|The Destruction of Marycrest|
|News/Features - Feature Stories|
|Tuesday, 22 January 2002 18:00|
As an undergraduate in the mid-1980s at what was then Marycrest College, I was given the basic foundation of a liberal-arts education. I had learned logic, ethics, morals, and, on a good day, something about computers.
Many years later, as a full-time member of the faculty at Marycrest International University (MIU), I learned its final lessons: Scared people will do or say almost anything to keep their jobs, and whistleblowers are quickly fired.
In March 2001, the North Central Association of Colleges & Schools (the accrediting body for universities throughout the Midwest, known as the NCA) visited the Marycrest campus as part of the school’s re-accreditation process. The administration at Marycrest had created a multi-volume document entitled “MIU Self-Study Report Prepared for the Commission on Institutions of Higher Education of the North Central Association of Colleges & Schools.” I had prepared a rebuttal to its report that detailed numerous violations and deficiencies at Marycrest.
The NCA held an open meeting for the campus to state its concerns and grievances, and there were about 30 or 40 of my students in the room – almost 10 percent of the entire student body at that point. I waited until everybody else had finished, and then I presented the document I had created. I had made eight copies – one for each NCA on-site member – and my name appeared prominently on the title page.
The next day, before NCA representatives left campus, someone had turned a copy of my report over to the administration of Marycrest. Later that week, a Marycrest administrator sent an e-mail to the entire campus that quoted sections of my supposedly confidential statement. My position was eliminated at the end of the semester, and I was given 24 hours to clear out my office and leave the campus.
Marycrest issued a public statement saying that the NCA on-site team had recommended that the school be reaccredited. But this was, at best, a half-truth. Steve Crow, executive director of the NCA, told me in an interview in December, “The on-site team actually recommended that Marycrest be put ‘on notice,’ which is, basically, probation with a one-year timeline.” Marycrest had also been put on probation in 1994, a status that was lifted in 1995.
But the new sanction proved fatal to the school. On December 17, President Pascal “Pat” V. De Luca announced that Marycrest International University would close on June 30, 2002, after the spring semester. Hundreds of students will now have to attempt to transfer their Marycrest credits, and more than 100 faculty and staff will lose their jobs.
Since it was founded in 1939, Marycrest College had been owned and operated by the Congregation of the Humility of Mary (CHM), a Catholic order of nuns. The CHM was a teaching order; it relied upon a constant stream of young women to join the order, be educated at its expense, go out into the world, teach, and turn over some portion of their salaries back to the “mother house” for the care of the older sisters.
By 1989, the median age of nuns worldwide was 67; few women were joining the order. And in 1990, Marycrest College was approximately $3 million in debt.
“Marycrest College’s debt was Marycrest College,” said Jim Victor, who was chairperson of the school’s board in 1990, in a December 2001 interview.
As I wrote in my report to the NCA: “Like any other entrepreneur who had founded a business, the Sisters were perfectly within their rights to sell what they had created and ‘retire’ on the profits. I don’t think anybody on campus or in the local community begrudged the Sisters’ right to create a ‘nest egg’ to ensure the continued funding of their Order.”
Whom they sold Marycrest to, however, was another issue.
“It is fair to say that at the time, discussions were being held with more than one party, and the offers were dissimilar,” Victor said.
There were, in fact, exactly two bidders for Marycrest: St. Ambrose University and the Teikyo Yamanashi Education & Welfare Foundation of Tokyo, Japan. Teikyo had made a habit of buying American colleges “that were already in [financial] trouble,” the NCA’s Crow said in a December interview.
The issue of the two “dissimilar” offers remains a subject of contention with both Marycrest and St. Ambrose, even after 11 years. Marycrest officials claimed there were two components to any deal to buy the school: retention of faculty and purchase price.
St. Ambrose Provost and Dean of Faculty Don Moeller, who was a key negotiator with the Marycrest board in 1990, flatly stated in a December 2001 interview, “We had agreed to accept all faculty and staff and retain tenure and put nontenure faculty on a tenure track.”
