Perles resigned from MSU's board. Then a debt he owed was wiped out

Days after George Perles stunned members of the Michigan State University community by announcing that he was immediately stepping down from his board of trustees seat, MSU formally wiped out a nearly $200,000 debt the former football coach owed on a gift pledge.

The move zeroed the balance that Perles, also the school's former athletic director, owed on a $500,000 pledge to the school, according to confidential donation records obtained by the Free Press. The pledge was to cover half the cost of a $1-million plaza in front of the school’s football building. It is named for Perles and his wife.

The directive to zero out Perles’ balance came from the office of then-interim President John Engler, multiple sources employed inside Engler's administration told the Free Press. They spoke on the condition of anonymity because they are not authorized to talk to the news media.

The move was highly unusual in an era where many universities have sued donors to recover amounts pledged to the institutions. Perles said in his resignation statement that his poor health — he has suffered from Parkinson's for years —  played a major role in his decision to step down, but others say the debt was forgiven to encourage Perles to retire early so Engler's supporters could persuade then-Gov. Rick Snyder to appoint  a pro-Engler board member to replace Perles. The move backfired when Snyder picked someone with no ties to either Engler or anyone else on the board. On Thursday, the board accepted the embattled Engler's resignation as interim president after threatening to fire him if he didn't resign

While the initial vote to hire Engler had been unanimous by the board of trustees, his term had been marked by behind-the-scenes squabbling. With the election of two new Democrats to the board, Perles' replacement was seen as key to deciding Engler's fate in 2019 — and more importantly, the culture of the board and the school going forward.

 "John and his supporters really needed Perles to go while Snyder was still governor," said a former university insider with ties to Engler. "They really thought they could use their connections with Snyder's administration to get someone on the board who would be supportive of Engler and work with him to do the reforms Engler...started. They knew if the pick went to (newly elected Gov. Gretchen Whitmer), there was no way the person picked was going to be someone who supported him. There was too much pressure on Whitmer to let her do that."

In May, MSU officials from the office that handles donations sent an email noting they were writing off the money because of a conversation with Perles, according to an email shared with the Free Press by MSU spokeswoman Emily Guerrant after the Free Press asked questions. 

“According to our university records, the Perles account was closed in May 2018. At that point in time, we expected no further contributions, nor did we plan to ask for any future contributions," Guerrant said. "We appreciate all the support, financially and personally, that George and Sally have given to the university over the past 60 years. At Michigan State, our donors are valued and appreciated. They do not enter into legally binding agreements but rather give generously from the heart. We are grateful for every contribution we receive from our Spartan family.”

However, experts told the Free Press gift agreements have been repeatedly ruled as legal contracts by courts across the country. And writing it off was not the same as zeroing the account and telling Perles the legally binding contract was being torn up, the sources inside Engler's administration told the Free Press. Once the account was zeroed out and the contract ended, MSU couldn't go to court and force Perles or his estate to pay off the debt. 

Engler did not respond to request for comment on Thursday or Friday. 

A close friend of Perles, who said he spoke with him after the November resignation, said Perles told him the pledge being forgiven had been one of the factors in his decision.

"Having that (pledge) removed definitely helped persuade (Perles) to make (the resignation) effective immediately," the friend said. "Before that, he was going to resign — everyone knew that — but he shocked everyone" with how fast it happened.

The topic of dropping the $200,000 came as Perles and his wife had discussions with the university about Perles' retirement benefits, according to Perles' friend. The friend said Perles told him Engler and board member Joel Ferguson subsequently pushed then-board chairman Brian Breslin to get Perles to sign the resignation letter. Ferguson and Breslin were both longtime Perles friends and allies.

Perles, Breslin and Ferguson did not respond to requests for comment.

"It was all done to protect (Engler)," the Perles friend told the Free Press. "I'm pretty sure George didn't realize all the ramifications of retiring immediately until afterward when people started asking him about it."

His resignation stunned people in Michigan’s political circles. Snyder got less than a day’s notice that Perles was leaving, then-Michigan Lt. Gov. Brian Calley told the Free Press. Calley also said Snyder’s administration was not planning on having to make the pick. Snyder chose Democrat Nancy Schlichting, the former CEO of Henry Ford Health Systems, to fill Perles' seat. She was among the seven board members who voted unanimously on Thursday to accept his resignation.

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Perles makes a donation

Perles has had a long history with MSU, starting with playing football for the school. He received both a bachelor's and master's degree from the school. In 1982, he was named the head coach of the football team. In 1990, he added athletic director to his responsibilities as head football coach after flirting with leaving the school to go to the NFL.

At the end of Perles' coaching career, an external investigation uncovered various infractions, including grade tampering by an athletic department administrator. MSU president M. Peter McPherson fired Perles before the end of the 1994 season, and ordered the Spartans to forfeit their five wins for that season. The NCAA also investigated and found a lack of "institutional control" in the football program, but didn't find any wrongdoing from Perles. At the time, he made $123,000 a year from MSU, but had an estimated $277,000 in outside income.  

In 2007, he ran for a seat on the board, and won election. He won re-election in 2014 for a term that was scheduled to end in 2023.

