University of Louisville trustees threaten to sue foundation ove - WDRB 41 Louisville News

University of Louisville trustees threaten to sue foundation over financial records

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University of Louisville Board of Trustees Chairman Larry Benz, Sept. 9, 2016 University of Louisville Board of Trustees Chairman Larry Benz, Sept. 9, 2016
Foundation Chairman Robert Hughes Foundation Chairman Robert Hughes
Trustee Ron Butt Trustee Ron Butt

LOUISVILLE, Ky. (WDRB) --  The University of Louisville is threatening to sue its own foundation over access to the nonprofit organization’s financial records – a situation one university trustee likened to “a child filing a lawsuit against their parent.”

The U of L Board of Trustees on Friday voted to empower its chairman to sue the foundation for refusing to turn over records despite “significant questions” about the foundation’s stewardship of funds.

Trustees Chairman Larry Benz said the university’s reputation has been “damaged severely” by a long-entrenched “culture of secrecy and lack of transparency” at the foundation, which is the custodian of donated funds to U of L and its $680 million endowment.

He cited recent decisions by two major donors to withhold funds from the foundation and said as many as 70 other donors have expressed similar concerns in recent days.

“Their message has been convincing and consistent: Clean up the foundation,” Benz told reporters following the meeting Friday. “It is an eyesore for the community.”

Robert Hughes, chairman of the foundation’s Board of Directors, said it would be a “waste” of both the university and foundation’s money for the two to enter a legal battle.

“I think reasonable people sitting around a table can come up with reasonable answers without the benefit of a lawsuit,” Hughes said.

Hughes said he hopes he and Benz can work out an agreement to avoid litigation, though they disagree on things like which board should choose an accounting firm to examine the foundation’s books.

Because he is also a trustee, Hughes was present Friday as the trustees debated suing the foundation for an hour and a half behind closed doors.

Hughes abstained from the vote to OK the lawsuit because he said he wanted input from the other foundation directors.

Fourteen of the 16 trustees present voted to authorize the lawsuit, including two trustees who, like Hughes, are also on the foundation’s board: Benz and Brucie Moore.

Trustee Ron Butt cast the only dissenting vote and said he would immediately resign from the board in protest of the “divisive” action. Butt blamed Benz for failing to reach an accord with the foundation.

“I just don’t agree with the premise of (legal action) if there is another avenue available, and there is,” he said.

James Ramsey, who resigned as university president on July 27, continues to run the foundation as its president, a job he hopes to keep until Jan. 1. Ramsey did not attend Friday’s meeting.

Benz and Acting U of L President Neville Pinto have called for the foundation board to fire Ramsey with no severance as allowed by his foundation employment contract.

The foundation board is scheduled to meet on Friday, Sept. 16.

Benz said the trustees demand the foundation follow a “pathway of complete restored confidence” that includes:

  • Subjecting itself to an examination by a “forensic” accounting firm hired by the trustees. Hughes has objected to the term “forensic” and said the foundation board – not the trustees – will hire a top-notch firm to examine the foundation and satisfy donor concerns.
  • The foundation should “respond appropriately” to the recommendations of Kentucky Auditor Mike Harmon’s office when its report is release as soon as October, Benz said.
  • The 15-member foundation board needs an overhaul, according to Benz, including six new members to replace two who have resigned and four whose terms have expired. Benz said new members would allow the foundation fundamental changes like separating the university and foundation presidencies. There is “no reason in the world” that one person should serve in both roles, as Ramsey did for 14 years before resigning from the university in July.  
  • Benz also demanded that the foundation turn over the records he has sought for months, despite Hughes’ assertion that the request calls for more than a million documents.

Benz said those records include more details about a $38 million loan from the university to the foundation that – as WDRB first reported earlier this year – was unilaterally approved by Ramsey without the knowledge of either board.

Benz also mentioned a WDRB report earlier this week showing that Ramsey signed a document last year – also without the approval of either board – giving him the power to award as much “deferred” pay from the foundation to his longtime former Chief of Staff Kathleen Smith on whatever terms he chooses.

Benz called the agreement “a very liberal contract that the foundation (board) never approved” and said it begs the question, “What else is out there?”

WDRB also reported last month that a handful of administrators in the university president’s office have for years gotten extra pay from a foundation subsidiary called University Holdings Inc., and officials have offered no explanation for the payments.

“Our foundation has multiple subsidiaries, holding companies (and) single-purpose entities that make absolutely no sense,” Benz said. “So, forensic accounting expertise is needed to navigate this complex weave that the foundation has created over the last several years.”

The foundation has been under heavy media scrutiny since early 2015, when a public tax return revealed its multi-million-dollar payments to Ramsey and other top U of L administrators

Here is the resolution authorizing a potential lawsuit:

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