I SYSTEM Little Rock,AH 72201 DATE: August 3, 2016 TO: Dr. Charles L. Welch, President Arkansas State University System FROM: Jo LunBeck Assistant Vice Chancellor for Administration RE: Arkansas State University?Jonesboro Chancellor Potential Noncompliance with State of Arkansas Law During a review of concerns outlined in EthicsPoint Case_31 (Case 31), Internal Audit (IA) noted occurrences of potential noncompliance with a State of Arkansas law that were outside the purview of Case 31. Because IA deemed the occurrences required administrative review, this memorandum is serving as noti?cation of the potential noncompliance. The Arkansas State University-jonesboro (ASUJ) Chancellor?s activities may raise questions under Arkansas Code Annotated (A.C.A.) 21-8?304, Prohibited Aoiz'oz'tz'or, when he appeared to use his position to secure financial assistance for a family member. For example, three occurrences have been provided for your review and consideration: 1. An email with a family member?s resume attached, dated November 25, 2015, from the Chancellor to an individual who works for a partner for Subject: . . . [family member], states: .. I would like to talk to you about [family member] [family member] is very interested in NYIT but frankly, we?d need some sort of help to make that a reality. Perhaps we can find a way to be mutually helpful. A subsequent email, dated November 30, 2015, from the individual to the Chancellor, Subject: Tuition Exchange Program, includes a forwarded email with the Tuition Exchange Program guidelines, and states: .. Arkansas State should look into joining the Tuition Exchange Program [family member] would then be eligible for a 100% scholarship to NYIT. An email, dated November 30, 2015, from the Chancellor to the individual, states: . . Will check but occurs to me that maybe we should just create together an ?exchange? as part of our partnership since you will have employees here limit it to 5 or so new ones a year? With eligibility requirements to sustain, etc. maybe NYIT employees and dependents could pay the IN?State rate (unless they qualified for a ?better? rate via an SAT score, etc.) this would amount to a signi?cant ?discount? (neighborhood of 66% over top rates) so maybe this same discount rate would be applied to ASU employee dependents at NYIT just a thought. . . 1 A 7.4 22/26 In an email, dated the same day, the individual responded to the Chancellor: Subsequently, on January 5, 2016, the Chancellor emailed the individual again, the email states: . . you have the better idea .. . if OK with you I will start having my I-IR folks draft the Exchange MOU. . . .. On a more personal note, attached here is [family member]?s resume, including a website address that has some photos and provides more info. There are many personal, professional and political reasons that I continue to encourage [family member] not the least of which is thatI think it is a good As a friend, however, I am sure you are aware that we would need some substantial assistance to make this ?nancially viable, simply due to the number of ?intervening opportunities? I do not know what options might be available .. . but any consideration would be greatly appreciated for sure, here, if [family member] were to attend NYIT, it would be seen as a mark of validation and ?good for the order? of all we are doing and plan to do together maybe [family member] could be part of the vanguard of the ?exchange? plans we discussed. I know I deal with these types of?special requests? every day and, if it looks good for all concerned, do my best to make things happen. I do not pretend to know your options or whether there are any. Of course, I speak as the father, I would love for [family member] to be able to consider something from NYIT within the next six weeks or so. Regardless, I appreciate your time and attention and friendship. . . The individual emailed the Chancellor on the same day and responded: Approximately three weeks later, on january 25, 2016, the Chancellor emailed the individual the following: The Chancellor emailed the individual again one minute later and copied the Vice Chancellor for . . I will work . . . [family member]?s request and carry the answer to 9? . Jonesboro; see you onJanuary 215?. . . . . Also on a person [sic] note I want to thank you for your interest in [family member] If more could be done, we would be honored and indebted and would hope to one day return the favor. 3, Student Affairs (V CSA). The email stated: A 7.4 23/26 A 7 4 24/26 Please consider this an informal note to simply rekindle the dialogue. I have included who oversees ?nancial aid and enrollment at A?State. . . . [W]e began discussion ofa possible MOU between NYIT and State regarding dependent tuition rates. I believe the timing is propitious for moving this idea forward. Plus, we have a Board of Trustees meeting in late February and IF any agreement needed approval (not sure it does), that would be a good time to ask for it. And, I see no problem with what I am suggesting below. I believe this agreement should apply ONLY to UNDERGRADUATE students at present (perhaps later a separate MOU can be crafted for graduate students). This COULD get complicated but I prefer to keep it as simple as possible. To me, there are only two fundamental variables: a) the tuition/ fee rate assessed each population, and b) the question of whether these students would qualify for additional ?institutional? scholarships such as those associated with certain test scores. . . . Frankly, I do not believe there will ever be large numbers of students who will ever be attending the ?other? institution but a reciprocal agreement of this sort would be widely viewed as yet another mutual benefit of a partnership which holds such great promise. . . An email dated February 24, 2016, from the Chancellor to the Vice Chancellor for Finance and Administration (VCFA) and VCSA, states: for NOW In informal exchanges with Edward Guiliano and folks at NYIT we have discussed another possible point of collaboration by providing the dependents of employees of each institution some ?discount? 