Chancellor Dzau sends E-mail on Potti Mess

Fact Checker will have a special report on the Potti mess Monday morning. Please check back.

The text of the Chancellor's e-mail to Duke Medicine employees follows:

I wanted to send a brief note to let you know that you may see some media reports -- most notably in tomorrow's News & Observer -- related to a request by Dr. Joe Nevins to retract an important scientific paper authored together with Anil Potti, MD in the Journal of Clinical Oncology. The request for retraction of this paper is the latest in a series of regrettable events that have occurred over the past year related to the science that was the source of the requested retraction.

It's important for you to know that the well-being of our patients, especially patients who volunteer to participate in clinical trials, is our highest priority. In this situation, we are confident that we acted deliberately and appropriately as an institution to both fully protect research participants and fairly evaluate the science and actions of the involved faculty scientists.

While a regrettable situation, I also recognize and appreciate the tenacity and scrutiny of the scientists who raised the questions about this data and the study that is being retracted. A scientific misconduct investigation regarding Dr. Potti began several weeks ago, he continues to be on administrative leave, and I'm pleased that the Institute of Medicine has initiated a major national review of this situation and this field of research.


✔✔✔✔✔ BOMBSHELL -- Potti co-author says their research has no validity!!!!!

Fact Checker has learned that Dr. Joseph Nevins -- co-author with Dr Anil Potti of many important cancer journal articles -- has asked the Journal of Clinical Oncology to retract the key paper in their research.

This is the worst possible news: Potti's research is as fake as his credentials!! Devastating news for the University and its crown jewel, Duke Health.

Nevins, Barbara Levine Professor of Breast Cancer Genomics and director of the Center for Applied Genomics and Technology at DUKE, has been mum so far as scandal engulfed the work that he and Potti did. He did not comment publicly when Duke found this fall that Potti had big lies on his resume, including a faked Rhodes Scholarship.

But tonight, the bombshell. Nevins put it all on the table in a letter to the editor of the cancer journal.

The key Nevins-Potti article is a 2007 paper entitled "Pharmacogenomic Strategies Provide a Rational Approach to the Treatment of Cisplatin-Resistant Patients With Advanced Cancer."

Nevins: the data we presented in the paper does not support the conclusions that we gave identifying thru genome study what medicines will work best in specific patients with specific cancers.

That is a paraphrase. No direct quotes are yet available.

Some of the same data that Nevins denounced tonight was used by Duke last winter in a internal investigation (with outside consultants). That review cleared Potti!!!!

FC has reported -- but Duke has not confirmed -- that its secret investigation was led by Dr. John Harrelson, professor of orthopedic surgery and associate professor of pathology. A Deputy Fact Checker reports he is a double Dukie, Trinity '61 and MD '64, who also stayed on at Duke to train on the House Staff. He is now retired.

The heat will be on him and others, including Vice Deans reporting to Medical School dean Nancy Andrews, who signed off on the Harrelson report, to explain how they managed to endorse Potti's research when they held their supposedly thorough review.

Tonight, there is still the mystery -- why Potti's data could not be duplicated. What reason does Nevins believe? Error? Fraud? It's hold your breath time.

To its credit, Duke immediately notified the outside experts conducting a new, complete, unfettered review of this mess. The experts are from the prestigious Institute of Medicine, "an independent non profit that works works outside of government to provide unbiased and authoritative advice to decision makers and the public."

Established in 1970, the IOM is the health arm of the National Academy of Sciences, which was chartered under President Abraham Lincoln in 1863. FC has previously expressed confidence in a rigorous, no-stone-unturned review, and endorsed the efforts of Duke chancellor Dzau to bring in the IOM.

FC has learned that beyond the one journal article that Nevins asked to be retracted, he is scrutinizing other research involving Potti. At this hour nothing is known about the reaction of the string of other people who joined Potti in his various articles, or in his lab.

This would seem to be a vindication of the work of researchers at MD Anderson Comprehensive Cancer Center, U of Texas, Houston, who have been questioning Potti for years. More on this later. These researchers, who stood steadfast in the face of assault by Duke, are heroes!

How will Duke by responding to this latest crisis? FC information:

FC has learned first, it will keep Potti on the payroll, suspended from the faculty, from research and seeing patients until all investigations are over. The Institute of Medicine Review is expected to take 18 months.Then there is a separate Duke review of faculty misconduct.

This clown should be fired forthwith. If the administration cannot bring itself to do it, the Trustees should direct it. The faculty of this school should revolt. Any stakeholder who loves Duke should revolt.

What about Potti's patients? While new patients were barred, previously enrolled patients are continuing to be treated according to Potti's bum science!!! Expect Duke -- facing HUGE HUGE malpractice lawsuits -- to contend "we do not believe that patients were endangered through their participation in these studies."

Fact Checker and Deputies are assigned. Keep watching this space for developments.


POTTI BOMBSHELL --- Co-author at Duke says experiments not valid!!!!

There are fast breaking developments in the Anil Potti scandal tonight.

Fact Checker has learned that Dr Joseph Nevins, Potti's co-author on many papers, has asked the Journal of Clinical Oncology to retract a key article about their research. Nevins is Barbara Levine Professor of Breast Cancer Genomics and director of the Center for Applied Genomics and Technology at DUKE.

This is devastating news for the University. And for Potti.

Still FC has learned Duke will take no action against Potti until a current "outside" investigation is completed, probably 18 months.

More in the hours ahead!!!!


Brodhead Spins Big Bonuses Paid to Administrators, Claiming They Are Not What Duke Called Them!!

✔Fact Checker will address the issue of bonuses paid to administrators first.

Mr Brodhead spins that the bonuses are not that at all, but "at risk" payments that won't be paid in bad years, and will be paid in good years. Sure sounds like a bonus to me.

Dick, please be advised that before this issue became incendiary and thus highly embarrassing for you, Duke University itself referred to these payments at "bonuses and incentive payments." Those precise words appear in the IRS Form 990's that were the sole source for all the numbers in the Herald-Sun.

Spin away, Mr. President, but you are stuck with the words that your fellow administrators used to classify all of these payments.

✔Now your second point is the numbers in the Herald Sun were misleading because bonuses earned in the 2007-08 year, which was before the financial meltdown, were not paid until 2008-09 when the meltdown was underway.

Wrong again, Dick, for the statistics in the Herald Sun revealed only how much money top administrators actually lugged away during the academic year 2008-09 year, making no further representations. Dick, you will recall that year, for you laid off people and froze the salaries of others.

✔In the final analysis, $2 million is $2 million for the Chancellor -- no matter how it accumulates -- and that's an obscene amount of money for someone who decides to work at a "non-profit" institution. That's the point of the Herald-Sun article.

Not to mention that the Chancellor is allowed to take enough time off to make another $1 million every year by serving on four time-consuming corporate boards.

In the final analysis, here's what is "at risk." Someone working in the Duke investment office, DUMAC, who lugs home a bonus twice the size of his regular salary is "at risk" of being called on the carpet by stakeholders in the University. The President is "at risk" of having to duck their anger.

So here's the challenge for you Mr. President. You have all the figures for the 2009-10 academic year. They have been audited. Release them now, instead of getting an extension of the time to file the form 990 as Duke usually does. Fact Checker would like to see the "bonus" "at risk" figures for the first year of the financial meltdown, combined with the base salaries of the second year.

Loyal Readers, does anyone want to bet whether FC hears from Brodhead???

✔As for the Academic Council discussion of the budgetary process, we are given nothing but obfuscation. Yes, the deans of the various schools determine how their budgets will be spent. But the central administration determines what those budgets will be by allocating university-wide resources.

Peter the Provost understated the budget crisis at the Fuqua School. Yes it is highly dependent on tuition. And their highly touted, signature Cross-Continent MBA has attracted only half the students the Dean "promised." That's 140 people who are not paying the tuition of $120,100 (yes $120,100).

Moreover, Fuqua's corporate education business has fallen off the cliff.

Mr. Provost, I invite you to share with us the actual numbers about Fuqua. What reason can there be that stakeholders cannot have this information?

✔The Chronicle says Mr Brodhead informed the faculty the Trustees discussed "the endowment, undergraduate admissions and global strategy, among other issues."

There is no detail on any of this. Does this newspaper suppose its readers are entitled to some hint of precisely what was said about items on that list?


Potti Mess: Another investigation beginning but that's not enough

Search words: Duke University Anil Potti

✔Fact Checker here.

The Chronicle is correct in itemizing different investigations into the Potti mess, and I start today's essay by declaring there is a need for one more. The Cancer Letter -- which broke the story of Potti's fake Rhodes Scholarship -- expressed this need very well:

"When questions about Potti’s science emerged in scientific literature and in alarms sounded by internal critics, the Duke administration formed a protective barrier around the man they considered their star, forming committees that operated in secret, and then incorrectly portraying the findings of one of these committees as validation of Potti’s science."

The integrity of this university, the credibility of its administration, demand a fourth investigation. An outside investigation of our administration. The alarms the Cancer Letter wrote about went off for nearly four years before this school acted.

The Cancer Letter says the entire Brodhead Administration needs to be investigated. "Focusing on the three Duke trials (Potti's so called clinical trials, experiments on human beings) may have been good enough last week, but not now..."

