Man’s letters warned about lack of ‘proper auditing controls’
A former broker who worked with University of North Texas employees alerted multiple UNT officials to problems with financial controls in 2009, five years before financial issues at the university were addressed.
The Denton Record-Chronicle has obtained letters that Phillip Young, a financial planner, sent to UNT administrators and regents in March and August of 2009. His letters warned them of potential problems with some employee retirement plans and overall financial controls.
Kelley Reese, a UNT spokeswoman, said the university is familiar with Young and his criticisms.
“Over the years, administrators at UNT and the UNT System have heard from Mr. Young on many varying issues, and have always asked for specific details so that we could respond appropriately and as necessary,” Reese said in a statement.
UNT System Chancellor Lee Jackson responded to Young’s letters in 2009 and seemingly dismissed the concerns.
Previously, as far back as 1992, the university’s human resources department had authorized Young to help faculty members set up Texas Optional Retirement Program plans. He was a securities broker at the time and helped UNT employees establish and maintain retirement plans. His work there ended in 2006.
Young told the Record-Chronicle that he had no oversight from the finance department.
Now, the retirement plans he helped establish and later questioned are part of an ongoing investigation by the State Auditor’s Office looking at financial irregularities at the university.
UNT officials have hired consulting firm Deloitte & Touche to help provide documentation for the state auditor’s investigation. Auditors will attempt to determine how much state money the university received for employee benefits such as the retirement plans — and how much it should not have received.
The Deloitte & Touche audit, completed in May, found that UNT took $83.5 million in state funds it was not entitled to since 2004. Of that, $9.8 million was overdrawn from state-funded optional retirement plans that Young questioned in 2009.
Young has not been directly involved with the retirement plans since 2006. That year, the Financial Industry Regulatory Authority fined him and suspended his membership in the regulatory group for borrowing money from public customers, according to public records. His firm subsequently fired him, records show.
Young said he fought back and forth over technicalities. He admitted mistakes but said he does not believe they invalidate his insights about UNT finances.
Before those professional setbacks, Young helped faculty and staff establish retirement accounts with Texas Retirement Trust, a private company. That required them to contribute a portion of their salaries to a trust. UNT and the state matched their contributions.
After more than 10 years of activity, the Texas State Securities Board realized Texas Retirement Trust wasn’t properly licensed. Neither Young nor UNT had known of the problem, according to Young. Soon after, he was sanctioned.
“No client lost any money, and it was not a ‘Ponzi’ scheme,” Young wrote in a letter dated Aug. 25, 2009. “I did no harm, and UNT did no harm; but, since UNT did not have the proper auditing controls in place, we could have been running a ‘Ponzi’ scheme with the trust, and the university would have been none the wiser for it.”
Board of Regents Chairman Brint Ryan acknowledged that he met with Young last week about the letters, but he declined to comment on whether he believes Young’s claims were legitimate then or relevant today.
Basically, Young’s letters said the retirement plans had potential for mismanagement, that financial leadership was incompetent and that the university did not have appropriate financial controls in place in 2009. Young said the letters show that he warned administrators about financial problems years before they began taking remedial action in March.
Young addressed his first letter to Gayle Strange, then chairwoman of the UNT regents. He sent copies to Jackson and other UNT leaders. He said he did not trust UNT’s finance department or human resources department to handle the retirement plans.
“They administer programs involving hundreds of millions of dollars in retirement funds, without a clue as to how they would conduct appropriate due diligence with regard to the integrity of those accounts,” Young wrote.
Strange did not return phone calls to comment on Young’s allegations.
Several months later in 2009, Young sent a second letter to Andrew Harris, then vice president for finance and administration. He sent copies to UNT regents and administrators.
Jackson quickly responded with a written response to Young, saying any issues regarding finances and personnel would be handled internally.
“I appreciate your offer to volunteer to help correct these types of issues, but in most cases there are valid reasons why programs like this need to be developed, as much as possible, by attorneys and finance staff members rather than by volunteers, no matter how highly qualified,” Jackson wrote.
Reese, the UNT spokeswoman, did not respond to questions about whether university officials looked into Young’s allegations in 2009 or took any action in response.