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SSU Foundation leaders to face critics
Published: Monday, December 14, 2009 at 6:10 p.m.
Last Modified: Monday, December 14, 2009 at 6:10 p.m.
Sonoma State University officials likely will face tough questions about their management of the university’s beleaguered foundation at a town-hall meeting Wednesday on campus.
“I’m hoping we get some clarification on their investment process,” said Susan Moulton, who is an SSU professor and chairwoman of the campus faculty association.
The Sonoma State University Academic Foundation has received harsh criticism from faculty, donors and local and state politicians for issuing more than $20 million in real estate loans to local landowners, including deals with its current and former board members.
“We want to know how the decision was made to privilege some over others,” said Moulton, who is chairwoman of the Academic Senate.
In 2002, the foundation had invested more than half of its assets into private loans, including $15.5 million in loans to local landowners and a $6.1 million loan to the university to help renovate the administration building.
University foundations typically invest about 3 percent of their assets into alternative investments such as private loans, according to a 2001 study by the National Association of College and University Business Officers. Private loans tend to be riskier, and foundations need to maintain diversity in their investments to lower that risk, according to experts who advise universities on how to manage donations.
University officials have defended the loans, saying the investments provided consistent returns to the foundation. They also said the loans were safe because borrowers provided deeds of trust as collateral, meaning the foundation could foreclose on property in the event of a loan default.
However, they have declined to provide a complete list of the loans and how much the foundation earned on the investments. And at least one of the loans was not always secured with property as collateral.
The foundation manages all the donations made to the university and is responsible for administering scholarships and grants on campus. SSU President Ruben Armiñana and his top executives handle the day-to-day operations of the foundation, which has no paid employees of its own.
The town hall meeting will have a panel that likely will include top university officials such as Patricia McNeill, president of the foundation and vice president of development at the university, and Larry Furukawa-Schlereth, chief operating officer for the foundation and chief financial officer for the university. They will start the one-hour meeting with a presentation and then field questions from the audience, said Susan Kashack, a spokeswoman for the university.
The largest recipient of private loans from the foundation was former board member Clem Carinalli, who also arranged most of the foundation loans made to himself and others through his company Sonoma Mortgage and Investment.
He personally received more than $9 million in loans from the foundation and got his first loan two days after he resigned from its board of directors in 1995, a deal that was arranged and approved before he resigned, according to university officials.
The foundation may have to borrow $232,500 to cover one of the loans it made to Carinalli, who filed the largest personal bankruptcy in Sonoma County’s history in September. He also has not repaid the foundation for another loan of $1.25 million, which is secured with a deed of trust to a 9.6-acre property he owns in Windsor.
In a change of policy, foundation officials will answer questions about the Carinalli loans, Kashack said Monday. The university had previously announced it would cease discussing the matter publicly because Carinalli had entered bankruptcy.
The foundation’s endowment fund also lost millions of dollars invested on Wall Street during the past year as a result of the economic downturn, according to foundation officials. As a result, university officials now say they might not be able to fund student scholarships for next academic year.
Moulton and others have criticized the foundation for continuing to spend millions of dollars to construct the $110 million Green Music Center on campus while crucial academic services are cut. For instance, the foundation is spending large amounts of money landscaping the music center, Moulton said.
“I’m concerned about the priorities of the foundation,” Moulton said. “It ought to be serving things central to the university’s academic mission.”
During the 2007/2008 academic year, the foundation awarded $752,491 in student scholarships and $671,976 in campus grants, according to the most recent public filings with the Internal Revenue Service. That same year, the foundation spent $21 million on the Green Music Center. Donors to the foundation typically earmark their money for specific purposes, university officials have said.
The town hall meeting is open to the public and scheduled for noon on Wednesday in the Evert B. Person Theatre on the SSU campus. It will also be streamed live at mms://media.sonoma.edu/live and will be later posted at www.youtube.com/user/CSUSonoma.
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