State auditor and Board of Regents looking more deeply into ISU airplane use

Iowa State University President Steven Leath continues to insist his use of university aircraft violated no policies or laws.

We’ll learn more in the coming months, because the State Auditor’s Office is looking into the matter, and yesterday the Iowa Board of Regents approved a plan to audit every ISU Flight Service flight since Leath was hired in 2012.

State Auditor Mary Mosiman responded to my inquiry about the Leath airplane controversy by e-mail this morning: “Thank you for the question. My office decided to review this situation as soon as we became aware of it. I cannot comment or respond to specific questions while we are engaged in our audit work.”

I look forward to reading the report from the State Auditor’s Office.

Before yesterday’s Iowa Board of Regents meeting, I expected most board members would react casually to a preliminary compliance review on transportation policies at state universities. Board of Regents President Bruce Rastetter didn’t seem to care that Leath failed to inform him promptly about the July 2015 hard landing incident. He didn’t think that event was important enough to share with other regents, who had recently voted to extend Leath’s contract. Leath’s airplane travel didn’t discourage Rastetter from entering into a highly irregular land deal with ISU’s president later in 2015, whereby one of Rastetter’s companies purchased property in Hardin County, had it surveyed, and sold the non-farmable portion to a new company established by Leath’s family.

When news of the hard landing broke last month, Rastetter’s first instinct was to reach out to Leath’s office for talking points about how well things are going at ISU.

Regent Larry McKibben, chair of the board’s Audit/Compliance and Investment Committee, told a reporter last week that he doesn’t “spend a lot of time looking backward” and was mainly interested to know about possible ways to improve travel policies. He later told another journalist,

“I’m so proud of the work he’s done over there and the growth of the university since he’s been president,” McKibben said. “Iowa State continues to be a very well ranked AAU university. A ding on an airplane wing is not going to mess up the good work that’s been done.”

An October 14 letter from Board of Regents Executive Director Bob Donley to ISU’s Student Government seemed to suggest that contrary to a resolution student senators approved on October 5, the regents would not be looking separately into Leath’s airplane use.

For all of those reasons, I was surprised to hear the big news from yesterday’s meeting. From Jeff Charis-Carlson’s story for the Des Moines Register:

“In light of recent events regarding Iowa State, and frankly I’m extremely disappointed,” Bruce Rastetter, president of the board, said at the start of Thursday’s meeting in Cedar Falls. “We at the Board of Regents take the use of university resources very seriously. In more than just a few instances, the decision to use the plane appears to be questionable at best.”

Rastetter described Leath as “a successful president” but said the issue surrounding Leath’s use of university aircraft “has taken focus away from us being able to move our public universities forward. We need to return to devoting all of our time and resources to making the public universities the best they can be.”

Rastetter said “additional action is warranted” for the Board of Regents to “ensure that our universities are run in a manner that the people of Iowa expect and demand.”

To that end, board members voted unanimously for an internal review of every flight by ISU Flight Service since Leath became president in 2012. Vanessa Miller reported for the Cedar Rapids Gazette, “That audit will include a review of passengers who flew with Leath – to ensure they were prospective donors, as he’s said.”

It’s not clear whether internal auditors or staff from the State Auditor’s Office will have access to Leath’s personal flight log, which would cover all trips he has taken in ISU’s smaller Cirrus SR22 plane. Miller reported, “Iowa State doesn’t keep a log of its Cirrus flights, and auditors recommended it start doing so.”

Addressing the Board of Regents yesterday, Leath spoke about the airplane controversy for only a couple of minutes before giving his report on happenings at ISU. He released this statement later in the day:

I am committed to adhering to all university and Board of Regents policies. I welcomed the Board of Regents initial review of travel policies and the use of state equipment.

As the Board’s review shows, my use of university aircraft and the university’s purchases of the King Air and Cirrus did not violate policy; however, there are clearly things I can improve with regard to my use of the planes and there are things we can do as a university to clarify our policies and improve record-keeping and billing practices.

To that end, I fully support the Board’s decision to expand their review and perform a comprehensive audit of all flights by all users of ISU Flight Service since I started at Iowa State in 2012.

The Board’s review is linked on our FAQ website and we will continue to update the FAQ as necessary.

A more thorough audit will reveal whether Leath violated any policies or laws. The internal reviewer probably did not know, for instance, that Leath used a personal gmail account to communicate with staff at the Illinois airport where the hard landing occurred.

For now, the main conclusion appears to be that ISU’s policies were inadequate. From Miller’s story for the Gazette:

Auditors found policies to be lacking — especially at Iowa State, which is “silent on the use of university owned or chartered planes.” UI and UNI, meanwhile, have policies covering chartered flights, including authorization, decision-making considerations, and situations where charter use “is reasonable.”

Regarding use of private aircraft, Iowa State policy is limited to reimbursement guidelines, while UNI provides some guidance, and UI policy is “extensive, covering liability, reimbursement, and conditions and requirements for use.”

UI and UNI limit private aircraft reimbursement, while ISU does not limit reimbursements or require receipts.

Auditors suggested Iowa State should make numerous changes, including enacting private aircraft reimbursement limits, requiring receipts, and expanding or reviewing all its travel and equipment use policies.

Charis-Carlson quoted the preliminary report as saying, “While these trips did not conflict with university policy, we recommend more complete documentation of business purposes and recommend a greater distinction between business versus personal travel in the future.”

ISU officials say Leath was not required to reimburse the university for the damage, just as he would not be liable if he damaged a university car while on a business trip.

