SECOND QUARTERLY REPORT OF THE INDEPENDENT ATHLETICS INTEGRITY MONITOR PURSUANT TO THE ATHLETICS INTEGRITY AGREEMENT AMONG THE

NATIONAL COLLEGIATE ATHLETIC ASSOCIATION, THE BIG TEN CONFERENCE AND THE PENNSYLVANIA STATE UNIVERSITY

George J. Mitchell DLA PIPER LLP (US) March 1, 2013

Table of Contents Page I. II. III. INTRODUCTION AND SUMMARY .............................................................................. 1 THE MONITOR’S ACTIVITIES THIS QUARTER ........................................................ 3 OBSERVATIONS AS TO SPECIFIC AREAS ................................................................ 5 A. Substantial Completion of the AIA’s 120-Day Requirements .............................. 5 1. 2. 3. 4. 5. B. Appointment of the Athletics Integrity Officer ......................................... 6 Establishment of the Athletics Integrity Council ....................................... 7 Code of Conduct for Intercollegiate Athletics ........................................... 8 Policies and Procedures in Support of the Integrity Program .................... 9 Disclosure Program .................................................................................. 10

Penn State’s Efforts to Implement the Freeh Report Recommendations ............ 12 1. 2. Completed Recommendations ................................................................. 12 Recommendations in Progress ................................................................. 13 a. b. c. Penn State Culture (Recommendation 1.1).................................. 13 Ethics and Compliance Officer (Recommendation 4.1) .............. 14 New Policies Approved This Reporting Period ........................... 15 i. ii. iii. d. e. f. HR101: Positions Requiring National Search Process ............................................................................. 15 University Police Department Policy/Procedure #39 ...... 16 University Police Policy/Procedure #40 .......................... 16

Other Freeh Report Recommendations Nearing Completion ...... 17 Recommendations Concerning Facilities Security Issues ........... 19 External Monitor (Recommendations 8.2 and 8.3) ...................... 20

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Page C. Recommendations That Penn State Requested Not to Implement ...................... 21 1. 2. 3. 4. 5. D. IV. Realign Human Resources to Report to the University President (Recommendation 2.1.3) ......................................................................... 22 Separate Office of Human Resources from Finance and Business (Recommendation 2.2.1) .......................................................................... 22 Adopt a More Robust Human Resource Information/Capital Management System (Recommendation 2.2.7) ...................................... 23 Use Search Firms and Advertise for All Senior Executive Positions (Recommendation 2.4) ............................................................................ 23 Consolidate Oversight of Policies for Programs Involving NonStudent Minors (Recommendation 7.3) .................................................. 24

Update on Training Efforts .................................................................................. 24

OTHER EVENTS DURING THIS REPORTING PERIOD........................................... 25 A. B. C. D. Matters Concerning Penn State’s Board of Trustees ........................................... 25 Lawsuits, Legislative Activity, and Investigations .............................................. 26 The Athletics Department – Rise and Rally ........................................................ 28 The Administration .............................................................................................. 29

V.

AREAS OF FUTURE FOCUS AND CONCLUSION ................................................... 29

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I.

INTRODUCTION AND SUMMARY This is the second quarterly report of the independent athletics integrity monitor

(“Monitor”) pursuant to section III of the Consent Decree between the National Collegiate Athletic Association (“NCAA”) and The Pennsylvania State University (“Penn State” or the “University”), and article IV of the Athletics Integrity Agreement (“AIA”) among the NCAA, Penn State, and the Big Ten Conference. The AIA requires me, as the Monitor under that agreement, to prepare a written quarterly report to Penn State, the Big Ten Conference, and the NCAA regarding the University’s implementation of the provisions of the AIA. During the period since our first report on November 30, 2012, Penn State has continued to make steady progress in implementing the requirements of the AIA and the recommendations made in a report by Freeh Sporkin & Sullivan LLP dated July 12, 2012 (the “Freeh Report”). The past calendar quarter included the deadline for Penn State to complete its implementation of a number of actions that the AIA required to be accomplished within 120 days of its effective date. The University met the deadlines for most of those requirements, with a few minor exceptions that are discussed in this report. Most significantly among the AIA milestones that were met, Penn State identified and hired its athletics integrity officer, Julie Del Giorno, following an extensive search, and it obtained over 1,800 certifications (including certifications from the approximately 1,100 individuals who are “Covered Persons” under the AIA) that the certifying individuals had received, reviewed, and would comply with Penn State’s recently adopted Code of Conduct for Intercollegiate Athletics. The University also continues to make progress in its implementation of the Freeh Report recommendations. During the past quarter, 16 additional Freeh Report recommendations were put into place, including policies and practices concerning internal audit, human resources, the Board of Trustees, and the University police department. Penn State’s Freeh Report working

groups have continued to meet regularly to manage and track the University’s progress in implementing the proposed reforms, with 40 additional recommendations currently shown as “in progress” toward future implementation. There are five recommendations in the Freeh Report that the University requested not be implemented in the manner recommended in the Freeh Report. Among these are

recommendations: that the Office of Human Resources be realigned to report directly to the University’s president; that an executive search firm be used for all senior executive searches; and that policies and procedures for programs involving non-student minors be overseen by the Office of Human Resources. We have attended meetings at which these issues were discussed, and Penn State has consulted with us about the reasons for the request not to implement these recommendations in the manner recommended, which are discussed in more detail below. After considering Penn State’s rationale, I agreed that its proposed approach to these recommendations was reasonable and conveyed Penn State’s request to be excused from implementing these five recommendations to the NCAA and the Big Ten Conference, which both consented. During this reporting period, there also have been a number of external developments bearing mention. On January 2, 2013, Governor Tom Corbett filed a federal lawsuit against the NCAA challenging the Consent Decree and the sanctions imposed on Penn State. The NCAA has filed a motion to dismiss that action, which is being briefed. On January 4, 2013, a

Pennsylvania state senator filed an action in Pennsylvania state court seeking an order requiring the $60 million fine imposed in the Consent Decree to be used solely in the Commonwealth of Pennsylvania. A Pennsylvania statute to similar effect was signed into law by Governor Corbett on February 20, 2013, which the NCAA challenged in a federal lawsuit later the same day. Separately, on February 10, 2013, lawyers representing the family of Joe Paterno issued a report

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taking issue with the findings and conclusions of the Freeh Report. carefully all of these developments.

