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Can the Trustees Really be Trusted?

Dartmouth’s Troubling Investments

by CHRISTOPHER SCHONS

As a 1988 graduate of Dartmouth, I’m stunned by the college’s parlous state. In recent years, it has been buffeted by a series of tumultuous events on campus, and the resulting negative press reports. In 2012, Rolling Stone published a story about extreme hazing practices (featuring feces and something called a “vomlet”) by a college fraternity. Shortly afterward, a recent graduate told a horrific tale of sorority hazing, published in the Huffington Post, that left her with a blood alcohol level of .399 and nearly dead. Other recently published pieces recount nights of “wild intoxication” or mention the college’s “singularly homophobic, sexist and racist atmosphere.”

Last year also saw the college’s program for admitted applicants — “Dimensions of Dartmouth” — interrupted by undergraduate protesters declaiming loudly that the campus was inhospitable to gays, minorities and others. And just last month, a couple of dozen students occupied the office of college president Phil Hanlon, demanding that he give consideration to their “Freedom Budget,” purportedly designed to make Dartmouth a more equitable and tolerant place.

While all this was going on, the federal Department of Education was conducting a Title IX investigation of the college for alleged mishandling of sexual assault cases. Predictably, applications to Dartmouth this year dropped 14 percent, by far the worst drop-off in the Ivy League.

As for the “Freedom Budget” itself, it has been criticized as naive and utopian. But much of it makes sense, and at least one of its assertions deserves further examination here: “Dartmouth epitomizes power being isolated to rich, white males.” Is that true? If one looks at the Board of Trustees and the self-serving financial maneuverings in which it has indulged, there is no denying it. For many years, hundreds of millions of dollars of the college’s endowment have been channeled into financial firms of a handful of board members.

Last year, the New Hampshire Attorney General’s Office said no investigation was warranted into anonymous allegations that Dartmouth College trustees mismanaged the college’s endowment, The Associated Press reported.

Still, the practice is opaque. Dartmouth provides virtually no details beyond acknowledging that around 13.5 percent of its approximately $3.5 billion endowment is managed by companies connected to the Board of Trustees or its investment committee, and that it pays standard industry management charges on this money. (Financial experts say that the norm here would be a 2 percent annual fee, plus 20 percent of any profits.) Meanwhile, the implicated trustees themselves always decline to comment to the press. By engaging in what could be perceived as self-dealing, the trustees created the potential for Dartmouth College’s credibility and reputation to be damaged. And they have been damaged.

Moreover, the incoming chairman of the board — William H. Helman IV — not only has enjoyed untold profits thanks to his position as a trustee and Dartmouth’s resulting multi-million-dollar investments in his firm, Greylock Partners; he also has boasted in The Dartmouth that he basically handpicked the college’s current president. There is no proper oversight of this mutual back-scratching operation. So, while Dartmouth may not consciously set out to function in a way that exalts white male insiders (which describes all the trustees in question) at the expense of everyone else, it does end up doing exactly that. And, to its own detriment. Who now has faith in the college’s governance and investment methods and procedures? Half a dozen insiders make millions off their alma mater and apparently personally select a president who is beholden to them, while thousands of others — nominally members of the vaunted “Dartmouth family” — are saddled with student debt and/or shut out of lucrative decision-making procedures. The inequities are grotesque.

As one of 59,000 undergraduate alumni who have been begged for money by the college’s fundraising operation several times a year since even before we graduated, I think we are owed an explanation of how and why Dartmouth’s endowment has come to be invested in the firms of the trustees themselves. How were these decisions made? What were the exact fees and commissions charged? How much of these were recycled back to the college as “gifts”? Conversely, how much of trustees’ “gifts” to Dartmouth were recycled back to themselves in fees and commissions? Are opportunities to invest a portion of the endowment open to every alum with demonstrable financial acumen? Have the trustees’ self-directed investments beaten what a low-cost index mutual fund would have returned to the endowment?

Recently, when a Dartmouth undergraduate called me from Hanover asking for a donation, I asked her how much ultimately would end up in the pockets of the trustees. That’s a question we should all be able to answer. And along with the other troubling issues, it is essential that it be addressed so that Dartmouth can recover from its recent travails and come to be heralded exclusively as a fine institution of higher learning: Inclusive, welcoming, serious — and, not least, ethical.

Christopher C. Schons, a graduate of Dartmouth College, lives in Arlington, Va.

This column originally ran in the Valley News.