February 15, 2010

University Denies Conflict of Interest

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Chairman of the Board of Trustees Peter Meinig ’61 is one of the most powerful decision-makers at Cornell. But as the University begins a long process to consider whether it should lease its land in the Marcellus Shale to gas drilling companies, Meinig’s former ties to the natural gas industry has raised some eyebrows in the Cornell community and beyond.

From 1993 to 2001, Meinig served on the board of directors of Williams Companies, Inc, one of the nation’s largest natural gas companies. A Fortune 200 company that generated $1.42 billion in profits in 2009, Williams transports about 12 percent of the natural gas consumed in America everyday and has interests in the Marcellus Shale basin, according to the company’s website.

At least 74 students, faculty members and members of the community have signed a letter that requests Meinig recuse himself from advising and making decisions regarding the leasing of Cornell lands that contain the Marcellus Shale — a rock bed the size of Greece that stretches across New York, Pennsylvania, West Virginia and Ohio and may contain between 168 trillion to 516 trillion cubic feet of natural gas.

The letter, addressed to Meinig and forwarded to President David Skorton, was sent twice in mid-December, shortly before the University placed a moratorium on any consideration regarding the leasing and exploration of University land above the Marcellus Shale until government guidelines on natural gas drilling are established. Cornell owns 11,000 acres, or four percent, of Tompkins County’s land and more than 420,000 acres of mineral rights across the country, according to the University.

In an e-mail response, Meinig stated that he does not currently own any of Williams’ shares.

“If an issue comes before the board in which I might have a potential conflict of interest, under our [conflicts of interest] policy, I will act accordingly. As chairman of the Board of Trustees, it is my duty to interact with the President on a wide variety of subjects and offer advice, as appropriate. I do this routinely and will continue to do so,” said Meinig, who has served as chairman of the board since 2002.

Cornell’s Office of University Counsel has also ruled out a possible conflict of interest, according to Deputy University Spokesperson Simeon Moss ’73.

“University Counsel believes that no conflict is presented in this instance under the University’s policy — because the University is not engaged in any contractual transaction with any company in which Mr. Meinig has a financial interest,” Moss stated in an e-mail.

Even so, an industry analyst, who wished to remain anonymous because he fears repercussions from the University, said that “[Meinig’s] ties should be stated publicly and he should recuse himself from any decisions dealing with natural gas.”

“Williams is a huge and very influential company in the natural gas business and especially the natural gas transmission (that is, pipeline) business,” the analyst stated in an e-mail. “If [Meinig] is the former chairman of Williams, than he is without a doubt extremely connected and invested in the industry. Williams is one of the very top companies in the industry, there is no question.”

For 28 years, Meinig also chaired PGI International —a well-testing equipment manufacturer that employs over 300 people and has sales of over $30 million, according to its website. Meinig left the company in 2007 and his daughter, Anne Meinig Smalling ’87, is now the chairperson of the company’s board. Meinig stated in an e-mail that his daughters own about 15 percent of the company, while he owns “an indirect 1.7 percent interest in the company.”

According to the analyst, PGI International is a relatively small company that appears to make small gizmos for a small part of the gas drilling process. Yet Meinig’s involvement in PGI International is unlikely to result in a real conflict of interest.

“If Cornell were to lease their lands, I can’t really envision a way that PGI would stand to reap huge rewards. Their gizmos might be used, but it would hard to ensure that would happen,” the analyst said.

Meinig currently chairs HM International, LLC, a partnership representing the joint interests of the Hojel and Meinig families, according to the company’s website. Although HM International’s company profiles include PGI International and American Innovations –– a firm that provides service for the oil and gas industry –– Meinig wrote that the information is inaccurate and HM International does not have any ownership interest in those businesses.

Apart from serving on Cornell’s Board of Trustees for 19 years, Meinig is also one of the nine members of the board’s investment committee responsible for implementing Cornell’s investment policies on its $4 billion endowment. When Meinig and his family announced a $25 million gift to Cornell in 2007, the donation was the largest scholarship at Cornell at that time.

Cornell’s 16-page-long conflicts of interest policy states that all trustee members are required to submit annual written disclosure statements “regarding external commitments and interests.” Meinig stated in an e-mail that he fills out the University’s disclosure forms completely every year.

The policy also states: “A member is considered to have a conflict of interest when he or she or any of his or her family or associates … has an existing or potential financial or other material interest which impairs or might appear to impair the individual’s independence and objectivity of judgment in the discharge of responsibilities to the University.”

Michelle Bamberger vet ’85, who penned the letters to Meinig and Skorton and collected signatures, believes that the policy can be applied to Meinig’s case.

“There are two things in this policy that are important relative to Mr. Meinig. First, the policy correctly refers to not only the person but also his or her family. Secondly, it says ‘impairs or might appear to impair.’ Both Mr. Meinig and his family have financial interests in natural gas production. Whether or not he stands to benefit financially from any decisions made by Cornell, it is his and his family’s involvement in the industry that is the real problem, and that falls under the ‘might appear to impair’ section,” Bamberger said.

Others who signed the letter agreed that a mere appearance of a conflict of interest should provide enough reason for Meinig to recuse himself.

“It is my sincere hope that Mr. Meinig is above reproach and will do everything in his power to make sure Cornell’s actions related to gas extraction do not give the appearance of any conflicts of interest,” wrote Lisa Wright, a member of the anti-gas drilling Shaleshock Action Alliance, in an e-mail.

“Cornell is a complex place. If [Meinig] wants to give people information, that’s one thing … but he should stay out of any general discussions with those who need to make the decision. It is important that no one feel he is putting pressure on them to say yes to leasing the land,” said another signer, Catherine Wagner Ph.D ’79, who has worked as one of the Assistant Deans at the Admissions and Advising office in Arts and Science since 1998. She is now retired.

The issue has also called into question the transparency of University operations. Although the University Press Office has responded to Bamberger’s letters, dated Dec. 10 and Dec. 18, some signers of the letter said that the response — which referred the signers to the moratorium and Cornell’s conflicts of interest policy — was “not meaningful.”

“Knowing how the University works, I expect nothing from the University unless something happens to compel them to make a response. They’ll respond when they’re forced to,” said a signer who has worked at Cornell for decades but wished to remain anonymous.

The Office of University Counsel’s decision, which has not been made public, also fails to alleviate the concerns voiced by some members of the community. University Counsel James Mingle has declined to comment.

“It’s not an explanation. It’s sophistry,” said signer Marty Luster. As the Ithaca City Attorney from 2004 to 2005 and a New York State Assemblyman from 1989 to 2002, Luster said that it is common practice that people come forward and recuse themselves. He demands a clear written statement from the University to explain the rationale behind the Counsel’s decision.

“Cornell has the obligation to be free and communicative to us. But they’re not addressing this issue,” he said, adding that he was not most upset about Meinig. “My beef is with the University.”

Original Author: Venus Wu