Prosecutor: No Perjury Charges Against Gearhart

The last remaining judicial investigation in connection with the financial crisis in the University of Arkansas’ Advancement Division has been closed.

  • Chancellor Gearhart, January 14, 2013: “Why do we have these documents? Get rid of them!”
  • Gearhart under oath, September 13, 2013: “I have never said to anybody that they should destroy documents.”
  • Prosecutor Larry Jegley, June 2, 2014: “there may be differing versions of the events and discussion concerning the matters at issue”.

Pulaski Prosecutor Larry Jegley announced on June 2 that he’d found no probable cause to take action against University of Arkansas officials (via Arkansas Blog). At issue was whether Chancellor Gearhart or other officials had committed perjury at a hearing of the Legislative Auditing Committee; Jegley’s office had jurisdiction because the hearing was held in Little Rock. Jegley’s letter gives no detailed reasoning for his decision. According to ArkansasOnline, Jegley could not be reached for further comment. For the University, and in particular for Chancellor Gearhart, an embarrassing  chapter has been closed for good but the damage is considerable.

On January 14, 2013, Chancellor Gearhart told staff members at a meeting, after a budget document had been handed out: “Why do we have these documents? Get rid of them!”. This version of events was confirmed by three witnesses: former Associate Vice Chancellor for Development Bruce Pontious, now retired; Associate Vice Chancellor Graham Stewart, who left to take a position at Vanderbilt University; and former university spokesman John Diamond, who was fired in 2013 and recently was appointed as spokesman for the University of Wisconsin in Madison.

2 quote Gearhart: ‘Get rid’ of papers, Lisa Hammersley, Arkansas Democrat-Gazette, December 19, 2013

At the meeting of the Legislative Audit Committee on September 13, 2013, confronted by Diamond, Gearhart stated under oath: “I have never said to anybody that they should destroy documents.”

Washington County assistant prosecuting attorney Dave Bercaw, investigating possible FOIA violations, redacted the “get rid” quote out of his final report. Now the Pulaski County prosecutor closed the remaining perjury investigation, stating: “While there may be differing versions of the events and discussions concerning the matters at issue, none rise to meet the standards [of the perjury statute].

UA finance chief cleared in criminal investigation

The Washington County District Attorney has cleared University of Arkansas finance chief Don Pederson of criminal wrongdoing in connection with financial irregularities in the Advancement Division (find all related documents here). An attempted cover-up was not illegal. Was it ethical?

At issue in this particular investigation was the fact that the UA leadership had not disclosed the budget trouble to state auditors when it was discovered in 2012. The state audit conducted in 2013 states (p. 12):

“On October 25, 2012, during the exit conference for the University’s financial audit report for the fiscal year ended June 30, 2012, neither the Treasurer [Jean Schook] nor the Vice Chancellor for Finance and Administration [Don Pederson] disclosed to DLA staff information about the Treasurer’s report on Advancement issued six days earlier.”

The auditors concluded that the information about financial irregularities and the potential of fraud should have been disclosed to auditors, as (one would think) common sense would also dictate. But, it turns out, it wasn’t required by law, and the statement that Pederson did make to auditors in what is known as a Management Representation Letter – in which no mention of financial irregularities was made – was not technically false. Pederson’s base salary is currently $295,000, up from $250k in 2010. Treasurer Schook’s salary is $164,450, up from $118k in 2010.

Report by Arkansas Democrat-Gazette, April 30, 2014
University of Arkansas news release, April 30, 2014
Comment by Arkansas Blog, May 1, 2014

The new (and presumably final) investigation of the Washington County DA was prompted by of a group of state representatives, led by Nate Bell (best known for his far-right politics), who were surprised to see that the DA’s initial investigation had not addressed this particular matter. The result was predictable. The attempted cover-up was certainly unethical as well as poor judgment but apparently not technically illegal. As Arkansas Times’ Max Brantley put it:

“The University of Arkansas shaded, obscured and hid the truth about a huge deficit  in its advancement division. It got caught. Underlings took the fall. Dishonest behavior is not necessarily a  crime and sometimes it has no consequences, outside of public shaming.”

Update: Pederson will retire June 30, 2014 (announcement).

