Spending by the Smithsonian Chief

On Monday, Feb. 26 at 2 p.m. ET, Post reporter James Grimaldi discussed his story revealing the results of an audit of the secretary of the Smithsonian Institute, which turned up nearly $90,000 in unauthorized expenses from 2000 to 2005.

Smithsonian Head's Expenses 'Lavish,' Audit Says (Feb. 25, 2007)

The transcript follows:

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James Grimaldi: Good afternoon. There are a lot of questions. But before we get started, I encourage you to go to the source documents and review them for yourself. They are quite informative. They are listed as related documents on the story.

Employment agreements with Secretary Lawrence M. Small (pdf)

Regents audit committee response to Inspector General's findings

Accountant's report on Secretary Small's Compensation(pdf)

Inspector General's confidential letter to Board of Regents(pdf)

Sen. Grassley's letter to Smithsonian Board of Regents (pdf)

Ok, let's talk.

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Washington, D.C.: Who knew running a museum was such a cushy deal? It's frustrating to read this article after hearing so much about how the Smithsonian system is so strapped for cash that at one time they were considering charging admission fees.

Do you think we'll ever get an explanation from Small himself? He really thought he could waive any policy that applied to him?

James Grimaldi: Secretary Small declined my request for an interview, just as he declined my request for an interview a few years ago when we wrote about animal deaths at the National Zoo and the zoo director.

Also, as the Inspector General noted, his spokesman provided the Post inaccurate information in the past about his expenses.

Sen. Charles Grassley seems to agree with your comments about the expenditures. He put it this way in his letter to Chief Justice Roberts: "I find it unconscionable that, at a time when the Smithsonian can't find the money to fix a leaky roof, it can find the money to spend $212 for flowers for an individual, $334 for lunch for the Secretary and guest, $2700 for Cosmos Club membership for the Secretary and his wife, and $27,000 in car service for the Secretary."

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Washington D.C.: I read the letter fron Sen. Grassley to Chief Justice Roberts. It requests numerous items of information and raises additonal questions abiut the integrity of the SI's Board of Regents. Do you believe that the Secretary will face any disciplinary action, be forced to step down or continue to dishonor his office for the remainder of his term?

James Grimaldi: I believe that the Board of Regents, largely led by Roger Sant, will respond to the Grassley letter. Mr. Sant is chairman of the executive committee and the audit committee.

I have no indication that the regents plan any disciplinary action. I asked Mr. Sant if they planned to discipline Mr. Small, noting that Smithsonian employees have been disciplined for smaller indiscretions. He indicated that they were unlikely to do that.

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Washington, D.C.: Mr. Grimaldi--

As a former Smithsonian staff member, I recall how super-tight money has been for the Institution for many, many years. In fact, the Arts and Industries Building is now so dilapidated that it is closed to the public. For years, staff people had to be super-creative just to keep the Smithsonian running--not to mention small issues like updating exhibitions or conducting essential research.

The Congress for decades has demanded that the Smithsonian survive on appropriations that always fall short of the Smithsonian's real needs--including renovating the systems that make the buildings safe for the public, the staff and the collections themselves.

Secretary Small was appointed apparently because he would bring a businessman's approach to running the place. Across the country such businessmen are used to lots of perks of the sort that ordinary people can only dream of. Clearly Mr. Small decided that running the Smithsonian as a business meant that he would be treated like any ordinary CEO.

The problem is that the Smithsonian is not a business. But it must run its own businesses to make up for the missing Congressional appropriations. (And unlike any real business, the Smithsonian officers and employees are supposed to live the life of a mid-level bureaucrat--not an attractive option to someone who has become used to CEO perks.) The Board of Regents (just like any business' board of directors) apparently considers any criticism of its appointed Secretary to be criticism of the Regents themselves.

Frankly, I don't see any resolution of this mess. Do you? Have I missed some important piece of evidence? Or is the Smithsonian doomed to continual decay and the occasional scandal?

P.S. Yes, I agree that Secretary Small's expenditures and perks are quite out of keeping with his mission to protect the Smithsonian--but the problem is much deeper than his inability to limit his expenses. This kind of scandal is likely to persuade many donors to find other organizations who manage to devote 90% of every dollar raised to support the organization's work.

James Grimaldi: Sen. Grassley has requested a lot of information from the regents and does not appear interested in letting up. In the past, he has been involved in reforms regarding abuses at other nonprofits, including The Nature Conservancy, the Red Cross, American University, United Way and the Getty.

