Nominations to fill vacancies for six at-large directors on the board of the University of Louisville Foundation are expected at its committee meeting Tuesday, as the embattled nonprofit managing the university’s roughly $700 million endowment continues its leadership makeover.
The immediate resignation of four longtime foundation board members — Dr. Salem George, Joyce Hagen, Margaret Handmaker and Dr. William Selvidge — was announced Thursday by its new board chairwoman Diane Medley without any explanation. Each had been strong public defenders of former university and foundation president Dr. James Ramsey, who was forced into resigning last year after a string of scandals and criticism from now-former trustees.
An examination by state Auditor Mike Harmon last year found serious weaknesses in the governance and oversight of the foundation during the Ramsey era, a point re-emphasized in January by J. David Grissom — chair of the newest iteration of the university’s board of trustees, made up of 10 new gubernatorial appointees. Additionally, a new forensic audit of the foundation’s finances was initiated late last year and is expected to be finished in May, part of an effort to restore the confidence of the public and major donors. The market value of UofL’s endowment managed by the foundation withstood a 10.6 percent decrease in the 2016 fiscal year, the largest drop among the largest 200 college endowments.
Interim foundation director Keith Sherman told IL last week that Medley had met with each of the resigning board members days before they resigned, sharing her vision on how the foundation and board should proceed. While Medley declined to respond to IL’s questions through the foundation’s public relations firm on whether she asked the four to resign, their resignation letters and emails were obtained through an open records request.
Selvidge, Hagen and Handmaker each explained to Medley that they were resigning immediately due to living or working out of state and no longer having time to devote to the board. George gave no specific reason, only saying it had been an honor to serve on the university and foundation boards and that he is “proud of the advancements made” by the university during that time.
Selvidge specifically referred to “the prospects of an increased number of meetings, and me living in Florida,” while Hagen noted that her “residency in Florida and other board commitments render me unable to be front and center for all of the necessary work that lies ahead.” Both expressed confidence in the ability of Medley to lead the foundation through the current difficult and complex situation, with Hagen — who had been vice chair of the board — adding that “It is time for new leadership. I have every confidence in your ability to take the reigns (sic) and put the Foundation on a new and positive trajectory.”
Handmaker referred to her “current and future out of town commitments” in explaining why it was best for her to resign, telling Medley “you will have challenges in your new role, but I am confident that you will find it to be interesting and rewarding.” Noting that the board members of the university and foundation are almost entirely new — only one foundation director was serving in that role at this point last year — and the foundation has a new interim director, Handmaker added “you will be faced with a significant shortage of institutional memory.” Due to this “shortage,” Handmaker attached a three-page memo “with background information on the Foundation’s governance and compensation plans that I think will be helpful to you.”
The memo appears to strike a defensive tone toward the criticism that has been lodged against the foundation board over the large and controversial deferred compensation it gave to Ramsey and his top aide Kathleen Smith in their final years at the university. Stating “any suggestion that Trustees do not know what is going on at the Foundation is not well informed,” Handmaker added that the trustees and legal counsel of the university had crafted and encouraged the deferred compensation plans in an effort to retain Ramsey and Smith through additional financial incentives.
Handmaker said Ramsey “was recruited by the University of Tennessee” and the trustees “felt strongly that they wanted to do ‘whatever it took’ to keep him” at UofL. She goes on to claim that trustees “asked the Foundation” to pay “a supplemental retirement benefit” that Ramsey preferred over a salary increase — adding that “the same person chaired both the Board of Trustees and the Foundation Board (as was often the case), so the ‘ask’ was a bit of a formality.”
Handmaker’s memo did not name that board chair, but did refer to Chester Porter as the previous chair of both who allegedly “said it was critically important to discourage Kathleen Smith from electing early retirement,” then designed the retention plan for Smith. She went on to state several times that the grants and payouts to Ramsey and Smith were both “disclosed annually in the Foundation’s IRS Form 990, which is available to members of all boards and to the public.”
Smith retired from her position as the president’s chief of staff shortly after Ramsey’s resignation last year, and then was placed on paid administrative leave from her lucrative position at the foundation, were she remains to this day. Porter died in 2014, and Kennedy Helm — the university’s legal counsel mentioned in Handmaker’s memo — died in 2013.
Compounding the seriousness of the foundation’s transition, on Friday the student newspaper The Louisville Cardinal broke the story that UofL’s accrediting agency SACS recently informed the school that the foundation may have violated three of its standards relating to personnel appointments, relationships with institution-related entities and financial control. The university had already been placed on probation by SACS in December for violating standards and core requirements due to the executive orders and actions of Gov. Matt Bevin last year, which abolished and recreated the university’s board of trustees.