CEO greed and the commercialization of the Smithsonian
Posted by metaphorical on 3 March 2007
The Washington Post had a report last week on the over-the-top greed of the head of the Smithsonian Institution. Yet they missed the heart of the story, or willfully avoided reporting it. Congress is outraged, yet Congress is largely to blame, not that there isn’t plenty to go around. And in the ultimate irony, the conservatives who would like to commercialize the Smithsonian are the first to run afoul of the hired gun carrying that insane idea out. Let’s start with the greed.
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.
In a masterpiece of understatement, the Inspector General wrote to the audit and review committee that “Some transactions might be considered lavish or extravagant.”
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.
The inspector general’s review was prompted by a request by Sen. Charles Grassley.
“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.”
In addition, the Inspector General, A. Sprightley Ryan, found that “Many transactions were not properly documented or were not in accordance with Smithsonian policies,” according to the Post.
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.
The guy just doesn’t feel that rules apply to him.
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.
Small isn’t satisfied with the $915,698 he’ll earn this year.
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.”.
Here’s how greedy he is. He owns his home free and clear. But when he came up with a formula for the value of using the home, he calculated it in terms of a mortgage payment.
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.
In other words, he took the trouble to come up with the bogus mortgage calculation in the first place, but couldn’t be bothered to tell his staff to “refinance” it when interest rates plummeted. How is that different from turning a 5 into an 8 on an expense receipt? For a $50,000 receipt.
The Smithsonian Board of Regents repeatedly had to look the other way or authorize, after the fact, Small’s many violations of the conditions of his employment. In all fairness, some of those rules were somewhat puritanical and, even for an institution devoted to antiquity, overly antiquarian. For example, the rules don’t even allow first-class flight for overseas travel. No modern executive flies coach. But then the guy turns around and hires a Learjet.
Why didn’t the board just get rid of him? It was, to some extent, stuck between a rock and a hard place. There was one thing Small was very good at, irreplaceably good.
“The guy took over a place that was really sort of falling apart,” said [Roger Sant, chairman of the audit committee and the executive committee], 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?”
Well, honesty would have been a quality to look for, and a tiny bit of self-restraint. But to look at the bigger picture, Congress massively underfunds the Smithsonian, keeper of much of the heritage of the richest nation the world has ever known, and then is shocked, shocked, when its board brings in a hired fundraising gun. (It’s a great metaphor because it brings to mind the tyrannical sheriffs in Western movies, brought in by the frightened residents because only a bully can fight off the bad guys. The problem is, Washington has no Jimmy Stewarts ready to restore virtue without sacrificing gun-fighting—or fundraising—abilities.)
This isn’t a new problem, nor an unreported one.
Back in 2001, an independent review found that the Smithsonian needed “about $1.5 billion to repair and renovate its deteriorating facilities” while its repair budget was about $50 million per year.
In 2005, estimates of needed repairs rose to $2.3 billion, “almost 13 times its current facilities budget.” The Washington Post reported that “Some buildings and exhibits on the Mall and at the National Zoo have closed because of disrepair, and more leaks threaten the Smithsonian’s historic collections and irreplaceable objects.”
But if Small is such a good fundraiser, what are we to make of the Showtime deal, a topic the Post mentioned in the sentence quoted above, but doesn’t return to.
Back in 2005, the Smithsonian announced a deal between the Smithsonian and Showtime,
a joint venture that seeks to develop, launch, and operate a Smithsonian television programming service called “Smithsonian on Demand.” The SI’s goal in cutting the deal is to create more than 100 branded, original content programs a year about the Smithsonian’s collections and research. The arrangement also seeks to bring in an undisclosed amount of new revenue to the financially strapped institution. The SI hopes to have about 40 hours of programming available to about 25 million households by December 2006 when officials plan on launching the service.
As noted by the American Historical Association, 215 artists, historians, and filmmakers signed a letter of protest, to no avail.
Ironically, the first to run afoul of it isn’t Ken Burns, one of the letter’s signers, nor Michael Moore, who was another. It’s the well-known scholar, cinematographer, and respecter of the rule of law, Ollie North.
My “War Stories”” producers and I asked for access to the Smithsonian National Air and Space Museum’s Steven F.Udvar-Hazy Center near Washington’s Dulles International Airport. We were commencing production of a documentary on nuclear weapons tentatively titled, “From the Manhattan Project to Tehran” and wanted to “shoot” a few minutes of videotape of the “Enola Gay,” the B-29 bomber that dropped the first atomic bomb on 6 August 1945. Our requests fell into a bureaucratic black hole.
Two weeks ago, the Smithsonian’s brass handed down their verdict. Ms. Claire Brown, the National Air and Space Museum’s Director of Communications, informed us that our award-winning “War Stories” documentary unit will not be permitted to videotape in this public facility. According to her, the four minutes of the Enola Gay that we would air violates an exclusive contract between Showtime and “Smithsonian Networks.”
The irony that “War Stories” runs on that great fan of government spending, the Fox Network, and that the quoted report of North’s outrage is from FOXnews.com is just too delicious to ruin with further comment.