Penn State investigator is ex-exec at firm with PSU ties
Louis Freeh, tapped to investigate the Penn State scandal, spent five years as a top executive at MBNA, which counted Penn State among its biggest customers
Penn State investigator is ex-exec at firm with PSU ties
Joseph N. DiStefano
Louis Freeh, the man hired by Penn State University to run "an independent investigative review into all aspects of the University’s actions with regard to the allegations of child abuse" by Jerry Sandusky, spent five years and collected millions of dollars as a senior executive of a big financial company that enjoyed a long-running business relationship with Penn State, its alumni association and Sandusky's boss, former football coach Joe Paterno.
Freeh, who headed the FBI for eight years until 2001, spent the next five years as vice chairman at MBNA Corp., where his titles included general counsel. Penn State's announcement notes his earlier FBI service, and his previous, short stint as a federal judge, but does not mention his years spent working for MBNA, which paid the school millions of dollars for access to students and alumni. Freeh journeyed to Penn State in 2005 as featured speaker at a Penn State assembly where his colleague Ric Struthers, who managed the lucrative relationship between bank and school was guest of honor. Struthers, later head of Bank of America's credit card unit, is the highest-profile national businessman on the board of Sandusky's Second Mile Foundation, which a Pennsylvania grand jury report alleged Sandusky used to find abuse victims. A Penn State spokeswoman referred questions to the board's special committee for the investigation. "Judge Freeh has no previous personal connection to Penn State University," says Jeremy Fielding of Kekst & Co., the New York public relations company hired by the board and its special committee examining the scandal. "Prior to its acquisition by Bank of America in 2006, MBNA entered into many commercial agreements with third parties. In his role as General Counsel of MBNA, Judge Freeh had no role in negotiating the company’s agreement with Penn State University which was entered into many years before Judge Freeh joined MBNA. The investigation will be completely independent.”
Freeh left the credit card company in 2006 as it was acquired by Bank of America Corp., and cashed out stock options worth over $20 million, not counting his annual compensation, according to an MBNA document filed with the Securities and Exchange Commission. Freeh also served on the board of Fannie Mae before it was taken over by the federal government due to its insolvency in 2008, and on the board of Wilmington Trust Corp. until it was sold in 2010 after its share price collapsed due to bad real estate development loans in Delaware. Freeh currently serves as a member of the audit committee of Bristol-Myers Squibb Co., the drugmaker.
MBNA became the largest independent credit card issuer by landing college alumni and other group members as customers through lucrative arrangements that included giving the company access to alumni and student addresses and using college letterheads and mascots in marketing campaigns. Penn State, along with the National Football League and the National Education Association, was one of MBNA's biggest sources of profitable credit card debtors, company executives said at the time. Freeh didn't immediately return a call left at his Wilmington office.
Freeh is not the only former MBNA official with an important role at an institution trying to cope with the scandal.
One of his former superiors at MBNA, Ric Struthers, is the most prominent national business figure on the board of the Second Mile Foundation, the charity started and formerly run by coach Sandusky. (Fielding notes Freeh knew Struthers, but didn't report to him; he reported to MBNA's top boss, who at the time was company founder Charles Cawley. Struthers held the top job after Cawley's retirement. Freeh's duties at MBNA included lobbying Congress to make it harder for bankrupt consumers to write off their unpaid credit card bills, and marketing credit cards to police and other law enforcement groups.) Struthers, a 1977 Penn State graduate, played a key role in managing the business relationship between the Penn State Alumni Association and MBNA. The bank paid the alumni more than $30 million for its mailing lists and other marketing aid in its credit card solicitation campaigns from 1994-2010, as I reported in this space last year after the university was forced to disclose the payments by a change in federal law.
"Freeh, who served as MBNA's general counsel from 2001-06, gave a speech in 2005 at a dedication of a new Penn State business building that Struthers and his wife supported through a $2 million gift. Struthers attended the event," reported the Wilmington News-Journal here. Struthers collected more than $10 million a year in stock and cash pay from MBNA in the bank's final years; he donated $2 million to Penn State's 2002-05 capital campaign. He held a series of executive jobs at MBNA and ran it with other operations as chief executive officer of the nation's largest credit card operation, after its purchase by Bank of America, until his job was eliminated last year.
Besides paying the alumni group $30 million, "from 1998 to 2002, MBNA also agreed to pay Penn State an additional $500,000 a year to ensure that it didn’t make deals with other banks and that football coach Joe Paterno kept up his end of another MBNA marketing agreement. Terms of Paterno’s deal weren’t disclosed," as I noted in my Philadelphia Inquirer column last year. Struthers didn't return a call to his home.
