Drama At UA Rolls Into New Year

Wednesday, December 25, 2013

At best, there was a failure to communicate. At worst, possible perjury.

Or so suggest the latest developments in a controversy over the fundraising office of the University of Arkansas in Fayetteville.

Although the Legislature’s Joint Auditing Committee officially accepted a related audit, some lawmakers are probing further.

They want to know who knew what when about the $4.2 million deficit in the UA’s Advancement Division and, more specifically, whether a UA vice chancellor lied more than a year ago when he signed off on a 2012 audit.

It is a serious inquiry, one that might have been anticipated. The failure of the audit committee to hear two key witnesses at a recent hearing exacerbated the situation.

The panel voted 21-13 to accept the audit that had been delayed while a Washington County prosecutor investigated.

They heard from one UA trustee, then lawmakers shut down the hearing.

The resulting perception was one of a cover-up regarding UA financial practices, even though the prosecutor found no criminal wrongdoing related to the deficit.

The witnesses, both ex-employees - Brad Choate, who headed the division, and Joy Sharp,the budget director - have since been invited by another legislative committee to testify on Jan. 7. Both have accepted and will tell their stories to the Legislature’s Joint Performance Review Committee.

But that isn’t all that has happened.

Some of the same lawmakers on the audit panel, plus others, are now asking prosecutors in Washington and Pulaski counties to delve further into two issues.

One is a nagging question of whether UA Chancellor Dave Gearhart instructed others in the administration to “get rid of” some related documents. He has said he did not but another former employee, John Diamond, said Gearhart did. The conflicting statements between the chancellor and the UA’s former spokesman came in front of legislators in Little Rock.

Jurisdiction for the legislative meeting in which the conflicting testimony arose apparently rests with the Pulaski County prosecutor. So the legislative auditors have redirected the “potential perjury issue” to the Pulaski County prosecutor.

The Washington County prosecutor is specifically being asked to look at communication in October 2012 between Jean Schook, an associate vice chancellor, and Donald Pederson, vice chancellor for financial affairs.

State Rep. Nate Bell, R-Mena, and 13 more lawmakers made the request, suggesting Pederson may have provided false information to legislative auditors.

In an Oct. 19, 2012, letter to Pederson, Schook referenced the “likelihood of conflict of interest violations, intentional effort to disguise, misdirection of funds, risk of fraudulent activity” in the Advancement Division, where the deficit had been discovered and was being audited internally.

Six days later, during a routine meeting with legislative auditors, neither Schook nor Pederson disclosed the communication.

Also, Pederson signed a statement asserting “no knowledge of any allegation of fraud or suspected fraud” related to the 2012 audit.

Rep. Bell, in his letter to the Washington County prosecutor, said the prosecutor’s report on the deficit investigation didn’t address Pederson’s representations to legislative auditors in 2012.

With these recent requests to prosecutors coming in the waning days of December and during the holiday season, no one should expect any action from the prosecutors until next year.

They will answer soon enough.

Importantly, neither the UA’s internal audits nor the legislative audit nor the initial prosecutor’s investigation turned up any evidence that anyone was misappropriating money for personal gain.

The division followed poor accounting procedures and overspent its budget by millions. But the expenditures were deemed valid and there were no missing funds.

The other issues are quite serious. These allegations reinforce the idea that administrators may have covered up what the Washington County prosecutor called “a breakdown of internal control.”

Even if prosecutors ultimately find no criminal intent, just the evidence of the deficit and the breakdown of controls are problems for the UA.

The whole spectacle may give pause to the people who give the institution money. That includes private donors and taxpayers, whose dollars are doled out by legislators - including those asking who knew what when.

BRENDA BLAGG IS A FREELANCE COLUMNIST AND LONGTIME JOURNALIST IN NORTHWEST ARKANSAS.

Opinion, Pages 5 on 12/25/2013