A settlement in a lawsuit filed by Southwestern Baptist Theological Seminary and Baylor University returns control of the Harold E. Riley Foundation to the schools.

The Riley Foundation was founded by the late Harold E. Riley after his death in 2017. Assets included more than 1 million shares of Citizens, the insurance company he created. Citizens was valued at more than $300 million.

The Riley Foundation was established with Southwestern and Baylor as sole beneficiaries. Each school was granted three members on the foundation’s 11-member board. Payouts to the two schools in 2018 totaled $298,800.

In a June 2018 meeting, the board was downsized and the schools’ right to appoint board members was eliminated. The foundation’s tax status was changed from a public charity to a private foundation. In the settlement, the rights of the two institutions to appoint trustees to the Riley Foundation Board were restored.

The three Southwestern appointees serving on the foundation board agreed to the terms of the settlement and also agreed to resign from the board. They are Mike Hughes, foundation president; Charles Hott, chief financial officer; and Augie Boto, former executive vice president of the SBC Executive Committee.

Texas Attorney General Ken Paxton joined the lawsuit and alleged that Hughes and Hott “began to develop a scheme … to receive substantial salaries and benefits from this charitable foundation and find a way to change the structure of the foundation to the detriment of its sole charitable beneficiaries, Baylor and Southwestern.” Following testimony by Hughes that demonstrated former Southwestern President Paige Patterson’s involvement, the attorney general’s office issued a subpoena. The settlement was reached before Patterson was called to testify.

Information given to the attorney general indicated “efforts by Patterson and his associates to divert funds and redirect gifts away from the seminary to the Sandy Creek Foundation, his person nonprofit organization.”

According to a release from Southwestern, the seminary alleged that the Riley Foundation board led a “secret coup” in June 2018 in an “attempt to seize control of the foundation and its assets, which altered the foundation’s purpose and misappropriated assets worth millions of dollars.”

In the settlement, Hughes, Hott and Boto are prohibited from engaging in any efforts “designed to or will … discourage third parties” from financially supporting the schools or would “divert” gifts from the schools to third parties. The three also agreed “not to seek or accept any position or employment from or appointment in any fiduciary capacity, whether as an officer, director, or trustee at any Texas public and/or private nonprofit charitable organization” as well as all Southern Baptist entities.

Southwestern President Adam Greenway said the legal action was necessary to “protect charitable donors who deserve the confidence that the purpose of their generous gifts will be fulfilled with integrity and without interference.” Southwestern leaders indicated that although the civil claims were resolved by the settlement, the seminary would cooperate with state and federal officials “as they look into this and related matters.”

— With reporting from Southwestern Seminary staff and George Schroeder, associate vice president for convention news with the SBC Executive Committee.