MADISON, Wis. (AP) - The University of Wisconsin System regents accused UW-Oshkosh’s former chancellor and chief business officer of theft Wednesday, alleging in a civil lawsuit that the pair concealed millions of dollars in improper financial transfers to the school’s nonprofit foundation to help the organization execute five real estate development projects.
The lawsuit alleges Richard Wells and Thomas Sonnleitner illegally transferred $11.3 million from the university to the foundation between 2010 and 2014 to help pay for a new alumni center, a pair of biodigesters, renovations at the Oshkosh Sports Complex and a waterfront hotel project without recording the transfers in the university’s books.
The foundation was established to support the university and funding should have flowed only from the foundation to the school, UW and state Department of Justice officials said in a news release.
The lawsuit also alleges that Wells and Sonnleitner illegally guaranteed UW-Oshkosh would back the foundation’s bank loans for the projects and cover the foundation’s debt on the work if the foundation couldn’t meet its obligations - something the state constitution and UW System policies prohibit. The foundation still owes $13.9 million on the biodigesters and the alumni center but UW officials say UW-Oshkosh and the system isn’t responsible because the deal was illegal.
The lawsuit seeks unspecified damages. Online court records did not list an attorney for Wells, who was chancellor from October 2000 until August 2014, or Sonnleitner, who was vice chancellor of administrative services and chief business officer from 2000 until he stepped down in March. Sonnleitner’s home phone rang unanswered Wednesday. The lawsuit listed Wells’ address as Sarasota, Florida, but no residential telephone listing could be immediately found for him.
“This is both unacceptable and appalling,” Regent Audit Committee Chairman Michael M. Grebe said in the news release.
The news release said Wells’ and Sonnleitner’s actions started to come to light in April after foundation President Art Rathjen told current Chancellor Andrew Leavitt that the foundation may need help to pay its debts on the alumni center. Leavitt informed UW System President Ray Cross, prompting a review of the foundation’s financial documents.
The regents hired retired Dane County Circuit Judge Patrick Fiedler to conduct an independent review of the real estate projects. His work prompted UW officials to ask the state Justice Department to open a probe, which lasted from August to this month. Leavitt fired Rathjen on Tuesday.
The news release added that UW System staff are reviewing financial transactions between other foundations and their universities but haven’t found any irregularities so far.
Asked why no criminal charges have been filed, DOJ spokesman Johnny Koremenos said the agency doesn’t comment on “potential criminal investigations.”
Cross also has told every system chancellor to review deals with their schools’ foundations and add language stating only foundation board members or employees can initiate foundation transactions and requiring an annual foundation audit. Leavitt plans to create a new campus position that will focus on compliance with UW System rules and state law.
Republicans who control the state Assembly said Wednesday they may order state auditors to review relationships between universities and their foundations.
Republican state Sen. Steve Nass, one of UW’s most outspoken critics, said the case shows financial oversight at UW-Oshkosh is inadequate and called on legislators to use the upcoming state budget to “reform” the UW System. Nass already has called for cutting UW funding because he’s unhappy with a UW-Madison course entitled “The Problem of Whiteness” and another UW-Madison program that encourages men to question their masculinity.
Assembly Speaker Robin Vos told reporters Wednesday that he doesn’t believe the case should affect UW’s funding.
“Once in a while you have people make a mistake, and there’s nothing that can be done if they didn’t follow the processes that were already in place, which is what sounds like happened,” Vos said.
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This story has been corrected to reflect that Rathjen was fired Tuesday, not Wednesday.
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Associated Press writer Scott Bauer contributed to this report.
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Follow Todd Richmond on Twitter at https://twitter.com/trichmond1 . Follow Scott Bauer at https://twitter.com/sbauerAP .
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