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Tuesday, November 15, 2005

An Open Letter (#2)

An Open Letter to the American University Community

We write again to set the record straight. Both in the press and "town hall" meeting with the students, statements were made that were far from accurate and in certain instances flat-out false. It is important that you know the truth.

The Ad Hoc Committee

It was repeatedly stated that there was no group, no faction of the Board. A Trustee went so far as to call the idea of a group "a myth." The facts speak differently. The name ad hoc committee was created by its members. They sent e-mails to other Board members under this title and identified in their mailings who made up the committee. They are Gary Abramson, David Carmen, Jack Cassell, Pam Deese, Jerome Del Pino, Fuad El-Hibri, Hani Farsi, Charles Lydecker, Robyn Mathias, Regina Muehlhauser, John Petty, Bob Pincus, and Jeff Sine. At the "town hall" meeting, it was further stated that there had been no relationship with Ladner by any group of board members. To the contrary, some or all of them met with Ladner after he was suspended and negotiated his return. The terms included the reinstatement of the chef and the social secretary and, a new benefit, a salary for Nancy Ladner of $80,000 - $100,000, a level attained by only a few faculty members. They also called for a review of Ladner’s compensation within the year. Jeff Sine further negotiated a reduction in reimbursements to the University of $21,000 and not the $125,000 recommended by the Audit Committee. They agreed with Ladner not to enforce the imputed income amount set by the Audit Committee, but rather to have it negotiated between them and a third party. They attempted (luckily unsuccessfully) to call a special board meeting and pass their proposal before either the students or the faculty had an opportunity to express their views on Ladner's return.

The 2005 Salary Negotiations with Ladner

David Carmen, the leader of the ad hoc group stated he had been concerned about not paying Ladner above his peer group and that reducing Ladner's salary was the "right thing to do." This was clearly not his view at the time the salary issue was resolved. The Board's outside advisors recommended a salary at which they were willing to give the Board a "comfort letter" that the compensation was fair and reasonable. The advisors' recommendation was approved by the Board, with six dissenting votes-all of whom argued for higher compensation. The six dissenting votes all became members of the ad hoc committee, including its leader.

In addition, there were at least six Board meetings in 2004 and 2005 at which Ben Ladner’s compensation, with updates by the consultants, was discussed with the full Board. For Mr. Carmen and the ad hoc committee to claim they did not know the President’s compensation is disingenuous.

The Audit Report

Matt Pittinsky stated that the report of the Audit Committee was accepted "without reservations," "without amendment." This statement is completely and absolutely reckless and bears no relationship to the truth. The history of the Audit Committee's investigation is marked by repeated efforts by various board members to curtail and ultimately to dilute its conclusions--all in ways that only benefited Ben Ladner. The members who so acted all became part of the ad hoc committee. In early May of this year, Len Jaskol, Chairman of the Audit Committee, made a three hour presentation of the Committee's preliminary findings. The Board voted unanimously to continue the investigation. From that moment forward, there were constant attacks on the Committee and its outside advisors. The objectivity of the advisors was constantly questioned. They were accused of being "out to get Ben." John Petty tried to get the audit cut back, arguing for something he called a "standard audit." He ultimately, as a member of the Audit Committee, dissented from the report, arguing that the recommendations should be prospective only. This meant that Ladner would get a slap on the wrist, but would not have to pay the University one cent or have his tax returns amended to show additional imputed income. David Carmen in an e-mail urged Leslie Bains, as Chairman, to devote the University's energy to uncovering the whistleblower rather than the audit. At the September 12 board meeting, Bob Pincus urged that the audit go back only one year and not the three years chosen by the Audit Committee.

This opposition to the Audit Committee's work was only a prelude to the efforts made at the October 10 board meeting. After Len Jaskol made the Committee's report, amendments were made by the ad hoc committee to change the proportion of reimbursements and imputed income, an action which would have benefited Ben Ladner at the University’s expense. The amendment passed with all members of the ad hoc committee present voting in favor. Len Jaskol, George Collins and Gary Cohn refused as members of the Audit Committee to sign any altered report or audit. Only John Petty offered to sign. The Audit Committee report and an affirmation letter to KPMG (the University’s auditors) attesting to the validity of AU’s financial condition, if left unsigned by its Chairman, would have grave financial repercussions to the University. Despite this, several board members (all members of the ad hoc committee) voted to uphold the amendments. The amendment was eventually reconsidered and voted down, not as a matter of doing the right thing, but because Len Jaskol demanded they do the right thing.

