Scandal in Academe

It seemed innocent enough at the start. Three years ago, Harry A. Lowther, a "retired businessman," and his wife, Barbara Phillips Lowther, a psychology teacher, set up their own small foundation in Illinois. Last week, as a result of their still unfolding financial manipulations, the Lowthers had driven a renowned educational-research institute close to bankruptcy, hastened the closing of an experimental college in Arizona, damaged some leading reputations in higher education--and produced the juiciest scandal in U.S. academe in years.

The Lowthers were married in January 1972, and that summer founded the Phillips Research Foundation, which focused on "nontraditional study,"* one of the hottest catchwords in education. Next, they formed Lincoln Open University as an experimental nontraditional college in Illinois. On Christmas Day, 1973, the school received a $350,000 grant from the Lilly Foundation--which gave the Lowthers instant respectability in the academic world.

Very Winning. Then, the Lowthers called Samuel B. Gould, former chancellor of the State University of New York (TIME cover, Jan. 12, 1968) and one of the best-known figures in higher education. Gould had finished a major study --financed by the Carnegie Corporation --on nontraditional education; the Lowthers offered to pay for a council headed by Gould to do more work on the subject. Gould, who says that the Lowthers could be "very winning," accepted.

That offer was apparently made to soften up Gould. A short time later, the Lowthers again contacted Gould, who was also president of the prestigious Institute for Educational Development, an educational-research organization in New York City. This time the Lowthers offered to take over the institute itself and have it act as the management arm of the Phillips Foundation. The institute had been started as an affiliate of the Educational Testing Service in 1965 but had fallen on hard times. At a board meeting last March, the details were worked out: the Phillips Foundation took over financial control of the institute, and Lowther signed a personal guarantee for a $200,000 loan from the Educational Testing Service; in return, the Lowthers and their associates were given four of the seven seats on the institute's board, Lowther was named board chairman and treasurer, and the institute's headquarters were moved to the same building in Lombard, Ill., that housed the Phillips Foundation and Lincoln Open University. At that meeting, institute officials expressed doubt about the Lowthers' financial condition; Lowther reassured them by producing an Internal Revenue Service form declaring that the Phillips Foundation had a net worth of $5.9 million. (The previous year the foundation had reported a net worth of minus $2,814 to the IRS.)

In December, the Lowthers' pyramid started falling apart. In an apparent attempt to gain another base for securing grant money, Lowther tried to take over tiny (445 students) Prescott College, an experimental school in Arizona. The college was $440,000 in debt and on the verge of bankruptcy. Thus, when Lowther agreed to pay the school's operating costs in return for control of its board and operating capital, the college thought it had found a savior and tentatively agreed to the deal. But soon $105,000 in foundation checks to the college bounced, and--for the first time--it was discovered that Lowther had been convicted of stock fraud in 1970. Prescott officials called the Illinois attorney general's office, and on Dec. 18 the college suspended operations.

Payment Due. The roof also fell in on the institute. Employees were not paid, the rent was due in New York and in Lombard. Educational Testing Service was demanding payment on its $200,000 loan. Gould resigned as institute president last month (although he remains a trustee), and at an emergency meeting Lowther was thrown off the board. Lawrence E. Dennis, 54, former provost of the Massachusetts state college system, was named treasurer and acting president. Dennis estimates that the institute is at least $500,000 in debt and may have to shut down at the end of the month. Meanwhile, the Lowthers have brazenly filed a bankruptcy suit against the institute, claiming that it incurred all of its financial obligations itself. Says Dennis: "It's beyond doubt the most incredible action imaginable."

The fate of the institute, the Phillips Research Foundation, Lincoln Open University (which suspended operations Jan. 3) and the Lowthers now depends on audits and investigations by the IRS and the Illinois attorney general. For his part, Sam Gould can only say, "The whole thing is embarrassing."

* Which involves minorities, older people and others who have traditionally not attended college.

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