American University Case Study – (200 points) Due February 17. You.docx

American University Case Study – (200 points) Due February
17. You need to write a 5-7-page (not including a reference
page and cover page) analysis and recommendations. You are
hired as an outside organizational behavior consultant. You
have been brought in to fix the problems at American University
with Benjamin Ladner and the American University. To get full
credit you must use 5-7 terms from the textbook. You must also
include a minimum of 4 additional sources beyond the use of
the textbook. To write this paper you need to do research on
root cause analysis, business process improvement,
organizational behavior, and organizational change management
and include how these terms apply to your analysis. CASE
STUDY IS ATTACHED
Final paper assignment rubric
Expert
Proficient
Apprentice
Novice
Integration of Knowledge
The paper demonstrates that the author fully understands and
has applied concepts learned in the course. Concepts are
integrated into the writer’s own insights. The writer provides
concluding remarks that show analysis and synthesis of ideas.
The paper demonstrates that the author, for the most part,
understands and has applied concepts learned in the course.
Some of the conclusions, however, are not supported in the
body of the paper.
The paper demonstrates that the author, to a certain extent,
understands and has applied concepts learned in the course.
The paper does not demonstrate that the author has fully
understood, and applied concepts learned in the course.

Topic focus
The approach is focused narrowly enough for the scope of this
assignment. A thesis statement provides direction for the paper.
A solid logical and innovative strategy is clearly established.
The approach is focused lacks a highly innovative strategy.
The approach is not cohesive and focused enough for this
assignment.
The approach and strategy is not clearly coherent.
Depth of discussion
In-depth discussion & elaboration in all sections of the paper.
In-depth discussion & elaboration in most sections of the paper.
The writer has omitted pertinent content or content runs-on
excessively. Quotations from others outweigh the writer’s own
ideas excessively.
Cursory discussion in all the sections of the paper or brief
discussion in only a few sections.
Cohesiveness
Ties together information from all sources. Paper flows from
one issue to the next without the need for headings. Author's
writing demonstrates an understanding of the relationship
among material obtained from all sources.
For the most part, ties together information from all sources.
Paper flows with only some disjointedness. Author's writing
demonstrates an understanding of the relationship among
material obtained from all sources.
Sometimes ties together information from all sources. Paper
does not flow - disjointedness is apparent. Author's writing does
not demonstrate an understanding of the relationship among
material obtained from all sources.
Does not tie together information. Paper does not flow and
appears to be created from disparate issues. Headings are
necessary to link concepts. Writing does not demonstrate
understanding any relationships
Spelling and grammar
No spelling &/or grammar mistakes.
Minimal spelling &/or grammar mistakes.

Noticeable spelling & grammar mistakes.
Unacceptable number of spelling and/or grammar mistakes.
Sources
More than 4 current sources, of which at least 2 are peer-review
journal articles or scholarly books. Sources include both general
background sources and specialized sources. Special-interest
sources and popular literature are acknowledged as such if they
are cited. All web sites utilized are authoritative.
4 current sources, of which at least 1 are peer-review journal
articles or scholarly books. All web sites utilized are
authoritative.
Fewer than 4 current sources, fewer than 1 are peer-reviewed
journal articles or scholarly books. All web sites utilized are
credible.
Fewer than 4 current sources, or fewer than 1 are peer-reviewed
journal articles or scholarly books. Not all web sites utilized are
credible, and/or sources are not current.
Citations
Cites all data obtained from other sources. APA citation style is
used in both text and bibliography.
Cites most data obtained from other sources. APA citation style
is used in both text and bibliography. There are some minor
errors in the application of the APA 6th edition citation style.
Cites some data obtained from other sources. Citation style is
either inconsistent or incorrect. There are some significant
errors with the use of APA 6thedition citation style.
Does not cite sources or failed significantly to effectively
follow the APA 6th edition citation style as required on the
graduate level.
1
Dallas Residency Case Study: Ben Ladner’s Years of Living
Lavishly

Please write a 5-7 page paper that answers the following
questions around this case.
What are the key issues in the case?
How would you solve the problem?
What theories, concepts, and models from the textbook apply to
this case?
Ben Ladner’s Years of Living Lavishly
American University president Ben Ladner and his wife, Nancy,
were behaving like billionaires—until their years of living
lavishly caught up with them.
By Harry Jaffe on April 1, 2006 – Washingtonian Magazine
In January 2004, American University president Benjamin
Ladner and AU board chair George Collins took their wives to
St. John in the Virgin Islands.
In their roles as president and board chair, Ladner and Collins
had become friends. They dined together after board meetings,
sailed together, vacationed together.
When Ladner and his wife, Nancy Bullard Ladner, were looking
for a second home, Collins and his wife introduced them to
Gibson Island, an enclave on the western shore of the
Chesapeake Bay. Their wives, both with Southern roots, hit it
off. Collins sponsored the Ladners for membership in the
island’s tennis and golf club.
But by 2004 the mix of business and fun wasn’t always
pleasant. Ladner was lobbying the board for a raise, and he
couldn’t leave it in the boardroom. During the trip to St. John,
Ladner kept talking about money.

At the time Ladner was making $880,750 a year, including base
pay, bonus, and incentives. This put him among the nation’s
best-paid college presidents. But he wanted more.
In a confidential memo to Collins, Ladner had made the case for
a package of bonuses and investments that would have added $5
million on top of his base salary over the next five years. He
would be making more than any college president in the nation.
“You’re not running a top-ten school,” Collins replied. “You
don’t have a medical school. You’re not Harvard. You are not
an investment banker, and you are very well paid.”
Ladner was beginning to disappoint Collins in other ways.
Collins had pressed him for accurate measurements of student
performance and how AU compared to other institutions. He
found Ladner’s numbers “sloppy.”
On the St. John trip, Collins told Ladner that his proposed
financial package was unlikely to be approved. And Collins
thought to himself: We had better start looking for a new
president.
Later, to a few fellow board members, he said: “Time to hire
our own lawyer.”
A year and half later, the downfall of Benjamin Ladner unfolded
in public view. Leaks of his expenses cast him as a profligate
spender of college funds for personal use. Students pilloried
him on the Internet and protested on campus. Deans and faculty
issued votes of no confidence.
“His moral compass has lost its bearings,” Paul Martin Wolff
wrote to other trustees.
The AU board, split into camps, suspended Ladner in August

2005. By October he was out on the street.
In many ways, the previous 11 years were exceptional for
American University. The campus at DC’s Ward Circle, where
Massachusetts Avenue meets Nebraska Avenue, had undergone
major renovations. Applications had risen during Ladner’s
tenure from 4,829 to 13,560, and freshmen entered with higher
test scores. The endowment had bloomed from $29 million to
$281 million. The schools of law and international service were
considered first-rate. The Cyrus and Myrtle Katzen Arts Center,
the campus’s new crown jewel, was about to be dedicated.
Some of the credit had to go to Ladner.
“To dismiss his years as illusion is BS,” says Cornelius “Neil”
Kerwin, who served as provost for seven years and took over as
interim president. “It’s dead wrong.”
But they were also years of living lavishly for Ben and Nancy
Ladner. An anonymous letter to the board in March 2005
accused the couple of “severe expense account violations”—of
blowing the university’s cash on a French chef, on weekends
abroad, on extravagant parties for friends and family. The board
investigated and corroborated the charges.
Ladner felt blindsided and abused. He left unapologetic and
unrepentant.
The demise of Ben Ladner is still reverberating through the
board and the campus. Students want changes to the board. A
Senate committee, investigating abuses among nonprofit
corporations, is examining financial transactions by Ladner and
the AU trustees. Federal prosecutors are investigating, too.
What brought Ben Ladner down? The anonymous letter? A
campus rebellion? Weak oversight? A power play by the board?

Or was Ben Ladner the author of his own undoing, a man who
lost his ethical center and, when confronted, attacked even his
friends?
Many American University students and faculty first saw
Benjamin Ladner on November 4, 1994, when he delivered his
inaugural address. He spoke of AU’s “unique identity” and its
“American destiny.”
Founded in 1893 with ties to the Methodist Church, American
University was unusual: It is one of the few universities
chartered by Congress. It developed over the next century as a
private, coeducational college that ranked in the middle range
of universities. Against DC’s major colleges, Georgetown and
George Washington, it ranked a distant third in 1994.
American University’s destiny, Ladner thundered, “is now
clouded by a remarkable crisis, which may well be the most
alarming dilemma of our time: namely, the extent to which the
self-set goals of private individuals are unrelated to the
expanding needs of the public domain.
“Institutions,” he said, “are increasingly regarded solely as a
functional means for attaining private ends. . . .”
Ladner’s rousing speech in the school’s gymnasium brought the
crowd to its feet, according to the Washington Post.
Ladner was 52. A tall, heavyset native of Mobile, Alabama, he
delivered his speech with a mellifluous voice that was part
Southern preacher and part professor of philosophy. He had
studied both religion and philosophy in college and graduate
school.
People described Ladner as “charming,” “intelligent,”

“personable,” “visionary.”
Growing up in Mobile, the youngest of three children, he played
ball, rode horses, studied cello. He went to Baylor University on
a basketball scholarship in 1959, according to a feature in
American University’s alumni magazine, but was injured in his
freshman year and left the team. He graduated with a degree in
English and religion, then earned a divinity degree from
Southern Seminary and a 1971 doctorate from Duke in
philosophy and religion.
In the 1970s Ladner taught at the University of North Carolina’s
Greensboro campus; in 1980, he became director and then
president of a nonprofit teacher-training organization, the
National Faculty of Humanities, Arts, and Sciences. Based in
Atlanta, it was funded by grants from government and
corporations.
When AU came calling in 1994, Ladner had never held a major
administrative or management job at a university. But AU was
desperate for stable leadership.
Four years earlier Richard Berendzen, who dreamed of AU
becoming “Harvard on the Potomac,” was forced to resign the
presidency after being charged with making obscene phone calls
from his office. He would plead guilty. Provost Milton
Greenberg took over.
AU then hired Joseph Duffey from the University of
Massachusetts; he served less than two years before leaving to
head the US Information Agency. Elliott Milstein, a popular
dean of the law school, became interim president. The board
then offered the presidency to Scott Cowen, a dean at Case
Western Reserve University, but he turned down the job at the
last minute.

