March 28 (Bloomberg) -- Old photographs adorn the mantelpiece in Lee John Mynhardt’s living room. In one, he’s standing beside his parents and sister. In another, he’s all smiles as he wraps his arms around some college buddies.
Today, Mynhardt, 28, is confined to a wheelchair, a quadriplegic unable to move from the chest down, burdened with medical expenses that at times have topped $10,000 a month. As a senior at Elon University in Elon, North Carolina, he broke his neck when he was grabbed from behind and dragged out of a keg party held by a chapter of one of the largest national fraternities, Lambda Chi Alpha Fraternity Inc.
Mynhardt says he is a casualty of the strenuous efforts by national fraternities such as Lambda Chi to avoid paying compensation for deaths and injuries at their local chapters. After he sued, Lambda Chi Alpha and its insurer won court rulings that they weren’t liable for his plight.
“As soon as there’s an incident, national fraternities start distancing themselves,” Mynhardt said at his Charlotte, North Carolina, home. “It’s irresponsible.”
National fraternities, which grant charters to campus chapters and collect dues from undergraduate members, have at least $170 million in annual revenue, along with valuable holdings ranging from real estate to Tiffany windows. The nonprofit organizations often protect their growing wealth by insulating themselves from legal and financial responsibility for a wave of alcohol and hazing-related deaths and injuries.
Besieged by lawsuits alleging negligent supervision, some of the biggest national fraternities have limited insurance coverage they provide to members, shielded funds in hard-to-tap foundations and cast blame on local chapters with few or no assets. Rather than intensify monitoring of branches, some fraternities have ceded daily supervision to undergraduates.
Such strategies are paying off. While at least 57 people have been killed or paralyzed since 2005 in incidents involving fraternities or their members, the low-profile national bodies have enjoyed increases of 13 percent in revenue and 29 percent in membership.
“It’s a curious business model,” said Peter Lake, a professor at Stetson University College of Law in Tampa, Florida, who specializes in higher-education law. “You’re establishing a national brand and franchising. And then when your core customers are in a pinch, you’re turning away.”
James Ewbank, a lawyer who has represented at least 10 national fraternities, urged them at a conference last summer to deflect blame when they are sued by bringing cases against chapter members and colleges.
“Share the fun,” he said, according to an outline of his remarks posted online by the Fraternity Executives Association.
The comment was hyperbole, Ewbank said in an interview.
While Cornell University in Ithaca, New York, and Trinity College in Hartford, Connecticut, have begun cracking down on local chapters, many schools have found it futile to prod national fraternities to take control, said Brett Sokolow, who has advised Lambda and other fraternities on risk management.
“Colleges have been trying to get a handle on these issues for a long time, and they haven’t seen nationals step up so they figure why should it change now,” Sokolow said.
The national fraternities’ success in avoiding liability reinforces their “intransigence,” he said. “They want to wash their hands of the problem and say it’s their brothers’ fault, it’s their chapters’ fault. These are million-dollar organizations that sponsor activities that are harmful.”
There are at least 75 national fraternities with branches on college campuses across the U.S. Some have fewer than 10 chapters while others have more than 200. Membership is almost all male. Presidents Ronald Reagan, George W. Bush, George H.W. Bush and Bill Clinton all belonged to fraternities.
Membership in national fraternities increased to 327,260 in 2011 from 253,148 in 2005, according to the North-American Interfraternity Conference, a trade group. Revenue from dues and other sources for national fraternities and their related charitable groups rose to at least $170 million in 2010 from about $150 million in 2005, Internal Revenue Service filings show. Local chapters earned many tens of millions more. Fraternities own and operate more than $3 billion in real estate, according to the Fraternal Government Relations Coalition, a lobbying group.
Reflecting a national surge in binge drinking by college students, fraternity mayhem today can be far more dangerous than the hijinks celebrated in the 1978 movie “Animal House.” Since 2005, 52 students died and five were paralyzed in incidents linked to fraternities, according to data compiled by Bloomberg from lawsuits, news accounts and interviews. Nine fraternities, including some of the largest, are linked to 38 of the 57 cases, or two-thirds.
Eight students died in both 2011 and 2012. Those are the most fatalities in at least a decade, according to Hank Nuwer, a professor at Franklin College in Franklin, Indiana, and author of four books on hazing. Two have died this year.