We note and review

However, the Monitor’s role is focused on ensuring

compliance with the agreement entered into by Penn State. II. THE MONITOR’S ACTIVITIES THIS QUARTER In our work during the past quarter, we have tracked closely the work of the Penn State faculty, administrators, and staff who are charged with responsibility for implementing the requirements of the AIA and the Freeh Report’s recommendations. In addition to our regular attendance at meetings of the administration response team and the Freeh Response Advisory Council, we have visited the University Park campus frequently to meet with various administrators, faculty members, and staff and to attend other meetings pertinent to our work. A member of our team attended a training meeting of head coaches and athletics administrators on December 5, 2012 to review their new roles as “Team Monitors” under the AIA and provide training on the requirements of the Code of Conduct for Intercollegiate Athletics that Penn State recently adopted pursuant to the AIA. In addition, on February 14, 2013, we attended the first meeting of the Freeh Response Advisory Council’s subcommittee on ethics and core values. We have had meetings this quarter about the AIA or the Freeh Report recommendations with: President Rodney A. Erickson; Karen B. Peetz, the outgoing chairman of the Board of Trustees; incoming chairman Keith E. Masser; trustees Ira M. Lubert and Keith W. Eckel; Professor Larry C. Backer (who is the current chair of the Faculty Senate); Athletic Director David M. Joyner; Associate Athletic Director for Compliance Matthew Stolberg; Vice President and General Counsel Stephen S. Dunham; Senior Vice President for Finance and Business David Gray; Vice President for Administration Thomas Poole; Associate Vice President for Human Resources Susan Basso; Director of the Center for Workplace Learning and Performance Susan 3

Cromwell; Associate Athletic Director for Facilities and Operations Mark Bodenschatz; Manager of Access Controls and Electronic Security Programs Robert Waldhuber; and incoming Athletics Integrity Officer Julie Del Giorno. We also have continued to work with Guidepost Solutions, LLC to assess and provide recommendations regarding physical security issues for Penn State’s athletics and recreational facilities. A team from Guidepost was present for one home football game weekend in

November 2012 during which the Guidepost representatives participated in a series of operations and security meetings from Thursday through Saturday and observed the security measures that were applied effectively by Penn State and its contractors for that event. During a regularly scheduled visit in February 2013, Guidepost personnel and members of our team jointly met with Athletics Department administrators, engineers, and project managers to understand the plans and schedules for implementation of the access restrictions for these facilities recommended in the Freeh Report. We also reviewed security installations at the University Park Multi-Sport Facility, the Pegula Ice Arena, and the Blue Band Building. Separately, we have continued to collect and review relevant documents from Penn State, including a number of documents that were recently produced to us related to the physical security recommendations in the Freeh Report. We issued supplemental document requests based on Penn State’s reported progress and activities as well as the 120-day deadlines imposed in the AIA. To date, the University has produced roughly 11,000 pages of documents in response to our requests. Penn State has been cooperative in responding to our requests.

Although a few of its responses have been delayed, we attribute this to resource issues rather than a lack of good faith. We also continued to review publicly available documents to the extent we determined them to be relevant.

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As in the first quarterly period, we met with attorneys at Saul Ewing LLP to discuss, collect, and review relevant documents gathered by Judge Freeh and his staff in the course of their work on the Freeh Report. They have been responsive to our requests for relevant

documents, and our work with them is continuing. We also met with lawyers who worked on the Freeh Report to understand the rationale for certain of its recommendations and to discuss Penn State’s request not to implement several recommendations in the manner recommended, as is discussed in further detail below. III. OBSERVATIONS AS TO SPECIFIC AREAS A. Substantial Completion of the AIA’s 120-Day Requirements

As discussed in our earlier report, a central requirement of the AIA is for Penn State to “establish and maintain an Integrity Program” for the Athletics Department. The deadline for Penn State to complete the implementation of several of the components of that “Integrity program” was 120 days after August 29, 2012 (the effective date of the AIA), with certain follow-up requirements due no later than 30 days thereafter. The “120-day” requirements

included: adopting a code of conduct for intercollegiate athletics; using “best efforts” to appoint an athletics integrity officer; establishing an athletics integrity council; implementing or updating policies and procedures regarding the operation of the Integrity Program; and establishing a disclosure program through a hotline for receiving and responding to complaints.1 With some limited exceptions discussed in detail below, Penn State completed these AIA requirements before the applicable deadlines.

1

AIA § III.

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1.

Appointment of the Athletics Integrity Officer

The AIA required Penn State to use its best efforts to appoint an athletics integrity officer within the first 120-day period, but it also allowed for the possibility of a 60-day extension of that deadline upon the approval of the NCAA and the Big Ten Conference. During the initial 120-day period, Penn State prepared and advertised the job description, assembled a search committee, and screened and interviewed a number of candidates for this new position. Despite these efforts, however, the University was unable to complete the appointment of an athletics integrity officer by December 2012. It therefore requested a 60-day extension, which the NCAA granted and subsequently confirmed in a letter to Penn State dated January 31, 2013. On January 24, 2013, Penn State announced that it had hired Julie Del Giorno to serve as its first athletics integrity officer beginning part-time in March 2013 and full-time as of April 1st.2 Ms. Del Giorno is a 1986 graduate of the United States Military Academy who served as a commissioned officer in the United States Army from 1986 to 1995. Her tours of duty included combat operations in the Persian Gulf War and in Somalia, and she is a recipient of the Bronze Star Medal. After her military service, Ms. Del Giorno earned a master of business administration degree from the University of Central Arkansas, and she is also a graduate of the National Association of Collegiate Women Athletics Administrators/Higher Education Resource Services Institute for Administrative Advancement. Since 2006, she served in various positions at Moravian College, including as chief of staff and as senior administrator with oversight responsibility for aspects of that institution’s NCAA Division III intercollegiate athletics program. Previously she served as interim vice president for student affairs at East

“Penn State names athletics integrity officer,” January 24, 2013, http://live.psu.edu/printstory/63815.