Here is another excerpt from his letter:

"The Audit Committee recommended, and the Board approved, sweeping the unauthorized purchases of alcohol and gifts under the rug with no one being held accountable. This is the type of action I would expect from the boards of public corporations that are completely dominated by an out-of-control CEO - I expect more from the Smithsonian Board of Regents."

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Locking the barn door after the horses....?: From the article: "The board last month accepted the committee's decision to dismiss the findings and defended Small's expenses as "reasonable." The regents also decided to rewrite several rules to authorize many of the transactions that had been deemed in violation of policy." Isn't this just the latest of several instances where leaders of public, semi-public, or private institutions flaunt the rules guiding spending, but the oversight agencies prefer to let bygones be bygones, write off the losses, and focus on clarify the rules for the future? It feels like there is no accountability in the present anymore.

James Grimaldi: When I spoke with Mr. Sant on Saturday afternoon, he seemed surprised when I reviewed some of the regents' actions, including the change in Mr. Small's employment agreement to waive preapproval for his wife's paid travel (which is required for other Smithsonian employees.)

He was surprised. I read him the paragraph from Small's emlployment agreement that was changed to read thusly:

"The Secretary's spouse is authorized to travel at the Smithsonian's expense when there are business reasons for her to do so."

Mr. Sant then said that change was "a mistake" and went further than intended. He said they would be reviewing that again because the regents thought Small should be required to get pre-approval for his wife's paid travel.

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Washington, D.C.: Sounds and reads like American University (Ben Ladner) deja vu all over again. This time, it's the taxpayers paying the price. Not quite, but almost as ridiculous as how the powers that be over at the American Red Cross get taken care of.

James Grimaldi: There is one noteworthy similarity between American University and the Smithsonian Institution. One person has served on the boards of both institutions--Robert P. Kogod, a Washington real estate developer and philanthropist.

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Northeast Washington, D.C.: After looking thru the documents it seems clear that a lot of his expenses aren't really documented. How can this happen and how can the board say, well, that's OK? My employer will not pay me for an expense I don't have an original receipt for...how does Small get away with it?

James Grimaldi: There were about $29,000 in unsupported transactions, found in schedule B1 of the Cotton report. The IG said most of those transactions were from 2000 and 2001. The IG said: "It is not surprising that some percentage of records could not be located, given the time elapsed, the relocation of the Office of the Comptroller (incluind its voluminous and at that point poorly organized records) in 2000, and the turnover in personnel since then."

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College Park, Md.: Would you happen to have an address handy for the Smithsonian Regents? I'd like to let them know just how appalled I am by their enabling Small's behavior. I don't care how much money he raises for his pet projects, he's a terrible steward for of our nation's museums.

James Grimaldi:

The Smithsonian Institution

1000 Jefferson Drive, SW

Washington, DC 20560

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Washington, D.C.: Why have the Democrats in Congress not taken up this issue? Have they said anything? Why is Sen. Grassley the only voice on this matter?

James Grimaldi: I don't know if I can answer that.

Under the Smithsonian charter, there are six congressional regents on the board.

* Sen. Chris Dodd (D-Conn.) has just replaced former Sen. Bill Frist (R-Tenn.)

* Sen. Patrick J. Leahy (D-Vt.)

* Sen. Thad Cochran (R-Miss.)

* Rep. Xavier Becerra (D-Calif.)

* Rep. Sam Johnson (R-Texas)

* Rep. Ralph Regula, Representative from Ohio

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Washington, D.C.: I cannot tell you how incensed I am about the findings of your reporting. It makes me not want to even step foot in any of the museums anymore. And the fact they won't even speak to you about this is even more telling -- what are they trying to hide? What is it going to take before salaries of charity CEOs are finally controlled? First Ladner, now Small, what has to happen before nonprofit groups realize that they are out of control?

(And note to Smithsonian -- when you fill Small's job when he is finally forced out over this, please include "Must drive yourself to/from work and all events, or take regular District of Columbia taxis" to save us taxpayers and donors all the car-service fees.)

James Grimaldi: In addition, the Smithsonian generally ignores my Freedom of Information Act requests. Citing a DC Circuit opinion, the Smithsonian attorneys state that the institution does not have to abide by FOIA. (The ruling states that because Congress created the Smithsonian, and FOIA does not apply to Congress, that it should also not apply to the Smithsonian.)

Still, the Smithsonian in the past has said that they try to abide by FOIA regardless that it does not apply. (Though FOIA does not apply to Congress, the GAO honors FOIA requests all the time.) However, I requested Mr. Small's expenses in a FOIA last April and the institution ignored my request.

