Trustees of the Freedom Forum, the Arlington-based foundation led by USA Today founder Allen H. Neuharth, agreed yesterday to pay the forum nearly $174,000 to settle allegations of improper use of the organization's funds for lavish travel, custom furniture and the promotion of Neuharth's autobiography.
In an unusually detailed agreement with the New York state attorney general, trustees of the nonprofit foundation said they would generally refrain from flying first class, using limousines or staying in luxury hotels for foundation meetings -- all frequent practices until 1994.
Each of the 14 trustees will pay $10,000 to reimburse the organization for these past expenses, and will institute new cost-control and conflict-of-interest policies.
Neuharth, the chairman of the foundation, will pay an additional $30,000 to compensate it for funds used to buy and promote copies of his book in New York state that investigators called an attempt to manipulate its standing on the best-seller lists in 1990. He will also pay $3,957.50 as reimbursement for a massage table and electronic treadmill that were bought at foundation expense for his office.
In an interview, Neuharth called the purchase of the massage table and treadmill "a dumb thing to do." But the settlement involves no admissions of wrongdoing by the forum or its officers, and Neuharth and several other trustees yesterday expressed disagreement with almost every aspect of the settlement. They said they signed the agreement merely to avoid an expensive court fight.
"The agreement seems to say that they haven't found very much," said Neuharth, the former chairman of Gannett Co., the Arlington-based media giant. He described the investigations as "a matter of judgment over expenditures, and different people have different judgments."
But Sean Delany, an assistant attorney general for the state of New York, called the pattern of spending by the Freedom Forum "very unusual."
For example, he said the organization spent $120,000 decorating its boardroom, and purchased a $40,000 desk for Neuharth's use.
"It appears that the corporate mentality may have been transferred to the charitable world, and that is not appropriate," Delany said. "We don't ask nonprofit groups to take a vow of poverty, as Al likes to say, but we do ask them to take a vow of frugality." Neuharth was known for expensive tastes while running Gannett.
The three-year investigation of the Freedom Forum by the New York attorney general's office grew out of press accounts, including those in The Washington Post, that detailed the Freedom Forum's spending from 1989 to 1993.
The stories discussed repeated trips by the trustees and their spouses to exotic locales and cities hosting major sporting events, salaries far in excess of those paid by foundations of similar size, and elaborate furnishings for the foundation's $17 million headquarters, such as a carved stone staircase and expensive artwork featuring Neuharth's image.
Although it does not solicit public donations, the Freedom Forum enjoys tax-exempt status, and its financial activities are subject to oversight by state and federal officials. Government auditors regularly examine tax-exempt organizations to prevent "self-dealing," a vaguely defined term for the use of an organization's funds for personal gain.
The Freedom Forum runs a variety of journalism education and scholarship programs, and is constructing a $30 million museum in Rosslyn focusing on the history and future of the news media.
It has also conducted a variety of unrelated activities, such as awarding six-figure cash "Free Spirit" prizes to retiring Supreme Court Justices William J. Brennan and the late Thurgood Marshall. Recently appointed trustees include columnist Carl Rowan, astronaut Alan B. Shepard and former Canadian prime minister Brian Mulroney.
New York authorities had jurisdiction over the organization because it is still chartered in that state, despite moving its headquarters from Rochester, N.Y., to Arlington in 1989, when it was still known as the Gannett Foundation. In 1991, it severed its ties to Gannett Co., the media company once headed by Neuharth and also based in Arlington, and changed its name to the Freedom Forum.
The Freedom Forum was represented by two law firms in the matter, including one in which former Senate majority leader and White House chief of staff Howard H. Baker Jr. is a partner.
New York officials said they wanted the Freedom Forum to adopt a conflict-of-interest policy after the state's investigation revealed that some trustees were unaware of a personal relationship between Neuharth and design consultant Barbara Whitney, who received "substantial sums" for work on the headquarters. Neuharth has said that current trustees were fully informed of major policy decisions.
Columnist Rowan, who called the state investigation "unfair and unjust," said he was "never left in the dark on any major proposal." Rowan is one of seven current trustees who weren't with the organization when most of the questionable expenses were authorized. But the full 14-member board nevertheless agreed to pay $10,000 each to meet terms of the settlement agreement.