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Stroudsburg University where her responsibilities included serving as academic coordinator for intercollegiate athletics. As required under the AIA, Ms. Del Giorno will report to the director of university ethics and compliance (when that position has been filled), and she will chair the recently established Athletics Integrity Council. In collaboration with the Athletics Department compliance staff, Ms. Del Giorno will oversee compliance with obligations of integrity, civility, ethics and institutional control, and she will meet quarterly with the NCAA and the Big Ten Conference.3 Representatives of our team met with Ms. Del Giorno soon after Penn State announced her appointment, and we anticipate working closely with her once she has started in her position as athletics integrity officer. 2. Establishment of the Athletics Integrity Council

In our previous report, we noted that Penn State announced the members of its Athletics Integrity Council on October 17, 2012 and that the Council held its first meeting on November 14, 2012 notwithstanding that an athletics integrity officer had not yet been appointed. Once she has started in her role as athletics integrity officer, Ms. Del Giorno will become the chairman of the Council, taking over that responsibility from acting chairman Damon Sims, who is Penn State’s vice president for student affairs. During this quarter, members of the Athletics Integrity Council reviewed and approved the Code of Conduct for Intercollegiate Athletics and updated sections of the Athletics Department’s policy manual that relate to the Integrity Program. While the members of the Council did collaborate on these matters by email during the quarter, the Athletics Integrity

3

Id.; see AIA § III.B.1.

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Council did not meet in person during this reporting period. A meeting of the Council is scheduled for early March 2013 after Ms. Del Giorno has started in her new role. In connection with the establishment of the Athletics Integrity Council, the AIA requires “Team Monitors” to be appointed for each of Penn State’s 31 intercollegiate athletics teams who are to report – to both the athletic director and the Council – any “issues or problems that have arisen during that year and any corrective action taken in response” and to certify his or her team’s compliance with applicable NCAA and Big Ten Conference rules. On November 19, 2012, Athletic Director David M. Joyner notified Penn State’s varsity head coaches that they had been designated Team Monitors and provided them information about their new responsibilities in that role. On December 5, 2012, Dr. Joyner and Associate Athletic Director for Compliance Matthew Stolberg met with the head coaches to review and provide training on these responsibilities and on Penn State’s recently adopted Code of Conduct for Intercollegiate Athletics that is discussed below. A member of our team attended that meeting. 3. Code of Conduct for Intercollegiate Athletics

Prior to our initial report, on November 16, 2012, Penn State finalized and its Board of Trustees formally adopted a new Code of Conduct for Intercollegiate Athletics, as required by the AIA. The AIA also requires that the Code of Conduct be distributed to all “Covered Persons” within 30 days after its adoption and that each of those “Covered Persons” provide a certification that he or she has received, read, and understood the document and will abide by it. “Covered Persons” include student-athletes, coaches, administrators, team managers, the president, members of the Board of Trustees, and certain others. There are approximately 1,100 “Covered Persons” at Penn State within the AIA’s definition of that term, but the University circulated the Code of Conduct to, and obtained

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certifications from, a larger population of more than 1,800 individuals. The AIA’s deadline for obtaining all of these certifications was December 16, 2012. Based on the information we have reviewed, it appears that Penn State timely distributed certifications to all “Covered Persons,” and it also appears that the University has obtained those certifications from all but one of them.4 4. Policies and Procedures in Support of the Integrity Program

During this quarter, Penn State satisfied the AIA’s requirements to adopt or update written policies and procedures concerning the operation of the Integrity Program and to distribute those policies and procedures to all Covered Persons.5 Under the AIA, updated written policies were required to be adopted by no later than December 27, 2012, and those updated policies were to be circulated by no later than 30 days thereafter. An internal Penn State committee collaborated to prepare updates to chapters I and II of Penn State’s pre-existing Intercollegiate Athletics Policy Manual to satisfy this AIA requirement. The updated chapters were timely completed by December 21, 2012. We have reviewed the two updated chapters and believe their substance meets the AIA’s requirements. On February 5, 2013, Dr. Joyner distributed the updated chapters to relevant individuals within the Athletics Department. On February 6, 2013, the updated chapters were circulated to members of the Board of Trustees. Over the following two weeks, the Morgan Academic We have reviewed substantial compilations of data showing that certifications were obtained from many individuals, and we believe that Penn State has made a substantial good faith effort to obtain certifications from all “Covered Persons.” We are continuing to work with Penn State to enhance its recordkeeping in this area and to confirm that this effort has been completed as to every required individual. One of the trustees, Anthony P. Lubrano, declined to sign a certification because of his disagreement with the Consent Decree and the AIA. In a letter to the NCAA and the Big Ten Conference dated January 23, 2013, Penn State’s outside counsel described the University’s efforts to obtain Mr. Lubrano’s certification and enclosed a copy of Mr. Lubrano’s letter explaining his unwillingness to provide one.
5 4

See AIA § III.C.2.

