By Robert L. Capers, Peter Unger, Karen Van Essen, Alexander S. Birkhold, and Brian D. Schneider of Arent Fox LLP (legal counsel to NACUBO)
Colleges and universities should take steps now to implement a plan in response to the investigation dubbed “Operation Varsity Blues,” in which federal prosecutors charged at least 50 people in an elaborate scheme to gain admission for their children at elite universities. Business officers are critical members of institutional risk management teams and have a key role to play in creating and implementing a comprehensive strategy.
As federal prosecutors continue their investigation, it is critical for colleges and universities to implement proactive programs to prevent misconduct, to assess the internal controls governing their admissions process, and to conduct internal investigations to uncover potential misconduct and initiate remedial measures where appropriate. Mapping and implementing a strategy now will help institutions successfully navigate potential admissions fraud.
Be Proactive: Five Steps to Take Now
Colleges and universities can take steps to prevent problems before they arise by implementing policies and procedures addressing admissions.
- Implement Policies: Institutions without a formal policy governing the admissions process should develop one as soon as possible. Policies should address the admissions requirements, establish a clear application procedure, and provide guidelines for evaluating applications. The college or university should task a department or individual with overseeing admissions and its regulation. Once in place, these policies should be regularly examined to ensure they are appropriate and effective.
- Identify and Train Personnel: The college or university should conduct vetting of personnel involved in the admissions process. A robust conflict of interest policy, rules regarding nepotism, and disclosure related to financial interests will enable institutions to identify potential problems early. Every individual with discretionary authority is responsible for compliance, and all staff that are part of the process should be trained and held accountable. In turn, understanding the role of each individual—whether formal or informal—in the admissions process will help universities come to grips with who influences decision-making.
- Conduct Audits and Implement Controls: Internal controls and compliance programs should be regularly evaluated at colleges and universities. Regular audits and assessments should be conducted to ensure that the university and its admissions staff comply with applicable laws and internal rules. If the institution has guidelines concerning recruited student-athletes, for example, the school should consider undertaking an audit to determine if and why athletes drop off the team for which they were recruited. Anti-bribery management systems and certifications traditionally used by financial institutions, like ISO 37001, can also help schools prevent and mitigate risks.
- Channel Complaints: Establish an anonymous hotline to facilitate reports of illegal, unethical, or noncompliant activities. This can promote a culture of reporting misbehavior and can also help universities identify and halt misconduct sooner. Colleges and universities should also create mechanisms to investigate internal complaints.
- Initiate an Internal Investigation: Even institutions that believe they are in the clear should consider whether to initiate an internal investigation to evaluate and advise their governing boards about potential risks.
Initiating and Managing an Internal Investigation
In addition to assisting with implementing a compliance program, legal counsel should team with the institution’s leadership to determine an appropriate strategy to manage an investigation.
Identify Conflicts and Representation: If used, outside counsel must be clear that they represent the institution and not the employee: Joint representation might not be possible for employees, officers, coaches, or others who are involved, and some states, like California require written consent to a joint representation. An “Upjohn warning” should be given in writing that explains that statements from employees, officers, coaches, or others will not necessarily be protected by the attorney-client privilege. Retention of independent legal counsel for these individuals should be considered at the initiation of the internal investigation.
Save the Evidence: Failing to preserve relevant documents after the start of an investigation can slow or stymie the investigation and can result in criminal charges if a government investigation has already been initiated or is anticipated. Colleges and universities should issue a document preservation notice to relevant employees and officers requiring that they do not destroy or delete relevant documents. Such notices may also be more stringent and require employees to contact counsel if they are aware that they possess relevant evidence.
Plan the Investigation: Colleges and universities should prepare thoroughly for witness interviews by reviewing the evidence, investigating witness backgrounds, and preparing outlines. Counsel can help develop a plan to sequence conversations with employees, officers, and others. An internal investigation might begin with a witness who can help counsel understand the admissions process, practices, and personnel involved before moving to individuals with personal knowledge of the events in question.
Analyze the Evidence: Understanding the evidence will enable colleges and universities to understand the facts and scope of the inquiry and will help refine a school’s strategy. Depending on the nature and time period of the conduct at issue, documents will be a key component of the investigation.
Interview Witnesses: Witness interviews will provide additional key details, particularly in a large fraud investigation with numerous implicated individuals. Colleges and universities should focus on gathering all relevant facts and making a determination about the witnesses’ credibility.
Draft the Report: Colleges and universities and their legal counsel should consider what kind of report to prepare (written or oral), whether to share the report and with whom, and how it might ultimately be used by the government. The report should address the independent investigator’s mandate and background of the investigation, provide a summary, detail the investigation and outline findings, draw legal conclusions, and evaluate potential legal liabilities. Counsel can also provide schools with recommendations based on the findings. If an institution is already in dialogue with the government about the investigation or its progress, counsel can help coordinate with the government.
The Potential for Self-Disclosure
Protect Your Interests: Institutions must evaluate whether to disclose any findings publicly and to the government. Counsel can help colleges and universities determine if they are legally required to make a disclosure at the end of the investigation. Even if not faced with a legal obligation, voluntary disclosure might be in a university’s best interest.
Share the Report: Although disclosing the report might reveal confidential and potentially damaging information, it can also signal willingness to address the issue and to work with the government, which can lessen potential penalties. Voluntarily disclosure often acts to assuage government concerns that information is incomplete or inaccurate. In the best circumstances, the government might not conduct its own investigation if a complete report is provided by the institution. Legal counsel can assist to preserve the attorney-client privilege to the greatest extent possible. Before disclosing, evaluate charges that the institution could face and the economic and reputational consequences of potential criminal and civil claims or liability.
Colleges and universities should not wait to implement and evaluate internal controls concerning the admissions process. A well-planned and managed internal investigation can help an institution stay out front of potential problems, mitigate consequences from Operation Varsity Blues, and avoid a sequel.