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Molina, for his part, says the school has a new, highly qualified president waiting in the wings to turn the school around, if only the Department of Education will allow New College access to financial aid money to pay him. In the meantime, Molina says, the school will seek to sell property in order to cling to life.

New College's financial crisis exists, in its most immediate form, as the result of recent steps by the Department of Education to investigate what the school has done with previously granted federal money. Recordkeeping has been sketchy, with several unsubstantiated rumors of unaccounted-for funds. Pending investigation, the education department has frozen millions of dollars' worth of federally subsidized student loans and grants from last fall and this spring.

The school, which had an annual budget of around $15 million, has depended almost entirely on tuition payments, much of it coming from students receiving federal aid. As a result, the lack of federal dollars has all but eliminated that budget. An education department spokeswoman would not comment directly, so I don't know the nature of the apparent accounting irregularities that have caused federal officials to suspend payments. Molina told me the rumors of missing federally linked money are false. "There was a lot of concern that we have moved money around, and we weren't accounting for it," he said. "But we have done a full accounting and a full reconciliation of funds."

Beyond the issue of the frozen money, the current crisis seems more fundamentally rooted in recently resigned college president Martin Hamilton's dreams of creating a nonprofit real-estate empire. These dreams began to crumble last year, as students and teachers informed the Western Association of Colleges and Schools (WASC), which accredits New College, about allegations that Hamilton gave away grades, credit, and money to a foreign student he had befriended — accusations he strenuously denies.

Whether true or not, the claims invited scrutiny by regulators, and revealed a situation at New College even more complicated than an alleged student-administrator relationship gone awry.

For years, student tuition seems to have served in part as cash flow for a series of real-estate transactions. There exists no evidence that any people involved with the school have enriched themselves, and I have no reason to believe that. But public records seem to reveal a financial situation at New College that would take teams of accountants significant time to sort out.

My own review of information at the recorder's offices of San Francisco and elsewhere reveals that for many years the school seems to have been partly run as a tangled real estate and credit operation, in which the college acquired properties across the state and then took out loans against them, using the money and property to engage in further transactions. In 2006, the school bought a dilapidated flophouse on Fillmore, intending to turn it into a residence hall. Molina said that building is now in escrow; the sale was held up because of asbestos contamination and other permitting issues.

That purchase was part of then-president Hamilton's apparent strategy to significantly expand the school, which included buying the Roxie Theater business in 2005, but not the building. Hamilton had also lobbied for rights to acquire the former U.C. Berkeley Extension campus in the Upper Market area. Public records describe purchases, sales, loans, leases, and intramural property transfers that seem extraordinary for a small liberal arts school.

During recent months, the school appears to have tried to stay afloat. In mid-July, the school sold its interest in a piece of property near Calistoga in a transaction valued at $1.7 million. Since November, the school has borrowed at least $1 million, most from current and former trustees, using as collateral a former creamery on Valencia that it bought in 2005 for $1.5 million.

On Dec. 13, the school took out a $1 million loan secured by other New College campus buildings from Advance Holdings Participações Ltda., which I was unable to find information about at press time.

The college's seemingly intractable financial situation was recently summarized in a report from the WASC, which has suspended accreditation. "The fragile state of the financial situation leaves the College with few options to continue operations in the near and long term," the report read. "All the property is highly mortgaged, leaving little ability to sell and lease back buildings which would, in any case, be a short-term solution to the cash crisis. Continuing to borrow from individuals and bank overdrafts are a further indication of desperation to meet the basic operating obligations."

Much has been written here and elsewhere about the disastrous effects of New College's previous cultlike leadership structure, in which old friends Hamilton, Peter Gabel, and Millie Henry ran the college as if it were their own personal property. The WASC report made this analysis official, declaring that "many faculty members felt they were living in a culture of currying favor, rather than a culture of accountability with clear faculty rights and responsibilities." Both Molina and trustee Jane Swan told me that the old guard would no longer have a role running the school.

Ironically, and despite its mismanagement, New College seemed to attract significant academic talent because of its professed commitment to preparing students for careers advancing social justice. This is the aspect of New College that is worth saving.

It's now up to San Francisco civic leaders to dramatically expand, or supplant, the current board of directors and provide a complete break from the school's troubled past. This may seem like an obscure story about the travails of a tiny institution. But a human disaster is taking place that should matter to everyone. New College belongs, as a matter of law, to all of us. It is an IRS recognized category 501(c)(3) public benefit corporation, meaning that it is publicly subsidized through tax breaks to provide services the government somehow missed.

If this proves impossible, Molina, Swan, and Knowlton should admit defeat in their efforts to save the school, and help students and faculty get on with their lives and dreams.

Write Your Comment show comments (15)

  1. Until the Office of the Inspector General investigates all the golden parachutes and other payoffs to the people who mismanaged New College's money, we won't know if felonies were committed. For now, none of the trustees -- including Molina, Swan, and Knowlton -- have provided any of the crucial information demanded by the alumni association last July. The fact the trustees continue to operate in secret suggests an ongoing cover-up.

