Prosecutor asked to review testimony of 2 on UA deficit

Legislative auditors have asked Pulaski County Prosecuting Attorney Larry Jegley to look into contradictory statements made under oath in September by University of Arkansas at Fayetteville Chancellor G. David Gearhart and former university spokesman John Diamond.

The two testified before the Legislative Joint Auditing Committee as it reviewed a state auditors’ report on a $4.2 million deficit in the university’s fundraising division.

Diamond said Gearhart told a group of Advancement Division officials to “get rid of” documents to keep them from public view. Gearhart denied doing that.

In a letter to Jegley dated Wednesday, Legislative Auditor Roger Norman noted that his office initially referred the “potential perjury issue” to Washington County Prosecuting Attorney John Threet in Fayetteville. Norman said he’s rerouting the question now because the contradictory statements were made in Little Rock.

State law requires the legislative auditor to notify the appropriate prosecuting attorney on all matters that appear to involve a criminal offense, Norman’s letter said. His office notified Threet in September of four issues related to state auditors’ investigation into the university fundraising division’s deficits.

A Dec. 12 report by Deputy Prosecuting Attorney David Bercaw in Fayetteville found no criminal wrongdoing. Three issues he investigated dealt with finances: a twice-paid expense reimbursement for former Division of Advancement chief Brad Choate, questionable accounting involving receivables by school Treasurer Jean Schook’s office and an improper deposit of a $1.35 million check by former division budget officer Joy Sharp.

The fourth issue sent to Threet involved questions related to the contradictory testimony from Gearhart and Diamond before the Legislative Joint Auditing Committee.

Bercaw’s report about that testimony said: “If anyone did perjure themselves at the hearing, jurisdiction would properly lie in Pulaski County, as the hearing took place in Little Rock.”

Norman’s letter quoted the same statement in his letter to Jegley and added: “Hence, the potential perjury issue is being referred to you.”

Contacted Thursday, Jegley said he hadn’t received Norman’s letter yet. He said he’ll wait until he does before deciding what to do next.

“I’ll take a look at it and see what his allegations are,” Jegley said.

In an email to the Arkansas Democrat-Gazette on Thursday, UA spokesman Mark Rushing said he believes any potential perjury issue already has been resolved by the prosecutor’s office in Fayetteville.

“…It is the university’s position that the prosecuting attorney’s report was merely pointing out that technically, upon a finding of evidence of perjury, proper jurisdiction would be in Pulaski County,” Rushing wrote. “However, the report states that no wrongdoing or criminal activity occurred. If the prosecuting attorney’s office had found any evidence of perjury, such evidence would have been referred to the Pulaski County prosecutor for appropriate action.

“Deputy prosecutor Dave Bercaw confirmed [to the university] that his investigation did review the issue, did not find evidence of perjury by Chancellor Gearhart or anyone else, and if he had found such evidence, the matter would have been referred to the Pulaski County prosecutor,” Rushing’s email continued.

The Democrat-Gazette’s efforts to contact Bercaw and Threet on Thursday were unsuccessful.

Deputy Prosecuting Attorney Mieka Hatcher, who worked with Bercaw on the investigation, sent a three-sentence email response Thursday night:

“The substantive issues of the alleged perjury charge were part and parcel of the [Freedom of Information Act] review. The investigation did not reveal any evidence of perjury. However the jurisdiction with the controlling authority is Pulaski county.”

Hatcher could not be reached before deadline for further questions.

Rushing’s email took issue with an article in Thursday’s newspaper about Gearhart’s and Diamond’s contradictory Sept. 13 statements.

The story to which Rushing objected used notes from the Washington County prosecutors’ interviews with Associate Vice Chancellor Graham Stewart and former Associate Vice Chancellor Bruce Pontious.

Stewart’s and Pontious’ accounts of a Jan. 14 meeting matched a key point of Diamond’s statements about that meeting to legislators in September: that Gearhart told Advancement Division leaders to “get rid of” budget-related documents.

Stewart went on to say that he “sensed frustration and nota directive” in Gearhart’s comment, according to the prosecutors’ notes.

Stewart wouldn’t comment further on those statements, and Pontious could not be reached for comment. Their remarks to prosecutors were released within the past week after a public-records request by the newspaper.

Rushing’s email restated Gearhart’s denial of Diamond’s allegations, especially related to documents requested under the state’s Freedom of Information Act.

“The chancellor’s recollection of the [Jan. 14] meeting was that he disagreed with Mr.Diamond’s viewpoint and was frustrated with Mr. Diamond for continuing to argue about the issue,” Rushing wrote. “The chancellor never directed anyone to destroy records subject to any [Freedom of Information Act] request.”

Fundraising division finance officer Denise Reynolds, who was present at the Jan. 14 meeting, supported Gearhart’s statements in September, saying he had never asked her to destroy records or to refrain from creating them.

The issue is important because it’s a crime for anyone to destroy a document that is under a Freedom of Information Act request. At the time of the January meeting, the Democrat-Gazette was seeking information about the Advancement Division through such requests. Gearhart also has said that the publicly-financed university is open and transparent in its actions.

Bercaw’s report found that “with the possible exception of [UA Foundation] Payment Authorization Forms ... there is no evidence that any records relevant to our examination, needed for the audit or subject to a FOIA request were disposed of.”

However, the state auditors’ report released Sept. 10 said auditors “experienced difficulty obtaining advancement financial records, which potentially limited the scope of this review.”

The fundraising deficit controversy traces back to July 2012, when UA officials were surprised to learn of overspending in the Division of University Advancement, which oversees fundraising, alumni affairs and other outreach efforts. The deficit didn’t become widely known publicly until last December when a reporter questioned UA officials about reports of financial problems in the division.

State auditors, invited in by Gearhart in February, determined that the advancement division had a cumulative deficit of $4.2 million as of June 30, 2012.

UA officials say that deficit was reduced to $3.2 million by June 30, 2013, although they’re still dealing with annual operating deficits in the division.

UA officials and Washington County prosecutors say they found no evidence of fraud or personal gain. They believe the money went to needed university projects, such as new hires.

Front Section, Pages 1 on 12/20/2013

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