[House Hearing, 106 Congress] [From the U.S. Government Publishing Office] ANTI-DRUG MEDIA CAMPAIGN: PROGRAM AND CONTRACT ACCOUNTABILITY AND ADMINISTRATION ======================================================================= HEARING before the SUBCOMMITTEE ON CRIMINAL JUSTICE, DRUG POLICY, AND HUMAN RESOURCES of the COMMITTEE ON GOVERNMENT REFORM HOUSE OF REPRESENTATIVES ONE HUNDRED SIXTH CONGRESS SECOND SESSION __________ OCTOBER 4, 2000 __________ Serial No. 106-272 __________ Printed for the use of the Committee on Government Reform Available via the World Wide Web: http://www.gpo.gov/congress/house http://www.house.gov/reform ______ U.S. GOVERNMENT PRINTING OFFICE 74-927 DTP WASHINGTON : 2001 _______________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpr.gov Phone (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001 COMMITTEE ON GOVERNMENT REFORM DAN BURTON, Indiana, Chairman BENJAMIN A. GILMAN, New York HENRY A. WAXMAN, California CONSTANCE A. MORELLA, Maryland TOM LANTOS, California CHRISTOPHER SHAYS, Connecticut ROBERT E. WISE, Jr., West Virginia ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York STEPHEN HORN, California PAUL E. KANJORSKI, Pennsylvania JOHN L. MICA, Florida PATSY T. MINK, Hawaii THOMAS M. DAVIS, Virginia CAROLYN B. MALONEY, New York DAVID M. McINTOSH, Indiana ELEANOR HOLMES NORTON, Washington, MARK E. SOUDER, Indiana DC JOE SCARBOROUGH, Florida CHAKA FATTAH, Pennsylvania STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland MARSHALL ``MARK'' SANFORD, South DENNIS J. KUCINICH, Ohio Carolina ROD R. BLAGOJEVICH, Illinois BOB BARR, Georgia DANNY K. DAVIS, Illinois DAN MILLER, Florida JOHN F. TIERNEY, Massachusetts ASA HUTCHINSON, Arkansas JIM TURNER, Texas LEE TERRY, Nebraska THOMAS H. ALLEN, Maine JUDY BIGGERT, Illinois HAROLD E. FORD, Jr., Tennessee GREG WALDEN, Oregon JANICE D. SCHAKOWSKY, Illinois DOUG OSE, California ------ PAUL RYAN, Wisconsin BERNARD SANDERS, Vermont HELEN CHENOWETH-HAGE, Idaho (Independent) DAVID VITTER, Louisiana Kevin Binger, Staff Director Daniel R. Moll, Deputy Staff Director James C. Wilson, Chief Counsel Robert A. Briggs, Chief Clerk Phil Schiliro, Minority Staff Director ------ Subcommittee on Criminal Justice, Drug Policy, and Human Resources JOHN L. MICA, Florida, Chairman BOB BARR, Georgia PATSY T. MINK, Hawaii BENJAMIN A. GILMAN, New York EDOLPHUS TOWNS, New York CHRISTOPHER SHAYS, Connecticut ELIJAH E. CUMMINGS, Maryland ILEANA ROS-LEHTINEN, Florida DENNIS J. KUCINICH, Ohio MARK E. SOUDER, Indiana ROD R. BLAGOJEVICH, Illinois STEVEN C. LaTOURETTE, Ohio JOHN F. TIERNEY, Massachusetts ASA HUTCHINSON, Arkansas JIM TURNER, Texas DOUG OSE, California JANICE D. SCHAKOWSKY, Illinois DAVID VITTER, Louisiana Ex Officio DAN BURTON, Indiana HENRY A. WAXMAN, California Sharon Pinkerton, Staff Director and Chief Counsel Steve Dillingham, Special Counsel Ryan McKee, Clerk Sarah Despres, Minority Counsel C O N T E N T S ---------- Page Hearing held on October 4, 2000.................................. 1 Statement of: Hast, Robert H., Director, Office of Special Investigations, General Accounting Office, accompanied by Pat Sullivan, Assistant Director, Office of Special Investigations, and John Cooney, Senior Special Agent, Office of Special Investigations............................................. 20 Twyon, Jane, president, Worldwide Media Directors, Consultant to ONDCP................................................... 119 Vereen, Donald, M.D., Deputy Director, Office of National Drug Control Policy, accompanied by Alan Levitt, Campaign Director, ONDCP; and Richard Pleffner, Project Contracting Officer, ONDCP............................................. 39 Letters, statements, etc., submitted for the record by: Cummings, Hon. Elijah E., a Representative in Congress from the State of Maryland, prepared statement of............... 162 Hast, Robert H., Director, Office of Special Investigations, General Accounting Office, prepared statement of........... 23 Mica, Hon. John L., a Representative in Congress from the State of Florida: Letter dated September 21, 2000.......................... 4 Memo dated April 13, 2000................................ 13 Prepared statement of.................................... 8 Twyon, Jane, president, Worldwide Media Directors, Consultant to ONDCP, prepared statement of............................ 122 Vereen, Donald, M.D., Deputy Director, Office of National Drug Control Policy, prepared statement of................. 42 ANTI-DRUG MEDIA CAMPAIGN: PROGRAM AND CONTRACT ACCOUNTABILITY AND ADMINISTRATION ---------- WEDNESDAY, OCTOBER 4, 2000 House of Representatives, Subcommittee on Criminal Justice, Drug Policy, and Human Resources, Committee on Government Reform, Washington, DC. The subcommittee met, pursuant to notice, at 10:09 a.m., in room 2154, Rayburn House Office Building, Hon. John L. Mica (chairman of the subcommittee) presiding. Present: Representatives Mica, Gilman, Barr, Burton, Ose, Mink, Kucinich, and Cummings. Staff present: Sharon Pinkerton, staff director and chief counsel; Steve Dillingham, special counsel; Carson Nightwine, investigator; Michael Garcia, senior technology advisor; Chris Morrow, intern; Sarah Despres, minority counsel; and Jean Gosa, minority assistant clerk. Mr. Mica. Good morning. I would like to call this hearing of the House Subcommittee on Criminal Justice, Drug Policy, and Human Resources to order. We will be joined by other Members during the hearing. But the order of business today will be, first, I will start with an opening statement and then we will recognize other Members for their opening statements. I am pleased to welcome the other Members and, as I said, I will recognize them after I have given my opening statement. The topic of today's hearing is the National Youth Anti- Drug Media Campaign, program and contract accountability and administration. We will be reviewing some problems we have had with the administration of the National Anti-Drug Media Campaign. Today's hearing will focus on the administration and financial management of our billion dollar National Anti- Narcotics Media Campaign. This program was funded by Congress in 1997 to deal with the dramatic increase in illegal narcotic abuse experienced since 1993. While the anti-drug media campaign began with some self-admitted mishandling by the Office of National Drug Control Policy [ONDCP], Congress and our oversight committee have supported the goal of this much needed Federal effort to better educate the public and our young people about the serious consequences of drug abuse. It is important that I remind everyone that I have been a strong supporter of an effective public media campaign to help fight drug abuse and misuse across this Nation. This anti-drug program is far too important for even $1 to be wasted or misspent. We cannot allow recent drug use and human destruction trends to continue. Administration officials lately have attempted to put a happy face on an increasingly sad situation. Unfortunately, the Office of National Drug Control Policy has set a goal of reducing overall drug use to 3 percent by the year 2002. However, information from ONDCP indicates that overall drug use actually has increased from 6.4 percent in 1997 to 7 percent in 1999. That is important because, again, their goal was, and their objective was, in fact to get overall drug use down to 3 percent by 2002 and, unfortunately, it has risen in the last 3 years to 7 percent, going in the wrong direction overall. The age at which our youth first use heroin has dropped from the mid-20's to age 17. Additionally, methamphetamine, ``ecstasy,'' and ``designer drugs'' use has skyrocketed both for youths and adults. Sadly, our Nation now experiences more drug-induced deaths than murders. We released at a hearing just a few weeks ago the fact that 16,926 Americans died in our last recorded year, which I believe was 1998, of drug-induced deaths as opposed to murders, which was a lower figure for the first time since we have been collecting those statistics. Accordingly, I have worked with our leadership in Congress and with ONDCP and with other officials to support efforts to reduce the demand for drugs. That is very important that we address demand. With that cooperative spirit, we withheld formal review of the ONDCP media campaign by our subcommittee until October 14, 1999, more than a year into the program's operation. At our October 14, 1999 hearing and after a preliminary review of the administration of the anti-drug media campaign, some concerns were raised relating to contract mismanagement, financial oversight of the billion dollar program, the adequacy of the match donation as required by law, and effectiveness of the media message that had been produced to date. One area of particular concern was oversight of a growing number of contracts, ONDCP had issued somewhere in the neighborhood I believe of 19 contracts, but the growing number of contracts and subcontracts for handling various tasks of the program and the management and administration of those contracts and oversight of those contracts. In my opening statement last October, a year ago, I advised, and I will quote from my opening statement at that hearing 1 year ago, ``I see a very tangled web of contracts that appears overly complicated, expensive, bureaucratic and untested.'' The subcommittee expressed concern about the program management effectiveness and instances of contract flipping, where we found in the information that ONDCP had provided us, in fact, I think it was 15 boxes that we went through and they provided us that background, but we found that there was in fact the practice of contract flipping, where contracts were subcontracted, no work done, but payment was made to the original contractor. We raised this as a concern. Several months ago the subcommittee was informed by the Office of Special Investigation of the General Accounting Office [GAO], about issues associated with the largest ONDCP contract. This is a pretty substantial contract, a 5-year contract which totals up to $175 million annually, certainly the lion's share of our billion dollar campaign, and that is actually a multibillion campaign when we take into consideration that we also require a match. This large contract's primary purpose was to buy media time. I might say that issues were identified by multiple anonymous sources to the General Accounting Office, citing problems of financial mismanagement, over-billing, possible contract fraud, and negligent administration of contract funds for the billion dollar ad campaign. I spoke to Barry McCaffrey, our Director of ONDCP, this morning. He had sent me a letter, and I would like that letter to be made part of the record, it is a letter of September 21, which begins ``Members of your staff were apparently instrumental in assigning two special agents from the General Accounting Office's Office of Special Investigations to examine ONDCP, the HHS Program Support Center, and our primary youth anti-drug media campaign contractors.'' Without objection, I would like this to be made a part of the record. Mrs. Mink. No objection. [The information referred to follows:] [GRAPHIC] [TIFF OMITTED] T4927.001 [GRAPHIC] [TIFF OMITTED] T4927.002 Mr. Mica. But, again, I spoke to General McCaffrey this morning. Our staff did not sick anyone on anyone. Information came to us from multiple sources and to GAO about some very serious allegations relating to the ad program and its administration and financing. So, again, I am sorry that this has had to come before the subcommittee, but it is an oversight responsibility of the subcommittee. Issues, as I said, were identified by the General Accounting Office, citing problems of financial mismanagement, over-billing, possible contract fraud, and I will say possible, we have not identified that to date, we will find out more about that today, and negligent administration of contract funds for the billion dollar ad campaign that certainly should raise legitimate concerns by every member of this panel. Based on the information provided to me by GAO investigators, I believe that these very serious allegations should have been properly reviewed by GAO. I also resent recent press statements that have attempted to put a political spin on the GAO investigation or this subcommittee's legitimate oversight responsibility. The charges of possible over-billing, contract fraud, and financial mismanagement are most serious and require attention and concern of and oversight of our oversight subcommittee, and certainly of the General Accounting Office when allegations are presented to that agency. Among the concerns that have arisen are some of the following: Why did the ONDCP contract officers raise serious concerns about the costs being charged under the contract? Why has ONDCP refused to pay millions of dollars in submitted bills? And we have read some headlines over the weekend that they are now refusing to pay some of these bills. Why did ONDCP officials express cost concerns to the Department of HHS contract officers who were responsible and who had oversight responsibilities? We must determine that. Was contract administration management within ONDCP and arrangements within HHS sufficient to oversee this complex contract? The HHS contract officer and the assigned contract specialist were employees of the HHS Program Service Center. The Center is paid to help administer these contracts. The assigned specialist reportedly had a caseload of almost 60 contracts. Why didn't ONDCP push for an immediate audit? In April, the ONDCP consultant identified cost issues, with some cost estimates at over 200 percent of industry standard. And additionally, we have an internal memo that was provided to us dated April 13 that raised serious questions about the conduct of the billing and overpayments, some very legitimate and well- documented concerns. Why were these not investigated? Finally, are appropriate safeguards in place or underway for effective monitoring and controlling costs? What steps have been taken by ONDCP to deal with what obviously is a situation that needs some attention? The basic issues we have before us today are simple. Has ONDCP been negligent in its administration of the contract? Is the public being gouged? And what is being done to remedy the situation and prevent future problems? Today, we are not evaluating whether the media campaign is having its anticipated impacts. That will be a topic for future discussion and for future oversight. We all hope that the media campaign's demand reduction efforts are a success. Everyone on this panel wants this program to be a success. Congress authorized the program. Congress funded the program. And with the tragic deaths we are seeing across the Nation and in so many of our districts and the heartbreak this brings to so many families, we have a responsibility to make certain this program is a success. It is important to hold managers accountable to ensure investment, and this is an investment, to ensure investment integrity, and to achieve an absolute maximum return on taxpayer dollars that are being put into this important program. That is why we are having the hearing today. It does interest me that, according to the Washington Post, the ONDCP program manager who will be testifying before us today was quoted as saying, and this is from the Washington Post dated September 30, page A-2, ``There is absolutely no over-billing.'' I find the program manager's conclusion perplexing and bothersome, as an audit has just been done, an audit that really will determine I think what has been going on here. After all, it is his own contracting officer, the person who actually reviews the bills, who presented the issues to his senior management and requested an audit many months ago. I look forward to learning how these statements, memoranda, and actions can be reconciled. Today, we need to determine whether ONDCP's media campaign management has both the talent and objectivity to oversee effectively the Nation's largest public media campaign ever undertaken and that the contract with one of the largest advertising companies in the United States is properly managed. There is not a person on this panel who would not like to see our national media campaign work and be successful. By the same token, we have a responsibility both as overseers of this program and as stewards and trustees of hard earned taxpayer dollars to see that this Government sponsored billion dollar campaign is properly administered. Unfortunately, rather than to cooperate to resolve financial mismanagement problems, correct administrative negligence, and assist in proper investigation of possible criminal misconduct, some in the administration have attempted to thwart the congressional hearing process, attack the GAO investigative staff, and block the proper review of very significant problems of a very important Federal program. I believe that is very unfortunate. Today's hearing will focus on the management, financial administration, and current problems facing our national anti- drug media campaign programs. We will hear from the General Accounting Office, we will also hear from ONDCP, and we will hear from its consultant. Hopefully this hearing can help us identify specific areas that need our attention and that will improve both the effectiveness and performance of our anti-drug media campaign. [The prepared statement of Hon. John L. Mica follows:] [GRAPHIC] [TIFF OMITTED] T4927.003 [GRAPHIC] [TIFF OMITTED] T4927.004 [GRAPHIC] [TIFF OMITTED] T4927.005 Mr. Mica. With those comments, I am pleased at this time to yield to the gentlelady and ranking member from Hawaii, Mrs. Mink. Mrs. Mink. Thank you very much, Mr. Chairman. I have had an opportunity to discuss the issues that are before this subcommittee both with the Office of National Drug Control Policy staff as well as the GAO investigators. I believe that this hearing which has been called today is absolutely premature. The GAO investigators have been given a very narrow assignment which they are about to report on to this committee today, and that is the role of the Director of the Office of National Drug Control Policy with reference to what he did or did not do upon being advised that there was potential fraud being committed with respect to this contract that the chairman has just described. The issue really before this Congress and this committee and subcommittee ought to be whether the allegations that have been made about fraud are in fact true. To what extent the Director of this agency acted in one way or another it seems to me is not the crux of the issue. Those matters can be discussed much later. The more important issue is whether these anonymous sources that have brought this charge of fraud and doctoring of billing and so forth is true and can be proven. From what I have gathered in my discussions with the investigators and with GAO, any such conclusions are premature. It will take the agency many more months to investigate the so-called doctored sheets and to investigate the 300-plus employees who submitted these worksheets. We also need to go to the contractor and find out exactly what their contracting practices were. At this point, we should be sitting here commending the ONDCP for having alert, conscientious staff that decided to withhold payment of $13 million or so before all of this broke because they were insistent that the Government contracting practices with reference to justification of billing was actually proven by the contractor who sought payment rather than point to this withholding of the moneys allegedly due the contractor as some proof that there was knowledge of fraud. It seems to me that the employees who function in this capacity were doing exactly what the law expected of them; and that is, to require all contractors dealing with the Federal Government to provide proof that the payment was justified. I have no idea because we have no facts before us as to exactly what proof was lacking which caused the agency not to make these payments to the contractor. But all of that needs to be looked into by the GAO. And as I understand it, there is an ongoing inquiry. It is sad that a subcommittee hearing has to be called based upon anonymous tips from whomever, either in the contractor's agency or in the drug policy agency. I never understood why the whistle-blower law required the agencies to refrain from disclosing the people who are coming forth with important valuable information that could lead to the prosecution of individuals. If the matter is still under investigation, that is fine, then anonymity is probably a valuable requirement. But if we are to have a congressional hearing upon which these charges are based, it seems to me that the identity of these individuals is required. The whistle- blower law then protects these individuals from intimidation