That’s what a disgusted Bethune-Cookman trustee is telling his alma mater amid questions about forged signatures, financial mismanagement and millions allegedly spent without the knowledge of the school’s leadership.
BY THE FLORIDA COURIER STAFF
DAYTONA BEACH – In a scathing six-page letter dated Sept. 15, Johnny L. McCray, Jr., a Pompano Beach-based attorney and longtime member of the Bethune-Cookman University (B-CU) Board of Trustees, issued an ultimatum demanding that the board bring in forensic auditors to probe the school’s finances for fraud and fiscal mismanagement – or he would file lawsuits against individual board members and request a state and federal criminal investigation.
McCray’s letter is the first public glance at a boardroom dispute that has been roiling in the wake of the university’s decision to spend $72 million to build new on-campus housing that is being financed by a Maryland-based housing project company, TG Quantum, LLC.
Quantum calls itself “a one-stop solution for public sector entities that seek to utilize private sector funding options and/or public private partnership (P3) strategies as a tool to accomplish public sector goals,” according to Internet research.
A YouTube video Quantum prepared for B-CU cites student housing projects at Baylor University, the University of Tampa and Texas Christian University as some of its success stories.
According to McCray’s letter, in February 2014, B-CU agreed to pay Quantum and the other project partners nearly $6 million in periodic payments ranging from $250,000 to $1.7 million each, even before the board gave final approval to the dormitory project.
McCray states that the board did not become aware of the Quantum agreement until April 2015 – more than a year later – and only then by accident.
“…the TGQ (Quantum) Agreement first came to the attention of the Board in a report by independent auditors commissioned after the departure of impugned CFO Emmanuel Gonsalves, whose tenures at prior institutions were marred by public and well documented allegations of financial impropriety and fiscal mismanagement,” McCray states.
“But for the report of these independent auditors, the Board would not have been aware of the TGQ Agreement, nor would the Board have been aware that $5.6M of unauthorized and theretofore undisclosed expenditures had already escaped the University’s coffers.”
Gonsalves, B-CU’s former chief financial officer, left his last two jobs under professional clouds.
Prior to 2008, Gonsalves, a native of Trinidad and Tobago, served as a top administrator at Medgar Evers College of the City University of New York. B-CU’s current president, Dr. Edison O. Jackson, was president of the college and was Gonsalves’ boss there.
In September 2008, Gonsalves returned to his native country to became the president of the College of Science, Technology and applied Arts of Trinidad and Tobago, known there as CONSTATT.
In 2012, Gonsalves was placed on “administrative leave” by the CONSTATT board of trustees, according to local press reports. The CONSTATT board ordered “an audit into all aspects of the college’s finances, and administration and has instructed employees not to destroy any of the school’s documents,” according to an article in the New York Carib News dated July 9, 2012.
After Gonsalves left CONSTATT, Jackson brought him to Daytona Beach. A decision by Gonsalves last year to establish a community development corporation (CDC) without the B-CU board’s knowledge raised eyebrows, and Gonsalves left B-CU in January to “pursue his personal and professional ambitions,” as Jackson told the Florida Courier in a previous interview.
McCray’s letter indicates that the B-CU board also hired auditors to review Gonsalves’ work in the wake of his departure from B-CU – just as the CONSTATT board did before them. According to McCray, the auditors discovered the Quantum agreement during the B-CU audit.
Who signed it?
McCray writes that Jackson denied having signed the Quantum agreement. The B-CU board then hired a handwriting expert whose conclusion about whether Jackson signed the document was “inconclusive,” according to McCray.
“The examiner’s report…did not establish to any reasonable degree of certainty the inauthenticity of the subject signature…the examiner opined ‘it is probable that the writer of the signature was not [President] Jackson.’ More importantly, the examiner’s report failed to shed any light on who may have been the signor of the TGQ Agreement,” McCray reports.
He urges his fellow board members not to stop asking questions.
“Given the recent inconclusive report…and other developments at the University which raise serious questions about the current financial health of the University, I fervently believe that the fiduciary duties entrusted to each of us mandate nothing less than the probing investigation of a forensic audit,” McCray states.
A forensic audit is an intensive, specialized review of financial records that attempts to find the source of transactions with an eye toward revealing and prosecuting fraud, financial malfeasance and economic crimes. It is different from the regular yearly audit that many non-profit educational institutions generally undergo.
McCray, a B-CU Class of 1978 graduate, is a longtime supporter of the school. He was president of his graduating class before matriculating to Howard University, where he earned a law degree in 1981 before being admitted into the Florida Bar in 1982. He has practiced law in his Pompano Beach hometown for more than 34 years.
He has been on the Bethune-Cookman board for more than seven years, and served on various board committees over the last two presidential administrations there. He’s won various alumni awards from the Mid-Eastern Athletic Conference, the school’s National Alumni Association, and from the university itself as a distinguished B-CU alumnus.
How could this happen?
The “most vexing question,” according to McCray, is how a legally binding $5.6 million contract, as well as regular payments of millions of dollars, could get past the president, his staff, the school’s attorney, and the board at a school the size of B-CU.
