Senate Panel Requests Records From AU on Ladner and Board
Friday, October 28, 2005
The Senate Finance Committee has asked for every document related to ousted American University president Benjamin Ladner's severance package and compensation and for the board's plans for an audit of all 11 years of his tenure.
In a four-page letter, Sen. Charles E. Grassley (R-Iowa) asked for details on all no-bid contracts over $100,000, copies of all correspondence with the Internal Revenue Service for the past five years, biographies of each trustee and documentation of how the board made certain decisions.
AU is the first college to get an inquiry letter in an ongoing review of charities led by Grassley and Sen. Max Baucus (D-Mont.), and it broadens the scope of the committee's oversight. "It appears the AU board could be a poster child for why review and reform are necessary," Grassley wrote in a letter yesterday to the acting AU board chairman, Thomas A. Gottschalk.
Ladner lost the presidency this month after an audit questioned hundreds of thousands of dollars in personal and travel expenses. He has said that most of the spending was appropriate under the terms of his contract, but the board asked him to reimburse the university $134,000, declare an additional $398,000 in income over the three years investigated and pay the school the amount it would have withheld in taxes on that sum. On Monday, AU trustees and Ladner agreed to a departure deal, which included $950,000 in a one-time severance payment and about $2.75 million in deferred compensation.
In his letter, Grassley, the chairman of the committee, called "particularly troubling" a situation in which a nonprofit organization believes "that it is proper to provide approximately $3.75 million in payments to an individual who has failed to pay taxes on nearly $400,000 in income [for the past three years] after the board terminated his employment. Such actions raise significant questions about what other things a charity that has such a cavalier attitude toward the tax laws might be doing."
Grassley asked the board to explain the school's expense policies, how they were enforced for Ladner and whether it plans to change the rules. The questions build on those that auditors asked this spring but significantly expands the inquiry.
The university has until Dec. 1 to respond.
Gottschalk said yesterday that the board would do everything it could to cooperate.
In the days since the agreement on the departure deal, anger on campus has continued to mount. Hundreds of students have sent an e-mail to members of Congress asking for oversight of a board they said engaged in reckless behavior that could cost students and faculty and staff members millions of dollars.
Deans condemned the severance deal, student leaders issued angry statements, colleges within AU passed resolutions criticizing the board, and talks about potential litigation continued.
Board leaders reached out to the faculty and students yesterday with a letter apologizing, explaining, pledging reform and asking to move forward.
"We are chagrined that the board's own processes over the years did not allow us to have a clear understanding of what contracts were in place, their provisions, and the various forms of compensation which the president was receiving," said the letter, signed by Gottschalk and Gary M. Abramson, the board's chairman-elect. "We acknowledge this deficiency and we apologize to the entire community for it."
Trustees need "to be less isolated and insulated from the campus," they wrote, have improved and more inclusive governance and be more vigilant over financial matters. They explained how they considered legal advice, Ladner's successes at the university and campus sentiment before settling on terms for his departure.
Last week, Acting President Cornelius M. Kerwin told the Faculty Senate that the board is far more than an advisory group. "There is not an authority beyond them besides the Congress of the United States that issued the charter," he said.
Some students and professors wondered whether the United Methodist Church, which has supported the private university throughout its history, could sweep out the board, and some have contacted the leadership.
But the church can't do that, Bishop John R. Schol of the Baltimore-Washington Conference of the United Methodist Church, a trustee, said recently. The church's board of higher education has the authority to approve new members, though, he said.
Kerwin told faculty members last week that the board is not going to be dissolved. "Their ability to renew themselves is really quite robust," he said, because it's a self-perpetuating group. Even a move to limit the board's size a few years ago took an act of Congress, he said.
Kyle Taylor, the student government president, attended that meeting. Learning of the congressional action "triggered my realization that this was something we could actually do," he said of seeking changes to the board. "We feel we don't have representation on the board -- we're not on equal footing. We need to find power."
An online petition went public midday Wednesday urging members of Congress to take immediate action against the board. "The students should realize they are potentially doing great harm to their own university," which needs time to heal, said Tom Ingram, president of the Association of Governing Boards of Universities and Colleges. "The university board needs to get its act together -- it strikes me as a board that earnestly wants to do that. The university's reputation is at stake, and it's already suffered some blows."