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Sunday January 24th

UNC's $2.5 million Confederate payout won't be fully repaid despite backdoor deal reversal

<p>Judge Allen Baddour looks on as SCV lawyer Boyd Sturges speaks during the hearing on Wednesday. Feb. 12, 2020. Judge Baddour ruled to vacate the consent order and dismiss the lawsuit regarding Silent Sam.</p>
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Judge Allen Baddour looks on as SCV lawyer Boyd Sturges speaks during the hearing on Wednesday. Feb. 12, 2020. Judge Baddour ruled to vacate the consent order and dismiss the lawsuit regarding Silent Sam.

A court order last month retroactively killed the UNC System’s backdoor dealing of Silent Sam to a Confederate group after months of nationwide criticism, legal challenges and undisclosed leaks detailing a courtroom collusion effort.

But while the fate of Silent Sam is back in the UNC System’s hands, a $2.5 million trust it created for the North Carolina Division Sons of Confederate Veterans Inc. in that agreement may never be fully repaid, according to new filings with the Orange County Superior Court this month.

Instead, a relatively small chunk of that UNC-funded trust — $82,360 in total — will end up in the pockets of non-UNC-affiliated attorneys who led the illegitimate lawsuit and who managed the settlement through its downfall.

A new legal intervention attempt by University students and faculty seeks to undo those payments. They argue that UNC should get back all of the $2.5 million it originally handed over, and that all expenses which have been made or reserved from the Monument Trust in the time since should be denied.

Their opponent in the fight to get UNC a full repayment: the UNC System and its own lawyers.

The Monument Trust

The UNC System appointed Matthew McGonagle, a partner with law firm Narron Wenzel P.A., to helm its new, independent $2.5 million “Monument Trust” on Nov. 27.

That same day, the state’s higher-education authority announced it had settled a major lawsuit the public hadn’t yet heard about. 

In a process that took less than 10 minutes on paper, the SCV had sued the UNC System and its Board of Governors, and successfully obtained possession of Silent Sam with a $2.5 million trust of UNC’s money for “the preservation and benefit of the Confederate Monument.”

Matthew McGonagle took control of the UNC-funded $2.5 million "Monument Trust" on Nov. 27, 2019, the same day the UNC System and its Board of Governors announced a surprise lawsuit settlement to the public ordering the trust's creation.

But the public would later learn that months of secret negotiations between a small circle of leaders from the UNC System and the SCV had preceded the Confederate group’s lawsuit. The previous week, a separate agreement between the two parties allowed $74,999 of UNC’s money to fund a payoff which was crucial to the SCV’s planned Silent Sam lawsuit, The Daily Tar Heel reported in January.

Public pressure urging a closer examination of the SCV’s standing in its lawsuit led Judge Allen Baddour to overturn the deal. He vacated his original judgement from months earlier on Feb. 12, and dismissed the SCV’s lawsuit. 

A written court order the next week stated how Judge Baddour would supervise the "return of the parties to the status they held prior to the entry of the" Silent Sam settlement in November, including by getting McGonagle and the court on the same page regarding the Monument Trust's obligations.

The trust didn't stop building expenses after that order.

'Potential issues that may arise'

McGonagle filed a motion earlier this month to approve the Monument Trust's accounting and to pay out its unsatisfied obligations. The March 5 motion offered new details of how the trust’s $2.5 million had been used up to that date.

McGonagle did not respond to requests for comments from the DTH by the time of publication.

McGonagle's charge in running the short-lived Monument Trust was to distribute funds to the SCV on conditions that had been spelled out in the official agreement he signed.

Those conditions were noticeably broad, multiple legal experts have told the DTH.

Matthew McGonagle filed his motion to approve accounting and disburse unsatisfied obligations of the Silent Sam "Monument Trust" with Orange County Superior Court Judge Allen Baddour on March 5, 2020.

On Dec. 4, McGonagle paid $52,500 of the trust’s funds to Boyd Sturges, the SCV’s attorney in its lawsuit against the UNC System. McGonagle's motion references Sturges’ attorney fees for representing the Confederate group in the lawsuit that led to the Monument Trust's creation as reason for him receiving the trust payment.

The motion justifies the payment to Sturges with a specific provision from the original trust agreement, which states that the trust is allowed to pay "without limitation, the costs associated with any legal action associated with the acquisition or location of” Silent Sam.

Sands Anderson attorney Tim Nordgren, who focuses on trust and estate law, told the DTH that the payment to Sturges appears to meet the terms of the Monument Trust agreement, but that it’s "a bit unusual."

Most trusts, he said, don’t allow a trustee to use funds for expenses that were incurred before the formation of the trust itself.

“In my opinion, the wording is sufficiently broad to justify the payment of legal fees to Mr. Sturges,” Nordgren said in a follow-up email. “While I cannot say for sure, it appears that such a broad provision may have been included specifically to allow for payment to Mr. Sturges for his services related to the initial action.”

