Years before a budget crisis forced the Field Museum to slash research and cut science jobs, three former trustees raised alarms about financial practices at the museum — including some of the same practices that experts have said contributed to the Field's current woes.
As the Field pushed forward with a massive building campaign, the three sent a memo to the board's audit committee in November 2006 condemning "a pattern of deception and disregard for commitments to donors, financial institutions, patrons, and trustees" and demanding an investigation.
The memo expressed concern about "campaign targets being missed and lowered" and "capital expenditures that have exhausted the museum's debt capacity without increasing academic positions or attendance." It also criticized the museum for not setting enough money aside to pay off debt.
"We are addressing this letter to you out of concern for actions taken during our tenure that we feel have caused harm to the Museum's reputation and financial viability as a leading Chicago cultural institution," the memo stated. The authors included economist and financial analyst Harlow Higinbotham, who five years earlier had helped revise the museum's budget process.
A follow-up investigation found no inappropriate activity, and the museum's former president and several board members have said the spending of the last decade seemed prudent while the work was underway. The main culprit for the current cuts, according to those board members and the current president, is the recession.
But the memo raises questions about whether the current crisis would have played out differently if the museum had worked to address the problems the authors highlighted. One of them, Edward Hirschland, said he believes the Field could have avoided some of its current problems by heeding the warnings about spending, debt and lagging fundraising.
"It seems that time has proved those correct," Hirschland said. "And I'm not happy that we were right."
Board members interviewed by the Tribune could recall making no changes in response to the 2006 memo. Two questioned the motives of the authors.
"The feeling at the time (was that) this was just kind of a revenge thing," said Marshall Field V, a great-great-grandson of the merchandising king after whom the museum is named. He pointed out that Higinbotham had lost his position on the board the year before.
"It was just an effort to stick it to the board of the museum for not re-electing him," Field said.
William Kunkler, an executive vice president at the private equity firm CC Industries, served on the board audit committee to which the letter was addressed.
"I just remember it as being a distraction caused by a few individuals," Kunkler said. "With that big a body, you're always going to have people say, 'I told you so,' with whatever ax to grind they have, and often (they are) people who are not part of the real board leadership."
Kunkler said the Field's administration has monitored and responded to the museum's financial situation appropriately as it changed over the past decade.
The chairman of the audit committee at the time, Jack Greenberg, responded to the three former trustees in March 2007, saying the committee had evaluated the allegations and hired an outside law firm, Mayer Brown, to perform "a major part of that evaluation."
Greenberg, a former McDonald's boss who now chairs the Metropolitan Pier and Exposition Authority board, wrote that the outside lawyers' "conclusion and our evaluation is that we have not found any pattern of deception and disregard" and that the committee considered the matter resolved.
The museum declined to make public Mayer Brown's conclusions or the findings of the audit committee, and Greenberg declined to comment for this story.
Museum spokeswoman Nancy O'Shea said the investigation was extensive and the allegations were found to be "without any substantial merit." O'Shea did not respond to a question about which specific allegations the outside firm reviewed.
The other two authors, Higinbotham and his wife, Susan, declined to comment. Hirschland, a management consultant, said he was questioned by Mayer Brown lawyers but never saw their findings.
The museum now has a debt load of about $170 million. It is in the process of cutting $5 million from its budget of about $60 million, decreasing science positions and research funding.
A Tribune investigation earlier this year documented some of the factors that led to the budget crisis, including static attendance numbers despite a bevy of new attractions and fundraising that brought in only $150 million for $254 million in capital projects.
The museum, which took out a $90 million loan in 2002, moved forward on projects with little donated money in hand, and fundraising never caught up. Conventional wisdom among museum experts holds that institutions should secure pledges for at least half the cost of a new project before breaking ground.
The Field's original capital campaign goal in 2001 was $365 million, according to board meeting minutes, but the number was repeatedly revised downward. The Field declared the campaign over in its 2008 annual report after raising a total of $190 million for new projects, exhibitions and endowment funds.
