The two large foundations that last September threatened to withhold future contributions to the University of Louisville Foundation until it withstood an independent review by a forensic accounting firm have now committed to pay $1 million each toward the cost of that review. The investigation, which was completed in June, found mismanagement and overspending of endowment assets in the administration of former UofL President James Ramsey.
The cost of the review by the Chicago-based firm Alvarez & Marsal had ballooned to $2.2 million from an original $900,000, as the board of trustees this summer authorized more spending for the firm to further investigate certain findings in case civil litigation was necessary. As of last week, these increasing costs and the transparency of the contract terms with the firm had drawn the ire of state legislators who approved them, but it now appears that the James Graham Brown Foundation and the C. E. and S. Foundation will step in cover all but $200,000 of the current bill.
In early September, Ramsey had already resigned under pressure as president of the university but was still leading the foundation, while longtime ally Bob Hughes remained the chairman of UofL Foundation board of directors. On Sept. 2, the James Graham Brown Foundation sent a letter to Hughes stating that while the nonprofit had given UofL entities over $72 million in grants over the past 55 years, it would be unlikely to do so in the future unless major reform efforts were taken by UofL Foundation leadership.
In the letter signed by the Brown Foundation’s chairman and CEO R. Alex Rankin and President Mason Rummel, they requested that the UofL Foundation hire “a nationally recognized forensic accounting firm identified by the University to conduct an independent review of ULF and its related entities,” in addition to conducting a best practices governance review and complying with the requests for financial information from then-chairman of the UofL board of trustees Larry Benz. Their letter concluded by stating that “If needed, the Brown Foundation would consider a grant to support the costs, or a portion of the costs of a forensic audit to facilitate the resolution of these issues.”
Three days later, the C.E. and S. Foundation sent Hughes a letter to “echo the concerns” expressed in the Brown Foundation letter, requesting “immediate action” on their four recommendations. Signed by the C.E. and S. Foundation president and Humana founder David Jones Sr. and treasurer David Jones Jr., the letter stated that the foundation had not considered donating to the UofL Foundation “since unrefuted public reports of ULF funding inappropriate private inurement surfaced more than a year ago,” but would “offer to join the Brown Foundation in funding the cost of third party reviews needed to resolve governance and financial issues.”
UofL sent out a joint press release with the two prominent foundations on Tuesday announcing that they “have fulfilled earlier pledges to help offset the cost” of the A&M forensic investigation, committing $1 million each. UofL spokesman John Karman told IL that such money “will be received by the general fund of the university and used expressly to defray costs associated with the audit.” He added that the money from the C.E. and S. Foundation “is expected in a few days,” while half of the money from the Brown Foundation is expected in the next few days and the other half “will be received after the first of the year.”
“Our goal with this forensic investigation has been to restore the confidence of our donors in the UofL Foundation,” stated UofL board of trustees chairman J. David Grissom in the press release. “The James Graham Brown and C.E. and S. foundations have helped us take a giant step toward that goal with their substantial contributions. We appreciate their concern, their leadership and their financial support. We look forward to working with these two foundations, and we are committed to full transparency in satisfying the terms of these generous gifts.”
“The James Graham Brown Foundation is pleased with the continued progress of the University of Louisville Board of Trustees in re-engineering and revitalizing the governance, leadership and momentum of the university,” stated Rummel of the Brown Foundation. “As we stated in our letter of September 2016, we welcome the opportunity to help offset the costs and expenses of the forensic investigation. It is our hope that a $1 million grant for this purpose will signal our support and appreciation of the hard work and commitment the university’s Board of Trustees has shown in the continued improvement of this important institution.”
“The University of Louisville is vital to our city and to the commonwealth of Kentucky,” stated David Jones Sr., president of the C.E. and S. Foundation. “This forensic investigation is needed to restore the community’s faith in and support of the university and its foundation. Through this donation, the C.E. and S. Foundation hopes to ensure that the university can conclude its thorough investigation without creating a burden for Kentucky’s taxpayers.”
On Thursday, the UofL board of trustees will meet to discuss possible recommended actions to take in the wake of the A&M report, which could include civil litigation against former foundation officials due to the endowment’s estimated loss of $60 million. Ramsey and Hughes left their positions with the university last fall, while Ramsey’s former top aide Kathleen Smith and foundation CFO Jason Tomlinson were fired this summer.
Disclosure: IL investor David Jones Jr. is an officer of the C. E. & S. Foundation