Prosecutors will investigate an accusation that University of Arkansas at Fayetteville Chancellor G. David Gearhart ordered documents to be destroyed to keep them from public view, Washington County Prosecuting Attorney John Threet said Monday.
Legislative Auditor Roger Norman sent an email to members of the Legislative Joint Auditing Committee on Monday saying Arkansas Code Annotated 10-4-419(c) (1) requires him to contact the appropriate prosecuting attorney on all matters that “appear to involve a criminal offense,” so he has done that.
Threet said he had been notified about the matter, and deputy prosecutor David Bercaw will consider it as he reviews a legislative audit of the campus’ deficit-plagued fundraising division released Sept. 10.
“It will go into the mix, all information that he has,” Threet said.
On Friday, UA’s former chief spokesman, John Diamond, told legislators under oath that on Jan. 14, Gearhart ordered top officials in the UA’s Advancement Division to destroy and stop creating budget-related documents so that the records wouldn’t be available in connection with a multimillion-dollar deficit.
That meeting was three weeks before Gearhart requested audits of the Advancement Division on Feb. 5, saying he was doing so in an effort to be “transparent.” The audits were completed and made public Sept. 10.
Gearhart, also under oath at Friday’s meeting, denied Diamond’s accusation, saying: “I have never said to anybody that they should destroy documents. … His accusations today are astounding to me. They are not accurate. I hope he has proof of them.”
Gearhart went on to describe Diamond as “a disgruntled employee.” Diamond has said he was fired in August because he differed with Gearhart and others over Freedom of Information Act requirements and releasing documents to the media.
Gearhart didn’t respond Monday to an email and text message seeking comment.
State law says that once a public document is requested under Arkansas’ Freedom of Information Act, it cannot be destroyed, legal experts say. State law doesn’t regulate the creation of public documents.
Under Arkansas Code Annotated 5-54-121, destroying a public record could be a felony punishable by up to six years in prison. Violation of Arkansas’ Freedom of Information Act is a misdemeanor with a maximum penalty of up to 30 days in jail.
State Sen. Bryan King, R-Green Forest, said Monday that Diamond made a criminal accusation that’s beyond the scope of the Joint Legislative Audit Committee, which heard the testimony Friday.
“Audit’s function is not criminal in nature,” said King, referring to the committee he co-chairs with Rep. Kim Hammer, R-Benton. “The staff people have cautioned me about getting involved in something that’s of criminal nature.”
King said everybody makes mistakes but destroying documents would be a more serious matter.
“You know what, screw ups, bad judgements, bad decisions, that’s part of life. And I’m not any more immune to that than anybody else,” said King. “But what concerns me is [the Legislative Joint Audit Committee] had problems getting records. There could be something more to it, and that’s where the criminal investigation should come in.
“If there was a cover up, those allegations should be looked into and followed up on,” said King. “We’re going to stay after this thing and make sure the prosecutor does due diligence. If there is something wrong, we’re going to make sure they’re held accountable.”
Both audits released last week noted a dearth of financial records, which Gearhart blamed on two former UA employees: Brad Choate, who was vice chancellor for Advancement, and Joy Sharp, who was the Advancement Division’s budget officer. Gearhart said both were “dismissed” from their jobs but allowed to continue working in other roles until June 30, which was the end of the fiscal year.
“The Division of Legislative Audit staff experienced difficulty obtaining Advancement financial records, which potentially limited the scope of this review,” according to its report.
UA System auditors said, “We never received any budget files for the Advancement Division. … We determined that financial documentation was not sufficiently available to audit the decentralized budgeting controls within the Advancement Division in accordance with generally accepted auditing standards.”
Diamond said Friday that one reason documents weren’t available for the auditors is because Gearhart ordered them destroyed.
The audits revealed that the Advancement Division had a $2.1 million deficit at the end of fiscal 2011. The deficit grew to $4.2 million by the end of fiscal 2012. The division normally has about $10 million in annual revenue and other funding.
The university has blamed the deficit on unfunded salaries as the Advancement Division ramped up for a major fundraising initiative. Gearhart said no money was “lost.”
The Advancement Division has balanced its operating budget for the current fiscal year, although its expenditures increased to $13.37 million, according to UA officials.
State auditors flagged three things that concerned them and sent a letter to Threet on Sept. 9 regarding those matters. The flagged items included a duplicate $2,051 reimbursement by Choate, a $1.35 million payment on a donor gift that was deposited in the wrong kind of account, and improper postings by the university treasurer’s office, according to a referral letter released Wednesday.
Threet said such letters are often forwarded to him when further investigation by his office might be warranted.
“Legislative Audit doesn’t make recommendations,” said Threet. “They make that clear. They make findings. I can’t tell you where it’ll lead, but what we’ve got is the audit itself, the same thing Legislative Audit made public.”
The Legislative Joint Audit Committee decided Friday to leave the audit open because of Diamond’s accusation.
State Rep. Charlie Collins, R-Fayetteville, who serves on the audit committee, said the issue has been a black eye for the university.
“This story has been out there, and it’s been churning, and it has turned into its own level of drama,” said Collins. “It’s not good for anybody. We need to get to bottom-line truth, get it in the open, get the consequences over with and move forward.”
King said he has more questions about the audit itself, but he’ll save them until the committee’s next regular meeting on Oct. 10 and 11.
At a Sept. 10 news conference, Gearhart said that in light of the deficit, UA would hire someone to oversee budgets.
On Monday, UA announced that Timothy O’Donnell, vice president and former treasurer of Southwestern Energy Co., had been hired as associate vice chancellor for budget and financial planning. He will start work Oct. 7, according to a news release.
“Mr. O’Donnell brings the right skills to the job of enhancing the university’s budgeting processes and implementing needed improvements to budget controls,” said Donald Pederson, vice chancellor for finance and administration. “We had many excellent candidates for this position, but Tim’s experience and qualifications clearly stood out.”
O’Donnell worked for a public accounting and real estate development firms in Dallas before joining Arkansas Western Gas in Fayetteville as manager of utility accounting in 1991. He advanced into top management positions with the parent company, Southwestern Energy Co., during his 22-year career there, a news release said.
Front Section, Pages 1 on 09/17/2013