Court test possible on Razorback spending accountability | Arkansas Blog

Monday, December 18, 2017

Court test possible on Razorback spending accountability

Posted By on Mon, Dec 18, 2017 at 10:01 AM

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A Little Rock lawyer indicates a court test is likely of the Razorback Foundation's refusal to provide information about its financial deals with Razorback athletic department officials, from the athletic director to coaches.

Chris Corbitt, representing Kevin Lemley, has requested records from the Foundation about loans made to fired athletic Director Jeff Long to purchase whole life insurance policies. The existence of the loan was disclosed, but not detailed, in the publicly available federal 990 tax form filed annually by the Foundation. Corbitt wants to know if loans of $450,000 and $500,000 were forgiven on Long's recent termination and other information about ownership and beneficiaries of the policy.

The Foundation declined to provide the information, claiming exemption from the state Freedom of Information Act. Director Scott Varady said the foundation does not receive public money or support. I asked Corbitt when he copied me on the request if he was prepared to sue if the request was denied, as I expected it to be, and he said, "Hell, yes."

Meanwhile, the University of Arkansas has responded to a similar FOI request with some answers and some documentation.

Rebecca Morrison, who handles UA FOI requests wrote to Corbitt:

At various times and as the letters provided reflect, the University requested that the Razorback Foundation establish three (3) deferred compensation plans for Jeff Long. These obviously predate the current administration, but apparently were financial interest vehicles mutually agreed upon between the Foundation and Mr. Long and were funded by the Foundation, not the University.

It is the University’s understanding with regard to the first two deferred compensation plans that the Razorback Foundation agreed to provide the funding as requested by Mr. Long. It is also the University’s understanding that the Razorback Foundation’s Form 990 lists the payments as “loans” for accounting purposes, and that these sums were not direct loans to Mr. Long. The Foundation has advised that these sums relate to payments made on behalf of Mr. Long to purchase split-dollar life insurance policies. The sums listed on the 990 apparently represent the Razorback Foundation’s initial funding to purchase the policies, along with interest. According to the Razorback Foundation, the Foundation is the collateral assignee on these policies and will be repaid the amount it used to purchase the policies upon the death of Mr. Long.

With regard to Mr. Long’s third deferred compensation plan, the University asked the Razorback Foundation to fund $250,000 towards the plan. Mr. Long requested that the Razorback Foundation put the funds in an annuity policy, and the Razorback Foundation apparently did so. The Foundation has advised that this annuity policy vested in Mr. Long on the date of his termination for convenience.

The University does not have any record which reflects who the beneficiary of the policy is or from whom the policy was purchased.
Here's the letter from the UA to Long detailing its expectations of benefits to be provided by the Razorback Foundation as part of his pay package.

Let me boil this down and provide some history. The Razorback Foundation once operated within the athletic department. I was part of an FOI request for its records in the 1980s that changed all that. Attorney General Steve Clark opined that the records  were public. Hog powers, then as now, didn't want them released. A UA Board member was sicced on Arkansas Gazette publisher William Malone to get him to withdraw the FOI request. We didn't. We got the records. Subsequently, the Foundation moved off campus and took other steps to shield itself from public inspection.

Until recently, most mainstream media accepted this setup meekly rather than rile the potentates of Pigland. The Foundation relies on private contributions and, significantly, on added payments from premium seating and parking at football and basketball games. The Foundation may get no public dollars, but it profits handsomely for its franchise to extract payments from people who attend sporting events in publicly owned facilities of a public university. Ticket handling alone requires the participation of public employees.

But the obvious public connections are the pay promises made to coaches and athletic directors by the university. Those deals are struck in consultation with foundation officials. They commit the Foundation to meeting terms and the Foundation accepts those terms, understanding that sufficient money will flow to meet those obligations. John Watkins, a former UA law professor who wrote the book on FOI law in Arkansas, told me years ago that the Foundation's claim of exemption from the sunshine law wouldn't stand up in court.  Too many entanglements between public and "private." The Democrat-Gazette, which has now decided to seek the records on the payout to fired football coach Bret Bielema, wrote the other day about a North Carolina study that said the veil of athletic financial secrecy has been torn away from similar operations in at least 11 states.

The public deserves to know how money flowing from a public institution's activities is spent. The Foundation is now on the hook for potentially more than $19 million in contract buyouts for the fired athletic director, head football coach and a raft of assistant coaches. Were those good deals? Will seat premiums be rising to meet the payouts?

The UA controls how the Razorback Foundation must spend money. It should follow that the public is entitled to know the details. Perhaps Chris Corbitt will get there if he sues, though an elected judiciary can be influenced by politics, too. It won't be easy in any case. Between the UA, the Razorback Foundation and the big money interests (think Waltons) who prefer that their deals with the university be kept private, there'll be no shortage of secrecy-defending lawyers in the courtroom.

This is a case that should be settled by a famous rule enunciated by a former Hog coach. Remember the Do Right Rule?

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