[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
ANTI-DRUG MEDIA CAMPAIGN: PROGRAM AND CONTRACT ACCOUNTABILITY AND
ADMINISTRATION
=======================================================================
HEARING
before the
SUBCOMMITTEE ON CRIMINAL JUSTICE,
DRUG POLICY, AND HUMAN RESOURCES
of the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
OCTOBER 4, 2000
__________
Serial No. 106-272
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
U.S. GOVERNMENT PRINTING OFFICE
74-927 DTP WASHINGTON : 2001
_______________________________________________________________________
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Mail: Stop SSOP, Washington, DC 20402-0001
COMMITTEE ON GOVERNMENT REFORM
DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana ELEANOR HOLMES NORTON, Washington,
MARK E. SOUDER, Indiana DC
JOE SCARBOROUGH, Florida CHAKA FATTAH, Pennsylvania
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
MARSHALL ``MARK'' SANFORD, South DENNIS J. KUCINICH, Ohio
Carolina ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia DANNY K. DAVIS, Illinois
DAN MILLER, Florida JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas JIM TURNER, Texas
LEE TERRY, Nebraska THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California ------
PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont
HELEN CHENOWETH-HAGE, Idaho (Independent)
DAVID VITTER, Louisiana
Kevin Binger, Staff Director
Daniel R. Moll, Deputy Staff Director
James C. Wilson, Chief Counsel
Robert A. Briggs, Chief Clerk
Phil Schiliro, Minority Staff Director
------
Subcommittee on Criminal Justice, Drug Policy, and Human Resources
JOHN L. MICA, Florida, Chairman
BOB BARR, Georgia PATSY T. MINK, Hawaii
BENJAMIN A. GILMAN, New York EDOLPHUS TOWNS, New York
CHRISTOPHER SHAYS, Connecticut ELIJAH E. CUMMINGS, Maryland
ILEANA ROS-LEHTINEN, Florida DENNIS J. KUCINICH, Ohio
MARK E. SOUDER, Indiana ROD R. BLAGOJEVICH, Illinois
STEVEN C. LaTOURETTE, Ohio JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas JIM TURNER, Texas
DOUG OSE, California JANICE D. SCHAKOWSKY, Illinois
DAVID VITTER, Louisiana
Ex Officio
DAN BURTON, Indiana HENRY A. WAXMAN, California
Sharon Pinkerton, Staff Director and Chief Counsel
Steve Dillingham, Special Counsel
Ryan McKee, Clerk
Sarah Despres, Minority Counsel
C O N T E N T S
----------
Page
Hearing held on October 4, 2000.................................. 1
Statement of:
Hast, Robert H., Director, Office of Special Investigations,
General Accounting Office, accompanied by Pat Sullivan,
Assistant Director, Office of Special Investigations, and
John Cooney, Senior Special Agent, Office of Special
Investigations............................................. 20
Twyon, Jane, president, Worldwide Media Directors, Consultant
to ONDCP................................................... 119
Vereen, Donald, M.D., Deputy Director, Office of National
Drug Control Policy, accompanied by Alan Levitt, Campaign
Director, ONDCP; and Richard Pleffner, Project Contracting
Officer, ONDCP............................................. 39
Letters, statements, etc., submitted for the record by:
Cummings, Hon. Elijah E., a Representative in Congress from
the State of Maryland, prepared statement of............... 162
Hast, Robert H., Director, Office of Special Investigations,
General Accounting Office, prepared statement of........... 23
Mica, Hon. John L., a Representative in Congress from the
State of Florida:
Letter dated September 21, 2000.......................... 4
Memo dated April 13, 2000................................ 13
Prepared statement of.................................... 8
Twyon, Jane, president, Worldwide Media Directors, Consultant
to ONDCP, prepared statement of............................ 122
Vereen, Donald, M.D., Deputy Director, Office of National
Drug Control Policy, prepared statement of................. 42
ANTI-DRUG MEDIA CAMPAIGN: PROGRAM AND CONTRACT ACCOUNTABILITY AND
ADMINISTRATION
----------
WEDNESDAY, OCTOBER 4, 2000
House of Representatives,
Subcommittee on Criminal Justice, Drug Policy, and
Human Resources,
Committee on Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:09 a.m., in
room 2154, Rayburn House Office Building, Hon. John L. Mica
(chairman of the subcommittee) presiding.
Present: Representatives Mica, Gilman, Barr, Burton, Ose,
Mink, Kucinich, and Cummings.
Staff present: Sharon Pinkerton, staff director and chief
counsel; Steve Dillingham, special counsel; Carson Nightwine,
investigator; Michael Garcia, senior technology advisor; Chris
Morrow, intern; Sarah Despres, minority counsel; and Jean Gosa,
minority assistant clerk.
Mr. Mica. Good morning. I would like to call this hearing
of the House Subcommittee on Criminal Justice, Drug Policy, and
Human Resources to order.
We will be joined by other Members during the hearing. But
the order of business today will be, first, I will start with
an opening statement and then we will recognize other Members
for their opening statements. I am pleased to welcome the other
Members and, as I said, I will recognize them after I have
given my opening statement.
The topic of today's hearing is the National Youth Anti-
Drug Media Campaign, program and contract accountability and
administration. We will be reviewing some problems we have had
with the administration of the National Anti-Drug Media
Campaign.
Today's hearing will focus on the administration and
financial management of our billion dollar National Anti-
Narcotics Media Campaign. This program was funded by Congress
in 1997 to deal with the dramatic increase in illegal narcotic
abuse experienced since 1993. While the anti-drug media
campaign began with some self-admitted mishandling by the
Office of National Drug Control Policy [ONDCP], Congress and
our oversight committee have supported the goal of this much
needed Federal effort to better educate the public and our
young people about the serious consequences of drug abuse.
It is important that I remind everyone that I have been a
strong supporter of an effective public media campaign to help
fight drug abuse and misuse across this Nation. This anti-drug
program is far too important for even $1 to be wasted or
misspent. We cannot allow recent drug use and human destruction
trends to continue.
Administration officials lately have attempted to put a
happy face on an increasingly sad situation. Unfortunately, the
Office of National Drug Control Policy has set a goal of
reducing overall drug use to 3 percent by the year 2002.
However, information from ONDCP indicates that overall drug use
actually has increased from 6.4 percent in 1997 to 7 percent in
1999. That is important because, again, their goal was, and
their objective was, in fact to get overall drug use down to 3
percent by 2002 and, unfortunately, it has risen in the last 3
years to 7 percent, going in the wrong direction overall. The
age at which our youth first use heroin has dropped from the
mid-20's to age 17. Additionally, methamphetamine, ``ecstasy,''
and ``designer drugs'' use has skyrocketed both for youths and
adults. Sadly, our Nation now experiences more drug-induced
deaths than murders. We released at a hearing just a few weeks
ago the fact that 16,926 Americans died in our last recorded
year, which I believe was 1998, of drug-induced deaths as
opposed to murders, which was a lower figure for the first time
since we have been collecting those statistics.
Accordingly, I have worked with our leadership in Congress
and with ONDCP and with other officials to support efforts to
reduce the demand for drugs. That is very important that we
address demand.
With that cooperative spirit, we withheld formal review of
the ONDCP media campaign by our subcommittee until October 14,
1999, more than a year into the program's operation.
At our October 14, 1999 hearing and after a preliminary
review of the administration of the anti-drug media campaign,
some concerns were raised relating to contract mismanagement,
financial oversight of the billion dollar program, the adequacy
of the match donation as required by law, and effectiveness of
the media message that had been produced to date. One area of
particular concern was oversight of a growing number of
contracts, ONDCP had issued somewhere in the neighborhood I
believe of 19 contracts, but the growing number of contracts
and subcontracts for handling various tasks of the program and
the management and administration of those contracts and
oversight of those contracts.
In my opening statement last October, a year ago, I
advised, and I will quote from my opening statement at that
hearing 1 year ago, ``I see a very tangled web of contracts
that appears overly complicated, expensive, bureaucratic and
untested.'' The subcommittee expressed concern about the
program management effectiveness and instances of contract
flipping, where we found in the information that ONDCP had
provided us, in fact, I think it was 15 boxes that we went
through and they provided us that background, but we found that
there was in fact the practice of contract flipping, where
contracts were subcontracted, no work done, but payment was
made to the original contractor. We raised this as a concern.
Several months ago the subcommittee was informed by the
Office of Special Investigation of the General Accounting
Office [GAO], about issues associated with the largest ONDCP
contract. This is a pretty substantial contract, a 5-year
contract which totals up to $175 million annually, certainly
the lion's share of our billion dollar campaign, and that is
actually a multibillion campaign when we take into
consideration that we also require a match. This large
contract's primary purpose was to buy media time. I might say
that issues were identified by multiple anonymous sources to
the General Accounting Office, citing problems of financial
mismanagement, over-billing, possible contract fraud, and
negligent administration of contract funds for the billion
dollar ad campaign.
I spoke to Barry McCaffrey, our Director of ONDCP, this
morning. He had sent me a letter, and I would like that letter
to be made part of the record, it is a letter of September 21,
which begins ``Members of your staff were apparently
instrumental in assigning two special agents from the General
Accounting Office's Office of Special Investigations to examine
ONDCP, the HHS Program Support Center, and our primary youth
anti-drug media campaign contractors.'' Without objection, I
would like this to be made a part of the record.
Mrs. Mink. No objection.
[The information referred to follows:]
[GRAPHIC] [TIFF OMITTED] T4927.001
[GRAPHIC] [TIFF OMITTED] T4927.002
Mr. Mica. But, again, I spoke to General McCaffrey this
morning. Our staff did not sick anyone on anyone. Information
came to us from multiple sources and to GAO about some very
serious allegations relating to the ad program and its
administration and financing. So, again, I am sorry that this
has had to come before the subcommittee, but it is an oversight
responsibility of the subcommittee. Issues, as I said, were
identified by the General Accounting Office, citing problems of
financial mismanagement, over-billing, possible contract fraud,
and I will say possible, we have not identified that to date,
we will find out more about that today, and negligent
administration of contract funds for the billion dollar ad
campaign that certainly should raise legitimate concerns by
every member of this panel.
Based on the information provided to me by GAO
investigators, I believe that these very serious allegations
should have been properly reviewed by GAO. I also resent recent
press statements that have attempted to put a political spin on
the GAO investigation or this subcommittee's legitimate
oversight responsibility. The charges of possible over-billing,
contract fraud, and financial mismanagement are most serious
and require attention and concern of and oversight of our
oversight subcommittee, and certainly of the General Accounting
Office when allegations are presented to that agency.
Among the concerns that have arisen are some of the
following: Why did the ONDCP contract officers raise serious
concerns about the costs being charged under the contract? Why
has ONDCP refused to pay millions of dollars in submitted
bills? And we have read some headlines over the weekend that
they are now refusing to pay some of these bills.
Why did ONDCP officials express cost concerns to the
Department of HHS contract officers who were responsible and
who had oversight responsibilities? We must determine that.
Was contract administration management within ONDCP and
arrangements within HHS sufficient to oversee this complex
contract? The HHS contract officer and the assigned contract
specialist were employees of the HHS Program Service Center.
The Center is paid to help administer these contracts. The
assigned specialist reportedly had a caseload of almost 60
contracts.
Why didn't ONDCP push for an immediate audit? In April, the
ONDCP consultant identified cost issues, with some cost
estimates at over 200 percent of industry standard. And
additionally, we have an internal memo that was provided to us
dated April 13 that raised serious questions about the conduct
of the billing and overpayments, some very legitimate and well-
documented concerns. Why were these not investigated?
Finally, are appropriate safeguards in place or underway
for effective monitoring and controlling costs? What steps have
been taken by ONDCP to deal with what obviously is a situation
that needs some attention?
The basic issues we have before us today are simple. Has
ONDCP been negligent in its administration of the contract? Is
the public being gouged? And what is being done to remedy the
situation and prevent future problems? Today, we are not
evaluating whether the media campaign is having its anticipated
impacts. That will be a topic for future discussion and for
future oversight.
We all hope that the media campaign's demand reduction
efforts are a success. Everyone on this panel wants this
program to be a success. Congress authorized the program.
Congress funded the program. And with the tragic deaths we are
seeing across the Nation and in so many of our districts and
the heartbreak this brings to so many families, we have a
responsibility to make certain this program is a success. It is
important to hold managers accountable to ensure investment,
and this is an investment, to ensure investment integrity, and
to achieve an absolute maximum return on taxpayer dollars that
are being put into this important program. That is why we are
having the hearing today.
It does interest me that, according to the Washington Post,
the ONDCP program manager who will be testifying before us
today was quoted as saying, and this is from the Washington
Post dated September 30, page A-2, ``There is absolutely no
over-billing.'' I find the program manager's conclusion
perplexing and bothersome, as an audit has just been done, an
audit that really will determine I think what has been going on
here. After all, it is his own contracting officer, the person
who actually reviews the bills, who presented the issues to his
senior management and requested an audit many months ago. I
look forward to learning how these statements, memoranda, and
actions can be reconciled.
Today, we need to determine whether ONDCP's media campaign
management has both the talent and objectivity to oversee
effectively the Nation's largest public media campaign ever
undertaken and that the contract with one of the largest
advertising companies in the United States is properly managed.
There is not a person on this panel who would not like to
see our national media campaign work and be successful. By the
same token, we have a responsibility both as overseers of this
program and as stewards and trustees of hard earned taxpayer
dollars to see that this Government sponsored billion dollar
campaign is properly administered.
Unfortunately, rather than to cooperate to resolve
financial mismanagement problems, correct administrative
negligence, and assist in proper investigation of possible
criminal misconduct, some in the administration have attempted
to thwart the congressional hearing process, attack the GAO
investigative staff, and block the proper review of very
significant problems of a very important Federal program. I
believe that is very unfortunate.
Today's hearing will focus on the management, financial
administration, and current problems facing our national anti-
drug media campaign programs. We will hear from the General
Accounting Office, we will also hear from ONDCP, and we will
hear from its consultant. Hopefully this hearing can help us
identify specific areas that need our attention and that will
improve both the effectiveness and performance of our anti-drug
media campaign.
[The prepared statement of Hon. John L. Mica follows:]
[GRAPHIC] [TIFF OMITTED] T4927.003
[GRAPHIC] [TIFF OMITTED] T4927.004
[GRAPHIC] [TIFF OMITTED] T4927.005
Mr. Mica. With those comments, I am pleased at this time to
yield to the gentlelady and ranking member from Hawaii, Mrs.
Mink.
Mrs. Mink. Thank you very much, Mr. Chairman. I have had an
opportunity to discuss the issues that are before this
subcommittee both with the Office of National Drug Control
Policy staff as well as the GAO investigators. I believe that
this hearing which has been called today is absolutely
premature. The GAO investigators have been given a very narrow
assignment which they are about to report on to this committee
today, and that is the role of the Director of the Office of
National Drug Control Policy with reference to what he did or
did not do upon being advised that there was potential fraud
being committed with respect to this contract that the chairman
has just described.
The issue really before this Congress and this committee
and subcommittee ought to be whether the allegations that have
been made about fraud are in fact true. To what extent the
Director of this agency acted in one way or another it seems to
me is not the crux of the issue. Those matters can be discussed
much later. The more important issue is whether these anonymous
sources that have brought this charge of fraud and doctoring of
billing and so forth is true and can be proven. From what I
have gathered in my discussions with the investigators and with
GAO, any such conclusions are premature. It will take the
agency many more months to investigate the so-called doctored
sheets and to investigate the 300-plus employees who submitted
these worksheets. We also need to go to the contractor and find
out exactly what their contracting practices were.
At this point, we should be sitting here commending the
ONDCP for having alert, conscientious staff that decided to
withhold payment of $13 million or so before all of this broke
because they were insistent that the Government contracting
practices with reference to justification of billing was
actually proven by the contractor who sought payment rather
than point to this withholding of the moneys allegedly due the
contractor as some proof that there was knowledge of fraud. It
seems to me that the employees who function in this capacity
were doing exactly what the law expected of them; and that is,
to require all contractors dealing with the Federal Government
to provide proof that the payment was justified. I have no idea
because we have no facts before us as to exactly what proof was
lacking which caused the agency not to make these payments to
the contractor. But all of that needs to be looked into by the
GAO. And as I understand it, there is an ongoing inquiry.
It is sad that a subcommittee hearing has to be called
based upon anonymous tips from whomever, either in the
contractor's agency or in the drug policy agency. I never
understood why the whistle-blower law required the agencies to
refrain from disclosing the people who are coming forth with
important valuable information that could lead to the
prosecution of individuals. If the matter is still under
investigation, that is fine, then anonymity is probably a
valuable requirement. But if we are to have a congressional
hearing upon which these charges are based, it seems to me that
the identity of these individuals is required. The whistle-
blower law then protects these individuals from intimidation
and harassment and other kinds of possible negative employment
consequences within the agency or within the contractor's
office or wherever they work. But to have a hearing today and
to be faced with the crux of the issues that we are discussing,
coming from anonymous sources which we on this side have not
had the opportunity to investigate, to interrogate, to discuss
these matters to understand the enormity of the charges being
made, I find that extremely tenuous and difficult to justify.
I am of course, as are my colleagues on this side of the
aisle, equally concerned about any charges of fraud and
mismanagement and lack of propriety in terms of any employees
inside and outside the Government. And it is our function as an
oversight committee to investigate those. But it seems to me
that this hearing today is premature and is really an effort to
single out the agency and exactly what they did with the
information that came to them about these charges of fraud.
That matter has been turned over to the GAO. It is being
investigated. It seems to me that we ought to wait for that
investigation to conclude.
The Special Investigators Office of the GAO is charged with
investigating criminal conduct. And here we are talking about
these matters without a shred of evidence from this special
investigating unit to indicate that fraud did occur, who is
responsible for this fraud, and to what extent this Congress
and this subcommittee can now move to make sure that those
kinds of things never occur again. The investigation of the
criminal conduct is not our responsibility. Our responsibility
is policy directed. And to that extent, to have a hearing
before we know whether there has been in fact deliberate
criminal conduct on the part of anybody it seems to me is an
inappropriate investigation.
