[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
INVESTIGATION OF MANAGEMENT PROBLEMS AT LOS ALAMOS NATIONAL LABORATORY
=======================================================================
HEARINGS
before the
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
FEBRUARY 26 and MARCH 12, 2003
__________
Serial No. 108-13
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
__________
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COMMITTEE ON ENERGY AND COMMERCE
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL BILIRAKIS, Florida JOHN D. DINGELL, Michigan
JOE BARTON, Texas Ranking Member
FRED UPTON, Michigan HENRY A. WAXMAN, California
CLIFF STEARNS, Florida EDWARD J. MARKEY, Massachusetts
PAUL E. GILLMOR, Ohio RALPH M. HALL, Texas
JAMES C. GREENWOOD, Pennsylvania RICK BOUCHER, Virginia
CHRISTOPHER COX, California EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia FRANK PALLONE, Jr., New Jersey
RICHARD BURR, North Carolina SHERROD BROWN, Ohio
Vice Chairman BART GORDON, Tennessee
ED WHITFIELD, Kentucky PETER DEUTSCH, Florida
CHARLIE NORWOOD, Georgia BOBBY L. RUSH, Illinois
BARBARA CUBIN, Wyoming ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois BART STUPAK, Michigan
HEATHER WILSON, New Mexico ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona ALBERT R. WYNN, Maryland
CHARLES W. ``CHIP'' PICKERING, GENE GREEN, Texas
Mississippi KAREN McCARTHY, Missouri
VITO FOSSELLA, New York TED STRICKLAND, Ohio
ROY BLUNT, Missouri DIANA DeGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania TOM ALLEN, Maine
MARY BONO, California JIM DAVIS, Florida
GREG WALDEN, Oregon JAN SCHAKOWSKY, Illinois
LEE TERRY, Nebraska HILDA L. SOLIS, California
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho
David V. Marventano, Staff Director
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Oversight and Investigations
JAMES C. GREENWOOD, Pennsylvania, Chairman
MICHAEL BILIRAKIS, Florida PETER DEUTSCH, Florida
CLIFF STEARNS, Florida Ranking Member
RICHARD BURR, North Carolina DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire JIM DAVIS, Florida
GREG WALDEN, Oregon JAN SCHAKOWSKY, Illinois
Vice Chairman HENRY A. WAXMAN, California
MIKE FERGUSON, New Jersey BOBBY L. RUSH, Illinois
MIKE ROGERS, Michigan JOHN D. DINGELL, Michigan,
W.J. ``BILLY'' TAUZIN, Louisiana (Ex Officio)
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Hearings held:
February 26, 2003............................................ 1
March 12, 2003............................................... 91
Testimony of:
Browne, John C., Senior Research Scientist and former
Laboratory Director, Los Alamos National Laboratory........ 181
Busboom, Stanley L., Staff Member and former Director,
Security Division, Los Alamos National Laboratory.......... 97
Darling, Bruce B., Senior Vice President, University Affairs
and Interim Vice President, Laboratory Management,
University of California:
February 26, 2003........................................ 66
March 12, 2003........................................... 149
Dickson, Frank P., Jr., Laboratory Counsel, Los Alamos
National Laboratory........................................ 114
Doran, Steven L., Consultant, Office of the President,
University of California................................... 20
Erickson, Ralph E., Manager, Los Alamos National Laboratory
Site Office, National Nuclear Security Administration, U.S.
Department of Energy, Los Alamos........................... 190
Friedman, Gregory H., Inspector General, U.S. Department of
Energy..................................................... 50
Hernandez, John, former BUS-5 Team Leader, Los Alamos
National Laboratory........................................ 171
Marquez, Richard A., Associate Director for Administration,
Los Alamos National Laboratory............................. 171
McDonald, Jaret.............................................. 23
McTague, John P., Professor of Materials, Materials
Department, former Vice President for Laboratory
Management, University of California, Santa Barbara........ 184
Salgado, Joseph F., former Principal Deputy Director, Los
Alamos National Laboratory................................. 104
Walp, Glenn A., Consultant, Office of the President,
University of California................................... 12
Additional material submitted for the record:
Salgado, Joseph F., former Principal Deputy Director, Los
Alamos National Laboratory, letter dated April 10, 2003,
enclosing material for the record.......................... 209
(iii)
INVESTIGATION OF MANAGEMENT PROBLEMS AT LOS ALAMOS NATIONAL LABORATORY
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WEDNESDAY, FEBRUARY 26, 2003
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Oversight and Investigations,
Washington, DC.
The subcommittee met, pursuant to notice, at 1 p.m., in
room 2322, Rayburn House Office Building, Hon. James C.
Greenwood (chairman) presiding.
Members present: Representatives Greenwood, Walden,
Ferguson, Rogers, Tauzin (ex officio), Deutsch, and Schakowsky.
Also present: Representatives Wilson, Radanovich, Markey,
Eshoo, Tauscher, and Tom Udall.
Staff present: Ann Washington, majority counsel; Dwight
Cates, majority staff; Michael Geffroy, majority counsel; Young
Choe, legislative clerk; and Edith Holleman, minority counsel.
Mr. Greenwood. Good afternoon. I apologize for the delay.
This hearing of the Oversight and Investigations Subcommittee
will come to order.
Without objection, the subcommittee will proceed pursuant
to committee rule 4(e). Is there objection to proceeding
pursuant to rule 4(e)? What is it? We need to know that.
Committee rule 4(e) is the new rule that allows that those
members who are present at the time the hearing is gaveled to
order who wish to forgo an opening statement will have an extra
3 minutes accorded to them for questions. Without objection, we
will pursue according to rule 4(e).
This afternoon we hold the first day of our hearing to
examine allegations of mismanagement and theft of government
funds and property at Los Alamos National Laboratory. The focus
of today's hearing will be on the evidence and allegations of
what went wrong.
We will hear from the people who first discovered these
problems and first investigated the situation at Los Alamos, as
well as others brought in to investigate as matters quickly
spun out of control.
The situation we begin to confront today is not your run of
the mill theft and misuse of taxpayer property, as much as that
demands our urgent attention in its own right. We also must
examine what our committee investigators have learned is a
disturbing breakdown in management controls and oversight at,
of all places, an institution that pursues research critical to
the Nation's security.
At our next hearing, which we will hold within the next
couple of weeks, we will be able to raise these serious
questions directly with the management at the lab, those people
charged with ensuring that things like don't happen. But today
we turn to the people who identified the problems and their
experiences in doing so.
By way of background, as many of you know, the committee
has been involved in an ongoing investigation of fraud, waste
and abuse in government procurement through the purchase card
program since July 2001. In fact, we had the Department of
Energy before us just last April.
At that hearing, DOE testified that they had little or no
idea how the purchase card programs are operated at their
contractor run facilities such as Los Alamos. Unfortunately,
soon thereafter, we all got a close look at what DOE didn't
know.
The committee quickly became involved in the situation at
Los Alamos in November of 2002 when press reports began to
surface that several laboratory employees were under
investigation by the FBI for misusing a government supply
contract to buy goods for personal use. Our investigation soon
discovered that was just the tip of the iceberg.
We have learned that the property theft and mismanagement
problems at Los Alamos extend far beyond the misuse of this one
government supply contract by two lab employees. We have
learned of a lab employee who allegedly attempted to use her
government purchase card to buy a $30,000 Ford Mustang, another
employee who used her purchase card at a local casino, and
another employee who altered a travel voucher to obtain
additional funds.
We have learned of hundreds of thousands of dollars in
unchecked theft of government property, including scores, if
not hundreds, of lab computers and hundreds of other lost
items, simply written off the lab's books each year.
This property management system is surely in need of an
overhaul. I find it astonishing that a laboratory that can
develop the most advanced nuclear weapons systems on the face
of the earth and technologies to rapidly detect radiological,
biological or chemical attacks by terrorists cannot develop a
system to simply keep track of its sensitive property and
prevent theft of government property by its own employees.
Our other key finding is a lack of accountability among
both the lab's officers and employees with respect to poor
inventory and fiscal controls. Simply put, cases of theft,
misuse or loss of government property are not aggressively
investigated, and usually no one is held accountable when it
occurs.
Indeed, the most decisive action taken by the lab to deal
with this issue was its decision to unceremoniously fire the
two security officials who were aggressively investigating
these instances of mismanagement, misuse and theft.
These two gentlemen, Mr. Glenn Walp and Mr. Steve Doran,
both of whom are very experienced law enforcement officers, are
here with us today. I very much look forward to hearing their
testimony about their experiences at the lab when attempting to
look into allegations of wrongdoing, and their suspicions as to
why they were terminated from their positions.
Also with us today on the first panel is Mr. Jaret
McDonald, who works for a Los Alamos facilities management
subcontractor and who was the first person to raise with Los
Alamos management the concerns about theft. The determination
to see these concerns addressed ultimately led to the current
FBI investigation into the misuse of a government supply
contract to buy personal camping and hunting equipment, among
other things. He will describe his lengthy, until recently,
unsuccessful efforts to get anyone at the lab to take his
concerns seriously, and why he ultimately decided to contact
the FBI directly in June of 2002.
We will also hear today from the Honorable Greg Friedman,
Inspector General for the Department of Energy. Mr. Friedman's
office opened an inquiry in November into the allegations of
management coverup of property and procurement problems and the
terminations of Mr. Walp and Mr. Doran.
Its initial report, issued last month, clearly expresses
strong reservations about the manner in which senior laboratory
management responded to these problems, including the
terminations. I am pleased to have Mr. Friedman with us today
and look forward to a more detailed discussion of his office's
findings and recommendations.
We are also joined today by Mr. Bruce Darling, the Interim
Vice-President of Laboratory Management for the University of
California, which operates Los Alamos under contract with the
Department of Energy.
Mr. Darling also became intimately involved in the matter
before us when he traveled to the lab in November at the
request of University of California President Richard Atkinson
to review management concerns at the lab. We should note that,
since UC's direct involvement in this matter began under Mr.
Darling, UC has taken a series of personnel administrative
actions in an attempt to begin reforming the lab management and
systems, including replacing the lab's director and deputy
director and the lab's director and deputy director of
security.
UC has also rehired Mr. Walp and Mr. Doran to advise the
Office of the UC President as it continues its investigation
into management problems at the laboratory. I am pleased to
have Mr. Darling here today to add his insight into what
exactly happened at the lab and what further plans UC has to
correct these problems in the future.
I thank all of the witnesses for attending. I now recognize
the ranking member of the committee, Mr. Deutsch, for his
opening statement.
Mr. Deutsch. Thank you, Mr. Chairman. For many years this
committee has been investigating the management at the Los
Alamos National Laboratory by the University of California. The
University and the laboratory's attempt to cover up management
failures and its treatment of loyal employees who try to bring
problems to management's attention and get them fixed has been
a continuing theme of those hearings.
Two years ago, the University promised that many changes
would be made. It set up a special laboratory management
council and committed to making changes in the Security
Division. Our first two witnesses, Glenn Walp and Steve Doran,
were hired to professionalize the criminal investigations and
to make changes.
What they found is that the laboratory did not want change.
As a senior lab manager warned Mr. Walp a few months before he
was fired, the laboratory is famous for eating its own
children. Mr. Walp was told that he would be leveled with both
barrels if he did not keep management happy and protect the
lab's contract with the Department of Energy and, as we will
hear later, he was leveled with both barrels.
Today, however, we are looking at an unprecedented
situation. Mr. Walp and Mr. Doran were actually rehired by the
University, while the laboratory's director, deputy director,
the director and deputy director of security and the head of
audits and assessments were removed from their positions
because of their management incompetence in controlling
procurement and property and their failure to address the
problems brought to their attention.
This incompetence was only exacerbated when they tried to
control Mr. Walp's and Mr. Doran's investigation into what was
basically relatively routine criminal activity. The laboratory
did not want any of this known, especially by this committee.
What we are going to hear today is that in less than 2
years these systems allowed three people in just one division,
by using numerous suppliers and procurement vehicles, to buy
all kinds of camping and hunting gear, including 251 knives, 18
pair of binoculars, sleeping bags, Arctic jackets, hiking
boots, Coleman lanterns, battery operated ice chests, and
global positioning systems.
They were not cheap. The binoculars cost up to $3,300 each,
some of the knives $266 each. There were helmets and boxes of
gloves for all-terrain vehicles, floor sanding equipment for
facilities that had no wood floors, auto supplies when vehicles
were maintained by the GAS, railroad ties for retaining walls
that weren't built, welding tools for people who weren't
supposed to weld, and over $5,000 of lock picking equipment,
plus a CD containing instructions on how to pick locks, enough
hand and shop tools to maintain an army. The perpetrators
couldn't even figure out how to use it all.
In addition, Mr. Chairman, our Federal dollars were going
to pay these lab employees--actually, there is a receipt that
actually went through the procurement process for Oakley
sunglasses that, obviously, as you see from the copy, were
approved, directly approved. Thank you.
These were all ordered by a small group of people whose
main job was to supervise a subcontractor that did the actual
maintenance work and brought its own tools and supplies.
Shockingly, the manager of this group was given high marks
during these years for his ability to control costs.
Even more shockingly, these purchases were rarely
questioned by any of the contract administrators, even though
the purchase of knives, for example, is not allowed in the
laboratory, and what conceivable reason could they have for
lock picking equipment.
Where did all these purchases go? It is difficult to tell,
since the majority of them do not appear to have gone through
the regular inventory delivery system to be marked, and most of
them did not require inventory controls, because they cost less
than $5,000. But some of them were found in the houses of the
implicated managers when the FBI raided them.
How did the lab handle this? When Jaret McDonald, who is
one of our witnesses today, went to the Security Division to
ask for an investigation, the investigator, who remains on the
lab's payroll today, received a list of all these purchases,
agreed that they were suspicious, made a call to the FBI. But
they did no serious follow-up for 7 months until Mr. McDonald
went directly to the FBI.
The FBI has focused on one contract, but our investigation
shows that these same types of purchases were also made under
several other contractors and vendor agreements. This is not
the only instance in which procurement and financial controls
were weak or nonexistent.
Another employee working directly for the head of
procurement used her credit card to get cash advances, as has
been mentioned by the chairman, at various casinos. Why wasn't
this picked up immediately, because like several other
employees, she was both the buyer and the approver of purchases
on her credit card. The same situation has been mentioned
regarding purchase of a Mustang vehicle.
Yet another employee was able to convert $1,800 to her own
personal use by simply sending electronically a bogus travel
plan and asking for an advance check. No supervisory approval
was required. However, instead of allowing these instances to
be handled by the appropriate law enforcement agencies, Mr.
Walp and Mr. Doran, Joe Salgado, the lab's principal deputy
director, and Frank Dickson, the lab's counsel, quickly and
personally took over the management of the investigation.
When Mr. Walp and Mr. Doran tried to do their job and work
with outside law enforcement agencies to prosecute, Mr. Salgado
and Mr. Dickson had them fired based on a flimsy
justifications, some of which they knew were false. The real
reason was that they were not protecting the laboratory and its
contract with the DOE.
Mr. Chairman, the procurement and property systems, but
more importantly, the entire management of Los Alamos National
Laboratory needs a complete overhaul. It is not enough to say
that there is a great science at the lab. Employees have to
remember that they are public servants with public trust, and
those individuals who bring fraud, waste, abuse and
mismanagement to the lab's attention should be honored, not
pursued and ostracized in their community.
I hope this hearing will be the beginning of such a
process. Thank you.
Mr. Greenwood. The Chair thanks the gentleman and
recognizes----
Mr. Deutsch. Mr. Chairman, may I also just mention, the
ranking Democrat on the full committee, Mr. Dingell, probably
will not be here, and if I could submit his statement for the
record.
Mr. Greenwood. Without objection, the statement will be
made a part of the record.
[The prepared statement of Hon. John D. Dingell follows:]
Prepared Statement of Hon. John D. Dingell, a Representative in
Congress from the State of Michigan
Thank you, Mr. Chairman, for holding this hearing, which I
understand is the first of three hearings on the University of
California's and the Department of Energy's management of the Los
Alamos National Laboratory. We have been holding hearings on the lab
for many years, with many promises of reform, mostly unfulfilled.
Today, we will hear more promises. The question that everyone,
including the Department, must answer is whether they are too little,
too late.
Over two years ago, the University promised the Congress and this
Committee that it would make major changes in its management of its
Laboratories, particularly in the area of property control. Appendix O
was added to the University's contract. A senior laboratory management
council was established that was going to shape up the management.
Security and safeguard efforts were going to be strengthened.
This management council did put the National Ignition Facility at
Lawrence Livermore National Laboratory back on track, but the day-to-
day management of Los Alamos--a billion-dollar business--appears to be
worse than ever. There are still no basic controls. It is still
operating with its ``unique'' procurement systems left over from the
Manhattan Project days and outside of standard University operating
practices.
I am particularly pleased that Glenn Walp, Steven Doran, and Jaret
McDonald are testifying today. They each have compelling stories. For
example, Mr. Walp was told when he went to Los Alamos that he was there
to change things in security, particularly in the investigation of
property theft. But when he tried to make changes that would hold
Laboratory employees responsible for their criminal behavior, he was
fired because his ``customers''--the top management of the Laboratory--
didn't want the FBI or any other law enforcement agencies on its
premises. This management tried to run the investigations themselves,
and when the FBI said they had ``screwed up,'' they blamed Mr. Walp,
firing him and his colleague Mr. Doran. That was an outrage.
So now there is yet another management council and more promises
that we will hear about today. Two management consulting firms are at
Los Alamos as we speak. They will recommend more changes. But, once
again, we cannot know if these are only promises to make us go away, or
if they have real meaning and will actually be implemented.
And will people who in good faith try to make these changes be held
in high repute in the Los Alamos community, or will they be seen as
troublemakers and ostracized when the lights of the press fade?
Already, one of our witnesses has been told that his actions may not be
good for his career. This reactionary attitude must be rooted out.
People who bring environmental, safety, procurement and property
management, and fraud, waste and abuse to their managers' attention
should be rewarded.
The University of California must do better, or we must find
someone who can. There are many universities, government agencies and
businesses that can do research without letting their property
management, procurement, travel and other systems be run like the
proverbial cookie jar.
One last thing, Mr. Chairman. When Bill Richardson was Secretary of
Energy, he was pilloried mercilessly, and very often unfairly, by some
on this Committee and others for security and property control
shortcomings at Los Alamos. The lab and the University were, frankly,
largely let off the hook in Congressional hearings. The Department of
Energy is ultimately responsible for what happens at Los Alamos, but I
also hope everyone now understands the University of California and the
lab management played the key role in these chronic management
shortcomings. Now the University has one last chance to fix things.
Mr. Greenwood. The gentleman from Louisiana, chairman of
the full committee, Mr. Tauzin.
Chairman. Tauzin Thank you, Chairman Greenwood.
Let me first point out, as we've done very often, one of
the most essential functions of this subcommittee is to cast
the bright light of sunshine upon areas within our full
committee's jurisdiction that are susceptible to waste, abuse
of taxpayer dollars, and outright fraud and theft, as this case
may be.
The serious and disturbing problems with management and
theft of government property at Los Alamos National
Laboratories demonstrate very clearly why this investigative
function is so important to this committee, to the Congress,
and to the public at large.
The facts that this committee and its investigation have
uncovered, which we will begin to explore today, reveal a
troubling story of looting at the lab. They also reveal what
appears to be an utter lack of interest by senior laboratory
managers to do anything the theft and fraud that was apparently
going on right under their noses.
In fact, we will hear today that the lab's management not
only ignored this malfeasance, but in some cases actually tried
to prevent others from exposing this malfeasance. Management
actually turned its back on the good guys trying to make
matters right.
I won't repeat the chairman's discussion of the committee's
findings in detail except to say there appears to have been
inadequate inventory controls and oversight at Los Alamos.
Now I do have two other questions. How long has this gone
on at the facility, and what other gaps in property management
and, by extension, what other gaps in security exist at this
vital lab?
What I found most astonishing in this investigation is that
this theft, this fraud, this abuse, takes place in such a vital
facility for this Nation. It is a facility this country, this
Nation, puts an awful lot of trust in with some of the most
sensitive information that our government and our people are
entrusted with.
Mr. Chairman, we will begin the examination today, as you
suggested, and give this our most close--our closest scrutiny,
but we must understand as best we can what happened and why,
and then do everything in our power to fix it.
Now we have some serious matters, obviously, before us, but
I am confident that you as chairman of this important
subcommittee--I've seen your work before. We are going to get
to the bottom of this, and we will have some recommendations
about how to make sure this doesn't happen anymore. But I want
to extend my personal welcome to the witnesses before us.
I want you to know how much the committee appreciates the
fact that some of you had to go through an awful lot in recent
months as you've tried to do what was right, and particularly
to Mr. Walp and Mr. Doran, I want to thank you for being here
and for doing your job.
I was pleased that our committee--our committee letter
insisting that you be rehired and put back on the job was
honored and that you've had a chance to follow through on your
investigation.
I am particularly pleased to welcome Mr. McDonald. Like
Sherron Watkins before us in the Enron investigations, we
learned the importance of whistleblowers, of people who put
themselves in the terrible, awkward position we know you feel
yourself in today, Mr. McDonald, who went not once, but twice,
to management trying to tell them what was going on and,
frustrated with the lack of response you got, eventually had to
go to the authorities, as you have to the FBI.
I realize you are here under friendly subpoena, and that is
kind of interesting that we had to do this to facilitate your
attendance here, and the information you bring us also had to
be delivered by subpoena.
I note that for the record, but I most of all want to say
thank you to you and emphasize again, Mr. Chairman, and to all
the members of this most important committee of our full
committee how critical it is that this country protect
whistleblowers who try to do the right thing and who come
forward, as you have, Mr. McDonald, and try to protect
investigators such as the other two, to make sure that we honor
and respect the role you play in this most awkward
circumstance.
I want to say one more time that we will not tolerate any
ill treatment of any DOE, Los Alamos or subcontract employee
who is willing to assist this committee as we move forward with
this investigation. We will not tolerate it. We will insist
that you be treated fairly and that anyone else who wants to
assist us is not harmed in any way by their willingness to
assist this committee in its work, and this country in solving
the problems that are presented to us in this awful mess.
Again, Mr. McDonald, you are to be commended, as we
commended Sherron Watkins, and I notice that Time magazine
commended whistleblowers like yourself. You are critical to
this country and to the taxpayers of this country, and we honor
and respect you for being here today. Thank you.
[The prepared statement of Hon. W.J. ``Billy'' Tauzin
follows:]
Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee
on Energy and Commerce
Thank you, Chairman Greenwood. You know that I've pointed out
before that one of the essential functions of this Subcommittee is to
cast a bright light on areas within the Full Committee's jurisdiction
that are susceptible to waste and abuse of taxpayer dollars--and
outright fraud and theft, as this case may be.
The serious and disturbing problems with mismanagement and theft of
government property at Los Alamos National Laboratory demonstrate very
clearly why this investigative function is so important to the
Committee and to the public.
The facts that this Committee's investigation has uncovered, which
we will begin to explore today, reveal a troubling story of looting at
the lab. They also reveal what appears to be an utter lack of interest
by senior laboratory managers to do anything about the theft and fraud
going on right under their noses.
In fact, we'll hear today that the lab's management not only
ignored this malfeasance, but in some cases actually tried to prevent
others from exposing this malfeasance. Management actually turned its
back on the good guys trying to make matters right.
I won't repeat the Chairman's discussion of the Committee's
findings in detail, except to say that there appears to be very
inadequate inventory controls and oversight at Los Alamos. But I do
have two other questions: How long has this gone on at this facility?
And what other gaps in property management and--by extension--security
exist here?
What I find most astounding about this management and oversight
mess, this fraud and theft and abuse, is that it takes place at such a
vital facility. It takes place at a facility that our Nation trusts
with some of our most sensitive information.
Mr. Chairman, what we begin to examine today, as you suggested,
requires our closest scrutiny. We must understand as best we can what
has happened and why--and then do everything within our power to ensure
that it is fixed.
We have serious matters before us. But I am confident that, with
the help of Members on both sides of the aisle, this Committee will
pursue them and help fix them.
Let me extend my welcome to the witnesses. And let me also add that
the Committee appreciates very much that some of you have gone through
quite a lot in recent months as you tried to do what was right.
Sometimes it does just take a few good men (and women, of course) to
set things right. We commend you for that. And let me assure you that
this Committee will not tolerate any ill treatment of any DOE, Los
Alamos or subcontractor employee who assists this Committee and this
Nation in getting to the bottom of this mess at Los Alamos.
Thank you again, Mr. Chairman. I look forward to the testimony and
the questions, and yield back the remainder of my time.
Mr. Greenwood. But we can't guaranty you to be on the cover
of Time magazine.
The gentlelady from Illinois, Ms. Schakowsky. Do you wish
to make an opening statement or have 3 extra minutes?
Ms. Schakowsky. I would like to.
Mr. Greenwood. The gentlelady is recognized for an opening
statement.
Ms. Schakowsky. Thank you, Mr. Chairman and ranking member
Deutsch, for convening today's hearing and for your leadership
on this important subject.
In my previous role as the ranking Democrat on the
Government Reform Subcommittee on Government Efficiency and
Financial Management, I had the opportunity, along with my
chairman, Steve Horn, to look at government procurement
practices and, unfortunately, the numerous cases of abuse that
exist. We were particularly focusing on the Department of
Defense, but it suggested that this may be occurring throughout
the U.S. Government.
The committee today will review findings that are even more
concerning, because it suggests a lack of attention to critical
information at one of the Nation's most critical national
security installations, the Los Alamos National Laboratory.
We will hear about illegal use of taxpayer funds, theft of
government property, lax to nonexistent inventory controls, and
a culture of denial and deceit at Los Alamos. What is most
troubling to me, though, is the fact that management at the Los
Alamos National Laboratory knew about the problems and were
more concerned with self-preservation and the image of the lab
than with their responsibility to the American public.
One would think that news of individuals using government
funds to procure items such as lockpicking sets, hunting
knives, golf equipment, and numerous other illegitimate
purchases would immediately raise flags and touch off
disciplinary and other actions.
What little we have seen at Los Alamos in that regard came
only after inquiries by this committee, the press, and the
Department of Energy's Inspector General. Energy and Commerce
Committee staff uncovered serious problems. The staff
investigation brought to light the fact that Los Alamos
National Laboratory has no system in place to conduct inventory
review for items that are either not sensitive, computers and
the like, or cost less than $5,000.
In fact, the Department of Energy does not require
inventory controls for such items. According to committee
documents, as of February 2002 items that were either sensitive
or worth more than $5,000 went unaccounted for to the tune of
$723,000, and millions of dollars worth of very expensive
equipment were stolen as well.
This leads me to the question whether the problems we are
seeing at Los Alamos extend to the broader Energy Department,
and Mr. Chairman, I hope you will consider calling Secretary
Abraham and Acting National Nuclear Security Administration
Administrator Brooks to come to discuss these issues with the
subcommittee.
Beyond the staff mismanagement and illegal procurement
issues, what troubles me most is the retaliation against Los
Alamos personnel who tried to investigate allegations of abuse
of taxpayer funds, and it sounds like from the opening
statements so far that this is a major concern to the committee
and its leadership.
These individuals were doing their patriotic duty by
raising concerns over Los Alamos' serious management failures,
and instead of being commended and encouraged, they were fired.
Mr. Chairman, I want to thank you again for convening this
important hearing. Improving homeland security and taking care
of our struggling economy are top priorities for my
constituents and those around the country. What went on at Los
Alamos undermines both of those important efforts, and I look
forward to working with you to improve the situation.
If we cannot at least root out theft and mismanagement at
Los Alamos, how can we confidently guaranty the security of the
Nation's nuclear weapons stockpile to the American people? I
welcome our witness and look forward to their testimony.
Mr. Greenwood. The Chair thanks the gentlelady. The
gentleman from Oregon, the vice chairman of the subcommittee,
Mr. Walden, do you wish to make an opening statement?
Mr. Walden. Thank you, Mr. Chairman. I am going to waive my
opening statement under our rules to give my time at Q&A.
Mr. Greenwood. Very well. Mr. Ferguson has come and gone.
Mr. Rogers?
Mr. Rogers. I will waive my statement, Mr. Chair.
Mr. Greenwood. All righty. Now we are joined by other
members of the full committee who are not members of the
subcommittee, Mr. Radanovich, Ms. Wilson, Ms. Eshoo. Mr. Markey
is expected. We are also joined by Ms. Tauscher of California
and Mr. Udall of New Mexico who will be observing. Glad to have
their presence as well.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. George Radanovich, a Representative in
Congress from the State of California
Mr. Chairman, today's hearing is a vital step in restoring and
maintaining confidence in the national security of our nation. I
strongly believe in the outstanding work of Los Alamos and in its
employees.
