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Thursday, October 13, 2005

Paul Wolff's Resignation Letter

From a confidential source. It's been bouncing around a bit, but I think it's finally starting to get leaked out.

Here it is in its entirety. Let me know what you think. Personally? I love it.

My Fellow Trustees:

I resign from the American University Board of Trustees effective immediately. I can not and will not continue to serve on a Board that counts among its members individuals who show so little regard for the most basic canons of board governance.

The atmosphere in the boardroom remains polluted with mean spiritedness. The call for better governance by the self-appointed Ad Hoc Committee has now been exposed as the sham I always worried that it was. My conscience forbids me being a party to any agreement with Ben Ladner that either allows him to be affiliated with AU or to receive severance other than that irrefutably mandated by law. I cannot be involved, no matter how well-intentioned, in any additional payment. I stand four-square with the deans, the faculty, and the students. They are right. We cannot compensate ethical blindness. To do so, undermines AU’s core values.

A board can only operate effectively if its members are collegial and treat their fellow trustees with respect and deference, no matter how strongly they may disagree. They discuss; they do not disparage. It is on this principle that all other principles of governance build. Yet the Ad Hoc Committee, and most particularly several of its members, have never missed an opportunity to attack our outside advisors, question their competency, belittle the motives of the Chair, challenge the integrity of fellow trustees, and make baseless claims of conflict of interest against Margery Kraus and me, all without any support, only with innuendo and meanness.

I had hoped that once we all recognized the need for Ben to leave, the sniping would stop. When Jerome DelPino, early in the meeting, asked that the “trashing” of fellow trustees stop, I felt that a new day had arrived for the Board. My hopes were immediately dashed. Literally within minutes, the attacks began anew. First there was a gratuitous challenge to Tom Gottschalk’s right as Vice-Chair to run the meeting, but more importantly, an attack on his objectivity and loyalty to the Board. This was the beginning, not the end.

Leslie Bains has served this University for many years – longer than all members of the Ad Hoc Committee. She has been generous in both her time and her money, unlike several members of the Ad Hoc Committee. She has always put the interest of AU first, at no time more than when she offered her resignation so that her Chairmanship would not be an issue during the debate over Ben Ladner. Notwithstanding that act of ethical generosity, people on the Board sought to exact the last pound of flesh and tried mightily to make sure that her exit from the Board was not defined by her grace, but by their nastiness. Although she made it clear to the Vice-Chair that she would resign effective Tuesday, this did not satisfy her detractors who, ignoring the by-laws, sought her removal at yesterday’s meeting and made clear their displeasure when the Vice-Chair ruled them out of order.

The attacks on the integrity of Arnold & Porter have been continuous, strident and without merit. They have been raised to such levels of vituperation as to be almost humorous except that they clearly evidence an abandonment of decency. It is hard to believe, but true. One of our Trustees has spread the ridiculous rumor that Arnold & Porter is the subject of the United States Attorney’s investigation regarding the University. As I said yesterday and as bears repeating today, I have worked with Arnold & Porter and its lawyers for over three decades. Before the Board hired Jim Joseph, I knew him by reputation. I have now seen him at work. His reputation, as significant as it is, understates his excellence, his devotion and his decency.

When Manatt, Phelps was hired to give a second opinion (an unnecessary expense only incurred because of the relentless attacks on Arnold & Porter by the Ad Hoc Committee), the assignment was given to Steve Ryan, a well-known and well-respected attorney in this city. Notwithstanding the impeccable credentials of both him and his firm, the work of Manatt, Phelps has been attacked as biased, improper and to use its detractors’ words, “out to get Ben.”

It is not acceptable governance to ignore the message, but attack the messenger. This practice continued unabated yesterday. My letter to the Trustees outlining my opposition to Ben’s retention is still unanswered. Not a word; not a call; not an e-mail. Just an attack on my and my wife’s integrity. The same is true for Arnold & Porter’s opinion letter on my and Margery Kraus’s alleged conflict. Unanswered. No opposition. No apology. Indeed there has never been any opposition on the merits to the actions of the Executive Committee or the Audit Committee. Tom Gottschalk’s fitness to chair the meeting yesterday was challenged because, as an Executive Committee Member, he had voted to suspend Ben. Yet his speech and letter explaining the decision elicted not one word of response from his critics. The attacks on Protiviti, Arnold & Porter and Manatt, Phelps not only continued yesterday, but became even more shrill. The wait continues for a response to the law firms’ various memoranda and opinion letters. As the decibels of attack got higher, so did the level of disregard for their research and their opinions, backed not only by Jim Joseph and Steve Ryan, but with the full support of their respective firms.

That these attacks continued unabated yesterday would be reason enough to leave the Board. I defend Leslie Bains, Jim Joseph and Steve Ryan not because they are either friends or fellow lawyers, but because they are good people who did nothing but what was best for AU.

