LOUISVILLE, Ky. (WDRB) -- The longtime attorney for the University of Louisville Foundation told board members Tuesday that the foundation had separate accounting to intentionally conceal a program under which it has paid over $20 million in extra compensation to university administrators.
“If you want my honest opinion, I believe it was done for obfuscation purposes, clearly,” attorney David Saffer told the foundation board.
Saffer was explaining why the foundation created two limited liability companies – one called Minerva and another called DCPA – to administer its “deferred compensation” awards to former U of L President James Ramsey and about a dozen other top U of L officials.
In an interview after the meeting, Saffer said he regretted using the word “obfuscation” and that the intention was never to conceal the compensation from the public – but rather from other foundation employees.
Saffer said the separate companies and the foundation’s hiring of an accounting firm to keep track of the compensation was intended to compartmentalize the program so that “a group of people who worked at the foundation would not have immediate access to those records.”
“If I had to rephrase it again, I would have said ‘for privacy’s sake’ -- for consolidation of that function outside a lot of eyes within the foundation,” Saffer, of the firm Stites & Harbison, told WDRB News.
Update, 5:40 pm: Foundation interim executive director Keith Sherman issued a prepared comment on Saffer's remarks:
Earlier today when answering a question our legal counsel David Saffer offered an opinion regarding the Foundation’s creation and use of DCPA, LLC. I cannot emphasize enough that the Foundation is now operating with full transparency and will continue to do so to ensure the trust of our donors and UofL students, faculty and staff, because it's the right thing to do. Our governance review is on-going and we are working diligently to meet the high standards demanded of our mission to support the University of Louisville’s academic pursuits.
The surprising comment from Saffer – who has worked for the foundation since 2008 – wasn’t the only change in posture on display Tuesday as the foundation’s board began wrestling with a number of organizational and financial issues.
The board is composed almost entirely of new members as result of Gov. Matt Bevin’s overhaul of the university’s trustee board and the recent resignation of four members who were loyal to Ramsey, who left his role as foundation president last September.
Papa John’s International founder John Schnatter – who joined the board earlier this year – said it’s “bad optics” for the foundation to be in the real estate development business with NTS Corp., whose owner J.D. Nichols pledged $10 million to the organization and once offered to personally pay Ramsey’s incentive compensation.
Schantter also appeared to criticize a deal in which Ramsey, using the foundation, promised an additional $6 million in deferred pay to athletics director Tom Jurich without approval of the foundation or athletics board. WDRB first reported the deal last month.
“With athletics and this board we are mixing peas and carrots and the optics are bad,” Schnatter said.
Sherman, the foundation’s executive director, said the $1 billion capital campaign that Ramsey led between 2007 and 2014 was overhyped with “alternative math.”
Sherman said the actual cash received by the foundation – which manages U of L’s $784 million endowment – has averaged only $24 million over the last six years.
Meanwhile, donations and pledges of future gifts are down significantly in the fiscal year that started July 1. The foundation has received only $17 million so far, compared to $47 million at the same time last year, chief financial officer Jason Tomlinson told the board.
Tomlinson said the decline “speaks for itself.”
Sherman said the foundation will likely slash the funding it provides the university beginning in the fiscal year that starts July 1 because the organization has spent too much of the endowment in recent years.
The foundation spent 5.8 percent to 7.8 percent of the endowment each year over the last four fiscal years, while spending a 4-5 percent spending rate is more sustainable, Sherman said.
"We are going back to a true spend policy of, 'this is what we can afford to do,'" Sherman said.
The foundation expects to provide $75 million in endowment spending to the university this fiscal year. Most of that -- $45 million -- represents unspent endowment funds from previous years. The foundation also planned to raise $53 million in new, immediately spendable gifts for the university, according to the foundation's budget.
Sherman and Tomlinson said it's too soon to say just how much less support the foundation will provide the university next fiscal year.
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