Trustees' fiscal ties roil Suffolk

Conflict-of-interest policy scrutinized

By Frank Phillips and Peter Schworm
Globe Staff / November 26, 2008
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Boston lobbyist Robert Crowe was key among the Suffolk University trustees who made David J. Sargent the highest paid university president in the nation in 2006, with a $2.8 million compensation package. Less than a year later, Sargent renewed a $10,000-a-month contract with Crowe's lobbying firm to represent Suffolk's interests in Washington.

This month, as controversy flares over Sargent's pay, the job of publicly defending it falls on George Regan, himself a new appointee to the Suffolk Board of Trustees as well as the beneficiary of a $366,000 annual contract with the university.

By repeatedly renewing lobbying contracts with Crowe's firm over the last decade, and by adding its longtime public relations consultant to its board, Suffolk has put itself in the middle of the debate over the propriety of nonprofits maintaining financial relationships with their trustees.

Crowe and Suffolk officials deny there is any connection between Sargent's top-in-the-nation pay package and payments to Crowe. But it inspires the kinds of conflict-of-interest questions that have drawn attention from regulators and have spurred some other educational institutions and nonprofits to impose tighter disclosure rules.

"This is kind of thing that raises suspicion and invites further outside scrutiny," said former attorney general Scott Harshbarger, who more than a decade ago forced Boston University to adopt a strict conflict-of-interest policy for its trustees.

He said such arrangements shake the public's confidence in private and public institutions, by giving the appearance that trustees independence is compromised, that they are giving administrators special treatment, or receiving unfair compensation, or both.

In Massachusetts state and municipal agencies, such relationships are largely prohibited or, in limited circumstances, are subject to rules that require board members to refrain from participating in debates where conflicts could arise.

Suffolk's own conflict-of-interest policies, adopted in the 1970s, call for full disclosure by trustees of any financial ties to the university. A Suffolk spokesman said Crowe has made the appropriate disclosures to the university every year as required. Crowe's firm has been representing the university in Washington for more than a decade, with the contract renewed each year.

"Suffolk University takes great pains to ensure that in rare cases when there's a business relationship between a trustee and the university, an open and transparent process is followed so that all trustees are aware of any potential conflict," said John Nucci, Suffolk University's vice president for external affairs.

Crowe objected to questions about his dual role as Suffolk lobbyist and a trustee involved in setting the president's compensation. As clerk of the trustees and a member of the board's executive committee, he plays a leading role at Suffolk. When the board was voting in 2006 to set Sargent's compensation package, he was assigned the job of reading the recommended contract aloud to the rest of the board.

"To even insinuate there is a conflict is wrong," Crowe said last week. "There is no conflict." He asserted that he does not profit from the work that the firm where he is chief executive, WolfBlock Public Strategies LLC, does for Suffolk. He said his firm's rate of $120,000 a year is half what other lobbying companies would charge. The firm, he said, has been instrumental in securing federal funds for Suffolk.

"Whether or not my public strategy group is paid $10,000 is not relevant," Crowe said. "We don't make money on that. We are providing a service to Suffolk."

Regan, a Suffolk graduate, was elected to the board at its Nov. 12 meeting. Regan said he also saw no potential conflict, calling the notion "ridiculous." Regan said he is reconsidering whether he will accept his appointment. His hesitance, he said, stems from a busy schedule that includes sitting on other nonprofits and not from any notion that he faces a conflict by sitting on a board governing the administration that gives his firm contracts.

"My question is one of time. I have eight offices to run, it's a difficult economy, and I am on seven or eight other boards," Regan said. "But your ridiculous questions are going to force me to be on the board because otherwise it would look like there was something wrong."

Colleges and universities are tight-lipped about trustee deliberations, but several Massachusetts institutions said it was not unusual for board members to disclose a financial relationship with the institution to their fellow board members.

Boston College, for example, said there have been several recent instances where trustees have recused themselves.

Boston University said it was not uncommon. Under the university's conflict-of-interest policy, which trustees must sign annually, business relationships with trustees, or their immediate family, are forbidden unless "found to be of clear benefit to the university."

The state attorney general's office, which regulates nonprofit organizations, requires board members to fully disclose any financial interest they have with the organization they will be governing. It also urges organizations to adopt written guidelines for trustees that deal with potential conflicts.

Suffolk, in its 2007 filing, did not reveal its contract with Crowe's firm. A spokeswoman for Attorney General Martha Coakley, Emily LaGrassa, declined to comment on the lack of disclosure. The university did disclose that it had leased property in which one trustee had an interest.

Suffolk lawyer Michael Feeley called the failure to disclose Crowe's financial relationship with the university a "regrettable oversight." He said, "Suffolk University will move to correct it immediately."

Higher education specialists said business relationships between colleges and their trustees are common, but many colleges have tightened conflict-of-interest guidelines to require recusals from pertinent votes.

"It isn't unusual for a college to have board members whose companies have a relationship with the institution, but colleges have to make sure they are doing what's best for themselves," said Ada Meloy, general counsel of the American Council on Education, the major coordinating body for US colleges. Trustees should automatically recuse themselves when business relationships come before boards, she said.

Interviews involving the Suffolk University board indicated that conflict-of-interest standards are adopted differently, depending on the individual trustee. For example, One board member - Beacon Hill lobbyist John A. Brennan Jr. - said he felt it was inappropriate for his firm to work for Suffolk while he is sitting as a trustee. So he dropped a lucrative contract he had with Suffolk when he was elected to the board last year. His firm, Brennan Associates, had been paid $93,000 to lobby in 2005 and 2006.

"Once I went on the board, I made a decision that I won't accept compensation for services from Suffolk during my tenure on the board," he said.

Crowe, who has served on the board more than two decades, said he did not recall any disclosure of Regan's financial ties when considering his appointment. Another member who was present at that meeting, but requested that his name not be used, also recalled no such disclosure.

However, Nucci, the university's vice president, said the trustees nominating committee did include Regan's financial ties to Suffolk during its presentation.

"It was presented to them in the report by the nominating committee," Nucci said. "Each trustee got it."

The packets listed Suffolk among Regan's clients as part of his biography. It did not discuss any details of his financial relationship with the university.

Colleges' financial practices have come under intense scrutiny in recent months, as congressional leaders have called for the institutions to spend more of their endowments to curb tuition costs and expand financial aid for low- and middle-income families.

Last week, a national survey by the Chronicle of Higher Education showing a sharp increase in college presidents' salaries renewed criticism that colleges are abusing their nonprofit status.

Suffolk University has been in the center of the storm, with the Chronicle of Higher Education survey placing Sargent's $2.8 million salary package at the top of its survey.

College officials said the compensation, largely comprising payments deferred until Sargent retires, was designed to rectify years of below-average wages.

But students and faculty denounced the package as extravagant, particularly during the current financial crisis and criticized the trustees as irresponsible. The survey prompted several of the highest paid presidents to give back part of their pay or decline their raises. Sargent has not made such an offer.

Sargent had previously pledged more than $1 million to the university, including $800,000 since his contract took effect. In the past decade, he donated $250,000 to the law school, making good on a 1999 pledge. In 2006, he donated $50,000 to a scholarship fund. Since then, he has also pledged $750,000 to the university's capital campaign, much of which is used for financial aid.

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