Six weeks after Iowa State University released the Internal Audit report on ISU Flight Service and University Owned Aircraft, I’ve made surprisingly little headway toward filling in the gaps.

Not for lack of trying.

The Iowa Board of Regents and ISU have withheld information that should have been included in a “comprehensive audit” purporting to cover every flight President Steven Leath has taken on a university airplane.

For today, I will focus on one issue: ISU staff’s refusal to tell me whether Leath has reimbursed the ISU Foundation for the full cost of flights to Rochester, Minnesota in July 2015. The matter raises questions about the foundation’s compliance with federal tax code and the accuracy of ISU’s official narrative.

NOT THREE, BUT FOUR JULY 2015 ROUND-TRIP FLIGHTS TO ROCHESTER

Ryan Foley reported for the Associated Press in October, “Most of Leath’s flights have been billed to the ‘Greater University Fund,’ a pot of unrestricted donations to Iowa State’s foundation that is advertised as helping the school’s most critical needs.” The internal audit referred to the “ISU President’s Office/Greater University Fund” as a single entity for airplane usage and billing purposes.

When the Board of Regents formally received the audit and gave Leath a vote of confidence, ISU announced that the president had reimbursed the ISU Foundation $19,133.08. Most of that money covered training flights in the university’s smaller Cirrus SR22, which Leath had often piloted. The rest paid for trips in ISU’s King Air, flown exclusively by professional pilots.

Leath reimbursed the foundation $3,796.80 for medical travel. The internal audit explained on page 6,

Between May 2013 and August 2016, a university-owned aircraft or university resources were utilized to transport the University President to Rochester, MN seven times. The University President stated that on three occasions the sole purpose of the trip was a medical appointment, but the use of Flight Service was necessary for him to return to campus to meet university obligations.

Leath’s mea culpa to the Board of Regents on December 12 included this passage:

I have also paid for two trips when I used university planes to go to Mayo for medical visits. At the time, I believed it was appropriate because I had to get back to Ames for important university commitments. Even though this was within policy, I told [Regents Executive] Director [Bob] Donley that I would feel more comfortable if I paid for those flights myself–which I have done.

Leath’s claim to have acted “within policy” is dubious. The auditors noted (page 6) that the president’s employment contract does not address medical travel. The auditors recommended (page 7) that the Board of Regents “should determine which travel expenses, if any, are appropriate for the University President to be reimbursed for when pursuing medical care.”

ISU staff confirmed that these controversial trips took place during the second half of July 2015. When I asked about the discrepancy between “three occasions” mentioned in the audit and the president’s reference to “two trips,” Leath’s communications assistant Megan Landolt explained in a December 13 e-mail,

On three occasions (which is actually two trips) the sole purpose was for a medical appointment. The wording in the audit is likely confusing because two of the “occasions” are actually considered “one trip” – that is the university plane flew President Leath to Mayo for a medical procedure (one occasion), then the plane returned a few days later to pick up President Leath and fly him back to Ames (second occasion). The third occasion was up one day and back the next. The President paid for all three occasions (two trips).

Records currently available on ISU’s website show King Air round trips from Ames to Rochester on July 23, July 29, and July 30, 2015. The AP’s Foley accessed more complete billing records before ISU took them offline in September. He says those records also showed a July 20, 2015 round trip between Ames and Rochester, which is consistent with Landolt’s statement: “the university plane flew President Leath to Mayo for a medical procedure (one occasion), then the plane returned a few days later to pick up President Leath and fly him back to Ames (second occasion).”

Each round trip to Rochester cost $1,265.60, as shown on “Daily Trip Information Sheets” ISU posted in October. The relevant flights are on pages 131-132 and 135-138.

So Leath’s $3,796.80 payment covers the July 23, 29, and 30 trips, but not the July 20 flight that (by Landolt’s account) took the president to Mayo.

While working on my analysis of the internal audit last month, I realized that Leath owed the ISU Foundation another $1,265.60.

WHY IT MATTERS

To the ISU Foundation, $1,265.60 is a trivial amount of money, not even one-hundredth of 1 percent of the $81,378,668 in reported expenses for fiscal year 2016, running from July 2015 through June 2016.

To the ISU Flight Service, $1,265.60 represents only about 0.14 percent of the $880,584 in recorded expenses for fiscal year 2016.