Speaking of dishonest behavior, it is interesting to note that the University of Arkansas Board of Trustees recently enacted a Code of Ethical Conduct (along with new policies on accounting, budgeting, and transparency). The new code states:

“Employees shall conduct themselves in a manner that strengthens the public’s trust and confidence by adhering to the following principles:

  • conduct that is beyond reproach and integrity of the highest caliber;
  • honesty and fairness; and
  • accountability, transparency and commitment to compliance”

Revolutionary stuff! In addition to admonishing everybody to follow all applicable laws (seriously!), the code states:

“Employees involved in the preparation of reports and documents (and information included therein) filed with or submitted to federal, state, and local authorities by the University are required to make disclosures that are full, fair, accurate, timely, and understandable. They may not knowingly conceal or falsify information, misrepresent material facts, or omit material facts. These same obligations also apply to other public communications made by the University.”

The code requires all employees to report suspected violations but there is no specific requirement to actually follow up and investigate such reports. The Academic Daylight blog has reported a number of dubious practices, including the under-reporting of the compensation of certain top administrators, dubious accounting practices in the UA Athletic Department, and violations of internal procedures in the approval of extra compensation to UA faculty. We also found that required workforce audits had not been conducted and that certain reports required by law to be posted online were not.

In none of these issues have corrections been made.

Faculty Job Satisfaction at the UA

University of Arkansas faculty members took part in the 2009-10 edition of Harvard University’s national study, “Collaborative on Academic Careers in Higher Education” (COACHE), a survey examining job satisfaction among tenure-track faculty members. The University also conducted a survey in the fall of 2007 to determine faculty perceptions of the general climate on the UA campus. Although these surveys are now a few years old, they are the most recent available and contain interesting results.

In the COACHE study, the UA was compared to a group of six peer institutions. coache
UA faculty members were among the most satisfied in the category “way you spend your time as a faculty member” but were least satisfied in many other categories, including tenure practices, assistance in obtaining grants, leave and child care policies, fairness of evaluations, and compensation (cf. Executive Summary, p. 18-20). Often, female faculty were even lass satisfied than men. According to both surveys, female and minority faculty reported significant deficits concerning the institutional culture of the University and its (lack of) support for diversity.

A new COACHE survey was conducted in January 2014 and the results are expected at the end of May. We’ll report.

Compensation of top UA administrators underreported

The University of Arkansas has significantly underreported the compensation of Chancellor Gearhart, athletic director Jeff Long, and Vice Chancellor Chris Wyrick.

State law requires Arkansas universities to prepare an annual report detailing the compensation of top administrators. Uark Transparency has made all editions of the Administrators Compensation Survey available on its web site (see The Proliferation of Administrators in Higher Education). Comparison of the reported data with the UA’s expenditures database reveals significant discrepancies:

  • Jeff Long's FY 2013 salary

    Jeff Long’s FY 2013 salary

    Athletic Director Jeff Long received a total of $1,140,000 in cash payments during fiscal year 2013 (July 2012 to June 2013) but the survey discloses only $865,000. A $275,000 bonus payment in July 2012 is not disclosed in the survey. The University has declined to comment.

  • The Chancellor house provided by the UA to Gearhart is a benefit worth $21,788 per year but was omitted from the fiscal 2012 and 2013 surveys. UA spokesperson Mark Rushing acknowledged the mistake, stating: “The tables are put together by Human Resources Payroll Office. Since the Housing under IRS rules is not a taxable compensation for a chancellor required by the BoT to live on campus, it is not in their data base and has to be added manually. The lack of this data was simply an unintentional omission. We will add it in the future.”
  • Chancellor Gearhart also received a payment labeled “Special (retirement,etc.)” of $22,986.68 in 10/2012. This doesn’t seem to be disclosed in the FY 2013 survey. The University has declined to comment.
  • Vice Chancellor Chris Wyrick, who became head of the Advancement Division in April 2013, receives a $12,000 per year car allowance in cash that was omitted from disclosure in the FY 2013 survey. Vice Chancellors Gaber, Pederson and Robinson also receive the allowance.

Arkansas law ACA 6-63-316 requires state-supported universities to file the Administrators Compensation Survey with the Arkansas Department of Higher Education (ADHE) by July 15 of each year. The law was enacted in 2009 as “AN ACT TO INCREASE SALARY TRANSPARENCY FOR ADMINISTRATORS IN STATE-SUPPORTED INSTITUTIONS OF HIGHER EDUCATION” (Act 321 of 2009). According to ADHE director Shane Broadway, so far no corrected report was submitted.

The reports are posted on the ADHE web site. In addition, state law (ACA 25-1-118, Act 742 of 2011) also requires all state entities to post mandatory reports, including the Compensation Survey, on their own web sites. The University of Arkansas so far does not comply with that requirement and many reports remain unavailable that by law should be accessible online.

