Author: James Daly

Buntrock unworthy of leadership

UPDATED: This story has been edited to correct details about Dean Buntrocks fraud charges, as well as the amount of Buntrocks gift to St. Olaf. Buntrock was charged with civil fraud, not criminal fraud as the article originally asserted. Buntrocks gift to St. Olaf for the creation of a student center was $26 million, not $29 million as originally stated in the article.

This year marks the 10th anniversary of a significant corporate fraud suit brought against Dean Buntrock ’55, founder and former longtime CEO of Waste Management. It also marks Buntrock’s 40th year serving on the St. Olaf Board of Regents.

On March 26, 2002, the U.S. Securities and Exchange Commission filed a suit against Dean Buntrock and five other Waste Management executives for committing “massive financial fraud motivated by greed and a desire to preserve professional and social status.” The SEC’s 89-page complaint was damning of Buntrock, calling him “the leading force behind the fraud.”

The massive fraud occurred between 1992 and 1997 and was not fully revealed until 1998, when Waste Management announced it had overstatedits profits for the prior five years by an astounding $1.7 billion. It was the largest earning restatement in history, until Enron surpassed it. Revealingly, the U.S. government brought criminal charges against Arthur Anderson LLP, Waste Management’s outside auditor, for its role in the Enron scandal.

Waste Management’s stock plummeted after the restatement, costing shareholders $6 billion. At the same time, as the SEC complaint notes, Buntrock and his cronies “profited handsomely from their fraud.” Disturbingly, on Oct. 1, 1997, a mere 10 days before the company’s new management announced profits from 1996 had been overstated, Buntrock donated 100,000 shares of his inflated stock to St. Olaf to fund his $26 million commitment to build a new student center in his honor.

“Through the gift of inflated stock, Buntrock was unjustly enriched in the form of the increased tax benefit,” stated the SEC. The SEC estimated Buntrock’s ill-gotten gains from bonuses, retirement benefits, trading and charitable giving alone to be nearly $17 million.

In August 2005, Buntrock and the executives reached a $30.8 million settlement with the SEC. Waste Management agreed to pay $17.1 million in penalties on behalf of Buntrock, who was left to pay a measly $2.3 million penalty. Nonetheless, Bloomberg News reported that it was “the largest fine imposed on an individual in an SEC accounting fraud case.”

These revelations have not changed a thing. “Buntrock Commons” is still the name of the student center. The college’s most prestigious academic scholarship remains the “Buntrock Scholarship.”

Defenders of Buntrock typically rely on at least one of three lines of reasoning. All three reflect naivete concerning legalese and the lawsuit against Buntrock.

The first is that Buntrock never admitted to any wrongdoing. This is only half true. According to the SEC’s press release, the executives “settled without admitting or denying the allegations in the Commission’s complaint.” This phrase is far from proof of innocence. In fact, it is standard practice for legal settlements to include this phrase.

The second alleges that Buntrock was not convicted of any crimes and/or that he was never tried. This is remarkably deceptive. Buntrock wasn’t convicted of any crimes because he settled. Settling is the common and convenient recourse for defendants who cannot win their case and want to avoid the publicity and expenses that come witha public trial. Waste Management spent $37 million defending Buntrock and his henchmen and had estimated the cost of going to trial at another $32.5 million.

The third is that Buntrock’s case was a civil suit, not a criminal suit. While this is true, it is misused to argue that Buntrock did not commit any wrongdoing.This reasoning was used by Jerrol Tostrud, then-Chair of the Board of Regents, in a letter to the editors of the Manitou Messenger published Nov. 5, 2005. A week earlier, the paper’s executive editors opined an editorial titled “Buntrock, A History” that overviewed the SEC’s allegations against Buntrock. It seems as though Tostrud felt so threatened by the information divulged that he made the extraordinary decision to respond with a letter signed by him and then-President Christopher Thomforde.

“Perhaps you do not understand the difference between civil and criminal charges. Each year, thousands of individuals and corporations have differences of opinion with both the Internal Revenue Service IRS and the SEC regarding complex tax and securities laws. The vast majority of these disputes are settled short of litigation, as this case was. There were and are no criminal charges against Mr. Buntrock.”

This is deceitful. Litigation is simply the proceedings of a lawsuit. Therefore, the SEC litigated against Buntrock. Moreover, the burden of proof for a civil fraud case is “clear and convincing evidence,” so the fact that the case was civil does not absolve him of culpability.

