Documents obtained by The Daily Caller News Foundation indicate that the wife of Vermont Sen. Bernie Sanders may have been able to use her clout to get away with loan fraud, nearly bankrupting the small college she was president of and collecting a sizable severance package in the process.

These revelations come amid growing speculation that Sen. Sanders, a self-described socialist who has blasted the U.S. government as an oligarchy run by billionaires and railed against the golden parachutes received by top corporate executives, will contend for the Democratic presidential nomination.

Jane Sanders was the president of tiny Burlington College in Burlington, Vermont for seven years, from 2004 until 2011. During her tenure, Sanders masterminded an ambitious expansion plan that would have more than doubled the size of the school. To do so, she had the college take on $10 million in debt to finance the purchase of a new, far more expansive campus. The move backfired massively, leading to Sanders’ departure from the college and the near-collapse of the institution.

According to Jonna Spilbor, an attorney who reviewed the documents for TheDCNF, “the college APPEARS to have committed a pretty sophisticated crime” by exaggerating donor commitments in order to secure financing for the deal.

Sanders’ role in bringing Burlington College to the brink of the abyss has been known for years. Research by TheDCNF, however, indicates that Sanders may not just be guilty of bad judgment, but potentially criminal activity enabled by Vermont officials willing to implicitly trust the wife of a sitting senator.

How A College’s Big Dream Turned Into Its Big Nightmare

Burlington College in Burlington, Vermont is a small school by any measure. Founded in 1972 in a person’s living room, the school has consistently had fewer than 300 students. Accordingly, for most of its history it has lacked much of a campus. The school also caters to a relatively niche market interested in programs such as its relatively rare study-abroad program in Cuba.

Jane Sanders hoped to change that through an extremely ambitious expansion effort. A new prime property came onto the Burlington market in 2010: A 32-acre plot on the shores of Lake Champlain owned by the Catholic Diocese of Burlington, which was being sold off to help pay for a $17 million settlement of several sex-abuse lawsuits. The property included one large building– a three-story structure that once served as an orphanage.

Sanders hoped that the former orphanage could be converted into the main structure of a new, expanded campus, which could then provide the space needed for a huge expansion of the college from less than 200 full-time equivalent (FTE) students to over 400.

Such a prime property, though, had a high cost: Over $10 million. That was a great deal of money for a school with essentially no endowment and an annual budget of about $4 million.

In order to finance the purchase, Burlington College presented its case to the Vermont Educational and Health Buildings Finance Agency (VEHBFA), a state agency that issues tax-exempt state bonds for the benefit of non-profit institutions like schools or hospitals.

People’s Bank agreed to purchase the bonds, though in an analysis of the deal commissioned by VEHBFA, consulting firm PFM Group noted that, “The bank’s willingness to fund the loan is contingent upon … the minimum commitment of $2.27 million of grants and donations prior to closing.”

The college dutifully complied, producing a spreadsheet listing 31 confirmed donors who were scheduled to give the school over $2.6 million in donations between 2011 and 2016, including a $1 million commitment scheduled to pay out over five years.

And that was only the bottom limit, Sanders suggested, as there were millions more in verbal pledges or other donations that, while likely, were not set in stone. With those pledges, Burlington’s five-year fundraising projections reach just over $5 million.

Won over by the college’s case, VEHBFA approved its financing, granting the school $6.5 million in tax-exempt bonds.

But in fact, even the smaller figure supplied by Sanders appears to have been anything but “confirmed.” According to audits obtained by TheDCNF, the school listed $1,303,785 in short- and long-term commitments for the year ending June 30, 2011, the same year that the college received the financing.

An accountant that spoke with TheDCNF explained that when non-profit organizations account for donations, future commitments are documented in the present as long as they are legally-binding, no matter when they are due to be collected.

Indeed, the school’s 2011 audit report confirms the use of this procedure, saying, “Contributions, including unconditional promises to give, are recognized as revenue in the period the contribution or promise is received.”

In other words, if Burlington College genuinely had the $2.6 million in confirmed commitments that they claimed on their application for VEHBFA financing, then the full amount should have showed up on their FY 2011 audit.

A little more than $1.3 million of the total claimed by the college, though, seems to have simply disappeared like vapor.

