Relaymedia

$112 Million Promised to College Turns Out to Be Fraud

( [email protected] ) Sep 28, 2004 02:42 PM EDT

The largest gift in the history of Saint Mary's College which increased to $112 million by a first-time donor turned out to be all promise and no cash.

Seven years ago, a donor who insisted upon strict anonymity pledged a promised gift started at $25 million to Saint Mary's, a small liberal arts school run by Christian Brothers in Moraga, a secluded town in the San Francisco Bay area. The college's origins date back to the state's early history.

The promised gift was increased on nine occasions over the next few years to a total of $112 million, putting Saint Mary's in an elite club of colleges and universities nationwide to receive such a substantial donation.

Based on the promise, the college built a $25 million, three-story science center and began plans for several other buildings and major renovations on campus.

"Thanks to the generosity of an anonymous donor, all Saint Mary's students have the unique opportunity to experience science instruction and research firsthand," the college president, Brother Craig J. Franz, a marine biologist, said at the science building's dedication ceremony in 2000. "It is a gift that goes directly to our goal of enhancing student learning."

"It was accepted on the basis of faith," said Dr. Giles Miller, who was a member of the college's board of trustees at the time of the pledges and has since retired. "Faith is a big thing in religion."

In a letter to the students and staff, college officials revealed last month that the donor had not made good on a penny of the $112 million, suggesting that there had been "a serious act of deception against Saint Mary's."

The science center has been paid for with bond money. Now the bond must be covered with other funds. While insisting that the college's finances remained sound, the officials warned that future construction projects would have to be seriously scaled back.

Law enforcement authorities started a criminal investigation in early August. The college's board named a team of its own led by a former federal prosecutor, Neal J. Stephens, to delve into the matter. This week, Brother Craig, 50, announced that he would step down in January after seven years.

Brother Craig said in an interview on Friday, "I did make some mistake at some point along the line," but he said he was waiting for the college's internal investigation to determine precisely what went wrong.

"People are angry that the college got involved in this," he said. "They are angry at the college that we wasted resources having faculty and staff plan buildings that are not to be built."

He said his departure resulted from his hope that a new president would be better able to heal the wounds.

The $112 million pledged was to have come from the donor's profits on the real estate scheme, which purported to involve buying property from PepsiCo occupied by fast-food restaurants and leasing the restaurants back to PepsiCo. Deputy District Attorney Steven Bolen said PepsiCo knew nothing of the scheme, and that documents written to investors on PepsiCo letterhead were fabrications.

The authorities have identified two men at the center of their investigation. They are Saint Mary's mysterious benefactor, identified as Conrad Colbrandt, a businessman who was named to the college's board of regents in 2000; and a business associate of Mr. Colbrandt, John Banker, an 83-year-old former real estate broker whose license was revoked in 1980 after he pleaded guilty to grand theft and forgery in a real estate case and was sentenced to five years in prison.

For many at the college, the criminal investigation is secondary to the internal review, which many hope will explain the relationship between Brother Craig and Mr. Colbrandt and how it was that the college never insisted on even a small down payment on the $112 million.