Probe Turns Focus To AU's Trustees
Saturday, December 3, 2005
The chairman of the Senate Finance Committee said yesterday that its investigation of American University will now focus on the current board of trustees.
After getting several requested boxes of documents from the private university, a 12-page letter from the chairman and vice chairman of the board explaining the decisions surrounding the ouster of president Benjamin Ladner, and hearing from students, faculty and alumni, Sen. Charles E. Grassley (R-Iowa) made clear that the congressional inquiry is not over.
"The best way to avoid problems like Benjamin Ladner's excessive compensation and severance is for boards to know that the buck stops with them," Grassley said in a statement yesterday.
Ladner's presidency ended in October after an audit questioned hundreds of thousands of dollars of spending by Ladner and his wife for travel and personal expenses over the past three years. He agreed to sever ties with the school in exchange for a $3.75 million severance package -- a deal that angered many on campus, who had asked that he be fired without a "golden parachute."
Along the way, five of the 25 trustees quit. The U.S. attorney's office has been looking into the matter. And a congressional committee reviewing nonprofit institutions -- which must avoid excessive compensation because of their tax-exempt status -- has jumped in, too.
In their most detailed public explanation to date, trustees Chairman Gary M. Abramson and Vice Chairman Thomas A. Gottschalk sent a letter -- made public yesterday -- to Grassley and Sen. Max Baucus (D-Montana) describing the events of the past months, defending some of the board's actions and saying others are being corrected.
Gottschalk and Abramson explained why the board had been impressed with Ladner's presidency, and wrote, "Perhaps, because of the university's success under his leadership and concern that Dr. Ladner might be recruited to another university, the board failed to follow sufficiently rigorous procedures for reviewing and approving the president's employment contract and compensation, as well as effectively auditing expenses."
They wrote about a contract signed in 1997 by Ladner and then-Chairman William I. Jacobs that had no end date and ambiguous terms that allowed Ladner to be reimbursed for expenses over and above what was allowed for other university employees. The full board -- including Gottschalk and Abramson -- did not know about that contract until this year, they said.
Ladner has defended his spending as consistent with the terms of that contract.
Based on the advice of consultants that Ladner's total compensation could be considered excessive, the board decided this year to reduce it from $886,750 to no more than $793,000.
And they explained the reasoning that went into his severance package: They worried about a potential lawsuit, particularly given the ambiguity of the 1997 contract.
This week, in a letter to the university community, four of the five former trustees proposed rescinding the severance package and removing the 13 board members who the four say opposed them when they pushed for an investigation, cuts in Ladner's pay and other changes.
They said the current board is stalling on making changes and recommended that the search for a new president begin right away.
"Now more than ever, the university needs new leadership," said the letter, which was signed by two former chairmen, Leslie E. Bains and George J. Collins, and former trustees Leonard R. Jaskol and Paul Martin Wolff.
The four said they will return to the board and start the changes if students and faculty members want them back -- and if the 13 opposing members are removed. The board is self-appointed.
Gottschalk responded: "Since these other trustees are no longer involved in the board, it's hard for them to have current information or accurate information about all of the good efforts and good motivations that are proceeding."
One of those efforts is their response to the Senate Finance Committee, Gottschalk said, adding that it ". . . certainly gets us farther along in explaining the good reasons that the board had for the actions they've taken."