The most unfortunate aspect of the issue before us today is that
the apparent wrongdoing by a few employees has reflected badly on the
exceptional work by so many others who devote themselves to the
nation's security.
I continue to have confidence in the high quality of the weapons
program and the scientific and technical work of Los Alamos. By taking
many corrective steps, I believe the lab recognizes that the business
and administrative practices of the laboratory need to be revamped so
that they will rise to a level of quality similar to the quality of the
science at the lab.
In order to restore the confidence of the nation, the lab has
implemented numerous oversight changes involving administrative and
business operations:
The University has made sweeping management changes at Los
Alamos, and senior University administrators have taken on
direct, personal responsibility for managing Los Alamos
functions;
President Atkinson has established an interim Oversight Board
of University Regents and scientific experts to guide the
Interim Director;
All administrative and business operations will report to the
University of California Office of the President, for the
purpose of ensuring that the recommended changes to laboratory
business practices are implemented in a timely and effective
manner;
the University has directed an External Review Team to expand
its recently completed review of the Lab's purchase card
system;
As soon as the expanded work is done, the Lab will report the
results to the Committee and to the public and will immediately
address any deficiencies identified by the External Review
Team.
These changes reflect the University's deep concern about the
allegations that have been made about Los Alamos business practices and
their absolute and steadfast commitment to addressing them in a timely
manner.
I trust the Lab will continue to cooperate fully with the
legislative bodies and agencies investigating these matters, and to
support the thousands of dedicated employees at Los Alamos so that they
can remain focused on their valuable work on behalf of the American
people in a time of war.
Mr. Chairman, I look forward to working with you to ensure that
Congress and this committee are satisfied that the University of
California lives up to its long history of exceptional service to this
nation.
______
Prepared Statement of Hon. Mike Ferguson, a Representative in Congress
from the State of New Jersey
I would like to thank the Chairman for holding this important
hearing and for his ongoing work investigating fraud and the abuse of
government procurement procedures.
My constituents expect their tax dollars to be managed properly,
and I know they appreciate the Chairman's scrutiny of matters where the
public's trust is broken.
We are here today to investigate possible wrongdoing at a vital
national institution, where order, secrecy and adherence to regulation
are essential.
Last fall, word of procurement improprieties at the Los Alamos
National Laboratory came to the Committee's attention, prompting swift
and necessary action.
The allegations surfacing from Los Alamos are startling. It is
reported that audits have revealed that the lab has lost $2.7 million
in computers and other technical equipment. In addition, a lab-
sponsored audit has uncovered millions of dollars in unsubstantiated
procurement credit card purchases, allegedly ranging from camping
equipment to a Ford Mustang.
Mr. Chairman, Homeland Security must be one of our highest
priorities, and it goes without saying that security at our nation's
nuclear institutions is essential. I look forward to hearing from the
witnesses today, identifying the problems at the lab and working to
continue the process of securing the Los Alamos facility.
It is crucial that corruption and wrongdoing are rooted out from
our most sensitive facilities, and I believe that this hearing is a
step toward that goal. Thank you again, Mr. Chairman for you continued
scrutiny of this matter.
______
Prepared Statement of Hon. Anna G. Eshoo, a Representative in Congress
from the State of California
I'd like to thank Chairman Greenwood and Ranking Member Deutsch as
well as the Chairman and Ranking Member of the full Committee Mr.
Tauzin and Mr. Dingell for allowing me to participate in this important
hearing.
The accusations of fraud, mismanagement, and reprisals against
whistleblowers at the labs managed by the University of California,
both Los Alamos and Lawrence Livermore Labs, are extremely serious and
sobering.
Clearly, there have been errors that the University of California
must take full responsibility for.
Systemic changes must be instituted to ensure that whistleblowers
are protected, respected and never against.
The University of California must also resolve these serious abuses
in a way that provides the Members of this Committee, the full Congress
and the American people a certainty that they will not occur again.
This hearing offers the University of California the opportunity to
tell the Congress and the American people what it has found and what
they are doing to remedy the serious problems at Los Alamos.
It is important for this hearing to be followed by six-month
progress reports for the foreseeable future.
It is critical that the University of California demonstrably
reaffirm that the protection of our national security is its highest
priority and that it has not been compromised.
The work done by the labs includes some of our nation's most
guarded secrets.
We must be confident that these secrets and the work of the labs
has not and will not be compromised.
As we examine the management problems that have been uncovered by
this Committee, the Inspector General, and through the University of
California's own internal investigation, we must also keep the
important work done at the labs in proper perspective.
This important work and the research that the labs conduct are
critical to protecting America from hostile regimes and terrorist
organizations.
Recent events have illuminated this work.
For example, shortly after the September 11th terrorist attacks,
Lawrence Livermore National Laboratory reported that North Korea was
resuming its nuclear weapons program.
The International Atomic Energy Agency weapon's inspectors who are
currently in Iraq were trained at Los Alamos.
We've recently read about a new weapon developed jointly at
Lawrence Livermore and Los Alamos that could knock out a region's
electric circuitry without harming civilians.
The work the Labs is ongoing and critically important to our
collective homeland security.
Finally, the University of California must demonstrate their
commitment to changing the culture of mismanagement that has existed at
the Labs over the years. This is indisputable.
I encourage this Committee to continue its important role in
overseeing this commitment, affording the University of California the
opportunity to see them through.
Mr. Greenwood. With that, I would ask unanimous consent.
One of the witnesses, Mr. Jaret, has photographs that
supplement his testimony, and without objection--well, I would
ask for unanimous consent that he be permitted to show the
photographs. Seeing no objections, that will be in order.
At this time, I would advise our witnesses that, pursuant
to the rules of this subcommittee and the rules of this House,
you are entitled--well, we take our testimony under oath here.
Do you have any objections to giving your testimony under oath?
Okay.
You are also entitled to be represented by counsel. Do any
of you wish to be represented by counsel this afternoon? In
that case, if you would stand and raise your right hands, I
will swear you in.
[Witnesses sworn.]
Mr. Greenwood. So saying, you are all under oath, and we
will recognize Mr. Walp first for your opening statement, sir.
Welcome.
TESTIMONY OF GLENN A. WALP, CONSULTANT, OFFICE OF THE
PRESIDENT, UNIVERSITY OF CALIFORNIA; ACCOMPANIED BY STEVEN L.
DORAN, CONSULTANT, OFFICE OF THE PRESIDENT, UNIVERSITY OF
CALIFORNIA; AND JARET McDONALD.
Mr. Walp Thank you. Honorable Chairman Greenwood and
Honorable Members of the subcommittee, ladies and gentlemen,
good afternoon. My name is Glenn Walp. I was Director of the
Office of Security Inquiries (OSI) at the Los Alamos National
Laboratory from January 22, 2002, until Laboratory officials
terminated my employment on November 25, 2002.
I hold a bachelor's and a master's degree in criminal
justice, and I am in the proposal stage of my doctorate in
criminal justice. I am graduate of the FBI National Academy,
the FBI National Executive Institute. Among the many law
enforcement positions I have held, I was Commissioner of the
Pennsylvania State Police, the largest State police
organization in America, a member of the Governor's cabinet,
and responsible for administering a budget of over $400
million.
When I first came to Los Alamos, Mr. Stanley Busboom, my
second level manager, and Mr. John Tucker, my immediate
supervisor, told me that I was hired because of my expertise in
law enforcement. They told me to professionalize all OSI
operations, and candidly acknowledged to me that much of the
OSI staff was incompetent, and their work product was severely
deficient.
They told me to bring in new staff, which I did. In the
first few months, I improved the OSI reporting system, which
was in disarray, ensured training of OSI personnel in good
investigative practices, and initiated investigations on major
security and safeguards issues.
Although many lab employees told me that they were
delighted to see my office address the serious and pervasive
problems of theft and gross waste of government funds, it was
not long before my supervisors began to obstruct my efforts and
those of other OSI employees.
With the encouragement of senior management, on March 26,
2002, I completed a report that identified the total failure of
laboratory management to do anything about massive theft at the
laboratory. I later proposed to Mr. Tucker a plan to have the
FBI get involved in investigating these problems. Mr. Tucker
adamantly rejected my proposal on the ground that the lab did
not want the FBI back at the lab after the Wen Ho Lee case and
missing hard driver computer case--or missing hard drive
incident.
Mr. Tucker also told me, in what became a very common
refrain, that if I pursued the theft problems, it could not be
good for upper management or the laboratory's image. When I
found that much of the stolen property at the lab was
deliberately mischaracterized as lost, salvaged or dismantled,
my findings were ignored.
When Mr. Steve Doran, working under my supervision,
corroborated that two facility managers had purchased almost
$400,000 in questionable goods through the laboratory's
purchase order system, Mr. Frank Dickson, the lab's chief
counsel, told me that Mr. Joseph Salgado, the Deputy Director,
and he were concerned that my investigation could bring
negative publicity to the lab and adversely affect the
University of California's contract with the Department of
Energy.
When I continued to pursue the issue, Mr. Dickson
obstructed my office and the FBI's efforts to obtain necessary
documents. When we persevered in our efforts, Mr. Busboom told
Mr. Doran and me directly that Mr. Dickson would level me with
both barrels and would fire Mr. Doran if we interfered with Mr.
Dickson's relationship with the FBI, the DOE IG or the U.S.
Attorney.
It was the same with all of our other investigations. That
is, inquiries into problems with local vendors, the credit card
system, and the purchase order system. Mr. Salgado, Mr.
Dickson, Mr. Tucker and Mr. Busboom obstructed our
investigations, administratively resolved matters so as to
cover up Federal felonies, and ultimately fired Mr. Doran and
me. The reasons the managers gave for their actions were always
the same: Our job was to protect UC and UC's contract, not the
United States taxpayer.
What we know now is that Mr. Salgado and other lab managers
believed that Mr. Doran and I were the source of documents
leaked to the press that revealed massive fraud by lab
employees, and in order to prevent us from talking to DOE
Inspector General investigators which came to investigate the
fraud allegations, they willfully fired Mr. Doran and I. The
only reason they gave later was that we did not fit.
They were accurate about that. We did not fit. We were
intent on doing our jobs with integrity and stopping the
massive fraud and mismanagement at the lab. Even today, despite
all the publicity, the Congressional interest, and the DOE
investigations, the lab has not changed.
Many of the same lab managers responsible for obstructing
us and the FBI are still at the lab, drawing their same
salaries. Although administrative regulations and laws have
been violated, no action has been taken against these
individuals.
It is time for Congress, the DOE, and the American public
to call a halt to the lab's activities and make a long overdue
change.
A written statement is attached to my opening statement,
clarifying the details of the obstruction and the
mismanagement, and I will gladly respond to any questions that
you may have in this matter, and I thank you for inviting me
here today to this assembly.
[The prepared statement of Glenn A. Walp follows:]
Prepared Statement of Glenn A. Walp, Consultant, Office of the
President, University of California
In mid-2001 I applied for a nationally advertised position as
Office Leader of the Office of Security Inquiries (OSI) at the Los
Alamos National Laboratory (LANL). Publicized responsibilities included
conducting investigations into thefts, protecting property, and being
responsible for the strategic and tactical planning of all OSI
operations.
I was selected for the position with a $10,000.00 bonus if I could
arrive by mid-January, 2002; I was hired on January 22, 2002. I learned
that one of the reasons I was hired, and with specificity prior to the
end of January, was because my employment fulfilled a standard within
the Department of Energy (DOE) Appendix O mandate, ensuring the Lab
would receive supplemental funding (multi-million dollars) from DOE.
I was advised by my Division Leader, Stanley Busboom and my Deputy
Division Leader, John (Gene) Tucker that the reason I was hired was
because of my extensive law enforcement experience and expertise,
especially in criminal investigations. I was told by Busboom and Tucker
to professionalize all OSI functions as I deemed appropriate, and they
would support me in my efforts.
I fulfilled all job requirements and supervisory directions in
totality, receiving a 100%-plus rating for my performance of duty on
October 2, 2002. Statements within that rating included: ``Mr. Walp has
not faltered''; . . . ``applied . . . hands-on leadership and
management''. ``A pro-active and caring leader . . . a strong and
professional manager . . . very effective performer''.
Shortly after my arrival I was contacted by the Office Leader of
the Office of Internal Security, Ken Schiffer, who proposed there was
significant theft occurring at the Lab. Tucker agreed with Schiffer's
postulation, stating theft has been so rampant at the Lab ``it has been
making the valley green for years''. Subsequently I was ordered by
Busboom to conduct research and submit a written report on the theft
issue.
Preliminary data disclosed that OSI inquiry reports were severely
lacking in investigatory analysis; property was inappropriately handled
as lost, salvaged or dismantled when in fact it was stolen; major theft
occurred at unsecured drop points; and most importantly, there was a
severe problem with lost property. That is, although it was the spring
of 2002, the Business Division did not have accountability of over 700
pieces of property that was identified as lost in 1999 through 2001,
amounting to approximately $2.7 million. Lost items included: nearly
260 computers; 124 printers; 48 radios; 37 cameras; a $25,000.00
thermal analyzer; $25,000.00 control milling machine; $35,000.00 2-ton
magnet; $32,000.00 magnet lifting unit; $33,000.00 wire brush; $23,000
water tank; $27,000 remote terminal; $11,000 copier; $20,000
spectometer; $20,000.00 module oscillator; 2 work stations worth
$47,000.00; $11,000.00 cryogenic refrigerator; 2 trailer vans worth
$19,000.00; and a $6,000.00 forklift. It was investigatory speculation
that many of the items reported as lost were actually stolen.
The requested theft report was submitted to Busboom on March 26.
After submitting the March theft report I learned that theft was
occurring within the purchase card and purchase order programs, but the
most egregious area was most likely in the Local Vendor Agreement (LVA)
and Just In Time (JIT) systems. The LVA and JIT systems allows a Lab
employee to use their personal identification badge as a credit card,
with little to no audit controls. Lab personnel proposed that the LVA
and JIT systems were so flagrant that any employee, for example, could
have a computer installed in their residence and no one would ever
know. These same personnel advised me that they had been telling their
supervisors and administrators about this theft for years, but these
Lab officials would not take any action to resolve the problems.
Memorandums had been prepared by Business Division personnel in the
fall of 2001, warning of the problems associated with the purchase card
system, yet their supervisors failed to take any action. Other BUS
Division memorandums were prepared after the release of the March theft
report, confirming the severity of the theft, and the egregious
mismanagement of Lab auditing and property control systems.
I asked Tucker to allow me to work with the FBI to address this
blatant theft. Tucker rejected my request, stating that because of the
Wen Ho Lee and hard drive cases the Lab did not like the FBI coming
into their domain. Tucker also proposed that if I continued in my
efforts I am liable to determine that high level Lab management are
involved in these thefts and that would not be good for the Lab's
image.
criminal incidents uncovered
Between June and September, 2002, five major criminal incidents
were disclosed.
NIS Incident
Unbeknownst to me, during 2001, major theft was occurring in the
Nonproliferation International Security (NIS) area. Information on this
criminal activity had been given to Lab authorities Bill Sprouse,
Tucker, Katherine Brittian, and Scott Gibbs, by certain Lab employees,
but these authorities failed to take any substantive action. The
employees became disenchanted with the cavalier approach of these Lab
officials, consequently making a complaint with the FBI on June 24,
2002. On July 1, 2002, the FBI assumed the NIS investigation in
conjunction with OSI.
The major method of theft used by the NIS suspects was the purchase
order system. A review of purchase order transactions by the suspects
in the last 18 months revealed over $400,000.00 in questionable
purchases. Purchases included:
Ninety-two hunting knives; 72 hunting-type jackets and shirts; 26
GPS systems; 32 pairs of fishing/hunting-type boots; 22 cameras; 6
Rototillers; and 56 different types of lock pick and glass cutting
devices. Other items included a go-cart; motorcycle helmets (2
children); model airplanes; sleeping bags; plumbing fixtures; truck
beds; and shock absorbers.
The FBI apprehended two suspects in this case on October 31, 2002.
Mustang Incident
Lab employee Lillian Anaya was suspected of attempting to purchase
a Ford Mustang with parts, amounting to nearly $30,000.00, using a
government credit card. Stanley Hettich, a Business Division
administrator willfully failed to report this crime to OSI, indicating
he had not reported any similar type situations to OSI in the last
three years. Hettich suggested that the ESA Division had gone native,
and the whole system of property purchase was out of control. Hettich
blamed Mr. Richard Marquez and Mr. Joseph Salgado for this failing,
because they ordered him to give Lab employees anything they wanted;
customer satisfaction was the key.
Casino Credit Card Incident
Lab employee Mary Wood used a government credit card to purchase
personal items, and secure cash at local casinos. Salgado directed that
Wood should not be interviewed and she should just be fired. Tucker
recommended that she not be interviewed because she would not confess
and it would be a waste of time. Security Specialist Steven Doran, OSI,
interviewed the subject at which time she confessed. Immediately after
the confession Dickson ordered that all the reports be submitted to him
and he would determine what would happen to the case.
Tool Incident
Lab employee Orlando Smith was suspected of improperly purchasing
tools amounting to approximately $1.2 million in 12 months, from an
unauthorized vendor, while misusing a government vehicle.
Forged Voucher Incident
Lab employee Clarissa Rodriguez forged a government voucher for
$1,800.00.
The aforesaid investigations were initiated in accordance with
professional investigatory processes, but were quickly tainted by
persistent interference and obstruction by multiple Lab officials. This
interference and obstruction included:
overall interference and obstruction
Contrary to an original agreement between the FBI and the Lab, all
documentary reports needed by OSI or the FBI had to be reviewed and
approved by Frank Dickson, the Lab Chief Counsel prior to distribution.
This system severely hampered investigative processes, and in one case
the FBI waited for approximately six weeks to receive a much-needed
report because Dickson failed to act on the request.
Dickson verbally oppressed Doran and me to reveal all confidential
FBI investigative information to individuals who had no need to know
and should not have known. Dickson had been previously warned by the
FBI not to tell anyone about this information especially anyone in the
Audits and Assessments Division because there was suspect in that
division. Notwithstanding, Dickson forcefully ensured confidential
information was given to a member of the Audits and Assessments
Division, placing multiple OSI/FBI investigations in jeopardy.
Ms. Chris Chandler, an employee of Dickson, attempted to forcefully
secure confidential FBI investigative notes from me, through verbal
intimidation; she was refused access to the notes. During the discourse
she stated that she did not care about anyone's constitutional rights
or the successful prosecution of an FBI investigation. If Chandler
would have obtained these notes it could have jeopardized multiple OSI/
FBI investigations.
Dickson attempted to force the FBI to take premature investigative
action against multiple suspects, threatening he would place the
suspects on investigative leave unless the FBI acquiesced to his
demands. The threatening action of Dickson, if brought to fruition,
would have placed the NIS and Mustang cases in jeopardy.
nis incident
Dickson attempted to gain entry into an area that contained
suspected NIS stolen property placing an FBI investigation in jeopardy.
After being refused by the FBI, Dickson became irate at Doran and Walp
because they failed to cajole the FBI into allowing him access.
Salgado and Dickson directed, through Busboom and Tucker, to remove
Doran and Walp from the NIS investigation two days before culmination
of that investigation. Despite the pleas of the FBI to allow Walp and
Doran to remain on the case because they were integral to the success
of that investigation, Busboom adamantly refused. The only reason given
by Busboom for this action was that it was ``Dickson's payback against
Walp'' for Walp challenging Dickson's improprieties in the forged
voucher incident.
mustang
Dickson directed that potential FBI criminal evidence held in
official OSI investigatory control, be taken from OSI, thereby breaking
the chain of evidence and jeopardizing an FBI investigation.
Chandler conducted a dual inquiry on this case that had the
potential of obstructing the FBI investigation.
forged voucher
Dickson, Tucker and Phillip Kruger of the Laboratory Human
Resources Division, conspired to cover up this federal felony by
failing to immediately notify an appropriate criminal justice
authority, and handled the case administratively. Although Tucker
originally agreed this was a federal felony that must be investigated
by a federal law enforcement agency, he then recanted, explicating to
me, since the property did not belong to the United States taxpayers,
but rather the University of California (UC), there was no crime.
Hence, that is why Dickson has the authority to do anything he wants
with any crime that occurs on Lab property. Tucker also said that all
property and monies in control of the Los Alamos National Lab does not
belong to United States taxpayers because it is UC property and monies.
walp and doran warned to comply with lanl's corporate philosophy/
culture
Doran and I were consistently warned that our major job was not
inquiry into crime, but rather, protection of the Lab, its image, and
ultimately the UC contract. Concerning this issue paraphrased comments
included:
Dickson stated to Walp--
Salgado is concerned about the NIS case bringing negative PR to
the Lab, which may negatively affect the UC contract, therefore
I (Dickson) will keep a pulse on all FBI activity.
While preparing a news release on the Anaya and Wood cases, Dickson
wanted to keep information out of the release concerning the total
amount of thefts committed by Wood, stating ``what we're looking at is
protecting the Lab here''.
Dickson stated to Walp and Doran--
We need to remember who we work for, who is our boss and that
is the Lab, not the FBI. That is the way it is, we must look
out for the Lab and its image first, not the FBI investigation.
Salgado stated to Walp--
I am concerned that the Mustang and tool cases may generate bad
PR for the Lab, which may negatively affect the Lab's contract.
The critical aspect of the Mustang case is the bad PR for the Lab,
not the illegal attempt to purchase the vehicle.
Chandler stated to Walp--
I am not concerned about violating anyone's constitutional
rights or interfering with an FBI prosecution; my job and your
job is to protect our employer, the Lab.
Busboom stated to Walp and Doran--
Of critical importance is protecting the UC contract, and it
should be the primary concern of you as you perform your OSI
functions; your major job is not law enforcement or helping the
FBI, but to protect the Lab and its contract.
Tucker stated to Walp--
If you continue your efforts in ferreting out Lab theft you may
find that high management personnel are implicated and that
would not be good for the Lab's image.
Dickson doesn't want UC to be embarrassed concerning the Mustang
case, so they are going to take action that forces the FBI to move on
the case, because Lab officials must look out for the Lab first, its
image, and not the FBI investigation.
Your main job and that of OSI is to protect the Lab, Lab people,
the Lab contract and the Lab image above anything else; Tucker
identified this concept as ``corporate philosophy'' and/or ``corporate
rules''. The corporate rules must be followed by you and other OSI
members if they are to be successful as Lab employees.
Tucker states to Walp and Doran--
You need to know that your major responsibility is to your
employer, the people who pay your checks, therefore you must ensure
that you protect them, their image, and the UC contract.
reason for terminations
Lab officials have progressively espoused multiple reasons for the
terminations of Doran and Walp, to include: (a) They didn't fit
(contained in their termination papers); yet Busboom refused to
elaborate on what that meant; (b) Doran and Walp didn't get along with
certain groups and/or individuals at the Lab. The groups and/or
individuals identified in a Lab press release as the groups and/or
individuals they did not get along with, were groups or individuals who
were either suspects in crimes, or were interfering or obstructing OSI/
FBI investigations; (c) Salgado proposed that the reason was that a
chronology of the Mustang case contained incorrect telephone data
obtained from OSI. This insignificant issue was an inadvertent error of
an OSI employee, not Walp or Doran. The issue was quickly corrected,
and had no significance to the relevant factors associated with the
case; (d) Salgado said it had to do with FBI investigatory issues
concerning the wearing of a body wire, and the number of suspects
involved in the NIS case. All data on these matters were accurately and
completely forwarded to Salgado in a timely manner, with the
clarification that these issues were under the control of the FBI, not
OSI; and (e) Dickson proposed the reason was because Doran and Walp had
a poor relationship with the FBI. Recent investigation into this
allegation by a federal investigator found this accusation to be
totally erroneous.
In January of 2003, it was disclosed by a UC official that the
actual reason for our terminations was, as originally proposed by Doran
and Walp, a willful attempt by Lab officials to prevent Doran and Walp
from talking to DOE Inspector General
Investigators. The reason, according to the official, was because
they were fearful of what we would reveal to these investigators
concerning the crime, mismanagement and corruption at the Los Alamos
National Lab.
threats
During the course of our employment Doran and I were consistently
threatened that our efforts to approach our responsibilities from a
point of integrity, without regard for the Lab contract, would cause us
problems. For example:
1. Tucker stated to Doran and me, that we must be careful in
challenging the ethics of Lab officials because the Lab is
famous for sacrificing its children for the sake of its image.
2. Busboom told Doran and me, Dickson would level me with both barrels
and would fire Doran if we interfered with Dickson's
relationship with the FBI, the DOE IG, or the U.S. Attorney.
3. Busboom, Tucker and John Tapia told Doran and me they believed
Dickson was attempting to make us scapegoats; that Dickson was
trying to blame Walp and OSI for his own shortcomings; and
Dickson was conspiring to get people to falsely accuse Walp of
being uncooperative.
issues that still need to be addressed
Although much has been accomplished in addressing the theft,
mismanagement and corruption of the Lab, there is still much to do. For
example:
1. All lost reports for the last decade need to be reviewed item-by-
item, to ascertain, with specificity, their locations. The Lab
uses a classification system that identifies property as
salvaged, dismantled and retired. It is hypothesized that these
classifications have been used to cover up for lost and stolen
items. It is speculated that if these classification reports
were reviewed, the microscope would reveal significant fresh
ink.
2. Since Johnson Control of Northern New Mexico never reported any item
of theft under $5,000, the details of this unknown needs to be
analyzed.
3. A November 7 Price-Waterhouse-Coopers (PWC) perfunctory report,
illustrated $153 million dollars of questionable ``purchase
card'' transactions, while a review of questionable ``purchase
order'' transactions by NIS personnel amounted to approximately
$400,000.
Thus, all Lab ``purchase card'' and ``purchase order''
transactions need to be analyzed item-by-item, purchaser-by-
purchaser, for at least the last decade. It is theorized that
the attempted Mustang purchase and the illegal purchase orders
within NIS were not the first situations of this type
effectuated by these illegal processes.
4. All voucher transactions for the last decade should be reviewed for
illegalities.
5. It is proposed that the most egregious area of theft is contained
within the LVA and JIT systems. A comprehensive analyses of
these purchases for the last decade needs to be completed.
Doran and I had multiple cases we had no opportunity to
investigate, but need to be addressed. They include:
1. Significant theft of gasoline.
2. Two cases of potential fraud that may involve kickbacks to present
and former employees of the Lab.
3. Steve and I were recently contacted by multiple individuals,
proposing that they were aware of major fraud and theft that
had occurred at the Lab in previous years, amounting to
multiple millions of dollars in theft and fraud.
4. There are outstanding issues concerning criminal matters. Such as:
(a) theft of FBI evidence from an OSI office; (b) the
possibility of federal/state crimes being committed by Lab
officials; and (c) that crimes although known by Lab officials,
were never reported to an appropriate authority. As of this
date, Security Specialists James Mullins and Doran, and I, have
never been contacted by any law enforcement agency for official
interviews, notwithstanding we are critical witnesses to these
matters.
I attempted to effectuate a Federal Bureau of Investigation (FBI)
investigative task force to address these blatant failings, but the
plan was soundly rejected by my immediate supervisor.
Between June 24th and September 20th five major criminal
investigations were unraveled.
Although these investigations commenced in accordance with
professional investigatory processes, by August these systems began to
be tainted by interference and obstruction by certain Lab officials.
Namely:
1. Contrary to an original agreement between the FBI and the Lab, Frank
Dickson, the Lab Chief Counsel, ordered that all documentary
evidence had to be personally approved by him prior to
distribution; he attempted to force the FBI to take premature
investigative actions; he verbally oppressed Steven Doran and I
to reveal confidential FBI investigative information to people
who should have not known; he directed that potential FBI
criminal evidence held in official OSI investigatory control be
forcefully taken from the custody of OSI, thereby breaking the
chain of evidence control; and he ineptly attempted to gain
access into an area where suspected stolen property was stored.
These acts either hampered or had the potential of obstructing
FBI investigations.
2. Chris Chandler, an employee of Dickson, through verbal intimidation,
attempted to secure confidential FBI written notes from me,
indicating within that discourse that she was not concerned
about a person's constitutional rights or a successful FBI
prosecution; and, she conducted a dual inquiry that had the
potential of obstructing an FBI investigation.
3. Stanley Hettich, a Business Division administrator, willfully failed
to report criminal activity occurring within his area of
responsibility, admitting he had not reported any similar
situations in the last three years.
4. John (Gene) Tucker, my immediate supervisor inappropriately forced
Doran and me to remove certain ``spy type'' information from an
official OSI inquiry report; and, advised Doran and me that we
would be sacrificed as children of the Lab for the sake of the
Lab's image, if we challenged the ethics of Lab officials.
