PAGE EIGHT

THE MICHIGAN DAILY

SATURDAY, itiIARGIi 12. 1966

Kelley Makes Public Report on Conflict of In

iterest

(Continued from Page 1)
versity has steadily increased over
the years.
A further letter from Eugene
Power dated June 17, 1958 was di-
rected to Attorney General Paul
Adams, in which representation
was made that the business con-
cern of Regent Power was bor-
rowing books from the University
of Michigan library for the pur-
pose of microfilming .and sale of
films, and the question was pro-
pounded whether such activity
was lawful.
("Kelley notes that Adams ruled
this procedure to be legal and that
this was reported to the Regents
by Power. He further reports that
in 1958 University Microflims plac-
ed a camera in the University li-
brary for the purpose of photo-
graphing excerpts from books to
be microfilmed by the company,
and adds that Power's firm had
employes working regularly in the
University library at this time.
"At the same time," he states, "it
also appears that the University
of Michigan library was continu-
ing to film certain library mater-
ials at the request of University
Microfilms.)
Agreement for Space in Library
(Kelley states that in 1962 Uni-
versity Microfilms placed and be-
gan operating two cameras on the
third floor of the library; the
company paid no rent to the Uni-
versity.)
It does not appear that any
other person or persons were af-
forded space in the University of
Michigan library on similar terms,
nor is there any indication that
library officials received requests
for similar arrangements f r o m
other person or persons. It should
be pointed out, however, that this
arrangement is common in li-
braries throughout the world, and
we have learned of no case where
any library has ever requested
that rent be paid for the space
occupied by cameras placed there
for this purpose.
One final observation is made
relative to the above described
general relationship between Uni-
versity Microfilms and the Uni-
versity of Michigan library. The
special report of the Auditor Gen-
eral shows that the University of
Michigan Library Photoduplica-
tion Service charges a basic rate
of .05c per exposure for copies of
bound materials, and where the
order is for 1,000 exposures or
more, the rate of .045c per ex-
posure. University Microfilms was
given the reduced rate of .045c per
exposure on all orders including
those that were under a thousand
exposures.
For the fiscal year ending June
30, 1965 a total of $1,797.63 of
business was transacted between
the University of Michigan library
and University Microfilms. The
Auditor General states further
that most of the orders from Uni-
versity Microfilms were u n d e r
1,000 exposures and no other com-
pany was given the reduced rate.
Mr. Power states that almost
every order placed by University
Microfilms, Inc. was for more
than 1,000 exposures. The Univer-
sity charged a uniform 4%c rate.

He states further that if Univer-
sity Microfilms, Inc. had been
charged the higher rate the addi-+
tional charge would have been
during the last two years $16.85.
* * * .
University Shelf List 3
(The report outlines the cata-
logue system used by University li-1
brary.)
Frederick H. Wagmann, Direc-
tor of the University Library, who
estimates that during the past 30
years perhaps 90% of the catalog
cards of the University of Michi-
gan undergraduate library have
b e e n obtained by duplicating
cards received from the Library of
Congress without charge. The re-
mainder of the cards have been
prepared by the University library
staff at the expense of the Uni-
versity of Michigan.
One copy of the catalog card
for each publication in the Uni-
versity of Michigan undergraduate
library is kept in a separate cata-
log as the shelf list of the library,
consisting of approximately 57,000
cards, and serves as an inventory
of the undergraduate library.
In 1959, at the request of Eu-
gene B. Power, in behalf of Uni-
versity Microfilms, the University
of Michigan library produced a
microfilm of the shelf list of the
undergraduate university library.
In effect the microfilm was of each
of the catalog cards in the under-
graduate library. University Mi-
crofilms paid $375.00 or 5c per ex-
posure for microfilming of th un-
dergraduate library shelf list. The
order was executed on May 11,
1959 and was billed on May 29,
1959. The statement for this ac-
count indicates that the charge
was 5c per exposure. Thereafter
University Microfilms sold copies
of the University of Michigan un-
dergraduate library shelf list at
rates determined by University
Microfilms, Inc. In 1964 Univer-
sity Microfilms reordered the un-
dergraduate library shelf list for
copyflo purposes, apparently a dif-
ferent process of film reproduc-
tion, and University Microfilms
was billed in the amount of $570.96
at 6c per exposure.
Exhibit A, which is attached to
the Special Report of the Auditor
General, indicates that the Uni-
versity library had on other oc-
casion sold certain portions of its
shelf list to other subscribers at a
price which paid for the library's
cost of cataloging. It is also clear
that no effort was made to charge
University Microfilms any portion
of the cost of cataloging.
Publication of Theses
by Doctoral Candidates
Prior to the election of Eugene
Power as Regent of the Univer-
sity of Michigan, graduate stu-
dents submitting doctoral theses
as a requirement for award of a
degree were required to publish
the thesis at a fee of $25.00 and
the microfilming was done by Uni-
versity Microfilms, which collect-
ed the fee, published as abstract
of the thesis, indexed the thesis
in a publication known as "Dis-
sertation Abstracts," retained the
negative of the thesis in its vault
and sold copies at a rate fixed by
University Microfilms.
After the election of Regent
Power and his assumption of of-