Under the Chairmanships of George Collins and Leslie Bains with Len Jaskol, as chair of the Audit Committee, a new transparency came to the Board replacing the secret agreements, concealed activities, and dereliction of duty we experienced under the leadership of Bill Jacobs as chairman and John Petty as Audit Committee Chairman. The Ad Hoc Committee has made numerous calls for changes in governance. I found this quizzical but was willing to press on. I questioned whether their requests had substance because so many of its members had been leaders in the attempts to derail the audit, no one more so than John Petty with his constant drumbeat about “standards audits.” His position reached unthought-of levels of silliness when the Board was presented with a statement by Ben’s personal chef, complaining that the investigation of the Ladners did not appear to be a “standard audit.” I concede, as Ben and Nancy have proved, that the chef knows his lobster, foie gras and fine wines. But auditing procedures. Come on.

My hopefulness that the Ad Hoc Committee truly wanted better governance became skepticism when they showed no interest in Leslie Bains’ 14-point program. Their response to her call for openness and more participation by faculty and students was a demand for her resignation. Yesterday, my skepticism turned to disbelief. It is now clear that the Ad Hoc Committee is motivated by nothing but a desire for the days of the past when secrecy prevailed and the President’s expenses were never audited. They continue to embrace Bill Jacobs’ heretofore hidden 1997 contract that was neither authorized nor ratified by the Board. They simply brush off the fact that two law firms have opined that the ’97 contract is invalid.

When it worked to their advantage, the Ad Hoc Committee demanded strict obedience to the by-laws. Yet yesterday, when the by-laws were an impediment to their actions, they flouted them. Only the strength of the Vice-Chair in ruling their actions out of order prevented us from having improper action approved. Nothing highlights the Ad Hoc Committee’s disregard for good governance more than its attempt to override the by-laws and install a new chairman. What made their actions that much more reprehensible was the fact that the new Chairman had been selected by them without consultation or even warning to any other Board member. Their confidence that they could ignore the by-laws and force their demands upon the Board was made abundantly clear in a document that they inadvertently allowed non-members to see. In this paper they refer (as if it were a fait accompli) to their candidate as the new Chairman.

Juxtapose these actions with their earlier complaints about the over-reaching of the Executive Committee. We have heard repeatedly, and again yesterday, how the properly empowered Executive Committee erred in suspending Ben without discussion with them. The Executive Committee had the power to act. It explained its reasoning. The Ad Hoc Committee has no power to act. It never explained its decision or sought anyone’s advice. They simply tried to force a new chairman upon us.

The Trustees are fiduciaries to the University, not Ben Ladner. Yet many on the Ad Hoc Committee still do not seem to grasp this most basic tenet. How else can one explain their behavior during the compensation review in early 2005. The Compensation Committee under George Collins, for the first time in my years on the Board, sought a thorough analysis of Ben’s compensation. Not happy with the results, members of the Ad Hoc Committee, and only members of the Ad Hoc Committee, voted to reject the recommendations of our outside advisors, shrug off any need for a comfort letter, thumb their noses at the IRS and invite government sanctions. Etched in my mind is the smug statement of one Ad Hoc Committee member that we should give Ben whatever he wants.

I was prepared to attend yesterday’s meeting and overlook their loyalty to Ben, rather than the University, as misguided, but well intentioned. I was prepared to start with a clean slate and disregard the fact that they were ready to bring back the chef, the social secretary and to give Nancy Ladner a salary greater than many professors. This was clearly false exuberance. When a committee was chosen to negotiate with Ben, the Ad Hoc Committee members again revealed where their loyalties rest and nominated only their own, not interested in any other views. Wiser heads prevailed and a committee of balanced views was chosen. A committee of multiple voices and not just one was clearly anathema to two of the committee’s leaders who voted against the selections.

I have great respect for the three members of the committee designated to negotiate severance with Ben. I have every belief that they will do everything possible to get the absolute best deal for AU. My disagreement is not with those people, but with their mission. I am opposed under any circumstances to any negotiation with Ben. I do not back off out of the fear that he may sue the University. As Dean Grossman pointed out, expedience should not trump ethics. We should not alter our position out of fear of litigation. As the Dean further stated, it is likely that, severance package or no severance package, there will be litigation. Litigation from Ben if he is not satisfied. Litigation from concerned faculty members and other stakeholders if the package is too rich.

The deans, the faculty and the students have spoken out unequivocally. They have asked not only that Ben be discharged but that he be given no more of the University’s money. They have asked repeatedly that there be no golden parachute, no severance package and nothing that is not legally required. I agree.

