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A former ECU chancellor is suing the UNC System. Here's what you need to know.

<p>Chairperson Harry Smith discussed the status of higher education in North Carolina on Friday, Sept. 20, 2019 in a meeting of the UNC Board of Governors at the Friday Center.&nbsp;</p>
Buy Photos Former Board of Governors Chairperson Harry Smith in a meeting of the UNC Board of Governors at the Friday Center on Friday, Sept. 20, 2019. He resigned 4 days later.

On June 12, former East Carolina University Chancellor Cecil Staton filed a lawsuit against the UNC System, alleging that a “misinformation campaign” by former Board of Governors chairperson Harry Smith led to his “pressured resignation” in March 2019. Here’s what you need to know.

Who is involved? 

In addition to the UNC System, the lawsuit lists Smith, risk management and screening firm QVerity and QVerity partner and general counsel Peter Romary as defendants.

  • Cecil Staton served as the 11th chancellor for ECU from 2016 to 2019. During his time as chancellor, Staton launched a $500 million branding and marketing campaign to boost awareness of ECU, over $200 million of which was raised during his tenure. According to The Chronicle of Higher Education and Inside Higher Ed, during his tenure, Staton received criticism for a decline in athletics revenue, and for the ECU Foundation's purchase of a new chancellor's house for $1.3 million. Staton is currently the president and CEO of Asian American Hotel Owners Association, Inc., the largest hotel owners association in the country, a position he has held since November. 
  • Harry Smith joined the Board of Governors in 2013, and was its chairperson from 2018 until he resigned in September 2019 to focus on running his private equity firm. In an article from NC Policy Watch about Smith's decision to step down, he stated that the job had become overwhelmingly political. During his tenure as chairperson, he was known for frequent clashes with other Board members, the article states.Prior to joining the Board, Smith served as the CEO of Flanders Filters Corporation, a company that produces and distributes air filters. 
  • Peter Romary, a QVerity attorney based in Greenville, North Carolina, was hired in 2019 by former BOG member Tom Fetzer to conduct an investigation into then-interim ECU Chancellor Dan Gerlach, who was photographed drinking and dancing with students at local bars, while the UNC System conducted its own investigation. The move was criticized by current BOG Chairperson Randy Ramsey, and led to the Board’s Governance Committee drafting revisions to its ethics policies. Fetzer drew criticism from many Board members in 2018 for also interfering in the hiring process of Western Carolina University’s chancellor, during which he revealed the name and information of a candidate to QVerity.

A business proposal

Staton alleges in the lawsuit that Smith held a “vendetta” against him, which stemmed from a rejected business proposal.

Staton did not immediately respond to requests for comment. 

According to email exchanges from 2016, Smith was involved in discussions with Rick Niswander, who served as ECU's vice chancellor for administration and finance, about potentially acquiring an apartment complex, formerly known as North Campus Crossing, for university housing. 

In an email to Staton about the deal, Niswander said he declined to pursue for a number of reasons, including having to "artificially create demand” by requiring sophomores to live on campus and then housing some in the complex, which Niswander said was located 3 miles from ECU's campus. 

The lawsuit asserts that Staton rejected the proposal in the interest of the university and its students and “in consideration of the blatant conflict of interest and impropriety of Smith — a member of the UNC-BOG, seeking to receive financial benefits.”

In an email exchange from September 2016, Tom Shanahan, senior vice president and general counsel for the UNC System, stated that if Smith was considering the deal, he should have a discussion about the potential transaction considering the perspectives of ECU, the UNC System and Smith’s role as a Board member. 

“The BOG has a policy on ‘Dual Memberships and Conflicts of Interest’ that is implicated in transactions where a member might have an interest, so there are important procedural steps to follow,” he wrote. 

Smith replied that he was no longer a part of the deal, noting it was an "unusual situation" and that he would give "plenty of notice" if he believed something would come from the proposal. 

According to an article in The News and Observer, Smith co-owns two apartment complexes leased by college students in Greensboro and Georgia. 

Multiple outlets have reported that an April 2018 lawsuit accused Smith and another board member of attempting to steer N.C. Central University towards a particular firm for a multimillion dollar student housing contract. Both Smith and the other board member denied the allegations.

A damaging dossier

The lawsuit alleges that Staton’s rejection of the proposal resulted in retaliation efforts and a “course of harassment” from Smith, including interference with his governance of ECU and questioning Staton’s competence and qualifications for the job. The suit also claims that the UNC System did not take action to prevent or dissuade Smith’s actions. 

The suit also claims that Smith and Romary prepared and disseminated a dossier with defamatory statements, entitled “Was the Hire of ECU Chancellor Cecil Staton an Act of Gross Negligence?” The suit alleges that the dossier prevented Staton from obtaining another position in higher education administration. 

The suit alleges that under the pseudonym John Q. Public, Romary wrote to interim UNC System President Bill Roper and ECU’s Board of Trustees about Gerlach’s fitness as interim chancellor, and to Roper and Smith in March 2019 about Staton with “unfounded allegations” after the announcement of his resignation. 

In an email statement, Romary denounced Staton’s allegations, and said that he has heard the author of the dossier is a former ECU professor. 

“In short, I am being sued over documents I never wrote, sent to a university I had never heard of before the news article about this suit, at the direction of someone who never hired me, directed me, or did anything with me at all,” Romary wrote. 

Smith also stated in an interview with the DTH that Staton’s allegations are false, and that he had no involvement “in any way, shape or fashion” with the dossier. 

“I didn't have any idea of any job search Cecil was in, in any way, and further, I wish him well,” Smith said. “...What I focused on was the metrics of the university and all the universities.”

He also denounced allegations regarding the North Campus Crossing proposal.

“It's just unfortunate, (the lawsuit) seems to have been put together with some anger and some hate,” Smith said. “And I support any process that produces facts.”

The DTH sent an interview request to Steve Long, a Board member who has been critical of Smith’s leadership in the past and his involvement in Staton’s resignation, echoing Staton’s allegations of the former chairperson's “personal vendetta” in a statement in 2019. 

In response to the request, the UNC System responded that neither the system nor the UNC System Board of Governors issue comments on pending litigation.

Emma Geis contributed reporting.

@MaydhaDevarajan

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