DeSteph’s “Relentless” Search for the Truth at UVa

uva_fog_smallby James A. Bacon

The controversy over the University of Virginia’s $2.2 billion Strategic Investment Fund may have settled down since a state auditor determined in August that the controversial pot of money was in full compliance with Virginia law. But William R. DeSteph, Jr., R-Virginia Beach, isn’t satisfied. He has released correspondence expressing his ire at university officials for keeping legislators and the public in the dark.

“My confidence in the forthrightness of the University’s leadership has been undermined by its own contradictory statements and numerous private conversations about public matters,” DeSteph wrote in a Sept. 14 letter addressed to UVa President Teresa Sullivan. It was a matter of “grave concern,” he said, that she continued “to refuse to provide the public records requested by my colleagues and me.”

“If you and the University’s leaders persist with obvious disingenuous efforts to keep the doors closed and Virginia in the dark,” he wrote, “you will only reinforce the nation that something’s amiss.”

DeSteph’s sentiments echoed those of a Sept. 8 letter that Del. Terry G. Kilgore, R-Gate City, had addressed to Sullivan and Rector William H. Goodwin Jr.: “Our concerns have always been that not only did the public not know about [the fund], much less where to look, but also that clearly neither did your Board of Visitors nor we as legislators charged with keeping a tight rein on the public’s purse.”

The existence of the fund was revealed by former Board of Trustees member Helen Dragas in a Washington Post op-ed shortly after she left the board this summer. She charged that board members had been coaxed into raising the tuition for incoming first-year students by 10% without understanding that income from the fund, estimated to be about $100 million per year, could have been used to offset tuition increases. University officials planned to use the money to recruit star faculty, enrich the student experience and provide financial aid for lower-income students as part of a longer-term plan to boost UVa into the ranks of the Top 10 universities nationally.

Critics contend that, while what UVa did was legal in setting up the Strategic Investment Fund, the process was opaque to the public, the legislature and even some members of the Board of Trustees. They also charge that the first full explanation to the board of the purpose to which the fund would be put was held in a closed session in likely violation of Virginia’s Freedom of Information Act.

A joint Senate-House subcommittee of the General Assembly held a hearing last month to look into the matter. A state auditor showed how UVa had consolidated various reserves and other restricted funds and handed them to the University of Virginia Investment Co. (UVIMCO) to invest, which it did successfully. The actions were legal, properly accounted for, and fully disclosed in university documents, the auditor said.

In pursuing their inquiries, DeSteph and his legislative allies have asked for voluminous information from the university. In a Sept. 2 letter to DeSteph, Sullivan referred to “thousands of pages of document that we have already provided in response to your requests.”

According to a Sept. 9 letter to DeSteph, Senate Majority Leader Thomas K. Norment Jr., R-James City, had advised Sullivan that “any and all legislative requests for information on this matter would come either through the Joint Subcommittees or the respective Committee Chairs. … It is important that any requests for information be focused and pertinent to the use of the Fund to advanced the University’s mission.”

However, DeSteph, Kilgore and others were not satisfied. As DeSteph wrote to Senate Majority Leader Thomas K. Norment Jr., R-James City:

The issue has never been the legality of the fund. Instead, the issues have always been the University’s administration disguised the money, had private conversations with just a handful of the Board of Visitors’ leadership about how to spend public money and the investment income off of this public money, and convinced the Board to go along with its plans in an illegal closed session while simultaneously instructing members to keep them a secret from us and the public. …

Rector Bill Goodwin has been far less than candid over the course of numerous conversations, I’ve been given the run-around by President Terry Sullivan, and plainly told by Pat Hogan, the University’s chief operating officer, that what’s gone on is none of my business.

I have documentation and accounts from a wide range of sources — including many board members — that for whatever reason, Virginia’s leadership and citizens have been led astray.

In his correspondence, DeSteph referred to his service as an intelligence officer with Naval Special Warfare and the Naval Investigative Service. “That experience taught me to be dogged in the pursuit of the facts and take people at their word until I learned otherwise. But if I came to understand that misdirection and deflection were at work, my search for the truth would be relentless.”

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19 responses to “DeSteph’s “Relentless” Search for the Truth at UVa

  1. “While perhaps intoxicating to you, the pursuit of a number one national magazine ranking shall never be a legitimate excuse to put Virginia’s children second.” That was my favorite line in Kilgore’s letter.

