Smithsonian Head's Expenses 'Lavish,' Audit Says

[BayGBM]

Smithsonian Head's Expenses 'Lavish,' Audit Says
Board Calls Small's Charges 'Reasonable'
By James V. Grimaldi, Washington Post Staff Writer


Lawrence M. Small, the top official at the Smithsonian Institution, accumulated nearly $90,000 in unauthorized expenses from 2000 to 2005, including charges for chartered jet travel, his wife's trip to Cambodia, hotel rooms, luxury car service, catered staff meals and expensive gifts, according to confidential findings by the Smithsonian inspector general.

"Many transactions were not properly documented or were not in accordance with Smithsonian policies," acting Inspector General A. Sprightley Ryan wrote on Jan. 16 to the Smithsonian Board of Regents Audit and Review Committee. "Some transactions might be considered lavish or extravagant."

Small, who in 2000 became the 11th Smithsonian secretary, will earn $915,698 this year in total compensation -- more than that of the outgoing president of Harvard University, which has an endowment about 30 times the size of the Smithsonian's. Over the past seven years, Small has also received $1.15 million for making his house available for official functions.

Small declined an interview. "Mr. Small is not going to talk about his own compensation," said Smithsonian spokeswoman Linda St. Thomas. "The regents determine all secretaries' compensation."

Small, 65, reports to the institution's 17-member Board of Regents, which referred the inspector general's findings to its audit committee, made up of four regents. The board last month accepted the committee's decision to dismiss the findings and defended Small's expenses as "reasonable." The regents also decided to rewrite several rules to authorize many of the transactions that had been deemed in violation of policy.

Sen. Charles E. Grassley (R-Iowa), who had requested the inspector general's review when he was chairman of the Senate Finance Committee last year, expressed outrage at the audit committee's response.

"I am shocked at what the Smithsonian is spending its money on when it comes to food, flowers, alcohol and other items," Grassley said in a letter last week to Chief Justice John G. Roberts Jr., who chairs the Board of Regents. Grassley criticized "what appears to be an 'anything goes' culture by the Smithsonian secretary and his staff, which views that his champagne lifestyle should be subsidized by the taxpayer."

The inspector general's letter and accompanying audit report were kept confidential at the request of Small's office, according to Grassley's staff.

Copies of the letter and report were obtained by The Washington Post.

The findings provide a rare look into Small's management style at an institution that encompasses 19 museums and galleries and the National Zoo and contains such national treasures as the Hope Diamond and the 1903 Wright Flyer. The Smithsonian is both a nonprofit organization under tax laws and a creation of Congress that receives 70 percent of its funding from the federal budget -- $715 million last year.

In the past seven years, the regents have nearly doubled Small's base salary, from $330,000 in 2000 to $617,672 today. The regents said they wanted to bring his pay in line with the median for college presidents and museum directors. Small's expenses for his first six years as secretary amounted to about $850,000, according to the audit report.

After reviewing the inspector general's findings, the regents' audit committee concluded that Small did not charge for expenditures "solely for personal benefit." The committee's report was written by Small's office using an outline provided by the committee, according to Grassley.

"Are you troubled by the secretary's office playing an important role in drafting a document that reviews the propriety of the secretary's own actions?" Grassley wrote to Roberts. "Does this raise questions in your mind about the board's independence?"

A spokeswoman for Roberts told The Post, "The chief justice has no comment."

Roger Sant, chairman of the audit committee and the executive committee, has been vocal in his support of Small's tenure and compensation.

"The guy took over a place that was really sort of falling apart," said Sant, who served on the Marriott International Inc. board with Small before becoming a regent. "There was hardly any fundraising capability. He's raised almost a billion dollars personally. What more could we have asked for as a regent?"

Sant, who was co-founder of AES Corp., said the other key members of the audit committee were Robert P. Kogod, a Washington real estate developer and philanthropist, and Patricia Q. Stonesifer, CEO of the Bill & Melinda Gates Foundation. Sant acknowledged that Small has encountered repeated controversy. Early in his tenure Small angered scientists over proposed changes in research across the institution. He upset historians and filmmakers seeking access to institution archives when he signed a semi-exclusive deal last year with the Showtime cable channel. Small also was convicted of violating the Migratory Bird Treaty when he imported indigenous headdresses festooned with feathers and animal parts from endangered species.

"I think that any of that is far outweighed by his performance as secretary in the past seven years," Sant said. "On any measure I can think of, his results have been outstanding."

A 'Hypothetical' Mortgage
Small took over the Smithsonian after serving as president and chief operating officer at Fannie Mae, where he earned $4.2 million in his last year in addition to bonuses. His original employment agreement provided him with a housing allowance so he could use his residence for "official Smithsonian hospitality." Previous secretaries had been allowed to live in a Smithsonian-owned home.

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

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

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

Small's office calculated his "hypothetical" mortgage at $3.5 million, using an 8.32 percent interest rate for a 30-year fixed mortgage, dating back to Small's hiring date in 2000. When he was hired, interest rates averaged 8.05 percent, but they dropped over the next four years and averaged 5.87 percent in 2005, the inspector general said.

With refinancing or an adjustable-rate mortgage, "the overall costs could have been lower," the inspector general said.

After reviewing the inspector general's letter, the regents disregarded a recommendation to require more "record-keeping and reporting" from Small. Instead, they endorsed the existing arrangement and authorized a $193,000 housing fee for 2007.

Side Trip to Cambodia
The inspector general found that Small's chartered-jet travel breached Smithsonian policy. The inspector general singled out a $14,509 round-trip charter flight to San Antonio in May 2001. Small attended the opening of a museum affiliated with the Smithsonian and "Smithsonian-related social functions" in Texas. He then returned to Washington for a Board of Regents meeting on a Learjet.

The inspector general found the expense "excessive" because commercial flights were available.

Small stayed in Texas because a major donor, Kenneth Behring, who has given $100 million to the institution, had invited him to a conference and the Learjet was the only way to attend the event and return in time for the regents meeting, Sant said. Also on board, Sant said, was Sen. Bill Frist (R-Tenn.), a regent at the time.

Sant defended the expense but said Small's handling of the flight "was a little less rigorous than it should have been."

