BY JIM DOOLEY – A heavily-redacted University of Hawaii report on how it lost $200,000 on its cancelled
Stevie Wonder fundraising concert said UH officials never properly investigated the promoters of the event, failed to obtain cancellation insurance for it and took no steps to safeguard the money after it was wired to a Mainland “escrow account.”
UH President M.R.C. Greenwood released the 57-page report after the UH board of regents spent 7½ hours behind closed doors discussing the concert fiasco and the subsequent re-assignment of Athletics Department Director James Donovan III to a different job.
“The university was the victim of a fraud, probably a very sophisticated fraud,” Greenwood said.
“Our employees made mistakes but the incident that caused it was someone tried to sell us a scam and unfortunately we bit on that,” she said.
Asked where the money went and whether the university will recover it, Greenwood said, “The FBI is in charge of that investigation. Of course the FBI does not share with us everything they know. I think they are quite persuaded that we have been a victim…and we’ll have to wait and see if they can get our money back for us or if they can put us on the trail of people we can extract the money from.”
The idea of staging a Stevie Wonder concert here to benefit the UH Athletics Department began with discussions between department official Rich Sheriff and local entertainment promoter Robert Peyton, according to the report.
Peyton’s name has been removed from the report, as have the names of all other non-UH employees, even including now-departed UH Manoa Chancellor Virginia Hinshaw, who held that office until last month, when many of events in the report occurred.
It is possible to match some individual names, including Peyton’s, with previously-reported details of the cancelled concert.
Peyton and Sheriff, manager of the UH Manoa athletics arena, knew each other casually and had previously discussed staging events at the arena, the report said. Peyton first broached the idea of a Wonder concert to Sheriff in March of this year, the report said.
Peyton had previously done business with a woman who held herself out to be Wonder’s “international agent and claimed to be dealing with” three individuals with connections to Wonder, according to the report.
The names of the woman, her contacts and even Stevie Wonder were stricken from the report.
That began a chain of events that ultimately led to pre-sales by the University of hundreds of thousands of dollars worth of concert tickets, payment by UH of the $200,000 deposit and payment by Peyton of another $50,000 (which he borrowed from an unidentified financial institution), the report said.
Sheriff was aware of Peyton’s background as an entertainment promoter here and thought he “was a good guy,” said the report, written by private attorneys Dennis Chong Kee and Calvert Chipchase.
But the lawyers could find no evidence that “anyone at the University conducted any further review” of Peyton’s background or ability to deliver the Wonder concert, said the report.
The UH was unaware of a $24,196 legal judgment entered against Peyton here in October 2010 or of a mortgage foreclosure lawsuit pending against him in state court, the lawyers wrote.
The report does not discuss the fact that Peyton completed personal bankruptcy proceedings here in early 2010 that resulted in the surrender of personal assets and discharge of more than $1 million in personal debts. The bankruptcy case was first revealed by Hawaii Reporter July 24. Bankruptcy, Bad Debts Trail University of Hawaii Concert Promoters.
Sheriff approached Donovan “who agreed with the concert idea and told Sheriff to ‘handle it,’” the report said.
“Donovan believed that the event was within Sheriff’s scope of responsibilities, as Sheriff had previously handled numerous events at the center,” according to the report.
Sheriff and Peyton began discussing details of the concert in late March and Peyton said the University would have to front expenses because Peyton didn’t have the money, Chong Kee and Chipchase reported.
Donovan refused to advance UH money but was receptive to the idea of using advance ticket sale proceeds to
cover initial expenses, the report said.
Details of the deal went back and forth in April and by early May, the Mainland promoters purportedly representing Wonder, elsewhere identified as Epic Talent, LLC of Miami, began pressing Peyton and UH for approval, according to the report.
A draft “engagement memorandum” was drawn up which required the purchase of “nonperformance insurance” to cover losses if the concert was cancelled.
A concert date of August 18 was set and pre-sales of tickets were to begin on June 18. Included in the deal was a requirement that cancelation insurance had to be obtained by the promoters before tickets sales began or deposit moneys were paid.
But the sales began and the deposit money was paid despite the fact that no one ever secured the insurance coverage, said the report.
Donovan had little say in the final agreement, which was signed by his assistant, Carl Clapp, while Donovan was travelling on the Mainland, the report said.
After Wonder’s agents told the university that he had never agreed to the concert and wasn’t available on the specified date, Greenwood announced that the event had been cancelled and tickets would be refunded.
Donovan and Sheriff were placed on paid leave, although both have since been reinstated.
Greenwood stressed today that no one at UH has been implicated in wrongdoing.
“This has been a really sad episode for the University, our fans and the public. We are very, very sorry, sincerely sorry that this happened,” she said.
“The University of Hawaii employees were motivated by a desire to help Athletics raise revenue and no UH employee benefitted financially from this event,” Greenwood said.
She also released copies of correspondence between Donovan’s lawyer and the University regarding her decision to place Donovan on paid leave and to reassign him to another executive position outside of the Athletics Department.
Donovan’s lawyer, David Simons, said in a July 16 letter to Greenwood and Manoa Chancellor Tom Apple that they “deliberately made Mr. Donovan a scapegoat for what was a systemic problem at the University of Hawaii.
The suspension “ruined his reputation,” Simons wrote in demanding an apology and restoration of Donovan to the Athlietic Director’s post.
“Worse, you not only suspended him but you ordered him to stay silent so he could not let people know the truth,” the letter continued.
“The obvious and only reason you publicly suspended Mr. Donovan was to deflect criticism toward him and away from both of you and from the people who caused this problem,” Simons said.
Greenwood also released a copy of a an agreement dated August 11 which said Donovan would be transferred to a new UH job but paid at his Athletic Director’s salary through March of next year.
The new job carries a three-year term and will pay Donovan $200,640 annually. The University also agreed to pay Simons’ $30,000 legal fees.
“You have conducted yourself with great honor and as a gentleman for whom I have developed an even higher regard and respect,” said Chancellor Apple in a memo on the new arrangement that was also signed by Greenwood.
The Board of Regents met in executive session from 9:30 a.m. to 5 p.m., finally emerging with an announcement that it had approved the settlement with Donovan, despite considerable lobbying for his reinstatement as Athletic Director by a variety of political figures, UH alumni and others.
“We are in full support of the University’s decision to move former Athletic Director Jim Donovan to the UH Chancellor’s office and affirm President Greenwood and Chancellor Apple’s actions in this personnel change,” board chairman Eric Martinson said.
“We apologize for the University’s handling of this matter and are deeply sorry for the concern and upset it has caused in the community,” Martinson said.
The lawyers’ report released today “shows a failure of management in the Athletics Department and additional issues with financial controls at several levels,” said Martinson.