[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
SECRET AGENT MAN? OVERSIGHT OF EPA'S IG INVESTIGATION OF JOHN BEALE
=======================================================================
HEARING
before the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
OCTOBER 1, 2013
__________
Serial No. 113-65
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
U.S. GOVERNMENT PRINTING OFFICE
85-907 WASHINGTON : 2013
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC
20402-0001
COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas MARK POCAN, Wisconsin
DOC HASTINGS, Washington TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming ROBIN L. KELLY, Illinois
ROB WOODALL, Georgia DANNY K. DAVIS, Illinois
THOMAS MASSIE, Kentucky PETER WELCH, Vermont
DOUG COLLINS, Georgia TONY CARDENAS, California
MARK MEADOWS, North Carolina STEVEN A. HORSFORD, Nevada
KERRY L. BENTIVOLIO, Michigan MICHELLE LUJAN GRISHAM, New Mexico
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Stephen Castor, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
C O N T E N T S
----------
Page
Hearing held on October 1, 2013.................................. 1
WITNESSES
The Hon. Arthur A. Elkins, Jr., Inspector General, U.S.
Environmental Protection Agency
Oral Statement............................................... 7
Written Statement............................................ 9
Mr. Patrick Sullivan, Deputy Inspector General for
Investigations, U.S. Environmental Protection Agency
Oral Statement............................................... 16
Written Statement............................................ 18
Mr. Robert Brenner, Former Director of Policy Analysis and
Review, Office of Air and Radiation, U.S. Environmental
Protection Agency
Oral Statement............................................... 25
Written Statement............................................ 27
The Hon. Bob Perciasepe, Deputy Administrator, U.S. Environmental
Protection Agency
Oral Statement............................................... 33
Written Statement............................................ 36
APPENDIX
Letter from the Hon. Kerry Benvolio.............................. 94
Unite States of America v John C. Beale.......................... 95
Committee on Oversight and Government Reform: Staff Report....... 114
SECRET AGENT MAN? OVERSIGHT OF EPA'S IG INVESTIGATION OF JOHN BEALE
----------
Tuesday, October 1, 2013
House of Representatives,
Committee on Oversight and Government Reform,
Washington, D.C.
The committee met, pursuant to call, at 9:37 a.m., in Room
2154, Rayburn House Office Building, Hon. Darrell E. Issa
[chairman of the committee] presiding.
Present: Representatives Issa, Mica, Duncan, McHenry,
Jordan, Chaffetz, Walberg, Lankford, Gowdy, Farenthold,
Woodall, Meadows, Bentivolio, Cummings, Maloney, Norton,
Tierney, Lynch, Connolly, Speier, Pocan, Duckworth, Kelly, and
Horsford.
Staff Present: Molly Boyl, Deputy General Counsel and
Parliamentarian; Lawrence J. Brady, Staff Director; Joseph A.
Brazauskas, Counsel; Ashley H. Callen, Deputy Chief Counsel for
Investigations; Sharon Casey, Senior Assistant Clerk; Steve
Castor, General Counsel; Drew Colliatie, Professional Staff
Member; John Cuaderes, Deputy Staff Director; Adam P. Fromm,
Director of Member Services and Committee Operations; Linda
Good, Chief Clerk; Tyler Grimm, Senior Professional Staff
Member; Christopher Hixon, Chief Counsel for Oversight; Mark D.
Marin, Deputy Staff Director for Oversight; Ashok M. Pinto,
Chief Counsel, Investigations; James Robertson, Senior
Professional Staff Member; Laura L. Rush, Deputy Chief Clerk;
Jonathan J. Skladany, Deputy General Counsel; Peter Warren,
Legislative Policy Director; Rebecca Watkins, Communications
Director; Lena Chang, Minority Counsel; Courtney Cochran,
Minority Press Secretary; Susanne Sachsman Grooms, Minority
Deputy Staff Director/Chief Counsel; Jennifer Hoffman, Minority
Communications Director; Elisa LaNier, Minority Director of
Operations; Una Lee, Minority Counsel; and Dave Rapallo,
Minority Staff Director.
Chairman Issa. The committee will come to order.
The Oversight Committee exists to secure two fundamental
principles. First, Americans have a right to know that the
money Washington takes from them is well-spent. And, second,
Americans deserve an efficient, effective government that works
for them. Our duty on the Oversight and Government Reform
Committee is to protect these rights.
Our solemn responsibility is to hold government accountable
to taxpayers because taxpayers have a right to know what they
get from their government. Our obligation is to work
tirelessly, in partnership with citizen watchdogs, including
the IG's office, to deliver the facts to the American people
and bring genuine reform to the Federal bureaucracy. This is
our mission statement.
And today we are here because a high-ranking EPA official
swindled taxpayers. In fact, effectively, he embezzled $800,000
or more over most of his career from the taxpayers.
He's here with us today, not as our most important witness,
because, in fact, what we want to find out in this committee
and the reason that this hearing has great merit is we want to
find out how top officials at the EPA under multiple
administrations for more than a decade never verified that a
man who said he's a secret agent of the CIA--never verified
that he was.
We also want to find out--that big lie was compounded with
a big lie while an individual, who was supposedly working for
the CIA, also got his pay raised to a level that appears to be
above the statutory limit. And I repeat: It appears as though
Mr. Beale was paid an amount greater than Congress allows.
Just as this committee investigated some months ago CMS
allowing for payments greater than the statutory limit to the
State of New York and we do not hold New York accountable
alone, we do not hold Mr. Beale accountable alone. No
individual and no individual's boss should be able to write
anything that allows for somebody to be paid more than the law
allows.
The lack of internal controls at the EPA and, in fact, the
lack of external controls in government as a whole will be the
subject not just today but in the days to come.
We hear complaints from the private sector that top EPA
officials turn a deaf ear to their concerns about how
regulations kill jobs and add enormous cost with little or no
benefit. That is an issue that we will deal with many times as
we address the EPA.
But today it appears as though there was a deaf ear taken
to somebody not working. In fact, evidence shows--and we will
hear from the Inspector General--evidence shows that beyond
even the craziness of somebody saying they had to be gone for
weeks or months at a time because they: ``worked for another
agency,'' not doing that job but still being paid, and, in
fact, not being billed back to the CIA, over and above that we
understand there was actually a retirement ceremony in which
the individual retired and then convinced the now-director and
others that he should continue being paid because he wasn't
really retired; his retirement from the CIA was awaiting a
replacement.
To my understanding, your first replacement was killed by
the Taliban. And we're really sorry for the loss of that
nonexistent secret agent to replace a nonexistent secret agent.
It is not our desire, ordinarily, to call anyone before
Congress simply to ridicule them, but I believe that today
there is a degree of ridicule of top individuals at the EPA
and, I fear, top individuals and lower individuals throughout
government if, in fact, we cannot make a government-wide search
to see if this has happened before.
One thing that I've found in the many years in which I
manufactured consumer electronics: There is no such thing as
one defect. There is no such thing as everything is perfect
except the one you got, ma'am. There is no such thing as, well,
this is the first time we've had a report of this defect or
this problem. Here I believe the lack of controls at the EPA
almost guarantee that others did not do their job and fell
through the cracks.
We have an agenda on this side of dais, which is we'd like
to have union officials keep time cards to show how much time
they spend doing union work versus the work of agencies. That
has not passed the Congress, and it may not, but finding out if
people do work should.
We have learned that Deputy Director Perciasepe--I'll get
it better in time--and now-Administrator McCarthy worked
extremely close with Mr. Beale for years. In fact, in 2009
through 2012, Ms. McCarthy was John Beale's direct supervisor
at the Office of Air and Radiation, where he was senior
official. This office is responsible for the most sweeping
regulations affecting business.
As we look at a history of working closely with names we
all know, including direct report to people who continue to be
in the office today, what we find interesting is, if Mr. Beale
could perpetrate outright lies with impunity, what did he do in
his daily work life on those rare days in which he actually
performed work for the EPA?
We need to get to the bottom of this because we owe it to
the American people. We need to discover, in fact, whether
individuals like Mr. Beale and others not performing work are
now sitting in retirement collecting paychecks in retirement
for work they did not do and, thus, a retirement they did not
earn.
Finally, I want to thank the Inspector General for the work
done. It is our report that, in fact, your investigation began
delayed because, at a time when you should have been informed,
the general counsel and others were being consulted around you.
And for that, we want to make sure it is clearly understood
that going to a lawyer when you discover something is not a
substitute for also going to the IG.
This committee supports the Inspector General's offices and
their work. The 12,000 men and women who independently--
independent of Congress and, quite frankly, whenever possible,
independent of their employers in the executive branch--seek to
rout out waste, fraud, and abuse is essential to this
committee.
There is no partisan divide on the work of the IGs, and we
will work on a bipartisan basis to ensure that administrations,
Republican and Democratic, understand IGs are never to be kept
in the dark when there is an allegation of even a portion as
onerous as this one. IGs have to be brought in at the
beginning, not when it's about to become public.
It also is disturbing to me that, Mr. Brenner, back in the
1970s when you and Mr. Beale went to Princeton, you began a
friendship. A friendship should, in fact, require that when
you're the superior of somebody who you helped bring into the
Agency, that you look with a little more scrutiny, that, in
fact, you are more likely to know that what somebody is saying
isn't true. And I find it astonishing of that.
Additionally, during our investigation and with the help of
the Inspector General, we became aware of what appears to be an
inappropriate acceptance of an $8,000 gift, a discount on a
Mercedes-Benz, from an outside lobbyist. My understanding is
this was not done with the preapproval or cooperation directly
of Mercedes-Benz, but it is our intention to use our power to
do an investigation beyond that which the IG has authority.
If it were up to me, the IG would have had authority to
interview all of you, or both of you, even as you sought
retirement to escape his jurisdiction. One of the reasons
you're here today is, in fact, that the IG Act has certain
limitations. It cannot compel former members of government to
speak to them. It cannot go between agencies and, in fact, is
very stovepiped. It is our intention to move legislation that
expands the ability of IGs to gain subpoena authority and that
that authority should extend to investigations that begin
within their agencies but which have tentacles in other
agencies and with former employees, particularly when those
employees' very paychecks are what is in question.
So I want to thank my ranking member for being patient as I
went through a little longer opening statement. And I look
forward to this hearing and to the work we must do afterwards.
And I yield to the ranking member.
Mr. Cummings. Thank you very much, Mr. Chairman.
Mr. Chairman, this is a very important hearing, but before
I discuss today's hearing, I want to address our current budget
situation.
Today is the first time the Federal Government has shut
down in 17 years. This has happened because a small group of
Tea Party Republicans has taken our country hostage as a part
of their ideological crusade to overturn the law of the land
and put insurance companies back in charge of healthcare
decisions of millions of Americans.
The Republican House leadership could have averted this
shutdown immediately by simply allowing the House of
Representatives to vote on a clean continuing resolution. Let
me say that again. If they put a clean resolution on the floor,
it would pass and there would be no government shutdown.
But they refuse because they are placing internal
Republican politics ahead of the best interests our Nation and
our economy. So, this morning, 800,000 hardworking, middle-
class Federal workers who would have been at their duty
stations providing vital services to the American people are
furloughed. Many of them are my constituents. And things will
only deteriorate from here.
I agree that our committee has a constitutional duty to
provide oversight, and hearings like this one are a key part of
that oversight. But it seems odd for our committee to be here
today acting like nothing is different and pretending that we
are just going about our business as usual. I want to make
clear that a government shutdown is not business as usual, and
we should not treat it that way.
I urge my colleagues on the other side of the aisle to ask
your leadership to put a clean CR on the floor and end this
shutdown today.
With that said, let me turn to today's hearing. I want to
begin by thanking Inspector General Elkins and his deputy,
Patrick Sullivan, for investigating this gross abuse of
taxpayer funds.
I also want to acknowledge the Department of Justice for
successfully prosecuting Mr. Beale, who pleaded guilty last
Friday and will be forced to pay back the almost $900,000 in
funds he stole--in funds he stole--from the American people.
In addition, I want to acknowledge the role of
Administrator McCarthy in finally revealing this fraud, which
lasted incredibly for decades. I know we will discuss the
Inspector General's concerns about how quickly his office
received a referral, but I believe that the IG will agree that
had it not been for Administrator McCarthy, this fraud may
never have been uncovered.
Mr. Beale's betrayal of the public trust for his own
personal enrichment is truly shocking in its scope, duration,
and sheer audacity. It is amazing.
Mr. Beale defrauded the Environmental Protection Agency for
decades, under both Republican and Democratic administrations,
by claiming he was a covert operative of the CIA. One senior
EPA official during the Bush administration actually approved
Mr. Beale's request to work offsite 1 day a week so he could
participate in an interagency special advisory group working on
a project with the Directorate of Operations at the CIA. Give
me a break.
This was no ordinary ruse. In addition to lying, he stole
and lied, lying to senior EPA officials across multiple
administrations, Mr. Beale also duped his own family members,
his friends, and even his own lawyer. That's a lot of duping.
Mr. Beale did not come clean to his own criminal defense
attorney until investigators arranged for a meeting at CIA
headquarters in Langley, Virginia, in order to finally confront
him about his lies.
But that's not all Mr. Beale did. That's not all that he
lied about. According to the Inspector General, Mr. Beale also
lied about contracting malaria and serving in Vietnam, all to
obtain a handicapped parking spot. Oh, my God. Mr. Beale also
lied on travel vouchers, about where he was going and why he
needed to go there, so he could visit his family in California.
Simply put, Mr. Beale was a con artist, and the American
taxpayers were his mark. As public servants, we must always
remember that we serve the people. Mr. Beale flouted one of the
most basic tenets of government service: It's not your money;
it's the taxpayers' money. It's people that go out there, the
ones that I saw this morning when I left home at 5 o'clock
getting the early bus. It's their money. And you stole it.
Mr. Beale's actions are an insult to the thousands of
hardworking and dedicated public servants across the country
and an insult to our CIA agents around the world. While Mr.
Beale was claiming to work at Langley and pretending to go on
secret missions overseas, real intelligence agents were hunting
down Osama bin Laden and battling al Qaeda in the most
dangerous places in the world.
Mr. Beale's impersonation of a CIA agent forced our
Nation's law enforcement and intelligence officials to spend
their scarce time and resources uncovering his fraud instead of
combatting real threats around the globe. This is truly
reprehensible.
I'm gratified that justice has been served and that Mr.
Beale will pay for his fraud, for his lies, for his theft.
However, our inquiry cannot end there. We need to understand
how EPA's system failed to catch him earlier and examine
additional reforms.
Although the Inspector General's audit work is still
ongoing, I look forward to hearing about his initial
recommendations and to hearing from the Deputy Administrator of
EPA about steps the Agency has already taken and plans to take
to safeguard taxpayer dollars from this type of fraud in the
future.
As I close, let me say I urge my colleagues to refrain from
using Mr. Beale to make generalizations about government
workers. Mr. Beale is an aberration, not a rule. The vast
majority of Federal employees dedicate their lives to serving
the public. They come to work every day. They give it
everything they've got because they realize it's bigger than
them. It's not about them; it's bigger. They are honest, they
are hardworking, and they would never even contemplate
breaching the public trust in this manner.
So, Mr. Chairman, with that, I look forward to the
testimony, and I yield back.
Chairman Issa. I thank the gentleman.
Chairman Issa. And I join with him in saying, on a day in
which hundreds of thousands of Federal workers are on furlough
without pay, we don't take this as an ordinary day, but perhaps
an appropriate day to have somebody who furloughed himself with
pay time and time again.
Members will have 7 days to submit opening statements for
the record.
Chairman Issa. And we'll now recognize our first panel of
witnesses.
The Honorable Arthur A. Elkins, Jr., is the Inspector
General for the U.S. Environmental Protection Agency.
Welcome.
Mr. Patrick Sullivan is Deputy Inspector General of
Investigations at the EPA and oversaw and had primary
responsibility for this investigation.
Mr. Mark Kaminsky, who is sitting behind the two IGs, is a
special agent with the Office of the Inspector General at EPA.
He may be called to answer questions because of his direct
contact in this investigation and will also be sworn in when
the others are sworn in.
The Honorable Robert Perciasepe is the Deputy Administrator
of the U.S.--United States--United States Environmental
Protection Agency. We get so used to just saying ``EPA'' around
here.
And Mr. Robert Brenner is the former Director of Policy
Analysis and Review at the Air and Radiation Division of the
U.S. Environmental Protection Agency.
And our primary witness, Mr. John C. Beale, is the former
senior policy advisor at the U.S. Environmental Protection
Agency and, allegedly, the CIA.
With that and pursuant to the committee rules, would all of
you, including Mr. Kaminsky, please rise to be sworn and raise
your right hands?
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth?
Thank you. Please be seated.
Let the record reflect that all witnesses answered in the
affirmative.
This is a large panel, and even with some not making
opening statements we're going to consume a lot of time. So I'd
ask you to keep your opening statements as close to 5 minutes
or less as possible. Your entire written statements will be
placed in the record, in addition to any comments that you may
want to give us afterwards. We'll hold the record open--I'll
announce that at the end--for a couple of days.
Mr. Elkins?
STATEMENT OF THE HONORABLE ARTHUR A. ELKINS, JR.
Mr. Elkins. Thank you. Good morning, Chairman Issa, Ranking
Member Cummings, and members of the committee. I am Arthur
Elkins, Inspector General of the U.S. Environmental Protection
Agency.
I am pleased to appear before you today to discuss some of
the recent important work of the Office of Inspector General.
In particular, I will highlight the audit work that ensued as a
direct result of the OIG's criminal investigation of former EPA
employee John C. Beale.
The EPA's Assistant Inspector General for Investigations,
Patrick Sullivan, whose testimony will follow mine, will
provide more specific details of the investigation that led to
Beale's guilty plea on September 27th of 2013.
Thank you for allowing me the opportunity to share with you
the OIG's various efforts to safeguard the EPA and the U.S.
Chemical Safety and Hazard Investigation Board from fraud,
waste, and abuse through independent oversight of their
programs and operations.
Before I begin, I would like to commend the expertise,
diligence, and professionalism of the OIG staff, whose
exceptional work serves as the foundation of my testimony this
morning.
Once my office learned about the serious allegations made
against Beale, the OIG's Office of Investigations immediately
launched and quickly completed a successful investigation of
what you will certainly agree to be an egregious and almost
unbelievable case. As a result of this investigation, the OIG's
Office of Audit has mobilized to aggressively assess the
various internal control issues at the EPA that allowed this
highly troubling scenario to occur.
My testimony will primarily detail the subsequent work that
will be conducted by the OIG's Office of Audit as a result of
the investigation. I also received a congressional request that
the OIG immediately launch an investigation into the Agency's
policies and processes that facilitated Beale's fraud.
The Office of Investigations requested audit assistance to
address the following potential EPA systemic weaknesses: EPA's
retention bonuses, the statutory annual pay limit, EPA's first-
class travel, EPA's process for approval of foreign travel,
EPA's vetting process for new employees, time and attendance
issues, timely referrals of potential criminal allegations to
the OIG, and authority of EPA's Office of Homeland Security.
In September 2013, the OIG's Office of Audit sent a
notification letter to the Agency stating our plan to begin
preliminary research on various administrative areas as a
result of recent actions taken against a former EPA employee.
We are also currently performing work to address the first part
of congressional requests. We have reviewed the OIG's Office of
Investigations case files to determine how the fraud took
place, what internal controls existed, what controls may need
strengthening, and what controls were compromised,
circumvented, or overridden.
On completion of this part of the request, we will provide
a letter to the requester which will address the facts
concerning how the fraud occurred. The estimated date for the
issuance of this letter will be October 31, 2013, barring any
delays due to the possible shutdown of the government and the
EPA's cooperation.
We just started our preliminary research for the second
part of the congressional request. We will keep the committee
updated on the audit's estimated completion.
Further, this audit may uncover other issues that I have
not detailed this morning. Accordingly, we may issue early
warning reports on time and attendance and travel as it relates
to Beale.
This investigation has also resulted in several
investigations related to administrative matters. As these are
ongoing investigations, I am unable at this juncture to discuss
them but will do so when I can.
My testimony today highlights the OIG's commitment to
continue to shine a light on the EPA and the CSB to guarantee
that our tax dollars are being well-spent so that a scenario
such as the Beale case should not happen again.
Funding to the OIG clearly represents a great value to the
American taxpayers. I ask the committee to please keep in mind
that additional budget cuts may force us to focus on statutory
work and reduce discretionary work, such as requests from
Congress to investigate agency programs or operations.
In conclusion, I would like to reaffirm the OIG's
commitment to add value and assist the agency in accomplishing
its mission of safeguarding the health of the American people
and protecting the environment. We take very seriously our
mandate to promote economy, efficiency, and effectiveness and
prevent and detect fraud, waste, and abuse through independent
oversight of the EPA's programs and operations.
Mr. Chairman, this concludes my prepared statement. I will
be pleased to answer any questions you or the Members may have.
Thank you.
Chairman Issa. Thank you.
[Prepared statement of Mr. Elkins follows:]
[GRAPHIC] [TIFF OMITTED] 85907.001
[GRAPHIC] [TIFF OMITTED] 85907.002
[GRAPHIC] [TIFF OMITTED] 85907.003
[GRAPHIC] [TIFF OMITTED] 85907.004
[GRAPHIC] [TIFF OMITTED] 85907.005
[GRAPHIC] [TIFF OMITTED] 85907.006
[GRAPHIC] [TIFF OMITTED] 85907.007
Chairman Issa. Mr. Sullivan?