5. Dickson, Tucker, and Phillip Kruger of the Laboratory Human
Resources Division, willfully failed to immediately notify an
appropriate criminal justice authority, as it pertained to the
crime of forgery of a federal voucher.
6. Stan Busboom, my Division Leader, and Tucker, removed Doran and
myself from an official FBI investigation two days before
culmination of that investigation, and to the potential
detriment of that investigation.
7. Busboom stated to Doran and me that unless we ensured there was a
positive relationship between Dickson and the U.S. Attorney and
the FBI, Dickson would level me with both barrels and Doran
would be fired.
8. Busboom and Tucker opined that Salgado and Dickson were attempting
to make Doran and me scapegoats.
9. Doran and I were warned by a Lab official that Dickson was
attempting to fabricate negative information against Doran and
me and that Tucker was involved in this conspiracy.
Doran and I were consistently advised by multiple Lab officials
that our major role was not inquiry into crime, but the protection of
the Lab and its image, for the purpose of protecting the University of
California contract.
Although much has been accomplished in addressing the theft,
mismanagement and corruption of the Lab, there is still much to do. For
example:
1. All lost reports for the last decade need to be reviewed item-by-
item, to ascertain, with specificity, their locations. The Lab
uses a classification system that identifies property as
salvaged, dismantled and retired. It is hypothesized that these
classifications have been used to cover up for lost and stolen
items. It is speculated that if these classification reports
were reviewed, the microscope would reveal significant fresh
ink.
2. Since Johnson Control of Northern New Mexico never reported any item
of theft under $5,000, the details of this unknown needs to be
analyzed.
3. A November 7 Price-Waterhouse-Coopers (PWC) perfunctory report,
illustrated $153 million dollars of questionable ``purchase
card'' transactions, while a review of questionable ``purchase
order'' transactions by NIS personnel amounted to approximately
$400,000.
Thus, all Lab ``purchase card'' and ``purchase order''
transactions need to be analyzed item-by-item, purchaser-by-
purchaser, for at least the last decade. It is theorized that
the attempted Mustang purchase and the illegal purchase orders
within NIS were not the first situations of this type
effectuated by these illegal processes.
4. All voucher transactions for the last decade should be reviewed for
illegalities.
5. It is proposed that the most egregious area of theft is contained
within the LVA and JIT systems. A comprehensive analyses of
these purchases for the last decade needs to be completed.
Doran and I had multiple cases we had no opportunity to
investigate, but need to be addressed. They include:
1. Significant theft of gasoline.
2. Two cases of potential fraud that may involve kickbacks to present
and former employees of the Lab.
3. Steve and I were recently contacted by multiple individuals,
proposing that they were aware of major fraud and theft that
had occurred at the Lab in previous years, amounting to
multiple millions of dollars in theft and fraud.
4. There are outstanding issues concerning criminal matters. Such as:
(a) theft of FBI evidence from an OSI office; (b) the
possibility of federal/state crimes being committed by Lab
officials; and (c) that crimes although known by Lab officials,
were never reported to an appropriate authority. As of this
date, Security Specialists James Mullins and Doran, and I, have
never been contacted by any law enforcement agency for official
interviews, notwithstanding we are critical witnesses to these
matters.
Most recently Steve and I, and our attorney were informed by a top
administrator of the University of California that he has direct
evidence that we were wrongfully terminated because Lab officials did
not want us speaking to DOE Inspector General Investigators.
The aforesaid is an overview of the issues I encountered when
employed by the Lab.
I am prepared to answer any questions that you may have concerning
these and associated matters.
Thank you.
Mr. Greenwood. Thank you, Mr. Walp.
Mr. Doran.
TESTIMONY OF STEVEN L. DORAN
Mr. Doran. Good afternoon, Chairman Greenwood, members of
the subcommittee, ladies and gentlemen. Thank you for inviting
me here to testify. My name is Steven Doran.
Los Alamos Laboratory recruited me to work as an
investigator in the Safeguards and Security Division in the
spring of 2002. The recruiter who approached me told me the lab
was having serious problems with national security and theft
and needed people like me to come in and help them clean it up.
The lab recruiter encouraged me to take the job, because
working at the lab would be a service not only to the
laboratory but to my country as well. I went to Los Alamos with
the hope that I could be part of a broad effort to stop the
rampant theft at the lab and protect the security of the
country's most important nuclear secrets.
I started work on July 15, 2002. A few days later I began
work with the FBI on the Bussolini and Alexander case where the
two managers at the lab had misused the government purchase
order system to steal hundreds of thousands of dollars in
property.
In the following days and months, I saw the FBI and my
successful investigative efforts in this case and all other
cases I was working on thwarted by the lab's upper level
management, Joseph Salgado, Frank Dickson, Gene Tucker and Stan
Busboom. Lab managers from other departments including Richard
Marquez, Stan Hettich, Dick Stickler, Vernon Brown and John
Tapia attempted to cover up, change and conceal information
from our office.
These lab managers and lab counsel Dickson continue to make
innuendos and threats to Mr. Walp, and my employment could be
in jeopardy if we continued investigating the rampant misuse of
government credit cards and the purchase order system.
Because of the productive working relationship that I
developed with the FBI, Special Agent Jeffrey Campbell, Mr.
Busboom told me specifically I had to protect the lab's
relationship with the FBI and the United States Attorney or I
would be fired. He made it clear that he wanted me to
participate in the cover-up of major crimes at the lab and use
my good relationship with the FBI to prevent them from
investigating these matters on their own.
Although I always followed orders given to my by my
superiors, I refused to cooperate in their cover-up. My upper
level managers refused to provide me and the FBI with documents
we needed for our investigations, discouraged me from
interviewing key witnesses, disseminated information about our
investigation to the targets of those investigations, and
administratively settled cases so that the United States
government could not criminally prosecute the wrongdoers.
By October, almost all of my investigations had been
stopped or bottlenecked in Mr. Dickson's office. Less than 3
months after I started work at Los Alamos, I spent most of my
day defending my position that we were working to protect the
taxpayer funds and national security rather than the University
of California contract.
This meant I had to do my real work at night and on the
weekend. Despite the FBI's repeated requests that the
laboratory management reconsider and assign us to help them,
the managers refused to let us help the FBI. Dedicated former
and current employees at the laboratory supported us and kept
on reporting things to us, even after management began to
retaliate against us.
I received a call about a possible espionage matter which I
passed on to the Counterintelligence Division. When the
division did nothing, I called and e-mailed again. As far as I
know, the laboratory never followed up on this matter.
After I was terminated I got calls from former employees
who had documented millions of dollars in frauds but were
ignored by lab management. All of these people responsible for
management of the lab, all but one, still have a job at Los
Alamos. A number of the managers who thwarted our
investigations remain in positions of authority, and are
working actively to conceal the enormity of the problem of
theft and misuse of government monies.
Just before I left New Mexico to come to this hearing, a
number of Los Alamos employees brought me new documentation
that they believe demonstrate that these same managers are
giving false information to UC and the Department of Energy
about expenses charged on purchase cards as late as January of
2003.
To me, this demonstrates why UC needs to take these
managers out of their positions of responsibility at the lab.
It is unfortunate that it took the current crisis of competence
to put the lab's problems on the national agenda. By now
Congress and DOE are actively exercising oversight and
requiring accountability.
It looks as though the University of California is trying
to do something about these problems. Another step in UC's
accountability to the lab has to be to take these managers out
of their current jobs and put in fully reliable and honest
employees.
I hope that Mr. Walp and my termination has a silver
lining. It brought Los Alamos to its senses about putting some
order into its house so that it can go about doing important
work in the way that best serves the citizens of the United
States.
Thank you.
[The prepared statement of Steven L. Doran follows:
Prepared Statement of Steven L. Doran, Consultant, Office of the
President, University of California
Good afternoon. Chairman Greenwood, members of the Subcommittee,
ladies and gentlemen:
Thank you for inviting me here to testify. My name is Steven Doran.
Los Alamos Laboratory recruited me to work as an investigator in the
Safeguards and Security Division in the Spring of 2002. The recruiter
who approached me told me that the Lab was having serious problems with
national security and theft, and needed people like me to come in and
help them clean it up.
After interviewing with Mr. Walp, Mr. Michael Wismer and Ms. Nina
Epperson, the Lab offered me the job. The Lab recruiter encouraged me
to take the job, because working at the Lab would be a service to the
Laboratory as well as the country. I went to Los Alamos with the hope
that I could be part of a broad effort to stop the rampant theft at the
Lab, and protect the security of the country's most important nuclear
secrets.
I started work on July 15, 2002. A few days later, I began to work
with the FBI on the Bussolini and Alexander case, where two managers at
the Lab had misused the government purchase order system to steal
hundreds of thousands of dollars in property. In the following days and
months, I saw the FBI's and my successful investigative efforts in this
case and all the other cases I was working on thwarted by the Lab's
upper level management--Joseph Salgado, Frank Dickson, Gene Tucker, and
Stan Busboom. Lab Managers from other departments, including Richard
Marquez, Stan Hettich, Dick Stickler, Vernon Brown, and John Tapia
attempted to cover up and change and conceal information from our
office.
These managers and Lab counsel Dickson continued to make innuendos
and threats that Mr. Walp's and my employment could be in jeopardy if
we continued investigating the rampant misuse of government credit
cards and the purchase order system. Because of the productive working
relationship that I developed with FBI special agent Jeff Campbell, Mr.
Busboom told me specifically that I had to protect Lab counsel's
relationship with the FBI and the United States Attorney, or I would be
fired. What he meant was that I should participate in the cover-up of
major crimes at the Lab, and use my good relationship with the FBI to
prevent them from investigating these matters on their own.
Although I always followed the orders given me by my superiors, I
refused to cooperate in their cover-up. My upper level managers refused
to provide me and the FBI with documents we needed for our
investigations, discouraged me from interviewing key witnesses,
disseminated information about our investigations to the targets of
those investigations, and administratively settled cases so that the
United States government could not criminally prosecute the wrongdoers.
By October, almost all of my investigations had been stopped, or
bottlenecked in Mr. Dickson's office. Less than three months after I
started work at Los Alamos, I spent most of my workday defending my
position that we were working to protect taxpayer funds and the
national security, rather than the University of California contract.
This meant that I had to do my ``real work'' at nights and on the
weekend. Despite the FBI's repeated requests that Lab management
reconsider and assign us to help them, the managers refused to let us
help the FBI.
Dedicated former and current employees at the Laboratory supported
us, and kept on reporting things to us, even after management began to
retaliate against us. I received a call about a possible espionage
matter, which I passed on the Counterintelligence Division. When the
Division did nothing, I called and e-mailed again. As far as I know,
the Laboratory never followed up on this matter. After I was
terminated, I got calls from former employees who had documented
millions of dollars in fraud, but were ignored by Lab management.
It is unfortunate that it took the current crisis of confidence in
the University of California to put these problems on the national
agenda. But now that Congress and the DOE are actively exercising
oversight and requiring accountability, it looks as though the
University of California is trying to do something about these
problems. I hope that Mr. Walp's and my termination has a silver
lining--it brought Los Alamos to its senses about putting some order in
its house so that it can go about doing its important work in a way
that best serves the citizens of the United States.
Mr. Greenwood. Thank you, Mr. Doran.
Mr. McDonald.
TESTIMONY OF JARET McDONALD
Mr. McDonald. Thank you. Mr. Chairman and members of the
committee, my name is Jaret McDonald, and I am an employee of
KSL at Los Alamos National Laboratory. KSL is a joint venture
between the following companies: Halliburton, Kellogg, Brown &
Root; Shaw, and Los Alamos Technical Associates.
KSL holds the support service subcontract for the
maintenance and construction operations of LANL facilities. My
current job duties include oversight of more than 70
maintenance and construction employees. I have been an employee
of KSL since January 2003.
Prior to my employment with KSL, I was an employee of
Johnson Controls Northern New Mexico, a subsidiary of Johnson
Controls, Incorporated. JCNNM held the support services
subcontract prior to KSL. Prior to my current work assignment
as Zone Manager for Zone 13, I worked at TA-35 and Technical
Area 33. My duties were very similar to my job
responsibilities.
While working at TA-35 and TA-33, I became suspicious of
purchases made by University of California employees that did
not appear to be related to facility maintenance tasks or
general LANL business, as it related to the operations and
maintenance of the facilities under their oversight.
I suspected that these purchases were made using blanket
purchase orders, BPOs. The items I saw being purchased struck
me as highly unusual. In approximately January 2002, I brought
my suspicions to the attention of my Johnson Controls
supervisor, who instructed me to contacted an individual at
Safeguard and Securities Division at the University of
California, which I did do.
After a couple of months and several communications with
authorities at the University of California, it did not appear
that action was being taken to address the situation.
Consequently, in March 2002, I contacted the FBI through the
agency's anonymous online tip. Subsequently, I was contacted by
the FBI and a representative from the University of
California's Security and Safeguards Division.
I was instructed by the University of California and
Johnson Controls to cooperate with the FBI in their ensuing
investigation into the suspicious purchases. The FBI asked me
to provide information and documentation accordingly, as that
information related to the suspicious purchases, which I did.
Mr. Chairman, members of the committee, this concludes my
statement. I would be happy to answer any questions.
[The prepared statement of Jaret McDonald follows:]
Prepared Statement of Jaret McDonald
Mr. Chairman and Members of the Committee, my name is Jaret
McDonald and I am an employee of KSL at Los Alamos National Laboratory
(LANL). KSL is a joint venture between the following companies:
Halliburton, Kellogg, Brown & Root; Shaw, and Los Alamos Technical
Associates. KSL holds the support services subcontract for the
maintenance and construction operations of the LANL facilities. My
current job duties include oversight of more 70 maintenance and
construction employees. I have been an employee of KSL since January
2003. Prior to my employment with KSL, I was an employee of Johnson
Controls Northern New Mexico (JCNNM), a subsidiary of Johnson Controls
Incorporated (JCI). JCNNM held the support services subcontract prior
to KSL. Prior to my current work assignment as Zone Manager for Zone
13, I worked at Technical Area 35 and Technical Area 33 and my duties
were similar to my current job responsibilities.
While working at TA-35 and TA-33, I became suspicious of purchases
made by University of California employees and that did not appear to
be related to facility maintenance tasks or general LANL business as it
related to the operations and maintenance of the facilities under their
oversight. I suspected these purchases were made using blanket purchase
orders (BPO). The items I saw being purchased struck me as highly
unusual. In January 2002 (approximate date), I brought my suspicions to
the attention of my JCNNM supervisor who instructed me to contact
Safeguard and Securities Division at the University of California,
which I did. After a couple of months and several communications with
authorities at the University of California, it did not appear that
action was being taken to address the situation. Consequently, in March
2002 (approximate date), I contacted the Federal Bureau of
Investigation (FBI) through the agency's anonymous on-online tip/
hotline. Subsequently, I was contacted by the FBI and a representative
from the University of California's Security and Safeguards Division. I
was instructed by the University of California and JCNNM officials to
cooperate with the FBI in their ensuing investigation into the
suspicious purchases. The FBI asked me to provide information and
documentation accordingly, as that information related to the
suspicious purchases--which I did. Mr. Chairman, Members of the
Committee, this concludes my statement. I would be happy to answer
questions.
Mr. Greenwood. Thank you, Mr. McDonald. I appreciate that.
You have provided us with photographs of items purchased by
lab employees using one of the several available procurement
tools at the lab, such as purchase order, Just-in-Time
contract, blanket purchase agreement or government purchase
card. I would like to look at these items now and ask you to
explain what each of them is and why someone might need or not
need this item for work purposes at the laboratory,
particularly interested in knowing why they needed fly rods.
Mr. McDonald. Mr. Chairman, would you like to ask me
questions or would you like to narrate?
Mr. Greenwood. Why don't you just go right ahead and
narrate what you see in the pictures there.
Mr. McDonald. Okay. Mr. Chairman, members, basically what
we are looking at here is some of the questionable items
concerned. As an example, if you look, you can see a Ramsey
winch on the back of this John Deere mower and John Deere
trailer. To the left, you see some snowblowers and perhaps
another tractor around behind some Craftsman boxes.
As far as what this could be used for at the laboratory, I
think it would be difficult to make a judgment what a person
could use this for at the laboratory in a work related
environment.
Mr. Greenwood. Let me understand that. Did the gentleman
who purchased these items and who had them placed in this
storage facility have responsibilities that would include
mowing the lawn or blowing snow?
Mr. McDonald. No, sir.
Mr. Greenwood. Okay. Why don't you proceed?
Mr. McDonald. I guess that's about all I really have to say
about this picture.
Mr. Greenwood. Okay.
Mr. McDonald. Moving on to picture number 2, one of the
items that struck my eye as I was taking these pictures was a
sleeping bag. I am pretty sure that most laboratory folks do
not need a sleeping bag.
Mr. Greenwood. They sleep on the job without a sleeping
bag?
Mr. McDonald. Yes, sir.
Mr. Greenwood. Do you have any idea what the cost of that
sleeping bag was?
Mr. McDonald. I do not, sir.
Mr. Greenwood. What is this facility? If you could also
name the facility, the buildings, if you could explain what
they are.
Mr. McDonald. Sure. This facility that we took pictures of
is Technical Area 33. This is, I believe, Bunker 23.
Mr. Greenwood. What is it used for?
Mr. McDonald. This particular bunker is used for a shop for
the University of California employees and storage area.
Some of the other items that I thought were questionable
was--I believe that's a cooler, an Igloo cooler, and a Coleman
heater.
Mr. Greenwood. Okay, next slide.
Mr. McDonald. Once again, sir, more coolers that I found
questionable, automatic plug-in coolers.
Mr. Greenwood. Go back. That toolbox on wheels there, is
that an item that you suspected was purchased improperly, or
not?
Mr. McDonald. I don't have an opinion, sir.
I guess you can read from the box here, American Angler
fishing type equipment.
Mr. Greenwood. Okay.
Mr. McDonald. Lawn mowers--you know, KSL or Johnson
Controls, we do perform, you know, facility maintenance and
such at the laboratory, and we do use lawn mowers. However, I
took this picture because I didn't understand why laboratory
folks would need a lawn mower.
Mr. Greenwood. Okay.
Mr. McDonald. We are looking at some Rancho shocks and some
DeWalt tools. The Rancho shocks----
Mr. Greenwood. These are shock absorbers for a motor
vehicle?
Mr. McDonald. Yes, sir, would be used, you know, obviously,
on a motor vehicle, and since the facility--vehicle maintenance
was done by GSA. It didn't really make sense that somebody
would have shocks.
Mr. Greenwood. Were those the same shock absorbers that
were found on Mr. Alexander's car? Do you know?
Mr. McDonald. I do not know that. This picture--I found it
ironic that laboratory folks would need CDs on how to instruct
lockpicking.
Mr. Greenwood. How to instruct lockpicking?
Mr. McDonald. This picture was taken. I questioned the
volume of gloves in the drawer, and I couldn't imagine. We
didn't have nearly that many people working out there. So I
took this picture, really, with trying to get some sort of
understanding why you would need so many pairs of gloves.
This might be self-explanatory. I felt that this was
questionable as well.
Mr. Greenwood. It's a tool for breaking into an automobile?
Mr. McDonald. Yes, sir.
Mr. Greenwood. In case you couldn't pick a lock.
Mr. McDonald. automatic gate opener--I don't know of an
area where we could have used one of these.
Mr. Greenwood. All right.
Mr. McDonald. Some miscellaneous Honda engines. I don't
want to speculate, but anyway, the Honda engines could be used
for any number of things. Like I said, the majority of the
facility and maintenance work my people actually performed, and
we didn't have any Honda generators. So----
Here is another picture of a Warren winch. I believe these
are all-terrain vehicle or four-wheeler winches that you are
seeing there. There's two of them stacked on top of each other.
Then off to the left, of course, there is a Big Cot.
Mr. Greenwood. Your big sleeping bag?
Mr. McDonald. Yes, sir. Inside this bunker, I believe this
is Bunker 22--housed some TVs and VCRs, questionable items.
Coleman equipment, Cabela's equipment, more coolers. Looks like
an air conditioning unit. I took some pictures of the internal,
and here are some Cabela's armchairs, which struck me as
unusual.
Mr. Greenwood. Deluxe armchairs?
Mr. McDonald. Yes, sir. Motorola two-way radios, not
something that we can typically use at the laboratory.
Mr. Greenwood. Why? I've been at the laboratory. I can
imagine--I'm sure that security personnel, for instance, may
have had need for portable radios. Explain why the
responsibilities of the gentleman in question would not--could
not be presumed to include the need for these kinds of radios.
Mr. McDonald. I believe that all the Federal communications
there at University of California is regulated, and we are not
allowed to just use any type of two-way radio in order to
communicate. The facility that I was with, we actually did
have, you know, very expensive radios which to use to
communicate with each other.
Mr. Greenwood. Okay. Is that the last slide? Okay. Thank
you.
We understand that you wished to appear here voluntarily
and offered to provide this committee with these photographs,
the property being observed being purchased with government
funds, but kept for personal use by lab employees. Yet the
committee had to issue you a subpoena both for your personal
appearance and also for the photographs that you brought with
you, and that was at the request of your current employer.
What exactly did your employer advise you regarding your
appearance here, and what did he advise you regarding your
photographs?
Mr. McDonald. Sir, my employer didn't especially advise me
at all on this particular matter. Part of the reason why I
needed a subpoena to get here, I guess, is I wanted to make
sure that I was friendly to the committee and the members. But
I also did not want to appear to be too familiar or--sorry--too
friendly. So----
Mr. Greenwood. Okay. In your statement to the committee,
you stated that you approximated your first contact with lab
security personnel regarding the Bussolini and Alexander
situation as around January 2002. Through staff interviews, we
have been told that the Office of Security Inquiries, OSI, was
first contacted by you in September of 2001. Do you believe
that to be correct?
Mr. McDonald. Yes, sir, that could very well be correct.
Mr. Greenwood. What did you tell the OSI inquirer?
Mr. McDonald. The individual--I met with him, and
originally it was via e-mail, and then we met a number of times
after in person. But the first time we met in person, I
mentioned to him what was going on in my particular area as far
as what I thought was waste, fraud and abuse, theft.
He said people have turned these people in before, and I
didn't believe it.
Mr. Greenwood. Okay. All right. During the course of our
investigation, staff were told in interview with Robert Garcia,
who is the Mesa Equipment representative for the lab, that
Bussolini and Alexander advised him they were setting up a
secret and anti-terrorism center out at TA-33 or TA-35. This
was the reason for their excessive purchases and the reason
that some of the items' descriptions on invoices had to be
changed.
Do you know anything about this anti-terrorism center, and
were Bussolini and Alexander ever given that kind of direction
from management?
Mr. McDonald. I did not know anything about that, sir. As
far as I know, they did not get direction from the laboratory
to do anything like that.
Mr. Greenwood. Mr. Walp, according to your statement, you
were told that when you were hired at LANL, you were selected
because of your expertise in law enforcement. What did your
management team, Mr. Busboom and Mr. Tucker, advise you would
be your daily role?
Mr. Walp. They told me that, as indicated, they hired me
because of my background and my expertise, made comments that
one of the reasons I was hired, because they didn't have that
knowledge in that area, told me to basically go over into OSI,
if you will, and professionalize and bring expertise to it, do
whatever you feel is necessary to bring it under appropriate
professionalism, and that they would support me in that effort.
Not really definitive as to specifics other than saying that
the current individuals that were there doing an investigation
didn't really have the backgrounds or the expertise to do the
jobs the way they wanted them done, and there were problems
with reporting systems, and just basically go over there and do
the job that was necessary to professionalize it.
Mr. Greenwood. What kind of problems did they identify?
Mr. Walp. They identified, again, the weaknesses in the
current investigators. They touched on the reporting system to
a degree, but had also told me--In my posting, it was indicated
that part of my job would be the investigation of theft, the
protection of property, but didn't go anything with specificity
as to exactly what I should do in that arena.
Mr. Greenwood. What is your understanding of the reasons
you were asked to resign and you were subsequently terminated?
What did they say to you?
Mr. Walp. Well, through the course of the multiple months
they said a lot to me. I guess I could couch it in the terms
that, when I began to--when I first arrived there, I was
approached within a few days by a gentleman, Mr. Ken Shiffer,
who indicated--former FBI agent--that he felt there was a lot
of theft going on. He arranged a meeting between Mr. Tucker and
myself, at which time he talked about theft of a whole
truckload of lumber and many other ideas.
Mr. Tucker agreed, and made the statement to me that he
agreed there was rampant theft, that it had been making the
valley green for years. Therefore, they were knowledgeable, and
then asked me to go on my way of trying to find out and get a
grasp on what was going on there.
Later on, Mr. Busboom asked me actually to make an official
report on that. Then when I found out through my efforts as to
the degree of the theft and the mischaracterization of actually
lost property, missing property, dismantled, salvaged or
whatever, was actually stolen, I attempted to approach it from
an FBI investigative perspective.
In fact, Mr. Shiffer and I--Mr. Shiffer felt there may--
wanted to approach it from a RICO perspective, felt that it may
tied in with the drug trade in that area, and asked me to
approach Mr. Tucker, which I did, because I knew at that point,
having experience in white collar crime, that my evidence would
be buried in the bowels of the reports.
It took me a while to find out where those reports were,
because in law enforcement you have the uniformed crime reports
which are easy to go to, to get a profile, but I finally found
out after some consternation that it was buried in BUS 6 and
BUS 5, the Business Division, and that's where I got my report
then when I submitted a report on March 26.
When that happened and I approached Mr. Tucker, because I
knew I had to have enough personnel, I needed quality personnel
that would do investigative audit, not just audit but
investigative audit, and the FBI certainly has that expertise,
I was soundly rejected at that time.
The first inclination that there were some problems there,
because I'm beginning to unravel things, and the more I
unraveled, the more disturbance it caused by higher command
like Mr. Dickson and Mr. Salgado, that if this stuff is
revealed--constantly, from the time we were there before Steve
got there and then, of course, while Steve was there, we were
constantly reminded that our job, even though you help the FBI,
your main job is to protect the lab, its image, its PR, and
ultimately the protection of the contract. That was our main
job.
We were told that on multiple occasions. We were warned on
August 14 that, if I--Steve and I were in a meeting--that if we
continued to pursue this, that the lab is famous for
sacrificing its children for the sake of its image. When I
tried to get the FBI task force, Tucker, the caveat to that
was--and he said, Glenn, if you continue in these efforts of
trying to find the theft, you are liable to find that high
management is involved, and that is not good for the lab's
image.
So we ultimately ended up in, oh, around the month of
September where Mr. Tucker explained to me in detail what
corporate philosophy meant there, and again very distinct said
it was protecting the lab, its image, its PR and ultimately the
contract.
Of course, as we unraveled these things, we had
interference from Dickson, Busboom and Tucker. I'll just give
you a few examples what I felt led up to this termination then.
For example, the first problem we encountered was the
reporting. When we first established the system would work with
the NIS case--that is the Bussolini and Alexander case--we had
a plan set up where the FBI could easily get reports, and that
worked well for about 2 weeks, and then Dickson passed an order
down that before we could get those reports, he had to
personally review them before they would pass down.
In one case, the FBI was waiting over 6 weeks for a report
and never did get it until they made a complaint to Mr.
Salgado, because Mr. Dickson was sitting on it, refused to pass
that information down.
Mr. Dickson wanted personally to get in one of these
bunkers, to go down one night and get into the bunkers, and the
FBI did not want him to, in fact refused to allow him, because
he said all they need is to see the lab counsel down there
looking at this stolen property, and it would jeopardize the
case.
We collected evidence on the Mustang case. I personally
went in with my people and collected evidence out of Lillian
Anaya's office. Immediately upon collecting that evidence--and
at that time they didn't have an evidence control system; they
had evidence in lockers and in drawers and under desks and
whatever. So I set up a specific law enforcement type
structured system.
Immediately Dickson wanted to get into those evidence
boxes, and I told him that the FBI needs to review them first,
because there may be prosecutorial evidence in those boxes.
Ultimately, the FBI was going to serve a search warrant, and
their comment to me was they had become so frustrated with
Dickson interfering with it that, if we could do it in OSI,
look and see what's in those boxes and pass it on to them.
The day I appointed two investigators to look into it, Mr.
Tucker called me and said they are coming over and grabbing all
those boxes and taking them from my official investigatory
control, which they did that day. The FBI was not pleased with
that, even though I warned Tucker that they may be ordering an
obstruction of justice, because the FBI had just sent Dickson a
letter indicating that, before they would go into the boxes or
interview anybody, they would need to get together with them to
make sure they weren't interfering with their cases.
