Athletic Accounting Part III

Athletic Accounting Part III 

A December 9, 2015 Star Tribune editorial declares that the recent financial audit of the U of M athletic department reveals "a department whose spending excesses have undermined public trust." See Sense of Privilege at U of M Athletics Department.

This financial audit is just the proverbial tip of the iceberg. It was limited to the financial activities of the administration of the athletic department. The U of M internal auditor is working on an audit of "sports related activities." See p. 711 of the Dec 2015 BOR Special Docket. This next audit should include information on the operations and financing of the teams and facilities.

The public saw the dark gray uniforms that the football team used this year for one game (against Michigan). The public did not see the $2,928,985 expense for uniforms and equipment on line 26 of the 2014 U of M report to the NCAA. Nor did the public see the $3,306,483 for severance benefits on line 23 of the report or the $7,378,442 for guarantees (for visiting teams) on line 18 of the report or the $17,663,000 for "athletically related facilities annual debt service" on p. 2 of the report.

  UMN NCAA Financial Report FY14 by Bill Gleason

The U of M reports $0 for student fees (line 2) and $0 for direct state government support (line 6). This ignores the student fee for the construction of the football stadium that generates more than $1 million for the University each year and the $10,250,000 that the University receives from the state each year to pay the bonds issued for the stadium. For more detail on the complex (and opaque) financing of the athletic department and its facilities see the March 2013 post on Athletic Accounting.

The principal cost of the construction of the football stadium was $288 million and the principal cost of phase 1 of the "Athletes Village" will be $166 million. Those amounts do not include the interest that will be paid on the bonds issued to pay for part of the costs of construction. In the case of the stadium those bonds will be paid over more than 20 years (adding tens of millions of dollars in interest).

Michael W. McNabb

University of Minnesota B.A. 1971; J.D. 1974
University of Minnesota Alumni Association life member


Editor's note:

Mr. McNabb properly notes that the expansion of money going toward athletics departments at universities is a seemingly never-ending business.

Yesterday's Washington Post contains yet another example of this phenomenon:

As college sports revenues spike, coaches aren’t only ones cashing in

This is an outstanding piece and includes much interesting and useful information about university athletics departments and money:

For the Record: Non-resident U of Minnesota tuition to be raised: Better late than never?

This topic has been covered on numerous occasions both on The Periodic Table, as well as the Star-Tribune.

From The  Periodic Table:

State Rep Blows Whistle on Out of State Tuition Giveaway  January 10, 2013

This post contains links to background information


From the Star-Tribune:

University of Minnesota Has Lowest Out of State Tuition for BigTen Publics October 30, 2010

Today the Star-Tribune reported on plans at the University of Minnesota to fix what is obviously another money sink at the U, by finally attempting to set out of state tuition at the median of that charged by BigTen schools, instead of current bargain basement prices, e.g.

What follows are some selected quotations from the Star-Tribune.  Please see the complete article for more information.

After years with the lowest rates in the Big Ten, the University of Minnesota is considering raising tuition for nonresident students by $12,800, more than 60 percent, by the end of the decade.

Kaler has been under increasing pressure from lawmakers and other critics who say the current rates favor nonresidents at the expense of students from Minnesota. At the U, in-state students pay $13,380 a year in tuition and fees, a higher rate than half the Big Ten schools.

State Rep. Bob Barrett, who has called for a significant increase in the rate for out-of-state students, said that Kaler’s proposal is a start. “Nonresident tuition has been and currently is way too low,” said Barrett, a Republican from Lindstrom who sits on the House higher education committee.


But he said raising that rate is just the first step. “They need to use that money to lower resident tuition,” he said. “They have an opportunity with these millions and millions of dollars they’ll receive from nonresidents, and they need to apply it to resident tuition.”


University spokesman Steve Henneberry said that “any extra funds would be used to minimize in-state tuition increases.”

“I think being at the bottom, in terms of sticker price, hurts us,” said Regent Michael Hsu. “We’ve got to be concerned with our brand. … Otherwise, we’re talking about Lexus and Toyota. And we’re Toyota.”

For the Record: Governor Arne Carlson - Maybe the enemy is us?

What follows are selections. Please see the entire post for more information.

From former Governor Arne Carlson's post in Minnpost:

When I was in college, the most popular commentary on the human condition was a cartoon character named Pogo. And his most memorable line was, “We have met the enemy and he is Us.”

We [The University of Minnesota] have a most competent faculty, excellence in research, and an eager-to-learn student body. But this commitment to excellence does not extend to Morrill Hall.

For instance, we have learned that in the area of testing drugs for large pharmaceutical companies, the oversight process was corrupted by the presence of university professionals who were on the payroll of the very companies whose drugs were being tested. We also know that the former chief counsel of the university wrote the language claiming exhaustive investigations by entities that never engaged in such endeavors. Further, we know that President Eric Kaler, his management team, and the Board of Regents used those false claims to beat down critics, including faculty members who called for an independent review. They simply buried the truth.

Now, we have a growing scandal in the athletic department where Kaler and the Board of Regents hired an athletic director and associate without proper review and the result has been a very public sex scandal and the usual cries of shock from the appointing authorities. This was followed by the revelation of extraordinary misspending and waste in the athletic department.

There is a reason for this and that is there is no oversight of university management. The sad reality is that the Board of Regents is little more than a band of cheerleaders for the president and regents are content as long as they are accorded praise from the administration and receive a variety of perks including box seats at the football games, etc.