The cost of one King Air round trip between Ames and Rochester works out to just 0.24 percent of Leath’s base salary of $525,000, or 0.19 percent of his annual pay if you include deferred compensation of $125,000. Ironically, the Board of Regents approved Leath’s current contract, with a 5 percent salary increase and higher deferred compensation, during the first week of August 2015. At that time, no one on the board knew the president had damaged ISU’s Cirrus three weeks earlier and since used ISU’s King Air for personal travel to Mayo.

So why does it matter now whether Leath reimbursed the ISU Foundation $3,796.80 or $5,062.40 for his travel to Rochester?

Returning to ground Bleeding Heartland discussed here, those travel expenses may violate Internal Revenue Service rules on “excess benefit transactions.”

Texas attorney Jeramie Fortenberry has described prohibited practices under federal Internal Revenue Code, such as “inurement” and “private benefit.” In this post, he explained,

An “excess benefit transaction” is a transaction in which an economic benefit is provided by an applicable tax-exempt organization to or for the benefit of any disqualified person, if the value of the economic benefit provided by the exempt organization exceeds the value of the consideration (including performance of services) received for providing the benefit.

As a 501(c)(3) non-profit, the ISU Foundation is an applicable tax-exempt organization.

Federal code defines “disqualified persons” as

1. Any person who was, at any time during the five-year period ending on the date of the transaction involved, in a position to exercise substantial influence over the affairs of the organization (whether such influence is formal or informal);

2. A family member of an individual in the preceding category; […]

Leath controls spending from the ISU Foundation’s Greater University Fund, which pays for his use of the Flight Service. I’m neither an attorney nor a tax professional, but from where I’m sitting, Leath and his relatives look like disqualified persons.

I first ventured into this territory because of a March 2014 trip to the east coast, during which the King Air stopped twice at a small New York airport to pick up and drop off Leath’s brother and sister-in-law. Although the internal audit mostly sidestepped that issue, the unnecessary stops at Elmira Corning surely incurred extra costs to ISU’s foundation, for the benefit of Leath and his relatives.

Board of Regents President Bruce Rastetter declared on December 12 that Leath’s apology and repayments “eliminate any questions about the personal benefit that he may have received by using the university aircraft.” Not by a long-shot–especially not if ISU picked up the tab for a trip to Rochester with no business purpose.

ISU staff have said that aside from July 2015, all of Leath’s trips to Mayo combined medical appointments with donor meetings. We can’t be sure of that, because according to the internal audit (page 6), foundation records could not substantiate seven of the president’s trips attributed to donor relations or outreach. Point 3 of this post explored that problem.

Staff for ISU and the Iowa Board of Regents have rebuffed my requests for the dates and destinations of those not-really-about-donor-relations trips. So for all I know, they may include one or more visits to Rochester.

For today, let’s assume July 2015 was the only time Leath went to Mayo without conducting any ISU business during his stay.

ISU STONEWALLS

Compared to several huge flaws in the so-called “comprehensive audit,” failing to account for one of Leath’s Rochester trips is small potatoes. The day after I published my piece, I contacted Landolt and ISU’s chief spokesperson John McCarroll, explained what I’d found, and asked, “Will President Leath reimburse the ISU Foundation another $1,265.60 for the fourth King Air round trip flight that was involved in taking him to Rochester and back twice for medical appointments?”

I expected to be told promptly that Leath had taken care of the oversight. Instead, weeks went by with no response. After the holiday break, I circled back. Again, no answer.

A month to the day after Internal Audit released its report, I contacted ISU staff regarding incomplete public records on the Flight Service and unreimbursed Rochester travel. This time, I copied a few more people on the correspondence, including ISU’s general counsel Michael Norton. My thought process was, perhaps an attorney would recognize the possible legal issue and push to resolve this problem. I enclose the whole e-mail chain below. Excerpt from the first message:

I want to make you all aware that Megan has never answered my simple question about whether President Leath has reimbursed or will reimburse the ISU Foundation for all four round trips the King Air made between Ames and Rochester during July 2015.

The $3,796.80 reimbursement for medical travel (part of the $19,133.08 President Leath paid back late last year) only covers three of the four times the King Air flew round-trip between Ames and Rochester that month.

I ask again: will President Leath reimburse the ISU Foundation another $1,265.60 for the fourth King Air round trip flight that was involved in taking him to Rochester and back twice for medical appointments in July 2015?