“If such a substantial amount of funds was expended unbeknownst to the Board and the President, only the Good Lord knows what, if any, additional improprieties our current knowledge may portend,” he fumes.
“What is the true financial condition of the University in the wake of confirmed revelations of fiscal improprieties? If $5.6M is expended unbeknownst to the President, key administrators and staff members, the University’s General Counsel, and the Board’s finance committee, the University has a problem.”
He adds, “How can an educational institution the size of our university not realize $5.6M has been expended? What void in institutional controls could have coalesced to spin the maelstrom which resulted in such disregard for governance?”
No partial reimbursement
McCray’s letter implies that after questions were raised about the Quantum agreement, Jackson convinced Quantum to refund the payments – if the B-CU board gave final approval on the $72 million project.
“President Jackson assured the Board that he had secured an agreement from TG Quantum and/or its partners to reimburse the University $4M within 60 days of closing on the Dormitory Project, with the remaining $1.6M to be reimbursed at a later date(s). At the time, the Board was advised that closing was slated to occur within days of the adjournment of the April 2015 meeting of the Board.
“We are now approaching six (6) months onward, and the Board has received no indication that a dime of those monies have been replenished to the University’s coffers,” according to McCray.
McCray points to a lack of urgency in getting the funds back from Quantum, despite signs the B-CU is tightening its financial belt.
“…(T)he President has disseminated to the University at least two memoranda, on April 23, 2015 and June 6, 2015, imposing university-wide spending freezes. Not only may the failure to timely reimburse the funds, coupled with the recent memoranda raise questions about the University’s financial condition, such failure may constitute a material breach of the project documents by a party(ies) with whom the University is otherwise committed to long-term contractual relationships,” McCray states.
“Nevertheless, even if the monies were reimbursed, unless and until the Board is fully apprised of the current financial condition of the University, such reimbursement is merely a palliative to conceal known improprieties and an unsightly plaster covering the weightiest questions raised by the little which we already know.”
In subsections of the letter titled, “Role of the Board Member in Financial Oversight,” “Fiduciary’s Duty of Care,” and Personal Liability of Fiduciaries, McCray writes that board members’ responsibilities are to “exercise…three core duties: the duties of good faith, of loyalty and of care,” which includes the duty to “read and review the financials, and ask questions about their content.”
He points out other concerns that he says should give board members pause:
•Gonsalves allegedly spent $500,000 to acquire a facility in Deltona – about 20 miles away from the school’s Daytona Beach campus – that was unapproved by the board and that was reported “belatedly” to certain committees of the board.
•Gonsalves formed the CDC without the board’s knowledge. Then he chose as a CDC board director a man who had been forced to resign from the United Way of New York City following an investigation that determined that he had converted $225,000 of its funds to his personal use.
•Recently published Daytona Beach-area newspaper reports indicate that B-CU hired a convicted felon to serve as an accountant at the university.
After informing board members that they could be sued personally for failure to abide by their duties, McCray gives a stern warning:
“…(I)f this Board fails to conduct an appropriate investigation, I am prepared to prosecute a derivative lawsuit, on behalf of the University, against the appropriate persons for breach of fiduciary duty. At this time, I also believe it may be appropriate to involve state and federal law enforcement officials to investigate whether embezzlement or other criminal acts may have been committed against the University.
“A forensic audit of the University’s books and records for the fiscal years 2011 to 2014 is necessary for the Board to have a fair and accurate picture of the University’s financial position, and more particularly, to ferret out potential wrongdoing, whether civil or criminal, that may impact on the University’s financial health.”
In an April 2015 interview with the Florida Courier, Jackson beat back concerns about the school’s operations and financial condition. He mentioned that the university has an annual audit that showed “We’ve got a clean bill of health.
“It’s not like we aren’t open. Yes, we are. Every board member knows the fiscal health of the university,” he said then.
In response to an online petition from B-CU alumni requesting a forensic audit,
Jackson said three B-CU alumni on the board represent B-CU’s National Alumni Association.
“They voted for this project,” he said, referring to the $72 million dorm construction deal. “…the board made that decision.”
He added that there are seven B-CU graduates on the board. “And so the question is, what do you want to see… and you have elected representatives on the board and they have not raised any questions at the board meetings.
“You can, I guess, throw stones at anything. This project is a good project.”
Nothing else to say
When finally reached to confirm the existence of the letter after numerous attempts, McCray replied with a curt “No comment,” then hung up on a Florida Courier reporter.
The Florida Courier reached out to B-CU officials last week for comment and submitted a copy of McCray’s letter to them prior to publishing this report. A B-CU spokesperson indicated that B-CU Board Chairman Dr. Joe Petrock would respond on behalf of the board, and offered this newspaper an exclusive interview with Petrock and B-CU President Jackson to discuss McCray’s allegations.
Scheduling conflicts did not allow the interviews to take place prior to publishing this report. To date, the school has not issued any formal written response. The Florida Courier will publish B-CU’s response whenever it is issued.