    The fund itself is nothing more than very good cash management, by an institution blessed with enough assets to make the structure work. The real bottom line story is that the institution is flush, not that it is secretive.

    There were quiet murmurs in the committee room years ago when the General Assembly passed its landmark legislation setting some of these institutions free from full state oversight. There was a trade off – we set you free, you build your own financial base, go after out of state students, do as you will with tuitions, and in return understand we no longer pump in General Fund dollars at the old rate, we no longer will provide more than half the money needed to give a Virginia student that bachelor’s degree. I didn’t like the trend then, but I don’t see how the genie gets put back into the bottle now. They are state schools in name only, only because the people still own most of the land and buildings. For now.

    • Thank you. I’ve been making this point since this nonstory broke. There is no story. This is all a product of legislation that was passed over a decade ago that already quasi-privatized U.Va./W&M/VT. The days of the General Assembly having any true authority over those 3 schools beyond appointing the BOVs are over.

      But of course, the blog author never seems to want to criticize those who are wrong: DeSteph, Kilgore, Ramadan, Dragas, and Petersen. Let’s not forget that DeSteph is so dumb he was alleging that U.Va. had spent a 300 million dollar line of credit back in July. When the reality is that the school hadn’t touched any line of credit. Where are the posts about a 300 million dollar lie? Where are the posts pointing out that an alum of the law school (Petersen) is writing columns as if U.Va. Law School is a public school when it privatized in 2003????

      That’s called bias. Even this post likes to cast U.Va. as having done something wrong with DeSteph’s comment at the end. The author will never write a post blasting the stupidity of the statements made by U.Va.’s critics. Recall Dragas swallowed the Rolling Stone story 100% without raising a single question……ah, silly facts get in the way of a good narrative. DeSteph…300 million dollar lie…..Petersen…epitome of the Richmond clown show when he doesn’t even know his own alma mater privatized….Dragas…..so many errors….from “slush fund” to MOOCs to Rolling Stone……

      • When the former rector of the board alleges there is a slush fund it is hardly a non-story. And it is the kind of story that it hard for financially challenged reporters and readers to follow. But underestimate DeSteph and the other legislators at your peril. As I noted, it is a different story than the one which was told – and that is a story about the priorities of the current leadership (love of rankings), the fading focus on the original shining mission of the institution (and many of its peer institutions are losing their way), and the growing economic and political power of the “not for profit/tax exempt” sector.

      • “This is all a product of legislation that was passed over a decade ago that already quasi-privatized U.Va./W&M/VT. The days of the General Assembly having any true authority over those 3 schools beyond appointing the BOVs are over.”

        The leaders of UVA do not agree with your interpretation of that decade old law. They have said quite the opposite repeatedly in writing over the past 4 years. What they are trying to do right now is take over absolute control without the legal authority to do so.

  2. still seems to be a question of whether public money is involved or not.

    • No question that some of the funds came in as state support. Most state agencies, General Fund or not, end the fiscal year with cash balances. The higher ed institutions as a rule are allowed to keep their balances and roll them over into the next year. If I understood what I heard at that meeting, the fund was built by accumulating all those pots of money from all around the enterprise into one sum large enough to make aggressive investing possible.

      Tis a wonderful thing in today’s America to be “not for profit.” UVA is not for profit, its hospital and its myriad graduate schools are not for profit, and the sums they accumulate and earn in the market enjoy incredible tax advantages. Giant pools of capital have formed around not for profit, tax exempt entities like UVA. While tax collections languish.

      • Steve –

        You last paragraph makes a very astute and potent observation.

        In practical affect, under today’s rules and circumstances, “Not for Profit” organizations are increasingly run as powerful “Profit” generators. They deploy their special powers now to create and aggregate within themselves by artificial means huge pools of Investment capital, and in so doing their leaders are increasingly accountable to no one but themselves.

        So today, in more and more non-profits, the monkeys within the non-profit can run their own zoo to its leverage enormous powers and wealth to serve their own self interests, if only because there are no checks on the power of those internal interests who can buy out any challenger.

