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Smithsonian Makes Changes At Troubled Business Unit

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By Jacqueline Trescott and James V. Grimaldi
Washington Post Staff Writers
Saturday, June 21, 2008

The Smithsonian Institution yesterday officially changed the name of its troubled business unit and revamped the way profits are distributed to its museums.

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Smithsonian Business Ventures was created in 1999 to coordinate the for-profit divisions of the Institution, such as Smithsonian magazine and other publications, the gift shops and Imax theaters. But the unit had an often-contentious relationship with the museum staffs, and its leadership was criticized for the amount of money spent on salaries and expenses.

A member of the Smithsonian's Board of Regents told Congress last year that the division had "gross problems."

In an e-mail distributed to the staff yesterday, Acting Secretary Cristián Samper talked about improvements, not deficiencies. "Effective July 1 we will officially change the name of SBV to Smithsonian Enterprises (SE) to better reflect the diverse nature of its activities and to capture the entrepreneurial and collaborative spirit we hope will characterize its work in years to come," Samper wrote.

One symbolic move was to change the division leader's title from chief executive officer to president. Gary M. Beer, the last permanent CEO, resigned last year after the Smithsonian inspector general found Beer had misused his business credit cards and billed thousands of dollars in unauthorized expenses. The inspector general did not "see any expenditures that violated the law," according to the report.

Beer's salary in 2005 was $570,317. His separation agreement with the Smithsonian, obtained in a Freedom of Information Act request by The Washington Post, showed that Beer was paid a $180,000 settlement after he resigned in July 2007. The agreement also called for him to reimburse the Smithsonian $28,700 for expenses that lacked appropriate documentation. Beer recouped $29,000 for "unused vacation." He was entitled to unlimited leave at the time, as were most Smithsonian senior executives.

The Smithsonian also filed forms with the Internal Revenue Service reclassifying more than $60,000 of Beer's expenses as personal income. In the separation agreement, the Smithsonian acknowledged that Beer objected to the reclassification.

The business unit's performance had been lackluster during Beer's tenure. SBV profits fell 14 percent, from $27.9 million in 1999 to $23.9 million in 2006, prompting some of the Institution's museum directors to call for a complete overhaul of the unit.

Last year, SBV made a profit of $26.6 million in unrestricted funds, according to the Smithsonian. But it is expected to show substantial losses this year because its catalogue and online stores had to shut down in March when its distribution center, owned by an independent company, went bankrupt. The two operations are expected to start taking orders in August, say Smithsonian officials.

In the past, each museum had a separate formula for how much money it received from its gift shops and other profit-making operations. The museum directors argued that the system was unfair, and the varying methods created a combative relationship with SBV executives. The business people, on the other hand, said the museums weren't very cooperative, criticizing the selection of merchandise and the placement of the stores.

Samper said yesterday that the museums, starting Oct. 1, would received a 50 percent share of the profits after expenses. The other 50 percent goes to the overall Institution.

Tom Ott, the director of the Smithsonian's media division, is the acting president of Smithsonian Enterprises until a permanent selection is made by the incoming Secretary G. Wayne Clough. Clough, the former president of Georgia Tech, is scheduled to start July 1.


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