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    Report of forgivable loan program.

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    Report of forgivable loan program.

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    © All Rights Reserved
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    411 views26 pages

    Attorney General's Report On Law School Foundation (Redacted)

    Uploaded by

    The Texas Exes
    Report of forgivable loan program.

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    ATTORNEY GENERAL OF TEXAS GREG ABBOTT December 31, 2014 ova, score fy Gove, (Chairman Paul L Foster ULT, System Board of Regents 201 West Seventh Street, Suite 820 Austin, Texas 78701-2901 Chancellor Francisco G. Cigarroa, MD. U-T. System Office of the Chancellor 601 Colorado Street, Suite 404 ‘Austin, Texas 78701-2901 ‘Dear Chairman Foster and Chancellor Cigarrou In accordance with your request, on behalf of The University of Texas Board of Regents, tht the Office of the Attorney General investigate the relationship between the University of Texas ‘School of Law and The University of Texas School of Law Foundation, enclosed please find the Office of the Attorney General's investigation report. Sincerely, IBSile Former United States Supreme Court Justice Louis D, Brandeis sid that “sunlight is said t0 be the best of disinfectants.” The State of Texas has set as policy in its open govenrment laws the ideal that the public should know what ite government is doing, especially with regard to money.) Transparency leals to accountability which ean be effecmuated by the establishment of internal contols and procedures that enable the safeguarding of valuable assets. The University of Texas Law School Foundation (°UTLSF” or “Foundation” is a valuable asset to the University of Texas Law School ("UTLS” or “Law Sehoo!”) that was created in order to support the law school. It is clear from this investigation that the Foundation has proceeded under the UTES Deans’ guidance to expend funds in support of Law Scliool goals, However, the Law School bas avoided the disclosure of Foundation payments aad disbursements made to Lav School employees and this set into motion a lack of eransparency that ultimately led toa lack of accouatabiity with regard to compensation tt the Law School ‘The goal of the forgivable loan program, the second storgage program, and the housing sllowance was to place the la sebcol in & competitive postion in the pursuit and retention ‘flaw professos, The law school's suceessfel recritzent and retention of lw professors during this time period is without question. The failure to provide the UT System snd Regents the fal picture of compensations subject o one of many narativesdepening upon the souree. Whether this felre was inteational or sizply nepligenco, the Law Schools falar to flow Univeesity rales also witout question” L_BrietBackground The University of Texas System Board of Regents coquested the Olfice of the Attorey General (*OAG?)1o conduct an investigation ofthe isses related tothe elatonship beteed the Law School and the Foundation related to compensation and related benelits tor employees ofthe Law School” Specifiealy, the Regents asked the OAG to investiga the following ‘© How the selatiouship Uetween the Law School ard the Foundation funetioned in practice; "Tes Guvcenment Code $852 00, $552002. sed thre was no thcust to has he oa rom the Hoard of Regt, Me vewed the Boar of ‘gens as ropanen of sythig that would teagthen UTLS, Hi ma fet was foul lousy ta might fallow any fil pbc, Motion Open Sesion Apa 11, 013. (OAGUTLS 003668) Leer rom Kosten Cire to Sent dated Jane 27,2014. The OAG his bce aed tht elvan dimen and mines hs vestigation ha vere posses hy any Rsgeat oe System hate ben pc. * The processes, procedures and polices for decision-making at the Law School i relation to monies contibuted by the Foundation and compliance an oversight with those processes, procedures aad policies; ‘+ The flow of Foundation funds to employees ofthe Law School and the flow of funds to the Law School from the Foundation; ‘The use and management by the Law Schoo! of funds provided forthe support of the Law School hy the Fonnestion; snd * The level of transparency between UT Austin and the Law School leadership regarding the above issues. As attomeys and not auditors, the OAG did not perform an audit or use adit practices inthe course of its investigation, It is our opinion that audits are best left to qualified auditors of the Regents’ choosing. The Regeats have requested such audits including, requesting that the University of Texas System Audit Office "UT Audit Office”) complete special review CUT System Audit Office Report”) ofthe financial management practices of the Law School and the Foundation. Specifically, the UT System Audit Office Review included an audit of “the flow of funds between the Foundation and UT Law to determine whether interna contiols related to financial management are suficient fo ensure that douor funds are handled and used to support UT Law in a manner that provides ‘accountability for the use of funds and trmsparency to the donor and pabtie, and does not circumvent UT Austin, UT System, or Sate spending rales. The review included all Foundation funds gifted to, reimbursed to, or paid diretly on behalf of UT Law Detwieen September 2010 and February 2013, which covers Fiscal Years CFY") 2011, 2012, and half oF 2013." ‘The UT System Audit Office Report was issued on November 5, 2013, and included "numerous recommendations for improving tansetions hesween the Foundation and the Law School. Importantly, the Audit Report didnot include the Foundation’s deferred ‘compensation and forgivable loan prograns.* Thus, to the hes of eur knowledge, there has been no avait conducted regarding the Foundation’s defered compensation and forgivable loa programs. ‘The OAG did not conduct any investigation into any potential ctiinal culpability a that responsibility is best left to the dstet atoraey's office which i vested ‘withthe authority o perfor that task. ‘The OAG's investigation consisted of reviewing the Report and Recommendations on The Relationship between the Law School and Foundation, the UT System Ault Office Report dated November 5, 2013 (OAGUTLS_003670), requesting and reviewing documents from. « Specifically the Report provided tat since the “temo compensation orgvable own erangements will be futher investiga by the Office of the Atty Gena of Texas OAC") mo aioe dead tag ans (wil be] prone hy the UT Aut Ofc] ae pa of te Report, Speil Review of Prana Management (GAGUTLS_ 03695), * See Rept and Recoasnendations dati October 15,2012. (OAGUTLS. 603789) the Regents, the UT System, the Law School aad the Law Schoo! Foundation of interviewing a number of individuals involved in the deferred compensation program, Forgivable loan program and related payments made directly from the Foundation to Law Scliool empoyees.* IL_Miring/Compensation he UT Law Schoo!'s process for hting a news professor is fairy simple, Once a potential hire was identified the dean would put together terms of an offer. An offer letter setting font all of the compensation ard texms of employment together with acceptance by the puspective professor is forwarded to the University's Provost and Budget office, along with ‘Prior Approval Request ("PAR") form. ‘This form travels tothe Provost and then te terms of compensation and tenure goes to the UT System and to the UT Bout of Regents for approval. The process for pay inereases for ckisting professors and deans travels a very Similar path depending upon the amount of the inerease,” Whether a professor Was a new hire or was receiving a pay increase, documentation of either should exist in the form af a PAR and should be found in multiple loestons.