College Finally Got Alumnus To Pledge; Next Job: Collecting

College Finally Got Alumnus
To Pledge; Next Job: Collecting

Haverford and Rich Oil Man Jousted
For 2 Decades Over How Much He'd Give
By DANIEL GOLDEN
Staff Reporter of THE WALL STREET JOURNAL
July 24, 2003 11:51 a.m.

HAVERFORD, Pa. -- Haverford College has the Marshall scholarships, the Marshall professorship and the Marshall Fine Arts Center.

What it doesn't have is the Marshall money to pay for them.

"My friends often introduce me as the Marshall Unfunded Professor of the Natural Sciences," says Haverford astronomer Bruce Partridge, holder of the faculty chair. "It's an interesting and sad saga. Here's an alumnus who could have been remembered as the single greatest benefactor of the college."

Instead, J. Howard Marshall II is likely to be remembered at Haverford for his role in one of the most prolonged misadventures in the annals of college fund raising. Known to the public as the Texas oil tycoon who married former Playboy Playmate Anna Nicole Smith in 1994 -- he was 89 years old, she 26 -- Mr. Marshall was also one of Haverford's wealthiest alumni and a longtime board member of the college, founded by Quakers in 1833.


The case affords a rare look at the lengths to which a financially strapped college went to secure big gifts. Interviews and memos filed in a school lawsuit against Mr. Marshall's estate show that both Haverford and Mr. Marshall were less than candid with each other. Together, they created a cautionary tale for colleges about the hazards of pinning their hopes on reluctant angels.

Harsh feelings linger on both sides. "Among many evils, the most glaring ethical violation committed by Haverford in my opinion was the callous, blatant criticism they heaped upon J. Howard in private and in their notes while simultaneously praising him to his face in an attempt to get his money," said E. Pierce Marshall, a son of Mr. Marshall and his principal heir, in a written statement.

Haverford President Thomas Tritton warns that Mr. Partridge's professorship and other unfunded memorials "won't necessarily retain" the Marshall name. "For twenty-some years, the college relied on promises he made to us," he says. "It strains credibility to think we'd build a building and name it after his wife if we didn't think he was good for it."

In 1976, Haverford's then-president, John R. Coleman, cajoled Mr. Marshall into making what was then the largest pledge in Haverford's history: $4 million. Hoping for up to $50 million, college leaders courted Mr. Marshall assiduously for the next two decades. Leading alumni, including former Goldman Sachs co-chairman John Whitehead and former U.S. Transportation Secretary Drew Lewis, were coned for the effort.

But while the cantankerous Mr. Marshall basked in all this attention, he had donated less than $2 million by his death in 1995. Haverford sued his estate in a Houston probate court, contending it was owed $5 million in unpaid pledges, including some it said Mr. Marshall made after the first one. In April, a jury found that Haverford hadn't been injured because it hadn't relied on Mr. Marshall's pledges but instead had named already-funded projects after him.

Haverford does stand to get $1.2 million from a trust Mr. Marshall set up in 1993 to pay his charitable obligations. But Mr. Tritton says Haverford's endowment will have to write off a $1 million loan it made to the college to help build the Fine Arts Center in the 1980s, plus $1.2 million in interest. The college had expected to repay the loan with a gift from Mr. Marshall. Mr. Tritton says Haverford no longer embarks on any project without having half of the money for it in hand.


Haverford's fund raising "was very, very aggressive," says jury foreman Gary Robert Thomas, an insurance underwriter. "It didn't do anything illegal, but it operated in a gray area."

The juror says he didn't like the fact that Haverford kept an extensive file on Mr. Marshall, including details of his and his then-wife's drinking habits, confidential financial information and health. In one 1987 memo, Haverford's then-president, Robert Stevens, warned, "Howard can still change his will and Howard will live another five years at least in my view. If I am not here for the whole of that time, whoever is the next president better work damned hard to make certain that the will is not changed."

