KANSAS CITY — The Kansas City Art Institute is suing a southern California couple over an unfulfilled $5 million pledge.
Larry and Kristina Dodge, once multimillion-dollar business people and philanthropists, said they're facing hard times and can no longer pay the remaining $4 million they owe.
"This is an organization that is ruthless," a sobbing Kristina Dodge told the Kansas City Star. "Completely ruthless and heartless."
Based on the couple's 2005 pledge, the school built a $7 million building on its Kansas City campus that includes studios, drawing rooms and classrooms, the newspaper reported.
The art institute pursued the unpaid portion of the couple's pledge in the California Superior Court of Orange County. The Dodges, of Dana Point, Calif., initially tried to fight the lawsuit without an attorney, saying they couldn't afford one. But they made procedural errors, and the court entered a default judgment of $4 million against them.
"KCAI built a building based on a contract that the college had with the Dodges, and we still expect them to live up to the contract," the school said in a brief response to an inquiry from the Kansas City Star. "That's why we're leaving the name on the building."
The Dodges have since found a pro bono attorney to represent them. Larry Dodge said he has assets but the issue is liquidity and that he will probably have to file for bankruptcy.
The failure of American Sterling Bank in Sugar Creek figured prominently in the couple's financial demise.
Federal officials found the bank had a net loss of $2 million by the end of 2006. And regulators said CEO Larry Dodge, who also was chairman of the board and had controlling stock interest, caused the bank to file false financial documents in 2007 and 2008 to cover up the problems.
The bank was seized in 2009, and the next year regulators barred Dodge from banking and assessed a civil penalty against him of $2.5 million. On appeal, the penalty was reduced to $1 million.
Larry Dodge, who was raised in California but spent nearly 30 years in the Kansas City area, said he continues to believe that the bank should not have been seized. Part of the problems stemmed from a scheme in which mortgage applications were submitted that contained false supporting documents about the borrowers' assets and credit history. The mortgage fraud scheme cost the bank more than $8.5 million and led to two guilty pleas.
Kristina Dodge said she and her husband poured in $22 million of their own money to keep the bank afloat. Now, their oceanside home is set to be sold next month on the Orange County courthouse steps.
The Dodges said they learned they were being sued by the Kansas City Art Institute when a process server showed up at their daughter's 11th birthday party on the beach.
Until then, Larry Dodge said, he had been in talks with the art institute about restructuring the terms of his pledge.
"The most disgusting thing about it is, without an explanation, they file a lawsuit," Larry Dodge said. "Since that time, they've been absolutely horse's behinds."
Fundraising experts call the situation highly unusual.
"It doesn't happen much, and when it does happen the institutions tend to do their utmost to keep it under wraps because this can only be bad for them, both showing that they had a pledge that was not fulfilled and that they were willing to take a donor to court," said Andrew Mytelka, an editor at The Chronicle of Philanthropy. "I think it's a deterrent to future donors."