Newcomers to corporate academia could be forgiven for being confused by management’s unerring instinct for repeatedly failing to do due diligence and making financially and functionally poor decisions - for example choosing overpriced computer systems known to perform poorly. This is especially notable at Rutgers University.
15 years ago Rutgers was saddled with an accounting system, RIAS, reported in a 2007 State Investigative Report as being chosen:
"through a system selection process that was a textbook approach on how not to select a system … ancient and … held together by Elmers glue, [supplemented by] a proliferation of underground shadow systems [that] are completely out of control.”This system was replaced in 2016 by Cornerstone, described by the Rutgers administrators that were required to use it as:
“a disaster … a poorly-designed, complicated system causing stress and increased workloads [that] produces inaccurate and unreliable data … including a new chart of accounts with 43-digit account strings [resulting] in a backlog of 12,650 unpaid bills and infuriated vendors.” To a newcomer, the choice of Cornerstone may seem odd, since this system had before its selection by Rutgers been used by another NJ university, Montclair State, which successfully sued Cornerstone’s parent company, Oracle, for:
“breach of contract, gross negligence, willful misconduct and fraud.” According to Montclair, “Oracle staffed the project with unprepared staffers, missed deadlines and didn't adequately test the software [and] Oracle even used a ‘rigged’ software demonstration.”Cornerstone has been remarkably expensive at Rutgers. Over the past 3 years – after Cornerstone’s rollout and multi-year intensive debugging – two companies responsible for maintaining the system, Huron Consulting and Accenture have received over $62 million. Other companies have also reaped windfalls (e.g. in its first year of implementation, Rutgers paid Oracle $9.3 million, SciQuest $1.7 million, Huron $372K, and Deloitte $4.6 million) but focusing on Huron and Accenture is worthwhile.
The chief advocate for Cornerstone at Rutgers has been its CFO, J. Michael Gower, who joined Rutgers in 2013, and who had a longstanding relationship with both of these companies. To understand that relationship, it is worthwhile to understand where these companies came from.
That story begins over two decades ago, with the infamous case of Enron, which went bankrupt in 2001 associated with multiple convictions for fraud and conspiracy. This is relevant to Rutgers because Enron’s accounting firm, Arthur Anderson, was found guilty of illegally destroying documents relevant to the investigation into Enron.
Arthur Anderson surrendered its license to practice, and its top executives formed two other companies: Huron Consulting and Accenture, in 2001 and 2002 respectively. Fraud and related charges have followed these companies as well – Accenture, for example, is the topic of the book Conspiracy of Fools, which described them as perpetrating “Ponzi schemes,” and their establishment offshore, first in Bermuda and then in Ireland, was also the subject of numerous news articles. Huron we will come back to.
This is the background of Accenture and Huron. What is the background of Mr. Gower, and what is his relationship to these companies? Gower came to Rutgers from Yeshiva University (2008-13), where he was CFO, after a stint at U. Vermont (2003-8), where he was VP of Finance & Administration. Before that, he was at Cornell, Duke, and PricewaterhouseCoopers.
While at Vermont, Gower spent university funds in an unsupervised manner on products sold or maintained by Accenture and Huron, including PeopleSoft and Hyperion Strategic Finance software. The choice of these products was itself odd, as it followed Cleveland State University’s successful lawsuit of PeopleSoft in 2004 for:
“fraud and breach of contract.” Cleveland State termed the software “woefully deficient,” “unusable” and “vaporware.” Cleveland’s suit was joined by Ohio’s Attorney General, and PeopleSoft (by then bought by Oracle) settled in 2005 for $4.25 million.
It was later the same year of the settlement that Gower chose PeopleSoft as U. Vermont’s financial management system. Failed software, lawsuit, after which Mr. Gower chose that software. Sound familiar?
PeopleSoft, currently integrated into Rutgers’ Cornerstone system, was plagued with failures, and Burlington Free Press described Gower’s involvement in the purchase as
“unauthorized squandering of millions.” By 2008, an audit committee of University Trustees called Gower and his colleague at Huron, David Klipa, to testify why the software was not working as advertised: Trustees “asked how the problem could have gotten so bad without earlier strong action … [Gower responded that he] was not sure what could have been done differently …” and Klipa assured the trustees that plans were in place to repair the damage.
Plans were indeed in place: the $5 million initial cost “resulted in the resignation of UVM’s then Vice President for Finance and Administration, J. Michael Gower,” and was followed by additional contracts amounting to $14M to bring the system into working order.
This story repeated itself in Gower’s next position, at Yeshiva University. Here, as CFO, Gower was responsible for investments, including those with Bernie Madoff, the grandmaster of ponzi schemes, which cost Yeshiva between $14M and $110M. More significantly for his propensity to buy problematic software from Huron & Accenture, Gower and his Huron colleague Klipa co-produced a powerpoint presentation advertising Huron’s capabilities for “Designing a Chart of Accounts that Meets Your Institution’s Changing Needs.”
It should go without saying that a CFO collaborating with a client on an advertising project promoting the client’s software is problematic: this too has proven to be a common practice by Gower, who likewise has signed off on funding for other consulting organizations with whom he openly collaborates.
So this is the history of Rutgers financial management. Enron is found guilty of fraud and conspiracy, aided by Arthur Anderson which is found guilty of destroying documents as part of the conspiracy. Arthur Anderson dissolves and its executives form Accenture and Huron Consulting. Michael Gower repeatedly chooses products associated with these companies that have failed publicly, that have been termed fraudulent, poorly-designed, inadequately tested, and unusable, and that have led to successful lawsuits against the parent companies.
He collaborates openly with clients of the university – whose spending he oversees – to promote their products, he hires consultants of organizations that he is part of, and he systematically fails to perform the most basic of due diligence tasks. When faced with these failures, he takes no responsibility, assures all concerned that the right steps were taken throughout, and pays, pays, pays to his collaborators money that students and faculty provide. And Mssrs. Gower and Klipa have consistently been promoted and given bonuses.
This is what corporate academia has led us to. In future posts I’ll describe the, sadly predictable, consequence in terms of repeated irresponsible spending and management decisions.