In 2019, a college admissions corruption scandal made headlines in the United States and around the world. Richard Singer, who masterminded the scheme, promised wealthy parents that he could get their children coveted places at Stanford, Yale, USC, and other selective colleges through what he called the “side door.” Rather than donate $45 or $50 million to gain an edge in admissions, parents would pay Singer and his foundation to bribe college coaches to recruit the students as college athletes—even though many of the students had never competed in the sport for which they were allegedly being recruited. U.S. federal prosecutors, in the so-called “Varsity Blues” investigation, uncovered this scheme and indicted more than fifty people (parents, coaches, and others). Many of the defendants pled guilty. This past October, in the first Varsity Blues case to go to trial, a jury found hedge fund magnate John Wilson and former casino executive Gamal Abdelaziz guilty of conspiracy, wire fraud, and mail fraud. More trials are likely coming, and more convictions are likely.
Beyond the sensational headlines—which often focused on the wealthy parents, several of whom are celebrities—what broader lessons can we draw from the scandal? When it first broke, many commentators attacked the broader culture of entitlement and privilege in which wealthy parents secure unfair—but in most cases entirely legal—advantages for their children through legacy preferences and favoritism toward big donors. Other commentators drew attention to the hypercompetitive, win-at-all-cost culture fostered by the U.S. college admissions system. Critics pointed to a culture that leads not only to criminal bribery of the sort revealed in the Varsity Blues investigation, but also to less visible forms of dishonesty like college admissions “consultants” who draft essays for pay and students who cheat on college admissions tests, sometimes with the support or complicity of adults.
Those critiques of the U.S. college admissions culture are apt, but there’s another important lesson that emerges from the scandal, one that has received less attention: The scandal highlighted the extent to which universities have failed to address seemingly obvious corruption risks, and failed to implement effective controls for identifying applicants who were bribing their way onto campus. Compared to other large institutions, universities are behind when it comes to establishing effective anticorruption controls.
Certainly, many of the illegal payments at issue in the Varsity Blues cases were funneled directly to coaches and athletic department officials, rather than to the universities, and one might be reluctant to fault the universities for not scrutinizing payments that they didn’t know about. But while much of the coverage of the scandal focused on these direct payments to coaches, Singer and his foundation also made payments directly to university athletic departments. At least $2.4 million of the more in $7 million that Singer paid coaches and athletic officials ended up in university accounts. For example, Singer and his clients funneled $1.3 million to USC accounts controlled by Senior Associate Athletic Director Donna Heinal, while Stanford’s sailing program received $770,000. The fact that large amounts of tainted money were flowing to university accounts highlights the extent to which universities lacked sufficient oversight.
Universities might have caught Singer’s money flowing through their accounts had they taken a page from the anti-money laundering and anti-bribery compliance programs found in many large firms. Businesses—especially those in high-risk fields such as banking, defense contracting, and resource extraction—spend billions on programs to identify suspect funds, train employees, and identify red flags. Universities typically do not place nearly so much emphasis on this issue. In fairness, the fallout from the college admissions scandal seems to have induced at least some universities, to their credit, to strengthen their monitoring and control systems. For example, Stanford has developed a more systematic vetting process for gifts, establishing a gift acceptance committee to provide more oversight and educating development officers on the importance of due diligence on donors and intermediaries (a bit like the know-your-customer rules that apply in banking and other sectors). Other universities should follow Stanford’s lead and train faculty, staff, and administrators to think carefully about where their money comes from and why they are the targets of donations.
In addition to scrutinizing donations, universities also need to undertake a serious assessment of external and internal corruption vulnerabilities. For example, many universities are highly decentralized, allowing their managers and staff significant autonomy. While there are undoubtedly benefits to this approach, it also comes with corruption risks. Likewise, universities should recognize that academic culture, which lends itself to trust and collegiality, also makes them an easy mark for those who would abuse credulity. Savvy operators like Singer are skilled in identifying weak points in intuitional structures and at exploiting the incentives that made university officials susceptible to bribery. Singer was himself a former college basketball coach, and he understood the constant demands on coaches to raise money for their programs. He also targeted smaller, less popular sports programs like tennis and sailing so that his applicants attracted less attention than they would have if they had been recruited to the football or basketball team. And he understood that by building relationships with gatekeepers he could exploit their relatively unscrutinized power over the admissions process.
