When Fisk University officials agreed to hand over a Georgia O’Keeffe painting to a Santa Fe, N.M., museum for $7 million a few months ago, few in the art world understood why. Sure, the nearly 140-year-old historically black college has serious financial troubles—by the end of fiscal year 2005, it was $3.5 million in the hole. And the art Fisk wants to sell, specifically O’Keeffe’s “Radiator Building—Night, New York” and Marsden Hartley’s “Painting No. 3,” is the university’s most valuable asset.

Fisk acquired the paintings from O’Keeffe, who in 1949 gave the university a portion of the vast collection owned by her late husband, Alfred Stieglitz. But when Fisk sought a court ruling to sell the two paintings in December 2005, the Georgia O’Keeffe Museum in Santa Fe quickly intervened to block the sale with claims that Fisk would violate a no-sale agreement it made with O’Keeffe.

After a Davidson County judge threw out Fisk’s motion to dismiss the museum’s lawsuit, Fisk agreed in February 2007 to what droves of art critics have since called a very bad deal: the university would sell “Radiator Building” to the museum for $7 million, and the museum would in turn allow Fisk to sell the Hartley on the open market. Fisk representatives say the university was getting “everything they wanted,” even though Christie’s had appraised “Radiator Building” at $8.5 million.

Fisk attorney Mike Norton says the university thought the painting could have been worth as much as $10 million, and Saul Cohen, chairman of the O’Keeffe Museum’s board, says Fisk officials tried to drive up the museum’s offer to at least $15 million. Somehow, in the end, Norton says Fisk saw the $7 million as merely a “slight discount.”

Tennessee Attorney General Robert Cooper was not so convinced. Charged with the task of approving the settlement (his office supervises charitable gifts in the state), Cooper put on the brakes and asked Fisk to take 30 days to find better options—namely, a donor willing to pay to keep the paintings on campus. By the end of its search, Fisk had several offers of $25 million for “Radiator Building,” and the absurdity of this deal seemed undeniable. Well, except to Fisk. The university had already signed the deal and was sticking to it—for better or worse.

Cooper turned down the settlement last week, saying the $7 million offer was “simply too deep a discount from the apparent market value.” He went on to explain that the bargain-basement price would “represent both an artistic and financial loss for Fisk.”

Indeed, for a university that’s battled financial doom for decades, the difference between $7 million and $25 million is colossal. In fact, it’s more than two-and-a-half times more than the estimated $7 million Fisk has in its endowment now. Yet, before Cooper’s decision, when the Scene asked Fisk spokesman Ken West how losing that much money would hurt the university, West simply said, “Obviously, it’s probably better to have more [money].”

Probably? But that’s all university officials would say. They didn’t say they wanted out—at least not in any disclosed reports they made to Cooper. And they definitely wouldn’t talk to the Scene about why they were still touting the merit of the settlement, or even about why they signed it in the first place.

At least, O’Leary wasn’t talking. Three weeks worth of requests to speak to the school’s president went largely unanswered. When asked why the Scene’s initial three requests to speak to O’Leary were ignored, West said the president was “on a trip.”

Before the attorney general called the whole thing off, the Scene asked Norton if he thought the deal was fair. “No,” he said. “Now that [Fisk is] getting bids upwards of $20 million, it seems all but reasonable.” He went on to say that Fisk wouldn’t be “terribly disappointed” if the attorney general turned down the deal, raising even more questions as to why O’Leary signed off on the settlement in the first place. Or why, according to Fisk officials, the Fisk board of trustees unanimously approved it.

West wouldn’t comment on whether Fisk’s financial problems could’ve driven school officials to rush into the settlement before determining the true worth of “Radiator Building,” but he did say expediency was a factor in the decision. “There’s no regret in trying to expedite a legal process for a university that is trying to increase its financial wherewithal,” West says. Norton adds that “the $1.5 million [loss] did not look like a big price to pay to get it resolved immediately.”

Fisk officials also contend that they had no idea what “Radiator Building” was worth in the first place. Fisk has never quite known what to do with the Stieglitz Collection. While they went to great lengths to turn a building constructed in 1888 and used as a gymnasium into the Van Vechten Gallery to house the works, the space has always been sub-par. And Fisk knows it.

In the ’70s, O’Keeffe paid to send the entire collection to New York for restoration out of frustration with Fisk’s handling—or rather, its mishandling—of the art. On several occasions before her death, she donated tens of thousands of dollars just to make sure the art was properly maintained. It wasn’t, and the whole collection had to be moved to the Frist Center.

So it’s no surprise that university officials might not have known what “Radiator Building” would’ve actually sold for, but there’s no indication that they made any effort to figure it out. West says he isn’t sure if Fisk consulted any outside art experts about the $7 million offer. West also wouldn’t comment on what Fisk did, outside of consulting Christie’s estimate, to weigh the museum’s offer because he was “not involved” in the process.

With the case returning to court now, it seems Fisk’s chances to prevail over the O’Keeffe Museum are not so good. Fisk’s main argument in court has been that “Radiator Building” is a personal O’Keeffe painting—not part of the Stieglitz Collection—and not subject to the no-sale condition. But the director of the university’s galleries from 1992 to ’99, Kevin Grogan, has testified that “Radiator Building” is indeed part of the main collection. Even Norton says Fisk’s claim isn’t “as important as you think.”

Fisk hasn’t got money to blow on litigation. Norton says the settlement was appealing because Fisk knew it could burn a lot of time and money in court and still get stuck not being able to sell any paintings. “When you’re in court, even if your chances of winning are three in four, would you take $10 today instead of $20 or $30 three years from now?” he says.

That’s why Fisk said in a statement last week that officials are now “hopeful that the museum will consider other settlement arrangements for the litigation.” There’s still no word on how the O’Keeffe Museum is going to proceed. Cohen said all along that there is little sense in the museum going to court. If the museum did win the case, which is now scheduled for mid-July, he says Fisk wouldn’t be able to sell any of the Stieglitz works—and all the museum would win is the right to not hang “Radiator Building” on its wall.