STATEMENT OF PATRICK SULLIVAN
Mr. Sullivan. Chairman Issa, Ranking Member Cummings,
members of the committee, I am Patrick Sullivan, Assistant
Inspector General for Investigations at EPA.
The EPA's OIG investigation of this case has included more
than 40 interviews, the review of thousands of documents, and
coordination with many Federal law enforcement agencies. On
September 27th, Mr. Beale entered a plea of guilty to one count
of theft of government funds.
The activities relevant to this case began in 1988 when Mr.
Beale was hired as a consultant to the EPA by his close friend
Robert Brenner, then-director of EPA's Office of Policy
Analysis and Review, and continued until Mr. Beale's retirement
in April of 2013.
Our investigation revealed that Mr. Beale engaged in the
following misconduct: false official statements, timecard
fraud, incentive retention bonus fraud, travel voucher fraud,
false impersonation of a Federal official, and misuse of an
official government passport.
Mr. Beale's official personnel file contains numerous
misleading and false statements, including a claim that he
worked for a U.S. Senator.
Over a period of 22 years, Mr. Beale received a retention
incentive bonus amounting to 25 percent of his salary. Evidence
suggests Mr. Beale was only authorized to receive this bonus
for 6 years, costing the government approximately $500,000.
Mr. Beale's work on the Clean Air Act in the early 1990s
gained him significant prestige. Starting in 1994, he began the
false impersonation of a CIA employee, lying to even his wife
and closest friends in addition to his EPA colleagues. He told
OIG investigators that he perpetrated this lie to, quote,
``puff up the image of myself.''
The investigation revealed Mr. Beale was absent from the
EPA for long periods of time between 2000 and 2013 under his
alleged CIA cover. During this time, Mr. Beale lied to several
high-ranking EPA officials about his work for the CIA,
including former Assistant Administrators Jeff Holmstead and
Gina McCarthy.
Subsequent investigative interviews revealed Mr. Holmstead
shared Mr. Beale's claimed CIA status with other EPA executives
and it became, ``an open secret'' in EPA that Mr. Beale worked
undercover for the CIA. When Gina McCarthy became Assistant
Administrator for the Office of Air and Radiation in 2009, she
was told during her orientation process and subsequently by Mr.
Beale himself that he worked for the CIA.
Additionally, an executive assistant that worked for Mr.
Beale recalled that he had told her he needed to stay on with
the CIA until his replacement, who had been captured and was
being tortured in Pakistan, had recovered. She responded:
``John, that's what movies are made of.''
When interviewed by OIG investigators, Mr. Beale admitted
to taking off a total of 2-1/2 years for nonexistent CIA work
at a cost to the taxpayers of approximately $350,000. Mr. Beale
also stated that during these periods he actually was working
around the house, riding his bicycle, and reading books.
Concurrent with his frequent absences from the EPA, Mr.
Beale received a substantial cash award, including a
Presidential Rank Award of $28,000, all on top of his salary
and the 25 percent retention incentive bonus.
Mr. Beale perpetuated the lie that he had contracted
malaria in Vietnam during his service in the U.S. Army, using
it both as another reason for his frequent absences and used it
to obtain a handicapped parking permit at EPA. Mr. Beale never
had malaria, and he never served in Vietnam. Over time, the
parking space cost the taxpayers and the government
approximately $18,000.
Mr. Beale also committed travel card fraud--excuse me,
travel-related fraud. For example, we were able to confirm that
he charged more than $80,000 in trips between 2005 and 2007 to
California. All these trips to California were fraudulent. He
traveled there to visit his elderly parents, who lived in
Bakersfield.
Another example: Mr. Beale usually stayed at hotels that
far exceeded--I mean far exceeded--the allowable government
lodging rate. In one instance, he charged the government $1,066
per night for 4 nights in London even though he had the
opportunity to stay at a different hotel at $375 per night.
When confronted with this outrage by our investigators, Mr.
Beale stated, ``Even I am outraged at this.''
From approximately 1998 until his retirement in 2013, Mr.
Beale claimed he had a back injury requiring first-class
airplane accommodations. He provided medical documentation from
a chiropractor supporting this claim. Due to Mr. Beale's
undertaking extensive physical activities and his many other
deceptions regarding his health, his claim is dubious at best.
And one example, when he traveled from Washington to London,
his first-class ticket was 14 times higher than the coach fare.
The government was charged $14,000 for this one ticket as
opposed to $1,000 had he taken a coach flight.
Mr. Beale was never held accountable for his spending on
these trips. When interviewed, those responsible for approving
his travel vouchers acknowledged that the charges he submitted
often seemed excessive, but they were never questioned because
he was a highly respected EPA senior official and based on his
work for the CIA.
That concludes my remarks, Chairman. I'll be happy to
answer questions at the appropriate time.
Chairman Issa. Thank you.
[Prepared statement of Mr. Sullivan follows:]
[GRAPHIC] [TIFF OMITTED] 85907.008
[GRAPHIC] [TIFF OMITTED] 85907.009
[GRAPHIC] [TIFF OMITTED] 85907.010
[GRAPHIC] [TIFF OMITTED] 85907.011
[GRAPHIC] [TIFF OMITTED] 85907.012
[GRAPHIC] [TIFF OMITTED] 85907.013
[GRAPHIC] [TIFF OMITTED] 85907.014
Chairman Issa. Mr. Brenner?
STATEMENT OF ROBERT BRENNER
Mr. Brenner. Good morning, Chairman Issa, Ranking Member
Cummings, and distinguished committee members. I am Rob
Brenner, and I served as Director of EPA's Office of Policy
Analysis----
Chairman Issa. Could you pull the mic a little closer,
please, for everyone? Thank you.
Mr. Brenner. --from 1988 until my retirement 2 years ago.
Today I am voluntarily appearing before the committee solely in
my individual capacity.
I am very proud of my career in public service, my
accomplishments, and the accomplishments of the team that I was
a part of. My career at EPA was defined by the opportunity to
play a key role in the development, congressional passage, and
the implementation of the bipartisan Clean Air Act amendments
of 1990, legislation that has prevented millions of premature
deaths and illnesses.
During the implementation phase, I designed and led
programs to provide business opportunities and economic
incentives for U.S. companies, support technological
innovation, reduce toxic exposures for communities, and monitor
the Clean Air Act's costs and benefits for the U.S. taxpayers.
I am also fortunate to have been well-recognized for those
efforts. I received a gold medal from EPA, meritorious and
distinguished public service awards from three different
Presidents, and a distinguished career service award from then-
Assistant Administrator Gina McCarthy and Administrator Lisa
Jackson.
Of course, those accomplishments are far from mine alone.
Just as meaningful to me are the many notes of thanks I
continue to receive from exceptional individuals I recruited,
managed, and mentored during my 30-plus years at EPA.
In 1987, one of the people I recruited to assist with those
efforts was John Beale. John and I met in graduate school,
where he was working on both a master's degree in public
affairs and law degree as part of a scholarship program. We
became good friends, and we worked together on a foundation
program to identify and recognize leaders in the area of energy
and environmental policy.
After graduate school, we stayed in touch. And from the
early 1980s until about 1989, we saw each other about once a
year at a vacation home we co-owned in Massachusetts.
I want to take this opportunity to described why John's
recent conviction for post-2000 thefts from EPA is so
inexplicable for his friends and colleagues, including me.
The answer is: That period was preceded by more than a
decade of effective and highly regarded work. During that time
period, John co-directed the Agency's Clean Air Working Group
during the challenging 1989 to 1990 clean air legislative
process. He developed many strong relationships at EPA, on the
Hill, and with stakeholders. And he became a frequent and well-
respected participant in clean air strategy meetings at the
White House.
After that, he provided strategic advise on several key
rulemakings to implement the Clean Air Act; created and managed
the process that brought together the auto industry, States,
and the environmental community to create the national low-
emitting vehicle program. He played a central role in the
development of the landmark national health standards for ozone
and particulates. And he became a highly regarded member and a
frequent leader of U.S. teams negotiating international
environmental and energy agreements and protocols.
Yet, after 2000, this exceptional record turned into one
that resulted in John's pleading guilty to years of deception
and hundreds of thousands of dollars of theft based, in part,
on his claim that he worked for the CIA.
The question then becomes, how could anyone at EPA believe
that John was involved in national security work? And the
answer is that, if it had been anyone else, it almost certainly
would not have been credible, but John had established a track
record that made him one of the most highly regarded members of
the EPA. Moreover, he had served in the military, he had been
an undercover policeman, and he had worked at the U.S.
Attorney's office in New York--the type of background I would
have expected of someone doing national security work.
While I am in no way trying to defend the conduct which is
the basis for this guilty plea, I am saddened and disappointed
that John's good works and contributions at EPA will be
overshadowed by these unfortunate events.
And at this time, I'm prepared to answer any questions.
Chairman Issa. Thank you.
[Prepared statement of Mr. Brenner follows:]
[GRAPHIC] [TIFF OMITTED] 85907.015
[GRAPHIC] [TIFF OMITTED] 85907.016
[GRAPHIC] [TIFF OMITTED] 85907.017
[GRAPHIC] [TIFF OMITTED] 85907.018
Chairman Issa. Mr. Beale, do you have an opening statement?
Mr. Beale. Thank you, Mr. Chairman. No, I do not have an
opening statement.
Chairman Issa. Before I go to Mr. Perciasepe, Mr. Beale,
it's my understanding that you may intend to assert your
constitutional privilege to remain silent. Is that correct?
Mr. Beale. Yes, it is, Mr. Chairman. In the letters from
September 23rd and 24th, I think my attorney advised the
committee of that fact. And I will be asserting my Fifth
Amendment privilege this morning.
Chairman Issa. And is it my understanding that you have
already, as earlier stated, you've already pled guilty to the
charges before you?
Mr. Beale. Mr. Chairman, I respectfully have to make the
same statement, that I'm asserting my Fifth Amendment
privileges this morning.
Chairman Issa. Mr. Beale, today's hearing will cover the
topics including the U.S. EPA, the Inspector General's
investigation of your employment at the EPA as a senior policy
advisor in EPA's Office of Air and Radiation. You were uniquely
qualified to provide us testimony that would help the committee
better understand your conduct while at the EPA as an employee.
To that end, I must ask that you consult with your
attorney, recognizing that although you have already pled
guilty and, by definition, are not subject to prosecution for
these very areas we're investigating, we do have a need to find
out whether not you but other individuals participated or in
some way aided in your ability to do this. Those areas of our
investigations are clearly not subject to protection for you
against self-incrimination but, in fact, are the legitimate
requirements of government to ensure that this does not happen
again.
So I would ask you to consult with your attorneys as to
whether or not you're prepared to help in this investigation or
whether, having already pled guilty, you continue to assert
that you would be incriminated from something you've already
pled guilty to. Would you please seek counsel and then give me
your answer?
Mr. Gowdy. Mr. Chairman, could I ask the chair a question?
Chairman Issa. Of course.
Mr. Gowdy. Was there a written plea agreement between the
government and Mr. Beale?
Chairman Issa. Under Federal rules, the sentencing
guidelines are not mandatory at a plea agreement, but he did
enter one.
Mr. Gowdy. Is there a requirement that he cooperate in that
plea agreement? Is he looking for a 5K1.1 or a Rule 35 at some
point?
Chairman Issa. It is my understanding that cooperation is
part of the consideration for the sentencing not yet to happen.
Mr. Gowdy. Is there a transcript of the plea colloquy
between he and the judge when he entered his change of plea?
Chairman Issa. If the counsel can make us aware of that,
behind Mr. Beale?
Mr. Beale. It is my understanding that there is a
transcript, but we don't have a copy of it right now.
Chairman Issa. Counsel, you're not sworn, but if you could
answer the gentleman's question as a member of the bar, it
would be helpful for us dispense with this.
Mr. Kern. Mr. Chairman, there is no 5K1 component to the
plea agreement. It's a straight-up plea agreement that doesn't
require any additional testimony or information from Mr. Beale.
Mr. Gowdy. Did he receive a reduction in his guideline
points for acceptance of responsibility?
Mr. Kern. He did.
Mr. Gowdy. Was it the super-acceptance or the two-point
acceptance?
Mr. Kern. It was three points, two plus one.
Mr. Gowdy. And is any part of that, receiving a reduction
in his sentence for cooperation, that doesn't include answering
questions when he's not in jeopardy in a congressional
committee hearing?
Mr. Kern. No. It only requires acceptance of responsibility
as contemplated by the guidelines.
Mr. Gowdy. Mr. Chairman, I'd love to have a copy of that
plea agreement if we could get one. And I'm sure that other
attorneys on this panel and non-attorneys would like to see it,
as well.
Chairman Issa. Thank you. Mr. Gowdy, I'm going to direct
staff to get that. And, obviously, it's of our interest that
the U.S. Attorneys' Office not enter an agreement that would in
some way allow what is occurring here to occur.
Mr. Cummings, do you have any questions before we move
forward?
Mr. Cummings. Mr. Chairman, I just wanted to enter into the
record the--going to Mr. Gowdy--and I think Mr. Gowdy makes an
excellent inquiry, because I was wondering the same things.
We've got the letter of September 23rd, 2013, from Mr.
Kern--I guess that's his counsel--September 24th, 2013, from
Mr. Kern to the committee. And then this is a statement of the
offense. I think we ought to have that as part of the report.
Chairman Issa. Without objection, it will all be placed in
the record.
Do you have any other questions?
Mr. Cummings. No, I just--no. No, I don't.
I do have one question, Mr. Chairman, to the counsel.
Counsel, would you identify yourself, please?
Mr. Kern. Yes. John Kern on behalf of Mr. Beale.
Mr. Cummings. And so you--okay, fine.
Is there any--you know, part of our problem here is that
we're trying to prevent this from happening again. So there is
no requirement anywhere for him to cooperate with anybody with
regard to how he accomplished what he allegedly accomplished so
that we can try to make sure it doesn't happen again? There's
no requirement anywhere?
Mr. Kern. No, there's not.
Mr. Cummings. All right. Very well.
Chairman Issa. Okay. We'll move forward and dispense with
this.
Mr. Beale, did you serve in Vietnam?
Mr. Beale. Mr. Chairman, I respectfully decline to answer
that question on the basis of the advice of my attorney to
assert my Fifth Amendment privilege.
Chairman Issa. Mr. Beale, did you ever or do you now--do
you now or did you ever serve with the Central Intelligence
Agency as an agent or an operative or in any capacity in which
you aided the CIA?
Mr. Beale. Mr. Chairman, I respectfully decline to answer
that question on the basis of my Fifth Amendment privilege.
Chairman Issa. With that, I have no choice but to relieve
you of your position at the dais. We will escort you. You're
subject to a deposition--or, sorry, subject to a subpoena. So
we're going to ask that you remain and monitor the entire
hearings from an anteroom that we're making available to you,
along with your attorney.
It is the intention of this committee to seek your return
for purposes of full disclosure. We will do so in concert with
the U.S. attorney and, obviously, the trial judge.
And, with that, we'll take just a 2-minute recess so they
can reassess how the seating order----
Mr. Cummings. Mr. Chairman?
Chairman Issa. Yes?
Mr. Cummings. Just one thing.
First of all, I'm hopeful, Mr. Chairman, that after
sentencing we bring him back. Because then he is no longer in
jeopardy and we can get the kind of information that we need to
assist in the things that you talked about a little bit
earlier, making sure this stuff does not happen again, so that
we can get as much detail as possible. Then he's not in
jeopardy.
So I'm hoping while he's watching that he's aware that he
will likely--and I'm assuming the chairman would have no
objection to bringing him once sentencing is over.
Chairman Issa. And I agree with the gentleman. And the
reason for him watching it is so he knows what is said here.
The intent is to work with the U.S. Attorneys' Office. I
believe that the appropriate arrangement should be prior to his
sentencing as part of his plea bargain. That is not my
decision; it's not your decision. But we will seek to work with
the court.
As you know, we delayed this hearing until after the plea
bargain in order to make the closure of this portion of the
investigation for the IG's office in place.
But we will take this 2-minute recess and we'll be right
back. Thank you.
[Recess.]
Chairman Issa. The committee will come to order.
We now recognize Mr. Perciasepe for his opening statement.
STATEMENT OF THE HONORABLE BOB PERCIASEPE
Mr. Perciasepe. Chairman Issa and Ranking Member Cummings
and all the members of the committee who are here today, thank
you for providing me with the opportunity to appear before you
today and to discuss the Environmental Protection Agency's
progress in addressing recent issues brought to light by the
EPA Inspector General's ongoing investigation involving former
EPA employee John C. Beale.
As evidenced by EPA's referral of this matter to our
Inspector General and our steadfast cooperation with the
Inspector General's investigation to this matter, we approach
this with great seriousness. And we're approaching corrective
actions aggressively to deal with the issues that were raised
by Mr. Beale's fraudulent activity.
As stewards of the taxpayers' resources, EPA takes
seriously our responsibility to ensure that Federal funds are
used for the purposes that are appropriate, cost-effective, and
important to the Agency's mission.
The recent Inspector General's investigation, as we know,
identified a number of administrative processes and controls,
which were listed in testimony just a few moments ago, that
were either insufficient or they were not being effectively
used in preventing what appears to be a calculated, long-term
criminal fraud.
While I have not been provided the full details yet of the
Inspector General's investigative findings, I am aware the most
significant fraud involved employee pay, including exceeding
statutory pay limits, unauthorized extension on retention
incentives, time and attendance, government-funded travel. And
in nearly all instances, there are policies and procedures in
place. However, a number of them may have been ignored,
circumvented, or undermined by Mr. Beale's criminal misconduct.
At this time, the EPA is fully cooperating with the
Inspector General and is looking forward to assessing all
findings with a complete commitment to implement appropriate
further process improvements and administrative changes
necessary to ensure more effective internal controls.
While we are waiting for the Inspector General's report and
continue to cooperate with them, we don't want to wait to deal
with some of the issues that we already know about. So in
regard to steps already taken as part of our regular ongoing
process of improvements and based on some of the preliminary
findings shared, I want to outline a number of actions that
we've already begun to take.
Back last year and more recently this year, back in October
of last year, I directed the Office of Administration and
Resource Management in our Office of Chief Financial Officer to
conduct additional reviews of policies and controls for time
and attendance, employee pay, and travel.
These reviews have resulted in strengthening of existing
policies. We've strengthened supervisory control on time and
attendance. We've increased oversight of time entry and
approval practices, including generation of acceptance reports
to assist managers. To show every employee whether the employee
or their timekeeper entered the employee's time; each employee
who fails to enter his or her own time for three pay periods in
a single quarter; any instance where a supervisor or a time
approver failed to approve an employee's time--all of these are
now available in exception reports and are an additional series
of controls on top of our existing system. These reports will
then enable the Office of Chief Financial Officer, working with
the employees and supervisors and time approvers, to correct or
discover what the issues may be.
We have improved review of employee travel, including a
requirement now that 100 percent of all travel vouchers will be
audited and all receipts will be submitted by the Chief
Financial Officer before payment is authorized.
We have tightened retention incentive processes, requiring
future retention incentives to be entered into the human
resource system with a not-to-exceed date, stop date, on the
system, generating an exceptions report which will require a
human resource specialist to either confirm the recertification
has been received or end the incentive payment. So I might add
as an aside, there is nobody at EPA right now receiving
incentive payments.
We've also ensured a review of gross payment amounts of
employees by generating new controls for employee pay to ensure
compliance with the statutory pay limits.
These documented changes in policies and procedures will
also be supported by an array of new training, resources for
employees and supervisors, and defined roles and
responsibilities associated with our administrative processes.
As I indicated previously, our agency is fully committed to
strengthening accountability for stewardship of resources
entrusted to us by the taxpayers. And we expect fully to be
working with the Inspector General as they do their
administrative review of this current investigation and that
they will be providing us with additional recommendations
beyond the ones I've already mentioned that we've already
implemented.
So I want to thank you again for allowing me to represent
the Agency here today, and I'm looking forward to answering
your questions. Thank you, Mr. Chairman.
Chairman Issa. Thank you.
[Prepared statement of Mr. Perciasepe follows:]
[GRAPHIC] [TIFF OMITTED] 85907.019
[GRAPHIC] [TIFF OMITTED] 85907.020
[GRAPHIC] [TIFF OMITTED] 85907.021
[GRAPHIC] [TIFF OMITTED] 85907.022
[GRAPHIC] [TIFF OMITTED] 85907.023
Chairman Issa. I will now recognize myself for a series of
questions.
Mr. Sullivan, you and your deputies in your investigation
uncovered not just the big lie, the ``I'm a secret agent man,''
but you also uncovered these excess payments.
Were you able to discover whether any other--whether this
was a common overrun, allowing people to fly first-class, you
know, the nature of how--you know, each of the violations that
are unrelated to his not showing up to work? Did the scope of
your investigation include any other employees other than Mr.
Beale?
Mr. Sullivan. Our investigation was targeting Mr. Beale for
his alleged criminal conduct, which we've now proven by his
guilty plea. The question you're referring to now, I believe,
the bigger picture, our Office of Audit is engaged now in a
thorough audit of the seven areas that Mr. Elkins already
testified to.
Chairman Issa. And the EPA is audited by an outside
accounting firm. Is that correct? Who is it?
