washingtonpost.com
Correction to This Article
A Sept. 24 Metro article about suspended American University President Benjamin Ladner incorrectly identified Pete Smith as chairman of the board of trustees' audit committee. Smith was a member of the compensation committee.
AU's Ladner Defends His Spending
Suspended President Says School's Trustees Have Treated Him Unfairly

By Susan Kinzie and Valerie Strauss
Washington Post Staff Writers
Saturday, September 24, 2005

Suspended American University President Benjamin Ladner defended his spending and his integrity yesterday, and said he has been treated unfairly by some members of the school's board of trustees, who barred him from campus this summer.

He cannot talk to faculty or students, he said, by order of the board's chairman. "You don't do this to people," Ladner said.

In a meeting with Washington Post editors and reporters yesterday afternoon, Ladner talked about the inquiry into his expenses, which has mushroomed into something that has fractured the board and could damage the private university of about 11,000 students at a time when it has been ascendant. It was the first time he has spoken publicly at length about the inquiry.

Ladner, who was suspended in August pending the outcome of the investigation into his and his wife's expenses by the board of trustees, acknowledged some missteps -- such as not immediately reimbursing the university for his son's 13-course engagement party dinner last year -- but rejected an independent report that questioned more than half a million dollars in spending in the past three years.

The previous board chairman also spoke out for the first time yesterday, denying some of Ladner's words, and the rift on the board seemed to widen as a letter surfaced from a former board member who resigned last year rather than work with an "increasingly difficult" Ladner.

Ladner said most of the thousands of dollars that his wife charged to AU for household furnishings, food and beverages and that was questioned by the companies hired to do the audit was consistent with the terms of his contract.

As trustees consider his spending before deciding on Ladner's future at AU, one of the primary conflicts involves contracts. Three years after he came to the school, in 1997, he signed another contract that gave him dramatically better benefits, but that was unknown to many on the board. Lawyers are now arguing over whether that contract is legal.

"There's a good deal of internal tension right now," Ladner said of AU's trustees. A small group of board leaders has violated policies, he said, including board bylaws and the terms of his contract.

Some on the board argue that Ladner is not operating under a legal contract and that he has abused their trust. But one trustee has said they all share some culpability.

Ladner said he will consider legal action if he's dismissed "with cause." But he is not insistent on returning, he said.

"If I go back and everyone says, 'Ben, you misunderstood everything, everyone thinks you're a jerk,' " then it wouldn't make sense, he said. He wants to go back to a university ready to move forward.

Last night, an e-mail went out to professors at AU, announcing that the head of the faculty senate was calling a meeting "to address the investigation." Faculty leaders are expected to meet with the executive committee of the board Wednesday. And the faculty of several of the university's schools and colleges will meet Monday.

"Did I use some bad judgment? Sure. I'm the first one to say I've made mistakes," he said. But there's a new climate of oversight in the post-Enron, post-WorldCom America, he said, and board members got worried about their responsibilities. He wasn't getting questioned about contracts and spending years ago, he said. "Ten or 15 years ago, a lot of presidents did this by handshake," Ladner said. "Over four or five years, the context of financial arrangements changed so dramatically."

Pete Smith was chairman of the board's audit committee until late last year. "In my 30 years as a compensation consultant with Watson Wyatt, I have never had a more difficult client," he wrote in his resignation letter, which was obtained by The Post from someone other than Smith, who would not comment. Its authenticity was verified by three people. "More important, Ben wanted to control all information pertaining to his compensation very closely. At first I thought this was just a quirk. But as things evolved, I began to wonder if the intent was to hide the full scope of his compensation. . . . Important elements of his pay were not understood or explained to the board. His own CFO was in the dark concerning some elements of his pay; and the reporting of Ben's compensation on [the IRS] Form 990 was incomplete . . .

"As the committee wrestled with this problem, dealing with Ben became increasingly difficult and it began to feel like the board reported to Ben rather than the reverse. It was then that I decided to resign as a trustee."

Tensions with the board began last year, two trustees said, when Ladner asked for a $1 million bonus and several millions more in other compensation. The audit began last spring after an anonymous letter was sent to the board alleging expense violations.

Ladner denied yesterday that he had asked the board to raise his compensation.

But George Collins, the board chairman whose rotation ended last spring and a member of the compensation committee, said yesterday, "He most certainly did. I can say as chairman of the compensation [committee] and as a chairman of the board, he asked for an annual increase and review because it was [in] his contract. It was in the '94 contract as well as the new '97 contract, which I didn't see until a year ago."

When asked whether it made sense for a university president to spend money on first-class travel, multi-course meals and the best hotels, Ladner said he did not always do so, and he never knew anybody thought it was unacceptable because no one on the board ever told him. "The trustees knew because the trustees flew with me. We stayed at the same hotels," he said.

Two trustees, speaking anonymously to protect their position, said they had no idea that Ladner was not paying those expenses -- such things as extended layovers in some of the best hotels in Paris and London, chauffeurs waiting outside private events, meals at expensive restaurants in New York with his wife -- himself.

Ladner said he has written a check for $21,000 to pay the university for some of the events in question, including more than $1,000 in limousine bills for his wife, Nancy Ladner. He said a trip to Nigeria never cost the university anything. Others have stepped forward to cover some of the travel bills to the AU campus in the United Arab Emirates, according to his lawyers' response to the report. And Ladner said that in many ways, he and his wife were very generous, paying half the rental cost of the car the university leased for his wife, for example. He said he has been completely transparent in his spending.

The report contradicted that again and again, citing difficulty getting documents and receipts from him, or verification of Ladner's assertions that his wife went to 240 university-related events last year. Nancy Ladner's time that was documented in chauffeur's logs and the social secretary's calendar includes frequent trips to a salon, jewelry shops and engagements on Gibson Island, where they have a weekend home.

Ladner said he's heard from many supporters, including donors who have told him that if he goes, their gift does, too. Two people close to the investigation said they also have heard from donors threatening the opposite.

Carolyne Berry, the father of a 2005 graduate, said he and his wife had planned to make a "significant endowment" to AU, but they have changed their minds. "The Board of Trustees has apparently condoned Mr. Ladner's free spending and unilaterally decided that the mission of the university is to enrich the president's lifestyle and NOT provide competitive salaries for professors or scholarships for deserving students," he wrote in an e-mail.

Ladner was asked what he was most proud of in his time at AU. He came to a school fractured by leadership problems, with four presidents in four years and over time helped people renew the school, he said, "building community."

© 2005 The Washington Post Company