LOUISVILLE, Ky. (WHAS11) – With a near unanimous vote to potentially sue, the UofL Board of Trustees sent a clear message to the Foundation: increase transparency or we will take legal action.
"Why are they so scared of a forensic audit? Why are they so scared to turn over records? The transparency and the public has demanded knowledge on these," said Chairman of the Board of Trustees, Larry Benz.
Benz said his number one concern with the Foundation is lack of transparency evidenced by them not being forthcoming with accounting records, including those about $38 million transferred from the University to the Foundation.
"In terms of the $38 million, we can't trace all of it, we know some of it went to pay down a loan that the UHI, the real estate holding company, borrowed from a credit line of the University of Louisville foundation, so in essence they borrowed money from us to pay down a borrowing that they made from themselves to themselves and it just doesn’t make any sense," said Benz.
Here is the text of the resolution: pic.twitter.com/I9Uz4QNeDR— Michaela MacDonald (@WHAS11Michaela) September 9, 2016
Board of Trustees Chairman Larry Benz outlined steps the Foundation would need to take, including: agreeing to external forensic audit by a firm chosen by the Trustees, responding appropriately to the State Auditor's report expected this fall and changing the board's composition and nominating process. Benz said besides two big names donors--the James Graham Brown foundation and C. E. & S. Foundation--more than 70 other donors, big and small, have expressed concerns about the Foundation.
"Their message has been convincing and consistent: clean up the foundation, it is an eye sore for the community, and frankly these donors are telling us they will not contribute until they get complete transparency and confidence restored in the university's charitable asset, its University of Louisville foundation," said Benz. "That pathway towards restored confidence for our community is critical at this most vulnerable time for our reputation of our university which quite frankly has been damaged severely because of the secrecy and the veil of secrecy and the shenanigans, quite frankly, that has gone on at the University of Louisville foundation. Those days end today.”
Trustee Ron Butt was the only vote against. He called the move divisive and said he would be sending his resignation to the Governor today. Trustee Bob Hughes abstained from the vote, not saying he was for or against, but giving his position as Chairman of the Foundation board as the reason for his abstention.
"Basically I think what was voted on was that that may be necessary if the two sides are not able to work together, but I think the two sides should be able to work together," said Hughes.
Hughes sent this letter saying "Foundation representatives have begun to compile the records" asked for in the open records request that will contain more than 1 million pages of documentation. Hughes said he has authorized the hiring of up to 4 additional staff members to help fulfill the request.
"The letter was designed to show we are already addressing those issues, and were going to actually move forward last Monday with an RFP to that extent for the audit," said Hughes.
The State Auditor's Office is still auditing the Foundation.
State Auditor Mike Harmon released a statement on Friday:
“The focus of the special examination, which our staff has been working on for more than a year, is on the governance structure and relationship between the Foundation and the University of Louisville.
While a forensic audit would not likely interfere with our work, we would recommend the board await the release of our report before engaging another entity to perform a governance review in order to avoid any duplication of effort.
No matter what decision is made, we will continue to move forward with our governance review of the Foundation, and are hopeful our work will soon draw to a close.”