By Todd Cohen
A gift of stock gives fiduciary duties to the beneficiary and can grow a long tail, along with tangles the donor may not anticipate.
In 1981, the late Fred Jensen donated his 44 percent stake in Pan Aero Management Corp., a privately held firm he had co-founded two years earlier in Colorado, to the University of Rochester, his alma mater.
Now, three years after Jensen died and a year after the university hired a consultant and legal counsel to evaluate the firm and suggest actions to “improve our prospects for selling our shares,” the university is trying to sell the company, says Douglas W. Phillips, senior vice president for institutional resources.
“The university desires to sell its ownership in PAMC, as is the case with most all assets donated to the university, in order to generate funds for its educational mission,” Phillips said in a prepared statement. “The advice received by the university indicates the value of the university’s shares may be increased if they are divested in the context of a sale of PAMC as a whole.”
Phillips says 60 percent of the firm’s shareholders “are interested in selling the company,” but that Donald M. Hardy, a co-founder and minority shareholder, opposes the sale.
“I certainly oppose the sale at an unknown price,” says Hardy, who was the firm’s president and board chairman. “I have no idea what price the University of Rochester thinks it could accomplish.”
Founded in 1979, PAMC developed and arranged financing for turbine facilities, and sold electricity they generated to utility companies.
Its partners include Enron Wind Corp., a subsidiary of bankrupt Enron Corp.
Hardy says the university in September 2001 rejected an offer by a group that wanted to buy its shares.
He says he quit as president after his removal from the board at a special January 2002 board meeting requested by the university.
And he says he and other investors to whom he had sold shares after Jensen died have not been able to file personal income tax returns because the university “had not been able to provide” them with financial data about the company.
Phillips says the university received an offer in 2001 and rejected it because it was too low.
And he says PAMC cannot provide some data to shareholders because Enron has been “unable to provide information to almost all their partners.”
The university’s administration and the investment committee of its board of trustees, he said in the prepared statement, “are continuing the effort to sell the university’s shares in the company, which may involve a sale of the company if this will increase the proceeds to the university.”