Philanthropists | Philanthropy

Mizzou gives millions to conservative college to end lawsuit over donor’s instructions

THE COLLEGE FIX   |  December 26, 2019 by Troy Sargent

A cautionary tale to higher education donors’ considering a legacy gift

Hillsdale College is well known for not taking government money. Last week the Michigan private school got a new reputation, by looting millions from a public university.

The University of Missouri agreed to pay Hillsdale nearly $4.7 million to settle a lawsuit over the former’s alleged violation of a donor’s conditions for his gift.

Mizzou alum Sherlock Hibbs required Mizzou to hire six “disciples” of the Austrian school of economics as professors. He designated Hillsdale, home to Austrian economist Ludwig von Mises’ personal library and an Austrian economics program, as a failsafe for the gift in case Mizzou ignored the ideological terms.

“Missouri University never embraced Mr. Hibbs’ intent, and consequently students aren’t getting the exposure to intellectual philosophies necessary for broad-based education,” Hillsdale lawyer Jay Nixon, a Mizzou alum and former Democratic governor of Missouri, told RealClearPolitics when the suit was filed.

Mizzou received the $5 million trust following Hibbs’ death in 2002. The donor installed Hillsdale as a monitor to verify every four years whether Mizzou stuck with Hibbs’ wishes.

According to the 2017 lawsuit, Mizzou officials accepted the money without intending to fulfill Hibbs’ request to the full extent.

Provost Brady Deaton and John Stowe, associate dean of the Trulaske College of Business, “re-wrote it, ‘focusing on some Austrian tenets that are compatible with what we do in our business school,’” the suit claimed, apparently quoting their communication.

“MU has never appointed a dedicated and articulate disciple of the Ludwig von Mises (Austrian) School of Economics to a Chair or Distinguished Professorship funded by Mr. Hibbs’ gift,” Hillsdale argued.

“Final judicial resolution of the lawsuits would not necessarily result in a final resolution of the dispute,” the settlement petition reads, explaining the parties’ decision to voluntarily end litigation. “[T]he applicability of certain terms” of Hibbs’ trust, “including the qualifications and experience of future appointees” of the six positions created by the trust, “may continue to be litigated into perpetuity.”

It’s not clear that the settlement is the end of the matter, however. The most recent docket entry for the lawsuit, Dec. 9, says Judge Stephanie Morrill “will take matter [sic] under advisement.”

Hillsdale also filed a second lawsuit in mid-October against past and current members of the Board of Curators and recipients of trust funds “relating to the Trusts in Case,” the settlement reads. Nothing has happened in the case since Oct. 22, according to its docket.

Hillsdale’s litigation “offers a cautionary tale to higher education donors—particularly those considering a legacy gift,” the American Council of Trustees and Alumni told The College Fix.

If Mizzou is “not committed to teaching the Austrian school of economics – as Mr. Hibbs wished – then the university should have worked with the donor to ensure an agreement that both parties would be comfortable funding and implementing,” Emily Koons Jae, interim director of ACTA’s Fund for Academic Renewal, wrote in an email.

As early as 2003, Provost Deaton expressed concern that the school would be “held hostage by a particular ideology,” according to the suit. By 2006 Bruce Walker, dean of the business school, had appointed professors from within the school who were not the required “disciples” of Austrian economics.

In accordance with Hibbs’ will, Mizzou was “required to promptly and in writing inform Hillsdale of the name and qualifications of each appointee, and ‘certify that the appointee is a dedicated and articulate disciple of the Ludwig von Mises (Austrian) School of Economics.’”

However, the administrators allegedly “pressured those professors to falsely certify to the Board of Curators and to Hillsdale—repeatedly—that the University had complied with the condition of the Hibbs’ bequest.”

Since the origination of the trust in 2002, Mizzou’s investment of the funds grew to $9.2 million, according to the Missourian. The two colleges split the sum in the settlement, signed Nov. 21, leaving Hillsdale with almost the entirety of the original $5 million value of the trust.

After approximately two years of Mizzou repeatedly filing for change of venue, the case moved from St. Louis County to Boone County in October. Mizzou sought a hearing to dismiss the case Oct. 11, but the Nov. 8 hearing was canceled a week before, according to the case docket.

The parties filed a joint motion to stay the proceedings Nov. 27 and start a “case management conference” instead. They announced the settlement, pending court approval, Dec. 9. Detroit News columnist Ingrid Jacques broke the news of the settlement last week.

“The Settlor [Hibbs] did not anticipate that Curators and Hillsdale would be involved in multiple lawsuits, and possibly be parties to multiple future lawsuits into perpetuity, regarding the meaning and application of certain provisions” of the trust, the 18-page settlement petition reads.

Changing the settlement terms is better than spending the trust “in unending litigation,” it continues. “There is no recognized independent accrediting organization that Curators and Hillsdale agree would determine whether an appointee would qualify as a Disciple” of Austrian economics under the original agreement, and Hibbs was wrong about “the ease and ability of the parties to agree” on this core question.

In light of Mizzou’s actions, “[d]onors might reconsider or reevaluate institutions that are not like-minded in their missions and commitments,” Hillsdale lead counsel Peter Herzog said in the college’s statement on the settlement.

Mizou claimed “trustees could not be sued for ignoring [Hibbs’] directions because they were immune as ‘state actors,’” Hillsdale said. This legal view offers no “recourse” to donors whose gifts go toward inappropriate causes.

A university spokesperson did not answer Fix questions: why Mizzou did not initially “engage on the merits” of the lawsuit as Hillsdale claimed, whether it disputes the evidence Hillsdale cited, and what the public should know that is not revealed in the lawsuit.

Media Relations Director Christian Basi instead provided a previous statement that contends Mizzou has already spent $4.4 million “consistent with Hibb’s intent” and that “[w]e are pleased with this resolution.” Mizzou will “continue our work of educating students about free and open markets” with professors “who are strong proponents of such markets,” Basi said.

He continued that “some of the proceeds” Mizzou is keeping will be used to sponsor a campus symposium focused on Austrian economics.

Basi apparently misspoke in the statement by describing the symposium as “biannual,” or twice a year: The 74-page settlement terms document specifies that it will happen “at least” every two years, or biennial. It says the curators will spend at least $15,000 on the symposium, and that Hillsdale will get the money if Mizzou doesn’t follow through.

The two schools will also explore “opportunities for the exchange of expertise or visiting scholars, students or lecturers” in the Austrian school in the year after the settlement is finalized. Failure to agree on such exchange won’t invalidate the agreement, though.

Because Hibbs provided for a way for Hillsdale to ensure Mizzou honored his last will and testament, Hillsdale prevented further violations of his legacy, ACTA’s Jae told The Fix.

Mizzou’s curators had a duty to “establish safeguards for the use of endowments,” she said. If the “university mishandling donors’ gifts was brought to their attention, then it becomes the trustee’s fiduciary duty to investigate and take appropriate remedial action.”


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