® ‘The amount for any individual forgivable Ioan was determined by the UTLS dean, Once th amount was determined, the approval ofthe UTLSF was obtained and the paperwork for the Joan prepared and fonded, In reviewing the records from UILSE, 27 forgivable loans were ‘uae between December 2003 and November 2010, In only one instarce was the complete information relating 1 the loanleampeasstion provided io the Provost. The UTLSE provided 4 complete accovating of all tunds to UY. The obligation to repoit aianey transiexs that constituted compensation to aa employee from UTLSF to the UTLS remained with the UTLS Dean and their staf, The UTLSF provided, and we have attached, the listing of all payments made from UTLSF to UT empleyoes and UT-selated entities for the years 2004 though 2014?) Be NOU Sep ors WeieNGow” frgveMe Ioan Would ft ean the approval of ths Fay Budget, ©All persons involved viewed these forgivable lan wanna as compensiion, AT no tine dl anyone {elievetba the eampenston from th om reacted to amg bat es cles ” The Semmary of Funding by Year schalule wil 9 bike the sate tolls ae the Dishureenls to TT Employees and UT Adit Organizations as hoy ae peestnting the se inoraaion. Te Suma Funing by Year schule reets expences a se Gosndation ob at acl eoceung bass tan be ‘edt he aid fnancl Yateens each yor (he managee fe tbe stated om i let (oie Back co the aed meal stem) The chefs of Dishuserents to UT Exployess a UT Aine Organizations etkey dsbuseaeas Of as athe Jetia which they mee nde and dos aot eet ‘he scrus method of secouing, Furieemore, ti dsbrscnet sukedule tly shows panes UT, tT 3 IIL, How the Relationship Between the Law School and the Law School Foundation Funetioned in Practice a, Relevant Foundation History and Structure ‘The UTLSF is critical to the operation of UTLS, as the Foundstion funds up to 20% of the Law School's operational budget. Tie Foundation is comprised of past graduates of UTLS ‘who support the Foundation with their donated time and monetary gifts, ‘The Foundation was established in 1952 as an educational foundation to support The University of Texas School of Law!” The Foundation is @ non-profit corporation organized under the Laws of the State of Texas. Specifically, the Foundation is organized and ‘operated in pertinent part to: Sappott an education. legal research, financial assistance to deserving students, ‘nd the progress of the law, to solicit donations for particular objectives. to ‘accomplish such purpose, including objectives of establishing or assisting in «establishing professorships and scholarships inthe School of Law of the University of ‘Texas, under such directions, imitations and provisions as may be declared in writing inthe donations not inconsistent with the objects and proper management of the [The University of Texas} or its breuches; to collect such donations and to expend funds for accomplishing such objectives: and t0 cooperate at all times with The University ‘of Texas Development Board...” ‘The Foundation is managed by « Board of Trustees “Foundation Board”) and is governed by Bylaws.” On November 9, 2001, the Foundation Board adopted official Bylaws. In avcontance with the Bylaws, the Oificers of tho Foundation shall consist of a President, & Vice President, « Secretary and one of more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and such other officers and assistant officers as the Board of Trustees ‘may from time-to-time elect or appoiat. ‘The Board of Trustees’ President shall have general ‘executive charge, managemeat, and control of the properties, business, and opetations ofthe Foundation as may be reasonably incident to sult responsibil “The UTLSF President has authority to agree upon and execute all leases, contracts, evidences of indebtedness, and Cmplojes aad UT alii operations so doce not include all disbasemeus made ia spon of The {Universiy of Texas School of Law such astese made to ote vents, (See Appendix A) "This inesigation wl focus om septa ofthe Founda str aed gree ben the yey 2000 2014 tat belpexphin the ratiasip between the Law School ani Foundation. A gence! oneview ofthe "Foundations history and ockgound canbe ands Speral Reine of Fnanta Managemen The Univer of Texas at Austin Schoo! of Law Use of Lew School Foundation PundsSeptenber 2010 though Febmary 2013." (OaGUTLS 003672) * Amended and Restated Bylans of he Untriyof Teta Seo of Law Foundation, adopted Novente 9 2001, pug 1 (OAGUTLS. 600745) ® Second Amended ant Rested Anil of Icopontion, (OAGUTLS.000842) "Tehns been ou observation ta the Foundation Bylaws have not aay ben apt upto dt, Ths may have used ies wit a documented ppv proves tthe Fondation, “ Ameaded and Restated Bylaws of The Unversity of Tena School of Law Foundation, apt November 9 2001, page. (OAGUTLS_ 000713) 4 ‘other obligations in the name of the Corporation [Foundation] subject to the approval of the Board of Trustees." In addition, according to the Bylaws, the Executive Committee shall he composed of the Board's President, Vice President, wo will be its Vice-Chair, the Sectetsty, the main Committee Chairs, former President and two at-large Trustees. The Executive Committee is entitled to exercise all of the powers and authority of the Board; however, sch powers and authority shall be exercised only with regard to matters requiring attention under circumstances which make it impracticable for the Board tp act on the matter. The President shill report to the Board af the next meeting any action taken by the Executive Commitee and those actions shall be recorded in the meeting minutes, ‘The Executive Committee “shall not have authority to act for the Boar ‘with regard” to cettan issues including, for example, “taking any action prohibited by the Board, selling, leasing, or exchanging all or ‘substantially all ofthe assets of the Corperation [Foundatin),.. electing ‘or removing Trustees or officers af the Corporation.” D. Memorandum of Understanding Between the Foundation ‘Regarding Administrative Functions, Including MOU Fund 1d UL Law School ‘The Foundation also operates under a document called the Foundation Approval Mana ‘This manual outlines for the Foundation the levels of approval required for certain Foundation financial tansactions including selling or disposing of property, approving budgets, invoices, signing checks, sdvances and credit card charges."” In avcontance with the Memorandum of Understanding (“MOU”) agreement between the ‘Foundation and che University, originally executed in April 1982, che Univesity provides to the Foundation “reasonable spac,” utilities and telephone service, “[Law School] equipment and personnel.""* The MOU further provides that the Foundation and Law School will execute an annual writen agreement (“Agreement”) “specifying the use of University ‘personne! to directly assist in the operaion of The Foundation and setting forth a reasonable sum to be paid by the Foundation to the [Law School] forthe assistance readering by such Personnel.” Thus, under each Agreement, the Foundation is to pay the Law School a reasonable amount in otder to reimburse the Law School for providing personnel to support the Foundation.” ° Amended and Kestted Bylavs of The alters of Texas Seo! of Law Foundtin, all Noveber 9, 2001, page 5. (OAGUTLS 000743) ' amended and Rested Bylavs of The Univesity of exs School of Law Foundation, alo November 9, 2001, page 4. {OAGUTLS 000713) # Foundation Appoval Mal (OAGUTLS. 