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The Troubles at the Pacific Research Institute

Note from Erick: Having received a call from the Chairman of the Board of PRI, I have investigated this matter and find that the allegations here and in the original reporting on PRI really are not true. In fact, what I’ve discovered from talking to people within the State Policy Network and PRI is that the firm alleged to be placing Sally’s work at great expense is actually working for the whole of PRI and not just Sally. Likewise, the Chairman of the Board of PRI notes that Sally’s work has turned PRI around financially over the past two decades, but has suffered some layoffs and other problems as a result of the economic downturn, not because of Sally Pipes’ activity.

Based on the comments from people both inside and outside PRI, I don’t think we can let this post stand at RedState.

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What does the President of a prestigious think tank do when faced with tough financial times? Most would make sensible spending cut backs, but first to his or her own budget, before terminating valuable researchers and scholars.

But that’s not how it’s been done at the Pacific Research Institute. Employees have been asked to make deep cuts personally, as well as cuts to project budgets. Research assistants and scholars have been terminated. In one year, the staff at PRI has been reduced by 70 percent.

However, even with dramatic financial problems, the spending practices of PRI President Sally Pipes have not been curbed, and this is cause for alarm in a failing company which fired 40 percent of the staff in one day. PRI needs someone at the helm who is not just interested in high rent and a penthouse salary, but who will care enough to do what it takes to help PRI survive in order to continue to do the important work.

But there are serious problems within the organization, which come from the top.

Even with employee firings and deep cuts, Pipes continues to live and travel indulgently, paid for by PRI employees and donors. She’s been called the Marie Antoinette of the think tank world.

A recent investigative story in Mother Jones Magazine, a left-leaning periodical, reported, “In just the 24 hours following the Supreme Court’s Obamacare decision, Pipes churned out thousands of words of outraged copy, publishing columns in the National Review Online, the Orange County Register, the Daily Caller, Human Events, and elsewhere—all while running her small think tank and keeping up her typically frenetic schedule of media interviews.”

Mother Jones questioned how Pipes could possibly be such a prolific writer, while producing books, giving speeches all around the country, and running PRI.

The answer is found in PRI’s IRS form 990 (which most think tank donors review). Pipes is paid more than $500,000 annually income and bonuses for her work, receives a $32,500 401k contribution, and $12,042 in “other” contribution. Additionally, Pipes paid more than $400,000 annually to Keybridge Communications for ghost writing in 2010 (also on the 990 form), and more than $350,000 in 2009.

This practice is highly unethical and probably one of the key reasons that funding to PRI has dried up – donors like original studies.

Pipes consumes more than $1 million of the budget, by herself, which is more than one-quarter of PRI’s total income — a highly unethical and indiscrete decision. Other think tank Presidents are paid top salaries, but more in line with the total earnings of the think tank. The President of the Manhattan Institute, which had a 2009 income three-times larger than PRI, pays its President less – and more appropriately.

The employee medical plan is paltry, but expensive – ironic for a think tank, which bills itself as a leader in health care issues. And employee dental and vision benefits were terminated entirely by PRI in 2011. It is ironic that a company made up of scholars and professionals have no dental or vision benefits.

Thus far, the board members have been deaf to the problems, even though the fiduciary responsibility to the non-profit is to more than just Pipes. She is leading the entire company straight into extinction, and will no doubt try to walk away from it unscathed if it crumbles.

However, current and former PRI employees know that Pipes is responsible for the gross mismanagement and irresponsible spending, which continues even after the termination of the former VP.

Yet she continues to risk the future of the company and reputation of PRI.

Pipes’ spending is not sustainable and her behavior is in stark contrast to the free market policies PRI touts.

Two PRI scholars published studies in the past year, neither of which was marketed by PRI. But the funding for the studies had substantial earmarks for marketing.

Nearly all marketing funds as well as PRI marketing and support staff time is spent on Pipes, whose studies, papers, opinion pieces, and books are ghost written by Keybridge. Should this information ever be made public, PRI and it legitimate scholars would be thoroughly discredited.

Excessive salaries by non-profit CEO’s and Presidents turn donors away. Public and peer perception is incredibly important for donations to continue and grow. Yet with Pipes funneling funds from other studies, donors are becoming disenchanted with the entire organization, and the legitimate scholars’ work is compromised.

A high salary does not create an effective leader. PRI should be developing leadership within the organization – instead, the remaining employees are conducting serious job searches, fearful of the demise of PRI. And some have even hired headhunters.

Over the years PRI has employed many talented people, passionate about the work and areas of study. These other scholars perform their own research and produce original studies and op eds. But the talk in the think tank community is that Pipes has become inconsequential because the work being produced under her name is not her own, the work is stagnant, and because she is undermining and marginalizing PRI’s scholars.

Add to this reckless spending, a shameless travel and dining budget, unorthodox lease payments of $30,000 a month for the San Francisco office, a couple of depleted endowments, and a serious drop in donor contributions, and the current PRI is a recipe for disaster.

Why does Pipes maintain an office in San Francisco, the most expensive rental market in California? Where does PRI you want to have impact? Sacramento? Offices in Sacramento and Orange County would be far more appropriate and significantly less expensive.

The PRI Board of Directors should perform its own investigation and independent audit into the operations of PRI. The financial information and spending would be simple to confirm with an outside, independent audit.

The goal is to ensure PRI survives unscathed and continues to do important work. PRI needs someone at the helm who is not just interested in high rent and a penthouse salary.

PRI is an organization operating without a financial safety net for the future, and has become entirely personality based because of Pipe’s direction – both unforgiveable consequences of selfish, self-centered leadership.

PRI’s predicament is not the result of the economic downturn in California; it is about gross mismanagement. And because of the failing economy, Pipes’ spending can no longer be glossed over or sustained.

Only with decisive and swift action, it could be turned around. Otherwise, Pipes will take everyone down with her.

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