Ben Ladner was not even under consideration when John Petty,
who had met Ladner in 1978, gave his name to a headhunter. “I
threw his hat in the ring,” says Petty, a banker who later joined
the AU board. “I knew he was a big-league guy. It was time to
go from the minors to the majors.”
At his inauguration in November 1994, Ladner came off as a
heavy hitter with high ethical standards. He talked of bridging
“the traditional gap between private interest and public
responsibilities.”
One of his first acts was to see to his private interest.
As soon as the Ladners came to Washington, they toured the
house that had been the AU president’s residence since 1968.
The sprawling house with swimming pool at 3300 Nebraska
Avenue sits on a large corner lot across from the campus.
Presidents over the years had welcomed students and faculty
into the glass-walled room along the rear. Students could walk
from Fletcher Gate on the campus’s west end, cross a small
street, and ascend the steps to the gathering space.
“We held many meetings there,” says Elliott Milstein, now a
professor at AU’s Washington College of Law. “It was a big
asset. The job of the president is to bring people together.”
But the house did not meet the Ladners’ expectations.
“Inadequate,” was the word AU officials recall their using. The
Ladners went house-hunting in nearby Spring Valley, one of
DC’s most expensive neighborhoods. They chose a new stone
mansion around the corner from AU at 4835 Glenbrook Road.
Perched on a hillside, it has white pillars flanking its entrance
and elaborate stone walls. The Korean ambassador’s residence
is two houses down.

As it happened, American University had once owned the lot
and sold it to a developer. To suit the Ladners, the university
sold the former president’s residence on Nebraska Avenue for
$1.325 million and bought back the land and house on
Glenbrook for $1.45 million. AU officials said it made more
sense to buy a new house than to refurbish the old one.
Over the next two years the university paid for an estimated
$200,000 in renovations and improvements ordered by the
Ladners. They called in landscape designers to create a
waterfall and pond behind the patio at a cost of about $30,000.
The Ladners outfitted the house with expensive china and
stemware to host elegant affairs for donors and dignitaries.
Board members were entertained with fine wine in Waterford
Curraghmore crystal, $100 a glass. Waiters wore tuxedos.
But in moving a few blocks from campus and creating lavish
living quarters, the Ladners separated themselves from students
and faculty. Past presidents had hosted as many as eight events
a week; the Ladners opened their home perhaps a dozen times a
year for university events.
To students and faculty, the house became a metaphor for
Ladner’s reign. Says a dean who had been at AU for decades:
“The extravagance started from day one. It was an imperial
lifestyle.”
The responsibility for overseeing President Ladner belonged to
the American University board of trustees.
The board that hired Ladner in 1994 was packed with names
from local real estate like Edward Carr, Stuart Bernstein, and
Gary Abramson and with such heavy hitters as prosecutor
Kenneth Starr and General Motors executive Thomas
Gottschalk.

With 24 members, it was a relatively large group; it met just
three times a year. A board member who joined in 1999 called it
“a cocktail board.”
The board negotiated Ladner’s first contract in standard fashion.
It set his salary at $225,000, an increase of $30,000 over the
amount paid his predecessor. It provided him a car and driver to
assist him “in carrying out his duties as president.” It allowed
for travel and entertainment expenses “reasonably incurred by
Ladner in the performance of his duties.” The contract had a
three-year term.
In 1997 William Jacobs—an athlete as an AU student, then an
executive with MasterCard in New York—took over as board
chair. One of his first acts was to sign a new contract with
Ladner.
That contract set Ladner’s salary at $295,000. It added an
annual “split dollar” life-insurance-premium payment,
beginning at $184,000—$109,000 thereafter—to be invested
toward his retirement, at which time Ladner would receive the
capital gain, and the principal would revert to the university.
This was in addition to a standard life-insurance policy the
university paid for. It was essentially a cash payment to an
investment account, which brought his annual compensation to
$404,000.
The contract went far beyond cash.
It called for “full use” of a car and driver. The university would
house the Ladners and pay for “housekeeping services and
residence staff.” It allowed first-class travel. It made Ladner a
tenured faculty member at the rank of professor in the
Department of Philosophy and Religion. If the college let him
go for any reason other than cause, it would pay him two years’

salary.
Referring to Nancy Ladner as the university’s “First Lady,” the
contract allowed her a car with a phone—but no driver. It called
for payment of “expenses related to her role in conducting
University business.”
The 1997 contract was open-ended. It had no termination date, a
standard clause in most employment contracts. It was signed
only by Ladner and Jacobs.
Jacobs never took the contract to the board, according to
members at the time. There is no mention of it in board minutes.
No member remembers seeing it.
Says A.W. “Pete” Smith Jr., who joined the board in 1999: “It
allowed them to live an expense less life.”
The 1997 contract said AU would provide a driver for Ben
Ladner, but the Ladners had greater needs. They advertised for
a “chauffeur/butler,” according to a faculty member.
By most accounts, the Ladners had not lived an extravagant life
in Georgia. They had sent their children mainly to public
schools. They lived in a modest home northeast of Atlanta.
The Ladners were devoted to each other. They’d been high-
school sweethearts in Mobile but went their separate ways in
college. Each married and divorced. They married each other in
1982, according to AU’s alumni magazine.
In his first year as president, Ladner worked to improve what he
called a university that was “less than the sum of its parts.”
In a 1996 memorandum to the board, he added up his
accomplishments, which included reorganizing the senior staff,

changing the budget process, and attending social, political, and
financial meetings. On campus, he said, he attended “every kind
of meeting imaginable.”
Although he portrayed himself as active on campus in his 1996
performance review, students say he gradually withdrew. They
joked about “Ladner sightings.” They knew he was on campus
only if his car, with driver, was idling in front of the president’s
building.
Before Ladner took office, students could walk into the white
clapboard president’s building. Ladner ordered the door locked
and a camera installed so an aide could buzz students in.
Previous presidents had worked out of an upstairs office;
Ladner moved downstairs to the large, ceremonial office, which
he had redecorated.
Ladner had a necklace of medallions made for him to wear at
graduation and other ceremonies. It bore a shield for each of
AU’s eight schools.
Nancy Ladner took her “first lady” title to heart. Her name tag
at campus events identified her as First Lady.
In the Ladners’ home and office, staff members lived in fear of
the president’s temper. They would have meetings to decide
how to approach him about such matters as putting blinds on
windows.
“We didn’t want him to become irate over one thing or
another,” says Katya Thomas, Nancy Ladner’s personal
assistant in the fall of 1998 and into 1999.
Thomas, a native of Michigan, was on leave from the Foreign
Service. Her diplomat husband was out of the country. She

thought the AU job would be interesting for a while. Her salary
was $45,000.
“She had had younger people in the job,” Thomas told me from
Kinshasa, where she’s now stationed in the US Embassy. “She
liked me because I was a diplomat’s wife. She took pride in her
social circle that included some ambassadors.
“She liked to say that she frequently has rulers at her table,”
Thomas says.
Dinner was always treated as a special event, Thomas says—
even if there were no guests. Nancy Ladner would dress for the
meal every night. Good food and the right chef were status
symbols for her. There was talk that the Ladners tried to hire
away one of Dan Snyder’s chefs but failed.
The Ladners were strict about housekeeping, sources say. The
kitchen had to be scrubbed down every night. Sheets and towels
were ironed.
Several of the Ladners’ four grown children came to the
president’s house for the holidays in 1998. According to
Thomas, they brought their dirty laundry in suitcases. The
Ladners’ Filipino housekeeper had asked to have some vacation
during the holidays.
“She came crying to me,” Thomas says. The Ladners had
ordered her to work on Christmas Eve until all the clothes were
washed and ironed. “She said, ‘I can’t do this anymore.’ ”
Thomas says she talked the housekeeper out of quitting, but a
few weeks into January, Thomas left herself.
What forced her out was not Ben Ladner’s screaming at her that
some packages of toilet paper stored in the garage might cause

the “First Lady” to get dust on her fur coat, nor calls at 5 am
from Mrs. Ladner about spaghetti strands left in the sink.
“She called me on New Year’s Day and demanded to know what
had happened to a certain bottle of Champagne,” Thomas
recalls. “The implication was I had taken it. I had to quit.”
Under chair Bill Jacobs, AU’s board rewarded Ben Ladner
handsomely. Jacobs joked to other board members that he and
Ladner figured his annual compensation “on the back of an
envelope.”
In fact, the board’s compensation committee adjusted his salary
and benefits annually, according to records obtained by The
Washingtonian. Ladner’s base salary had started at $225,000 in
1994 and was increased to $295,000 in 1997, then to $325,000
in 1998.
Ladner’s big break came in 1999.
Jacobs sent a confidential letter to AU finance chief Don Myers
authorizing him to pay Ladner $365,000 in base salary,
$148,000 in the annual contribution to his life-insurance policy,
$100,000 incentive compensation (“paid to him immediately”),
$91,250 in deferred incentive, and a past-due accumulated
payment of $47,362. On top of those payments, Jacobs told
Myers to establish a “deferred-compensation retention program”
with $400,000 that Ladner could collect after five years.
The total topped $1 million, counting the $400,000 that would
be waiting for Ladner in 2004.
The board gave Ladner another raise in 2000: $410,000 base;
$145,000 bonus; $102,500 deferred compensation; $109,000
split-dollar contribution to his life-insurance policy. Total:
$766,500. In 2001 Ladner’s compensation package totaled

$846,500.
Though American University was a midsize campus—with
11,000 students, including a law school and a few graduate pro
grams—it was paying its president Ivy League wages. Richard
C. Levin, president of Yale University, made $600,000 in 2003.
George Collins replaced Bill Jacobs as board chair in 2001.
Collins had retired from the top job at T. Rowe Price, sailed
around the world, and at Ladner’s urging agreed to run the AU
board.
Leslie Bains became vice chair, again with Ladner’s backing.
An AU graduate who had become one of the leading women in
the private-banking business, she had put in many years with
HSBC North America and Chase. When Ladner came to court
her for a spot on the board in 1994, she was responsible for $25
billion in assets for Republic National Bank.
“He seemed to have a plan for leadership,” says Bains. “He was
charming.”
Bains was not charmed by Bill Jacobs, whom she found
controlling. “His way or the highway,” she says. She was also
disappointed at the AU board’s lack of interaction with students
and faculty, who made cameo appearances at some board
meetings. She suggested to Ladner that the board have dinner
meetings with students.
“I don’t think it would work,” he said.
In remaking the board, Ladner also brought on Paul Martin
Wolff, a top litigator with Williams & Connolly.
Collins, Bains, and Wolff became friends with Ladner. They
socialized and did favors for one another. Wolff chose Ladner

to speak at an award ceremony for him. Bains asked him to give
a speech at a New York event for bankers after the September
11 attacks. “He was terrific,” she says.
But Collins, Bains, and Wolff came to board meetings with high
expectations for accountability. Collins, a graduate of Virginia
Military Institute, had served as a squadron commander in the
Air Force and gotten his MBA at American. He joined the AU
board in 1986 and had been on hand for the Berendzen debacle,
during which his advice to the chair was “Shoot him on the
spot”—fire him for cause, no parachute.
A sailor, a self-made man, and an athlete in his mid-sixties,
Collins didn’t have time for frills. When he heard people refer
to Nancy Ladner as First Lady, he said, “As far as I know,
there’s only one First Lady, and she serves in the White House.
We have to strip that from our vocabulary.”
Ben Ladner devoted lots of time to international projects, in
particular one with the American University of Sharjah in the
United Arab Emirates. He landed a multimillion-dollar contract
for AU to help manage the university. He and his wife visited
the Persian Gulf nation once or twice a year. He got a seat on
the Sharjah board for Leslie Bains.
The three stopped in London on the way back from Sharjah in
February 2004.
“How long are you staying in London?” Nancy Ladner asked
Bains.
Bains was leaving the next morning so she could attend
meetings in New York.
“Too bad,” Nancy Ladner said. “We’re spending a few days.
Can we give you a lift to the hotel?”

