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UW-Oshkosh (copy)

The UW System Board of Regents and the UW-Oshkosh Foundation reached an agreement in the cases involving the foundation's bankruptcy.

The University of Wisconsin System will use federal money to pay off bank loans taken out by the UW-Oshkosh Foundation, according to agreements released Friday.

The UW System paid $6.3 million to banks using federal money designated for administrative costs — meaning no state taxpayer money or tuition dollars, according to UW System spokeswoman Heather LaRoi. This money comes from reimbursements for administrative costs already incurred by the UW System related to federal grant activity at UW campuses.

At the close of fiscal year 2018, the UW System had about $9.5 million in federal money from this fund that had accrued over the last decade, according to LaRoi.

UW-Oshkosh will pay back the UW System $3.825 million in annual installments of $191,250 from January 2020 through July 2038, according to the agreement. The annual payments will be made with money from the Witzel biodigester, which turns organic waste into energy. The UW System Board of Regents assumed ownership of the biodigester along with the UW-Oshkosh Alumni Welcome and Conference Center.The payments related to the bankrupty case stem from a building projects controversy surrounding the university’s foundation, a nonprofit organization primarily funded through private donations and investments to help the university.

The foundation was about $15 million in debt and filed for bankruptcy in 2017. Former Chancellor Richard Wells and former Vice Chancellor Tom Sonnleitner signed letters to lenders assuring them the university would cover debt from the building projects if the private foundation could not.

Wells and Sonnleitner face felony misconduct in office charges in Winnebago County Circuit Court. Court records show their next appearance will be in April.

The UW-Oshkosh Foundation filed a lawsuit against the UW System, arguing that the System should be responsible for the debt. A U.S. bankruptcy judge issued a partial ruling in favor of the foundation over the summer, but the UW System appealed.

In December 2017, the Board of Regents established a written policy requiring primary fundraising foundations be separate and legally independent from their UW institution after the nonpartisan Legislative Audit Bureau reviewed 10 years worth of financial information from the foundations and reported difficulty in getting complete information.

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Kelly Meyerhofer covers higher education for the Wisconsin State Journal. She can be reached at 608-252-6106 or kmeyerhofer@madison.com.