The Severance Package

At the October 10 Board meeting, the ad hoc committee proposed that a group comprised entirely of their members negotiate a severance package with Ladner. This was defeated and a more objective committee was appointed. The ad hoc committee, however, had the last word. When the negotiators made their recommendation of a severance amount, it was amended upward by the ad hoc committee members. They raised the amount so that Ladner would come out "whole" and not suffer any consequences of paying taxes on his improper behavior. Bob Pincus made an amendment and the ad hoc committee approved over $500,000 be added to the package with the clear result that University is funding Ladner's reimbursement as well as paying the taxes on his imputed income. The committee also tried to negotiate (unsuccessfully) that Ben Ladner did not have to pay interest on the $125,000. After the meeting, one of the ad hoc committee members tried to increase the package even further and add $800,000 to the deal to compensate Ladner for his alleged lost professorship.

To this day, they assert that the severance package would minimize the University’s financial exposure. Just the opposite is true as litigation, if pursued by Ladner, would have cost approximately $400,000. The package totaled $3,750,000, a difference of $3,350,000. As they say, just do the math. Also to this day, they assert that the severance package would bring closure and allow the University to go forward. In fact, just the opposite has occurred. The AU community has reacted negatively, the Justice Department has begun a formal investigation, the IRS is poised to audit, and the Senate Finance Committee is probably going to use AU as the poster child for bad governance. Is this closure?

The 1997 Contract

Former Chairman Bill Jacobs and Ben Ladner secretly negotiated the 1997 contract. It was never authorized nor ratified by the Board. Jacobs never informed his successor George Collins of its existence. Until early 2005, no one on the Board knew of its existence with the possible exception of John Petty, then Chair of the Audit Committee, with whom Ben Ladner says he discussed certain of its terms. Petty had a duty to inform the Board of the existence of the contract, as did Ben Ladner, Bill Jacobs, and Mary Kennard as Secretary. On numerous occasions, Paul Wolff and others asked John Petty, as then Chairman of the Audit Committee, what the costs were of maintaining the presidency above and beyond Ladner's salary. The Board was repeatedly told that the imputed income amounts were quite small, always only a few thousand dollars. Petty never told the Board until 2005 that there had been no audit and that the numbers came from Ladner.

The Audit Committee gave Ladner the benefit of any doubt and determined his tax and reimbursement obligations as if the '97 contract were valid. To determine, however, what, if any, obligation the University had to Ladner if he were discharged, the issue of the contract's validity had to be confronted. Two law firms and University counsel opined that the contract was invalid. There was and is no opinion to the contrary. Yet seven members of the ad hoc committee voted to uphold the contract.


In a recent DC Examiner article it was stated, “Trustees said they feel no pressure to resign”. Given the votes of no confidence by the students, Faculty, Deans, staff and other stakeholders of the University, how could they not feel pressure to resign? This insensitivity does not bode well for American University. If they are the agents of change, as they claim to be, the various constituencies ought to be extremely concerned.

We hope this information will be of assistance to you in assessing the current Board's statement to always put American University first.


Leslie E. Bains, Former Chair of the Board of Trustees

George J. Collins, Former Chair of the Board of Trustees

Leonard R. Jaskol, Former Chair of the Audit Committee

Paul Martin Wolff, Former Trustee


Anonymous Anonymous said...

Thanks for forwarding this. Confirms what we've know all along.Most of the members of this current board are a bunch of lying B*****ds. We are wasting our time talking to them about anything( Governence issues,representation on the Board etc.) The only reason any of our groups should be meeting with any of them is to discuss the time and place of their resignations!!

6:53 PM

Anonymous Anonymous said...

We need to focus 100% of our efforts on legal efforts to remove them(get Law Faculty, Students and Alumni to work on this). Also redouble our efforts to lobby who ever we need on the Hill to replace this bunch. Lets stop negotiating with them about their future structure etc. We don't want them in our future

7:00 PM

Anonymous Anonymous said...

Can we please get Bains, Collins, Jaskol, and Wolff at their own town hall meeting?

Down with this shitty board already!

7:03 PM

Blogger Meg said...

Quick response to the last anon: I cannot promise anything, but a town hall with atleast three of the four (if not all 4) is currently being worked out. I cannot give details yet, but we are working on it. Promise!

7:09 PM

Anonymous Anonymous said...

This letter shows that it is impossible to "move forward" with the current BOT and that they must be removed! What lying sacks of shit!

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Anonymous Anonymous said...

I knew that little bastard (Pittinsky) couldn't be trusted.

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Anonymous Anonymous said...

You get those 4 together for a Town Hall meeting and you'll have to rent out the MCI Center. People will turn out to hear the real story. You won't get anyone to turn out to listen to that bunch from last week

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