Dec. 27 (Bloomberg) -- Joe Paterno sat in his kitchen one morning in March 2002 as a graduate assistant described a locker-room shower encounter he saw between a boy and a longtime friend and colleague of Penn State University’s football coach. Paterno slumped in his chair, “shocked and saddened,” according to court testimony.
Mike McQueary’s words couldn’t have come at a worse time. Paterno was trying to fix the Nittany Lions’ money-making football program he built on a motto of “success with honor,” after the low point of his coaching career. The State College, Pennsylvania, university was near the end of a $1.4 billion fundraising campaign, was six years removed from the opening of a $55 million basketball arena and had just expanded the football stadium to the nation’s second-biggest.
Paterno, in his 37th year as coach, told McQueary he had done the right thing describing what he saw involving Jerry Sandusky, a former Nittany Lions defensive coach. The biggest man on campus then sent the case to his immediate bosses and did nothing else. That set the stage for his firing nine years later, 11 days after his record 409th win, amid a scandal over alleged child-sex abuse and coverup that has echoed far beyond the Central Pennsylvania region known as Happy Valley.
“The revenue opportunities are so substantial that the pressure placed upon the athletic department and coach, specifically, make it ever more difficult to pursue a school’s mission,” Warren Zola, 44, assistant dean of graduate programs at the Carroll School of Management at Boston College, said in a telephone interview from his Chestnut Hill, Massachusetts, office.
Paterno, who turned 85 on Dec. 21, was unable to comment for this story because of health issues, said Dan McGinn, a spokesman. Paterno is being treated for lung cancer found after his firing and broke his pelvis in a fall at his home this month.
The dependence by U.S. universities on sports to help fund everything from money-losing gymnastics teams to general scholarships has created a system where the needs of coaches and their programs supersede the educational values of their institutions, said Robin Harris, executive director of the Ivy League, whose schools don’t give athletic scholarships.
It also creates an environment where a coach like Paterno, a Brooklyn, New York, native known as “JoePa” whose bronze statue stands outside 107,000-seat Beaver Stadium, had the power to tell the university’s president that he wouldn’t help raise another penny if the school’s top disciplinarian wasn’t fired for being too strict with his players.
‘So Much Money’
“There is so much money tied into big-time college athletics that it forces some people to make bad decisions,” Harris said in a telephone interview. “They may be people affiliated with a program, or coaches and administrators who do things purposely wrong, or turn a blind eye, because they are focused on generating revenue and not necessarily the integrity of the enterprise.”
Paterno and Graham B. Spanier, 63, Penn State’s president, were fired by the school’s trustees on Nov. 9, four days after Sandusky, 67, was charged with sexually assaulting eight boys from 1994 to 2009. While neither Paterno nor Spanier was charged in the case, the trustees said the two leaders should have done more.
Athletic Director Tim Curley, 57, was placed on administrative leave and Gary Schultz, 62, a vice president in charge of finance and the campus police, retired after they were accused of lying to a grand jury about what McQueary told them about Sandusky’s actions. Sandusky, Curley and Schultz all have denied wrongdoing.
McQueary, 36, testified at a Dec. 16 preliminary hearing for Curley and Schultz that he went to Paterno’s house the day after the shower incident and told the coach what he had seen, although he didn’t offer explicit details. About 10 days later, McQueary met with Curley and Schultz and told them he had seen Sandusky and a boy, both naked, in the shower.
“I conveyed to them that I saw Jerry with a boy in the showers and that it was severe sexual acts going on and that it was wrong and over the line,” McQueary testified.
Educators said they see plenty wrong with big-time college sports.
Winning generates money from television, ticket sales, sponsors and alumni, according to a 2010 report by the Knight Commission on Intercollegiate Athletics, an independent, non-profit group dedicated to reforming college sports.
Networks including Walt Disney Co.’s ESPN and News Corp.’s Fox will combine to pay the top five conferences and the Bowl Championship Series that determines the national football title about $14 billion in rights fees through 2032.
