Seven years after being promised more than $100 million from a single donor, Saint Mary's College of California found itself the victim of a cunning real estate-fraud plan and without a penny of the promised money.
Debra Holtz, media relations officer at Saint Mary's, said that though the college is still fiscally healthy, the scandal will cause a significant delay in the school's capital improvement projects.
Between 1997 and 2003, the then-"anonymous" donor, whose identity remained secret to all but a few college administrators, pledged a series of donations totaling $121 million to Saint Mary's, a small Catholic liberal arts school in the San Francisco area.
Between 2000 and 2003, Conrad Colbrandt - the "anonymous" donor - served as a member on Saint Mary's Board of Regents, which advises the trustees and managed the college's endowment. He is the president of Tacol and Forefront Properties and planned to give Saint Mary's the money he would receive from a real estate opportunity.
But the real estate opportunity turned out to be a hoax, perpetrated by John Banker, an 84-year-old ex-convict, according to an Oct. 14 police report. Banker has no previous ties to Saint Mary's.
Banker conned Colbrandt and countless other investors into believing that PepsiCo Inc. would sell its restaurant land to their investment group, which would in turn lease the land back to the corporation. The cost of the lease would cover the investment and provide a huge profit.
But Banker had never been involved with PepsiCo Inc., and reports say that he has now fled the country with about $9 million of investors' money.
Banker has a history of bad real estate deals - his real estate license was revoked in 1980, when he was sentenced to 64 months in state prison after being accused of 43 counts of grand theft and forgery, according to the police report.
But no one at Saint Mary's looked into Banker's background.
"It was accepted on the basis of faith," Giles Miller, a member of the college's board of trustees at the time of the pledges who and has since retired, told the New York Times. ''Faith is a big thing in religion.''
Nicholas More, a chairman on the Board of Trustees at Saint Mary's, wrote, "The scheme incorporated the use of false documents, many lies and misleading representations, forgeries and false identities. It was sophisticated enough to fool many individual investors, including experienced accountants, attorneys and entrepreneurs."
Banker insisted to Saint Mary's officials that the donor's name be undisclosed because PepsiCo Inc. executives would kill the deal if the donation became public, and because he did not want any of his five ex-wives to learn about his potential income from PepsiCo.
In anticipation of the donation, Saint Mary's trustees borrowed $17 million for the construction of a new $26 million science building and began planning new buildings and major renovations on campus.
But Holtz said, "We are in sound financial health. We never put these pledges into our financial statements. They were something we hoped to get. It made our capital improvements go faster, but it has no effect whatsoever on our day-to-day operations."
Saint Mary's spent approximately $30 million in anticipation of the donation and now has a long-term debt of approximately $53 million, according to the college's Web site.
The scandal has had no effect on the school's operating budget or endowment, but it will cause a significant delay in capital improvement projects, Holtz said.
Brother Craig Franz, the president of Saint Mary's, recently announced his resignation. In a letter to the Saint Mary's community he wrote, "In the weeks since we disclosed the unrealized pledges, it has become clear to me that evolving perceptions about my leadership would make it increasingly difficult for me to effectively inspire our alumni and others to support the College now and in the future. I am stepping aside now because my paramount interest is in seeing Saint Mary's move forward."
This year Brown has received numerous donations from alumni, including more than $100 million donated by Sidney Frank and $20 million donated by Fredric Garonzik '64, Jonathan Nelson '77 and an anonymous alum. But according to Ronald Vanden Dorpel M.A. '71, Brown's senior vice president for University advancement, Brown is at no risk of losing these pledges.
"At Brown we have safeguards in place in terms of the review of gifts and prospects for gifts that make any incidents such as that which happened at Saint Mary's impossible," Vanden Dorpel said.
Vanden Dorpel said donations that are put towards building projects are spent as the money comes, unlike at Saint Mary's, which began spending the donation before receiving any money.
Vanden Dorpel said Brown does an appropriate amount of research and is always aware of the donors they are dealing with. While donors are allowed to leave their personal identity undisclosed if they wish, Vanden Dorpel said the University requires a signed gift agreement and will not accept a donation without knowing who the donor is.
