Field Museum was warned years ago about budget issues

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.