University of Louisville trustees push no-confidence vote in Ramsey

Former University of Louisville President James Ramsey, right, speaks to reporters in 2016.

LOUISVILLE, Ky. (WDRB) – Lawyers representing the University of Louisville, its former president James Ramsey and other former administrators have scheduled a mediation next week aimed at resolving the university’s claims that Ramsey and his former aides recklessly overspent U of L’s endowment to the tune of $80 million.

The conference, confirmed by four sources with knowledge of the case, is not guaranteed to produce a settlement in the two-and-a-half-year dispute that involves multiple parties. One person described it as an “exploratory” meeting to see where the various sides stand.

U of L and the U of L Foundation sued Ramsey and four other individuals in April 2018, alleging they “schemed” to “deplete” U of L’s endowment by excessively spending from the $743 million donor fund on ill-advised ventures and outsize compensation for administrators.

Ramsey and his former chief of staff Kathleen Smith “paid themselves (and others) excessive compensation out of the (U of L) Foundation,” the lawsuit alleges, specifically complaining about the $8.75 million Ramsey received and the $2.6 million Smith got in deferred compensation from the foundation between 2005 and 2016.

“Millions of dollars of donations originally intended for the benefit of the university and its students instead were used to pay excessive compensation,” former U of L trustees chairman J. David Grissom said when the lawsuit was filed April 25, 2018. “Other funds were directed toward risky and inappropriate investments, and spending regularly exceeded the foundation’s own policy.”

Lawyers for Ramsey, Smith and the other defendants have said all the spending U of L challenges in the lawsuit was approved by university and foundation boards, yet the U of L side declined to sue those board members.

They have also said that all the money went to the university, even if its current leadership might second-guess the spending.

For example, one of the things U of L challenges in the lawsuit is the Ramsey administration’s transfer of $11 million from the foundation to U of L’s own James Graham Brown Cancer Center. The U of L side alleges administrators improperly couched the $11 million as a loan that would be repaid so as not to reveal the true extent to which they were spending from the university’s endowment.

Ramsey was forced to resign in 2016 after 14 years leading the university and the foundation. His ouster coincided with an overhaul of the boards governing each institution and a new policy that U of L’s president cannot also head the foundation.

U of L side has spent more than $5 million so far

The settlement talks come as the foundation, which is footing the legal bills for the Ramsey case, has spent about $3.6 million so far. That’s in addition to more than $2 million U of L spent on a 2017 “forensic investigation” that forms the basis of the lawsuit.

And, after more than two years, a trial is still a long way off. The U of L side agreed early on to let the defendants take their depositions first. So while former U of L trustees chairman J. David Grissom has been deposed multiple times, it’s still unclear when Ramsey and the other defendants might sit for questioning.

Besides Smith, the other defendants are former U of L chief financial officer Michael Curtin; former U of L Foundation chief financial officer Jason Tomlinson; and former foundation board member Burt Deutsch.

In addition to the slow pace of the case, the U of L side has had other setbacks.

Earlier this year, U of L parted ways with the Birmingham, Alabama law firm it had hired to prosecute the lawsuit and turned the case over to Lexington attorney Barbara Edelman of Dinsmore & Shohl. Edelman declined to comment for this story.

And last month, the university exhausted its appeals of a 2019 judge’s order that removed a defendant with robust insurance coverage from the case.

Jefferson Circuit Judge Judith McDonald-Burkman dismissed U of L’s claims against Stites & Harbison, the law firm that represented the foundation during the Ramsey era, finding U of L waited too long to bring its claims against Stites.

The Kentucky Court of Appeals affirmed McDonald-Burkman’s ruling and the state Supreme Court last month declined to take the case.

It’s unclear what ramifications Stites’ removal has for U of L’s other claims, but the lawsuit alleges it was only with Stites’ “substantial assistance or encouragement” that Ramsey and the defendants were able to allegedly breach their fiduciary duties.

All along, the U of L side has said that it hopes to tap not only the personal assets of Ramsey and the other defendants, but also about $25 million in various insurance policies owned by the foundation to cover misconduct by its directors and officers.

“To recover from those policies we must bring claims against the individuals and, hopefully, those policies will step up,” U of L’s former lead attorney in the case, Andy Campbell, said when the suit was filed in 2018.

Reach reporter Chris Otts at 502-585-0822, cotts@wdrb.com, on Twitter or on Facebook. Copyright 2020 WDRB Media. All rights reserved.