Friday, December 7, 2018

Latest twist in university-foundation wrestling match: a $730,000 demand for back rent on welcome center

Photo by Miles Maguire

The UW Oshkosh Foundation wants the school to pay back rent on the campus welcome center.
By Miles Maguire

Just a day after a federal judge ordered mediation for the University of Wisconsin Oshkosh Foundation and the UW System Board of Regents, the foundation has filed a new legal action, asking for $730,000 in back rent.

The lawsuit, formally described as an “adversary complaint to recover fraudulent transfers,” is based on the fact that UW Oshkosh has been using the foundation-owned Alumni Welcome and Conference Center without paying for it.

The welcome center overlooks the Fox River at the intersection of Wisconsin Street and Pearl Avenue. The building has 40,000 square feet of usable space--15,000 square feet of Class I office space and 25,000 square feet of conference and meeting space, according to court papers.

The foundation argues that at market rates the university has been getting upwards of $365,000 a year in value by using this space without paying for it.

One of the university’s largest customers for conference space has been Oshkosh Corp., which has paid the school about $150,000 since 2014, according to figures released earlier this year under a public records request by the Oshkosh Examiner.

Some of the office space in the building is occupied by the university’s Office of Advancement, which recently began raising funds for a newly formed nonprofit called the Titan Alumni Foundation. The emergence of this rival foundation has spurred allegations that university officials have improperly interfered with donor agreements to cover some of the costs of the welcome center.

In a bankruptcy case, the presiding judge has the authority to review, and undo, completed transactions stretching back two years before a debtor seeks court protection.

For this rule to apply, the transactions have to be found to be fraudulent according to a technical definition that takes into account whether a deal would have been struck in the ordinary course of business.

Here the foundation is arguing that its understanding with the university was unfair because it was stuck with the loans for the building while giving the school free use of the facility.

The foundation “allowed the university to pay no rent for use of the welcome center based on a mistaken assumption that the defendant would voluntarily pay its indebtedness which was due,” according to a court filing.

“Other businesses would not incur $10 million in debt constructing a facility and allow a third-party to use it without paying rent,” the foundation said.

During the time of the free-rent arrangement, the foundation affiliate that owned the welcome center was insolvent because the liquidation value of the building was less than its debts, court papers say.

It’s unclear what the effect of this new claim will be on the upcoming mediation process. The filing establishes a monetary value that the UWO foundation may be able to use in negotiating a settlement with the state.

Tim Mulloy, the chairman of the foundation, was not immediately available for comment. The university and the board of regents have a policy of not commenting on litigation.

Thursday, December 6, 2018

University asks for, and gets, mediation agreement with its foundation that might settle lawsuits

Photo by Miles Maguire

A foundation official said he was optimistic but cautious about the outcome of scheduled negotiations.
By Miles Maguire
The legal battle between the UW Oshkosh Foundation and the University of Wisconsin System Board of Regents may be coming to a close as both sides have agreed to mediation.

The two parties are scheduled to meet Dec. 21.

A pair of unfavorable court rulings, a looming deposition of UW Oshkosh Chancellor Andrew Leavitt and the defeat of Republican Gov. Scott Walker all could be factors pushing the regents to look for a resolution.

“They approached us to see if we would be willing to sit down,” said Tim Mulloy, the chairman of the foundation.  

He said he was “optimistic” that a settlement could be reached, but he also expressed caution about the outcome of the negotiations.

Neither the university nor the UW System would comment on the mediation plan.

One reason for optimism is that the scope of the differences between the two sides has been greatly reduced. In addition the foundation has said that it would be willing to transfer ownership of two campus buildings that it owns to the university if the state would pay off about $8 million in outstanding debt.

Both buildings are being used by the university without charge. The foundation says they are worth far more than $8 million based on their cost of construction, but the UW System has not conceded this point.

If the building transfer occurred, the foundation would be able to exit bankruptcy, and the university would have complete control over these facilities.

A stumbling block is language in the current state budget that says that UW System regents cannot transfer funds to the foundation without legislative approval.

The mediation was ordered Dec. 6 by U.S. District Judge William C. Griesbach based on a joint agreement between the foundation and the board of regents.

Griesbach also issued an order that blocks the foundation from collecting on a judgment it has won against the state. While ruling for the state, Griesbach acknowledged that the foundation is suffering “reputational harm” and suggested that his temporary order would be no more than a “short stay.”

Griesbach did not rule on the validity of either side’s arguments but only noted that the UW System had more to lose if it was ordered to pay up now but later won on appeal.

Two courts that have delved into the matter have largely rejected the UW System’s legal argument that it does not have to make good on promises from two former university officials.

But Griesbach noted that those two officials face trial on misconduct charges, which “raises serious questions as to their authority to bind the board in the manner alleged.”

If mediation fails, the foundation will return to its plan to force Leavitt to answer questions under oath about his communications with foundation donors. The foundation alleges that these communications upended several planned gifts, including one for $2 million in exchange for naming rights to the school’s Alumni Welcome and Conference Center.

Foundation supporters are hoping that the incoming administration of Gov.-elect Tony Evers will be less interested in pursuing this litigation. But a law passed in early December might subject such a change in legal strategy to review by the legislature.

Friday, November 30, 2018

$2 million naming-rights deal for alumni center upset by actions of UW officials, foundation alleges

Photo by Miles Maguire
The UWO Foundation says it may sell the alumni center if the UW System continues to resist paying a court judgment.

By Miles Maguire

A $2 million naming-rights deal for the UW Oshkosh alumni center has been put on ice after the donor canceled a $500,000 check upon learning that an agreement he approved with university officials did not match his intent, court papers show.

The University of Wisconsin Oshkosh Foundation alleges in court filings that the naming-rights deal as well as several other major gifts were targeted in repeated acts of interference by university officials, possibly including UW System President Ray Cross.

In addition, according to a sworn affidavit from former state Sen. Jessica King, UW Oshkosh Chancellor Andrew Leavitt spoke to her at a memorial for longtime professor Dr. Kenneth A. Grieb and told her that future gifts in his name should be directed away from the university foundation.

King is the executrix of Grieb’s estate and had just informed the chancellor that Grieb “had left a generous gift through the UW Oshkosh Foundation for the International Studies Department,” the affidavit states. Grieb died this summer after teaching for more than 50 years at the university.

The allegations of state officials directing donations away from the foundation represent the latest skirmish between the university and its long-established fundraising arm. Rep-resentatives of Cross and Leavitt were asked to comment for this story. They declined to do so.

The dispute over charitable gifts has surfaced as the UW System is attempting to keep the UWO foundation from collecting on a multimillion-dollar judgment that would allow it to emerge from bankruptcy.

If the impasse continues, the foundation says, it may attempt to sell the Alumni Welcome and Conference Center, which overlooks the Fox River and which is currently used by the university rent free.