On Sunday, the Austin American-Statesman reported that, while UT President William Powers Jr. served as dean of the Law School, he received $325,000 under a deferred compensation agreement that was apparently not approved by the UT System Chancellor.
Although receiving the money without the Chancellor’s approval violated no laws, it did go against a UT System regents rule which states that “no [UT-System] officer or employee … shall accept remuneration” from an external entity whose primary objective is to support the UT System or any of its 15 academic and health institutions without explicit approval of the Chancellor.
Powers' past misstep was revealed by the Statesman just as student groups began calling once again for the resignation of Regent Wallace Hall, the embattled member of the board of regents who is currently under investigation by the House Select Committee on Transparency in State Agency Operations. That committee is considering recommending Hall’s impeachment, an unprecedented move, and recently issued a report claiming that Hall may have illegally viewed confidential student data.
It’s worth noting, however, that this student data was compromised in the course of Hall’s massive open records requests to the University, which he has said he made in an effort to find information on alleged misdeeds committed by UT officials in regard to admissions decisions and loans gifted to employees of the law school.
So what does Powers’ violation of this rule mean for the battle between Powers and the UT System regents? Given that Powers’ action broke no laws and, by many indicators, appears to be an unintentional mistake, probably not much. It also says little about the ultimate intentions of Hall. But the revelation does demonstrate how much money is being exchanged between higher-level administrators at the University and how much UT depends on obscure rules to keep these transactions fair and above ground.
The regents’ rule against System officials receiving large sums of money without the Chancellor’s approval, which Powers violated, is an attempt to avoid the problem of conflicts of interest in the dispersal of University funds. As recent history will tell us, that problem is very real: Larry Sager, Powers’ successor in the law school, was asked by the president to resign from his position after it was revealed that he had received a $500,000 forgivable loan from the same nonprofit foundation from which Powers received money while dean at his own suggestion.
Powers and Sager, however, were not the only faculty members that received retention payments from the UT Law School Foundation without a chancellor’s sign-off. According to the Statesman, about 20 professors received such forgivable loans, ranging from about $75,000 to $500,000 between 2006 and 2010.
It’s likely that Powers did not realize he was violating a rule in taking the money. Although he failed to mention the lack of disclosure to the Statesman when the paper inquired about it a year ago, Powers has since provided them with the necessary information, calling his initial failure to do so an “honest mistake.”
The recent revelation may not point to wrongdoing on the part of Powers, but it should certainly cause students to reflect on the recent efforts to “Stand with Powers” and stand against Hall. Powers’ lack of disclosure, although potentially accidental, is yet another reminder of how much money is being exchanged at the highest levels of University administration and how few eyes — of Texas or otherwise — are watching these transactions.
As the attorney general investigates the University of Texas Law School Foundation, legislators and former Foundation trustees are continuing to hammer out the fine line between the University and the private institutions that support the 40 Acres.
In a 4-3 vote last month, the UT System Board of Regents decided to begin a new external review of the Foundation’s relationship to the University. In 2011, President William Powers Jr. asked Larry Sager, then dean of the School of Law, to resign after it was revealed Sager received a $500,000 forgivable loan as part of a program administered by the Foundation. Regent Wallace Hall claims Powers was aware of the loan, which Powers denies.
Powers, who was dean of the law school before becoming president, said in an interview with The Daily Texan that the Law School Foundation has historically maintained full transparency and has now corrected its failures to disclose information.
“It is important that the salaries and other benefits they are making decisions on are known to the University,” Powers said. “It was the case during my tenure at the law school, and they have since corrected themselves.”
A report on the foundation released after Sager resigned found the structure of the forgivable loan program to be “not appropriate.” The author of the report, System general counsel Barry Burgdorf, has since resigned, and a regent committee has recommended setting this report aside in the ongoing investigation.
Burgdorf declined a request for comment on the facts of his report or on the new investigation. Several legislators sent a letter to the regents that compared the start of a second investigation to a personal attack on Powers. After scrutiny from the Texas Legislature, the regents agreed to have the attorney general conduct the investigation instead of hiring an outside firm to conduct one.
