UA Official Questioned In FBI Investigation To Retire

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One of the University of Arkansas administrators cleared in an investigation into a $4.2 million budget shortfall has announced his retirement effective next month.

Donald O. Pederson, the vice chancellor for finance and administration, said he will retire effective June 30, according to a statement released by the university. Pederson has held the position since 1998 and has been a vice chancellor at the school since 1986, according to the UA.

Pederson and other university officials were questioned by the Washington County Prosecutor’s Office last year after $4.2 million was misappropriated out of the UA Advancement Division.  The prosecutor’s office brought in an FBI specialist to assist in the investigation. The situation was investigated by the state Legislative Audit Committee. No criminal wrongdoing was established.

After the prosecutor’s office cleared the UA officials, Rep. Nate Bell, R-Mena, sent a letter to Washington County Prosecutor John Threet, saying he was concerned Pederson may have lied to the Legislative Audit Committee about the university’s finances during an audit before the multi-million-dollar shortfall came to public light.

In an internal review of the UA’s $4.2 million shortfall, the university’s vice chancellor for financial affairs reportedly wrote a letter to Pederson in which she references the “likelihood of conflict of interest violations, intentional effort to disguise, misdirection of funds, risk of fraudulent activity, (and) deliberate efforts to disguise.”

Bell contends that the letter was dated Oct. 19, six days before Pederson allegedly told legislative auditors that he had no knowledge of any allegations of suspected fraud associated with the UA’s money situation.

The letter to Threet states that Pederson at the time signed a document stating, “We have no knowledge of any allegation of fraud or suspected fraud affecting the entity.”

Threet’s office released their findings last December in an investigation into the university’s financial shortfall. While David Bercaw, a deputy prosecutor, found the UA practiced undisciplined and damaging money practices, he said he found no evidence of any intentional wrongdoing or criminal activity. No money slated for expenses went missing; the UA’s Division of Advancement just spent too much money, although all for legitimate expenses, his investigation found.

Timeline Of The UA’s $4.2 Million Budget Shortfall

November 2012 – The University of Arkansas announces that two campus officials have been re-assigned after mismanaging the University Advancement Division’s $10 million budget, to the tune of at least $3.1 million. The two officials were later revealed to be vice chancellor Brad Choate and budget manager Joy Sharp, both of whom later lost their jobs.

December 2012 – The university announces plan to use reserve funds to cover the shortfall.

January – The UA decides against implementing a gift tax to cover the lost money, which was estimated at the time to be $4.3 million.

February – UA Chancellor G. David Gearhart requests an audit from state officials and the University of Arkansas System to determine how the Advancement Division’s budget was mismanaged. “The university has been transparent and accountable about this situation,” Gearhart said at the time.

July – The UA’s Advancement Division undergoes major staff changes, including the firing of Brad Choate and Joy Sharp. Bruce Pontious resigns and is replaced as associate vice chancellor for university development by Mark Power.

August – UA spokesman John Diamond fired after heated meeting with administrators allegedly about public records requests by the media concerning the budget shortfall.

September – Former UA spokesman John Diamond, in testimony to a state committee, accuses Chancellor G. David Gearhart of ordering budget documents to be destroyed following the $4.2 million Advancement Division shortfall.

September – State audit finds the university did not follow “proper fiscal oversight” in the management of the Advancement Division’s money. Chancellor G. David Gearhart tells 5NEWS the budget problems were mismanagements, but were not intentional.

November – FBI and local prosecutors begin investigation into the UA’s budget shortfall to determine if any laws were broken.

December – Prosecutor finds no criminal activity associated with the Advancement Division money problems, but finds several financial discrepancies and instances of money mismanagement. Investigation documents state the university misplaced a $1.5 million Tyson gift and accidentally put the money in the Advancement Division, instead of using it to construct a child center, as had been the purpose of the gift.


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