Clamping Down on Corruption

Public institutions in New Jersey face intense scrutiny from both state and federal governmental officials.
January 5, 2006

Leaders of New Jersey’s public colleges are increasingly under the microscope, from both federal and state officials.

On January 1, an order by Gov. Richard Codey took effect, preventing leaders at the state’s 31 public institutions from doing business, directly or indirectly, with the institutions they govern or by which they are employed. Just a week earlier, the federal government enlisted a former U.S. attorney, Herbert Stern, as a monitor to oversee the finances of the University of Medicine and Dentistry of New Jersey.

The actions occurred amid growing concerns about mismanagement of dollars at the institutions. One of the top issues centered on dealings at the medical university, which a federal prosecutor has accused of double billing Medicare and Medicaid by at least $4.9 million. The prosecutor also alleged that, since 2000, nearly $700 million in no-bid contracts were awarded to companies that often had affiliations with university employees.

In Codey’s order creating the new state prohibitions, signed November 15, he explained, “[R]ecent events have compellingly demonstrated that our public institutions of higher education and the members of the governing boards of those institutions must conduct business in the most transparent manner possible, to ensure that the citizens of New Jersey have complete confidence in the operation of those institutions and in the persons who are governing them.”

The problems, though, haven’t stopped with the order. On Wednesday, The Star-Ledger of Newark reported that only six of the state’s 400 trustees had, in fact, resigned in line with the guidelines of the order, far fewer than state officials had expected. “Another 30 (including the entire board of Atlantic Cape Community College) failed to fill out the conflict of interest disclosure forms required by the state,” according to the report. Additionally, “some board members listed conflicts on their disclosure forms, but inexplicably failed to quit by Sunday’s deadline.”  

The Star-Ledger also indicated that “dozens” of presidents and trustees have filed for exemption from the order, but several have already been denied by the state’s Executive Commission on Ethical Standards.

Codey told the paper that if there is “no legitimate reason” for failures to resolve conflicts of interest, the leaders in question would, in fact, be fired.

The federal government, too, has taken a firm line. If the University of Medicine and Dentistry of New Jersey had not accepted the proposal for a federal monitor, U.S. Attorney Christopher Christie could have proceeded with legal action that would have left the institution without any federal funds.  The institution, which employs approximately 15,000 workers, costs about $1.6 billion to operate each year.

In a December statement, John J. Petillo, the university’s president, noted that the federal monitor proposal is “unprecedented,” but that many things have gone on at the university that “must and will change.”

“Having an outside presence will allow me to further drive down reform to the very foundation of this institution,” said Petillo. “We have been and will continue to work with the United States Attorney in these efforts, for we are all after the same thing -- a university above reproach, a university in which all faculty, students, staff and alumni can take pride.”

Richard Novak, who directs the Center for Public Trusteeship and Governance at the Association of Governing Boards of Universities and Colleges, cautioned that the new actions -- at least those by the state -- could be going too far. “I hope it’s not a rule where a baby is being thrown out with the bathwater,” he said. Noting that most, if not all, exemptions have been denied to date, he said, “the overall situation in New Jersey might not really call for this strict of an order.”  

Novak explained that in many communities nationwide, it would be difficult for college officials to comply with such an order. He provided the example of a small town with only a few banks where a banker sits on the board of trustees of the local college.  

He also said that in working closely with the leaders of nine state colleges in New Jersey on a variety of governance proposals, he didn’t witness any conflicts of interest that would have called for resignation.

“An absolute decree that you can in no way, no how, have any connections with business interests would be bad,” said Novak.

Still, Novak said that the trustee association believes that disclosures of conflicts of interest are important. He indicated that the group’s latest guidelines say that every board member who has a conflict of interest in terms of business dealings with an institution of higher education that they serve for “should recuse themselves.”    


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