Conner Prairie, the living history museum in Fishers, and its governing trustee Earlham College today prepared to formally sever relations following a years-long dispute over money and control.

 

A final transfer of assets from Earlham to Conner Prairie was scheduled to take place at a State House ceremony this afternoon.

Carter’s political acumen was in evidence when he appointed U.S. District Judge Sarah Evans Barker and Butler University President Bobby Fong to the seven-member board that will oversee Conner Prairie’s assets.

 

After years of bitter fighting over control of Conner Prairie, the two sides were given a chance to appoint members to a new governing board. Earlham chose a pair of its trustees: Morris Mills and Thomas Fisher. Across the table will be three people with close ties to Conner Prairie: Berkley Duck, Stan Hurt and Douglas Church.

 

So whom to put between these two groups? Carter wanted to see how the board would shake out. “I did sort of wait to see how the others were coming together before I made my appointments,” Carter said.

 

By choosing neutral parties, Carter may have inserted a buffer between the two sides. The board will meet Dec. 8 at Conner Prairie. Judge Barker will chair the meeting, but there’s no truth to the rumor that she’ll take her gavel and a U.S. marshal.

The appointees are:

Stan Hurt, Chairman, Arts Council of Indianapolis, appointed by Governor Mitch Daniels

Douglas D. Church, Managing Partner, Church, Church, Hittle & Antrim, appointed by Chief Justice Randall T. Shepard

Judge Sarah Evans Barker, United States District Court, Southern District of Indiana, appointed by Attorney General Steve Carter

Dr. Bobby Fong, President, Butler University, appointed by Attorney General Steve Carter

Berkley Duck, Chairman, Save the Prairie, Inc., appointed by Hamilton County Circuit Court Judge Judith S. Proffitt

Judge Thomas G. Fisher, Indiana Tax Court , appointed by Earlham College Board of Trustees Chairman Mark Myers

Morris Mills, Earlham College Board of Trustees, appointed by Earlham College Board of Trustees Chairman Mark Myers

The Foundation is one of the two new nonprofit boards established by the Conner Prairie Agreement reached last July between the Attorney General and Earlham College. Hamilton Superior Court Judge William Hughes approved the agreement in September.

The Attorney General is asking Judge Barker to lead the Foundation in its first organizational meeting. Carter is also asking board members to begin their work immediately with a first priority to appoint the initial members of the Museum Board.

The Conner Prairie Foundation Board will be responsible for managing the endowment assets, while the Conner Prairie Museum Board will be responsible for operating the museum.

The Museum Board of Directors would consist of eleven members selected by the Board of the Foundation. At least one Director would be selected from nominees made by each of the following organizations and officeholders:

· The Hamilton County Board of Commissioners

· The Mayor of Carmel

· The Town Council of Fishers

· The Governor of the State of Indiana

· The Mayor of Indianapolis

· The Board of the Indianapolis Convention and Visitors Association

· The Board of the Hamilton County Convention and Visitors Bureau

· The Conner Prairie Alliance; and

· Earlham College (this is a direct appointment)

The Board of the Foundation would select two of its members to fill the remaining two directorships.

The pact, approved by Hamilton Superior Court Judge William Hughes, leaves both sides of the lawsuit with a substantial piece of the $175 million endowment that had been a focus of litigation and past concern.

Hughes’ ruling also clears the way for the formation of two governing Conner Prairie bodies: a seven-member Foundation Board and an 11-member Museum Board.

“I believe this basically resolves this case,” Hughes said after approving the agreement between Earlham’s board of trustees and Indiana Attorney General Steve Carter.

The court’s approval should be the final step before the college and the museum finally part ways. A link to my coverage of this issue to-date

In a related editorial, the Journal Gazette opines that AG Carter should be authorized by the legislature to hold private charitable foundations to account for their actions, noting the AG’s action against Earlham as trustee as a positive example of the AG’s oversight of charities.  The editorial was prompted by the activities at the Schwab Foundation, which I have discussed earlier. The piece notes that Indiana Code 30-4-5.5-1 give the AG authority to pursue the trustee of a charitable trust, but does not cover private foundations. Link.

