UC Santa Cruz whistleblower lawsuit shines spotlight on inner workings of big campus donations

A whistleblower retaliation lawsuit filed this week by UC Santa Cruz’s former deputy director of planned giving offers a glimpse inside the complex world of big-ticket philanthropy at the school and the ways in which the University of California and other post-secondary institutions across the country help manage the finances of some of their major donors. 

The lawsuit filed Monday by Cecilia Reyes focuses on allegations that she was fired after blowing the whistle on a “scheme” to pressure donors to hand over management of their gifts to a Florida consultant who would keep a hefty share of the funds. Reyes alleges that the consultant pressured at least one donor to turn over control of his charitable trust.

Both the consultant and the donor involved, neither of whom are named as defendants in the lawsuit, contend that the suit’s allegations mischaracterize their financial dealings and cast an unfairly negative light on donation arrangements that are widespread across the charitable giving sector.

In the complaint filed in Santa Cruz County Superior Court on Monday, Reyes alleges that she was hired as UCSC’s deputy director in August 2021 with a promise that she would be given the director’s position when the then-current director retired, as first reported by the San Francisco Chronicle. 

When the director retired in 2022, Reyes said she was encouraged by UCSC’s associate vice chancellor of development, Priya Mehta, to apply for the opening. But Reyes said things began to change after she filed a whistleblower complaint in August 2022 expressing concerns about Florida-based consultant Thomas E. Dieters, whom UCSC had hired to help with the school’s planned giving program.  

Soon after she filed her complaint, Reyes alleges that Mehta started canceling meetings with her and attacked her job performance. She filed a whistleblower retaliation complaint in October 2022 with UCSC’s Equity and Equal Protection Office. The next month, Reyes said she was told her position was being eliminated as part of a “restructuring” and that she was being placed on administrative leave, the lawsuit alleges. 

Reyes’ lawsuit claims she applied for the director job in early January 2023 and UCSC contacted her for an interview before telling her in February that it had “decided to temporarily close the recruitment process for this position.” Reyes was let go in February 2023. The lawsuit claims the director job was eventually reposted as an executive director of gift planning position and someone else was hired, without Reyes being interviewed.

According to the lawsuit, Reyes said her concerns focused on Dieters’ work promoting his nonprofit, Charitable Gift America, as part of a six-month contract she said he had been given to help UCSC with its planned giving work. Dieters said he does not recall having a six-month contract and provided Lookout with a copy of a one-month agreement with UCSC for June 2022. UCSC spokesperson Scott Hernandez-Jason declined to provide a copy of Dieters’ contract, citing the litigation.

Planned giving involves donors who want to commit to give a gift to a school in the future. The donation can take several forms, with some donors offering gifts through their estate after they die. Other gifts are structured as charitable gift annuities or charitable remainder trusts, where donors pledge sizable sums of cash or assets to a school upfront and receive regular fixed payments from the school in return until their death. Schools usually invest the gifts to help fund the payouts and keep whatever amount of money is left over when a donor dies. The arrangement allows donors to give money to institutions while also knowing they will continue to have a regular income stream for the rest of their lives.

At UCSC, donors would typically make such arrangements by transferring their trusteeships to the University of California Board of Regents or the UC Santa Cruz Foundation, the nonprofit that fundraises for the school, Reyes’ lawsuit said. But the lawsuit claims Reyes was encouraged to add a third option for current and prospective donors: giving their money to the school through Dieters’ nonprofit.

As part of that option, Dieters’ firm would give UCSC an immediate payout from a gift that represented  “a small percentage” of the total donation while Dieters’ nonprofit would keep the rest, the complaint reads. In essence, the lawsuit claims UCSC was sacrificing the larger future payment it would receive once a donor died to earn a smaller one right away. 

In an interview, Reyes said Dieters requested access to confidential donor information and asked Reyes to arrange meetings with donors to help her get planned gifts, which she considered to be her job. Reyes’ lawsuit also claims Dieters misled donors who thought that by giving him control over their trusts, they were handing management of their gifts to the University of California. The lawsuit refers to multiple “donors” but offers details of only one UCSC “top donor” who agreed to transfer trusteeship over his charitable trust to Dieters’ nonprofit.

“Ms. Mehta and Vice Chancellor Mark Davis, at the expense of significant financial loss to UCSC, but most importantly, at the expense of donors’ trust, were so eager to increase their current gift numbers for their campaign, that they agreed to give away significant portions of donor gifts in exchange for a return on a small percentage in immediate payment,” the lawsuit claims.