Smithsonian policy states that employees should select transportation that is "most advantageous" to the institution when "cost and other factors are considered."

At the time of the San Antonio flight, the inspector general noted, a Smithsonian spokesman told The Washington Post that Small had paid for the trip using a discretionary account funded with his own money. "That characterization is inaccurate," the inspector general said. "The trip was paid for with Smithsonian funds."

The inspector general determined that Small had given the institution almost $430,000, primarily in securities, making him eligible for a tax deduction. But there was no separate discretionary fund. The inspector general noted that any donations become the property of the institution and are subject to its guidelines, which require "reasonableness."

Sant said that Small misunderstood how the donations would be handled. "He had the impression at the time that it was to create a slush fund to use for things, and that was ultimately incorrect," Sant said. "That was a mistake. But I don't think it was a personal-gain sort of thing."

Another trip highlighted by the inspector general involved Small's wife, Sandra, who in 2004 was reimbursed $5,764 for a three-day side trip to Cambodia after she and Small had traveled to China for the Smithsonian. The institution's policy permits spouses to accompany employees at Smithsonian expense "if their services in an official capacity can be demonstrated in advance." The auditor "was not provided with evidence of prior authorization or approval," the inspector general said.

The inspector general also found that while Small's employment agreement permitted first-class travel, he is required to abide by Federal Travel Regulations, which mandate that federal employees use government travel rates. "The Secretary's travel costs did not always come within those limits," the inspector general found. "For example, the Secretary spent approximately $27,000 on car service while on travel over the course of the 6-year review period."

In response to the findings regarding travel, the regents in January reversed a policy requiring Small to abide by Federal Travel Regulations. Instead, they authorized first-class travel, the use of car services, quality hotel accommodations and meals.

In response to the section about Small's wife's trip to Cambodia, the regents changed Small's employment agreement to waive preapproval, which is required for other Smithsonian employees.

Yesterday, Sant said that change was "a mistake" and went further than intended; he added that Small should be required to get pre-approval for his wife's paid travel.

Flowers for the Staff
The secretary's staff justified some spending that appeared to violate policy because they believed "the Secretary could waive any policy if it applied" to him.

The inspector general replied in a footnote, "We are aware of no written authority for the Secretary to waive Smithsonian policies."

A list of expenses prepared by an outside auditor working for the inspector general showed that Small often purchased expensive floral arrangements, rented tables, china and flatware, and hired high-end caterers for meals for employees who reported directly to him. The expenses included more than $2,000 for alcohol, though the auditor found that the rules do not allow the purchase of alcohol. Small also threw staff dinners, including one in July 2000 that cost $4,300.

Small justified the meals by telling the auditors that his staff frequently worked through lunch or dinner. Nevertheless, the auditors ruled the meals unauthorized because Smithsonian policy through December 2004 prohibited payment for meals unless they were essential to complete a project.

In December 2004, the rule was changed to allow the secretary to authorize staff meals at his discretion.

The inspector general also determined that Small had charged the institution hundreds of dollars for unauthorized "personal lunches" without any Smithsonian business purpose. After the investigation began, Small reimbursed the Smithsonian more than $700 for lunches and his wife's spousal fee at Washington's exclusive Cosmos Club.

Of 200 non-travel transactions identified as unauthorized, 66 involved gifts, including a $4,800 unauthorized bonus for an assistant to the secretary.

Small sent gifts to employees and donors, including plants, books, ties and smithsonite -- a mineral named for James Smithson, whose endowment to the United States resulted in Congress creating the Smithsonian Institution and trust. Between 2000 and 2004, Small spent $9,300 on flowers for staff, donors and regents.

The gifts were charged against a trust fund that does not authorize gifts to staff, volunteers and donors, the inspector general found.

On Christmas Day 2004, according to the outside auditor's report, Small charged $1,800 for "smithsonite for donors." "Some of the gifts listed in the report appear to be lavish," the inspector general said.

[Dos Equis]

Good grief.  You would think someone making $915,698 wouldn't need to abuse an expense account.  Greed, arrogance, and selfishness.   

[240 is Back]

wow, what a scumbag.

[BayGBM]

Can Democrats and GOP members on this board agree he should be fired? 

Check out his compensation for the last few years. 

http://www.washingtonpost.com/wp-dyn/content/custom/2007/02/23/CU2007022300992.html

[BayGBM]

Smithsonian Documents Detail Chief's Expenses
Invoices Include Work on Home of Secretary Small
By James V. Grimaldi, Washington Post Staff Writer
Monday, March 19, 2007; A01

Internal Smithsonian documents offer a glimpse into what one senator called the "Dom Perignon" lifestyle of the taxpayer-supported institution's chief official, who turned in a $15,000 receipt for the replacement of French doors at his home and spent $48,000 for two chairs, a conference table and upholstery for his office suite.

Smithsonian Secretary Lawrence M. Small's spending has been the subject of intense public scrutiny after The Washington Post published details last month from a confidential inspector general's report delving into his $2 million in housing and office expenses over the past six years.

Spreadsheets and invoices obtained by The Post include previously unreleased details on expenses deemed by the Smithsonian Board of Regents to be authorized and "reasonable" under the terms of Small's employment agreement.

Small spent nearly $160,000 on the redecoration of his offices in the institution's main building on the Mall shortly after he took the helm of the world's largest museum system in 2000. The expenses include $4,000 for two chairs from the English furniture-maker George Smith, $13,000 for a custom-built conference table and $31,000 for Berkeley stripe upholstery.

Small has also received $1.15 million in housing allowances over a six-year period in return for agreeing to use his 6,500-square-foot home in Woodley Park for Smithsonian functions. To justify those expenses, Small has submitted receipts for $152,000 in utility bills, $273,000 in housekeeping services and $203,000 in maintenance charges, including $2,535 to clean a chandelier. The home-repair invoices show $12,000 for upkeep and service on his backyard swimming pool, including $4,000 to replace the lap pool's natural gas heater and pump.

The office expenses were permitted under Smithsonian policies and procedures, and the housing allowance was part of Small's employment agreement. The $160,000 in office renovations are part of $846,000 in total office expenses Small filed between 2000 and 2005. About $90,000 was found by the institution's inspector general to be unauthorized, including charter jet travel and transactions that "might be considered lavish or extravagant," The Post reported last month.

