[LETTERS to the editor]Who should pay for “honor”?

President Oh Young-kyo and other Dongguk University officials have refused to accept Yale University’s $100,000 offer, together with a public apology, for its administrative error involving the fake diploma of disgraced art professor Shin Jeong-ah.

“We refused, as we thought we can regain our honor by winning the suit,’’ a Dongguk official said. The university said it would continue its compensation suit, in which it seeks $50 million for defamation.

One of the definitions for the word honor in my Microsoft Encarta College Dictionary is, “Treat something as money: to accept a check or other financial instrument as money or as a substitute for money and pay it when it is due.”

In recent weeks, a bad investment climate has turned into one of the worst financial crises in decades, forcing a United States government bailout of Fannie Mae, Freddie Mac and the American Insurance Group.

In three of the last four fiscal years, Yale did better than Harvard in a crucial competition: endowment growth. Yale’s endowment grew to $22.9 billion on June 30 - the end of the fiscal year. Returns have generally slowed at endowments, reflecting the tumult in the markets this year. Yet despite the lower return in fiscal 2008, Yale’s endowment has returned an annualized 16.3 percent over the last decade. That figure exceeds Harvard, where the average annualized return for the same period was 13.8 percent.

The returns for both schools means that they outperformed 95 percent of the 165 large institutional funds that are measured by the Wilshire Trust Universe Comparison Service.

The Yale endowment has been run for the last two decades by David F. Swensen.

The endowment received $232 million in gifts and provided Yale with $850 million toward its budget last year. It is not to be confused with that of the Yale Law School, another huge endowment.

Although Yale declined to say which asset classes outperformed the others, the endowment did say that it would adjust its asset allocations in the coming fiscal year. It plans to continue reducing its exposure to hedge funds, which had been as high as 25 percent of its portfolio two years ago and dropped to 23 percent last year. For fiscal 2009, Swensen & Co., as it were, is reducing hedge funds to 21 percent. Yale is reducing exposure to domestic equities, to 10 percent of the portfolio from 11 percent. At the same time Swensen plans to increase Yale’s exposure to real assets to 29 percent from 28 percent, and its commitment to private equity will increase to 21 percent (by 2 percent). Holdings in foreign equities will remain at 15 percent.

The fact that the returns were positive at all was impressive in the continuing bear market.

But after June 30, commodities markets dropped precipitously, by almost 30 percent, from their all-time highs - according to Dow Jones?AIG Commodity Index - potentially reversing some endowment gains. Much of this was due to a substantial fall in the price of oil, which peaked at $147 per barrel but has been inching back toward that figure after trading as low as $92.

Trying to sue Yale in a Connecticut court may not be such a terrific idea for Dongguk. Yale mistakenly confirmed the authenticity of Shin’s Ph.D. Yale President Richard C. Levin admitted the error, and he sent a letter of apology on Yale stationery to Oh.

Perhaps Swensen & Co. could help Dongguk with its portfolio management during some part of fiscal 2009.

Altogether, the Seoul Western District Court found Shin guilty of faking three separate degrees - the academic one from Yale, a fine arts one, and an MBA. Shin must have felt, while going out into the job market, that she might as well do so in style.

Two of the bogus degrees were purportedly from Kansas State University. Did Dongguk officials exercise due diligence in contacting all the institutions involved? Shouldn’t Dongguk have sued the Kansas institution although it has a much smaller endowment than that of Yale? And if Yale is at fault, should Yale alone be forced to satisfy the whole measure of Dongguk’s “honor”?

Richard Thompson, visiting professor, Mokpo National University

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