Ben Johnson stepped down as Peru State College president Aug. 15, retiring to Florida after leading the college through nearly a decade of record growth.
Since then, college leaders made a surprising discovery: Unbeknownst to his bosses, Johnson had accepted from the Peru State College Foundation a deferred compensation package worth nearly a half-million dollars in private funds.
The foundation offered Johnson the deal in 2003, a carrot to entice him to stay at Peru State. He accepted, and that year began earning credit toward the payout, valid only if he remained president for five more years and committed to an additional five years of fundraising for the foundation.
But Johnson, who was making $163,000 when he retired, never told State College System Chancellor Stan Carpenter, the Peru State College Board of Trustees or the state’s Accountability and Disclosure Commission about the arrangement.
Johnson violated no state college system rule by failing to speak up, which may prompt a change in the system’s disclosure policies.
And it’s common for college and university leaders to receive privately funded perks, like salary supplements and housing and car allowances.
But now State Auditor Mike Foley is raising a number of questions:
* Why was there an apparent lack of transparency in Johnson’s payout deal?
* How much should the public know about the compensation of public employees, even if some of it is privately funded?
* Because public college and universities’ private foundations play an increasing role in daily operations on campuses, should they be subject to the same audits the public institutions are?
“The public has a right to know, how much are these state employees being compensated?” Foley said in an interview. “(Foundations) are stepping into the public arena, and that brings with it additional scrutiny.
“If you guys want to play in this arena, let’s see the books.”
Carpenter, now serving as interim Peru State president in addition to state college system chancellor, learned about the deal and alerted the Accountability and Disclosure Commission last month. He declined to comment.
Neither he nor the presidents of Wayne or Chadron state colleges have deferred compensation package agreements.
Said Kristin Petersen, the state college system’s general counsel and vice chancellor for employee relations: “We were disappointed that we were not informed (of Johnson’s payout package). Even though the foundation is private, its actions do impact the college and the students and the system.”
Johnson did not respond to an e-mail or phone messages left at his home over the past week.
But Peru State College Foundation Board President Charles Niemeyer defended the arrangement, blaming the lack of transparency on a “miscommunication” and vowing the foundation will notify the state college system of such deals in the future.
Johnson’s financial package was a recognition of his leadership at Peru State — the campus enjoyed increased fundraising, record enrollment and significant physical growth during his tenure — but did come with strings attached, Niemeyer noted.
“This was not like, ‘Here’s a bunch of free money, now go retire,’” Niemeyer said. “What we did, as a foundation board, was to secure 10 years of service (from Johnson).”
In addition to his fundraising duties, Johnson is an online professor for the state colleges, earning $80,000 this year to teach a full load of 12 credit hours per semester.
His first deferred compensation package payment, worth $77,655 before taxes, arrived to him in late August. He’s scheduled to receive payments in ever-growing amounts each of the next four years, for a pre-tax total of $455,572.
The Peru State College Foundation, with more than $10 million in assets according to its Web site, exists solely to support Peru State, with funds going to scholarships, academic programs and other campus initiatives. It is a self-supporting corporation independent of the college.
Thus, Niemeyer said, the foundation handled Johnson’s payout deal the same way it does many of its initiatives: without direct interaction with Carpenter or other state college leaders.
“There was zero thought of the need to report this to the chancellor because we really don’t have anything to do with him,” Niemeyer said. “He runs the state college system, we run the foundation…
“We buy land, we buy buildings, we give out scholarships without any interaction with the chancellor.”
Providing money for Johnson — who was key in turning around Peru State’s fortunes after sluggish growth nearly forced it to close in the late 1990s — was a worthy investment, Niemeyer said, because without the compensation package, Johnson might have left.
“He was a phenomenal president,” Niemeyer said. “His leaving would have really set the campus back.”
Enrollment, for example, has risen from about 1,300 when Johnson arrived at Peru State in 1999 to 2,300 now. Fundraising also has grown, and the campus has undergone a makeover, featuring newly updated facilities like the Al Wheeler Activity Center, with an Olympic-sized pool, three basketball courts, weight room and intramural field.
Petersen and William Roskens, chairman of the Peru State Board of Trustees, agreed Johnson’s tenure was a success.
But open dialogue, they said, is critical to an institution’s success.
“This was something that (Auditor Foley) felt like the citizens of the state had a right to know about, and we don’t disagree with that,” Roskens said. “We don’t want situations like this to re-occur because they are gray and gray situations are not what you want.”
No state college system policy explicitly required Johnson to divulge his compensation package. System leaders now are reviewing their rules, Petersen said, though she said it’s too early to speculate on what changes might be made.
“We’ll take a close look at our policy and see so we don’t have something like this happen again,” she said.
In a letter dated Nov. 18, the Accountability and Disclosure Commission notified Johnson that he hadn’t disclosed any sources of income over $1,000 in his most recent statement of financial interest, a reporting form required annually from certain elected officials and public employees.
Similar omissions existed for previous years, the letter said, and there was no filing at all from 2007.
On Dec. 1, the commission wrote Johnson again, alerting him state law required him to report all sources of income over $1,000, including Peru State.
Officials sometimes don’t understand they must list their employers as income sources, said Frank Daley, executive director of the Accountability and Disclosure Commission. Johnson’s omissions, then, were common ones.
By law, Daley couldn’t say whether the commission is investigating Johnson.
Johnson did respond to the commission’s Dec. 1 letter with a full listing of his income sources and benefits since he took the helm at Peru State.
In his letter, Johnson wrote: “I apologize for not knowing I needed to record the salary and benefits associated with my position as president of Peru State College on the annual disclosure forms. I assumed I was disclosing only ‘additional’ non-employment related income.”
Though Johnson’s deferred compensation package is now public, Foley remains troubled.
Private foundations can and should support their universities, Foley said, noting they provide critical support in areas like financial aid, research and construction.
But he believes such support should be fully disclosed to the public.
“We’ve got to probe further,” he said. “I don’t think this is a unique situation.”