And then we have the Minnesota Legislature, which appoints the Regents but fails to conduct any meaningful public oversight.

... it is time for all of us to recognize our responsibility to speak out and insist on a thorough housecleaning at Morrill Hall. If we fail to do so, then Pogo’s truth becomes our reality and we fail our children.

For the Record: The Rochester campus of the University of Minnesota is a failed experiment.

A letter to the editor has appeared in the Star-Tribune today:

(Emphasis added)

When the Rochester campus of the University of Minnesota was established in 1998, it was a worthwhile endeavor. Today, that campus — at least as it has evolved — is a failed experiment that deserves to be terminated.

The university’s presence in Rochester began as a cooperative relationship with the local community college and Winona State University. In 1998, it was designated as a branch of the university’s Twin Cities campus. And in 2006, it became a coordinate campus in the University of Minnesota system. In that year, there were 21 employees at the Rochester campus. By 2014, the number of employees had ballooned to 104. This number includes a chancellor, a vice chancellor, an associate vice chancellor and an assistant vice chancellor. The combined “chancellorian” salaries equal $624,000. I have no doubt that these are talented and hardworking individuals. I can even accept that there are plausible reasons why their lofty salaries are merited. But they represent an unaffordable administrative burden.

The recently released enrollment figures for Rochester reveal that the entire student body this fall is 416 students. The ratio of non-faculty staff members to students at Rochester (1 to 5) is nearly twice as high as the national average for public colleges. The university did not plan on creating this bureaucratic monster. The vision for this campus was one with a student population about double its present size. This goal has shown itself to be unobtainable. The highest that enrollment has ever reached was 495 in 2013, and it has been trending downward.

Nationwide, the huge increases in the cost of higher education are among the most dire challenges facing universities. An inordinate expansion of administrative and support staff has been identified as the major driver of these increases. And a Wall Street Journal article in 2012 identified the University of Minnesota as the leader in the growth of this bureaucratic burden. We now see that within the university system, the Rochester campus is the “heart of darkness.”

At this point, the Rochester experiment can be characterized as the height of bureaucratic self-interest, or the nadir of rational management. In either case, it stands as a test case for the competence of the administration of the university as a whole. Successful enterprises encourage risk-taking. Viable organizations acknowledge failures.

Robert Katz, Minneapolis

The Management of the University Part II

The Management of the University Part II

1. Internal Audit

 Table for technology vendor audit

 p. 60 of June 2015 AUD Docket 

In September 2015 the U of M Office of Internal Audit presented its quarterly report to the Board of Regents. The expected implementation rate of outstanding essential recommendations was 40%. You might think that the U of M administration would easily clear such a low bar. You would be wrong. The actual implementation rate of 16% did not even come close. See p. 135 of the Sep 2015 AUD Docket. The actual implementation rate for the previous quarter was 13%. See p. 46 of the June 2015 AUD Docket.

What is the effect of the failure to meet even the low expected implementation rate for essential recommendations? Consider the conclusion of the Internal Audit Office in its recent report on technology vendors:

     The University is using an increasing number of vendors to provide technology services where the vendors are responsible for managing systems and/or have access to University data. Despite increased use of these services, controls and processes for performing due diligence of these vendors is inadequate. The University has insufficient directives and oversight for technology vendor management. Units are responsible for determining due diligence processes independently, leading to varied and often inadequate processes.

p. 60 of the June 2015 AUD Docket (emphasis added)

How many resources of the University are squandered as a result of the failure to implement even essential recommendations? Who is responsible at the highest level of the U of M administration for ensuring implementation? Who should be held accountable?

2. Facilities Management

Map of campus 

p. 70 of the Sep 2015 FAC Docket

In September 2014 the associate vice president for facilities management informed the Regents that the current approach to facilities management is unsustainable. See p. 23 of the Oct 2014 BOR FRI Docket. Today approximately one-third of the buildings on the Twin Cities campus (7.7 million square feet) are rated in critical or poor condition. See p. 107 of the Sep 2015 FAC Docket.

The administration is planning to submit to the state legislature a 2016 Capital Request in excess of $300 million. Consider the descriptions of some of the current facilities in the Capital Request:

     $100 million health sciences facility on Minneapolis campus. The poor condition of the University's educational facilities are undercutting the competitiveness of University programs. Almost all of the educational and training facilities for the Medical School and other health professional schools are over 40 years old and are in need of major renovation and renewal or, simply, replacement. Accreditation bodies are citing deficient facilities in their reviews, student applicants are citing the poor educational facilities for their decisions to enroll at other institutions, and student dissatisfaction with the educational facilities is high.

     $42 million chemistry and engineering building on Duluth campus. The existing Chemistry building was the first building constructed at UMD in 1948 and was not designed to be dedicated to chemistry. Utility infrastructure is outdated, frequently in need of repair, and cannot support 21st century science. The building has numerous deficiencies, including a lack of adequate eye washers and showers, lack of chemical storage space, rusty and poorly ventilated under the hood storage, very old and poorly designed labs, lack of adequate wall space for chemical storage cabinets and gas cylinders, lack of adequate supply of wall or bench mounted electrical outlets, and water leaks. In addition, students have noted corroded gas lines and gas valves, poor air handling systems, and an elevator which is often out of service. Many of these have the potential to compromise the health and safety of building occupants. 

