Head of Stanford Apologizes for ‘Embarrassing’ Overbilling

The president of Stanford University publicly apologized Saturday for the “highly embarrassing” recent charges that the prestigious institution has overbilled the federal government for millions of dollars in costs it claimed were linked to research.

At the same time, Donald Kennedy said that no university officials were guilty of criminal wrongdoing, as a government oversight committee has suggested.

Kennedy, in his first public statements about the controversy since a congressional hearing on the matter two weeks ago, offered the apology during a keynote address to Stanford alumni at the Century Plaza.

“I owe you an expression of deep regret and apology that we have not met our historical standards in this affair,” he told members of the Stanford Alumni Assn. and Stanford Club of Los Angeles County.

“I take full responsibility for the management of the institution, and I am sorry it has let you down.”

The federal government reimburses colleges and universities for many overhead costs related to government-sponsored research. After a federal official overseeing the Stanford program told officials in Washington that the school had overcharged the government by millions of dollars for research overhead, investigators from several agencies and a congressional subcommittee began their inquiries.

Those investigators now allege that Stanford may have overcharged the government by more than $160 million during the last decade.

Among the costs that have been questioned by investigators are $184,000 for depreciation of the Stanford Sailing Assn. yacht and $185,000 for administrative costs associated with a profitable shopping center owned by Stanford. In addition, auditors are scrutinizing bills for wine, expensive furnishings, flower arrangements and a $4,000 wedding reception at Hoover House, the president’s official residence. Stanford has agreed to withdraw some of these claims.

Kennedy, who has been Stanford’s president for 10 years, explained that “infirmities” in the institution’s accounting practices have led to the problems. He acknowledged that university officials showed “poor judgment” in allowing any Hoover House expenses to be charged to the government.

The university billed the federal government for many of the expenses “merely because it was lawful to do so,” Kennedy said. “We pursued what was permissible under the rules, without applying our more customary standard of what is proper.”

Kennedy said that the costs of several items have been inaccurately reported, such as a pair of lead urns that investigators said cost $12,000 but which actually cost $1,200. The urns, according to Kennedy, were returned to the store two weeks after their purchase.

He also said that school officials have found no evidence of another expense cited by the auditors--$7,000 in bedsheets for the president. Kennedy suggested that the auditors may have been referring to a $6,500 bill for table linens used in university functions held at Hoover House.

Last year, Stanford was reimbursed more than $84 million for so-called indirect research costs, which Kennedy said amounted to 28% of the school’s operating budget. Stanford has the third-highest reimbursement rate of research institutions nationally, after Harvard Medical School and Columbia University.

Since the controversy, Stanford has withdrawn about $690,000 in charges and hired a major accounting firm to review financial and management practices.