Fact Checker Special Report: Fuqua shuns backwater of Kunshan, looks to Shanghai as part of its unbridled world-wide vision

Fact Checker has previously reported anomalies in plans for Kunshan, in both the confidential Trustee briefing papers that we obtained exclusively in mid-February and in Global Vice President Greg Jones's presentation to the Academic Council at its December meeting. In each report, the Fuqua School of Business was portrayed as the driving force in developing Kunshan, yet key Fuqua programs were not mentioned.

Curious of course, Deputy Fact Checkers were told to make following up and resolving this apparent contradiction a top priority. And voila, this morning we share new documents from deep within the Brodhead Administration -- and share a shock.

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The Fuqua Business School is eschewing locating its premiere degree granting programs -- apparently including its highly touted Cross-Continent MBA -- in Kunshan. Rather, Dean Blair Sheppard is quietly -- the adverb clandestinely seems appropriate too -- seeking to develop a separate Duke campus in Shanghai. And he's doing so with minimal faculty involvement.

While Dean Sheppard does not use the same description of Kunshan as Fact Checker -- that it is a "backwater" with no university and little cultural development -- he concedes this point time and time again in documents we have just obtained. He also acknowledges the interest in Shanghai is undercutting Kunshan, and it is obvious to FC that Duke is not being forthright about it with the city or our new partner, Wuhan University.

Dean Sheppard (not to be confused with Duke's fundraising chief Bob Shepard) stresses the importance of being located in "The Bund" section of Shanghai, the beautiful, historic financial and tourist center, listing "location" and "intellectual (climate)" and "immediate connection to banks" among the reasons. This would "solve a key dilemma for Fuqua of not being ... in a major market or money center. This is a big constraint for (the study of) finance" at Duke.

The dean presents a map showing possible locations, and even picture after picture of glorious old buildings under re-construction to bring them up to 21st century standards.

✔ ✔ ✔ In a stark admission, Shepperd says "our students had become increasingly disaffected with the quality of their (international) experience" in both the Cross-Continent MBA and the Global Executive MBA. "This resulted in declining enrollments in both programs even before the recession," with one program taking a seven percent and the other a 13 percent hit. "If you wish to understand how bad it had gotten.... just speak to our Associate Dean for executive MBA programs, who was the person on the front line fielding complaints."

In other words, the students complained they were not exposed to top level executives or real corporate problems, as they were being warehoused in make-shift classrooms in hotel ballrooms. And the last thing Sheppard wants is these programs planted in the backwater of Kunshan.

His assessment: They will not "work" there. Period.

(We have been attempting to find out if Sheppard communicated this dissatisfaction to the Academic Council, charged with maintaining the quality of Duke's degrees, and our initial review of the Council's thorough minutes indicates he did not. In the confidential Trustee briefing papers, one or more faculty members is/are designated to monitor the strength of international offerings, but we do not know if this safeguard was in place during the period Sheppard described, or if it is in place even now.)

Dean Sheppard's conclusion that Kunshan is not appropriate is a major blow to the Brodhead Administration. In the face of growing criticism for picking this city as our home in China, the President and his team have gone to great lengths to praise every dimension.

Sheppard states he wants Duke to become "THE business school of Shanghai," a dream that is clearly at the expense of Kunshan. Or as he put it, Duke might experience a "potential loss of focus" and have to "limit" resources in Kunshan. Indeed Sheppard speaks not only of an initial foothold, but a "planning process" with a goal of "a more extended campus" in Shanghai.

✔ ✔ ✔ ✔ And worse, he recognizes the city of Kunshan might see this as double-dealing: under the label of "problems" and the subhead of "trust," the Dean states "it would be really important to manage the (Shanghai) deal and discussions with Kunshan in order to avoid loss of the very good relationships we have with them. So far so good." Yes, he used that phrase.

Advocating simultaneously for Kunshan and Shanghai with the Chinese Ministry of Education will be key. And tricky, for as Sheppard notes, "could be interesting."

✔ FC has made repeated requests for an interview with Dean Sheppard, stressing to him the importance of his input and perspective for this Special Report, and received no response. Come on Dean, "could be interesting."

This is consistent with what FC has found other administrators doing: circling their wagons as the glitz on our move into China wears off, with stakeholders asking probing questions and learning disturbing facts.

The documents FC has seen list various Fuqua programs under either Kunshan or Shanghai. This list does not include the signature Cross Continent MBA, which costs a staggering $140,000 over a 14-month period and includes only 70 classroom days, with the rest self-study at home. Self-study. Means homework. While not included, the surrounding discussion makes it clear Sheppard wants this in Shanghai.

One of Sheppard's definite plans for Shanghai is a joint Ph.D. with Shanghai Jiao Tong University (SJTU). This is the school that elected to bow out of sponsoring Duke's entry into Kunshan -- we need a sponsor according to Chinese law -- a year after a very elaborate ceremony during which President Brodhead signed a deal and broke ground with a silver shovel.

One source tells FC that people at Duke familiar with the details now believe SJTU cancelled the deal in Kunshan because it is going into competition with it. Officially Duke said Shanghai Jiao Tong did not want to be involved with a school in another provence (state), an explanation that FC labeled specious since everyone knew from day one where Kunshan was located.