fice, upon advice of counsel, a new
agreement was executed by the
doctoral candidate and the Uni-
versity of Michigan, wherein the
doctoral candidate paid a fee of
$25.00 to the University of Michi-
gan for microfilming of his thesis.
The microfilming was to be done
by the University, a film copy was
sent to the Library of Congress
and the University library would
retain the negative and make
copies of the thesis upon request
at rates fixed by the library. The
aforesaid agreements in e f f e c t
since 1956 have never been fully
kept by the University of Michi-
gan, in that the University of
Michigan library, in making a mi-
crofilm of the thesis, delivered the
negative film to University Micro-
films for storage in its vaults and
for the sale of copies at rates de-
termined by University Micro-
films, Inc. Eugene Power states
that he became aware of the

cy of these microfilms paying roy-
alties of 10 per cent. The Special
Report of the Auditor General
indicates that such agreements1
were entered into with the Bureau
of Business Research, University
of Michigan School of Business
Administration and for the micro-
filming of current and back files
of the "Michigan Business Re-
view" authorizing University Mi-
crofilms to reproduce the issues on
microfilm and pay a commissior
of 10%. The contract was signed:
by Eugene Power in behalf of
University Microfilms and Philip
Wernette, the Professor in the
School of Business Administra-
tion. Apparently the University
received royalties in the amount
of $4.46.
The Bureau of Business Research
entered into 4 contracts with Uni-
versity Microfilms to reproduce 4
of the University of Michigan ti-
ties * in their out-of-print book

agreement for the first time in series. This contract called fors
1964 and that steps were prompt- University Microfilms to pay thej
ly taken to correct the matter. University royalties of 10% on the
At that time, University Micro- invoice of the sale price of each1
films attempted to obtain a modi- copy sold. Apparently one pay-
fication of the agreement, and at ment was made by University Mi-I
Mr. Power's suggestion, the agree- crofilms to the University in theI
ment would have contained the amount of $4.89 in January of;
following language: "the manu- 1965. One of these contracts for
script is to be microfilmed and re- the publication of the book "The
turned to the Graduate School. Problem of Retail Sight Selection"1
The negative will be stored where dated February 7, 1964, was exe-
positive microfilm or xerographic cuted by Alfred W. Swinyard, Di-
enlargement will be made upon re- rector of the Bureau of Business
quest at announced rates." See Research in behalf of the Univer-
letter of August 5, 1964 on Uni- sity, and Eugene Power signed in
versity Microfilms, Inc. stationery, behalf of University Microfilms.
signed by Stephen Rice. This same The Special Report of the Audi-
letter also indicates that Univer- tor General indicates that the
Microfilms, Inc. wished permission Board of Regents never authoriz-
to distribute microfilm or xero- ed the execution of the aforesaid1
graphic copies of the dissertation. contracts. Further, unauthorized
The contract form between the persons executed the contracts in
University of Michigan and the behalf of the University.1
doctoral candidate was not chang- Purchases of Services=
ed. John G. Gantt, head -of the by University of Michigan
Photoduplicate Service of the Uni- During the period of January
versity library, in a memo dated 1, 1956 through October 31, 1965,
November 27, 1965 to Dr. Fred- the University of Michigan pur-
erick H. Wagmann, Director of chased certain services from Uni-
the University library, indicates versity Microfilms, Inc. in the to-
that the procedure for microfilm- tal amount of $49.83 and services
ing dissertations has been consis- from University Microfilms, Limit-
tent since 1956. It appear further ed, in the amount of $614.39. Mr.
that the University of Michigan Power states that he had no pei-
library microfilmed the disserta- sonal knowledge of any of the
tion and stored the negative mi- aforesaid purchases by the Uni-
crofilm at University Microfilms, versity of Michigan, from either
Inc. with copies made by that con- business concern.
cern at rates fixed by it. Nor is General
there any indication that any University Microfilms, Inc., a
other arrangement is presently in' Michigan profit corporation, as
effect. heretofore indicated, was controll-