Justin R. Cannon, a student at Earlham College in Richmond, Ind., is one of the youngest combatants in the Christian culture wars. But he’s a happy warrior because his contribution to the debate — an illuminating online analysis that argues the Bible doesn’t condemn faithful gay relationships — has piqued the interest of clergy and laypeople across the United States.

Ultimately, the whole saga is a shame.

It’s a shame that Earlham and the former Conner Prairie board couldn’t come to a consensus on the initial separation between the two.

It’s a shame the board was fired.

It’s a shame that the former board members felt the need for revenge.

It’s a shame they decided to drag Earlham’s name through the mud.

It’s a shame that Attorney General Steve Carter would make many insinuations against Earlham: That it hadn’t followed the law; that it had a conflict of interest; that it had no business running the museum.

It’s a shame that Carter insisted that he was merely protecting employee morale.

It’s a shame that Carter spent, at minimum, $300,000 to come to a conclusion similar to Earlham’s initial plan.

It’s a shame that the Indianapolis-centric view is that people from Richmond couldn’t effectively run Conner Prairie, even though the college helped build it into one of the biggest tourist sites in the state with a $170 million foundation.

It’s a shame that Earlham’s reputation has suffered, wrongly, at the hands of Save the Prairie and the state attorney general.

Perhaps the biggest shame of all is that Eli Lilly wasn’t around to clarify his intent, or to proudly gaze on what Earlham created from his humble charge.

Conner Prairie celebrated its own Independence Day on Tuesday, two years after a struggle for control of the living history museum fractured a four-decade bond with Earlham College.

 

Under Tuesday’s agreement, the museum:

• Receives $85 million of the $175 million endowment created by Lilly gifts and subsequent interest income from investments; Earlham will receive the rest.

• Gets a deferred payment of $6.5 million from nearby land that Earlham intends to sell and a $2.5 million interest in Prairie View Golf Course, which is owned jointly by the college and museum.

• Keeps the 58-acre museum site and buildings, and receives a parcel of land between River Road and White River from Earlham; Earlham will retain hundreds of acres west of River Road and south of 146th Street.

Carter and Earlham attorneys will ask a Hamilton Superior Court judge to dismiss a lawsuit filed by the attorney general that demanded an accounting of how the Lilly gifts have been used.

A deadline passed on Wednesday without an anticipated report of the final settlement.

 

However, lawyers are said to be working on the complex paperwork to split up hundreds of millions of dollars in assets and land.

 

Under Carter’s plan, accepted in principle by Earlham’s trustees, the new foundation and its board would receive $91.5 million from the endowment and 2,200 acres of land, including the living history museum in Fishers and adjacent land in Fishers and Carmel.

 

Earlham would keep the remaining $82.5 million in the Conner Prairie endowment, which has been created through the years from Lilly stock donated in the 1960s and ’70s. And Earlham would retain roughly 500 undeveloped acres.

Earlham College has proposed developing more than 1,000 homes on some undeveloped land it owns adjacent to Conner Prairie, the popular living history museum in Hamilton County.

 

However, the college has at least temporarily shelved its plans, filed earlier this year, while talks continue with Indiana Attorney General Steve Carter to try to settle a 2-year-old dispute over control of the museum.

 

Should be about done with these, no?

Carter sent a letter to Earlham insisting that the college meet a June 15th deadline to come up with the details on the resolution of the dispute:

The framework agreement calls for the transfer of a $91.5 million endowment and 2,200 acres of land, including and adjacent to the museum in Fishers, from the college to an independent foundation.

Earlham would keep the remaining $82.5 million in the endowment, created through the years from millions of dollars in Lilly stock donated to Conner Prairie and Earlham in the 1960s and early 1970s. Earlham also would retain nearly 500 undeveloped acres at the museum site.

Link.

Earlham’s Pie thrower has been reveled today in the Pal-Item. Last week a EC student made national news when he hit William Kristol with a pie as the commentator spoke at the college. And it turns out he is a local:

Josh Medlin, a 2002 graduate of Randolph Southern High School and religion major at Earlham, said he was making a statement about what he called a mock dialog when he threw the ice cream pie and he didn’t realize his actions would jeopardize his future at the school.