Moreover, Duke's action is replete with conflict of interest.
FC notes the first Duke review -- conducted internally last December with outside bio-statisticians as consultants -- went forward while Duke had a substantial financial interest in proving Potti's science was indeed valid -- for the university would collect a royalty from every patient who ever is screened by the methods he invented. Why wasn't this conflict of interest recognized? Well it was, but not until recently. At least now Duke is divesting itself of a financial interest in Potti's so-called discoveries.

Just how much money is at stake here? Neither Rose Ritts, executive director of Duke's Office of Licensing and Ventures, nor VP for PR Michael Schoenfeld, answered FC inquiries about how much money the school stood to make.

Further, we have the spectacle of the husband of the Dean of the Medical School working with Dr Potti and co-signing at least one major medical journal article. Yet two administrators promoted by the Dean -- who still report to her -- were allowed to sign off on Duke's internal investigation last December.

✔✔And now the decision of the august Institute of Medicine to accept the assignment of reviewing Dr. Potti's science.

Unfortunately, this is being muddled from the start by the simultaneous review of the standards that all scientists should be using when they develop tests -- thru their genome studies -- that will predict the course of a disease and its response to particular medicines. This gives Dr Potti a big excuse: the standards had not been developed within the profession, how could he have known what to live up to.

Meanwhile, just like the three year old case of biochemist Homme Hellinga, the Potti case will drag on and on. The prediction for another 18 months.

We know both Hellinga and Potti are collecting pay. In Potti's case, even though the Chronicle did not remind us today, we know he is suspended.

The big question that FC has not been able to answer is suspended from what? Just his teaching position? Just his research position? His ability to admit and treat patients at Duke Hospital?

In reviewing the website of the North Carolina Medical Board, FC notes Dr Potti retains his license to practice medicine, and there is NO report from Duke, as a health care institution, about actions it took against Potti after discovering "substantial concerns" -- meaning big lies -- in his resume. FC believes these concerns are properly reported to the Board.

✔Thank you for reading Fact Checker.
Archive http://dukefactchecker.blogspot.com/

Hyprocisy in Allen Building? Nowicki aide talks about self study leading to conversation about financial aid. FC bets Nowicki keeps study secret

✔Fact Checker here.

The assistant vice provost writes:

"I am hopeful that the new financial aid advisory committee, as well as the socioeconomic diversity study being conducted by the Office of the Dean of Undergraduate Education, will help to bring financial aid into the public conversation at Duke..."

Well the assistant vice provost is pretty new here and perhaps she does not understand. How many studies by the Dean of Undergraduate Education have ever been made public to facilitate a conversation at Duke? Answer: none that FC is aware of.

I'd welcome hearing from Dean Nowicki with a list of studies he has made public, however, because Fact Checker always accepts correction. And I'd welcome a promise from Nowicki that the socioeconomic diversity study will be made public in full.

✔There are many internal studies that would be interesting fodder. For example a study that shows that black students -- considering the credentials they arrive with including high school grades and SAT scores -- do not get grades as high as admissions officers expected. No where near as high. The same is true for Hispanic students, but their grades do not lag as much as expected.

Perhaps the assistant vice provost can help Fact Checker obtain that study, although at the moment I am betting my tickets to the Carolina game (attention blogger named Crazy, here's your chance) that none of this will be transparent.

Loyal Readers, be advised that FC once asked for a list of all self-studies, not their data nor conclusions, just a list and was told this too is confidential.

As for the College Board, has Duke gone to the board and explained why being able to reveal its formulas would be very useful? Has Duke considered joining with other universities and building an alternative to the College Board system?

I'll bet you a drink on the Robertson bus to Chapel Hill (read today's column by Sandeep Prasanna to learn how soused it is)
that Duke has not taken either of these steps.

✔In the meantime, decency requires that Duke be consistent in stating the cost of attending school.

These numbers never match:

A) the cost of tuition, fees, room and board calculated by the financial aid office, as it appears on letters sent applicants about their prospective aid.

B) the numbers about the same items that appear in a news release after every February meeting of the Trustees, where they jack tuition.

C) the numbers on line under Quick Facts about Duke.

I also note that Quick Facts states that in 2009-10 (the latest year offered) "Four of 10 undergraduates receive need-based financial aid." However, the ever jolly fund-raisers in their just issued report on giving during the 2009-10 academic year -- filled with more self congratulation than donations -- state "nearly half of Duke undergraduates received some form of financial aid."

That's a difference of about 600 students.

✔✔Fact Checker. Counting everyone carefully.


Turmoil in Allen Building, as VP with key responsibilities during the budget crunch leaves Trask's staff

Hof Milam, vice president for finance, is leaving Duke, and unusually quickly for someone with the highest level responsibility. He starts December 1st at Wake Forest as senior vp for finance and administration.

Coupled with the departure of VP Kemel Dawkins, believed to have been pushed out, this is the second turnover within six months of 4 VP's reporting to Executive Vice President Trask. This is unusual turmoil -- unhealthy turmoil -- in the key staff watching over Duke's finances during the continuing budget crunch.

Milam was particularly valuable, having experience not only with educational budgets, but with health system finance and general management as well.

The move comes just months after Trask eliminated Dawkins position (partially to save money according to the official news release), shuffled duties and gave Milam more authority.

But Milam did not pick up the swath of territory that Trask's two other VP's did -- and observers wondered why.

Milam joined Duke in 2003 and flew under the radar. The Chronicle archive has very little about him. For example he was listed as being on a panel of four administrators plus a moderator -- all white, middle aged men just like it was on plantations in the old South -- who outlined to employees -- many of them black on the lowest rungs of the pay ladder -- the prospect for layoffs and the details of incentives to get them to retire. But the Chronicle story on this briefing did not mention anything Milam said at all.

Milam was responsible for -- or took the heat for -- the elimination of a Duke financial report that had a rather cryptic title: "Summary of Unrestricted Unallocated Budget Funds." This provided some of the best insight for stakeholders interested in the university's budgeting process, and the allocation of resources. For athletics, for example, rather than wet labs in Chemistry.

And in the past few days, Milam has been in the news for suggesting there was little importance to the ten year average of returns on our endowment. When the average was riding high, he did not talk about irrelevance at all. When the average plummeted to a dangerous 6.5 percent this year, he pooh-poohed it.

Milam never responded to Fact Checker, who asked why, if the average had no significance, his office compiled it and issued a graph showing its movement each year. Or why, good year after good year, the PR department issued news releases with the ten year average in the second or third paragraph, and why the Duke Management Company, the university's investment arm, featured a graphic and explanation of the ten year average on the home page of its weak internet site.

With hypocrisy like that, it's a wonder that Brodhead did not promote him!!

Milam is returning to his alma mater -- as well as that of his parents, his wife and his two kids. Immediately before Duke, he had another stint as an administrator at Wake Forest, serving as chief operating officer and chief financial officer of an HMO affiliated with Wake Forest University's Baptist Medical Center.

With changes in IRS Form 990, Duke has not had to list Milam's salary since 2007-2008, when it was $317,500. A FC review of the salary structure at Wake Forest suggests that he may earn only marginally more.

Trask has made a temporary appointment to do Milam's work, and spouted the usual pap about a nationwide search for a replacement.

Chronicle columnist gives occluded view of lacrossse hoax. FC nails him.

Response to a column in the Chronicle this morning:

In discussing the media, this column is right. In discussing our lacrosse team and the hoax, it is just plain wrong.

From the column: "None of this is to say that the team, as has been explained on countless occasions, was entirely innocent in its conduct...."

What do you mean by that? What are you referring to? Not entirely innocent.

There's nothing illegal about watching strippers at a party; two weeks before the lacrosse party, our men's basketball team employed one or more young ladies for a similar event. Sororities have employed young men. Have you ever been to the Durham County fair?

Not innocent. Are you referring to underage drinking? Give me a break.

You say the lack of innocence has been explained on "countless occasions." What is that about? Where? When?

You sound like Brodhead with a wishy washy concession that there may not have been a rape or any other sexual misconduct, "but what they did was bad enough." Whatever that was, Dick.

The column continues to indicate the divisive nature of the case derives from framing it as Duke vs. Durham. That is historically inaccurate.

The ink was barely dry on the police report summarizing Crystal Gail Mangum's first account of the "rape" -- the first of seven accounts by my tally -- when the Group of 88 faculty swung into action. With incessant pot banging, with a sign saying "Castrate," and with calls for team members to "come clean" and turn in their teammates who were rapists, these faculty members disgraced themselves with a rush to judgment and also with their pursuit of their own agenda.

That agenda included removal of big time athletics from Duke, some fuzzy notions about women's rights, and inflammation of conflict based upon class and color, power and privilege. Yes there was tension with Durham -- but most people realized a lot was generated by imported groups like the Black Panthers.

The response of our administration to this crisis -- this hoax -- eclipsed any concern over Duke-Durham relations. It was so bad, that even President Brodhead felt impelled after the players were declared "innocent" to stand on this campus and apologize for the way he had responded. His apology was partial -- never mentioning Coach Pressler for example -- and he never explained why he took positions he did.

