Qui­etly han­dling the USC scan­dal

Los Angeles Times - - FRONT PAGE - By Son­ali Kohli, Sarah Parvini, Matt Hamil­ton and Adam Elmahrek

How USC han­dles one of the big­gest scan­dals in its his­tory will be de­cided be­hind closed doors by a small group of wealthy and pow­er­ful peo­ple.

Com­posed of 57 vot­ing mem­bers, USC’s board of trustees in­cludes noted phi­lan­thropists, ac­com­plished alumni, Hol­ly­wood in­sid­ers and in­dus­trial ty­coons. The group’s in­flu­ence ex­tends from the floor of Sta­ples Cen­ter to me­trop­o­lises in In­dia and China.

A small ex­ec­u­tive com­mit­tee makes many of the sig­nif­i­cant de­ci­sions fac­ing the univer­sity. A USC spokesman re­fused to iden­tify who is on this com­mi­tee. Nor would the univer­sity dis­close what hap­pens at its meet­ings or re­lease min­utes.

It is this elite group that is over­see­ing the in­ves­ti­ga­tion into how the univer­sity han­dled the case of for­mer med­i­cal school dean Dr. Car­men A. Pu­li­afito. The Times re­ported last month that Pu­li­afito, while lead­ing USC’s Keck School of Medicine, par­tied with a cir­cle of ad­dicts, pros­ti­tutes and other crim­i­nals who said he

used drugs with them, in­clud­ing on cam­pus.

The full board of trustees, which in­cludes di­rec­tor Steven Spiel­berg, Lak­ers owner Jeanie Buss and mall mag­nate Rick J. Caruso, must ul­ti­mately de­ter­mine whether USC Pres­i­dent C.L. Max Nikias, him­self a vot­ing mem­ber, and other top ad­min­is­tra­tors acted ap­pro­pri­ately with re­gard to Pu­li­afito.

Since the scan­dal broke, the trustees have been largely silent. Times re­porters at­tempted to con­tact all 57 vot­ing mem­bers by phone, email or both. Re­porters also sent re­quests to USC’s press of­fice seek­ing com­ment from trustees. Only two com­mented to The Times. The rest did not re­ply, or de­clined to com­ment. Nikias did not re­spond to re­quests for in­ter­views but has re­leased letters to the USC com­mu­nity.

Sev­eral trustees told re­porters to take their ques­tions to the USC ad­min­is­tra­tion.

“They’ve asked us not to speak,” said Ly­dia Ken­nard, founder and chief ex­ec­u­tive of KDG Con­struc­tion Con­sult­ing. “All calls should be re­ferred to the univer­sity.”

Caruso, who com­pleted his un­der­grad­u­ate de­gree at USC, told Times colum­nist Steve Lopez: “If the al­le­ga­tions are true ... I’m very dis­turbed and con­demn the il­le­gal use of drugs, es­pe­cially by some­one who holds the high­est level of trust and care.”

In a short state­ment to The Times, board Chair­man John Mork, a Den­ver oil ex­ec­u­tive, did not dis­cuss the trustees’ plans for mov­ing for­ward but ex­pressed sup­port for Nikias and the univer­sity provost, Michael Quick.

“As chair­man, I am cer­tain they will work quickly and de­ci­sively to make all ne­c­es­sary changes and will put in place poli­cies and pro­ce­dures to pre­vent some­thing like this from hap­pen­ing again,” the state­ment read.

Some ex­perts said the lim­ited in­for­ma­tion about the board and its ac­tiv­i­ties could present chal­lenges for USC as it tries to nav­i­gate the scan­dal.

The USC by­laws “give a huge amount of power to the ex­ec­u­tive com­mit­tee,” said Michael Po­li­akoff, pres­i­dent of the Amer­i­can Coun­cil of Trustees and Alumni and a for­mer vice pres­i­dent for aca­demic af­fairs and re­search at the Univer­sity of Colorado.

