Housing Kappa Sig: Headquarters for controversy
A gracious, white-columned estate on sprawling, green acres. Brother fighting brother, leaving the home abandoned and decaying. While this might sound a lot like Gone with the Wind, the house at issue is not Tara, but Colridge. And the "brothers" at war are not Union and Confederate soldiers, but officers of Kappa Sigma Fraternity and the nonprofit Kappa Sigma Memorial Foundation.
Their recent civil suit over who actually owned the Ivy Road headquarters might have struck some as warlike as it charged up to the Virginia Supreme Court, lining lawyers' pockets along the way to the tune of $1.5 million.
Though all appeals have been exhausted– and one side is the clear legal victor– no one is gloating over the spoils: Eight months after the Supreme Court weighed in, grand Colridge sits empty, awaiting a buyer.
Meanwhile, the relationship between the Fraternity and the Foundation lies in tatters, the Fraternity now hunkered down in a corrugated steel and brick office park on Avon Street Extended, and the Foundation licking its wounds in El Paso, Texas– both far cries from the gracious mansion home they once shared.
But before the lawsuits, before the acrimony, there was simply a dream of a happy home and a heck of a lot of good parties.
Back in 1965, a Kappa Sigma named Richard Miller arrived in Charlottesville from his Texas home with a single purpose: to establish his beloved fraternity's national headquarters in Charlottesville, where "Kappa Sig" had been founded back in 1869 by UVA Lawn resident William McCormick and four friends. They pledged eternal friendship, brotherhood, and an everlasting bond.
In his quest to bring Kappa Sigma back to its birthplace, Miller didn't have to look far for a proper home, recalls his wife, Deane, who accompanied him on that trip.
"It was the first house we looked at," she recalls of Colridge. "Dick just loved it."
Within months, Miller had plunked down $175,000 for the 17-acre, 1922 estate, and the Fraternity had moved in, as had the Foundation (then called Kappa Sigma Inc.), the organization Miller helped create to manage the estate for the Fraternity.
In the beginning the brotherly love flowed freely, as Kappa Sigma brothers and their families from the 200-plus chapters around the country descended on Colridge for "conclave," a biannual reunion of sorts. There, in the mid-1960s, Miller, the "Grand Worthy Master," would preside over a weekend of festivities and Fraternity rituals.
"It was just so much fun," Deane recalls from her El Paso home. The Foundation's high falutin' board members– including Willard F. Rockwell, founder of the multi-billion dollar Department of Defense contractor Rockwell International, and Senator John G. Tower– added star power to the gatherings, and often shuttled friends– including the Millers– to and from Richmond in private limousines.
Times were so good, in fact, that when Miller offered to assign Colridge to the Foundation so that the deed could be held in the corporate name– protecting the house from any suits against any of the Fraternity's thousands of members– both groups considered a written agreement defining the terms of their trust unnecessary.
Miller, in a burst of optimism, even called the headquarters "a perpetual monument to Kappa Sigma Fraternity."
Fast forward nearly 40 years to find the Fraternity and the Foundation squaring off in a bitter legal battle, that optimism of the past only a memory.
Admiration to acrimony
"From 1966 until 2000, the relationship between the two groups worked beautifully," Miller told a reporter back in 2001, soon after Kappa Sigma the Fraternity first filed suit against Kappa Sigma the Foundation.
But around that time, a list of complaints on the Kappa Sigma Fraternity website revealed the unraveling. According to the website, back in 1967– just one year after the warm, fuzzy purchase of Colridge– the Foundation had "tried to vote to eliminate the rights of the members of Kappa Sigma Fraternity to participate in the operation of the corporation and the election of its officers."
In 1975, writers on the website claimed, the Foundation had recruited a celebrity board of directors including Senator Bob Dole and newsman Sam Donaldson– without the Fraternity's consent. In the late 1990s, the Foundation quietly listed the property for sale.
On May 4, 2001 in Albemarle County Circuit Court, the Fraternity sued to retake the house– and its claim went straight for the jugular: The Foundation had been created by the Fraternity solely to manage Colridge for the Fraternity. Without the Fraternity's blessing, the suit claimed, the Foundation had no legal basis for existing.
In addition, the Fraternity alleged that the Foundation took donations from Kappa Sigma brothers under false pretenses and neglected to distribute some $1.7 million of those funds.
Not surprisingly, The Foundation fought back, vigorously arguing that it had never betrayed the trust of its donors and that Colridge had never been intended solely to benefit the Fraternity.
