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Understanding the Robertson v. Princeton settlement

Presented here is a brief glossary of terms and case history to aid in understanding the Dec. 9, 2008, settlement agreement for the lawsuit that the Robertson family filed against Princeton University in 2002.

• Robertson v. Princeton University
The "Robertson" in the lawsuit refers to certain Robertson descendants, not the Robertson Foundation or the donor. In July 2002, descendants of donor Marie Robertson and her husband, Princeton class of 1926 alumnus Charles Robertson, sued Princeton University to redirect the funds she gave to create the Robertson Foundation for the benefit of Princeton University in 1961.

The plaintiffs in the lawsuit included the three Robertson-appointed members of the Robertson Foundation board, while the defendants included Princeton University itself and three of the four University-appointed members of the Robertson Foundation board, including Princeton University President Shirley M. Tilghman, who has chaired the board, but not including former New Jersey Gov. Thomas Kean, who became a University-appointed trustee in May 2007.

• Robertson gift
A $35 million gift from Marie Robertson created the Robertson Foundation for the benefit of Princeton University in 1961. The Robertson gift was not a bequest, as it was made while the donor was alive. The donor's husband, Charles Robertson, a 1926 graduate of Princeton, chaired the Robertson Foundation board for the first 20 years after the gift was made until his death. Since then the president of the University has chaired the board.

• Robertson Foundation
Despite its name, the Robertson Foundation is not a family foundation. The Robertson Foundation is what the tax code calls a "Type I supporting organization," which means that it was created for the sole purpose of providing funding to the charity it supports -- in this case Princeton University.

• Robertson Foundation Board of Trustees
The governance structure to oversee the use of the Robertson gift was set up jointly by the Robertson family and the University when the Robertson gift was made. As a supporting organization, the foundation was structured so that the University appoints four of the seven members of the foundation board. This reflects the requirement under federal tax law that the supported organization, in this case Princeton University, must control the board. Federal tax law explicitly prohibits the family of the donor from controlling a supporting organization.

• Mission of the Robertson Foundation
The foundation's certificate of incorporation states that the Robertson Foundation funds are to be used to "support at Princeton University" a "Graduate School" as part of the "Woodrow Wilson School."

The certificate describes the Wilson School as a place where "men and women dedicated to public service may prepare themselves for careers in government service, with particular emphasis on … international relations and affairs." (There is no reference to "diplomatic careers" in the certificate.)

• Woodrow Wilson School of Public and International Affairs
Founded in 1930 and renamed in 1948 after former Princeton President and former U.S. President Woodrow Wilson, the Woodrow Wilson School of Public and International Affairs leads among public affairs school in the country in placing its graduate students in first jobs in the government and nonprofit sectors. Many graduates of the school also go into government service later in their careers.

While the school has a substantial undergraduate component, the Robertson Foundation only funds the graduate program. In addition, while the Robertson Foundation provides very significant support for the Wilson School's graduate program, the program also is supported by other University funds.

• Robertson Foundation spending/reimbursement
The Robertson Foundation did not make "grants." It reimbursed the University at the end of each year for funds the University spent throughout the year on the graduate program of the Woodrow Wilson School.

Because the Robertson Foundation is not a private foundation -- it is a supporting organization under the tax code -- its sole legal purpose was to provide financial support for the Woodrow Wilson School graduate program at Princeton.

• Dispute leading to the lawsuit filed in 2002
The first disputed vote in the history of the Robertson Foundation board came in 2002, when the Robertson Foundation changed its investment strategy. Family members challenged the decision by the Robertson Foundation board to engage professional management for the foundation's endowment. After an interview process involving multiple investment firms, the foundation engaged the Princeton University Investment Co. (PRINCO) to become the investment manager for the Robertson Foundation on Jan. 1, 2004. Prior to that, the Robertson Foundation funds were managed by a volunteer investment committee made up of Robertson Foundation board members, including lead plaintiff in the lawsuit William Robertson.