In addition to the $90,000, about $28,000 in expenses had insufficient or no supporting documents. These were variously labeled as "reimbursement," "one-time vendor" and "Smithsonian petty cash," documents show.

Small, whose total compensation will top $915,000 this year, said in a statement that he is declining to comment while an ongoing Senate Finance Committee investigation looks at his expenses.

The controversy over Small's spending comes amid recent reports describing a broad decline in the Smithsonian's physical plant and institution-wide austerity measures ordered in recent years. The Smithsonian, for example, sent out an e-mail a year ago urging employees to save energy: "Use task lighting instead of general lighting whenever possible. Turn off decorative or accent lighting."

Roger Sant, the chairman of the executive committee of the Board of Regents, has taken the lead in defending the secretary. Sant praised Small's ability to raise money for the institution.

"He has raised $1.1 billion, and contributed more than half a million dollars himself," Sant said yesterday. "I don't think he does this job for money. He has been generous with his own money and he's gotten other people to be generous with their own money."

Sant noted that Small has strengthened financial controls, reduced staff, increased productivity, opened three new museums, overseen the opening of new exhibits, updated "old and run-down" exhibits, hired undersecretaries of science and art, and directors at five museums and the National Zoo.

The 17-member Board of Regents, which hires and oversees the secretary, in January dismissed the findings of the inspector general and defended most of Small's expenses, including those for his office and home, as "reasonable." After the Post report, the regents met again on Feb. 28 and decided to establish an independent three-person committee to review the issues raised, citing the interest of Sen. Charles E. Grassley (R-Iowa), ranking member of the Senate Finance Committee. Grassley and other members of Congress requested the inspector general's review last year.

The regents also created a governance committee to review the board's practices. "We're taking these criticisms seriously," Sant said. "If we've been wrong, we'll be the first to admit it."

Senate investigators, speaking on condition of anonymity because the investigation is ongoing, said a review of Small's expenses by an independent accountant working for the Smithsonian inspector general did not include hundreds of transactions. The investigators have since requested documents on those transactions.

"Mr. Small's champagne lifestyle turns out to be Dom Perignon," Grassley said. "The authorized expenses are over-the-top by any measure. The manipulation of the audit might be even worse."

Small's financial staff had coded each line item with a "Y," for yes, and "N," for no, to determine which expenditures the independent accountant should review. Inspector General A. Sprightley Ryan said she approved the categorization of the expenses and said she determined that the excluded items were unrelated to personal expenditures by Small.

"I believe the senator got that one wrong," Sant said. "There was such a column of yes and no, but it was only a way of determining expenses in the secretary's office versus his personal expenditures."

Among the Small housing invoices sent to the Smithsonian is a $5,700 bill from a contractor to patch a roof, repair a skylight and redo walls in Small's house in January 2005, records show.

Those repairs came three months before the Government Accountability Office reported that roof leaks were plaguing Smithsonian art museums, archives and the National Air and Space Museum. One leak left a stain on the canvas wing of the Lilienthal Hang-Glider, a pioneering piece of early flight design that influenced the Wright Brothers.

Small, in a speech at the National Press Club shortly after taking over as secretary, promised to find either public or private money to repair "shabby" Smithsonian buildings, including the Arts and Industries Building, the institution's second-oldest building.

"All of the physical facilities, the physical premises of the Smithsonian, should shine," Small said in April 2000.

Sant said that Small has been unable to get funding to fix the facilities. Sant blamed Congress and the administration -- as well as his own Board of Regents. "We just can't get the money to refurbish the buildings," Sant said in an interview last month, adding that Small has "done everything he knows how. It is the one place we're not doing the public a service."

Last year, the Smithsonian archives and other tenants were forced to abandon the Arts and Industries Building. Signs on the door say the building is "closed for renovations," but there currently are no plans to reopen the building.

Offices in the Castle
Small's office suite is on the second floor of the east wing of the Smithsonian Castle, the historic Gothic revival building that is the oldest in the institution's system. The first secretary of the Smithsonian and his family in the late 1800s lived in the space that now contains Small's offices.

I. Michael Heyman, Small's predecessor, began working in the secretary's offices in the castle in 1994. "I didn't change the office at all from the time that I got it," Heyman said, adding that he was reluctant to talk about his successor. "I might have brought in a small table."

In late 1999, as Heyman was moving out, the Smithsonian retained an architectural firm, Adamstein & Demetriou, which had designed Marriott Corp.'s board room and adjoining test kitchen. The architects were paid $43,000.

Small's office also turned to a Georgetown interior designer, August Georges, to purchase two chairs that now sit in his office. Debbie Winsor of August Georges described English-made George Smith chairs as "probably some of the best quality chairs you can buy." Winsor said she did not remember the purchase for Small because the sale occurred seven years ago.

One chair was purchased in January 2000 and the second in April, according to a spreadsheet. They cost $2,043 each, plus shipping.

Small also borrowed from the Smithsonian collection to decorate his offices. On the landing outside his office, Small placed a large stuffed Bengal tiger from the Natural History Museum and placed it on the royal blue carpeting. It sits in front of the model of a jet airplane from the Air and Space Museum. Inside Small's office are artworks from Smithsonian galleries, artifacts from Air and Space and the skull of a black rhinoceros from Natural History.

"It looks like the Smithsonian Castle has been turned into Mr. Small's palace," Grassley said. "It's a display of disregard for the Smithsonian's mission to keep institution artifacts and artwork in the executive office. With tax benefits and tax dollars, donations are made and items are purchased for the public to enjoy. Having a catalogue's worth of art in your office goes against the standards set by top museum directors."

Heyman said that he and his predecessor did not showcase artifacts in the secretary's office, but he expressed no objection. Asked if he thought the offices needed a makeover, Heyman said: "No. That's all in the eye of the perceiver."

Sant said he does not think Small's office is ostentatious. "I think it is only appropriate for a museum director or secretary of the Smithsonian to have some artifacts in his office because that's what he represents," Sant said. "That doesn't mean that there ought to be artifacts withheld from the public."

