AUGUSTA, Maine — The College of the Marshall Islands has stripped Wilson Hess, president of the University of Maine at Fort Kent, of the honorific title president emeritus amid allegations he mismanaged college endowment funds while leading an independent nonprofit group dedicated to the college’s support.
The 10-member board of regents at the small community college in the Central Pacific, where Hess was president from 2005 to 2009, voted unanimously on Dec. 12 to strip Hess of his title.
In making its decision, the board cited what it described as Hess’ troubling lack of transparency in his work leading a U.S.-based group dedicated to fundraising for the college, which Hess guided after departing as college president in 2009.
The nonprofit Friends of the College of the Marshall Islands lost its tax-exempt status in 2013 after failing to file the necessary paperwork with the IRS during the prior three years, when Hess was at its helm as executive director. It is now in the process of dissolving.
College officials learned of the lapse earlier this year after reviewing public IRS filings available online, according to college president Carl Hacker. Regents and school administrators were incensed that they hadn’t been told sooner.
Since 2008, the college had given roughly $1 million of its endowment to the group, and board members were furious at what they perceived as a former president hiding critical details about how that money was being handled.
Wealthy foundations and donors favor charitable giving that can be written off for tax purposes, so the loss of tax-exempt status hamstrung the group’s ability to fundraise, jeopardizing its core mission of supporting the college.
Officials with the the college sought to have its funds returned and, in July, Friends of the College of the Marshall Islands cut a check to the college worth about $1 million, according to Hacker and the nonprofit group’s current president, David Kalinski, a Washington, D.C., lawyer.
But the college never was notified about the nonprofit losing its tax-exempt status in the first place, a fact confirmed by Kalinski. Hess was the group’s executive director from 2009 through 2013 and Kalinski described Hess as the principal liaison between the college and the nonprofit.
The discovery of the lapse sparked the college’s board of regents and administration to take action against Hess. They also allege that his management of the college yielded short-term results that left the school on precarious financial footing.
“The legacy of non transparency and lack of openness to finance and budgets has caused much undo [sic] pain and torment” at the college, Hacker wrote in a May email to Hess, which was provided to the Bangor Daily News. “We cannot entrust our scarce and valuable resources to you any longer than is absolutely necessary.”
The college has not taken any legal action against Hess and officials in the Marshall Islands have not alleged any criminal conduct.
UMS Chancellor James Page said he was aware of the concerns raised by the College of the Marshall Islands but the system stood by Hess’ reputation as an able administrator.
“As stewards of Maine’s public university system, we have an obligation to consider any new information about our leadership team and we will continue to monitor events, but our focus remains our current and future work here in Maine,” he said.
In an interview, Hess said he would respect the wishes of the college’s regents and stop referring to himself as president emeritus of the college, but said his management of both the college and its finances were completely above board.
“I think we did wonderful things there,” he said. “If it’s going to cause heartburn for me to use that [title], I won’t. I don’t need the resume builder at this point in my career.”
Scapegoat?
The College of the Marshall Islands, located in the city of Majuro, is a community college of some 1,300 students that serves mainly students from Micronesia, a region northeast of Australia that includes several Pacific island nations. Hess took control of the college during an uncertain period when the institution was at risk of losing accreditation.
By the time he left in 2009, the college had regained full accreditation, thanks in part to initiatives by Hess to rebuild the school’s physical infrastructure and increase credentialing standards for faculty, including an expectation that teachers would hold master’s degrees and be fluent in English.
But capital improvements and more qualified staff cost money, and the college’s current president says Hess’ efforts were unsustainable.
“Mr. Hess certainly did the job on the academic side of things and working to maintain the accreditation of CMI,” wrote Hacker in an email to the BDN. “But do the ends justify the means? I don’t think they do. … You can’t just fly in and fly out, leaving that situation behind, and not be accountable.”
