MANAGED $10 MILLION PORTFOLIO

Stansley’s exit from UT raises big questions

His $1,200 a day salary was paid to brother’s firm

The Blade/Dave Zapotosky
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Former Ohio Gov. Bob Taft, left, appointed Rick Stansley, far right, to the University of Toledo Board of Trustees in 1999. When Mr. Stansley’s term expired in June, 2009, UT President Lloyd Jacobs, center, named him University of Toledo Innovation Enterprises chairman and later hired him to run UTIE for $1,200 a day.

Stansley

The University of Toledo’s push for economic development in the region will continue, but the agency it used to dole out nearly $10 million in investments since 2008 is essentially in limbo, following the abrupt departure of a contract employee managing the portfolio.

Deng

An independent review of the nonprofit University of Toledo Innovation Enterprises — which has a portfolio of 16 university-owned or affiliated companies — found that in July, 2011, a year into his tenure running the agency, former UT board of trustees chairman Rick Stansley was paid his $1,200-a-day salary with checks made out to a mining company owned by his brother.

Wedding

UT President Lloyd Jacobs said he was aware that payments for Mr. Stansley were sent to Stansley Mineral Resources of Sylvania, but that he was unaware until recently that the state of Ohio unsuccessfully tried last year to garnish Mr. Stansley’s wages because of a $1 million lien filed in 2012 by the Ohio Department of Taxation for “sales tax.”

The university’s answer to Lucas County Common Pleas Court in a May 20, 2013, letter stated that Mr. Stansley was not and had never been an employee of the university.

As a contract employee, that is technically correct, but multiple UT records referred to Mr. Stansley as holding multiple titles including director of strategic business development, co-director of photovoltaics innovation and commercialization, and interim assistant dean of the school of solar and advanced renewable energy.

Mr. Stansley was also board chairman of Rocket Ventures LLC, a $22.5-million venture-capital fund that recently returned to the Toledo Regional Growth Partnership after being jointly run with the university.

“I don’t want to hide behind the specious difference of an employee or independent contractor,” Dr. Jacobs told The Blade. “Someone at a midlevel management probably looked in a computer and couldn’t find him as an employee and reported that to the court. If it had come to my attention, we probably would have done something a little different.”

In all, the contract with UT netted Mr. Stansley nearly $1 million in public funds since June, 2010. He was paid out of a presidential account, with invoices approved by the director of senior administration operations and the business manager of the president’s office, under the direction of Dr. Jacobs.

That presidential account was budgeted $500,000 this fiscal year, a UT spokesman said, with about $170,000 spent as of Thursday.

Mr. Stansley has received his $1,200-a-day salary under a contract that started on June 24, 2010, and was to run through June 20, 2015, but he resigned earlier this month. Mr. Stansley said he was offered an opportunity to buy a waste-removal operation in Flint, Mich.

Paid on holidays

Some at UT criticized university leaders for allowing Mr. Stansley to be paid his $1,200-a-day salary on holidays, such as Memorial Day and Independence Day. UT professor and union official Don Wedding said Mr. Stansley violated UT policy and the terms of his contract signed by Dr. Jacobs by not specifying what work he performed. The contract calls for a “description of the services performed.”

Mr. Stansley, in an interview with The Blade this week, brushed off criticism, saying the University of Toledo Innovation Enterprises — often called UTIE — has been successful.

“It was about supporting economic development and an off-shoot of good economic development would be the creation of jobs,” he said. “Originally, it was meant to support start-up enterprises.”

Neither Mr. Stansley nor UT officials could provide an estimate of the number of jobs created with the $10 million in public investment since 2008. Heavy investments in the solar industry, especially solar panel-maker Xunlight, skews the numbers because of downsizing, he said.

UTIE was given $10 million from UT in 2008. Since then, according to university finance records, $6.68 million was invested in 16 companies. Another $1.4 million is earmarked for other investments, and $725,687 in cash is left in UTIE accounts.

The fund lost $1.425 million in cash write-downs because of losses at some of the companies the fund invested in. UTIE also had an “equity loss” of $3.86 million, according to its financial reports.

Xunlight deal

For example, among the UTIE investments was $3 million to solar-panel maker Xunlight.

UT records show that Xunming Deng, a UT professor of physics, and his wife, Liwei Xu, created Midwest Optoelectronics LLC in 2002. Midwest Optoelectronics LLC was later listed as a shareholder in MWOE Solar Inc, which later became Xunlight.

UTIE forgave $1 million of its investment in Xunlight. In exchange, Xunlight gave UT ownership of one of its solar-panel manufacturing lines.

UT spokesman Jon Strunk said slightly more than $5 million of equity was transferred to UTIE from the University of Toledo Foundation in 2008. The largest amount of that was in the form of 736,471 units of ST&I MWOE Holding Inc. stock, valued at $4.7 million. That was ultimately devalued to about $100,000 with a $4.6 million write down.

“Prior to the formation of UTIE, UT received equity stakes in several spin-off companies created with intellectual property developed at UT,” Mr. Strunk said. “While the value of that equity rises or falls based on current market valuations, the investments UT made in the equity transferred to UTIE from the UT Foundation in 2009 were never cash assets.”

