No Penalty Planned in UCLA Case : Professor Allegedly Misused $500,000

A UCLA professor misused more than half a million dollars in public funds but, under state administrative policy, he will remain anonymous, retain his tenured post and suffer no disciplinary penalty, a legislative investigation has disclosed.

In his semi-annual report of investigations to the Legislature, Auditor General Thomas W. Hayes said the state “recovered over $500,000” after investigating allegations “that a professor used state resources to support his private commercial activities.”

Because the matter did not involve criminal proceedings, Hayes refused to identify the professor. “We have just decided not to put names in there (the report),” he said. “We’ll include names (if) it becomes a criminal matter.”

The auditor general’s top investigator, Harold L. Turner, said the case could have been turned over to prosecutors but that office policy defers such decisions to the department or agency being investigated--in this case, the University of California.

UCLA officials also refused to identify the professor and said an internal audit had found “no intentional misuse of university resources.”

“The university considers the investigation completed and the issue resolved,” said Rich Elbaum, a university spokesman.

Officials at the Los Angeles County district attorney’s office said they had not been informed of the matter and had not seen the auditor general’s report, but they did not rule out the possibility of a criminal investigation.

The investigation of the professor’s activities, identified only by file No. I-5003, was one of 19 conducted by the auditor general for the Legislature into allegations of improper activity by state employees.

State law requires that the audits be kept confidential unless the Joint Legislative Audit Committee deems disclosure “necessary to serve the interests of the state.” Because state and UCLA officials withheld the names of those involved in the investigation, The Times was unable to obtain comment from the professor or his supervisors.

According to the report, the root of the problem occurred 20 years ago, when the professor used university funds and facilities to develop “a new procedure that revolutionized the methods used in his field of research.” The procedure requires the use of rare and expensive materials, so “the professor devised a cost-effective method of applying the procedure.”

At first, the discovery was “used exclusively in research,” but when later clinical applications were developed, the federal Food and Drug Administration granted two licenses for the procedure, to UCLA and to the National Institutes of Health. “The university used the proceeds generated from the activity to support research directed by the professor,” the report continues.

In 1984, two years after the FDA deregulated the activity, UCLA discontinued the procedure “and divested its interests in favor of a private corporation. The professor was the president and principal stockholder of the corporation,” the report states.

The investigation found that this corporation, with the apparent approval of the professor’s supervisors, used university furnishings and equipment free of charge and that 10 UCLA employees worked for the corporation while remaining on the university payroll.

The report also said the university agreed to sell materials directly to the professor’s corporation, without competitive bids, and “failed to bill the corporation promptly for the purchases.”

$13,187 to UCLA

After the investigation by the auditor general and UCLA’s internal audit department, the professor’s corporation paid $13,187 to the university as compensation for his employees who had remained on the university payroll.

The professor’s business enterprises also paid UCLA $500,000 in exchange for all “rights, title and interest in the procedure developed by the professor,” the report states. UCLA also waived its rights “to any past or future income that the professor or his commercial entities earned or will earn from using the procedure” and “agreed not to compete with the professor’s commercial activities for a period of one year.”

A university committee was also established to oversee the professor’s research activities.

Neither state nor UCLA officials would identify the corporations or individuals involved or the name or membership of the supervisory committee.

The auditor general’s office noted that the investigation of the professor was a more complicated matter than it usually deals with.

“This UCLA one is a pretty big violation, I would say,” Hayes said.

“It was bigger than something we usually get involved in,” Turner said.

The largest amount recovered by the auditor general from any of the investigations he completed in the first half of this year, other than the UCLA case, was $2,450.99 from a state employee who reportedly directed his subordinates to work on his private car on state time.

Although that employee was suspended for 60 days, and other employees who conducted personal business on state time received reprimands, demotions, salary reductions and, in one instance, dismissal, the report did not indicate any disciplinary action against the professor.

“My impression is the reason the university took no action against the professor is because higher-level officials within the university had knowledge of the activity and basically were ignoring it,” Turner said. “He skated by partly because of that.”

Turner said that no “higher level officials” at UCLA were investigated by the auditor general or disciplined by the university. “The responsibility for corrective action rests with the university. We left it up to them to make judgment as to who should be chastised.”

UCLA apparently has taken no action against any employee. In the statement prepared after a Times inquiry, Elbaum said, “The audit found no evidence of intentional misuse of university resources” although “procedural errors relating to lease agreements, equipment repair and use of staff resources were found.”

Elbaum said, “We choose not to release the names because there is no affirmative obligation to release the information, and we don’t want to do anything that is inconsistent with the auditor general.” Elbaum referred to a statute that prevents the auditor general and members of the legislative audit committee from releasing information without a vote of that committee.

The committee’s chairman, Assemblyman Art Agnos (D-San Francisco), said UCLA officials are not bound by the rules affecting auditor general investigations.

“They have no legal right to do that (withhold the information),” Agnos said.

In contrast to the UCLA case, an auditor general’s investigation last year of financial irregularities at UC Santa Barbara led to the resignation of that campus’ chancellor, Robert A. Huttenback, and to a tightening of fiscal controls within the university.

The names of those investigated in the Santa Barbara case were available to the public, and the audit was followed by criminal charges against Huttenback and his wife, Freda, who are awaiting trial, and several other university employees.

The auditor general reported in April that the irregularities at UC Santa Barbara involved a total of about $800,000.

Conflicts of Interest

This is not the first time that the UCLA faculty has been investigated for conflicts of interest between their academic responsibilities and outside business ties. In 1983, a six-month investigation by the Fair Political Practices Commission found that 210 researchers in the UC system, including 33 at UCLA, had ties to outside businesses.

Unlike those at other UC campuses, however, administrators at UCLA initially refused to provide the commission with documentation of those ties. The officials changed their minds and released the information after the commission threatened to redraft its regulations, allowing it to seize the documents.

In the present UCLA case, Turner said investigators were tipped to the professor’s activities by an anonymous colleague. “The individual contacted us because he or she didn’t feel that anybody was doing anything about what seemed to be a blatant misuse of authority,” Turner said.