Colleges rarely sue one another, so when little Hillsdale College in Michigan sued the much larger University of Missouri a couple of years ago, it raised some eyebrows. Hillsdale alleges that Mizzou blatantly violated the terms of Wall Street financier Sherlock Hibbs’ will, who left $5 million to his alma mater upon his death to create multiple chairs to be held by “disciples” of the Austrian school of economics. Hibbs, who died in 2002, was a strong adherent of that approach to economics, led in the 20th century by Ludwig von Mises and Friedrich Hayek, asserting, among many other things, that market-based solutions to problems are generally superior to those imposed by governments. Austrian economists are generally libertarians or at least market-oriented conservatives.
Last week’s Wall Street Journal’s account of the current brouhaha by Hillsdale alum Nicole Ault revealed the published vitae of about two dozen members of the Department of Economics (the logical home of Austrian economists) at Mizzou. None had a remotely Austrian orientation. I then learned the names of the alleged Austrian disciples holding Hibbs financed positions, all teaching management or marketing courses unrelated, as far as I could tell from published vitae and course offerings, in any important way to Austrian economics. To be fair, Mizzou once did have a genuine (and good) Austrian economist, Peter Klein —but he left in 2015 to go to Baylor, and I do not believe he was funded with Hibbs money.
If the facts are precisely as newspaper accounts state, there is little doubt in my mind that Mizzou owes Hillsdale, very conservatively, the nine million dollars reportedly now in the Hibbs endowment. Violating the wishes of a donor is akin to fraud, in my opinion, and I have seen it too often in academia. I think there should be serious consequences to violators of donors’ intent –why give to support your favorite cause if your wishes can easily be ignored? The professors who in 2018 signed statements that they are true disciples of Austrian economics should be fired, both for not being Austrian economists (and thus ineligible for Hibbs funding) and for being liars. The dean and other administrators who masterminded this fraud should lose their jobs and perhaps worse –face felony charges for misappropriating funds. When universities start paying huge fines (how about punitive damages?) and top officials are fired and perhaps even go to jail, violations of donor intent will sharply decline.
The Mizzou misappropriation of funds allegation would never have arisen except for an extremely eccentric but highly perceptive precaution taken by Sherlock Hibbs –he appointed Hillsdale College as an overseer of the funds, giving them the power to assess, every four years, whether donor intent is being met –and, if it is not, to become the recipient of those funds. Hillsdale is known for its strong adherence to conservative or libertarian principles combined with a strong Christian tradition–it is opening a new spectacular $30 million chapel at a ceremony with Justice Clarence Thomas speaking in a few days. Hibbs felt that if there were hanky-panky in the use of funds at Mizzou, Hillsdale would protest. He was right.
In some respects, this allegation of violation of donor intent is small compared with some others I have heard. Most famous is the 2008 settlement where Princeton, facing a lawsuit that many felt it would lose, agreed to pay to descendants of Marie and Charles Robertson $90 million (out of an endowment that had grown to $900 million). Princeton was supposed to use the money to support students for federal international service, but large sums clearly were used for other purposes.
I have personally seen funds diverted from the intent of the donor in several instances. Another example: the misuse of the Shelby Cullom Davis Endowment funds to Trinity College to support a professorship in free enterprise and related activities would have gone unabated if it were not for the courageous actions a few years ago of the chair holder, Gerald Gunderson, and state legal authorities. Universities will say almost anything to get the money, and then start to chip away at donor intent. The ultimate problem is that university administrations are too often not very accountable to anyone. There are no shareholders, and the true “ownership” of most colleges and universities is somewhat nebulous. A governing board has ultimate authority (the Board of Curators at Mizzou), but it is often a rubber stamp for the administration and ignorant of much that happens on campus. Powerful groups –senior administrators, superstar faculty –can persuade presidents and CFOs to allocate funds in a way inconsistent with agreements made.
A similar example played out recently in a dispute between the University of Wisconsin and Washington University in St. Louis. The two schools jointly were to share in the royalties from a patent arising from research performed by researchers at the two schools, with Wisconsin administering the money. Washington U. said Wisconsin was violating the legal agreement by underpaying it, and a federal court agreed, ordering Wisconsin to pay Washington U $31.6 million.
The moral of the story? Donors beware. Candidly, I would not buy a used car from some university administrators –their adherence to integrity and honesty is imperfect, putting it conservatively. Have outsiders review the use of funds. Put in the donor gift agreement strong provisions for periodic review of fund usage by individuals whose interests are aligned with that of the donor. Make fraudulent use of funds a crime subject to meaningful penalties, both financial and penal.