Mr. Sullivan. I don't know, sir.
Chairman Issa. Okay, so you don't know if EPA got a clean
audit on its spending.
Mr. Elkins. Chairman Issa, my staff conducts the EPA's
financial statement audit, so it's done in-house.
Chairman Issa. Okay. So, previously, these were simply
areas that were not audited thoroughly, obviously.
Mr. Elkins. The specific areas that we're discussing here,
no, not.
Chairman Issa. And audit of pay never includes verifying
whether you exceed the SES pay cap?
Mr. Elkins. No, we have not conducted an audit on that
issue.
Chairman Issa. Okay.
Mr. Perciasepe, does your accounting change now catch
someone who has paid more than the statutory maximum?
Mr. Perciasepe. Yes, sir, it would. We've designed these
improvements we've been making and the ones that we are now
implementing to deal with the most important findings that we
know of so far.
Chairman Issa. Uh-huh.
Mr. Perciasepe. And so we are--again, I want to keep
pointing out that we will expect to learn more, but yes.
Chairman Issa. Okay.
Mr. Brenner, you said some glowing things about Mr. Beale,
including, you know, if it had been anybody but Mr. Beale, you
would've not considered his story credible.
But isn't it true you were aware that he basically took
trips to domestic locations and turned expense accounts in?
Were you also aware of his excess spending, in excess of the
EPA guidelines and/or Federal regulations?
Mr. Brenner. No, sir, I was not aware of that.
Chairman Issa. Mr. Elkins or Mr. Sullivan, in your
investigation, who did review and would approve a first class
ticket for 10 times the cost?
Mr. Sullivan. We interviewed the individual that signed the
vouchers. She told us that because Mr. Beale's status as an
executive and because of his CIA connection, she never actually
looked at the vouchers, she just signed them and processed
them.
Chairman Issa. So, in other words, at EPA, his undercover,
super-secret status was known by a great many people?
Mr. Sullivan. That is a fair statement, Mr. Chairman.
Chairman Issa. So when our Founding Fathers said the only
way to keep a secret between two people is for one to be dead,
they didn't understand how the EPA can keep secrets among many
people, including people who have no security clearances? In
other words, weren't there people at the CIA who have no high
ranking security clearance who were ``well aware'' that he was
with the CIA?
Mr. Sullivan. Well, if I understand your question, Mr.
Chairman, Mr. Beale does not have a security clearance. To our
knowledge, he has never had a security clearance; that is
correct.
Chairman Issa. Well, we kind of understand that part on
him. But in other words, the people in HR and so on that were
approving these excess payments without looking at them, they
were told he was in the CIA. So it was an open secret that he
was super clandestine secret.
Mr. Sullivan. Well, the folks in HR might not have known
that, but the people at his level, the executives in the
agency----
Chairman Issa. But the person approving the vouchers
without looking at them was high ranking?
Mr. Sullivan. Yes, a deputy assistant administrator.
Chairman Issa. So a deputy assistant administrator can,
without credible requirements, can approve expenses greater
than they are supposed to be approved and nobody behind them
needs a justification?
Mr. Sullivan. That is what happened, sir.
Chairman Issa. So there is no control over the American
taxpayers for excess at the EPA.
Mr. Sullivan. Well, I know that is part of the issue of the
audit that Mr. Elkins described is taking place now.
Chairman Issa. Mr. Brenner, you yourself received, as I
understand a $9,000 discount--or $8,000 discount on a Mercedes
Benz. I understand you drove here in a Mercedes Benz today. Is
it true that you received a discount through a lobbyist on
behalf of Mercedes Benz on your automobile?
Mr. Brenner. [inaudible.]
Chairman Issa. Please turn the mic on for all of us.
Mr. Brenner. I am sorry. It is on.
Chairman Issa. I asked if you received a discount. That is
pretty much a yes or no. Did you receive a discount on a
Mercedes, arranged by a lobbyist, on an automobile you were
purchasing?
Mr. Brenner. As I said, Mr. Chairman, this is an issue that
was reviewed and investigated a couple years ago, and my
understanding is that the decision was that no further action
on it was warranted. And I disclosed it in my 2011 financial
disclosure form.
Chairman Issa. Okay. So, today, in the investigation in
which we are conducting on EPA--there was an investigation. You
have disclosed it in financial documents after the fact. So
let's go through this. Did you receive--did you accept an
$8,000 discount for a Mercedes Benz?
Mr. Brenner. Mr. Chairman, I came here voluntarily today to
discuss the issues associated with Mr. Beale. I did not come
prepared to discuss this set of issues that, as I said, have
already been investigated and a decision has been made on it,
and I am not prepared to discuss those issues today.
Chairman Issa. Mr. Brenner, we served you with a subpoena,
and then you said you would come voluntarily.
Mr. Brenner. No.
Chairman Issa. I am sorry. We threatened a subpoena, I
guess.
Mr. Brenner. I am not aware of that either.
Chairman Issa. Okay, let me go through the script.
During the course of the committee's investigation, it was
brought to our attention that you allegedly engaged in
unethical conduct. According to the report from the EPA
Inspector General, you accepted an $8,000 discount from
Mercedes Benz. The discount was not offered to the general
public and was arranged specifically for you by a lobbyist
employed by, well, Hogan & Lovells, a local law firm.
The committee is charged with preventing and investigating
waste, fraud and abuse. The information that we have uncovered
during the investigation as a result of the inspector general's
work includes this allegation of improper discount and
demonstrates at least one possibility that the culture in which
you operated as a supervisor promoted or allowed unethical
behavior at the EPA, which Mr. Beale has pled guilty to.
At this point, the committee would ask once again,
voluntary or otherwise, because we will request you back
involuntarily, would you please answer the question, did you
receive the discount? Not was it passed by, not was it
prosecuted; did you receive the discount?
Mr. Brenner. Mr. Chairman, as I said, that was not an issue
I came here today prepared to discuss. I came voluntarily to
discuss the matters directly related to Mr. Beale. If the
committee wants to pursue this set of issues, I would ask that
that be done through my counsel----
Chairman Issa. Are you represented by counsel here today?
Mr. Brenner. I am represented by counsel here today.
Chairman Issa. Would you please confer with counsel as to
whether or not this question, a question which takes no
preparation--you know whether or not you received a discount.
You said there was an investigation that cleared you. We are
inquiring into that because, quite frankly, it was part of the
IG's investigation. It is part of the information that was
given to us. And it is germane to this hearing.
You are not here simply because you were duped by Mr.
Beale. You are here as part of the broader investigation about
what might be a negligent culture at the EPA as to whether or
not the American people's moneys are being protected and well
spent.
Please seek your counsel. We will wait.
[discussion off the record.]
Mr. Brenner. Mr. Chairman, as I noted on my 2011 financial
disclosure form, I did receive a discount on a vehicle, and it
is described in that form.
Chairman Issa. And the attorney/lobbyist who arranged for
that, is that somebody that does business with the EPA?
Mr. Brenner. Mr. Chairman, as I said, this is a set of
issues that I did not come prepared to discuss in detail with
you and the committee.
Chairman Issa. And we will stay at a 10,000 foot level. You
know the individual. Was it an individual or a firm that did
business with the EPA and sought to influence legislation?
Mr. Brenner. Yes, Mr. Chairman, it was an individual who
did business with EPA.
Chairman Issa. Is it your understanding that you are
allowed to accept discounts of monetary value from lobbyists or
anyone else who does business with your agency that you oversee
and/or accept them, something not available to the general
public? I am just asking you what you understand the ethics to
be.
Mr. Brenner. Mr. Chairman, as I said, this is an issue that
was reviewed and investigated by the IG and the Department of
Justice, and they came to the conclusion that no further--at
least my understanding is they came to the conclusion that no
further action is warranted.
Chairman Issa. Well, I am going to go to the ranking
member, and I am not sure that we believe that this is a closed
matter.
But, Mr. Cummings, thank you for your patience through
this.
Mr. Cummings. Just to piggyback on just one question, Mr.
Elkins, Mr. Brenner said the IG had--it is his opinion he has
been cleared of this. Is that right? And did you do the
investigation that he is talking about?
Mr. Elkins. Representative Cummings, I would like to refer
this to Mr. Sullivan.
Mr. Cummings. Mr. Sullivan. I didn't know who to ask.
Mr. Sullivan. Yes, Mr. Cummings, my office did do the
investigation. And Mr. Brenner is not accurate in his
recitation of the facts.
The fact is that the U.S. Department of Justice Public
Integrity Section did decline prosecution of Mr. Brenner for
accepting the discount. However, we were never able to
interview him because he retired prior to us being able to
interview him. And once he retired, we no longer had the
ability to compel an interview.
Our process is that once we get a declination, an employee
within the agency is compelled to speak to us because there is
no longer--they are no longer in jeopardy of prosecution. And
that was indeed our plan, to compel Mr. Brenner's interview
with us, but it never happened.
Mr. Cummings. Well, that is very helpful. Thank you very
much.
Chairman Issa. I would ask unanimous consent that the
gentleman have his full 5 minutes.
Without objection, so ordered.
Mr. Cummings. Thank you very much.
Mr. Elkins and Mr. Sullivan, I want to thank you for
joining us today. I want to commend you and your team of
investigators for your very fine work in uncovering this
massive fraud on the taxpayers and helping bring Mr. Beale to
justice.
I am struck by the audacity of Mr. Beale's lies. According
to the criminal plea agreement, ``For more than 10 years, Beale
engaged in a pattern and scheme of deception, during which he
lied to the United States Government, his supervisors, friends
and family about a position he claimed he had with the Central
Intelligence Agency.''
It goes on to say that Mr. Beale used his fake CIA job as
an excuse to just not show up for work, but he did it for what
ended up to be two and a half years. Is that right?
Mr. Sullivan. Yes, sir. At a minimum, two and a half years,
at a minimum.
Mr. Cummings. What does that mean?
Mr. Sullivan. That means that the two and a half year
figure was agreed to during negotiations between the United
States Attorney and Mr. Beale's defense counsel.
Mr. Cummings. So it is quite possible it could have been
more. Is that what you are saying?
Mr. Sullivan. It could have been a little bit more or maybe
a year or two more, but we agreed on a two and a half year
figure.
Mr. Cummings. The idea that Mr. Beale was a secret agent
for the CIA seems preposterous to all of us now, but it was a
lie, and he kept it going for decades. He fooled pretty much
everybody, his employers, his family and even his criminal
defense lawyer, and it sounds like Mr. Beale was good at lying.
And the more people he--you know, the more he lied, the more it
seems that people believed him. And they went on and on and on,
and I guess it became easier to believe.
Mr. Sullivan, you interviewed more than 40 current and
former EPA employees in connection with your investigation. Is
that correct?
Mr. Sullivan. Yes, sir.
Mr. Cummings. And did senior EPA officials across multiple
administrations, both Democratic and Republican, believe that
Mr. Beale was working for the CIA?
Mr. Sullivan. Yes.
Mr. Cummings. So you heard Mr. Brenner talk about what a
great guy he was, all this wonderful stuff he had done. Did you
get the impression that everybody kind of felt that way when he
talked about all of his secret agent stuff and playing James
Bond? I mean, is that, because he was such a good guy, they
thought--do you think that is why everybody just said, oh, he
is off on another mission?
Mr. Sullivan. Well, sir, I think the best way I can
describe it is this. Mr. Beale did very high quality work for
the agency. He got a lot of accolades. And based on our
interview with him, he said that wasn't enough; he needed to
puff up his image. That is when he assumed the persona as being
a CIA undercover agent. It was universally accepted, absolutely
universally accepted throughout the agency that he worked for
the CIA among the senior executives.
The first executive that ever questioned him working for
the CIA was in fact Gina McCarthy. Beyond her suspicions,
everyone else we interviewed flat out believed he worked for
the CIA.
Mr. Cummings. So you mean to tell me that somebody could
walk in, I could be working for the EPA or in some other
agency, and say, you know what, guys, I am with the CIA, and is
it nothing is required----
Mr. Sullivan. Well, Mr. Cummings, I think----
Mr. Cummings. To show that? Do you follow me?
Mr. Sullivan. He began in 1994 with assuming this persona,
and he did it a little bit a time. And finally, when he spoke
to Mr. Homestead, who was then assistant administrator, in
2001, he crafted a somewhat believable story that the CIA had
recruited him to be on this oversight panel, and in fact, he
was reviewing undercover operations around the globe as part of
his oversight panel he was recruited to join, allegedly. Of
course, it was all a lie. But Mr. Homestead believed that. And
he used that to a springboard more and more time away from the
agency.
Mr. Cummings. In fact, the plea agreement described that,
in 2001, a senior Bush administration official at the EPA
granted Beale permission to be out of the office 1 day a week
in order to work on, and I quote, ``an interagency special
advisory group working on a project with the Directorate of
Operations at the CIA.'' Pursuant to this authorization, Mr.
Beale began taking 1 day a week off on days he claimed he was
working for the CIA, and he did that for many years.
Mr. Sullivan, is that right? Do you recall how many years
that happened? I know you have talked about two and a half
years a little earlier.
Mr. Sullivan. Yes, the total, it was a minimum of two and a
half years that was agreed to by his defense counsel and the
U.S. Attorney's Office for the plea agreement. He began taking
1 day off a week, and then he gradually--it morphed into more
and more time. There was a period of time, for approximately 2
years, he never came into the office. That was toward the end
of his career.
Mr. Cummings. But that Bush administration official was not
alone. The plea agreement said that Mr. Beale was also lying to
his family.
Mr. Sullivan, was that true? Was Mr. Beale also lying to
his family?
Mr. Sullivan. That is correct. It is absolutely correct
that based on--and we could see that based on email traffic. We
never interviewed Mr. Beale's wife. We also had another----
Mr. Cummings. Are they still married?
Mr. Sullivan. Yes, sir, to my understanding.
Mr. Cummings. Are you sure?
Mr. Sullivan. I do not know.
Mr. Cummings. Okay, go ahead.
Mr. Sullivan. We also had one other employee, who was an
administrative person, executive assistant, that did suspect
Beale, but she was fairly midlevel rank. And she believed that
Beale's travel vouchers were far too excessive. And she brought
that to the attention of her immediate supervisor, who was a
deputy assistant administrator, the person in fact who was
signing the vouchers, and her fears were dismissed.
Mr. Cummings. What about his criminal defense attorney?
Mr. Sullivan, do you have any understanding of whether
after he had already been caught, Mr. Beale initially lied to
him as well, is that right?
Mr. Sullivan. Yes. Mr. Beale maintained the persona of
being a CIA agent and his defense counsel told the U.S.
Attorney assigned to the case that, please, tell the OIG agents
to back off because you are interfering with the CIA work. And
the U.S. attorney came to us, and we have a great relationship
with the CIA Inspector General's Office. We discussed the case
with them. They had already told us he did not work for the
CIA, and they had no record of him whatsoever. So we arranged
for him to come to Langley in a secure room, and that was the
point where Mr. Beale, I think, finally came forward and told
his attorney that he really did not work for the CIA.
Mr. Cummings. I have one other thing. How did the
government force Mr. Beale to face the facts and admit that he
was never employed by the CIA? You brought him to the CIA?
Mr. Sullivan. No, we said we would. We arranged that. We
arranged it to make him feel comfortable, and we arranged him
for a particular day to meet us at the main gate in McLean on
123, and he would be escorted by one of our agents and a CIA
employee, and we would go to the secure room with Mr. Beale and
his attorney.
Mr. Cummings. Can you describe that? I just got to know. I
mean, what was that like? You got a guy who has been lying that
he is a part of the CIA. You bring him to the CIA. And now
there is this wonderful meeting where--I mean, tell us what
happened.
Mr. Sullivan. Well, he never showed up, because he finally
then told his defense counsel that he really didn't work for
the CIA. But it came to that point in order for us to get past
that bridge because he had maintained with his own counsel that
he worked for the CIA.
Mr. Cummings. Clearly, EPA needed more checks and balances,
is that right?
Mr. Sullivan. Yes, sir.
Mr. Cummings. I see you have just been sent a bulletin.
What does that say?
Mr. Sullivan. It is cell phone records and locations
overseas. During the time he allegedly worked for the CIA, he
was in communications with executives at the EPA, and he
claimed he was overseas, either in Pakistan or other locations.
When we pulled his government cell phone records, we found he
was actually at his vacation home in Massachusetts making the
phone calls claiming that he was overseas.
Mr. Cummings. The chairman said something that I think is
so probably quite accurate. He said that a lot of times when he
saw a defect, it was probably more than one defect. And I am
just wondering, I mean, when you all look at this, are you
seeing this as an aberration, or are you seeing, you know what,
there is probably more of this stuff going on?
I mean, did you--Mr. Elkins or Mr. Sullivan, do you have an
impression?
In other words, we are trying to make sure it doesn't
happen again. I mean, do you believe that this is just one of
these things that happened, this guy was just a phenomenal liar
and he got away with it, or do you think that it is quite
possible that there are other situations like this?
Mr. Elkins. Well, Representative Cummings, in our business,
we don't really like to deal with speculation. We like to deal
with the facts. That is why we are starting our audit.
Hopefully, at the end of that audit, we will be able to shine a
light on your question and give you an answer to that question.
Mr. Cummings. So you expect that if the audit, if there are
some things like this happening, that that audit might provide
you with the information you need to be able to answer that. Is
that what you are saying?
Mr. Elkins. That is our goal, yes.
Mr. Cummings. All right.
Thank you very much, Mr. Chairman.
Chairman Issa. Thank you.
And if you will yield me long enough to pile on a little
bit, I think what Mr. Cummings and I are both getting to is the
internal controls to prevent each and every one of these abuses
from happening appear not to be in place.
And obviously, when it is done, Mr. Perciasepe, you have
made it clear you are trying to create those internal controls.
Obviously, we would like to find out who else fell between
the cracks. And then the challenge for us is, Mr. Elkins, you
are one of 74 IGs. We figure there are 73 other agencies that
need to do some soul searching about internal controls, and
that is a big part of the reason why Mr. Cummings and I have
you all here today.
Chairman Issa. With that, I would like to go to the
gentleman from North Carolina.
Mr. McHenry. I would like to yield the balance of my time
to the gentleman from Ohio, Mr. Jordan.
Mr. Cummings That is the whole time.
Mr. Jordan. I thank the gentleman, and I thank the
chairman.
Mr. Brenner, do you know Patrick Raher?
Mr. Brenner. Yes, sir, I do.
Mr. Jordan. And isn't it true that Patrick Raher is a
member of the EPA Clean Air Act Advisory Committee?
Mr. Brenner. He was at one time. He is not a member now.
Mr. Jordan. But he was at one time. Do you know how long he
served?
Mr. Brenner. I do not know how long.
Mr. Jordan. Isn't it true that he was a member back in
1992, do you know? Our records indicate he was a member in
1992.
Mr. Brenner. I think that is correct.
Mr. Jordan. Okay. You testified you and Mr. Beale did
important work on the Clean Air Act. Did you work with Mr.
Raher back in the early 1990s, when he was a member of the
Clean Air Act Advisory Committee?
Mr. Brenner. That was a forum that met publicly----
Mr. Jordan. Have you worked alongside Mr. Raher? You said
you knew him. Did you work alongside of him in his capacity at
the Clean Air Act Advisory Committee? In your capacity with the
EPA, did you work with him?
Mr. Brenner. I discussed Clean Air Act issues in that
public forum with Mr. Raher and with many other people who were
a member of this Public Advisory Committee.
Mr. Jordan. Okay. And let me go back to where the chairman
was a little while ago. Have you ever purchased an Mercedes
Benz automobile?
Mr. Brenner. I did.
Mr. Jordan. And Mr. Sullivan, did Mr. Brennen--Brenner,
excuse me, receive a discount for the purchase of this
automobile?
Mr. Sullivan. Yes, our investigation revealed he did
receive a $8,000--it was entitled a VIP discount.
Mr. Jordan. An $8,000 VIP discount.
Mr. Sullivan. Yes, sir.
Mr. Jordan. And the individual who helped, ``broker the
deal,'' I am look at your report, can you tell me who that
individual was?
Mr. Sullivan. It was Mr. Raher.
Mr. Jordan. The same Mr. Raher who served on the EPA
Advisory Committee?
Mr. Sullivan. Yes, sir.
Mr. Jordan. The same Mr. Raher that Mr. Brenner has known
since 1992?
Mr. Sullivan. Well, I don't know how long he has known him,
but it is the same Mr. Raher.
Mr. Jordan. Well, he was working at the EPA and Mr. Raher
has been at the Advisory Committee, was working at the Advisory
Committee since 1992.
Mr. Brenner, is that accurate, what Mr. Sullivan had to say
there? Is everything exactly that way? You got an $8,000
discount from Mercedes Benz when you purchased this automobile?
Mr. Brenner. Sir, Mr. Raher is somebody who I have known,
as you mentioned, since 1992 and in fact before that. He has
been a friend of mine throughout that period. And it is true
that he was involved in----
Mr. Jordan. So he is a friend.
Mr. Brenner. He is a long-time friend.
Mr. Jordan. Well, you didn't tell me that a little while
ago. A long-time friend?
Mr. Brenner. That is the case, that he has been a friend.
Mr. Jordan. Okay, now I want to come more to the present
time when you got the $8,000 discount on the purchase of the
Mercedes Benz that Mr. Raher was the broker for that deal and
at the time worked as a lobbyist for the Daimler Auto Group. At
that time, were you also then working on the CAFE standards?
