Tuesday, May 10

PSU Claim Payment (and other) Malfeasance

The evidence timeline reveals that a small group of trustees, led by Ira Lubert, used the settlement process as part of the costly scheme to convict PSU in the court of public opinion.


Ray Blehar

There is a lot of confusion over the latest Penn State University Board of Trustees (PSU BOT) insurance debacle and misdirected anger at PSU's insurer (the Pennsylvania Manufacturer's Insurance Company) about the release of uncorroborated claimant information.  

Make no mistake, the people at fault for this debacle are former PSU President Rodney Erickson and the PSU BOT's Legal and Compliance Committee.  However, the settlement scheme was just one cog in the wheel of an orchestrated effort to convict PSU in the court of public opinion.

The timeline, as usual, tells the story.

Rolling Out the Red Carpet For Lawsuits

After (then) PSU President Graham Spanier attempted to defend the University from the baseless allegations of a failure to report Sandusky, he was removed and the BOT began a series of actions to convince the public of the culpability of PSU officials in the Sandusky matter.

Nov. 4, 2011:  Sandusky charges were announced.

Nov. 9, 2011:  The PSU BOT announced removal of Spanier and Paterno, leading public to believe PSU officials were guilty of a cover-up.  No vote was held prior to announcement of their removals.

Nov 11, 2011: Then interim (puppet) President Rodney Erickson's 5-Point Promise impled that PSU had a culture that failed to do the right thing and he committed to providing support to the victims.

Awareness of "Hole" of Coverage
Upon receiving the first lawsuit, PSU learns that the policies in effect during the time period when most of the (then) alleged abuse occurred do not cover "abuse and molestation"

Nov. 30th, 2011, John Doe A filed a civil lawsuit against The Second Mile and Penn State for his alleged abuse suffered from 1992 through 1996.

Jan. 6, 2012:  PSU filed a claim with PMA for coverage under its comprehensive and commercial general liability (CGL) policy.

Jan 30, 2012:  PMA issued a reservation of rights letter denying coverage under the CGL policy because of its "abuse and molestation" exclusion in effect after 1992.  In addition, PSU policies have "intentional acts" exclusions and prohibit punitive damages.

Attempt to Side-step "Hole" In Coverage

PSU will file bodily injury claims to circumvent abuse and molestation exclusion.

Jan 31, 2012:  The President Rodney Erickson's personal notes, dated January 30,  indicated a plan to submit abuse claims as bodily injuries and utilize Hershey Medical Center to record medical expenses against the claims.

Feb 15. 2012:  PSU filed a lawsuit against PMA seeking payment of the (bodily injury) claims for John Doe A.

Freeh Report, NCAA, and Lawsuits

With the understanding that intentional acts are not covered under its insurance policy, a small group of trustees embrace the allegations in the Freeh Report that place blame on PSU officials.  In the following ten days, this group negotiates a set of sanctions and harsh financial penalties from the NCAA.  This action is a continuation of the small group's goal of convincing the public of the culpability of Paterno, Spanier, and others for not preventing Sandusky's abuse.

July 12, 2012: The Freeh Report was issued claiming PSU officials were aware of Sandusky's sexual abuse of children and concealed the abuse.  

July 12, 2012:  PSU officials Karen Peetz, Rodney Erickson, and Kenneth Frazier publicly praised the Freeh Report as comprehensive and thorough, admonish Paterno, Curley, Schultz, and Spanier for their failure to protect children, and pledged to reform PSU by following the report's recommendations.

July 23, 2012:  The President Erickson signed a Consent Decree with the NCAA and agreed to pay $60 million in fines for sexual abuse prevention and victim programs.  The Consent Decree's language quotes from the Freeh Report.  Action was approved by PSU BOT Executive Committee.

July/Aug 2012:  Sandusky victims from trial and elsewhere file lawsuits against PSU.

Some Settlements Approved 

Despite knowing that it is not insured for abuse and molestation claims from 1992 to 2004, the University begins settlements with trial victims who were abused during that time frame.  Erickson understands that some of these claims will not be covered and infers that they will be paid from internal loan interest (residing in the Institutional Support Budget).  While Erickson stated that Penn State wanted a "just outcome for the victims," the underlying motive for the settlements was as a demonstration of the University's culpability for Sandusky's abuse.

