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UND'S BRUSH WITH THE LAW SPAETH: UND ERRED IN ATHLETIC ACCOUNTING
UND officials say they've changed athletic department fund-handling procedures in response to an investigation by North Dakota Attorney General Nicholas Spaeth.
Three weeks before hockey coach John "Gino" Gasparini resigned as athletic director in June, Spaeth told UND administrators to fix unlawful accounting practices with athletic funds.
Both Gasparini and UND president Thomas Clifford said this week the accounting problems has nothing to do with the coach's resignation as athletic director effective June 30.
Gasparini said Friday it was "strictly coincidental" that he resigned the same month as a Grand Forks meeting on athletic accounts with the attorney general. He said his status as athletic director had been status as athletic director had been "a point of discussion between the president and I for well over a year."
Spaeth said this week, he learned UND's athletic department for years had been violating a law requiring state money to be deposited in state accounts. He said UND officials apparently didn't know they were doing anything wrong.
UND was giving some checks intended for the athletic department to the gambling operations of a nonprofit organization, the UND Athletic Club, headed by Gasparini. The money was returned to the university from gambling profits.
"We were in error in our procedure," Gasparini said.
"Our discussions and meetings with Nick clarified the procedure we should follow and that's been implemented. It doesn't change the funding: it's just the procedure in which money is put into one account to service another. Everything's accounted for."
As Spaeth and UND officials explained it, the athletics department had been giving some receipts, such as from sports arena rentals, directly to the Athletic Club to supplement its gaming revenue. That was so the club could meet a required for North Dakota's charitable and non-profit gaming limit the percentage of administrative overhead at each site.
Gasparini is president of the UND Athletic Club, which runs several non-profit gambling sites under the name of the Glenn Jarrett Memorial Scholarship Fund. It also been referred to at times as the "Jarrett Foundation."
There is no separately incorporated Jarrett memorial fund or foundation involved in the club transactions. "The athletic club and the Jarrett fund or foundation are one and the same," Gasparini said.
Spaeth said he was satisfied UND and its athletic department had corrected their accounting procedures this summer.
UND will continue to supplement gaming operations of the athletic club, using a share of VIP season ticket revenue that previously went directly to the athletic department.
Spaeth met with Clifford, Gasparini and Lyle Beiswenger, UND vice president of finance, the first weekend in June. Spaeth was in Grand Forks then for a Special Olympics event. On June 25, Gasparini announced at a UND news conference he was ending his dual appointment as hockey coach and athletic director. Since July 1, he's returned to full-time duties as hockey coach.
Spaeth said, "I don't see any connection between the two events." He said Gasparini's job status never came up in talks he had with UND administrators.
Spaeth also pointed out that no state money seems to have been lost in the transactions. "It wasn't a case of anyone stealing anything," he said.
At the request of UND's Beiswenger, a certified public accountant firm has been called in to review the Athletic Club accounts and fund-handling this month, as a preliminary to a full audit next fiscal year.
Jerry Lucke, a partner in Coutts, Lucke and Associates Ltd. of Grand Forks, said he expected the initial review of the athletic club records to be completed by September Beiswenger said, to his knowledge, the Athletic Club and its Jarrett scholarship fund gaming operation had never been audited.
Spaeth said he didn't know the exact amounts of money that had been passed through the athletic club gaming books. And he said his investigation wasn't set up to determine how much was involved.
"We just dealt with recent history the last couple of years. It's no secret, though. This had been going on for years."
Spaeth said it's likely that thousands of dollars were improperly transferred in recent years. But he said he found no tax money or state appropriated dollars involved.
The athletic department depends on income from Sioux ticket sales gifts and sports arena rentals for 80 percent of its $1.9 million budget, the UND administration says.
"I don't think anybody was acting in bad faith," Spaeth said. "Based on my interviews, they weren't aware of the legal requirements, and auditors never caught it."
He and university officials said some checks that normally should have been deposited in the athletic department accounts were used to cover shortfalls in the gambling operations. The UND Athletic Club has four gambling sites in Grand Forks and a fifth in Grafton.
"Shortfalls" that Spaeth referred to weren't actual gambling losses, but rather amounts needed to meet the state's required percentage of revenue compared with expenses for prizes and for running the game sites.
According to UND officials, the gaming operation has produced about $60,000 a year in profits for the athletic department.
The state allows a maximum of 50 percent for gaming expenses, such as for prizes. It's common practice for gaming sponsors to supplement gaming income with other funds when their expenses run over the limit, Spaeth pointed out.
Beiswenger and Jerome Kvidt, business manager of the athletic department, said the money that had been funneled through the gaming operation included rental from the Engelstad hockey arena and the Hyslop Sports Center.
They also said the gaming operation received checks intended as team travel reimbursement from the National Collegiate Athletic Association and the Western Collegiate Hockey Association for Sioux post-season playoffs.
President Clifford said this week: "The issue on the gaming has been resolved. We've taken all the corrective measures suggested."
Grand Forks Herald, August 4, 1990