But be that as it may, we are here today. I hope that we
can elicit from the witnesses who have been called their frank
and honest opinion as to what we are doing here today and why,
and where do we go from here. Thank you very much, Mr.
Chairman.
Mr. Mica. I thank the gentlelady and ranking member.
We are joined this morning by the chairman of the full
Committee, Mr. Burton, the gentleman from Indiana. You are
recognized, sir.
Mr. Burton. Thank you, Mr. Chairman. I will not take very
much time. I would maybe like to take a little issue with my
colleague, the gentlelady from Hawaii. I have before me from
the Executive Office of the President, the Office of National
Drug Control Policy a memo from the project officer who
indicates that there are suspicions of fraudulent conduct. That
is not anonymous. That is something that we have as a matter of
fact. I hope this has been entered into the record. If it has
not been, it should be.
Mr. Mica. Without objection, the April 13th memo will be
made a part of the record.
[The information referred to follows:]
[GRAPHIC] [TIFF OMITTED] T4927.006
[GRAPHIC] [TIFF OMITTED] T4927.007
Mr. Burton. The other thing, Mr. Chairman, is that we do
have a responsibility as an oversight committee over the
executive branch to ferret out waste, fraud, abuse, and if
there is criminal activity, to investigate that as well. We
have some very fine legal minds on this committee, like Mr.
Cummings on the other side. If we see something that is illegal
that has been going on, we should investigate that, we have the
responsibility to investigate it, and if we find there is some
criminal activity, send a referral to the Justice Department.
So there is no question that this falls within the jurisdiction
of your subcommittee. And I congratulate you for holding this
hearing.
I would just like to say one thing. This shows that this
whole program of advertising and bringing more awareness to the
youth of America about the perils of using drugs is not working
as well as we would have hoped. We have taken a tremendous
number of resources that were used for interdiction and for
eliminating drugs at their source and fighting the drug war in
places like Colombia, Bolivia, and Peru and we put them over
into this new program. The results have been, at best,
questionable. As I understand it, there have been more drug
deaths in 1998, that is the last report we have, than there
have been murders. And so, the program has not been as
beneficial as we would have hoped.
The staff over at ONDCP has been increased but the number
of people that have been involved in the other programs has
been reduced dramatically. We have been trying, Chairman Gilman
and I and Chairman Mica along with others, to get equipment
down to the Colombian national police and the people in power
down in Colombia so they could fight the producers of the
cocaine and heroin that is flooding our country and killing our
young people. Much of that money has been very, very difficult
to get. We finally have the President and the administration on
board. But, unfortunately, we were just informed the other day
in the Foreign Affairs Committee on which I serve that the
helicopters probably will not get down there until after 2002
and the drug war could very well be lost by that time. So we
are very concerned about that, especially when we have plenty
of helicopters already in our inventory that we could send down
there, the Blackhawks and the Hueys.
So I think we need a more balanced approach. I think this
apparent evidence of wrongdoing in the advertising is another
manifestation of a program that is not working well. We need a
more balanced approach in the war against drugs. Obviously, we
need education. I do not downgrade that request from the
administration and where they are heading at all. I am just
saying that we have put too much emphasis on the educational
aspects and not enough on interdiction and eradication. We need
to have a three-pronged approach instead of focusing primarily
on this one area. We know from the statistics that we have so
far that this one approach and focusing more on that than the
others simply is not working. We are still losing the war on
drugs, if you want to call it that, and I think it is
unfortunate. We need to have a balanced approach, and I think
this is one more manifestation of reasons why we need a
balanced approach.
I thank you once again, Mr. Chairman, for holding this
hearing.
Mr. Mica. I thank the chairman.
I am pleased to recognize the gentleman from Maryland, Mr.
Cummings.
Mr. Cummings. Thank you very much, Mr. Chairman. I am
certainly very pleased that Mr. Burton is here with us, and I
do appreciate what he just said with regard to prevention/
education. We need to stick in there treatment, something that
I have been very concerned about, and certainly interdiction.
Mr. Chairman, I would first like to take a moment to thank
the Office of National Drug Control Policy for their strong
leadership and cooperation with Congress in fighting this war
against drugs. I believe it is important to note that ONDCP
Director General Barry McCaffrey personally sat down with youth
in Baltimore for a half-day town hall meeting to hear how the
drug war and the media campaign have impacted their lives. I
was sitting there as they talked with the director and they
made it clear that these ads were having an impact on them. But
the reason why he was there was to find out how he could be
even more effective, how the ads could strike even more of
their classmates. These were high school students sitting down
for half a day with the No. 1 drug officer in the world to find
out how we could take these tax dollars that citizens are
giving our Government and spend them in a cost efficient and
effective manner. And I thank Dr. Vereen, the ONDCP Deputy
Director, who I have also worked with, for all of your
assistance as well.
Now, to the issue at hand. It is unfortunate that despite
its good work, ONDCP has to again be placed in a defensive
position as a result of unsubstantiated allegations. I might
add that when I first came to Congress 4\1/2\ years ago, one of
the first hearings that I had in this committee was an attack
on this agency. Since the inception of the National Youth Anti-
Drug Media Campaign in 1998, this subcommittee has closely
monitored the campaign to determine its efficiency and
effectiveness. According to a recent GAO report, ``ONDCP has
met most mandates'' regarding the media campaign funds and
program guidelines.
In July of this year, GAO, the revered investigative
authority, found that survey data on drug abuse, focus groups,
and community input supported the notion that ONDCP's anti-drug
media campaign has met its congressional mandates. According to
numerous studies released this year, the campaign has had real
results in meeting campaign goals to reduce drug use among its
target populations. According to the most recent Monitoring the
Future Survey, as anti-drug ads have risen, so have attitudes
about the social disapproval and perceived risk of illegal drug
use. The 1999 National Household Survey on Drug Abuse reported
that drug use by 12 to 17 year-olds dropped by 21 percent over
a 2-year period, from 1997 to 1999. Additionally, the PRIDE,
that is the Parent's Resource Institute for Drug Education,
survey reported that, between 1996 and 1999, annual use of any
illicit drug declined by a third among junior high school
students.
Over the years, we have held numerous hearings to
investigate allegations. I have noticed that this subcommittee
in some ways resembles our full committee--one that has
continually sought to find wrongdoing in this administration.
Sadly, allegations have not only been levied against ONDCP, but
also one of the top public relations firms in the Nation,
Ogilvy and Mather, an important partner in the media campaign.
These allegations may be sensational but they do not assist
in combating the drug war, and further, have potential to
strain a successful partnership between Ogilvy and Mather and
our Office of National Drug Control Policy that will eventually
affect our Nation's youth, the very youth that I talked about a
little bit earlier who sat down with the drug czar.
The allegations raised today question whether Ogilvy and
Mather over-billed for labor or falsified records, and whether
ONDCP and HHS contract management did not adequately followup
once alerted to the concerns. I have worked closely with
General McCaffrey and his staff on numerous issues. I know that
he is running a tight ship because he is very concerned about
the effectiveness and cost-efficiency of all the dollars given
to ONDCP by this Congress. As such, I believe that ONDCP should
be afforded the opportunity to find solutions and answers when
questions arise--before our subcommittee jumps in to
investigate and point fingers.
I would like to outline a timeline that highlights when the
irregularities at question were raised and how ONDCP addressed
them.
On April 13, 2000, a memo from Richard Pleffner, ONDCP
project contracting officer, who will testify today, to General
McCaffrey stated concerns regarding Ogilvy's management
practices and possible billing irregularities. These
uncertainties were reinforced when a former Ogilvy employee
raised those concerns.
Three weeks later, on May 4, 2000, ONDCP sent a letter to
Ogilvy expressing concern about labor costs in their year 2000
project plan and asked that Ogilvy reassess the plan to make
the costs in line with the original proposal.
ONDCP then went on to hire an independent media consultant,
who will testify today, Ms. Jane Twyon. Her findings concluded
that there were cost-savings that Ogilvy could have made based
on industry traditions and standards.
Subsequently, ONDCP withheld approximately $14 million in
payments to Ogilvy. Although Ogilvy provided several reasons
for their costs in a June 2000 letter, ONDCP asked Ogilvy to
break down its costs more thoroughly to assist in determining
what were reasonable expenses.
Since that time, General McCaffrey approved the
recommendation by ONDCP's Office of Legal Counsel for ONDCP to
conduct an internal audit of the management practices of the
media campaign to identify areas that need improvement. My
understanding is that General McCaffrey also approved a
recommendation that HHS conduct an audit of all media campaign
contractors.
All this to say, what is the problem? I will review, and I
close: ONDCP was alerted to a potential problem, ONDCP took
necessary steps to investigate the issue, and ONDCP took steps
to address the problem. As such, I believe that instead of
attacking and launching new investigations, ONDCP should be
commended for taking action.
Mr. Chairman, I look forward to hearing from today's
witnesses so that we may clear up this issue and get back to
the business of saving our Nation's youth. Thank you.
Mr. Mica. I thank the gentleman from Maryland.
I am pleased to recognize the vice chairman of our
subcommittee, the gentleman from Georgia, Mr. Barr.
Mr. Barr. Thank you, Mr. Chairman. I love the way folks on
the other side approach these hearings. They reach the
conclusion that nobody has done anything wrong and then they
blast us for holding a hearing. Thank goodness, folks with that
sort of outlook are not running the Department of Justice.
Actually, they are.
Mr. Chairman, this is a very important hearing. You posed,
and I repeat these since apparently some folks on the other
side did not hear them during your opening remarks, some very
important questions regarding possible over-billing, contract
fraud, and financial mismanagement. These are questions I am
sure that came to your mind not simply sitting around with
nothing better to do, but, as always in these hearings, based
on your careful consideration of evidence before you,
interviews, and materials submitted to you by the staff, and,
in this case, including your review of extensive materials
provided by the General Accounting Office [GAO], not the
General Anonymous Office, as another member apparently thinks
we are dealing with here, anonymous evidence. We are dealing
with a report from the General Accounting Office.
The questions that you pose, Mr. Chairman, I think at least
some of them are worth repeating because every one of them
clearly falls within the jurisdiction of this committee. Now I
know that it might be easier if we just sit back the way
Government operated up until 6 years ago and just let these
things roll merrily along and, as former Senator Everett
Dirksen used to say, a billion here, a billion there, and
pretty soon you might be talking about real money. Those of us
on this side take our fiscal responsibility seriously and a
billion here and a billion there requires very strong oversight
on behalf of the taxpayers of this country. And if we just sit
back and let these things roll merrily along and wait until
this great Department of Justice that we have conducts an
investigation, not only would we be through the next
administration but probably two or three administrations after
that, and billions of dollars would have been lost.
It is entirely appropriate, Mr. Chairman, indeed, it would
not be responsible not to conduct an investigation at this
time, to start asking some questions in order to uncover any
potential problems and assist rather than fight the GAO in
attempting to remedy them, and assist ONDCP rather than fight
it or sweep it under the rug if problems exist and help them
resolve them. Some of the questions you pose, Mr. Chairman, and
apparently these are irrelevant to the other side, but I think
they fall clearly within your interpretation and very clear
mandate for jurisdiction of this committee: Why has ONDCP
refused to pay millions of dollars in submitted bills?
Why did ONDCP officials express cost concerns to Department
of Health and Human Service contract officers who also had
contract oversight responsibilities?
Was contract administration management within ONDCP and
arrangements with HHS sufficient to oversee this complex
contract?
Why didn't ONDCP push for an immediate audit? In April, the
ONDCP consultant identified significant cost issues, with some
costs estimated at over 200 percent of industry standards.
Finally, are appropriate safeguards in place or underway
for effectively monitoring and controlling costs?
I would ask my colleagues on the other side, what do you
find so offensive and inappropriate about these questions?
These are standard oversight questions that ought to be
answered. And when, as in this case, evidence comes before this
committee, not by some anonymous source but by memos and by
notations by the highest officials in ONDCP, that raise
questions, maybe that can be very well answered, but raise
questions substantiated by GAO that there are some problems
here, why the people on the other side of this aisle find this
so offensive is very, very strange indeed. These are simply
straightforward oversight questions posed by you and this
subcommittee on this side as early on in this process as we
became aware of them in an effort to straighten this out and to
continue the good work of ONDCP. But if there are problems
there, to make an effort, rather than wait until all the money
has been spent, until all of the horses have left before we
close the barn door, to address these questions now.
I commend you, Mr. Chairman, for stepping forward and
conducting appropriate and timely oversight as good stewards of
the public's money. Thank you.
Mr. Mica. I thank the gentleman.
I would like to recognize another member of our
subcommittee, the gentleman from California, Mr. Ose.
Mr. Ose. Thank you, Mr. Chairman. I think Mr. Barr has very
eloquently stated why we are doing this. It is interesting, I
was studying this material the staff has put forward the last
couple of days regarding the actual contract. And while I have
a number of questions on the contract, not the least of which
is that the pages that would otherwise detail the unit costs
within the contract seem to be missing, I am looking forward to
this discussion and am particularly interested in getting all
the way back to the time sheets of the Ogilvy Mather employees.
I think that is where the crux of this matter lays.
With that, I would like to go straight to questions if we
could, having read Mr. Hast's testimony.
Mr. Mica. I thank the gentleman.
There being no further opening statements, Mrs. Mink moves
that we leave the record open for a period of 2 weeks for
additional statements, comments, information through the
Members and the Chair.
Mrs. Mink. Fine. Great.
Mr. Mica. Without objection, so ordered.
We will turn now to our panel of witnesses that we have
assembled this morning, all of whom I believe will be
testifying at some point. We are pleased to have Mr. Robert H.
Hast, who is the Director of Office of Special Investigations
of the General Accounting Office. He is accompanied by Pat
Sullivan, the Assistant Director, Office of Special
Investigations, and John Cooney, a Senior Special Agent, Office
of Special Investigations. We are also pleased to have back the
Honorable Donald Vereen. Dr. Vereen is the Deputy Director of
the Office of National Drug Control Policy. Dr. Vereen is
accompanied by Mr. Alan Levitt, who is the Campaign Director
under the ONDCP for the media campaign, and Mr. Richard
Pleffner, Project Contracting Officer of ONDCP. We also have
Ms. Jane Twyon, who is with Worldwide Consulting, and she is a
consultant to ONDCP.
For those of you who have not appeared before our
subcommittee before, this is an investigations and oversight
subcommittee of the House of Representatives. In that regard,
we do swear in our members and you will be under oath. Also, if
you have lengthy statements or documents to submit, I am not
going to run the clock because I think we are just going to
hear from three and then use others as resources, but if you
have lengthy statements, data that you would like made part of
the record, if you would request so through the Chair it will
be so ordered.
With that, if you would please stand to be sworn, everyone
who is going to testify.
[Witnesses sworn.]
Mr. Mica. Let the record reflect that all the witnesses
answered in the affirmative.
I am pleased now to recognize Mr. Robert H. Hast, the
Director of the Office of Special Investigations, the General
Accounting Office. Welcome, sir, and you are recognized.
STATEMENT OF ROBERT H. HAST, DIRECTOR, OFFICE OF SPECIAL
INVESTIGATIONS, GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY PAT
SULLIVAN, ASSISTANT DIRECTOR, OFFICE OF SPECIAL INVESTIGATIONS,
AND JOHN COONEY, SENIOR SPECIAL AGENT, OFFICE OF SPECIAL
INVESTIGATIONS
Mr. Hast. Mr. Chairman and members of the subcommittee, we
are here to discuss the investigation you asked us to undertake
concerning the Office of the National Drug Control Policy's
contract with Ogilvy-Mather, which is the lead media campaign
contractor for the National Youth Anti-Drug Media Campaign. I
respectfully ask that my written statement be entered into the
official hearing record at the conclusion of my summary
remarks.
Mr. Mica. Without objection, your entire statement will be
made part of the record. Please proceed.
Mr. Hast. You received allegations that the ONDCP had
learned that Ogilvy was allegedly inflating its labor costs
and, as a result, was over-billing the Government for its
services under the contract by falsifying time sheets. In
response, ONDCP's Chief of the Media Branch hired a consultant
to study the Ogilvy contract. This consultant reported that
Ogilvy's labor costs were far above industry standards.
Further, in April of this year, the Director of ONDCP,
General Barry McCaffrey, U.S. Army, retired, was informed about
these allegations and the results of the consultant's study.
This allegedly resulted in General McCaffrey's decision that an
external audit be conducted of the Ogilvy contract. However,
according to the allegation, after the General met privately
with the contractor's project director, the project director
announced that General McCaffrey was satisfied with the
contract's costs and that no external audit was to be
conducted. In addition, you received information that Ogilvy
allegedly had provided assistance to General McCaffrey
concerning matters not involving ONDCP and billed for this
service under the contract.
Beginning in July, we investigated the facts and
circumstances surrounding actions that ONDCP took after
receiving the allegations that Ogilvy may have over-billed the
Government. We also investigated allegations that Ogilvy had
provided services unrelated to the contract and submitted
invoices under the contract for those services. We did not
investigate the allegation that Ogilvy had over-billed the
Government under this contract; however, GAO is currently
conducting a review and audit of ONDCP's contracting operations
which will include these issues.
In summary, we found that General McCaffrey knew about the
fraud allegations concerning Ogilvy's billing practices; and
there is evidence to suggest that he agreed with the need for
an external audit of the contract. When we interviewed General
McCaffrey, he initially stated he had no recollection of the
accusations of fraud related to the Ogilvy contract. After
reviewing the April 13th memorandum that showed he had been
informed of these allegations, he did recall receiving the
allegations. He then told us that after receiving the April
13th memorandum and a report by a consultant that questioned
Ogilvy's costs, he traveled to New York City where he met with
Ogilvy executives and told them that their costs were growing
and that they needed to get them under control.
