Getty Chief Will Depart Under Cloud
In 2000, J. Paul Getty Trust board member John Biggs became chairman of the trust’s audit committee, thanks in large measure to his impeccable Wall Street credentials as a stickler for corporate accountability.
But months later, when he was scheduled to review expense accounts filed by the trust’s high-flying then-chief executive, Barry Munitz, Biggs delegated the task to Munitz’s assistants, who now say they were in no position to question his lavish lifestyle.
What seemed an administrative handoff would have dramatic consequences for one of the nation’s largest private foundations.
Over the next four years, Munitz spent much of his time traveling first class, leaving day-to-day management to his staff as he ran up a series of questionable expenses. Eventually, his absences led to an institutional crisis and his spending sparked an investigation by the state attorney general’s office.
Late last year, the Getty board hired a high-priced team of outside attorneys, who spent dozens of hours reviewing Munitz’s expenses. When they finished in February, Munitz was forced to resign, giving up more than $2 million in pay and reimbursing the Getty $250,000 to settle “unresolved disputes.”
On Thursday, the Getty announced that Biggs had decided to resign as chairman by the end of October, attributing his departure eight months ahead of schedule to the “heavy responsibilities” of his position and obligations to other organizations.
Biggs, who rose to board chairman in 2004, said in recent interviews that by ousting Munitz and implementing reforms, Getty trustees have shown “courageous leadership” and been “a model for all nonprofits to follow.”
A Times review of internal Getty records, along with interviews with current and former trustees and staff, shows that at crucial junctures, Biggs contributed to the controversies the board is now taking credit for fixing.
In one instance, Biggs and a board colleague negotiated a $3-million severance agreement for museum director Deborah Gribbon in 2004 before involving the full board, a deal that has been scrutinized by the attorney general’s investigators.
Later, when the board was warned by experts that Munitz’s actions probably would lead to state and federal sanctions, Biggs continued to deny publicly that there were problems.
Frances Hill, an expert on nonprofits and the law, said Biggs and the rest of the board had a duty to insist that they be fully informed and to keep a closer watch on the institution’s money.
“They all failed,” she said.
Sen. Charles Grassley (R-Iowa), chairman of the Senate Finance Committee and a vocal critic of excess in the nonprofit sector, raised similar concerns after The Times reported that Biggs raised no objection when Munitz hired his former boss, former board chairman David Gardner, to write a book about the Getty that would never materialize.
“The Getty still has leadership problems,” Grassley said at the time. “I thought the organization had turned a corner by removing Mr. Munitz, but it appears a bigger shake-up may be necessary to ensure that the board is putting the public first.”
As early as this week, the state attorney general’s office may release the results of its yearlong investigation of the Getty’s use of its tax-exempt assets. The probe has focused on Munitz’s spending and the governance of the Getty board.
Under Biggs’ leadership, the Getty has recently made a series of policy changes to address past problems, including stricter travel, grant and conflict of interest policies. The board chairman now will conduct a quarterly review of the chief executive’s expenses.
In recent interviews, Biggs admitted to making mistakes that, in hindsight, have contributed to the Getty’s problems. But he said the recent changes have been “an example of the way a board should respond to problems when they find them out.... What more could you ask for?”
Biggs, 70, took over the board chairmanship just before the Getty’s troubles became public. He had recently retired as president and chief executive of New York-based TIAA-CREF, the nation’s largest pension management firm. He has been a widely regarded expert on corporate governance since Enron’s collapse, when he criticized before Congress a lack of vigilance by auditors.
Biggs’ track record in the corporate world won him the chairmanship of the Getty’s audit committee, where one of his assignments was to review Munitz’s expense reports.
Two days before he was scheduled to review the reports, in March 2001, Biggs asked Getty Chief Operating Officer Stephen Rountree whether the review was really necessary, Rountree recalls.
“He suggested it was unusual to have a board member devote that much time and energy to review expense accounts and asked me to inquire with our outside auditors,” Rountree said in an interview last week. “There’s no question he knew this was a kind of annoying and unpleasant task that came with the assignment of the audit chair.”