and harassment and other kinds of possible negative employment consequences within the agency or within the contractor's office or wherever they work. But to have a hearing today and to be faced with the crux of the issues that we are discussing, coming from anonymous sources which we on this side have not had the opportunity to investigate, to interrogate, to discuss these matters to understand the enormity of the charges being made, I find that extremely tenuous and difficult to justify. I am of course, as are my colleagues on this side of the aisle, equally concerned about any charges of fraud and mismanagement and lack of propriety in terms of any employees inside and outside the Government. And it is our function as an oversight committee to investigate those. But it seems to me that this hearing today is premature and is really an effort to single out the agency and exactly what they did with the information that came to them about these charges of fraud. That matter has been turned over to the GAO. It is being investigated. It seems to me that we ought to wait for that investigation to conclude. The Special Investigators Office of the GAO is charged with investigating criminal conduct. And here we are talking about these matters without a shred of evidence from this special investigating unit to indicate that fraud did occur, who is responsible for this fraud, and to what extent this Congress and this subcommittee can now move to make sure that those kinds of things never occur again. The investigation of the criminal conduct is not our responsibility. Our responsibility is policy directed. And to that extent, to have a hearing before we know whether there has been in fact deliberate criminal conduct on the part of anybody it seems to me is an inappropriate investigation. But be that as it may, we are here today. I hope that we can elicit from the witnesses who have been called their frank and honest opinion as to what we are doing here today and why, and where do we go from here. Thank you very much, Mr. Chairman. Mr. Mica. I thank the gentlelady and ranking member. We are joined this morning by the chairman of the full Committee, Mr. Burton, the gentleman from Indiana. You are recognized, sir. Mr. Burton. Thank you, Mr. Chairman. I will not take very much time. I would maybe like to take a little issue with my colleague, the gentlelady from Hawaii. I have before me from the Executive Office of the President, the Office of National Drug Control Policy a memo from the project officer who indicates that there are suspicions of fraudulent conduct. That is not anonymous. That is something that we have as a matter of fact. I hope this has been entered into the record. If it has not been, it should be. Mr. Mica. Without objection, the April 13th memo will be made a part of the record. [The information referred to follows:] [GRAPHIC] [TIFF OMITTED] T4927.006 [GRAPHIC] [TIFF OMITTED] T4927.007 Mr. Burton. The other thing, Mr. Chairman, is that we do have a responsibility as an oversight committee over the executive branch to ferret out waste, fraud, abuse, and if there is criminal activity, to investigate that as well. We have some very fine legal minds on this committee, like Mr. Cummings on the other side. If we see something that is illegal that has been going on, we should investigate that, we have the responsibility to investigate it, and if we find there is some criminal activity, send a referral to the Justice Department. So there is no question that this falls within the jurisdiction of your subcommittee. And I congratulate you for holding this hearing. I would just like to say one thing. This shows that this whole program of advertising and bringing more awareness to the youth of America about the perils of using drugs is not working as well as we would have hoped. We have taken a tremendous number of resources that were used for interdiction and for eliminating drugs at their source and fighting the drug war in places like Colombia, Bolivia, and Peru and we put them over into this new program. The results have been, at best, questionable. As I understand it, there have been more drug deaths in 1998, that is the last report we have, than there have been murders. And so, the program has not been as beneficial as we would have hoped. The staff over at ONDCP has been increased but the number of people that have been involved in the other programs has been reduced dramatically. We have been trying, Chairman Gilman and I and Chairman Mica along with others, to get equipment down to the Colombian national police and the people in power down in Colombia so they could fight the producers of the cocaine and heroin that is flooding our country and killing our young people. Much of that money has been very, very difficult to get. We finally have the President and the administration on board. But, unfortunately, we were just informed the other day in the Foreign Affairs Committee on which I serve that the helicopters probably will not get down there until after 2002 and the drug war could very well be lost by that time. So we are very concerned about that, especially when we have plenty of helicopters already in our inventory that we could send down there, the Blackhawks and the Hueys. So I think we need a more balanced approach. I think this apparent evidence of wrongdoing in the advertising is another manifestation of a program that is not working well. We need a more balanced approach in the war against drugs. Obviously, we need education. I do not downgrade that request from the administration and where they are heading at all. I am just saying that we have put too much emphasis on the educational aspects and not enough on interdiction and eradication. We need to have a three-pronged approach instead of focusing primarily on this one area. We know from the statistics that we have so far that this one approach and focusing more on that than the others simply is not working. We are still losing the war on drugs, if you want to call it that, and I think it is unfortunate. We need to have a balanced approach, and I think this is one more manifestation of reasons why we need a balanced approach. I thank you once again, Mr. Chairman, for holding this hearing. Mr. Mica. I thank the chairman. I am pleased to recognize the gentleman from Maryland, Mr. Cummings. Mr. Cummings. Thank you very much, Mr. Chairman. I am certainly very pleased that Mr. Burton is here with us, and I do appreciate what he just said with regard to prevention/ education. We need to stick in there treatment, something that I have been very concerned about, and certainly interdiction. Mr. Chairman, I would first like to take a moment to thank the Office of National Drug Control Policy for their strong leadership and cooperation with Congress in fighting this war against drugs. I believe it is important to note that ONDCP Director General Barry McCaffrey personally sat down with youth in Baltimore for a half-day town hall meeting to hear how the drug war and the media campaign have impacted their lives. I was sitting there as they talked with the director and they made it clear that these ads were having an impact on them. But the reason why he was there was to find out how he could be even more effective, how the ads could strike even more of their classmates. These were high school students sitting down for half a day with the No. 1 drug officer in the world to find out how we could take these tax dollars that citizens are giving our Government and spend them in a cost efficient and effective manner. And I thank Dr. Vereen, the ONDCP Deputy Director, who I have also worked with, for all of your assistance as well. Now, to the issue at hand. It is unfortunate that despite its good work, ONDCP has to again be placed in a defensive position as a result of unsubstantiated allegations. I might add that when I first came to Congress 4\1/2\ years ago, one of the first hearings that I had in this committee was an attack on this agency. Since the inception of the National Youth Anti- Drug Media Campaign in 1998, this subcommittee has closely monitored the campaign to determine its efficiency and effectiveness. According to a recent GAO report, ``ONDCP has met most mandates'' regarding the media campaign funds and program guidelines. In July of this year, GAO, the revered investigative authority, found that survey data on drug abuse, focus groups, and community input supported the notion that ONDCP's anti-drug media campaign has met its congressional mandates. According to numerous studies released this year, the campaign has had real results in meeting campaign goals to reduce drug use among its target populations. According to the most recent Monitoring the Future Survey, as anti-drug ads have risen, so have attitudes about the social disapproval and perceived risk of illegal drug use. The 1999 National Household Survey on Drug Abuse reported that drug use by 12 to 17 year-olds dropped by 21 percent over a 2-year period, from 1997 to 1999. Additionally, the PRIDE, that is the Parent's Resource Institute for Drug Education, survey reported that, between 1996 and 1999, annual use of any illicit drug declined by a third among junior high school students. Over the years, we have held numerous hearings to investigate allegations. I have noticed that this subcommittee in some ways resembles our full committee--one that has continually sought to find wrongdoing in this administration. Sadly, allegations have not only been levied against ONDCP, but also one of the top public relations firms in the Nation, Ogilvy and Mather, an important partner in the media campaign. These allegations may be sensational but they do not assist in combating the drug war, and further, have potential to strain a successful partnership between Ogilvy and Mather and our Office of National Drug Control Policy that will eventually affect our Nation's youth, the very youth that I talked about a little bit earlier who sat down with the drug czar. The allegations raised today question whether Ogilvy and Mather over-billed for labor or falsified records, and whether ONDCP and HHS contract management did not adequately followup once alerted to the concerns. I have worked closely with General McCaffrey and his staff on numerous issues. I know that he is running a tight ship because he is very concerned about the effectiveness and cost-efficiency of all the dollars given to ONDCP by this Congress. As such, I believe that ONDCP should be afforded the opportunity to find solutions and answers when questions arise--before our subcommittee jumps in to investigate and point fingers. I would like to outline a timeline that highlights when the irregularities at question were raised and how ONDCP addressed them. On April 13, 2000, a memo from Richard Pleffner, ONDCP project contracting officer, who will testify today, to General McCaffrey stated concerns regarding Ogilvy's management practices and possible billing irregularities. These uncertainties were reinforced when a former Ogilvy employee raised those concerns. Three weeks later, on May 4, 2000, ONDCP sent a letter to Ogilvy expressing concern about labor costs in their year 2000 project plan and asked that Ogilvy reassess the plan to make the costs in line with the original proposal. ONDCP then went on to hire an independent media consultant, who will testify today, Ms. Jane Twyon. Her findings concluded that there were cost-savings that Ogilvy could have made based on industry traditions and standards. Subsequently, ONDCP withheld approximately $14 million in payments to Ogilvy. Although Ogilvy provided several reasons for their costs in a June 2000 letter, ONDCP asked Ogilvy to break down its costs more thoroughly to assist in determining what were reasonable expenses. Since that time, General McCaffrey approved the recommendation by ONDCP's Office of Legal Counsel for ONDCP to conduct an internal audit of the management practices of the media campaign to identify areas that need improvement. My understanding is that General McCaffrey also approved a recommendation that HHS conduct an audit of all media campaign contractors. All this to say, what is the problem? I will review, and I close: ONDCP was alerted to a potential problem, ONDCP took necessary steps to investigate the issue, and ONDCP took steps to address the problem. As such, I believe that instead of attacking and launching new investigations, ONDCP should be commended for taking action. Mr. Chairman, I look forward to hearing from today's witnesses so that we may clear up this issue and get back to the business of saving our Nation's youth. Thank you. Mr. Mica. I thank the gentleman from Maryland. I am pleased to recognize the vice chairman of our subcommittee, the gentleman from Georgia, Mr. Barr. Mr. Barr. Thank you, Mr. Chairman. I love the way folks on the other side approach these hearings. They reach the conclusion that nobody has done anything wrong and then they blast us for holding a hearing. Thank goodness, folks with that sort of outlook are not running the Department of Justice. Actually, they are. Mr. Chairman, this is a very important hearing. You posed, and I repeat these since apparently some folks on the other side did not hear them during your opening remarks, some very important questions regarding possible over-billing, contract fraud, and financial mismanagement. These are questions I am sure that came to your mind not simply sitting around with nothing better to do, but, as always in these hearings, based on your careful consideration of evidence before you, interviews, and materials submitted to you by the staff, and, in this case, including your review of extensive materials provided by the General Accounting Office [GAO], not the General Anonymous Office, as another member apparently thinks we are dealing with here, anonymous evidence. We are dealing with a report from the General Accounting Office. The questions that you pose, Mr. Chairman, I think at least some of them are worth repeating because every one of them clearly falls within the jurisdiction of this committee. Now I know that it might be easier if we just sit back the way Government operated up until 6 years ago and just let these things roll merrily along and, as former Senator Everett Dirksen used to say, a billion here, a billion there, and pretty soon you might be talking about real money. Those of us on this side take our fiscal responsibility seriously and a billion here and a billion there requires very strong oversight on behalf of the taxpayers of this country. And if we just sit back and let these things roll merrily along and wait until this great Department of Justice that we have conducts an investigation, not only would we be through the next administration but probably two or three administrations after that, and billions of dollars would have been lost. It is entirely appropriate, Mr. Chairman, indeed, it would not be responsible not to conduct an investigation at this time, to start asking some questions in order to uncover any potential problems and assist rather than fight the GAO in attempting to remedy them, and assist ONDCP rather than fight it or sweep it under the rug if problems exist and help them resolve them. Some of the questions you pose, Mr. Chairman, and apparently these are irrelevant to the other side, but I think they fall clearly within your interpretation and very clear mandate for jurisdiction of this committee: Why has ONDCP refused to pay millions of dollars in submitted bills? Why did ONDCP officials express cost concerns to Department of Health and Human Service contract officers who also had contract oversight responsibilities? Was contract administration management within ONDCP and arrangements with HHS sufficient to oversee this complex contract? Why didn't ONDCP push for an immediate audit? In April, the ONDCP consultant identified significant cost issues, with some costs estimated at over 200 percent of industry standards. Finally, are appropriate safeguards in place or underway for effectively monitoring and controlling costs? I would ask my colleagues on the other side, what do you find so offensive and inappropriate about these questions? These are standard oversight questions that ought to be answered. And when, as in this case, evidence comes before this committee, not by some anonymous source but by memos and by notations by the highest officials in ONDCP, that raise questions, maybe that can be very well answered, but raise questions substantiated by GAO that there are some problems here, why the people on the other side of this aisle find this so offensive is very, very strange indeed. These are simply straightforward oversight questions posed by you and this subcommittee on this side as early on in this process as we became aware of them in an effort to straighten this out and to continue the good work of ONDCP. But if there are problems there, to make an effort, rather than wait until all the money has been spent, until all of the horses have left before we close the barn door, to address these questions now. I commend you, Mr. Chairman, for stepping forward and conducting appropriate and timely oversight as good stewards of the public's money. Thank you. Mr. Mica. I thank the gentleman. I would like to recognize another member of our subcommittee, the gentleman from California, Mr. Ose. Mr. Ose. Thank you, Mr. Chairman. I think Mr. Barr has very eloquently stated why we are doing this. It is interesting, I was studying this material the staff has put forward the last couple of days regarding the actual contract. And while I have a number of questions on the contract, not the least of which is that the pages that would otherwise detail the unit costs within the contract seem to be missing, I am looking forward to this discussion and am particularly interested in getting all the way back to the time sheets of the Ogilvy Mather employees. I think that is where the crux of this matter lays. With that, I would like to go straight to questions if we could, having read Mr. Hast's testimony. Mr. Mica. I thank the gentleman. There being no further opening statements, Mrs. Mink moves that we leave the record open for a period of 2 weeks for additional statements, comments, information through the Members and the Chair. Mrs. Mink. Fine. Great. Mr. Mica. Without objection, so ordered. We will turn now to our panel of witnesses that we have assembled this morning, all of whom I believe will be testifying at some point. We are pleased to have Mr. Robert H. Hast, who is the Director of Office of Special Investigations of the General Accounting Office. He is accompanied by Pat Sullivan, the Assistant Director, Office of Special Investigations, and John Cooney, a Senior Special Agent, Office of Special Investigations. We are also pleased to have back the Honorable Donald Vereen. Dr. Vereen is the Deputy Director of the Office of National Drug Control Policy. Dr. Vereen is accompanied by Mr. Alan Levitt, who is the Campaign Director under the ONDCP for the media campaign, and Mr. Richard Pleffner, Project Contracting Officer of ONDCP. We also have Ms. Jane Twyon, who is with Worldwide Consulting, and she is a consultant to ONDCP. For those of you who have not appeared before our subcommittee before, this is an investigations and oversight subcommittee of the House of Representatives. In that regard, we do swear in our members and you will be under oath. Also, if you have lengthy statements or documents to submit, I am not going to run the clock because I think we are just going to hear from three and then use others as resources, but if you have lengthy statements, data that you would like made part of the record, if you would request so through the Chair it will be so ordered. With that, if you would please stand to be sworn, everyone who is going to testify. [Witnesses sworn.] Mr. Mica. Let the record reflect that all the witnesses answered in the affirmative. I am pleased now to recognize Mr. Robert H. Hast, the Director of the Office of Special Investigations, the General Accounting Office. Welcome, sir, and you are recognized. STATEMENT OF ROBERT H. HAST, DIRECTOR, OFFICE OF SPECIAL INVESTIGATIONS, GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY PAT SULLIVAN, ASSISTANT DIRECTOR, OFFICE OF SPECIAL INVESTIGATIONS, AND JOHN COONEY, SENIOR SPECIAL AGENT, OFFICE OF SPECIAL INVESTIGATIONS Mr. Hast. Mr. Chairman and members of the subcommittee, we are here to discuss the investigation you asked us to undertake concerning the Office of the National Drug Control Policy's contract with Ogilvy-Mather, which is the lead media campaign contractor for the National Youth Anti-Drug Media Campaign. I respectfully ask that my written statement be entered into the official hearing record at the conclusion of my summary remarks. Mr. Mica. Without objection, your entire statement