State Department Inspector General Accused of Multiple Cover-Ups
By Matt Renner
t r u t h o u t | Report
Wednesday 19 September 2007

The State Department's inspector general has allegedly interfered with and blocked numerous investigations into contracting fraud in Iraq and Afghanistan, as well as probes related to domestic issues, according to several whistleblowers who provided detailed accounts of the widespread malfeasance to a Democratic congressman.
Congressman Henry Waxman (D-California), chairman of the House Oversight and Government Reform Committee, sent a letter to Howard Krongard, the inspector general for the State Department, requesting his participation in a Congressional investigation into Krongard's work as inspector general.
The letter contained allegations of misconduct made by seven current and former members of Krongard's staff, including the assistant inspector general for investigations and his deputy, both of whom resigned after Krongard allegedly blocked and interfered with their investigations. According to the letter, the allegations have been backed up by emails given to the Committee.
Waxman contended Krongard turned his office into an arm of the president. "One consistent element in these allegations is that you believe your foremost mission is to support the Bush Administration, especially with respect to Iraq and Afghanistan, rather than act as an independent and objective check on waste, fraud, and abuse on behalf of U.S. taxpayers," Waxman's letter stated. Krongard was appointed by Bush and confirmed by the Senate in 2005.
Current and former colleges of Krongard pointed to his loyalty to Secretary of State Condoleezza Rice and the Republican Party as motivation for his potentially criminal behavior. The whistleblowers alleged that Krongard's "strong affinity with State Department leadership," and his "partisan political ties," led him to "halt investigations, censor reports, and refuse to cooperate with law enforcement agencies," according to the letter. A spokesperson for the State Department would not comment on the allegations of an improper relationship between Krongard and Rice.
Rice refused to comply with a subpoena for her testimony issued by the oversight committee in April. A spokesperson for the oversight committee had no comment when asked about the committee's commitment to enforcing the subpoena.
In the letter, Waxman's sources claimed that Krongard stymied multiple internal investigations into State Department projects in Afghanistan and Iraq, interfered with multiple investigations by other agencies, and censored State Department reports and audits.
According to Waxman, Krongard's office has not concluded a single fraud investigation relating to State Department contracts in Iraq or Afghanistan.
Whistleblowers told Waxman that Krongard prevented his staff from cooperating with a Department of Justice (DOJ) investigation into problems with the construction of the US Embassy in Iraq and a DOJ investigation into the smuggling of weapons by private security contractors into Iraq. According to the Associated Press, "several administration officials" confirmed that the security contractor was Blackwater.
Controlling investigations into the Iraq Embassy project was a priority for Krongard according to members of his staff. Reports of human trafficking and the use of slave labor by contractors who were building the embassy were not investigated properly by Krongard or his office. According to his own testimony in front of the House Oversight Committee, Krongard personally conducted what he termed a "review" that "essentially consisted of agreed-upon or limited procedures."
According to Waxman's letter, the "review" consisted of interviews with workers who were hand-picked by the contractor. After issuing a subpoena, Waxman received a report prepared by Krongard as a result of his "review", which according to Waxman's letter, consisted of "six pages of handwritten notes showing that Krongard interviewed six foreign workers ... Krongard produced no documentation that identified the six employees ... there is no documentation indicating that you talked with any of the individuals who raised the allegations of trafficking."
Waxman also included internal emails that show Krongard instructed his staff to clear "all matters relating to the New Embassy Compound," with Krongard or William Todd, the deputy inspector general.
According to Waxman, Krongard interfered with the on-going Congressional investigation of Kenneth Tomlinson, the head of the Broadcasting Board of Governors, and a close associate of Karl Rove, for possible unethical behavior. According to staff members, Krongard received a request from members of Congress to investigate Tomlinson. Krongard allegedly had the request and accompanying testimony from whistleblowers faxed directly to Tomlinson. According to the letter, Congressional investigators said Krongard's actions were "inconsistent with standard investigative procedures," and "jeopardized the investigation."
The letter states officials from Krongard's office faced "daily antagonism" from Krongard. According to the letter, officials said Krongard would "'chastise the employees without warning,' causing 'people to come to work every day fearful.'" Waxman asserted this work environment caused the retention rate of trained staff to fall. "In the investigative division, for example, only 7 of 27 investigator positions are currently filled. This serious under staffing raises its own questions about your commitment to conduct investigations into waste, fraud, and abuse at the State Department," Waxman wrote.
The Oversight committee scheduled a hearing on this issue for October 16.

Matt Renner is an assistant editor and Washington reporter for Truthout.

