Congressional Record—Senate S4691
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May 17, 2006 CONGRESSIONAL RECORD — SENATE S4691 There being no objection, the mate- moval of certain AU board members—par- board members of a tax-exempt university. rial was ordered to be printed in the ticularly focusing on members serving on the Do you believe this is the appropriate mes- RECORD, as follows: ad hoc committee that took actions regard- sage AU should send to students—it is all ing former AU president Dr. Ladner without right to violate the law if the penalty is de U.S. SENATE, the knowledge of key board members. minimis? Please provide a complete expla- COMMITTEE ON FINANCE, In reviewing the material, I understand the nation of these events and your views of Washington, DC, May 17,2006. views of those who believe the members of them, as well as all related material. GARY M. ABRAMSON, the ad hoc committee should be removed. In The issue of whistleblower protection at Chair of the Board, American University. the course of our review, I have also focused non-profit institutions has also been of great THOMAS GOTTSCHALK, on several key votes by some AU board mem- concern to me in the course of the Commit- Vice Chair of the Board, American University, bers. In particular, given all related informa- tee’s work. Whistleblowers in certain situa- Washington, DC. tion reviewed by the Finance Committee, I tions are protected from retaliation under DEAR MR. ABRAMSON AND MR. GOTTSCHALK: am seriously troubled by votes cast in Octo- state and federal law. A series of aggressive I am writing to you regarding the Finance ber 2005: 1) to amend the audit committee’s emails to other AU board members by one Committee’s review of governance issues at recommendation and secondly to reject the AU board member appear to attack whistle- American University (‘‘AU’’). AU is a feder- audit committee’s recommendations on a blowers trying to do the right thing regard- ally chartered non-profit, tax-exempt edu- vote for reconsideration; 2) to reject three ing the situation at AU. They include the cational organization. Congress enacted the identical recommendations from counsel, in- following language: ‘‘You are right in citing law in 1893 that first incorporated AU, ap- cluding Manatt Phelps as well as Arnold & a Nixon era example. People do not tolerate pointed its initial individual corporate mem- Porter, that had concluded that Dr. Ladner’s leaks any more. No one is so naive anymore bers, and specified the size and composition 1997 employment agreement was invalid; 3) to think that unidentified ‘whistleblowers’ of its board of trustees. Act of Feb. 24, 1893, not to terminate Dr. Ladner for cause; and 4) are public servants. You are right in saying ch. 160. In 1953, Congress enacted legislation, to increase cash severance to Dr. Ladner by there always must be a process for people to altering, among other things, the process by an additional $800,000 over eight years—after report wrongdoing but this is not the way.’’ which the AU board of trustees is elected. the board had already voted to increase Dr. As a champion of whistleblowers in Con- Act of Aug. 1, 1953, Pub. L. No. 183, ch. 309. Ladner’s cash severance by $950,000. gress for years, I can state categorically that The Finance Committee’s review is predi- It is important to bear in mind that these not only are whistleblowers public servants, cated on this unique history of the legisla- votes were made after the findings from they are often heroes—saving lives and tax- tive relationship between the federal govern- protiviti independent risk consulting re- payers billions. I commend you, Mr. ment and AU as a congressionally chartered ports, which I am releasing today; were Gottschalk, and former board chair Ms. institution, as well as on the Committee’s known to the board and that provided in de- Bains, for taking a strong line against any general legislative and oversight jurisdiction tail the expenses of Dr. Ladner and his wife effort to bring the Salem witchcraft trials to over tax-exempt charitable organizations. that he charged to AU. The report shows ex- northwest DC. But again, that a board mem- In conducting its governance review, the penses that would make for a good episode of ber might propose retribution against whis- Finance Committee has reviewed the numer- ‘Lifestyles of the Rich and Famous’—a life- tleblowers, as appears from some of these ous documents provided by AU and material style paid for by AU students and their par- emails.is inexcusable. I would appreciate provided by other sources, as well as discus- ents. In addition, as noted above, the board your general views on the benefit of whistle- sions with current and former board mem- members were aware of the findings of two blower protection at tax-exempt organiza- bers, faculty, students and AU employees. In respected law firms that found that Dr. tions, as well as your specific views on the addition, I have heard concerns raised by AU Ladner’s 1997 employment agreement was in- series of emails appearing to support aggres- students from Iowa and their parents. To valid. sive efforts to search, find, and punish those allow students, faculty and staff, and the While I fully understand that as Chairman who try to speak out against what is wrong. public to have a better understanding of the of the Senate Finance Committee, I’m not In particular, do you believe such efforts governance issues still facing AU, I am today here to direct the management of the affairs send the appropriate message to AU stu- releasing relevant material provided to the of AU or its board, I do want you to know dents—especially given that a large number Finance Committee. It says volumes about that I am considering proposing federal leg- of AU graduates will be employed in public problems of AU governance that students, islation that would require changes in the service? faculty, and supporters often have to learn structure, composition, and governance of Finally, let me return to the overall issue about the work of the AU board from the the AU board, as Congress has done pre- of governance. In meetings with my staff, U.S. Senate Finance Committee rather than viously. In particular, in discussions with Fi- AU representatives have given assurances from the board itself. I understand that gov- nance staff, AU board members have noted that AU will have in place governance re- ernance changes are to be proposed that pro- that they do not view that under current fed- forms that will provide students and faculty ponents claim will ensure that there will be eral law the AU board has the authority to a meaningful and substantive voice at AU. I greater openness and transparency at AU. I compel a board member to resign. Please view this as a vital part of AU governance look forward to meaningful reform in this confirm if that is accurate, and please also reforms coupled with greater sunshine and area and expect to be informed of the details provide your views about the wisdom of Con- transparency that I mentioned at the begin- of those proposals. gress amending the law to provide the AU ning of my letter. Please inform me in detail While I am releasing quite a bit of infor- board such authority and, if so, suggested what the governance reforms are as to stu- mation today, I am frustrated that there is changes to the law. certain key material that I cannot release In addition, I want to draw your specific dents and faculty. today. When the Committee began this in- attention to a board meeting that discussed Given that Congress is currently consid- vestigation on October 27, 2005, I received as- Mr. Ladner’s compensation package. In gen- ering reforms to provisions of the tax code surances of cooperation. The Washington eral, under federal tax laws, outside review affecting charities as part of the conference Post stated on October 28, 2005, ‘‘Gottschalk and justification for the salary of a highly on the pension bill, I ask that you provide said yesterday that the board would do ev- compensated individual at a public charity answers to this letter within 10 working erything it could to cooperate.’’ Unfortu- provides a safe harbor from penalties under days. Thank you for your time and courtesy. nately, those words have not always been Section 4958 of the Internal Revenue Code. Cordially yours, met by deeds. While AU has over time pro- My review of tax-exempt organizations and CHARLES E. GRASSLEY, vided material requested, AU continues to corporations has found that in the over- Chairman. redact material provided and most frustrat- whelming number of cases outside consult- f ingly labels key documents’ ‘confidential’ ants provide a justification for the salary re- and not to be released to the public. This is quest that is being considered. In fact, the HONORING THE INDY RACING not what I would expect from a university AU situation is the only example Finance LEAGUE that benefits from tax-exempt status and Committee staff have seen of an outside con- Mr. BAYH. Mr. President, I rise was chartered by act of Congress. I call on sultant stating that a salary of an individual today to applaud the Indy Racing you to hold to your public commitments of at a public charity is too high. full cooperation and allow for public release However, in calling for a salary for Dr. League, IRL, for its decision to use of all documents without redaction that Ladner higher than that recommended by ethanol in its race cars and the impact have been requested.