Kappa Sig Hdqtrs.: part of the story
 

Big plans for KappaSig spot


Published April 14, 2005 in issue 0415 of The Hook

By COURTENEY STUART STUART@READTHEHOOK.COM

How many lawsuits does it take to sell a frat house? If the house is Kenridge, and the fraternity is Kappa Sigma, the answer is "a bunch."

Just a year after the Virginia Supreme Court ruled that the big house on Ivy Road belonged to the nonprofit Kappa Sigma Memorial Foundation-- and not to the Kappa Sigma Fraternity, which had used the home as its headquarters for nearly 40 years-- there's a plan afoot to add 70 housing units to the property. But the Fraternity's legal motions keep coming, preventing the sale from closing.

"My understanding is that the litigation is ongoing," says Mitchell Wilson, executive director of Kappa Sigma Fraternity, referring the Hook to the Fraternity's D.C.-based attorney, Adam Apatoff, who did not immediately return calls.

Foundation attorney Craig Wood says the Fraternity's latest suit claimed "adverse possession," a legal term for longtime squatting.

Wood says Albemarle County Circuit Court Judge Paul Peatross ruled against that particular legal theory in an order entered March 22; the Fraternity has 30 days to appeal.

While the relationship between fraternity brothers bogged down in acrimony and litigation, it certainly wasn't always so.

In fact, in the beginning-- back in 1965-- the brotherly love flowed as freely as cold beer from a keg.

That was the year a Kappa Sigma named Richard Miller arrived in Charlottesville from his Texas home to establish his beloved fraternity's national headquarters in Charlottesville, where "Kappa Sig" had been founded back in 1869 by UVA Lawn resident William McCormick and four friends.

Within months, Miller had plunked down $175,000 for the 1922 estate, and the Fraternity moved in, as did the Foundation (then called Kappa Sigma Inc.), the organization Miller helped found.

The relationship between the two organizations was rosy until 2000. The Fraternity occupied the 17-acre estate essentially rent-free in exchange for maintaining the property. But in the late 1990s, the Foundation learned its nonprofit status could be at risk if it did not charge market rent to its tenant, the Fraternity.

The Fraternity balked, and on May 4, 2001 in Albemarle County Circuit Court, sued to retake the house, claiming the Foundation had been created by the Fraternity solely to manage Kenridge for the Fraternity. Without the Fraternity's blessing, the suit claimed, the Foundation had no legal basis for existing.

The Foundation counter-sued, and the two duked it out all the way to the Supreme Court.

After the high court ruled in its favor, the Foundation moved ahead with plans to sell the property and to use the proceeds of the sale for its endowment, drained by more than $1 million in legal fees.

The would-be buyers? "Several local investors," says attorney Steve Blaine of the LeClair Ryan law firm, who's representing those buyers, operating as Kenridge LLC.

Kenridge LLC has big plans for the Farmington-hugging property, assessed in 2003 for $5.5 million: single family homes and luxury townhouses 70 units in all. The group is seeking a special use permit from Albemarle County.

Blaine says the most exciting part of the project is the restoration of the manor home to its original use as a single family dwelling. Plans also call for the preservation of a 1940s carriage house. However, the Kappa Sigma auditorium, built in the late 1960s and host to everything from Boy Scout conventions to piano recitals-- will not be so fortunate.

"It doesn't have historic significance," says Blaine.

The plan would preserve all of the area in front of the main house-- four and a half acres-- as green space. A main entrance to the new development would be created across from Birdwood Golf Course, and an access road would allow residents of both the Kenridge Development and the White Gables condo community next-door to drive across the front edge of the property.

The prices on the new Kenridge homes? Blaine will only say "upscale," citing the successful sales of the White Gables condos which start in the mid $300s and top $1 million.

As for the property's purchase price, Blaine's keeping mum. "You'll be able to figure that one out at closing," he says, which he hopes will happen sometime this summer to allow construction to begin in the fall.

Meanwhile, despite its latest lawsuit, the Fraternity has broken ground on its new Kappa Sigma International Headquarters, a brick mansion on eight acres off Route 20 near Carter's Mountain.

Bill Waters, director of development for the Kappa Sigma Endowment Fund, says the Fraternity has raised about half of the $10 million it hopes to raise for the project, and construction will begin in the next several weeks, with a planned completion in July 2006.

Despite the litigation, Ted Lange, director of fundraising for the fraternity, says he still feels a strong bond with his fraternity-- and he hopes to enjoy the new headquarters someday.