We had Chris Chandler, who works for Mr. Dickson. She came
to me 1 day, and the FBI in the beginning said that they would
give me their official notes, because of my law enforcement
experience that I may be able to help them tell them where to
go in this direction.
She came into my office 1 day and demanded to have those
notes so she could take them back to her office, and I refused
her, I said, because they can't--that wasn't the deal, and I
can't let them out of my possession. At that time she became
argumentative with me and said that she did not care about
anybody's constitutional rights or that it would interfere with
an FBI prosecution.
She began to do an investigation behind the back of Steven
Doran--this was on the Mustang case--and the FBI, interviewing
people that she shouldn't have interviewed. She may have
interfered, totally obstructed with that case.
One of the most egregious things that Mr. Dickson did 1
day, even though he was previously warned by the FBI, once we
got into these investigations, that he was not to reveal any
information to anybody, especially anybody in Assessments and
Audits, because there was a suspect that was connected to the
NIS case in there, Mr. Dickson arranged a meeting which Steve
and I attended, and he verbally intimidated us, that we tell
everybody in that room everything we know about every case we
have, including all FBI confidential information.
I challenged him at that time again that they may be
bordering on obstruction of justice, this is an FBI case. His
comment was to me--and I'll paraphrase, but it is in my batch
notes--was--the way he quoted was this way. He says don't go
there, boys. He says you need to know who you work for, who
pays your check, and that's the University of California. Your
job is to protect the lab, its contract, and not the FBI
investigation. He made it very clear at that time.
Obviously, we were given threats that, again, we would be
leveled or fired. The FBI--Mr. Dickson gave them an ultimatum
on the Mustang case with Lillian Anaya that either they
interview her by August 19 or they were going to put her on
investigative leave. They were going to seal her office and, if
you will, blow the case before they had the opportunity of
interviewing her.
On the Bussolini-Alexander case, they gave them another 48
hour ultimatum. Either they bring this case to a conclusion
within that 48 hours or they were going to put them on
investigative leave before they even had the opportunity.
The FBI was extremely upset about that, that they were
interfering with their case, because their timetable wasn't
ready at that point. So all these things culminating together
ultimately ended in the Clarissa Rodriguez case where it was a
forged voucher.
On September 20, we----
Mr. Greenwood. I'm going to cut you off here, because there
are other members that need to ask questions. Just one
question, and I ask you to answer it just very briefly, because
my time has long expired.
There was mention of early on being told that this lab,
this theft at the lab had been making the valley green for a
long time. Do you have any sense as to how--we talked about
specific cases, but how rampant this problem is?
Mr. Walp. The theft? To me, my observation, sir, was the
lab was riddled with theft. I believe it still is riddled with
theft. You have yet to uncover the real theft, and I believe
that is in the LVA systems and the just-in-time systems. I
think that is going to be hundreds and hundreds of thousands of
dollars of theft when you finally get into it. But most
egregious of all was management knew about it. Tucker--I was
only there a few days. It's been going on for years. Shiffer
says it's been going on for years.
Tucker never said it wasn't going on. Mr. Tapia agreed it
was going on for years. They knew about it, but they did
nothing about it. Then when I tried to do something about it,
that's when they tried to shut us down and stop us.
Mr. Greenwood. Okay, thank you. The gentleman from Florida,
Mr. Deutsch.
Mr. Deutsch. Mr. Walp, really just to continue exactly on
that line of questioning, when you say they knew about, did
they know specifics or just--I mean, it was so flagrant that it
was obvious it was going on?
Mr. Walp. I think the one thing--you need to go back to Mr.
McDonald's statement. In the fall of 2001, this information was
reported to Bill Sprouse who worked in OSI at that time before
me getting there. He said--I have a memo from him--he told
Tucker. They were aware of it.
There also was information given to a Mr. Scott Gibbs who
works in the Associate Director's office under Mr. Holt who was
given an e-mail on it. He did nothing about it. They gave it to
Katherine Brittian in Assessments and Audits, and they did
nothing about it.
So they were very well aware of the NIS case in 2001. Mr.
Sprouse told me that he told the FBI. The FBI says they never
told us anything. So as it deals with NSI, to me they
definitely knew about that.
There is no doubt, because the property manager regarding a
report with the lost property, was identified as lost, the 2.7
between 1999 and 2001--the property manager in S Division when
I questioned him trying to get a background on this, his
comment was, well, the way they take are of that is there is a
form you fill out, and you can either put dismantled, salvaged,
missing. They even have one called retired.
He says, the way you take care of it is, if you are doing
an audit and you can't find it, you just fill out a form, and
that takes care of it. It just goes away.
As it dealt with the LVA systems and the JIT systems----
Mr. Greenwood. Explain what LVA is.
Mr. Walp. Yes. Local Vendor Agreements, and the JIT is the
just-in-time where, if you need something in a hurry, you can
buy computers or clothing, shoes or whatever.
In my meeting in July with Mr. Tapia and his crew, when I
explained to him what we were going to do to try to correct
this problem, there was about 12 people in that room from the
Business 6 unit, and they almost stood up and cheered. They
said, finally, finally someone is interested in this. We've
been telling our supervisors and administrators for years. They
won't help us, and they gave me a sample of how bad it is.
They said, Glenn, we can take you down to Santa Fe today.
We can have a whole computer system in your house this
afternoon, and no one will know, and no one will ever know,
because of the system that is set up and the controls that are
not there.
Paul Mirey, financial area, attempted to send a memo out
after my report in March to try to get people to comply with
the way it should be done, and that was rescinded. I attempted
to get a young lady by the name of Meredith Brown to put out
this information in a--it's a LANL pamphlet to tell people to
report thefts. I went to Tucker, and Tucker said, no. He said,
that's not good to distribute that information lab-wide; you
shouldn't have that information.
A Ms. Roybal and a Mr. Martinez in the fall of 2001
identified severe problems with the purchase card system, made
three memos, sent it to their bosses, and their bosses rejected
it: Basically, thank you, but no, thank you, we don't want to
know about it.
When I interviewed Mr. Stanley Hettich, who is currently
working in the same position in Procurement in BUS 5, when
Steve and I went to interview him regarding the Mustang case,
because he had no intentions of telling me--Mr. Tapia had
called me, and he asked me, he said, did Mr. Hettich call you
yet about that Mustang case. I said, no. He said, well, he
doesn't want to; he doesn't want to tell you anything, but he
said, I told him, because he was a higher authority.
So I went to interview him----
Mr. Deutsch. Again, I was focusing--I'm convinced. Okay?
I'm convinced.
Mr. Doran, I understand that you were in a little
convenience store recently where a Los Alamos employee was
using his credit card to buy a bunch of little flashlights. Can
you describe that interaction?
Mr. Doran. Actually, he was using his ID card to buy
flashlights. They have a system set up at the laboratory where
you use your employee identification number, known as a Z-
number, your identification card, and they have what they call
cost codes and program codes to make purchases.
He had a basket full of the little Mini-Mag flashlights
and, when he approached the register, the girl behind the
counter said to him, you better purchase everything that you
need or want, because this program will probably be ending very
soon, and they just laughed.
Mr. Deutsch. You have settled your case the University and
going to be the Director of Security work out at the
President's office. In that new position, what do you hope to
accomplish, and do you think you can actually fix what is going
on?
Mr. Doran. Well, I hope with this new position that I will
be very instrumental in fixing these problems. As I've said
from the beginning, I don't care who does it, as long as it
gets done.
Mr. Deutsch. Mr. Salgado, then the lab's deputy director,
and Mr. Frank Dickson, the legal counsel, said several times
that you and Mr. Walp gave them incorrect information. One of
the often repeated allegations is that you said there were
three suspects in the TA-33 case, and there were only two. Who
told you that there were three?
Mr. Doran. From the beginning, sir, there were three
individuals identified as prime suspects, Mr. Bussolini--sorry.
Mr. Deutsch. Oh, okay. Actually, apparently, you are not
supposed to identify those people.
Mr. Doran. Okay.
Mr. Deutsch. Not the third person.
Mr. Doran. Okay. There were three suspects identified
initially. One of those suspects actually is now a witness for
the government.
Mr. Deutsch. There was some discussion about that witness
wearing a wire. Is that correct?
Mr. Doran. There was a discussion early on that, if we were
able to turn that suspect into a witness, that we would ask him
to wear a wire as part of an investigative technique. However,
that never occurred.
Mr. Deutsch. And it never occurred, because?
Mr. Doran. There was no need to have him do that.
Mr. Deutsch. You've spent a great deal of time learning
about the control system at the lab. Is that correct?
Mr. Doran. Yes, sir.
Mr. Deutsch. Can you explain to us the bar coded inventory
control system?
Mr. Doran. The bar coded inventory control? Basically, bar
codes are placed on items that are considered either sensitive
and/or over the $5,000 dollar amount.
Mr. Deutsch. Okay. And is that in a central location or how
does it actually function?
Mr. Doran. Once the items are bar coded, they are placed on
what they call an accountability statement, so that they can be
tracked throughout the system, and those items can be anywhere
within the laboratory and even off of laboratory property,
depending on what their use is.
Mr. Deutsch. Okay. Now Mr. Alexander and another employee
purchased several cameras and pairs of binoculars. Should they
have been bar coded as attractive items for the supplier who
delivered them not to the central receiving point but directly
to Mr. Alexander, or were they bought by local vendors in an
attempt to avoid the bar coding system?
Mr. Doran. Okay. You know, that brings us to a whole
'nother set of problems, because Mr. Bussolini and Alexander
were purchasing items through Mesa, Mesa Contracting, which was
not an approved vendor to sell those types of items, like the
high speed digital cameras and what-not. Those items were
able--they were able to sneak those items through without
having them bar coded.
Mr. Deutsch. The tractors and the asphalt pavers, would
they be bar coded as well?
Mr. Doran. If they were over $5,000, yes, they should have
been.
Mr. Deutsch. Okay. And when property is bar coded, is it
assigned to a certain person?
Mr. Doran. Typically, it is. Whenever--they have what they
call accountability statements, and whatever is issued to you
for your own use is assigned to you. If it is something that is
used like within an office like a copy machine as an example,
it is assigned to that office.
Mr. Deutsch. Now Mr. Alexander--we have actually--our staff
has looked at his assigned property list, and it doesn't
include the asphalt paver and the cameras. What would make you
believe it is outside of the lab's inventory system? He did not
have that, obviously, through the system. Again, it's a
conscious effort to keep it out of the system?
Mr. Doran. Okay. In a lot of cases, you know, like Glenn
has mentioned and Mr. McDonald has mentioned, it just--because
the system is so archaic and in such disarray, just about
anything can slip through the system at any one time, and it
doesn't take a whole lot of effort to do that.
Mr. Deutsch. I guess also, Mr. Alexander had a Rototiller.
What is a Rototiller? I mean, how would you use that?
Mr. Doran. A gardening tool.
Mr. Deutsch. I mean, is there any use that you can envision
it being in the----
Mr. Doran. No, not in his division. Again, as Mr. McDonald
mentioned, JCNNM is the contractor who provides those services,
and they provide their own tools and equipment. So there would
be no need for Mr. Bussolini and/or Alexander to have any of
those items.
Mr. Deutsch. Mr. McDonald, would you want to respond to
that as well? I mean, why would Mr. Alexander have a
Rototiller?
Mr. McDonald. To me, it doesn't make sense.
Mr. Deutsch. Okay. And why is that?
Mr. Mcdonald. Well, just the fact that, as far as Johnson
Controls or KSL that I currently work for, if there was going
to be some need for that type of work to be done, we would do
it. It would not be a University issue. So for having
Rototillers, it would be pretty difficult to be able to use.
Mr. Deutsch. What about the type of grounds? I mean, is
there an issue about the grounds themselves being toxic or
radioactive? Apparently, my understanding is that an actual
environmental plan would have to be implemented before the use
of that type of equipment?
Mr. McDonald. That is correct.
Mr. Deutsch. Did you ever see anyone use a Rototiller at
the lab?
Mr. McDonald. No, never have.
Mr. Deutsch. Last night you showed the staff a picture of
several fire extinguishers just lying on the ground. What would
be the environmental issues of that?
Mr. McDonald. Certainly not good. I believe that, if the
New Mexico Environmental Department could get hold of that,
there could be some serious issues, since the fire
extinguishers were Halon.
Mr. Greenwood. The time of the gentleman has expired. The
gentleman from Oregon, Mr. Walden.
Mr. Walden. Thank you very much, Mr. Chairman. Gentlemen,
thank you for being here today.
Mr. McDonald, I want to ask you what you are feeling right
now about being here. Are you concerned that--given what I've
heard already about retribution and all and all the threats,
intimidation, are you concerned about being here today and what
it may mean to the company for whom you work?
Mr. McDonald. I am, but not to the point, I guess, where I
would lose my job. I am still concerned.
Mr. Walden. All right. Mr. Doran, I want to ask you a
little bit about what you do now for the system, but especially
as a result of the meeting with UC officials, you and Mr. Walp
were rehired, I understand, by the University?
Mr. Doran. Yes, sir.
Mr. Walden. As consultants to the Office of the President?
Mr. Doran. Yes, sir.
Mr. Walden. And are you dealing with the current problems
at the lab?
Mr. Doran. To be perfectly honest with you, sir, I just
accepted the Director of Security for the President's office
yesterday. So I haven't been assigned any files at this time.
Prior to that, Mr. Walp and myself have been generating reports
based on our previous investigations at the laboratory and
meeting with the UC investigatory team and providing them with
information to move forward.
Mr. Walden. One the reasons that was cited for your firings
was perhaps the way the Mustang was handled.
Mr. Doran. Yes, sir.
Mr. Walden. Or some would say mishandled, and that that
hurt the lab's relationship with the FBI. Mr. Doran, how would
you describe the relationship you had with the FBI?
Mr. Doran. I have a wonderful relationship with the FBI. It
has been stated by all of the agents that we've worked with
that the relationship that they had with Glenn and myself was
the best relationship that the FBI has ever had with the
laboratory in its history.
Mr. Walden. I was reading through your report dated
February 14, the Los Alamos National Laboratory investigative
summary. You make some comments at the beginning of it about
how it is mainly written from memory, that you haven't had
access to personnel records. You don't know what's been
destroyed or not.
Mr. Doran. Right.
Mr. Walden. Will you have access to personnel and records
under your current hiring arrangement?
Mr. Doran. I can't answer that question, sir, because it
hasn't been discussed.
Mr. Walden. One of the incidents that you discuss here is
the G&G Industrial Supply.
Mr. Doran. Yes, sir.
Mr. Walden. Now I've been in small business 17 years
nearly. If I were the only employee in my company, as
apparently Mr. George is in his----
Mr. Doran. Yes, sir.
Mr. Walden. [continuing] I think I would know that a lab
had spent $800,000 with my company.
Mr. Doran. I think you would, too, sir.
Mr. Walden. Yet you indicate he didn't seem to know that.
Mr. Doran. He claimed not to.
Mr. Walden. Can you describe--I mean, I understand some of
these tools were allegedly just basically bought from K-Mart or
other local vendors and then he was the middle man, basically.
Mr. Doran. Yes, sir.
Mr. Walden. Because of his, ``tremendous customer
service.'' That is what is reported.
Mr. Doran. I was hoping he would take me on as a partner,
sir, but----
Mr. Walden. Does he have a profit sharing plan? That's a
serious question.
Mr. Doran. Well, I guess when you are the sole owner, you
do.
Mr. Walden. Is this something that is going to be
investigated as to--what was the 800,000 in tools for? What was
purchased? Where did they go?
Mr. Doran. We have no idea sir. None.
Mr. Walden. Is that something the FBI is looking into?
Mr. Doran. I believe, at the point we were terminated, the
Inspector General's Office had that file.
Mr. Walden. This is so outrageous, it's hard to know where
to start, frankly, as a taxpayer.
Mr. McDonald, have you in your other work--have you worked
with other labs or other Federal facilities over time?
Mr. McDonald. No. Los Alamos National Laboratories are the
first one I've worked with.
Mr. Walden. And at what point--these photos that we saw
here, at what point in your work there at the lab did you
decide to start taking photos? Had you witnessed other things
that raised alarm bells first?
Mr. McDonald. Yes, sir. Initially, the first thing that
raised an alarm for me was having one of these people that you
guys referred to before had taken me out to one of these
bunkers for the first time to see what was sort of out there,
and that struck me odd as some of the materials, tools and
equipment that were inside or housed within this bunker.
One of the things that really caught my eye was some
aluminum tubing, because we just hardly have a use for aluminum
tubing, you know. Electricians use steel conduit and so on and
so forth.
I asked somebody what it was used for. A man told me that
it was used to build a go-cart for his nephews.
Mr. Walden. A go-cart for his nephews?
Mr. McDonald. Yes, sir.
Mr. Walden. What about--there's some reference in the
materials about some organization approaching the lab for
donations of used equipment or things that they were going to
get rid of, and it is reported that, well, they already donated
it to a nonprofit or they have a specific nonprofit or Pueblo
that they donate to.
Mr. Mcdonald. I believe that was the State of New Mexico
had approached the laboratory for donations.
Mr. Walden. Okay. And can you describe more fully what you
have witnessed, either--any of you, in terms of that
relationship and where equipment went? Mr. Walp?
Mr. Walp. Right before our terminations, a gentleman came
forward to us. I had spoken at a national property managers
meeting in Albuquerque. After I gave my presentation, he came
forward to Steve and explained it to him. Quite frankly, we
never had the opportunity to investigate it. It is still
sitting on the table at Los Alamos to be investigated. Never
had the opportunity.
Mr. Walden. Speaking of Los Alamos, you add in your
testimony that part of what you were encouraged to do when you
got there was to hire new people as inspectors, according to
Mr. Doran. Correct? I mean, you brought him in as associate.
Mr. Walp. Yes.
Mr. Walden. How many new people did you hire?
Mr. Walp. They originally gave me the authority to hire
one. I had two individuals who were extremely qualified, and I
convinced Mr. Busboom to allow me to hire the two, which I did,
Mr. Doran and a Mr. Mullins. Then we brought in an entry level
individual, Mr. Thanh Nguyen, who was helping me. Then I also
brought in some secretarial help. So probably about four or
five in all.
Mr. Walden. what is their status today?
Mr. Walp. Mr. Mullins left.
Mr. Walden. Why?
Mr. Walp. He was not satisfied. He was only there a few
short weeks and got involved in these situations. In fact, he
was the investigator in the Clarissa Rodriguez case, the
voucher case, and he got so disgusted, he said I'm out of here.
Mr. Walden. When did he leave?
Mr. Walp. He left about a week after we were terminated.
Mr. Walden. So last fall or last winter?
Mr. Walp. Yes, and Mr. Thanh Nguyen--I spoke to him, and he
may be leaving.
Mr. Walden. Why?
Mr. Walp. Same thing. He felt there was corruption.
Mr. Walden. Still?
Mr. Walp. That's what he told me. Yes.
Mr. Walden. Mr. Doran, you are at work for the President
now, but you don't know what your authority is going to be?
Mr. Doran. The agreement was just made yesterday, sir,
actually late yesterday evening. So in preparing for this
session today, we haven't had an opportunity to discuss it.
Mr. Walden. So you agreed to take the job without really
knowing what the responsibilities are?
Mr. Doran. I have a basic knowledge of what the
responsibilities will be.
Mr. Walden. Does the timing of that agreement have anything
to do with the date of this hearing?
Mr. Doran. No, sir.
Mr. Walden. Okay. I guess I have heard so much about how
things have been suppressed over time, allegedly, and I am
hearing today that there are still employees perhaps still
working there today doing these same investigations you two
gentlemen were doing and then subsequently got fired for after
you talked to the Inspector General, and those individuals now
are concerned they are not getting anywhere.
Why should the University of California continue to have
this contract? Maybe you are not the ones to ask that question,
especially you, Mr. Doran, since you are working for the big
President.
Mr. Walp. I can answer it, if you want me to.
Mr. Walden. You bet. Are you working for UC?
Mr. Walp. No, just as a consultant to the President.
Mr. Walden. You're working for UC then.
Mr. Walp. I'm working for UC, but I'll certainly answer
that question.
Mr. Walden. All right. Give me your answer.
Mr. Walp. Okay. I would preface my statement by saying with
specificity, Mr. Darling, I met him and I think he is a very
honorable man.
Mr. Walden. And he is?
Mr. Walp. And he works for the University of California
directly under the President, and I think he is attempting to
correct problems there. I never met Mr. Nanos, but he appears
to be attempting to make some changes there, but my personal
opinion is I think it's time to gut the place. I think it is so
infected, it's a culture that has been ingrained in that place
for decades, and I think it's a time for change.
Again, I would say as I said before that, if they are truly
serious about changing this, then they need to get rid of the
people that are there. These are the same people who interfered
and obstructed.
Mr. Walden. I couldn't agree more. Are any of the people
who have been removed from their positions being personally
held accountable for what walked away from facility at taxpayer
expense?
Mr. Walp. Not to my knowledge. In fact, I think there's
Federal crimes that have been committed that need to be
investigated.
Mr. Walden. Well, Mr. Doran, I hope when you go to meet
with whoever is going to tell you what your authorities are
that you will press the limits and get back into the case you
know well.
Mr. Doran. Yes, sir. Just to answer your question, since
the beginning of this entire situation, you know, I have been
upright and honest. I was in the process of losing my home over
this entire ordeal. I have said this time and time again. My
accepting this position has nothing to do with the situation
that has occurred or any situation that will occur in the
future.
Mr. Walden. Have they made up your salary from the past,
and have they paid you any kind of lump sum to come back?
Mr. Doran. Yes, and they did recover my home. But it has--
there was no agreement that I would, you know, not continue
to----
Mr. Walden. Right. I'm not questioning your ethics on this
at all. I'm just curious.
Mr. Doran. Yes, they did.
Mr. Greenwood. The Chair thanks the gentleman.
Mr. Walden. Thank you, Mr. Chairman.
Mr. Greenwood. The gentlelady from Illinois is recognized.
Ms. Schakowsky. First of all, let me reiterate my great
thanks to you for having the courage to pursue this and to
bring this to the public light. I think that the notion that
you work for the American taxpayers, first and foremost, is so
important, and it is so unacceptable that you would get
punished for doing just that. So let me express my personal
thanks, and on behalf of my constituents as well.
Knives, 451 knives costing $19,127, were purchased. In 1
week, 27 boning knives were purchased. Is there any use for
boning knives at the lab?
Mr. Doran. Not to our knowledge, no.
Ms. Schakowsky. When you discovered these things and you
brought--what exactly was said to you? What was the response? I
mean, there clearly is no excuse for it. So what was the
response?
Mr. Walp. The response was, as we encounter from the very
beginning, they took a very cavalier approach. I was in a
meeting one time. It was a supervisory meeting, and they talked
about an individual who every year bought a full set of hunting
clothes and boots and knives through the JIT and the LVA
systems, and I was just young there at that time, and I ask
him. I said, do you ever approach this. Actually, there was
laughter in the room: Oh, he does this every year.
There was that type of approach, a very, very cavalier
approach. When we began to check the items these people were
purchasing, the people in the----
Ms. Schakowsky. But let me just ask you this. This is in
the context of some sort of a management meeting. I'm trying to
picture a room where people are laughing at these inappropriate
expenditures. What was the context and the setting for that
kind of conversation?
Mr. Walp. That specific conversation was in a training
room, probably contained about 40 to 50 people and a presenter
who was actually in charge of the audit system, and it was
brought up. Again, I'm a new kid in the block, and to me, I
mean, I was astonished that they were even laughing about this.
But it was a comical approach. It was a cavalier, comic one.
When I brought to Mr. Tucker's attention how serious the
problem in NIS, and understand, the FBI through the U.S.
Attorney had identified $50,000 just to reach that standard. I
said, you know, this is a major crime. His response to me was,
Glenn, that's not a major crime. He said, it's only $50,000. I
said, well, any law enforcement environment I worked, $50,000
is a big theft. But it was the cavalier approach to--and quite
frankly, comical, that that's the price of doing business here.
Ms. Schakowsky. To me, it's reflective of a culture--we
dealt with this at the Department of Defense, too--a culture
that would allow this. You are saying that there are 40 people
in the room. They are all involved in some way or another with
auditing?
Mr. Walp. No. No, the subject dealt with auditing, but the
other people represented a multiplicity, scientists, you know,
S Division, whatever. It was a multiplicity within that room,
but that was the attitude that was taken. It was not a serious
issue.
To those, as I indicated, that were involved in it--it's
like when I had another meeting with BUS 6 people and I told
them what my plan was to begin to develop evidence to try to
prosecute these people and bring a halt to it, those people
cheered me, if you will, and indicated finally someone is
interested in taking care of these thefts, because nobody cares
about it. We've been telling our supervisors for years, and no
one cares, because they just didn't care. It's an ingrained
culture. It's ingrained within the philosophy of the people
there. It wasn't a big issue.
Ms. Schakowsky. And so explicit that people felt free to
talk about it in any setting, really, that it wasn't something
that just some managers would get together and whisper about.
But you could say in a public setting, ha, ha, ha, what's the
big deal.
Mr. Walp. Yes. In fact, as I indicated, my property manager
when I began to look into this, his comment was, well, this is
how you take care of it; you just make up a dismantled report
or salvage report, and I would get a lot of them, and I would
go back to the people and say, well, show me the salvage
report; because there is supposed to be, by the rule, a salvage
report. We don't have any.
We had people who are scientists who are retired, and all
their computer equipment went with them. I said, well, you
know, that's Federal taxpayer money. Said, no, he's retired,
he's retired. Retired with him. Goes with him. That's just the
attitude here.
Ms. Schakowsky. So as a consequence, we are--let's go back
to these 40 people. How did they react to you then, too? Were
you just kind of this odd man out, and that was not the way we
do things around here? Did they scorn you? How were you treated
by those individuals?
Mr. Walp. I wasn't scorned, but I knew I was a loner. It
just jumped from that when I brought my philosophy to the fore.
It was like, you know, okay, but we're moving on. It was just
the way it was.
Ms. Schakowsky. Two hundred twenty-five pairs of gloves
costing over $7,000. Were 255 pairs of the most expensive
gloves really needed in any way?
Mr. Doran. Part of the information that came out of this
investigation was the theft, but the waste as well. We found
garbage cans full of those expensive gloves with just minimal
amounts of dirt on the fingertips. They were just almost used
like----
Ms. Schakowsky. They were being tossed?
Mr. Doran. Yes. Basically, almost being used like
disposable latex gloves. We found garbage cans full of them. We
found them still sealed in their packages, scattered around the
different work sites and things of that nature.
Ms. Schakowsky. So what were they purchased for originally?
Mr. Doran. Well, again it was just, because they had this
budget that was almost a bottomless pit, a lot of things that
they were purchasing were just misused and abused. I mean, we
found air conditioning units that were worth thousands of
dollars just rotting in the boxes, and power washers. They just
had such a free hand with purchases and equipment, a lot of it
was just wasted.
Ms. Schakowsky. And did you talk to--in addition to the
people who were--I'm trying to get at this culture question,
how deep it goes, how embedded it is. When you would have
conversations about this, what was just the general tone?
Mr. Doran. Well, the general tone, at least in my case, not
with Glenn, of course, but with most of the employees that I
spoke with, was you know, Steve, you make good money; you got
an easy job, if you want it to be an easy job. Just keep your
mouth shut, and come into work, spend the day, you know, play
on the Internet and go home and don't worry about it. It's the
way it's always been, and nobody cares.
Ms. Schakowsky. So this was a tone that was pretty
pervasive throughout?
Mr. Doran. Pretty much. We were constantly being thwarted,
you know, by saying, well, you know, you are not a policeman
anymore, which we understood. You have no law enforcement
authority anymore, which we understood. But the main issue was,
even though we didn't take the crime to the prosecutorial
stage, we did report crime, and what we were seeing was a
tremendous amount of crime, a tremendous amount of waste, and
it was our duty to report it, and we told them we were going to
report it.
Ms. Schakowsky. Mr. McDonald, how did Mr. Alexander and
Bussolini buy so much stuff they didn't use at the lab? Didn't
they ever run out of money?
Mr. McDonald. It did not appear so. They would use these
blanket purchase orders. These people had always been commended
in the past for having such a great budget. So----
Ms. Schakowsky. So don't you think we ought to be taking a
closer look at that budget?
Mr. McDonald. Yes, ma'am.
Ms. Schakowsky. I wondered if you wanted to comment at all
on this question of a pervasive culture.
Mr. McDonald. Other than that I would agree with these
gentlemen, that is correct. I would see that throughout the
hill, even at a support service subcontract level.
Ms. Schakowsky. And does anyone want to comment? What do we
need to do first? Do we need to change the leadership at the
top, just wholesale, in order to improve this situation?
