What funds will the University use to pay the fine included in the NCAA's Consent Decree?
We expect to pay the fine, which is five annual installments of $12 million that will support initiatives for the prevention and treatment of child abuse, out of football reserves, the deferring of capital and maintenance expenditures, and an internal loan to the Athletic Department. We will not use state or philanthropic money to pay the fine.
At this time we fully expect that these funds will satisfy the $60 million and it is impossible to speculate beyond the life of the Consent Decree. Great care will be given to developing a budget that will protect all of our students, and the fine is expected to have no impact on the scope and quality of the University’s academic enterprise or on tuition costs to students. Penn State remains committed to keeping its opportunities affordable.
What initiatives has the University undertaken in the aftermath of the Sandusky matter on the issue of child abuse?
President Erickson and the rest of Penn State's leadership team, along with the entire Board of Trustees, are very concerned about victims of child abuse. To demonstrate the University's commitment to being a positive force for awareness and change, the University has undertaken the following initiatives:
- Penn State has donated $1.5 million of its share of Big Ten bowl game revenues to the Pennsylvania Coalition Against Rape and the National Sexual Violence Resource Center to assist in the efforts to raise awareness about child sexual abuse and develop outreach educational programming across the Commonwealth and beyond.
- The University launched a Center for the Protection of Children at the Penn State Hershey Children’s Hospital that is devoted to the prevention and treatment of child abuse. The Center is the first piece of a University-wide institute that will bring together many existing and expanding resources at Penn State related to the prevention and treatment of child abuse.
- In December 2011, the University opened a Sexual Assault and Relationship Violence Hotline at 800-550-7575 (TTY 866-714-7177) that can be accessed 24 hours a day, seven days a week, for all Penn State Campuses.
In October 2012, the University hosted the Child Sexual Abuse Conference, which convened some of the nation’s top experts in child sexual abuse and child trauma research, prevention, and treatment for a public forum. The two-day conference was designed to help educate the public in Pennsylvania and across the nation about this critical issue
.The event included remarks by Sugar Ray Leonard and Elizabeth Smart, both of whom suffered sexual abuse as children.
- In November 2012, based on a proposal by the Presidential Task Force on Child Maltreatment, the University created the Network on Child Protection and Well-Being, which is built on Penn State established expertise and resources. The Network's mission is to advance child protection and well-being through research, education, and engagement.
- In September 2013, a second annual Conference on Child Protection and Well-Being was held. The event attracted district attorneys, children and youth services professionals, law enforcement officials and medical professionals as well as Penn State faculty.
- A third annual conference, "The Role of Parenting and Family Processes in Child Maltreatment and Intervention" is scheduled for May 5-6, 2014, at the Nittany Lion Inn on Penn State's University Park campus.
- In January 2013, Penn State announced it was hiring a dozen new faculty members over three years as part of its Network for Child Protection and Well-Being. The goal of this initiative is to advance knowledge, practice, education and outreach to combat child abuse. To date, the University has hired six faculty researchers and has searches in progress for six others. This cluster hire is designed to bring faculty members from different disciplines together to address the problem of child maltreatment in new ways. Significant areas of research include: human development, bio-behavioral health, public policy, criminology, psychology, medicine, education, nursing, human services, and prevention science.
- Many other initiatives are under way, including enhanced staff training on the detection of potential child abusers. At President Erickson's direction, the criteria for reporting questionable conduct appearing to involve child abuse for all University officials must be beyond the legal requirements and must be driven by moral standards of what is right and what is wrong. To date, more than 30,000 people affiliated with Penn State have received training to identify and report child abuse.
- Seven counties across Pennsylvania instituted an educational parenting program, and prevention efforts were bolstered — all through the University's partnership with the Pennsylvania Coalition Against Rape (PCAR), which is focused on fighting child sexual abuse.
- Also, at President Erickson's direction, all deans and chancellors, vice presidents, vice provosts, and other senior officials and faculty of the University have received instructions on the reporting of actual or suspected instances of sexual abuse and harassment. The president has reminded all that there is a single reporting standard applicable to everyone in the Penn State community, without exception.
- University leadership rapidly implemented all but one of the 119 changes recommended in the report from Judge Louis Freeh. Penn State is now focusing on Phase II of reforms, to continue the positive momentum. The latest update outlines a comprehensive plan for a wide range of functional areas, including ethics, culture and values; governance; legal, risk, compliance and audit; safety and security; youth programs; training and development; human resources administration; communications; policy review and development; and athletics.
What is the status of civil cases filed against the University?
