In a 1,200 word piece in today’s edition of the Times, education reporter Lisa Federaro delves into the increasingly nasty battle between Wesleyan and Tom Kannam (et al.).The story, which ran on page A14, doesn’t break much new ground, though there are new and aggressive quotes from some of the defense attorneys. Federaro has an interesting analysis, highlighting sections of the lengthy complaint that the Argus and other publications chose to ignore. Overall, she found Wesleyan’s case to be “an unusual airing of alleged ivory tower impropriety” that sought “to portray [Kannam] as a money-obsessed bureaucrat who exploited Wesleyan’s prestige and resources to boost his personal wealth.” Though we were not as analytical in our own story, I personally found Federaro’s characterization of the complaint to ring true. No summary can really do justice to the full panoply of sordid details that Wesleyan outlines in it’s lawsuit–though most news outlets seem to agree that the story of the “Taj” is worth telling.
Mostly, the article confirms that the defense will be taking the basic position first elaborated by co-defendant Ralph Gill in an extended comment on our original story. Gill made a number of claims, but his main argument seemed to be that Michael Roth was using the lawsuit to deflect blame for the falling endowment onto Kannam. Gill claimed to have inside information that Roth was not fundraising to the satisfaction of the Board of Trustees, though he provides no evidence or sources for that assertion.
In Federaro’s story, the Belstar Group’s attorney, Martin Stein, makes a similar argument.
But Mr. Stein, the lawyer for Belstar, said that he believes that Wesleyan was “looking for a scapegoat” for its recent endowment losses.“There’s no claim that because Kannam was spending so much time on Belstar and others, that he did not do his job properly and or that Wesleyan lost money because of that,” he said. “Wesleyan’s silence on these things speaks very, very loudly. It’s a real hatchet job.”
Basically, the defense appears to be acknowledging that Kannam was spending time working on his outside entrepreneurial ventures, a fact that seems to be conclusively proved by the emails in the complaint. But they are challenging Wesleyan’s accusation that spending time on these ventures detracted from Kannam’s work for the University, or that it constituted a violation of the conflict of interest clause in his contract. Stein’s argument that Wesleyan never directly connects Kannam’s outside ventures to a decline in the endowment is interesting. Consider this line from the complaint:
Moreover, the University discovered that during his employment Kannam had defrauded the University of thousands of dollars and caused the University to incur significant expenses for his personal outside “entrepreneurial ventures.”
What are these other “significant expenses” beyond the thousands of dollars Kannam defrauded the University of? Are they endowment funds? It is not clearly explained. While the fraud line is a reference to Kannam’s alleged doctoring of expense reports, the “significant expenses” phrase is most likely a prelude to the “University Resources” section of the complaint, in which Wesleyan’s attorneys argue that Kannam had his staff at the Investment Office work on projects related to his outside ventures:
Kannam’s various entrepreneurial ventures, such as the Belstar organizations and VCP [Vietnam Capital Partners] took advantage of Wesleyan’s resources, including having the University’s interns and employees do research for Belstar Group and its affiliated companies without any compensation for same.
[As an aside, it is notable that Wesleyan is not suing any of the other employees in the Investment Office who they also appear to be accusing of violating their conflict of interest policy, which states, among other things, that “any involvement by an Individual in personal business ventures shall be conducted outside the University work environment during times which the Individual is not required or expected to perform duties or responsibilities related to his or her University employment.”]
Interestingly, this section includes information on the salaries and benefit packages of three Investment Office employees. Collectively, the trio made roughly $230,000 annually starting in the 2003-2004 school year–their first full year at Wesleyan. Two of the three are never explicitly accused of doing work for VCP and Belstar, but the implication is there. Therefore, Wesleyan seems to be implying that a portion of these three salaries, which add up to over $1.3 million over the last six years, was essentially spent on other companies’ labor. Add in Kannam’s $460,000 salary over the last 8 years (his salary was likely lower when he allegedly started his outside ventures in 2001), and that’s easily another $3 million plus that Wesleyan could argue was partially spent on other companies’ labor.
In other words, Stein is correct that Wesleyan’s complaint never accuses Kannam of sinking the endowment because he was distracted at the helm. That assertion is never explicitly argued.
But I don’t see how this invalidates Wesleyan’s argument. Their main point seems to be that Kannam doctored expense reports–which no one seems to be denying at this point–and caused the University to waste tons of money by paying people to essentially work for other companies.
Whether Michael Roth is using this case to deflect blame from himself for the University’s poor endowment numbers is another story. We have no idea whether that is true, and I think it will be hard for Kannam’s defense to prove that.