6 tell their sides of UA unit woes

Choate says he’s scapegoat; Diamond says law ignored

Capt. Lindsey Williams of the Arkansas State Police (left) serves a legislative subpoena Tuesday to Brad Choate, former University of Arkansas at Fayetteville vice chancellor of advancement, requiring Choate to testify before the Legislature’s Joint Performance Review Committee.
Capt. Lindsey Williams of the Arkansas State Police (left) serves a legislative subpoena Tuesday to Brad Choate, former University of Arkansas at Fayetteville vice chancellor of advancement, requiring Choate to testify before the Legislature’s Joint Performance Review Committee.

Former University of Arkansas at Fayetteville fundraising division leaders Brad Choate and John Diamond told legislators Tuesday that the state’s largest university in the past year has deteriorated into a “hostile work environment” rife with cultures of “cover up” and “delete and destroy.”

UA audit Jan. 7, 2014 meeting audio


Click here to listen to full audio of the meeting.

Chancellor G. David Gearhart, seated beside the two former top employees, denied their accusations.

But Gearhart acknowledged that 18 months of wrestling with a surprise $4.2 million spending deficit in the university’s fundraising unit - and charges and counter charges that resulted - have been “a humbling experience for me and the university staff.”

“I am not here to make excuses, but to say I’m sorry it happened,” said Gearhart, who repeated his apology several times during the legislative Joint Performance Review Committee hearing.

At the end of a five-hour session, legislators made no formal decision about what they might do next in examining questions of inaccurate accounting and questionable financial management, and whether the university circumvented the state’s Freedom of Information Act regarding public records.

But state Sen. Keith Ingram, D-West Memphis, got around to asking Gearhart, a Fayetteville native and chancellor since 2008, a question about the chancellor’s and UA-Fayetteville’s future.

Citing errors in university accounting and reports that the chancellor had told employees to destroy public documents to keep deficit information out of public view, Ingram said: “The one constant in this has been you, Chancellor.

“With all of this combined do you think you have the [public] confidence to continue to lead?” Ingram asked.

“Yes, sir, I do,” Gearhart replied.

Tuesday’s meeting was the first time former Advancement Division chief Choate and his budget officer, Joy Sharp, have spoken publicly about what caused the fundraising division’s cumulative spending deficit over fiscal 2011 and 2012.

Both were longtime friends and co-workers of Gearhart and were reassigned after the deficit was discovered. They left the university June 30, the end of the fiscal year.

University officials, state auditors and prosecutors have found no evidence that any money was misspent. But Gearhart has blamed Sharp for accounting errors, which she acknowledges, and Choate for lack of budget oversight, which he disputes.

All six main players in the fundraising division’s deficit case spoke Tuesday. Besides Choate, Diamond, Gearhart and Sharp, the university’s chief financial officer, Don Pederson, and treasurer, Jean Schook, sat at the speakers table and answered questions.

Choate and Sharp made statements to the committee, though Sharp’s statement was brief. Diamond, the former university spokesman and an associate vice chancellor, talked about how he believes he was fired in part for voicing his belief that the university was not following state public records laws.

Choate told legislators that the financial crisis “is not a university Advancement failure. This is a failure in the university’s Finance and Administration Division.”

“By pointing the finger at me - by accusing me of being inattentive and neglectful in my duties - they hoped to deflect attention away from serious, systemic problems that would raise questions about the university’s inadequate financial management controls and, as the [state] audit revealed, its questionable accounting practices,” Choate said.

Diamond, who was the university’s public information officer before he was fired Aug. 23, focused on how Gearhart and other top officials responded to records requests from the public and media, including the Arkansas Democrat-Gazette.

“I’ll share with you documentable examples of the university’s willful disregard for the letter and spirit of FOIA,” Diamond said. “And I will explain to you why I believe citizens of Arkansas deserve further investigation into the possibility of perjury and of efforts to subvert the state’s Freedom of Information Act, which as you know is a criminal offense in this state.”