Forget Duke vs. Durham. The chair of the Trustees was also highly divisive and to this day leaves a historical gap in our knowledge. But maybe Bob Steel has gotten religion. On Founder's Day, the man who closed Trustee meetings that had been open for a generation just three years earlier, the man who refused to meet reporters afterward, the man who had no comment during most of the hoax, said Duke should be more transparent! When Bob Steel comes clean, the issue will rest.

The column states, "It’s best to remember things like the Duke lacrosse case for their lessons..." Well I have just outlined what I consider the lessons of lacrosse.

And for the administrators who have said "it's over" for three years, hear this plea: settle the lawsuits.

In addition to the fight with team members, Duke is currently in a legal three-way with two insurance companies principally over the cost of defense lawyers -- and let us remember that when this fight began there was evidence that Duke's costs exceeded $25 million for legal fees. Legal fees alone. That was more than two years ago. That was before the $2 million bill from hot-shot Washington lawyer Jamie Gorelick for one year of part-time work revealed by FC.

As the column states, no one is at each other's throat anymore over the lacrosse hoax. The reason for that is that the sense of outrage on this campus .... on many issues ... is muted. The reason is not because "it's over."

As for scavengers like the Today Show, I agree the media is pushing it.

Not long ago I gave some FC advice personally to a former editorial page editor of the Chronicle who wrote a Newsweek column. She took a three year old cheating scandal that embraced -- among others -- lacrosse players at a high school, added it to the Duke lacrosse hoax, and then factored in the shooting in Virginia -- and reached conclusions about what this sport must be doing to young men.

Shame on that editor. How a rape that did not occur becomes part of the chain of events that supports conclusions about a sport.... only the Group of 88 could explain that.


Analysis of Trask's annual financial report

✔Good day, Fellow Dukies. Welcome back from the fall break.

The Number One Trick in the PR Handbook is to release on a Friday afternoon information that you would rather have buried. Thus -- with everyone in weekend mode -- Duke followed this playbook when it found “substantial issues” -- meaning many big lies -- in the resume of Dr. Anil Potti, who nonetheless was not fired. And this past Friday, this was the playbook for the annual Financial Report from Executive Vice President Tallman Trask.

Fact Checker and Deputies -- wisely anticipating the timetable -- did not take Columbus Day vacations. By Saturday morning they held a news conference, part of which is transcribed below.

✔Pre-med student: “Fact Checker, I am concerned about the Chemistry Department. Its budget was cut five percent last year, ten percent this year, and now “wet” labs are being cut in half and we will watch demonstrations on the internet. What does the Trask report say about Chemistry?”

Fact Checker: “Nothing.”

✔Parent of freshman: “Fact Checker, I heard things were so bad that Duke is going to have to cut the number of Arts and Sciences professors. What does the Trask report show about Trinity College budget?”

Fact Checker: “Nothing. The words ‘Arts and Sciences’ do not appear. Nor 'Trinity College.'”

✔Faculty grouse: “Fact Checker. Thank you for all you do for Duke! I know the athletics budget has grown at a faster pace than academics. I am concerned about the balance. What does the Trask report reveal?”

FC: “Nothing. The word ‘athletics’ does not appear.”

✔Trinity College senior: “FC, I am contemplating graduate school. Hell, I won’t be able to get a job next June anyway. I am worried about Fuqua though. It failed in London, it failed in Moscow and it lost millions in Frankfurt. As you reported, Fact Checker, the Inter-Continental MBA program is wobbling in its second year, drawing only half as many students as the Dean “promised,” and only 30 percent, rather than the hoped for 50 percent, from international locations. Not to mention Kunshan, where a Deputy reported that despite Brodhead’s cornerstone laying last January, and a PR spin on “site preparation,” there is no construction above ground for the second straight year. What does Trask report on Fuqua?”

FC: “Nothing. The word does not appear at all.”

✔✔Fellow Dukies, you see the point. The Trask report does nothing for transparency in areas of critical concern. It is useless for stakeholders who wish to keep officials accountable and to participate in the governance of Duke. In fact, it raises the substantial question of how Trask and other administrators decide what snippets they will tell us, and how they decide what to withhold. The answer, I fear, is not charitable.

Suggestion: greater transparency should extend particularly to those areas that Trask and his staff have said they would cut, so that we continue to have totals of the number of people laid off (never revealed), so that we know what we are saving by having the thermostats higher in warm weather (not yet in effect campus-wide). In other words, we have heard their proposed changes, but their financial reports do not let us see their accomplishments.

Historically, Duke’s annual financial report revealed much more. It was supplemented by IRS Form 990 which appeared promptly within the federal deadline of six months after the end of the fiscal year on June 30th; now Duke gets extensions -- claiming that numbers which are always audited by the start of October -- are not available until April or May. The result is the Form 990 is always almost a year out of date.

The President too kept us informed. William Preston Few started a tradition of very detailed reports; this continued over the decades, with Nan Keohane adding important and eloquent essays on university policy, her persuasive discussion of the imperative of affirmative action for example. With the advent of the internet, she also posted her reports to the Trustees.

No more. No more. No more. This is the Age of Brodhead and the big secret.

What is most notable about Trask’s report is the cold demeanor. There is no identification with employees who have been laid off, or those who have been asked to work harder. There is no identification of anyone who might have had a stellar performance in steering us through a very rough sea. The cover of the report might be a metaphor: it shows the East Campus steam plant and its chimney, about as far detached from the Duke that most people love and experience as any building I can imagine.

As Loyal Readers might deduce from the length of the introduction, this review threatens to be long -- a discussion and interpretation of Trask’s report and the context for it. Please read it through; it is vital.



While most of this essay applies to the entire University, the following concerns only the “educational” side of Duke, including the Medical School and medical research. It does not apply to Duke Health, which is to say patient care.

In the last five years, which is to say three and a half under President Bush and the loath-to-spend Republicans, and then 18 months under President Obama and the fully Democratic Congress, federal grants and contracts have grown 26 percent at Duke. Yes, 26 percent. (In one of the essays I praised earlier, Keohane foresaw a dramatic downturn in federal support!)

In the last year alone, we received $580 million, an 11 percent increase. And don’t say it is stimulus money: only $52 million was from the economic program Congress passed in February 2009. (Overall, as of October 1, 2010, Duke has received more than $200 million in stimulus -- either cash in hand or promised. Duke has no announced plan for when this short term infusion runs out.)

FC Suggestion: that Duke publish a formal report on its stimulus funds, with a candid assessment. Right now I only find lists of projects that right-wingers object to, including a study at Duke of Facebook. I worry that such short term financing is merely opportunistic, not part of a strategic plan.

Put another way, government money represents 28 percent of all income at this private university. Far more than tuition and fees. Far more than the endowment. Far far more than gifts. This is reason enough to open our Board of Trustee meetings, so people shepherding this public money operate in the sunlight.


Every Dukie who loves and cares about this awesome institution can probably recite the endowment numbers: $6.1 billion before the meltdown to $4.4 billion. And it now has “rebounded” to $4.8 billion.

But while we -- including Fact Checker -- focused on the principal, another number was flying under the radar. That’s the return we get on our endowment. Not year to year, which can bounce around quite a bit, but on a sustained basis over 10 years.

Duke was mighty proud: it boasted our ten year return was among the best among all major college endowments. This appeared near the top of press releases year after year, and right on top of the Duke Management Company’s website.

Kaboom, as they say. We were lulled by what happened in 1999-2000, when the dot.com boom brought Duke an incredible 58.8 percent return on its entire investment portfolio. But with Trask’s new report, that aberration disappears from the average, and we find we’ve only earned a return of 6.5 percent over the decade. Anemic.

If this were not such a devastating number, it would be humorous to watch administrators scramble. Trask himself started talking about an 11 year return, to breathe new life into the aberration, and also a six year average -- statistics he has never offered before.

Loyal Readers, when you hear this, stand up and shout, “I read Fact Checker. Enough with the shuffle. No gimmicks!”

Then there is the comment that Vice President for Finance Hof Milam made to the Chronicle: “There is no magic to a 10-year measurement for one particular 10-year period… I don’t think the 6.5 percent for the last 10 years tells me anything about future returns and certainly not the returns for the next five years.” This explains why Milam’s office draws up a chart every year showing how the ten year average moves.

When you budget for a return of 8.5 percent, and you get only 6.5 per cent long term, this is deep trouble.

Let’s look at this another way: if our endowment of $4.8 billion yields two percent less than we planned for each year, that’s a shortfall of almost $100 million per year. In other words, a shortfall every bit as big as the one that developed when our endowment slipped from $6.1 billion, the $100 million shortfall that President Brodhead has said we are trying to close in three steps ending with our 2011-12 budget.

And yet another way of looking at this. In this decade, the endowment has given us as much as 19 percent of the annual operating income for the educational part of Duke. That has slipped, down to a projected 15 and 16 percent. If we must cut again because the sustained earnings are below expectations, the endowment may only provide 9.8 percent.


By the way, a by-product of our investment return is a slush fund for the President, accumulated through some fancy footwork and leveraging called “virtual equity dividends.“ This allows the President to push initiatives he likes, moving them forward before they are incorporated in the regular budget. Zap. For two years, the slush fund has been dry.

Suggestion: we make the slush fund a permanent part of the budget, rather than having it depend on luck.