0n undergraduate tuition We know that there are not likely to be many ?takers? but perhaps some 5? An email, dated the same day, from the VCFA to the Chancellor, states: . . When you brought this to my attention previously, . . . [Assistant Vice Chancellor for Human Resources] and NYIT HR rep had preliminary conversations .. . Let me also follow up .. The Chancellor responded to the VCFA: ?Let?s talk ?rst. An email, dated April 21, 2016, from the Chancellor to Rev. Wildes at Loyola, with a subject that includes ?Daughter at Loyola; From Chancellor Tim Hudson, Arkansas State University?, states: .. I have to be somewhat conscious of costs. Loyola has offered . . [family member] a scholarship However, if there is any additional assistance that you or others might provide, I believe that would confirm . .. [family member]?s decision A 7.4 25/26 I know you must deal with these matters every day (I know I do) and I apologize for putting another case on your desk. .. . Any additional financial consideration at this juncture would be appreciated. Meanwhile, if I can ever be of assistance to you or anyone associated with Loyola, I hope you will do me the honor of calling on me. . . The Executive Assistant to the President (EAP) responded to the Chancellor the same day: . . Fr. Wiles asked that I acknowledge and thank you for your email below regarding [family member] attending Loyola. [I-l]e has forwarded this information to [Vice President for Enrollment Management (V and asked that .. . personally review [family member]?s offer and respond to you. The VPEM responded to the Chancellor, EAP, and others, the following on the same day: .. Interesting the student has actually already deposited with us. I will bring it to appeals tomorrow, but likely they have their ?nal offer from us. Call me when you get a chance.? A subsequent email, dated April 27, 2016, from the VPEM to the Chancellor and others, states: ?She has been awarded $2000.00 form [sic] theatre and a $1000jesuit Identity. [family member] should have a revised award letter within a couple of days.? 3. An email, dated April 28, 2016, from the Chancellor to the President of University of South Alabama, Subject: .. . 3227724)! mam/?ed ?r dedrion, states: Mother and I have to be somewhat conscious of costs. A number of private schools, including Loyola in New Orleans and couple in New York, have made [family member] generous and attractive offers If there is anything that you or others might be able to provide at this point, I believe it would confirm [family member]?s decision to attend South. .. . I know you must deal with these matters every day (I knowl do in fact I am interviewing 10 students today for 6 ?ambassador? scholarships they help with me at events, stewardship, etc. and receive the in?state tuition rate in return) and that you always keep the best interest of your students and institution in mind so I do apologize for putting another case on your desk. . . . Meanwhile, if I can ever be of assistance to you or anyone associated with South Alabama, I hope you will do me the honor of calling on me. An email response, dated May 2, 2016, from the President of South Alabama to the Chancellor, states: .. I spoke with Christopher who is associate vice president for enrollment services about [family member]. He is looking A 7.4 26/26 into your .. . [family member]?s application and will determine if . .. [family member] is eligible for some funding. I?ll let you know when I hear from Christopher. .. In an email, dated April 30, 2016, the Chancellor forwarded his original email written to the President to the Executive Vice President, and said: Hate to bother you but we can?t seem to get any clarity for comparison purposes on what might be available at South Even if answer is ?no help? we could make the comparisons to others?I am trying to keep the ?South? option alive ??any advice (Didn?t know whether to send this to you but we are getting to decision time and have not heard with any clarity from South) . . The Executive Vice President responded by email on May 2, 2016: .. Christopher is looking to see if there is a way he can help some with . . . [family member]. He should have an answer this week. . . The Chancellor, responded to the Executive Vice President the same day, and said: ?Many thanks the ?competition? has lined things out pretty clearly )3 for her. A.C.A. 21?8?304, ProhibitedActivities?, Item (21), states: ?No public servant shall use or attempt to use his or her of?cial position to secure special privileges or exemptions for himself or herself or his or her spouse, child, parents, or other persons standing in the first degree of relationship, or for those with whom he or she has a substantial financial relationship that are not available to others except as may be otherwise provided by law. . . Recommendation: IA recommends the ASU System President review and take appropriate action to remedy any noncompliance as noted in the occurrences. Response: I concur with this recommendation and will act accordingly. If you have any questions or desire further information regarding any aspect of the program review, please contact me. cc: Board of Trustees Ms. Julie Bates Mr. Brad Phelps A 7.4 2/26 1? 1?1 ARKANSAS STATE UNIVERSITY TM Audit Report Arkansas State University-Jonesboro EthicsPoint Case_31 Review August 2016 Arkansas State University System Internal Audit A 7.4 3/26 Table of Contents Purpose and 1 1 Case 3] Management Assessment .. 11 Recommendation and Response 17 Comments 17 Attachment 1 .. 18 SI - ARKANSAS STATE UNIVERSITY 53 501 Wnodl?ne. SUIIH 600 Little Huck,AH 7220] o: '501-6604000 1 501-660-1010 DATE: August 3, 2016 TO: Dr. Charles L. Welch, President FROM: Jo LunBeck Assistant Vice President for Administration RE: Arkansas State University?Jonesboro EthicsPoint Case#31 Review PURPOSE AND SCOPE On April 8, 2016, Internal Audit (IA) received an anonymous hotline report, EthicsPoint Case_31 (Case 31) that relayed con?ict of interest concerns for two Arkansas State University?Jonesboro (ASUJ) staff members: Dr. Tim Hudson, Chancellor (Chancellor), and Dr. Deidra Hudson, Director of Study Abroad (DSA). The purpose of this report is to furnish the Arkansas State University (ASU) System President with an assessment of the auditable concerns. The initial scope of the review was de?ned as the period May 1, 2012, to May 31, 2016, except in cases where activities reviewed may have been documented at a date outside the de?ned scope. Information for the audit was obtained primarily through staff and faculty interviews, observations, examination of university account documents, and review of procedures deemed necessary to provide an analysis and comments concerning the following: 1. Compliance with Federal laws, State of Arkansas laws, and ASU policies, procedures, and guidelines; 2. Adequacy of documentation; and 3. Adequacy and application of accounting and operating controls. Because the review was based on limited tests of university records and related procedures, not all instances of control weakness, noncompliance, or operational deficiencies may have been discovered. Any issues or comments on items necessary to be addressed are listed in the Care 31 Management or Comment; sections of this report. BACKGROUND The background items presented below are limited to information that is considered relevant to this review. Case 31 The general nature of the concerns reported in Case 31 were: ?It is great that you are auditing the payments to the Study Abroad site in Spain. However, when are you going to investigate