Universities should develop controls to address the specific risks revealed by the college admissions scandal while also thinking broadly about how to protect themselves. USC, for example, has instituted multiple layers of review for athletic recruits and now audits team rosters to ensure that recruited athletes take the field. Although this is undoubtedly a step in the right direction, such reviews depend on employees’ willingness to challenge recommendations and a more general culture of scrutiny. To develop such a culture, universities may wish to relieve coaches of development expectations and provide athletic staff with high-quality anti-bribery training. They may also wish to consider ending the practice of earmarking coveted recruiting spots to specific programs, as this practice gives the coaches in those programs too much power over individual admissions decisions. Indeed, more generally universities should take steps to make it more difficult for any individual to have an outsized influence on the admissions process.
However universities respond to the Varsity Blues scandal, it’s clear that they’re just beginning to address the significant risk of corruption to their integrity and reputation. Indeed, last month, USC faced another bribery scandal after federal prosecutors indicted the former dean of its School of Social Work for bribing a Los Angeles city councilman with admission to the school. If universities want to prevent such scandals in the future, they will need to address the institutional vulnerabilities that these incidents reveal, and become much more aggressive about recognizing and combating corruption risks.
Justin, what an interesting way to frame the U.S. college admissions scandal. It seems to me there are significantly different incentive structures between university employees and, say, employees of a large financial institution. Faced with institutional pressure, university employees like coaches, have every incentive to make sure their programs are well-funded and worthwhile (especially in the context of COVID-19 where smaller sports programs are being cut). And within the context of university donations, ratings like US News & World Reports place heavy emphasis on things like alumni donations, which, in turn, relate back to universities’ reputations. I think perhaps a larger question here is: how can we deemphasize this culture (I argue, toxic) within universities to prevent scandals like this from happening in the first place?
Thanks for the great comment, Devon. I think you’re right to point the cultural piece. While I emphasized vigilance culture, the root cause of bribery and corruption in many large organizations is a breakdown in ethical culture, where other considerations–reputation, personal gain/advancement, corporate profits–trump doing the right thing. I do think that the competitive pressures faced by universities and their employees make them more than ever like large financial institutions. Though they have different business models, they face fierce competition for reputation (e.g., U.S. News Rankings), athletic success, and fundraising, which like the competitive pressures in finance can lead to unethical behavior. Sadly, fierce competition seems to be a societal affliction, but there’s certainly more that universities can do to instill an ethical culture–training, institutional messaging, ethics policies–to ensure that such competition doesn’t become toxic.
Justin, it is really a timely subject.
I am wondering if your proposition should apply to all universities or only to larger and competitive ones. I am asking this question because anti-money laundering and anti-bribery compliance programs are cost-demanding and, maybe, there is a threshold beyond which these programs are not efficient, in cost-benefit analyses.
Additionally, even though universities’ employees have significant autonomy, they are constrained by the reputation of the institution, particularly because they are usually people who care about education and higher values. Do you have any thoughts about how the reputation of the university could be a disincentive to corrupt activity?
Thanks, Marcelle; you make an excellent point. I should have emphasized in my post that universities need to adapt their response to corruption to their specific risks. Those risks might be very different within the same college or university. For example, a small, highly-competitive liberal arts college might be more exposed to someone attempting to bribe individuals involved in the admissions process, while a less competitive school of social work might face less bribery risk in its admission process but might face a risk of its managers bribing public officials to secure city contracts. The starting point is to identify the risks in each part of the organization and assess where it makes sense to take additional measures.
In answer to your second question, I’m not sure that reputation is necessarily a disincentive to corrupt activity. I would say, however, that as in many things ambition can lead to corruption. USC, for example, has struggled with a variety of ethical issues, many of which can probably be tied back to its ambitions for developing its reputation as a world-class research university and athletics powerhouse. Those ambitions put pressure on university employees that may have led to unethical behavior and probably also contributed to effective managers receiving less scrutiny because their colleagues valued their work in support of the school’s reputation.
Great post, Justin!
Your post raises very relevant issues toward universities’ fundraising procedures. It seems that universities have to manage large financial funds, but they are not always equipped with the most effective internal control tools to deal with possible misconducts committed by their employees.
As you described so well, Singer identified a vulnerability in sport programs: coaches are under constant pressure to raise funds, might not have the adequate training to deal with finances, and have significant discretion to make their decisions.
In your opinion, what are the main obstacles for the implementation of more rigid compliance rules in high level education institutions?