MSU’s Nassar scandal may be costlier than Sandusky

April 10, 2018 GMT

Michigan State University’s ties to former Olympic gymnastics doctor Larry Nassar may be a costlier problem for the college than Pennsylvania State University’s Sandusky scandal, according to a new report.

Michigan State faces credit rating, settlement cost and political scrutiny concerns, according to a report published Tuesday by Wells Fargo Securities. Last month, Michigan State’s credit rating outlook was revised to negative from stable by S&P Global Ratings, and Moody’s cut the school’s outlook to negative in January.

Following the conviction of former Penn State assistant football coach Jerry Sandusky for dozens of counts of sexual abuse, Moody’s downgraded the school in late 2012, only to revise its outlook to positive a year later. By 2016 Penn State was at Aa1, its pre-crisis rating.

“It is rather remarkable how resilient large and established universities can be to weather incidents that hurt their brand,” wrote Roy Eappen, a senior analyst at Wells Fargo Securities.

But Michigan State’s problems look to be deeper than Penn State’s. Sandusky-related settlements cost Penn State about $109 million among 35 accusers, according to the report, citing the Associated Press.

Michigan State is facing more than 250 victims and mounting legal fees, according to the report. The school has already been billed $9 million by law firms for work related to Nassar, Eappen wrote, citing the Lansing State Journal.

Both Penn State and Michigan State are public, research universities with strong philanthropic support. At the time of Penn State’s scandal, the school had better cash flow relative to Michigan State and was less reliant on tuition revenue, Eappen wrote.

A loss of accreditation is unlikely in Michigan State’s case. Like Penn State, it has powerful stakeholders, including the state and donors to its $2.7 billion endowment.

“Such partners are likely to want Michigan State to commit to reform, which ultimately supports surviving these challenges,” Eappen wrote.