The third leg of the University of Texas scandal has to do with the university’s accounting for donations. After Mr. Hall and others challenged the university’s method for calculating in-kind donations (mostly software licenses), the administration was obliged to take some $215 million off of its reported fundraising counts. Software licenses may have a high nominal value, but in practice are generally sold at a discount and can be granted virtually free of cost if a company is so inclined, providing the university with an easy way to inflate fundraising reports. The university maintains that it did nothing wrong in its prior accounting, but has changed the way it reports such in-kind donations. As I have written elsewhere, public and semi-public institutions reliably engage in accounting shenanigans that would make Gordon Gekko blush and should quite possibly land one in jail. The university’s book-cooking may not have been illegal, but it does not inspire confidence in the financial integrity of the institution.
Those issues — questionable compensation practices for executives, dodgy accounting standards, sweetheart deals for friends and family — are familiar to anybody who has paid any attention to corporate governance over the years, the main difference between academia and Wall Street being that the University of Texas’s compensation sweeteners run in the six-figure rather than the seven-, eight-, or nine-figure range. But the principles are very similar, which brings up the fundamental question presented by the case of Mr. Hall: Is a university’s board of trustees to act like a corporation’s board of trustees, taking an active role in policy, management, and fiduciary issues, or is it to be a rubber stamp, a prestigious sinecure in which to park political cronies and campaign donors, one more stop on the cursus honorum
for the charity-ball set? “It’s the classic university issue,” says Mr. Ryan. “Is the board a genuine check on the strong president of a university, or is it something else?” Mr. Hall believes that as a regent he has a duty to investigate wrongdoing and potential wrongdoing, and for that he is to be impeached.
The substantive case against Mr. Hall, to the extent that there is one, is partly based on the fact that he failed to disclose some business litigation on his application form when he was named a regent. This is so nakedly a pretext that it hardly deserves a response, though Mr. Hall’s lawyers will be releasing a letter on the subject later this week. Consulting with the governor’s office, Mr. Hall was advised that the litigation in question was not material to his application and did not require disclosure, and he took that advice. He has since disclosed that litigation, which indeed does not appear to be relevant to anything he has done as a regent. It is at most a minor oversight that was easily corrected. Even among his critics, there is no serious suggestion being made that he has acted out of any kind of financial or political self-interest, or indeed that he has done anything more than be an acute pain in the collective managerial posterior of the complacent and self-satisfied university system.
The real objection, as spelled out in the state-house document establishing the impeachment proceedings, is that as a regent Mr. Hall “abused that office by making numerous unreasonably burdensome, wasteful, and intrusive requests for information.” A trustee asked for information — lots of it. Given the university’s mismanagement of everything from admissions to compensation to accounting standards, the fact is that the regents should have been — and should be — more aggressive in monitoring how the university’s administration conducts its business on the public’s behalf.
The fact that the university’s administration does not want to share information with its regents, the media, or the people of the state of Texas suggests that there is much more to be discovered here. The attack on Wallace Hall is a case of political bullying, and it is shameful, but it may yet prove productive if in the course of its prosecution more light is shed on the self-serving practices of the state university systems in Texas and elsewhere.
— Kevin D. Williamson is roving correspondent at National Review.