Ex-chancellor didn’t gain from school funds, attorney says
Wells accused of funneling money through foundation
The attorney for a former University of Wisconsin-Oshkosh chancellor accused of illegally funneling public money through the school’s foundation to back real estate projects says nothing the chancellor did was “a frolic of his own,” nor did he benefit personally.
Others within the UW System knew what Richard Wells was doing, and did not object, attorney Raymond Dall’Osto said in a response filed Wednesday to a civil suit in Dane County Circuit Court.
Dall’Osto is pushing the UW System to provide a clear paper trail of money transfers alluded to in the civil suit — evidence against the former chancellor that Dall’Osto said must go beyond “vague, unspecified” accusations.
The UW System listed in its civil suit total amounts transferred from the university to the fundraising foundation for specific projects but did not name the accounts from which the money allegedly came. Wells is accused of covering his tracks by not properly detailing the activities in university accounting records.
The civil suit does not accuse Wells of personal gain.
However, the Milwaukee Journal Sentinel reported Sunday that Wells persuaded the UWOshkosh Foundation’s board of directors to pay about $120,000 above assessed and fair market values when it bought his private residence in January 2013 as an official home and entertaining venue for future chancellors. A year and a half after the sale, Wells retired and moved to Florida.
The UW System had turned down Wells when he asked the state to buy the house, citing the asking price of $450,000 and a lack of desire to buy additional properties.
The house sale was a private deal between the chancellor and foundation, but UW System policies prohibit chancellors from exerting control over campus-affiliated foundations, which are legally separate.
A spokesman for the Department of Justice, which filed the civil suit on behalf of the UW System, has declined to comment on whether criminal charges are being considered.
After the foundation paid the $450,000 asking price for the house, which faces an art center and is backed by a parking lot and art center annex, it spent another $62,000 to fix it up. The foundation replaced two bulging concrete patios, addressed serious water drainage issues on the property, updated the electrical service and completely remodeled the kitchen.
Wells and his wife had purchased the sprawling, classic mid-century ranch with brick privacy walls for $285,000 in 2001. City building records do not reflect any substantial improvements they made.
The house deal sheds more light on the former chancellor’s relationship with the foundation, whose mission is to raise private donations to support university students, faculty, programs and facilities. The foundation is named as a third-party defendant in the state’s civil lawsuit.
When he retired after 14 years as chancellor, Wells was heralded for modernizing the state’s third-largest university. But he’s now accused of driving the UW-Oshkosh Foundation into debt by pushing real estate projects, despite a recession. The foundation may face bankruptcy if it cannot find a way to remain solvent.
Wells’ right-hand man and the university’s former chief business officer, Thomas Sonnleitner, also is accused in the same civil lawsuit of comingling public funds with UW-Oshkosh Foundation funds to back bank loans on the real estate projects.
The five projects , which ostensibly benefit the university, included a
new welcome and conference center, a new sports complex, backing for a private waterfront hotel, and two biodigesters that convert waste to energy and provide educational exposure for students.
The Journal Sentinel reported last month that more than $4 million in university funds used for a biodigester that converts manure into electricity at the state’s largest dairy farm played a key role in exposing the foundation to potential bankruptcy as rapidly changing markets dulled the allure for some sectors of renewable power.
A spokeswoman for the UW System on Thursday referred questions to the Department of Justice. But on the day the suit was filed in January, and the Oshkosh Northwestern broke the story, the UW System issued a news release with documents detailing its case against Wells and Sonnleitner.
While the UW System alleges in the lawsuit that Wells and Sonnleitner made improper loan guarantees to banks if the foundation couldn’t keep up with debt payments, the response to the lawsuit filed by Wells attorney Doll’Osto minimizes any so-called guarantee:
“The guarantees, comfort letters, and memoranda of understanding alleged, referenced or underlying the allegations in the board’s complaint do not constitute a legally enforceable guarantee (guaranty), and did not and do not create any legally enforceable debt, giving of credit, obligation or assumption of debt, which is binding on the State of Wisconsin.”
The Legislature’s joint audit committee decided last week to have the nonpartisan Legislative Audit Bureau audit the relationship between all UW System campuses and their legally separate, affiliated foundations to make sure UW-Oshkosh was an anomaly, as the UW System says, based on its own auditing.
Campuses already file annual financial statements to the UW System — balance sheets signed by chief business officers. Now, the UW System will begin requiring chancellors to also sign them.
Additionally, new memoranda of understanding will require affiliated foundations to file their annual financial statements with the UW System. That way, system officials can see the other side of the ledger and better monitor the flow of money.
Money should flow from foundations to campuses — not campuses to foundations — with a few specific exceptions such as scholarship money and lease payments, according to UW System policies.