The risk of fraternity life is so great that only four insurers cover college-age men living together in chapter houses, said Ned Kirklin, who sells fraternity insurance for a unit of Willis & Co. To make coverage affordable, a group of fraternities self-insures part of the risk.
At colleges, which value fraternities as a lure to prospective students and breeding ground of generous alumni, it often takes a death or serious injury to spur discipline. California State University in Chico temporarily suspended Greek life in November after a senior pledge drank himself to death.
National fraternities don’t always avoid liability. After becoming intoxicated at a 2011 New Year’s Eve party at the University of Pennsylvania’s Phi Kappa Sigma House, 20-year-old Matthew Crozier fell over a railing, hit his head and died. His parents received a $3 million settlement from the national fraternity, based in Chester Springs, Pennsylvania, and from a related corporation that owned the chapter house.
Greek life, with its secret rituals and traditions, fosters leadership and brotherhood, fraternity leaders said.
“Out of all the organizations on a college campus, fraternities and sororities are founded on the concept of high values and moral leadership,” said Rick Barnes, a board member of the Association of Fraternal Leadership & Values in Fort Collins, Colorado.
Some deaths and injuries, which took place off-campus or at unofficial events, shouldn’t be counted as fraternity-related, the leaders said. Most national fraternities haven’t had any fatal incidents at their chapters since 2005.
National fraternities are not to blame when members at faraway branches breach rules against hazing and drinking, their executives said. Many dispatch representatives to teach chapters about risk management. They reinforce the lessons at annual conventions and after fatalities and serious injuries.
Still, national fraternities often take a hands-off approach to daily supervision. Rather than hire graduate students or older adults as live-in advisers, most rely on undergraduates to ensure that fraternity rules are followed, said Charles Eberly, former president of the Center for the Study of the College Fraternity, based at Indiana University.
In 2009, Pennsylvania State University freshman Joseph Dado died after drinking beer from an open tub at an Alpha Tau Omega party. Even so, the national fraternity’s lawyer recommended against active supervision of local chapters in a 2012 article.
“The role of a national fraternal organization should be predominately passive in its supervision and involvement in the daily activities of local chapters,” G. Coble Caperton, general counsel for Alpha Tau Omega, wrote in the newsletter Fraternal Law. The reason: Most courts won’t hold nationals liable if they don’t take steps creating a legal duty to supervise chapters.
Caperton said in an interview that his fraternity punishes chapters for violating rules and spends “enormous” sums educating members.
“There’s no way we could have a person on-site running these 135 chapters,” he said. “We are anything but passive in preventing alcohol abuse, drug abuse or hazing.”
Some national fraternities may be reluctant to restrict drinking for fear of losing dues-paying members. Indianapolis-based Theta Chi learned that lesson after it joined a small group of fraternities that prohibit alcohol in chapter houses.
“It was the best thing we ever did,” said Dave Westol, former executive director of Theta Chi. “You may have five knuckleheads who won’t join, and the five who replace them” will stay out of trouble.
Theta Chi membership stood at 5,911 in 1998, when the fraternity voted to go alcohol-free. By 2003, when the ban took effect, it had fallen to 5,126. Westol left in 2006, with membership down to 4,664. In 2010, the national board abandoned the policy. With drinking permitted, membership has rebounded to about 6,700 today.
Declining membership played no role in reversing the alcohol-free policy, Theta Chi Executive Director Michael Mayer said in an e-mail.
Philip Dhanens died of alcohol poisoning after he and other freshmen were locked in a room last August at a Theta Chi chapter at Fresno State University in California until they finished bottles of vodka and tequila.
The national fraternity should have monitored the local chapter more closely, said his mother, Diane Dhanens. She and her husband filed a lawsuit this month against the national fraternity and the chapter.
Fraternity leaders say, “‘We’ll let you wear Theta Chi,’” she said. “But when something bad happens, ‘We’re out of here.’”
Theta Chi said in a statement that it revoked the charter of the Fresno State chapter and that it has “strict guidelines prohibiting underage alcohol consumption.”
Some national fraternities have segregated assets to avoid liability in high-profile cases. Based in Evanston, Illinois, where its headquarters contains a priceless collection of stained-glass Tiffany windows, Sigma Alpha Epsilon has been associated with eight deaths since 2005, the most of any fraternity. Most recently, University of Idaho freshman Joseph Wiederrick, who had been drinking at an SAE party on a Saturday night in January, got lost on his way back to his dorm. The 18-year-old wandered at least five miles, stumbled off an embankment, and froze to death under a bridge.