Housing Allowance
Some previous Smithsonian secretaries have been allowed to live rent-free in an institution-owned house. But Small owned his own home in Washington when he became the 11th secretary. He received a housing allowance so he could use his residence for "official Smithsonian hospitality," according to his employment agreement.

Heyman, who paid rent for a house in Washington, said he received no housing nor any reimbursement for the few times he entertained at home.

Under the terms of his housing allowance, Small was allowed to be reimbursed for half of his actual housing costs, up to $150,000 for the first year. He was required to provide receipts of his expenses, but the inspector general in her review found that he was allowed to stop filing receipts after a few months for "administrative ease." Every year of his tenure, Small has collected the maximum reimbursement, which has grown to $193,000 this year.

But the accountants who reviewed Small's housing expenses for the inspector general found that they were far short of the amount that Small needed to show in order to receive the maximum reimbursement, according to Senate investigators.

For example, in 2000, Small's actual housing expenses amounted to $92,000 -- which would only entitle him to $46,000 under the formula rather than the $150,000 he received that year, the investigators said.

After the review began, Small's staff retroactively submitted paperwork for a "hypothetical mortgage," noting that Small's contract permitted him to claim reimbursement for the "equivalent costs of home ownership." It was hypothetical because Small does not have a mortgage and owns his $3.5 million home outright, the inspector general said.

The hypothetical mortgage added $24,000 a month to his housing expenses, allowing him to qualify for the maximum in housing allowances, according to investigators.

The inspector general on Jan. 16 found some fault with the hypothetical calculation, stating "the overall costs could have been lower." She found that the hypothetical mortgage rate of 8.32 percent was higher than available market rates. But she did not recommend that Small reimburse the institution for his housing allowance. Thirteen days later, the Board of Regents revised his contract to permit a lump-sum housing allowance of $193,000.

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

Accountants working for the Smithsonian inspector general disallowed $30,000 for planting trees around Small's home because that was deemed to be "capital expense," which was not eligible for reimbursement under his employment agreement.

[BayGBM]

Senate Pushes for Smithsonian Reform
By Jacqueline Trescott, Washington Post Staff Writer
Friday, March 23, 2007; C12

In a stern rebuke to Smithsonian Secretary Lawrence M. Small, the Senate yesterday voted to freeze a $17 million increase in the institution's proposed 2008 budget.

The budget bill amendment sponsored by Sen. Charles Grassley (R-Iowa) would keep the freeze in effect until the Smithsonian reforms how business is done in the secretary's office. The measure, which passed on a voice vote, specifically caps salaries for any executive at the Smithsonian at $400,000, the current pay for the U.S. president. Small's compensation this year is $915,698.

The amendment also requires that Smithsonian travel expenditures conform to federal regulations and that Smithsonian employees follow ethics guidelines used by all federal employees.

Yesterday's action was prompted by recent reports in The Washington Post about Small's spending since he took the job in 2000. A Post review of his expense accounts found that Small, the Smithsonian's chief executive, had $90,000 in unauthorized expenses. Also, the institution's Board of Regents had approved $2 million in expenses for Small's private home and offices. The Smithsonian's former inspector general told The Post that Small had asked her last year to stop an audit of Smithsonian Business Ventures, the division that brings in revenue for unrestricted use.

After questions were raised about Small's expenses and other Smithsonian practices, the regents this week appointed an independent review committee to look into the matters.

Roger W. Sant, chairman of the regents' executive committee, was out of town yesterday for a speaking engagement and was not available to comment on the Senate vote. A Smithsonian spokesman said that officials routinely don't comment on bills or amendments until the process is completed on Capitol Hill. Small has declined to be interviewed about the reports on his expenses.

Earlier this week Grassley released additional expense accounts that showed Small and his wife went to Las Vegas on Smithsonian business in 2002, and the institution paid for first-class air travel and hotel. The tickets cost $3,464.50 each.

Grassley is the ranking member of the Finance Committee and a senior member of the Budget Committee. Hearings on the Smithsonian budget and reports about Small's spending are scheduled to be held next month.

After the amendment passed yesterday, Grassley said, "It signals to the Smithsonian that a champagne lifestyle at taxpayer expense is unacceptable."

The Smithsonian receives 70 percent of its budget from the federal government. The White House has requested $678.4 million for the Smithsonian for the fiscal year that begins Oct. 1. The budget includes salaries, rents, utilities, travel and security, as well as an account that is dedicated to repairs and construction.

[BayGBM]

I've gone over some of this guy's expenses and many of his expense account items are, in fact, reasonable.

•  I was in a furniture store last week and $4000 for two chairs is not off the charts.  Sad but true. 

•  He and his wife flew to Nevada on official Smithsonian business and they flew first class.  Do you (as a taxpayer) expect the head of the Smithsonian to fly coach?  I don't.

But a $13,000 conference table?  $300,000 to remodel his office?  That's way over the top; he should be fired.

http://www.washingtonpost.com/wp-dyn/content/graphic/2007/03/19/GR2007031900078.html

[Dos Equis]

•  He and his wife flew to Nevada on official Smithsonian business and they flew first class.  Do you (as a taxpayer) expect the head of the Smithsonian to fly coach?  I don't.

I expect them to use their own funds to upgrade from coach to first class, like many responsible business people do. 

[240 is Back]

i don't know, or care, what party he is.

his shareholders should look at his spending, and what he delivers to them.

if he's not earning what he's burning, toss him on his can and hire someone else for less.

[tu_holmes]

I thought the Smithsonian was a private entity... that was given grants by Rich people.

What do I care what he does with his "allowances"?

Doesn't this country have bigger problems than this one?

[BayGBM]

I thought the Smithsonian was a private entity... that was given grants by Rich people.

What do I care what he does with his "allowances"?

Doesn't this country have bigger problems than this one?

Wrong. 70% if its budget comes from the federal government--that is to say, your taxes.  Members of the board of the SI include senators and the chairman of the board is Cheif Justice John Roberts.

The ability to name bigger problems does not excuse Small's behavior.  Thankfull,y he is now out on his ear.  This guy should be in jail. 

[BayGBM]

Smithsonian Head Replaced Amid Criticism
By Jacqueline Trescott and James V. Grimaldi, Washington Post Staff Writers
Monday, March 26, 2007; 1:02 PM

Lawrence M. Small, the banker who took over the Smithsonian Institution seven years ago, was replaced Monday, according to congressional sources.