Landolt responded the same day but dodged my question about the travel to Mayo. It’s not my first, second, or third encounter with her stonewalling. Let’s try this another way:

Can I interpret your reply to mean than [sic] President Leath refuses to reimburse the ISU Foundation $1,265.60 for the fourth King Air round trip flight to Rochester, MN in July 2015?

If so, I am seeking comment on why President Leath insists on the foundation footing that bill, having inaccurately told the Board of Regents on December 12 that he “paid for those flights myself.”

Landolt responded quickly. Her message in full:

The audit states “…on three occasions the sole purpose of the trip was a medical appointment, but the use of Flight Service was necessary for him to return to campus to meet university obligations.” I already explained those three occasions to you and confirmed the President’s payment. Further, President Leath explained the payments he made during the open session of the Dec. 12 Board meeting relating to the audit and in the subsequent press conference. Similarly, the Board of Regents addressed the payments and the adequacy of the payments during those same events. Please refer to those statements.

If you have issues with the audit, you’ll need to contact the Board of Regents Office.

By now I was getting annoyed.

Megan, your explanation from December 13 made clear there were four round-trip flights to Rochester in July 2015. The invoice for the July 20 trip is no longer part of the publicly available documents, for some reason, but it used to be there. You confirmed President Leath was flown up to Rochester for the first medical procedure and picked up a few days later (on July 23). The next time he went to Mayo, he was flown up one day (July 29) and back the next (July 30).

President Leath’s December 12 statement was inaccurate on this point. Contrary to what he told the Regents and the public, he did not reimburse ISU for the full costs of July 2015 King Air round-trip flights to Rochester. President Leath paid for three of those trips, but the King Air made four round-trip flights (July 20, 23, 29, and 30) to take him to and from Rochester twice.

I don’t understand why you are so resistant to acknowledging this reality or why President Leath doesn’t just pay back the other $1,265.60.

The next day, a new tack from Landolt:

Neither President Leath, nor anyone else ever claimed he made a payment for every time university aircraft was used to go to Rochester. The President’s payments were discussed in detail with the Board Office and the Board indicated its satisfaction with those payments.

Are you kidding me?

Megan, I haven’t been asking about every trip to Rochester. Only the ones in July 2015.

President Leath certainly implied in his December 12 statement that he had fully reimbursed the foundation for his two trips to Rochester during July 2015. But as I have explained to you several times, his reimbursement payments reflect the incomplete King Air records showing only three round-trip flights or “occasions.”

ISU’s King Air made four round-trip flights to Rochester in July 2015. Why will President Leath not cover the cost of all four flights?

That was thirteen days ago. No one from ISU has responded.

I have been trying to figure out why I’m getting a runaround over a small amount of money to someone as well-off as Leath.

The obvious explanation is that ISU’s communications staff have instructions not to concede any point to me, no matter how minor. If they admit that Leath’s $19,133.08 payment didn’t settle all accounts for his use of airplanes, that opens the door to other points the internal audit didn’t properly address: Leath’s excessive number of “training” flights, “donor relations” trips with no donor contacts, unnecessary stops in Elmira, failure to report the hard landing to ISU’s Office of Risk Management, the Cirrus trip with a 37-minute stop in North Carolina, and so on.

Another possibility comes to mind.

THE MISSING JULY 20, 2015 KING AIR RECORDS

A recent post by Ditchwalk inspired me to pay closer attention to what the King Air records tell us about passengers. Recall this portion of Landolt’s December 13 e-mail:

On three occasions (which is actually two trips) the sole purpose was for a medical appointment. The wording in the audit is likely confusing because two of the “occasions” are actually considered “one trip” – that is the university plane flew President Leath to Mayo for a medical procedure (one occasion), then the plane returned a few days later to pick up President Leath and fly him back to Ames (second occasion). The third occasion was up one day and back the next. The President paid for all three occasions (two trips).

Now let’s look at the King Air records for the second trip. Here’s the Daily Trip Information Sheet for July 29.

Ames to Rochester is listed as a “PAX FLIGHT,” meaning the plane was carrying a passenger (Leath). The return leg from Rochester to Ames says “W/O PAX,” indicating that Leath had disembarked, and the pilot flew back alone. Here’s the corresponding page for July 30.