     $6.6 million plant research facility on St. Paul campus. The existing greenhouse is a fragile structure, costly to operate and rife with problems that are expensive to fix. Environmental, structural and functional deficiencies have resulted in escalating maintenance and repair costs, and serious safety issues. Failure of seals around large glass panes allows glass to shift and fall. High humidity levels, resulting in extensive cracking and spalling of the exterior concrete masonry unit knee walls, and freeze and thaw cycles have heightened the rate of deterioration of the greenhouse. This facility has the smallest footprint of any like buildings on the St. Paul campus but has the highest energy use and the second highest CO2 emissions. Gaps in the structure's foundation further compromise the plant collections and student projects as a result of insect migration.

pp. 132, 134 and 137 of the Sep 2015 FAC Docket

(emphasis added)

The administration declares that "at a world class university it is unacceptable to have people study, live, work or receive care in buildings classified as poor or critical." See p. 60 of the Sep 2015 FAC Docket. Indeed. See Crumbling Academic Infrastructure.

How did this happen? Too many resources have been allocated to the construction, operation, and maintenance of buildings that are (at best) secondary to the purposes of an institution of higher education, such as a recreation center, alumni center, football stadium and, coming soon, a massive "athletes village." Too many resources have also been allocated to the black hole of costs of administration. See section 4 below.

Who is responsible at the highest level of the U of M administration for the allocation of resources? Who should be held accountable?

3. Budget Management

In August 2015 Standard & Poor's revised its outlook on U of M debt from stable to negative:

"The negative outlook reflects our opinion that increased debt issuance over time, coupled with weakness in financial operations, could pressure the debt ratings on UM," said Standard & Poor's credit analyst Jessica Wood.

The university's total debt has increased during the past few years, and UM's plan to issue approximately $260 million in new debt will increase its total debt to $1.67 billion by fiscal year 2017, inclusive of state-supported debt.

See the Pioneer Press report: UMN Debt Prompts Negative Outlook From S &P.

Unfazed by this negative assessment, in October the Regents approved the plan of the U of M president to incur even greater debt for capital projects in fiscal year 2018 ($194,888,000) than the University will incur in fiscal year 2016 ($123,829,000) or in fiscal year 2017 ($99,556,000).

The debt to be incurred in fiscal year 2018 (commencing on July 1, 2017) includes: athletic village long term debt $89,470,000; athletic village short term debt $36,560,000; and a new track $20,000,000.

See p. 32 of the Oct 2015 FIN Docket,  See also the Pioneer Press report on Ski-U Mah Turning Into IOU With $290 Million Debt Load.

So the president and the Regents have placed at risk the credit rating of the University--in part so that they can engage in the sports entertainment business. This is what happens when there is no accountability for persons making decisions to spend other people's money.

This void of accountability has generated increasing financial risks at institutions of higher education across the country. In 2008 and 2009 the consulting firm Bain & Co. examined the finances at the University of California (Berkeley), Cornell University, and the University of North Carolina. In a report in 2012 Bain observed that the operating principle for universities has been the "Law of More":

     Many institutions [of higher education] have operated on the assumption that the more they build, spend, diversify and expand, the more they will persist and prosper. But instead the opposite has happened: institutions have become over leveraged. Their long term debt is increasing at an average rate of approximately 12% per year, and their average annual interest expense is growing at almost twice the rate of their instruction-related expenses (see Figure 5). In addition to growing debt, administrative and student service costs are growing faster than instructional costs. And fixed costs and overhead consume a growing share of the pie (see Figure 6).

p. 3 of The Financially Sustainable University

 (emphasis added).

Just as the Wall Street bankers created a housing bubble using other people's money, the senior administrators and the Regents at the U of M have created a higher education bubble using both student loan debt and institutional debt. When this budget balloon bursts, the senior administrators and the Regents will walk away unscathed just as the investment bankers did. The students (and their parents) will suffer harm from the student loan debt that inflated the balloon. They will be shackled with that debt for many years (or even decades for many students in the professional schools). And the citizens of Minnesota will pick up the tab for the huge institutional debt.

4. Costs of Administration

The Expense Summary in the Administrative Cost Benchmarking Report for fiscal year 2015 is a list of personnel and non-personnel expenses for three broad categories of expenses: (1) direct mission activities (instruction, research, and public service); (2) mission support & facilities; and (3) leadership & oversight. Here are the administrative expenses for the second and third categories:

The Report shows total operating expenses of $3,243,350,000 for fiscal year 2015. So the costs of administration ($969,628,750) account for 30% of those total expenses. See the Expense Summary in the Report at p.46 of the Oct 2015 FIN Docket.

Is 30% in administrative overhead excessive? There is no national system for comparing administrative costs at universities so we have to look to the world outside the campus. With administrative overhead of 20% American private health insurance companies had the highest administrative costs of any health insurance system in the world prior to the enactment of the Affordable Care Act. See, T.R. Reid, The Healing of America (Penguin Press 2009) at pp. 36--38.

The Affordable Care Act now requires health insurance companies to send rebates to customers if administrative costs and profits consume more than a set percentage of premiums (20% for individual and small group markets and 15% for large group markets). See the August 17, 2014 Star Tribune report on Health Insurers Must Pay Up or Pay Back.

