Campus criminals: think the corporate world is the only one plagued by white-collar crime? Think again ... and beware.
It was a decision they'll never forget.
Life with England went well until one fateful night in March of this year, when state and federal drug-enforcement agents descended on England's half-million-dollar home and arrested him and his family for possessing more than 2.5 pounds of marijuana. What ensued was one of the lowest points in the Ankeny, IA, school's 37-year history. In the end, England resigned and he and his wife pleaded guilty to marijuana possession and other counts. Today, DMACC is right where it started more than 15 months ago--searching for a new president.
"It's rough because now we're back to square one," says Donovan Honnold, the school's director of Marketing and Public Relations. "Never in a million years did we think we were hiring a criminal."
And DMACC is not alone in its naivete Across the country, a handful of other schools have grappled with similar situations in recent years--circumstances in which one or more of their administrators is involved in and convicted of committing a crime. Just as the former officials of companies such as Enron and WorldCom abused the systems they helped set up, so too have these academic white-collar criminals perpetrated abuses on the very systems they either helped to build or were hired to administer. Some instances, such as the England case, involve a completely outlandish set of events; others, such as recent cases at both public and private schools in Wisconsin, California, and Massachusetts, focus on more traditional white-collar crimes: embezzlement and fraud, for instance. Whatever the specifics, one thing is clear--no school is immune to such illicit behaviors. Like destructive weeds, it's vital to know how to deal with them when they crop up, and more importantly, how to try to prevent them from creeping into your backyard in the first place.
"Any time money and power intersect without appropriate checks and balances, you'll have the potential for problems," says Warren Baker, senior partner at the Chicago law Firm Gardner, Carton & Douglas, and an attorney who has prosecuted a handful of such white-collar crime cases over the years. "The real successes come in how schools handle these scandals, and how they implement reforms to ensure they never happen again."
Protecting themselves against illicit behavior never crossed the minds of trustees at DMACC, when they installed England. The newcomer was the first new president the college had enjoyed in 20 years, and within his first few weeks, England steered the school into a rigorous strategic planning and accreditation process that none of his peers had even considered in the past. College officials remember it seeming as if England "was everywhere on campus," and recall thinking he was one of the most accessible and agreeable peers they had ever known. Based upon performance, all of their initial impressions made perfect sense; a pre-hire background check failed to reveal a 1971 conviction for marijuana possession, so trustees had no reason to doubt the man's integrity.
Of course, all of these positive impressions changed overnight, as news of England's arrest on March 12 hit the local newspapers. Honnold and other school officials read about the debacle just as community members and students did. The details were simply shocking: Drug enforcement officials found more than $20,000 worth of marijuana littered throughout every room of the house, as well as 72 small marijuana plants under cultivation via special lights for indoor growing, and a book in England's bedroom on how to "grow your own pot." Even England's two children, ages 17 and 23, were arrested.
"It was like someone had blindsided us at 70 miles per hour," remembers Honnold, who had the unenviable task of addressing the media as college spokesperson (see "Spinning Disaster," page 29). "The more the facts in the case came out, the more you found yourself thinking 'No!' in disbelief."
And as speculation swirled around how the Englands used the weed, DMACC trustees acted quickly to contain the damage. In a hastily convened meeting on March 15, board members voted to hire auditing and law firms to conduct an independent probe to ensure that no college property, personnel, or funds were used in England's alleged criminal activity. Board members also voted to place the accused president on paid administrative leave pending the outcome of the police investigation. England would continue to receive his $183,750 annual salary, but trustees made it clear that he was not welcome anywhere on the Ankeny campus until local police determined what kinds of charges they were going to file against him.
This decision came nearly two weeks later, when local authorities announced that after repeated searches of England's home, they found neither triple-beam scales nor wads of cash, both items commonly associated with drug dealers. Labeling England and his family as "recreational" drug users, police reduced the charges to possession of marijuana with intent to deliver and failure to affix an Iowa drug tax stamp, accusations which carried a maximum penalty of five years on each count and a fine of $75,000. Immediately, William Kutmus, England's lawyer, negotiated his client's resignation from the school. For DMACC board members, the end couldn't have come quickly enough.