Regarding the allegation that he had ordered an external
audit, General McCaffrey stated that he had never ordered such
an audit. He added that he had no knowledge of any written
order for an external audit or an annotated memorandum with a
handwritten comment stating the need for an external audit. He
was then asked if he ever used the words ``we need an external
audit,'' and stated that he did not recall that. However, after
reviewing again the annotated April 13, 2000, memorandum,
General McCaffrey acknowledged that the handwritten comments,
which included the statement ``we need an external audit,''
were his. He told us that although he admittedly wrote that
phrase on the document, he did not at that time recollect the
document and he never did order an independent audit to be
carried out on the Ogilvy contract but it was his intention to
conduct an audit at some point in time.
ONDCP's General Counsel informed us that after we
interviewed General McCaffrey, the director approved a closeout
audit of all media campaign contracts, including the Ogilvy
contract. This was to be done in conjunction with the proposed
transfer of contracting responsibilities to the Navy. In
addition, General McCaffrey has also approved an internal audit
of the management practices of the Media Campaign.
With regard to the allegation of a private meeting with
Ogilvy's project director, we found that General McCaffrey had
a private meeting with her in June after internal ONDCP
discussions of the need for an external audit. General
McCaffrey's description of the meeting and the project
director's description vary as to whether excessive costs were
discussed. However, we found no evidence that this meeting
impacted any decision with respect to an external audit of the
Ogilvy contract; and we were told by General McCaffrey that he
never ordered an audit.
Further, concerning the allegations that Ogilvy provided
services beyond those covered by its contract, we found that
Ogilvy did not write congressional testimony for ONDCP
employees. Ogilvy did provide ONDCP with figures, research, and
documentation for use in responding to congressional inquiries
and testimony. Ogilvy billed for the service under the
contract.
Ogilvy did not provide any services to General McCaffrey
involving his response to an article in the New Yorker magazine
that was critical of General McCaffrey when he was in the
military. General McCaffrey told us that no one had assisted
him in response to this article. However, we found that an
official of another ONDCP contractor, Fleishman-Hillard, had
spent 3 or 4 hours advising General McCaffrey on this matter.
Fleishman-Hillard, however, did not charge the time to its
ONDCP contract. We were told that this time was considered a
personal favor to General McCaffrey. We also found a May 16,
2000, memorandum to General McCaffrey from Alan Levitt
informing him that Fleishman-Hillard officials had told company
staff that it was assisting General McCaffrey on that matter.
This concludes my prepared statement. I am happy to respond
to any questions you or members of the subcommittee may have.
[The prepared statement of Mr. Hast follows:]
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Mr. Mica. Thank you. I have no questions at this time. I
understand Mr. Sullivan and Mr. Cooney were involved in the
investigation but have no statement at this time. Is that
correct?
Mr. Hast. That is correct.
Mr. Mica. Then we will recognize at this point Dr. Donald
Vereen, who is the Deputy Director of the Office of National
Drug Control Policy. Welcome, sir, and you are recognized.
STATEMENT OF DONALD VEREEN, M.D., DEPUTY DIRECTOR, OFFICE OF
NATIONAL DRUG CONTROL POLICY, ACCOMPANIED BY ALAN LEVITT,
CAMPAIGN DIRECTOR, ONDCP; AND RICHARD PLEFFNER, PROJECT
CONTRACTING OFFICER, ONDCP
Dr. Vereen. Thank you very much, Chairman Mica and members
of the subcommittee. We welcome this opportunity to explain
important aspects of the management and oversight of the
National Youth Anti-Drug Media Campaign. I am here representing
the White House Office of National Drug Control Policy. I am
the Deputy Director there, a physician with a public health
background, and I have been actively involved with the media
campaign. I would also like to introduce two of my colleagues,
Mr. Alan Levitt, the program manager for the media campaign,
and Mr. Rick Pleffner, the contract manager for the media
campaign, and recognize a couple of partners who are with us,
the Community Anti-Drug Coalitions of America, the National
Association of Drug Court Professionals, partners that have
been working with and are invested in the media campaign.
As you know, the campaign is an integrated, science-based
public health communications effort designed to reach youth and
adult audiences with messages that influence attitudes and
action. Many indicators point to a positive trend and a
generation of teenagers are increasingly choosing to stay away
from drugs. So we are here today to ensure that this committee
is provided with detailed understanding of ONDCP's media
campaign management and oversight structure. So allow me to
submit at this time my detailed written testimony for the
record.
Mr. Mica. Without objection, your entire statement will be
made part of the record. Please proceed.
Dr. Vereen. What I will do at this time is highlight three
critical components expressed in the written testimony, which
is actually already available on the Web.
ONDCP is meeting Congress' intent and we are appreciative
of your confidence in our ability to design, implement, and
manage this vitally important public health campaign. We
welcome the oversight. We take very seriously our management
responsibilities for this campaign. Let there be no doubt that
Director McCaffrey is the accountable public official for this
5-year, $1 billion effort. We welcome close public scrutiny of
our operations and will continue to cooperate fully with all
oversight functions, including the General Accounting Office
review, committee inquiries, as well as congressional hearings
like this one. This is the seventh hearing to focus on the
media campaign since March 1999.
We take great pride in the GAO's recent conclusion that
ONDCP had processes in place to monitor and approve all paid
advertising expenditures before paying vendors. We are
involving experts in prevention in the campaign. As I said
before, the campaign is firmly grounded in science. We have the
use of a behavioral change expert panel, as well as Wesstat
Corp., the University of Pennsylvania's Annenberg School of
Communications, and our own National Institute on Drug Abuse
which is evaluating the campaign to show that it is actually
having the desired effects for the American public.
Is ONDCP negligent in administering this contract? Is the
public being gouged? The answers to those questions are, no. We
are diligently protecting the public purse. From the campaign's
inception, ONDCP has relied on other Federal agencies to
provide administrative contract support for the campaign's paid
advertising contracts. We made this decision because of our
conclusion that neither ONDCP nor the larger Executive Office
of the President had contract administration capabilities
necessary to support this extensive contract. The Department of
Health and Human Services Program Support Center provides
administrative contract support for this media campaign. They
have the sole responsibility for determining allowability and
reasonableness of expenses billed to the Government by
contractors.
Nevertheless, ONDCP ensures that only valid campaign
expenses are paid by monitoring all of the contractors' costs
and spending. We execute this responsibility by attending
planning meetings with contractors, obtaining periodic
financial status reports, and reviewing and approving all
campaign expenditures. We make recommendations to the contract
administrators in HHS, and our experience is that they agree
with most of our recommendations.
Our media campaign has enjoyed a tremendous amount of
support. You have that information in front of you in a number
of slides. This is to demonstrate that we are fulfilling the
promise that we have established, a model for a public-private
sector collaboration. There are a host of collaborators who are
involved with this who are invested in this program.
We are proud of the campaign's significant accomplishments.
We have exceeded the pro bono match requirements which you
helped us to develop and establish. Since July 1998, over
425,000 public service announcements have run because of the
campaign. And in terms of banner ads on Web sites, there have
been an impressive 586 million total impressions between 1999
and the year 2000. And we have bought advertising in more than
2,000 media outlets. These accomplishments have been critical
to achieving the positive trends toward attitude and behavior
change among our national youth. You have required that of us.
Drug use, according to the National Household Survey, has
declined 21 percent. Sixty-three percent of teens reported
their parents were talking to them about drugs.
And last, I want to mention that we are enormously proud of
the accomplishments of our contractors. Ogilvy and Mather is
one of the largest and most respected advertising companies in
the world. They bring significant negotiating leverage to the
table, allowing the Government to attain the lowest possible
market rates and access to substantial and unique media match
opportunities. We estimate that the ONDCP has saved 10 to 50
cents for every taxpayer media dollar invested. So we are
getting a great bang for our buck with Ogilvy. The company has
been considered experienced in social marketing campaigns,
having been responsible for the highly successful America
Responds to AIDS campaign. Fleishman-Hillard is the other large
contractor, one of the largest and most well-respected
communications firms in the world. And we work with the Ad
Council and they are the quarterback of our campaign's public
service component.
Mr. Chairman, I want to thank you and this committee for
the opportunity to address your concerns. We welcome the
committee's leadership and continued interest in reviewing the
progress and achievements of the media campaign. We continue to
forge ahead to maintain a strong management and oversight
structure for this campaign. But more importantly, we are fully
committed to securing the mission and effectiveness of this
campaign to change drug use attitudes and behavior among our
Nation's youth.
We will be happy to take your questions. I will let Mr.
Levitt introduce himself and Mr. Pleffner introduce himself.
[The prepared statement of Mr. Vereen follows:]
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Mr. Mica. Mr. Levitt.
Mr. Levitt. I am a 30-year career employee, a member of the
Senior Executive Service. My whole career has been focused on
developing and implementing public education programs on energy
independence, conservation, science, drugs, public issues. I
have two degrees in communications. I have attended the Kennedy
School of Government's program for senior managers in
Government, and the Federal Executive Institute.
Mr. Mica. Mr. Pleffner, do you have a statement, or are you
just going to do a self-introduction?
Mr. Pleffner. Yes. I serve as the project officer for the
media campaign. I have the primary responsibility for day-to-
day technical administration of the contract, act as the
facilitator, communicating with the contracting officer at HHS.
I have roughly 20 years of Federal procurement and acquisition
experience.
Mr. Mica. Thank you.
We will now recognize for a statement Ms. Jane Twyon. She
is with the Worldwide Consulting group, a consultant to ONDCP.
You are recognized, Ms. Twyon. Welcome.
STATEMENT OF JANE TWYON, PRESIDENT, WORLDWIDE MEDIA DIRECTORS,
CONSULTANT TO ONDCP
Ms. Twyon. Thank you, Mr. Chairman. I am a bit of a fish
out of water here, so just help me along if I do something
improper. I would like to ask that my written testimony be
included in the record as well as what I am going to say.
Mr. Mica. Without objection, your entire written statement
will be made part of the record. Please proceed, and you will
not be scaled just yet. [Laughter.]
Ms. Twyon. Thank you. I should correct before I go any
further that the spelling of my name is T-W-Y-O-N, no E, and
that my company is Worldwide Media Directors.
What I am going to do with my time here today with you is
just to try and put my report into the proper frame where it
should be and how it should be looked at. So I am going to go
pretty quickly and hopefully will make things clearer to all of
you.
I believe that I bring great value to my clients. The
objective of my analysis is to evaluate the work product and
the cost and, where possible, bring about improved
relationships, improved work process, and improved
efficiencies. As stated in my report, I do not presume to
direct the exact manpower costs to be realigned.
As a consultant, I cannot give you any magic answers as to
where you specifically need to make changes. This is for two
major reasons. First, I am using industry standards and
industry averages and all businesses are unique in their
advertising requirements. You should be aware that I did not
give any special weighting for the possible differences between
a private versus a Government sector advertising agency cost of
service. I did adjust for the requirement of matched media, but
not for any unique Government contracting procedures. Second, I
do not have any hands-on day-to-day experience on this
business. My evaluation is based upon specific documentation
from Ogilvy, industry reports, surveys, as well as my
experience and stated assumptions. Making assumptions was
necessary to complete the report and give it grounding for
future analysis.
My report delivers the best information and recommendations
that I could provide, and I take my work very seriously.
Additionally, my report puts a stake in the ground and
estimates a savings of $8.5 to $14.8 million in compensation.
This savings was based on specific documentation that I had to
evaluate and the assumptions that I made in my evaluation.
However, you cannot use these figures as real savings. They
need to be viewed as a snap shot estimate that indicates
further work needs to be done to find real savings or to
clearly understand why this business is operating above the
industry average.
The ONDCP understands that I applaud their conscientious
management of this assignment and for seeking advice on how to
improve the media product and costs. Additionally, you must
also be aware that I have stated several times to the ONDCP
that my report does not see any delinquency from any party on
costs. I realize that the current compensation grew out of the
needs of the ONDCP and the desire by Ogilvy to respond to and
service these needs and this very important piece of business
for them.
I see my report, and I think this is very important to all,
I see my report as the beginning, it is not an end. It is the
start of a process for the ONDCP and Ogilvy to work to find
ways to become more efficient. It is an evolutionary process.
As a media consultant on this assignment, I do believe that we
can improve the work process, relationship, and costs.
My compensation report was part of a larger report. Part of
that was to look at Ogilvy media costs. And as I stated to
ONDCP in my presentation on May 11th, Ogilvy's media rates
looked competitive. I am sharing this fact with you today
because I do not want to see a compensation report destroy good
work. It would be the tail wagging the dog. As a consultant, my
interest is in finding ways to raise the bar and bring this
account closer in line to the industry on manpower
compensation. I believe my report shows you can do better. But
the report does not do the job.
I must state again that I see no fault with Ogilvy or the
ONDCP, and I hope that my report is not used to derail a good
relationship and excellent work from Ogilvy. I want the ONDCP
to continue all the good aspects of the campaign, keep and grow
a strong agency relationship, and, yes, let's work together to
lower the compensation.
I also want to make an aside to the committee and this is
on a personal note. I am, I guess the best word to use, angry
with this committee because I believe that you have compromised
me as a consultant. By handing out what was my confidential and
a very, very technical report and handing it out to the press
without a cover note and without putting it in any context, it
opens the door for this information to be misused and
misquoted. And we cannot be surprised that this has happened.
Yesterday I read from Ad Age, which is in my business one
of the premier trade publications, on their Web site they talk
about the issues with ONDCP, they identify me as the
consultant. And let me just read one little piece from what
they said, and people in my business are reading this. It says
that I have said that a savings of from $8.5 million to $14.5
million a year would be ``reasonable to expect'' by letting
less senior account people buy at Ogilvy. Now I know this
information is wrong because account people do not make media
buys. And I would never be so ridiculous as to tell a client
that they are going to get major savings by compromising on
senior manpower. I know it is wrong but the people who read
this report will not know it. The article is full of data from
my report; the information is out of context, it is misused,
and it is misquoted. And I feel that because of that you have
compromised me and you have embarrassed me. And for that, I am
angry.
That is the end of my report. Thank you.
[The prepared statement of Ms. Twyon follows:]
[GRAPHIC] [TIFF OMITTED] T4927.101
[GRAPHIC] [TIFF OMITTED] T4927.102
Mr. Mica. Thank you. We will get back to you in just a
moment.
We will start with some questions that I have and then
proceed to other Members. First of all, let's begin with you,
Mr. Levitt, you are the media campaign manager. When and how
did you first become aware of cost and billing concerns with
the contractor Ogilvy and Mather?
Mr. Levitt. Well, sir, we have four major contracts and
under those probably 20 or 25 subcontractors are working for
those contractors. In virtually every single instance, we have
recommended withholds from billing. I think it is a total of
about $18 million.
Mr. Mica. My question was with the Ogilvy and Mather
contractor, when did you first become aware of cost and billing
concerns. Do you recall?
Mr. Levitt. It was not necessarily billing concerns, but
billing irregularities. They did not bill for labor for about
10 months. So it would be about September 1999.
Mr. Mica. You first became aware of some over-billing----
Mr. Levitt. No, it----
Mr. Mica. I am sorry, billing irregularities in October
1999?
Mr. Levitt. They had not billed for everything. And may I
just correct one point. When I say over-billing, I am talking
about fraudulent over-billing. When I put in a travel voucher
when I go on a trip, I do not consider it fraud if I make a
mistake. I am talking about deliberate cooking the books. We
have no evidence of that whatsoever.
Mr. Mica. OK. Were you aware of the external analysis of
costs by the outside consultant who has testified today?
Mr. Levitt. There are two different issues here. One is the
past billings, which continue and have----
Mr. Mica. But I do not think she dealt with----
Mr. Levitt. Her analysis was about the future and it was
the Ogilvy labor structure and do we need the different
components of it.
Mr. Mica. And when were you aware of her report?
Mr. Levitt. We commissioned that report I believe in March
or April 2000. But we had concerns about costs for the campaign
long before that.
Mr. Mica. When was that commissioned, Ms. Twyon?
Ms. Twyon. I actually gave the report on the 27th. Late
March was the first time I was contacted. I do not know the
exact date but it was late March.
Mr. Mica. Thank you.
When, Mr. Levitt, were you aware of the memorandum dated
April 13th from the contract technical representative Mr.
Pleffner, who is with you today. When were you first made aware
of the memo? I think we have got a copy of it up here.
Mr. Levitt. I believe he started writing that memo in
March, sometime in late March.
Mr. Mica. So you were aware of it before he put it on paper
on April 13th?
Mr. Levitt. I was aware of the five different issues he
raised in that memo.
Mr. Mica. And did you agree or disagree with the concerns?
Were you concerned?
Mr. Levitt. I agreed with all of them.
Mr. Mica. You did?
Mr. Levitt. I think I differed to some degree with----
Mr. Mica. Who presented the memo of the 13th stating these
concerns and problems to the Director?
Mr. Levitt. Mr. Pleffner.
Mr. Mica. Mr. Pleffner.
Mr. Levitt. It went from him, through our legal counsel,
through our chief of staff Janet Crist, directly to General
McCaffrey.
Mr. Mica. So, first, the legal counsel was made aware.
Mr. Levitt. That is just the process we would use for
something that would include these issues.
Mr. Mica. Mr. Pleffner, there are some pretty serious
questions raised about billing practices and over-billing in
your memo of the 13th. It appears that Ogilvy and Mather had
initially provided you and informed you--if you want to read
this, it says ``Ogilvy contract manager informed me that the
invoice included all labor costs incurred during the period
January 4, 1999 through June 30, 1999. Subsequently, several
months later, they submitted two additional labor bills for
this same period.'' And it said that Ogilvy increased its
claimed effort by 27 percent, the number of people working on
the contract rose by some 33 percent, and by 33 percent for
invoice costs. Is that correct?
