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Both Sides Appear Far Apart in Lawsuit Involving Donahue Academy and Ave Maria University

The question of how independent the Rhodora Donahue Academy should be from Ave Maria University is emerging as a fundamental matter in a lawsuit filed by former Donahue director Brian Lawe against AMU and three of its trustees who also serve on the Donahue board. Mr. Lawe alleges that AMU improperly controls the Donahue board to manipulate finances and shore up the university's bottom line.

The lawsuit says that Donahue board chair Michael Schwartz and directors Michael Timmis and Paul Roney, all of whom also serve on the AMU board, have a conflict of interest and "breached their fiduciary duty" by placing the interests of AMU over the interests of Donahue. AMU's vice president of legal afairs and general counsel, Bill Kirk, said after the suit became public last week that "these allegations have no merit" and denied there was a conflict of interest.

Mr. Schwartz, in a letter to Donahue parents, said last week that it was never the vision of Tom Monaghan, who founded both institutions, to have the two operate as entirely independent entities, although other than saying that Mr. Monaghan "established a close relationship between the two," he did not provide further details of that vision. He said "Mr. Lawe opposes the close connection between the university and the academy."

Mr. Lawe, in his own email Wednesday to members of the Donahue community, denied he opposes a relationship between the two. "Anyone saying I am against Donahue and AMU working together is deceptive," he said. "I am in favor of Donahue and AMU working together as non-profits focused on Catholic education; but not in a situation where Donahue serves as a piggybank for AMU or if Donahue students are disadvantaged."

Mr. Monaghan, through a spokesman, declined to answer questions about his intent when the two institutions were founded., 

Both institutions are separate 501(c)(3) charitable organizations. All five members of the Donahue board have close ties to AMU – the three who serve on the AMU board plus Robert Farnham, the university chief financial officer, and Kim King, its athletics director.

The bylaws of the Donahue Academy, which were originally written when Mr. Monaghan was founding both schools, speak of a "close ongoing relationship between Ave Maria University and the Donahue Academy" but they also specify that AMU should control no more than 25 percent of all the seats on the board.

Naples attorney Kevin Carmichael, who wrote the original bylaws in 2004, said in an interview that this structure was intentional to ensure the independence of both institutions. He confirmed that in comments he provided to a Donahue board member on a possible increase in the size of the board that he urged maintaining the 75-25 percent ratio. A copy of the comments was obtained by The Ave Herald.

"It is apparent to me that a great deal more Academy related Directors should be appointed to the board to achieve the bylaw designated 75%/25% split," Mr. Carmichael wrote in April. "This seems logical from a governance perspective, a strong voice from the University but not an overwhelming voice. This structure permits input without dominance."

Mr. Carmichael, who does not now represent any organization or person involved in the lawsuit, wrote that he thought that directors who "have the Academy's interests as their primary mission" needed to be added immediately "to counter the increasing voting influence of the University."

Mr. Lawe, in his email, said that the percentage guidelines specified in the bylaws were ignored and alleges AMU President Jim Towey needed to "takeover" Donahue to cut the academy's costs so that it could pay $300,000 in annual rent for its building, which AMU owns. Mr. Lawe said that any Donahue board members who also served on the AMU board should have recused themselves from voting on matters involving the rent.

"This is not a frivilous issue," Mr. Lawe wrote. "It is a serious legal issue."

A letter sent by Mr. Lawe's attorney to all members of the Donahue and AMU boards asked for a meeting to discuss these matters, but Mr. Lawe said that he has received no indication of interest in such a meeting. He said he is proceeding with his intent to take the matter to court as well as to ask the Florida attorney general to investigate.

Mr. Schwartz said in his note to parents that AMU President Jim Towey invited Mr. Lawe and others in May to meet with him and share their concerns but Mr. Lawe declined to meet. Mr. Lawe said that no Donahue board member ever offered to meet with him to discuss concerns and asked, "Why would Donahue and AMU both defer to Towey as the decision maker for a meeting?"

Calls to Mr. Kirk at AMU, Mr. Schwartz and their attorney were not returned.

"AMU has real problems," Mr. Lawe said. "In my opinion it has weak enrollment, bad retention, employee morale issues and significant debt. Now that Towey has taken over Donahue, retention is plummeting and employee morale is crashing. Timmis and Towey should focus on solving AMU's problems and leave Donahue alone."

For further background, click here for previous Ave Herald story Lawsuit Alleges Conflict of Interest, Improper Actions by Key Members of Donahue Academy Board 

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