Mr. Brenner. No, sir, I was not. And I am going to say
again that this is an issue that was looked at----
Mr. Jordan. Well, it is our understanding, at that time,
you got the--at the time you got the $8,000 discount, were you
working in the Office of Air and Radiation?
Mr. Brenner. I was working in the Office of Air and
Radiation at the time.
Mr. Jordan. And that office had jurisdiction over the CAFE
standards?
Mr. Brenner. That office shared jurisdiction with another
agency.
Mr. Jordan. But that office was involved in forming the
CAFE standards, correct?
Mr. Brenner. But I was not.
Mr. Jordan. But was your boss, Ms. McCarthy, your direct
supervisor, was she involved?
Mr. Brenner. Yes, I believe she was involved in it.
Mr. Jordan. Mr. Sullivan, do you know if Ms. McCarthy knew
about the discount that one of her employees got from someone
in the auto industry at the time they were working on
implementing the CAFE standards for the auto industry?
Mr. Sullivan. She did not know about it at the time. We
interviewed Ms. McCarthy, and indeed, we interviewed every GS-
14 employee and above.
Mr. Jordan. When did Ms. McCarthy find out about the
special sweetheart deal that Mr. Brenner got from Mercedes
Benz?
Mr. Sullivan. It is when we interviewed her.
Mr. Jordan. And when was that? Give me that date.
Mr. Sullivan. That was--well, I don't have the report in
front of me, sir, but I believe it was in late 2010.
Mr. Jordan. When did Mr. Brenner again get the special
deal?
Mr. Sullivan. In 2010.
Mr. Jordan. The same year.
Mr. Sullivan. Yes.
Mr. Jordan. The same time they are working on CAFE
standards. We had a hearing in this committee. In fact, Mr.
Chairman, I would ask to enter into the record some of the
findings from the hearing we had in our subcommittee last
Congress on implementation of the CAFE Standards.
Chairman Issa. Without objection, so ordered.
Mr. Jordan. At the same time the CAFE Standards were being
formed?
Mr. Sullivan. Sir, I don't have any direct knowledge of the
CAFE standards. I didn't have any visibility on that. We were
just investigating the allegation that Mr. Brenner took--an
ethical violation----
Mr. Jordan. Ms. McCarthy knew about it in 2010. Mr. Brenner
got the loan, the sweetheart deal, in 2010. CAFE standards were
being worked on in 2010 out of Ms. McCarthy's office.
Mr. Sullivan. I will accept that assertion, sir, but we
weren't looking at the CAFE standards.
Mr. Jordan. Okay. Well, I understand that. I am just saying
the dates; it all happened at the same time.
Mr. Chairman, I understand I am out of time, but here is
the point: Mr. Raher, who is on the Clean Air Act Advisory
Committee, has known Mr. Brenner for 20-some years, not just
known him, close friends, then works as a lobbyist for a major
auto group at the time the CAFE standards are being
implemented. Mr. Brenner who works in the office of Ms.
McCarthy where they are putting together these CAFE standards
gets a sweetheart deal. That is what is going on at the EPA,
and that is our concern.
With that, I yield back.
Chairman Issa. I thank the gentleman.
We now go to the gentleman from Massachusetts, Mr. Lynch.
Mr. Lynch. Thank you, Mr. Chairman.
I want to thank Mr. Elkins and Mr. Sullivan especially for
your participation in the hearing this morning.
I want to talk a little bit about these retention bonuses
and the conditions under which they are granted. There seem to
be two conditions based on the regulations and statutes and EPA
policy. One of the conditions is that for an employee to
receive a retention bonus, that there is the danger that they
would be attracted away to private practice and we would lose
the benefit of their services.
Is that correct, Mr. Elkins?
Mr. Sullivan?
Mr. Sullivan. Yes, that is the general concept behind the
recentive retention bonus.
Mr. Lynch. Mr. Perciasepe, the other condition is that we
actually retain the employee, we actually retain them. So in
this case, at least you can enlighten me, we did not really dig
down and verify whether Mr. Beale's job offers, private sector
opportunities, were real, number one, and then we didn't verify
whether we retained him. It is apparent that he was gone for a
year and a half at one stretch. He was not employed. He just
left for a year and a half. There is a total of two and a half
years here that he was absent from the workplace. So, on the
retention bonus, we didn't verify that he deserved it, and then
we didn't verify that we retained him. Now, there is a complete
collapse, and I am wondering if you can help me with this?
Mr. Perciasepe. Well, I think you mentioned the reasons for
a retention bonus correctly. They are likely to leave. They
have offers or some other reason that they are likely to leave.
They are performing work that is necessary for the agency. And
when there was an approved retention bonus for Mr. Beale, it
was in the time frames that you heard several people talking
about, including Mr. Sullivan, that he had a high prestige. He
was a high-performing individual, and it was not unreasonable
to expect that he might be getting retention bonuses.
Mr. Lynch. But for a year and a half, he was puttering
around the house reading books. That is not a high performance.
Mr. Perciasepe. The problem is not in the original
rationale for that back in the 1990s. The problem is that it
kept getting recertified without any recertification process.
So it went on through the time period that I think the
inspector general is talking about. So the issues of when he
was at work and not at work are not during the initial granting
of the retention bonus.
Mr. Lynch. Okay, let me stop you because you are not being
helpful.
Mr. Sullivan, how did this guy basically absent himself
from the workplace for a year and a half, and we didn't pick up
on it? He was gone for 2 and a half years out of 13 years. How
did this happen?
Mr. Sullivan. He, again, claimed he was living his
alternate lifestyle as the CIA undercover agent, and he claimed
he was traveling overseas and doing undercover work and no one
questioned him, and he had free rein. No one questioned Mr.
Beale ever. No one questioned his vouchers. No one questioned
his time away from the office. No one questioned his lack of
work product.
Mr. Lynch. What are we doing now to make sure this doesn't
happen again, Mr. Perciasepe?
Mr. Perciasepe. As I mentioned in my opening statement, and
I want to be clear about this because we are working with the
IG as they do their review, so we are going to probably learn
more, but in advance of that, we have moved ahead and
established a number of improvements to our controls. We have
controls. They were not followed. So we have added additional
levels of control. And on retention bonus, we have put a hard
stop. They need to be renewed every year, and they only have a
3-year duration.
Mr. Lynch. That was always in there.
Mr. Perciasepe. Right. That's always in there. What didn't
happen in the early part of the last decade is that nobody ever
reviewed those. So what we now have in the system is a hard
stop. If they don't get reviewed, the payment stops.
Mr. Lynch. We need to do a lot more.
I only have 20 seconds left. What kills me is there
actually are employees, whether they are doctors at the VA or
finance people at SEC, that we actually do need to pay
retention bonuses to, to retain them, because of the value they
bring to the government and to the taxpayer. This is just
disgraceful that we have undermined it in this fashion. So you
have got to clean up your act.
Thank you. I yield back.
Chairman Issa. I thank the gentleman.
We now go to the gentleman from Ohio, Mr. Jordan.
Mr. Jordan. Thank you, Mr. Chairman.
Mr. Sullivan, I am going to come back to you. At the time
that this--and also--well, we have entered the report, but I
will come back to that maybe, Mr. Chairman.
But Mr. Sullivan, did you recommend prosecution for the
sweetheart deal that Mr. Brenner got with Mercedes Benz and
that Mr. Raher facilitated with the Daimler Auto Group?
Mr. Sullivan. That was a joint investigation that we had
with the FBI. It was opened up; a file was opened up in the
Public Integrity Section of the Department of Justice. We
believed we had enough evidence to prove a crime. The U.S.
Attorney's Office--excuse me, the Public Integrity Section
declined prosecution, and the FBI dropped out of the case, and
it left us----
Mr. Jordan. But in your professional opinion, you felt it
should have proceeded with a prosecution?
Mr. Sullivan. Well, we presented the facts, and that
decision is always up to the Justice Department.
Mr. Jordan. I understand that. But are you are a good
lawyer. I can tell. You are testifying here today, and you know
what you are talking about. In your professional judgment, you
felt it should have moved forward?
Mr. Sullivan. I think that there was merit to move forward,
yes, sir.
Mr. Jordan. Okay. And just to refresh my memory again. What
date did you recommend that, that you sent this on and, the
decision was made. What was the date
Mr. Sullivan. The declination, again, I don't have my file
in front of me, the declination happened sometime in 2011.
Mr. Jordan. In 2011. Okay. Mr. Brenner, when did you step
down?
Mr. Brenner. I retired from EPA in August of 2011.
Mr. Jordan. So this declination that Mr. Sullivan talked
about was before you retired?
Mr. Brenner. I am not sure exactly when the declination
took place.
Mr. Jordan. Mr. Sullivan, can you answer that?
Mr. Sullivan. Yes, the declination happened before Mr.
Brenner retired.
Mr. Jordan. Well, let me go to Mr. Sullivan. Was there
talk--when you talked with Ms. McCarthy about this incident,
was there talk of disciplining Mr. Brenner, any type of
disciplinary action? I mean, here you have got the inspector
general, who thinks it should be prosecuted. Was there any
disciplinary action taken?
Mr. Sullivan. Well, let me explain how it works. When we
work a criminal investigation, we concentrate on that first.
And when we interviewed Ms. McCarthy the first time, it was
based on a fact trying to develop evidence for a potential
crime.
The second time we spoke to Ms. McCarthy about this it was
after the declination had been issued, and it was after Mr.
Brenner had retired. At that point, we were looking at a
potential administrative violation. We also endeavored to
determine it if any other employee in the Office of Air and
Radiation had accepted a VIP discount. Therefore, we
interviewed every GS-14 and above, any supervisor, and that was
in excess of 50 people, and there was no evidence anyone else
accepted a discount.
Mr. Jordan. Mr. Brenner, were you disciplined in any way
for the loan deal with Mercedes Benz, with the discount that
you got when you purchased the automobile? Was there any type
of disciplinary action taken?
Mr. Brenner. No, sir.
Mr. Jordan. And no talk of getting fired or any type of
disciplinary action at all?
Mr. Brenner. No, sir. As I said, it was investigated, and
the Department of Justice declined to take further action on
it.
Mr. Jordan. And did you get any type of bonus when you--in
2011, when your retirement comes due or in that calendar year?
Mr. Brenner. I don't remember what bonuses I might have
received in that year.
Mr. Jordan. Mr. Sullivan, how many people directly report--
when you were doing this investigation, how many directly
report to Ms. McCarthy when she was running the Office of Air
and Radiation. How many people directly reported to her?
Mr. Sullivan. To my understanding, it is in excess of
1,000.
Mr. Jordan. Direct reports.
Mr. Sullivan. Direct reports? She had three deputy
assistant administrators.
Mr. Jordan. And who were those three deputy assistant
administrators?
Mr. Sullivan. Well, at one time, there was Mr. Brenner, Mr.
Beale, and a Ms.--and another lady.
Mr. Jordan. So two of the three had significant problems,
two of the three that directly reported to her, Mr. Beale and
Mr. Brenner.
Mr. Sullivan. Subsequent investigations uncovered that,
that is correct.
Mr. Jordan. I want to do one last thing if I could, Mr.
Chairman. Let's put on the screen. This is what amazes me. Not
only does Ms. McCarthy know that this takes place, if we could
put that up, the invitation, this is the invitation for the
retirement party. At the bottom, you can see where it mentions
Gina McCarthy as the head of the thing.
So Ms. McCarthy only has three people who report directly
to her. Two of them were here today; one left already, Mr.
Beale. The other is Mr. Brenner. Mr. Brenner gets a sweetheart
deal from Mercedes Benz, facilitated by Mr. Raher, who has been
an adviser to the EPA since 1992 and a close friend of Mr.
Brenner. All this goes on. The IG recommends prosecution. No
discipline--no disciplinary action taken at all for Mr.
Brenner. In fact, they throw him a party. They throw him a
party when he retires. That is what is going on at our
Environmental Protection Agency.
Chairman Issa. Would the gentleman yield?
Mr. Jordan. I would yield to the chairman.
I yield back to the chairman.
Chairman Issa. My understanding is he didn't retire. This
was the nonretirement retirement of Mr. Beale, who everyone
knew stayed on the payroll.
Mr. Jordan. For Mr. Beale, but not for Mr. Brenner.
Chairman Issa. That is correct.
We now go to the gentleman from Virginia, Mr. Connolly.
Mr. Connolly. Thank you, Mr. Chairman.
Mr. Perciasepe, part of me feels we are a little bit
fiddling while Rome is burning because of course, we are now on
the first day of a complete government shutdown. And while the
sordid details of this case are fascinating and should be dealt
with and are a worthy topic of congressional attention and
oversight, Mr. Perciasepe, does the shutdown cost EPA money on
a daily basis?
Mr. Perciasepe. The shutdown costs the American people on a
daily basis.
Mr. Connolly. Is there a dollar estimate for just the EPA?
Mr. Perciasepe. I don't have a dollar estimate.
Mr. Connolly. Mr. Sullivan or Mr. Elkins, any idea of what
it costs EPA every day we are shutting down?
Mr. Elkins. I don't have that number available.
Mr. Connolly. Would it be fair to suggest that it far
exceeds what we are looking at here today in terms of the
estimated cost of Mr. Beale's fraud?
Mr. Elkins. I would say that the cost would be substantial.
Chairman Issa. Would the gentleman yield for a question?
Mr. Connolly. Yes, sir.
Chairman Issa. Isn't it true the CBO scores a savings for
every day that 800,000 employees are not being paid?
I agree with the gentleman, by the way, that we should not
be in shutdown, that the important work of the EPA and other
agencies, we would like to have them back to work as soon as
possible, but I am not sure we have the right panel to analyze
the cost-benefit analysis.
Mr. Connolly. I know the chairman will appreciate, I wanted
to reclaim my time right after you said that.
But okay, I am glad we in agreement.
But I think it is fair to say that there is also a cost
associated, both tangible and intangible, with the shutdown,
and I think it is really important we put this hearing in that
context.
I think it is also important to really guard against taking
an egregious particular case and then generalizing. There are
former Members of Congress, even from the chairman's home
State, who were incarcerated for being criminals who were
engaged in criminal activities. And to take that particular
case and then say, well, then all of Congress must be
complicit, let's start making sure that we include in our
accusations and insinuations that all of them are corrupt,
would be a false premise.
Chairman Issa. Would the gentleman yield further for one
moment?
Of course, I will stop the clock.
I would bring to the gentleman's attention, I believe it
may have been before you arrived here, that the Congress took
up what we often call the Duke Cunningham law so that any
Member of Congress who disgraces and embezzles and/or receives
gifts in return for their favors as voters would in fact
forfeit their pension, so never again will we have that. And
that is a big part, and I have offered some legislation for the
ranking member to consider we are trying to do is to recognize
that never again should somebody retire on a 22-year
retirement, as Mr. Beale, did when in fact he didn't work for
22 years.
Mr. Connolly. And I really appreciate the point of the
chairman because I would be glad to join with the chairman and
the ranking member on such legislation. I think that is exactly
the corrective kind of action we ought to be looking at. What
we shouldn't be doing is trying to paint with a guilty brush by
insinuation the guilt of Mr. Beale and perhaps others. We have
to be very careful about that. And that is the point I was
making.
And I know the chairman would agree with me that those who
might conclude we are all to be painted with the same brush,
that would be a false assertion, no matter the temptation of
the public to look cynically at a Congress when individual
examples of corruption occur. That is the point I am trying to
make.
Mr. Perciasepe, is EPA rampant with corruption? Was this a
circle of conspiracy that Mr. Beale was only the sort of the
tip of the iceberg?
Mr. Perciasepe. You know, at the core of this matter is an
individual who deliberately and with calculation defrauded the
EPA and the American taxpayer. I am not able to say how much
further that went because that is still under review, but we
have policies and controls in place. They were----
Mr. Connolly. So stipulated.
Mr. Sullivan and Mr. Elkins, any evidence of a conspiracy,
that this is wider than just Mr. Beale?
Mr. Elkins. Sir, that is why we are conducting our audit.
Hopefully, within the very near future, we will be able to give
you an answer to that question.
Mr. Connolly. So, right now, you don't have an answer to
that question?
Mr. Elkins. No, I don't, because we haven't completed the
audit.
Mr. Connolly. A final question, if I may, Mr. Chairman.
Mr. Brenner, you indicated--did I understand your testimony
correctly that you vacationed together with Mr. Beale?
Mr. Brenner. I said that----
Mr. Connolly. Could you turn on your microphone, Mr.
Brenner?
Mr. Brenner. Sorry. I said that occasionally John Beale and
I had vacationed together at a house that we co-owned in
Massachusetts.
Mr. Connolly. Over what period of time?
Mr. Brenner. The time I was referring to was in the 1980s.
Mr. Connolly. 1980s. For the whole decade? Was this a
regular thing, or it just happened once? We are trying to get
at how well you knew Mr. Beale.
Mr. Brenner. I think it was about once a year from that
period, from about 1983 until about 1989. But I have said that
I knew Mr. Beale very well.
Mr. Connolly. And if the chair would just indulge one final
question, you indicated in your testimony that starting in 1988
through roughly the year 2000, you felt that Mr. Beale was a
solid professional and did good work, is that correct?
Mr. Brenner. That is correct.
Mr. Connolly. But starting in 2000, you saw a change.
Something changed, is that correct?
Mr. Brenner. I don't know that I personally saw anything
after 2000. What I was describing is that I was Mr. Beale's
supervisor through the 1990s, and after that, I was no longer
his supervisor.
So what I am saying is during the time that I was his
supervisor in the 1990s, there were a lot of noteworthy
accomplishments that Mr. Beale deserves credit for in many
different areas. He was highly regarded. After 2000, though, I
was no longer his supervisor, and I have said in my testimony,
given his plea, that of course something went dramatically
wrong in terms of his performance at EPA. He pled guilty to
fraud.
Mr. Connolly. Yes, I understand that. But did you observe
that at the time, this change in your friend, or is this
something you just were made aware of retrospectively?
Mr. Brenner. No, I did not observe that myself.
Mr. Connolly. That is what I wanted to get at.
Chairman Issa. I thank the gentleman.
Mr. Connolly. I thank the chair.
Chairman Issa. Please note that I majored in indulgence
here.
Mr. Connolly. You have been most indulgent.
Chairman Issa. With that, we recognize the gentleman from
Utah, and I ask indulgence to borrow 15 seconds.
Mr. Chaffetz. Absolutely, Mr. Chairman.
Chairman Issa. Mr. Brenner, I just want to understand, in
1994, when Mr. Beale began perpetrating this criminal activity
of claiming to be CIA and taking time off, you had prior to
that time co-owned this home that you call a vacation home in
Massachusetts, having bought it from his parents. That is the
way I understand it. Is that true?
Mr. Brenner. That is true. That house was purchased by the
two of us somewhere around 1983.
Chairman Issa. Okay. So, at the time that you helped Mr.
Beale get into this job and through the period of part of your
supervising him, you were friends; you co-owned a building, a
home, a vacation spot together. That is correct, right?
Mr. Brenner. It is correct that we co-owned. I don't
describe that as helping Mr. Beale get into EPA. We have a
personnel process, had a personnel process at the agency, where
his application----
Chairman Issa. I don't want to take more of his time. It is
just that when somebody says I sort of know this guy, he is a
friend, but you could own a building together, you are friends,
you vacation together, and you are his supervisor.
With that, I will let the gentleman from Utah follow up.
Mr. Chaffetz. Mr. Chairman, if I can ask unanimous consent
to have my clock reset to 5. I believe Mr. Connolly was given
an extra----
Chairman Issa. The indulgence is so noted.
Mr. Chaffetz. And I thank the gentleman from Virginia as
well for his understanding.
And I thank the chairman.
Listen, this is important. If we are going to get to the
truth, we have to understand. As a Nation, we are self-
critical. We are going to look deep into these things to make
sure they never happen again.
So I have seen the movie ``Catch Me If You Can.'' It smells
a lot like that. It is unbelievable that somebody could get
away with this.
I want to go back to that invitation and this party. There
is a retirement party. Mr. Beale is stepping down. My
understanding, Mr. Sullivan, is that Ms. McCarthy was at that
retirement party, and she was keenly aware that he was
retiring. Correct?
Mr. Sullivan. Yes, sir, that is correct.
Mr. Chaffetz. But he didn't actually retire. He continued
on for how much longer on the payroll of the United States
Government?
Mr. Sullivan. A year and a half longer.
Mr. Chaffetz. And at that time, he was the direct--who was
his direct report? He reported directly to Ms. McCarthy during
that time, correct?
Mr. Sullivan. Yes.
Mr. Chaffetz. Did he show up to work during that time?
Mr. Sullivan. No.
Mr. Chaffetz. Let's put up slide No. 2--slide No. 7, pardon
me. Slide No. 7.
This is a letter from Gina McCarthy, who is now the EPA
administrator, but prior to that, she had this responsibility
for Mr. Beale. The retirement party happened in September of
2011. This is an email that is dated January of 2013: ``As you
are aware, we have been seeking confirmation for your
employment status with the other Federal agency you maintained
you have worked for or are currently working for while employed
at the EPA.''
And later it goes on and says, ``We have been unable to
confirm the existence of an interagency detail or any other
type of arrangement.''
You are familiar with this email, Mr. Sullivan?