Sep 19, 2012:  In a Bloomberg interview, then President Erickson stated that settlement money would come from insurance and internal loan (interest).

Sep 20, 2012:  PSU hired Feinberg Rozen to moderate and settle claims.

Lubert: Board Member
at PSU & Second Mile
Oct 26, 2012:  Subcommittee on Legal and Compliance, then chaired by current BOT Vice-Chair Ira Lubert, approved settlement actions in Sandusky related matters.  Lubert was formerly a regional director at The Second Mile charity.

July 12, 2013:  Subcommittee on Legal and Compliance propose approval of claims.  Committee members included: Ira Lubert (chair); Kenneth Frazier (vice chair), Keith Masser (ex officio), Kathleen Casey, Richard Dandrea, Keith Eckel, George Greig, and Adam Taliaferro.  Approved by PSU BOT Executive Committee.

Oct 28, 2013:  26 of 31 claims settled for the amount of $59.7 million.  
3 claims were denied (D.F. claim among them) and 3 claims agreed to in principal (Victim 6 and Victim 9).  The settlement agreements contained a provision that the claimants cannot file additional lawsuits against The Second Mile.

More Lawsuits and "Freeh" Money

Unable to come to terms with Penn State, Victims 6 and 9 use discovery of the Freeh Source materials to extract additional money from the University.

Nov 22, 2013: After being unable to reach agreement, Victim 9 files a lawsuit relying heavily on information from the Freeh Report to prove negligence on the part of Penn State.

Mar 18, 2014: After being unable to reach an agreement, Victim 6's legal team is awarded discovery of some of the Freeh Source materials.

Sep 3,  2014:  Victim D.F. sues PSU, also citing Freeh Report to prove negligence.

Dec. 5, 2014:  Victim X sues PSU, claiming abuse in 1988, argues his case would have been within the statute of limitations if not for PSU's failure to report in 2001.

Jan 1, 2015:  Victim 9 legal team awarded discovery of Freeh Source materials.  PSU was required to turn over all materials d by May 29, 2015

Apr 12, 2015:  By an 18-6 vote,  the BOT approves a substantial and undisclosed settlement for Victim 9 (estimated at between $15 - $20 million) and for five other claimants.  Total payment of approximately $33.2 million.

Judge Slams Door on Reimbursements

In an outcome that should have been a surprise to no one, Judge Glazer ruled that PSU's case for reimbursement for the claims from between 1992 and 2004 were essentially denied.   In his ruling, he frequently referenced the Freeh Report to justify that PSU was negligent, especially noting the timeframe from 1998 to 2001. Moreover, PSU attempted to refute the Freeh Report findings that PSU officials knew about Sandusky's behavior, but the arguments were refused by the Judge due to - among other things -- the University's acceptance of fines and sanctions from the NCAA. 

32 claims were paid by PSU for a grand total of $92.8 million.

What we know:

1.  PSU is not entitled to reimbursement for the claims between 1992 and 2004, which include at least eight victims: Matt Sandusky, Victim #2, John Doe A, Victim #3, Victim #4, Victim #5, Victim #7, and Victim #10.  Estimated Loss:  $12 million.

2.  PSU can receive $3 million aggregate limit for three claims paid from 2005 and 2006.  This coverage would include the exorbitant ($20 million) claim paid to Victim 9, a payment to Victim 1, and one other payment.  Estimated Loss: $21 million.

3.  PSU can receive full coverage for three claims prior to 1992. The ruling notes claims from 1976, 1987, and 1988. Estimated Coverage: $6 million.

What we don't know:

How many of the eighteen remaining claims fell within the 1992 to 2004 time frame that is not covered and how many occurred prior to 1992 and are fully covered.

The Bottom Line
The Committee on Legal and Compliance knowingly made a decisions to pay out at least $32 million that they (and Erickson) knew would not be covered by insurance.  

In news that surprised no one who closely followed this fiasco, the University went on record to admit that the Committee and Feinberg Rozen did not require evidence to support the allegations made in the claims.  At this point, we now know what Eric Barron meant in his video stating that some people don't believe Paterno's statue should be returned because of what they know.

