Every public university in Florida owns private direct support organizations – better known as university corporations – that hold millions of dollars in university assets out of public sight.
Originally intended to solicit donations from wealthy donors and make expenditures for the university, the function of these university corporations has expanded over the years.
USF currently owns 12 university corporations, which are responsible for everything from land acquisition and collecting medical fees to investing hundreds of thousands of dollars of university funds. The USF Foundation, Inc., the fundraising corporation for the university, currently holds roughly $573 million in university assets, as of June.
Though Florida has some of the most liberal public records laws in the U.S., known as the Government in the Sunshine Laws, these corporations enjoy a spot outside public records disclosure laws enjoyed by no other public agency or instrumentality in the state.
Government in the Sunshine
The controversy surrounding university corporations has ignited in recent years, after a legal case in which a University of Central Florida football player collapsed and died during conditioning at the school’s practice complex – a complex owned by UCF’s athletics university corporation.
In addition to questions surrounding transparency and accountability from the public, the case opened debate about whether these private companies leave universities open to larger lawsuits.
Local attorney Mark Caramanica with Thomas and LoCicero, a Tampa law firm that specializes in media and open government law, said the inability of the media and the public to track university corporations’ use of state funds is the biggest issue surrounding direct support organizations.
A state statute passed by the Florida Legislature in 1975 gives university corporations an exemption from disclosing most public records, except for an audit the corporation must give to the Board of Governors (BOG) each year.
However, a 2005 advisory legal opinion from then Attorney General Charlie Crist made it clear that the legislative exemption did not exempt university corporations from all open government laws.
While Caramanica said he believes the original intent of the exemption was to protect the identity of donors who wished to remain anonymous, some university corporations broadly interpret the exemption to cover all corporation-related documents.
In a 1987 report on university corporations and their accountability to the state, the Florida Senate Committee on Governmental Operations recommended the “records of all direct support organizations be open to the public, with the exceptions of the identity of donors” — a recommendation that has still yet to be acted upon by the Legislature.
“Records relating to financial activities are exempt and if you interpret and apply that broadly, you’ll get to records that are beyond just simply the identity of the donor,” Caramanica said. “So any time you really want to follow the money, so to speak, that can potentially become a barrier.”
A series of public records requests by The Oracle to a representative from the USF Foundation showed the university cites the exemption when asked to disclose a donor list, who the corporation contracts to invest university funds and the schedule and travel expenses of Foundation CEO Joel Momberg, a public USF employee.
The USF Foundations’ 2014 financial statement shows the Foundation spent roughly $1.6 million on salaries and other supplements and another $107,591 on travel and per diems. Momberg is paid a salary of $532,250 as of May 2014, according to state employment records.
Mike Schneider of the Associated Press filed similar public records requests with more than 30 of Florida’s largest university corporations and 14 denied all of Schneider’s requests, including the USF Foundation.
USF Director of Media and Public Affairs Lara Wade said she could not provide a list of USF employees who are used by the Foundation to conduct day-to-day operations, because the university’s Human Resources department does not designate who is and who’s not assigned as a Foundation employee in its internal tracking system.
It is also unclear what is and isn’t considered to be within the scope of the public records exemption for university corporations.
Pursuant to a public records request by The Oracle, Jay Wilson, director of USF Foundation communications, provided meeting information and an agenda for the USF Foundation’s investment committee.
Media and Public Affairs Coordinator Adam Freeman, however, declined to provide an email exchange between four members of the university’s General Counsel, citing the public records exemption for university corporation business.
The email was obtained by The Oracle from a source who claimed to have received the email exchange in a prior public records request, but Freeman said the document may have been produced “inadvertently.”
The email exchange was between four USF employees, normally within the scope of Florida’s public records laws, and did not mention the USF Foundation or any of the university’s 11 other private corporations.
Caramanica said he sees the inconsistency of universities in response to public records as “trying to have it both ways” – claiming the benefits of a public agency when it is beneficial, but claiming to be a private company in the face of open government laws.
“If they are going to claim that they enjoy the same … rights as a traditional government entity, then they shouldn’t be able to say at the same time that they are not subject to the same records and meetings disclosure obligations as the university would be,” he said.
The university does not see the public records exemption as ducking open government laws, but rather claims the exemption is necessary for university corporations to conduct their business.
Noreen Segrest, vice president and chief operating officer for the USF Foundation, said the records exemptions are important in protecting donor anonymity and the investments the Foundation makes with university funds.
Segrest defended the accountability of the Foundation, saying it is responsible to and held accountable by the BOG through yearly audits. She also said the protections for university corporations under Florida law allow the USF Foundation the “flexibility to maximize resources for the university.”
“When we make investments, there are many investment choices, where, if we are discussing their individual holdings, they might not want to do business with us,” Segrest said. “A lot of investment choices require that the investors not disclose information.”
Caramanica, however, said the amount of control over what have traditionally been university functions, such as land holding and investment, give further evidence to a need on the part of the community to be able to hold university corporations accountable and keep an eye on how public money is being spent.
“It’s like they’ve, in many cases, seeded an entire function to what amounts to a private entity,” he said. “I think that just goes against the spirit of open government and that we should be able to inspect the activities of those types of organizations when they’re performing government functions.”
