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More from Fact Checker on Kunshan; 4/4/11
Topic Started: Apr 4 2011, 10:03 AM (433 Views)
Quasimodo

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http://dukefactchecker.blogspot.com/
Sunday, April 3, 2011
Fact Checker Exclusive: How the Fuqua dean exagggerated Kunshan’s commitment to Duke

✔ FC here. Good day, fellow Dukies.

Our recent series of Special Reports on the Brodhead Administration's plans for Kunshan relied in large measure on internal documents prepared by Blair Sheppard, dean of the Fuqua School of Business, that we received from Loyal Readers. As we noted in the Reports, Sheppard did not respond in any way to our repeated requests for an interview so we could further glean his perspective.

But Sheppard may be smarting from that terrible, discourteous decision, for he has just emerged, breaking silence, sending out a list of questions he himself formulated, along with his own answers.

We will go carefully through most of Sheppard's presentation, although not in his order. We start with the dean asking if Kunshan is a "backwater," and we wonder where he got that term from!

(snip)

✔✔✔ We will return in a few moments to Sheppard's self-described Q and A, some of it more original than what we have just gone through.

Like settlers moving through the Great Plains under attack by Indians, the Brodhead Administration has circled its wagons and is hoping to ward off all stakeholders who want to examine its aureate, simultaneous expansion into at least nine cities around the globe, including most notably and grandly, Kunshan, China.

Increasingly, there are arrows flying, in the form of pointed questions, demands for answers, challenges to rationale and confrontations over decisions.

Increasingly, as FC has documented in recent Special Reports, the trickle of information being given stakeholders is incomplete if not misleading. One notorious example: the Academic Council got only 23 of 47 pages of the "Duke-Kunshan Planning Guide."

✔✔✔✔✔ FC can state flatly that the 23 pages include only one of three financial models, the rosiest. And buried in the 23 pages is a warning from a consultant that Duke hired, that our likely tuition is too high for the Chinese to bear.

(snip)

President Brodhead did answer questions at a recent meeting Academic Council.
They were solid questions, incisive, informed, and he looked uncomfortable.

But Brodhead shuns such sessions. An appearance last month before alumni in Boston was structured. After brief remarks from the President, the alumni office shifted the focus to an discussion of world health problems with Medical Chancellor Victor Dzau.

In Miami, the focus was shifted to the local art scene; upcoming in New York, Brodhead will speak briefly, and then engage a behavioral scientist in wide-ranging conversation.

For alumni returning for reunions this week, Brodhead is scheduled for one hour -- most taken up by presentation of reunion gifts. He will offer "Issues and Answers" about Duke -- Issues that he himself raises, not to be confused with Questions and Answers.

✔✔✔✔ With the faculty stirring, we asked a professor for confidential guidance for our reporting: how much collaboration he or she has seen between the administration and stakeholders -- particularly faculty -- over Kunshan:

"You've hit the crux of the problem -- there was never any broad discussion with the faculty (or even faculty leaders) to design a strategy before-the-fact for Asia: Should we? Why or why not?

"What elements of a partner are we looking for? Under what circumstances would we just say 'no'?

"How does any program in Asia impact (positively) the overall Duke portfolio, now and in the future? How does it help differentiate Duke from our peers/competitors? And, specifically, what's the value added for the real 'crown jewel' of the brand -- Duke (that is, Duke in Durham ) and undergraduates?

"I can't remember a single discussion of that sort with the faculty.

(snip)

✔✔✔ Back to Sheppard. Many of the Q and A's that Sheppard himself prepared are benign. But his account of the land and buildings is not.

(snip)

The city of Kunshan owes its development as a low-level, labor intensive repetitive assembly point for computers and other goods to sharks in Taiwan. They recognized they could hire in Kunshan for one tenth -- yes one tenth -- the salary in Taiwan. Managers came from Taiwan, and there are about 20,000 Taiwanese now in enclaves in Kunshan.

The point is, with all this vacant land, how is it that we are so darn lucky to be this close to Shanghai.

Sheppard also valued the land at $2.4 million per acre -- $480 million for the land alone. We are watching to see how much other parcels in the industrial park fetch. He said Kunshan would "provide" this land, and called it a "gift."

So Duke's PR department promptly added $480 million to the inflated costs of construction that the city was going to pay for -- and voila, as we say -- we have a news release talking about Duke's $835 million dollar campus in China!

Problem is there was no "gift" of the land. And its sales value should not have been included -- because Duke did not take title at all.

We only got a "free lease." that has much less value than the numbers the Fuqua Dean used.

In November, 2009 Sheppard said the lease was for a "minimum 20 years free, with free utilities for five years, probably free in perpetuity." At another point, he said 12 years. And most recently, he said it was for ten years which, as any major developer in the United States could tell you, is not much assurance. As for the electricity, a short-circuit seems to have enveloped the deal, and this is now included in general operating costs that Duke and Kunshan will split.

We do not know what will happen after ten years: Kunshan may demand rent. It may demand to be bought out. And worse, it may not help Duke expand Duke Kunshan University to its intended size, leaving us to provide all the capital for new construction.


This of course would add horrendously to the cost of operating the joint venture. GO DKU!!! (DKU - the abbreviation being pushed for Duke Kunshan University.)

✔ Moreover, while originally the city was to pick up all operating losses -- Duke would "get started for free" were Sheppard's precise words -- the commitment has devolved so Kunshan will absorb only 45 percent for six years, possibly leaving Duke holding the bag after that.

✔✔ The most recent Chronicle editorial on financial details hit the nail on the head: Brodhead and his fellow travelers are "hazy at best" in describing Kunshan finances. Put another way: the newspaper found "constantly shifting statements coming from Duke administrators (that) do little to engender confidence."

(snip)

✔✔ Finally, in his self-described Q and A, Sheppard comes to the defense of Wuhan University as our partner.

Loyal Readers will recall how a Deputy Fact Checker reported we were in a pickle and had to find a last minute marriage (as required by Chinese law) after our first sponsor, Shanghai Jiao Tong University, backed out after a year of dickering.

Sheppard describes Wuhan as "highly ranked," without attribution. The Times of London list of the 400 best universities in the world, and US News and World Report's rankings too, do not include Wuhan.

All we want to know is whether Global Vice President Greg Jones meant Wuhan when he told the Academic Council that one potential partner was "weak." By process of elimination, we believe he did.

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Two of my Brodhead blog posts have been read in China this morning. In Kunshan, I wonder?
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