Director of the Charitable Trusts Unit Anthony Blenkinsop notified College officials on Friday that the New Hampshire Attorney General's Office will not launch an official investigation of the Board of Trustees for allegedly abusing endowment funds and approving illegal investments, according to Director of Media Relations for the College Justin Anderson.
In February, an anonymous group claiming to be composed of former and current faculty members and staff known as "The Friends of Eleazar Wheelock" released a whistleblower letter that accused Board members of using their positions to manipulate the College's investments.
"They have simultaneously directed the College's $3-billion endowment to themselves, their firms and their friends," the letter said. "They have furthered their own self-interest at the expense of the College and the Upper Valley."
After reviewing financial materials sent by the College in July and September, the Charitable Trusts Unit found "no basis" for the allegations of endowment mismanagement and concluded that the Board did not violate state law, Blenkinsop said in a letter to College officials.
The College invests the majority of its endowment through firms that have no affiliation with the Board of Trustees, according to College General Counsel Bob Donin. However, the College does invest a portion of the endowment in related party investments when it is in the best interest of students, faculty and staff, according to Donin.
"The value of all such investments amounts to just 1.3 percent of the value of the Dartmouth endowment as of June 30, 2011," Donin said in a letter to the Attorney General's Office.
In total, over 13 percent of the endowment is invested in firms that Board of Trustees and Investment Committee members have previously managed, according to Donin.
The letter distributed by The Friends of Eleazar Wheelock included a list of 10 trustees involved in the financial services and investment industries. The list included founder of Apollo Management Leon Black '73, Vice Chairman of Morgan Stanley Bradford Evans '64 and founder of Avid Partners Pam Joyner '79.
The group alleged that these former trustees used College funds to promote their own firms.
"That pattern is that a donor/investment manager's pledge to support Dartmouth is reciprocated with an investment of ever increasing proportions in the donor's firm, lending the credibility of an Ivy League institution to the firm," the letter said.
Since the law permits such investments when public disclosure requirements are followed, the Charitable Trusts Unit found no merit to the accusation that the College violated the law by engaging in these transactions with the trustees' approval, according to Blenkinsop.
"The allegations from the unnamed authors of the letter to the Attorney General are all the more absurd considering that the New Hampshire legislature specifically chose to allow nonprofit organizations to transact business with board members' companies when doing so could be advantageous to the organization," Anderson said in an email to The Dartmouth.
The letter claimed that College officials have not fully disclosed investments in their financial statements and suggested that the College engaged Lehman Brothers, a global financial services firm, in six interest rate swaps that totaled over $550 million but did not publicly report its losses on these bets.
According to Donin, however, the College's financial statements included all of its interest swaps and any related losses.
"Dartmouth has used interest swaps in conjunction with its variable-rate debt as a prudent method to hedge against interest rate increases," he said. "Through the use of the swaps, Dartmouth was able to effectively fix all of its variable-rate debt at very reasonable tax-exempt swap rates between 3.73 percent and 3.78 percent."
While the Charitable Trusts Unit is not planning to open an investigation, it reserves the right to do so if any evidence of illegal activity comes to light, Blenkinsop said.
When compared to other colleges' governing bodies, Dartmouth's trustees' strong ties to the financial industry could create dubious financial situations and promote an image that favors money-making over scholarship, according to women's and gender studies professor Michael Bronski.
"It's good news that no laws were broken," Bronksi said in an email to The Dartmouth. "But as bad as actually breaking the law is giving the appearance that there are legal but possibly unethical investment connections here."
History professor Russell Rickford said that the concerns regarding investments indicate a "corporate philosophy" and management style among the College's operations. The political and ethical implications of the College's finances include unfair terms of labor and an attempt to undermine unions via labor subcontracting, he said.
"It should not be surprising that such retrograde practices are reflected in the College's investments and in the companies with which it does business," Rickford said in an email to The Dartmouth. "It is up to the students and to other members of the Dartmouth community, including workers, to decide what labor practices and investments are consistent with the College's professed ideals of citizenship, social responsibility and democracy."
