Settlement restores control to Baylor and Southwestern

Photo: Flynt / Bigstock

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A legal settlement has returned control of the Harold E. Riley Foundation to Baylor University and Southwestern Baptist Theological Seminary.

The settlement—reached after former Southwestern Seminary President Paige Patterson was subpoenaed but before he testified—required three foundation trustees to resign and bars them from employment and board service to any Texas charitable organization or Southern Baptist Convention entity.

The university and seminary had filed a lawsuit in September, claiming the Riley Foundation was trying to misuse millions of dollars in assets intended for the two schools.

The suit asserted some members of the foundation’s board led a “secret coup” to seize control by rewriting the foundation’s bylaws without notifying Baylor or Southwestern and changing the foundation’s stated charitable purpose. As part of the changes, the schools lost their ability to name board members, removing the foundation’s sole beneficiaries from any governance role.

Terms of the settlement

The settlement, entered in a Feb. 8 hearing in the 67th Tarrant County Judicial District Court, restored the rights of Baylor and Southwestern Seminary to name trustees to the foundation’s board.

It also required Mike C. Hughes, Charles Hott and David August “Augie” Boto to resign from the board and from paid positions of the foundation.

Hughes was president of the foundation and had been vice president for institutional advancement during most of Patterson’s time as president at Southwestern Seminary. Hott was former chief investment officer at the foundation and a former trustee at the seminary. Boto was former executive vice president and interim president at the SBC Executive Committee.

The settlement was reached after one week of trial testimony in a temporary injunction hearing in which Hughes testified.

It also was reached soon after the office of Texas Attorney General Ken Paxton issued a subpoena compelling the testimony of Patterson, who was fired as Southwestern Seminary president less than two weeks before the foundation governance was changed.

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A news release from Southwestern Seminary stated: “The subpoena was issued after evidence was presented showing involvement of Patterson, coupled with information provided to the Texas attorney general indicating efforts by Patterson and his associates to divert funds and redirect gifts away from the seminary to the Sandy Creek Foundation, his personal nonprofit organization.”

In December, Paxton had filed a motion to intervene in the lawsuit, alleging Hughes and Hott “began to develop a scheme … to receive substantial salaries and benefits from this charitable foundation and find a way to change the structure of the foundation to the detriment of its sole charitable beneficiaries, Baylor and Southwestern.”

Limits placed on former foundation board leaders

Under the terms of the settlement, the former foundation board members are prohibited from any efforts to discourage third parties from supporting the schools financially or to divert gifts elsewhere.

Hughes, Hott and Boto also are barred from accepting employment or appointment as an officer, director or trustee of any Texas public or private nonprofit charitable organization, as well as all SBC entities.

Southwestern Seminary pledged to cooperate fully with any further investigation by state and federal officials following settlement of the civil suit.

(Southwestern Baptist Theological Seminary Photo)

Adam W. Greenway, president of Southwestern Seminary, said the settlement “returns the foundation to its original purpose” consistent with the donors’ wishes.

“This agreement vindicates our desire to honor Mr. Harold E. Riley’s legacy and to hold accountable those individuals whose actions served to undermine his donative intent. While painful and costly, this cause of action was necessary to protect charitable donors who deserve the confidence that the purpose of their generous gifts will be fulfilled with integrity and without interference,” Greenway stated.

“This victory is not only for Southwestern Seminary and Baylor University, but for all who are committed to ensuring that resources intended to advance kingdom purposes are not misused.”

(Baylor University Photo)

Likewise, Baylor officials expressed appreciation for the generosity of the family for whom the foundation is named, along with pleasure that the civil dispute was settled.

“We are pleased this matter has been resolved, and that the funds entrusted to Baylor by the Riley Foundation will now be used for their intended purposes. We appreciate the generosity of the Riley family on behalf of Baylor students and faculty,” said Jason Cook, vice president for marketing and communications at Baylor.

Responses from former board leaders

Baptist Press, the SBC news service, quoted a statement from Joe Cleveland, Hughes’ attorney, saying his client was “pleased that a settlement was reached … resulting in a complete dismissal of all claims against him without any admission of liability.”

“Mr. Hughes resigned as president and trustee of the Harold E. Riley Foundation to obtain peace and in hopes that Baylor and Southwestern will continue to do everything in their power to achieve Harold Riley’s wishes,” the attorney’s statement said.

Hughes was honored “to serve the foundation over these years,” he said, adding “his sole and only purpose was to achieve Harold Riley’s desire to help students at Baylor and Southwestern for generations to come.”

In a text message to Baptist Press, Boto stated: “The services rendered by the foundation’s trustees have always been in keeping with Harold Riley’s wishes, as well as in the best interests of both Southwestern Seminary and Baylor University. I trust the new trustees that the beneficiaries have chosen will commit themselves to do those same things. I wish them well.”

Hott declined comment, and Patterson did not respond immediately to the Baptist Press request for comment.

Newly named Baylor representatives on the Riley Foundation board are Jeff Wallace, senior director of investment operations, finance and legal; and Doug Welch, chief compliance officer.

Newly named Southwestern Seminary representatives on the foundation board are Colby T. Adams, vice president for strategic initiatives and chief of staff; and F. Edward Upton, associate vice president for institutional relations.


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