SAE changed its bylaws in March 2011, a month after the hazing death of Cornell University sophomore George Desdunes at the SAE chapter there. SAE pledges kidnapped Desdunes, blindfolded him, tied him up and forced him to drink so much alcohol that he died, according to his family.
Cornell withdrew recognition of the chapter, which was convicted in a county court of violating anti-hazing laws and fined $12,000, and the Desdunes family sued Sigma Alpha Epsilon for $25 million. The case is pending.
SAE’s revised bylaws state that its related charitable foundation and housing corporation are “not part” of the national organization.
“They’re attempting to have these lines drawn so it’s harder to get to those assets,” said Douglas Fierberg, a Washington lawyer who represents Desdunes’s family.
Today, the Sigma Alpha Epsilon Foundation and the SAE Financial and Housing Corp., which together earned $4.6 million in 2010 revenue, are seeking dismissal from the lawsuit. They say they’re separate entities from the national fraternity, which had $5.5 million in revenue.
SAE lawyer Frank Ginocchio declined to comment.
Mynhardt, whose neck was broken at the Elon fraternity party, visited the school for the first time in 2003, as a prospective student. Born in Phoenix, he had moved as a child to Botswana, where his father was a pilot. He attended boarding school in South Africa and opted for college in the U.S. to study business.
Elon, with its Georgian-style buildings, expansive fields and innumerable oak trees on 500-plus acres, appealed to him. Plus, it had a contingent of South Africans and offered rugby, which the six-footer had played since childhood.
On a campus tour, his guide touted Elon’s robust Greek life. Mynhardt went to a fraternity party, where the 17-year-old was served beer.
“They’re telling us 40 percent of the campus was Greek,” he recalled. “It was a huge selling point.”
Greek life is ingrained at Elon, which dominates a town of 9,500 in a region once populated by textile mills. An up-and-coming university that draws three-fourths of its students from outside North Carolina, Elon is home to 23 fraternities and sororities. A quarter of the 5,400 undergraduates are members, according to the university.
“Almost all the parties on the weekend are Greek related,” said Al Drago, a sophomore.
Elon promotes its Greek life, saying on its website that “the fraternity and sorority community at Elon has enhanced the lives of thousands of men and women” and added “many valuable dimensions” to the university.
The school’s bylaws state that students under 21 who consume alcohol will be punished and that fraternity events on or off campus must comply. In practice, it’s easier for Elon to enforce rules for on-campus fraternity and sorority houses, which it owns. Private off-campus parties often fall outside its purview, said Dean of Students G. Smith Jackson.
“It’s private property,” Jackson said. “It’s not our jurisdiction to go in and start confronting students.”
That’s why many Elon students go to parties at off-campus residences rented by members of various fraternities, and known by colorful nicknames, such as “The Plantation,” “The Museum,” and “The Bullpen.”
Mynhardt was injured at an off-campus party on Feb. 3, 2007, at 211 North Lee, a one-story red brick house with bushes in front and a barbecue grill on the side. Three Lambda Chi brothers, including John “Jack” Cassady, vice-president of the fraternity chapter, shared the rental, known as “211,” which had been passed for years from one group of Lambda brothers to the next, according to court records.
Elon’s Lambda chapter had a turbulent past. Since 2005, Elon had cited it for breaching school policy at on-campus and off-campus events, placed it on probation and voiced concern about drug use and hazing, court records show.
The chapter’s risk manager, a 20-year-old, was responsible for enforcing the rules set by the national fraternity, based in Indianapolis. Those rules state that no chapter may provide unrestricted access to alcohol and that chapter funds may not be used to buy it. Around that time, each chapter member paid annual dues of $400, including $65 to the national organization and $93 to an insurance brokerage that the national co-owned.
Carolyn Whittier, Elon’s then director of Greek Life, warned a Lambda national executive in August 2006 that there were problems at the chapter, including drug use.
“It is highly advised that the Grand High Zeta” -- the national’s board of directors -- place the chapter under alumni control, Whittier wrote. Lambda didn’t follow her advice. It did send a representative to meet with the Elon chapter that November.