Within the past year, roughly 90 percent of the college’s 160 employees have taken pay cuts as Hacker and the board attempted to erase a net revenue deficit that has existed since 2007, according to financial documents provided by the college. Now the school is again under close scrutiny by accreditors, who in July put the college on watch because of concerns about its finances.
Hacker and other college officials say Hess left no mechanism for the college to support the vision he achieved.
In his defense, Hess points to a management analysis of the college’s financial report in 2009 — published several months after his departure. The report notes the $15.8 million growth in net assets and the “continued improvement” of the college’s financial condition during his tenure.
He said he believed he is being made a scapegoat for the college’s current financial position.
A financial plan published this year by Hacker noted that subsidies to the school from the central government of the Marshall Islands were down while the number of students and school costs were up. U.S.-based support for the college also has dwindled.
But college officials say the problems began under Hess — he just had the skills to hide them, they say.
“This all became clear after he was gone,” said Robert Willson, the school’s human resources chief, in a phone interview from the Marshall Islands. “Subsequent presidents have realized there’s no way we can fund what he created.”
The issue with the nonprofit group was the proverbial last straw for the college to take some action against its former president, said Hacker.
‘Dropped the ball’
Hess was executive director of the Friends of the College of the Marshall Islands from 2009 through 2013. Hess was unpaid for most of that time, according to IRS documents, but did receive about $17,000 in 2010 for his work, specifically regarding the administration of a grant that helped fund a collaboration that allowed graduates of College of the Marshall Islands’ associate degree nursing program to continue their education at UMFK.
In July 2010, when Hess became president of UMFK, he stopped being paid by the Friends organization, he and Kalinski said. He continued as volunteer executive director until late 2013.
In May of this year, Hess was in Majuro to attend the graduation of the first cohort of bachelor’s degree nursing students. At that time, he met with Hacker and other school officials, who questioned him about the endowment funds held by Friends of the College of the Marshall Islands, according to both.
Hess said he did not disclose the loss of tax-exempt status during that meeting. He later said he believed Kalinski had notified the school, but Kalinski said in an interview that no one with the group told the college.
Kalinski said the failure to file timely tax returns was the result of organization board members’ inexperience in running 501(c)3 nonprofit groups. Though the organization was working to rectify the situation, Kalinski said, it had learned that regaining its tax-exempt status would be difficult because it was not meeting the IRS requirement that one-third of its support come from small donors.
During the May meeting, Hess told Hacker and the others that the group was considering transferring the endowment funds to a Hawaiian foundation, which he said was better equipped to meet the one-third requirement. But that idea didn’t sit well with the college, he said.
“The folks there seemed quite distraught by the notion that their money would be in the hands of folks even further outside their control,” Hess said.
Kalinski said in a recent interview that Friends of the College of the Marshall Islands simply was unprepared to meet the complex tax requirements for American nonprofits that benefit foreign organizations.
“We dropped the ball,” he said. “We did not alert [the college], and we dropped the ball on that too. It’s always a good idea to provide bad news yourself, rather than let them find out another way. Part of that was that we’re 7,500 miles away. But there was never a lot of communication in either direction, for the entire life of the organization.”
‘Forging ahead’
The allegations against Hess come at a time of widespread financial turmoil and unprecedented turnover of presidents of the UMaine system’s seven campuses.
Page, the system chancellor, said UMFK has “proven financial controls and collaborative oversight” to ensure the proper management of tuition, tax dollars and donations, and lauded Hess’ record in Fort Kent.
“UMFK enrollment is up, they are building new bridges for students from 46 high schools from across the state to attend college, have recently completed a very successful comprehensive fundraising campaign, and Wilson is providing critical leadership to the system wide credit transfer initiative,” Page said.
Even with Page’s support, however, Hess said that it’s inevitable that the accusations from his former employer will “raise questions,” but that he’s comfortable his record speaks for itself.
“We will continue to prove, with that record, that we’re forging ahead at our little campus,” he said.
Follow Mario Moretto on Twitter at @riocarmine.