“The President and Mrs. Leath decided to make a donation equal to the costs because they wanted to move forward in a positive way — not because they were obligated to reimburse the university or Foundation,” Megan Landolt, Leath’s assistant for communications, said via email last week. “Just because a donation is provided to the ISU Foundation does not mean that it has to be taken as a charitable deduction on one’s taxes.”

Leath told reporters after the meeting that it was never his intention to claim a deduction for the donation.

That settles one question. ISU has yet to respond to many other requests for information or clarification.

Why did Rastetter suddenly become “extremely disappointed” and decide Leath’s airplane use was a serious matter? Maybe he didn’t appreciate being called out by Regent Subhash Sahai. Miller reported on October 19,

In an Oct. 9 email made public Wednesday, Sahai expressed frustration to Regents President Bruce Rastetter and President Pro Tem Katie Mulholland.

“Silence from the regents who might have known as to what has been going on with present and past incidences of use/misuse of planes at ISU is deafening,” Sahai wrote. “President Leath cannot just say that, ‘I told the president of regents’ and be absolved of his responsibility.”

Sahai wrote that the handling of the issue could lead to bad perceptions.

“I feel some type of further inquiry and investigation is a must,” he wrote. “We are being perceived as neglectful of our obligations.”

Maybe Rastetter put some distance between himself and Leath because the Hardin County land purchase increased scrutiny of the “cozy relationship” between a university president and the president of his governing board. The Des Moines Register’s editorial board predicted on October 2 that the Board of Regents would do nothing about Leath’s airplane use: “That’s no surprise, as it’s a board in name only, with Rastetter — Leath’s confidant and defacto real estate agent — calling the shots.” The Dubuque Telegraph-Herald’s editorial board declared on October 16,

Normally, we would call on Leath’s employer, the Iowa Board of Regents, to dig deeper into all this and disclose its findings to the public. However, any regents investigation of their employee, no matter how thorough and objective, would lack public credibility. That’s because Leath and the regents chair, Bruce Rastetter, have had business dealings together–a million-dollar land purchase. On top of that, the regents were either permissive or inattentive regarding Leath’s personal use of public property. So they have to answer for that.

Speaking of business dealings, Rastetter and Leath have been on the same page regarding a project to improve the Ames Municipal Airport, with a major financial commitment from ISU. Ryan Foley reported for the Associated Press on October 12,

A plan backed Tuesday by the Ames city council would require Iowa State to make annual payments of up to $74,000 to the city through 2035 — a potential exposure of $1.3 million. The university will pay an additional $250,000 upfront. […]

In a speech last month before the scandal broke, Leath said the airport improvements would “offer more inviting, convenient access to our university and community.” The school is expanding its nearby research park and hopes the airport will make a good impression on business leaders considering locating there.

Board policy says regents are responsible for approving financing for capital projects. But Board spokesman Josh Lehman said Wednesday the plan didn’t need approval since the airport is owned by the city and therefore not under the regents’ jurisdiction.

Board President Bruce Rastetter has praised Leath for working with the city to improve the airport, saying the project would encourage economic growth. Rastetter, an agribusinessman and Republican Party powerbroker, stores his business plane at the airport.

Lucky break for Rastetter: the Board of Regents didn’t need to vote on a capital project that will indirectly benefit his company while costing ISU a lot of money. If the matter had come before the regents, that would have raised conflict of interest questions.

Whatever the motivations, the regents’ newfound commitment to oversight is welcome. During yesterday’s board meeting, Sahai rebuked Leath: “I think it’s important for all the [university] presidents to realize that your bosses are not just one board member.” Sahai added that Leath and Rastetter had shown a “cavalier attitude” toward the hard landing incident.

Any relevant comments are welcome in this thread. All Bleeding Heartland posts about the ISU airplane scandal are archived here.

UPDATE: In a “Civic Skinny” column for Cityview, published on October 21, Michael Gartner put the airplane controversy in the context of intrigue at ISU’s Foundation. Only two months after Leath became president, the person who had led the foundation for nearly a decade was fired. Roger Neuhaus took the job in January 2013 but was “unceremoniously dumped” a little more than two years later.

[P]eople close to the university say Leath and Neuhaus slowly became wary of one another. Most university foundations are legally independent from their universities, but most are, in fact, simply arms of the office of the universities’ presidents. What the president wants, he gets — and foundation boards, often groups of alums — usually just go through the motions of approving requests from a president. Sometimes, they don’t even do that.

Indeed, no one can remember a time when the ISU Foundation ever turned down a request from an ISU president.

But Leath, unlike Geoffroy, had several unusual requests. One was to buy an airplane for $3 million to $4 million, which would have allowed him to avoid disclosing that to the Board of Regents or the public. The plane then would be given to the university. It’s unclear how Leath accomplished this — one board member says the foundation never voted on the issue — but a person familiar with how foundations work said there often are back-doors into and out of foundations. At any rate, in February of 2014 the foundation bought a Beechcraft King Air 350 for $2,875,000 and spent another $600,000 on upgrades and furnishings. And it now is owned by the university.

The contract was signed not by Neuhaus but by Lisa Eslinger, the foundation’s senior vice president for finance and operations.

(The July 2014 contract to buy a single-engine, four-seat plane for $470,000 was directly with the university, perhaps because the price was below the threshold that required notification to the Board of Regents. It is this plane that pilot Leath damaged a year ago, an accident he didn’t report to the Board of Regents.)

The new page for “frequently asked questions” about the Flight Service states, “After the purchase, avionics upgrades, inspections, safety improvements, maintenance, refurbishment, branding and paint totaling $595,568 were made to the King Air using the same discretionary funds that were used by the ISU Foundation to purchase the plane; those funds are designated for Department of Athletics’ priorities (see question 5).”

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