In suit, Raese-owned company alleges fraud, collusion by WVU
CHARLESTON, W.Va. -- A Morgantown-based radio company filed a wide-ranging lawsuit against West Virginia University officials and a television station group Wednesday, asking a judge to block WVU from awarding a lucrative media rights contract.
West Virginia Radio Corp., owned by Morgantown businessman John Raese, also sued the nonprofit WVU Foundation, alleging it violated state charity laws after forfeiting a $5 million loan to Charleston-based West Virginia Media Holdings, which owns four television stations.
West Virginia Radio's lawsuit names 10 defendants, including WVU Board of Governors Chairman Drew Payne, West Virginia Media Holdings President Bray Cary, athletic director Oliver Luck and WVU President James Clements. The suit accuses Cary and WVU officials of "fraud, collusion and the palpable abuse of discretion." Meanwhile, Clements failed to control Luck and other high-ranking university administrators, according to the suit, "exposing WVU to unnecessary expense, management and ridicule."
The 49-page complaint alleges that WVU officials forced out longtime athletic director Ed Pastilong, then launched various "fraudulent schemes" to enrich themselves and benefit West Virginia Media.
"Although WVU and its Foundation exist for salutatory purposes, they have been corrupted by a cadre of self-interested, self-dealing individuals who view WVU and its Foundation not as a vehicle for higher education and the betterment of West Virginia and its citizens, but instead as an opportunity for personal profit," according to the lawsuit.
WVU spokesman John Bolt said the university does not comment on pending litigation. Cary did not respond to a request for comment.
West Virginia Radio's lawsuit says WVU officials "tailored" a recent bid request so that Winston Salem, N.C.-based IMG College and subcontractor West Virginia Media would win the university's third-tier media rights – a deal valued at $110 million over 12 years.
In the complaint, the radio company called the re-bid a "sham" and asked a judge to force WVU to bar West Virginia Media and IMG from bidding on the contract a second time. The suit was filed in Monongalia Circuit Court.
In January, IMG signed a tentative third-tier media rights deal with WVU. But the university announced it would re-bid the multimillion-dollar contract after West Virginia Attorney General Patrick Morrisey released a report finding that WVU officials – including Luck and Payne – violated purchasing and ethics rules while creating the deal with IMG.
Payne, who serves on West Virginia Media's board of directors, stood to gain financially from the media rights contract, the suit says. Board of Governors member David Alvarez also owns shares of the media group.
West Virginia Radio also alleges that WVU violated purchasing rules when Luck handpicked a consulting firm, Rockbridge Sports Group, to advise the university on the media rights contract. A Rockbridge consultant later voted to award the deal to IMG and West Virginia Media.
"These blatant and unlawful actions are not the result of inadvertence or errors made in good faith, but instead are the purposeful result of a fraudulent scheme to benefit West Virginia Media, a corporation certain insider defendants own, or to personally enrich themselves…" the lawsuit alleges.
According to the suit, the WVU Foundation loaned $7.75 million to West Virginia Media in 2001. Six years later, the Foundation sold its shares in the company for $2.7 million. Cary and other West Virginia Media investors have served on the Foundation's board of directors, the complaint says.
The WVU Foundation is the university's fundraising arm.
"The Foundation's investment was wholly improper under West Virginia law and its own stated rules because it did not benefit WVU, but instead benefited private individuals who also served on its board," according to the lawsuit.
WVU Foundation's investment allowed West Virginia Media to acquire television stations "it otherwise could not have afforded," the suit alleges.
"In other words, the Foundation's improper and illegal investment in West Virginia Media allowed the media startup to grow into a substantial player in the West Virginia media market," the lawsuit states.
West Virginia Radio's lawsuit also alleges that WVU illegally acquired a scoreboard for Milan Puskar Stadium in 2007.
The lawsuit asks a judge to award unspecified "exemplary damages" from WVU officials "for their outrageous and scandalous behavior and to deter other future such breaches of their fiduciary obligations."
The radio company said it would donate any court-awarded damages to the WVU Children's Hospital.
Third-tier media rights cover televised coverage of some non-conference football and basketball games, radio broadcast rights, non-revenue sports coverage, coaches' shows, signage, online content and seatback sales.
West Virginia Radio has handled WVU football and men's basketball games for decades through a partnership with the WVU-owned Mountaineer Sports Network, which now holds the media rights.
Payne and other West Virginia Radio critics have said the company doesn't want to give up its "sweetheart deal."
Reach Eric Eyre at email@example.com or 304-348-4869.