Mr. Pleffner. Yes, that is correct.
Mr. Mica. And I guess you had gotten some information from
an anonymous source, where it says ``when a former Ogilvy
employee related facts to ONDCP supporting suspicions of
fraudulent conduct.'' And you said ``our review of time sheets
led to increasing concerns.'' So you and Mr. Levitt were aware
of problems before and then you were presented with these new
billings. You said many of the time sheets for invoices 14 and
16 were illegible and contained an inordinate number of
changes, alterations, almost always increasing the time charged
to the ONDCP contract. Is that correct?
Mr. Pleffner. That is correct.
Mr. Mica. Now we have asked for copies of these time
sheets. Mr. Hast, did you get copies of these time sheets that
are in question?
Mr. Hast. The Office of Special Investigations has not. We
did not request them. I do not know whether the ongoing GAO
audit has them yet or not.
Mr. Mica. OK. I requested copies I think of some pretty
specific documents. Have we received copies? Have you produced
these yet, Dr. Vereen?
Dr. Vereen. If they have been produced, we have sent them.
Mr. Mica. Has the Office of Drug Control Policy provided
the subcommittee or GAO the time sheets in question?
Dr. Vereen. We have seen them. They are being produced.
They are in the process of being produced, but I do not know if
you have actually received them.
Mr. Mica. Well I want these time sheets and I would like
them----
Mr. Barr. Will the chairman yield?
Mr. Mica. Yes.
Mr. Barr. I was having difficulty. You said ONDCP has not
received them?
Dr. Vereen. No. We have seen them. They have been examined.
But the request for them was made and I do not know if they----
Mr. Mica. Well I want these time sheets. I want them turned
over to us and I would also like them turned over to the
investigators.
Dr. Vereen. Sure.
Mr. Mica. When information was presented to me initially,
if this had just been an anonymous report unsubstantiated about
over-billing and irregularities, I might not have paid much
attention to it. But with the documentation that we have, with
this internal memo--this is an official memo that you prepared,
is that right, Mr. Pleffner?
Mr. Pleffner. Yes, it is.
Mr. Mica. Do you still stand by the comments that you put
into this memo? Is there anything incorrect in this memo?
Mr. Pleffner. There is nothing incorrect. I still stand by
it.
Mr. Mica. Mr. Levitt, you testified that you were aware of
this even before the 13th, some of these allegations. The next
question I would have is, I see handwriting on there, Mr. Hast,
has GAO determined whose handwriting it is? It says discuss,
need, and then down at the bottom, ``Yes. We need an external
audit.''
Mr. Hast. Yes.
Mr. Mica. Whose handwriting is it?
Mr. Hast. General McCaffrey identified that as his
handwriting.
Mr. Mica. OK. Dr. Vereen, was an external audit ordered at
that point immediately after April 13th and this memo was
initialled by the Director?
Dr. Vereen. No. An audit was discussed. At the same time,
we were making arrangements to change the contracting activity
from HHS to another entity and at that time an audit would be
done.
Mr. Mica. First of all, GAO, were you told that an audit
would not be conducted until the end of the contract, that was
the term of the contract, and is that 4 years?
Mr. Hast. That was not clear. General McCaffrey said he
intended to have an audit at some time.
Mr. Mica. Mr. Pleffner, did you get a copy of this memo
back that said yes, we need an external audit?
Mr. Pleffner. Yes, I did.
Mr. Mica. And what was done then? Did you order the
external audit? Did anyone proceed with an external audit?
Mr. Pleffner. No. The decision, as I noted in the memo, was
to request an audit once the contracting function was
transferred out of HHS. At that time we were discussing the
possibility of moving it to the Navy, as we currently are.
Mr. Mica. What was your opinion of that procedure of
waiting until the end? Did you have any other recommendation?
Mr. Pleffner. My preference at the time was for an
immediate audit given the irregularities that we had and the
allegations that were made. But, again----
Mr. Mica. It also says the contracting officer's initial
response was ``their policy was to perform an audit only at the
end of the contract--in this case, at the end of 5 years.'' and
I see a large handwritten ``No.'' Was that also your opinion?
Mr. Pleffner. To wait for 5 years?
Mr. Mica. Right.
Mr. Pleffner. No, sir, that is not my opinion.
Mr. Mica. It looks like again, I am not sure, this is the
ONDCP Director's ``No.'' Is that correct, Mr. Hast?
Mr. Hast. Yes.
Mr. Pleffner. And I do agree with the Director's position
that it cannot wait for 5 years. As a matter of fact, I had
requested in early March or mid-March that HHS initiate an
audit. It was before I prepared this memorandum.
Mr. Mica. And what did they say?
Mr. Pleffner. The contracting officer informed me that it
was HHS policy to conduct audits only after the conclusion of
the contract, in this case it would have been 5 years.
Mr. Mica. There was also a meeting that some people have
referred to of the ONDCP Director with Ms. Seifert, I believe
it is, she is with Ogilvy and Mather, and this took place I
guess after the production of this memo from you to the
Director. Is that correct?
Mr. Pleffner. Correct.
Mr. Mica. Is anyone familiar with that meeting?
Mr. Levitt. Which meeting was this, sir?
Mr. Mica. Director McCaffrey had a meeting with Shona
Seifert.
Mr. Levitt. Seifert, yes.
Mr. Mica. Right. And she had a conversation with Alan
Levitt and Jill Bartholomew. Is anyone aware of that meeting?
Mr. Levitt. Well, I am Alan Levitt. I should be. Yes, she
had a meeting with Director McCaffrey I think it was on June
5th. Is that what you are talking about?
Mr. Mica. Right.
Mr. Levitt. The meeting was on June 5th. That was after a
meeting, a long briefing on another topic completely. And what
had happened before then is Ogilvy had responded to the Jane
Twyon report and gave their view of it and did an analysis for
us. Our management team----
Mr. Mica. You stayed in the whole meeting?
Mr. Levitt. I was not in the meeting with the Director.
Mr. Mica. You were not in the meeting but you are aware----
Mr. Levitt. No. Afterwards, she came down and told me that
because of her briefing the Director felt more comfortable with
some of the labor issues--not billing--some of the labor issues
that were being discussed in Jane Twyon's report.
Mr. Mica. Did you say uncomfortable or comfortable?
Mr. Levitt. A little more comfortable.
Mr. Mica. More comfortable.
Mr. Levitt. Right.
Mr. Mica. And what was communicated then to you, Mr.
Pleffner?
Mr. Pleffner. On June 6th, I met with Alan Levitt and Ms.
Bartholomew at which time they informed me of the visit they
had with Ms. Seifert the day before.
Mr. Mica. I am sorry, can you repeat that? For some reason,
this seems to be coming across garbled.
Mr. Pleffner. I met with Alan Levitt and Jill Bartholomew
on June 6th, the day following the briefing and the meeting
between----
Mr. Mica. The meeting was on the 5th, right?
Mr. Pleffner. Correct. On the morning of the 6th, Mr.
Levitt and Ms. Bartholomew informed me of the visit and told me
that Ms. Seifert had told them the Director had no problem with
the contract costs and that Ogilvy would continue being the
advertising contractor for ONDCP.
Mr. Mica. That is different than what Mr. Levitt said.
Mr. Levitt. I do not recall that. What I recall is she said
the Director felt more comfortable because of their report.
Now, the Director was not in the meeting when she gave her
report. That was reported to him by the management team chaired
by Janet Crist.
Mr. Mica. We have got a vote, a couple of votes. I am a
little bit concerned about the status of management of this
whole program. We are moving now from HHS you said to the Navy.
The only audit we have being conducted at this point is by GAO
and that has been instituted really since some of this has come
to the attention of the subcommittee. Is that correct, Mr.
Hast?
Mr. Hast. Yes.
Mr. Mica. Dr. Vereen, where are we in the status of who is
in charge of the contract?
Dr. Vereen. We tried to evaluate several other sources in
the Federal Government. Our first choice at this point is the
Navy and we are meeting with them I believe on Monday to try to
finalize that contracting relationship so we can switch it
over. That will start an audit and we will proceed from there.
Mr. Barr. Excuse me. Mr. Chairman.
Mr. Mica. Yes?
Mr. Barr. Would you yield for just a moment please?
Mr. Mica. Real quickly. Go ahead.
Mr. Barr. Are you saying, Dr. Vereen, that you still have
not made a final decision on changing over to the Navy?
Dr. Vereen. Well, it is not just our decision. We had to go
and look for appropriate contracting agency. We had started
looking earlier in the year, predating this memo, and we have
decided upon the Navy as the best choice for us. We are
providing them with information and doing a final meeting I
believe on Monday so that transfer can be finalized.
Mr. Mica. It appears that the contract administration is in
disarray. We went to HHS and asked them simple questions; they
do not have a clue, it is strictly a ``que pasa?'' situation.
This is a very expensive contract. We want it to succeed. So we
need somebody in charge. We cannot have an audit at the end of
a 4-year period when we have these reports. And this is not an
anonymous report. Mr. Levitt, who is in charge of the program,
and Mr. Pleffner, the financial officer, knew about problems
with the contract. And we did not have an audit in place until
this was raised to the level of GAO investigators and the
subcommittee.
So there is something dramatically wrong with the
administration and financial management. I do not know if there
is any criminal misconduct here by anybody. But I want to see
the time sheets and I want to see them in a timely fashion. And
I want GAO to continue reviewing this matter. Our subcommittee
is not an investigative staff at the level of these folks. I
think you all are former Secret Service agents, is that right?
Mr. Hast. Yes, sir. We are all retired Secret Service, FBI,
or from other investigative agencies.
Mr. Mica. So it is not a bunch of people that fell off the
wagon during pumpkin season or something. We have competent
people whose responsibility is as independent investigators of
the General Accounting Office of the U.S. Government. So I want
this pursued. If someone is ripping off the taxpayers, I want
that pursued. I want those documents. And they can put on a
media campaign against me, but this is not political, this is
not anything, it is my oversight responsibility and I take it
very seriously. I want the program to succeed.
So that is the end of my questions at this point. Dr.
Vereen, I want you to deliver the message I am not playing
games. I just want to make certain that this thing that we have
created--we created it, we authorized it, financed it, you
administer it--that it is properly administered. Short and
simple.
I apologize to the minority for taking longer, I wanted to
give you a shot. But maybe we should go ahead and vote and come
back and I will recognize you immediately.
We will stand in recess until 5 minutes after the last
vote.
[Recess.]
Mr. Mica. I would like to call the Subcommittee on Criminal
Justice, Drug Policy, and Human Resources back to order.
I have additional questions which I will submit in writing,
I do not know if we will do a second round today, to the drug
czar's office, ONDCP, and some of the others who have testified
today.
Let me yield at this time to the ranking member, the
gentlelady from Hawaii, Mrs. Mink.
Mrs. Mink. Thank you very much, Mr. Chairman.
First, I would like to express my apologies and concern to
Ms. Jane Twyon for the release of her confidential memorandum
to ONDCP and consequent embarrassment that such a release has
caused her. I just am very, very sorry. I do not know what else
the subcommittee can do to ease the situation and to respond to
your concerns with respect to your professional integrity. So I
certainly am very sensitive to those kinds of abrogations of
our release of information that could cause someone harm.
Ms. Twyon. Thank you.
Mrs. Mink. My question to you, Ms. Twyon, is when were you
asked to do this particular review of the Ogilvy contract?
Ms. Twyon. I was contacted in late March and then I have a
contract with the Ad Council who actually hired me at the
request of ONDCP on April 4th.
Mrs. Mink. When did the Ad Council get the request, if you
got the request in March?
Ms. Twyon. I think it was just a short period of time
there, so say at the end of March.
Mrs. Mink. And so who compensated you for this report?
Ms. Twyon. I am paid through the Ad Council who hired me.
Mrs. Mink. And the Ad Council was paid by the ONDCP people
presumably?
Ms. Twyon. Yes.
Mrs. Mink. And what was your specific charge when you were
asked to undertake this investigation? Was it fraud?
Ms. Twyon. No.
Mrs. Mink. At any time were you instructed to look at this
particular situation from a fraud perspective?
Ms. Twyon. No.
Mrs. Mink. Was there any suggestion that there was
deliberate tampering with work sheets and over-billing and all
the rest of what we have heard today?
Ms. Twyon. No. That was not really part of my assignment.
Mrs. Mink. Did you investigate that as any part of your
report?
Ms. Twyon. No. That area is not part of my assignment.
Mrs. Mink. So then your report should not be cited in any
way as legitimizing any of these communications to this
subcommittee or to others that there is evidence of fraudulent
conduct?
Ms. Twyon. That is right.
Mrs. Mink. Now in your examination, did you come across
anything that was fraudulent in your estimation?
Ms. Twyon. No, I did not.
Mrs. Mink. So that as far as you are concerned the only
inquiry that you investigated and reported on was the
comparison of the charges that Ogilvy made to the Government as
they related to industry-wide charges for the same type of
work. Is that correct?
Ms. Twyon. Correct.
Mrs. Mink. OK. So the agency then, from what we have heard
from Mr. Levitt, became concerned about the submission of these
billing sheets and accounting from Ogilvy back in September
1999. Is that correct, Mr. Levitt?
Mr. Levitt. Right. Correct.
Mrs. Mink. And what did you do when you found out that they
were not billing you at the appropriate intervals and had
waited 9 months to submit their first comprehensive billing?
Mr. Levitt. Our project officer, Mr. Pleffner could
probably better answer that. He had been in conversation with
Ogilvy for I think some months before.
Mrs. Mink. Mr. Pleffner, would you answer that question.
Mr. Pleffner. Yes. After receipt of their first labor
invoice----
Mrs. Mink. Which was when, what date?
Mr. Pleffner. That was mid-September 1999.
Mrs. Mink. Was that unusual for a contractor to wait 9
months into their contract to submit their first pay sheets?
Mr. Pleffner. Extremely unusual.
Mrs. Mink. And what did you do about it?
Mr. Pleffner. There is really not much you can do to force
them----
Mrs. Mink. Did you contact them and say what is going on
here, why are you so late?
Mr. Pleffner. I had been in communication with the Ogilvy
financial and contracting folks since February 1999 encouraging
them to bill for their labor.
Mrs. Mink. Now is there any evidence to show that the
lateness was due to their transition problems of one contractor
to another?
Mr. Pleffner. I have no evidence of that.
Mrs. Mink. No evidence of that.
Mr. Pleffner. No.
Mrs. Mink. So did they give you any reason to believe that
they understood the gravity of their situation and that they
were going to take care of it promptly?
Mr. Pleffner. I really cannot speak to----
Mrs. Mink. Well, were you concerned that they did not give
you any response or indication that they were going to take
care of this delinquency?
Mr. Pleffner. Extremely concerned. Again, I had numerous
discussions with not only the financial and contracting folks
but the project director.
Mrs. Mink. Was it your decision then to withhold payment
when they finally did submit their vouchers for payment?
Mr. Pleffner. It was my recommendation to the contracting
officer, yes.
Mrs. Mink. And the contracting officer is who?
Mr. Pleffner. Janet Miller with the Health and Human
Services Program Support Center.
Mrs. Mink. And she then followed up on your recommendation
and withheld payment. Is that correct?
Mr. Pleffner. Correct.
Mrs. Mink. And this $13, $14, $18 million, whatever the
figure is, that was withheld constituted what account for
Ogilvy? Was it their money that they had spent themselves as an
agency? Was it advertising money? Was it their operational
money? Is it part of their contract proceeds that was withheld?
Mr. Pleffner. The $13.4 million to date that I have
recommended for withhold are costs that Ogilvy states they have
incurred.
Mrs. Mink. So by your withholding it, they are hurting
because they are not getting reimbursed for out of pocket
costs. Is that a correct general conclusion?
Mr. Pleffner. Out of pocket labor. Yes, ma'am.
Mrs. Mink. Now when was the first withholding?
Mr. Pleffner. The first withholding was roughly August-
September 1999.
Mrs. Mink. And you have continued to withhold additional
sums till today it is about $14 million. Is that correct?
Mr. Pleffner. Correct.
Mrs. Mink. Is there any indication that you are about to
release any of this money because they have performed to your
satisfaction in terms of giving you the tear sheets or whatever
it is that is missing in the various billings that they have
sent you?
Mr. Pleffner. Obviously, upon receipt of supporting
documentation, any withholds that are determined reasonable,
yes, release would----
Mrs. Mink. So how much of their out of pocket costs since
they became the contractor in this instance have actually been
released and paid to Ogilvy? I want to get a comparison. You
have withheld $13-$14 million. What have they actually been
paid?
Mr. Pleffner. To date, they have billed for approximately
$187 million.
Mrs. Mink. But that is moneys they have spent in the media
buys. I am talking about out of pocket operational expenses for
Ogilvy.
Mr. Pleffner. For the labor to date, they have billed
roughly $23 million. I have recommended withhold of
approximately $7.8 million. Media purchases--you were not
interested in the media. Out of pocket or production expenses I
believe they have invoiced for roughly $6-$7 million. I have
recommended withhold of a little over $1 million.
Mrs. Mink. So, if you add that up, it is about $8 million
that you are currently withholding?
Mr. Pleffner. Close to $9 million for labor and----
Mrs. Mink. Now at any time that you made those requests for
withholding, did anyone else step in and intervene and suggest
that you were being overly strict and asked you not to withhold
these moneys?
Mr. Pleffner. Yes.
Mrs. Mink. Who?
Mr. Pleffner. The contracting officer at Health and Human
Services.
Mrs. Mink. Asked you to be more understanding? And did you
then comply?
Mr. Pleffner. The contracting officer felt that I was over
zealous in the request for supporting documentation, yes.
Mrs. Mink. So who prevailed, you or the HHS?
Mr. Pleffner. To the best of my knowledge, all but a couple
of the recommended withholds the contractor has in fact
withheld.
