Show Page 4 Two February 26 1975 years later: USU still By Ken Sink Staff Writer It could take three to four years for USU and the state attorney general to clear up all litigation resulting from the USU investment scandal says W Boyd Christensen vice president for business The university is still involved in numerous lawsuits concerning the loss of an estimated $29 million from speculation on the stock market The losses were discovered when the university was the subject of an independent audit in December of 1972 For the past 15 months members of the attorney general’s office have been working on the atUSU investment case tempting to clear up lawsuits against stock brokerage houses across the country stands to lose partially cover the losses The remainder of the loss was absorbed by the university said Rolfe Kerr assistant to President Glen L Taggart “The losses did not find their way to any department or academic program” Kerr said The money came from university investment funds Kerr said Began in 1970 At the recommendation of the state auditor USU initiated an investmnt program in the fall of 1970 Th“-auditor- ’s report million on stocks interest appreciation and stock sales Value fell in 1972 The value of USU’s portfolio fell with the stock market in the second half of 1972 All of the university’s profit and $603332 more was lost as of June 30 1974 Since then part of the loss has been offset by new profits made by USU’s investment program The university invests in securities guaranteed Christensen' said Under the Money Management Act USU is empowered to invest its state money in time cer- suggested the university invest its funds “in time certificates or tificates bonds real estate other short-ternotes” mortgages and loans to college saw students Investment in common The administration greater potential in other areas stocks with state money is than time certificates and the prohibited The university can invest its money was invested in common stocks Kerr said own money in stocks The funds Still at a Loss “There was a feeling in many available for investment in governmental agencies at the stocks come from grants from Utah State University is “still time to move into higher return private donors the scholarship in a loss position” as a result of investments” Kerr said fund building fees and money The Institutional Council from the bookstore student its investment program’s established an investment policy $2864843 loss said Christensen housing union center athletics in June 1971 Under the plan USU would lose $1349840 if its and distribution center - trustee First Security Bank Donald Catron USU controller In the month of January 1975 were to liquidate the four stocks became the investment officer USU owned stock in Federal in USU’s original portfolio USU Catron was put in charge of the Mogul Utah International Eli holds shares in Harvey Group program because he knew the Lilly IBM Minnesota Mining field pretty well Kerr Zenith National Industries investment Elgin and Manufacturing and Monroe National Insurance and AT & T said Incorporated The net realized loss for USU is Catron was later dismissed by a figure found by USU for his part in the in$483086 Five Mutual subtracting USU’s investment vestment fiasco USU’s investment program USU owned shares of five profit from the loss figure In the 1974 budget session the made a profit of $2261511 from mutual funds during January state legislature gave USU a July 1 1970 to June 30 1972 The They were: Dreyfus Leverage special payment of $1068538 to profits came from dividends Fund Harbor Securities Morgan m SE Necdltam Jewelers stitjs Don't Miss this Fabulous One Time m MIKAS A CASUAL DINNERWARE SALE STOCK VERY LIMITED ON OVER 30 MIKASA PATTERNS Wellesly Incom and Investmen Company of America Utah State also made money from investments in time cerGrowth tificates government securities savings accounts real estate and mortgages The total profit made during the month of January was $3210917 The current profit made since July 1 1974 has reduced the $603332 loss figure to $483086 Members of the Higher Board of Education ordered USU to begin a “prudent disposal” of USU’s portfolio on December 4 1972 Catron kept on going with the because he could he pull it out Kerr thought said There is no evidence the motive was personal gain he said The theory is that Catron did it to help Utah State Kerr said The attorney general filed lawsuits against 11 brokerages to recover loses “The lawsuits are a unique case” said William Loos legal counsel to USU “There is no precedent no law no idea of what to do in a case involving a university filing this kind of state program lawsuit” Nine Cases The brokerages being sued includes Merrill Lynch Pierce Fenner and Smith Nine of the cases are still being decided in Federal District court Loos said Aldon Judge presiding judge National Association of Stockbrokers and the USU didn’t have the authority to purchase stocks he said Power No Being a state subsidy USU had no power to invest state funds in common stocks Loos said The brokerages should have known this and the deals are null and void he said was but the brokers continued to sell stocks to him Loos said The deals are null and void because Catron didn’t have the authority to buy stocks for USU he said to a Federal According Reserve Board regulation the customer must receive his stocks within 35 days of purchase and the broker must receive payment within 35 days Loos said The stocks were not delivered to USU within the time limit he said Catron’s removed in authority 1972 The brokers violated the “know your customer” rule of the National Association of Stockbrokers by recommending USU buy high risk stocks Loos said The brokers should have known those stocks were not suitable he said USU and the attorney general’s office are asking for “over $3 million” in their suits said Assistant Attorney that USU contends belongs to the university A suit against the Financial Anderson over the Development Corporation of lawsuits is waiting for a Utah Palm Beach has been settled Supreme Court ruling before he USU received $50000 from the gives his decision Loos said corporation as payment of a loan The Utah Supreme Court is Catron gave the business hearing an appeal by First A lawsuit against Dupont Equity Corporation of Florida of a district court decision First Glore Forgan Inc and Dupont Equity contends USU owes it Wolston Inc has moved to money for stocks bought by bankruptcy court The judge in Catron that case awaits the Utah USU contends that the stocks were not delivered within the time limit and USU refused to pay First Equity for the stocks The attorney general and USU contend that there are four reasons why the brokerages should be sued Loos said The charges say'the brokers violated a SEC regulation one NY Stock Exchange rule one rule of the Supreme Court decision Brokerages named in the lawsuits include: Bear Stearns & Co Blyth Eastman Dillon & Co Bosworth Sullivan & Co Horn-blowHarris Upham & Co & Noyes Inc Merrill Lynch Pierce er Weeks-Hemphi- ll Fenner and Smith Bros Sutro Inc Shearman & Co SUPPORT THE BUSINESSES DISPLAYING THIS POSTER A I 'iui K ONE LRGE GROUP 40 and 45 piece sets Priced Reg up to $90 ANOTHER GROUP Priced up to $95 45 pc and finally ONE LAST GROUP Priced at $120 SK Needham Innhi $5995 $7995 90 Day Free Layaway 141 North Main Middle of t ho block sign of ihe clock General David Wilkinson The amount included interest on the money held by the brokers IGI THEY SUPPORT YOUR PAPER Lehman & Co |