Who are they? Lubert, Frazier, Peetz, Dambly, Eckel, Casey, and Dandrea.  And they are all trustees who stood by the Freeh Report and did everything possible to ensure that it never got reviewed.

It is highly probable that if the Judge hadn't released the uncorroborated information about reports to Paterno in his ruling, one or some of these trustees would have leaked the information to the press -- on or about the time the alumni-elected trustees were going to finally toss the Freeh Report on the ash heap of history.

The settlements by this cabal of trustees and their efforts to protect the false and harmful narrative that was put forth by the Attorney General, the Freeh Report, and the NCAA were all part of an ongoing effort to convict Paterno, Spanier, Curley, and Schultz in the court of public opinion.

The purposeful damage done to the University by their actions is immeasurable and should qualify as malfeasance.


  1. Thanks for putting these events together in a timeline.

    What was the motive for this cabal of trustees to commit malfeasance that was so harmful to Penn State's reputation and finances?

    Will Penn State sue the alleged 1971 victim for return of the settlement money now that he violated the confidentiality agreement by giving his story to CNN?

    1. Tim,
      PSU won't sue the phony victim from 1971. That would look bad (LOL).


  2. The only thing that seems to be common to any of this is the protection of the Second Mile and the captains of industry that ran PSU at the time ? Their willingness to throw Paterno, Spanier, Schultz and Curley, and in essence PSU, to the wolves is amazing !! One can only surmise what lies behind this need to protect their reputations "at ALL costs" ? Their involvement and association with the "Second Mile" could be "what they know" and need to protect so vehemently !!!

    1. Very well said! You hit the nail on the head with "at ALL costs". Billion dollar news outlets that used to be respected are now obviously colluding to publish false news about innocent people to hide something very criminal that they are involved in. This decay of journalistic integrity is historically indicative of desperation.

      As you said, "one can only surmise". Well anyone that has read my long-winded posts knows that I like to surmise. I tend to look at the bigger picture when I surmise, and I think it would help others that want to restore the Paterno's and PSU's good name to do the same. We say things like, "well it seems irresponsible that Sara Ganim left that out", or "Ganim doesn't seem to understand the meaning of fact checking". Do we really think we can simply just shame people like Sara Ganim and John Micek into actually investigating, and fact checking their stories? These two are not just making innocent mistakes. They have sold-out their morality to billion dollar fake news outlets that are undermining the very fabric of our country. Too much drama, you say? Too unbelievable to be true? Too uncomfortable and frightening to think about? Well, we better think about it and stop believing these "journalists" that have literally sold their souls to the devil will come around. They may be from Pennsylvania and we want to think that they have our best interests at heart. And that optimism or maybe even naivety, shows we still have our humanity. We are not soulless shells that have long ago traded away what makes us human for money and contrived and hollow Pulitzers.

      Jesus Christ, came to give us what I consider to be one of the most important questions we can answer:

      Mark 8:36 "For what shall it profit a man if he shall gain the whole world and lose his own soul?"

    2. Hambone 55 & Truthseeker,
      Yes, another underlying motivation by Penn State, the PA State Government, and the media was to protect The Second Mile and whatever was going on there.

      This smells of organized crime running the state of Pennsylvania.


  3. Thank you Ray for providing a superb time line that clearly shows how the criminal acts of a few have irreparably trashed the reputation of good men and the the public image of a great university. There MUST be consequences.

    1. Thanks, Carole.

      I'm not an attorney, so I am not sure if these are crimes or torts, but what happened definitely violated some law or code.


  4. One basic and obvious question, where are the state and federal regulators?

    1. Excellent question! And yes, it's the obvious. The answer, I believe, is in the bigger picture. The regulators are being "regulated". I know it's uncomfortable to realize, but something is terribly wrong and upside down right now in our country. Billions, and I mean multi-billions, are being funneled into controlling and suppressing information. Mainly, information that reflects truth in reality. And I say "truth in reality" knowing very well these two words should be synonymous with each other. But what is happening today in our country is the shaping of a revisionist false reality. Quite simply, the false reality is being sloppily created by billion dollar criminals desperately trying to hide their enormous crimes against us, the people.

