UNC’s chief fundraiser has an outside gig. Experts say it could hurt the university.
David Routh has one of the most important jobs at UNC-Chapel Hill, the state’s flagship university.
As vice chancellor for university development, Routh leads UNC’s fundraising. That’s so important to UNC that two years ago, leaders bumped up his pay more than 35%, to roughly $850,000 a year, so that he’d stick around to see through a $4.25 billion fundraising campaign.
After giving him the $225,000 pay boost — more than the starting pay for two liberal arts assistant professors — the university allowed Routh to work a side gig. For the past several weeks, he has been a consultant to New Republic Partners, a recently formed investment firm with several university and political connections. It’s work he says will take just three hours a week.
Three experts in higher education management said they see conflicts in the relationship and question why university officials approved it. One said Routh should immediately give up the outside work and return any compensation he has received.
“If I were the president of the university, if I were the chair of the board of the university, I would instruct this individual: You have to resign, effective immediately,” said James Finkelstein, a professor emeritus of public policy at George Mason University. “’And anything that you have been paid you need to return, if for no other reason so that there isn’t any appearance of a conflict.’”
Routh, 61, is a non-salaried, part-time independent consultant and senior advisor for New Republic Partners, based in Charlotte. University documents show he planned to begin his work with the firm on March 15.
Routh declined to be interviewed but said in email responses that New Republic is paying him company stock options worth an undefined value for his work. He has told the university he will tend to his duties only at night, during weekends or while on vacation.
A May 3 letter that New Republic sent to “Shareholders, Clients and Friends” said Routh’s work includes being available to talk with potential clients.
“In this role, David will be closely following the progress of our firm and will be available to talk with successful families and individuals,” the letter states, “as well as endowments and foundations, about the investment management solutions, wealth advisory offerings and concierge financial services New Republic Partners provides to those who join the firm as clients.”
Routh gave a different characterization of the work to UNC officials in a written request for their approvals three months earlier. He made no mention of meeting with potential clients in what is known as a “Notice of Intent to Engage in External Professional Activities for Pay.”
“The leadership team would like me to be available as a sounding board and advisor on matters of corporate strategy, building high-performing and diverse teams, business execution and client experience,” Routh wrote.
The investment firm’s letter was dated one day before Vanessa Ragland, the UNC human resources director responsible for non-faculty officials, signed that she had reviewed Routh’s request.
Routh said the company letter reflects “a narrow focus of helping a client who might value advice about how to structure a charitable giving plan, how to structure individual gifts, or how to structure the ongoing stewardship of a gift.”
He said UNC Chancellor Kevin Guskiewicz had not seen the letter before the company released it. University spokeswoman Joanne Peters Denny did not comment on the substance of the letter.
Routh said Ragland had let him know on May 3 she had received all the required approval documents.
“So, I am honestly not sure why the EPAP system would be showing a May 4th approval date,” he said.
Ragland did not respond to a News & Observer reporter’s phone message and email request for comment.
Routh said he would not have moved forward with New Republic without university approval, and his work there won’t conflict with his university responsibilities.
“I have always been, and remain, completely committed to my University, and conducting myself with the highest levels of integrity,” Routh said in an emailed statement. “I believe this activity in no way runs counter to those principles.”
UNC leaders see no conflict
Guskiewicz and Board of Trustees Chair Richard Stevens see no conflict with Routh’s side job, Denny said in an email. But the university redacted information from Routh’s written request to do the outside work that helps explain any conflict it might raise.
Neither leader agreed to an interview. “His request was thoroughly reviewed by the University ethics process and I see no conflict of interest. I was informed verbally by the Chancellor and by David,” Stevens said in a short email response.
Art Padilla, a former UNC system vice president who helped develop its conflict of interest policies, said if he had been Routh’s supervisor he would not have approved him taking on the outside work, given the information gathered by the N&O.
“No, absolutely not,” said Padilla, who is now a management professor and department head emeritus at N.C. State University.
Routh raises money as UNC’s vice chancellor for development and the chief executive of the UNC-Chapel Hill Foundation Inc., a nonprofit corporation that receives money from donors on behalf of the university. Routh is leading the $4.25 billion “Campaign for Carolina” campaign that began on Oct. 6, 2017, and has raised $3.77 billion so far.
The outside work follows a big bump in university pay for Routh that began in fiscal year 2019. Routh was paid $551,617 during his first full year on the job in fiscal year 2014. His pay jumped dramatically five years later, when the UNC foundation gave him an additional $225,000 retention supplement on top of $116,000 in bonuses and incentives, the UNC foundation’s tax records show.
A note on that 2019 tax return said the $225,000 annual retention payments are an incentive to “proactively” retain Routh as the university wraps up its “Campaign for Carolina” fundraiser, scheduled to end in December 2022. Routh could be paid that extra $225,000 until at least 2025 with annual approval by the chancellor and the Foundation Board.
Routh also serves as secretary on the board of directors of the University of North Carolina at Chapel Hill Foundation Investment Fund Inc. The foundation invests its long-term assets in that fund, which, in turn, invests all of its assets in the UNC Investment Fund Inc.
The UNC Investment Fund is responsible for investing the long-term assets of the University of North Carolina System, its constituent institutions and their affiliated endowments and foundations.
The Chapel Hill Investment Fund’s board of directors governs the fund and oversees its investment manager, the UNC Management Company.