Mrs. Mink. Now, under the law, who has the responsibility
to make those recommendations with respect to payment? Is it
you or is it the contracting officer in HHS?
Mr. Pleffner. I have been appointed by the contracting
officer as project officer. I make the recommendations, the
contracting officer makes the final decision.
Mrs. Mink. So actually we should have another seat here for
them to respond to this question since they have the ultimate
decision.
Mr. Pleffner. They would be better suited to respond to
their actions, yes.
Mrs. Mink. Has anyone in a supervisory capacity over your
work at any time suggested that you were being over zealous?
Mr. Pleffner. No.
Mrs. Mink. Did anyone attempt to interfere in the exercise
of your due diligence requirements with respect to this account
within the agency?
Mr. Pleffner. No one has interfered with it at ONDCP.
Mrs. Mink. Now with respect to the tasking, this is to Mr.
Hast at the Office of Special Investigations, GAO, with respect
to the task that you were assigned to investigate, who made
that request? Is it in writing? What were the dimensions of
that request? What was your mission? What prompted it? I think
that is important to know in the record.
Mr. Hast. Let me start with what prompted it. In the GAO
audit that has been mentioned at this hearing----
Mrs. Mink. Well, first, who requested the GAO audit?
Mr. Hast. I think that was Chairman Kolbe of the
Subcommittee on Treasury, Postal, and General Government.
Mrs. Mink. Not this committee?
Mr. Hast. Not this committee.
Mrs. Mink. I was just told by counsel it is not an audit,
it is a management review. Is there a difference?
Mr. Hast. I am sure there is but I do not think I could
explain it.
Mrs. Mink. On the one hand, the Director of this agency is
being called down for not having an audit, so we had better
have a definition of what was actually done by the GAO.
Mr. Hast. I would have to leave it that it was a management
review. But I do not think I can go a lot deeper than that.
Mrs. Mink. What is the difference? Well, you can submit
that response. I am told there has not been a financial audit.
Maybe Mr. Vereen can answer that question.
Dr. Vereen. It is a general audit of the media campaign
that was requested by Congressman Kolbe. And there were some
conclusions that were drawn about how well we were
administering the campaign.
Mrs. Mink. Was it a financial audit or a program audit?
Dr. Vereen. No.
Mr. Hast. Program audit.
Mrs. Mink. Right. OK. All right, Mr. Hast, describe what a
special investigation is in the GAO. Is it a criminal
investigation division of the GAO?
Mr. Hast. Yes.
Mrs. Mink. You wear badges and you walk around with guns
and so forth?
Mr. Hast. No guns, Congresswoman.
Mrs. Mink. No guns. OK.
Mr. Hast. But we do have badges. The Office of Special
Investigations is a small unit in GAO, approximately 25
criminal investigators, all of them senior criminal
investigators that have been hired from other investigative
agencies such as the Secret Service, the FBI, IRS, and various
IG offices. When there are allegations of fraud or criminality
we are asked by the Congress to conduct investigations into
these allegations. The other way we get into investigations is
how we got into this one. When our audit teams or management
review teams are out in agencies, if they develop allegations
of fraud or criminality, they bring our office in. That is what
happened in this case.
Mrs. Mink. So who brought you in, let's try to be specific?
Mr. Hast. The General Government Division team that was
doing the management review had allegations brought to them by
individuals they talked to that wanted to remain anonymous at
this time. We interviewed those individuals and not only did we
find their statements credible, when we reviewed our files we
had another anonymous tip that had come in on the GAO FraudNet,
our hotline, that kind of parallelled the allegations that were
here. Once we determined that these were credible, we went to
this subcommittee because of its oversight responsibilities and
presented the information and were requested by Chairman Mica
to conduct an investigation.
Mrs. Mink. What was the scope of your investigation? Was it
based upon the anonymous tips and the hotline?
Mr. Hast. It was to determine what ONDCP did when they had
allegations of fraud.
Mrs. Mink. Why were you not charged to look at the fraud
since we had two tips?
Mr. Hast. We actually are looking at the fraud. We went
back to Chairman Kolbe and presented our findings, the
information to him, since it started with his committee, and
our General Government Division is now conducting a financial
audit to determine whether these allegations of fraud have
merit. And if they do, our office will continue its criminal
investigation.
Mrs. Mink. But you were never charged with conducting an
investigation to see whether there was any fraud?
Mr. Hast. No.
Mrs. Mink. So that is not the reason for your presence here
today?
Mr. Hast. That is correct.
Mrs. Mink. And your charge then was what?
Mr. Hast. To determine what actions were taken to react to
the allegations that ONDCP received.
Mrs. Mink. So we are not here today to make any
determination with reference to whether the hotline tips and
the informers and so forth brought in credible accusations that
could end up in charges being brought against certain
individuals for fraud. We are not here doing that today, are
we?
Mr. Hast. We are not. No, ma'am.
Mrs. Mink. I think that should be made perfectly clear,
that the limits of this investigation only go to the agency
response. And in that connection, Mr. Chairman, I want to note
that it seems to me from the record, the dates, the concerns
that have been expressed by the responsible staff people in the
ONDCP indicate that they acted promptly and that the steps they
had taken in hiring a consultant and in making all of the
internal reviews that they made were quite appropriate. So I do
not understand why we are here today and why the GAO has not
been given precise instructions by this committee to
investigate the fraud and report back to us, because that is of
course our concern. I hope that is the outcome.
With respect to the time sheets, I understand that the
agency has a copy, that Ogilvy has the originals and that the
agency does in fact have a copy of these time sheets. Is that
correct, anybody from the agency?
Mr. Pleffner. That is correct. I have copies.
Mrs. Mink. That is correct. So if the committee makes a
request for a copy of these time sheets, that is not a problem.
Is that a problem? Is that an invasion of privacy? Are we then
going to be charged with having looked at records that we
should not have looked at?
Dr. Vereen. The request for those time sheets came in late
yesterday. We are prepared to turn them over. They do contain
some proprietary information related to Ogilvy, so some things
we do have to be careful about.
Mrs. Mink. Are you working with your legal counsel with
respect to what can be turned over and what cannot?
Dr. Vereen. Yes. They are actually working on that as we
speak. The request came in yesterday.
Mrs. Mink. When do you expect those will be delivered to
the subcommittee for our examination?
Dr. Vereen. We suspect in just a couple of days.
Mrs. Mink. We may be out of here in a couple of days.
Dr. Vereen. They may be on the way.
Mrs. Mink. Thank you. Thank you very much, Mr. Chairman.
Mr. Mica. Just to respond to the gentlelady. We have
requested these and I think it would be appropriate, we can
discuss this later, to turn them over to GAO. We are not
criminal investigators and I do not want to infer that there is
even----
Mrs. Mink. I understood that the GAO has it.
Mr. Mica. GAO does not have it.
Mr. Hast. We do not have it.
Mr. Mica. So, again, there are several parts to this. We
are concentrating on management administration today.
Mrs. Mink. Mr. Chairman, I would be happy not to have them
then and have it turned over to the GAO.
Mr. Mica. Well, we are going to get them. I requested them.
Mrs. Mink. Oh, you want them. All right.
Mr. Mica. We have been joined by the chairman of the full
International Relations Committee who is also a member of our
subcommittee. If I may, I would like to recognize him because I
think he is going to have to leave to go and chair another
meeting. You are recognized for an opening statement or
whatever.
Mr. Gilman. Thank you, Mr. Chairman. I regret that I could
not be here earlier. We were conducting a hearing and I have to
go on to another one. I want to thank you, Mr. Mica, for
calling this important and timely hearing on our Nation's Anti-
Drug Youth Media Campaign and the expenditure of taxpayer funds
in this very worthy and important effort to keep our youngsters
off of illicit drugs. And as you know, we have worked with you
consistently and for a long period of time in our war against
drugs, both domestically and internationally.
The 5 year $1 billion educational campaign for our young
people is an important tool in our fight against teen drug use.
I think the concerns expressed by some on alleged excessive
billing and possible mismanagement of some of these precious
media funds that are hard to come by, especially when the lives
of our young people are at stake, is certainly worthy of a very
careful review and analysis. These funds are intended to help
keep our young people off of illicit drugs here at home. These
dollars need to be used wisely, judiciously since we have cut
both our source nation and transit drug-fighting dollars in
recent years. In turn, we have seen more and more illicit drugs
entering our Nation from abroad, such as deadly cocaine and the
heroin from Colombia. Only now is the administration about to
help Colombia. It may be too little, too late. We hope not.
Alleged ONDCP print media costs of 238 percent above the
industry average, along with ad buying and placement fees far
above an industry average of 3.5 percent, and local broadcast
media costs of 179 percent above industry average, if true,
certainly require response from ONDCP and those managing this
important anti-drug media program. We, the American taxpayers,
and the parents of our young people are entitled to an
accountability and transparency in this important media effort.
We certainly need to see an independent, unbiased, external
audit of these funds now in light of these many concerns, as
called for by General McCaffrey back in I guess it was April
when that letter was first presented to him and not after 5
years and the contract expires. We must effect change before,
not after, the 5-year timeframe.
I hope we can get assurances today that such an external
audit is in fact going to be done by the executive branch. And
I understand GAO is already involved in doing some auditing.
There is already far too much unfounded skepticism about our
war on drugs and whether or not we can win or even do something
effective about it. I hope the media campaign we intended to
help to win our war on illicit drugs here at home and keep our
kids off illicit substances does not prove to be yet another
unfortunate cause for despair and skepticism. And we hope and
trust that today's hearing can alleviate some of these
concerns.
So I look forward to reviewing the testimony of today's
witnesses. Getting an honest assessment of the media campaign's
management, and the results in advancing our vital national
interest of keeping our young people off these deadly illicit
substances are two goals I am sure we can all agree upon.
Mr. Chairman, with your permission, just one question.
General McCaffrey wisely noted after reading your April 13th
memo that we need an external audit, as depicted on that
display there. Do you still share that view, Mr. Pleffner? And
why has there not been an audit of that nature?
Mr. Pleffner. Yes, I do share the General's view that there
needs to be an external audit.
Mr. Gilman. And why was that audit not conducted?
Mr. Pleffner. It was decided early this year--HHS' policy
was to wait until the end of the contract--and it was decided
by ONDCP to wait until after transfer of the contracting
function to another Government agency. At that point an audit
would be requested.
Dr. Vereen. To clarify, sir. The rules regarding HHS and an
audit was that an audit would be done at the end of the
contract. We did not want to wait that long. So we took steps
predating the memo to change the contracting activity to some
other entity. And at this point, we are very close to changing
that contract to the Navy. When that transfer takes place, an
audit will be requested.
Mr. Gilman. Why do you have to wait till the end of the
contract to conduct an audit if you see some problems?
Dr. Vereen. Well, the problems that were identified we have
known about for more than a year. We have taken steps to
protect the public purse by withholding payment on bills sent
to us----
Mr. Gilman. You are withholding payments. Why isn't an
audit appropriate then?
Dr. Vereen. Well, an audit is appropriate.
Mr. Pleffner. We believe an audit is appropriate.
Dr. Vereen. Yes. We have taken steps.
Mr. Pleffner. The contracting officer stated that HHS had a
policy that an interim audit would not be conducted, that we
would have to wait until the conclusion of the contract.
Mr. Barr. Excuse me. Would the chairman yield?
Mr. Gilman. I am pleased to yield to the gentleman.
Mr. Barr. You all are I think confusing us up here. Is it a
policy or was it a specific term of the contract that no audit
would be performed before the expiration of the 5-year
contract? You all have used different terms and the legal
significance of them is significant.
Mr. Pleffner. The contracting officer sent me an e-mail,
after I requested that an interim audit be performed, she sent
me an e-mail telling me that HHS policy was to wait until the
conclusion of a contract, the end of the contract before an
audit could be performed.
Mr. Barr. So it was not that there was any legal
prohibition on you all demanding that an audit be performed,
which would be the appropriate way to protect the taxpayers,
you are saying that HHS said we are just not going to do it
because it goes against our policy.
Mr. Pleffner. Correct. Now I must add that HHS would have
performed an audit----
Mr. Barr. If they got more money.
Mr. Pleffner. If they got more money, yes, sir.
Mr. Barr. That is big of them. I yield back.
Mr. Gilman. Thank you. And thank you for your comments, Mr.
Barr.
HHS was prepared to do an audit, all they wanted from ONDCP
is to get paid for it. So there was no obstruction, is that
correct, in doing the audit at any time? Is that right?
Mr. Pleffner. Yes, sir.
Mr. Gilman. I cannot understand then why an external audit
was not ordered right after General McCaffrey suggested that.
There is no explanation apparently that is logical, unless you
have another explanation for it.
Mr. Pleffner. I would like to add that to date ONDCP had
paid HHS roughly $1 million in fees. We believed, and the MOU
that we have with HHS states, all contract administration
functions would be performed. One function is contract audits.
We believed that the fees that we had already paid them should
have covered the audit.
Mr. Gilman. Did anyone pursue that with them and say, look,
we have paid this money, why isn't an audit being conducted?
Mr. Pleffner. Beyond the communications I had with HHS back
in March 2000, it was at that point we decided that we were
going to be moving the contracting function, we decided not to
pursue the action.
Mr. Gilman. Not to pursue an audit?
Mr. Pleffner. Correct, through HHS.
Mr. Gilman. Why?
Mr. Pleffner. Again, they were requesting additional
compensation.
Mr. Gilman. But you felt they had been given the
compensation, is that correct?
Mr. Pleffner. Correct.
Mr. Gilman. So did anyone try to resolve that issue, that
you had paid them and they were not doing an audit. Did anyone
try to resolve that? Did you ask General McCaffrey to resolve
that issue?
Mr. Pleffner. No, sir, I did not.
Mr. Gilman. Thank you. Thank you, Mr. Chairman.
Mr. Mica. I thank the gentleman from New York.
I am pleased to recognize the vice chairman of our
subcommittee, Mr. Barr, the gentleman from Georgia.
Mr. Barr. Thank you.
Let me followup on the very insightful questions of
Chairman Gilman just to make sure for the record that we
understand what is going on here. In the exhibit over here, at
the bottom of page 2, there is a handwritten notation by
Director McCaffrey which is to the right of the following
sentence, ``The contracting office's initial response was that
their policy was to perform an audit only at the end of the
contract--in this case, at the end of 5 years.'' The notation
off to the side is ``No.'' Not just no, but ``No!'' with
exclamation point. That to me indicates, and does it indicate
the same thing to you, Mr. Pleffner, as the author of this
document, that Director McCaffrey was saying no, we are not
going to wait until the end of the end of the contract?
Mr. Pleffner. That was my feeling, he did not want to wait.
Mr. Barr. And then further on down, it says ``Since we are
considering changing contracting offices''--which you all are
still apparently considering several months later, this is 6
months ago--``(from HHS to Navy--blue folder is on its way)''--
what is a blue folder on its way?
Mr. Pleffner. That is the mechanism in which to forward
documents up through the chain of command.
Mr. Barr. Did the blue folder ever get there?
Mr. Pleffner. Yes, sir.
Mr. Barr. But the process still has not taken place,
changing this responsibility from HHS to Navy?
Mr. Pleffner. The Director has approved the change to the
Navy.
Mr. Barr. But it has not actually taken place. I thought
that was what Dr. Vereen testified.
Mr. Pleffner. We are currently negotiating costs and terms
of the arrangement, the MOU.
Mr. Barr. So the authorization has been given but the
details have not been worked out.
Mr. Pleffner. The final details, correct.
Mr. Barr. OK. Then it says, ``we decided to wait before
initiating an audit.'' And then down at the bottom of the page
there is a notation, as testified to by GAO this is General
McCaffrey's notation, ``Yes. We need an external audit.'' To
me, Mr. Pleffner, and I would like to see whether you agree
with this, that to me clearly indicates when you put those two
notations together that General McCaffrey was saying no, we are
not going to wait for 5 years to conduct an audit, and we need
one immediately.
Mr. Pleffner. Yes, I agree.
Mr. Barr. But again, as we have learned with this
administration that you have to ask, what does ``immediate''
mean to this administration, do you know? What does immediate
mean to you as a public servant and somebody who has written a
very lucid and straightforward memo here?
Mr. Pleffner. Well, I believe----
Mr. Levitt. Sir, as program manager, can I just make a
comment here?
Mr. Barr. I am sorry. I want Mr. Pleffner to explain to me
what immediate means to him.
Mr. Pleffner. Immediately meant to me immediately after
transfer of the contracts out of HHS.
Mr. Barr. In other words, you were seeing something that
concerned you here, and that is very possibly, to put it
mildly, significant waste of taxpayer money and significant
activity by Ogilvy that raised very serious questions in your
mind about billing practices. Is that correct?
Mr. Pleffner. Correct.
Mr. Barr. And based on that, as a public servant, you
recommended to the Director that an immediate audit be
performed. Is that correct?
Mr. Pleffner. That is correct.
Mr. Barr. That immediate audit has not been performed. Is
that a fact?
Mr. Pleffner. That is a fact.
Mr. Barr. OK. That is why we are concerned up here. If I
could, Ms. Twyon, you testified earlier I think in response to
a question by the gentlelady from Hawaii that you have a
contract or you contracted with the Ad Council.
Ms. Twyon. Correct.
Mr. Barr. And that is the basis on which your report was
performed or drafted?
Ms. Twyon. Yes.
Mr. Barr. And were you compensated for that service?
Ms. Twyon. Yes.
Mr. Barr. How much? Approximately.
Ms. Twyon. Let me look because I do not know the answer to
that. Let's see if it is in here. I have $15,000.
Mr. Barr. OK. And that $15,000 more or less, I am not
trying to pin you down to a specific amount, was received by
you from the Ad Council pursuant to moneys that they received
from ONDCP?
Ms. Twyon. Yes.
Mr. Barr. So this report was paid for by the taxpayers of
this country?
Ms. Twyon. Yes. I assume so.
Mr. Barr. OK. Your document is not a classified document,
is it?