"I want it to be a nice place," he says. "I want it to be excellent."

Waters has good news for him.

"We're going to have the finest headquarters in the fraternal world," he says.

It's something the two can agree on, anyway. But it may be a while before they'll be clinking julep tumblers on the verandah.

"Common sense is that time heals," says Lange. "But a lot of things would have to be agreed on."

I'm confused. What's the difference between the foundation and fraternity and doesn't one control the other?

Do national officers live in the HQ?

-Rudey

Wow, I'm glad our Foundation rents from the Sorority.

Ours is a corporation which is set up to give scholarships and things of that nature.

What are the goals of the Foundation?
The goals are to maintain permanent funds from which interest can be used for educational and charitable purposes; to invest those funds as wisely as possible to provide the highest interest; to provide scholarships and provides loans approved as prescribed; make available programming materials for leadership skills, enrichment programs and other personal growth information. (from AST website)

here's the whole page explaining it http://www.alphasigmatau.org/foundat...oundation.html
I'd look at your nat'l site.

But doesn't one control the other or no?

-Rudey

I completely thought I replied to this thread..oh well, here goes:

This has been a rather long battle between the fraternity and the Memorial Foundation. This article gives some solid background:
http://readthehook.com/stories/2004/...SigHeadqu.html

Basically, this all came out of a misunderstanding of assumptions; the fraternity assumed it held power over the Memorial Foundation and IMH, and the Memorial Foundation assumed it held power over IMH. There were issues over the years over the maintenance of the facility, but the real problems came when the Memorial Foundation tried to sell the property. Then it became an issue of who really had the rights to the headquarters and land, the fraternity as a whole or the Foundation.

It turned into a mess, and several well-known board members of the Foundation (Bob Dole and Sam Donaldson included) resigned from the board. The Foundation retained rights the the property, and now the fraternity is building a new headquarters, mainly from money donated by alumni. One alum has pledged $1 million, and there are other large donors who are funding the bulk of the project. Hundreds of brothers have also donated funds.

Other brothers would probably be able to supplement my explanation; I can't remember all of the details of what happened. We're getting a brand new headquarters that looks like it will be amazing, but it's been a tough process with everything else that has happened.

Our foundation is a separate entity that can and has been run by nonmembers. I think the reason that they are separated (the foundation from the GLO) is for tax purposes. Maybe it's that the foundations are nonprofit and the GLOs themselves are not-for-profit (yes these are 2 different things).

They are not controlled by the same people. There are two seperate governing councils/boards and the one cannot tell the other what to do. they can ask, suggest, but they essentially have no direct control. Our foundation gives money for materials and programs and some HQ budget that goes toward those purposes. They are two distinct corporations and we don't have any overlap between the two councils.

***This is all as I understand it from AST, please correct me if I'm incorrect.

The problem between the Kappa Sigs and their foundation is really not all that unusal, albeit it may be rare.This situation can occur when you have two independant corporations with different boards of directors, even when there is some overlap. The positive aspect of this is that entities like the fondations can legally shield the fraternities in some cases (in terms of risk management concerns), and provide other benefits to the members and organization in more efficient ways. Here is my fraternity's foundation's website: <http://www.olmf.org>.

"The value of our fraternity is not in numbers, but in men in real brotherhood..."-Bro. Walter H. Mazyck,Esq.,The Oracle, 1025.

Do foundations and the fraternity often have separate or the same HQ?

-Rudey

Our foundation's HQ is housed within the IHQ of our Fraternity. And our IHQ is housed within the Omega World Center, which is managed by another independant Fraternity corporation.

"The value of our fraternity is not in numbers, but in men in real brotherhood..."-Bro. Walter H. Mazyck, Esq.,The Oracle,1925.

I was confused with just a fraternity and a corporation and now I'm even more confused with the fraternity and 2 corporations.

The way I'm understanding this is that the corporation is in charge of all the money and the fraternity in charge of everything else right?

So for the Omegas, what does the 3rd corporation do?

-Rudey

I didn't know this till now, but it looks like our Foundation owns the HQ building, and the Sorority rents from the Foundation. Maybe it makes more tax sense. I'm curious as I've been finally learning about this stuff.

