Correction to This Article
A June 21 Style article incorrectly said an independent review committee found that former Smithsonian deputy secretary Sheila P. Burke aided former secretary Lawrence M. Small in setting his own salary, leave and spending, and in ignoring policy. The panel did not conclude that she aided Small on those issues.

Secrecy Pervaded Smithsonian on Small's Watch

By James V. Grimaldi and Jacqueline Trescott
Washington Post Staff Writers
Thursday, June 21, 2007

Leaders of the Smithsonian in the past seven years took extraordinary steps to keep secret the amount of top executives' compensation, lavish expense-account spending, ethical missteps and management failures, an independent report released yesterday shows.

Former secretary Lawrence M. Small, with the help of his top deputy, Sheila P. Burke, took advantage of a vast gap in oversight to set his own salary, spend freely, take unlimited leave and ignore policy to pursue private agendas, according to the independent review committee, which was established by the Smithsonian Board of Regents to investigate reports of excessive spending and management abuses.

Compounding the problem, traditional institutional watchdogs, including the Board of Regents, general counsel, inspector general and chief financial officer, all failed in their duties to rein in excesses, the panel found in its report.

The efforts at concealing lavish expenses included Smithsonian management ordering the alteration of accounting records to obscure a $14,000 Learjet flight that Small took to pick up an award and meet potential donors, the investigators said. A Smithsonian spokeswoman said the accounting change was a reclassification that is "common practice for a variety of innocent reasons."

Charles Bowsher, the former U.S. comptroller general who conducted the investigation, said the panel did not find illegalities, but said that Internal Revenue Service regulations might have been breached. "We certainly had concerns in the tax area and that is why we are calling for a full audit of Mr. Small and Mrs. Small's travel expenses, and that could have tax consequences, no question about that," Bowsher said. He singled out Small's Smithsonian-paid, first-class trip to Hawaii with his wife, Sandra, as one that might be considered taxable income.

Efforts to hide key management decisions about the publicly funded museum complex occurred at the beginning of Small's tenure in 2000, when he was hired to be the 11th secretary of the 160-year-old institution, overseeing a $1 billon budget, 18 museums and the National Zoo. To "conceal the true size of his pay," Small was given a $150,000-a-year housing allowance, the independent investigators said.

"There was concern, among the limited number of former Regents involved in setting Mr. Small's compensation, that there would be adverse publicity if the Smithsonian announced that Mr. Small was being hired at a salary in excess of $500,000 a year," the report said.

Small's employment agreement was derided by the panel's investigators as being amateurish and negotiated without legal counsel. "Only a few people were involved in negotiating his initial contract and, until quite recently, in fully discussing and understanding the full scope of his total compensation package," the report said. "The Regents involved in contract discussions with Mr. Small appear to have acquiesced to Mr. Small's demands without questioning the appropriateness" of the arrangement.

After the initial compensation level was set, Small, whose compensation as a top banker at Fannie Mae included a $1 million-a-year annual retirement payment, was allowed essentially to set his own salary with scant review by the regents, the panel said. Small hired a consulting firm to prepare a report "primarily intended to justify the substantial 2001 increase in Secretary Small's compensation."

The regents were hampered because "Small limited the flow of information so as to prevent the board from hearing criticism of his stewardship," the panel said. But the panel also lambasted the Board of Regents for failing to "look behind the tightly controlled data provided by Mr. Small. Nor did it engage in the active inquiry of Mr. Small and Smithsonian management that would have alerted the board to problems."

The panel consisted of Bowsher, Stephen D. Potts, former director of the U.S. Office of Government Ethics, and A.W. "Pete" Smith, a retired business executive. Their work was supported by attorneys from Williams & Connolly and Arnold & Porter.

The panel also cited the failure of what they called the "gatekeepers," including the general counsel, who is also the chief ethics officer, and the inspector general, for failing to engage in aggressive oversight of Small and his management team.

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