Bains accepted, but she was surprised to see a limousine waiting
for them at Heathrow. She was more surprised to see the
Ladners embrace the chauffeur when he got out to open her
door.
“You seem to know him so well,” Bains said.
“We always use him,” Mrs. Ladner answered.
Back in New York, Bains related the story to her husband. They
agreed it was a bit “weird,” but she thought: “If they want to
spend their money that way, fine.”
The Ladners stayed in London two days and three nights. The
hotel cost $2,352; food and other expenses, including a car and
driver, were $2,513. The bills went to American University.
Bains paid her own way and assumed the Ladners had as well.
On another trip, the Ladners and Bains stopped off in Rome.
They ran into one another at one of Rome’s finest restaurants,
near the Spanish Steps. Again, Bains assumed the Ladners were
treating themselves. In fact, they billed AU $1,285 for meals
during a two-night stay in Italy.
Board member Paul Wolff recalls inviting the Ladners to his
home on Reservoir Road for an informal dinner. He and his wife
noticed that a car delivered the couple and waited to drive them
home.
Bains, Wolff, and others say they repeatedly asked John Petty,
then chair of the board’s audit committee, about Ladner’s
expenses. Petty brushed them off by saying it was an
insignificant sum, perhaps $8,000 a year.
When I asked Petty about these exchanges, he said: “All

expenses were signed off by the university’s finance
department. If I blew anyone off, it was their duty to demand
more detail.”
Under Petty, the board’s audit committee never examined
Ladner’s expenses.
As Ben Ladner approached the end of his first decade as
president, he believed he deserved more money—much more.
Ladner presented his case to the board with a list of 33
accomplishments. He had launched a $200-million capital
campaign, obtained new academic accreditations, and led
international delegations. The budget had grown from $180
million to $330 million; 70 percent of campus buildings had
been or were being rebuilt or renovated.
The board was generally pleased with Ladner; with the memory
of Richard Berendzen’s scandalous departure still in mind, they
were motivated to keep him happy.
But some board members were becoming uncomfortable.
Salaries of university presidents are reported to the Internal
Revenue Service on Form 990 each year, and the Chronicle of
Higher Education publishes a list of the top ten. By 2002
Ladner had begun making the list.
For 2003, the board raised Ladner’s base pay only 3 percent and
did not increase his merit bonus. Ladner took offense.
On February 19, 2004, Ladner faxed from his study a memo
marked confidential to board chair George Collins. He
complained about the small raises. “Furthermore,” he wrote, “I
am now falling behind the salary levels of president’s [sic] at
peer competitive schools.”

Ladner suggested ways the board could sweeten the deal: It
could establish a new “retention incentive” of $225,000 a year
to reward him for committing to another five years. In addition
to that he asked for three cash bonuses of $200,000 each over
the five years. He asked the board to increase his annual
deferred compensation 10 percent, together with “a much larger
percentage increase in my annual base salary.”
Collins did not circulate the memo in part because he thought it
so outlandish that it would embarrass Ladner. The request was
dead on arrival. Collins dubbed it the D.O.A. memo.
George Collins asked board member Pete Smith to join the
compensation committee and study Ladner’s pay.
Smith, a Boston native, had worked for 30 years with Watson
Wyatt, one of the world’s top consultants on executive
compensation. He retired in 1999 as CEO. Paul Wolff had asked
him to join the AU board.
When he did, Smith took it upon himself to tour the campus and
visit with Ladner’s Cabinet, key faculty members, and students.
He found that people had the impression that Ladner was living
large, that he was detached. He reported to Ladner. “You need
to be seen and touched,” Smith told him. “People complain
about the car always idling by the president’s office building.
Why don’t you ditch the chauffeur? When I needed a car and
driver, I used to rent one.”
“You don’t understand the needs of a college president,” Ladner
said.
“I used to be CEO of an $800-million company,” Smith
responded.
“I can’t be the only one showing up at an embassy event without

my own chauffeur,” Ladner said.
In late 2003, Smith began looking into Ladner’s compensation.
Financial scandals concerning executive compensation had
tarnished the image of high-profile charities and other
nonprofits such as the United Way and Adelphi University. The
federal government had passed legislation penalizing board
members of nonprofit institutions, such as colleges, for
overpaying their executives.
Smith engaged a new set of compensation consultants to review
Ladner’s salary package and compare it with those at other
institutions. The goal was to get a “comfort letter” from the
consultants that would satisfy the IRS.
Ladner was skeptical of the process, according to board
members and his memos. Then his strongest champion, Bill
Jacobs, left the board. George Collins took his spot on the
compensation committee.
The new consultants discovered that Ladner had been including
only his base salary and his annual bonus in comparing his total
compensation with that of other university presidents. He had
never included the deferred-incentive part of the package. The
swing was more than $100,000 a year.
“Adding that blew his compensation off the charts,” says Pete
Smith. “He was one of the highest-paid university presidents in
the country. It was unacceptable.”
Rather than getting a raise, Ladner was told the compensation
committee would recommend a cut in his pay. But the
committee wanted to soften the blow: It suggested that he join
outside boards that paid.
Ladner was angry. Committee members said he was rude to

anyone who disagreed with him.
“He would blow himself up like a balloon and get red in the
face,” recalls Leslie Bains. “We saw a whole different side of
him.”
He threatened to quit; he searched for allies on the board. He
started to wage war.
The one who quit was Pete Smith. In a letter to Collins and
Bains, he wrote, “It began to feel like the board reported to Ben
rather than the reverse. It was then that I decided to resign as
Trustee.”
On New Year’s Eve 2004, the Ladners treated their son Dean to
an engagement dinner at their residence. It was an intimate
affair for Dean and his fiancée, Nicole.
The 13-course meal, served by waiters, began with white truffle
and porcini egg custard and American sturgeon caviar, served in
eggshell.
After purple and neon-green cauliflower soup sake-style,
littleneck clams, oysters, and crabmeat, the chef prepared a
lobster tasting: lobster bourbon bisque, lobster claw, and lobster
tail.
The meal was prepared by Rodney Scruggs, the Ladners’ chef.
Under the 1997 contract, the university agreed to pay for dining
staff at his residence. The Ladners hired Scruggs in 1999 for
$52,035; when he cooked the engagement dinner, his salary was
$88,000.
Scruggs stocked the family kitchen, bought the wine, scrubbed
the counters. When Ladner arrived home after work, Scruggs
dimmed the lights and made sure there was soft music playing.

He greeted the couple with hors d’oeuvres. He served two- to
four-course meals every night, whether there were guests or not.
The Ladners did not eat leftovers.
When the Ladners drove to their Gibson Island home for the
weekend, Scruggs would pack meals with instructions on how to
prepare them. At times, he would go to cook for them.
As a reward, the Ladners sent Scruggs to France to be
“rejuvenated as a chef.” He put all of his skills into that New
Year’s dinner.
The main courses were Alaskan black cod and salmon, then
Muscovy duck breast, then roasted rack of Colorado lamb.
Dessert was Death by Chocolate.
The price tag, including $111.40 for flowers, $307.96 for
Champagne and wine, and $595 for waiters, totaled $1,381.95.
The Ladners expensed it to American University.
On February 25, 2005, the AU board held its scheduled meeting,
facing the unpleasant task of cutting Ladner’s pay.
Collins opened the session at 9:35 am. He introduced Bishop
John Schol, a new trustee who represented the Methodist
Church. He also introduced Jim Joseph, an Arnold & Porter
attorney Collins had hired to oversee the compensation review
and serve as the board’s outside legal counsel.
At 11:30 Collins called the board into executive session. It
lasted three hours. Some board members questioned why they
needed Joseph, but Collins defended his choice and said he
would resign if the outside counsel were not accepted.

Joseph proceeded to explain why he deemed Ladner’s
compensation package out of proportion. He gave a detailed
explanation of the IRS sanction rules. He presented the
compensation committee’s proposal to cut Ladner’s pay, which
would bring it in line with current standards.
Ladner asked Collins to send Joseph out of the room. Then
Ladner recited his accomplishments, talked about his
philosophy of education, and said, “This is not about money.”
To which Gary Cohn, a trustee who worked for Goldman Sachs,
replied: “I have sat through many, many compensation
presentations, and every time someone says it’s not about
money—it is always about money.”
When Ladner finished his appeal, the board asked him to leave
and brought Joseph back into the room. For an hour they argued
the points of federal law and tax regulations.
David Carmen came to Ladner’s defense, according to board
members in the room. Carmen, a lobbyist, scoffed at the IRS
regulations and called potential financial penalties “de
minimus.” He said that rewarding Ladner was much more
important. He was joined in that sentiment by board member
Pamela Deese, a lawyer.
Collins adjourned the meeting without a vote but scheduled one
by phone in April, when the board voted 11 to 5 to reduce
Ladner’s compensation. Carmen and Deese were among the five
dissenters.
John Petty, the trustee who had recommended Ladner years
before, abstained.
David Carmen’s role as Ladner’s chief advocate struck some
board members as odd. Before the February board meeting,

Ladner had approached Leslie Bains and said, “I want Carmen
off the board.” According to Bains, Ladner accused Carmen of
using his board position to get clients for his lobbying firm.
Carmen had founded his company, the Carmen Group, in 1985.
He made his name doing opposition research for the Republican
National Committee, advising Ronald Reagan and both
Presidents Bush. He joined the American University board in
2001.
Ladner told Bains that Carmen should leave the board if he
didn’t start contributing to the university. Bains says she
approached Carmen, who pledged to give money to AU over
time. Bains explained the conversation to Ladner.
“I still can’t stand the guy,” he said, according to Bains.
Carmen, through his marketing director, declined to comment.
An anonymous letter came to George Collins and other
executive-committee members the first week of March 2005.
It accused the Ladners of “SEVERE expense account
violations.” It said the Ladners had charged the university for
“their son’s engagement party, lavish presents for their
children, a personal French chef . . . long weekends in Europe
for pleasure, maintenance of their personal residence in
Maryland including garbage bags, daily wine for lunch and
dinner at $50 to $100 per bottle, etc. . . .
“This needs to be made public because he may get away with
taking hundreds of thousands of dollars from American
University. . . .
“Please investigate. Thank you.

