At Wilmington University, it’s all in the family

Rising from an abandoned motel and gas station off Du Pont Highway, Wilmington University prides itself on small class sizes, a dozen intimate campuses without the frills, and faculty and trustees who are intensely loyal. It’s a true family atmosphere, university employees and students agree.

And family takes care of family, federal tax records show.

Since 2005, the private nonprofit university has employed more than 20 relatives of trustees or administrators as full-time employees, adjunct instructors or service contractors – the highest number of relatives working at any college or university in the state. Salary records dating to fiscal year 2009 show that some of these employees doubled or even tripled their salaries and benefits by receiving promotions to director-level positions. During the same period, university trustees approved recurring payments to firms owned by a half-dozen current or former trustees or their spouses at a total cost of more than $10.5 million.

All told, 10 families or individual relatives of trustees have received more than $43.5 million from Wilmington University in salaries, benefits and contracts over the last eight years, according to a News Journal analysis of the university’s IRS tax forms. These connected individuals have benefited from the school’s spiraling growth; the university has boosted its enrollment nearly a hundredfold to about 21,000 students over the last half-century. The current budget stands at $115.4 million.

Among the biggest benefactors are outgoing University President Jack Varsalona and his family members, who have earned more than $16.2 million in salary and benefits since 2008. The bulk of that amount came from a one-time $4.6 million retirement bonus paid to Varsalona in fiscal 2015, rewarding more than 25 years of service at the commuter school, on top of his average $1 million annual salary. That year, the 68-year-old was the highest-paid private university president in the country, taking home an estimated $5.4 million.

Other top-paid families include former trustees Robert and Dorothy Peoples, whose Bear construction firm received more than $9 million in payments since 2008. Former University President Aubrey Doberstein and three members of her extended family took home more than $7.9 million during the same period. Investment manager Marvin & Palmer Associates in Wilmington, co-owned by Trustee Vice Chairman David Marvin, received more than $1.4 million in payments. Until last year, Marvin’s son, Brian, also a university trustee, worked as a principal at his father’s company.

Higher education watchdog groups argue that sharing a nonprofit university’s wealth with trustees, their relatives and relatives of executive staffers gives the perception of an exclusive club, where board members set salaries for administrators who, in turn, hire family members and recommend trustees’ companies for contracts. The more such practices are condoned at the highest levels of management, the more the branches of the family tree multiply –– which can rattle potential donors and depress employee morale.

“The boards who make the decisions are captured by the people they’re supposed to be overseeing,” said Richard Vedder, an economist and director of the Center for College Affordability and Productivity at Ohio University. “It also calls into question whether the university is truly serving a public good.”

Wilmington University leaders maintain in interviews and on federal disclosure forms that the trustees and senior staff whose companies or family members gain from such arrangements are not directly involved in the decision-making process. Employees are selected based on merit, and trustees’ firms must offer competitive pricing — sometimes at a steep discount — to win the job, according to outgoing University President Jack Varsalona, whose daughter is an assistant vice president at the school.

Varsalona’s successor, Wilmington University’s Executive Vice President LaVerne Harmon, is scheduled to take over in July. She is the first African-American woman to be hired as a university president in Delaware. Harmon declined to be interviewed for this story.

Hiring family members and trustees is entirely appropriate, Varsalona said, as long as there’s a conflict of interest policy and it’s disclosed and they’re the best person for the job. Relatives of administrators and trustees represent less than 2 percent of the university’s nearly 1,400 employees, he said.

But such practices are frowned upon by the state Public Integrity Commission, which monitors ethical standards for all state executive branch employees, officers and honorary state officials.

“It leaves a bad impression with the public,” said Commission Counsel Deborah Moreau. “In general, it’s not a good idea and should be stayed away from.”

Under Delaware law, state officials are prevented from using their public office to “secure unwarranted privileges, private advancement or gain.” Violations are punishable by a maximum one year in prison and a $10,000 fine. No state university has incurred penalties for nepotism or conflicts of interests among trustees in recent memory, Moreau said.

As a private university, Wilmington University doesn’t have to abide by the state ethics code, but must disclose transactions with interested persons to the IRS on annual returns. The News Journal reviewed the nonprofit’s Form 990s dating to fiscal 2009, the first year the school included a table listing the compensation of relatives of University trustees and senior administrators.

Wilmington University’s relatives roster has included the daughters and sons-in-law of Varsalona and his predecessor, Audrey Doberstein; the son of former University Provost Betty Caffo, the spouses and/or children of five of six current vice presidents, and the children of four of 19 trustees.

Like other universities nationwide, Wilmington University doesn’t prohibit relatives from being employed by the university and won’t block trustees’ companies from receiving contracts. Every employee and trustee holds “a position of trust,” according to the university’s conflict-of-interest statement.

“With trust comes responsibility,” the policy states. “It’s up to each of us to avoid situations that may lead to an actual or potential conflict of interest. We must not use our position for personal gain, or for the benefit of our family, friends, colleagues or anyone else.”

