Friday, Aug. 20, 2004 | 11:02 a.m.
UNLV's former chief financial officer filed a lawsuit against the state's higher education system Wednesday, alleging that university President Carol Harter fired him after he refused to remain silent about proposed financial wrongdoing.
Anthony Flores, the vice president of finance for the University of Nevada, Las Vegas, until March, claims in the lawsuit that Harter asked him to find a way to improperly divert federal grant money through the UNLV Research Foundation instead of through the university itself.
By doing so, Flores said, Harter was trying to hide grant money that is supposed to revert to the state general fund. Most federal grants include money for the indirect costs of facilities and administration, and 25 percent of that money is supposed to go back to the state to pay for its share of those costs.
The lawsuit and ongoing personnel issues prohibit UNLV officials from saying why Flores was originally demoted, Harter said, but she did say that his charge that he was fired for telling her no was "nonsense."
In his lawsuit and in several e-mails and memos his attorney provided to back up the claim, Flores paints a picture of a president intent to find a way to keep research dollars from going back to the state in what university officials dubbed a "tithe" or "tax." Flores alleges that he was first demoted and then later fired because he repeatedly told Harter her plan didn't work.
"Carol Harter tried to push out Tony Flores and push him into a confidentiality agreement," Adam Levine, Flores' lawyer, said. "She essentially told him that if he breathed one word about the UNLV Research Foundation to (Regent and audit committee chairman) Doug Hill or anyone else he would be fired."
But in interviews with Harter and other university officials familiar with the e-mails about the research money and the UNLV Research Foundation, a somewhat different picture emerges.
Harter readily admitted that she has had several conversations over the last two years with her senior management team about ways to avoid the payment to the state by using the Research Foundation, but she said these were only "creative conversations" to find ways to promote more research at the university and promote economic development in the state.
"That's my job -- to try to find ways to bring money to the university and to try to bring research dollars," Harter said. "But absolutely no action, however, was taken to hide any money."
Harter and several of the other institutions have never concealed the fact that they dislike giving the state back 25 percent of their research dollars, and have repeatedly asked the state Legislature to let them keep the money to put toward even more research, said Mark Stevens, Assembly fiscal analyst for the state Legislative Counsel Bureau.
The provision is not mandated in state statute, but is provided for each biennium as part of the budget process, Stevens said. The money offsets the state's contribution to the public institutions of higher education.
"We would like to keep that 25 percent, but it's hardly to line anybody's pockets but keep it for the university," Harter said.
Harter said the e-mails show"a conversation about how to enhance the research dollars of a university."
"It has nothing to do with the personal gain of anyone involved in the conversation .. and somehow it is being made to appear that way," Harter said.
She said when her senior staff, at that time including Flores, told her the plan was not feasible, she accepted that.
To date, the Research Foundation has never received any grant money for indirect costs and does not even have a mechanism set up to accept indirect costs, Harter, UNLV Provost Ray Alden and Paul Ferguson, vice president of research and graduate studies, said.
All current grants being used by the Research Foundation provide money for direct costs only, and go through the foundation to promote the commercial use of UNLV's research -- not because anyone is trying to circumvent regent policies or state regulations, the university officials said.
"This is one person's perspective that is almost 180 degrees from what the true situation was," Alden said, calling the lawsuit "completely unfounded."
The University and Community College System of Nevada is taking the allegations seriously by investigating the accusations and auditing the UNLV Research Foundation, Interim Chancellor Jim Rogers said.
"Believe me, it is being thoroughly investigated," Rogers said, adding that there have been no findings of wrongdoing as yet.
Internal auditor Sandi Cardinal said the report may not be completed until December. She said she could not comment on any of the findings thus far.
Rogers said he first learned of the allegations in late June after system attorneys asked him how they should handle a letter from Levine dated May 4.
In the letter, obtained by the Las Vegas Sun, Levine tells system attorney Walter Ayers that Flores would keep his accusations confidential if the university system agreed to buy out the remaining portion of his contract. Flores had already been demoted from vice president of finance to chief financial officer of the office of research and graduate studies, Levine said.
"If the university will agree to do so (buy out his contract), Mr. Flores will enter into a non-disclosure covenant which would encompass the subject of indirect cost recoveries and/or the utilization of foundations such as the UNLV Research Foundation to circumvent state and regent policies in order to avoid sharing such recoveries with the state of Nevada," Levine writes in the letter.
Rogers said he immediately called Clark County District Attorney David Roger and forwarded the letter for investigation.
"We reviewed the contents of the letter, and although the message was ill-advised, we don't feel that it rose to the level of criminal extortion," Roger said.
The district attorney's office did not press charges but sent Levine a letter warning him that he was "very close to crossing the line" of committing extortion, Roger said.
That letter, which was obtained by the Sun, tells Levine that if he and his client "have information that would lead you to believe that a crime has been committed by any of the parties referred to in your letter, you would be well advised to contact the Nevada attorney general's office rather than pursuing the course set forth in the letter."
But Levine said he and his client were only responding to requests of Harter and university attorneys to keep the information confidential, and that prior to sending the letter to the district attorney's office at the end of June, Ayers had been in negotiations with him to buy out Flores' contract. Ayers had even given him a proposed settlement agreement that contained a confidentiality clause, Levine said.
Levine said the university trumped up the extortion charges against Flores in order to terminate him only after he sent documentation proving his claims to Regent Doug Hill, chairman of the audit committee, and the Legislative Counsel Bureau. Levine said it was further retaliation against his client for refusing to be a part of a plan to allegedly divert federal grant dollars to the Research Foundation.
In the lawsuit, Flores says he has forwarded his allegations to the Nevada attorney general's office and the Legislative Counsel Bureau. The attorney general's office would not confirm or deny the existence of any investigation, spokesman Tom Sargent said, and Lorne Malkiewich, director of the Legislative Counsel Bureau, said he was unable to confirm the bureau had received the information.
University officials said they created the UNLV Research Foundation two years ago to help the university pursue commercial use of some of the research professors were already doing, as well as help with patents and the development of projects such as the Harry Reid UNLV Research and Technology Park and the Nevada Test Site Development Corporation. The nonprofit acts independently of UNLV, but is still subject to university and Board of Regent oversight.
"This Research Foundation has such a possibility to be a great engine for economic development in the community and economic diversification," Harter said.