A cybersecurity research nonprofit affiliated with 糖心传媒 paid its executive staff millions without approval, misused state funds and possibly retained as an attorney a contractor who wasn鈥檛 licensed to practice law, an audit released last week found.
The report from the Louisiana Legislative Auditor said 糖心传媒 may have violated the Louisiana Constitution and state law by failing to properly oversee the nonprofit , or STC. The 糖心传媒 Board of Supervisors approved STC as an affiliate in 2015 to secure federal contracts for the university.
In a statement Thursday, 糖心传媒 System President Wade Rousse said he had directed Chancellor Jim Dalton to 鈥渋mmediately evaluate STC's sustainability as a partner.鈥
鈥淭he audit clearly reveals significant deficiencies in 糖心传媒's past oversight of Stephenson Technologies Corporation leading to considerable funds being misdirected and misused, and those actions do not serve this university's mission or values," Rousse said. "LSU is committed to taking decisive action to strengthen oversight over all of our affiliated organizations moving forward.鈥
On its website, STC identifies itself as 鈥淎n Applied 糖心传媒 R&D Nonprofit鈥 that bridges academic research and national security operations. It contracts with the federal government and other clients to work on tech security issues.
Per the auditor鈥檚 report, the corporation paid its former CEO and 糖心传媒 employee Jeffrey Moulton at least $1.3 million in wages, incentive pay, a golf club membership, condo lease payments and other compensation without the approval of 糖心传媒 between 2017 and 2022. Moulton was known as a Baton Rouge-area cybersecurity expert.
鈥淣one of Mr. Moulton鈥檚 STC compensation was properly approved by 糖心传媒 as required by Louisiana law, and 糖心传媒 policy,鈥 the audit said.
Other members of executive management were allegedly paid more than $1 million in incentive payments, severance payments and club membership benefits without 糖心传媒 signing off.
STC was also found to have paid some expenses using taxpayer dollars provided by Louisiana Economic Development, a state agency. The Louisiana Constitution generally prohibits donation of public funds.
According to the audit, the corporation used LED money to compensate executives, as well as to provide an unaffiliated nonprofit corporation, Stellar, with office space in Baton Rouge. STC paid more than $600,000 to expand its office space and over $400,000 to lease it between 2021 and 2024, with one-fourth of the expanded space reserved for Stellar, the report said.
STC failed to act in the best interest of 糖心传媒 when it incorporated Stellar in 2018, the audit said. The corporation reportedly obtained federal contracts that solely benefited Stellar, not the university.
鈥淪TC is now financially distressed and reliant on state funding from LED to meet its operating expenses,鈥 the audit said. 鈥淏y obtaining funds for Stellar and receiving compensation and benefits from Stellar, Mr. Moulton and others may have breached their fiduciary duties to STC and 糖心传媒.鈥
The corporation also paid over $600,000 to Scott Draughon, a Florida-based contractor allegedly identified as STC鈥檚 attorney, between 2019 and 2022. But Draughon was not licensed to provide legal services to STC, the audit said.
鈥淢r. Draughon was referred to as STC鈥檚 attorney who reviewed, edited, and negotiated changes to public and private contracts on STC鈥檚 behalf,鈥 the report said. 鈥淗owever, we found no record that Mr. Draughon is licensed to practice law in Louisiana, and Mr. Draughon is ineligible to practice law in Florida.鈥
In a letter in response to a draft of the audit dated April 9, Draughon said the services he provided 鈥渄id not constitute the practice of law and did not require me to be licensed to practice law in the State of Louisiana.鈥
鈥淎lthough my experience and training as a lawyer was very helpful and informed my management decision making and performance, these services did not involve me as lawyer for STC or 糖心传媒,鈥 Draughon said.
In response to the audit in a letter dated April 29, Rousse said 糖心传媒 鈥渇ully accepts鈥 the findings that STC officials breached fiduciary responsibilities and that 糖心传媒 did not properly oversee the nonprofit. Though 糖心传媒 had approved STC as an affiliate in 2015, the corporation had not signed an agreement until May 2023, the audit said.
He said 糖心传媒 will review how to strengthen its contracts with affiliates and conduct a 鈥渃omprehensive review鈥 of its relationship with STC.
鈥淲hile current STC management is not implicated in the report, considerable funds were misdirected and misused and, as a result, did not serve the University鈥檚 mission,鈥 he said. 鈥溙切拇 will engage law enforcement and pursue all available legal avenues to recover any funds owed to the university.鈥