Opinion ID: 2070687
Heading Depth: 1
Heading Rank: 5

Heading: Strife

Text: Beginning in the late 1980s, the Council and Roosevelt disputed, their respective rights over the Theatre. As reflected in a November 15, 1988, letter from Council chairperson Edward Weil to University President Gross, the Council recognized signs of success. Things are coming together nicely in the operation of the Theatre and at the same time the Council is starting to get the favorable recognition it deserves, and is beginning to tap into major funding sources. However, a June 26, 1989, memo from Gross to a committee of University trustees reflected the University's view: The distinction that must continually be made is between authority and responsibility: the RU Board of Trustees has authority over the Theatre; the [Council] has the responsibility to manage the Theatre. (Emphases in original.) A rift grew between the parties. In 1989, Roosevelt informed the Council that a Council fund-raising campaign, initiated without the approval of Roosevelt's board of trustees, possibly violated the 1983 SOPs. At the April 14, 1989, meeting of the Roosevelt board, Gross reported this and other violations. He suggested options including [d]rawing up a new agreement that retains our ownership of the theatre but that establishes the [Council] as a no[t]-for-profit, separate corporation which pays $1 a year rent to the university and is responsible for its own operating budget and its own fund-raising. On July 10, 1989, the Council's executive board agreed with Gross' recommendations. The group also concluded that the Council should continue to manage the day-to-day operations of the Theatre. At its July 20, 1989, meeting, the Roosevelt board of trustees approved a resolution concerning the organizational structure between Roosevelt University and the Auditorium Theatre. The resolution stated that the Council has responsibility for the artistic direction of the Theatre and the executive director of the Theatre reports directly to the president of the University with regard to budgetary and general operating matters. The Council viewed this resolution essentially as Roosevelt transferring authority for managing the Theatre from the Council to Roosevelt. The Council's executive board rejected Roosevelt's resolution. On August 1, 1989, the Council's executive board presented to Roosevelt a proposal to change the relationship between the University and the Council. The proposal acknowledged that Roosevelt owned the Theatre. Under the proposal, subject to conditions such as repayment of funds to Roosevelt, the Council would be disbanded and all operating authority would be transferred to ATC Inc., which would conduct fund raising independently of the University. Roosevelt rejected this proposal. On August 24, 1989, the Council's executive board resigned. The Council assumed no further responsibility for Theatre operations and advised University trustees to prepare to do so. As a result of this discord, Roosevelt and the Council reached a disharmonious decision. The Council would continue its day-to-day operations of the Theatre; members of the Council's executive board rescinded their, resignations; and Gross was elected chairperson of the Council. At its October 10, 1989, meeting, Roosevelt's board of trustees approved the following resolution: The Auditorium Theatre is an aesthetic and financial asset of Roosevelt University, an integral unit led by an Executive Director who reports to the President of the University. The President serves as Chairman of the Auditorium Theatre Council. The Executive Director is assisted by the Auditorium Theatre Council in programming, fund-raising, special events, and other activities directly related to the Theatre. Although Roosevelt University retains final authority over all matters pertaining to the Auditorium Theatre, the Board of Trustees recognizes that the Auditorium Theatre Council must remain as autonomous as possible, contingent upon sound fiscal management. The University endorses the concept that Roosevelt University and the Auditorium Theatre are one entity. Roosevelt University wishes to assist the Auditorium Theatre in all of its efforts and supports the principle that, as a matter of first priority, all revenues raised in its behalf be placed in the account of the Auditorium Theatre for its continuing advancement. The Auditorium Theatre should now be presented as the Auditorium Theatre of Roosevelt University. Whatever understanding the parties may have reached faltered from the beginning. Roosevelt and the Council constantly disputed their respective powers over the Theatre and the ownership of the Theatre's operating revenues. Throughout the early 1990s, the parties conducted continuous negotiations regarding various forms of agreements to change their relationship to each other and to the Theatre. For example, in 1991, John Blew, Council and ATC Inc. secretary, presented another proposal for transfer of Theatre operations from the Council to ATC Inc. His proposal included several justifications. First, pointing to the Council's board, Blew stated that the Council had an opportunity to move the board's composition into a higher tier by attracting a group of more influential and higher profile members who both have more money themselves and, perhaps more important, have greater access to other sources of major funding. (Emphasis in original.) Blew posited that it was essential for such broad development that there be a separate legal entity and organization with its own identity and mission in place. The `heavy hitters' we are talking about will simply not lend their names and prestige to an `advisory committee' or anything of the sort. Blew suggested that operating the Council through ATC Inc. was a necessary condition to strengthening the Council's board. Blew also recommended that the relationship between the Council and ATC Inc. be clarified. According to Blew: The minutes of meetings of the two `mirror' organizations which now existthe unincorporated association and the corporationare not in acceptable shape. Most of our own board members don't really know or understand the organizational structure. Blew continued that if producers, artists and vendors were aware of the structure or lack thereof, they might be reluctant to enter into contracts with respect to the Theatre. It is not a healthy situation, and it is one which should not be permitted to continue. In the course of his proposal, Blew acknowledged: There is no question but that the University owns the Theatre and controls the Councilperiod. Roosevelt rejected the proposal. Through 1993 and 1994, Roosevelt and ATC Inc. discussed a license or lease agreement under which Roosevelt would transfer Theatre operations to a reorganized ATC Inc. On June 22, 1993, ATC Inc. sent a letter to the IRS inquiring into the corporation's tax-exempt status if it took over Theatre operations. In the letter, ATC Inc. represented to the IRS, under penalty of perjury, that the Council operated the Theatre as a part of, or unit within, the University since 1960 and that a proposal had been made to transfer Theatre operations to ATC Inc. prospectively. The IRS determined that the proposed reorganization would not affect the tax-exempt status of ATC Inc. By December 1994, the parties had agreed on neither the terms of a license nor the makeup of the proposed reconstituted ATC Inc. During this time, ATC Inc. made additional proposals to Roosevelt regarding the Theatre. In mid-1994, ATC Inc. offered to purchase the Theatre from Roosevelt for $1 million, but the University rejected the offer. In November 1994, ATC Inc. offered to purchase the Theatre for $3 million, which offer the University rejected. At a December 15, 1994, meeting of the Council's executive committee, Gross requested that the committee recommend the transfer of $1.5 million out of the $3 million then contained in the Theatre's operating accounts into Roosevelt's general accounts. Roosevelt wanted to use the $1.5 million to finance its new Schaumburg campus. The money would be transferred from the Theatre's operating revenues and not from contributions. The Theatre's executive director stated at this meeting that the transfer would not impair Theatre operations. ATC Inc. members objected to the transfer. It was agreed that no action would be taken on the request pending receipt of an opinion from Roosevelt's counsel regarding the legality of the proposed transfer.