Wanda Bigham, who was then president of Marycrest, and Victor made public statements contradicting this. They both claimed that it was the matter of faculty retention that tipped the scales toward the Teikyo offer. Things got out of hand at a Davenport Rotary Club meeting shortly after the sale to Teikyo was announced, when guest speaker Victor repeated this statement. Both Moeller and Victor in recent interviews recalled that a member of the audience, a St. Ambrose professor, shouted that Victor was a liar.
“I had no reason to stand up and lie,” Victor said in December.
St. Ambrose’s Moeller is equally adamant: “Our offer was genuine. Negotiations were finished the day that the sale to Teikyo was announced. ... We were expecting that the announcement would be that our [St. Ambrose’s] offer had been accepted.”
But Teikyo didn’t live up to its part of the bargain. Since Marycrest was sold to Teikyo, there has been a steady decline in the number of faculty, from more than 80 on the day of the sale to approximately 20 today. Furthermore, no faculty member has received tenure at Marycrest in the past 10 years.
So it appears unlikely that the decision to sell to Teikyo was about protecting the jobs of the faculty and staff.
But money was certainly a factor.
Marycrest was sold to Teikyo for just more than $5 million, according to information from a variety of sources. Of that amount, about $3 million was for assumption of the school’s debt.
The remaining $2 million was paid, presumably, to the Congregation of the Humility of Mary, although Victor would not confirm this. “I don’t think I’m in a position to comment about that,” he said. Because the CHM is a religious order, it is not required to make its not-for-profit tax records publicly available.
Another factor in the acceptance of the Teikyo offer over St. Ambrose’s might have been a stormy, competitive relationship historically between the two local schools.
In 1959, Marycrest broke off from St. Ambrose – with which it had been affiliated for 20 years – and became a separate accredited college.
A former Marycrest president, who insisted on anonymity, said in a recent interview that one of the school’s problems was going co-ed. The formerly all-male St. Ambrose began admitting women, so Marycrest in 1969 began accepting men. The school had to build a new dorm, and it lost its niche market as a women’s college. But “you have to keep up with the Joneses,” the former president said.
In 1972, there was a brief marriage of Marycrest and St. Ambrose known as Cardinal Neumann University. By 1973, they were divorced, re-establishing separate academic institutions.
I mentioned the apparent animosity between Marycrest, the Sisters, and St. Ambrose to the former president. “You hit the nail on the head when you said ‘pure antagonism,’” the former president said.
In that context, it’s not much of a surprise that Marycrest took the Teikyo offer instead of St. Ambrose’s.
On December 21, 1990, the “Restated Articles of Incorporation of Teikyo Marycrest University” were filed with the Secretary of the State of Iowa. It read, in part, “The Corporation shall have one class of members. Each member shall have full voting power. Initially, there shall be one member, the name and address of which is as follows: Dr. Shoichi Okinaga, 6-5-30 Hatanodai, Shinagaawa, Tokyo, Japan.”
A Story Befitting Dickens
The story of Shoichi Okinaga and the Teikyo Yamanashi Education & Welfare Foundation is one befitting Dickens.
From a lower-middle-class childhood that included witnessing the firebombing of Tokyo in 1944, Shoichi Okinaga grew up to control a fortune of $4.2 billion. This would place him 93rd on the Forbes list of the wealthiest people in the world, five up from beer magnate Alfred Heineken and one down from Phillip H. Knight of Nike.
But the name of Shoichi Okinaga does not appear on Forbes’ list of billionaires. Shoichi Okinaga shuns publicity, and his wealth is stashed in an interlocking group of U.S. not-for-profit foundations.
Shoichi Okinaga’s educational operations – which began with one dilapidated high school that he inherited from his father – had already run afoul of the Japanese Ministry of Education when he had planted 10 schools (from kindergartens to colleges) in one three-story building. He was told in 1970 by the Ministry that he was no longer allowed to create multiple schools at single locations in Japan.