The university’s employee handbook further stipulates that an employee can’t be supervised by a relative, domestic partner or significant other. Members of a trustee compensation committee set the salaries of key employees, which are then reviewed by an independent consultant to see if they meet the federal government’s reasonable compensation standard for nonprofit entities.

A university spokeswoman declined to provide copies of the consultant’s reports and would not release the names of trustees serving on the compensation committee.

The practice of employing relatives or spouses at Wilmington University is “rampant,” according to former adjunct instructor Bill Cain, who taught photography at the university for eight years. The chair of his former department is married to another adjunct instructor in the same department, he said.

Cain said he never witnessed blatant favoritism, but the family dynamic made him feel uncomfortable. He ended up leaving the school because he could no longer tolerate the commute from his Warminster, Pennsylvania, home.

Other former instructors did not respond to requests for comment.

University board chair Joseph J. Farnan Jr., a former federal judge, did not respond to repeated interview requests from The News Journal. In a written statement, Farnan noted that trustees commit “countless volunteer hours” in service to students seeking an affordable education.

“The board is proud of the service and commitment of its 600 (full-time) employees and it is an affront to their service to suggest that any of them has been hired or retained on any basis other that merit,” he wrote.

Wilmington University’s current board includes two father-son teams. Farnan and his son, Michael, a Wilmington attorney who works at his father’s law firm, and David Marvin and his son, Brian.

In each of the last two fiscal years, veteran Trustee Florence Garvin, 88, received $36,000 from the university for conducting market research in her home county of Delaware County, Pennsylvania, where the school is trying to expand its reach. At The News Journal’s request, Wilmington University furnished four massive binders, which represented only a portion of Garvin’s work, Varsalona said.

A retired international human resources executive for DuPont, Garvin said Varsalona initially approached her about leading the research project. It’s a sticky situation when volunteer trustees receive payments, she acknowledged, but “trustees, as a rule, add value.”

Ditto for relatives, she said.

“They wouldn’t work for the university if they didn’t have the skills. Jack [Varsalona] wouldn’t put up with it.”

Surrounded by a jumble of fast food restaurants and motels, corporate jets whining from above, Wilmington University’s main New Castle campus is a lesson in restraint. The 48-year-old institution isn’t equipped with luxury high-rise dormitories, powerful research laboratories or manicured gardens with piped-in classical music. On a recent weekday, a few students hurried into modest red brick buildings, ready to go to class after putting in a full shift at their day jobs.

“A Chance to Prove Yourself” declared an ad in The New York Times in the late 1960s, when Wilmington College first flung open its doors to C+ students with the desire and determination to learn. Before long, the school began offering off-campus classes at The Grand Opera House in downtown Wilmington and at Dover Air Force base.

Today, the school collaborates with captains of local industry to offer practical skills like applied chemistry, nursing and cost accounting, to help students thrive in the modern workforce.

Sam Rahasakeran, who is studying for a master’s degree in information sciences, said he doesn’t much care what Varsalona earns or which relatives or trustees the school employs.

“As long as I get a quality education, that’s fine with me,” he said.

“Caring about students first” is Wilmington University’s raison d’être, according to Varsalona, who previously worked as an adjunct instructor at the school, and as Ursuline Academy principal and education advisor to former Delaware Gov. Pierre S. du Pont.

Hired in 1987 as Wilmington University’s vice president of academic affairs, Varsalona climbed the ranks to executive vice president and provost. As the school’s fourth president, he has shepherded a period of major expansion.

Under his leadership, Wilmington College became Wilmington University, brokered partnerships with schools in multiple states, doubled enrollment and more than quintupled the university’s endowment, or reserve fund, to more than $78 million. The university consistently ranks among the fastest-growing nonprofit doctoral institutions in America by The Chronicle of Higher Education.

The secret: Undercut your peers with affordable tuition and market to students who, as a result of academic, financial or family challenges, have been snubbed by other institutions as “not college material.”

Today, six Wilmington University colleges offer about 90 undergraduate and graduate degree programs at more than a dozen locations in Delaware, New Jersey and Maryland. To further its reach, the university is developing a new $33 million campus on a 41-acre field at Beaver Valley Road and Concord Pike in Brandywine Hundred. Three, three-story buildings are scheduled to be built over the next decade, with construction to begin this spring.

The school accepts 100 percent of its applicants and doesn’t appear in the rankings of more than 300 top national universities, according to U.S. News & World Report; Forbes ranks the school among 200 top universities in the northeast.

Accredited by the Middle States Commission on Higher Education, the university receives accolades for its online programs, bachelor’s program in elementary education and overall affordability. Alumni include more than a half-dozen current or former local and state government leaders, such as Speaker of the House Pete Schwartzkopf, State Reps. Ruth Briggs King and Charles Potter Jr., state Auditor Tom Wagner, Department of Correction Commissioner Perry Phelps, and former New Castle County Executive Tom Gordon.

