Current Events
American University President Benjamin Ladner is Placed on Administrative Leave After Questionable Use of University Funds
Students at AU say "Nothing less than honest and open stewardship of student funds should be accepted."
washingtonpost.com
Senate Panel Requests Records From AU on Ladner and Board
By Susan Kinzie and Valerie Strauss, Washington Post Staff Writers
Friday, October 28, 2005; B01
LINK
The Senate Finance Committee has asked for every document related to ousted American University president Benjamin Ladner's severance package and compensation and for the board's plans for an audit of all 11 years of his tenure.
In a four-page letter, Sen. Charles E. Grassley (R-Iowa) asked for details on all no-bid contracts over $100,000, copies of all correspondence with the Internal Revenue Service for the past five years, biographies of each trustee and documentation of how the board made certain decisions.
AU is the first college to get an inquiry letter in an ongoing review of charities led by Grassley and Sen. Max Baucus (D-Mont.), and it broadens the scope of the committee's oversight. "It appears the AU board could be a poster child for why review and reform are necessary," Grassley wrote in a letter yesterday to the acting AU board chairman, Thomas A. Gottschalk.
Ladner lost the presidency this month after an audit questioned hundreds of thousands of dollars in personal and travel expenses. He has said that most of the spending was appropriate under the terms of his contract, but the board asked him to reimburse the university $134,000, declare an additional $398,000 in income over the three years investigated and pay the school the amount it would have withheld in taxes on that sum. On Monday, AU trustees and Ladner agreed to a departure deal, which included $950,000 in a one-time severance payment and about $2.75 million in deferred compensation.
In his letter, Grassley, the chairman of the committee, called "particularly troubling" a situation in which a nonprofit organization believes "that it is proper to provide approximately $3.75 million in payments to an individual who has failed to pay taxes on nearly $400,000 in income [for the past three years] after the board terminated his employment. Such actions raise significant questions about what other things a charity that has such a cavalier attitude toward the tax laws might be doing."
Grassley asked the board to explain the school's expense policies, how they were enforced for Ladner and whether it plans to change the rules. The questions build on those that auditors asked this spring but significantly expands the inquiry.
The university has until Dec. 1 to respond.
Gottschalk said yesterday that the board would do everything it could to cooperate.
In the days since the agreement on the departure deal, anger on campus has continued to mount. Hundreds of students have sent an e-mail to members of Congress asking for oversight of a board they said engaged in reckless behavior that could cost students and faculty and staff members millions of dollars.
Deans condemned the severance deal, student leaders issued angry statements, colleges within AU passed resolutions criticizing the board, and talks about potential litigation continued.
Board leaders reached out to the faculty and students yesterday with a letter apologizing, explaining, pledging reform and asking to move forward.
"We are chagrined that the board's own processes over the years did not allow us to have a clear understanding of what contracts were in place, their provisions, and the various forms of compensation which the president was receiving," said the letter, signed by Gottschalk and Gary M. Abramson, the board's chairman-elect. "We acknowledge this deficiency and we apologize to the entire community for it."
Trustees need "to be less isolated and insulated from the campus," they wrote, have improved and more inclusive governance and be more vigilant over financial matters. They explained how they considered legal advice, Ladner's successes at the university and campus sentiment before settling on terms for his departure.
Last week, Acting President Cornelius M. Kerwin told the Faculty Senate that the board is far more than an advisory group. "There is not an authority beyond them besides the Congress of the United States that issued the charter," he said.
Some students and professors wondered whether the United Methodist Church, which has supported the private university throughout its history, could sweep out the board, and some have contacted the leadership.
But the church can't do that, Bishop John R. Schol of the Baltimore-Washington Conference of the United Methodist Church, a trustee, said recently. The church's board of higher education has the authority to approve new members, though, he said.
Kerwin told faculty members last week that the board is not going to be dissolved. "Their ability to renew themselves is really quite robust," he said, because it's a self-perpetuating group. Even a move to limit the board's size a few years ago took an act of Congress, he said.
Kyle Taylor, the student government president, attended that meeting. Learning of the congressional action "triggered my realization that this was something we could actually do," he said of seeking changes to the board. "We feel we don't have representation on the board -- we're not on equal footing. We need to find power."
An online petition went public midday Wednesday urging members of Congress to take immediate action against the board. "The students should realize they are potentially doing great harm to their own university," which needs time to heal, said Tom Ingram, president of the Association of Governing Boards of Universities and Colleges. "The university board needs to get its act together -- it strikes me as a board that earnestly wants to do that. The university's reputation is at stake, and it's already suffered some blows."
American U. President Placed on Leave
The Board of Trustees of American University announced Wednesday that Benjamin Ladner, the institution's president since 1994, had been placed on administrative leave.
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The brief announcement from Leslie Bains, chair of the board, said that Ladner was on administrative leave pending the outcome of an investigation into personal and travel expenses.
The investigation, which is being conducted by outside lawyers and auditors, was revealed by The Washington Post early this month. The Post reported that it had received an anonymous letter - also apparently sent to board members - with allegations about spending by Ladner. According to the letter, Ladner used university funds to pay for the use of a French chef, an engagement party for his son, trips to Europe, and $200,000 in drainage and landscaping work at his home.
University officials - including Ladner - have declined to discuss the investigation. A spokeswoman said last night that the president would not comment on being placed on leave.
While the board statement did not say so, the spokeswoman said that the president's leave is a paid one. According to Internal Revenue Service records, Ladner's salary was $633,000 last year.
At American, Ladner has been credited with raising large sums of money to pay for new and renovated facilities, and with promoting links between the university and foreign institutions.
An editorial published Monday in The Eagle, AU's student newspaper, praised Ladner's fund raising skills and said that they had led to 'momentum' for the university. But the editorial also said that students, as the ones paying ever-increasing tuition costs, have a right to know how university money is being used, and that Ladner cannot expect "blind trust."
