State Examines Spending at Getty

In the latest in a series of setbacks for the world’s richest art institution, the California attorney general’s office has opened a wide-ranging inquiry into financial practices at the J. Paul Getty Trust, according to a confidential memorandum.

The memo, written by the Getty’s general counsel and circulated to the trust’s upper management, said the attorney general has requested eight years of records relating to trust Chief Executive Barry Munitz’s compensation and expenses, as well as expenditures made for his wife, grants, gifts to trustees and a 2002 real estate transaction.

State regulators also have asked for documents connected to criminal charges pending in Italy against Marion True, the Getty’s curator for antiquities, for allegedly conspiring to purchase looted artifacts.

Times stories describing Munitz’s spending, perks and favors for friends prompted the state’s review, according to the memo by Peter Erichsen, the Getty’s top lawyer. He cautioned 17 senior Getty officials, including Munitz, not to destroy records related to the attorney general’s areas of interest and instructed them to preserve all communications with The Times.

The attorney general’s office said policy prohibited it from confirming or denying the existence of an investigation.

Sen. Charles E. Grassley (R-Iowa), who has led a national push for stricter oversight of nonprofits, called the attorney general’s inquiry into Getty transactions “the responsible course of action.” Under state and federal law, foundations such as the Getty Trust must use their resources for the public good, not private benefit.

“Nonprofit status is government-conferred and taxpayer-supported,” said Grassley, chairman of the Senate Finance Committee, which is considering the first major overhaul of laws governing tax-exempt groups in 30 years. “Nonprofits have to abide by certain standards to enjoy that status. Public scrutiny is part of keeping nonprofits accountable for their special position.”

Getty officials would not respond to The Times questions, but issued a written statement through their public relations consultant saying that it will “fully cooperate” with the inquiry.

“Counsel to the Getty has already met with representatives of the attorney general’s office to ensure that information or documents responsive to any request are produced as quickly as possible,” the statement said.

In the past, Getty officials have denied that Munitz’s practices were out of step with the law.

They have also said the IRS recently concluded an audit of the Getty’s 2001, 2002 and 2003 fiscal years and found nothing wrong with Munitz’s pay, perks or financial dealings.

They would not provide a copy of the IRS findings letter, which identified other areas of concern.

Experts on nonprofit law said that, in certain regards, California’s statutes are written more broadly than the federal tax code. For example, officers have a far-reaching “duty of loyalty” to protect nonprofits’ resources.

The attorney general’s office is likely to look for patterns of excessive spending or instances when Getty resources may have been diverted for personal benefit, they said.

The Times reported in June that Munitz has traveled the world first-class at Getty expense, sometimes with his wife.

His total compensation, which topped $1.2 million in the fiscal year ending June 2004, ranks him among the nation’s highest-paid nonprofit leaders.

In 2003, when the trust was laying off staff and making cutbacks, the Getty paid $72,000 to provide Munitz with a Porsche Cayenne SUV.

At times, records show, Munitz has dispatched Getty employees to do personal tasks for himself and his wife.

His office spent more than $20,000 on gifts for four retiring trustees. Federal and state law prohibit nonprofits from giving resources to insiders, and J. Paul Getty’s will bars trustees from receiving any form of compensation. The Getty has said the gifts were appropriate.

In 1999, two grant payments totaling more than $90,000 were rushed out at Munitz’s direction without the due diligence required by the tax code.

The attorney general’s office also is reviewing the Getty’s 2002 sale of a Brentwood property to billionaire Eli Broad for $700,000 less than its appraised value. As The Times reported in Dec. 2004, Munitz played a direct role in negotiating the sale to Broad, a close personal friend.

The Getty has said the transaction was conducted properly, and the trust received fair market value for the land.

The attorney general’s inquiry adds to the troubles that have surrounded the Getty since late last year.

Museum director Deborah Gribbon abruptly resigned in October, citing differences with Munitz. Her position has yet to be filled, and her interim replacement has taken a job elsewhere.

The Getty’s curator for antiquities, True, faces trial in Rome on charges that she conspired to purchase looted antiquities. True also directs the Getty Villa, the museum’s soon-to-be-re-opened Malibu campus.

After the publication of The Times story in June, the Council on Foundations, the industry group that represents nonprofits, also initiated a review of the Getty.

The attorney general’s request for information will not necessarily result in regulatory action against the trust, experts said.

If state regulators were to conclude there had been misuse of the Getty’s resources, they could impose penalties, require the misspent money to be repaid, or, in an extreme measure, remove trustees.

California is among the few states with the resources to investigate private foundations, and is considered more aggressive than most, said Janne Gallagher, the Council on Foundation’s general counsel.

“They bring cases fairly frequently,” said Douglas Mancino, a Los Angeles attorney who specializes in nonprofit legal matters. “If they smell a rat, they would be very much willing to make demands on the organizations and the individuals involved.”