| Part I, Line 1 |
Jerry Falwell, Jr. engaged in the following excess benefit transactions: (i) unreimbursed use of or direction of the use of University owned aircraft for personal purposes; (ii) use of University credit cards to pay for personal charges without reimbursement; (iii) benefited from University employees providing personal services for housekeeping and groundskeeping services to his family, plus the provision of an administrative assistant services to his wife without reimbursement; (iv) use of University employees to manage capital improvements and intellectual property upgrades on his personal property without reimbursement; (v) maintenance at offsite personal property without reimbursement; (vi) excess academic benefits for the benefit of his children attending the University, and (vii) received "gross up" for tax payments for personal services in contravention of his employment agreement. With regard to Jerry Falwell Jr.'s son, Charles Wesley Falwell, and his daughters-in-laws, Laura Falwell and Sarah Falwell, each received unreasonable compensation for services provided to the University. In addition, Charles Wesley Falwell and his wife-Laura Falwell were permitted to live in University housing paying below market rent. Finally, Jerry Falwell, Jr. authorized the use of University assets to provide security services and personal care services to his mother, Macel Falwell that were unreimbursed. With regard to the computation of the amount of tax incurred by the organization managers or disqualified persons during the year under section 4958 as disclosed in Part I, Line 2, the University only included excess benefit transactions that occurred during fiscal years ending June 30, 2016 through June 30, 2021. The University informed all disqualified persons listed above of the identified excess benefit transactions and demanded repayment. As of the date of the filing, JERRY FALWELL JR., WESLEY CHARLES FALWELL, LAURA FALWELL, AND SARAH FALWELL HAVE EXPRESSED THEIR INTENT TO MAKE PARTIAL CORRECTIONS OF the excess benefits. The University is evaluating potential additional collection options. With regard to corrective action, Sarah Falwell and Jerry Falwell, Jr. are no longer employees of the University. The University has made adjustments to the compensation of Charles Wesley Falwell and believes the compensation paid is now reasonable. Laura Falwell has changed roles at the University and the University believes the compensation paid is now reasonable. Further, Charles Wesley Falwell and Laura Falwell are no longer residing in University-owned housing. The University has taken significant actions to put new policies and procedures in place to minimize the risk of future excess benefit transactions occurring. These actions include adopting Amended and Restated Bylaws for the University that include provisions restricting the powers of the University's President to act on behalf of the University without the approval of the Board of Trustees. The University revised its Signature Authority Policy that creates significant limitations on the power of the President to approve certain transactions which are reserved to the Board of Trustees and others which required approval of a Board committee or concurrence with the President and CFO. The University also adopted a new aircraft usage policy to (1) require the Executive Committee of the Board of Trustees of the University to approve the ability of the President to exceed the number of allotted flight hours provided in President's employment agreement and (2) require contemporaneous documentation of the business purpose for each passenger on each flight and a list of passengers before each flight. The Board of Trustees of the University adopted Board of Trustees Guidelines, which included a fleshed-out process by which the Executive Committee of the Board of Trustees is to set the compensation and benefits of the President. Additionally, the adopted Board of Trustees Guidelines require the President to furnish the Executive Committee with market data on the comparability and reasonableness of compensation and benefits of other officers of the corporation, and key employees. Further, the Board of Trustees adopted a Code of Business Conduct that sets a standard of ethical conduct expected of all trustees, officers, and employees, including an expectation that such persons must avoid circumstances where their financial or other personal ties could present an actual or potential conflict of interest. The Code of Business Conduct requires that violations of the Code to be reported and the policy protects good faith reporters from retaliation and allows for anonymous reporting. The Board of Trustees adopted a more robust Whistleblower Policy, which encourages employees, trustees, and other covered persons to report "Wrongful Conduct", which is defined to include use of University property, resources, or authority for personal gain for oneself. The Whistleblower policy also protects good faith reporters from retaliation and allows for anonymous reporting. The Board of Trustees also adopted a revised Conflicts of Interest and Commitment for Senior Officers and Executives Policy, which requires senior officers and executives to disclose any potential conflicts of interest and conflicts of commitment. Under this revised policy, the resolution of such potential or actual conflicts of the President are subject to the approval of the Audit Committee and Board of Trustees. Also under this policy, the President must take steps to adopt conflict of interest policies more generally applicable to the University community. The Board of Trustees also adopted a Policy on Anti-Nepotism for Senior Officers and Executives, whereby the employment by the University of relatives or close friends of senior officers and executives (including the President), absent the approval of the Board of Trustees, is prohibited. Under this Policy, the compensation of any relatives or close friends of such individuals, if hired, must be reviewed and approved annually by the Board of Trustees. The Board also adopted a resolution requiring (1) all other University policies to be updated to be consistent with these newly adopted or updated policies and (2) University employees be trained on the new or updated policies. |