State auditors are taking a close look at St. Mary’s financial practices after a routine audit arrived at mixed findings regarding a large land purchase made with a Trustee.
The tract of land, resting just north of the College and off the side of Route 5 and owned by Board of Trustee member Michael P. O’Brien, was originally going to become the eventual site of off-campus privatized student housing. However, according to Vice President of Business and Finance Tom Botzman, members of the college administration were concerned about a possible increase in pedestrian traffic on Route 5 and possible commercialization of the area. Botzman further said that, “we would rather have students experience the campus experience [in on-campus housing].”
Therefore, members of the College began discussing the purchase as far back as 2005, finalizing the deal in 2008. According to Botzman, the interim period was the result of two different independent appraisals ordered by the office of the attorney general, the organization of the deal (which was for ethical reasons an “arms-length” transaction between the attorney’s office and O’Brien’s lawyer), and two appeals to the state ethics commission to mitigate the “inherent conflict of interest possible in such a transaction.”
The tract of land was valued at $860,000 and $1.1 million on these two appraisals. O’Brien, however, received an appraisal for the land valued at $1.625 million. The college eventually bought the land for $800,000; the rest was considered a nonmonetary tax-deductible donation from O’Brien.
Botzman attributed these appraisal differences to changing economic situations and different perspective plans for the land, a charge legislative auditor Bruce Myers and his team found suspect. In their report, Myers argues that the highest value, which was based on the appraisal ordered by O’Brien and used to determine the final selling price of the land, was “based on assumptions provided to the appraiser by the seller,” and was specifically prohibited for use by third parties.
Myers also pointed out that the appraisal called for nine possible subdivisions on the property, whereas the deed to the land limits the number to six.
These problems were serious enough that they led Myers to refer his audit of the college to the Criminal Division of the Office of the Attorney General, since the possibly of a fraudulent transaction would have led O’Brien to receive undue tax benefits from the donation. Myers was also concerned that the college had not disclosed the deal adequately to the state Board of Public Works (BPW).
“Everyone’s pushing for full disclosure and transparency,” Myers said. “That’s what we’re asking for.”
Myers added, however, that it is possible that the College had just made an honest mistake, but “[my office] doesn’t determine intent. We just lay out the facts.”
Senior Counselor to the Office of the Attorney General Sarah Slaff, who is assigned to the college, said she was, “baffled by the referral to the criminal division.”
Botzman echoed her sentiment, and added, “I strenuously disagree with the findings.” He pointed out that the land had in fact been bought at below market value and that nonmonetary donations of the kind that occurred in this deal are common.
An independent review of the case made by Richard Timbie of Caplin and Drysdale also said that, “BPW approval is not required for a gift of property, nor does the BPW have to approve the amount of the donation that is attributable to a bargain purchase.” He concluded, “In my opinion, the College’s representatives acted lawfully and in the College’s best interest throughout the process of negotiating the purchase and obtaining a BPW approval.”
Botzman also conceded that some of the audit’s other findings, such as lackadaisical oversight of Bon Appetit expenditures and the Alba study program, were valid and that the College would do more to rectify the problems. He asserted, however, that even with all of these findings, “nobody did anything illegally, immorally, or unethically.”