Editor's note: This story has been updated to include comments from Ann Oldfather, the attorney for former University of Louisville Foundation official Kathleen Smith.

Ousted University of Louisville Foundation President James Ramsey was the nation's highest-paid officer at a public university foundation, and that could make him liable for big IRS penalties if his pay is deemed excessive.

Ramsey's foundation compensation was $2.4 million in 2014, the most recent year for which figures are available. That was the most for any public university foundation officer or employee in the United States, excluding payments to coaches for major college sports programs.

A Courier-Journal review of nearly 1,600 officers and employees of 1,146 foundations also shows three other university officials came in right behind their president: Dr. Donald Miller, director of the James Graham Brown Cancer Center, $1.79 million; Shirley Willihnganz, executive vice president and university provost; $1.1 million; Kathleen Smith, assistant secretary and university chief of staff, $675,848.

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That premium pay could subject all four to IRS sanctions under a federal law that allows the government to impose higher taxes on non-profit executives who receive "unreasonable” pay, as well as the managers who approve such compensation.

An overpaid executive is liable for a 25 percent tax on the excess benefit, and penalties can go to 200 percent of the excess amount if it isn’t corrected within a year. Nonprofit managers are liable for a 10 percent tax.

The tax codes don't explicitly define “reasonable” but the agency takes into account pay rates at similar organizations. For comparison purposes, the Courier-Journal looked at "reportable compensation" of every employee listed by foundations on their annual IRS forms.

Ramsey's compensation averaged more than $2 million per year at the nonprofit U of L Foundation from 2012 to 2015, or $1,538 per hour. Tax records show he worked 25 hours per week.

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That was several times as much as what top executives at similar or larger university foundations were paid in 2014, each working 40 or more hours per week. For example:

• The University of Illinois Foundation, with more than twice the assets of the U of L Foundation, paid its president $546,806, or $263 per hour.

• The Indiana University Foundation, which manages three times more assets, paid its CEO $423,967, or $204 per hour.

• West Virginia University Foundation, with one and a half times the assets of U of L, paid its CEO $357,948, or $153 per hour.

Ramsey's foundation pay alone exceeded what the three schools paid their presidents plus their separate foundation CEOs in 2014. He also was paid $342,930 per year as U of L's president. None of the three comparison universities' foundations supplemented their university president’s regular pay.

The Courier-Journal previously reported that Ramsey was paid 2.5 times as much in total compensation as the average of the Atlantic Coast Conference's 14 other presidents and chancellors.

“There is little question in my mind that he was overpaid,” said Michael Wyland, an editorial advisory board member and consulting editor for the Nonprofit Quarterly, a Boston-based independent nonprofit news organization that covers charitable foundations.

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In an email, Ramsey's lawyer, Steve Pence, said his client was worth the money.

"Let's face it, the prior UL and Foundation boards thought very highly of Dr. Ramsey, were impressed with his accomplishments, and wanted to keep him,'' Pence wrote. "In my opinion, justifiably so. The new board feels differently. Fine. We’ll see in time who they bring in as the new president and what they accomplish over the next decade."

Miller in an email said his 2014 compensation reflected payout of a retention plan offered in 2008 to keep him from jumping to a "very good position elsewhere." He also received $1.7 million in deferred pay in 2012.

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The university in 2015 told the Courier-Journal that Miller was given extra pay by the foundation to keep other universities from poaching him and that Willihnganz and Smith were being rewarded so that Ramsey could keep his team together.

Smith’s lawyer, Ann Oldfather, said her client also deserved her pay, noting that she was a 45-year U of L employee and raised more than $100 million for the school.

Oldfather said it's unfair to look only at Smith's 2014 pay, which, she suggested, included an uncharacteristically large amount of deferred compensation. Though IRS records show that in 2013 Smith was paid $259,063, she made $1,413,669 in 2012.

Willihnganz, in a message to the Courier-Journal, said only that she has not been contacted by the IRS about it.

Luis Garcia, a Detroit-based IRS spokesman, said his agency doesn’t confirm or deny any investigation.

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Current foundation managers say they haven’t received any queries from the IRS about pay to former officers or about directors who approved it.

In July 2016, however, the IRS Lexington office told U of L it was auditing its 2014 federal employment tax returns and requested information that included contractors and employment contracts for Ramsey, Willihnganz and the head coaches for the football and basketball teams. The letter, obtained by the Courier-Journal, doesn't mention the foundation. U of L spokesman John Karman at the time called the audit routine. It's unknown if the IRS took any further action.

Willihnganz was paid an average of $1.095 million by the foundation from 2012 through 2015, while Smith averaged $746,528 per year, according to tax reports. Each received more per year than the CEOs of foundations associated with IU, Illinois, West Virginia and Oklahoma State University; Oklahoma State had the same amount of assets as U of L.

Garcia said the IRS doesn’t track penalties for excessive compensation, but in 2007 it announced that 40 executives were assessed a total of $21 million in taxes after a special investigation of 100 nonprofit organizations.

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Tax professionals say excessive compensation at nonprofits is an IRS priority, though less than 1 percent of charities are audited annually.

To determine if pay is reasonable, the the IRS looks at an executive’s job description and complexity, size and budget of the nonprofit, as well as the experience needed for the job.

If the nonprofit hires a consultant to survey compensation at similar charities, and based their executive’s pay on the result, the compensation is presumed reasonable and the IRS must prove it is not.

The foundation said in its tax report that pay for Ramsey and other officers was based on such a survey but didn’t hire an outside company to do that work.

Current foundation managers said they can only find a 2015 survey done after the compensation for Ramsey and other officers came under fire.

The tax report also says a personnel committee and the foundation’s full board approved the pay, but a forensic audit commissioned by the university said “it appears ULF paid deferred compensation not approved by the ULF Board of Directors."

Wyland said that “if compensation wasn’t approved by the full board, that can be problematic" because it would be harder for the foundation to say it was reasonable.

What you need to know:University of Louisville Foundation audit

The foundation ultimately paid $21.8 million in deferred compensation to nine officers from 2010 to 2016, including $7.2 million to Ramsey.

Oldfather maintains the deferred compensation was no secret. The foundation board established the plan in 2005, she noted.

She also said the foundation's annual tax reports, which included the deferred compensation, were circulated to all board members. However, no documents provided by Oldfather or the foundation show specific approval of the amounts awarded to Ramsey and other "key employees."

Ramsey and other foundation officers face a potential lawsuit from the university. The Board of Trustees earlier this month appointed a special litigation committee to decide whether to sue the foundation for allegedly depleting the university's endowment through excessive spending and lavish pay. A university lawyer has estimated the losses at $40 million to $100 million.

Reporter Andrew Wolfson can be reached at 502-582-7189 or awolfson@courier-journal.comReporter Justin Price can be reached at 502-582-4464 or jjprice@courier-journal.com