Bank First National lawsuit lingers over UW Oshkosh Foundation as bankruptcy continues
OSHKOSH - Must a public university follow through on what officials call unconstitutional financial agreements made by its former leaders?
One bank suing the University of Wisconsin System argues yes.
In an ongoing lawsuit against the UW Oshkosh Foundation and the UW System, Bank First National says the university should be on the hook for paying back a loan the foundation took out to build the Alumni Welcome and Conference Center.
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It sites letters from former UWO Chancellor Richard Wells and former Vice Chancellor Tom Sonnleitner, which it says indicates the university would pay back loans for several high-profile construction projects if the foundation was unable to do so.
The letters are at the heart of another ongoing lawsuit the UW System previously filed against Wells and Sonnleitner, claiming they illegally funneled university money to help fund foundation projects. The deals have come under fire since USA TODAY NETWORK-Wisconsin reported the agreements in 2016. Meanwhile, the letters have already spurred systemic changes to further separate private foundations from the public universities they serve.
According to the bank's lawsuit:
The bank loaned $10 million in 2013 to the UW Oshkosh Foundation Alumni Welcome and Conference Center LLC, a wholly owned subsidiary of the foundation, to finance the construction of the facility on Pearl Avenue.
The agreement included that the foundation would repay the loan, which is now in default, with interest, using proceeds from renting the facility and pledges made by donors. Upon completion of the facility, ownership would be transferred to the university.
The foundation and UW Oshkosh each signed guaranty letters stating that they'd pay back the loan if the LLC failed to do so. Wells and Sonnleitner signed such letters in June 2012. Both former administrators later said the letters are not legally binding.
But the bank's lawsuit states the guaranty letters were critical to the loan's approval.
"Bank First relied upon that guaranty in making the loan," according to the lawsuit. "In fact, Bank First would not have made the loan without that guaranty."
With the LLC and foundation now unable to pay the loan and the university refusing to, the lawsuit seeks to force the organizations to honor their promises of payment.
At the same time, the university was informing Bank First National in June 2016 that it would not stand behind the guaranty letters, the university also forced the foundation to execute a deed for the Welcome Center, according to the lawsuit.
The deed was never recorded because the foundation did not own the property. It is still owned by the LLC, therefore the foundation could not transfer ownership.
"Amazingly, the University believed it could obtain title to the Welcome Center without paying for the building," the complaint states.
Bank First National also alleges the entire UW System and Board of Regents were aware of UW Oshkosh's role in the planning and construction of the Welcome Center — and fully supported it.
The Board of Regents filed a motion to dismiss the lawsuit Aug. 15, citing that a number of the bank's claims against the board is barred by sovereign immunity. A brief accompanying the motion states the bank cannot force the guarantees because it was unconstitutional for them to be made in the first place.
The bank's lawsuit is on hold until a judge rules on the motion to dismiss the case. A hearing on that is scheduled for Oct. 27.