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Legal fees in 'coffee fund' case cost NIU more than $64,000

NIU paid defendants’ bills

DeKALB – Northern Illinois University paid more than $64,000 to cover legal fees for nine people charged in the coffee fund investigation, records show.

The university’s Board of Trustees also has approved changes to its policy on when it will cover employees’ legal bills in the future.

The employee legal bills were paid under indemnification agreements. The university covered legal costs for all nine of those who were indicted, according to records obtained through a Freedom of Information Act request.

That includes three people – Robert Albanese, Lawrence Murray and Kenneth Pugh – who received court supervision in connection with violations of the state property control act. One of the three, Albanese, had already left his role as associate vice president of finance and facilities when he was charged.

All three of the people who accepted plea agreements successfully completed court supervision and had the conviction removed from their record.

The episode sparked changes not only in NIU’s indemnification policy, but also led to legislation in Springfield, where one state lawmaker has proposed eliminating indemnification for university and local government employees altogether.

Murray, a manager in the Materials Management Department who pleaded guilty to a misdemeanor in May 2013, was the last to be paid. The university paid him $7,544 for legal expenses on March 20, records show. Murray had been required to reimburse NIU $4,000 as part of his plea agreement.

On March 12, the NIU board approved changing its policy on how and when the university would pay legal expenses for board members, administrators and employees.

The six people who saw charges against them dropped would still have been reimbursed under the revised policy, said Jerry Blakemore, NIU’s vice president and general counsel. However, those who accepted plea agreements could have been denied, he said.

“It says that even a plea could be used as a basis for denying coverage,” Blakemore said. “We didn’t have that before the new policy.”

Reimbursed legal fees for the current and former employees ranged from $15,917 for Mark Beaird, who was a specialist in materials management, to $4,220 to Keenon Darlinger, who was a manager in the department. Charges against both Darlinger and Beaird were dropped in 2013.

The coffee fund was an off-the-books bank account where university employees deposited the proceeds from the sale of university-owned scrap metal and other materials. Officials said the funds were used for purposes such as employee retirement parties and lunches.

Records from local scrap metal company DeKalb Iron and Metal Co. showed the fund received more than $13,000 from 2005-12, although it apparently had existed long before that.

The Daily Chronicle first reported on the existence of the fund in August 2012, and by October 2012, nine people were indicted on felony charges as a result of the ensuing investigation by NIU police.

The state’s civil service code required all of them to be paid while on leave. At one point, the university was paying $2,000 a day to employees who weren’t working, and NIU would eventually pay about $200,000 to employees on leave in the case.

Clay Campbell, the state’s attorney who brought the charges, lost a bid for re-election in November 2012. His successor, Richard Schmack, dismissed charges against six of the defendants and reached plea agreements with three managers.

The NIU board’s changes would give more direction for when the university would or would not pay for employees’ legal defense, but a proposal in the state legislature would ban local governments and state universities from covering employees’ legal bills under any circumstances.

State Sen. Michael Connelly, a Republican from Lisle, in April made two proposals, SB 1102 and SB 1145, that would bar local governments and state universities from paying employees’ legal bills. Connelly did not return calls seeking comment. The proposals passed the Senate and have been referred to the House Rules Committee.

John R. Butler, the chairman of the NIU board, says a blanket ban on indemnification would be a mistake. Managers and others with administrative roles should not be expected to hire their own lawyers every time someone takes issue with one of their decisions, Butler said. What’s more, people who are accused and not convicted should not be unfairly bankrupted, he said.

“As long as overzealous prosecutions and misunderstandings remain a possibility, we should consider the real economic consequences to state officers, including low-paid employees who might have no idea that the activity they’re engaging in is illegal,” Butler said. “So with that I would say I favor the status quo.”

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