SaveWCAL wins another round; Judge Wolf scolds MN Attorney General’s office

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Ruth Sylte, president of SaveWCAL, alerted me yesterday to a press release posted on their website titled Rice County District Court Judge issues Order in WCAL case. In his ruling, Judge Wolf wrote:

The only watchdog looking out for the interests of the trust in this case was the Respondent, the non-profit organization SaveWCAL. SaveWCAL raised the alarm when they first learned of the sale of WCAL by St. Olaf, but neither St. Olaf nor the Minnesota Attorney General’s Office paid any heed to SaveWCAL’s warning. Now, the Court is faced with a plethora of issues to unravel in the aftermath of St. Olaf’s unapproved sale of WCAL and the Minnesota Attorney General’s Office’s breach of its duties in this case.

See our previous blog posts/discussions from March, 2007, June, 2007, March 2008.

Media coverage this week:

Now what?

In a letter to MN Attorney General Swanson, Ruth writes:

Therefore, the Attorney General has a legal responsibility to the 80,000 listeners-beneficiaries of the WCAL trust to commence a proceeding requesting the Court to declare that the sale of the assets of the charitable trust to Minnesota Public Radio is void.

21 thoughts on “SaveWCAL wins another round; Judge Wolf scolds MN Attorney General’s office”

  1. An email from a colleague:

    In most states, attorney generals do have significant obligations to oversee management of public charities and trusts. It would be interesting to see if the sale could be unwound based upon lack of approval of it from the AG. Do you know if the AG’s approval is *required* for a charity sale? Or is just that the AG *may* block a sale?

    Anyone know? 

  2. Point of clarification. The first quote that you use in the article above is a direct quote from Rice County District Court Judge Gerald Wolf in his Order — not from SaveWCAL.

    As you noted, the MPR story is a classic attempt at spin. The main issue is that the assets of a charitable trust (WCAL) were disposed of by the trustee (St. Olaf College) without the required notice and without the required approval of the Court. The Court has upheld SaveWCAL’s legal analysis of the situation.

    State statutes clearly say:
    “Where the trustees of a charitable trust have no power under the trust instrument or under an order of a court of equity to convey such property, a deed made of such property is void and subject to cancellation upon application of proper parties.”

    Yesterday, SaveWCAL submitted a formal letter to the Minnesota Attorney General demanding that she do her job and defend the WCAL charitable trust. The full text of the letter can be found on the SaveWCAL web site at: http://savewcal.livejournal.com/121725.html

    As the Judge noted, “The Minnesota Attorney General’s Office failed in its duty in this case.”

    Utterly. The AG has not only failed its duty, it has failed the citizens of Minnesota by refusing to do its job (defending the WCAL charitable trust) and deliberately neglecting its clients (the tens of thousands of donors to WCAL who gave millions of dollars to the trust).

    Any donor to a Minnesota charitable trust or nonprofit organization should now be deeply concerned about this dereliction of duty and lack of accountability from the chief legal officer of the state who is required to oversee and protect charitable trusts.

  3. Griff: Judge Wolf was quite clear that the issues before him did NOT involve the sale of the radio station. Rather, the issues involved how St. Olaf must use the trust monies given for the radio station.

  4. Griff: St. Olaf was granted much of the relief it requested. “SaveWCAL survives another round” would be more accurate.

  5. David, St. Olaf has been saying the donated restricted funds are endowments. Judge Wolf ruled they’re a trust. Why wouldn’t that be considered ‘winning a round’ for SaveWCAL? Yes, some money was ‘released’ but there are a couple of important ‘denieds’ in his ruling.

  6. Griff: I consider the “GRANTED’s” to be St. Olaf getting what they wanted. The “DENIED’s” don’t further SaveWCAL’s “cause” of void the sale; they just prevent St. Olaf from unilateral control, and make it possible to void the sale.

    I am going to read the opinion again. But, I don’t think Judge Wolf required the Attorney General to act. The trust funds seem to be in legal limbo.

  7. I don’t read the order quite the same way David L does. The order and memo are a little confusing unless you’re really familiar with the issue, which I’m not, so I’ll try to interpret it in a way that’s as easy to understand as possible.

    St. Olaf’s most recent petition sought four kinds of relief from the court:
    1. Releasing the restriction that certain “restricted gifts” had to be used to support WCAL;
    2. Releasing the restriction that the Norberg funds had to be used to support WCAL;
    3. Confirming that certain “restricted gifts” had already been completely expended;
    4. Confirming that certain “undocumented gifts” were not subject to any restrictions.

