Lawmakers deny University of Louisville request to double legal spending
"We just felt it was going too far..." said committee chairman Rep. Stan Lee, a Republican from Lexington.
FRANKFORT, Ky. (WDRB) -- In a surprising move, state lawmakers threw a wrench into the University of Louisville's tentative plan to sue over some $100 million in losses sustained through mismanagement of the university's nonprofit foundation.
Frustrated over ballooning fees for lawyers and auditors, the Kentucky General Assembly's contracts review committee denied U of L's request Monday to double its two-year budget for outside attorneys to $2.5 million.
"We just felt it was going too far, and at some point we just needed to make a statement as to what was going on," said committee chairman Rep. Stan Lee, a Republican from Lexington.
The request included an additional $600,000 to pay outside attorneys working on potential litigation related to a blistering, June 8 forensic investigation of the foundation's finances under former U of L President James Ramsey.
U of L has already spent about $600,000 on attorney's fees related to the foundation investigation, and the additional request would have provided funding to move forward with suing former officers or board members of the foundation.
U of L board of trustees Chairman David Grissom said last week that the trustees still haven't decided whether to go to court as they weigh factors like additional costs, the likelihood of recouping funds and reputational harm.
But the decision is expected within a month, he said last week.
Reached Monday, Grissom declined to comment on lawmakers' move to limit U of L's legal spending.
The forensic investigation -- which concluded the foundation overspent millions dollars, depleting the university's endowment -- was the sole factor behind the university's request to double its legal spending for the 2016-2018 budget period.
For months, university trustees have been exploring taking action against former officers -- such as Ramsey and other administrators -- and board members of the foundation to recover some of the losses, though no specific target has been publicly named.
Lee said in an interview following the meeting that the denial of the request shouldn't prevent U of L from bringing litigation.
He said the university should ask attorneys to work on a contingency, meaning they would get paid a percentage of any money flowing from a successful case.
But Craig Dilger, a Louisville attorney serving as the university's primary counsel on the forensic investigation, said that type of arrangement is "easier said than done."
"It's absolutely possible… but obviously this a very complicated and difficult (case)," Dilger told reporters following the meeting.
"Expert witnesses on these kind of cases -- fiduciary duty and that sort of thing -- don't work on a contingency basis."
Dilger added that, while it is the university trustees' decision, he thinks there is a "legal basis" for action over the foundation's losses.
"We think there should be another step. We think there should be litigation," Dilger told reporters.
Reach reporter Chris Otts at 502-585-0822, firstname.lastname@example.org, on Twitter or on Facebook.
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