The letter went on to accuse the editors of an unjustifiable attack on a college hero. “Your labeling of Dean Buntrock as a fraud is defamatory, demeaning to him and without merit. You provided no facts to support your labels,” it stated.

Astonishingly, the letter concludes with, “We need more people like [Buntrock].” It seems inconceivable that Thomforde, who refused to sacrifice his moral autonomy as college president, had a hand in writing the letter, even though his name was attached to it. Thomforde created a controversy by placing signs on his lawn that read, “Say no to the war on Iraq.” The day after the U.S. launched its invasion of Iraq, he gave a speech during chapel service decrying the destruction of war and calling for benevolence. He even joined students sitting on the stairs of Buntrock Commons to protest the Iraq war.

Such political outspokenness no doubt angered donors and members of the Board of Regents who supported George W. Bush. How else could one explain what happened next? On June 7, 2005 , Tostrud announced the coming academic year would be Thomforde’s last as president. He gave no justification. It is conceivable that Thomforde was forced to resign. Considering Thomforde’s achievements as president, the Board’s decision was unwarranted.

According to a St. Olaf news story published June 17, 2005, Thomforde’s accomplishments included growing the endowment by $70 million, increasing the first-year retention rate to 94 percent, setting the college down a path of environmental sustainability and making operational changes that saved the college $500,000 in one year alone. Thomforde, who was 6′ 9” and wore a bow tie, was popular among students. An editorial in the Manitou Messenger that fall described him as “the most visible administrator on this campus . . . [who] is frequently seen strolling past Fireside, waving and smiling, stopping along the way to bend down and chat with students and faculty.”

Thomforde remained true to his conscience in his final year. On March 9, 2006, he wrote an email to all students, faculty and staff announcing that President George W. Bush in his 2007 budget proposal had recommended the elimination of Upward Bound UB, Educational Talent Search ETS and GEAR UP – programs that help low income students gain entrance to college.

The concerted effort by Tostrud to paint Buntrock as a saint only months after quasi-impeaching President Thomforde evinces Tostrud’s moral meekness. The lies he promoted about Buntrock reveal his fear of how students would respond to the truth.

The fact that the Board has not impeached Buntrock, now 82, speaks to the lost souls who have been at its helm. The Board of this Christian college is in bed with a criminal.

It is unconscionable that Buntrock’s name remains attached to the student center and the college’s most prestigious merit-based scholarship. It is an abomination that needs to be rectified.

The Regents used to name campus buildings after morally upstanding individuals whose devotion to the college left a personal impression on students: Agnes Mellby, Gertude Hilleboe, Thorbjorn Mohn. Now they write seven- and eight-figure checks for buildings to be named in their honor. The former tradition should be resurrected to rename the student commons. It is high time to purge this Christian college of such a disgrace.

James Daly ’13 daly@stolaf.edu is from Cambridge, Wis. He majors in environmental studies.

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Letter to the Editor: Piper Center corruption

UPDATED: This story has been edited to reflect the fact that Buntrock faced civil rather than criminal charges.

It’s only two months old, yet the Harry C. Piper Center for Vocation and Career has already violated the college’s commitment to its students as stated on the St. Olaf website, that it will “encourage [students] to lead lives of unselfish service to others” and “challenge [them] be responsible and knowledgeable citizens of the world.”

Through two of its new flagship programs, “New York Connections” and “Ole Biz,” the Center has connected scores of students with alumni who hold senior positions at Goldman Sachs, Wells Fargo and Barclays – the very banking giants that have made fortunes by robbing pensioners, stockholders, homeowners and just about everyone else.

These alumni are remarkably intelligent and privileged human beings who have sold their souls to the highest bidder. They are servants of greed. The vast majority of them are no doubt morally upright in their households and workplaces, yet they use their talent to perpetuate institutions that destroy lives and families. Their work sustains the very mega-banks whose insatiable greed nearly destroyed the U.S. economy and then forced American taxpayers to bail them out.

The 25 students participating in the Piper Center’s New York Connections Program were divided into three tracks according to their career interest. Those who chose the business and finance track met with an alumnus who is a vice president at Goldman Sachs and Company. This behemoth investment bank played a leading role in two of the greatest financial disasters ever: the dot-com bubble of the late ’90s and the housing bubble that caused the “Great Recession.” Goldman Sachs also created the oil bubble that contributed to the price of a barrel of oil skyrocketing from $60 in the middle of 2007 to a high of $147 in the summer of 2008. This in turn caused food prices to rise, forcing an estimated 100 million people into hunger.

