Secret university audit catches chancellor lying

This is an edition of the University Scandals 96-97 series, selected installments of which were submitted for Pulitzer Prize consideration. Click here to access the archive.

University and Community College System of Nevada Chancellor Richard Jarvis will soon be forced to resign. "The real power at the university lies with UNR President Joe Crowley," a highly placed insider told this column January 5. "No matter who's had the title of chancellor, Crowley's had the power. He never takes the blame, and somebody else always takes the fall."

Fall will come in winter this Tuesday when the university board of regents' audit committee meets in Las Vegas. A report from the huge national accounting firm of Coopers & Lybrand will provide new confirmation of the financial depredations revealed exclusively in this column over the past four months.

The report will also put Jarvis out of a job and make Crowley's position shaky the same week the Nevada legislature goes into session. Come Tuesday, Mr. Jarvis will be exposed as publicly lying to the legislative counsel bureau while rebutting the embarrassing legislative audit published last month. He printed flyers to pass out at the December 18 Carson City audit hearing (the same morning that kangaroo court called the Nevada Ethics Commission met regarding the Jarvis-Crowley attempt to keep newly-elected regent Howard Rosenberg from being seated).

To the legislative audit criticism that "budgetary and expenditure control within the University System contains significant weakness," Jarvis responded "external audits have not found any significant weaknesses over the last decade of audits." A secret October report says otherwise.

Both Crowley and Jarvis subsequently wrote self-serving articles for the Reno Gazette-Journal's editorial page. The audit "did not find that the University of Nevada-Reno suffers from grave accounting problems," Crowley wrote. Last Sunday, this column dismantled that fabrication.

I recommend that you get your own copy of the legislative counsel bureau report. Call Gary Crews at (702) 687-6815. His handiwork is about to be eclipsed by Coopers & Lybrand:

DEFICIT SPENDING FOLLIES: Mr. Jarvis spent $3,099,000 more than his office took in during the 95-96 fiscal year. For months, former system treasurer Janet MacDonald and former deputy state controller Mary Sanada have warned about oceans of red ink simultaneous with horrendous student fee hikes.

THE $100 MILLION MYTH. Remember the much-ballyhooed UNR fundraising campaign which so quickly topped its goal of $100 million? Coopers & Lybrand auditors note that only $6.7 million has actually been received from the UNR Foundation and UNR boosters. Where's the rest?

THE MILLION DOLLAR GOVERNOR IN WAITING. Other than to preserve comfortable and lucrative personal empires, much of the hatchet-job aggressiveness of the U-system is designed to protect the anointed next governor of Nevada, a rich, good looking Las Vegas banker named Kenny Guinn. He is beloved of the gambling-industrial complex and has been called in to put out fires at UNLV on many occasions. Only continued scandals about the U might derail his victory train.

Coopers & Lybrand provide just such scandals, in spades. Guinn served as vice-president of the UNLV Foundation when it was used to park the illegal contract hiring Rollie Massimino to coach the Runnin' Rebels pro basketball team. Guinn denied prior knowledge while disclosing the deal after he was named interim UNLV president.

The very day a legislative subcommittee issued subpoenas, a private, non-profit corporation was filed with the Nevada secretary of state. Headed by Tahoe Regional Planning Agency member and Las Vegas casino mogul Steve Wynn, the gamblers' front immediately agreed to take over the illegal Massimino contract. The Internal Revenue Service did not grant tax exemption.

Guinn inherited a university in chaos and had to scramble to cover a deficit in the neighborhood of $10 million. About then, $7.3 million got lost in the system for a few years. With Guinn frantically hustling money, the UNLV campus was rife with rumors that part of his dilemma involved coming up with a quick $1.8 million to pay off Massimino.

A checklist of UNLV deficiencies shows financial mismanagement at its most blatant. "During the course of our audit work," Coopers & Lybrand wrote, "we noted that UNLV does not have an effective system of internal a result...C&L proposed over 30 adjustments totaling in excess of $50 million." Some of the adjustments raise very serious questions:

"* Over $1 million in receivables which did not exist

"* $10 million posting error to depreciation expense

"* $7.1 million difference between the detailed listing of cash held by the Public Works Board per UNLV and amounts provided to C&L directly by the Public Works Board."

The latter means the U fails to balance its checkbook, opening the system up to fraud and looting. Remember what I exclusively revealed last Sunday: "Because the university's bank accounts were curiously not reconciled for a couple of years, they were wide open to fraud. Nevada is infested with professional thieves. Using perfectly forged checks printed by personal computers, they prey on institutions and casinos. One Las Vegas hotel got hit for half a million dollars. If the U never reconciled its multimillion dollar accounts, they could never catch such a forgery. If you don't protest a bad check within 30 days, you eat it.

"To its credit, Bank of America, recognizing the university's vulnerability, recommended subcontracting the U's checking to a North Carolina bank which offers transaction tracking. Now, within three days of any check being written, an electronic message is sent to North Carolina with the check number and amount. A forged check thus has very little possibility of slipping through because the tracking computer has complete information as to which checks are outstanding and for what amounts," I reported.

BofA still took the fall for a big client, chastising scurrilous newspaper articles (mine) about "missing money." What will they say now that they have effectively participated in trying to cover up the university's multimillion-dollar mismanagement?

The smoking gun report is dated October 4, 1996. In a memo curiously dated December 18, the same day the legislative audit was published, UNLV Controller Louis A. DuBois wrote to Sandra K. Cardinal, the school's director of internal audit. Mr. DuBois concurred with all but one minor C&L recommendation.

When did the regents learn of the Coopers & Lybrand report? Regents Dorothy Gallagher of Elko, Mark Alden, a Las Vegas certified public accountant, and chairman Madison Graves II, also of LV, were present when Jarvis distributed the above misleading statement in Carson City. Along with UNR President Crowley, all used the occasion to campaign for more money for the university.

Whatever credibility the U had dies Tuesday when the Coopers & Lybrand report comes out of the closet. You can have your own for the cost of copying at Office Depot on Plumb Lane in Reno, in the Barbano file.

DEJA VU ALL OVER AGAIN: In our only conversation November 1, Chancellor Jarvis said he would look into the substantial matters I raised. Immediately thereafter, he ordered university officials to stop talking to me. Mr. Jarvis seemed concerned. The legislature was coming up, where someone is only as good as his word, he said. "The trust factor is the most important thing," he told me.

That trust is gone, and soon, so will be Chancellor Jarvis and perhaps, after two decades, UNR President Crowley.

Be well. Raise hell.

© Andrew Barbano
Andrew Barbano is a Reno-based syndicated columnist and 28-year Nevadan.
Barbwire by Barbano has originated in the Sparks Tribune since 1988.
This column originally published 1/19/97.
Reprints from the beginning of the university newsbreaks remain available for the cost of copying at
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