A seemingly never-ending deluge of headlines of controversies and scandals continue to rock higher education, including student activists threatening speakers they disagree with and campus cultures that increasingly stifle free speech and academic inquiry. These stories of hubris and self-righteousness may be enough to cause donors to pause before making a gift. They only distract, however, from a far more pressing matter: the misuse of donor funds by many colleges and universities.
Recently, I had a front-row seat to such a scenario from my vantage point as outside counsel for Hillsdale College. The late Sherlock Hibbs, a graduate of the University of Missouri, generously gifted his alma mater $5 million to support the professorships of several “dedicated and articulate disciples” of the Austrian School of Economics. A decorated veteran of the Second World War and longtime opponent of government overreach, Hibbs donated a significant portion of his life savings so that future generations of scholars and students could benefit from studying the principles of liberty and responsibility.
Unlike many donors, Hibbs did not merely leave the responsibility for executing his gift to Mizzou’s normal process for receiving gifts, nor did he blindly accept that they would employ the best practices of overseeing his donation. Rather, his will stipulated that Hillsdale College was to ensure that Mizzou was using the funds for the purposes he intended.
This is what the Austrian school strove to combat: public institutions trampling over the wishes and rights of private individuals.
The choice was a fitting one: Hillsdale College — nationally recognized for its principled refusal to accept any form of federal funding — boasts several fully endowed economics chairs whose occupants study the Austrian school. Hillsdale didn’t relish such a role, and its president, Dr. Larry Arnn, tried in vain to convince Sherlock not to put the college in such a difficult position. Sherlock would not be deterred. He visited Hillsdale College and gave it a generous gift, but he made it clear that he knew what he was doing by asking it to serve in this oversight capacity.
Mizzou eagerly accepted the gift and faithfully submitted its required certifications to Hillsdale — certifications that promised it was honoring the terms of the gift — in 2006 and 2010, but not in 2014. Baffled, Hillsdale investigated the matter. It then came to light that administrators within the Trulaske School of Business had never truly honored the terms of this gift and had instead simply deposited the funds in Mizzou’s endowment.
Hillsdale’s investigation included a review of past syllabi of the classes taught by the professors who had been appointed to fill the chairs, as well as communications that had been made between members of the administration and the professors. It found that one Mizzou professor had all the qualifications that should have entitled him to one of the endowed positions, but, for some reason, he was denied that slot. Eventually, he left the University of Missouri and now holds a prestigious position teaching Austrian economics at another fine university.
Ultimately, there was no evidence at Mizzou of anything approaching an intention to truly teach Austrian economics, let alone to serve as an incubator of “dedicated and articulate disciples” of the subject.
Once Hillsdale discovered these deficiencies — and communications with Mizzou failed to offer any hope of a resolution — it became clear that this was indeed a blatant refusal to honor the donor’s intent. Hillsdale College then felt that it had no choice but to pursue legal action. Remarkably, Mizzou claimed that its trustees are “state actors,” immune from suit for failing to adhere to the terms of gifts that it receives. This was a stunning position to take; it means that the university has, before this case, apparently believed that all of its trustees, faculty, and administration can violate the terms of gifts that it receives with impunity and immunity.
This offers valuable insight into the nature of what has gone wrong with so many donor gifts that have been misapplied in the higher education world. In the end, however, and perhaps after further examination of the absurdity of taking such a legal position in a public court setting, Mizzou abandoned this line of defense and provided $4.7 million of the original $5 million to Hillsdale.
Given its long-standing interest in Austrian economics, Hillsdale is grateful to be able to continue to support the scholarship and teaching of its economics faculty in concert with Hibbs’s wishes. Yet the college is even more grateful to be able to have dutifully carried out the commission that Hibbs gave it and thereby take a stand on an issue that has been overlooked for far too long in higher education. In the name of making Hibbs’s gift “compatible with what we do in our business school,” the dean of the Trulaske School rewrote its terms. When confronted about it, the university attempted to use its standing as a public institution to shield its leadership from ever being held responsible. It’s yet another instance of exactly what the Austrian school strove to combat: public institutions trampling over the wishes and rights of private individuals. (READ MORE: Hillsdale College Stands Up to Gretchen Whitmer)
I submit this story as a cautionary tale to donors to post-secondary institutions and university trustees alike. Trustees should ensure that the university is indeed honoring the intent of all its donors’ gifts. For their part, donors should carefully consider whether or not their alma mater will honor the intent of their gifts before they open their checkbooks, and they might be wise to install a reliable trust protector to continue to oversee the process well into the future.
Peter W. Herzog is a partner in the law firm of Wheeler Trigg O’Donnell, where he has had the privilege of representing Hillsdale College.
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