Ms. Twyon. You are asking me something I do not know how to
answer. It was a confidential document. I do not know what
classified means here, so I do not know how to answer you.
Mr. Barr. OK. I have a copy of it here and I would ask
unanimous consent to have it included in the record.
Mr. Mica. Without objection, so ordered. It is now a public
document.
Mr. Barr. Do you have a copy of it?
Ms. Twyon. Yes, I do.
Mr. Barr. Do you see any markings on there that indicate
that it is a classified document or that any portion of it is
classified?
Ms. Twyon. No, it is my copy.
Mr. Barr. OK. Neither does our copy. On page 19, under your
summary it states that ``The savings range of $8.5 to $14.8
million is reasonable to expect. The agency can always add to
staff to help the ONDCP better perform and at the same time
increase the agency revenue. The point is not in justifying the
staffing, but in finding ways to realign the manpower to
industry standards.'' You do not disavow that finding, do you?
You stand by it?
Ms. Twyon. No, not at all. I support that.
Mr. Barr. OK. Thank you.
Continuing on with your report of April 13th, Mr. Pleffner,
in the middle of page 2 you state, ``He stated that last
summer, Bill Gray, president of Ogilvy New York, held a meeting
with the most senior account staff and complained about the
lack of revenue with this contract.'' And a little bit further
down you seem to indicate that there might be a connection
between the senior official at Ogilvy, Mr. Gray, complaining
about the lack of money coming in on the contract and then
additional time sheets and altered time sheets coming back in.
Is that correct?
Mr. Pleffner. That is correct.
Mr. Barr. Further on down in the next paragraph, the last
sentence reads: ``The fact that an outside source, particularly
an executive level employee, corroborates these concerns,
prompts me to formally document these issues in this
communication.'' Did you believe at that time, and do you
believe as you sit here today, that there was credible evidence
to substantiate your concerns as related to the Director of
ONDCP? Did you feel that there was a substantial basis and
credible evidence on which to base your conclusions that there
were questions here and that there ought to be an immediate
audit?
Mr. Pleffner. At that time, yes, I did believe.
Mr. Barr. Do you still believe that there is sufficient
evidence, credible evidence on which to base that conclusion?
Mr. Pleffner. Of billing irregularities, the Ogilvy
practices associated with financial and contract management,
yes, I still believe it is necessary.
Mr. Barr. If I could, Mr. Hast, turn to your testimony
today, a copy of which I believe, Mr. Chairman, has been placed
in the record. One thing that caught my attention, on the
bottom of page 2, you say, ``However, we found that an official
of another ONDCP contractor, Fleishman-Hillard, spent 3 to 4
hours advising Director McCaffrey on this matter. This time was
not charged to the ONDCP contract. We were told that this time
was considered a personal favor to Director McCaffrey.'' Would
that be covered by ethics and be required to be reported? In
other words, if an outside contractor provides services and
does not charge them, that would be considered----
Mr. Hast. I am not enough of an expert on ethics to know.
We were reporting the facts. But I do not know what the ethics
rules would be on that.
Mr. Barr. Dr. Vereen, are you aware of whether or not that
has been reported?
Dr. Vereen. No, I am not.
Mr. Barr. OK. Are there any lawyers from DEA here with you
all today?
Dr. Vereen. Lawyers from ONDCP, yes, I believe there is
one.
Mr. Barr. OK. Would you consult with him and ask if that
has been reported under ethics.
Dr. Vereen. Not to his knowledge.
Mr. Barr. OK. Would you suggest to him that the Director
may want to check into that.
Dr. Vereen. Noted.
Mr. Barr. Mr. Hast, I would like to draw your attention for
a couple of minutes here to what has happened after the April
13th memo. We have some concerns that are based on credible
evidence that there are serious discrepancies in billing
practices and costs. But nothing happens. There seems to be
some dispute here as to the position of the head of ONDCP with
regard to whether or not the contract would continue, whether
or not costs are an issue or not an issue. You deal with some
of this in your complete testimony on pages 4, 5, and 6.
The conclusion, at least the partial conclusion that you
reach on page 6, is that ``Ms. Seifert stated that sometime
after the May 23, 2000, meeting, Ogilvy received another letter
from Ms. Crist, which included a form to be filled out in order
to have Ogilvy explain its labor costs.'' But thereafter, there
were additional meetings that you document. For example, on
page 8, you say ``Ms. Seifert told us that on June 5, 2000, she
had a private meeting with Director McCaffrey for approximately
20 minutes. She stated that she had met with Director McCaffrey
alone approximately 4 to 5 times in the past 2 years and that
on other occasions she had met with Director McCaffrey when
someone else was present.'' Then continuing on down on your
page 8, in the middle there is a paragraph that reads, ``Mr.
Pleffner told us that after Ms. Seifert left the June 5, 2000,
meeting with General McCaffrey, she met with Mr. Levitt and Ms.
Bartholomew where, according to them, she announced that
Director McCaffrey was satisfied with the contract costs and
that the Ogilvy contract would continue. Mr. Levitt and Ms.
Bartholomew deny that this conversation occurred. Ms. Seifert
denies making this statement.''
What was the basis on which you included these references
in here, and do you believe that those conversations took
place?
Mr. Hast. I believe when we interviewed Mr. Levitt and Ms.
Bartholomew we were under the impression that when Ms. Seifert
came up she said that the General was satisfied with the
billing and no audit would take place, and they said she did
not say that. I think they were technically correct that she
did not come out and say no audit would take place. What she
said was the General was satisfied with the price. And I think
that is what Mr. Pleffner and Mr. Levitt----
Mr. Levitt. Congressman Barr, I said nothing whatsoever
about any audit.
Mr. Barr. Excuse me just a minute. And that is precisely
what your testimony says. It does not say that somebody said
that the audit would not be performed. It simply says, as you
have just testified orally, that Ms. Seifert announced that
Director McCaffrey was satisfied with the contract costs and
that the Ogilvy contract would continue. Was that corroborated
by information or answers or testimony given to you by Mr.
Pleffner?
Mr. Hast. Yes.
Mr. Barr. OK, Mr. Levitt?
Mr. Levitt. As I said before, Ms. Seifert told me that in
the meeting that she had with General McCaffrey he expressed
more comfort with the issues of the labor, not billing, but the
labor, the Jane Twyon report. She said nothing whatsoever about
an audit. There was no discussion of an audit.
Mr. Barr. Mr. Pleffner, you authored the original memo here
on April 13th. It is my impression that you testified that Mr.
Levitt said that costs were not an issue based on the results
of that meeting. Is that correct?
Mr. Pleffner. That is correct.
Mr. Barr. This is why, Mr. Chairman, there are so many
questions about this. We have a memo that is based on very
clear and convincing evidence, credible evidence that an audit
should take place. Then we have some meetings that appear
unusual, at least according to standards of previous practice
in that there were no witnesses there. And then we have
essentially an announcement that the contract costs were OK,
Mr. McCaffrey was satisfied with them, and the contract would
continue. And here we come 4 months later and still no audit
has been taken. This stretches the meaning of immediate beyond
even I think the standards laid down by the head of this
administration.
Mr. Mica. Will the gentleman yield?
Mr. Barr. Yes.
Mr. Mica. One of the things that concerns me is the report
by Ms. Twyon that highlights the costs for this program. She
identified, and she is sort of an expert consultant to come in
and look at that, ONDCP costs is 179 percent above industry
average. Is that correct?
Ms. Twyon. I have to find the page that you are----
Mr. Mica. And then a commission rate of 14 percent versus
industry rate of 3.5 percent.
Mr. Cummings. Mr. Chairman, she was trying to answer the
question. I just think it would be beneficial to all of us----
Mr. Mica. I am just trying to help identify the page.
Ms. Twyon. Yes. It is just that I have a lot of numbers in
the report. So if you will just give me a minute, I will be
able to answer you more clearly, I can try to answer you more
clearly.
Mr. Mica. I can have a staff person bring this down.
Ms. Twyon. No, I have it. I have it right here.
Mr. Mica. Our vice chairman was making some points and I
just wanted to confirm that this is what you found in your
examination and were paid for.
Ms. Twyon. The answer is what you are reading there is what
I found based upon the information that I was given, and I was
given specific information from Mr. Pleffner of what I was
going to look at, and the assumptions which are listed in my
report that I made.
Mr. Mica. That is all I wanted to confirm. Thank you. I
will yield back to the gentleman.
Mr. Barr. Thank you. Mr. Hast, have you all interviewed Mr.
Bill Gray, president of Ogilvy New York?
Mr. Hast. We have not yet.
Mr. Barr. Do you have plans to?
Mr. Hast. I believe that we are going to wait till we see
how the financial audit goes. And if they determine there are
suspicions of fraud, we will be back to interview people at
Ogilvy about this.
Mr. Barr. That might be some period of time it appears.
Mr. Hast. It could be, yes.
Mr. Barr. Do you believe there might be a case to be made
based on just the information contained in Mr. Pleffner's memo
to interview Mr. Gray before some indefinite point in the
future?
Mr. Hast. Yes, I think there could be a case made for us to
do that.
Mr. Barr. Would you be in a position to take such steps?
Mr. Hast. Absolutely.
Mr. Barr. OK, if you would please. Thank you.
I yield back.
Mr. Mica. I thank the gentleman.
I would like to recognize the gentleman from Maryland, Mr.
Cummings.
Mr. Cummings. Thank you very much, Mr. Chairman.
Mr. Hast, I am just curious. Something just happened that I
found very interesting. At first, I thought you had indicated
that you were going to go through a certain procedure to wait
for certain documents before the interview was conducted with
Mr. Gray. Then when Mr. Barr suggested that you do it, did you
say you were going to do it now? I am just trying to figure out
what happened.
Mr. Hast. Yes. I believe that we were going to wait before
we conducted any more interviews until we see how the audit
came out. But since this question was raised and it can be a
yes or no answer from Mr. Gray as to whether--the only thing we
would interview him about is did he have a meeting with his
executives where he told them that they were not making enough
money on this contract, and did he give them any instructions.
I think we could do a very simple interview and pin that down.
Mr. Cummings. I understand that and that makes a lot of
sense. Can you tell me why it is that your plan was to wait for
the audit? Why did you want to do that before possibly
interviewing Mr. Gray? I am just putting aside what you just
said and am now going on to the original plan?
Mr. Hast. The original plan would be if the audit
completely exonerated Ogilvy, and the audit found absolutely
nothing irregular with the billing sheets, and all of the
people that we interviewed whose sheets have been changed had
answers that absolutely made sense and there was no suspicion
of fraud, there would not really be a necessity to do it.
Mr. Cummings. I see.
Ms. Twyon, first of all, I do not know whether anybody did
it, but around here we are very concerned about our reputations
too. They are the things that get us elected. If you have been
harmed in any way, I apologize for us.
Ms. Twyon. Thank you.
Mr. Cummings. Let me just ask you this for the record. Your
report, did you have a finding of over-billing?
Ms. Twyon. I did not look at any billing of manpower. That
was not part of my charge.
Mr. Cummings. And what were you doing? Since your report is
so significant, I want to make sure that we have it clear. We
have got C-Span looking at this and maybe some of your comrades
are looking at it. I want to make sure you are very clear
because I think it is important to everybody involved.
Ms. Twyon. It is non-media compensation. It is the cost of
manpower and the number of manpower hours is what I was looking
at.
Mr. Cummings. So I take it that you would not have found
any fraudulent activity by anyone because that was not in your
purview. Is that right?
Ms. Twyon. That is correct. I did not have any
documentation of anything like that I was even evaluating.
Mr. Cummings. I guess this would be directed to Mr. Vereen
or Mr. Levitt. Ms. Twyon reports that a 15 percent commission
rate is traditional for the purchase of advertising time and
space. Is that correct, Ms. Twyon?
Ms. Twyon. Yes. It is a historic number. Today it is no
longer true, but years ago that was the number that agencies
earned, 15 percent.
Mr. Cummings. In addition, the report states that a
consumer could even negotiate a commission as low as 7.5
percent on a large advertising purchase due to increasing
advertising industry competition. Is that correct?
Ms. Twyon. Yes, but I am isolating then specific
assignments. It may not be the total assignment of doing
creative and media and PR and everything that an agency might
do. So that there are varied commissions depending upon what
the assignment is to the agency.
Mr. Cummings. Mr. Levitt or Mr. Vereen, who negotiates the
commission? How is that done, do you know? Is it your legal
department?
Mr. Levitt. Mr. Pleffner is actually the person to ask.
Mr. Cummings. Mr. Pleffner, how is that determined?
Mr. Pleffner. Early on in the second year of the contract,
I requested that Ogilvy submit a project plan, a proposal for
media and non-media costs. That was submitted to ONDCP on March
8th. It was as a result of that media plan and the increased
costs that we had identified that we retained Jane Twyon to
assist us in analyzing. We have been in discussions with Ogilvy
since spring of 2000.
Mr. Levitt. Congressman Cummings, let me make one comment?
Mr. Cummings. Sure.
Mr. Levitt. I think there have been many misunderstandings
here and also in the media about Ms. Twyon's report, which I
think is a very, very good report. It is a directional report.
It helps us focus on what kind of labor structure we want in
the future--do we want so much behavioral component, do we want
so much of the media buy.
There are a couple of things that Ms. Twyon did not realize
at the time. First of all, the report that she was asked to
analyze had about $1.5 million more I think of labor and
overhead costs than was reality, because during the time that
she analyzed it, Ogilvy came down about $1.5 million in their
costs. So it is inflated from that point of view. She also had
to make certain assumptions, which she clearly mentions in her
report, and she also mentions that there are certain unique
things to every advertiser that she may not be aware of.
This campaign is for all Americans. We have 11 languages.
We have a science-based approach. One ad, one time on ER or a
program like that can cost a half million bucks for 30 seconds
of taxpayer's funds. There is a greater accountability on the
part of the Government. So we require a higher level of
testing, a higher level of behavioral components, audience
focus groups, much more so than if you are just selling
Kleenex. This is a behavior/attitude change campaign. It is not
a consumer product marketing campaign. And there are a lot of
differences. That is what the experts told us was going to
work.
Mr. Cummings. Does that affect the rates?
Mr. Levitt. I do not know if it affects the rates. It
affects the labor structure, and I do know it affects the pro
bono match. Congress has mandated a pro bono match, and Ms.
Twyon has accommodated a big chunk of that. But what she
probably did not know is that when you traffic an ad, when
you--let me just give you an example. If you win a gold medal 1
day in the Olympics, you could be on TV in 2 days with a
commercial. In our program, because it is evaluated by the
National Institute of Drug Abuse, and because we have all these
accountability measures, it will take at least 2 months and
testing and coordinating with a dozen organizations in the
behavioral science field, in NIH, with the Annenberg School of
Communications. So it is a lot more labor intensive. And some
of that she may not have taken into account and that may have
skewed why it is so much above average.
I think what is unfortunate here is that advertising
clients have people like Jane Twyon come in, she has a
wonderful reputation, she was recommended by the Ad Council,
and her report is being taken out of context completely. What
happens when the next Government agency wants to bring in an
outside consultant?
Mr. Cummings. All right. I understand.
Ms. Twyon.
Ms. Twyon. I have to agree with what Mr. Levitt said. I do
the absolute best I can, but, as I state in my report, I make
assumptions. That is required. I am very careful to list my
assumptions, which I did. It does not mean that they are right;
they are just the best I could make so that we can move
forward. So there is information that I do not have because I
am not working in the field, I am just given a report and I go
away and do my analysis. I will give you one of the specifics
that I did not realize when I first did my report. When I
initially did my report on the manpower issue area, there was a
line called ``production.'' I made the assumption, since
everything else was manpower, that was manpower. In the end, I
found out that was not manpower, that was actual production
cost. So I can make mistakes because I do not know pieces of
information.
My report, let me say again, is the beginning. It is not
the final product. Think of it like a roadmap. You now take
this roadmap and you work with the agency, Ogilvy, and ONDCP to
figure out what is there. It lists everything very clearly so
now you have a place to go. You know if you are going to move
manpower from one discipline you have to put it someplace else.
If you change an assumption, you know why you are going to
change the assumption. That is the point, it is a very good
base to move forward from.
Mr. Cummings. Mr. Levitt, you said something that I am just
curious about. You said that while Ms. Twyon was doing her
report the costs, and correct me if I am wrong or misquoting
you, the costs from Ogilvy came down. Did you say something to
that effect?
Mr. Levitt. Yes. The proposed cost for the following year's
budget was reduced by Ogilvy. We had been talking to Ogilvy a
couple of months before this, not just Ogilvy but all of the
contractors in the media campaign. There was huge inflation
because of the rich ad climate in the last several years. There
was actually increased costs because of our success--we have
had a million phone calls into our clearinghouse from parents
asking for information. All these things jack up the costs for
printing or other kinds of labor.
We have looked at all our contractors, including Ogilvy
because they are the biggest one, and we have had a series of
meetings. In fact, we are talking now about possibly taking a
number of other activities and transferring them to other
organizations or maybe we do not need that level of effort this
year in the campaign. It is not a matter of this over-billing
or are we paying for labor that we do not need, rather, do we
need this level of effort at this stage of this campaign.
We have asked Ogilvy to do a lot more work for us. We have
asked them to do ads on ecstasy and meth and heroin. We have
asked them to do a huge Internet component. The Internet is
surging. For African-American and Hispanic families, Internet
use has surged almost 500 percent in the last 4 years. The
previous campaign, by the Partnership for Drug-Free America, as
good as it was, did not have a huge Internet component. We are
doing a variety of other things with this campaign. Reaching
out to the entertainment industry. Last week, actually somebody
from Chairman Mica's district, Tinker Cooper, spoke to 20
writers and producers on ecstasy, about the unfortunate
problems her son had with it. So Ogilvy is involved with a lot
of these other activities that may not be apparent. This is not
just an ad campaign. It is a comprehensive public health
communication campaign.