Between the engagement of PRINCO in 2004 and the end of the fiscal year June 30, 2008 (the most recent reporting period), the value of the Robertson Foundation's endowment grew from $561 million to more than $900 million under PRINCO's management.

• Dissolution of the Robertson Foundation
As one of the terms of the settlement, the Robertson Foundation will cease to exist. The Robertson Foundation's certificate of incorporation provides that, in the event of dissolution, the foundation's assets are to be transferred to Princeton University for the continued use of supporting the graduate program at the Woodrow Wilson School of Public and International Affairs.

Spending previously subject to the oversight of the Robertson Foundation board now will fall under the sole control of Princeton, which will continue to use the endowment to support the graduate program of the Woodrow Wilson School.

• Reimbursing attorneys fees/ Banbury Fund
In accordance with the settlement agreement, Robertson Foundation funds will be used to reimburse the Banbury Fund for certified legal fees and expenses in connection with the Robertson v. Princeton litigation of $40 million. These funds will be reimbursed over the course of three years, with the initial payment of $20 million to be made in 2009, and subsequent payments of $10 million in years 2010 and 2011.

William Robertson and members of the Robertson family funded their lawsuit through the Banbury Fund, a private charitable foundation controlled by the Robertson family. The University does not believe this was an appropriate use of Banbury Fund earnings and assets, which declined during the course of the litigation from approximately $50 million to less than $20 million. Banbury funds also were used by the Robertsons to pay public relations expenses, which are not being reimbursed under the settlement.

• University costs of the Robertson litigation
Princeton University estimated that it spent more than $40 million in defense costs in the pre-trial phase of the Robertson case, and the University estimated that the cost of continuing to prepare for trial, participating in the trial, and addressing any appeals would add at least another $20 million to the legal costs of each side. The case lasted 76 months, and the plaintiffs attempted to examine almost every spending decision of the Robertson Foundation for the past 47 years. To deal with these and other matters, Princeton engaged nine expert witnesses, while the Robertsons engaged seven. There were 29 reports prepared by these experts, totaling 2,098 pages. In the 6 1/2 years of the pre-trial discovery phase of the case, the University produced almost half a million pages of electronic and print documents; there were more than 80 depositions of fact and expert witnesses covering more than 25,000 transcript pages; complex motions required more than 3,000 pages of briefing; 124 witnesses were listed to testify at trial; and more than 5,000 trial exhibits were identified. Pursuant to the settlement agreement, the University's defense costs, to the extent they are not covered by insurance, will be reimbursed by the Robertson Foundation.

• Establishing a new foundation
Under the terms of the settlement agreement, $50 million in Robertson Foundation funds will be transferred to a new foundation over a seven-year period -- beginning in 2012 and ending in 2018 -- for the restricted use of preparing students for careers in government service. The $50 million, plus interest, is to be paid under the following schedule: $5 million in each of the years 2012, 2013, 2014, 2015 and 2016; $10 million in 2017; and $15 million in 2018.

• Filing settlement with the court
The signed agreement to settle the Robertson v. Princeton litigation will be presented for approval to the Mercer County Chancery Court, which has jurisdiction over the matter.

• Presiding judge
On Sept. 24, 2008, Judge John Fratto was designated to preside over the Robertson v. Princeton trial. Superior Court Judge Maria Sypek, however, remains the presiding judge during the pre-trial phase of the case. The settlement agreement will be presented to Sypek for approval.

Superior Court Judge Neil Shuster, who retired from the bench effective March 1, 2008, was the first judge to preside over the Robertson case. Shuster issued seven key decisions on pretrial motions in the fall of 2007, summaries of which can be found on the Princeton website www.princeton.edu/robertson. Sypek became the presiding judge after Shuster's retirement.

• Trial date

Jan. 20, 2009, had been set as the date for the commencement of the trial. Because of the settlement, there will be no trial. Both parties are filing papers Dec. 10, 2008, with New Jersey Superior Court Judge Maria Sypek for the settlement to be approved.

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