Nixon sues MOHELA for Sunshine law violations

~ Attorney General said board failed to give proper notice of meetings and held secret discussions.

JEFFERSON CITY, Mo. -- Attorney General Jay Nixon on Tuesday sued to strike down a proposed loan sale by Missouri's college loan authority on claims it was crafted in violation of the state's open meetings law.

Nixon alleges 12 Sunshine Law violations in the lawsuit against the Board of Directors of the Missouri Higher Education Loan Authority, claiming the members failed to give proper notice of meetings and held secret discussions that should have been public.

In a brief meeting with no public discussion, MOHELA's board voted Jan. 31 to back the sale of $2.4 billion in loan assets this year and the gradual sale of additional loans to generate $450 million for Gov. Matt Blunt's higher education initiatives.

Before the meeting occurred, the seven board members had been thoroughly briefed about the details of the plan in a series of one-on-one discussions among the agency's director, the board chairwoman and other board members.

The agency has denied violating Missouri's Sunshine law, but Nixon said the board's actions kept the public in the dark.

"This is a significant public policy proposal that deserves to be seen in public, talked about in public -- not delivered as a cooked dish for dessert," Nixon said in an interview.

The lawsuit, filed in St. Louis County Circuit Court, asks a judge to invalidate the board's actions and assess penalties against its seven members.

Missouri law requires meetings of public bodies to be open to the public, whether conducted in person or by phone. Purposefully violating the the Sunshine law can result in fines up to $5,000, while knowingly violating it -- a different standard -- can bring fines of up to $1,000. Attorneys costs also can be assessed.

A 1986 state appeals court ruling said a discussion involving less than a quorum of members does not constitute a public meeting. But it also said secret small-group get-togethers cannot be held with the intent of deliberately sidestepping the Sunshine Law.

MOHELA Board Chairwoman Karen Luebbert did not return a call seeking comment Tuesday.

The agency's interim executive director, Raymond Bayer Jr., declined to comment, saying agency officials had not seen the lawsuit. But Bayer has said previously that the individual discussions with board members were not intended to sidestep the law. Instead, Bayer has said, they were trying to make sure board members agreed with the proposal that was hurriedly being drafted as a counter to Blunt's plan.

Blunt traveled the state Jan. 26 to announce his proposal to sell MOHELA outright to fund university construction projects and create endowments for student scholarships, professors and business recruitment to campuses.

An e-mail sent that same day by Bayer to the board members -- and obtained by The Associated Press under the Sunshine Law -- outlined a potential alternative of selling loans to achieve Blunt's funding goals while still saving MOHELA's current structure. That plan was firmed up in the ensuing private discussions and was embraced by Blunt in a news conference minutes after the brief Jan. 31 board meeting.

The lawsuit contends board members, at the direction of Blunt's office, participated in a "hub-and-spoke communication approach to avoid having a meeting." The suit says the private discussions should be treated as an improperly closed meeting for which no notice was given.

"It is clear that there were numerous communications of multiple types during that weekend, and it is clear the public did not receive the light of the sun they deserve," Nixon said in the interview.

Blunt spokesman Spence Jackson denied the assertion that the governor's office directed any Sunshine Law violations.

"There is no merit to this charge, and it is just another political stunt by the attorney general, who cannot accept the fact that the governor's Lewis and Clark Initiative is a win, win, win for students, colleges and the economy," Jackson said.

Nixon's lawsuit contends MOHELA's violations began around Jan. 19, when rumors first surfaced that Blunt wanted to sell the agency. The board failed to give proper notice of meetings on Jan. 20 and Jan. 24, and met improperly in closed sessions to discuss the proposed sale, Nixon alleges.

At the second meeting, the board also fired the agency's director, Michael Cummins -- an action that Nixon said can occur in closed session. Although the suit doesn't directly ask that Cummins be reinstated, Nixon spokesman Scott Holste said that's among the potential consequences if a judge determines that meeting was held without proper notice.

The initial sale of $2.4 billion of loans -- about half the value held by MOHELA -- is projected by the agency to fetch $2.55 billion on the open market. Most that money would go to pay down the bonds backing those loans or get plugged into other investments while the agency buys more student loans. About $150 million from that initial sale would be transferred to the state, with proceeds from additional sales to follow in quarterly payments through 2010.

Of the eventual $450 million in projected state proceeds, Blunt wants to spend $300 million on construction, $100 million on scholarships, $20 million on professors and $30 million on attracting high-tech businesses. But those spending decisions would need legislative approval.

Earlier Tuesday, the Legislature held its first public hearing on the proposed MOHELA sale. Twelve university leaders told the Senate Education Committee that the proceeds are needed to renovate aging buildings or construct new ones.

Support from the university leaders was focused on the governor's plan and not a rival plan announced by House leaders last week that would shift more money to scholarships and less to building projects while also paying about $75 million of the state's debt.