CLAYTON — More donors have filed to block Webster University from using scholarship funds to meet the school’s loan obligation.
ºüÀêÊÓƵ County Circuit Court Judge Stanley J. Wallach will rule this spring whether the donors have a legal standing against Webster’s plan to tap into all $37 million of private donations.
Wallach made no decision at a hearing Friday. He said he wants the Missouri Attorney General’s Office to file its position on the matter before the case proceeds.
“This is a serious situation,†Wallach said.
Webster wants to use restricted endowment funds, which are earmarked for scholarships, research and professorships, in order to meet the “liquidity ratio†on a loan it obtained to construct new science and business buildings on its main campus in Webster Groves.
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But now several donors have filed suit against the school to prevent it from using their funds for anything other than scholarships.
The school is under pressure to improve that ratio, its lawyers said Friday, after a report this week from Moody’s credit agency into junk status. Moody’s warned that Webster is at risk of default if it doesn’t improve its liquidity.
“This is about the students,†attorney Brian Kaveney said. “We want to put Webster in a better situation financially. We’re not asking to move money out of Webster.â€
Over the past decade, Webster has lost more than $160 million, including a $37 million deficit at the end of the 2022-23 school year. Yet its board of trustees continually awarded raises to then-Chancellor Beth Stroble and President Julian Schuster that made the two among the highest-paid university leaders in the ºüÀêÊÓƵ region.
The school’s problems compounded over the past year when Webster was sued for allegedly not paying rent at its satellite campus in downtown ºüÀêÊÓƵ.
It also reported in its latest audit that nearly $2 million was “misappropriated.â€
School officials have said that the missing money is related to an ongoing review of a former employee “who has not been affiliated with the university for months.â€
Four of its leaders, including Stroble and CFO Richard Meyer, have since resigned.
Moody’s downgraded Webster’s bond rating from Ba3 to B1 due to the college’s debt and its reliance on a $40 million loan— in which endowment funds were used as collateral — for its “liquidity.â€
This week, former trustee Mary Alice Dwyer-Dobbin and Jane and Bruce Robert filed their objections to Webster using their donations for anything other than their endowed scholarships and professorships — joining the suit filed Monday by Jack and Sherry Schreiber, whose scholarships have more than $100,000.
Dwyer-Dobbin’s donations have established several scholarships and an endowed professorship worth more than $1 million today, according to court records.
“They gave millions of dollars for students and professors,†said Jay Kanzler, attorney for the Schreibers and Dwyer-Dobbin. “Not for cars, trips and bonuses.â€