As Another Big University Gift Goes Wrong, What Are Some Key Takeaways?

In early June, the University of Alabama’s chancellor called on the school to return more than $21 million to non-alumnus donor and real estate executive Hugh Culverhouse Jr., whom it accused of persistent meddling in administrative affairs. On June 7th, the deed was done. The university wired Culverhouse $21.5 million of a $26.5 million pledge after its board of trustees voted in favor of giving him a refund. University workers promptly removed his name from the law school.

Those looking to find closure in the board’s decision will be disappointed. In a piece in the Washington Post, Culverhouse counterattacked, arguing the university returned the gift to punish him for speaking out on the state’s restrictive anti-abortion law and calling for students to boycott the school. “I will not be silenced,” he said. “Once again, I call on students to protest and reconsider their educational options in Alabama. I also appeal to out-of-state and international businesses to consider the consequences of conducting business in a state that discriminates against women and defies constitutional law.”

Kellee Reinhart, a university system spokeswoman, pushed back, issuing a statement saying that the board’s decision had nothing to do with the abortion issue and instead was a “direct result of Mr. Culverhouse’s ongoing attempts to interfere in the operations of the law school,” adding that “any attempt by Mr. Culverhouse to tie this action to any other issue is misleading and untrue.”

The saga provides a fascinating and maybe portentous case study of what happens when a hands-on donor makes a historic gift in a highly charged political climate. Certain elements of the story, like the idea that donors have strong opinions about how universities use their gifts, won’t come as a huge surprise. Other aspects, however, are highly unusual—to say the least. We don’t often see donors inciting students and calling for boycotts; usually, it’s the other way around. Nor do we see a loyal donor seeking to inflict punishment on a university and its students because of a law passed by the state legislature.

At the very least, the controversy is the latest example of a growing trend in higher ed giving—aggrieved and vocal wealthy donors expressing their displeasure with how recipient schools handle their donations.

Disagreements with the Administration

Let’s briefly set aside Alabama’s abortion law and instead focus on areas in which Culverhouse disagreed with university’s administrators.

Culverhouse hoped the initial donation would allow the law school to expand its enrollment by 8 percent annually, ultimately serving between 500 and 550 students. Law school dean Mark E. Brandon didn’t go along with this idea, arguing, according to Culverhouse, that the expanded enrollment would harm its position on the crucial U.S. News & World Report rankings. (Alabama is currently ranked No. 25.)

This didn’t sit well with Culverhouse. “There’s this horrible problem you’ve having in education, with people paying money to get in, and a state law school is denying access to students who would have gotten in the year before, simply to be 25th on a magazine poll,” he said.

In one sentence, Culverhouse encapsulated one of the big tensions facing donors in the current higher ed landscape. On one hand, donors profess an interest in bolstering access to college and elite institutions. At the same time, universities, fundraisers and alumni remain beholden to the U.S. News & World Report rankings. Even a tiny bump in the rankings can burnish a school’s brand and help it attract the world’s best and brightest students.

It would make sense if Brandon was reluctant to boost the law school’s enrollment. In the eyes of the faceless, yet absurdly influential rankers, greater enrollment equals “less elite.” We saw a similar development at Purdue University, as President Mitch Daniels tried to sell officials on a bold plan to lower tuition. Administrators expressed concern that a tuition freeze would suggest the school “lost confidence in our product.” (It turns out their concern wasn’t warranted. Purdue has seen an increase in student applications and enrollment.)

As far as the University of Alabama is concerned, Culverhouse said he thought the enrollment issue had been resolved.

“You’d Better Believe I Will Be Involved”

But there’s more. In May, Culverhouse argued that of the total funds, only $2,000 had been used—for travel-related purposes. Not a dime went to scholarships, he claimed. Culverhouse isn’t the first mega-donor to complain about how the recipient institution handled his money or protest administrative decision-making.

The Pearson Family Members Foundation sued the University of Chicago to recoup its donation, alleging the university kept the Pearson brothers in the dark about key hiring and planning decisions. The Engelstad Family Foundation rescinded its $14 million pledge after the University of Nevada Las Vegas Board of Regents pushed out then-President Len Jessup.

