University of Louisville to spend up to $400,000 for more 'forensic' work on troubled foundation
The University of Louisville will spend up to $400,000 on follow-up work to last month’s blistering forensic report detailing millions of dollars of excessive spending by the university’s nonprofit foundation.
LOUISVILLE, Ky. (WDRB) -- The University of Louisville will spend up to $400,000 on follow-up work to last month’s blistering forensic report detailing millions of dollars of excessive spending by the university’s nonprofit foundation during former President James Ramsey’s tenure.
Kentucky lawmakers on Tuesday approved the university’s request to increase its contract with Chicago-based Alvarez & Marsal – which completed the June 8 forensic report -- to $2.16 million, up from $1.76 million previously.
The additional work comes as the governing boards of the university and foundation continue to weigh whether to file one or more lawsuits aimed recovering some of the money the foundation lost due to the mismanagement detailed in the report.
On Tuesday, an attorney for the university provided the first public estimate of the losses officials believe the foundation incurred -- $40 million to $100 million.
Craig Dilger, a contracted attorney for U of L’s board of trustees, told the General Assembly’s contract review committee that he pegs the losses at $60 million to $65 million, though varying opinions account for the wide range.
The forensic report detailed how the foundation – charitable nonprofit that exists to serve U of L --depleted the university’s endowment to fund excessive spending on things ranging from extra administrator compensation to real estate to football tickets.
Confirming previous WDRB reporting, Alvarez & Marsal said the foundation overstated the value of the endowment – an $800 million fund that is supposed to last forever – by up to $72 million.
The foundation regularly borrowed from the endowment to pay expenses, including $1.7 million in extra employee salaries through a holding company the foundation created.
The report said the foundation withdrew an additional $42 million from the endowment to fund excessive or unbudgeted spending – including a deferred compensation program for administrators that cost nearly $22 million and didn’t appear to be approved the organization’s board.
The General Assembly’s contract review committee on Tuesday approved the $400,000 increase in U of L’s contract with Alvarez & Marsal, though state Sen. Paul Hornback, R-Shelbyville, said he is becoming frustrated with the amount of state money needed to deal with the issues at the U of L Foundation.
The follow-up work was first estimated to cost “in the neighborhood of $200,000,” J. David Grissom, chairman of U of L’s board of trustees, said at the board’s June 15 meeting.
But, "Further analysis by the university’s outside counsel and A&M indicated that the actual cost to cover the additional services would likely be in the range of $200,000 to $400,000," U of L spokesman John Karman said in an email Tuesday.
Karman added that Alvarez and Marsal's additional fees could end up being less than $400,000.
In a brief interview Tuesday, Grissom said the extension involves Alvarez & Marsal being available for "extra work not contemplated" in the original contract, but he doesn't know if that work will result in additional public material, such as an addendum to the June 8 report.
"My understanding is, it’s more like them being on call to provide to provide more in-depth information on certain subjects," he said.
The university has not fulfilled WDRB’s June 20 open records request for documentation that would reveal the scope of the additional work.
“This addendum is to deal with the ongoing issues and questions that result from the report,” Dilger told the committee on Tuesday.
He said some trustees, in their closed-door discussions, have raised questions about certain findings in the report which require responses from Alvarez & Marsal.
Dilger also said the additional work “really is to allow A&M to continue consult with” Dilger’s law firm, Stoll Keenon Ogden, about “what comes next” as a result of the report.
The addendum will keep Alvarez & Marsal on contract to U of L through Oct. 1.