Tuesday, July 10, 2007

INNOCENT: Will Steel Resign?

"... these three individuals [David Evans, Collin Finnerty and Reade Seligmann,] are innocent of these charges."

North Carolina Attorney General Roy Cooper, Apr. 11, 2007

Friends of Duke University posts a letter from a Duke alum that gives reasons why BOT chair Bob Steel should resign. The letter appeared in today’s Durham Herald Sun under the head:

Steel shouldn’t serve as Duke board’s chair
I want to comment on the letter. If you’ve already read it, scroll down to the double star line where my commentary begins.
To the editor:

While Duke has finally announced seven new members of its Board of Trustees, the university has yet to reveal results of May's election of leaders of the board. With two new vice chairs, including the first African-American, this certainly is newsworthy.

This secrecy has the result of shielding Chairman Robert Steel from scrutiny for standing for re-election. Yes he is a titan from Wall Street, and yes he's a loyal son and benefactor. But he has now accepted a key position in the federal Treasury Department. The potential for conflict of interest properly caused Steel to recuse himself from overseeing Duke Management Company, the arm of the university that invests more than $7 billion. This is a responsibility assigned to him by university by-laws and a key element of his job; unable to fulfill this requirement, he should have retired.

Duke has invested an unusually high percentage of its money in private equity and hedge funds -- two bets that have paid off big for several years. But day after day, we see how similar investments are wobbling. Even the major hedge fund run by Goldman Sachs, Steel's former Wall Street firm, lost six percent last year. Two tangled hedge funds run by the firm of another Trustee are in the financial news daily with loses likely to exceed $1.2 billion.

Duke faces critical decisions on investment strategy and as contemplated by the by-laws, the chair should give his imprimatur. In this context, Steel's re-election is inappropriate.

New York

The writer is a Duke alumnus, '63, Duke Law '66.

What does it tell us about Duke’s current governance when the trustees still haven't revealed the results of their election of board leaders?

Many Duke alums share Rickards’ concerns. And so do many experts in the area of government ethics.

Last Dec. 1 The Washington Post reported [excerpt]
[W]atchdog groups and others have expressed concern about Steel's situation.

They worry that he will inevitably have to choose between his fiduciary duty to Duke, which has an endowment of $4.5 billion and about $3 billion in other investments, and his role at Treasury.

His position there makes him privy to often-sensitive price-moving information about U.S. markets, especially those involving management of the government's $8.6 trillion in debt.

They also doubt that a senior Treasury official, whose hours are grueling, would have enough spare time to also chair a major research university.

In addition, they question the propriety of allowing a top federal official to head an organization that in fiscal 2006 alone, according to Duke, received $1.1 billion in federal funds, including $45,543 from Treasury for a clinic for low-income taxpayers.

"It's a conflict of interest," said Thomas J. Fitton, president of Judicial Watch, a conservative government watchdog group. "In his role as the chairman of the Board of Trustees, there will be decisions he will make that will be in conflict with his role as a high-level government official."

Melanie Sloan, executive director of the left-leaning Citizens for Responsibility and Ethics in Washington, agreed. "The concept of having a government job is that you work only on behalf of the American people, and being a trustee creates a divided loyalty," she said.

Barbara Roper, director of investor protection for the Consumer Federation of America, added: "He's creating the very real possibility that he will face situations where he has not just the appearance of a conflict but the reality of a conflict and then will have to decide how to behave. There will always be questions about whether he handled that kind of situation appropriately."
KC Johnson last December took a look at both Steel’s “hands-on” role in Duke’s “throw them under the bus” response to the witch hunt and frame-up as well as the potential for conflicts of interest resulting from Steel's dual roles. KC's post, "The Steel Trap," is a "must read."

Here’s part of what KC said:
In the lacrosse case, perhaps no person has played a more unexpected role than Board of Trustees chairman Bob Steel. In the contemporary academy, trustees are normally quite hands-off. But when they do involve themselves in University affairs, they more often than not focus on issues such as upholding standards, promoting intellectual diversity, or working to uphold the University’s financial well-being or overall reputation.

Since March, Steel has avoided all of these customary patterns.

He has been remarkably hands-on, vigorously defending the Brodhead administration’s actions to interested parties and journalists behind-the-scenes. His actions do not seem to have been designed to uphold either the University’s reputation or its long-term financial standing.

