KAHULUI » Stan Sheriff Center manager Rich Sheriff allowed ticket sales for a Stevie Wonder concert to begin even though he knew that the promoter he was working with had not obtained liability and cancellation insurance policies for the show, a report commissioned by the University of Hawaii Board of Regents found.
Auditors preparing the report couldn’t determine who authorized ticket sales to begin.
The UH ticket office manager who was not identified by name told auditors that Sheriff verbally approved printing and sale of the tickets. But Sheriff, charged with negotiating and managing the contract to put on the concert, denied approving the sale and said the authorizations "must have come from higher-ups."
The report is the result of a regents’ task group that examined what turned out to be a concert scam, in an attempt to figure out what went wrong and make recommendations on how to prevent similar occurrences.
The group determined that then-athletic director Jim Donovan, associate athletic director Carl Clapp, assistant athletic director for business Tiffany Kuraoka, in addition to Sheriff, acted with good intentions but ultimately used poor judgment that resulted in the university losing $200,000.
"There were a series of miscues that took place that resulted in the loss to the university," said task group chairman Larry Rodriguez, a business consultant.
He also noted that the $200,000 was held in an account for the promoter, Bob Peyton, and technically Peyton lost the money.
But UH "took the positive and responsible step to make sure that those who bought tickets were reimbursed their money," said Rodriguez.
By doing so, UH assumed the loss, Rodriguez said.
Peyton has declared bankruptcy.
The report from the accounting firm KMH LLP and a group of business leaders was made public Thursday at the regents meeting at the UH-Maui College campus in Kahului.
The report identifies several points in the process where red flags should have been raised about the contract, ticket sales and the wiring of the money to a Florida bank account.
Two men are facing wire fraud charges for allegedly swindling UH out of the money, taking the proceeds deposited in the Florida bank account and using them for personal expenses.
The report said the athletic department failed to do due diligence on promoter Peyton and failed to adequately investigate and evaluate his company, BPE, and its ability to put on the concert before signing a contract. The report also noted there are no policies in place to require due diligence for use of the Stan Sheriff Center.
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 a liability and cancellation insurance policy was in place, as required by the contract with Peyton, before ticket sales began and the $200,000 was wired to the Florida account. The contract also did not include a deposit for use of the center, which university policies require.
KMH LLP said the total loss to the university was $211,970 because of the additional cost to print and sell tickets. The additional cost includes $10,962 in ticket processing fees.
Rodriguez said the group recommends the university develop policies and clear authority for the use of the center and for printing, sale and distribution of tickets for non-university events.
Rodriguez told the regents’ audit committee that existing policies give the authority to sign a contract for the use of the center to the Manoa chancellor. But instead Donovan assumed responsibility and signed the contract.
Donovan delegated the authority to negotiate the contract to Sheriff and the financial approval authority to Clapp and Kuraoka.
"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, chairman of the regents’ audit committee. "I think they had a duty to follow the terms of the contract (and make 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 disbursing department to wire funds, although it was unusual for the athletic department to do so.
Payments to an escrow account are unusual for the university, however. The report said Sheriff and Kuraoka "should have, at a minimum, raised questions on special handling and processing."
The report notes that the university does not have policies or guidelines for payments to escrow accounts and should develop them.
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.