“For me it seemed like a playful thing to do and physically harmless,” Medlin said Monday evening. His action got the attention of media around the country, including the New York Times and Fox News. The first news story on the Palladium-Item’s Web site has received more than 10,000 hits in the last week.

Link.

In his defense, he stated the pie was to bring to light what he felt was Kristol’s skirting of the issues and his contribution to the sad state of real debate in this nation. He is sorry that he is facing suspension, but unrepentant, just the same:

“I did not intend to hurt Kristol or the Earlham/Richmond community, and regret that some seem to believe the opposite is true. I harbor no hatred for Kristol, but despise the words of his I’ve read and now heard. With the understanding I have now of consequences, I still would have pied.”

The letter also stated, “Several of us decided to react to Kristol’s coming to Earlham, and chose pieing as the appropriate response. We also attempted to distribute flyers explaining the action, but they were confiscated.”

A panel commissioned by the US Senate Finance Committee has issued a report recommending more governmental oversight and financial disclosure for non-profit charities and foundations. The request for the recommendations followed the uproar when it was disclosed that several charities collected money for victims of the 9/11/01 tragedy, but then spent the money on other endeavors. Criticism regarding this issue lead to the resignation of the president of the Red Cross.

Link to a story on the recommendations in the Indy Star.

This subject gives me the opportunity to address the issues raised by a comment by RiShawn Biddle to this post on charitable trusts: I recognize that charities are meant to benefit the public broadly, and the government (federal, state, and local) has permitted public charities to avoid most taxes that they would otherwise face. I recognize that this gives the public and the government a stake in how these organizations are operated. But I object to the notion that we as citizens should not be able to create and operate institutions that benefit us without extensive governmental involvement and oversight.

Yes there is a lot of fraud, abuse and basic incompetence in the non-profit sector. As someone who has been involved in many non-profit endeavors, I have seen my share. But the government is not the best solution for every problem that confronts us. I believe that there is just as much fraud, abuse and basic incompetence in the government as there is in the non-profit sector. Private parties who fund and create such public charities with their hard earned cash are best positioned to know of the risks and to implement protections. People who devote themselves to the non-profit sector are capable of ferreting out abuses, and implementing solutions, and they are doing that right now.

Another problem I have with the proposal for more federal oversight of non-profits comes from personal experience. Many non-profits are fairly small organizations with very small budgets, sustained only by the willingness of a few individuals to devote their lives to the cause. Increasing governmental oversight typically means more forms, more complicated forms, and an increase in the amount of institutional resources that must be expended on administrative tasks. While a big foundation like Lilly can fairly easily deal with increased administrative overhead, smaller organizations will struggle. A small organization that relies on volunteers to complete tax forms and even to perform audits will be hard pressed to fill those tasks if they become too burdensome.

A trust is very flexible and versatile tool in an attorney’s toolkit. A trust can do basic but important things like provide the future support for your minor children if you die before they reach an age of responsibility (say, 45). Trusts can also be used hide things from public view, like the control of land. With a trust, there is the person (trustor) who transfers assets to a trustee who then holds and manages those assets for the benefit of someone (the beneficiary).

The great thing about a private trust is that the actual trust document, where the trustees’ authority and instructions come from, can be kept private, shielded from public view. Even so, the trustee is considered to be a fiduciary in the law, meaning that the trustee has certain duties and obligations with respect to the trust assets that he or she can be held to account for. If the trustee violates those duties, he or she can be called into court by the beneficiaries to account, and could be removed, replaced, or see the trust terminated if it is found that he or she violated those duties.

Creating a trust for the benefit of the public (a “public charitable trust”) has likewise been a great way for private citizens to do something good, but maintain control over their particular vision over time through the use of a trust. Someone who wants to, say created a living history museum, so modern Hoosiers can appreciate the ways of life of the first European settlers in this region, can do this with a trust. Presumably, if the trustor thought that the government knew best how to use the trustor’s assets, the trustor would simply give those assets to the government to do with as it pleased. But in reality, most folks do not have that kind of view of the government, and most folks with substantial means struggle mightily to assure that the state and federal governments get no more (and maybe a little less) that what the law requires.