tirectly in any contract with the igan from University Microfilms
state, and the people have then and University Microflims Limited,x
provided "which shall cause a it is clear that isolated trans- h
substantial conflict of interest." actions took place between thev
It is incumbent, then, to deter- aforesaid business concerns andc
mine when a contract shall cause the University of Michigan overr
"a substantial conflict of interest." the period of 1956 through Octo-..
* * * ber 31, 1965. These apparentlyc
(Kelley cites the debates at the were done without the personalf
1963 constitutional convention in knowledge of Regent Power. Thet
an attempt to define "substantial holding of Deputy Attorney Gen-1
conflict of interest.") eral Gilmore is clear that it isc
« * * contrary to law for the Universityt
The key to the problem is the of Michigan to purchase servicest
meaning of the word "substantial" from business concerns in which
in Article IV, Sec. 10 and the a Regent has an interest in such
debates support the conclusion purchase of services. Since these
that the framers of the revised transactions were entered into
Constitution wish to recognize cer- without the personal knowledge
tan realities of our modern so- of Regent Power, any sums col-
ciatv in that many persons in- lected from the University of
cluding pubim officers own shares Michigan should be refunded by
of stock in large corporations and University Microfilms.
the state should not be penalized We note again that these are in
for purchasing products from such the amount of $49.83. a relatively
corporations because the state of- small sum when. spread over ten
ficer may hold a small stock in- years. The purchases of services
terest in the corporation. The de- by the University of Michigan
bates are clear that the conflict from University Microfilms, Lim-
relates to a pecuniary interest, but ited, are somewhat larger in
the delegates to the convention do amount. This business concern is'
not assist us fully in explicitly located in a foreign country, far
adopting a definition of the term removed from the University of
"substantial" Michigan, and clearly supports
Some guidance may be obtained the contention of Eugene Power:
by examining decisions of courts that he had no personal knowledge
of last resort in determining what of such purchase of services and
constitutes a substantial conflict the sums should be refunded to
of interest. the University of Michigan.
* *It is possile also to dispose of
(Kelley cites several court cases the problem of the contracts be-
to further clarify the meaning of tween University Microfilms and
"substantial conflict of interest.") certaiertMinsofilhs nd
* * certain departments of the Uni-
versity of Michigan for reproduc-
Givig due weightto the debates tion rights of journals and books.
of the framers of the Michigan These contracts were neither
Constitution of 1963, and applying authorized by the Board of Re-
the principles enunciated by the gents nor any other persons with
various courts of last resort, it gets nty to execute such con-
is my opinion that the word "sub- tracts in behalf of the University,
stantial" as it is used by the These contracts were also entered
people in Article IV, Section 10, intoe ctotaths werso enered
means material as opposed to edge of Regent Power. They
trivial, and the conflict of interest should be terminated at once.
must involve a pecuniary or bene- University Microfilms has in-
ficial interest. stituted controls to prevent these
Applying these legal principles occasions from recurring. It is
to the facts at hand, it is clear also incumbent upon the Univer-
that we need concern ourselves sity of Michigan to take proper
only with some but not all of the steps to make certain that this
transactions between University problem does not recurt.
Microfilms and the University of Conclusion
Michigan. Nevertheless, there remain three
Such considerations must give basic problems:
recognition to previous opinions -Microfilm cameras owned by
'of this office rendered in answer: the company have been placed in
to inquiry of Eugene Power. the University library without
Deputy Attorney General Gil- rental;
more rendered an opinion holding -The undergraduate shelf list
that the borrowing of books and was sold without royalty payments
periodicals and microfilming and to the University, and
subsequent sale of films was com- -Copies of doctoral disserta-
pletely legal and may be con- tions were sold by University Mi-
tinued. This opinion was confirm- crofilms and microfilms of doctor-
ed by Attorney General Adams in aldissertations were stored in the
1958. Mr. Power, as Regent of company's vaults rather than in
the University of Michigan, had the vaults of the University li-
a right as a state officer to rely brary
aupon the opinions of Deputy At- Certainly, Mr. Power was entit-
ptorney General Gilmore and At- led to rely upon the advice he re-
torney General Adams. These ceived from the Attorney General
opinions are also supported by the in 1956 and 1958. But two major
holding in Preston v. Gillam, developments have occurred since
supra, that there is no conflict 1956:
of interest when the interest of a In the first place, the amount
public officer in a particular mat- of use measured by the number of
ter is the same as any other photographic exposures taken an-
citizen. Atnually by University Microfilms of
Deputy General Gil- materials in the various libraries
more also upheld the legality of of the University of Michigan has
the purchase of microfilm at stan- increased sevenfold over the past
dard rates made openly at the decade.
same rate at which all citizens
can purchase them. The Auditor
General's report indicates that
University Microfilms was given
1preferential treatment. There ap-______________
pears to be a dispute as to how'-
many orders placed by University
Microfilms were for less than 1,000
exposures, but there is no dispute
that not every order was for 1,000