The $5 million from the university’s foundation was in addition to the $10 million in cash UT trustees provided UTIE.

Last year, UT officials said UTIE had invested $549,996 in Nextronex, which makes electrical inverters. Recently released records show UTIE’s investments in the firm have grown to $749,996.

UT officials were not able to provide information on all the companies UTIE has invested in.

Dr. Jacobs said he is unsure if UTIE will be given another infusion of cash or if Mr. Stansley’s position would be replaced.

“We are not entertaining new investments, at least not for the moment, although there are a couple in the pipeline,” he said. “Watching the portfolio is something that must be done.”

Appointed by Taft

Mr. Stansley, a graduate of Southview High School who dropped out of college after a combined two years at UT and Lourdes College, was appointed a university trustee by former Ohio Gov. Bob Taft in 1999. Mr. Stansley was elected chairman by UT trustees in 2006.

When Mr. Stansley’s term on the UT board expired in June, 2009, Dr. Jacobs appointed him as chairman of the UTIE board, and later hired him to run UTIE, agreeing to pay him $1,200 a day.

The UT board has kept quiet on UTIE and other matters, with the board holding a special, closed meeting last week to “consider the employment of a public employee.”

University officials would not elaborate on the meeting’s purpose, and an email obtained by The Blade shows that UT board chairman Joseph H. Zerbey IV has requested other trustees direct media inquiries to him.

Rebecca Albers, chief of the Ohio Attorney General’s education division, was joined by Sloan Spaulding, another attorney from the A.G.’s office, at the UT board’s Feb.19 meeting.

Neither would comment about why they were at the meeting, and did not identify themselves when questioned by a reporter.

Mr. Zerbey, who is also president and general manager of The Blade, said the pair were at the UT board meeting to provide advice on the personnel matter. That representatives of the state attorney general would advise the board is not unusual since the office is UT’s official legal representative, but rarely do attorneys from the A.G.’s office attend board meetings.

Mr. Zerbey said the board did not discuss Mr. Stansley in executive session, since he was not an employee of the university. When asked if the board discussed UT President Jacobs, Mr. Zerbey declined comment.

“I'm not even going there,” he said.

While UTIE’s original $10 million fund was provided by the university, UTIE also turned to state investment entities to augment its funding.

Mr. Stansley submitted a letter of intent on Feb. 6 for $3 million in funding from the Ohio Third Frontier’s Pre-Seed Capitalization Program, a program that is meant to “increase the availability of professionally managed capital and associated services to accelerate the growth of early-stage Ohio technology companies.”

The money would create a venture capital fund called the Ohio Innovation Fund that would “focus its investments in growing industries in Ohio.” 

Those industries would include advanced polymers, composites, specialty metals and alloys, fuel cells and energy storage, solar photovoltaics, and other potential areas.

Known collaborators, according to the letter, would be UT, the Launch Pad Incubation, Foveros Mining Ltd., and Olympic Milling Co. Ltd.

Both Foveros Mining and Olympic Milling appear to be Zambian-based companies. Foveros, a mining and mining equipment company, appears to be a subsidiary of Olympic, which focuses on agribusiness.

Launch Pad, a UT entity related to UTIE, requested $450,000 in state funds for fiscal year 2014. Launch Pad was one of 15 incubators to request funding; a December evaluation of the programs recommended that 11 receive funding. While the evaluators recommended Launch Pad receive funding, the incubator had some of the lowest ratings among those that received state funds, and the reviewers noted several “substantial shortcomings.”

Launch Pad, housed in a 26,500-square foot UT facility, has 17 employees, but only 10 tenants, a ratio the reviewers called “very high.”

The reviewers wrote that it was unclear what role each staff member plays, whether all staff were needed, and said that personnel costs appear “extremely high.”

While the flow of deals at Launch Pad has become more robust in recent years, the reviewers expressed doubts if the current tenant levels are sustainable. And the reviewers said that performance of the incubator were heavily based solely on Xunlight. Few other companies have graduated from the incubator, and many that have graduated have either shut down or left the state.

“The reviewers remain unconvinced that the goals for 2014 will be achieved,” the report states.

In 2012, the Ohio Third Frontier Commission placed conditions on $1 million of funding for Rocket Ventures, the fund previously chaired by Mr. Stansley, after it was the subject of a critical report by an independent evaluator hired by the commission.

The report recommended that Rocket Ventures be denied additional funding because of “relatively weak” results. At the time of the decision, Ohio Third Frontier Commission member Bill McCreary argued for continued support for Rocket Ventures.

Mr. McCreary, now a senior fellow at UT who has formed a company that developed an educational game prototype, was hired to run a new UT project called One World Schoolhouse, which would house a simulation and educational game development laboratory, a learning innovations laboratory, and an international connections program on the second floor of Carlson Library.

UT officials said at the time they didn’t see a conflict of interest for Mr. McCreary, despite his involvement in an agency that grants state funds to the university. 

He is also on the UTIE board of directors.

Contact Ignazio Messina at: imessina@theblade.com or 419-724-6171 or on Twitter @IgnazioMessina.

Contact Nolan Rosenkrans at: nrosenkrans@theblade.com or 419-724-6086, or on Twitter @NolanRosenkrans.