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Donors, including a former trustee, are suing to block Webster University from reclassifying endowment funds to meet the terms of a loan agreement, The St. Louis Post-Dispatch reported.
Amid ongoing business struggles, Webster has sought to unrestrict $34 million in endowment funds to meet liquidity requirements for a loan that requires the university to “maintain 75% unrestricted assets to outstanding long-term indebtedness,” according to court documents.
However, that level fell to 19 percent in fiscal year 2023, which prompted Webster to seek to unrestrict funds to avoid violating the terms on a $30 million loan agreement. Against the wishes of some donors, Webster went to court to reclassify the endowment money. Now former trustee Jack Schreiber, who established scholarships to memorialize late family members, is trying to prevent the move.
“Had the Schreibers been told that the monies in the Bette Schreiber Endowed Scholarship and the Andrew Schreiber Endowed Scholarship would be used for purposes other than the restricted purpose, and inconsistent with their intentions, the Schreibers would not have established and funded the scholarships,” an attorney for the family wrote in court documents.
Schreiber, a former bank president, stepped down from Webster’s Board of Trustees in 2018. He told the Post-Dispatch that he resigned because the university didn’t listen to his warnings as it racked up debt while failing to rein in expenses.
“I had a front-row seat with all of this, and I didn’t think management was adequately addressing all the serious financial problems that were going on,” Schreiber told the newspaper.
Webster officials defended its reclassification effort in a statement to Inside Higher Ed.
“Webster University appreciates the contributions of all its donors and supporters whose gifts have helped the University achieve its mission of delivering world-class education around the globe,” spokesperson Stephanie Dane said by email. “While seeking the reclassification of endowment funds from ‘restricted’ to ‘unrestricted’ status has become necessary to satisfy loan agreement terms, following such reclassification the University will continue using those funds just as their donors intended. We cannot comment further on developments in any active legal process.”
