March 22 , 2003
USA Foundation turns down request to return
$2.8 million:
University officials say money is in wrong account
(Section:
B Page: 01)
by Jeff Amy, Staff Reporter
The University of South Alabama Foundation
has denied a second attempt by university officials to retrieve
almost $2.8 million, an amount university officials say is wrongly
locked in the foundation's bank account.
The tussle involving what is known
as the College of Medicine Miscellaneous Endowment is a subplot in the larger
struggle between the free-standing foundation and the 12,000-student university
for control of the roughly $250 million endowment.
In December, USA President
Gordon Moulton renewed a 1999 request that the foundation return $2.78
million held in the medical school fund.
In January, foundation
President Aubrey Green denied the request, following advice from
Ron Snider, one of the foundation's outside lawyers. Green said
the foundation isn't allowed, under the terms of a 1993 legal
agreement, to give the money back.
USA officials argue that the
foundation is using an overly restrictive interpretation of the
document. Thursday, Moulton added that even if the 1993 agreement
bars the return of the funds, he thinks the university and foundation
should amend the deal to release the cash.
University trustees
and officials for the last decade have decried what they claim
is stingy giving and mismanagement of the foundation, a savings
account that was created in large part with federal money paid
to USA for treating high numbers of poor patients at its hospitals.
Foundation board members and managers have said their
management has been careful. Foundation officials have increased
their giving under pressure but say they can't guarantee year-to-year
giving and it's important to build up the endowment, which by its
charter operates for the sole benefit of the university.
The money
that created the medical school fund came from surpluses built
up by some medical departments. Longtime medical faculty say
departments were invited, but not forced, to put money into a university
account known as the "quasi-endowment." Former Medical College Dean Charles
Baugh, who died in 2000, wrote in 1999 that the quasi-endowment was different
from a traditional endowment, where interest and income but not principal can
be spent. Departments were told they would be able to retrieve and spend the
original deposits at some point, said Dr. Susan LeDoux, a professor of cell
biology and neuroscience. "The understanding was it would be there like a savings
account, that in tough times they could go back and get it out," said LeDoux,
a professor since 1988. "That's how it was portrayed to the faculty." But the
money was moved from USA accounts to the foundation in 1990, along with most
other savings. Those transfers became embroiled in a legal fight involving the
foundation, USA trustees and state auditors. LeDoux was involved in a 1999 effort
to get the medical school money back. Then, the foundation board voted to give
$1 million for medical school needs but not the whole quasi-endowment. The foundation
said $1 million represented the total earnings from the original deposit. Moulton
renewed the push to get all the money back at the December foundation meeting,
hoping to invest it in medical school projects. Dr. Robert Kreisberg, the dean
of the medical college, said the university would use the money to "support
faculty, conduct research and support patient care in a wide range of areas
including sickle cell disease, pediatrics and cardiovascular disease." Moulton
was told the foundation would study the subject. The rejection came Jan. 17,
in a pair of stiff, legalistic letters characteristic of most dealings between
the university and foundation. Snider, the foundation lawyer, cited the November
1993 agreement, which says, "It is understood and agreed by the parties that
all transfers of such funds and property were made, are made, and shall be made
to the foundation irrevocably..." That clause applies only to "endowment funds." University
officials argue that does not include the medical school's $2.78 million, because
of the understanding that the medical departments could withdraw all their money.
But Maxey Roberts, the foundation's acting managing director, said Thursday
that anything transferred before the settlement is considered endowment funds,
under the foundation's reading. Green, the foundation president, pointed out
in a letter accompanying Snider's interpretation that the foundation has given
out $2.87 million earned from the medical school endowment since 1992, almost
as much as the total deposits of $3.4 million by medical departments. Moulton
said Thursday that even if the foundation is barred from giving the money back
under the 1993 settlement, the university and foundation could agree to change
the terms. "There's nothing put in writing in a contract that can't be changed
by the consent of both parties," Moulton said. Moulton said he had not written
any letters to the foundation suggesting such a change but has suggested it
verbally to some foundation directors. The foundation board is dominated by
supporters of the late Fred Whiddon, who was pushed out of his post as USA president
in 1998. He continued to control the foundation until his death last year. Roberts
said a change in the 1993 settlement was a possibility, "but only the board
could do that." Copyright 2003, Mobile Register. All Rights Reserved. Used
by NewsBank with Permission. Record Number: MERLIN_1159549