the relationship between the Hudsons and the Rubies? Tim Hudson has hired Pablo Rubio, who is the some [sic] of Alphonso Rubio, the 1 A 7.4 4/26 person who brought us to Spain (btw, Alphonso was on his advisory board when Tim was at UHV, and there is some information that corruption between the two is by [sic] Tim was ?red at UHV). It is a well known fact that the Hudsons have had free vacations to Spain 5! on Alphonso. Chancellor The Chancellor began employment with on May 1, 2012, as a direct report of the ASU System President, Dr. Charles L. Welch. His of?ce is located in the Administration Building on the campus injonesboro, Arkansas. Prior to joining the Chancellor?s past employment, as recorded on his Curriculum Vitae, included: 0 Vice Chancellor at the Texas Tech University System from 2011 to 2012; 0 Special Assistant to the Chancellor for International Programs and Initiatives - University of Houston System from 2010 to 2011; 0 President of the University of Houston-Victoria from 2004 to 2010; 0 Provost and Vice President for Academic Affairs at the University of Southern Mississippi from 2002 to 2004', 0 Associate Vice President for Administrative Affairs and Dean of the College of International and Continuing Education and Professor of Economic Development, University of Mississippi from 1998 to 2002; 0 Founding Dean, College of International and Continuing Education and Professor of Geography and Area Development, University of Southern Mississippi, from 1991 to 1998; 0 Dean, Center for International Education and Associate Professor of Geography, University of Southern Mississippi, from 1987 to 1991; 0 Associate Professor of Geography (tenured) and Development Officer, University of Southern Mississippi, from 1986 to 1987; 0 Assistant Professor of Geography and Development Of?cer, University of Southern Mississippi, from 1985 to 1986; 0 Analyst, Of?ce of the Geographer, Bureau of Intelligence and Research, US. Department of State, Washington DC from 1983 to 1985; and 0 Director, Master?s Program in Economic Development and Assistant Professor of Geography, University of Southern Mississippi, from 1981 to 1983; and 0 Development Consultant, Mississippi Research and Development Center, Jackson, Mississippi, from 1979 to 1980. The Biography oft/ye Chancel/0r, located at states: Preparing the next generation of leaders with a commitment toward a global mindset is a high priority for Hudson; significant growth in the university?s study abroad opportunities for A?State students is a result. .. DSA The DSA is employed as an Hourly Non?Student Extra Help employee since May 1, 2013. The DSA initially reported directly to the Provost and Vice Chancellor for Academic Affairs and Research (Provost), Dr. Lynita Cooksey. The study abroad programs were transferred to the Office for Global Initiatives on April 1, 2015, and the DSA then reported to the Executive Director of Global Initiatives, Dr. Thilla Sivakumaran. The DSA is responsible for managing all logistical aspects of the study abroad programs and serves as the primary contact and source of information in the Of?ce for Study Abroad for the programs. A 7.4 5/26 A 7.4 6/26 The DSA is not required to complete an Appendix A Dirt/0mm qf Potential Con?ict cy? Interert 0r Coryf/z'ct if Commitment. An email, dated June 30, 2016, from the Assistant Vice Chancellor for Human Resources (AVCHR) to IA, Subject: .. . Corgi/1'6! oflnterert?rmr, states: .. as a part-time employee .. . is not required to complete the annual form. I do not have any copies on ?le. . . The Rubios Dr. Alfonso Rubio, also known as Dr Alfonso Rubio Munoz (Alfonso): 0 Holds a doctorate in information science from Universidad Complutense de Madrid [University of Houston?Victoria HV) UHV NEWSWIRE datedJuly 30, 2009]; 0 Signed a Master of Business Administration certi?cate agreement with Hudson in 2005 to allow Spanish-based students to study a curriculum developed collaboratively by faculty in Victoria and Spain NEWSVVIRE dated December 9, 2009]; 0 Elected as a UHV President?s Regional Board Member 2009-2012 NEWSWRE dated July 30, 2009b 0 Founder, President, Chief Executive Of?cer of Grupo Sense, an information, publishing and education conglomerate with of?ces throughout Europe, to which Multisense Espa?a, S.A. (Multisense) belongs NEWSVVIRE dated July 30, 2009, and ?xingiuu?l?gjsg?ggi]; and 0 President of Multisense [Proposal to dated March 28, 2016]. Mrs. Adela Diez (Adela): 0 Alfonso?s wife [1111px 0 Pablo?s and Carlos?s Mother relagccaolivethosimam u?tlg'n?csscimi; Director of the Honors College (DHC) interview]; and 0 Vice President of Grupo Sense, to which Multisense belongs [Letter to Chancellor datedJune 1, 2012]. Mr. Pablo Rubio, a.k.a. Pablo Rubio Diez (Pablo): 0 Alfonso?s and Adela?s son interview; Chancellor?s email dated October 27, 2015]; 0 Received Bachelor?s degree in Business Administration from Manchester Metropolitan University, United Kingdom in May 2009 [Resume on file with Human Resources]; 0 Received Master?s in Marketing Sales Management from ESIC Business School and Universidad ReyJuan Carlos 1. Madrid, Spain injuly 2010 [Resume on ?le with Human Resources]; 0 Employed by Academic Partnerships (AP) from November 2013 to August 2015 in Dallas, TX, Spain [Resume on ?le with Human Resources]; and 0 Employed by from February 8, 2016, to july 8, 2016 Banner System~Human Resources]. Mr. Carlos Rubio Diez (Carlos): 0 Alfonso?s and Adela?s son [lirl?pru/ 0 Received Bachelor?s degree in Business Administration from Manchester Metropolitan University (2004?2007) [Linked in]; and 0 Received MBA, Master of Business Administration Certificate, Blended Program from UHV (2007? 2008) [Linked in]. In correspondence between the Chancellor, DSA, and the Rubios, they refer to each other affectionately using family references, e.g. brother, uncle, cousin, and family. UHV On April 22, 2016, IA contacted the University of Houston (UH) System ChiefAudit Executive (CAE), who has been employed in the UH System Internal Audit Department (IAD) since October 1, 1987, to discuss the Case 31 UHV~related concerns. The CAE explained the UH System IAD had not received any assertions regarding the Chancellor?s relationship with Alfonso, who was a member of the UHV Advisory Board (PRAB) from 2009 to 2012. The CAE indicated the IAD had received a similar issue report related to the former UHV President?s [current ASUJ Chancellor?s] travel and found no wrongdoing. An August 6, 2010, UHV NEWSWRE article titled, UH Prerz'dent Tim Hadron to arrume ?ea/[y created port, reported: .. President Tim Hudson has accepted a new challenge. He is stepping down as president to become Special Assistant to the Chancellor for International Programs and Initiatives. . . Based upon, the UH comments and the information reported in the UHV NEWSWIRE, dated August 6, 2010, IA