UM fund gets big money, spotty results

March 24, 1991|By Patricia Meisol | Patricia Meisol,Sun Staff Correspondent

ADELPHI -- In the decade since the University of Maryland Foundation Inc. opened shop here, it has amassed millions of dollars from investments, fees and donors who gave with the sole proviso that their money be spent in the best interests of the university.

By the end of that period, the foundation had helped campuses raise tens of millions of dollars, about 95 percent of which officials say is restricted to academic projects.

But it also had created $12.5 million in new debt for the University of Maryland.

And, when classrooms at the state's main research university were so crowded that many students could not graduate in four years, the private fund-raising arm had spent some of its undesignated money on real estate deals that soured and on perks for selected university officials.

The foundation has operated privately under the auspices of the University of Maryland Board of Regents since 1978, and much about it is a mystery.

But records and interviews with several dozen current and former foundation and university employees offer a glimpse into its business. For instance:

* It was the lead player in a Bowie research park that, after 10 years and four developers, has attracted only one tenant and left it with an $800,000 promissory note.

* It agreed to pay Montgomery County to build a new biotechnology research institute in Shady Grove that it planned to rent to the University of Maryland. The bill, now assumed by the institute, totals $12.5 million.

* It spent an estimated quarter of a million dollars designing a hotel-conference center that was scrapped last spring.

* It paid former Chancellor John S. Toll $100,000 to convince major donors to continue supporting the university after he resigned and went to work for a Washington research group.

* It dispensed perks, including thousands of dollars to University of Maryland Baltimore County President Michael K. Hooker, who used some of the money to pay a baby sitter for his daughter. After The Sun discovered this practice, lawyers for the foundation determined that the money should have been reported as personal income under rules governing non-profit, tax-exempt agencies, and Mr. Hooker said he would file an amended tax return.

For much of the past decade, as annual fund raising grew to $25 million, the foundation apparently operated without a list of priorities, ignored policies set by regents for keeping track of money, and rarely reported to the public what it did with income undesignated for any campus.

Even top foundation officials were in the dark.

"I was not aware of where the money was going," said Carol Parr, second in command of the foundation for four years until she quit in 1988. "It was an untenable situation," said Ms. Parr, now vice president for development at Gallaudet University.

The foundation's current directors say they are proud of their accomplishments over the years. They say that any money entrusted to them for specific purposes has been spent as requested and that much of the rest was spent on a fund-raising campaign launched in 1988. They say that their investments were undertaken at minimal expense, in cooperation with the regents, for the good of the University of Maryland System, and that such improvements as new classrooms in Montgomery County could not have been achieved without the foundation.

"It was always for education purposes," said John Martin, current president of the foundation.

Officials say they run a private organization with no obligation to disclose such details as how much unrestricted income they earned and what they did with it, what loans they made, or how they may have benefited university campuses over the years.

"Why should we?" asked Charles E. Peck, the newly elected chairman, explaining that donors have confidence in the foundation and none has ever complained.

The University of Maryland Foundation Inc. is a quasi-public fund-raising arm and bank for five of 11 state university campuses responsible to the regents. Although small in comparison with similar institutions in other states, it is the largest non-profit foundation affiliated with a state university in Maryland and manages more than half of all gifts to state campuses.

In its banking capacity, it disbursed $700,000 in interest for scholarships last year and returned $13.1 million in temporarily deposited gifts for academic purposes to the campuses.

In addition to investing gifts in stocks and bonds for the campuses, however, the foundation's stated purpose is to engage in entrepreneurial activities. This mission is shared by few public universities and only about 1 percent of non-profit organizations nationwide, said Richard Larkin, a senior manager specializing in non-profit organizations at Price Waterhouse in Washington.

The foundation's philosophy has been to encourage gifts and activities whose proceeds do not have to be used for donor-inspired projects or returned to specific campuses.

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