Tag Archives: endowment

Liveblog: Open Forum on the Endowment

Summary: Mark Davis ’96 from University Relations, Brett Salafia from the Investment Office, and Corey Guilmette ’13 of the Committee for Investor Responsibility all gave presentations followed by open questions. Most of the conversation centered on endowment performance, alumni participation, and the question of divestment. There was also some delicious food. Get your fill (of liveblog) after the jump.

CIR Hosts Open Forum on the Endowment

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From the estimable Corey Guilmette ’13:

This Tuesday, April 30th, from 4:15-5:15 in 41 Wyllys 114 the Committee for Investor Responsibility (CIR) will be hosting conversation with Wesleyan’s Investment Office, University Relations, and CIR members about investing, social responsibility, and Wesleyan’s financial future.
There will be FOOD!!! Including, but not limited to: Pad Thai, Cookies, Cobbler. 

The Investment Office will give an overview of endowment strategy and performance.

University Relations will discuss the alumni giving process.

Student members of the Committee for Investor Responsibility will report on progress on community investment and shareholder engagement, and solicit input on ideas for future projects.

A Question and Answer session will follow.

Date: Tuesday April 30th
Time: 4:15PM
Place: 41 Wyllys Room 114

Fit To Print: Wesleyan Need Blind Struggles Covered in NYT

What’s the Twittersphere saying about the Times piece? Click past the jump.

A weekend New York Times article covers Wesleyan’s change in admissions policy, giving a national and international platform to some of the activism surrounding need blind here on campus. With little communication to the alumni and larger Wesleyan community about the recent change in admissions policy, for many alums this could be the first they hear of the policy shift, a topic we’ve been abuzz with for months. Not only did my mom text me this morning to check the article out, but other people are wildly sharing it, too: it is listed in the top-emailed articles on the NYT website, and the tweeting world is hot on the topic.

The article cites financial instability as threatening diversity at small elite colleges, specifically Wesleyan and Grinnell. Small schools like our own have been steadily raising tuition, while families are increasingly unable to meet rising costs in a weak economy. Richard Perez-Pena writes,

As a result, more students need financial aid than did a few years ago, they need much more of it on average, and colleges have fewer resources with which to provide it, though a major expansion of the federal Pell Grant program has made up some of the difference.

Wesleyan is described as having “had the most heated recent debate.” Disappointingly, then, no students are quoted in the piece, but President Roth gives a shout out to student activism, saying “I applaud the students’ commitment to our values,” and adds, “I did not think that the economic model we were using would be sustainable in even the midterm, over the next decade.” This is out of character given his recent confrontations with chalking Wesleyan students  and Nemo Allen ’12 from Democracy Now!. Links in the NYT article direct readers to two Argus articles about student activism surrounding the barge-in at the Trustee meeting and protest at the Homecoming football game. Additional coverage here and here.  Added to this semester’s memorably heated moments—but unmentioned in the Times—are the artistic chalk bomb, Alumni letter asking to withhold alumni donations, and parent assembly infiltrations.

NPR Report: Wesleyan Part of Larger Trend In Colleges’ Financial Woes

NPR has a story this week on how the financial cancer attacking many elite private colleges—that is, more money coming out than in—is affecting schools like Grinnell College, MIT, and, of course, Wes. The focus is on recent struggles over need-blind admissions. Grinnell seems to be an unusual case; despite not being in the same admissions tier as Wes (with an acceptance rate of 43%), it has enjoyed a rosy financial situation thanks in no small part to Warren Buffett sitting on its board. This has allowed it to pay 60% of its students’ costs, which is a higher rate than any other school except Harvard.

Even Grinnell, however, is showing the first signs of trouble, and says it has reached the point where it has had to switch some of its grants to loans.

“We don’t get in a room and say, ‘OK, do we give more aid here or do we give a raise to a professor over here?’ It’s never that stark, but behind the curtain, what’s happening is this tradeoff,” says Kington.

The towering monolith of MIT, meanwhile, told NPR it would never ever ever in a million years end need-blind admissions. “That’s one of our rock-solid principles. It’s sort of built into our DNA,” said MIT Chancellor Eric Grimson. Hopefully we will not have to see the unsustainable financial models and practices of these elite universities bring them, in 10 or 20 years, to the point Wesleyan is at now. NPR says the end of need-blind policies has sustained “some backlash” herea big understatement.

Socially Responsible Investment Coalition

A note from the Socially Responsible Investment Coalition:

Where is Wesleyan’s endowment money invested? At the last report, our endowment was invested in some scary companies, like Raytheon (weapons manufacturers?!?!), coal mining (destroying our beautiful earth?!??!!!), and more.

But at the present, there is no transparency about where our money could be invested. It could be anywhere.

