Follow-up on athletic fiascos at Penn State and UNC Chapel Hill

Pennsylvania State University (Penn State). Fisher Fine Arts Library building. Photo courtesy of
Pennsylvania State University (Penn State). Fisher Fine Arts Library building. Photo courtesy of


Historic Old Well at UNC Chapel Hill. Photo courtesy of
Historic Old Well at UNC Chapel Hill. Photo courtesy of

I’ve not been watching closely for updates, but have seen a few articles on the massive scandals at Penn State and University of North Carolina Chapel Hill.

12/1/15 – Newsworks – Penn State, insurer scuffle over paying Sandusky victims – Penn State may have skated by with the serious consequences from NCAA getting reversed, but the legal liabilities are adding up. The University has already paid $92.8M to settle 32 cases, with many more still in the works with an unknown number of unresolved cases.

Their insurer is refusing to cover the full tab. As a result, the school and insurer will be going to court in 2016 to address their cross-claims.

A few assertions from the insurer ought to give pause to all leaders of organizations. Ponder a moment how you would counter these arguments from your insurer:

  • First, the company claims the annual policies, in effect since 1992, contain an “abuse and molestation” exclusion.
  • They also claim there is a $2M per occurrence cap and claim at most there is one occurrence per year, thus max of about $40M exposure.
  • I’m sure at court there will be an argument that there aren’t even 20 occurrences. As a wild guess, try this on for size: the insurer may assert there was one occurrence in each year when any abuse started, thus less than even 20 occurrences.
  • Also, the insurer claims the university failed to pass on to the insurer knowledge that Sandusky was a risk.

Lots of ground there for the insurance company to mitigate or eliminate their obligations to Penn State.

In the meantime, the settlements are being paid out of a special fund. If I understand correctly, the University borrowed money from itself with the payments going into this fund. Thus the ‘interest’ paid from one fund to another is available for discretionary expenses. Thus, by using this special fund, the University can boldly claim that neither tuition money, nor taxpayers funds, nor donations have been used to pay for the settlements.

Essentially, looks to me like there is an off-budget, off income-statement slush fund that is available for such emergencies.

I wonder if the state legislature knew about that special fund. Wonder if they will consider that in the next round of appropriations.

I wonder if donors, students, and faculty knew Penn State is so amazingly rich they have well over $100M in their save-it-for-a-rainy-day reserves.

That the board can use at its sole discretion.

Which hasn’t been made available for understaffed programs.

Or invested in new facilities.

11/2 (?) – Inside Carolina at Scout website – Cunningham: No Change in NCAA Timeline The UNC athletic director thinks the NCAA investigation will be resolved in spring 2016.

That assessment is in spite of the University finding additional departments that were providing inappropriate help to student athletes. By the way, that also means UNC still hasn’t identified the full scope of the academic and athletic fraud. They cannot be sure they know the outer boundary of the scandal.

NCAA has not yet decided whether the new issues will require reopening the allegations. If they do that would reset all of the timelines.

Here is a recap of the sequence of a complaint and time limits from the article:

  • Notice of allegation is issued.
  • 90 days for school to provide a reply
  • 60 days for NCAA to give their response to the Committee on Infractions
  • COI meets six times a year
  • 6 or 8 weeks for COI to deliver their report

Add that up: three months for reply, plus 2 months for NCAA response, plus average one month delay for next COI meeting, plus two months to deliver report. That is a maximum time limit of about eight months. If NCAA issues a new notice of allegation, the new charges will likely stretch resolution into late summer.

As a reminder, one of the five allegations against the school is lack of “institutional control”. My understanding of not having institutional control in the academic world is comparable to using nuclear weapons in the military world. Doesn’t get much more serious.

Essentially, in non-academic words, that specific accusation says UNC isn’t able to oversee its academic departments. If I grasp the implications correctly, I think that means the university is not capable of being a university.

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