In the wake of a scathing audit report on the University of Louisville Foundation’s past leadership, the foundation’s board of directors on Wednesday chose to create an ad hoc committee to further investigate the information revealed in the audit. That committee in turn will present the full board with recommended actions, which could include litigation against key players mentioned in the report.
The audit by Chicago-based firm Alvarez & Marsal, which examined the foundation under the administration of former president James Ramsey, found that UofL’s endowment suffered through liquidations and heavy losses related to failed loans and investments to startup companies, in addition to exorbitant spending on compensation for top staff and real estate investments. Both the foundation and the UofL board of trustees now are digesting the audit report and weighing whether or not to take legal action against any of its former leadership.
After a two-hour closed session in which foundation board members discussed the audit findings, board chairwoman Diane Medley said she would delegate authority to a special ad hoc committee “to recommend action as a result of this audit to the full board that will entail making analysis of any affirmative action — including litigation — which may be warranted.” She added that while the foundation already has implemented a number of reforms since last fall, “there are more to be made based on this audit. We will be implementing those ASAP.”
“We don’t want to take any action that is premature, but we also don’t want to drag our feet on anything,” said Medley. “So (the work of the committee) will be of the upmost importance.”
After the meeting, Medley said the creation of the committee was necessary because “there’s a lot of information in (the audit) that requires further investigation, actually, and further analysis. The report goes a long way in leading us down the path of where we need to look, which we very much appreciate, but there is more work to be done.”
While commending the work of the auditors and saying she has yet to find anything to dispute in the report, she added that further investigation is needed so the foundation has the strongest case possible if litigation is necessary.
“There are allegations in this report about certain actions that people took,” said Medley. “We want to make sure that we see the documentation firsthand that proves that, one way or the other. Because we do not want to go out and instigate any kind of litigation ourselves that is not well though out, that is not accurate.”
Medley added that this committee’s investigative work may require hiring “an accountant or a forensic person to do further analysis,” or more discussions with Alvarez & Marsal, adding that “we’re just being very cautious, careful and hopefully constructive about it, but not dragging our feet. One thing we definitely do not want to do is let this drag on much longer.”
As for what type of litigation may be warranted, Medley said the duty of foundation board members “is to preserve the principle of the foundation. And if there are causative actions that we can take to restore any of that, we need to consider it. But because of that, we need to make sure that we are confident that the allegations are correct.”
Asked if she was surprised by anything in the 269-page audit, Medley replied: “I would say, unfortunately, no.”
CFO on a “mutually agreed upon” leave from work
Medley also addressed foundation CFO Jason Tomlinson’s work status, which has been up in the air since last Friday. When asked by IL last Friday to confirm or deny a tip that Tomlinson was placed on leave, foundation director Keith Sherman answered that “Jason is on paid leave” and said he would not comment any further. Tomlinson’s attorney Don Cox later told IL that this was incorrect, as Tomlinson was not on paid leave, but rather had been on vacation since the previous week.
Medley took issue with the semantics of reports on Tomlinson’s status, stating that “he was not put on paid leave. He is on vacation.” Asked if he is still an employee in good standing, she answered “at this point.”
“We did not put him on administrative leave,” said Medley. “He is taking leave.” Asked if that leave was voluntary, she said it was “mutually agreed upon.” Medley added that she did not know when Tomlinson’s leave began or how long it would last.
Early in Wednesday’s board meeting, Sherman presented a resolution to remove the signatory authority of Ramsey from one of the foundation’s bank accounts and replace it with his own authority. After Sherman noted that Tomlinson was one of the foundation officials that still had such authority, board member Donna Heitzman spoke up to ask “Why would we leave the CFO on here, given his position?” Sherman replied that “he is on leave and he is still an employee of the foundation.”
“Even though he’s on leave, we’re still comfortable with that person on leave having authority?” asked Heitzman again, to which Sherman answered “yes.”
The resolution passed after Medley suggested they were free to later review Tomlinson’s authority if board members felt it was necessary.
Trustees to tackle audit findings on Thursday
On Thursday afternoon, the UofL board of trustees will meet to address a full agenda that includes approving the budget for the 2017-2018 academic year, approving athletics construction projects and discussing a UofL Hospital affiliation agreement. They likely will discuss the audit findings in closed session due to the discussion of personnel matters or potential litigation.
Medley is both a trustee and foundation board director, and said she did not yet know whether the two boards would pursue investigations or recommendations stemming from the audit report independently or in conjunction.