I had hoped in the past that Ben would do what is best for the University and resign quietly and apologetically. He has done just the opposite. He has been steadfast in his statements that he is right and that he should be retained. He has dismissed the votes of no confidence as “uninformed.” He has labeled his transgressions “mistakes.” He has been steadfast in giving a deaf ear to calls for his resignation. He has shown no contrition. As time has made clear, nobody but a very few diehard supporters on the Ad Hoc Committee agrees with Ben. The deans, the faculty, the students, noted university presidents, and the media have condemned his unseemly behavior and his waste of precious University assets. His response has been to hunker down and to give and to write self-serving interviews and editorials belittling the investigation as a vicious attack on a “man of change.” Quite frankly, he simply doesn’t get it. He still sees 13-course meals, posh hotels, chauffeured limousines, all paid for by tuition dollars, as appropriate. This is why, as I stated yesterday, he should be discharged. We have long gone past the time to allow him the luxury of resignation.

Ben Ladner is an at-will employee. There is no contract between him and the University. As I have stated, and two major law firms have confirmed, the 1997 contract is invalid. Even if people believe it is valid, the Board should follow the expert advice of our counsel and force Ben to prove, in a court of law, the contract’s validity. To ignore the legal opinions and to give Ben a single benefit under the ’97 contract is quite simply a breach of fiduciary duty.

The question of the validity of the ‘97 contract is really only an academic exercise. The issue of its effect on any severance to Ben is a moot issue. Under its provisions, Ben can be discharged for dishonesty. If so discharged, he gets nothing in benefits, no severance. I will not enumerate the laundry list of untruthfulness uncovered by the Audit Committee’s investigation. It is only sufficient to cite two – one major; one minor – to make clear that even under the ’97 contract nothing is owed to Ben Ladner. Minor is the fact that, in the face of uncontested documentation to the contrary, Ben told the media not once but repeatedly that he never sought a raise in compensation. Major is the uncontradicted fact that after this investigation began, Ben altered his records without disclosure so as to show that certain trips were for business, not pleasure.

My call for no severance is not vindictive, but necessary to show how serious we take his misdeeds, his damage to AU. We must remember the cost already of Ben’s excessive behavior. The over $500,000 in imputed income and reimbursables if diverted from fine wines, fancy parties and luxury travel would have covered the salaries for one year of at least four faculty members. The earnings alone from this waste of University assets would have provided in perpetuity a full tuition scholarship for one student.

Members of the Ad Hoc Committee have complained repeatedly about the cost of the investigation. No question about it. It has been huge. It will total nearly $1 million. But we must remember that this $1 million was spent because of Ben’s behavior. It was necessary to do so. The whistleblower letter could not be ignored. The Audit Committee had to be thorough. It could not brush off the allegations or sweep them under the rug. As Len Jaskol made clear on several occasions, the cost, moreover, was exacerbated by Ben’s unwillingness to cooperate and stonewalling. The cost was further increased by the delaying tactics of the Ad Hoc Committee.

The need to sever all relationships with Ben Ladner and to have him leave with no severance package is not only a question of money, but a question regarding the future of AU. As Acting Provost Ivy Broder so eloquently stated, “an ethical cloud” hangs over the school. There is an unfathomable depth of resentment on the campus toward Ben Ladner. As our faculty pointed out, Ben’s behavior has subjected the University, the deans, the faculty and the students to embarrassment. We must remove the cloud. We must speak out clearly and unequivocally. We must tell the University and all of our constituencies that a new day is dawning and that behavior such as Ben’s will not be countenanced. Any payment beyond that required by law will send a clear message that bad behavior has its rewards. People will continue to look cynically upon our University. To compensate ethical lapses only compounds our problems. As I leave the Board, I urge you to do what is right, not what is expedient. If we are to be a school that shows zero tolerance for misbehavior, we must also mete out zero reward for such lapses.

I leave the Board with sadness. I have great affection for AU. I always had respect and admiration for the deans and faculty. No more so than yesterday. I never fully understood the depth of their love for this University. I always knew we had an outstanding student body. I now know that they are not only outstanding but committed to this University and its core values.

It has been a pleasure to work over the years with so many outstanding fellow trustees. I have admired the work of George Collins and Leslie Bains for bringing a new openness and transparency to the Board. I have and will always have a soft spot in my heart for George Collins who sacrificed his friendship with Ben Ladner for fiduciary duty. The list goes on. Len Jaskol for his tireless work as Chairman of Audit Committee. Tom Gottschalk, Ed Carr and Gary Cohn for their dedicated service to the Board and the Executive Committee. I wish all of you, both friend and foe, good luck. I leave with a fervent hope that you will do the right thing for AU, the deans, the faculty, the students, the alumni and all those, like myself, who wish nothing but the best for the University.


Paul Martin Wolff


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11:24 PM


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