The Oregonian



UO Agrees To Return Grayson Donation







The University of Oregon Foundation will repay $850,000 it

received from embattled Portland financier Jeffrey L. Grayson and his wife, Susan.


The university's fund-raising arm announced Friday that it had jointly decided with the UO administration to return the money to Capital Consultants, Grayson's former investment firm. The court-appointed receiver now in control of Capital Consultants demanded last June that the foundation repay the money.


Receiver Thomas Lennon claimed the donation should be returned because Grayson took the $850,000 out of Capital Consultants when the investment firm was already insolvent and not paying some of its other creditors.


Work crews this morning are scheduled to begin removing the Grayson Hall name from the university classroom building renamed in his honor. The building will be renamed McKenzie Hall, after the river that runs into the Willamette River near Eugene.


"This is a sad day for everyone," said Allan Price, the university's vice president for advancement. "Obviously, we would not have accepted the money if we knew Capital Consultants' liabilities exceeded its assets."


Grayson's firm lost an estimated $355 million of its clients' money in failed and allegedly fraudulent investments. A federal grand jury returned an indictment against Grayson in October charging him with 22 felony counts of mail fraud, conspiracy, money laundering, witness tampering and making illegal payoffs to a former union pension fund trustee.


Grayson and his wife, Susan, agreed initially to donate $1.5 million to their alma mater in 1996. Though the Graysons only produced slightly more than half their initial pledge, the university went ahead and spent $1.5 million remodeling its former law school to house modern classrooms and offices of the university's School of Arts and Sciences.


The university also went ahead with plans for renaming the building Grayson Hall. In April 1997, David Frohnmayer, UO president, went to the Oregon State Board of Higher Education and successfully obtained an exception from state statutes forbidding the naming of a state university building after a living person.


Grayson Hall became an embarrassment in September 2000 when the U.S. Securities and Exchange Commission and Department of Labor sued Capital Consultants and its two top executives, accusing them of concealing failed loans from clients.


The lawsuits set off one of the largest and most contentious white-collar crime legal battles in the city's history as Grayson's lawyers, accountants and business partners were also pulled into the legal fray.


Grayson pleaded not guilty to all criminal charges against him. His trial is scheduled to begin March 26, 2002.


Barclay Grayson, Jeffrey Grayson's son and the former president of Capital Consultants, was sentenced in November to 24 months in federal prison after pleading guilty to one count of mail fraud.


Price predicted the university will "get some heat" for its decision to return the money. Since the issue came to light last summer, the university has heard "from people across the spectrum," some arguing the foundation had accepted "dirty" money that should immediately be returned, others arguing the foundation had accepted the donation in good faith and should hold onto it.


Price defended the foundation's decision to accept the money in the first place. At the time, Grayson was a respected businessman and an active UO fund-raiser. The Grayson affair will, however, prompt the university to revisit its policies regarding the naming of buildings after big donors, Price said.


"I really do want to look at that and make sure there are some guidelines" regarding when buildings are named for donors, Price said. "Right now, there isn't a hard-and-fast policy."


Eventually, Lennon will distribute the $850,000 as well as other assets of Capital Consultants to the investment firm's former clients.


In a statement, the university applauded Grayson as "a staunch supporter of the UO. He gave countless hours to a range of activities in support of the university. We find the entire situation tragic and unfortunate."

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