UO president faces ethics complaints

Daily Emerald Archives — October 19, 2006

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http://www.dailyemerald.com/2006/10/19/uo-president-faces-ethics-complaints/

University President Dave Frohnmayer is under investigation by two state agencies following ethics complaints filed last month by a professor.

In separate letters to the Government Standards and Practices Commission and the Oregon State Bar, associate economics professor William Harbaugh alleges that Frohnmayer failed to report the 2005 sale of his Eugene home on a legally required, annual financial disclosure statement.

The complaints also contend that Frohnmayer did not report a potential conflict of interest arising from his purchase of a $700,000 home from the former president and CEO of Williams’ Bakery during the same year that the University acquired the bakery property.

Frohnmayer denied the allegations Wednesday, saying he followed the law in filing his 2005 statement of economic interest and that Tom Williams, former bakery CEO, had no stake in the bakery sale.

“We’re bewildered at the intensity of this unfounded attack,” he said. “Any attack on the ethics of a person is something you take very seriously. All you’ve got is your own professional reputation. There’s never been an ethics complaint against me, notwithstanding high-profile actions I’ve taken, in my entire life.”

Harbaugh petitioned the commission, which reviews ethics complaints against public officials, and the bar, which investigates allegations about Oregon lawyers, after becoming frustrated with what he called Frohnmayer’s lack of cooperation in releasing public records.

Harbaugh said the bottom line is that Frohnmayer didn’t report everything on his financial disclosures, suggesting he has not been forthcoming with other records as well.

“The question is why?” Harbaugh asked Wednesday. “Why didn’t he record this transaction?”

But Frohnmayer said he went above and beyond the reporting requirements of the law, saying Harbaugh should have contacted him before filing allegations.

Harbaugh said people he respects urged him to file the complaints because they saw them as “potentially serious” ethical issues, adding that he didn’t confront Frohnmayer before making the complaints because he thought Frohnmayer would be unresponsive.

The commission is conducting a confidential preliminary investigation and may announce its findings Nov. 17, said Don Crabtree, GSPC interim executive director. Oregon law prevents him from commenting on pending cases.

The bar’s Client Assistance Office is reviewing the allegations for the bar to determine if they merit referral to its disciplinary unit.

Frohnmayer has discussed the matter with the Faculty Advisory Council, a group of professors that confidentially advises the president, and has notified Oregon University System Chancellor George Pernsteiner and Oregon Board of Higher Education President Henry Lorenzen.

Pernsteiner said he has reviewed the complaints and Frohnmayer’s financial disclosure form and determined that the OUS will not investigate.

“From what I have seen, I don’t see any basis for anything improper,” he said. “I have every confidence in President Frohnmayer.”

Lorenzen, a Pendleton lawyer, said after reviewing the complaints that he believes Frohnmayer will be absolved of wrongdoing.

“I’ve come to the preliminary conclusion that the complaint is without merit,” Lorenzen said, adding that he wouldn’t elaborate until the GSPC and the bar issue opinions.

A question of residence

The allegations center on Frohnmayer’s 2005 Annual Verified Statement of Economic Interest, a six-page form listing his assets and sources of income for that year. Frohnmayer is one of several top-ranking University officials who must submit the form to the GSPC annually or face as much as $1,000 in fines.

The form requires Frohnmayer to list all real property that anyone in his household owned within the jurisdictional boundary of the public entity in which he serves, although it exempts his “principal residence.” For 2005, Frohnmayer did not report any real property, leaving the space blank despite an instruction on the first page of the form that says no spaces should be left blank and “N/A” should be written if the requested information does not apply to the filer.

Frohnmayer said an assistant helped him prepare a draft of the document, and that the blank did not indicate wrongdoing.

“Blank means blank,” Frohnmayer said.

He did list “rental of principal residence,” his newly purchased home at 545 Spyglass Drive, as a source of income more than $1,000 on another section.

Harbaugh and Frohnmayer, however, disagree about what constitutes the Frohnmayers’ principal residence.

Prior to 2005, Frohnmayer and his wife, Lynn, considered their principal residence a five-bedroom home on Baker Boulevard near Laurelwood Golf Course. Because Dave Frohnmayer’s Oregon University System contract requires him to live in the McMorran House, a state-owned property southeast of campus, the Frohnmayers leased the Baker Boulevard house as a source of income.

In April 2005, they sold the Baker Boulevard house for $405,000 and bought Williams’ two-bedroom home on Spyglass with the intent to lease that property as well. They used a 1031 in-kind property exchange, a tax strategy that allows the owner of investment property to delay paying taxes on revenue from its sale by reinvesting sale money in another property. In this case, the Frohnmayers will not pay taxes on the Baker Boulevard sale until they eventually sell the Spyglass house.

Dave and Lynn Frohnmayer said they considered both the Baker Boulevard and Spyglass homes to be their principal residences and as business properties because the McMorran House, while luxurious, is not truly theirs.

“We hang our hat here,” Lynn Frohnmayer said. “But this house is used for multiple, multiple purposes.”

“I could be required to leave there at a moment’s notice,” Dave Frohnmayer said. “I serve at the pleasure of the Board of Higher Education. In that respect, the home that I own is no different from the home that a professor would own on sabbatical who would probably rent it or lease it for the year that he or she is gone.”

Lynn Frohnmayer said she consulted with a certified public accountant, who assured her that homes could be both rented and used as a principal residence.

But the complaints assert that McMorran House is Dave Frohnmayer’s principal residence because he lists it as his home address on Lane County voter registration rolls, his resume and property deeds. Harbaugh also cites a 1960s opinion by the Congressional Joint Committee on Internal Revenue Taxation when it found that President Richard Nixon could not list his principal residence as a San Clemente compound and not the White House.

