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Board of Regents Files Lawsuit Against Medical College Foundation

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Atlanta — October 20, 2009

The Board of Regents of the University System of Georgia (USG) announced today that it has filed a lawsuit against the Medical College of Georgia Foundation after many months of attempting to resolve its differences with the Foundation. The lawsuit was filed by the attorney general of Georgia in the Superior Court of Richmond County.

Strains in the relationship were first made public in the summer of 2008 when the regents terminated the Cooperative Organization status of the Foundation. The president of the Medical College of Georgia (MCG), Dr. Daniel Rahn, and others also resigned from the Foundation’s board in subsequent months. The suit contends that the Foundation has refused to cease using the name Medical College of Georgia as it was contractually bound to do and also required to do under the trademark laws of the United States and the State of Georgia.

Additionally, the Foundation is alleged to have violated its fiduciary responsibilities to the Medical College under its Articles of Incorporation and Bylaws; has failed and refused to align its fundraising priorities and efforts with those of the Medical College and the Board of Regents; has refused to furnish, in a timely manner, financial information necessary for MCG’s budgeting and planning purposes; has violated Georgia’s Unfair Trade Practices Act; and otherwise has acted in a manner contrary to the best interests of the Medical College as required by the Foundation’s articles.

The lawsuit also notes that the Cooperative Organization Agreement expressly provided that, on termination, the Foundation was prohibited from using the MCG name, symbols and trademarks and that a separate agreement known as the “Affiliation Agreement” provided that use of the Medical College name, trademark and symbols was subject to the approval of the MCG president.

According to the lawsuit, the Foundation acknowledged its obligation to cease using the name in correspondence after the termination of the formal relationship between the entities and even filed papers to change its name in June, 2009, only to change it back to the Medical College of Georgia Foundation, Inc., in August 2009.

The suit also contends that the Foundations’ Articles of Incorporation and Bylaws require it to supplement and enhance actions taken by the Board of Regents to support MCG, but today, the Foundation makes no effort to follow the fundraising priorities of the Regents and MCG. Rather, according to the lawsuit, the Foundation independently determines its fundraising priorities without regard to the most important needs of MCG. The lawsuit contends that the failure of the Foundation to collaborate and cooperate with MCG and the Board of Regents is harmful to MCG and not in its best interests and could jeopardize MCG’s accreditation and its fundraising capacity.

Formal and informal discussions and negotiations following the action terminating the Foundation’s Cooperative Organization status were intensified in the months leading up to the filing of the lawsuit. Representatives of the Board of Regents, MCG, the Attorney General’s office and the Foundation were involved in those discussions. These efforts have not been successful.

The Board of Regents now believes the courts provide the only means of resolving the relationship between MCG and the Foundation.

Since August 2008, the Board of Regents and MCG have been affiliated with the Georgia Health Sciences University Foundation, a cooperative organization operating within the Board of Regents’ guidelines.

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