U of L Foundation auditors get $400K more as investigation reaches final stage

07/11/2017 01:50 PM

FRANKFORT — The Government Contract Review Committee approved a $400,000 increase for the University of Louisville Foundation’s forensic audit contract on Tuesday, and an attorney for the school said it might not be the last time he comes before the panel as the U of L board considers legal action in response to the scathing report.

The addendum bumped Alvarez & Marsal’s contract with U of L to nearly $2.2 million through Oct. 1. The auditing firm’s report, released in June, detailed several million in questionable expenses by U of L Foundation leaders and lax oversight by the nonprofit’s board.

Craig Dilger, an attorney with Stoll Keenon Ogden who represents the university, said losses at the foundation, which oversees the school’s endowment, ranged between $40 million and $100 million depending on estimates and calculations, and he tabbed the number closer to $60 million.

The $400,000 increase will cover the final phase of the auditing firm’s investigation, Dilger says, including answering follow-up inquiries, helping implement policy changes and possibly preparing for litigation.

Dilger says the U of L board of trustees is still considering what action, if any, it will take to recoup misappropriated money.

“As you can imagine, activities that seek to recover somewhere between $40 million and $100 million are going to cost some money, so I would not ever tell you that this is the last time I’ll be before you,” he said. “I don’t think it is.

“I do think that we’re coming to the end of the investigation, and so this addendum to the (Alvarez & Marsal) contract, I believe, will be the last one on that part of the process … but I anticipate I’ll be in front of you again as the board of trustees either elects to move forward with litigation or some other process.”

Sen. Paul Hornback, R-Shelbyville, asked whether recovery efforts could yield reimbursements for the state, which has financed the audit, before U of L recoups any funds for its foundation.

Dilger said that would depend on the course of action taken by the university.

“I think there absolutely is an avenue whereby the cost expended to recover the money could be recovered and could be recovered in a way that benefitted the state,” Dilger said. “That’s a step that’s several miles down the road in terms of what happens.”

“The answer is definitely yes,” he continued. “How that works out and what dollars actually come back to the state, I think, is a question that we would have to address as the board of trustees decides what step to take.”

Hornback said he hoped that state tax dollars would be reimbursed through recovery efforts by U of L.

“I think the taxpayers should be paid back first before the university or the foundation gets a penny of any of that,” Hornback said.

“We need to set a precedent to make sure that we don’t allow these things to happen, and if they do happen again and the taxpayers are on the hook, we’re going to come after you and we’re going to try to recover those monies back for the taxpayers of this state,” he added.


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