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http://dealbook.nytimes.com/2014/09/08/wall-street-hand-stays-the-stormy-course-at-n-y-u/
Under the command and control of John Sexton, its president, and Martin
Lipton, its chairman, for more than a decade, New York University has
courted more than its fair share of controversy. So some might have
expected that with the two stepping down over the next two years, new
leadership might mean a fresh and less controversial direction.
But that would be wrong.
The incoming chairman of the board of trustees, whose past activities
have already drawn criticism, appears set to take up the mantle of the
status quo, and he will be leading the search for the next president,
leading many to believe the university will remain mired in the recent
unsavoriness.
And there is much to consider.
Over the last two years, among other forms of protest, there have been
five nonbinding faculty votes of no confidence in Mr. Sexton’s
leadership that he and Mr. Lipton have virtually ignored. There has been
Mr. Sexton’s campaign to expand N.Y.U.’s real estate footprint by two
million square feet in and around its already dense Greenwich Village
environs and six million feet over all by 2031, a plan opposed by some
faculty members and community residents. And there has been Mr. Sexton’s
effort at global hegemony, known as the Global Network University, which
has expanded N.Y.U.’s academic presence overseas to include N.Y.U. Abu
Dhabi — replete with its own controversy — N.Y.U. Shanghai and outposts
in 11 other cities, from Tel Aviv to Accra, Ghana.
N.Y.U.’s aggressive global expansion, also bitterly opposed by some
faculty members, resulted in a July 2013 letter demanding the
resignation of Mr. Lipton, the 83-year-old founder of the powerful Wall
Street law firm Wachtell, Lipton, Rosen & Katz. The faculty could not
understand why Mr. Lipton had been so steadfast in keeping his law firm
small and concentrated but had no problem expanding N.Y.U. around the globe.
“While you honor your own partners’ ‘need to monitor the quality’ in
your domain, you take no interest in the faculty’s assessment of the
toll that your extractive policies are taking on the necessary work that
we, and only we, perform at N.Y.U. — the work that keeps this university
alive,” they wrote.
Mr. Lipton, needless to say, did not resign.
In June 2013, The New York Times reported that N.Y.U. had extended large
loans to Mr. Sexton and other “executives and star professors” to help
them pay for vacation homes in places like East Hampton, Fire Island and
Litchfield County, Conn. Mr. Sexton’s own vacation home in Fire Island
was financed with a loan from the university that “grew to be $1
million,” according to The Times.
When Mr. Sexton retires in 2016, he will receive a “length of service”
bonus of $2.5 million, on top of his annual salary of just more than
$1.5 million. He will also receive an annual retirement benefit of
$800,000. He has also enjoyed the rent-free use of an apartment in
Washington Square. After The Times published its article, N.Y.U. said it
would stop making loans available for vacation homes.
These are just some of the highlights, or lowlights, if you will,
involving the extraordinarily well-paid administrators at the
university, where the annual cost of attendance is among the highest in
the country.
For his part, in a recent video interview with Ariel Kaminer of The
Times, Mr. Sexton defended his tenure at N.Y.U. and proclaimed that he
was “not perfect,” “only human” and preferred to look to the future, not
the past when discussing the institution.
Overseeing all of this seemingly endless controversy is the often
irascible Mr. Lipton and an extraordinarily large board of trustees made
up of some 65 members, many of whom are, in typical fashion these days
at colleges and universities, billionaires. There are hedge fund
managers like Kenneth G. Langone (a big donor for whom the medical
center is named), Michael H. Steinhardt and John A. Paulson; corporate
titans like Laurence D. Fink and Barry Diller; real estate developers
like Larry A. Silverstein, Constance J. Milstein and William C. Rudin;
and the financiers John L. Vogelstein, William T. Comfort and Fred
Wilson. Maria Bartiromo, the Fox Business anchorwoman, is also a
trustee. No faculty members of any stripe are on the board.
Although Mr. Lipton did not follow the advice to resign, he told The
Times in April that, after 60 years of involvement with the university,
he would step down as chairman of the board of trustees in October 2015.
But he is making sure the board’s top spot remains in the hands of the
moneyed set. He is to be succeeded by William R. Berkley, the
billionaire chairman and chief executive of the W.R. Berkley
Corporation, a publicly traded specialty property and casualty insurance
company in Greenwich, Conn., with a market value of $6.2 billion. Mr.
Berkley graduated from N.Y.U. in 1966.
The transition from Mr. Lipton to Mr. Berkley is unusually long, as
these things go, but it will give Mr. Lipton the chance to steer the
appointment of Mr. Sexton’s successor in much the same way he handpicked
Mr. Sexton, a former dean of N.Y.U.’s law school, as the university’s
president in May 2002. (In July, Mr. Lipton named some two dozen people,
including a few N.Y.U. professors, to the search committee, with Mr.
Berkley as the chairman.)
Mark Crispin Miller, a tenured professor of media studies at N.Y.U. and
a longtime critic of Mr. Sexton, calls Mr. Berkley’s appointment as the
new board chairman “a choice as inappropriate for N.Y.U. at this
decisive moment in its history as Lipton’s rule itself has been for many
years.” Mr. Miller has long decried the “stranglehold” that “financial
interests” have on the nation’s colleges and universities, and
especially at N.Y.U.
Mr. Berkley’s critics, including Mr. Miller, cite several concerns about
his appointment: He is also on the board of trustees at the University
of Connecticut and at Georgetown University, where students – just as at
N.Y.U. — have piled on debt to pay for tuition, room and board. He was
the lead director of the First Marblehead Corporation, a large
Boston-based provider of student loans, when the stock plunged, in 2008,
from a high of $56 a share to a low of 60 cents. (After a 10-to-1
reverse stock split, it now trades at about $4.70 a share.)
