Connecticut Attorney General Richard Blumenthal, a recently-announced candidate for U.S. Senate known nationally for his involvement in high-profile suits against the tobacco industry, polluters, and subprime mortgage lenders, has opened an investigation into the alleged misconduct of the University’s former Vice President for Investments, Thomas Kannam. The Attorney General’s office is attempting to determine whether Kannam misused any donated funds.
“My office is responsible for protecting charitable dollars and taking action when necessary to ensure that donated dollars are not diverted or misused,” Blumenthal wrote in a statement that his office provided to The Argus.
Jack Chin ’85, a law professor at the University of Arizona and a former white-collar crime prosecutor, explained why the misuse of charitable funds is of particular interest to the state.
“Because charitable funds are tax-deductible, and they are supposed to be used for particular charitable purposes, Attorney Generals often have a role in monitoring charities,” Chin wrote in an e-mail to The Argus. “It also is the case that criminal prosecutors are more interested in crimes involving public and charitable funds than they are with private businesses which can take care of themselves.”
The involvement of the state does not necessarily mean that any criminal proceedings are underway. Rather, the state may be the only party with the standing to bring a civil suit.
“In contrast to a business corporation, where shareholders can bring lawsuits against the university and its officers and directors if they misbehave, virtually nobody but the state attorney general has standing to bring suit against a charitable nonprofit corporation and/or its officers and directors for violation of their duties,” wrote Henry Hansmann, a Professor of Corporate Law at Yale in an e-mail to The Argus.
According to Blumenthal, his office is working in cooperation with the University’s administration. David Winakor, Wesleyan’s General Counsel, could offer no comment on the substance or extent of the investigation, although he did say that he was unaware of any investigation into whether the University failed in its oversight responsibilities.
“If the Attorney General’s office chooses to use its resources to look into this claim, they will find no evidence of misappropriation of donations to Wesleyan,” said Stephen J. Fitzgerald, Kannam’s attorney.
According to the University’s Vice President for Finance and Administration John Meerts, the University is not claiming that Kannam abused Wesleyan’s endowment. Meanwhile, the state’s investigation is in an early stage.
“If any charitable funds intended to benefit the university and its students were maliciously misused for personal gain, my office will work with Wesleyan University officials to take whatever additional action may be appropriate,” Blumenthal wrote.