NYU Using Tuition Dollars To Acquire Administrators’ Multimillion Dollar Homes

When Jack Lew, NYU’s former VP of Operations, underwent confirmation hearings to become Secretary of the Treasury two weeks ago, he hit an unexpected speed bump: Senators were curious about Lew’s NYU salary of $840,000 (higher than President Sexton’s at the time), his $685,000 severance bonus, and a $1.4 million mortgage he received from NYU for a house in the tony Bronx neighborhood of Riverdale.

“Mr. Lew claims that he cannot remember the interest rate he paid on his $1.4 million mortgage that tax-exempt New York University gave him,” said Senator Charles Grassley, former chairman of the Senate Finance Committee, in a speech on the senate floor. “Does this pass the laugh test?”

Information retrieved by the New York Times confirmed that much of Mr. Lew’s loan was forgiven, adding a house to his already considerable compensation. While senators reproached the since-confirmed Secretary for his excessive loans from NYU and their nontransparent terms, NYU Local has learned that Lew’s loans may only be the tip of the iceberg.

“We currently have outstanding loans to 168 individuals,” we were told by Martin Dorph, Executive Vice President of Finance. As of last week, those loans total “approximately $72 million.” That NYU has nearly a tenth of a billion dollars — coming from “a number of sources,” including “tuition revenues” — loaned out to faculty and administration may seem excessive, but most of the mortgages are innocuous, providing an investment return to the university like similar loans would for a bank.

Where the trouble lies is with the few administrators at the top, who are rewarded with lavish loans, and in some cases the university’s outright purchase of homes. Of the 168 loans NYU currently has outstanding, only 7 — 4% — are given to top administrators. Yet these top administrators command over 10% of the funds. While the average mortgage is around $400,000, top administrators’ average over $1 million.

Far and away the largest loan we found on NYU’s tax forms is that given to Richard Revesz, Dean of the Law School. As of 2010, the latest year for which NYU’s forms are available, Revesz had received a $5.73 million dollar loan from the university, $5.68 million of which was still outstanding. Revesz received this loan on top of his $1.04 million salary.

But perhaps more shocking than the sum of the loan, which bought Revesz a West Village town house, is its increase over time. Most university mortgages go towards the one-time purchase of a house or apartment and are then repaid over the following years, much like loans from a bank. But Revesz’s first shows up on NYU’s 2007 tax forms,with a loan for $1.3 million. In 2008, it increased to $2.59 million, and in 2009 jumped to $5.1 million. The most recent tax forms indicate Revesz owes the university $5.68 million.

That Revesz seems to have been loaned between $500,000 and $2.5 million every year for the past five years runs counter to NYU’s statement that loans are made “for the purpose of recruitment and retention.” After a Faculty Senate Counsel meeting last week in which faculty members pressed President Sexton on the large sums top administrators receive, Mr. Dorph sent an email to faculty stating:

In some cases, when such people are hired, there are employment agreements that dictate obligations – such as severance — when they depart.  To be clear:  We do not give gifts – we honor employment agreements.

Dorph declined our request for comment on Revesz’s loan, so we cannot at this time say whether yearly loans of up to $2.5 million were in his “employment agreement.” Needless to say, it’s hard to see a way in which these kinds of yearly payments contribute to the “recruitment” or “retention” of Revesz, who has been at the helm of the Law School for 11 years.

We’ve also learned that NYU has, in some cases, purchased luxury homes for faculty and administration. In 2010, through an entity called “NYU Realty Trust, ” the university purchased a $6.15 million apartment for Medical School Dean Robert Grossman. And last week, the New York Times reported that NYU paid over $4 million to house a former Columbia professor on the UWS after she left to join NYU.

“There are ways in which non-profit institutions like private universities can take on the character of a for-profit, begin to think like one,” said Andrew Ross, a professor of social and cultural analysis. “One of the most vulgar manifestations of this is the accumulation of wealth at the top.” Ross called top administrators’ salaries “astronomically high,” adding that “the compensation spread between the top and the adjunct faculty — many of whom qualify for food stamps to feed their families — is much more typical of financial Wall Street firms.”

It appears that university housing may just be another example of the disparity between faculty and top administrator compensation. Christine Harrington, a professor of politics who lives in the university-owned Silver Towers, told us that her building “hasn’t been maintained,” and that, among residents, “There’s a general sense that the maintenance of the property — the hallways, the lighting, the elevators — is below what it has been.” Harrington, who has been at NYU for 28 years, concluded that “The gross disparities are not what I expected and accept.”

Of course, NYU cannot be blamed for offering faculty housing in general, as this is common practice among universities. And not every loan is excessive: Steinhardt Dean Mary Brabeck, for example, received a $500,000 mortgage for moving out of faculty housing after two years, she told us, so the university could free up space for incoming faculty. NYU set the terms of the one-time recruitment loan from the outset.

Neither can we expect that every faculty member will receive similar compensation. Upper administrators will, by dint of their university-wide role, provide more value than most faculty members can.