Lambda, which had 2011 revenue of $7.5 million for the national and related foundation, has had three deaths linked to chapter events since 2005. Tad Lichtenauer, a spokesman for Lambda, declined to comment.
On the Friday night of the party, Mynhardt started drinking at friends’ apartments, police records show. Then he and some classmates drank at two local bars. At one, Mynhardt met a sophomore, Mary Kelly. They left the pub at 2 a.m., closing time, and joined the crowd at “211.”
By then, more than 15 of the Lambda chapter’s 23 members had made their way to the keg party, court records show. The next day was Lambda’s “wing bowl” -- a chicken-eating gala that was the year’s top recruiting event -- and potential recruits had come by.
Partygoers danced and played beer pong in a room bedecked with Lambda’s Greek letters and signature cross with crescent. Sober brothers stood ready to drive drunk ones home, according to court records.
Mynhardt and Kelly soon locked themselves in a bathroom, kissing, according to court records. After several minutes, someone began banging on the door. Mynhardt stepped out and said they were leaving.
With that, Cassady’s friend Clinton Blackburn, a student at the University of North Carolina at Greensboro who was visiting for the weekend, grabbed Mynhardt in a full-nelson wrestling pose. Blackburn later told police that he and Cassady wanted to throw Mynhardt out because Cassady needed to go to the bathroom and Mynhardt wouldn’t unlock the door.
Blackburn, who was drinking beer that night, put his arms under Mynhardt’s arms and his hands behind Mynhardt’s head, Kelly told police. Blackburn, then 22, pushed Mynhardt’s head forward, according to police reports.
“We’re leaving,” Mynhardt protested as he lost control of his legs and collapsed to the floor. Blackburn fell on top of him while someone else kicked him, Cassady said, according to court records. Kelly went to Mynhardt’s side.
“I can’t feel my legs,” Mynhardt exclaimed.
Cassady, then a month shy of his 21st birthday, had drunk about eight beers, according to court documents. He and others grabbed Mynhardt by the legs, dragged him through the kitchen and dumped him outside, aggravating his injury. Kelly urged them to bring him inside.
“Call 9-1-1,” Mynhardt shouted, cursing.
When police arrived, a panicked Mynhardt asked if he was paralyzed. Cassady told an officer he was “worried” about his fraternity chapter, according to a police report. Cassady and Blackburn were arrested for serious assault. The charges were dismissed in 2010 after Mynhardt chose not to pursue them.
“It was a terrible, terrible accident,” Blackburn said. “I just pray for Lee every day and hope he comes out of this thing alright.”
Kelly declined to comment.
Mynhardt was flown to the UNC Medical Center in Chapel Hill, where he underwent surgery. His lungs collapsed, almost killing him.
While he once contemplated suicide, “it’s not something I would ever do,” he said. “You either put up with it and do your best, or you give up. I was 21 turning 22 at the time, and I figured I had a lot more going for me.”
Mynhardt spent five years as an inpatient and outpatient at Shepherd Center, a rehabilitation hospital in Atlanta. He learned to use his biceps, which he can still control, to offset the paralysis of his triceps. Eating, sleeping, controlling pain, using a catheter to urinate -- everything was new.
“To get that small bit of independence, you work harder than anything you’ve ever worked at in your life,” he said.
Anticipating millions of dollars in lifelong medical bills, Mynhardt filed suit in a North Carolina superior court in 2008. He claimed that the university failed to police a dangerous fraternity and that the Lambda national ignored warnings about its troubled chapter. He also sued the chapter, six of its members and two other partygoers.
“Elon and the national fraternity ignored a known risk,” said Michael Petty, one of Mynhardt’s lawyers. “The university was very involved in its fraternities, and Lambda should have been.”
A key issue in the case was whether the fraternity sponsored the off-campus party. Cassady, the local’s vice president, testified in a deposition that it was an informal chapter party intended as a warm-up for the next day’s “wing bowl” recruiting.
Lambda argued that it had no day-to-day control over the Elon chapter and no role in organizing a party where its rules were broken. Its lawyers cited Lambda’s extensive risk-management rules and said the national organization had previously sent delegates to brief members on them.
Judge Howard Manning dismissed Mynhardt’s claims against Elon and the Lambda national in 2011, and his ruling was upheld on appeal last May. The fraternity hadn’t assumed a “duty to protect” the chapter or its members, the appeals judges said.
