Endorsement of developer's project raises further questions about how Aggie coach is being paid

Posted 6/01/2007 01:22:00 AM

In light of a recent increase in his compensation, a few eyebrows went up when New Mexico State Aggies’ basketball coach Reggie Theus showed up at a Las Cruces City Council meeting last week to speak in favor of a controversial development.

The university announced three weeks ago a $100,000 increase in Theus’ annual compensation, bringing it to $446,000. The raise is contributed entirely by the private sector and, because the donations are funneled through the NMSU Foundation, the university won’t release the names of the donors.

The Board of Regents also approved three weeks ago a restructuring of President Michael Martin’s contract that includes deferred compensation and an optional housing allowance paid by private donors. I wrote at the time that both moves were controversial because the secrecy has the potential to hide impropriety.

Ten days later, Theus surprised many by waiting more than four hours during the council’s meeting for the chance to endorse The Vistas at Presidio, a 6,000-acre development proposed by Philip Philippou.

“I’m here in support of Philip Philippou in the sense that I think he’s become a friend of mine,” Theus told councilors. “I think he’s a man of integrity and he’s someone that I know has the best interest of this city at hand.”

Before leaving the meeting, Theus, Las Cruces’ biggest celebrity, gave Philippou a hug.

Since then, several people have called and e-mailed me to ask me whether Philippou is helping pay Theus. It’s a question I can’t answer. As long as the information remains secret, however, such actions by Theus will be viewed by many with skepticism.

Widespread practice has been controversial

While the University of New Mexico does not supplement salaries of high-ranking officials with donations from the private sector, across the nation, the practice is commonplace. In 1998, one study found that a third of public university presidents received supplemental compensation through university foundations.

Though most state university foundations try to keep their donor lists secret, it’s not uncommon for courts to order the release of records. In a 2005 article published in the Journal of Law and Education, Scott Reinardy and Charles Davis examined a number of court cases and attorney general opinions from around the nation and concluded that “courts in most states would find such foundations public agencies for purposes of freedom of information laws” and would require them to release donor lists and other financial records.

In recent years, courts in at least six states have opened the books of university foundations in response to lawsuits. The question has often come down to whether foundations that are non-profits set up to benefit public institutions are truly operating as separate entities or are acting as de facto state agencies that are subject to public records laws. It’s an important distinction because the federal government allows non-profits to keep donor lists secret.

Since university foundations exist solely for the benefit of the schools to which they are tied, there’s a fine line between operating as a non-profit and a state agency.

According to the Council for Advancement and Support of Education, issues critical to the distinction include “independent governance, use of university office space that is not rented at fair market rates, service of university employees that is not covered by quid pro quo agreements, handling of state funds, and the specific terms of the operating agreement between the foundation and institution.”

In denying my request for the names of the contributors to the compensation for Theus and Martin, Rebecca Dukes, who is both the university vice president for advancement and director of the NMSU Foundation, said “donor records are private and those gifts are given to New Mexico State University Foundation, Inc.,” which she wrote is a “separately incorporated” non-profit, “not a governmental agency.”

She did provide me with the foundation’s agreement with the university and its 2005-2006 audit. She also directed me to the university’s 2005 annual tax form, which is public record and contains a lot of information about how the foundation operates.

Foundation gets free services and facilities use

In the 2005 fiscal year, the foundation had assets of almost $70 million, a figure that increased to more than $82 million in 2006.

The foundation has no employees. University staffers do the foundation’s work, and the foundation reimburses the university for salary expenses – more than $859,000 in 2005 and $1.1 million in 2006. Some NMSU employees work exclusively for the foundation; others split their time between foundation and NMSU.

The university provides a number of services to the foundation for free or at discounted rates. According to the foundation’s agreement with the university, utilities, maintenance and repairs and property insurance are provided by NMSU, as are data processing, telephone service, “some consumable office supplies,” and “routine business and financial services.”

The estimated value of services and use of facilities NMSU donated to the foundation during the 2005 fiscal year was $107,762, according to the public documents. In 2006, it was $151,412. The university also paid administrative fees to the foundation in 2005 totaling $374,304 and in 2006 totaling $396,731.

Such financial assistance isn’t a one-way street, according to Martin. He said the foundation owns an office in Santa Fe that the university uses without paying “full rent.”

In addition, the university president has some direct control over the foundation. Major fundraising campaigns have to have his approval. Martin is also Dukes’ boss.

Martin said the foundation’s relationship with NMSU isn’t unique.

“This is the way all universities do it,” he said.

Is foundation operating as a public body?

The New Mexico Inspection of Public Records Act defines “public body” as “the executive, legislative and judicial branches of state and local governments and all advisory boards, commissions, committees, agencies or entities created by the constitution or any branch of government that receives any public funding, including political subdivisions, special taxing districts, school districts and institutions of higher education.”

