The recent economic troubles of a Sonoma County real estate developer Clem Carinalli, who was involved in loans from the Sonoma State University Academic Foundation, did not negatively impact the Foundation's endowment pool or student scholarships, says Patricia McNeill, Foundation president.
A July 1, 2009 article in The Press Democrat reported that Carinalli's loans put the Foundation in jeopardy when he recently defaulted on a $1.2 million loan which was backed by a first deed of trust for Sonoma County property.
The Foundation is currently in the process of taking ownership of the property in lieu of foreclosure, says Chief Financial Officer Laurence Furukawa-Schlereth. The only other outstanding Carinalli loan, for $235,500, was not in default and has been paid in full.
McNeill and Furukawa-Schlereth have responded to the newspaper's reporting with a guest editorial published July 17, 2009. It responds to many of the issues raised by the article.
The guest editorial follows:
CARINELLI LOANS WERE LEGAL AND ETHICAL
By Patricia McNeill, President, SSU Academic Foundation and Laurence Furukawa-Schlereth, Chief Financial Officer, Sonoma State University
Like you, we believe it is very important for Sonoma State University to keep its students, faculty, donors and the public at large properly informed on issues of concern to them.
Recently, you have read about loans, secured by real estate, that were made by the University's Academic Foundation to a local real estate developer, Clem Carinalli. These types of investments were made in accordance with all legal, ethical and fiduciary guidelines. They were part of an investment strategy that has been successful for more than 15 years. These investments outperformed other types of fixed income category investments in the Foundation's total portfolio providing an average annualized rate of return of approximately 9%.
Some questions have arisen which we wish to clarify:
- At no time have any taxpayer funds been used by the Foundation to make investments
- Scholarships were not negatively impacted
- The endowment pool has not been negatively impacted
- Mr. Carinalli resigned from the Foundation Board before any of the loans were made to him
- Loan interest rates were consistent with loans made to other borrowers in the same time frame
- Loans were secured by first deeds of trust and serviced through a brokerage firm
- At no time was the reported decline in the Foundation assets due to any financial issues associated with Mr. Carinalli.
Earning and sustaining the trust of the campus and community is one of our highest priorities and guides our every decision. Since 1974, the Foundation has existed to support the mission of the University in providing the finest education to our students. Its purpose is to receive and administer gifts, endowments, scholarships and planned giving. Its activities are directed by a board of community members, students, faculty and administrators.
The loan investments involving Mr. Carinalli represent a small part of the Academic Foundation's total investment portfolio and primarily support a charitable remainder trust program in which many beneficiaries have received steady returns on their investment.
We encourage you to learn more about the SSU Academic Foundation and its investment policy at http://www.sonoma.edu/afd/fnd/.
SSU has earned and maintained the trust of the community throughout its nearly 50-year history. We take this responsibility very seriously and continue to provide integrity, honesty and transparency to our business practices. Our students benefit from the generosity of members of the community.
On behalf of those students, we offer our thanks and our continued commitment to excellence.
