NGS had in 2009 paid Gee $732,891. Gee's wife, formally listed on payroll as "VP Reg Affairs," received a salary of $100,000. In addition, the school spent more than $130,000 on two new Mercedes Benz cars for the Gees, loaned Gee $41,000 to purchase a two-week timeshare in the US Virgin Islands (which the school later transferred to its name, assuming the mortgage and reimbursing Gee for the money he had already spent on the timeshare), and then shelled out $3.25 million for a residential compound on Oyster Pond overlooking Martha's Vineyard. The sign in front of the complex reads "National Graduate School Oyster Pond Campus," but the school's documents state that the six-bedroom house on the property was to be Gee's home.

Gee shifted the costs of his lavish lifestyle onto the school, using tuition dollars and charitable donations to fund his posh lifestyle and using the school's nonprofit status to sidestep sales tax. Now the school is in financial trouble with Bank of America, and has to renegotiate the terms of the mortgage on the Oyster Pond property after failing to maintain the proper debt to net worth ratio. Most of the students at NGS are non-traditional, looking to finish a partially-completed bachelor's degree or pick up a graduate degree after gaining some work experience.

Gee founded the school in 1994, serving as its first and--until now--only president. In 2006, he got a 17-year contract guaranteeing a salary of at least $400,000 per year until 2023, when Gee will be 79. Among the perks included were an annual bonus of at least 15% of his salary, travel costs for the Gees' trips to the timeshare, allowance for expenses "well above the norm" (yes, this was the language in the contract), renovations to his home prior to any school event being held there, and reimbursement for clothing and luggage that wore out as a result of his travel. Gee was entitled to 4 weeks of paid vacation each year, along with 30 sick days; at the end of each year he was paid for any unused leave.

In contrast, the median salary for a chief executive of a single institution is $255,859, according to a recent study by the College and University Professional Association for Human Resources. It's true that larger institutions typically pay their presidents more, justifying the expense as necessary to draw top administrators. Tufts University, for instance, pays its president $738,596. But Tufts has nearly 11,000 employees and more than 5,000 students.

NGS has fewer than 400 students, relies on part-time professors, and has neither the branding nor the breadth of educational offerings that justify such an expensive president. Gee's credentials are questionable as well. He has claimed a graduate degree from Harvard, but the university has no record that he earned one. (Gee does have a PhD in Literature from the University of Ottawa). Non-profit expert Elizabeth K. Keating, hired by the Boston Globe to investigate NGS's suspicious financial standing, commented, "If I sat down to write a fictional case study that was designed to wave red flags about an organization that is misusing its tax exemption for personal gain, this would be it."

As a result, the New England Association of Schools and Colleges will review NGS in September, two years sooner than its standard periodic review. Because the Association requires that a school devote "all, or substantially all, of its gross income to the support of its educational purposes and programs," NGS may lose its accreditation. NGS currently allocates about 50% of its budget for academic purposes.

Massachusetts Attorney General Martha Coakley has launched a separate investigation into the school's mismanagement of funds. If the IRS decides to investigate as well, NGS could lose its tax-exempt status. Then currently enrolled students would have to find other programs and complete their degrees elsewhere.

One cause of the scandal is an uninvolved board of trustees that for the most part blindly followed Gee's commands. Scott Adams, a board member until 2007, described the board as Gee's "puppet" that "rubberstamped" his proposals. John Rabbit, on the board from the founding of the school in 1994 until 2006, recalled Gee saying "he was president for life" and considered NGS "his school." At times, past board members say, when Gee didn't consult the board about financial matters, the board failed to confront him. When Gee did bring matters before the board, the trustees approved his proposals.

But the larger cause of the failure here appears to be a simple lack of ethics and a determination by a submissive board to look the other way. How many other small and obscure schools are operated this way?

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Rachelle DeJong is a student at The King's College and an intern at Manhattan Institute.