AP: Federal agencies flunk their audits
AP: Defense Department and Homeland Security Are Not Meeting Basic Accounting Standards
MARTHA MENDOZA
AP News
Sep 15, 2007 05:29 EDT

Ten years after Congress ordered federal agencies to have outside auditors review their books, neither the Defense Department nor the newer Department of Homeland Security has met even basic accounting requirements, leaving them vulnerable to waste, fraud and abuse. An Associated Press review shows that the two departments' financial records are so disorganized and inconsistent that they have repeatedly earned "disclaimer" opinions, meaning that they simply cannot be fully audited.

"It means we really can't put any faith in the numbers they use," said Ross Rubenstein, who teaches public administration at Syracuse University's Maxwell School.
The Federal Financial Management Improvement Act of 1996 requires, among other things, that the financial systems of major federal agencies "comply substantially" with generally accepted accounting standards. Each year, those agencies are required to release results of outside audits.

The AP review of financial statements from the federal government's 15 executive departments shows that most pass their audits, although many agencies _ including NASA, the Coast Guard and FEMA _ have been frequently cited for serious accounting errors.
The entire Homeland Security Department, with a $35 billion budget this fiscal year, passed its first audit in 2003 with strong stipulations, but has failed every one since.

And the Defense Department, with a $460 billion budget this fiscal year, has never even come close to passing. Because that department makes up at least 20 percent of all federal spending, the entire federal government also has failed its audits since the congressional mandate took effect.

Failing an audit in any other venue could have dire consequences _ a public company's stock could plummet, state and local governments could see bond and credit ratings sink. But for the federal government, effects are less direct because the U.S. Treasury is a guaranteed funding source.

Still, Tina Jonas, undersecretary and chief financial officer of the Department of Defense, and David Norquist, chief financial officer at the Homeland Security Department, agree that a disclaimer on an audit leaves their agencies vulnerable to waste and fraud. Both said they have other checks in place aimed at controlling how money is spent but also acknowledged that resolving the audit problems would save their agencies money.

"The consequence to the public is the federal budget is conceivably larger than it needs to be. And there's no way of knowing, if it can't even be audited," said Ronald W. Johnson, a senior vice president at RTI International, a nonprofit research institute in Research Triangle Park, N.C. "Even if there are no financial consequences, there are political consequences."

For example, federal officials regularly face considerable fire from Congress at budget time for failing to balance their books.
"The inability of Defense and Homeland Security to pass financial audits is costing taxpayers dearly. There is no accountability for billions in wasteful spending," said Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee. "Private contractors are getting rich, military equipment can't be tracked, and fraud is growing. The departments seem incapable of providing even the most basic level of accountability by balancing their financial books."

Robert Dacey, chief accountant for the Government Accountability Office, characterized the financial affairs of the two departments as "a pretty consistent mess."

Jonas concedes the Department of Defense has a larger problem than most other federal agencies because of its mission, size and historical resistance to keeping its books.

"I think about this as if we have an old house, and we've got really bad plumbing and really bad wiring, and we have to pass an inspection on stuff, so we have to modernize," she said.
At last count, accounting at the Defense Department is performed in 4,000 different business systems, Jonas said. And in its most recent audit, the department acknowledged that it had more than $270 million worth of unsupported accounting entries.

Jonas noted that there also have been what she called "significant successes." In 2001, the Pentagon had hundreds of inoperable accounting systems and no data standards. This year, she said, it received a clean audit opinion on $215 billion, or 15 percent, of its assets and $967 billion, or 49 percent, of its liabilities.
Established in 2002, the Department of Homeland Security faces slightly different challenges. Norquist, the agency's third chief financial officer, said that despite recent problems, officials have "a number of checks on our numbers and our budgets."

What there isn't, however, is a central financial management manual _ something all other federal agencies have _ that would enable auditors to check if Homeland Security is even meeting its own policies.

Nor is there a central accounting system: In 2005, after spending $52 million, DHS dropped a $229 million contract with BearingPoint to develop a single software accounting system after it became obvious it wasn't going to work. The department now plans to base its systems on those already in place at the Transportation Security Administration or Customs and Border Protection.

Norquist also likened his agency's situation to a house.
"If you left your front door unlocked, it doesn't mean your house got robbed. But you should be concerned if your front door is routinely left unsecured," he said.

Some experts say the accounting standards for federal agencies themselves don't make much sense because they treat the government like a company, which buys and sells things, rather than a public entity, which collects taxes and spends whatever is needed. The federal government also doesn't have to account for required future payments, such as Social Security and Medicare.

