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Historic battle settled: Prairie pact lays out plans without judging past practices

July 11, 2005

But whatever Earlham College puts in the 41-year history of credits and debits, it will have no bearing on the resolution of a decades-long dispute over control of the Hamilton County attraction. That deal is largely done. Carter and Earlham board Chairman Mark B. Myers ended nearly two years of negotiation July 5, putting quill-topped ballpoint to paper in front of a cheering crowd in the museum's Welcome Center.

The agreement-which frees Conner Prairie from Earlham's control and calls for two new not-for-profits to oversee finances and operations-still is subject to court approval, but the attorney general believes the most difficult work is over.

"I can't think of any reason why it wouldn't be approved," Carter said, although he doesn't expect the court to simply brandish a rubber stamp. "[The judge] may read the documents and have questions; he may set the matter for a hearing to discuss it. I don't think either should be viewed with alarm."

Hamilton Superior Court Judge William Hughes last weighed in on the case in September, ordering Earlham to produce the accounting state law requires public charitable trusts to make available each year.

Earlham, the museum's trustee since 1964, has never complied with the law and has since appealed the ruling.

Because the case is still pending, Hughes declined to comment on the settlement.

A history of conflict

Carter got involved in the dispute in mid-2003, following Earlham's ouster of the museum president and 27 of its 30 board members. The college defended the housecleaning, citing a growing budget deficit; the former directors blamed their dismissal on questions they raised about Conner Prairie's endowment.

The central issue in Carter's inquiry was what Indianapolis philanthropist Eli Lilly intended when he gave Earlham millions of dollars in Eli Lilly and Co. stock, primarily to support Conner Prairie.

Lilly said the Quaker-affiliated Richmond college could use leftover income from the endowment on its own educational programs, sparking a decades-long debate over whether Earlham spent enough on the museum.

In early 2004, Carter ended his preliminary review of the situation, saying Earlham had a conflict of interest as the trustee and potential beneficiary of the Lilly funds. He recommended Conner Prairie be set free along with its portion of the shared endowment, which would be controlled by separate boards focused only on the well-being of the museum.

Carter's negotiations with the college continued until January of this year, when he made public his plan to split the assets.

Conner Prairie would get 830 acres of land and a total of $94 million: $85 million immediately from the endowment, another $6.5 million within five years and Earlham's $2.5 million stake in a neighboring golf course.

Earlham would get the remainder of the estimated $176 million endowment and 413 acres of prized property west of River Road and south of 146th Street.

The settlement signed this month-a full four months after the Earlham board agreed "in principle" to Carter's proposal-carries the same terms, albeit in greater depth.

A gift that keeps giving

The 55-page document and accompanying materials lay out the case from stem to stern. Among the interesting nuggets:

The new Conner Prairie Foundation will oversee the public charitable trust, which will include only the William Conner House and its immediate grounds. The rest of the original 58-acre trust will be considered part of the museum, a separate not-for-profit.

Earlham will provide an accounting for the existing trust before the deal closes later this year.

Conner Prairie Foundation will get $85 million or an amount equivalent to 48 percent of the shared endowment balance as of the closing date, whichever is more. The museum's share must be adjusted to allow for any appreciation since Dec. 31, 2003, when funds totaled $176 million.

Earlham must contribute another $6.5 million within five years, mortgaging some of its 413 acres to guarantee the payment. And if the property ultimately sells for more than $19.5 million, the college will split the excess with the museum.

All together, the endowment assets transferred to Conner Prairie must equal at least 50 percent of the value of the shared funds as of the closing date.

Earlham must forgive $5.8 million it says the museum owes the college.

Myers said the agreement is the result of hard work by negotiators on both sides. Earlham has spent "a lot" of time and money to resolve the issue, he said, and is hopeful the museum will thrive on its own.

"Conner Prairie is a gift that keeps on giving for generations," he said.

Carter is equally pleased with the outcome, even though it was a long time coming. His office has spent about $300,000 on the matter so far.

"Our goal all along was to provide for the needs of the museum," he said. "This does that."

An end to uncertainty

Consultants came up with the $94 million figure after examining spending practices and projecting them into the future-with growth factored in. The museum needs about $4.9 million each year from its endowment, Carter said.

The $85-million-here-$6.5-millionthere approach was a response to Earlham's concern about freeing up all the money at one time.

"Earlham [officials] expressed that they would have difficulty coming up with the entire amount now," Carter said. "So we accommodated them. ... Obviously, they've been relying on the endowment to throw off income for their operations."

College spokesman Lou Gerig confirmed Earlham's desire to fund Conner Prairie's endowment in stages. He could not say why.

The $94 million is nothing to scoff at, but it isn't quite what Conner Prairie's exdirectors were hoping for when they asked Carter to get involved. Before their dismissal, board members had asked Earlham for freedom and $100 million-at a time when they thought the endowment was worth $150 million.

Former board Chairman Berkley Duck is nevertheless pleased.

"Obviously, [Conner Prairie] has crossed a major threshold," he said. "The independence of the museum was a necessity if it was to survive. ... I expect it to become a more creative and vibrant place."

Museum employees were equally hopeful, cheering as the agreement was signed and applauding when Carter departed.

"We're glad to be moving forward," said interpreter David Allison.

The past two years have not been easy, as uncertainty threatened to overshadow their hard work. The impact was spelled out in general terms in a disclosure that accompanied the settlement.

An undisclosed number of positions have been eliminated in the food-service, guestservice, programs, facilities and development departments. Volunteer hours have dropped. And the museum endured a "substantial decrease" in contributions and grant revenue. No one got pay raises this year.

"There had to be some belt-tightening," said Executive Director Ellen Rosenthal, who flew back from vacation in New York for the ceremony. "But we tried to reduce expenses in ways that would not have an impact on the visitor experience."

Some changes were business decisions that probably would have been made anyway, Rosenthal said. Others may be reconsidered once funding is more stable. For now, the staff is eager to shift its focus.

"It was a very tough time," Rosenthal said. "We're beyond that now and are looking at the future."

A challenging road ahead

Still, the work is far from over. While the court is contemplating the settlement, organizers will apply for tax-exempt status for Conner Prairie's foundation and operating company. And then there's the process of actually incorporating the two entities and populating their boards.

Even after that is complete, new museum leaders must try to mend relationships that broke down during the dispute.

At least one such partnership has endured. The 60-member-strong Conner Prairie Alliance stands ready to reopen its Apple Store on the museum grounds this fall. Before the management overhaul, the group raised about $100,000 a year through various fund-raising efforts.

Alliance President Peggy Neal said she's proud the organization stayed connected during the dispute.

"We maintained our membership and our spirit," she enthused. "We'll really be hitting the pavement running."

The same could be said for the incoming museum leaders.

When all is said and done, Conner Prairie will operate with more transparency than most not-for-profits. A draft of the articles of incorporation call for the museum and foundation to conduct an annual meeting and make audited financial statements available to the public every year.

That's a fitting conclusion to a conversation that began with questions about what went on behind closed doors, Carter said.

"This whole exercise in some ways was about restoring public confidence. ... If you open up the process some, there is less reason to be suspicious," he said. "I think there needs to be more accountability, not less."
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