Trouble At Emu

SPECIAL INVESTIGATION

TROUBLE at EMU

By Eric Jackson

If you are an Eastern Michigan University (EMU) student working your way through school, chances are good that you faced a crisis when paying this semester's tuition bill. Your own money woes are probably related to a crisis that is coming to a head at EMU - in the courts and in labor-management relations - over its governance and the way that its funds are handled. 

All of this comes at a time when EMU administrators claim that the school is facing a budget crisis. Due to an alleged $7.3 million budget shortfall, there have been layoffs and tuition increases of between 9.1 and 9.6%.

Yet it doesn't look like the university is broke. This summer EMU was completing a new $13 million (plus cost overruns) football stadium and a $1.25 million outdoor recreation center. Across campus, university funds were being spent to widen sidewalks and to replace a big parking lot near McKenny Union. 

Among the many issues at stake is your right to know how university funds are spent. That right may virtually disappear with the transfer of EMU assets to the Eastern Michigan University Foundation, a Michigan non-profit Corporation which was founded in 1990 by EMU president William Shelton as a result of an October 1989 resolution of EMU's board of regents.

According to records on file with the Michigan Corporations and Securities Bureau, the foundation "is organized and operated exclusively to receive, hold, invest and administer funds and to make expenditures to iron behalf of Eastern Michigan University." Accordingly, EMU has transferred millions of dollars in, university funds into the foundation.The foundation' s offices are at Welch Hall, EMU's administration building, and the foundation's work is currently being done by EMU employees while foundation staff positions are officially "vacant."

It sounds benevolent enough. Yet when this writer attempted to learn more about the EMU Foundation through a request to the foundation under Michigan's Freedom of Information Act (FOI A) and Open Meetings Act (OMA), the request was denied. In his refusal to disclose board meeting minutes and other information, the foundation's chair, Chrysler Vice-President for Marketing John Damoose, claimed that as a "private Corporation," the EMU Foundation is not subject to FOIA or OMA.

This reporter then filed suit against the foundation, seeking to compel disclosure of the requested information and a declaration that FOIA and OMA apply in this matter. Pretrial conferences and motions are scheduled to take place before Judge Kurtis T. Wilder on September 8-9 in Washtenaw County Circuit Court.

FOIA provides that organizations which have public bodies as their principal source of funding are subject to the act's public disclosure provisions. The OMA requires that groups which are created by public institutions and given the power to make final decisions about public business must open their meetings and provide meeting minutes on request.

The foundation has received an overwhelming majority of its funds directly from the university. In the 1991-92 fiscal year, the foundation received $261 ,341 from the university, the sum of all gifts made to the university during 1991. In its own name, the foundation raised $116,120 directly from donors in the same time period. More significantly, at a March 24, 1992 regents' meeting, the university's endowment, then worth around $7.7 million, was handed over to the foundation. The endowment is the net sum of virtually every donation ever made by alumni and other supporters to Eastern Michigan University over its 143 year existence. It has traditionally been conservatively invested in interest-bearing accounts, with the interest income being used mostly as a scholarship fund.

The endowment, which had never before supported university administrators, will be tapped to pay for a foundation president and vice -president, whose starting salaries will be $102,000 and $72,000 respectively, according to the foundation 's financial plan. The plan provides these two administrators with a combined initial annual travel budget of $15,000. 

(see TROUBLE AT EMU, page 10)

SPECIAL INVESTIGATION

Trouble at EMU

According to the foundation's bylaws, its presidency is initially reserved for a "university related official." Currently, the foundation's acting president is EMU Executive Vice-President Roy Wilbanks, and its acting vice-president is EMU information chief Kathleen Tinney, neither of whom are now on the foundation's payroll as permanent executives.

The university also plans to shift virtually all of its money-making enterprises to the foundation. One such component will be revenues from advertisements on the football stadium' s new NFL-style "instant replay" scoreboard. Also slated for transfer to the foundation are Eastem's golf course, Center for Corporate Learning (CCL) and Corporate Educaü'on Center (CEC), which are located in and around the Radisson Hotel on Ypsilanti's Ford Lake.

The Radisson on the Lake hotel complex, a public and private sector effort which includes EMU's golf course, CCL and CEC, is in Chapter 11 bankruptcy. The principal investor, to the tune of some $20 million, is the Michigan state employees' pension fund. EMU, the City of Ypsilanti and Ypsilanti Township also have significant financial investments in the development.

The Huron Shores Golf Course and its $1.5 million clubhouse, integral parts of the hotel complex, were built primarily at EMU' s expense on land leased from Ypsilanti Township. The course was designed by a South African firm, which led to campus protests in the late 1980s. Few EMU students use it. The golf links are advertised as one of the hotel' s main attractions, and attracted enough hotel related golfers to net a reponed $75,000 profit in the last fiscal year.

The hotel draws few "walk-in" customers, but is reportedly often filled to a 60% capacity by people attending conferences and other events sponsored by EMU or booked through the CEC and CCL. The hotel can not turn a profit at the current occupancy rates, so less than three years after its 1989 opening, extensive renovations have been undertaken, aimed at making it more attractive to up-scale guests. With the entire development' s success dependent on fïlling the Radisson's rooms at $100 per night, it appears doubtful that any business reorganization will succeed. It is also possible that Michigan workers and other investors will never see the money that they invested.

These transfers of university assets to a "private" foundation may invite more trouble for the already beleaguered university. EMU' s track record of mismanagement and possible misappropriation of funds indicate that EMU's finances need more public scrutiny, not less.

EMU Executive Vice-President and acting President of the EMU Foundation Roy Wilbanks, several EMU current and former regents and several state legislators are embroiled in a controversy over international travel. The trips were funded by federal money which came through the Michigan Department of Education (MDE). Acting head of the MDE at the time of the disputed expenditures was former EMU vice president Gary Hawks.

