Sportsball Brings Money to Penn State: $-1/4 Billion


Universities that run pro sports teams under the cover of “academics” like to justify it as bringing in funding and helping the endowment.

awesomeI’m sure Penn State will still say that football has been an important money-raiser for the university. Except that apparently, since the disclosure of a university-shielded child rape scheme, it’s cost them $1/4 billion. Set that as an offset against what football has raised for the university, along with the other expenses, and maybe it doesn’t look like such a great deal.

Penn State’s costs related to the Jerry Sandusky scandal are approaching a quarter-billion dollars and growing, five years after the former assistant football coach’s arrest on child molestation charges.

The scandal’s overall cost to the school has reached at least $237 million, including a recent $12 million verdict in the whistleblower and defamation case brought by former assistant coach Mike McQueary, whose testimony helped convict Sandusky in 2012.

The university has settled with 33 people over allegations they were sexually abused by Sandusky, and has made total payments to them of $93 million. [1]

See, here’s a problem: because they’re pretending that the sportsball business is a non-profit part of the university, the entire university’s finances are affected by the sportsball franchise’s success or failure.

Penn State could have learned a thing or two from the Roman Catholic Church: separate your assets, don’t keep a paper trail, and – oh, yeah – “plausible deniability” only works for government intelligence programs, it doesn’t protect you from civil liability. If they actually were running a standalone business, and not tax sheltering it under the cover of a university, they would have just bankrupted themselves. They also, maybe, would have been more concerned about good governance.

The bleeding has only just begun. That’s another thing Penn State could have learned from the Roman Catholic Church. This will top $500 million, easily, before it’s all done.

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At least Penn State isn’t building F-35s.

In my career I deal constantly with “false economies.”  For example, some company decides that it’d be cheaper to automate and remote-manage some system, so they replace a human with an internet-connected thingie, and “save money” – or think they do, until they discover that their cost model was wrong: if you automate something badly and don’t invest in making it secure and reliable then you can “save money” by setting yourself up for a downstream loss of millions of dollars. When that happens, they invariably complain about the technology not being any good, but the mistake they really made was that their cost model was off, because it built in the “savings” achieved by cutting corners. By the way, most of the federal government’s massive reliance on beltway bandits to “outsource” various IT processes: savings achieved by cutting corners. And that’s why a lot of my career consists of writing a recommendation/report that says “don’t do it” and then doing an incident response years later which reads, “that thing I told you not to do…?”

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[1] York Dispatch: Abuse Scandal Costs Penn State Nearly Quarter Billion

Comments

  1. Siobhan says

    It works great when you don’t have predators running your program, I’m sure.

    I mean I know predators deliberately seek out leadership positions such as coaching but shhhh think of the money we might make.

  2. Dunc says

    if you automate something badly and don’t invest in making it secure and reliable then you can “save money” by setting yourself up for a downstream loss of millions of dollars

    Yeah, but the people who made the decision and the contractors that implemented it are long gone by the time those downstream losses manifest themselves, so they’re all winners.

  3. says

    Dunc@#2:
    A couple years ago I did a paper entitled “The Anatomy of Security Disasters”* – the premise of which is that mistakes take a while to come to fruition, and we don’t plan accordingly. Consequently, as you say, we’re often dealing with the strategic blunders of our predecessors, and never get to see our own blunders blossom.

    Quoting myself:

    Suppose management is duly and accurately apprised of the
    fact that the idea is bad. If the idea is something management really
    wants to do, there is sometimes a period of negotiation, or re-tuning.
    The idea bounces back and forth and has various tweaks applied to it,
    but two important things remain:
    1)It is still a bad idea.
    2)It is going to happen anyway.

    I’d probably been reading “systemantics” when I wrote that…

    (* http://www.ranum.com/security/computer_security/editorials/disasters/v2-1.pdf
    http://www.ranum.com/security/computer_security/editorials/disasters/handouts.pdf )

  4. Brian English says

    Hi Marcus,
    In Oz, our Republican frotting government has a great time with Tech savings*. We had a census snafu that was designed to save money by having everybody fill it out online on a certain night. It had a form that required information that was previously optional on the paper version of years passed. This pissed everybody off, because why is that compulsory? Then it was leaked that this compulsory information would be used to match tax records and ‘save money’ by catching those not paying taxes.
    Sounds good, but only if you think those not paying taxes were companies, but of course a company doesn’t fill in a census. No, it was welfare recipients that were in the gun. Australia already has an efficient welfare system, so this was punching down on the poor and claiming ‘savings’. In the end, the website crashed on the night, people filled in bullshit information, and what was once a trusted event, the census, is now muck. Cost lots to pay IBM for that snafu.
    Around the time of the past election, the Government, ersatz republicans, who went from sound majority, to just scraping in by help of Darth Rupert for a few seats, said with Tech they’d save lots of money in welfare overpayments. Seeing a pattern yet? Anyway, they now have a system that matches tax returns, census data, and welfare forms automatically. If you put yourself down as having worked for a week at Marcus Ranum and Co, it assumes you worked the last x years at that weekly rate. A specious assumption for those on welfare. You then fill in a tax return, in which you put down you worked for a while at Marcus Ranum and Associates for a week, it assume you had a different job, given slight variance in names, which happens when people fill in forms. It then notes that you received the dole. Bingo!
    People use to do this work, but people cost money, and savings! Also, people check that things make sense, not bill first, so savings!
    You are automatically served with a notice for the debt based on x years (or something), even though you have been told to only keep records for last 18 months. You can challenge the debt, but you must start repayment now, even for a debt that is false, and if you don’t, debt collectors will be brought in and you will incur a 10% of your putative debt fee on top.
    Of course, Apple, and companies like that pay no tax, but hey, they’re important. Disabled and unemployed people are being sent debt notices because they’re to blame for their predicament, slackers! and they’re not rich….
    Long story short, those debts will be paid by a few who can’t afford to fight the government, but that ‘saving’, essentially fraud as you’re not legally allowed to invoice someone for a debt that isn’t real, is illusory as the government will be sued for years by happy lawyers and their class actions, and the expensive Tech will be shut down, or at least greatly modified, at great expense. But that will be the next governments problem, as this government is in its last term, even with Murdoch’s help.

  5. Brian English says

    Apologies for the long post. I got carried away. I should note that even if you don’t fill out a tax return, but any form, it will be cross matched with your welfare payments, and if the details don’t exactly match (computers, do what they’re programmed to do), any discrepancy will be assumed to be fraudulent on your part and you’ll be billed…

  6. says

    Brian English@#4,#5:
    That system is totally ripe for monkey-wrenching. Most tax systems are, and the more automated they are, the worse you can damage them.

    For example, the US tax system is optimized to detect people trying to not claim income. That means you can do profoundly disproportionate damage by submitting income statements for someone you don’t particularly like; it screws both them and the tax system. This is an example of a “disambiguation cost attack” in my doctrines of cyberinsurgency…

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