This is awesome investigative journalism. Find the money trail and see where it leads. And in the case of the Penn State scandal, the money will lead to everything.— Palestra Jon- Time to dissolve PSU. What a cesspool of corruption and abuse.— taxmanndumbeth
- Joe DiStefano is one of the only reasons to read the Inky these days. I enjoy his stuff every time.— Bud Fox
- Given how large Penn State's Alumni Association is, good luck finding ANYONE who doesn't have some tie to the university (new game: six degrees of Penn State).— Phantoms9805
- You beat me to it. "This guy worked for a company that worked with this other company that had a guy who used to work for a company that had business dealings with Penn State."
— verve - Time to dissolve PSU? What an ignorant statement... I can say the same thing about Unions, which have clearly outlived their usefullness at this point. As awful as this fiasco has been, which was caused by ONE sicko, and probably covered up by a FEW others, it doesn't make the ENTIRE university a "cesspool." It was funny that all these media outlets covered the "riot" but left out the vigil (which was attended by more students) or the fact that PSU students run the largest student-run philanthropy organization in the world. Or the fact that among recent hirees, which university ranked consistently among the best, as far as preparation for the real world performance? And don't even talk about how you're a taxpayer that has the right to demand to do so...
PSU is one of a handful of schools that can operate their entire sports program WITHOUT ANY state funding (that is all the football program, too); in fact, the state only contributes about $1000 per undergrad; compared to UNC (University of North Carolina) which contributes $25000 per undergrad).— thegloryofoldstate - The usual suspects are going to get the job done and well at that though for the benefit of whom exactly is a whole other question.— Tkat
- Yes, they can use the profits what essentially is a pro football program (of course, the players that make all that money get nothing)that to pay for all other sports. Great, but when Penn State Football, Inc. gets to be so monolithic that is is deemed preferable to expose young boys to rape than publicly reveal that a pedophile has been enabled to commit such crimes, it is beyond saving. The fact that you STILL believe that this is an isolated incidence of a few individuals demonstrates the illness that pervades Penn State's entire existence. It's even worse that you defend the exemption from public disclosure corruptly given to PSU for the purpose of covering all of this up. Let's let the investigation play out, but if Penn State continues to circle the wagons rather than have its alums and students demand that the academic mission outweigh football, it's going to be a painful fall.— Palestra Jon
- What an idiotic statement about dissolving PSU. Obviously not a college graduate of any institution of higher learning. As are all the conspiracy theorists. As one reader so aptly pointed out, with one of the largest undergraduate bodies of any University in the country and one of the largest alumni groups, good luck finding anyone in any line of work or profession without ties to the University. And about time that alumni body comes out in support of the great institution PSU was and still is and what a great man Joe Paterno was and still is. What a bunch of short-sighted people that make statements condemning the whole institution and a great person.— FraninTampa
- Great info. I'm a PSU law student and obviously I want the school to do well and I still think it's a great place overall, but from what you wrote calling this an "independent" investigation doesn't pass the laugh test.— daveb618
- What is going on here? Is this the same "backroom" setups that will, on the surface, seem valid and thruthful, while some critical interviews or investigations will be just "fluttered" at and buried in the "noise" of the overall report. It reminds me of how Nutter avoided being interviewed in the Ackerman/Archie debacle. Just because he supposedly initiated the probe doesn't relieve him of culpability or involvement in the resulting fiasco... There were indications he balked at backing Ackerman against Archie and his gang...Was he interviewed? Were notes taken? Do they exist?— oblekr
- The University is more than the Paterno and Company Football As Religion Cult. There are tiny museums all over the old campus that celebrate the singular accomplishments of scientists and artists. The university owns many portfolios and research artifacts that are of great interest and importance. Unfortunately the realm of soggy towels, forgotten j-straps and stinky sneakers has garnered all the attention. Shut down the foot ball machine.— psupoed
- Well this is, we will never know the truth now, I don't think Penn State wants the full truth, it will make them look too bad.— primo
- Exactly what does this prove?
That some guy made money while working for a credit card company that had ties to dozens and dozens of colleges and the NFL for marketing purposes?
It's stretches all credulity and reality to twist that into Freeh has PSU ties, and the ties that the company had are extraneous at best - it's not like PSU and MBNA entered into an exclusive contract. They had contracts with hundreds of universities - and I'm sure high profile university personalities like Joe Paterno - as well as every NFL team.
What doesn;t pass the laugh test is this so-called piece of "investigative" journalism.
It is a clear example of yellow journalism - but what can you expect from people who have to create news, not report it.
So now Mr. Freeh is going to be tarred and feathered because of what? The Inquirer didn;t get to hand pick its own "independent" investigator?
If you can't trust the guy that used to run the FBI, and who was a federal judge, who exactly can you trust?
I just don't understand how people think these days. Actually, they aren't thinking anymore, and simply are swayed by the latest sensational - and in many cases, wholely misleading - headline.— Watching and Waiting - Freeh is a straight shooter and will get this right.— Flyers_1
