Friday, Aug. 4, 2006 | 7:22 a.m.
Gasper Lazzara's offer to UNLV more than three years ago couldn't have come at a better time. He offered to donate more than $40 million to launch an orthodontics program.
Lazzara's offer was straightforward: He would donate the money over 30 years if the university would train orthodontics students to work at clinics he operated around the country.
University officials eagerly accepted. They needed money to finish construction of its orthodontics building and wanted to expand into new dental specialties.
Three years later, the deal blew up. Lazzara turned out to be unreliable as a business partner. University officials expressed surprise. They said they had checked out his business thoroughly and it appeared stable and well run.
But a review of university files by the Sun and an interview with Barbara Henry, the UNLV Foundation employee assigned to look into Lazzara three years ago, has found that documents sent to the university's chief fundraiser had indeed revealed major questions about Lazzara's company. Henry says she repeated those warnings aloud at a staff meetings of the foundation's board of directors.
It turns out that Henry's concerns were well founded.
Lazzara told UNLV in June that he will not be able to make good on the second half of his $3.5 million gift to UNLV, nor will he be able to make the full $480,000 annual payment that UNLV was counting on for at least the next two years.
In fact, a new report shows Lazzara broke his promise to pay the university in January, months earlier than UNLV officials reported. The $3.5 million payment was due Jan. 31, and UNLV filed a breach of contract in February to get half of it, according to a report sent to regents last week by Gerry Bomotti, vice president of finance.
Lazzara had agreed to help UNLV start the orthodontics program in exchange for committing up to half of each 16-person class for students who would agree to work for Lazzara's Imagine Orthodontics practices after they graduated. In addition to covering the students' tuition and living expenses, the company offered UNLV $30,000 per student in exchange for UNLV reserving slots for its scholarship students.
But Imagine Orthodontics no longer has the money to build more clinics in which to place those students and must scale back its operations, Lazzara recently wrote UNLV officials.
UNLV is scrambling to make up the lost revenue and may have to raise tuition to cover expenses, dip into other real estate funds to finish construction on the orthodontic building, or postpone adding dental specialties to the School of Dental Medicine, Bomotti said.
The initial eight students have dropped their contracts and are staying in the program on their own, he said.
In recent weeks Lazzara has backed out of similar commitments for orthodontics schools he helped start at Jacksonville University and University of Colorado Health Science Center. Lazzara has not returned repeated phone calls from the Sun.
Regents will take up the issue today as part of a hearing looking at cheating at UNLV's School of Dental Medicine and the failure of the UNLV's Institute for Security Studies to live up to expectations.
Henry's research, reviewed at the foundation's office this week by the Sun, raises several questions about the start-up Florida company's controversial practices and founder Lazzara's past business dealings. Reached by the Sun on Tuesday, the now-retired Henry said her investigation, which was limited to public documents, showed a need for more research into the company . She recommended rejecting Lazzara's proposal .
John Gallagher, executive director of the UNLV Foundation and the university's vice president of development, says he doesn't remember such a conclusion.
Henry's background check was not forwarded to regents when they approved the deal in May 2004. Then-UNLV President Carol Harter told regents that Gallagher's review had found Lazzara to be financially solid. It was unclear whether Harter herself saw Henry's research; calls to her this week were not returned.
It may be that Henry's research was never read by higher-ups until this week, following Sun inquiries. Henry received e-mail notification that at least four of her three-year-old e-mails to Gallagher were opened on Tuesday - after the Sun asked to review the foundation's research on the company, including any e-mails sent to Gallagher.
Gallagher told the Sun he resented the implication that he hadn't read the reports.
What is clear is that Henry's instincts proved correct: that the deal would bring UNLV bad publicity.
And Jim Rogers, chancellor of the Nevada System of Higher Education, is annoyed . The regents' approval of the pact was Rogers' first act as chancellor.
"One thing that you can count on is that we are going to follow this thing right down to the last comma and period, and that whatever there has got to be made public will be made public," he said after he was told of the Sun's findings. "We are a little shocked and distressed that we didn't know anything about this."
Henry's review of Lazzara and his past companies was part of normal foundation operations. Henry assembled her major findings into an e-mail to Gallagher on July 21, 2003, and sent it a second time on March 1, 2004, according to a copy provided by Gallagher on Tuesday.
In the July 21 summary, she highlighted items she believed warranted further investigation.
She recalls sending Gallagher a separate e-mail recommending against the proposal, as well as arguing aloud against the deal at foundation staff meetings. She retired in December 2004 and did not retain copies of her e-mails or her research.
Henry was surprised to get the notices Tuesday that her e-mails had finally been opened that same day . She said she now believes Gallagher read her recommendation against the proposal and deleted it, without looking at the research supporting her conclusion. The e-mail that Henry said contained her recommendation was not in the file reviewed by the Sun.
In her research, Henry found that Lazzara's first company, which managed orthodontics clinics, failed, and that his second, Orthodontics Center of America, was the subject of a number of critical media articles and financial analyses. The company also was the target of a class-action lawsuit.
Orthodontics Center of America filed for bankruptcy in March.
Lazzara started Orthodontics Education Company in conjunction with Imagine Orthodontics, another management company.
Henry wrote Gallagher that she didn't find anything about Lazzara's company. She does not appear to have investigated Imagine Orthodontics.
Henry's research went so far as to list Lazzara's known property (a $2 million home, a $700,000 beach house, several condos, luxury cars and fishing boats), and a penchant for celebrity memorabilia. A news article reported Lazzara had purchased a harmonica owned by Mick Jagger and a chair owned by Muhammad Ali.
Lazzara made a $3.5 million gift to Jacksonville University and a $3 million commitment to the University of Colorado to start orthodontics residencies there.
What bothered Henry the most, she said, were questions raised by orthodontists and dentists about the negative effect Lazzara's offer would have on the quality of the education. Orthodontists worried that because of its partnership with the company, UNLV would accept lesser-qualified students .
They also questioned whether faculty would want to work at a school so dominated by one company's students. Orthodontists compared the contracts students signed - promising to work for Lazzara for seven years in exchange for his picking up their education bills - to indentured servitude.
"I felt the protesters were right," Henry said in an interview this week. "I didn't think UNLV needed the bad publicity."
Regents voted to approve the partnership with the company in May 2004. Gallagher said he didn't think anything in Henry's research was of concern except the issues of student contracts and the admissions process. There was no way, he said, to dig deeper into the private company's finances. Henry said that in the past, when her research had warranted further investigation, UNLV turned to lawyers for help.
In Gallagher's mind, Henry's research showed a "guy who knows how to run a business" and a "high net worth individual." That is the information he forwarded to his superiors.
The UNLV Foundation counted more than $8 million of the promised money from the company as a pledge in its $500 million capital campaign. That includes the $3.5 million gift and some of the additional money that Lazzara promised to pay UNLV while it was training his future employees, Gallagher said. Those numbers will be adjusted downward if Lazzara does not produce the money, Gallagher said.
Gallagher and other UNLV officials say the partnership was worthwhile. Lazzara has said he may be able to give $300,000 in 12 $25,000 installments this year if UNLV does not dissolve the partnership.
"We're still north of $2 million ahead of the game from these guys," Gallagher said.
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