20. $25 Million To See The Books

The Alumnae Association of Mills College (AAMC) have posted a treasure trove of documents from their lawsuit on their web site. A huge thanks to all involved in getting this information out into the public domain.

The documents shine more light on what has been going on under the veil of secrecy within the Board of Trustees. What are the Alumna Trustee plaintiffs asking for? Why does the College argue they should not have it?

There is an enormous amount to unpack, and details revealed in these documents merit further digging which may result in future posts diving deeper. For now, let's look at some highlights.

Exec Summary - TL;DR

The Alumna Trustees say they have not seen anything to indicate the necessity of the extreme decisions President Hillman and the Executive Committee have been making. They are asking for 2 things:

To see financial and other documents which the Bylaws say they are entitled to inspect and copy.
A Temporary Restraining Order preventing the College from entering into any transactions for 60 days, to give them and other Trustees time to review the information and fulfil their fiduciary duties.

The College is arguing that since the term of one of the Alumna Trustees has now expired, she shouldn't get to see documents they refused to provide her while she was on the Board. They've gone to great lengths compiling all the documents requested and they are prepared to show them to the AAMC President, but only under highly specific conditions of their choosing. They are afraid she will share what she learns with the AAMC who are trying to save the College. This fear is sufficient to justify a unique interpretation of the bylaws: she is only allowed to view the documents in person, without counsel or an accountant or other expert to assist her. She is not allowed to make copies and is not allowed access to electronic (searchable) records. The Defendants are also demanding the AAMC put up a $25 million bond to ensure that none of the deep, dark secrets in the Mills College books escape into the public arena for discussion and debate.

Plaintiff Claims

Trustees have a right to inspect and copy any document of the College
The Defendants have intentionally refused to comply with the College's Bylaws
Without the information they have requested Trustees cannot exercise their fiduciary duties
Decisions are being attributed to the Trustees which were never presented to them
Negotiations are taking place with the Board only being informed after the fact
The information they have does not support the radical decisions being made
Announcements that have been made prematurely have dramatically curbed any potential for future enrollment
The Court should put the brakes on any extreme decision for 60 days to give sufficient time to consider the College's future options

Defendant Arguments

There's no necessity or urgency here. However the deal can't be slowed down for 60 days
Plaintiffs were given all the information they need, they just weren't diligent enough to read it
Plaintiffs claims have no merit whatsoever
Trustees do not have the right to consult with lawyers or accountants in fulfilling fiduciary duties
Trustees never asked for information before the lawsuit
A 60-day injunction on any merger decision would do financial harm to Mills College
By asking to see the financial basis for the decision to close/merge, the AAMC is on a "fishing expedition"
The request for information is a facade to further the AAMC's litigation objectives
Statements from Mills College students and alumnae are irrelevant
Mills has been losing money since 2017 and everyone knew that because there were Town Halls
The College has endeavored to be transparent
The AAMC won't be harmed by Northeastern taking over Mills College
Any financial, officer or director mismanagement is "imagined"
If an injunction is issued the AAMC should put up $25 million as a bond in case information leaks

Alumnae Army Activated

This Monday August 2 at 10:30am there is a rally outside the Courthouse in Alameda County. If you're in the Bay Area, please come and support the Resistance. If you're somewhere else, please help with a donation. We are not part of the AAMC or any other organized Mills Group but we are in full support of both the rally and this lawsuit. Mills College deserves #NewLeadership instead of these failed old people who have done their best to wreck something rare, magical and precious.

It appears the Hillman Administration's tactic to censor the AAMC from discussing the lawsuit by interfering with their web site and emails was yet another facepalm failure. In their most recent survey, taken after the announcement of the Northeastern takeover and the beginning of this lawsuit, an overwhelming 83% were in favor of legal action - even more if you count all the "yes, but" comments detailed under the 4% "Other".

Source: aamc-mills.org

The Legal Process

The lawsuit is being impacted by COVID-19. The Court system is not operating like it used to. Alameda County Superior Court sure has a lot of cases. The Judge is not hearing arguments in the Court; instead, he will be reviewing these documents then making a ruling. It is not clear how long this process is expected to take.

The filing is asking the Court to enforce the College's Bylaws, which give the Trustees the right to inspect and copy any document. They have also asked the Court to place a 60-day restraining order to prevent committing to any decision about Mills College's future to give the Trustees sufficient time to review the documents and consider and deliberate any findings from them.