As we would expect, this time the Ames to Rochester leg is “W/O PAX,” while the return to Ames is a “PAX FLIGHT,” indicating that the King Air picked up Leath and brought him home in time for dinner with Bruce Harreld, hired soon after to be president of the University of Iowa.

Now let’s look at the Daily Trip Information Sheet for July 23, when Landolt said “the plane returned a few days later to pick up President Leath and fly him back to Ames.”

Uh oh.

Both the trip to Rochester and the return leg are “PAX FLIGHTS,” indicating that Leath started July 23 in Ames, flew to his medical appointment and back the same day.

When I asked ISU staff why the July 20 trip information sheet was missing from the 2015 King Air records linked on the university’s Frequently Asked Questions page, Landolt was evasive:

The FAQ was updated with a link to the comprehensive audit shortly after its release on Dec. 12. Questions regarding the audit, findings, or process should be directed to the Board of Regents Office. As the audit is the definitive document on this matter, Iowa State has no further comment. If you are seeking public records, please direct your request to our Public Information Officer (srippke@iastate.edu). Please be as specific as possible about the records you are seeking to ensure swift and accurate retrieval.

Perhaps the July 20 invoice is mysteriously absent because it too would show both legs as “PAX FLIGHTS.”

ISU’s Greater University Fund was billed the same amount ($1,265.60) for every King Air round trip to Rochester, regardless of whether Leath was on the plane for both legs.

But if Leath was a passenger in both directions on July 20 as well as on July 23, then he lied to Internal Audit and the Board of Regents about taking “two trips” for medical visits during July 2015. Why he might want to conceal a third trip is anyone’s guess.

If Leath traveled to Rochester three times in July 2015 instead of twice, this part of his December 12 public statement makes more sense.

I have also paid for two trips when I used university planes to go to Mayo for medical visits. At the time, I believed it was appropriate because I had to get back to Ames for important university commitments.

Rochester is about 182 miles from Ames, less than a three-hour drive. Couldn’t Leath have driven himself there on the 20th, seen a doctor, then driven home two or three days later in time for whatever obligation he had in Ames?

If the president needed to see a doctor at Mayo and return to Ames the same day on July 20 and again on July 23, flying would be logical. Six hours in a car plus time in the doctor’s office wouldn’t leave much room for business meetings before the end of the day.

A review of Leath’s schedule should show whether he conducted any university business in Ames on July 21 and 22, 2015. That will be my next request to ISU’s Public Information Officer.

P.S.- On January 6, I e-mailed all eight Board of Regents members who heard the auditor’s report and evaluated Leath’s performance on December 12. (Illness prevented Regent Subhash Sahai from attending that meeting.) My series of questions included the following:

President Leath’s travel to Rochester, Minnesota for medical appointments in July 2015 involved four round-trip King Air flights (on July 20, 23, 29, and 30), yet the university president reimbursed Iowa State for the cost of only three journeys ($3,796.80 total, which is three times $1,265.60).

The president’s staff have not responded to my request for comment on whether President Leath will reimburse the university for an additional $1,265.60.

Will the Board of Regents insist that President Leath cover the full cost of July 2015 King Air travel to Rochester? If not, why not?

Zero out of eight regents responded to my message. If I had oversight responsibilities for ISU, I’d want to minimize chances of the foundation having trouble with the IRS.

UPDATE: About four hours after publishing this post, I received an unexpected e-mail from Landolt.

There has been quite a bit of confusion regarding the Rochester trips that were included in President Leath’s payment to the ISU Foundation. I now realize I was incorrect regarding the dates of those flights.

As noted in the audit, there were “three occasions [where] the sole purpose of the trip was a medical appointment.” Those three occasions consisted of two trips to Rochester which were billed as three roundtrip flights. They are:
October 13, 2015 (The university plane flew President Leath to Rochester, dropped him off, and returned)
October 15, 2015 (The university plane flew to Rochester to pick up President Leath and returned)
March 8, 2016 (The university plane flew President Leath to Rochester and returned with him the same day)

None of the other trips to Rochester were questioned by the auditors, including the July 2015 trips, so there was no need to include those trips in President Leath’s payment to the Foundation.

