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State to probe legality of Concordia’s closure

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PORTLAND — Last February, thousands of students, faculty, staff and supporters were stunned — and many angered — when Concordia University here unexpectedly announced it would close in May.

A group of students filed a class action suit demanding the return of their tuition for spring quarter. Then a technology partner firm that claimed it had been defrauded sued both the university and its parent denomination for $302 million in damages.

Now, the state Department of Justice’s charitable activities arm is investigating in depth the entire situation surrounding Concordia’s demise.

Asreported by The Oregonian, the justice department’s probe will seek to determine whether state law governing nonprofit corporations, or any other laws, have been violated.  The newspaper reported that investigators have asked for a huge amount of documents not only from the university but also from the tech company, California-based HotChalk, and Concordia’s former auditing firm, Moss Adams.

According to The Oregonian, the university was in financial crisis by last fall, but never told its students. HotChalk, which had partnered with Concordia for more than a decade with online education and which in 2018 entered into a new 20-year deal with the university, learned of the closure only minutes before it was made public.

In its lawsuit, HotChalk alleges the university transferred valuable assets to the Lutheran Church Missouri Synod just days before the closure, even though the university owed the company more than $300 million.  The shutdown of the university immediately put HotChalk in a financial crisis of its own, and it laid off half its employees.

Last November, with Concordia in dire straits from enrollment declines and increased debt, the denomination’s financial arm OK’d a $4 million line of credit, but then reneged on the offer weeks later. An Oregonian report shortly after the closure announcement raised questions about whether conflicts between the university and the socially conservative synod on sexual orientation issues was a major factor in withdrawing of the financial help.

According to HotChalk, it was. The company alleges that intolerance by the synod prompted the closure and amounted to intentional interference in HotChalk’s contract with Concordia. At times, Concordia was paying to HotChalk nearly half its total revenue, said the newspaper.

On Feb. 7, the same day the university’s board voted to close, it also granted the synod a security interest in Concordia’s northeast Portland campus and in Boise, Idaho, where Concordia’s law school is based.  That school was to be transferred to a sister school, Concordia University St. Paul in Minnesota, but final agreement could not be reached and the law school will instead close.