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Rutgers President Has Kept Lucrative Jobs at Companies That Do Business with Rutgers

In Apparent Conflict of Interest, Bob Barchi Makes $639,495 in Cash and Stock After Recent Sale of Company That Does Business With Rutgers
Bob Barchi
Robert Barchi has faced remarkably little criticism for his two private-sector jobs that he has held throughout his Presidency. Daniel Munoz

NEW BRUNSWICK, NJ—Rutgers University President Robert Barchi has been getting paid from multiple entities with competing financial interests, including the taxpayers and tuition-payers at the state university, and two companies that do business with Rutgers.

All told, Barchi made well over $1 million dollars last year, a combination of his public salary with two side jobs serving on the Boards of Directors of private companies that sell products to Rutgers.

Living in a free house on the Busch campus, Barchi already draws an annual salary of $650,000 from the school, more than three times what the state's Governor earns and $250,000 more than the US President.

In an apparent conflict of interest, Barchi has also been working for two private companies, both of which have contracts with Rutgers.  A conflict of interest is defined as "a situation in which a person or organization is involved in multiple interests, one of which could possibly corrupt the motivation of the individual or organization."

In February, a $6 billion deal to sell one of two companies where he moonlights netted Barchi enormous profits, but officials won't say how much he made off the deal.

Barchi has long collected payments from both Rutgers, and two companies that do business with it, in an arrangement that creates a stunning conflict that was first explored by the Bergen Record's Patricia Alex and Shawn Boburg.

Ten months into his tenure at Rutgers, many were shocked to learn that Barchi also made more than $300,000 in compensation from two different companies: Princeton-based Covance, and VWR International, based in Radnor, Pennsylvania.

"It smells to high hell quite frankly," Harvard professor Jay W. Lorsch, who focuses on corporate governance, told the Record at the time.

A "contract research organization" that spun off of Corning Incorporated in 1996, Covance provides drug development and animal testing services, and has been accused of abusing primates at facilities in Germany and the United States.

Barchi made $226,295 during 2014 as a member of Covance's Board of Directors, including $125,000 cash and $101,295 in stock awards.

But, Covance had pulled in about $100,000 in business from the medical school that is now a part of Rutgers, between 2008 and 2013.

Perhaps because the scandalous story broke over the summertime in 2013, when the campus was quiet, not much came of it over the past 19 months.

In response to public questioning, Barchi explained his side of the story at the September 2014 University Senate meeting, where he pledged to continue moonlighting, but also not to get involved with any university decisions involving the companies.

"I have made that disclosure and I have guaranteed this board and I'll guarantee you that I will not be involved in any decision that has anything at all to do with this university, either positively or negatively, for those companies," he told the crowd.

"And that's just the way I've always operated. I've done it for my entire career involvement with these companies and others. And that's the way I intend to do it going forward."

Barchi also said that the pay he received for serving on the boards was fair market value.

"You will find that [the compensation is] right at or below the median compensation for any other board. They're not overpaid. It is what it is in that kind of business."

According to StreetInsider.com, Barchi had 5,658 shares in Covance as of December 31, when he gained 308 additional shares for his service on the board.

And if he held on to those shares until February 18, when the sale of the company was finalized, they would have been worth $639,495.

All Covance shareholders were compensated $75.76 per share, and given about one-fourth as many shares of Labcorp stock as the deal was finalized.

Labcorp will allow the company to continue operating under the name Covance, and it will continue to be based out of Princeton.

Both companies do business with Rutgers.

Barchi ignored questions about the deal when New Brunswick Today approached him on March 26, refusing to answer.

"The president formally recused himself from any and all discussions or decision making regarding these companies and has had no involvement with business decisions between the companies and the university," said a Rutgers spokesperson.

Rutgers added that purchasing decisions and management of the Covance contract are handled by University Procurement Services, though it would seem implausible for Barchi's subordinates in that department to not be aware of and influenced by Barchi's ties to the company.

Rutgers officials have repeatedly refused to say how much Barchi made off the sale of Covance.

"Like all employees of Rutgers, and indeed all private citizens, he does not discuss his private finances," said university spokesperson E.J. Miranda.

BARCHI'S OTHER, BIGGER CONFLICT OF INTEREST

VWR International is a laboratory supply company that has been criticized for union busting.  The most recent records available show Barchi making over $100,000 as a Director.

That company received nearly $15 million in contracts with Rutgers between 2008 and 2013.