        I believe this is structure now at work at UVA. That UVA’s president today answers only to the current administration of the Federal government. For example, in sharp contrast to today’s state investigation, note how UVA “submitted itself lock stock and barrel to the demands, including the vast document search, by the Accreditors who were operating under Federal control in the fall of 2012. And also how UVA submitted to the Title IX sexual witch hunts of boys, a gambit born and breed in the White House starting in January of 2014, an election wedge issue gambit by the White House that at UVa culminated but did not end with the Rolling Stone debacle 11 months later, in late November of 2014. This obsequious behavior, in my opinion, is on display everyday at UVA in its communiques to the outside world. In sharp contrast to how UVA official treat the State legislature, which treatment reeks with contempt.

        • As to Steve’s comment “No question that some of the funds came in as state support.”

          I am close to sure he is right. Earlier on this website I said that the found money was likely from Philanthropy. I said this because the Cornerstone Plan or one of the follow up annual reports on the Cornerstone plan said this was where future Academic support was going to come from. What I apparently misread was that Philanthropy was going to support future Academic needs over and above those paid for out of monies thrown off (generated from) the Strategic (Research) investment Fund. This is apparent from recent statements by Sullivan, namely:

          Questioner: “Hi. Thanks. I wonder if you might explain the relationship between the Cornerstone Plan and the Strategic Investment Fund.”

          Sullivan: “So that’s a very good question. When the Cornerstone Plan was first adopted, the board did not allocate funds for the strategic investments we would need in it. But instead, we found funds through philanthropy. Some of the ideas in the Cornerstone Plan were so exciting they immediately attracted philanthropists who were interested. And through reallocation from things that we were already doing. Pat Hogan and his team have saved almost $55 million in the university through their careful stewardship of our resources. That was money that, in many cases, we could direct towards other opportunities. But we’ve reached a point now where we have bigger investments that we need to make. And you know, those of you who work every day in our IT system and other parts of our research infrastructure around here, you understand that there are things here that take more money than we’re able to get just by reallocating resources. So the strategic investment fund is intended to provide ongoing possibilities for additional investments we can make but carefully vetted and always approved by the board. And of course, one of the things that the proposals asked for is what is the relationship of this project either to the university strategic plan, the Cornerstone Plan, or to the medical center strategic plan. So we’re trying to keep it all in very close alignment. Good question. Thank you. Did I cover everything? [LAUGHING]” End of Answer.

          —-

          The (LAUGHING) is in the transcript. And the jest should be there.

          Hence, one issue that I assume Mr. DeSteph is digging deep into is the question of “the meaning of Sullivan’s words, namely:

          “… And through reallocation from things that we were already doing. Pat Hogan and his team have saved almost $55 million in the university through their careful stewardship of our resources. That was money that, in many cases, we could direct towards other opportunities.”

          There appears to be no doubt there somewhere big in here and after you strip out the “highly excitable philanthropists and their real money,” somebody robbed Peter to pay Paul. Who is Peter? How was he robbed? By stealth and theft? By armed hijack? Who did what to whom? And who took the hits? For how much? And when? And was their any real cost savings? Or is that just another fairy tale?

          • Good digging, Reed! Sullivan’s statement that “through reallocation from things that we were already doing — Pat Hogan and his team have saved almost $55 million in the university through their careful stewardship of our resources” aligns with a remark that Bill Goodwin said, to the effect, that some of the funds came from “efficiencies.”

            If I understand Sullivan’s statement correctly, the university spent that $55 million on advancing the university’s strategic aims before it devised the $2.2 billion Strategic Investment Fund. I wonder if the disposition of those funds was ever put before the Board of Visitors, and, if so, how it was couched.

      • I think if State funds were used – then the state has some justifiable interest but there’s an easy fix for that – just restrict state funds so that they cannot be used that way – and/or unspent must be returned.

        In terms of the Medical – I don’t think the state has any legitimate claim as to how it should be used but again – they can fix it in the upcoming GA if they really want to.

        I’d be opposed to the GA attempting to directly control , ‘administer” UVA or any other higher ed – as a condition of funding.. I think their control is only on the monies they contribute as to use or non-use and again if they want to contribute money for only one purpose – tuition – then so-encumber it.

        but the State should not be hands-on – on operation, administration or strategic planning, etc.

  3. On FOIA –

    I don’t think the FOIA law was every intended to be a “citizens are entitled to ANY information that govt has” law.

    nor – was it intended for citizens to be the arbiter of what they thought was what they were entitled to.

    it’s always been restricted in actual law – and I would argue – in spirit as the GA has on numerous occasions – subsequently agreed with an agency over their prior assertion that certain stuff was not releasable.