✔Speaking of leverage, Duke continues to exploit exotic, risky investments, with only a small sliver of our nest egg in US stocks traded on Wall Street. Twice as much is invested in international stocks.

This is the conundrum: higher yields come from bigger risks. FC has no solution other than saying all stakeholders have a right to know where the money is parked and the outcome.

In the last fiscal year, hospital reserves alone took a $50 million bloodbath with interest rate swaps, futures contracts, swaptions (never heard of it, but Trask says we own some), options and warrants.

✔The largest concentration of our money is with hedge funds, about $1.3 billion, and private equity companies, just over $1 billion. We have moved heavily into comparatively safe bonds, just under $1 billion.

Some of the churn of assets has slowed down. In the year after the great Wall Street collapse, Duke bought and sold securities worth $31,818,000,000 as it moved money around. This past fiscal year, the total was $16,538,000,000.

Much of our portfolio -- too much -- is valued by using estimates. And there are three grades:

First, some of our investments can be readily traded, for example stocks on Wall Street. That is, we know the value because there is a ready market (like Wall Street) where the investment can be turned to cash.

The second grade is less liquid -- where there is no ready market but at least there are some guideposts to value. A good example of this kind of asset is your family home even though Duke does not trade in this kind of real estate. You know it can be sold someday, but there is no immediate market. And you know what the guy next door sold for, and what the guy down the street sold for, so at least there are some guideposts.

But $5 billion in Duke money sits in the third grade of investments where we can only pray for its value. Example: a private equity deal that won’t mature for four years. If we try to sell out, for sure there will be a massive loss.

These estimates for the current value of these investments depend on the sharks who put them together -- the hedge fund and private equity dealers. We hope for good faith, we take their word.

Trask writes, “Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in Duke’s consolidated financial statements.“

$5 billion. And counting.

Private equity deals and hedge funds often require not just an initial investment, but continuing deposits. Duke is obliged to pony up $1 billion more. Yes, more money for the precise investments that soured so badly in the meltdown.

Suggestion: the state of South Carolina, fed up with high fees from hedge funds and secrecy about holdings -- both the value of their holdings and the nature of them -- is starting its own fund, hoping to attract other states to invest as well. (The fees are typically 2 percent of your investment every year, plus 20 percent of your profits. If there is a loss, it's yours alone.) Duke should take the lead among universities.

✔✔✔✔✔GIFTS Or more accurately PRIVATE SUPPORT

The separate annual report on “gifts” has not yet been issued yet. We assume the PR people are awaiting another Friday. We do have some snippets.

Caveat one: Duke administrators use the word “gifts” very loosely. Don’t think of this as a gift you may get on your birthday. In many cases, we have to provide services in return. Thus, the American Cancer Society’s $750,000 grant to Dr. Potti for cancer research.

Caveat two: Fundraisers who want to look good, through their national professional association, have developed their own protocols for counting “gifts.” This is called the CASE method. By this standard, as President Brodhead bragged during his start-of-the-school-year tour of local newspaper editorial boards, Duke received $345 million in 2009-10, the third highest on record, recession be damned! Loyal Dukies will immediately notice the selective release of information, since the full report is not yet available.

Here's the problem: Every other number in Duke’s financial reports -- and in reports you see in the outside word -- is derived using a different protocol, called the Generally Accepted Accounting Principles, or GAAP. By this standard, Duke recorded pledges and cash of $174 million -- while Brodhead was talking of $345 million.

This is one good reason why we need Fact Checker!!!

In his report, Trask boasts of “nearly 100,000 donors.” The count is undoubtedly accurate, but let’s put this into context. We reached 100,000 donors in the year before the 1996 lacrosse hoax -- and then saw a big falloff as alumni objected to the administration’s handling of the matter. Duke has just recovered. Or has it.

In each of the last five years, we have added more than 4,000 new alumni, their spouses, their parents and their employers -- all of whom we solicit. The number who have died off is vastly smaller, due to the limited size of the student body 50 and 60 years ago. Thus the “nearly 100,000 donors” is not as strong an army as officials would suggest.

We will have more of this when we get the annual Development Report.

A few paragraphs ago, we mentioned that the “gift” totals combined pledges and cash. This has assumed new importance because the eight year old pledge of $72 million -- Duke's largest gift -- by former Trustee Chair Pete Nicholas, founder of Boston Scientific Corporation, and his wife Ginny, heir to the vast Lilly drug fortune. In a scoop, the Chronicle reported they had stiffed the University.

The latest numbers from Trask indicate the problem goes beyond the Nicholas situation -- for the amount of "uncollectible amounts" exceeds their pledge. There is also $13,416,000 promised in the last fiscal year -- well after Nicholas -- that Duke does not think it will ever see.

FC Suggestion: Duke should record and announce all gifts only when the cash is received.

One of the strengths of a university is its endowment, a perpetual engine pushing it to greatness. Duke has added very little in the way of new contributions. A chart in the Trask report indicates $25 million came in during the year for both endowment and long term capital projects. VP for PR Michael Schoenfeld told Fact Checker on Tuesday, responding to an inquiry very promptly, that cash, not pledges, for endowment during 2009-10 totaled $69.1 million on a GAAP basis. He said there is no breakout for donations for buildings.

We will have to wait the annual report on giving to take another look. FC Suggestion: Duke follow the format used by Notre Dame during its last big fund drive, wherein contributions are clearly put into bins for immediate use, for buildings that last two generations or more, and for perpetual endowment.

✔Included in Trask's totals, though it has not yet been publicly announced, Fact Checker can report the biggest gift during the past year was by bequest from the estate of Glenn A. Kiser, MD ‘41 and his wife Muriel, $17.2 million for the pediatrics department. He was a pediatrician in Salisbury NC and his wife, a UNC Greensboro graduate, a public school teacher for more than 30 years.

How does FC find out such things?????

The biggest gift during the past year to any institution went to Columbia University -- $400 million for undergraduate aid from the estate of alumnus and broadcasting tycoon John Kluge. In recent years, many schools have gotten gifts in the $200 million dollar range that have eluded Duke. These include UCLA from record and movie maven David Geffen, NYU from hedge funder John Langone, Johns Hopkins from NYC Mayor Michael Bloomberg and Cornell Medical from Citibank’s Sandy Weill.

President Brodhead has noted the lack of major gifts. And it bodes ill for the forthcoming fund-raising drive, which could well be delayed. Any delay would also play into the question of whether the President, who is 63 years old, would be able to provide leadership for the duration -- in other words continue in office for another decade at least. This continuity is not an option, it is mandatory.

Finally a brief note on The Duke Endowment. Often confused with Duke University's own endowment, with James B. Duke as the creator of each, this giant Charlotte based charity is the University's single most important contributor. It too has hit hard times and is not making all the gifts it once did. We defer discussion until arrival of the annual fund-raising report.


✔Special endowment spending: Duke Health and the “educational” functions of Duke each have a budget of about $2 billion. Duke Health is rolling in money from patients. Duke education is skimping by.

In 2008-09, when the financial meltdown began, "education" went through $182,000,000 of extra appropriations from the endowment to cover red ink. Last year, for 2009-10 we hid $89 million in red ink this way. Our current budget has another $72 million shortfall, even though Trask and Dean Crumbliss have erroneously described it as “balanced.”

This is not sustainable.

✔Routine endowment spending: Moreover, beyond the red ink, the Trustees have juggled the formula governing how much money we routinely move each year from the endowment to the annual budget.

The traditional formula was responsible. It anticipated a continued return of 8.5 percent on endowment. We’d take 5.5 percent of that to spend, and 3 percent to reinvest to protect our purchasing power against long-term inflation.

Even though Fact Checker was assured in writing by a very very high ranking administrator that no changes in the formula had taken place, Trustees acted irresponsibly behind closed doors. We are at work on the precise time-line here, to re-evaluate when the assurances were given and to see if we should scream.

For 2008-09, Trustees approved a special spending rate for endowment related to financial aid. This was 28 percent above normal, which by our calculation would be 7 percent.

And for the 2009-10 year, Trask reveals for the first time the Trustees increased the spending rate for financial aid funds to 7.2 percent, and for all endowment to 5.8 percent.

Fellow Dukies, this is living beyond our means. It is robbing future generations of their rightful share of the money set aside to insure the greatness of this school in perpetuity.

No, I have no suggestions. But we do need a strategic plan so that we do not just take step by step, but rather are running toward the goalpost.

✔Fringe benefits: even with fewer employees, the cost of fringe benefits jumped.

The pension fund -- once with hundreds of millions in surplus -- now has a pad (positive funded status) of just $157,273,000. This suggests that within the next few years, Duke will have to add substantially to its contributions to the pension system at the expense of the current budget.

Look at the growth in pension benefits:

2011-12 $38,907,000
2012-13 $40,512,000
2013-14 $42,316,000
2014-15 $44,990,000
2015-16 $48,136,000

Here's another view: A Loyal Reader -- a mole in Allen Building -- has sent Fact Checker confidential documents that show the cost of fringe benefits continuing to spiral out of control for the next three years -- despite Brodhead Administration attempts to control them.

The current numbers plus the projected increases are startling: right now the University budgets a hidden 25.9 percent of salaries for fringes. But in two years, this will increase to 28.5 percent. (This is one reason why administrative expenses, questioned by the columnist, are so high and expanding).