It is likely that there would be an immediate and sharp reduction in the costs of administration if the legislature required the University to send rebates of state general appropriations to the state treasury if the U of M administrative costs exceeded 15% of its total expenses.

President Kaler promised the state legislature to reduce administrative costs by $90 million over a six year period. Such a reduction will simply slow the rate of increase in the costs of administration. Those costs continue to rise despite the reduction in certain administrative expenses.

Moreover, the reduction of certain administrative expenses will not reduce the U of M budget by a single penny. The president intends to simply spend the $90 million on "mission" and "mission support." See The Phantom Reduction.

5. Finding Solutions

A dismal rate of implementation of essential recommendations of the internal auditor. Crumbling academic infrastructure. A black hole of costs of administration. And no accountability for the highly paid senior administrators in charge of the management of the U of M.

The current Troubles at the U of M have been years in the making. These Troubles are not random problems. There has been a systemic failure of management.

The U of M president has the greatest responsibility and should have the greatest accountability. Many of the Troubles had their origin in decisions of Robert Bruininks and then increased in intensity as Eric Kaler failed to make course corrections. A prime example is the Markingson case. See A Restoration of Trust Part II.

The Regents do not provide effective oversight. They rely on the senior administrators to sift through the volumes of information about the operations of the University. So they see only the information selected by the administrators. They develop a bond with the senior administrators with whom they spend most of their time on campus. So as a group they tend to dismiss the perspectives of other persons (on the rare occasions when they hear other perspectives).

Consider the annual Plan, Performance, & Accountability Report that senior administrators present to the Regents (and to the public). The annual report is full of laudatory assessments of the work of the administration. It is rare to find even a mention of a problem, much less an analysis of the problem and a discussion of possible solutions. For example, the annual reports do not mention the irreparable harm to agricultural research inflicted by the ill-conceived plans for UMore Park. See More on MoreU Park and MoreU Park Fiasco. How is it possible to hold the senior administrators accountable if critical assessments are omitted from their reports?

Our system of higher education is broken. Over the past decade we have seen escalating costs, skyrocketing tuition, and staggering student loan debt.

The high tuition high financial aid experiment has failed the vast majority of students and their parents. It has vaulted many of U of M students into the top tier for student loan debt notwithstanding the ballyhoo by the administration about the Promise Scholarship program. (This was a predictable result of the experiment as college administrators classify student loans as "financial aid.") See Student Debt: Fiction v. Fact Part II.

We need to find a better way to operate and to finance higher education. The state legislature should establish a task force with members of the higher education committees, university administrators, staff from the Minnesota Office on Higher Education, and informed students and parents.

The work of the task force should include an analysis of the rise in the costs of administration over the past 40 years. If there has been an increase in the number of administrators that is disproportionate to any increase in the number of students or the level of research, we should ask why. If there has been a substantial increase (in constant dollars) in the compensation of any administrator, we should ask why.

We should also compare the compensation paid to University administrators to the compensation of senior administrators in state government who have similar qualifications and duties. For example, the annual salary of the state commissioner of human rights is $145,000 (after a large raise in July 2015). The annual salary of the vice president of the U of M Office for Equity & Diversity is more than 50% greater at $230,700. See Nice Work If You Can Get It.

Each biennium the citizens of our state now invest more than $1 billion in the U of M in general appropriations. With that much at stake the legislature should appoint a qualified person to monitor on a continuing basis the operations of the University and the use of state appropriations. This legislative liaison (or watchdog) should have the responsibility to review the information produced by senior administrators, to collect additional information through his or her own independent research, and to meet with all groups at the University so that the perspectives of other well-informed and thoughtful members of the University community are presented to the legislature.

Michael W. McNabb

University of Minnesota B.A. 1971; J.D. 1974

University of Minnesota Alumni Association life member

For the Record: Dr. Mickey Nardo: "hardly a right" on clinical trials at University of Minnesota

Dr. Mickey Nardo, a psychiatrist with a conscience, writes on his outstanding blog:

1 Boring Old Man

hardly a right…

Posted on Thursday 8 October 2015

When Charles Schulz became Chairman of the Department of Psychiatry at the University of Minnesota Medical School in 1999, he came with a plan. I wrote about it in a series back in April if you’re not familiar with the story:

• Academic·Industrial·Complex I…
• Academic·Industrial·Complex II…
• Academic·Industrial·Complex III…

By that time, it was a plan following the lead of any number of Psychiatry Departments around the country. Build a Clinical Research Center and get the lucrative contracts for doing Clinical Trials for the Pharmaceutical Industry’s CNS drugs to support the Department’s overall funding. It was the heyday of psychopharmacology – and there were plenty of those studies available to propose or bid on. Such a plan requires some way of recruiting subjects for the studies, and that job fell to Stephen Olson who was apparently good at it.

They hit a glitch when a subject, Dan Markingson, killed himself while in a study in 2004. He had been recruited in an absurd way. He was declared incompetent, committed to treatment, but was offered a much less restrictive placement if he volunteered for a Clinical Trial. The paradox is obvious – declared incompetent? but volunteered? By my read of his records, Dan remained in a psychotic state throughout his stay in a halfway house until his suicide six months into the study. Ultimately, the legislature passed "Dan’s Law" in 2009 which prohibited the recruitment of committed patients for drug trials.

