MADISON, Wis. (AP) -- The University of Wisconsin System regents accused UW-Oshkosh's former chancellor and chief business officer of theft Wednesday, alleging in a civil lawsuit that the pair concealed millions of dollars in improper financial transfers to the school's nonprofit foundation to help the organization execute five real estate development projects.
The lawsuit alleges Richard Wells and Thomas Sonnleitner illegally transferred $11.3 million from the university to the foundation between 2010 and 2014 to help pay for a new alumni center, a pair of biodigesters, renovations at the Oshkosh Sports Complex and a waterfront hotel project without recording the transfers in the university's books.
The foundation was established to support the university and funding should have flowed only from the foundation to the school, UW and state Department of Justice officials said in a news release.
The lawsuit also alleges that Wells and Sonnleitner illegally guaranteed UW-Oshkosh would back the foundation's bank loans for the projects and cover the foundation's debt on the work if the foundation couldn't meet its obligations -- something the state constitution and UW System policies prohibit. The foundation still owes $13.9 million on the biodigesters and the alumni center but UW officials say UW-Oshkosh and the system can't be held responsible because the deal was illegal.
The lawsuit seeks unspecified damages. Online court records did not list an attorney for Wells, who was chancellor from October 2000 until August 2014, or Sonnleitner, who was vice chancellor of administrative services and chief business officer from 2000 until he stepped down in March.
"This is both unacceptable and appalling," Regent Audit Committee Chairman Michael M. Grebe said in the news release. "Dr. Wells and Mr. Sonnleitner were top personnel who were far afield from the rules and statutes that govern university operations. They had no right to make these promises or sign these documents."
The news release said Wells' and Sonnleitner's actions started to come to light in April after foundation President Art Rathjen told current Chancellor Andrew Leavitt that the foundation may need help to pay its debts on the alumni center. Leavitt informed UW System President Ray Cross, prompting a review of the foundation's financial documents.
The regents hired retired Dane County Circuit Judge Patrick Fiedler to conduct an independent review of the real estate projects. His work prompted UW officials to ask the state Justice Department to open a probe, which lasted from August to this month. Leavitt fired Rathjen on Wednesday, a day before filing the lawsuit.
The news release added that UW System staff are reviewing financial transactions between other foundations and their universities but haven't found any irregularities so far.
Cross also has told every system chancellor to review their deals with their schools' foundations and add language stating only foundation board members or employees can initiate foundation transactions, contracts and obligations as wells as requiring an annual foundation audit. Leavitt plans to create a new campus position that will focus on compliance with UW System rules and state law.
Republicans who control the state Assembly issued a news release saying they may order state auditors to review the relationships between universities and their foundations.
"This situation is alarming on so many levels as it threatens to undermine the integrity of UW-Oshkosh and the UW System as a whole," Assembly Speaker Robin Vos, Majority Leader Jim Steineke and budget committee Chairman John Nygren said. "The misuse of funds, whether it pertains to taxpayer dollars, student fees or foundation money, should never be tolerated."
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