UCSC’s response: “The insinuations are absurd”

Neither Dieters, Mehta nor Davis, who serves as vice chancellor for university relations, are named as defendants in the complaint, which lists UCSC as the only defendant. 

Mehta told Lookout on Tuesday that she didn’t have a comment and said the university hadn’t yet been served with the lawsuit.

Davis, who also serves as president of the UC Santa Cruz Foundation, denied all the allegations in the lawsuit. “The insinuations that are being made in this article are absurd,” he wrote in an email to Lookout. “Contrary to the allegations made by a former employee, there was no time that campus officials cheated donors or steered gifts away from the university. We hold our fundraising practices to the highest of industry standards.”

UCSC’s Hernandez-Jason wrote in a statement to Lookout on Tuesday that the university follows UC policy for all fundraising activities. “We believe this lawsuit is without merit. To date we have not been served,” he wrote. “If and when we are, we look forward to refuting these claims in court.”

The University of California Office of the President, which isn’t listed as a defendant, directed questions to UCSC’s media office.

Reyes told Lookout in an interview on Tuesday that she filed the complaint because she wants the truth to be known and to ensure that other people who may find themselves in her position know that what she alleges is unethical. Reyes, 61, said she has retired and hasn’t been able to get another job since her termination from UCSC.

She added that she believes UCSC executives might not understand the complexities of the gifts involved. “They didn’t really understand planned gifts,” she said. “Most people don’t.”

Donor denies pressure

In several interviews with Lookout, Dieters, the consultant, and Bill Dickinson — whom Reyes, Dieters and Dickinson all identified as the top donor referenced in the complaint — separately disputed the lawsuits’ characterization of their dealings.

“I want to underscore at no point was he luring me,” Dickinson said of Dieters. “He didn’t seek me out. I sought him out.”

Dieters told Lookout he had been hired for a one-month contract for June 2022 and does not recall signing a six-month contract as the lawsuit alleges. 

He said he was connected to UCSC through a mutual friend who had previously worked at Carnegie Mellon University with Davis. He said he was hired only to assess the planned giving program and submit a report, and did so as a favor.

“We’re really not in the consulting business,” Dieters said. “Some people just knew me and they knew I could help them so I begrudgingly said, ‘Fine.’”

Dieters says his work with UCSC was contracted with his for-profit organization, Thomas Mitchell & Associates, which he described as a third-party administrator for gift annuity programs, not through his nonprofit, Charitable Gift America, which is named in the lawsuit.

Senior UCSC officials hired him because they were unhappy with the performance of the planned giving department, he said. And while Dieters said the recommendations he gave UCSC were confidential, he agreed with their concerns. “Let’s just say it was consistent with what their thoughts were,” he said. According to the lawsuit, Dieters recommended that UCSC eliminate either Reyes’ job as deputy director or the vacant director’s position.

Dieters provided Lookout with an emailed copy of a UCSC purchase order dated June 8, 2022, showing a one-month contract in June for $10,000 for an “in-depth audit of existing planned giving program” and a one-paragraph “statement of work” outlining how he was expected to spend two to three days on campus interviewing development leaders and officers in person and over Zoom.

He said he made two trips from Florida to UCSC in the summer of 2022 and interviewed every development officer at the school. As part of that work, Dieters said Davis, Mehta and Reyes asked him to meet with Dickinson.

Dickinson told Lookout he had asked Reyes for her advice about a charitable remainder trust he had with Morgan Stanley that he was managing himself. The trust, which he originally set up in 2006 to hold two condos he owned, was worth around $400,000 by 2022, he said.

Dickinson said he was looking to transfer the trust out of the brokerage in the summer of 2022 because Morgan Stanley had made incorrect tax payments to the IRS and the California Franchise Tax Board. He said he no longer wanted to manage the trust as its trustee and was looking for help getting the tax payments refunded. 

Dickinson said he asked Reyes if the UC could help him with the tax issue if he were to make the university the trustee. However, he said Reyes told him the UC would offer him only a 2.2% annual payout and would contract out the tax work to a third party – an additional cost to the trust. 

The payout offer was too low, Dickinson said, given that the payments were income he needed for his retirement. “I said, ‘Well, that’s a deal-killer,’” he recalled. “I can’t afford that.”

Dickinson said Reyes then connected him with Dieters, who offered to try to help. He transferred trusteeship of the trust to Dieters in November 2022, a time period he said Dieters had told him was beyond the end of his contract with UCSC. 

