Friday, April 25, 2014
American Academy of Arts and Sciences Self-Reports Excess Benefit Transaction after Internal Investigation
Those of you in the Boston area are probably aware of the simmering controversy regarding the allegation of unreasonable compensation paid to, and the allegedly embellished academic credentialsl of Leslie Berlowitz, former President of the American Academy of Arts and Sciences. This Boston Globe story triggered an avalanche of consequences, including separate investigations by the Academy (the Report of which blames the President, but not the Board), the Massachusettes AG, the National Endowment for the Arts Humanities, the National Science Foundation, and ultlimately the President's resignation. After the President's resignation, the Academy amended its 990's to report excess benefit transactions primarily because of the finding that the President exerted improper influence on the Academy's compensation committee and that the President caused the Board not to follow the 4958 safe harbor procedures that would have protected the organization from an allegation that it engaged in an excess benefit transaction. The Report presents a nice case study for the nonprofit governance, determining reasonable compensation under IRC 4958, and the application of IRC 4958 as it relates to an insider's -- or a disqualified person's -- compensation. You can read many of the source documents, including the Board's mea culpa to its Fellows, and the former President's response to the report, via this Boston Globe link. The Boston Globe limits visitors to ten free articles so you can also access the full report here.
The other thing that seems apparent from the report is that you are more likely to be found to have engaged in an excess benefit transaction, or some other conduct frowned upon in the Code if you are just a plain old meanie!