[1]MOBILE, Ala. (BP)–“The University of Mobile has sinned as an institution,” declared Robert Maxwell, chairman of the university’s board of trustees. “We violated the 1994 agreement made with the Alabama Baptist State Convention. The institution did this, and we are guilty.”
Maxwell made his comments to the State Board of Missions’ executive committee May 15. Two days earlier, university trustees, meeting behind closed doors, had ousted Michael Magnoli as president of the Baptist-affiliated university.
In 1994, messengers to the annual Alabama Baptist state convention affirmed an agreement limiting financial support of the university’s Latin American Branch Campus in Nicaragua to gifts specifically generated for that campus and funds generated from that campus. Another part of the agreement required trustees to return to the Mobile campus about $2.3 million used to initiate the LABC.
Maxwell said the university violated both provisions of the agreement. When the current fiscal year ends on June 30, trustees expect Mobile investments in Nicaragua will have grown by $1 million to $3,321,093.
Following the 1996 Alabama Baptist State Convention annual meeting, Steve Lee, director of finance, told The Alabama Baptist newsjournal the university had returned $739,000 of the more than $2.3 million owed. Now trustees say that was not true.
Walter Hovell, a trustee until he was appointed vice president of finance for the school on May 13, said, “Subsequent to the report dated June 30, 1996, it was observed that some of the (financial) entries prior to that date were not appropriate. They were changed back for the previous year.”
The accurate figure for 1996 should have been $2,458,578, Hovell said. That is a $100,000 increase rather than a $700,000 decrease. Hovell said an examination of 1997 records showed other financial entries improperly credited to LABC. The amount of improperly credited entries total $995,000, he reported.
Hovell, former president of Mobile Gas Service Co., and Mike Johnson, vice president of the Bank of Mobile and university trustee, found these and other irregularities during a financial review the two conducted in April and early May.
The review began when Magnoli asked trustees to help solve what he called “a cash flow problem.” The study showed the university would need almost $1.7 million to meet obligations through June 30, 1997. Additional funds would be needed to get through July and August. The review also found the university showed an operating deficit averaging about $800,000 annually. The shortfalls prevented the university from doing more than paying the interest on the mounting short-term debt, which had reached nearly $5.5 million.
A $2.2 million loan from AmSouth Bank in late April alleviated the short-term problems, Maxwell said. He added that trustees are negotiating with a bank to restructure all of its short-term debt into a 15-year note.
However, since the restructure involves a second mortgage on property owned by the university, approval of messengers to the 1997 annual Alabama Baptist State Convention would be required. The convention meets Nov. 18-19 in Huntsville.
In addition to funds owed outside the campus, Maxwell revealed the university has borrowed $1.5 million from its endowment and is accruing interest on the inter-fund borrowing.
Maxwell told executive committee members the financial crisis was created by shortfalls in projected income on both campuses of the university as well as capital expenditures on both campuses that were not fully funded.
In response to a question by state convention president Leon Ballard, pastor of First Baptist Church, York, Maxwell said the university would have to cut about $1 million annually from its budget in order to operate with a balanced budget and pay the extra $200,000 required for debt service if the restructuring is approved.
Maxwell said this will require more than staff reductions by attrition and not starting new programs. “We will have to do a thorough study of everything we do at the University of Mobile,” he said.
During a question-and-answer session, executive committee members asked about the future of the LABC. Maxwell said the current situation may have proved the campus is “not economically viable.” He quoted Hovell as describing the Nicaraguan campus as “a bleeding jugular for the university.”
Maxwell argued the LABC has its pluses as a mission opportunity and as a tool of economic development for that area of Nicaragua.
Maxwell urged executive committee members to see the removal of Magnoli and the “candor” of his report as “a vivid demonstration that it is OK to let the university trustees handle university-related problems.”
In a telephone interview, trustee Gary Enfinger, pastor of First Baptist Church in Thomasville and a trustee, said, “There were a lot of things we were not aware of as a board. We would have taken action much sooner if we had known things before three or four weeks ago.” Enfinger said information had been “withheld” from trustees. “We heard innuendos, but we could not act until we had facts.”
On May 16, following a similar presentation by Maxwell to the full State Board of Missions, executive secretary Troy Morrison told board members, “I hope what we learned today is not just the tip of the iceberg.”
Morrison said when he heard about the financial difficulties he was “disappointed but not surprised.” He said concerns about the finances of the University of Mobile had been raised for four years and that it had been his responsibility to raise them.
“One of the most frustrating, confusing, perplexing things of my life was to raise issues about the university’s financial condition as reflected in the audits and to have convention leaders sitting in the same meetings say the audits were excellent,” he said.
Morrison said he continues to have “grave concerns” about the university’s finances. “I hope the trustees can handle the problems.” He asked members of the State Board of Missions to pray for all students, faculty, administrators and trustees at the University of Mobile.
“Part of our family is in deep, deep trouble, and when part of the family hurts, we all hurt,” he said.
Magnoli, meanwhile, insisted to the end he had done nothing wrong. He blamed the perilous financial conditions of the school on overruns on new construction. “The top man always takes the blame and that is what is happening here,” he said.
Magnoli had a little over two years remaining on a five-year contract. Maxwell declined to say what Magnoli received to vacate the presidency of the university, citing a confidentiality agreement. He insisted the university’s cash outlay was less in the severance than would have been paid had Magnoli stayed through his contract.
However, it was reported at the State Board of Missions meeting in Montgomery that the value of Magnoli’s agreement neared $400,000. Reportedly, the agreement includes cash, the car he was using and certain insurances.
“I’m going to take a little while to think about the future,” Magnoli said before leaving the campus May 13. “I do not want another 9 to 5 job.” He added he will probably cultivate some of his “side businesses” and accept consulting contracts which have been “kept on the periphery” because of his duties as president of the University of Mobile.
“My contacts now are in Miami, Washington, New York and Central America. I probably will devote a lot of attention to those areas in the future,” he added.
Magnoli was a member of the first graduating class of the University of Mobile. After earning two doctoral degrees, he returned to the college in 1978 as director of development and was promoted to vice president of development in 1981. He became president in 1984.