took no further action on the Case 31 concerns related to UHV. Multisense Multisense, which belongs to Grupo Sense, is the third?party vendor procured for the Lanjaron Study Abroad Program. The Multisense Website ?About Us? section, located at 01:11, states: ?Grupo Sense, formed over 30 years ago and to which Multisense Espa?a belongs, has also provided language training and education for thousands of students in the fields for which they offer services. Over its three decades, Multisense has provided the necessary training and preparation for thousands of professionals who now occupy positions of great responsibility. Multisense was one of the first companies in the world to offer on?line teaching providing classes in technology to students in over 30 countries all over the world. We offer our business and educational experience to students who wish to learn Spanish and become professionals within their chosen ?elds, be it in business, in the health industry, arts or any others. . . IA determined 6 Multisense invoices have been paid in 7 wire transfers from to Multisense (in dollars): 18 students, 2 faculty, and 1 assistant; 13 weeks; 15 credit hours possible February 11, 2014 ll 66,624.70 February 20, 2014 2,000.00 june 16,2014 15,334.01 83,958.71 12 students, 2 faculty, 1 assistant, and 1chaperone; 12 weeks; 15 hours possible April 20, 2015 at 69,808.20 June 23, 2015 2,261.04 55 72,069.24 20 students, 2 faculty (split-time), and 1 assistant; 12 weeks; 15 hours possible February 18, 2016 94,676.93 June 9, 2016 8,091.17 $102,768.10 A 7.4 7/26 The invoices were emailed to the private email account on two occasions: 0 On January 23, 2014, one of the Multisense invoices for the first Lanjaron Study Abroad program was emailed from the private email to the work email; and 0 On February 1, 2016, one of the invoices was emailed from Multisense to the private email, then forwarded to the Study Abroad Administrative Specialist II (SAASII) on February 2, 2016. The method of delivery for the remaining invoices received was not able to be determined. The 2014 and 2015 invoices listed an apartment in Lanjaron as a part of the accommodation charges. The apartment was described by the faculty residents as being owned by Alfonso. IA was unable to determine the apartment portion of the total accommodation charge either year because the amount was aggregated with other Lanjaron locations listed on the invoice in the accommodations category, e.g. Hotel Espa?a, classroom, study area, etc. In 2015, at a faculty member?s request, the DSA made arrangements for the faculty member to reside in an apartment, and the faculty member was instructed by the DSA to pay an additional 200?, or approximately $226.06, upon arrival in Lanjaron. The additional amount paid was charged to cover the difference between the cost of the hotel room, provided for the faculty member by ASUJ, and the cost to rent Alfonso?s apartment. Documentation included with the Travel Authorization (TA) processed on January 31, 2014, indicates the expenses for lodging and meals for orientation week are included in the Multisense invoice. An email from the Executive Assistant to the Provost (BAP) to the SAASII, datedjanuary 28, 2014, Subject: Trudy Abroad Signed TA?rr Spain Trap, states, ?The hotel, lodging and food is a part of the program fee which will be a direct bill. Because the Multisense bill is itemized in broad categories, the portion of the expenses could not be ascertained. An email, dated February 18, 2015, from Alfonso to Marie Trudeau was then forwarded to the DSA. In the forwarded email, dated February 19, 2015, Alfonso states: ?Dear Dee Dee, 3) I would like to know how much you are planning to pay [chaperone], to make the necessary arrangements with Multisense to pay the resulting bill and also know how much work I can entrust her with, such as for instance: a) Could she be the guide for the trip to La Alpujarra ifI tell her which towns and activities to prepare? Could she arrange to show some films through YouTube, with the projector, which could have a cultural interest for the program? c) Will she meet with the students outside the scheduled classes in order to have them practice their Spanish with her? d) What other activities could she prepare? Alfonso? The chaperone?s spouse was a graduate assistant employed by for the Lanjaron Study Abroad program; however, the chaperone had no recorded employment relationship with Study A 7.4 8/26 Abroad paid $2,399.20 for the chaperone?s and assistant?s airfare. If salary expenses were billed to by Multisense for the chaperone?s employment, IA could not ascertain in what capacity she was employed or the amount of the salary because the Multisense bill is aggregated in broad categories with general descriptions, e.g. hiring or guide. Pablo Pablo assisted AlfOnso, his dad, with the Lanjaron Study Abroad program that was provided by Multisense. On November 22, 2013, an email, dated November 15, 2013, was forwarded from the DSA to Pablo, Subject: Spam'rb stated: I hope that your trip home was uneventful We so enjoyed spending time with you. To follow up on our conversation regarding Spanish language instructors, we would pay our instructors around $5000.00 US dollars. I am not sure of the going rate in Spain. We would need two individuals to teach language and culture approximately 2.5 hours per day Monday Thursday for 11 weeks (or 44 days). The program dates are roughly February 2 May 2. It would be best if the instructor has a or is currently working in this capacity at a university or in a language institute. . . A response emailed from Pablo to the USA on the same date, stated: . . About Lanjaron?s [sic]: Thanks for that brief, I will make sure that those cv?s selected will have meet [sic] those requirements you?ve pointed out. Btw, about the over/night trips to Malaga and Cordoba I will be assisting my dad so that all gets plani?ed [sic] to detail. .. The Chancellor endorsed Pablo?s employment with a c0mpany doing business with ASU, involved him in fact?finding with a company potentially doing business with and eventually hired Pablo to work for throughout the years 2013 through 2016. In November 2013, the Chancellor negotiated with an individual on the behalf of Pablo to have consultant work with a company doing business with and he offered in?kind assistance by An email sent Tuesday, November 5, 2013, from the Chancellor?s Assistant to the DSA, Subject: Wed. Dinner Lin, includes the CEO of AP and Pablo as two of eleven guests for a dinner on Wednesday night. An email, dated November 21, 2013, from the Chancellor to the CEO of AP, states: . . Arkansas State is working on content for various certi?cates that can be offered online and in Latin America. We are keen to explore this ?next phase? of online education including the concept of target" language