Accused executives pose challenge for schools

Ethical issues over gifts and names of buildings

October 19, 2003|By Ameet Sachdev | Ameet Sachdev,CHICAGO TRIBUNE

CHICAGO -- As testimony began last week in the trial of L. Dennis Kozlowski, officials at Seton Hall University in New Jersey watched with more than casual interest.

One of its lecture halls is named after Kozlowski, the former Tyco International Ltd. chairman and chief executive who is accused, along with another executive, of stealing $600 million from the company.

Some faculty and students want the Catholic university to remove the name from Kozlowski Hall, an elegant sandstone building with a large marble-floored atrium. But the administration has held off on any action.

"The university is unwilling to speculate on what course of action might be taken when that case is resolved," said spokeswoman Robina Schepp.

Seton Hall's problem -- accepting money from someone who went on to be accused of wrongdoing -- is part of a broader ethical challenge for colleges, especially those facing budget constraints because of reduced state funding or alumni contributions, or declines in their investment portfolios.

During the stock market boom, universities targeted business executives and corporations for gifts. But in today's charged regulatory environment, schools say they are more sensitive about the integrity of their donors. They don't want to be embarrassed like a number of universities where the names gracing buildings or professorships have become tainted.

The University of Missouri has an endowed chair in economics named for alumnus Kenneth L. Lay, former chief executive of Enron Corp., which became a symbol for corporate scandals.

The Kellogg School of Management at Northwestern University in Evanston, Ill., found itself in an awkward position last year when the Andersen accounting firm collapsed.

Part of the graduate business school is housed in a building named for Arthur Andersen, the founder of the 89-year-old firm and one-time accounting professor. The school, however, gave little thought to removing his name, said Dean Dipak Jain.

"We feel that he was a great contributor to management education," he said. "I separate the individual from the institution."

But some of the faculty at Missouri have a hard time making a similar distinction with Lay, who donated $1.1 million in Enron stock in 1999. (University officials cashed in the Enron shares because of the school's policy to immediately sell all stock donations.)

Although Lay has not been charged with any crime in connection with the Enron debacle, many damaging facts about his corporate stewardship have emerged, enough to convince some professors that the school should return the money.

"Lay was CEO of an enterprise that cheated," said Paul Wallace, professor emeritus of political science. "We feel a chair should relate to some degree of ethics." In public remarks last year, Missouri's Chancellor Richard Wallace said that if Lay were to be found guilty of wrongdoing, the university would remove his name from the professorship and return the money.

Schools are taking steps to protect their reputations in case a donor falls into disrepute. Some have added legal clauses to gift agreements that reserve the school's right to remove or change a name, said Martin Grenzebach, a Chicago-based philanthropy consultant.

Seton Hall did just that in December. Its gym was named for Robert E. Brennan, the flamboyant former head of now-defunct First Jersey Securities, who was convicted of bankruptcy fraud and money laundering in 2001. The school removed Brennan's name from the recreation center. It did not give back his money.

The Chicago Tribune is a Tribune Publishing newspaper.

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