This week’s announcement of the closure of Vermont’s debt-burdened Burlington College brings to mind the famous quote from Britain’s legendary Conservative Party prime minister, Margaret Thatcher, that the real problem with socialist governments is that “they always run out of other people’s money.” Coralee A. Holm, the college’s dean of operations and advancement, released a statement claiming that the institution had “struggled under the crushing weight of the debt” related to a $10 million purchase of property — a purchase made in 2010, under the leadership of former Burlington College president, Jane Sanders, the wife of the socialist U. S. senator and Democratic presidential contender, Bernie Sanders.
During her seven-year tenure as president of the college, from 2004 to 2011, Jane Sanders pledged to double the student enrollment by spending millions of dollars of borrowed money on a beautiful new campus — 33 acres along the bank of Lake Champlain that was purchased in 2010 from the Roman Catholic Diocese of Burlington, Vt. President Sanders predicted that the new campus would attract more students and donations from alumni. It didn’t. The next year, Sanders took her $200,000 severance package and left Burlington College in such dire straits that by July 2014, the New England Association of Schools and Colleges (NEASC) put the institution on probation for not meeting its financial-resources standard. The Chronicle of Higher Education concluded that since the Federal Department of Education allows a college only two years of probation, Burlington College would have lost its accreditation in January 2017. On May 13, 2016, the Burlington College Board of Trustees voted unanimously to close the college effectively at the end of this month.
Burlington College is facing allegations of loan fraud during Jane Sanders’s tenure as the school’s president.
While the purchase of property by a college administrator is certainly not evidence of socialism, the way Jane Sanders was able to gain approval for the loan from the State of Vermont Educational and Health Buildings Finance Agency raises questions. In fact, Jane Sanders did such a good job of convincing loan officers that Burlington College would be a good risk that the school is now facing allegations of loan fraud during her tenure as Burlington College president. On January 10, 2016, a request for an investigation into federal bank fraud was filed with the United States attorney for the District of Vermont in behalf of Wendy Wilton, a Catholic member of the Immaculate Heart of Mary parish in Rutland, Vt., and other aggrieved Vermont parishioners. Wilton and the parishioners allege in the complaint that the sale of the Roman Catholic Diocese of Burlington headquarters to Burlington College entailed federal loan fraud.
The complaint claims: “The loan transaction involved the overstatement and misrepresentation of nearly $2 million dollars in what were purported to be confirmed contributions and grants to the college.” According to the complaint, Sanders sought and received approval to finance the sale of the diocesan property from the Vermont Educational and Health Buildings Finance Agency — even though there was no evidence that Sanders’s school had the collateral they claimed to have. Tax-exempt bonds were to be used for the transaction. Those bonds were purchased by People’s United Bank in the form of a $6.5 million loan to the college along with a $3.65 million second mortgage from the diocese.
The loans were contingent on the college’s providing proof of a minimum commitment of $2.27 million in grants and donations prior to the closing. Sanders submitted what she claimed was evidence of $2.6 million in confirmed grants and donations. But Sanders never had those confirmed grants and donations, the complaint alleges; instead, she “engaged in a fraudulent scheme to actively conceal and misrepresent material facts from a federal financial institution.” Sanders also signed the closing certificate and the loan agreement. Unfortunately, by the end of fiscal year 2011 (six months after closing on the loans), Sanders had collected only $279,000 of the $2.6 million in donations she had claimed to have. She left the presidency later that year. By 2014, the college had collected only $676,000, a shortfall of almost $2 million, and then it defaulted on its loan from the diocese.
#share#In an attempt to avoid bankruptcy, Burlington College sold much of the 33-acre property to a real-estate developer in 2014 and reached a settlement with other creditors, including the diocese. But the agreement has been costly for the diocese, which was forced to accept payments totaling $1,592,000 and an unsecured $1 million investment as settlement of the $3.65 million in principal it was owed. The diocese was also forced to forgo collection of up to $923,000 in interest accrued over the five-year life of the loan.
It’s instructive to look at this scandal as yet another example of the fraud of socialism itself.
Questions remain about how Jane Sanders was able to convince creditors — including the diocese, the State of Vermont Educational and Health Buildings Finance Agency, and a federally insured bank — that the school qualified for the $10 million loan. The complaint filed by the “aggrieved Vermont parishioners” suggests that Sanders’s privileged status as the wife of a powerful United States senator “inoculated her from the robust underwriting that would have uncovered the apparent fraudulent donation claims she made.” The public harm in this case is substantial, the Vermonters claim, and “the evidence indicates that Sanders, as president of the college, successfully and intentionally engaged in a fraudulent scheme to actively conceal and misrepresent material facts from a federal financial institution.”
Whether the complaint will be successful or not remains to be seen. Regardless, it’s instructive to look at this scandal as yet another example of the fraud of socialism itself. A key theme of the presidential campaign of Vermont socialist Bernie Sanders is his pledge to make tuition at public colleges “free.” Taxing Wall Street “winnings” will pay for his $75 billion a year program, Sanders promises, relying on the belief that wealthy Wall Street investors will be happy to hand over their profits to the state. Both predictions — that college can be free for students and that investors will fund it — are sure to fail.
A recent report from the Brookings Institution has pointed out that the biggest beneficiaries of Sanders’s free-college proposal would be the wealthy:
Families from the top half of the income distribution would receive 24% more in dollar value from eliminating tuition than students from the lower half of the income distribution . . . leaving families from the bottom half of the income distribution with nearly $18 billion in annual out of pocket college costs that would not be covered by existing federal, state and institutional grant programs. . . . Devoting new spending to eliminating tuition for all students [i.e., the socialist promise of free college tuition] involves a tradeoff with investing the same funds in targeted grant aid that would cover more of the total costs of attendance for students from well-off families.
This finding that the wealthy would benefit more than the poor from Senator Sanders’s socialist promise should not surprise anyone. The primary problem of socialism is that it claims to help the poor, yet it often benefits the rich at the expense of the poor. While real-estate developers who purchased the diocesan land from Burlington College have gained a great deal in their ability to develop the once-pristine land along Lake Champlain, the losses incurred by the Burlington Diocese will probably hurt the poor — those in Vermont who have been well served by Catholic charities and other direct-service programs. Students enrolled at Burlington College have been harmed, and faculty and staff will be fired. That is the real scandal of socialism.