The Penn State child sex abuse investigation has already cost the university more than $12 million in crisis communication and legal fees. The university is expected to shell out at least an additional $5 million in settlements, experts estimate.
“I think that Penn State will likely be able to settle all of these sexual misconduct claims for something in the area of $5 million. There will be one or two claims that will be fairly expensive but the majority will go for reasonable number,” John Roskopf, vice president of Risk Management at EIIA, a non-profit association.
A scathing report yesterday commissioned by the public college found that top university officials over a 14-year period covered up molestation by assistant football coach Jerry Sandusky, who was convicted on 45 counts, some of which occurred on the campus.
“My assumption is that the investigation costs are basically over and now the costs are going to be settling cases,” said Tom Bark, a professor of law and health sciences at the University of Pennsylvania.
According to Roskopf, “a reasonable figure [for sexual misconduct] is $500,000 on average.” Roskopf stated that when large settlements are not typically seen when a defendant reaches out to settle.
He added, “surprisingly, sexual misconduct claims do not settle for the large amounts the public think they would go for. A $500,000 settlement for some of these victims is probably substantial.”
On Nov. 21, 2011, the college hired Freeh Sporkin & Sullivan LLP to conduct an independent investigation into the failure of University personnel to report abuse allegations against Sandusky and the circumstances surrounding abuse at the schools facilities.
A Special Investigative Council retained by the Penn State University for a seven-figure fee found that four of the University’s most powerful people concealed “critical facts” in order to avoid the consequences of “bad publicity” in connection to the Sandusky child abuse case from the school’s trustees, the Penn State community and the public.
University officials Thursday called the report “sad and sober” and held itself “accountable” for the findings.
The university launched an Openness Website that follows the amount spent on legal fees and crisis communication. The financial figures, which were last updated in Feb. 2012, show more money being spent on the internal investigation and crisis management than on legal services and defense.
According to the Websites Openness page, by the end of Feb. the University spent more than $5.3 million on its internal investigation and crisis communication in the sex abuse scandal that rocked the University last year.
Two months later the figure would balloon even more.
According to the Centre Daily Times, by the end of April the University had shelled out close to $12 million in legal and other fees in connection to the child abuse scandal related to the case. Of the $11.9 million spent, more than half was spent on crisis management and for an internal investigation.
The university has spent $2.46 million for the board of trustees’ internal investigation, including $1.14 million to Freeh, Sporkin & Sullivan, former FBI director Louis Freeh‘s firm, according to Pennstatetrustee.com, a blog operated by Myke Triebold, a Penn State graduate. The website breaks down the fees with $111,164 going to Domus Inc. and $172,563 to Kekst and Company Inc., both for public relations for Freeh; $499,370 to Ketchum Public Relations for crisis management; $506,162 to Reed Smith LLP and $32,053 for “other” consultants and costs.
With the college’s reputation at stake, Roskopf does not find the figure spent for crisis management surprising.
“Penn State is a very large organization, a very far-reaching organization and it has a huge alumni base and needs to be sure that they get their message out to their friends and to their alumni that this is still a great institution,” said Roskopf. ”Their success at spending $5 million [through the end of Feb.] is reflected in the fact that they collected over $200 million in donation.”
He continued, “It is key for Penn state to maintain their reputation. That’s an expensive endeavor.”
A request for comment from Kekst and company was not immediately returned.
Here’s a break down of fees paid out as of Feb. 2012:
Internal Investigation and Crisis Communications: $5,348,238
– Freeh Group/Kekst Public Relations
– Reed Smith/Ketchum Public Relations
– The Academy Group
University Legal Services/Defense: $1,205,438
– Saul Ewing
– Duane Morris
– Lanny J. Davis and Associates
– Schnader Harrison Segal & Lewis LLP
– Jenner & Block LLP
– ML Strategies
– Lee, Green & Reiter Inc.
Externally Initiated Investigations: $49,788
– Margolis & Healy
Officers Legal Defense* (Schultz, Curley, Spanier): $338,545
Other Institutional Expenses: $635,634
Total as of Feb. 29, 2012: $7,577,643