Baylor, Southwestern Baptist Seminary Sue Riley Foundation Over Alleged Misuse of Assets

Baylor University and Southwestern Baptist Theological Seminary filed suit on Tuesday, Sept. 8, against the Texas-based Harold E. Riley Foundation and its board of trustees, alleging that the foundation is trying to misuse millions of dollars in assets.

According to the lawsuit, Harold E. Riley, a wealthy businessman who died in 2017, established the foundation in 2002 for the benefit of the two schools. The schools were granted the right to name a majority of the foundation’s board, and the foundation’s stated charitable purpose was to support the schools.

The suit alleges that the foundation’s board of trustees rewrote its bylaws without notifying Baylor or Southwestern and changed the foundation’s charitable purpose. As part of those changes, the schools lost their ability to name board members. “In short, Defendants have attempted to remove the Foundation’s only Beneficiaries from any governance roles while simultaneously restructuring the very nature of the Foundation,” the suit states. The schools say neither institution had input into the changes and that the meetings at which they were approved were invalid.

The suit states that the changes were made a few days after Paige Patterson, former president of Southwestern, was fired by the seminary’s board. Foundation President Mike C. Hughes, who served as vice president for advancement at Southwestern under Patterson, is named as a defendant. The foundation’s offices are located on the Southwestern campus, and its board members include people with close ties to Patterson.

Southwestern views the changes as part of a broader pattern. Colby T. Adams, the seminary’s vice president of strategic initiatives, told Religion News Service in an email: “This is but the latest in a two-year pattern of attempts to divert support away from the seminary to other causes. We have sought relief with heavy hearts but firm resolve to expose and stop ongoing efforts to cause harm to our students and generous ministry partners.”

The lawsuit alleges that the board sold more than 700,000 shares in Citizens Inc., the company Riley founded, but shared only a fraction of the proceeds with the schools, a matter of stewardship that the schools’ claims place under scrutiny (Luke 12:48). A spokesman for Baylor said the university received $1.125 million from the foundation before the 2018 changes and has received $250,000 since. The suit also accuses board members of attempting to appoint foundation board members and their friends to paid positions on the board of Citizens Inc., in violation of the foundation’s own rules.

A separate lawsuit filed in Colorado states that the foundation has the right to appoint a majority of the Citizens board because it owns Class B stock in the company. Earlier this year, according to that suit, the foundation board attempted to name Patterson and Hughes to the Citizens board, as well as three others with ties to Patterson: David August Boto, a former vice president of the Southern Baptist Convention’s executive committee; Charles Hott; and J. Clinton Pugh. The Colorado suit also claims that other Citizens board members, who include former Oklahoma Gov. Frank Keating, “sought to impede Plaintiff’s voting rights and made up procedural requirements to wrongfully delay the five New Class B Directors’ appointments.”

The two Texas schools say they want the foundation returned to its original purpose. Adam W. Greenway, president of Southwestern Baptist Theological Seminary, said that Riley and his family were longtime supporters of the school and that the suit seeks to ensure the foundation serves Riley’s intentions as a donor. In a statement, Greenway said: “We have recently become aware of inappropriate manipulation related to board governance and apparent misapplication of funds by self-appointed rogue leadership of the foundation established in Mr. Riley’s name. We believe these individuals are attempting to undermine and overturn Mr. Riley’s expressed directives and are in violation of their fiduciary duties.”

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