    Finally – if any entity subject to FOIA feels that critics or opponents want the data to essentially cause harm or trouble for that agency – they’re not going to enable it unless the law is so explicit that they must or risk contempt of court.

    so the issue with UVA is being litigated along the lines of what folks think they should have to release versus what UVA thinks they have no choice but to release and unless the GA is willing to change the law and/or go to court – UVA is not about to “help” the critics and opponents essentially get involved in what the critics and opponents think is the proper way for UVA to create and operate a strategic fund.

    Reed mentions the difference between the Feds and the State – and he’s right – the Feds have an explicit law and regulation that leaves UVA little choice but to comply – or lose funds or get whacked in court – and the State has done neither – restrict funds or explicit law.

    So if the State is not willing or able to do this -all this back and forth is futile . just political theater with UVA exercising it’s middle finger to the perceived opponents….

    The moral of this story is that if the GA – REALLY wants to have certain things happen – they need to legislate it – like the Feds have – and get out of the Kabuki theater business.

  4. Thank you, Steve — that is the only point about the Fund that matters:. “The fund itself is nothing more than very good cash management, by an institution blessed with enough assets to make the structure work.”

    The real story is, some legislators don’t like the implications of their loss of control agreed a decade-plus ago and can’t resist the opportunity to pontificate in populist ways about it regardless of the facts (sounds like a trend this year). This says a lot more about them than about the University. They should find other kids on the playground to bully.

    There are legitimate questions here (e.g. “the fading focus on the original shining mission of the institution (and many of its peer institutions are losing their way)”, and I agree with RF about the “obsequious behavior … on display every day at UVA” in regard to federal regulators — but these issues cannot be resolved by the GA — only the donating alumni and present paying students can correct the University’s course.

  5. MOOC “done right” – ought to provide a solid education to any academically-qualified Virginian.

    I’d like nothing better than to see UVA and VaTech give Liberty University a tough run for the money.

    I also have to believe that some folks are pining away for a bygone era – an anachronism in the 21st century economy. It harkens back to the ole “boarding school” mindset except in UVA’s case the “drunken/rape boarding school concept”. 😉

    Seriously – why NOT, pursue a strategic vision of making a UVA-quality education to any qualified student who doesn’t want to go into hock up to their proverbial eyeballs for an “on-campus”…. “experience”?

    This whole story could be entitled: “revenge of the buggy-whip era”.

  6. “Seriously – why NOT, pursue a strategic vision of making a UVA-quality education to any qualified student who doesn’t want to go into hock up to their proverbial eyeballs for an “on-campus”…. “experience”?”

    Why?

    Because the success of any such a low cost problem would threaten the monopolistic money making machine they want to build instead.

    At bottom this scheme labeled the 21st century new university is not about educating kids, it’s about creating an autocracy of self anointed high priests for the unwashed masses of the 21s century.

    • By that standard I am an unwashed mass. As is my family; we did not make the grade for High Priest. I enjoyed the residential experience and will defend it — as an option — as would my children, I believe. But I completely agree with LarryG, it should not be the only way to get a UVA-quality education in Virginia. There is no fundamental reason the level of academics at our community colleges cannot be up to UVA undergraduate teaching standards.

      • “There is no fundamental reason the level of academics at our community colleges cannot be up to UVA undergraduate teaching standards.”

        I agree. But unfortunately, from all that I have been able to find out (and indeed experienced personally in the case of one well known institution) the level of academics at our community colleges are by and large absolutely abysmal. A hugely expensive waste of many students’ time and money.

  7. re: ” There is no fundamental reason the level of academics at our community colleges cannot be up to UVA undergraduate teaching standards.”

    totally agree – and no reason why Community Colleges could not partner with UVA to provide courses not available at the Community College – and a potential path to UVA itself – with both residential and non-residential matriculation.

    I note – the critics -seem to have few ideas about how to go forward. They essentially want to play blame games and seek retribution for UVA’s “sins”.

    I for one am tired of these people. We will always have problems. Wrongs to be righted. Need for reform. But these folks these days are not after a better day -they’re basically modern day haters and vandals.. whose primary goal is to tear down what they don’t like.

  8. What’s next? Benghazi emails?

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