Dubious $237 million donation to FAMU is ‘fraudulent,’ investigation's final report says

A scathing, 176-page investigative report into a Texas hemp farmer's dubious $237 million gift to Florida A&M University found the donation to be "fraudulent," confirming months of skepticism.

The Monday report chronicles how FAMU "improperly handled" the gift and vetting what was supposed to be the largest donation in HBCU history. It came out the same day Hurricane Debby was raking the state and the university's campus was shut down, and one day after former President Larry Robinson's last day as FAMU's president.

It notes his lack of trust in the university's leadership team while secretly moving forward with the gift before it was publicly announced at a May 4 spring commencement ceremony. The donation debacle also "exposed a fundamental misunderstanding of the complexities associated with private stock donations," the report concluded.

Moreover, the report for the first time suggests a motive for Gregory Gerami's actions, suggesting "a calculated effort to defraud the investors and partners by presenting ambitious but ultimately unverified business ventures," going on to say that the investigation found "the major gift to be fraudulent and the valuation performed by Mr. Gerami to be baseless."

The investigation — which was being monitored by the Board of Governors' Office of Inspector General — was performed by law firm Buchanan Ingersoll & Rooney to look into Gerami's gift to FAMU to determine what went wrong and to recommend corrective actions. Investigators cited the Tallahassee Democrat's watchdog journalism six times in the report.

Four factors that contributed to the university's "improper handling" of the gift were highlighted: Leadership involvement and influence, secrecy and non-disclosure, a shortened timeline due to commencement, and a lack of due diligence and understanding of private stock.

"The pressure to deliver a high-profile announcement caused individuals to overlook and ignore critical red flags," the report said. "The combination of leadership influence, the rush to showcase the major gift, and the subsequent lack of thorough vetting created an environment where scrutiny and caution were sacrificed for perceived immediate gains, ultimately allowing the fraudulent major gift to proceed unchecked."

Gerami disagrees with report's conclusions; firm says he spun a 'web of deceit'

In an interview with the Tallahassee Democrat, Gerami said he had not yet read the full report and had little to say until he did. When asked if he agreed with the report's findings that the gift was fraudulent, Gerami said, "No."

"I am reviewing the report. When I get done reviewing the report, I will have a statement," he said.

Last Friday, Gerami contacted the Democrat to say he was pulling the gift from FAMU as of that day – a decision that appeared to be sequenced with the bombshell findings of the third-party investigation.

He said he made the decision because FAMU had not signed IRS forms that needed signatures from the university, the donor and appraiser. Gerami said he sent a letter to the university revoking the gift but refused to share the letter with the Democrat.

Instead he sent what appeared to be a press release that said, "Unfortunately, FAMU has not signed this form, despite our requests. Additionally, certain individuals associated with FAMU have made statements that are not supported by facts or evidence."

As a result, Gerami told the Democrat, "The certificate has been cancelled."

But the report disputes Gerami's claim and said the transaction was cancelled months earlier. It states that Carta, the company that handled the stock transaction, terminated the relationship with Gerami's Batterson Farms on May 14 due to a "violation of their terms in conditions." The shares issued to FAMU are "now reflected as cancelled," investigators said.

Gerami also said he obtained a more recent third-party valuation of the private stock gift to FAMU and, at the time of the statement, was valued at $9.93 per share (a decline from the previous $15 per share value he presented to FAMU).

But in the report, investigators determined that any evaluation shouldn't be trusted. The report chronicles what it says are his "deceptive practices" and his "fraudulent scheme."

"Mr. Gerami's entry into the business world was marked by grand ambition; however, his ventures have been significantly tainted by reports of fraudulent activities, manipulative tactics, and a web of deceit that entrapped investors and associates," the report states.

'Implicit trust' in FAMU's leadership team

The report highlighted four fundamental institutional flaws that caused FAMU to miss red flags about Gerami and his purported gift.

A tight circle of about a half-dozen FAMU administrators, directors and others kept the donation hushed, including Robinson and School of Business and Industry Dean Shawnta Friday-Stroud — who also served as vice president for University Advancement and executive director of the FAMU Foundation at the time before resigning from the positions amid the gift's chaotic aftermath.

Both Robinson and Friday-Stroud had direct involvement and oversight of the donation, and Friday-Stroud's clout and support of the gift through her three roles "left no proper chain of command for individuals to raise concerns or seek financial advice without appearing to undermine her authority," according to the report.

"This atmosphere of implicit trust in leadership's judgment and directives contributed significantly to the acceptance of the fraudulent gift without adequate scrutiny," the report said.

Highlights about the university's improper leadership and influence also state that Robinson repeatedly told staff members "not to mess this up," which prompted the small group of individuals who were in-the-know to move forward despite warning signs.

