Showing posts with label Judith Huntington. Show all posts
Showing posts with label Judith Huntington. Show all posts

Monday, February 25, 2019

Dying with Dignity: College of New Rochelle will probably close

Over the course of my life,  I have witnessed the death of several friends and relatives; and some of them did not die a good death.

My father expired miserably in a VA hospital because his government doctors did not diagnose his treatable cancer in time to save his life. He had survived the Bataan Death March and three years in a Japanese concentration camp during World War II, but that sacrifice did not entitle him to decent medical care in his final years.

I witnessed the death of a relative who died in a ramshackle house he inherited from his mother--a house that smelled of urine and dirt. I was the only person with him when he closed his eyes for the last time.

America's small liberal arts colleges are dying too--brought down by a host of maladies for which there is no cure. And like too many people, many of these colleges are closing their doors without dignity--a fate I don't think they deserve.

William Latimer, president of the College of New Rochelle, sent a memo to the campus community last week, announcing that the college will probably close this summer.  The college was doomed two years ago when campus officials revealed that the college had a huge tax liability because it had failed to pay federal payroll taxes--a $20 million tax bill. Judith Huntington, New Rochelle's president at the time, resigned; and a senior financial officer precipitously retired.

Soon after that revelation, the college received an anonymous $5 million gift, which might have been a payout from the college auditor's malpractice insurance (just a guess), but the infusion was not enough to restore the College of New Rochelle to financial health.

That was two years ago. The college tried to lay off some faculty members to stem the flow of red ink, but the professors sued; and a judge ruled that the college had fired the professors in violation of the faculty handbook. But of course, the professors won a Pyrrhic victory. A college with no money can't pay its faculty, no matter what the faculty handbook says.

New Rochelle's fate is somewhat similar to the fate of Mount Ida College, a tiny little institution located in a Boston suburb. Mount Ida sold out to the University of Massachusetts amid accusations that it had misled professors and students about its imminent demise.  Maura Healy, the Massachusetts Attorney General, expressing the self-righteous indignation so typical of New England bureaucrats, launched an investigation. But to what purpose? Mount Ida still closed.

Other small colleges are cutting academic programs in an effort to stay alive--particularly programs in the liberal arts.  McDaniel College announced a few days ago that it is eliminating five majors and three minors--all in the liberal arts. Students responded as they always do to bad news--by lecturing their elders.

"As students at a liberal arts college," McDaniel  students said in a priggish statement,  "we believe firmly in the first principles of this institution, which advocate for the importance of a liberal arts education."

In ringing tones of high-mindedness, the students sermonized about the importance of the liberal arts. "As you all know, having the opportunity to take courses across many disciplines creates students who are flexible, knowledgeable and able to think critically in the face of all that the world has to throw our way." Music and German, two programs that were cut, "are both living, breathing, culturally relevant languages," the students pointed out. As for other programs being jettisoned,they too are "integral to the creation of well-informed citizens and academics."

Blah, blah, blah. The students who penned that blather ought to take some responsibility for the decisions they made to enroll at McDaniel--just another wobbly and obscure liberal arts college. And what do they think a McDaniel degree in German is worth on the job market? Not enough to pay off their student loans, I wager.

Students can express their rage about programs being slashed and colleges closing. Attorney generals can launch investigations. And professors can sue to try to save their jobs. But the colleges that are closing or downsizing are not generating enough revenue to keep their doors open. That is the stark reality.

Let's let these little institutions die with dignity--because they are dying anyway.

College of New Rochelle (photo credit Inside Higher Ed)


Sunday, July 2, 2017

College of New Rochelle failed to pay federal payroll taxes for about two years: Will anyone be held accountable?

College of New Rochelle, a Catholic college located in Westchester County, New York, announced last fall that it had failed to pay federal payroll taxes for about two years and that it owed approximately $20 million in unpaid taxes. A close examination of the college's financial picture also revealed that the college owed an additional $11.2 million to other creditors.

