By James V. Grimaldi and Jacqueline Trescott
Washington Post Staff Writers
Thursday, August 2, 2007
The Smithsonian Institution yesterday replaced Gary M. Beer as chief executive of the museum complex's embattled business unit after an inspector general's report found he had abused his institution-issued credit card and billed thousands of dollars in expenditures that were unauthorized or lacked evidence of a business purpose.
Acting Smithsonian Secretary Cristián Samper named Tom Ott, president of Smithsonian Publishing, as the acting chief executive of Smithsonian Business Ventures. Ott, 48, immediately replaces Beer, the founding chief executive of the unit who had announced he would remain on the job until September when his contract ended. The early departure was "by mutual agreement," Samper said. "We wanted to turn that page."
Samper said yesterday he would direct Beer to reimburse the Smithsonian $30,000 for expenses that were deemed "unsupported," or lacking documents to justify them as reasonable business expenses. Samper also said the Smithsonian would reclassify about $65,000 in inadequately substantiated expenses as reportable income, meaning Beer might have to pay additional income taxes.
Beer did not submit vouchers or expense reports as required under Smithsonian policy and instead arranged for his credit card to be paid directly by the Smithsonian, Inspector General A. Sprightley Ryan found in a report released yesterday. He routinely wrote checks to cover personal expenses he charged, though personal use of the card violated Smithsonian policy, the report said.
A fiscal officer working for Beer often authorized Smithsonian payments to the credit card company that exceeded the amount owed. That happened so frequently that Beer's account carried a credit for 36 of the 60 months reviewed by the inspector general, Ryan said.
Beer's attorney, Leslie Kiernan, said in a nine-page letter to the Smithsonian that Beer had done nothing wrong. She blasted the inspector general's 16-month investigation of Beer and the business unit, saying the probe had "devolved into an inquisition" and the final report "falsely and publicly smears Mr. Beer and the institution itself."
"The IG report confirms that I received no outside income or perks, and found nothing illegal or unethical," Beer said in a letter to his staff announcing his early departure.
"This is a case about misplaced records, not misappropriated funds," Kiernan said. "There is no evidence that any of the expenses at issue were incurred for Mr. Beer's personal benefit and all evidence that is now available show that they were incurred during routine business travel, for business dinners and other obvious business purposes."
Marina Ein, a spokeswoman for Kiernan, said Beer disagreed with the Smithsonian's reclassifying certain expenses as income.
Rep. Doris Matsui (D-Calif.), a member of the Smithsonian's governing board, testified during a House Administration Committee oversight hearing that the situation at the business ventures unit "is something where we believe we found gross problems. I would call it a misadventure."
The chairman of the committee, Rep. Robert A. Brady (D-Pa.), agreed with Matsui. "There is a strong sense in Congress that the Smithsonian has veered off course in recent years."
Beer, a former executive of the Sundance Institute, came to the Smithsonian in 1999 shortly after the institution created the separate business unit to run museum shops, theaters, concessions and publications and forge new business ventures. At the time, outside consultants predicted the stores would make twice as much money. But SBV profits fell 14 percent, from $27.9 million in 1999 to $23.9 million in 2006.
The review of Beer's expenses from 2000 to 2005 also found that a subordinate routinely approved Beer's expenses, and that the unit followed no written expense-account policy.
"Such practices do not set the proper tone, especially for an entity that is part of a nonprofit organization," Ryan said.
The investigation found that Beer charged the Smithsonian for use of a limousine service about 160 times, costing $30,000. Some of the limousine charges were for trips in Washington, though the Smithsonian also paid $28,000 for his use of a parking garage -- and $40 for two parking tickets.
Ryan did not recommend that Beer reimburse most of the limousine charges, though she deemed them to be unauthorized under Smithsonian policy.
Beer contended that a car service was more efficient and that the unwritten Smithsonian Business Ventures policy permitted use of a car service. Ryan noted that other Smithsonian executives knew that he was using chauffeured cars.
Sen. Charles E. Grassley (R-Iowa), who had requested a review of Smithsonian expenses, criticized the inspector general for letting Beer off the hook for the charges. "It is clear that just like former Secretary [Lawrence] Small, Mr. Beer thought he was entitled to champagne," Grassley said in a statement. "The CEO of SBV must have thought he was living in the emerald city when he paid the Oz and Oz Town Car Corporation and other limousine services tens of thousands of dollars to provide him a gold-plated ride."
Samper ordered a review of the Smithsonian travel regulations to comport with Federal Travel Regulations and said he would review policies regarding the use of car services. He also said he had appointed a task force to review the structure of the eight-year-old Smithsonian Business Ventures.
Rep. Vernon Ehlers of Michigan, the ranking Republican on the House committee, suggested disbanding Smithsonian Business Ventures, changing its name or reconfiguring it to prevent it from being something "autonomous that can run wild, as this one has done."
The investigation of Beer's compensation and expenses has been mired in controversy since it was launched in March last year. Ryan's predecessor launched the investigation, but resigned after then-Secretary Lawrence M. Small called her and asked her not to conduct the review.
The Beer report had been due in the spring. But, in recent months, Ryan has been battling with Beer's outside attorney, Kiernan, a white-collar criminal defense attorney and ethics specialist at Zuckerman Spaeder LLP.
Ryan said documents kept by Smithsonian Business Ventures, which Beer oversaw, were a mess, making the investigation "protracted and difficult."
Kiernan said it was Smithsonian Business Ventures' fault for the disarray of documents, most of which are filed away in 800 cardboard boxes in storage. The inspector general's "recommendations rest on the legally unsupportable premise that Mr. Beer should be held personally responsible for the Smithsonian's failure to locate years-old accounting records."
The inspector general also found that SBV did not have a written policy regarding business expenses.
Beer told the inspector general that the unit did have a policy, but it was not written and was different from Smithsonian policy.
Beer was not required to submit formal vouchers or expense-account reports required by other Smithsonian Business Ventures employees, the controller, Robert Schelin, told the inspector general.
Beer's attorney submitted to the investigators a sworn declaration from Schelin asserting that "in his view all expenses submitted were reasonable, in furtherance of SBV's mission and supported contemporaneously by adequate documentation."
The inspector general found a repeated practice of paying advances on Beer's credit card. Ryan pointed to a memo sent by Beer's assistant to the controller in December 2004. "The balance due on [the] account is 7,237.09, which is due by Jan. 6, 2005. Do you want to issue a check for $10,000?" The controller responded with a handwritten note, "Approved for Payment; Bills to be reconciled."