Ladner Aide Contradicts Explanations Of Expenses
Saturday, October 1, 2005
The longtime executive assistant to suspended American University President Benjamin Ladner said he made no effort to separate his personal and business expenses and insisted on "the best room with the best view" in exclusive hotels, even giving her a guide to fine lodging worldwide.
Margaret H. Clemmer, who worked for Ladner from December 1996 until his suspension in August, also said in a confidential statement that Ladner asked her to add past appointments on his calendar after the board of trustees began an inquiry into his personal and travel expenses last spring. She said she did not know whether the appointments had, in fact, occurred and been inadvertently left off.
Clemmer's 11-page statement to the audit committee contradicts some of Ladner's explanations of his expenses and raises further questions about his conduct as president of the 11,000-student university in Northwest Washington.
The statement was obtained by The Washington Post from someone other than Clemmer, who still works in the president's office. She did not return calls.
An attorney for Ladner said yesterday that he could not comment on the statement. "I haven't seen it. Someone on the board has obviously leaked it to the press but withheld it from Dr. Ladner, so he cannot respond," David Ogden said. "It is very disappointing that members of the board would harm the university by continuing a constant series of leaks that distort the truth."
Ladner and his attorneys say his contract guarantees him "first-class travel," and he has said that he often stayed in moderately priced hotels.
Clemmer said Ladner told her not to book overseas rooms that cost more than $600 a night or U.S. rooms above $400. Ladner also asked her to make reservations at such chic restaurants as Alain Ducasse au Plaza Athenee in Paris and Daniel in Manhattan. He told her, she said, to use the name of the ruler of Sharjah, located in the United Arab Emirates, to get a table at the Michelin three-star restaurant Le Gavroche in London.
And, according to Clemmer's statement, Ladner and his wife, Nancy, expected their university-provided chauffeur to run personal errands, and Nancy Ladner once wanted the chauffeur to take her adult children barhopping in Georgetown.
The U.S. attorney's office and the FBI have subpoenaed documents in the case. The board of trustees began looking into the Ladners' expenses last spring after receiving an anonymous letter.
And although some board members have been strongly supportive of Ladner, a majority of the 24 voting trustees now say that he should not stay on as president, according to sources close to the board. The board is scheduled to meet Oct. 10.
Yesterday, Leslie E. Bains, the board's chairman, issued an open letter to the university, saying that she would pursue a 14-point reform program, including reinforcing spending controls and guidelines and instituting annual audits of senior officers; adjusting the board of trustees to include students and faculty members but not the president; increasing involvement and oversight by the board; instituting a more rigorous annual performance review of the president and salary evaluations in line with comparable schools; and allowing "zero tolerance at all levels of the university for financial and ethical lapses."
Clemmer's statement goes on to say that early in her tenure as Ladner's executive assistant, he told her that he separated personal and business expenses at the end of each year. Later, she said, "I realized his personal and business expenses were not being separated annually as he had told me. Additionally the 'settling up' at the end of each year was not a bill payable to the university by Dr. Ladner for their personal expenses, but an amount being assessed to his taxes as 'imputed income.' "
She said, "I also understand the difference between paying taxes on the value of something that benefits the person and not the university, vs. reimbursing the university for the actual cost of that item."
As tax-exempt organizations, universities must follow certain rules. When an employee uses a university's money to buy something personal, the money should be repaid or declared as income on that person's tax form, according to experts on tax law. And when a university has a state or local sales tax exemption -- as American does in the District -- it is improper for an employee to claim that exemption on personal purchases, they said.
If the university approves the money being spent, it becomes, in effect, an extra benefit -- considered imputed income by the Internal Revenue Service.
Any extra benefits employees receive must be reported as income on their taxes. Celia Roady, a lawyer who specializes in tax-exempt organizations, said it is not always clear what constitutes such a benefit. She has no direct knowledge of the situation at American and spoke in general terms explaining the tax law.
Ladner and his wife have been paying taxes on a certain percentage of the spending at the house and for their cars, counting it as personal income on his tax forms. His attorney said Ladner was not familiar with the details of those tax laws and was never told during his 11 years as university president that the driver's services -- or any other salaries of university employees -- should be regarded as imputed income.
Investigators hired by the executive committee have questioned the amounts he recorded -- between $5,800 and $8,400 a year for each of the three years examined -- and whether those accurately reflected the personal benefits he and his wife received from the university-provided chef and social secretary, among other university services. The Ladners also estimated that 10 percent of the use of the university-owned black Infiniti Q45 was personal, for an annual addition to his taxable income of between $400 and $1,200 for the years investigated. And the Ladners told investigators that they "absorb" $500 a month for Nancy Ladner's car; they lease it from her brother, who is a car dealer, and he covers $500 a month while American pays $440.
Investigators say the Ladners owe the university about $100,000 and should pay imputed tax on more than $400,000 for the three years that were investigated, sources close to the investigation said.
One of Ladner's attorneys, Randolph M. Goodman, wrote in response to the audit committee that Ladner is willing to add about $32,000 to his imputed income for the three years. Ladner has said he would pay about $21,000 to the university for such things as birthday parties, limousine service and meals the chef prepared for their Gibson Island home.
His attorneys have said that most of his spending is covered by his contract; that some of his travel has been paid by supporters at overseas campuses; that Nancy Ladner's activities, including shopping, were often done for the university; and that the report underestimates the amount of university business conducted while traveling and at home.
Statements from the chef and social secretary said auditors overstated their non-university work.
Ladner's attorney said he needed a chef not only for formal university events, but also because people often drop by to discuss business over meals.
Clemmer told investigators, "It is not Dr. Ladner's habit to hold unscheduled or impromptu university related meetings . . . at lunch or dinner."