But like most states, in Minnesota, there’s a 72 hour holding period before a commitment hearing [for observation]. Is that a loophole? Comes now the case of Robert Huber:

U owes mistreated psychiatric subjects an apology

Star-Tribune

By Carl Elliott

October 7, 2015

Thanks to a former Fairview Hospital patient with the courage to speak out about his mistreatment, the University of Minnesota is finally ending a controversial research practice. As of last month, the university will no longer test experimental drugs on mentally ill patients who have been involuntarily confined to a locked psychiatric unit under a 72-hour hold [“U halts recruiting of confined patients,” Sept. 26].

In July 2007, Robert Huber came to Fairview for help. He was hearing voices and feeling panicked. His treating psychiatrist, Dr. Stephen Olson, used a 72-hour emergency hold to confine Huber to a locked psychiatric unit. Then Olson asked Huber to sign up for a research study testing an experimental drug.
A pharmaceutical company was testing an unapproved antipsychotic drug called bifeprunox. Huber had never been prescribed any antipsychotic drug before, much less an experimental one, but he agreed to take part because he thought it was the only way to escape confinement. “I was so afraid they were going to lock me up,” Huber told the Star Tribune.

The study went very badly. The drug caused severe side-effects. Huber considered suicide. Only a few weeks after he was enrolled, the FDA rejected the drug for marketing approval, citing the death of a research subject in Europe. Yet nobody at the university told Huber — or for that matter, any of the other subjects enrolled in the U study — that the FDA had rejected the drug.

When Huber’s story was made public by KMSP-TV news in 2014, the university tried to smear him. A press statement prepared with the assistance of Brian Lucas, the senior communications director for the U’s Academic Health Center, read in part: “His medical record shows extreme anxiety and paranoia, a history of head injuries and lengthy battle with alcoholism. It is highly inappropriate for him to be put in the media spotlight as a spokesperson for clinical trial safety.”

In early 2013, Huber and I filed separate complaints to the university. It took over 14 months for the university to respond. The university hired an external consulting firm at a cost of $22,000, but neither the university nor the consulting firm ever bothered to interview Huber about what had happened to him. Finally, on May 6 of last year, the university sent Huber a letter informing him of its conclusion. The letter conceded minor problems but said, “You were not pressured or coerced to participate in this study.”

Recently, a commenter asked why I had spent so much time on a fourteen year old Clinical Trial. It was a long time ago, and nobody’s using that drug in kids anymore. Why not put it in the past and move on? One could equally say the same thing about Carl Elliott and the Markingson case, or the Huber case. It was a long time ago. Why not just move on? Here’s one part of the answer from Carl…

Huber deserves an apology from the university. He also deserves our gratitude, for having the courage to step forward and tell his story. There may well have been many other patients like him over the years. If the university is genuinely committed to research reform, it will find out how many other involuntarily committed patients have been recruited into research studies, and will apologize to them as well.

But sadly the evidence is that the university is «not» genuinely committed to research reform. And the authors of Paxil Study 329 are «not» genuinely committed to setting the record straight. If they were, these things wouldn’t have happened in the first place. Carl Elliott had to move heaven and earth [and the Minnesota State Legislature] to get them to finally act. It took Jon Jureidini twelve years to finally have his say about Study 329 and the original authors still remain mum or discounting. These stories come from a time when Clinical Trials in psychiatry had moved from the realm of a scientific enterprise aimed at defining the safety and efficacy of a new drug to becoming a hurdle to be negotiated on the way to commercial success, and a means for financial support for a psychiatry department.

In both of these Minnesota cases, recruitment and retention by any means necessary trumped clinical care, scientific observation, and the intent of the involuntary hospitalization procedures of the legal system. I question whether Charles Schulz stepping down is even close to enough. He apparently provided administrative support and brought in the studies, but left the actual conduct of the Clinical Trials in the hands of others [like Stephen Olson]. With the same people in charge, what’s to guarantee that the same forces won’t be at work in the future?

Running Clinical Trials is hardly a right. It’s a privilege…

For the Record: Involuntary holds and recruitment of patients for clinical trials at the University of Minnesota

  264732555 Letter From Carl Elliott to Brooks Jackson Regarding Apology to Robert Huber April 23 2015

  Psychiatric Clinical Trials and the Recruitment of Involuntarily Held Patients

  283338443 Email From Sen Terri Bonoff to UMN Professor Leigh Turner Sept 30 2015

  October 5, 2015 Letter to Senator Terri Bonoff

For the Record: Mannix and Bierschbach on the Studham Hire

Scott Studham, Former Chief Information Officer

University of Minnesota

Briana Bierschbach and Andy Mannix have written an excellent piece on MinnPost about the hiring of  Scott Studham as Chief Information Officer at the University of Minnesota.

I note with pride that both of these journalists are U of M and Daily alums.  Plenty of people out there in the real world with these credentials practicing journism.  Just a few names that come to mind: Vadim Lavrusik, Emma Carew Grovum, Jake Grovum, CJ Sinner, Kia Farhang, McKenna Ewen, and Anne Millerbernd.  Journalism is an increasingly tough racket and you don't go into it to make a lot of money.  These folks make me proud to also be an alum of the U of M.

Policy at MinnPost only permits a short excerpt.  Here it is, but I strongly urge readers to look at the whole piece and the comments.

Link to full piece:

History of complaints trailed former CIO before being hired by University of Minnesota

Excerpt:

"Complaints of nepotism and creating a hostile work environment dogged former University of Minnesota Chief Information Officer Scott Studham long before he came to the Twin Cities, according to documents from Studham’s former employer, the University of Tennessee."