Over the years, Perles gave regularly to MSU, often in relatively small amounts, his donation records show. Staff in the university's development office were in regular contact with him, sending cards, making phone calls and visiting with him in person, records show.

In late February 2007, Charles Webb, then the vice president for university development, began discussions with Perles about donating money toward a building project at the football building. At a follow-up meeting in early April 2007, Perles agreed to donate the money.

MSU's staff put together a formal agreement in May 2007 and Perles and his wife, Sally, signed it on Sept. 8, 2007. 

Perles agreed to give $500,000, payable $50,000 per year from 2008 to 2011, with the remaining $300,000 to be paid off by Dec. 31, 2012.

In response, MSU agreed to name the area at the entrance of the football building the George J. and Sally A. Perles Plaza. 

"The agreements are definitely enforceable," said Doug White, the former director of the nonprofit management master's degree program at Columbia University in New York City. Courts have enforced contracts in suits by both universities against donors and donors against universities, he said. "We're past the day of just a handshake agreement. These are a legal transaction."

After the agreement was signed, Perles began to donate. By the end of 2011, he had given more than $215,000.

But his giving slowed after that. In 2013, university development staff noted several times in donation records tracking contacts with donors that they needed to call Perles about his gift account balance. There is no record of what happened with those calls.

On May 3, 2018, a one-line email was sent from one advancement staffer to another staff. It said "....1 Perles pledge written off/unfilled." 

The road to Engler being hired

In January 2018, MSU was in all sorts of turmoil. Longtime MSU sports medicine doctor Larry Nassar, also the doctor for USA Gymnastics, was on trial for sexually assaulting hundreds of female athletes.

Lou Anna Simon, then MSU's president, was also under pressure to step down for her handling of the situation. After she resigned in January, the political maneuvering that led to Engler being hired began. 

The board, split equally between Democrats and Republicans, had two candidates in mind to replace Simon on an interim basis — former Gov. Jim Blanchard, a Democrat, and former Gov. John Engler, a Republican, both MSU alumni.

Michigan’s Republican Party, which held control of both the Legislature and the governor’s office, got involved in the race. Key lawmakers made it clear to the board Engler should be picked, or state aid for MSU could be in jeopardy. 

Once named to the position, Engler battled with Nassar survivors, students and faculty over the course of 2018.

Pressure started mounting to fire Engler, but a majority of the board members — including Perles — supported him. The only two who wanted Engler gone were Brian Mosallam and Dianne Byrum. Byrum was elected in early January to be the chairwoman of the board following a week of intense politicking behind the scenes by all board members and a two-hour closed-door session before the vote was taken.

Then pressure shifted to the November elections. Breslin and fellow Republican Mitch Lyons said they wouldn’t run for re-election. Democrats, riding the wave of reform at MSU, elected Brianne Scott and Kelly Tebay to replace them. Both Scott and Tebay said during the campaign they would vote for firing Engler. 

That left Engler’s fate hanging in a 4-4 tie. 

In order to keep the status quo, Engler and his supporters on the board needed to make sure Democrats didn’t get a chance to appoint someone aligned with the reform wing.

That meant Perles needed to retire right away. 

A board member with no ties to the university

Perles has not been physically present at MSU board meetings for some time, often calling in and rarely speaking at length.

As late as MSU's last home football game on Nov. 24, Perles' friends were being told that he still planned to step down in January 2019, sources within the Democratic Party told the Free Press. Democratic MSU board members were beginning to plan strategy on how to fire Engler and names were circulating as to Perles' successor. 

Then came Nov. 29 and a sudden exit. Breslin announced Perles had submitted a letter of resignation.

Days later, Perles’ account was zeroed out.

Barbara McQuade, a professor at the University of Michigan Law School and the former United States Attorney for the Eastern District of Michigan who put former Detroit Mayor Kwame Kilpatrick behind bars, said it'd be hard to prove that a crime had been committed even if zeroing out the account was some sort of incentive for Perles to retire. But the move might still be questionable.

"In our office, we often talk about crime versus slime," McQuade told the Free Press. "I'm not sure this is a crime, but it has a lot of slime." 

As soon as Perles resigned, speculation began to flow about who would be picked by Snyder to fill the seat.

But picking someone with close ties to Engler, or anyone else wasn’t on Snyder’s agenda.

"It was important to have people not connected in any way to people currently running MSU, including the (interim) president,” Calley, who was involved in the appointment discussions, told the Free Press. “We wanted someone outside of the regular political system. We were looking for someone coming in with no allegiances, alliances or historical baggage. Just fresh eyes."

The group got that in its appointment of Schlichting. In addition to being the former CEO of Henry Ford Health System, she is a member of several boards, including the board at Duke University. She will serve the remainder of a term set to expire in 2023.

But although Schlichting is a Democrat, she has no ties to current board members or Engler. She, unlike the other board members, didn't run for election, meaning she doesn't have campaign donors or party officials to please.

She said not having ties to anyone will help her unify the board.

"I think they (other board members) appreciate that objectivity. I'm a Democrat, but I have supported both parties, particularly in health care. I don't think health care should be a political issue. I think the same for public universities. These shouldn't be political. They should be about what is best for the students."

Contact David Jesse: 313-222-8851 or djesse@freepress.com. Follow him on Twitter: @reporterdavidj