Dear Survival Guide:
I am an administrator at a large university. I have been in the community for many years and have made many good friends. A few years ago, one of my good friends married a faculty member in my college. Both had been married before. I talk to my friend often as we both have children the same age. We have been friends for years and helped each other through some difficult times.
Her husband has never been a favorite of mine. Over the years, he has had numerous affairs with graduate students in his unit. The women had never been in his area of expertise, so according to our campus policy there was no conflict of interest, since he never had them in class or directed their research. Within a couple years of the marriage, he was back at it. My friend knows about the affairs but has found her own way to cope with it when it happens.
Last week, I met her for coffee to catch up. During the conversation, she told me that her husband is involved with one of the students he teaches. I did not say anything at the time, but was quite bothered by what she told me. Clearly, I have been put on notice as a university administrator, but this information came to me in a moment of friendship, outside of work hours and off university premises. I am feeling a great deal of anxiety about this, but don't want to betray my friend's trust.
Any guidance you can provide would be appreciated.
I’m sorry for the stress you are feeling. You’re caught in a classic ethical dilemma between conflicting loyalties. These can be extraordinarily hard and uncomfortable situations. The worst of it is that, now that you know this information, you cannot un-know it. It falls into an area where you have serious responsibilities in multiple directions: your bond of confidentiality with your friend set against your moral and legal responsibilities to your job.
The main problem here is that you were caught off-guard in one role when information came to you about which you have obligations in your other role. In an official meeting in your office, for example, about a work-related topic, it is easier to remind yourself (and others) about the boundaries of your obligations and the confidences you can, and cannot, keep. This probably catches more people by surprise in academe than in other settings because of the fluidity with which people move in and out of leadership positions. In colleges and universities, it is not uncommon for a person to rotate into a chairmanship having friendships of long duration with members of the unit. Not only can the boundaries can be harder to find and maintain under those circumstances, especially when a rotation back to the faculty will follow in just a few years, there just isn’t the same training for the position.
Many learn this lesson the hard way, much like I did in my first job, when I naively promised a crying student confidentiality for our conversation, right before she told me about harm being done to subjects of research. I was, of course, bound to act upon that information, and thus violate the very pledge of confidence I had just finished providing. In that circumstance, we were able to figure out a way to gather the information about the problem from another source so we could take action and -- sort of -- protect her as the source, but none of us were comfortable, including the student who understandably felt exposed, vulnerable and misled. My earnest well-meaningness didn’t do much to mitigate her concerns, though we were able to protect her from the retaliation she feared, the more so since the violation of regulations was substantiated and so severe that the identity of the person who reported it was the least of the researcher’s problems.
After that, I learned -- and have spent many years telling others -- that setting boundaries of topics, confidences, time and roles is one of the critical skills needed for surviving and thriving in the complicated roles we assume when we are wearing many hats at once: teacher, mentor, friend, administrator and more. There are good ways to set boundaries in official conversations, and good ways to talk about them if they arise unexpectedly in conversations. For some suggestions, see my complaint-handling guidelines. 
In your situation, though, you weren’t wearing your "watch the work boundaries" hat, because, you were in friends-sharing-confidences territory. A couple of questions come to mind that might help you work your way through this.
First, how certain are you that your friend’s information is correct? Whatever your answer, it doesn’t change the fact that you’ve heard a potentially serious allegation about boundary-crossing conduct and that your position makes you responsible for problems of that nature. You don’t know if it’s true, and if this information came to you another way -- not directly from the student, but from another student, or a faculty member -- what would you do? What would your policy provide? You do not have any direct information right now; you essentially have an unofficial allegation of misconduct. One of the complicating factors, of course, is that you’ve been hearing about the husband’s affairs for years, so in your gut, your sense is that this is likely to be true, which raises the stakes in this situation in several uncomfortable ways.
On the friendship front, the most direct thing to do here is for you to talk to your friend and tell her that you’ve really been struggling with this since she told you about it and tell her about the bind it puts you in: if true, the relationship seriously violates the stewardship responsibilities of a faculty member, abuses the power he holds in the relationship, and presents a conflict of interest. What’s the chance your friend would be willing to release you from the confidence and let you use the information to ask questions of the faculty member and student, even if you do not name her as the source of it?
On your job front, review your institution’s policy about allegations of inappropriate conduct. Does it require a complainant to proceed? What does it say about information received confidentially? Some policies require a complainant. That can be a legally-problematic position that doesn’t change the fact that you’re on notice of potentially inappropriate conduct, but some policies do that, and you need to know what your official policies require. If the policy requires a complainant, then all you’d be able to do, likely, is engage in what’s called in the medical environment "watchful waiting."
Assess your obligations here: Your institution should be providing an education to students free from coercion and conflicts of interest. Any intimate personal relationship between a supervisor — whether in an academic or employment sense — creates a conflict of interest. There’s a conflict between the supervisory role and the personal role, not only for the two in the relationship, but also for others who might be affected by judgments that favor the beloved over others. It sounds like your policy addresses this as a conflict of interest, and not as a matter of sexual harassment. That has always seemed the stronger approach to me, as it focuses on the institutional interest at stake, the integrity of the education received by its students. You are not the bedroom police nor interested in becoming so; what you care about is the overall fairness and quality of graduate supervision in your university.
Let’s think some about the student and resources available to her. Does this student have access to reasonable adults in her environment if she is troubled by what is going on? Is there an unobtrusive way to make sure that/those adult/s are in contact with her? Sometimes students simply don’t know where to go or who to talk with if they’re troubled. On the other hand, she might not be troubled at all right now, but might become so later; if she does, how will she know where to go and whose doors are open for her? Is there a way to listen quietly to figure out if there’s any sense of an active and inappropriate faculty-student relationship in the faculty member’s unit? Has the chair heard anything about this? You’re on thin ice here and you cannot and should not call up and ask "So, heard anything about X sleeping with Y?"
Before deciding what to do, I’d probably talk to your university’s lawyers about boundaries and procedures, to make sure you’re on firm ground, or as firm as it can be under these unpleasant and uncomfortable circumstances. Ask their advice about what steps should be taken, if any, given what you’ve been told. Do they consider this a form of notice to the university?
If your friend agrees to let you use the information, and maybe even if she does not, and if your attorneys concur, then you -- or the chair, more likely -- one option to consider seriously is to have a conversation with the faculty member that goes like this: "We do not have an allegation against you and we have no direct information. Nonetheless, there are rumors reaching us that you are having an inappropriate relationship with a student. We would like to give you an opportunity to respond to this, and if you decline, which is your right, are putting you again on notice of our policies and are documenting that notice. Violation of these policies can lead to discipline up to and including dismissal if substantiated."
Good luck to you in this very hard situation. Your commitment to grappling with this issue, rather than just flinching from it, is important. Whatever action you do or do not take, after consulting, do think about whether you can contribute to improving the policies and practices of your university to strong and clear guidance to students and faculty members alike about appropriate boundaries, and what to do when relationships develop.
C.K. Gunsalus is professor in the Colleges of Business and Medicine and a research professor in the College of Engineering at the University of Illinois at Urbana-Champaign.