If you want to know where Wesleyan’s money is invested – the first step in moving our endowment toward socially responsible investment – join the Socially Responsible Investment Coalition and sign our petition calling for endowment transparency here in support of the recently passed WSA Resolution on endowment transparency. Make your voice count – let our Board of Trustees know that Wesleyan cares where our money is invested.

Do You Support BIG Coal?

Noah K-M ’13 hopefully doesn’t care that I abbreviated his last name for stylistic reasons:

Do You Support BIG Coal?

Should Wesleyan’s endowment?

Come to an informational meeting this thursday for Wesleyan’s chapter of the Socially Responsible Endowment Coalition to learn how you can help direct our investments toward sustainable, peaceful, and (just for fun) profitable funds. Whether you are down with singing about investment transparency in Usdan, talking with administrators, or crunching numbers, your talents, enthusiasm and creativity will be put to use. our actions as a group have the potential to support sustainable practices WORLDWIDE!!!

Date: Feb. 17
Time: 4:30 PM – 5:30 PM
Place: University Organizing Center (next to P-safe building on High Street)
Cost: The faster we handle BIG coal, the sooner we can pick off pesky small coal.

Roth’s public response to the Kannam legal situation

roth smirkRe: the Thomas Kannam lawsuit. In a campus-wide email and on his blog, President Roth briefly lays out the case against Kannam and says he’s got this.

Key details in boldface:

Many of you are aware that Wesleyan has commenced litigation against former Vice President and Chief Investment Officer Thomas Kannam. For those of you hearing about this for the first time, here are the basic facts: On September 30, 2009, Wesleyan received a report through its Whistleblower Policy concerning Mr. Kannam’s potential violation of Wesleyan’s Conflict of Interest Policy. This report was fully and promptly investigated. We believe that Mr. Kannam was a principal in one or more other substantial business ventures and that his work was potentially in conflict with his responsibilities at the University. As a result of this activity, Wesleyan believes that Mr. Kannam had, at a minimum, violated the Conflict of Interest Policy and his employment agreement with the University. Mr. Kannam was terminated on October 13, and on November 24 Wesleyan brought suit in Connecticut Superior Court against him and related parties.

An unpleasant matter like this one, touching a community like ours, stimulates questions and speculation as a matter of course. In this case our strong desire for transparency must be weighed against both legal interests and institutional policy regarding personnel issues. Given the pending litigation, it would be inappropriate for me to comment at length. What I can say is that the situation, while disappointing, is no cause for alarm. However, the University has an obligation to all those who have supported it over the years to hold members of the campus community to the high standards expected of them, and this litigation reflects just how seriously the University takes its fiduciary responsibilities and adherence to its policies. Once the nature and scope of Mr. Kannam’s activities were revealed, we acted quickly and judiciously.

Wesleyan’s endowment is being overseen by the Treasurer’s Office in close consultation with the Portfolio Subcommittee of the Board of Trustees. A search process is underway that will result in new leadership for endowment management, and I will be able to report on this in the spring. In the meantime, I am gratified by the continuing support the University has been receiving from its alumni and others.

Michael S. Roth
President

An assertive statement, yet tactful, considering the situation. I don’t suppose we’ll be hearing a rebuttal from the other side anytime soon.

In the meantime, things are heating up.

Wes sues former VP Tom Kannam for $3 million

Cue populist rage!!

Unless you’re a particularly keen watchdog of the administration, you probably paid little attention to the departure of former Vice President of Investments and Chief Investment Officer Thomas Kannam back in October, via a vaguely worded all-campus email stating that he had “left Wesleyan University to pursue other opportunities.”

As it turns out, Kannam is now being pursued by the University in a $3 million lawsuit, for civil theft, fraud, statutory forgery, breach of fiduciary duty, breach of contract, and unjust enrichment, among other charges.

Thomas Kannam, via FacebookThere’s been no public announcement of this, but according to a late scoop by the Argus,the University filed its suit in the Middletown Superior Court on November 24. Kannam’s employment was terminated on October 13th, presumably soon after his misconduct was brought to light. The basic details of the suit are available here on the State of Connecticut’s Civil Inquiry website – Kannam is listed at the top of a list of about twenty other defendants.

Kannam oversaw a period of steady growth of the Wesleyan endowment, which peaked above $700 million in 2007, but dropped significantly after the stock market bust in 2008. He was the second-best paid employee on campus, with a $460,000 paycheck in 2007, but clearly that wasn’t enough.

According to the Argus, Kannam violated his contract with the University by spending more of his time on “personal entrepreneurial ventures” than his duties at Wesleyan, which involved presiding over investments and the growth of the University’s endowment. The University’s complaint states that Kannam had been improperly profiting from his position since 2001, by exploiting his privileged access to Wesleyan’s financial information with several outside investment ventures, including the Cross Border Capital Advisors (CBCA) and the Belstar Group.