9912023 "Tens Atoraey Geaezl Opiian MW'373 (981) "The OAG has bn uebl To establish hat an MOU bas been executed annul. According to UT Aust, Foundation Law Seboo! Stat andthe Foandson, tke rogiedsnnval Agseeent Wasnt eect infil yeas 2008-10 or 203-10 al has ot bee exceed fr te curt school yar. The ONG fa Bon ld I ‘ow aanulagreemets inthe proces of ig negate. (OAGUTES 001336), Personne! support included one or mare Law School employees working full or part-time on Foundation related business (the “Foundation Law School Sta). The Foundation Law School Staff often included the Dean of the Law School, the Assistant Dean for Financial “Affairs and the Assistant Dean for Development and Alumni Affairs. ‘The employees of the Law School were required 10 comply with Law School and University. polices and ‘Procedures even while Working on Foundation business” Prior to Mare of 2014 the Foundation did not have its own administrative staff to handle Foundation related business. After March 2014. the Roundation employed itz own sdiminisrative sta and n0 longer uses the Law Schoo! personnel for administrative funetions. Prior to March 2014, the Foundation relied on Foundation Law School Staff to perform key ‘Foundation adiinistative functions including, but not limited to ‘+ Accounting and financial management forthe Foundation © Fundraising, including preparation of Foundation related slumni information, sewsletters and materials; Preparing, managing and retaining Foundation records snd repor + Event plana ‘© Preparing all materials for Foundation Board of Trustees meetings, specifically, preparing the Foundation's annual Budget for adoption by the Board of ‘Trustees; Monitoring the Foundation’s adopted Budget and recommending changes; + Preparing and approving all Foundation disbursements and ensuring disbursements \were made in accontance with the Foondation Bylaws and Approval Manuals; » Determining whether UT Law salaries, invoices received, and other transections should be paid for with Law School or Foundation Funds or cornbination of funding sources; and + Recommending changes to the Foundation’s Approval Manual, While the Law School Staff were performing all administrative functions on behalf of the Foundation, there was ongoing communication between the Board of Trustes, especially the ‘Boat’s Executive Leadership Team, and Foundation Law School Staff. Por example: (1) Prior to the Board of Trustees bi-annual Boart of Trustee Meetings (“Board Meetings”), Law Schoo! sta would prepare the Board of Trustees “Board Books,” include all Board of Trustees Budge’s and Budget modification documents; and (2) Foundation Law School Staff often discussed and sought approval from the Board of ‘Trustes, regarding disbursements of Foundation funds, 2 Report and Recommendations on Te Relationship beckon to Law Sskoo and Foundation dtl October 15,2012, page Over the yeats, some Foundation Trostees were in contact with the Dean of the Lave School, University of Texas at Austin President or President's Office and individaal employees ofthe University of Texas at Austin, Prior to 2004, the Foundation appears to have been paying the costs associated with the salaries and benefits for most of the Dean's staff. After analyzing the situation, the ‘Foundation determined that insteed of die Foundation paying for the majrity of the Deans staff, it would reimburse the Law Schoo! “forthe easonable cost af services provided to the Foundation,” by Foundation Lavr School staff oniy.* Prior to 2007, the agreement between the Law School and the Foundation provided that oa a periodic basis throughout the year, the Foundation would pay the Law School an arnount for use of Foundation Law Sebool StaiT based on relevant employees" university salaries and benefits. Thus, amounts the Law School charged to the Foundation might vary depending on the number and type of sia involved in Foundation busizess. Afler 2007, the Foundation and Law School decided to sop having the Fouadation reimburse the Law Schoolon a periodic basis. Instead, the Foundation and Law Schoo! would nogotiate and sign an anna Agreement where the Foundation would agree to pay the Law Selo one anncal lump-sits amount. According to Foundation Law School Staff, this change was made 49 ease monthly record keeping for multiple staf, In fiscal year 2006-07, under the Agreement tbe Jump-sum stmount the Foundation paid to the Law Schoot was $250,000. Foundation Law School Staff provided no documentation to Substanbate the validity of the $250,000 ameunt, Put diffeeatly, there was 00 documentation indicating thatthe cost of the services provided by the Law School t Foundation totaled $250,000... However, dusing interviews with this office, ted thatthe $250,000 amownt was based on the sales ise From 2006-07 to 2012-13, the lump sum amount paid by the Founation tothe Law Schoo! ‘under heir annual Agreements increased foi $250,000 to $830,000 (see table below). ‘The Foundation Law School Staff provided no reased amounts. However, during inteeviews with his office asserted that the increases were based on relevant salaries an Denefits and that foe aantal contract was negotiated ‘o ensure the Law School was fully reimbursed 2? ‘Amount of Agreement or MOU pass No agicement Tas been executed. Foundation penonral | indicate an Agreement is being nevotiated between the aw School and Foundation. eal Ye 2003, (OAGUTLS oo102) ‘As prt of is investigation he OAC ul not lego eile amounts prose No agreement was executed this eal yea. SSS [20113 $330,000 i 2011-2 ~]s315;000—~ | 2010-11 $315,000 7 | (2008-10 [No agreement was located tis fiscal year. $300,000 S500 0000 Ry agreement withthe University, the Foundation's office is located inthe Law Sehool2* In addition co the personnel related reimbursements covered by the MOU, the Law Schoo ‘would also charge the Foundation directly for any overhead, including amouggs fa is Ss Faas Law School tlephones and utiles, Conversations with te indicts that the Law School has neves charged the Foundation at ammount ‘Olrreat for oitce space uilized by Foundation Law School Staff Foundation Board of Trustees Meetings and Law: hool Part In accordance with the Bylaws, the Foundation can have regular Board meetings and special riectings "tn practice, the Foundation Board of Trustees met twice per yeas = once in May and once in November. A quorum of the Boatd of Trustees is requted for consideration of aay matters pertaining to the Foundation's purposes.** Minutes ate taken at each Board of Trustees meeting ‘The following individuals, including Law School employees, attend Board of Trustees bi annual Board meetings and events held in conjunction with those meetings (1) Trustees and Senior Trustees: (2) The Law School Dean; @) Associate or Assistant Law School Deans; and () Foundation Law Schoo) taf Amended and Resta Ryans of The Univesity of Tox Seool of aw Foto, adopted Novem 9, 2001, page % meat ad Rota Bylaws of The University of Texas Schoo of Law Foudatv, adopted Novem 9 2001, page 2. 5 Amended and Resta Bygns of Te University of Teas Schoo of Law Foundatoa,sdoped Novem, 2001, page (OAGUTLS. 000749) 2 The Foundation guy manage fr tthcempliyse forte tims, (OAGUTES. 003677) ‘AC meetings of the Board of Trustees, matters pertaining to the Foundation were considered, ‘withthe president presiding? Generally, Board Meetings are called to order by the Presideat of the Foundstion, and, as discussed below, there is a report to the Foundation Board of Trestees by the Dean of the Law School, The Board of Trustees will also hear a report from each of the Board of ‘Trustees’ Standing Committees, including the Foundation’s Budget, Audit, and Investment Committees, an from other “ad hoo" committees, Im addition, the Board will generally hold an “Executive Session.” During the Executive Session, Foundation Law Schoo! Staff are generally asked to leave the meeting A review of the Board's meeting minutes indicate thatthe Dean of the Law School typically provided a "Dean’s Report” tothe Foundation Board of Trustes that included: 1) The Law Schoo!’ efforts regarding faculty recruitment and retention; 2) iforts on behalf ofthe Law School to meet the Dean's Long-Range Planning fous” 3) Number of Law Schoo! student applications and student body composition, including efforts to recruit minority students; 4) The rank ofthe Law School; 15) forts to improve student recruitment or student life, including student employment; ©) Tuition amounts charged to in-state and out-of-state students: 7) The University or Law Schoo!s legislative agenda; 8) Amount of public funds ceived to support the Law School; and 9) The Dean's priorities including for example, ensuring that the University of Texas be among the top law schools in the nation or increasing the Law Sehoo!’s office space. During the Dean's Report, Board members, at mes, made suggestions to the Dean regarding Law Schoo! policy including suggestions regarding tition increases, and seducing the size of the law school.” A review of early minutes (2000-2001) reflect that Board of Trustees 2 Amended and Rese Bylaws of The University of Texas School of Law Founion, adopted November 9, 2001, pe 3 3 The Bylaw allow for she cation of Sanding Commitee; the Sting Committees inte: Bulgst Commie, Deveopmect Commies, Audit Commies, ant Invent Come, Amended aad Resa Balas “of The ‘Unversty af Teese Schl of’ Lay. Fovodationy doped Novoskee 3001, (GAGITLS.e00750) "3 Boasd Mestng Miats, November 8.2008. (OAGUTLS. 001088) 2 Atte Apil 1,200, Boat of Testes Meeting one Triste ens to the Dean ofthe Law Scho hat that be etool could increase (i-sta]yexdet [ton] substan a sil provi a bata or a apie legal education. A Sate Senate and Foundation Tatas ued be would bs oppy to werk with De aw school on that Anotee Tree sid that he would ke tis to bea igh prion for te next gate session” (OAGUTES.001200) On May 12, 200, Dean Povers tan the Senne, Represecane abd Foundation Board Members for tt work onthe ten Ines il which had bee assed by Boh uses of ‘he Legisatre. During the May 2001 oar of Tastes mating, Trot sate Us the two ain le of he Feundaion Boar ate (1) effective tdasing, and (2) ssisig the Law Sshiol polly befove the legsste and witia he Univers. (QAGUTLS 001183} 9 ‘members were working withthe Logislsture to pass the Law Schoo's agenda. Board of ‘Trustees members also advocated for the Doan with the Administation of the University. 4. Foundation Budget Process, Including Flow of Funds to the Law School Brom ‘He Foundation ‘The Foundation's budget process js important to understanding the relationship between the Law School and the Foundition.™ The Board adopts aa annual budget daring the Board oF ‘Trustee's meeting, UT Sysiem has stated thatthe Foundation does not receive funding from any public funds. * Ulike some other types of compeasation provided by the Foundation, the forgivable loan ‘compensation was disbursed directly from the Foundation to the fectlty bein, provided the loan, and therefore, would noc have heen included in the Law School's aecouating system. IV, The Processes, Procedures and Policies for Decision-Making at the Law School in Relation fo Monies Contributed by the Foundation and Com Oversight With Those Processes, Procedures and Polici 8. Dean William C. Powers, Jr's Deferred Compensa om Agreement Williaan C. Powers, Jt, became Dean of the Law School in 2000, Dean Powers attemled Foundation mestings in his capacity as Dean of the Law Scaool. At the Foundation’s mecting on May 12, 2001, Desn Powers identified for the Foundation a peiential need for deferred compensation packages end other financial incentives in oder to attacthigh-awality lw school faculty.* The approval policies are sunnmarized below.» 4n ate 2000 or early 2001, the Foundation President, David eck appears to have sent o emailed a “proposal” to UT-Austin® suggesting that Dean Powers receive a deferred compensation (“Powers’ Fint Agreement"). Although, the OAG requested all documents reganling Powers’ First Agrecment, copies of the “proposal” that was provided to then. President Latry Fauliner by Mr. Beck were not produeed by any entity in response to this investigation, Docurtents provided by the Foundation show that during the Foundation 2 Fountion Board menor eal Powers on Sag beat hon Powers was cntenplating non sees of Sage a8 Dean ofthe Law Scho. (OAGTES 726,727,729 723) 2 The OAG asked tie Foundation psp the ahd Append Bo % Repoc apd Recesumensions on The Reltontiphiten the a § hol ant Fastin ded Octobe } on, MN con et eo dein na nt sige peters! tye Ben nd imss sans a UT Aus pos meena a > pape Cet ppd yh OAG sag ial an * Te fom Pat Otten 0D Seos Maden Ince Vice Pra ed Pov ded Jeary) 001 (OAgU TS 037) Fa near rune ee oven by Che. Pres document ae wee eed by AG vetett ones Grn 08. 10 Board's executive session on November 10, 2000, the Foundation approved the eoncept of deferted compensation for Dean Powers. >® ‘The OAG was provided a document that shows that on January 31,2001, Patricia Oblendort, then Univesity of Texas Vie President for Tnstictional Relations snd Legal Affairs, wrote & Jeter to Dr. Sheldon Fland-Olsoo, Executive. Vie-President and. Provost, regarding Poets’ First Agreement.” She copied Dr. Faulkner on this lee. Oblendort specifically noted that her positive recommendation of the agreement was based on the folowing fact ‘+ The August 31, 2005 initial vesting period “seems reasonable,” and does not “tic” the Iw school's hands % That "David Beck's letter indicates that such agreements are subject 10 our [Wniversity of Texas at Austin’s] approval” and she “believes that is sufficient procedaraly from our perspective”; That while she originally recommended the University of Texas at Austin be a party ‘o the Agreement, she had “tethought” this position and itis “preferable” the agreement be between “the Law School Foundation and Bill Powers {the Dean)” only: ‘© She determined thatthe Agreement did not require “Yormal approval by the Board of Regents,” but that certain Regents with “close testo the Law School should know of its existence.” (On February 7, 2001, Dr. Fkland-Olson sent a letter to Dr. Faulkner stating that Patti Ollendorf and he had looked over the proposed Powers deferred compensation agreement and believed the agrecinent was “acceptable."*' Dr, Olson further stated in this letter that lose friends ofthe Law School on the Board of Regents should be informed of the existence since it “does not seem thatthe agreement requires tegeatal approval.” On February 16, 2001, Dr. Faulkner sent a letter about the proposed Powers deferred compensation agreement to Dr. Fawin R. Sharpe, Executive Vice Chancellor for Academic Afais at UT System, in order to “inform [UT] System of its existence,” Dr. Faulkner indicated be also wanted to “inform any Board [of Regents] members who aze friends of the School of Law. and] could speak to Chairman Loeffler and Regeat Oxford,” On May 10, 2001, Dr. Faulkner sont a Jeter to Mr, David J. Beck, Foundation President indicating that both the University of Texas at Austin and The University of ‘Texas System “supportfed] ‘The University of Texas Law School Foundation’s plan enter into a deferred ‘eoumpensation seement with Willam €. Powers, 31° 2 Mints of Foundation, May 10,2002. (@AGUTLS. 001149) ° Ler from Pati Ohledoe to De. sheldoe Eklund Olson, Executive Vie President ad Provost dated nnuary 31,2001, (OAGUTLS_003784) 2 There i ao mention ofthe Chancellor’ approval, (RD. Burk is Challe fom Jane 1, 2000 wl une 21,200). 4 Lee fom Dr Silden EAlmi-Olsoa to Preset Larry Faller and Pat Oblodor dtd Rebar 7, 2001, (OAGUTLS 003785) ‘2 Leterfom Dr. Lary Faller to Dr Edwin She dated February 16,2001. (OAGUTLS. 003098) ‘© Letier om Dr. Lary Fale to Me, Davi I. Hoek td May 10.200). (OAGUTLS. 