offerings at all levels, such as courses constituting an [sic] MBA and other degrees, and certi?cates in Spanish A 7.4 9/26 A 7.4 10/26 . . . As I suggested when we spoke, I recommend that AP seek a short term consulting relationship with Pablo Rubio, who we both now know and who is generally open to this idea, to abet this process. Arkansas State can offer some in?kind assistance if you choose to make this investment. I believe his background and quali?cations are suited to the task. A framework and deliverables, all open to negotiation, are outlined below. Pablo Rubio would agree to: a two month consulting internship with AP $6000 per month (all to be paid by AP) plus round trip airfare Madrid/ Dallas (start time could be negotiable; we would prefer that he begin here no later than mid?March). work from Dallas for one month (his housing, work space and tasks provided by AP). assign him to work from Arkansas State for one month (his housing, work space and tasks provided by ASU). Deliverables include: develop a strategy to evolve current coaching/ academic assistance models into a bi?lingual format assess current online products in light of Latin America Spanish market assess viability of technology platforms to penetrate Latin America market assess relevancy of materials assess depth of market assess market strategies develop a plan to transfer Spanish language initiatives for other target languages such as Mandarin.? An email, dated April 23, 2014, from Pablo to the DSA, states: .. I will be working for AP for its business in Spain. In order for them to proceed with the payment of my salary Multisense Espana S.A will act as a contractor for the services I will provide AP with. The reason I chose to make it this way is mainly because I knew that Multisense was registered in the State as a contractor already, due to its business with ASU. The version of the form that my parents have is not completely ?lled in and it is extremely important that I share exactly the same information contained in that document here in AP. I would require you to send the document over to me. Is a form called SBEN which is a Certi?cate of Foreign Status of Bene?cial Owner for United States Tax M'tbholding. Obviously, I will make good and con?dential use of it by only share [sic] with AP the information related to Multisense Espana. An email response from the Chancellor dated April 23, 2014, states: Pablo?s resume indicates his employment with AP began in November 2013 and ended in August 2015. An email, dated September 11, 2015, from the Chancellor to the AVCHR, Subject: Intm'm/ Virz'ling ?lcbz'ef states: .. Any forms Multi Sense [sic] ?lled out in order to contract with ASU are maintained in our procurement area; I doubt they are allowed to duplicate or transmit them--I have never heard of that happening. This approach puzzles me: Did AP suggest this mechanism? If so, how did they know of our business with Multi Sense [sic]? Overall, matters are complicated enough and I strongly suggest leaving anything to do with the ASU Multi Sense [sic] relationship in Spain completely separate from AP. ?All things international? in public universities such as ASU are subject to routine independent audits in which any ?deviations? are viewed with suspicion. Of course, Multi Sense [sic] can supply AP with any documents it wants to and/or initiate new ones. I am contemplating having someone in my COS position (or maybe some other?) for a year or so who can help me I would need someone ?uent in Spanish. Is it possible to bring in a foreign national on this basis. How best to proceed in your opinion. N0 rush but probably need to have a ?plan? anyway by end of month. On the same date, the AVCHR responded: We can hire a foreign national. I would like to discuss the potential visa options. . . An email, dated September 29, 2015, from the Chancellor to the AVCHR, Subject; CV Pablo Rubia, states: . . I have ?nished my informal conversations on the opportunity we have been discussing and believe that Pablo Rubio (like most Latin based names his LAST name Rubio is placed in the ?middle? sometimes) is best suited. Attached is his resume. His undergraduate degree is from UK and his masters from Spain. He has considerable computer marketing skills and background (even worked for AP in their Spain operations). . . An email, dated October 16, 2015, from the AVCHR to the Chancellor, asks: [C]an you tell me what salary that you agreed on with Pablo Rubio? Did you have a speci?c Title that you wanted to use? . . A 7.4 11/26 The Chancellor responded the same day: Although the hiring for the Coordinator of Special Projects was handled inconsistently with typical staff selections, the ASU System Associate General Counsel (AGC) advised that Higher Education is exempted from the Arkamar Governor?r Executive Order 15-07 (Executive Order) and Of?ce for Personnel ?$70,000 (plus housing in housing .. . what about Coordinator of Special Projects or Assistant to the Chancellor . . Management (OPM) job Advertz'rz'ng Memo 7?16-15 (State Policy), that states: An email, dated July 6, 2016, from the AVCHR to IA, indicated did not voluntarily agree to be . . All positions, regardless of their FLSA status, must be advertised for a minimum of ?ve (5) business days before being ?lled. . .. However, the policy notes that State of?ces, departments, and agencies excluded from this Executive Order include: 3. Of?cers, employees, and academic personnel of State Institutions of Higher Education; Any of these of?ces, departments, or agencies exempt from this Executive Order may voluntarily agree to be covered by the provisions of this Order. covered by this Executive Order or State Policy. Prior to Pablo?s Visa approval for employment with an email from the Chancellor to an international businessman, dated October 27, 2015, states, . . We should talk soon about a possible relationship for the campus we are building Spanish language program We will have two choices: 1) operate a program ourselves or 2) sub?contract to you (or another supplier). . . . I am going to hire a young man from Spain to help me (Alfonso Rubio?s son but Alfonso himself has NO role in this project) since there is MUCH to do in the future IF you think it would be useful, I can have him visit with you in Spain. The international businessman responded on October 28, 2015: An email dated El 7 ene 2016, (Translation: January 7, 2016] from the Chancellor to the same international businessman, states: 1! .. I will be happy to manage the Spanish language centre! . . Are you in Madrid? Spain? If so, I would like [sic] to meet brie?y with a young man who will come to work for me next month to help manage the project in Mexico. A part of his duties will be to help us make strategic decisions about our Spanish language program speci?cally, would it be best to do our own or