Full-time students pay less than $11,000 a year in tuition and fees, a number that has remained virtually unchanged for the last five years. Upon graduation, students have a median loan debt of about $15,000 — the lowest in the state, according to university leaders. The average age of an undergraduate is 31. Nearly a third of all students take all their coursework online.

“Everything we raise goes to scholarships for working students,” said Varsalona, noting that the university extends scholarships for participants in the state’s SEED program without requesting any state funding.

The school also works with local high schools so that students can earn college credit. Recently, the university became one of the first schools in the country to partner with a technology education organization in providing education and job training opportunities to low-income students.

The reigning Delaware Teacher of the Year, Wendy Turner, is the eighth alum to receive that honor in the past decade.

Turner, a second-grade teacher at Mount Pleasant Elementary School who earned her master’s degree at night, praised the university for its flexible course schedules. While enrolled at Wilmington University, she juggled raising two young children and working full time as a finance manager for a credit card company.

“It was exactly what I needed,” she said of the experience. “It was accessible and affordable.”

Several trustees praised Varsalona’s legacy.

“I’ve never worked with anyone who is as dependable in his vision and in saying what is going to happen and what should happen,” said Garvin. “He is worth every cent.”

“His personality, his personal philosophies … it’s something you cannot describe in words,” said former Trustee Chairman Irénée du Pont Jr. “He’s just an ideal man.”

For his service, Varsalona has reaped benefits typically reserved for a corporate CEO, according to Vedder, the Ohio economist.

“The trustees who agreed to this are living in la la land,” he said.

In reality, boards like Wilmington University’s are stacked with business leaders who understand the need to dangle hefty retirement bonuses to prevent star talent from going elsewhere, according to Raymond Cotton, a Washington, D.C.-based attorney who has negotiated compensation packages for hundreds of university presidents.

On average, a president of a U.S. doctorate-granting institution stays for seven years, according to a 2012 report by the American Council on Education. Varsalona kept his post for more than a decade.

“In the business world, those people who bring substantial benefit get substantial pay,” Cotton said.

Varsalona agreed: “It was a retention plan,” he said of his multi-million-dollar payout.

But forking over more money for administrative expenses means there is less to go around.

Of the university’s 769 faculty members, the vast majority are adjunct instructors who work part time with no benefits. The average salary for a faculty member is $87,000; for an adjunct, it’s less than $2,400 per course. Adjuncts typically have other full-time jobs in the subjects they teach, Varsalona said.

Wilmington University spent $18 million on administration compared to $41 million on instruction in 2014, according to the nonprofit American Council of Trustees and Alumni. The Washington, D.C.-based organization, which promotes accountability in higher education, compared Wilmington University’s administrative-to-instructional cost ratio to three of its Pennsylvania peers: Widener University, the University of the Sciences and Robert Morris University.

Wilmington University had the second-highest ratio at 39 percent, the council found. An updated study has not been conducted.

A ProPublica analysis of 2013 data ranked the school at the bottom of 99 universities that graduate students within six years. Wilmington University came in 95th place, with a 39 percent six-year graduation rate, compared to 80 percent at the University of Delaware. Within 10 years of graduation, one in five WilmU students who received federal aid earned less than $26,000 a year, according to 2011 data analyzed by the nonprofit ProPublica.

University officials say the 39 percent graduation rate only accounts for full-time students who enterered WilmU as freshmen, or about 13 percent of the university’s total enrollment.  It’s unfair to compare graduation numbers of a commuter school with a majority of nontraditional students to a traditional university where students enter right after high school, according to Varsalona.

“We consider it a privilege to accommodate working students, regardless of how long it takes them to graduate,” he said.

But critics worry that the school is more concerned about packing in students than providing them with a quality education.

Ken Hemphill, who helped form the Beaver Valley Alliance to oppose the school’s planned Concord Pike campus, studied several years of the university’s tax filings to learn more about his new neighbor. He was stunned by Varsalona’s compensation and the family ties on the payroll.

“I couldn’t believe what I was seeing,” the Glen Mills resident and open space advocate said. “They’re no longer in the education business. They’re in the money-making business.”

A Wilmington University psychology major, who requested anonymity for fear of retaliation, called Varsalona’s compensation “ridiculous.”

“He takes so much money out of the school that it could likely go back to fund programs,” she said.

The salary of Varsalona’s successor has not been determined yet, a school spokeswoman said. Last fiscal year, Harmon earned more than $757,000 as executive vice president, according to IRS records.

Du Pont, who chaired Wilmington University’s board of trustees for more than four decades, dismissed questions about the university’s financial stewardship.

“I believe (Wilmington University) is better than any other university everywhere,”  said the former director of E.I. du Pont Nemours and Company. “The business is to put teachers who want to teach in front of students who want to learn.”

When pressed about Varsalona’s salary, trustee contracts, and the number of relatives on the university payroll, the 98-year-old grew impatient.

“You’re getting into areas I should not be talking about,” he said, before offering these parting words:

“It works very well for Wilmington University.”