Mr. Walp. Quick answer, yes. That is my opinion. I think it
even goes further than that as it deals with property. I know
we are zeroing in on property, but to me, it is also a security
incident, and I will not go into any specifics. That wouldn't
be appropriate for this forum, but an extreme concern of Steve
and I dealt with the NIS case, Bussolini and Alexander. Here we
people who changed the light bulbs, who had keys to the kingdom
of the blackest area.
They had items in their possession such as GPS systems, GPS
locator systems. If you lose something, you can find it. The
high tech night vision binoculars, high tech cameras, RF
detectors which means that you can--you identify if someone is
in the room with you that has a bug on, it would be identified.
I know the lab has come out and attempted to defend that
and, as we hear, gee, this can be--this is hunting stuff. That
may be true for certain items, but my question is when is the
last time, because they bought over 56 different type of lock-
pick items and glass cutting--you know, when is the last time a
hunter needs a lock-pick to get into a national forest, and
when is the last time a hunter needs an RF detector to find out
if an elk is wearing a bug?
So we are concerned from a security perspective. So we
asked ourselves this question: How can the premier lab in the
world allow this to happen for almost 2 years where anything
was purchased, and without reservation, and the people doing
the auditing--we had to show it to them, that they didn't even
know they bought model airplanes, and they said, you know,
what's the big deal? And you say, well, what about this, and
what about this, and what about this? They said, well, you
know--they never challenged it.
So I have great concern that that lab that was supposed to
be producing--you know, it deals with national defense, and
there are many people there doing an outstanding job, but yet
the unit, the Security and Safeguards Division that are
supposed to be the guardians of the gates to make sure that
those types of evidence does not get out to the enemy, and that
high tech accomplishments that they make, they are the same
ones that were involved in the cover-up, self-preservation and
protectionism. They were the ones that are there.
It is our position, and I think Steve will confirm this,
that we wholeheartedly believe, just as--when the 1978
Inspector General Act was passed, in Chapter 5 it states words
to this effect. It makes no sense to have the people who are
doing the auditing and investigating report to and be
supervised by people you are auditing and investigating. That's
exactly what is happening when you deal with safeguards and
securities under the umbrella of a contractor.
It is time to take--I'm sorry, sir.
Mr. Walden [presiding]. Yes. We have gone over a couple of
minutes. So now we will need to go to Mr. Rogers.
Mr. Rogers. Thank you, Mr. Chairman. I just want to follow
up on that thought that you are having there. My concern is, if
you are willing to steal, you are willing to sell information
as well. How close are they to the information? Well, let me
back up.
You did not have a security clearance when you arrived, but
I understand you have attained one.
Mr. Walp. I did, yes.
Mr. Rogers. So you would understand which individuals
involved in this would have security clearances and those who
would not?
Mr. Walp. Yes.
Mr. Rogers. To the best of your knowledge, which
individuals--not by name, but give me a number of individuals
who had security clearances that may have in some way been
involved in this? Is it pervasive?
Mr. Walp. I would say this. I'll take--I will couch it in
these terms. There were seven that I knew of. However, it is
down to these two individuals that Mr. McDonald was speaking
about, and the other ones may be used as state's evidence, but
yet you had that arena of seven.
Also important to me, in addition to the equipment, was the
vulnerability. These people had the highest clearance you can
get, and one of the factors when you do background is to make
sure people are not involved in gambling, prostitution, because
they are vulnerable.
Here are individuals who are walking away with the farm
and, if you had someone from the outside walk up to them and
say, look, I know what you are doing and you either give me
what I want or we are going to report you to the police, it
placed these individuals in an extremely high vulnerability.
Did anything like that happen? Probably not. Could have?
Yes, it could have happened. How can you let that happen in the
premier lab in the world, to let that go on without anybody
knowing about it?
Mr. Rogers. Well, you say probably didn't happen, but you
don't know for sure if it did or did not.
Mr. Walp. I do not know. I do not know.
Mr. Rogers. How does a clerk in the store know when a
program is coming to an end?
Mr. Doran. Since our termination, a lot of program changes
have been made, and one of the things that we have noticed
around town--I live in Los Alamos--is that, where before you
could pretty much purchase whatever you wanted using the ID
card system--I'll put it in those terms--now they have like
lists of what you can buy and what you can't buy. So they see
that the noose is tightening and that, more than likely, that
program will come to an end relatively soon.
Mr. Rogers. To the best of any of your knowledge, is any of
the security clearances been on hold? Is anyone getting
rechecked at this time, given any information that's been
provided?
Mr. Doran. Not that I am aware of, sir.
Mr. Rogers. So anybody that was close to this still
continues to hold and enjoy the privileges of a security
clearance with sensitive information?
Mr. Doran. As far as I know.
Mr. Rogers. That concerns me greatly, Mr. Chairman. That
gets my blood going. I used to be an FBI agent. So I know what
you do.
Second, if you would, Mr. Doran, you worked on the Mary
Frances Wood case.
Mr. Doran. Yes, I did.
Mr. Rogers. This is the individual who used the card at a
casino.
Mr. Doran. Yes.
Mr. Rogers. You were given some direction on that case from
your management. Is that correct?
Mr. Doran. Yes, sir, I was.
Mr. Rogers. Can you tell me what direction that was?
Mr. Doran. Originally when that information was brought to
our attention that the credit card was being used at casinos
for cash advances, I was basically given a green light to do
whatever necessary to bring that case to fruition.
Once I started gathering information that proved she was
guilty of those crimes, I was advised through Mr. Tucker--or
Mr. Tucker advised me that Mr. Salgado had advised him that I
was not to go through with an interview of Mrs. Wood.
Mr. Rogers. So you conducted that interview anyway, as I
understand it.
Mr. Doran. Well, basically, what happened is I conducted
the interview of Ms. Anaya with the FBI agent, Jeff Campbell,
and at that time she refused to give us any information. I
called Mr. Tucker, gave him a brief of what had occurred during
that interview, and he said, well, go ahead and interview Ms.
Wood, because, you know, she probably won't tell you anything
either. When I brought her in for the interview, she gave us a
full confession of what she had done. So I think it kind of
backfired on them.
Mr. Rogers. Interesting. Is she still employed?
Mr. Doran. No. She worked for a contractor. She didn't work
for the University of California, and the day that they asked
me to take her credit card, keys, ID card, and then they just
told her or had me tell her not to report to work the following
day. So as far as I know, she could still be working for that
contractor.
Mr. Rogers. To the best of your knowledge, does she have
access to any confidential, secret or elevated material?
Mr. Doran. No, sir.
Mr. Rogers. What is the status--well, before I do that, I
know we've got a vote here, and I want to get this on the
record. You were also investigating the fact that some of the
vehicles that belonged to the lab were being fueled twice, in
some cases three times every day.
Mr. Doran. Yes, sir. I just got the peripheral information
on that. We were terminated just as we began that
investigation. Supposedly, the P-cards were being used to
purchase large quantities of fuel for like fuel tanker type
trucks. You know, they were using the credit cards to purchase
that.
Also, we were told that the GSA cards were being misused.
Vehicles were being filled two and three times a day. Fuel
purchases exceeded the amount of fuel that the vehicle could
hold, and that type of thing. But I have no--again, we never
started that investigation. So I have no hard copy
documentation to prove any of that.
Mr. Rogers. But on the face of what you were told and on
the basis of that information that you received in the receipts
of those, it indicated to you that there was probably some
misuse of those gas cards, in your estimation?
Mr. Doran. If the statements that were given to me by the
individuals who gave them to me were true, yes. But we never--
we continued to request the hard copy documentation. We wanted
receipts. We wanted to know which--we wanted them to identify
the vehicles, identify the vendors, and we never got any of
that.
Mr. Rogers. Mr. McDonald, to your knowledge, what is the
status of the equipment that you showed us here in the slides?
Mr. McDonald. After--I have actually met with some of the
people who are still in kind of control of the equipment, and
the equipment that we've seen in the pictures, for the most
part, are still there where it is being inventoried and so on
and so forth, and determined in some means of property
redistribution.
Mr. Rogers. At this point, do you think it is being handled
properly? When you say redistribution is being handled, sent to
another institution that may be able to use that equipment in
its proper use?
Mr. McDonald. Correct.
Mr. Rogers. Someone, I think, mentioned, and forgive me--
you said it is easy to sneak through on the bar code. Maybe it
was you, Mr. Doran.
Mr. Doran. Yes.
Mr. Rogers. When you say that, did you identify any process
that they were using that was consistent throughout the lab to
avoid getting on the accountability statement?
Mr. Doran. Basically, what Bussolini and Alexander used is
they had the equipment delivered to an unauthorized location so
that it didn't go through the central warehouse and, therefore,
it wasn't accounted for.
Mr. Rogers. So, obviously, they had other individuals
involved who were receiving that as well.
Mr. Doran. The salesman at Mesa was definitely helping them
to purchase items, changing invoices, you know, using part
numbers versus what the actual item was, and delivering it to
offsite locations.
Mr. Rogers. Now was there any investigation? Do you have
any information on where this material went after it left the
lab? Was it in people's homes? Could you determine if it was
resold?
Mr. Doran. Well, the only thing I can give you is just
hearsay. After Glenn and I were ordered not to deal with the
FBI, some of the individuals who were then assigned to deal
with the FBI said a good deal of those items were found in the
homes of Bussolini, Alexander, Mr. Bussolini's girlfriend, and
other offsite locations.
Mr. Rogers. Thank you for being here today. Mr. Chairman, I
will yield back the time.
Mr. Walden. The gentleman yields back his time. For the
witnesses, the audience, and the members, we have two votes on
the floor. We have about 10 minutes to go.
So we will recess for approximately 30 minutes to
accommodate those two votes and time to get back to resume. If
there are no other subcommittee members who haven't already
done a round of questioning, we will go to full committee
members, and Ms. Eshoo will be the first member.
[Brief recess.]
Mr. Walden. Ladies and gentlemen, why don't we resume the
hearing. Before we give Ms. Eshoo an opportunity to ask
questions, I understand Mr. Doran wanted to make a clarifying
comment regarding a question that Mr. Rogers raised. So I would
like to give you the opportunity to do that, and then we will
go to Ms. Eshoo, who is a member of the full committee.
I would remind you all that you are still under oath. Mr.
Doran, if you would like to go ahead and clarify for the
record.
Mr. Doran. Okay. So far as the gas purchases were
concerned, it was an issue where my last contact on that issue
was with Mr. Jay--I am drawing a blank on his last name.
Mr. Walden. Johnson?
Mr. Doran. Jay Johnson, thank you. We were told by Mr.
Johnson that Mr. Marquez had shut down that investigation for
the time being, that they had pretty much bigger fish to fry
and that they would be gathering the documents at a later date
to give to us to begin our investigation.
Mr. Walden. It's my understanding Mr. Johnson was fired a
week--no, you were fired a week----
Mr. Doran. I was fired a week--or actually, 2 weeks later.
Mr. Walden. Thank you. Ms. Eshoo, for your round of
questioning, the full committee, 10 minutes.
Ms. Eshoo. Thank you, Mr. Chairman. Let me begin by
thanking you, the chairman of the full committee and the
ranking member of the full committee as well as the
subcommittee chairman and ranking person of the committee for
extending the legislative courtesy to me to join you in the
very important investigation in oversight committee hearing
today. I appreciate it, and I believe that my constituents do
as well. So my thanks to you.
To the panelists, thank you to you. Since I didn't get to
make an opening statement, let me just make a couple of
observations about where we are and what has brought us here
today.
As a Californian, I think I speak for many, not only in
California but across the country and around the world, that
the University of California is one of the great public
universities of the world. This hearing today is not a source
of pride to us.
The mismanagement that has been spoken, the evidence of
abuse, of neglect, of fraud--these are not things that we
value. This is not a source of pride to us. So I commend you
for coming forward. It is important that we have brave
citizens, I think, that are willing to stand up publicly and
say we are here to protect the investment of the American
people through their tax dollars, and that is what this
contract represents.
So I salute you for doing it. I think that you have paid a
price for it, but I think that at the end of this, what I hope
and, I believe, will be or is the case is that we will come
through this better, because we can weed this out.
So my questions to you are in that arena. In your testimony
you have done, I think, an excellent job of informing the
subcommittee of the mismanagement, of the abuse, all of the
things that have been part of your testimony. I am not going to
repeat it. I think it just sounds in many ways that the wheels
have come off. I mean, I don't know all of this equipment and
whatever--this just doesn't belong anywhere.
In your work at the lab, can you establish any kind of
nexus between what you uncovered, what you blew your whistle
about, with great legitimacy, with the issue of anything that
impinges on our national security? Either Mr. Walp or Mr.
Doran?
Mr. Walp. Okay. From my position----
Ms. Eshoo. And I have some more questions. So if you could
just be as brief as possible.
Mr. Walp. I'll be brief, and perhaps I won't go into it. As
I explained, I believe, to Mr. Rogers, our extreme concern as
it dealt with security was the NIS, the spy type of equipment,
these people having the keys to the kingdom, and just very
quickly, it happened about the end of October where Mr.
Bussolini was taken on a tour and was not allowed into a
certain area. He immediately goes back and attempts to get keys
to get in there, making the statement I need to know what's
behind that door.
Putting all that together, this whole situation, how it was
let to happen, has extreme concern to us as it deals with
national security, with the caveat that the people in charge,
Safeguards and Securities, who are supposed to protect us from
our secrets getting out, allowed this to happen, if you will.
They knew about it in 2001 and did nothing about it, and then
after we bring it to the fore, accept it.
Ms. Eshoo. I'm going to ask--because I have some follow-up
questions--Mr. Doran, if you would like to add anything to it.
Mr. Doran. No. I mean, basically, it is just the--it's a
situation where it is more of a campus environment than a
national laboratory environment, and that is, in fact, a major
problem.
Ms. Eshoo. Do you find this to be the case in all
departments or in specific areas? I know that you used some
acronyms to describe different parts of the organization in
your testimony. I am not so sure if you are referring to the
entire lab or the business/bookkeeping/supervisorial oversight
of employees. What is it that you--I mean, is it all of it? Is
it some of it?
Mr. Walp. As it deals with the theft and mismanagement, you
are talking about?
Ms. Eshoo. Well, all the things that you have testified
about.
Mr. Walp. Yes. The theft and mismanagement, to me, covers
the whole spectrum of the lab as it deals with all the
different systems, purchase cards, purchase orders.
Ms. Eshoo. But is it throughout the lab or is it in that
purchasing area?
Mr. Walp. No, because the people who are doing the
illegalities are beyond the purchasing area or the procurement
area. It's just that----
Ms. Eshoo. Which leads me to my next question. Of the
people that have been relieved or fired to date, I think that
your testimony, both of you, said that you still believe that
there are some or many others that still have to go. Do you
want to comment on that? Is it a whole layer of management? Are
they rank and file?
I hope that a lot of people from the lab are tuned in
today, most frankly, and I'm glad the cameras are here, because
I think everyone at that place needs to know how seriously we
are taking this and that we are committed to cleaning it up.
So is it certain departments or is it pervasive to the
entire lab? Is it purchasing?
Mr. Walp. Okay. To me, it deals with the top layer. I'll
give you one specific example. Mr. Stanley Hettich, the
individual we had the Mustang case on, told Steve and I very
emphatically he had no intentions of telling us about that
Federal crime. In fact, he has not told us----
Ms. Eshoo. Mr. Walp, what I am looking for is I want to
just--it's very important to give the specifics, and I
appreciate that, but because of the time constraints, I want
your big picture thinking about--and advice to the Congress.
That is, do you, either one of you, see that all of this has
been taken care of in terms of the people that have been fired
or put on leave or are there many more to go?
The point that I am trying to get at is how much do we need
to do to cut the cancer out of the organization?
Mr. Walp. Two quick things from my end: You need to get rid
of the whole top layer in order to----
Ms. Eshoo. And how many does that represent?
Mr. Walp. It might be 15 to 20, and then change the
culture.
Ms. Eshoo. Do you agree, Mr. Doran?
Mr. Doran. Yes. I believe everybody in the upper echelons
of the financial area should be removed. They were there before
the problems started. They were there during the problem, and
they continue to hold their positions today.
Ms. Eshoo. Do you believe, with your considerable knowledge
and investigation and experience to date at the lab, that if
this were the case, what you just stated to us--do you believe
that that would cleanse the culture that one of the members, or
more than one member, touched on, to cut this out of the
organization so that it can move on under leadership that is
committed to not only reforms but also to sustain the reforms?
Mr. Walp. If you've got it, and bring in leadership, you
need leadership who will change that culture. If you bring in
the same type of thinking, it is going to go back to exactly
where it was before.
Mr. Doran. And I would concur with Glenn. I mean,
basically, they need strong financial leadership, people who
are concerned about the taxpayer dollar, who know how to manage
money on a grand scale.
Ms. Eshoo. Again, I want to go back to this, because the
labs do the critical, important work. They provide the
research. They are critical to protecting our country. So I
want this to be as clear as possible, and I know that you don't
have knowledge about every single thing.
I understand, and I know that you said for the record that
you have an anxiety and concerns about the national security
area based on what you observed, and I think that that is
legitimate. Is there anything else that you need to add to
that, because if you don't, I think that is a consideration in
this as well.
Mr. Doran. Well my only comment would be is that the entire
system needs to be looked at from top to bottom. Some very
common sense, basic security procedures can be added and
changed to make it tremendously more effective than what it is
today.
Ms. Eshoo. See, I think that when you look at an
organization and they have trouble keeping their books, you
can't help but raise the question, and the American people
would legitimately raise the question, well, why would we have
confidence on this other side. But I do think, given this
mismanagement and all of the other things that are a part of it
that are not pretty, that are not good and that we have to
clean out and get rid of, should not impinge on the whole
national security area. So I appreciate that.
I also want to, for the record, state today that there are
recent events that have illuminated the critical work that the
lab does. One of them is that, shortly after September 11 and
the attacks on our country, the Lawrence Livermore national
Laboratory was the one that reported that North Korea was
resuming its nuclear weapons program.
Many of the International Atomic Energy Agency weapons
inspectors were trained at Los Alamos and are in Iraq today. So
I think that, as we seek to root this out, we've got to
appreciate the larger picture and the larger stage that we set
this up.
Again, I want to thank the chairman, and I hope that
someone is going to ask some questions about the whistleblowers
and if what the University of California has put into place is
satisfactory, but that will have to wait. Thank you, Mr.
Chairman, and thank you to the courageous witnesses that are
here today.
Mr. Greenwood. The Chair thanks the gentlelady and
recognizes for 10 minutes the gentleman from Massachusetts, Mr.
Markey.
Mr. Markey. I thank you, Mr. Chairman, very much, and I
thank you so much for the courtesy in allowing us to ask
questions.
They are courageous. I agree with the gentlelady from
California. I think everyone here admires the courage of Mr.
Walp and Mr. Doran and what they have gone through to bring
this information to us. You are like latter day Paul Reveres,
bringing the warning. You are whistleblowers. It is a very
difficult position to place yourself and your families in.
With apologies, Mr. Chairman, to Henry Wadsworth
Longfellow, I would like to offer the following brief remarks.
Listen, my children, and you shall hear tales of two latter day
Paul Reveres, who were asked by Los Alamos to expose fraud and
security weaknesses and dangerous flaws, and to blow the
whistle when danger appeared.
Today Paul Revere is a hero for all, and those here today
have echoed his call. They've risen up to warn of dangers that
prey on the nuclear lab near Santa Fe. They warned DOE of
problems galore. Yet at first their warnings were largely
ignored. They warned of theft, lost computers, and more, and
instead of rewarding these brave two, they were fired. Their
careers were through.
Through day and night ride these Paul Reveres, and we must
protect their right to sound the alarm, instead of causing them
personal harm. A cry of warning when trouble is near. They are
a voice in the darkness, a warning at the door, and their
rights should be protected forevermore. But borne on the night
wind of the past through all of our history to the last.
In the hour of darkness and peril and need, the people will
waken and listen to hear warnings of waste, wrongdoing and
greed to protect our modern day Paul Reveres. And you can be
assured that from this day forward, this committee will be
monitoring anything and everything that does happen to you.
Now let me ask this. In your opinion, has the University of
California accepted the reality that national security may have
been compromised, in your opinion? Do you think they now accept
that?
Mr. Walp. Of course, I can't speak for them, sir, but I
would say in the meetings that I had, I believe there is
extreme, grave concern on the part of Mr. Darling and his staff
as to the functions that were effectuated at Los Alamos. Quite
frankly, I would couch it in these terms. I believe they would
say that, in many senses, it was a rogue aspect of their whole
operation.
Mr. Markey. But they do accept it?
Mr. Walp. I believe they do.
Mr. Markey. Do you agree with that, Mr. Doran?
Mr. Doran. I would have to agree. And I would just like to
make one quick comment. Glenn and myself have never insinuated
that the people at the laboratory--that everyone at the
laboratory is corrupt and, you know, that they do not love
their country, that they do not do their jobs. There are a lot
of tremendous employees at that laboratory who have helped us
tremendously in doing our job and in bringing this thing to
you.
So I would never want anyone to think that the people--that
the majority of the people at that laboratory do not work to
the better ends of their country.
Mr. Markey. Do you believe that any criminal laws have been
broken?
Mr. Walp. There is no doubt, absolutely. From a Federal
end, Title 18, Section 641, as it deals with theft, obviously;
Title 18, Chapter 1.4, misprison of a felony, not reporting a
felony, absolutely.
Mr. Markey. How about in the national security area?
Mr. Walp. I would say this, that those laws that were
violated--you know, it may not deal with specificity with an
issue that deals with security, but holistically I believe it
does, because these are crimes that occurred at the premier lab
in the world. Therefore, I think, holistically, it certainly
has an umbrella effect over all security.
Mr. Markey. Do you agree with that, Mr. Doran?
Mr. Doran. Yes, I would agree.
Mr. Markey. My understanding is that seven desktop
computers, three laptop computers, and other equipment was
reported stolen. Other computers were reported lost. Could
there have been any classified information on any of those
computers or other devices?
Mr. Doran. There's always a possibility that that
information was contained on those computers.
Mr. Markey. Mr. Walp?
Mr. Walp. And I would agree with Mr. Doran. We don't have
any specific case saying this case had classified information
on it, but if there are computers out there, which there are,
that they have no idea where they are at, that possibility
certainly exists, that it could occur.
Mr. Markey. Mr. Walp, the University of California has
announced that they are reorganizing the division which you
worked in, to report elsewhere in the lab. Is that a good idea?
Mr. Walp. No. It is my very adamant position that, if the
United States citizens want true security of their labs as it
deals with national security, they must take action to take
that division out of the umbrella of a contractor. Absolutely
imperative, because it was infested with self-preservation and
protectionism for the bottom line of their salaries and their
retirements. You must take it out of that environment. That's
my opinion.
Mr. Markey. I want to thank both of you. You are each
patriots, and I very much appreciate the courage it took to do
what you have done. Thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman. Someday you
will tell me how long you tried to find a word that rhymed with
Los Alamos before you gave up. You know you did.
We thank all three of our witnesses for your time and for
your service to your country. It is appreciated. It will
enable--and only because of your cooperation will we be enabled
to do our job and make sure that this doesn't happen in the
future at Los Alamos, at any other lab or, in fact, at any
other Federal facility or program.
So thank you again, and you are excused.
We will now call the Honorable Gregory H. Friedman,
Inspector General, U.S. Department of Energy. Mr. Friedman,
thank you for joining us. I believe you are aware that the
Oversight and Investigations Subcommittee takes testimony from
witnesses under oath. Do you object to giving your testimony
under oath?
Mr. Friedman. I do not.
Mr. Greenwood. Pursuant to the rules of the committee, you
are entitled to be represented by counsel. Do you choose to be
represented by counsel?
Mr. Friedman. I do not.
Mr. Greenwood. If you would raise your right hand.
[Witness sworn.]
Mr. Greenwood. You are under oath, and we look forward to
your opening statement, and you are recognized.
TESTIMONY OF GREGORY H. FRIEDMAN, INSPECTOR GENERAL, U.S.
DEPARTMENT OF ENERGY
Mr. Friedman. Thank you very much, Mr. Chairman, and
members of the subcommittee. Thank you for the opportunity to
appear today to testify on the Office of Inspector General's
recent inquiry concerning Los Alamos National Laboratory.
In February 2002, my office issued a report entitled ``U.S.
Department of Energy's Purchase Card Programs--Lessons
Learned.'' In May 2002, I testified before this subcommittee
regarding the results of that effort. Specifically, we
identified a number of concerns with respect to the
Department's management of purchasing activities. In recent
months, of course, our focus has turned to Los Alamos in light
of allegations about potential abuses at that facility.
On November 5, 2002, the Acting Administrator of the
National Nuclear Security Administration requested that the
Office of Inspector General review allegations that management
of the laboratory was engaged in a deliberate cover-up of
illegal activity and security concerns. We interviewed over 60
laboratory officials and other parties, and reviewed thousands
of pages of pertinent records.
One of our first steps was to interview two laboratory
security officials, Glenn Walp and Steve Doran, who testified
just a few minutes ago. Both men are former law enforcement
officers and had been hired by the laboratory in 2002 to help
address an acknowledged deficiency in Los Alamos' handling of
property loss and theft. Both men were vocal in their
criticisms of the laboratory's management of these issues.
Approximately 1 week after we interviewed the two security
officials, the laboratory terminated their employment. This
raised the specter that the terminations could have been
retaliatory. Consequently, we incorporated these actions into
our inquiry.
Our recently issued report disclosed a series of actions by
laboratory officials that obscured serious property and
procurement management problems and weakened relevant internal
controls. These actions created an environment in which Los
Alamos employees were discouraged from, or had reason to
believe they were discouraged from, raising concerns to
appropriate authorities.
In short, management's actions resulted in delayed
identification and resolution of underlying property and
procurement weaknesses and related security concerns.
For example, we found that laboratory management published
materials distributed to laboratory employees in advance of a
2002 Department of Energy cyber security review. These
materials contained such phrases as ``resist the temptation to
spill your guts;'' ``Handwritten notes can be especially
damaging; they are not easily disavowed;'' and ``Finger
pointing will just make the program look bad.''
Our inquiry also corroborated a number of the concerns
expressed by the two terminated security officials. The
laboratory's decision to terminate the employment of the two
security officials during ongoing external reviews that were
addressing some of the very same issues raised by these
officials was an incomprehensible action on the part of the
University of California.
In our view, these events raised doubts about Los Alamos'
commitment to solving noted problems, and fostered a chilling
effect on employees who may have been willing to speak out on
matters of concern.
Our inquiry also disclosed that, even after considering
recent events at Los Alamos, in December 2002 the NNSA rated
Los Alamos excellent in both procurement and property
management. Although we did not review the particular process
by which NNSA arrived at such a rating, we believe the process
should be reevaluated in light of events.
Our report of inquiry contained specific recommendations
for corrective action. We feel it is especially important that
Department of Energy officials ensure that the University of
California and the laboratory's management are held accountable
for implementing and executing corrective actions resulting
from the situation at the laboratory.
In addition to this special inquiry, we have a number of
ongoing efforts at the laboratory. Our most recent report
issued on February 21, 2003, examined internal controls over
firearms at Los Alamos. We found weaknesses in the
administration of the firearms inventory, which included over
1600 guns. We noted, for example, that 12 firearms received in
1999 were not entered into the laboratory's inventory. Also,
separate firearms inventories maintained by Los Alamos and the
security subcontractor were inconsistent and had not been
reconciled. In addition, all firearms were not processed
through a central receiving point, resulting in delays in
entering some firearms into the Los Alamos property management
data base. In fact, some firearms never made it into the data
base. Management asserted that the problems we encountered
concerned receipt of firearms and not accountability of
firearms. However, in our judgment, the failure of Los Alamos
to provide an accurate firearms inventory, the lack of
reconciliation of the Los Alamos inventory with the security
force inventory, and the acknowledged problems in the process
for receipt of firearms and their inclusion in the official
laboratory inventory raised doubt about the property control
system at Los Alamos. In response to our report, management
indicated that corrective actions would be taken.
Other ongoing Office of Inspector General reviews and
investigations, as well as matters under the purview of the
Federal Bureau of Investigation, are continuing to address a
number of the related concerns. These efforts include: A review
of laboratory controls over laptop and desktop computers; a
review of allowability of costs claimed by the University of
California under its contract to manage the laboratory for the
Department of Energy; and a number of criminal investigations
regarding misuse of purchase authority.
The criminal investigations are being closely coordinated
with the United States Attorney's Office in New Mexico. Due to
the sensitive nature of the ongoing investigations, we will be
unable to provide specific information on individual cases.