to contract with a partner (Of course, I have you in mind for this option). A 7.4 12/26 In an email datedJanuary 8, 2016, the international businessman responds: I am in Madrid an [sic] happy to meet him! I will love to manage the Spanish centre in partnership with you! . . Furthermore, in an email dated the same day, the Chancellor, responds: . . I am asking Pablo Rubio (I believe you might have met his father, now retired, Alfonso at one time) to meet with you at your convenience to simply initiate a dialogue with you on this matter. . . . Also, as you know, you and I will negotiate privately any business arrangement that might develop. I think it could be helpful if Pablo and you spoke brie?y so that he has a better understanding of the scope of your organization and the possible alternatives . . . .. . Currently, my tentative plans call for me to be in Spain inJune of this year perhaps we can meet then as well. . . On January 11, 2016, the AVCHR notified the Chancellor in an email: Pablo had his interview with the embassy of?cials and should receive his Visa within the next two weeks. . . An email datedJanuary 12, 2016, from the Chancellor to the AVCHR, states: ?Remind me of the working title we decided on (he will be doing MUCH more than just helping me with Mexico). . . The AVCHR later responded: ?Coordinator of Special Projects.? A forwarded email, dated January 13, 2016, from the Chancellor t0 Pablo, Subject: 178241, states: . . We will have someone meet you in Memphis on February 5. We will plan for you to stay at our home on the night of the 5th and then move into the apartment the following Saturday. The apartment will be fully furnished and equipped. .. The itinerary was for a round?trip ticket with the ?rst ?ight from Madrid, Spain ending in Memphis, Tennessee (T N) on February 5, 2016. The return flight is from Memphis, TN ending in Madrid Spain on July 28, 2016. The cost of the ticket was $1,193.66 and paid by ASUJ requisition from a carryforward account on February 23, 2016. Once IA provided the Vice Chancellor for Finance and Administration documents supporting the payment on July 8, 2016, the airfare was reimbursed to ASUJ from private funds onJuly11, 2016. Pablo met with the international businessman as the Chancellor had requested onJanuary 14, 2016. On February 10, 2016 an offer letter was approved for Pablo as Executive Assistant to the Chancellor, and the Chancellor was informed the offer was accepted by Pablo on February 11, 2016. Pablo?s salary was listed as $70,000 with a start date of February 8, 2016. When hired, Pablo was not required to complete an Appendix A. An email dated, April 29, 2016, from the AVCHR to IA, states: 10 A 7.4 13/26 ?We have always held that the form is an annual form requirement that we complete in January. New hires after that point would complete the form within 12 months of employment . . . If requested of an employee who began after 1/1 our response has always been that these individuals will complete in January. . . Note: Effective July 2016, ASUJ Human Resources has included the Appendix A in the employee new hire packet. Based on a list provided by the Director of Residence Life to IA on May 3, 2016, Pablo was one of four employees provided free university housing through the Office of Residence Life during the period July 1, 2015, through May 3, 2016. The other three employees listed were required to live on campus as a condition of their employment as Area Coordinators. The rent amount for Pablo?s free housing was not initially included as part of his taxable income by the Payroll Department. After being notified by IA, the AV CHR sent Pablo an email, dated May 5, 2016, that states: . . the housing you receive as part of your compensation package is subject to taxation. Payroll will tax this bene?t on a quarterly basis. . . . You will be taxed on this amount on your May 15, 2016, payroll check. Pablo Rubio resigned from Arkansas State University effective July 8, 2016, (Attachment I). CASE 31 MANAGEMENT ASSESSMENT ABM IA reviewed the following: 0 Information gathered for ASUJ Study Abroad Special Review (SASR) related to Lanjaron study abroad program that is facilitated by Multisense; 0 Multisense invoices for the Lanjaron study abroad program; Applicable employment records; 0 Applicable travel documents; 0 Various online material; and 0 Public records. Note: Because the Case 31 report was received during fieldwork for the ASUJ SASR, information was gathered that was common to both audits. The ASUJ SASR report was issued on July 25, 2016. Results During the review of the Case 31 concerns, IA noted the following instances of noncompliance with State of Arkansas regulations and ASU policies, procedures, and guidelines: 1. Statement of Financial Interest. The Chancellor filed a Statement with the State of Arkansas (Arkansas), Secretary of State, for calendar years 2012, 2013, and 2015; however, the Statement of Interest filed for calendar year 2012 did not include gifts and nongovernmental sources of payment related to a trip 11 A 7 4 14/26 to Spain from June 11, 2012, to june 22, 2012, as outlined in a letter from Adela, Vice President of Grupo Sense, to the Chancellor, dated June 1, 2012, that states: On behalf of the Organizing Committee of the 9th Annual International Conference on Regional Development, CADE (Centro de Apoyo al Desarollo Empresarial) [sic] the sponsors of the conference such as Grupo Sense, I want to express my gratitude for your participation in this year?s event. Having an American scholar with your credentials has no doubt contributed to its growth and impact. These workshops will be attended by local officials as well as entrepreneurs and are a key element of the work of CADE, Grupo Sense and others in promulgating economic development in the area. . . . Fee Summary for [Chancellor] Conference fee: (1750 Euro) waived as invited participant Local Transportation Fee: (400 Euro) waived as invited participant Workshop Fee: (various) all waived as conductor and invited participant? The Chancellor traveled to Spain for the same purpose from june 9, 2014, to July 3, 2014. The State of Arkansas Secretary of State?s Website did not re?ect a Statement of Interest as ?led by the Chancellor for calendar year 2014. The Chancellor received timely no tification of the required filing. An email, datedjanuary 19, 2015, from the AVCHR to a group of employees, including the Chancellor, states: . . The Arkansas Ethics Commission issued an opinion on February 17, 2012, identifying those persons required to ?le a Statement of Financial Interest with the Arkansas Secretary of State. As an individual in charge of departments or a division within the University and who is responsible for the administration of a departmental budget you are required to file a Statement of Financial Interest. The