CU Foundation's murky books
Owens has right idea
Rocky Mountain News, Denver, November 20, 2004

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The University of Colorado Foundation is very irate with those of us who ask about its operations. So irate, in fact, that this week it mischaracterized a News reporter's straightforward inquiry as "an unacceptable violation of journalistic ethics."

As it happens, such truculent rhetoric is part of what fuels suspicion about whether the $700 million foundation, which is the university's non-profit fund-raising arm, has been used to support activities that might be controversial or absolutely inappropriate if they were openly funded by the university.

We first addressed this matter in October 1999 when the university confirmed that a high-priced consultant for an educational initiative by President John Buechner had been paid by the foundation. There is little doubt the arrangement was meant to conceal the consultant's salary from public scrutiny. When the university was asked by The Colorado Daily for a copy of the employment contract, officials at first insisted - erroneously, it turned out - they didn't even have a copy.

More recently focus has been on the foundation's relationship to the athletic department. A private firm that examined documents for the Colorado attorney general in his probe of the football recruiting scandal recommended a "complete, independent review of the Foundation's internal controls." That would seem only prudent given several unexplained but extremely curious entries in foundation documents provided to the AG's office.

After the flap in 1999, state Sen. Ron Tupa, D-Boulder, sponsored a bill to open more foundation records to public view. The measure died, but now Gov. Bill Owens has embraced the idea, so a bipartisan bill may have a decent chance. We also applaud Friday's news that the state auditor will conduct an independent review of the foundation's financial transactions with the university.

Until that happens, a fog of misleading rhetoric will no doubt continue to emanate from Boulder. Also this week, for example, a foundation press release touted a KPMG examination earlier this year, claiming the outside accountants "traced the flow of funds from donors, through Foundation records, in virtually every transaction between the Foundation and the University benefiting Athletics for the period from January 1, 2001 through February 29, 2004." Moreover, "the findings indicate a quality accountability system that earned exemplary praise from the auditors."

Well, we've read KPMG's report and that is not what it says at all. KPMG reviewed a random sample of donor receipts, not "virtually every transaction." And the auditors specifically emphasized they "were not engaged to, and did not, conduct an examination, the objective of which would be the expression of an opinion on the propriety of the Foundation's accounting."

We hope the CU Foundation can indeed crow someday about its finances. Unfortunately, that moment still has not arrived.

Barnett defends camp finances
Coach responds to each point in report
By John C. Ensslin And B.G. Brooks, Rocky Mountain News
November 18, 2004

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BOULDER - University of Colorado football coach Gary Barnett defended the financial transactions of his summer football camps Wednesday as "completely legal."

"It's my money," Barnett said. "I can do whatever the heck I want with it."

CU pays Barnett $200,000 a year for the camps, which he operates as his personal business.

In a news conference following his football team's workout, Barnett issued a point-by-point rebuttal of questions raised by an independent fraud investigator working for the state attorney general's office during a grand jury investigation of the CU football program.

Predovich & Co., a forensic auditor hired by Attorney General Ken Salazar, raised a series of questions about the Gary Barnett Football Technique School, including the absence of documentation for $780,679 of deposits the camp made between April 2001 and July 2003.

The Predovich findings were reported by the Rocky Mountain News on Wednesday.

"While we may be a bit primitive in our accounting ways, we're completely legal," Barnett said.

Meanwhile, the chairman of the CU Board of Regents said Wednesday that the report's contention that he had received a $10,000 check from Barnett's football school was inaccurate.

Regent Jerry Rutledge said the check was made out to his clothing store, not to him personally. He said Barnett bought $1,000 gift certificates for 10 members of his coaching staff to purchase clothing from the store he owns in Colorado Springs.

"The technique school is a private entity, not a university organization," Rutledge said in a prepared statement released by CU officials.

"I value the University of Colorado," he added. "As a regent, my focus is to act in the best interest of the university. That has never wavered."

Rutledge was one of the regents who voted to approve Barnett's contract as head football coach.

Jon Caldara, president of the Independence Institute, a think tank often critical of government, questioned the business arrangement between Barnett and Rutledge.

"It's one of those things that there might be nothing technically illegal or immoral, but it looks bad," he said.

Caldara said he hoped that Rutledge or Barnett disclosed the purchases at some point, either during a regents meeting or in writing, in what Caldara called a "Hey, we go back a ways, and I'm buying my T-shirts from Jerry" situation.

Barnett said he has bought clothing for his coaches at Rutledge's store for the past five years.

Salazar convened a grand jury to investigate allegations raised by a civil lawsuit in which three women contend they were raped by CU football players and recruits in December 2001.

In August, the grand jury issued one indictment against former CU recruitment aide Nathan Maxcey on charges of hiring a prostitute and using his CU cell phone to call sex lines and escort services.

