Corporate regents court conflict

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For a public official, the appearance of a conflict of interest often drains public trust as irrevocably as a verified one. Gene Powell’s undisclosed connection to Vanguard, the company the UT System Board of Regents chose in September to build a new children’s hospital partnering with the University of Texas Health Science Center (UTHSC) at San Antonio, presents just such a damaging appearance.

At a specially called meeting last month, Powell, the Board of Regents chairman, oversaw the selection of Vanguard Health Systems to build a $350 million children’s hospital in San Antonio. The hospital will partner with UTHSC-San Antonio, so the Board of Regents was charged with choosing the firm to build the hospital. As chairman, Powell doesn’t vote in board matters along with the other 10 regents, but he presided over the meeting and failed to reveal to many participants that a company called AirStrip Technologies that he co-founded with his son, Dr. Cameron Powell, has a pending business deal with Vanguard. That detail about Vanguard, a Nashville, Tenn.-based company, emerged in an article published Sunday, Dec. 2 by John Tedesco in the San Antonio Express-News, almost one month after the regents made their choice.

As a defense, Powell’s lawyer, Mark Murray, told the Express-News, “When you’re simply presiding over a discussion of others, I’m not sure I would have thought to make that announcement.” The Express-News said Powell “was listed as chairman of AirStrip, and [was] until recently, when the San Antonio Express-News began asking questions about the company.” Subsequent to the newspaper’s prying, AirStrip, which makes smartphone applications for doctors, removed Powell’s biography from the company website.

Francie Frederick, general counsel to the Board of Regents, said Texas law did not require Powell to announce his connection or to recuse himself from the meeting; the Texas Education Code says board members need to disclose a conflict if they have a “substantial interest” in a company seeking to do business with an institution of higher education.

Because Powell is not paid by Vanguard, does not own stock and is not employed by the company, his connection is not a “substantial interest,” according to Frederick. Frederick’s argument pales in comparison to the appearance of a conflict of interest, sloppiness or obfuscation on Powell’s part, which resulted when he failed to act with an abundance of caution and disclose the potential conflict..

The episode is reminiscent of another father-son Board of Regents potential conflict of interest that occurred this time last year, when the UT System Board of Regents took a $10 million stake in MyEdu, a website that collects and makes available to students information about professors and courses at public institutions like UT. The regents claimed the costly investment would improve graduation rates by allowing students — consumers, in their view — to make more informed choices about the courses they selected during registration. More to this point, MyEdu was co-founded by John Cunningham, the son of William Cunningham, a former chancellor of the UT System and president of UT-Austin. William Cunningham invested $175,000 in MyEdu.

Anthony de Bruyn, then a UT System spokesman, wrote at the time in an email to the online news site Inside Higher Ed, “There are no conflicts-of-interest … The vice chancellor and general counsel to the system and the general counsel to the board are responsible for vetting possible conflicts for members of the Board of Regents. In this case, there were no conflicts of interest. Texas law was precisely followed.”

Considering their biographies and professions, it is no surprise the 10 regents have regular run-ins with potential conflicts between their board duties and corporate interests.

In recent years, the UT regents have held out their corporate backgrounds as evidence to bolster their constant drumbeat that universities should be run more like businesses, that college students should make registration and major decisions as if they were consumers and that professors at public institutions should be held accountable for their work product as if they were corporate employees. Many Texans support that line of thinking if only because it pledges to be in the interest of lowering college costs. Many UT students admire the regents’ line of thinking, too. From their freshman year, UT students are made to stand in awe of the job-guaranteeing McCombs School of Business, an outpost of the regents’ cherished principles of efficiency and accountability, and seek jobs as seniors with the most desirable corporate brands. At the same time that they demand efficiency, accountability and promote corporate culture, the regents appear to take advantage of their power as public servants to advance their personal business and financial interests. This, some might reasonably argue, happened with Powell and the selection of Vanguard, causing him as a UT System leader to lose his integrity and credibility.

Transparency calls for disclosing a potential conflict of interest. In this case, there was no good reason for Powell to keep quiet about his connection, however removed, to Vanguard, when the regents were awarding the company $350 million to build yet another UT System hospital.