Pearson Family Foundation Suing UChicago for Return of Gift

Pearson Family Foundation Suing UChicago for Return of Gift

The Thomas L. Pearson and the Pearson Family Members Foundation is suing the University of Chicago for the return of $22.9 million — the amount given so far on a $100 million pledge made by the foundation, the Chicago Maroon, the university's student paper, reports.

Announced by Thomas L. and Timothy R. Pearson, on behalf of their family, in the fall of 2015, the $100 million commitment — the second-largest gift in the university's history — was supposed to establish a research institute and annual global forum dedicated to the study and resolution of global conflicts. Housed at the Harris School of Public Policy, the Pearson Institute would aspire to recruit world-class scholars who would produce groundbreaking research to be used in the design and implementation of policy. However, in the lawsuit filed on February 20, the Pearsons declared that they had lost all confidence that the university would be "an appropriate or capable steward of the Pearson Family legacy," as it had allegedly failed to fulfill several key contractual obligations that were agreed upon when the gift was made, the Maroon reports.

The lawsuit is a culmination of a year-long dispute. The grant agreement required UChicago to appoint an institute director by September 1, 2016; the university appointed a faculty director in June 2017, saying that "[a]n internationally recognized executive director, who will be responsible for the overall activities and initiatives of the Pearson Global Forum, is expected to be announced in the near future." According to the Maroon, when no institute director had been appointed by the September 2016 deadline, the Pearsons, in June 2017, sent the university a notice of default. After the university responded several weeks later, the Pearsons told the administration they would not pay the $13 million installment due at the end of the month, which prompted the university to send the Pearsons its own notice of default.

Although the institute's website now identifies the faculty director as the institute director, the Pearsons' lawsuit alleges that it was a last-minute change to secure the university's legal position. In addition to the faculty director, two junior professors were hired to serve as full professors to fill three of four named-chair positions — hires the Pearsons were unhappy with. "By hiring these professors, the U of C deliberately failed to use the chaired professorships, as agreed by the parties, as a significant resource to be used to help establish and advance the reputation and standing of [the Pearson Institute]," the complaint alleges.

The complaint further alleges that the university did not make preparations for the first "Pearson Global Forum" in October, as agreed to, but instead planned to meet that obligation by involving the institute in the 2018 Irish Catholic Bishops' World Meeting of Families Congress. The complaint also alleges that UChicago informed the Pearsons in March 2017 that it had the right to collect millions of dollars from the institute for part of the Harris School's operating costs, increasing the institute's expenses by 50 percent; and that by changing the number of Pearson Institute scholarships without prior notice, the university was not negotiating transparently.

"The Pearsons are profoundly disappointed, and regrettably have been left with no other choice or course of action. The lawsuit speaks for itself," the foundation said in a statement to the Maroon. "The Pearsons believe their story is a cautionary tale that should give pause to any family, philanthropist, benefactor, or donor who is considering granting a university any amount of money — large or small."

Documents obtained by the Maroon prior to the lawsuit suggest that the university believes it has the option to terminate the grant agreement, which would allow it to remove the Pearson name from the institute after two years. For its part, UChicago issued a statement to the Maroon denying that the institute was in danger and saying that it "will continue [its] important and meaningful work with the full support and endorsement of the university.

"The university honors its grant agreements with its donors, and it did so with the Pearsons," the statement continues. "The Pearsons' complaint is without merit, and the university will vigorously defend itself against the baseless allegations."