TRENTON, N.J. (Legal Newsline) - New Jersey's attorney general has filed suit against a Hoboken university, its president and its chairman of the board of trustees, leveling a 16-count civil complaint against them.
Stevens Institute of Technology, school president Harold J. Raveche and board trustee chairman Lawrence T. Babbio are charged with financial mismanagement, excessive spending of endowment investment gains, improper handling of specific endowments and investments, failure to properly maintain records and accounts and excessive compensation of the school president in the civil complaint.
Attorney General Anne Milgram, acting under the authority of the New Jersey Non Profit Corporation Act and the Uniform Management of Institutional Funds Act, is seeking to overhaul the school's governance practices and its internal controls and accounting practices, and to remove Raveche and Babbio from their positions.
"The university is important to the State of New Jersey and we are determined to see to it that it is managed in a way that will make its students and alumni proud," Milgram said.
Milgram and the Stevens board met earlier this month in an effort to review the findings of a three-year investigation into the school's financial practices and to seek a settlement.
The school instead sought a temporary restraining order Wednesday in an attempt to block any potential action by Milgram or to cover up the investigation by requiring any proceeding against the school to be done in secret. The initial hearing denied the restraining order, the attorney general said.
The investigation found that annual financial reports misstated the school's assets during certain years. School officials were regularly warned by outside auditors of deficiencies in management and financial policies, the AG said.
Stevens' independent accountant from 2000 to 2005, PricewaterhouseCoopers, removed the school as a client due to the high risk posed to the accounting company by the school.
The school's auditor from 2005 to present, Grant Thornton, has also repeatedly found internal control deficiencies and other material weaknesses and issued multiple internal control letters with instructions and criticisms related to Stevens' financial management practices.
Former trustees of Stevens told investigators that the board was not informed of key financial information, including endowments reports and reports from auditors. Information related to annual hikes in salary and bonuses paid to Raveche, who saw his total salary and payment jump from $362,458 in 1999 to $1,089,780 in 2008, was also not disclosed to the trustees. Raveche also received $1.8 million in loans at below market rates. Approximately half of the loans - $928,319 - were agreed to be forgiven in a 2007 employment agreement. The suit charges that the loans and their forgiveness were outside the scope of Stevens' authority under the New Jersey Nonprofit Act.
Repayment of improper payments of compensation, benefits and loans to Raveche are asked for by the suit.
The suit also charges that the administration and Raveche spent more than board-approved spending rates, used gifts and bequests to pay operating expenses, invaded restricted assets, collateralized the endowment and excessively borrowed through lines of credit.
Raveche and the administration are also alleged to have gone beyond the scope of powers delegated by the school's by-laws or trustee board resolution in some of the spending and borrowing, which is a violation of donor-imposed restrictions on certain endowment assets.