“An employee.”
Having just endured the bruising battle over Ladner’s pay,
Collins thought: “What now?” He assumed the letter was from a
disgruntled employee, but he knew he had to investigate it. He
alerted AU finance Chief Don Myers, then called the board’s
lawyer, Jim Joseph, then called Ben Ladner.
“We just received an anonymous letter about your expenses,”
Collins said.
“Oh, boy,” Ladner responded, according to Collins.
Collins set in motion an investigation.
When David Carmen was told about the letter, board members
say, he wanted to go after the whistleblower.
The job of running the investigation fell to Leonard Jaskol, the
recently appointed chair of the board’s audit committee. Jaskol,
a 1958 graduate of AU, joined the board in 1995. His $400-
million company, Lydall, sold air-filtration equipment. A
resident of Connecticut, he was recruited to broaden the board’s
base to New England.
Collins told Jaskol he had received the anonymous letter and
asked him to handle it. Jaskol contacted Jim Joseph, who
teamed up with AU’s internal auditor, Protiviti, to conduct a
forensic audit.
Jaskol told Ladner what he was doing. “I have no reason to
believe you have done anything wrong,” he said.
“It could be embarrassing,” Ladner said.
“We will do it as discreetly as possible,” Jaskol said.

In late April, Protiviti notified Jaskol of its initial review of the
available ledgers.
“We’ve got issues,” the auditors said.
Among their findings: There was a lack of documentation; the
Ladners had not abided by AU’s travel and entertainment
policies; the “expenses were rather extraordinary.”
Jaskol read the first review and reported to the audit committee
in May that there was “a potential abuse of discretion and abuse
of privilege by a significant amount.”
Jaskol wanted Protiviti to perform a forensic audit going back
three years. John Petty and other board members fought his
request, but ultimately the board ordered the deeper
investigation. ➝
“Ben Ladner did not accept that very well,” Jaskol says.
Ladner refused to turn over documents, according to Jaskol and
other board members. He tried to block investigators from
interviewing his staff at the residence and the university.
“He tried to delay and obfuscate,” Jaskol says. “He tried to
discredit lawyers and auditors. It was right out of his playbook
from the compensation scrap.”
When Jaskol met with Ladner, he made sure a third party was
present.
The investigators discovered a trove of documents, including
receipts for every party and bottle of wine, Ladner’s personal
calendar, and the chauffeur’s log. Jaskol asked for copies and
took boxes to his home in Naples, Florida.

“I wanted to see all the same documents,” he says. “If I’m going
to stand up there to say this person misbehaved, I know what
that would do to their reputation. I wanted to bend over
backward to be fair.”
Jaskol and his wife, Lynn, spent last summer sifting through the
boxes. One day she found the record for a first-class plane
ticket to Nigeria for $22,345.
“Must be a misprint,” Jaskol said.
She checked and verified the price. Jaskol asked her to compare
the price for a business-class elite ticket: $8,000. The $14,000
difference would have paid a semester’s tuition for a student.
The cost of the Nigeria trip became emblematic for Jaskol and
other board members of the Ladners’ lack of judgment. The
1997 contract did permit Ladner to travel first-class, but did he
have to book rooms in elite hotels and tables in the finest
restaurants? The contract allowed him to have a car and
driver—but did he have to hire a limo if the driver wasn’t
available? And did Ladner have to be driven to every
appointment? Did the driver have to take Nancy Ladner to the
hairdresser? The contract said the university would pay for
travel and entertainment “reasonably incurred in the
performance of his duties as President.” Did that mean a lavish
dinner for his son? Or a $5,000 lunch for Nancy Ladner’s
garden club?
One day Mrs. Ladner asked for a car and driver to take her
children bar-hopping in Georgetown. Executive assistant
Margaret Clemmer told her the request was inappropriate. “I’m
not asking,” Ladner replied.
On August 19 the auditors from Protiviti delivered a 31-page
report, in which they examined the purpose and cost of every

foreign trip, every party, and every chauffeured ride to the
hairdresser.
“The whistleblower was accurate,” Jaskol says. “It was all
basically true.”
After receiving the report, the board’s executive committee met
and discussed firing Ladner for cause but decided to take the
matter before the full board. On August 24 the AU board
suspended Ladner pending the final outcome of the
investigation.
Kyle Taylor, president of the AU student-government
association, was leaving on vacation when he learned that
Ladner had been put on administrative leave. He wasn’t
surprised to hear that Ladner was spending a lot of money on
himself. To the extent that students thought about the president
at all, they believed he lived a plush life.
Taylor loved AU. A swimmer from Anaheim, California, he
would be the first in his family to graduate from college.
“The culture of AU is one of critical thinking,” he says. “We
have a cutting-edge curriculum that connects with the city. We
sent volunteers down to help victims of Katrina. For the first
time we’ve had two Rhodes-scholar finalists.
“The university is larger than the president. It’s not as if he was
a leader who was taking us somewhere.”
Taylor began serving as student-government president in April
2005. He attended board meetings but, on Ladner’s orders, was
instructed not to speak unless asked. His only direct contact
with Ladner came when he was invited to the residence to
discuss graduation policies.

During late August and early September the AU campus was
quiet.
On September 12, the battle within the board was joined.
Trustees gathered in the law offices of Arnold & Porter, where
Jim Joseph is a partner, to hear the results of the audit. Len
Jaskol displayed the numbers in a PowerPoint presentation with
the accountants. Joseph helped explain Ladner’s lavish lifestyle.
Ladner was on the counterattack. He’d hired his own lawyers
and sent a letter to board members the night before rebutting the
audit’s main points.
Essentially, Ladner and his lawyers said he had done nothing
wrong. The 1997 contract permitted almost every expenditure.
According to board members, one lawyer said, “If Ben Ladner
wanted to spend $100 on a bottle of wine, he was allowed to
under the contract.”
The board split into two camps.
The pro-Ladner group, led by attorney Pamela Deese, lobbyist
David Carmen, and banker Robert Pincus, argued that the
president should be reinstated. The audit had gone back too far,
they said, and the meeting at Arnold & Porter was itself illegal.
Pincus said the board had been at fault for not monitoring
But a smaller group, led by attorney Paul Wolff, believed that
Ladner had shown such bad judgment that he had lost his ability
to lead. Wolff was joined by Leslie Bains, who had taken over
as board chair from George Collins in May. But Collins was
there on September 12, and he had one line for Ladner: “The
professor of philosophy has flunked Ethics 101.”
The pro-Ladner group was preparing a motion to reinstate

Ladner. Bains adjourned the meeting.
Nine days later, Pam Deese invited a small group of board
members to the conference room of her law firm, Arent Fox.
Their goal was to figure out a way to wait out the controversy,
keep the details under wraps, and make a deal to reinstate
Ladner. Gary Abramson, an AU graduate who’d been a board
member for 20 years, attended.
“If this thing could be saved, how his contract could be
rewritten?” is how Abramson describes the session.
Abramson, a real-estate investor, was not too concerned about
Ladner’s behavior. He was not close to the president but
believed he was doing a great job and raising a lot of money.
“I knew he had a car and a driver,” Abramson says. “None of
this was secretive. He did exercise some poor judgment.”
But Abramson, along with others, also believed the Ladner
investigation had been poorly handled by the board’s executive
committee, run by Collins and Bains. This small group, he
argued, had controlled information and made unilateral
decisions.
“I didn’t find out that Ben had been suspended until the night
before the story broke in the Washington Post,” he says. “They
should have called an emergency meeting of the board.”
So Abramson had agreed to the meeting at Deese’s firm. There
the group talked about asking Ladner to reimburse the
university for some of the parties—Dean’s engagement dinner,
for instance. They wanted to offer him $800,000 in
compensation. They talked about paying Nancy Ladner $80,000
a year—and bringing back the chef, who had been fired by the
board.

“We wanted to move forward in a positive way,” Abramson
says.
Paul Wolff caught wind of the meeting to reinstate Ladner and
phoned Leslie Bains. “The only chance we have is to get public
opinion behind us,” he said.
Wolff had written a four-page, single-spaced letter to trustees
on September 20 laying out the case against Ladner. It included
details from the audit: the weekends in Europe, the garden
parties, a birthday party for board member John Petty—all
expensed to AU.
“Nothing upsets me more and leads me to stronger feelings than
a comparison of the treatment of our students and faculty on one
hand and Ben’s personal chef and Nancy’s personal secretary on
the other,” he wrote.
Wolff sent copies of his letter to the Washington Post, AU’s
student newspaper, The Eagle, and a Web site, Benladner.com,
which Ladner had tried to shut down with a lawsuit.
The Washington Post had been covering the controversy since
late July, when it received a copy of the whistleblower’s letter.
It had reported on Ladner’s suspension and the unfolding
scandal. But Wolff’s letter revealed new spending details. The
Post was soon to receive a copy of the complete audit.
Ben Ladner’s years of living lavishly became public. Federal
prosecutors began issuing subpoenas for AU financial records.
The reaction at American University was immediate. Students
rallied outside an informal board meeting on September 28. Hail
to the thief read one of the signs. What set the students off,
according to Kyle Taylor, was Ladner’s offer to pay back a

fraction of the funds auditors said he owed the university.
The accountants and lawyers working for the AU board had
totaled up the Ladners’ expenses for the past three years and
sifted out costs that could be attributed to Ladner’s work for the
university. They came up with two figures: $125,000 for
personal expenses the Ladners should pay back to AU; $398,000
in taxable income they should have reported to the IRS.
Ladner offered to pay back $21,000 and add $32,000 to his
taxable income.
“That was the last straw for students,” says Taylor.
Leslie Bains organized a forum so students and faculty could
meet with board members. Deans and students voiced their
dismay with the board and called for Ladner’s resignation. The
faculty senate, deans, and students issued votes of no
confidence.
Kyle Taylor slipped a note to Bains. It said students had
blocked the hallways and wanted to come in. “How many?” she
asked.
“Three to four hundred,” he said.
“We don’t have room,” she said. “But give me a delegation. We
must hear from the students.”
Board member Gary Cohn said, “Let them in.”
The students demanded that the ten trustees on hand vote on
whether they wanted Ladner to return. The majority said no.
David Carmen extolled Ladner’s accomplishments but declined
to indicate his preference.

