In Its Latest Public Filings, Liberty U. Blasts the President Who Turned It Into a Billion-Dollar Behemoth


The bitter confrontation between Jerry L. Falwell Jr. and Liberty College — the establishment Falwell led for over a decade — exhibits no indicators of abating, per newly filed federal information obtained by The Chronicle.

In the latest Kind 990 that Liberty filed with the Inner Income Service, the college disclosed that Falwell earned $3.5 million from the establishment in 2020 — $2.4 million of it from severance. However Liberty additionally accuses Falwell and his household of benefiting from a collection of doubtful monetary transactions throughout Falwell’s final 5 years as president of the Christian mega-university. The recriminations observe the filing of dueling lawsuits by the 2 events in state courtroom in 2021, and earlier than that, the pair’s very public and acrimonious separation in August 2020.

Among the many accusations Liberty ranges in opposition to Falwell in its 990:

  • Falwell used university-owned plane and college bank cards for private ends, and did not reimburse Liberty.
  • The college offered housekeeping and groundskeeping providers to Falwell’s household, furnished administrative-assistant providers to his spouse, and made capital enhancements and intellectual-property upgrades to his private property, the prices of which Falwell didn’t reimburse Liberty.
  • Falwell’s son (Charles Wesley) and daughters-in-law (Laura, Charles Wesley‘s spouse, and Sarah, who’s married to Jerry L. Falwell III) earned “unreasonable compensation” throughout their time as staff of Liberty, and Charles and his spouse, Laura, paid below-market hire whereas residing in college housing.
  • Falwell’s mom (now deceased) acquired safety and personal-care providers from Liberty — which have been allegedly licensed by Falwell, however not reimbursed.

In a press release to The Chronicle, a lawyer for Falwell disputed the veracity of “nearly all of the statements” made by Liberty to the IRS. He additionally instructed that an examination opened by the IRS into Liberty’s operations in the course of the 2019 fiscal yr might have motivated the establishment to make such allegations.

“This seems to us to be Liberty positioning itself with respect to the IRS audit and improperly ascribing blame to Mr. Falwell,” the lawyer, Vernon E. Inge Jr., wrote.

Liberty makes a quick reference in its 990 to the IRS’s curiosity within the college’s operations in 2018-19: Liberty acquired discover of the IRS’s examination on September 30, 2021. And “administration doesn’t consider this examination will end in materials liabilities or changes to the monetary statements.”

A spokesman for the college declined to remark past the disclosures made within the establishment’s federal return and monetary statements.

The most recent volley of accusations and countercharges gives a marked distinction to what was as soon as a fruitful partnership between Falwell and the establishment, throughout which Liberty turned an online juggernaut. Liberty generated $1.5 billion in revenue within the 2021 fiscal yr, and enrolled 123,000 undergraduate and graduate college students during the 2019-20 tutorial yr.

After overseeing the growth of Liberty into the online-education behemoth it’s as we speak, Falwell’s consideration turned to courting clout and controversy inside the nationwide political and media arenas — at the same time as a few of his extra colourful appearances in these spaces rankled members of his personal group. His early and high-profile endorsement of Donald J. Trump for president later afforded him access to, and pull in, Trump’s administration.

However a lot of Falwell’s allies deserted him in August 2020 after Falwell posted on Instagram a photograph of himself posing with a pregnant Liberty worker whereas on trip. Falwell had one hand across the lady’s waist, the opposite holding what gave the impression to be an alcoholic beverage. Positioned on leave by the college shortly thereafter, new info quickly emerged a few tangled relationship between the primary household of Liberty and a Miami pool attendant named Giancarlo Granda. Falwell argues that what began as an opportunity assembly at a Miami Seashore lodge finally devolved into an extortion try in opposition to the Fallwells by Granda, which Granda denies. Granda alleges {that a} yearslong sexual affair with Falwell’s spouse had the husband’s blessing, which Falwell denies. Nearly instantly after these allegations turned public, Falwell stepped down as president of Liberty.

Correcting the Report

The transactions known as into query by Liberty in its current submitting increase their very own questions on when Liberty turned conscious of the doubtless problematic advantages, and when and the way it decided these funds to be improper. Different public information and statements to the media provide ambiguous solutions to these questions.

