Lawsuit Alleges Conflict of Interest, Improper Actions by Key Members of Donahue Academy Board
Published on Monday, 11 July 2016 19:36
Two prominent members of the Ave Maria community have taken their dissatisfaction with recent actions of the board of the Rhodora J. Donahue Academy to court, filing a lawsuit that alleges a majority of the Donahue Board acted improperly by putting the interests of Ave Maria University ahead of the best interests of the K-12 Catholic school.
The lawsuit filed June 30 on behalf of Brian Lawe, a former Donahue board member, and William LaMothe, a retired executive and philanthropist, says that three members of the Donahue board who also serve on the board of AMU– Michael Schwartz, Michael Timmis and Paul Roney – "breached their fiduciary duty by placing the interests of AMU over the interests of RDA [Donahue Academy] to the detriment of RDA."
The suit also names Ave Maria University and its president, Jim Towey, charging Mr. Towey with "aiding and abetting breach of fiduciary duty."
A letter from the lawyer filing the suit, Casey Weidenmiller of the firm Woods, Weidenmiller, Michetti, Rudnick & Galbraith, says the alleged conflict of interest was "compounded when President Towey moved to exert full and complete control of the RDA board, in brazen contradiction of the RDA board bylaws, legal standards and moral expectations." The suit says AMU's motivation was to shore up the university's finances.
Mr. Weidenmiller says in his letter, which was copied to all members of the AMU board of trustees, that his clients are prepared to see "through to the end their pursuit of independence for RDA" but suggests that the "best next step" would be to have a meeting to see if "common ground can be reached" that would correct what he describes as "the various financial and operating decisions which were made" and to ensure the Donahue board will be "constituted with members who will have no conflict." He asks for a response by July 15, saying that if none is received "my clients have already authorized me to move forward with amending the Complaint to add additional claims and factual allegations that may make it more difficult to find common ground."
The suit also seeks unspecified monetary and punitive damages, and asks the court to direct the board to honor the alleged agreement with Mr. Lawe.
The Donahue Academy community was rocked in the spring by the board's decision to fire three highly-regarded members of it staff for budget reasons citing, in part, the Donahue Academy's inability to pay $300,000 annually in rent payments for the school's building, which is owned by AMU.
A central contention of the lawsuit is that Mr. Lawe agreed to resign from the Donahue board in April, 2015, in exchange for a promise by AMU that for the next seven years the academy would turn over to AMU its annual operating surplus and AMU would forgive the balance of rent due for that year.
"As it turned out," the suit alleges, "the supposed agreement was really a scheme between RDA and AMU, with the assistance of Defendants Timmis, Schwartz and Roney, to coerce and defraud Lawe to resign his positions so that AMU could have full control over RDA such that AMU could manipulate the funds and books of RDA to benefit AMU."
Several Donahue parents had previously said they would be removing their children, one of whom is Mr. LaMothe's grandson, from the school this fall because of their unhappiness with the direction taken by the board.
All five members of the Donahue board now have close ties to AMU. In addition to Mr. Schwartz, Mr. Timmis and Mr. Roney, who also serve on the AMU board, the Donahue board voted May 24 to add Robert Farnham, AMU's chief financial officer, and Kim King, AMU's athletics director. One of the board members who was replaced, former AMU fundraising VP Carole Carpenter, opposed the move telling The Ave Herald, "I disagreed with the decisions made and could not stand behind them based on the means and methods used for making them."
Although the operation and financing of AMU and Donahue have been intertwined since Tom Monaghan founded both schools, they are separate 501(c)(3) charitable organizations.
Mr. Lawe said in a response to an email from The Ave Herald that he and Mr. LaMothe would not make any further comment at this time. In a separate email sent by Mr. Lawe to some Donahue parents, Mr. Lawe said, "It is always regrettable to resort to filing a lawsuit to right a wrong, especially in a community such as ours. However, we face an obstinate RJDA board and an AMU President who are ignoring serious fiduciary conflicts in their actions."
Mr. Schwartz, the Donahue board president, told The Ave Herald that he had no comment at this time. He said he needed to review the matter with other members of the Donahue board and might have further comment in the future.
[UPDATE] AMU's vice president for legal affairs and general counsel, Bill Kirk, told the Naples Daily News, in a story published in the July 14 edition, "The university believes these allegations have no merit." He denied that there was a conflict of interest and said the university is disappointed to learn of the filing of the suit. "It's unfortunate that something like this lawsuit will distract from the mission of the school," he said. "The university believes this is a frivolous lawsuit. It's really sad this is going on. It's unfair to the board members who volunteer their time."
For further background:
Click here for Naples Daily News story: Ave Maria University board accused of manipulating funds of affiliated Donahue Academy
Click here for a copy of the court filing in PDF format
Click here for Ave Herald Editor Patricia Sette's Naples Daily News column: Teacher Firings, Board Changes, Raise Concerns in Donahue Community
Click here for previous Ave Herald story Parents, Staff and Students Upset by Recent Staff Cuts