Complete 2012 forensic audit documents - Kansas Bioscience ...

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Jan Katterhenry was reimbursed twice for the same expense, resulting in a $10.42 overpayment to Ms. Katterhenry. Ms. Katterhenry initially reported this expense on her expense report dated October 24, 2007 with no receipt and subsequently reported this same expense on her expense report dated November 27, 2007, supported with the itemized receipt. Both requests were paid to Ms. Katterhenry in full. On an expense report covering expenses incurred on September 17, 2008, Cary Nourie reported a $309.00 airfare expense twice. The expense was listed in both the “Air & Rail Travel” column and the “Misc.” column of the expense report. The total of the expense report was $722.00, which was paid in full on October 1, 2008 with check number 1677. Payment and supporting documentation is located at Exhibit 50. Bret Healy, one of the former Directors of Commercialization for HBV, was reimbursed twice for the same expense, resulting in a $13.04 overpayment to Mr. Healy. Mr. Healy initially reported the expense from TGI Friday’s on his expense report dated January 13, 2009, supported with the itemized receipt, and subsequently reported this same expense on his expense report dated February 15, 2009, supported with the credit card receipt. Both requests were paid to Mr. Healy in full. KBA management has reviewed and verified all of these payments to be double payments. Recommendation: Management should ensure that all KBA employees and BOD members adhere to the appropriate policy. Any exceptions to policy for which reimbursements are made should be formally approved and the documentation should be maintained with the expense report. The business purpose of all expenses should be clearly explained on the expense report; and the name of the attendee and their business affiliation should be noted with regard to all meal and entertainment expenses. Furthermore, the BOD should consider requesting reimbursement for any verified instances of duplicative expense reimbursements. Management should consider creating parameters around the definition of “normal and reasonable” with regard to travel and entertainment expenses. With regard to expenses that exceed the stated definition, a short description of why the incurred expenses are considered to be reasonable should accompany the expenses reimbursement form. KBA’s Response: KBA accepts BKD’s recommendations noted in this section. KBA has made written requests for reimbursement from the individuals who were inadvertently issued duplicate expense reimbursements; Tom Thornton, $3,139.33; David Franz, $680.36; Jan Katterhenry, $148.71; Cary Nourie, $309.00; and Bret Healy $14.04. Mr. Franz and Ms. Katterhenry have repaid the amounts requested. Mr. Thornton has agreed to repay the amounts requested. KBA management will recommend the Board adopt a more detailed definition of “normal and reasonable” with regard to travel and entertainment expenses, in line with BKD’s recommendation. Of course, KBA management and the Board may refuse reimbursement of expenses considered unreasonable. 120
VENDOR CONTRACT AND RELATED EXPENSE REVIEW Given the scope of our engagement, BKD reviewed vendor contracts with two objectives: 1) to determine with whom and for what large sums of money were spent, and 2) to determine the appropriateness of the vendor contracting, contract authorization and vendor payment processes. We reviewed 104 contract files for approximately 300 vendors in this process. A listing of contract files reviewed is located at Exhibit 51. Significant Vendors BKD’s review indicated that significant amounts of money (subjectively defined as greater than $100,000) were expended by KBA with regard to the following projects or initiative: • NBAF • KUCC NCI designation pursuit • Heartland BioVentures • Animal health • Eminent Scholars funding program • Investment consulting • <strong>Bioscience</strong> Park and Venture Accelerator • General Counsel • Office expense/administrative <strong>audit</strong>ing • Sponsorships Please refer to Exhibit 52 for a listing of significant contracts and their total payments. NBAF NBAF had eight significant contracts (greater than $100,000) for a total of $2,841,099. Akin Gump The service agreement with Akin Gump Strauss Hauer & Feld, LLP (“Akin Gump”), signed by John M. Simmons, began December 15, 2007 and was to provide “Advocacy services to promote the interest of the National Bio and Agro-Defense Facility.” The fee arrangement included a $25,000 monthly retainer and reimbursable expenses. The contract was renewed at the same terms through December 15, 2008. On January 12, 2009, KBA acknowledged the automatic renewal of the contract. On March 1, 2009, a new unexecuted contract specified that the terms changed to monthly payments of $20,000. This contract expired February 28, 2010, and contracts dated December 1, 2009 and June 1, 2010 followed. The terms remained at $20,000 per month. Beginning in December 2010, the monthly retainer was reduced to $15,000. BKD did not observe an RFP in the file for the subsequent contract. The finding for the March 1, 2009 unexecuted contract is located at Exhibit 53 - Contract Exhibit A- Missing Contract Findings. In addition to the monthly retainer, Akin Gump charged hourly for legal fees associated with the NEPA portion of the representation, which was not engaged separately. This was $49,634.74 in September 2008 and $62,806.75 paid in February 2009. Akin Gump also assisted in the Texas Biological and Agro-Defense Consortium Lawsuit discussed previously in this report. Akin Gump was paid a total of $1,422,979. 121
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Table of Contents INTRODUCTION ....
