Federal Officials Scrutinize Ladner
Tuesday, September 20, 2005
Federal law enforcement officers are reviewing documents regarding suspended American University President Benjamin A. Ladner, whose personal and travel expenses are being investigated by the school's trustees.
Officials from the U.S. attorney's office in Washington, working with the FBI, requested documents from American University, which turned them over to comply with a subpoena, according to two sources with knowledge of the probe.
In addition, the Internal Revenue Service has contacted the university about issues involving the Ladner case, but the IRS is not actively involved, according to the sources, who spoke on condition of anonymity because the probe is ongoing.
The case could have tax implications not only for Ladner but also for AU, which is bound by laws governing how much charities and universities pay their executives.
The board of trustees placed Ladner on administrative leave Aug. 24, and Provost Cornelius M. Kerwin stepped in to serve as acting president. Ladner would not comment for this article. The chairman of the board, Leslie E. Bains, did not return a phone call yesterday.
Channing Phillips, a spokesman for the U.S. attorney's office, said last night that grand jury secrecy rules and Justice Department policy prevent his office from commenting.
The trustee board is close to completing its probe of Ladner, who became president in 1994. He has been credited with raising academic standards and the national profile of the university, which is in Northwest Washington .
There is a split on the board about the severity of the issues reviewed in its audit, according to several sources familiar with the board's discussions. Some trustees view Ladner's expenses as justified by the constant fundraising and entertaining required of today's university presidents, while others believe that the spending was out of line for a school of AU's size, the sources said.
Those sources and others with knowledge of the board probe said it involved a number of complicated issues and hundreds of thousands of dollars in travel and personal expenses over the past three years. The board has not determined whether Ladner should be asked to repay the university for any of the spending, a source said.
The board also has been wrangling with Ladner over compensation -- his salary, benefits and allowances -- which has more than tripled since he came in 1994, according to one source with detailed knowledge of Ladner's pay. In 2004, his base salary was $633,000, but his total compensation was well over $800,000, according to forms the university filed with the IRS.
Last year, some board members became concerned that Ladner's pay was too high for the president of a 10,000-student private, nonprofit school and that they could be liable under laws intended to avoid excessive compensation to executives of charities, sources knowledgeable about board activities said.
Any payment of an executive's personal expenses by the organization generally must be repaid or reported as income, said LaVerne Woods, chair of the tax-exempt organizations committee of the American Bar Association.
The board decided to reduce Ladner's overall compensation by an undisclosed amount, according to the sources. The trustees, meanwhile, continued to investigate his personal and travel expenses, including an engagement party for his son that he allegedly charged to the university, the sources said.
Because his contract required Ladner to spend a certain amount of time at a university-owned house, sources said, Ladner's attorneys argued that the cost of all food and services required while living there should be paid by the school.
A preliminary report by Arnold & Porter LLP, a law firm helping the trustees, has been completed and sent to Ladner. The report includes records of several chauffeurs employed by Ladner and his wife, Nancy Bullard Ladner. Chauffeurs kept a log of their duties, including taking Ladner to such events as an athletic awards banquet, dropping off dry cleaning and taking Nancy Ladner to an appointment at a hair salon.
A final report has not been completed but is expected to be within a few weeks, the sources said. The board, however, already has eliminated the position of personal chef to the Ladners and transferred the social secretary for the Ladners to another department.
Staff writer Allan Lengel and researcher Bobbye Pratt contributed to this report.