CSU audit: Fresno State Lyles Center director received ‘questionable payment,’ had conflicts of interest

The director of Fresno State’s Lyles Center for Innovation and Entrepreneurship was accused of taking questionable payments and having several conflicts of interest with current and former business partners in an audit released Feb. 12.

The investigation, commissioned by California State University Chancellor Timothy P. White, claims that Lyles director Timothy Stearns took one questionable payment of $3,000 and more than $150,000 in similar payments over a two-year span.

Larry Mandel, the CSU vice chancellor, oversaw the audit and wrote the final report with Cindy Sanford, the system’s senior manager of investigations. The pair reviewed campus procedures and financial records, as well as records from a PayPal account used by the center and Stearns’ email account.

Mandel said that most payments made to Stearns appeared to be legitimate, save for the one $3,000 payment. He expressed concern over more than 700 payments made from the California State University, Fresno Foundation, which oversees the business practices of the university, to Stearns from June 1, 2013, to June 30, 2015. These total more than $150,000.

The $3,000 payment was billed as a UP Global Startup Weekend trip for four entrepreneur students. The amount would mean that the cost per student of this event was $750. However, the auditors found the costs to be between $49 and $75 per student. When pressed about the discrepancy, neither the Lyles Center nor UP Global knew anything about the transaction, the audit said.

Stearns and his staff allegedly were using credit cards tied to his personal accounts to pay for Lyles Center goods and services. The $150,000 was billed as reimbursements to Stearns.

The Lyles Center’s 2014-15 budget was $1.7 million. Around $300,000 of that comes from state funding. The remainder is from grants, contracts and donations made to the center through the university’s foundation.

The report said that Stearns is a partner in the Kids Invent corporation. It notes that he used another Kids Invent partner as a consultant for the Lyles Center, a conflict of interest. He also is accused of using center resources to benefit Kids Invent, a program offered to elementary school students to help teach business skills.

Additionally, it notes that Stearns used a partner in another business for contract work at the Lyles Center. However, he officially severed the pairing just before his now former partner billed the university. This is still a potential conflict of interest, the audit said.

The audit also notes that the center has been creating websites without permission from the university and that the duties performed on behalf of the center were not segregated enough.

Mandel and Sanford recommended that the university sever all ties with contract labor and partnerships tied to Stearns, destroy the PayPal account, create better bookkeeping practices, review the unauthorized websites and spread out the duties in the Lyles Center.

Lynnette Zelezny, provost and vice president for academic affairs, released a statement to The Bee on behalf of the university.

In it, she said that the university asked the chancellor’s office to take a look at Stearns in June after administrators learned of his potential conflicts of interest.

“University administrators will work closely with the center’s director and campus counsel to implement the necessary corrective action items in response to the recommendations contained in the report,” Zelezny said.

She added that the center has grown significantly over the last decade, and the audit showed areas that required additional management to ensure compliance with university rules.

The university’s responses to each of the five main recommendations are listed in the audit. It agreed with all of them and promised to work to correct the issues.

Debbie Adishian-Astone, the interim vice president for administration at Fresno State, said in an interview Tuesday that the university is taking the audit seriously.

The university has dissolved the partnership between Lyles and Stearns’ former business partner and is working to end the one with his current partner, she said. It also has instructed Lyles management and staff to use purchase orders instead of personal credit cards for major business payments.

Both Stearns and his staff have been cooperative, Adishian-Astone said.

Fresno State has assured the auditors that it will have the fixes in place or nearly so by April.

When asked whether Stearns could be fired, Adishian-Astone declined to comment on any personnel matters.

Stearns began at Fresno State as a professor in 1994. He has been the center’s only director since its opening in 2003. In 2009, he received the President’s Award of Excellence from then-Fresno State President John Welty. He has worked often with community groups at public events as both a professor of entrepreneurship and the Lyles Center director.

This story was originally published February 16, 2016 at 1:24 PM with the headline "CSU audit: Fresno State Lyles Center director received ‘questionable payment,’ had conflicts of interest."