FAMU and AAMU: An Exercise in Incompetence, Malfeasance, and Breaches of Fiduciary Duty

By: Donald V. Watkins

Copyrighted and Published on June 4, 2024

An Editorial Opinion

Here are some serious subjects to think about this Tuesday. They deserve our attention.

Florida A&M University

Florida A&M University (FAMU) is owed nearly $1.9 billion from the state of Florida.  The debt is confirmed and verified in a September 18, 2023, letter from the U.S. Departments of Education and Agriculture to Gov. Ron DeSantis.  Yet, FAMU has refused to discharge its fiduciary duty to collect this debt.

Instead, In April-May 2024, FAMU got scammed in a fake $237 million tax fraud “gifting” scheme.  FAMU happily announced this worthless “gift” during the university’s May 4th commencement service.  

The $237 million "gifting" transaction fell apart under the hot lights of media scrutiny.  FAMU paused the gift and began an internal investigation into how and why the university got scammed. 

On May 24, 2024, the Florida Board of Governors for the State University System of Florida for took over the investigation into this embarrassing fiasco.

Today, there is a crisis of confidence in FAMU's president and board of trustees. Heads are expected to roll after the Florida Board of Governors completes its investigation into the facts and circumstances surrounding the $237 million "gift" to FAMU and presents its findings to Gov. DeSantis.

Alabama A&M University

Alabama A&M University (AAMU) is owed more than $527 million from the state of Alabama.  The debt is confirmed and verified in a September 18, 2023, letter from the Departments of Education and Agriculture to Gov. Kay Ivey.  Yet, AAMU has refused to discharge its fiduciary duty to collect this debt.

Instead of collecting its $527 million debt, AAMU confirmed on May 13, 2024, that the university made a $52 million offer to purchase the campus and facilities of bankrupt Birmingham-Southern College (BSC), which closed on May 31, 2024.

Insiders at AAMU do not understand why the university is offering a bankrupt historically white private college fair market value for its campus, buildings, furnishings, and equipment.  No sophisticated buyer acting in a fiduciary capaacity offers fair market value for anybody's distressed real property, special-purpose buildings, and other tangible assets. These assets are usually acquired at "fire sale" prices.

All of BSC’s assets are pledged as collateral on bank loans made to the college.  Today, BSC is upside down in these distressed assets, meaning the defunct college owes more on the loans than its property holdings are worth.

Insiders at AAMU also say the university has failed to conduct the necessary and proper due diligence that is required for the BSC acquisition transaction. Reportedly, there was no credible, independent, in-depth, inspection-based appraisal of BSC's distressed assets that was prepared by a qualified and reputable appraiser prior to AAMU's $52 million offer.

Like FAMU, AAMU appears to be caught up in a scam of its own making with its announced plan to acquire BSC's 192-acre campus.  AAMU is merely trying to bailout BSC's bankers, mortgage creditors, and unpaid vendors with the land-grant university’s limited financial resources.

Dormitories and other buildings on AAMU's campus in Huntsville are in deplorable shape due to decades of deferred maintenance, inadequate state funding (to the tune of $527 million), and an anemic $50 million endowment. Yet, AAMU says it has the money to buy BSC's entire 192-acre campus 100 miles away in Birmingham and pay a premium price for it.

AAMU's $52 million purchase offer for BSC's distressed assets cries out for a federal criminal investigation. Whenever financial transactions do not make common sense from a customary financial standpoint, "under-the-table" money has usually changed hands.

AAMU’s announced purchase offer for BSC appears to be a deflection from the fact that AAMU's president and board of trustees have breached their fiduciary duty to collect payment on the $527 million debt that has been owed to the university by the state of Alabama since September 18, 2023.  Apparently, AAMU prefers to spend its time and limited money bailing out BSC's bankers, creditors, and vendors rather than collecting the $527 million that is legitimately owed to the university.

Breaches of Fiduciary Duty Eventually Have Consequences

Professionals in the banking world are literally laughing at the governing officials at FAMU and AAMU. These HBCU officials are more interested in brandishing their university credentials and regalia at public gatherings, attending football games in skyboxes, and traveling to VIP events at university expense than they are in performing their fiduciary duty to collect $1.9 billion and $527 million, respectively.

FAMU and AAMU have hoodwinked their university stakeholders (i.e., students, faculty, staff, and alumni) into believing they are somehow better off waiving their collection of the confirmed and verified debts acknowledged in the September 18, 2023, letters.  What is worse, their stakeholders have seemingly bought into this false narrative.

Finally, FAMU's and AAMU's governing officials have shown a level of incompetence, malfeasance, and breach of fiduciary duty that is rarely seen on America's higher educational scene and in today's financial services industry.  If this same kind of incompetence, malfeasance, and breach of fiduciary duty had occurred in the private world of guardianships, estates created by wills and trusts, and conservatorships, the guardians, executors, trustees, and conservators of such trusts and estates would have been removed from office and possibly prosecuted criminally by now.