Gearhart said his most important message “is that we have embraced and have implemented new policies.”

State auditors and Washington County prosecutors have said “that most of what has been alleged here today is not accurate,” Gearhart told legislators.

Sharp told legislators that because of overwork, she made accounting mistakes, including incorrect revenue projections.

“My part was totally human error. There was no fraud, no intention of fraud,” Sharp said. “All expenses were for the university only.”

The Legislature’s Joint Auditing Committee had invited Choate and Sharp to testify Dec. 13, but those legislators unexpectedly decided to accept the auditors’ report on the deficit and adjourned.

The Joint Performance Review Committee held Tuesday’s hearing in part to give Choate and Sharp a chance to tell their sides of what happened, legislators say.

Rep. Mark Lowery, R-Maumelle, who requested the committee hearing, said after the meeting that he believes more investigation is needed.

“I think there was enough uncovered today that the Joint Performance Review Committee needs to keep looking into it,” Lowery said. “I’m hoping that especially in light of what we heard at the end in regard to the [Freedom of Information Act], that alone is going to keep this fire fueled. There is a systematic failure in transparency.”

Lowery also said he hopes that the arrangement between the university and Choate that allowed the former fundraising chief to finish out his contract at the university doesn’t get ignored in all the other points raised Tuesday.

“From an observer of all these facts, it appears that keeping him on contract was a way to get him to sign an agreement to be silent,” he said. “That’s wrong, when they’re using tuition money or taxpayer dollars for that.”

Other legislators suggested that Tuesday’s airing of charges and counter charges by all the main players in the Division of Advancement deficit might be enough.

“Sometimes when you have a wound, you have to pick off the scab to heal. I think we did that today,” said Rep. Terry Rice, R-Waldron, after the hearing.

Timeline of events surrounding the UA-Fayetteville Advancement Division deficit

A chronology of the Advancement Division deficit

The discovery of deficit spending by the University of Arkansas at Fayetteville’s fundraising division occurred 18 months ago. Since then, a review by the university treasurer found fault with the division’s administrator and its budget officer, the university chancellor called for state auditors to investigate, auditors found lax fiscal controls, and a prosecutor reviewed the auditors’ findings for possible criminal violations but found none.

July 3, 2012: The University of Arkansas Foundation surprises university officials by refusing to transfer $225,000 in deferred compensation for Chancellor G. David Gearhart, citing the fundraising division’s “lack of availability of funds.”

Dec. 3, 2012: Gearhart announces a $3.1 million deficit for the fundraising unit, called the Division of University Advancement, and blamed fundraising chief Brad Choate and budget officer Joy Sharp. Both were reassigned. They left the university June 30. Gearhart’s statement, released after a reporter began asking questions, also said that the fundraising division overspent on hiring and other needs, but that no one committed fraud.

Feb. 5, 2013: As questions about the deficit continue, Gearhart calls in state auditors.

Feb. 15: The university releases its own report by treasurer Jean Schook on the deficit, after the Arkansas Democrat-Gazette sues to obtain the document under the state’s Freedom of Information Act.

Sept. 10: The Legislative Audit Division and the UA System’s internal audit division’s joint report questions the practices of top finance official Don Pederson and Schook, along with Choate and Sharp’s handling of fundraising division finances.

Sept. 13: Former university spokesman John Diamond tells legislators on the Legislative Joint Auditing Committee that Gearhart at a January meeting ordered Advancement Division officials to “get rid of ” public records to keep information about the deficit out of public view. Gearhart responds that he had never ordered anyone to destroy documents and described Diamond, who was fired Aug. 23, as a “disgruntled” employee. Both men were under oath when they spoke.

Dec. 12: Washington County prosecutor’s office releases a report on its inquiry into four issues raised by auditors, saying it found no grounds to charge anyone.

Dec. 13: Choate and Sharp are denied a chance to tell their sides of the issue to the Joint Auditing Committee when legislators unexpectedly vote to accept the auditors’ report and adjourn without hearing from the two former Advancement Division officials.