He is also accused of sitting on several corporate boards without letting the University President know of his involvement with them, as his contract required him to do. Among the corporate boards he sat on were his father’s company, Advance[d] Device Technology Inc., which supplies infrared devices to the United States military, and Vietnam Capital Partners – sure to further enrage anyone (SEWI, SDS) who supported the University’s divestment from weapons contractors like Raytheon two years ago.

Despite receiving healthcare benefits and pension from the Belstar Group, and being named their “critical endowment asset” because of the secret financial information he was able to leak to them, Kannam apparently still took business trips on their behalf at the University’s expense. The University also accuses Kannam of fraudulently and routinely using Wesleyan funds for personal expenses, such as golfing outings, international travel, and a trip to the 2008 Super Bowl (!!), among other things.

Kannam allegedly used non-financial University resources for his personal ventures as well, by offering to have staff at the Wesleyan Investment Office handle Belstar projects, and using the services of Wesleyan’s Quantitative Analysis Center (QAC) for Belstar without paying any fees.

According to the University, Kannam was perfectly aware of the conflicts of interest and tried to hide them, especially in the wake of the post-Enron-scandal Sarbanes-Oxley Act, which set higher standards for oversight by corporate boards. He was also worried that he’d have to “lay low” after the arrival of new president Michael Roth in 2007, whose oversight would presumably not be as conducive to fraud and theft as former president Doug Bennet’s was.

The Investment Office was in North College when Kannam first started working at Wes, but the University claims that he lobbied to have his office moved into its current location at 74 Wyllys Avenue, which Kannam called “The Taj” and used mainly to conduct his personal non-Wesleyan business away from the prying eyes of colleagues.

The University released some of Kannam’s email correspondences from his personal work computer at “The Taj”, which include these somewhat implicating statements:

Economy Sucks, Top Colleges Bypassing Need-Blind Policies

Applications are at a record high at top universities (including Wes), but it seems that with shrinking endowments and many more needy students applying, a lot of colleges are finding ways to accept more wealthy applicants and still claim to be need-blind in admissions, like taking more transfer and wait-listed students, or admitting more international students who pay full tuition.

Which is too bad for high-achieving low-income students, who these schools can’t afford to support in this economic climate.

The admission strategies of many top liberal arts schools in the same league as Wes are brought up in this NY Times article, which gives some insight into the pressures Wesleyan’s admissions office must be facing:

[…] The trend does not mean colleges are cutting their financial aid budgets. In fact, most have increased those budgets this year, protecting that money even as they cut administrative salaries or require faculty members to take furloughs. But with more students applying for aid, and with those who need aid often needing more, institutions say they have to be mindful of how many scholarship students they can afford.

Colleges say they are not backing away from their desire to serve less affluent students; if anything, they say, taking more students who can afford to pay full price or close to it allows them to better afford those who cannot. But they say the inevitable result is that needier students will be shifted down to the less expensive and less prestigious institutions.

There’s going to be a cascading of talented lower-income kids down the social hierarchy of American higher education, and some cascading up of affluent kids,” said Morton Owen Schapiro, the president of Williams College and an economist who studies higher education.

[Continued after the jump]

Bigger classes, higher tuition, major budget cuts

The Board of Trustees recently met for their first board meeting of the year, and the news that emerged was not good.

Due to the economic downturn, the University’s endowment has lost over $120 million… and if you remember, Wesleyan’s endowment isn’t all that big, compared to our “peer institutions.”

A student in the know writes:

Wesleyan’s endowment is down 20% over the last 4 months, and there will be major repercussions for the University’s budget over the next few years—a $15.5 million deficit each year.

The trustees are considering a proposal from the administration that would deal with the problem by increasing class size by 30 for the next four years. There would also be major cuts across all the departments, a one-year salary freeze for staff and faculty, and a slightly larger than normal increase to the cost of tuition. No faculty positions or departments would be eliminated under this plan.

Students should be particularly aware of the ramifications of the first and last strategies being proposed. By increasing class size over the course of the next four years, if we reach our target admission levels, we’ll see around 120 more students on campus—making residential space even tighter (meaning triples for many more freshmen, and a lack of class-appropriate housing in general), leading to longer lines at dining venues, and possibly causing class sizes to swell. By tacking on an additional increase to tuition, the University would raise your bill next year by 5.9%, a bit more than the standard 5% annual increase.

The future is always hard to predict, but current projections, assuming a 5% year-over-year return on the endowment, put us back at our pre-downturn total in 2013. So, in a nutshell, current predictions show that it’ll take us five years to get back to where we were four months ago.

The Board of Trustees meets again in February—unless they decide to call a meeting sooner. It seems fairly certain that a quick reversal of fortunes isn’t on the horizon, and of course, there’s no guarantee that further erosion of the endowment won’t occur. By February, we’ll see if even more restrictive measures are needed to secure the financial stability of the University.