Exploring Lewis and Clark College's Perfect Storm
When the President of Lewis & Clark College made a $10.5 million loan to a company that converted waste oil into useful products, he thought he was investing the College's funds in an environmentally friendly company that would generate an attractive rate of return for the College. However, events unfolded differently: the company defaulted on the loan, which was subsequently found to have been made without the authorization of the College's Board of Trustees.
The Board of Trustees turned to Tonkon Torp to launch an investigation into the circumstances surrounding the loan. As a non-profit institution relying in part on bequests and charitable gifts from alumni and community sponsors, ensuring the integrity of the College's financial stewardship was an extremely important objective. Tonkon Torp conducted an independent review and analysis of the loan transaction and the President's actions. The resulting "Spencer Report" - named for its principal author, Tonkon Torp partner George Spencer - concluded that the loan was a one-time event brought about by a convergence of unfortunate circumstances: the perfect storm.
The Board of Trustees followed Tonkon Torp's recommendations and restructured several of its key oversight committees to ensure such improper loans were not made in the future, and added a new general counsel position to handle the internal legal affairs of the College. In a remarkable epilogue to these events, the Pamplin family of Portland donated $6.5 million to help compensate the College for the loss, and the Board of Trustees expects the remainder to be fully recovered through bankruptcy collections and other gifts.
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