The documents show that Mr. Stevens, Haverford's president from 1978 to 1987, also sought to leverage a business dispute between Mr. Marshall and Mr. Whitehead into larger gifts from both. Some of the college's information about Mr. Marshall's finances was obtained without his knowledge from a former aide to him.

Colleges have long had problems with unpaid pledges. Elihu Yale broke his promise to give his namesake university £200 a year. Manufacturer Paul Tulane died in 1887 without leaving a will, disappointing the New Orleans school named after him, which expected to get his entire estate. Chicago investor Charles Alberding died in 1989 soon after pledging $10 million for a field house at Cornell. His heirs didn't honor the nonbinding pledge, Cornell says, so the building now bears another name. The heirs couldn't be reached for comment.

But colleges rarely sue donors, fearing a backlash from other benefactors. When Mr. Marshall retreated from a $25 million donation he had discussed with Yale Law School, the school went along.

Born in Philadelphia, Mr. Marshall starred in soccer and tennis at Haverford and edited the student newspaper. Fellow seniors voted him "most important man" in the class. After getting a degree from Yale Law School, he taught there, doing research on the oil industry. He became a federal regulator, then an executive at Ashland Oil and Signal Oil & Gas. Mr. Marshall developed much of the legal and regulatory doctrine for the oil industry, says Robert Bradley Jr., an energy historian who edited his autobiography. Despite their collaboration, Mr. Bradley says, Mr. Marshall declined to give to the historian's own nonprofit institute: "He was a hard nut to crack on the philanthropic side."

The size of his fortune was disputed, because it depended on valuation of his 15% interest in closely held Koch Industries, a Kansas energy concern. Forbes put his wealth as high as $725 million in 1990 but said he "vehemently denied" the figure. One Haverford official noted in a 1980 memo, "He describes himself as 'cash-poor' but richer every day, a condition with which he will apparently be afflicted for the indefinite future."

Pressed to Contribute

Haverford has a reputation as one of the nation's best small colleges. But its endowment, now $260 million, was just $20 million in 1976. The school planned a $20 million fund drive and looked to Mr. Marshall to launch it with a major gift.

He dodged its urgings. The evening before the campaign's kickoff, Mr. Marshall and Bettye Bohanon Marshall, the second of his three wives, stayed over at the home of Mr. Coleman, the college president. Mr. Coleman was holding a party but arranged to have other guests leave at 10:30 so he could make a last appeal to the Marshalls.

Mr. Coleman says he pleaded with them until 2 a.m., when Mrs. Marshall finally offered $1 million, far less than the school wanted. Catering to the Marshalls' political views, Mr. Coleman says he responded, "Remember, if we don't get the money, the federal government's going to get the money, and it's going to go to welfare."

Mr. Coleman says he used that argument because he was "desperate. I figured it would be a good button to push, but I ain't proud of it. It was the most shameful thing I ever said in my life."

Nevertheless, it worked. The next day, before an alumni audience, Mr. Marshall promised "to give the college at least $4 million.... Hopefully, it will be considerably more."

Elated, Haverford administrators began to think bigger. One wrote in an internal memo that Mr. Whitehead, then chairman of Haverford's board, saw "the chance that Howard and Bettye might set up wills that give us half the estate when the first one of them passes away and the remainder when the second one goes."

But 18 months after his pledge, Mr. Marshall laid out its terms: At his death, Haverford would get $4 million -- minus any gifts to the college he'd made in the meantime. These terms worried the college. Not only did they set $4 million as a maximum, but it was uncertain whether the commitment would be enforceable.

It also wasn't clear if the pledge, given its uncertain date of fulfillment, should count toward the campaign goal. Haverford memos show Mr. Whitehead grew discouraged with what he regarded as Mr. Marshall's irresponsibility, and felt the pledge should be deducted from the campaign total so far. Other administrators feared that such a move might publicly humiliate Mr. Marshall and ruin any chance at his millions.

Into this confusion stepped a new Haverford president: Mr. Stevens. Like Mr. Marshall, he had attended and taught at Yale Law School. He began visiting the Marshalls in Houston frequently, staying at their home and dining with them at their country club, River Oaks.

