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Tyco settlement funds go largely untapped

New Hampshire Union Leader

February 16. 2013 2:48AM

Projects funded with Tyco settlement
The Center for Public Responsibility and Corporate Citizenship has funded the following activities since 2002:

-- N.H. Public Television "Outlook on Money" series, $27,020.

-- UNH Whittemore School of Business Statewide Investor Education Workshops, $65,357.
-- Corporate Governance and Investor Education Symposium at UNH, $63,253.

-- N.H. Public Television "More than Money" investor education series with Myron Kandel, $75,517.

-- Symposium on investing and business ethics with John Bogel, founder of the Vanguard mutual funds, at Franklin Pierce College, $50,000.

-- UNH Summer Outreach Program on Public Responsibility and Ethics, $15,700.

-- Student Investor Education initiatives through N.H. Jumpstart Coalition, $125,000.

-- Programming and office costs for the Initiative for Corporate Responsibility and Investor Protection with Myron Kandel (three years), $225,000.
Source: New Hampshire Bureau of Securities Regulation

Barry J. Glennon, now director of the state Bureau of Securities Regulation, remembers well the day in 2002 when he and some associates squared off against some of the highest-paid corporate attorneys in the country, representing Tyco Corp., then based in Exeter.

The outgoing chairman of the international conglomerate, Dennis Kozlowski, had just lost his job amid imminent charges of sales-tax evasion, and later was convicted and imprisoned for looting the company of more than $100 million.

"It was a Friday afternoon. I remember it to this day," Glennon said. "They had a huge bevy of lawyers, probably some of the finest in the country, that we were up against, and they finally came to terms. We were about ready to file a cease-and- desist order against them."

Rather than face action by the bureau, Tyco agreed to settle for $5 million. The agreement required that the money be put into a fund, controlled by the Securities Bureau and the University System of New Hampshire, to promote investor awareness and ethical governance of corporations.

In the decade since, the fund has grown to nearly $7 million, with less than $1 million spent on the purpose for which it was intended. (See related story.) The organization originally set up to administer income from the fund ­- the Center for Public Responsibility and Corporate Citizenship - has been largely dormant for the past five years.

Its board members have, for the most part, moved out of public life or are about to, and there is no legal way to replace them. The University of New Hampshire and Saint Anselm College have proposals before the CPRCC board to use the money for permanent endowments. Some decisions are likely to be made soon about the fate of the fund.

"This would be the optimal time for us to move forward," said University System of New Hampshire Chancellor Edward MacKay, a board member. The board chairman is Secretary of State Bill Gardner. The other board members are former Gov. John Lynch (who was chairman of the UNH Board of Trustees at the time of the settlement); Deputy Secretary of State Robert Ambrose; and Mark Connolly, former director of the Bureau of Securities Regulation.

Connolly resigned in 2011 to protest the state's handling of the Financial Resources Mortgage Ponzi scheme; Lynch is no longer in office; and MacKay is scheduled to retire in March.

"When the fund was created, the five individuals were identified by name, not position, so there is no real mechanism for turning people over," MacKay said. "Bill (Gardner) and I have basically been in control. I've asked that we try to schedule a time to get the board together, and I will do whatever is necessary to help that happen."

Two proposals

The UNH proposal calls for creating The Responsible Governance and Sustainable Citizenship Project, which that would "become the centerpiece and engine behind an innovative curriculum to address the pressing issues of principled governance and ethical obligations."

"Our goal is nothing short of giving every student at UNH and throughout the university system access to courses and other experiences that include discussion of the big questions with which they will need to grapple on their way to becoming productive, responsible and involved citizens and leaders of communities, businesses and political institutions."

The proposal's authors claim, "There is literally no comparable program elsewhere in public education," and ask for a $5 million endowment to set up and run the program through the College of Liberal Arts.

Saint Anselm College in Manchester, which has always focused on ethical issues as part of its curriculum, is proposing an Ethics in Governance program through the expansion of an existing endowment - The Richard L. Bready Chair in Ethics, Economics and the Common Good.

"The program would give special emphasis to the value of public responsibility in government and business; and the ethical dimension of managing public and private funds for protecting citizens and investors," according to the Saint Anselm proposal, which seeks $2.5 million.

MacKay said the Saint Anselm proposal will get a fair review, despite the fact that the state university system is represented on the CPRCC board, while Saint Anselm is not. It's conceivable that both proposals could be funded.

"The language of the settlement suggests that a public institution would be managing the fund, so I think there is a preference for a strong role by a public institution in providing these services, but not necessarily an exclusive role," Mac-Kay said. "Saint Anselm does have some good programs in the area of ethical governance, so they have legitimate program strengths that could complement the university."

A unique opportunity

It's not as if nothing has been done with the Tyco settlement money since 2002. In 2005, the CPRCC hired as its first director, Myron Kandel, former CNN financial editor. In the ensuing three years, Kandel hosted several high profile forums designed to improve corporate responsibility and investor protection, but that approach eventually fizzled.

"Myron Kandel was a very effective individual and was able to use his contacts to bring excellent speakers and other individuals to the state," said MacKay. "But he was at a point in his career that he needed to spend more time with his family, and we began to think that rather than hire another individual for what could be construed as a series of ad-hoc events, we needed to find a more permanent solution and embed the program within a college or university."

During and after the Kandel experience, the fund was used to pay for a variety of unrelated initiatives, ranging from $27,000 to New Hampshire Public Television for an "Outlook on Monday" series to a $125,000 grant to a student investor education initiative. But MacKay, Gardner and others involved say the fund has great potential that has gone largely untapped.

"We want to come up with something that's pretty unique, because this was such a unique agreement," Gardner said. "We want something that we're going to look back on and say, 'Wow' - something that will continue into perpetuity."

MacKay shares the same outlook. "There is strong agreement that we want to create a permanent endowment so that the dollars are used for the intended purpose into the future."

That purpose involves educating the next generation of business leaders and investors to avoid the disaster that Kozlowski and his accomplices wreaked upon Tyco.

Kozlowski himself might appear some day to render a cautionary tale. He's already eligible for parole.

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