University of Louisville sues former president James Ramsey
LOUISVILLE, Ky. (AP) — The University of Louisville sued its former president Wednesday, accusing James Ramsey of overseeing elaborate schemes to steer millions of dollars from the school’s investment arm into unauthorized ventures, depleting the endowment while padding his own compensation.
After reviewing stacks of documents, UofL and its foundation filed the lawsuit naming several other ex-foundation officials as defendants, including Ramsey’s chief of staff, Kathleen Smith.
Reaching beyond campus, the suit named Stites & Harbison law firm as a defendant. It served as legal counsel for the foundation — UofL’s investment arm — during the alleged improprieties.
The legal fight will air an embarrassing and disruptive chapter for UofL, but university and foundation officials said the suit was the right course despite the unflattering publicity.
“When you keep on peeling the onion back and you see what some of the actions that were taken, it boils down to it’s the right thing to do,” UofL Foundation chair Earl Reed said.
“When certain activities occur that are so egregious and wrong for the future of the university and the foundation and our donors, you just can’t sit back and let it go,” he added.
Ramsey’s attorney, Steve Pence, said Wednesday morning he had not had a chance to review the lawsuit but insisted his client “has done nothing wrong.”
“We wish the university would get on with the business of managing what has already been built, rather than tearing it down,” Pence said in a phone interview.
Ramsey led the university for 14 years. His power swelled when he assumed dual roles as UofL president and head of the foundation until he resigned both positions in 2016.
Bob Connolly, chairman of Stites & Harbison, said he had not yet seen the suit but expressed confidence in the work its attorneys did for the foundation. Smith’s lawyer, Ann Oldfather, told the Courier Journal that she and her client “welcome the opportunity to put our case out there.”
Andrew Campbell, an attorney for the university and foundation, said evidence will show the law firm’s involvement in structuring some of the inappropriate expenditures.
“We believe the evidence will show that that firm stepped over the line from simply being legal consultants and providing legal advice to a much more active role,” he told reporters.
Campbell said losses incurred by the university and foundation included money inappropriately spent and investment returns lost because money wasn’t invested properly.
“We don’t know the full extent of those numbers at this point,” he said. “I will simply tell you it’s many millions of dollars. And we’re going to seek the maximum recovery from the defendants ... that we can achieve. And we’re optimistic in that regard.”
If they win in court, plaintiffs could seek to tap into defendants’ personal assets as well as insurance policies the foundation maintained for officials to cover such conduct, Campbell said.
University and foundation leaders agreed Wednesday to proceed with the suit. It alleges breach of fiduciary duty, fraudulent appropriations and improper diversion of funds for personal gain.
The suit, filed in Jefferson County Circuit Court in Louisville, accuses the defendants of depleting the foundation’s endowment by diverting millions into “speculative ventures, loans and gifts that had little realistic chance of repayment.” While engaging in “this disloyal conduct,” it said, Ramsey and Smith paid themselves and others “excessive compensation.”
Defendants disguised the transactions to avoid scrutiny, it said.
Reed said the alleged actions caused “significant financial harm” to the university and foundation. The suit is necessary, he said, “not only to restore confidence in the university, but also to recover funds that were intended to support the educational mission of the university.”
The alleged actions mostly occurred from 2010 to 2016, Campbell said.
Kentucky’s attorney general, Andy Beshear, worked previously as an attorney for Stites & Harbison. UofL trustees Chairman David Grissom said Wednesday that Beshear had “no involvement or culpability whatsoever” in actions alleged in the lawsuit.
While the civil action is pursued, Grissom acknowledged that discussions involving the university, foundation and law enforcement agencies are continuing but provided no details.
A forensic audit released last year shed light on the foundation’s woes.
It found, among other things, excessive spending on compensation and bad investments in real estate and startup companies. The audit found that the foundation’s officers and directors depleted at least $42 million from the university’s endowment and tried to hide lucrative deferred compensation for Ramsey and his top aides.
Since Ramsey’s departure, the foundation has adopted reforms such as a line-item budget and prohibition on the university president also running the foundation. The foundation board was overhauled with a new set of members.
To crack down on excessive pay, the foundation was banned from providing deferred compensation. In another move, it agreed to make no investments in startup companies or real estate without written board approval.