Tuesday, November 17, 2009
Sonoma State U Foundation Has Some Explainin' To Do!
PD Editorial: Loan unknowns
SSU foundation must explain how loan was left unsecured
KENT PORTER / The Press Democrat
Published: Monday, November 16, 2009 at 5:28 p.m.
Last Modified: Monday, November 16, 2009 at 5:28 p.m.
A loan from from the Sonoma State Academic Foundation helped pay for remodeling Salazar Hall, the campus building that houses the administration. Loans from the foundation to financier Clem Carinalli have raised questions about the foundation.
Not long ago, lenders were pretty loose with cash and credit when it concerned anything having to do with real estate. But even in that environment, we have a hard time understanding the cozy financial relationship that existed between the Sonoma State University Academic Foundation and financier Clem Carinalli.
Foundation board members have defended the practice of making personal loans to Carinalli — seven in all, the first one issued two days after Carinalli stepped down as a foundation board member — saying they were all secured with real estate.
Now it turns out that this wasn’t exactly the case. As Staff Writer Nathan Halverson reported on Saturday, one loan from 1997, with an outstanding balance of $232,500, was unsecured.
This has added significance because, although Carinalli paid off the balance during the summer before filing for bankruptcy protection, the court is likely to force the foundation to pay that money back on grounds that it received preferential treatment.
This would leave the Sonoma State foundation at the back of the line of Carinalli’s creditors, many of whom are owed money for loans that were properly secured.
Foundation officials contend they didn’t find out that the loan was left unsecured until July of this year. Somebody, they say, altered the deed, without the foundation’s permission, when Carinalli paid off a significant portion of the loan in 2005.
But how exactly does something like that happen and then go undetected for four years? It’s sloppy and unprofessional at best. At worst, it’s indicative of something possibly more underhanded.
Either way, we challenge the university to conduct a thorough investigation and offer a complete public accounting of what transpired with these funds — all of the $9.6 million in loans made to Carinalli.
We say “challenge” because although the foundation manages millions of dollars and gifts, endowments and scholarships on behalf of a public university, it’s permitted to operate under a veil of secrecy unique among public and quasi-public institutions in California.
A recent attempt to pull back that veil through legislation was vetoed by the governor.
As a result, the public is left to hope that the Sonoma State foundation will be forthcoming with what happened with these loans.
There’s little doubt that the university’s endowment benefited financially from a majority of the loans made to Carinalli — as well as those loans brokered by him — and that much of that money was invested back into the community in ways that benefited the county.
But in the process these and other personal loans exposed the foundation, and the university, to inordinate risk and, now, ridicule. Local residents deserve to know the full story of what happened.