Judaism abhors outright hypocrisy. Therefore a mitzvah performed as a direct result of a transgression, mitzvah haba baveirah, loses its value. Thus the Mishna teaches that a stolen lulav may not be used. It would be quite incongruous to thank G-d with stolen goods. To emphasise the point, and perhaps point to its pervasiveness the mishna specifically disqualifies a stolen hadas , arava and etrog. While there are few who would actually steal a lulav there are perhaps many more who may not pay the applicable taxes or custom duties.
The recent conviction of David Radler, former chief operating officer of Hollinger International, on mail fraud has brought these issues to the forefront. Queen's University ( Kingston , Ontario ), where Mr. Radler had donated $1,000,000 decided not only to strip Mr. Radler's name from a wing of its business school but to return his donation. Is such an approach necessary? Recently a group of investors initiated a lawsuit against " Ridley College " alleging that a gift made in 1998 came from monies from which they were cheated. The suit claims that the school "had knowledge of circumstances which would have led a reasonable person to inquire about the source of funds" something which Ridley claims they had no duty to do.
It is quite clear that one has no right to give charity with money that is not rightfully theirs. Underreporting one's income and then donating the resulting tax savings would constitute theft and the government would be well within its right to recover that money. Similarly, shareholders may demand that the CEO desist from making large corporate gifts without their approval; they are not his personal funds. The Shulchan Aruch states that when collecting large sums of monies one must ensure that the money actually belongs to the person making the donation. The case discussed involves a woman who has no apparent source of income making large gifts - the onus is on the charity to ensure these are not stolen funds. This ruling would seem to indicate that absent a reasonable basis for suspicion, a charity may accept donated funds without further investigation. (It would also seem to indicate that large gifts should be solicited from both husband and wife where applicable)
The fact that someone earned some income illegally does not void donations made from his legitimate earnings. Furthermore monies donated before one embarks on fraud would not be recoverable. Absent direct linkage between a particular transaction and a particular donation we have to assume that the inappropriate donation would be in the same ratio as that to his total income. Thus if one's income is $1,000,000 with $100,000 earned illegally then 10% of his donation can be assumed to be illegitimate. Thus returning the full amount of the Radler gift appears to be unnecessary. Nonetheless those monies that are to be returned must not go to the donor but to those who were defrauded.
The issue of "naming rights" is one in which perception is crucial. Jewish ethics teaches that one should do mitzvoth for their own sake, not for recognition. However, as the recipient must express gratitude to those who help them, in practice it is appropriate to put up a plaque acknowledging a donation. And since people like to see their name acknowledged, one should prominently display such plaques. The goal is to raise more money and honouring past donors helps bring in future ones. With public displays in essence a tool for inducing further gifts it would appear that having a name of one of questionable moral character is likely to have the opposite effect, thus removing such a name is the appropriate approach. In addition to these pragmatic considerations a charity must be careful lest it appear that money is more important than morality.