Thursday, September 27

Accounting for Accountability



The Penn State Board of Trustees paid Freeh Sporkin & Sullivan, LLP $6.5 million dollars for the 267-page document commonly known as the Freeh Report. The Report has come under intense scrutiny in the two months since its release and the veracity of the report has been questioned by concerned alumni, as well as by numerous legal authorities.  Perhaps in response to the substantial limitations and errors that have been documented to exist in the Report, the Board has now taken the stance that it will not review the entire document but will only focus on the 18 pages of Chapter 10: Recommendations for University Governance, Administration, and the Protection of Children in University Facilities and Programs.

At an approximate cost of $24,344.57 per page, this seems at first glance to be a waste of $6,061,798. According to Penn State's own figures, this is enough money to have covered the yearly salaries of 54.5 assistant professors or 242.5 graduate teaching assistants, or to fund a year of education for 273 Penn State freshmen.  This is more than twice the amount spent to establish the Penn State Hershey Center for the Protection of Children.

However, could even the $6 million figure be misleading?



The Centers  for Disease Control published a 2007 manual entitled "Preventing Child Sexual Abuse Within Youth-serving Organizations: Getting Started on Policies and Procedures." This document, which is available free online, encompasses at least 55 of the 114 recommendations of the Freeh report.  This is a conservative estimate, omitting such items as 4.1.1 - 4.1.5, which require the creation and structure of an independent office of compliance and items in sections 5 and 6 involving reporting of allegations and suspicions to human resources and BOT which may not be permissible under Pennsylvania laws regarding crimes involving children and unsubstantiated allegations against employees. These 55 recommendations comprise 8.64 of the 18 pages of Chapter 10, but considering half pages are not standard in formal documents, it is fair to add only another $194.756.56 to the total of overspending on the part of the Board.

The remaining 59 recommendations of the Freeh Report, at a cost of $243,445.70, relate to operating policies of the Board, administrative structure within the University leadership, and restructuring of the Human Resources Department. Also available free of charge online are the administrative structure and operating rules of the Boards of Trustees for most American public and private universities. Of the ten universities that are most similar to Penn State in terms of enrollment and academic offerings, five (Arizona State, Illinois, Minnesota, Texas A & M, and Washington) have a Board of Trustees charged only with overseeing the non-profit financial foundations of the institutions and Boards of Regents/Directors that govern the physical and academic operations of the colleges. The other five (Central Florida, Florida, Michigan State, Ohio State, and Texas) have Boards of Trustees very similar to that of Penn State. All ten of these schools have similar internal administrative structures as Penn State and at each school the University President is granted greater power over the operation of the institution than their counterpart at Penn State. Since none of these schools is known to have encountered a situation such as that which faced Penn State, it is not clear how those 59 items can prevent child sexual abuse or increase institutional control.

While it is beyond the scope of this article to discuss the veracity of the Freeh Report  conclusions, it is important to note that the $6,061,798.00 worth of pages the BOT has deemed unimportant comprise the sole item (see Consent Decree) used to justify the NCAA and Big Ten sanctions, which will cost the University dearly over at least the next five years:


  • $60 million in fines to the NCAA
  • $60 million to continue full funding of all programs normally supported by the football program, per NCAA
  • $60 million minimum in loss of bowl revenues, per NCAA and Big Ten
  • $500,000 (estimated) to integrity monitor George Mitchell.  Although Administration has mentioned that Mitchell will be hired at a discounted rate, what is a discounted salary for a former senator, lawyer, and presidential envoy?
  • $30 million (estimated) for the implementation of EVERY recommendation in Chapter 10 of the Freeh Report- at least 14 of these involve hiring additional full-time employees or outside consultants, and adding technology.
  • $5 million (estimated) ethics training required by the Freeh report and the Consent Decree for all student-athletes, faculty and staff.


The same Freeh Report the BOT has chosen not to review was also used as the basis for the Middle States Commission on Higher Education accreditation warning.  Four of the issues raised by MSCHE are likely to be addressed by the implementation of the Consent Decree and Freeh recommendations; but the real irony of the situation is concern over Accreditation Standard 3 (Institutional Resources).  MSCHE is questioning Penn State's ability to meet its financial obligations over the next few years without a decline in academic standards and quality of student life.

And then there are the additional legal costs.  At least three lawsuits have already been filed by victims who were not assaulted on Penn State property but are using the Freeh Report to hold the University liable. Are 15 or more suits to follow?  While punitive damages in such cases would ordinarily be paid by the plaintiff's liability insurance, Penn State's insurer has filed suit against the University in order to deny payment because of those same conclusions in the Freeh Report.

The BOT has repeatedly stated that they stand by the decisions they have made, and that all were in the best interest of Penn State.  Is it then safe to assume that the CFO's at Merck, U.S. Steel  and Eat'n Park would retain their positions if they spent millions so superfluously?  Would Bank of New York Mellon and Independence Capital Partners consider such an action a responsible use of their clients' funds?  Did the Helmsley Trust fritter away millions that could have been spent fulfilling their mission of promoting good works and education?  Would Eckel Farms still be in business if 10% of its budget was thrown into determining why tobacco crop yields  in North Carolina are lower and then applying the solutions to orange groves in California?

Finally, one must question why a former director of the FBI would be hired to produce recommendations on child abuse, operating policies of a University Board of Trustees, administrative structure of University leadership, and reorganization of human resources.  The public has no access to the resumes of Freeh's SIC staff, and it is unclear how his background in federal law enforcement would make him the most qualified person to conduct an investigation to produce these particular recommendations.  Since Freeh's hiring was announced only 12 days after the Grand Jury Presentment, it is prudent to question whether this investigation had another purpose- to obfuscate the truth by stopping the Sandusky story at the door of the Lasch Building.

Jessi Lillo, Penn State '91 & Deborah Beidel, Penn State '76

3 comments:

  1. Between this article and the Surma Vendetta articles you guys are really stepping up you game. Outstanding work.

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  2. Eckel is on the board or is the chair of Nationwide Insurance. He is also in the natural gas industry. Not just a farmer. Was formely the head of Nationwide Financial Services.

    http://www.psu.edu/trustees/vote/2010%20ag%20candidates%20web%20Eckel.pdf

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