The grand jury also delivered a scathing report that accused the regents of being unqualified and not equipped to oversee the CU football program, according to sources familiar with the report.

The report, which has not been publicly released, also criticized the management of Barnett's summer football camp.

The grand jury based its findings, in part, on the audit conducted by Predovich & Co. The News obtained a copy of that report this week.

The Predovich report raised questions about several checks issued by the camp to coaches and their relatives.

Barnett said that he could have explained any of the expenses had the investigators bothered to ask.

Barnett said since he's been a head coach, he has paid for the tuition "for all the college-age students (children) of my staff members" - explaining the four checks from $2,000 to $5,000 that went to former assistant Brian McNeely and current assistant head coach Brian Cabral.

"As for the 10 checks for $500 each that went to unidentified women," Barnett said, that money went to "the wives of all of our coaches. . . . We kept $500 back from all of our coaches from their normal payment for camp and gave it to their wives.

"People just took little bits of information and either made assumptions or just threw it out there to try to misguide the public. That's an opinion."

Barnett said the $780,679 of deposits to his camp represented five years of tuition paid by campers, not the two years cited by the examiner's report. "Every camper's name has been delivered to everybody." Barnett said his costs probably exceed the revenues.

"There's probably a lot more than that going into running the camp," he said. "We have huge expenses."

The Predovich report criticized the university and its private fund-raising arm, the CU Foundation, for not supplying all the financial documents sought by Salazar's office. University and foundation officials have strongly disputed that complaint.

Attorneys for the regents succeeded in convincing Denver District Judge Jeffrey Bayless to suppress the grand jury's report, a move that Salazar has appealed.

On Wednesday, the CU Foundation released an independent audit done last summer that tracked funds from donors to the foundation between January 2001 and February 2004. The audit found no irregularities, except for some minor bookkeeping errors, foundation officials said.

"To conduct this sort of extensive - and expensive - review, all in a search for some fictitious, phantom expenditure, and to then find absolutely nothing, is a clear indication that there has been no misappropriation of any sort from the CU Foundation," said foundation Chairman George Sissel.

Foundation President and CEO Michael Byram said foundation officials are disgusted that the Predovich report was leaked and called upon Salazar to investigate how that happened.

Several regents and university officials declined to comment on the Predovich report, citing rules regarding the secrecy of grand jury investigations.

Regent Tom Lucero said he was frustrated by the leak.

"Apparently, there's only one side playing by an ethical standard," Lucero said.

Another regent, however, said she was taken aback by what she read.

"Like many Coloradans, I was totally surprised and shocked by what I read about the forensic audit," Cindy Carlisle said. She said she had not been privy to the regents' closed-door discussions about the content of the grand jury report.

Tom Strickland, a former U.S. attorney who advised the regents on the grand jury report, called the latest disclosures, a "grave and significant violation of the court order" on secrecy.

Because of grand jury secrecy, university officials cannot respond to most of the allegations, Strickland said.

However, one veteran prosecutor noted that grand jury secrecy does not entirely preclude people from discussing issues of public concern - especially people who were not called upon to testify.

Without commenting on the CU grand jury in particular, outgoing Adams District Attorney Bob Grant said, in general, people who testified before a grand jury are prohibited from discussing their specific testimony.

"They can't indicate what they discussed with the grand jury," Grant said. "That doesn't mean if the subject matter was Pluto, that they can't talk about Pluto ever again."

On Wednesday, CU officials did depart from their standard practice of refusing to comment because of grand jury secrecy.

In a joint prepared statement, CU President Betsy Hoffman and CU Chancellor Richard Byyny said they have not seen the Predovich report. They expressed "outrage" that it was leaked to the News.

They also disputed the report's claim that CU failed to turn over some of the documents that investigators had sought.

"We believe we fully complied with all subpoenas for documents issued by the grand jury," they stated. "To suggest we did not is false."

This belief, they said, is based upon repeated assurances from the attorney general's office.

"For anyone to assert now that we intentionally failed to comply is just plain wrong," the statement said.

They noted that the university and the CU Foundation are currently undergoing an outside audit of all transactions for a one-year period.

Reaction to CU financial report

• Jerry Rutledge, CU regent: This transaction between the Technique School and my store was for the purchase of clothing, which is the business of my store.

• Betsy Hoffman, CU president, and Richard Byyny, chancellor: In order to ensure that the public maintains the highest confidence in those controls, both the university and the foundation have initiated financial audits that will cover the custody and use of gift funds.

• Michael Byram, president of the CU Foundation: The CU Foundation fully complied with all subpoenas from the grand jury. To suggest otherwise is false.

Staff writer Gabrielle Crist contributed to this report. ensslinj@RockyMountainNews.com or 303-892-5291
Copyright 2004, Rocky Mountain News. All Rights Reserved.