SSU examines conflicts of interest at campus groups

<p>Sonoma State University officials announced plans Friday to create a committee to examine its conflict of interest policy on campus.</p><p>SSU Chief Financial Officer Larry Furukawa-Schlereth made the announcement at a quarterly board meeting of the SSU Academic Foundation, which has become mired in controversy after it loaned a former board member millions of dollars.</p><p>Clem Carinalli, a prominent Sonoma County real estate investor, received the first of seven loans two days after resigning from the foundation’s board in 1995. The relationship came to light this summer when he failed to repay one of the loans, which the foundation is in the process of recouping by foreclosing on his property.</p><p>As of June 30, the foundation expected to lose $153,000 on the loan but has yet to take possession of the property north of Windsor.</p><p>The private loans to Carinalli drew public ire, including criticism from state Sen. Leland Yee, D-San Francisco, who authored a bill that would force university foundations and other campus auxiliaries to comply with the California Public Records Act.</p><p>Yee’s bill, SB 218, has been sent to Gov. Arnold Schwarzenegger for his signature.</p><p>Sonoma State operates three other auxiliaries on campus that would come under the scope of the new committee. They are Sonoma State Enterprises, which operates retail and dining services, Sonoma Student Union Corp. and the Associated Students of Sonoma State University, according to the state university Web site.</p><p>Furukawa-Schlereth, participating in the board meeting via speakerphone, said the conflict of interest committee would focus on the university’s auxiliary organizations. He was not available later to provide further details.</p><p>SSU President Ruben Armiñana, who was present at the board meeting, did not discuss the conflict of interest policy and would not answer questions afterward.</p><p>Foundation attorney Jeremy Olsan provided his annual review of the conflict of interest rules during the meeting and asked board members to sign a pledge to adhere to them.</p><p>“Don’t use the foundation for your own personal gain,” Olsan said.</p><p>Olsan said a board member currently can enter into a financial relationship with the foundation only if four criteria are met. The relationship must be disclosed to the board, noted in the board minute meetings and ratified in a board vote. In addition, it must be a fair and reasonable partnership, Olsan said.</p><p>Current board member Alan Johnson, a retired dentist, partnered with the foundation in the late 1990s to make two loans to Carinalli, according to county land records. Johnson, who was a member of the board at the time, was part of an investor group including the foundation that made $2.1 million in loans to Carinalli in 1996 and 1997, according to county land records.</p><p>Johnson declined comment after the meeting.</p><p>Olsan said he needed to look at the details of the loan arrangement between Johnson and the foundation to determine if the relationship had created a conflict of interest. He was not the foundation attorney at the time, he said.</p><p>While the controversy over the Carinalli loans thrust the foundation into a statewide debate over the Yee bill, it has suffered far larger financial losses from the turmoil on Wall Street.</p><p>The foundation’s endowment fund had lost $8.1 million in the year ending June 30, or about 20 percent of its value, according to an audited report issued Friday.</p><p>Due to losses on Wall Street, the foundation’s endowment could not make any of its scheduled grants this year to campus programs and an endowed chair in Native American studies, Furukawa-Schlereth said.</p><p>Student scholarships will not be impacted this current academic year, but funding for next year is uncertain, he said.</p><p>“We’re going to need to find a strategy to fund scholarships for (the 2010-11 academic year),” he said.</p>