will be made part of the record. Please proceed. Mr. Hast. You received allegations that the ONDCP had learned that Ogilvy was allegedly inflating its labor costs and, as a result, was over-billing the Government for its services under the contract by falsifying time sheets. In response, ONDCP's Chief of the Media Branch hired a consultant to study the Ogilvy contract. This consultant reported that Ogilvy's labor costs were far above industry standards. Further, in April of this year, the Director of ONDCP, General Barry McCaffrey, U.S. Army, retired, was informed about these allegations and the results of the consultant's study. This allegedly resulted in General McCaffrey's decision that an external audit be conducted of the Ogilvy contract. However, according to the allegation, after the General met privately with the contractor's project director, the project director announced that General McCaffrey was satisfied with the contract's costs and that no external audit was to be conducted. In addition, you received information that Ogilvy allegedly had provided assistance to General McCaffrey concerning matters not involving ONDCP and billed for this service under the contract. Beginning in July, we investigated the facts and circumstances surrounding actions that ONDCP took after receiving the allegations that Ogilvy may have over-billed the Government. We also investigated allegations that Ogilvy had provided services unrelated to the contract and submitted invoices under the contract for those services. We did not investigate the allegation that Ogilvy had over-billed the Government under this contract; however, GAO is currently conducting a review and audit of ONDCP's contracting operations which will include these issues. In summary, we found that General McCaffrey knew about the fraud allegations concerning Ogilvy's billing practices; and there is evidence to suggest that he agreed with the need for an external audit of the contract. When we interviewed General McCaffrey, he initially stated he had no recollection of the accusations of fraud related to the Ogilvy contract. After reviewing the April 13th memorandum that showed he had been informed of these allegations, he did recall receiving the allegations. He then told us that after receiving the April 13th memorandum and a report by a consultant that questioned Ogilvy's costs, he traveled to New York City where he met with Ogilvy executives and told them that their costs were growing and that they needed to get them under control. Regarding the allegation that he had ordered an external audit, General McCaffrey stated that he had never ordered such an audit. He added that he had no knowledge of any written order for an external audit or an annotated memorandum with a handwritten comment stating the need for an external audit. He was then asked if he ever used the words ``we need an external audit,'' and stated that he did not recall that. However, after reviewing again the annotated April 13, 2000, memorandum, General McCaffrey acknowledged that the handwritten comments, which included the statement ``we need an external audit,'' were his. He told us that although he admittedly wrote that phrase on the document, he did not at that time recollect the document and he never did order an independent audit to be carried out on the Ogilvy contract but it was his intention to conduct an audit at some point in time. ONDCP's General Counsel informed us that after we interviewed General McCaffrey, the director approved a closeout audit of all media campaign contracts, including the Ogilvy contract. This was to be done in conjunction with the proposed transfer of contracting responsibilities to the Navy. In addition, General McCaffrey has also approved an internal audit of the management practices of the Media Campaign. With regard to the allegation of a private meeting with Ogilvy's project director, we found that General McCaffrey had a private meeting with her in June after internal ONDCP discussions of the need for an external audit. General McCaffrey's description of the meeting and the project director's description vary as to whether excessive costs were discussed. However, we found no evidence that this meeting impacted any decision with respect to an external audit of the Ogilvy contract; and we were told by General McCaffrey that he never ordered an audit. Further, concerning the allegations that Ogilvy provided services beyond those covered by its contract, we found that Ogilvy did not write congressional testimony for ONDCP employees. Ogilvy did provide ONDCP with figures, research, and documentation for use in responding to congressional inquiries and testimony. Ogilvy billed for the service under the contract. Ogilvy did not provide any services to General McCaffrey involving his response to an article in the New Yorker magazine that was critical of General McCaffrey when he was in the military. General McCaffrey told us that no one had assisted him in response to this article. However, we found that an official of another ONDCP contractor, Fleishman-Hillard, had spent 3 or 4 hours advising General McCaffrey on this matter. Fleishman-Hillard, however, did not charge the time to its ONDCP contract. We were told that this time was considered a personal favor to General McCaffrey. We also found a May 16, 2000, memorandum to General McCaffrey from Alan Levitt informing him that Fleishman-Hillard officials had told company staff that it was assisting General McCaffrey on that matter. This concludes my prepared statement. I am happy to respond to any questions you or members of the subcommittee may have. [The prepared statement of Mr. Hast follows:] [GRAPHIC] [TIFF OMITTED] T4927.008 [GRAPHIC] [TIFF OMITTED] T4927.009 [GRAPHIC] [TIFF OMITTED] T4927.010 [GRAPHIC] [TIFF OMITTED] T4927.011 [GRAPHIC] [TIFF OMITTED] T4927.012 [GRAPHIC] [TIFF OMITTED] T4927.013 [GRAPHIC] [TIFF OMITTED] T4927.014 [GRAPHIC] [TIFF OMITTED] T4927.015 [GRAPHIC] [TIFF OMITTED] T4927.016 [GRAPHIC] [TIFF OMITTED] T4927.017 [GRAPHIC] [TIFF OMITTED] T4927.018 [GRAPHIC] [TIFF OMITTED] T4927.019 [GRAPHIC] [TIFF OMITTED] T4927.020 [GRAPHIC] [TIFF OMITTED] T4927.021 [GRAPHIC] [TIFF OMITTED] T4927.022 [GRAPHIC] [TIFF OMITTED] T4927.023 Mr. Mica. Thank you. I have no questions at this time. I understand Mr. Sullivan and Mr. Cooney were involved in the investigation but have no statement at this time. Is that correct? Mr. Hast. That is correct. Mr. Mica. Then we will recognize at this point Dr. Donald Vereen, who is the Deputy Director of the Office of National Drug Control Policy. Welcome, sir, and you are recognized. STATEMENT OF DONALD VEREEN, M.D., DEPUTY DIRECTOR, OFFICE OF NATIONAL DRUG CONTROL POLICY, ACCOMPANIED BY ALAN LEVITT, CAMPAIGN DIRECTOR, ONDCP; AND RICHARD PLEFFNER, PROJECT CONTRACTING OFFICER, ONDCP Dr. Vereen. Thank you very much, Chairman Mica and members of the subcommittee. We welcome this opportunity to explain important aspects of the management and oversight of the National Youth Anti-Drug Media Campaign. I am here representing the White House Office of National Drug Control Policy. I am the Deputy Director there, a physician with a public health background, and I have been actively involved with the media campaign. I would also like to introduce two of my colleagues, Mr. Alan Levitt, the program manager for the media campaign, and Mr. Rick Pleffner, the contract manager for the media campaign, and recognize a couple of partners who are with us, the Community Anti-Drug Coalitions of America, the National Association of Drug Court Professionals, partners that have been working with and are invested in the media campaign. As you know, the campaign is an integrated, science-based public health communications effort designed to reach youth and adult audiences with messages that influence attitudes and action. Many indicators point to a positive trend and a generation of teenagers are increasingly choosing to stay away from drugs. So we are here today to ensure that this committee is provided with detailed understanding of ONDCP's media campaign management and oversight structure. So allow me to submit at this time my detailed written testimony for the record. Mr. Mica. Without objection, your entire statement will be made part of the record. Please proceed. Dr. Vereen. What I will do at this time is highlight three critical components expressed in the written testimony, which is actually already available on the Web. ONDCP is meeting Congress' intent and we are appreciative of your confidence in our ability to design, implement, and manage this vitally important public health campaign. We welcome the oversight. We take very seriously our management responsibilities for this campaign. Let there be no doubt that Director McCaffrey is the accountable public official for this 5-year, $1 billion effort. We welcome close public scrutiny of our operations and will continue to cooperate fully with all oversight functions, including the General Accounting Office review, committee inquiries, as well as congressional hearings like this one. This is the seventh hearing to focus on the media campaign since March 1999. We take great pride in the GAO's recent conclusion that ONDCP had processes in place to monitor and approve all paid advertising expenditures before paying vendors. We are involving experts in prevention in the campaign. As I said before, the campaign is firmly grounded in science. We have the use of a behavioral change expert panel, as well as Wesstat Corp., the University of Pennsylvania's Annenberg School of Communications, and our own National Institute on Drug Abuse which is evaluating the campaign to show that it is actually having the desired effects for the American public. Is ONDCP negligent in administering this contract? Is the public being gouged? The answers to those questions are, no. We are diligently protecting the public purse. From the campaign's inception, ONDCP has relied on other Federal agencies to provide administrative contract support for the campaign's paid advertising contracts. We made this decision because of our conclusion that neither ONDCP nor the larger Executive Office of the President had contract administration capabilities necessary to support this extensive contract. The Department of Health and Human Services Program Support Center provides administrative contract support for this media campaign. They have the sole responsibility for determining allowability and reasonableness of expenses billed to the Government by contractors. Nevertheless, ONDCP ensures that only valid campaign expenses are paid by monitoring all of the contractors' costs and spending. We execute this responsibility by attending planning meetings with contractors, obtaining periodic financial status reports, and reviewing and approving all campaign expenditures. We make recommendations to the contract administrators in HHS, and our experience is that they agree with most of our recommendations. Our media campaign has enjoyed a tremendous amount of support. You have that information in front of you in a number of slides. This is to demonstrate that we are fulfilling the promise that we have established, a model for a public-private sector collaboration. There are a host of collaborators who are involved with this who are invested in this program. We are proud of the campaign's significant accomplishments. We have exceeded the pro bono match requirements which you helped us to develop and establish. Since July 1998, over 425,000 public service announcements have run because of the campaign. And in terms of banner ads on Web sites, there have been an impressive 586 million total impressions between 1999 and the year 2000. And we have bought advertising in more than 2,000 media outlets. These accomplishments have been critical to achieving the positive trends toward attitude and behavior change among our national youth. You have required that of us. Drug use, according to the National Household Survey, has declined 21 percent. Sixty-three percent of teens reported their parents were talking to them about drugs. And last, I want to mention that we are enormously proud of the accomplishments of our contractors. Ogilvy and Mather is one of the largest and most respected advertising companies in the world. They bring significant negotiating leverage to the table, allowing the Government to attain the lowest possible market rates and access to substantial and unique media match opportunities. We estimate that the ONDCP has saved 10 to 50 cents for every taxpayer media dollar invested. So we are getting a great bang for our buck with Ogilvy. The company has been considered experienced in social marketing campaigns, having been responsible for the highly successful America Responds to AIDS campaign. Fleishman-Hillard is the other large contractor, one of the largest and most well-respected communications firms in the world. And we work with the Ad Council and they are the quarterback of our campaign's public service component. Mr. Chairman, I want to thank you and this committee for the opportunity to address your concerns. We welcome the committee's leadership and continued interest in reviewing the progress and achievements of the media campaign. We continue to forge ahead to maintain a strong management and oversight structure for this campaign. But more importantly, we are fully committed to securing the mission and effectiveness of this campaign to change drug use attitudes and behavior among our Nation's youth. We will be happy to take your questions. I will let Mr. Levitt introduce himself and Mr. Pleffner introduce himself. 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Mr. Levitt. Mr. Levitt. I am a 30-year career employee, a member of the Senior Executive Service. My whole career has been focused on developing and implementing public education programs on energy independence, conservation, science, drugs, public issues. I have two degrees in communications. I have attended the Kennedy School of Government's program for senior managers in Government, and the Federal Executive Institute. Mr. Mica. Mr. Pleffner, do you have a statement, or are you just going to do a self-introduction? Mr. Pleffner. Yes. I serve as the project officer for the media campaign. I have the primary responsibility for day-to- day technical administration of the contract, act as the facilitator, communicating with the contracting officer at HHS. I have roughly 20 years of Federal procurement and acquisition experience. Mr. Mica. Thank you. We will now recognize for a statement Ms. Jane Twyon. She is with the Worldwide Consulting group, a consultant to ONDCP. You are recognized, Ms. Twyon. Welcome. STATEMENT OF JANE TWYON, PRESIDENT, WORLDWIDE MEDIA DIRECTORS, CONSULTANT TO ONDCP Ms. Twyon. Thank you, Mr. Chairman. I am a bit of a fish out of water here, so just help me along if I do something improper. I would like to ask that my written testimony be included in the record as well as what I am going to say. Mr. Mica. Without objection, your entire written statement will be made part of the record. Please proceed, and you will not be scaled just yet. [Laughter.] Ms. Twyon. Thank you. I should correct before I go any further that the spelling of my name is T-W-Y-O-N, no E, and that my company is Worldwide Media Directors. What I am going to do with my time here today with you is just to try and put my report into the proper frame where it should be and how it should be looked at. So I am going to go pretty quickly and hopefully will make things clearer to all of you. I believe that I bring great value to my clients. The objective of my analysis is to evaluate the work product and the cost and, where possible, bring about improved relationships, improved work process, and improved efficiencies. As stated in my report, I do not presume to direct the exact manpower costs to be realigned. As a consultant, I cannot give you any magic answers as to where you specifically need to make changes. This is for two major reasons. First, I am using industry standards and industry averages and all businesses are unique in their advertising requirements. You should be aware that I did not give any special weighting for the possible differences between a private versus a Government sector advertising agency cost of service. I did adjust for the requirement of matched media, but not for any unique Government contracting procedures. Second, I do not have any hands-on day-to-day experience on this business. My evaluation is based upon specific documentation from Ogilvy, industry reports, surveys, as well as my experience and stated assumptions. Making assumptions was necessary to complete the report and give it grounding for future analysis. My report delivers the best information and recommendations that I could provide, and I take my work very seriously. Additionally, my report puts a stake in the ground and estimates a savings of $8.5 to $14.8 million in compensation. This savings was based on specific documentation that I had to evaluate and the assumptions that I made in my evaluation. However, you cannot use these figures as real savings. They need to be viewed as a snap shot estimate that indicates further work needs to be done to find real savings or to clearly understand why this business is operating above the industry average. The ONDCP understands that I applaud their conscientious management of this assignment and for seeking advice on how to improve the media product and costs. Additionally, you must also be aware that I have stated several times to the ONDCP that my report does not see any delinquency from any party on costs. I realize that the current compensation grew out of the needs of the ONDCP and the desire by Ogilvy to respond to and service these needs and this very important piece of business for them. I see my report, and I think this is very important to all, I see my report as the beginning, it is not an end. It is the start of a process for the ONDCP and Ogilvy to work to find ways to become more efficient. It is an evolutionary process. As a media consultant on this assignment, I do believe that we can improve the work process, relationship, and costs. My compensation report was part of a larger report. Part of that was to look at Ogilvy media costs. And as I stated to ONDCP in my presentation on May 11th, Ogilvy's media rates looked competitive. I am sharing this fact with you today because I do not want to see a compensation report destroy good work. It would be the tail wagging the dog. As a consultant, my interest is in finding ways to raise the bar and bring this account closer in line to the industry on manpower compensation. I believe my report shows you can do better. But the report does not do the job. I must state again that I see no fault with Ogilvy or the ONDCP, and I hope that my report is not used to derail a good relationship and excellent work from Ogilvy. I want the ONDCP to continue all the good aspects of the campaign, keep and grow a strong agency relationship, and, yes, let's work together to lower the compensation. I also want to make an aside to the committee and this is on a personal note. I am, I guess the best word to use, angry with this committee because I believe that you have compromised me as a consultant. By handing out what was my confidential and a very, very technical report and handing it out to the press without a cover note and without putting it in any context, it opens the door for this information to be misused and misquoted. And we cannot be surprised that this has happened. Yesterday I read from Ad Age, which is in my business one of the premier trade publications, on their Web site they talk about the issues with ONDCP, they identify me as the consultant. And let me just read one little piece from what they said, and people in my business are reading this. It says that I have said that a savings of from $8.5 million to $14.5 million a year would be ``reasonable to expect'' by letting less senior account people buy at Ogilvy. Now I know this information is wrong because account people do not make media buys. And I would never be so ridiculous as to tell a client that they are going to get major savings by compromising on senior manpower. I know it is wrong but the people who read this report will not know it. The article is full of data from my report; the information is out of context, it is misused, and it is misquoted. And I feel that because of that you have compromised me and you have embarrassed me. And for that, I am angry. That is the end of my report. Thank you. [The prepared statement of Ms. Twyon follows:] [GRAPHIC] [TIFF OMITTED] T4927.101 [GRAPHIC] [TIFF OMITTED] T4927.102 Mr. Mica. Thank you. We will get back to you in just a moment. We will start with some questions that I have and then proceed to other Members. First of all, let's