3. Prize Money
3.1 I heard the prize money doesn’t really exist and that it’s all just a scam.
The short answer: The money is real.
The medium-length answer: The money is held in the form of immediately negotiable bonds held by Goldman Sachs, a highly respected investment firm. Anyone can verify that the money exists by requesting the information in writing from the JREF. They will in turn forward you the most recent account statement from Goldman Sachs.
The long answer: The JREF is a 'tax exempt' organization, so they are required by law to have a level of financial transparency. That means that the public can request things like an annual report and copies of JREF's 990 (the tax return non-profits file). Go to
http://tfcny.fdncenter.org/990s/990search/esearch.php (search for Randi, 2005 is here.) to look up JREF's 990. Contained within these types of documents is enough information to verify that the organization does indeed have special assets in a reserved account to cover the prize, should it ever be won. The contract between the claimant and JREF is binding enough that the JREF must pay the prize if someone wins it. This is a published, legal obligation, not just a casual offer. We have no choice in the matter. As a savvy applicant, all you need to do is verify that the organization has the funds to cover the prize. Also, if JREF were not able to hold up its end of the bargain, the IRS would investigate and pull the JREF's tax exempt status. It would mean severe penalties for the JREF, and Randi himself would also be personally liable and subject to potential incarceration. Rest assured: The money is there.
Long answer, continued: The JREF prize fund is maintained in a way that is similar to an endowment fund. Non-profits often create reserves of assets called endowments to build up enough money to take care of the organization in the case of bad financial times, or to save up money for a project down the road, like building a new facility or starting a large new program that would require a lot of capital. Endowment funds are held in a separate Goldman Sachs account designated, "James Randi Educational Foundation Prize Account." This prevents the JREF from accidentally spending the prize money. It is never a good idea to just let large sums of money sit in a savings account for years and years, so most non-profits invest their endowment funds. The way they invest it is really not important. JREF invests in bonds, which is fine. If a claimant wins the prize, it must be awarded within ten days, as per the Challenge rules and the legally binding contract entered into when the application was signed.
I know you are going to ask, "What if the bonds cannot be easily liquidated?" If the JREF did not pay a winning claimant in a reasonable amount of time, we would be open to a lawsuit for breach of contract. The claimant will be paid. The JREF states that the funds are held in immediately negotiable bonds so that a claimant can feel at ease about the ability of the JREF to pay. The fact that the JREF will do so is going above and beyond the requirements of the law and the generally accepted practices of good, responsible non-profits. It is an enormous act of good faith on JREF's part. The million dollars exist. Arguments to the contrary are utterly pointless, and they will not be entertained by the JREF.
Topic Closed
