LOUISVILLE — The University of Louisville placed two high-ranking officials on paid leave this month after local media reported that the FBI was investigating the officials for allegedly misappropriating federal grant money. The news followed a series of recent scandals and embarrassments at the university, including a string of criminal convictions of senior staff for financial crimes dating back to 2008.
David Dunn, 63, the executive vice president of health affairs at the university, and Priscilla Hancock, 59, a vice president and the university’s chief IT officer, have been placed on paid leave. The dollar amount of the allegedly misappropriated grant funds has not been released.
“The allegations of potential misconduct were brought to the university’s attention in the summer of 2014,” President James Ramsey said in a recent email to university staff. “The University of Louisville Police Department began an extensive review. Midway through that review, the university determined that it would be prudent to seek assistance from the U.S. Attorney’s Office.”
Dunn and Hancock allegedly are targets of an FBI investigation, the Courier-Journal has reported. A third target of the investigation, Russell Bessette, 73, the former associate vice president for health affairs, resigned in January 2014.
The University of Louisville hired Dunn and Bessette in 2011 away from SUNY Buffalo, where they were partners in a medical information business. Upon Bessette’s resignation in 2014, Dunn said in a letter released by the university: “It is regrettable that we find ourselves at a juncture where there does not appear to be the best match between your considerable talents and the future demands of the Health Sciences Center.”
The FBI and U.S. Attorney’s Office in Louisville declined to comment and would not provide any additional details of the alleged misconduct, citing the ongoing investigation.
During the past decade, the University of Louisville has grown at an extraordinary rate, raising more than $1 billion in a capital campaign for the university foundation between 2006 and 2014, which has more than offset the steady cuts from state funding during the same time period. The private fundraising has allowed the university to invest more than $100 million in its main Belknap campus, increasing its dormitory capacity from about 1,850 beds to nearly 8,000 and transforming it from a commuter school to a thriving residential community, bolstered by the university’s successful athletics programs.
In addition to winning the 2013 NCAA National Basketball Championship, the Louisville Cardinals have developed a first-class football program that was a cornerstone of Louisville’s successful 2014 application to the Atlantic Coast Conference, where Louisville lags behind its peer institutions in a number of metrics. Louisville’s investments in athletics have gone beyond its revenue-generating sports to include a new natatorium and fields for soccer, baseball and softball, which have resulted in teams that have become national contenders and further strengthened residential campus life.
To develop the engineering programs at its Speed School, the university partnered with General Electric to create a makers space called First Build, and with UL (formerly Underwriters Laboratories) to create an additive manufacturing training center that specializes in 3-D printing.
At its health sciences campus downtown, which was run by Dunn until his paid leave began this month, the university has distinguished itself in cancer research, where patients at the James Graham Brown Cancer Center regularly surpass the national average survival rates, while other research has led to the discovery of a cervical cancer vaccine developed from tobacco plants.
But along with the advances and successes, the university remains dogged by public scandal, most recently accusations that a former assistant basketball coach paid a woman thousands of dollars to provide prostitutes to parties attended by players and recruits at an on-campus dormitory for student-athletes. The commonwealth’s attorney in Jefferson County has impaneled a grand jury in the matter, and the woman at the center of the allegations, Katina Powell, is cooperating with a parallel NCAA investigation, according to ESPN.
In October, Ramsey apologized for wearing a stereotypical Mexican costume — along with numerous members of university staff — during a Halloween party that came amid a national conversation about race and cultural sensitivity on U.S. college campuses.
After the story — and a photograph of the party’s attendees — went viral online, Ramsey issued a statement at the time: “I want to personally apologize for the recent incident and any pain that it may have caused our students, faculty, staff and the community. We did not intend to cause harm or to be insensitive. I hope this doesn’t detract from the hard work we — the entire U of L community — have done and continue to do in building an inclusive, supportive, welcoming campus for all our university family. I pledge to work to ensure that we move forward as one university.”
On top of that, the university has been victimized by a series of financial criminals.
Robert Felner, the dean of Louisville’s school of education from 2003 to 2008, pleaded guilty to defrauding Louisville and the University of Rhode Island — his previous employer — of $2.3 million in federal grant funds meant for No Child Left Behind research.
