AG's office urged to investigate board's approval of deals
By Patrick Healy, Globe Staff, 11/1/2003
Former state attorney general Scott Harshbarger and several Boston University professors called on the attorney general's office yesterday to investigate the BU board of trustees for approving $30 million in business and charitable deals last year that benefited trustees' companies and other interests.
The transactions emerged as a source of tension this fall, between BU trustees and president-elect Daniel S. Goldin, with Goldin indicating that he would examine those and other items of board business as possible conflicts of interest. The trustees, several of whom were planning to fire Goldin, reached a severance deal with Goldin Thursday night, and he forfeited the presidency.
Harshbarger said the $30 million in deals amounted to conflicts of interest that may violate a 1993 agreement between BU and the state, which was signed after Harshbarger's office found that a handful of powerful BU trustees, along with president John Silber, had excessive control over deal-making and governance at the university.
Harshbarger said that the same kinds of deals appear to be in place today, and that the executive committee, which voted no confidence in Goldin last week and had moved to oust him, has returned to having outsize power on the BU board.
Ann E. Donlan, a spokeswoman for Attorney General Thomas F. Reilly, declined to comment on Harshbarger's remarks or whether the office would investigate the BU board.
"There are no matters currently involving BU before this office," Donlan said.
The Globe yesterday disclosed a range of tranactions, based on BU's most recent tax filings in 2002, including $5.6 million for insurance to trustee Frederick H. Chicos's company, the Chickering Group, and $25,468 for banking services to trustee Marshall M. Sloane's company, Century Bank & Trust, which operates a branch at BU's student union.
Some BU trustees' companies have also reaped profits from other arrangements, which were not disclosed in the tax filings, to offer insurance and supplies to BU employees and schools.
"These deals should be a real red flag to the state," said Harshbarger, now running a corporate governance legal practice in Quincy. "The issues 10 years ago are the same as today: Is there self-dealing by trustees of a public charity university? Are the trustees acting out of loyalty to the university or to each other and Silber?"
BU officials say those transactions are appropriate and conform to university, state, and federal rules on conflicts of interest.
The Globe has also learned that two BU employees met Wednesday with Reilly aides to accuse the board of trustees of making deals with individual trustees' companies that may violate BU's own conflict-of-interest rules and the 1993 agreement.
According to a BU source with close knowledge of the meeting, the two employees cited the Century Bank & Trust transaction, among others. When BU paid $25,468 to the bank in 2002, trustee Sloane was the bank's chairman, and BU president Jon Westling and BU executive vice president Joseph Mercurio were listed in BU's tax forms as involved with the company, most likely serving on its board.
The two BU employees have not filed a formal complaint with the attorney general's office, but instead "explored whether the BU trustees had the same kind of problems today that they had during the Harshbarger investigation," according to the BU source, who added that the employees are waiting to hear further word from Reilly's office.
A second source who has been informed about the meeting by participants said that the attorney general's aides would not investigate BU unless a formal complaint was filed requesting a probe.
"Reilly's office seemed to be taking a wait-and-see approach," this source said.
Carol Neidle, a BU linguistics professor who helped organize a petition supporting Goldin, was among those yesterday calling for a state investigation. She expressed concerns in particular about trustee Gerald S.J. Cassidy, a Washington lobbyist for BU and a longtime friend of Silber's whose firm, prior to Cassidy joining the BU board, has been paid roughly $800,000 by BU in recent years to lobby for grants and contracts and other business matters. Cassidy was also the trustee who first brought Goldin to BU and to Silber's attention as a candidate for the campus presidency.
"I think Cassidy, who has received millions from BU, led the trustees to believe that Goldin would act differently and support the board's deals," Neidle said. "When Goldin didn't play ball, they acted against him. These trustees think they can do anything and the attorney general's laws have no teeth."
During a news conference at BU yesterday, a university lawyer, Robert Popeo, said that the board's conflict-of-interest policies are "absolutely cutting edge" and that "not one of these [transactions] reflect an indication or substance of conflict."
He said the trustees' audit committee, as well as the full board, reviewed and approved such transactions, and they are reported annually in BU's tax filings, steps, Popeo said, that many universities do not take.
Marcella Bombardieri of the Globe staff contributed to this report. Patrick Healy can be reached at email@example.com.
© Copyright 2003 Globe Newspaper Company.