“We want to encourage universities and Greek organizations to adopt policies to curb underage drinking and drinking-related injuries,” the judges said. That “does not make a university or Greek organization an insurer of every student, member or guest.”
Courts in 12 other states have issued similar rulings clearing nationals of liability for local wrongdoing, Lambda said in court documents.
Mynhardt’s lawsuit still had life. Because Cassady had testified that the party was a fraternity event, a judge allowed him to pursue his case against the chapter itself. If Mynhardt were to win, he hoped to collect from Lambda’s insurance company, which covered the chapters and individual members.
Instead, the national fraternity’s insurer, Liberty Corporate Capital Ltd., sought to walk away from the tragedy. It filed suit, seeking permission not to cover the chapter or several members. Liberty is increasingly filing and winning such cases, court records show.
Lambda chapters and members can’t choose their insurer. The fraternity requires them to buy insurance through James R. Favor & Co., a brokerage based in Aurora, Colorado, that is owned by Lambda and other national organizations. Favor places the insurance with Liberty.
That coverage has narrowed in scope. In 1996, Lambda reduced coverage for chapters and members to “end the subsidization of inappropriate conduct,” James R. Favor, the brokerage’s late founder, said in a 2012 affidavit in Mynhardt’s case. As a result, Lambda “has controlled its rising cost of insurance premiums.”
The restricted overage is of dubious benefit to chapters and their members, said Jeffrey Stempel, who teaches insurance law at the William S. Boyd School of Law at the University of Nevada, Las Vegas and reviewed the Lambda policy.
“This strikes me as being perilously close to saying we cover you unless you’re bad,” Stempel said.
Liberty Corporate argued that the events at “211” weren’t covered because they violated Lambda policies, including rules barring kegs, underage drinking and public access to alcohol, and requiring professional security at parties.
“It’s terrible when someone is injured, but it doesn’t mean we should be held liable” if the national fraternity isn’t negligent, said Jon Pavey, former chairman of James R. Favor.
A federal judge in Greensboro, North Carolina, agreed, ruling in August that Liberty need not provide coverage for the chapter or members. Since the chapter has virtually no assets, the decision meant Mynhardt couldn’t collect damages from it even if he won his case, said Joseph Williford, the chapter’s lawyer.
Mynhardt appealed the ruling. He reached settlements with half a dozen students, including Cassady, who were covered under their parents’ homeowners’ insurance. Mynhardt, who Williford said was seeking as much as $20 million, collected less than $2 million from the parents’ policies.
Tapping the parents’ insurance “is particularly distasteful when the national fraternity requires every single member to contribute to the purchase of liability insurance that is very unlikely ever to pay out a dime,” said Richard Pinto, Cassady’s lawyer.
According to court records, Mynhardt dismissed his appeal after the insurer, Liberty, agreed to a confidential settlement. Liberty’s lawyer, Nolan Burkhouse, acknowledged it made a five-figure payment before declining further comment.
“It’s a horrible, horrible result,” said Petty, who declined to comment on the settlement amounts.
Mynhardt’s medical and rehabilitation costs, including onetime expenses such as a $70,000 specially outfitted van, have already exceeded $1 million, Mynhardt said. The family has dipped into savings to pay costs not covered by the insurance settlements.
“Lee’s health comes first,” said his father, Louis Mynhardt.
Despite Mynhardt’s misfortune, off-campus frat parties still dominate Elon’s social scene. At midnight one recent Saturday, girls in short skirts and guys in tropical shirts braved the 44-degree temperature to gather at a house rented by members of one fraternity. Elon’s student-run “Safe Ride” van ferried some guests to the door. The keg was out back and the dancing inside, with a strobe light pulsing.
Only members, friends and women were welcome, said a fraternity brother, beer cup in hand. Anyone else, he said, should find another party.
Mynhardt moved into a ranch house in Charlotte last year near Carolinas Medical Center, where he had been hospitalized before. He has friends nearby and an aide living with him full-time. Another visits part-time. Every morning, an aide sits him up in bed, moves him to his wheelchair, transports him to the shower, dresses him and helps with dozens of activities he can’t do alone.
Seeking some measure of independence, Mynhardt is now in his first year at Charlotte School of Law. Unable to use his fingers, he takes notes with a stylus attached to his palm and a touch-pad computer.
“I believe a lot of positive things can come out of fraternities,” he said. “But if they’re not run correctly, things are going to get out of control.”
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