USC’s by­laws state that the ex­ec­u­tive com­mit­tee must in­clude seven to 17 trustees, in­clud­ing the board chair­man and the univer­sity pres­i­dent. The doc­u­ment gives the small as­sem­bly al­most all de­ci­sion-mak­ing power when the full board is not in ses­sion.

“There will be a fair num­ber of board mem­bers who are not en­gaged in se­ri­ous de­ci­sion-mak­ing,” Po­li­akoff said. “The prob­lem with empowering the ex­ec­u­tive com­mit­tee in that man­ner is that a great num­ber of trustees … are more or less in the dark. They be­come dec­o­ra­tive back­drop rather than ac­tu­ally fill­ing the fidu­ciary role. That is not a healthy sit­u­a­tion in gov­er­nance.”

The USC board is larger than most — pri­vate univer­sity boards are usu­ally around 30 mem­bers, and best prac­tices sug­gest that no more than 15 peo­ple over­see a univer­sity, Po­li­akoff said.

Stan­ford Univer­sity, by com­par­i­son, has 32 vot­ing trustees. The en­tire 10-cam­pus Univer­sity of Cal­i­for­nia sys­tem has 26 re­gents re­spon­si­ble for de­ci­sion-mak­ing.

USC de­clined to com­ment on the board’s struc­ture or why the body is so large. But uni­ver­si­ties, es­pe­cially those try­ing to fundraise, re­tain large boards be­cause their trustees are ex­pected to do­nate — and of­ten the more impressive the trustees, the more likely oth­ers are to give to the col­lege, said Michael Useem, a Univer­sity of Penn­syl­va­nia man­age­ment pro­fes­sor who writes about gov­er­nance.

Un­der Nikias’ lead­er­ship, USC re­cently reached a $6-bil­lion fundrais­ing goal, aided by mul­ti­mil­lion­dol­lar gifts by trustees in­clud­ing phi­lan­thropist Wal­lis An­nen­berg and Suzanne Dworak-Peck, a prom­i­nent so­cial worker.

Wealth is a com­mon thread in the trustee ros­ter. About a dozen are bil­lion­aires, in­clud­ing de­vel­oper Ed Roski; Miriam Adel­son, an ad­dic­tion spe­cial­ist and the wife of casino owner Shel­don Adel­son; Sales­force Chief Ex­ec­u­tive Marc Be­nioff; and Ta­mara Hughes Gus­tavson, the daugh­ter of Pub­lic Stor­age Inc. co-founder B. Wayne Hughes.

Some on the board are USC alums, such as Be­nioff, con­struc­tion mag­nate Ron­ald Tu­tor, and David Bohnett, a phi­lan­thropist and tech­nol­ogy in­vestor.

Over the years, more in­ter­na­tional fig­ures have joined the ranks, in­clud­ing the head of Korean Air, Yang Ho Cho; In­dian in­dus­tri­al­ist Ratan N. Tata; and Wenxue Wang, a Chi­nese de­vel­oper.

The trustees’ pub­lic si­lence is not sur­pris­ing, non­profit gov­er­nance ex­perts said — many boards choose to speak with a uni­fied voice dur­ing in­ves­ti­ga­tions, es­pe­cially when in­for­ma­tion is still com­ing out.

But the trustees should in­ter­nally be ex­am­in­ing their prac­tices and com­mu­ni­ca­tions, said Cath­leen Kaveny, a Bos­ton Col­lege pro­fes­sor who spe­cial­izes in law, ethics and med­i­cal ethics.

“The board can’t let it­self off the hook. This is a ques­tion of trustee ethics,” Kaveny said. “A healthy board is going to ask it­self: ‘Have we par­tic­i­pated in the cre­ation of a cul­ture where the most egre­gious eth­i­cal lapses are ig­nored be­cause the money is com­ing in?’ ”

Nikias an­nounced last month that the univer­sity was hir­ing a for­mer fed­eral pros­e­cu­tor, Debra Wong Yang, to lead the out­side in­ves­ti­ga­tion. USC would not say whether it was the board or Nikias who se­lected Yang.