Doing well: Gearhart’s inner circle

Amid budget trouble, money was found for hefty pay raises to some UA top administrators

Arkansas Blog has published information compiled by John Diamond concerning some remarkable pay raises recently awarded to administrators connected to the University of Arkansas’ troubled Advancement Division. Recall that the Advancement Division is still running a deficit attributed to uncontrolled payroll increases. Some of the raises are due to promotions which Diamond contends were granted without following proper procedures. A University spokesman has denied that allegation, claiming that these positions had been posted and their pay reviewed. We haven’t seen the records proving or disproving this but point out that workforce analyses, salary and raise audits required under UA policy apparently have not been conducted in recent years. We have also reported on some remarkable extra compensation awards that were not pre-approved as required by policy.

Room for raises at the top

Associate Vice Chancellor for Development Mark Power received a whopping 32% raise, to $194,000. He took over in July 2013 for Bruce Pontious, who left in September. Power’s salary has gone up 57% in four years (he already was listed as Associate Vice Chancellor back in 2010). The salary comparison is based on the Administrator’s Compensation Survey (see last post for details). Chris Wyrick, who was promoted head of Advancement in 2013, now makes twice what he made in 2010. To be fair, he still makes less than his predecessor Brad Choate. It is noteworthy however that he already got a raise after only three months on the job, to $287,000. Shortly thereafter, Wyrick had to publicly explain offensive remarks he was reported having made.

Judy Schwab, another Associate Vice Chancellor in Chancellor Gearhart’s inner circle, got a 10% raise to $165,000, an increase of 26% over four years. Even more remarkable is a 15% raise for treasurer Jean Schook. Schook pleased Gearhart by assigning all blame for the Advancement Division trouble to Brad Choate and Joy Sharp, but found her own financial maneuvers severely criticized by the Legislative Audit.

Scott Varady, working as General Counsel for the System Office, was even awarded two raises in just a few months. He now makes $200,000, 32% more than in 2013. General Counsel has played a significant if somewhat covert role in the whole crisis. For example, they provided the fake justification for withholding records from journalists’ FOIA requests. When the prosecutor’s office investigated possible FOIA violations by UA administrators, the UA attorneys interviewed critical witnesses in presence of Gearhart’s private attorney. The conduct of these interviews on September 24, 2013 was initially revealed by John Diamond in legislative testimony. The UA has confirmed that the interviews have taken place but contends that no related records, notes, transcripts, or emails exist, and no comment has been made as to the purpose. Why did Varady’s taxpayer-funded salary make a sudden jump last December?

Denise Reynolds, named head of budget and HR for Advancement in 2013, received a 3% raise in July 2013 and then an additional 20% in October, retroactive to July. She now makes $92,500, 46% more than only two years ago. She was a witness in the Washington County prosecutor’s investigation of possible FOIA violations. The Democrat-Gazette reported on December 19, 2013 that top administrators Bruce Pontious (now retired) and Graham Stewart (leaving end of January for Vanderbilt) testified that Gearhart told them at a meeting on January 14, 2013 to “get rid” of budget documents, confirming the account given earlier by John Diamond (fired). “Soon after that September meeting with legislators, Reynolds supported Gearhart’s version of what happened. She told the Arkansas Democrat-Gazette that the Chancellor never told her to destroy documents or stop creating them.” The “get rid” quote was included in a draft version of the prosecutor’s report but was edited out of the final version. The Pulaski County prosecutor is currently investigating whether Gearhart lied under oath about what happened at this meeting.

Pay raises for selected University of Arkansas top administrators, 2010-2014 (table was revised to better reflect benefits)

Pay raises for selected University of Arkansas top administrators, 2010-2014 (table was revised to better reflect benefits)

A more comprehensive compilation of pay raises for top administrators (xls format) shows that a number of Vice Chancellors and Vice Provosts have done very well recently, with rates of increase better, and sometimes much better, than 20% over four years being the norm. Most faculty members and other UA employees were lucky to get any raises at all.

The Proliferation of Administrators in Higher Education

The Administrator’s Compensation Survey has the data

One aspect of the UA Advancement Division budget trouble that perplexed many observers is the fact that so many highly paid professional administrators failed to notice (so they said) what was going on for years. In response to public criticism, the University hired yet another administrator with the title of Associate Vice Chancellor for Budget and Financial Planning (the UA already had the positions of Vice Chancellor for Finance and Administration, Associate Vice Chancellor for Financial Affairs, and Budget Director) whose “job apparently will be to make sure no other highly paid UA administrators create the same sort of public relations nightmare”, as the Courier News’ Roy Ockert put it.

