UofL Foundation invests in property deal with major donor, unwin - wave3.com-Louisville News, Weather & Sports

UofL Foundation invests in property deal with major donor, unwinds it after KYCIR question

LOUISVILLE, KY (WAVE) - Giving back has become legion for heir and philanthropist Henry Vogt Heuser Junior.

The Vogt Scholarships provide $10,000 for college to a senior from each of Jefferson County's Public High Schools.

"I've seen so visibly what scholarships just do and mean for students," Vogt told KET in a segment of its American Graduate Champion series that aired April 2014. "And I'm just addicted to this process."

He's given, or bequeathed, millions of dollars to the University of Louisville.

Less than a week prior, UofL's then-President Dr. James Ramsey had persuaded the University Foundation's directors to enter into a deal that "may result in a multi-million dollar benefit" according to minutes from the Board's meeting. The Foundation would borrow almost $3.5 million from one of Heuser's companies to buy 99 percent interest in a vacant factory in Oklahoma that Heuser had spent the previous months trying to sell for $6 million.

"The market for this type factory is very narrow," said Kate Howard, a staffer for the Kentucky Center for Investigative Reporting (KyCIR), a WAVE 3 News content partner. "It's heavy machinery. It's 150,000 square feet."

Tuesday, Howard reported the results of a month's long investigation into the deal on the Center's website.

KyCIR revealed how the university’s nonprofit fundraising arm took a 99 percent ownership stake of a vacant factory in Oklahoma. The move appears to have no academic purpose and raises ethical red flags, experts said.

From documents obtained via Open Records request, Howard learned that two appraisers whom Heuser's accounting firm hired valued the property between $4,730,000 and $5,100,000 in 2010, conceding that their calculations wouldn't qualify as a "conclusion of value" as the professional standards of the National Association of Certified Valuators and Analysts define it.

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"Essentially, what (the Foundation) did was ensure that $3.5 million worth of whatever he sold the factory for isn't taxable," Howard told WAVE 3 News. "So that appears to have shielded him whatever the factory sold from capital gains taxes that would have been subject to on the difference between whatever he has in the property and what it sold for."

"My recollection is that the Foundation would be receiving an appreciated gift or donation in excess of the base of the sale of the property," said Foundation Board member Dr. Larry Benz, chairman of UofL's Board of Trustees.

UofL would get most of the difference after the Foundation paid back its paper loan.  Except, the Center's investigation found, the Foundation hadn't borrowed nor paid back a dime.

Except, the Center's investigation found, the Foundation didn't actually borrow, or pay, a dime.
 
"In worst-case-scenario, which apparently is as it turned out, the Foundation didn't receive any donation from it either," Benz said.

The site still hasn't sold. Foundation staffers cited that as one reason for unwinding the deal in August, one month after the Center made its Open Records requests.

"Some tax experts I spoke with said they exposed themselves to - potentially put their tax exempt status at risk," Howard said. “If it were found that they were going into deals, essentially  to assist donors with their tax situation."

"I personally don't know whether it is or isn't," Benz said. "And personally want to do some due diligence on that - as well as find out what triggered the unwind."

Heuser hasn't commented. Foundation Board Chairman Brucie Moore hasn't returned phone calls. Benz, who's questioned a number of the Foundation's investments and accounting techniques, wants the arrangement made part of the Forensic Audit and Management Review of the Foundation's practices.

A special meeting of the Joint Audit Oversight Committee is scheduled for Thursday. Included is a closed session to discuss potential litigation and proposals received from firms seeking to perform the audit.

"Apparently there were some legal transactions and other events that needed to happen that we probably weren't as sensitive to at the time (the deal was approved)," Benz told WAVE 3 News. "And we needed to be."

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