begin with you, Mr. Levitt, you are the media campaign manager. When and how did you first become aware of cost and billing concerns with the contractor Ogilvy and Mather? Mr. Levitt. Well, sir, we have four major contracts and under those probably 20 or 25 subcontractors are working for those contractors. In virtually every single instance, we have recommended withholds from billing. I think it is a total of about $18 million. Mr. Mica. My question was with the Ogilvy and Mather contractor, when did you first become aware of cost and billing concerns. Do you recall? Mr. Levitt. It was not necessarily billing concerns, but billing irregularities. They did not bill for labor for about 10 months. So it would be about September 1999. Mr. Mica. You first became aware of some over-billing---- Mr. Levitt. No, it---- Mr. Mica. I am sorry, billing irregularities in October 1999? Mr. Levitt. They had not billed for everything. And may I just correct one point. When I say over-billing, I am talking about fraudulent over-billing. When I put in a travel voucher when I go on a trip, I do not consider it fraud if I make a mistake. I am talking about deliberate cooking the books. We have no evidence of that whatsoever. Mr. Mica. OK. Were you aware of the external analysis of costs by the outside consultant who has testified today? Mr. Levitt. There are two different issues here. One is the past billings, which continue and have---- Mr. Mica. But I do not think she dealt with---- Mr. Levitt. Her analysis was about the future and it was the Ogilvy labor structure and do we need the different components of it. Mr. Mica. And when were you aware of her report? Mr. Levitt. We commissioned that report I believe in March or April 2000. But we had concerns about costs for the campaign long before that. Mr. Mica. When was that commissioned, Ms. Twyon? Ms. Twyon. I actually gave the report on the 27th. Late March was the first time I was contacted. I do not know the exact date but it was late March. Mr. Mica. Thank you. When, Mr. Levitt, were you aware of the memorandum dated April 13th from the contract technical representative Mr. Pleffner, who is with you today. When were you first made aware of the memo? I think we have got a copy of it up here. Mr. Levitt. I believe he started writing that memo in March, sometime in late March. Mr. Mica. So you were aware of it before he put it on paper on April 13th? Mr. Levitt. I was aware of the five different issues he raised in that memo. Mr. Mica. And did you agree or disagree with the concerns? Were you concerned? Mr. Levitt. I agreed with all of them. Mr. Mica. You did? Mr. Levitt. I think I differed to some degree with---- Mr. Mica. Who presented the memo of the 13th stating these concerns and problems to the Director? Mr. Levitt. Mr. Pleffner. Mr. Mica. Mr. Pleffner. Mr. Levitt. It went from him, through our legal counsel, through our chief of staff Janet Crist, directly to General McCaffrey. Mr. Mica. So, first, the legal counsel was made aware. Mr. Levitt. That is just the process we would use for something that would include these issues. Mr. Mica. Mr. Pleffner, there are some pretty serious questions raised about billing practices and over-billing in your memo of the 13th. It appears that Ogilvy and Mather had initially provided you and informed you--if you want to read this, it says ``Ogilvy contract manager informed me that the invoice included all labor costs incurred during the period January 4, 1999 through June 30, 1999. Subsequently, several months later, they submitted two additional labor bills for this same period.'' And it said that Ogilvy increased its claimed effort by 27 percent, the number of people working on the contract rose by some 33 percent, and by 33 percent for invoice costs. Is that correct? Mr. Pleffner. Yes, that is correct. Mr. Mica. And I guess you had gotten some information from an anonymous source, where it says ``when a former Ogilvy employee related facts to ONDCP supporting suspicions of fraudulent conduct.'' And you said ``our review of time sheets led to increasing concerns.'' So you and Mr. Levitt were aware of problems before and then you were presented with these new billings. You said many of the time sheets for invoices 14 and 16 were illegible and contained an inordinate number of changes, alterations, almost always increasing the time charged to the ONDCP contract. Is that correct? Mr. Pleffner. That is correct. Mr. Mica. Now we have asked for copies of these time sheets. Mr. Hast, did you get copies of these time sheets that are in question? Mr. Hast. The Office of Special Investigations has not. We did not request them. I do not know whether the ongoing GAO audit has them yet or not. Mr. Mica. OK. I requested copies I think of some pretty specific documents. Have we received copies? Have you produced these yet, Dr. Vereen? Dr. Vereen. If they have been produced, we have sent them. Mr. Mica. Has the Office of Drug Control Policy provided the subcommittee or GAO the time sheets in question? Dr. Vereen. We have seen them. They are being produced. They are in the process of being produced, but I do not know if you have actually received them. Mr. Mica. Well I want these time sheets and I would like them---- Mr. Barr. Will the chairman yield? Mr. Mica. Yes. Mr. Barr. I was having difficulty. You said ONDCP has not received them? Dr. Vereen. No. We have seen them. They have been examined. But the request for them was made and I do not know if they---- Mr. Mica. Well I want these time sheets. I want them turned over to us and I would also like them turned over to the investigators. Dr. Vereen. Sure. Mr. Mica. When information was presented to me initially, if this had just been an anonymous report unsubstantiated about over-billing and irregularities, I might not have paid much attention to it. But with the documentation that we have, with this internal memo--this is an official memo that you prepared, is that right, Mr. Pleffner? Mr. Pleffner. Yes, it is. Mr. Mica. Do you still stand by the comments that you put into this memo? Is there anything incorrect in this memo? Mr. Pleffner. There is nothing incorrect. I still stand by it. Mr. Mica. Mr. Levitt, you testified that you were aware of this even before the 13th, some of these allegations. The next question I would have is, I see handwriting on there, Mr. Hast, has GAO determined whose handwriting it is? It says discuss, need, and then down at the bottom, ``Yes. We need an external audit.'' Mr. Hast. Yes. Mr. Mica. Whose handwriting is it? Mr. Hast. General McCaffrey identified that as his handwriting. Mr. Mica. OK. Dr. Vereen, was an external audit ordered at that point immediately after April 13th and this memo was initialled by the Director? Dr. Vereen. No. An audit was discussed. At the same time, we were making arrangements to change the contracting activity from HHS to another entity and at that time an audit would be done. Mr. Mica. First of all, GAO, were you told that an audit would not be conducted until the end of the contract, that was the term of the contract, and is that 4 years? Mr. Hast. That was not clear. General McCaffrey said he intended to have an audit at some time. Mr. Mica. Mr. Pleffner, did you get a copy of this memo back that said yes, we need an external audit? Mr. Pleffner. Yes, I did. Mr. Mica. And what was done then? Did you order the external audit? Did anyone proceed with an external audit? Mr. Pleffner. No. The decision, as I noted in the memo, was to request an audit once the contracting function was transferred out of HHS. At that time we were discussing the possibility of moving it to the Navy, as we currently are. Mr. Mica. What was your opinion of that procedure of waiting until the end? Did you have any other recommendation? Mr. Pleffner. My preference at the time was for an immediate audit given the irregularities that we had and the allegations that were made. But, again---- Mr. Mica. It also says the contracting officer's initial response was ``their policy was to perform an audit only at the end of the contract--in this case, at the end of 5 years.'' and I see a large handwritten ``No.'' Was that also your opinion? Mr. Pleffner. To wait for 5 years? Mr. Mica. Right. Mr. Pleffner. No, sir, that is not my opinion. Mr. Mica. It looks like again, I am not sure, this is the ONDCP Director's ``No.'' Is that correct, Mr. Hast? Mr. Hast. Yes. Mr. Pleffner. And I do agree with the Director's position that it cannot wait for 5 years. As a matter of fact, I had requested in early March or mid-March that HHS initiate an audit. It was before I prepared this memorandum. Mr. Mica. And what did they say? Mr. Pleffner. The contracting officer informed me that it was HHS policy to conduct audits only after the conclusion of the contract, in this case it would have been 5 years. Mr. Mica. There was also a meeting that some people have referred to of the ONDCP Director with Ms. Seifert, I believe it is, she is with Ogilvy and Mather, and this took place I guess after the production of this memo from you to the Director. Is that correct? Mr. Pleffner. Correct. Mr. Mica. Is anyone familiar with that meeting? Mr. Levitt. Which meeting was this, sir? Mr. Mica. Director McCaffrey had a meeting with Shona Seifert. Mr. Levitt. Seifert, yes. Mr. Mica. Right. And she had a conversation with Alan Levitt and Jill Bartholomew. Is anyone aware of that meeting? Mr. Levitt. Well, I am Alan Levitt. I should be. Yes, she had a meeting with Director McCaffrey I think it was on June 5th. Is that what you are talking about? Mr. Mica. Right. Mr. Levitt. The meeting was on June 5th. That was after a meeting, a long briefing on another topic completely. And what had happened before then is Ogilvy had responded to the Jane Twyon report and gave their view of it and did an analysis for us. Our management team---- Mr. Mica. You stayed in the whole meeting? Mr. Levitt. I was not in the meeting with the Director. Mr. Mica. You were not in the meeting but you are aware---- Mr. Levitt. No. Afterwards, she came down and told me that because of her briefing the Director felt more comfortable with some of the labor issues--not billing--some of the labor issues that were being discussed in Jane Twyon's report. Mr. Mica. Did you say uncomfortable or comfortable? Mr. Levitt. A little more comfortable. Mr. Mica. More comfortable. Mr. Levitt. Right. Mr. Mica. And what was communicated then to you, Mr. Pleffner? Mr. Pleffner. On June 6th, I met with Alan Levitt and Ms. Bartholomew at which time they informed me of the visit they had with Ms. Seifert the day before. Mr. Mica. I am sorry, can you repeat that? For some reason, this seems to be coming across garbled. Mr. Pleffner. I met with Alan Levitt and Jill Bartholomew on June 6th, the day following the briefing and the meeting between---- Mr. Mica. The meeting was on the 5th, right? Mr. Pleffner. Correct. On the morning of the 6th, Mr. Levitt and Ms. Bartholomew informed me of the visit and told me that Ms. Seifert had told them the Director had no problem with the contract costs and that Ogilvy would continue being the advertising contractor for ONDCP. Mr. Mica. That is different than what Mr. Levitt said. Mr. Levitt. I do not recall that. What I recall is she said the Director felt more comfortable because of their report. Now, the Director was not in the meeting when she gave her report. That was reported to him by the management team chaired by Janet Crist. Mr. Mica. We have got a vote, a couple of votes. I am a little bit concerned about the status of management of this whole program. We are moving now from HHS you said to the Navy. The only audit we have being conducted at this point is by GAO and that has been instituted really since some of this has come to the attention of the subcommittee. Is that correct, Mr. Hast? Mr. Hast. Yes. Mr. Mica. Dr. Vereen, where are we in the status of who is in charge of the contract? Dr. Vereen. We tried to evaluate several other sources in the Federal Government. Our first choice at this point is the Navy and we are meeting with them I believe on Monday to try to finalize that contracting relationship so we can switch it over. That will start an audit and we will proceed from there. Mr. Barr. Excuse me. Mr. Chairman. Mr. Mica. Yes? Mr. Barr. Would you yield for just a moment please? Mr. Mica. Real quickly. Go ahead. Mr. Barr. Are you saying, Dr. Vereen, that you still have not made a final decision on changing over to the Navy? Dr. Vereen. Well, it is not just our decision. We had to go and look for appropriate contracting agency. We had started looking earlier in the year, predating this memo, and we have decided upon the Navy as the best choice for us. We are providing them with information and doing a final meeting I believe on Monday so that transfer can be finalized. Mr. Mica. It appears that the contract administration is in disarray. We went to HHS and asked them simple questions; they do not have a clue, it is strictly a ``que pasa?'' situation. This is a very expensive contract. We want it to succeed. So we need somebody in charge. We cannot have an audit at the end of a 4-year period when we have these reports. And this is not an anonymous report. Mr. Levitt, who is in charge of the program, and Mr. Pleffner, the financial officer, knew about problems with the contract. And we did not have an audit in place until this was raised to the level of GAO investigators and the subcommittee. So there is something dramatically wrong with the administration and financial management. I do not know if there is any criminal misconduct here by anybody. But I want to see the time sheets and I want to see them in a timely fashion. And I want GAO to continue reviewing this matter. Our subcommittee is not an investigative staff at the level of these folks. I think you all are former Secret Service agents, is that right? Mr. Hast. Yes, sir. We are all retired Secret Service, FBI, or from other investigative agencies. Mr. Mica. So it is not a bunch of people that fell off the wagon during pumpkin season or something. We have competent people whose responsibility is as independent investigators of the General Accounting Office of the U.S. Government. So I want this pursued. If someone is ripping off the taxpayers, I want that pursued. I want those documents. And they can put on a media campaign against me, but this is not political, this is not anything, it is my oversight responsibility and I take it very seriously. I want the program to succeed. So that is the end of my questions at this point. Dr. Vereen, I want you to deliver the message I am not playing games. I just want to make certain that this thing that we have created--we created it, we authorized it, financed it, you administer it--that it is properly administered. Short and simple. I apologize to the minority for taking longer, I wanted to give you a shot. But maybe we should go ahead and vote and come back and I will recognize you immediately. We will stand in recess until 5 minutes after the last vote. [Recess.] Mr. Mica. I would like to call the Subcommittee on Criminal Justice, Drug Policy, and Human Resources back to order. I have additional questions which I will submit in writing, I do not know if we will do a second round today, to the drug czar's office, ONDCP, and some of the others who have testified today. Let me yield at this time to the ranking member, the gentlelady from Hawaii, Mrs. Mink. Mrs. Mink. Thank you very much, Mr. Chairman. First, I would like to express my apologies and concern to Ms. Jane Twyon for the release of her confidential memorandum to ONDCP and consequent embarrassment that such a release has caused her. I just am very, very sorry. I do not know what else the subcommittee can do to ease the situation and to respond to your concerns with respect to your professional integrity. So I certainly am very sensitive to those kinds of abrogations of our release of information that could cause someone harm. Ms. Twyon. Thank you. Mrs. Mink. My question to you, Ms. Twyon, is when were you asked to do this particular review of the Ogilvy contract? Ms. Twyon. I was contacted in late March and then I have a contract with the Ad Council who actually hired me at the request of ONDCP on April 4th. Mrs. Mink. When did the Ad Council get the request, if you got the request in March? Ms. Twyon. I think it was just a short period of time there, so say at the end of March. Mrs. Mink. And so who compensated you for this report? Ms. Twyon. I am paid through the Ad Council who hired me. Mrs. Mink. And the Ad Council was paid by the ONDCP people presumably? Ms. Twyon. Yes. Mrs. Mink. And what was your specific charge when you were asked to undertake this investigation? Was it fraud? Ms. Twyon. No. Mrs. Mink. At any time were you instructed to look at this particular situation from a fraud perspective? Ms. Twyon. No. Mrs. Mink. Was there any suggestion that there was deliberate tampering with work sheets and over-billing and all the rest of what we have heard today? Ms. Twyon. No. That was not really part of my assignment. Mrs. Mink. Did you investigate that as any part of your report? Ms. Twyon. No. That area is not part of my assignment. Mrs. Mink. So then your report should not be cited in any way as legitimizing any of these communications to this subcommittee or to others that there is evidence of fraudulent conduct? Ms. Twyon. That is right. Mrs. Mink. Now in your examination, did you come across anything that was fraudulent in your estimation? Ms. Twyon. No, I did not. Mrs. Mink. So that as far as you are concerned the only inquiry that you investigated and reported on was the comparison of the charges that Ogilvy made to the Government as they related to industry-wide charges for the same type of work. Is that correct? Ms. Twyon. Correct. Mrs. Mink. OK. So the agency then, from what we have heard from Mr. Levitt, became concerned about the submission of these billing sheets and accounting from Ogilvy back in September 1999. Is that correct, Mr. Levitt? Mr. Levitt. Right. Correct. Mrs. Mink. And what did you do when you found out that they were not billing you at the appropriate intervals and had waited 9 months to submit their first comprehensive billing? Mr. Levitt. Our project officer, Mr. Pleffner could probably better answer that. He had been in conversation with Ogilvy for I think some months before. Mrs. Mink. Mr. Pleffner, would you answer that question. Mr. Pleffner. Yes. After receipt of their first labor invoice---- Mrs. Mink. Which was when, what date? Mr. Pleffner. That was mid-September 1999. Mrs. Mink. Was that unusual for a contractor to wait 9 months into their contract to submit their first pay sheets? Mr. Pleffner. Extremely unusual. Mrs. Mink. And what did you do about it? Mr. Pleffner. There is really not much you can do to force them---- Mrs. Mink. Did you contact them and say what is going on here, why are you so late? Mr. Pleffner. I had been in communication with the Ogilvy financial and contracting folks since February 1999 encouraging them to bill for their labor. Mrs. Mink. Now is there any evidence to show that the lateness was due to their transition problems of one contractor to another? Mr. Pleffner. I have no evidence of that. Mrs. Mink. No evidence of that. Mr. Pleffner. No. Mrs. Mink. So did they give you any reason to believe that they understood the gravity of their situation and that they were going to take care of it promptly? Mr. Pleffner. I really cannot speak to---- Mrs. Mink. Well, were you concerned that they did not give you any response or indication that they were going to take care of this delinquency? Mr. Pleffner. Extremely concerned. Again, I had numerous discussions with not only the financial and contracting folks but the project director. Mrs. Mink. Was it your decision then to withhold payment when they finally did submit their vouchers for payment? Mr. Pleffner. It was my recommendation to the contracting officer, yes. Mrs. Mink. And the contracting officer is who? Mr. Pleffner. Janet Miller with the Health and Human Services Program Support Center. Mrs. Mink. And she then followed up on your recommendation and withheld payment. Is that correct? Mr. Pleffner. Correct. Mrs. Mink. And this $13, $14, $18 million, whatever the figure is, that was withheld constituted what account for Ogilvy? Was it their money that they had spent themselves as an agency? Was it advertising money? Was it their operational money? Is it part of their contract proceeds that was withheld? Mr. Pleffner. The $13.4 million to date that I have recommended for withhold are costs that Ogilvy states they have incurred. Mrs. Mink. So by your withholding it, they are hurting because they are not getting reimbursed for out of pocket costs. Is that a correct general conclusion? Mr. Pleffner. Out of pocket labor. Yes, ma'am. Mrs. Mink. Now