Marshall Field V, who served for years as chairman of the board's development committee, disputed the idea that the target was lowered. He said campaign was split into two phases and the second phase of the campaign was postponed.
But museum board records help explain why Hirschland and the Higinbothams were concerned about paying off construction debt. In a 2000 presentation, board finance members heard that the museum would not be able to pay into its debt service fund the following year, and they were told in 2001 that the museum would begin using money from its operating budget to make debt payments. It's not clear whether the Field started doing that right away, but by 2011 annual debt payments were making up more than 12 percent of operating expenditures.
In the years after the 2006 memo, the Field started 10 new projects, including a 3-D theater, the Grainger Hall of Gems and a new exhibit on conservation, according to records provided by Chief Finance Officer Jim Croft. In total, $41 million of the $254 million in capital projects built since 2000 was spent after 2006.
In an interview this year, John McCarter, who served as the Field's president from 1996 to 2012, disputed the idea that the museum took spending risks, saying everything built under his watch was eventually paid for and that the museum had a lower debt load relative to its peers in 2002.
McCarter had no comment on the 2006 memo beyond the answers O'Shea provided.
The ex-trustees' memo also expressed concerns about the way millions of dollars from the 2004 sale of 19th Century Western paintings by artist George Catlin were being spent. An auction of paintings by Catlin and other artists brought in $15.5 million, and the museum said in a news release at the time that the money would help buy new collections.
The three former board members wrote that they were concerned about "possible misuse of funds received, inconsistent with prior assurances."
The concerns proved prescient. Beginning in 2010, much of the money was used to help fund the salaries of staffers who care for collections. That move is unusual among major museums and drew criticism from museum scholars.
Hirschland said he did not know in 2006 that some of the money would go toward staff salaries but said a lack of information and documentation left him and the memo's other authors suspicious about how the funds were being used and how they would be used in the future.
O'Shea has said that the Field's decision to put money related to the sale toward salaries of staff who care for artifacts and specimens was the result of "careful contemplation" and that it is an appropriate use of collections funds.
The museum's current president and several board members have blamed the Field's financial problems mainly on the economic downturn in 2008. Both Kunkler and McCarter have told the Tribune that the museum's spending choices did not appear risky at the time they were made.
"We're here because of what happened to the economy largely," current President Richard Lariviere said in an interview this year.
Kunkler, who now chairs the museum's development committee, said that even in retrospect the memo does not change his opinion that the museum's spending was prudent at the time it was underway and that the reasons for the current strain are the recession and a reduction in allocations from the Chicago Park District. Annual funding from the district, which dropped at many museums around the city, fell from $7.4 million in 2000 to $6.3 million in 2011 at the Field rather than increasing with inflation.
Kunkler also said the museum was not oblivious to brewing financial trouble. McCarter "made cuts … back then in response to changed conditions," he said. The museum's 2007 annual report notes budget cuts of close to $1.2 million.
Higinbotham left the board after his term ended in 2005, and he was not renominated — an unusual occurrence. The previous year, he had voted against selling the Catlin paintings, some of which his great-grandfather had helped secure for the museum. The Field said Higinbotham's departure was unrelated to his objections.
Museum tax documents show that Susan Higinbotham served on the board in a nonvoting capacity. As chairwoman of the volunteer group Friends of the Field Museum Library, she was entitled to a seat under the board bylaws.
But in 2006, museum board leaders announced in an August letter that they were discontinuing the group's activities. That move, made over the objections of many members, ended her time on the board.
Hirschland, who resigned from the board over the sale of the Catlin paintings, said he feels that museum leadership had retaliated against the Higinbothams for earlier warnings about spending and ignored concerns of staff members worried about the sale of the Catlins.
The 2006 memo criticized "actions to silence, discredit and retaliate against those who sought to uncover and mitigate these problems."
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