It's a delicate dance as Kaler courts wealthy alum Sanford

  • Article by: TONY KENNEDY , Star Tribune
  • Updated: April 7, 2013 - 6:30 AM

U President Eric Kaler says ties with alum and magnate T. Denny Sanford do not color hospital takeover talks.

When T. Denny Sanford visits the Masters this week at Augusta National Golf Club, University of Minnesota football coach Jerry Kill will be his special guest.

Late last year, when the retired banker celebrated his 77th birthday, university President Eric Kaler and his wife, Karen, joined Sanford’s family and friends at a party in Sioux Falls, S.D. And when U of M Athletic Director Norwood Teague toured the University of Nebraska’s state-of-the art athletic facilities, Sanford was at his side.

The handshakes and companionship are normal in the context of the U’s courtship of a wealthy alum — particularly a 1958 alumnus who is a self-made billionaire and now a major donor to the Golden Gopher Athletic Fund.

Now those close ties between university officials and Sanford are raising questions about the U’s impartiality in evaluating a potential takeover of the state’s vaunted U of M medical complex by Sanford Health, a fast-growing hospital chain launched by Sanford’s $400 million gift in 2007.

The issue is likely to surface Sunday at a public hearing called by Minnesota Attorney General Lori Swanson to examine merger talks between Sanford Health and Fairview Health Services, which controls the university medical center.

“Decisions about the future of the University of Minnesota hospital should be based on the best interests of the people and patients of Minnesota and nothing else,” Swanson said. “Athletic financial dealings should have no place whatsoever in discussions about the fate of the world-class university hospital.”

Tax-exempt Fairview, the Twin Cities’ second-largest chain of hospitals and clinics, has controlled the U’s hospital and clinics since 1997, but would relinquish that control to South Dakota-based Sanford if the U agrees to the merger. Merger negotiations were proceeding privately until Swanson disclosed them two weeks ago, saying the people of Minnesota have a right to discuss their interests in a merger before any deal is made.

Representatives from the U, Fairview and Sanford Health are expected to attend the State Capitol hearing.

In an interview last week, Kaler said he is keeping his conversations with T. Denny Sanford about athletic funding separate from any consideration of business proposals from Sanford Health.

“Clearly, there’s two conversations going on,” Kaler said. “I have absolutely no problem separating the two.”

Kelby Krabbenhoft, CEO of Sanford Health, also argued that the two matters are distinct.

“The [university] presidents are predictably very aggressive about accessing Denny, but we stay out of that for obvious complicating reasons,” Krabbenhoft said.

It may be difficult, however, to keep the two discussions separate.

E-mails obtained by the Star Tribune show that Kaler was also scheduled to initiate preliminary talks this past week in Sioux Falls with Krabbenhoft. Kaler canceled the meeting in part because of Swanson’s sudden inquiry, but he intends to reschedule even though he has proposed the university’s own takeover of Fairview — a move that would exclude Sanford.

A ‘Gopher forever’

In a March 25 e-mail to Kaler, Krabbenhoft didn’t mince words about his own enthusiasm for U of M athletics and possible funding. The e-mail provided a “discussion agenda” for the scheduled April 1 meeting at Sanford headquarters, including an item called “Denny Sanford and the U of M.” Another item of discussion was: “President Kaler-Sanford Health Trustee (post-Merger).”

Krabbenhoft offered to fly Kaler to and from Sioux Falls in a private plane for the meeting, and he summed up his e-mail with accolades for the U’s decision to fire basketball coach Tubby Smith. In the email, Krabbenhoft called himself a “Gopher forever” and said he also intended to write to “Norwood” about the basketball situation.

The CEO closed the e-mail with this personal “hope”: “that Sanford and Fairview come to a reality and I can get as deeply invested and supportive as I/we should be in the Athletic future of the University of Minnesota.”

Krabbenhoft explained in an interview that his e-mail referred to possible gifts to U of M athletic programs from the nonprofit company’s “community dividend” fund, which has been used to support other university athletic endeavors. He said it has always been separate from “Denny’s giving.”

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