NEWTON — As the financial picture at Mount Ida College grew increasingly grim and its bank finally refused to loan more money, the school two years ago turned to a mysterious benefactor whose private money kept the school on life support, documents show.
The money — more than $16 million — came through a shell corporation that obscured its true source: Rosalie K. Stahl, a 98-year-old New York City real estate investor and longtime personal client of college president Barry Brown.
The arrangement helped the troubled school stay afloat a bit longer, but Stahl stood to benefit too, through interest she could collect on her loans. She was also probably eligible for a tax deduction for an $8 million gift she also made to the school in 2015. Previously, when Brown worked at Suffolk University in Boston, Stahl helped bolster that school, too, documents show.
The Mount Ida loans raise questions of whether Brown was serving two masters and whether he used his dual roles to create a business opportunity for his client. Although Mount Ida trustees say Brown disclosed his connection to them, the conflict is nonetheless problematic, according to eight experts in nonprofit ethics and college governance who reviewed the situation for the Globe. The deal led the experts to question whether Brown and trustees had students’ interests as their top priority.
“This is the president of the institution with a private financial interest,” said Scott Harshbarger, the former state attorney general and an expert in nonprofit governance.
At the same time, at least one expert wondered at the wisdom of Brown’s apparently advising an elderly investor to put significant money into a struggling college.
“If I were one of her heirs, I would really be upset,” said Lawrence Zicklin, a former managing partner at the investment management firm Neuberger Berman and expert in business ethics.
The Mount Ida trustees, however, said they were grateful for the money, which helped the school stay open while it strategized ways to be successful in the long term.
“The board has never had any doubt with respect to president Brown’s integrity or his commitment to the welfare of Mount Ida College,” wrote board chairwoman Carmin Reiss in a statement.
Mount Ida trustees said Brown did not profit personally from the loan arrangement.
Despite the lending, trustees realized early this year that the college would not have enough money to make payroll starting in June. In March they gave students less than two months’ notice that the school would close and failed to notify state regulators of its plan to shutter it.
The entity that loaned Mount Ida $16.5 million is listed publicly as Carlson Property LLC. Brown’s name does not appear on any public filings by the college nor does the name of his client, but after questions from the Globe, trustees acknowledged that Stahl’s trust funded Carlson.
Attempts to reach Stahl were unsuccessful, but her daughter said she was aware of the transactions.
Carlson Property now holds a mortgage for about 15 acres of the campus in return for the lending, public documents show. The initially anonymous donation of $8 million in 2015 also came from Stahl, according to a statement from trustees.
The Boston Business Journal reported on the Carlson loans Saturday.
Brown is a trustee of Stahl’s personal trust, documents show. He has been involved in matters on behalf of her family for at least three decades and in multiple states, according to public documents filed in New York, California, the Virgin Islands, and Massachusetts.
Harshbarger, who as attorney general oversaw the state’s public charities, said the lending arrangement with Carlson Property at Mount Ida could violate core fiduciary obligations that govern nonprofit charities, including colleges.
University trustees have a legal obligation to act in the best interest of the institution and to make informed decisions about its finances. College presidents as well as trustees are advised to file annual conflict-of-interest disclosure forms that list their other financial and nonprofit interests.
Harshbarger, now senior counsel at the firm Casner & Edwards, also said there should have been more public disclosure around who was behind the lending to show how the tangled relationship could still have been in the best interest of the school.
The lending was not fully described in the school’s audited financial statement, nor mentioned on a disclosure form the school is required to file annually with the state attorney general. It asks about business done with parties that have personal ties to the institution.
“There is a whole trail of insider dealing here that could possibly be justified as in the best interest, but there’s no core documentation or disclosure so that anybody independently can be satisfied that that’s the case,” Harshbarger said.
Before accepting the presidency, Brown disclosed his role with the Stahl trust to college trustees as well as his intention to continue in that role, according to a statement from the trustees sent to the Globe. Reiss, the chairwoman, said Brown introduced the college to the Stahl trust early in his tenure as a major donor with a history of philanthropy in higher education. She said the financial transactions were negotiated at arm’s length, and Brown recused himself from discussions and votes.
“Any implication that there is or was a conflict of interest in these matters is not only unfair and misleading, it is false,” said the statement from the board.
Richard Lyon, Stahl’s longtime accountant, said Brown did not participate in decision-making on behalf of Carlson in negotiations with the college. The LLC is managed by Lyon, and he said decisions were handled by him in consultation with attorneys.
It is also unknown how much, if at all, Brown was paid by the trust.
Brown declined a request to be interviewed for this story. The Globe sent Mount Ida a list of 16 questions for Brown, which he did not answer. It sent trustees eight questions, which they also declined to answer, instead providing several statements.
The board declined to release its conflict-of-interest policy, Brown’s contract, or disclosure forms, board meeting minutes, or any other documents to back up its assertions that Brown disclosed his conflicts, recused himself, and did not profit from the deal.
As Mount Ida negotiated the sale of its campus to the University of Massachusetts Amherst, Reiss said Carlson Property agreed to forgive nearly half the loan balance.
“The Board is grateful to the Stahl Trust and to Carlson Properties [sic], LLC for their financial support to Mount Ida College through both substantial gifts and below-market-rate loans that enabled the college to pursue a revitalization effort during the last few difficult years,” Reiss wrote.
She said the loans came “at a time when the college’s bank and other commercial lenders had declined to extend credit.”