      The media persecution of the newly-elected, first ever female Attorney General in PA is an example of this sloppy false reality. There are very big crimes to cover, and Kathleen Kane is a threat to exposing these crimes. It's out-of-control organized crime against the people of this country. The crimes include murder, theft, organized slander and child sex trafficking. And it's been an integral partnership between our own once-trusted government and billion dollar media outlets.

      Yes, so where are the regulators? They have gone criminal. So now the people have to reform these organizations that we trusted to regulate. Will an honest PA legislator step up and initiate this?

    2. This mess should be investigated by the Congress. This can't be left in Pennsylvania's hands.


  5. Ray:

    Just a thought for discussion. I assume the funds for the claims paid out now and in the Future, which are not covered by insurance, would be funded by taxpayers and student tuition.

    Do the BOT members (past and current) have a fiduciary responsibility to the taxpayers and students who are burdened with funding those claims. Does not the acceptance of the FREEH report without review and the decision to accept claims without review etc violate those fiduciary responsibilities?

    Would it be a "position question" for the Attorney General, and AG candidates on pursuit of violation of fiduciary responsibility.

    I have to think that Frazier, Peetz, Erickson, etal would be more concerned about those duties if they were the ones paying out the claims and facing saying good-by to one of their beach houses!

    Unfortunately I would assume that Corbett, Fina, Noonan and the AG crew would be protected by sovereign immunity.

    1. I doubt there is much that can be done from outside because the Board of Trustees has no one above them.

      I doubt violation of fiduciary duty would even be a crime unless they were embezzling university money or steering university contracts to themselves or cronies.

      The best solution is to probably get a majority of honest Board Members and then they can weed out the bad apples and expose the corruption.

    2. Tim;

      My thoughts were along the lines of the trustee (BOT) owing a fiduciary responsibility to the principals, (taxpayers and students) to properly oversee the finances entrusted to them.

      I misspoke in referring it to the AG it would probably be a matter for the Governors Office of Chief Counsel as a civil matter to seek restitution from those on the BOT who negligently and carelessly failed to perform those duties in their incompetent handling of the FREEH report and subsequent approval of claims. Therefore obligating the principals to provide millions of taxpayer money.

      Problem is too many board positions are beyond the control of the voting alumni.

    3. Mike and Tim,
      From what I understand, and I haven't had time to really delve into this, purposeful failure/acts of bad faith can be prosecuted under the charitable/fiduciary rules.


  6. Mike for Justice - I agree that the BoT has a fiduciary duty and they have badly failed in that duty over and over in their handling of the Sandusky scandal.

    Giving lavish settlements to unbelievable claims just to head off lawsuits is now backfiring as reports leak out.

    In many people's minds, Penn State giving a settlement means the claims are true.

    I doubt there has ever been a case where Board members had to reimburse a university for financial losses the Board was responsible for. No one would serve on a Board if their bad decisions could cost them money.

    Penn State will pretend that no taxpayer money was used to pay for the Sandusky scandal with bookkeeping tricks.

    1. Tim;

      Just noticed this. I came back and took a second look after PN Charlie Thompson's article on the cost of the claims.

      As far as board members reimbursement. It has happened in some home owner associations to the tune of hundreds of thousands. Recent major case in Victorville, CA extends boards fiduciary responsibilities.

      Got to think that if a HOA board member could be found financially responsible, the fiduciary requirements for a board at Penn State and it's $5 BILLION dollar annual budget would have even more due diligence expected and required !!

  7. " orchestrated effort to convict PSU in the court of public opinion."

    I just don't understand why they would do this. Who were they trying to protect? What's the value of it?

    Important donors or decision makers who were closely aligned with the second mile?

    What's your theory?

    1. See my two above posts that explain my theory. But Ray would be the one to offer the definitive facts you can put together to form the most likely theory as to "why".

    2. Andrew,
      You stated the primary reason why:

      Important donors and/or decision makers were closely aligned with the second mile (were afraid that (let's just say) bad acts would be exposed).

      Whether those bad acts were profiteering or participating in child prostitution is the million dollar question.

      Spanier, Paterno, and others were scapegoated to make sure no one shined the light into those dark corners.