NEWS

AG's office taking over ASU investigation

Josh Moon
Montgomery Advertiser

An investigation into allegations of financial misdealings at Alabama State University will now be carried out entirely by the state's attorney general's office, which has assigned an acting attorney general to investigate the school.

A spokesperson for Gov. Robert Bentley's office told the Montgomery Advertiser that the governor's office would not extend the contract for a forensic audit of ASU that has now lasted more than 16 months and cost taxpayers over $1 million. What will happen with the audit is unclear.

"The Legislature has appropriated money for the Office of Prosecution Services, a portion of which will be used by the acting attorney general assigned to investigate Alabama State University," said Jennifer Ardis, Bentley's communication director.

Attorney General Luther Strange's office said Strange has recused himself from the ASU investigation and appointed district attorney Chris McCool, from the 24th district, to serve as acting attorney general.

Reached by phone on Friday, McCool said he wasn't ready to comment on whether his office would continue the forensic audit, but said, "If we do, that will obviously be public record, so you'll know."

McCool said he has been serving as acting AG on the ASU case since Dec. 17, 2012 — less than a month after the university's problems began with allegations from former ASU president Joseph Silver. McCool also declined to provide a status update or give any indication on how much longer his investigation might last.

Silver claimed in November 2012 that he had uncovered problems with contracts at ASU, including some deals in which the school didn't receive a clear return on the money it paid out. That touched off an ugly scene in which Silver attempted to fire two university administrators by way of an iPhone email, while they had a closed meeting to discuss suspending him. Silver, who had served only three months, eventually was pushed out after receiving a $685,000 separation agreement.

Shortly thereafter, Bentley ordered a forensic audit of the school and hired Birmingham firm Forensic Strategic Solutions to carry it out. The audit ran into almost immediate trouble when ASU hired Birmingham attorney and former federal judge U.W. Clemon to vet each request for documents that FSS submitted.

That slowed the process to a crawl and drove the price of the audit up. In a March email, Bentley's office provided the Advertiser with a record of payments to FSS, showing that the firm had been paid just over $988,000. That figure does not include the cost of ASU's attorneys' fees, which totaled more than $700,000 up to March, according to figures provided by Clemon.

Audit future

Where the decision by Bentley's office leaves the audit is unclear. During a committee meeting Friday, both ASU president Gwendolyn Boyd and vice president for finance Freddie Gallot said the university has heard nothing about the status of the audit and was waiting until the most recent FSS contract extension ran out on April 30 to make inquiries.

When told outside of the meeting of Bentley's decision not to extend the FSS contract and leave the investigation in the hands of the AG's office, Boyd said she had not received that information.

"You're giving me news," she said.

Gallot said it had been several weeks since he had been asked to fill a request for information from FSS.

However, the uncertainty of the forensic audit isn't exactly helpful to ASU. During his presentation to the financial committee, Gallot said the school's yearly audit of fiscal year 2013 was on hold while auditors from the firm Warren Averett also awaited the April 30 deadline before it submitted their report.

"Without that (forensic) audit, I'm afraid we could be looking at another qualified opinion, which isn't good," Gallot told the committee members.

A qualified opinion, instead of the more favorable unqualified opinion, means an auditor discovered a situation that doesn't comply with generally accepted accounting principles. Gallot said the uncertainty created by the forensic audit provided that sort of situation, leading to a qualified opinion on the 2012 audit.

That, in turn, was partially responsible for Moody's decision to downgrade ASU's credit rating twice.

"It wasn't the only reason, by no means, but it played a part in that," Gallot said. "This forensic audit hanging out there isn't good for us. It's not really good if it just goes away. We need findings presented."

Grand jury

It is unlikely that the forensic audit will be scrapped, however.

Last month, FSS in-house attorney Jeff Windham seemed to indicate that the firm was supplying information from its audit to a grand jury. Windham said he couldn't produce public records the firm had taken from ASU because state and federal laws prohibited FSS from doing so. When asked which laws, Windham said, "State and federal laws prohibit me from telling you that, too."

Most grand jury testimony and evidence presented is confidential. Sources familiar with the investigation at ASU have told the Advertiser that a state grand jury and a federal grand jury are receiving evidence and hearing testimony about ASU.

At least some of what FSS has passed along to the AG's office is well known.

The firm released a preliminary audit report in October detailing a series of findings at ASU, including problems with a Medicaid program the school managed and the relatives and friends of trustees receiving lucrative contracts at the school.

ASU officials have vehemently denied those allegations and filed a lawsuit in Los Angeles Superior Court claiming FSS misrepresented facts in the report to intentionally damage ASU. ASU legal counsel Kenny Thomas said that case is still in the discovery portion and was advancing slowly.

"Things move pretty slow out there," Thomas said.

The last major filing in the case was a motion by FSS to have the case moved from Los Angeles to Alabama.