UNIVERSITY PARK, Pa. -- Penn State officials announced today (Oct. 28, 2013), that over the past few months the University has reached agreement with 26 of the victims of former assistant football coach Gerald Sandusky. The terms of the settlements, which include a release of all claims against Penn State and other parties, are subject to confidentiality agreements. Of the 26 settlements, 23 are fully signed and three are agreed in principle, with final documentation expected within the next few weeks.
The aggregate dollar amount paid by the University for the 26 settled claims is $59.7 million and will be reflected in the University’s audited financial statements for the year ended June 30, 2013.
"The Board of Trustees has had as one of its primary objectives to reach settlements in a way that is fair and respects the privacy of the individuals involved,” said Keith Masser, chair of the Board of Trustees. "This is another important milestone in accomplishing that goal. I would like to thank the board’s Legal and Compliance Committee, as well as its Legal Subcommittee for its leadership throughout this process.”
“We hope this is another step forward in the healing process for those hurt by Mr. Sandusky, and another step forward for Penn State,” said University President Rodney Erickson. “We cannot undo what has been done, but we can and must do everything possible to learn from this and ensure it never happens again at Penn State.”
The settlement amounts will not be funded by student tuition, taxpayer funds or donations, according to officials. The University maintains various liability insurance policies, which the University believes cover the settlements and defense of claims brought against Penn State and its officers, employees and trustees. Expenses not covered by insurance are expected to be funded from interest revenues related to loans made by the University to its self-supporting units.
Penn State has received claims from 32 individuals who were or allege that they were victims of Sandusky. The University has rejected certain of the six remaining claims as being without merit and has engaged others in possible settlement discussions. The University retained the law firm of Feinberg Rozen LLP to act as independent third-party facilitators of the settlement negotiations between the University and the victims.
"I would like to thank Ken Feinberg and Michael Rozen for their efforts to facilitate the settlements," Erickson said. "Their expertise and efforts have been invaluable to our ability to reach mutually acceptable resolutions in the large majority of the claims."
Over the past year, Penn State has instituted more than 115 changes related to safety, human resources, security, compliance and governance. Through self-imposed urgency, the Board of Trustees, administration and staff have brought sweeping reform and best practice processes to nearly every aspect of the University’s governance and oversight. In doing so, the University considered the recommendations of multiple parties to determine the best course forward, including but not limited to the Pennsylvania Auditor General, Penn State University Faculty Senate and the Freeh Report recommendations.
“We have made great strides, but a great deal of work remains,” Erickson said. “Our University is a better institution today as a result of the work and dedication of our trustees, administrators, faculty, staff and students."
What investigations are currently under way at Penn State and how do we know they are sufficiently independent?
The University has been and is cooperating fully with all appropriate government authorities and all criminal and administrative investigations, including those described below. Out of respect for the legal process and the privacy of the individuals involved it would not be appropriate to comment on specific charges, evidence or individuals until the legal process and such investigations are completed.
- Attorney General: The Grand Jury investigation is ongoing, which means further questioning and charges may yet occur.
- U.S. Department of Education: This review under the Clery Act has been underway since late November 2011 to examine University processes and policies regarding the reporting of and response to crimes committed on campus. The Department of Education issued a preliminary report on July 12, 2013 here. The University recently received a preliminary report from the Department of Education, read more here. Penn State is expected to respond to the report in 2014.
- United States Attorney, Middle District of Pennsylvania: This investigation is ongoing and the University is cooperating fully. For the University's statements on this investigation, visit http://news.psu.edu/story/151394/2012/02/24/us-attorney-issues-subpoena.
Was Judge Freeh, hired by the Board of Trustees, truly independent?
The Special Investigations Task Force, chaired by a member of the Board of Trustees, was responsible for hiring Judge Louis Freeh and served as the liaison between Judge Freeh’s team and the Board to ensure Freeh’s team had the resources and access to the University’s people and information to fulfill their mandate. No one from the University or the Board, including the members of the Special Investigations Task Force, saw the report in either draft or final form prior to its public release, based on the public's outspoken desire to ensure transparency, independence and impartiality. Judge Freeh and his team had access to all members of the Board of Trustees and the University.
How much money is the University paying for legal fees, consultants and PR firms associated with the Sandusky matter?
Some of the fees and costs set forth below are expected to be reimbursed under the University's insurance policies.
Freeh Sporkin & Sullivan/Pepper Hamilton LLP: $8,172,002
Independent Monitor: $3,415,505
- DLA Piper, LLP (NCAA Monitor)
Guideposts Solutions LLC
Board of Trustees - Legal Services, Consulting Services and Communications: $9,152,225
- Reed Smith LLP
- Kekst and Company Inc.
