K-State ‘freezing’ relationship with KSU Foundation

Published 3:45 pm Monday, April 22, 2024

By Chanda Veno, Frankfort State Journal

In a letter sent to Kentucky State University alumni and stakeholders on Sunday, the KSU Board of Regents chair stated that the university is “freezing” its relationship with the Kentucky State University Foundation (KSUF).

In the letter, K-State Board of Regents Chair Tammi Dukes noted that the foundation has played a crucial role in supporting the university’s students and mission.

“Donors entrusted their funds to the foundation with the expectation that they would be utilized for the betterment of our beloved institution,” she wrote.

“However, recent events have cast a shadow of doubt on the transparency and stewardship of these funds.”

The KSU Foundation was established in 1968 by the Board of Regents and for 21 years members of the Board of Trustees were appointed by the regents to the foundation. In 1989, the Board of Regents disaffiliated with the KSUF and agreed that all donations and funds deposited at the foundation were “exclusively for the benefit of Kentucky State University,” according to the letter.

In the letter, Dukes indicates that the Board of Regents has continuously made efforts to work collaboratively with the foundation but has been “faced with challenges in obtaining confirmation of deposits made by agents of KSU and donors into the appropriate accounts since April 2022.”

“Despite the university’s repeated and written requests for records and invitations from the Board of Regents to participate in committee meetings to foster open dialogue, the foundation has chosen to pursue legal action to keep their records hidden from the public and, presumably, our institution,” Dukes stated.

She also noted that when the university sought information from the foundation, it responded saying that funds “may be used for the benefit of Kentucky State University or any other educational entity.”

“The Board of Regents cannot remain idle as the foundation continues to spend funds fighting a lawsuit to prevent the disclosure of their records,” the letter says, adding that after much deliberation the decision to freeze the relationship between the two entities was made.

Effective immediately, all accounts established for the benefit of K-State and held by the foundation, will cease any and all expenditures. In fact, no funds will be deposited to the foundation and no disbursements will be authorized without the written approval of KSU President Koffi C. Akakpo until the KSUF provides all requested documentation and trust is restored in the integrity of the accounts established for the benefit of students and the mission of the university.

Last month, three Kentucky Court of Appeals judges agreed with Franklin Circuit Court Judge Phillip Shepherd’s ruling, which granted summary judgment and attorneys’ fees in a lawsuit brought against The State Journal by the KSUF.

In a unanimous opinion released on March 1, Court of Appeals Deputy Chief Judge Pamela Goodwine, Judge Glenn Acree and Judge Allison Jones concurred with the lower court that the KSU Foundation is a public agency, and as such, must comply with open record requests.

The court concluded that KSUF “was created as a public agency by a public agency; therefore and thereafter, Appellant, a public agency, empowered its public agency board members to perpetuate its existence by selecting successor boards in a way that, to quote the circuit court again, ‘does not … break the chain of appointment by a public agency.’”

It added that KSUF, which is a nonprofit agency that accepts donations from any source for the purpose of benefiting the university, is “an entity where the majority of its governing body is appointed by a public agency …”

The State Journal’s original open records request to the KSUF in May 2021 was for documentation regarding former K-State President M. Christopher Brown II’s travel and birthday party expenses and any payments over $1,500.

The KSU Foundation denied the request and the newspaper filed an appeal to the Office of the Attorney General (OAG) in September 2021.

“From the evidence in this record, the foundation appears to be the same entity it was in 1989, prior to the court’s holding in Kentucky State University Foundation Inc. that the foundation is a public agency,” Assistant Attorney General Matthew Ray wrote, opining in favor of The State Journal. “… The foundation’s claim that it is a different entity than the one before the court in 1992 is not supported by the record before this office.”

In the absence of that evidence the Office of the Attorney General found that the KSUF is still a public agency and required to provide responsive records.

The following month, the foundation — represented by Frankfort attorney Ed Logan of Logan Burch & Fox — appealed the OAG decision in hopes that the Franklin Circuit Court would assert that the KSU Foundation is not a public agency and wouldn’t need to release the records requested by The State Journal.

In the Franklin Circuit Court’s ruling in 2022, Shepherd cited that the KSU Foundation falls under two of the 11 subsections of KRS 61.870 because it is “established, created and controlled by the university” and the manner with which “its board is appointed.”

The KSUF then took its case to the Court of Appeals — alleging that the circuit court erroneously concluded the foundation met the definition of a public agency under KRS 61.870(l)(j), which says “entity is a public agency if it is ‘controlled by a public agency,’” and that the court abused its discretion when it awarded attorneys’ fees.

In its opinion, the Court of Appeals wrote that nearly every contractual obligation undertaken by the KSU Foundation is for the benefit and priorities of the university.

The foundation argued that it did not act in bad faith when it refused to produce the requested public records. The Court of Appeals disagreed.

“Notwithstanding [KSUF’s] protestations, its withholding of public documents was not a ‘mere refusal to furnish records based on a good faith claim of statutory exemption, which is later determined to be incorrect’ by the circuit court and now this court,” the opinion reads.

“Not only do we conclude the circuit court was not clearly erroneous in finding the public documents willfully withheld, we conclude it was not an abuse of discretion to award attorneys’ fees under KRS 61.882(5).”

The appellate court also awarded supplemental attorneys’ fees and costs.

Dukes noted in the letter to stakeholders that the hope is that the situation with KSUF can be resolved swiftly and amicably.

“We call upon the KSU Foundation to cease their lawsuit and cooperate fully with out requests for transparency,” Dukes added.

“The records requested by the Board of Regents are the receipts of how funds were spent on behalf of Kentucky State University; as of today, a complete accounting of spending has not been received. The funds we have entrusted to the foundation are critical to the long-term success of Kentucky State University and it is imperative that they are managed with the utmost care, integrity and openness.”

Until the issue is resolved, any donations for the university should be sent to Kentucky State University Attn. Institutional Advancement, 400 E. Main St., Frankfort, KY 40601.

The letter also notes that K-State has managed and operated its own endowment that had a market value of $22,345,626.97, as of March 31.

The last update received from the foundation in June 2022 indicates its net assets have a market value of $12,273,927.

The Board of Regents plan to keep alumni and stakeholders updated on the developments to repair its relationship with KSUF.

“However, if the foundation continues to refuse to align with our mission of solely supporting Kentucky State University’s students and programs, as well as continues with the obstruction of transparency of funds to benefit said students with their lawsuit, we will be prepared to dissolve our relationship with the foundation and request an immediate transfer of all funds to Kentucky State University,” Dukes wrote. “Should that occur, all donor restrictions and intent will be honored in the promotion and disbursement of funds by KSU.

“Thank you for your continued dedication to Kentucky State University. Together, we will overcome this challenge and emerge stronger than ever.”