Let chips fall, experts advise uw-oshkosh in midst of scandal gas blower will not start

Before criminal charges were filed, UW-Oshkosh’s private fundraising foundation already was heading toward bankruptcy. State taxpayers could be on the hook for millions of dollars to cover the foundation’s bank debts. And fundraising for new student scholarships has been a challenge in the midst of a public relations nightmare, the university has acknowledged.

Higher education experts around the country were at a loss Friday to name another university in a similar legal quagmire. But they were clear about one thing: Trust will not be rebuilt without a full airing of what happened and safeguards to prevent it from happening again.

In 2011, Phillip Day, a former chancellor of City College of San Francisco, pleaded guilty to felony misuse of public funds. He illegally funneled money to a political campaign supporting a 2005 bond measure that benefited the college. He was sentenced to five years of probation.

Also in 2011, former University of Central Arkansas president Lu Hardin pleaded guilty to engineering a scheme to get part of a $300,000 bonus early so he could pay off gambling debts at a casino. He got five years of probation and community service for fraud and money laundering.

Former UW-Oshkosh Chancellor Richard Wells and former Vice Chancellor Tom Sonnleitner have not been convicted of anything. But they were each charged last week in Winnebago County Circuit Court with five counts of misconduct in office by acting beyond their authority as parties to a crime.

Wells and Sonnleitner are not accused of any personal gain, though Wells did sell his private home to the university’s fundraising foundation for a hefty profit, despite the house needing significant repairs. The house was put up for sale to help cover the foundation’s debts, and the current chancellor had to move out.

Foundation leaders must step up communications with donors, be transparent about what happened, and ensure safeguards are in place to protect new money given to support the university, said Rob Moore, a spokesman for the Council for Advancement and Support of Education.

"Donors might want to rally around the university, but are they confident they’re starting fresh, or will their money go to pay off the legal liability of the existing situation? They may say: ‘Prove to me this is actually going to go to the university and will support the initiatives I believe in that the university is undertaking.’"

State Rep. Amanda Stuck (D-Appleton) — both a lawmaker and an alum of UW-Oshkosh — said it’s important that alumni and donors remember the actions of Wells and Sonnleitner "do not reflect the quality of the staff or the quality of the education students receive there."

"I’m very proud to be a UW-Oshkosh grad," said the state lawmaker, who earned her bachelor’s degree in political science from there in 2007, and her master’s in public administration in 2012. She was a new member of the UW-Oshkosh Foundation Board when news of the scandal broke and stepped down to avoid conflicts with her legislative role.

The first is a civil lawsuit filed in Dane County Circuit Court more than a year ago by the UW System through the state Department of Justice. This suit first brought to light allegations that Wells and Sonnleitner promised university backing for bank loans, and funneled $11 million in taxpayer money into five foundation building projects.

Those projects included: the Best Western Premier Waterfront Hotel in downtown Oshkosh; the Alumni Welcome and Conference Center; two biodigesters, which turn animal waste into electricity; and the Oshkosh Sports Complex, which includes Titan Stadium.

A second civil lawsuit was filed in federal bankruptcy court last year. This one pits the foundation against the UW System. It alleges the UW System is responsible for the actions of Wells and Sonnleitner and is obligated to fulfill promises made to back bank loans if the foundation couldn’t make payments.

If it’s determined that Wells and Sonnleitner did something illegal — and acted alone — questions still will be raised about how they could have moved millions of dollars between the university and foundation without anyone else knowing or questioning it, both at the campus and UW System level.

"We may have to bolster or solidify that university officials cannot have a part in contractual obligations with foundations so they can’t have a ‘nod, nod, wink, wink’ conversation of, ‘We’ll take care of you with the banks,’ " Mikalsen said.

If Nass and other state lawmakers hadn’t "blown the whistle" that the UW System was trying to reach a deal that potentially would have used public funds to help bail out the UW-Oshkosh Foundation, the controversy may have been swept under the carpet, Mikalsen charged.

"It’s another black eye on the UW System, in terms of its management approach in the last 15 years," Mikalsen said. "Someone at System either had to know and didn’t do anything, or they knew about it and let these two (Wells and Sonnleitner) hang."