The foundation was founded in 1952 and has provided faculty members loans for housing, deferred compensation and other forms of payment to attract and retain them at UT. Over the past 11 years, the foundation has provided $75 million to the law school and its faculty. The foundation is currently valued at $213 million with 596 endowments.
Shannon Ratliff, a former trustee of the foundation and a former UT System regent, said it is a “shame that the Foundation had been caught up in politics.”
“I wish I knew how the Law School Foundation had any bearing on the current debate over the direction of the University,” Ratliff said. “I can’t believe you could find so much fault with a foundation whose sole purpose is to give the law school additional resources to succeed.”
Ratliff said the foundation’s independence from legislative oversight will allow it to help the law school maintain a diverse student body if the U.S. Supreme Court rules against the University in the pending case Fisher v. Texas.
If the court decides against the University, a student’s race would likely no longer be allowed as a factor in admissions decisions. Ratliff said he believes the foundation would focus its student recruiting efforts on attracting students from underrepresented groups if that happens.
After a federal circuit court decision in 1996 banned the University from factoring race into admissions, Ratliff said the foundation focused its scholarship funding on underrepresented groups — something an internal fundraising unit would have been unable to do. The Supreme Court overturned the 1996 decision in Grutter v. Bollinger in 2003.
John Massey, president of the foundation, said it had “learned [its] lesson the hard way,” but would like to begin discussions with the attorney general’s office on providing similar forms of assistance for faculty that are appropriately disclosed to the University. Massey testified before a legislative committee focused on government transparency and has since declined requests for comment.
“We can use [forgivable loans] for someone just beginning his career, we can give some money that they can use right now, and that puts a kind of golden handcuffs on them because it’s forgiven over a period of time,” said Ward Farnsworth, current dean of the law school. “Those are advantages that a simple salary will not achieve.”
Farnsworth said assistance from the foundation has helped the school maintain higher faculty salaries and lower tuition for students than the state could afford on its own.
The University is already in discussions with the attorney general’s office to find a way to resolve 16 other outstanding loans made under the forgivable loan program without punishing law school faculty for receiving these loans, University spokesman Gary Susswein said. Susswein said the outstanding loans may be paid through the University payroll to the faculty members.
About $300,000 of Sager’s loan has been forgiven, although he still owes the foundation $200,000 plus interest. Of the $5.4 million paid out under the program, $3.27 million has been resolved. Other faculty loans were valued at less than Sager’s, but one was for $250,000, Massey said.
Update - Reaction from President William Powers Jr. after the Board of Regents' decision:
"Any implication that what occurred today is [about] not being transparent or forthcoming with information to the System or perhaps to the Regents is simply false. If that was an implication I think that’s the most important thing to dispel... Executive session is not open and I’m not at liberty to talk about that. But I will say that, again, any impression that there were facts that we were not forthcoming with is simply not true... The Burgdorf report looked into this. The Attorney General looked into this. The audit committee is now auditing. That’s still in progress. We have cooperated and been forthcoming with information at every stage.”
After an uncharacteristcally heated meeting, the UT System Board of Regents voted Tuesday to continue the investigation of the UT School of Law Foundation’s relationship with the University, including an additional external review at the recommendation of the board's Audit, Compliance and Management Review Committee. The vote passed with a narrow 4-3 margin.
The specially called meeting — held during a period of escalating tension between the regents, the Texas Legislature and President William Powers Jr. — featured several moments of conflict.
The Audit, Compliance and Management Review Committee formerly recommended an external review of the use and management by UT-Austin of funds provided by the foundation to supplement the committee’s investigation.
During the tense meeting, several regents said they were concerned with the use of taxpayers’ money on an additional review. Regent Steven Hicks referred to the $500,000 price tag of an conducting an additional investigation as “beating a dead horse.” Hicks said the System has steered toward a board-driven entity in recent months, and that he did not approve of this shift.
“There have been times in the last two years where not only I have not been proud, I’ve been somewhat ashamed of being a UT regent, and that’s a real travesty to me,” he said.
Regent Wallace Hall defended the committee’s recommendation because he said the System continues to receive documents that were not included in an initial open records request he made recently. The open records request was far-reaching, requesting boxes of University documents over the course of the last 18 months.