 "The documents from Tennessee, obtained through a public-records request, detail human resources complaints and internal investigations into Studham’s behavior both as CIO at the University of Tennessee’s flagship campus, in Knoxville, as well as similar complaints during his tenure at the Oak Ridge National Laboratory (ORNL), in nearby Oak Ridge, Tennessee."

"The documents also raise additional questions about the vetting process employed by the University of Minnesota for high-profile positions. Studham’s departure came just weeks after the school’s athletics director, Norwood Teague, resigned amid allegations that he sexually harassed two university employees. It was later revealed that Teague was facing a gender discrimination complaint at his previous job at Virginia Commonwealth University while being recruited to join the U of M. VCU later settled the complaint for $125,000."

For the Record: U of M Alum Marshall Tanick on the U's Penchant for Secrecy

Marshall Tannick earned his J.D. from Stanford Law School with top honors in the Order of the Coif. He graduated Phi Beta Kappa with a B.A. in Journalism from the University of Minnesota.

Marshall, a prominent local attorney, writes in the Pioneer Press:

As the turmoil continues and gets worse at the University of Minnesota regarding former Athletics Director Norwood Teague, one feature that has been overlooked is the faulty manner in which the university selected him. He was chosen in 2012 by President Eric Kaler as the only "finalist" for the $400,000 position. 

The university customarily uses this one-finalist-only process as a means of circumventing public scrutiny under the Minnesota "sunshine" laws, the data practices and open meeting statutes. The institution speciously justifies this opaque practice by citing fears that high-quality candidates will be deterred from applying if their identities are publicly revealed. So, the school shrouds the process in an unnecessary veil of secrecy akin to picking a pope.

But the concern that "sunshine" will repel candidates, as if they were vampires, is an illusion. Many other educational systems around the country -- and in Minnesota, as well -- reveal the names of multiple candidates for major positions, which allow the public to examine their qualifications, rather than disclosing only the sole "finalist" as a fait accompli. Had the university done so with Teague, it may have provided input from those with greater knowledge of his activities and behavior at his prior job in Virginia than the now-discredited search committee was able to discover for more than $100,000 in fees. 

By the way, the man who selected Teague for the position got his job this same way.

President Kaler, like his recent predecessors, also was chosen by the Board of Regents as the only "finalist," as a means of limiting oversight of the selection process.

In addition to improving background checks and other hiring features, the "U" ought to take a look at its penchant for secrecy and the resulting defective process for picking top-level administrators. The institution should fix it with a strong dose of transparency before the next selection proceeds, including Teague's replacement and, perhaps, Kaler's, too.

Marshall H. Tanick, Minneapolis

 The Open Meeting Law is violated on a regular basis at the U of M.  Here are just a few examples:

April 2, 2015 Faculty Consultative Committee closes its meeting for a legislative session update. (The law does not permit closing a meeting of a committee of one public institution to discuss the actions of that public institution with another public institution.)

February 18, 2014 Senate Committee on Finance & Planning closes its meeting to discuss problems with funding for UMD. (The law does not permit closing meetings to discuss the use of public funds and tuition at a public institution.)

December 5, 2013 FCC closes its meeting to discuss the Academic Health Center.

September 21, 2013 FCC conducts its entire annual retreat off the record.

For an analysis of the application of the Open Meeting Law to the U of M see the Postscript on FCC & The Open Meeting Law at the end of New Year's Resolutions for New President (originally posted on the University of Minnesota blogging system UThink, on December 19, 2010. This system is now defunct.)

FCC & OPEN MEETING LAW

The memorandum of the U of M general counsel on the Open Meeting Law is included in the September 16, 2010 report of the FCC. The general counsel declares (emphasis added):

A plain reading of the statutory text could indicate an exceptionally broad interpretation of the phrase 'committee . . . of a public body.' However, Minnesota courts, the Commissioner of Administration, and practical constraints functionally limit the reach of the statute to include only committees that have the capacity to transact public business on the part of the public body by making final policy decisions. The committees considered by the courts to be transacting public business are committees of the governing bodies of the public body at the University of Minnesota, this means
committees of the Board of Regents. We are aware of no Minnesota court opinion stating or suggesting that the Open Meeting Law applies to a committee such as the FCC, which is not a committee or subcommittee of the Board of Regents and does not transact business on behalf of the Board.

The general counsel needs to review the statute.

Here is Minn. Stat. 13D.01:

Subdivision 1. In executive branch, local government.

All meetings, including executive sessions, must be open to the public
(a) of a state . . .
(b) of the governing body of a . . . or
(6) other public body;
(c) of any
(1) committee,
(2) subcommittee . . .
of a public body

It is true that the scope of paragraph (b) of Minn. Stat. 13D.01 subd. 1 is limited to meetings of the governing body of a public body. However, paragraph (c) requires that meetings of ANY COMMITTEE of a public body must be open to the public. Unlike paragraph (b), paragraph (c) does NOT limit its scope to a "governing" body.

The general counsel also needs to review the opinion of the Minnesota Supreme Court in Star Tribune Company v.University of Minnesota Board of Regents, 683 N.W.2d 274 (Minn. 2004):

Although we have not used the precise term 'public body' to describe the University, we have used terms that convey the same meaning. . . . 