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Support Center for Student Athletes distributed the updated chapters to all student-athletes and student team managers. While the chapters were circulated after the 30-day deadline under the AIA, much of the material in the updated policies previously had been provided to Covered Persons in the form of the recently adopted Code of Conduct for Intercollegiate Athletics. The untimely distribution of the updated policies was a minor breach of the AIA’s requirements that did not ultimately undermine the spirit and substance of the Consent Decree or the AIA.6 5. Disclosure Program

The disclosure program called for under the AIA must provide a method for individuals, anonymously or named, to disclose, report, or request advice on matters relating to compliance with the AIA, Penn State’s intercollegiate athletics policies, applicable NCAA and Big Ten Conference rules, or the principles of institutional control, responsibility, ethical conduct, and integrity that are incorporated therein.7 The program must include a non-retribution, non-

retaliation policy, must be overseen by the athletics integrity officer, and must include certain mandatory investigatory procedures. The athletics integrity officer also must maintain a

disclosure log that is available for inspection by the NCAA and the Big Ten Conference in which Penn State records information about each report or inquiry and the actions taken in response. Penn State has met the first and most central requirement of the disclosure program, which is to provide for an athletics compliance hotline that permits named or anonymous reporting or inquiries by affected individuals. As discussed in our initial report, Penn State has modified its preexisting ethics and compliance hotline to provide for the elements required under the AIA. The rules governing that hotline already included a non-retaliation policy, and callers
6

This delay appears to relate to the occurrence of Penn State’s winter recess during the 30-day period.
7

AIA §III.E.

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already were provided an option to remain anonymous. Penn State also incorporated changes to its ethics and compliance reporting website, which now provides reporters the option to specify a concern relating to “NCAA Compliance/University Athletics.”8 Penn State completed all of these enhancements before the 120-day deadline. We conducted a test call to the hotline this quarter and confirmed that hotline operators were properly instructed to handle athletics compliance issues in the manner contemplated in the AIA. Operators appeared to be well-prepared to receive reports of perceived athletics violations on an anonymous basis. Callers who do not opt for anonymity are provided contact information for Associate Athletic Director for Compliance Matthew Stolberg and given the option to report concerns or questions to him directly. Any calls suggesting that there is a risk of imminent danger are elevated to Mr. Stolberg’s attention immediately. Operators provide all callers with a reference number and a call-back date to provide them the opportunity to learn the status of their report. Callers may request that Mr. Stolberg contact them with updates or the resolution of the report. According to a February 4, 2013 report prepared by the Office of Internal Audit, the ethics and compliance hotline received significantly increased activity during 2012: 159 calls (on all issues) as compared to 34 and 40 calls in 2010 and 2011, respectively. However, only one of the calls in 2012 related to an issue of athletics compliance; after investigation, Penn State took corrective action on that issue. One additional call related to athletics compliance has been received in 2013 to date. The University now has drafted a form of disclosure log to record and track such calls, as contemplated by the AIA, and we anticipate the form of that document will be finalized once Ms. Del Giorno has begun her work as the athletics integrity officer.

8

www.mycompliancereport.com/brand/psu.

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B.

Penn State’s Efforts to Implement the Freeh Report Recommendations

The Consent Decree requires Penn State to adopt all of the recommendations that were set forth in chapter 10 of the Freeh Report and to do so “in spirit and substance” by no later than December 31, 2013. This quarter, the University has continued to make progress in There are five Freeh Report

implementing many of those 119 recommendations.

recommendations, however, that Penn State requested it be permitted not to put into effect in the form suggested in the report. The NCAA and the Big Ten Conference have accepted our recommendation and consented to Penn State’s request. 1. Completed Recommendations

Penn State completed or substantially completed the implementation of 16 additional Freeh Report recommendations since our initial report. These included the approval of

University Policy HR101 on Positions Requiring a National Search; solicitation of a consulting firm to assist in developing a new human resources information and performance management system; development of audit plans incorporating both operational monitoring and compliance testing for Clery Act compliance and background checks; addition of a public comment period during Board of Trustees meetings; publication of Board of Trustees news and meetings via social media outlets; retention of the Commission on Accreditation for Law Enforcement Agencies, Inc. to obtain full accreditation for the University police department; and determination to regularly send a list of notices of incidents and threat warnings from the University police department to appropriate administrators.9

The Board of Trustees first provided for a public comment period at its meeting in September 2012. In January 2013, the Board provided for the first public comment periods during meetings of Board committees.

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Two further recommendations have been identified by the University as ongoing: the designation of the associate vice president for human resources to oversee and coordinate executive compensation matters; and the retention of outside consultants to support the periodic self-assessment of the Board of Trustees. 2. Recommendations in Progress

An additional 40 recommendations are categorized by Penn State as “in progress,” and it appears that the University is making a good faith effort to complete their implementation in spirit and substance by December 31, 2013. Several matters addressed during the quarter bear mention. a. Penn State Culture (Recommendation 1.1)

The first recommendation in chapter 10 of the Freeh Report recommended that the University “[o]rganize a Penn State-led effort to vigorously examine and understand the Penn State culture . . . .” In conjunction with meetings of the Board of Trustees in November 2012 and January 2013, joint meetings were convened of the Freeh Response Advisory Council and the Board of Trustees Response Team to discuss this recommendation. Those meetings resulted in the appointment of a subcommittee of the Freeh Response Advisory Council to focus on culture. The chancellor of Penn State Abington, Karen Wiley Sandler, will chair the subcommittee. The subcommittee has been tasked with drafting a

comprehensive statement of principles reflecting Penn State’s values. The subcommittee held its initial meeting on February 14, 2013, at which it outlined a plan to gather consensus on Penn State’s core values with input from internal constituencies and outside experts and to develop a program of informal training and education to reemphasize those values under the