Secondly, the nature and com-
plexity of the relationship has
been sharply altered. For instance,
where before the books were mi-
crofilmed at the company's office,
now because of the volume the
company has placed two cameras
on University property; where be-
fore the microfilming was limited
to books and periodicals, now it
has been extended to the filming
of the University shelf list; and
the method of handling disserta-
tions has been changed. -
It is true that these altered
circumstances were undertaken
primarily at the request and for
the convenience of the Univer-
sity, but it is also apparent that
by these actions the relation-
ship between the University and
the company has changed radi-
cally both in the amount and
character since Mr. Power's init-
ial days as a Regent. Therefore,
while there is no question of Mr.
Pewer's motives, his integrity,
or his devotion to the interest of

the University; and while it is
clear that, serving without com-
pensation, Mr. Power has made
invaluable contributions to the
welfare of the University and to
the cause of education and scho-
larship in this state and, in-
deed, the nation, it must be con-
cluded t h a t because of the
change in the amount and char-
acter of the relationship be-
tween the University and the
c o m p a n y, for Mr. Power to
maintain his position as a Re-
gent while his company has its
present relationship with the
University is inconsistent with
the requirements of the Michi-
gan Constitution r e 1 a t i n g to
"substantial conflict of inter-
est."
** *
(The opinion concludes by di-
recting the state Legislature to
pass legislation to provide a clear
definition of the conflict of inter-
est provisions of the 1964 constitu-
tion.)

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U'

Relative to the dissertations, it
must be concluded that when Eu-
gene Power became Regent of the
University of Michigan, University
Microfilms, Inc. no longer collect-
ed $25.00 for microfilming doctor-
al dissertations of students at the
University of Michigan. In addi-
tion, abstracts of dissertations
were prepared and editorial work
done by University Microfilms,
Inc. at no cost to the students.
However, University Microfilms
continued to receive negative mi-
crofilm, stored it in their vaults
and sold copies of it at rates fix-
ed by University Microfilms, Inc.
Contracts between Agencies
of the University
and University Microfilms
University Microfilms undertook
to microfilm certain rare books
and journals and to be sales agen-

ed by Eugene Power and his wife.
Mr. Power also owned the con-
trolling interest in University Mi-
crofilms, Limited, a foreign cor-
poration. On April 26, 1962, the
Powers transferred all of their
ownership of University Micro-
films, Inc. and University Micro-
films, Limited, to Xerox Corpor-
ation, a foreign corporation, in ex-
change for approximately 1 of
1% of Xerox common stock. At
that time University Microfilms,
Inc. became a wholly owned sub-
sidiary of Xerox Corporation.
Since University Microfilms, Inc
became a wholly owned subsidiary
o f Xerox Corporation, Regent
Power continues to serve as Presi-
dent of University Microfilms,
Inc. and draws a substanial an-
nual salary in that office. He also
serves as a member of the Board
of Directors of Xerox Corporation
but without salary. He remains
a stockholder in Xerox Corpora-

Alice ran so fast that she couldn't keep up with
Herself.

MONDAY, MARCH 14
Deadline for contributionsF
for spring issue

generation
420 Maynard

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Power Submits Resignation to
Regents After Kelley' s Ruling

Lion.