It would be up to a judge to decide whether that includes the NMSU Foundation. Do the contract fees paid by NMSU and the donated services and use of facilities amount to “public funding?”

Despite what courts in other states have determined, Phil Sisneros, spokesman for the state Attorney General’s Office, didn’t seem to think aspects of the foundation’s relationship with the university would matter.

“The foundation is not subject to the Inspection of Public Records Act, which means that they’re not required to disclose donor lists,” he said.

Bob Johnson, director of the New Mexico Foundation for Open Government, said changing that “would require a lawsuit and a ruling by the Supreme Court, or some legislation.” He said state university foundations should have to open their books.

“I think that they’re skirting the law, and I think without legal action or legislative action they’re able to do it,” he said.

Why does it matter?

Some argue that if donors lose their anonymity, a number of potential contributors will refuse to give. According to the article by Reinardy and Davis, when the University of Louisville in Kentucky was forced to open its records in 2003, it was revealed that, out of about 45,000 donors, 62 had requested confidentiality.

The article also cited examples of three university foundations whose fund-raising efforts were not deterred by court rulings that opened their books. Eastern Michigan University’s foundation reported an increase in assets from $20 million to $25 million a year after its records were made public in 1997.

The universities of Toledo and Louisville also increased their assets significantly after their books were opened to the public.

A number of abuses have been revealed by the opening of records. For example, according to Reinardy and Davis, opening the books of the University of South Carolina Foundation in 1991 revealed that the school’s president was illegally spending foundation money in violation of tax laws. He later pleaded guilty to tax evasion.

Audits have revealed other problems. At Grambling State University in Louisiana, an audit found in 2000 that more than $1.5 million intended for the university was given to the foundation in violation of the state constitution. At Florida Atlantic University in 2003, investigators found that $42,000 had been allotted by the foundation to buy a Corvette for the outgoing university president. The foundation’s chief fundraiser later pleaded guilty to falsifying records for trying to mask the expense.

What happens next?

The current agreement between NMSU and its foundation was approved by the regents in 1991, and Dukes called it “outdated.” The university is in the early stages of constructing a new agreement that will address services the university provides the foundation and other matters.

The new agreement probably won’t open donor lists to the public. Not only do university officials believe they have a right to keep such information secret, but the foundation also promises donors, in its Donor Bill of Rights, “confidentiality to the extent provided by law.”

Without a lawsuit or legislation, or an attorney general opinion that would have to be requested by a lawmaker, the public isn’t likely going to learn who is helping the university pay Theus and Martin.

A prior version of this posting incorrectly stated that Grambling State University is in Iowa. It also incorrectly stated that NMSU is the first school in New Mexico to use private donations to boost the compensation of high-ranking employees.

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18 Comments:

At 8:02 AM, June 01, 2007, Anonymous Anonymous said...

Good work, Heath. It was chilling to see the University close ranks with a high-powered developer and the city council to push the Presidio development through. It would be great to see who is supplementing President Martin's and Coach Theus's salary -- it's clearly a way of buying influence with university officials...

 
At 8:31 AM, June 01, 2007, Anonymous Anonymous said...

This stinks to high heaven. Clearly, the Foundation is the beneficiary of public funds and its actions (including fundraising and disbursements) track directly with the NMSU President's Office. Let's see some character and good faith here: Open the books and the records, Dr. Martin. Don't wait for a lawsuit to force your hand.

 
At 9:14 AM, June 01, 2007, Anonymous Bootjack said...

Mr. Theus and Martin are PUBLIC employees.Mr. Martin's statement that this is the way that ALL universities do it is not only inaccurate and self serving but smacks of at best a well honed sense of childish entitlement.Mr. Theus has been to how many public meetings prior to his televised display of physical affection before a fawning & applauding pro development Council Chambers?Can we expect this same enthusiasm from Reggie on future issues involving growth and development? This is an issue for Common Cause New Mexico to spearhead and initiate action for change to result in full disclosure of all Foundation funneling of private money to public employees.You can be certain that other NM universities are closely watching how this unfolds.

 
At 9:18 AM, June 01, 2007, Anonymous Anonymous said...

GO AGGIES!

 
At 9:34 AM, June 01, 2007, Anonymous Anonymous said...

this really ought to be investigated...coaches coach, they dont flak for development becasue of a booster..wrong use of a public official and the Unversity, and wrong for nmsu involving itself. Martin and Boston have explaining to do

 
At 9:45 AM, June 01, 2007, Anonymous Anonymous said...

I think this is a little over the top. Seems to me you are just looking for someone to go after. If unnamed donors are needed to make our university better then so be it. This has nothing to do with the welfare of the students, who are best served by a university with the funds to pay for good staff.

