Penn State's Legal Spending on Sandusky Tops $250M

Two dozen MI Abrams battle tanks or three V-22 tilt rotor aircraft, enough high-tech military hardware to outfit a small country with dreams of regional hegemony.

Or, for those with gentler tastes, a new medical school, with a teaching hospital thrown in.

That is what a quarter of a billion dollars will get you. That also happens to be just about what Pennsylvania State University and its insurers have spent so far on victims' settlements, defense costs, and fines stemming from the Jerry Sandusky sexual-molestation case following Sandusky's 2012 conviction.

And those costs are likely to rise, although not dramatically.

According to the latest tabulation, the university says it has shelled out $81.8 million to pay for crisis communications, an internal investigation by former FBI director Louis Freeh, as well as defending against victim lawsuits in addition to other legal matters.

Add to that $93 million in settlements with 32 Sandusky accusers, $60 million in NCAA fines and $2.4 million in U.S. Department of Education penalties and the total is at least $237.2 million and more if lost bowl-game revenue is included. Penn State disclosed the spending in response to an inquiry from the Inquirer last week.

While it has been tragic for the university and for Sandusky victims, the case has been a bonanza for law firms. Of the nearly quarter billion dollars shelled out so far, at least $112 million has gone to compensate lawyers, consultants, and others engaged to handle the myriad lawsuits, internal investigations, and criminal probes. Among the prominent firms representing the university are Saul Ewing, and White & Williams in Center City, and Reed Smith, a Pittsburgh-founded firm with a global presence.

Sandusky victims have been represented by some of the nation's top plaintiffs firms, including Kline & Specter and Ross Feller Casey, both of Center City.

While legal fees are not penalties, "they are a direct consequence of acts and omissions, which, of necessity, required Penn State to defend itself on multiple fronts for many years," said plaintiffs' lawyer Thomas R. Kline, who represented the first Sandusky victim to settle with Penn State. The costs are "one more of the many lessons learned by Penn State and other institutions of higher learning from this tragedy."

The university says it has used no tuition or state money to pay costs from the Sandusky case, relying instead on insurance coverage and interest income.

"Uninsured expenses can be covered by this interest and will not be funded by student tuition, taxpayer funds, or donations," said university spokeswoman Lisa Powers.

Of the legal fees, some $8.1 million went to pay Freeh's firm and consulting firm KPMG for an investigative report on Sandusky's predations and what Freeh described as the failure of senior university administrators to stop him, once they had evidence suggesting Sandusky was a pedophile.

A state grand jury convicted Sandusky on June, 22, 2012 of 48 counts of child molestation involving 10 adolescent boys, and he is serving a 30- to 60-year sentence in Greene State Correctional Institution, in southwestern Pennsylvania.

Former Penn State president Graham B. Spanier, athletic director Tim Curley, and former university vice president Gary Schultz are awaiting trial on criminal child-endangerment charges stemming from their alleged failure to report Sandusky's activities.

There remains considerable debate in the Penn State community about the Freeh report and the degree of Penn State's responsibility.

Some board members believe that the evidence against the university and its former administrators is thin, and that the university was too eager to settle.

"It's a catastrophe as it pertains to the broad brush with which the university has been painted," said trustee Anthony Lubrano. "Anyone associated with Penn State will be forever tainted by what Louis Freeh described as a culture problem."

There likely won't be any more fines -- the largest was the NCAA's $60 million penalty.

And much of the litigation has ended, including the legal battle the university waged to have its insurer, Pennsylvania Manufacturers Association Insurance Co., cover costs related to the Sandusky settlements.

But other court battles continue.

At least one other victim's lawsuit is likely to be filed. Philadelphia plaintiffs' lawyer Matt Casey, who has settled cases on behalf of seven Sandusky victims, says he anticipates filing a lawsuit soon on behalf of yet another.

Plaintiffs' lawyers have done particularly well in the Sandusky affair.

Of the $93 million that Penn State has paid out to victims in settlements, a third of that likely will be paid by the victims to their lawyers as fees, a standard contingency arrangement.

One recent example: One of the lawyers for former Penn State assistant coach Michael McQueary, who said he had seen Sandusky molesting a child in a shower in 2001, filed for $1.65 million in attorneys fees in McQueary's whistle-blower case against the university.

Overall, McQueary has won $12.3 million in damages from Penn State.

The damage awards and settlements may seem huge to the uninitiated, but Casey says they likely would have been much greater had the university chosen not to settle and gone to trials.

Then, both sides would have geared up for a massive litigation battle along the lines of a mass tort case like asbestos lawsuits or the struggle between plaintiffs lawyers and Merck & Co. over its anti-inflammatory drug, Vioxx, which was pulled from the market in 2004.

Such battles require both sides to form trial teams staffed with high-priced attorneys and engage in lengthy and expensive discovery that can take years before a trial date even is on the horizon.

"None of the sexual abuse cases was ever heard by a jury," Casey said of the Sandusky victim lawsuits. "If they had been, each case likely would have resulted in a verdict of tens of millions of dollars due to the nature of the conduct and the damage inflicted."

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