Unable to expand in Japan, Okinaga decided to move operations across the Pacific and to start buying up U.S. colleges. With the help of a Des Moines CPA named Fred Van Liew, Okinaga set up a number of tax-exempt not-for-profit foundations in the United States. According to tax records, Van Liew draws a combined salary of $242,000 a year from these not-for-profits. (Van Liew did not return a phone call for this story and also did not return phone calls for a December story in the Des Moines Register.)
The tax returns for some of these not-for-profits are fascinating reading:
• Teikyo Foundation, Inc. Net assets, $5.9 million. Charitable disbursements, $499,069;
• Teikyo University Foundation, Inc. Net assets, $2.3 billion. Charitable disbursements, $1.4 million (all donations made in Japan); and
• The Okinaga Foundation. Net assets, $5.1 million. Charitable disbursements, $511,410.
In other words, Okinaga’s tax-exempt foundations had $2.3 billion in assets (mostly real estate, cash, government bonds, and gold bullion) and yet donated only $2.4 million, or slightly more than 1 percent, to “charitable” causes. Some of those charities happen to be other Okinaga-controlled tax-exempt foundations.
And they paid virtually no taxes. Records show that Okinaga’s not-for-profits paid only $6,458 in taxes on its “residual funds” in fiscal year 1999-2000.
Shortly after the sale of Marycrest was announced, the Quad City Times ran an article under the headline, “Iowa educator says he’s wary of college merger.” Dr. John Hartung, president of the Iowa Association of Independent Colleges & Universities, was quoted as saying, “The IRS should take a look into the way Teikyo executes its mergers and make sure it complies with all U.S. laws.” (Hartung did not return numerous requests for an interview for this article.)
Marycrest was the last of a handful of U.S. colleges that Okinaga purchased. His track record – of cramming multiple schools into confined places in Japan, and not making investments in schools he bought in the U.S. – was out there for anyone to look at. I asked Victor in December if the board had performed due diligence before approving the sale. He said it had, and “besides, who’s not to say that Okinaga didn’t give Marycrest an extra 10 years of life?”
But St. Ambrose arguably would have been a better steward of Marycrest. In the 11 years since Marycrest’s board of trustees rejected its offer, St. Ambrose has grown to become a university with almost 4,000 students and net assets of more than $96 million. St. Ambrose is not closing this year.
What Went Wrong?
Marycrest officials clearly thought the sale of Marycrest to Teikyo would bring capital for programs and physical improvements. On December 11, 1990, the Quad City Times quoted C. Dana Waterman III, a Marycrest board member at the time, as saying, “We expect the capital to provide for us and make us secure for years to come.” (Waterman did not return a phone call for this story.)
Yet a review of Marycrest’s tax records does not show any large influx of money from Teikyo or any other source. Indeed, nearly all of Marycrest’s budget remained derived from tuition, with gifts and grants making up less than 4 percent.
While it is true that Teikyo assumed Marycrest’s outstanding debt, there wasn’t any more money in Marycrest’s coffers than there was before.
Teikyo Yamanashi now owned the campus, and Marycrest was now responsible for maintaining Okinaga’s property.
In the 11 years since Okinaga bought Marycrest, a total of $396,254 was spent repairing campus buildings, according to building permits filed with the Davenport Public Works Department. Almost half of the money ($150,000) was spent in 1991 putting an elevator into Walsh Hall and making it handicapped-accessible, and another $64,117 was contributed by the Riverboat Development Authority to fix the leaking roof on Clifton Manor (which is on the historical register). The rest of the property was left to deteriorate. The leaking dorm roofs became the subject of campus cartoons.
I asked De Luca, “Why didn’t Okinaga throw some money in the pot?”
Marycrest’s last president answered: “I guess because he chose not to.”