Mr. Chairman, as I indicated previously, our work at Los
Alamos continues. Our objective is to address the concerns that
have been raised regarding laboratory operations.
This concludes my statement, and I would be pleased to
answer any questions. One apology at the outset, if you will. I
am suffering from a chest cold and a head cold. So if my voice
is especially unappealing, I trust you will understand why.
Mr. Greenwood. No, it's just normally unappealing.
Mr. Friedman. You must have been speaking to my wife, Mr.
Chairman.
[The prepared statement of Gregory H. Friedman follows:]
Prepared Statement of Hon. Gregory Friedman, Inspector General, U.S.
Department of Energy
Mr. Chairman and Members of the Subcommittee. Thank you for the
opportunity to appear today to testify on the Office of Inspector
General's recent inquiry concerning Los Alamos National Laboratory.
introduction
For 60 years, the University of California (University) has
operated the Los Alamos National Laboratory (Los Alamos) for the
Department of Energy (Department) and its predecessor agencies. Among
its many important missions and functions, Los Alamos has critical
national security responsibilities, including helping to ensure the
safety, security, and reliability of the nation's nuclear weapons
stockpile.
In recent years, Los Alamos has been the subject of intense
scrutiny during a number of controversies regarding allegations of
espionage, lax security, and related internal control failures. The
Department and Los Alamos initiated actions intended to ensure that the
Laboratory was carrying out its missions with a heightened emphasis on
protecting national security interests. Realignment of Los Alamos'
security function, or ``S'' Division, was one such action. On a broader
scale, Congress and the President created the National Nuclear Security
Administration (NNSA) as a semi-autonomous agency within the
Department.
In 2001, Los Alamos undertook a nationwide search to recruit an
experienced leader for the Office of Security Inquiries within the
``S'' Division. In addition to various security responsibilities, the
job announcement for this position provided that the person hired would
conduct investigations into theft and property protection. Given the
sensitive nature of much of the work at Los Alamos, imbuing this
position with a sense of urgency for the protection of property--
especially computers and other technology that may store classified and
other national security information--was consistent with the
Laboratory's stated goal to heighten national security awareness. The
nationwide search culminated with the hiring of a new Security
Inquiries Team Leader (Security Inquiries Leader) in January 2002.
In February 2002, my office issued a report entitled, ``U.S.
Department of Energy's Purchase Card Programs--Lessons Learned.'' In
May 2002, I testified before this Subcommittee regarding the results of
that effort. Specifically, we identified a number of concerns with
respect to the Department's management of purchasing activities. In
recent months our focus has turned to Los Alamos in light of
allegations about potential abuses at that facility.
On November 5, 2002, the NNSA Acting Administrator requested that
the Office of Inspector General review allegations that management of
the Laboratory was engaged in a deliberate cover up of illegal activity
and security concerns. We interviewed over 60 Laboratory officials and
other parties, and reviewed thousands of pages of pertinent records.
One of our first steps was to interview two Laboratory security
officials, Glenn Walp, the Security Inquiries Leader, and Steven Doran.
Both men are former law enforcement officers, and had been hired by the
Laboratory in 2002 to help address an acknowledged deficiency in Los
Alamos' handling of property loss and theft. Both men were vocal in
their criticisms of Laboratory management's handling of these issues.
Approximately one week after we interviewed the two security
officials, the Laboratory terminated their employment. This raised the
specter that the terminations could have been retaliatory.
Consequently, we incorporated these actions into our inquiry.
summary of inquiry findings
Our recently-issued report of inquiry disclosed a series of actions
by Laboratory officials that obscured serious property and procurement
management problems and weakened relevant internal controls. These
actions created an atmosphere in which Los Alamos employees were
discouraged from, or had reason to believe they were discouraged from,
raising concerns to appropriate authorities. In short, management's
actions resulted in delayed identification and resolution of the
underlying property and procurement weaknesses, and related security
concerns. Specifically, we found that Laboratory management:
Failed to take appropriate or timely action with respect to a
number of identified property control weaknesses. There was:
(1) inadequate or untimely analysis of, and inquiry into, property loss
or theft and security issues;
(2) lack of personal accountability for property;
(3) a substantial degree of dysfunction in the Laboratory's
communication and assignment of responsibilities for the
handling of property loss and theft concerns; and
(4) inadequate controls over procurement and property systems.
We also found that Laboratory management:
Had inadequate policies governing when and under what
circumstances activities must be reported to law enforcement.
Issued, then immediately rescinded without adequate
explanation, a memorandum requiring corrective actions to
address ``disturbing negative trends regarding Laboratory
management of Government property.'' Another memorandum was
later reissued in modified form, but a number of the corrective
action mandates were never fully effectuated.
We found, as well, that the Laboratory:
Published certain materials distributed to Laboratory
employees, in advance of a 2002, Department cyber security
review, containing such phrases as
1. ``Resist the temptation to `spill your guts' '';
2. ``Handwritten notes can be especially damaging . . . They are not
easily disavowed''; and
3. ``Finger pointing will just make the program look bad.''
Our inquiry corroborated a number of the concerns expressed by the
two terminated security officials. The Laboratory's decision to
terminate the employment of the two security officials during ongoing
external reviews that were addressing some of the very same issues
raised by these officials, was, in our judgment, an incomprehensible
action on the part of the University of California. These events:
Raised doubts, in our judgment, about Los Alamos' commitment
to solving noted problems;
Fostered a chilling effect on employees who may have been
willing to speak out on matters of concern; and
Were inconsistent with Laboratory and University of California
obligations under its contract with the Department of Energy.
As you know, the University recently announced that the two
security officials had been re-hired, albeit on a temporary basis, as a
part of the Office of the President.
Our report of inquiry contained specific recommendations for
corrective action. In particular, responsible Department officials must
ensure that the University of California and the Laboratory's
management is held accountable for implementing and executing
corrective actions resulting from the current situation at the
Laboratory.
details of inquiry findings
A. Allegations of Cover-up/Questionable Management Actions
Laboratory officials took a number of actions that, in our
judgment, obscured serious property management and security problems.
These actions created an atmosphere in which Los Alamos employees were
discouraged from, or had reason to believe they were discouraged from,
raising concerns about property loss and theft, or other concerns, to
the appropriate authorities.
In short, management's actions made successful identification and
resolution of the underlying property, procurement, and security
weaknesses problematic. The most overt action taken by Los Alamos was
the firing of the two security officials. This action, taken amidst
ongoing reviews of allegations of lax security controls, was clearly
and predictably controversial. Moreover, the officials were fired soon
after they spoke with the Office of Inspector General. It is impossible
to imagine that this action would not have had a chilling effect on
other employees who might have contemplated speaking out about problems
at the Laboratory. In our judgment, the terminations undermined
management's actions to address the core issue: identifying and
correcting weaknesses in controls over national security assets.
In addition to the firings, our inquiry disclosed that Laboratory
management:
Issued, then immediately rescinded, a memorandum requiring
corrective actions to address problems regarding the management
of Government property.
Published Laboratory documents that could be interpreted as
discouraging Los Alamos employees from reporting on the extent
or severity of control weaknesses.
Rescinded Memorandum
In an April 2002, memorandum, addressed to all Laboratory
``Leaders,'' the Laboratory's Office of the Chief Financial Officer
(CFO Office) cited the need to ``call your attention to disturbing
negative trends regarding Laboratory management of Government property
and to engage your support in taking corrective action.'' According to
the CFO Office, the concerns were that the amount of property missing
during the Fiscal Year 2001 inventory had nearly tripled from the
previous year, to $723,000; and, that substantial amounts of property,
valued at $533,000, had been reported lost or stolen during Fiscal Year
2001.
The CFO Office's memorandum further stated that neither Los Alamos
nor the Department could accept $1.3 million (the approximate total of
the two categories listed previously) in unaccounted property. The CFO
Office noted that the issue would negatively impact the Laboratory's
rating in property management. Attached to this memorandum was
organization-specific listings reflecting property losses.
To address these concerns, the CFO Office described four new
quarterly tracking and trend reports that this office would be
responsible for issuing. The memorandum requested that each Los Alamos
division develop a corrective action plan to raise awareness of
property accountability and safeguards. The memorandum also suggested
the initiation of a root cause analysis and planned training, and
recommended review of instances of multiple losses or lack of
accountability by the same individual. On December 18, 2002, we asked
the CFO Office to provide us copies of each of these reports, including
copies of each division's corrective action plan.
In a memorandum dated December 19, 2002, we were informed that the
April 10, 2002, memorandum had actually been rescinded the day after it
was distributed. We were told that Los Alamos management decided that
it would be more appropriate to provide each division leader only the
information relevant to his or her division and that it served no
purpose and was insensitive to people's privacy to publish the entire
list. Thus, an e-mail was sent asking division leaders to disregard the
memo of the previous day. Although a version of this memorandum was
subsequently reissued a number of the corrective action mandates were
never fully effectuated.
This chain of events raised doubts as to management's commitment to
address identified control weaknesses.
Laboratory Documents
During our inquiry, two other significant documents came to our
attention that could be interpreted as discouraging Los Alamos
employees from reporting on the extent or severity of control
weaknesses.
We reviewed briefing materials for a training course to be attended
by Los Alamos employees in anticipation of a November/December 2002
Department of Energy Inspection & Evaluation (I&E) review on Laboratory
cyber security. The briefing materials, which were prepared by the
Laboratory's Office of Chief Information Officer (CIO Office), were
titled, ``Surviving the [I&E] Audit,'' and included the following
suggestions:
``Resist the temptation to `spill your guts'.''
``Handwritten notes can be especially damaging . . . They are
not easily disavowed.''
``Finger pointing will just make the program look bad.''
When shown these materials, a senior Los Alamos management official
said that he had not previously seen them and that they were
``stupid.'' Subsequently, on December 16, 2002, a memorandum was sent
to certain employees clarifying the purpose of these materials in light
of their ``potential for misinterpretation.''
A second document was a Code of Ethical Conduct statement. The
document was based on the Institute of Internal Auditors (IIA) Code of
Ethics, but departed from the IIA code by requiring auditors not to use
information in a manner that could be perceived as ``. . . detrimental
to the University of California, the Los Alamos National Laboratory, or
the Audits and Assessments Office.'' While it may not have been the
intent of the document, reporting erroneous payments or surfacing other
internal control weaknesses--traditional responsibilities of internal
auditors--could be perceived as ``detrimental'' to Los Alamos. Los
Alamos auditors were also asked to ``exhibit loyalty in all matters
pertaining to the affairs of the University of California, the Los
Alamos National Laboratory, and the Audits and Assessments Office . .
.'' The conduct statement created, in our opinion, the appearance of a
lack of independence for Los Alamos auditors.
B. Security Officials' Terminations
We endeavored to evaluate the Laboratory's decision to terminate
the employment of the two security officials consistent with the
Department's standards for protecting contractor employees from
retaliatory actions. Based on our evaluation, we believe it will be
difficult for the University of California to sustain its burden under
the prevailing standard for adjudicating these matters.
Specifically, under the Department's procedures, once an initial
case of retaliatory termination is established, the burden shifts to
the contractor entity to demonstrate, by clear and convincing evidence,
that the contractor entity would have taken the same action without the
contractor employee's disclosure or other protected activity.
In this regard, our inquiry disclosed that:
The two security officials were vocal in their criticisms of
the Laboratory's management of property loss and theft
concerns.
Laboratory management acknowledged that prior to the arrival
of the Security Inquiries Leader, Laboratory efforts to inquire
into these matters were inadequate.
Recent external reviews, including this inquiry, corroborated
a number of the fundamental concerns previously expressed by
the two terminated security officials relating to property and
management systems.
As late as October 2002, the Security Inquiries Leader had
received a favorable performance evaluation.
The timing of the terminations was, itself, suspect. A memorandum
documenting the Laboratory's stated rationale for the terminations is
dated the same day (November 20, 2002) as the Office of Inspector
General's interview of one of the two security officials. We were
advised by the Security Inquiries Leader, and Laboratory documentation
confirmed, that he had informed his management, in advance, that he and
his staff were to be interviewed by the Office of Inspector General
inquiry team.
In the November 20, 2002, memorandum cited above, a senior Los
Alamos official documented what he believed to be valid reasons for the
terminations. We evaluated these reasons, and concluded that a
substantial number of them do not withstand scrutiny.
C. Internal Control Weaknesses
In a March 26, 2002, memorandum to Los Alamos management, the
Security Inquiries Leader expressed significant concern with the manner
in which Los Alamos addressed property loss and potential theft. Our
inquiry corroborated a number of those concerns. Specifically, we
found:
(1) inadequate or untimely analysis of, and inquiry into, property loss
or theft and security issues;
(2) lack of personal accountability for property;
(3) a substantial degree of dysfunction in the Laboratory's
communication and assignment of responsibilities for the
handling of property loss and theft concerns; and
(4) inadequate controls over procurement and property systems.
Property and Security Issues
We noted that property loss and theft issues, and related security
considerations, were not subject to thorough and consistent analysis.
For example, in 2001, a report documenting the loss of a security radio
was inadequate. It did not provide information concerning what
frequencies might have been compromised.
The Security Inquiries Leader expressed this and related concerns
in his March 2002 memorandum, including those with respect to the entry
into a law enforcement tracking system of Laboratory property theft
reports. Although he noted that such reports were being provided to the
Los Alamos Police Department and the FBI, the Security Inquiries Leader
asserted that those agencies were not entering the property information
into the National Crime Information Center records because the reports
were of poor quality.
As noted by a counterintelligence official, the theft of Laboratory
property can have national security implications. In this vein, with
respect to previous Laboratory property reports he reviewed, the
Security Inquiries Leader observed:
``The reports indicate that no questions were asked pertaining
to the type of data that may have been on stolen computers,
laptops, PDAs,1 and digital cameras. It is possible
that they may have had sensitive or proprietary materials on
those systems, but inquiry personnel failed to explore that
potential; at least one can assume this view based on the data
contained in the inquiry reports.''
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\1\ ``Personal Digital Assistants.''
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Based on these concerns, we requested that Los Alamos explain the
steps taken to account for lost computers and other sensitive
equipment. We also inquired as to any efforts made to evaluate whether
classified or other protected information had been compromised as a
result. The Laboratory produced a draft memorandum, dated December 18,
2002, in which the Chief Information Office (CIO) concluded that none
of the lost, stolen, or unlocated computers identified by Los Alamos
contained classified information. The CIO's memorandum also concluded
that there were at least 258 computers lost, 44 computers stolen, and
61 computers unlocated for Fiscal Years 1999, 2000, 2001, and
2002.2 We did not validate these numbers, or the CIO's
conclusion concerning the non-compromise of classified information. In
fact, a CIO official told us that there were inconsistencies between
these numbers and previous reports provided by the CFO and the Office
of Security Inquiries.
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\2\ The memorandum identified an additional 75 computers requiring
follow up and resolution status.
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A CIO official acknowledged that the Laboratory's processes for
reporting lost, stolen, and unlocated computers are ``fragmented.'' He
noted inconsistencies between computers reported lost and stolen to the
Office of Security Inquiries and data available to property management
officials. Another Laboratory official confirmed that these reporting
mechanisms are not integrated throughout the Laboratory, and both of
these key officials asserted that they have recently recommended
corrective action to ensure that appropriate systems are integrated.
The timing of the Laboratory's effort to reconcile these important
questions is, in and of itself, troubling. It was not until the
November-December 2002 timeframe that there was intensive effort in
this regard.
Property Accountability
According to a Los Alamos official, Laboratory employees have not
been routinely held liable or accountable for lost property under their
control. This official explained that when an employee first takes
custody of an item of property, the employee signs an
``accountability'' statement. However, Los Alamos management generally
chose not to enforce the statements, according to this official, but
rather chose to ``write off'' the missing property at the end of an
inventory cycle. An accounts receivable official could not recall ever
receiving any restitution from any Los Alamos employee for a lost or
stolen item for which he or she was responsible. The Security Inquiries
Leader made a similar point in his March 2002 memorandum.
Another issue we identified relates to Los Alamos' use of ``drop
points'' for the delivery of new equipment. Under the drop point
system, Laboratory property is not delivered, uniformly, to a central,
secure location. At such a secure central location, the equipment can
be tagged, inventoried, and consistently tracked. We were told that
many of these Laboratory drop points are in open spaces with little or
no security. A number of key officials advised that there have been
insufficient Laboratory efforts to ensure that equipment delivered to
Laboratory drop points is safeguarded. We were also told that property
would be left at these locations for inordinate amounts of time,
without being checked by property administrators.
Communication and Responsibilities
Our inquiry disclosed a substantial degree of dysfunction in Los
Alamos' communication and assignment of responsibilities and
authorities for the handling of property loss and theft concerns. For
example, Laboratory management sent mixed messages to the two former
security officials with respect to the scope of their authorities and
responsibilities. Security Inquiries officials were told that they were
not ``investigators.'' At the same time, our inquiry disclosed that one
of the terminated security officials was directed by a senior Los
Alamos official to travel off site, to another state to interview a
private citizen, to obtain information concerning a matter (the alleged
improper purchase of a Mustang automobile), which included the
possibility that it was criminal in nature. This appeared inconsistent
with previous direction, and other management communications to these
officials, about the scope of their responsibilities and authorities.
Further, Laboratory management acknowledged that there were
inadequate Laboratory policies that governed when and under what
circumstances Laboratory activities must be reported to law
enforcement. Laboratory officials had been drafting such a policy since
the spring of 2002, but the policy remained in draft at the time of our
inquiry.
Our inquiry also disclosed organizational inconsistency between the
roles of the Office of Audits and Assessments and the Office of
Security Inquiries. The Office of Audits and Assessments was tasked
with the internal review of Laboratory ``waste, fraud, and abuse''
concerns, whereas the Office of Security Inquiries was responsible for
reviewing alleged ``theft.'' This left not only the potential for
``overlap'' in responsibilities, but ``underlap,'' as one senior
security official characterized this condition to our inquiry team.
Procurement and Property Systems
As we completed our inquiry fieldwork, the final report of the
Laboratory's external review team was completed. That report noted a
number of Laboratory ``programmatic weaknesses'' with respect to Los
Alamos' controls over purchase cards, including:
Failure to reconcile and approve monthly statements;
Failure to resolve disputed transactions;
Failure to properly account for controlled property;
Purchase of restricted items in violation of Laboratory
policies;
Insufficient documentation of items purchased;
Inadequate or ineffective sanctions for non-compliance;
Insufficient training, especially for approvers;
Insufficient program audit and review procedures;
Failure to properly manage cardholder spending limits; and,
Failure to safeguard card information.
The external review team recommended a number of corrective
actions, and noted that they had not validated the Laboratory's
implementation of recent corrective actions.
We also noted during our inquiry that NNSA had completed an
assessment of the Laboratory's ``Personal Property Management'' and
``Procurement Management,'' in December 2002, and rated the Laboratory
as ``excellent'' in both categories. Although we did not evaluate the
process by which NNSA arrived at such a rating, we believe the process
should be re-evaluated in light of events.
recommendations
In our report, we made specific recommendations for corrective
action. In particular, responsible Department officials must ensure
that the University of California and the Laboratory's management are
held accountable for implementing and executing corrective actions
resulting from the situation at the Laboratory.
other oig reviews
Beyond this special inquiry, Mr. Chairman, we have a number of
recently completed reviews and ongoing efforts at the Laboratory. Our
most recent report, issued on February 21, 2003, examines internal
controls of firearms at Los Alamos. We concluded that weaknesses exist
in the administration of the firearms inventory, which included over
1,600 guns. We found, for example, that 12 firearms received in 1999
were not entered into the Laboratory's inventory. Also, separate
firearms inventories maintained by Los Alamos and the security
subcontractor were inconsistent and had not been reconciled. In
addition, all firearms were not processed through a central receiving
point, resulting in delays in entering some firearms into the Los
Alamos property management database. In fact, some firearms never made
it into the database. Management asserted that the problems we
encountered concerned receipt of firearms and not accountability of
firearms. However, in our judgment, the failure of Los Alamos to
provide an accurate firearms inventory; the lack of reconciliation of
the Los Alamos inventory with the security force inventory; and the
acknowledged problems in the process for receipt of firearms and their
inclusion in the official Laboratory inventory raised additional doubt
about the property control system at Los Alamos. In response to our
report, management indicated that corrective actions would be taken.
Other ongoing Office of Inspector General reviews and
investigations, as well as matters under the purview of the Federal
Bureau of Investigation, are continuing to address a number of relevant
concerns. The OIG efforts include:
A review of laboratory controls over laptop and desktop
computers;
A review of the allowability of costs claimed by the
University of California under its contract to manage the
Laboratory for the Department of Energy; and
A number of criminal investigations regarding misuse of
purchase authority.
The criminal investigations are being worked in coordination with
the United States Attorney's Office in New Mexico. Due to the sensitive
nature of ongoing investigations, we will be unable to provide specific
information on the individual cases.
Mr. Chairman, as noted previously, our work at Los Alamos National
Laboratory continues with the objective of addressing a number of
concerns that have been raised regarding Laboratory operations.
This concludes my statement and I would be pleased to answer any
questions.
Mr. Greenwood. Thank you, Mr. Friedman.
Your special inquiry report points out that you
corroborated a number of Mr. Walp's and Mr. Doran's fundamental
concerns about property controls at the laboratory. What was
the most significant concern there that you were able to
corroborate?
Mr. Friedman. Well, over and above the notion that the
laboratory did not countenance very well whistleblowers, people
who brought problem information to their attention. There was
the general lack of accountability, and I think they had a very
good point on that, and that is the main point that we have
corroborated through our reviews.
Mr. Greenwood. Did you sense this culture that Misters
Doran and Walp referred to?
Mr. Friedman. There was a tone at the laboratory that, I
think, parallels the description that they gave you today.
Mr. Greenwood. Okay. In its letter in response to a list of
questions from the committee, the University of California
asserts, ``No classified information was contained on the hard
drives of the hundreds of computers that have been lost or
stolen at Los Alamos over the past 3 years.''
Do you believe that Los Alamos has accurately accounted for
these computers and can rightly assert that none of them
contained classified information?
Mr. Friedman. Well, at this point, given what we have found
to date, Mr. Chairman, I don't have any confidence that they
have the total number, and I am not sure they ever will get the
total number. As has been indicated, there may very well have
been computers that were procured but never made it into the
inventory data base. So, therefore, I don't know how you
necessarily would know they are missing.
With regard--did your question pertain as well to the
question of the classified information?
Mr. Greenwood. Yes.
Mr. Friedman. We found, or they have identified that at
least 400 computers in 3 years were lost, missing or stolen or
unlocatable. Given the fact that they don't have the computers,
I would not necessarily express a great deal of confidence in
the final conclusion that there was no sensitive or classified
information compromised.
I don't have an instance in which that was the case, but I
certainly couldn't assure you that that was not the case.
Mr. Greenwood. According to a February 5, 2003, memo from
you to Acting Administrator Linton Brooks at the National
Nuclear Security Administration, your office encounter,
``significant dysfunction at Los Alamos during your review.''
Specifically, you note that lab management failed to comply
with your request for information regarding an April 10, 2002,
internal lab memo. Could you describe the significant
dysfunction that you encountered in your review?
Mr. Friedman. Well, the memo in question, Mr. Chairman,
came to our attention through a third party and, when we talked
to the purported author of the memo, he didn't have a copy of
the memo nor was he able to provide the five data points that
had been requested as a result of the memo. He was not able to
provide any of that information.
We departed that day with a commitment on his part to get
us the information and to provide it to us. It was very
surprising that this person, who was in a fairly senior
position at the lab, could not provide us the information at
that instant.
Subsequently, in fact, we received an e-mail message from
this individual stating that, in fact, the earlier memorandum
that had been referred to had been withdrawn. We still have a
data request, and we do to this day have a data request for all
the information that may have resulted, as had been requested
by the original memorandum.
Basically, we then found after our review had been
completed that, in fact, the memo had been re-issued
subsequently. We still have not received the substance of the
information. Of the five data points, three of the five data
points, we don't believe, have ever been fully complied with.
So as a result, we don't have confidence in the system.
Even if there was a significant misunderstanding, a lack of
candor with the Office of Inspector General or a
miscommunication within the lab, that is a dysfunction in and
of itself.
Mr. Greenwood. The committee's investigation of problems at
Los Alamos has focused on the University of California, the
contractor in charge of operating Los Alamos. In your opinion,
is the Department of Energy and National Nuclear Security
Administration also at fault for management breakdowns at Los
Alamos?
Mr. Friedman. There certainly are shared responsibilities.
The Department of Energy and the NNSA specifically is the
contract manager for the University of California contract at
Los Alamos. So absolutely, they have a responsibility.
Mr. Greenwood. You have looked at this pretty thoroughly.
If it was your job to make sure that this kind of thing doesn't
happen, not only at Los Alamos or anywhere else within DOE or,
for that matter, the Federal Government, what kinds of things
would you do? How do we fix this?
Mr. Friedman. Well, first, there needs to be--and this is
going to require a sustained effort, Mr. Chairman--a change in
the culture with regard to encouraging people who have
legitimate concerns to raise those concerns, and they should
know that it is done in an environment in which they will not
be retaliated against.
Second, it is the responsibility of management to act on
those concerns. Once they are brought to your attention, they
need to be addressed.
Third, it seems to me, we have to make sure that the
processes, or at least the University of California at this
point needs to make sure that the processes that are in place,
procurement, financial, inventory, at the various laboratories
under its management are first class, that they operate as
intended, and that they are doing the job, and that the
interest of the taxpayers is ensured as a result of those
processes.
Mr. Greenwood. Just wondering what would happen if we had
an immunity day and asked everybody to just please bring back
all the stuff they have stolen over the last 20 years, and make
a big pile.
Are you satisfied the University of California has recently
announced corrective actions?
Mr. Friedman. Well, this is going to take some time. It is
a good start. The jury is out, and we will go back and take a
look at it at some point in the future to see if, in fact, they
are operating as intended.
Mr. Greenwood. I would like unanimous consent to enter
these documents into the record. Without objections.
The Chair recognizes the gentleman from Florida for 10
minutes.
Mr. Deutsch. Thank you, Mr. Chairman. Now I think
underlying all of our investigations is actually what the
laboratory does, and I think all of us have this concern, that
if this level of scrutiny is done on the criminal activity in
terms of devices, how much serious is there out there that we
don't know about?
I think that really is the anxiety I think all of us has,
is as awful as all of this is, whether it is a Rototiller or a
sleeping bag, it would be a lot worse if it were enriched
uranium.
Have you independently looked at those issues in terms of
the entire structure and the system that they have in place for
protection of not just, as you had acknowledged, with stolen or
the unaccounted for computers. We have no idea what was on
those computers.
It just raises the stakes more than just criminal activity,
but really espionage and national security, which obviously
are, in fact, as significant as all these other issues are,
much more troubling.
Mr. Friedman. Well, we are attempting to address that, Mr.
Deutsch, and let me give you one example. One of the reviews
that we have ongoing right now, as I indicated, is a
comprehensive review of the controls over desktop and laptop
computers, and we are going to follow them to the core, as they
were purchased, through the process, as they are disposed of.
Those that are identified as being stolen, lost or
unlocatable, we will follow those as well and really examine
the controls over those computers. So I hope we will get to the
issue, the core issue, that you are referring to.
Mr. Deutsch. Do you feel you as the Inspector General have
enough resources to do that?
Mr. Friedman. That is a loaded question. The answer, Mr.
Deutsch, is that we don't have enough resources. We are doing
the best we can with what we have. We are spread over 14
different Department of Energy locations around the country.
Our objective is to do the maximum with the people that we
have.
We recognize the fact that resources are tight throughout
government.
Mr. Deutsch. But again, let me just kind of--have you seen
any change in the resources available to you post 9-11, either
in last year's budget or in this year's budget?
Mr. Friedman. This year's budget, I am pleased to say, we
had a fairly substantial increase. But the delay in getting the
budget has worked against us in terms of hiring.
Mr. Deutsch. I mean, could you be more specific with what
that increase was?
Mr. Friedman. I am embarrassed to tell you, I don't know
the precise number.
Mr. Deutsch. Do you have a ballpark, 10 percent, 20
percent?
Mr. Friedman. It was about a 20 percent increase.
Mr. Deutsch. And is that more directed toward these types
of issues that we are discussing?
Mr. Friedman. Unfortunately, we have an obligation under
statute to audit the financial statements of the U.S.
Department of Energy, and that is the most labor intensive and
dollar intensive effort that we undergo. So a disproportionate
part of our budget is directed toward the financial statements
of the Department of Energy.
Mr. Deutsch. And what percentage of your budget, would you
say, is directed toward that versus these other type of
activities?
Mr. Friedman. Well, it is about 20 percent of our entire
budget, and we think that is quite high.