The student journalists criticized trustees for being evasive about the investigation. Nothing less than honest and open stewardship of student funds should be accepted, the editorial said.
Cornelius M. Kerwin, provost at the university, has been named acting president.
From The Eagle, student newspaper at AU:
There has been a lot of scrutiny of AU President Benjamin Ladner's use of his expense account in the wake of an anonymous tip to the Board of Trustees. The informant alleged that Ladner fraudulently wrote off expenses as university related. This is a serious charge and should be investigated fully, but it should also be remembered that Ladner is innocent until proven guilty.
However, students and parents should keep the Board's feet to the fire and demand more details be released. As the ones who are paying ever-increasing tuition costs, they have the right to be fully abreast of the findings of the investigation launched by the school.
The Board is currently being evasive and owes the AU communitymore than a "no comment" response. Little is even known about how President Ladner goes about his finances through the school. He could very well have walked a fine line that while not illegal, would still set a bad precedent. It would behoove the University to better explain the process.
In addition, the fact that the accusation was made anonymously is also troubling. AU has a process for lodging complaints, and since the tip came from a university employee, they should have known about this. Not every whistleblower needs to be the next Deep Throat.
It is a shame that the momentum American has experienced since Ladner came to office has to be slowed because of a scandal. After years of failed presidents and a bad reputation, it seems American's best days are ahead. The school moved up in the U.S. News rankings again this year, which come out today. The school's capital campaign and fundraising have been outstanding, and Ladner's 15-point plan seems to be working. However, success and prestige does not mean Ladner deserves our blind trust.
No matter how much AU is lauded, nothing less than honest and open stewardship of student funds should be accepted.
American University Controversy
AU president says he will consider legal action if he's dismissed "with cause."
Dr. Benjamin Ladner
President, American University
Friday, October 7, 2005; 11:00 AM
LINK
American University President Benjamin Ladner was suspended in August after the Board of Trustees began looking into his personal and travel expenses, an inquiry sparked by an anonymous letter sent to the board in March.
He was online Friday, Oct. 7, at 11 a.m. ET to discuss the controversy.
Ladner remains on suspension pending the outcome of the investigation into his and his wife's expenses by the board.
Ladner has acknowledged some missteps -- such as not immediately reimbursing the university for his son's 13-course engagement party dinner last year -- but rejected an independent report that questioned more than half a million dollars in spending in the past three years. He said most of the thousands of dollars that his wife charged to A.U. for household furnishings, food and beverages and that was questioned by the companies hired to do an audit was consistent with the terms of his contract.
A longtime executive assistant said he made no effort to separate his personal and business expenses and insisted on "the best room with the best view" in exclusive hotels, even giving her a guide to fine lodging worldwide, The Washington Post reported.
Trustee Paul Wolff said in an online discussion with washingtonpost.com on Monday that he believed that "it is in the university's best interest that he step down before the Oct. 10 board meeting."
A transcript follows.
____________________
Dr. Benjamin Ladner: I appreciate the opportunity to respond to questions and charges that have been raised about my record at American University. I'm very proud of my record, but more importantly, it is a record that is shared with the entire AU community -- its students, faculty, staff and board members.
In my 12 years at AU, I know that the work is only as important as the challenging academic environment it creates for our students. Expanding our overseas locations, attracting foreign students, expanding university programs, and raising funds from an expanding list of donors are all designed to build a new and better AU.
Since arriving at AU in 1994, I have worked hard to raise the standard of academic excellence and to put our university on sound financial footing. With a team of talented administrators, we have seen the number of high achieving students seeking acceptance. Freshman GPA's have increased from an average of 3.2 to 3.55 while SAT score averages have risen 1133 to 1285. We have worked hard to increase AU's endowment from $29 million to $251 million and grown alumni giving from 6% to 20% annually.
Recent press reports based on leaked documents and anonymous sources have raised concerns about expenses I incurred in carrying out the duties of my office. Because of the recent leaks, it has become difficult to separate what's fact from what isn't. This morning I would like to provide answers to your questions.
_______________________
Cleveland Park, Washington, D.C.: What are your objections to adding one or two student trustees to AU's board of trustees? Some colleges and universities have been using the practice for years.
This would be especially important at an institution like AU since it is so dependent on tuition rather than an endowment (thanks in part to your failure to build an endowment of note). Student trustees would serve as another check on the university's budget.
Dr. Benjamin Ladner: I have not said I'm against it, but that it is something the Board would probably be willing to look at. Since coming to AU, I have expanded the "Campus Representatives" group that sits on Board committees and participates in the general session of the Board. This group now has three students, one faculty,one staff, and an alumnus. It would be a natural next step for the Board to discuss this question. There are several constituencies at AU in addition to students--staff, faculty, alumni, etc.--all of whom could make the same argument. Obviously, there would have to be some kind of balance in representation.
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Washington, D.C.: President Ladner,
How would you describe the ethical consciousness of the Board of Trustees? Thank you.
Dr. Benjamin Ladner: I appreciate your question, but I do not think it is appropriate for me to comment on the ethics of the board. This is for others to decide.
_______________________
Washington, D.C.: Dr. Ladner, last night on AUTV you said that you had extended invitations to the students, faculty, and staff of American University to talk about the situation. When were those made, who were they made to, and why are we only hearing about them now?
Dr. Benjamin Ladner: I offered to meet with groups of faculty, students, staff, and deans as early as last week. Several of these meetings were actually set up. Then on the day of the meetings, the lawyer for the executive committee notified me that the invitation from the faculty and deans had been withdrawn. For the meeting with students, I was never notified that the invitation had been withdrawn, so I showed up but was denied entry into the meeting.
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Washington, D.C.: The people on the board who are attacking you have really gotten the students and faculty upset, and yet only one side of the story has come out. What would you like to say to the students, faculty and AU alums?
