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Georgia's Odd Couple
Can two foundations share a university without driving each other crazy?

By Don Campbell
Athens, Georgia

Higher education's version of the Hatfields and McCoys might be over. After two years of relentless warfare, the University of Georgia and the UGA Foundation that had served it for 68 years have divorced -this time for good. The university has taken a new partner, called the Arch Foundation, to raise money for the university's academic programs. Meanwhile, the old foundation will continue to manage the university's $475 million endowment and share a staff with the new foundation.

UGA President Michael Adams, the target of several trustees on the UGA Foundation, appears to be more firmly ensconced than ever. He has taken a direct hand in choosing trustees for the new 30-member Arch Foundation, even as trustees of the old foundation debate their future.

University of Georgia President Michael Adams survived an ouster attempt by the university's foundation.
(Photo by Robin Nelson, Black Star, for CrossTalk)
A university with two major foundations is an unusual arrangement, and the way it came about is a case study in how communications and cooperation can get trampled in a power play. A university governing board smacked down a foundation that was attempting to exercise authority it didn't have, and the best efforts by outside parties to mediate were largely ignored.

Although squabbles between universities and foundations are not unusual, the outright firing of a foundation apparently is unprecedented, prompting Tom Ingram, the president of the Association of Governing Boards of Universities and Colleges (AGB), to call the Georgia situation "an aberration-thank goodness."

The players in this long-running saga tend toward two extreme views: 1) It was a case of a small group of foundation trustees with money or connections and a penchant for secrecy trying to topple a university president; or 2) It was a case of a profligate and manipulative university president obsessed with salary, perks and power persuading his boss, the board of regents, to do his bidding.

The truth is probably somewhere in between, but it is hard to find anyone in Georgia who is both informed and objective. The mood of those who will talk about it runs to anger, disappointment, frustration and weariness.

While Adams and the regents may have come out winners, the full cost of the controversy may not be known for years. The fight has already cost the UGA Foundation about a million dollars in legal fees, a sum that trustee Otis Brumby, a Marietta, Georgia publisher, calls "just an obscene that could be going to scholarships and grants."

A few big donors have declared they will boycott the university's $500 million capital campaign as a result of the dispute, and some university supporters worry that the presence of two foundations-one with the imprimatur of the university and one independent-will confuse contributors.

And it is still uncertain how the two foundations will get along under an agreement where one is managing an existing endowment and the other is trying to accumulate a new one, and where the old foundation maintains control of coveted sky suites at the football stadium and properties used in UGA's study-abroad program.

All this comes at a time, ironically, when the university has been on a steady rise academically. For the past four years, it has been listed in the top 20 U.S. public universities by U.S. News & World Report, at one point reaching number 18.

"The vital signs at the University of Georgia have never been stronger," said Adams. The university will enter the 2005-06 academic year with "the strongest student body ever, the strongest faculty ever, the strongest financial position ever, the strongest fundraising year ever," he said. "And not many places can say that."

And not many places, if any, have been through what UGA has been through in the past two years.

Adams was hired by the Georgia regents in 1997 from Centre College in Kentucky, in part because of his reputation as a top-notch fundraiser. His early years at Georgia seemed harmonious. The first rumblings of discontent came in 2001 when foundation trustees learned that sometime before football coach Jim Donnan was fired in 2000, Adams had secretly agreed to pay Donnan a quarter-million dollars if his contract were terminated early.

The next red flag came when foundation trustees discovered that Adams had used $13,000 in foundation funds to charter a plane to take university officials and spouses to George Bush's inauguration in 2001. Eyebrows were also raised when an Adams aide, without authorization, committed the foundation to spend $850,000 on an "eco-lodge" in Costa Rica for a study-abroad program.

But the pivotal event, described repeatedly by those aligned with Adams and the regents as "the straw that broke the camel's back," came when Adams announced in June 2003 that he would not extend for two years the contract of Vince Dooley, the UGA athletic director and legendary football coach.

