Wright State University invested more than $200,000 for minority ownership in a local tech company that spent much more on executive bonuses and side deals with affiliated companies than it returned to WSU, according to a forensic audit of the school’s research funding released Friday.
The only return on investment to WSU was a single payment of $3,000, according to the audit.
The audit by Plante Moran questioned the business arrangement Wright State Applied Research Corporation had with the company Advratech.
“Our analysis of Advratech’s financial and contractual documentation identified potential issues regarding bonuses, conflicts of interest, the total rate of indirect costs charged to awards and unidentified payments,” auditors wrote.
Advratech was managed by local businessman Eric Graham until the fall, when it was purchased by another local technology company.
In a statement to the Dayton Daily News, Graham said he is “proud of the work Advratech completed through the partnership with the university, and I sincerely hope that similar good work can continue.”
“Advratech’s efforts were robust, and the model works: allowing qualified University researchers to serve as principal investigators (lead researchers) on the contracts we secured is a successful scenario that helped win numerous (federal research) contracts,” he wrote.
The company received nearly $1 million in federal research dollars last year, according to federal data.
The audit says WSARC spent $202,500 to purchase one-third of Advratech through a subsidiary in 2013.
The company’s management committee consisted of former WSU administrator Ryan Fendley, Graham and Graham’s daughter, Patricia Kukulka.
Fendley was fired from Wright State in 2015 amid an ongoing probe into possible violations of federal immigration law. It is unclear when he was removed from Advratech’s management team or how or when Wright State gave up its interest in Advratech.
From January 2013 through June 2015, Advratech had $3.2 million in revenue and $3.16 million in expenses. In 2013, it operated at a loss.
Auditors say Advratech’s financial statements indicate there were $483,600 in payments to Graham’s companies during that time period.
“I did Advratech as a give back to the school, my alma mater, and didn’t receive a penny in compensation,” Graham said in an email to this newspaper Monday.
Tina Matte, a spokeswoman for Graham, said the money went to 20 employees, not including Graham.
“It was not meant to be a money-making venture,” she said. “All the money that went into Advratech was meant for the research. It was not a profit-generating enterprise.”
Trustee: WSU ‘was taken advantage of’
The audit’s findings on Advratech warrant further “looking into,” said Doug Fecher, trustee and chairman of the WSU board’s finance committee. When releasing the report Friday, WSU trustees approved a resolution encouraging the university administration to use the document to take disciplinary actions or make judicial referrals if needed.
Fecher, who became a trustee in July 2014, said “it appears to me the university was taken advantage of” by the company.
“I think it’s obvious in a way,” Fecher said. “You have to look at it and ask are both parties getting benefit? It looks as if the folks associated with Advratech received more benefit.”
The audit also says the company paid $206,000 in employee bonuses and commissions, though auditors could not verify which individuals received the bonuses.
WSARC subcontracted with Advratech on three projects, according to the audit.
One of those contracts required disclosure of any conflict of interest, the audit says, noting no disclosure was made even though four Advratech vendors “could create a conflict of interest.”
The four possible conflicts of interest, according to the audit, were these:
- Advratech paid $212,000 to Graham’s company, Maric Management, and loaned the company another $50,000.
- Maric Management was a parent company Graham used for several businesses. This included Advratech as well as Slone Gear International and MLPC, Inc., both of which also did business with Advratech.
- Advratech also loaned $50,000 to James Gates, listed as vice president of Advratech and Maric Management, auditors wrote.
- And the audit says Advratech paid $3,075 to the company R-Designs, LLC, which went to Ryan Kukulka, the husband of Patricia Kukulka.
Matte said Slone Gear, MLPC and R-Designs together received less than $25,000.
Advratech is one of several area companies listed in the audit, dated October 2016 but made public last week after WSU trustees reversed their decision not to release it.
In total, the audit details millions of dollars in questioned spending at a time when the university faces a budget challenge expected to force staff cuts and elimination of university programs.
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The Dayton Daily News is your only source for up-to-the-minute information on the budget crisis and federal investigation involving Wright State University. Watch for future stories about the Plante Moran audit and other critical information we dig out as part of our continuing coverage.