Dr. Benjamin Ladner: The Board and I agreed at the outset that the process of inquiry would be confidential until all reports and information had been reviewed and discussed by the Board. Unfortunately, there has now been a series of anonymous leaks designed to present isolated data, out of context, that have not even been reviewed yet by the Board. I am confident that when all the facts are reviewed by the Board, the misleading information will be fully rebutted and there will be a positive outcome both for AU and for me. I still believe in the principle of "innocent until proven guilty," not the reverse.
_______________________
Arlington, Va.: Mr. Ladner:
I applaud your courage at participating in this discussion. I'm sure you will face some very unpleasant questions. My question involves compensation for university presidents in general. If a non-profit educational institution wants to hire talented individuals, they need to pay for them just like everyone else. I think if they doubled your salary and perks it still wouldn't be too much. Why do so many outside of education have a problem with paying university presidents on par with other professions in the for-profit sector?
Dr. Benjamin Ladner: The compensation of university presidents is not very well understood by the most people. In fact, most Boards, like AU's, spend a lot of time collecting data, comparing compensation at similar institutions, and evaluating performance. The simple fact is, whoever is AU's president, the general range of compensation will be similar, however the total is distributed among annual salary, benefits, etc. This is because the ranges have for years been tracked by outside consultants who have advised the Board on its decisions about my compensation. They have determined that the AU President's compensation "fits" within a range that is in line with other similar institutions with long-serving presidents.
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Silver Spring, Md.: Good morning, President Ladner.
Given the widespread media coverage, both locally and nationally, of the allegations of misspending, do you believe that a fair investigation can take place and that the outcome of such an exercise will be accepted by the wide AU community?
Thank you.
Dr. Benjamin Ladner: I hope so. Unfortunately, there have been two processes going on: one by the full Board, and the other, a one-sided campaign conducted through anonymous leaks and misinformation to the media. I have confidence in the judgment of the full Board.
_____________________
Washington, D.C.: I have read that it was the policy of your financial office to destroy receipts after only one year. Is this true? If so, why -- common practice is to keep receipts for five years.
Dr. Benjamin Ladner: This has been the policy of the finance office (not my own), which I have followed completely. One of the difficulties I have faced throughout the investigation is the requirement to produce receipts going back three years, which, because I complied with the finance office policy, have been destroyed. I agree that, going forward, this policy should be changed. This issue is one example of how the press coverage has failed to convey all the facts.
_______________________
New York: Dr. Ladner:
What do you think you've learned from this incident that would make you, if retained, a better president of AU? Would you do anything differently, whether in terms of compensation, communication with students and faculty, student discipline (in light of your own sense of injustice), or any other issue?
Dr. Benjamin Ladner: I've learned a great deal. Despite the fact that I average three months a year on the road raising money, setting up new programs, etc., I believe I can do a better job (and should have)communicating with the the campus. Although I have conducted Eagle Roundtable dinners with students, faculty and staff; held town meetings with the campus community; met with parents and alumni, attended campus events; taught a course; etc., I know there are ways in which I can be even more systematically available to the campus community. I'm certainly open to suggestions. I welcome an opportunity to engage in extended dialogue about the key principles that have been at issue throughout this process.
_______________________
Van Ness, Washington, D.C.: Do you consider your "missteps" minor or major lapses in judgment?
Dr. Benjamin Ladner: I do believe I have made mistakes, and I understand how the perception of the significance of these has been exaggerated in the media. In a few instances, I overlooked the fact that certain personal expenses were charged to the university. Because of my single-minded focus carrying out university business, I regret these accounting errors and have already reimbursed the university. In hindsight, I should have been more vigilant and precise. The amounts being leaked to the media are overblown and inaccurate, and will be shown to be wrong.
_______________________
Washington, D.C.: Why are you not answering questions about the specific allegations against you? You seem to be attacking the process but you are not disputing the facts that have been reported and affirmed by Trustees.
Dr. Benjamin Ladner: In fact, I do dispute the allegations and the exaggerated amounts leaked to the press. I have provided extensive rebuttals, which the press has not reported. Although a few individual trustees have accepted some of the leaks as true, it is interesting to note that a September 29 statement signed and released by a majority of the Board, noted that "Decisions on these matter cannot appropriately or legally be made by one or a small number of Board members." This statement was given to the press, but not reported fully.
_______________________
washingtonpost.com: Dr. Ladner, as producer of this discussion I must tell you that several readers are writing in criticizing you for not answering any of the hardball questions. If I may, I would like to ask you three questions: If asked by the Board of Trustees to step down, will you? Have you offered to pay back the university for any expenses deemed inappropriate? Would you take a pay cut?
Dr. Benjamin Ladner: I will not make any personal decision about continuing or stepping down until faced with the actual decision by the Board. I have not only offered but have actually submitted a check for the expenses for which I am responsible. As with all compensation decisions, it is the Board, not I, who decides what my compensation will be.
_______________________
Dr. Benjamin Ladner: Thank you for your questions. I realize the limitations of trying to respond to so many questions. Clearly, there are vital issues at stake, not only about me and my leadership, but also about the nature of dialogue, openness, and fairness within the university. I am eager to bring this process to a close, and believe the full Board will arrive at a positive outcome in light of all the facts.
_______________________
Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.© 2005 Washingtonpost.Newsweek Interactive
Lawyers' Report Says Ladner Should Repay AU $115,000
Study Raises Doubts on Validity of ContractBy Valerie Strauss and Susan Kinzie, Washington Post Staff Writers
Friday, October 7, 2005; B01
LINK
Lawyers hired by the executive committee of American University's Board of Trustees have concluded that suspended President Benjamin Ladner should reimburse the university more than $115,000 for personal expenses and that he should have reported more than $350,000 in additional taxable income over three years, according to three sources who have seen the document.