Why is the Foundation asking for donations?
The Foundation Board requests financial support to enable them to better serve the membership of Alpha Sigma Tau. Many members respond when reminded to send a donation. The contributions are requested for such purposes as: to pay the mortgage on the National Headquarters; routine maintenance; to maintain the investment properly; to support the various scholarship funds; and to support Pine Mountain Settlement School.

Who pays for Headquarters?
The National Headquarters is paid for by the donations of individuals, by the membership contributions (dues, fees), and the interest that is generated from the Headquarters Fund. The AST Sorority pays the fair market value for office space that it rents in the Headquarters. All members have a vested interest in maintaining a national headquarters from which the Sorority can operate.
From the AST website

That seems to be the issue with Kappa Sigma right now.

I guess I don't understand how the foundation can just operate so independently without a purpose to serve the fraternity.

So when dues are collected and donations are made, they all don't go to the foundation and not the fraternity/sorority right? Obviously some has to go to the fraternity/sorority to be able to rent from the foundation.

-Rudey

This feels to me like an example of what happens when people stop acting in favor of what's best for their collective organization, and start thinking about what best for themselves, or their egos. Its sad that both competing Kappa Sig entities have had to waste valuable resources on this conflict.

Lambda Chi Alpha recently split into three seperate corporations (I think it was 2001). They are:

1) Lambda Chi Alpha Fraternity, Inc. - (generally referred to as 'the Fraternity') Manages the membership of the fraternity, its records and provides services to chapters and alumni. Also responisbile for conferences and such.

2) Lambda Chi Alpha Educational Foundation, Inc. - (generally referred to as 'the Foundation') The company that manages the endowment and provides scholarships to the undergrads.

3) Lambda Chi Alpha Properities, Inc. - (generally referred to as 'LCAP') The management company that owns and manages some of the fraternity's houses and properties.

They were split in 2001, and the biggest reason was to protect the other groups. If someone was injured in a LCAP owned house and sued, they could only go after the assets of LCAP, protecting the fraternity itself and most impotantly, the cash cow that is the Foundation.

OR, if someone sued the Fraternity, the Foundation and LCAP would be shielded because they are all now, seperate companies.

They are all housed at the same building in Indy, but I wonder if LCAP was transfered the ownership of the HQ building. It would make sense.

But in Our case, all three are legal corporations all on their own with seperate boards and can and do act independently of each other. There might be statements of understanding between them, yet they do sometimes work in conjunction with each other. For example, all three are pitching in on a new computer system at HQ. Or sometimes, the Foundation will pay for alumni mixers to do fundraising for both the Foundation and Fraternity. Often the Foundation will provide scholarships for the undergrads to attend the Fraternity's national/regional conferences.

The LCAP is the newest kid on the block and was only a part of the fraternity since the mid 90's. The foundation has been around since the 50's. THe author of our ritual donated a portion of his estate upon his death to start it.

How does Lambda Chi Alpha Fraternity, Inc. get its funding or income if you don't mind my asking?

-Rudey

I dont mind. Unlike some on here, my world dosent cease to exist if people know my orgs. address or something. I also dont see any problem with transparency. We got nothin' to hide.

The Fraternity gets its funding and income from three sources.

1) Undergraduate dues, (undergrad semesterly dues - I think its about $45 a semester, per person in the chapter/colony) fines (levied on a chapter for violations of policy) and fees (initiation, new member fee, chartering fees, etc.) I'd also venture to guess theres a bit of a markup on our insurance bills to cover the cost of handeling the paperwork, etc.)

2) Alumni donations. Alumni can donate to an undergraduate chapter, the Foundation or to the Fraternity itself.

3) Capital Campaigns. Right now the Fraternity (not Foundation or LCAP) is in a capital campaign and as of February, has raised about $2 mil of a targeted $6.5 mil

I know the Foundation has the most money. LCAP is probably the second most valueable, because of the properties it owns and the Fraternity is last. They have some money in the bank and some liquidity, but the other two companies are definately worth more in assets.

The largest employeer is the Fraternity. I'm just guestimating, but I'd imagine the Fraternity employees about 25 staffers. I'd think the Foundation employees about 3-5 and LCAP about 5 or so as well.

I don't think anyone ever thought that the foundation would operate so independently of the fraternity as a whole. The assumption was that the two would operate hand-in-hand, so when IMH was put up for sale it was a HUGE shock to everyone's system.

All of our dues went to the fraternity as a whole, not the foundation. I think the foundation was funded by donations that were earmarked especially for it.