Mr. Sullivan. Yes, sir, I am.
Mr. Chaffetz. Let's go to slide No. 8. About a month later,
this is an email, and the highlight I wanted: ``It has come to
my attention that you are currently receiving a retention bonus
in addition to your base salary. As a result, I have notified
OARM to cancel payment of the retention bonus.''
So what happened there? In between--Gina McCarthy, she
becomes aware that maybe this is a lie. It is fraud. It is
deception. And she sends this.
Mr. Sullivan. Mr. Chaffetz, can you tell me the date of
that email? I can't read it.
Mr. Chaffetz. It is February 5th.
Mr. Sullivan. February 5th. And that was almost a week
before we were informed about the situation. We were informed
on February 11th of 2012--I am sorry, 2013.
Mr. Chaffetz. So what did she do about it? Did she tell you
about it?
Mr. Sullivan. She told us about it on February 11th of
2013.
Mr. Chaffetz. She didn't tell you about it first, right?
She told the General Counsel's Office.
Mr. Sullivan. That is correct, sir.
Mr. Chaffetz. So she didn't tell you directory first. She
told somebody else about it.
Mr. Sullivan. That is correct.
Mr. Chaffetz. And then it went to another office, correct?
Mr. Sullivan. That is correct.
Mr. Chaffetz. And then it finally landed on your desk.
Mr. Sullivan. That is correct.
Mr. Chaffetz. Did she fire him?
Mr. Sullivan. Fire who? Mr. Beale?
Mr. Chaffetz. Yes.
Mr. Sullivan. No.
Mr. Chaffetz. So Gina McCarthy knows that it is fraud. He
is admitting that he doesn't have any excuse to this. He has
basically been outed at this point. And the only thing that she
does is get rid of his retention bonus?
Mr. Sullivan. Well, sir, with all due respect, I think you
mischaracterized that.
Ms. McCarthy forwarded her concerns about fraud, and it was
our job as criminal investigators to investigate it. During
this time period, from February 11th on, we were conducting our
criminal investigation. So Ms. McCarthy had her suspicions.
Mr. Chaffetz. But she had enough to go and say, let's get
rid of your retention bonus, because obviously, this other
agency isn't true.
What happened to Mr. Beale? Did he get fired?
Mr. Sullivan. No, sir. He retired.
Mr. Chaffetz. And as a consequence, does he get his full
retirement benefits?
Mr. Sullivan. Yes, sir, he does.
Mr. Chaffetz. So here he is prosecuted, convicted, pled
guilty, owing hundreds--almost $1 million. He defrauds the
Federal Government. Gina McCarthy knows about this. She only
had three reports at the time: Mr. Brenner, who has his own
ethical problems and challenges. The number two person is
defrauding the Federal Government by nearly $1 million, faking
his way, saying he is a CIA employee, and she doesn't fire him?
And the guy still, month after month, the United States
taxpayers are going to pay him for his extraordinary services,
and it is based, right, on the highest 3 years of his income,
which was fraudulent.
It is another example, Mr. Chairman, of this
administration, the Obama administration, failing to actually
fire somebody. What does it take to actually get fired in this
Federal Government? If this person could be fired and she
didn't do it, I think we have no choice but to hear from
Administrator McCarthy. She was involved in this. She went to
his retirement party. He didn't show up to work for years, and
she paid him above what she is allowed to do by the statutory
limit; didn't fire him; he still gets his bonus. She needs to
come before this committee.
Chairman Issa. I thank the gentleman.
As I go to Ms. Duckworth, I just want to make sure our
timeline is accurate. According to what the gentleman just went
through, the administrator was aware and was working with the
general counsel on the fact that he didn't work for that other
agency, in her estimation, before the investigation was given
to you, is that correct? In other words, general counsel--her
awareness, general counsel, and then, later, you, is that
right?
Mr. Sullivan. That is correct.
Chairman Issa. Okay. We can follow up on that later. Thank
you.
The gentlelady from Illinois.
Ms. Duckworth. Thank you, Mr. Chairman.
We are here to talk about government accountability today,
and this an incredibly important topic, but I would be remiss
not to mention that our government is in shutdown for the first
time in nearly 20 years. American veterans, small business
owners and families all across the country are waking up today
to news that their government has failed to meet its most basic
function.
I have been willing to work with my colleagues on both
sides of the aisle to make changes to the Affordable Care Act.
I even voted against my own party to repeal the Medical Device
Act. But the time to have these discussions is not when
government is being held hostage.
This government shutdown is a disgrace. It is a waste of
the American people's time. They are right to be extremely
disappointed in us.
Our neighbors sent us to Washington to find solutions and
not to play politics, and I hope that my colleagues remember
that as we continue this discussion.
That is why I am so pleased to be working in a bipartisan
way at this hearing today. Like so many of my colleagues, I am
outraged at this clear case of abuse in the public trust. At a
time when programs critical to the livelihoods of Americans are
being slashed, Mr. Beale managed to pocket hundreds of
thousands of hard-working taxpayer dollars by making up
fantasies and lies. And while this is just one particularly bad
apple in an otherwise hard-working, honorable civil service
workforce, it seems totally inexcusable to me that the
management of this agency failed to catch and stop his
fraudulent activity. For an entire decade after he was
legitimately authorized to do so, Mr. Beale was able to receive
thousands of dollars on autopilot.
Mr. Elkins and Mr. Sullivan, I understand that your office
is still working on recommendations on how to address these
massive management failures at the EPA. Could you share with us
your thoughts on the controls that EPA has already started to
put into place, and perhaps reflecting what my colleague from
Utah was talking about in terms of once a manager finds out or
suspects that there is something going on, are they allowed to
fire that person right away or must the investigation process
continue, and how has that changed?
Mr. Elkins. Well, first of all, I applaud the actions that
EPA is taking to address some of the issues that we have
discussed here at this hearing. We will continue to look, as a
result of our audit, at what other internal control weaknesses
are out there and make recommendations to resolve those
internal control weaknesses as they make themselves apparent.
In terms of the personnel issues or the regulations that
you spoke of, I am not prepared to address specifically what is
allowed and what is not allowed for those, and I don't want to
speculate. Without having the actual regulations in front of
me, I don't want to speculate on that issue.
Ms. Duckworth. Thank you.
Mr. Sullivan, do you think the controls that EPA has
already started to put in place are sufficient?
Mr. Sullivan. Ma'am, I really don't want to offer an
opinion on that. I haven't had a chance to see them being
implemented. But I do want to say that we have received
complete cooperation during this investigation. So I am very
hopeful and optimistic. But I don't think we have had enough
time to see if they are going to work.
Ms. Duckworth. Mr. Brenner, this vacation home that you co-
own in Massachusetts, when did you pay that off?
Could you turn your microphone on, please?
Mr. Sullivan. Sure. We purchased the home in 1983 or
somewhere around then, and then, in later years, in the late
1990s, Mr. Beale bought the remainder, my share of the house,
from me because this was his family home that they had built
together back when he was a teenager, and his plan was to
redevelop the house. He bought out my share.
Ms. Duckworth. Okay, I am running out of time so I am going
to cut you off a little bit. So he bought out the time years
after you authorized him to get additional pay that he wasn't
authorized to get.
Mr. Brenner. First of all----
Ms. Duckworth. Twenty-five percent of his salary more than
he should have gotten.
Mr. Brenner. Well, I don't think that is accurate that he
was not authorized to get it. We went through a complete
process for justifying that increase in pay.
Ms. Duckworth. Right, based on him orally saying, oh yeah,
I have an oral offer of a job offer. So, basically, you----
Mr. Brenner. No, I think there was more than that.
Ms. Duckworth. That is not what I am reading in the
investigation here. It says that there is no documentation that
he ever had a job offer from another firm.
Now, my question is, you helped him get additional money
for years, and then he turned around and, with that additional
income, was able to pay you and buy you out of this home that
you shared. Don't you think that is an ethical problem that you
are facing right now?
Mr. Brenner. Actually, what happened at the time was he
sold a residence that he had here in the area, and he used the
proceeds from that in order to be able to----
Ms. Duckworth. And how did he buy that residence, with
additional dollars, with the pay that he received, a job that
you helped him get and a job that you helped him get more money
than he should have been getting for, for all this time.
You know, Mr. Perciasepe, just with my last question, I
just want to ask, you know, even if an EPA employee has a buddy
like Mr. Brenner to help him out, who himself is willing to
engage in questionable ethics by accepting handouts from
lobbyists, can this continue to happen with the EPA today?
Mr. Perciasepe. Today there is no one at EPA getting these
retention bonuses. Only 28 people have gotten it in the last 20
years. We have put new processes in place. And I agree with the
inspector general that I need to see more of their work to know
if I need to do more. But we have not waited, and we have put
some new controls in place. It is basically layers of controls
that would kick out these things when they are not being--the
problem with the Beale activity through the first decade of
this century was that it was never kicked out that his
retention bonus had expired. And it should have been. And it
can't go that way anymore because we now have a hard stop in
the system that would pop it out, and it would either have to
be recertified with the evidence that you suggested,
Congresswoman, and/or the payments would stop. So that is what
would happen today if somebody else got a retention bonus.
Ms. Duckworth. Thank you.
Mr. Gowdy. [Presiding.] I thank the gentlelady.
The chair would now recognize the gentleman from Florida
Mr. Mica.
Mr. Mica. Thank you, Mr. Chairman.
First of all, Mr. Elkins, I heard that you have said to the
committee that you think measures have been put in place so
this could not happen again. Is that correct?
Mr. Elkins. Mr. Mica, actually, Mr. Perciasepe made that
statement.
Mr. Mica. Well, do you agree with what he said? Based on
your investigation what took place.
Mr. Elkins. Well, at this stage of the game, since we have
not completed our audit, I couldn't really speculate.
Mr. Mica. You cant speculate. But this is an incredible
tale of ripping off the government for two decades. It is also
astounding--and I wasn't here, I had to run to the floor--but
to find out that this individual is going to get his
retirement.
Is that the case again, Mr. Perciasepe.
Mr. Perciasepe. I can only say at this time, Congressman,
we are looking into that. I mean, obviously, we had to wait for
the investigation to be completed. Obviously, it was plead--it
was put before the judge on Friday, so we are going to look
into all avenues to collect money that might be due to the
Federal Government.
Mr. Mica. Well, let me ask you a further question, how
would you describe the relationship between Mr. Beale and Ms.
McCarthy?
Mr. Perciasepe. I think Ms.--Administrator McCarthy was
suspicious of all of these activities, and I recognize that we
can parse through how many months here or how many months
there. But the bottom line is she was the first person since
2001 that actually questioned these activities, which led
ultimately to the inspector general's report.
Trying to check out somebody's personnel status, it doesn't
necessarily require the IG as a first step. But I recognize
that we need to make sure that we are following up with the IG
on these matters. So we did do that, and the investigation has
been completed, and we now see what we see here.
Mr. Mica. Okay, let me ask----
Mr. Perciasepe. I want to point out that she is the one
that precipitated that--whether how many months one way or the
other----
Mr. Mica. Let me ask Mr. Sullivan a question. Can we put
the slide up? I think it is slide eight. It is an email from
McCarthy in February of 2013, a month after her last email
questioning Mr. Beale's work status. This email is about the
fact she is now cutting off his retention bonus.
Mr. Sullivan, for how long had Mr. Beale been receiving
these bonuses.
Mr. Sullivan. He had been receiving them continuously since
1991.
Mr. Mica. It seems strange and ironic that someone who had
stated they retired is receiving a bonus, which was in fact--
the bonuses I thought were designed to keep people from leaving
the agency. Even if the facts of Mr. Beale's situation were
true, would his covert activities warrant a retention bonus?
Mr. Sullivan. I don't want to offer an opinion on that,
sir. I don't know. All I can tell you is he continued receiving
them up until 2013.
Mr. Mica. Well, again, it is incredible all these--this
time that passes, gaming the system, then, at the very end,
continuing to game it to receive a bonus designed to keep
people from the agency and he was set to leave, it is just
beyond the pale.
Mr. Elkins, would you like to comment?
Mr. Elkins. Sir, clearly, there were some internal controls
that were not functioning properly, and to that extent, that
would be the extent of my comment.
Mr. Mica. Well, again, when we are facing--well, today's
the government shutdown, but we are facing financial bankruptcy
of the Nation in a couple of weeks with our debt exploded from
the beginning of this administration from $9 trillion to $17
trillion and soon asking for nearly another trillion dollars to
keep us afloat. And people see this kind of money going out to
someone who scammed the system. It is greatly disappointing,
disheartening and very sad for the American taxpayer.
I yield back, Mr. Chairman.
Mr. Gowdy. Thank the gentleman from Florida.
The chair would now recognize the gentlelady from New York,
Ms. Maloney.
Mrs. Maloney. Thank you.
And I thank the chairman and ranking member for calling
this hearing. It is unbelievable. It is outrageous. It reminds
me of the movie, the famous movie on fraud, ``Catch Me If You
Can,'' who defrauded so many people. In this case, you are
defrauding United States taxpayers, eroding their faith in
government. It is outrageous beyond belief.
And Mr. Perciasepe, I want to know, how much does he get in
retirement? And what are you going to do to make sure he
doesn't get the retirement money? That is the first step that
we can take in retrieving what, by his own admission, Mr. Beale
said that he received over $800,000 in pay, bonuses, travel,
benefits, and a total scam that defrauded the government for
well over a decade. So do you know how much he makes in
retirement? And what are you doing to make sure that the scam
doesn't continue, that a complete fraud, who said he was a
member of the distinguished CIA, and no one even bothered to
check? It is almost--the incompetence is beyond belief. So do
you know what his retirement is each year?
Mr. Perciasepe. Congresswoman, I do not know----
Mrs. Maloney. Can you get it back to the committee?
Mr. Perciasepe. We can definitely get it back.
Mrs. Maloney. And can you get us the steps you are taking
to make sure he does not get his retirement. And if you say,
you cannot get it, we can't stop it because of bureaucratic
regulations, then I believe, in a bipartisan effort, we would
join in a single bill to stop it and to stop anyone else who
defrauds the taxpayer of getting a retirement benefit. It is
beyond belief. He scams the taxpayer, scams the agency, scams
the government and erodes the confidence we have in government
and then gets a retirement? I, for one, hope that we can stop
that at the very least.
Now these retention benefits that my colleague was talking
about, who recommended him to get these retention benefits? Do
you know, Mr. Sullivan, who recommended them?
Mr. Sullivan. Yes, ma'am.
In 1991, Mr. Brenner prepared the paperwork for the first
set of retention bonuses, and it was approved by a gentleman by
the name of William Rosenberg, who was the then assistant
administrator for the Office of Air and Radiation. The second
round of retention bonuses were prepared in 2000, and again,
Mr. Brenner recommended them, and it was signed by Mr.
Perciasepe, who at the time was the then assistant
administrator for the Office of Air and Radiation.
Mrs. Maloney. So, Mr. Brenner, the gentleman with whom he
sells his house to the guy he is recommending to get an illegal
bonus and then has other business relationships, he is
recommending that he gets this bonus treatment.
Now Mr. Brenner, did you think that he had another job
offer.
Mr. Brenner. Yes, this was in 1991, when the original----
Mrs. Maloney. Did you get it in writing, a copy in writing?
Was in the file any information about the job offer that
entitled him to this additional pay and scam?
Mr. Brenner. I don't remember whether we had it in writing
or whether we had obtained the information through a phone
call, but he did have an offer, and I would note that----
Mrs. Maloney. There is no offer, unless it is put into the
file.
And Mr. Sullivan, will you research this and get back to
us? Was there anything in the file in writing about this
alleged job offer that Mr. Brenner's pal got, who then he sold
his house to or did other business deals with, was there
anything in writing in the file?
Mr. Sullivan. I can answer that question now,
Congresswoman. Mr. Beale told us that he never had a written
offer, either in 1991 or 2000, so there was never a written
offer for any of the retention incentive bonuses.
Mrs. Maloney. So we have policies in place, but they are
not implemented. We need an audit of what is happening. Who
would be the proper person to audit this so that the Mr.
Brenners of the future can't get away with it?
Mr. Brenner, did you recommend other people to get this
special treatment?
Mr. Brenner. I don't remember having----
Mrs. Maloney. Okay, Mr. Sullivan, would you investigate who
else he recommended should get this and whether or not he had
business deals with them? I mean, this is just unbelievable.
And who would be the proper person, Mr. Perciasepe, to audit
this to make sure that people within the agency are honest?
Mr. Perciasepe. Well, first of all, we put some new
controls in already on the retention bonus system. No one at
EPA right now is getting a retention bonus. Even the Inspector
General themselves have used this technique to keep valuable
employees. And so we don't want to----
Mrs. Maloney. I am not questioning the policy. I am just
saying the policy--we need professionals, and we need highly
qualified people get many offers. But I believe that Mr. Beale
never had another offer. I believe that he lied, like he lied
to everyone else. So how do we catch the liars? Who would you
say would be the appropriate agency to audit the EPA to see if
anyone else is involved in some type of scam and whether this
is following?
Now, I would just like to say, how many other people do you
think are scamming the EPA right now with your lax policies
that in place?
Mr. Perciasepe. Well, first of all, I believe we have
adequate policies in place at EPA.
Mrs. Maloney. Well, they are obviously not working, to the
tune of $800,000, and it would have continued without the
excellent work of Gina McCarthy and I would say the
investigators and the prosecutors who stopped this. I
congratulate their public work.
But that this was allowed to happen for well over a decade
is an outrageous abuse.
Mr. Perciasepe. There are two things here: There is a
policy, and then whether the policies followed and if there are
controls to make sure the policies are followed.
Mrs. Maloney. Obviously, there weren't controls. What do
you recommend would be the controls? The policies were in
place.
Mr. Perciasepe. Correct.
Mrs. Maloney. You required written information. The written
information was not there.
Mr. Perciasepe. These things only last for 3 years. They
should be recertified.
Mrs. Maloney. You know, they have to be killed with a date
for 3 years. So the policies were abused. My question is, how
do you enforce the policies that are in place? There should be
an audit of this. Where should the audit come from?
Mr. Perciasepe. I am going to say, first, I have done----
Mr. Gowdy. The gentlelady's time has expired.
Excuse me, the gentlelady's time has expired, but you may
answer her question.
Mr. Perciasepe. Thank you. Thank you, Mr. Chair.
We have made some changes already, based on what we know,
in terms of controls to make sure the policies are implemented.
I am confident that the inspector general, who we have a very
good working relationship with, is also looking at this to see
if there would be more to do. I am not going to presuppose that
what we've already done is enough, but I want you to be
comfortable that we have already made changes that have more
controls on there.
Mrs. Maloney. Mr. Chairman, I still haven't had the answer
to my question, what are--he says, ``we put more''----
Mr. Perciasepe. The IG, the IG.
Mrs. Maloney. The IG is investigating.
What I was asking about, who audits before it even gets to
the IG? Who audits to make sure they are doing what they are
supposed to do? That was my question. Is there an audit there?
The IG is going after corruption.
I am talking about a level where you make sure that the
policies that are put in place actually happen, an audit level,
where would that be?
Mr.--anybody, can anybody answer that where they think it
should be?
Mr. Elkins. Yes, I will try to answer that. I believe what
you are referring to are the internal controls. And I think, at
the program and operational level, once those internal controls
are in place that the folks who are in charge of implementing
those policies and programs should be the ones to audit those
to make sure that they are being implemented correctly.
Mrs. Maloney. Can we ask, in this case, would it have been
Mr. Brenner who would have audited it? And since he is the one
who approved it, who would have audited in the case of Mr.
Beale? If you had a proper audit, who would be the person in
EPA who should have audited whether or not all his claims were
true and all the stuff that he was doing, ripping off
everybody, who would have been the proper person to audit it?
Mr. Gowdy. You may answer it briefly.
Mr. Elkins. Typically speaking, it would probably be a
supervisor.
Mrs. Maloney. And the supervisor was Mr. Brenner, right?
Mr. Chaffetz. If the gentlewoman would yield, I believe it
was Gina McCarthy.
Mrs. Maloney. Supervisor was Gina McCarthy, but she--so
should be auditing it for the whole area.
Mr. Chaffetz. Gentlewoman, I appreciate that. She only had
three direct reports: Mr. Brenner, Mr. Beale and another
person.
Mr. Brenner. Could I have an opportunity to clarify this?
Mr. Gowdy. Well, the gentlelady, her time has expired. I
have been very generous, but you and I will have a chance to
talk briefly. And you may have an opportunity to answer it in
response to one of my questions.
But for now, we will go to the gentleman from Michigan, Mr.
Walberg.
Mr. Walberg. Thank you, Mr. Chairman, and thank you to the
panel that's here that has helped to get to the bottom of some
of these issues that we are questioning.
Mr. Sullivan, were you ever aware that Mr. Beale was in
Pakistan?
Mr. Sullivan. He had significant foreign travel, and we
knew he took a trip to India. And I am not sure if we ever
confirmed a trip to Pakistan. But many times when he claimed to
be in Pakistan, through phone records, we proved he was in the
United States.
Mr. Walberg. Could we get the slide up, 4B, on that?
I wanted to ask that question and see if had you any direct
information--4B.
Okay, you notice it says there this was an email from John
Beale to Gina McCarthy, ``Due to recent events that you have
probably read about, I am in Pakistan.''
