Treasurer McCord, Senator Corman Seek Return to State of PSU Penalties

Their lawsuit argues the NCAA must deposit money into an endowment fund for use in Pennsylvania

Harrisburg – State Treasurer Rob McCord today joined state Senator Jake Corman (R-Centre County) in suing the National Collegiate Athletic Association (NCAA) to recover the first installment of $12 million dollars in penalties that Penn State University paid in the wake of the Jerry Sandusky child sexual abuse case. A state law enacted earlier this year requires the money to be deposited into an endowment fund under the custodianship of Treasurer McCord. The suit was filed in Commonwealth Court.

“Under state law as it currently stands, I have a responsibility to safeguard that money for the citizens of Pennsylvania, who support Penn State with public dollars,” McCord said. “The behavior that led to the penalties occurred in Pennsylvania, the victims were in Pennsylvania, and the funds should remain in Pennsylvania.”

McCord said he did not disagree with one main goal of the July 2012 consent decree between the NCAA and Penn State – the $60 million in penalties should be spent on child abuse prevention and victim assistance programs. He does dispute the right of the NCAA to commandeer funds from a state-related institution that receives a substantial share of its budget through appropriations by the Pennsylvania General Assembly, and to subsequently divert those funds outside the state.

“No matter how virtuous the NCAA’s ultimate plan for the money might be, it cannot achieve those ends by unlawful means,” McCord said. “It must comply with state law and turn over the money to the endowment fund.”

The McCord/Corman lawsuit, filed in the form of an amended complaint filed with Commonwealth Court, points out that last year, the General Assembly passed and the Governor signed into law a direct appropriation of $214 million for Penn State. The state provides additional support to Penn State through capital budget appropriations, student aid grants and loans, non-profit tax benefits, and program funds within the Agriculture Department budget.

Corman and McCord contend the state provides such a significant percentage of Penn State’s discretionary budget that it is impossible to claim the penalties are derived entirely from non-Commonwealth-sourced funds.

Corman and McCord filed the suit in their official capacities. Corman is the Chairman of the Senate Appropriations Committee and was the principal sponsor of the Institution of Higher Education Monetary Penalty Endowment Act, which required the NCAA to deposit the entire $60 million in penalties with the state Treasurer. As the designated sole custodian of those funds under the act, McCord has a fiduciary duty to protect a state asset, and in this case, seek deposit of the $12 million payment into the fund. As Treasurer, McCord is the custodian of all Commonwealth funds, approximately $90 billion in public assets.

The lawsuit describes the establishment of the consent decree, noting that Penn State entered into it under threat of the so-called “death penalty” – a ban on participating in athletic events overseen by the NCAA, at a cost of tens of millions in revenue to the university. It goes on to note that the NCAA unilaterally decided after signing the consent decree that it would spend the $60 million penalty mostly outside of Pennsylvania’s borders. The NCAA’s intended use of the fund is not detailed within the consent decree, and it has not identified the child abuse prevention programs to which money will be directed.

Corman was repeatedly rebuffed in his efforts to hold an in-person meeting with NCAA President Mark Emmert to discuss the use of the funds and ensure they would be applied to appropriate Pennsylvania organizations and programs. An NCAA vice president contacted the senator by phone and refused his request for oversight of the funds and repudiated his right to keep the $60 million penalty money in the state.

“It is apparently the NCAA’s belief that it is not accountable to the elected authorities of this Commonwealth who are responsible for ensuring the appropriate and lawful expenditure of public-generated dollars,” McCord and Corman said in their filing.

The suit further traces the creation of Penn State as a land grant school under the federal Morrill Act of 1862. The Morrill Act made grants to states, not to institutions; by accepting the grants, states agreed to carry out the educational purposes of the act, which are still codified in federal law. In accordance with that commitment, Pennsylvania continues to fund and regulate Penn State.

Several suits have been filed during the past several months in state and federal courts concerning the NCAA’s sanctions against Penn State. McCord is among several defendants in a suit filed by the NCAA in federal court, due to his role as custodian of the funds under state law. On March 14, McCord asked the U.S. Court to delay considering that case until other state and federal legal proceedings are resolved.

The consent decree imposed a variety of financial and non-financial penalties on the university for its handling of reports about the actions of Sandusky, a former assistant football coach who was eventually convicted for child molestation.

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Click here to see a copy of the complaint filed in Commonwealth Court