Penn State’s Disaster Cleanup

What the university can learn from the BP oil spill.

Former Penn State assistant football coach Jerry Sandusky leaves the Centre County Courthouse, on June 19, 2012 in Bellefonte, Pennsylvania.

Former Penn State assistant football coach Jerry Sandusky.

Photo by Mark Wilson/Getty Images.

Jerry Sandusky is guilty. This much we know. The child-molesting former defensive coordinator of the Penn State football team was found guilty of 45 of 48 counts of child sexual abuse. But State College is nowhere near the end of the Sandusky saga. There is more—in fact, much more—to follow besides Sandusky’s doomed appeal and sentencing. The results of an internal investigation by former FBI Director Louis Freeh are expected soon, perhaps as early as this week. Two university officials await trial on charges they failed to report suspected abuse and then lied to a grand jury. There’s already one civil suit filed against the school in connection with this sordid mess, with others expected to follow.

And, as prosecutors look more closely at Penn State’s higher-ups, the case against the university’s leadership will likely only look worse. CNN recently reported on the “alleged contents” of emails (that had been “read to” the network) indicating that school officials might have changed their mind about going to authorities about Sandusky in 2001. The report suggests that former athletic director Tim Curley, after meeting with coach Joe Paterno, decided against reporting a 2001 incident of abuse to authorities. Even more disturbingly, the report quotes another email from then-President Graham Spanier indicating that his biggest concern was that the principals could be “vulnerable” for failing to report what they knew.  Penn State can’t afford many more revelations like this one.

Understandably, the university is trying to get a handle on this public relations debacle. Almost immediately after the jury announced its verdict on Sandusky, Penn State issued an unusually direct and apologetic press release. Trying to get ahead of the flood of litigation about to drown what’s left of its reputation, the university offered counseling in its statement and mentions, vaguely, a “program to facilitate the resolution of claims against the University arising out of Mr. Sandusky’s conduct.” It also recognizes the need to “address the victims’ concerns and compensate them,” and concludes by promising to get in touch with counsel for the victims “in the near future with additional details.”

It sounds like the school has some kind of formal claims resolution process in mind. That’s potentially a great idea. Establishing a sound program of victim compensation is a far better option—better for Sandusky’s victims, better for Penn State—than ad hoc litigation. But what will the details of that program be? Achieving fairness through a compensation fund poses a huge challenge. It is not hard to imagine that dozens of victims will come forward, many of whom may have until now remained silent. How would their compensation be decided? How would one victim’s years of abuse be measured against another’s? What about the possibility of fraudulent claims?

Penn State isn’t in totally uncharted waters. What the school has on its hands is a disaster—a disaster for the lives of Sandusky’s victims and a disaster for the reputation of an otherwise respected public university. Although every disaster relief initiative—from the BP oil spill fund to the 9/11 Victim Compensation Fund—presents unique challenges, well-designed compensation programs have several features. They employ the services of an independent third party, have a fair and efficient hearing process, and disburse awards in a way that is consistent among similar victims. They can also offer flexible remedies. Penn State should bear this in mind as it tries to make amends for the disaster Sandusky and his enablers left in their wake.

Given Penn State’s public relations situation, it won’t be easy to create a program that will inspire confidence while fairly compensating victims. But here’s a road map for how to do it:

The first step is for the school to identify a respected, neutral third party to oversee the claims resolution process. That person, the “special master,” would be responsible for designing a fair and equitable system of claims processing, conducting hearings, and meting out compensation. In making this selection, Penn State should seek advice from the victims’ attorneys. It should also create a compensation fund and involve the trustees of that fund in the decision. 

It is critical that this person be truly autonomous. In the BP case, claims administrator Kenneth Feinberg stepped down earlier this year after complaints—and a judge’s ruling—that he was not independent of the oil giant. (BP was paying Feinberg’s firm some $850,000 a month for administering the fund.) A transparent selection process and a clearly disclosed, hourly compensation rate for the special master would likely stave off any complaints of undue influence. Even better if Penn State can get the right person to agree to do this for free. And I’d strongly recommend finding someone who is way, way outside the vast Penn State orbit.

The next step is to design some clear criteria for proving eligibility for compensation. This won’t be easy. Obviously, Sandusky didn’t commit his vile acts in public. Any compensation program based on exposure to a tortious act is bound to turn up a number of “false positives”—people who will say they were injured but weren’t. The 9/11 Victim Compensation Fund, for example, uncovered 35 cases of fraud, but since most of the original fund’s compensation went to the families of those killed, lying was easily detected (no death certificate). There’s no such obvious expedient toward the truth here; young men can simply lie about having been abused.

But people also get away with lying in the judicial system. The key is to put objective requirements for eligibility into place. For those who haven’t testified in the criminal case, we might start with simply requiring the claimant to show that Sandusky had spent time alone with the claimant. Other safeguards may be appropriate. And perhaps the concern with fraud is overstated in this case—there’s obviously an intense personal disincentive to cast oneself as the victim of abuse, notwithstanding the possibility of a payday.

Then we’re left with what we might call the $64,000 question: How much should people be compensated for their harm? One of the hallmarks of compensation funds is the flattening out of damage awards—sometimes into a one-size-fits-all model, and other times into a chart for payments based on a small number of variables, with claimants paid according to where they fall on that chart.

In this case, compensation might start with actual out-of-pocket expenses (counseling costs, hospitalization, lost wages if proved) and then continue by paying each claimant an amount for emotional distress based on the period of time during which the abuse took place. I know this sounds creepy, but there are only two other alternatives. The first is to mete out ad hoc awards that depend on how sympathetic and credible a particular victim happens to be; in other words, to rely to an extent on the tort model. The second is to give everyone the same amount for emotional distress, which is a more defensible option. But whatever the compensation, it should be generous. I’m sure Penn State will remember that the default is tort liability, with the substantial possibility of nasty punitive damages awarded against the university if a cover-up can be established.

The two other benefits of this kind of claim resolutions system are related: It can design very flexible remedies, like providing counseling and occupational support, and it can remain open and available to victims for a long period of time. The fund that’s created to compensate should be endowed with enough money to keep it running for years, maybe even more than a decade, probably outlasting the original special master.

The final piece of this complex puzzle involves the question of opt-outs. Often, as with the 9/11 fund, victims reached a point of irrevocable decision: By choosing to go through the administrative process, the claimant waived the right to sue in court. Forcing that decision made sense there, because the fund amounted to government largesse (in part because it had nothing to do with the government’s liability). It’s not a good idea to force that choice here. Let the claimant go through the process, and, if he is not satisfied with the result, he can try the tort system. Most won’t.

An artist recently rubbed Jerry Sandusky’s image out of a mural in downtown State College, replacing the creep with Dora McQuaid, a Penn State alumna who is a poet and an advocate against sexual violence.  But the school has a lot more cleaning up to do. If Penn State handles this right, they could still do a lot of good.