Key Questions on Sale of Westminster Choir College to Chinese Unanswered

Colleen O'Dea | March 29, 2019 | Education
Assistant Attorney General describes response of prospective seller, Rider University, as ‘less than optimal’

Credit: Wikimedia Commons
Westminster Choir College (Williamson Hall)
The New Jersey Attorney General’s Office has “concerns” about Rider University’s proposed sale of Westminster Choir College to a Chinese-government-owned company and, calling the university’s responses to its questions about the sale “slow and partial,” is asking a Superior Court judge for more time to consider the legality of the transaction.

Judge Paul Innes asked the state to weigh in on the proposed sale of the world-renowned conservatory in Princeton to Kaiwen Education, a for-profit Chinese company partially owned by the Chinese government, because the sale is the subject of two lawsuits seeking to prevent it.

In a letter sent on Wednesday to Innes, Assistant Attorney General Jean P. Reilly wrote that her office cannot yet determine whether the sale is appropriate because Rider still has not fully answered all the questions submitted to it, nor provided all documents related to the sale. Reilly termed the university’s response “less than optimal.”

She did, however, provide some grounds for the approval of a sale, which Rider had hoped to complete by July 1, but those might make the transfer less attractive.

Specifically, Reilly wrote that the donation of land to the college in the 1930s constituted the creation of a trust and that puts certain conditions on any sale, namely that it cannot violate the terms of the trust. The state “does not currently have enough information to determine whether Rider has violated the Trust terms,” wrote Reilly. If it has not violated that trust, Rider may be able to sell the college property but all proceeds of the sale would have to remain in the trust and could only be used for purposes in line with the wishes of the trust.

$19M endowment at issue

If that sale can go through, Reilly wrote that Westminster’s $19 million endowment “should not be included as part of the Proposed Transaction” without a separate court proceeding to ensure that the intent of those who donated to the endowment “will be honored and protected.”

Constance Fee, an alumna of Westminster and president of the Westminster Foundation — a group of Westminster faculty, alumni and donors that filed one of the lawsuits seeking to block the sale — cheered the letter.

“The opinion released today makes it almost certain that Westminster Choir College will remain open for future generations,” Fee said. “We expect that Rider University will see the hopelessness of its efforts to sell this school and will instead return to proper stewardship of one of the world’s great cultural institutions.”

“The AG’s opinion … makes any attempt to sell the renowned music college almost impossible,” said Bruce Afran, the foundation’s attorney. “The opinion says that the 1935 Trust that created the campus must continue to be used for the Choir College’s educational and religious mission or shift to the Princeton Theological Seminary under the terms of the 1935 Will of Sophia Strong Taylor. If the Court accepts the AG’s position, it will be impossible for Rider to sell the College to Kaiwen Education … or to anyone other than a non-profit educational institution.”

Kristine Brown, a Rider spokeswoman, said the university is aware of the letter from the Attorney General’s Office and will address it through the court process.

Complicated litigation

“The issues raised in the letter do not come as a surprise as they are currently the subject of the pending litigations,” Brown said. “The University will carefully review the letter and respond to the claims and issues through the court proceedings. We look forward to the Superior Court of New Jersey resolving the issues in dispute after all the parties have had the opportunity to be heard.”

WCC was founded in 1920 in Ohio and relocated to Princeton in the 1930s, finding a home on land provided by Taylor. The philanthropist’s donation named Princeton Theological Seminary as a steward. When the small school was struggling financially, it merged with Rider in the early 1990s. At that time, the seminary entered into a legal agreement that outlined the understanding that Rider would preserve Westminster’s mission.

Rider University president Greg Dell’Omo’s announcement of the sale of the college, which currently enrolls 320 undergraduate and 119 graduate students, brought suits by the seminary, as well as the Westminster Foundation. One contends that any change to Westminster’s mission would violate the trust and should return it to the seminary while the other states the endowment cannot be transferred as part of the sale.

The Attorney General’s letter appears to agree with the plaintiffs’ contentions.

Reilly spelled out the state’s concern that “the Proposed Transaction calls for transfer to the Buyers of WCC’s $19 million Endowment Fund without any mechanism to preserve the donors’ intent that their gifts be restricted to certain uses.”

While the letter makes clear that Rider has the right to sell the property on which the college is located, Reilly wrote that “the sale proceeds would become part of the Trust and the Trustee would have to administer them in accordance with the Trust terms” or seek court permission to use the money for another purpose.

State needs more information

Jeff Halpern, contract administrator of the Rider University Chapter of the American Association of University Professors, said Reilly’s letter affirms what the union has contended since the sale was announced in 2016.

“If Rider sells Westminster, all the proceeds must be used to benefit Westminster,” he said. “President (Greg) Dell’Omo can’t simply cash out Westminster and use the windfall to fund his fantasies.”

It is unclear whether Rider has yet violated the terms of the original Taylor trust or whether the sale to Kaiwen would constitute such a violation. The state cannot make such a determination yet because it has not received all the information it needs from the university, according to Reilly.

Initially, it took Rider six months to respond to the state’s questions and then it only answered two of 49. Last month, the university provided further answers, though some of those were incomplete and Reilly wrote that “Voluminous redactions made it difficult to review some of the critical documents.”

The university gave the state still more information earlier this month but continues to assert that most documents related to the proposed sale are confidential, Reilly wrote. The state and the university are continuing to negotiate over the release of documents.

Rider accused of ‘stonewalling’

“In short, the State’s attempted review of the Proposed Transaction has been a long process that is still incomplete,” Reilly said in seeking more time from the court to evaluate the sale.

Joel Phillips, a longtime Westminster faculty member who opposes the sale, termed Rider’s lack of responsiveness to the state “persistent stonewalling.”

The state has sent Rider another 45 questions and hopes the answers to those will be detailed and help “resolve critical issues such as the fate of WCC’s Endowment Fund, Rider’s contemplated use of the sale proceeds, and the fair market value for the assets.”

Reilly’s analysis of the sale agreement also jibes with that of faculty, who have warned that Kaiwen could close the college at any point, despite Rider’s assertion that the Chinese company would be required to maintain Westminster’s programs for at least five years. While the agreement contains that five-year stipulation and another that precludes Kaiwen from closing the college within 10 years of the sale, Reilly wrote that another provision of the contract allows the buyer to invoke a clause allowing it to curtail classes or close the school for financial reasons.

“This ability to shut down WCC at any time if financial circumstances warrant makes no provision at all for the disposition of the income or the principal of the Endowment Fund,” she wrote.

Halpern said, “The fact that the AG concurs with our interpretation is yet another example that even when this administration is faced with facts, it chooses to lie.”

Innes has scheduled a court conference on the matter for April 15 in Trenton.