For nearly three years, the two sides duked it out. The Foundation's celebrity members, Dole and Donaldson, resigned from the Foundation over the attempt to sell Colridge, and though neither man returned the Hook's calls, a 2001 letter from the pair to the Foundation offered an explanation: "We oppose this action and do not recall voting on it," they wrote.
Several days later, Dole elaborated in a second letter: "I do not wish to become involved in this exercise which seems to be getting out of hand." The one-time presidential candidate signed it, "a puzzled Kappa Sigma."
Current Foundation president John Birkelbach says he has his suspicions. "Members of the Fraternity solicited them to resign," he believes, "and they did so."
Non-profit, big problem
To understand how the Fraternity and the Foundation went from back slapping to back stabbing, one has to revisit the mid-'70s, Birkelbach says. That's when the Foundation sought nonprofit status from the IRS so that donors could receive a tax deduction.
But what might have seemed like an easy way to increase donations to fund scholarships for Kappa Sigma brothers had some unexpected strings attached.
"One implication [of having 501 (c) 3 status]," says Foundation attorney Craig Wood, "is that you no longer own property for your own benefit."
In the case of Kappa Sigma, that property was Colridge, and the stage was set for conflict.
That stage may have been set, but the play didn't actually get going until the mid-1990s when the Fraternity underwent a legal audit.
Foundation attorney Wood says that following the audit, the Fraternity began pressuring the Foundation to investigate whether it was complying with IRS requirements for nonprofits.
In fact, it wasn't. The Foundation, says Wood, learned that it should have been charging market rent to any tenants at Colridge who did not also have 501 (c) 3 status. Ironically, there was one such tenant: the Fraternity itself– a tax-exempt but still for-profit organization.
Market rent at the lush Ivy property would not be cheap. Although purchased in 1966 for $175,000, it was assessed in 2003 for $6 million– a staggering 3,400 percent increase.
Over the course of three decades, the frat had essentially been occupying most of the 6,500 square-foot house and 17.5 acres of land rent free, though it had paid for insurance, taxes, and general maintenance of the property. It also managed the Kappa Sigma Auditorium, allowing local organizations to rent it and hosting national Kappa Sigma events.
"It wasn't our fault or anyone's fault," says Ted Lange, the director of fundraising for the Foundation, of the soaring property value. Had property values not increased so sharply, he says, "fair market value would have appeared far more reasonable."
For several years, the two organizations attempted to negotiate a lease– getting so far, says Birkelbach, as to have an agreement that both sides agreed to sign.
But though it looked like a done deal, Lange says the Fraternity did a sudden about-face, filing the lawsuit against the Foundation in May 2001.
What could have driven the Fraternity to turn on its brothers?
Kappa Sigma Fraternity executive director Mitchell Wilson did not return the Hook's calls, nor did David Cynamon, the D.C.-based attorney who represented the Fraternity in its suit.
But that "fair market" price may have been the straw that broke the camel's back.
While no one the Hook spoke to recently could give the exact rental value, back in 2001 the Kappa Sigma Fraternity complained on its website of a $30,000 rent bill sent by the Foundation. Lange guesses that would have been two months' rent.
For seven months following the May 2001 filing, both the Foundation and the Fraternity prepared for their day in court. That day came in December 2001, when, in a rocky start for the Foundation, Albemarle County Circuit Court judge Paul Peatross ruled in favor of the Fraternity, stripping the Foundation of its legal status, and handing over its assets to a court-appointed guardian for the next three years. But the Foundation didn't flinch.
It took its appeal all the way to the Virginia Supreme Court, a process that exacted a significant toll. Locals may have noticed that the auditorium– once a lively public venue for everything from Boy Scout conventions to piano recitals– was being used far less frequently. Nor did the Foundation award any scholarships during that period. During the appeal, says Birkelbach, the Foundation "had its hands tied."
In November 2003, the Virginia Supreme Court overturned Peatross' decision in what Wood calls a "precedent setting" case. "At the time the lawsuit was filed," says Wood, "there was no similar case to tell you when corporate actions become final."
At issue in the Kappa Sigma case, Wood explains, was the timing of the Foundation's decision to seek nonprofit status in 1974.
The Supreme Court ruling, which Wood says gives the Foundation "clear and unassailable legal status," states that there is a five-year statute of limitations on corporate decisions. The Fraternity would have had to object before 1979 to the Foundation's decision to go nonprofit in order for the outcome to have been different. They were nearly 24 years late.
Not surprisingly, Wood believes the Supreme Court made "the correct decision."