In 2011, Powers asked Larry Sager, former dean of the School of Law, to resign after concerns arose regarding the foundation’s forgivable loan program. Though Sager received $500,000 through the program, Powers has said he was not aware of the loan at the time it was made. This assertion was contradicted at the meeting, when Hall said he had discovered evidence that Powers was aware of the forgivable loan and had chosen not to address the matter. Powers denied to reporters that he had been anything less than transparent in his dealings with the regents.
The program was used as a tool to recruit and retain top law faculty from across the country to UT by offering them forgivable loans if the faculty members agreed to stay for a certain number of years. The foundation and its program are funded by UT alumni and other donors.
The Regents' audit committee also recommended setting aside a previous report on the foundation’s relationship with the University released last November.
System vice chancellor and general counsel Barry Burgdorf, who announced his resignation earlier this month, wrote the report, which concluded that the forgivable loan program was conducted in a manner that was “not appropriate.” The report laid out the history of the forgivable personal loan program, which began in 2003 while UT-Austin President Bill Powers served as law school dean. The program was then expanded under Sager.
In the report, Burgdorf recommended permanently ending the program and awarding compensation to faculty through restricts gifts rather than direct payouts during hiring.
At a House hearing on transparency in state operations last week, foundation board president John Massey said the foundation was in the process of phasing out the forgivable loan program and finding new incentive programs to help attract top faculty to the University.
The System created a task force to look into the incident last year and was supposed to provide their results later this spring.
Earlier this week, Pedro Reyes, executive vice chancellor for academic affairs at the UT System, directed Powers to not delete any emails from electronic devices in or accessed by the Office of the President over the course of the audit review of the Law School Foundation.
Regents Hall, Alex Cranberg, Paul Foster and Brenda Pejovich voted in the majority to continue the investigation with an external review, while regents Hicks, James Dannenbaum, and Robert Stillwell voting against continuing the review process.
Cranberg said the external review would provide a more comprehensive view of the events that led toward lapses in governance that have been fixed. Stillwell said he was happy with Burgdorf’s report, which was also reviewed by the staff of the Office of the Attorney General.
Tensions surrounding the Board of Regents have escalated in recent months. In February, after a meeting at which Powers was intensely questioned by the board, Lt. Gov. David Dewhurst and House Speaker Joe Straus relaunched the Joint Oversight Committee on Higher Education Governance Excellence, and Transparency. At the committee’s first meeting yesterday, members requested information from the system required to investigate allegations the board was “micromanaging” UT administration.
The Texas Legislature also recently passed three resolutions honoring Powers. At the ceremony following the resolutions, Dewhurst became emotional, telling Powers “we are lucky to have you.”
I believe in reform, and I know that Bill Powers believes in reform,” Dewhurst said. “That’s why I’m particularly troubled when I see UT regents go around this man. I see them trying to micromanage the system.”
Dewhurst also referred to what he called “character assassination” plots launched against Powers and his family.
In a statement, board chairman Gene Powell said these allegations “surely had to be the result of misinformation and were either incorrect or inaccurate.” Powell, regent Printice Gary and student regent Ashley Purgason were not present at Wednesday's meeting.
The UT System Board of Regents will hold a special meeting on Wednesday to discuss and possibly take action on issues regarding the relationship between the UT School of Law and the Law School foundation. The board will also discuss “the financial management and use” by UT of funds to support the law school and relevant legal issues after hearing a recommendation from the Audit, Compliance, and Management Review Committee.
In December 2011, President William Powers Jr. asked Larry Sager, former dean of the School of Law, to step down from his position after an open records request from law school faculty revealed he obtained $500,000 in forgivable personal loans from the UT Law School Foundation.
Barry Burgdorf, the UT System vice chancellor and general counsel who resigned earlier this month, authored the System’s report on the incident. The report found the lack of transparency in the forgivable personal loan program meant it “suffer[ed] infirmities that make it inappropriate for a public university in Texas.”
Last week, Pedro Reyes, executive vice chancellor for academic affairs, emailed Powers directing him not to delete emails of any time from electronic devices or computers in or accessed by the Office of the President over the course of the pending audit review of the Law School Foundation. The email also directed the offices of the provost, executive vice president for business affairs and vice president for legal affairs not to delete emails, and mentioned Sager, assistant dean Kimberly Biar, and Glenn Woelfel, senior financial analyst for the law school.