Dec. 19: The Joint Performance Review Committee invites Choate and Sharp, along with Diamond, Gearhart, Pederson and Schook, to testify Tuesday about the deficit and issues surrounding it.

Ongoing: At the request of 14 legislators, the Washington County prosecutor’s office is looking into whether Pederson misled state auditors when he signed an October 2012 management-representation letter without disclosing the fundraising division’s deficit problem.

What they said

Selected quotes from those who testified Tuesday about the University of Arkansas at Fayetteville Advancement Division deficit before the legislative Joint Performance Review Committee.

From Brad Choate, former vice chancellor of advancement, whom the university blamed, along with the division’s former budget officer Joy Sharp, for lax financial oversight that led to the deficit.

“This is not a university Advancement failure … This is a failure of the university’s Finance and Administration Division.”

“If this were simply a matter of Joy Sharp misrepresenting and overspending Advancement resources, the logical and prudent response would have been to remove her from budget responsibility, investigate the matter and remedy the matter in a transparent and accountable manner.

“But that didn’t happen. Instead, we got months of convoluted attempts to blame two individuals and conceal information that auditors and the public could have used to draw their own conclusions. That’s what happens when people have something to hide. That’s what happens when leaders panic.”

“A more thorough and expansive investigation must take place. I know everyone wants to put this behind us, as do I, but there are a lot of us counting on you to bring out the truth.”

From John Diamond, former associate vice chancellor for university relations and the university’s chief spokesman, who was fired, his boss said, for insubordination. Diamond says he was fired because he objected to the university’s inadequate responses to public records requests from the Arkansas Democrat-Gazette.

“I will explain to you why I believe citizens of Arkansas deserve further investigation into the possibility of perjury and of efforts to subvert the state’s Freedom of Information Act, which as you know is a criminal offense in this state.”

[When he sought to respond to media requests for Advancement Division budget documents]: “In several instances I was told updated budget information had not yet been assembled. And I believed it, because my fellow associate vice chancellors and I were not receiving the budget information ourselves. … It wasn’t until July 22, during a tense meeting of our Advancement leadership team, that we all discovered that monthly budget documents - public documents - had indeed been prepared.”

“A credibility gap exists, and it’s damaging to the university and the state. Just 20 months ago the U of A was receiving widespread national praise for the integrity with which it handled the Petrino situation. The only way to restore that kind of public trust and the university’s accountability is for some entity - a district or special prosecutor, with or without the help of a grand jury - to put all relevant witnesses under oath to get to the truth.”

Chancellor G. David Gearhart on Choate.

“It’s devastating to me, as his friend, as someone who hired him twice. I don’t know what caused that, but somehow he wasn’t paying attention to the budget. But the bottom line is that it did happen. … He did not have a handle on the finances.”

Gearhart, asked why no one higher up was monitoring the Advancement Division.

“I can’t say nobody was, sir. I would say the responsibility for monitoring it is in the executive that is in charge of that area. We do give them wide latitude to use their funding as long as it’s done for appropriate things. And we do hold them responsible for that.”

Gearhart on Diamond:

“We lost faith in Mr.Diamond. His argumentative nature. His inability to take direction. His failure to respond to requests from deans and others. His failure to answer telephone calls.”

Gearhart on his role and the impact of the deficit controversy.

“This has been a humbling experience for me and the university staff. I am not here to make excuses, but to say I’m sorry it happened. I take full responsibility for everything that happens at the university.”

From Rep. Mark Lowery, R-Maumelle.

“I hope to God we are not teaching accounting at the University of Arkansas like this.”

“I was surprised by the chancellor’s response, in that he admitted Choate was told to destroy a document - a document that could have been used to show his only work product during that time period, something that could have justified the expense - because no one had FOI’ed it yet. That is … it stretches the imagination. It shows a total lack of willingness to be transparent.” Information for this article was contributed by Lisa Hammersly and Claudia Lauer of the Arkansas Democrat-Gazette.

Front Section, Pages 1 on 01/08/2014

Upcoming Events