Secrecy and foundations

Open government advocates have their sights set onfundraising groups that have evaded public records laws for years despite beingrun by public employees and conducting the state’s business — universityfoundations.

These foundations, often called auxiliaries, raise funds forpublic universities through private donations. They are responsible forfunneling millions of dollars into higher education for everything fromscholarships to major campus renovations.

A common assumption is that because these foundations wereestablished as private entities, their business is outside the scope of statepublic records law. However, as it became clear that these foundations take onlarge projects for universities and make decisions that directly affectpublicly funded colleges, citizens and journalists began investigating thefoundations’ operations and flexing their public information rights.

In California, these investigations revealed rampantcorruption. At Sonoma State University, reporters from the SantaRosa Press-Democrat used public records and inside sources todocument a series of unusual personal loans that the Sonoma State UniversityAcademic Foundation made to one of its former board members and to clients ofhis finance company — loans that the borrowers were unable to fully repay whenthe economy hit the skids. The disclosures led to an investigation by the stateattorney general.

That was only the start of California’s problems asinvestigations uncovered questionable handling of donor funds.

According to a California Attorney General audit, thepresident of Sacramento State University, Alexander Gonzales, spent more than$27,000 of the school’s foundation funds in 2007 to remodel his kitchen. Theaudit found that Gonzales also received more than $80,000 for housing expensesand a loan of more than $230,000 from the foundation.

California State Sen. Leland Yee has fought for three yearsto pass a bill that would specifically require university foundations to beheld to public records law requirements.

Adam Keigwin, a spokesman for Yee, cited multiple cases ofcorruption within California’s auxiliaries as part of Yee’s motivation for thebill.

“First and foremost, almost all of these foundations andauxiliary organizations are fully administered by public employees and it istaxpayer dollars that are being used to facilitate these organizations and thatmeans that we have a right to know how those funds are being spent,” Keigwinsaid. “They are there to serve the public universities. They are there forscholarships and other services. If they are being misappropriated that meansthere is less money for students.”

Yee authored two bills in years previous that passed thestate Senate and Assembly but were vetoed by former Gov. Arnold Schwarzenegger.

In May, Yee struck a compromise with administrators of thestate’s public higher education system, once major opponents of the bill.

Under the compromise, the legislation was amended to protectthe anonymity of foundation donors except those donors or volunteers whoreceive “something from the university valued at over $2,500” or “a sole source(no-bid) contract within five years of the donation,” according to a press releasefrom Yee.

“We have pretty much guaranteed ourselves a signature [fromthe governor],” Keigwin said. “For us, it was worth making that compromise.”

Pennsylvania courts weigh in

While California’s open government advocates found a saviorin the legislature, transparency supporters elsewhere are taking other avenuesto spark change.

Those in Pennsylvania used the courtroom.

David Loomis, a journalism professor at Indiana Universityof Pennsylvania, teaches news reporting courses after spending more than 25years as a professional journalist. He gives his students the opportunity topublish stories on The HawkEye, an online site he created andedits.

Loomis said his intention for the HawkEyeis to highlight investigative journalism centering on issues directly affectingIUP students.

When a former president announced major campus renovationplans, including a $280 million residential update and an $80 million meetingcenter, students involved with the HawkEye honed in on funding sources for theprojects.

One of Loomis’ students expressed interest in how theuniversity’s foundation, one of the major financial players in the campusoverhaul, decided to take on such large plans.

On June 7, 2010, Loomis requested pledge amounts and minutesof meetings regarding the construction from the university’s auxiliaryfoundation.

What the university released, however, was little more thanblack bars stretched across pages and pages of foundation records.

Loomis and one of his students went to inspect the releaseddocuments before deciding not to pay the $118 duplication fee associated withthe documents because they felt information was wrongfully redacted.

“It was like a CIA document,” Loomis said. “We thought thatwould be a waste of money. The amount of money is not exorbitant and we canafford it. It just didn’t make sense to pay money for no information.”

Loomis and his pro bono attorney, Gayle Sproul, appealed tothe state’s Office of Open Records arguing that Pennsylvania’s Right to KnowLaw required the release of more information than the foundation offered.

