Whitney board fears SCSD2 trying to influence members
Date posted: March 6, 2014
SHERIDAN — Members of the Whitney Benefits board fear Sheridan County School District 2 may be trying to influence the individuals the district appoints to the foundation.
The Whitney Benefits board consists of 13 members who serve four-year terms and are appointed by the boards of trustees of the three county school districts — one from SCSD3, two from SCSD1 and 10 from SCSD2. This arrangement of Whitney Board members being selected by county school districts was laid out in Edward A. Whitney’s will.
Whitney member Roy Garber, who joined the board in 1992, explained that in reading Mr. Whitney’s documents and will, Whitney seemed to struggle with how to have board members appointed to his foundation. He ultimately settled on having school district boards, of which there were 30 to 40 at the time of his death, appoint members. However, once chosen, the board members were to be representatives of Whitney Benefits and not the individual school districts, Garber said in his interpretation of the will.
“It is kind of a hard concept to understand but that is what it is,” he said. “Once you are appointed, you are a Whitney Board member, you are not a representative of any school district. At that point, your sole responsibility becomes the operation of Whitney Benefits.”
Differing opinions arise
However, recent letters from SCSD 2 have raised concern among the Whitney board that SCSD2 is encouraging its appointed representatives to align themselves with the school district and its funding requests.
In December 2013, a letter from Whitney Benefits Board President Tom Kinnison to SCSD2 school board members said that five board members were seeking reappointment to the board. Only two, Kim Love and Dr. Stephen Holst, were reappointed.
Dave Withrow, Val Burgess and Everett McGlothlin received letters saying their previous service was appreciated, but they would not be reappointed for another term. They were replaced by Tom Pilch, Lori McMullen and Lyn Phipps.
In a letter from SCSD2 Board Chairman Richard Bridger on Dec. 3, 2013, he congratulated new board members and closed his letter with, “We know you will do an outstanding job in enhancing the educational opportunities for all the children in Sheridan County School District #2 through the actions of the Whitney Foundation.”
SCSD2-appointed Whitney board members were also singled out in a letter written by SCSD2 attorney Tracy Copenhaver of Powell. Copenhaver sent the letter on Dec. 30 and specified that his interpretation of the Whitney will allowed for direct funding of school district projects, rather than only post-secondary education.
Copenhaver concludes his letter with the statement, “I would hope that all of the participating entities, members of the school board, and of the Whitney Benefits, Inc. board could ultimately reach agreement as to appropriate uses of the funds to benefit all the youth in Sheridan County in acquiring a quality education. To that end, I hope that those Whitney Board members appointed by the Sheridan County School District #2 Board of Trustees will look favorably on those proposals coming before the Whitney Board later this spring.”
Garber said no official requests to the Whitney board have been made recently by SCSD2, though school district officials attended a Whitney board meeting on Feb. 18 and discussed some priorities for school facilities and programs on which they hope to partner with Whitney.
However, Garber has said in previous interviews that SCSD2 Superintendent Craig Dougherty unofficially approached Kinnison at least three times last spring and summer, requesting $10 to $20 million for a proposed community recreation center the district is investigating.
The school district has worked with or hired companies to complete a market analysis, cost estimates and a campaign for a bond election issue. Those reports have cost the district more than $17,000 and indicate the recreation facility could cost $45 million and operate on a $700,000 to $1.7 million deficit.
Copenhaver’s letter created a concern among Whitney board members that the district was trying to improperly influence board members, which prompted a return letter from Kinnison, written on behalf of the board.
It notes, “…Trustees must exercise a wholly disinterested and independent judgment, in this instance ‘consistent with the terms of Mr. Whitney’s will.’…this responsibility calls for an undivided loyalty, which precludes each Trustee from ever acting for or in the interests of themselves or a third party…There is no indication anywhere in the will that Mr. Whitney ever intended that the appointed Trustees were to ‘represent’ the individual School Districts or Boards.”
It added that statements made in Copenhaver’s letter, “raise the specter that there may be a view of an obligation or loyalty to the District by reason of the appointment. While your letter acknowledged that it was a request not a mandate, the tone of the letter, coupled with the Copenhaver opinion letter designed to interpret the will to allow direct programmatic and capital funding to school districts, strongly and inappropriately suggests an alliance clearly unintended by Mr. Whitney and at least the appearance of an appointment demanding divided loyalty.”
Responsibility weighs heavy
The charge for Whitney Board members to act only in the interest of the foundation and not in the interest of themselves or a third party is of vital importance, Garber said.
Garber noted that several years ago, the Whitney Board began distributing informational packets to prospective appointees, letting them know ahead of time about what are considered potential conflicts of interest. For instance, board appointees cannot have any close family members, including children or grandchildren, with current student loans from Whitney Benefits.
“(It) explains the basic conflicts of interest and they can read that and if they don’t have any conflicts and want to go ahead and leave their name in, that helps,” Garber said about the packet.
Once appointed, Garber said board members receive more in-depth training and information about Whitney Benefits operations and also about general nonprofit and IRS rules that members must know.
“We have our attorney come in and explain to them all the ramifications involved in conflicts of interest, self-dealing and all of the things that could get you in trouble with the IRS and any other statutes that apply to nonprofits. We do provide a training right off the bat,” Garber said.
One important issue that each board is made aware of is every member’s financial liability to the foundation. Once on the board, each member is personally financially liable for decisions they make with the organization’s money.
“Basically, what it means in the terms of Whitney Benefits, if you were to obligate foundation funds to something that didn’t fall under the terms of the will and that were challenged in court…you could be held personally responsible to repay that money,” Garber explained. “You decide that just handing a few million here and $10 or $20 million there, you want to be careful about how you spend the foundation’s money.”
Garber said this financial liability rests heavy on each board member and therefore, the board carefully weighs funding decisions it makes and seeks the opinion of an attorney regularly, to make sure decisions fit within the parameters of the Whitney will. He said each board member is also expected to consider each funding decision in terms of what Mr. Whitney intended when he set up the foundation and for the future of the organization.
“It was a dilemma I think most every foundation has had,” he said. “I think if you look statistically across the country, that’s one of the biggest threats to foundations across the nation is that people come along and as time passes, because times change, they start to slowly, with good conscience, change the foundation that they serve. Pretty soon foundations are so far away from the person who started them that sometimes they are unrecognizable from where they came from and where they end up.”
“Mr. Whitney said, in so many words, you serve here because you want to be part of the community,” Garber continued. “You get no compensation for serving on this board. I think he foresaw some of those dilemmas. How do you appoint people for the good of the foundation? It wasn’t easy then and it continues to be a dilemma today for many foundations.”
SCSD2 Board Chairman Richard Bridger refused to comment on this article and referred questions to the district’s attorney Kendall Hoopes.