003786) n On May 16, 2001, the Foundation executed a deferred compensation agreement with Dean Powers." This agement is not a forgivable lon, But was a deemed compensation agreement. The agreement provided in pat the following ‘© The Foundation would contribute $65,000 to Dean Powers’ “Deferral Account on February 1, 2001, September 1, 2001, September 1, 2002, September 1, 2003 and September 1, 200%; ‘+ Earnings on Dean Powers’ “Deferral Hind” were to be credited to the Deferral ‘Account; and ‘© Dean Powers was not entitled to a distribution of his Deferral Account until his Retirement Date. ®| ‘The rationale included in Powers’ Frst Agreement for the deferred compensation was thet Dean Powers was curently employed as Dean of the Law School and his services would continue to be of substantial value to the Law School. Thus, the Foundation desired to encourage him to “remain as Dean of the Law Sehool and to devote his best efforts to its alfirs through the use of deferred compensation.” Dean Powers was provided a lump sum payment of $141,292 on September 14, 2005, that he ‘was entitled t0 under the First Agreement in order “to alleviate the burden of heving to shoulder a tax lability for undistributed vested amounts." The First Agreement addressed his eligibility for payment of lump sum for tax Hibiity incurred asa resule of vesting in his deferral account On November 11, 2005, the Foundation Board of Trustees held their anoual fall meting, ‘The Board mecting minutes do not reflect a vote of the Board regarding Dean Powers compensation agreement that terminates as of the date the Foundation no longer has any liability to pay benefits * ‘This office's investigation did locate a draft First Amendment to Dean Powers’ Defered Compensation Agreement with an effective date of July 29, 2005, but this draft Fist Amendment was not executed.” Despite no new agreement or amendment to the original agreement being executed, on December 14, 2005, Kenneth Roberts authorized Kimberly Biar to pay an additional $115,000 to Dean Powers. (OAGUTLS_002975) Roberts states that the Foundation Board, Chancelior Mark Yudof and President Lary Faulkner “have * May 16,200, Powers and Foundtion executed Defined Compensation Agreanat, (QAGUTLS. 001501) ‘8 Defined by he Deferet Compensation Agoemen as si Ath Witte, (OAGUTLS 001503) OAGUTES 001501, ‘© E-mal fom Robin C. Gis to Randy Wallace dtd March 20,2014, (OAGUTLS.002971) ‘ Poners' Defared Compensation Ageemetesected May 16, 2001, pose 3, Scion 4), (OAGUTLS.001503) © Powers Deered Compensation Agreement executed May 16, 2001, age, Section 1 (OAGUTLS 001505) 2" Draft Fist Amendet io Dean Powers" Deter Compensation Agent, (OAGUTLS 002976) approved."®” The Board meeting minates do not reflec © ot supplement Dean Powers’ compensation pgs oes ot recall such approval, a letter execute floes give System approval for the payment, ‘The $11,000 was paid irecly fom the Foundation’s accounts to Dean Powers: The funds did not run through the Law School or University accounts although the payment was ater ratified by the University's Board of Regeats >» Dean Powers remained Dean of the Law School until 2006 when he became President Designate for Fanuary 2006 and thea President on February 1, 2006, A December 5, 2008 leder tein Charceller Yudof to Dean Powers includes the following statement: “It i futher understood that The University of Texas Law School Foundation vill make a ode-tize Loup sum payment to you to satisfy is deterred compensation committment w you for FY 2006." On February 9, 2006, thee is an entry in the Regeat’s docket that approves a payment to President Powers fora “one-time” lump sum payment for fiscal year 2005.2 On December 10, 2008, the Foundation and Presiden Powers executed a Second Amendment the original deferred compenstion agreement." "This amendment was technically the first amendment since the frst ameniment was never executed, The Foundation believes the nunbering of de amendment to be an error by the Foundation's aliomey, who was not informed that the first amendaveat was never executed. The ‘amendient reftects changes in tax laws and entitles Powers to the balance in the Deferral Fund in a single payment as of the first day ofthe calendar month following his rerement date 'b, Faculty Loan Programs 2000 to Present - A Timeline of Key Events i. 2000-2001 Powers’ Faculty Recruitment und Retention Plans On November 10, 2000, curing his fst “Dean's Report” as the new Dean ofthe Law School to the Foundation Board of Trustees, Desn Powers indicated that the Law School will “decide where it wants tobe in five yeats.” Powers expressod that he wanted to implement more strategic planning for faculty aad noted te importance of doiug well inthe las sebhool 3) rankings. He explained thatthe “faculty job market is a free-agent type of market and other schools can ‘raid’ facully by making very high-dollar offers?” For these teasons, Powers stated that he was considering “the possibilty of offering defered compensation packages in ‘order to recruit and retain the very best faculty members.">" ‘The genesis for attracting and retaining “star talent” through the use of Feandation funds was Dean Page Keeton. The need for a program to attract and retain talented professors is indisputable, Allowing soch programs to develop without the formal approval and oversight ofthe univessty, system and regents is destined to be a program that opens itself, at bes, to criticism, Proper financial controls and compliance with wniversity policies must be starting points for any suck program, ‘Several months later, during the May 12, 2001, Foundation Board meeting, Dean Powers ‘again ceiterated to the Foundation Board the importance of having a highly regarded faculty, He reported that top UT Law School faculty members would be visting other law schools during the coming academic year. It was a this time that the Trustees asked what could be done to attract this type of top-tier faculty. According to the Foundation’s meeting minutes, Dean Powers esponded “that the creation of a “war chest” of funds which could be used Io “quickly put together deferred compensation packages and other financial incentives” would bbe extremely important. Dean Powers noted that he had been able to do this om a limited basis for some of the ecent faculty adgtions and that it “peoved extcal to the Law School's Also in early 2001, Dean Powers appointed a Long-Range Planaing Commitee and charged it with studying the Law Schoo! and propose a plan for improvement.” The committe: ‘consisted of thirteen faculty members, eight alumni, to students and one staff member. The Long-Range Planning Commitee determined its strategie goal should be: “{T]Jo be ranked among the top ten law schools in the United States on every reasonable measure of academic achievement within ten years.” ‘The Long Range Planning Committee also identified five areas to focus on: faculty hiving and retention; student life; cursiculum,; revenue; and alumni affairs. Regarding fecilly hing and retention, Dean Powers betieved that forthe law school 10 “emerge a8 one of the nation’s top ten Iw school” he “most important task maybe to build 4 beter faculty” through lateral hire of “stars frm other Law Schools tht were “peer oF ‘beter than he UT Law School, particularly in the cone scholarship areas." In UT Law Magazine, Dean Powers wrote 2 Mints ofthe Foundation, November 10,2000, (OAGUTLS._€01193) {Mites ofthe Foundation, May 112, 2001, (OAGUTLS- 001190) ‘2 hup rw uous lan np/yp-coniendypoadsnagazineachive/UTLAWepringO pat © Investigation Exhibit UT Law Mapaine, Opeaing Doors pat, (. 