A now-dismissed lawsuit sheds some light on the Karen Pletz case

One of the last burning legal embers of Karen Pletz’s reign over the Kansas City University of Medicine and Biosciences got stamped out a couple of weeks ago – at least for now.

Former KCUMB vice president of admissions Stephen Phipps dismissed his own lawsuit against the osteopathic university on September 26.

He had sued the school, claiming that KCUMB officials, including former board chairman Danny Weaver, had coerced him into lending Pletz, the former CEO of the university, thousands of dollars.

To be exact: $218,817.

Phipps thought he had to make the loan in order to keep his job.

The pressure from Weaver and from Doug Dalzell, KCUMB executive vice president, to extend Pletz huge sums of money from Phipps’ retirement account and through credit-card advances put him in a tough spot. Tough enough, he claims, that it led to his suffering a pair of strokes. (Dalzell, Kansas City eaters will recall, is father to Rob Dalzell, the restaurateur who closed his downtown establishments right after Pletz’s firing and skipped town.)

Phipps lost his job after suffering those strokes. He now lives in Boone County, Missouri.
When the Kansas City Business Journal contacted Phipps last year and asked why Pletz needed those loans, he replied, perhaps sardonically, “You’d have to ask her, and obviously you can’t.”

That’s because Pletz killed herself on November 22, 2011.

The Pletz saga was probably the biggest and most salacious business and civic scandal in Kansas City since the downfall of real-estate titan Kroh Brothers Development Co., in the late 1980s. In that case, commercial real-estate magnates and brothers George and Jack Kroh testified against each other in federal court. Their empire had fallen amid allegations that they had propped up their business through skulduggery, such as passing worthless checks, lying to investigators, and obtaining bogus personal loans for their wives.

Funny-money crimes also put Pletz in the glare of federal prosecutors after KCUMB fired her, late in 2009. The allegations told a brazen story: Prosecutors said Pletz had cooked up minutes to university board meetings that never happened, in order to make it seem as though university directors increased her salary. She was accused of submitting lavish expense reports for meetings with dignitaries that didn’t take place and of embezzling other university funds.

More troubling from a legal standpoint was a triple-dipping scheme in which she used university money to make a donation to Benedictine College, then asked that the university reimburse her for the donation as though she had paid it herself, and wrote it off on her personal taxes as her own charitable contribution.

Her suicide in Fort Lauderdale, Florida, averted what would have been a high-profile federal trial, one that almost certainly would have brought more titillating details to the surface.

But the claims in Phipps’ lawsuit paint the picture of a university administration run amok. Pletz was reputed to be a profligate spender, but the decision by university leaders to compel employees to extend personal loans to her is a head-scratcher.

Weaver became CEO after KCUMB jettisoned Pletz, but he has since left. He claims to have returned to his Florida medical practice, even though he purchased a house in Parkville not long before his departure.
Phipps’ lawsuit was dismissed by his attorney, Jarrett Johnson. Johnson tells The Pitch that sometimes plaintiffs’ lawsuits get dismissed as a routine matter, but in this case Phipps can refile the case within a year.

So Phipps’ claims may return to the Jackson County docket.

Phipps did try another route to recover his losses. He filed a claim in Pletz’s probate case for the amount of the loan. He claimed that it was secured by Pletz’s jewelry and other property from her Country Club Plaza condo. 

But Phipps is somewhere toward the back of a long line of people trying to get at what’s left of Pletz’s estate. The Internal Revenue Service filed a $342,481 lien against her estate. The Missouri Department of Revenue wants $62,871, which is less than what American Express is seeking ($77,534).

Even the poor River Club, an exclusive hangout for the city’s corporate elite that overlooks Case Park, wants its $1,140 cut.

Pletz’s estate, which is being administered by her husband, Jack Pletz, at least settled the biggest claim – the one belonging to KCUMB. The university wanted back $2.1 million, a figure that represents what officials there believe she stole. Jack Pletz and the university appear ready to settle the matter.
But that’s not necessarily the end of KCUMB’s Pletz-related lawsuits. Pletz’s criminal attorneys at the downtown law firm Rouse Hendricks German May are still trying to find a way for the university to repay her legal fees.

They twice argued, while Pletz was still alive, that the university had an obligation to pay her legal fees because she was an officer of the university. Such agreements are common in the corporate world, like the time Westar Energy had to pay millions in legal fees to lawyers of former executives David Wittig and Douglas Lake, even though they were both accused and, at one point, convicted of looting the Kansas utility. 

KCUMB says its bylaws are clear: It doesn’t have to cover Pletz’s legal fees.