"Otherwise," he explains, "corporate acts could be challenged forever."
Lange is a bit more introspective about the whole process– especially the financial toll the legal proceedings took on both the Foundation and the Fraternity.
Estimating that his organization has spent $500,000 defending itself (and that the Fraternity spent as much as $1 million), Lange now says he wishes the case had never reached the courts at all.
"Before anyone files a lawsuit," he says, "they need to sit down and talk and talk and talk and talk."
For Dick Miller, the Supreme Court's decision to overturn the lower court's ruling was a relief. But unfortunately, his dream of Colridge as a "perpetual monument to Kappa Sigma" was not to be.
In December 2003, Birkelbach says, a month after the Supreme Court decision, the Fraternity packed up and vacated the premises without notice. Property insurance and taxes, which the Fraternity had covered for 35 years, went unpaid. A toilet sprung a leak, says Birkelbach, and no one was there to notice water seeping through the first-floor ceiling.
Birkelbach says Albemarle County had liens on the property for nonpayment of taxes for the last six months of 2003, in addition to late penalties and interest.
Two months ago, Birkelbach and fellow board members came to Charlottesville to prepare the property for sale.
Fortunately, he says, it could have been worse.
"The Frat," he says, "took generally good care of the property."
After securing insurance and paying property taxes through the first part of 2004, the Foundation decided to sell the property through Denver-based Argus Real Estate, which handles many such estate sales. Mike McCune, the Argus agent listing the property could not be reached.
And while many locals may wonder what such a real estate gem– one assessed for nearly $6 million– might go for, the Foundation's Lange says "the value will be determined by the buyer."
Colridge was one of four early 20th century mansions built on Ivy Road by industrialist Hollis Rinehart who originally named the house "Kenridge." If the recent sales of the two surviving Rinehart mansions are any indication, that value could be stunning. [See sidebar on Hollis Rinehart, page 24].
White Gables, for instance, was assessed in 2003 for $1.9 million. It sold that year for $2.85 million to Weather Hill Homes' owner Vito Cetta, who has since turned the property yet again– to Norfolk-based developer Robinson Inc. Ground was broken for a 76-unit super-luxury retirement condo in late May.
Another Rinehart house, this one best known for housing the Institute of Textile Technology, sold in late 2003 for $6.6 million.
Giving up the dream
Though he lived to see the Foundation emerge victorious from its long battle, Miller did not live to see what will become of the mansion he loved. He died in March at age 86, following a long illness. But for his widow, Deane, her warm regard for Kappa Sigma Fraternity– like her love of Colridge– is unchanged.
Though Deane says she knew nothing about the Fraternity when she married Miller, after a few conclaves she became "fast friends" with many of her husband's "brothers."
Senator John Tower, who died in a 1991 plane crash, was "such a darling man," Deane says. And spending time with Willard F. Rockwell and his wife was always exciting. "They were just fabulous people," says Deane, recalling trips on the Rockwells' private jet and weekend stays on their private island.
"You cannot imagine the wonderful, wonderful memories," she says through sudden tears.
While Deane says her husband was happy to know that the lawsuit had finally ended– in the Foundation's favor– she believes he hoped that the Foundation would somehow be able to hold on to the property.
"It was like a dream to him," she says, "to have that beautiful house."
Now, instead of a mansion on a verdant campus, the Fraternity finds itself sharing space on a high-speed stretch of Avon Street Extended. Like its new neighbors Schnabel Engineering and Diffusion Pharmaceuticals, for instance, the Fraternity is housed under drop ceilings and fluorescent lights in a modern office park called Astec Center.
John Birkelbach says he believes Miller understood the necessity of selling the property in order to continue the Foundation's mission of providing "leadership scholarships" to Kappa Sigmas and non Kappa Sigmas alike.
As for the Foundation's relationship with the Fraternity, Birkelbach hopes blood will be thicker than water– especially water that's now under the bridge.
"I really hope that over time the ill feelings will be healed," says Birkelbach, "and we'll be able to get back to doing things as a group. We'll just have to wait and see and hope it works out properly."
PHOTOS BY JEN FARIELLO
Senator Bob Dole was recruited for the national fraternity's board of directors then resigned.
Sam Donaldson resigned from the Foundation board in 2001 over the dispute.
Kappa Sig headquarters not yet gone with the wind
Insert: the fraternity's new headquarters on Avon Street Extended
The 1922 home, White Gables, resold last year, is currently being developed as 76 luxury condominiums.