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Regents probe concludes poor judgment to blame in debacle

By Craig Gima

LAST UPDATED: 2:20 p.m. HST, Nov 15, 2012

KAHULUI >> A University of Hawaii Board of Regents task group that examined the Stevie Wonder concert debacle determined that then-Athletic Director Jim Donovan, Associate Athletic Director Carl Clapp, Stan Sheriff Center manager Rich Sheriff and Assistant Athletic Director for Business Tiffany Kuraoka acted with good intentions, but ultimately used poor judgment that resulted in the university's loss of $200,000 in a scam.

The report also said it is not clear who authorized the athletic department to begin selling tickets to the concert before liability and cancelation insurance had been obtained.

The report from the accounting firm of KMH LLP and a group of business leaders was released today at the regents meeting at the UH-Maui College campus in Kahului. The report said the authority to approve the concert should have come from then-UH Manoa Chancellor Virginia Hinshaw, but was instead assumed by Donovan.

The task group also said that Sheriff, Clapp and Kuraoka should have made sure liability and  cancellation insurance policy was in place, as required by the contract with promoter Bob Peyton, before ticket sales began and the $200,000 was wired to a Florida bank account. The contract also did not include a deposit for the use of the center, which is required by university policies.

FBI investigators said the university was told it was an escrow account, but two men arrested for allegedly scamming the university withdrew the funds and spent it on personal expenses.

Sheriff knew the insurance hadn't been obtained but did not stop the ticket sales, the report said.

KMH LLP said the total loss to the university was $211,970 because of the additional cost to print and sell tickets.

The auditors couldn't determine who authorized the printing and sale of the tickets before insurance was in place. The ticket office manager indicated Sheriff verbally authorized the sales to begin. But Sheriff denied approving the sale, saying the authorizations "must have come from higher ups."

Larry Rodriguez, a business consultant and the chairman of the task group, said the group recommends the university develop policies and clear authority for the use of the Stan Sheriff Center and for the printing, sale and distribution of tickets for non-university events.

Rodriguez told the regents' audit committee this morning that existing policies give the authority to sign a contract for the use of the center to the UH Manoa Chancellor. But that Donovan assumed responsibility and signed the contract instead.

Donovan delegated the authority to negotiate the contract to Sheriff and the financial approval authority to Clapp and Kuraoka.

They should have made sure liability and cancellation insurance policies were in place before funds were wired and the contract should have included a deposit for the use of the center as required by university policies, Rodriguez said.

The report also notes that the Athletic Department did not adequately investigate promoter Bob Peyton and his  company BPE before signing the contract to put on the concert. If they had done so, it would have raised several "red flags," the repair said.

"It (the report) shows that the athletic director wanted to do something good, but ultimately they should have sought the opinion of the chancellor, they should have consulted with the upper campus," said James Lee, the chairman of the regents' audit committee. "I think they had a duty to follow the terms of the contract (and made sure the cancellation insurance was in place)."

The task group also determined that the wire payment of the $200,000 was approved according to policies before it was sent out. They noted that it is not unusual for the university dispersing department to wire funds, although it was unusual for the athletic department to do so. Rodriguez said that UH Chief Financial Officer Howard Todo has already started tightening fiscal controls at the university.

"We did not find a pervasive lack of controls in the athletic department, but we did see multiple situations where policies and procedures weren't followed or there weren't polices or procedures," Rodriguez said.

The regents paid KMH LLP $50,000 for its services in preparing the report. 

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