Following the release of a report by UT’s Internal Audit Division, Governor Phil Bredesen negotiated the unconditional resignation of John Shumaker from the presidency of the University of Tennessee, which Shumaker tendered on August 8, 2003. Bredesen also negotiated a severance package to settle his $735,000-per-year contract. The settlement was approved on August 21 by the board of trustees upon Bredesen’s strong recommendation that it would be cheaper for the State than taking Shumaker and his contract to court. The package called for Shumaker to be paid $422,956 in lieu of up to $1.7 million, in exchange for his unconditional departure. The agreement called for UT to pay Shumaker $249,800 and for the UT Foundation to pay him $173,156.
Governor Bredesen recommended to the board of trustees, following release of the audit report from the Tennessee Comptroller of the Treasury’s State Audit Division on October 9, 2003, that the severance offer be rescinded, in view of additional information about possible misconduct. The additional information included the notification by Connecticut State University officials to state prosecutors and other authorities that an internal audit had found that Shumaker had accepted a $10,000 cash payment from Hyundai Corporation (in two $5,000 checks); had taken a $5,000 trip to South Korea; and made questionable use of compensatory time while he was president of Central Connecticut State University from 1987 to 1995. At the board of trustees’ meeting, Bredesen stated that he no longer felt any personal obligation to support the package, since during the negotiations with Shumaker, he had been repeatedly asked whether everything was on the table, and it had become apparent that that might not have been the case.