public disclosure of sources of income, investments and expenditures.
The Pahlavi Foundation in Iran evokes a mixture of reactions from Americans working in that Middle Eastern country, who believe it to be anything from a sham foundation whose real purpose is to serve as the Shah’s personal holding company to the conviction that the foundation spends its income for charitable and educational programs. The foundation’s executives depicted their organization in the bright light of good works. “I don’t know of one penny of Pahlavi Foundation money which went to the Royal Family or His Majesty,” one said, adding: “You know the Royal Family can get money elsewhere.”
While the public doesn’t get annual reports, the Shah is supposed to get weekly progress reports. “He gets a report of the meetings and procedures…Once a week, the vice executor reports directly to His Majesty on the activities of the Pahlavi Foundation. I believe it is on Tuesdays,” an executive said. The Shah, who both started the foundation and gave it his family name, is said to follow the organization’s activities with particular interest. “This is his baby,” one of the executives said.
The foundation did publish a Progress Report for public consumption in the London Times of May 22, 1973. This report traces the beginnings of the Pahlavi Foundation to 1950 when the Shah issued a proclamation distributing “all the lands he had inherited among the farmers who were tilling them.” The following year, Bank Omran, which the foundation owns, was formed to provide loans for seed, fertilizer and farm implements for these farmers.
In 1958, the Shah formally set up the Pahlavi Foundation, according to the Progress Report. And in 1961, in the midst of a combined anti-corruption and land reform drive, the Shah ordered the full distribution of the Crown lands by January, 1962, and the transfer of his entire fortune to the foundation. Newspaper accounts at the time placed the value of this endowment at between $100-million and $131-million.
Dana Adam Schmidt, reporting for the New York Times from Tehran on July 27, 1961, wrote of the Shah’s contribution to the land reform: “He inherited about 1,000 villages covering 7,000,000 acres and worth about $100,000,000 from his father, Riza Shah Pahlevi. The present Shah has already distributed the lands of about 330 villages.” The official version of the happenings in 1961 as recorded in the Progress Report in the London Times was: “The Foundation was registered as a public endowment in 1961, and from that day on, the entire personal wealth and property of the Pahlavi Family were devoted to charity and public welfare.”
The Progress Report gave an outline of the philanthropic activities of the foundation including a total of 6,850 students being granted scholarships or loans for advanced degrees; 7,636 children being cared for in 88 orphanages, foundling homes, nurseries, hostels, youth aid centres and vocational schools; book translations; writing awards; grants for the repair of mosques; and the underwriting of the costs of sending athletes to the Olympics.
Iran’s Blue Chips
The foundation is better known among Americans in Iran for its business ventures: the Bank Omran; luxury hotels, such as an interest in Tehran’s Hilton; factories; and oil drilling ventures.
An urbane foundation executive readily agreed that the Pahlavi Foundation has extensive business investments, just as the Rockefeller Foundation or the Ford Foundation in the United States. “In Iran, you don’t have such things as bonds and stocks. Our fixed income producer, which is equivalent to blue chip stocks in the United States, is real estate. We are interested in fixed, secure income. We invest in hotels, buildings and apartments, That provides us with fixed income… Stock is now becoming available (in Iran). We have invested some in what we consider the prime industries.”
He explained the evolution of the Pahlavi Foundation’s investment in New York City: “The management of the Pahlavi Foundation presented the proposal to His Majesty, and he approved it…We’re putting up a building of 36 stories. The object is to generate an income in order to grant scholarships, fellowships to Iranian students…The idea was to generate some money in the U.S. locally.” There are about 25,000 Iranians studying in the U.S. The executive indicated that the construction of the high rise, for which a name has yet to be chosen, would cost about $30-million. He said the anticipated income from the building would be “very small, some two to three million dollars net per year.”
In urging the U.S. Internal Revenue Service to grant the Pahlavi Foundation (New York) its tax exemption, Eugene T. Rossides of the Rogers & Wells law firm wrote: “This program is not only important to Iran but will also bring significant benefits to the United States because future leaders in Iran will have received part of their education in the United States and will have developed associations and friendships here. The program will be an important factor in fostering and strengthening Iranian-U.S. friendship and relations.” The exemption was granted.
The purchase of the site on the southwest corner of Fifth Avenue and 52nd Street came in the summer of 1973 — while Rogers was still Richard Nixon’s Secretary of State and months before the New York branch of the foundation was incorporated. Reports filed with the IRS show the land had a market value of $7,883,333, and was being carried on the foundation books at $12,508,894. The foundation has demolished the DePinna Building, a nine-story structure built in 1928. The group which sold the land to the foundation had intended to tear down the DePinna Building themselves, planning to replace it with a high rise similar to the one being built by the Pahlavi Foundation. The new office tower will house various Iranian government offices, the Iranian consulate, the National Iranian Oil Company; possibly an exclusive private oilmen’s club; as well as providing office space for private corporations.
Some Conclusions:
The location of the Pahlavi Foundation’s property on Fifth Avenue just north of Rockefeller Center, St. Patrick’s Cathedral, and the 51-story Olympic Towers office-apartment building complex can only be described as exquisite. The foundation’s investment could easily be interpreted as a symbolic gesture of the new greatness of Iran, because it is placed where it will be seen by the nation’s and the world’s tourists and businessmen strolling along Fifth Avenue. I agree with an assessment offered by an American businessman in Tehran with an intimate knowledge of Iranian politics and finance: “There’s certainly some prestige involved, but that in itself is not enough of an explanation. It’s more an eleemosynary aspect than the prestige.”
Received in New York on June 4, 1976
©1976 Kenneth C. Crowe
Kenneth C. Crowe is an Alicia Patterson Foundation award winner on leave from Newsday. He is studying the investment and movement of foreign funds into the United States with emphasis on the OPEC nations’ oil monies. This article may be published with credit to Newsday and Mr. Crowe as a Fellow of the Alicia Patterson Foundation.