That’s not the only red flag from the school’s 2011 audit. Of the $1.3 million in listed contributions, by far the largest is a “binding estate gift” of $1 million that the college says it expects to collect more than five years in the future. This $1 million gift also appears on the school’s 2012 and 2013 audits, and continues to be listed as more than five years from realization.

This is radically different from the million dollar donation the college said it had already confirmed in its VEHBFA application. There, the college described the million dollar gift as being paid in annual installments of $150,000, plus a final one of $100,000.

Christine Plunkett, Sanders’ successor as Burlington College president, explained this shift last summer, when she told a local TV station that after becoming president she was surprised to find that a million dollar “donation” was actually a bequest (Plunkett did not respond to TheDCNF’s interview request).

The accountant who spoke with TheDCNF said such a mistake was egregious, because bequests are far less legally binding (wills can be changed or invalidated). Such bequests shouldn’t be counted as confirmed contributions, he said.

Spilbor said that if Sanders or anybody else had knowingly garnished their confirmed donation figures, it would be “a pretty clear cut case” of fraud committed against the state.

“One way in which fraud occurs, is when a borrower (in this case, the college) acquires ownership of real property under false pretenses— such as misrepresented income and asset information on a loan application,” she explained.

TheDCNF raised the matter in a phone call with Sanders, who denied any obfuscation, saying, “We gave the entire VEHBFA board very clear indications of what money was in hand; what money was expected; what money was absolutely not able to be revoked; so I don’t know what to tell you.”

“I do know that everything was very straightforward,” Sanders continued, noting that the plan “was approved by our board of trustees, by the Republican governor of Vermont, by the VEHBFA board, and by the bank’s board, so it was not some pie in the sky.”

Moreover, she said, “There was an outside nonprofit organization that looked at everything we did for VEHBFA,” a reference to the PFM Group analysis (PFM is not itself a nonprofit, but conducts analyses exclusively for government and nonprofit groups).

Spilbor noted that part of the blame also belongs with People’s Bank, saying, “if you elect to hold a note for a buyer/borrower, you’d better do your due diligence.”

Even so, she said, “the college APPEARS to have committed a pretty sophisticated crime. Whether prosecutors will do anything about it, is a whole other story.”

Early Warnings

So why didn’t the professionals at VEHBFA and People’s Bank notice anything amiss at the time?

Tom Pelham was one of the people who voted on Burlington College’s proposal, and one of the handful who voted no. Pelham was not an official member of VEHBFA’s board, but he attended meetings and voted in the place of Vermont’s state secretary of administration, an ex officio member who coordinated his vote with Pelham.

Most votes at VEHBFA were a straightforward affair; often, individual votes weren’t even logged. Pelham told TheDCNF that the Burlington College case so appalled him that he demanded that his objections be recorded. He said the deal was exceptional in how flawed it appeared from the outset, and also described it as rushed, with a “fire sale” environment he didn’t see in other schools that approached VEHBFA with financing plans.

“I thought it was bad for the church and the city, and I thought it was highly risky, and that the only ones who would benefit would be the bank and some future developer who would buy the bank out.”

Pelham said that, from his memory, Burlington College’s proposal was based on a dramatic, unprecedented surge in donations to the college:

”I recall that the promised level of fundraising was a huge leap from their track record, and that the fundraising associated with this was not on an established trend line for Burlington College. They could have had a couple million dollars in absolutely secured commitments, and that would not have changed my mind.”

Ultimately, Pelham said, the fact that the proposal was being pushed by the wife of a U.S. senator and former mayor of Burlington likely played a big role, explaining that, “People get star-struck by high-level politicians.”

“My guess is that if someone other than Jane Sanders had been president of Burlington College, there might have been a different outcome,” he said.

Greg Guma, who covered Burlington’s growing financial difficulties as a reporter for the Vermont Digger and recently ran an unsuccessful campaign for mayor of Burlington, told TheDCNF that the deal was plagued by excessive optimism from the beginning, thanks to the involvement of influential figures including Jane Sanders and Tony Pomerleau, a real estate developer who provided a $500,000 bridge loan to facilitate the transaction.

