JONESBORO — A former Arkansas State University board member said money his family donated to help buy land for the Heber Springs campus was instead used to settle a bankruptcy.
Dick Herget, a member of the Herget Family Charitable Foundation and a retired Heber Springs businessman, said his family would like the money to be donated to another organization.
The dispute with the Herget Family Charitable Foundation, a longtime donor to the state’s second largest university system, comes at a time when the Jonesboro campus alone said that during 2009-10 ithad its second-best fundraising effort in its history.
“Absolutely, this will hurt our relationship with ASU,” Herget said Friday. “That’s over with.”
A June 28 letter sent to the ASU board of trustees and former ASU System President J. Leslie Wyatt by attorney Richard H. Mays of Heber Springs said much of the $200,000 donated by the family was ultimately used to pay a bankruptcy settlement for one of the land sellers involved.
“[T]he university appears to have made use of a portion of a donation from the Herget Family Charitable Foundation in a way that appears to be highly questionable,” Mays, the Herget family foundation’s attorney, wrote in the letter.
The family requested that the “balance of the donation” be released and donated to the Arkansas Methodist Medical Center Foundation in Paragould.
Lucinda McDaniel, an ASU System attorney, responded in a July 15 letter to Mays that ASU’s use of the donation was “reasonable, prudent and proper in every respect.”
Asked about the matter Friday, McDaniel said she would not comment.
“Our answer to that letter will give you everything you need to know,” she said.
Florine Milligan, chairman of the trustees, referred questions to McDaniel.
The trustees met Friday in Little Rock to ask the ASU Foundation to hire a consultant to help find a new system president. Wyatt announced his resignation in May and retired June 30. He is now an ASU-Jonesboro professor.
The board did not discuss the donation issue during its meeting Friday.
The Heber Springs campus is part of ASU-Beebe and has more than 700 students.
According to Herget, a former ASU trustee from 1975-85, the Herget Family Charitable Foundation gave the ASU Foundation the $200,000 in 2002 to be used to buy 234 acres at the base of Sugarloaf Mountain in eastern Heber Springs. Two physicians - Robert Clark of Conway and Kenneth Kelly of Seattle - jointly owned the site.
The property was appraised at $950,000, and Clark agreed to sell his share of the land to the ASU Foundation for $475,000, both Mays’ and McDaniel’s letters said. Records of the sale at the Cleburne County assessor’s office also show Clark sold the land for $475,000.
Kelly said a separate appraisal showed the land was worth $1.8 million and Kelly asked $836,500 for his share, according to McDaniel’s letter.
That amount was more than the ASU Foundation would agree to pay, Mays wrote.
McDaniel wrote in her letter that the foundation agreed to pay Kelly $475,000 in cash and acknowledge a gift of property worth the remaining$361,500, which equaled the $836,500 asking price.
The ASU Foundation bought the land March 1, 2002.
On Feb. 13, 2003, Kelly filed bankruptcy in Seattle. Because he filed less than a year after the land sale, Kelly’s bankruptcy trustee attempted to reverse the sale and get Kelly’s land back for the benefit of his bankruptcy.
McDaniel said in her letter that the ASU Foundation used Herget’s donation to pay interest on a loan obtained to buy the property and not for Kelly’s bankruptcy.
“After much diligent inquiry and negotiation, it was determined that it was in the best interest of the ASU Foundation and all parties involved to pay the bankruptcy trustee the sum of $125,000 in order to settle its claim, a claim that quite likely would have resulted in a reversal and avoidance of the transaction,” McDaniel wrote in her letter to Mays.
Robert L. Potts, ASU System interim president, said Friday that ASU’s attorney said“it was a perfectly legitimate transaction.
“Mr. Herget’s attorney thinks the opposite, that it’s not appropriate.”
Potts said that as far as the ASU System knows, the responding letter answers all the questions.
He said the transaction occurred before he became the ASU-Jonesboro chancellor in 2006 and interim ASU System president on July 1.
“I didn’t have any firsthand knowledge,” he said.
The letter from the Herget family’s attorney asked the ASU trustees to release $118,000 of the original $200,000 donation. The $118,000 would then be donated to the Arkansas Methodist Medical Center Foundation in Paragould.
The ASU Foundation gave, with the Herget family’s approval, $82,000 in 2006 from the original donation to the Cleburne County Community Foundation.
Information for this article was contributed by Debra Hale-Shelton of the Arkansas Democrat-Gazette.
Front Section, Pages 1 on 07/31/2010