Leslie Bains flew back to New York, expecting the board and
campus to unite. She issued a 14-point plan to reorganize the
board, a centerpiece of which was to add a student and a faculty
representative.
In private e-mails, board members were taking shots at one
another, with much of the fire directed at Bains.
Lead by Carmen, an “ad hoc” committee of board members
accused Bains of trying to bring down Ladner so she could
replace him as president. They accused Paul Wolff of a conflict
of interest because his wife worked for the university, a fact
that was both public and allowed by board rules. Ladner had
hired her.
The ad hoc group had hired former US Attorney Eric Holder to
represent it in its effort to reinstate Ladner. According to Bains,
Holder called her the Friday night before the scheduled October
10 board meeting and pressured her to give up chairmanship. He
described how the board would unseat her. It could, he
insinuated, get ugly.
Bains spent a harrowing weekend before the meeting. She
consulted with friends, board members, and her husband. She
came to the conclusion that the board’s focus on the attempt to
remove her would divert its attention from Ladner’s misdeeds.
Bains decided to resign effective the day after the board
meeting. She did not attend the meeting, which was run by vice
chair Tom Gottshalk.
“Sadly,” she wrote in her resignation letter, “a very small, yet
mean-spirited group of Trustees on this board has disregarded
their fiduciary obligations to be stewards of the university.”
Referring to the 1997 contract, she wrote: “The major issue here
is not whether Dr. Ladner violated a contract that is or is not
valid. What he did was just plain wrong.”

The October 10 meeting took place with the campus in revolt,
the scandal unfolding daily in the media, and federal
investigators seeking documents.
Len Jaskol presented the final audit report, which said Ladner
should reimburse the university $125,000 for personal expenses
and pay taxes on $398,000 in imputed income during the three
years the audit covered.
Ladner’s allies wanted to alter the audit in his favor by
switching funds from the amount he must give back to AU to
the amount he owed taxes on so he would pay less out of
pocket.
“I will not accept those changes,” Jaskol said. “I will not sign
the audit letter. I will not be party to a lie.”
Without Jaskol’s signature as chair of the audit committee, the
university would not receive the blessing of its outside
accountants. Its loans could then be called in. “It was the
nuclear option,” Jaskol says.
The board voted to accept the audit as it was.
Paul Wolff moved that the board dismiss Ladner; George
Collins seconded the motion. The board voted. Ben Ladner was
out.
Next up was the matter of a severance package for Ladner.
Preliminary negotiations had settled on a potential multimillion-
dollar payoff.
“I am opposed under any circumstances to any negotiation with
Ben,” Paul Wolff wrote in a letter of resignation the next day.
“We cannot compensate ethical blindness. To do so undermines

AU’s core values.”
Ladner’s allies were prepared when the board took up his
severance deal on October 20. Three matters were on the table.
Was Ladner’s 1997 contract valid? Two law firms—Arnold &
Porter and Manatt, Phelps & Phillips—had determined that it
was not a valid contract because it was not authorized or
approved by the board at the time.
The board voted that the contract was not valid, though seven
members—including most of the ad hoc committee—voted that
it was. Next the board voted that Ladner should be terminated
for “cause or dishonesty” under contractual terms.
Finally, the matter of his severance. The three-person
committee that had negotiated with Ladner—Gary Cohn, Jack
Cassell, and Bishop Schol—recommended $3.2 million. It
included salary and benefits for one year, deferred
compensation, and moving expenses.
Pamela Deese said the sum was too small. She argued to
increase it to $4.4 million.
“You don’t owe him anything,” said Jaskol. He said the 1997
contract, which called for a severance, was not valid, and even
if it were, the board had just voted to terminate him for cause,
which allowed AU to oust him with no severance payment.
Jaskol moved to pay Ladner nothing; Collins seconded the
motion. The board voted it down. Instead it accepted a motion
by Robert Pincus to raise the $3.2 million to $3.75 million. It
also allowed him to resign rather than be fired.
After the meeting, Len Jaskol and George Collins resigned from
the board. Gary Abramson was elected chair.

The day after the deal became public, Senator Charles Grassley,
chair of the Finance Committee, launched an investigation of
American University finances. He asked for documents going
back 11 years.
“The Finance Committee has been engaged in a bipartisan
review of charities and reform of charities,” he wrote, “and it
appears the AU board could be a poster child for why review
and reform are necessary.”
David Carmen, the GOP lobbyist, called the staff director of
Grassley’s committee and asked that the investigation be kept
quiet.
Because American University is chartered by Congress, some
people argue that Congress has the authority to replace its board
of trustees.
“That would be welcomed,” says student-government president
Kyle Taylor. “We have lost any trust in them.”
Taylor says trust evaporated after a meeting with Pamela Deese,
head of the committee handling governance and reform. The
subject of how much money board members were supposed to
donate came up. Deese said each member was supposed to give
$5,000.
Deese said the four board members who resigned had never
given to the college.
“So they have never given to the university?” Kyle Taylor says
he asked. “I find that hard to believe.”
“It’s true,” Deese said, according to Taylor. “They have never
given. Paul Wolff made up an excuse about how he does not

contribute money to causes. He doesn’t believe in giving or
something. He feels like his time is enough of a contribution.
George Collins made a million-dollar pledge and has not paid a
single penny toward it.”
Taylor related the conversation to Wolff, who demanded an
apology from Deese. In fact, all four—Wolff, Bains, Collins,
and Jaskol—have given generously to AU.
Deese and board chair Abramson at first denied her no-giving
assertions and refused to comment. Wolff and Bains threatened
to sue—at which point Abramson posted a letter of apology on
the AU Web site.
At a board meeting on February 17, Taylor reiterated his hope
that students could be represented on the board. Students rallied
in support of the idea. Only 11 of the remaining 20 board
members took part. Taylor says he was rebuffed.
Ben and Nancy Ladner moved out of the Glenbrook Road
residence in late January with the help of $18,000 the board
agreed to pay them for furniture the couple did not want.
Rumors circulated that the Ladners had taken items paid for by
the university. Senator Charles Grassley demanded an
accounting of the move and the funds AU paid the Ladners.
Grassley’s investigators are combing AU documents and
interviewing students, university officials, and former board
members. Federal prosecutors are conducting an investigation.
Grassley’s committee held an informal hearing March 3. Bishop
Schol spoke for the AU board and admitted it had “made
mistakes” and “lost credibility” but said it was in the midst of
reform.
Student-government president Kyle Taylor asked the committee

to replace the board. “This is a body,” he said, “whose members
were more concerned with finding the whistleblower than
addressing the financial misconduct.”
Board chair Gary Abramson and Bishop Schol were the only
current trustees at the hearing. They were outnumbered by board
members who had resigned—Leslie Bains, Paul Wolff, Pete
Smith, and Len Jaskol.
Ben and Nancy Ladner were at their home on Gibson Island.
1
1
Dallas Residency Case Study: Ben Ladner’s Years of Living
Lavishly
Please write a 5-7 page paper that answers the following
questions around this case.
What are the key issues in the case?
How would you solve the problem?
What theories, concepts, and models from the textbook apply to
this case?
Ben Ladner’s Years of Living Lavishly
American University president Ben Ladner and his wife, Nancy,
were behaving like billionaires—until their years of living
lavishly caught up with them.
By Harry Jaffe on April 1, 2006 – Washingtonian Magazine
In January 2004, American University president Benjamin

Ladner and AU board chair George Collins took their wives to
St. John in the Virgin Islands.
In their roles as president and board chair, Ladner and Collins
had become friends. They dined together after board meetings,
sailed together, vacationed together.
When Ladner and his wife, Nancy Bullard Ladner, were looking
for a second home, Collins and his wife introduced them to
Gibson Island, an enclave on the western shore of the
Chesapeake Bay. Their wives, both with Southern roots, hit it
off. Collins sponsored the Ladners for membership in the
island’s tennis and golf club.
But by 2004 the mix of business and fun wasn’t always
pleasant. Ladner was lobbying the board for a raise, and he
couldn’t leave it in the boardroom. During the trip to St. John,
Ladner kept talking about money.
At the time Ladner was making $880,750 a year, including base
pay, bonus, and incentives. This put him among the nation’s
best-paid college presidents. But he wanted more.
In a confidential memo to Collins, Ladner had made the case for
a package of bonuses and investments that would have added $5
million on top of his base salary over the next five years. He
would be making more than any college president in the nation.
“You’re not running a top-ten school,” Collins replied. “You
don’t have a medical school. You’re not Harvard. You are not
an investment banker, and you are very well paid.”
Ladner was beginning to disappoint Collins in other ways.
Collins had pressed him for accurate measurements of student
performance and how AU compared to other institutions. He
found Ladner’s numbers “sloppy.”

On the St. John trip, Collins told Ladner that his proposed
financial package was unlikely to be approved. And Collins
thought to himself: We had better start looking for a new
president.
Later, to a few fellow board members, he said: “Time to hire
our own lawyer.”
A year and half later, the downfall of Benjamin Ladner unfolded
in public view. Leaks of his expenses cast him as a profligate
spender of college funds for personal use. Students pilloried
him on the Internet and protested on campus. Deans and faculty
issued votes of no confidence.
“His moral compass has lost its bearings,” Paul Martin Wolff
wrote to other trustees.
The AU board, split into camps, suspended Ladner in August
2005. By October he was out on the street.
In many ways, the previous 11 years were exceptional for
American University. The campus at DC’s Ward Circle, where
Massachusetts Avenue meets Nebraska Avenue, had undergone
major renovations. Applications had risen during Ladner’s
tenure from 4,829 to 13,560, and freshmen entered with higher
test scores. The endowment had bloomed from $29 million to
$281 million. The schools of law and international service were
considered first-rate. The Cyrus and Myrtle Katzen Arts Center,
the campus’s new crown jewel, was about to be dedicated.
Some of the credit had to go to Ladner.
“To dismiss his years as illusion is BS,” says Cornelius “Neil”
Kerwin, who served as provost for seven years and took over as
interim president. “It’s dead wrong.”