Records provided to New Brunswick Today show that, just ten days after Barchi took office, the medical school agreed to extend a contract with VWR International for an additional year.

While he is not the only college President to also draw compensation from a corporation, Barchi's side work stands out because of the sheer income he makes from it, and the fact that the university does business with his companies, raising questions as to who benefits from the crossover.

According to a 2011 survey cited by the Bergen Record, only 3% of college presidents make more than $300,000 sitting on corporate boards, further contextualizing the irregularity of Barchi's arrangements.

The Covance deal is just the latest development, as the company was sold in February to Labcorp for $6.1 billion.

Rutgers officials said Barchi is no longer involved in the North Carolina company that bought Covance, though it's still not clear if he owns any stock in it.

According to Barchi's most recent financial disclosure statement, along with his wife who is a Rutgers professor, he owns more than $500,000 worth of real estate outside New Jersey, but none in the Garden State.

The Barchis also reported owning more than $250,000 worth of art, jewelry and collectibles, and one or more boats valued between $100,000 and $250,000.

But Covance was by far Barchi's biggest investment, with more than $500,000 in stock as of 2014.

In his financial forms from the prior year, he had reported his stake in Covance as "greater than $50,000 but not greater than $100,000."

Several state legislators, including the Senate Majority Leader Loretta Weinberg, took a stance against Barchi's private-sector side work following the original revelations about Barchi's ties to Covance and VWR, and called on him to resign from the side jobs.

But Governor Chris Christie took to Barchi's defense, passing the buck to the school's powerful governing board: "If the [Rutgers] Board of Governors is comfortable with it, they’re the ones running Rutgers University day-to-day, not me.”

Rutgers officials said that the board was aware of Barchi's other jobs, and had approved the pre-existing arrangements for him to sit on the boards, when they hired him in 2012.

Barchi joined the Covance board in 2003, and the VWR International board in 2006.

"I've been in this for a long time," Barchi said months later under questioning from New Brunswick Today.  "It was fully disclosed to the board when I came here before I said I would come... and those were the terms under which I came."

But not everyone saw it like Barchi did, including many of the university's students and faculty members.

"Rich board members may see this as normal, but faculty members see this as proof that the president is living in a very different world than they do," Rutgers-Newark professor Robert Snyder told The Record.

VWR International's filings with the federal government show that the company is proud to have Barchi on the board, but considered whether or not he was "independent."

Though the company is not subject to rules requiring a certain number of board members to be independent, the filing does acknowledge that the board considered Barchi's employment at Rutgers in evaluating his independence.

"In determining Dr. Barchi’s independence, the Board considered that the Company had net sales to Thomas Jefferson University, where Dr. Barchi served as President until August 2012, of less than $0.1 million during 2012 and net sales to Rutgers, The State University of New Jersey, where Dr. Barchi began serving as President," reads the most recent filing.

It was not until July 9, the same day Rutgers handed over documents to The Record, that a memo was issued advising high-level officials at the university to exclude Barchi from any decisions involving the two companies.

According to his financial disclosure forms, Barchi also owns stock in more than 40 other companies.

The companies Barchi's stock range from popular brands like CVS CareMark and Apple Inc., to more controversial entities like Halliburton and Chevron Corp.

Both he and his wife also own stock in city-based Johnson & Johnson, whose worldwide headquarters neighbors the Rutgers campus.

PREVIOUS PRESIDENT DID NOT GET PAID BY CORPORATIONS

By comparison, Barchi's predecessor Richard McCormick was the University President while he served on three boards, including those at the State Theatre, Robert Wood Johnson University Hospital, and the NJN Foundation.

But each of those organizations are non-profits, and McCormick received no compensation at all for his service on any of the boards.

Barchi is not the first Rutgers President to come under fire for membership on a corporate board.

According to a February 1993 article in the Newark Star-Ledger, McCormick's predecessor Francis Lawrence sat on the board of directors at Chemical Bank, and saw no conflict of interest when the board of governors voted to set up an account at the bank.

"I had nothing to do with the decision," Lawrence said at the time. "Those decisions were made in 1989 before I came on board."

Not satisfied with Barchi's explanation of the side jobs, New Brunswick Today took to the microphone at a University Senate meeting in September 2013 to ask him a simple question: "Why won't you resign and work for Rutgers full-time?"

In his defense of the side work, Barchi relied heavily on arguments that they had been longstanding and disclosed, pointing to the fact he had been allowed to hold private-sector board member positions in his previous jobs.

"So let me say first that I've been on these boards for, in some cases, a decade or more, alright?" Barchi began.

