LOUISVILLE, Ky. (WDRB) -- On Sept. 29, 2011, University of Louisville President James Ramsey signed a document awarding his Chief of Staff Kathleen Smith an extra $53,587 in pay from the university's foundation, of which Ramsey is also president.
Like Ramsey and U of L Provost Shirley Willihnganz, Smith had been promised large “deferred” payments from the foundation if she stayed on the job at U of L for years to come.
In Smith's case, the foundation in 2007 promised her $450,000 if she remained employed through 2012.
What was different about the $53,587 one-time grant Smith received in 2011 is that all she had to do to qualify for the “deferred” money was remain employed for one more day – as the pay “vested” the very next day, Sept. 30, 2011.
and other records obtained in multiple requests over the last two months shed new light on how top U of L executives have been enriched by the university foundation over the years, at a time when the inner workings of the $1.1 billion nonprofit organization are under increased scrutiny.
In February, stories in The Courier-Journal and Insider Louisville revealed that the foundation's latest tax return showed executives had earned millions of dollars from special deferred accounts set up by the foundation.
Ramsey was paid $2.7 million by the foundation in the fiscal year ended June 30, 2013, while Willihnganz received $1.9 million and Smith got $1.4 million, the
shows. The payments included investment returns on the deferred pay while it was held by the foundation and “gross up” checks to cover the executives' income taxes for the big payouts.
Smith's extra $53,587 in “deferred” pay in 2011 was a reward for her exceptional performance in 2010-11,
But the one-day vesting of the compensation contradicts what Ramsey told the foundation's board at its meeting last month – that all of the deferred pay was “tied to us being here a certain amount of time.”
And it's not the only instance in which the pay really wasn't “deferred” all that long.
On Dec. 1, 2013, Ramsey signed
giving her an additional $300,000 that vested seven months later, June 30, 2014. That same document extended a $50,000 annual grant of deferred pay Willihnganz had been getting since 2009, with the first payment vesting not in the future, but five months prior – June 30, 2013.
WDRB's review of foundation records also reveals:
- Each of the three U of L executives was credited with deferred pay that was dated months or years in the past and retro-actively credited with investment results.
- Smith and Willihnganz were at times paid by not only the university and the foundation, but a third organization created by the foundation – as much as $78,000 for an average workload of two hours a week, according to tax forms.
- Ramsey received $2.5 million from the foundation in 2007-2008 due, in part, to a large retirement payout meant to mimic a state pension.
- The foundation provides Ramsey with perks like a long-term care insurance policy paying $100,000 annually for life and a $12,000 annual “car allowance” for his wife.
Documents also show the foundation's former vice chairman, Burt Deutsch -- who for years has been the board's de-facto spokesman on sensitive issues like executive compensation -- is now a $120,000-per-year consultant for the foundation.
Deutsch's paid work began when he left the board in September 2013, and the arrangement was not approved by the board or advertised for competitive bidding.
For more on Deutsch's consulting agreement, read:
Ramsey, who declined requests since April 9 to speak with WDRB News for this story, began his report to the foundation's directors on March 31 by saying there was no sense “dancing around” the executive pay issue since it had been in the news.
He told directors that the media was making the foundation out to be “the bad guy” when, in fact, the deferred pay arrangements were requested by the U of L Board of Trustees to ensure Ramsey and his key staff had incentives to remain in their jobs over a long term.
“You just did what the Board (of Trustees) asked you to do,” Ramsey told the foundation directors.
But the university wasn't able to produce records supporting Ramsey's assertion that the trustees requested the pay contracts.
The day after Ramsey made the comment, WDRB filed an open records request asking for any such records, and the university said it could find none.
“Often these discussions take place in executive (closed) session, and there are no reports of those discussions,” said Smith, the longtime assistant secretary for both the foundation and trustee boards, in an email.
The foundation, whose assets have about doubled under Ramsey
, receives donations on behalf of the university and invests the money, doling out more than $100 million in annual operating support for U of L. Ramsey has said the foundation plays a crucial role in advancing U of L as state money for higher education continues to decline.
