Charles Fishman, a Washington, DC, lawyer who had known John Shumaker for some years and with whom Shumaker had jointly incorporated a business designed to allow universities to establish profitable international operations, was approached in 2002 by the China Electronics Corporation about building a joint American-Chinese high school in Beijing. He contacted Shumaker and arranged to meet him in Beijing, since Shumaker had already scheduled a trip to Japan. In June 2002, Shumaker signed a letter of intent with Beijing Bohua Foreign Language School concerning a Sino-US high school in Beijing. He signed an agreement to establish the school on October 8, 2002.
Fishman proposed to make himself available to consult with the university for $10,000 a month plus out-of-pocket expenses. UT’s General Counsel prepared a contract for legal services. On September 26, 2002, an agreement was executed with Fishman through which UT agreed to pay an in-office legal fee of $300 per hour and a travel-status legal fee rate of $3,000 per day. The maximum amount of the contract was $175,000. Since the contract was for legal services, it was judged not required to be competitively bid. The contract was later amended to include developing opportunities in Korea, and the maximum amount was revised to $300,000. The total amount paid on the contract was $287,873.87, which included the Sino-US high school and other projects.
The internal audit performed by UT’s Audit and Consulting Services unit and issued on August 15, 2003, determined that the contract was improperly classified as being for legal services and that it would have been better practice to have compensated Fishman based upon the successful completion of a proposal instead of the cost associated with locating them.