"Even if they were getting clean bills of health on these audits, they only measure what's going on this year and don't talk about promises being made down the road," said Kent Smetters, former deputy assistant secretary for economic policy at the Treasury Department.
If those funds committed into the future are taken into account, the federal deficit this year would be about $2 trillion, not $158 billion, said Smetters, who teaches at the University of Pennsylvania's Wharton School.

"The bottom line is that you have the president's budget passed by Congress, and these agencies have a line in there of how much money they're going to get. And what these audits say is that they can't trace how that money actually gets spent," he said. "That's a problem."

Source: AP News

From: Talking Points Memo, source AP
9-15-07

Exec: Workers helped on senator's home
Former Oil Company Executive Testifies Employees Worked on Alaska Sen. Ted Stevens' Home
DAN JOLING
AP News
Sep 15, 2007 00:34 EDT

In the latest sign of corruption problems for Republicans, a corporate executive testified Friday that his employees worked for months to remodel the Alaska home of Sen. Ted Stevens.

Stevens, the longest-serving Republican senator, is under scrutiny in a corruption investigation that also is targeting Alaska state officials.

Bill Allen, former chief executive of oil services company VECO, testified that he spent more than $400,000 to bribe state legislators and for work at Stevens' house in the ski resort town of Girdwood. He said VECO also paid at least two contractors, a plumber and a carpenter, for work on the house. The project in 2000 more than doubled the size of the four-bedroom structure.

Under questioning at the trial of former state House Speaker Pete Kott, Allen said: "I don't think there was a lot of materials" bought for the Stevens remodeling, but "there was some labor."

VECO's business is providing engineering and construction services for oil companies; it does not do home construction. The key question is whether Stevens paid for the renovations or received a gift from Allen and VECO. The senator insists he paid from his own funds.
It was less than a year ago that Republicans lost control of Congress, in part because Democrats made corruption a major campaign issue. Stevens is one of several senators with ethics problems, complicating an already challenging political landscape for Republicans in 2008.

Stevens spokesman Aaron Saunders declined to comment on the testimony, but referred reporters to a previous statement from the senator.

"I continue to believe this investigation should proceed to its conclusion without any appearance that I have attempted to influence its outcome," that statement said. "I will continue my policy of not commenting on this investigation until it has concluded."

In July, Stevens told reporters: "I will tell you we paid every bill that was given to us with our own money," referring to himself and his wife. "She works and I work. That was our own money."

In the Senate since 1968, Stevens gained prominence as a powerful and feared chairman of the Appropriations Committee while his party held the majority. He also was Senate President Pro Tem, which put him third in line for the presidency after the vice president and the House speaker.

Stevens is known for directing millions of federal dollars to Alaska, never apologizing for the pork-barrel politics that some feel has gone too far.

Even a politically wounded Stevens would mount a strong bid for re-election next year, GOP insiders say. Democrats, hoping for an upset, are urging Anchorage Mayor Mark Begich to challenge him.
The Alaska testimony comes on the heels of the revelation that Sen. Larry Craig, R-Idaho, pleaded guilty to a misdemeanor after an undercover sting in an airport men's room. Earlier, Sen. David Vitter, R-La., acknowledged that his phone number appeared in records of a Washington area business that prosecutors have said was a front for prostitution. The Senate Ethics Committee is looking into allegations that Sen. Pete Domenici, R-N.M., tried to influence a federal prosecutor in an election probe of Democrats.

Of those, only Vitter's seat is not up for re-election next year.
Allen _ a longtime Stevens friend and political supporter _ in May pleaded guilty to extortion, conspiracy and bribery of legislators.
The workers at Stevens' home were VECO employees, probably one to four at a time, Allen said. He said the work on the home lasted for "probably a couple of months." Later, he testified it might have been as much as six months.

Allen said he also gave Stevens some used furniture, and Allen visited the site every month or two. "Most of the time I was gone with VECO business," Allen said.

The remodeling job at Stevens' home was fraught with problems from the start. He estimated it would cost about $85,000 and told city building officials he would be his own contractor.

The plan was to raise Stevens' single-level home and, beneath it, construct a new first floor with two bedrooms, a game room and sauna. Complete with a wraparound porch, the completed project would be twice the size of the original, modest house in the town of Girdwood, about 40 miles south of Anchorage. Building records don't indicate how things went wrong, but somehow the framing was botched and help was called in to fix it.

Allen also said the plea agreement he signed admitted payments to Stevens' son Ben, whom Allen had hired as a consultant in after he left college in 1995. The consulting work continued after Ben Stevens was appointed to the Alaska state Senate in 2002.
"It was $4,000 per month," Allen said.