Mr. Sullivan. Well, we could definitely say, Congressman,
that he was not in Pakistan then because we checked his cell
phone usage and the cell towers he was pinging off of were
either in Massachusetts or in Arlington, Virginia.
Mr. Walberg. So, when he said, ``I am reachable by cell,
text or email with a 9-hour time difference, ho, ho, ho.''
Mr. Sullivan. That was obviously a lie.
Mr. Walberg. Thank you.
Mr. Perciasepe, when was the first time that Ms. McCarthy
expressed to you that she had concerns about Mr. Beale.
Mr. Perciasepe. We had conversations, probably in 2012,
during our regular meetings, where she was expressing these
concerns. And everybody in the agency at the management level
said that they should be pursued and which is what she did.
Mr. Walberg. Did you ever discuss with Ms. McCarthy her
decision to refer the matter to the general counsel, rather
than the IG?
Mr. Perciasepe. No, I never did. But I don't think----
Mr. Walberg. Did you ever discuss with Ms. McCarthy the
general counsel's decision to have the Office of Homeland
Security look into the matter, rather than refer it to the IG.
Mr. Perciasepe. Will you let me answer?
Mr. Walberg. Well, I think you did. I asked if you ever
had, and you said, no. So what about this?
Mr. Perciasepe. The idea that you pursue what may be a
personnel--an HR matter through the general counsel or there
may be something related to the other agency that has mentioned
several times here, the lead unit in our agency that deals with
the intelligence community at a general level is the Office of
Homeland Security, but once that was discovered that that was
not--there was nothing to verify there, then we immediately
turned it over to the IG.
Mr. Walberg. Well----
Mr. Perciasepe. So we are talking about a couple months
here when this has obviously something that Ms. McCarthy----
Mr. Walberg. Then, to your knowledge, was the decision to
direct the matter to the Office of Homeland Security, which is
located in the Office of the Administrator, done to contain the
issue within the agency and keep the story from becoming news
that could affect the agency?
Mr. Perciasepe. Absolutely not. It was to determine facts,
and once we had the facts, we turned it over to the IG.
Mr. Walberg. To your knowledge, was the decision to direct
the matter to the Office of Homeland Security, which is located
in the Office of Administrator, done so that EPA could
understand the facts of the story prior to becoming news?
Mr. Perciasepe. Once we understood the facts, we turned
them over to the IG to let it go where it went. And I can
guarantee you that the IG will attest that we cooperated
completely; we wanted them to get to the bottom of it.
Mr. Walberg. Mr. Sullivan, Mr. Elkins.
Mr. Sullivan. Yes, sir.
Mr. Perciasepe is correct that it was referred to Homeland
Security first via the Office of General Counsel. The only
problem that we had with that is the Office of Homeland
Security, who are not criminal investigators, not--without law
enforcement authority, they interviewed Mr. Beale, very
prematurely in our estimation, and it caused us great harm to
the investigation.
Mr. Walberg. The head start caused you harm.
Mr. Sullivan. That is correct, sir.
Mr. Walberg. Mr. Perciasepe, you worked with Mr. Beale both
in the 1990s and from 2009 on; is that correct?
Mr. Perciasepe. I was the assistant administrator for Air
and Radiation for two and a half years in the late 1990s,
correct.
Mr. Walberg. When was the first time Mr. Beale represented
to you that he was doing work for the CIA?
Mr. Perciasepe. He never represented that to me.
Mr. Walberg. Never at all?
Mr. Perciasepe. Never.
Mr. Walberg. Did you ever have any doubts about this claim
when it came evident?
Mr. Perciasepe. I had lots of doubts about it when it
became evident to me when I came back to the agency.
Mr. Walberg. What did you do to seek to verify the claim?
Mr. Perciasepe. It was already on--Administrator McCarthy--
well, Assistant Administrator McCarthy at the time was in the
process of running it through what we just talked about.
Mr. Walberg. You oversaw the office in with Mr. Beale
worked and later became the deputy administrator, don't you
think it was your responsibility to verify one of your
employees was missing work under the guise of being a covert
operative for the CIA?
Mr. Perciasepe. He was not doing that when he worked for
me.
Mr. Walberg. Mr. Chairman, it's amazing.
As we are talking today of a government shutdown, I think
we have evidences here of government shutdown in the EPA over
issues that cost the taxpayer almost a million dollars.
And I yield back.
Mr. Gowdy. I thank the gentleman.
The chair would now recognize the gentlelady from
California, Ms. Speier.
Ms. Speier. Mr. Chairman, thank you, and I thank the
ranking member, and I thank the inspector generals for being
here. This is an absolute disgrace. This is stealing money from
the American People. It reminds me of a perfect burglary and is
ripe for a made-for-TV movie.
Now, having said that, I am deeply concerned about a number
of things: One, prospectively trying to take someone's
retirement away, as the bill that's being suggested by the
chairman and being discussed with the ranking member, is
something that I would endorse. But I would recommend that what
we need to do here is introduce a private bill to take away the
pension of Mr. Beale, because this bill that we are
contemplating is only going to be prospective in nature. And I
think this man has got to be brought to real justice.
I am concerned about, one, he is in debt to the American
people, having ripped them off about $800,000. Do we even know
if he has assets that equal $800,000? Do we know that?
Mr. Sullivan. Yes, ma'am, he does. He had significant
assets. In fact, he's already paid back to the Clerk of the
Court here in the District of Columbia $886,000, and he has 90
days to pay the $507,000 asset forfeiture judgment against him.
Ms. Speier. How much money have you spent in this
investigation?
Mr. Sullivan. We can get back to you on that, ma'am. I
don't have that in front of me.
Ms. Speier. Because I think the other thing that we should
look at is the cost recovery that should be attributed to the
individual who has conducted themselves in such an illegal
manner. The taxpayer shouldn't have to pick up the tab for
that. We should be able to cover that cost as well, and that
should be contemplated in any legislation we do as well.
Mr. Brenner, do you think you have done anything wrong?
Mr. Brenner. No, I do not think I have done anything wrong
with respect to the way Mr. Beale's personnel issues were
handled during the time I was his supervisor.
Ms. Speier. Well, let's start by the fact that you
recommended him for a retention bonus, which you did, correct?
Mr. Brenner. That's correct.
Ms. Speier. And it's required that you have a written offer
to base that retention bonus on, correct?
Mr. Brenner. I don't know whether a written offer is
required. It requires that there either a written offer or a
determination that an offer was made. In other words, I believe
at times it is done through a phone call to discuss it with
whoever was making the offer.
Ms. Speier. Is that true, Mr. Sullivan, is it required that
there be a written offer?
Mr. Sullivan. It's my understanding that a written offer is
not required, although most packages do have a written offer
attached. What is required the supervisor recommending the
incentive bonus has to assert that he or she did due diligence
to confirm there was an offer.
Ms. Speier. So what was your due diligence, Mr. Brenner?
Mr. Brenner. We are talking about something that happened
20 some years ago and I----
Ms. Speier. You can't recall, it sounds like.
Mr. Brenner. I don't recall whether there was a letter or
whether there was a phone call, but I know that it was reviewed
by the personnel office, all of these retention allowances----
Ms. Speier. No.
Mr. Brenner. Need to be reviewed.
Ms. Speier. But you had an obligation to do due diligence.
Did you talk to this prospective employer? You have to be able
to recall that.
Mr. Brenner. It's 20-some years ago, so I don't remember
whether I either talked to the employer or had received a
letter, but I know that without one of those two things being
in place, there was no way it could have been approved.
Ms. Speier. Well, let me ask you about the $8,000 discount
you received. Did you disclose that on your financial
disclosure statement?
Mr. Brenner. I did.
Ms. Speier. You did? Is that an amount that is legal to
actually receive?
Mr. Brenner. It's on my--2011 disclosure statement, and as
I said----
Ms. Speier. Was that after the fact, was that after it was
reported?
Mr. Brenner. That's when it was reviewed.
Ms. Speier. Okay, so----
Mr. Brenner. And as I said, it was reviewed and
investigated by the Department of Justice and the decision was
to decline taking additional action on it.
Ms. Speier. Well, whether they declined to take legal
action or not does not mean that it wasn't illegal. If you
received an $8,000 discount, that is a gift that exceeds the
limits under the financial disclosure laws. And I think you are
guilty, and I do think that you should be held accountable for
the fact that you received a gift that exceeded the amount that
you are allowed to receive under those laws.
Mr. Sullivan, the fact that Mr. Beale took three trips to
London at $25,000 a piece, one to London and India for $36,000,
and made it his goal in life to only fly first class, and was
able to get a chiropractor to basically say that he had a back
problem and, therefore, should be able to fly first class is
deeply troubling to me. I think I could go to a chiropractor
and get a letter saying that I have a back problem. Lots of
people up here could probably do that. That's not a basis on
which you fly first class internationally or anywhere. So what
do we do to fix that?
Mr. Sullivan. As Mr. Elkins had previously testified, there
are an ongoing series of seven audits within EPA, and one of
them, specifically, the audits that I am going--not in my shop,
that's the Office of Audit, was looking at the first class
travel in EPA, and I know they will be part of the
comprehensive report that will be produced.
Ms. Speier. You know, Mr. Sullivan-- and I know I exceeded
my time, Mr. Chairman, let me make one more comment--what you
have uncovered troubles all of us greatly. I worry that there
could be incidents like this in other agencies within the
Federal Government. And I hope that what you have uncovered is
shared with other IGs throughout the system and that we clean
up this act everywhere, because I wouldn't be surprised if we
have first class travel going on at other agencies under the
ruse that everyone has a back problem, and I yield back.
Mr. Gowdy. The chair thanks the gentlelady.
And the chair would now recognize the gentleman from
Oklahoma, Mr. Lankford.
Mr. Lankford. Thank you, Mr. Chairman.
I completely associate myself with the comments that the
gentlelady just made, Ms. Speier. This is something we do need
to establish a process. There are employees that have been
furloughed through sequestration. At the same time, we have got
an employee that's getting a quarter million dollar salary,
well in excess of what is legally accessible, and doing zero
work at the EPA, zero, not even showing up. That is frustrating
for the people that are working there and that are doing their
job. That's frustrating for other people in the Federal family,
and it's incredibly frustrating to the Federal taxpayer, who
works very hard, and who counts pennies, and who is very
attentive to their own family and what they turn in on the IRS
forms that goes into working for the Federal Government they
want to know it actually works. And someone's watching how this
is being spent. So I do appreciate the work, we have a lot of
work still to go to be able to evaluate some of these
processes.
But I would like to talk about a couple of these processes,
pick up on what Ms. Speier was mentioning before. What is the
paperwork that is required to turn in and say, I have a back
problem, I have to get first class tickets everywhere that I
fly? What's required for that?
Mr. Sullivan. In this case, our investigation revealed that
Mr. Beale presented a chiropractor note, and it was submitted
to the travel office at EPA, and he was flagged and is being
authorized for first class travel.
Mr. Lankford. Okay, was that because he was an executive or
he was just traveling period?
Mr. Sullivan. Because he traveling. It is my understanding,
whether you are an executive or not, if you submit a legitimate
doctor's note and your supervisor approves it, you will be
eligible for first class travel.
Mr. Lankford. Okay. So same thing dealing with getting a
closer parking spot, he can walk in and say, I am a Vietnam vet
and had malaria, and so I need a closer parking spot. Was there
documentation that was required for that?
Mr. Sullivan. There is documentation that is required, but
it's our understanding it was just his assertion. There was--no
one from EPA asked him for a doctor's note to confirm his
malaria.
Mr. Lankford. Okay, he walks in one day and says, I work
for the CIA, I need a day off a week. What documentation is
required for that?
Mr. Sullivan. Normally, there has to be an interagency
agreement, and EPA would go to the other agency and sign a
memorandum of understanding for the repayment. Currently,
though, since 2008, there's a requirement now that if the CIA
does recruit an employee from another agency, the director of
the CIA is required to inform that of that agency as well as
the general counsel, but that's in effect only from 2008 on.
Mr. Lankford. So no--everyone was grandfathered in that was
already in, so it was just additional new hires at that point,
so it wouldn't have been evaluated by EPA looking for this
documentation, or that's everybody?
Mr. Sullivan. Well, it is my understanding from henceforth
from 2008 on, but I don't know if anyone went back to look at
Mr. Beale's case. If I could tell you no one did to our
knowledge, no one went back and confirmed----
Mr. Lankford. So when the rule was changed in 2008, no one
went back and confirmed it and said, hey, we need to get all of
this paperwork cleaned up; we have a gap in the file----
Mr. Sullivan. That's correct.
Mr. Lankford. To be able to get all that done.
Mr. Perciasepe, how many staff does EPA have that worked
full time for the EPA and also get paid by another agency?
Mr. Perciasepe. I don't know the answer to that. We do have
interagency agreements. We even have EPA employees working here
in Congress, but we can certainly get that for the record.
Mr. Lankford. No, no, I am not talking about they also do
that, but they are getting paid. I am assuming that Mr. Beale
was claiming that he was not just being paid by the EPA, but he
was also employed by the CIA, being paid over there.
Mr. Perciasepe. I do not know that, what he claimed. I
don't know what he claimed because I haven't seen the full
investigative report yet.
Mr. Lankford. So the question is, is there any one that is
paid by the EPA that is assigned to a location that is also
paid by them, that is paid by two different agencies at the
same time? So I understand you are saying some EPA folks are
assigned to Congress.
Mr. Perciasepe. Yes, and then we pay those salaries. And
it's usually one or the other is paying. I mean, somebody could
go on an agreement, like Mr. Sullivan saying, or an interagency
agreement of some kind and how the pay is distributed is often
part of that discussion. But we certainly can get you
information about how many are doing that, but it is--there are
several kinds of agreements and how that goes, and it could go
either way on how the pay is done.
Mr. Lankford. Mr. Sullivan, do we know of any employees
that are with EPA that are also being paid by another agency at
the same time; they are actually working for two agencies
simultaneously?
Mr. Sullivan. Well, for example, we have an agent detailed
to the Federal Enforcement Training Center. We have agreement.
They reimburse us for that person's salary, but the employee
would not receive both salaries at the same time; that would be
illegal.
Mr. Lankford. That's what I'm getting at. I think it might
be a little odd that the CIA was actually covertly having the
EPA pay the salary of one of their secret agents to send them
out there. I don't know whether we have a lot of EPA folks that
are currently on the CIA task force, but again, the whole thing
smells weird from the very beginning, trying to figure out
where that works.
The other problem that I see in this is this constant
statement over and over again that he was an executive, and so
when he turned in travel vouchers, they weren't challenged.
Mr. Sullivan. That is absolutely correct. That is, the
person who signed his travel vouchers told us point blank, she
never reviewed the vouchers, never looked at the receipts; she
accepted as fact whatever Mr. Beale put in because he was an
executive and because he worked for the CIA.
Mr. Lankford. Okay, so it begs the issue of, who is
supervising the supervisors at this point? And obviously,
that's the task of the IG that we ask you to be able to do to
be able to step in. In this case, the agency went around you to
try to investigate it and have you last in line to be able to
look at it rather than first in line, but we have a real break
down of process here when supervisors just turn in stuff; all
the people that work under them don't feel like they can
actually respond back to it and challenge what's happening, and
they just sign off, and expenses continue to fly. So this is
not the end of this conversation because we do want to follow
back up on the many issues of fraud that's here and how
systemic this really is. And we hope we find nothing. But my
fear is, there will be several more that we find in the
process, probably with not stories as well written as this
story but other issues that are out there.
With that, I yield back
Mr. Gowdy. The chair thanks the gentleman from Oklahoma and
now recognizes the gentleman from North Carolina, Mr. Meadows.
Mr. Meadows. Thank you, Mr. Chairman.
Mr. Perciasepe, I am intrigued by your testimony because
you said earlier that Mr. Beale never represented to you that
he worked for the CIA. So is that, to follow up, that you never
heard of him working for the CIA, because there's a difference?
Mr. Perciasepe. When this unfolded.
Mr. Meadows. Before it unfolded, had you ever heard of
that?
Mr. Perciasepe. No.
Mr. Meadows. So no one ever shared what he was doing?
Mr. Perciasepe. I didn't see Mr. Beale for 13 years. I
don't know went on from 2001 to--or 2000 until I came back to
the agency.
Mr. Meadows. But from 2009 on, he worked with you. Well,
maybe not, because he wasn't really there; he was covertly in
Pakistan?
Mr. Perciasepe. I don't know.
Mr. Meadows. You don't know.
Mr. Perciasepe. That's what we're--that's what we turned
this over to the IG for.
Mr. Meadows. So tell me how the retention bonuses are
supposed to work. How do they work?
Mr. Perciasepe. The basic premise is you have a person who
is likely to leave because they have either a job offer or some
other important financial reason and that they are critical to
some of the work that they are doing. And then there is a
process we go through where that is laid out; there are
recommendations made.
Mr. Meadows. So you have been involved in those processes,
and you are the one----
Mr. Perciasepe. Only once. I don't know if you were here
when I mentioned earlier, there is currently no one at EPA
that----
Mr. Meadows. So how long are they supposed to last?
Mr. Perciasepe. They are supposed to last 3 years. That's
the policy, and they are supposed to be recertified every year.
Mr. Meadows. So, Mr. Sullivan, so, to your knowledge, how
long did Mr. Beale actually receive his retention bonus?
Mr. Sullivan. The first series of retention bonuses went
from 1991 to 1999. They should have stopped after 3 years. They
did not. Then he was put in for a second round of incentive
bonuses in 2000, and that was the same year he got promoted to
the senior leader position. And so, during the course of his
career, he received bonuses for 22 years and should not have
received them for more than 6.
Mr. Meadows. Okay. So Mr. Perciasepe, after year 2000, he
shouldn't have been receiving a retention bonus?
Mr. Perciasepe. He shouldn't--he should have had it
recertified in 2001, 2002 and 2003.
Mr. Meadows. He just said 1999.
Mr. Perciasepe. No, no, he said it was redone in 2000,
which I think we would be 3 more years, if I am not correct.
Mr. Meadows. So 2000 was the start of 3 years.
Mr. Perciasepe. Right.
Mr. Meadows. And you signed off on that; is that correct?
Mr. Perciasepe. Yes, I did.
Mr. Meadows. So what did you go through to sign off on it?
Did you check with the CIA?
Mr. Perciasepe. No, as I have already mentioned----
Mr. Meadows. I am sorry.
Mr. Perciasepe. --he did not use that line with me. In the
1990s, and this is hard to believe----
Mr. Meadows. Thirteen years ago, I know.
Mr. Perciasepe. It is painful for me to go through this,
but this was a person who had a reputation, a positive
reputation in the Federal Government, both inside EPA and
outside EPA, in that time period. It would not be--it's not
outside the realm of possibility to me as the assistant
administrator that this person could be getting offers from
other entities.
Mr. Meadows. But I thought we had a guideline that said it
stops at 3 years.
Mr. Perciasepe. Right. Well, I----
Mr. Meadows. So you just have to have a good reputation to
be able to exceed the guideline?
Mr. Perciasepe. I had no knowledge of any previous one at
this particular moment I am talking about in the year----
Mr. Meadows. So how did you approve one without having
previous knowledge, that just says when it comes to your desk,
if they have a good reputation, you sign off on it?
Mr. Perciasepe. Well, it's not just a good reputation.
There has to be a case laid out by the career leaders in the
agency, which was done in this case and then.
Mr. Meadows. Wouldn't that case have previous retention
bonuses that would have been paid?
Mr. Perciasepe. They were not included, I don't recall them
being included.
Mr. Meadows. Really?
Mr. Perciasepe. So when Mr. Sullivan says there were 6
years out of the number of years, one was based on the original
one, and one was based on the one that I did. Those were
legitimate years that he could have gotten a retention bonus
under the rules of the agency. The problem we have is there was
nothing that stopped it; it just kept going. And that's what I
have changed. I changed the system so there is a hard stop.
Mr. Meadows. So there is a hard stop. All right. Let me go
over, I guess, to Mr. Brenner because didn't you sign off on it
as well? And you were his friend so you knew he was in the CIA,
and you were signing off on a retention bonus I guess to keep
him working at the CIA? Because you were very close--you have
an intimate relationship with him; is that not true?
Mr. Brenner. I am a close friend of Mr. Beale's, but I had
never heard from Mr. Beale that he worked for the CIA.
Mr. Meadows. But you knew he was not showing up for work.
You knew he was somewhere other than being at work.
Mr. Brenner. No, the period we are talking about is 1991
and the 2000----
Mr. Meadows. That is not the--no, I am talking in general.
I'm not just saying that one period. You knew that there was
something that he wasn't showing up, but he was still getting
retention bonuses because you had to sign off on them. In 2000,
I have got your signature right here.
Mr. Brenner. And in 2000, I believe he was showing up. I
certainly was not aware of any problem with Mr. Beale's
attendance in the year 2000 or in the decade prior to that.
Mr. Meadows. I appreciate the chair's indulgence let me
finish with this question. Both of you Mr. Perciasepe and Mr.
Brenner, both of you knew that he retired. You knew that, and
yet we still continued to give him retention bonuses to retain
him to make sure that he wouldn't retire a second time? How--
can either one of you explain that and justify that?
Mr. Perciasepe. Well, first of all, he did have a
retirement party, but based on what I am now--what I now know,
he never, to my knowledge, never submitted the retirement
papers.
Mr. Meadows. I understand, but in your mind, you went to
the retirement party, I think, didn't you?