Throughout the world of higher education, the bureaucratic apparatus has expanded way out of proportion with student enrollment and faculty size (see below for a sample of items documenting and debating this trend). Critics of “administrative bloat” point out that the number of administrators per student has increased while the faculty-student ratio is generally flat or declining. There’s also a growing chasm between the salaries of regular faculty and administrators (and, following overall economic trends, growing inequality between top and bottom earners in general). Again Ockert:

“Increasingly, educational administrators claim they must compete with business and industry in offering salaries to administrators. In hiring professors, though, the strategy is to be competitive with other universities. Because of that and other factors, a chasm is developing between administration and faculty at many institutions, not only in terms of salary but also in educational theories, campus governance and academic experience. Too many educational administrators have little or no teaching experience, which may profoundly affect their understanding of the institution’s most important mission — the education of students.

Readers can look up how much individual UA administrators (or any employee) are paid at the OpenUA and BudgetUA portals. A comprehensive overview over administrator pay in Arkansas higher education is provided by the annual Administrator’s Compensation Survey, available on the web site of the Arkansas Department of Higher Education (ADHE). The survey, mandated by state law (ACA 6-63-316), covers all administrators (athletic coaches are included in that category) with salaries of $100,000 or more and includes all benefits. From 2010 to 2013, the survey expanded from 501 pages to 723 pages. The number of University of Arkansas administrators covered increased from 117 to 161 (this includes the System Office). Another tidbit: 20 individuals were listed with a job title of ((Associate) Vice) Chancellor. Note that the line item for the Chancellor house, worth $21,788, was by mistake omitted from Chancellor Gearhart’s compensation page (see below). His total compensation adds up to roughly $400k, plus $225k in deferred compensation.

Update: The Chronicle of Higher Education has a national survey of Executive Compensation at Public Colleges. Chancellor Gearhart is ranked 64th out of 256 top execs.

Chancellor Gearhart's salary and benefits

Chancellor Gearhart’s salary and benefits

The Administrator’s Compensation Survey (pdf)

Further extensive employment and salary data can be found at the federal IPEDS data center. IPEDS reports that the number of full time UA employees in the category “Executive/administrative/managerial” increased from 181 in 2001 to 290 in 2011, a 60% increase! Meanwhile, full-time instructional faculty increased only 18%, from 834 to 989.

Links discussing the proliferation of administrators in higher education:

Diamond’s Damning Testimony

John Diamond’s testimony at yesterday’s legislative hearing (find all related documents here) was even more damning than what he revealed back in September. He offered a number of clear-cut violations of the state Freedom of Information Act, and shared emails documenting the condescending attitude of top University officials toward the press. Under Arkansas law, failure to comply with the Freedom of Information Act is a criminal violation. Among the cases cited by Diamond:

  • “There was a large budget notebook for FY14 that was kept in Denise Reynolds/ office. (…) That notebook was clearly responsive to the FOIa but he [Chris Wyrick] did not provide it.”
  • “Chris [Wyrick] himself maintained a large notebook of materials related to his reorganization plan. (…) That information was responsive to the FOIA but was not provided.”
  • There were four copies of a video of the June 20 staff meeting Chris had had us make when he announced the reorganization plans. Under the law, videos are lectronic documents – the kind sought in the July 22 FOIA. Those videos were not provided in response to the FOIA.”
  • “There were countless email exchanges dealing with these topics between and among individuals, including the Chancellor, Chris, and Don Pederson, that were specifically asked for by name or title. But none of these was provided as responsive to the July 22 FOIA. I gave the Washington County prosecutor’s office over one hundred pages of potentially responsive documents related just to the July 22 FOIA alone. In Arkansas, knowingly and negligently violating a FOIA request is a criminal offense.”

The emails provided by Diamond give insight into the attitude and mindset of officials like Gearhart and Pederson with respect to dealing with inquiries and demands for transparency and accountability from the public. Below is a January 23, 2013 email by CFO Pederson announcing that he would not respond to inquiries and FOIA requests from the Arkansas Democrat-Gazette any more. Nowhere has it been expressed so clearly that University officials regard compliance with Freedom of Information as a matter of their own discretion rather than an obligation of the law. Pederson implies that this had been cleared with Chancellor Gearhart, Provost Gaber, President Bobbitt, and unnamed legal counsel. Diamond further reports that the next day, Gearhart told him “he had been getting a lot of pressure from President Bobbitt and trustees to stop me from answering reporters’ questions on the Advancement situation.” Gearhart then allegedly yelled: “Don Bobbitt and the board told me to shut John Diamond up!”

Pederson email January 23, 2013

Pederson email January 23, 2013