College Weathers a ‘Perfect Storm’

Nearly three years ago, a “perfect storm” began brewing over Palatine Hill that did not hit the College with full force until last summer. In 2001, Michael Mooney, then president of the College, authorized a $10.5-million loan to Environmental Oil Processing Technology Corporation (EVOP), an Idaho-based company in the business of converting waste oil into useful products. He pursued the loan because he admired the company’s environmental agenda and felt it was an opportunity for the College to obtain an above-market rate of return.

However, it didn’t turn out that way.

The company defaulted; the board scrutinized the circumstances surrounding the loan (which had been made without its approval); the press ran with the story; and an otherwise commendable presidency of 14 years ended abruptly.

In the wake of that storm, the Board of Trustees retained Tonkon Torp, a respected Portland law firm, to conduct an independent review and analysis of the loan transaction and the board’s actions. The full report, authored by partner George C. Spencer, is available online here. That report concludes that the loan was an unusual, one-time event that is unlikely to occur again because of several key actions that have been undertaken by the board and the administration.

Action Steps

• Restructuring of board committees. The board reconstituted its Audit Committee as a standing committee, separate from its Finance Committee. The Audit Committee is charged with undertaking a regular review of the College’s financial policies and procedures. The Finance Committee is charged to oversee short-term investments.
• Review of the Business Office. The board, in collaboration with the College administration, instituted a review of the structures, staff, and operations of the Business Office. As a result, business and financial policies and procedures have been reviewed, revised, and codified.
• Changes in administrative leadership. The College has hired several seasoned professionals to strengthen the infrastructure of the institution. Paul Bragdon, former president of Reed College and an acclaimed leader in higher education, is serving as interim president (see related story). James Walker, highly respected as the former executive vice president and chief financial officer of Oregon Health & Science University, is now vice president for finance and treasurer of the College (see related story). And David Ellis, a licensed attorney and former associate dean of administrative affairs at Lewis & Clark Law School, has been appointed general counsel and secretary of the College (see related story). The latter is a new position recommended by the Tonkon Torp report.
• Hiring of a new president. Trustee Owen Panner, a federal judge of the U.S. District Court for the District of Oregon, is chairing the search committee for a new president. For updates on the search, click here.

Financial Recovery

The money for the loan came from the College’s cash reserves—money that is set aside for short-term investment and not needed for immediate operations. Its loss did not compromise the operations or financial stability of the College.

The Board of Trustees has assured the College’s stakeholders that the entire $10.5-million loan will be restored. The recovery effort was jump-started by an extraordinary gift of $6.5 million by the Pamplin family (see related story). The balance of the loan amount will be obtained from the sale of assets of the bankrupt company, other recoveries, and gifts from other board members and supporters of the College.

Moving Forward

“All individuals, all families, all institutions have chapters that they wish weren’t in their histories,” says Paul Bragdon, interim president. “I’m hoping the College can close this chapter. I want us to move forward and take pride in the good work we do.”