Attorney General Andy Beshear commenting on the UofL Foundation audit on Monday | Photo by Joe Sonka

Attorney General Andy Beshear told reporters on Monday that last week’s audit report on the University of Louisville Foundation was “very disturbing,” and his office is analyzing whether or not to pursue criminal or civil charges if any alleged wrongdoing is within its jurisdiction.

The audit report on the foundation’s finances and management under the administration of former president James Ramsey found that UofL’s endowment suffered heavy losses related to failed loans and investments to startup companies, in addition to exorbitant spending on compensation for top staff and real estate investments. It also found that such actions occurred without proper disclosure to the foundation’s board and included efforts by foundation leadership to shield such information from the media and open records requests.

While noting that the audit report did not conclude that any criminal actions took place or make referrals to law enforcement agencies, Beshear said “the findings are disturbing enough to where we need to carefully review it to see if there is criminal activity, and secondly, if that would fall under our jurisdiction, as opposed to say the commonwealth attorneys here in Jefferson County.” He said he did not know if the FBI is conducting its own investigation.

Beshear added that his office might ask for more information from the parties involved in the audit, as the report by Chicago-based firm Alvarez & Marsal included “a limited number of documents attached to it.” What the attorney general found most disturbing about the report is that the endowment funds mismanaged and misspent by the foundation “are meant to help that university and I hope would be used to ultimately lower the overall tuition that students face.”

As for what could potentially constitute a criminal act, Beshear said that gross mismanagement alone would be insufficient, but this could include “seeking personal enrichment in a way that violated the law. You’re thinking less of mismanagement and more of theft. And we would have to see more documents to suggest that that occurred.”

Beshear also said there is potential for civil litigation stemming from possible “breaches of fiduciary duty, either from the former president or possibly members of the board who were involved.”

According to Beshear, the secondary question of whether his office would have jurisdiction to prosecute if crimes did occur would depend on whether money was involved that is connected to the state treasury, or if there are “serious and significant issues with the fact that this is a 501(c)(3) type of foundation.”

Beshear was asked to respond to a statement released by Republican Senate President Robert Stivers last week in which he said the audit findings justified the actions of Gov. Matt Bevin and the Kentucky General Assembly to abolish the previous UofL board of trustees and replace it with a new board. Beshear said Stivers and the governor are attempting to “rewrite history,” arguing that the movement to push through oversight reforms and conduct a forensic audit of the foundation was initiated last year by the very trustees the governor fired — first last summer through his executive order and then through a Senate bill passed in January.

“I think that whether it’s Senate President Stivers or the governor, they’re trying to rewrite history,” said Beshear. “The fact is, reformers on the original board pushed for this audit. They came out a long time ago and said ‘we believe that money in the foundation is being mismanaged, and the president of the university shouldn’t also be the president of the foundation.’ They pushed to know what the total compensation going to President Ramsey was and they were stonewalled. That’s what the governor called dysfunction within the board.”

Beshear filed a lawsuit challenging Bevin’s executive orders replacing UofL’s trustees; in turn, Franklin Circuit Judge Phillip Shepherd issued a temporary injunction and ultimately struck down the orders, which reinstated the old board. Ramsey resigned as president of the foundation in September — and his chief defender, Bob Hughes, stepped down as chairman of the foundation board — after which the board members of both the university and foundation began the process of hiring a firm to conduct a forensic audit. Senate Bill 12, cited by Stivers last week, subsequently abolished this board and created a new one, which the governor then filled with the same trustees he had appointed earlier.

“That original deal between the governor and President Ramsey was intended to get rid of those reformers on the board,” added Beshear. “And if you recall in that original deal, it allowed President Ramsey to move over to the foundation. The interim board negotiated a resolution where he could stay as president of the foundation and continue these very concerning actions. So I believe that those reformers on the original board deserve a lot of credit, if not a direct apology from the governor and the Senate president.”

Bevin’s spokespersons have not responded to emails from IL seeking his reaction to last week’s audit report and Beshear’s comments on Monday.

Asked if he ever did legal work for the UofL Foundation before becoming attorney general, Beshear answered “I don’t think I did any legal work,” though the law firm he previously worked at — Stites & Harbison — “certainly did.” Asked if he should recuse himself from any case stemming from the audit for that reason, Beshear said he hasn’t seen anything to suggest this would be appropriate, adding that other law firms are mentioned in the audit, such as Frost Brown Todd and Taft Stettinius & Hollister — the latter of which “is working directly for the governor right now.”

David Saffer of Stites & Harbison was the external attorney for the foundation and is mentioned prominently within the audit, including several email chains between himself and top foundation staff in which methods of concealing their actions from open record requests are discussed. The audit found that Ramsey’s top assistant, Kathleen Smith, engaged in such discussions on concealing the actions of the foundation — whether setting up organizations to hide compensation packages or engaging in spending that was not disclosed or approved by the board — more than anyone else connected to the nonprofit.

Asked if he was concerned that his former colleague advised officers to conceal open records, Beshear answered: “From what I reviewed on the emails… it appears there are questions asked on how to do that. I didn’t see any advice to do it. But everyone has a duty to follow the open records law.”

Beshear added that this particular case “is a great example of how that open records law needs more teeth. The problem is that violations of the open records law don’t come with significant enough penalties,” noting that his office ruled against the foundation at least eight times for violating open records law.