Powers’ spokesman Gary Susswein described this move as “unusual.”
The UT System Board of Regents announced an advisory task force on relationships between UT institutions and UT-affiliated foundations in response to a report deeming the procedure of obtaining a forgivable personal loan through the Law School Foundation inappropriate for the University.
During the regents’ regular meeting Thursday, Board Chairman Gene Powell said the advisory task force will look into the best practices regarding relationships with foundations that regularly contribute to UT.
“This review was a necessary step to assure that requests from universities to these groups are consistent to the best practices,” Powell said.
Last year, Larry Sager, former dean of the School of Law, stepped down from his position at the request of UT President William Powers Jr. after it was found he obtained a $500,000 forgivable personal loan from the Law School Foundation, a nonprofit organization not operated by the University that helps support law professors’ salaries, without approval from central administration.
The UT System report, released Tuesday and written by Barry Burgdorf, UT System vice chancellor and general counsel, looked into the relationship between the foundation and the University following Sager’s resignation.
In the report, Burgdorf wrote that Sager’s ability to recommend and negotiate the personal loan for himself created an impression of self-dealing that the System does not condone.
Sager approached former foundation president Robert Grable in 2009 and proposed the loan over dinner after Steve Leslie, executive provost and vice president, denied Sager a salary increase because of a tight budget, according to the report. Leslie oversees compensation of University deans.
According to the report, Powers said he did not discuss the personal loan with Sager either.
After discussing the report in executive session, Powell said the task force will create a central structure for relationships with UT-affiliated foundations and establish record-keeping procedures and provisions to assure that UT employees are not receiving direct benefits from external sources.
The task force is also expected to recommend locations and staffing for foundation offices. The Law School Foundation is currently housed on campus.
“This will go a long way to establish the best management practices to help support these entities that have supported UT System institutions for so long,” Powell said.
The forgivable personal loan program is currently suspended.
Sager’s spokesperson Glenn Smith said conflicts with Sager’s personal loan could have been avoided if the procedures the task force will recommend had already existed.
“Historical practices were followed by Dean Sager and other faculty,” Smith said. “Whatever new procedures will be put in place will be followed as well.”
Stephen Susman, a member of the Law School Foundation’s board of trustees, said he supports the creation of the task force. Any official procedures for salary approval that might be implemented through the task force will help avoid situations like the one Sager was put in, Susman said.
“This wasn’t Sager’s fault,” Susman said. “The University did not have a procedure in place. The notion that they would expect Sager to get approval for his own contract is stupid.”
Susman said the foundation was aware Sager was negotiating his own loan, and executive committee members assumed he had the authority to do so.
Susman was not on the foundation’s board of trustees when Sager was awarded the forgivable personal loan.
In a statement to The Daily Texan, UT President Powers said he welcomes the recommendations set forth by the report released by the System.
“The report released by the UT System recognizes the foundation’s vital role in maintaining a nationally ranked law school,” Powers said. “The report also offers some important recommendations to modernize and bring more transparency to the relationship between UT and the foundation.”
Regents Robert Stillwell and Brenda Pejovich will head the task force, and a representative from the Office of the Attorney General will provide advice. UT institution presidents will also participate in establishing recommendations that will be presented to the regents for approval in 180 days.
Printed on Friday, November 16, 2012 as: UT, affiliates' relation to be assessed
Last year, Larry Sager, former dean of UT School of Law, loaned himself $500,000 from a private fund used to sweeten employment offers. When a group of disgruntled law school professors filed an open records request that disclosed Sager’s loan to himself and the whole forgivable loan operation, UT President William Powers Jr. asked Sager to step down from his post, and big questions were raised about the methods our law school employs to compete with higher-paying private institutions when recruiting faculty members. While UT may have one of the best law schools in the country, it’s also a public institution and cannot, in trying to compete with private universities, compromise its responsibility to be transparent. Barry Burgdorf, UT System vice chancellor and general counsel wrote in a recent report, “The idea of Dean Sager’s $500,000 forgivable personal loan was his. Obviously, this lack of transparency and accountability is unacceptable and, at a minimum, it creates an impression of self-dealing that cannot be condoned.”
