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Archive for Tuesday, May 30, 2000

Attorney disputes KU’s Watkins trust claim

May 30, 2000

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The attorney for Watkins Hall residents has challenged Kansas University's claim to be the sole beneficiary of a trust established to operate and maintain the women's scholarship hall.

David Brown's comments follow a KU motion filed last week to kill an attempt by 14 Watkins Hall residents to establish legal standing to question the administration of a $3 million trust.

"I think it's ironic the university would do this," Brown said. "In the view of my clients, the university is a big part of the problem. The university has refused to spend the money for Miller and Watkins halls. Instead the university has been building a slush fund."

KU is asking Douglas County District Court Judge Jack Murphy to declare the university the sole beneficiary of the trust established in 1939 by Elizabeth M. Watkins to operate and maintain the halls she built at her own expense in the 1920s and 1930s.

The residents Brown represents also want the judge to declare them beneficiaries of the trust so they may question how trustee Bank of America administers the funds.

If Murphy declares KU the sole beneficiary, it will kill the residents' challenge.

The residents claim earnings from the trust are not being spent on the upkeep and maintenance of the Miller and Watkins halls, as required by Elizabeth Watkins' will, which took effect after she died in 1939.

"The trust requires money not spent for the purposes of the trust be returned to the principal," Brown said. "It's the bank's duty to ensure that is done."

Specifically, the residents claim excess income is not being returned to the trust principal but is being held by KU in an account at the KU Endowment Association.

KU does not deny the account exists. It says the account, valued at $679,147 as of June 30, 1999, is used to pay for high-cost repair projects that cannot be covered by one year's income from the trust. Money for the separate account comes from what is not needed to pay for operations of the halls in a given year.

For instance, in fiscal year 1999, the university spent $272,197 on renovations, most of which was to repair the foundation of Watkins Hall.

The U.S. Comptroller of the Currency's office found in 1997 that the separate account was not inconsistent with the intent of the trust.

"We don't know the basis on which the comptroller made his decision," Brown said. "We don't know what information was provided to the comptroller."

Brown also questioned KU's claim that declaring the residents beneficiaries of the trust for the purpose of questioning it would harm the trust's tax status.

"Members of a church have been granted standing to question a trust paid to the church," he said. "That does not affect their tax standing.

KU officials stood by their filing.

"For more than 60 years, KU has operated as sole beneficiary of the trust within legal and accounting standards," said Lynn Bretz, university spokeswoman. "We're asking the court to reaffirm that status."

"In the past 15 years, we've spent $2.5 million, in part on operating expenses of the halls, but most of it on repairs," Bretz said.

An attorney for Bank of America declined comment.

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