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Tuesday, July 17, 2012
Updated: July 18, 12:45 PM ET
Penn St. leaders passed on reform

By Don Van Natta Jr.
ESPN.com

In November 2004, four of Penn State's leaders, including then-president Graham Spanier, sat down at Joe Paterno's kitchen table on a Sunday morning. The men asked the iconic coach to retire. Paterno said no, and that was that.

That same month, seven members of Penn State's board of trustees proposed sweeping reforms that would have strengthened the board's oversight power of Spanier and other campus leaders, including Paterno, according to documents obtained this week by "Outside the Lines." The group told the full board, "Decisions scrutinized with the benefit of hindsight need to withstand the test of being informed decisions."

But the board never took a vote on the proposal. Spanier and then-board chairwoman Cynthia Baldwin considered the reforms -- and, just as Paterno had done, said no, three current trustees say.

The revelation comes to light five days after former FBI director Louis Freeh's firm released its school-sanctioned report on what the university did to protect children in the wake of the arrest of former defensive coordinator Jerry Sandusky and the board's Nov. 9 firing of Paterno and Spanier. The report, which blasted the board for poor governance and a failure of leadership, has led some trustees to say they now regret the good-governance proposal never was put to a full vote by the board's 32 members eight years ago.

Joel Myers, a longtime trustee, said the Freeh investigators told him that if the good-governance proposal had been adopted by the board back in 2004, "This (crisis) could have been avoided."

The 2004 proposals are eerily prescient considering how the trustees, according to the Freeh report, were left in the dark by Spanier, Baldwin and trustee Steve Garban as the Sandusky criminal investigation escalated in 2011. If the proposals had passed, the trustees say the measures might have made a difference in the way the board had responded to the Sandusky matter.

Two trustees said Freeh's investigators had asked them and other trustees about the 2004 good-governance proposal and appeared determined to find out why it had not been adopted. One trustee also said Freeh's investigators told them they had obtained emails between Spanier and Baldwin and others discussing the merits of the trustees' proposal. The trustee also said Freeh's investigators said that the emails showed "Spanier and Baldwin put a stop" to the good-governance proposal. "They didn't want the added scrutiny," the trustee said.

"It was a big, missed opportunity," said Al Clemens, another longtime trustee. "Back in 2004, we just knew there wasn't enough accountability, and it seemed like a reasonable step to try to protect the university. It seemed like the right thing to do."

Penn State Joel Myers, a longtime trustee, said the Freeh investigators told him that if the good-governance proposal had been adopted by the board back in 2004, "This (crisis) could have been avoided."

After the good-governance proposal was discussed in a private board session in 2004, at least four young boys were sexually abused by Sandusky. Two trustees who spoke on condition of anonymity said they fear the board's failure to adopt the good-governance proposal will be used by victims' lawyers in the negligence lawsuits against Penn State.

"This could increase our liability," a current trustee said, "possibly by millions."

Yet there is no mention in the Freeh report of the trustees' failed good-governance proposal or the Spanier and Baldwin emails. A spokesman for the Freeh Group declined to comment.

The board's failure to improve its good-governance practices is a curious omission from the Freeh report, which made the trustees' governance failure a main focus of its findings.

The report blames the trustees for weaknesses in the university's "culture, governance, administration, compliance policies and procedures for protecting children." In particular, Freeh's investigators criticize Penn State's failure to abide by the Clery Act, the 1990 federal law that requires college administrators to report potential crimes on campus to law enforcement authorities. The law is named after Jeanne Clery, a Lehigh University student murdered in her dorm room in 1986.

In particular, the Freeh report concludes the trustees had abdicated many of their leadership responsibilities to administrators, especially Spanier and Paterno. And repeatedly, the report criticizes the lack of transparency at the top of Penn State.

"The board's over-confidence in Spanier's abilities, and its failure to conduct oversight and responsible inquiry of Spanier and senior university officials, hindered the board's ability to deal with the most profound crisis ever confronted by the University," the report states.

At last week's board of trustees meeting, trustee Ken Frazier said his colleagues on the board were "deeply ashamed" by the findings in the Freeh report. The trustees and current university president, Rodney Erickson, have pledged to adapt some, if not all, of the recommendations made by the Freeh Group. Alumni groups have called for the resignations of some or all of the trustees, and several trustees confronted Garban, the ex-chairman, at last week's meeting and urged him to quit.

No trustee has resigned.

Joe Paterno & Graham Spanier
Penn State's board of trustees never voted on a 2004 proposal that would have given them more oversight of then-president Graham Spanier, left, and football coach Joe Paterno, right.

Spanier declined to comment for this story, a spokesman said.

Charles De Monaco, Baldwin's attorney, released a statement Tuesday afternoon, saying she took the "issues raised in the memo very seriously" and sought counsel from the Association of Governing Boards of Colleges and Universities to address the board. De Monaco said an attorney recommended by that group addressed the board about "governance best practices."

He said the board made changes over the next three years of Baldwin's tenure as chairwoman and beyond: "Ms. Baldwin, as chair, did not in any way interfere with the board's consideration of the issues raised in the Nov. 9, 2004 memorandum," De Monaco said. "To the contrary, Ms. Baldwin was instrumental in facilitating a full discussion of those issues. In addition, she continued to consult with the AGB for guidance."

