Senator Rebukes Getty
Amid national attention to excesses at nonprofits, the chairman of the Senate Finance Committee has rebuked the board of the J. Paul Getty Trust, saying it has failed to curb Chief Executive Barry Munitz’s lavish pay, perks and travel.
“Charities shouldn’t be funding their executives’ gold-plated lifestyles,” Sen. Charles E. Grassley (R-Iowa) said this week in a statement to The Times. His committee is considering the first major overhaul of laws governing nonprofit organizations in 30 years.
“I’m concerned that the Getty board has been spending more time watching old episodes of ‘Lifestyles of the Rich and Famous’ than doing its job of protecting Getty’s assets for charitable purposes,” he said.
Grassley’s comments came in response to a June 10 Times story that related how Munitz, who makes more than $1.2 million and is among the nation’s highest-paid leaders of nonprofits, had traveled the world first class at Getty expense, often with his wife. Records showed that even when the trust was cutting staff, Munitz used Getty resources on pet projects and favors for friends.
“The board’s failure is especially troubling, because the Getty is a private foundation that doesn’t rely on outside donations and therefore doesn’t need to be responsive to potential donors,” Grassley said.
The spotlight has fallen on the Getty as nonprofits have been trying to demonstrate that they are capable of self-regulation. Like other tax-exempt organizations, it is required by law to dedicate its resources to the public good, not private benefit.
On Wednesday, a panel representing the nation’s 1.3 million charitable organizations presented a set of proposed reforms to Grassley’s committee. Among the ideas were increased penalties for excessive compensation and tighter restrictions on first class and spousal travel.
“The issue of extensive compensation and lavish travel were a very deep concern to the panel,” said Diana Aviv, executive director of the Panel on the Nonprofit Sector, a group formed to advise Grassley’s committee. “Most people don’t want to allow lavish lifestyles to be paid for on the backs of charities.”
The Senate Finance Committee, which has proposed even tighter restrictions, is expected to introduce legislation in July.
Asked to respond to Grassley’s statement, none of the Getty’s staff or 12 trustees, including Munitz, would comment Wednesday.
But in the past, Getty board Chairman John Biggs has defended the trust’s oversight.
“There is an engaged and accountable governance structure in place,” wrote Biggs, former chief executive of TIAA-CREF, an investment fund for education professionals, in a March letter to The Times.
Trust officials have said an IRS audit covering the Getty’s 2001, 2002 and 2003 fiscal years found nothing wrong with Munitz’s pay, perks or financial practices. They would not provide a copy of an IRS letter informing the Getty of its findings.
The trust’s $5 billion and varied international programs make it unique in the nonprofit sector, Getty officials have said.
Turnover on the board has been substantial in the seven years since Munitz took over. Many of the newcomers are longtime associates of his whom he has had a hand in choosing, he acknowledged in a November interview.
Trustee Ramon Cortines, one of the few pre-Munitz holdovers, said in an interview earlier this year that management had involved the board less in decision-making in recent years.
“Instead of discussion or debate, it’s now ‘informing the board,’ ” he said.
Munitz has said the board is not a “rubber stamp,” but acknowledged that members sometimes give the trust less attention because they perceive it as less needy than other organizations they support.
The board has delegated broad authority to Munitz and his staff.
No board approval is required for any Getty grant, regardless of size, though trustees are informed of larger ones, Getty officials said. Munitz’s approval is required for grants of more than $100,000.
Trust officials say that Munitz is required to submit his expenses to the board chairman but that the chairman can designate a staff member to review and approve them.
Getty records show that some of Munitz’s expenses are approved by two deputies he brought to the trust from the California State University system, which he served as chancellor.
It is unclear how often board members have reviewed Munitz’s expenses. Records show that former board Chairman Robert Erburu, also a former chairman of Times-Mirror Co., reviewed expenses for three years at once in May 2000 in response to a request from an external accounting firm.
Getty officials would not say whether Biggs had reviewed Munitz’s expenses. Neither would they comment on whether a proposal to review the expenses quarterly, made by Cortines several months ago, had been adopted.
Setting Munitz’s compensation is a process over which the board has direct responsibility. Getty officials said the compensation was based on recommendations from an outside consultant and was negotiated by a board committee.
But Cortines, a member of the committee when Munitz’s 2004 contract was negotiated, said his only involvement came when a recommendation was presented to the full board. “There was no debate,” Cortines said.
He added that Biggs and the committee’s chairman, former trustee Lewis Bernard, negotiated the contract.
Reported excess at other nonprofits has triggered the national push for reform.
The James Irvine Foundation, for example, was alleged to have feted its outgoing president with a rich compensation package, lavish gifts and parties while cutting its charitable programs and laying off employees.
The reports echoed similar scandals at for-profit companies such as Enron, Tyco, Adelphia and Worldcom and led to the landmark Sarbanes-Oxley Act, which increased the accountability of corporate board members.
Several experts on tax-exempt organizations said Munitz’s use of resources went well beyond what was allowed at most other large private foundations and art institutions.
The Council on Foundations, the industry group that represents nonprofits, initiated a review of the Getty after the Times story appeared -- a step the group has taken just half a dozen times in the last five years.
“The article raises some significant questions,” said Janne Gallagher, the council’s general counsel. “Now we’d like to talk to the Getty about them.”
Times staff writer Steven E. Bodzin contributed to this report.