But many wealthy people, from Henry Ford, to Eli Lilly, to Bill Gates, happily turn over substantial sums to fund projects to benefit the public, but in some specific way.

When someone decides to fund a trust for the benefit of the public, the issue becomes, who among the beneficiaries (”the public”) has the power to hold the trustee to account? Generally, the only entity with the authority to question the actions of the trustee with respect to that trust (outside the IRS) is seen to be the state’s attorney general. In the recent Earlham/Conner Prairie flap, Steve Carter, the state’s AG, claimed he had the authority to call Earlham into court to account for the “Public trust” created in 1964, when Eli Lilly deeded the 64 acre Lilly homestead to Earlham to “hold this parcel in perpetuity as a public charitable trust; that it will keep and maintain all improvements situated thereon and related to the Conner House and Monuments in a good state of repair in all respects.”

The AG’s claim of authority over the trust came from 2 statutes. This general one:

IC 4-6-1-6 All of the rights, powers, and duties conferred by law upon the attorney-general are conferred upon the attorney-general created by this chapter; in addition thereto, the attorney-general shall consult with and advise the several prosecuting attorneys of the state in relation to the duties of their office, and when, in his judgment, the interest of the public requires it, he shall attend the trial of any party accused of an offense, and assist in the prosecution; and shall represent the state in any matter involving the rights or interests of the state, including actions in the name of the state, for which provision is not otherwise made by law.

And IC 30-4-5-12, which simply says that a public charitable trust must notify the AG annually that an accounting has been prepared and is available to be reviewed by the AG and the public. Federal statutes governing such a trust (implemented by the IRS)would also require that the public be permitted to view an annual accounting. However, in order to obtain any control over a public charitable trust, the AG would have to be able to prove to a court that the trustee violated his or her duties with respect to the trust: That there has been a breach of trust.

Now the AG says he needs more authority to regulate public charitable trusts, and charitable organizations generally. According to an article by Andrea Muirragui Davis in the February 21, 2005, Indianapolis Business Journal (IBJ, offline, can you believe it), the state AG is pushing a pair of bills moving through the Indiana Legislature (HB1453 & SB424) that would give the AG more options in a situation like he confronted with Earlham. The bill includes this:

SECTION 7. IC 30-4-5.5 IS ADDED TO THE INDIANA CODE AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2005]:
Chapter 5.5. Enforcement Powers of the Attorney General
Sec. 1. (a) This section applies if a trustee of a trust for a benevolent purpose does any of the following:
(1) Commits a breach of trust.
(2) Violates the mandate of a charitable trust.
(3) Violates a duty listed in this article.
(b) The attorney general may petition a court to issue one (1) or more of the following remedies for an action enumerated in subsection (a):
(1) Injunctive relief.
(2) Appointment of temporary or permanent receivers.
(3) Permanent removal of trustees.
(4) Appointment of permanent replacement trustees subject to court approval.
A remedy under this subsection is in addition to any other remedy.
(c) The attorney general may seek a remedy listed in subsection (b) against a trustee or a trust.
(d) If the attorney general is successful in an action under this section, the attorney general may recover reasonable attorney’s fees and court costs.
SOURCE: IC 30-4-6-3; (05)SB0424.1.8. –> SECTION 8. IC 30-4-6-3 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2005]: Sec. 3. (Venue) (a) Venue in a proceeding brought by the attorney general against a trustee or a trust lies in Marion County, unless a court determines that venue in Marion County would be a hardship for a trustee or a trust.

Source: SB424

The IBJ article quoted one lawmaker, Senator David Ford from Hartford City, who voted against the measure as questioning what the AG was doing getting involved in public charitable trusts in the first place. I wonder the same myself. I understand the concern: A dishonest trustee could pillage and plunder a public trust, or a negligent trustee could permit the trust’s assets to dwindle away and rot. Some oversight should be in place, to protect assets pledged to the public benefit, for the benefit of the public.

