Documents filed this week in a lawsuit over housing near the University of Akron exposed a fight involving one of the nation’s largest charitable foundations, Akron leaders and the former director of the University Park Alliance.
The president and Akron program director of the Miami-based John S. and James L. Knight Foundation, a $2 billion charitable organization funded by the former owners of the Akron Beacon Journal and Knight Newspapers, accused management of the UPA of deception and raised concerns about the ability of city leaders sitting on the board to oversee UPA.
An amended complaint in a lawsuit by businessman Roger Carter against UPA contains emails among Knight Foundation officials and members of the UPA board, a nonprofit group working on the redevelopment of 50 city blocks around UA.
The suit alleges that UPA in late 2012 was deceptive — specifically former executive director Eric Anthony Johnson — in securing a $6 million grant and $1.9 million loan from Knight by withholding information that UA had dropped its involvement in a key component of the project, jeopardizing its success.
The foundation canceled the grant in April 2013. Carter sued, placing in jeopardy Carter’s investment with UPA in the University Square Brown Street housing project.
“This crisis was not brought on by Knight failing to fund but by UPA having induced KF [Knight Foundation] into a grant under false pretense, causing KF to audit before going any further,” Knight Foundation President Alberto Ibargüen wrote in an email dated May 11, 2013, to the foundation’s vice president for communications. “Where are the honest leaders of the UPA board accepting responsibility for telling the full, true story?”
In a notation to herself on Sept. 8, 2013, Knight’s Akron program director Jennifer Thomas raised questions about Johnson: “No one to reign him in. There are many points along this path where the board could have spotted this,” and she later suggested he was running a Ponzi-like scheme.
Board members named in the suit are Johnson, Thomas, UA president Luis Proenza, Mayor Don Plusquellic, Children’s Hospital president William Considine, Summa Health System CEO Thomas Strauss and vice president Patrice Lange, County Executive Russ Pry, Akron Metropolitan Housing Authority director Tony O’Leary, Akron School Superintendent David James, Akron Chamber CEO Dan Colantone, former Beacon Journal publisher Andrea Mathewson, attorney J. Bret Treier, First National Bank vice president John Falatok and community leaders Ann Gates and Ethel Chambers.
Knight Foundation and University of Akron officials declined comment. James, UPA board chairman, also declined comment, saying he could not comment on pending litigation and had not reviewed the complaint. Calls to Considine and Treier were not returned. Thomas, who recently resigned from the foundation, said she could not comment.
Johnson denied the allegations.
Advent of the suit
In Summit County Common Pleas Court, Carter says he contributed two Brown Street student-rental properties to UPA in exchange for a 5 percent stake in University Park Village, a UPA venture.
Carter’s attorney, Bradley S. LeBoeuf, on Thursday said the amended complaint includes documents and other information obtained during the discovery process.
“UPA was supposed to contribute in excess of $2 million toward the development of University Park Village,” LeBoeuf said. “Unfortunately, the development has not occurred. He has concerns whether it is ever going to occur. … We’re wondering what the future is of UPA.”
Although the source of the information is not clear, the complaint alleges that UA president Proenza told another board member, Treier, in October 2012 that the university “would not participate in a joint venture with UPA for the development and management of University Square.”
Treier shared the information that month with Johnson, but no one else on the board, and the Knight Foundation approved the grant and loan in December 2012 not knowing about the change, according to Carter’s complaint.
The funding fell apart quickly.
Knight Foundation Vice President, Chief Financial Officer and Treasurer Juan J. Martinez, in an April 2, 2013, email to Johnson and UPA board chair James, said UPA funding was cut off.
“As part of Knight’s monitoring of the grant Knight staff became aware that UPA management had been notified by UA prior to Knight’s approval of the grant, that UA would not partner in the development and management of student housing at University Square,” Martinez wrote.
“As a result of this development the originally proposed University Square project is not feasible and the corresponding financial model and benefits to UPA, which was a major element of the Knight grant are not achievable. … These circumstances could lead to the conclusion that material facts concerning the grant application were misrepresented to Knight. In light of these issues Knight has no choice but to immediately stop any future funding to UPA.”
Johnson resigned as UPA’s executive director three days later.
Knight president Ibargüen wrote in a May 2013 correspondence to several Knight Foundation board members and representatives that: “The accurate story is that KF was misled in material ways, and that UPA … was not paying bills even before we froze the grant.”
In an email the following day, Considine, who also is a member of the Knight Foundation board, wrote: “Everyone now knows Eric was egregiously deceptive and that will be told.”
However, that information was not forthcoming in media interviews with board members. Thomas, who resigned from the UPA board in August, expressed frustration when she reacted to a Beacon Journal editorial on the matter: “The part that they continue to neglect is that it wasn’t just miscommunication but hiding invoices, making false promises to developers and creating a Ponzi like scheme.”
The suit also references an email from Thomas to the Knight Foundation on Sept. 6, saying Plusquellic “has commenced a ‘private investigation’ of defendant Eric Johnson.” Plusquellic was out of town and did not return a call seeking comment.
Johnson, reached at his new job in Charlotte, N.C., said he had not seen the amended complaint and, reacting to portions read to him over the phone, vehemently denied all allegations.
“I don’t even know where to begin. That is not accurate information,” said Johnson, who is now chief development officer of Horizon Development, a nonprofit subsidiary of the Charlotte Housing Authority.
“They are trying to destroy my career is what they’re trying to do. I came into a situation where it was wrought with sheer competition amongst those anchor institutions. Everybody wanted a piece of the funds,” said Johnson.
Johnson denied that he was told by Treier that Proenza changed the scope of the university’s project and believed at the time of his resignation that the project was intact.
“I did not think for one iota that these people would try to throw me under the bus. I was trying to do the right thing, particularly in the Roger Carter situation. That is totally disgraceful. That is all I’m going to say.”
Cheryl Powell can be reached at 330-996-3902 or email@example.com. Betty Lin-Fisher can be reached at 330-996-3724 or firstname.lastname@example.org. Follow her on Twitter at www.twitter.com/blinfisherABJ and see all her stories at www.ohio.com/betty.