when was the first withholding? Mr. Pleffner. The first withholding was roughly August- September 1999. Mrs. Mink. And you have continued to withhold additional sums till today it is about $14 million. Is that correct? Mr. Pleffner. Correct. Mrs. Mink. Is there any indication that you are about to release any of this money because they have performed to your satisfaction in terms of giving you the tear sheets or whatever it is that is missing in the various billings that they have sent you? Mr. Pleffner. Obviously, upon receipt of supporting documentation, any withholds that are determined reasonable, yes, release would---- Mrs. Mink. So how much of their out of pocket costs since they became the contractor in this instance have actually been released and paid to Ogilvy? I want to get a comparison. You have withheld $13-$14 million. What have they actually been paid? Mr. Pleffner. To date, they have billed for approximately $187 million. Mrs. Mink. But that is moneys they have spent in the media buys. I am talking about out of pocket operational expenses for Ogilvy. Mr. Pleffner. For the labor to date, they have billed roughly $23 million. I have recommended withhold of approximately $7.8 million. Media purchases--you were not interested in the media. Out of pocket or production expenses I believe they have invoiced for roughly $6-$7 million. I have recommended withhold of a little over $1 million. Mrs. Mink. So, if you add that up, it is about $8 million that you are currently withholding? Mr. Pleffner. Close to $9 million for labor and---- Mrs. Mink. Now at any time that you made those requests for withholding, did anyone else step in and intervene and suggest that you were being overly strict and asked you not to withhold these moneys? Mr. Pleffner. Yes. Mrs. Mink. Who? Mr. Pleffner. The contracting officer at Health and Human Services. Mrs. Mink. Asked you to be more understanding? And did you then comply? Mr. Pleffner. The contracting officer felt that I was over zealous in the request for supporting documentation, yes. Mrs. Mink. So who prevailed, you or the HHS? Mr. Pleffner. To the best of my knowledge, all but a couple of the recommended withholds the contractor has in fact withheld. Mrs. Mink. Now, under the law, who has the responsibility to make those recommendations with respect to payment? Is it you or is it the contracting officer in HHS? Mr. Pleffner. I have been appointed by the contracting officer as project officer. I make the recommendations, the contracting officer makes the final decision. Mrs. Mink. So actually we should have another seat here for them to respond to this question since they have the ultimate decision. Mr. Pleffner. They would be better suited to respond to their actions, yes. Mrs. Mink. Has anyone in a supervisory capacity over your work at any time suggested that you were being over zealous? Mr. Pleffner. No. Mrs. Mink. Did anyone attempt to interfere in the exercise of your due diligence requirements with respect to this account within the agency? Mr. Pleffner. No one has interfered with it at ONDCP. Mrs. Mink. Now with respect to the tasking, this is to Mr. Hast at the Office of Special Investigations, GAO, with respect to the task that you were assigned to investigate, who made that request? Is it in writing? What were the dimensions of that request? What was your mission? What prompted it? I think that is important to know in the record. Mr. Hast. Let me start with what prompted it. In the GAO audit that has been mentioned at this hearing---- Mrs. Mink. Well, first, who requested the GAO audit? Mr. Hast. I think that was Chairman Kolbe of the Subcommittee on Treasury, Postal, and General Government. Mrs. Mink. Not this committee? Mr. Hast. Not this committee. Mrs. Mink. I was just told by counsel it is not an audit, it is a management review. Is there a difference? Mr. Hast. I am sure there is but I do not think I could explain it. Mrs. Mink. On the one hand, the Director of this agency is being called down for not having an audit, so we had better have a definition of what was actually done by the GAO. Mr. Hast. I would have to leave it that it was a management review. But I do not think I can go a lot deeper than that. Mrs. Mink. What is the difference? Well, you can submit that response. I am told there has not been a financial audit. Maybe Mr. Vereen can answer that question. Dr. Vereen. It is a general audit of the media campaign that was requested by Congressman Kolbe. And there were some conclusions that were drawn about how well we were administering the campaign. Mrs. Mink. Was it a financial audit or a program audit? Dr. Vereen. No. Mr. Hast. Program audit. Mrs. Mink. Right. OK. All right, Mr. Hast, describe what a special investigation is in the GAO. Is it a criminal investigation division of the GAO? Mr. Hast. Yes. Mrs. Mink. You wear badges and you walk around with guns and so forth? Mr. Hast. No guns, Congresswoman. Mrs. Mink. No guns. OK. Mr. Hast. But we do have badges. The Office of Special Investigations is a small unit in GAO, approximately 25 criminal investigators, all of them senior criminal investigators that have been hired from other investigative agencies such as the Secret Service, the FBI, IRS, and various IG offices. When there are allegations of fraud or criminality we are asked by the Congress to conduct investigations into these allegations. The other way we get into investigations is how we got into this one. When our audit teams or management review teams are out in agencies, if they develop allegations of fraud or criminality, they bring our office in. That is what happened in this case. Mrs. Mink. So who brought you in, let's try to be specific? Mr. Hast. The General Government Division team that was doing the management review had allegations brought to them by individuals they talked to that wanted to remain anonymous at this time. We interviewed those individuals and not only did we find their statements credible, when we reviewed our files we had another anonymous tip that had come in on the GAO FraudNet, our hotline, that kind of parallelled the allegations that were here. Once we determined that these were credible, we went to this subcommittee because of its oversight responsibilities and presented the information and were requested by Chairman Mica to conduct an investigation. Mrs. Mink. What was the scope of your investigation? Was it based upon the anonymous tips and the hotline? Mr. Hast. It was to determine what ONDCP did when they had allegations of fraud. Mrs. Mink. Why were you not charged to look at the fraud since we had two tips? Mr. Hast. We actually are looking at the fraud. We went back to Chairman Kolbe and presented our findings, the information to him, since it started with his committee, and our General Government Division is now conducting a financial audit to determine whether these allegations of fraud have merit. And if they do, our office will continue its criminal investigation. Mrs. Mink. But you were never charged with conducting an investigation to see whether there was any fraud? Mr. Hast. No. Mrs. Mink. So that is not the reason for your presence here today? Mr. Hast. That is correct. Mrs. Mink. And your charge then was what? Mr. Hast. To determine what actions were taken to react to the allegations that ONDCP received. Mrs. Mink. So we are not here today to make any determination with reference to whether the hotline tips and the informers and so forth brought in credible accusations that could end up in charges being brought against certain individuals for fraud. We are not here doing that today, are we? Mr. Hast. We are not. No, ma'am. Mrs. Mink. I think that should be made perfectly clear, that the limits of this investigation only go to the agency response. And in that connection, Mr. Chairman, I want to note that it seems to me from the record, the dates, the concerns that have been expressed by the responsible staff people in the ONDCP indicate that they acted promptly and that the steps they had taken in hiring a consultant and in making all of the internal reviews that they made were quite appropriate. So I do not understand why we are here today and why the GAO has not been given precise instructions by this committee to investigate the fraud and report back to us, because that is of course our concern. I hope that is the outcome. With respect to the time sheets, I understand that the agency has a copy, that Ogilvy has the originals and that the agency does in fact have a copy of these time sheets. Is that correct, anybody from the agency? Mr. Pleffner. That is correct. I have copies. Mrs. Mink. That is correct. So if the committee makes a request for a copy of these time sheets, that is not a problem. Is that a problem? Is that an invasion of privacy? Are we then going to be charged with having looked at records that we should not have looked at? Dr. Vereen. The request for those time sheets came in late yesterday. We are prepared to turn them over. They do contain some proprietary information related to Ogilvy, so some things we do have to be careful about. Mrs. Mink. Are you working with your legal counsel with respect to what can be turned over and what cannot? Dr. Vereen. Yes. They are actually working on that as we speak. The request came in yesterday. Mrs. Mink. When do you expect those will be delivered to the subcommittee for our examination? Dr. Vereen. We suspect in just a couple of days. Mrs. Mink. We may be out of here in a couple of days. Dr. Vereen. They may be on the way. Mrs. Mink. Thank you. Thank you very much, Mr. Chairman. Mr. Mica. Just to respond to the gentlelady. We have requested these and I think it would be appropriate, we can discuss this later, to turn them over to GAO. We are not criminal investigators and I do not want to infer that there is even---- Mrs. Mink. I understood that the GAO has it. Mr. Mica. GAO does not have it. Mr. Hast. We do not have it. Mr. Mica. So, again, there are several parts to this. We are concentrating on management administration today. Mrs. Mink. Mr. Chairman, I would be happy not to have them then and have it turned over to the GAO. Mr. Mica. Well, we are going to get them. I requested them. Mrs. Mink. Oh, you want them. All right. Mr. Mica. We have been joined by the chairman of the full International Relations Committee who is also a member of our subcommittee. If I may, I would like to recognize him because I think he is going to have to leave to go and chair another meeting. You are recognized for an opening statement or whatever. Mr. Gilman. Thank you, Mr. Chairman. I regret that I could not be here earlier. We were conducting a hearing and I have to go on to another one. I want to thank you, Mr. Mica, for calling this important and timely hearing on our Nation's Anti- Drug Youth Media Campaign and the expenditure of taxpayer funds in this very worthy and important effort to keep our youngsters off of illicit drugs. And as you know, we have worked with you consistently and for a long period of time in our war against drugs, both domestically and internationally. The 5 year $1 billion educational campaign for our young people is an important tool in our fight against teen drug use. I think the concerns expressed by some on alleged excessive billing and possible mismanagement of some of these precious media funds that are hard to come by, especially when the lives of our young people are at stake, is certainly worthy of a very careful review and analysis. These funds are intended to help keep our young people off of illicit drugs here at home. These dollars need to be used wisely, judiciously since we have cut both our source nation and transit drug-fighting dollars in recent years. In turn, we have seen more and more illicit drugs entering our Nation from abroad, such as deadly cocaine and the heroin from Colombia. Only now is the administration about to help Colombia. It may be too little, too late. We hope not. Alleged ONDCP print media costs of 238 percent above the industry average, along with ad buying and placement fees far above an industry average of 3.5 percent, and local broadcast media costs of 179 percent above industry average, if true, certainly require response from ONDCP and those managing this important anti-drug media program. We, the American taxpayers, and the parents of our young people are entitled to an accountability and transparency in this important media effort. We certainly need to see an independent, unbiased, external audit of these funds now in light of these many concerns, as called for by General McCaffrey back in I guess it was April when that letter was first presented to him and not after 5 years and the contract expires. We must effect change before, not after, the 5-year timeframe. I hope we can get assurances today that such an external audit is in fact going to be done by the executive branch. And I understand GAO is already involved in doing some auditing. There is already far too much unfounded skepticism about our war on drugs and whether or not we can win or even do something effective about it. I hope the media campaign we intended to help to win our war on illicit drugs here at home and keep our kids off illicit substances does not prove to be yet another unfortunate cause for despair and skepticism. And we hope and trust that today's hearing can alleviate some of these concerns. So I look forward to reviewing the testimony of today's witnesses. Getting an honest assessment of the media campaign's management, and the results in advancing our vital national interest of keeping our young people off these deadly illicit substances are two goals I am sure we can all agree upon. Mr. Chairman, with your permission, just one question. General McCaffrey wisely noted after reading your April 13th memo that we need an external audit, as depicted on that display there. Do you still share that view, Mr. Pleffner? And why has there not been an audit of that nature? Mr. Pleffner. Yes, I do share the General's view that there needs to be an external audit. Mr. Gilman. And why was that audit not conducted? Mr. Pleffner. It was decided early this year--HHS' policy was to wait until the end of the contract--and it was decided by ONDCP to wait until after transfer of the contracting function to another Government agency. At that point an audit would be requested. Dr. Vereen. To clarify, sir. The rules regarding HHS and an audit was that an audit would be done at the end of the contract. We did not want to wait that long. So we took steps predating the memo to change the contracting activity to some other entity. And at this point, we are very close to changing that contract to the Navy. When that transfer takes place, an audit will be requested. Mr. Gilman. Why do you have to wait till the end of the contract to conduct an audit if you see some problems? Dr. Vereen. Well, the problems that were identified we have known about for more than a year. We have taken steps to protect the public purse by withholding payment on bills sent to us---- Mr. Gilman. You are withholding payments. Why isn't an audit appropriate then? Dr. Vereen. Well, an audit is appropriate. Mr. Pleffner. We believe an audit is appropriate. Dr. Vereen. Yes. We have taken steps. Mr. Pleffner. The contracting officer stated that HHS had a policy that an interim audit would not be conducted, that we would have to wait until the conclusion of the contract. Mr. Barr. Excuse me. Would the chairman yield? Mr. Gilman. I am pleased to yield to the gentleman. Mr. Barr. You all are I think confusing us up here. Is it a policy or was it a specific term of the contract that no audit would be performed before the expiration of the 5-year contract? You all have used different terms and the legal significance of them is significant. Mr. Pleffner. The contracting officer sent me an e-mail, after I requested that an interim audit be performed, she sent me an e-mail telling me that HHS policy was to wait until the conclusion of a contract, the end of the contract before an audit could be performed. Mr. Barr. So it was not that there was any legal prohibition on you all demanding that an audit be performed, which would be the appropriate way to protect the taxpayers, you are saying that HHS said we are just not going to do it because it goes against our policy. Mr. Pleffner. Correct. Now I must add that HHS would have performed an audit---- Mr. Barr. If they got more money. Mr. Pleffner. If they got more money, yes, sir. Mr. Barr. That is big of them. I yield back. Mr. Gilman. Thank you. And thank you for your comments, Mr. Barr. HHS was prepared to do an audit, all they wanted from ONDCP is to get paid for it. So there was no obstruction, is that correct, in doing the audit at any time? Is that right? Mr. Pleffner. Yes, sir. Mr. Gilman. I cannot understand then why an external audit was not ordered right after General McCaffrey suggested that. There is no explanation apparently that is logical, unless you have another explanation for it. Mr. Pleffner. I would like to add that to date ONDCP had paid HHS roughly $1 million in fees. We believed, and the MOU that we have with HHS states, all contract administration functions would be performed. One function is contract audits. We believed that the fees that we had already paid them should have covered the audit. Mr. Gilman. Did anyone pursue that with them and say, look, we have paid this money, why isn't an audit being conducted? Mr. Pleffner. Beyond the communications I had with HHS back in March 2000, it was at that point we decided that we were going to be moving the contracting function, we decided not to pursue the action. Mr. Gilman. Not to pursue an audit? Mr. Pleffner. Correct, through HHS. Mr. Gilman. Why? Mr. Pleffner. Again, they were requesting additional compensation. Mr. Gilman. But you felt they had been given the compensation, is that correct? Mr. Pleffner. Correct. Mr. Gilman. So did anyone try to resolve that issue, that you had paid them and they were not doing an audit. Did anyone try to resolve that? Did you ask General McCaffrey to resolve that issue? Mr. Pleffner. No, sir, I did not. Mr. Gilman. Thank you. Thank you, Mr. Chairman. Mr. Mica. I thank the gentleman from New York. I am pleased to recognize the vice chairman of our subcommittee, Mr. Barr, the gentleman from Georgia. Mr. Barr. Thank you. Let me followup on the very insightful questions of Chairman Gilman just to make sure for the record that we understand what is going on here. In the exhibit over here, at the bottom of page 2, there is a handwritten notation by Director McCaffrey which is to the right of the following sentence, ``The contracting office's initial response was that their policy was to perform an audit only at the end of the contract--in this case, at the end of 5 years.'' The notation off to the side is ``No.'' Not just no, but ``No!'' with exclamation point. That to me indicates, and does it indicate the same thing to you, Mr. Pleffner, as the author of this document, that Director McCaffrey was saying no, we are not going to wait until the end of the end of the contract? Mr. Pleffner. That was my feeling, he did not want to wait. Mr. Barr. And then further on down, it says ``Since we are considering changing contracting offices''--which you all are still apparently considering several months later, this is 6 months ago--``(from HHS to Navy--blue folder is on its way)''-- what is a blue folder on its way? Mr. Pleffner. That is the mechanism in which to forward documents up through the chain of command. Mr. Barr. Did the blue folder ever get there? Mr. Pleffner. Yes, sir. Mr. Barr. But the process still has not taken place, changing this responsibility from HHS to Navy? Mr. Pleffner. The Director has approved the change to the Navy. Mr. Barr. But it has not actually taken place. I thought that was what Dr. Vereen testified. Mr. Pleffner. We are currently negotiating costs and terms of the arrangement, the MOU. Mr. Barr. So the authorization has been given but the details have not been worked out. Mr. Pleffner. The final details, correct. Mr. Barr. OK. Then it says, ``we decided to wait before initiating an audit.'' And then down at the bottom of the page there is a notation, as testified to by GAO this is General McCaffrey's notation, ``Yes. We need an external audit.'' To me, Mr. Pleffner, and I would like to see whether you agree with this, that to me clearly indicates when you put those two notations together that General McCaffrey was saying no, we are not going to wait for 5 years to conduct an audit, and we need one immediately. Mr. Pleffner. Yes, I agree. Mr. Barr. But again, as we have learned with this administration that you have to ask, what does ``immediate'' mean to this administration, do you know? What does immediate mean to you as a public servant and somebody who has written a very lucid and straightforward