Penn State officials abruptly canceled a meeting last week at which they were to vote on a new president, saying little more than that they needed more time.
On Tuesday, the Albany (N.Y.) Times Union reported that David R. Smith, president of the State University of New York Upstate Medical University, had been in line to get the job until allegations surfaced that he accepted $349,295 in payments from outside sources on top of his $625,000 in compensation from SUNY.
The matter is under review and Smith is on leave, the university said in a statement. The university has named a new "officer-in-charge."
"Due to an ongoing review of compensation issues at Upstate Medical University, as well as recent health issues, Upstate President Dr. David Smith will be on leave from his duties at this time," the release said. SUNY spokesman David Doyle declined further comment.
A letter from SUNY Chancellor Nancy L. Zimpher said that Smith, a medical doctor, received payments from Pediatrics Service Group L.L.P. in 2012 and 2013 and MedBest Medical Management Inc. in 2010 without her prior approval.
The outside payments were uncovered by a search firm that works for both Penn State and SUNY, the Albany newspaper reported.
Penn State used the executive search firm Isaacson, Miller. John Isaacson did not return a call for comment Wednesday.
Thornburgh, whose firm led the presidential searches that brought John A. Fry to Drexel and Neil D. Theobald to Temple, said he didn't expect the reports to affect Penn State's ability to find a new president.
"My sense is that they are going to have the same challenges now as they had before in terms of the complexity of the board dynamics and politics and the overwhelming leadership challenge facing the next president," he said.
But what the events show, he said, is that the board needs "to be extra careful about the vetting and due diligence of any candidate," and they serve as "a lesson for the board in managing expectations. You don't announce a meeting with the full presumption you're going to appoint a president and then pull the plug at the last minute."
He did give the university credit, however, for bringing the potential hire "to a screeching halt."
"If they had gone ahead and announced this appointment and found out afterward about this controversy, then the fallout would have been exponential," he said.
Penn State board members either declined comment or did not return calls. Some board members said they did not know if Smith was the pick because they had not been told the identity of any candidates - another indication of the continuing rift on the board.
Such a rift could present another hurdle for Penn State's presidential search.
"If I did want to be a president, the last thing in the world I would want to do is go into a situation where there is a split board," said Ronald G. Ehrenberg, director of the Higher Education Research Institute at Cornell University.
Ehrenberg, who also sits on the SUNY board, said Smith has been a "wonderful" president who deftly handled the running of a public medical university.
Molly Corbett Broad, president of the American Council on Education, gave Penn State credit for being "appropriately cautious" about its selection. She noted that president Rodney Erickson has agreed to remain in the job through June 30, so the board has time.
Also Wednesday, Moody's Investors Service affirmed Penn State's Aa2 credit rating and upgraded its outlook from "stable" to "positive." Moody's praised Penn State's "rapid response to governance, management, and financial challenges," among other factors.