- The Washington Times - Tuesday, June 26, 2012

As the top official at the nonprofit Landon School, an exclusive private day school for about 700 boys on a 75-acre campus in Bethesda, headmaster David Armstrong receives nearly a half-million dollars per year, tax forms show.

But a former top finance official says Mr. Armstrong also is receiving hundreds of thousands of dollars in additional deferred compensation from the nonprofit school, bringing his total pay package to around $800,000.

The former head of finance and operations at Landon, Timothy Harrison, said in a recent interview he raised concerns that the pay package could run afoul of Internal Revenue Service rules. After that, and raising other concerns about the school’s treatment of Hispanic workers, he said he found himself without a job.

Mr. Harrison recently filed a lawsuit in Montgomery County Circuit Court accusing the school of retaliating against him after he reported discrimination against Hispanic maintenance workers, a charge the school has called inaccurate and misleading.

While the outcome of the litigation remains unclear, the complaint provides a window into the compensation practices of the elite private school where Mr. Armstrong has been headmaster since 2004.

The school’s most recent IRS statement filed in May, which covers finances from July 1, 2010, to June 30, 2011, shows Mr. Armstrong’s total compensation at $453,718. The next highest paid employee received $256,230.

(Click here to review a PDF of Landon’s latest IRS 990.)

The IRS forms, which the school provided to The Washington Times, list Mr. Armstrong’s base salary at $349,758, while he received other compensation and nontaxable benefits totaling just over $100,000. He was one of five officials to receive a $40,000 nontaxable housing benefit and the only one to receive what the school described as nontaxable discretionary spending of $20,000.

Meanwhile, Mr. Harrison’s lawsuit states that a well-known executive compensation expert estimated Mr. Armstrong’s total compensation, including income, deferred compensation, housing allowance, golf-club membership and other benefits, at $800,000.

The consultant, Hugh Mallon, “opined that comparably situated headmasters at other area private schools are paid dramatically less,” the lawsuit states.

A person who answered the phone at Mr. Mallon’s office said he was out of the office and he did not return a cellphone message by deadline.

Mr. Harrison said while at Landon, he hired Mr. Mallon to help benchmark executive salaries in part to ensure the school was complying with IRS rules.

Mallon expressed shock to Harrison when Mallon learned of what Armstrong’s proposed contract for the coming year would include in salary, other compensation and benefits because the compensation was so high compared to other private schools and headmasters around the country,” Mr. Harrison’s lawsuit states.

Mr. Harrison said he was told his contract would not be renewed in January, and he was placed on leave in March until his contract runs out, which is at the end of June. He filed the lawsuit against the school this month.

The school defends the compensation and has vowed to fight Mr. Harrison’s lawsuit. In a statement by Landon’s board of trustees to The Washington Times last week, officials said Mr. Armstrong has been “an exceptional leader for a complex educational institution such as Landon, and he has the full confidence of the school community, including students, parents, faculty and staff.”

The board also said Mr. Armstrong is “fairly and reasonably compensated for his exemplary performance.”

“The Board exercised due diligence in determining Mr. Armstrong’s compensation,” the board said. “The process was based on the guidance provided by a leading law firm with expertise in compensation for the leaders of independent schools and a review of compensation levels for Mr. Armstrong’s peers at similar private schools, with due regard to Mr. Armstrong’s experience and responsibilities and the challenges presented.

“An independent committee of trustees was established in 2011 to examine Mr. Armstrong’s salary, benefits and other compensation all of which were determined to be reasonable and proper.”

The Times also sought information from the school on the contrast between the compensation reported for Mr. Armstrong reported by the school to the IRS of $453,718 and the $800,000 figure contained in Mr. Harrison’s lawsuit.

In their statement, the trustees said an independent auditor has reviewed Mr. Armstrong’s employment contracts and the audit firm has never expressed concerns about his compensation.

“Moreover, each year a certified public accountant from the firm prepared the school’s tax returns, which include disclosures about compensation for Mr. Armstrong and other senior members of the school’s administration,” the trustees said.

“The board is confident that proper procedures are in place to assure that required public disclosures regarding Mr. Armstrong’s compensation, as well as that of others school officials, are accurate and in full compliance with other legal requirements.”

Meanwhile, Mr. Harrison’s lawsuit states that Mr. Mallon told him that Landon was possibly violating IRS rules on excess benefit transactions. Mr. Mallon also said that based on a review of data obtained from guidestar.org, a website that collects and makes public nonprofit IRS statements, Mr. Armstrong was one of the top 10 highest compensated headmasters in the country with a salary 150 percent to 170 percent higher than his peers.

Mr. Harrison’s attorney, Adam Augustine Carter of the Employment Law Group, said Landon’s board “is not exercising its fiduciary duties to oversee how David Armstrong … is managing its employees.”

In a separate statement, the school said it would defend itself against “Mr. Harrison’s allegations” and added that Landon has “a longstanding commitment to treat all members of the community employees, students and others fairly and without regard to race, ethnicity or gender.”