Burgdorf’s report, which the UT System released on Tuesday, determined that the forgivable loan program is not illegal but “inappropriate.” Burgdorf looked into the relationship between the University of Texas Law School Foundation and the University following Sager’s resignation.
Burgdorf’s report found that the forgivable personal loan program began in 2003, while Powers was serving as dean of the law school prior to his appointment as University president. The forgivable personal loan program expanded under Sager “in response to the departure of various law school faculty members ... The report recognized the foundation’s significant role in the School of Law’s development helping supplement faculty compensation and providing adequate funding to retain the top faculty, but determined it inappropriate for a public institution to grant forgivable personal loans to faculty through an independent foundation.” We applaud Burgdorf’s call for sunlight when it comes to the law school because, in the words of former Supreme Court Justice Louis Brandeis, it is the best disinfectant.
A report released by the UT System Tuesday determined the interaction between the School of Law and the University’s central administration is insufficient in regards to faculty compensation.
Last December, UT President William Powers Jr. asked Larry Sager, former dean of the School of Law, to step down from his position after it was found he obtained a $500,000 forgivable personal loan from the University of Texas Law School Foundation, which helps support law professors’ salaries, without notifying appropriate administrators.
The UT System report, written by Barry Burgdorf, UT System vice chancellor and general counsel, looked into the relationship between the foundation and the University following Sager’s resignation.
Burgdorf’s report found the forgivable personal loan program began in 2003 during Powers’ time as the law school dean prior to his appointment as University president. Powers did not obtain a forgivable loan but did receive a deferred compensation agreement from the foundation in 2001, which was approved on various administrative levels.
The expansion of the forgivable personal loan program occurred while Sager was dean in response to the departure of various law school faculty members.
The report recognized the foundation’s significant role in the School of Law’s development helping supplement faculty compensation and providing adequate funding to retain the top faculty, but Burgdorf’s report determined it inappropriate for a public institution to grant forgivable personal loans to faculty through an independent foundation.
In Sager’s case, essentially awarding himself the forgivable loan, the lack of administrative approval is fundamental to the conflict.
“The idea of Dean Sager’s $500,000 forgivable personal loan was his,” Burgdorf wrote. “Obviously, this lack of transparency and accountability is unacceptable and, at a minimum, it creates an impression of self-dealing that cannot be condoned.”
Sager approached former foundation president Robert Grable in 2009 and proposed the loan over dinner after Steve Leslie, executive provost and vice president, denied Sager a salary increase because of a tight budget. Leslie oversees compensation of University deans.
According to the report, Powers said he did not discuss the personal loan with Sager either.
While the loan program did not violate any laws, it is inappropriate for a public university in Texas, Burgdorf wrote.
Burgdorf’s recommendations include distancing the School of Law from the foundation as separate entities, not releasing compensation to a dean without consent from University administrators, permanently ending the program and awarding compensation to faculty through restricted gifts rather than direct payouts.
The UT law school dropped back out of the prestigious top 14 law schools compiled by the U.S. News & World Rankings, but officials say the drop is not a result of controversial administrative decisions made last fall.
The firing of the former law dean Larry Sager in December did not influence the rankings since the U.S. News & World peer assessments were sent out in early October and were due in December.
Interim law dean Stefanie Lindquist said the key to the rankings is the school’s peer assessment scores that have remained consistently strong for years, but other factors influence the fluctuations.
U.S. News & World began the rankings in 1990, with the most importance placed on peer assessments from the top administrators and faculty of law schools, as well as a lesser portion by pre-selected lawyers and judges. Another portion of the rankings is based on selectivity factors and faculty resources.
“The rankings do not necessarily reflect the true quality of the law schools,” Lindquist said. “Given that we know the quality of the school has not changed, it seems artificial.”
President William Powers, Jr. fired the previous law dean, Sager, in December after several law professors filed an open records request that revealed compensation disparities among the faculty.
“The change in deanship here had no impact on the rankings,” Lindquist said. “The surveys were already in the seals.”