And it's a drain on resources big enough to affect other budget items, including the amount of money needed to accord employees base salary increases after two years of freezes. Small wonder that President Brodhead and Dean of Arts and Sciences Crumbliss have slipped in, very quietly, talk of the goal of a balanced, sustainable budget being delayed.

When the fiscal crisis hit, Brodhead announced a three year austerity plan that would have ended next year. But more recently, he and Crumbliss have talked of the 2012-13 year as well.

✔The biggest factor in fringe benefits is of course the medical plan. And ours is gold plated. Hearing. Vision. And despite rhetoric, the Brodhead Administration has failed to address the core structure.

Rather, it has danced around the edges making changes that almost every other health plan made years ago. For example, for the first time this year, employees must avoid brand-name drugs and use generics. And employees also must use specialists like cardiologists and dermatologists who have signed contracts with the Duke plan that limit their fees. Previously Duke allowed its faculty and employees to go to any doctor, at a much greater cost. Duke continues to accord retirees and their spouses medical benefits -- no longer enjoyed in corporate America, now reserved largely for military retirees and their spouses.

FC suggestion: Duke make public an analysis of its health plans, comparing them to other schools in the area as well to private industry. Our employees must begin to realize they are going to have to pay higher premiums and higher co-pays.

Another very costly fringe gives almost all employees extra money -- added to their taxable salary -- if they have children in college. This unique benefit -- unheard of outside the academic tower -- started as a benefit allowing children of faculty to attend Duke for free, which in fact did not cost Duke any real money since all the classes were offered anyway.

But the benefit has spread in every imaginable direction, affecting more employees and allowing them to select whatever school they want. As the amount of this benefit is tied to Duke's tuition, it goes up every year. Year old statistics show an administrator like Executive VP Trask, who has two children, would receive an extra $56,232 per year during their undergraduate years.

Suggestion: Duke index this benefit to our own need-blind admissions policy, giving a sliding scale of benefits, with nothing to employees with substantial earnings.

✔A comparison with historical figures for overall fringe benefits is equally stark. The oldest figures that Fact Checker obtained pertain to the 2007-08 academic year. They show fringe benefits adding 22.7 percent to budget costs. With a projected 28.5 percent rate for the 2012-13 academic year, the increase amounts to an astounding 26 percent in just five years.

Fellow Dukies, this is not sustainable.

For the first time this year, Duke has calculated a fringe benefit rate for Ph.D. students who get stipends to teach and do other work. It is vastly lower than regular faculty, 8.4 percent of their salary. This is projected to increase to 9 percent by the 2012-13 academic year.

✔✔✔ FINANCIAL ASSISTANCE: The report says Duke spent $196 million in the 2009-10 academic year, up 13 percent over the previous year. Trask must be counting every crumb, and there is no explanation how he reached that total. Four years ago FC saw a budget estimate putting need blind aid at $53 million.

In addition, students participating in work-study programs earned $30,909,000. That’s down from $35,136,000, reflecting fewer employment opportunities at the university.

Students who borrowed from Duke to attend school repaid $6,515,000. That’s way down with no explanation, from $9,493,000 the year before.

Suggestion: As President Brodhead has stated, we cannot let a new barrier go up, based upon the socio-economic status of one's birth, to replace the barrier of race that burdened us for too long. Excellent so far. But Duke has focused on only one part of the equation -- meeting the higher cost. There must be equal focus, realizing that Duke itself is the one raising the barrier with tuition hikes far in excess of education. Our strategic plan, badly in need of updating, should focus on this.

✔✔ INTEREST CHARGES, BORROWING When President Brodhead arrived at Duke in mid-1994, the total debt was approximately $1 BILLION. Six years later, on June 30, 2010, we owed $2,732,000,000. To be fair, and Fact Checker is fair, $500,000,000 of the new borrowing was for cash reserves, just in case. We are sitting on it. FC's previous link of this money to the endowment apparently was inaccurate.

The report states that Duke spent $117,459,000 on interest on indebtedness in one year, a huge jump from $90,836,000 the year before. That’s more than twice what we spent ($42,093,000) on all of our libraries combined! This is an unsustainable course.

Moreover, Duke has been paying very favorable interest rates on its ever-expanding debt. In most cases, the interest rate is variable, meaning that with better economic times, the university will pay more.

Further, unlike people who may borrow money to buy a home, who pay interest plus some of the principal back every month, Duke only plays interest. Example: we are borrowing to put up the new Keohane Quad home. Forty or fifty years from now, we will have an out of date building and still owe every penny from the construction bonds. Our only recourse will be to refinance -- at the mercy of the current interest rate being demanded by lenders.

This is very unhealthy. It is the legacy to future Dukies from the Brodhead years.

Suggestion: we only put up buildings that are fully paid for. Sorry to crimp your style, administrators.

While Duke has maintained high credit ratings (but not the highest), there was a revolt among Duke Health bond-holders during the past academic year. They surveyed the burgeoning debt. They surveyed the risky investments where their collateral was held. And they successfully demanded that DUMAC separate out of its general investment pool the collateral, and put it into far safer investments that can quickly be turned into cash without a fire sale. This has the effect of moving some of DUMAC’s money into investments that yield less.


For the 10th consecutive year, Duke Health was profitable. And boy was it. Whoops, this is a non-profit institution so we speak of surpluses.

We shall look at the growth of earnings from the perspective of the controversial bonuses paid to Chancellor Victor Dzau. While we do not know the terms of his secret personal contract, it is safe to assume there is some tie to profitability.

The $1 million bonus that Dzau was paid during the 2008-09 academic year was tied to earnings of $175.4 million in 2007-08.

In 2008-09, we know that profits soared to $220.3 million. We won’t know his bonus based on this until the new Form 990’s appear next May.

In 2009-10, profits leaped again, to $258 million. Dzau will be paid his “incentive” for our last fiscal year during the current one, and in May 2012 we will learn about it.

As FC has noted, this is only the beginning of a compensation package that is inappropriate for these lean years, inappropriate when viewed in the context of the squeeze on so many fellow employees.

Duke allows Dzau to take sufficient time off to sit on four corporate boards, earning another $1 million a year in fees. We believe he is also scientific adviser to other corporations. And in the past, he has received $250,000 in one year from the Diagnostic Clinics, the private corporation that issues no reports formed so Duke Medical School professors can also see private patients and earn fees. We do not know if this is an annual payment.

While Dr. Dzau has taken the brunt of the "bonus" uprising, there are other managers whose bonus -- expressed as a percentage of their base -- was even larger.

Suggestion: candor. FC had to pursue and pour through many pages to compile the list. As is happening with union contracts and personal service contracts throughout our society, Duke should seek to reopen negotiations.

✔Duke Health has been able to grow its profits despite capacity constraints at Duke Hospital. Currently we are building a Comprehensive Care Center and a new hospital, called the Medical Pavillion at present but watch for a donor’s name, that will allow for further growth.

There is another way of looking at all this: every time a patient is charged $1,000, Duke keeps $125 in profits, adding it to massive reserves. We have a separate corporation, the Patient Revenue Management Organization, with 1,257 employees sending out bills for every aspirin. That’s right. 1,257 at last count. Including the Medical School, Duke Health embraces 24,791 employees.

Trask‘s report reveals that Duke expanded its charity care policies so that uninsured people, who formerly were billed for full freight, receive some of the same discounts negotiated by insurance companies for patients they cover. This seems like major wonderful news to Fact Checker, but the tiny type in a footnote is all we know.

In discussing malpractice at Duke Health, Trask reveals Duke has set aside about $70 million to cover lawsuits. Then there is this oblique warning, perhaps with Dr. Anil Potti in mind: “The estimated liability for professional and patient general liability claims will be significantly affected if current and future claims differ from historical trends.“ FC anticipates a flood of lawsuits from cancer patients; we will be watching carefully to see if Duke sets aside additional monies.

Which brings this discussion to the Durham Casualty Corporation. This is not in Durham at all, in case you are looking around for its office. And the casualties happen to be victims of Duke malpractice. Duke runs an insurance company that has hopped around the Caribbean and is now headquartered in Bermuda, which is to say in tax havens. FC has no idea how all this works, for no reports are available, but we do know that exemption from the federal income tax only extends to core functions, not auxiliary enterprises.

As a statement of high principle, Duke should not only conduct its affairs with transparency, but it should not dodge taxes. It should be a good corporate citizen of North Carolina and the USA.

Moreover, just as we look for moral investments, for green investments, we should look for investments that create jobs, good jobs. No one in the USA ever got a job because of money stashed in Bermuda. Nor because of an investment in a private equity situation. We should have annual reports on social responsibility achieved as well as dollars earned by our endowment.

As Loyal Readers will undoubtedly recall, Duke faced significant liability claims of another nature stemming from its handling of the lacrosse hoax. But aside from one $2 million payment to a law firm in one year, we have not been able to trace the totals. At the present time, Duke and two insurance companies are locked in a three-way federal court battle over the costs of defending and settling this mess. One of the insurance companies is balking because Duke will not reveal the extent of its costs to settle with the three players who were falsely indicted.


Trask is his usual blunt self in saying Duke is not out of the woods, identifying 2009-10 as a period for “important first steps toward achieving stability.” Note: first steps.

