SSU faculty demands clarity on loan
Administration response sought on discrepancies about statements related to $232,500 loan to Carinalli
Published: Thursday, November 19, 2009 at 3:00 a.m.
Last Modified: Thursday, November 19, 2009 at 10:54 p.m.
Sonoma State University faculty members are demanding that administrators explain discrepancies in their public statements about an SSU Academic Foundation loan to former board member Clem Carinalli.
SSU foundation officials have refused multiple requests for interviews placed over the past nine days to discuss the loan. They are compiling a written response that may be released next week, SSU spokeswoman Susan Kashack said.
The SSU Academic Foundation may have to return a $232,500 payment from Carinalli, whose recent payments to creditors are being heavily scrutinized in court after he filed the largest personal bankruptcy in county history.
SSU foundation officials have refused to answer questions about how they discovered the 1997 loan to Carinalli was modified, removing all of the property that he used as collateral to secure the note. Nor have they explained discrepancies between SSU officials’ statements about the loan and public records that contradict their account.
Foundation officials drew criticism Thursday both from faculty and elected officials for their tight-lipped approach to explaining the situation, which came to light at a Nov. 6 bankruptcy hearing.
The silence from SSU administrators has unnerved a faculty already jittery from the dramatic cut in university funding from the state, said Susan Moulton, who is an SSU professor and chairwoman of the Academic Senate.
“It causes us to be uneasy about the management of the institution,” Moulton said. “There seems to be a groundswell among the campus community questioning the financial management of this institution.”
State Sen. Mark Leno, a San Francisco Democrat who represents residents of Rohnert Park, said he thought university officials should be more forthcoming.
“They should be talking. The greater the transparency, the better,” Leno said.
Faculty blasted the administration this week on an online SSU message board and sent copies to local legislators and California State University Chancellor Charles Reed. They have requested a town hall meeting for SSU officials to publicly address the controversy. It is tentatively scheduled on Dec. 16.
“They need to be accountable,” said Noel Byrne, a sociology professor who has been at Sonoma State for 31 years.
University officials who run the foundation have declined requests for interviews made by The Press Democrat for more than a week.
“People are just unavailable,” Kashack said Thursday. “They’re busy doing university business, or on vacation, or on furlough.”
The disputed facts about the loan date back to July 9, when the university’s chief financial officer, Larry Furukawa-Schlereth, said the $232,500 loan to Carinalli was secured with real estate — a statement echoed by other university officials who stressed that the collateral made the investments safe and appropriate.
But that loan was not secured with real estate when Furukawa-Schlereth made the statement in a taped interview, and the foundation had already notified Carinalli of that fact, according to Carinalli, land records and bankruptcy documents.
The loan’s collateral, which consisted of five Carinalli properties, had been removed in 2005, according to county land records.
University officials discovered its loan was unsecured sometime well after July 9, Kashack said last week. Both sides agree the university contacted Carinalli, who had been unaware that all five properties had been removed. He took out a loan for $232,500 and repaid the foundation on July 9, according to bankruptcy documents and land records.
The foundation may now have to return the $232,500 payment, said Carinalli’s attorney, Merle Meyers. The foundation probably received preferential treatment because it was repaid within a 90-day period before Carinalli filed bankruptcy, Meyers said. Payments made to unsecured creditors during this period are not prohibited, but can be nullified and returned to the bankrupt estate if the creditor received preferential treatment.
The Academic Foundation collects donations made to the university and distributes grants, scholarships and funding to construct the $110 million Green Music Center. It is struggling to fund grants and scholarships for the next academic year, and it might have to borrow money if it is forced to return the $232,500 payment, Kashack said last week.
Under state law, university foundations are private nonprofit organizations and are exempt from complying with the California Public Records Act — a transparency law that requires taxpayer-funded agencies to give the public access to internal records.
Although the SSU foundation is a registered nonprofit, it has no independent office or employees, and is run by university staff, including SSU president Ruben Armiñana, who serves as chairman, SSU Vice President Patricia McNeill, who serves as the foundation’s president, and Furukawa-Schlereth, who serves as chief operating officer.
Clara Potes-Fellow, director of media relations for the California State University system, defended the foundation’s refusal to answer questions about the loan. While university executives are required to talk openly with the public, that same policy does not hold true for foundation officials, Potes-Fellow said.
“Everyone at the CSU is responsible to respond to the public and the news media because we are a public entity,” she said. “The foundations are not public entities run with state resources. They are private institutions run with private donations.”
Foundation executives don’t have “the same level of obligation to speak in public about the issues of the foundation, because that is a private institution that is not run with state government dollars,” she said.
SSU officials were technically volunteering their time when they ran the foundation and its $72 million in assets, according to the university.
Faculty and elected officials do not think that excuse cuts it.
“It is absolutely outrageous,” said state Sen. Leland Yee, D-San Francisco. “The CSU refuses to respond to serious allegations that may very well result in the loss of hundreds of thousands of scarce dollars that won’t be benefiting the campus.”
Yee proposed a law that would have made foundations beholden to the same transparency laws that govern the university, but it was vetoed by Gov. Arnold Schwarzenegger in October.
Leno, who supported Yee’s bill, thinks foundation officials should discuss the matter even without a legal requirement.
“I understand that they believe themselves to be a private foundation,” he said. “But even private foundations have public relations needs.”
Lorna Catford, a lecturer in the psychology department and director of the Collaborative Autism Training & Support Program at Sonoma State, worries that the many good deeds of the foundation will be hurt by the Carinalli loan and the university’s handling of it.
“The respect of the community is evaporating. If the foundation is seen as terrible, people aren’t going to give donations,” she said. “It pains me to think that the good works of the foundation are going down the tubes.”
You can reach Staff Writer Nathan Halverson at 521-5494 or nathan.halverson@pressdemocrat.com.
Editor's Note
An earlier version of this story incorrectly described the treatment of creditors in bankruptcy proceedings. Payments made to unsecured creditors in the 90-days prior to a bankruptcy filing are not prohibited, but might be considered preferential treatment and could be nullified and returned to the bankrupt estate.
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