VECO is one of the state's largest oil field services company, with more than 4,000 employees. The company operates around the world but more than half of its work is in Alaska, supporting the oil industry with service and maintenance contracts, according to Allen.

Rick Smith, a former VECO government affairs vice president, followed Allen on the stand Friday. Smith in May pleaded guilty to two counts of conspiracy and one of bribery. He testified that the bribery charge applied to Kott, Ben Stevens and three other state lawmakers: former Republican Reps. Vic Kohring of Wasilla and Bruce Weyhrauch of Juneau and current state Sen. John Cowdery.

It was the first time Cowdery's name has been made public as part of an investigation. Smith revealed no details of his involvement with the Anchorage senator. Like Ben Stevens, Cowdery has not been charged.

___
Associated Press writers Matt Apuzzo in Anchorage and Larry Margasak and Charles Babington in Washington contributed to this report.
Source: AP News

I have sent numerous letters to all of my elected representatives, including Congressman Dave Reichert, regarding the continuing (and growing) problem with corruption within Defense Contracting, Defense contractors, such as The Boeing Company, the “Tanker Deal,” the more recent GAO decisions regarding the “Helicopter Deal” with the USAF, etc. (This information is posted previously on this site.)


My letters have all stated concerns for the corruption, no bid aspects, etc. and have asked for my elected officials to stand up and clean up the mess and my contention that business should be done in an ethical manner both by defense contractors, all government agencies and the Pentagon.

This is the response I got back 9-14-07 from Congressman Reichert, which makes it seem that they note the topic, but not the view and what they are being asked to do. I feel like he counted my letter as one supporting the current status quo, which to say the least, is NOT what I stated!

I am disgusted with what has been going on in the Boeing Company and others. I am further disgusted with the apparent lack of ethical and responsible government oversight of defense and other contracting. I asked Rep. Reichert to challenge Boeing and their corrupt counterparts within our government, not to continue to give them contracts at any cost, but to clean their act up and make them deal ethically and honestly with the government and the American people.


To date, I have not received any kind of response from Senator Patti Murray or Senator Maria Cantwell or any of the others I wrote to about this matter.
VM
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Response from Congressman David Reichert on September 14, 2007

“Thank you for sharing your thoughts regarding the Air Force tanker selection process. It was good to hear from you and I welcome the opportunity to respond.

The United States Air Force is currently looking to purchase a new line of refueling tankers. They have come up with a list of 26 requirements that must be met by companies such as Boeing in order to receive a contract.

In 2004, the House Armed Services Committee voted unanimously to require the Air Force to enter into a multi-year contract for new tankers. The current line of tankers includes planes that are 40 years old, some of which are corroding and the Air Force now has an urgent need to replace these planes. The Department of Defense is currently considering all options for this contract to ensure that they get the best planes for the taxpayers' dollars. I believe that Boeing is the company that can provide the Air Force with the best possible planes for the taxpayers' money, and I am hopeful that Congress will work to continue a strong relationship with Boeing. Boeing has a proven track record of providing high-quality refueling tankers for the US Air Force.

Please know that I will continue to support Boeing and jobs in the Pacific Northwest. Boeing's Everett plant provides hundreds of jobs for Washington families. The impact that this contract could have on the economy of our region and the lives of thousands of Washingtonians is very significant. Please know that I will continue to fight on behalf of Washington families by advocating that this contract be awarded to Boeing.

Once again, thank you for taking the time to get in touch with me. Your interest and input are valued and I hope to hear from you in the future regarding other matters of importance. I encourage you to visit my website and sign up for my weekly e-newsletter at http://www.house.gov/reichert/ to learn more about other issues impacting the 8th Congressional District and our nation.”

Sincerely,

David G. Reichert
Member of Congress

Attention All POGO Bloggers:

A new document posted at the POGO Blog (http://www.pogoblog.typepad.com) shows detailed changes to the 1978 Foreign Intelligence Surveillance Act made since the 9/11 terrorist attacks including color coded breakdowns for each law which amended the Act. The document was written by David S. Kris, the former Associate Deputy Attorney General who was most responsible for tearing down "The Wall" between national security and criminal investigations, and co-author of National Security Investigations and Prosecutions. The document was posted by POGO’s new investigator Beverley Lumpkin who covered the Justice Department and the Department of Homeland Security for years at CBS, Associated Press and ABC before joining POGO a few weeks ago.

Marthena Cowart, Director of Comunications/POGO