President Biden’s choice of University of Pennsylvania President Amy Gutmann to be U.S. ambassador to Germany is spurring new controversy – and not just over quid pro quo concerns about her decision to pay Biden $911,000 in salary for an ambiguous professorial role at the prestigious college.
Gutmann is the second-highest-paid Ivy League president, receiving roughly $3.9 million in total compensation in 2020, according to the university’s latest publicly available 990 tax forms. Only Columbia University’s Lee Bollinger makes more — reportedly $4.6 million in 2018 — while all other Ivy League presidents earn less than $2 million annually, according to the latest figures available.
Ethics watchdogs have assailed the nomination as taking the pay-to-play practice of choosing ambassadors to new levels.
New presidents usually reward at least a handful of big campaign donors and bundlers with such plum posts even if they lack the foreign-policy credentials to become the chief U.S. diplomat in those countries. In some particularly embarrassing cases, the ambassadorial picks haven’t known even the basics about the nations in which they were chosen to serve.
In this case, Biden tapped Gutmann, a long-serving and widely respected university president but one with little if any foreign policy experience, to represent the U.S. with one of our closest allies. And the nomination comes after Gutmann was personally responsible for directing nearly $1 million in university funds to Biden in the 2½ years before he launched his presidential run.
It’s not unusual for universities to pay former presidents, secretaries of state and other top government officials six-figure fees for speeches. But watchdogs argue that the salary amount for a professorship in which Biden mainly delivered speeches without teaching a class raises ethics flags – especially considering the strong chance that Biden would run for president at the time the payments were made.
“I don’t mind as much payments to a president who is termed out. [Bill] Clinton wasn’t going to run again. President Obama – same way,” John Pudner, executive director of Take Back Our Republic, a conservative nonprofit, said in an interview. “But a lot of people expected that Joe Biden was going to run for president again, and that’s what changes it for me.”
Pudner and other watchdogs also argue that Gutmann’s nearly $4 million salary runs counter to Democrats’ push to make college more affordable and Biden’s efforts to wipe out billions in student loan debt.
“Overpaying administrators and a few faculty inflates academic compensation all over the country, driving the cost of college to astronomical new levels,” Pudner and Richard Painter wrote in a Monday Newsweek op-ed. “Democrats talk about making college affordable, and the possibility of canceling student debt, but people like Amy Gutmann are doing everything they can to drive the cost of higher education sky high.”
Painter is a University of Minnesota law professor who served as chief ethics lawyer to President George W. Bush from 2005 to 2007 before becoming a top critic of Donald Trump.
Gutmann last year also spurred criticism for declining to emulate decisions by the presidents of five of the country’s top colleges — Harvard, Dartmouth, Brown, Cornell, and Stanford — to take a COVID-related pay cut of 20% or more for the academic year.
“Every dollar of these recaptured funds will be used to help meet the financial aid needs of our undergraduate, graduate or professional students,” Cornell Provost Michael Kotlikoff wrote in an email to students last year.
Instead of following suit, Gutmann kept her salary level as Penn instituted a hiring freeze and prevented employees making more than $70,000, including officers, deans and vice presidents, from an annual wage or stipend increase in the 2021 fiscal year.
Gutmann’s lucrative salary is also raising questions about why she is receiving far more than other university presidents and whether it would trigger IRS action because it’s so high.
In order to demonstrate that the compensation is not excessive for a “public charity” to provide, large nonprofit institutions typically hire outside compensation consultants to study comparable salaries at similar organizations and file reports with salary recommendations to boards of trustees to approve, according to Michael Sanders, the lead partner of Blank Rome LLP’s tax group. In such a case there would be a presumption of reasonableness, which shifts the burden to the IRS to prove that the compensational is unreasonable, Sanders explained.
The stakes are high if the IRS determines the salary is excessive because any amount deemed over the line must then be repaid, along with an added excise tax by the official who received it, Sanders told RealClearPolitics, citing section 4958 of the U.S. tax code.
University spokesman Stephen MacCarthy referred all questions about Gutmann’s ambassadorial nomination to the White House while defending Penn’s decision to pay Biden $911,000 for the professorship. The former vice president and longtime senator served as Benjamin Franklin Presidential Professor of Practice, a position that didn’t require him to teach a class. Gutmann helped recruit Biden, according to former Pennsylvania Gov. Ed Rendell.
The appointment sparked criticism on the campaign trail last year after Biden claimed that he became a “teacher” after his term as vice president ended.
“Rather than taking a Wall Street job, I became a teacher, became a professor,” he said.