But they were also years of living lavishly for Ben and Nancy
Ladner. An anonymous letter to the board in March 2005
accused the couple of “severe expense account violations”—of
blowing the university’s cash on a French chef, on weekends
abroad, on extravagant parties for friends and family. The board
investigated and corroborated the charges.
Ladner felt blindsided and abused. He left unapologetic and
unrepentant.
The demise of Ben Ladner is still reverberating through the
board and the campus. Students want changes to the board. A
Senate committee, investigating abuses among nonprofit
corporations, is examining financial transactions by Ladner and
the AU trustees. Federal prosecutors are investigating, too.
What brought Ben Ladner down? The anonymous letter? A
campus rebellion? Weak oversight? A power play by the board?
Or was Ben Ladner the author of his own undoing, a man who
lost his ethical center and, when confronted, attacked even his
friends?
Many American University students and faculty first saw
Benjamin Ladner on November 4, 1994, when he delivered his
inaugural address. He spoke of AU’s “unique identity” and its
“American destiny.”
Founded in 1893 with ties to the Methodist Church, American
University was unusual: It is one of the few universities
chartered by Congress. It developed over the next century as a
private, coeducational college that ranked in the middle range
of universities. Against DC’s major colleges, Georgetown and
George Washington, it ranked a distant third in 1994.

American University’s destiny, Ladner thundered, “is now
clouded by a remarkable crisis, which may well be the most
alarming dilemma of our time: namely, the extent to which the
self-set goals of private individuals are unrelated to the
expanding needs of the public domain.
“Institutions,” he said, “are increasingly regarded solely as a
functional means for attaining private ends. . . .”
Ladner’s rousing speech in the school’s gymnasium brought the
crowd to its feet, according to the Washington Post.
Ladner was 52. A tall, heavyset native of Mobile, Alabama, he
delivered his speech with a mellifluous voice that was part
Southern preacher and part professor of philosophy. He had
studied both religion and philosophy in college and graduate
school.
People described Ladner as “charming,” “intelligent,”
“personable,” “visionary.”
Growing up in Mobile, the youngest of three children, he played
ball, rode horses, studied cello. He went to Baylor University on
a basketball scholarship in 1959, according to a feature in
American University’s alumni magazine, but was injured in his
freshman year and left the team. He graduated with a degree in
English and religion, then earned a divinity degree from
Southern Seminary and a 1971 doctorate from Duke in
philosophy and religion.
In the 1970s Ladner taught at the University of North Carolina’s
Greensboro campus; in 1980, he became director and then
president of a nonprofit teacher-training organization, the
National Faculty of Humanities, Arts, and Sciences. Based in
Atlanta, it was funded by grants from government and
corporations.

When AU came calling in 1994, Ladner had never held a major
administrative or management job at a university. But AU was
desperate for stable leadership.
Four years earlier Richard Berendzen, who dreamed of AU
becoming “Harvard on the Potomac,” was forced to resign the
presidency after being charged with making obscene phone calls
from his office. He would plead guilty. Provost Milton
Greenberg took over.
AU then hired Joseph Duffey from the University of
Massachusetts; he served less than two years before leaving to
head the US Information Agency. Elliott Milstein, a popular
dean of the law school, became interim president. The board
then offered the presidency to Scott Cowen, a dean at Case
Western Reserve University, but he turned down the job at the
last minute.
Ben Ladner was not even under consideration when John Petty,
who had met Ladner in 1978, gave his name to a headhunter. “I
threw his hat in the ring,” says Petty, a banker who later joined
the AU board. “I knew he was a big-league guy. It was time to
go from the minors to the majors.”
At his inauguration in November 1994, Ladner came off as a
heavy hitter with high ethical standards. He talked of bridging
“the traditional gap between private interest and public
responsibilities.”
One of his first acts was to see to his private interest.
As soon as the Ladners came to Washington, they toured the
house that had been the AU president’s residence since 1968.
The sprawling house with swimming pool at 3300 Nebraska
Avenue sits on a large corner lot across from the campus.

Presidents over the years had welcomed students and faculty
into the glass-walled room along the rear. Students could walk
from Fletcher Gate on the campus’s west end, cross a small
street, and ascend the steps to the gathering space.
“We held many meetings there,” says Elliott Milstein, now a
professor at AU’s Washington College of Law. “It was a big
asset. The job of the president is to bring people together.”
But the house did not meet the Ladners’ expectations.
“Inadequate,” was the word AU officials recall their using. The
Ladners went house-hunting in nearby Spring Valley, one of
DC’s most expensive neighborhoods. They chose a new stone
mansion around the corner from AU at 4835 Glenbrook Road.
Perched on a hillside, it has white pillars flanking its entrance
and elaborate stone walls. The Korean ambassador’s residence
is two houses down.
As it happened, American University had once owned the lot
and sold it to a developer. To suit the Ladners, the university
sold the former president’s residence on Nebraska Avenue for
$1.325 million and bought back the land and house on
Glenbrook for $1.45 million. AU officials said it made more
sense to buy a new house than to refurbish the old one.
Over the next two years the university paid for an estimated
$200,000 in renovations and improvements ordered by the
Ladners. They called in landscape designers to create a
waterfall and pond behind the patio at a cost of about $30,000.
The Ladners outfitted the house with expensive china and
stemware to host elegant affairs for donors and dignitaries.
Board members were entertained with fine wine in Waterford
Curraghmore crystal, $100 a glass. Waiters wore tuxedos.

But in moving a few blocks from campus and creating lavish
living quarters, the Ladners separated themselves from students
and faculty. Past presidents had hosted as many as eight events
a week; the Ladners opened their home perhaps a dozen times a
year for university events.
To students and faculty, the house became a metaphor for
Ladner’s reign. Says a dean who had been at AU for decades:
“The extravagance started from day one. It was an imperial
lifestyle.”
The responsibility for overseeing President Ladner belonged to
the American University board of trustees.
The board that hired Ladner in 1994 was packed with names
from local real estate like Edward Carr, Stuart Bernstein, and
Gary Abramson and with such heavy hitters as prosecutor
Kenneth Starr and General Motors executive Thomas
Gottschalk.
With 24 members, it was a relatively large group; it met just
three times a year. A board member who joined in 1999 called it
“a cocktail board.”
The board negotiated Ladner’s first contract in standard fashion.
It set his salary at $225,000, an increase of $30,000 over the
amount paid his predecessor. It provided him a car and driver to
assist him “in carrying out his duties as president.” It allowed
for travel and entertainment expenses “reasonably incurred by
Ladner in the performance of his duties.” The contract had a
three-year term.
In 1997 William Jacobs—an athlete as an AU student, then an
executive with MasterCard in New York—took over as board
chair. One of his first acts was to sign a new contract with
Ladner.

That contract set Ladner’s salary at $295,000. It added an
annual “split dollar” life-insurance-premium payment,
beginning at $184,000—$109,000 thereafter—to be invested
toward his retirement, at which time Ladner would receive the
capital gain, and the principal would revert to the university.
This was in addition to a standard life-insurance policy the
university paid for. It was essentially a cash payment to an
investment account, which brought his annual compensation to
$404,000.
The contract went far beyond cash.
It called for “full use” of a car and driver. The university would
house the Ladners and pay for “housekeeping services and
residence staff.” It allowed first-class travel. It made Ladner a
tenured faculty member at the rank of professor in the
Department of Philosophy and Religion. If the college let him
go for any reason other than cause, it would pay him two years’
salary.
Referring to Nancy Ladner as the university’s “First Lady,” the
contract allowed her a car with a phone—but no driver. It called
for payment of “expenses related to her role in conducting
University business.”
The 1997 contract was open-ended. It had no termination date, a
standard clause in most employment contracts. It was signed
only by Ladner and Jacobs.
Jacobs never took the contract to the board, according to
members at the time. There is no mention of it in board minutes.
No member remembers seeing it.
Says A.W. “Pete” Smith Jr., who joined the board in 1999: “It
allowed them to live an expense less life.”

The 1997 contract said AU would provide a driver for Ben
Ladner, but the Ladners had greater needs. They advertised for
a “chauffeur/butler,” according to a faculty member.
By most accounts, the Ladners had not lived an extravagant life
in Georgia. They had sent their children mainly to public
schools. They lived in a modest home northeast of Atlanta.
The Ladners were devoted to each other. They’d been high-
school sweethearts in Mobile but went their separate ways in
college. Each married and divorced. They married each other in
1982, according to AU’s alumni magazine.
In his first year as president, Ladner worked to improve what he
called a university that was “less than the sum of its parts.”
In a 1996 memorandum to the board, he added up his
accomplishments, which included reorganizing the senior staff,
changing the budget process, and attending social, political, and
financial meetings. On campus, he said, he attended “every kind
of meeting imaginable.”
Although he portrayed himself as active on campus in his 1996
performance review, students say he gradually withdrew. They
joked about “Ladner sightings.” They knew he was on campus
only if his car, with driver, was idling in front of the president’s
building.
Before Ladner took office, students could walk into the white
clapboard president’s building. Ladner ordered the door locked
and a camera installed so an aide could buzz students in.
Previous presidents had worked out of an upstairs office;
Ladner moved downstairs to the large, ceremonial office, which
he had redecorated.

Ladner had a necklace of medallions made for him to wear at
graduation and other ceremonies. It bore a shield for each of
AU’s eight schools.
Nancy Ladner took her “first lady” title to heart. Her name tag
at campus events identified her as First Lady.
In the Ladners’ home and office, staff members lived in fear of
the president’s temper. They would have meetings to decide
how to approach him about such matters as putting blinds on
windows.
“We didn’t want him to become irate over one thing or
another,” says Katya Thomas, Nancy Ladner’s personal
assistant in the fall of 1998 and into 1999.
Thomas, a native of Michigan, was on leave from the Foreign
Service. Her diplomat husband was out of the country. She
thought the AU job would be interesting for a while. Her salary
was $45,000.
“She had had younger people in the job,” Thomas told me from
Kinshasa, where she’s now stationed in the US Embassy. “She
liked me because I was a diplomat’s wife. She took pride in her
social circle that included some ambassadors.
“She liked to say that she frequently has rulers at her table,”
Thomas says.
Dinner was always treated as a special event, Thomas says—
even if there were no guests. Nancy Ladner would dress for the
meal every night. Good food and the right chef were status
symbols for her. There was talk that the Ladners tried to hire
away one of Dan Snyder’s chefs but failed.