Given that President Hillman has announced that "the Board has approved the commencement of talks with Northeastern", "negotiations with Northeastern are only just beginning", "nothing is finalized yet", and "final decision is subject to board approval"...it seems like 60 days is a reasonable request when there is 170 years of history at stake. Likewise, given that the Bylaws explicitly state Trustees can see any document, letting them see documents seems like a reasonable request.

So why is the Hillman Administration fighting against this so ferociously? Why not just show their workings? Surely there is some report or analysis of various scenarios, of which a Board or Committee or Advisor said "we recommend Option A as the best course of action" - Option A being to announce the College is closing permanently, then announce a deal with UC Berkeley, then announce that Berkeley are no longer any good because there's a miraculous deal with Northeastern, then announce pay rises for staff for the first time in 10 years, then announce you're going to start talking to Northeastern to figure out what the deal is so the Board can decide if it's good for Mills or not. We don't know what Options B, C, or D were and why they were rejected, or if the Board spent any time at all investigating the substance of the proposals made by the Save Mills Coalition. One would think the Board of Trustees would know, but the essence of this lawsuit is that despite months of demanding to see the business case for this decision it has not been provided.

The College's auditors have assessed Mills as a "going concern" until at least January 2022. The $5 million short-term debt is not due for renewal until March 2022. The AAMC already agreed to delay repayment of their $2 million loan. The next phase of ADA compliance is due by December 2023. The accreditors have approved the College through 2028. It would appear that there is sufficient time for Mills College to properly consider its options, including the option to remain independent and just partner with other schools if they need a couple hundred more students.

However, one of the declarations states that the Board will be voting to merge with Northeastern on August 12. This seems like breakneck speed for a deal that was only made public a few weeks ago. What exactly are they negotiating, that can be resolved so quickly? What degree of due diligence is Mills College doing on Northeastern?

Perhaps the septuagenarians of the Mills College Board don't know, but the world has changed in the 21st Century - these days, it is customary to date for a couple years before getting married for life. Northeastern students could sleep in Mills College beds, Mills could reap the thrills and dollar bills, without Mills having to hand over every single asset they have to Northeastern with no prenup...on the first date.

Source: Huffington Post

The Majority of Defendants Are Silent

The initial lawsuit named 9 defendants:

Beth Hillman - President
Katie Sanborn - Chair
Eric Roberts - Trustee, Chair of the Resources & Sustainability Committee
Liz Parker - Trustee, Chair of the Audit & Risk Committee
Karen May - Trustee
Marilyn Schuster - Trustee, Mills Institute Designer
Ophelia Basgal - Trustee, UC Berkeley Visiting Fellow

and two of the College's Officers

Maria Cammarata - VP Finance
Renee Jadushlever - VP Operations

All the Trustees sued are on the Board's Executive Committee, which received a recent vote of no confidence from faculty and staff along with former provost Chinyere Oparah. The lawsuit also specified "Does 1-20", which suggests the possibility that more Defendants could be added in the future.

Mills College's response is very strange. Instead of including statements from all Defendants, they included statements from their lawyer, only three of the Defendants, and one of the Trustees who was not sued. Are the other Defendants afraid to go on record? Are some of them potentially sympathetic to the Plaintiffs? It seems the College Officers in particular could be stuck in a bad situation. Reports are that staff morale is terrible and many are afraid to speak out or even ask questions.

$25 Million To See The Books

Did they announce pay rises for everyone before even seeing a term sheet from Northeastern? Sounds like a poison pill aimed to discourage any other potential bidders.

This seems similar to their premature "burning platform" announcement that 200 co-ed UCB Changemakers would be living on campus from Fall 2021...clearly before Mills had actually signed the deal with Berkeley, which has now fallen through. Another in a long line of Hillman embarrassments.

This Administration is out of control and seems to be very much out of their depth when it comes to mergers and acquisitions. What are the chances that they are being taken for a ride, and this is a much better deal for Northeastern than it is for Mills College? Or is it more likely that despite the repeated, highly public displays of incompetence, this "negotiation dream team" (which includes a new interim provost hired before ever speaking to the President or setting foot on Mills College's campus) will somehow pull a rabbit out of a hat and put those Goldman Sachs banker dudes in their place with legendary deal-making skills that advance the cause of women's leadership and racial and social justice.

Why would Northeastern go away if the Board had 60 days to think about the deal? Their current campus is at Wework SF - another Spectacular Failure. Do they have their pick of 135-acre Bay Area land parcels to choose from?

If the Alumna Trustees have to raise $25 million, wouldn't they be better donating that money to save the College? The suggestion that they need to a) raise this money in less than 2 weeks before the Board votes to give Mills away to Northeastern, then b) put it in a bond just so they are allowed to see the basis for the decision that Mills can no longer be independent, is preposterous.