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Other Employment Decision Allegatio
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have all provided information and i
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KBA again appeared before the Comme
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ENGAGEMENT APPROACH Interviews Inte
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• Kent Glasscock - President Nati
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Computer Forensics Computer hard dr
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START-UP PHASE KBA has operated und
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State University the proposed grant
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described Thornton as an effective
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Investment Committee. All current H
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The program goals are to: 1) recrui
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Through June 30, 2011, three Rising
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grants or bonds. KBA also works wit
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center is a public and private coll
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Some individuals BKD interviewed ob
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The Texas Consortium also requested
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Accreditation Council for Graduate
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$581.8 Million Funding Cap Breakdow
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• Tom Thornton - President, Illin
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divine interVentures’ Bankruptcy
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Sullivan indicated that everything
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On January 11, 2011, Mr. Coburn ind
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CHANGE OF EMPLOYMENT STATUS OF CFO/
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Ethics Investigation Regarding Clay
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As a result of the possible violati
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large enough to meet KSU’s needs
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On January 9, 2007, KBA’s BOD aut
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The Kansas City Area Life Science I
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The committee that reviewed the arc
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Monthly payments for Series 2009A a
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If KBA is able to maintain the abov
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Debt Service Payments Debt service
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• assisting KBA with understandin
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Business Development: HBV has a net
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Beginning in August 2009, Ryan Whit
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Page 110 and 111: However, the EarCheck product langu
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Page 120 and 121: In summary, it appears that Lindsay
Page 122 and 123: Allegations have been made that the
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Page 128 and 129: After the RFQ evaluation, Ennis Knu
Page 130 and 131: venture firms that will co-invest a
Page 132 and 133: include only those guests determine
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Page 138 and 139: Mr. Eisenbrandt, Thornton’s attor
Page 140 and 141: Ms. LoScalzo further recalled that
Page 142 and 143: Based on these findings, Buck Consu
Page 144 and 145: In addition to base compensation an
Page 146 and 147: Tom Thornton Overpaid Car Allowance
Page 148 and 149: The following expenses are discusse
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Page 152 and 153: KBA Meeting Expenses In general, wi
Page 154 and 155: Furthermore, the required supportin
Page 158 and 159: The agreements state that Akin Gump
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Page 162 and 163: Mr. Bret Healy Mr. Healy was origin
Page 164 and 165: Ennis Knupp & Associates, Inc. KBA
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Page 168 and 169: approval. The executive staff will
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Page 172 and 173: Additionally, KBA’s BOD approved
Page 174 and 175: Subsequently, on April 4, 2011, KBA
Page 176 and 177: Cary Nourie Tom Thornton worked wit
Page 178 and 179: Tom Churchwell Tom Thornton sat on
Page 180 and 181: KBA’s Response: KBA management wi
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Page 186 and 187: Recommendation: The BOD should cons
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KU Center for Research, Inc. Associ
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APPENDIX B
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Two specific software programs were
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used to remove data from a system i
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Temporary Internet Files and Cookie
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EXHIBIT 1 CCleaner Product Informat
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EXHIBIT 2 Microsoft Word Files from
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Thursday, April 14, 2011 Gov. John
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Kansas Bioscience Authority applaud
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Transition plan.docx
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Personnel Director of Marketing and
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EXHIBIT 4 Archive.PST Folder Schema
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Thornton Laptop Windows Shortcut Fi
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USBStor ControlSet001\Enum\USBStor
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EXHIBIT 8 Windows Shortcut Files Po
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APPENDIX F
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600 BKD Professional Hours through
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