United States Project

How university foundations try to avoid public scrutiny—and what reporters can do

In 2012, College of DuPage President Robert Breuder paid $185 to taxidermize a cock pheasant. He gave the bird, mounted on an oak stand, to an upscale campus restaurant, where it serves as a decorative piece.

A year later, Breuder bought a black-powder rifle as a gift for the outgoing president of the college’s foundation board. The rifle and its case, supplied by a Pennsylvania dealer, cost $610.

In 2014, Breuder spent $1,292 on a hunting excursion at an exclusive game reserve one hour from the college’s Glen Ellyn, Ill., campus. He hosted three guests, and the tab covered their meals and wine, gun rental and ammunition, and hunting licenses.

Breuder expensed each bill to the College of DuPage Foundation, whose main mission is to raise funds for student scholarships at the college. The bills came to light because the Chicago Tribune in April requested, under the state public-records law, foundation and college documents related to Breuder’s spending.

Initially, the college said it didn’t have responsive records, and the foundation refused to release anything—so the Tribune filed a lawsuit to compel disclosure. Around the same time, Breuder went on administrative leave pending the outcome of several criminal investigations of his spending. Then, this month, with new leadership in place, the college released some records from Breuder’s files, 500 pages in all.

As the Tribune reported:

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The records show how Breuder used donor money to engage his passions for hunting, wine and fine dining. The documents also reinforce Breuder’s reputation as a chief executive who lived well on the school’s tab and often spent in a manner at odds with a community college’s mission of providing an affordable education. … Records show … that Breuder only occasionally hosted potential donors. Instead, he spent the money on trustees, senior managers, foundation board members and vendors of the college.

The paper has been investigating the College of DuPage since January, and its series, as of this writing, includes roughly 60 stories with contributions from reporters Jodi S. Cohen, Stacy St. Clair, and Christy Gutowski. They have reported on everything from prosecutors’ interest in the foundation to non-competitive contracts awarded to foundation board members.

“[The college] is supported by taxpayer money, and taxpayers have a right to know how that money is being spent,” said Mark Jacob, the Tribune’s associate managing editor for metro news. “It’s our obligation as a news organization to try to keep track of how public money is being spent.”

Jacob added that when the college released the records from Breuder’s files, it didn’t concede that it had done anything wrong, nor did the college concede that it was releasing the records because of the lawsuit. Indeed, the lawsuit is ongoing, with the college and foundation circling their wagons. (They are separate parties, represented by different counsel.)

The Tribune isn’t satisfied by the seemingly stopgap disclosures and is insisting that the college and foundation release all other responsive documents. For its part, the foundation claims that as a nongovernmental nonprofit corporation, it’s not subject to the state public-records law, and the college agrees.

In its answer to the Tribune’s complaint, the college makes the expected arguments (e.g., the lawsuit is moot because the college has produced, or will, the responsive documents). But the answer goes further. It denies that the foundation is a public body or a subsidiary of one. It denies that the foundation is contracted with a public body to perform public functions on the college’s behalf. And, thus, it denies that the foundation is subject to the public-records law.

Randall Samborn, a spokesman for the college, declined to comment.

The Tribune claims the college is using its foundation, housed on campus and staffed by college employees, “as an artifice to circumvent” the law: “The foundation is mostly or entirely under the control of [the college, which] has been using the existence of the foundation as an excuse or a subterfuge to shield its financial records and expenditures from public view,” according to the complaint.

At least one other Chicago news organization shares those concerns. The Daily Herald, which covers the suburbs, has reported on the DuPage controversy and to some extent backstopped the Tribune’s reporting by requesting from the college copies of, and responses to, every Tribune inquiry.

“The college’s FOIA officer was under siege once the Tribune stories began,” said Jake Griffin, the Daily Herald’s assistant managing editor for watchdog reporting. “We were almost automatically receiving extension requests [and then] … waiting 10 days for the college to respond to a request that [it] literally had already responded to.”

Griffin added, “What good does it serve to keep the activities of the foundation free of public scrutiny and oversight, especially considering [that it’s] using the auspices of the college as the means for generating funding?”

Good question.

‘Public bodies cloaked in a thin private veneer’

The DuPage case isn’t unique—it’s characteristic of efforts nationwide to define, defend, and challenge the legal status of foundations and other entities affiliated with public colleges and universities. At the University of Kansas, for example, the director of the Center for Applied Economics claimed in June that he was not a public employee subject to the state public-records law, because money used to pay him is funneled through the school’s private foundation. And in Connecticut, lawmakers are preparing a bill to require the secretive UConn Foundation to be more transparent. The foundation drew criticism last year for spending more than $250,000 on a Hillary Clinton lecture and for agreeing to pay $300,000 toward an increase in the university president’s compensation.

Foundations come in all shapes and sizes, but mostly they’re private 501(c)(3) nonprofit corporations dedicated to serving one school or one public system. They’ve become critical cogs in the academic wheel as state support for higher education has waned. And they’re performing essential tasks once performed only or chiefly by universities themselves, such as raising funds for scholarships and for campus construction projects, even managing institutional investment portfolios. Theirs, then, are public functions: Without the foundation, the university would have to use public resources to perform the functions itself.

Their significant responsibilities (and occasional bad behavior) have put foundations in the public eye. They’re typically supported by donations rather than taxpayer money, but, as one advocacy group put it, they ”live and breathe through the university umblical cord” as ”public bodies cloaked in a thin private veneer.” With that in mind, should a public university’s private foundation be subject to a state public-records law?