For example, the “unreasonable compensation” allegedly acquired by Charles Wesley Falwell, Laura Falwell, and Sarah Falwell was not some extremely guarded secret inside Liberty’s group. As a result of these three folks have been each kinfolk of President Falwell and staff of the exact same establishment, IRS guidelines required Liberty for years to disclose inside its annual return the compensation it paid to every of the three Falwells every fiscal yr. Within the 2020 fiscal yr, Liberty reported paying Charles Wesley $101,000, Laura $76,000, and Sarah $67,000. The return itemizing these compensation quantities was reviewed by the manager committee of Liberty’s board earlier than it was filed with the IRS in Might 2021, the university told the IRS. The return was additionally reviewed earlier than submitting by the establishment’s appearing president, in-house authorized counsel, and chief monetary officer. However Liberty didn’t alert the IRS to any extra benefit transactions within the returns it filed for the fiscal years 2016 by way of 2020.

Within the return filed this yr by Liberty with the IRS, the college told the company that Jerry Falwell Jr., Charles Wesley Falwell, Laura Falwell, and Sarah Falwell had all expressed an intent “to make partial corrections of the surplus advantages.” Certainly, after a change in Laura’s function on the college, Liberty now believes the compensation paid to her is affordable. The college reached the same determination for Charles Wesley after it “made changes.” Sarah Falwell is no longer employed by the establishment. And Charles Wesley and Laura not reside in college housing. The respective compensation quantities paid to every by Liberty within the 2021 fiscal yr? Charles Wesley: $72,000; Laura: $78,000; and Sarah: $16,000.

And whereas Liberty alleges in its newest 990 that Falwell benefited from university-financed renovations and repairs to his private residence, it additionally seems that sure board members would have, in concept, been at the least considerably conscious of the character of that association earlier than his resignation. Monetary information prepared for Liberty and filed with the IRS in 2020 point out college belongings and manpower (valued at $175,000) have been deployed in the course of the 2019 fiscal yr to renovate and restore Falwell’s private residence “which is used for college functions.” Such a reliance on college belongings was crucial, Liberty wrote on the time, “resulting from safety considerations associated to utilizing exterior contractors.” The college additionally reported to the IRS that Falwell reimbursed Liberty on August 15, 2019, for the work.

An affirmation of overview by the manager committee of Liberty’s board seems within the return for the 2019 fiscal yr, because it does for 2020. And by the tip of June 2020, Liberty estimated the establishment had offered an extra $19,000 in development providers to Falwell and his private residence, in response to the establishment’s monetary statements.

Moreover, when questioned by Politico, Liberty disclosed that Falwell and the board had reached an settlement, relationship again to at the least 2012, which allowed its then-president entry to school development providers, the price of which was then billed to Falwell.

Liberty, nonetheless, offers no indication in its Kind 990 of what set of bills associated to Falwell’s dwelling it considers unreimbursed: bills it beforehand advised the IRS had been reimbursed? Or is Liberty referencing beforehand undisclosed bills which it now believes require fee from Falwell?

Getting Paid

Liberty’s multimillion-dollar fee in 2020 to Falwell in the end didn’t quell the dispute over how a lot the previous chief govt believes he’s owed. In line with Liberty’s returns, Falwell acquired $3.5 million in complete compensation in 2020: practically $2.5 million in severance, in addition to $830,000 in base pay, a $100,000 bonus, simply over $122,000 in different taxable compensation, and $7,800 in nontaxable advantages.

Falwell has contended he’s owed an extra $8 million from Liberty, an obvious reference to a deferred-compensation association that the previous president reached together with his board when he nonetheless led the establishment. On the shut of June 2021, $8.7 million in deferred compensation had accrued in a supplementary retirement plan Liberty created for Falwell. In concept, had Falwell remained president of Liberty, he would have been entitled to that complete sum as soon as his tenure prolonged previous a sure date outlined in his contract. As a substitute, Falwell and Liberty break up, thereby placing some or all the compensation accrued for Falwell susceptible to forfeiture.