    (I took these from paragraph 5 of the amended petition, rather than looking to the end of the petition where the relief requested is broken down more.)
    From here, I turn to the court’s order and accompanying memorandum to see if it can be said that St. Olaf “got what they wanted.”

    #1
    The portions of the petitions which were granted released restrictions on funds “to fund the operation of core WCAL activities”, or to be “used in accordance with the intentions of the donors or donors’ heirs”. Since WCAL is not in operation, these funds cannot be used by St. Olaf for other purposes or by the new radio station.

    There is a class of gifts called “restricted endowment gifts” upon which the court granted a release of restrictions. These gifts must be used for core WCAL activities, or:

    “The broadcast and recording of the St. Olaf Christmas festival, the production and broadcast of the weekly sing for joy program, the production and broadcast of public service programs such as news, weather, debates, and St. Olaf classes, the broadcast of classical music, the broadcast of live and recorded St. Olaf band, choral, and orchestra concerts, and student employment and mentoring.”

    So the restricted endowment funds can still be used in WCAL-type activities even though there is no WCAL in existence. Almost half a million that can only, essentially, be used for AV equipment. And these funds are still held as endowment funds, so there remains a trust and the trustee’s responsibility to the beneficiary, generally, WCAL.

    Therefore, in request #1 by St. Olaf, the “restricted gifts” were NOT released from the restriction that they be used for the benefit of WCAL, so St. Olaf “loses” on the first request.

    #2
    The Norberg Funds, which are the subject of St. Olaf motion #2, are funds held in a perpetual charitable trust. The Norberg trust is specified that annual distributions will be made to WCAL. Since WCAL is no more, St. Olaf is seeking permission to end the annual WCAL distributions so the Norberg funds can be used elsewhere.

    The court found that the Norberg funds can be released, again, for use to fund the operation of core WCAL activities. Again, the Norberg funds which were intended to be annually allotted to WCAL must remain in use for WCAL. So, again, St. Olaf did NOT prevail in their #2 request in their Amended Petition.

    #2(a) Also in the order other large gifts are addressed. The court released restrictions on these gifts so that they could be used in accordance with the donors’ intentions or the intentions of the donors’ heirs.
    Generally these gifts are as follows:

    Jensen funds–released to be used to support core WCAL activities. Restrictions NOT completely released, as St. Olaf requested.

    Schroeder fund–released to be used to support core WCAL activities, specifically the Christmas festival. NOT released to be added to an existing scholarship fund.

    Munck funds–$150,000 remains of the original bequest; this is released to be used to support core WCAL activities and to acquire new recording equipment for the production of programs which feature religious music and services. This IS what St. Olaf was requesting.

    Turbis bequest–again, released to be used to support core WCAL activities.

    #3
    This is where it gets confusing. I think the argument St. Olaf was making here is that there were restricted, non-endowment gifts, the initial “corpus” of which has been spent (yet the gifts live on through compounding interest.) Therefore the question becomes whether the funds are now non-restricted, since the original amount of the gift was spent, or restricted, as the interest lives on. (Interesting argument, but the right answer is restricted.) How the AG puts it, which is equally confusing, is that “St. Olaf provides no legal authority that the growth of a restricted gift is legally unrestricted.”

    The restricted non-endowment gifts are broken into two sub-categories: about $243,000 that was not characterized by the donors as earmarked for endowment, and not promised by St. Olaf to be held as endowed funds; and about $415,000 in funds promised to be held for WCAL or classified as quasi-endowment. The court decided to treat both sub-categories of funds the same way, and characterize both groups of funds as “special endowment gifts”. This is because the original intent of the donors can be surmised, and because St. Olaf either promised to hold the gifts as endowments or held the gifts as endowments.

    The court did NOT find that the “restricted gifts” had been expended, therefore St. Olaf did NOT prevail in #3 of their petition.

    #4
    The “undocumented gifts” were treated by St. Olaf as a permanent endowment. But there’s no information as to what the donors’ intent was. It’s likely that the funds were solicited for a certain purpose. So, the court DENIED St. Olaf’s motion to confirm that the “undocumented gifts” were not subject to restriction.

    So, basically, I don’t see how St. Olaf prevailed here, except in getting funds released to support core WCAL activities. From the original petition, it’s clear that the original goal was to release all restrictions that the trust funds be used to support WCAL.

  8. Britt: The original Petition requested release of all of the funds. But, in the last Motion, St. Olaf seems to have changed their tactics a bit. They asked for and received most of what they requested.