Dickinson said Dieters met with him at Dickinson’s request and that during their ongoing discussions, he did his due diligence on Dieters’ business and “concluded that he was for real.”

“I asked Tom if we could meet,” he said. “He wasn’t hustling me.”

Dieters wasn’t able to resolve the issue with the IRS, and Dickinson eventually chose to transfer the trust to Harvard University’s divinity school. Harvard, he said, had offered him a payout of between 5% and 5.5%, much higher than UC’s 2.2%, on the condition that the arrangement would be irrevocable. Dieters signed the papers to transfer the trusteeship to Harvard last month, Dickinson said.

During the ongoing discussions over what to do with his trust, Dickinson said Dieters had raised the idea of a charitable gift annuity that could pay $50,000 to UCSC immediately, an amount greater than what his gift would be worth when he died, Dickinson recalled Dieters telling him.

A UCSC graduate and former foster youth, Dickinson said he briefly considered the idea as a way to support the Smith Society, a program he founded at the university in 1999 that offers financial, academic and social help to students who lack traditional family support. Ultimately, he said he decided not to pursue the arrangement.

Dickinson disputed the characterization in the lawsuit that Dieters pressured or misled him in the discussions about a charitable gift annuity. “At no point did I experience Tom Dieters luring me, controlling me or trying to influence me,” he said. ”We were just tossing around an idea. I wasn’t even on the threshold of doing it.”

While the Smith Society operates within UCSC, Dickinson said the volunteer-run program raises most of the money it spends itself and that as its chief fundraiser, he approached it like a small business. “Understandably, folks at the university think from an institutional perspective,” he wrote in an email. “I don’t.”

Dieters told Lookout he first met with Dickinson because UCSC development officials were worried they were going to lose out on securing the trust donation from Dickinson. “All I was trying to do was save a gift for UC Santa Cruz that they had royally screwed up and inevitably they lost it to Harvard,” Dieters said. “I tried to do everything I [could] to save that gift for that university.” 

He said he never charged Dickinson a fee for Charitable Gift America (CGA) to act as trustee and that the assets remained with Morgan Stanley until they were signed over to Harvard last month. Dieters said his nonprofit’s only role as trustee was to manage two payouts to Dickinson a year.

Dieters said it was the only time his nonprofit has acted as a trustee for a donor in this way. The primary business of CGA is to write gift annuity contracts, essentially arranging for donors to give money to charities while continuing to receive an income stream from those donations. The practice is common, he said, though his nonprofit is “unique” in that it offers to give charities grants up front instead of when a donor dies.

Dieters disputed the lawsuit’s characterization of CGA’s business model as a scheme that offered only a small fraction of a donation to a charity. 

On average, he said gift annuities are worth half of the original amount of the gift when a donor dies, which is usually about 12-15 years after making the donation. CGA writes contracts that give upfront grants to charities based on the current value of the gift, a calculation that typically works out to about 45% of the original donation amount, he said. For example, he said, a $100,000 donation is likely to be worth $50,000 when a donor dies but worth $45,000 today.

“Would you rather have $45,000 today or $50,000 12-15 years from now?” he asked. “The math is pretty simple. You’d much rather take the present value of that gift today. And we have enough resources where we can make grants to those organizations so they can turn a deferred gift into a current gift.”

Dieters said he has been writing such contracts for about five years and has about 1,000 clients. He declined to name them but described them as “significant organizations.” Dieters said CGA pools the remainder of the funds and invests them to fund the lifetime payouts to donors along with other management expenses and fees, which he says are lower than what many other types of private wealth investment vehicles charge.

“Spread the word. Let every charity know that’s what we do,” he said. “My business will go through the roof.”

He said CGA’s business is legitimate and ultimately had nothing to do with his work for UC Santa Cruz. He also disputed the lawsuit’s claims that he pressured Reyes to include CGA’s offerings in its materials to donors, saying he typically recommends offering donors a variety of charitable gift annuities, including his own. 

Days after the lawsuit shone an unwanted spotlight on his personal finances, Dickinson said he believes that those involved “are all decent people” who were trying to do their best. 

“That’s the sad part of it to me. I can see why [Reyes is] doing this lawsuit. And I can see why lawyers are saying things the way they’re saying because that’s what lawyers do,” he said. “But I think it all was more innocent than this.”

Note: Lookout founder Ken Doctor is a trustee on the UC Santa Cruz Foundation board.

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