Each Liberty and Falwell agree that he resigned. Falwell argues, nonetheless, that he resigned as a result of Liberty violated his contract when it positioned him on go away. Liberty alleges that Falwell solely managed to safe such a beneficiant compensation bundle by illegally concealing damaging private details about himself and his spouse, and that Falwell was obligated to reveal it to the board throughout contract negotiations. This purported failure would render the complete compensation association void, Liberty argues.

In its most just lately filed monetary assertion, Liberty speculates {that a} courtroom would possibly quash Falwell’s declare to the compensation altogether.

“Your complete profit is topic to forfeiture if sure situations are usually not met or if a courtroom guidelines within the college’s favor in pending litigation with Falwell,” the establishment wrote.

Liberty and Falwell’s authorized actions in opposition to one another stay lively: Liberty argues that by failing to avail the establishment’s board of alleged reputationally damaging private actions, Falwell failed to meet his contractual and fiduciary tasks to the college, and likewise dedicated statutory conspiracy.

Falwell’s countersuit accuses Liberty of repeatedly defaming him, together with when a high-ranking college official mentioned the previous president of the college had engaged in “sinful conduct.” Each claimants individually argue that every is entitled to tens of millions of {dollars} in damages from the opposite, in addition to the return of sure property.

New Guidelines

Since Falwell’s resignation, Liberty says it has revised varied insurance policies regarding presidential energy and monetary oversight.

  • Presidential utilization of Liberty plane is to be cataloged and monitored extra intently by the board of trustees.
  • Related board members are to stick to a extra “fleshed out course of” when setting compensation and advantages for the president.
  • The president should furnish market information to board members when setting compensation charges for officers and key staff.
  • The board adopted a code of enterprise conduct for trustees, officers, and staff, which “contains an expectation that such individuals should keep away from circumstances the place their monetary or different private ties may current an precise or potential battle of curiosity.” They have to additionally disclose potential or precise conflicts of curiosity and “conflicts of dedication.”
  • Liberty’s management and personnel are required to report actions that violate the newly adopted code; “good-faith reporters” are to not be retaliated in opposition to, and nameless reporting is obtainable. A “extra strong” whistle–blower policy was additionally adopted.
  • Any employment by Liberty of kinfolk or shut pals of senior officers and executives (together with the president) is prohibited, until the board approves.
  • The compensation of any kinfolk or shut pals who’re employed is to be reviewed yearly by the Board of Trustees.

Such policy updates signify, in concept, a departure from sure conduct beforehand tolerated at Liberty, the place not solely Falwell and his household doubtlessly benefited from their connections with the college, however so did different officers, key staff, donors, trustees, and their shut associates.

A Reuters investigation in 2020 detailed how Liberty lent $750,000 in start-up cash to an organization shaped by Robert Moon, a good friend of Falwell’s. Liberty in flip enlisted that firm to supervise its sprawling development initiatives, which generated tens of tens of millions of {dollars} in income for Moon’s firm. Moon’s firm is listed as a “important contributor” to Liberty in its federal filings.

Extra development providers have been offered to Liberty by Spence Development, and the corporate has earned more than $725,000 in compensation from the college since 2018-19. Spence Development is owned by the son of Charles Spence, Liberty’s senior vp for campus services and transportation. Liberty beforehand employed Spence’s son Joshua till 2017-18.

And in addition in 2020, Politico identified a lot of funds from the college to corporations and folks with connections to the establishment’s board members. There was the $70,000 paid to “the Gainey Basis, a non-public basis that’s the important funder of a camp for Christian athletes owned by the household of Michigan-based board member Harvey Gainey.” One other $135,000 was paid to Ducar Worldwide, a Christian tour firm owned by the board member Duke Westover. Politico discovered that “at the least three extra board members have had spouses or kids on Liberty’s payroll in 2017 or 2018.”

The sprawling internet of enterprise transactions with insiders and their households even drew the attention of the crediting-rating service Moody’s, which cautioned Liberty that such concentrated governance and administration management restricted its credit standing.

“We consider the management’s determination to have interaction within the variety of and vary of those transactions signifies the intently held scope of governance,” an analyst for Moody’s wrote.

Following Falwell’s resignation in August 2020, management at Liberty announced the college would undertake an inquiry into the establishment’s operations underneath its former president’s tenure. The college anticipated its investigation can be accomplished by December 2021. Up to now, no findings from that investigation have been launched to the general public.

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