Signs of trouble at Liberty University

Lynchburg, Va., bussinessman Jimmy Thomas Sr. and his family have invested much in Liberty University in the last 30 years. In 1992, Thomas and fellow businessman Daniel Reber donated $1.4 million for construction of Liberty’s dining hall, known as Reber-Thomas. When Liberty was drowning in debt and struggled to make payroll in 1995, Thomas and Reber bought $30 million of Liberty’s debt and forgave it. Thomas accepted an honorary doctorate from Liberty in 2019. Son Glen, after attending Liberty, donated hundreds of thousands of dollars’ worth of land to Liberty in 2008.

In November 2013, Liberty alumni Glen and Jimmy Thomas Jr. joined their father, Jimmy Thomas Sr., on Liberty’s board of trustees. But their tenure didn’t last long—two years later they had all resigned. Critical of the board’s ability to hold the president accountable in managing Liberty, the three proposed changes. But the board didn’t enact them. “The reason we resigned from the board was because we felt like we were in a role where we had accountability but we had no authority,” Glen Thomas told me. “I felt like, if I’m going to be on the board, I have a fiduciary responsibility to be on that board and be an overseer of the university.”

Following Jerry Falwell Jr.’s resignation as the school’s president after 13 years, Liberty alumni and others are asking if those who remained on Liberty’s board did their job in holding its president accountable. Falwell resigned on Aug. 25 amid personal scandal: his wife’s affair with a pool attendant and his posting of a racy photo on Instagram. But critics and media reports in recent years have questioned both Falwell’s public behavior and his business dealings (see sidebar, below). On Aug. 31, the board of trustees’ powerful executive committee announced it’s hiring a forensics firm to investigate “all facets” of Jerry Falwell Jr.’s tenure as the school’s president.

The committee’s statement about the investigation acknowledged skepticism about the board’s governance: “Some may say that all the signs were there for a long time before last week, but all the signs were not there until the start of last week.” Critics disagree.

Despite the scandals, Falwell says he’s walking away with a $10.5 million severance package, though it’s not clear what of that may be severance pay and what could be deferred retirement income. “The board was gracious not to challenge that,” he told The Washington Post. “There wasn’t any cause. I haven’t done anything wrong.”

Falwell's claim raises questions about the terms of his employment contract. Liberty is a private school, so it doesn’t have to disclose the contract’s terms. Nondisclosure agreements keep trustees and other officials from sharing details with the public, and few people have even seen Falwell’s employment contracts.

Liberty’s bylaws hand the responsibility of negotiating a president’s contract and evaluating his job performance to the board of trustees’ executive committee (currently composed of five people), independent of the full, 32-member board. At least 16 of those trustees were on the school’s board when Jerry Falwell Sr. died in 2007, including longtime board chair Jerry Prevo, who became acting president when Falwell Jr. resigned.

The bylaws don’t require the executive committee to disclose the terms of the president’s contract to the full board, nor does the full board vote on the employment contract. People familiar with how Liberty’s board works say the full board never would have seen the full terms of Falwell’s employment contracts, the latest of which Falwell signed in 2019.

Michael Poliakoff, president of the American Council for Trustees and Alumni (ACTA), warned against all-powerful executive committees: “That is not healthy. It’s common enough, but it’s not healthy.” ACTA is a nonprofit that advocates for trustees providing more accountability for colleges and universities. An entire board rubber-stamping an executive committee’s decisions means the board “is not performing its duty as a fiduciary, governing board,” Poliakoff said. He recommends boards be nine to 15 members: “That tends to get everybody focused.” But it’s common for private colleges to have larger boards with less activity.

Liberty’s tax filings do state Falwell’s compensation, which in 2017 (the last year available) topped $1 million. It had been just shy of $1 million for several years prior to 2017. According to data ACTA compiles at howcollegesspendmoney.com, for every dollar it spent on instruction in 2018, Liberty spent 64 cents on administration. Poliakoff said the average among peers is 27 cents. In years past, Liberty officials have said they wanted to make the school into a University of Notre Dame for evangelicals. Notre Dame spent 43 cents on administration per dollar on instruction in 2018. For comparison, Baylor University spent 26 cents on administration, and The King’s College in New York City spent 39 cents in the same year.

Falwell’s claims also raise the question of whether his contract included a morals clause barring immoral behavior. Because of board protocols and nondisclosure agreements, only a few people actually know. Liberty’s board has given no indication it’s going to enforce morals clauses.

Price Harding is chairman of executive search firm CarterBaldwin, which has performed work for Liberty in the past. He says most Christian schools don’t include morals clauses in presidents’ contracts because doctrinal and community life standards usually keep administrators in check and give trustees enough authority to hold them accountable.