memo here? Mr. Pleffner. Well, I believe---- Mr. Levitt. Sir, as program manager, can I just make a comment here? Mr. Barr. I am sorry. I want Mr. Pleffner to explain to me what immediate means to him. Mr. Pleffner. Immediately meant to me immediately after transfer of the contracts out of HHS. Mr. Barr. In other words, you were seeing something that concerned you here, and that is very possibly, to put it mildly, significant waste of taxpayer money and significant activity by Ogilvy that raised very serious questions in your mind about billing practices. Is that correct? Mr. Pleffner. Correct. Mr. Barr. And based on that, as a public servant, you recommended to the Director that an immediate audit be performed. Is that correct? Mr. Pleffner. That is correct. Mr. Barr. That immediate audit has not been performed. Is that a fact? Mr. Pleffner. That is a fact. Mr. Barr. OK. That is why we are concerned up here. If I could, Ms. Twyon, you testified earlier I think in response to a question by the gentlelady from Hawaii that you have a contract or you contracted with the Ad Council. Ms. Twyon. Correct. Mr. Barr. And that is the basis on which your report was performed or drafted? Ms. Twyon. Yes. Mr. Barr. And were you compensated for that service? Ms. Twyon. Yes. Mr. Barr. How much? Approximately. Ms. Twyon. Let me look because I do not know the answer to that. Let's see if it is in here. I have $15,000. Mr. Barr. OK. And that $15,000 more or less, I am not trying to pin you down to a specific amount, was received by you from the Ad Council pursuant to moneys that they received from ONDCP? Ms. Twyon. Yes. Mr. Barr. So this report was paid for by the taxpayers of this country? Ms. Twyon. Yes. I assume so. Mr. Barr. OK. Your document is not a classified document, is it? Ms. Twyon. You are asking me something I do not know how to answer. It was a confidential document. I do not know what classified means here, so I do not know how to answer you. Mr. Barr. OK. I have a copy of it here and I would ask unanimous consent to have it included in the record. Mr. Mica. Without objection, so ordered. It is now a public document. Mr. Barr. Do you have a copy of it? Ms. Twyon. Yes, I do. Mr. Barr. Do you see any markings on there that indicate that it is a classified document or that any portion of it is classified? Ms. Twyon. No, it is my copy. Mr. Barr. OK. Neither does our copy. On page 19, under your summary it states that ``The savings range of $8.5 to $14.8 million is reasonable to expect. The agency can always add to staff to help the ONDCP better perform and at the same time increase the agency revenue. The point is not in justifying the staffing, but in finding ways to realign the manpower to industry standards.'' You do not disavow that finding, do you? You stand by it? Ms. Twyon. No, not at all. I support that. Mr. Barr. OK. Thank you. Continuing on with your report of April 13th, Mr. Pleffner, in the middle of page 2 you state, ``He stated that last summer, Bill Gray, president of Ogilvy New York, held a meeting with the most senior account staff and complained about the lack of revenue with this contract.'' And a little bit further down you seem to indicate that there might be a connection between the senior official at Ogilvy, Mr. Gray, complaining about the lack of money coming in on the contract and then additional time sheets and altered time sheets coming back in. Is that correct? Mr. Pleffner. That is correct. Mr. Barr. Further on down in the next paragraph, the last sentence reads: ``The fact that an outside source, particularly an executive level employee, corroborates these concerns, prompts me to formally document these issues in this communication.'' Did you believe at that time, and do you believe as you sit here today, that there was credible evidence to substantiate your concerns as related to the Director of ONDCP? Did you feel that there was a substantial basis and credible evidence on which to base your conclusions that there were questions here and that there ought to be an immediate audit? Mr. Pleffner. At that time, yes, I did believe. Mr. Barr. Do you still believe that there is sufficient evidence, credible evidence on which to base that conclusion? Mr. Pleffner. Of billing irregularities, the Ogilvy practices associated with financial and contract management, yes, I still believe it is necessary. Mr. Barr. If I could, Mr. Hast, turn to your testimony today, a copy of which I believe, Mr. Chairman, has been placed in the record. One thing that caught my attention, on the bottom of page 2, you say, ``However, we found that an official of another ONDCP contractor, Fleishman-Hillard, spent 3 to 4 hours advising Director McCaffrey on this matter. This time was not charged to the ONDCP contract. We were told that this time was considered a personal favor to Director McCaffrey.'' Would that be covered by ethics and be required to be reported? In other words, if an outside contractor provides services and does not charge them, that would be considered---- Mr. Hast. I am not enough of an expert on ethics to know. We were reporting the facts. But I do not know what the ethics rules would be on that. Mr. Barr. Dr. Vereen, are you aware of whether or not that has been reported? Dr. Vereen. No, I am not. Mr. Barr. OK. Are there any lawyers from DEA here with you all today? Dr. Vereen. Lawyers from ONDCP, yes, I believe there is one. Mr. Barr. OK. Would you consult with him and ask if that has been reported under ethics. Dr. Vereen. Not to his knowledge. Mr. Barr. OK. Would you suggest to him that the Director may want to check into that. Dr. Vereen. Noted. Mr. Barr. Mr. Hast, I would like to draw your attention for a couple of minutes here to what has happened after the April 13th memo. We have some concerns that are based on credible evidence that there are serious discrepancies in billing practices and costs. But nothing happens. There seems to be some dispute here as to the position of the head of ONDCP with regard to whether or not the contract would continue, whether or not costs are an issue or not an issue. You deal with some of this in your complete testimony on pages 4, 5, and 6. The conclusion, at least the partial conclusion that you reach on page 6, is that ``Ms. Seifert stated that sometime after the May 23, 2000, meeting, Ogilvy received another letter from Ms. Crist, which included a form to be filled out in order to have Ogilvy explain its labor costs.'' But thereafter, there were additional meetings that you document. For example, on page 8, you say ``Ms. Seifert told us that on June 5, 2000, she had a private meeting with Director McCaffrey for approximately 20 minutes. She stated that she had met with Director McCaffrey alone approximately 4 to 5 times in the past 2 years and that on other occasions she had met with Director McCaffrey when someone else was present.'' Then continuing on down on your page 8, in the middle there is a paragraph that reads, ``Mr. Pleffner told us that after Ms. Seifert left the June 5, 2000, meeting with General McCaffrey, she met with Mr. Levitt and Ms. Bartholomew where, according to them, she announced that Director McCaffrey was satisfied with the contract costs and that the Ogilvy contract would continue. Mr. Levitt and Ms. Bartholomew deny that this conversation occurred. Ms. Seifert denies making this statement.'' What was the basis on which you included these references in here, and do you believe that those conversations took place? Mr. Hast. I believe when we interviewed Mr. Levitt and Ms. Bartholomew we were under the impression that when Ms. Seifert came up she said that the General was satisfied with the billing and no audit would take place, and they said she did not say that. I think they were technically correct that she did not come out and say no audit would take place. What she said was the General was satisfied with the price. And I think that is what Mr. Pleffner and Mr. Levitt---- Mr. Levitt. Congressman Barr, I said nothing whatsoever about any audit. Mr. Barr. Excuse me just a minute. And that is precisely what your testimony says. It does not say that somebody said that the audit would not be performed. It simply says, as you have just testified orally, that Ms. Seifert announced that Director McCaffrey was satisfied with the contract costs and that the Ogilvy contract would continue. Was that corroborated by information or answers or testimony given to you by Mr. Pleffner? Mr. Hast. Yes. Mr. Barr. OK, Mr. Levitt? Mr. Levitt. As I said before, Ms. Seifert told me that in the meeting that she had with General McCaffrey he expressed more comfort with the issues of the labor, not billing, but the labor, the Jane Twyon report. She said nothing whatsoever about an audit. There was no discussion of an audit. Mr. Barr. Mr. Pleffner, you authored the original memo here on April 13th. It is my impression that you testified that Mr. Levitt said that costs were not an issue based on the results of that meeting. Is that correct? Mr. Pleffner. That is correct. Mr. Barr. This is why, Mr. Chairman, there are so many questions about this. We have a memo that is based on very clear and convincing evidence, credible evidence that an audit should take place. Then we have some meetings that appear unusual, at least according to standards of previous practice in that there were no witnesses there. And then we have essentially an announcement that the contract costs were OK, Mr. McCaffrey was satisfied with them, and the contract would continue. And here we come 4 months later and still no audit has been taken. This stretches the meaning of immediate beyond even I think the standards laid down by the head of this administration. Mr. Mica. Will the gentleman yield? Mr. Barr. Yes. Mr. Mica. One of the things that concerns me is the report by Ms. Twyon that highlights the costs for this program. She identified, and she is sort of an expert consultant to come in and look at that, ONDCP costs is 179 percent above industry average. Is that correct? Ms. Twyon. I have to find the page that you are---- Mr. Mica. And then a commission rate of 14 percent versus industry rate of 3.5 percent. Mr. Cummings. Mr. Chairman, she was trying to answer the question. I just think it would be beneficial to all of us---- Mr. Mica. I am just trying to help identify the page. Ms. Twyon. Yes. It is just that I have a lot of numbers in the report. So if you will just give me a minute, I will be able to answer you more clearly, I can try to answer you more clearly. Mr. Mica. I can have a staff person bring this down. Ms. Twyon. No, I have it. I have it right here. Mr. Mica. Our vice chairman was making some points and I just wanted to confirm that this is what you found in your examination and were paid for. Ms. Twyon. The answer is what you are reading there is what I found based upon the information that I was given, and I was given specific information from Mr. Pleffner of what I was going to look at, and the assumptions which are listed in my report that I made. Mr. Mica. That is all I wanted to confirm. Thank you. I will yield back to the gentleman. Mr. Barr. Thank you. Mr. Hast, have you all interviewed Mr. Bill Gray, president of Ogilvy New York? Mr. Hast. We have not yet. Mr. Barr. Do you have plans to? Mr. Hast. I believe that we are going to wait till we see how the financial audit goes. And if they determine there are suspicions of fraud, we will be back to interview people at Ogilvy about this. Mr. Barr. That might be some period of time it appears. Mr. Hast. It could be, yes. Mr. Barr. Do you believe there might be a case to be made based on just the information contained in Mr. Pleffner's memo to interview Mr. Gray before some indefinite point in the future? Mr. Hast. Yes, I think there could be a case made for us to do that. Mr. Barr. Would you be in a position to take such steps? Mr. Hast. Absolutely. Mr. Barr. OK, if you would please. Thank you. I yield back. Mr. Mica. I thank the gentleman. I would like to recognize the gentleman from Maryland, Mr. Cummings. Mr. Cummings. Thank you very much, Mr. Chairman. Mr. Hast, I am just curious. Something just happened that I found very interesting. At first, I thought you had indicated that you were going to go through a certain procedure to wait for certain documents before the interview was conducted with Mr. Gray. Then when Mr. Barr suggested that you do it, did you say you were going to do it now? I am just trying to figure out what happened. Mr. Hast. Yes. I believe that we were going to wait before we conducted any more interviews until we see how the audit came out. But since this question was raised and it can be a yes or no answer from Mr. Gray as to whether--the only thing we would interview him about is did he have a meeting with his executives where he told them that they were not making enough money on this contract, and did he give them any instructions. I think we could do a very simple interview and pin that down. Mr. Cummings. I understand that and that makes a lot of sense. Can you tell me why it is that your plan was to wait for the audit? Why did you want to do that before possibly interviewing Mr. Gray? I am just putting aside what you just said and am now going on to the original plan? Mr. Hast. The original plan would be if the audit completely exonerated Ogilvy, and the audit found absolutely nothing irregular with the billing sheets, and all of the people that we interviewed whose sheets have been changed had answers that absolutely made sense and there was no suspicion of fraud, there would not really be a necessity to do it. Mr. Cummings. I see. Ms. Twyon, first of all, I do not know whether anybody did it, but around here we are very concerned about our reputations too. They are the things that get us elected. If you have been harmed in any way, I apologize for us. Ms. Twyon. Thank you. Mr. Cummings. Let me just ask you this for the record. Your report, did you have a finding of over-billing? Ms. Twyon. I did not look at any billing of manpower. That was not part of my charge. Mr. Cummings. And what were you doing? Since your report is so significant, I want to make sure that we have it clear. We have got C-Span looking at this and maybe some of your comrades are looking at it. I want to make sure you are very clear because I think it is important to everybody involved. Ms. Twyon. It is non-media compensation. It is the cost of manpower and the number of manpower hours is what I was looking at. Mr. Cummings. So I take it that you would not have found any fraudulent activity by anyone because that was not in your purview. Is that right? Ms. Twyon. That is correct. I did not have any documentation of anything like that I was even evaluating. Mr. Cummings. I guess this would be directed to Mr. Vereen or Mr. Levitt. Ms. Twyon reports that a 15 percent commission rate is traditional for the purchase of advertising time and space. Is that correct, Ms. Twyon? Ms. Twyon. Yes. It is a historic number. Today it is no longer true, but years ago that was the number that agencies earned, 15 percent. Mr. Cummings. In addition, the report states that a consumer could even negotiate a commission as low as 7.5 percent on a large advertising purchase due to increasing advertising industry competition. Is that correct? Ms. Twyon. Yes, but I am isolating then specific assignments. It may not be the total assignment of doing creative and media and PR and everything that an agency might do. So that there are varied commissions depending upon what the assignment is to the agency. Mr. Cummings. Mr. Levitt or Mr. Vereen, who negotiates the commission? How is that done, do you know? Is it your legal department? Mr. Levitt. Mr. Pleffner is actually the person to ask. Mr. Cummings. Mr. Pleffner, how is that determined? Mr. Pleffner. Early on in the second year of the contract, I requested that Ogilvy submit a project plan, a proposal for media and non-media costs. That was submitted to ONDCP on March 8th. It was as a result of that media plan and the increased costs that we had identified that we retained Jane Twyon to assist us in analyzing. We have been in discussions with Ogilvy since spring of 2000. Mr. Levitt. Congressman Cummings, let me make one comment? Mr. Cummings. Sure. Mr. Levitt. I think there have been many misunderstandings here and also in the media about Ms. Twyon's report, which I think is a very, very good report. It is a directional report. It helps us focus on what kind of labor structure we want in the future--do we want so much behavioral component, do we want so much of the media buy. There are a couple of things that Ms. Twyon did not realize at the time. First of all, the report that she was asked to analyze had about $1.5 million more I think of labor and overhead costs than was reality, because during the time that she analyzed it, Ogilvy came down about $1.5 million in their costs. So it is inflated from that point of view. She also had to make certain assumptions, which she clearly mentions in her report, and she also mentions that there are certain unique things to every advertiser that she may not be aware of. This campaign is for all Americans. We have 11 languages. We have a science-based approach. One ad, one time on ER or a program like that can cost a half million bucks for 30 seconds of taxpayer's funds. There is a greater accountability on the part of the Government. So we require a higher level of testing, a higher level of behavioral components, audience focus groups, much more so than if you are just selling Kleenex. This is a behavior/attitude change campaign. It is not a consumer product marketing campaign. And there are a lot of differences. That is what the experts told us was going to work. Mr. Cummings. Does that affect the rates? Mr. Levitt. I do not know if it affects the rates. It affects the labor structure, and I do know it affects the pro bono match. Congress has mandated a pro bono match, and Ms. Twyon has accommodated a big chunk of that. But what she probably did not know is that when you traffic an ad, when you--let me just give you an example. If you win a gold medal 1 day in the Olympics, you could be on TV in 2 days with a commercial. In our program, because it is evaluated by the National Institute of Drug Abuse, and because we have all these accountability measures, it will take at least 2 months and testing and coordinating with a dozen organizations in the behavioral science field, in NIH, with the Annenberg School of Communications. So it is a lot more labor intensive. And some of that she may not have taken into account and that may have skewed why it is so much above average. I think what is unfortunate here is that advertising clients have people like Jane Twyon come in, she has a wonderful reputation, she was recommended by the Ad Council, and her report is being taken out of context completely. What happens when the next Government agency wants to bring in an outside consultant? Mr. Cummings. All right. I understand. Ms. Twyon. Ms. Twyon. I have to agree with what Mr. Levitt said. I do the absolute best I can, but, as I state in my report, I make assumptions. That is required. I am very careful to list my assumptions, which I did. It does not mean that they are right; they are just the best I could make so that we can move forward. So there is information that I do not have because I am not working in the field, I am just given a report and I go away and do my analysis. I will give you one of the specifics that I did not realize when I first did my report. When I initially did my report on the manpower issue area, there was a line called ``production.'' I made the assumption, since everything else was manpower, that was manpower. In the end, I found out that was not manpower, that was actual production cost. So I can make mistakes because I do not know pieces of information. My report, let me say again, is the beginning. It is not the final product. Think of it like a roadmap. You now take this roadmap and you work with the agency, Ogilvy, and ONDCP to figure out what is there. It lists everything very clearly so now you have a place to go. You know if you are going to move manpower from one discipline you have to put it someplace else. If you change an assumption, you know why you are going to change the assumption. That is the point, it is a very good base to move forward from. Mr. Cummings. Mr. Levitt, you said something that I am just curious about. You said that while Ms. Twyon was doing her report the costs, and correct me if I am wrong or misquoting you, the costs from Ogilvy came down. Did you say something to that effect? Mr. Levitt. Yes. The proposed cost for the following year's budget was reduced by Ogilvy. We had been talking to Ogilvy a couple of months before this, not just Ogilvy but all of the contractors in the media campaign. There was huge