Dowling College paid $4.6M to businesses with ties to trustees, records show
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Dowling College, the financially struggling Oakdale liberal arts school, paid more than $4.6 million over a period of about five years to businesses with ties to four of its trustees, federal tax records show.
Most of the payments -- about $4.5 million between 2006 and 2010 -- went to Lessing's of Great River, a food and restaurant company that provided cafeterian services, according to Internal Revenue Service records. IRS records also show a Dowling trustee's son-in-law worked there.
Dowling disclosed the ties between trustee Gerald Curtin and Lessing's in its 2010 federal income tax return, a Newsday examination of the school's IRS filings from 2006 to 2010 found.
While federal tax law doesn't forbid such contracts, questions about the ethics of similar business arrangements that benefitted friends or relatives of college trustees have arisen at institutions of higher learning across the country. One concern has been whether colleges get the best work for a fair price when they fail to cast a wide net before hiring a company for a job.
Last fall, Newsday reported that under its current board of trustees, Dowling has been plagued by steep enrollment losses, millions of dollars of debt, a small endowment and a poor borrowing rating. Dowling has had six presidents in the past seven years -- including Norman Smith, who was appointed earlier this year and is serving in an interim role.
Trustees oversee financial and academic operations and are often expected to make financial contributions in addition to bringing a diversity of expertise and fundraising skills.
College governance experts contacted by Newsday said, in general, business transactions involving people with ties to trustees at institutions of higher learning can raise questions about ethics, favoritism and inside dealing.
"The appearance of conflict oftentimes can create more of an embarrassment to an institution than they might expect," said Richard Legon, president of the Association of Governing Boards of Universities and Colleges, which provides guidance to trustees and board and campus leaders.
'We have nothing to hide'
Michael Puorro, chairman of Dowling's board of trustees, would not consent to an interview but stated to Newsday in an email earlier this year, "We have nothing to hide."
"Trustees have always fully abided by our conflict of interest disclosure as reported to the College's Committee on Ethical and Professional Conduct and to all relevant governmental entities," Puorro wrote. He noted the trustees have provided "extraordinary" funding and gifts.
In 2010, the Chronicle of Higher Education examined 618 private nonprofit colleges and found one in four had ties with trustee-affiliated companies. The Chronicle said such ties could be harmful, noting concerns about favoritism in financial dealings at private schools had existed for years.
On Long Island, two other private nonprofit colleges made disclosures on their 2010 IRS filings concerning grants, employment and business transactions involving people with ties to the institutions.
Most organizations exempt from income tax -- such as nonprofit colleges and universities as well as certain political organizations and nonexempt charitable trusts -- file an IRS Form 990 annually.
Dowling's 2010 Form 990 states none of its trustees with personal or business ties to companies paid by the school voted during decision-making for those contracts. That 2010 form states Lessing's received $1 million from Dowling.
The college listed its business transactions with Lessing's on tax forms before 2010 but wasn't required by law to disclose at that time trustee Curtin's ties to the food service company.
However, a 2008 IRS redesign of its Form 990 required such disclosures going forward to promote transparency and reveal possible conflicts of interest.
Link to Lessing's
When Dowling made its disclosure concerning Lessing's on its 2010 tax form, Curtin's son-in-law, Peter Lessing, was working at the food service company, his family's business.
In the past, Lessing's has listed Peter Lessing as its culinary director. He did not return a phone call to the company's offices.
Lessing's has catered weddings at historic mansions, provided food services for schools -- including Dowling -- and runs restaurants such as Mirabelle Tavern at the Three Village Inn in Stony Brook.
Curtin, who has been a Dowling trustee for more than a decade, said in an interview he did not think the school's payments to Lessing's posed a conflict of interest for him. Curtin said he did not vote on the Lessing's contracts.
"We don't talk about it at Thanksgiving and things like that," Curtin said. "If there was any voting on it, I abstained."
Curtin said his colleagues on the board approved the Lessing's contract just as he had voted to approve work by businesses with ties to other trustees.
Asked if there had been competitive bidding for the Lessing's contract, Curtin would only say private colleges have "more leeway" in selecting contractors than government agencies.
"I know for a fact there's no conflict," Curtin said.
Dealings not uncommon
Tom Ingram, a national expert on governing institutions of higher learning, said it is "good practice to avoid situations where trustees or members of their respective families are part of organizations that do business with the institution."
Other disclosures Dowling made to the IRS concerning business arrangements with people or companies with ties to the school's trustees included $27,200 to Posillico Civil, a Farmingdale construction company; $13,362 to Farrell Fritz, a prominent Uniondale law firm; and $23,970 to Prime Visibility Media Group in Melville.
Trustee Joseph K. Posillico is president of Posillico Civil; trustee John Racanelli is a partner at Farrell Fritz; and former trustee Stuart Henry once served as chief executive of Prime Visibility.
Dowling's IRS filings did not describe the work the businesses did for the college.
Newsday could not locate Henry for comment; a spokeswoman for Prime Visibility said he is no longer with the company. Posillico and Racanelli did not return repeated phone calls.
Back in 1996, when then-New York Attorney General Dennis Vacco was probing transactions between Adelphi University and vendors tied to some of its trustees, The New York Times interviewed Racanelli, already a Dowling trustee. In commenting on the Adelphi situation, Racanelli said, "It's better not to have those kind of involvements, because at every step of the way potential conflicts arise. It's best to stay clear of those kind of conflicts."
In 1997, the State Board of Regents removed 18 of Adelphi's 19 trustees after finding several had engaged in conflicts of interest in business dealings with the university.
In fall 2012, Dowling had 3,716 students -- down more than 15 percent from 2011. Smith said fall 2013 enrollment plunged to 2,500 but final state figures won't be available for several months.