LOUISVILLE, Ky. (WDRB) –The University of Louisville’s preliminary agreement in January to accept $800,000 in insurance money for damages it once estimated at more than $80 million stemming from mismanagement by its former President James Ramsey must move forward, a Jefferson County judge ruled Thursday.
The settlement still needs approval by U of L’s board of trustees and the board of the U of L Foundation, but its “material terms” are enforceable, Judge Judith McDonald-Burkman ordered.
While she ruled the settlement is confidential until approved by the boards, the text of McDonald-Burkman’s 14-page opinion reveals the contours of the deal, including the $800,000 insurance payment to U of L.
If the deal is buttoned up, U of L and its nonprofit foundation will have lost millions of dollars pursuing “financial fraud” claims against Ramsey, his former chief of staff Kathleen Smith and three other former officials, all of whom left U of L about the time of Ramsey’s ouster in 2016.
As of April, the U of L Foundation had spent $3.5 million on legal fees for the case. U of L also spent more than $2 million on a 2017 “forensic investigation” of Ramsey’s management of the foundation, which formed the basis of the 2018 lawsuit.
U of L spokesman John Karman declined to comment.
In the lawsuit, U of L and its foundation alleged Ramsey, Smith and other defendants “depleted” the university’s endowment, a pool of donations invested in financial markets for the long-term benefit of the university.
Ramsey, Smith and others “disguised” their “excessive and unauthorized” endowment spending and “paid themselves (and others) excessive compensation out of the Foundation,” according to the lawsuit.
Attorneys for Ramsey, Smith and the other defendants have said the previous university and foundation boards approved the spending and compensation – yet their members were not sued – and that the money was not misappropriated, but spent for the benefit of U of L.
For example, the lawsuit complains about a $10 million transfer from the endowment to U of L’s own James Graham Brown Cancer Center, which was classified as a loan from the endowment even though there was no expectation the cancer center would repay it.
Lawyers in the case agreed in principle to the $800,000 deal during a Jan. 29 mediation session, but it later fell apart.
The U of L Foundation refused demands to retract a claim made in 2018 to the Internal Revenue Service that the foundation excessively compensated Ramsey and Smith in violation of nonprofit rules.
Attorneys for Ramsey and Smith said U of L’s refusal to renege on the IRS claim left their clients exposed to potential penalties, though the IRS hasn’t acted on the information.
Meanwhile, the secondary defendants in the case – former foundation chief financial officer Jason Tomlinson, former foundation board member and consultant Burt Deutsch and former U of L chief financial officer Mike Curtin – had no stake in the spat over the IRS claims.
Rather than wait for U of L, Ramsey and Smith to resolve that issue, their attorney, Don Cox, asked McDonald-Burkman to enforce settlement.