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guidance of the new director of university ethics and compliance. The subcommittee intends to formalize this plan of action in the coming weeks. This is a vitally important but challenging project that will require significant resources over an extended period. It is never easy to drive broad attitudinal change throughout an institution with the scope of Penn State. But as noted in our first report, and as President Erickson has stated on numerous occasions, an atmosphere where individuals fear reprisal if they report wrongdoing is unacceptable to all of the University’s constituents. b. Ethics and Compliance Officer (Recommendation 4.1)

The Freeh Report recommended the appointment of both a University-wide ethics officer and a chief compliance officer. Penn State plans to combine these two functions into one position, the director of university ethics and compliance, based on recommendations from faculty experts in this field and the expressed preference of numerous candidates for the chief compliance officer position. The search process for this new position is continuing. The University hopes to fill the post during the first quarter of 2013. The director of university ethics and compliance will have a dual reporting line both to the Board of Trustees and to the senior vice president for finance and business. This

arrangement will permit the director to deal directly with the Board if an issue arises that concerns potential wrongdoing by a senior administrator. Penn State anticipates that the director of university ethics and compliance will head an office structured in a manner similar to the Office of Internal Audit. The office will be located near the Offices of General Counsel, Internal Audit, and Risk Management to facilitate communication and interaction. To avoid duplicating responsibilities, the University also plans to merge the ethics council and the compliance council that were recommended in the Freeh

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Report into one council to be established by the end of March 2013.10 With the hiring of the new director, Penn State will be poised to complete nine related recommendations in the Freeh Report.11 c. New Policies Approved This Reporting Period (1) HR101:

Penn State approved and implemented three new policies this quarter:

“Positions Requiring National Search”; (2) University Police Department Policy/Procedure #39: “Conflict of Interest”; and (3) University Police Department Policy/Procedure #40: “Incident Reporting.” i. HR101: Positions Requiring National Search Process “Positions

On January 14, 2013, the University formally adopted Policy HR101:

Requiring National Search Process.”12 The policy defines which positions require a national search and outlines the process for conducting the search. Under the policy, Penn State must nationally advertise its search for all executive positions, Division I head coaching positions, associate athletic director positions, and the athletic director position. The search process for the positions defined in Policy HR101 includes both a national search as well as internal posting. The national search must include advertisement in relevant publications to encourage a broad, diverse candidate pool. It also encourages the formation of a search committee to facilitate the process.

10 11

See Freeh Report, ch. 10, Recommendations 1.2.1 and 4.1.2.

See Freeh Report, ch. 10, Recommendations 1.2, 1.2.1, 4.1, 4.1.1, 4.1.2, 4.1.3, 4.1.4, 4.1.5, and 4.1.6.
12

See Freeh Report, ch. 10, Recommendations 1.3 and 5.3.

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ii.

University Police Department Policy/Procedure #39

University Police Department Policy/Procedure #39: “Conflict of Interest” provides guidance to University Police and Public Safety and Security employees who encounter an investigation involving potential conflicts of interest.13 It applies to all employees of “all Police and Security operations within the Penn State system.” While recognizing that conflicts of interest may arise in a number of circumstances, it singles out investigations of administrators in the police or security reporting chain, highly-placed University employees, and University Police and Public Safety and Security employees as examples of applicable situations. The policy requires either the employee with knowledge or the head of the local unit to notify the assistant vice president of police and public safety at University Park “as soon as practical” of investigations or suspicions involving wrongdoing by an administrator. It similarly requires the head of a police or security unit to inform the assistant vice president if any concern arises that an investigation is being inappropriately hindered. The assistant vice president then must determine whether the local unit can continue the investigation or if it needs to be referred elsewhere. iii. University Police Policy/Procedure #40 “Incident Reporting” provides guidance in

University Police Policy/Procedure #40:

report-writing standards for University Police employees.14 The policy contains a detailed guide of procedures and mechanisms for reporting specific types of incidents. The policy incorporates the obligation for the referral of incidents involving student misconduct to the Office of Student Conduct and the referral of incidents involving employee misconduct to the Office of Human Resources.
13 14

See Freeh Report, ch. 10, Recommendations 6.5 and 6.7. See Freeh Report, ch. 10, Recommendation 6.4.1.

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d.

Other Freeh Report Recommendations Nearing Completion

Penn State is close to completing implementation of several additional recommendations in the Freeh Report: • The University has prepared modifications to the Institutional Conflict of Interest Policy, which are now being reviewed by the University’s general counsel.15 It is anticipated that the revised policy will be approved within the next month. • Penn State is now implementing a new system for tracking all employee training required by federal or state law or University policy.16 The University recently purchased software to coordinate training activities and track employee attendance. An online “mandated reporter” training program was made available to all Penn State employees in February 2013; Penn State plans to extend the online training program to Clery Act training obligations in the near future. The University intends to begin online training programs for University volunteers in April 2013. • Penn State has begun a public search for an additional human resources position within the Athletics Department to supplement that office’s capabilities. The University expects to fill the new position soon. • The Office of the General Counsel hired three new attorneys beginning in the first quarter of 2013.17

15 16 17

See Freeh Report, ch. 10, Recommendation 1.2.2. See Freeh Report, ch. 10, Recommendation 2.2.10. See Freeh Report, ch. 10, Recommendation 2.3.3.

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The University is developing a “Policy on Policies” to guide the drafting, approval, and revision of University policies. It is expected that the new policy will be drafted by the end of March 2013 for approval in April 2013.18

Penn State has established a committee to review and oversee implementation and enforcement of policies relating to non-student minors on campus and the operations of youth camps and activities.19 The committee is co-chaired by the associate vice president for human resources and the director of risk management and also includes the assistant vice president for Penn State professional education. This group identified three main types of activities on which to focus attention: (1) camps and other programs involving minors being dropped off on campus; (2) outreach programs involving University groups or clubs visiting neighboring elementary schools; and (3) day-care centers. The committee has also recommended the creation of a new position for a children’s program coordinator who would report to the director of university ethics and compliance and would be responsible for maintaining an inventory of all University programs for children.20 The committee plans to recommend specific updates to University Policies AD39: “Minors Involved in University-Sponsored Programs” and HR99: “Background Check Process.” It also is working on a project to develop a section of the University’s website combining all relevant policies and information qualifying as “parent information for youth programs.”21

18 19 20 21

See Freeh Report, ch. 10, Recommendation 2.8.1. See Freeh Report, ch. 10, Recommendation 7.3. See Freeh Report, ch. 10, Recommendation 7.3.1. See Freeh Report, ch. 10, Recommendation 7.3.5.