Roger Sant, head of the Smithsonian's executive committee, was expected to make an announcement this afternoon.

Small's management of the Smithsonian has been sharply criticized by members of Congress, and his compensation and spending practices have been subjected to scrutiny by the Smithsonian's inspector general. Last week, two separate committees were appointed to look into management operations at the museum complex, which includes 18 museums and research facilities as well as the National Zoo.

Small's spending has been the subject of intense public scrutiny after The Washington Post published details last month from a confidential inspector general's report examining his $2 million in housing and office expenses over the past six years.

Hired in 2000 from Federal National Mortgage Association (Fannie Mae), Small's tenure overseeing the 160-year-old institution has been rocked by repeated controversy.

Early in his tenure Small angered scientists over proposed changes in research across the institution. Last year, he upset historians and filmmakers seeking access to institution archives when he signed a semi-exclusive deal with the Showtime cable channel. Small also was convicted of violating the Migratory Bird Treaty when he imported indigenous headdresses festooned with feathers and animal parts from endangered species.

Despite troubles, Small has never received any public admonishment from the Board of Regents, which is chaired by the chief justice of the United States. Regents have boosted his salary 60 percent, from $333,000 in 2000 to $884,733 in 2006. The Smithsonian oversees the National Zoo, 18 museums and a 19th that is under development. It is both a nonprofit organization under tax laws and a creation of Congress that receives federal appropriations -- including $615 million last year.

The Post reported in February that Small accumulated nearly $90,000 in unauthorized expenses from 2000 to 2005, including charges for chartered jet travel, his wife's trip to Cambodia, hotel rooms, luxury car service, catered staff meals and expensive gifts, according to confidential findings by the Smithsonian inspector general.

Last week, the Post reported that Small spent nearly $160,000 on the redecoration of his offices in the institution's main building on the Mall shortly after he took the helm of the world's largest museum system in 2000. The expenses include $4,000 for two chairs from the English furniture-maker George Smith, $13,000 for a custom-built conference table and $31,000 for Berkeley stripe upholstery.

Small has also received $1.15 million in housing allowances over a six-year period in return for agreeing to use his 6,500-square-foot home in Woodley Park for Smithsonian functions. To justify those expenses, Small has submitted receipts for $152,000 in utility bills, $273,000 in housekeeping services and $203,000 in maintenance charges, including $2,535 to clean a chandelier. The home-repair invoices show $12,000 for upkeep and service on his backyard swimming pool, including $4,000 to replace the lap pool's natural gas heater and pump.

Last year, a federal investigation into Fannie Mae's questionable business practices found that Small was prominent among executives who encouraged employees to hit profit targets above all else so that managers, including Small, would receive larger annual bonuses. Regulators say Small advocated tactics that violated generally accepted accounting rules and misled investors.

[tu_holmes]

Wrong. 70% if its budget comes from the federal government--that is to say, your taxes.  Members of the board of the SI include senators and the chairman of the board is Cheif Justice John Roberts.

The ability to name bigger problems does not excuse Small's behavior.  Thankfull,y he is now out on his ear.  This guy should be in jail. 

Ok... good... I didn't know that it was mostly tax dollars... Then I am very happy. It's very common for people to not know where money comes from... In this country people just don't know unless they research, and I'll admit, I've never researched the Smithsonian Institutes funding.

[BayGBM]

Ok... good... I didn't know that it was mostly tax dollars... Then I am very happy. It's very common for people to not know where money comes from... In this country people just don't know unless they research, and I'll admit, I've never researched the Smithsonian Institutes funding.

The SI is on the Mall in Washington, DC.  Prime federal government real estate.  Like everything else in that location it is all (or almost all) federally funded. 

Sad to say but people like Small count on people like you, who have no idea what's going on, to look the other way--or worse--suggest that we shouldn't care when he is robbing the tax payers blind!

I grew up in that area and local schools always had field trips to the SI through all of elementary and middle school.

Have you ever been to the Smithsonian?  It's an incredible string of museums and unlike most museums across the country it is all free (your taxes pay for it so there is no entrance fee).  Some museums elsewhere in the country charge as much as $30 to enter.

The infuriating thing about this scandal is that now that he has resigned all will be forgotten and forgiven.  He will not have to pay back any of the stolen (yes, STOLEN) funds.

I have lost all faith in Justice John Roberts (chairman of the SI board).  Any time Small's violations were brought to light the board retroactively changed the rules so that he was never officially guilty of anything.  No person of any character would ever allow that.  "Justice" Roberts is an asshole.

[tu_holmes]

The SI is on the Mall in Washington, DC.  Prime federal government real estate.  Like everything else in that location it is all (or almost all) federally funded. 

That's true...

Sad to say but people like Small count on people like you, who have no idea what's going on, to look the other way--or worse--suggest that we shouldn't care when he is robbing the tax payers blind!

It's not like we don't want to know these things, but the reality is that most people have a lot of stuff going on outside of watching what people at the "Smithsonian" are doing... We would like to know all, but guess what? It's just impossible... We can't know or be involved with everything going on.

I grew up in that area and local schools always had field trips to the SI through all of elementary and middle school.

Have you ever been to the Smithsonian?  It's an incredible string of museums and unlike most mousiness across the country it is all free (your taxes pay for it so there is no entrance fee).  Some museums elsewhere in the country charge as much as $30 to enter.

Yes, I've been but it was years ago... I'm originally from Richmond, Va, so of course I've been there, I'm sure it was a school related function though... back when i was in highschool.

The infuriating thing about this scandal is that now that he has resigned all will be forgotten and forgiven.  He will not have to pay back any of the stolen (yes, STOLEN) funds.

I have lost all faith in Justice John Roberts (chairman of the SI board).  Any time Small's violations were brought to light the board retroactively changed the rules so that he was never officially guilty of anything.  No person of any character would ever allow that.  "Justice" Roberts is an asshole.

[Deedee]

You have to admit, the man has great taste though.  Those two chairs are positively swanky and the conference table is gorgeous too.  Even though he ripped off the tax payers, at least he left the Smithsonian offices in a state of uber-chic.