- Daniel J. Edelman, Inc.
- La Torre Communications
- Domus Inc
- The Academy Group
- Ethics Resource Center
University Legal Services/Defense: $17,004,947
- Saul Ewing
- Duane Morris
- Lanny J. Davis and Associates
- Jenner & Block, LLP/Kasowitz, Benson Torres & Friedman
- ML Strategies
- Lee, Green & Reiter Inc.
- Document Technologies Inc.
- White and Williams LLP
- Feinberg Rozen, LLP
Externally Initiated Investigations: $5,596,232
- Margolis & Healy
- Lightfoot, Franklin, White LCC
- Buchanan Ingersoll
- Saul Ewing
Indemnified Persons' Legal Defense: $9,904,740
- Farrell & Reisinger
- Caroline M. Roberto
- Vaira & Riley
- Schnader, Harrison, Segal & Lewis, LLP
- Gover, Perry & Shore
- Gentile Meinert Assoc/CSI
- Fox Rothschild LLP
- Hamburg & Golden, P.C.
- Cohen & Grigsby
- Dinsmore & Shohl
- Camson Rigby
- Robert A. Leonard
Other Institutional Expenses: $2,469,081
- NCAA Fine: $24,000,000 *
TOTAL as of June 30, 2014: $79,714,732 **
* No amount has yet been paid; the first two annual payments have been set aside pending litigation.
** Does not include settlements for victim civil lawsuits, several of which remain unresolved.
Please note: Some of the fees and costs set forth above are expected to be reimbursed under the University's insurance policies.
From where are the funds coming to pay for legal defense for the University and other public relations and costs associated with the Sandusky controversy?
The costs surrounding legal defense and public relations efforts for the University associated with the Sandusky matter are not funded by student tuition, taxpayer funds or donations. The University maintains General Liability and Directors & Officers insurance policies which are expected to cover the defense of claims brought against the University and its officers, employees and trustees. Legal and other expenses not covered by insurance are expected to be funded from interest revenues related to loans made by the University to its self-supporting units. As a common business practice, the central University -- which has the ability to finance bonds backed by its credit rating -- is able to loan its self-supporting units money for special projects. These units do not have their own borrowing authority, but they are all part of the University's credit profile. As an example, in the case of the most recent $100 million Beaver Stadium expansion, the University bore the risk to finance a bond at a variable rate during a favorable financial period. The University then loaned funds at a fixed interest rate to Intercollegiate Athletics, which then repaid the loan with interest from its ticket sales, club seats leases, sponsorships and other income generated. The interest from this loan is then placed into a fund that can be used for more projects in the future or in emergency situations. Therefore, uninsured expenses can be covered by this interest and will not be funded by student tuition, taxpayer funds or donations. Compensation paid to all such attorneys, consultants and firms will be regularly updated and all expenses are audited.
Does Penn State have any plans to honor/recognize Coach Paterno's contributions to Penn State?
This is a sensitive topic and one that has been discussed for some time. Joe Paterno did a lot of tremendous things for the University and we need to take appropriate time, reflection and distance to consider his life as a whole before deciding if and how best to honor his contributions to Penn State.
How are settlements with the victims progressing?
The settlement process initiated by the University with the assistance of Kenneth R. Feinberg and Michael K. Rozen is ongoing. The University remains committed to completing this process in a fair, responsible and timely manner. Read more here: http://news.psu.edu/story/293049/2013/10/28/administration/settlements-announced-sandusky-victims
Is the University involved in the lawsuit against the NCAA?
The University is not a willing party in this lawsuit. http://progress.psu.edu/resource-library/story/penn-state-clarifies-it-is-not-a-willing-party-to-ncaa-lawsuit
What changes has the Board of Trustees made to its governance structure?
- Taking a more active and structured oversight role by implementing specific oversight committees focused on Risk, Audit, Legal, Compliance, Governance, Academic Excellence, Human Resources and Compensation—http://www.psu.edu/trustees/committee-structure.html
- Initiating a comprehensive review of best practices in governance, with the goal of developing a specific set of reform recommendations; and
- Making most Board of Trustees meetings open to the public.
- In addition, the Board of Trustees have adopted a number of new policies and procedures to positively impact governance, such as prohibiting row officers from serving on the Board for five years after leaving their position; strengthening a comprehensive set of Conflict of Interest policies; establishing term limits for all trustees; and revising the bylaws to allow for faculty, staff, and student representation on committees.