But again, my issue goes back to the original intention of the trustor: If the trustor thought the government knew best what to do with the trustor’s assets, why didn’t the trustor just hand them over to the government? The AG and many in government seem to think that “public” means them: they have a monopoly on the public sphere, and anything that enters that sphere is subject to their review, approval and ultimately, control.

But I wonder what the long-term impact of increased governmental oversight will be on individuals considering making gifts for the public benefit. If you see that the government is going to step in and start pushing your trustee around, deciding who should do what, and what is appropriate, will you be a willing to fund the thing from the start? If Eli Lilly knew that the state AG would be stepping in and deciding that Earlham was out and coming up with his own plan for Mr. Lilly’s gift, would he have given it over in the first place?

{Thanks go out to Marcia Oddi, at the Indiana Law Blog, for her heads up on (and provision of) the IBJ article}

The President of the college wrote a letter to the editor of the Pal-Item, published yesterday:

Dear friends in the Richmond and Wayne County community:

Last Saturday, (Feb. 5) the Earlham board of trustees approved a framework for resolving the dispute over Conner Prairie. There are significant issues yet to be negotiated, but we are optimistic that this agreement will set the stage for a mutually agreeable resolution of the issues remaining under negotiation between Earlham and the attorney general.

Throughout this process we have been guided by three principles: honoring Mr. Lilly’s intentions, assuring that Conner Prairie thrives into the future and seeing that no harm comes to the college or the seminary. The Earlham board of trustees believes that the framework for agreement abides by all three of these principles.

All of us at Earlham are particularly grateful for the support we have received from our friends and neighbors in Richmond and Wayne County. Throughout this process we have been heartened by the trust expressed by those who have known us the longest and have some solid knowledge of our character.

We are eager to see resolution of all remaining issues and we will be sure to inform you once we arrive at a final agreement.

Doug Bennett, Richmond

Link.

Now Doug Bennett did not create the conflict with the Conner Prairie board. Those problems had been brewing for years, long before Bennett came to the college. I also would guess that the decision to fire the Conner Prairie board and take control of the museum was not one that Mr. Bennett had the final call on. But Bennett was Earlham’s “face” during the conflict, and I would say that face has a fair amount of egg on it at this point. One thing is certain, if Earlham can get this settled, and Bennett can get back to running the college instead of wrestling with the powerful in the center of the state, there will be much relief on campus.

All of my Earlham vs. Conner Prairie coverage is now here.

Per the Pal Item, Earlham says it has resolved the Conner Prairie lawsuit by acceding to AG Carter’s demands to give up control of the museum, and coughing up close to $94 Million from its endowment for the benefit of the museum:

According to a press release from Earlham, the new Conner Prairie endowment will be funded in the amount of $85 million at the time of closing, $6.5 million within a five-year period thereafter, and the transfer of the Prairie View golf course valued at $2.5 million.

The release said also that Earlham’s obligation would be subject to certain contingencies including being allowed to sell land owned by the College west of the White River in Carmel, Ind., arriving at definitive agreements, and judicial approval of the settlement.

“From the Earlham Board’s perspective, this framework will grant Conner Prairie independence and provide a more than adequate endowment to underwrite the Museum’s future, ” said Mark Myers, chair of the Earlham Board. “At the same time, by converting land to cash, Earlham can create this fund without compromising either the College or the Earlham School of Religion.”

Link.

There is no confirmation from the AG yet, but this looks like a big win for the AG and his friends from Carmel. It also looks like a big black eye for the college, delivered via Earlham College president, Doug Bennett, who starting this row in June of 2003, when he dismissed the 27 members from the museum board and took control.

The Pal-Item reveals today in an editorial that AG Steve Carter went behind Earlham’s back while pretending to negotiate with the college in his recent press release of his plan for Conner Prairie:

Attorney General Steve Carter has been fundamentally dishonest with Earlham College.

The college and Carter’s office were in negotiations trying resolve the dispute over Conner Prairie and its massive endowment when Carter contacted three newspapers and asked them to attend a meeting on Saturday, Jan. 22.

