Tuesday, March 27, 2 p.m.

Smithsonian's Small Quits in Wake of Inquiry

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James V. Grimaldi
Washington Post Staff Writer
Tuesday, March 27, 2007; 2:00 PM

Post reporter James V. Grimaldi was online Tuesday, March 27 at 2 p.m. to discuss the resignation of Smithsonian Secretary Lawrence M. Small, who faced mounting questions about his business expenses and management operations.

A transcript follows.

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James V. Grimaldi: Good afternoon. Looks like there are a lot of comments and questions. Let's get started.

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Silver Spring, Md.: I recently heard that Congress was withholding funding from SI using the excuse of Small's misuse of funds. How do they (Congress) think that this impacts all of the scientific and other public value related activities of SI? It seems that Small should have been removed years ago based on the direction he was taking the Institution. The Board of Directors also seems at fault for not taking a more active role in ensuring that the mission of SI was the main goal of the administrator of the Institution (Small), so why is the Institution suffering because of a few men (and women) behaving poorly?.

James V. Grimaldi: We reported in our story today that Senator Grassley plans to withdraw his amendment that would have frozen the $17 million increase in the Smithsonian budget. He will tell the conferees on the budget resolution to remove the amendment.

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Rockville, Md.: Will the secretary's resignation ease the budget crisis in the Smithsonian, or is the crisis a product of a larger governmental shortfall? It's my understanding that much if not most of the Smithsonian's funding comes through donors and "business ventures" rather than tax dollars.

James V. Grimaldi: Well, that's not correct, really. About three-quarters of the Smithsonian's $1 billion budget comes from federal grants and appropriations. The Smithsonian Business Ventures has not been very successful, according to a recent report of the Inspector General of the Smithsonian, who said that dollars adjusted for inflation show a drop in "business" revenues. Separately, there is a large shortfall in funds for routine maintenance of buildings that suffer water leaks.

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Downtown D.C.: On Larry Small's housing expenses: Can you explain (maybe again) what the actual arrangement was on his housing expenses? Was there perhaps a tax advantage to calling the money a reimbursement for expenses, rather than either plain compensation or a housing allowance? And in particular, has there yet been an answer to how many times Larry Small's home was actually used for Smithsonian entertaining? Should the regents be blamed for agreeing to his deal in the first place, or did Small push a reasonable deal to unseemly limits?

James V. Grimaldi: The housing allowance is hard to get your head around.

Small was allowed to claim reimbursement of up to 50 percent of his actual housing costs, up to $150,000 per year. He was to be paid after he provided documentation of such expenses as mortgage payments, homeowner's insurance, utilities and real estate taxes, or "equivalent costs of home ownership," according to a copy of the employment agreement.

A few months after Small became secretary, the inspector general said, he stopped filing the required monthly documentation "for administrative ease."

Instead, Small calculated his housing expense using a mortgage interest rate that was "hypothetical," the inspector general noted, because he owned his home free and clear.

I am not sure the tax implications for the housing allowance, and I am not privy to Mr. Small's tax returns. That is a question for the Internal Revenue Service, and the inspector general, a couple of times in her report, indicated that Mr. Small might face certain tax implications.

There are legitimate questions about how Mr. Small's contract was negotiated by the executive committee at the time -- in 1999. Also, there is a question about whether any attorneys reviewed this contract. I have not investigated that question in detail.

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Washington, D.C.: Was there any one approving his expenses? For example, when he used the money to pay for his personal house cleaning, did he submit vouchers to get reimbursed? Or did he just charge such expenses on a government credit card?

James V. Grimaldi: He was required to provide receipts of his expenses, but the inspector general in her review found that he was allowed to stop filing receipts after a few months for "administrative ease."

Small's housing expenses were submitted to the inspector general after the fact during a compensation review.

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Arlington, Va.: I'm a regular donor to the Smithsonian, but I'm going to have a hard time justifying any donation this year. What is it about certain CEO's moving to the non-profit/charity sector that believe they should be compensated like a Fortune 500 CEO? Surely the Smithsonian can find someone who can raise funds like Small and still abide by expense guidelines? Or is that an incorrect assumption?

James V. Grimaldi: Roger Sant, chairman of the audit committee and the executive committee, said the Regents wanted to bring his pay in line with the median for college presidents and museum directors.

With regard to best practices: After the IG issued her report finding that Mr. Small charged unauthorized travel for his wife, Sandra, (Small's wife's spent $5,700 in Smithsonian money to travel to Cambodia), the regents changed Small's employment agreement to waive preapproval, which is required for other Smithsonian employees.

Spousal travel is frowned upon by the Independent Sector on Nonprofits. The group's draft principles state: "Charitable organizations should not pay for nor reimburse travel expenditures (not including de minimis expenses of those attending an activity such as a meal function of the organization) for spouses, dependents, or others who are accompanying individuals business for the organization unless they, too, are conducting business for the organization."

After our story was published, the Regents said they would go back and review that practice.

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Bremo Bluff, Va.: Sorry, but I just have to ask...

What the heck were Small and the regents thinking?? The guy is filthy rich? Did he think no one would complain about raiding the piggy bank? Did the regents think no one was going to notice? It is mind-boggling.

James V. Grimaldi: I have attempted to gain access to Mr. Small's expenditures for years. But the Smithsonian ignores my FOIA requests.

