City College entities battle over fiscal oversight in the wake of a money laundering scandal
By Anna Widdowson
The Foundation of City College of San Francisco is seeking to shield its financial dealings from public scrutiny under a new agreement that could limit the college district's oversight of fundraising done in its name.
The agreement establishes the formal relationship between the foundation and the district, renewing a document that expired last June. But it became controversial when the district sought to make the foundation into an auxiliary organization, which would allow greater oversight by the district and the public, while the foundation sought greater autonomy and secrecy surrounding its fundraising operations.
The two sides have been in strained negotiations for months, but the freshly inked compromise agreement will likely be on the Feb. 25 Board of Trustees' agenda as a discussion item so that public testimony can be taken and changes can be made before it's formally considered for approval.
The backdrop of the dispute — and the reason it's so contentious — is last year's criminal indictment of former City College Chancellor Philip Day for a money-laundering scheme using foundation accounts. Last July, Day was charged with eight felonies for misappropriating more than $150,000 in college funds, including using the foundation to funnel public money into a political campaign and maintaining an unregulated slush fund. The trial is set to begin later this year.
But the foundation, which controls more than $19 million in scholarships and other assets for the district, says that corruption is precisely why it wants to back away from the college, which managed the foundation's finances under the previous agreement that expired last June.
Peter Bagatelos, the foundation's lawyer, said Day's missteps have cast a shadow on the foundation that has impeded its ability to fundraise. He explained that many donors mistook the district's actions for those of the foundation and were scared away from donating, which is why the foundation is seeking to be an independent body.
Yet a Guardian investigation ("On shaky ground," 3/5/08) unearthed documents showing that the foundation helped Day launder $35,000 in public funds into a 2006 political campaign, although an internal audit couldn't find evidence that foundation directors approved the transfer and, as Bagetelos told us at the time, "It was never done with their consent or knowledge or participation."
Now the foundation is asserting that it cannot fundraise successfully if it is turned into an auxiliary organization, as some trustees are seeking, which would subject the foundation to public records, open meetings, and other sunshine laws that Bagatelos derided as "a lot of bureaucracy and entanglements."
"They just want to go out and raise money to help the students," Bagatelos said. As for why transparency hinders that cause, he said: "There are many donors who don't want to be made public."
"The foundation is not a public agency, it's a private corporation," he noted.
A rough draft of the agreement, which is still under review, lays out the steps the foundation will take to gain greater autonomy, including hiring and paying its own employees, and adopting a structure comparable to other nonprofit entities to make it more attractive to prospective donors.
But some college trustees, including President Milton Marks and Vice President John Rizzo, believe they should be given greater oversight over the foundation's finances. "The district [and the foundation are] equally tarnished by the activity because they enabled [Day]," Rizzo said. "I just want to get enough sunshine in there that goes beyond what they have to report by law, so if a future chancellor does something like that, we'll know about it."