By Amy Silverman
By Olivia LaVecchia
By Monica Alonzo and Stephen Lemons
By Chris Parker
By Michael Lacey
By Weston Phippen
The intent was to make operations as lean as possible, to replace full-timers with contract labor wherever possible.
The next surprise descended on the boards of the new and the old WIU corporations alike. On September 1, the Arizona Court of Appeals reversed the Superior Court decision denying that WIU had to pay back loans to World Universities and Ronald Bauer, and ordered that summary judgment be entered in favor of Bauer. Suddenly, WIU had an additional $4.6 million added to the liability side of its balance sheet, and the proposed sale became instantly complicated.
If and when the sale occurs, the nonprofit entity now known as WIU would transfer its name and certain assets to an entirely new corporation formed by the for-profit investor group, which would then run the university. The debts of the old corporation would be paid by the proceeds of the sale, and that nonprofit entity would be dissolved.
But the investors have not offered to pay anything near $4 million to acquire WIU. And the WIU board is left wondering if the new debt could be dumped off on the soon-to-be-extinct nonprofit corporation.
William Moore, Ronald Bauer's attorney, has taken a firm stance against such a move. "There's no way you can get out of a debt that easily, by transferring your assets to another corporation," he says. "Until some provision's made for the payment of the debt, there's going to be a big problem with any sort of transfer."
WIU has asked the appeals court to reconsider its reversal. Meanwhile, the new investors have stated that the question will be settled one way or another, perhaps by reaching a settlement with Bauer.
Taking the theoretical market value of $1.3 million to $1.5 million, less $700,000 in prepaid tuition, less an estimated $300,000 in other debts, would leave $300,000 to $500,000 to cover Bauer's claims.
"Knowing Bauer, if they offered him $500,000 to walk away, he might take it," says former WIU comptroller Lee Simpson. "On the flip side, he's been pushed around enough that he just might not go for it."
But as Blair says with a sigh, "If they're looking for $4 million, well, I'd like to find it, too."
Perhaps it will be left to the prospective investors to pick up whatever pieces are left in the wake of bankruptcy proceedings.
Even if the dealing parties figure out a way to squelch or satisfy Bauer, former WIU employees are questioning whether a group of businessmen can make the university run better than they could.
While board president Blair extols Haynes' "good, solid leadership," which has helped turn around WIU's finances, others question his credentials.
"Here's the joke," says Carolyn Flagler, the university's former director of international programs. "Jim Haynes has a bachelor's degree. He has no industry experience; he has no academic experience. It's nothing against him personally, but if we were going to build a business that was oriented toward a more aggressive, profit-educational stance, you'd think they would pick someone who had some sort of connections or credibility either in industry or academia, or at least a credential.
"I've worked in industry where you make decisions from a bottom-line point of view, but I wonder from a staff point of view what the hell they're doing."
"They're doing what they're doing to get the money out of the university," says former comptroller Lee Simpson, "and my only concern would be that they would milk more money out of it than they should." Then he softens.
"[John Cotton's] going to make a run for it, and dump some money into the university. If they do it right, it can be a good university and a good revenue producer."
Daniel Diethelm of the new investor group counters by pointing out how badly bureaucrats and state governments have delivered education. He would describe his group's investment as largely philanthropic in nature, aimed at keeping the university in business as a favor to its alumni and for its service to the business community.
But, he admits, "If run academically appropriately, if you keep the academic standards up and you provide a good service, education is going to be the foremost field in the future. Everybody needs it."
Can good deeds and good profits co-exist? James Samels, a Boston-based college business consultant, thinks so. "I don't think it's necessarily a self-serving, totally pecuniary interest that seeks to upstream the vertical integration of business synergies so that they can just turn a buck," he says. Nonacademic translation: Businessmen aren't just whores for money.
Standard English commentary: "But I do think they wouldn't be doing it if there wasn't a buck to be made.