It's foundational: Ruling reaffirms that how universities invest donors' money is the public's business



A public university sets up a fundraising apparatus to collect and invest money exclusively for the support of the university. That’s a public activity, covered by public disclosure responsibilities. Common sense, right?

Increasingly, it’s also the law.

In an April 24 ruling, North Dakota’s attorney general reaffirmed that university foundations must respond to requests to inspect and copy their records, just like the universities they sustain.

Attorney General Wayne Stenehjem’s advisory ruling came in response to a request from a reporter for The Dickinson Press, who was looking into real-estate investments made by Dickinson State University and its foundation.The foundation is locked in a court battle over management of a senior-living facility, built on university property. Disagreements over that project, and over a student apartment building the foundation built and manages, caused a rift provoking several foundation board members to resign.

The DSU Foundation refused to release internal correspondence about the senior-living center and student residences, claiming the foundation is a private corporation not covered by North Dakota’s public-records law. But Stenehjem said even a private corporation can be subject to the open-records act if it performs a “governmental function,” as university foundations do:

The DSU Foundation exists solely to support and aid DSU. Any activities that the DSU Foundation performs on DSU’s behalf, such as aiding or supporting DSU, are ‘governmental functions’ subject to the open records act.

Stenehjem directed the foundation to sift through its emails and turn over everything the Press requested, withholding only documents legitimately exempt as attorney work product.

When journalists seek access to the financial records of university foundations, they usually succeed. While some states protect the names of donors by statute, records reflecting how donors’ money is invested and spent are far more likely to be available. At least 12 states have explicitly declared the records of public universities’ foundations to be open for public inspection.

Public disclosure of these documents is essential. Recently, access to the minutes of foundation board minutes helped reporters at Cleveland’s Plain Dealer document how the Ohio State University Foundation loosened its investment standards just as President Gordon Gee was retiring, enabling the foundation to steer $50 million into a new-and-untested investment fund run by two California money managers friendly with Gee and Ohio Gov. John Kasich.

Emails later released by OSU show that Gee, while serving as president, was also helping introduce a founder of the Drive Capital investment firm to other prospective university clients. And just a few months after the university agreed to let Drive manage $50 million from its $7 billion foundation, Gee sought and received clearance to solicit a co-founder of Drive for a $1.5 million donation to Ohio State.

The suspicious eagerness to steer millions of donors’ money to political insiders might never have come to light without the benefit of public-disclosure laws. Which is why venture-capital firms have spent years trying to convince state legislatures to conceal the terms of their investment agreements with college foundations.

Are foundations in your state required to disclose their records? Check out the SPLC’s guide to obtaining records from university foundations.

Tagged: Dickinson State University, newsgathering, North Dakota, open records, public records, university foundations