Smithsonian Officials Serve On Board Of Its Insurer
Wednesday, April 11, 2007
The Smithsonian Institution last year renewed a contract giving the Chubb Group more than a half-million dollars of insurance business annually while Lawrence M. Small, then the Smithsonian secretary, and Sheila P. Burke, the deputy secretary, held highly paid seats on Chubb's board of directors.
Small received cash and stock valued at $169,675 from Chubb last year, according to proxy statements filed with the Securities and Exchange Commission. He also received options to purchase 105,943 shares.
Burke received cash and stock valued at $194,676 from Chubb and options to purchase 56,000 shares, according to the SEC. Small and Burke sit on Chubb's compensation committee. Burke is also a member of Chubb's finance committee and pension and profit-sharing committee.
Small, who resigned late last month after seven years at the helm of the Smithsonian in the wake of questions about his salary and expenses, was set to receive $915,698 from the museum complex this year. Burke received $400,000 last year. A Senate committee holds hearings on Smithsonian compensation practices today. And another Senate committee investigation has raised questions about the Chubb-Smithsonian relationship.
Chubb, which provides just over half of the Smithsonian's insurance, is one of the world's largest insurance companies. It has sold policies to the Smithsonian since 1992, before Small and Burke came to the institution. Small has been a Chubb director since 1989 and Burke since 1997.
The Smithsonian reviews its insurance policies every five to seven years, according to the institution. The insurers are selected through a broker and a bidding process run by the Smithsonian risk management director.
"There is no consultation between that office and the deputy secretary or former secretary on this matter," said Linda St. Thomas, director of media relations for the Smithsonian. The Smithsonian has increased the amount of business it does with Chubb in recent years, mainly because some other insurers did not renew their policies after the Sept. 11, 2001, attacks, she said.
In a selection process conducted after the attacks of 2001, the year after Small became secretary, Chubb was renewed as a carrier. In the current fiscal year, which ends Sept. 30, the Smithsonian will pay Chubb $548,341. The Smithsonian will pay a total of about $1 million for insurance this year, less than a private company of similar size might pay because the federal government insures the buildings.
The institution's second-largest insurer is XL Specialty Insurance, which holds about 20 percent of the Smithsonian's business.
The propriety of Small and Burke's service on corporate boards has been questioned by Sen. Charles Grassley (R-Iowa), the ranking minority member of the Senate Committee on Finance and a leader in reform of nonprofit organizations. "This is a significant departure from standard practice in the government," Grassley said of the officials' seats on corporate boards and their outside income.
St. Thomas said government rules allow employees to sit on private boards if there is no conflict of interest.
"I do think it is a major conflict of interest for both Small and Burke to sit on the Chubb board, given the insurance policies of the Smithsonian," said Pablo Eisenberg, senior fellow at the Georgetown Public Policy Institute. "The Board of Regents should have not permitted this, but the regents have demonstrated their lack of responsibility in overseeing the affairs of the institution."