Felner was a divisive figure at the school of education, drawing complaints that he was brash, rude and unprofessional — the faculty at one point took a vote of no confidence in him — but the administration routinely defended his leadership. The university ultimately looked into Felner’s handling of grant funds, and upon discovering criminal activity, reported him to federal authorities.
Felner was indicted in October 2008 on charges of mail fraud, conspiracy to commit money laundering, income tax evasion, and conspiracy to impede and impair the Internal Revenue Service. He pleaded guilty, and in May 2010, he was sentenced to 63 months in federal prison and was ordered to pay $510,000 in restitution to the University of Louisville and $1.64 million to the University of Rhode Island. He was released from prison in May 2014.
In April 2014, the sixth such indictment came against Perry Chadwick Vaughn, 36, the former executive director of the Department of Family and Geriatric Medicine at the University of Louisville’s School of Medicine. He was indicted for embezzling $2.8 million and failing to report nearly $2.5 million in income to the IRS.
The Courier-Journal has estimated that between 2008 and 2014, University of Louisville employees have been accused of mishandling at least $7.6 million. In March of this year, Vaughn was sentenced to 63 months in federal prison. At Vaughn’s sentencing hearing, Judge Charles Simpson III expressed hope that the case would result in a “teaching moment” for the university.
But by then, the university had begun to address it. In July 2013, the university hired a local accounting firm, Strothman and Company, to conduct a financial review of university operations.
One of the recommendations that came from that audit was for the university to hire a chief financial officer. The university then merged its business and financial offices into one unit and hired Harlan Sands in a newly created role of CFO/COO for the university. Sands is a former lieutenant commander in the Navy and a former public defender in Miami, according to his university bio. Before accepting his current job in Louisville, he held positions at Florida International University and the University of Alabama at Birmingham.
Upon the placement of Hancock on paid leave because she is a target of an ongoing FBI investigation, Ramsey said in his email to staff that her responsibilities, “day-to-day leadership over IT operations,” will be assumed by Harlan Sands.
On Wednesday afternoon, Ramsey released this statement:
“We recognize that there are challenges, but we’re facing them head on. We’re cooperating with the NCAA and FBI investigations, and we’re determined to find the truth. We’ve put safeguards in place to protect the university against employee misconduct. We make such wrongdoing public. We prosecute criminal behavior, and people have gone to jail as a result of their crimes. We welcome diversity, and we have a climate of inclusivity here. When we make mistakes, we acknowledge them and take steps to get better.“Meanwhile, we’re attracting better students to U of L. We’ve seen a 60 percent increase in our graduation rate during my tenure. We’re also graduating more and better prepared students who are ready to enter the workforce and contribute to their communities. We’re doing groundbreaking research. We’re also engaged with our alumni and recently completed a $1 billion capital campaign. I don’t believe that the challenges we currently face in any way overshadow the tremendous accomplishments we make every day.”
Some in the community believe the university has been through too much in the past few years and that it is time for a change at the top.
“In my opinion, President Ramsey should resign. It’s time for a new beginning. There’s been too many scandals,” said Steve Wilson, a former member of the university’s Board of Trustees. “I think President Ramsey has been a great president over the years. His strength was in fundraising and bringing more funding into the university at the same time that the state has decreased funding, so he’s been able to bring that strength to the table. But the problems run the gamut in many areas. It boils down to leadership and accountability.”
Bob Hughes, an 11-year member of the university’s Board of Trustees and current chairman of the University of Louisville Foundation, the school’s private fundraising arm, strongly disagrees. Hughes, a graduate of the university’s medical school, said talk of removing Ramsey isn’t appropriate given his success at the university’s helm.
“I don’t think [Wilson] has a deep understanding of the institution, and the direction we’re taking it in,” Hughes said. “When you make a request like that, it’s dramatic, but it doesn’t serve the university when you don’t understand its mission.”
And Ramsey retains strong support with others who have made significant investments in the university.
“What President Ramsey has done with that campus since he’s got there — it’s like two different schools. It’s been great. He has done a wonderful job,” said former trustee J.D. Nichols, who in 2014 committed to give $10 million to the University of Louisville Foundation. “But just like any business that expands rapidly, you’re going to make some mistakes. Is there criticism? Sure, but the good that has been done outweighs the bad.”
This story has been updated to include Ramsey’s comments, which the university released late Wednesday afternoon.
