Federal authorities are investigating a 2010 land deal for a Vermont college that was run at the time by Jane Sanders, the wife of Senator Bernie Sanders of Vermont. The deal ultimately contributed to her ouster as president of the college.
The deal involved a $10 million sale of about 33 acres of lakefront property by the Roman Catholic Diocese of Burlington to Burlington College — where Ms. Sanders was president — so the college could relocate and expand.
To finance the purchase, the college needed to borrow from a bank and obtain additional finances from the diocese, according to David V. Dunn, a Burlington College trustee at the time.
A public agency issued a bond, which the bank then bought. The college needed to demonstrate that it had the financial resources to pay the bank loan, which it did by saying that it would receive $2.6 million in donations and that it would also increase its enrollment, Mr. Dunn said. “Neither of those were true,” he said in an interview Monday.
The loan was granted and the purchase was then made based on Ms. Sanders’s assurance that the college would receive millions of dollars in pledged donations that it would use to repay the loan, according to Mr. Dunn and reports by VTDigger and other Vermont news organizations. But some of the pledges turned out to be overstated, and enrollment did not increase.
When the donations fell short of the $2.6 million promised by Ms. Sanders, she was forced to resign in 2011. Financially strapped, the college closed last year.
A federal law enforcement official, who declined to be identified because the matter was still under investigation, confirmed that federal authorities have been probing the deal. The Washington Post reported on Monday that the investigation has accelerated in recent months, with prosecutors hauling boxes of records from the college.
Jeff Weaver, a spokesman for Ms. Sanders and her husband, said that she was being scapegoated for the college’s failure. “This was a deal that was vetted by other senior members of the staff,” Mr. Weaver said. “It’s not like she just went in there and said, ‘Hey, I want to borrow $10 million, could you write me a check?’”
Initially, the board was not concerned about the financing of the deal, Mr. Dunn, the former trustee, said on Monday.
“At some point, it changed when the board was made aware that the rate of donations that were pledged was not near what was received,” Mr. Dunn said. “In addition to that, there was a large donor who had advised the board that the donation was actually an estate gift that was going to be paid when she died, and that she was feeling quite healthy.”
Mr. Dunn said that the overstatement of pledges was a factor in Ms. Sanders’s termination but that there were other management issues as well. “I don’t believe that there was fraud in terms of willful intent,” he said. “I believe that there was information that was misrepresented.”
On Monday, Mr. Weaver, the spokesman for Ms. Sanders, said, “The fact that the pledges did not necessarily come through does not mean they were not valid when made.”
Mr. Weaver also characterized the investigation as politically motivated. He said it had been set in motion by Brady Toensing, a lawyer who filed a complaint about the land deal with the United States Attorney’s Office for the District of Vermont in January 2016 on behalf of various Catholic parishioners. A spokesman for the office did not respond to a telephone message on Monday.
“We request an investigation into what appears to be federal loan fraud involving the sale of the Roman Catholic Diocese of Burlington headquarters,” to Burlington College, Mr. Toensing wrote in a letter to the federal prosecutor’s office.
“This apparent fraud resulted in as much as $2 million in losses to the Diocese and an unknown amount of loss to People’s United Bank, a federally financed financial institution,” the letter said. At the time, Mr. Toensing was the vice chairman for the Vermont Republican Party. He later became the state chairman for Donald J. Trump’s presidential campaign.
The Post reported that the diocese and the college had reached a settlement on the debt.
Mr. Toensing’s letter ended on a political note.
“Ms. Sanders and her husband have built political careers pontificating against corporate corruption and claiming to want to help the needy,” it said. Part of the mission of the diocese was to serve the needy, the letter continued, and the financial loss as a result of the failed real estate deal would “materially detract from this charitable work.”