Again, Trask writes that our endowment “returns are expected to experience continued downward pressure in the coming years.”

Brodhead told us when all this started to fall apart it would take only three years. In fact, the acting Dean of Arts and Sciences Crumbliss let a little secret out of the bag when he said Trinity College would need an extra year -- that is, 2012-13 -- to achieve sustainability. They should share with us more of what they know, and also give us a blueprint for the future, which at the moment ends with 2012.

As Loyal Readers can deduce from this FC report, despite lip service and constant repetition of the word “transparency” in the administrative corridors of Allen Building, there is no accountability. Example: we were told one area being addressed with cost cutting vigor was travel expenses. There is no documentation anywhere that would allow us to monitor that; the Form 990 expense category for travel expenses actually is growing, but it includes expenditures in research contracts that are expanding in size, which is to say the category embraces more than travel to meetings and conferences that Allen Building might reign in.

Finally, we point to one coming decision we will be watching very very closely. President Brodhead has stated that there will be a limited amount of money -- that which is not sucked up by fringe benefits -- to give small raises for the first time in two years. We believe these raises should not be accorded across the board, but rather weighed toward employees with low salaries, for they have had far less flexibility in dealing with their personal budgets than a faculty that is, collectively, one of the best paid in the world.

Just as Duke gave one time payments only to people earning under $50,000 in the first year of the freeze, and under $80,000 in the second, we believe any increases in base salary should also be responsive to faithful lower-paid employees caught in a frightful squeeze.

✔Thank you for reading Fact Checker. Informative. Incisive. Not verbose.


Lacrosse hoax: Duke rejected $5 million from insurer AIG to cover some legal costs. New mediation planned

The Bloomberg News wire has just sent out the following story:

(( FC note: we believe the $5 million is the maximum specified in Duke's insurance policy. It is not known why Duke is seeking more than the max ))

American International Group Inc. is in talks with Duke University to settle a lawsuit over expenses tied to the school’s court dispute with lacrosse team members falsely accused of sexually assaulting a stripper.

Duke and a unit of New York-based insurer AIG set a mediation date in the almost two-year-old case, according to a motion filed last week. The school was seeking reimbursement of costs from confidential settlements with three members of the team who were exonerated after they were accused of rape by a stripper invited to a 2006 party.

“The parties are hopeful that they will be able to resolve this dispute at the November 4 mediation and have agreed that it is preferable to avoid incurring significant expenses,” according to the motion from AIG and Duke in federal court in Durham, North Carolina.

A settlement may reduce distractions as AIG seeks to repay taxpayer loans within its $182.3 billion government bailout. Chief Executive Officer Robert Benmosche has settled disputes with investors and former CEO Maurice “Hank” Greenberg.

Duke and AIG have held settlement talks and agreed to reconvene, according to the Oct. 8 filing. Mark Herr, a spokesman for AIG, and Michael Schoenfeld of Durham-based Duke declined to comment.

Duke had demanded reimbursement for costs tied to lawsuits by players and another by the team’s former coach over the school’s role in investigating the accusation, according to the November 2008 complaint. The athletes said Duke remained silent during the probe even though the university had evidence they were innocent.

$5 Million Offer

Duke had purchased two so-called individual-and- organization policies protecting the school and some of its administrators from legal costs, according to the complaint.

AIG had offered $5 million to Duke, Joseph O’Neil, a lawyer at Peabody & Arnold LLP in Boston involved in the defense, said in December 2008. O’Neil declined to comment when reached by telephone today.

AIG and Duke made the Oct. 8 comments as part of a pre- trial request for a 60-day extension to complete discovery, or the swapping of evidence.

The case is Duke University and Duke University Health System Inc. v. National Union Fire Insurance Co. of Pittsburgh Pa., 08-cv-0854, U.S. District Court, Middle District of North Carolina (Durham).


Duke tears down "lacrosse house," leaving a hole that is a metaphor for its own incomplete record

The Chronicle reports Duke has bulldozed the house on North Buchanan that was the site of the lacrosse party and hoax. The house, which Duke acquired shortly before the party, had become dilapidated.

✔Fact Checker here. Phail Wynn, Duke VP for Durham, stated he hopes tearing down the house brings “closure to this chapter in Duke’s history… We can move forward from here.” He is just the latest Brodhead Administration official to sing “it’s all over,” and I wish it were.

To me, the empty lot is now a metaphor for the hole that President Brodhead and former Trustee chair Bob Steel have left in the historical record. I am sure every Loyal Reader has his or her own favorite question. The preceding post refers to medical evidence that Duke surely had. My question is to Brodhead: when you refused to meet with the parents of the three lax players facing 30 years in prison, what the hell was going through your mind?

We are entitled to know everything, indeed we must know everything, and that’s part of the price of closure. Settlement of the remaining lawsuits, yes, but this is not about money alone.

Fact Checker also feels this article needs some heavy editing to make sure it is not misunderstood by people who did not live through the hoax.

Here’s one example: “From the moment Crystal Mangum wrongly accused three Duke lacrosse players of raping her….” Some people might read this to say that Mangum picked the wrong three, that there were others who raped her. As State Attorney General Roy Cooper declared, there is no credible evidence of any crime.

Another example: Various people and groups “agonized over what exactly took place.” I do not think the Group of 88 faculty agonized at all; I think they leaped to conclusions they wanted to hear , creating false chasms of color and class, power and privilege. And when the answer turned out to be that exactly nothing took place, they refused to accept it or apologize.

Again, the Chronicle refers to when “the verdict of innocent was handed down.” This is jury talk; the case never got that far, being tossed out by the state Attorney General Roy Cooper who superseded the disgraced and soon to be disbarred local prosecutor Michael Nifong. You cannot tell this story without quoting Cooper’s precise word: “Innocent.”

Finally, I feel the Chronicle’s calm historical picture does not do justice to the militancy and absurdity that were expressed at 610 North Buchanan.


Duke tries to sneak its new financial report by Fact Checker by releasing it Friday afternoon of a holiday weekend!!

Friday 2:34 PM

Duke University has just released its annual financial report for the academic year 2009-2010.

Deputy Fact Checkers are at work. We will have an analysis as soon as possible.

We note the timing: released Friday afternoon of a long holiday weekend.

Loyal Readers will undoubtedly recall that Duke issued its report on the "issues" in Dr. Potti's resume (translation: multiple, relevant, serious lies) on a Friday afternoon too. It's the time for those of us who love Duke to be alert to messages the administration would like to bury.

The cover of the new report from executive vice president Tallman Trask report is most curious: a picture of the steam plant.

Yes, the steam plant, that age-old symbol of Duke University!!!! It's just like the photography that welcomes you to the website, eight pictures that alternate, only one of which (cheering the basketball team) could in any way whatsoever suggest DUKE! Check it out. www.duke.edu

Please check back for an update.


The $1 million dollar bonus may be even larger this year!!!!!!

Please scroll down for another new post this morning.

A Chronicle editorial said Fact Checker's expose of the extraordinary bonuses paid Duke administrators needs context:

First the context of the corporate world where such salaries and better salaries are common.

Second it would be better to view these bonuses as part of the larger scheme of equity for all employees.

From Fact Checker

Your thoughtful editorial suggests that the huge pay checks for administrators should be part of a larger dialogue about equity in pay at Duke. And the Fact Checker organization agrees.

Please be advised that the Brodhead Administration, through Michael Schoenfeld, VP for public relations, has either refused to provide information that would enable this dialogue -- or not answered our repeated e-mails at all.

Since the financial crisis began, we have sought information not about individuals, but about the group of people laid off. How many people were involved, what were their salaries, and what about their demographics, sex and race.

We sought the same about people taking incentives to retire, for the additional reason of ascertaining how their pensions were being augmented and whether they’d have enough income to live decently.

With respect to incentives offered faculty, we have called again and again for information about these payments, and the demographics involved.

For the past three years, we have requested information about the demographics of top-earning people at Duke, including 776 in Duke Health and 1,831 in “education” positions who earned more than $100,000 in 2008-09. We think knowing who is in these positions would be an excellent report card on our commitment to equity and affirmative action.

Again, we were denied or received no response.

In the past 24 hours, the spin doctors have made much of the term “bonus,” trying to bury it. Please be advised that “bonus and incentive compensation” is not a category created by Fact Checker, but rather the precise term used in the source reports we received personally from Mr. Schoenfeld. Federal law mandates access to these reports from Duke and all non-profits; we obtained these reports after protracted correspondence.

All that is past. We invite the Brodhead Administration to give us all the information now, enabling the university-wide analysis the Chronicle called for.

We further call upon the Administration to release specific information about top officials for 2009-10 forthwith. All of this has been audited and there is no reason we cannot have it now. The federal reports are due December 31st, but Duke always seeks extensions that drag this into late spring. With respect to Dr. Dzau, we are most concerned that his $1 million extra payment -- call it whatever you want -- came after a year when Duke Health turned a profit of $175.4 million. The next report on Dzau’s earnings will cover a year when profits were $220.3 million.

ESR / Fact Checker

Financial crisis: Duke's ten year average return on endowment craps out to 6.5 percent

Chronicle lead story begins by saying Duke is "somewhat back on track" financially. That's not enough assurance for Fact Checker!!