inflation because of the rich ad climate in the last several years. There was actually increased costs because of our success--we have had a million phone calls into our clearinghouse from parents asking for information. All these things jack up the costs for printing or other kinds of labor. We have looked at all our contractors, including Ogilvy because they are the biggest one, and we have had a series of meetings. In fact, we are talking now about possibly taking a number of other activities and transferring them to other organizations or maybe we do not need that level of effort this year in the campaign. It is not a matter of this over-billing or are we paying for labor that we do not need, rather, do we need this level of effort at this stage of this campaign. We have asked Ogilvy to do a lot more work for us. We have asked them to do ads on ecstasy and meth and heroin. We have asked them to do a huge Internet component. The Internet is surging. For African-American and Hispanic families, Internet use has surged almost 500 percent in the last 4 years. The previous campaign, by the Partnership for Drug-Free America, as good as it was, did not have a huge Internet component. We are doing a variety of other things with this campaign. Reaching out to the entertainment industry. Last week, actually somebody from Chairman Mica's district, Tinker Cooper, spoke to 20 writers and producers on ecstasy, about the unfortunate problems her son had with it. So Ogilvy is involved with a lot of these other activities that may not be apparent. This is not just an ad campaign. It is a comprehensive public health communication campaign. And can I just add one other thing? Mr. Cummings. Briefly, because I want to get to Mr. Hast. I have a number of questions. Mr. Levitt. We are extremely proud of this program. It is working, including the financial component of it. We have had seven hearings, we have provided this committee with 18,000 pages of documents, and we have cooperated with the GAO, and we will continue to. But we are very comfortable with what we have done. Mr. Cummings. Now when Ogilvy appeared in Mr. Mica's district, did they bill you for that? Mr. Levitt. When what? Mr. Cummings. You just said a few minutes ago they were in charge of something in Mr. Mica's district. You did not? Mr. Levitt. No. Mr. Cummings. What did you say? Mr. Levitt. One of the people who testified before this committee I think a year ago, Tinker Cooper, lost her son to ecstasy and heroin. She was from Congressman Mica's district. We actually brought her and somebody else to this roundtable discussion last week and it was very, very successful. Mr. Cummings. Thank you. Mr. Hast, I just want to make sure the record is clear. You had certain findings that you provided us in your opening statement, is that right? Mr. Hast. Yes. Mr. Cummings. You had some findings. I just want to make it so clear that we have a complete record, and this may not be a complete record even with the questions I am going to ask you. The findings that you provided I think are partly why we are here today. But I want to just ask you about some other ones. Another GAO inquiry recently found that ONDCP ``has met most mandates'' regarding the media campaign funds and program guidelines. Are you familiar with that? Mr. Hast. Yes. Mr. Cummings. And was that a part of the same inquiry? Mr. Hast. No. Mr. Cummings. OK. And were you involved in that? Mr. Hast. I was not. Mr. Cummings. So did you review that in the process of doing what you have been doing in regard to your investigation? Mr. Hast. Yes. We discussed that investigation with the people that did it. I really did not read it. Mr. Cummings. OK. You did not read the investigation? Mr. Hast. I did not read the audit that the other group did. But I did discuss it with them in our General Government Division. The management review, I am sorry. Mr. Cummings. Wait a minute. Let's rewind. GAO did an audit, a management review? Mr. Hast. A management review, I am sorry. Mr. Cummings. And they reviewed ONDCP? Mr. Hast. Yes. Mr. Cummings. And you did not read the document? Mr. Hast. I did not. Mr. Cummings. Are Mr. Sullivan and Mr. Cooney with you? Mr. Hast. Yes. Mr. Cummings. Did you all read it? Mr. Sullivan. Yes, I read the document. I am the Assistant Director in charge of the squad that handled the investigation. I read the document and Mr. Cooney read the document. Mr. Hast is our boss. Mr. Cummings. OK. Did you share the information that you found with Mr. Hast? Mr. Sullivan. Yes, we briefed Mr. Hast after we digested the document. At every step of the investigation we briefed Mr. Hast as to how the investigation was progressing. Mr. Cummings. So, basically, Mr. Hast is over you and you all are sort of doing the day-to-day work? Mr. Sullivan. Yes, sir, Mr. Cummings, that is correct. Mr. Cummings. I see. Fine. The question that I just asked Mr. Hast is, is it correct that report said ONDCP had met most of its mandates? Mr. Sullivan. Mr. Cummings, that is absolutely correct. However, the management review did not focus on any of the allegations of fraud. So they just looked at, as mandated by the Appropriations Committee, whether this program was following the guidelines that Congress set. Mr. Cummings. I see. OK. And this investigation you are talking about you are saying is zeroing in on fraud. Is that correct? Mr. Sullivan. Our investigation, Mr. Cummings, was we were specifically requested to examine the allegations that the suspicions of false billing were brought to the attention of ONDCP management and the allegation was they did nothing with those allegations and the audit was never conducted that was initially ordered by General McCaffrey. That is what we were asked to look at, whether or not the response of ONDCP was appropriate or not. Mr. Cummings. So you were asked about whether they responded to these allegations and the response being an audit. Now that is what I think you just said. Is that right? Mr. Sullivan. No, sir. Mr. Cummings. OK. Say it again. Mr. Sullivan. Just to narrow the focus, we were asked, within the very narrow parameter, whether or not ONDCP responded appropriately when the allegations of false billing was first brought to the attention of senior ONDCP management. In other words, what did ONDCP management do as a result of the April 13th memorandum authored by Mr. Pleffner; if an audit was not conducted, why was it not conducted immediately; and what other response was taken in regard to that memo. Mr. Cummings. Now did Ms. Twyon's report play a significant role in what you all have been doing? Mr. Hast. I would say that it did not. It was part of the memo that we reviewed, and as much as it played a role in that memo, I think it played a role in our investigation. Mr. Cummings. Now is it true that, in evaluating how funds for paid advertising were managed and dispersed, GAO found that although ONDCP used administrative contract support from other Federal agencies to assist with paid advertising contracts, it remained responsible for ensuring that only valid campaign expenses were paid out of from ONDCP, and that ONDCP had processes in place to monitor and approve all paid advertising expenditures before paying vendors and reporting to Congress? Mr. Sullivan. Mr. Cummings, that is our understanding. We ascertained that from the interviews we conducted with Mr. Pleffner and other officials at ONDCP responsible for managing the contract. So that is our understanding, sir. Mr. Cummings. I know, Mr. Hast, the question was asked whether you had met with Mr. Gray. But is it true that Ogilvy and Mather officials were interviewed by GAO? Mr. Hast. There were several Ogilvy and Mather officials interviewed. Mr. Cummings. And during those discussions, I take it those were extensive interviews? Mr. Hast. Yes. Mr. Cummings. Did the question of fraud come up? Mr. Sullivan. Yes, sir, it did. Mr. Cummings. OK. Is that a part of the 91 page report? Mr. Sullivan. No, sir. Mr. Cummings. Can you tell us why? Mr. Sullivan. The allegations that we were investigating had nothing to do with the initial management review that was conducted by the General Government Division. We are the investigative arm of GAO and we were specifically mandated to conduct an investigation to determine the response to the allegations that were originally raised in the April 13th memorandum. Mr. Cummings. Now ONDCP, I guess this would be Mr. Levitt or probably Mr. Pleffner I would guess, is it customary in your review of invoices, before recommending payment or nonpayment, to express any concern to the contractor about the costs? I mean, if you saw something that looked a little irregular, would it be your custom to say wait a minute, red flag, there is something wrong here? Mr. Pleffner. It is customary to discuss with the contractor concerns, as I did with Ogilvy. Mr. Cummings. And as I looked at your memo, the memo that is on the board there, I take it that there came a point in time when you brought it to the attention of people in your agency. And then at what point did you get additional information? In other words, you had the information that had come to you through the process of doing your job, and you inquired I think of the Ogilvy people exactly why do I see these problems. At what point did other outside sources come-- did they come before, did they come later--to tell you that there might be something wrong here? In other words, that the information that you may have been given by Ogilvy was not necessarily accurate. Mr. Pleffner. The issues relating to irregularities with Ogilvy's invoices were first raised in September 1999. There were probably a half dozen labor invoices where I identified these problems, communicated the problems to Ogilvy and the contracting officer. It was March 2000 that I had a former Ogilvy employee come to me and make the allegations that prompted me to write this memo to the Director. Mr. Cummings. And you knew that person? Mr. Pleffner. Yes, I did. Mr. Cummings. And you felt comfortable that person's word was true? Mr. Pleffner. I had no reason to not believe him. He did not provide any evidence. This was a phone conversation we had. But in my position, you never take this kind of allegation lightly. A number of the allegations made were consistent with concerns that I had with regard to the labor billing. Mr. Cummings. And when you talked to Ogilvy, your first discussions with them were when? Mr. Pleffner. As far as the billing issues? Mr. Cummings. What you just talked about, yes. Mr. Pleffner. The first discussions on billing issues was late September 1999, early October 1999. Mr. Cummings. And what were you told back then by Ogilvy? Mr. Pleffner. By Ogilvy, they stood by the invoices they submitted. Mr. Cummings. And what was your reaction to that at that time? Mr. Pleffner. At that time, my reaction was to do my job, which was to recommend withhold of any costs I believed were inappropriate or unsupported, which I did. Mr. Cummings. Mr. Levitt. Mr. Levitt. Can I put into context the kind of withholds that we would have? Mr. Cummings. Yes. Mr. Levitt. I think there is a nefarious tone in some of the questions and in some of the news accounts about this. Ogilvy had never worked for the Federal Government before. There are a maze of issues dealing with the Federal Government; high levels of accountability for media, proof that it ran on your TV station, small business, EEO, women-owned business, a whole variety of things--and I could provide that for the record if you want--that are not difficult to obtain but that are strange in the ad culture, in the ad industry. In the ad industry, when you produce an ad, or in the movie business when you shoot a program, you have got a platter of food in the background, the cameraman and everybody else eats. You cannot pay for food in the government. You cannot fly first-class in the government. There are also issues of should the bonus go in the overhead or direct salary account. A whole range of issues. There was not just one issue. Most of them had to do with labor-related issues. But, again, this could be an innocent thing. And Ogilvy also has had three different financial people involved in the billing over this period of time. They now realize they have to get somebody who really knows about the Federal acquisition process. But at least the billing part could be completely just part of the routine financial oversight that a government agency does with its contractors. As I said before, we have withheld from all of our contractors and subs and even government agencies that we have cooperative agreements with. Dr. Vereen. And we would be happy to provide that documentation as well. Mr. Cummings. I would like to have that, Mr. Chairman. I just have two more questions. When you got the Twyon report, and I do not know who is best to answer this, did you have discussions with Ogilvy with regard to that report? Mr. Levitt. Yes. We have had several discussions with Ogilvy. In fact, Ms. Twyon was in a meeting with Ogilvy discussing her report. They came down, they brought their president, Bill Gray, and other financial people, as well as Ms. Seifert, the project officer, to discuss it and respond. And we have had two meetings like that. We have also had two very lengthy analyses of Ogilvy's labor structure and proposals. They have come down a little bit, but also proposals of why these things cost so much in different categories and some options for us to reduce the costs even further. Mr. Cummings. Did they provide you any explanation on the difference in their costs and those recommended by Ms. Twyon? Mr. Levitt. Yes, to some degree. Part of it was what I just mentioned, that there were some things that she did not take into account. And there were legitimate differences of opinion also between Ogilvy and the Federal contracting process. Mr. Cummings. My last question to Mr. Hast. Is there any other evidence, and I understand from Mr. Sullivan, and I appreciate your testimony today by the way, it sounds like the Twyon report was not a very significant thing in what you all did; is that right? I think I asked that. Mr. Hast. Yes. Only in how Mr. Pleffner analyzed it in his document. Other than that, we did not do a lot with the Twyon report. Mr. Cummings. OK. And do you agree with her, from what you all have seen, that report does not really deal with over- billing, or does it? Does it allege over-billing? Mr. Hast. I am really not an advertising industry expert and that is really why we did not deal much with that report, because I think you would have to be in the field to really understand it. Mr. Cummings. And so, other than the Pleffner memo, I think that is about it, is there any other reason for you all to believe that Ogilvy committed any kind of fraudulent activity here? I mean from stuff that you have. Mr. Hast. I would not want to say that we believe it. I think we have interviewed other people that have substantiated the allegations in that memo to the point that I think it requires further investigation. But at this point, we have absolutely no proof of fraud by anyone. Mr. Cummings. Thank you. Thank you very much. Mr. Barr [presiding]. Mr. Sullivan, I think you testified earlier in response to questions from the gentleman from Maryland that one of the things that you all were tasked with looking at was whether or not ONDCP responded appropriately to the allegations of false billing, as brought to the Director's attention in early 2000. At this point, do you believe that ONDCP did or did not respond appropriately? Mr. Sullivan. We have not formed any final conclusions as to whether they responded appropriately or not. We were just conducting the investigation and we are presenting the facts for the subcommittee to draw your own conclusions. Mr. Barr. You have not formed any conclusion one way or the other? Mr. Sullivan. No, I have not formalized a final conclusion myself, Mr. Barr. Mr. Barr. Do you believe it is appropriate to order an immediate audit in the face of such allegations and for another 6 months to go by and no audit is even close to being performed? Do you believe that is an appropriate response? Mr. Hast. Mr. Barr, if I could answer that. I believe if someone thought there were allegations of fraud, they should move very quickly. I think in a number of our interviews, especially with General McCaffrey, the view of this was billing irregularities. And although fraud was mentioned in the memo, I do not believe from our interviews that was where his focus was. This was also sent to his General Counsel. I think that is the role of attorneys. The attorneys that reviewed this I think should have taken the fraud more seriously and probably recommended moving somewhat more quickly. Mr. Barr. According to your written testimony, the ONDCP General Counsel, Mr. Jurith, told you that they were aware of the billing irregularities. So apparently ONDCP knew that there were billing irregularities. Correct? Mr. Hast. Yes. And he initialled the memo with the allegation that there was possible fraud. Dr. Vereen. Mr. Barr, may I make a comment? Mr. Barr. Sure. Dr. Vereen. Those billing irregularities led us, well before this memo, to explore options to change the contract and initiate an audit. This predates the memo. All of that was in place predating the memo. And I draw your attention to the end of the second page, you mentioned the word ``immediate,'' the immediate refers to upon the moment that the contract is transferred. We have attempted, as Mr. Pleffner related earlier, attempted to negotiate an early audit without incurring extra costs. That did not happen. But we already had a plan in place to change the contract, to initiate an audit. Unfortunately, that has taken a while, and that is about to be---- Mr. Barr. That is real unfortunate. That is the whole question here. This has been going on for over a year. I know immediate might mean one thing to somebody and maybe 2 or 3 more days to somebody else. But this has been going on for over a year. This is taxpayer money we are talking about. Dr. Vereen. This is true. But we have talked to the Department of the Interior, we have talked to the Department of the Navy, and others to see who else could handle such a complex contract. Mr. Barr. How about GAO? Dr. Vereen. I am not aware that we checked with GAO. Mr. Barr. This is what they do for a living. Dr. Vereen. There is a new GAO review that has started last month that we are a part of, that we are cooperating with. Mr. Barr. That is exciting, too. Maybe we will see some results immediately there too? Dr. Vereen. I am sure as fast they can get a report to you. Most audits take approximately 6 months. Mr. Barr. Once they get started. Dr. Vereen. Yes. Mr. Barr. This one isn't even started. Dr. Vereen. But you have from our records and our accounting to you a full and open discussion. You know exactly what we know in terms of billing irregularities. Mr. Barr. Well, let's see. Mr. Hast, according to your testimony, you all were told in March of this year, March 2000 that Mr. Dan Merrick had contacted Mr. Pleffner and Jill Bartholomew, ONDCP's Deputy Director for National Media Campaign, and Mr. Merrick told them in March of this year--that is how many months ago, 7--that Ogilvy was falsifying billing records. We are not here to have a legal debate over what constitutes fraud in terms of proving each and every element thereof beyond a reasonable doubt. I am using your words here. You all were told in March 2000 and ONDCP knew 7 months ago, at the latest, that Mr. Merrick told them that Ogilvy was falsifying billing records. Correct? Mr. Hast. Yes, that is correct. Mr. Barr. And here we are 7 months later and ONDCP has done absolutely nothing. Is that an appropriate response? Mr. Hast. No, I do not think so. Mr. Barr. And I appreciate that. I think that is a correct answer. ONDCP has not responded appropriately despite your best intentions. That is the problem. There is evidence of false billing here involving taxpayer moneys, and this has been going on for a period of time and you all have known about it for a period of time, and here we are still worrying about some blue folder floating around within Department of the Navy and you all have not even ordered an audit. That is why we are concerned about this. Dr. Vereen. Even as that is occurring, sir, the shields are up. The media campaign is protected and well-run with the exacting scrutiny that we have illustrated to you. So funds are going nowhere without the proper documentation, sir. Mr. Barr. The only one that seems to be conducting any exacting scrutiny was Mr. Pleffner. He had it pegged right. And Mr. Hast seems to have it pegged pretty right here. Dr. Vereen. And thanks to his efforts, we have been aware and he is continuing to do his job properly. Mr. Barr. Who is? Dr. Vereen. Mr. Pleffner. Mr. Barr. That