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April 12, 2021

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‘Culture of fear’ at Western Washington University after auditors fired, prompting lawsuits and resignations

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The internal audit office at Western Washington University is tasked with investigating and preventing legal and financial risk. But it has instead become the epicenter of sudden firings, lawsuits and even a police escort from a board of trustees meeting in recent years.

After one former auditor sued, claiming he was pushed out over an audit of a former president’s travel expenses, Western settled for $216,000.

His successor, Antonia Allen, sued the university earlier this month for alleged retaliation and wrongful termination. Allen was fired soon after her office completed a contentious audit into the use of “ghost courses” to pad students’ credit loads, which her office reported as fraud to federal investigators.

The only other internal auditor at the university said the termination created a “culture of fear” and left as a result. So did the longtime administrator who initially reported the “ghost courses” to the office and saw Allen’s firing as an “incredibly dramatic move.”

The turmoil is troubling, said Richard Chambers, CEO and president of the Institute of Internal Auditors. The organization’s industry standards, which Western’s audit office is supposed to follow, state that internal auditors must be independent.

“There appears to be an unfortunate pattern that has emerged,” Chambers said when a reporter described the situation to him early this year. “In decades in this profession, I’m hard-pressed to recall many instances in which there have been two very high-profile cases like this that have occurred at the same organization around the same time.”

Western declined to comment on the turmoil or allegations in Allen’s lawsuit.

Emails obtained by The Seattle Times through a records request show that Allen repeatedly expressed concern about a lack of independence. Allen reported to the vice president for business and financial affairs, even though she told university leadership her office often audited and reviewed his division.

Since Allen was fired last year, her role has been filled by the assistant vice president from that same division. Western’s spokesperson, Paul Cocke, declined to comment when asked if there are other staff in the office and if the university intends to find replacements.

Even before the shake-ups shrunk the audit office, one of Western’s top leaders said there were “high stakes” for adding staff.

Friction with administrators

Audit director Mathew Babick, who was hired in 2014, lasted less than a year.

Babick claimed in a lawsuit that then-President Bruce Shepard resisted an investigation into his travel expenses, which found a $112 expense submitted without a detailed receipt, and prevented Babick from discussing the matter with the board of trustees. Babick said he resigned under the threat of termination.

In the following years, Babick was escorted by campus police in protest from a closed board audit committee meeting, which he believed should be public. And he sued the university, alleging retaliation and wrongful termination.

Western did not admit liability when it settled with Babick, and Shepard denied Babick’s claims, as first reported by the student newspaper, The Western Front.

Allen was hired to fill the role in 2017, under new President Sabah Randhawa. Previous auditors had reported to the president, but she was told to report to the vice president.

Under Allen, Western’s audit office completed investigations into topics including misuse of university resources and violations of federal requirements for reporting crime statistics to the tune of up to $2.5 million in federal fines, which was later confirmed by an independent consultant.

Administrators largely accepted the findings of Allen’s audits, until her office investigated a report of possible financial aid fraud.

“Ghost courses”

Two years ago, then-registrar David Brunnemer told the audit office he believed that Western’s elementary education department was issuing internship credits without requiring work, so students could meet requirements for financial aid.

The audit office found that 20 students received “fraudulent” credits between 2016 and 2019, resulting in around $5,000 in over-awarded financial aid. Students and staff used the terms “ghost courses” and “credit adder” when discussing the arrangement in emails.

Possible sanctions included federal fines up to $57,317 per violation, suspension of federal aid funds and “possible fines and/or imprisonment” for involved employees, according to the auditors.

The audit also found that 31 students were allowed to take a required course or retake courses without registering. The auditors estimated tuition loss to be about $50,000 and identified a dozen possible cases that would add on about $35,500.

The auditors concluded that faculty and staff “engaged in these activities for the benefit of their students without consideration of the financial or academic implications of their actions.” They categorized the findings as fraud.

Assistant state Attorney General Melissa Nelson, who provides legal counsel to Western, disagreed and sent an 11-page memo to the auditor’s office, which Allen claims attempted to dissuade her from reporting to the U.S. Department of Education’s Office of the Inspector General.

Nelson also suggested that Allen edit the audit report to say the use of filler courses was not a systemic issue, which would require a report to the feds.

When Allen’s office contacted the OIG’s regional office, the special agent in charge wrote in an email, “This is definitely fraud and must be reported.”

Allen told the president and chair of the board of trustees audit committee, John Meyer, that Nelson gave advice that went against federal reporting requirements and interfered with the investigation, according to Allen’s lawsuit. She said she would work only with Western’s other legal counsel in the future.

Attempts to contact Nelson were forwarded to the state Attorney General’s Office, which declined to comment.

Faculty and administrator fallout

Faculty reacted strongly to the auditors’ “ghost course” report — particularly the parts detailing possible federal consequences.

“The draft report said, ‘You’re all going to go to jail,’ which freaked everyone out and seemed precipitous,” Bill Lyne, president of the United Faculty of Washington State, said by phone. “There should have been more conversation with the faculty before drafting the report and calling the Department of Education.”

When Lyne emailed those concerns to Allen, she said that reaching out to federal and state agencies was typical for her office, as was listing all potential penalties.

“No one was intending to defraud anybody,” Lyne told The Times. “Whether or not what they were doing would be considered fraud in the eyes of the law, certainly they weren’t walking around thinking, ‘Ah, we’re getting away with something.'”

Lyne said the administration and faculty were “on the same page” and worked closely on management’s response to the audit.

In their response, top administrators agreed that training for staff and transcript adjustments were necessary, as was repaying the $5,000 in over-awarded financial aid. But they declined recommendations to reimburse tuition revenue loss and rejected the use of the word “fraud.”

The report was finalized in July 2019.

Three months later, Allen met with Randhawa. Western’s president had two documents. The first, a settlement offer for $82,000 representing six months of salary and benefits, if she resigned and released all claims against the university. The second, a letter of termination.

Allen refused the settlement and was fired. Her lawsuit, filed by Seattle attorney Jack Sheridan, seeks economic and emotional damages, reinstatement to her job and expungement of negative comments from her personnel file.

When Brunnemer, the registrar, heard what happened, he decided to retire early, after more than 25 years at the university.

“It was disheartening that another good, effective professional was dismissed in such a surprising fashion,” Brunnemer said when reached by phone. “Fixing what the audit came up with is not difficult. It means that good, hardworking, honest people made mistakes that are correctable.”

The other internal auditor at Western, who worked there for 10 years, left in May. It does not appear that Western filled his position.

Western also hasn’t expanded the office — something Allen pushed for in her role, and that Meyer, chair of the audit committee, said he saw as important.

“If something happens that we should have anticipated or that we had an idea was out there, the Herald or Times won’t say we couldn’t investigate due to lack of funding,” Meyer wrote in an email last year. “They’ll say we screwed up. So will the students.”

Western, the third largest university in the state, has fewer auditors per population than other universities. The University of Washington’s internal audit website lists 15 staff, while Washington State University has six.

Early this year, the state Office of Financial Management removed requirements that some agencies, including Western and Eastern, have internal audit programs.

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