Adam Greenway and SWBTS announced today that there has been a settlement in the lawsuit that they and Baylor University brought against the trustees of the Harold E. Riley Foundation (HERF) over their attempt to take control of the foundation and redirect its assets. Mr. Riley was a longtime benefactor of SWBTS and Baylor, and set up this foundation to continue to support those institutions after he died.
When Dr. Paige Patterson was fired from Southwestern, friends of his took control of the board of HERF and there are allegations that the intent was to redirect money from the HERF foundation to Patterson’s Sandy Creek Foundation. Baylor and SWBTS sued to regain control of the board, restore the original structure and foundation of the board, and to regain the funding as Mr. Riley intended.
The entire story can be found in the SWBTS press release, which can be read in full here. Significant portions are copied below, with my comments. In addition, the settlement is published here. (The press release from SWBTS is indented and italicized.)
A settlement returning control of the Harold E. Riley Foundation to Southwestern Baptist Theological Seminary and Baylor University “vindicates” the schools’ action in bringing a lawsuit to protect the “donative intent” of the foundation’s namesake and longtime benefactor of the schools, Southwestern Seminary President Adam W. Greenway said following a Feb. 8 hearing in which the settlement was entered in the 67th Judicial District Court of Tarrant County, Texas, presided over by Judge Don Cosby.
Greenway expressed thanks to “report that, in the Lord’s kindness, truth and justice has indeed prevailed.”
There is no way to look at this except as a complete victory for the Seminary and for Baylor, and a complete defeat for the Patterson forces. The seminary got everything it was seeking and the Patterson forces gave up everything. This is not so much a settlement as a capitulation. The reasons for that capitulation become clear later.
The lawsuit filed by Southwestern and Baylor in September 2020 alleged the HERF board led a “secret coup” in June 2018 in an “attempt to seize control of the Foundation and its assets,” which altered the foundation’s purpose, removed the schools’ rights and status as charitable members and sole beneficiaries, and misappropriated assets worth millions of dollars.
Under the settlement, the rights of Southwestern and Baylor to name trustees to the HERF board are restored, and Mike C. Hughes, Charles Hott, and David August “Augie” Boto are required to resign from the board and all paid positions of the foundation, effective immediately upon request of Southwestern and Baylor. Hughes was the HERF president and previously served as Southwestern’s vice president for institutional advancement from 2006-2017. Boto is the former executive vice president of the Southern Baptist Convention Executive Committee and served as its interim president from 2018-2019. Hott, HERF’s former chief investment officer, was a Southwestern trustee from June 2017 until Jan. 26, 2021, when he was notified by board chairman Philip Levant that in light of Hott’s disclosure of material conflicts of interest on his annual report to the seminary he was considered as having resigned from the board under longstanding board conflict of interest policy. As part of the settlement, Hott represents and agrees that he is no longer a seminary board member.
The now former HERF board members are also prohibited from engaging in any efforts “designed to or will … discourage third parties” from financially supporting the schools or would “divert” gifts from the schools to third parties. Additionally, Hughes, Hott, and Boto agree “not to seek or accept any position or employment from or appointment in any fiduciary capacity, whether as an officer, director, or trustee at any Texas public and/or private nonprofit charitable organization,” as well as all Southern Baptist Convention entities.
The settlement was precipitated after one week of trial testimony in a temporary injunction hearing in which only one witness, Hughes, testified and often had difficulty answering questions about actions of the foundation’s board that Southwestern and Baylor alleged were contrary to the intent of Harold E. Riley, who established the charitable organization for the sole benefit of the two schools that he had financially supported for many years.
After one week of trial, it evidently became so clear that the truth stood on one side that a settlement was reached. The next paragraph explains the real reason for the settlement.
