Perpetuity is a Long Time: A Closer Look at the Sweet Briar College Mess

The Washington Post reported that Virginia’s Amherst County Attorney has filed a lawsuit seeking to stop Sweet Briar College from closing its doors at the end of the current school term in May. The lawsuit was filed on behalf of the Commonwealth of Virginia. County Attorney Ellen Bowyer claims that closing the school would violate the terms of the will of Indiana Fletcher Williams, under which the school was founded, and asserts that endowment funds have been misused.

I have read Ms. Williams’ 1899 will, and have noted the following interesting facts: There were 13 clauses in her will. In the first 12, she bequeathes cash and/or other assets to various people or institutions. In the 8th clause she gave a life tenancy to her “Mount St. Angelo” Virginia plantation (1,050 acres) to her cousin. Upon the death of her cousin, the property was to be subject to the 13th clause of the will.

In the 13th clause, she directs that her adjoining plantation—Sweet Briar Plantation—and other miscellaneous land and assets on the land be put into a trust under the control of four trustees named in the document. The trustees were to form a corporation or other Virginia legal entity to create the “Sweet Briar Institute,” a school for the education of girls and young women. The corporation is to “have and hold” these assets “forever” upon the condition that the assets are used for the school. “No part of the land may be sold at any time,” although land unused by the school may be rented out. The personal property given via this clause “shall be kept inviolate as an endowment fund, which shall be invested and re-invested… and of which the income only shall be used for the support and maintenance of the school…” 

This appears to me to be a very strong gift instrument that must be followed in perpetuity.

In her will, Ms. Williams also instructed that the school “become self-sufficient” but she hoped that the income from the endowment would also provide sufficient funds to “establish free scholarships… for a limited number of deserving students.” The corporation was also to “keep in repair and in good order the cemetery on Monument Hill forever.” That's another perpetual obligation in the gift instrument.

In other materials linked from the Washington Post article, there is a board member resignation letter dated June 29, 2014. In this letter, the resigning board member indicates that he is resigning as his “views on most issues are not shared by the majority” of fellow board members. This provides the opportunity for an interesting tangential issue. Actions of a board become the actions of the entity and all board members are called upon to support the majority decision. That is basic individual board member responsibility. If and when it becomes impossible for an individual board member to support the majority, the only course of action available to that individual is resignation.

This individual had been on the board for seven years and he indicates in his resignation letter that the subject of declining enrollments, together with the board’s “lack of interest or ability to direct and control the college’s attempts to increase enrollment,” have been the subject of discussion during all of his tenure. The lack of student numbers prohibited the college from self-sufficiency, and costs could only be met by invading the endowment far beyond its ability to generate annual income. In noting that the board has spent excessive amounts from the endowment, the resigning board member accurately referred to the UPMIFA law governing the management of endowments by nonprofit organizations. The Amherst County Attorney lawsuit also specifically mentions the inappropriate management of the college’s endowment.

In addition, there is an allegation from a 1976 alumnus that she donated $5,000 in 2007, which was restricted to the restoration of a building on campus. The building was never restored and has been sold to a private purchaser. The donor’s funds have not been returned and the college has not requested donor permission to use the donation for another purpose. Restricted donations must be used for the donor's restricted purpose or returned to the donor.

There are numerous other documents alleging various wrongdoings on the part of the college. This appears to be a nonprofit organization that has lost its way. Monitoring the performance of charitable organizations is usually the job of the state attorney general, but most state AGs say they do not have the budget or resources for this work. Thank goodness for the Amherst County Attorney, but I am concerned that the college will claim that she does not have legal standing in this matter.

This is a very interesting case and a great learning opportunity for those interested in charitable organizations and governance. Let’s see how it plays out.