"We were so relieved to announce his resignation," says Honnold. "It was the darkest period DMACC had ever gone through, and I think all of us were just [glad] to move on."
England was sentenced in June to two years of probation and 100 hours of community service. Whether or not the former DMACC president actually can find a job in academia after his marijuana conviction is left to be seen. But at schools where officials have committed crimes such as fraud or embezzlement, convictions and their ensuing media blitzes have ended careers almost instantaneously. In Milwaukee, at Marquette University, for instance, Assistant Director of Student Finance Linda Mrochinski was placed on leave last September in the wake of a charge that she embezzled more than $23,000 from Central Michigan University while serving as that school's financial aid officer between 1999 and 2001. Eventually, Mrochinski pleaded guilty, netting herself nearly $250,000 in fines. She has not found a job in academia since.
The Mrochinski case is, as one expert puts it, "small potatoes" when compared to some other money-related legal bombshells that have caused schools convulsions. Perhaps the most infamous of these is the case of Edward Oplinger, a former agronomy professor at the University of Wisconsin who plead guilty to diverting nearly a half-million dollars of research money into his own bank accounts between 1992 and 1999. Most of the money had come from donations made by seed companies and other farm-related groups. To this date, through a lengthy insurance settlement, the university is still paying back some of the donors.
Reached at his Madison campus office recently, Director of Internal Audit Jerry Lange was hesitant at best to discuss the Oplinger case. He describes it as a "real black eye" for the institution, admitting that the university has a lot of departments and that officials "don't have rigid control over how each of them handles business." He adds that because Oplinger had set himself up as director of a 501c(3) in support of the university, he was able to perpetrate the fraud independent of almost any oversight whatsoever--until someone in the school's auditing office began to smelt something fishy (see "Crime Spotters," right).
"He got greedy; that's not unusual for people who commit fraud," says Lange, whose department serves as a campus Internal Affairs Bureau of sorts, to investigate questionable behavior and operations. "People like [Oplinger] start small and they get away with it, and the longer they get away with it, the more they take."
Lange and other auditors started investigating Oplinger, whom they suspected in the mid '90s. They obtained bank statements, canceled checks, and other documents from the 501c(3), to find out where the money had gone. These efforts pieced together a picture of serial small-scale embezzlement that spanned nearly four years. The audit team then conducted interviews with representatives from outside companies who thought they had made large donations to the nonprofit--donations that were nowhere to be found in the record books. After nearly 15 months, Lange determined that more than $500,000 was unaccounted for. This was no ordinary embezzlement case. Fortunately for Lange, he and university auditor Bruce Leinweber had established policies concerning fraud and embezzlement back in the early 1990's, making their response to the Oplinger case a welt-plotted formality, not an ad hoc effort. The policies the Internet Auditing team had put in place institutionalized a process through which University Police investigates crimes first, and then turns a case over to the local district attorney as soon as they discover evidence that can substantiate criminal activity. [To view the school's recently updated policies, visit www.bussvc.wisc.edu/howto/ admin/white collar crime procedures.html.]
With Oplinger, University Police turned the case over almost immediately, removing it from political pressures within the school, and placing it in the hands of the appropriate authorities.
"We feel this approach sends a clear message that it doesn't matter if you're a custodian or a professor, you will suffer the same consequences," Lange says. "We don't want to get caught cutting deals for one class of employee versus another."
Oplinger, like Mrochinski and England, ultimately was convicted of the charges against him, justifying his employers far-reaching inquiry into his acts of wrongdoing. Still, not every white-collar crime case ends in such vindication for a school. A recent University of California effort to prosecute a low-ranking employee for embezzling $250,000 worth of subway fares ended when the officials at the school's Berkeley campus decided not to press charges due to insufficient evidence. In the late 1990s, a five-year investigation into the actions of a former chief financial officer accused of financial impropriety at Mount Ida Cortege (MA) ended with no evidence whatsoever, after the Massachusetts Attorney General's office announced that the former official had been cleared on all charges.