The board of directors sets the long-term strategy and reviews asset allocation, investment policy and the fund’s performance while an executive committee on that board reviews more immediate investment recommendations. Routh is not on that committee, according to the university, the fund’s annual reports and the website.
Experts warn of red flags
The three university management experts said Routh’s outside work raises potential conflicts in three areas.
First, Routh’s campus job is to raise money for the university, serving as chief executive of its foundation. But as a consultant for New Republic Partners, he’s promoting the firm’s investment tools, according to the May 3 letter. That’s potentially money that could be donated to UNC, they said.
Second, Routh serves as board secretary of UNC’s Foundation Investment Fund, which oversees investment decisions. That creates the potential for Routh to steer university money toward New Republic for investment, Padilla said.
“He could go to the foundation and say, ‘New Republic got a 14% return; you’ve got your money with Aardvark Associates, and you only got 12%,” Padilla said. Being a nonvoting member of the foundation board still creates the appearance of a conflict, he said.
“It was apparently deemed to be appropriate and not in conflict and thus the activity was approved. It seems like a clear conflict of time and interest to me, but I don’t know all the details,” Padilla said.
Padilla and Finkelstein said the arrangement could put the university on the defensive. “Why would you want to have your donors raising questions about the ethics of your chief development officer?” Finkelstein said.
Finkelstein has studied outside work by top higher education officials, and joined the debate in California that ultimately caused officials to place new limits on outside work for university presidents after one was found serving on corporate boards that presented conflicts of interest, The Sacramento Bee reported.
The third potential conflict is Routh’s time. Matthew Hartley, an associate dean for academic affairs at the University of Pennsylvania’s graduate school for education, said the three hours that Routh said he would spend per week is “fairly minimal” if he kept to that amount. But Hartley said Routh is in a critical position for the university that demands “100% of someone’s time and talent.”
“You can’t have someone who is responsible for one of the most essential functions of the university moonlighting,” Hartley said. “You can’t have him doing a second job. He ought to be spending 60, 70 hours a week doing nothing but thinking about, ‘How can I help this university garner more resources to help its mission?’”
UNC approved outside work
Outside employment is encouraged for state university system employees as long as it complies with UNC System policy and does not create conflicts of interest or commitment, according to the system policy.
In a written disclosure to the university, Routh acknowledges both an equity stake and that New Republic is “involved with or related to” his work at UNC-CH. Campus officials redacted a section of a form that Routh submitted that would spell out those connections.
That form also notes a review by the Conflict of Interest Office, university counsel and the issuance of a conflict of interest management plan. Neither Routh nor other UNC officials would detail potential conflicts.
When an individual checks that they have a potential conflict of interest on that form, the university conducts a careful review to determine if there is in fact a conflict, and if it can be managed, university spokesperson Denny said in an email.
UNC and Routh followed all relevant conflict of interest policies and processes to ensure the work doesn’t interfere with Routh’s duties as vice chancellor, she said.
Campus officials cited the state’s personnel law for not disclosing how Routh described the ways the outside job is related to his university job.
Typically, when a public employer creates or gathers records for the purposes of reviewing an employee for hiring, firing, promotion, or other personnel reasons, the records are not treated as public records, said Brooks Fuller, director of the North Carolina Open Government Coalition.
The law includes a provision commonly known as the “integrity exemption” that allows top officials to make public personnel information that shows their agency is acting in the public’s best interest. UNC officials did not exercise that option.
Routh said he has a consulting contract with New Republic and is not an employee. It’s impossible to estimate the value of stock options he has received, he said.
“It is not knowable what these stock options might be worth,” Routh said. “That depends on whether there is appreciation in the stock price or not. They could be worth nothing or something down the road.”
Stock options typically give an investor or employee an opportunity to buy or sell stock in the company at a fixed price during a set amount of time in the future.
A company could allow an investor to buy 100 shares at $10 dollars per share a year from now, for example. If the stock climbs to $20 per share during that period, the investor pockets $1,000. On the other hand, if it plummets, the options could be worthless.
Routh did not disclose any details about his stock options.
Firm has political, UNC ties
New Republic Partners was formed last year, state business records show. It serves clients across the Southeast, including the John M. Belk Endowment, the M.C. Belk Pilon family interests and Springs-Close-Bowles family interests. The Belk Foundation is a prominent UNC donor.
Thomas Hoops and Ralph N. Strayhorn, who have decades of experience in banking and financial services, lead the privately held firm. Strayhorn is chairman and CEO, while Hoops is president and chief operating officer. Both are UNC alums.
Strayhorn said in an emailed statement that they “do not comment on personnel or contractual relationships outside of the firm” and referred questions to UNC. Hoops declined to comment through a spokeswoman.
The firm’s board has strong ties to prominent state figures. UNC System Board of Governors member and major Republican Party donor Art Pope, a former state lawmaker, and former State Treasurer Janet Cowell serve on its board of directors. Sam Bowles, a son of former UNC System President Erskine Bowles, is the board’s managing director.
New Republic Partners specializes in investment, lending and wealth management for individuals and families, endowments, foundations and advisors who serve accredited investors, according to its website. The firm says that its advisory business ranks as the sixth-largest registered investment advisory in the Carolinas and top 50 in the Southeast, managing $1.35 billion in assets.
Routh said he will make no investment decisions on behalf of the firm. The firm is not doing business with the university, Denny, the UNC spokeswoman, said.
This story was originally published June 24, 2021 at 5:45 AM with the headline "UNC’s chief fundraiser has an outside gig. Experts say it could hurt the university.."