In fact, the Regents do not contend that the University is not a public body. Rather they argue that the Open Meeting Law does not appy to the Regents because the legislature did not expressly name the Regents as an entity subject to the
requirements of the law. . . . 

Because the 'public body' language of the Open Meeting Law is certainly broad enough to encompass the University, the Regents are in essence arguing there should be an exception to the stated scope of the Open Meeting Law for theUniversity. However, as the court of appeals pointed out, the Open Meeting Law contains express exceptions for meetingsof the commissioner of corrections, state agencies exercising quasijudicial functions involving disciplinary proceedings and'as otherwise expressly provided by statute.' Minn. Stat. 13D.01 subd. 2. The University is not included among those express exceptions. . . . 

Given the broadly inclusive language of the Open Meeting Law, our numerous opinions recognizing the University as a public institution, the failure of the legislature to include the University among other expressly stated exceptions, and our principle of construing the Open Meeting law to favor public access, we hold that the University is subject to the terms of the Open Meeting Law.

Star Tribune Company v. University of Minnesota Board of Regents,
683 N.W.2d at 281(Minn. 2004).

So the University is a "public body" (as that statutory term is applied by the Minnesota Supreme Court), and the FCC as a committee of a public body is subject to paragraph (c) of subdivision 1 of Minn. Stat. 13D.01.

It appears that the FCC needs independent counsel on this point of law.



Michael W. McNabb

University of Minnesota B.A. 1971; J.D. 1974

University of Minnesota Alumni Association life member

For the Record: Why did Studham leave?

An article has appeared on the Wall Street Journal site about the recent departure of our CIO (Chief Information Officer.)

Comments so far on this article are below with emphasis added. A transparent explanation of what happened is due from the University of Minnesota administration.  

Ex-Studham Employee wrote: 

What a crock. This man is a sociopath was run out on a rail by his own senior leadership after increasingly sporadic temper tantrums and abuses of power. If he ever crosses the threshold of a college or university again, it will be too soon.

Good Riddance wrote:  

One should know that the attempts to "boost employee engagement through surveys and feedback on IT issues" amount to reeducation programs and constant gaming of the survey to boost OIT ratings after scoring below almost every department on campus. Those who would not (or could not) comply were forced out. 

University of Minnesota employee wrote:

No one quits a $250k+ a year job to go running, this might as well say he resigned to "focus on his family." The reality is he was the subject of an internal investigation regarding the misappropriation of University funds and other questionable practices. He burned bridges with senior leadership and most everyone he worked with. In the shadow of recent scandals involving other senior University of Minnesota staff the institution’s tolerance for high risk behaviors evaporated. Simply put he was forced out. What happened to reporting WSJ? You might as well just republish the press release.

Huh... wrote: 

Other people hold down full-time jobs and train for triathlons and marathons. Quitting your job to do suggests time management issues. If my husband quit his job to train, he had better come home with a first place trophy. Just saying.

Studham fails wrote: 

Ditto to all of the comments above. Studham was a cancer on the university and the poster child for unethical behavior and wasting university resources for personal benefit. Seeing him in action was like watching a child stuck in puberty - embarrassing for an "executive" at his level. Goodbye and good riddance.

Fork and Spoon operator from sector 7-G wrote:

Some of the vitriol here is a little over the top but he was a bully who claimed to not know why every little request resulted in a five alarm fire on down the line. The Abilene Paradox comes to mind for most of the decision making going on the last few years. 

"In an Abilene paradox a group of people collectively decide on a course of action that is counter to the preferences of many (or all) of the individuals in the group. It involves a common breakdown of group communication in which each member mistakenly believes that their own preferences are counter to the group's and, therefore, does not raise objections. A common phrase relating to the Abilene Paradox is a desire not to "rock the boat." "

Brand mismanagement wrote:

Far more interesting in promoting the "Scott Studham" brand than accomplishing his job. An earlier poster was correct -- he was about to undergo an investigation into misappropriation of funds related to expanding his empire. He got out before anything became public.


Univ of Tennessee employee wrote:

Practically everything said above could have been and was said of Studham's tenure at UT. Until he learns to work with his peers rather than against them, and work for the good of the institution in which he is employed, he will never rise to the level of responsibility he so desperately craves.

Yet another Univ. of TN employee wrote:

He drove morale into the ground while he was here. He tried to replace managers with "service owners" until no one knew who was responsible for purchasing or hiring. It was total chaos. When he left people were cheering throughout our IT department. How does this type of person who gets chased out of every job they've held keep getting hired? When he came to UT, people from ORNL called to ask us that same question. He was forced out there too.

Get Real, WSJ wrote:

No mention that he resigned "effective immediately", with the news released after-hours on the Friday leading into a long weekend? Nobody at that executive level *ever* resigns "effective immediately" unless they're trying to get out ahead of a scandal. Ever. Try doing some real reporting.


Studham's Research "Expertise" wrote:

Studham claims to have a strong background in research computing. While at The University of Tennessee, he proposed replacing Linux on our supercomputer with Windows. He said he had done that at ORNL and that it had made supercomputing easy to use. We called ORNL and could find no such system. In fact, their IT people found the idea quite amusing. He also tried to replace SAS and MATLAB with Excel. He claimed to be customer driven so when we asked what customer had asked for these changes, he said that he was a customer too.


