Three University of Arkansas System trustees — Reynie Rutledge, Kelly Eichler and Morril Harriman — have ties to businesses that stand to earn at least $195,800 from a $160 million project to add upscale seats to Donald W. Reynolds Razorback Stadium in Fayetteville, public records show.
The trustees’ board, meeting at the C.A. Vines Arkansas 4-H Center west of Little Rock, is to vote today on whether to hire the businesses. A board committee approved the hires Wednesday.
Two Little Rock companies will split about $163,800 as underwriters for a $120 million bond issue for the stadium project, according to University of Arkansas spokesman Mark Rushing.
Stephens Inc. of Little Rock would serve as one senior underwriter, according to a resolution before the board. The Stephens company lists Eichler’s husband, Brad Eichler, as an executive vice president, head of investment banking.
Crews and Associates investment bankers of Little Rock, the other senior underwriter, is affiliated with First Security Bancorp of Searcy. Rutledge, the trustees chairman, is First Security’s president and chief executive officer, according to the companies’ websites.
The Mitchell Williams law firm of Little Rock is recommended as legal counsel for the bond issue. Harriman is a lawyer with the firm.
Mitchell Williams likely would earn $32,000 to $92,000 for the job, depending on the bond issue’s complexity, the university spokesman said in an email. Bond counsel compensation since 2013 has averaged about $60,000 per project, Rushing said.
Arkansas Code 21-8-1001, concerning conflicts of interest, says no state board member “can participate in, vote on, influence or attempt to influence an official decision if the member has a pecuniary [financial] interest in the matter under consideration.”
Eichler and Harriman don’t think that’s a worry in this case. Rutledge was absent from Wednesday’s meeting because of illness and couldn’t be reached for comment.
Harriman and Eichler were present for Wednesday’s committee meetings, including the votes to hire underwriters and legal counsel for the bond issue.
During the meeting, Harriman said University of Arkansas lawyers had told him he could vote on the resolutions without a conflict of interest because he isn’t an officer or equity member of the law firm.
He decided to disclose his affiliation with Mitchell Williams and told the board that he would abstain from voting, despite the legal opinion that it was permissible for him to vote.
Except for Harriman’s abstention, the committee’s voice vote appeared to be unanimous for Mitchell Williams.
Eichler, who joined the board in March, said she participated in the voice vote to hire her husband’s firm as a bond underwriter, which sell bonds to investors.
Conflicts of interest exist every day and aren’t illegal, as long as they don’t include self-dealing, Eichler said in an interview after Wednesday’s meeting.
“Stephens doesn’t rely on me to get business,” she said.
Also, her husband isn’t part of the bond section at Stephens, Eichler said. If the trustees had voted on an investment banking matter for Stephens, she said she would have abstained from participating.
Conflict-of-interest guidelines by a national university association go further than state law and consider actual and apparent conflicts of interest.
“If reasonable observers, having knowledge of all the relevant circumstances, would conclude that the board member has an actual or apparent conflict of interest in a matter related to the institution, the board member should have no role for the institution in the matter,” according to the Association of Government Boards of Universities and Colleges in Washington.
The group’s “Conflict of Interest” statement also goes beyond abstaining from votes.
If a university board member doesn’t vote because of an actual or apparent conflict of interest, “ordinarily the board member should not participate in or attend board discussion of the matter,” the guidelines say.
Ethics experts at the organization weren’t available Wednesday to answer questions about UA trustees’ hiring of firms with which they are associated.
The University of Arkansas System has its own standards of conduct for trustees regarding conflicts of interest.
“A trustee has an indirect interest in a transaction if (i) another entity in which the trustee has a material interest or in which the trustee is a general partner is a party to the transaction or (ii) another entity of which the trustee is a director, officer or trustee is a party to the transaction. A trustee shall also be deemed to have an indirect interest in a transaction if any member of his or her immediate family is a party,” the policy says.
But a conflict-of-interest transaction may be approved by the board “if it receives the affirmative vote of a majority of the trustees on the Board, who have no direct or indirect interest in the transaction.”
UA Trustee Cliff Gibson said he isn’t worried about the close associations of board members with companies the system hires.
Gibson and trustee and former U.S. Sen. David Pryor voted against the stadium expansion project earlier this year and spoke critically about it again Wednesday.
But Crews and Stephens Inc. were the lowest bidders among interested underwriters, Gibson said, and an independent company that advises UA recommended them.
“Just because Rutledge owns the bank that gave the lowest bid doesn’t bother me,” Gibson said. “I want the best bang for the buck for the University of Arkansas.”
Arkansas Ethics Commission director Graham Sloan said Arkansas law “prohibits members of boards and commissions from participating in the decision-making process if they have a financial interest in the matter under consideration.”
Competitive bidding, when a board accepts the lowest bidder, can be an exception, Sloan said.
Although UA board committees Wednesday approved employing Stephens, Crews and Mitchell Williams, a vote of the full board today is required to make it official.
A Section on 09/08/2016
Sign up for free, daily email alerts from the Arkansas Democrat-Gazette