Publisher William NeSmith, shown with a replica of the university mascot, a bulldog, serves on both the old and the new UGA foundations.
(Photo by Robin Nelson, Black Star, for CrossTalk)
Dooley, described by one state lawmaker as "someone so popular in Georgia people even name their bird dogs after him," had been in negotiations with Adams for nearly two years about the timing of his retirement. He had asked Adams in 2001 for four more years, permitting him to retire in 2005. They eventually agreed that Dooley would retire at the end of June 2004. But in June 2003, Dooley again asked for two more years, instead of one, and Adams said no.

The reaction was like watching a tennis match in which each call by the umpire sets off a temper tantrum by one player or the other.

Former UGA football star Herschel Walker called Adams' dismissal of Dooley an unnecessary slap at a Georgia icon and resigned from UGA's capital campaign committee.

The UGA Foundation called a special meeting and ordered a forensic audit of Adams' spending of foundation funds. The timing seemed suspicious to some, given that the foundation had recently been publicly supportive of Adams, but critics of Adams insist that the audit was not related to Adam's refusal to give Dooley another year.

Foundation Trustee William Espy, a leader of efforts to oust Adams, said that "the origins of our disputes with Mike Adams have everything to do with our fiduciaries. This whole dispute has nothing to do with the continued employment of Vince Dooley or athletics. It had zero to do with that."

In any event, Adams moved adroitly to exploit the notion that this was a case of football boosters running wild, telling ESPN that "this has now become about what element is going to control the University of Georgia-the academic side of the house or the athletic side of the house."

But Espy, who funds three athletic scholarships at UGA, insists that while "the local press bought into that, and continues to buy into that, it has had nothing to do with our dispute." Two weeks after the special foundation meeting Dooley supporters delivered to the regents a wheelbarrow full of 60,000 names of people demanding that Adams be removed from office.

Former UGA Journalism Dean John Soloski says donors "large and small" have indicated they no longer will contribute to the journalism school.
(Photo by Robin Nelson, Black Star, for CrossTalk)
The special audit, released three months later, accused Adams of making improper expenditures, and suggested that he may have misled the foundation by inflating the value of a purported job offer to become president of Ohio State University. The audit, which also criticized the foundation's management practices, was immediately denounced by Adams' supporters as based more on innuendo and gossip than on fact.

When the Atlanta Journal-Constitution hired outside experts on forensic accounting-which focuses on suspected illegal activity-to examine the audit, even they disagreed over its relevance and credibility.

The foundation then threatened to withhold the supplement that it provided for Adams' salary, which made up more than half of his $550,000 annual compensation package, but later yielded and agreed to pay it. Shortly thereafter, however, with foundation trustees continuing to snipe at Adams, the regents suddenly directed UGA to cut its ties to the foundation. The next day, foundation trustees vowed to continue to operate as an independent organization.

The regents then voted to stop using private funds directly to supplement the salaries of state university presidents, but to continue to ask foundations to contribute money to the regents for that expense. After the foundation agreed to pay Adams deferred compensation for 2003 and 2004, the regents agreed to cancel the divorce between UGA and the foundation if the foundation would sign a memorandum of understanding defining their relationship. It also directed foundations at the system's other 33 institutions to sign such agreements.

Despite intense negotiations between the foundation and the regents, agreement on details of an operating agreement could not be reached before a deadline of April 12 this year. Eight days later, without a signed agreement, the regents again directed the university to sever its ties to the foundation. This time there would be no reconciliation.

The Atlanta newspaper reported that Columbus, Ga., banker James Blanchard, a former foundation trustee who had negotiated the previous peace treaty with the regents, sent an e-mail to regents chairman Joel Wooten calling the regents' decision "an abomination and the act of a bully," adding, "consider me an adversary rather than an ally."

Amid the charges and counter-charges, many observers outside Georgia are wondering why it had to come to this. Why, for example, were efforts by third parties to mediate the dispute rejected?

Plenty of outside advice was available, if the two sides wanted it. For example, at the same time the Georgia parties were negotiating, a task force of the AGB and the Council for Advancement and Support of Education (CASE) were approving a model "Memorandum of Understanding" (MOU) which the two organizations commended to their members.

The preamble to the model MOU spelled out several elements that universities and their foundations should include to define their relationship, and offered a seven-page formal contract that the two parties would sign committing them to that relationship.