This latter case is perhaps the most compelling of its kind: Despite the lack of evidence against the former official, Mount Ida administrators agreed they needed to change their financial accounting processes. The case began in 1993, when then-Attorney General Scott Harshbarger brought charges against CFO Paul Kendall Palmer. The charges included falsifying corporate records, evading taxes, filing false reports with the state, and using a college credit card to make personal purchases including flight lessons, women's clothing, and plane tickets for his children. Harshbarger's investigation claimed Palmer had bilked his former employer out of more than $54,000, and uncovered a culture of a closely held corporation wherein the Board of Trustees had allowed compensation packages that covered just about every expense for Palmer and President Bryan E. Carlson.
"They were running the place like an old boys club, with more ethically questionable perks than I've ever seen," Harshbarger says today, from his new position as a corporate integrity lawyer for Boston-based Murphy, Hesse, Toomey & Lehane. "We felt the abuses going on [at Mount Ida] rivaled those that we eventually saw on the corporate level with a company like Enron."
In court, the State's case against Palmer was hurt by Judge Sandra Hamlin's decision not to allow the jury to consider charges that he had made 225 improper personal expenditures on the college credit card. These charges stemmed from 39 purchases totaling $5,800, which prosecutors said included barbecue grills, a trip to Atlantic City, NJ, and women's clothing. Instead, Hamlin said there was not sufficient evidence that these expenditures were for personal use, and allowed the jury to consider only one charge, larceny over $250. The jury found Palmer not guilty of this charge.
Palmer had resigned of his own volition well before the case went to trial, but the brouhaha he set off still led to sweeping changes on the school's quiet 84-acre campus. First, Harshbarger got school officials to agree to implement a series of reforms in the school's financial and administrative procedures, including a stipulation that no member of the committee that nominates members of Mount Ida's Board of Trustees can have substantial business ties with the college. In addition, college officials agreed to amend the school's bylaws to limit the terms of most board members to 13 years, and to inform the attorney general about how compensation packages are determined for the president and top administrators.
"At the end of the day, they ended up restructuring everything," says Harshbarger. "We didn't get our man, but it was a victory for accountability nevertheless."
The Mount Ida case is a perfect example of how a school can learn from white-collar crime and grow: Checks and balances replaced cronyism, and everyone came out ahead. Across the board, officials at other institutions who have dealt with white-collar crimes agree that establishing some sort of oversight structure is the ultimate goal, and may be the only way to prevent the crimes from happening again (see "Preventative Measures," above). Still, experts like Chicago attorney Warren Baker say there are no foolproof methods to "prevent" white-collar crime--only ways to deter it.
"You can't prevent people from stealing, but you can create a culture and an atmosphere that can be structured in a way to encourage integrity and openness," he says. "In many cases, the best way to limit or control these types of crimes is simply to promote an environment that rewards those who do the right thing."
When disaster strikes, there's more than one way to play it.
When news of the arrest of Des Moines Area Community College then-President David England hit the wires, the school's Public Relations department quickly determined it was time for "lockdown" measures. According to Director of Marketing and Public Relations Donovan Honnold, this meant that no information went out without his approval, and no comments were made that didn't refer members of the local news media to the authorities investigating the case.
"We tried to control the information flow as aggressively as possible," says Honnold. "It was our goal to eliminate all speculation and get the spotlight off of our school."
To do this, Honnold says he and his peers employed a policy of openness throughout the entire ordeal. Honnold was the official spokesman during this time, and when news reporters asked him about the scandal, he told them everything he knew. If a reporter asked him a question he didn't know, Honnold says he'd admit his ignorance, and promise to find the correct information immediately. At first, this strategy didn't exactly work; as long as England was still on paid leave, reporters had dozens of questions about how the college would handle his employment situation as the case progressed. Once board officials negotiated England's resignation, however, the process of deferring reporter questions to investigators became easier, since DMACC's role was basically complete.
