MOHELA Board approves asset transfer despite suit

By Elliot Njus

Published Sept. 11, 2007

Pending legal action failed to stop the Missouri Higher Education Loan Authority board from approving a $230 million funding transfer.

The MOHELA board has decided to transfer its assets to the state, despite a lawsuit that could block the sale.

Two former MU students, Michael McGennis and Aaron Izadi-Moghadam, filed the class action lawsuit against MOHELA, the state's student loan agency, its governing board, and two administrators, after state legislation authorized the sale of the agency's assets to fund construction at higher education institutions across the state.

The plaintiffs are represented by a team of attorneys that includes John Lichtenegger. Lichtengegger is a former member of the UM system Board of Curators, the UM system's governing board.

The sale of MOHELA assets was authorized by the Missouri General Assembly as part of an omnibus higher education bill in May. The proceeds from the sale are to be used to fund the Lewis and Clark Discovery Initiative, an effort to fund capital improvement projects at the state's universities and colleges.

No MU projects or improvements are being funded by the sale.

The plaintiffs contend the sale of the assets violates the institution's mission by improperly diverting resources from students to institutions, calling the plan a "raid on the MOHELA coffers."

But the agency's board voted to transfer the money to the state in spite of a hearing to be held today. The law authorizing the sale requires that the agency transfer the $230 million by Sept. 15, but it allows the agency to put off the payment if it interferes with its ability to sustain itself financially or to fulfill its obligations to Missouri students.

MOHELA Director of Business Development Will Shaffner said the board's resolution stated the funds would be transferred by Friday, one day before the date mandated in the statute.

He said tomorrow's hearing could block the funding transfer even though the resolution was already approved by the MOHELA board.

"We will do whatever the court orders us to do, of course," he said.

The vote took place during a regularly scheduled board meeting. Shaffner said the board meets four to five times per year.

Marty Drewel, the Missouri Budget and Planning Division deputy director, said Missouri higher education institution presidents and chancellors have been notified that some schools will begin to receive funds Oct. 15.

He said the funds will be distributed according to a cash flow planned by the division. Some schools will not receive funds through the initial payment. The entire $350 million in funding from the asset sale must be transferred to the state by Sept. 30, 2013 unless the MOHELA board and the state office of administration approve a deferral.

Drewel said he was not sure what would happen if the division was ordered to return the funding from the asset sale.

Colleges and universities would apply to be reimbursed for the capital improvements approved in the appropriations bill that accompanied the omnibus education bill. Drewel said schools that have already started projects with their own funds might not be reimbursed if the funding transfer is blocked.

"That's kind of a decision each school made," he said. "If that's something they've done, they've assumed the risk."