    Comment by Jay Taber — February 12, 2008 @ 07:36PM

  2. Schools which receive DOE funding are required to have sufficient cash reserves to cover expenses in even of "heightened cash monitoring," which is what New College is currently experiencing. New College squandered its cash reserves. New College never developed alumni/ae giving. In July we formed the New College Independent Alumni/ae Association and practically begged the school to let us help. We are repeatedly turned away. New College doesn't want alumni/ae money for some unknown reason. The Director of Alumni Relations tells me she has no time for alumni relations.

    Whether New College survives or fails (and I hope it survives), we are alumni/ae for life. If you attended any program at New College, please join the alumni/ae association! We are open to all former students, whether you graduated or not.
    Holly Harwood ASC BA '05
    http://newcollegealumni.net

    Comment by Holly Harwood — February 12, 2008 @ 09:11PM

  3. Thank you for the first balanced, well-researched article on the dire situation at New College.

    I have been trying to help as best I can - imagine my dismay when, after securing and distributing the WASC Special Visit Team Report, to have the Bay Guardian churn out a negative, misleading article consisting mainly of excerpts from the report. What are they trying to do, run New College into the ground? Does Bruce Brugmann have beef with Peter Gabel or what?

    You, sir, actually researched both the causes of the situation as well as the steps being taken to remedy it. For there most certainly ARE such steps being taken; throughout the students, staff and faculty, the motivation and desire to preserve New College is rampant. But we need help, and perhaps this excellent article will generate some.

    With great respect,
    Alex Brant-Zawadzki
    1L, New College of California School of Law

    Comment by Alex Brant-Zawadzki — February 12, 2008 @ 10:13PM

  4. Thank you for this much needed article. There is so much about New College that is truly worth saving. The teachers, the students, even the janitorial staff are brilliant and committed individuals. New College is a San Francisco institution, the gem of the Mission District, and it is the home of the nation's only Public Interest law school.

    Many incredible programs have developed in New College even in the midst of years of a deteriorating administration. Imagine, how the education will flourish when the administration is completely renewed and revitalized!

    Thank you for calling on the readers, the leaders, the teachers, and friends throughout the Bay Area to come together and help our school reorganize. We need help!

    Rana Chang
    3rd year lawstudent, New College School of Law

    Comment by Rana Chang — February 12, 2008 @ 11:22PM

  5. Judging by their past behavior, this Friends of New College ruse is just another attempt by Martin Hamilton and Peter Gabel -- along with their cronies Ted Corman, Phillip Knowlton, Luis Molina, and Jane Swan -- to bamboozle WASC and defraud the Department of Education. What better way to launder proceeds from questionable real estate deals using federal funds, than to set up a holding company posing as a charitable organization?

    Comment by Jay Taber — February 13, 2008 @ 12:58AM

  6. 1) As a member of the historical community who has worked without pay for the past 3 months for the sake of our students, it gets tiresome to hear the former leadership (Peter, Martin and Milly) get slammed in the press. The reference to "cultlike", referring to the historic leadership of the College, has no basis in fact. Why do you imagine that people who have worked for 25 or more years without personal gain, are "cultlike?" Considering what I have learned in my 28 years here, about the craziness, as well as the incredible ability of New College to encourage students to blossom, or go out into the world and create social change, the historical leadership were heroes who miraculously kept the College's mission alive in the midst of constant financial struggles, for 36 years, while other Colleges simply folded.

    2) The issues regarding the purchase of real estate by the College are not so simple as is implied by your article. The Roxie theatre was not a "purchase", for example. With the transfer of ownership, a donation was made to the College in order pay off the Roxie debts, so literally, we did not "buy" it, but we did save it from closure. The vision for the purchase of the properties was to enhance the College, not for some real estate scheme. For example, the Roxie enhanced our Media Studies program-the Creamery purchase, with KPFA Radio broadcasts located there, gave publicity to the College and that, in turn, enhanced our enrollments. As for the Fillmore property, we intended to create a green student dormitory that could enhance enrollments. (Two of the sellers provided donations back to the College that helped us with our debt-asset ratio that the Dept of Education requires for financial stability).

    The College was in the midst of expanding enrollments and was having trouble accommodating all of its activities in the space that was leased /owned when it sought the UC Laguna St campus. In an unstable economy, the purchase of real estate is considered by many, to be an investment for the future. In hindsight, its easy to criticize, but there are now thousands of Americans in similar circumstances being foreclosed on by banks who are also in trouble, for trying to invest in their own futures by the purchase of real estate.

    3) Most of our recordkeeping for the Department of Education has now been straightened out, if the DOE will only release our funds so that we have a chance to pay salaries to people who could continue doing this work. The students who are suffering for lack of funds are taking the brunt of the delay by the DOE in approving the release of funds.

    4) Although I am critical, I do appreciate your efforts to help us. It would be great if some community leaders would volunteer to join the Board in order help us stabilize our finances and help restructure the College. New College is one of the most unique educational institutions that exists anywhere in the annals of the American educational system. I hope someone can please step forward to help us save it!