One element focused on compensation for university presidents, saying that governing boards should assume full responsibility for providing such compensation, but adding: "When private support is necessary, institutions and foundations should structure such supplements in ways that limit the foundation's influence in presidential selection or oversight." The determination of Georgia regents to limit that aspect of the foundation's influence is widely believed to be the reason that no agreement could be reached and the second "divorce" became final.

Wooten, the regents chairman, said that endless hours of negotiations failed because "a few key players associated with the UGA Foundation refused to accept the primacy of the board of regents relationship...The failure to accept that relationship and to just push back on some issues kept us from ever getting complete cooperation."

Both sides had initially indicated interest in outside advice. In January of 2004, Indiana University Foundation President Curt Simic, an expert on university-foundation relationships, had come to Georgia and talked to the regents and the presidents and heads of the state's 34 universities and foundations. But his advice-that there must be more formal and informal communication between institutions and foundations-didn't work, at least in the case of UGA.

In the spring of this year, the regents, who oversee all of Georgia's public colleges and universities, were negotiating MOUs with foundations at the three most prominent state universities, UGA, the Medical College of Georgia and Georgia Tech. As those negotiations bogged down, Republican State Representative Barry Fleming pushed through the House of Representatives a resolution calling for a legislative review of the negotiations at the three institutions.

The resolution appeared to break the impasse at the Medical College of Georgia and Georgia Tech, but not at UGA. Fleming said he had also suggested getting the AGB to mediate, "but they (regents) won't even let these people come in and talk with us." After the resolution was passed in the legislature, Fleming said, the regents "had a miraculous change of heart" and resolved several disputes in the negotiations with the medical college and Georgia Tech, but continued to stonewall against the UGA Foundation.

"The speculation that is most prevalent," said Fleming, "and what I draw from the board of regents...the decision was made a while back that they were going to do whatever it took to get rid of the crowd running the UGA Foundation."

The lines were drawn so deeply that even efforts by those on the sidelines to counsel compromise ran into trouble. When UGA deans secretly drafted a statement calling on the university and the foundation to "focus on what's important" for the students and faculty at UGA, word leaked out within hours and brought outside pressure that split the normally friendly group.

"Even by taking what we thought was a neutral stance," said UGA journalism professor and former dean John Soloski, "we stepped on the playing field and we didn't know it. We had to quickly get off." The bland statement, for what it was worth, was approved.

DuBose Porter, Georgia House Democratic leader, believes the donnybrook could have been avoided if Governor Sonny Perdue, a Democrat-turned-Republican, had interceded.

"In the past," Porter said, "we've had governors who intercede and solve these kinds of things. This has been languishing for much too long."

But AGB president Ingram believes both Fleming and Porter are wrong in suggesting intervention by politicians in the legislature or the governor's office.

"I really do believe it was the responsibility of the leaders of the board of regents and on the ground at the University of Georgia to work out their differences," Ingram said. "When that didn't happen, the board of regents had not just the authority but the moral responsibility to exercise their judgment...If we have issues like this in the future on any dimension or scale, the last thing we should want is for the governor or legislature to intrude."

Calculating the damage of this long-running feud is subjective, but there is broad agreement both inside and outside Georgia that it has tarnished the University of Georgia's national image and could adversely affect donations to the university, at least in the short run.

Charles Campbell, an Atlanta lawyer and president of the Richard Russell Foundation, a major supporter of UGA programs, feels the image issue keenly because he will be a trustee of the new Arch Foundation. As governor of Georgia in the 1930s, Russell created the board of regents as a way to shield higher education from politics.

"I don't think there's any question that it (the dispute) has not been helpful, that it has come at a very strange and unfortunate time, in the sense that the university has never been more highly rated, or more highly regarded outside Georgia than it is now," said Campbell. "To have this happen at this time is certainly counterproductive. Whether it's caused any lasting damage to the university probably depends partly on what happens here, and that's one reason I was willing to get involved (in the Arch Foundation)."

Said AGB's Ingram: "We don't see boards (of regents) saying to their foundations 'cease and desist, we're going to replace you with another group of men and women to accept your responsibilities...This is one end of the continuum, the worst of tensions, the worst of angry feelings and power politics."