After investigating his claim, the OOR ruled in Loomis’favor and ordered the university to release everything in the original request,except information that would reveal donor identities.

In response, the university appealed the decision to thestate appeals court arguing that Loomis was not allowed to challenge theredactions because he failed to pay the $118 duplication fee.

The appeals court sided with the university, reversing theOOR decision and ruling that because Loomis never paid the duplication fee hehad no right to the requested information.

In July 2011, Loomis requested the documents in an electronicformat, hoping to reduce the reproduction cost. The university refused torelease an electronic version of the documents and Loomis eventually paid the$118.

He is now discussing further legal action with his attorney.

In the same court that the Loomis case ended, a regionalpaper in Pennsylvania, The Pocono Record, won atwo-year legal battle over records from East Stroudsburg University and itsfoundation. Sproul was the newspaper’s attorney in that case as well.

In February 2009 the paper filed a public records requestfor funding information from the East Stroudsburg University Foundation inconnection with the paper’s investigation of an ESU official suspected ofsexual and financial impropriety.

The foundation denied the Record’s request, arguingthat the private foundation was exempt from the Right to Know Law. However, onMay 24, 2010 a state appeals court sided with the Record,finding the foundation performed a “governmental function” and ordering it torelease donor information and pledge amounts made to the ESU Science andTechnology Center.

The court mandated the release of ESU Foundation boardmeeting minutes regarding fundraising and fund management, and donor files andcontributions from five specific donors and one corporate donor.

The university then released a 187-page document that — inSproul’s opinion — redacted too much information and was a “flagrant violation”of the law.

Unhappy with the information the paper received, Sproulwrote to ESU Public Information Officer Richard Staneski threatening legalaction if more information was not released in compliance with the court’sorder.

In May 2011, the university filed a motion forclarification, seeking to “determine what, if any error,” was made by ESU.

The university argued that the release of information aboutthe six specific donors was impossible without actually identifying the donors.

On June 6 a state court judge ruled in favor of thenewspaper, granting Sproul’s motion for the court to enforce the originalruling. All information that would reveal donors’ identities was withheld fromrelease.

Restraint without secrecy

Frank LoMonte, executive director of the Student Press LawCenter, said these foundations, though established as private entities, arestill under the scope of public records laws because they perform“indispensable government functions.”

“We don’t want government agencies hiding functions fromscrutiny by privatizing them,” LoMonte said. “If the foundation didn’t exist,the university would clearly have to use public resources to raise its ownmoney.”

LoMonte said foundations can be transparent withoutrevealing personal donor information.

“I think as much as anything, the reason for having theexternal entity raise money is for donor confidentiality purposes,” LoMontesaid. “But what you are seeing is that it is possible to keep donor informationprivate and still have a good level of transparency. Now, at least the publiccould know, broadly, how the money is being spent.”

Across the nation, the applicability of public records lawhinges on the way each state views university foundations and the relationshipbetween the foundation and the university. If a foundation works closely with apublic university, its records are more attainable.

The level of transparency also depends on the particulars ofeach state’s public records law.

For instance, university foundations in Nevada are simplysubjected to the same public records requirements as other government agencies,while foundations in Colorado are able to restrict identifying donorinformation and donation amounts.

Like California’s potential law, the Georgia Legislaturepassed a bill in 2005 making donor names non-public, unless the donors havesold goods or services to the university worth more than $10,000 within threeyears of making a donation.

Loomis, the journalism professor at IUP, said he sawnewsworthiness in what his employer’s foundation was doing because cuts inpublic education spending by state governments are causing public schools to findfunds elsewhere.

“I can see why these organizations were created. Thelegislatures in their wisdom decided to slash public support for highereducation and that imposes tremendous burdens on undergraduates and it forcesadministrators out of the public spigot in search of private funding,” Loomissaid.

“That tends to leave the impression that there is someevasion of public scrutiny. They don’t want us to know anything about it, but Ithink those are answers my students and I want.”

By Nick Dean, SPLC staff writer