Supreme Court upholds auditor's subpoena in $1.2 billion University of Iowa utility deal

William Morris
Des Moines Register

The University of Iowa must respond to a subpoena from the state auditor seeking details of its billion-dollar deal to lease out its utility system for the next 50 years.

The university announced the deal with two French companies in December 2019, in which the companies receive the right to operate and receive the revenue from the school's power plant and other infrastructure in exchange for a massive upfront payment.

Auditor Rob Sand sought information about the $1.165 billion transaction before it had officially closed, and the university refused to share details of its investors and other information. Sand subpoenaed the documents in January, but the university and Iowa Board of Regents fought it in court, claiming the auditor was not engaged in a legally authorized audit, and eventually brought the matter to the state Supreme Court.

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In its decision Friday, the court did not accept the university's argument that an audit must have a "clear beginning and end" to be legally valid.

"We need not decide the exact moment [Sand's] request for information turned into an audit," Chief Justice Susan Christensen wrote for the court. "However, it certainly happened by the time a subpoena was served on the Agency."

Because the auditor has wide latitude to audit state agencies whenever he sees fit, the court said his determination an audit is necessary is sufficient to back a subpoena with the force of law.

"Here, Auditor Sand served a subpoena as part of an audit on a state agency he is authorized to audit as often as deemed necessary," Christensen wrote.

In a statement Friday, Sand noted the court's opinion was unanimous.

"This is a massive win for taxpayers," he said. "It protects their ability to know what state government is doing with their money."

A spokesperson for the University of Iowa Board of Regents provided a brief email statement: "We appreciate the Supreme Court hearing the case and providing clarification."

Although the utility deal closed in March 2020, the university still has not provided the subpoenaed documents while the matter remained tied up in court.

The court also held that Sand was within his rights to request information about the deal even before it closed, noting that "accountants have been chastised for failing to ensure the legality of transactions, and the public tends to blame the auditor of state for negative consequences resulting from a business failure."

Four justices joined Christensen in the majority opinion, while Justice Edward Mansfield wrote a concurring opinion joined by Justice Thomas Waterman. In his concurrence, Mansfield said he agrees with the result but holds "a narrower view" of the State Auditor's authority and said audits typically should focus on past financial statements, not dig into future transactions.

"The State Auditor does not get to make free-standing requests for information which, ipso facto, create an audit," Mansfield wrote. "The job is auditor, not 'investigator.'”

Despite that, Mansfield said he too would affirm Sand's subpoena, given the large scope of the transaction, and noted the university had arguably invited an audit when it notified Sand of the pending transaction and offered to provide more information. 

William Morris covers courts for the Des Moines Register. He can be contacted at wrmorris2@registermedia.com, 715-573-8166 or on Twitter at @DMRMorris.