The Leavitts specifically asked the Southern Utah Foundation (whose board member Steven Bennion was also president of Southern Utah University) for the arrangement.
The really interesting part? One member of the Leavitt family involved in these decisions is Mike Leavitt, the U.S. Secretary of Health and Human Services in the Bush administration (and former Governor of Utah).
The Leavitt Foundation had already been under scrutiny because the Leavitt family had made large donations but the Foundation had paid out little to charity until last year.
The IRS is investigating. The Leavitts, the foundation administrators, and the university say they see nothing wrong with the arrangement, and a Leavitt spokeswoman says that the Senate Finance Committee reviewed this arrangement as part of Leavitt's confirmation last year.
This kind of arrangement is not surprising to me given what I've heard about other Mormon business arrangements, which commonly use family-owned companies and partnerships to do business with each other in order to gain tax advantages.
(Hat tip to Trent Stamp at Charity Navigator.)