Occasionally, he has stepped out publicly, though in dubious ways. His most prominent role in this regard came when he rationalized the suspension of the season, pointing not to presumption of innocence, due process, or “victims’ rights,” but instead public relations. As he informed the New Yorker, “We had to stop those pictures [of the players practicing]. It doesn’t mean that it’s fair, but we had to stop it. It doesn’t necessarily mean I think it was right—it just had to be done.” That quote hardly inspires confidence of a BOT chairman providing moral leadership for the University.
Indeed it does not.

Steel needs to resign. Does anyone think there are trustees on the board with enough courage, influence and love for Duke to convince Steel to do that?


Roger Duke '71 said...

Unfortunately, no...

Anonymous said...

Since I have observed nothing resembling integrity from the BOT or their representatives, nope.

Anonymous said...

Steel should resign but lacks the integrity needed to do so. That's the sad truth!

Anonymous said...

Is there anybody on the Duke Board of Trustees with COURAGE??? Integrity???? Are you kidding???

First of all, if there were, we would have heard from them by now.

Secondly, they would be suffering from unbearable peer pressure.

Nope. Neither one.... YET.

Keep it up John!

A grateful alum

Anonymous said...

The trustees are a mixed group who see each other infrequently and who for the most part don't know each other well. The work under Steel's direction. An uprising is unlikely.

Anonymous said...

The only reason that a wrecking ball was not needed to get Nifong out of the DA office, was the Sheriff collected the keys before he could go there. Bob Steele will need the wrecking ball to get him off the BOT. He has no intention of resigning. His behavior is shameful in this affair and deserves to be ousted.

Jack said...

The lacrosse case, the fiasco as it was called by the Ethics Panel chairman, has really turned into a shameful scandal for Duke university. Until March 2006, Duke was this so-called prestigious university, an Ivy wannabe, where the moneyed sent their smart kids. Duke was that school where Coach K was upheld as such a great person, and a great coach second, the appearances of the basketball team was a network treat. A beautiful campus, fabulous endowment, an attractive student body, impossible to get into (for most). Great research, top notch facilities, a “name’ among names. Then…Crystal Magnum spun her tale, and things have been spinning badly for Duke ever since. The Gang of 88 goes on record to state in no uncertain terms the utter disdain they have for their own students, and the administration fails miserably to support three young men in what must be considered a devastatingly frightening conspiracy to send them to jail. And while the Gang of 88 get all the notoriety for their naked racism, resentment and malicious slandering of the lacrosse players, the remaining hundreds of faculty members sat in silent complicity. The media, the public officials, law enforcement blah, blah, blah. This tragic event peeled back the thin veneer of "Duke" to reveal an immoral (a modern ethicist might kindly call it amoral) unprincipled institution, that, having spent so many years buying it’s way up the US News rankings, could not, absolutely could not make the right decision in a time of crisis. Ruled by image and expediency, public relations and “perception”, it was less that they wanted to harm the boys; I believe it was a matter of the entity being simply incapable looking at a situation and making a “value judgment” – this is either right or wrong, black or right. That kind of decisiveness had been bred out of the school’s DNA, its value (sic) system. And it didn’t happen over night. Richard Brodhead, behaving so badly, is not the leader; he did not set the tone that others in the administration followed. Brodhead is the product of a rudderless (morally) ship. If not Brodhead, then someone else “just as bad” would have been in the President’s office last March when the call came. Morality, doing the right thing has not been evident in a single step that Duke has taken in connection with this case – right up to the insulting recipients of the Griffith awards.
Yes, of course Mr. Steele should resign, for his stance in the lacrosse case, and for the conflicts of interest (or appearances thereof) he is likely to face in his role with the Treasury Department. Perhaps he will surprise everyone and act out of expedience.

Anonymous said...

10:17 = Thanks - great post.

Anonymous said...

The problem is the the BOT has 37 members. It is a committee which gets together for cocktails parties, wine-tasting, and votes on recommendations presented to them by staff.

The BOT needs to be cut down to about 10 members who take an active role. In truth Duke is run by Steele, Brodhead, and the faculty.

Anonymous said...

Steel has nerves of STEAL.