Paying federal payroll taxes is required by federal law; and failure to do so can lead to big trouble. The Internal Revenue Service can impose fines and even jail time for wilful failure to pay those taxes.

The college released a statement in November suggesting that the college's former controller, Keith Borge, was responsible for the error. Borge retired as controller of the college in May 2016. Without identifying Borge by name, college leaders said that the financial irregularity came to light only after the controller retired at the end of the 2015-2016 academic year.

Apparently, the college's auditor did not discover this mammoth financial problem for some time, which is curious. The College of New Rochelle's auditing firm was KPMG, a highly reputable global auditing firm with an reputation for competence and integrity.

CNR's president, Judith Huntington, stepped down shortly after the college announced its financial crisis. Huntington said she relied on the controller to manage the college's financial affairs, which is reasonable. But Huntington is herself a CPA and was employed for 15 years at KPMG as a senior audit manager. She's also the director of a major bank. According to Bloomberg, Huntington served as a bank director at Signature Bank during the same time she was president of CNR. Apparently being a college president is only a part-time job.

At least one more senior administrator departed CNR after the financial scandal broke. Betty Roberts, Vice President of Finance, terminated her employment at the college sometime in late 2016. According to a news story, Roberts came to CNR after serving in a similar position at Alcorn State University, a Mississippi HBCU that was under investigation by the Mississippi state auditor's office.

Will anyone be sued over this massive scandal? I doubt it. Little can be gained by suing individuals, who do not likely have the resources to pay any judgment that might result. And anyone who gets sued for the big screw up at the College of New Rochelle will likely implicate others.

How about KPMG? Can KPMG be sued for failing to pick up CNR's massive tax liability more quickly?

Perhaps, but Huntington and KPMG undoubtedly have close ties stemming from her 15 years as a senior audit manager for the firm.  And there may be lots of good reasons why the college might demur from suing a very powerful  global firm.

So let's just rack this incident up as an unfortunate episode in the institutional life of the College of New Rochelle. "Least said, soonest mended," as the old saying goes.

But then there is the matter of a mysterious $5 million donation to CNR, which was made anonymously after the scandal broke. This quick cash will buy CNR some time to get its financial house back in order. What party would make a $5 million anonymous gift to a college that may not survive this huge financial crisis?

Perhaps the money is not completely a  gift. Perhaps the donation was an exchange by some interested party for a covenant not to sue. We will never know.

We can take comfort, however, in a pledge made by KPMG, which was neck deep in CNR's travails, that appears on its web site:
At KPMG, our promise of professionalism to each other, our clients and the capital markets we serve compels us to align our culture of integrity with our values, words and actions.
This is the same KPMG that was auditor for Wells Fargo when the bank created two million bogus accounts. Robert Earl Keen is right: "The road goes on forever and the party never ends."

Judith Huntington, former president of College of New Rochelle
(photo credit: College of New Rochelle)

References

Judith Huntington. Executive Profile. Bloomberg.com (last visited July 2, 2017).


Associated Press. Alcorn State President Christopher Brown Resigns Amid Investigation. Gulflive.com, December 19, 2013.

Sarah N. Lynch. Lawmakers question quality of KPMG's Wells Fargo audits. Reuters, April 25, 2017.

Vani Murthy. The consequences of wilful failure to pay payroll taxes. Journal of Accountancy, June 1, 2014.

Jonathan Ortiz. College of New Rochelle Financial Probe Finds Millions in Unpaid Taxes. Westchester, Magazine, November 2, 2016.

Colleen Wilson. $5 million boost for struggling College of New Rochelle. USA Today, December 16, 2016.

Colleen Wilson and Mark Lungariello. Another finance official out at College of New Rochelle. Lohud.com, November 22, 2016.













The consequences of willful failure to pay payroll taxes

The penalties for failing to pay over trust fund taxes can be severe and sometimes include prison time.
BY VANI MURTHY,

The consequences of willful failure to pay payroll taxes

The penalties for failing to pay over trust fund taxes can be severe and sometimes include prison time.
BY VANI MURTHY,