Nearly three years after beginning an investigation into the leasing of a residence for former Ohio University President Roderick McDavis, the Ohio Inspector General’s Office issued a report Tuesday determining the “appearance of impropriety” in the university’s transactions with an Athens landlord.
The investigation was centered around actions taken by the university before and after entering a lease agreement for the residence of McDavis, located at 31 Coventry Lane south of OU’s campus. The university’s lease expired shortly after McDavis left the university in February 2017.
According to the report, the office found “appearance of impropriety” in dealings between the university and Athens landlord and OU donor John Wharton, who leased the home to OU in 2015. The report also found about $20,000 in payments was wrongfully issued to Wharton for repair work done on the home while McDavis lived at the residence, which was paid for by the university.
The investigation began in 2015, the same year McDavis and his wife, Deborah, left their on-campus home at 29 Park Place and began searching for a new residence. Deborah broke her foot after being spooked by a bat that was living in the residence.
The university had originally planned to purchase the Coventry Lane house from Wharton for about $1.2 million. In April 2015, however, the university decided to lease, rather than purchase, the home after a “problematic” verbal agreement between Wharton and OU Director of Athletics Jim Schaus was discovered. The conversation raised concerns that Wharton would make a conditional donation of about $100,000 in exchange for the university’s purchase of the house.
The investigation found no evidence that the university planned to purchase the residence in exchange for a donation. It also found no truth to an allegation that the university had been referring clients to Wharton.
In a statement following the publication of the report, OU General Counsel John Biancamano said the university intends to give the matter “full attention” before issuing an official response.
“We have been cooperating with the Inspector General’s office regarding its review of Ohio University’s business practices for over three years, so we were anticipating the release of this report,” the news release reads. “When we initially learned there were issues surrounding some of our practices in 2015, Ohio University immediately initiated its own internal review. We have implemented many positive process changes since then and continue to strive to employ best practices.”
The report lists several recommendations to strengthen the university’s internal control over a number of areas, including contracts and leases; accounting; real estate; donations, gifts and pledges. It also asks that current OU President Duane Nellis respond within 60 days with a plan detailing how the recommendations will be implemented.
“We’re happy to have (the investigation) concluded, obviously,” Biancamano said during a Tuesday conference call. “These can sometimes be positive experiences for an institution. It’s not a bad thing for an institution to have its books reviewed and its processing looked at. And we look at this as an opportunity to do things better, and we’ll continue to try.”
According to the report, Wharton is listed as the agent/incorporator for University Real Estate III — also known as Ohio Realty and University Off-Campus Housing — and Broney’s Alumni Grill.
Biancamano said he has trained employees in University Advancement to ensure a wall exists between fundraising and business transactions. He also noted that no employees involved in the matter have been disciplined, as they all acted “in good faith.”
“We have always been sensitive to the notion that there should be no link between business contracts and donations,” Biancamano said. “This has provided us an opportunity for us to reexamine our processes and to talk about it more.”
Vice President for Finance and Administration Deborah Shaffer emphasized the importance of having a “firewall” that separates fundraising and contracting.
“We’ve always had a wall — which is evidenced in this transaction — between our fundraising activity and our contracting for good and services,” Shaffer said. “This was a very unique transaction for Ohio University.”