The report says that Ladner should refile his personal tax returns with the Internal Revenue Service and that the school should amend its annual nonprofit tax returns, said the sources, who spoke on the condition of anonymity because of the sensitivity of the investigation.
Ladner's attorneys have argued that the spending in question was appropriate according to the terms of his 1997 contract. But lawyers hired by the executive committee concluded that the board should not consider the 1997 agreement enforceable because it probably would not be upheld in court. The contract, which some board members say they never saw, included a more generous severance package than his initial contract, as well as more compensation and other perks.
Ladner did not return phone calls last night. Last month, his attorneys disputed initial findings of the audit committee in a letter to the board counsel: "As you know, we have concluded that the figures presented by [the auditors] and you, both for reimbursement and tax reporting, are very exaggerated and in many cases demonstrably wrong."
The report was distributed late yesterday to the 24 voting members of the board in advance of Monday's meeting to determine the fate of Ladner, who came to the 11,000-student university in Northwest Washington in 1994 and was suspended in August. The investigation began last spring when some board members received an anonymous letter questioning Ladner's personal and travel expenses.
Ladner has said he was abiding by the terms of his 1997 contract. He also said auditors overstated the amount of personal spending by him and his wife, Nancy, a full-time volunteer for the university, and underestimated the amount of time they spent on university business over the years. He has offered to reimburse the university more than $21,000 for some events, such as birthday parties.
Employees of nonprofit universities, which are tax-exempt organizations, are bound by certain rules. Personal spending has to be repaid promptly or declared as income on the employee's tax return, according to experts on tax law. If the personal spending is approved by the school, the IRS may consider it imputed income, an extra benefit.
Ladner and his wife have been paying taxes on a certain percentage of the university-paid expenses at their house and for their cars. His attorneys have said he is willing to add about $32,000 to his imputed income for the years in question.
The IRS has contacted the school once, according to sources familiar with the investigation.
The report distributed to the board is not binding on the panel but represents the opinion of an independent law firm brought in by the executive committee of the board last year, as well as a group of independent auditors. The law firm is Arnold & Porter, and the auditors are from Protiviti, an independent risk-consulting group. Some board members have adamantly disputed earlier reports with similar conclusions and defended Ladner, who they said has raised academic standards and improved facilities.
One key issue under investigation has been the 1997 contract that Ladner signed with then-board chairman William I. Jacobs. Jacobs said in an interview Wednesday that he told board members there was a new contract for Ladner but did not have it passed around.
Robert Pence, who was on the board from 1989 to 1998, distributed a letter to the board yesterday saying that he has asked many of his fellow trustees about their recollections of the contract. "Anyone who says they discussed this with me (or all of the then-current members of the board) is not telling the truth," Pence said.
Jacobs said on Wednesday, "We did not want the contract to be in the newspaper the next day, and if anybody wanted to know specifics about the contract, they could find out whatever they wanted." Nobody asked, he said.
© 2005 The Washington Post Company
Attorneys Challenge AU Trustees' Leadership
By Valerie Strauss and Susan Kinzie
Washington Post Staff Writers, Saturday, October 8, 2005; B01
LINK
Attorneys for suspended American University President Benjamin Ladner yesterday challenged the way a months-long investigation into Ladner's personal and travel expenses has been conducted and questioned "the continued fitness" of the leadership of the board of trustees that started the probe.
The challenge came in two letters sent to attorneys hired by the board of trustees' executive committee to help with the investigation.
The letters also dispute conclusions about Ladner made in a report given Thursday to board members, who are to meet Monday to discuss Ladner's future at the university. That report concludes that Ladner's 1997 employment contract, with its generous severance package and other perks, would not hold up in court, that Ladner should repay the university more than $115,000 and that he should have reported more than $350,000 in additional taxable income over three years.
The investigation was launched last spring after an anonymous letter writer questioned spending by Ladner and his wife, Nancy. The Justice Department is also investigating.
It was the first time that Ladner's attorneys challenged the board's leadership, although some trustees who support Ladner have privately made similar statements. The letters help illustrate the battle lines among the board's 24 voting members.
Two sources involved in the investigation who asked not to be identified because of the situation's sensitivity said the letters presage an attempt by some members to remove the chairman of the board, Leslie E. Bains, the other five members of the executive committee who started the investigation and at least one other member who opposes Ladner. Bains did not return a call for comment.
Ladner did not return a phone call yesterday seeking a response to the letters. In an online chat on Washingtonpost.com yesterday, in which he selected questions, he said that he believes media coverage has been unfair and that when the facts are known there will be a "positive outcome" for him and AU.
Ladner's attorneys, David W. Ogden and Randolph M. Goodman, sent the letters to attorney James Joseph, who was hired by the board last year and has led the spending probe, and to Stephen M. Ryan, who helped with it. Neither Joseph nor Ryan, who work for different law firms, nor Ladner's attorneys, who work for the same firm, returned phone calls.
One of the letters complains about media coverage of the investigation and accuses anti-Ladner forces of engaging in leaks damaging AU and the president. The other letter disputes the report that Joseph sent Thursday to board members.
The conclusion that the contract would not stand up to a legal challenge was made separately by Ryan and Joseph.
Several current and former board members said they never saw the 1997 contract.
Former trustee William I. Jacobs "mentioned it at a board meeting, but I do not ever remember hearing specifics about the contract" or it being ratified, said Abbey Joel Butler, a trustee from 1986 to 2004. "I never, ever read the contract -- that was a mistake that all the board made. . . . We forgot about the contract, and it never came up again."
Ogden and Goodman say in the letters that the conclusion was based on a "gross misunderstanding and mischaracterization of the circumstances surrounding the contract."
One of the Ogden and Goodman letters includes a statement by Jacobs, who said he reported to the full board about Ladner's new contract, discussing its components and offering to provide more details to anyone who requested them.
