Trustees | Trusteeship

Rich and Powerful Figures Will Set USC Course in Scandal, from Behind Closed Doors

LA TIMES   |  August 7, 2017 by Paul Pringle, Harriet Ryan, Tania Ganguli, Michael Finnegan, and Victoria Kim

How USC handles one of the biggest scandals in its history will be decided behind closed doors by a small group of wealthy and powerful people.

Composed of 57 voting members, USC’s board of trustees includes noted philanthropists, accomplished alumni, Hollywood insiders and industrial tycoons. The group’s influence extends from the floor of Staples Center to metropolises in India and China.

A small executive committee makes many of the significant decisions facing the university. A USC spokesman refused to identify who is on this commitee. Nor would the university disclose what happens at its meetings or release minutes.

It is this elite group that is overseeing the investigation into how the university handled the case of former medical school dean Dr. Carmen A. Puliafito. The Times reported last month that Puliafito, while leading USC’s Keck School of Medicine, partied with a circle of addicts, prostitutes and other criminals who said he used drugs with them, including on campus.

The full board of trustees, which includes director Steven Spielberg, Lakers owner Jeanie Buss and mall magnate Rick J. Caruso, must ultimately determine whether USC President C.L. Max Nikias, himself a voting member, and other top administrators acted appropriately with regard to Puliafito.

Since the scandal broke, the trustees have been largely silent. Times reporters attempted to contact all 57 voting members by phone, email or both. Reporters also sent requests to USC’s press office seeking comment from trustees. Only two commented to The Times. The rest did not reply, or declined to comment. Nikias did not respond to requests for interviews but has released letters to the USC community.

Several trustees told reporters to take their questions to the USC administration.

“They’ve asked us not to speak,” said Lydia Kennard, founder and chief executive of KDG Construction Consulting. “All calls should be referred to the university.”

Caruso, who completed his undergraduate degree at USC, told Times columnist Steve Lopez: “If the allegations are true … I’m very disturbed and condemn the illegal use of drugs, especially by someone who holds the highest level of trust and care.”

In a short statement to The Times, board Chairman John Mork, a Denver oil executive, did not discuss the trustees’ plans for moving forward but expressed support for Nikias and the university provost, Michael Quick.

“As chairman, I am certain they will work quickly and decisively to make all necessary changes and will put in place policies and procedures to prevent something like this from happening again,” the statement read.

Some experts said the limited information about the board and its activities could present challenges for USC as it tries to navigate the scandal. The USC bylaws “give a huge amount of power to the executive committee,” said Michael Poliakoff, president of the American Council of Trustees and Alumni and a former vice president for academic affairs and research at the University of Colorado.

USC’s bylaws state that the executive committee must include seven to 17 trustees, including the board chairman and the university president. The document gives the small assembly almost all decision-making power when the full board is not in session.

“There will be a fair number of board members who are not engaged in serious decision-making,” Poliakoff said. “The problem with empowering the executive committee in that manner is that a great number of trustees … are more or less in the dark. They become decorative backdrop rather than actually filling the fiduciary role. That is not a healthy situation in governance.”

The USC board is larger than most — private university boards are usually around 30 members, and best practices suggest that no more than 15 people oversee a university, Poliakoff said.

Stanford University, by comparison, has 32 voting trustees. The entire 10-campus University of California system has 26


USC declined to comment on the board’s structure or why the body is so large. But universities, especially those trying to fundraise, retain large boards because their trustees are expected to donate — and often the more impressive the trustees, the more likely others are to give to the college, said Michael Useem, a University of Pennsylvania management professor who writes about governance.

Under Nikias’ leadership, USC recently completed a $6-billion fundraising goal, aided by multimillion-dollar gifts by trustees including philanthropist Wallis Annenberg and Suzanne Dworak-Peck, a prominent social worker.

