- Associated Press - Thursday, April 26, 2018

MADISON, Wis. (AP) - The state Department of Justice on Thursday charged two former University of Wisconsin-Oshkosh officials with misconduct in connection with a financial scandal involving five building projects.

DOJ prosecutors charged former Chancellor Richard Wells and former Vice Chancellor Tom Sonnleitner each with five felony counts of misconduct in office. Each count carries a maximum sentence of 3 ½ years in prison. Both men are due to make initial court appearances June 11.

According to criminal complaints against the men, they illegally promised banks that the university would guarantee any debt that the private, nonprofit UW-Oshkosh Foundation couldn’t cover as the organization completed a series of real estate development projects between 2010 and 2014.

The projects included the renovation of a hotel and convention center and a sports complex, and the construction of a new alumni center and two bio-digesters - one in Rosendale and the other on the UW-Oshkosh campus.

The complaints note that the Wisconsin Constitution prohibits the state’s credit from being extended to help any person, association or corporation. The complaints also cite a law that bars state agencies, their officers and employees from creating any debt or liability against the state without prior state appropriation to pay it.

UW System regents filed a lawsuit in early 2017 alleging that Wells and Sonnleitner improperly funneled $11 million to the foundation to help it execute the construction projects and illegally promised that the university would back the foundation’s bank loans if the foundation didn’t meet its obligations. The case is still pending.

Regents Audit Committee Chairman Michael Grebe said in a statement Thursday that Wells and Sonnleitner broke “the sacred trust they carried as public UW officials.”

“We support these charges by DOJ, and will continue to seek justice in this case while serving students with integrity and transparency,” Grebe said.

Wells’ attorney, Raymond Dall’Osto, said in a statement that he and Wells were “saddened that the Attorney General’s office has chosen to issue criminal charges against him, based upon memoranda of understanding, loans and undertakings through the UW Oshkosh Foundation, which were intended to benefit the university.”

Dall’Osto declined further comment beyond saying he plans to make discovery requests for evidence and will appear alongside Wells at his initial appearance. Wells has said previously that he didn’t personally benefit and the UW System didn’t have clear rules for universities and foundations.

Sonnleitner’s attorney, listed in court records as former federal prosecutor Steven Biskupic, didn’t immediately reply to an email. Sonnleitner argued in filings in the lawsuit that UW officials knew what he and Wells were doing and didn’t object, and that the banks financing the construction projects knew the school’s pledge to cover the foundation’s construction obligations wasn’t legally enforceable.

UW System officials launched a review of transactions between schools and their foundations after filing the lawsuit. The study identified about $5.4 million in questionable transactions between 2010 and 2017 but concluded none of them were illegal.

A Legislative Audit Bureau report released last month found that between 2007 and 2017, many UW institutions and foundations weren’t fully separate and independent, and the UW System didn’t track how much money was flowing from schools to the foundations and other affiliated organizations. The report recommended that campuses more closely monitor their relationships with affiliated organizations such as their foundations.

The UW-Oshkosh Foundation declared bankruptcy in August in the face of $14.5 million in debt for three of the building projects.

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Follow Todd Richmond on Twitter: https://twitter.com/trichmond1


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