    Comment by kathy voutyras — February 13, 2008 @ 05:24AM

  7. This is from Merriam-Webster:
    cult:
    5 a: great devotion to a person, idea, object, movement, or work (as a film or book); especially : such devotion regarded as a literary or intellectual fad b: the object of such devotion c: a usually small group of people characterized by such devotion

    Thank you Matt Smith, for a fair and well-researched article. Let's hope that people in the progressive/radical community find it worthwhile to deeply transform, and salvage the best of, the New College; and also, let's advocate for an investigation into the work of Peter Gabel, Martin Hamilton, and the cult-like circle of friends that has mismanaged the school. Let's advocate for FULL DISCLOSURE: open the school's books! Luis Molina and the Board of Trustees must also be held accountable for their inaction and complicity in this disaster.

    Comment by Brooke Lober — February 13, 2008 @ 10:37AM

  8. One of the lessons New College administrators and trustees learned too late, was that alumni are a college’s greatest asset. Blow them off as irrelevant, and you might as well hang up the For Sale sign. In the case of New College of California, that is exactly what happened.

    Comment by Jay Taber — February 13, 2008 @ 12:22PM

  9. As a research assistant at New College, I have been able to innovate curricula that prepared groups of students to participate in seminars at Harvard as part of their New College coursework. Based on my graduate thesis, I will present at a national conference at Stanford next month. In each case, I’ve brought a radical perspective to otherwise centrist events. The opportunity for individualized, radical, effective education is rare and diminishing. New College has offered that for decades. I appreciate your article for asking outsiders to support the college.

    Comment by neil maclean — February 13, 2008 @ 04:35PM

  10. Creativity does not depend on a decrepit institution run by insipid bureaucrats. It depends on the individual spirit that refuses to be complacent in the face of such petty tyrannies. So this creativity will continue in other places and other ways without the distraction of fending off the interference of incompetent buffoons and mind-bending despots. Diversity in academia, like life, is a healthy thing, but perversity of purpose is not a condition in which it can prosper.

    Comment by Jay Taber — February 13, 2008 @ 09:48PM

  11. The Alumni and Friends of New College of California School of Law was established by alumni of the Law School. It has no connection to Peter Gabel, Martin Hamilton or New College. We're not even sure if the Law School will keep the New College name.
    The non-profit organization is applying to gain tax-exempt status so donations will be deductible from the date of incorporation, Feb. 8 2008.

    From their fundraising letter: "Our immediate goal is to sustain New College of California School of law over the 2008 Spring semester now under way. Contributions paid on a monthly basis over the next five months will be especially effective in helping us do so. If you are able to do so, please give your strong consideration to a monthly pledge amount each month for the next five months. If you are unable to contribute monthly, please submit your donation as soon as possible as funds are needed urgently. Please make your contribution payable to Alumni and Friends of New College of California School of Law and send them to:
    601 Van Ness Avenue, Suite E #875
    San Francisco CA 94102

    Comment by Alex Brant-Zawadzki — February 13, 2008 @ 09:50PM

  12. Who cares. Let it close. Just another wasteful pseudo-educational experiment gone amiss. It never had the standards or the Academic reputation as USC or Stanford. Nothing but a bastion of bogostic pseudo-intellectuals spewing forth inane blabberings of pseudo-truth.
    You want truth? Go to Wikipedia.

    Comment by Calton — February 19, 2008 @ 03:22AM

  13. There is no doubt that faculty and students have been severely abused and exploited. Thank-you for calling for outside intervention to put an end to the obscene and bizarre leadership of the gang of three--Peter, Martin and Millie who ruled through fear and acts of cruelty to maintain total/authorship over their educational experiment. An experiment that enabled them to govern themselves without laws or rules or practices as this was of course the anarchic learning environment that would offer faculty and staff the most valuable eduational expericence. Because afterall these were three brilliant educators who had many lessons to teach. And of course they still do. I believe they tell us when it is time for them to retire because they still are the most brilliant of us all. Aren't they ? Well they are still getting away with federal loan fraud. They are still running the school. They are still setting up shelters to move the existing money around, and they are still not paying faculty and denying students teach out. So pretty brilliant in a very scary way.

    Comment by Tango — February 26, 2008 @ 01:37AM

  14. I enrolled with this college in January of 2008. I was supposed to attend an organic chemistry course at their Whittier Campus. I recieved an email from Craig Anderson that the school was shutting down, and I said do not charge my credit card. However, they charged $1600 on it anyway knowing that the school had no funds, or classes that would start. I asked for the past 3 weeks for a refund and no one even called me back. I am trying to dispute this with the credit card company, and will contact the DA to pursue criminal charges against Lolita, and whom ever did this. Does anyone know of a civil or ciminal litigation starting or in process?? I refuse to let these people get away with this!

    Ryan_c_mathews@yahoo.com

    Comment by ryan mathews — March 8, 2008 @ 06:17PM

  15. A couple of places you can follow the New College saga:

    http://friendsofnewcollege.com

    Sign up on the email list at friendsofncoc-subscribe@yahoogroups.com

    Comment by Darius Cantu — March 29, 2008 @ 08:50PM

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