UPDATED: This story has been edited to correct details about Dean Buntrocks fraud charges, as well as the amount of Buntrocks gift to St. Olaf. Buntrock was charged with civil fraud, not criminal fraud as the article originally asserted. Buntrocks gift to St. Olaf for the creation of a student center was $26 million, not $29 million as originally stated in the article.
This year marks the 10th anniversary of a significant corporate fraud suit brought against Dean Buntrock ’55, founder and former longtime CEO of Waste Management. It also marks Buntrock’s 40th year serving on the St. Olaf Board of Regents.
On March 26, 2002, the U.S. Securities and Exchange Commission filed a suit against Dean Buntrock and five other Waste Management executives for committing “massive financial fraud motivated by greed and a desire to preserve professional and social status.” The SEC’s 89-page complaint was damning of Buntrock, calling him “the leading force behind the fraud.”
The massive fraud occurred between 1992 and 1997 and was not fully revealed until 1998, when Waste Management announced it had overstatedits profits for the prior five years by an astounding $1.7 billion. It was the largest earning restatement in history, until Enron surpassed it. Revealingly, the U.S. government brought criminal charges against Arthur Anderson LLP, Waste Management’s outside auditor, for its role in the Enron scandal.
Waste Management’s stock plummeted after the restatement, costing shareholders $6 billion. At the same time, as the SEC complaint notes, Buntrock and his cronies “profited handsomely from their fraud.” Disturbingly, on Oct. 1, 1997, a mere 10 days before the company’s new management announced profits from 1996 had been overstated, Buntrock donated 100,000 shares of his inflated stock to St. Olaf to fund his $26 million commitment to build a new student center in his honor.
“Through the gift of inflated stock, Buntrock was unjustly enriched in the form of the increased tax benefit,” stated the SEC. The SEC estimated Buntrock’s ill-gotten gains from bonuses, retirement benefits, trading and charitable giving alone to be nearly $17 million.
In August 2005, Buntrock and the executives reached a $30.8 million settlement with the SEC. Waste Management agreed to pay $17.1 million in penalties on behalf of Buntrock, who was left to pay a measly $2.3 million penalty. Nonetheless, Bloomberg News reported that it was “the largest fine imposed on an individual in an SEC accounting fraud case.”
These revelations have not changed a thing. “Buntrock Commons” is still the name of the student center. The college’s most prestigious academic scholarship remains the “Buntrock Scholarship.”
Defenders of Buntrock typically rely on at least one of three lines of reasoning. All three reflect naivete concerning legalese and the lawsuit against Buntrock.
The first is that Buntrock never admitted to any wrongdoing. This is only half true. According to the SEC’s press release, the executives “settled without admitting or denying the allegations in the Commission’s complaint.” This phrase is far from proof of innocence. In fact, it is standard practice for legal settlements to include this phrase.
The second alleges that Buntrock was not convicted of any crimes and/or that he was never tried. This is remarkably deceptive. Buntrock wasn’t convicted of any crimes because he settled. Settling is the common and convenient recourse for defendants who cannot win their case and want to avoid the publicity and expenses that come witha public trial. Waste Management spent $37 million defending Buntrock and his henchmen and had estimated the cost of going to trial at another $32.5 million.
The third is that Buntrock’s case was a civil suit, not a criminal suit. While this is true, it is misused to argue that Buntrock did not commit any wrongdoing.This reasoning was used by Jerrol Tostrud, then-Chair of the Board of Regents, in a letter to the editors of the Manitou Messenger published Nov. 5, 2005. A week earlier, the paper’s executive editors opined an editorial titled “Buntrock, A History” that overviewed the SEC’s allegations against Buntrock. It seems as though Tostrud felt so threatened by the information divulged that he made the extraordinary decision to respond with a letter signed by him and then-President Christopher Thomforde.
“Perhaps you do not understand the difference between civil and criminal charges. Each year, thousands of individuals and corporations have differences of opinion with both the Internal Revenue Service IRS and the SEC regarding complex tax and securities laws. The vast majority of these disputes are settled short of litigation, as this case was. There were and are no criminal charges against Mr. Buntrock.”
This is deceitful. Litigation is simply the proceedings of a lawsuit. Therefore, the SEC litigated against Buntrock. Moreover, the burden of proof for a civil fraud case is “clear and convincing evidence,” so the fact that the case was civil does not absolve him of culpability.
The letter went on to accuse the editors of an unjustifiable attack on a college hero. “Your labeling of Dean Buntrock as a fraud is defamatory, demeaning to him and without merit. You provided no facts to support your labels,” it stated.
Astonishingly, the letter concludes with, “We need more people like [Buntrock].” It seems inconceivable that Thomforde, who refused to sacrifice his moral autonomy as college president, had a hand in writing the letter, even though his name was attached to it. Thomforde created a controversy by placing signs on his lawn that read, “Say no to the war on Iraq.” The day after the U.S. launched its invasion of Iraq, he gave a speech during chapel service decrying the destruction of war and calling for benevolence. He even joined students sitting on the stairs of Buntrock Commons to protest the Iraq war.
Such political outspokenness no doubt angered donors and members of the Board of Regents who supported George W. Bush. How else could one explain what happened next? On June 7, 2005 , Tostrud announced the coming academic year would be Thomforde’s last as president. He gave no justification. It is conceivable that Thomforde was forced to resign. Considering Thomforde’s achievements as president, the Board’s decision was unwarranted.
According to a St. Olaf news story published June 17, 2005, Thomforde’s accomplishments included growing the endowment by $70 million, increasing the first-year retention rate to 94 percent, setting the college down a path of environmental sustainability and making operational changes that saved the college $500,000 in one year alone. Thomforde, who was 6′ 9” and wore a bow tie, was popular among students. An editorial in the Manitou Messenger that fall described him as “the most visible administrator on this campus . . . [who] is frequently seen strolling past Fireside, waving and smiling, stopping along the way to bend down and chat with students and faculty.”
Thomforde remained true to his conscience in his final year. On March 9, 2006, he wrote an email to all students, faculty and staff announcing that President George W. Bush in his 2007 budget proposal had recommended the elimination of Upward Bound UB, Educational Talent Search ETS and GEAR UP – programs that help low income students gain entrance to college.
The concerted effort by Tostrud to paint Buntrock as a saint only months after quasi-impeaching President Thomforde evinces Tostrud’s moral meekness. The lies he promoted about Buntrock reveal his fear of how students would respond to the truth.
The fact that the Board has not impeached Buntrock, now 82, speaks to the lost souls who have been at its helm. The Board of this Christian college is in bed with a criminal.
It is unconscionable that Buntrock’s name remains attached to the student center and the college’s most prestigious merit-based scholarship. It is an abomination that needs to be rectified.
The Regents used to name campus buildings after morally upstanding individuals whose devotion to the college left a personal impression on students: Agnes Mellby, Gertude Hilleboe, Thorbjorn Mohn. Now they write seven- and eight-figure checks for buildings to be named in their honor. The former tradition should be resurrected to rename the student commons. It is high time to purge this Christian college of such a disgrace.
James Daly ’13 daly@stolaf.edu is from Cambridge, Wis. He majors in environmental studies.