Myers, one of the trustees, "vaguely" recalled attending such a seminar, but Clemens said he could not remember it.

"More importantly, we didn't make any changes that we needed," Clemens said.

Myers said a few "small changes" were made in governance over the next few years, but he said he could not recall them.

De Monaco referred a reporter to the board secretary for details of the governance changes that he described. The secretary did not return calls.

Penn State spokesman David La Torre said Tuesday that "memos written for the board do not require a board vote." He said the minutes of the Nov. 18, 2004, board meeting do not show this issue was discussed during the public session; he declined to comment whether it was discussed in a private session.

Among Penn State's current 32-member board are leaders of corporations, including leaders of Merck and the Bank of New York Mellon Corporation, alumni, Pennsylvania residents and appointees of the governor. Pennsylvania Gov. Tom Corbett, who is mentioned sparingly in the Freeh report, is also a trustee.

In 2004, a group of trustees became concerned the board was nothing more than a group that rubber-stamped decisions made by Spanier and his lieutenants, three trustees said. They became concerned that Spanier appeared to be keeping them in the dark on important matters, they said.

Several new trustees who joined the board back then also became alarmed that there was not a subcommittee to deal with financial matters. In March 2004, the board approved an audit subcommittee.

In corporate boardrooms, Sarbanes-Oxley, the 2002 federal law setting enhanced standards for public company boards and public accounting firms, also had non-corporate institutions reconsidering best practices. Penn State is a $6.5 billion not-for-profit corporation with a $1.8 billion endowment and an enrollment of 96,000 students.

Back in 2004, we just knew there wasn't enough accountability, and it seemed like a reasonable step to try to protect the university. It seemed like the right thing to do.

-- Al Clemens, longtime Penn St. trustee,
on reform proposed in 2004

Governance procedures had last been amended by Penn State on January 19, 1996, the trustees in 2004 had discovered. And that fall, the trustees consulted with an outside law firm in Philadelphia to bring sweeping changes to the responsibilities and operations of the board of trustees.

When making its proposal during a private session at the Nov. 18, 2004 meeting, the small group of trustees said, "Our goal is to be certain that we as trustees are fulfilling our fiduciary duties in a meaningful way and that when we are requested to consider matters of importance, we are following a process which is exemplary and also consistent with all legal requirements and 'best practices,' " a memo of talking points shows. "This will enable the trustees to act in the best interest of the university, the administration and the various constituencies we represent."

The trustees proposed an improved environment for "informed" decisions, saying "the adequacy of information for board meetings needs to be reviewed and such information needs to be provided with sufficient advanced timing to allow trustees and the board as a unit, to meet its due diligence and fiduciary duty requirements before voting."

They also said to improve compliance "in an era of heightened scrutiny, boards are employing independent outside legal counsel as advisors. Such counsel should work with university counsel to create an environment that both facilitates and protects the governing body and the administration."

The trustees also proposed a number of significant changes to the university's by-laws, giving the board ultimate authority for personnel decisions, which had previously been the decision only of the president. These amendments were also not voted on by the full board.

Clemens is "deeply hurt" that it didn't go forward.

"I was disappointed it never went anywhere, and we didn't do anything to improve the accountability of everyone," he said. "That's the important thing. We didn't get an outside attorney with governance experience. That's what we were trying to do, and it didn't happen."

According to the Freeh report, the Pennsylvania attorney general's office told then-university counsel Baldwin on Dec. 28, 2010, that Paterno, athletics director Tim Curley and vice president Gary Schultz would be subpoenaed to testify before the Sandusky grand jury. Baldwin did not seek outside counsel's advice.

This could increase our liability, possibly by millions.

-- Current Penn St. trustee
on failure to adopt governance proposals

The Freeh report found that Spanier and Baldwin dealt with the escalating Sandusky crisis throughout 2011 with no outside advice from lawyers with experience dealing with grand jury investigations. Spanier and Baldwin also failed to seek the full advice of the board on how to handle the crisis.

This failure was noted by the Freeh Group, which referred to the administrators' "over-emphasis on 'The Penn State Way.' " As defined by Freeh, "The Penn State Way" is "an approach to decision-making, a resistance to seeking outside perspectives, and an excessive focus on athletics that can, if not recognized, negatively impact the university's reputation as a progressive institution."

Baldwin and Spanier representatives have both said the Freeh report contains many errors, though no specifics have been provided.

Maribeth Schmidt of the alumni group Penn Staters for Responsible Stewardship said the board's inaction and the omission of the failed good-governance proposal in the Freeh report are disturbing.

"This new development certainly raises additional questions about the integrity of the Freeh report and further demonstrates that its objectivity is severely in question," she said in a statement. "The members of Penn Staters for Responsible Stewardship would certainly expect that any misstep by the board -- especially one this significant -- which occurred in the years included in the Freeh investigation would have been documented and reported in its entirety."

The closest Freeh's investigators come to mentioning the board's evolving governance procedures can be found in the fine print, in footnote 557: "See Standing Orders of the Penn State board of trustees, Order IX. This statement on the general policies of the board of trustees was initially set forth and approved by the board on June 11, 1970 and amended from time to time, the most recent being January 19, 1996."

Don Van Natta Jr. is a senior writer for ESPN The Magazine and ESPN.com. He can be reached at don.vannatta@espn.com. Follow him on Twitter @DVNJr.