    In the broader scope of the funds, St. Olaf remains the trustee, and the Attorney General remains the agency responsible for ensuring the fudiciary capacities are used appropriately.

    It doesn’t appear that the “sale” assets are going to be saved, nor that WCAL will be saved. It appears that the only restriced monies will be those monies specifically given to WCAL to be held in trust for WCAL.

  9. From my perspective as a regular person (or I like to think I am a regular person), you can’t put the spilled milk back in the cup or something like that. The radio station is gone. We will never get it back.

    At the same time, St Olaf should not be enriched by charitable gifts given for a specific purpose that it no longer can carry out–those gifts should be taken away, both as a punishment for causing their not-for-profit entity to fail by selling its purpose, and to make sure that any future trustees take their jobs very seriously when deciding to unwind a charity.

    There is public need for donors to be able to trust that their charitable gifts will be used for the purpose given, not that they will be raked in for other uses by a college trying to make a fast buck. (Which is what this looks like when St Olaf sells the not-for-profit radio station which they used to solicit gifts then take the gifts and apply them elsewhere. No matter how ‘worthy’ St Olaf believes their programs to be, that is not what the donors intended, not what premise St Olaf accepted the gifts.)

    No matter how many wins SaveWCAL has in court, they may end up with a bunch of funds and no radio station on which to use them.

  10. St. Olaf did change its tactics, David. It had to in order to attempt to avoid serious legal problems. And Britt is essentially correct.

    St. Olaf is putting on a game face. They have definitely not gotten what they intended with their original petition.

    * On December 28, 2006 St. Olaf filed their original court Petition seeking a release of ALL restrictions on two categories of gifts in the “WCAL charitable trust endowment” — and that is what they called it. St. Olaf claimed that the endowment held $1.36 million and that the College should have unrestricted access to approximately $860,000 of that amount with approximately $500,000 restricted to “Core WCAL Activities.” (Note: At the time of the 2004 sale, the WCAL endowment was approximately $2.9 million. Where did the rest of the money go? Also, the Special Master’s investigation requested by SaveWCAL and ordered by the Court found that the WCAL charitable trust has assets in excess of $5 million — far more than amount St. Olaf originally claimed to the court — and recommended that the use of those assets should be restricted to “Core WCAL Activities”.)

    “Core WCAL Activities” is a euphemistic phrase made up by St. Olaf College in an attempt to assemble activities for which the college thinks it should be allowed to use WCAL charitable trust funds and is trying demonstrate to the court that it is still “honoring” the WCAL trust. In other words, the College had to find a way to convert those endowment funds to “related” purposes now that WCAL no longer exists (which brings up other issues related to charitable trust law). BTW, the original concept of “core WCAL activities” was put together by a senior St. Olaf administrator who admitted under oath that he was not a regular WCAL listener!

    Of course, the whole purpose, the true “core activities” of the original WCAL charitable trust was running a radio station — and that is clearly the purpose for which St. Olaf had solicited gifts/contributions and the intent with which the donors gave their money. Period. Which is why the judge did not lift all of the restrictions.

    * On February 27, 2007 SaveWCAL attorney Michael McNabb informed the Court that St. Olaf’s admittance of the existence of the charitable trust meant that essential and irreplaceable assets of that trust (license/tower) had been sold by the trustee without required notice and without required judicial approval — a violation of state law — and that state law mandates a trustee is not allowed to profit from the destruction/dissolution of a trust or to re-purpose funds from a trust for purposes other than those of the trust.

    * Just seven days later on March 6, 2007, St. Olaf College suddenly submitted an Amended Petition which completely removed crucial language regarding the trust and removed the case law that supported St. Olaf’s original contention of the WCAL charitable trust funds as a “charitable trust”. Since that time — and even after the ruling — St. Olaf continues to refuse to publicly acknowledge that WCAL is a charitable trust and calls the money “endowment-like” funds, probably upon the advice of their attorneys. All I can say is that if it looks like a duck, walks like a duck and quacks like a duck…

    Most importantly, the court’s ruling has now removed any doubt. WCAL is a charitable trust. Period.

    So…

    Irony of ironies. The court has basically required St. Olaf to continue the WCAL trust — even though the college no longer has WCAL. St. Olaf must now use the majority of the funds in the WCAL trust to…produce the same kind of services WCAL was providing to St. Olaf at no direct financial cost to the college, due to the generosity of WCAL donors — but without the station, staff, etc. and the donor stream that supported WCAL. The rest it must keep in trust for an entity that no longer exists. (Whose bright idea was it to sell the station?)