Here's today's post

The most important number here is the ten year return on our endowment -- which has fallen to 6.5 percent. This is the first university announcement, and it's far worse than the 7.45 percent predicted by Fact Checker!!

Whoops, FC did note the figure was tentative and we'd have to hear from Trask.

The problem is simple: Duke budgets as if its sustained return year after year is 8.5 percent.

What do we do with that? We spend roughly five percent, and another 3.5 percent is plowed back into principal to protect the buying power of the endowment against inflation.

Something’s got to give.

We cannot keep budgeting as if we were earning 8.5 percent -- when for the past decade we have not done so. Either we trim further the amount of money we take to spend each year -- or we cheat future generations by not covering for inflation. It’s that simple.

Dr. Trask makes me laugh this morning. He says, yes, but our 6 year and 11 year averages still are above our target. Tallman, whoever heard these statistics before? Show me where in any report you have ever issued, you broke it out for six years and 11 years. This manipulation is offensive.

Dr. Trask is correct in sounding the warning bell for the Finance Committee of the Trustees. This is serious stuff, as serious as it gets. But he is waffling to wonder whether this is a “short term anomaly” or a long term reality.

Dr. Trask, Fact Checker has no crystal ball, but some pretty high powered financial managers have already decided this is not a short term anomaly. Please check out the change in investment assumptions at CalPers, the giant endowment that supports the state of California pension system. And Ditto in NJ.

✔OK the Chronicle story needs just a little sandpaper. “DUMAC is a private firm that handles Duke’s investments.”

Rather than having an investment office in Allen Building, Duke chose to create Duke Management Company. It is as much a part of the university as the English Department, History Department or basketball team. To confuse the issue, DUMAC has one outside client, which happens to be a separate charity founded by James B. Duke called The Duke Endowment. So I do not know what is meant by private firm.

As for the “$40 million to go” portion of this article, Fact Checker must point out a few things. First, this year’s budget has $71 million in red ink covered by a special withdrawal from the endowment authorized by the Trustees, part of quarter BILLION dollar appropriation over three years to accommodate the new financial reality in steps rather than one jolt.

In addition to the $71 million, we are drawing down selected portions of our endowment at a faster pace than usually authorized by the Trustees. This includes the amount of money we spent on need-blind undergraduate admissions, 28 percent above the usual pace. A Deputy Fact Checker recently obtained information, not yet confirmed, that the Graduate School of Arts and Sciences is similarly drawing down its endowment at a faster rate. We cannot sustain that either.

The Chronicle reports that endowment income provided 19 percent of university revenue two years ago, 18 percent last year ago, 17 percent this year. I do not know if any of the special appropriations mentioned in the last paragraph -- the $71 million and so forth -- are included, or if this only relates to our continuing support. It makes one big difference.

FC would also like to point out, calculating the value of our endowment is mostly guesswork. Hopefully fair guess work, but mostly guess work. We are at the mercy of hedge fund operators and private equity vultures to estimate value, because almost all of our investments are not traded in the open market, nor are there any guidelines to calculate their worth. Who is to say, for example, what a $10 million investment in a private equity deal will be worth when it matures in three years?

Ah yes, there’s also that pesky $500 million we borrowed during the height of the financial meltdown, rather than spending money as we routinely do from the endowment. We still owe this -- and $500 million is properly subtracted from any total value for the endowment that you see.

✔Let FC add that the financial results for 2009-2010 are being dribbled out by the administration -- most favorable numbers first. In the next few days, we will get Trask’s annual report which contains another segment of information on the academic year, but not all the information. Loyal Readers, keep watching this space.

✔Thanks for reading FC.


Fact Checker slams Brodhead, Dean Wells for failure to lead against prejudice

Loyal Readers: be sure you scroll down. There are three important posts this Monday morning.

Thank you for this heartfelt column. (Gay Chronicle columnist discusses harassment, particularly of young Americans)

Let us not think the problem is elsewhere. At Rutgers, at Johnson and Wales University.

The problem is at Duke and so is the silence from our administrators.

Mr. Brodhead, if you need more information about the people who call others fags, or refer to the LGBT Center as the Faggot Center, or use the term "S-on-D" let me know.

If you need more information about the student who put a note addressed to a N-- under the bedroom door of a woman he does not know, let me know. Or who followed it up with a note about Kentucky Fried Chicken, and who then went around boasting about his achievements, let me know.

And you might want to ask Larry Moneta about the witness who has come forward about acts of racism a month ago and wrote FC. With permission, this letter was forwarded to your VP for Student Life. This witness has NEVER been contacted. What a shameful performance, particularly by Larry, because I have news for him, the same people saying Fag and N-- also referred to a Jew Pig.

Maybe that gets closer to home for him.

Mr. Brodhead, you have been silent. Dean Wells, you have an important pulpit.

When Martin Luther King was finally allowed to speak at Duke half a century ago, he focused on people on the sidelines, people of presumed good will who were silent. He said these people were morally equivalent to segregationists.

Think about it. And get back to me for details, Mr President and Mr Dean, when your conscience wakes up and you are ready to be the leaders you should be.


Chronicle only skims Trustee meeting, gives us no meat

Search words: Dr Anil Potti Duke University

Please scroll down to the next post as well. There are three vital posts today. The previous one, this one, the next.

The Chronicle skims through a lot of ground and leaves Fact Checker thirsting for more information at every turn:


The man had multiple lies on his resume. Did Trustees discuss whether he should be fired outright?

Did the Trustees explore Mr. Brodhead's explanation of Potti's resume, that there are truths, lies and "intermediate explanations?" Did Trustees wonder about the message this sends about the honor code?

Potti had cancer patients being treated according to his "research." Does the board have any message for them? Has anyone sued for malpractice yet? And will their claims be expedited?

In addition to the investigation into Potti, our administration must be investigated. From the Cancer Letter: "When questions about Potti’s science emerged in scientific literature and in alarms sounded by internal critics, the Duke administration formed a protective barrier around the man they considered their star, forming committees that operated in secret, and then incorrectly portraying the findings of one of these committees as validation of Potti’s science." What steps are being taken to do this?


Having spent more than a decade boasting about the ten year average return on our endowment -- and how it is better than other schools -- we now find our long term return well below our expectations. And this fact has not appeared in any press release, whereas the old ten year average was always in the fore.

Translation: Did the Trustees discuss the 7.45 percent (FC calculation, Trask may update) ten year return, when we budget based upon a sustained 8.5 percent return?

Did they discuss the coming loss of federal incentive funds?


Chronicle, you let Brodhead slip in a timetable for two more years of hardship. His original goal was for the last academic year, this year and next year. This is major, major slippage in the goal of a sustainable budget that you have NOT covered.


Chronicle, when Brodhead said there would be another full year of slippage in Kunshan, you let him slip that in too. This is major, major. What is his reason?

Coupled with our scraping together only half of the people our Dean "promised" for this year's Cross Continent MBA Program -- the signature of our international effort -- after last year's failure too, this would indicate to me a rocky start to say the least.

Fact Checker also calls upon Fuqua to release specifics on the academic qualifications of those who were admitted. There are a lot of rumors.


The question for Dean Andrews is this: with this giant new facility, how come there are no plans to increase the number of MD students. While other schools -- particularly Fuqua and Law -- have multiplied, the medical school still turns out only 99 or 100 doctors year after year. Despite great need in the USA. A few more doctors and a lot less lip service about the need for medical equality around the world would be good too.


In rejecting the Chronicle's request for open meetings (presumably like the partially open meetings started in 1973 and in effect until precisely two years ago), Brodhead said Trustees must have confidentiality to speak out with vigor.

At the meeting this past weekend, please tell us:

A) Did any Trustee bring something to the floor that was not on the administration-sponsored agenda, and if so, what was it.

B) Give us some examples -- without names -- of the kind of comments made this weekend that needed confidentiality.

Fact Checker waits.

Clery Report lists 7 robberies, but Fact Checker finds 9 in official press releases

Search words Duke University Clery Report campus crime rape

✔ Fact Checker here.

The new Clery Report raises a lot of questions. And the answer about the number of sexual assaults is unsatisfactory. Moreover, this morning, Fact Checker is challenging directly the official count of the number of robberies on campus.

✔ Sex first.

Duke maintains that in the past, only officials and faculty were required to report violent sex acts against any victim (not only students.) These acts included rape, forcible touching, a very broad variety of aggressive offenses.

But now more people are mandated to report such crimes if they hear about them, including RA's.

There is no evidence whatsoever that RA's were hearing about violent crime and keeping silent. And that this factor accounts for the jump in the number of sex crimes.

Duke has been dodging behind excuses for years in one crime category or another, explaining the definition of the offense changed, as well as theorizing we are getting reports on things previously under the carpet. There is no evidence to support this theory.

Last year, there was a similar increase in one category, and Dean Joe Gonzalez, who always seems to draw negative assignments so that the boss is left to bask only in the sun, gave The Chronicle a song and dance explanation.

✔ ✔ ✔ ✔ ✔
Now robberies.

Fact Checker challenges the report's statement that seven robberies occurred on campus. That is, a face to face confrontation with a great danger of violence. In each of the cases Deputy Fact Checkers have examined, someone had a gun in his or her face, or in the back of his or her head, and their hands in the air. Duke Police sent out a Clery Alert and were on the scene.