One such trip, purportedly a foreign language teacher exchange, sent Wilbanks and EMU regents Anthony Derezinski and Richard Robb to Germany. Another "teacher exchange" program sent Wilbanks, Hawks, former EMU regent Geneva Titsworth and three state legislators to Japan and Korea. In addition to EMU, Lansing Community lege and Macomb Community College participated in the "teacher exchanges."

The use of federal funds for purposes other than for which they were intended is illegal. Unintentional misuse is a civil wrong, for which repayment may be required. Intentional misappropriation of federal money is a crime for which people may be sent to prison.

On September 30, 1991, the U.S. Department of Education concluded that the junkets had Hule to do with teacher exchanges and ordered some $202,000 in grant money be repaid. The educational institutions are appealing this order.

The foreign trips are also the subject of a Grand Rapids federal grand jury investigation, which may result in criminal charges. The grand jury, whose proceedings are closed to the public, began to call witnesses in the spring of 1992.

All self-serving spending by EMU officials isn't necessarily illegal. In fact, much of it sterns from structures set up by state law. State law stipulates that EMU's eight regents are appointed by the governor for eight-year terms. Typically, these positions go to longtime party activists, large financial contributors to gubernatorial campaigns, defeated or retired politicians or elected officials' spouses. In contrast, U-M regents are elected and may be removed by the voters if their abuses become too scandalous. Appointed EMU regents receive far less public scrutiny than their U-M counterparts.

The patronage system has brought many well-connected activists into administrative and staff positions at EMU. Most prominently, Executive Vice-President Roy Wilbanks, a former Democratie member of the Ypsilanti Township board of trustees who has a bachelor's degree in physical education and a master's degree in social foundations, effectively runs the university on a day-to-day basis. Wilbanks supervises personnel matters and controls a general fund budget of some $130 million.

Although EMU's political patronage system has often been tied to allegations of improper financial dealings, the present abuses are so brazen that they have galvanized all of the campus employees' unions into concerted action. In April 1992, president Shelton announced an anticipated funding shortfall and demanded that the unions give up pay increases which were part of their negotiated contracts. The administration then announced a series of unilateral budget-cutting moves, which it claimed would result in 13 layoffs and $3.5 million in savings.

An All Union Council, consisting of American Federal, State. County & Municipal Employees (AFSCME), the American Association of University Professors (AAUP), the United Auto Workers (UAW) and EMU's police officers' association, is challenging the regents' austerity moves. They insist that Eastem's budget crisis is contrived, that there is no $7.3 million gap between university revenues and expenditures for which they must suffer.

The unions point to excessive management costs. In the past five years, EMU's enrollment rose 4%, while the number of university administrators rose 25%. Looking at executive bloat in dollar terms, the picture is even worse. In 1987 administrative salaries cost EMU $10.5 million, while in 1991 the university paid its management $18.4 million.

Campus workers deride EMU's construction boom. In addition to the new football stadium, sidewalk and parking lot construction, the university is spending over $7 million on renovations to McKenny Union and $1.25 million on an outdoor recreation center. Among scheduled new projects is a $14.1 million sports training center.

Students and professors also complain that budget decisions harm academic programs. The underfinancing of EMU's library is evident to students, who often must go to U-M to find materials that they need for classes. The North Central Association, which inspects and evaluates colleges and universities, cited EMU's failure to upgrade its library as a serious shortcoming which may affect Eastern's accreditation if it is not corrected.

Part of the unions' anger arises from the way that the alleged crisis has been presented to them. When President Shelton demanded that employees give back scheduled wage increases, the unions pointed out that their contracts mandated specific procedures for renegotiations, starting with the opening of all university financial records to the workers' representatives. Shelton refused to open the books or enter into negotiations, so the unions refused to give up their contractual rights.

Labor and management are also arguing about the scale of the cutbacks. While the administration says that only 13 people were laid off, the unions claim that 25 employees, 20 of them women, were affected by the cuts. It appears, for example, thatfïve faculty members lost their jobs due to their programs being eliminated, yet these were not counted by the administration as layoffs.

The administration' s claimed layoff procedure was that each affected department would consider its employees, determine who was essential and whose job could be eliminated, and elimínate the latter. Labor leaders say that this method is a cover for union busting. For example, Jan BenDor, who worked in EMU's job placement service lor students and graduates, is bargaining chair for UAW Local 1976 (which represents non-teaching professionals) and a member of the All Union Council. Her position was "eliminated," although the job she did is now being performed by someone else.

Campus labor leaders point to EMU's recent hiring of two Human Resources administrators, whose resumes stress union busting skills, as proof of the university's intentions. Wilbanks reinforced workers' fears at a July 18 board of regents retreat, where he listed "erosion of management rights" as a key human resources department issue for the coming year. Virtually no recent employee grievances have been resolved short of arbitration.

Eastern employees' sour mood could lead to bitter labor strife in the coming year. EMU workers have patiently exhausted less drastic remedies. Professors and other union members set up an informational picket line at the regents' meeting - which took place when students were away between spring and summer semesters - at which tuition hikes and layoffs were approved. The unions complained to the governor and the legislature, to no avail. Contracts for three of the All Union Council's six bargaining units, representing about three quarters of EMU's employees, expire in the fall of 1993.

Although Eastern's crisis may ultimately take the form of ordinary labor-management contract disputes, campus labor leaders see it as something much more. The AAUP's Cheryl Conklin characterizes the current controversy as "a serious ethical crisis." The UAW's Jan BenDor, who traces the problem to structures set up by state law, asks: "Will it take a constitutional amendment, creating regionally-elected and recallable boards, to stop the looting?"