"Permanent" Endowment expires after seven years, contradicting public statements

(Nashville) Newly-uncovered documents in the Watkins-Belmont merger case raise serious questions about claims made by the leadership of both institutions regarding the multimillion-dollar scholarship endowment that is to be created by the sale of Watkins College of Art's North Nashville campus.

The new documents, including the merger contract itself, were released by the Tennessee Attorney General's office in response to an Open Records request filed by Mark Schlicher, a Watkins instructor, and alumnus, who is one of three plaintiffs in a lawsuit that challenges the terms of the merger and the secrecy that has surrounded it. A hearing is set for May 20, 2020, in Davidson County Chancery Court. 

The merger agreement between Watkins and Belmont University called the “Plan of Merger”, states that the Belmont scholarship fund to be created from the liquidation sale of Watkins real estate and other assets will only be restricted to that use for just slightly more than seven years, until December 31, 2027. Those assets are estimated, according to documents filed in the lawsuit, at roughly $17 million. 

The temporary restrictions on the use of the money by Belmont directly contradict public statements made by both Watkins and Belmont officials, who have stated that the funds would be “permanently restricted” for scholarships for future students of the Watkins College of Art at Belmont “forever”.

At the January 28, 2020, joint press conference announcing the merger, Belmont President Bob Fisher promised, “Revenues [from the sale of the Watkins assets] will go into a permanently restricted endowment to benefit all current Watkins students and future students at Watkins.”

On March 17, several days after the merger agreement was signed, Watkins representatives made similar misstatements in a teleconference with State Senator Brenda Gilmore and others. Watkins Attorney for the merger Larry Papel falsely claimed, "It's restricted to Watkins College of Art students forever.” Watkins Commissioner Walter Knestrick, whose signature appears on the merger agreement, described the endowment as a "huge scholarship for the future Watkins College students forever." 

Watkins spokesman Philip McGowen is quoted in an article published May 15 in the "Tennessee Lookout" online newspaper, and characterizes the endowment as "sustaining Watkins College of Art for future generations,"

However, the contract, which was executed on March 13, specifies that Belmont has the sole right to use the money in the fund, including both the principal and interest, for any purpose whatsoever after December 31, 2027. A simple majority vote of the Belmont board of trustees is all that will be required. In non-profit law, that type of agreement is defined as a "temporary restricted endowment". A “permanent restricted endowment” is restricted in perpetuity.

“We have finally obtained the legal merger contract between Watkins and Belmont and the details of the merger outline a destruction of at least $17 million in charitable trust assets in a manner more egregious than we had imagined,” said Kevin Teets, lead attorney for the three plaintiffs. “The 100-page legal merger document also reveals that the public has been intentionally misled in ways unconscionable. Any characterization that this merger ensures scholarships for future generations of Nashville students is simply untrue. What is true is that more than $17 million in public money intended for Nashville's youth will be guaranteed for a mere seven years if this merger occurs under the existing terms," Teets said. “Transactions on an individual's personal credit report have a shelf life longer than the guarantee that the Watkins trust and its assets are actually used for scholarships," he added.

Belmont University will be the sole surviving entity after the merger deal is finalized. No Watkins board members, nor the state-appointed Watkins Commissioners, will have seats on the Belmont board. Ownership of Watkins real estate and property will be transferred to Belmont immediately upon final closing, scheduled for June 30, 2020. The Watkins fine art collection, conservatively valued at over half a million dollars, will be transferred to Belmont with no restrictions on whether it is stored, displayed, sold, or given away, in whole or in part.

In addition, the contract reveals that Belmont is given the unrestricted right to stop using the Watkins name after twenty-five years.

"The shocking misstatements exposed by these documents illustrate why it's so important to insist on sunlight for this closed-door deal. In the name of ‘preserving the legacy’ of Samuel Watkins, the current Watkins and Belmont leadership seek instead to extinguish it, and appear willing to state falsehoods about it. Seven years is not 'forever'. Twenty-five years is not ‘ future generations'. It’s barely one generation”, said Schlicher.

The lawsuit asks Chancellor Patricia Head Moskal to affirm that the property belongs to the public charitable trust established by state law and the 1880 will of Samuel Watkins, and to declare that the Trust is a public entity, subject to the legal protections guaranteed by Tennessee's Public Records and Open Meetings laws. The plaintiffs have filed numerous documents with the court, seeking to counter the claim that the Watkins property is instead owned by a private non-profit corporation that was formed in 1974 in support of the public Trust. 

Watkins College of Art was established by an act of the Tennessee Legislature in 1881 that accepted the will of Nashville philanthropist Samuel Watkins, which donated money and property to the state, in trust, to develop an independent, affordable public educational institution for the benefit of "the youth of Nashville." Originally named "Watkins Institute," the College has been in continuous operation for 135 years.

On January 28, 2020, the Watkins Commissioners and Belmont University, a private Christian College, abruptly announced a merger plan that sparked immediate student protests, creation of an online petition garnering nearly 6000 signatures, and resulted in the filing of the lawsuit that seeks transparency, accountability, and public participation with the goal of a better deal for the Watkins community and for Nashville.

The plaintiffs in the legal challenge filed to Save Watkins are Kenneth Strawn and Amari Harris, two students currently attending Watkins, and Mark Schlicher, a faculty member at the institution. The plaintiffs are represented by attorneys Kevin Teets and Jonathon Fagan.

Referenced Document:

“Plan of Merger” by and between Belmont University and Watkins. March 13, 2020.

Select Save Watkins Press 

• Dulce Torres, "Lawsuit Alleges Belmont-Watkins Merger Violates Public Trust," May 15, 2020. 
• Emma Whitford, “Watkins-Belmont Merger Controversy Continues,” Inside Higher Ed, March 20, 2020.
• Jason Hall, “'Save Watkins' group calls for resignation after alleged armed incident,” Fox17 Nashville, March 19, 2020.
• Taylor Dafoe, “A Nashville Art School Made Headlines When It Announced a Merger With a Christian University. But a New Injunction Could Stop It,” ArtNet News, March 16, 2020.