I'm talking the top drawer here. Harvard, Princeton and Yale, the gold standard of American universities. They're being sued for alleged loan sharking.
The International Herald Tribune reports that Massachusetts developer Fred Fahey is suing the universities along with three other schools and two foundations that invested in Realty Financial Partners.
Fahey arranged to borrow about $10-million to finance a golf course community development. He borrowed the money from a lender called LR5-A. Realty Financial is a limited partner in LR5-A and the schools and foundations are limited partners in Realty Financial.
Fahey negotiated two loans with LR5-A. The largest, for $6.7-million, apparently came with a 42% interest rate. It's going to be tough to "pierce the corporate veil" once to get at Realty Financial and even harder to do it twice in order to get at the Ivy Leaguers but Fahey is determined to give it a shot.
Massachusetts law generally prohibits interest rates in excess of 20%.
It seems non-profits in the US have become fond of these sorts of investments. The Yale endowment gained 28 percent in the 12 months that ended June 30; Princeton's increased 25 percent; and Harvard's, 23 percent.
By the way, what sort of interest are you getting from your bank?