By James V. Grimaldi
Washington Post Staff Writer
Tuesday, June 26, 2007
Former Smithsonian Secretary Lawrence M. Small had inquired about the institution's insurance policies with Chubb Group at a time when he collected compensation from the insurer as a member of Chubb's board of directors, people familiar with the contacts said yesterday.
Smithsonian officials previously said Small was never involved in the museum's insurance policies. Spokeswoman Linda St. Thomas confirmed yesterday that Small had asked about a particular Chubb policy that covered liability for directors and officers.
Small's intervention led the Smithsonian to move from one kind of Chubb insurance to another, St. Thomas said. "We got a better deal financially," she said. "We paid no higher premium and they amended the Chubb basic policy."
The call came in late 1999 after Small was named secretary-designate and just before his installation as secretary. He had been on the board of Chubb since 1989 and was allowed to keep that position when he joined the Smithsonian.
Since 2000, Small's Chubb compensation was $4.8 million -- $84,000 in cash, $3 million in stock and $1.8 million in stock options. The Smithsonian's No. 2 official, Deputy Secretary and Chief Operating Officer Sheila P. Burke -- a Chubb director since 1997 -- earned $2.9 million from 2000 to this year. Of that amount, Burke received $611,000 in cash, $1.9 million in stock and $400,000 in stock options.
Charles A . Bowsher, chairman of an independent review committee that investigated Smithsonian management problems, is scheduled to testify today before the Senate Rules Committee, which also oversees the federally supported museum complex. Bowsher's panel called it "an obvious conflict of interest" for Small and Burke to sit on the board of Chubb while Chubb held half of the institution's insurance coverage.
Small resigned in March over questions about his compensation. Small's attorney yesterday declined to comment. Burke's attorney, Mark Kilberg, said that Burke never contacted anyone regarding Chubb insurance and that Burke abided by Smithsonian policies. In an arrangement negotiated with Small, Burke was allowed unlimited leave and outside activities. Burke announced her resignation last week, effective in September.
Rep. Robert A. Brady (D-Pa.) said the Smithsonian Board of Regents should demand Burke's immediate resignation. Brady, chairman of the House Administration Committee, which also oversees the Smithsonian, criticized as inadequate a policy announced last week prohibiting Smithsonian executives from receiving outside compensation.
"Burke apparently has been AWOL from the institution much of the time -- the independent review committee found that she has taken off about one-quarter of the work days during her seven-year tenure because of service on boards and non-Smithsonian activities," Brady said in a statement. "The new Smithsonian policy announced last week, which would prohibit much of this extraneous activity, does not take effect until after Burke's departure, potentially allowing her to continue to moonlight. This cannot be tolerated."
Kilberg said Burke has not been asked to step down from the Chubb board or other outside activities, which brought her $10 million in income since joining the institution, where she earns $400,000 a year. "So long as it is permitted by the regents, she will stay on the board" of Chubb, Kilberg said. He added that Burke was able to perform her job effectively by working nights and weekends.
The committee also criticized the regents for allowing the conflict of interest to occur unchecked. The panel found that Small and Burke put their board service on financial disclosure forms, but there was no evidence the regents ever saw those forms. Unlike Cabinet secretaries and their deputies, Small and Burke's forms were "confidential" and not publicly disclosed. Also, until 2004 the forms were submitted to Small's executive secretary instead of the chief ethics officer, General Counsel John Huerta, who said he learned of Burke's service on the Chubb board by accident in 2004. Huerta told the independent panel he had asked Small to submit a letter of recusal for himself and Burke but never got one.
After the panel began its investigation earlier this year, Burke submitted a letter recusing herself from Chubb business, Kilberg said.
A Smithsonian insurer since 1992, Chubb has increased its business with the museums to about $548,341 this year. The independent panel said decisions regarding Chubb should have been up to the Board of Regents and taken away from lower-level employees lest they "believe themselves obligated to steer business to a company on whose board their superiors serve."