U of L Foundation gets rid of Ramsey-era holding company that borrowed millions from school's endowment
LOUISVILLE, Ky. (WDRB) – The University of Louisville Foundation’s board voted Thursday to dissolve University Holdings Inc., an organization the foundation created a decade ago under former U of L President James Ramsey to borrow from the school’s endowment and pay extra salaries and car allowances to a handful of administrators.
Getting rid of UHI, as the entity was known, is the next step in the “clean up” effort under the remade foundation board that took control in early 2017, foundation chairman Earl Reed said in an interview following Thursday’s meeting.
Created in 2008, UHI was a nonprofit organization that existed only on paper – it was controlled by foundation officials and had no separate staff, office space or means of generating revenue.
“It’s basically a shell or a conduit that produces no benefit,” Reed said Thursday.
Ramsey’s administration used UHI to withdraw at least $55 million from the school’s endowment to make real estate purchases and fund foundation operations like Nucleus, the downtown life sciences organization and MetaCyte, a defunct business incubator, according to a lawsuit the university and foundation filed against Ramsey in April.
WDRB first revealed UHI’s prolific borrowing from the school’s endowment in 2016.
UHI also paid about a dozen U of L and foundation employees extra salaries and car allowances.
In 2011, UHI paid former U of L Provost Shirley Willihnganz $78,685, and former Ramsey chief of staff Kathleen Smith $64,297, each for working an average of two hours a week for the organization, according to UHI’s federal tax return covering the period.
Four rank-and-file employees in Ramsey’s office also got supplemental payments and car allowances from UHI, as WDRB reported in 2016.
The foundation alleges in the lawsuit that Ramsey’s administration used “creative accounting” to classify UHI’s spending of endowment money as an investment – one that would be repaid with interest – to mask how the endowment was being depleted.
In 2015, the foundation listed UHI’s “line of credit” as an investment worth $69.4 million, including interest, for the endowment. Today, the foundation lists it as only $35 million, or the amount current officials think can actually be repaid.
Ramsey, who resigned in 2016, has said in court papers that the foundation’s lawsuit quibbles with legitimate business judgments made long ago and is riddled with non-specific allegations.
The lawsuit says Smith, Ramsey’s former chief of staff, “schemed” with the foundation’s former law firm to “obfuscate” the compensation from UHI.
The lawsuit quotes a September 2013 email in which Smith wrote, “We need to protect UHI . . . I would like to make the paper trail to our holdings as obscure as possible.”
Ann Oldfather, Smith's attorney, said in an email Thursday the lawsuit takes Smith's 2013 email of out context, and the notion that she schemed to keep the UHI compensation secret is "demonstrably wrong" because the UHI pay was disclosed on public tax returns filed by the organization.
"It is not much of a scheme, and certainly not obfuscation to turn around that same year and show that UHI salary and Kathleen’s other sources of her overall salary fully disclosed on the publicly available" tax form, Oldfather said.