A look into the financial background of a Florida donor whose $95.7 million promise to the University of Colorado’s dental school has collapsed could have revealed some red flags.
Dr. Gasper Lazzara was on his third venture to create a national chain of orthodontics centers when he offered multimillion-dollar donations to CU and two other university orthodontics programs.
In 2001, two years before CU accepted Lazzara’s offer, a class-action lawsuit filed against one of his companies accused it of inflating the stock price through “false and misleading statements.”
And the financial stability of Lazzara’s second company, Orthodontic Centers of America, was questioned by Forbes magazine in 1996.
It’s unclear what CU officials knew about Lazzara before they accepted his 30-year donation promise, which kick-started an orthodontics program and helped build a new dental school.
Lazzara told CU dental school dean Denise Kassebaum in May that he could not make his July payment, pulling scholarship money for 12 orthodontics residents and leaving the school to search for other funds to meet its building payments. He had committed to $1.75 million, plus inflation and stipends for students, for 30 years.
CU officials said Friday that they investigated Lazzara’s background before entering into a business partnership with him, including looking at the financial health of his companies. But they would not release their findings, saying those were protected by attorney-client confidentiality laws.
“They did the standard due diligence,” Health Sciences Center spokeswoman Catherine Bedell said.
Regents did not have to approve the business agreement with Lazzara, which was signed by former CU president Betsy Hoffman. But regents were “fully briefed” on the arrangement, university spokeswoman Michele McKinney said.
CU did not insure the donation because that is not normal practice, she said.
“With any gift agreement, there is always risk,” McKinney said, adding that some gifts include fluctuating stock. “That’s the nature of that type of arrangement.”
One employee of the University of Nevada, Las Vegas Foundation questioned that school’s arrangement with Lazzara, which is now in limbo. Lazzara also backed out of an agreement at Jacksonville University in Florida, officials there said.
The UNLV Foundation employee gave officials the Forbes article in 2003, according to the Las Vegas Sun newspaper. The employee also told them about the 2001 lawsuit.
Forbes reported that Lazzara’s 1980 plan to operate a chain of dental practices in Florida malls failed. Then he created Orthodontic Centers of America, which grew to include hundreds of clinics across the country.
Lazzara took the company public in 1994. He received $62 million in stock sales overall, according to Forbes, and resigned in 2001.
The disposition of the 2001 suit could not be determined through court records available online.
But Orthodontic Centers of America and Lazzara’s former business partner are battling a similar 2005 class-action lawsuit that accuses them of violating U.S. Securities and Exchange Commission laws. The lawsuit alleges the company “engaged in a scheme to deceive the market,” misleading stockholders who suffered when prices crashed.
Lazzara donated $3 million to CU through the university’s foundation in 2003, making good on the first part of his $95.7 million promise. The former dean of Colorado’s dental school, Howard Landesman, nominated Lazzara to a three-year term on the CU Foundation’s board of trustees. Lazzara has not attended meetings in the past year, foundation spokesman Gigi Reynolds said.
Lazzara did not return calls seeking comment, but his son, John Lazzara, said they still were in negotiations with CU and did not want to abandon their commitment.
“It’s a fairly new relationship,” he said. “We have encountered some difficulty in terms of the execution of our vision of how the program was supposed to work.”
Lazzara agreed to give CU $1.75 million a year for 30 years to pay program fees for orthodontics residents and help the school meet its $1.6 million annual building payment.
Lazzara’s company, Orthodontics Education Co., based in Ponte Vedra Beach, Fla., was to fund tuition plus $28,800 annual stipends for 12 of the program’s 16 residents. In exchange, those students committed to working in one of his clinics for seven years.
CU calculates the total commitment at about $3 million a year in donations to the school and students, plus 2.5 percent in annual inflation.
Librarians Barry Osborne and Barbara Hudson contributed to this report.
Staff writer Jennifer Brown can be reached at 303-954-1593 or jenbrown@denverpost.com.