(We have conflicting information on whether the joint Ph.D. survived the breach in the Duke-SJTU agreement. One source says the idea is dead. But in a memo to faculty reporting on the last Trustee meeting, Sheppard notes without elaboration that plans for Shanghai are on track.)

SJTU has plans to invest $300 million in its business school -- clearly a pie big enough for Duke to savor a slice.

The joint SJTU - Duke Ph.D. is unique in all of our international plans for two reasons:

-- The government of China has agreed to pay for ten students -- the first indication in any of our ventures of where the money is coming from.

-- And the ten would spend the first two years in Durham -- the first indication any of the new Chinese students would have any intercourse with the mother Duke campus at all. Sheppard also makes vague reference to faculty post-docs funded by China.

The Shanghai campus would also rob Kunshan of the Masters in Management Science degree focusing on finance, the same degree focusing on accounting, and a vague part-time MBA focused on "finance and professional services."

Sheppard also talks about a masters degree in law in finance and international business in Shanghai.

✔ ✔ ✔ ✔ ✔ And if starting a new university in Kunshan and a new campus in Shanghai were not enough, Sheppard has also revealed incorporating in a third Chinese location -- Jiangsu Province, which has 77 million people in the last census. Sheppard notes the governor is a vigorous advocate for an executive MBA focused on the Yangtze River delta. The province's capital is perhaps better known than the province, the city of Nanjing.

"We would need to put more attention into China, faster under this model, limiting resources to do other locations."

✔ ✔ ✔ ✔ ✔ And the list of other locations -- cities that Fuqua seeks to move into in one gulp -- is overwhelming: London, Dubai, New Delhi, St. Petersburg, Kunshan, Shanghai, Nanjing. Brazil, believed to be the city of Sao Paulo, was recently visited by Duke's new global VP Gregory Jones. Then there is Seoul, where an executive education program is underway. And Johannesburg, for Global Academic Travel Experience (GATE) elective courses, and Global Consulting Practicums which have flown under the radar.

This list does not include Sheppard's undisclosed plans for the Master of Management Studies (MMS) degree. Unlike most business school degrees, which contemplate students will work for several years before seeking an MBA, this is designed for students immediately after they get their undergraduate degrees. It has feasted off the lack of jobs in the economy, with many students finding this a more attractive opportunity than unemployment or working in a supermarket.

The initial plans for the MMS in Durham included a three year trial run. But after only one graduating class last May, Sheppard began lobbying to make the degree permanent, which he has done, and to be allowed to create a "template" for international expansion at his call, which is under consideration. The template is an unusual idea since usually the faculty approves venture by venture, city by city.

The list would be even longer -- but earlier Fuqua excursions fizzled. These include the loss of millions of dollars in Frankfurt, the failure of a program with the London School of Economics, and animosity enough in Moscow that we had to flee to St. Petersburg.

In discussions with one source, FC used the word "grandiose." We got instant agreement.

We note that the rapid -- the unbridled -- global expansion is coming as Duke in Durham has had to contract because of the financial meltdown. Just 17 months ago the Trustee chair said the university was in "dire financial strait," after a year in which fully 30 percent of all the wealth accumulated by Trinity College and Duke over the generations disappeared. We have previously written about the unexpected capital contribution Duke is having to make in Kunshan, and the massive operating losses which were not in the original plan. Based upon documents presented at the last Trustee meeting, FC believes the losses will easily be $100 million in the first decade, more likely $150 million and possibly higher.

All this while we are crimped in Durham.

We still do not know if Duke is going to be able to break its two year wage freeze, but we can assure Loyal Readers that any thaw will be meager. We still do not know if the Arts and Sciences, which has a critical budget problem, will be able to keep its full staff of professors.

And now for an overview, three concluding FC observations:

✔ First, Fuqua faculty whom we talked to in complete confidence do not have a total picture of the scope of the school's adventure. Some faculty are now openly discussing the need for facts and figures independent of those developed by the Brodhead Administration. (FC has asked Trustee David Rubenstein, chair of the special China committee, for a list of committee members, whether there are students, faculty and other shareholders on this committee like on other Trustee committees, and whether there is a staff or consultants who are providing information independent of the administration. He has not yet responded to this very recent request.)

✔ Second, we were most surprised to see in the internal documents that FC gained access to, a repeated emphasis on making money, on profits. Phrases like "a key aspect of continued profitable growth for the school and a key to our brand." It is a frank admission that some of the menu Fuqua has assembled is just to make money. We always thought a university was purer than that.

✔ And the other observation is that all of this is different from earlier international ties. These programs are designed for Chinese students studying in China. With the exception of the joint PhD program outlined above, none of these people will come to Durham. And only a small handful of Dukies will leave the main campus and go to Kunshan, perhaps 20 students a year for an undergraduate certificate program in public health, just enough to mollify the Chinese government and satisfy its legal requirement.

We anticipate two more Special Reports based upon the latest documents we obtained, just as informative, just as explosive. Loyal Readers are invited to submit news tips and documents anonymously and in total confidence to Duke.Fact.Checker@gmail.com

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