Stevens Institute of Technology President sued for plundering the endowment and receiving $1.8 million in illegal low-interest loans

Stevens Institute of Technology President sued for plundering the endowment and receiving $1.8 million in illegal low-interest loans 

New Jersey College Is Beset by Accusations

Publication: NYTimes
Date: December 22, 2009

In the 1990s, the president of Adelphi University was accused of receiving excessive compensation and forced from office. Since then, the leaders of American, Towson, Texas Southern and other endowment-poor universities have also crashed to earth after plunging their institutions into turmoil for similar excesses.

Now, charges are swirling over Stevens Institute of Technology in Hoboken, N.J. The state attorney general has sued the institute and its president, Harold J. Raveché, accusing him of plundering the endowment and receiving $1.8 million in illegal low-interest loans for vacation homes, with half of them later forgiven.

The institute’s trustees tripled Dr. Raveché’s salary over a decade, to $1.1 million last year, higher than presidential salaries at Harvard, M.I.T. and Princeton, and, the lawsuit says, Stevens used multiple sets of books to hide its deteriorating financial condition.

“We found extensive misconduct going back years, a pattern of misinformation to the board and misuse of the endowment,” the attorney general, Anne Milgram, said in an interview this month. “Stevens Institute needs real reform.”

Ms. Milgram, citing her oversight responsibilities for New Jersey nonprofits, filed suit on Sept. 17, naming Dr. Raveché; Lawrence T. Babbio Jr., the chairman of the institute’s board and a former Verizon president; and the Stevens trustees as defendants.

Dr. Raveché’s lawyer, Angelo Genova, said he would not allow his client to be interviewed. A Stevens spokesman, Peter McDonough, took written questions about Dr. Raveché’s salary, mortgage loans and expense billings, and lawyers for the board responded, “We cannot comment on the issues raised by the attorney general because they are part of the ongoing litigation.”

Jack B. Siegel, a Chicago lawyer who follows nonprofit cases nationwide, called the allegations against Stevens “the case of the year” because, unlike previous campus scandals focusing on presidents’ salaries or spending, the case against Stevens outlines a sweeping list of accusations.

“You’ve got allegations involving excessive compensation, but also abuse of the endowment, keeping two sets of books, misleading the board and forgiveness of below-market-rate loans,” Mr. Siegel said. “The entire process of oversight looks tainted. You rarely see a case this extreme.”

The Internal Revenue Service has its own continuing investigation that “includes issues pertaining to defendant Raveché’s compensation,” the suit says. It also notes that Stevens paid the I.R.S. $750,000 last year in penalties and unpaid taxes for several of its spinoff technology companies.

Steve Cuff, a Stevens alumnus who founded a California technology firm and served on Stevens’s board for 10 years, said Dr. Raveché had packed it with loyalists.

“They were all beholden to him, and there were no controls on what he spent,” Mr. Cuff said. “He’d travel the world, keeping no receipts. He’d come to the West Coast, have limousines meet him, stay in five-star hotels, all under the guise of raising money. And it was very, very expensive.”

Maureen Weatherall, a Stevens vice president, said Dr. Raveché was a visionary leader who had rejuvenated the institute since becoming its president in 1988, building undergraduate enrollment to 2,240 and graduate enrollment to 3,700. The endowment grew to $155 million last year from $57 million in 1988, she said.

The state’s suit says that the endowment was valued at $157.5 million in 2000, but because the institute borrowed from it repeatedly in the years since, it is now “worth less than $115 million.”

Dr. Raveché has a bachelor’s degree in chemistry from Hofstra University and a Ph.D. in physical chemistry and statistical mechanics from the University of California, San Diego. From 1985 to 1988, before going to Stevens, he served as dean of science at Rensselaer Polytechnic Institute in Troy, N.Y.

The turmoil at Stevens can be traced to 2004, when Moody’s downgraded its bond ratings to near junk status because of operating deficits and rising debt. A faculty committee, led by Donald N. Merino, a professor of technology and engineering management, had studied the institute’s tax returns and other public financial reports, and concluded that administrative salaries were excessive and that Stevens’s finances were deteriorating.

Ms. Milgram said her investigation began with reports from a faculty whistle-blower.

“There’s no question, I’m the main whistle-blower, and it’s not been easy,” Dr. Merino said. “They are making my life miserable.”

Among surprises in the faculty’s 2004 report was that Stevens, which provides Dr. Raveché with a brick colonial residence with a view of the Manhattan skyline, had extended him three mortgage loans totaling $1.8 million for two vacation homes, one in Mount Snow Valley, Vt., and the other near the Jersey Shore. The suit calls those loans “unlawful.”

In a 2005 interview with The Chronicle of Higher Education, Dr. Raveché justified the loans by saying that he frequently used the two homes for college fund-raising events.

In that same period, The Chronicle put Dr. Raveché on its list of the country’s highest-paid college presidents. Ms. Milgram’s complaint quotes Stevens trustees as saying that they first learned of his compensation not from board deliberations to approve it, but from that report.

One Stevens trustee, the founder of New York Waterway, Arthur E. Imperatore Sr., demanded a full accounting of Stevens’s finances at a fall 2005 board meeting, but got little support, said Richard S. Muller, a professor emeritus of electrical engineering at the University of California, Berkeley, and a Stevens board member who attended the meeting.

“Arthur stood up and resigned, right then and there,” he said. Dr. Muller, a member of the National Academy of Engineering, said he also soon left the board, but not before leveling his own criticisms.

In a 2005 e-mail message that Dr. Muller said he sent to other Stevens trustees, he referred to the Berkeley chancellor, whose salary that year was about $400,000, one-third less than that of Dr. Raveché, yet “heads a campus with 35,000 students, seven Nobel laureates and nearly 200 National Academy members.” He called Dr. Raveché’s salary a “gross error.”

“One, Hal is not worth it; two, it is wildly out of line with any reasonably benchmarked comparative situation; three, it alienates alumni and erodes faculty confidence; and four, Stevens is nearly broke and cannot afford it,” Dr. Muller wrote.

The state’s suit says that in 2005, two independent compensation consultants told a committee of Stevens trustees that the president’s salary was excessive. That information was withheld from the full board, according to the suit. Furthermore, it says, to justify his salary, Dr. Raveché insisted that one consultant benchmark it against the presidents of elite universities including Johns Hopkins, which has a research budget 50 times larger than Stevens’s.

The Stevens board has rejected calls by the faculty for an independent audit. On Sept. 2, Ms. Milgram met with the board at the campus, outlining her accusations and offering to negotiate a settlement if Dr. Raveché and the chairman, Mr. Babbio, would step down.

Instead, the board went to court seeking, unsuccessfully, to persuade Judge Thomas P. Olivieri of New Jersey Superior Court to seal the proceedings in her lawsuit to avoid “devastating consequences” that could result from it. Stevens has not yet responded to the state’s specific accusations.

Resource Box

School Newspaper Reports:
The Stute Feb 11, 2005        The Stute Feb 18, 2005


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