Mr. Deutsch. Now can I--I mean, just to try to get a feel
for this, how many people would you say--how many person time
are you allocating to the Los Alamos situation at this point?
How many full time positions?
Mr. Friedman. How many full time positions? Probably 20 to
25. Let me just expand on that for a second. We are also doing
sensitive property reviews at the other University of
California labs as well.
Mr. Deutsch. And in terms of the other facilities that you
have responsibility for, do you have any sizable people in
terms of property evaluation at any of the other locations?
Mr. Friedman. Well, yes. You know, obviously, we have----
Mr. Deutsch. You have jurisdiction, but I mean, is there
anything that large in terms of numbers of people?
Mr. Friedman. No. No, there is nothing that large, not by a
long shot.
Mr. Deutsch. Have you uncovered anything similar to what's
happened in Los Alamos?
Mr. Friedman. Well, it is too early to tell, but the
firearms review was the first step in a series of steps to look
at property controls.
Mr. Deutsch. At this point, do you think the laboratory has
taken sufficient personnel action to deal with the problems
that you've identified?
Mr. Friedman. Well, as I indicated earlier, certainly, a
number of personnel actions have taken place. There are a
number of reorganizations that have taken place. But it is too
early for us to judge whether those are really effective in
addressing the problem.
Mr. Deutsch. When would you want to come back for us where
you feel you can actually judge those?
Mr. Friedman. Well, let's look at 6 months, and maybe we
will have a chance to look at it in that timeframe. It may be a
little longer than that. Did you ask for a timeframe? Did I
answer you correctly?
Mr. Deutsch. Yes, you did. In your longer statement you
said that the firing of Mr. Walp and Mr. Doran while they were
ongoing reviews of property and procurement controls undermined
management's action to address the core issue, identifying and
correcting weaknesses in controls over national security.
Would you explain how exactly this undermined the core
issue?
Mr. Friedman. Well, basically, we felt that these people
were on the front line of identifying these problems, and
taking them out of the loop undermined this very process that
was designed to get to the bottom of these issues and to
investigate and prosecute those cases where there was
wrongdoing.
Mr. Deutsch. And the core issue being?
Mr. Friedman. The core issue being people on the inside
with the investigative information to provide to us or to the
FBI as to wrongdoing at the laboratory.
Mr. Deutsch. Right. But I guess the thing that raised just
my concern again is that weakness in controls over national
security, not over theft but over national security. What were
you alluding to there?
Mr. Friedman. Oh, what we were alluding to is--and as I
indicated, we have not found a computer that contained
classified information that was lost or stolen. What I am
alluding to is that the national security mission of Los Alamos
is inextricably tied to the day to day business of the
laboratory.
So to the extent that you have people who are involved in
misdeeds, who are even responsible for common inventory, it
sends a very, very important message to the rest of the
laboratory.
Mr. Deutsch. How helpful would Mr. Palmieri's April 10 memo
have been in implementing the necessary correction actions?
Mr. Friedman. He laid out five different steps. I thought
they were good steps, the most important of which was
corrective action plans for all of the divisions at the
laboratory in terms of their dealing with property. I thought
that was the most impressive. To date, we have not received any
of those corrective action plans.
Mr. Deutsch. And controlling the property on the inventory
list really doesn't address the abuse in the procurement
system. Most of the property isn't even on that list. Is that
not correct?
Mr. Friedman. I don't think it is most of the property. I
think there is a fair amount of the property that is not on
that list. I don't know the precise percentage.
Mr. Deutsch. And finally, under the new reorganization
plan, Mr. Walp's former office is going to be merged into the
Audits and Assessments Section. Audits does not have a good
reputation for prosecuting fraud, waste and abuse, particularly
criminal cases.
Does this appear to just be another attempt to put the
investigators into an office much more acceptable to upper
management?
Mr. Friedman. Frankly, until I heard it today, I did not
know that is the way it was going to be reorganized, and I'd
like to take a look at that, and I would be more than happy to
give you my opinion after I have done that. I don't have an
opinion on it right now. Unless the Audits and Assessments unit
is girded up and given authority, I'm not sure that it is a
good idea.
Mr. Deutsch. Thank you.
Mr. Greenwood. Before we go to Ms. Eshoo, just one quick
question.
I want to understand something. University of California
manages about $2 billion worth of Federal money in this
program, and they get a performance fee that totals around $8-
$9 million. If property is stolen from the lab, does that come
out of the funds that would otherwise enure to the benefit of
the University of California or, in fact, does it just get
moved--pushed along to the Treasury?
Mr. Friedman. This is a question, Mr. Chairman, that really
ought to be addressed to the Department itself. But in general,
unless the most senior members of the contractor staaff are
aware of the fraud, the taxpayers carry the burden of those
losses.
Mr. Greenwood. Thank you. The gentlelady from California.
Ms. Eshoo. Thank you again, Mr. Chairman. for the
legislative courtesy that you have extended to me. Thank you,
Mr. Friedman, for your excellent testimony and your very
important work.
I have two questions. Are you aware of the reforms that the
University has undertaken relative to this scandal and, if so,
do you believe they are the soundest policies to cure the ills
that you have investigated and reported?
Mr. Friedman. Well, as I indicated, there have been a
number of personnel changes. There have been a number of
reorganizations. For example, the University's auditor is now
directly involved at Los Alamos. So it's impressive,
Congresswoman, but I want to withhold judgment on the final
analysis until we have a chance to look at it after it has been
executed for a period of time to see if it is doing the job.
Ms. Eshoo. In the analysis that you did, can you tell us
what the dollar figure is that--as you just mentioned in the
answer to the last question that was posed to you, who picks up
the tab. The American taxpayer. How much have they been ripped
off?
Mr. Friedman. Well, I don't have an independent number, but
relying upon the number that has been referred to in the April
10 memorandum, at least $1.3 million.
Ms. Eshoo. And the contract is for how much?
Mr. Friedman. The contract is in the nature of about $1.3
billion a year. I am not precisely sure of the exact amount.
Ms. Eshoo. And it is a 5-year contract?
Mr. Friedman. I'm sorry?
Ms. Eshoo. Is it a 5-year contract?
Mr. Friedman. It is a 5-year contract, as I understand it.
Ms. Eshoo. I would still like to have that amount in my
checking account, but I think that context is also important
here.
do you believe that, with the most stringent reforms and
the commitment to sustain them, that what has been uncovered
can be permanently eradicated?
Mr. Friedman. I'm sorry. I'm not sure I understand your
question. Could you repeat it?
Ms. Eshoo. Reforms placed on the books that University of
California has to accept this, and it's up to them to do, to
put the reforms into place, to develop the confidence of the
Congress that they can indeed sustain the reforms. I mean, some
reforms sound terrific, but they are not worth the paper that
they are written on.
Mr. Friedman. Right.
Ms. Eshoo. So not only to recognize that reforms need to be
made, that they can indeed and will be sustained. Do you
believe that those reforms can actually cure the ills that we
know about? So much talk, excuse me, about the culture, and
that's a lot of times a lot more difficult to get at. Do you
believe it can be weeded out?
Mr. Friedman. I think, if there is a sustained effort, it
is going to take a fair amount of time. It is not going to be a
quick fix, and I suspect that the changes proposed by the
University of California are evolving, and there will be more
of them, is my expectation. Mr. Darling, I think, is going to
succeed me on the panel, and I think he can answer that more
directly, but I think there is a chance they can address the
underlying issues, sure.
Ms. Eshoo. Well, that's positive. In the examination of
security and audit divisions or departments, whatever the right
word is, I don't have the sense that moving one person from one
to the other is really what is going to fix this. Do you think
that an outside--a private security company would be better and
that you wouldn't have the situation that sounds to me like the
fox in charge of the chicken coop.
It is very difficult to, I think, given the situation, and
I think under a whole set of normal circumstances, that that is
an easy thing to carry out. Do you think the University would
be better off going outside to do this?
Mr. Friedman. Well, respectfully, there are at least two
outside investigative organizations with appropriate authority.
One is my office. The other is the Federal Bureau of
Investigation. One of the findings which is most unfortunate is
that there was a reluctance to share information with our
office, a delay in sharing with our office and the FBI.
Ms. Eshoo. How do you think that is best addressed, though?
Mr. Friedman. Well, I think in part that is a cultural
issue----
Ms. Eshoo. They have probably learned by now.
Mr. Friedman. And I suspect, with Congressional pressure,
and more emphasis on the part of the NNSA, I think those issues
can be addressed.
Ms. Eshoo. I think that investigation and oversight--and I
always say this to my constituents in town hall meetings--is
really one of the most important roles that the Congress can
play, and I think that what I have learned from you and from
the other witnesses, but especially from you, is that the
accountability in the review that comes with investigation and
oversight can indeed happen.
I am pleased to hear you say that you--to give you 6 months
or a little more to take a look and to come back. But I think
the seriousness with which this situation is taken and then
turn that into something is really very important.
Let me just ask you one more question, and it is one that I
have continued to pursue with whomever is testifying, and I
plan to ask this of the University people as well. I think it
is very, very important to know about this nexus of national
security and the work, the contract that the University has.
While there is a question about the computer that contained
classified information, and I think that is still part of the
work that you are doing, to pursue that, to chase that down, is
there anything else that you can point to that raises serious
questions about what I am asking you?
Mr. Friedman. There is nothing that comes to mind. Let me
clarify one thing so I'm not misleading you. We are not
investigating the loss of a particular computer that we think
may have had classified information at this time.
Ms. Eshoo. Thank you. Thank you, Mr. Chairman. Thank you
for your good work.
Mr. Greenwood. Thank you. One final question, Mr. Friedman.
The University of California has operated Los Alamos for 60
years. It is my understanding that each time the contract comes
up for renewal, it has been extended noncompetitively to the
University of California. Do you think that it is time for the
Department of Energy to put the Los Alamos contract up for
competition?
Mr. Friedman. Well, I don't have a position on this
particular contract, Mr. Chairman, but my general position is
and the position of my office has been, based on the work that
we've done, is that maximizing competition is in the best
interest of the taxpayers.
So, certainly, you never know who is out there or who might
have some good ideas. So I wouldn't rule it in or rule it out,
but I think generally, maximum competition is in the best
interest of the taxpayers.
Mr. Greenwood. Okay. Well, thank you, sir. We appreciate
your testimony.
I call our final witness, Mr. Bruce Darling, Senior Vice
President, University Affairs, and the Interim Vice President
for Laboratory Management at the University of California.
Welcome, Mr. Darling. Thank you for being with us.
Mr. Darling. Thank you, sir.
Mr. Greenwood. You may have heard me say to the other
witnesses that it is the custom of this committee to take
testimony under oath. Do you object to giving your testimony
under oath?
Mr. Darling. No, I do not.
Mr. Greenwood. Also pursuant to the rules of the House and
this committee, you are entitled to be represented by counsel.
Do you wish to be represented by counsel?
Mr. Darling. I do not. I should note, however, that the
University has retained Covington & Burling in the person of
Lanny Breuer. He has been assisting the University and the
committee in its investigation, but I do not wish counsel.
Mr. Greenwood. Okay, thank you. In that case, if you would
rise and raise your right hand.
[Witness sworn.]
Mr. Greenwood. You are under oath, Mr. Darling, and you may
give your statement.
TESTIMONY OF BRUCE B. DARLING, SENIOR VICE PRESIDENT,
UNIVERSITY AFFAIRS AND INTERIM VICE PRESIDENT, LABORATORY
MANAGEMENT, UNIVERSITY OF CALIFORNIA
Mr. Darling. Good afternoon, Mr. Chairman, Mr. Deutsch, and
members of the committee. I'd like to thank you for this
opportunity to address the business, property management, and
procurement problems at Los Alamos National Laboratory. With
your permission, I'd like to give you a brief summary of the
written testimony that I have submitted for the record.
First, let me say that I am not here to offer any excuses
whatsoever. To the contrary, the University of California
accepts full responsibility, and we are aggressively making the
changes to restore public confidence in Los Alamos and in the
University of California.
Our efforts have benefited greatly from the information
made available to us by Glenn Walp and Steven Doran, other
laboratory employees, the Department of Energy Inspector
General, and this committee. All of you have helped us identify
problems, expose abuses, and to begin to resolve them in an
effective and decisive manner.
If I may say, along with Mr. Tauzin, I, too, would like to
recognize Jaret Mcdonald for identifying the thefts at the
facility known as TA-33 and for fully pursuing the matter,
including when he had to go to the FBI outside of the
laboratory.
In particular, Mr. Chairman, I would like to acknowledge
your leadership, and I would like to say that the information--
new information that has come out of today's hearing is
something that we will pursue vigorously and immediately.
In my remarks, I will briefly describe what actions we have
taken to date to resolve the problems at Los Alamos. In doing
so, I would like to touch on personnel changes, increasing
financial integrity at the lab, property controls, as well as
the University's governance of these three national assets.
The University's actions began last August with the
appointment of an external review team to examine the lab's
purchase card program. Then late last year President Atkinson
dispatched a team of senior University officials, first to
review the laboratory business practices, and subsequently the
dismissals of Mr. Walp and Mr. Doran.
As a result of our findings, the University has made
sweeping management changes, beginning in late December with
the appointment of Vice Admiral George P. Nanos as Interim
Director of Los Alamos.
Admiral Nanos brings to Los Alamos a strong management
background as commander of the Naval nuclear weapons program as
well as the Naval Sea Systems Command which had more than
40,000 employees and over a $20 billion annual budget--so a
factor of 10 greater than Los Alamos in terms of budget.
To date, 15 lab managers and employees have either been
terminated, removed from management positions and/or reassigned
to new positions. These include the laboratory Director, the
Principal Deputy Director of the laboratory, the Chief
Financial Officer of the laboratory, the Security Director and
Deputy Director of the laboratory, and the Audit Director of
the laboratory. In addition, the University rehired Mr. Walp
and Mr. Doran, as you heard previously.
Among the other steps we have taken, Senior University
officials are directly managing Los Alamos' business functions,
both the business activities and the audit activities. We have
strengthened the independence of the audit office. We have
rescinded the audit office's so called loyalty oath that you
may have read about in Inspector General Friedman's report, and
we have activated an independent whistleblower hotline.
In addition, we initiated a comprehensive property
inventory that is now underway, and we have reviewed every
property delivery site, known as drop points, an issue that was
brought to our attention by Mr. Walp and Mr. Doran; and we have
improved the lab's business organization, procedure and
financial systems and controls.
In addition, we have brought in external resources to bear
on these problems. First, we created an external review team,
which you know began in August, looking at the purchase card
program. It was made up of two former Federal Inspectors
General, along with a dozen forensic auditors from
PricewaterhouseCoopers, and we have recently expanded that
effort to include all procurement at the laboratory, not just
the purchase card system. So the just-in-time contracts,
regular procurement, blanket purchase orders, as well as the
local vendor agreements that you heard about earlier from Mr.
Walp and Doran.
I should also add that another external resource we have
brought to bear is Ernst & Young that currently have 30
consultants on the ground at Los Alamos today, looking at
business processes, financial controls and organization
structure to do a comprehensive review of the entire business
operations of the lab, for many of the reasons you have heard
from the previous witnesses.
To sustain these changes, and I do mean sustain them,
President Atkinson has established an interim oversight board
for Los Alamos. We are revamping the University's laboratory
governance structure. What we want to do is create a clear set
of expectations for everyone involved and a very clear culture
of accountability for all of us in this process.
Let me underscore that the lab financial controls did
indeed have serious weaknesses. The purchase card program
differed from those at the University's 10 campuses and the 2
other laboratories that we manage for the Federal Government.
It lacked strong controls and, unfortunately, the controls that
did exist were not enforced adequately.
It is also clear that Los Alamos did not impose the kind of
sanctions that would have encouraged employees to better
account for laboratory property in the way that all of us
should be doing. And the dismissals of Mr. Walp and Mr. Doran
were both unwarranted and, to use the Inspector General's
words, incomprehensible.
While we address these problems, I want to assure you that
we are also focused on fulfilling the mission of the laboratory
to the Nation, especially at this critical time in world
events. The lab's science and weapons programs must meet their
objectives, and the security operations must meet the Nation's
expectations.
Managing Los Alamos is a privilege for the University of
California. It allows us to contribute to the Nation's defense
in innumerable ways, from weapons development to the
stewardship of the Nation's nuclear stockpile, and to homeland
security. Our challenge is now to raise the business practices
to the quality of our science and our weapons programs. We owe
this to the American people who, after all, are paying for it,
and whose security is also dependent upon the work of the
laboratory.
Finally, let me just say that Interim Director Nanos,
joined by many honest and hard working lab employees, are
working diligently to bring about a change in the culture of
the laboratory. The challenge now is to solidify his efforts
and to sustain them over the long term.
In conclusion, I would like to apologize to you on behalf
of President Atkinson, myself, and the University's Board of
Regents for these business practice failures. They detract from
the very real and valuable contributions that thousands of Los
Alamos scientists, technicians and support personnel are making
to our Nation. We are a stronger and safer Nation because of
their efforts, and we regret what has taken place.
Mr. Chairman, I would be pleased to answer any questions
that you or members of the committee may have.
[The prepared statement of Bruce B. Darling follows:]
Prepared Statement of Bruce B. Darling, Senior Vice President of
University Affairs, University of California
Mr. Chairman, Mr. Deutsch and members of the Committee: My name is
Bruce Darling, Senior Vice President of University Affairs for the
University of California. On January 8, President Atkinson also
appointed me interim Vice President for Laboratory Management.
I appreciate the opportunity to appear before the Committee today
to address the management problems at Los Alamos National Laboratory.
Let me assure you at the outset that I am not here to offer any excuses
for the business, property management, and procurement problems at the
Laboratory. On the contrary, the University of California takes full
responsibility for these problems and is aggressively implementing the
changes necessary to strengthen financial controls and restore the
American public's confidence in Los Alamos and the University's
management of it.
Our efforts have benefited greatly from the information made
available by Glenn Walp and Steven Doran, other Laboratory employees,
the Department of Energy Inspector General, the media and this
Committee. All have been invaluable in the University's effort to
identify problems, to expose abuses, and to resolve them in an
effective and decisive manner. I want to acknowledge in particular the
leadership of Chairman Greenwood in this effort. If additional
information becomes available today or at any other time, we will
pursue it immediately. And we will continue to work with the Committee,
the Department of Energy, and current and former employees at Los
Alamos, including Mr. Walp and Mr. Doran, to accomplish our corrective
actions.
Since the problems at Los Alamos have been reported in the media
and discussed at this hearing, I will focus initially on the actions we
have taken to date and then I will describe why we did so:
sweeping management changes
The University made sweeping management changes at Los Alamos
starting in late December with the appointment of Vice Admiral George
P. Nanos as Interim Director following the resignation of the
Laboratory Director and the removal, and later termination, of the
Principal Deputy Director. Admiral Nanos brings to Los Alamos a strong
management background and valuable experience leading the U.S. Navy's
nuclear weapons program. He also commanded the Naval Sea Systems
Command, the Navy's largest acquisition command responsible for the
design, construction, support and maintenance of all Navy ships and
shipboard weapons systems, with four nuclear repair shipyards, seven
Navy laboratories, 40,000 employees, and a $23 billion budget.
Soon thereafter, we removed the director of the Lab's Audit Office.
We removed and reassigned the Chief Financial Officer and his two
deputies, and both the director and the deputy director of the Lab's
Security Division. We also rehired Mr. Walp and Mr. Doran, with full
back pay to the date they had been dismissed by the former Laboratory
management.
At the same time, senior University administrators took on direct,
personal responsibility for managing Los Alamos functions.
university management of los alamos audit office
The University Auditor is now directly managing the Audit Office.
In that capacity, he has already taken a number of significant steps:
He has strengthened the independence of the audit function by
having the auditors of all three laboratories report directly
to him.
He rescinded the so-called ``loyalty oath'' prior to its
mention in the DOE Inspector General's Special Inquiry on Los
Alamos operations.
He has commenced peer reviews of the critical audit and
assessments functions and redefined the internal audit
reporting structures.
He has developed a plan to bring current the substantial
backlog of audit and investigation work utilizing existing
staff, UC audit managers, and outside experts.
He added an independent whistleblower hotline (1-800-403-4744)
that improves confidentiality in order to encourage employees
to report improper activities without fear of retaliation. This
is intended to give employees confidence that their concerns
will be investigated fully and in a timely manner. He is also
implementing at Los Alamos recent University policies for
reporting and investigating irregularities and protecting
whistleblowers from retaliation.
university management of los alamos business and finance
The Laboratory's finance and business operations are also now being
managed by the University's Vice President for Financial Management,
who has extensive corporate finance experience. In that capacity, she
has taken the following actions:
She organized a ``red team'' consisting of property,
procurement and technology specialists from Lawrence Livermore
National Laboratory to conduct a high level review of the
organizational structure, business procedures and financial
systems of the procurement and property functions.
She is conducting an internal risk assessment of key financial
and business processes, including a ``cradle-to-grave''
assessment of property acquisition.
She adopted a more effective transitional organizational
structure in the Business Division that includes enhancements
to financial controls and business processes.
She will integrate the financial control and business process
improvements with the Enterprise Resource Project of the
Laboratory.
She named a senior procurement officer from the University as
interim head of the Procurement Office and installed a new
administrator to lead the purchase card program.
external review of purchase cards and procurement
Meanwhile, the University has directed an External Review Team--
made up of two distinguished former federal Inspectors General and more
than a dozen forensic accountants from PricewaterhouseCoopers--to
expand its recently completed review of the Lab's purchase card system
to include all other procurement practices at the Laboratory, including
Just-in-Time contracting, blanket purchase agreements, and local vendor
agreements. As soon as the expanded work is done, we will report the
results to the Committee and to the public and we will immediately
address any deficiencies identified by the External Review Team.
external review of key business processes
The University has also retained Ernst & Young to conduct a
comprehensive review and validation of the Laboratory's key financial
processes; to review systems integration and controls; to assess the
business organization and recommend the optimal organizational
structure; to evaluate core competencies of the business organization
personnel; and to recommend required employee skill sets. A team of
over 30 Ernst & Young consultants has been at Los Alamos for several
weeks now and is expected to report back to us next month.
property inventory
Property management is another high priority. To that end, we are
moving forward with a comprehensive property inventory--the first since
1998. As you can imagine, at a facility like Los Alamos, which covers
43 square miles and includes some 2,000 buildings and $943 million in
controlled property inventory, a wall-to-wall inventory is a massive
but important and necessary undertaking. We have also conducted a
survey of all Laboratory delivery sites, known as ``drop points,'' in
order to assess vulnerabilities in security. Our external consultants
will recommend additional property management controls that we will be
instituting.
interim oversight board
More strategically, President Atkinson has established an interim
Oversight Board of University Regents and scientific experts to guide
Interim Director Nanos and to ensure that necessary reforms are
vigorously pursued at Los Alamos. Its membership includes three members
of the Board of Regents, Richard Blum, Peter Preuss and Gerald Parsky;
UC San Diego Chancellor Robert Dynes, a physicist; and Sidney D. Drell,
a Stanford University professor emeritus and a noted arms control
advisor.
Both Blum and Parsky are highly regarded financial experts with
long experience in financial management. Parsky's firm acquires and
builds middle-market companies in the industrial sector of the economy.
Under his leadership, Blum's firm has helped to build numerous
publicly- and privately-owned companies both in the United States and
abroad.
Drell served in 2001-2002 as chair of the senior review board for
the Intelligence Technology Innovation Center and also served from
1992-2001 as a member of the President's Foreign Intelligence Advisory
Board.
Dynes is a physicist specializing in semiconductor research. He
came to UC San Diego in 1991 after a 22-year career with AT&T Bell
Laboratories. He has two decades of experience consulting and advising
on national laboratory oversight issues, including as vice chair of the
President's Council on National Laboratories.
Preuss is President of the Preuss Foundation, which is involved in
brain tumor research. In 1970, he founded Integrated Software Systems
Corporation, the first software company specializing in computer
graphics. He is chairman of the Regents' Committee on Oversight of
Department of Energy Laboratories.
university governance and oversight
At the same time, we are working on a larger revamping of the
University's governance structure for the three national laboratories
it operates for the federal government.
External Oversight. We are examining various national laboratory
management models for elements that we can draw upon to improve our own
oversight: DOE's Sandia National Laboratories, Argonne National
Laboratory, Oak Ridge National Laboratory, and Brookhaven National
Laboratory; DOD's Draper Laboratory; and NASA's Jet Propulsion
Laboratory. Our goal is stronger oversight by people with expertise in
science and weapons, technology businesses, and corporate governance
who will hold the Labs and the University accountable.
For the new governance board, we are currently developing a list of
candidates with experience relevant to national security laboratories.
We are developing a charter and initial definition of roles and
responsibilities for this oversight structure and its relationship to
the UC Board of Regents, to the University President and Vice President
for Laboratory Management, and to the Laboratory Directors. We will
include a list of expectations for Laboratory Directors in creating and
maintaining a culture of accountability at the Laboratories.
Internal Oversight. To ensure that the University remains fully
engaged in oversight, not just at Los Alamos but also at the other two
Laboratories, we are designing an improved internal University
structure. It will integrate a broader array of University management
expertise--business and finance, audit, legal counsel, and human
resources--into the oversight of the Laboratories, create a strong
support function and staff for the external oversight body, integrate
external expertise into the University's oversight, and create our own
clear set of expectations and culture of accountability.
That's where we are today. Now let me explain the events that led
us to this point.
Without addressing every allegation you may have read about in the
press or heard about in the hearing today, we clearly determined that
the general thrust of many of the allegations concerning control
weaknesses are valid. It is clear, for example, that the purchase card
program at Los Alamos, which differed from the program used at the
University's ten campuses and two other UC-managed laboratories, lacked
strong controls. The controls that did exist were not adequately
enforced. It is also clear that Los Alamos did not impose the kinds of
sanctions and accountability that would have encouraged employees to
keep track of property for which they were responsible. And it is clear
that the dismissals of Mr. Walp and Mr. Doran were unwarranted.
As I explained earlier, we have been aggressively correcting these
problems. We also accept the challenge posed to us by Chairman
Greenwood during his visit to Los Alamos last month to make our
purchase card program a model for the nation.
purchase card external review team
Last August, when we first heard allegations of procurement card
abuse at Los Alamos, the University immediately directed the Lab to
establish the External Review Team (described on Pages 4-5) to examine
the Lab's purchase card program. This team reviewed 45 months of
transactions totaling $120 million and 170,000 separate transactions.
Following issuance of the External Review Team's final report in
December 2002, the University Auditor, Patrick Reed, was dispatched to
verify the Lab's efforts to reconcile and review all questionable
transactions raised by the External Review Team.
The University Auditor, in turn, submitted his interim report in
February. It concludes that there were approximately $320,000 in costs
that were questioned as to allowability. These costs, including some
that cannot be documented because of records lost in the 2000 Cerro
Grande fire, will be fully reimbursed to the Department of Energy
immediately upon a determination by the DOE contracting officer that
this represents a full and fair accounting of the questioned
transactions. In addition, the Lab adopted the University's purchase
card program in June 2002 and has reduced the number of purchase cards
in use by the Lab's 8,500 employees from 1,100 to 561. Furthermore, all
current cardholders and ``approving officials'' have been trained on
purchase card policies and procedures. Numerous changes have been made
in the policies and procedures governing the purchase card program in
order to tighten internal controls and reduce the risk of fraud. We
have decreased cardholder-spending limits and imposed requirements that
each transaction be approved by a supervisor. We have also banned the
use of purchase cards to buy inventory-controlled items. Finally, we
have implemented sanctions such as revocation and suspension of cards
for inappropriate card usage or non-completion of training
requirements.
university special review team
While the External Review Team was conducting its initial review,
President Atkinson directed me on November 21, 2002 to lead a Special
Review Team of senior University administrators to assess first-hand
the scope of the problems at the Laboratory. During our visit to Los
Alamos four days later, we identified weaknesses in the Laboratory's
purchasing, property management, audits and assessments, financial
management, security, and public communications programs and issued a
report with nine findings and recommendations. To cite a few examples,
we learned that:
$4.9 million in purchase card transactions either had not been
electronically reconciled in a timely manner or were otherwise
under question;
There was no systematic process to ensure that controlled
property items purchased via alternative procurement methods
(e.g., purchase cards, Just-in-Time contracts), were entered
into the property inventory;
There was an urgent need to evaluate the Laboratory's business
systems, financial controls and accountability;
There were ineffective processes to ensure that senior
Laboratory officials were notified of inappropriate business
activity at the Laboratory. In addition, there was an
inadequate process to ensure that inappropriate activity, such
as waste, fraud, abuse or theft, was reported to Laboratory
management, the DOE Inspector General, and UC officials.
