Calculated belief

June 20, 2003

Keele University managers' defence of the Owengate financial restructuring deal ("Keele denies cash 'wheeze' costs", THES , June 6) illustrates our difficulties.

Pro vice-chancellor Tony Dugdale reportedly said the managers were not aware of any double counting. That is precisely the problem. It occurred, and neither the university council, its finance office nor the funding council, for which the appraisal was performed, spotted it.

Registrar Simon Morris claims the deal was adequately scrutinised because "insurers acting as underwriters put the university through a huge amount of diligence". Of course they did. But the insurance is against a failure on the part of the company, Owengate Keele plc, to maintain payments to its bondholders, not against losses to the university.

As far as we are aware, the only independent advice obtained by the university consisted of a report by its auditors on the accounting treatment of the cash premium and a risk analysis by PriceWaterhouseCoopers that conspicuously failed to identify the risks.

If Dugdale or Morris have access to soundly based calculations that substantiate their belief that the deal is value for money, they should produce them and the matter will then be closed.

Peter Fletcher
Keele Association of University Teachers

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