Monday, September 14, 2009

`Reader's Digest''s Hidden History--Part 11

(The following article originally appeared in the October 27, 1993 issue of the now-defunct alternative Lower East Side weekly, Downtown. Between 2007 and its recent bankruptcy, Reader’s Digest has been owned by Citigroup board member Tim Collins’ Ripplewood Holdings’ private investment/leveraged buy-out firm. See below for parts 1 to 10 of article).

As a result of their 100 percent ownership of the Reader’s Digest Association’s voting stock, both DeWitt “Wally” Wallace and Lila Acheson Wallace became quite wealthy during their lives [before both dying in the early 1980s]. Fortune magazine estimated DeWitt Wallace’s worth at nearly $300 million [in 1960s money] in 1968 and this made the Reader’s Digest co-founder among the 31 wealthiest men in the United States at that time, according to Theirs Was The Kingdom by John Heidenry. The same book also noted that, at the time of her death in 1984 at the age of 95, Reader’s Digest co-founder Lila Acheson Wallace “was the richest woman in the United States,” with a net worth of at least $250 million [in 1980s money] that was “two and a half times the size of the estate left by Henry Luce” of the Time-Life magazines media conglomerate.

As early as 1935, Mr. & Mrs. Wallace had pocketed a huge fortune from their Reader’s Digest publishing hustle and they used part of this fortune to buy 105 acres of land in Mount Kisco, New York, upon which the childless couple built a 22-room castle called “High Winds”—during the height of the Great Depression. Although Mr. & Mrs. Wallace were quite eager to spend $277,336 [of 1930s money] in the 1930s to build their “Reader’s Digest Castle,” in 1936 their Reader’s Digest Association only donated $4,418 to 13 organizations, including “a check for a mere $10” to the American National Red Cross, according to Theirs Was The Kingdom. The same book noted, however, that “As the Digest’s fortune grew, Wally and Lila…established trust funds for numerous members of the Wallace and Acheson families.” But over $500,000 [in 1930s money] per year from their Reader’s Digest Association’s gross income was personally taken home by Mr. & Mrs. Wallace in the form of salaries during the late 1930s.

To reduce their federal income tax bills, Mr. and Mrs. Wallace apparently utilized the “non-profit” philanthropic foundations which they established. As Theirs Was The Kingdom revealed in the early 1990s:

“Wally’s greatest vulnerability lay with his philanthropies, which he often used as a cover to pad the retirement or compensation packages of favored employees…He arranged for Digesters to serve on the boards of organizations to which he gave money. But honorariums, free travel, and other perquisites—many of them nontaxable—were often involved. Another of Wally’s tax-evading ploys was to arrange for the children of privileged Digesters to travel abroad courtesy of the Reader’s Digest Association’s Foreign Study League…”

(end of part 11)

(Downtown 10/27/93)