The 1997 agreement was not presented to or approved by the board, according to an analysis by Jo
Senate Panel Requests Records From AU on Ladner and Board
By Susan Kinzie and Valerie Strauss, Washington Post Staff Writers
Friday, October 28, 2005; B01
LINK
The Senate Finance Committee has asked for every document related to ousted American University president Benjamin Ladner's severance package and compensation and for the board's plans for an audit of all 11 years of his tenure.
In a four-page letter, Sen. Charles E. Grassley (R-Iowa) asked for details on all no-bid contracts over $100,000, copies of all correspondence with the Internal Revenue Service for the past five years, biographies of each trustee and documentation of how the board made certain decisions.
AU is the first college to get an inquiry letter in an ongoing review of charities led by Grassley and Sen. Max Baucus (D-Mont.), and it broadens the scope of the committee's oversight. "It appears the AU board could be a poster child for why review and reform are necessary," Grassley wrote in a letter yesterday to the acting AU board chairman, Thomas A. Gottschalk.
Ladner lost the presidency this month after an audit questioned hundreds of thousands of dollars in personal and travel expenses. He has said that most of the spending was appropriate under the terms of his contract, but the board asked him to reimburse the university $134,000, declare an additional $398,000 in income over the three years investigated and pay the school the amount it would have withheld in taxes on that sum. On Monday, AU trustees and Ladner agreed to a departure deal, which included $950,000 in a one-time severance payment and about $2.75 million in deferred compensation.
In his letter, Grassley, the chairman of the committee, called "particularly troubling" a situation in which a nonprofit organization believes "that it is proper to provide approximately $3.75 million in payments to an individual who has failed to pay taxes on nearly $400,000 in income [for the past three years] after the board terminated his employment. Such actions raise significant questions about what other things a charity that has such a cavalier attitude toward the tax laws might be doing."
Grassley asked the board to explain the school's expense policies, how they were enforced for Ladner and whether it plans to change the rules. The questions build on those that auditors asked this spring but significantly expands the inquiry.
The university has until Dec. 1 to respond.
Gottschalk said yesterday that the board would do everything it could to cooperate.
In the days since the agreement on the departure deal, anger on campus has continued to mount. Hundreds of students have sent an e-mail to members of Congress asking for oversight of a board they said engaged in reckless behavior that could cost students and faculty and staff members millions of dollars.
Deans condemned the severance deal, student leaders issued angry statements, colleges within AU passed resolutions criticizing the board, and talks about potential litigation continued.
Board leaders reached out to the faculty and students yesterday with a letter apologizing, explaining, pledging reform and asking to move forward.
"We are chagrined that the board's own processes over the years did not allow us to have a clear understanding of what contracts were in place, their provisions, and the various forms of compensation which the president was receiving," said the letter, signed by Gottschalk and Gary M. Abramson, the board's chairman-elect. "We acknowledge this deficiency and we apologize to the entire community for it."
Trustees need "to be less isolated and insulated from the campus," they wrote, have improved and more inclusive governance and be more vigilant over financial matters. They explained how they considered legal advice, Ladner's successes at the university and campus sentiment before settling on terms for his departure.
Last week, Acting President Cornelius M. Kerwin told the Faculty Senate that the board is far more than an advisory group. "There is not an authority beyond them besides the Congress of the United States that issued the charter," he said.
Some students and professors wondered whether the United Methodist Church, which has supported the private university throughout its history, could sweep out the board, and some have contacted the leadership.
But the church can't do that, Bishop John R. Schol of the Baltimore-Washington Conference of the United Methodist Church, a trustee, said recently. The church's board of higher education has the authority to approve new members, though, he said.
Kerwin told faculty members last week that the board is not going to be dissolved. "Their ability to renew themselves is really quite robust," he said, because it's a self-perpetuating group. Even a move to limit the board's size a few years ago took an act of Congress, he said.
Kyle Taylor, the student government president, attended that meeting. Learning of the congressional action "triggered my realization that this was something we could actually do," he said of seeking changes to the board. "We feel we don't have representation on the board -- we're not on equal footing. We need to find power."
An online petition went public midday Wednesday urging members of Congress to take immediate action against the board. "The students should realize they are potentially doing great harm to their own university," which needs time to heal, said Tom Ingram, president of the Association of Governing Boards of Universities and Colleges. "The university board needs to get its act together -- it strikes me as a board that earnestly wants to do that. The university's reputation is at stake, and it's already suffered some blows."
American U. President Placed on Leave
The Board of Trustees of American University announced Wednesday that Benjamin Ladner, the institution's president since 1994, had been placed on administrative leave.
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The brief announcement from Leslie Bains, chair of the board, said that Ladner was on administrative leave pending the outcome of an investigation into personal and travel expenses.
The investigation, which is being conducted by outside lawyers and auditors, was revealed by The Washington Post early this month. The Post reported that it had received an anonymous letter - also apparently sent to board members - with allegations about spending by Ladner. According to the letter, Ladner used university funds to pay for the use of a French chef, an engagement party for his son, trips to Europe, and $200,000 in drainage and landscaping work at his home.
University officials - including Ladner - have declined to discuss the investigation. A spokeswoman said last night that the president would not comment on being placed on leave.
While the board statement did not say so, the spokeswoman said that the president's leave is a paid one. According to Internal Revenue Service records, Ladner's salary was $633,000 last year.
At American, Ladner has been credited with raising large sums of money to pay for new and renovated facilities, and with promoting links between the university and foreign institutions.
An editorial published Monday in The Eagle, AU's student newspaper, praised Ladner's fund raising skills and said that they had led to 'momentum' for the university. But the editorial also said that students, as the ones paying ever-increasing tuition costs, have a right to know how university money is being used, and that Ladner cannot expect "blind trust."