A larger liability
A separate legal issue with university corporations was raised during the lengthy legal battle that has followed the death of the UCF football player, Ereck Plancher.
A circuit court ruling in 2011 found the UCF Athletics Association, Inc. liable for Plancher’s death, awarding a $10 million wrongful death judgment to his family.
Legal counsel for the corporation appealed the judgment in 2013 and the appeals court reduced the damage award to $200,000.
The court ruled that university corporations, by virtue of being owned by a university, have the same $200,000 cap on lawsuits against them that every other public university has.
This $200,000 cap on liability in civil cases involving negligence is known as sovereign immunity. Now, Tampa-based lawyer Stacy Blank, the appeals lawyer for the Plancher family, has brought a challenge against sovereign immunity for university corporations before the Florida Supreme Court.
Briefings from both Blank and the UCF Athletics Association’s lawyers were completed early last month and now it is up to the court to decide whether university corporations or their insurance companies are entitled to sovereign immunity.
Eleven of Florida’s public universities, including USF, have filed friend of the court briefs with the Florida Supreme Court, claiming university corporations are instrumentalities of a public agency and thus entitled to sovereign immunity.
In the initial brief to the court, counsel for the Plancher family highlighted a statement made by UCF Athletic Director Keith Tribble explaining in his deposition that privatizing the athletics association allowed the university to hire coaches “without having it, you know, be public.”
The initial brief highlights how Tribble’s testimony is not in line with Florida statutes, which state a university corporation can be set up “exclusively to receive, hold, invest and administer property and to make expenditures for the benefit of the state.”
“I think universities understand the power of that exemption and some exercise its power more judiciously than others; they don’t necessarily want to overreach and have a legislative backlash to that,” Caramanica said. “But again, it certainly has been used to obstruct. These are records which, had they been in the hands of the university proper, they would be subject to public records laws.”
While a court ruling in favor of university corporations would be a detriment to the Plancher families damage award, Caramanica said that ruling would also strengthen the links between government entities and university corporations.
This strengthened link could serve as further evidence in future legal challenges that university corporations should be held to the same public records disclosure laws as every other state agency – a legal challenge former USF student Ahmad Saadaldin said he would welcome.
In the spring semester of 2013, Saadaldin and the USF Students for Justice in Palestine (SJP) began a boycott, divest and sanctions campaign, hoping to sway students and university administrators to cut all ties with companies that supported the Palestinian occupation.
The group originally attempted to put the campaign in the hands of students by placing a referendum on the ballot during Student Government elections. Brian Goff, the student body president at the time, discounted the referendum saying it did not align with the goals of Student Government.
SJP then began collecting signatures for a student petition in spring 2014.
After collecting more than 10,000 signatures — a feat the group claims is the largest student petition in the state — SJP took their demands to the USF Foundation.
The group was asking the Foundation to stop investing in companies allegedly supporting human rights abuses, namely Hewlett-Packard, Boeing and Lockheed Martin.
SJP claims to have used the information provided in the limited yearly reports the USF Foundation makes public to find what stocks its mutual funds invest in using information from the U.S. Securities and Exchange Commission.
They took this route, Saadaldin said, because the Foundation declined to provide them with any investment information.
“Everything is so secretive, you have no idea who your foundation invests in or what companies,” Saadaldin said. “They release a report every year, but it’s very vague. They just say we invest in these management firms.”
They further claimed the information revealed the Foundation was investing in companies such as PetroChina, BP, Caterpillar and a number of other controversial companies.
The USF Foundation declined to comment on what specific companies it invests in.
SJP demanded the Foundation’s Investment Committee adopt a socially responsible investment policy, a policy the group claimed would keep the Foundation from investing in companies complicit in human rights violations.
As of 2012, 148 universities have a socially responsible investment policy, according to NACUBO-Commonfund Study of Endowments.
The group also wanted a separate committee for responsible investment set up to give representation to the larger university. SJP envisioned the group being made up of students, faculty and staff from across the university.
Saadaldin said he believes students and faculty have a right to know how their money is being spent, especially when university corporations claim to be operating in the interest of and for the betterment of universities.
“This is what they call for: (the university) wants students to be engaged, and as soon as they get engaged, they want to ignore it if it’s not in line with what they want,” he said. “When there’s no transparency, who is really profiting?”
In May, the Investment Committee unanimously rejected the demands of the student petition.
The investment committee told representatives from SJP they did not have the authority to regulate or make demands of the investment firms the Foundation contracts with.
Saadaldin, however, pointed to the universities who have successfully implemented socially responsible investment policies and said he believes it is clear other universities can and do maintain a higher level of control over their investments.
“They just constantly keep deflecting responsibility and blame; they don’t want to take any responsibility at all,” Saadaldin said. “They don’t want to be transparent at all.”
While there have been a number of legal challenges to the university corporation exemptions to public records disclosure laws, every decision has upheld the exemption.
The Plancher case is currently awaiting a court response to hear oral arguments, and a decision is expected in the coming months.
Caramanica said he foresees the legal issues surrounding university corporations remaining controversial for as long as the public is shut out from how these private corporations operate using public money.
“As more responsibilities are being passed off, they become more central to being subject to the public records laws in terms of people having a right to know what they are doing,” he said.