“President Frohnmayer’s argument is remarkably similar” to the Nixon argument, Harbaugh said.

“Given that President Frohnmayer has not used the Baker or the Spyglass address on official documents, used a tax regulation specific to investment rather than residential property in the transactions involving these houses, currently rents the Spyglass house out and has never lived in the house, he cannot claim it as his principal residence and therefore should have reported these transactions,” the complaints say.

As a legislative body, the committee had no precedent-setting power, Dave Frohnmayer said.

Regardless of debate about his primary address, Dave Frohnmayer said, neither the Baker Boulevard nor Spyglass houses fall within the jurisdiction of the University, defined by the City of Eugene and the Legislature as being on-campus.

Harbaugh said jurisdiction refers to the Oregon University System, not just whether the Frohnmayer house is on campus. He cites a July 21 e-mail between former GSPC Executive Director L. Patrick Hearn and himself, in which Hearn states that “the public entity UO employees serve is the state of Oregon.”

“Any property within the jurisdictional boundaries of the state should be listed,” according to the e-mail.

Dave Frohnmayer said Hea
rn is not legally trained and that the State Board of Higher Education would have a different view.

“There is obviously no attempt to deceive anyone,” he said. “So, I mean, what is the problem?”

Harbaugh alleges that, although the 1031 transaction was not taxed, Dave Frohnmayer should have listed the $405,000 Baker Boulevard sale on another part of the form that applies to “gross pre-tax income of any nature derived from any source.”

“The definitions of the words gross and pre-tax are straightforward,” the complaints say. “Regardless of the fact that the income from the Baker sale was sheltered from capital gains taxation as a 1031 transaction, it should have been reported as ‘gross pre-tax income.'”

Dave Frohnmayer said he did not see any money from the exchange involving Baker Boulevard, and that Harbaugh is confusing income with the selling price of the house.

“There is no income, no gain. There’s no loss,” he said. “I wouldn’t even know what it is right now because it depends on the valuation of the Spyglass house if and when it’s sold.”

In the bar complaint, Harbaugh also alleges that Dave Frohnmayer made false statements in filling out the form-a crime.

“I ask the bar to consider that, because these violations of those statutes involve making false statements under oath or in documents in which the truth is required by law, they necessarily reflect adversely on President Frohnmayer’s honesty and fitness to practice law, and to take appropriate action.”

Dave Frohnmayer said he helped form the law as state attorney general in the 1970s and that he did nothing wrong.

“The principal residence for purposes of the ethics law is what you own,” Dave Frohnmayer said. “I know that because, you know, in 1974 I helped to draft it. I was really clear that they didn’t want to confuse 10,000 public officials … with the personal homes, the homes you own. That’s why the exemption is there.”

“This is statement of economic interest,” he said. “It’s not a statement of where do you vote, where do you sleep?”

A perceived conflict?

Another “potentially troubling aspect of the Spyglass purchase,” according to the complaints, is that the Frohnmayers bought the house from Williams, who Harbaugh proposes might have had a financial stake in the sale of the Williams’ Bakery property to the University, leading to a potential conflict of interest.

“That’s just the wildest, unfounded speculation,” Frohnmayer said.

Williams built the former Williams’ Bakery, the family business located next to the eastern edge of campus, and sold it to United States Bakery in 1991. He served as director of United States Bakery until March 2001, when he resigned and severed all financial ties with the bakery.

“There have been no financial transactions of any kind between myself and United States Bakery,” he said.

The University bought the bakery building in February 2005 with plans to build a new basketball arena on the site.

Williams said he and his wife, who now live in Seattle, approached the Frohnmayers about a year before the sale. The Williamses had heard the Frohnmayers were looking for a smaller home, and the Frohnmayers toured the house.

Dave Frohnmayer said his family no longer needed the five-bedroom house that they remodeled to accommodate several children.

He didn’t discuss the bakery during the sale and the thought of a conflict of interest never crossed his mind because he assumed Williams had given up interest in the bakery when he sold it in 1991, he said.

Williams said he might have briefly asked Dave Frohnmayer about the status of the sale during a football game tailgater at one point, but that they never discussed the terms of the sale.

“I had and have a very strong human interest in Williams’ Bakery,” Williams said. “It had my name on the door for a long time. I started working there when I was a kid.”

The complaints say Harbaugh hopes that Dave Frohnmayer can prove there wasn’t a conflict of interest, but that the circumstances dictated that Dave Frohnmayer should have reported the property sale to the Oregon University System chancellor.

Harbaugh said Wednesday that testimony from Williams seems to have resolved the possibility of the house sale influencing the bakery sale, but Dave Frohnmayer’s failure to report a connection between the house and the former bakery executive still may represent “false swearing without financial gain.”

Start of an investigation

Dave Frohnmayer and Harbaugh crossed paths last year when Harbaugh began to criticize the administration’s efforts to pass a proposed Diversity Plan. Harbaugh and Dave Frohnmayer traded e-mails and debated the plan at a May 24 University Senate meeting.

Harbaugh compiled the documents leading to the accusations while trying to find records on the University’s affirmative action policies – information he said Frohnmayer’s administration was hesitant to provide when it should have given it freely. Language in the affirmative action plans would be needed to justify parts of the Diversity Plan, he said, but the University said it didn’t have the affirmative action plans from the years between 1996 and 2003.

“I concluded that this was a pattern of refusing to provide basic information about public issues, so that’s when I filed the complaint,” he said.

He appealed his request to the Oregon Attorney General’s Office, which found that the University had been unable to locate the records he requested and thus had not denied his request.

Contact the news editor at phowell@dailyemerald.com