The student journalists criticized trustees for being evasive about the investigation. Nothing less than honest and open stewardship of student funds should be accepted, the editorial said.
Cornelius M. Kerwin, provost at the university, has been named acting president.
From The Eagle, student newspaper at AU:
There has been a lot of scrutiny of AU President Benjamin Ladner's use of his expense account in the wake of an anonymous tip to the Board of Trustees. The informant alleged that Ladner fraudulently wrote off expenses as university related. This is a serious charge and should be investigated fully, but it should also be remembered that Ladner is innocent until proven guilty.
However, students and parents should keep the Board's feet to the fire and demand more details be released. As the ones who are paying ever-increasing tuition costs, they have the right to be fully abreast of the findings of the investigation launched by the school.
The Board is currently being evasive and owes the AU communitymore than a "no comment" response. Little is even known about how President Ladner goes about his finances through the school. He could very well have walked a fine line that while not illegal, would still set a bad precedent. It would behoove the University to better explain the process.
In addition, the fact that the accusation was made anonymously is also troubling. AU has a process for lodging complaints, and since the tip came from a university employee, they should have known about this. Not every whistleblower needs to be the next Deep Throat.
It is a shame that the momentum American has experienced since Ladner came to office has to be slowed because of a scandal. After years of failed presidents and a bad reputation, it seems American's best days are ahead. The school moved up in the U.S. News rankings again this year, which come out today. The school's capital campaign and fundraising have been outstanding, and Ladner's 15-point plan seems to be working. However, success and prestige does not mean Ladner deserves our blind trust.
No matter how much AU is lauded, nothing less than honest and open stewardship of student funds should be accepted.
American University Controversy
AU president says he will consider legal action if he's dismissed "with cause."
Dr. Benjamin Ladner
President, American University
Friday, October 7, 2005; 11:00 AM
LINK
American University President Benjamin Ladner was suspended in August after the Board of Trustees began looking into his personal and travel expenses, an inquiry sparked by an anonymous letter sent to the board in March.
He was online Friday, Oct. 7, at 11 a.m. ET to discuss the controversy.
Ladner remains on suspension pending the outcome of the investigation into his and his wife's expenses by the board.
Ladner has acknowledged some missteps -- such as not immediately reimbursing the university for his son's 13-course engagement party dinner last year -- but rejected an independent report that questioned more than half a million dollars in spending in the past three years. He said most of the thousands of dollars that his wife charged to A.U. for household furnishings, food and beverages and that was questioned by the companies hired to do an audit was consistent with the terms of his contract.
A longtime executive assistant said he made no effort to separate his personal and business expenses and insisted on "the best room with the best view" in exclusive hotels, even giving her a guide to fine lodging worldwide, The Washington Post reported.
Trustee Paul Wolff said in an online discussion with washingtonpost.com on Monday that he believed that "it is in the university's best interest that he step down before the Oct. 10 board meeting."
A transcript follows.
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Dr. Benjamin Ladner: I appreciate the opportunity to respond to questions and charges that have been raised about my record at American University. I'm very proud of my record, but more importantly, it is a record that is shared with the entire AU community -- its students, faculty, staff and board members.
In my 12 years at AU, I know that the work is only as important as the challenging academic environment it creates for our students. Expanding our overseas locations, attracting foreign students, expanding university programs, and raising funds from an expanding list of donors are all designed to build a new and better AU.
Since arriving at AU in 1994, I have worked hard to raise the standard of academic excellence and to put our university on sound financial footing. With a team of talented administrators, we have seen the number of high achieving students seeking acceptance. Freshman GPA's have increased from an average of 3.2 to 3.55 while SAT score averages have risen 1133 to 1285. We have worked hard to increase AU's endowment from $29 million to $251 million and grown alumni giving from 6% to 20% annually.
Recent press reports based on leaked documents and anonymous sources have raised concerns about expenses I incurred in carrying out the duties of my office. Because of the recent leaks, it has become difficult to separate what's fact from what isn't. This morning I would like to provide answers to your questions.
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Cleveland Park, Washington, D.C.: What are your objections to adding one or two student trustees to AU's board of trustees? Some colleges and universities have been using the practice for years.
This would be especially important at an institution like AU since it is so dependent on tuition rather than an endowment (thanks in part to your failure to build an endowment of note). Student trustees would serve as another check on the university's budget.
Dr. Benjamin Ladner: I have not said I'm against it, but that it is something the Board would probably be willing to look at. Since coming to AU, I have expanded the "Campus Representatives" group that sits on Board committees and participates in the general session of the Board. This group now has three students, one faculty,one staff, and an alumnus. It would be a natural next step for the Board to discuss this question. There are several constituencies at AU in addition to students--staff, faculty, alumni, etc.--all of whom could make the same argument. Obviously, there would have to be some kind of balance in representation.
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Washington, D.C.: President Ladner,
How would you describe the ethical consciousness of the Board of Trustees? Thank you.
Dr. Benjamin Ladner: I appreciate your question, but I do not think it is appropriate for me to comment on the ethics of the board. This is for others to decide.
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Washington, D.C.: Dr. Ladner, last night on AUTV you said that you had extended invitations to the students, faculty, and staff of American University to talk about the situation. When were those made, who were they made to, and why are we only hearing about them now?
Dr. Benjamin Ladner: I offered to meet with groups of faculty, students, staff, and deans as early as last week. Several of these meetings were actually set up. Then on the day of the meetings, the lawyer for the executive committee notified me that the invitation from the faculty and deans had been withdrawn. For the meeting with students, I was never notified that the invitation had been withdrawn, so I showed up but was denied entry into the meeting.
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Washington, D.C.: The people on the board who are attacking you have really gotten the students and faculty upset, and yet only one side of the story has come out. What would you like to say to the students, faculty and AU alums?
