The University of Louisville sued its former president on Wednesday, claiming he and others conspired to divert millions of dollars from the school's investment arm in a long-running scheme.
The lawsuit seeks to recover millions that the university claims was lost during the tenure of former university president James Ramsey.
The university and its foundation filed the suit in Jefferson County Circuit Court in Louisville. Other defendants include Ramsey's chief of staff, Kathleen McDaniel Smith; other former foundation executives; and the law firm of Stites & Harbison, which served as the foundation's legal counsel.
U of L Foundation chairman Earl Reed said the actions alleged in the suit caused "significant financial harm" to the university and foundation, the school's investment arm. He said that the lawsuit is the "right thing to do.
"We believe it is necessary not only to restore confidence in the university, but also to recover funds that were intended to support the educational mission of the university and the success of its students," Reed said.
The suit accuses the defendants of a series of financial improprieties that included diverting money for their own personal enrichment.
Ramsey's attorney, Steve Pence, said Wednesday morning he had not had a chance to review the lawsuit, but said his client "has done nothing wrong. We wish the university would get on with the business of managing what has already been built, rather than tearing it down," Pence said in a phone interview.
Ramsey was forced out as president in 2016.
The suit accuses Ramsey and other defendants of conspiring to divert millions of dollars from the foundation's endowment into speculative and unauthorized ventures, putting the foundation at risk. It says the endowment was depleted through complicated and often unauthorized transactions designed to avoid scrutiny. The suit claims the actions occurred from 2008 to 2016.
The suit also claims that Ramsey and Smith colluded to pay excessive compensation to themselves and others. University leaders announced the decision to file suit after meeting behind closed doors on campus Wednesday morning.
Since Ramsey's departure, the foundation has adopted reforms such as a line-item budget and prohibition on the university president also running the foundation. Ramsey once held both roles in what critics saw as a conflict of interest. The foundation board was overhauled with a new set of members.
To crack down on excessive pay, the foundation was banned from providing deferred compensation. In another move, it agreed to make no investments in startup companies or real estate without written board approval.
A forensic audit released last year shed light on the foundation's woes. It found, among other things, excessive spending on compensation and bad investments in real estate and startup companies.
