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Report Says Forgivable Loans to University of Texas Faculty Inappropriate

According to a report released by the University of Texas System, Larry Sager’s process to obtain a $500,000 forgivable loan for himself created “an impression of self-dealing that cannot be condoned” and should be suspended permanently. The report was written by Barry Burgdorf, the University of Texas System Vice Chancellor and General Counsel, according to the Texas Tribune. The report also examines the University of Texas Law School Foundation, which used forgivable loans to supplement salaries of professors.

When the loan was discovered, UT-Austin President Bill Powers asked Sager to resign from his post back in December 2011. The loans were suspended by the foundation when it learned of Sager’s resignation from the school. Glenn Smith, the spokesman for Sager, said, “It was done in accordance with the law and with the foundation’s historical practices.”

The foundation started issuing forgivable loans to faculty members, at the discretion of hre dean, back in 2003. In 2003, Powers was the dean at the law school but he never received a forgivable loan but he did get a compensation package from the foundation that was deferred. Sager asked for a raise in 2009 but was declined because of budget issues. He then asked Robert Grable for a $500,000 forgivable loan. Grable was the president of the foundation at the time.

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Grable broached the issue with the foundation’s executive committee and it was approved. The administration of the university were never informed of the added compensation for Sager though.

“Dean Sager had good reason to believe that the foundation had consulted with President Powers,” Smith said. Smith also said that the payout in the first year was $100,000 and it appears on a document from the university in the report.

During Sager’s time with the law school, the forgivable loan program was expanded so that the school could entice top faculty to join the law school. The forgivable loan program began prior to Sager working at the law school and is described by the law school as “a highly effective and sensible recruiting and retention tool.” The report did say that the process used to approve and report the loans was broken and too much power was given to the dean.

Burgdorf wrote in the report that “the heavy balance of the evidence indicated that Dean Sager essentially acted alone and never consulted or sought input from the UT-Austin Central Administration and never reported this element of faculty compensation to anyone internally or externally.”

In the report, Burgdorf recommended that the outstanding loans be allowed to complete their lifespan. The office of Attorney General Greg Abbott did not agree with that suggestion though.

“Given our conclusion that the foundation’s forgivable loan program is legally problematic, it is difficult to also conclude that such an arrangement should nonetheless be allowed to continue years into the future,” Daniel Hodge, the first assistant attorney general, wrote in a letter to UT System Board of Regents Chairman Gene Powell.

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Posted by on November 14, 2012. Filed under Law School News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

 

 

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