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Motives questioned in eye institute's closing

Jack Eckerd had no idea that the USF Eye Institute was on the verge of collapse. Days before, he had been approached with an urgent plea to release a $250,000 gift for a research lab only partly begun.

"The understanding we had was that (the institute) would continue to operate," James Roberts, Eckerd's executive aide, said. "As it was presented to us, that was part of the overall ... agreement. That thought was implicit, although in hindsight it should have been made more explicit."

Indeed. A week after Eckerd reluctantly signed over his gift, separate negotiations between the private foundation running the institute and the University of South Florida (USF) broke down, and the institute was forced to close.

The result was at least one unhappy philanthropist, an embarrassed university president and a cacophony of finger-pointing as to what went wrong.

But the tale of Eckerd's gift _ which he probably will get back _ is more than a story about one rich man and his money. It reflects the judgments that were at stake as USF and foundation officials haggled over the institute, and what one side or the other may have been willing to overlook as it pressed its case.

Did foundation officials mislead Eckerd into thinking the institute would survive, when they should have known it would fail?

Or did the university sabotage the institute by failing to offer reasonable financial support, simply so it could end an embarrassing chapter in its troubled medical school history _ and possibly reopen the institute under university control?

Foundation supporters say the episode has soured numerous big-money donors against the university and its current administration _ although few will say so publicly. University officials insist there has been no effect on other fund-raising.

At the same time, one state university official says USF would have been foolish to annoy private donors simply to make a point or to take the program for itself.

"That neat solution would hardly be worth the price," said Dr. Patricia Haynie, the state's vice chancellor for health affairs, an early critic of the institute and chairwoman of a committee studying what to do with the institute building.

A university relies heavily upon the good will of various private backers, she said. "In my opinion, it's not in the best interest of a university to take actions that are harmful of those relationships.

"So the idea that they did this so that the university could then get control of the program _ I wouldn't personally buy that argument. But ... I can understand why some would have that opinion."

Open for 14 months

The eye institute closed in mid-September, 14 months after it opened. By then the arguments over the source of its money problems and whether it should have opened in the first place had been simmering for a year.

Critics in the university said the financial projections used to promote the institute were fatally flawed. The institute's private backers pointed out that those projections came partly from a faculty doctor, and that the university system ultimately had approved the project despite its doubts.

In any case, after the project was clearly in trouble, the Legislature in June approved a $14-million bailout _ half in public money, half from mortgage-holder Barnett Bank _ to erase the institute's crippling construction debt.

As part of the deal, the institute's building was to be deeded over to the university. A Board of Regents committee, led by vice chancellor Haynie, was asked to develop a plan for the best long-term use of the building.

At the same time, to keep the institute open, USF and private foundation officials had to work out an agreement to cover the institute's operating expenses.

That, apparently, is when the relationship between the foundation and the university once again went awry _ and when Jack Eckerd, a former drugstore magnate and Republican politician who has given millions to charities, got caught in the breach.

Roberts, Eckerd's spokesman, said his boss was led to think everything would work out. "The people at the eye institute that I spoke to felt confident that they would be managing the eye institute. I don't know if they were reading the situation correctly or not."

Henry Reinhard, a former Cigna Healthplan executive who was brought in to manage the institute after it fell into trouble, said he worked all summer on a plan forreducing the operating deficit, projected at just under $1-million for the fiscal year that began July 1.

He said he identified nearly $800,000 in potential cost savings. He got an equipment vendor to defer some payments; he made proposals for other university departments to use some of the institute's space; he asked for a more favorable allocation of patient fees collected by the university. In the end, he said, the institute could balance its books if the university would just subsidize it by about $18,000 a month.

Reinhard presented his plan at a meeting the day after Labor Day. "The university made it clear they weren't prepared to put a dime into it. ... We were within $18,000 a month of making it happen, and they backed off."

Albert Hartley, the USF executive vice president who handled the negotiations, said he remembers a different scenario. He said he pestered Reinhard all summer for a plan showing how the foundation would balance the deficit. "We could not get an answer."

Then, at the Sept. 4 meeting, Hartley said, Reinhard presented a plan that was overly optimistic in its projected revenues and would have the university make up a large part of the shortfall.

The university, for example, was being asked to pay rent on a building it would already own. Requested payments to the foundation from the university's ophthalmology department also were too high. And the budget relied upon one-time savings and windfalls that would not be possible in future years. "We saw things getting worse, not better," Hartley said.

"Hence, media reports that suggest that the eye institute could have been saved if USF would have contributed $18,000 per month in support are totally inaccurate," Hartley said in a written statement issued later to defend the decision. "The facts are that USF contributed more than $1.1-million this past year to support the eye institute and could not assume the overall financial burden estimated at $750,000 to $1-million in future years."

Should Reinhard and the foundation have known that their plan probably would not work?

"Without any question," Hartley said.

