Cal State Fullerton and business school donor Steven Mihaylo cut ties

Privately, the honeymoon might have ended years ago, but now Cal State Fullerton is going public with a break-up involving donor Steven Mihaylo, who until this week was namesake of the university’s business school.

University officials announced Wednesday, Aug. 26, they were ending their relationship with Mihaylo and removing his name from the College of Business and Economics after they were unable to resolve differences over $22 million Mihaylo had promised but not yet given to the school.

The falling out appears to date at least to late 2016, when Mihaylo stopped payments on a planned $30 million gift to the business school after giving $8 million.

University President Fram Virjee said has tried to repair that relationship that since taking his post in 2018. But a hurdle, Virjee said, has been Mihaylo’s suggestion, “on multiple occasions,” that the university buy a communications system from Crexendo, an Arizona-based company run by Mihaylo. Virjee also said Mihaylo complained – without providing specific examples – that the university was wasting money and stifling conservative thought and expression on campus.

Mihaylo, in a statement sent by his attorney, Jeffrey Korn, said Wednesday that he was “astonished” and disappointed in Virjee’s comments. He also disputed the university’s assertions and said the school has failed to live up to its commitments.

Earlier controversies

Mihaylo, 76, went to high school in Big Bear and graduated from Cal State Fullerton in 1969 with a degree in accounting and finance. He soon founded Inter-Tel, a business telephone and telecommunications company that he sold in 2007 for about $750 million. During his career Mihaylo has maintained a relationship with Cal State Fullerton and, in 2005, he received an honorary doctorate of humane letters from the school.

But in recent years, relations between the school and Mihaylo have deteriorated.

One source of friction came in 2007, when some business students were assigned to research the donor whose gift of $4.5 million had landed his name on the then-new business school building, Steven G. Mihaylo Hall. They learned that a few years earlier Inter-Tel had paid $9 million to settle federal allegations of mail fraud and anti-trust violations.

Mihaylo wasn’t accused of any wrongdoing, and said that the violations were confined to two individuals who worked at the company. “We fired both of them,” he said at the time. “We made restitution.”

The businessman and the university apparently patched things up. In 2008, Mihaylo pledged $30 million to support the business school. At the time his pledge was biggest donation ever promised to Cal State Fullerton.

But in 2016 Mihaylo again was connected to controversy at the school, when he swapped Twitter messages with students and later told the student newspaper that the university no longer fully supported free speech and conservative thought.

Virjee said that when he came on board at Cal State Fullerton two years ago “I began conversations with (Mihaylo)…  trying to create a relationship with him, understand what his issues were.” That’s when, according to Virjee, Mihaylo brought up the idea of selling the university a phone system.

Virjee said he quickly shut that down. The school didn’t need a new phone system and, as a public institution, it would seek competitive bids for any such purchase. Then, according to Virjee, Mihaylo accused school officials of wasting money and proposed that he be allowed to select conservative speakers to invite to campus. Mihaylo, according to Virjee, also wanted the school to agree to hire as many Republicans to the faculty as they had Democrats.

Though Mihaylo was offered the chance to look at the university’s finances, Virjee said the long-time supporter declined.

Virjee said not getting the rest of Mihaylo’s promised gift is “not helpful,” but added it won’t interfere with long-term plans for the business college, which already has a strong academic reputation.

Stifling dissent?

Mihaylo, who lives in Phoenix, contends Cal State Fullerton has shirked its commitments to him. In the statement, he described the school’s news release as “false and misleading” and said a movement has been underway for years to suppress conservative thought on campus.

“In 2007 I began to see students blame our Country and our system of free enterprise for whatever problems we were facing,” the statement said.

Though officials assured him the university would always present all sides of issues, they rejected his suggestions for campus speakers and didn’t welcome opposing views, Mihaylo said. He added that he tried to work out an amicable resolution.

“I believe the reality is the University chose not to fulfill their obligations to me, and far more importantly fulfill their obligations to their students to provide unbiased and diverse thought and to provide students with a framework to access the free enterprise system and to succeed and thrive.”

Questions about philanthropic gifts and the concept of “tainted money” – who donated it, how they earned it, and what they may want in return – are “a very old, old story,” said Leslie Lenkowsky, a professor at Indiana University’s Lilly Family School of Philanthropy.

Lenkowsky said examples of donors and their beneficiary institutions parting ways range from a controversial gift from oil tycoon John. D. Rockefeller to a religious institution in 1905 to recent revelations of accused sex trafficker Jeffrey Epstein’s donations to several universities.

Under the law, a tax-exempt donation should be a gift that doesn’t get the giver anything “substantial” in return, Lenkowsky said – but what qualifies as substantial can be a gray area.

Others said university donors often expect something for their investment. But such requests are “largely implicit, and presumably (touch on) things that are shared by the organization accepting them,” said Cecelia Lynch, a political science professor at US Irvine.

As a hypothetical example, Lynch pointed to a donor helping to fund medical research in the hope that it will lead to a treatment or cure for a particular disease.

But Lynch said disputes between universities and the individuals and charities that help fund them are becoming more common. Public funding is dwindling, she noted, and reliance on wealthy givers isn’t always without strings.

“You have this greater and greater concentration of wealth in the hands of individuals (who) can decide what kind of education and social services the rest of us get.”

Source: Orange County Register