[BayGBM]

You have to admit, the man has great taste though.  Those two chairs are positively swanky and the conference table is gorgeous too.  Even though he ripped off the tax payers, at least he left the Smithsonian offices in a state of uber-chic.

Indeed, his taste is fine.  As I said, I was in a furniture store a couple weeks ago and $4000 for two chairs is not entirely off the charts--when you are spending your own money.  But when you are in a position of public trust and spending taxpayer's dollars that should give you a reality check. 

Redecorate your office?  Sure.  But the budget for that should be limited to something like $25,000.  You most certainly don't spend $160,000 as was reported.

[BayGBM]

That's true...
It's not like we don't want to know these things, but the reality is that most people have a lot of stuff going on outside of watching what people at the "Smithsonian" are doing... We would like to know all, but guess what? It's just impossible... We can't know or be involved with everything going on.

Nothing personal, but that kind of rationalization is lame.

It's the responsibility of citizens to know and pay attention to this sort of thing.  America doesn't ask much from you: vote, pay your taxes, stay out of trouble, be informed (read the news) enough to keep them honest.  Is that really so hard?

Maybe I'm biased because I grew up in the area and have been to the SI many times, but not knowing that the SI is funded with your tax dollars is something I would expect from a new immigrant--not an American citizen who grew up in this country.  By the way, even if this was a traditional company it would still be cause for alarm.  Any time, money is stolen like this, we all somehow pay a price.  Having "too much going on" is not an excuse for watching your tax dollars stolen right in front of you.  Anyhow, this isn't about you--it's about Small.

As usual, the most annoying part of this episode is that the guy was already filthy rich before he took the SI job when he decided to bilk the taxpayers out of even more money.  This guy is scum and deserves to die. 

We need a Star Chamber to eliminate guys like this.  And THIS guy too. http://www.getbig.com/boards/index.php?topic=101142.0

[tu_holmes]

Nothing personal, but that kind of rationalization is lame.

It's the responsibility of citizens to know and pay attention to this sort of thing.  America doesn't ask much from you: vote, pay your taxes, stay out of trouble, be informed (read the news) enough to keep them honest.  Is that really so hard?

Maybe I'm biased because I grew up in the area and have been to the SI many times, but not knowing that the SI is funded with your tax dollars is something I would expect from a new immigrant--not an American citizen who grew up in this country.  By the way, even if this was a traditional company it would still be cause for alarm.  Any time, money is stolen like this, we all somehow pay a price.  Having "too much going on" is not an excuse for watching your tax dollars stolen right in front of you.  Anyhow, this isn't about you--it's about Small.

As usual, the most annoying part of this episode is that the guy was already filthy rich before he took the SI job when he decided to bilk the taxpayers out of even more money.  This guy is scum and deserves to die. 

We need a Star Chamber to eliminate guys like this.  And THIS guy too. http://www.getbig.com/boards/index.php?topic=101142.0

Not really... I mean, I read a lot.. I'm very informed, but you CAN NOT be informed about everything.

Do you understand the science of sending a person to the moon? Do you have a deep understanding of deep sea animal life?

There are many things you have a "basic" understanding of, but do not have a complete working understanding of.

Do I know what's going on in the world around me... Yes, of course... I read other countries news sites DAILY, but I refuse to believe that EVERYONE is going to know EVERYTHING about everything.

You act like people should stop living life to learn about the SI... not gonna happen.

As far as the SI is concerned... everything is not tax dollars, you've said it yourself... 30% right?

Saying that a "New Immigrant" wouldn't know it but everyone else would is just ignorance on your part.

Do you know EVERY federally funded program in the country? Hardly... you don't have the time to keep up with them all and neither do I.

I sense a nice elitist attitude in your tone... Good job.

Oh, and if this is on the top of YOUR list for problems in America... You're doing pretty well then... most people think this country has much bigger problems.

[Camel Jockey]

You have to admit, the man has great taste though.  Those two chairs are positively swanky and the conference table is gorgeous too.  Even though he ripped off the tax payers, at least he left the Smithsonian offices in a state of uber-chic.

He should be chucked into prison. I'm sure some black guy will appreciate how he decorates his cell before he considers sodomizing the scum.

[Dos Equis]

He should be chucked into prison. I'm sure some black guy will appreciate how he decorates his cell before he considers sodomizing the scum.

I'm sure some white guy will appreciate it too . . . . 

[Camel Jockey]

I'm sure some white guy will appreciate it too . . . . 

Some white supremist dude would probably rape him too, along with a northern mexican. There, are you happy now? 

[Dos Equis]

Some white supremist dude would probably rape him too, along with a northern mexican. There, are you happy now? 

No.  You forgot Asian, Hawaiian, Middle Eastern . . . . 

[BayGBM]

More proof this guy is no good.

Back in 2004 he was found guilty of violating the endangered species act by holding feathers of endaged birds in his personal art collection.  You can read the details of that story here
http://www.washingtonpost.com/wp-dyn/content/article/2004/01/22/AR2005040309000.html

As part of the settlement of that case he got 2 years of probation and 100 hours of community service, but more than a year after that case ended he still had not performed the community service!

Smithsonian's Small Still Awaits Word on Community Service
By Jacqueline Trescott
Washington Post Staff Writer, Wednesday, February 23, 2005; C01

More than a year after he pleaded guilty to buying tribal art made from the feathers of endangered birds, Smithsonian Secretary Lawrence M. Small has not started the 100 hours of community service he was sentenced to by the federal court, in part because of a disagreement with the U.S. attorney over what he should do.

In correspondence with the U.S. District Court in North Carolina last spring, Small proposed doing extensive reading on the Endangered Species Act so that he could make "a constructive contribution to the effort to preserve endangered species." He said there was "gridlock" in Congress over reauthorizing the law. Small initially suggested doing traditional service, such as working in a soup kitchen, but the judge rejected that.

In his letter to the court, Small said: "It is conceivable that with extensive research, lots of contact with people who are key players in the world of endangered species legislation, legal affairs and regulation and a great deal of luck, I might be able to contribute in some small way to progress in this highly contested and extremely troubled area."

In reply, the government argued that his education on endangered species matters would lead to another role -- as a person who would "mediate political discussion and promote legislative change."