Mr. Perciasepe. Yes.
Mr. Meadows. So how could you justify going to his
retirement party and then making--him getting a retention bonus
to make sure that he stayed retired? I mean, what is it?
Mr. Perciasepe. This is--this is the change I have made in
the system.
Mr. Meadows. I am not asking about the change. I mean, how
could you have not seen that?
Mr. Perciasepe. I don't see his paycheck. I don't see his
time sheet.
Mr. Meadows. But you had to sign off on it, on the
retention bonus.
Mr. Perciasepe. Thirteen years before.
Mr. Meadows. I understand 13, but----
Mr. Perciasepe. It would have been my assumption that it
had expired 10 years earlier.
Mr. Meadows. So you manage by assumption?
Mr. Perciasepe. Well, there's 17,000 employees. I am not
looking at their paychecks.
Mr. Meadows. All right, I yield back.
Thank you for the indulgence, Mr. Chairman.
Chairman Issa. [presiding.] I thank the gentleman.
Have we completed the first round?
Okay, we will now go to the gentleman from South Carolina.
I think he's the last----
Mr. Chaffetz. Mr. Chairman, a point of inquiry for a
moment. I just wanted to indicate to the chair that I was
hopeful that we would have a second round. I would like an
opportunity----
Chairman Issa. We will have a short second round. It's the
chair's intention to get out of here at close to 12:30 as
possible.
Mr. Perciasepe, you had originally wanted to leave at
12:30, but we had said it might take a little longer. We will
get you out close to it.
Mr. Perciasepe. Mr. Chairman, I am at your disposal.
Chairman Issa. Okay, then, moving along, the last questions
on the first round, the gentleman from South Carolina.
Mr. Gowdy. Thank you, Mr. Chairman, just initially, I
wanted to make the observation, Mr. Chairman, according to the
percentage report, Mr. Beale is looking at between 30 and 37
months in Federal prison for about a $900,000 loss.
You get more time in prison for that for--than that for
stealing a six pack of beer if you threaten you have a weapon,
which you really don't have. You get more time in prison for
that for a very small amount of certain controlled substances.
Even though he refused to answer our questions, Mr.
Sullivan, did you interview Mr. Beale?
Mr. Sullivan. My staff did, sir.
Mr. Gowdy. Did you advise him of his Fifth Amendment right?
Mr. Sullivan. At the time of the interview with him, it was
with counsel. It was in the U.S. Attorney's Office proffering,
and it was not necessary--it was per written agreement that he
would cooperate with us.
Mr. Gowdy. All right. You had an agreement with him that he
would cooperate. Did that agreement also include that he would
cooperate with other entities that were investigating
wrongdoing?
Mr. Sullivan. At the time the agreement was--the proffer
meaning, and it was up to the U.S. attorney whether he would
accept it or not. It was a limited agreement.
Mr. Gowdy. Well, he is getting a three level reduction in
his guideline range for cooperation. That's super acceptance of
responsibility. And yet this morning, he wouldn't answer is
single one of Chairman Issa's questions. So I guess my question
is, is anyone going to go before the district court judge and
make sure he or she knows that Mr. Beale wouldn't even answer
this branch of government's questions? He answered--you can't
plead guilty without waiving your Fifth Amendment privilege. So
he waived it for the judge, and he waived it for the executive
branch when you wanted to talk to him or when the U.S. attorney
wanted to talk to him, but he wouldn't waive it for Darryl Issa
when he wanted to talk to him. Can I rest assured that the
sentencing judge will be made aware of that?
Mr. Sullivan. What we will do, Mr. Gowdy, is we will brief
the attorney AUSA on the case, and we will bring your concerns
forward to the U.S. attorney assigned to the case.
Mr. Gowdy. I just find it stunning that you would want to
avail yourself of the maximum departure from the guidelines
that you could get for acceptance of responsibility and still
sit here and not answer a single solitary question from a
coequal branch of government.
Ms. Maloney asked a question that I thought it was an
extremely good question. Actually, she asked a bunch of really
good questions, but I never heard an answer to this one. Is
there a policy or procedure in place to investigate conflicts
of interest between those who approve bonuses and those who
receive bonuses? Not all at once.
Mr. Perciasepe. The only requirement I know of,
Congressman, is a financial disclosure requirement of all the
senior officials.
Mr. Gowdy. So, in theory, Mr. Brenner could be approving
financial bonuses or other financial incentives for someone
that he has a financial stake in whether or not they get more
money, is that within the realm of the possible, because it
certainly sounds like that's what went on.
Mr. Perciasepe. I am not going to speculate on what's
possible, but----
Mr. Gowdy. Why not?
Mr. Perciasepe. Because I am going to wait to read what the
IG investigative report----
Mr. Gowdy. Well, if you are not going to speculate on
what's possible my next question is this, if Mr. Chaffetz or
Jimmy Jordan told Chairman Issa that they weren't going to be
here for a couple of weeks because they were CIA operatives,
how would Mr. Issa go about verifying whether or not--I want to
be very clear, to date, neither Mr. Chaffetz nor Mr. Jordan
have alleged that they are CIA operatives--but if that were to
happen, how would Mr. Issa go about investigating whether or
not that was true?
Mr. Perciasepe. I can't answer that.
Mr. Gowdy. Well, the next person who claims it in your
agency how will you go about investigating whether it's true?
Mr. Perciasepe. Under the current rules, as Mr. Sullivan
pointed out, if there is an interagency relationship with that
agency, the general counsel and the head of the agency would
know.
Mr. Gowdy. So, what, a phone call?
Mr. Perciasepe. I don't know what the process is.
Mr. Gowdy. Is that what we are talking about, Mr. Sullivan,
a phone call to verify whether or not someone really is a
secret agent with the CIA?
Mr. Sullivan. Well, I testified earlier, sir, that in 2008,
a new directive came out; I think it was Intelligence Directive
304, which requires the Director of National Intelligence to
inform the head of an agency and the agency's general counsel
if one of their employees is working undercover for the CIA.
Mr. Gowdy. Mr. Sullivan, I appreciate that. And it really
doesn't matter whether you are a new Earth guy or an old Earth
guy, but 2008 just seems a little late to be figuring out that
with one phone call, you can decide whether or not someone
claiming to be a spy and traveling first class and racking up
$900,000 in unwarranted compensation really does work for
another agency. I mean, look, I understand technology has
progressed a lot; 2008 just seems a little late for to us
figure that out. There was nothing in place prior to that?
Mr. Sullivan. Well, sir, clearly the officials at the time,
going back to the 1990s through the 2000s, could have checked
his story; no one did. It took us in the IG about a week, using
our contacts at the CIA to positively confirm he had absolutely
no relationship with the CIA. We were able to determine early
on he has never had a security clearance. So, right now, when
he was an employee, he was not allowed to see classified
material, because there was no security clearance on file with
the EPA office of security.
Chairman Issa. I thank the gentleman. I just want to hear
one more time, since 2008, the head of each agency is given a
list of anyone who is a clandestine agent working under their
cover.
Mr. Sullivan. That's my understanding, Mr. Chairman, from
an Intelligence Directive 304. It's on the Internet, and it
pretty much explains the requirement of the Director of
National Intelligence and the CIA to inform executive branch
agencies.
Chairman Issa. So Secretary Clinton would know every one at
the State Department and her deputy would know everyone who was
CIA implant. The EPA directors, each of them--or
administrators, each would have been given this information. So
if the administrator had even one person who was embedded, they
would know that. We don't need to know if they had one, but if
any agency had an embedded CIA person, they would have, in
fact, had a list, and he would not have been on it, since 2008.
Mr. Sullivan. That's right. That's my understanding, Mr.
Chairman,
Chairman Issa. Well, I share with the gentleman from South
Carolina his outrage, but 2008 was a long time ago, too. I seem
to remember George W. Bush was President then.
Mr. Gowdy. I defer to the chairman's recollection.
Chairman Issa. With that, we go to the gentleman from
Maryland.
Mr. Cummings. I understand that Mr. Beale's fraud was
initially uncovered by the EPA current Administrator Gina
McCarthy back when she was assistant administrator of the
Office of Air and Radiation. Is that right? Is that correct?
Mr. Sullivan. Yes, sir.
Mr. Cummings. I understand that the Administrator McCarthy
started asking questions about Mr. Beale's employment status
after she discovered that Mr. Beale was still being paid many
months after she had attended his retirement party. Is that
right?
Mr. Sullivan. Yes, sir.
Mr. Cummings. Mr. Sullivan, I understand that your
investigators interviewed the administrator. Is that right?
Mr. Sullivan. Yes, sir.
Mr. Cummings. At the time that the Administrator McCarthy
started asking questions about Mr. Beale's status, can you tell
us whether she believed that Mr. Beale was a CIA agent, and why
did she think that was the case, if she thought that was the
case?
Mr. Sullivan. Yes, she most definitely thought Mr. Beale
worked for the CIA. When she was confirmed by the Senate and
was--had her in-briefing in 2009, she was told she had a member
of her staff who was on the CIA, and that was Mr. Beale, and
indeed, when she met Mr. Beale, he told her he worked for the
CIA.
Mr. Cummings. So who would have told her that?
Mr. Sullivan. It was during her in-briefing process. She
couldn't recall exactly who told her, but she remembered
distinctly being told that during the in-briefing process.
Mr. Cummings. So it would not be unusual for somebody
coming in to be confirmed in a position comparable to hers to
be told that you have got somebody here that's with the CIA or
any other agency?
Mr. Sullivan. Yes, sir. She assumed that was part of the
regular process, that's what she was briefed on.
Mr. Cummings. Now the inspector general has criticized the
EPA for not referring Mr. Beale to him earlier. Mr. Perciasepe,
can you tell us why there was a delay in the referral to
inspector general, what was EPA doing during that period, and
why did it take so long? It's kind of crucial because I am
seeing where some of the questioning is going, and I think they
are fair questions, and if you have an answer, I want to know
the answer.
Mr. Perciasepe. Well, I can give you an explanation. When
Assistant Administrator McCarthy, who I want to point out, once
again, no one ever questioned this for over a decade,
questioned this, the first thing she wanted to do and the first
thing she wanted to see was whether or not this person had any
of these relationships that are being discussed. So she asked
the general counsel and the Office of Resource Management,
where our personnel folks are; they asked the Office of
Homeland Security, who has relationships with the intelligence
community. And when nothing could be found there, I think it
was quickly confirmed and then quickly, as Mr. Sullivan just
mentioned, it was quickly referred to the inspector general.
That is what happened. Those are facts, that is what happened.
There was no--there was absolutely no attempt to go around the
IG at all. It wasn't only an attempt to verify the story. And
once it was not verifiable, then it became a matter that needed
to be investigated.
Mr. Cummings. Now, Mr. Sullivan, I know that the Inspector
General's Office has criticized the EPA for referring Mr.
Beale's case to the IG's Office no sooner. We fully support the
IG's efforts, so I want to give you a chance to explain in more
detail why this was a problem.
Mr. Sullivan. Mr. Cummings, it was a problem because Mr.
Beale, based on the evidence that--based on the suspicions
given to us on February 11th, it was clear to us there was a
lot of evidence pointing to massive fraud against the agency.
And a lot of this evidence was available, should have been
referred to us much, much earlier. Specifically, the problem we
had with Department of Homeland Security, the gentlemen or
representatives of that office interviewed Mr. Beale twice and
had three other contacts with him. And that's basic 101 in law
enforcement investigations; you never interview the target of
the investigation until you have all your facts in a row. And
our investigation was severely hampered because Mr. Beale was
alerted----
Mr. Cummings. He had a heads up.
Mr. Sullivan. Exactly.
Mr. Cummings. And finally, just to give credit where credit
is due, this fraud had been going on for decades under both
Republican and Democratic administrations. Is that right?
Mr. Sullivan. That is correct, sir.
Mr. Cummings. But it was Administrator McCarthy who finally
exposed it. Is that right?
Mr. Sullivan. To my knowledge, Ms. McCarthy was the first
person, executive at EPA that ever questioned Mr. Beale's
relationship to the CIA.
Mr. Cummings. And so you credit her for exposing it. Is
that right?
Mr. Sullivan. Yes, sir.
Mr. Cummings. In your opinion, is it possible that this
fraud could have gone undiscovered if it were not for
Administrator McCarthy's actions? That's my last question.
Mr. Sullivan. I think it's highly likely had it not been
Ms. McCarthy raising the alarm, this never would have been
discovered.
Mr. Cummings. So Beale would even still be getting money,
big time.
Mr. Sullivan. Yes, sir.
Chairman Issa. If I could follow up on the gentleman very
briefly, because it is the same exact question, slightly
differently. If Mr. Beale had simply retired and not tried to
get greedy and keep taking a full paycheck, he also would never
have been discovered because he would have been gone for over a
year before the administrator would have even thought to ask.
Is that right?
Mr. Sullivan. That is 100 percent correct, Mr. Chairman.
Chairman Issa. So is that the old ``pigs get fat, hogs get
slaughtered.'' I guess we should be happy he was that greedy.
We now go to the gentleman from Utah, Mr. Chaffetz.
Mr. Chaffetz. I thank you, Mr. Chairman, I appreciate it.
Mr. Perciasepe, I hope I am pronouncing your name properly.
When did----
Mr. Perciasepe. Just pretend an ``h'' after the ``c.''
Mr. Chaffetz. Thank you.
When did you--you said that the first time you had heard
about it, there was some scuttle or some discussion with senior
administrators about Mr. Beale, when did that happen?
Mr. Perciasepe. Some time in 2012, the idea of trying to
find out what the real arrangements were here.
Mr. Chaffetz. So can you give me--2012, is it the beginning
year, spring, beginning of the year, fall?
Mr. Perciasepe. It wasn't at either end, so it must have
been somewhere in the middle. Probably----
Mr. Chaffetz. So--probably when?
Mr. Perciasepe. I was going to say probably say that it was
probably more than the middle of the year, but I don't really
know.
Mr. Chaffetz. Okay so June, July-ish, is that fair? Okay,
middle of the year. And Ms. McCarthy was aware of that as well?
Gina McCarthy was aware of that as well?
Mr. Perciasepe. That--the conversation was about--the
conversation was about whether or not we should proceed with
trying to figure out--not whether or not, but that she was
going to proceed and I encouraged her to proceed to find out
what was going on.
Mr. Chaffetz. So, at the middle of 2012, you encouraged her
to proceed to figure out whether or not this is accurate.
Mr. Perciasepe. I was agreeing with her.
Mr. Chaffetz. You were agreeing with her.
Now, go back. If you could put back up slide 4D.
The date on this is March 2011, pull out here. This is from
Mr. Beale to Gina McCarthy, you mentioned--and so he is sending
his notes back to her via email: ``You mentioned the meeting
you have with Intel, et cetera, tomorrow. Do you want to see if
I can break away from Langley to attend that meeting with you?
I am not sure, but I will try if you want.''
So it's out there. He is perpetuating the myth that he is
at the CIA. By mid-2012, Gina McCarthy knows about it. He
directly reports to Gina McCarthy. You are encouraging Gina
McCarthy to pursue this. But it's not until spring or until
late winter--it's in the January or February, March, time frame
of 2013 that she actually inquires about this, and the IG is
telling us they figured it out in a week.
I don't understand it, again, Mr. Chairman--this why I
think why I think we need Gina McCarthy here--why it took her 8
months, at least, if not more; it looks like she had known
about this for a couple years. It's her direct report. And
remember, Mr. Chairman, during this time, he is never even
showing up to work. The guy didn't show up for years, not a
single day, and he's being paid at a pay level above and beyond
what is allowed by statute. I think she has at least some
responsibility and some questions to answer.
Now--my time is short, I'm sorry. Mr. Brenner, what was the
purchase--when you bought the home with Mr. Beale back in the
early 1980s, what was the purchase price?
Mr. Brenner. I am sorry, I don't remember what.
Mr. Chaffetz. Can you please put the microphone on? You'd
think you would have that by now.
Mr. Brenner. I am sorry, I don't remember the purchase
price of the home.
Mr. Chaffetz. Come on. You don't have any clue what the
purchase price of that home was. What was the selling price?
Mr. Brenner. And I don't remember the selling price.
Mr. Chaffetz. When did you sell that home?
Mr. Brenner. All I remember is it was done at market value.
Mr. Beale purchased my share of the house.
Mr. Chaffetz. How much did he pay you for that house?
Mr. Brenner. He paid me somewhere on the order of $30,000
or $40,000.
Mr. Chaffetz. So your original purchase price, you have no
idea, and you don't know what the sale price is, but he wrote
you a check for $30,000 or $40,000. When did you get that
$30,000 or $40,000?
Mr. Brenner. I am sorry. I misunderstood your question. You
asked about the price of the house. The portion that I put into
the purchase of the house was somewhere around $10,000 in 1983
or 1984, somewhere in there. And then, when Mr. Beale decided
to purchase my share of the house, it was for a number like
$30,000 or $40,000 about 14 years later.
Mr. Chaffetz. So you get $30,000 or $40,000 from this
person. Are you still friends?
Mr. Brenner. We are.
Mr. Chaffetz. When's the last time you saw him, besides
today?
Mr. Brenner. I have seen Mr. Beale periodically over the
last--well, actually, I have seen him a lot over the last 2
weeks because when he left the hospital after his throat
problems, because he had rented out his house in Arlington,
he's staying in my guest room now.
Mr. Chaffetz. Mr. Chairman, this is just an unbelievable
story.
I yield back.
Chairman Issa. I thank the gentleman.
Mr. Cummings. What did you say? Beale is staying--wait a
minute. I just--I know I didn't hear that. Beale is staying in
your guesthouse?
Mr. Brenner. Mr. Cummings, Mr. Beale needed a place to live
in the area as he goes through these court proceedings, and his
house that he had is rented out. And so----
Mr. Cummings. You mean this is the guy that just paid the
Federal Government $850,000-some. He didn't have no place to
go? And he's about to pay another $500,000-some. He didn't have
anyplace to go, so he came to you?
Mr. Brenner. That's correct, that he is--I agreed that he
could stay in our guest room when he has either court
proceedings, hearings, medical issues in the area.
Mr. Cummings. Are you married?
Mr. Brenner. I am.
Mr. Cummings. Your wife agreed to that?
Mr. Brenner. Yes, she did.
Mr. Cummings. Okay.
Chairman Issa. You have a very understanding wife.
Mr. Brenner. I do.
Chairman Issa. The gentlelady from New York.
Mrs. Maloney. Thank you. Thank you.
Mr. Elkins and Mr. Sullivan, would you look into the house
since Mr. Brenner can't remember what he paid for it, when he
sold it, the money involved? Could you get us a report on the
house arrangement?
And I want to look to the timing on the house. There
appears to be a discrepancy in the testimony that I was reading
from you. The IG has testified that you owned the house
together until 1999, and I believe that you said you owned the
house together until 1989. I want to give both of you a chance
to explain the discrepancy in your testimonies.
How long did you own the house together? Did you own it
until 1999 or 1989?
Mr. Brenner. I think I just said that it was about 14 years
later. So my recollection is the late '90s. If I said late
'80s, that's not consistent with the 14 years.
Mrs. Maloney. Okay. Then you have cleared that up.
Well, Mr. Brenner, do you think that you had a conflict of
interest in your recommending Mr. Beale to be hired to work in
your department in 1989, as he owned the house together with
you?
Mr. Brenner. I do not think I had----
Mrs. Maloney. Why not?
Mr. Brenner. --a conflict of interest. Because the way the
process works is I could go through the process of recommending
that Mr. Beale be rehired--be hired, but there are several
reviews that needed to occur throughout the----
Mrs. Maloney. But you recommended him as he was living in
the house with you. And you say you didn't know that he was
lying about the CIA, about everything else he was doing.
Mr. Brenner. We were not living in the house at the----
Mrs. Maloney. Well, you said--you recommended him, I
believe, in 1989. And I think you testified you bought the
house in 1983 and that he paid you $30,000 for it. So you were
involved in the house together. We'll get Mr. Sullivan to get
the information, and Mr. Elkins on this, exactly how it
happened. But you saw no conflict of interest.
Well, did you see a conflict of interest when you were
recommending him for a retention bonus, the bonus for which he
didn't show up for work for 2-1/2 years? Did you see any
conflict of interest when you were recommending for the
retention bonus?
Mr. Brenner. When I recommended Mr. Beale for the retention
bonus, as I think both Mr. Sullivan and Mr. Perciasepe have
mentioned, he had an outstanding record during the 1990s as a
civil servant at EPA. And those recommendations were based on a
record that was then reviewed by others----
Mrs. Maloney. What was his title? What was his title at
EPA?
Mr. Brenner. I believe it was a senior policy analyst. And
then in the year 2000 he----
Mrs. Maloney. If he was a senior policy analyst, I'd like
to see what reports he gave the EPA. What did he analyze? I'd
like to see it.
Mr. Sullivan, Mr. Elkins, could you get us a report on what
was his outstanding work and why did he receive a gold medal? I
want to know, did he do anything--what did he do? I want to see
his reports. We have policy analysts that work for us. They do
a great job; they deserve their pay.
I want to see what this scam artist, who got away with a
parking lot for $18,000 that he didn't deserve because he
wasn't handicapped--and no one checked on him. And then he got
a retention bonus that you recommended, which is documented
that he didn't even work for 2-1/2 years. Then we know that he
lied and said he was running around Pakistan doing CIA work,
when he's down at your home resting and having fun. Maybe you
were with him. I think that his times that he said he was
working when he was at his joint home with you, we should get a
report on it.