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Citizen: Is this right? A $193,000 a year housing fee for a house that is paid for and that is supposed to represent 50 percent of his actual housing expenses? He spends over $32,166 a month just to house himself? That is 11.52 million over 30 years not accounting for more increases. I guess this explains the $12 admission to the Air and Space museum at Dulles airport.

James Grimaldi: The Dulles museum--which I highly recommend as a wonderful educational experience--does not charge an entrance fee. However, there is a fee (I think you're right that it is $12) to park your car.

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Arlington, Va.: The Smithsonian's Board rejected the IG's report. Wouldn't the Board be responsive to costs and benefits or are they all friends of Mr. Small?

James Grimaldi: There are two ex officio members of the board -- the chief justice (Roberts) and the vice president (Cheney). Traditionally, the chief is elected by the Board of Regents to be Smithsonian chancellor.

In addition to the six congressional board members (three House, three Senate), there are nine "citizen members," who are selected by a nominating committee (unclear to me where the list is developed within the Smithsonian) and then sent to Congress. The citizen members are approvd by a joint resolution of Congress.

Your question sounds like the ones from the ranking member of the Senate Finance Committee regarding board independence. Grassley said, "Please explain how board members are selected and who nominated, proposed or actively supported every citizen board member since January 1, 2000."

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Washington, D.C.: Nothing about this report is surprising. I sent you an email as well James, and all I can say is that this is par for the course. The Smithsonian has been getting museum employees at high levels rich for several years by classifying the upper management as Trust Employees instead of Federal Employees. Add in garbage like paying someplace around $70K for Steve Shaiken (former President of Museum Retail) to move to D.C. only to see him vanish 11 months after he was hired (and as soon as he didn't have to repay those expenses) to take a job in Florida with Royal Carribean. It has been mismanaged for a very long time, and the creation of Smithsonian Business Ventures only enabled it more with people like Gary Beer getting exorbitant salaries only to sell the museums off piece by piece in exclusive contracts.

James Grimaldi: Feel free to e-mail me with any suggestions about what to review at the institution at nzp@washpost.com. (That is a tip mailbox we set up some years ago when we were looking at the National Zoo.)

The Smithsonian inspector general did two other reports that might interest you:

Executive Compensation at the Smithsonian, January 19, 2007

Executive Compensation at Smithsonian Business Ventures, Phase I, January 19, 2007

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Fairfax, Va.: I was left with the sense that the regents feel their role and that of the Secretary are, above all, to raise money. And that all rules, procedures and evaluations should be chiefly based on driving the net take. It seems to me that this has been the accepted norm for nonprofit boards: Recruit rainmakers. Sen. Grassley evidently disagrees, and I can't swallow it whole myself, but Social Darwinism (neocon) seems to be the prevailing ethos of our time. In this context (objectionable as some of us find it), isn't the board and audit committee's response appropriate for a fiduciary? That is, if the rules are obstacles to maximum fundraising, they are bad rules. Is that your take on what Sant et al are thinking?

James Grimaldi: Yes, I believe that's what their thinking is. But I'm not sure it will hold up if Grassley gets his way. He has forced reforms on other nonprofits. His work led to changes at American University, which shares a board member with the Smithsonian. He most recently got changes at the Getty museum--in response to an excellent series of articles in The Los Angeles Times.

Grassley was peeved that the board approved "first-class travel for all travel by the Secretary and, in certain circumstances, by the Secretary's spouse." The senator's reaction: "This is incomprehensible. First-class air travel is extremely rare for charities and is certainly not standard or best practice for charities."

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Washington, D.C.: Isn't this all totally moot because the guy has donated >$400K to the Smithsonian over recent years, so he is basically spending his own money? I mean, I know he may have broken some rules or not documented things right, but he's clearly not trying to benefit financially. He just figured that because he was basically providing the funds for these things from his personal money, maybe it was OK if he didn't fill out a few forms.

Is this right? Or am I missing something?

James Grimaldi: The audit did find some expenses that were for his personal benefit.

Also, his donations to the institution were eligible for a tax deduction.

The IG determined you can't make a contribution to a tax-exempt organization, take a tax deduction and then use that charitable donation as your own slush fund. Once the institution receives the money, it is subject to the rules, regulations and policies of the organization.

She also said that there might be some significant tax implications with the Internal Revenue Service regarding how this was handled.

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James Grimaldi: Thanks again for all your comments. Stay in touch.

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