Frank Whitney, U.S. attorney for the Eastern District of North Carolina, where Small was sentenced in January 2004, said in a brief opposing the plan: "Allowing the defendant to spend time learning about the [Endangered Species Act] so that he may change the law he violated fails to promote a respect for the ESA."

The problems with Small's community service, first reported by Hearst News Service, emerged after the U.S. District Judge Terrence Boyle suggested Small do something that would "address the issue of endangered species in the Amazon, and that would build off the Defendant's strength, such as his business and community contacts," according to court documents.

In his letter to the court Small said he could play a useful role because of the Smithsonian's prestige and involvement with scientific issues.

"As long as care is taken to make sure I am not viewed as involving the institution in an effort that is motivated entirely by personal obligation, I can see the approach described above as perfectly viable," he said. He added that involvement of the Smithsonian should wait until he completed his service.

"It might be possible for me, as a non-participant in the conflict with no prior history of involvement, to create a means to bring about some degree of consensus among the conflicting forces. This might be done by having the Smithsonian Institution convene a conference, create a task force or commission, or produce a series of reports or articles, all designed to make specific recommendations persuasive enough to allow a bipartisan coalition of legislators to form and, ultimately, make constructive changes" to the existing law.

Whitney's letter, written last April, said, "The Court should not permit the Defendant to satisfy his obligations to the community for his criminal conduct by reading and chatting with prominent political figures. To do so would minimize his criminal activities and remove any deterrent value of his sentence."

"The phrase 'community service' brings to mind activities such as helping the poor, the elderly, or young, or promoting awareness on the consequences of criminal conduct. It does not conjure visions of leisurely reading materials at a desk, and meetings over coffee to discuss the status of a statute," Whitney said. "The defendant's proposal falls far short of being just punishment for the offense."

The government attorney suggested that Small could combine his "managerial and financial skills" with organizations that are concerned with the issue. "Perhaps the defendant could impart his fund-raising skills to an organization such as the World Wildlife Fund or the Environmental Defense Fund, two organizations which already appear in his proposal. Alternatively, he could participate in an Earthwatch program in the Amazon, or volunteer with an Amazon conservation group," according to the court document.

Smithsonian spokeswoman Linda St. Thomas said Small would not discuss the impasse.

The court has not commented on the community service plan since the government's rejection last April.

Small was accused of violating the Migratory Bird Treaty Act because he bought a $400,000 collection of Amazonian tribal artifacts that contained 219 items with endangered feathers. The government said Small had participated in "illegal trafficking in wildlife."

Small bought the collection in 1998, two years before he became Smithsonian secretary. Articles about his extensive collection and the private gallery he built to house them led to the inquiry by the U.S. Fish and Wildlife Service. Court documents said Small also introduced another collector to his art dealer. That resulted in a sale that took place when he was Smithsonian secretary.

The person who sold the items to Small was sentenced last December. The other buyer has only been identified as a Washington collector.

After pleading guilty to the misdemeanor, Small was sentenced to two years' probation with 100 hours of community service. He was also ordered to send a public apology to several national newspapers. The letter was sent; none of the papers printed it.

[BayGBM]

Controversial CEO to Leave Smithsonian Business Ventures
By James V. Grimaldi and Jacqueline Trescott
Washington Post Staff Writers, Thursday, May 17, 2007; A01

Gary M. Beer, the founding chief executive of the Smithsonian's business unit and architect of a controversial deal with Showtime Networks Inc., has announced plans to leave amid internal and congressional inquiries into his management, expense account and promotions of a female subordinate.

Beer told staff in an e-mail that he will not attempt to renew his contract in September as chief executive of the seven-year-old Smithsonian Business Ventures. The unit, known internally as SBV, runs museum gift shops, restaurants, theaters and other profitmaking ventures.

The departure of Beer, who earned more than a half-million dollars in 2005, along with the resignation in March of Smithsonian Secretary Lawrence M. Small, signals a move away from the high-flying, private-sector culture installed to make the institution run in a more profitable, market-based fashion. The era of Small and Beer was marked by corporate-style compensation, executive-rich expense accounts and deals with private partners that clashed with the scholarly, public-sector ethos of the 160-year-old institution.

"As the Institution reassesses the balance in public and private sectors going forward, I believe this is an opportune time for a change," Beer said in the e-mail late Monday. "The misinformation about SBV that has circulated in the last year is most unfortunate, as the record of accomplishment is one of which we should all be proud."

The acting Smithsonian secretary, Cristián Samper, thanked Beer yesterday in a statement but questioned "whether the current mandate for SBV is the right one."

Beer, 46, a former executive at Robert Redford's Sundance Institute, has come under increasing scrutiny in recent weeks as the Smithsonian has been roiled by controversy over its leadership and finances. Small was forced to resign following revelations of lavish expense account spending, including $2 million in housing and office expenses over seven years.

The Smithsonian inspector general, who earlier this year issued a report criticizing the business unit's performance, is also investigating Beer's expenses and is expected to issue a report this month. As that report neared completion, Beer told some of his nearly 500 employees at senior staff meetings that his expenses over five years included at least $10,000 in unitemized expenditures and $30,000 in limousine charges. Three Smithsonian magazine employees who attended one of the meetings said Beer, explaining the chauffeured car service, told the group, "I don't do Yellow cabs."

Beer said the comment was taken out of context.

"I often take taxis, but when I travel in New York I typically use a scheduled car service because it is more efficient and reliable," Beer said in a statement to The Washington Post. "I have found finding cabs -- particularly at rush hour or in rain or snow when I am headed for the airport -- to be unreliable."

Sen. Charles E. Grassley (R-Iowa) Monday sent a seven-page letter to the Smithsonian Board of Regents asking about the management of the business unit.

In addition to queries about Beer's performance, the letter includes a series of detailed questions about promotions and bonuses for one of Beer's lieutenants, Jeanny Kim, who was identified by her title, vice president and general manager of media services. The letter also asks for all e-mails between Beer and that individual, as well as for that vice president's personnel file.

Senate investigators have told The Post the questions were prompted by statements from former employees that it was widely believed in the office that Beer had an intimate relationship with a direct subordinate.

