Document: Ramsey can give former chief of staff as much "deferred" pay from foundation as he wants
On his way out the door at the University of Louisville Foundation, one of James Ramsey’s last official actions as the nonprofit’s chief executive could be to give Kathleen Smith, his longtime former chief of staff, as much “deferred” pay as he wants. Ramsey, the former U of L president, signed an unusual amendment to Smith’s deferred compensation agreement with the foundation last November.
LOUISVILLE, Ky. (WDRB) – On his way out the door at the University of Louisville Foundation, one of James Ramsey’s last official actions as the nonprofit’s chief executive could be to give Kathleen Smith, his longtime former chief of staff, as much “deferred” pay as he wants.
Ramsey, the former U of L president, signed an unusual amendment to Smith’s deferred compensation agreement with the foundation last November – one that essentially gives Ramsey the ability to award Smith any amount of money from the foundation’s coffers, on whatever terms he wants, as often as he wants.
WDRB obtained a copy of the document in a public records request.
At the same time, the foundation has not produced records documenting approval of the $200,000 in deferred pay that Smith received in 2014 and will apparently continue to get every other year, according to the foundation’s latest public tax return. That is despite Smith’s insistence earlier this year that there was documentation of the $200,000 award.
That grant – which included an additional payment to make it effectively tax-free – was one component of Smith’s $859,181 total compensation from the foundation in 2014, according to the organization’s latest tax return.
It wasn’t until the following year that Ramsey signed the open-ended amendment to Smith’s deferred pay – an arrangement that differs from the typical way in which top U of L employees like Smith have been given such payments in the past.
Usually, there is a memo or contract specifying how much the foundation promises to pay the employee on a certain “vesting” date, assuming he or she remains in the job. The idea is to entice important employees to stay on the job over the long term.
In 2008, for instance, Smith was promised $512,500 – plus investment earnings and a payment to offset income taxes – if she remained in her job through July 1, 2012.
But the amendment Ramsey signed last year promises no specific amount of money to Smith.
It says Smith “may from time to time receive grants of deferred compensation in such amounts and subject to such conditions, including vesting, as the Foundation shall determine through the action of its President.”
That means Ramsey can give Smith what he sees fit and also decide how long Smith must wait – whether a year, a day or no time at all – before becoming entitled to the money.
Ramsey and Smith are the only signatories to the document, which appears to have been executed without the approval of the foundation’s Board of Directors or the university’s Board of Trustees.
It’s unclear how much extra pay – if any – Ramsey has given Smith since signing the amendment. WDRB has requested those records, but the foundation says they are “in storage, in active use or otherwise not readily available.”
The foundation, a charitable nonprofit organization, is U of L’s custodian of donated funds and the manager of its $680 million endowment that supports academic departments.
It faces the “escalating gravity” of key donors losing confidence in its stewardship of funds, according to acting U of L President Neville Pinto. Two donor groups recently demanded an independent examination of the foundation’s books before giving any more money to U of L.
Ramsey resigned after 14 years as U of L president on July 27, but he remains president of the foundation. An apparent effort to buy him out of that position – even though he is owed nothing – fell apart on Monday when a hastily scheduled foundation board meeting was canceled.
Smith, meanwhile, remains chief of staff to Acting U of L President Neville Pinto. An administrator since 1981, she has served four university presidents and has previously said it will be up to the next permanent president of U of L whether to retain her.
Ramsey did not reply to an email seeking comment on the open-ended authorization he signed for Smith’s pay last November. Smith has not responded to three messages this week.
Robert Hughes, a Western Kentucky physician who chairs the foundation’s Board of Directors, said in an interview Wednesday that he was unaware of the 2015 amendment to Smith’s deferred pay. But Hughes has no concerns about Ramsey unilaterally handing out retention incentives to his subordinates.
“If you are the leader of a team, you have to be able to put that team together and keep that team together to generate the results that you want,” Hughes said, adding that Smith’s work on behalf of the foundation and the university “has just been exemplary.”
Officially, Smith is the foundation’s assistant secretary, a role that includes maintaining the records of the foundation’s board. But Hughes said she is “integral” to the foundation’s day-to-day operation, including meeting with donors and securing state money for road improvements around campus.
To be sure, Ramsey has for years determined how much foundation money will be paid to his key lieutenants without either governing board signing off on the specific amounts.
Ramsey has claimed broad authority to award the deferred pay contracts under a 2006 authorization by U of L’s Board of Trustees. But as WDRB reported last year, the authorization was actually for “appropriate one-time bonuses” and does not contemplate pay continually awarded over several years or even mention the term “deferred compensation.”
In 2011, Ramsey signed an amendment to Smith’s deferred compensation plan which awarded her an additional $53,587 so as long as she remained employed until the next day, as WDRB reported last year.
The foundation’s latest tax return, released in May, shows that Smith received a $200,000 payment described as “retention grant biennium” in 2014.
But the foundation has produced no documents showing authorization of that award despite two open records requests from WDRB – one in early 2015 and the second last month.
In a May 25 interview, Smith said there was, in fact, documentation for the award.
“There was a second participation grant that occurred in 2014 and it authorizes a biennial vesting,” she said.
At the time, she said she would provide the document to WDRB, but has not done so. Hughes said he didn’t know the details of the $200,000 grant.
“The specifics of that I am not aware of. I have heard that she was on some kind of deferred-comp plan,” Hughes said.
Last year, an independent compensation consultant hired by U of L said the foundation’s incentive packages were not “deferred” long enough to provide a true motive for the executives to remain employed – and that it should take at least three years for any promise of extra money to come through.
But neither the trustees nor the foundation board acted on the consultant’s recommendations.
Smith’s deferred compensation agreements are below:
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