The answer is yes, it should be.

“Most foundations, given what, who and how much they fund at state universities, already amount to quasi-government agencies,” said Clay Calvert, a First Amendment scholar at the University of Florida. “It’s only a legal fiction to suggest they are not full government agencies.”

But numerous states have embraced that fiction. According to a 2015 study by Alexa Capeloto, an assistant professor of journalism at the John Jay College of Criminal Justice, state statutes and case law have set out inconsistent standards to determine what records and types of organizations are subject to sunshine laws.

At least 20 states have tried to classify public-university foundations through legislation or case law, and in at least 11 of them, the classification favors the finding that foundations are the alter ego of their universities and subject to public-records laws. In the other nine states, foundations are exempt from such laws or generally protected from them by courts. Elsewhere, the question remains unresolved, according to Capeloto’s study.

Consider state statutes. Lawmakers have been most active in states, such as Connecticut, where a foundation controversy has made headlines. California Gov. Jerry Brown, for example, signed a bill in 2011 extending the state public-records law to university-affiliated foundations in the two state systems—after it came out that the CSU Stanislaus Foundation had hosted a $500-per-plate black-tie gala honoring former Alaska Governor Sarah Palin.

Notably, only seven other states have passed a law providing clear guidance on whether a public university’s private foundation is subject to its state public-records law, according to Capeloto’s study. And four of those states classify foundations as nonpublic bodies.

Now, consider case law. Courts have used three main criteria to guide their decisions: funding, function, and creation/control. Courts that focus on funding have said a foundation is public if it accepts university or taxpayer money. Courts that focus on function have said a foundation is public if it operates as an alter ego of its university. Courts that focus on creation/control have said a foundation is public if the university created and controls it. And, more narrowly, whether a disclosure law applies to a foundation depends on the law’s precise definition of a covered body.

Clarify and scrutinize

To be sure, foundations aren’t without their benefits. They’re usually free from state regulations on property transactions that can slow down deals, for example, and free to invest in a variety of financial markets and accounts. And, to the extent they’re immune to sunshine laws, foundations offer discretion, sometimes explicitly. The University of New Mexico Foundation states on its website that it offers donors “[g]reater assurance of … confidentiality, since [it] is a separate not-for-profit corporation and not subject to open records laws.”

But students, taxpayers, and donors have a legitimate interest in monitoring foundation activity, with the media serving routinely as their eyes and ears. It’s probably true that foundations make universities more nimble and flexible, but it’s true at the expense of transparency and accountability. Those values are supposed to distinguish an organization that performs public functions. They’re baked into our system of government and more important than nimbleness and flexibility—and, dare we say, donor privacy.

Universities and foundations have claimed often that revealing any identifying information about donors would chill fundraising. But, as Capeloto and other scholars have noted, that’s unproven. Moreover, there’s an arguable public interest in the openness of donor information.

“Whether donors are buying influence with public agencies is the information that the public needs the most,” said Frank LoMonte, executive director of the Student Press Law Center. “It’s ironic that the institutions that claim they’ll be unable to raise money if they can’t protect their donors’ privacy will engrave their donors’ names in 10-foot-high letters into the facades of buildings.”

Fundraising is central to a public university’s operations and subsistence, and it makes little sense to allow one to offload its essential functions onto an artificially separate, private entity with the purpose or effect of evading accountability. Recent years have yielded too many scandals at foundations, brought to light by journalists who scoured their financial records.

In 2005, the Atlanta Journal-Constitution successfully sued the University System of Georgia Foundation to obtain its donor lists, which revealed that its affiliated colleges were awarding contracts to companies after they donated to a fund that supplemented the chancellor’s salary. Two years earlier, an investigative audit at Florida Atlantic University revealed that its foundation had allocated $42,000 to buy a red Corvette for FAU’s outgoing president.

Not every foundation is a bad actor, but that’s not a precondition to public accountability in circumstances that call for it—and these do. “As state and taxpayer funding continues to dry up for public universities,” Calvert said, “the foundations play ramped-up roles in helping to sustain the universities with which they are associated.” Those roles deserve public scrutiny.

And the public deserves clarity in the law. Legislatures should decree that public-university foundations are subject to the same records laws as the universities they support. Courts should cut through any artifice and conclude that a university-affiliated foundation that exists for the purpose of serving the university and performing public functions is an arm of the state and accountable to its citizens.

Meanwhile, foundations should view those laws as a floor rather than a ceiling, making it a policy to release more than simply the minimum required by law. And journalists should push foundations to be transparent, and use all manner of documents to watchdog them, including annual reports and tax returns (generally, nonprofits are required to make them available, and they can be treasure troves).

Scrutiny and clarity are key. Otherwise, many foundations will continue to hide in plain sight by clinging to a legal fiction.

“If an organization is staffed by public employees, spends the public’s money, or acts on behalf of the government, then the public has a right to know what is going on,” said Adam Marshall, a legal fellow at the Reporters Committee for Freedom of the Press. “This is especially true at public universities, which are specially charged with increasing the knowledge and general welfare of our states.

This post has been updated to include the names of the Chicago Tribune reporters involved in the DuPage series.

Jonathan W. Peters and Jackie Spinner co-wrote this piece. Peters is CJR’s press freedom correspondent. An attorney, he is an assistant professor of journalism at the University of Kansas, where he teaches and researches media law and policy, with an affiliate research position exploring big data and Internet governance in the KU Information & Telecommunication Technology Center. Spinner is CJR’s correspondent for Illinois and Indiana.