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Audit: LSU deal had conflicts of interest, legal problems

Louisiana State University so poorly handled the licensing of a medical software program that it created conflict of interest problems, may have violated the state constitution and could have lost available royalty money, according to a legislative audit.

Legislative Auditor Daryl Purpera's office outlined a litany of problems with the licensing and attempted marketing of LSU-created software designed to ease the sharing of patient data. By 2006, the software, known as CLIQ, was used across the then-LSU-run network of public hospitals and clinics.

The largely unsupervised approach led to cancelled contracts, no profits and potential legal violations, according to the auditor's review released Monday. The arrangement cost the university $410,000 in legal fees, $954,000 in contracting fees and an untold amount in possible revenue if the software marketing could have been successful through more traditional methods, the report suggests.

The university sought to commercialize CLIQ and sell it to a wider market. But rather than use its traditional technology management office, LSU instead worked through a private nonprofit formed by Frank Opelka, who also worked as the university system's vice president for health care and medical education redesign.

The nonprofit created in 2014 was called the Louisiana Health Information Technology Foundation, or LaHIT. News outlets report that beyond Opelka, its management board also included a member of the LSU Board of Supervisors and the daughter of a Board of Supervisors member, among others.

Auditors said LSU didn't follow its own procedures and bylaws in using LaHIT for the commercialization of the university's intellectually property and didn't get approval for several of the maneuvers from the Board of Supervisors, escaping proper oversight.

"This gave LaHIT control over the licensing proceeds and the terms of the sublicense agreement, and may have prevented the LSU developers of the software from receiving the full amount of the royalties owed to them," the report says.

Auditors say payments to an outside legal firm to help LaHIT license the software may have violated the state constitution. Other possible work arrangements also could have run afoul of the constitution, the report says.

As part of its work, LaHIT sublicensed the CLIQ software to a for-profit company in February 2016 that was supposed to handle the commercialization. But the university didn't receive an equity share in that company.

The report says Opelka and an attorney involved in the licensing arrangement told auditors the design of the commercialization effort was aimed at keeping any money generated with LSU, rather than put it at risk of budget cuts.

In a statement released Tuesday, LSU described the software licensing approach as "a well-intentioned attempt to commercialize a new product that would improve health care in Louisiana and generate additional funds for LSU during a period when the university's budget repeatedly was being cut."

LSU eventually terminated both licensing agreements in 2017 and 2018 because LaHIT and the for-profit company didn't follow through on contract requirements. The university never received any royalties for commercialization of the CLIQ software, according to auditors. Opelka no longer works for LSU.

University System President F. King Alexander requested the investigation from Purpera's office in April 2018. In a written audit response, Alexander outlined policy changes being made to keep LSU in control of its intellectual property, such as a new Board of Supervisors committee to oversee agreements with outside organizations.

Alexander appeared to largely lay the blame for missteps on Opelka, describing him as "operating at various times outside of the boundaries of his position."

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