When internal and outside auditors agreed with Biggs, he directed Rountree to “leave the review to the audit staff,” records show. “I disagreed with it, but I felt it was appropriate” for the audit chairman to decide, Rountree said, adding the he and other staff members had long had concerns about Munitz’s spending.
The decision put senior staff in the awkward position of questioning their boss over expenses, said Rountree, now president of the Music Center of Los Angeles County. “We put ourselves at risk in terms of our employment.”
Biggs said that if he had known about the staff’s concerns, he would have reviewed the records.
“I wish someone on the staff had had the courage to tell me confidentially about it, but they didn’t,” he said.
For the next four years, records show, the board did not review Munitz’s expenses. At the peak in 2002, Munitz was out of the office for 139 days and spent $225,000 on travel, including a $29,000 trip to Australia with his wife to “meet cultural officials” on their way to a nearby vacation with friends.
Through his attorney, Munitz said he thought the board was approving his expenses -- something he understood to be required by his contract.
It was only “after questions were raised ... by The Times,” Munitz added, that he discovered that the board hadn’t performed the review.
Said one former trustee: “We can’t hide from the fact that we didn’t check his expense accounts. That was bad governance.”
Shortly after he became board chairman, Biggs faced a crisis that nearly tore apart the institution: Museum Director Deborah Gribbon suddenly resigned, raising questions about the Getty’s leadership.
Gribbon had emerged as Munitz’s chief critic, chafing over his vision and frequent absences. Munitz found her ineffective and unreliable, and had taken away some of her responsibilities, including control over programming at the Getty Villa.
In May 2004, Munitz sent Gribbon a nine-page letter, putting on record what he described as her poor performance, unprofessional behavior and emotional instability.
In the letter, Munitz wrote that Gribbon was mistaken in her belief that she was “ ‘widely seen as’ someone who is fair and professional in dealing with colleagues and staff.”
Five months later, Gribbon announced her resignation in a letter from her attorney to Biggs and Vice Chairman Lewis Bernard. According to two former Getty officials, she said Munitz had harassed and “constructively discharged” her and demanded more than $5 million.
Without telling the full board, Biggs and Bernard began negotiating a settlement with Gribbon’s attorneys through Getty general counsel Peter Erichsen that would pay her $3 million and cite “philosophical differences” with Munitz as her motive for leaving. The deal came with strict nondisclosure and nondisparagement clauses that prohibited anyone from saying more.
Rumors of Gribbon’s departure spread among board members, who demanded an explanation. But it was not until about three weeks later, at a strategic planning retreat, that the full board was briefed by Biggs and Bernard, records and interviews show.
Several board members were “furious” that Biggs and Bernard had negotiated the deal in private without the input of the full board, according to former board members. Some objected to the generous sum -- nearly seven times Gribbon’s annual compensation.
The board eventually voted unanimously to finalize the agreement despite the objections, but there remain lingering resentments about how Biggs handled it.
“Essentially, it was someone blackmailing you,” one former trustee said. “We allowed it to happen.”
The arrangement remained a secret until it was reported in February by the New York Times, the day after Munitz resigned. Almost immediately, the attorney general wrote to the Getty inquiring about the transaction. Gribbon and Bernard declined to comment for this article.
In recent interviews, Biggs admitted to some misgivings.
“I regret in many ways that I couldn’t have communicated with more people more frequently on it, but generally speaking, we came out of it with a unanimous decision,” he said.
Soon after Gribbon’s departure, The Times sent a detailed list of questions to the Getty asking about Munitz’s use of Getty resources for personal benefit. In a March 2005 letter to the full board, Erichsen braced trustees for the likely fallout.
Erichsen told board members that leading legal experts had advised him the expected article was likely to prompt investigations by the Internal Revenue Service and the state attorney general’s office, which would be able to “successfully assert” that several of Munitz’s spending practices violated tax laws, possibly including rules against self-dealing.
Still, Biggs strongly defended Munitz’s actions for months.
In a letter written to Times editors three days after Erichsen’s memo, Biggs branded as “untrue” any implication that Munitz was “making decisions which benefit him at the expense of the Getty.” The Getty “operates within the constraints set by law and makes regular and proper disclosures of its activities,” he wrote.
But records show that he made the comment without having ever reviewed Munitz’s expenses.
The first batch was sent to him for review the next day.