8) © Investigation Ehbis9 UT Law Mapaine, Opes Doors pit. (23) (One area for improversent is that only a hansfal of faculty enjoy nearly universal recognition and high regard among legal academics. Others enjoy that igh stature ‘within their field, but ot outside thei Fields. Younger faculty may aan thls stare, but that is hard to predict, We nwt retain these younger sehiolars as their stars rise We also need to add more faculty who ate clearly ofthe caliber of our cusrent stars Another azea for improvement is that our strengths in traditional legal scholaship ‘often do aot ren to interdisciplinary work, even though such work is increasingly ‘important to the legal academy and is intrinsically valuable. For these reasons, We reed to make a concerted effort to develop intedisciplinary scholarship. Michigas, Virginia, and Berkeley—schools with which we compote —all have ston profiles centers of interdiseiplinary scholarship, We especially neel to expancl out presence in Jr and economies, business, history, philosophy, and political science. With these considerations in mind, we recommended that in the next five years we should make at least five lateral appointments of cleat stas from peer or beter institutions. The scholars nevdn’t be senior, but there must be w neet-consensus vies, inside and outside the institution, about their quality. Five appointenen's like this it five years would be transformative. Moreaver, we should make Texas a major center of interdisciplinary scholarship in atleast two of three arwas that would be om a pat ‘With our leading areas of strength in traditional scholarship. And we should explone prospects for joint appointments of distinguished scholars with the top twenty seademic units at UT, suc as economics, business, goverment, history, Latin American stules, philosophy, psychology, and sociology. is important to note thet, round the same time the UTLS wanted ty hud its faculty in comain core areas, other elit law schools were undertaking their own efforts to expand thei “star” foculty, Eventually, the limited supply of subjectively “star” faculty in certain seas of lav, combined withthe intense recruiting efforts of multiple elite law schools tested in the need ~ or at least perceived need - on the past of many law schools to offer relatively ‘expensive faculty compensation packages in ofder o atact of retin “star” talent. Because many of the elite law schools providing compensation packages are private insttations, data tegarding their compeasation programs is not publicly avaible, What is clear is tha the University of Texas Law School was clearly competing to recruit and retain siar faculty against private law schools. According to our interviews with Law Schoo! Staff and professor, the types of competitive ‘compensation packages might include = Sipniticanc ase sa © Tenure; ‘© Deferred Compensation or Forgivable Loans ‘© Housing arangements;* o ‘© UT Law Magan, Opening Doors, Sis 2003, Ce | Gua een ates os os 15 Housing allowances; Relocation assistance; Free college tuition forthe aculdes children’s tuition o wition matching: Summer and other stipends, Research support Request to teach only some semesters or number of classes Providing a spouse with an employient epportunty; of ther items of value such as football stadium season ickets, ‘During the November 9, 2001 Law School Foundation Board of Trustees meeting, Dean Powers reported that to mace lateral star faculty aires and maintain existing faculty “equines rooney.” He further stated that “It is etitically important to build up faculty excellence fonds to recruit and guard against raiding.” One Foundation Board of Trustees member suggested seeking law firm support for assisting with faculty reesuianent and retention methods Another Foundation Board of Trustees member suggested that he had “Weferred compenstion plan administrators who will be willing to work With the Law School to set up deferred packages for faculty at no cast 10 the Law School" What is elear from cut Investigation is hat these Foundation ideas were pursued, Ji, Rorgivable Loans 2003 to 2005 During the Powers Era On September 9, 2003, Dean Powers wrote a leter to Law School Foundation Board Cinnirman David Beek requesting that the Board of Trustees or Executive Commites of the Board of Trustses approve a $100,000 loan to Mitch Berman,”> Berman was idenitied a fone of the Law School's “very brightest” faculty who was at ssk of leaving the Law Schoo! for the University of Chicago. Powers proposed that Mr. Becman receive a $100,000 “ioan’ forgivable on an annual pro-ia basis over a Seven year period from the Foundstion, The [puspose of the loan was to alleviate Berman's concerns over housing. Powers notes in the letier that “we have money ia unendowed funds, specifically in the Long Fund and the Bracowell & Patterson Fund” and this was the “sort of “war chest” we need to attract and retain faculty.” (On September 22, 2003, members of the Beard of Trustees voted in favor of the transaction with Miteh Berman.” Powers again wrote to David Beck on November 11, 2003, and ‘outlined key tenas of the tansacton.®* The legal documents between the Foundation and Berman were executed on December 19, 2003." throng te Law Setoo exiting nde is one IMPs tee a forgive tom poze fom be Fouadation exis unde is tenure. * Mines othe Tastes, November 9, 2001. (OAGUTES_ 001179) ‘Pawar er to eck tel SepeemBer 9 248. (OAGUTLS 001259) ' Powrs er fo Beck Jed September 9, 208. (OAGUTLS. 0159) "Memo trom As to eck dated Seplember 22,2018. (OAGUTLS 001798), ' Powars leer to Beck ded November U1, 2003. (OAGUIILS. 01797) “ Bensan Leer Agietent ated Dezembs 18, 208. {OAGUTLS. 001313) 16 At least by December 2003, the law firm of Jenkens & Gilchrist and the Foundation were developing deferred compensation, promissory notes or loan atzangements for the Foundation related to Powers’ vecuiting andl retention efforts, The law fim. drafted promissory notes and fetter ygreements. ‘They also performed legal esearch related {0 the rogram.”* Law School staff indicated that it was determined that these programs should be run through the Foundation not the Lav School--because it was not clear under University policy or state law that the Law Schoo! could enter into leans ditectly vith faculty.” Tn our interviews wit she states she was unware of the loans and dit not approve te program. Netter te Foundation or Law Sehocl provided significant records regarding legal or fax analyses related to the program and its resulting tax cor legal liability created on behalf ofthe Stute or Law School employees, uring 2004 a 2005, there were two othor transactions between the Foundation and law School faculty that occurred under Powers’ enue as Dean of the Law School. One was with Prafessor Bemic Black and the oer with Professor Ernie Young. The Law School and the Foundation could not provide documentation of their communication between one another regarding a request for approval for Black's transaction.” A leter dated November 9, 2005, from President Powers to Foundation Road Chairan Reck requesting s inancial package for Professor Young. was produced to this office”® In this Teter, Powers requested Foundation approval for Young to receive what was desciibed hy Powers as a “forgivable Joaa” and a “housing allowance." He sates the source to be the “Susman Godley money. ‘The Foundation Board approved the tansaetion with Young.” At the November 5, 2004, Foundation Bond of Trustees mecting, a Trustee asked Dean Powers “if there was any resentment among the faculty to the recrutiuet of "Stas" higher salaries..." whieh would have included Berman and Black, Powers responded that it was “soonething he watched closely." Powers noted that Law School taiton increases perinited salary increases for the Faculty generally, which helps with morale overall. ‘The Dean said he has received some erticism fom the feculty but that it was a manageable situation.”® never TE TT oy of whom served ‘on the Faculty Budget Commitee ding the Powers forgivable loans cra, revealed thatthe ‘Commitee was made awa tat the sated compensation for Professors Becmuan, Black, and ‘Young didnot reves their cal compensation. ‘The details as to the amount ofthis “off-the- boaks* compessaton was neither requesed by not provided to the Faculty Budget ® Jenene Giles euro Powers dated Debi 3 2003. (OAGUTIS 042410) ® Doeamenttion obtained varing de OAG's investigation costes thatthe UT Sys hal haowledge ofthe fexience of the Law Schos' forgivable Ten pura. In at ert one inane. soe ttthe UT System Ine the details of one Ian Howover. thei "loan my have Been a part of th ese tat ths UT System dificult acoustig fr tis unique atl f eampensston. Whatever the sco. UT-Anstin dd not AMG i blgation wade uiersty Rules to repr “all-of a profesorscompesuton, The Iga the ‘maul spe alto extend oto Provs's Ori, the Siem, nthe Regents. Intervie wii May 14, 2004 Voundaton Mowing Misucs reflec at Black bal been terial tom Sanford (QAGIELS ovo fom Powers Beek, (OAGUTLS 01261) November 9,200 ee om Powers n Hoek. (ONGUTLS. 