Are Universities Above the Law?

[Valin]

The Weekly Standard:

The great unscrutinized institutions of our time.

PETER BERKOWITZ

 

5/20/13

 

Corporate governance is a much-discussed topic, and the operation of corporations has proven a fertile field for investigative journalism. But even though many colleges and universities are multibillion-dollar-a-year operations, the subject of university governance has been largely neglected. This is unfortunate because university governance raises fascinating questions of great public interest involving the complex intersection of law, morals, and education. Nasar v. Columbia is a case in point.

 

On May 6, Columbia University submitted a motion to dismiss a lawsuit filed against it in mid-March in the Supreme Court of New York by Sylvia Nasar, the John S. and James L. Knight professor of business journalism at the Columbia University Graduate School of Journalism. Nasar’s complaint alleges, among other things, that “from 2001-2011, Columbia illegally misappropriated and captured for its own purposes income generated by a $1.5 million charitable endowment” established by the Knight Foundation. Columbia contends that Nasar’s suit is without merit and that even if all her allegations were true, the university could not be found to be in violation of the law. But if all of Nasar’s allegations are true and the courts of New York are unable to grant relief, it would mean that New York state law permits university administrations to disregard their written agreements with impunity and behave deceitfully when called to account.

 

(Snip)

 

 

Nasar learned of irregularities in Columbia’s management of Knight chair funds in 2010. She protested to Columbia and alerted the Knight Foundation, which promptly initiated an audit performed in the autumn of 2010 by Big Four accounting firm KPMG. According to the KPMG audit, “it appears that the Graduate School of Journalism did not abide by the original terms and spirit of the grant agreement.” The audit concluded that at least $923,000 of expenditures were “unallowable” and claims against Columbia could total as much as $4.5 million.

 

The original Knight Foundation agreement with Columbia provided that endowment income should be used specifically “for additional salary and benefits to the base salary” (emphasis added) of the holder of the Knight chair and “to support the chairholder’s program of research and service.” The agreement also stipulated that “the base salary and benefits of the Knight Chairholder shall be provided by the Donee [Columbia] (from funds other than those earned from the Knight Endowment Grant).” In fact, as the KPMG audit shows and as Columbia acknowledges, the journalism school did use endowment income, in violation of the agreement, to pay Nasar’s base salary and not to supplement her base salary or support her research. In addition, Nasar’s complaint alleges that Columbia repeatedly dissembled about misappropriated funds and that, after Nasar discovered Columbia’s misuse of Knight chair monies, Nicholas Lemann, the dean of the journalism school, sought to intimidate her into keeping silent.

 

(Snip)