PR officials and spin doctors at the University of Wisconsin employed a similar strategy during the case involving former agronomy professor Edward Oplinger, who embezzled more than $500,000 from the school in the 1990s while he was in residence there. Jerry Lange, director of the school's Internal Audit department, says he met twice a week with representatives from a variety of campus departments to keep them abreast of the latest developments in the scandal so that nobody would be caught off-guard. Members on this "information" team included representatives from Internal Audit, University Police, and the Chief Financial Chancellor's office, to name a few.
"It was a loosely coordinated effort to make sure everyone was on the same page," says Lange. "We figured the more informed everybody was, the less chance we had of presenting an image that was in some way scattered."
Lange says the Internet was another powerful tool aiding his ability to control the media frenzy that surrounded the Oplinger scandal. Because the school had posted its employee conduct policies online, months before the scandal broke, Lange was able to answer a majority of media questions about school policy by giving reporters a simple Web address. In all, he estimates that he referred at least two dozen reporters to the Internet for answers to their questions. To see the policy, head to the Web at wwww.bussvc.wisc.edu/intaudit/auditfindings.html.
How can you know when you're being ripped off? Heed the experts.
Unless you're totally clueless, catching someone on your campus committing white-collar crime shouldn't come as a total surprise. Most cases begin when someone spots the perpetrator engaged in suspicious behavior--hushed phone calls, late nights in the office, even a desire to take work home at night when it's not necessary. According to former Massachusetts Attorney General Scott Harshbarger (now an attorney with the Boston law firm Murphy, Hesse, Toomey & Lehane; firstname.lastname@example.org) you'll need to watch for these other red flags--signals that something out of the ordinary might be afoot:
* Officials living beyond their means
* Extracurricular activities that are somehow connected to business associates affiliated with the school
* Frequent days off
* Repeatedly unpredictable behavior
Of course, this list is by no means a textbook series of characteristics possessed by all white-collar criminals, but Harshbarger says that many of the most infamous perpetrators have demonstrated one or more of these attributes. "Criminals come in all shapes and sizes," he says. "The best way to spot someone who may be out to take advantage of you, is to simply stay on your toes."
Here's how to stop campus white-collar crime in its tracks
In an ideal world, the best way to eliminate white-collar crime on your campus would be to prevent it from happening altogether. While some experts say that isn't always possible, Dave Bender, an attorney with the Camarillo, CA, law firm Wood & Bender (www.wood-bender.com), says that awareness and communication on all levels of your organization can certainly help. With that in mind, here are some additional pointers that administrators at any school can institute:
* Separate duties. People who bring in money for the university should not be the ones counting it. The more frequently these two responsibilities are linked, the stronger the temptation for theft and embezzlement.
* Establish internal controls. The best-laid plans are laid in advance. Don't wait until one of your employees has stolen from you, before you set up policies to respond to this kind of behavior.
* Institutionalize oversight. Create a position that enables someone to watch which money goes where. Some schools also have established an audit department responsible for investigating claims of misuse.
* Reward honesty, Employees don't necessarily have to report everything about the way they handle finances. Celebrate those who do, with commendations, thank-you luncheons, and letters of encouragement in their files.
* Be aware. Most important in the fight against white-collar crime is a simple awareness of what's going on. Talk to your employees, ask them what's up, and engage in random audits to keep everyone honest.
To quote famous football coach Vince Lombardi, the best offense is a good defense. Taking these simple steps against white-collar crime could make your school a safer place for everyone, including you.
Matt Villano is a freelance writer based in Seattle and Moss Beach, CA.
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|Title Annotation:||Special report: security|
|Date:||Sep 1, 2003|
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