Lawrence Sager

Former UT Law School dean hints at legal action in statement

In a statement to the Texas Tribune, former UT Law School dean and current law professor Lawrence Sager hinted at taking legal action against UT System Regent Wallace Hall.

Earlier on Tuesday, the Texas Tribune published an interview with Hall that stemmed from a current unpassed house resolution that would begin impeachment proceedings against Hall. The interview focused primairly on the possible impeachment, but Hall touched on a 2011 controversy where UT's Law School Dean resigned.

"Almost immediately after the board was told of [University of Texas at Austin School of Law] Dean [Larry] Sager's half a million dollar concealed and unauthorized grant to himself, President Powers gave a statement to the press saying that "nothing illegal or improper" had taken place," Hall said in the interview to the Texas Tribune.

Later in the day, the Texas Tribune published a statement from Sager, who said Hall made several "false and defamatory remarks regarding my actions."

"In the interview, Mr. Hall said that I concealed an unauthorized grant to myself. Both assertions are demonstrably false," Sager said in his statement to the Texas Tribune. "It is hard not to conclude that Mr. Hall has willfully and maliciously misstated these facts to serve some end other than the truth.  His remarks are baldly defamatory and cannot go unchallenged.  Legal action may be the only effective resort."

The Daily Texan has reached out to Sager, but he has not responded yet for comment.

The trailer for Homo Erectus, a 2007 movie written, directed by and starring Adam Rifkin, lasts two and a half painful minutes and features a montage of women being clubbed over the head, one naked butt and a few cuts of men kissing, the last an unsophisticated reference to the first word in the film’s title.

Roderick Hart, dean of the College of Communications, confirms what the trailer implies: “It was a terrible film.”

But UT and UT students helped make the movie. Homo Erectus was produced by Burnt Orange Productions, LLC, a company owned by the UT Communication Foundation. The University cannot legally own a for-profit company, but the foundation successfully circumvents that rule because the Communication Foundation is an external nonprofit. Its stated mission is to support the University.

In reality, the Communication Foundation was established  in 2003 to pay for Homo Erectus and other films with both public and private money. Those films, in their defense, provided a learning experience for UT students interested in filmmaking, a handful of whom worked behind the scenes and on the set. Radio, Television and Film students worked on four films produced by Burnt Orange Productions between 2003 and 2007.

The films were meant as an educational exercise, with the possibility that they would additionally generate revenue. Ellen Wartella, dean of the College of Communication when the Communication Foundation was established, explained in an interview: “We were hoping to set up a film production program that our students would work on that would actually produce films. We hoped it would develop into a source of income to keep production going with in the department. It was a way of connecting our students and getting them money for productions and getting them shown in theaters.”

In the past year, other external foundations collecting private money to support this public University have come under close scrutiny as part of a larger power struggle for control and oversight between the UT System Board of Regents and the UT administration.

In 2011, Lawrence Sager, former dean of the University of Texas Law School, resigned under pressure after he received a $500,000 forgivable loan using funds from the School of Law Foundation, a fact revealed by an open records request filed by disgruntled faculty members. Because the School of Law Foundation and the Communication Foundation are external to the University, the money they contribute is subject to different rules than public funds that come from other sources: the Texas Legislature (13 percent of the 2012 UT-Austin budget), the Permanent University Fund (the UT-System endowment) and federal funding from the U.S. Government.

In a state rabid about access to public information and transparency of government, the foundations operate in the shadows. The rules governing the money’s distribution are inconsistent and vague. The University wants to keep the regents at bay, but at a public institution, even private funds must be dispersed in a manner that is transparent and clear. This lack of transparency was truly the most objectionable characteristic of the Communication Foundation, the tastefulness of clubbing women aside.

The University was unable to provide records of Burnt Orange Productions’ expenditures, but the foundation “registered consistent negative balance of more than $760,000 on its tax forms since filmmaking ended in 2007,” according to an April 29 article in The Daily Texan. It continues, “By writing off its losses, the foundation registered a positive balance on its 2012 tax return of $22,000, but how those funds will be spent and whether or not the organization has any potential as a vehicle for funding at the University of Texas remains to be seen.” 

Should Homo Erectus and a filmmaking company described as a “sinkhole” for private and public money be a part of the mission of higher education? Many students involved directly in the project say “yes,” because the foundation provided them with valuable learning experience. One student told the Texan, “The main long-term benefit I received was working with high quality material.”

But any money flowing touched by foundations linked to the University — even money aimed ostensibly at enhancing the student experience — should be subject to all the transparency requirements of a public university in Texas. The intentionally opaque structures of many external foundations, which blur the lines between public responsibility and private interest, demand attention. 

Correction: Because of a copy editing error, an earlier verision of this article incorrectly said Lawrence Sager, former dean of the University of Texas Law School, gave himself $500,000 forgivable loan using funds from the School of Law Foundation. Sager did not give himself, but received the forgivable loan.

UT law professor Henry Hu will return to School of Law after heading a division of the Securities and Exchange Commission for 13 months. Hu is a graduate of Yale Law School and his writings have appeared in Columbia Law Review, The New York Times and The Wall Street Journal. Hu was named director of the Division of Risk, Strategy and Financial Innovation (Risk Fin) in 2009. Hu announced his decision Thursday; the SEC has not yet named a replacement. The SEC set up Risk Fin as a regulatory agency in September of 2009 in response to the 2008 banking meltdown and lawmakers’ criticisms for not catching the Bernie Madoff Ponzi scheme. The agency is tasked with improving the SEC’s ability to identify developing risks and trends in the financial markets, as well as breaking down barriers within the SEC and improving communication between divisions, according to the SEC website. The agency was created through the merger of separate SEC units that conducted economic analysis and risk assessment. Hu hired people he had previously worked with who managed hedge funds on Wall Street, adding people with a business and financial background to a staff primarily made up of securities lawyers. The division was the first created at the SEC in 37 years. “He’ll be remembered as the George Washington of Risk Fin,” said John Nester, the director of the SEC’s Office of Public Affairs. Hu will resume teaching and the research he worked on prior to his departure, said Lawrence Sager, dean of the law school. “He is brilliant,” Sager said. “He has a wondrous technical understanding of the world of corporate finance and SEC regulation. This brings a marvelous dimension to the classroom, workshop table and the world of academic writing.” It was always understood Hu would return to UT after working for a stint at the SEC, Sager said. “We have worked so hard at the law school to build up a stellar faculty,” he said. “Bringing members of the faculty home with a treasure trove of experience is so important to us.” Law professor Lino Graglia said it is very important for the school to have a highly regarded expert in securities regulation. “He’s something of a perfectionist,” Graglia said. “He applies that perfectionism to his work; he has very high standards.” Graglia said there is no better experience for teaching securities regulation than to be the one creating it. “The only problem the school has now is that he’ll have offers from other schools,” Graglia said.