Mr. Stevens and G. Holger "Hogie" Hansen, who became Haverford's vice president for institutional advancement, took a "good cop, bad cop" approach to soliciting Mr. Marshall, Mr. Stevens said in a deposition taken in 2000. "I was a good cop." Mr. Stevens says he made that remark in an "irreverent" spirit.

Initially, Mr. Stevens was pessimistic. "Frankly, I think we should not count" on the $4 million "until we see the check, indeed until the check has cleared the bank," he wrote to his fund raisers in May 1979. But in mid-1980, he persuaded the Marshalls to write a $160,000 check to resurface tennis courts. He offered to name them for Mrs. Marshall, although they already bore the name of a retired tennis coach. In the end, plaques recognized both the coach and Mrs. Marshall.

Mr. Stevens then moved to "tie up" the rest of the pledge by allocating it for specific purposes. That would let the college count the $4 million toward the campaign total. He says another purpose was to enable Mr. Marshall to enjoy the benefits of his pledge right away. In a letter, he suggested to Mr. Marshall earmarking $3 million for a scholarship fund and $840,000 for a professorship.

Mr. Stevens's letter didn't spell out another implication of this proposal: that it would effectively revise Mr. Marshall's 1977 document, in which he had said that any new pledges would be deducted from the $4 million. Since $4 million would now be committed to specific items, if Mr. Marshall made subsequent pledges, Haverford could argue that they added to his estate's ultimate obligation.

Mr. Marshall signed a copy of the terms. He attended Mr. Partridge's first lecture as Marshall professor, and expressed his hope that Haverford wouldn't use "reverse discrimination" in choosing scholarship recipients. "Neither of us believes in 'quotas,' 'percentages,' or even 'diversity,' " he wrote to Mr. Stevens. Haverford, which practices affirmative action in admissions, assured him race wouldn't be weighed in the scholarships.

With the $4 million earmarked, Mr. Stevens persuaded Mr. Marshall in 1981 to pay $1.6 million to renovate an auditorium. Mr. Stevens says it was "clearly understood" this was in addition to the $4 million. But there appears to be no written record of such a stipulation.

In fact, Mr. Marshall declined to sign a pledge concerning this $1.6 million. He told Haverford he preferred "verbal assurances" because he didn't want to have to list the pledge as a contingent liability on his balance sheet. Each month, Mr. Stevens flew to Houston and gave the construction bill to Mr. Marshall, who wrote a check to take back to Haverford.

At this point, Mr. Marshall asked for an honorary degree. "We obviously have to do an honorary degree for Howard very soon," President Stevens wrote in a May 1981 memo to the development office. "I wouldn't exactly say that was a quid pro quo for the latest gift, but Howard has done a great deal for Haverford." Two years later, the college gave honorary degrees to the Marshalls. Mr. Stevens says it was recognizing them chiefly for supporting its 1980 transition to coeducational status from all-male.

Next, Mr. Stevens moved to take advantage of a Koch Industries split in which Mr. Marshall and Mr. Whitehead were on opposite sides. In the early 1980s, Mr. Marshall helped Charles Koch quash a bid for control by a brother, Bill, who was advised by Goldman Sachs, Mr. Whitehead's firm.

In a September 1983 memo, Mr. Stevens described his latest pitch to the Marshalls. "I put it in terms of them making a commitment so that we could get even more money out of John Whitehead. That is very attractive to them because they feel badly about the part that Goldman, Sachs played in advising the dissident member of the Koch family."

Four months later, Mr. Stevens wrote Mr. Marshall asking for "a pledge to be paid over time.... That will help in terms of my leverage of getting more out of John Whitehead."

Mr. Marshall took the bait. "Of course I would enjoy helping to pick John Whitehead's pocket for the benefit of Haverford," he responded. In June 1984, he changed the living trust -- a document akin to a will -- that embodied his bequests. The change raised his Haverford pledge to $5 million from $4 million.

