Faculty, Students Brace For Financial Fallout From USC's $1 Billion Sexual Abuse Settlement

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Last week, USC announced that it will pay out more than $1 billion to settle hundreds of sexual abuse claims against a former campus gynecologist, George Tyndall. Now, the campus is bracing for the financial fallout.

"The amount is significant, and we will face some difficult financial choices in the near term," USC President Carol Folt said in a letter sent by email to the campus community and posted on the university's website.

The settlement, Folt said in the letter, will be funded over the next two fiscal years "largely through a combination of litigation reserves, insurance proceeds, deferred capital spending, sale of non-essential assets, and careful management of non-essential expenses."

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Folt told the USC community that paying the settlement wouldn't hurt USC's academic excellence. But not everyone was reassured.

"Faculty have been shut out of any involvement or understanding of the budget," said USC law school professor Ariela Gross, who was one of 200 faculty members who called on then-President C.L. Max Nikias to resign in 2018 because of his handling of several scandals.

"We kind of have to take their word for it, and that leads to suspicion and doubts," Gross said.

USC President Carol Folt during an interview on campus Friday, September 20, 2019. (Kyle Grillot for LAist)

A few days before the settlement was revealed, USC announced it would raise student tuition by 2% starting this Fall. In the current academic year, students saw a 3.5% hike. Folt said in her letter that no philanthropic gifts, endowment funds or tuition "will be redirected from their intended purposes" in the wake of the settlement.

"I don't want to blindly accept what I'm being told, so I'm wary" about the administration's claims, said Jacob Alpern, a USC senior communications major. He said he's somewhat worried that the settlement will hurt the quality of USC's programs and classes.

"I am hopeful that ... the student body won't take the brunt of the payout," he said.

The $1.1 billion cost to settle the cases combines the $852 million payout to more than 700 women announced last week and an additional $215 million USC agreed to in 2019 to settle a class-action lawsuit against Tyndall. (Tyndall has pleaded not guilty to multiple counts of criminal sexual misconduct and has forfeited his medical license.)

As USC administrators move forward to fund the settlement, students and faculty say they want the administration to be more open about how the expenses will trickle down.

Folt said she plans to create a committee of students, faculty and staff to give input on budget planning as the settlement payment plans are decided. Individual awards to the plaintiffs in three lawsuits filed against Tyndall could range from several hundred thousand to more than a million dollars.

The challenge will be to isolate students and employees from the costs.

"I think they have every right to know, it's so much money," said Robert Kelchen, a professor at Seton Hall University who studies higher education finance.

He doesn't think USC's insurer will provide the bulk of the needed funds because sex abuse settlements at other universities have led insurance companies to limit how much they pay -- and this settlement is far greater than in other college sexual abuse cases. In addition, USC's $4.4 billion endowment is restricted for other uses.

"For a university that gets a large share of its revenue from tuition, it's hard to say that students aren't going to pay at least part of the bill in the long run," Kelchen said.

That's because students are likely to pay in the future for building maintenance that the university put off because of the settlement.

Details about how USC may be paying for the settlement, Kelchen said, may come from future filings with the U.S. Department of Education, the yearly income tax filing known as Form 990, and filings with bond holders and credit rating agencies because taking on a $1 billion liability affects the university's credit worthiness.

Correction: A previous version of this story misspelled Robert Kelchen's name. LAist regrets the error.

READ MORE:

• USC agrees to $852 million settlement of state sexual abuse lawsuits.
• USC's most recent audited financial statement.
• Michigan State University sells bonds to pay for $500 million sexual abuse settlement.