But some of UGA's biggest donors say the controversy hasn't changed their attitude about giving. Jane Seddon Willson, a pecan farmer from Albany, Georgia, and a UGA Foundation trustee, has given millions to UGA, and says she has no plans to stop. "I still love the university and I'm a graduate of Wellesley College," said Willson, who became enamored of UGA when she and her husband began attending seminars there decades ago. "I think it's a little bit dramatic-those who say they'll not give anymore."

William NeSmith, publisher of a group of small newspapers in the Athens area, a UGA Foundation trustee and out-going national president of the UGA Alumni Association, said "I'm not going to give less, I'm going to give more, with hopes that all this will be worked out." NeSmith, who has donated more than $100,000 to UGA in the past five years, and who will serve briefly on both the old and new foundations, says he will "cheerlead" fundraising for a new alumni center at UGA as soon as his chairmanship of the alumni association ends.

But there are also indications that the dispute has made some potential donors wary. Soloski, the former journalism dean, says he's had donors "large and small" tell him they'll not donate again to the Grady College of Journalism and Mass Communications, or are holding off until they see how the controversy ends. Included, he says, are two potential million-dollar contributors.

Trustee Otis Brumby says the million dollars the UGA Foundation has spent during the controversy could have paid for student grants and scholarships.
(Photo by Robin Nelson, Black Star, for CrossTalk)
Tad Perry, executive director of the South Dakota Board of Regents, says that any kind of swirling controversy "raises doubts about the stability of an organization. And if you were trying to recruit high-powered researchers or deans, or presidents," said Perry, who recently negotiated MOUs with that state's six university foundations, "there's going to be a pause in the commitment because of the environment. And you'd want to test-certainly I would, if I were looking at a position at the University of Georgia. I'd [want to] be sure I understood what the potential impact is for me. Particularly if you're trying to build some program, and you're doing private resource hunting, as most deans and presidents are, yeah, I think it does have an impact on you."

UGA Foundation Trustee Brumby, who has agreed to serve on the new Arch Foundation, says that there might be a bright lining to the dark cloud. "I suspect that any time you have some uncertainty, it causes people to rethink their giving or their commitment, and that's why all that's happened in the past two years is unfortunate. But I suspect there are some who feel this shouldn't have happened, therefore I need to step up and do more."

Does that mean the squabbling is over? Not likely.

Some trustees of the old foundation have suggested they still have the authority to not just manage funds already received, but to solicit more. If that happens, UGA officials say the university's accreditation by the Southern Association of Colleges and Schools could be endangered, because a university president must have ultimate control over fundraising done on behalf of the university.

Also, there have been threats by at least one prominent donor to UGA to sue the old foundation if it allows control over his contributions to pass to the university or to Adams. And there are reports that Dooley is finishing up a book that puts Adams in a bad light in a chapter that describes the terms of their separation.

But while the sniping may continue, some find a nugget of good news in how the controversy has played out.

"You'd certainly prefer that the issue would have never arisen," said Adams, the man at the center of the controversy. "[But] it has established positive priorities for what we're about." He said that in his contacts with colleagues and other senior administrators at universities around the country, "we've been given good marks... for how the university responded and handled this matter. From that standpoint, it's been a net positive."

Regents chairman Wooten argues similarly that the feud was a net plus because it "brought clarity to the relationship" between colleges and universities and the board of regents and it forced the regents to address the issue of who pays salary supplements for university presidents.

In much the same vein, others see the outcome as a vindication of Richard Russell's vision more than 70 years ago. Russell, the late Georgia governor and U.S. senator, wrote in his memoirs that one of the things he was most proud of from his life in public service was the creation, when he was governor, of the board of regents as a vehicle to limit political influence on Georgia's higher education system.

The decision by the regents to fire the UGA Foundation is seen by some as an example of the regents finding the backbone to do just that.

"Whoever on the board of regents, either brilliantly or by sheer luck, required UGA to sever its relationship with the foundation made an incredibly brilliant political maneuver," said UGA's Soloski. "Because in that one decision, the regents now have teeth, and they bark and they bite. They've established themselves as a power. That bodes well not just for UGA, but for the system overall."

Don Campbell is a freelance writer and a lecturer in journalism at Emory University.

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National CrossTalk Summer 2005



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