001261) % Fonmation Boart Mites dated November 12098. (QAGUTLS- 001049) ~ Foumftion Boat! Mioues dated November 5,08. (OAGUTLS. OO1C8D Comite. ‘This version of erets i ceotiten wth he descipon provide fi, Faculty Loans During the Goode Bra Thee loans were executed during Dean Steve Good's interim term as Dean of the Law School. ‘The fact of the existence of a forgivable Ioan to Derck Jinks was identified in a memorandum dated April 26, 2006 fiom Dean Goode to then Provost, Sheldon Ekland. Olson.” ‘Two other loans were executed daviag Dean Goose's tenure with both going to Professor Rill Sage.” The first of these loars was disclosed to dae Provost in accordance with UT pokey ontizmed that nove of the details of any of the three Joans were provided to the Faculty Buclget Committe." Goode entered the policy of aot sharing Foundaticn-based compensation with the Faculty Budget Committee when he became the Interim Dean” iv. Faculty Forgivable Loans 2006 to 2010 During the Sager Rra ‘The grestest expansion of the faculty forgivable Ioan program oocured during Dean Larry Sager’s tenure as Dean aiter Powe ascension (o President of the University of Texas at ‘Austin in 2006. After Lary Sager became Dean of the Law School in September af 2006, 20 forgivable loan transactions were executed betwecn December of 2006 and August of 2010. Based on ovr interviews with current and former Law School faculty, these loans did in fact reorut and retain high-quality faculty, as was the stated goal of the program, WMI oc 0: on co s cning ton te wie te Enorraton abouts loans wasnt epved fo oe of ee anapreney. However, eile Dean Gone fd ed some infonsaton to UT System, hss nt te ten of Das Lindguist that te dete of te fegvable loan program were sysercally prvi he Law School Fecully Budget Committee, UT Austia, of UT Syston in accordance ‘with University policies and procedures. The University's policy provided: Responsibility for preparing recommendations for salary rates, promotion, tenure renewal of appointment, or non-enewal of appointment rests with the budget council (or other departmental governing body) and the department ekiir. Administrative ‘officers at each level shall give fll consideration to recommeadations from the level below. Inthe ease where a recommendstion is mdiied or disapproved the action should nommally be taken only after consultation with the level below. All recommendations shall be forwarded 10 the President for final evaluation and 18 ldcision, ‘The Presidents decisions with regard to salary advancement, promotion in ran, the award of tense, and renewal of appointment are sect fo coatitmation by the Chancellor of The University of Texas System and the Board of Regents. No commitment reganing salary rales, promotion, teaure, of renewal of eppointineat may be made without the approval ofthe President aad subsequent confirmation by the Chancellor of the University System aad the Board of Regents." ‘he forgivable loan program possibly became known to the faculty through the Loftus Carson litigation, faculty talking amongst themselves and Dean ‘Sager sharing. some information witha select subset of the Law School Faculty Budget Committee towards end of his were, Further, one must distinguish beween general knowledge that a forgivable Joan propre existed and knowledge ofthe terms of any of the forgivable loans. Further still one must distinguish between Knowledge of the forgivable loan program and the pioper exceation of ‘the procedaves put in place (o foster transparency not just within the University, bat withthe public as wel ‘There can be ie dspeement tha the UT Siem nes as ery 452006 of he existence of the forgivable Ioan program atte UTTS “Esc thatthe UTES aid nox frovide Information on th anwant of lic (oR i the Provost cr UTA Budget st He sited he purpose was fo aot puicaon aad pa faculy pose sas ofthe Informalion becoming public. cs lll ‘ot fe there was ster any inet to Lap the intron either fn he C hetnteon, UT Sten, tr the Regents ase fed -y had knowlege and supporied the goals ofthe program, MBs ie a doe cea engl TES a ht oe Miner sily asp byt UTLST wie ors wee maga by UTIMCO” he dean, Sage nae ess of UTLSE Fd ofl budge acl Us la eho. fe wes ven vised lade by OILS for ietemining at os oo of ie CFLS The FO fOr VTLS war aoe CFO fo he UTLSF. Ihe dtnon of ope cman asin hg part let to he discon of te ean, Tis podeed pe cna problems anda lack a hetrangeney ond the publi One example of lack of controls is seen in a Sayer and Dan Rodrigues interaction, At some point, Mr. Rodriguez experienced an emergency. He reached oxt to Dean Sager for a resolution, Dean Sager acid unilaterally and approved the diect payinent of $25,000 in lieu ‘of another portion of his compensation (a tution stipend of up wo $25,000). This payment is not recorded in any University PAR or request 0 the University System, Nor was this ‘request forwarded to the Foundation or ever approved by the Foundation c. Dean Larry Sager’s Compensation © OAGUTIS cosise © May 17, 2006 al orn Randy Wallie to Kibey Bir {OAGUTLS-002337) "© MOU butwoen Sager onl Rosigaes OACUTLS. 02568, 19 Lamy Sager came to the Law School as + Jaw professor in 2002. He is the Alice Jane Drysdale Sheffield Regent Chair in Law. He is compenssted for tha tenured chait position, [At the November 8, 2002 Beard Mesing, the Founlation approved in exec session two resets tr the facsy mrtg progam for Sof 2 Ps Tone Cohen®* The Foundation's ond ind ta (ae mage fee te anf Sage war aot dety executed and was then personally gateteed by 2 Fouaion Dowd Member" MMIIMIMess any kac wedge o thse acs Is important fo vote that morgage loan programs and housing allowances were not new or ‘uncommon programs st the Law Sebiool even prior to the beginning of deferred ‘compensation ot forgivable loan programs. Finances atthe Law School were described as tight.” ager was made Dean of the Law School on September 1, 2006." He had regular interaction ‘with the Foundation in his role as Dean, but his interaction began in early 2006, as “Dean Designaie."* Lis clear from Foundation records that Saget wanted (a -- and in fact did increase the use of forgivable loans (o recmit and retin faculty.” Dean Seger felt the Laww School was not spending cnoogh per stadent and that it was importa to maintain an appropriate sent to Jaculty ratio along with increasing Cop faculty." Sager was also concemed with space issues at the Law School. “By traditional guidelines, the Law School is in a 40,000 squate foot eficit on space. The dean said that if we continue to prow ous faculy, the Law School vill bbe 65,000 square fet sby."™* Jn December 2008, Sager and Powers met reganding compensation st the Law School They met again in January of 2009, During that meeting Powers says le told Sager that salaries were frozen and no rises were to be provided, including any raise for Suger.®” (On May 1, 2009, the Foundation and Sager executed an agreement whereby Sager received a $500,000 forgivable Loan.” Foundation records show the agreemen: was being negotiated © Foutdon Board Mints dated Nove 8, 2002. (OAGUTLS. 01138) inate May 92003. (OAGUTLS. 001117) * Dont Meine Nines Novenfur 32005 (OAGUT.S. D102) an Moy, 208 (OAGUTLS 90050, 2 Sou Mest Mines November 2008 May 11 207 (ONGUTES. 