Stripping away the disinformation and propaganda, there are no logical arguments left coming from the College's side. 83% of the AAMC support suing the College because even though we're told it's broke, their motivation is to try to get money out of it? Puh-leeze. The AAMC lent the College $2 million, which is the complete opposite of what the Defendants are trying to suggest.

Economic Hilliteracy

President Hillman is becoming well-known for gaslighting. Still, it is remarkable to witness her doing it in writing, under penalty of perjury, in a case that is on the 6 o'clock news.

The 5 years of audited annual accounts are available here. They go up to 30 June, 2020. According to the lawsuit the Alumna Trustees were unaware of the severity of the College's financial situation as recently as March 2021. So clearly, something happened in the last year which is relevant to the College's survival.

Audited accounts are high-level annual summaries. Bank statements provide transaction details. President Hillman's confused testimony that these things are identical demonstrates once again that she has a limited grasp of financial matters.

What Information Are They Refusing To Provide?

The list of documents requested suggests some tantalizing possibilities.

Insurance payouts Does the College have coverage for unexpected business losses, such as from a COVID pandemic?

Power of attorney Hall Capital took over as investment managers in 2010. Were they given Power of Attorney over the College's endowment? Meaning that the Board doesn't even control that money any more? Is this Board acting in the best interests of the College, or the best interests of the endowment?

$15 million endowment loan Does this mean the Board has already approved drawing money down from the endowment in addition to the 7% payout rate increase? If so, why can't those funds be used to go through a proper process of reviewing the College's options, instead of hurtling into a fire sale while simultaneously claiming "there is no need for urgency" and "we can't possibly put the brakes on for 60 days".

Political involvement Gavin Newsom, Rob Bonta, Barbara Lee and the Lieutenant Governor could be involved in this? Just how close are these people to the College? Has Beth been gaslighting them too? Are they informed, or being taken for a ride?

The issue of private equity investments being marked to market (assessed at their current value, rather than historical cost) was raised in the original complaint, which revealed that Mills College was an early investor in Stripe - currently #2 biggest Global Unicorn, just above SpaceX. The difference between the College's original investment and its post-IPO value could be huge, private equity is a domain where a million gets turned into a hundred million in a single deal. How many other Global Unicorns is Mills College a shareholder of?

"Mills College Taught You Business, But You Just Don't Understand The Financials"

Board Chair Katie Sanborn graduated from Mills College with a degree in English. Later, she added a degree in journalism from Northwestern. Then she became a financial journalist. Perhaps that makes her more of an expert in finance that one of the Plaintiffs who has a Masters in Business from Mills College; perhaps not. If your endowment grows $20 million in a year, is that a financial crisis? What would Off The Record Global's "highest quality analysis" say?

Here's what Katie had to say:

If what the Chair is saying is true, it begs the question...why not just show the requested documents to the Trustees? Why gather them all together, then demand that they have to pay you $25 million first to look at them? Because they "don't understand", they have to come up with $25 million in 2 weeks? When the Hillman team couldn't do that since 2016?

Expenses are greater than revenues. Therefore, raise prices. You don't even need to do Economics 101 to understand that, 12 year olds with lemonade stands can figure it out. But not, apparently, President Hillman:

It appears one brave Alumna Trustee and Master of Business did try to talk some sense to the Board, but they were apparently ignored and now publicly accused of financial ignorance - by someone with no financial qualifications, no degree from Mills College, and a proven track record of fiscal failure.

Mills should charge the same as similar Colleges? Unthinkable! Impossible! It'd never work! Never mind the facts: before the Hillman Reset, Mills' annual tuition was $46,236 for the 2017-18 academic year. They had 1345 students, compared to 2021's 961. The numbers don't lie. There is demand for a high-quality elite education, that's why the schools providing that are booming - and always have been. There is less demand for Beth's vision of "cheap Mills for everyone".

They had a few years to try it, the results are clear: this model is not financially sustainable for Mills College.

So, what would work?

What about what Mills did for the other 164 years of its history, before Beth Hillman came along? What Susan and Cyrus Mills intended. Yeah that works. And it changes the fucking world!

The world needs what Mills College has to offer now more than at any other time in the school's history. Right as the magic of Mills becomes most valuable, strangers from the East swoop in trying to steal it away from the East Bay.

If the Bay Area was a country it would be #19 in GDP - Mills College has always been its beating heart. Founded in 1852, the same year Oakland was incorporated. Before Stanford. Before Berkeley. Before Silicon Valley. Before the Sixties. Always with them all.