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Items related to a number of other Freeh Report recommendations are on the agenda for consideration at the Board of Trustees meeting in March 2013. These include: upgrading the position of associate vice president for human resources to vice president; proposed modifications to the president’s authority in the University’s bylaws, charter, and standing orders; proposals for Board governance reforms; proposals to change the Board’s conflict of interest policy; completion of a Board crisis management plan; and presentation of draft guidelines for reporting legal and risk matters to the Board.22 e. Recommendations Concerning Facilities Security Issues

As previously reported, we retained Guidepost Solutions, LLC to assist with the review of security issues, including Recommendations 5.2 and 7.1 in chapter 10 of the Freeh Report, which recommended that Penn State evaluate and modify security and access protocols for Penn State’s athletics and recreational facilities and areas frequented by children or used in youth camps and children’s programs. Penn State has been cooperative with us and with Guidepost in discussing its plans and challenges in improving the physical security of relevant facilities. In November 2012,

Associate Athletic Director for Facilities and Operations Mark Bodenschatz and his team permitted Guidepost representatives to observe all security procedures in the course of a home college football game weekend. During other visits, Mr. Bodenschatz and his colleagues also have provided us tours of several athletics facilities to permit existing and planned security measures to be observed in the field. Penn State has told us it expects to complete the implementation of security enhancements at all the relevant facilities before the end of 2014. Given the need to provide for

22

See Freeh Report, ch. 10, Recommendations 2.1.1, 2.1.3, 3.1, 3.2, 3.4.3, and 3.6.

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evaluation, design, and budgeting, the longer schedule to complete this work is not surprising. The University has completed security assessments for the athletics facilities of primary concern. It also has a well-organized project management process in place. Penn State continues to work through the previously reported challenges related to the effective administration of Policy AD73, which concerns access to University athletics and recreational facilities. During this past reporting period, University officials debated, but

ultimately rejected, refinements to the policy that would have modified the type and number of guests permitted and afforded members of the alumni association access to facilities. As with any change, we expect the Penn State community will adapt to Policy AD73 and that it will become easier to enforce. There is no substitute, however, for sustained vigilance, particularly among security personnel in the relevant facilities. In this regard, we note that during a campus visit early in this reporting period, Guidepost personnel freely entered athletics facilities without being challenged or questioned by anyone. Work remains to be accomplished. f. External Monitor (Recommendations 8.2 and 8.3)

The Freeh Report called for an external monitor with the authority and resources to ensure that the report’s other recommendations were implemented. The report also

recommended that there be a review of Penn State’s progress in implementing its recommendations by the first anniversary of the report’s release. Penn State recently asked us whether we would be willing to perform this additional role to avoid the duplication of effort that might be required if a second monitor were named. Both the NCAA and the Big Ten Conference informed us that they would not object to such an expansion of our responsibilities, and the Monitor Agreement has been amended accordingly.

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C.

Recommendations That Penn State Requested Not to Implement

There are five recommendations that Penn State has determined it should not implement in the manner recommended in the Freeh Report. This decision was reached after significant deliberation in meetings attended by our team’s representatives. In a letter from its outside counsel dated February 13, 2013, Penn State explained to us the rationale for its decision as to each of these five recommendations. The AIA acknowledges that Penn State would need to assess the Freeh Report’s recommendations (other than those regarding the Athletics Department that are set forth in chapter 10, section 5.0) to determine whether their implementation would be impractical. The AIA requires Penn State to make good faith efforts to comply with “the spirit and substance” of the recommendations, and the NCAA and Big Ten Conference, in turn, agreed to consider and provide their consent to a decision not to implement or to alter a recommendation “for good and valid reasons.”23 Penn State’s request for permission not to implement the five recommendations in question (which are discussed below) followed an effort to benchmark practices at peer institutions. In addition to meeting with Penn State about the issues, our team met with some of Judge Freeh’s colleagues to better understand the reasons for these and other recommendations in the Freeh Report. Based on all of the information available to us, I concluded that the University’s requested exceptions were reasonable and complied with the spirit and substance of the AIA. I conveyed that view to the NCAA in a letter on February 20, 2013 in which I transmitted a copy of Penn State’s submission to me about these issues. The NCAA and the Big Ten Conference thereafter consented to the exceptions that Penn State had requested.

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AIA § III.A.

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1.

Realign Human Resources to Report to the University President (Recommendation 2.1.3)

The Freeh Report recommended that the position of associate vice president for human resources should be a full vice president position reporting directly to the president of the University. Penn State has decided that the position should be that of a full vice president and be a member of the President’s Council. The University intends to present these proposed changes to the Board of Trustees for approval at its March 2013 meeting. After conducting

benchmarking against peer institutions, however, Penn State determined that the vice president for human resources should continue to report to the senior vice president for finance and business, as provided for in the current organizational structure. Based upon our meetings with lawyers who worked with Judge Freeh, we understand the purpose of the realignment recommendation was to provide the head of the Office of Human Resources with more direct access to the University’s president. Having considered Penn State’s rationale, we believe its interpretation of the recommendation can still achieve this goal through other modifications in practices and policies that the University intends to make. We note that Susan Basso, the University’s current associate vice president for human resources, already has been participating in meetings of the President’s Council. 2. Separate Office of Human Resources from Finance and Business (Recommendation 2.2.1)

Recommendation 2.2.1 similarly suggested that the Office of Human Resources be separated from the University’s finance and business organization for the same reason – to provide human resources with more direct access to the University’s president. As explained above, Penn State intends to retain its current organizational structure with some changes in policy and practice to permit the vice president for human resources to have direct access to the University’s president as needed. 22

3.