6996) ad Souler 9300 (QAGUTAS 0085) $s Mesing Mines May 11,2007 an ovens 7,208, OACUTLS D088 * Brunel Sorbo 5,200 (ORGUTES ODS, ob aay Zi 200, (ORGUTLS #9) stn hat eet Poe ofe C11 SPs $50000 tomnmnUTI Donets Bub Gate auued sues! en estore tae cSmpuvel te USF Bed Deoween storeys at Vinson and Elkins LLLP. and Sager as ely as of Mach 2008!" A report hy the UT System's General Counsel previously foaed tha Sagce aptoeeled te Foundation president request the supplemental $500,000 payment for biel” dies thet he aay Was sought aftr President Powers veiccedM or 5 pay increase. ecllestion ofthe facts ae aot consistent wit the mals and ler evidence obtaed ating the conse of this Office's investigation Former UTLSP Boasd Menbel(MMMM tis oBce tat ie was never Informed tat Presieat Powers had sxjecied Dean Segoe request fora pay rise I = 5c tn 30,00 rrsivete toa toca of is sce mA UTES Dean. He believed that his efforts had ycled Monger fatty and Seles reputation forthe ia school ford that he was sexponsbie for ising ove S80 mln forte aw sa uae ahnied tat te Toan 3s not ages oa i ll eet mi Ei te lous ate tune I was sade. Ths lar ela Was sting ta fndepenertly substan or could sca 1 appears that, at dis in, there was not clarity regarding whether or not compenstion to Sager from the Foundation requited approval from the University's Adninistation Despite these questions, there is no definitive evidence thet Suger’s compensation arrangement withthe Foundation was formally approved by bis employei—the University of ‘Veras at Austin—prior to contract execution, There is also conflicting information as to ‘whether or not it was known by ls superiors prior to contact exeeation on May 1, 2009, Later, on June 27, 2008, President Powers was iiformedahont the existence of five-year dferted compensition (oan for an amourt of $100,000 per year via an email frum Associate Vice Presideat an i Discolop Mary Knight. However Tension repatding the level of disclosure by he UTLS is eloar by looking in two areas. First there was an effort by the Regents and UT management tobe inforaod as 0 the University's highest paid employees, This is commonly eferred to as the “Top Ten List.” This obligation ‘was in addition to all other policies and procedures and clearly did not replace all other UT requirements. rom 2007 to 2010, there is a large amount af documentation rezatding an effort by the University © compe a reporting of top ten compensated employees annually by comporent institutions. ‘There was cleatly discussion within the UTLS and Foundation regarding the disclosure and handling of the Foundation loans and defemed compensation WEBI 228s 0s (rise Compt ee oe am ent gig afer sho ove’ sso. Tass dane ta was oricd ea at os snterel by UT camino othe Bost of fama, NPA lociensn var den os al Bate o berdacd Mach 2209. (OAGUIES 137) Faas e Xeon del ue sO {(OAGUILS. 1399 Clamcoent nt be epied Ompone ie gues ‘Raper ad Recents Te Rao net La Shea nl Foadaon dat Osher Sis ne 32(ONOLTLA BT) Ft Ceo Novon dated Marc 2009, (OAGUTES. 1299 "fim agi ows dad se 2-20. oc “Ths” (OACUTLS. 203) 21 agreements as it relates to this list." “There is also discussion between President Powers, Oblesdorf and Budget Director Knight about the Foundation providing information sslted (0 Foundation payments for tis lst and an IRS audit request. Seoond, there were ongoing legal efforts by the Foundation suroursing litigation involving the Foundation, the Taw ‘School nd a law school professor wo nit disclosure of Foundation information related to the dos. Its clear from the Foundation Board Meeting minutes that Dean Sager knew as early as 2007 that the Foundation’s faculty loans snd cheir full disclosure were aa issue of concern amongst the law school faculty. Further, the sites indicate that Deen Sager supported a Jack of transparency: “The faculty does not know details of loans, for example, hut they do ‘know that foans exist" Ieis also clear that Knight, Oblendor? and Powers though that the ‘University should be informed, and conveyed this demand to UTLS. Accontng tthe Foundation stand 8 recon, Sager was also provided a Foundation credit card.” The Foundation became concemed that Dean Sager was charging items that set nt well Undentodby the Faundstion, “The Law Seon! Sia wha Wosked ee Found, bt rept dclyo Super were responsible for making dnturement pay the Foundation’s ctedi eat bill According a acon that Sager was curing Wo fe Founda’ xi cus appt neem tone Fou ‘ond nears an ely the Foundation made changes os cei cr polls a rem i fet To date. The eet Dean des not havea Foundation ced car Sager and other Law School personnel were also reimbursed by the Poursation for certain expenditures, ‘This office dil not audit tose expenditures, but expenditures reimbursed by the Foundation included items such as conferences, tavel, food, parking, computer equipment. club dues and storage unit fees" Unless done by the Fondation, these reimbursements are supposed to comply with Usiversity expenditare res and regulations, bat without a proper audit, i cannot be confirmed that said relmbusesaents were, in fact, in compliance with Univesity policies and procedues 4. Mulliney Settlement 13 Ei Bie to Newton dad December 2000. (OAGUTLS, 1291) ‘1 Chrnsfoy-taw Sahel Fouplation Esai rome Mary Knight. (OAGUTLS 003722) 8 Lota C: Cason, 1, Univer of Texas at Ata, et al, US Dart Cut, Westrn Dri of Teas, (Gt Aetion No ALIS.CA-49788, (OAGUTLS. 01308) 1 Hood Mesto ies Nove 9, 007 snd May 8, 2009 (OAGUIT 8000025. 0 eviews wifi ces provide by Foundation, Deans pit ada Sagce were oot ised a Fouaditon cect e ‘The May 12,2006, miro iadcate data Special Commit was frie by he Fowation Rose of ‘Trustees lp ease tha the Ba of Trace ws groeny “hari ts fidiciny des" The Seca Commitee as episod because te Fndation hn enocrerd problems” las to he “absent cent of interest betwen the staf ane Dea Wiese primary espns so Ge Law Shoo on he ons ha, ac tie Fovadaien‘hustees, whose nary eporiy i the rodent manager ofthe unis tes to “Tsiees." (DAGUILS 001028) "Fre elie sag ce Appendiy A. 2 Law School Professor Linds Mullen, through her aitomeys, sent a demand letter to Dean Sager atthe Law School on Tuly 13,2010. Mullin asserted thatthe Law School was not in ‘compliance with the Equal Pay Act with zegard to her compensation, Im contravention of the University’s siandard procedures goveming lawsuit demand letiers related 10 employment matters, Dean Saget did not immediately inform the Genctal Counse’s Oitice. Instead, ached the Foundation first and sought legal vie fom Vion and ins (ll -Anstia General Cons! Pais Olen Inchouse altemeys for the Law Senoo) were not informed of the existence of Professor Mullenix’s demand leier according to normal practice. MMIII sy she first learned of the issues with Mullinex wien she was ealled to Sager's office nearly a month later on August 5, 2010, Dosing this mecting, Olegdor wus py of the demand leter snd ‘ypevaiten notes regarding the ease iat Sager wished for Vinson and Flkins LLP. to represent the University and she processed an outside counsel contract Ww this effect." In the analysis of whether to setle this mtter, Sager indicated that the matter should be sted, at least in part, because he believed if the fall picture of the Law School's ‘compensation package were to bovome public it would he very damaging to the Law Schoo! and the University. Importantly, Deas Sager himself had received a $500,000 forgivable Joga that would have been publically disclosed, although Sager specifically denies this was a ‘concetn, The typed written notes sate i par the following: ‘whether or not she ultimately prevailed, would be very damaging to the Law School and to the University. To the Law School, bocanse of the specter of gender cliserimination, the personaf afacks that would accorapany litigation ofthis sor and te hostile and extensive revelation of the full picture of Faulty compensation, at & time when education is a natural target of poplar anger over costs, and ata time ‘when the faculty is just recovering from salary based unsest, The scitlement with Professor Mullenix included a forgivable loan from the Foundation," a sfate-funded pecmanent pay increase and reimbursement of atiorney’s foes, Acconding tothe University of Texes System's then-Cenecal Counsel, the settlement was improperly signed bby Oblendori" Additionally, the setlement did not follow tequited intemal epproval processes for sitlements."? The resulting forgivable loan is distinguishable from the others " Occ¥ amOz-OMi W apposed coenel coma, en Oko? apa ‘et pay the Pountion tt a te Unie. Tene we etal cpa ws ee of ra "PM ts cme on i ae pet

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