And I fail to understand why you think he deserved a
retention bonus. Were you aware he didn't work for 2-1/2 years?
Was he out at your house when he wasn't showing up for work?
Mr. Brenner. At the time--I think you're talking about the
period after he received the 2000 retention bonus. We no longer
owned the house together. He was not with me at the house
during that period.
And, as I said, the retention bonus is based on a solid
record of achievement that is----
Mrs. Maloney. But we know from your----
Mr. Brenner. --laid out in my testimony----
Mrs. Maloney. --prior testimony his retention bonus was
based on fraud. You never checked to see if he had another job
offer. You never called him. You never put in writing who it
is. I'll ask for you now to place before the chairman who it
was that he had this wonderful job offer.
But I'm concerned about--I think handicapped people are
entitled to special treatment, but he abused the system, and I
want to make sure other people aren't abusing it. He got an
$18,000 handicapped parking lot based on fraud.
And what are you doing to make sure that this abuse doesn't
continue, Mr. Perciasepe? What are you doing to make sure that
other people aren't ripping off the public and undermining
respect for government?
Mr. Perciasepe. Well, on all the issues that the IG has
already identified in their initial--in this part of the
investigation, but not everything that they are going to
recommend in their administrative recommendation, but on
everything--on all the points they've made, we've already
instituted initial additional controls.
Mrs. Maloney. Okay. Can you present to this committee the
additional controls that you've put in place in writing?
Mr. Perciasepe. Yes.
Mrs. Maloney. And, Mr. Sullivan, you also in your report
said that Mr. Beale claimed that he worked for the late Senator
Tunney of California. Now, did anyone verify his employment
history at--did anyone do a background check? He didn't work
for Senator Tunney.
Mr. Sullivan. That's correct.
Mrs. Maloney. So did anyone do a background check on him to
make sure that what he was saying was true?
Mr. Sullivan. Well, that is part of the audit review. We
had a very difficult time going back to 1988 and '89 when he
was originally hired. Frankly, we don't know if EPA did any
background check on Mr. Beale when he was hired.
Mrs. Maloney. So, Mr. Brenner, did you ever check any of
the information on his resume to see if it was true? Did you
check any of the information, the Tunney claim and other stuff?
Mr. Brenner. I would have, as part of the process, checked.
Either I or people in the personnel office would have checked
things that----
Mrs. Maloney. Was that part of the requirements when you
hired people, to check their resumes and make sure they are
accurate? Was that part of the protocol?
Mr. Brenner. Part of the protocol is either the hiring
office or the personnel office would do checks. I don't
remember----
Mrs. Maloney. But, obviously, you didn't do them because
Mr. Sullivan's report says you didn't do it.
And so, Mr. Sullivan, what changes do you suggest that the
EPA implement to prevent a repeat of this type of problem, that
a complete fraud comes in, rips off the government for
$800,000?
Another question I have: He has paid back the government
$800,000 and an additional $500,000. Where is all this money
coming from?
Mr. Sullivan. During the plea agreements between Mr.
Beale's attorney and the U.S. Attorneys' Office, it was clear
that he had those type of assets, that he could indeed repay
the government the amount of money he signed in the plea
agreement.
Mrs. Maloney. Well, how did he have the income on a
government salary to buy those kinds of assets? Who else was he
working for?
Mr. Sullivan. I don't know that, ma'am, but I do know that
he is married and his spouse is employed. So that is all I can
say, ma'am.
Mrs. Maloney. Okay.
I understand, Mr. Perciasepe, that the EPA has pledged to
do everything possible to prevent these abuses. You have a
tremendously important agency that is supposed to be protecting
our clean air, our clean water, and it apparently was
protecting a complete fraud, a complete fraud claiming he
worked for the CIA, and no one even bothered to check whether
he worked for the CIA. He is flying all around in first class,
and he is getting all kinds of benefits and not showing up for
2-1/2 years.
So what are you doing to make sure this kind of fraud
doesn't happen again?
Chairman Issa. The gentlelady's time has expired. You may
answer.
Mr. Perciasepe. Excuse me?
Chairman Issa. You may answer.
Mr. Perciasepe. Okay. Thank you, Mr. Chairman.
We have--on travel, on use of parking spaces, on retention
bonuses, on time and attendance, all of these things we have
put additional controls in place. In part, some of the things
we are learning, working with the IG on this case. But there
are other reasons that the Agency needed to be updating these
systems regardless.
So, whether it is enough, I think it is a good start. I
think it is really--it will make a difference. It will make it
very difficult for anybody to do what happened here. But I do
want to keep saying, because I believe this completely, that I
know that the IG's office will be looking at what we have
already done and what we are working on and what more might
need to be done.
I think the combination of us doing commonsense, important
things now to make sure we are in good shape and building on
what their recommendations will be--and I hope to see their
investigative report soon, which I have not--personally I have
not yet seen, which might give me more insight. But I can
assure the committee that I am aggressively going to pursue
additional controls where necessary.
Chairman Issa. I thank the gentleman.
We now recognize the gentleman from Maryland.
Mr. Cummings. Thank you very much, Mr. Chairman. Just for a
question or two.
Mr. Brenner, I have to tell you, I was sitting here feeling
kind of sorry for you earlier when you talked about basically
how you had been betrayed by your friend. I have to tell you,
though, my sorrow has turned into something else now because I
am just wondering how much information you might have.
You know, the chairman and I had a colloquy about 2 hours
ago now where we were talking about bringing Mr. Beale back
after he is sentenced so we can get additional information so
we could get to the bottom of some of this. But now I am
wondering how much information you might have since you all are
such good buddies and since he is laying in your house and
since this is somebody who, apparently, based on your
testimony, has betrayed at least your trust, but still you guys
seem to be doing pretty good.
So I am wondering if there is any additional information
that you might be able to help this committee with or help the
IG with with regard to how some of this stuff may have happened
so that we can make sure it doesn't happen again. Would you
have information that might be helpful to us?
Mr. Brenner. No, sir, I don't think I do because Mr. Beale
and I have not been talking about this investigation, and----
Mr. Cummings. How long has he been staying at your house? I
mean, this most recent situation.
Mr. Brenner. Since he came out of the hospital a couple
weeks ago.
And as I said in my testimony, I am very disappointed and
saddened about what has happened. And, yes, I am angry at Mr.
Beale for that kind of behavior.
Mr. Cummings. So, but all this time you all--you have
never--you haven't discussed this case? You didn't say, ``Man,
you know, how did you do that? How did you pull that one off?''
You never had that kind of discussion?
Mr. Brenner. No, because once the investigation started
off, it was clear from our attorneys, they told us we should
not be talking to each other about the investigation. And, in
fact, we avoided seeing each other for a long time. Only now
when he----
Mr. Cummings. But he was in your house.
Mr. Brenner. And only now when he--no, I said the time at
my house was just over the last couple weeks, not during the
investigation.
Mr. Cummings. I see. Okay.
All right. Thank you, Mr. Chairman.
Chairman Issa. Thank you.
Mr. Perciasepe, I came out of the electronics business, and
it hasn't changed a lot. When you go through ISO 9000, any of
the other standards for quality control, they won't accept that
if something doesn't get caught by one person, you put a second
person on the line; they won't accept that you put a third
person on the line.
How does this committee know that the steps that are being
taken now--and this is also a question for the IGs--are
automated? In other words, that they don't depend on somebody
who, as in the past, simply had a rule and they didn't check or
didn't enforce?
Thank you.
Mr. Perciasepe. Well, I think my initial work here, working
with our personnel offices and some of the other offices that
are covered by some of these policies, is to create automated
output. We are still at a step, though, Mr. Chair, that a human
will have to look at that output to verify. So there is an
additional output of a printout, and then there is an
additional eyes-on step.
I think we may need to do more in several cases--we may
need to do more in several cases, but this was one that I could
do now and get it done. And then I don't want to go too far
down the road without----
Chairman Issa. Sure.
Mr. Perciasepe. --further work with the IG.
Chairman Issa. Well, I think for people in, sort of, the
public audience, they can probably understand that if you took
all of the year-to-date pay in your HR department and said,
``Give me the grand total year-to-date on the last day of the
year for every employee last year, and tell me anyone in the
Excel spreadsheet that is above this number''----
Mr. Perciasepe. Yes.
Chairman Issa. --which is the absolute number, Mr. Beale
would have shown up.
Mr. Perciasepe. Yes, he would have.
Chairman Issa. So is there an automated check----
Mr. Perciasepe. Yes.
Chairman Issa. --even for that today?
Mr. Perciasepe. Yes. I have that now.
Chairman Issa. Okay. Our committee had a document request,
which is now overdue. Are you familiar with that document
request, and will we receive it today?
It is one of those challenges where we do the hearing and
then we get documents we would like to have had for the
hearing.
Mr. Perciasepe. Yeah, I don't know the status of the
document request. I do know there is one, though, Mr. Chairman.
Chairman Issa. Okay. Well, we would appreciate it if you
would follow up.
Mr. Perciasepe. I will follow up to make sure it is
expedited.
Chairman Issa. Before I go to the IGs, Mr. Brenner, have
you ever received gifts of any type from Mr. Beale?
Mr. Brenner. I cannot remember any gifts that I have
received from Mr. Beale, unless it was some small gift at the
time of a birthday or----
Chairman Issa. We will exempt everything $50 and below. Do
you remember a gift above $50 in value ever?
Mr. Brenner. I don't remember anything like that.
Chairman Issa. Did you pay him for your joint vacations,
all of your share of the cost? Many of those occurred after you
no longer owned the home, so that is why I am asking.
Mr. Brenner. I don't remember how many might have occurred
after I no longer shared ownership of the home.
And the agreement with the home was that, even after he had
bought it back from me, bought back my share, that I would be
able to visit from time to time. I think there have been very
few visits, maybe two or three, since the time the home was
repurchased from me by Mr. Beale.
Chairman Issa. So your testimony today is you bought the
home for approximately $10,000, sold it a little over a decade
later for about $30,000, and had the right to use it for
periodic vacations?
Mr. Brenner. Those are my recollections of the numbers. I
can't say for sure how accurate those numbers are, but that is
what I remember.
Chairman Issa. And I presume you didn't disclose that
equity interest, that capability of taking a vacation without
pay at his home?
Mr. Brenner. I disclosed the mortgage during the years that
it was required to show the mortgage on my disclosure form.
Chairman Issa. So there was a mortgage on the home during
the time the two of you owned the home that you bought it?
Mr. Brenner. That is correct.
Chairman Issa. So your going from $10,000 to $30,000 was an
equity share? The home was not owned outright?
Mr. Brenner. That is right.
Chairman Issa. You received this $8,000 VIP loan, or VIP
discount, from somebody representing Mercedes-Benz or Daimler.
Have you received any similar discounts during your career from
any entity?
Mr. Brenner. Nothing that I can remember, sir.
Chairman Issa. Mr. Sullivan, Mr. Elkins, this is going to
conclude this portion of the hearing. There have been a lot of
claims made. I want to set a tone, and then I would like you to
really represent the close, because it is your investigation
and your work.
But I believe that what we have heard today is that we had
an agency that didn't think anything of somebody saying they
were a secret agent for the CIA but in unclassified emails--
they would refer to their CIA activities in emails that were
obviously not being sent in a protected way, so that when they
say they are at Langley, if you are a covert agent, your email
is now out in the open, and other things of that sort.
Somebody could ride their bicycle to work but have a
handicapped parking space, and it didn't seem to bother anyone.
Somebody could fly first class at 14 times the amount of coach,
and it got overridden because somebody did a good job and/or
they were at the CIA. And, by the way, I was on the Select
Intelligence Committee. The CIA does not get to fly first class
as the CIA.
All of these were in a culture at the EPA that preceded
President Obama and continued, presumably, until January of
this year. Is that a fair characterization of some of the
problems that can exist, not just with this individual, but
with the nature of the Senior Executive Service sometimes being
exempted from the rules because somebody thinks they have done
a good job or there is some other reason to exempt them?
Mr. Elkins. The facts in this case speak for themselves,
and I think your characterization is clearly one assumption
that could be drawn.
Chairman Issa. And I am doing this really for Mr.
Perciasepe, who talks about 14,000 people at the EPA. Thirteen
thousand five hundred of them have no idea how you get any of
these perks--maybe 13,550, 600, 700. There has to be a very few
people at the EPA that have ever seen any set of perks similar
to what Mr. Beale got in the way of a lack of accountability.
But it did exist, and it appeared to exist at this top strata,
just as at the GSA when somebody was taking trips to Las Vegas
and cobbling together or at some of these other agencies, where
it is not the person at bottom. It is not even the person at
the middle. It is these people that we trust most to be
fiduciaries of our money.
And that is part of the reason that we called out Mr. Beale
and had him here. He is in that top three people reporting
directly to the Administrator for years. Isn't that a fair
statement?
Mr. Elkins. That is what the facts show, yes.
Chairman Issa. Okay.
Mr. Sullivan, I am going to ask you just one thing, and
your lieutenants. You took an investigation on after a series
of events had occurred. Mr. Beale was made aware that he was
obviously a target and that the jig was up. A general counsel
outside of EPA had been contacted and had begun doing
activities that rightfully would normally have been yours.
Did this--even though you were successful, is this the kind
of thing that compromises the work of the IG?
Mr. Sullivan. Well, in this case, our work was clearly
harmed, at least initially harmed. We were able to recover. We
get very concerned whenever allegations of criminal activity
are not referred to us immediately.
Chairman Issa. Okay.
I am going to close with just one statement, and I hope
that I will----
Mr. Cummings. I have one.
Chairman Issa. Okay, and then Mr. Cummings will make a last
statement, too. But I hope I am speaking for Mr. Cummings and
myself both.
This kind of event, where abuse of discretion, abuse of the
taxpayers' money, very likely criminal--and, of course, this
one turned out to be criminal--when these first occur and there
is any possibility that what you see in your lane--and although
your lane is broad, it is still about 1/74th of the
government--I have sent letters, Mr. Cummings has been involved
in this, saying, ``We need a heads-up,'' the chairman and the
ranking member, and over in the Senate our counterparts, so
that we can begin evaluating whether or not, in these months
that intervene in your investigation, we need to take action.
And I would only ask you today to remember that, had this
committee had input into some of these details and the lack of
control systems, our committee could have begun working on
either legislation or oversight many months ago. And that is
what we ask you for, is to give us a heads-up.
And I will pledge to you today, and let Mr. Cummings speak
for himself, but for both of us, that when that information
needs to remain only with the chairman and ranking member, it
will remain only with the chairman and ranking member.
But IGs were created by Congress to be eyes both to the
executive branch and to this branch. And, in this case, we
could have done more sooner, which we will now do, had we been
given a heads-up sooner. And this has been a pattern that Mr.
Cummings and I have tried to change.
Tell us at the beginning of an investigation that lasts 10
months so we can start looking--something you can't necessarily
easily do--at 73 other IGs and see if we can get them looking
at the same problem.
And, you know, we are working on IG modernization and
reform, and we want to formalize some of this. But for right
now, a heads-up to us and our Senate counterparts can really go
a long way. And I am just saying this for you and all of your
brothers and sisters in the IG community.
Mr. Cummings?
Mr. Cummings. Just one thing.
What is the deadline--I mean, you may have said this
earlier, but when do you expect to be finished your work, Mr.
Elkins? Because I am just wondering how long this is going to
go on.
I am not trying to rush you, but I want to have some kind
of idea, because my next question is for Mr. Perciasepe.
Mr. Elkins. Sure. I want to answer that question in maybe
two parts.
A typical audit could take us anywhere from 6 months to a
year. It depends on what we find once we pull back the sheets.
However, though, we have a vehicle which is called an early
warning report or quick action report. And to the extent that
we find instances that suggest an extreme risk to the agency,
we will issue a report quickly to the agency. And we have done
that in the past with EPA so that they can react to it quickly.
So----
Mr. Cummings. Is that the kind of information that the
chairman and I would get quickly, like you----
Mr. Elkins. Oh, yes, absolutely.
Mr. Cummings. Okay. All right. Go ahead.
Mr. Elkins. We can make that happen.
Mr. Cummings. You said there are two parts.
Mr. Elkins. That--the first part is the regular audit,
which is about----
Mr. Cummings. I see.
Mr. Elkins. --6 months to a year, and the second part is
the quick action report.
Mr. Cummings. Mr. Perciasepe, I have to tell you, as I have
listened to the testimony, I am not sure that we have--I know
you are waiting for the work to be completed, but I am not sure
that we have in place right now and we have done all that we
could do in EPA to prevent this type of thing from happening. I
know you need more information; I got that.
Mr. Perciasepe. I am happy to give the committee more
information. I believe, based on what I currently know, that we
have put in enough checks and balances and additional controls,
with the provisos I gave to the chairman earlier that there
still will be a requirement for another set of eyes on a couple
of these, that something like we are talking about today
couldn't happen in the way that we are talking.
Mr. Cummings. Do we know whether we have anybody else in
your agency who is allegedly doing this dual kind of agency----
Mr. Perciasepe. Well, we have people in the Agency that are
working at other agencies or that were sharing their salary, no
overlap, but sharing----
Mr. Cummings. I am praying that this is just an aberration.
But, you know, a lot of times people will say, well, you know,
Beale is doing it, and then they say, well, how did he do it,
and then you have some copycats. Again, I assuming that is not
the case.
Mr. Perciasepe. Well----
Mr. Cummings. But a lot of times people will look and they
will say, well, you know--and $900,000 is not a little bit of
money.
And then I think people--and I think the chairman was
alluding to this--people begin to find holes in a system. And
when I practiced law, I found that you could have any kind of
law but people find a way to get around it. And if they find
out that there is somebody that is doing it and has a way of
getting around it, a lot of times, you know, people who are
inclined to do that----
Mr. Perciasepe. Right.
Mr. Cummings. --then they begin to follow.
So I am just--so we are waiting for the audit. And we want
a thorough job, and so--I got that. But I want to make sure in
the meantime we are covering our bases.
Mr. Perciasepe. I want to make sure both of you know, and
the whole committee through you two, that I am not waiting, but
I am not going to go too far--I am going far enough to make
sure that I can catch this, but I don't want to go too far
until I see more of their work. And I may see that sooner than
later. Because, as I pointed out, we talk not infrequently, and
I feel like I have a pretty good working relationship here.
So, you know, I am as appalled as anybody that this could
have happened. And we have already put in place some quick
checks to make sure we are there. We will probably need to do
more. I would be remiss if I didn't say that.
Mr. Cummings. And so I am hoping, Mr. Chairman, that other
IGs that are watching this, that they might take a look at some
things that may be going on in their various agencies. I think
that we have gotten some clues of red-flag types of things that
may happen, and I am sure that you all will be open to letting
those other IGs know what kind of red flags, you know, they
might be looking for.
Is that a reasonable request, Mr. Elkins?
Mr. Elkins. That is a fair request, yes.
Mr. Cummings. Okay.
Again, I want to thank all of you for your testimony.
Mr. Chairman, I agree with you, we do need to have as early
notice as we possibly can. I think it would be very helpful,
and I am in total agreement.
We are just trying to be effective and efficient in what we
do. And I think the hearing has been very revealing. And
hopefully, you know, we won't be in this same position a year
from now, not having made all of the changes that need to be
made to safeguard the people's money.
Thank you very much, Mr. Chairman.
Chairman Issa. I thank you.
And in closing, I will be speaking to my leadership about
the DATA Act, something that would create structured data so
that the entire government could be viewed from a standpoint of
some of these statutory requirements that we keep seemingly
discover somehow could just be bypassed without an audit
picking it up.
So, with that, I thank you again, and we stand adjourned.
[The information follows:]
[Whereupon, at 1:06 p.m., the committee was adjourned.]
APPENDIX
----------
Material Submitted for the Hearing Record
[GRAPHIC] [TIFF OMITTED] 85907.024
[GRAPHIC] [TIFF OMITTED] 85907.025
[GRAPHIC] [TIFF OMITTED] 85907.026
[GRAPHIC] [TIFF OMITTED] 85907.027
[GRAPHIC] [TIFF OMITTED] 85907.028
[GRAPHIC] [TIFF OMITTED] 85907.029
[GRAPHIC] [TIFF OMITTED] 85907.030
[GRAPHIC] [TIFF OMITTED] 85907.031
[GRAPHIC] [TIFF OMITTED] 85907.032
[GRAPHIC] [TIFF OMITTED] 85907.033
[GRAPHIC] [TIFF OMITTED] 85907.034
[GRAPHIC] [TIFF OMITTED] 85907.035
[GRAPHIC] [TIFF OMITTED] 85907.036
[GRAPHIC] [TIFF OMITTED] 85907.037
[GRAPHIC] [TIFF OMITTED] 85907.038
[GRAPHIC] [TIFF OMITTED] 85907.039
[GRAPHIC] [TIFF OMITTED] 85907.040
[GRAPHIC] [TIFF OMITTED] 85907.041
[GRAPHIC] [TIFF OMITTED] 85907.042
[GRAPHIC] [TIFF OMITTED] 85907.043
[GRAPHIC] [TIFF OMITTED] 85907.044
[GRAPHIC] [TIFF OMITTED] 85907.045
[GRAPHIC] [TIFF OMITTED] 85907.046