 
At 10:18 AM, June 01, 2007, Anonymous Anonymous said...

give me a break...do you want NMSU to be competitive, do you want NMSU to keep an amazing coach a great president...look at any major university. who do you think is paying the top dogs. come on people get into the game. NM universities need to do whatever they can to get people to donate, this is the engine of our economy. Continue to give, please.

 
At 7:00 PM, June 01, 2007, Anonymous Anonymous said...

Meanwhile, "Mr. Aggie Air Raid", in violation of the constitution, is conducting Christian prayer sessions with players at a state funded university.......I guess the looming settlement for THAT debacle is why HE isn't being offered the opportunity to stick his hand in the goodie bag....

 
At 8:02 PM, June 01, 2007, Anonymous Anonymous said...

The anti-development crowd is so very democratic. According to them, if Theus does not agree with them, he apparently has no right to talk without being subject to investigation.

 
At 9:05 PM, June 01, 2007, Anonymous Anonymous said...

Now I remeber why I don't read this blog on a regular basis...your comment about blog being a four-letter word is certainly applicable to your blog.

Why is it so difficult to understand that the NMSU Foundation is a private, non-profit corporation organized under federal and state law. It's authority to act is created -and limited- by state and federal law. the Foundation has done nothing illegal - or improper. 82 million dollars - WOW - have you checked with CASE on the size of the NMSU Foundation corpus versus say Harvard, Yale, Notre Dame or even schools like Arizona State, University of Nevada, University of New Mexico?

What you refer to as "secrecy" could also be referred to as "confidentiality" which protects the donor, as well as the institution. If all of these records were public then we could find out how much you contribute to NMSU - your degreee granting institution - your alma mater- or maybe how much you don't give.

What amazes me the most is that after reading all of your "commentary" I was left asking myself "so what?" and, secondly, "what's your agenda?"

Must've been a slow blog day.....

 
At 9:31 PM, June 01, 2007, Anonymous Anonymous said...

As a private donor, I have the right to support our university without YOU knowing. I support these individuals in order to keep high quality, top producing individuals at NMSU. Without it, we would have low end presidents and coaches that would add no value to our school or community. I support tons of charities, non profits and foundations in southern New Mexico. Do you?

 
At 9:18 AM, June 02, 2007, Anonymous Anonymous said...

It's really very simple,if you want to accept private money,don't be a public employee,really think about it,what if other influential public employees accepted private money such as police chiefs,city managers,judges,etc.,,would you feel secure in their ability to remain unbiased and act with integrity?Disclosure is all that is being asked for and I sincerely doubt that a University president and a bball coach making more are in need of charity.

 
At 6:57 PM, June 02, 2007, Anonymous Anonymous said...

Give the police chief, cities, judicial systems a few years...they will all have there own 501c3...it makes sense...think about the word, foundation. it can keep these systems growing in perputity. once again, please think of the future.

 
At 6:58 PM, June 02, 2007, Anonymous Anonymous said...

if mumme gets us into a bowl game he will also see some private money in his new contract

 
At 7:00 PM, June 02, 2007, Anonymous Anonymous said...

the foundation of nmsu has just accomplished an amazing goal, raising "real" dollars for scholarships, faculty, athletics etc...don't give people any reason to think it is bad or corrupt. hard working people work in foundation fundraising.

 
At 7:03 PM, June 02, 2007, Anonymous Anonymous said...

heath, good work...sounds like a lobbing firm or PAC organization to me. I don't think it bad, just very interesting. money talks in this country.

 
At 10:03 PM, June 04, 2007, Anonymous Anonymous said...

NMSU and Martin would be better served if they put more energy into the caliber of professors they have
on staff,keeping the good ones by paying them well, and focusing on the quality of education they are providing to their student body.
This University is by far one of the most conservative public educational campuses I have every come across.
Public universities should be the liberal proactive "out of the box" type environments stimulating its students to move past established parameters and aim beyond the current mileau.
This university is more interested in their Aggies sports than the important educational endeavors of their predominantly non-athletic student population.
You see when a student begins college, there should be no reason for him/her to be required to take remedial reading courses or refresher math, etc. The priorities with this campus are astoundingly misplaced.
Who really cares about Theus et. al. and how much money Martin gets from developers. If its illegal then there should be consequences.
Can't anyone keep their eyes on the ball these days?

 
At 9:35 PM, July 12, 2007, Anonymous Anonymous said...

If anyone thinks influence peddling is something that doesn't happen at universities, then you should ask yourself why potential regents put on fundraisers for governors. You should ask yourself if accommodating a convention center on university avenue doesn't serve someone's private interests. Influence peddling at a university could be very useful to someone.

 

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