|A civil suit against two former UW Oshkosh officials has been pending in Dane County since 2017.|
By Miles MaguireA legislative committee agreed Wednesday to drop a civil lawsuit against two former top officials of UW Oshkosh who entered guilty pleas last month in a criminal case for their role in shifting funds between the school and its fundraising arm.
The approval of the Joint Finance Committee is required under a 2018 law that was passed during a lame duck session of the Wisconsin legislature. The panel’s OK will bring the curtain down on a legal battle that started in January 2017 and was close to resolution last summer.
The civil case, brought in Dane County Circuit Court, accused former Oshkosh Chancellor Richard Wells and former Vice Chancellor of Administrative Services Thomas Sonnleitner of illegally transferring funds from the school and making promises that the state would stand behind loans taken out by the UW Oshkosh Foundation.
“The resulting potential liability led to numerous court cases, including cases by the commercial lenders against [the University of Wisconsin System] and claims by the foundation in its eventual bankruptcy filing,” according to a memo from the Department of Justice requesting the committee to let the case drop.
Most of the legal rulings in the various cases have gone against the UW System, and it is unclear what financial damages were actually suffered by the state. At one time the exposure was estimated at $18 million, but the system ended up paying out only about $4.6 million and as part of that agreement took control of two facilities that were valued at a higher amount.
The system has also collected on a $1.5 million insurance policy to cover the actions of Wells and Sonnleitner.
Ultimately the state was able to convince Wells and Sonnleitner to plead guilty, pay a fine and make restitution. The two men, both retired and widely admired within the local community and among influential alumni, faced what would likely have been a long and costly legal battle.
They were never accused of personally profiting from the transactions but only making agreements that exceeded their legal authority.
In their defense the Oshkosh officials said they were acting at a time when the state was cutting support for higher education and when public institutions were being encouraged to act more like private businesses in assuming risk and pursuing new opportunities.
They have also said that higher officials in the UW System, including some members of the Board of Regents, were aware of their activities. Although the system initially argued that the transfer of funds from the university to an affiliated organization was illegal, an internal audit later found that such transfers had happened more than 2,000 times over a seven-year period at more than a dozen UW schools.
Wells has already paid the state $75,455 to settle his fine and restitution obligation. Sonnleitner has paid a $5,000 fine and still owes $70,455.
Legislators were told that if they did not agree to have the civil case dropped, Wells and Sonnleitner could reopen their criminal cases and amend their restitution agreements.
The finance committee agreed to close the case, and two others, without debate over the specifics of the settlement agreements.
The only criticism came from Rep. Chris Taylor, a Dane County Democrat, who objected to the fact that the legislature has taken a role in settling legal disputes that historically were left to the executive branch.
“This approval is an abuse of power,” she said. “It’s totally unprecedented.”
Last July, the Justice Department told the legislature it was ready to settle with Wells and Sonnleitner but needed the committee’s OK. When no approval was given, the parties went back to court and traded arguments during the fall in the criminal case, which was heard in Winnebago County.