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20008: Have the regents appoitned a search committee to find the next Secretary? Or is that still ahead of us?

James V. Grimaldi: Yesterday's Smithsonian news release said, "The Regents' search committee, chaired by Alan G. Spoon, is being organized and the search process will begin immediately."

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Upper Marlboro, Md.: Really - who do you all think Mr. Small was trying to attract as big money donors for the Smithsonian? Me? Joe-Joe down the street? To paraphrase Mr. Tony (that's Kornheiser) from his show this morning, Small could not show up to fundraisers on Metro! Yes, the chandelier actually had to be washed, and a limo was necessary, and the food had to be perfect. The money he was after would not expect anything less! Proletariat dreams of socialist utopia will not raise big money in these United States! Gimme a break!

James V. Grimaldi: The Smithsonian has not responded to requests from The Post or the Senate Finance Committee to provide information on how often Small has entertained at his home. A spreadsheet of Small's expenses given to the inspector general makes reference only to two dinners at the secretary's home, both in 2000. Investigators said they have seen documents showing that Small occasionally charged for catered events that he hosted outside the institution. Most of those events were held at a separate apartment on Calvert Street NW that Small used as a gallery for his own Amazonian artifacts, investigators said.

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Fairfax, Va.: First of all, kudos to both you and Jacqueline Trescott for a job well done. My question is: are the investigations into SBV still underway or have they ended with the Small resignation? Specifically are the expenses of Gary Beer, the relocation cost of Steve Shaiken, and the accounting/revenue sharing practices of SBV still a matter of OIG or Washington Post investigation?

James V. Grimaldi: Sure! And if you have any leads, e-mail me at grimaldij@washpost.com.

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Washington, D.C.: It is against the law for them to ignore your FOIA requests. You should have filed a law suit, then you would have seen some action.

James V. Grimaldi: The Smithsonian relies upon a DC Circuit Court of Appeals decision that said FOIA does not apply to the Smithsonian. The court ruled that because the Smithsonian is a creation of Congress, and because Congress exempted itself from FOIA, that therefore FOIA does not apply to the Smithsonian. Ironically, if that decision had been appealed to the Supreme Court, the chancellor of the Smithsonian (who under law is the U.S. chief justice), would have presided over the case (unless he had recused himself).

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Fairfax Station: I actually had dinner once at Small's home -- a very nice, small affair. But not once did he offer to let me use the lap pool. And that's where it gets obscene, doesn't it? I can accept being reimbursed for use of the home on occasion for private parties, but how does that extend to being paid for replacing the heater in the pool? I admit to stretching some expenses now and then when traveling for business (did I really need to order an entire bottle of wine instead of just two glasses?) but how does it get to the point that one can smugly justify reimbursements for normal repair and maintenance on one's home?

James V. Grimaldi: It was permitted under the terms of his contract as negotiated with the Smithsonian. You can find that here:

http://www.washingtonpost.com/wp-srv/nation/documents/smithsonian/employmentagreement.pdf

And other documents under our full coverage area: http://www.washingtonpost.com/wp-dyn/content/linkset/2007/03/26/LI2007032600697.html

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Fairfax, Va.: Hallelujah! It's about time they got rid of Small. It's one thing to run the Smithsonian in a business-like way; it's another to turn it into a commercial brand. I've distrusted Small since he first attacked the research side of the house, and I guess my misgivings were well-founded. We can only hope the search for a replacement will select someone with appropriate skills and values.

James V. Grimaldi: Mr. Small was the first secretary who was not a scientist or a scholar. (His predecessor, I. Michael Heyman, a lawyer, was former provost of the University of California-Berkeley.

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Arlington, Va.: Is Small going to be charged with any crime? I do not think a resignation is an end in itself.

James V. Grimaldi: There is no indication at all of a criminal investigation.

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Alexandria, Va.: At first I was outraged by this story, but I've since reviewed Mr. Small's accomplishments:

- Opened the NMAI and the Udvar-Hazy museums

- Presided over the renovations and reopening of the American Art Museum/Portrait Gallery

- Raised more money for SI in 7 years than it had in the previous 160 combined.

So, taken altogether, maybe he wasn't so bad after all?

James V. Grimaldi: Those are fair points to take from our story.

Small's critics, however, are quick to offer a counterpoint.

Sen. Grassley points out that a gift of $60 million from the Udvar-Hazy family for the new Dulles Air and Space annex was made in 1999 under the watch of Small's predecessor, Mike Heyman. Same for the $10 million from Ralph Lauren to save the Star Spangled Banner.

I have also been told that the $80 million from Ken Behring was a gift that had been in the works for a long time under Secretary Heyman.

In 1999, under Heyman, the Smithsonian raised $123 million, more than double the previous year.

On the Senate floor, Grassley said it was "insulting" to give Small credit for every dollar raised under his watch. After all, there are 18 museum directors and their No. 1 job is fundraising. There also is an extensive development office -- hardworking people who deserve credit for trying to raise money for the institution. And each of the 18 museums -- and a 19th in development -- has fundraisers.

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James V. Grimaldi: Thank you for the participation today. It was good to hear from everyone. Please feel free to send any tips to us at nzp@washpost.com. We will try to follow up on any leads. Thanks.

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© 2007 The Washington Post Company

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