Humana executive Bruce Perkins notified his alma mater, the University of Louisville, that he was pulling his multimillion-dollar pledges because of “extreme dissatisfaction” with the school’s leadership. And an anonymous donor who pledged to give a record $275 million to the Sanford Burnham Prebys Medical Discovery Institute in La Jolla, California, canceled $75 million of the gift for reasons that still aren’t entirely clear.

We sense a pattern developing. As I noted in my analysis on the latter revoked gift, many of today's big givers aren't interested in a “fire-and-forget” approach to philanthropy whereby benefactors make the large gift, attend a news conference, and then fade quietly into the background. Instead, they're more likely than in the past to keep close tabs on things to ensure that their money is well spent. Often, too, they want to be actively involved in helping big new initiatives succeed, tapping their own skills and networks to move the ball forward. This is all perfectly understandable.

A good example of this sentiment was reflected in Minnesota, where St. John’s University alumnus Roger Lindmark lost his bid to claw back a $300,000 endowment he says was being distributed to undeserving students. “Universities need to learn there are consequences when they don’t do their job in fulfilling the parameters of an endowment set up for a specific purpose,” he wrote in a 2017 letter to the school’s president.

Culverhouse, meanwhile, summed up his thoughts succinctly: “If I’m going to be investing that amount of money, you’d better believe I will be involved.” He also said, “You probably shouldn't put a living person’s name on a building, because at some point, they might get fed up and start talking.”

The Culverhouse saga also underscores more prosaic and tenuous elements of the donor/recipient relationship. “The law school and the university—they don’t talk to me. I didn’t know until I read about it that the head guy is recommending to send my money back,” Culverhouse told the American Bar Association Journal. “I think what provoked them the most was when they asked me if I wanted to see a football game and I said no; I don’t like to see young men hurting themselves.”

“This Isn’t Just About Politics”

Now, at this point, it’s worth remembering that all of these developments transpired before Culverhouse raised the issue of Alabama’s abortion law. In fact, the New York Times’ Richard Fausset writes that in a memo sent to the board of trustees the day before Culverhouse brought up the issue, the school’s chancellor and the board’s secretary and general counsel wrote that Culverhouse had “complained about the law school’s administration” of his gift. What’s more, they claimed Culverhouse had asked for the return of $10 million of the $21.5 million he had already given.

The chancellor and board secretary ultimately recommended a clean break, returning all of the money to Culverhouse, and removing his name from the school.

In his Washington Post piece, Culverhouse nonetheless drew a straight line between his abortion stance and the gift’s revocation. “I expected that speaking out would have consequences, but I never could have imagined the response from the University of Alabama,” he said. “This decision will hurt future students. Less money will be available for scholarships, and there will be fewer resources for the school to use to educate young minds and help them grow.”

“This isn’t just about politics,” he continued. “I am an independent—not a Democrat or a Republican. But taking away a woman’s right to make decisions about her own body isn’t about politics, either; it’s an act of oppression. This is a moment for people of conscience to take a stand and be prepared to speak out against the actions of lawmakers in states such as Alabama who want to roll back the clock to an era when women needed to risk their lives to get an abortion.”

As is often the case with these kinds of he said/they said disputes, we’re left with more questions than when we started. Here’s one: How can Culverhouse square his contention that the revocation will “hurt future students” with the university’s claim that he himself asked for $10 million back? But rather than go down that rabbit hole, I’d like instead to extract two parting questions from the controversy that will probably keep fundraisers up late at night as private dollars continue to reshape higher education.

First, if a mega-donor asks students to boycott a state’s flagship institution to punish its politicians over a piece of legislation, why stop there? What’s stopping a donor from calling for a boycott over a state’s inaction around climate change, fossil fuel divestment, or any other hot-button issue? The abortion issue, in particular, has blurred the lines between the political and the philanthropic. Companies like Netflix and Disney are considering boycotting neighboring Georgia in response to the state’s own recent anti-abortion law.

And second, in an era of dwindling support from state legislatures, can a public university afford to cut the cord with a hands-on donor like Culverhouse? Noel A.D. Thompson, a political science professor at Tuskegee University isn’t so sure. “When I read about this, I just said, ‘Wow, that’s a lot of money to give back.’ I’m not sure who’s behind that, but in my own judgment, that’s a kind of bone-headed proposition, really. Alabama does not have enough money for the legislature to go off on a tangent about this issue.”

Featured