I am not a fan of Michigan, so this is not upsetting at all. Interesting story in light of OSU troubles.

University of Michigan alumnus Donald C. Graham helped pay for the university's football team trip to France. His contribution came after U-M invested $102 million in his son's private equity funds.
Donald Graham
(Photo: Bill Bregar, Crain Communications)



The wealthy family who helped bankroll the University of Michigan football team's recent overseas trip has received more than $100 million in investments from the university, according to a review of hundreds of U-M records.

U-M's endowment has invested a total of $102 million in four private equity funds run by the son of U-M alumnus and mega-donor Donald Graham. Graham and his family foundation have donated more than $60 million to Michigan, including paying for half of the estimated $800,000 cost of the Wolverines' trip to France last spring, organized by coach Jim Harbaugh.


It is the kind of financial back-and-forth that has troubled critics worried about how large donations to U-M and other elite universities could influence investment decisions worth billions of dollars.

"This case raises questions about a conflict of interest. Is Michigan acting in the best interest of the university or in the interest of a donor?" said Charlie Eaton, assistant professor of sociology at University of California, Merced, who is writing a book about Wall Street's relationship with higher education. "My research suggests that this is not just a coincidence that Michigan is invested in its biggest donors."

Melanie Leslie, the dean of the Benjamin N. Cardozo School of Law at Yeshiva University in New York, who has studied governance issues at nonprofits, said in an interview that "it’s all about process and transparency. ... I don’t think a blanket rule prohibiting the investments with donors is necessarily the way to go."

Leslie added that the process must be clear enough to avoid a "lack of accountability and people benefiting their friends."

At U-M, thousands of donors — many of them alumni — count on university investment officials to safeguard and grow hundreds of millions of dollars donors put into more than 10,000 individual endowments. Those long-term funds, now worth more than $11 billion collectively, are the country's third-largest endowment for a public university.

Internal auditors at the University of Michigan, as far back as 2014, cited problems with the university’s management of its endowment, including a lack of proper oversight and staff members who accepted luxury gifts and high-end travel. But the auditors never finished the job.

In a March interview this year, after the Free Press asked about the unfinished audit, President Mark Schlissel said he had "dropped the ball." Schlissel then commissioned PricewaterhouseCoopers to complete a comprehensive financial review, which was released Thursday.

External auditors concluded that they generally found sound financial controls, though they recommended implementing stronger policies to avoid some potential conflicts of interest as well as stricter oversight of employee travel and gift from investment fund managers. The audit only examined investment operations from July 1, 2017 through March 31 of this year.

The PwC audit and the university's written response did not specifically impose greater controls over possible conflicts arising from investing with some of the university's wealthiest donors.

Instead, university officials appeared to be moving toward curtailing direct oversight over individual investment decisions by elected leaders.

Today, the regents approve all new investments and reports those investment decisions at their monthly meetings where the public may comment. But U-M said Thursday it may curtail that power and public participation. U-M did say it would still report the investments to the board in a public setting.

Under the proposal announced Thursday, the regents would only weigh in on the kinds of investments U-M should make and how to divvy up those investment dollars broadly by category. The actual decision to place money with individual investment funds, however, would rest with U-M's chief investment officer and its chief financial officer.

More from endowment coverage:

Donor funds profit from University of Michigan

U-M invests globally but little at home

Auditors warned U-M about endowment years ago

How banned broker got U-M to invest $95M

U-M trustees may keep investments in the dark

David Callahan, author of the 2017 book, "The Givers," said in an interview that private donors across the country have increasing influence at public universities where government support has dwindled.

Contributors who step into the funding breach say they are deeply thankful when they give back to their alma maters, according to Callahan. But getting into business with those same donors can be problematic for school officials, he said.

"How do you pull the plug on investing in a fund with a donor when they could be giving a lot more in the future?" said Callahan, who is also the founder and editor of the news website Inside Philanthropy,. "Even if it's underperforming, you have to weigh that against ticking that person off. It all sounds like a very bad idea."

Aaron Dorfman agreed. He's president and CEO of the National Committee for Responsive Philanthropy, a Washington-based research and watchdog organization tracking the operations and performance of nonprofits and their contributors.

"If I were a regent, I would support not investing with donors. There are too many other options," Dorfman said in an interview.

A Free Press investigation published in February found that executives at some of the nation's top investment firms donated hundreds of millions of dollars to the University of Michigan while the university invested as much as $4 billion in those companies' funds. Among them are firms run by billionaire Miami Dolphins football team owner Stephen Ross and Chicago real estate magnate Sam Zell. The Free Press reporting was based on hundreds of publicly reported investment transactions and donor records.

At the time of that analysis, Don Graham's role was little known.

His donation to Michigan football for the Paris trip had been anonymous. U-M documents for 2004, 2006, 2008 and 2015 did not reveal Graham's connection to the investment firm known as Graham Partners, which received more than $100 million in total from the endowment. The university also left Graham's name off a 2016 list of top contributors requested by the Free Press.

Industrialist Donald C. Graham founded the University

LINK: https://www.freep.com/story/sp...onor-trip/656874002/