And one way the foundation supports U of L's mission is by supplementing the pay of Ramsey and his top aides using privately raised funds instead of tuition or tax dollars, said Deutsch, the former longtime vice chairman, in a February interview.
“That's a lot the reason why people give money to the university, to take care of these management things,” Deutsch said. “…We don't look at the deferred compensation and retention bonuses apologetically – quite frankly. We look at it as something that, if we weren't doing those type of things, we would have been derelict in our duties.”
Retroactive investment returns
Since the deferred pay is invested just like hundreds of millions of dollars of other foundation assets, the executives' awards grow and become more valuable from the time they are awarded until the executives become entitled to receive the money.
But, between 2007 and 2013, each of the three executives received grants of deferred pay that were backdated by as much as four years and credited with fictional investment returns, WDRB's review shows.
For example, on July 1, 2007, the foundation gave Ramsey two $75,000 grants that were credited to his deferred pay account as of July 1, 2003 and July 1, 2004.
And the extra $300,000 Willihnganz received in the December 2013 employment extension was assigned “dates of contribution” as early as July 1, 2012 – more than a year earlier.
Saffer, the foundation attorney,
with the same investment results as the foundation's other assets for the period between the “credit” date and the actual awarding of the compensation.
He said there is no legal prohibition on that, since the foundation does not actually set aside money, or “fund,” the deferred pay accounts – they're just promises to pay executives certain amounts in the future.
“It is no different than if an employer says to an employee two years into her employment, ‘If you do certain things I will give you a retirement benefit 10 years from now that will be what $X dollars would grow to if it were to have been invested in a certain fund as of two years ago,'” Saffer
Saffer also wrote that he “understand(s)” the foundation's directors agreed in closed sessions to grant deferred pay to the officials, but the contracts were not written up until later for “workload” reasons, which would explain why some of the grants were “credited” months or years in the past.
Payments from University Holdings
Records also show that, in fiscal years 2011 and 2012, Smith and Willihnganz were paid not only by the university and the foundation, but also by a third organization called University Holdings Inc., which was created by the foundation in 2007, according to
University Holdings' purpose is “managing and providing working capital obtained from the foundation to the foundation's subsidiary organizations,” according to
In the year ended June 30, 2012, University Holdings paid Willihnganz $78,685, and Smith $64,297, for working an average of 2 hours per week, according to
Deutsch called University Holdings a “very important” piece of the foundation and said it's related to real estate developments such as the Shelbyhurst campus, the Nucleus area downtown and the engineering park planned on the Belknap campus.
Pay from University Holdings is not mentioned in
with the foundation, and the $78,685 she got from University Holdings in fiscal year 2012 exceeds the $45,646 to $49,845 listed in the employment letters as her foundation base compensation during the 2007-2013 period.
Records show Willihnganz first received pay from University Holdings (called UHI) in 2011, when
“Dr. Willihnganz's original role, and the role for which she was awarded the additional compensation, was to monitor the activities of UHI to make certain those activities were consistent with the mission set for UHI by the Foundation and the University,” Saffer wrote.
In another email, he said Smith coordinated the work of University Holdings.
University Holdings did not pay Willihnganz in fiscal year 2013, and Smith's compensation from the organization was reduced to $45,000, according to its latest tax form.
Ramsey got big retirement payout in 2007
Ramsey's currently makes base salaries of $349,789 from the university and $299,172 from the foundation. And he continues to earn deferred pay
. The pay becomes his in $500,000 increments every two years.
Ramsey declined bonuses and pay raises from the foundation and university for three years, 2008-2010, in solidarity with faculty and staff during lean times.
From 2003 to 2013, foundation tax forms show Ramsey was paid a total of $10.9 million from all sources. (However, Saffer could not answer whether, in some years, the tax forms also reflect Ramsey's university compensation.)
In the fiscal year 2013, Ramsey received $3.3 million in all from the foundation, but it was not the first time he had received a multi-million payout in one year.
In 2007, Ramsey received $2.5 million, including a $1.2 million retirement payout in which the foundation provided him with the same “lump sum” pension he would have received had he not joined U of L in 2002 and remained a state government employee for five more years.
The payout also assumed Ramsey purchased an additional 5 years of service credit from the state to retire with 27 years in the state system. Ramsey worked in a number of state policy jobs before joining U of L, including as state budget director.