Wealth is a common thread in the trustee roster. About a dozen are billionaires, including developer Ed Roski; Miriam Adelson, an addiction specialist and the wife of casino owner Sheldon Adelson; Salesforce Chief Executive Marc Benioff; and Tamara Hughes Gustavson, the daughter of Public Storage Inc. co-founder B. Wayne Hughes.

Some on the board are USC alums, such as Benioff, construction magnate Ronald Tutor, and David Bohnett, a philanthropist and technology investor.

Over the years, more international figures have joined the ranks, including the head of Korean Air, Yang Ho Cho; Indian industrialist Ratan N. Tata;and Wenxue Wang, a Chinese developer.

The trustees’ public silence is not surprising, nonprofit governance experts said — many boards choose to speak with a unified voice during investigations, especially when information is still coming out.

But the trustees should internally be examining their practices and communications, said Cathleen Kaveny, a Boston College professor who specializes in law, ethics and medical ethics.

“The board can’t let itself off the hook. This is a question of trustee ethics,” Kaveny said. “A healthy board is going to ask itself: ‘Have we participated in the creation of a culture where the most egregious ethical lapses are ignored because the money is coming in?’ ”

Nikias announced last month that the university was hiring a former federal prosecutor, Debra Wong Yang, to lead the outside investigation. USC would not say whether it was the board or Nikias who selected Yang.

In response to questions about who made the choice and who would oversee the investigation, Mork released another statement to The Times on Monday. In it he wrote that the president and top administration officials “regularly engage with the board’s executive committee to provide updates and seek advice on important matters related to the university.”

Nikias noted in his July 21 letter to the USC community that Yang will report “findings and recommendations” to the executive committee.

Yang has close ties to USC and served as the university’s attorney in at least four court cases.

Among the questions Yang is likely to examine: What did top administrators know about Puliafito’s problems while he was leading the medical school?

Current and former university employees told The Times that in 2012 when the university was deciding whether to give Puliafito another term, they complained repeatedly about what they considered Puliafito’s hair-trigger temper, public humiliation of colleagues and perceived drinking problem, and many were adamant he be removed.

Still, Nikias opted to reappoint Puliafito, giving him a new five-year term with an annual salary of more than $1 million.

In March 2016, the then-dean was with a 21-year-old woman in a Pasadena hotel room when she overdosed.

A witness to the overdose phoned Nikias’ office 10 days later and threatened to go to the media if the school didn’t take action against the dean. In a letter to the campus community released July 28 — 11 days after The Times broke the story — Nikias said that two receptionists who spoke to the witness did not find the report credible and did not pass it on to supervisors.

A week and a half after the witness called Nikias’ office, Puliafito resigned. The Harvard-trained ophthalmologist was allowed to continue seeing patients at USC clinics, represent the university at official functions and remain on the faculty.

Governance and ethics experts said Nikias’ role on the board deserves scrutiny.

Kirk Hanson, the executive director of the Markkula Center for Applied Ethics at Santa Clara University, said it is not uncommon for a president to serve as a voting member of a board. But if assessing his actions is part of the investigation, Hanson said, Nikias should recuse himself.

“It would be best practice to have the board supervise the investigation and discuss findings without him present,” Hanson said.

A USC spokesman declined to say whether Nikias would recuse himself or whether the results of the investigation would be made public.

Poliakoff said USC might help itself by being transparent in the process.

“Secrecy is something that needs to have a compelling justification,” Poliakoff said. “And when an institution has been in such a reputational crisis as USC is currently experiencing, sunshine is indeed … the best disinfectant.”

Asked about dean controversy, USC trustees are mostly silent The Times contacted the 57 voting trustees of the University of Southern California for reaction to the controversy surrounding former medical school dean Dr. Carmen A. Puliafito. Only two trustees commented. USC President C. L. Max Nikias has released statements to the campus community.

Launched in 1995, we are the only organization that works with alumni, donors, trustees, and education leaders across the United States to support liberal arts education, uphold high academic standards, safeguard the free exchange of ideas on campus, and ensure that the next generation receives an intellectually rich, high-quality college education at an affordable price.

Discover More