An angry letter

"I cannot help but feel grossly misled," Eckerd said in a blistering letter to USF President Francis Borkowski on Sept. 14, a week after the institute's closing was announced.

"Throughout the history of our dealings with the eye institute and this grant, we have made numerous concessions. We always operated in good faith believing that what we were told was accurate. I now feel that our good faith and trust have been egregiously maligned. While this has occurred under the auspices of the eye institute, it also casts a dark cloud over the university's credibility."

Borkowski responded to Eckerd twice. In a Sept. 24 letter, he said the university had done its best to protect Eckerd's interests, but that Borkowski would support Eckerd's request that his gift be returned at the next meeting of the foundation.

In another letter Oct. 4, however, Borkowski asked Eckerd whether he would not reconsider. Obviously trying to put the best face on an unpleasant situation, he told Eckerd that he thought foundation officers had solicited his gift "in the good faith belief that the foundation would continue to be involved in the management of the eye institute." Moreover, Borkowski said, there was a good chance that the eye institute might be revived; one research doctor would be able to use the partly completed lab in the meantime.

Eckerd wrote again, reiterating that he would like the $250,000 returned.

Borkowski said Friday that he really thought the university could have honored the terms of Eckerd's gift, although "I can clearly understand how Mr. Eckerd would have taken a different view. He made his commitment to a different set of individuals. ... I appreciate Mr. Eckerd's position, although I regret it."

For now, Eckerd is willing to attribute the incident to "a series of internal misunderstandings," his aide, Roberts, said. Although Roberts said they have heard nothing from the foundation, they are waiting for the money to be returned.

Steve Pankau, the foundation's lawyer, said he expects the foundation board to vote to return the money at its November meeting. Luckily, he said, it has not been spent.

An empty building

For now, the institute building is mostly empty, with one researcher and a few university administrative offices remaining upstairs. After several weeks of shuttling back and forth to teach and to treat patients, the faculty ophthalmologists moved their offices back to the medical school Friday.

But the prospect that they might someday return _ this time in a revived institute completely under the university's control _ has led to speculation that the university may have had an interest in letting the independent institute fail.

Dr. Ronald Kaufman, USF's vice president for health sciences, has been embarked on a policy to consolidate medical school projects, often provoking bitter controversy, most notably in the department of orthopedics, where a department chairman was fired and most of the faculty resigned.

Reinhard said he can conceive of no other motivation for university officials to have taken such a hard line in refusing to help the eye institute.

"It was not economics that killed this project," Reinhard said in an interview two weeks ago, "but an administration that took actions that helped bring about a self-fulfilling prophecy. ... The trends were in the right direction. But those who were opposed to it saw an opportunity to shut it down.

"I can't imagine why they would choose to alienate as many people as they have in this community."

Lyonal Lindsey, a foundation trustee, agreed that there is substantial bitterness among people who gave time and money to the institute, although most trustees who were contacted did not respond to requests to be interviewed for this story.

"I feel betrayed," said Reinhard, "not just for myself, but for all the people who worked so hard to make it a success. ... I won't argue that the early projections for the eye institute were overstated. I would argue that in spite of all that, we nearly pulled it off."

Kaufman, the health sciences vice president, vigorously disagrees.

"I can assure you that we felt very badlyabout all of this," he said. But in a budget pinch, "we can't really mortgage the future of the university for one program, no matter how worthy it might seem in principle. It's got to be financially credible.

"I think we gave it a real shot. I can assure you that the health sciences center has no plans to use this building for its programs. I have no dollars to operate the building or to remodel it to another program. So there's no reason we wouldn't want it to succeed."

As for the suggestion that Kaufman wanted the institute to fail so that he could revive it under his control, "that's blatant nonsense," he said. "The fact of the matter is, the building and the program exist. Whether it was fitting in a strategic mode or not, my job is trying to make things work."

What will happen to the building? Borkowski and vice chancellor Haynie said there is a strong possibility that at least part of it will ultimately house the university's department of ophthalmology, carrying on some of the eye institute's ambitious plans.

"We are committed to the development of a first-class department of ophthalmology," Borkowski said Friday. "We're going to have to have good facilities for them. ... It is a state-of-the-art facility."

Borkowski said he has asked Haynie to consider ophthalmology when she makes her recommendations to the regents in February.

Borkowski, however, denied that the institute's failure might have been part of a scheme to bring the eye doctors under more direct university control.

"It would be obviously foolhardy on the part of this institution not to make every effort to make things work," he said. "Certainly I can assure you that the intention of the university has not been to arrive at this point. It was simply the outgrowth and evolution of the discussions we had over a long period of time that we hoped would enable us to find a solution."

Borkowski called the institute's failure "a truly regrettable episode."

"In an institute our size with as much momentum as we have, there are occasions that are difficult, and there will be other difficulties in the future. ... The people who established the eye institute were honestly motivated. One cannot impugn their motives. It's regrettable that it didn't work out."