Left Out

Courtesy of Kevin Holcomb For many scientists, Howard Hughes is synonymous with a gold mine for biomedical research, even if the Howard Hughes Medical Institute (HHMI) is not mentioned in The Aviator, a recent film about Hughes' early career. But it hasn't always been clear skies for the storied institute. Although HHMI's Avice Meehan says that Hughes decided to create the institute after surviving a dramatic plane crash in the 1940s – an event featured in the film – Hughes biographer Richard Hack has a different story. When interviewed for the TV show, 60 Minutes, Hack said the HHMI was created after the secretary of the US Air Force threatened in 1953 to cancel all contracts with the reclusive Hughes' aircraft company, if he didn't give control of the company to a government-appointed person. Ninety days later, Hughes created HHMI and gave it all 75,000 shares of the Hughes Aircraft Company. Hack noted that establishing the institute made sense for two reasons: It got the Air Force off Hughes's back, and it offered him a tax shelter for the company. Needless to say, the move also raised many eyebrows at the Internal Revenue Service (IRS), which apparently challenged Hughes, so he began spending limited money on research. The battle between the IRS and the institute did not end, however, until years after Hughes's death from chronic kidney disease in 1976. Hughes, as the institute's sole trustee, left no formal will or successor trustee. Hughes' family then sued to obtain custody of his aircraft holdings, recalls George Cahill, a former HHMI investigator and vice president of the institute. "For several years, this was a bitter struggle," he says. Finally, in 1984, a Delaware state court appointed eight leaders in academia and business as trustees to the institute, and the trustees then elected a ninth member, the chancellor and president. The court left the aircraft company in the hands of the institute and gave the Hughes family control over his other operations, including some hotels in Las Vegas. The trustees immediately decided to sell the Hughes Aircraft Company to General Motors, which created an endowment for HHMI of around $5 billion. Until Hughes's death, the institute had distributed only around $63 million to support medical research. The aircraft company's price tag let the government know that the institute had not been channeling enough of its profits from Hughes Aircraft into medical research, which was necessary to justify its tax-free status. Ultimately, the IRS and HHMI reached a compromise in 1987, when the institute agreed to spend 3.5% of its net worth on research each year, plus another $500 million within 10 years. The latter figure represented what the institute owed in back taxes, Cahill says. John P. Atkinson of Washington University in St. Louis says he remembers hearing whispers about the institute's troubles with the IRS while he was working as an HHMI investigator from 1976 to 1992. "Certainly, early on, [HHMI] was used as a tax dodge," he says. After the settlement, "they were watched very closely to make sure they were abiding by the rules," he says. Atkinson says his colleagues at HHMI thought that the IRS was "tough, but fair" throughout the process, and they anticipated the ultimate outcome. "They went into this realizing that they owed the government some money; they owed science money," recalls Atkinson. Meehan says that the IRS agreement "set [the institute] on the path it's now on." Moreover, HHMI has "long since now met the terms of that settlement." Moreover, the trouble with the IRS did not change Atkinson's relationship with HHMI in the 1980s, which Meehan says was the case for all Hughes investigators at the time. HHMI was Atkinson's official employer, paying his salary and providing funding for equipment, a secretary, and yearly supply budget. Atkinson remained associated with Washington University, however, and applied for outside grants whenever he wanted to expand his work. Another blemish in the institute's early history appeared when then-president Donald Fredrickson stepped down in 1987 amidst charges that he and his wife were mismanaging the institute's budget. For instance, the trustees questioned them about a $2.5 million cost overrun for a $12.5 million project to renovate the Cloisters, a former convent on the campus of the National Institutes of Health. The convent was being converted into a dormitory for medical students chosen as HHMI fellows. In an interview with The Scientist in 1987, then-chairman George Thorn, who died in 2004, said that "a considerable amount" of the greater costs were due to contract changes, including the details of woodworking initiated by Mrs. Fredrickson. Some of these changes may have been necessary, but "were not properly checked out," noted Thorn. "It was an embarrassment for the organization, and part of the growing pains that took place," says Atkinson. Just as Hollywood may gloss over a person's warts, HHMI press releases don't often refer to either of the institute's scandals. Still, who can argue with the success of an aviation magnate or the medical research his money has funded? Since 1984, HHMI has ironed out many of its kinks and has pumped more than $500 million per year into the labs of more than 300 investigators, including 10 Nobel laureates.

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Alison McCook

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January 2005

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