By Joseph Lyell —
U of L and the U of L Foundation are suing former president and foundation chair James Ramsey and other former foundation officials for alleged breach of fiduciary duty, fraudulent appropriations and improper diversion of funds for personal gain.
Subjects of the litigation include: Ramsey, former foundation executive director Kathleen Smith, ex-directors Jason Tomlinson and Mike Curtin, former director and consultant Burt Deutsch and the Stites & Harbison Law Firm.
Board of trustees chair David Grissom said litigation is being pursued in civil court, but the university has been cooperating with law enforcement agencies in discussions about the case. He would not comment on the status or existence of criminal proceedings.
Lead litigation counsel for the university and foundation Andy Campbell said the evidence will show these parties were actively involved in the planning, execution and cover-up of the illegal misconduct that occurred under Ramsey.
Sitting trustee Brian Cromer is a lawyer at Stites & Harbison. Grissom said Cromer excused himself from this litigation matter to avoid a conflict of interest.
“One of the claims in the case involves excessive and unauthorized deferred compensation. The Stites firm was very involved in setting that up and structuring it,” Campbell said.
Campbell said emails show the firm structured deferred compensation of foundation administrators to avoid alerting the press.
“To conceal some $55 million in inappropriate expenditures, the defendants listed those as investments which were expected to receive a return, but in fact received very little or no return,” he said.
Campbell said Stites & Harbison crossed the line from providing legal consultation to maintaining an active role in planning and executing the unlawful actions that occurred under Ramsey.
In the wake of Ramsey’s reign, an audit published by Alvarez & Marsal on June 8, 2017, revealed that the U of L Foundation overspent, hid transactions from its directors and then tried to cover it up its mismanagement of the university’s endowment. Here are some highlights from the report:
- A ULF holding company loaned $52.2 million to its own companies, money those subsidiaries will likely not repay.
- 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.
- Endowment money was used to pay ULF employees $1.7 million in added compensation.
- ULF paid $10.3 million above market value for eight properties.
- ULF paid $30.1 million for properties not showing profits.
- Former executive director Kathleen Smith worked to ensure documents were harder for media to obtain.
Ramsey’s wrongdoings weren’t purely financial, though. Nearly a year before the audit, The Cardinal compiled a timeline of scandals under Ramsey.
At a faculty assembly meeting Feb. 23, foundation interim executive director Keith Sherman touted the organization’s reform and measures taken to increase transparency.
This article will be updated.
Photo by Arry Schofield / The Louisville Cardinal