Attorney General Lockyer Issues Report Criticizing Getty Trustees, Former President Munitz for Improper Spending and Legal Violations

(SACRAMENTO) – Attorney General Bill Lockyer today issued a report that finds the J. Paul Getty Trust’s (Trust) ex-president, Barry Munitz, violated his legal duty when he used Trust employees to run his personal errands, and concludes Getty trustees improperly allowed use of charitable funds to pay the travel expenses of Munitz’ wife and buy gifts of artwork for retiring board members.

“Charitable trusts such as the Getty are subsidized by taxpayers,” said Lockyer. “They provide substantial benefits to society and add great value to our communities, but they must at all times spend money lawfully and to further their charitable purposes. Board members and executives have a legal duty to make sure that happens. Unfortunately, with some expenditures and gifts, Mr. Munitz violated his duty, and Getty’s trustees failed to do their governance job. The Trust has taken steps to correct the problems, and Mr. Munitz has compensated the Trust for improper expenditures. But we are taking extraordinary measures to ensure that the board’s recently-adopted reforms take root.”

To provide ongoing, augmented oversight of the Trust, Lockyer announced that former Attorney General John Van de Kamp will serve as independent monitor of the Trust. Van de Kamp’s term will cover two fiscal years, and he will report to the Attorney General on whether Trust officials adequately implement and comply with the new policy and procedural reforms.

Lockyer’s appointment of an independent monitor marks the first time ever a California Attorney General has imposed such a requirement in a charitable trust enforcement action.

Among the report’s main findings:

• Munitz violated laws that require funds be spent to advance the organizations’s charitable purposes, as well as laws that prohibit use of Trust resources for private gain, when he used Trust employees to run his personal errands.
• Getty trustees improperly allowed the expenditure of charitable funds when they permitted the Trust to pay for the travel expenses of Munitz’ wife.
• Getty trustees improperly allowed the use of more than $21,500 in charitable funds to buy gifts of artwork for retiring trustees, who are supposed to serve without compensation.

The report also criticizes the trustees for footing the bill for Munitz to fly first class, stay in luxury hotels and dine at five-star restaurants. The report calls approval of such expenditures by a nonprofit organization “inappropriate” and finds payment of first-class air fare “clearly not reasonable” for flights that are not transcontinental or overseas. On another issue, the report finds improper the Trust’s payment of consulting fees to graduate art student Iris Mickein, concluding she did not earn the money.

Regarding other issues investigated by Lockyer’s charitable trust staff, the report concludes: the Trust sold a vacant residential lot in Brentwood, California to housing developer Eli Broad at fair market value; Munitz’ total compensation was not excessive and “was within reasonable limits”; a series of questioned grants made by the Trust to other nonprofit organizations were not improper and furthered the Trust’s charitable purposes; the salary paid by the Trust to former Trustee David Gardner to write a history of the Getty was not excessive, given the amount he repaid to the Trust and the amount of work he performed; the Trust’s payment of legal fees and related costs for Trustee Barbara Fleischman to provide testimony and documents to Italian authorities in their criminal investigation of former Getty Museum curator Marion True was proper; trustees did not violate their fiduciary duty or abuse their discretion in approving separation payments to former Getty Museum director Deborah Gribbon and Munitz’ former chief of staff, Jill Murphy ($3 million to Gribbon and more than $350,000 to Murphy, according to published reports).

Lockyer’s investigators also reviewed voluminous documents in examining whether any improper expenditures resulted from fraud on Munitz’ part. The investigators “found no evidence of fraudulent appropriation of the Trust’s property,” the report states. “The payments to Dr. Munitz from the Trust were authorized, and there was no indication that he obtained such authorization by making false statements, submitting false billings or through some other form of deceit. Nor did he take any Trust funds without permission.”

Under a settlement between Munitz and the Trust, the report notes, Munitz has compensated the Trust for expenditures found improper by Lockyer’s office. The value of the settlement – $250,000 in cash and more than $2 million in forfeited benefits, according to published reports – exceeds the value of the Trust’s loss from the improper payments, the report concludes. The report cites the trustees’ adoption of policy and procedural reforms “designed to prevent future problems such as those that have been the focus of our investigation.” The reforms include policies that restrict travel expenses and bar payment of travel expenses for spouses, prohibit use of employees for personal purposes and forbid gifts to trustees. Because of the settlement’s value and the voluntarily-adopted reforms, the Attorney General’s Office decided it was not necessary or appropriate to file an enforcement action against the trustees or Munitz.

To ensure that the trustees fully implement and comply with the reforms, however, Lockyer took the unprecedented step of appointing the independent monitor. Trustees will provide three reports to Van de Kamp (January 31, 2007, July 31, 2007 and January 31, 2008). Van de Kamp will review the reports, and gather any additional information he deems necessary. He then will advise the Attorney General’s Office on whether Trust officials have satisfactorily implemented and complied with the reforms. Van de Kamp will file his report with the Attorney General’s Office within 90 days following the end of his term.

The Attorney General’s Office launched an investigation of the Trust in July 2005 following a series of articles in the Los Angeles Times which raised questions about Trust expenditures and Munitz’ actions.