Adopt a More Robust Human Resource Information/Capital Management System (Recommendation 2.2.7)

In Recommendation 2.2.7, the Freeh Report suggested that the University obtain and install a new Human Resource Information/Capital Management System (“HRIS”) with sufficient growth capacity for use at University Park and all Commonwealth Campuses. While Penn State has agreed that this recommendation should be implemented, it has concluded that the project is too substantial and complex to be completed within the timeframe contemplated under the AIA, that is, by December 31, 2013. The purpose of the HRIS is to facilitate improved centralization of human resources processes and activities. Penn State believes that adopting such a new system will require several years and a significant investment of capital and human resources. Penn State has told us the project was being planned even before the Freeh Report recommended it. The University anticipates issuing a request for proposals for this project later in 2013, and it expects to have a better sense of the costs and schedule for completing the project after further work has been completed. We do not believe extending the deadline for completion of this significant project will undermine the spirit and substance of the Freeh Report recommendation. 4. Use Search Firms and Advertise for All Senior Executive Positions (Recommendation 2.4)

Recommendation 2.4 suggested that Penn State advertise externally for all senior executive placements and also engage executive search firms for those searches to broaden the available talent pool being considered. Judge Freeh’s colleagues explained to us that the purpose of this recommendation was to ensure that Penn State identified the best possible candidate for a position even if that candidate came from outside of the Penn State community. While Penn State has substantially adopted this recommendation in promulgating its new Policy HR101: “Positions Requiring National Search,” that new policy does not require the use 23

of an executive search firm in every instance. Penn State has explained to us that it often does engage executive search firms and will continue to do so when appropriate, but in many searches the field of qualified candidates is sufficiently narrow that such an expense is unnecessary to achieve the goal of this recommendation. We believe Penn State’s explanation for its requested variance from this recommendation is reasonable. 5. Consolidate Oversight of Policies for Programs Involving Non-Student Minors (Recommendation 7.3)

In Recommendation 7.3, Judge Freeh suggested that oversight of policies and procedures for programs involving non-student minors be consolidated in the Office of Human Resources and that the University appoint a coordinator to oversee matters in this area. Penn State has expressed its agreement with the principles motivating this recommendation – protection of children in University-affiliated programs and centralization of that effort. However, it differs in the proposed approach to accomplishing those objectives. The University has centralized these issues in a new committee co-chaired by the associate vice president for human resources, and that committee has recommended that the new coordinator position be established within the new Office of Compliance instead of the Office of Human Resources. We agree with Penn State that this approach maintains the spirit and substance of the recommendation. D. Update on Training Efforts

As of February 1, 2013, 10,482 people had completed Penn State’s mandated reporter training, which was described in detail in our first report. There were 15 additional training sessions in February 2013. In addition, there have been 25 additional Clery Act training sessions that have reached approximately 400 more individuals. As noted, Penn State has now

implemented an online version of the mandated reporter training program and plans to

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incorporate Clery Act training into an online format in the near future. Completing the online mandated reporter training will become an annual requirement for all Penn State employees. IV. OTHER EVENTS DURING THIS REPORTING PERIOD A. Matters Concerning Penn State’s Board of Trustees

The Board of Trustees met once during this reporting period, on January 18, 2013. This was the Board’s annual meeting, and as a result the Board attended to a number of matters relating to its composition for the coming year. Chairman Karen B. Peetz informed the

University that, due to her increased responsibilities with The Bank of New York Mellon Corporation, she would not stand for reelection as chairman of the Penn State Board of Trustees but would continue her term as a member of the Board. At the January 2013 meeting, the Board elected Keith E. Masser as the new chairman and Stephanie N. Deviney as vice chair. During the January meeting, the chair of the Committee on Governance and Long-Range Planning reported on the “considerable activities” that its members had undertaken since the last meeting. These included work related to governance reform proposals in the Freeh Report, from the Middle States Commission on Higher Education, and from the Pennsylvania auditor general. During the quarter, representatives from our team attended presentations to senior administrators and members of the Board related to these proposed governance reforms, and the University has kept us appropriately informed of its progress in working through these matters. At its January meeting, the Board also announced the eighteen-member Presidential Search and Screen Committee composed of members from the faculty, staff, administration, undergraduate and graduate student bodies, Athletics Department, and alumni association. Penn State hired an executive search firm to assist with the search. The Presidential Search and Screen Committee will work with two other groups – the Board’s Presidential Selection Council

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and the Blue & White Vision Council. The Board’s Presidential Selection Council will oversee the selection of the next president and set the timeframe for the search, as well as the qualities and capabilities desired of the person who ultimately will fill this role. The Blue & White Vision Council will focus on identifying the “strategic challenges and opportunities” that confront the University in the coming years. On February 17, 2013, a special committee of Penn State’s Faculty Senate issued a report entitled “Improving the Governance of Penn State, Revising the Structure of its Board of Trustees, and Furthering the Academic Mission of the University: Report and Recommendations of the Special Committee on University Governance.” The report’s 23 recommendations focus on the size, composition, and structure of the Board of Trustees. It includes several

recommendations aimed at increased faculty and student participation, recommends the elimination of public office holders as trustees, and recommends that the University president be solely an ex officio member of the Board. The report also recommends improvements to the selection process for new Board members and suggests methods for improving communication between the Board and the Penn State community. The report has been shared with the Board of Trustees. B. Lawsuits, Legislative Activity, and Investigations