And can I just add one other thing?
Mr. Cummings. Briefly, because I want to get to Mr. Hast. I
have a number of questions.
Mr. Levitt. We are extremely proud of this program. It is
working, including the financial component of it. We have had
seven hearings, we have provided this committee with 18,000
pages of documents, and we have cooperated with the GAO, and we
will continue to. But we are very comfortable with what we have
done.
Mr. Cummings. Now when Ogilvy appeared in Mr. Mica's
district, did they bill you for that?
Mr. Levitt. When what?
Mr. Cummings. You just said a few minutes ago they were in
charge of something in Mr. Mica's district. You did not?
Mr. Levitt. No.
Mr. Cummings. What did you say?
Mr. Levitt. One of the people who testified before this
committee I think a year ago, Tinker Cooper, lost her son to
ecstasy and heroin. She was from Congressman Mica's district.
We actually brought her and somebody else to this roundtable
discussion last week and it was very, very successful.
Mr. Cummings. Thank you.
Mr. Hast, I just want to make sure the record is clear. You
had certain findings that you provided us in your opening
statement, is that right?
Mr. Hast. Yes.
Mr. Cummings. You had some findings. I just want to make it
so clear that we have a complete record, and this may not be a
complete record even with the questions I am going to ask you.
The findings that you provided I think are partly why we are
here today. But I want to just ask you about some other ones.
Another GAO inquiry recently found that ONDCP ``has met
most mandates'' regarding the media campaign funds and program
guidelines. Are you familiar with that?
Mr. Hast. Yes.
Mr. Cummings. And was that a part of the same inquiry?
Mr. Hast. No.
Mr. Cummings. OK. And were you involved in that?
Mr. Hast. I was not.
Mr. Cummings. So did you review that in the process of
doing what you have been doing in regard to your investigation?
Mr. Hast. Yes. We discussed that investigation with the
people that did it. I really did not read it.
Mr. Cummings. OK. You did not read the investigation?
Mr. Hast. I did not read the audit that the other group
did. But I did discuss it with them in our General Government
Division. The management review, I am sorry.
Mr. Cummings. Wait a minute. Let's rewind. GAO did an
audit, a management review?
Mr. Hast. A management review, I am sorry.
Mr. Cummings. And they reviewed ONDCP?
Mr. Hast. Yes.
Mr. Cummings. And you did not read the document?
Mr. Hast. I did not.
Mr. Cummings. Are Mr. Sullivan and Mr. Cooney with you?
Mr. Hast. Yes.
Mr. Cummings. Did you all read it?
Mr. Sullivan. Yes, I read the document. I am the Assistant
Director in charge of the squad that handled the investigation.
I read the document and Mr. Cooney read the document. Mr. Hast
is our boss.
Mr. Cummings. OK. Did you share the information that you
found with Mr. Hast?
Mr. Sullivan. Yes, we briefed Mr. Hast after we digested
the document. At every step of the investigation we briefed Mr.
Hast as to how the investigation was progressing.
Mr. Cummings. So, basically, Mr. Hast is over you and you
all are sort of doing the day-to-day work?
Mr. Sullivan. Yes, sir, Mr. Cummings, that is correct.
Mr. Cummings. I see. Fine. The question that I just asked
Mr. Hast is, is it correct that report said ONDCP had met most
of its mandates?
Mr. Sullivan. Mr. Cummings, that is absolutely correct.
However, the management review did not focus on any of the
allegations of fraud. So they just looked at, as mandated by
the Appropriations Committee, whether this program was
following the guidelines that Congress set.
Mr. Cummings. I see. OK. And this investigation you are
talking about you are saying is zeroing in on fraud. Is that
correct?
Mr. Sullivan. Our investigation, Mr. Cummings, was we were
specifically requested to examine the allegations that the
suspicions of false billing were brought to the attention of
ONDCP management and the allegation was they did nothing with
those allegations and the audit was never conducted that was
initially ordered by General McCaffrey. That is what we were
asked to look at, whether or not the response of ONDCP was
appropriate or not.
Mr. Cummings. So you were asked about whether they
responded to these allegations and the response being an audit.
Now that is what I think you just said. Is that right?
Mr. Sullivan. No, sir.
Mr. Cummings. OK. Say it again.
Mr. Sullivan. Just to narrow the focus, we were asked,
within the very narrow parameter, whether or not ONDCP
responded appropriately when the allegations of false billing
was first brought to the attention of senior ONDCP management.
In other words, what did ONDCP management do as a result of the
April 13th memorandum authored by Mr. Pleffner; if an audit was
not conducted, why was it not conducted immediately; and what
other response was taken in regard to that memo.
Mr. Cummings. Now did Ms. Twyon's report play a significant
role in what you all have been doing?
Mr. Hast. I would say that it did not. It was part of the
memo that we reviewed, and as much as it played a role in that
memo, I think it played a role in our investigation.
Mr. Cummings. Now is it true that, in evaluating how funds
for paid advertising were managed and dispersed, GAO found that
although ONDCP used administrative contract support from other
Federal agencies to assist with paid advertising contracts, it
remained responsible for ensuring that only valid campaign
expenses were paid out of from ONDCP, and that ONDCP had
processes in place to monitor and approve all paid advertising
expenditures before paying vendors and reporting to Congress?
Mr. Sullivan. Mr. Cummings, that is our understanding. We
ascertained that from the interviews we conducted with Mr.
Pleffner and other officials at ONDCP responsible for managing
the contract. So that is our understanding, sir.
Mr. Cummings. I know, Mr. Hast, the question was asked
whether you had met with Mr. Gray. But is it true that Ogilvy
and Mather officials were interviewed by GAO?
Mr. Hast. There were several Ogilvy and Mather officials
interviewed.
Mr. Cummings. And during those discussions, I take it those
were extensive interviews?
Mr. Hast. Yes.
Mr. Cummings. Did the question of fraud come up?
Mr. Sullivan. Yes, sir, it did.
Mr. Cummings. OK. Is that a part of the 91 page report?
Mr. Sullivan. No, sir.
Mr. Cummings. Can you tell us why?
Mr. Sullivan. The allegations that we were investigating
had nothing to do with the initial management review that was
conducted by the General Government Division. We are the
investigative arm of GAO and we were specifically mandated to
conduct an investigation to determine the response to the
allegations that were originally raised in the April 13th
memorandum.
Mr. Cummings. Now ONDCP, I guess this would be Mr. Levitt
or probably Mr. Pleffner I would guess, is it customary in your
review of invoices, before recommending payment or nonpayment,
to express any concern to the contractor about the costs? I
mean, if you saw something that looked a little irregular,
would it be your custom to say wait a minute, red flag, there
is something wrong here?
Mr. Pleffner. It is customary to discuss with the
contractor concerns, as I did with Ogilvy.
Mr. Cummings. And as I looked at your memo, the memo that
is on the board there, I take it that there came a point in
time when you brought it to the attention of people in your
agency. And then at what point did you get additional
information? In other words, you had the information that had
come to you through the process of doing your job, and you
inquired I think of the Ogilvy people exactly why do I see
these problems. At what point did other outside sources come--
did they come before, did they come later--to tell you that
there might be something wrong here? In other words, that the
information that you may have been given by Ogilvy was not
necessarily accurate.
Mr. Pleffner. The issues relating to irregularities with
Ogilvy's invoices were first raised in September 1999. There
were probably a half dozen labor invoices where I identified
these problems, communicated the problems to Ogilvy and the
contracting officer. It was March 2000 that I had a former
Ogilvy employee come to me and make the allegations that
prompted me to write this memo to the Director.
Mr. Cummings. And you knew that person?
Mr. Pleffner. Yes, I did.
Mr. Cummings. And you felt comfortable that person's word
was true?
Mr. Pleffner. I had no reason to not believe him. He did
not provide any evidence. This was a phone conversation we had.
But in my position, you never take this kind of allegation
lightly. A number of the allegations made were consistent with
concerns that I had with regard to the labor billing.
Mr. Cummings. And when you talked to Ogilvy, your first
discussions with them were when?
Mr. Pleffner. As far as the billing issues?
Mr. Cummings. What you just talked about, yes.
Mr. Pleffner. The first discussions on billing issues was
late September 1999, early October 1999.
Mr. Cummings. And what were you told back then by Ogilvy?
Mr. Pleffner. By Ogilvy, they stood by the invoices they
submitted.
Mr. Cummings. And what was your reaction to that at that
time?
Mr. Pleffner. At that time, my reaction was to do my job,
which was to recommend withhold of any costs I believed were
inappropriate or unsupported, which I did.
Mr. Cummings. Mr. Levitt.
Mr. Levitt. Can I put into context the kind of withholds
that we would have?
Mr. Cummings. Yes.
Mr. Levitt. I think there is a nefarious tone in some of
the questions and in some of the news accounts about this.
Ogilvy had never worked for the Federal Government before.
There are a maze of issues dealing with the Federal Government;
high levels of accountability for media, proof that it ran on
your TV station, small business, EEO, women-owned business, a
whole variety of things--and I could provide that for the
record if you want--that are not difficult to obtain but that
are strange in the ad culture, in the ad industry. In the ad
industry, when you produce an ad, or in the movie business when
you shoot a program, you have got a platter of food in the
background, the cameraman and everybody else eats. You cannot
pay for food in the government. You cannot fly first-class in
the government. There are also issues of should the bonus go in
the overhead or direct salary account. A whole range of issues.
There was not just one issue. Most of them had to do with
labor-related issues. But, again, this could be an innocent
thing. And Ogilvy also has had three different financial people
involved in the billing over this period of time. They now
realize they have to get somebody who really knows about the
Federal acquisition process. But at least the billing part
could be completely just part of the routine financial
oversight that a government agency does with its contractors.
As I said before, we have withheld from all of our contractors
and subs and even government agencies that we have cooperative
agreements with.
Dr. Vereen. And we would be happy to provide that
documentation as well.
Mr. Cummings. I would like to have that, Mr. Chairman.
I just have two more questions. When you got the Twyon
report, and I do not know who is best to answer this, did you
have discussions with Ogilvy with regard to that report?
Mr. Levitt. Yes. We have had several discussions with
Ogilvy. In fact, Ms. Twyon was in a meeting with Ogilvy
discussing her report. They came down, they brought their
president, Bill Gray, and other financial people, as well as
Ms. Seifert, the project officer, to discuss it and respond.
And we have had two meetings like that. We have also had two
very lengthy analyses of Ogilvy's labor structure and
proposals. They have come down a little bit, but also proposals
of why these things cost so much in different categories and
some options for us to reduce the costs even further.
Mr. Cummings. Did they provide you any explanation on the
difference in their costs and those recommended by Ms. Twyon?
Mr. Levitt. Yes, to some degree. Part of it was what I just
mentioned, that there were some things that she did not take
into account. And there were legitimate differences of opinion
also between Ogilvy and the Federal contracting process.
Mr. Cummings. My last question to Mr. Hast. Is there any
other evidence, and I understand from Mr. Sullivan, and I
appreciate your testimony today by the way, it sounds like the
Twyon report was not a very significant thing in what you all
did; is that right? I think I asked that.
Mr. Hast. Yes. Only in how Mr. Pleffner analyzed it in his
document. Other than that, we did not do a lot with the Twyon
report.
Mr. Cummings. OK. And do you agree with her, from what you
all have seen, that report does not really deal with over-
billing, or does it? Does it allege over-billing?
Mr. Hast. I am really not an advertising industry expert
and that is really why we did not deal much with that report,
because I think you would have to be in the field to really
understand it.
Mr. Cummings. And so, other than the Pleffner memo, I think
that is about it, is there any other reason for you all to
believe that Ogilvy committed any kind of fraudulent activity
here? I mean from stuff that you have.
Mr. Hast. I would not want to say that we believe it. I
think we have interviewed other people that have substantiated
the allegations in that memo to the point that I think it
requires further investigation. But at this point, we have
absolutely no proof of fraud by anyone.
Mr. Cummings. Thank you. Thank you very much.
Mr. Barr [presiding]. Mr. Sullivan, I think you testified
earlier in response to questions from the gentleman from
Maryland that one of the things that you all were tasked with
looking at was whether or not ONDCP responded appropriately to
the allegations of false billing, as brought to the Director's
attention in early 2000. At this point, do you believe that
ONDCP did or did not respond appropriately?
Mr. Sullivan. We have not formed any final conclusions as
to whether they responded appropriately or not. We were just
conducting the investigation and we are presenting the facts
for the subcommittee to draw your own conclusions.
Mr. Barr. You have not formed any conclusion one way or the
other?
Mr. Sullivan. No, I have not formalized a final conclusion
myself, Mr. Barr.
Mr. Barr. Do you believe it is appropriate to order an
immediate audit in the face of such allegations and for another
6 months to go by and no audit is even close to being
performed? Do you believe that is an appropriate response?
Mr. Hast. Mr. Barr, if I could answer that. I believe if
someone thought there were allegations of fraud, they should
move very quickly. I think in a number of our interviews,
especially with General McCaffrey, the view of this was billing
irregularities. And although fraud was mentioned in the memo, I
do not believe from our interviews that was where his focus
was.
This was also sent to his General Counsel. I think that is
the role of attorneys. The attorneys that reviewed this I think
should have taken the fraud more seriously and probably
recommended moving somewhat more quickly.
Mr. Barr. According to your written testimony, the ONDCP
General Counsel, Mr. Jurith, told you that they were aware of
the billing irregularities. So apparently ONDCP knew that there
were billing irregularities. Correct?
Mr. Hast. Yes. And he initialled the memo with the
allegation that there was possible fraud.
Dr. Vereen. Mr. Barr, may I make a comment?
Mr. Barr. Sure.
Dr. Vereen. Those billing irregularities led us, well
before this memo, to explore options to change the contract and
initiate an audit. This predates the memo. All of that was in
place predating the memo. And I draw your attention to the end
of the second page, you mentioned the word ``immediate,'' the
immediate refers to upon the moment that the contract is
transferred. We have attempted, as Mr. Pleffner related
earlier, attempted to negotiate an early audit without
incurring extra costs. That did not happen. But we already had
a plan in place to change the contract, to initiate an audit.
Unfortunately, that has taken a while, and that is about to
be----
Mr. Barr. That is real unfortunate. That is the whole
question here. This has been going on for over a year. I know
immediate might mean one thing to somebody and maybe 2 or 3
more days to somebody else. But this has been going on for over
a year. This is taxpayer money we are talking about.
Dr. Vereen. This is true. But we have talked to the
Department of the Interior, we have talked to the Department of
the Navy, and others to see who else could handle such a
complex contract.
Mr. Barr. How about GAO?
Dr. Vereen. I am not aware that we checked with GAO.
Mr. Barr. This is what they do for a living.
Dr. Vereen. There is a new GAO review that has started last
month that we are a part of, that we are cooperating with.
Mr. Barr. That is exciting, too. Maybe we will see some
results immediately there too?
Dr. Vereen. I am sure as fast they can get a report to you.
Most audits take approximately 6 months.
Mr. Barr. Once they get started.
Dr. Vereen. Yes.
Mr. Barr. This one isn't even started.
Dr. Vereen. But you have from our records and our
accounting to you a full and open discussion. You know exactly
what we know in terms of billing irregularities.
Mr. Barr. Well, let's see. Mr. Hast, according to your
testimony, you all were told in March of this year, March 2000
that Mr. Dan Merrick had contacted Mr. Pleffner and Jill
Bartholomew, ONDCP's Deputy Director for National Media
Campaign, and Mr. Merrick told them in March of this year--that
is how many months ago, 7--that Ogilvy was falsifying billing
records. We are not here to have a legal debate over what
constitutes fraud in terms of proving each and every element
thereof beyond a reasonable doubt. I am using your words here.
You all were told in March 2000 and ONDCP knew 7 months ago, at
the latest, that Mr. Merrick told them that Ogilvy was
falsifying billing records. Correct?
Mr. Hast. Yes, that is correct.
Mr. Barr. And here we are 7 months later and ONDCP has done
absolutely nothing. Is that an appropriate response?
Mr. Hast. No, I do not think so.
Mr. Barr. And I appreciate that. I think that is a correct
answer. ONDCP has not responded appropriately despite your best
intentions. That is the problem. There is evidence of false
billing here involving taxpayer moneys, and this has been going
on for a period of time and you all have known about it for a
period of time, and here we are still worrying about some blue
folder floating around within Department of the Navy and you
all have not even ordered an audit. That is why we are
concerned about this.
Dr. Vereen. Even as that is occurring, sir, the shields are
up. The media campaign is protected and well-run with the
exacting scrutiny that we have illustrated to you. So funds are
going nowhere without the proper documentation, sir.
Mr. Barr. The only one that seems to be conducting any
exacting scrutiny was Mr. Pleffner. He had it pegged right. And
Mr. Hast seems to have it pegged pretty right here.
Dr. Vereen. And thanks to his efforts, we have been aware
and he is continuing to do his job properly.
Mr. Barr. Who is?
Dr. Vereen. Mr. Pleffner.
Mr. Barr. That is good. But why have you all not conducted
an audit?
[No response.]
Mr. Barr. The silence is deafening, Dr. Vereen.
Dr. Vereen. We have explained that we had moved to change
the contract and changing the contract at the end of the
contract would come----
Mr. Barr. HHS said that they would conduct an audit.
Dr. Vereen. No, they said they would not conduct an audit.
Mr. Barr. Now you are changing. They said that they would
conduct an audit if they were paid for it, if they were paid
for the time necessary to conduct an audit.
Dr. Vereen. And we had indicated that we had already paid
for it. That was our understanding. That was not resolved, so
we were in the process of changing the contract completely so
that would not be an issue any longer.
Mr. Barr. How much money are we talking about for that
audit, $300,000, $325,000?
Mr. Pleffner. I would estimate in the neighborhood of
$100,000, $125,000.
Mr. Barr. We are talking about a billion dollar contract
here with evidence of billing irregularities, false billing
records.