The Ladners were strict about housekeeping, sources say. The
kitchen had to be scrubbed down every night. Sheets and towels
were ironed.
Several of the Ladners’ four grown children came to the
president’s house for the holidays in 1998. According to
Thomas, they brought their dirty laundry in suitcases. The
Ladners’ Filipino housekeeper had asked to have some vacation
during the holidays.
“She came crying to me,” Thomas says. The Ladners had
ordered her to work on Christmas Eve until all the clothes were
washed and ironed. “She said, ‘I can’t do this anymore.’ ”
Thomas says she talked the housekeeper out of quitting, but a
few weeks into January, Thomas left herself.
What forced her out was not Ben Ladner’s screaming at her that
some packages of toilet paper stored in the garage might cause
the “First Lady” to get dust on her fur coat, nor calls at 5 am
from Mrs. Ladner about spaghetti strands left in the sink.
“She called me on New Year’s Day and demanded to know what
had happened to a certain bottle of Champagne,” Thomas
recalls. “The implication was I had taken it. I had to quit.”
Under chair Bill Jacobs, AU’s board rewarded Ben Ladner
handsomely. Jacobs joked to other board members that he and
Ladner figured his annual compensation “on the back of an
envelope.”
In fact, the board’s compensation committee adjusted his salary
and benefits annually, according to records obtained by The
Washingtonian. Ladner’s base salary had started at $225,000 in
1994 and was increased to $295,000 in 1997, then to $325,000
in 1998.

Ladner’s big break came in 1999.
Jacobs sent a confidential letter to AU finance chief Don Myers
authorizing him to pay Ladner $365,000 in base salary,
$148,000 in the annual contribution to his life-insurance policy,
$100,000 incentive compensation (“paid to him immediately”),
$91,250 in deferred incentive, and a past-due accumulated
payment of $47,362. On top of those payments, Jacobs told
Myers to establish a “deferred-compensation retention program”
with $400,000 that Ladner could collect after five years.
The total topped $1 million, counting the $400,000 that would
be waiting for Ladner in 2004.
The board gave Ladner another raise in 2000: $410,000 base;
$145,000 bonus; $102,500 deferred compensation; $109,000
split-dollar contribution to his life-insurance policy. Total:
$766,500. In 2001 Ladner’s compensation package totaled
$846,500.
Though American University was a midsize campus—with
11,000 students, including a law school and a few graduate pro
grams—it was paying its president Ivy League wages. Richard
C. Levin, president of Yale University, made $600,000 in 2003.
George Collins replaced Bill Jacobs as board chair in 2001.
Collins had retired from the top job at T. Rowe Price, sailed
around the world, and at Ladner’s urging agreed to run the AU
board.
Leslie Bains became vice chair, again with Ladner’s backing.
An AU graduate who had become one of the leading women in
the private-banking business, she had put in many years with
HSBC North America and Chase. When Ladner came to court
her for a spot on the board in 1994, she was responsible for $25

billion in assets for Republic National Bank.
“He seemed to have a plan for leadership,” says Bains. “He was
charming.”
Bains was not charmed by Bill Jacobs, whom she found
controlling. “His way or the highway,” she says. She was also
disappointed at the AU board’s lack of interaction with students
and faculty, who made cameo appearances at some board
meetings. She suggested to Ladner that the board have dinner
meetings with students.
“I don’t think it would work,” he said.
In remaking the board, Ladner also brought on Paul Martin
Wolff, a top litigator with Williams & Connolly.
Collins, Bains, and Wolff became friends with Ladner. They
socialized and did favors for one another. Wolff chose Ladner
to speak at an award ceremony for him. Bains asked him to give
a speech at a New York event for bankers after the September
11 attacks. “He was terrific,” she says.
But Collins, Bains, and Wolff came to board meetings with high
expectations for accountability. Collins, a graduate of Virginia
Military Institute, had served as a squadron commander in the
Air Force and gotten his MBA at American. He joined the AU
board in 1986 and had been on hand for the Berendzen debacle,
during which his advice to the chair was “Shoot him on the
spot”—fire him for cause, no parachute.
A sailor, a self-made man, and an athlete in his mid-sixties,
Collins didn’t have time for frills. When he heard people refer
to Nancy Ladner as First Lady, he said, “As far as I know,
there’s only one First Lady, and she serves in the White House.
We have to strip that from our vocabulary.”

Ben Ladner devoted lots of time to international projects, in
particular one with the American University of Sharjah in the
United Arab Emirates. He landed a multimillion-dollar contract
for AU to help manage the university. He and his wife visited
the Persian Gulf nation once or twice a year. He got a seat on
the Sharjah board for Leslie Bains.
The three stopped in London on the way back from Sharjah in
February 2004.
“How long are you staying in London?” Nancy Ladner asked
Bains.
Bains was leaving the next morning so she could attend
meetings in New York.
“Too bad,” Nancy Ladner said. “We’re spending a few days.
Can we give you a lift to the hotel?”
Bains accepted, but she was surprised to see a limousine waiting
for them at Heathrow. She was more surprised to see the
Ladners embrace the chauffeur when he got out to open her
door.
“You seem to know him so well,” Bains said.
“We always use him,” Mrs. Ladner answered.
Back in New York, Bains related the story to her husband. They
agreed it was a bit “weird,” but she thought: “If they want to
spend their money that way, fine.”
The Ladners stayed in London two days and three nights. The
hotel cost $2,352; food and other expenses, including a car and
driver, were $2,513. The bills went to American University.

Bains paid her own way and assumed the Ladners had as well.
On another trip, the Ladners and Bains stopped off in Rome.
They ran into one another at one of Rome’s finest restaurants,
near the Spanish Steps. Again, Bains assumed the Ladners were
treating themselves. In fact, they billed AU $1,285 for meals
during a two-night stay in Italy.
Board member Paul Wolff recalls inviting the Ladners to his
home on Reservoir Road for an informal dinner. He and his wife
noticed that a car delivered the couple and waited to drive them
home.
Bains, Wolff, and others say they repeatedly asked John Petty,
then chair of the board’s audit committee, about Ladner’s
expenses. Petty brushed them off by saying it was an
insignificant sum, perhaps $8,000 a year.
When I asked Petty about these exchanges, he said: “All
expenses were signed off by the university’s finance
department. If I blew anyone off, it was their duty to demand
more detail.”
Under Petty, the board’s audit committee never examined
As Ben Ladner approached the end of his first decade as
president, he believed he deserved more money—much more.
Ladner presented his case to the board with a list of 33
accomplishments. He had launched a $200-million capital
campaign, obtained new academic accreditations, and led
international delegations. The budget had grown from $180
million to $330 million; 70 percent of campus buildings had
been or were being rebuilt or renovated.

The board was generally pleased with Ladner; with the memory
of Richard Berendzen’s scandalous departure still in mind, they
were motivated to keep him happy.
But some board members were becoming uncomfortable.
Salaries of university presidents are reported to the Internal
Revenue Service on Form 990 each year, and the Chronicle of
Higher Education publishes a list of the top ten. By 2002
Ladner had begun making the list.
For 2003, the board raised Ladner’s base pay only 3 percent and
did not increase his merit bonus. Ladner took offense.
On February 19, 2004, Ladner faxed from his study a memo
marked confidential to board chair George Collins. He
complained about the small raises. “Furthermore,” he wrote, “I
am now falling behind the salary levels of president’s [sic] at
peer competitive schools.”
Ladner suggested ways the board could sweeten the deal: It
could establish a new “retention incentive” of $225,000 a year
to reward him for committing to another five years. In addition
to that he asked for three cash bonuses of $200,000 each over
the five years. He asked the board to increase his annual
deferred compensation 10 percent, together with “a much larger
percentage increase in my annual base salary.”
Collins did not circulate the memo in part because he thought it
so outlandish that it would embarrass Ladner. The request was
dead on arrival. Collins dubbed it the D.O.A. memo.
George Collins asked board member Pete Smith to join the
compensation committee and study Ladner’s pay.
Smith, a Boston native, had worked for 30 years with Watson
Wyatt, one of the world’s top consultants on executive

compensation. He retired in 1999 as CEO. Paul Wolff had asked
him to join the AU board.
When he did, Smith took it upon himself to tour the campus and
visit with Ladner’s Cabinet, key faculty members, and students.
He found that people had the impression that Ladner was living
large, that he was detached. He reported to Ladner. “You need
to be seen and touched,” Smith told him. “People complain
about the car always idling by the president’s office building.
Why don’t you ditch the chauffeur? When I needed a car and
driver, I used to rent one.”
“You don’t understand the needs of a college president,” Ladner
said.
“I used to be CEO of an $800-million company,” Smith
responded.
“I can’t be the only one showing up at an embassy event without
my own chauffeur,” Ladner said.
In late 2003, Smith began looking into Ladner’s compensation.
Financial scandals concerning executive compensation had
tarnished the image of high-profile charities and other
nonprofits such as the United Way and Adelphi University. The
federal government had passed legislation penalizing board
members of nonprofit institutions, such as colleges, for
overpaying their executives.
Smith engaged a new set of compensation consultants to review
Ladner’s salary package and compare it with those at other
institutions. The goal was to get a “comfort letter” from the
consultants that would satisfy the IRS.
Ladner was skeptical of the process, according to board
members and his memos. Then his strongest champion, Bill

Jacobs, left the board. George Collins took his spot on the
compensation committee.
The new consultants discovered that Ladner had been including
only his base salary and his annual bonus in comparing his total
compensation with that of other university presidents. He had
never included the deferred-incentive part of the package. The
swing was more than $100,000 a year.
“Adding that blew his compensation off the charts,” says Pete
Smith. “He was one of the highest-paid university presidents in
the country. It was unacceptable.”
Rather than getting a raise, Ladner was told the compensation
committee would recommend a cut in his pay. But the
committee wanted to soften the blow: It suggested that he join
outside boards that paid.
Ladner was angry. Committee members said he was rude to
anyone who disagreed with him.
“He would blow himself up like a balloon and get red in the
face,” recalls Leslie Bains. “We saw a whole different side of
him.”
He threatened to quit; he searched for allies on the board. He
started to wage war.
The one who quit was Pete Smith. In a letter to Collins and
Bains, he wrote, “It began to feel like the board reported to Ben
rather than the reverse. It was then that I decided to resign as
Trustee.”
On New Year’s Eve 2004, the Ladners treated their son Dean to
an engagement dinner at their residence. It was an intimate
affair for Dean and his fiancée, Nicole.

