By Shelby Brown and Kyeland Jackson–
An audit released June 8 found damning evidence against U of L’s foundation, revealing ULF overspent, hid transactions from its directors and tried hiding information from the media.
The audit, anticipated for months, gathered thousands of emails and more than a hundred interviews. It totals more than 138 pages, which U of L Board of Trustees Chair David Grissom said “paints a disturbing picture” of the prior administration.
“Let me be perfectly clear,” Grissom said in a statement. “The activities highlighted in this forensic investigation happened under previous university leadership and under a previous foundation board.”
Former U of L President James Ramsey, ousted by the board of trustees last July, was also president of the foundation until resigning in Sept. 2016. Before his resignation, Ramsey was under fire for reports of his deferred compensation. Between 2011 and 2016, those packages totaled $8.7 million.
Alvarez and Marsal, the auditing firm, said Ramsey refused in-person interviews and only answered their questions with written responses. The audit also said U of L’s IT department erased and “re-purposed” Ramsey’s hard drive before the audit was completed.
The full audit report is here.
Among numerous findings, the audit reported:
- A ULF holding company loaned $52.2 million to its own companies, money those subsidiaries will not likely repay
- ULF loaned $10 million to its research foundation which will not be repaid.
- The foundation spent over its endowment value by 7.48 percent. ULF administrators knew that overspending would reduce the endowment, but, despite advice by their financial advisors, didn’t make any substantive changes.
- The foundation spent all of a $17.6 fund within 10 years. Of that, $3.2 million paid executive compensation and $780,000 paid for football bowl game trips and other athletic expenses.
- ULF cashed in $42 million of the endowment to pay unbudgeted and over-budget spending, without notifying the full board.
- Endowment money was used to pay ULF employees $1.7 million in added compensation.
- The foundation’s deferred compensation plan cost more than $21.8 million. Just nine employees got $12.5 million of that total.
- ULF paid $10.3 million above market value for eight properties.
- ULF paid $30.1 million for properties not showing profits.
- The foundation spent $15.1 million for athletics and only received $11.6 million in return. But, athletics waived donations for season tickets the president’s office bought. ULF paid more than $800,000 yearly for season tickets to football and men’s basketball.
- Former Ramsey aide Kathleen Smith worked to ensure documents were harder for media to obtain.
- Some of Ramey’s purchases possibly broke school policies.
Interim President Greg Postel shared Grissom’s evaluation.
“This report should answer many questions about the past and close the door on a sad chapter in university history,” Postel said.
Grissom said the board is reviewing policies and procedures and could discuss legal action against previous administrators in weeks.
“The board has not yet determined what legal action, if any, should be taken as a result of the forensic investigation conclusions. However, I would anticipate that the board, after consulting with counsel, will, within the next couple of weeks, make that determination,” Grissom said.
Prior to releasing the audit, the board’s agenda included a Kentucky statute regarding exceptions to open meetings. Among other reasons, the statute says meetings are closed if “proposed or pending litigation is discussed.” Meetings are also closed if “discussions or hearings might lead to appointment, discipline or dismissal of an individual employee, member or student.”
“The steps we are currently taking will position us well for the future,” Postel said.
Foundation chairwoman Diane Medley said she would need time to “digest” the report before commenting further.
“I would point to the myriad changes we have undertaken at the foundation over the last few months as evidence that things have already changed for the better,” Medley said. “Particularly in terms of governance, financial management and overall transparency.”
The foundation has new leadership and a new board. It halted the deferred compensation plan, barred the UofL president from running the foundation and implemented transparency measures–like the immediate release of the entire audit online.
Three foundation meetings were scheduled June 9 but later canceled, citing a medical emergency in Medley’s family.
This story will be updated.