A representative of Carter’s office asked at least the Palladium-Item, if not the other two publications, not to notify Earlham of the meeting. Normally, when journalists are asked to embargo information, they comply unless the information is of a compelling public interest. But we only comply when the source is believed to be trustworthy. So, this newspaper complied with that request. It’s the attorney general after all.

Carter then released his proposal to end the situation, where he called for splitting the $174 million endowment, divvying up the land and appointing a fully independent board to oversee the living history museum.

When our reporter called Earlham to get its reaction to the proposal, public relations officials were dumbfounded — not by the proposal itself, but by the very release of information.

Earlham officials thought they were negotiating in good faith with someone trustworthy.

They were wrong.

A spokeswoman for Carter said the attorney general announced the proposal to let the public know where he stands. But that’s disingenuous at best. He announced his proposal because he wants to one-up the college. He’s not interested in negotiating; he’s waging a public relations battle.

Link.

Earlham was founded by the Quakers in 1847, and has been consistently well operated and managed by these quiet and peace loving people. Eli Lilly was impressed enough with the folks at Earlham to trust them with the Lilly homestead (present location of Conner Prairie) and millions of dollars in Lilly stock.  The fact that the state’s highest law enforcer has chosen to take such an aggressive stance with the college has got to start making more of us (at least in Eastern Indiana) upset.  Here is a link to my coverage of this issue to-date.

Marcia Oddi has some coverage up today at the Indiana Law Blog about Earlham’s dispute with the Indiana Attorney General over Conner Prairie, the living history museum near Indianapolis that Earlham runs under a gifts made by Eli Lilly.  In her coverage, she posts the online docket entry for the appeal Earlham has filed with the Indiana Court of Appeals.  The docket sheet reflect that although the Court accepted the interlocutory appeal on discovery issues, they had deferred ruling on whether several organisations of small colleges can intervene in the appeal as amicus curiae.

Marcia also mentioned that there is no easy link to my prior posts on this dispute, so I will provide them now: Here is a link to all my coverage of the Conner Prairie story.

Local News - Palladium-Item - www.pal-item.com

An Indiana Court of Appeals panel on Tuesday granted Earlham College’s request to review a Hamilton County court ruling on whether three major stock gifts to Earlham are restricted endowments or trusts under state law.

The three gifts were made by Eli Lilly and created the living history museum of Conner Prairie. An endowment created by the gifts and shared today by the museum and college is valued at about $174 million.

I cannot find the text of the release, but the Star says Earlham has called AG Carter’s plan to rollout 94 Million out of the college’s endowment to fund a separate museum “seriously flawed.”

Link.

Earlham contends that it is continuing t try to negotiate with the AG:

Earlham said creating an independent museum had been discussed with Carter, but “his consultants’ suggested endowment level for Conner Prairie is based on seriously flawed accounting assumptions and projections that substantially inflate their estimates of Conner Prairie’s short term and future needs.”

The Pal Item decided to cover Indiana Attorney General Steve Carter’s proposal for resolving the Conner Prairie dispute with Earlham College. The AG’s plan would split Earlham’s endowment, 94 Million for the museum, leaving only 80 Million for the college.

The front page story from the Item is here.

Over here your can find the AG’s plans and other documents from his side of the story.

The interlocutory appeal over discovery issues is still pending approval by the Indiana Court of appeals. The AG’s plan would set Earlham’s endowment back about a quarter century. I wonder if the survival of one of Eastern Indiana’s only liberal arts colleges, and one of the region’s biggest and most reliable employers will ever be deemed to be an appropriate concern for the AG.

Earlham College has garnered the support of several academic associations concerned about the heavyhanded (my term) oversight Indiana Attorney General Steve Carter is attempting to impose of Earlham. Four associations have requested leave to file friend of the court pleadings in the interlocutory appeal: The Indiana Catholic Conference, Independent Colleges of Indiana Inc., the Association of Governing Boards of Universities & Colleges and the National Association of Independent Colleges.

These groups are justifiably concerned that their members will be next on Carters hit list if he is permitted to extend his oversight authority to the Lilly gifts to Earlham. The groups started petitioning to join the action on December 10^th, and the Court has yet to reply.