Some of Falwell’s more alarming behavior—his possible sanctioning of his wife’s affair, his posting of an Instagram photo of him and another woman with pants unzipped and stomachs exposed, his calling a Liberty parent a “dummy” and a Liberty student “retarded”—could constitute morals clause violations.

Even if Falwell's contract didn’t have a morals clause, the school’s bylaws lay out the president’s responsibilities: “He provides spiritual and worldview leadership to the university in the pursuit of excellence.” Another section outlining the removal of board members allows trustees to hold one another accountable, saying trustees can be removed “should the board member’s conduct discredit the institution or be detrimental to the reputation, character, standing, or Christian mission of the institution.” As president, Falwell was a member of the board of trustees.

Several of Falwell’s public statements in recent years call into question whether he lived up to those mandates. He told Pastor David Platt on Twitter to “grow a pair” in 2019. He removed the tweet but in response said he’s not a spiritual leader: “I have never been a minister. UVA-trained lawyer and commercial real estate developer for 20 yrs,” he tweeted. “The faculty, students, and campus pastor … are the ones keeping LU strong spiritually.”

That same year, a reporter for sports website The Ringer asked Falwell how much his faith informed his politics. “Not at all,” Falwell toldhim.

In May 2020, Falwell protested Virginia’s COVID-19 face mask mandate. He tweeted a medical school yearbook photo of Virginia Gov. Ralph Northam in blackface standing next to a man in a Ku Klux Klan robe. The photo—which previously had become a scandal of its own for Northam—was superimposed onto a face mask. Backlash ensued. Black students transferred, and black faculty and staff resigned.

Maina Mwaura, a 1997 Liberty alumnus, pastor, speaker, and writer, organized a letter from Liberty’s black alumni, which asked Falwell to retract the tweet and take a job in politics, not leading Liberty. Mwaura got 35 people to sign the letter, and almost 40,000 people signed an online petition supporting it.

Mwaura wasn’t surprised by the groundswell of support he and his letter received—or the roller coaster of events leading to Falwell’s resignation. But the board’s inaction before the sex scandals did: “The lack of accountability really bothered me. At the end of the day, the board of directors completely failed us as an institution. … It wasn’t just one thing.”

Mwaura says he approached three board members directly about Falwell’s behavior. “Literally on almost every occasion I got nothing back,” he said.

The executive committee in its Aug. 31 statement alluded to a lack of spiritual leadership from Falwell: “We are also committed to learning the consequences that have flowed from a lack of spiritual stewardship by our former president.” The committee announced, while beginning a search for a new president, it may establish a new position “in the top leadership of the university” to be a spiritual coach to Liberty administrators.

Calum Best, who co-founded Liberty alumni advocacy group Save 71 earlier this year, told me the day that Falwell resigned the group doesn’t have much faith in the board of directors: “Falwell left today because he was humiliated, not because the board chose to respond to years of failed leadership. They had the opportunity to. Instead, they shirked their responsibility once again.”

Liberty’s Board of Trustees didn’t respond to my questions about Falwell’s contract or requests for interviews. Senior Vice President of Communications Scott Lamb said the school isn’t yet announcing the forensics firm conducting the independent investigation, but the firm may decide to announce its involvement later. “Transparency is the goal,” Lamb said.

Falwell critics and media outlets pointed out several business deals that benefited Falwell family or friends during his tenure. One transaction also involved the chair of the board of trustees’ executive committee: Harvey Gainey. In 2017, Liberty made a $30,000 contribution to Gainey’s private foundation that, according to tax filings, provides scholarships for Christian student-athletes.

The Gainey Foundation’s tax filing discloses that it made a $52,000 contribution to Liberty University the same year.

Liberty’s bylaws state, “The chairman of the executive committee and a majority of the other voting members of the executive committee shall have no contractual, employment, personal, familial, or financial interest in the institution.”

Liberty’s board didn’t provide responses to my questions about the transaction.

Poliakoff, the president of ACTA, said recent years’ reports of self-dealing under Falwell raise questions about trustees’ oversight: “All the rumors that come out from Liberty suggest that kind of transparent, careful analysis of what’s in the best interest of the school has not been done before.” He said the board should have demanded more transparency: “Liberty made a desperate mistake in vesting pretty much everything in its one leader.”

—with reporting from J.C. Derrick

Falwell’s business deals

Jerry Falwell Jr. says he is walking away from the Liberty presidency with $10.5 million. He also made a lot of money from his Liberty connection years ago while Liberty University’s general counsel. In 2019 I began investigating records that show Falwell, his family members, and close friends personally profiting from other deals with a nonprofit affiliated with Jerry Falwell Sr.

