Between the lines: what WCU’s Koch gift says, and doesn’t say

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Between the lines: what WCU’s Koch gift says, and doesn’t say

Few if any universities have made the Charles Koch Foundation jump quite so many hurdles before opening its wallet as Western Carolina University has.

More than 50 universities have Koch-funded centers that operate as de facto think tanks within the halls of academia.

Ralph Wilson, a research analyst with the watchdog group UnKoch My Campus, has read dozens of Koch’s donor contracts that spell out the expectations that come with taking the money. A pact between WCU and the Koch Foundation signed last week — providing $1.8 million over five years for the Center for the Study of Free Enterprise — is the least egregious he’s seen.

“It has perhaps the most thoughtfully constructed governance mechanism of any Koch center in the country. It is a triumph of faculty making the best of corporate and administrative overstep,” Wilson said.

WCU not only resisted ceding control to the Koch Foundation in the gift agreement, but will also set up an oversight board to keep the center from being co-opted by the libertarian brand of economics and unfettered capitalism that Koch promotes.

“I think what could have made a difference here was a lot of faculty chimed in early on. Really it is because of those faculty voices that we had this very robust process and were able to have an impact,” said Dr. Bill Yang, chair of the WCU faculty senate and an engineering professor. “The whole administration nurtured the idea of faculty input and really holds the same values we do on shared faculty governance.”

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A gift-vetting committee comprised of five faculty has been meeting since August to wordsmith the gift agreement from the Koch Foundation, and hopefully to prevent undue donor influence from creeping into WCU’s curriculum.

“Having a curricular impact does not automatically make a gift deniable. What are the impacts? Are they acceptable? If not, what could the remedies be? Does it fit with our mission? Is it going to benefit our students?” Yang postulated. “If it somehow limits or restricts academic freedom, then, of course, no, we cannot accept that.”

All Koch’s gift agreements insist on academic freedom.

But WCU’s gift agreement stipulates academic freedom in a better way than the boilerplate language found in other Koch contracts, Wilson said.

“A particularly excellent aspect of the new agreement is the removal of the Koch foundation’s false definition of academic freedom, replaced instead by the academic freedom policies of the UNC System. That is an important win, even if it is more symbolic than other potential changes,” Wilson said.

WCU’s gift agreement also cites the need to protect the “integrity of the university.” A reference to academic integrity is something not typically seen in other agreements.

Public record

Another difference that makes WCU’s gift agreement different from the norm involves disclosure of the gift agreement itself.

Gift agreements to launch Koch-funded free enterprise centers at the University of Kentucky and University of Louisville last year both contained language that limited the public release of the gift agreement.

Despite being a public record, the Koch Foundation told the universities “not to disclose the existence or contents” of the gift agreement unless forced to do so by law. And in that event, the Koch Foundation wanted advance written notice that it was being disclosed and to whom. The gift agreements for both are now readily found online, however, thanks to local newspapers that requested the gift agreements and posted them.

In a gift to Ball State earlier this year, the agreement tries to prevent the university from disclosing terms “without express written approval” from the Koch Foundation, even it was legally required to do so under “a public records request.”

However, WCU’s agreement specifically recognizes that the gift agreement is “a public document as defined by the North Carolina Public Records Act” and “shall be made available to the public upon request.”

Professor salaries

Koch money for university centers is usually earmarked to pay professors salaries, in hopes of upscaling the economics department with free enterprise economists who subscribe to Koch’s classical liberalism worldview. Gift agreements often give the Koch Foundation control over who’s hired with the money.

An agreement with West Virginia University in 2009 to hire a cadre of free market economists specified who to hire by name. The Koch Foundation said it would pull the plug on funding if the positions were offered to anyone else, unless they could agree on “satisfactory replacements.”

A pledge to fund five professors’ salaries at Utah State in 2008 came with an equally overt caveat: the Koch Foundation had to approve individual hires. If the university hired a professor it didn’t approve of, the funding would be pulled.

The Koch Foundation repeatedly scored this type of veto power over hiring decisions, until recently. Universities have been tightening up on their willingness to hand over the hiring reigns to the Koch Foundation, perhaps due to the national outcry over academia for sale.

When the University of Louisville launched its Center for Free Enterprise last year, the gift agreement merely stipulated that any faculty hired with Koch money “must have demonstrated a track record that is supportive of the Center’s Mission or show promise of developing such a record.”

