When the applause died down after H.F. "Gerry" Lenfest announced that he had donated The Inquirer and its sister publications to a new nonprofit institute, several journalists in the room asked the same hard question:

How could the news organization avoid potential conflicts of interest if it was taking money from outside donors?

"What we do cannot be bought," responded publisher Terrance C.Z. Egger, asserting to Philadelphia Media Network employees who gathered Tuesday that the company and its newsrooms would remain autonomous.

But as the region's dominant news provider wades into the pool of foundation funding, editors who run nonprofit newsrooms caution that even with the highest standards, keeping clean demands vigilance. At times, taking outside money has proved problematic for a news organization and clouded its most valuable asset, a reputation for impartial reporting.

Consider:

Last year, the Los Angeles Times announced that it received $800,000 to expand education coverage. What it didn't say, and what infuriated teachers' union leaders when they found out, was that some of the donors backed efforts to turn public schools into private and charter schools, the Washington Post reported.

In 2010, critics censured NPR for accepting $1.8 million for a government-reporting project from the Open Society Foundations, funded by the liberal billionaire George Soros. "No news organization," media-watcher Howard Kurtz wrote, "should accept that kind of check from a committed ideologue of any stripe."

The nonprofit Gates Foundation, a huge proponent of controversial Common Core education standards, spends $7 million a year on education-related journalism coverage through NPR, EdWeek, the Educational Writers Association, and other groups, the Poynter Institute reported last year. The foundation has invested millions in training programs for journalists.

"You have to be hypersensitive to it," said Robert J. Rosenthal, a former editor of The Inquirer, who runs the nonprofit Center for Investigative Reporting (CIR) near San Francisco.

Rosenthal said CIR makes clear to potential donors that they get no special privileges, no say in how stories are conceived, assigned, written, or edited. He has turned down money from people who seemed to have agendas, including a hedge fund that wanted CIR to undertake a specific story.

"They're fishing to see if you would take funding," he said.

A key goal

In Philadelphia last week, Lenfest shook the media landscape when he announced he had donated The Inquirer, the Philadelphia Daily News, and Philly.com to the new Institute for Journalism in New Media, in an effort to ensure that quality reporting continues here for generations.

The move, which placed PMN under the auspices of the nonprofit Philadelphia Foundation, opens philanthropic avenues to fund the company's journalism.

Charities, corporations, and other benefactors can give money to the institute to go toward specific reporting tasks. For instance, a donor could endow an investigative reporter in the same ways that others endow professors' chairs at colleges.

Lenfest gave $20 million to the institute but said much more would be needed. A key institute goal is to find new content-delivery models that could eventually assume the role of printed newspapers - with PMN as a laboratory.

He and Egger said the new structure sets walls between the newsrooms and the institute that will accept and solicit donations on their behalf.

The Lenfest gift agreement stipulates: "The editorial function and news coverage of PMN shall at all times remain independent of the institute, and the institute shall not attempt to influence or interfere with the editorial policies or decisions of PMN."

In interviews, PMN executives said that although the nonprofit institute and for-profit PMN were inherently connected, the institute has no governance power over the newspapers and website.

PMN and the institute are run by separate boards, each with independent responsibilities. PMN can make requests for funding to pursue certain projects, but the institute is not required to approve them. The news company can turn down money if it has qualms about a donor.

"We will remain fiercely independent," Egger said.

In an interview, Inquirer editor William K. Marimow was asked if accepting outside funding would influence the newspaper's reporting.

"Absolutely not," he said.

Marimow said he and the publisher were sensitive to the issues surrounding nonprofit funding, and would turn away any donor that held a particular view or bias.

"Terry Egger's ironclad commitment that we will be 'fiercely independent' is a guarantee that there won't be a temptation to take dollars from donors who have an advocacy position," Marimow said.

Egger said ethical newsrooms have always resisted outside attempts to influence news coverage, whether that pressure has come from advertisers, politicians, or even the company's owners.

"Let me be blunt," media scholar Philip Meyer wrote in The Vanishing Newspaper: Saving Journalism in the Information Age. "Allowing charitable foundations to pay for the news might be risky, but it can't be any worse than letting advertisers pay for it."

Today, as legacy news organizations struggle amid a dramatic erosion of revenue, advertising, and subscribers - in November PMN announced plans to lay off 46 journalists - notions of who should pay for news coverage are evolving.

"We're going to have to come up with new rules of the road," said Stephen Engelberg, a former editor at the New York Times and the Oregonian who now runs ProPublica, a nonprofit, Pulitzer Prize-winning newsroom.

Former Inquirer deputy editor Gene Foreman, author of a textbook on ethics in journalism, praised Lenfest for his generosity and sincere desire to see strong, public-interest journalism endure in Philadelphia.

But taking money to fund specific types of coverage "is somewhat problematical" because "it might actually be an effort to influence coverage. Each gift has to be studied very carefully, to avoid a conflict of interest."

When the company accepts funding to enhance news coverage in one area, Foreman said, "it raises questions about what you're not covering, because you're not getting foundation money to cover that."

"If I'm an editor, I'd hate to look a gift horse in the mouth," said Foreman, author of The Ethical Journalist: Making Responsible Decisions in the Digital Age. "But on the other hand, we have a duty to our readership as a whole to not have our coverage be influenced or appear to be influenced by someone with an agenda."

The Inquirer knows what can go wrong.

'Harsh lesson for me'

In 1995, the newspaper accepted an indirect $35,000 grant from the Foundation for New Era Philanthropy - later revealed as a Ponzi scheme that stole from investors. Taking funding to publish a special section on regionalism raised questions of whether the newspaper benefited, as then-publisher Robert J. Hall put it, from "ill-gotten money."

The Inquirer, embarrassed, said it would return the money to investors who lost out.

"It was a harsh lesson for me," said then-editor Maxwell E.P. King, now president and CEO of the Pittsburgh Foundation. "I thought we had taken all the steps necessary to insulate ourselves."

Afterward, King and other senior editors decided that was the end. No more money from outsiders. Period.

But if he were editing a publication today, King said, he wouldn't take that stand. Modern agreements can be crafted to ensure journalistic independence. And potential donors can read what's almost a Miranda warning - not, You might be covered and you might not like it, but, You will be covered, you will not like it, and you have no recourse.

"There are so many reasons to believe that nonprofit journalism can offer a really viable and creative and constructive alternative in a lot of situations," King said.

Of course, foundations don't necessarily approach news organizations with money in hand. Often, they must be solicited.

'To pay attention'

At the top of the home page of ProPublica, the New York-based investigative newsroom, is a bright red tab that reads, DONATE.

"You clearly want to pay attention to who is offering to give you money," Engelberg said. "We try to be clear with people [that] being a donor does not give you any sort of special journalistic privilege."

A foundation may donate for coverage of health care, climate change, education, or race, he said, but the newsroom chooses the specific stories.

"The issue is, Is the group clearly identified with one side in an advocacy position? Does the question you're being asked presuppose the answer? If the answer is yes to either question, you want to be extremely careful. . . . Because your credibility, your good name as a news organization, is the most important thing you've got."

215-854-4906@JeffGammage

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