Secrecy, non-disclosure discourages 'open communication'

In addition to the involvement of only a small group of individuals who were aware of Gerami's gift, the report says individuals were also under the perception of being subject to a non-disclosure agreement (NDA) .

But they weren't.

While Friday-Stroud was the sole signer of the NDA agreement — dated April 26 — on behalf of the FAMU Foundation, she required other individuals involved in discussions concerning the donation to sign a confidentiality agreement instead.

The NDA's existence "created an environment where individuals believed it was impermissible to seek advice of experts from the University Board of Trustees or the Foundation Board of Directors," according to the report.

"Former President Robinson's lack of trust in the university's senior leadership team and the university Board of Trustees' ability to maintain confidentiality and not leak information about the donor to the media led to a perceived need to prioritize secrecy," the report said.

"This mistrust and emphasis on confidentiality discouraged open communication and collaboration, leaving individuals feeling isolated and unable to voice their concerns or seek guidance."

'Pressure to deliver a high-profile announcement'

An expedited acceptance of the major gift on the university's part led to the push to share what was called a "transformative" announcement during FAMU's last spring commencement ceremony — a request that put the donation's acceptance on a tighter deadline.

"The urgency to announce the major gift at a commencement ceremony significantly truncated the timeline for proper due diligence, valuation and scrutiny," the report said.

According to the report, quickening the acceptance of the major gift was suggested to Gerami in late February by FAMU Director of Communications Keith Miles without adequate coordination with university leadership. Miles made the suggestions of a graduation announcement on a call with Gerami and Robinson without prior consultation with Robinson, according to the report.

"Mr. Miles' action placed the former president in a difficult position," the firm wrote. "Not wanting to offend the donor and presuming that due diligence had been completed prior to his involvement, former President Robinson acquiesced to Mr. Miles' suggestion."

At the spring graduation celebration, university officials brought out a large check and the crowd erupted in applause as Gerami exclaimed "and the money is in the bank."

But it wasn't.

Instead, there was "14 million shares of stock of intrinsic value" with a schedule to convert it to cash over a 10 year period.

During a FAMU Foundation Board meeting in May, board member Laurence A. Humphries said the stock could be worth "$500 million or it could be zero," without a proper valuation.

"This emphasis on accepting the major gift at commencement, driven by the Communications Department and strongly endorsed by former President Robinson and Dr. Friday-Stroud, came at the expense of proper due diligence," the report said.

"The pressure to deliver a high-profile announcement caused individuals to overlook and ignore critical red flags."

A lack of due diligence, understanding of private stock

According to the investigative report, FAMU officials did not conduct or require an independent valuation of the major multi-million-dollar gift. Instead, university officials exclusively relied on Gerami's claims without seeking additional verification.

In addition, Friday-Stroud's presumed financial expertise through her overarching roles was another factor that discouraged FAMU staff members from questioning Gerami's gift.

"This reliance exposed a fundamental misunderstanding of the complexities associated with private stock donations," the report said.

"The combination of unverified reliance on the donor's assertions and the intimidating influence of perceived expertise in the area of financial matters created an environment where critical scrutiny was absent, allowing the fraudulent donation to proceed unchallenged."

The law firm also noted that "a critical element of Mr. Gerami's fraudulent scheme" in a different business endeavor was "maintaining strong relationships with colleges and universities."

"Mr. Gerami approached multiple universities, purporting to be a benefactor of considerable means," the report says. "These institutions included the University of Mississippi, the University of Texas at Austin, Oakwood University, Miles College, Coastal Carolina University, and Wiley University, amongst others."

Law firm's recommendations for FAMU

Besides taking on the investigation to look into Gerami's gift, the law firm was also asked to recommend corrective actions for the university to consider moving forward.

Here are the law firm's two recommendations, which propose changes to FAMU's policies and regulations:

• Modifying FAMU Foundation Policies and Guidelines to place the determination for whether gifts over a certain threshold are in the "best interest of the University" at the sole discretion of the Foundation Board of Directors.

• Adding clear language to FAMU Regulation, Chapter 1.021, detailing the president's responsibility to provide timely and adequate information to the university's Board of Trustees related to financial matters above a certain threshold.

What happens next

• FAMU's trustees will meet virtually via Zoom to discuss the gift's investigation report at 11 a.m. Thursday during a previously scheduled retreat, which will be held both Wednesday and Thursday. The virtual meeting is open to the public.

Contact Tarah Jean at  tjean@tallahassee.com  or follow her on X:  @tarahjean_ .

This article originally appeared on Tallahassee Democrat: Donation to Florida A&M from Gregory Gerami 'fraudulent,' report says