UC CFO refutes accusation of interest rate swap losses

The Orange County Register published an article last Friday stating that the University of California has lost millions on risky bets on interest rates – a claim UC officials said was “completely wrong.”

The article said University officials agreed to financial deals called interest rate swaps, which the paper claims ultimately cost the UC millions and would continue to do so for 34 years.

Peter Taylor, chief financial officer for the UC, wrote a letter to the OC Register to correct what he claimed to be numerous errors, unfounded allegations and reckless reporting in the article. The Daily Bruin received the letter on Tuesday.

Taylor said in the letter that the interest rate swaps discussed in the article have actually saved the UC millions of dollars on debt service. He said the University entered into interest rate swaps not to bet on rates but to lock in fixed ones.

“To suggest that the university has made ‘risky bets on the advice of Wall Street bankers’ is unsubstantiated by the facts and portrays either ignorance or a willful disregard for the truth,” Taylor wrote in the letter.

Chris Knap, investigations editor for the OC Register, said Taylor’s letter mischaracterized the story. He added that numbers came directly from financial statements that the reporter was trained to interpret. The reporter, Melody Petersen, is trained as a certified public accountant and audited companies, local governments and universities before becoming a journalist.

“We stand by our story,” Knap said.

Knap said Taylor’s letter will be published as a letter to the editor on Sunday.

Compiled by Fiona Kirby, Bruin contributor.