The Daily Pennsylvanian, Penn’s student newspaper, later clarified that Biden never taught a regular class but spoke at the university on at least five occasions. One of the visits included a dialogue with former U.K. Deputy Prime Minister Nick Clegg, and in another he appeared with Gutmann to discuss international relations and cancer research.
MacCarthy characterized Biden’s affiliation with the university as “phenomenally successful.”
“As our Benjamin Franklin President Professor of Practice, he helped to expand Penn’s global outreach while sharing his wisdom and insights with thousands of Penn students through seminars, talks and classroom visits,” he said.
Biden brought “prominent world figures” to Penn’s campus for “forums and conferences to discuss and debate critically important issues including immigration, climate change, Brexit, national defense and global diplomacy,” he added.
MacCarthy didn’t respond to RCP’s questions about Gutmann’s salary and whether it undercuts Biden’s college affordability goals. He also didn’t respond to a question about whether the university had hired an outside compensation expert to ensure that its packages are comparable to those of top officials at other Ivy League universities.
A White House spokesperson argued that Gutmann’s qualifications and reputation speak for themselves.
“President Biden is thrilled to have nominated her for this important position,” the spokesperson said. “If confirmed, we look forward to Gutmann representing the Biden-Harris administration and the United States with such an important ally in Germany.”
Gutmann is the daughter of a Jewish immigrant who fled Nazi Germany and is a longtime advocate for making college more affordable. She often touts her school’s all-grant policy for undergraduate financial aid as the largest in the country with more than $1.4 billion disbursed since 2008. A Penn bio says she has raised more than $9 billion for the university since 2004.
In 2009, President Obama appointed her as chair of the Presidential Commission for the Study of Bioethical Issues during the Zika and Ebola health crises. During Hillary Clinton’s 2016 presidential campaign, her name was floated as a possible pick for education secretary — Cabinet-choice speculation that circulated again last year after Biden won the White House.
Biden has a long history with the university as well as with Gutmann. His late son, Beau, daughter Ashley and grand-daughter Naomi are all Penn graduates. Biden himself received an honorary degree from the university in 2013. In addition to recruiting Biden for the professorship, Gutmann created the Penn Biden Center for Diplomacy and Global Engagement in Washington, D.C., in early 2018.
Along with Gutmann’s decision to pay Biden $911,000, her large salary could become an issue during her upcoming Senate confirmation process.
Pudner, along with Take Back Our Republic President and Board Chairman Francis Johnson, is calling on Pennsylvania Attorney General Josh Shapiro to open an investigation into whether Penn is violating its charitable tax status by paying excessive executive compensation to Gutmann and other top university officials.
“Executive compensation in nonprofits is a matter subject to investigation and potential litigation by the state attorney general,” the pair wrote Shapiro. “Unlike a for-profit corporation, there are no shareholders to act as a check on self-dealing. That is the job of the attorney general.”
Shapiro is a longtime Democrat who is unlikely to act on that request. He previously served in the Pennsylvania House of Representatives and has been mentioned as a possible candidate for governor.
But the salary questions could cause headaches in Gutmann’s Senate confirmation process, although Republicans cannot block the nomination if all Democrats support her.
In the letter to Shapiro, Johnson and Pudner also took issue with the compensation the university doled out to Biden, raising the prospect that it could have been paid, at least in part, through foreign donations to the university. Last year a Philadelphia Inquirer report found that Penn received at least $258 million in foreign money from 2013 through mid-2019, with the most funds, $68 million, coming from Chinese entities, and another $2.75 million from Saudi Arabia‘s Ministry of Defense and other Saudi entities.
In 2015, the university established the Penn Wharton China Center in Beijing, which the university calls “an important hub through which Penn students and faculty can further grow exchanges with China.”
A university web page spotlights a Gutmann visit to the center and “an evening in Beijing” event she headlined.
“If there was any quid pro quo arrangement — for example, a promise to [Gutmann] of an appointment similar to the ambassadorship for which she now has been nominated — that would also be a violation of nonprofit law,” Johnson and Pudner argue in their letter.
“If Penn was used as a conduit for passing money from foreign donors to a presidential candidate, that also would be a matter of great concern,” they noted. “…We expect all nonprofits, regardless of political ideology or political affiliation of their leaders, will be held to account by the attorney general of the states where they are organized, do business and where they raise funds.”
A separate conservative group, the National Legal and Policy Center, last year filed a complaint with the Department of Education, calling for a full investigation into whether Penn directed any of the Chinese funds to the Biden Center. The complaint came after the DOE launched investigations against Harvard and Yale for failing to report foreign donations.
MacCarthy at the time said Penn had never “solicited any gifts for the Penn Biden Center” but did not say if the university directed any of the Chinese funds to the center.