A building, a name, a furor

When Steven G. Mihaylo made a multimillion-dollar pledge to help build Cal State Fullerton’s new business school quarters, there was celebration at the university.

It was the largest donation in the school’s history, and it came from an alumnus who had transformed himself from a high school dropout to the founder of a publicly traded telecommunications and software corporation. The building was to be named Steven G. Mihaylo Hall.

But nearly three years later, after a business class learned that Mihaylo’s company had pleaded guilty to two felonies, the donation and naming are causing division and dismay on the 36,000-student campus.

The student newspaper has called on the university to return the donation. The professor whose class uncovered the felonies says his character is being tarnished by administrators. They counter that Mihaylo himself did nothing wrong and that the professor’s outspokenness is hurting the school’s reputation.

Questions are being raised about whether the donation was large enough to justify naming the building after Mihaylo and about the business school dean’s ability to fairly review the matter, given the tens of thousands of dollars he earned last year as a director of Mihaylo’s company.

Mihaylo, meanwhile, said he was dumbfounded by the brouhaha.

“It shouldn’t be this hard to help people,” he said.

Major donors to colleges are often rewarded by having buildings, scholarships or professorships named after them, and the tempest at Cal State Fullerton is by no means the first of its type.

In 2005, New Jersey’s Seton Hall University removed former Tyco Chief Executive Dennis Kozlowski’s name from a building and a library rotunda at his request after he was convicted of looting $600 million in company funds. But deceased Enron founder Kenneth L. Lay still has a chair of economics at the University of Missouri named after him, although it remains vacant.

Mihaylo, a 1969 graduate of Cal State Fullerton, is in no way comparable to Kozlowski or Lay. But his donation raises questions about the naming process at his alma mater.

In May 2004, Mihaylo agreed to contribute $3 million to a new building to house Cal State Fullerton’s business school, but after construction costs grew to $87.5 million, he increased his donation to $4.5 million. The 190,000-square-foot building, which is under construction, was paid for mostly with $53.5 million from the state as well as additional private donations and other sources. It will have a 250-seat lecture hall and more than 30 classrooms, plus faculty offices and other spaces.

Universities typically require donations much larger than Mihaylo’s before they name a building after a donor. The Council for the Advancement and Support of Education found that it usually takes a contribution of 50% of construction costs. The Cal State system’s own guidelines call for the gift to equal at least 10% of the capital cost for a new facility, though it is not required. Mihaylo’s equals about 5%.

When Claire Van Ummersen, vice president of the American Council on Education, learned of Mihaylo’s naming donation from a reporter, she said: “Whoa! That’s a bargain.”

But Cal State Fullerton officials say the Cal State system does not have a long history of fundraising, since its projects traditionally have been state-funded, and it does not attract multimillion-dollar donations like its University of California siblings.

Pamela Hillman, Fullerton’s chief fundraiser, said Mihaylo’s donation was one of only two multimillion-dollar gifts received in the university’s history. The other, a $4.2-million pledge, resulted in the 2006 renaming of the science laboratory center as Dan Black Hall.

Mihaylo’s gift prompted management professor Hamid R. Tavakolian to assign students in his management class last semester to research Inter-Tel, the company Mihaylo founded, with a value of more than $600 million.

“Since he was one of our grads, it seemed like a good thing to do, to use him as an example for my students to create some motivation,” Tavakolian said.

But the students found that Inter-Tel tried to defraud a federal program that provides technology to poor schools. The company pleaded guilty to mail fraud and antitrust felonies, and agreed to pay $8.7 million in fines and penalties in 2004.

Mihaylo, who signed the settlement agreement, was never accused of wrongdoing.

He said that as the chief executive, he took responsibility, even though he had no knowledge of the scheme.

“It’s impossible to keep tabs on thousands of employees,” he said. “We just thought it was better to get it behind us and pay the fine and get on with our lives.”

But Tavakolian, a tenured professor, said the school should return the money.

“That’s really an insult to what we teach and to our students,” he said.

University leaders, including President Milton A. Gordon and business school Dean Anil Puri, have stood by Mihaylo.

“Steve Mihaylo’s conduct was appropriate and proper. He found out about the misconduct, and he fired the people who were guilty,” Puri said.

Tavakolian said Puri should have no role in judging the propriety of the matter, given that Mihaylo appointed him to Inter-Tel’s Board of Directors last year. In 2006, he got at least $25,000 in compensation.

Puri noted that his appointment occurred two years after the donation, as well as after Mihaylo had been ousted as the company’s chief executive on grounds unrelated to the scandal. Mihaylo placed Puri on the board as part of an agreement to end a proxy fight as he tried to regain control of the company.

“I agreed to serve because he is a friend of the college, and to be helpful,” the dean said.

Puri’s and Tavakolian’s disagreement has become public, with Puri circulating an e-mail a department chair wrote to Mihaylo that calls Tavakolian a “rogue professor.”

A student newspaper editorial called on the university to return the money.

The campus debate appears to be moot. Gordon said the university did not plan to review the matter. Steven G. Mihaylo Hall is expected to open in fall 2008.

seema.mehta@latimes.com

Times editorial assistant Yvonne Villarreal contributed to this report.