A spokeswoman for the Smithsonian, Linda St. Thomas, said the institution discourages but does not prohibit supervisors from having relationships with their direct subordinates. The policy does prohibit preferential treatment. St. Thomas said the Smithsonian's human resources department had received no formal complaints about Beer and Kim, who met at Sundance when Kim was a seasonal employee at the film festival.

Beer hired Kim as an executive assistant and gave her five promotions and four raises over the next six years. Kim, 39, now serves as a vice president and is one of the highest-paid employees in the business unit, earning more than $140,000 in 2006.

Kim did not return messages seeking comment. Beer declined to be interviewed, but provided The Post last week with a four-page letter in response to questions. He declined to address questions about his relationship with Kim. "Ms. Kim is an accomplished professional who has received promotions and raises based on merit," Beer said. "Ms. Kim was selected for that position at the request of Showtime as they were impressed by her performance."

Grassley and some members of the institution's board of regents had been quietly pressing for Beer to step down, according to sources familiar with the matter. Smithsonian executives had wanted to avoid forcing Beer out and being required to pay a full one-year severance package outlined in his contract, the sources said.

"A number of whistle-blowers have described problems from out-of-control spending to sweetheart promotions," Grassley said. "We need to have leadership at SBV that puts the Smithsonian first and high executive pay and perks in the rearview mirror. I don't know how you justify keeping someone with this record on the payroll until September."

Beer submitted his notice in a letter, dated Monday, to Samper.

In a statement to The Post yesterday, Beer defended his tenure.

"The fact is that SBV doubled revenue per museum visitor during my tenure," he wrote. "It is unfortunate that the focus is not on this financial success. The January 2007 IG report's mischaracterization of SBV's performance may lead to changes in the business model that will damage the Institution and the pocketbook of the American taxpayer. That is the real story."

Beer was hired seven years ago amid predictions that profits could be doubled through new initiatives and improved business practices. The new business unit was deemed vital to the Smithsonian's future as expenses, particularly a backlog of maintenance and repairs for the institution's vast 18-museum complex, continued to rise faster than federal funding, which accounts for three-quarters of the budget.

Instead, revenues have been flat and profits have dropped, prompting Samper this month to launch a top-to-bottom review of the business unit.

At the Smithsonian, Beer's biggest accomplishment was the deal he struck with Showtime, which granted the network virtually exclusive access to the institution's collections in exchange for a 30-year agreement expected to provide the Smithsonian with at least $99 million. The deal caused what Small called "a tremendous hullabaloo." Critics included librarians, historians and filmmakers, ranging from public television's Ken Burns to retired Lt. Col. Oliver North.

Beer negotiated the deal while he was an investor in a joint venture involving Showtime. He alerted Smithsonian ethics officials of his investment in March 2005. After a three-day review, the Smithsonian's general counsel determined there was no conflict of interest because Beer "did not have a general partnership interest" and was not involved in the venture's decision-making. The Government Accountability Office reviewed the issue and concurred. Beer currently has no ownership interest in the joint venture involving Showtime, he said in his statement.

Marcus Owens, a Washington attorney who previously ran the tax-exempt section of the Internal Revenue Service, told The Post that he would have advised against Beer's participation in the Showtime deal in order to avoid the appearance of a conflict.

In his statement to The Post, Beer defended the Showtime deal as a good one for the institution and said his expenses were justified. He said his expenses averaged $35,000 per year between 2000 and 2005, the period under review by the inspector general.

"All of these expenses were legitimate business expenses incurred in furtherance of the mission and operations of Smithsonian Business Ventures," he said. "During the course of the review, we learned that documentation for some expenses had been lost or misplaced."

A former Washington lobbyist, Beer in the 1980s joined Sundance, which Redford, the Oscar-winning director, founded to support independent films. Beer quickly became a controversial figure within Sundance for spending lavishly on his expense account, according to Peter Biskind, who wrote about Sundance in Premiere magazine and later in a book.

Eventually, Beer moved to the for-profit Sundance Group. He helped found the Sundance Catalog Co. and the Sundance Channel. He left in 1998 to develop his own private investments.

Beer began with the Smithsonian in August 1999, and the business unit was formally launched in August 2000. Beer was hired because he had been able to start a business unit at Sundance.

The Smithsonian's businesses -- two magazines, gift stores, restaurants, Imax theaters, mail-order catalogues, licensing deals and a travel service -- contribute less than 4 percent to its $1 billion budget. But Smithsonian leaders say the business cash is crucial because it is unrestricted -- not earmarked for specific uses.

However, the Smithsonian's inspector general found that profits fell from $27.9 million 1999 to $23.9 million in 2006.

Beer blamed the Sept. 11, 2001, attacks, a soft magazine-ad market and sinking catalogue sales. He said the inspector general's report omitted "market conditions and management's actions to address them."

Museum directors complained after profit-sharing from gift shops fell from $7.9 million in 2005 to $5.6 million last year. "Needless to say, we are shocked, disappointed and discouraged," Samper, then director of the Museum of Natural History, wrote in an e-mail to Beer.

Beer replied to Samper that the numbers were partly the result of changes in a new accounting system.

In a report released in January, Inspector General A. Sprightley Ryan found numerous accounting errors and questioned the accuracy of the business unit's financial statements. Ryan also urged that the business unit jettison "market-based pay" for base salaries and "pay for performance" for bonuses.

Ryan found that pay had increased while revenues remained flat and profits declined. In 2001, the business unit's payroll equaled its profits of $26.2 million. Last year, paychecks exceeded profits by $2 million. Beer earned $570,317 in 2005. The top 10 executives in the unit made a total of $2.7 million in 2006.

Smithsonian Deputy Secretary Sheila Burke, who sits on an internal institution board that oversees the unit, rejected Ryan's suggestion.

Documents obtained by The Post show that Beer approved in 2006 a bonus package of about $136,000 on top of the $325,000 salary for Steve Shaiken, the president of museum retail. That was in addition to Shaiken's $100,000 relocation package from Florida to Washington, which included $77,000 for the closing costs for a Ritz-Carlton condo and $22,000 to move household goods.

Shaiken left his job after one year and one day, and was allowed to keep all of his relocation expenses. Shaiken did not respond to messages seeking comment for this story.