There are few institutions that embody the nobler attributes of the nation’s capital more grandly than the Smithsonian, the vast network of museums and research institutes that house some of America’s greatest historical treasures.

But, like other non-profit organisations once considered above reproach – from the American Red Cross to the Nature Conservancy – the Smithsonian has found itself under a cloud of
controversy.

At the centre of questions raised by US lawmakers about one of the world’s biggest museum groups is the leadership of Lawrence Small, the former vice-chairman of Citigroup appointed as the museum’s 11th secretary in January 2000. Mr Small ascended to the helm of the Smithsonian following a nine-year tenure at Fannie Mae, the mortgage group that last month paid a $400m fine to settle charges with regulators in connection with a $10.8bn accounting scandal, discovered in 2004 but allegedly dated back to 1998.

Until recently, Mr Small’s tenure has been smooth, although avid Smithsonian watchers have noted several mishaps. There was, for example, his guilty plea in 2004 to a federal misdemeanour involving his private
collection of artefacts, which included pieces made from the feathers of endangered birds from the Amazon.

More recently, there was the revelation that the Smithsonian had agreed, without alerting Congress, to a 30-year contract with CBS/Showtime to create a Smithsonian cable channel – a deal that has enraged independent filmmakers and documentarians, who claim their access to the Smithsonian, an independent trust that relies on public funding for 75 per cent of its budget, will be curtailed by the corporate deal.

But it is Mr Small’s previous affiliation with Fannie Mae, coupled with the departure this month of the museum’s inspector-general, who was auditing the compensation of some executives, that has caught the attention of Republican Senator Charles Grassley.

Mr Grassley, in recent years a champion for greater accountability and transparency of some of the biggest non-profit organisations in the US, raised questions about Mr Small’s stewardship of the Smithsonian during a Senate finance committee hearing this week.

Although the Fannie Mae debacle has focused in large part on the tenure of the former chairman Franklin Raines, a report last month by the Office of Federal Housing Enterprise Oversight (Ofheo) also cited Mr Small. It detailed how executives intentionally created a “false” image of Fannie to manipulate accounts and maximise bonuses.

In a letter Mr Small sent to Mr Raines in 1998, Mr Small expressed concern that Fannie’s “piggy bank” and various magic bullets could not make up for an earnings shortfall – a predicament that would negatively affect top executives’ compensation. Mr Small was paid $1.9m in salary and bonus in 1998, according to documents provided by
Fannie. Mr Small, who has not been charged with wrongdoing, did not respond to requests for comment on the Ofheo report or his position at the Smithsonian.

The Department of Justice is still investigating alleged wrongdoing by individual executives at Fannie and, under the terms of its settlement with regulators, Fannie will next week recommend a list of executives who should forfeit some of the pay they earned at the mortgage group. The Ofheo report prompted Mr Grassley to send a letter to Rob Portman, head of the Office of Management and Budget, demanding to know: “In light of Ofheo’s report . . .
does the administration believe Secretary Small is the appropriate steward of the Smithsonian?”

Mr Grassley also wrote in a letter to the now outgoing inspector-general at the Smithsonian, Debra Ritt, that an audit of executives’ compensation at the Smithsonian business unit ought to be broadened to include “all types of compensation”. Including a housing allowance and benefits, Mr Small was paid a total of about $3.4m between 2000 and September 2004, according to public documents – a steep increase from his predecessor. The Smithsonian said each package was “worked out” with the compensation committee of the Smithsonian’s regents, or board, and said Mr Small’s pay was commensurate with that of a university president.

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