Questions surround cash flow at university

Updated: April 1, 2005, 12:29 AM ET
Scripps Howard News Service

The Internal Revenue Service is investigating two summer football camps run by University of Colorado coach Gary Barnett.

Both Barnett and his attorney acknowledged the investigation Wednesday, but said they were not sure what tax issues the IRS is looking into.

At the same time, the IRS has contacted the university seeking additional documents, said CU spokeswoman Pauline Hale. CU attorneys wouldn't say what kind of documents the IRS wants, she said.

"We feel that we are not at liberty to discuss details related to an ongoing investigation conducted by a federal agency," Hale said.

Barnett's lawyer, John Rodman, described the investigation as "broad" and said he thinks it's related to questions raised in media reports during the past several months. Those reports have focused on allegations of questionable accounting and lax oversight of camp expenditures.

Barnett said Wednesday, "We are eagerly cooperating with them because we're just as anxious for the truth to get out -- probably more anxious for the truth to get out -- than anybody. So we're cooperating completely."

Barnett said he turned over "everything they wanted" to IRS investigators roughly two weeks ago. "There was a list of documents," he said, "1099s, (camp) registration forms, tax returns, everything."

IRS officials "did not come in with anything in particular," Barnett said. "They just came in to look at it, and we turned everything over to them."

Jean Carl, an IRS spokeswoman in Denver, declined comment on the matter.

"Disclosure laws prohibit me from confirming or denying any investigation of any taxpayer," Carl said.

The camps operate each summer in two sessions for football players between the ages of 8 and 13. The youngsters get to practice at CU and learn from coaches on Barnett's staff. They can stay in dorms on campus or commute from home.

Although the camps are detailed on a CU Web site, Barnett and university officials say he operates them as a business independent of the university.

The IRS review comes as the state auditor's office continues a wide-ranging probe of spending at the football camps, as well as the university as a whole and its fundraising arm, the CU Foundation.

It also comes on the heels of a report by a state grand jury that criticized how the football camps tracked money, alleging it was loosely guarded and amounted to a "slush fund" for football coaches.

The grand jury was formed last spring to look into allegations that CU used sex and booze to lure football recruits. The panel was assisted by a report from a fraud examiner hired by state prosecutors.

The fraud examiner, Daniel Predovich, raised numerous questions about spending and tax issues at Barnett's two camps.

Barnett has repeatedly said the grand jury and Predovich reports were off-base. Football camp money was controlled, he said, and he can account for all expenditures.

Barnett also has said that he's confident the state audit won't reveal any wrongdoing related to the football camps. As for the IRS review, Barnett said Wednesday he had "no concerns" that investigators would discover anything troublesome.

Asked if it's possible they would discover technical mistakes related to tax matters, Barnett said: "Anytime anybody gets audited, they may have made a technical mistake. There's nothing there I'm concerned about or worried about."

CU's interim athletic director Jack Lengyel, who took over in December 2004 after Dick Tharp resigned under pressure, said he was unaware of the IRS' interest in the camps.

"All I know is I was advised the state was doing an audit, and we're complying with that audit," Lengyel said. "Beyond that, I have no further information."

CU spokeswoman Hale initially said she, too, was unaware of any IRS investigation. After checking with CU attorneys, she confirmed the IRS had contacted the school.

The IRS' interest in CU is the latest in a series of probes that grew out of a now-infamous party in late 2001. The party spawned allegations from three women that they were sexually assaulted by football players or recruits.

Those allegations led to a series of investigations by local police departments, an independent panel, state prosecutors and a grand jury.

Among the issues that emerge: questions in early 2004 about whether someone in CU's athletic department hired prostitutes for football recruits. The allegation was never proven. CU recruiting aide Nathan Maxcey admitted hiring prostitutes for himself but denied hiring them for recruits.

Maxcey was the only CU official criminally charged as a result of those investigations. He was charged with hiring a prostitute, embezzlement and theft relating to misuse of a university cell phone. The theft charge was later dropped.

But the investigations raised numerous questions about how money flowed within the football program.

Many of those questions came out of the Predovich report, which asked -- but didn't answer -- more than a dozen financial questions.

The Predovich report cited concerns with many checks written by the camps. Some covered tuition for assistant coaches' children. Some were made out to "various females," to petty cash or to other parties for unexplained or poorly explained reasons. The report also alleged tax records were missing and transactions were poorly documented.

Barnett said there were reasonable explanations for every transaction. Checks to "various females," for example, were gifts to the wives of assistant coaches.

Barnett complained that he could have answered investigators' questions if they'd asked him. He reiterated that belief Wednesday, saying investigators simply "didn't understand" the transactions.

The Predovich report also raised questions about an entity called High Hopes and its relationship to the football camps. It noted that several checks linked to the football camps included a notation for High Hopes. The report wasn't clear whether the checks were actually made out to High Hopes.

High Hopes, incorporated by Barnett in Missouri, has since been dissolved, said Rodman, Barnett's lawyer. Barnett said Wednesday that High Hopes is nothing more than a checking account he controls.

The Predovich report led to a string of newspaper stories that continued to raise questions about finances within the football program.

Those included reports on a little-known group of CU boosters funneling tens of thousands of dollars to the camps and coaches, and allegations by a former top CU administrator that questionable expenses at CU were often routed through the nonprofit CU Foundation.

As the stories snowballed in November, CU President Betsy Hoffman asked the state auditor to look into the matter. The auditor agreed and continues to assemble documents. A spokeswoman said Wednesday that the auditor's office was "right in the middle of things."

Asked why the IRS has now joined the fray, Rodman said: "I would glean that they're trying to follow up on the items that were in the newspaper, but they wouldn't tell me that. I mean, they're interested in looking at the (football camps) and we're interested in them doing so."

The Predovich report, meanwhile, predicted this turn of events. In one passage it said: "With all of the publicity generated, it would not be surprising for the Internal Revenue Service to conduct audits of the football technique school(s)."