The payout, approved in 2005 in
, was reduced by the amount it would have cost Ramsey to buy the additional five years of pension credit with the state.
with the foundation gives him a number of other perks, such as:
a life insurance policy with a $1 million death benefit;
a long-term care insurance policy with a lifetime benefit of up to $100,000 per year;
a supplemental disability policy worth more than the policy available to typical university employees;
and “gross up” payments to cover any income taxes on those insurance plans.
On March 20, WDRB asked the foundation for records showing the foundation's cost for those insurance plans, but the foundation has not yet fulfilled the request.
The foundation also pays Ramsey's premiums for his U of L family health insurance policy. And while Ramsey is provided a 2014 Cadillac Escalade, the foundation also pays a $12,000 annual car allowance for Ramsey's wife, Jane, according to the contract.
The car allowance for Ramsey's wife had been $6,000 a year according to his original 2003 contract, but it was doubled in the 2014 contract “to reflect Mrs. Ramsey's increased travel in support of the University,” Saffer said in a written answer to WDRB's questions.
The foundation also covers Ramsey's travel and entertainment expenses for university business, including business-class airfare on international trips; and two country club memberships for business use, according to the contract.
Willihnganz, who will step down as provost June 30 and return to teaching in 2016, also receives foundation-paid life insurance of similar value, no-cost family health insurance and $5,000 annually for financial planning fees, according to
. Willihnganz's regular pay of $342,694 from the university is supplemented with $49,845 from the foundation, according to the employment letter dated Dec. 1, 2013.
Smith, who earns $139,109 annually in regular pay from U of L, does not have an employment contract with the foundation or the university, despite her status as a key employee. Like other employees, she serves on at-will basis, Saffer said.
Sore point for some professors, students
The recent revelation that Ramsey and his top aides received millions of dollars from the foundation – while tuition at the university continues to climb – has been a sore point for some rank-and-file staff.
A half-dozen professors, including the chair and vice chair of the Faculty Senate, declined to speak with WDRB for this story, but
summarize several comments about the issue without attributing them by name.
“(There) appears to be a largess focused on senior administrators at the expense of the most vulnerable, i.e. students with increasing tuition every year as well as faculty and staff who have not received consistent raises,” according to one of the comments.
Connor Allen, a senior majoring in political science at U of L, questioned how the foundation spends its substantial resources.
“Even though it's technically not money coming from tuition, and they don't have to spend it to lower tuition, you keep hearing about the billions and billions of dollars that they are receiving, so I think there are some -- definitely -- out-of-step priorities,” Allen told WDRB on Wednesday.
Chester Porter, who signed many of the amendments to Ramsey's contract as chair of the foundation from 2005 to 2012, died in 2014.
Robert Hughes, a western Kentucky physician who chairs both the foundation and trustee boards, said he wasn't aware of details like the backdating of the deferred compensation, payments to Smith and Willihnganz from University Holdings and Ramsey's 2007 retirement lump-sum.
But Ramsey, Willihnganz and Smith are dedicated university servants who “literally eat, live and die that institution,” Hughes said in an interview.
“If you ask me, ‘do I think these people are worth what they got paid?' Most definitely, because of the job they do,” he said. “…Kathleen and Shirley, I have the utmost respect for… Those people are available 24-7. You wouldn't believe the number of conversations I've had with either Kathleen or Jim well past 10 o'clock at night.”
Hughes added that the university has come a long way under the three executives' leadership.
“We've doubled the graduation rate, and everything looks better,” Hughes said, crediting Willihnganz in particular with U of L's academic strides.
The three other U of L trustees who are also directors of the foundation -- Jonathan Blue, Larry Benz and Jody Prather -- declined to comment.
In an email, Smith said she has spearheaded and managed more than $53 million in road projects around U of L campuses since 2010, raised $43.5 million for the foundation and secured more than $15 million in federal grants.
“And, these functions are only one component of my job. They are things, however, that can be quantified and do not address qualitative accomplishments,” she wrote.
Willihnganz did not respond to a request for comment.
Reporter Chris Otts: 502-585-0822;
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