Shortly afterward, Mr. Stevens had dinner with Mr. Whitehead. He then reported back to Mr. Marshall: "The strategy worked -- at least partially. John will give us at least another $180,000 in cash right away and we may get another million. I can't thank you enough!"

Mr. Stevens, who says he was "extremely fond" of Mr. Marshall, adds that challenging alumni to top each other's gifts is the "lifeblood" of fund raising. Mr. Whitehead says he didn't know of Mr. Stevens's strategy but isn't offended by it.

Mr. Stevens also began to cultivate Mr. Marshall's assistant, Judy Wilson. In 1984, as Mr. Stevens was negotiating the extra $1 million, Bettye Marshall was showing signs of Alzheimer's disease. "Howard is becoming more and more dependent on Judy and less and less on Bettye so I raised with Judy the issue of the money," Mr. Stevens noted on June 8.

Mr. Stevens often conferred with Ms. Wilson on his visits to Houston, even after Mr. Marshall fired her. In 1990, Mr. Stevens, who had left Haverford, had breakfast with Ms. Wilson at an airport hotel. He then passed along to the college what he had gleaned about Mr. Marshall's recent will changes and efforts to avoid estate taxes. Mr. Stevens says that "good intelligence is not in any sense unethical." Ms. Wilson couldn't be reached for comment.

In the mid-1980s, Haverford asked Mr. Marshall to help pay for a new Fine Arts Center. Although he agreed with naming it after Bettye -- a landscape she painted is displayed in its hall today -- he again eschewed a written contract, and took umbrage when Haverford sought to bill him for interest on a loan from its own endowment.

"I expect to pay for a substantial cost of the new facility," he wrote to Haverford's Mr. Hansen in August 1988. "But how and when is something I want left to my own discretion." Mr. Hansen declined to comment.

Mr. Marshall was soon backing away. In 1989, he revised his living trust again, this time reducing Haverford's share to well below $5 million. But in February 1990, Mr. Hansen, new Haverford President Thomas Kessinger and board member Mr. Lewis met Mr. Marshall at the Ritz-Carlton Hotel in Houston. Mr. Lewis asked Mr. Marshall to "carve out from your assets a total of $50 million for Haverford." Mr. Marshall, implying that only his Koch Industries stock could fulfill such a donation, replied he would never give those shares away.

Other Expenses

Mr. Marshall's reluctance to part with Koch shares wasn't the only obstacle Haverford faced. Starting in the early 1980s, he lavished $2 million a year on a Houston stripper named Jewell "Lady" Walker, according to a judge's decision in a suit later filed in federal court in Los Angeles by Anna Nicole Smith.

In January 1991, Mr. Marshall recommended Ms. Walker's nephew, Herndon Walker, to Haverford as "an outstanding student, a good athlete and always a leader." Haverford accepted him and gave him financial aid. Mr. Walker says he had been accepted at other selective colleges as well, including Emory University, and graduated magna cum laude from Haverford.

Ms. Walker and Bettye Marshall both died in 1991. The oil man transferred his attentions and largess to Ms. Smith. After his death in 1995, she filed suit in Houston probate court, seeking half of his estate. A high school Mr. Marshall had attended in Philadelphia, the George School, also sued, saying he had promised money to renovate a gym; the school hasn't pursued the case, though.

Ms. Smith, like Haverford, cited oral promises by Mr. Marshall that had scant written support. Also like Haverford, she lost in probate court. But after she filed for bankruptcy in Los Angles, a federal court there awarded her $88.5 million from the estate. The estate's lawyers are appealing.

In Mr. Marshall's final years, he sparred with Haverford over his obligations. The college said he owed $5 million. Mr. Marshall took the position that Haverford was due no more than $2.4 million: his original pledge minus what he had already paid to renovate the auditorium. After much legal wrangling, the distribution of money in his charitable trust will leave Haverford only $1.2 million. The school is finally slated to get that check this summer.

Write to Daniel Golden at [e-mail]

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