Dr. Benjamin Ladner: The Board and I agreed at the outset that the process of inquiry would be confidential until all reports and information had been reviewed and discussed by the Board. Unfortunately, there has now been a series of anonymous leaks designed to present isolated data, out of context, that have not even been reviewed yet by the Board. I am confident that when all the facts are reviewed by the Board, the misleading information will be fully rebutted and there will be a positive outcome both for AU and for me. I still believe in the principle of "innocent until proven guilty," not the reverse.
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Arlington, Va.: Mr. Ladner:
I applaud your courage at participating in this discussion. I'm sure you will face some very unpleasant questions. My question involves compensation for university presidents in general. If a non-profit educational institution wants to hire talented individuals, they need to pay for them just like everyone else. I think if they doubled your salary and perks it still wouldn't be too much. Why do so many outside of education have a problem with paying university presidents on par with other professions in the for-profit sector?
Dr. Benjamin Ladner: The compensation of university presidents is not very well understood by the most people. In fact, most Boards, like AU's, spend a lot of time collecting data, comparing compensation at similar institutions, and evaluating performance. The simple fact is, whoever is AU's president, the general range of compensation will be similar, however the total is distributed among annual salary, benefits, etc. This is because the ranges have for years been tracked by outside consultants who have advised the Board on its decisions about my compensation. They have determined that the AU President's compensation "fits" within a range that is in line with other similar institutions with long-serving presidents.
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Silver Spring, Md.: Good morning, President Ladner.
Given the widespread media coverage, both locally and nationally, of the allegations of misspending, do you believe that a fair investigation can take place and that the outcome of such an exercise will be accepted by the wide AU community?
Thank you.
Dr. Benjamin Ladner: I hope so. Unfortunately, there have been two processes going on: one by the full Board, and the other, a one-sided campaign conducted through anonymous leaks and misinformation to the media. I have confidence in the judgment of the full Board.
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Washington, D.C.: I have read that it was the policy of your financial office to destroy receipts after only one year. Is this true? If so, why -- common practice is to keep receipts for five years.
Dr. Benjamin Ladner: This has been the policy of the finance office (not my own), which I have followed completely. One of the difficulties I have faced throughout the investigation is the requirement to produce receipts going back three years, which, because I complied with the finance office policy, have been destroyed. I agree that, going forward, this policy should be changed. This issue is one example of how the press coverage has failed to convey all the facts.
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New York: Dr. Ladner:
What do you think you've learned from this incident that would make you, if retained, a better president of AU? Would you do anything differently, whether in terms of compensation, communication with students and faculty, student discipline (in light of your own sense of injustice), or any other issue?
Dr. Benjamin Ladner: I've learned a great deal. Despite the fact that I average three months a year on the road raising money, setting up new programs, etc., I believe I can do a better job (and should have)communicating with the the campus. Although I have conducted Eagle Roundtable dinners with students, faculty and staff; held town meetings with the campus community; met with parents and alumni, attended campus events; taught a course; etc., I know there are ways in which I can be even more systematically available to the campus community. I'm certainly open to suggestions. I welcome an opportunity to engage in extended dialogue about the key principles that have been at issue throughout this process.
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Van Ness, Washington, D.C.: Do you consider your "missteps" minor or major lapses in judgment?
Dr. Benjamin Ladner: I do believe I have made mistakes, and I understand how the perception of the significance of these has been exaggerated in the media. In a few instances, I overlooked the fact that certain personal expenses were charged to the university. Because of my single-minded focus carrying out university business, I regret these accounting errors and have already reimbursed the university. In hindsight, I should have been more vigilant and precise. The amounts being leaked to the media are overblown and inaccurate, and will be shown to be wrong.
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Washington, D.C.: Why are you not answering questions about the specific allegations against you? You seem to be attacking the process but you are not disputing the facts that have been reported and affirmed by Trustees.
Dr. Benjamin Ladner: In fact, I do dispute the allegations and the exaggerated amounts leaked to the press. I have provided extensive rebuttals, which the press has not reported. Although a few individual trustees have accepted some of the leaks as true, it is interesting to note that a September 29 statement signed and released by a majority of the Board, noted that "Decisions on these matter cannot appropriately or legally be made by one or a small number of Board members." This statement was given to the press, but not reported fully.
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washingtonpost.com: Dr. Ladner, as producer of this discussion I must tell you that several readers are writing in criticizing you for not answering any of the hardball questions. If I may, I would like to ask you three questions: If asked by the Board of Trustees to step down, will you? Have you offered to pay back the university for any expenses deemed inappropriate? Would you take a pay cut?
Dr. Benjamin Ladner: I will not make any personal decision about continuing or stepping down until faced with the actual decision by the Board. I have not only offered but have actually submitted a check for the expenses for which I am responsible. As with all compensation decisions, it is the Board, not I, who decides what my compensation will be.
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Dr. Benjamin Ladner: Thank you for your questions. I realize the limitations of trying to respond to so many questions. Clearly, there are vital issues at stake, not only about me and my leadership, but also about the nature of dialogue, openness, and fairness within the university. I am eager to bring this process to a close, and believe the full Board will arrive at a positive outcome in light of all the facts.
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Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.© 2005 Washingtonpost.Newsweek Interactive
Lawyers' Report Says Ladner Should Repay AU $115,000
Study Raises Doubts on Validity of ContractBy Valerie Strauss and Susan Kinzie, Washington Post Staff Writers
Friday, October 7, 2005; B01
LINK
Lawyers hired by the executive committee of American University's Board of Trustees have concluded that suspended President Benjamin Ladner should reimburse the university more than $115,000 for personal expenses and that he should have reported more than $350,000 in additional taxable income over three years, according to three sources who have seen the document.