Dr. Vereen. It would still come out, sir. Right now, those
payments are being withheld until proper documentation is
provided. And it will come out in an audit if that is the case.
At this point, the campaign is functioning very well, it is
continuing to go forward, and we will continue to withhold
payments until those billings get cleared up. And an audit will
certainly identify those. But in the meantime, the entire
campaign is being properly managed with a level of scrutiny
that you can see is certainly satisfactory. The campaign is
safe and proceeding forward. The audit will happen when the
contract changes.
Mr. Levitt. Congressman, can I make a statement?
Mr. Barr. Sure.
Mr. Levitt. I managed this contract or have managed the
program, or helped General McCaffrey to manage the program. My
goal is giving the best value to the Government, including the
financial aspects of it.
Mr. Barr. When was the very first time that you were made
aware that there was possible fraud, there were billing
irregularities, false billing? When were you first made aware
of that?
Mr. Levitt. The first time the word fraud came into my
office----
Mr. Barr. Now do not play word games. I am not trying to
pin you down to the word fraud. OK? We have been through all
that before.
Mr. Levitt. Shortly after Mr. Pleffner was----
Mr. Barr. Not until April?
Mr. Levitt. End of March, April, I do not know when.
Mr. Barr. You know Mr. Merrick, don't you?
Mr. Levitt. Yes, I do. I think he is an outstanding
advertising person.
Mr. Barr. He has done prior work with ONDCP, correct?
Mr. Levitt. He was our project officer at Bates and also
co-project officer at Ogilvy. Outstanding integrity and
outstanding performance.
Mr. Barr. So you were aware that this evidence existed very
early in the year 2000, at the latest. I mean, you tell me.
Mr. Levitt. At the end of March or April.
Mr. Barr. Not in the fall of 1999?
Mr. Levitt. No. After he was separated.
Mr. Barr. When was the first time, Mr. Pleffner, that you
had any discussion at all with Mr. Levitt bringing to his
attention what you believed was evidence of false billing and
irregularities and/or fraud?
Mr. Pleffner. The irregularities first were identified in
early October, late September or early October 1999. Fraud was
never mentioned until Mr. Merrick came to me in mid to late
March in the year 2000.
Mr. Barr. Did you have discussions with Mr. Levitt sometime
about these matters and the evidence that was coming to your
attention in the fall of 1999?
Mr. Pleffner. Immediately upon me recognizing the problems,
I did share it with Mr. Levitt and our Office of Legal Counsel,
yes.
Mr. Barr. Thank you.
Mr. Levitt. Congressman, we, and this may have figured into
the decision not to audit, we were getting exceptional
performance by Ogilvy. They had saved us over $5 million just
this year in their up front media buy over the industry
average. They have led people like Tara Lipinski and Women's
World Cup Soccer to us. They have gotten a contribution from
Turner Broadcasting for almost $900,000.
Mr. Barr. Nobody here is arguing their competence. They may
be the greatest advertisers in the world.
Mr. Levitt. But I am talking about the value to this
program and to----
Mr. Barr. We are talking about fraud. We are talking
about----
Mr. Levitt. You see, it did not compute.
Mr. Barr. What did not compute? Just because they are doing
a good job, the evidence of false billing does not compute?
Mr. Levitt. I think allegations by a person who was
separated and with no evidence should be weighed against the
exceptional performance of this thoroughbred agency.
Mr. Barr. Mr. Pleffner looked at the time sheets. They do
not lie.
Mr. Levitt. That is a different issue, sir.
Mr. Barr. No. I am talking about the false billing.
Mr. Levitt. I am talking about an allegation of fraud
versus billing issues, which we have with all of our
contractors, and probably every Federal agency has with their
contractors.
Mr. Barr. Have false billing?
Mr. Levitt. Questionable bills.
Mr. Barr. No. I am talking about false billing that was
brought to your attention in the fall of 1999.
Mr. Levitt. Whether you use the word false, over-billed, it
is a question of semantics. I am talking about fraud. We had no
evidence of fraud, no convincing evidence of any kind,
otherwise we would have gone up with that in a second.
Mr. Barr. You had evidence that there was false billing.
You all may think there was no false billing. This is the
language in GAO's report. And Mr. Pleffner has testified to
that and he has testified that he had discussions with you
about it.
Mr. Levitt. Again, as I mentioned, I do not know if you
were here earlier this morning, but if I put in a taxi voucher
and I add it up the wrong way, am I defrauding the Government?
There are mistakes, there are differences in interpretation
what could be allowed and what could not be. Some of these were
legitimate differences or misunderstandings or sloppiness.
Mr. Barr. You are talking like a defense attorney for this
company.
Mr. Levitt. I do not mean to be.
Mr. Barr. Do you all have any further questions?
Mr. Pleffner. If I could clarify one point. Until the phone
call from Mr. Merrick, I had never mentioned to anyone any
concerns about fraud or false billing. What I brought to my
boss' attention, Mr. Levitt's attention, and Office of Legal
Counsel was billing irregularities. A number of costs, I will
admit, a number of the irregularities were unallowable costs in
my opinion. But the word fraud was never brought up until the
conversation in mid to late March with Mr. Merrick.
Dr. Vereen. And that was properly reported up the chain of
command so that we were all aware. And we proceeded on with our
management of this to protect the media campaign so that it
could go further.
Mr. Levitt. And Congressman, since HHS disagreed with Mr.
Pleffner on at least some of these bills, it shows that there
can be different interpretations sometimes of Federal
Acquisition regulations and contracting rules. It does not mean
one is defrauding the other. It means there could be a
legitimate difference of opinion.
Mr. Barr. Isn't that why an audit is conducted?
Dr. Vereen. That is why, I will repeat, we were taking
steps with other Federal agencies to change the contract.
Mr. Barr. I know, and you have been taking steps for the
last 7 months. That is very reassuring.
Dr. Vereen. Well, they were telling us to wait till the end
of the fiscal year. We did not want to wait till the end of the
fiscal year.
Mr. Barr. Well you have.
Dr. Vereen. We are just as frustrated.
Mr. Barr. The gentleman from Maryland.
Mr. Cummings. Thank you very much, Mr. Chairman. I have
just some things I need to clear up. First of all, let me say I
was very intrigued with your line of questioning, and I want
everybody in this room to understand that we are dealing with
some very, very serious allegations. The chairman is a former
U.S. Attorney, I am a defense attorney of 20 years, and I can
tell you we are dealing with some serious stuff. That is why I
am going to ask the following questions.
Mr. Pleffner, let me ask you, I am glad you cleared up
exactly what information was imparted when. I have read your
memo and I applaud you for bringing this to the attention of
the appropriate authorities. Let us go back to when you first
brought it up. Your immediate supervisor, would that have been
Mr. Levitt back there in late September, October?
Mr. Pleffner. That is correct.
Mr. Cummings. All right. First of all, what is considered
an irregularity? When you say irregularity, what do you mean?
Mr. Pleffner. Irregularity, question cost, unsupported
costs.
Mr. Cummings. OK. Do you oversee more than this contract,
or is this the only one that you have been handling in the last
2 years?
Mr. Pleffner. I oversee roughly a half dozen media campaign
contracts and MOUs.
Mr. Cummings. OK. I take it is a part of your job to make
sure that Government money is being spent consistently with the
contract, and I take it your job is to raise the red flag if
you see something that seems a bit out of kilter. Is that
correct?
Mr. Pleffner. Yes, it is.
Mr. Cummings. Is it unusual for irregularities to come up
in other contracts?
Mr. Pleffner. No, it is not unusual.
Mr. Cummings. And did you bring that to the attention of
Mr. Levitt, those other ones?
Mr. Pleffner. Yes, I did.
Mr. Cummings. And what would his normal response be, and
that may be a question stated poorly because there may not be a
normal response, but you bring it to his attention for what
purpose?
Mr. Pleffner. To keep him informed on a day-to-day basis of
the financial activities.
Mr. Cummings. And do you have authority to take certain
actions? In other words, do you go to him and say, look, Mr.
Levitt, I see these irregularities and I am telling you I have
got a problem with it, and what I am going to do is I am not
going to pay this. Is that the way it usually goes?
Mr. Pleffner. As a matter of fact, as project officer my
determination or my recommendation to HHS is made
independently. Mr. Levitt does not influence my recommendation
or decision.
Mr. Cummings. OK. So you are just keeping him informed, is
that right?
Mr. Pleffner. Correct.
Mr. Cummings. OK. Now when you presented this information
to Mr. Levitt, were you expecting him to do anything in
particular? First of all, I am not trying to lead you down some
rosy path with a bomb at the end. My concern is we have got
several issues going here. We have got a question of whether
Ogilvy committed some kind of fraud. This is the question I am
concerned about here, a question about whether your agency did
what it was supposed to do and whether what they did was
reasonable. We have heard Mr. Hast say that in his conclusion
he felt that--correct me if I am wrong, Mr. Hast--that the
response was inappropriate, it could have been done a better
way. Is that the response to all of this?
Mr. Hast. Yes. Basically, if they believed there was fraud,
the FBI or the HHS IG would have looked into that for free.
Mr. Cummings. OK. Now I want to come back just to make sure
we are clear. So, when you presented this to Mr. Levitt, did
you have an expectation that he would then do something with
the information? Now I am going all the way back now to
September and October. Or was that just informing him, is that
correct?
Mr. Pleffner. That was just informing him.
Mr. Cummings. OK. Now let's move on up. Between the April
13 memo and the September/October communication about
irregularities, were there other communications where you found
irregularities with regard to this contract and brought them to
Mr. Levitt's attention?
Mr. Pleffner. Let me first clarify that the irregularities
started in October 1999. The April memo is 2000.
Mr. Cummings. Right.
Mr. Pleffner. Yes, there are continuing irregularities with
the Ogilvy invoices.
Mr. Cummings. And I take it that during this period between
September 1999 and April 2000 you are constantly having
conversations with Ogilvy. Is that correct?
Mr. Pleffner. Yes.
Mr. Cummings. Saying why are you doing this? What is the
problem here? Could you get any satisfaction when you got your
answers? Were you getting any satisfaction?
Mr. Pleffner. No, I did not. I must also add though that
the HHS contracting officer was also in these discussions and
we did not receive satisfaction from them either.
Mr. Cummings. Now Mr. Levitt said that HHS disagreed with
some of your findings. Is that correct?
Mr. Pleffner. That is correct.
Mr. Cummings. Would you say 10 percent, 20 percent of the
findings they disagreed with?
Mr. Pleffner. I would say as a rule the vast majority,
probably 85-90 percent they disagreed with.
Mr. Cummings. HHS disagreed with 85-90 percent of your----
Mr. Pleffner. I stand corrected. That was on labor, the
withholds that I recommended on labor, the HHS contracting
officer disagreed with my recommendations, the rationale for my
withholding.
Mr. Cummings. You are kind of a strict guy, huh?
Mr. Pleffner. To all of them, not just Ogilvy.
Mr. Cummings. Now coming on up to April and late March. I
think you said the first time you started thinking fraud and
communicating fraud to Mr. Levitt was in late March or early
April. Is that correct?
Mr. Pleffner. It was late March.
Mr. Cummings. OK. What did you expect him to do when you
started mentioning fraud? I am just curious. It is one thing
for GAO to come to their conclusions, they are not in the
agency. You are and you were the one to bring this to their
attention.
Mr. Pleffner. When I brought it to his attention I guess I
expected him, I know I expected him to support me in elevating
my concerns to senior management.
Mr. Cummings. And you are saying that he did not do that?
Mr. Pleffner. He certainly did do that.
Mr. Cummings. OK. So at that point, he was doing what you
expected him to do. And I noted that there was a letter of 3
weeks after this. What was the first official response that you
saw to your memo of April 13?
Mr. Pleffner. Saw from?
Mr. Cummings. From anybody. In other words, you wrote the
memo and you expected a response from somebody. Is that right?
You expected them to take some type of action. I am saying be
it written or be it verbal, what was the first official
response that you had to that memo?
Mr. Pleffner. I received a copy of my memo back from the
Director with his comments roughly 2, 2\1/2\ weeks after I sent
it up to him.
Mr. Cummings. And what were your feelings about those
comments? That is the document that is on the board there,
correct?
Mr. Pleffner. Correct.
Mr. Cummings. What was your reaction to his comments? And
did you discuss them with him, by the way?
Mr. Pleffner. There was a meeting as I recall in late April
where there was a brief discussion. He did support the need for
an external audit. And he did say, as noted on the sidebar
there, that we would not wait 5 years for the audit.
Mr. Cummings. Now did he say when the audit would take
place when you two met?
Mr. Pleffner. I do not believe the timing was addressed in
that meeting.
Mr. Cummings. Did you make any recommendations as to when
it should start?
Mr. Pleffner. I do not believe I had the opportunity to
address when it should start.
Dr. Vereen. Congressman, there was a process to change the
contract and do an audit when the contract changed that was
already in place. The last line of the memo refers to an
immediate audit upon termination of the contract.
Mr. Cummings. Does that sound reasonable, what he just
said?
Mr. Pleffner. Yes, it does.
Mr. Cummings. That is your memo, right?
Mr. Pleffner. Yes, it is.
Mr. Levitt. Can I just add something. You cannot terminate
a contract automatically. You have to have HHS' permission, you
have to have another agency to go to. So it takes some time to
do that. We had pretty much decided on the Navy, but then there
were a couple of other agencies that came up that we had to
investigate.
Mr. Cummings. Mr. Pleffner, I do not have much more but I
have got to ask you this. We have heard a lot of testimony here
today. I have two questions. One, Mr. Vereen said a moment ago
that he feels that, as far as the people's money is concerned,
whatever you all have done so far to kind of freeze--you are
stopping payment on certain things and you are questioning
certain things--all the things that he talked about that you
have done while waiting to get this audit, do you feel
comfortable that your agency is doing what it needs to do so
that if there were some type of fraud going on at least it
would be frozen? Are you following my question? Is there
anything else that you all could be doing now?
Mr. Pleffner. I think we have done what we are supposed to
do. We are in the process of moving the contracts out of HHS
over to the Navy, at which time an audit will be immediately
initiated.
Mr. Cummings. So do you feel comfortable with what has
happened since the April 13 memo with regard to you all making
sure that you carry out the full extent of what your job is?
Mr. Pleffner. I am comfortable beyond a shadow of a doubt
that I have done what is necessary to protect ONDCP's, the
Government's, the taxpayer's interest. We have withheld since
April 13 an additional $8 million. On that date, we had only
withheld $5 million. We are now up to $13.4 million. We have
done what we could, if there is any impropriety, we have done
what we could to keep it in check.
Mr. Cummings. And I applaud you for that. And I do not want
you to misunderstand and think this is any kind of negative
toward you. I applaud what you have done. I guess the question
is, do you feel like you have gotten the cooperation from your
superiors in accomplishing what you just stated?
Mr. Pleffner. Absolutely. They have supported every
withhold I have recommended.
Mr. Cummings. I do not have anything else.
Mr. Barr. As an example of the basis, Mr. Pleffner, on
which you have recommended the withholding of funds--and this
is why I am a little bit surprised, maybe I should not be a
little bit surprised, that HHS disagrees with you--I refer to
your memo to Michelle Trotter of March 2, 2000. You say that
your recommendation to withhold close to $500,000 at that
particular time was based on: ``(1) various employees billed
without providing time sheets to support time worked against
ONDCP; (2) various salaries charged without documentation to
support the costs incurred; (3) various salaries exceed the
salaries proposed by the contractor.''
The basis on which you were recommending that funds be
withheld were not some theoretical, never heard of, ingenious,
imaginative argument. These are just pretty much standard
reasons for withholding funds that anybody should agree with.
Correct?
Mr. Pleffner. Correct.
Mr. Barr. During these past 7 months, Ogilvy has continued
to bill ONDCP and has continued to receive funds. Is that
correct?
Mr. Pleffner. That is correct.
Mr. Barr. I would like to thank all of the witnesses for
being here today.
Mr. Cummings. Mr. Chairman, I have two more questions.
Mr. Barr. The gentleman is recognized for 1 minute.
Mr. Cummings. Thank you very much, Mr. Chairman. I may need
just a little bit longer than that.
Mr. Barr. The gentleman is recognized for 2 minutes.
Mr. Cummings. Thank you very much, Mr. Chairman. I really
appreciate this 2 minutes.
Mr. Barr. The record will reflect that the gentleman just a
moment ago said that he had no more questions.
Mr. Cummings. Well, you just asked questions, Mr. Chairman,
that caused me to have more questions.
Mr. Barr. The gentleman is recognized for 2 minutes.
Mr. Cummings. Mr. Hast, there is something that has been
bothering me and it is part of your findings. When you talked
about General McCaffrey and whether he remembered the audit or
not, because I am always concerned about people's reputations,
I take it he did not remember at first this memo and notation,
is that correct, and you then presented it to him. Did he
readily say, oh, yes, this is my writing? I mean, there was not
any----
Mr. Hast. No, there was not.
Mr. Cummings. Did you feel comfortable that he had
forgotten, with your skill and your judgment?
Mr. Hast. Yes.
Mr. Cummings. OK. Thank you.
Mr. Levitt. Congressman, I know blue folders and I know
General McCaffrey, he probably reads 100 documents a night. He
is a workaholic. He probably only sleeps a few hours. It is
very common for him to forget something like that. And that is
why we have the notations.
Mr. Cummings. Thank you very much, Mr. Chairman. I really
appreciate that.
Mr. Barr. I would like to thank the witnesses for appearing
today.
The record will remain open for 2 weeks for any additional
material you all wish to submit for the record.
There being no further business before this subcommittee,
this subcommittee is hereby adjourned.
[Whereupon, at 1:54 p.m., the subcommittee was adjourned,
to reconvene at the call of the Chair.]
[The prepared statement of Hon. Elijah E. Cummings and
additional information submitted for the hearint record
follows:]
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