A subsequent shareholder lawsuit accused Mr. Berkley of knowing and
consciously disregarding “adverse nonpublic” information about First
Marblehead and then, nonetheless, issuing misleading and glowing news
releases about its finances to security analysts and the Securities and
Exchange Commission. The lawsuit also accused Mr. Berkley of being
“reckless and grossly negligent” and of selling nearly $39 million worth
of First Marblehead’s stock at high prices before the stock plunged.
In August 2009, a federal judge dismissed the case with prejudice
against Mr. Berkley and his co-defendants. Nevertheless, a vocal group
of N.Y.U. professors, who have organized themselves into the “N.Y.U.
Faculty Against the Sexton Plan,” remain incredulous that someone who
has benefited from a company that encourages students to load up on debt
to attend college is poised to become chairman of the board at N.Y.U.,
where the collective student debt remains among the highest in the nation.
They also do not like the fact that Mr. Berkley is a staunch defender of
charter schools and is chairman of the board of Achievement First, a
collection of 29 privately financed public charter schools in five
cities, stretching from Brooklyn to New Haven. In their view, many of
the billionaires who support charter schools also tend to be opposed to
teacher unions, which is a small leap to wanting to reduce the number of
tenured professors.
Then there is Mr. Berkley’s involvement with John G. Rowland, formerly
the governor of Connecticut, who pleaded guilty to a charge of
corruption in office and served 10 months in federal prison. In December
2002, according to a publicly filed report by the Connecticut House of
Representatives about the governor’s various transgressions while in
office, Mr. Berkley’s company agreed to pay Patricia Rowland, the
governor’s wife, $15,000 plus expenses of $1,477.19 to give a speech at
a company conference in Key Largo, Fla. Mr. Rowland went along for the
ride in the Berkley private jet and made some brief remarks after his
wife’s speech and answered some questions. (Mr. Rowland’s office later
misrepresented his participation in the conference, making it seem as if
he had been invited to give the speech, not his wife.)
What really has Mr. Berkley’s critics up in arms, though, was his role
as a member of the University of Connecticut board of trustees in a huge
campus construction project that resulted in 5,000 students living in
dormitories that failed to meet fire codes and suffered from other
construction flaws. According to Jonathan Pelton, who was co-chairman of
the commission that investigated the problems at UConn in 2005, fixing
the construction mistakes cost Connecticut taxpayers an additional $100
million.
Mr. Pelton, a UConn graduate who has a daughter at N.Y.U., is aghast
that Mr. Berkley would be the new N.Y.U. board chairman given his track
record at UConn. “You want trustees who are dedicated to the institution
above all else,” he said. “But William Berkley appears to be someone
whose personal and professional interests seem to cloud his judgment and
work as a philanthropist especially as concerns his participation on
boards and commissions.”
A call to Mr. Berkley’s office for comment was returned by John Beckman,
the N.Y.U. spokesman, who praised Mr. Berkley profusely in a subsequent
email.
“Achievement in one’s field, a record of generous philanthropy and a
history of dedication to an institution have historically been the
hallmarks of board chairs throughout higher education, and for good
reason,” Mr. Beckman wrote. “Mr. Berkley is a self-made man who went to
N.Y.U. on scholarship, built a Fortune 500 company from scratch and has
spent 25 years actively supporting education on every level. At N.Y.U.
he has served on multiple boards, helping make Stern a leading business
school and contributing to the university’s advancement. At Georgetown,
he established the Berkley Center for Religion, Peace and World Affairs.
And as the chairman of Achievement First, he oversees an innovative
charter school network that provides an outstanding education to more
than 9,000 students in New York and across the country. That’s why his
fellow board members believe he is exactly the right person to fulfill
the duties of chair at N.Y.U.”
Given the role that big money increasingly plays in the nation’s
colleges and universities these days, it is no surprise that somebody
like Mr. Berkley will succeed Mr. Lipton. It did not happen without a
fight, though. According to people close to the board, Mr. Sexton had
been pushing for Evan R. Chesler, the senior partner at Cravath Swaine &
Moore, a Wachtell Lipton rival. But Mr. Lipton prevailed in persuading
the board to appoint Mr. Berkley instead. Mr. Chesler had made financial
aid to students his chief concern, while Mr. Berkley had made the
expansion of N.Y.U.’s campus his priority.
Paradoxically, Mr. Sexton apparently sided with Mr. Chesler even though
Mr. Sexton remains a proponent of his own plan to expand N.Y.U.’s
campus. “It’s not a crazy idea,” one N.Y.U. professor told me. “He’s
hoping he can go out on a more sympathetic note by saying, ‘Well, I got
this guy made chairman of the board and he will work on getting
financial aid improved.’” But that did not happen.
In a statement sent to me by email, Mr. Sexton denied that he had
preferred Mr. Chesler to Mr. Berkley. “These are internal matters, and
normally I wouldn’t comment on them,” he wrote, “but it is important to
set the record straight: It is incorrect to claim that I expressed favor
for one or another candidate for board chair. I was clear that I thought
this was a board matter, and I did not think it was appropriate for me
to have a position. N.Y.U. is blessed to have great trustees, Bill among
them, and the university has every reason to be confident about its
future with Bill as leader of the board. I will be pleased and proud to
work with him in the years ahead.”
Given Mr. Berkley’s controversial background, and the support he clearly
enjoys from both Mr. Sexton and Mr. Berkley’s fellow billionaires on the
N.Y.U. board, it seems his appointment will not be calming the roiling
waters at the university anytime soon.
---
William D. Cohan is a former senior mergers and acquisitions banker who
has written three books about Wall Street. His latest book is “The Price
of Silence: The Duke Lacrosse Scandal, the Power of the Elite, and the
Corruption of Our Great Universities.”
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