Re­port: Top UC of­fi­cials med­dled in au­dit

San Francisco Chronicle Late Edition - - NEWS - By Nanette Asi­mov

Of­fi­cials in the Univer­sity of Cal­i­for­nia pres­i­dent’s of­fice im­prop­erly in­ter­fered with a state au­dit of UC fi­nances, in­structed cam­puses not to “air dirty laun­dry” in an au­dit sur­vey, and mis­led the re­gents about why they did it, ac­cord­ing to an in­ves­tiga­tive re­port re­viewed Tues­day by The Chron­i­cle.

The in­de­pen­dent in­ves­ti­ga­tion by for­mer state Supreme Court Jus­tice Car­los Moreno into au­dit tam­per­ing finds ev­i­dence that two top ex­ec­u­tives in UC Pres­i­dent Janet Napoli­tano’s of­fice — Chief of Staff Seth Gross­man and Bernie Jones, his deputy — di­rected the in­ter­fer­ence and over­saw changes to con­fi­den­tial sur­vey an­swers from three cam­puses to put UC head­quar­ters in a bet­ter light. Gross­man and Jones also sought to keep the mat­ter se­cret, warn­ing each other by text mes­sages to keep com­mu­ni­ca­tions “off of email.”

The re­port found that a third UC ex­ec­u­tive, Deputy Gen­eral Coun­sel Karen Petru­lakis, of­fered her own sur­vey revi-

sions, but also rec­om­mended that UC of­fi­cials in­form the state au­di­tor that they were chang­ing sur­vey an­swers that were sup­posed to be con­fi­den­tial re­sponses from cam­puses. That didn’t hap­pen. Petru­lakis left UC in July, and Gross­man and Jones re­signed last week.

The re­port also raises ques­tions about the role of UC Gen­eral Coun­sel Charles Robinson, who in­ves­ti­ga­tors say had con­cerns about the in­volve­ment of the pres­i­dent’s of­fice with the sur­veys. He called the le­gal risk “low but not zero,” ac­cord­ing to the re­port, and warned of the “po­lit­i­cal risk” of in­ter­fer­ing.

Moreno’s 65-page re­port, ex­pected to be re­leased Thurs­day, points no fin­ger of blame at Napoli­tano. It says she “forthrightly ac­knowl­edged her role in ap­prov­ing a plan” that re­sulted in in­ter­fer­ence. The re­port also says she was present at a din­ner meet­ing with her staff and some chan­cel­lors on Nov. 10, 2016, dis­cussing the state au­dit.

How­ever, the re­port con­tra­dicts state­ments Napoli­tano had made pub­licly to the re­gents and to state law­mak­ers, in which she as­sured them that cam­pus of­fi­cials were con­fused by the sur­vey ques­tions and asked her staff for help.

Moreno’s in­ves­ti­ga­tors say it was the other way around: Napoli­tano’s staff re­quired the cam­puses to show them their sur­vey re­sponses, then changed or deleted some an­swers to make her of­fice look bet­ter.

“While some (cam­pus vice chan­cel­lors) con­tacted UC of­fi­cials in Oak­land to in­form them they had re­ceived the sur­veys, there is no ev­i­dence that any (cam­pus vice chan­cel­lors) ex­pressed ‘con­fu­sion’ to UC se­nior lead­ers be­fore” the pres­i­dent’s of­fice be­gan plan­ning to re­view their sur­vey an­swers, in­ves­ti­ga­tors said.

The au­dit sur­vey was la­beled con­fi­den­tial and not to be shared out­side of the cam­puses. Its pur­pose was to let State Au­di­tor Elaine Howle hear in­de­pen­dently from cam­puses about the qual­ity of ser­vices pro­vided by Napoli­tano’s of­fice, and whether they were use­ful or a waste of money.

But Gross­man and Jones held a con­fer­ence call with the cam­puses’ as­so­ciate chan­cel­lors around the time of the Novem­ber din­ner meet­ing and told them that the sur­vey was “not the time and place to air dirty laun­dry,” ac­cord­ing to the re­port. The two ex­ec­u­tives also texted to each other: “Don’t want any­thing in email that could be prob­lem­atic if made it [sic] way back to the au­di­tor,” in­ves­ti­ga­tors found.

Through a spokesman, Gross­man called his role in the mat­ter “very lim­ited.” He said UC’s in­ter­nal au­dit staff had rec­om­mended that the pres­i­dent’s of­fice re­view the sur­vey re­sponses and that UC’s at­tor­neys had ap­proved it.

“The univer­sity’s at­tor­neys were di­rectly in­volved in work­ing with Bernie ( Jones) and the cam­puses’ re­sponses to the sur­veys,” he said through the spokesman, Nathan Bal­lard.

But the in­ves­ti­ga­tors said they found “lit­tle sup­port for the idea that the gen­eral coun­sel blessed the ac­tiv­ity.”

Jones de­clined to com­ment on the au­dit, and Petru­lakis could not be reached.

Dianne Klein, Napoli­tano’s spokes­woman, said ear­lier that the pres­i­dent “takes full re­spon­si­bil­ity for the fact that her of­fice re­viewed cam­pus sur­vey re­sponses be­fore they were sent to the state au­di­tor. She has pub­licly apol­o­gized for this. As she has said pre­vi­ously, had she to do this over again, she would not have ap­proved this ap­proach.”