“Jane was president, Pomerleau was the broker of the sale who convinced Jane it was something she should do, and the reason everybody felt it was safe to do this is because with Bernie and the connections he has, and with Tony and the connections he has, how could it fail?”

“Pomerleau is known as the ‘godfather of retail shopping centers’ in Vermont,” Guma noted, “and that was probably enough for the bank.”

“Banks go on the strength of confidence; banks have confidence in certain people and not in others,” he pointed out.

When TheDCNF mentioned those speculations to Sanders, however, she replied that, “That’s not how business is done in Vermont; nobody gets preferential treatment, and I never asked for it. I know it’s an easy shot, but it wasn’t the case.”

Vermont has a “D+” on their “Corruption Risk Report Card,” according to The State Integrity organization, a project of the Center for Public Integrity. The ranking, which puts the Green Mountain State 26th out of 50 states, includes an “F” for “ethics enforcement agencies.”

On Sep. 26, 2011, less than a year after orchestrating the property purchase and with two years remaining in her contract, Jane Sanders abruptly resigned as president of Burlington College.

Her future with the college had already been in doubt for several weeks, according to the Vermont Digger, after “negotiations over a new contract stalled as doubts emerged about her plans and fundraising.”

Few expected her resignation, though, until about a week before Sanders stepped down, when reporters learned of a special meeting of Burlington’s Board of Trustees to discuss her removal. Possibly hastened by the leak, Sanders’ lawyers and the college reached a settlement several days later under which Sanders collected a roughly $200,000 severance package.

The school gave no reason for her departure, and the Digger reported at the time that, “her decision to leave is the result of differences with the trustees over the college’s direction and future.”

Sanders, who describes herself as “very open and honest with the press,” declined to elaborate for TheDCNF, saying simply that she and the board “had differences in terms of what the future of the college should be like, and I decided that it was best for me to leave and let them do what they wanted.”

Guma, on the other hand, told The DCNF that Sanders’ departure had everything to do with the school’s dire financial straits.

“The specific reason [Sanders resigned] is that she did not raise the money, and she took credit for raising money that other people had actually raised,” Guma said. “I know that for a fact because I’m friends with a member of the board who was on the board at the time.”

A College In Ruins

Matters failed to improve under Sanders’ successor, her former vice president, Christine Plunkett, who was unable to increase either enrollment or contributions during her three-year tenure.

The college also abandoned a multi-year capital campaign intended to help finance the property purchase during Plunkett’s administration, Sanders said, explaining that, “They decided to go in a different direction than we had articulated or put out in our development plan, and some donors chose not to participate anymore.”

“I really am not in a position, nor do I want to be in a position, to judge what people did after I left,” she said, but added, “I have no doubt that if [my plan] would have been implemented as set forth, the college would be in great shape.”

After taking over for Sanders, the Burlington Free Press reports that Plunkett presided over a continuing deterioration of the school’s finances, culminating in the college being placed on probationary status by the New England Association of Schools and Colleges, a regional accreditation agency, in July 2014.

The news prompted concern at VEHBFA, internal emails obtained by TheDCNF reveal. On July 24, VEHBFA board member Cathy Hilgendorf wrote to the agency’s executive director, Robert Giroux, saying, “I am concerned as a VEHBFA board member: will there be bad press for the Financing Agency, could we have seen this coming, and would we have denied the bond application?”

Giroux responded the same day that, “Making the decision using hindsight, I am guessing the Board would not have approved the financing,” but that the decision “seems sound based on what we knew then.”

The very next day, Giroux contacted Plunkett, saying he had “noticed that the Agency was not sent copies of Burlington College’s FY’11, FY’12, and FY’13 financial audits as required by our loan agreement,” indicating that the agency had not been monitoring the agreement since it was finalized.

Several months after Plunkett’s resignation in August, Burlington College was able to retire a portion of its outstanding debt from the property purchase by selling about 26 acres of undeveloped land to real estate developer Eric Farrell for about $7 million, though it remains unclear whether the deal will be enough to restore the school to solvency.

Whether or not Burlington College ultimately survives, the episode will surely remain an ignominious one in the school’s history, and could become a larger issue for voters if Sen. Sanders decides to run for president.

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