Brother, Can You Spare $65 Million?

Carnegie Mellon University has a reputation--and a very effective PR machine perpetuating it--for being one of the top-class business schools in the country (if not the world). So this is why I'm continuing to scratch my head in amazement at how the financial wizards at CMU could have been duped into a Ponzi scheme.

This Ponzi scheme was not with the now-incarcerated Bernard Madoff, but rather with Westridge, an investment firm based in New York City. According to a recent article in the Post-Gazette, one or more of CMU's trustees knew the principals at Westridge. With cronyism firmly established, CMU proceeded to invest nearly $65 million with Westridge.

As many of you know, I am an alumna (and former employee) of Carnegie Mellon. I actually took a leave of absence from my secure, fairly well-paying job to attend school full time. In hindsight, it was the best decision I made: I received a superb education there.

Amongst all of the book-learning I did, one of the best bits of wisdom I learned at CMU was this: don't take anything at face value. Ask questions, put things in a context. To quote Ronald Reagan: "trust, then verify."

Perhaps the powers-that-be at CMU need to return to the classroom to learn this lesson again, as it was long on trust and short on verifying. Westridge sent rosy financial statements to CMU, which apparently CMU believed without question. CMU continued to invest money, perhaps blinded by greed, seemingly not asking about the veracity of these reports.

So now they've lost over $65 million, and on February 20 they filed suit against Westridge. This whole mess has become the big elephant in the room that CMU is not talking about. Nary a peep on their web site, no public comment about this whole mess.

Instead, the CMU Fundraising Machine wasted no time plotting a new scheme as to how to get their coffers re-filled--by their alumni, of course! Last week I received a passionate letter from CMU. In it they talked about "this difficult economic climate" and imploring me to give "whatever I can."

Instead of giving money, I'm choosing instead to give some advice. So CMU, here it is: rather than send alumni letters asking them for money, how about a letter with an explanation and/or update about the CMU/Westridge situation, and a great big mea culpa for the whole thing. And throwing in some assurances that they'll make sounder financial investment choices in the future.

And in the meantime, I'll be making my own sound investments...for myself.