According to the school’s audited financial statements, the interest rate on the first $12.5 million in lending was 6 percent. The other $4 million had a 6.5 percent rate. That totals about $1 million in interest per year. The school’s other loans have interest rates of 3 to 5 percent.
James Finkelstein, professor emeritus of public policy at George Mason University whose research focuses on college presidents, presidential contracts, and conflicts, said this is the first instance he has seen in which a university president also represents the interest of a donor to his university.
“Given the 24/7 demands of any university president and putting aside the potential conflicts of interest not to mention having to manage a catastrophic fiscal crisis, it is hard to imagine how Mr. Brown found time to manage Ms. Stahl’s affairs,” said Finkelstein, who also served as a university administrator at George Mason, New York University, and Ohio State University and worked for the inspector general’s office at the US Postal Service.
One specialist took a different point of view. Zicklin, the corporate ethics expert, said he is not bothered by Brown’s conflict of interest at Mount Ida because it was disclosed to the college.
But he questioned whether Brown acted in the best financial interest of Stahl as a trustee of her trust by advising her to lend money to Mount Ida. Her trust now stands to lose about half her investment as the school closes.
“I sure wouldn’t be in a position of advising a 96-year-old woman of making a loan to an institution that wasn’t creditworthy,” said Zicklin, who also endowed a center for business ethics at the Wharton School at the University of Pennsylvania and teaches business ethics at New York University.
Brown came to Mount Ida after more than three decades at Suffolk University, where he rose from law professor to provost to interim president. After arriving at Mount Ida in 2012, Brown led the college through a period of expansion, borrowing $30 million to invest in the campus in hopes of attracting more students. But while the academic profile of the school improved, it couldn’t keep up with its debt.
At the same time, records show that Brown continued his private work for Stahl and other members of her family, often out of the Mount Ida College address.
In 2015, Brown’s name appears on a mortgage from Stahl to one of her grandsons in Newton, documents show, listing Mount Ida College as the address of Stahl’s trust. As recently as last fall, Brown appears to have facilitated the transfer of real estate for Stahl in New York City, signing sales documents in November 2017. His name is also listed on paperwork of several other LLCs with Stahl, and he serves as a trustee of a charitable foundation set up in her name.
Public documents on file in several states show that Brown has done business for the Stahl family since the mid-1980s, when he was listed as a trustee of Stahl’s trust in California. In 1992 he was a co-plaintiff with Stahl’s daughter in a court case involving their property in the Virgin Islands.
The ties among Brown, Stahl, Suffolk, and Mount Ida stretch further. Jason Potts, the CFO at Mount Ida, worked at Suffolk under Brown as director of finance and real estate. Stahl’s grandson, Isaac, is a tennis coach at Mount Ida. Isaac at one point ran a real estate business with Potts. Robert Dannin, a Mount Ida trustee, is the husband of one of Stahl’s daughters.
From 2001 to 2008, Brown served as senior counsel at the national law firm Holland & Knight. Documents show that over the years, the firm continued to do business for Stahl. The firm represented Mount Ida in the recent sale of its Newton campus to the University of Massachusetts Amherst. Mount Ida also agreed that Holland & Knight could represent Carlson when it loaned money to the college, according to the firm.
Stahl seems to have followed Brown through his career as a college administrator. In 2004, when Brown was a professor at Suffolk, Stahl purchased an $85 million office building in downtown Boston and leased it to the university. The building, 73 Tremont St., has now become the school’s main building, with the president’s office on the top floor, overlooking Boston Common. A gold plaque outside identifies it as the Rosalie K. Stahl Center.
But experts also found the terms of the 73 Tremont deal unusual. The Tremont Street building is owned by an LLC, registered to both Stahl and Brown, to which Suffolk continues to make payments. It is unknown whether Brown profits personally from this.
That arrangement calls for Suffolk to pay the mortgage as well as a monthly fee to the LLC, which is now registered to the address of Mount Ida, and says the building will be donated to the school, subject to the mortgage, upon Stahl’s death.
Finkelstein, the expert in college presidents, said it is typical for colleges to establish limited liability corporations, especially for real estate transactions, with university employees as members of the corporation. But he said this is the first time he has seen an employee as the manager of an LLC that does business with the university.
Also during Brown’s time at Suffolk, Robyn Stahl, Rosalie’s daughter, donated an 80-acre horse farm in northern Maine to the university.
Suffolk at the time touted the donation as a valuable gift for the school, although little instruction ever took place on the property, according to former Suffolk officials. In 2016 Suffolk sold the farm to a local Native American tribe for about $700,000, public documents show.
For years, Rosalie K. Stahl lived in a condominium two blocks from Central Park in Manhattan. Now she is believed to reside in South Natick with her daughter in a house purchased by a trust set up by Brown.
Stahl’s daughter answered the door on two occasions this month when a reporter knocked. She said her mother was elderly and not capable of commenting for this story. She said Rosalie is “absolutely” aware of the lending by her trust.
The daughter instructed a reporter to leave further questions in the mailbox, but she did not respond to them.
Although the Stahl loans staved off closure temporarily, they were ultimately not enough to save the school. The Mount Ida College commencement took place earlier this month in Boston in a ceremony run almost entirely by the students, who asked Brown and the trustees not to attend.Laura Krantz can be reached at firstname.lastname@example.org. Follow her on Twitter @laurakrantz.