UC Settles With Arthur Andersen Entity

On April 8, the University of California filed a complaint in federal court against Enron executives and several financial and legal institutions directly involved in the defrauding of investors of more than $25 billion. The University of California was named lead plaintiff in the securities class action suit in February.

When discussions with Enron’s auditor – Arthur Andersen LLP – failed to reach a settlement, the University entered into negotiations with Arthur Andersen’s international entities, independent of the U.S. firm. The UC announced Aug. 27 that a tentative $40 million settlement had been reached with Andersen Worldwide SC, an umbrella organization representing the international divisions. The trial against the American firm is scheduled for Dec. 1, 2003.

The UC is one of several large public and private institutions that invested in Enron based on inaccurate company statements, documents and audits. The UC purchased a total of 2.2 million shares of Enron stock between May 2000 and January 2001 and lost $144.9 million. The losses represent less than 0.3 percent of the University’s total portfolio.

Court Rules Students Cannot Sue Colleges for Releasing Records

Through Gonzaga University and Roberta S. League v. John Doe, the U.S. Supreme Court ruled in a 7-2 decision in June that students cannot file suit when universities disclose confidential student records to non-governmental agencies.

Instead of filing civil suit, students can file a complaint to the Secretary of Education, who can then cut federal funding to the university. In order for students to file suit, Congress must create “new rights” regarding student privacy, the Supreme Court stated.

Critics argue the ruling leaves too much to administrative discretion. Since students cannot file lawsuits, the Secretary of Education may choose to ignore complaints.

Critics also contend that cutting federal funding from an institution because of student privacy violations is too strict a punishment and may weaken the effectiveness of the Freedom of Information Act since federal agencies may not release information in fear of suit.