There’s nothing wrong with real estate developers profiting from legal transactions. What’s at question here and in other media reports is whether Falwell’s position gave him an inside track to getting more profitable business deals or helping associates and family obtain deals, especially in light of Liberty’s independent investigation into the school’s “financial, real estate, and legal matters” under Falwell’s leadership.

Today, four restaurants—Cracker Barrel, Crab Du Jour (formerly a Ruby Tuesday), Buffalo Wild Wings, and Texas Roadhouse—and an overflow parking lot sit at an intersection on commercial corridor Wards Road, near Liberty’s campus. In the 1990s, those parcels sat empty.

In 1996, Liberty Broadcasting—the now-defunct broadcast ministry Falwell Sr. acquired in 1986—sold the property where those restaurants sit (and hundreds of other acres) to a Virginia company called Bi-State Properties. One of that company’s partners was Falwell family friend Fred Gene Davis (Falwell Jr. was a pallbearer at Davis’ 2006 funeral, and Falwell Sr.’s wife, Macel, wrote about a close friendship with Davis and his wife). In November 1997, Bi-State Properties conveyed the Wards Road property to two parties: Davis and Rocky Bottom Realty LLC. Falwell Jr. was a member of the LLC.

According to an official in the Lynchburg City Assessor’s office, Rocky Bottom and Davis paid $205,150 for the Wards Road parcel, though tax assessments valued it at twice that amount. In 1998, Davis deeded his interest in the property to MB Development LLC, whose manager was a cousin of Jerry Falwell Jr. Between 1999 and 2005, Rocky Bottom and MB Development sold five parcels to the restaurants named above, generating $2.6 million.

Liberty’s written response to my questions about the transactions in 2019 insists the relationship had nothing to do with the sales and that Liberty Broadcasting used the proceeds from Bi-State to pay down debt.

Another example: One of the many restaurants in the Wards Road corridor today is Muscle Maker Grill, at 3920 Wards Road. According to Lynchburg property records, Liberty Broadcasting Network took control of the property in the 1990s. In 2001—while Falwell Jr. served as Liberty University’s general counsel—Liberty Broadcasting sold the parcel to Gateway Country Plaza LLC for $327,000. Five years later, Gateway Country Plaza sold the same parcel to a developer for $2.675 million. Virginia records showed Falwell Jr. was one of the members of Gateway Country Plaza and performed the legal work on the transaction.

When I questioned the sale, Liberty spokesman Scott Lamb said Liberty Broadcasting had offered the property on the open market before selling to Gateway, and the company paid more than the assessed value of the property at the time, which was $275,000. Falwell Jr. also maintained he did not negotiate the sale between Gateway and Liberty Broadcasting.

Liberty’s written statements to me pointed out that Liberty Broadcasting was a separate entity with its own board. But the lines weren’t always so clear. In another transaction involving Liberty Broadcasting property, Falwell Jr. appeared before the Lynchburg Board of Zoning Appeals in February 2004 and told board members he was representing one of his LLCs and Liberty Broadcasting.

Once Falwell Jr. became president of Liberty -University, the school awarded his son Trey two contracts to manage property in a shopping center Liberty owns.

After spending a half million dollars in updates, Liberty partnered with a real estate broker to recruit more businesses to the nearby Plaza shopping center. In 2009 Trey Falwell formed a limited liability company that managed relationships with Plaza tenants. In its tax filings for years 2009-11, Liberty valued transactions with Trey Falwell’s company between $30,000 and $50,000 each year.

But beginning in 2012, after Trey Falwell formed a new company to handle the project, those disclosures disappeared from Liberty’s tax filings. IRS regulations require nonprofits list on their 990 tax forms business transactions with “interested parties”—such as family members of officers or board members—when those transactions exceed $100,000. The disclosure appeared again in Liberty’s 2016 tax filing. But by that time, Trey Falwell had been a regular employee of Liberty for about three years. He is now Liberty’s vice president of university support services. In written statements to me, Liberty said the original crop of disclosures was “overly inclusive” and Liberty’s auditors decided in 2012 not to include them anymore since they didn’t meet the $100,000 threshold.

Liberty has had other transactions involving Trey Falwell. In 2015, he bought a Liberty-owned house in Rustburg, Va., from the school for $222,500. Liberty on its tax return did not originally mark the sale as being with an interested party.

Last year Liberty amended its tax filing for the year of the sale that included additional disclosures of business transactions with Trey Falwell: $340,869 for “rent/sale transaction” and “employment compensation.” Liberty’s statements to me say that cumulative total includes Trey Falwell’s employee compensation, plus the rent and purchase price he paid for the home. The school filed the amended tax return “in an abundance of caution” after Trey Falwell requested it following other media reports.—M.R.

Editor’s Note: WORLD has updated this story since its original posting.