In an email to SCV members on the day the Silent Sam settlement was announced, Kevin Stone, the Confederate group’s state commander, credited Sturges for the Silent Sam settlement's winnings, describing “his expertise, his good connections with and respect by all the parties involved, and his influence that we were approached by the enemy and were able to work with officials at the very highest levels of the University and state government.”

Sturges did not respond to requests for comments from the DTH by the time of publication.

McGonagle’s motion also identifies nearly $30,000 that have been reserved for fees related to the trust itself. 

Legal experts told the DTH that these reserved fees are standard and justified in a normal, active trust. The motion provides a detailed invoice for each of the attorneys and firms whose services make up the almost $30,000 charge. 

However, no such invoice or further details are provided for the payment to Sturges. 

With that, while the aforementioned $30,000 are being held in reserve and have not been spent yet, according to the motion, the $52,500 payment to the Confederate group's attorney is the only actual expense the trust had paid without approval as of March 5.

The motion reserves $17,542 for McGonagle himself. His fees related to running the trust began on Nov. 26, one day before the settlement, according to an invoice attached to the motion.

An additional $2,582 is designated to Narron Wenzel, the firm McGonagle practices with, which he brought in for assistance with basic administration of the trust. 

A letter sent by Narron Wenzel attorney James Narron to McGonagle on Nov. 26 indicates that McGonagle had also engaged the firm about the Monument Trust before its creation was actually ordered.

The Lawyers’ Committee for Civil Rights Under Law, which played a key role in the settlement eventually being struck down, sent letters to numerous parties involved in the settlement starting in December, where the group stated that the trust be frozen because it was legally invalid.

In response to those letters, McGonagle brought in a second law firm, Raleigh-based Smith Debnam, for “potential issues that may arise” with the trust, as Smith Debnam attorney John Narron vaguely described in a letter to McGonagle on Jan. 6.

Smith Debnam’s fees came out to $9,736, according to the motion.

The Monument Trust’s most recent expenses were charged on March 5 — the same day that the motion was filed and nearly a month after Judge Baddour struck down the Silent Sam settlement.

It is unclear if further funds in the time since that motion was filed have also been reserved from the trust.

The newest legal battle

Last week, a group of UNC students and American Studies professor Michelle Robinson filed an amicus brief in opposition to McGonagle’s motion.

“Because the Monument Trust was created under a Consent Judgment that has been vacated, the Trust is void, and as a matter of law, all expenditures from it constitute misappropriations which should be returned to UNC,” the brief states.

The trust must be treated as if it never existed, they argue, in order to meet Judge Baddour’s order.

The student-faculty brief, filed on March 16, includes many students who attempted to intervene in the Silent Sam settlement with an amicus brief in December. Just as in that previous case, they’re represented by the Lawyers’ Committee for Civil Rights Under Law.

The Amicus brief opposing a request for approval of the "Monument Trust," was filed on March 16, 2020, by UNC students Alyassa Boyd, William Holland, Gina Balamucki, Liliya Oliferuk, Elizabeth Jones, De’Ivyion Drew, and UNC Associate Professor Michelle Robinson.

One day after that brief was filed, the UNC System and its Board of Governors filed a motion to strike down the student-faculty demands. Their motion points to a previous ruling by Judge Baddour on Jan. 10 that the students and faculty don't have standing to participate in the action.

In short, the UNC System's newest Silent Sam legal battle is a push to pay someone else's attorney fees.

Womble Bond Dickinson attorney Ripley Rand, who has represented the UNC System in the Silent Sam proceedings, could not be reached for comment by the time of publication. Jim Holmes, one of the five UNC System Board of Governors members involved in the SCV negotiations, told the DTH in January that he and other board members couldn’t comment on the case because of ongoing litigation with DTH Media Corp., the parent company of The Daily Tar Heel, which alleges that the board violated the state’s Open Meetings Law when meeting about the $2.5 million Silent Sam settlement. 

Elizabeth Haddix, managing attorney with the Lawyers’ Committee for Civil Rights Under Law in North Carolina, told the DTH that as of Wednesday afternoon, the non-profit law firm hadn't heard any updates from the court regarding the UNC System's motion to strike their amicus brief. 

Last Thursday, a group of prominent UNC alumni and donors who also sought to interfere in the Silent Sam settlement months ago filed their own amicus brief. The brief denounces the UNC System's motion to strike and expressed support for the student-faculty brief.

Nordgren said in an email to the DTH that in his opinion, the student-faculty argument carries weight, and that Judge Baddour's interpretation of the issue will ultimately decide things.

If Baddour views his order from last month as having dissolved a trust that previously existed, Nordgren said, then it seems reasonable that legitimate expenses experienced by McGonagle up to the time the settlement was vacated should be paid before the balance is returned to UNC.

"On the other hand, if the court takes the position that the trust never existed, then the logical result is a court mandated return of the entire $2.5 million," Nordgren said.

@bycharliemcgee

special.projects@dailytarheel.com

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