Statement of Financial Interest must be filed with the Arkansas Secretary of State no later than January 31, 2015. Failure to file carries civil and criminal penalties. Filing of the Statement of Financial Interest is the responsibility of the individual employee. Please note, that Arkansas State University does not receive and will not maintain copies of the Statement of Financial Interest. .. The Arkansas Ethics Commission, Advisory Opinion No. (Issued October 22, 1999), states: .. In Advisory Opinion No. the Commission opined that Ark. Code Ann. 21-8-8010) prohibits the receipt of a gift intended to reward a public servant for doing his or her job. The Commission noted, however, that said statute does not prohibit a public servant from receiving a gift conferred on account of a 12 A "7.4 15/26 A 7.4 16/26 ?de personal, professional, or business relationship independent of his or her of?cial status. . . . Because the value of the program exceeds one hundred dollars the free participation would constitute a gift within the meaning ofArk. Code Ann. In accordance with Ark. Code Ann. would need to report such participation as a gift on . . . Statement of Financial Interest. . . Arkansas Code Annotated (A.C.A.) 21~8?701, Person; required Exception! Contents, states: The following persons shall file a written statement of ?nancial interest: 4) An agency head, department director, or division director of state government or chief of staff or chief deputy of a constitutional officer, the Senate, or the House ofRepresentatives; . .. The statement of ?nancial interest shall include the following: (9) The source, date, description, and a reasonable estimate of the fair market value of each gift of more than one hundred dollars (3100) received by the public servant or candidate or his or her spouse or more than two hundred ?fty dollars ($250) received by his or her dependent children; . . . (11) Each nongovernmental source of payment of the public servant?s expenses for food, lodging, or travel that bears a relationship to the public servant?s of?ce when the public servant is appearing in his or her of?cial capacity when the expenses incurred exceed one hundred ?fty dollars The public servant shall identify the name and business address of the person or organization paying the public servant?s expenses and the date, nature, and amount of that expenditure if not compensated by the entity for which the public servant serves; 2. Appendix A Con?ict of Interest or Con?ict of Commitment. On the ASU Dirt/0mm afPa/enfz'a/ Con?ict qf I nteretr or Coryf/z'rt of Commitment (Appendix A), ?led with the Human Resources Department, the Chancellor marked the following selection for each of the 5 calendar years beginning August 22, 2012, to the most recent dated January 27, 2016: . . I have read the Arkansas State University System policy on conflict of interest or con?ict of commitment, and I have no actual or potential con?icts, or the appearance thereof, to disclose. Each of the ?ve Appendix A forms were signed by the Chancellor and signed as approved by the ASU System President. The appearance of a potential conflict of interest exists in that the Chancellor?s Curriculum Vitae, listing ASUJ employment as of May 1, 2012, indicates he was a recent or current board member for Grupo Sense de Madrid, to which Multisense belongs, and Multisense is a third?party provider 13 for the Lanjaron Study Abroad program. Alfonso is the founder of Grupo Sense and is referenced in a recent proposal received by the Chancellor as the President for Multisense. In early November 2012, the Chancellor sent the DHC and the chair of the Department ofWorld Languages and Culture on a week?long, fact~f1nding mission to Spain to explore the possibility of an Lanjaron, Spain study?abroad program that was eventually provided by Multisense. The DHC and were picked up at the airport in Madrid, Spain by Alfonso from Grupo Sense, to which Multisense belongs. Grupo Sense hosted the trip, and Alfonso arranged and took care of the Spain accommodations for the and including lodging, meals, and local travel. The Chancellor?s Office paid for the airfare and reimbursement for other miscellaneous expenses incurred. Subsequently, Multisense became a third?party provider for the Lanjaron Study Abroad program without the use of a competitively bid process that is detailed in the SASR draft report issuedJuly 25, 2016. Because the Chancellor did not report on any of the ASU System Appendix A forms filed for the five calendar years, 2012 to 2016, the appearance of a potential con?ict of interest, the ASU System Administration was not allowed the opportunity to determine whether an actual or potential con?ict of interest or con?ict of commitment existed and to evaluate the ramifications for the university. Therefore, the Chancellor did not receive express written permission to engage in activities that have the appearance of potentially benefiting others as required by the A5 5' Jim?; Conflict of I alarm! or Conflict ofCommz'tment Pat/2'91. The AXU Syria?: Polz'gl (Effective 09/07/07 Appendix A revised 09/25/09), Subject: Con?ict of Intern! or Con?ict of Commitment, states: ?All full-time employees of Arkansas State University; whether administration, faculty, or staff, are obligated to devote their working time and efforts to university activities. Participation in activities outside the university is encouraged so long as these activities do not create either a conflict ofinterest or a con?ict of commitment. Con?ict of Interest. A conflict of interest exists when an employee has the opportunity, directly, or indirectly, to secure personal gain or ?nancial benefit to self or others through in?uencing decisions of the university. Con?ict of Commitment. A con?ict of commitment exists when an employee?s time and effort to outside activities interferes with that employee?s obligations and responsibilities to the university. The Arkansas legislature has passed specific laws governing the actions of state employees with respect to ethical and employment con?icts of interest. Under those laws, conflicts of interest and con?icts of commitment are not always unethical or illegal. If the interests of the university are served by an arrangement in which the con?ict of interest or con?ict of commitment may exist, or if the con?ict is insubstantial or remote, the university may allow the employee to participate in the outside activity but only after obtaining express written permission from the university. 14 A 7.4 17/26 A 7.4 18/26 Examples. The following list provides examples of situations which may involve con?icts of interest or con?ict of commitment and must be disclosed. The list is not exhaustive. Any situation which has the appearance of or potential for a con?ict of interest or con?ict of commitment must be disclosed. 