“Clearly there’s going to be differentials in salary,” Professor Harrington told us. “But it’s not all or nothing. It’s about proportion and scale.” Professor Ross echoed her sentiment, saying “The moral issue is really one of scale. What’s the threshold beyond which it’s obscene? We’re talking about multimillion dollar apartments.”

Here at one of the largest private institutions in the country, it indeed seems that everything is bigger, from our sprawling Global University to the 2031 expansion in our own backyard. Criticism of the university’s expanding scale will reach a fever pitch this week, when Arts and Science faculty hold a no-confidence vote on President Sexton, who many consider responsible for the past decade’s shift towards expansion. Despite faculty opposition, the case against Sexton will be a difficult one; the same people who approve the outsized loans — the Board of Trustees — are the same ones in whose hands the fate of President Sexton’s job rests.

If faculty ire at the disparities between compensation of upper and lower echelons doesn’t result in a changing of the guard, they do have some suggestions for what they’d like to see change:

“We ask that the top administration take 25% cuts in salary,” said Professor Ross. Professor Harrington has called for more transparency of financial documents. “It’s really a matter of credibility,” she said. “There’s low credibility when you discover these sorts of things, and one way to resolve it is to put it on paper — to make it known. And unfortunately, the law doesn’t require that.”

But until NYU does decide to release more detailed financial information, we will be left in the dark. Mr. Dorph will claim the university does “not give gifts,” but without more transparent documents it’s hard to tell just what they do give.

It took the power of a senate confirmation hearing to get the information out of Jack Lew. With most staff, we’ll never be given that opportunity. “You’re not going to make a compelling response from Marty Dorph’s or John Sexton’s side of the table unless  you put it on paper,” said Professor Harrington. “Just show it to us. Because we’re already stunned they’ve given out these sums of money.”

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  1. Sean P. says

    For those who only read the headline… The article should be titled “NYU Offers Mortgages to Administrators” because once the spin is removed that’s all that really seems to be happening.

    The top 4% of administrators/faculty have borrowed 10% of loans? Shocking.

  2. Paul Pastore says

    Then you can make out your tuition check directly to Jack Lew Sean, I in the meantime will continue to be dismayed by Sexton’s corrupt wheeling and dealing.

  3. Sean P. says

    You can act as Righteous as you’d like Paul, but you’re failing to consider the money that Lew made for the school. Administrators like Lew can be worth “tens of millions of dollars”, according to Dorph’s email. So if Lew was paid $850k per year for his time at NYU from 2001-2006, that’s $5.1 mil plus $685k severance is about $5.8 mil total. So if we estimate Lew’s benefit to NYU to be $10 mil, taking the figure from Dorph’s email, that’s $4.2 mil he made for the school. I’d consider that tuition money well spent.

    But none of that is even important in the case against Sexton, since Lew’s contract was signed in 2001 – a full year before Sexton took office in 2002.

  4. Ernesto G. says

    While Pres. Sexton “officially” took office in 2002, Sean, his transition team was already in place long before then. Faculty were already alerted as to Sexton’s appointment (as opposed to election) as early as June 1, 2001. The memo to faculty, co-authored by Sexton himself and the outgoing President Oliva and titled “Initial Steps in Transition Planning,” stated that the university was taking “these steps well in advance of the formal transition (May 2002) in order to sustain the momentum which characterizes our University today…” To think that Sexton, who, by the way, had already been the Dean of NYU’s Law School for 14 yrs., did not play a role in Lew’s hire, his retention until 2006 (with an even higher salary that Sexton) and the inexplicable largesse (to the tune of $685,000) showered on Lew upon leaving the university for an even more lucrative Citigroup gig is either disingenuous or extremely naive on your part. But don’t take my word for it. I would suggest readings Pam Martens’ “NYU President and Former NY Fed Chair John Sexton Signed Jack Lew’s $1.3 Million Loan” (Wall Street on Parade, 2/27/13): http://wallstreetonparade.com/2013/02/nyu-president-and-former-ny-fed-chair-john-sexton-signed-jack-lews-1-3-million-loan/ Martens’ article includes a pdf of the document, clearly signed by Sexton and approving Lew’s $1.3 million loan on on August 22, 2001. The second mortgage loan by NYU to Lew in the smaller amount of $150,000 was made later that same year (2001). So yes, Sean, the Lew scandal is most certainly “important in the case of Sexton” … although it is hardly the president’s only failure of judgment.

  5. Sean P. says

    Great, you’ve proven that Lew took out a mortgage, and that Sexton signed onto a contract meant to ensure the payment back to NYU of “the monies due and to become due therein with interest,” and that the “Mortgage continues to secure a bona fide obligation,” as it says in the document. Did Sexton hire Lew? Did he negotiate the terms of the bonus? Did he himself decide to forgive the leftover money from the Mortgage? And even if we assume that Sexton did all these things, what proof is there that Lew’s cost to the school was not far outweighed by the benefit?