Some higher-ups in these financial institutions still have a conscience. Earlier this year, Goldman Sachs’s Executive Director Greg Smith resigned from the firm, citing its “toxic and destructive” culture.

After meeting the alumnus working for Goldman Sachs, the business and finance students met with three alumni who hold senior positions at the British bank Barclays formerly Barclays Capital. This summer Barclays paid a paltry $450 million to British investigators for its complicity in the biggest financial crime of all time. Barclays admitted to conspiring for the past decade with other Wall Street banks to fix global interest rates. The company manipulated Libor, a benchmark rate that determines interest rates for everything from student loans to credit cards and affects at least $500 trillion of financial transactions. As one Pulitzer prize-winning journalist put it, “Manipulating the Libor is a big deal because it affects the cost of money for almost everyone.”

That journalist is Gretchen Morgenson ’76, business and financial editor for The New York Times. Not only has she written about the Libor scandal, but she also has written extensively about the crimes of Goldman Sachs. Ironically, she was featured in the New York Connections program, although the business and finance students did not meet with her.

The Piper Center’s inaugural “Ole Biz” connected students with alumni serving another deviant mega-bank: Wells Fargo, the nation’s largest residential home mortgage originator. Held on Oct. 30 at the swank Minneapolis Club, the event featured over 150 students and 120 alumni, several of whom hold senior positions at Wells Fargo. The U.S. Attorney in the Southern District of New York is suing Wells Fargo for “hundreds of millions of dollars” for “defrauding a government-backed mortgage insurance program.”

In July of this year, Wells Fargo paid a laughable $175 million to settle a lawsuit brought by the Department of Justice DOJ for racially discriminatory lending practices. Among the DOJ’s allegations was that between 2004 and 2009 Wells Fargo discriminated by charging higher fees and rates “to approximately 30,000 African-American and Hispanic wholesale borrowers … because of their race or national origin rather than the borrowers’ credit worthiness …”

The Piper Center’s ties to criminal banks goes far deeper, for it is financed in large part by a multi-millionaire banker.

The Center for Vocation and Career bears the name of Harry C. Piper, who was chairman of Piper, Jaffray & Hopwood, Inc. and chaired the St. Olaf Board of Regents from 1986 to 1990. Harry’s son Addison “Tad” Piper donated $2.575 million to endow the center. Tad Piper is the retired Chair and CEO of Piper Jaffray Companies, an international investment bank based in Minneapolis. He was appointed to the Board of Regents in 1999 and became its chair in 2011.

Neither father nor son is a St. Olaf graduate, yet remarkably, they both have occupied the most powerful position in the college.

“[W]e have this kind of love affair with this college …” Tad Piper said in his speech at the Center’s dedication ceremony.

Students should be disturbed by this “love affair.” Piper Jaffray, like the other Wall Street banks, abused millions of investors. In 2003, it and nine other firms reached a $1.4 billion settlement with the SEC for “luring millions of investors to buy billions of dollars’ worth of shares in companies they knew were troubled which ultimately either collapsed or sharply declined.” Piper Jaffray and the other firms received “secret payments from companies they gave strong recommendations to buy.”

In accepting millions from Tad Piper, the college’s leadership clearly has no moral qualms about its cozy relationship with Piper Jaffray. Yet, this unconscionable action should come as no surprise. Nearly 13 years ago, the college leadership accepted $26 million for a new student center from Dean Buntrock ’55, one of the greediest CEOs in recent memory.

The Piper Center’s funding and its affinity for connecting students with alumni enriching themselves at Wall Street banks is a canary in the coal mine. It indicates that the president and Regents view the college mission statement as an anachronism, and they are in the process of rendering it irrelevant.

It also suggests a motive for turning the Center for Experiential Learning into the Piper Center: create more wealthy alumni. To hide this, the college leadership constructs a façade out of Christian rhetoric such as “vocation” and “unselfish service to others.”

Their hypocrisy was evident in President David Anderson’s speech at the Piper Center’s dedication ceremony.

“We expect graduates of our college to contribute to the common weal: in their families, in the workplace and in their communities,” he said.

Clearly this is duplicitous. Were it true, the Piper Center would not be introducing scores of unwitting students seeking to “expand their network” to alumni who work for banks that assault the common welfare.

In doing so, the Piper Center makes a mockery of the mission statement, which says, “life is more than a livelihood.” The primary function of the Piper Center is to create a new base of wealthy donors. To the Regents and the president, it is morally irrelevant how future donors will have made their money.

James Daly ’13 daly@stolaf.edu is from Cambridge, Wis. He majors in environmental studies.

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