UW System Bails Out UW-Oshkosh

Former UW-Oshkosh Chancellor Richard Wells and former Vice Chancellor Thomas Sonnleitner still face 17-and-a-half years in prison and $50,000 in fines for allegedly assuring lenders that the UW System would bail out the UW-Oshkosh Foundation if it defaulted on its loans. But that is exactly what has happened, and it is raising a lot of eyebrows in the bankruptcy world, in academia, and across the state of Wisconsin.

There’s a bankruptcy case, a civil case, and a criminal case all pending because the UW-Oshkosh Foundation, which is a separate, supposedly self-funded entity designed to support UW-Oshkosh inked five development deals that it hoped would provide revenue to the school over time. It backed two bio-digesters that turn farm animal waste in energy, an alumni welcome center, a sports complex, and a hotel in downtown Oshkosh.

When some of the investments went bust, it was revealed that Wells and Sonnleitner had allegedly promised the Foundation’s lenders that UW-Oshkosh — so students and taxpayers — would back the loans if the Foundation couldn’t make its payments. However, state law prohibits public funds from being spent to benefit private entities.

That being said, it was recently announced that the UW System has stepped up to the plate and agreed to pay $6.3 million to satisfy UW-Oshkosh’s lenders. This is exactly what Wells and Sonnleitner are in trouble for saying would happen, which is an interesting turn of events.

Taxpayers and lawmakers are watching to see exactly where the $6.3 million the UW System will pay is coming from. Academics and college administrators are wondering whether the charges against Wells and Sonnleitner will be dropped.

All of us in the bankruptcy world are interested in this case because this is not the last time we will see a case where lenders believe they have been promised access to assets that someone later says they cannot touch. Many businesses today are really a collection on related entities that work together. It can be unclear what assets are really on the table when a deal is stuck.

That’s where we come in. Our firm wades into the thick of disagreements over who owes and owns what all the time, and we have years of experience settling and litigating such matters. If you are trying to collect a debt and hitting brick wall, or you are trying to fend off an overzealous creditor, we are here to help.