The 13-course meal, served by waiters, began with white truffle
and porcini egg custard and American sturgeon caviar, served in
eggshell.
After purple and neon-green cauliflower soup sake-style,
littleneck clams, oysters, and crabmeat, the chef prepared a
lobster tasting: lobster bourbon bisque, lobster claw, and lobster
tail.
The meal was prepared by Rodney Scruggs, the Ladners’ chef.
Under the 1997 contract, the university agreed to pay for dining
staff at his residence. The Ladners hired Scruggs in 1999 for
$52,035; when he cooked the engagement dinner, his salary was
$88,000.
Scruggs stocked the family kitchen, bought the wine, scrubbed
the counters. When Ladner arrived home after work, Scruggs
dimmed the lights and made sure there was soft music playing.
He greeted the couple with hors d’oeuvres. He served two- to
four-course meals every night, whether there were guests or not.
The Ladners did not eat leftovers.
When the Ladners drove to their Gibson Island home for the
weekend, Scruggs would pack meals with instructions on how to
prepare them. At times, he would go to cook for them.
As a reward, the Ladners sent Scruggs to France to be
“rejuvenated as a chef.” He put all of his skills into that New
Year’s dinner.
The main courses were Alaskan black cod and salmon, then
Muscovy duck breast, then roasted rack of Colorado lamb.
Dessert was Death by Chocolate.

The price tag, including $111.40 for flowers, $307.96 for
Champagne and wine, and $595 for waiters, totaled $1,381.95.
The Ladners expensed it to American University.
On February 25, 2005, the AU board held its scheduled meeting,
facing the unpleasant task of cutting Ladner’s pay.
Collins opened the session at 9:35 am. He introduced Bishop
John Schol, a new trustee who represented the Methodist
Church. He also introduced Jim Joseph, an Arnold & Porter
attorney Collins had hired to oversee the compensation review
and serve as the board’s outside legal counsel.
At 11:30 Collins called the board into executive session. It
lasted three hours. Some board members questioned why they
needed Joseph, but Collins defended his choice and said he
would resign if the outside counsel were not accepted.
Joseph proceeded to explain why he deemed Ladner’s
compensation package out of proportion. He gave a detailed
explanation of the IRS sanction rules. He presented the
compensation committee’s proposal to cut Ladner’s pay, which
would bring it in line with current standards.
Ladner asked Collins to send Joseph out of the room. Then
Ladner recited his accomplishments, talked about his
philosophy of education, and said, “This is not about money.”
To which Gary Cohn, a trustee who worked for Goldman Sachs,
replied: “I have sat through many, many compensation
presentations, and every time someone says it’s not about
money—it is always about money.”
When Ladner finished his appeal, the board asked him to leave
and brought Joseph back into the room. For an hour they argued

the points of federal law and tax regulations.
David Carmen came to Ladner’s defense, according to board
members in the room. Carmen, a lobbyist, scoffed at the IRS
regulations and called potential financial penalties “de
minimus.” He said that rewarding Ladner was much more
important. He was joined in that sentiment by board member
Pamela Deese, a lawyer.
Collins adjourned the meeting without a vote but scheduled one
by phone in April, when the board voted 11 to 5 to reduce
Ladner’s compensation. Carmen and Deese were among the five
dissenters.
John Petty, the trustee who had recommended Ladner years
before, abstained.
David Carmen’s role as Ladner’s chief advocate struck some
board members as odd. Before the February board meeting,
Ladner had approached Leslie Bains and said, “I want Carmen
off the board.” According to Bains, Ladner accused Carmen of
using his board position to get clients for his lobbying firm.
Carmen had founded his company, the Carmen Group, in 1985.
He made his name doing opposition research for the Republican
National Committee, advising Ronald Reagan and both
Presidents Bush. He joined the American University board in
2001.
Ladner told Bains that Carmen should leave the board if he
didn’t start contributing to the university. Bains says she
approached Carmen, who pledged to give money to AU over
time. Bains explained the conversation to Ladner.
“I still can’t stand the guy,” he said, according to Bains.

Carmen, through his marketing director, declined to comment.
An anonymous letter came to George Collins and other
executive-committee members the first week of March 2005.
It accused the Ladners of “SEVERE expense account
violations.” It said the Ladners had charged the university for
“their son’s engagement party, lavish presents for their
children, a personal French chef . . . long weekends in Europe
for pleasure, maintenance of their personal residence in
Maryland including garbage bags, daily wine for lunch and
dinner at $50 to $100 per bottle, etc. . . .
“This needs to be made public because he may get away with
taking hundreds of thousands of dollars from American
University. . . .
“Please investigate. Thank you.
“An employee.”
Having just endured the bruising battle over Ladner’s pay,
Collins thought: “What now?” He assumed the letter was from a
disgruntled employee, but he knew he had to investigate it. He
alerted AU finance Chief Don Myers, then called the board’s
lawyer, Jim Joseph, then called Ben Ladner.
“We just received an anonymous letter about your expenses,”
Collins said.
“Oh, boy,” Ladner responded, according to Collins.
Collins set in motion an investigation.
When David Carmen was told about the letter, board members
say, he wanted to go after the whistleblower.

The job of running the investigation fell to Leonard Jaskol, the
recently appointed chair of the board’s audit committee. Jaskol,
a 1958 graduate of AU, joined the board in 1995. His $400-
million company, Lydall, sold air-filtration equipment. A
resident of Connecticut, he was recruited to broaden the board’s
base to New England.
Collins told Jaskol he had received the anonymous letter and
asked him to handle it. Jaskol contacted Jim Joseph, who
teamed up with AU’s internal auditor, Protiviti, to conduct a
forensic audit.
Jaskol told Ladner what he was doing. “I have no reason to
believe you have done anything wrong,” he said.
“It could be embarrassing,” Ladner said.
“We will do it as discreetly as possible,” Jaskol said.
In late April, Protiviti notified Jaskol of its initial review of the
available ledgers.
“We’ve got issues,” the auditors said.
Among their findings: There was a lack of documentation; the
Ladners had not abided by AU’s travel and entertainment
policies; the “expenses were rather extraordinary.”
Jaskol read the first review and reported to the audit committee
in May that there was “a potential abuse of discretion and abuse
of privilege by a significant amount.”
Jaskol wanted Protiviti to perform a forensic audit going back
three years. John Petty and other board members fought his
request, but ultimately the board ordered the deeper

investigation. ➝
“Ben Ladner did not accept that very well,” Jaskol says.
Ladner refused to turn over documents, according to Jaskol and
other board members. He tried to block investigators from
interviewing his staff at the residence and the university.
“He tried to delay and obfuscate,” Jaskol says. “He tried to
discredit lawyers and auditors. It was right out of his playbook
from the compensation scrap.”
When Jaskol met with Ladner, he made sure a third party was
present.
The investigators discovered a trove of documents, including
receipts for every party and bottle of wine, Ladner’s personal
calendar, and the chauffeur’s log. Jaskol asked for copies and
took boxes to his home in Naples, Florida.
“I wanted to see all the same documents,” he says. “If I’m going
to stand up there to say this person misbehaved, I know what
that would do to their reputation. I wanted to bend over
backward to be fair.”
Jaskol and his wife, Lynn, spent last summer sifting through the
boxes. One day she found the record for a first-class plane
ticket to Nigeria for $22,345.
“Must be a misprint,” Jaskol said.
She checked and verified the price. Jaskol asked her to compare
the price for a business-class elite ticket: $8,000. The $14,000
difference would have paid a semester’s tuition for a student.
The cost of the Nigeria trip became emblematic for Jaskol and
other board members of the Ladners’ lack of judgment. The

1997 contract did permit Ladner to travel first-class, but did he
have to book rooms in elite hotels and tables in the finest
restaurants? The contract allowed him to have a car and
driver—but did he have to hire a limo if the driver wasn’t
available? And did Ladner have to be driven to every
appointment? Did the driver have to take Nancy Ladner to the
hairdresser? The contract said the university would pay for
travel and entertainment “reasonably incurred in the
performance of his duties as President.” Did that mean a lavish
dinner for his son? Or a $5,000 lunch for Nancy Ladner’s
garden club?
One day Mrs. Ladner asked for a car and driver to take her
children bar-hopping in Georgetown. Executive assistant
Margaret Clemmer told her the request was inappropriate. “I’m
not asking,” Ladner replied.
On August 19 the auditors from Protiviti delivered a 31-page
report, in which they examined the purpose and cost of every
foreign trip, every party, and every chauffeured ride to the
hairdresser.
“The whistleblower was accurate,” Jaskol says. “It was all
basically true.”
After receiving the report, the board’s executive committee met
and discussed firing Ladner for cause but decided to take the
matter before the full board. On August 24 the AU board
suspended Ladner pending the final outcome of the
investigation.
Kyle Taylor, president of the AU student-government
association, was leaving on vacation when he learned that
Ladner had been put on administrative leave. He wasn’t
surprised to hear that Ladner was spending a lot of money on
himself. To the extent that students thought about the president

at all, they believed he lived a plush life.
Taylor loved AU. A swimmer from Anaheim, California, he
would be the first in his family to graduate from college.
“The culture of AU is one of critical thinking,” he says. “We
have a cutting-edge curriculum that connects with the city. We
sent volunteers down to help victims of Katrina. For the first
time we’ve had two Rhodes-scholar finalists.
“The university is larger than the president. It’s not as if he was
a leader who was taking us somewhere.”
Taylor began serving as student-government president in April
2005. He attended board meetings but, on Ladner’s orders, was
instructed not to speak unless asked. His only direct contact
with Ladner came when he was invited to the residence to
discuss graduation policies.
During late August and early September the AU campus was
quiet.
On September 12, the battle within the board was joined.
Trustees gathered in the law offices of Arnold & Porter, where
Jim Joseph is a partner, to hear the results of the audit. Len
Jaskol displayed the numbers in a PowerPoint presentation with
the accountants. Joseph helped explain Ladner’s lavish lifestyle.
Ladner was on the counterattack. He’d hired his own lawyers
and sent a letter to board members the night before rebutting the
audit’s main points.
Essentially, Ladner and his lawyers said he had done nothing
wrong. The 1997 contract permitted almost every expenditure.
According to board members, one lawyer said, “If Ben Ladner
wanted to spend $100 on a bottle of wine, he was allowed to

American University Case Study – (200 points) Due February 17. You.docx

American University Case Study – (200 points) Due February 17. You.docx

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