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Eckerd College chief is retiring

The trustees just learned that nearly two-thirds of the endowment has been spent in 18 months without their knowing about it.


© St. Petersburg Times, published June 21, 2000

ST. PETERSBURG -- Peter Armacost, Eckerd College's entrepreneurial and sometimes controversial president for 23 years, announced his retirement suddenly Tuesday, after board members discovered that nearly two-thirds of the college endowment had been spent without their knowledge.

The surprise announcement followed a weekend retreat where board members received an independent management review showing serious financial mismanagement at the college. Most troubling was learning that the endowment most of them thought only a week ago was $34-million had in fact been whittled down to less than $13-million in about a year and a half.

Arthur Ranson III, chairman of the board of trustees, said trustees were in the dark about the state of the endowment in large part because regular financial reports were late getting to them and because they failed to aggressively demand accurate and timely information. But Ranson, an Orlando lawyer and 1965 Eckerd graduate, stressed that the money went toward valid investments at the 1,530-student college.

"There has been absolutely no evidence and we are convinced that no money was misappropriated, no money was stolen and no laws broken," Ranson said.

Despite the problems, Ranson said Armacost's retirement was strictly voluntary and credited him with helping make Eckerd one of the premier liberal arts colleges in the Southeast.

Armacost will begin a one-year sabbatical July 1, holding the title of president emeritus and retaining his $184,000 salary. Trustees named Lloyd Chapin, faculty dean and vice president of academic affairs, acting president until an interim president is named and a national search for a new president begins.

Also resigning Tuesday was J. Webster Hull, vice president for finance, a former trustee who in 1997 took over the college's financial management. Hull, who once led a Kansas City bank regulators declared insolvent, could not be reached for comment. He directly oversaw the business affairs that trustees found to be rife with problems.

In a letter to faculty members Tuesday, Armacost, 64, said that he had been considering retirement for years, but that trustees persuaded him to stay to lead a financial campaign. Because the management report will delay that campaign, he decided it was time.

"I received credit for our many achievements, but I also accept responsibility for problems that have developed," Armacost said in a telephone interview.

He learned about the scope of the endowment problem at the same time as many board members, Armacost said. He knew that roughly $6.3-million had been spent on a new dorm, Omega, but he said he was unaware that nearly $15-million more had gone to capital expenses.

Other expenses that drained the endowment included repairing a fire-damaged dorm and paying millions in expenses for troubled real estate ventures the college had embarked on: the College Harbor continuing care community and the College Landings residential development.

"I didn't know it was coming from the endowment," Armacost said.

He and trustee chairman Ranson blamed serious staffing shortages in the college business office for making financial oversight difficult. The college had no comptroller for a year, which made accurate financial reports hard to come by and caused the last two annual audits to be late.

The reports apparently were difficult for many of the college's 52 board members to decipher, because most had no idea until a few days ago how much their small endowment had shrunk.

"There is certainly a responsibility on the part of the board to ask questions when reports are not being timely presented," Ranson said. "The board could have been more aggressive in demanding updated financials."

Largely through major contributions by trustees and other supporters, Ranson said he hopes the endowment will be replenished by Labor Day.

"We're not going to balance the budget on the backs of students or faculty members," he said.

Armacost arrived at Eckerd College in 1977 after serving as president of Ottowa University in Kansas. Eckerd was just 17 years old and struggling with declining enrollment and increasing budget deficits.

During his tenure, Armacost has helped enrollment grow from 853 students to more than 1,500, plus another 1,300 in a program for "experienced learners." He has added 40 faculty members and eight new buildings, brought the college budget into the black and revamped the core curriculum that includes a well-respected marine sciences program.

At a time when small, independent colleges with far greater endowments are struggling to stay afloat, Armacost has strengthened the college with creative and entrepreneurial approaches.

Some have been widely touted achievements. He established the Program for Experienced Learners for those over 25 to earn degrees while working, and the Academy of Senior Professionals, which allows retired executives to share their education and experience with traditional students.

He embarked on for-profit ventures such as an elder hostel, a Management Development Institute that conducts training courses, and an English language service that earns income and helps recruit foreign students.

Though that approach brought Armacost some of his greatest successes, it also brought some of his biggest failures.

Eckerd made two ill-fated forays into real estate development with College Harbor and College Landings. Both projects, which are at the western edge of campus, were supposed to attract distinguished retirees who would become part of the Academy for Senior Professionals.

Eckerd leased the land to private developers who were supposed to make payments to the college. Instead, both developments ended up in bankruptcy.

Even worse, the developer of College Landings borrowed money using the college's land as collateral. Eckerd said it has been forced to buy back its own land and blames former vice president for finance James Christison for taking unauthorized actions.

The older real estate development, College Harbor, consists of a five-story apartment building and a three-story health center with a nursing home and assisted-living units.

Christison brought even greater embarrassment to the college through a 1994 investment plan. Christison used college letterhead to write to investors and even proposed that Eckerd trustees invest the college's endowment money. The board turned him down, but the college has had to spend hundreds of thousands of dollars settling investors' claims.

Christison, who could not be reached Tuesday, has previously said Armacost was aware of almost everything he did.

Ranson laid much of Eckerd's current endowment problem at the feet of Christison, saying accounting systems were inadequate. But Christison had left Eckerd when much of the endowment was depleted.

That problem had its roots in the early 1990s when trustees authorized administrators to temporarily draw down the endowment to meet seasonal cash flow shortages. No more than 3 percent was to be spent -- and it was to be promptly paid back. But by 1997, administrators were over that cap by nearly $1-million, and by 1998 they were breaking the cap by more than $2-million.

Ranson said trustees are determined to enact better financial controls. They will, for instance, hire a general counsel to oversee compliance with internal rules and institute a cash management system to ensure more timely reports. And from now on the board's executive committee must approve any spending of endowment funds.

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