The new Clery Report, released on September 30, which is to say the last day permitted under federal law, covers crimes committed in the 2009 calendar year. For reasons best known in Allen Building, the Duke cover on the report says it is the 2010-11 edition.

Now the report says there were seven robberies.

The problem is, that the police department put out press releases about NINE robberies, not seven. And in two of these, two people were robbed. In one, a student was shot in the abdomen.

If two women were raped at once, I would hope we'd report two rapes. In this case, I would hope we'd report two robberies, so the total is not 7, not 9, but counting victims 11.

I recognize the Clery Act has some fudge factors -- only crime on campus, in nearby areas filled with Dukies and some other locations need be listed. But I have accounted for all that and still get 9 different occurrences and 11 victims.

I look forward to a better explanation from the University. And I hope the Chronicle adds this to its list of questions. FC


Trustees meet this weekend. Fact Checker offers draft of resolutions

Here are resolutions the Trustees can pass this weekend, drafted courtesy of Fact Checker.

✔ Resolved, inspired by former chair Steel's call in his Founders' Day address for more information about the university to be made public, the Trustees declare their plenary and committee meetings shall be open, their full minutes shall be published, their future agendas shall be known, and the governance of Duke University shall occur in a spirit of informed collaboration with all stakeholders. We shall be transparent, our officials held accountable.

✔ Resolved, the most fundamental responsibility of the Trustees is to insure the integrity of Duke University. The Administration having found that Dr. Anil Potti provided a resume that contained "significant issues," plural, which is to say multiple lies, the Trustees hereby direct President Brodhead to sever forthwith all connection, including employment as a member of the faculty and hospital privileges.

✔ Resolved, the Trustees declare their intention to treat patients of Dr. Potti who may have malpractice claims with sensitivity and expedience, and not subject them to years of litigation that adds to the burden of their cancer. There shall be no repeat of the dragging out that has occurred in the lacrosse case.

✔Resolved, the administration having arranged investigations into Dr. Potti's credentials, his faculty misconduct and the validity of his scientific discoveries, The Trustees shall now arrange an investigation into the way the administration ignored warnings about Dr Potti for four years and other possible missteps.

✔ Resolved, to meet both its current needs and future aspirations, Duke University must conduct a major fund drive in the years ahead. The President will be the symbol, spokesman and principal -- and continuity of leadership is required. Therefore, the Executive Committee of the Trustees shall formulate a likely timetable for the fund-drive, taking into account current financial doldrums, prospects for starting a "quiet" phase, and then the years of public fund-raising. The Trustees -- mindful that Mr. Brodhead is 63 years old and has mused about reserving time in his professional life to return to teaching -- shall open discussions with him immediately about the ardors of the years ahead and his availability to finish a multi-year fund drive, and shall recommend appropriate action to the board, if any, no later than its next plenary meeting.

✔Resolved, the name Aycock shall be stripped today from the East Campus dormitory and a new name shall be posted after appropriate stakeholder consultation. This dormitory is an inappropriate honor to a former Governor of North Carolina who instigated a race riot in which many black citizens of Wilmington NC were killed. Aycock not only was a segregationist, but a violent man, repeatedly fomenting strife to establish the supremacy of the white race.
✔ Resolved, Duke University will henceforth not ignore Memorial Day and Veterans Day, but shall have appropriate observances.

✔ Resolved, the Administration shall develop a clear policy on awarding salary increases once funds become available, stating whether these increases will be level across the board or if low-paid employees, whose budgets allow the least flexibility, shall receive priority over a faculty that already is one of the highest paid in the nation.

✔ Resolved, the Trustees shall eat at least one meal in Marketplace, standing in line to do so.

✔ Resolved, the Trustees take note that there are now 19 academic deans of Trinity College alone, not to mention other deans concerned with the undergraduate experience. It is the policy of Duke University that the number of deans shall never exceed the number of students.

Former Trustee chair Steel joins Fact Checker in calling for transparency at Duke

Fact Checker here. Good day Fellow Dukies!!

Deep in this morning's Herald Sun article about Founders' Day -- and barely mentioned in the Chronicle -- I could not believe my eyes.

Bob Steel -- former chair of Duke's Trustees, who two years ago engineered the end of partially open Trustee meetings begun in 1972, who even stopped the tradition of meeting with reporters as he left Trustee meetings -- was calling for "more accurate public information" about the university. Administrators must become more open even if it makes them uncomfortable, for "it will be worth the price."

And the killer quote, the university must be run with "more transparency and openness than has been the case."

This man must read Fact Checker!!!!!

✔Hopefully President Brodhead listened and learned from the man who more than any other is responsible for his tenure at Duke. Steel was vice chair of the board when Nan Keohane decided to return to research and teaching, and he was tasked to find a new president.

Steel and his committee surveyed internal candidates and passed them over. He became determined to lure someone from "the upper Ivies" but the Provosts at Harvard, Yale and Princeton were all brand new -- their predecessors having just moved into Presidencies. So he turned to the #3 man at Yale, the Dean of the College, a job unlike any that existed at Duke.

Their first meeting is instructive to us today. Rather than holding a discussion in New Haven -- where chances are no one had any idea who Bob Steel was, much less what he and Dick Brodhead were talking about -- they met at a remote restaurant along the Interstate highway.

This became a pattern, the metaphor for the way Steel, soon to be chair of the Trustees, and the new president would operate. Clandestine. Secretly. Out of the public view.

Yesterday, in cap and gown in Duke Chapel, Steel asserted that he got new religion. Better late than never.

Fact Checker and Deputies have long sought more information about Duke, and this weekend, we will send to officials who have not responded to our previous inquiries, an invitation to answer now in the spirit of Bob Steel.

At the risk of offending people who think that these essays are too long (hey, reading is voluntary) we shall move into background: Steel was chair during two crises.

First the financial meltdown. History has preserved only two words by Steel, and you have to shake your head at them. As universities all over the nation began to feel the pinch on their budgets and endowments, Steel said he had "good news" -- the only Chronicle quote. Brodhead standing next to him explained our money was "stable" and "secure."

By year's end, Duke's endowment had shrunk from $6.1 billion to $4.4 billion. There were similar losses in the pension funds and hospital reserves. And the net assets -- everything Trinity College and Duke had ever accumulated -- tumbled 30 percent from $10.5 billion to $7.5 billion.

Steel, forced from the board by term limits, left it to his successor, Dan Blue, to say we were in "dire financial straits."

✔Steel was also chair during the lacrosse crisis and maybe that's where he learned the following, quoting the Herald-Sun:

"The best antidote to harmful speculation about the university's operations, he argued, 'is more accurate public information' about how Duke operates."

The word "accurate" jumped off the page, for he was the Chair of the Trustees when our public relations office put out a lie in an official news release. A total falsehood that set the tone for the entire official response to the growing lacrosse hoax.

The official news release said Coach Pressler had quit.

In other words, the university was falsely stating the coach walked away from his team in time of greatest need, walked away from three players whom he had recruited, who now faced 30 years in jail for a crime that never occurred. Walked away from their families too, just as Brodhead did when he refused to meet with parents of the three who were indicted.

This essay could easily turn into a litany of what we do not know about Steel during the lax crisis. Everyone who lived through that ordeal seems to have his or her own list of actions and in-actions that did the most harm and peeved the most.

Maybe Steel can get religion on lacrosse too, no matter how late, instead of remaining as the most divisive Trustee chair in our history.

President Brodhead spoke out and apologized. Steel stood in the back of the room, silent, arms crossed over his chest. Today he fights lawsuits growing out of the debacle as if he were a used car salesman fighting odometer tampering.

In the new spirit of transparency, Bob, tell us what happened. Turn Duke's response in the litigation into the search for truth, instead of an adversary proceeding with a Washington hot shot lawyer who bills us for $2 million a year.

And now a Founders' Day lesson.

There is absolutely nothing in Duke's history that would point to a celebration yesterday. On September 30. Nothing.

Maybe on December 11th, to mark the day in 1924 when James B. Duke -- nicknamed Buck -- ceremoniously signed a document called an Indenture forking over the big bucks. But that falls during the exam period and no one would attend, not that over the years as the event skipped around from date to date, there was ever any stress on the capacity of Page Auditorium or Duke Chapel.

Maybe on December 29th, when the Trinity College Trustees met to change the school's name to qualify for the loot. But that falls during vacation time, no one attending for sure.

So here we are, Fellow Dukies, date plucked from a hat. Academic robes, the gold and silver chain around Brodhead's neck, the organ filling the Chapel, the pageantry is a late addition, trying to add spark with yet another Convocation, an occasion that has spawned only yawns over the decades.

And a final word about Harold Spike Yoh '58, who received the highest university honor yesterday. Yes this is the Yoh for whom the football building is named, fan #1 for more than half a century. And also the namesake of a Professorship.

He was a student during some of Duke's glory years on the gridiron: ACC championships and two Orange Bowls under Bill Murray. In those years, people would check each week for the national ranking of the football team, just as they await the basketball standings now.

And my point: Yoh's support was just as strong during the lean years. Duke students who walked out of the Alabama game two weeks ago when the score went lopsided could learn a lesson from him.


Thank you for reading Fact Checker. Have a good weekend!!!!