Testimony on UA files to yield no prosecution

Conflicting testimony under oath to legislators last September by the University of Arkansas at Fayetteville's chancellor and the school's former spokesman doesn't measure up to grounds for prosecution, according to a letter released Monday by 6th Judicial Circuit Prosecuting Attorney Larry Jegley.

Statements by Chancellor G. David Gearhart and former spokesman John Diamond may have contained "differing versions" of events, the Pulaski County prosecutor's letter said.

But "none rise to meet the standards meriting further actions" under state perjury laws, Jegley said.

On Sept. 13, Diamond told the Legislative Joint Auditing Committee that Gearhart had ordered school officials to "get rid of" records regarding an embarrassing, multimillion-dollar deficit in the school's fundraising division.

Gearhart, also under oath, told legislators at that hearing that he had never ordered anyone to destroy documents and called Diamond a "disgruntled" former employee.

"While there may be differing versions of the events and discussion concerning the matters at issue, none rise to meet the standards meriting further actions under [Arkansas] Code [Annotated] Section 5-53-102. We now consider this matter closed," Jegley's letter said.

The letter cites a section of Arkansas law titled "Perjury generally." It says: "A person commits perjury if in any official proceeding he or she makes a false material statement, knowing it to be false, under an oath required or authorized by law."

Jegley could not be reached for further comment late Monday afternoon.

Through 2013, the UA's University Advancement Division's cumulative overspending -- eventually calculated at $4.2 million -- became the focus of two state audits, three legislative hearings and three prosecutorial reviews.

Officials said they found no fraud or personal gain in the overspending though they questioned the university's accounting practices.

In a statement issued by the university Monday, Gearhart praised Jegley's diligence: "I believe this is the appropriate conclusion."

Diamond, who now works for the University of Wisconsin System, declined to comment Monday. He had not seen Jegley's letter.

Two other top officials in the Advancement Division at the time, Graham Stewart and Bruce Pontious, also told prosecutors that Gearhart had said to "get rid of" financial documents during the Jan. 14, 2013, meeting Diamond described.

A university finance officer who was at that meeting, Denise Reynolds, supported Gearhart's account.

Diamond was fired last August. University officials said he was insubordinate and his relationship with top officials had deteriorated. Diamond has said the firing came in part because he voiced his opinion that UA wasn't following the state's open-records law.

One of the legislators who heard Gearhart's and Diamond's testimonies said Monday that Jegley's decision didn't resolve his concerns.

"I still have my doubts about Gearhart's testimony," said Sen. Bryan King. The Berryville Republican co-chaired the Legislative Joint Auditing Committee at the Sept. 13 meeting where the testimony took place.

Records show that the deficit by the University Advancement Division caught university leaders by surprise when they first discovered it in early July 2012.

An October 2012 report by university treasurer Jean Schook cited Brad Choate, vice chancellor of advancement, for lack of oversight and Joy Sharp, his budget officer, for lack of expertise in budgetary matters.

Gearhart revealed the overspending in a December 2012 news release. He refused to release Schook's report until February 2013, four days after the Arkansas Democrat-Gazette filed a lawsuit. That same month, Gearhart requested audits from the state Legislative Audit Division and UA system auditors, saying he felt pressured by editorials in the Democrat-Gazette.

The audits, released in September 2013, found numerous matters of questionable accounting regarding the deficit. The university says it has since covered the financial shortfall from reserves and says the Advancement Division will repay the money.

Auditors last fall referred potential criminal allegations found in their review to the 4th Circuit prosecutor's office in Fayetteville. Last December, deputy prosecutor Dave Bercaw found no grounds for criminal charges though his report outlined breakdowns in the university's budgeting and internal financial controls.

But Bercaw said he had no jurisdiction in the legislative testimony because it took place at the state Capitol in Little Rock.

Bercaw also declined in April to prosecute the university's top financial officer, Don Pederson, over statements he made to auditors a few months after the university discovered the shortfall.

Pederson had received the university treasurer's report a few days before meeting with auditors. Legislators later questioned whether Pederson should have revealed the overspending problem.

They also questioned whether he was truthful in signing a routine audit letter that said he knew of no fraud, suspected fraud or allegations of fraud on the Fayetteville campus during the fiscal year. The treasurer's report, while noting no fraud had been discovered, noted that the risk of fraud had been present.

At least a half-dozen top advancement division officials have left their UA jobs since the deficit was discovered. Choate and Sharp left the university last June 30. Besides Diamond, Stewart and Pontious left in the past year. Pederson is retiring effective this June 30.

A Section on 06/03/2014

Upcoming Events