Football teams received a collective $281 million in bowl payouts last season, the National Collegiate Athletic Association said. Of that, $182 million, or 65 percent, came from the five BCS games, including the national championship.
CBS Corp. and Time Warner Inc.’s Turner Sports signed a 14-year deal worth almost $11 billion to televise the NCAA men’s basketball tournament.
ESPN is an investor in the Longhorn Network, which guarantees the University of Texas an average $15 million annually for 20 years. Texas had a nation-leading operating profit of $70.1 million last year, according to data compiled by Bloomberg. Penn State football generated $63.3 million in fiscal 2010, about 60 percent of the athletic department’s revenue.
Coaches like Paterno are the most powerful people at their universities, including the presidents, said Lewis Katz, a former owner of the National Basketball Association’s New Jersey Nets who donated $15 million to Penn State and whose name appears on a campus law building.
“Football trumps everything at Penn State,” Katz said. “There’s nothing that comes close to second.”
Winning requires universities to build facilities that lure top high-school recruits, and hire marquee coaches whose salaries often dwarf that of university presidents, says Jason Lanter, assistant professor of psychology at Pennsylvania’s Kutztown University and president of the Drake Group, a professors’ alliance to defend academic integrity from the sports industry.
“We’re talking big, big money here,” Lanter, 38, said in a telephone interview. “You need to have it to build the facility, to recruit, to get more money. It’s a vicious cycle.”
JD Reive is in his second season as the men’s gymnastics coach at the University of Iowa, where the football team accounted for 52.6 percent of athletic department revenue last year. The gymnastics team lost almost $600,000 in fiscal year 2010, according to university figures obtained through open-records laws. Reive said his program might disappear if the football team falters.
“There isn’t a gymnastics coach in the country that doesn’t worry about what happens if the football team doesn’t make a bowl game,” Reive, 35, said in a telephone interview. The Hawkeyes play in the Insight Bowl on Dec. 30 against Oklahoma.
Ohio State University’s football program had an operating profit of about $18.2 million last year. It hired Urban Meyer, a two-time national title winner at the University of Florida, as coach last month at $4 million a year, more than triple the $1.3 million paid in the fiscal year ending June 2010 to Gordon Gee, the Columbus, Ohio, university’s president.
Meyer, 47, succeeded Jim Tressel, who quit in May in a memorabilia-selling scandal involving top players. Tressel produced a national championship at Ohio State before the NCAA said he kept information about rule-breaking from school administrators for more than nine months. Asked early in the case if he was going to fire Tressel, Gee, 67, responded, “I hope he doesn’t fire me.”
Gee, through a university spokeswoman, declined to comment for this article. The NCAA on Dec. 20 banned the Buckeye football team from postseason play next year.
Zola, the Boston College assistant dean, said coaches have become “preposterously powerful,” and chancellors and trustees must “realign their mission along with athletic priority.”
Behind Paterno’s Coke-bottle eyeglasses and grandfatherly exterior was a bully, said Vicky Triponey, Penn State’s former standards and conduct officer who clashed with the coach over players who broke laws or school rules.
Triponey said in a 2005 e-mail to Spanier that Paterno believed she should have no interest in holding players accountable to general student standards.
“I do not support the way this man is running our football program,” Triponey, 54, said in e-mails first reported by the Wall Street Journal last month. “We certainly would not tolerate this behavior in our students, so I struggle with how we tolerate it in our coach.”
Triponey also said she was told by Spanier that the coach had given the president an ultimatum: Fire her or Paterno would stop raising funds for the university. Spanier told Triponey that he would pick her, though he didn’t want to have to make that decision.
The content of the e-mails was confirmed to Bloomberg News by Triponey’s husband, Michael Meacham, a former Penn State professor. Triponey, through her husband, declined to comment further.
Raymond Marsh, a spokesman for Penn State’s Office of University Development, wouldn’t say how much total money Paterno had helped to bring in.
“Penn State clearly raised more funds because he was involved,” Marsh wrote in an e-mail response to questions.
Spanier declined to comment through Bill Mahon, a university spokesman. The former president remains a tenured professor in the College of Health and Human Development and the College of the Liberal Arts.
