Cronyism and Conflicts of Interest—or, Maybe I’m Just too Damned Cynical

In my previous post, I remarked on the incongruities John Kasich’s appointment of Gordon Gee to lead a statewide study of how to increase affordability at Ohio’s public universities.

I did not anticipate that I would then almost immediately come across an unsettling, related article at Cleveland.com. Written by Henry J. Gomes and Brent Larkin of the northeast Ohio Media Group, the article is titled “Ohio State University Has Invested Millions with Friend of Gov. John Kasich and Gordon Gee, but Officials Won’t Share Details about the Deal.”

Ohio State University has apparently invested $50 million in the venture-capital start-up Drive Capital. The OSU investment currently constitutes more than one-quarter of the $181 million invested to date, though the announced target for initial investments is $300 million.

Drive Capital is headed by Mark Kvamme and Chris Olsen, described as veteran Silicon Valley venture capitalists who were formerly partners at Sequoia Capital. Kasich brought Kvamme to Columbus to head the very troubled, “privately funded” economic-development agency, JobsOhio. Kvamme resigned that position one year ago, and he and Olsen then started Drive Capital. Gee apparently committed OSU’s $50 million investment in Drive Capital before he resigned as President, but the transfer of funds was not made until after Interim President Joseph Alutto took office.

The deal was finalized shortly after the OSU Board of Trustees agreed to allow top university administrators much more leeway in making investments—specifically allowing up to $100 million in investments to be made without the prior approval of the Board.

Kasich, Kvamme, and Gee have publicly come to each other’s defense when each has been under attack in the media.

When Kvamme resigned as director of JobsOhio, Gee joined the agency’s board.

Similarly, in 2008, Gee resigned as a member of the Board of Directors of Limited Brands when its CEO Leslie H. Wexner joined OSU’s Board of Trustees. Wexner has been both one of most generous donors in the university’s history and one of the largest donors to Kasich’s gubernatorial campaign. After Gee resigned as President and Wexner resigned as a Trustee, Gee rejoined the Board of Directors of Limited Brands.  Moreover, the article notes that one of Wexner’s closest business associates, Jack Kessler, is the father-in-law of Geoff Chatas, the Senior Vice President for Business and Finance at OSU.

In a related story posted by WHIO, Chatas said that the investment with Drive Capital “is part of a broader strategy to find ways to increase job creation, commercialize the research findings and discoveries of our professors, and improve Ohio’s financial future and have a positive impact on society.” There is such emphasis in this statement on how this deal will enhance the public good that one might be excused for forgetting that it involves a $50 million investment in a venture-capital firm whose executives could not be more politically connected.

Kasich, Kvamme, and Gee have all insisted that they have not unduly influenced each other’s decisions and that they have been scrupulous in avoiding even the appearance of any conflicts of interest. They have certainly been scrupulous about technically avoiding any blatant demonstrations of conflicts of interest, but the idea that they have avoided the appearance of any conflicts of interest seems either incredibly cynical or patently delusional—not to mention, laughable.

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