New investigations of UT Law School Foundation and forgivable loans begin

Andrew Messamore

As the attorney general investigates the University of Texas Law School Foundation, legislators and former Foundation trustees are continuing to hammer out the fine line between the University and the private institutions that support the 40 Acres.

In a 4-3 vote last month, the UT System Board of Regents decided to begin a new external review of the Foundation’s relationship to the University. In 2011, President William Powers Jr. asked Larry Sager, then dean of the School of Law, to resign after it was revealed Sager received a $500,000 forgivable loan as part of a program administered by the Foundation. Regent Wallace Hall claims Powers was aware of the loan, which Powers denies.

Powers, who was dean of the law school before becoming president, said in an interview with The Daily Texan that the Law School Foundation has historically maintained full transparency and has now corrected its failures to disclose information.

“It is important that the salaries and other benefits they are making decisions on are known to the University,” Powers said. “It was the case during my tenure at the law school, and they have since corrected themselves.”

A report on the foundation released after Sager resigned found the structure of the forgivable loan program to be “not appropriate.” The author of the report, System general counsel Barry Burgdorf, has since resigned, and a regent committee has recommended setting this report aside in the ongoing investigation.

Burgdorf declined a request for comment on the facts of his report or on the new investigation. Several legislators sent a letter to the regents that compared the start of a second investigation to a personal attack on Powers. After scrutiny from the Texas Legislature, the regents agreed to have the attorney general conduct the investigation instead of hiring an outside firm to conduct one.

The foundation was founded in 1952 and has provided faculty members loans for housing, deferred compensation and other forms of payment to attract and retain them at UT. Over the past 11 years, the foundation has provided $75 million to the law school and its faculty. The foundation is currently valued at $213 million with 596 endowments.

Shannon Ratliff, a former trustee of the foundation and a former UT System regent, said it is a “shame that the Foundation had been caught up in politics.”

“I wish I knew how the Law School Foundation had any bearing on the current debate over the direction of the University,” Ratliff said. “I can’t believe you could find so much fault with a foundation whose sole purpose is to give the law school additional resources to succeed.”

Ratliff said the foundation’s independence from legislative oversight will allow it to help the law school maintain a diverse student body if the U.S. Supreme Court rules against the University in the pending case Fisher v. Texas.

If the court decides against the University, a student’s race would likely no longer be allowed as a factor in admissions decisions. Ratliff said he believes the foundation would focus its student recruiting efforts on attracting students from underrepresented groups if that happens.

After a federal circuit court decision in 1996 banned the University from factoring race into admissions, Ratliff said the foundation focused its scholarship funding on underrepresented groups — something an internal fundraising unit would have been unable to do. The Supreme Court overturned the 1996 decision in Grutter v. Bollinger in 2003.

John Massey, president of the foundation, said it had “learned [its] lesson the hard way,” but would like to begin discussions with the attorney general’s office on providing similar forms of assistance for faculty that are appropriately disclosed to the University. Massey testified before a legislative committee focused on government transparency and has since declined requests for comment.

“We can use [forgivable loans] for someone just beginning his career, we can give some money that they can use right now, and that puts a kind of golden handcuffs on them because it’s forgiven over a period of time,” said Ward Farnsworth, current dean of the law school. “Those are advantages that a simple salary will not achieve.”

Farnsworth said assistance from the foundation has helped the school maintain higher faculty salaries and lower tuition for students than the state could afford on its own.

The University is already in discussions with the attorney general’s office to find a way to resolve 16 other outstanding loans made under the forgivable loan program without punishing law school faculty for receiving these loans, University spokesman Gary Susswein said. Susswein said the outstanding loans may be paid through the University payroll to the faculty members.

About $300,000 of Sager’s loan has been forgiven, although he still owes the foundation $200,000 plus interest. Of the $5.4 million paid out under the program, $3.27 million has been resolved. Other faculty loans were valued at less than Sager’s, but one was for $250,000, Massey said.

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