Are we seriously supposed to believe that nobody could sell that to a few hundred students paying market rates for a high-quality liberal arts College? The whole world knows Oakland. Mills College is a global brand that produces leaders.

Source: CollegeTuitionCompare

Mills College annual expenses for FY2020 worked out to $53,854 per student. It seems clear that charging $30k per year is not sufficient for revenues to cover expenses; charging comparable tuition to Northeastern, USF or any of the Seven Sisters would result in a healthy profit. Simply restoring Mills' annual undergrad tuition to pre-Hillman levels would bring in an extra $9.4 million per year (based on 2021 student population).

Maybe some students would leave. Admissions needs revamping anyway, to bring more prospects in. Most Mills students receive financial aid and think their student loan debt is too high. If you cut tuition in half from current levels, they would probably still have the same complaint. Are young people's decisions driven more by calculating the size of their student loan debt at graduation, or quality education and career prospects?

"The Negotiations Subcommittee Determined"

One benefit of these documents is we finally get to see the Mills College Bylaws. From what we can piece together, they were changed by this Board during President Hillman's term to remove the separate Investment and Finance Committees, replacing them with a "Resources and Sustainability Committee"; then they were altered again earlier this year to remove term-limit requirements on Trustees, which affected many of the Defendants and other Trustees who have been on the Board since the 1990's and even 1980's.

The Bylaws seem very clear, the College seems in violation. Will this matter to a Judge, or does politics trump the Rule of Law in Alameda County?

First, Trustees have an "absolute right" to inspect the documents of the College, which specifically includes the right to make copies and extracts:

Second, the Executive Committee does not have the authority to form committees and delegate powers to them:

The Bylaws and the fiduciary duties of the Board of Trustees must seem like nuisances to the Cabal behind this plot. They form their own sub-committees, delegate them authority to decide the College's future and negotiate deals, all without the knowledge of the Full Board. Then, they get the Board to give them blanket retroactive approval for everything they've ever done. Is this even legal?

The Subcommittee on Negotiations was formed by the Executive Committee on April 27, 2021. The Save Mills and UC Mills coalitions were given a few minutes to present to the Board of Trustees on May 14, 2021. Did these coalitions actually ever meet with the Negotiations Subcommittee to discuss the details of their proposals - or is this more gaslighting from the Defendants?

Fixing A Financial Emergency...Or Creating One?

This slide helps explain how control of the endowment has been used to cripple Mills College, forcing it into its current position:

President Hillman's opening move when she started her term in 2016 was to slash the payout rate to 5% and keep it there for almost the entirety of her reign. Regardless of intent, the result was to deprive the College of millions in cashflow, which will now be restored for the future owners to enjoy.

The claim that 5% is the "generally accepted maximum" and 7% is too high is spurious. Under the governing act for endowments in California, UPMIFA, a 7% endowment drawdown is considered prudent.

The Institute Will Save Us

President Hillman included a presentation she gave the Board on April 22, 2021. Apparently students, alums, faculty, trustees and even Oakland residents have all been designing the Institute since Spring:

If any insiders are having second thoughts about the College's current direction and wondering what documents they should leak, whatever the plan for the "Mills Institute" is after 5 months of development sure would be interesting to see. Reach #millsforever via occupymills@protonmail.com

The Institute - A San Francisco Cult

The Resolutions That Tried To Kill Mills

Thanks to these legal documents we now have insight into two things:

The Resolution the Board passed on March 4, 2021 to begin exploring the possibility of a "teach-out" and replacing Mills College with Mills Institute, subject to further Board discussion and approval - presented to the media as "The Board voted to close the College"
The Resolution the Board passed on June 17, 2021 to begin discussions with Northeastern about a possible partnership - presented to the media as "Northeastern to absorb Mills College".

It is clear that there is a gigantic disconnect between what the Board actually voted on, and what President Hillman told the media they did.

March 4:

June 17:

This resolution lets the President and Executive Committee commit to a term sheet without discussing the terms with the Board first. Board approval is only required to execute the final transaction documents. In Silicon Valley it is common for a VC to sign a letter of intent with a startup that gives them exclusivity and prevents any other deals; then starve the company of funds for a few months of "due diligence" before going back to them with a "take it or leave it" final contract that has much harsher terms than what was originally agreed.

Northeastern wouldn't do that, would they? All they care about is women's education and racial justice.

Fortunately, we have the highly skilled professionals of the Subcommittee on Negotiations up against them, representing the long-term best interests of College and not their own self interest in any way. They pinky promise.

What could possibly go wrong?

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