is good. But why have you all not conducted an audit? [No response.] Mr. Barr. The silence is deafening, Dr. Vereen. Dr. Vereen. We have explained that we had moved to change the contract and changing the contract at the end of the contract would come---- Mr. Barr. HHS said that they would conduct an audit. Dr. Vereen. No, they said they would not conduct an audit. Mr. Barr. Now you are changing. They said that they would conduct an audit if they were paid for it, if they were paid for the time necessary to conduct an audit. Dr. Vereen. And we had indicated that we had already paid for it. That was our understanding. That was not resolved, so we were in the process of changing the contract completely so that would not be an issue any longer. Mr. Barr. How much money are we talking about for that audit, $300,000, $325,000? Mr. Pleffner. I would estimate in the neighborhood of $100,000, $125,000. Mr. Barr. We are talking about a billion dollar contract here with evidence of billing irregularities, false billing records. Dr. Vereen. It would still come out, sir. Right now, those payments are being withheld until proper documentation is provided. And it will come out in an audit if that is the case. At this point, the campaign is functioning very well, it is continuing to go forward, and we will continue to withhold payments until those billings get cleared up. And an audit will certainly identify those. But in the meantime, the entire campaign is being properly managed with a level of scrutiny that you can see is certainly satisfactory. The campaign is safe and proceeding forward. The audit will happen when the contract changes. Mr. Levitt. Congressman, can I make a statement? Mr. Barr. Sure. Mr. Levitt. I managed this contract or have managed the program, or helped General McCaffrey to manage the program. My goal is giving the best value to the Government, including the financial aspects of it. Mr. Barr. When was the very first time that you were made aware that there was possible fraud, there were billing irregularities, false billing? When were you first made aware of that? Mr. Levitt. The first time the word fraud came into my office---- Mr. Barr. Now do not play word games. I am not trying to pin you down to the word fraud. OK? We have been through all that before. Mr. Levitt. Shortly after Mr. Pleffner was---- Mr. Barr. Not until April? Mr. Levitt. End of March, April, I do not know when. Mr. Barr. You know Mr. Merrick, don't you? Mr. Levitt. Yes, I do. I think he is an outstanding advertising person. Mr. Barr. He has done prior work with ONDCP, correct? Mr. Levitt. He was our project officer at Bates and also co-project officer at Ogilvy. Outstanding integrity and outstanding performance. Mr. Barr. So you were aware that this evidence existed very early in the year 2000, at the latest. I mean, you tell me. Mr. Levitt. At the end of March or April. Mr. Barr. Not in the fall of 1999? Mr. Levitt. No. After he was separated. Mr. Barr. When was the first time, Mr. Pleffner, that you had any discussion at all with Mr. Levitt bringing to his attention what you believed was evidence of false billing and irregularities and/or fraud? Mr. Pleffner. The irregularities first were identified in early October, late September or early October 1999. Fraud was never mentioned until Mr. Merrick came to me in mid to late March in the year 2000. Mr. Barr. Did you have discussions with Mr. Levitt sometime about these matters and the evidence that was coming to your attention in the fall of 1999? Mr. Pleffner. Immediately upon me recognizing the problems, I did share it with Mr. Levitt and our Office of Legal Counsel, yes. Mr. Barr. Thank you. Mr. Levitt. Congressman, we, and this may have figured into the decision not to audit, we were getting exceptional performance by Ogilvy. They had saved us over $5 million just this year in their up front media buy over the industry average. They have led people like Tara Lipinski and Women's World Cup Soccer to us. They have gotten a contribution from Turner Broadcasting for almost $900,000. Mr. Barr. Nobody here is arguing their competence. They may be the greatest advertisers in the world. Mr. Levitt. But I am talking about the value to this program and to---- Mr. Barr. We are talking about fraud. We are talking about---- Mr. Levitt. You see, it did not compute. Mr. Barr. What did not compute? Just because they are doing a good job, the evidence of false billing does not compute? Mr. Levitt. I think allegations by a person who was separated and with no evidence should be weighed against the exceptional performance of this thoroughbred agency. Mr. Barr. Mr. Pleffner looked at the time sheets. They do not lie. Mr. Levitt. That is a different issue, sir. Mr. Barr. No. I am talking about the false billing. Mr. Levitt. I am talking about an allegation of fraud versus billing issues, which we have with all of our contractors, and probably every Federal agency has with their contractors. Mr. Barr. Have false billing? Mr. Levitt. Questionable bills. Mr. Barr. No. I am talking about false billing that was brought to your attention in the fall of 1999. Mr. Levitt. Whether you use the word false, over-billed, it is a question of semantics. I am talking about fraud. We had no evidence of fraud, no convincing evidence of any kind, otherwise we would have gone up with that in a second. Mr. Barr. You had evidence that there was false billing. You all may think there was no false billing. This is the language in GAO's report. And Mr. Pleffner has testified to that and he has testified that he had discussions with you about it. Mr. Levitt. Again, as I mentioned, I do not know if you were here earlier this morning, but if I put in a taxi voucher and I add it up the wrong way, am I defrauding the Government? There are mistakes, there are differences in interpretation what could be allowed and what could not be. Some of these were legitimate differences or misunderstandings or sloppiness. Mr. Barr. You are talking like a defense attorney for this company. Mr. Levitt. I do not mean to be. Mr. Barr. Do you all have any further questions? Mr. Pleffner. If I could clarify one point. Until the phone call from Mr. Merrick, I had never mentioned to anyone any concerns about fraud or false billing. What I brought to my boss' attention, Mr. Levitt's attention, and Office of Legal Counsel was billing irregularities. A number of costs, I will admit, a number of the irregularities were unallowable costs in my opinion. But the word fraud was never brought up until the conversation in mid to late March with Mr. Merrick. Dr. Vereen. And that was properly reported up the chain of command so that we were all aware. And we proceeded on with our management of this to protect the media campaign so that it could go further. Mr. Levitt. And Congressman, since HHS disagreed with Mr. Pleffner on at least some of these bills, it shows that there can be different interpretations sometimes of Federal Acquisition regulations and contracting rules. It does not mean one is defrauding the other. It means there could be a legitimate difference of opinion. Mr. Barr. Isn't that why an audit is conducted? Dr. Vereen. That is why, I will repeat, we were taking steps with other Federal agencies to change the contract. Mr. Barr. I know, and you have been taking steps for the last 7 months. That is very reassuring. Dr. Vereen. Well, they were telling us to wait till the end of the fiscal year. We did not want to wait till the end of the fiscal year. Mr. Barr. Well you have. Dr. Vereen. We are just as frustrated. Mr. Barr. The gentleman from Maryland. Mr. Cummings. Thank you very much, Mr. Chairman. I have just some things I need to clear up. First of all, let me say I was very intrigued with your line of questioning, and I want everybody in this room to understand that we are dealing with some very, very serious allegations. The chairman is a former U.S. Attorney, I am a defense attorney of 20 years, and I can tell you we are dealing with some serious stuff. That is why I am going to ask the following questions. Mr. Pleffner, let me ask you, I am glad you cleared up exactly what information was imparted when. I have read your memo and I applaud you for bringing this to the attention of the appropriate authorities. Let us go back to when you first brought it up. Your immediate supervisor, would that have been Mr. Levitt back there in late September, October? Mr. Pleffner. That is correct. Mr. Cummings. All right. First of all, what is considered an irregularity? When you say irregularity, what do you mean? Mr. Pleffner. Irregularity, question cost, unsupported costs. Mr. Cummings. OK. Do you oversee more than this contract, or is this the only one that you have been handling in the last 2 years? Mr. Pleffner. I oversee roughly a half dozen media campaign contracts and MOUs. Mr. Cummings. OK. I take it is a part of your job to make sure that Government money is being spent consistently with the contract, and I take it your job is to raise the red flag if you see something that seems a bit out of kilter. Is that correct? Mr. Pleffner. Yes, it is. Mr. Cummings. Is it unusual for irregularities to come up in other contracts? Mr. Pleffner. No, it is not unusual. Mr. Cummings. And did you bring that to the attention of Mr. Levitt, those other ones? Mr. Pleffner. Yes, I did. Mr. Cummings. And what would his normal response be, and that may be a question stated poorly because there may not be a normal response, but you bring it to his attention for what purpose? Mr. Pleffner. To keep him informed on a day-to-day basis of the financial activities. Mr. Cummings. And do you have authority to take certain actions? In other words, do you go to him and say, look, Mr. Levitt, I see these irregularities and I am telling you I have got a problem with it, and what I am going to do is I am not going to pay this. Is that the way it usually goes? Mr. Pleffner. As a matter of fact, as project officer my determination or my recommendation to HHS is made independently. Mr. Levitt does not influence my recommendation or decision. Mr. Cummings. OK. So you are just keeping him informed, is that right? Mr. Pleffner. Correct. Mr. Cummings. OK. Now when you presented this information to Mr. Levitt, were you expecting him to do anything in particular? First of all, I am not trying to lead you down some rosy path with a bomb at the end. My concern is we have got several issues going here. We have got a question of whether Ogilvy committed some kind of fraud. This is the question I am concerned about here, a question about whether your agency did what it was supposed to do and whether what they did was reasonable. We have heard Mr. Hast say that in his conclusion he felt that--correct me if I am wrong, Mr. Hast--that the response was inappropriate, it could have been done a better way. Is that the response to all of this? Mr. Hast. Yes. Basically, if they believed there was fraud, the FBI or the HHS IG would have looked into that for free. Mr. Cummings. OK. Now I want to come back just to make sure we are clear. So, when you presented this to Mr. Levitt, did you have an expectation that he would then do something with the information? Now I am going all the way back now to September and October. Or was that just informing him, is that correct? Mr. Pleffner. That was just informing him. Mr. Cummings. OK. Now let's move on up. Between the April 13 memo and the September/October communication about irregularities, were there other communications where you found irregularities with regard to this contract and brought them to Mr. Levitt's attention? Mr. Pleffner. Let me first clarify that the irregularities started in October 1999. The April memo is 2000. Mr. Cummings. Right. Mr. Pleffner. Yes, there are continuing irregularities with the Ogilvy invoices. Mr. Cummings. And I take it that during this period between September 1999 and April 2000 you are constantly having conversations with Ogilvy. Is that correct? Mr. Pleffner. Yes. Mr. Cummings. Saying why are you doing this? What is the problem here? Could you get any satisfaction when you got your answers? Were you getting any satisfaction? Mr. Pleffner. No, I did not. I must also add though that the HHS contracting officer was also in these discussions and we did not receive satisfaction from them either. Mr. Cummings. Now Mr. Levitt said that HHS disagreed with some of your findings. Is that correct? Mr. Pleffner. That is correct. Mr. Cummings. Would you say 10 percent, 20 percent of the findings they disagreed with? Mr. Pleffner. I would say as a rule the vast majority, probably 85-90 percent they disagreed with. Mr. Cummings. HHS disagreed with 85-90 percent of your---- Mr. Pleffner. I stand corrected. That was on labor, the withholds that I recommended on labor, the HHS contracting officer disagreed with my recommendations, the rationale for my withholding. Mr. Cummings. You are kind of a strict guy, huh? Mr. Pleffner. To all of them, not just Ogilvy. Mr. Cummings. Now coming on up to April and late March. I think you said the first time you started thinking fraud and communicating fraud to Mr. Levitt was in late March or early April. Is that correct? Mr. Pleffner. It was late March. Mr. Cummings. OK. What did you expect him to do when you started mentioning fraud? I am just curious. It is one thing for GAO to come to their conclusions, they are not in the agency. You are and you were the one to bring this to their attention. Mr. Pleffner. When I brought it to his attention I guess I expected him, I know I expected him to support me in elevating my concerns to senior management. Mr. Cummings. And you are saying that he did not do that? Mr. Pleffner. He certainly did do that. Mr. Cummings. OK. So at that point, he was doing what you expected him to do. And I noted that there was a letter of 3 weeks after this. What was the first official response that you saw to your memo of April 13? Mr. Pleffner. Saw from? Mr. Cummings. From anybody. In other words, you wrote the memo and you expected a response from somebody. Is that right? You expected them to take some type of action. I am saying be it written or be it verbal, what was the first official response that you had to that memo? Mr. Pleffner. I received a copy of my memo back from the Director with his comments roughly 2, 2\1/2\ weeks after I sent it up to him. Mr. Cummings. And what were your feelings about those comments? That is the document that is on the board there, correct? Mr. Pleffner. Correct. Mr. Cummings. What was your reaction to his comments? And did you discuss them with him, by the way? Mr. Pleffner. There was a meeting as I recall in late April where there was a brief discussion. He did support the need for an external audit. And he did say, as noted on the sidebar there, that we would not wait 5 years for the audit. Mr. Cummings. Now did he say when the audit would take place when you two met? Mr. Pleffner. I do not believe the timing was addressed in that meeting. Mr. Cummings. Did you make any recommendations as to when it should start? Mr. Pleffner. I do not believe I had the opportunity to address when it should start. Dr. Vereen. Congressman, there was a process to change the contract and do an audit when the contract changed that was already in place. The last line of the memo refers to an immediate audit upon termination of the contract. Mr. Cummings. Does that sound reasonable, what he just said? Mr. Pleffner. Yes, it does. Mr. Cummings. That is your memo, right? Mr. Pleffner. Yes, it is. Mr. Levitt. Can I just add something. You cannot terminate a contract automatically. You have to have HHS' permission, you have to have another agency to go to. So it takes some time to do that. We had pretty much decided on the Navy, but then there were a couple of other agencies that came up that we had to investigate. Mr. Cummings. Mr. Pleffner, I do not have much more but I have got to ask you this. We have heard a lot of testimony here today. I have two questions. One, Mr. Vereen said a moment ago that he feels that, as far as the people's money is concerned, whatever you all have done so far to kind of freeze--you are stopping payment on certain things and you are questioning certain things--all the things that he talked about that you have done while waiting to get this audit, do you feel comfortable that your agency is doing what it needs to do so that if there were some type of fraud going on at least it would be frozen? Are you following my question? Is there anything else that you all could be doing now? Mr. Pleffner. I think we have done what we are supposed to do. We are in the process of moving the contracts out of HHS over to the Navy, at which time an audit will be immediately initiated. Mr. Cummings. So do you feel comfortable with what has happened since the April 13 memo with regard to you all making sure that you carry out the full extent of what your job is? Mr. Pleffner. I am comfortable beyond a shadow of a doubt that I have done what is necessary to protect ONDCP's, the Government's, the taxpayer's interest. We have withheld since April 13 an additional $8 million. On that date, we had only withheld $5 million. We are now up to $13.4 million. We have done what we could, if there is any impropriety, we have done what we could to keep it in check. Mr. Cummings. And I applaud you for that. And I do not want you to misunderstand and think this is any kind of negative toward you. I applaud what you have done. I guess the question is, do you feel like you have gotten the cooperation from your superiors in accomplishing what you just stated? Mr. Pleffner. Absolutely. They have supported every withhold I have recommended. Mr. Cummings. I do not have anything else. Mr. Barr. As an example of the basis, Mr. Pleffner, on which you have recommended the withholding of funds--and this is why I am a little bit surprised, maybe I should not be a little bit surprised, that HHS disagrees with you--I refer to your memo to Michelle Trotter of March 2, 2000. You say that your recommendation to withhold close to $500,000 at that particular time was based on: ``(1) various employees billed without providing time sheets to support time worked against ONDCP; (2) various salaries charged without documentation to support the costs incurred; (3) various salaries exceed the salaries proposed by the contractor.'' The basis on which you were recommending that funds be withheld were not some theoretical, never heard of, ingenious, imaginative argument. These are just pretty much standard reasons for withholding funds that anybody should agree with. Correct? Mr. Pleffner. Correct. Mr. Barr. During these past 7 months, Ogilvy has continued to bill ONDCP and has continued to receive funds. Is that correct? Mr. Pleffner. That is correct. Mr. Barr. I would like to thank all of the witnesses for being here today. Mr. Cummings. Mr. Chairman, I have two more questions. Mr. Barr. The gentleman is recognized for 1 minute. Mr. Cummings. Thank you very much, Mr. Chairman. I may need just a little bit longer than that. Mr. Barr. The gentleman is recognized for 2 minutes. Mr. Cummings. Thank you very much, Mr. Chairman. I really appreciate this 2 minutes. Mr. Barr. The record will reflect that the gentleman just a moment ago said that he had no more questions. Mr. Cummings. Well, you just asked questions, Mr. Chairman, that caused me to have more questions. Mr. Barr. The gentleman is recognized for 2 minutes. Mr. Cummings. Mr. Hast, there is something that has been bothering me and it is part of your findings. When you talked about General McCaffrey and whether he remembered the audit or not, because I am always concerned about people's reputations, I take it he did not remember at first this memo and notation, is that correct, and you then presented it to him. Did he readily say, oh, yes, this is my writing? I mean, there was not any---- Mr. Hast. No, there was not. Mr. Cummings. Did you feel comfortable that he had forgotten, with your skill and your judgment? Mr. Hast. Yes. Mr. Cummings. OK. Thank you. Mr. Levitt. Congressman, I know blue folders and I know General McCaffrey, he probably reads 100 documents a night. He is a workaholic. He probably only sleeps a few hours. It is very common for him to forget something like that. And that is why we have the notations. Mr. Cummings. Thank you very much, Mr. Chairman. I really appreciate that. Mr. Barr. I would like to thank the witnesses for appearing today. The record will remain open for 2 weeks for any additional material you all wish to submit for the record. There being no further business before this subcommittee, this subcommittee is hereby adjourned. [Whereupon, at 1:54 p.m., the subcommittee was adjourned, to reconvene at the call of the Chair.] [The prepared statement of Hon. Elijah E. 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