The report says that Ladner should refile his personal tax returns with the Internal Revenue Service and that the school should amend its annual nonprofit tax returns, said the sources, who spoke on the condition of anonymity because of the sensitivity of the investigation.
Ladner's attorneys have argued that the spending in question was appropriate according to the terms of his 1997 contract. But lawyers hired by the executive committee concluded that the board should not consider the 1997 agreement enforceable because it probably would not be upheld in court. The contract, which some board members say they never saw, included a more generous severance package than his initial contract, as well as more compensation and other perks.
Ladner did not return phone calls last night. Last month, his attorneys disputed initial findings of the audit committee in a letter to the board counsel: "As you know, we have concluded that the figures presented by [the auditors] and you, both for reimbursement and tax reporting, are very exaggerated and in many cases demonstrably wrong."
The report was distributed late yesterday to the 24 voting members of the board in advance of Monday's meeting to determine the fate of Ladner, who came to the 11,000-student university in Northwest Washington in 1994 and was suspended in August. The investigation began last spring when some board members received an anonymous letter questioning Ladner's personal and travel expenses.
Ladner has said he was abiding by the terms of his 1997 contract. He also said auditors overstated the amount of personal spending by him and his wife, Nancy, a full-time volunteer for the university, and underestimated the amount of time they spent on university business over the years. He has offered to reimburse the university more than $21,000 for some events, such as birthday parties.
Employees of nonprofit universities, which are tax-exempt organizations, are bound by certain rules. Personal spending has to be repaid promptly or declared as income on the employee's tax return, according to experts on tax law. If the personal spending is approved by the school, the IRS may consider it imputed income, an extra benefit.
Ladner and his wife have been paying taxes on a certain percentage of the university-paid expenses at their house and for their cars. His attorneys have said he is willing to add about $32,000 to his imputed income for the years in question.
The IRS has contacted the school once, according to sources familiar with the investigation.
The report distributed to the board is not binding on the panel but represents the opinion of an independent law firm brought in by the executive committee of the board last year, as well as a group of independent auditors. The law firm is Arnold & Porter, and the auditors are from Protiviti, an independent risk-consulting group. Some board members have adamantly disputed earlier reports with similar conclusions and defended Ladner, who they said has raised academic standards and improved facilities.
One key issue under investigation has been the 1997 contract that Ladner signed with then-board chairman William I. Jacobs. Jacobs said in an interview Wednesday that he told board members there was a new contract for Ladner but did not have it passed around.
Robert Pence, who was on the board from 1989 to 1998, distributed a letter to the board yesterday saying that he has asked many of his fellow trustees about their recollections of the contract. "Anyone who says they discussed this with me (or all of the then-current members of the board) is not telling the truth," Pence said.
Jacobs said on Wednesday, "We did not want the contract to be in the newspaper the next day, and if anybody wanted to know specifics about the contract, they could find out whatever they wanted." Nobody asked, he said.
© 2005 The Washington Post Company
Attorneys Challenge AU Trustees' Leadership
By Valerie Strauss and Susan Kinzie
Washington Post Staff Writers, Saturday, October 8, 2005; B01
LINK
Attorneys for suspended American University President Benjamin Ladner yesterday challenged the way a months-long investigation into Ladner's personal and travel expenses has been conducted and questioned "the continued fitness" of the leadership of the board of trustees that started the probe.
The challenge came in two letters sent to attorneys hired by the board of trustees' executive committee to help with the investigation.
The letters also dispute conclusions about Ladner made in a report given Thursday to board members, who are to meet Monday to discuss Ladner's future at the university. That report concludes that Ladner's 1997 employment contract, with its generous severance package and other perks, would not hold up in court, that Ladner should repay the university more than $115,000 and that he should have reported more than $350,000 in additional taxable income over three years.
The investigation was launched last spring after an anonymous letter writer questioned spending by Ladner and his wife, Nancy. The Justice Department is also investigating.
It was the first time that Ladner's attorneys challenged the board's leadership, although some trustees who support Ladner have privately made similar statements. The letters help illustrate the battle lines among the board's 24 voting members.
Two sources involved in the investigation who asked not to be identified because of the situation's sensitivity said the letters presage an attempt by some members to remove the chairman of the board, Leslie E. Bains, the other five members of the executive committee who started the investigation and at least one other member who opposes Ladner. Bains did not return a call for comment.
Ladner did not return a phone call yesterday seeking a response to the letters. In an online chat on Washingtonpost.com yesterday, in which he selected questions, he said that he believes media coverage has been unfair and that when the facts are known there will be a "positive outcome" for him and AU.
Ladner's attorneys, David W. Ogden and Randolph M. Goodman, sent the letters to attorney James Joseph, who was hired by the board last year and has led the spending probe, and to Stephen M. Ryan, who helped with it. Neither Joseph nor Ryan, who work for different law firms, nor Ladner's attorneys, who work for the same firm, returned phone calls.
One of the letters complains about media coverage of the investigation and accuses anti-Ladner forces of engaging in leaks damaging AU and the president. The other letter disputes the report that Joseph sent Thursday to board members.
The conclusion that the contract would not stand up to a legal challenge was made separately by Ryan and Joseph.
Several current and former board members said they never saw the 1997 contract.
Former trustee William I. Jacobs "mentioned it at a board meeting, but I do not ever remember hearing specifics about the contract" or it being ratified, said Abbey Joel Butler, a trustee from 1986 to 2004. "I never, ever read the contract -- that was a mistake that all the board made. . . . We forgot about the contract, and it never came up again."
Ogden and Goodman say in the letters that the conclusion was based on a "gross misunderstanding and mischaracterization of the circumstances surrounding the contract."
One of the Ogden and Goodman letters includes a statement by Jacobs, who said he reported to the full board about Ladner's new contract, discussing its components and offering to provide more details to anyone who requested them.
The 1997 agreement was not presented to or approved by the board, according to an analysis by Jo