Hidden use of money by CU Foundation

Jerry Kopel

4/28/1995

Deep Throat to Bob Woodward in All The President's Men: "Follow the money."

"Money laundering" can mean passing drug money through Florida banks, or passing money for Nixon's 1972 presidential campaign through Mexican banks. But recently, Sen. Al Meiklejohn (R) applied it to the CU Foundation, Inc. and the University of Colorado.

The subject was HB 1001 dealing with non-profit corporations that have ties to state government. John Sanko of the Rocky Mountain News quoted Meiklejohn in a March 3l article:

"I think some of these non-profits have been used to run money through -- things like the president's mansion at Colorado University."

"We were absolutely deceived on that. We were told the foundation was buying it (the mansion). It wasn't at all. The university was paying for it and laundering the money through the foundation."

Meiklejohn's comments were based on a March 1994 article by RMN reporter Mike Romano who discovered the university "borrowed money" from the foundation to build the mansion and was paying the foundation back from budget funds until Romano's article blew their cover. About half the cost had been returned to the foundation at the time the article appeared, Romano told me.

The reason CU always gets away with "money tricks" was reluctance by the Joint Budget Committee up until now, to deal with the issue.

In January of 1988, a whistleblower letter to me led to a written admission by Dr. Benard Nelson, the Health Science Center chancellor, that he had spent $6,296 on a going-away party for hospital director Robert Dickler. Nelson claimed money for the party came from his "Chancellor's Gift Account."

As I tried to dig deeper and get the JBC and the Legislative Audit Committee interested, Denver Post reporter John Diaz, on March 27, 1988, exposed what had happened:

"In these lean times, it would be unrealistic for the University of Colorado to ask state legislators for luxury skyboxes at Folsom Field, a $700,000 mansion for the president, or money for chancellors to spend on gifts and entertainment.

"So where is CU getting the money for such things? From the University of Colorado Foundation, Inc., a sophisticated, somewhat secretive, and increasingly aggressive fund-raising agency formed by the Board of Regents in 1967....

"In two decades the foundation has grown from a shoestring operation into a money machine taking in $25 million a year from donations and investments."

The Diaz article revealed how the foundation "sweetened CU staff paychecks" and "provided discretionary accounts for administration".

"President E. Gordon Gee and chancellors at CU's four campuses receive accounts to spend as they see fit. At the end of February, the high-ranking administrators had almost a total of $100,000 at their disposal.

"The foundation's resistance to public scrutiny has been an irritant to some legislators, especially because alumni and other contributors receive tax deductions for donations made to the foundation.

"They should have to make a decision either to do away with their tax deductible status or make an accounting for the way the dollars are spent" said Rep. Jerry Kopel. "These are state institutions we are talking about."

Diaz discussed the frustration felt by the JBC in getting information about the foundation's discretionary fund. He quoted Rep. Elwood Gillis, the JBC chairman, as to foundation assets. "We don't know where they get them....We don't know the flow of their revenue."

In a box accompanying his article, Diaz listed where the CU Foundation said the cash came from: Individuals, 45 percent, corporations, 35 percent, other foundations and associations, 20 percent.

The Diaz article had a different scenerio than Sen. Meiklejohn or the Romano article on the money trail for the CU mansion:

"The university...lent the foundation $500,000 from a Health Sciences Center parking fund when donations lagged for the 4,500 square-foot Italianate mansion for CU's president. The foundation received a preferential interest rate, with payments delayed until May, 1990."

Tim O'Brien, then state auditor, in a Silver and Gold article on April 7,1988 stated "In my mind we clearly have the authority to conduct any audit of the foundation if we so desire. But because of the size and complexity of the organization, a foundation audit could be a significant use of our staff resources."

O'Brien said such an effort would not be undertaken without direction from the Legislative Audit Committee.

"Although members of the JBC recently indicated their concerns for more accountability by the foundation" wrote the S&G reporter "they didn't take any formal action on the matter." Admitted Sen. Robert DeNeir, JBC vice chairman," We should know where the money's going. We're leaving something hanging that we should know about."

Although not a member of Audit Committee at that time, I managed to convince Sen. Tilman Bishop to allow me to do a preliminary examination of the foundation. But the only papers the foundation agreed to and did produce were final tax filing figures without the background information on which those figures were based. And my examination of foundation witnesses, without documentation, proved fruitless.

A full-scale investigation complete with subpoenas, which the S&G article reported I had requested in writing to be done by the JBC, might well have avoided the money-laundering criticism leveled by Sen. Meiklejohn in 1995. But I hadn't turned up a "smoking gun" and no investigation was launched.

Rep. Tony Grampsas, who will soon chair the JBC, is awaiting conclusion of a legislative audit concerning spending of discretionary funds at CU's College of Arts & Science, due July 1st.

Regardless of the audit outcome, my suggestion to Rep. Grampsas would be to "follow the money". Do the same-type audit of CU Foundation, Inc.

Jerry Kopel writes a column for the Statesman based on 22 years past experience as a state legislator.