Triponey quit in September 2007, a month before the university limited the ability of its judicial-review process to end a student’s participation in activities, including sports.
Walter DeShields, a 2004 graduate of Penn State and head of the Philadelphia chapter of the African American Alumni Organization, said in a telephone interview it was clear during his time at the university that football and basketball players were given more leeway when it came to behavior and punishment.
“But playing on Saturday in a multimillion-dollar business is the only thing that matters,” he said in a telephone interview.
On Saturday, Oct. 29, Penn State beat Illinois 10-7 at Beaver Stadium, lifting Paterno above Eddie Robinson for the most wins by a coach at college football’s top level.
The Nittany Lions were off the next Saturday, Nov. 5, when State Attorney General Linda Kelly announced the grand jury presentation against Sandusky, Schultz and Curley.
According to the grand jury report, Paterno, after being informed by McQueary of what he saw, told Curley the next day. Paterno didn’t contact police. In a Nov. 9 statement, the coach said in hindsight he wished he had done more.
By the time Penn State played again, against Nebraska on Saturday, Nov. 12, Paterno was gone after 46 years in charge.
The NCAA said on Nov. 18 it would investigate the Sandusky case, hours before Paterno’s cancer was disclosed by his family.
Penn State said this month it would no longer assist in the management of licensing for Paterno’s name and likeness. Licensing for Paterno-related merchandise will now be coordinated by his daughter, Mary Kay Hort, the school said, and Paterno is barred from using university trademarks. Hort didn’t return an e-mail seeking comment on the move.
The scandal is costing the football team, which is searching for a permanent successor to Paterno. It has lost at least three top high-school recruits, including Noah Spence, a 6-foot-4, 245-pound defensive end from Harrisburg and the No. 1-rated player in Pennsylvania. Spence hinted via Twitter two days after Sandusky was charged that he might not choose the university that’s about 85 miles from his hometown.
No to PSU
“Um psu might be a no no for me ewwww,” Spence wrote. Spence’s father declined to comment and his son didn’t return repeated messages at their home. On Dec. 18, Spence said he would join Meyer at Ohio State.
Tommy Schutt, a 301-pound defensive tackle rated the leading recruit in Illinois, verbally committed to Penn State in June only to balk and pick the Buckeyes after the scandal. Chad Hetlet, Schutt’s coach at Glenbard West High School in Glen Ellyn, Illinois, said the player “wasn’t comfortable” with the situation at Penn State.
“He’s concerned about the future and what’s hanging over their head,” Hetlet said in a telephone interview.
Scout.com, a college recruiting website, said Penn State has its fewest commitments from the two highest levels of players since 2002, the same year McQueary said he saw Sandusky and the boy in the shower and the year after the Nittany Lions had their first back-to-back losing seasons under Paterno, who became head coach in 1966.
“There’s blood in the water,” said Mike Farrell of Rivals.com, another recruiting service.
John L. Lahey, president of Quinnipiac University in Hamden, Connecticut, said the biggest headaches in college sports seem to come from the more visible and valuable teams.
“When any part of the university, in this case athletics, becomes so important to the university, to the university’s brand, image, resources, as certainly is the case with the Penn State football program, it can cloud the better judgment of people with high intelligence and integrity,” Lahey said at the IMG Intercollegiate Athletics Forum in New York this month.
The college football chase for bigger, better and richer goes on.
The Board of Regents at Washington State last month approved $80 million to add premium seating and a new press box to Martin Stadium.
“It allows for new revenue streams which I believe are necessary to reinvest in scholarships and additional facility enhancement projects which are essential to attract top talent to our campus,” Athletic Director Bill Moos said.
The Cougars, who finished with two Pac-12 Conference wins last season, picked Mike Leach as football coach this month, giving him $2.25 million annually. The Pac-12 this year announced a 12-year, $2.7 billion TV contract with ESPN.
Washington State football generated $12.8 million in revenue in fiscal year 2010, almost a third of conference rival Washington. Leach’s contract includes a $25,000 bonus for beating the Huskies in the annual game known as the Apple Cup.
