Friday, June 19, 2015

Paul G. Rice: Parallels Between Work and Play(ing with Sweet Briar's Future)

Abrupt announcements.  Misleading stakeholders.  Endowment squandered.  Millions of dollars due to creditors.  Breach of fiduciary duty.

These are not the (Sweet Briar) stories you're looking for.

In fact, this isn't a Sweet Briar story at all.

(okay, it totally has to do with the events at SBC)

We know that Paul G. Rice started PEC Solutions with two of his colleagues, who then sold the company to Nortel in 2005.

After the acquisition, Nortel found itself in hot water.  In an interesting endowment coincidence, Nortel’s Health and Welfare Trust (NWT) appeared to breach its trust: HWT Governance Committees and a third party trustee--Northern Trust--breached their fiduciary duties to protect Nortel's disabled employees and survivors of deceased employees by allowing Nortel to misdirect over $100 million from the Health and Wellness Trust for purposes inconsistent with the terms of the Trust.

Jimmy Jones had nothing to do with the Nortel endowment, of course; he reserved that honor for Trinity College.

Many people (everyone) have questioned the appointment of Jones as interim president: a disgraced, asked-to-resign-for-mismanaging-the-endowment individual was the most qualified candidate?  Since Jones was never voted in by the Board of Directors (nor the smaller Executive Committee), it makes one wonder: did Rice hand-pick Jones to close the school because he (Rice) remembered the Nortel fall-out, recognized that Jones would never find a respectable job, and needed someone to take the fall?

(That could just be a coincidence.)

In 2006, Nortel again made headlines when it paid out $575 million and 629 million common shares to settle a class-action lawsuit that accused the company of misleading investors about the company's health.  

Jo Ellen Parker mislead Sweet Briar's stakeholders when she stated that Sweet Briar was poised to "flourish."

(Huh.  Another coincidence?)

On January 14, 2009, Nortel filed for bankruptcy; the company had an interest payment of $107 million due the next day.  Scott Shank has a $27 million problem.

(Okay, but it's just a coincide... now it's just getting weird.)

Fast forward to June 2009.  (Let me guess--coincidence?)  Nortel announced the wind-down of operations and the sale of its business units.  At that time, the company handed out $14.2 million in cash compensation to seven executives.  It also paid out $1.4 million to 10 former and current directors, and $140 million to lawyers, pension, human resources and financial experts helping to oversee the company’s bankruptcy proceedings.

Fast forward even further to May 2015: the court system has finally declared that the remaining assets will be divided up among the company's creditors, pensioners, and sold-off business units.

It will take years for Sweet Briar to go through the courts to unrestrict the remaining endowment and modify the will (because SBC is a trust), at which point the creditors will be paid, faculty and staff might receive severance, and the rest...well, no one really knows.

History repeats itself: misapplication of endowment; misleading stakeholders; closing its doors when a large payment comes due; and a years-long battle for recompense (first the creditors, then the individuals whose lives and livelihoods were most affected.)

Did Rice have anything to do with the Nortel situation that eventually brought the industry leader to its knees?  He was a senior executive at Nortel.  He is the chair of board of Sweet Briar.  

The business of mismanagement: a coincidence...or more?

1 comment:

  1. Similar issues at PEC although the cases against Rice and others were not proved.-Misleading investors. One thing that was proved was that PEC submitted about $6million worth of invoices that the Federal Government determined were wasteful and refused to pay.