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Professors threaten lawsuits against USF

Published: Wednesday, March 17, 2010

Updated: Wednesday, March 17, 2010 01:03


Two professors are trying to open a new chapter in a long-drawn dispute with the College of Business (COB), with one threatening to bring the case to court.

Professors Robert Welker and Marvin Karlins — two of the COB's longest-serving faculty — say after trying in the summer to report the misuse of nearly $2.2 million, a complaint that was eventually deemed unfounded by an internal audit, COB administrators retaliated against them this year.

As a result, Karlins said he's sought the legal advice of two attorneys to file a civil lawsuit against the University, and he and Welker are still fighting against USF's internal audit investigation in October that ruled the COB did not inappropriately use donations from a private corporate in 1999 and state-matching funds in 2004.

"It's become more personal now," Karlins said. "The thing that really angers me is that these people have a sense of arrogance that they can't admit they're wrong. There is no question, I believe — and maybe I'm wrong — that in any state court this goes into this is going to be decided in our favor."

Karlins and Welker have been trying to prove since July, when they filed an official complaint to the University, that the COB inappropriately used the funds because of the money's intended use. In their complaint, they cited a breach of contract for the money's initial intended use to establish an endowed professorship in business ethics.

Despite there still being no endowed professorship in business ethics in the COB, University Audit and Compliance (UAC) released a report in October and found there was no such breach because there is no documentation that Exide ever signed a contract.

As far as USF is concerned, the case of whether the COB misused funds is closed, said spokesman Michael Hoad and Robert Forsythe, dean of the COB.

In 1999, Exide paid $1.25 million as part of a settlement with the state to "establish an eminent scholar chair in business ethics," according to a press release from the State Attorney General's Office. And the state matched $937,500 of that donation in 2004 for the "Exide professorship in business ethics," according to a line item in a letter to President Judy Genshaft.

Soon after USF received the money, administration concluded that $2.2 million was not enough to attract and establish a top scholar given the investment return in the current market, Hoad said.

According to the audit report, then-Dean of the COB Robert Anderson was transparent and "clearly communicated" with the state the following year when he changed his mind and began using the funds in the area of business ethics, just not to establish the chair.

As far as the $1.25 million private donation from Exide to the USF Foundation, the UAC concluded that "annual stewardship reports were provided to Exide by the USF Foundation, and there is no evidence indicating that the contributor was not satisfied with the utilization of these funds."

"(Anderson) made a decision at the time, once the money was here, that the best thing he could do was not attempt to put it all in one person but divide the money in the way to build a program," Hoad said. "And the state said that was fine, and Exide never objected to it." 

With the money, USF pays $10,000 to "Exide professors" in the area of sustainability, now considered to be "business ethics," Hoad said. The professors teach courses, present workshops and seminars and publish articles on sustainable enterprises and ethics, according to the audit. The money has also been used for undergraduate competitions, ethics workshops and conferences.

But the professors argue that the money has been misused, and now they're taking their case outside the University.

"It's like you tell your son to go down to the store and come back and give me a loaf of bread, but he comes back with jelly donuts," Welker said. "And he says, ‘You know, it was cheaper, and I like them better.' But you gave money to get a loaf of bread, so don't come back with jelly donuts because it's cheaper and you like them better."

The professors point to a letter between the USF Foundation and the COB on March 24, 2000 asking administration to sign the contract and forward it for Exide's signatures. USF officials from the foundation and the COB signed it.

But there is no documentation that Exide ever signed off — the reason why the internal audit ruled there was never a contract to be breached. The corporation sent a check a week later for $1.25 million that says "pay to the order of the University of South Florida Foundation Eminent Scholar Chair in Business Ethics," according to the records.

After the audit report was released, the professors tried to go to the State Attorney's Office in November, but Associate Deputy Attorney General Kent Perez advised them in a letter to contact USF's Board of Trustees (BOT) and return if they didn't get a response.

Welker and Karlins wrote an e-mail to the BOT on Jan. 29 saying they were very disappointed with the report's findings and presented their argument. There has been no indication that the BOT will respond to the complaint. The next BOT meeting is Thursday, and the posted agenda does not mention the issue.

Trustees are not allowed to speak prior to meetings on issues that may come before the board. Rhea Law, chair of the BOT, could not be reached for comment.

Karlins said he has given USF enough time to settle the issue on its own, so he contacted the Board of Governors this week. If it does not take action by March 23, he will "be taking the matter to the prosecuting arm of the state government and officially charging that USF and the USF Foundation fraudulently obtained ($937,500) in state funds."

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