The July 23, 2015 flight record showing President Leath as a passenger on both the flight from Ames to Rochester and from Rochester to Ames is simply incorrect. To clarify, the university plane flew President Leath to Rochester on July 20, 2015, dropped him off and returned. The university plane then flew to Rochester on July 23, 2015 to pick up President Leath, and returned. Again, this one trip (billed as two roundtrip flights) was not among those questioned by the auditor, and therefore, was not included in President Leath’s payment to the ISU Foundation.

My apologies for the confusion. I hope this clarifies.

Thanks for reading, but that explanation clarifies nothing.

Here is one of Landolt’s messages to me from December 13, the day after ISU released the internal audit. She didn’t sound confused. On the contrary, her description of Leath’s travel fit the record of King Air flights on July 20, 23, 29, and 30. She said the trips for which the “sole purpose” was a medical appointment “occurred in July 2015,” and that donor/outreach meetings happened on the other four occasions, which would include Leath’s October 2015 and March 2016 visits to Rochester.

Someone must have told Landolt last month that Leath’s trips with no business purpose happened in July 2015, and that the president had donor meetings in Rochester during his October 2015 and March 2016 visits. How convenient for her to “realize” today that she was “incorrect regarding the dates of those flights.”

I have asked to see evidence that Leath did any donor outreach in Rochester between July 20-23 or on July 29-30, 2015.

The posted records show that the King Air dropped off Steven and Janet Leath on October 13, 2015, then returned to Ames with no passengers. Two days later, the King Air traveled to Rochester with no passengers, then returned with both Leaths. (see pages 191-192). In a separate message to me on December 13, Landolt confirmed that the Leaths traveled together in October 2015. Now she is asserting the president traveled alone on those dates, solely for a medical visit. Where did she obtain this new information?

ISU’s Frequently Asked Questions page (Where has the King Air flown since it was purchased?) noted “minor discrepancies” in the data and promised, “As part of the Board of Regents review, these databases will be reconciled and this FAQ will be updated with information about any additional flights as necessary.”

The auditors finished their review a month and a half ago. Not only has ISU not updated the King Air records–for instance, by adding the missing trip information sheet for July 20, 2015–they conveniently declare passenger records inaccurate anytime something doesn’t fit the narrative.

Why did ISU’s president make at least two, possibly three trips to Rochester within two weeks of his July 14, 2015 hard landing? University officials have consistently maintained that neither Steven nor Janet Leath was injured. As Bleeding Heartland discussed here (point 4), a serious injury would have required Leath to report the event as an “accident” to the National Transportation Safety Board. He reported the hard landing to the Federal Aviation Administration, which deemed it an “incident,” meaning the plane sustained damage, but no one was hurt.

SECOND UPDATE: Landolt also sent the new claims about Leath’s Rochester travel to Foley, who reported the story for the Associated Press.

Leath announced last month that he was reimbursing the university $3,800 for using the plane to attend doctors’ visits at the Mayo Clinic in Rochester. Leath didn’t specify then which of his numerous trips to Rochester the reimbursement covered, but his spokeswoman Megan Landolt said at the time that they involved flights in July 2015.

Landolt said Thursday that date was incorrect and apologized for releasing inaccurate information. Instead, Landolt said that Leath’s reimbursement covered three roundtrip flights in which university pilots took Leath to two medical appointments in Rochester in October 2015 and March 2016.

A Division of Criminal Investigation spokesman said that it continues to look into Iowa State’s flights. State law bars the use of public assets for private purposes or gain. […]

Landolt said the business purposes of the July 20, July 23, July 29 and July 30 flights between Ames and Rochester were to take Leath to and from visits with donors and potential donors. She said that the trips also involved medical appointments but that they had nothing to do with the hard landing. She said that Leath was dropped off July 20 and picked up July 23, and that university records showing separate roundtrip flights to Rochester on those dates were inaccurate.

I wasn’t aware that the DCI was looking into Leath’s airplane use.

Ditchwalk pointed out that this document, prepared by ISU general counsel Norton, does not mention any donor meetings during Leath’s visits to Rochester in July 2015 or at any other time. That file is linked from the FAQ page on Leath’s airplane use under question 16, relating to university business Leath conducted on certain King Air trips.

LATER UPDATE: In February 2017, ISU provided this document, showing that the King Air flew Steven and Janet Leath to and from Rochester on July 20, 2015. In other words, no records support the official line that the president was dropped off in Rochester on July 20 and picked up three days later.