The settlement also came after the Texas attorney general’s office – who intervened against Hughes and the foundation leadership in the lawsuit in December to “protect the public interest in charity” and joined in the settlement – issued a subpoena compelling the testimony of Paige Patterson, the former president of Southwestern who was terminated in May 2018, less than two weeks before the HERF governance was changed. The subpoena was issued after evidence was presented showing involvement of Patterson, coupled with information provided to the Texas attorney general indicating efforts by Patterson and his associates to divert funds and redirect gifts away from the seminary to the Sandy Creek Foundation, his personal nonprofit organization.
The Texas Attorney General intervened AGAINST the Patterson side in this “to protect the public interest in charity” and issued a subpoena that would have compelled Dr. Patterson to testified under oath and in public. Since his firing, he has been working in the background, helping with the establishment of the CBN, evidently directing efforts to divert funds away from the seminary and to himself, and other activities. The prospect of being forced to speak the truth in front of a court of law was enough to motivate a settlement.
Greenway made this statement.
“Southwestern Seminary is pleased with this outcome. This agreement vindicates our desire to honor Mr. Harold E. Riley’s legacy and to hold accountable those individuals whose actions served to undermine his donative intent. While painful and costly, this cause of action was necessary to protect charitable donors who deserve the confidence that the purpose of their generous gifts will be fulfilled with integrity and without interference. This victory is not only for Southwestern Seminary and Baylor University, but for all who are committed to ensuring that resources intended to advance Kingdom purposes are not misused.
“Mr. Riley had a long and deep commitment to Southwestern Seminary that began with his father’s experience as a student on Seminary Hill, where Harold lived as a teenager. In order to honor his father, Ray I. Riley, and to benefit future generations of students like his father, Harold contributed major gifts to Southwestern, including the lead gift for the Ray I. Riley Alumni Center. Harold also gave $16 million for the lead gift in building the J.W. MacGorman Chapel and Performing Arts Center in honor of our longtime New Testament professor, who deeply impacted Ray Riley. When Harold passed away in 2017, flags on the seminary’s Fort Worth campus were lowered to half-mast in his honor.
“Today’s settlement returns the foundation to its original purpose consistent with Mr. Riley’s wishes to benefit students and future ministers of the Gospel, like his father many years ago. I am thankful to report that, in the Lord’s kindness, truth and justice has indeed prevailed.”
According to this press release, this settlement does not end the story. Ken Paxton, Texas Attorney General, is exploring the possibility that Hughes and Hott, (and perhaps others involved in the scheme?) diverted money from a charitable foundation. It is clear that the possibility of criminal charges against them still exists.
In his December motion to intervene in the lawsuit, Texas Attorney General Ken Paxton alleged Hughes and Hott “began to develop a scheme … to receive substantial salaries and benefits from this charitable Foundation and find a way to change the structure of the Foundation to the detriment of its sole charitable beneficiaries, Baylor and Southwestern.” While the settlement resolves the civil claims in this matter, seminary leaders have pledged full cooperation with state and federal officials as they look into this and related matters.
The HERF Foundation has new board members, replacing those who directed the breakaway.
In light of the settlement and in coordination with the resignations of Hughes, Hott, and Boto, on Feb. 6 Southwestern and Baylor named their new HERF board members: Colby T. Adams, vice president for strategic initiatives and chief of staff, and F. Edward Upton, associate vice president for institutional relations, both representing Southwestern Seminary; Jeff Wallace, senior director of investment operations, finance and legal, and Doug Welch, chief compliance officer, both representing Baylor University.
Legal settlements usually involve each side getting a little bit of what they wanted and giving up some of what they asked for, but there seems to be no compromise here. The Patterson loyalists gave up and SWBTS and Baylor got everything they had asked for in the lawsuit. They were “vindicated.” The prospect of Patterson and the others being put on the stand under oath and being forced to testify seems to be the primary motivation for the settlement.
This story is far from over, but now it rests in the hands of the Texas AG. We rejoice that Mr. Riley’s intent has been restored and the money he left to help SWBTS and Baylor will now go to its intended purpose.