UofM wrote:

It is mind boggling that if what was said above about being "forced" out of previous positions, how the UofM could not have known...



UofMN wrote:

What makes you think the U didn't know? They conduct major searches for any "leadership" position and then pick the person who promises to "fix" whatever quagmire needs attention. My experience - the U couldn't care less about the quality of a candidate as long as h/she knows how to play the role of a vapid talking head who blames staff for everything.

Celebration Time C'mon! Let's Celebrate! IT Employee wrote:

The guy was a bully. Unethical and led by fear. He is paranoid and calculating. Everyone's ideas (including that of his boss and other VPs) were 'cute'. He believed he was the smartest guy in the room. Possible. Horrible all the same. Kudos to the U for finally realizing it and doing something about it. It took too long.

UMN employee again. wrote:

Doesn't anyone see that these series of firings are a distraction from the real skeletons in the University's closet? Faculty with tenure get away with horrible offenses of sexual harassment against students (minors, even), workplace bullying, embezzlement, religious persecution, blatant racism, and far far worse. On a daily basis. Ask any staff member (who are not to be confused with administrators). This is all a charade. If Studham and Teague were tenured faculty and not P&A annually renewable employees, NONE of this would have made the news. The staff brave enough to speak up against this behavior would have been sent to EOAA where all claims go to die.


ConcernedUofMAlum wrote:

What is going on at the U? Seems like there is no sense of how important upfront and credible public and media relations are for a major public research university that touches so many people, institutions and communities. Sad.

He pulled that "service owner" s*** at UT, too? wrote: 

The mother of all cluster**** reorgs in the history of cluster**** reorgs. You ******** at UT should've warned us about that crap! Although, to be fair, you were probably keeping that to yourselves to get rid of him.

It is about time wrote: 

Scott Studham was complicit in the move to make sure the majority of his employees did not have Civil Service protections in their jobs. He was proud of the fact that he purged most Civil Service employees from his ranks. Over half were moved from Civil Service to renewable contract positions.


Bedside manner... wrote:

...of a serial rapist.



For the Love of the UofMN wrote: 

Good riddance to bad rubbish. Now U of MN step up your game, bring in good leadership and to be honest kick the Studham backers to the curb... they are just as bad as him for riding the coattails and getting financial as well as job gain from him. ACIO's .... really??? Service Owners... blah. He pulled the wool over peoples eyes like a hat trick and people bought into his garbage.

Quiting to run a marathon? Ummm no asked to leave and about time.

University leaders, Regents etc.... let's wipe this egg off our faces. The University is a great school, I am a former employee and Alum, Go Gophers!!!!



UM concerned citizen wrote: 

I think this is happening / has happened everywhere, but the UMN is no longer a safe place to challenge authority unless you have tenure or civil service protections. Even then, there are ways to remove the whistle-blower. And with the threat of lawsuits arising from negative reference checks, is it any wonder that problem leaders are tolerated or shared with the next institution?


Lencioni wrote:

 Five Dysfunctions of a team:

Absense of trust. Check.
Fear of conflict. Check.
Lack of committment. Check.
Avoidance of accountability. Check.
Inattention to results. Check.

By his own measure Studham was wildly successful at creating a highly dysfunctional team. Time to start the next chapter. Ironically, this is a really exciting time to work in IT at the U.

Angry too! wrote: 

To UMN employee again -- I agree - there is no safe place to report offenses of harassment. Tenure and bad leadership is keeping sexual harassers and mean SOBs in their positions. I would never send my child to the University of Minnesota.


Relieved wrote: 

Seriously - quitting to ride his bike and swim laps? Story telling is one of Studhams few strengths and I would have expected more from him than a newfound love for fitness and homeschooling. The reality is that Studham is neither a technologist nor a leader. He's his own chief marketing officer and campaign manager. Peel back the shiny marketing glitz and chrome plated facade and you'll find an empty suit and a failed attempt at leadership. His sole interest is the pursuit of self gratification and those with the misfortune of working with him are just pawns in the game. Fortunately, the match is over. Checkmate.



Gopherlady wrote: 

Is there a thumbs up button for all of these comments?

Not Trending Positively wrote:

What we want is Studham's $80+ million "Upgrade" disaster to be fixed so that we can all do our jobs again.


IT Employee wrote:

The comments above have just barely touched the surface. He was verbally abusive towards his employees on a daily basis.

It looks like wrote: 

This "report" is a Studham publicity stunt that backfired spectacularly. 

I Can See Russia From My House wrote:

Seriously, WSJ? A well-paid university exec resigns "effective immediately," just as the school year is starting, in order to GET IN SHAPE, and that sounds credible to you? 

To Review.... wrote: 

So, to review, former Studham employees at Oakridge, U Tennesee, and U Minnesota all found him to be arrogant, a bully, and not smart. That he says he quit so he could run a marathon and then to work with his wife (because they home school their own kids) suggests his arrogance that people would believe it, especially when his “resignation” was accepted immediately the weekend before school hits. The weekend before his lauded work (maybe deservedly?) on the enterprise system would be tested at full load. President Kaler is not an idiot here. He got rid of an erupting problem because he already had too many scandals he had to manage (Norwood Teague, Psychiatry). What did Studham do that the top executives would force him out? That’s a journalistic question, and I hope the WSJ or one of the local outlets would investigate that. 

The list of comments continues to grow.  I will stop here, but readers may click the link for additional comments.