At WCU, Koch money was initially going to fund 1.5 professor salaries. That plan was scrapped due to faculty concerns that Koch would influence curriculum by buying professor slots.

Now, no Koch money will fund professor hires at WCU, but instead will go to research stipends for specific student and faculty projects, publications, conferences and other activities.

Naming the director

Yang said the gift-vetting committee was pleased with the final result WCU and the Koch Foundation arrived at.

“What we end up with is a good agreement. And we are halfway there to do a good job. The other half is in the hands of the people running it,” Yang said. “We can have all the robust process and policies and agreements in there, but there are still caveats that really boil down to the people who are going to carry the ball.”

The Koch Foundation seems to agree. It usually names the professor who will serve as the center’s director — always someone with outside ties to the Koch academic network.

Naming the director of the center in the gift agreement is an important strategy to ensure the donor’s mission and intent are upheld, according to Charlie Ruger, the university investment director of the Koch Foundation.

“The money is at the control and supervision of the center director and we want that person’s name in the agreement,” Ruger said during a panel discussion at the Association of Free Enterprise Education in Las Vegas this April, which was secretly recorded by activists with UnKoch My Campus. “We find that to be a pretty effective way to protect these investments.”

The message, Ruger said, is that if anyone else “ends up in control of these funds, the next check is not going to be on the way.”

“We want to empower people with the ideas. We want to empower academic entrepreneurs,” Ruger added.

But WCU’s gift agreement doesn’t name the director for the center — a stark difference from most.

That doesn’t mean the director is up in the air. Dr. Edward J. Lopez, the BB&T Distinguished Professor of Capitalism, is the visionary for The Center for the Study of Free Enterprise. As the one who courted the Koch gift, he will obviously be the center’s director.

Lopez is named as the director in the WCU Board of Trustees vote to approve the center last December.

Dr. Darrell Parker, Dean of the College of Business, said WCU has “already specified Dr. Lopez as the Director, and saw no need to stipulate it in the gift agreement.”

But it might not carry the same weight as naming Lopez as the director in the gift agreement itself, at least legally.

“The written words in the gift agreement should be considered as the key terms of the gift. Attached or related documents, while instructive, may not be considered binding,” said Shea Browning, WCU’s assistant general counsel.

Parker credited Lopez for making the center, and the money, a reality.

“The foundation was impressed by the vision of Dr. Lopez to foster cross-disciplinary student and faculty research projects on the subjects of economics, free enterprise and economic development,” Parker said. “We appreciate the foundation’s ongoing support of Dr. Lopez’s leadership and look forward to future research on timely and important topics related to economic development through the lens of faculty and staff scholars from a wide variety of disciplines.”

A baker’s dozen

The $1.8 million gift to house a free enterprise center on WCU’s campus is the largest gift the university has ever received. But for the donor, it’s less than a box of Krispy Kreme donuts — relatively speaking.

Charles Koch is the fifth richest man in America with a net worth of more than $50 billion, according to Bloomberg this month. The average net worth of an American is roughly $180,000.

Comparatively, Koch giving $1.8 million is on par with that average American giving $6.48.

Forbes Magazine recently called Charles Koch the nation’s most “politically influential billionaire” who’s on a “crusade for smaller government and economic liberty.”

Now 80, Koch is running out of time to realize the societal change he’s been pushing for — a libertarian utopia where government gets out of the way and a pure capitalism system means everyone can reach their own potential. Free markets are the path to the greater good.

While Koch’s political spending rivals that of the two major parties, Charles Koch called the return on his investment in the federal political arena “disappointing” in an interview with ABC’s John Karl earlier this year.

“At the federal level, we haven’t in any way changed the trajectory of the country,” Koch said.

That might be why Koch is ramping up his university giving — not only direct giving to universities, but to the affiliate think tanks and policy institutes that carry the ideas out of academia into society.

Funding university centers is critical to the Koch Foundation’s strategy to shift the American landscape toward a libertarian economic system.

“We’re not in it because of electoral politics,” said Charlie Ruger, director of university investments for the Koch Foundation. Ruger explained the mission behind Koch’s university giving at a national summit for free enterprise professors this spring.

“It’s not about getting certain people elected. We’re in this because we think freedom improves people’s wellbeing and the only way we can do that in the long term is through culture change,” Ruger said. “We’re trying to save the world here. Our mandate… is to change the culture.”

He lamented, however, “we’re losing now.”

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