The prosecution and conviction of Jerry Sandusky, the sanctions imposed on Penn State in the Consent Decree, and the Freeh Report’s findings and conclusions have led to several recent developments. On January 2, 2013, Governor Tom Corbett filed a federal lawsuit against the NCAA alleging that the Consent Decree and the sanctions imposed under it violated the federal antitrust

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laws.24 On February 8, 2013, the NCAA responded to the lawsuit with a motion to dismiss the complaint for failure to state a claim. Briefing on that motion is now underway. On January 4, 2013, Pennsylvania state senator Jake Corman filed a separate lawsuit against the NCAA seeking to block the use outside of Pennsylvania of any part of the $60 million fine to be paid by Penn State under the Consent Decree.25 Senator Corman has filed an application for preliminary injunction to prohibit the NCAA from disbursing funds it already had received from the University, and proceedings relating to that motion may occur over the coming weeks. Briefing as to the legal propriety of the action also is likely. On February 20, 2013, Governor Corbett signed into law a statute requiring Penn State to pay the $60 million fine into an endowment created as a separate trust fund in the state’s treasury designed to ensure that the funds are used only in Pennsylvania and for the benefit of Pennsylvanians through initiatives aimed at preventing child sexual abuse and assisting its victims. Later that day, the NCAA filed a federal lawsuit challenging the statute as

unconstitutional.26 Competing bills also have been proposed in the two chambers of the Pennsylvania legislature concerning Penn State’s governance. Both bills would enact as Pennsylvania law some of the Penn State governance revisions that had been recommended in the Pennsylvania auditor general’s recent report on that subject.

Complaint, Corbett v. Nat’l Collegiate Athletic Ass’n, No. 1:13-cv-00006-YK (M.D. Pa. Jan. 2, 2013). See Complaint, Corman v. Nat’l Collegiate Athletic Ass’n, No. 1 MD 2013 (Pa. Commw. Ct. Jan. 4, 2013). See Complaint, Nat’l Collegiate Athletic Ass’n v. Corbett, No. 3:02-at-06000 (M.D. Pa. Feb. 20, 2013).
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In a letter dated January 28, 2013, two members of the U.S. House of Representatives from Pennsylvania, Representatives Charlie Dent and Glenn Thompson, requested that the NCAA “restore the athletic scholarships taken away as part of the NCAA” sanctions against Penn State. In their letter, the congressmen assert that the scholarship reduction punishes

individuals who “had nothing to do with the unspeakable crimes committed by Jerry Sandusky and who should not have to suffer as a result of his actions” and that it “effectively denies individuals access to higher education nationwide.” The NCAA’s president, Mark Emmert, responded in a letter dated February 7, 2013, in which he noted that pending litigation constrained his ability to directly respond beyond pointing out that no Penn State student-athlete had lost a scholarship due to the sanctions, that all future student-athletes are eligible for scholarships at Penn State or other colleges, and that Penn State remains able to offer needsbased scholarships to deserving students. On February 10, 2013, lawyers representing the family of Joe Paterno released a report criticizing the findings and conclusions of the Freeh Report, particularly as they related to Mr. Paterno’s alleged knowledge of, or involvement in, events involving Jerry Sandusky. In response, Judge Freeh issued a statement disputing the criticisms and reaffirming the findings and conclusions in his report. C. The Athletics Department – Rise and Rally

Following the football season, an organization called “Rise and Rally” announced that it would host a celebration in Atlantic City, New Jersey to honor the Penn State football team. Rise and Rally said that it would invite Penn State football players who had exhausted their NCAA eligibility to attend autograph sessions, photo shoots, and other events and be compensated for doing so. The University became aware of the proposed event through media

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reports. The athletics compliance office investigated the matter and reported what was known about the organization and the event to the NCAA and the Big Ten Conference, which both confirmed that the event would not have violated applicable rules. After Rise and Rally

cancelled its event, citing a scheduling conflict, Penn State asked the group to alert the athletics compliance office in advance of any future plans that might implicate the University’s relationship with the NCAA. D. The Administration

On January 21, 2013, the University announced that Dr. David Joyner will serve as athletic director rather than acting athletic director. The University reiterated that Dr. Joyner will remain in place until President Erickson’s successor takes office, at which time Penn State will conduct a national search to fill that position.27 The University also reiterated publicly its plan to hire “a dozen new faculty members over the next three years as part of its recently launched Network for Child Protection and WellBeing, with the goal of advancing knowledge, practice, education and outreach to combat child abuse.” This cluster hire will target tenure-track, clinical, and research faculty members in an effort to advance Penn State’s goal to become a national leader in the prevention and remediation of child maltreatment.28 V. AREAS OF FUTURE FOCUS AND CONCLUSION As discussed in this report, Penn State has continued its steady progress in implementing the requirements of the AIA and the Freeh Report recommendations. University administrators, staff, and trustees continued to demonstrate a good faith effort to fulfill their obligations and to “Joyner to Remain as Athletic Director for Rest of Erickson’s Term,” Penn State Live, January 21, 2013, available at http://live.psu.edu/story/63753. “Penn State Hiring Faculty to Advance Prevention of Child Maltreatment,” Penn State Live, dated January 28, 2013, available at http://live.psu.edu/story/63899#nw1.
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implement improvements to Penn State’s functionality and security.

My team and I have

received continued, complete cooperation from the University in fulfilling my role as Monitor under the AIA. Our next quarterly report is due at the end of May 2013. We expect there will be further developments to report upon at that time, including the anticipated selection of the new director of university ethics and compliance, the commencement of activities under the direction of the athletics integrity officer, and the University’s continuing efforts to put into effect the remaining recommendations of the Freeh Report. We will continue to reach out to, and make ourselves available to, Penn State’s many constituencies to help us better understand the institution and the context for any recommendations we may make with respect to the AIA.

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