    St. Olaf has announced they will not appeal the ruling because they are “satisfied”. It would be more honest to say that they are currently “relieved”. Why? Any further legal investigations or proceedings regarding the trust will likely lead to more information coming to light that is not favorable to St. Olaf, MPR and the Minnesota AG’s office.

    St. Olaf has lost the benefits of the jewel that was WCAL, a 24/7 radio broadcasting presence to the region, built and maintained by WCAL donors that was “the voice of St. Olaf College” for over eight decades. And let’s not forget that WCAL had already made early forays into internet broadcasting as early as the late 1990s.

    St. Olaf has pocketed a reported $10.5 million from the illegal sale of WCAL charitable trust assets and has proudly and publicly announced that they are using the majority of those funds for purposes wholly unrelated to the intent of the WCAL donors — another part of the debacle which seems to be in direct violation of state charitable trust laws.

    It is hard to imagine that — in spite of warnings received before the sale became final — the leadership of a church-related college would take the assets of a community trust that was under their protection, sell them and pocket those funds for their own purposes. In legal terms, it’s called conversion. In layman’s language, theft. But it seems clear that that is exactly what has happened to the essential assets of the WCAL trust and that the court has said that the majority of the approximately $5 million determined by the Special Master re the recent petition must be used to carry on the work of WCAL.

    SaveWCAL also notes that the College has completely taken over the former WCAL radio building — which evidence in the college archives clearly shows was built completely with donations to the WCAL charitable trust, not the College — and is now using the building for their own purposes. Until St. Olaf reimburses the WCAL charitable trust for the building, I personally think of this aspect of the “sale” as a form of higher education squatting.

    St. Olaf still has not answered pertinent questions of how the sale occurred, why state laws have not been obeyed, and what role conflicts-of-interest existing with certain members of the administration, St. Olaf Board of Regents, the MPR Board of Trustees and the board of Piper Jaffray, may have played in the sale process.

    SaveWCAL continues to explore all the issues involved with the sale and to document them on our web site at http://savewcal.livejournal.com

  11. BTW, I’ll be interviewed on KYMN AM 1080 at 7:40am on Wednesday, June 18 regarding WCAL and SaveWCAL’s efforts. I hope that a number of you will listen in!

  12. I do agree with your pragmatic take on the matter, David L. I too see the matter for what it is rather than who “won”. I care nothing about the issue or the consequences of the court’s recent ruling. That being said,

    Core WCAL activities are broadly defined, no? And no matter what happens vis-a-vis the sale won’t change the sale significantly enough to replace WCAL as it bas known, right?

    So, what we have is a large amount of funds for a purpose limited only by imagination. So it’s time for the opposing parties to put their differences behind them, and work together to figure out how to expend their funds in a way that can heal the college community while honoring the wishes of the donors.

    Of course, that’s easier to say than do.

    My Lutheran grandparents were very disappointed that I went to Carleton when they found out it was in the same towm as St. Olaf. People across the country knew us, and St. Olaf, through the broadcast of the Christmas concert.

    The involved parties need to use this as an opportunity for growth. Can anyone say XM radio? Or MP3? Use that money in a way that will be sustainable, profitable, and marketable. The world’s changed, but the possibilities remain. The medium may change, but the message remains.

  13. SaveWCAL, too, would wholeheartedly like to see dialogue, Britt and David.

    SaveWCAL has approached St. Olaf College, directly and indirectly, on a number of occasions since September 2004 to try to begin a constructive dialogue about WCAL.

    It is also SaveWCAL that continued to try to reach out to the College, directly and indirectly outside of courtrooms, to express concern about the possible repercussions of their actions and choices.

    We have documented most of these attempts on our web site.

    It is the College, not SaveWCAL, that has steadfastly refused to engage SaveWCAL and the broader St. Olaf community in any sort of healing or constructive dialogue — which saddens us and many others.

    It was not SaveWCAL that created the sale or the court action. The Rice County District Court Petition regarding WCAL charitable trust assets was initiated and filed by St. Olaf College (not SaveWCAL), as is required of trustees by Minnesota state law. SaveWCAL, having been notified of the Petition by the Minnesota AG, took the opportunity to respond to St. Olaf’s required court action on behalf of the WCAL donors.

    SaveWCAL attorney Michael McNabb received the permission of the court to participate in the hearing on March 8, 2007. The Rice County District Court Order of October 16, 2007 confirmed the standing of SaveWCAL as a representative of the WCAL donors.

    The door to conversation with SaveWCAL (the donors) remains fully open to St. Olaf College, as it has since 2004. That has never changed.

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