Klein added that Napoli­tano has es­tab­lished a sys­tem at UC head­quar­ters to pre­vent fu­ture in­ter­fer­ence with state au­dits.

On Thurs­day in San Fran­cisco, the re­gents are ex­pected to pri­vately grill Napoli­tano and Robinson, UC’s top lawyer, not only about why they al­lowed the tam­per­ing, but why they mis­led the re­gents about their in­volve­ment with as­sur­ances that the cam­pus of­fi­cials had asked their staff for help with the sur­veys.

A new Cal­i­for­nia law, prompted by the UC con­tro­versy, goes into ef­fect Jan. 1 and im­poses a $5,000 fine on agen­cies that in­ter­fere with a state au­dit.

At UC, the sur­vey of cam­puses was part of Howle’s 2016 au­dit of Napoli­tano’s Oak­land of­fice and its then-$686 mil­lion an­nual bud­get. The bud­get is now $813.5 mil­lion.

The over­all au­dit found that the pres­i­dent’s of­fice had ac­cu­mu­lated $175 mil­lion in funds it hadn’t dis­closed to the pub­lic, had paid its staff far higher than com­pa­ra­ble state em­ploy­ees, and had re­lied on weak bud­get prac­tices that kept the re­gents un­clear about how money was spent.

Howle re­leased the au­dit in April and said she had been forced to dis­card the cam­pus sur­vey re­sults be­cause UC head­quar­ters had breached their con­fi­den­tial­ity.

Emails ob­tained by The Chron­i­cle in May showed that Howle learned of the in­ter­fer­ence when UC Santa Cruz sent her its sur­vey — then took it back. When the cam­pus re­sub­mit­ted its sur­vey to Howle, sev­eral an­swers had been changed: Tech­nol­ogy help from the pres­i­dent’s of­fice ini­tially rated as “poor” had be­come “good.” Rat­ings for three other ser­vices had been changed from “fair” to “good,” and three more had changed from “good” to “ex­cep­tional.”

Howle’s in­quiries re­vealed that an­swers had been deleted and changed at two other cam­puses.

UC San Diego’s rat­ing of one ser­vice had flipped from “dis­sat­is­fied” to “sat­is­fied.” And at UC Irvine, one rat­ing had switched from “OK” to “sat­is­fied,” and oth­ers from “sat­is­fied” to “very sat­is­fied.”

Ad­di­tional emails be­tween UC head­quar­ters and cam­puses ob­tained by The Chron­i­cle shed more light on the tam­per­ing and in­di­cate that Napoli­tano had been briefed on her staff ’s re­views of cam­pus re­sponses.

Moreno’s re­port up­holds th­ese find­ings.

In June, amid the tan­gle of al­le­ga­tions, an­gry re­ac­tions from state law­mak­ers and Gov. Jerry Brown, and de­fen­sive state­ments from UC lead­er­ship, the re­gents hired Moreno and an Or­ange County law firm, Hue­ston Hen­ni­gan, to sort out what hap­pened. The for­mer state Supreme Court jus­tice re­tired from the bench in 2011 and now works for a dis­put­eres­o­lu­tion com­pany called Jams.

Moreno was hired weeks af­ter state law­mak­ers ques­tioned Napoli­tano and then­re­gents Chair­woman Mon­ica Lozano in Sacramento for 4½ hours on May 2.

“I deeply be­lieve the trust that has ex­isted be­tween the Leg­is­la­ture and UC has been eroded and that much more trans­parency is needed,” Assem­bly­man Jose Me­d­ina, DRiver­side, chair­man of the Assem­bly Higher Ed­u­ca­tion Com­mit­tee, said dur­ing the hear­ing. “To say this is a black eye on the UC is an un­der­state­ment.”

Howle told law­mak­ers: “I’ve never had a sit­u­a­tion like that in my 17 years as state au­di­tor.”

In her tes­ti­mony, Napoli­tano said her of­fice “did things ap­pro­pri­ately,” but apol­o­gized for cre­at­ing “the wrong im­pres­sion.”

She said her staff be­came in­volved with the sur­vey be­cause the cam­puses asked them to. “Some on the cam­puses reached out to (head­quar­ters) with ques­tions and a re­quest for help with co­or­di­nat­ing the re­sponses,” she tes­ti­fied.

Lozano de­fended Napoli­tano and her staff at the hear­ing, but promised that the re­gents would im­prove over­sight of her of­fice and its bud­get.

On May 11, Brown an­nounced he was with­hold­ing $50 mil­lion from UC’s 2017-18 bud­get un­til UC made progress fix­ing the fi­nan­cial prob­lems iden­ti­fied in the au­dit and met other con­di­tions set by his of­fice.

The re­gents will hear an up­date on those re­pairs on Wed­nes­day, the first day of their two-day meet­ing in San Fran­cisco. The re­gents are ex­pected to dis­cuss the Moreno re­port pri­vately on Thurs­day morn­ing be­fore re­leas­ing it to the pub­lic.

Janet Napoli­tano, UC pres­i­dent, is not blamed for the sur­vey tam­per­ing.

On­line: The Chron­i­cle’s cov­er­age of the state au­dit and links to emails re­gard­ing the re­view of cam­pus sur­vey re­sponses at www.sfchron­i­cle.com/ucau­dit

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