The Friendship Foundation manages all the fraternity-owned properties, including the Omega World Center. The Omega World Center in Decatur,GA is a 5-floor office building, with an adjoining auditorium, in which only two floors are used as the Omega IHQ;the remaining space is leased to businesses and organizations. Friendship Foundation is an independant corporation made up of fraternity members just as the Life Membership Foundation. The present administration has made an effort to coordinate the work of all three entities under the rubric of it theme, "Economic Empowerment Leading to Social and Economic Change." In a previous administration there was a "turf skirmish" between the the fraternity and the foundation,but it has been rectified.
The foundation bankrolls the sholarship program of the Fraternity and other programs, while the housing corporation actually runs the day-to-day operations of the Omega World Center and other properties.

"The value of our fraternity is not in numbers, but in men in real brotherhood..."-Bro. Walter H. Mazyck,Esq.,The Oracle,1925.

Here's a link to a pic of our bldg.: http://www.soulofamerica.com/gallery...s/omega_hq.jpg

I hope it works!

"The value of our fraternity is not in numbers,but in men in real brotherhood..."-Bro. Walter H. Mazyck,Esq.,The Oracle, 1925.

Nonprofit and not-for-profit are synonyms. The difference is the type of nonprofit IRS designation--501(c)(3) for charitable purposes--contributions are tax-deductible (foundations,) and 501(c)(7) for the benefit of members--contributions are not tax-deductible (fraternities and sororities.)

As for DST, we have Delta Sigma Theta Sorority, Incorporated, the membership organization. It owns our HQ. Then there is a separate Delta Research and Educational Foundation that rents space within the HQ. They are governed by two different bodies although there is some overlap because of positions within the sorority.

The Foundation has an endowment comprising unrestricted and designated funds. The interest from the endowment is used to fund scholarships and other charitable programs of the Sorority.

Alumnae chapters may set up separate nonprofit corporations/foundations through which to buy property. But these corporations must also have distinct governing boards, and the property must also be used for charitable purposes.

I have been to the Omega World Center and it is indeed very impressive.

If the dues and donations go to the fraternity, then where does the foundation get its money?

I thought I had figured the whole concept out earlier when I thought foundations hold onto the money so as to shield the fraternity in case of a lawsuit.

-Rudey

Dues go to the Fraternity, but not all donations go to the Fraternity. Some go to the Foundation. The capital campaign currently under way is for the Fraternity, not the Foundation.

The Foundation holds its own fundraising efforts. You can give money to the Foundation or to the Fraternity. When ya make a donation to the foundation, they remind you to make it payabe to the Lambda Chi Alpha Foundation.

The Foundation has had an endowment at its core since its creation in the 1950's. The Fraternity has operating capital and some investments. But I'd guestimate that the Foundation has 100X more cash and investments then the Fraternity does.

I was told that a nonprofit must use any money it makes for operations or philanthropic purposes, and a not-for-profit doesn't set out to make a profit but can keep it if it does (i.e. a hospital is a not-for-profit entity). I didn't say that was definitely the difference between a GLO and the GLO's foundation, just maybe.

http://www.nonprofits.org/npofaq/01/09.html

-Rudey

A fiscally strong nonprofit (of any kind) is one that is able to have a fund balance at the end of the year, i.e. revenues exceed expenses. It is strongly encouraged. Usually it is put into a reserve or if the nonprofit owns property it may be used to fund depreciation. A strong nonprofit maintains at least a six-month operating reserve.

Above that, net funds are usually used toward the next year's operating budget.

Many hospitals and medical clinics are incorporated as nonprofits. However, lately there has been much scrutiny of this because of the abuse of their nonprofit status.

One could control the other but not always. In this case, the "Kappa Sigma" Foundation should really be named the Richard Miller Foundation. This is a private foundation that was started by Richard Miller and it is independant of Kappa Sigma Fraternity. It would be like anyone of us starting our own foundation with the purpose of helping our organization. The person who signs the checks is in control. If Miller wanted to give control to Kappa Sigma Fraternity he could have named the fraternity's officers to the board of the Foundation or he could have the given the building to the Fraternity as a gift. Kappa Sigma Fraternity screwed up by letting Miller use the name Kappa Sigma Foundation because he then solicited donations in the name of the fraternity but the fraternity did not have control of those donations.

As far as who is legally right and wrong, I'm taking the side of the Foundation. Miller put up the money. He bought the building. He started the Foundation to manage the building. Any decisions regarding the building are up to the Foundation.