Of 53 universities surveyed by Bloomberg this year, 46 diverted money to sports in their fiscal years ended in 2010, based on financial reports to the NCAA obtained from state schools under open-records laws.
Rutgers University, the 245-year-old state university of New Jersey, spent more money on athletics than any other public institution in the six biggest football conferences. More than 40 percent of sports revenue at Rutgers came from student fees and the university’s general fund, while budget cuts froze professors’ salaries, cut the use of photocopies for exams and increased tuition, housing and other fees.
“There are a lot of people chasing the Holy Grail,” Stanford University Athletic Director Bob Bowlsby said in a telephone interview. “Chasing leads to some bad decisions. Sometimes it’s doing things that you think you have to do to compete on the playing field.”
Stanford, based in Palo Alto, California, is among four schools in college football’s six largest conferences without a major NCAA infraction. Penn State is another, along with Northwestern and Boston College. The NCAA is investigating whether Penn State broke the governing body’s rules about institutional control of sports in the scandal.
John Etchemendy, Stanford’s provost, said the relatively small size of the Cardinal’s football and basketball venues keeps officials from becoming too reliant on those programs for revenue. No. 4 Stanford -- which is playing No. 3 Oklahoma State in the Fiesta Bowl on Jan. 2 -- completed a $100 million renovation of the football stadium in 2006 that removed 35,000 seats, to a capacity of 50,000. The basketball arena, Maples Pavilion, seats about 7,000. The University of Oregon’s $227 million Matthew Knight Arena, which opened last season, holds about 12,000.
“If you have a large stadium, you feel the need to fill it,” Etchemendy said. “Somehow the priorities have gotten distorted, if the football or basketball coach ends up having more influence or power than that president.”
Paterno’s teams had losing records in 2000 and 2001, going a combined 10-13. Penn State went 9-4 in 2002, setting a Beaver Stadium attendance record for a game against Nebraska, before losing records the following two seasons, including a Paterno career-low 3-9 in 2003. After a 4-7 record in 2004, university administrators asked Paterno to consider stepping down, according to the Centre Daily Times in State College. Paterno said no, and the Nittany Lions went 11-1 in 2005.
Bobby Bowden took Florida State to 31 bowls in 34 years and won 76 percent of his games. Toward the end of his tenure, Bowden, who went 33 years without a losing season, said he began receiving office visits from university administrators voicing concerns about empty seats on game day. He left under pressure after the 2009 season with a total of 377 victories.
“At the end, I didn’t win enough,” Bowden, 82, said in a telephone interview from his home in Tallahassee, Florida, where the university is based. “You can bet your life if you’re not winning and filling the stadium, got to sell those seats. Football pays 90 percent of our bills. Got to win to get those TV contracts.”
Whether the Sandusky case will affect wins, losses and revenue is the next question at Penn State. Since Sandusky’s arrest, sales of licensed T-shirts, caps and other merchandise have plunged by almost 40 percent from previous years, Brian Swallow, vice president of sales and marketing for Fanatics LLC, which runs the school’s online store, said in an e-mail.
Applications for admission are up more than 3.4 percent over last year, and alumni giving is up an undisclosed amount, Rodney Erickson, who succeeded Spanier as Penn State president, said in a Dec. 6 e-mail to alumni.
Students rioted the night Paterno was fired. The former coach and his wife, Sue, donated $4 million to the university and helped raise almost $14 million for an addition to the library, which was dedicated in 2000 and named in their honor. The football team this year was ranked No. 1 in academics among the top 25 by the New America Foundation, which compared graduation rates and the NCAA’s academic progress rate.
Tom Bradley has replaced Paterno on an interim basis as the Nittany Lions prepare to face the University of Houston in the TicketCity Bowl on Jan. 2 in Dallas. The game paid its participants $2.2 million last season, according to the NCAA.
“Football Saturdays are a ton of fun,” said Lanter, the Drake Group president. “But when you peel back the layers, people are becoming more ready to acknowledge that if we look at the money, as to where it’s going, control should go back to the universities.”
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