The University of Louisville Foundation’s board chairman has declined to follow through on a set of actions ordered by Larry Benz, chairman of the UofL Board Trustees, to restore confidence in the foundation’s governance ahead of its board meeting on Friday. In response, Benz stated Tuesday evening that unless such confidence in the foundation is restored, the university may “simply obtain authorization to start a new one.”
Last Friday, the Board of Trustees approved a resolution by a nearly unanimous vote stating that the university may sue the UofL Foundation if it does not turn over financial documents requested by Benz. The resolution noted that “significant questions have arisen with respect to the use of funds held for the benefit of the University by the Foundation” and gave Benz the authority to initiate legal action if the transparency demands are not met.
After that meeting, Benz outlined a “pathway to restored confidence” for the foundation, which included hiring an independent forensic specialty accounting firm chosen by the university to examine the foundation — a specific demand of several high-profile donors who said they would withhold further contributions until that happened. Benz added that this pathway would include complying with state Auditor Mike Harmon’s current examination of the foundation, filling long-overdue vacancies and expired terms on the foundation’s board, and turning over all financial records Benz requested of it through the Open Records Act, such as details of a $38 million loan from the university to the foundation that was not approved by either board.
UofL Foundation board chairman Bob Hughes balked at the need for a forensic audit and said the foundation should select and direct any accounting firm. In addition, he called the threat of a lawsuit outlined in the resolution “unnecessary,” adding that “reasonable people sitting around a table can come up with reasonable answers” without a lawsuit. Hughes, who also serves on the Board of Trustees, abstained from voting on the resolution, which was backed by 14 trustees and acting UofL President Neville Pinto.
A meeting of board members for both the university and foundation to iron out their differences was supposed to happen this week, but Hughes indicated Tuesday he would not agree to one because of the trustees’ resolution, as “threatening to sue people and then demanding meetings and complaining when they can’t happen isn’t productive.”
“The concept of a joint meeting between the Louisville Board of Trustees and the Foundation Board of Directors is not a bad one,” Hughes said in a statement released Tuesday. “However, because Chairman Benz has had the Trustees publicly threaten litigation, our legal counsel has advised us that a meeting at this time is not prudent.”
Benz laid out specific demands for Hughes to adopt at the foundation in a letter sent to him on Monday, including several that were to be implemented before the foundation’s board meeting at noon on Friday. In addition to his previously stated requests about cooperating with outside audits and turning over financial records, Benz said Hughes must significantly change the makeup of the foundation’s board, which currently has two vacancies and four members serving on expired terms. In addition, he said Hughes must also agree to not seek to remain as chairman of the foundation.
Benz stated that before the foundation board meets at noon on Friday, Hughes must withdraw the nominations he made last week to its nominating committee, which is charged with determining the foundation’s leadership. Three of the five people Hughes nominated — William Selvidge, Joyce Hagen and Salem George — previously signed a letter in a full-page Courier-Journal ad praising Ramsey’s leadership as university president and blasting trustees who had criticized him, with Hagen paying for the ad herself.
Hughes has been the chief defender of former UofL president and current foundation president James Ramsey from the criticism of trustees in the past two years, and just last week he suggested it would be fair to give Ramsey a settlement package if he resigns from his current position — a move that is strongly opposed by Pinto and Benz.
In his letter, Benz also stated that the foundation shall terminate James Ramsey “for cause” from his position as president of the foundation, as well as from “all positions at all entities affiliated with the Foundation” if he does not resign first. Additionally, Kathleen Smith — Ramsey’s assistant who received large compensation packages from the foundation — “shall immediately be relieved of any and all duties” at the foundation and its affiliates. Benz also stated the foundation must begin a search for a new executive director and chief fundraiser to fill Ramsey’s position, and vote to implement a governance review and implement best practices concerning the governance of public university foundations.
Hughes responded to Benz in a letter on Tuesday, stating that “most of your demands cannot be considered, adopted, revised, and/or rejected without the approval of the Foundation’s board,” requesting that Benz “allow the Foundation’s Board the opportunity to meet and consider an appropriate response.” Hughes also flatly refused to withdraw his appointments to the foundation’s nominating committee, saying they “reflected my considered judgment regarding who would best serve in the interests of the Foundation and the University,” and doing so “would undermine, not support, confidence in the Foundation.”
Hughes closed by referencing his letter delivered to Benz before last week’s trustees meeting about the difficulties of complying with Benz’s broad open records request and the desire to choose and direct its own auditor, adding that “Unilateral demands accompanied by unrealistic deadlines foster neither teamwork nor cooperation.”
Responding to Hughes’ refusal to hold a joint meeting of both boards and his demands in Tuesday’s letter, Benz said he still is hopeful that Hughes will reconsider and follow a “unified and reconciled approach” to the matter. As for his deadline to take legal action against the foundation, he said “we will wait until the nominating committee meeting.”
In a prepared statement released by UofL Tuesday evening, Benz hinted that if the foundation did not comply with the steps he laid out to restore confidence, the university may take action to scrap it altogether and create a new foundation.
“Our goal is to restore confidence and transparency,” said Benz. “The donors, faculty, staff, students and university stakeholders, as well as a nearly unanimous vote by the board of trustees, have given us the path forward to accomplish this. We must restore confidence in the foundation or simply obtain authorization to start a new one.”
Pinto — who was strongly in favor of a joint meeting between the two boards — also released a statement Tuesday evening backing Benz’s effort and the nearly unanimous resolution of the trustees to assure university stakeholders that it is “operating in an environment of accountability and transparency.”
“I respect the nearly unanimous decision of the Board of Trustees last Friday, a decision that was made after serious consideration of all the issues,” said Pinto. “As part of that decision, the board delegated to the chair the authority and discretion to file suit. As the Acting President of the University, I am required to ensure the responsible use of all resources entrusted to us by our donors. Nothing is more important to me than addressing the concerns of our donors and operating in an environment of accountability and transparency.”
In the background of the current dispute is the lawsuit in Franklin Circuit Court filed by Attorney General Andy Besehar, challenging the legal authority of Gov. Matt Bevin’s executive orders abolishing the UofL Board of Trustees and creating a new one this summer. Judge Phillip Shepherd issued a temporary injunction on those orders last month, enjoining the board that Bevin created and reinstating the old one that is meeting now. A hearing in that case is scheduled for Thursday morning, where an expert witness called by the attorney general’s office is expected to testify that Bevin’s actions have put UofL’s accreditation at risk.