In re­sponse to ques­tions about who made the choice and who would over­see the in­ves­ti­ga­tion, Mork re­leased an­other state­ment to The Times on Mon­day. In it he wrote that the pres­i­dent and top ad­min­is­tra­tion of­fi­cials “reg­u­larly en­gage with the board’s ex­ec­u­tive com­mit­tee to pro­vide up­dates and seek ad­vice on im­por­tant mat­ters re­lated to the univer­sity.”

Nikias said in his July 21 let­ter to the USC com­mu­nity that Yang will re­port “find­ings and rec­om­men­da­tions” to the ex­ec­u­tive com­mit­tee.

Yang has close ties to USC and served as the univer­sity’s at­tor­ney in at least four court cases.

Among the ques­tions Yang is likely to ex­am­ine: What did top ad­min­is­tra­tors know about Pu­li­afito’s prob­lems while he was lead­ing the med­i­cal school?

Cur­rent and for­mer univer­sity em­ploy­ees told The Times that in 2012 when the univer­sity was de­cid­ing whether to give Pu­li­afito an­other term, they com­plained re­peat­edly about what they con­sid­ered Pu­li­afito’s hair-trig­ger tem­per, pub­lic hu­mil­i­a­tion of col­leagues and per­ceived drink­ing prob­lem, and many were adamant he should be re­moved.

Still, Nikias opted to reap­point Pu­li­afito, giv­ing him a new fiveyear term with an an­nual salary of more than $1 mil­lion.

In March 2016, the then-dean was with a 21-year-old wo­man in a Pasadena ho­tel room when she over­dosed.

A wit­ness to the over­dose phoned Nikias’ of­fice 10 days later and threat­ened to go to the me­dia if the school didn’t take ac­tion against the dean. In a let­ter to the cam­pus com­mu­nity re­leased July 28 — 11 days af­ter The Times broke the story — Nikias said that two re­cep­tion­ists who spoke to the wit­ness did not find the re­port cred­i­ble and did not pass it on to su­per­vi­sors.

A week and a half af­ter the wit­ness called Nikias’ of­fice, Pu­li­afito re­signed. The Har­vard-trained oph­thal­mol­o­gist was al­lowed to con­tinue see­ing pa­tients at USC clin­ics, rep­re­sent the univer­sity at of­fi­cial func­tions and re­main on the fac­ulty.

Gov­er­nance and ethics ex­perts said Nikias’ role on the board de­serves scru­tiny.

Kirk Han­son, the ex­ec­u­tive di­rec­tor of the Markkula Cen­ter for Ap­plied Ethics at Santa Clara Univer­sity, said it is not un­com­mon for a pres­i­dent to serve as a vot­ing mem­ber of a board. But if as­sess­ing his ac­tions is part of the in­ves­ti­ga­tion, Han­son said, Nikias should re­cuse him­self.

“It would be best prac­tice to have the board su­per­vise the in­ves­ti­ga­tion and dis­cuss find­ings without him present,” Han­son said.

A USC spokesman de­clined to say whether Nikias would re­cuse him­self or whether the re­sults of the in­ves­ti­ga­tion would be made pub­lic.

Po­li­akoff said USC might help it­self by be­ing trans­par­ent in the process.

“Se­crecy is some­thing that needs to have a com­pelling jus­ti­fi­ca­tion,” Po­li­akoff said. “And when an in­sti­tu­tion has been in such a rep­u­ta­tional cri­sis as USC is cur­rently ex­pe­ri­enc­ing, sun­shine is in­deed … the best dis­in­fec­tant.”

Mar­cus Yam Los An­ge­les Times

THE USC cam­pus at dusk. Com­posed of 57 vot­ing mem­bers, the school’s board of trustees in­cludes phi­lan­thropists, alumni, Hol­ly­wood in­sid­ers and in­dus­trial ty­coons.

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