* x


EDITOR'S NOTE: Regent EugeneI
B. Power released the following let-1
ter after the attorney general issued
his opinion yesterday morning.
Working in the interests of ex-
tending the boundaries of know-
ledge is a rewarding experience and
for a long time my relationships
with The University of Michigan
have been satisfying ones. These
satisfactions deepened when ten
years ago the people of Michigan
first bestowed their honor and
trust by electing me a Regent of
the University.
Regent Giv en
High Praise
ByHatcher
EDITOR'S NOTE: University Pres-
ident Harlan Hatcher issued the
foliowing statement in relation to
Regent Eugene Power's letter of
resignation.
I am shocked at the sequence
of events. I regret them deeply.
Regent Power is a devoted public
servant and has served the Uni-
versity and the state faithfully
and generously.
When he became a Regent a
decade ago, he asked and received
fron the State Attorney General
at that time approval of guide
lines for the conduct, of his unique
service to libraries and scholars
while a Regent of the University.

When I started working with
microfilm more than 30 years ago,
it was a curiosity. It has now be-
come one of the significant ways
for students, scholars, and insti-
tutions of learning to exchange
knowledge and for new libraries
to build their collections. Univer-
sity M i c r o f i1 m s, Incorporated,
presently serves more than 1,000
colleges and universities through-
out the world. The work consists
of supplying microfilm and xero-
graphic copies of books, periodi-
cals and manuscripts, as well as
doctoral dissertations to libraries
and scholars.
When I took office in 1956 I
was aware that there might be
some question regarding my be-
ing a Regent and at the same
time continuing to supply services
to the University as I had for
many years. Accordingly, I asked
the Attorney General's office for
an opinion. The advice I received
has served to guide University
Microfilms, Incorporated, in its
relationships with the University
from that time on. Since the At-
torney General indicated I could
no longer sell to the University un-
der State law, I made arrange-
ments to donate to the University
the full range of services offered
by University Microfilms, Incor-
porated.
Last fall questions were raised
publicly about the relationships
between University Microfilms, In-
corporated, and The University of
Michigan.. I immediately asked
for a full-scale review of these
relationships.

faith believed was consistent with'
the law, I wish to acknowledge
the Attorney General's recognition
of my service to education and his
clear statement that there is no
question about my motives or in-
tegrity.
It is difficult for a layman like,
tnyself to understand fully how
different lawyers can arrive at
such divergent opinions on the
same facts. But this is beside the
point. That the Attorney General,
in pursuit of his duties as guard-
ian of the public interests, now
deems the relationship under con-
sideration inappropriate must be
regarded seriously. I have always
held the view that a man in pub-
lic office must conduct his affairs,
and those of any business or in-
stitution with which he is connect-
ed, with careful attention to the
law-and in my case this applies
to the law as it is now interpreted
by the Attorney General.
Under the present situation it
becomes impossible for me to con-
tinue to serve both as Regent of
the University and as an officer of
University Microfilms, Incorporat-
ed, especially in view of the plans
for increased participation in the
field of education by both Univer-
sity Microfilms, Incorporated, and
Xerox Corporation of which I am
a director.
Therefore, I have decided that
it is in the best interests of the
University and the corporations
with which I am connected if I
resign at once from the office of
Regent, and I shall submit my
notice to the Board of Regents

THE CONTROLLING LAW
(Kelley outlines in some detail
significant court precedents rele-
vant to the legality of contracts
between public officials and the
governmental units they repre-
sent.)
It must be concluded that unti
the year 1964 when the Michigan
Constitution of 1963 became ef-
fective the common law in Michi-
gan was that public officers may
not be interested in contracts
with a governmental unit which
they represent.
In the Michigan Constitution
of 1963 the people have provided
in Article IV, Sec. 10:
"No member of the legislature
nor any state officer shall be in-
terested directly or indirectly in
any rontraht with the state or any
political subdivision thereof which
shall cause a substantial conflict
of interest. The legislature shal
further implement this provision
by appropriate legislation."
We have then restated in th
Michigan Constitution of 1963 th
prohibition against state officers
being interested directly or in-

11
1
1
e
1
Il
n

or more exposures.
To some extent at least it must
be concluded that University Mi-
crofilms received preferential
treatment. This aspect of the
matter may be resolved by the
University library reviewing its
accounts and billing University
Microfilms for any charges that
may be due so that University
Microfilms would have purchased
microfilms at standard - rates
charged all citizens without any
preference.
Relative to the purchase of
services by the University of Mich-
NSU
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Tel: (212) TR 6-7013.

A

*

Petitioning for
Board in Control of
Student Publications
Onpin unil Mn rk 1

;ti