While enrollment of American students declined precipitously, the campus became flooded with Japanese students that the NCA would later claim were admitted and graded with lower “standards of student achievement” than the American students, according to a December 9, 2001, Des Moines Register article written by Marycrest alumnus Clark Kauffman. Marycrest’s academic dean later wrote in a confidential memo that the American Language & Culture (ALC) program (which was open only to Japanese students) “lacked any ‘meaningful standards,’” according to the same article. The Register summarized: “In essence, the accrediting association was alleging the school had compromised its standards and become financially dependent on students who didn’t belong there.”
Less than 1,000 students were left at Marycrest (down from a peak of 1,800 before the Teikyo purchase) when the NCA placed the school on probation in 1994. In public statements, Marycrest was quick to point out that the NCA found fault with its governance, not its academic programs, but this was not entirely correct. The NCA report also criticized the school’s ALC program, its admissions process, and the quality of its language labs.
Shortly after Marycrest was placed on probation, the board of trustees declared “an economic emergency,” suspended tenure, and began wholesale layoffs of faculty and staff.
The Iowa Supreme Court ruled (in the case of Thannisch v. Marycrest International University) that at this time, “Japanese officials ... essentially [had] financial control over the university as a whole.”
This is the crux of the issue. The NCA, in its guidelines for accreditation, states, “Clearly accreditation should involve an evaluation of the board’s commitment to and capacity for providing leadership that protects the integrity of the institution.” Furthermore, the NCA states that it is the duty of the board to “represent the public interest,” not the interest of an individual “owner.” The “Restated Articles of Incorporation of Teikyo Marycrest University” gave Shoichi Okinaga sole control over the university. It was his decision alone where the university’s funds were used or not used, and how they affected the university’s academic programs.
Probation was lifted in 1995 when Marycrest promised the NCA that it would create a new, independent board of trustees.
I returned to Marycrest in 1999 with a host of fellow alumni; all of us were optimistic and excited. Enrollment had sunk to about 400 students. My salary for teaching eight courses that year was $16,000.
The school had a lot of problems, all of which were directly or indirectly related to how the school’s money was allocated. The computers in my department were all at least three years old, which was inadequate considering I taught Computer Game Design. What was curious was that about $25,000 a semester was being collected from my students for “a computer lab fee,” and this money was supposed to be earmarked for buying new computers within the department every year. I discovered during a Department of Graphic Communications & Computer Science meeting that the money was, in fact, just thrown back in the school’s general budget.
Nonetheless, I began to recruit students for the computer-graphics program. Within a year I had tripled the size of the department. Unfortunately, the department’s budget wasn’t increased by a penny.
This was how the stage was set when Marycrest’s accreditation came up for renewal of its accreditation, and I presented my response.
On October 30, 2001, the NCA announced that Marycrest was being placed on probation for a slew of deficiencies, including governance, inadequate department budgets, inadequate science and computer-graphics facilities, and that the institution failed to demonstrate “integrity in its practices and relationships” – nearly all of which I mentioned in my report.
Kauffman’s article concluded with a quote from President De Luca: “We lost 55 percent of our enrollment after probation after 1994, and if that happens again, we’re going to be out of business.” (Jeff Ashcraft, Marycrest’s vice president of university relations, later said that the entire Des Moines Register article was sent to Tokyo.)
On Monday, December 11, 2001, the Quad City Times ran an article under the headline, “DeLuca [sic]: Marycrest not closing.” That Friday, the board of trustees pulled the plug.
I asked St. Ambrose’s Moeller if his school would be interested in making a bid for the Marycrest campus, and he said a lack of investment made it unlikely: “The buildings are in pretty bad shape – too many years of deferred maintenance.”
But Marycrest will be sold again. If the sales of Teikyo Westmar and Teikyo Salem – two other American colleges bought and sold by Okinaga – are any indication, Marycrest’s final price will be about 7 percent of its assessed value. That would mean a sale price of just a little more than $1 million.
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