Robert Morse, director of data research for U.S. News & World, said the drop could be the result of small changes in a lot of factors and because the law schools that historically make up the top 14, such as Yale and Stanford, score consistently higher.
“It’s that UT-Austin’s profile is somewhat below them and they can’t raise it high enough to consistently be in that group,” Morse said.
Law student Joseph Keeney began at the UT School of Law last fall and said he does not worry about the rankings. He said students concerned with the rankings are looking for the prestige associated with the group.
“I’m still going to have the same job prospects that I had expected before I started,” Keeney said.
Keeney said the firing of Sager caused some distraction during finals, but he did not think it would greatly affect his education.
“I haven’t noticed any change at all,” Keeney said. “I think we’re in good hands.”
Lindquist said she does not think the issue of changing deans will hurt next year’s peer assessments because the law school has moved beyond it and if a new dean is hired, it could bring positive publicity to the school.
Printed on Friday, April 6, 2012 as: Rank drop not tied to firing, law school says
The search for a replacement dean for the School of Law is underway, according to search committee chair David Rabban.
Rabban said he and other committee members are in the process of generating a list of potential candidates to replace former School of Law dean Larry Sager, who signed a letter of resignation Dec. 7 per request of UT President William Powers Jr. due to concerns over Sager’s management of the school. Sager joined the law faculty in 2002 and became dean in 2006.
Powers said the decision to remove Sager from the law school had nothing to do with the American Bar Association’s re-accreditation of the School of Law this year.
“For whatever reason the faculty was deeply divided and a very large group of faculty was not supportive of the dean,” Powers said. “This new leadership will bring the law school to a common goal. Healthy debates [among faculty] with the common goal of being the best department in the law school is important for moving ahead.”
Rabban said the committee is seeking “an intellectual leader with strong management skills” to fill Sager’s former position as soon as possible. The committee began meeting in November, as members formerly believed they would not need to fill the position until fall of 2012. In August, Sager announced his intent to step down from the position of dean following the academic year without giving a specific reason, according to The Texas Tribune.
“We’re generating a long list of candidates and we’re going to review that list as a committee,” Rabban said. “I can’t say there’s anyone already that we’ve been considering.”
Former associate dean Stefanie Lindquist was selected in December to serve as interim dean until a permanent replacement is found. Powers said Lindquist is already encouraging staff to look ahead, and other law school faculty members are grasping the concept well. Lindquist said she is planning to hold a student forum to update students in the law school about the transition and any updates in the dean search.
Lindquist said she did not have to think twice about accepting the position of interim dean and accepted the role as a part of her job duties.
“I didn’t think about it when President Powers called, I just said yes,” Lindquist said. “The position is enjoyable in the sense that it’s interesting and challenging.”
Lindquist said she is looking forward to returning to her former role and also teaching a number of courses in the law school as soon as the position is filled.
UT President William Powers Jr. requested immediate resignation Wednesday of School of Law dean Larry Sager due to concerns over Sager’s management of the school.
In a letter to law school faculty, Powers said due to “deep divisions within the faculty at the moment,” the decision to remove Sager was “in the best interest of the law school.” Stefanie Lindquist, associate law school dean, will serve as interim dean until administrators find a permanent replacement.
“I know there are concerns about compensation and gender inequalities at the law school, and the new leadership will be committed to exploring these issues and taking appropriate steps to address them,” Powers wrote in his letter.
According to documents obtained by The Texas Tribune, Sager wrote in a letter to colleagues that he made gender equity an important aspect of the budget committee, designated many raises for women faculty members and supported the Center for Women in Law. Sager also wrote that he and Lindquist established the Gender Equity Task Force to look into concerns.
Sager said in his letter his highest priority was building and maintaining law school faculty. Sager said he believed offers of greater compensation at law schools such as Harvard could draw UT faculty members away, and he “tried to meet the market” when recruiting and maintaining those appropriate for positions.
“All that said, I may not have gotten every case right in the course of our sustained effort to build and hold on to faculty,” Sager wrote.
In August, Sager announced his intent to step down from the position of dean following the academic year without giving a specific reason, according to The Tribune.
Powers wrote in his letter that he “hoped we could get through the transition year without interim leadership, but that is now not possible.”
UT law school representatives were not available for comment.