The University of Wisconsin Oshkosh Foundation has filed for Chapter 11 bankruptcy in federal court, and blamed the move on a “a policy flip flop and ill-advised political gamesmanship” by the University of Wisconsin’s board of regents.
At issue was how the foundation was planning on settling its debts, which were the result of real estate projects that University of Wisconsin officials said were improperly financed with public money and credit. The foundation was reportedly under pressure from state lawmakers not to use public funds to settle its debt. According to Tim Mulloy, chairman of the foundation’s board, the foundation, and the regents tentatively had reached a “fair and reasonable settlement,” but then had second thoughts.
In its filing, the foundation says it owes $15.8 million and has just $14.8 million in assets, according to the Milwaukee Journal. Creditors include Madison-based First Business Bank, $6.6 million; BIOFerm Energy Systems of Madison, $678,000; First National Bank of Manitowoc, $5.6 million; and Wells Fargo Bank of Milwaukee, $1.6 million.
“This is a petition that never should have happened and could have been avoided,” said Mulloy in a statement. “When the projects at the core of this matter were first proposed several years ago, the board of regents was a strong, public supporter,” he said, but “last summer, the board suddenly had a change of heart and reneged on its earlier commitments.”
Mulloy said the Chapter 11 petition will “put the foundation on a reasonable path to resolve numerous issues in an effective and efficient manner.” He added that the Chapter 11 filing will also stop the “unnecessary and expensive litigation that has resulted from the board of regents abandoning its earlier support, and a solution it previously had accepted.” The petition was filed in Wisconsin’s Eastern District of Federal Court.
Mulloy added that the regents’ own special investigation, which was conducted by a former Dane County Circuit Court judge, found that the foundation’s board “acted in good faith” and that it “bears no fault of any kind” relating to the financing of the projects involved in the dispute. The Regents’ special investigation also found that “the foundation board exercised due diligence” in addressing the financing issues and that the “board cannot be faulted in any way” and “has no culpability whatsoever” relating to the financing of the projects.
Michael Grebe, chairman of the the board of regents’ audit committee, said “we are disappointed to learn the UW-Oshkosh Foundation is declaring bankruptcy. We had the shared goal of trying to reach an agreement that would help keep the foundation solvent, however, we could not support using state dollars to save a private entity. That is understandably frustrating for the foundation, but we must act in a financially responsible manner on behalf of the UW System and our taxpayers.”
Paul Swanson, an attorney representing the foundation in its Chapter 11 filing, said the foundation’s endowment and other donations held for specific purposes as directed by the donors are protected during the foundation’s reorganization. Swanson said that because these funds are held in trust by the foundation, they are beyond the reach of general creditors and must be used for the particular use for which they were given. He also said that the Chapter 11 filing allows the foundation to seek reimbursement for losses from projects undertaken to benefit UW-Oshkosh, but which have since failed.
“This filing will provide a single forum for all involved parties, including the foundation, to be heard and have their disputes resolved,” said Swanson. “Most important, it will allow the foundation to continue its charitable mission, which is to serve UW-Oshkosh and its students, free from the claims of its creditors.”