0 Employee or immediate family member ownership, management, or other relationship with an organization doing business with the university; . .. 0 Acceptance of gifts, gratuities, or special favors offered because of university position; and/or 0 In?uencing university decisions or purchases to obtain personal benefit or bene?t for others; .. . Disclosure. When an employee desires to participate in an activity in which a potential or actual con?ict of interest or con?ict of commitment exists, that employee shall complete the Disclosure of Con?ict of Interest or Con?ict of Commitment form and submit the form to the immediate supervisor. After consulting with the employee, determining whether an actual or potential con?ict of interest or con?ict of commitment exists, and considering the rami?cations for the university, the supervisor will return a copy of the form to the employee within five (5) working days with a proposed approval, disapproval, or management plan. . . . No agreements may be entered into between university employees and outside entities until such time as approval has been given to engage in activities constituting a con?ict of interest or con?ict of commitment.? 3. Prohibited Activities. The DSA attempted to use her of?cial position to secure special privileges from an third? party vendor when the DSA asked Alfonso, President of Multisense, to use his apartment for personal reasons. An email, dated February 5, 2016, from the DSA to Alfonso, Subject: Laiy'aran Apartment in?rm, the DSA states: . . The Hudsons are planning a trip to Spain for the Summer. I want to take the children to Lanjaron. Is your apartment free the nights ofjune 22 and 23? I know that the 23rd is El Noche de Sanjuan. I thought the children may like to enjoy the festival there. Let me know if this is a possibility. On the same day, Alfonso responded to the DSA: . . Mi casa es tu casa. Por e1 e-mail de Tim he creido pensado que el 22 23 estidl/zbais en Marbella. El apartamento CStIc'l/a libre para vosotros esos iszas siempre. [Translation] My house is your house. Email Tim I have believed or thought that the 22?23 est bais [sic] in Marbella. The apartment is free for you these days and always. 15 A.C.A. 21?8?304, Pm/az'laz'tedActiw'tier, Item states: ?No public servant shall use or attempt to use his or her of?cial position to secure special privileges or exemptions for himself or herself or his or her spouse, child, parents, or other persons standing in the first degree of relationship, or for those with whom he or she has a substantial financial relationship that are not available to others except as may be otherwise provided by law. . . 4. ASU System Policy Nepotism. The Chancellor violated the ASU System Nepotz'rm policy when he restricted ?duciary discussions with Alfonso to himself and the DSA. These discussions took place despite the DSA reported directly to the Provost, and the ASU System Policy would not have allowed him to have any direct or indirect supervision over any employee to whom he is related by blood or marriage. An email, dated November 22, 2013, from the Chancellor to the DSA, Subject: Lary'aron, states: recommend that you establish a ?regular? time to talk to Spain/Alfonso/Pablo on this program maybe once a week for a few minutes. You might want to bring in others as a ?conference?. The only topic to ?avoid? IF you include others is the budgeting/ invoicing issue which you and I will handle with Alfonso. . . The A5 Syria?; Palz'gl (Effective May 15, 2009), Subject: Neporz'rm, Items 2 and 3, state, respectively: ?Arkansas State University System Nepotism Policy No employee will have any direct or indirect supervision or direction over any employee to whom they are related by marriage or blood. No employee will participate in any peer judgment or administrative review of any employee to whom they are related by blood or marriage. Exception In some extraordinary and narrowly limited circumstances, it may be in the best interest of the system to allow an employee to hold a supervisory position notwithstanding the concurrent employment of a spouse or relative. In such cases, appointment to such a position is only available upon the prior recommendation of the president of the system and approval of the Board of Trustees. In such cases, with input from others within the unit, the campus chancellor and the administrative head of the service area shall develop written procedures to protect the employees involved, and the system, from the appearance of bias, prejudice, or favoritism.? In summary, based upon ASU System Policy, the Chancellor engaged in conduct that warrants disciplinary review. 16 A 7.4 19/26 A 7.4 20/26 The A5 Syria?: 5 tag? andbook, Page 14 and 15, Bra/Jam}? That Mcgy Rem/z? in Action, states: ?Employees are prohibited from engaging in conduct listed below and may receive discipline up to and including termination for such behavior. This list has been established to serve as examples of behavior that could warrant a range of disciplinary sanctions and is not exclusive. Appropriate levels of discipline may be used based on the severity of employee behavior. 0 Violating any System Policy set by the Board of Trustees or any operating procedure, rule, regulation, or guideline established by a campus; .. RECOMMENDATION and RESPONSE Recommendation: IA recommends the ASU System President review, remediate, and administer corrective or disciplinary action as deemed appropriate for the noncompliance with State of Arkansas law and ASU policies, procedures, and guidelines. Response: I concur with this recommendation and will act accordingly. COMMENTS During the review, IA discovered potential noncompliance with a State of Arkansas law not related to the concerns reported in Case 31 that is addressed in a separate memorandum to the ASU System President dated August 3, 2016. The ASU System IA staff appreciates the cooperation, professional attitude, and prompt responsiveness of the faculty, and staff. If you have any questions or desire further information regarding any aspect of the program review, please contact me. cc: Board of Trustees Ms. Julie Bates Mr. Brad Phelps 17 Attachment I Original message From: Pablo Rubio Date: 6/20/16 10:07 AM To: Tim Hudson CC: Lori Winn Rick String Subject: Thank you Dr. Hudson, Please accept this notice as my intention to leave my employment at ASU on July 8, 2016. I will vacate my apartment no later than that date. At this juncture, I wish to return to Europe to pursue professional opportunities and to be near my growing family. I want to thank you and everyone at A-State for the wonderful experience here and for all of the many kindnesses and assistance I received. I learned a great deal and trust my work has been useful. All of you will always have a supporter of the Red Wolves in Madrid. Best wishes, Pablo Rubio 18 A 7.4 21/26