"I've served on these boards when I was the president of a major healthcare university. I served on these boards when I was provost of a well-respected Ivy league institution," Barchi continued.  "And every step of the way I have disclosed my involvement to the company and to the boards."

"I've put in place the kinds of protection we need to protect me and the institution," he told the crowd.  "It's all very above board and very public."

He ultimately said holding private-sector side jobs was standard practice for university presidents: "Many if not most of our peer institution presidents are on boards in the same way that I am."

IS EVERYBODY ELSE IS DOING IT?

New Brunswick Today asked Rutgers officials to back up Barchi's claims that his side jobs were normal back in September 2013.

Within hours, Rutgers Vice President of Governmental Relation Peter McDonough responded with a list of mostly private universities where presidents served on corporate boards for pay: Harvey Mudd College, Rennsaellaer Polytechnic Institute, Boston University, and the University of Miami.

But several of McDonough's examples did not hold up to scrutiny, as his assumptions about Boston University and University of Miami proved to be off-base, and several other examples differed significantly from Barchi's situation.

"As for other presidents who serve on boards of companies that may do business with their universities, one can only assume... that Boston University probably uses DuPont products and that the University of Miami probably subscribes to the media and information services of Gannett."

As it turns out, Miami's President Donna Shalala had left the Gannett board more than two years prior, and Boston University said that it does not use DuPont products, though their president makes $293,699 serving on that corporation's board of directors.

"Boston University has no direct business dealings with DuPont," said spokesman Colin Reilly. "If the university did have business dealings with DuPont, they would first have to be reviewed and approved by the Audit Committee of the board. Also, each year the Executive Committee reviews and approves the president’s outside activities."

But some of the high-level administrators cited by McDonough did show the potential for conflicts of interest between their public and private work, both involving the board of directors for New Brunswick's own major corporation: Johnson & Johnson.

The University of Michigan's former President Mary Sue Coleman made a $603,357 salary in that job, but also earned $110,000 for serving as a Director at Johnson & Johnson.

Coleman left office last July, after more than a decade in office.  Like Barchi, she donated some of her pay to the university she worked at.

"I'm perfectly well compensated," Coleman said, as she announced she would donate an amount equal to her recent salary increase towards a scholarship fund supporting opportunities to study abroad.

"Since President Coleman sits on the J&J board, she is not involved in discussions or decision-making involving J&J purchases or investments on behalf of the university," Michigan spokesman Rick Fitzgerald told New Brunswick Today at the time.

"Her position on the J&J board is disclosed to the Vice President and Secretary for the publicly elected Board of Regents."

Coleman was replaced by someone who does not appear to serve on any corporate boards.

McDonough had also cited the University of California-Los Angeles' (UCLA's) Vice Chancellor of Health Sciences Eugene Washington, another J&J board member.

For their part, UCLA officials said they weren't sure if they used J&J products.

"I am not sure whether or not the University of California Los Angeles and/or the UCLA Health System purchases goods from Johnson & Johnson," wrote Dale Tate, the Executive Director of Communications and Government Relations at UCLA Health Sciences.

"But as Vice Chancellor for Health Sciences and Dean of the David Geffen School of Medicine at UCLA, Dr. Washington has no role in procurement decisions, which are handled by the main campus and the University of California system."

Another situation cited by Rutgers officials is different only because of the ubiquitious nature of the products involved.

Mary Klawe earns $250,000 serving on Microsoft's board on top of her base salary of $400,000 as President of Harvey Mudd College.

Unsurprisingly, the private college does business with the corporation, which pays its President 62.5% as much as the school does.

According to spokeswoman Judy Augsberger, Harvey Mudd, "uses Microsoft products in the normal course of business and obtains these products through the same channels and with the same pricing as any other college or university."

"President Klawe discloses her relationship with Microsoft every year on both the Harvey Mudd College conflict of interest form and the Microsoft conflict of interest form. The audit committees at Harvey Mudd College and Microsoft review their respective forms," said Augsberger.

Rensselaer Polytechnic Institute, a private college, confirmed through a spokeswoman that their president, Dr. Theresa Jackson, is a member of the Board of Directors of IBM, FedEx, and PSE&G, but did not confirm or deny whether the institute does business with those entities.

"Rensselaer Polytechnic Institute, and the corporations on whose Boards Dr. Jackson serves, have policies and procedures regarding conflicts of interest. Dr. Jackson follows those policies and procedures," said spokeswoman Allison Neuman.