There were unacceptable audit practices, both in terms of the
timeliness of addressing audit findings and a serious backlog
of unresolved repetitive audit findings.
termination and subsequent rehiring of mr. walp and mr. doran
In addition, our report to the President strongly recommended that
the circumstances surrounding the dismissals of Mr. Walp and Mr.
Doran--which, unbeknownst to us, occurred the morning of November 25
when the first Special Review Team met in Los Alamos--be referred for
investigation to the Inspector General and that the University also
investigate the dismissals, but in a way that would not interfere with
the Inspector General's investigation. Both investigations subsequently
concluded that the dismissals were unwarranted.
On December 16, President Atkinson directed me to lead a second
University Special Review Team to explore the circumstances related to
the dismissals of Mr. Walp and Mr. Doran. We had already written both
gentlemen on December 11 to request their assistance in addressing the
procurement and property problems. On December 18, we interviewed ten
Los Alamos officials and departed with serious questions about the
events leading to, and the judgments exercised in, terminating their
employment. We interviewed four additional witnesses the following day
and, as a result, on December 20 we took two actions:
First, we placed a call to their attorney to arrange a meeting
to hear their allegations and to understand their views of the
Laboratory and its management;
Second, we hired a former U.S. Attorney to contact the U.S.
Attorney and the FBI in New Mexico to seek a better
understanding of the Laboratory's on-going relationships with
the FBI and the U.S. Attorney, and to discuss steps necessary
to solidify a good working relationship for the future.
fulfilling the laboratory's mission to the nation
I want to assure you that, while we have been identifying and
remedying these problems at Los Alamos, we have also been focused on
fulfilling the Lab's and the University's mission to the nation,
especially at this critical time in world events. We are focused on
ensuring that:
Los Alamos' scientific and weapons programs continue to meet
their objectives;
Security operations of the Laboratory meet the nation's
expectations;
The Lawrence Livermore and Lawrence Berkeley Laboratories,
which the University also manages, meet the same high standards
the University is setting for Los Alamos;
The University continues to strengthen its governance and
oversight of the three national laboratories it manages for the
Department of Energy.
And, lastly, that there are open and timely communications
with the Department of Energy, the National Nuclear Security
Administration, this Committee and Congress, as well as the
media, to promptly apprise all interested parties of our
findings and actions.
As you know, since the days of Professor and Nobel Laureate Ernest
O. Lawrence and his colleague Robert Oppenheimer, the University of
California has had the privilege of managing Los Alamos to contribute
to our nation's security. Over the last 60 years, the University and
the Lab have become an integral system, both through the research
collaborations conducted with our ten campuses, as well as the lasting
ties to the Los Alamos workforce. Through this unique partnership with
the federal government, the University is proud to have contributed to
every area of science and technology related to national defense.
The Lab has developed two-thirds of the nuclear weapons in the U.S.
arsenal. When nuclear weapons testing ended, the nation looked to Los
Alamos and Livermore to find ways to use the most advanced scientific
and computational assets to simulate nuclear testing and to ensure the
continued viability of our nuclear weapons stockpile. And today, as the
Committee knows, Los Alamos is front-and-center in the effort to
bolster homeland security, especially in the areas of counter-
terrorism, non-proliferation, and prevention and preparedness for
nuclear, biological, and chemical attacks. The International Atomic
Energy Agency inspectors that are in Iraq at this very moment were
trained at Los Alamos, and scientists at the Lawrence Livermore Lab
provide broad country analyses of potential proliferant countries, such
as recent information about North Korea's nuclear developments.
I raise all this to underscore the University of California's
continuing commitment to the nation even as we resolve the business and
administrative deficiencies at Los Alamos. The business practices need
to be raised to the same level of quality as the science and weapons
programs. We owe this to the American people, who are paying for the
work of the Lab, and whose security is dependent on the Lab. Let me
reemphasize that managing the national security laboratories for the
last 60 years has been an honor and an awesome responsibility, and we
will address any challenges that might detract from our ability to
fulfill our obligations to the American people.
Finally, I would be remiss not to mention the dedication and
commitment with which Interim Director Pete Nanos has tackled his
responsibilities at such a difficult time. He and Los Alamos National
Laboratory's employees are energized and working diligently to bring
about a change in the culture of Los Alamos to one that welcomes open
communication and encourages employees--without threat of retaliation--
to step forward with their concerns. Every indication is that he is
succeeding, but the challenge will be to solidify his efforts and
sustain them over the long-term.
In conclusion, let me apologize to you on behalf of President
Atkinson and the University's Board of Regents. The problems I have
outlined reflect poorly on Los Alamos and on the University, and
detract from our many accomplishments on behalf of the nation.
Moreover, they are a disservice to the thousands of honest and
hardworking scientists, technicians and support personnel who are
working to protect American troops and the American homeland. They
deserve better from the Laboratory's management and the University of
California.
Let me assure you that the University of California, including the
new management team at Los Alamos, shares with the Committee, the
Department of Energy, and the National Nuclear Security Administration
the urgency to fix the problems that have emerged. This has been a
difficult time, both for the University and for the Laboratory, but we
have benefited enormously from the intense scrutiny and from the active
involvement of the Secretary of Energy, the NNSA Administrator, and
this Committee in helping to identify the problems we are discussing
today and to develop appropriate remedies. Far from weakening us, this
experience has strengthened us; it has further bolstered our resolve to
restore the confidence of the Nation in the service we are determined
to perform in time of peace and in time of war.
Thank you again for this opportunity to address the Committee. I
would be pleased to answer your questions.
Mr. Greenwood. Thank you. Thank you, Mr. Darling.
Appreciate that.
Let me ask you a general question before I get a little bit
more specific. You have been here since 1 o'clock, and you have
listened to the other witnesses, and particularly the first
panel talked about a longstanding culture, an endemic system
here where it was widely understood that, for years, the lab
had been, ``greening the valley.''
The question is: How could this have been so widely
understood at the site and the University of California
oblivious to it? I'm assuming that the University of California
was oblivious to it, but you tell me.
Mr. Darling. Yes. I believe we were. I first heard the term
``greening the valley'' from Mr. Shiffer, the Director of
Counterintelligence at Los Alamos on November 25 when we
interviewed him. That was a very troubling assertion, because
the point was that the lab is one of the largest economic
forces in that part of northern New Mexico, and therefore, he
said it made a very attractive target for thieves, drug trade
or others who might want to prey on the laboratory.
So that was a very troubling assertion. This was the first
time that I had ever heard about it. When I asked others in the
University of California, President's Office, it was the first
time that they had.
I will just say very bluntly that I don't think the lab was
forthcoming to the University about the extent of the problems
that have been revealed to date, and indeed on occasions
rebuffed the University when it sought to inquire and obtain
further information.
Mr. Greenwood. Do you mean by that last statement with
regard to these most recent allegations or do you mean that
with regard to allegations in previous years?
Mr. Darling. No, I mean with regard to the allegations that
have come forward today. I do know that at times the
University's auditor sought to obtain information from the lab
auditor. I know that that was not forthcoming. I know----
Mr. Greenwood. With regard to these issues or in previous
years?
Mr. Darling. These issues. Then I will just give you an
example of that. I think it was December 24 when suddenly a
large number of so called G-29 reports that are required to be
filed by the audit office suddenly landed on the University
auditor's desk for the first time with no prior warning or no
prior information. That was only because we were moving, and we
had already--although we did not announce it until January 6,
we had already made a number of the management changes that I
have outlined here on December 21.
Mr. Greenwood. At the conclusion of your written statement,
you noted Admiral Nanos' efforts to change the culture at LANL.
Testimony we heard earlier today indicates that the culture
problems so widely examined during the Wen Ho Lee and missing
hard drive investigation are alive and well.
What are your views on the culture that Admiral Nanos is
attempting to change, and what is the University of California
to effect that profound change?
Mr. Darling. As you know, sir, my involvement with the
laboratories is very recent. It dates only to January 8. So I
cannot give you a historical perspective, but what we have
observed is that there is a lack of accountability, personal
and institutional; and I think that is a cultural issue that
needs to change. I think that----
Mr. Greenwood. To what would you attribute that? How does
that happen? What is your sense of how that came to be?
Mr. Darling. I can only speculate, but I think the only
thing that I can say is to have a culture of accountability
requires rigor, discipline, and relentlessness, day in and day
out, year after year after year. And, sir, I do not think that
was there. I do not think the senior managers of the laboratory
created those expectations, enforced those expectations, and
demanded those expectations.
Mr. Greenwood. Do you think it has anything to do with who,
if anyone, had anything at risk? In other words, in most
enterprises, particularly in the private sector, shoplifting,
theft by employees has a real and serious impact on the bottom
line, and management works assiduously to rout it out, because
it has to.
As you heard me ask Mr. Friedman and based on his response,
quite frankly, the University of California had, as I
understand it, nothing at risk economically, nor, obviously,
did the management at the laboratory. Everything that walked
away from the laboratory just was picked up by the taxpayers,
and there was no limiting factor whatsoever.
Mr. Darling. Well, I think the best way for me to answer
your question is to draw a comparison with our other two
laboratories and our 10 campuses of the University of
California. The University is a $16 billion enterprise, one of
the largest organizations in the Fortune 500, were it a
company. We do not permit that at our campuses. We do not
permit that at our other two laboratories, nor do we see the
extent of the problems at those other campuses or laboratories
that we have seen here at Los Alamos.
So I don't think it is the matter of having financial
resources at risk. We are able to invest that without having
financial resources at risk at those other elements of the
University.
Mr. Greenwood. And how do you know that it is not happening
at other labs that you supervise?
Mr. Darling. The day that we--well, let me back up. The day
that the President asked me to take a team to Los Alamos, I
included a representative of Livermore National Laboratory, the
Executive Officer of the lab, for exactly that purpose. We
wanted someone who knew the labs.
From that day forward, we have informed both labs about
exactly what we found. We have asked them to look into the
issues there. We have asked the University auditor to pursue
each of the issues that were brought up at Los Alamos that you
have heard about today, and thus far--we are not completed, but
thus far, we do not see the extent of the problems that we've
seen at Los Alamos.
Mr. Greenwood. Following the allegations raised by Mr. Walp
and Mr. Doran, Dr. Browne sent an e-mail to LANL employees that
states in part, ``Allegations currently being made about the
laboratory by two individuals who do not know the laboratory's
operations or its people are simply wrong. I am confident that
current investigations as well as future reviews will find that
allegations of widespread theft, cover-up or interference with
law enforcement at the laboratory simply are not true.''
The allegations, of course, were accurate. Do you agree
that Dr. Browne's e-mail is part of the problem?
Mr. Darling. I don't know if it is part of the problem or
if it is reflective of the problem, but it is certainly true
that it seemed to have excused behavior and issues that should
not have been excused. It seemed to have failed to look into
issues in adequate depth, because I believe that, had that
happened, I think that this information would have come out
before Mr. Walp and Mr. Doran were dismissed, and the
laboratory could have done something about it.
Mr. Greenwood. Over the past 3 months, the University of
California has dismissed or reassigned a number of LANL
employees. Indeed LANL's former Director, Dr. Browne, just
referred to, stepped down from his position as a direct result
of the investigation of the matters before the committee.
Can you tell me why the following individuals moved from
their positions at LANL, their current status and, if you can,
the salaries of those who remain there: Dr. Browne, the former
Director, what is he doing now?
Mr. Darling. He has returned to being a scientist. He is a
very eminent scientist in nuclear weapons and other scientific
areas. His salary was reduced. That was effective January 6.
His salary was reduced from $335,700 to $272,500.
Mr. Greenwood. Joe Salgado, the former Deputy Lab Director?
Mr. Darling. Joseph Salgado was terminated from the
laboratory on January 31 of this year.
Mr. Greenwood. Why was he treated differently than Dr.
Browne?
Mr. Darling. Because he was responsible for the--in a
very--he was responsible for the business and operational
aspects of the laboratory.
Mr. Greenwood. Wasn't Dr. Browne responsible as well?
Mr. Darling. Yes, he was, but he was responsible for, you
know, both the scientific and the business, and we felt the
responsibilities fell more squarely on the shoulders of Mr.
Salgado.
Mr. Greenwood. Okay. Katherine Brittian, the former head of
Audits and Assessments?
Mr. Darling. Yes. She was removed from her position as
Director of Audits and Assessments on January 13 of this year.
We are reassigning her to another position. If that occurs, her
salary will decline from $175,000 per year to $140,000 per
year. The adjustment----
Mr. Greenwood. Say that again.
Mr. Darling. From 175 to 140. I'm not sure what I said, but
that is what I meant to say.
Mr. Greenwood. I thought you said from 174 to 240.
Mr. Darling. I may have, and I apologize, if I did.
Mr. Greenwood. Stanley Busboom, former head of security.
Mr. Darling. Yes. A position has been identified for Mr.
Busboom outside of the security area, but we are in
negotiations with Mr. Busboom's attorney. So I can't speak to
what the status is beyond that, but if that position--if he
stays, salary will go from $190,000 per year to $140,000 per
year.
Mr. Greenwood. Now did he make the decision to fire Misters
Walp and Doran?
Mr. Darling. I think that is a very good question, Mr.
Chairman. I think he--he certainly signed the letter, and
whether he made the decision or whether Mr. Salgado made the
decision, I think there is some difference of interpretation
about. I think both might claim responsibility.
Mr. Greenwood. Well, why wouldn't he be out on his ear?
Mr. Darling. Well, I am told that he has a long track
record of--I'm too distant from this to speak from personal
experience, but of high service to the laboratory, and I should
say that that is one of the reasons--the policies provide that
people who have had distinguished service and who are no longer
effective managers but can serve the lab in another role, not
in a management role, have that opportunity. But I would also
just say that that is why we are in negotiations.
Mr. Greenwood. Gene Tucker, former Deputy head of LANL
security.
Mr. Darling. Yes. He was removed from his position as
Deputy head of security on January 8 of this year. The
situation is exactly the same as for Mr. Busboom.
Mr. Greenwood. In negotiation?
Mr. Darling. In negotiation. Salary would drop from 165 to
130, $1,000 per year, if he were to stay. But negotiations are
underway.
Mr. Greenwood. By the way, have you looked at whether these
salaries are comparable to the private sector, to begin with?
Mr. Darling. Yes, sir. They are considerably below the
private sector.
Mr. Greenwood. I'm in the wrong business. Thomas Palmieri,
former Business Operations Division leader and Chief Financial
Officer?
Mr. Darling. Yes. Mr. Palmieri was removed from the
position of head of--I'll just call him the CFO for that
shorthand title on January 24 of this year. His salary,
effective March 2, will decline from 180,000 to 140,000, and he
would become manager of the budget but not of all the financial
operations. He has a long distinguished history in doing
budgeting and is viewed as someone who is very capable in that
area.
Mr. Greenwood. As part of UC's effort to address LANL's
most recent problems, the University has retained several law
firms, consultants, independent investigators and accountants.
Does UC intend to seek reimbursement from the Department of
Energy for the costs of these firms and, if so, on what grounds
does the University intend to base such claims?
Mr. Darling. We do not intend to seek reimbursement from
the Department of Energy.
Mr. Greenwood. Whose idea was that?
Mr. Darling. The President's and mine.
Mr. Greenwood. During your own inquiries, did you learn of
any support----
Mr. Darling. I should also say--excuse me for
interrupting--but the Board of Regents shares that opinion as
well.
Mr. Greenwood. Okay. During your own inquiries, did you
learn of any support for the claim made by certain LANL
officials that the FBI and U.S. Attorney's Office is
dissatisfied with the assistance provided to them by Misters
Walp and Doran?
Mr. Darling. We have not, and I would say that this is a
very important issue, because one of the reasons given for
dismissing Mr. Walp and Mr. Doran was exactly that matter. So
on December 18 when we met with 10 lab--on our second visit to
Los Alamos to meet with 10 lab managers to inquire about the
dismissal of Mr. Walp and Mr. Doran, that was an issue that was
very much on our mind.
So we sought immediately thereafter to open a dialog with
the U.S. Attorney and with the FBI in New Mexico to find out
what their perspectives are. That has not yet occurred. I
believe it is occurring in early March. Our Deputy General
Counsel and the former U.S. Attorney that we have hired to
assist us in opening that door will be meeting with them for
exactly that reason.
Mr. Greenwood. And who was it that said that, in fact, the
FBI and the U.S. Attorney's Office were dissatisfied with the
gentlemen?
Mr. Darling. I may get this wrong, but there was a--I
believe there was a November 18 meeting between Mr. Salgado and
Mr. Dickson of the laboratory with the Special Agent in Charge
of the FBI and the U.S. Attorney. Upon return from that
meeting, there were two different versions of what the FBI had
said.
Mr. Salgado told us that the FBI thought that the
laboratory had blown the so called Mustang case, the Lillian
Anaya attempt to purchase a Mustang using a purchase card, and
he attributed the blame to Mr. Walp and Mr. Doran for not
pursuing it aggressively enough.
Mr. Dickson returned from that meeting and told us in our
private interview that he felt the FBI was saying that Mr.
Salgado had blown the case by pushing too hard and preventing
the FBI from doing the necessary investigative work that it
needed to do before having a case that it could refer to long
enforcement officials.
Mr. Greenwood. Thank you, sir. The gentlelady from
California, Ms. Eshoo.
Ms. Eshoo. Thank you, Mr. Chairman. Thank you, Mr. Darling,
for the work that you have done and for your testimony today.
Given the testimony of both Mr. Walp and Mr. Doran--and I
note that Mr. Doran's son is here. It is your son with him?
Mr. Darling. Louis.
Ms. Eshoo. I think that he has a lot to be proud of in his
father. Talk about role models.
Given their testimony relative to what is needed in
addition to some of the action that's been taken relative to
personnel, and I have found it quite interesting the list that
you just went through with the chairman, do you agree that more
need to go?
Mr. Darling. What I'd like to do, Congresswoman Eshoo, is
reserve judgment until we have had an opportunity for the
external review team that is looking into procurement and the
Ernst & Young consultants that are looking at all of the
business practices to report on their findings and
recommendations. But I would say, as Mr. Friedman said, this is
only a beginning.
I would urge you to also reserve judgment about our
performance, and I would urge you to be skeptical about our
reforms until you have had a chance to see us implement them
over time in a sustained way.
Ms. Eshoo. The reason I raise the question is because I
think that it was offered as a reform, in the reform column,
and it was relative to culture and how this is going to change
and that, if it is going to change, that that needed to be
done. So that's why I offer the question to you.
Do you believe that there needs to be any outside security
company that is brought in rather than the internals that you
have?
Mr. Darling. I do understand----
Ms. Eshoo. Internal mechanisms.
Mr. Darling. Yes. I do understand why Mr. Walp and Mr.
Doran have expressed skepticism about transferring their former
office, OSI, into Audits and Assessments, given the past
history. So I share on a historical perspective their concerns.
I will tell you that the University of California auditor
who is heading up that office at the moment has done a number
of the things I indicated to you, rescinding the loyalty oath
in the audit office, establishing hotlines, demanding that the
auditors act in the way that they should. He is an individual
who is above reproach. He has had 22 years of experience at
KPMG and auditing financial and governmental institutions. But
again, we have begun, and I think over time you should ask us
to prove to you that we are going to make the changes that will
cause Mr. Walp and Doran perhaps to change their minds over
time.
Ms. Eshoo. Did you find the timeframe that the Inspector
General mentioned when I asked him the question about the
amount of time that it would take--does that fit with what--the
reforms that you are putting in, and then a review of them, 6
months to a year?
Mr. Darling. I think 6 months to a year would be a very
good time for us to come back and have this further discussion
and for you to ask us not only what we have done but how we
have sustained it and how we intend to sustain it for the
future.
Ms. Eshoo. Are there golden parachutes that are offered to
the employees that are asked to leave?
Mr. Darling. Well, there may be negotiated settlements. I
indicated that we----
Ms. Eshoo. Well, I mean----
Mr. Darling. But no golden parachutes that I know of.
Ms. Eshoo. Well, what is a negotiated settlement? Is it
something other than what someone's salary is? I mean, do they
get something more than their salary when they are asked to
leave?
Mr. Darling. The University, in negotiations--the
University--if employees have a long service with the
University, the University upon settlement will occasionally
contribute as much as 1 month of salary per year of service.
Ms. Eshoo. Well, the reason I ask this is obvious. The
chairman asked the question about, you know, why wasn't
someone, whomever it was, just put out of the organization. So
it seems to me that, if in fact this is going to be reformed,
that fresh air is brought in. I mean, you have the job of Pope
John XXIII who had to throw open the windows and say that we
are going to have some fresh air come through this institution,
which is a very difficult thing for institutions to do, first
to acknowledge, which I applaud you for doing.
It seems to me that, if part of the organization looks over
their shoulder and sees people that have not served the
organization well being somehow rewarded, then that doesn't
clean out the culture that we want to reform, you see. That is
the intent with which I ask the question, and while I don't
want to get into specific personnel issues, that is why I offer
it. So I----
Mr. Darling. Well, I appreciate--sorry to interrupt. I
appreciate your raising the issue. There are also a number of
other individuals who have been terminated whose names I was
not asked about, including the two individuals involved in the
TA-33 case, including Mary Wood, and there are a number of
other names. But I am very sympathetic with your point. Indeed,
I have been making the same case internally.
Ms. Eshoo. I think it needs to be taken very seriously,
because we don't want to come back here and revisit these
things.
My final question, and the same question I have asked of
everyone: Do you have any knowledge of, in terms of these
shortcomings, the abuse, the fraud, that can be connected to a
diminishment of the national security of our country?
Mr. Darling. Thank you for asking the question. I do not,
and I would like, if I may, just give you a few points of
recent reviews. In August the Department of Energy site office
reviewed security at Los Alamos. In December there was an in
depth review by the DOE office headed by Mr. Glenn Podonsky,
I'm told, involved 30 to 45 experts who concluded that there
was effective national security performance.
Third, in January we brought in an outside firm that we use
to assist us with security, a firm by the name of ManTech
Aegis, to review Los Alamos and Livermore and to help us
improve any reporting of security incidents. They did not
identify any issues.
We also brought in security experts from Lawrence Livermore
National Laboratory to Los Alamos, again to look at this issue.
We have had a work group on cyber security probing to make sure
that, in terms of computer and other kind of access, we don't
have vulnerabilities, and we are issuing this week a strategic
plan for security at both of our national security
laboratories. It has been in development for the last year.
As I indicated, we have removed the Director and the Deputy
Director of the Security Division, and we have also examined
every one of the security issues that Mr. Walp and Mr. Doran
raised with us in our last meeting in late January to make sure
that we left no lead uninvestigated in exploring these issues.
Thus far, we have not found an issue, but I can't go beyond
that.
Ms. Eshoo. Thank you. Has my time expired, Mr. Chairman?
Mr. Greenwood. Well, apparently, we didn't start the clock.
Ms. Eshoo. All right. Can I ask one more quick question?
Mr. Greenwood. Certainly.
Ms. Eshoo. Thank you very much. Can you comment on--let me
just back this up with an observation first before I ask the
question, very quickly.
That is that, if in fact--going back to the culture of an
organization, if whistleblowers are not honored, respected, and
paid attention to, that sends a very broad and bad message. Can
you enlarge upon the whistleblower issue and how people in the
organization will have confidence that, when they make an
observation and they act on it, that there won't be punitive
action taken against them. In fact, I don't want to say
celebrated, but honored--honored. It takes a lot of guts to
step up and say something.
So there has to be confidentiality. In many ways, there is
a parallel to be drawn with the whole area of sexual abuse in
the workplace, and I've had some experience in setting up
systems in what I did before I came to the House.
So can you tell this committee with some confidence what
you have set up and why you have the confidence that it is
going to work, because it has these principles built into it?
Mr. Darling. Yes.
Ms. Eshoo. Thank you.
Mr. Darling. Congresswoman, I agree that terminating a
whistleblower sends a chilling message. It creates a climate in
an organization that is ultimately very destructive to the
organization itself and to the mission that it carries out.
So we have attempted to, both at the University and at the
three labs that we manage for the Federal Government, to set up
whistleblower information and reporting and protection systems
to accomplish the very goals that you have outlined.
Now the University has had in place for some time a
whistleblower policy. It was just updated in October because of
a new State law that was passed in California to strengthen
that, and it does apply to our three labs, including the one in
New Mexico, because we as the contractor in California impose
those same requirements.
What it provides is that any person may report allegations
of improprieties, whether they are known or suspected, that any
good faith disclosure automatically triggers an investigation.
It automatically triggers protection of the individual, and it
also provides for a follow-up system so the individual has a
way to find out what action the institution is taking on it.
Similarly, for anonymous whistleblowers--for example, we
have implemented a Pinkerton Company whistleblower hotline. An
individual may call up on that hotline, never mention their
name, provide the information. Pinkerton will relay it
immediately to the University's corporate audit office. A case
number will be assigned to it. The individual who called
anonymously will be informed of that case number, and the
individual may then call to follow-up to find out what has been
done on that case number and still maintain the individuals
anonymity.
Furthermore, we will provide information to Pinkerton so
that, when that individual does call, they will know on a
regular basis what the status of that is.
Second, we have tried to make reporting very easy. It
doesn't have to be in writing or to a designated person. We
want people to complain through the chain of command, because
as I told your investigators, if people do not step forward, if
people do not express their concerns, it really does create a
chilling environment, and all of us have the obligation to do
that up the line, and we also have the obligation to create an
environment in which people who work for us may do that, and we
must listen to them carefully, because if not, we have the kind
of incidents that occur here.
I will just say that Admiral Nanos has been very open about
this. He has held a number of all-hands meetings at the lab
where more than 700 people at each time come in to an
auditorium. He said he has been receiving regular e-mails from
people. So he is reassured that, at least for the time being,
people feel comfortable. They are coming directly to him.
Our auditor is also receiving those. I can't remember. We
have received in the last few weeks 156 different reports from
people. Now that may send a shock wave through you, but I think
that is a very, very healthy statement.
Ms. Eshoo. Thank you, Mr. Darling. Thank you again, Mr.
Chairman, for your courtesy.
Mr. Greenwood. The gentleman from California, Mr.
Radanovich.
Mr. Radanovich. Thank you very much, Mr. Chairman. Mr.
Darling, thanks for being in front of the panel today. Please
forgive me for being gone for a portion of this hearing. We
were having a security briefing on the House floor, and some of
these questions you may have answered, but I just want to kind
of reiterate some of them just to make sure, just so I am clear
that there were no confirmed security breaches or loss of
classified information as a result of these reported thefts at
Los Alamos. Am I correct?
Mr. Darling. That is correct, Mr. Radanovich. I think you
walked in as I was walking through the list of security steps
we have taken to ensure that. So I won't repeat it, but the
answer is we know of nothing.
Mr. Radanovich. Okay. And in your protocol in the
structural steps that you have taken for stronger oversight on
the laboratory, I would imagine that would be of general--well,
say, for example, there was a Frank Dickson, who is LANL's long
time General Counsel, who could not give a straight answer
about the proper means to report a potential situation of
fraud, waste, and abuse. I assume that you have taken the time
to explain all that.
Mr. Darling. I have not, and I appreciate your raising
that. On our November 25 visit one of the disturbing issues
that we faced was, when we asked how do people report issues,
and how do they get followed up at the laboratory, we found a
disconnect between the Office of Security Investigations, the
Audits and Assessments office, and the General Counsel's
office, and I believe that is one of the reasons that Mr. Walp
and Doran found the kind of resistance that they did, because
they were both people--one office elbowing the other out of the
way, and other cases where they simply weren't addressed at
all.
So we are--that is why we have put all of this into the
Office of Audits and Assessments under new leadership to try to
make sure that we address that for the long term in a clear,
simple, easy way that every employee will know how to pursue.
Mr. Radanovich. Okay, thank you. You may have addressed
this one also. I do need to ask it. Am I correct in
understanding that the University and the laboratory were both
investigating through internal and external review teams the
procurement fraud issues at Los Alamos as early as August 2002,
several months prior to the publicity surrounding Mr. Walp and
Mr. Doran, and this committee's own investigation? Was this a
case of your sweeping the issues under the rug until they
appeared in papers?
Mr. Darling. No. I don't--again, my involvement is quite
recent, but my understanding, as soon as the lab became aware
of purchase card programs in August and the University was
notified, we demanded that an external review team chaired by
two former Federal Inspectors General and
PricewaterhouseCoopers get involved to review that.
So I don't believe that the University of California,
Office of the President, did anything other than act
immediately to bring an outside group in to review these issues
the moment it heard about them.
Mr. Radanovich. Okay. Thanks. Also, in the case of Lillian
Anaya who tried to buy the Mustang, I hear she never got it,
but what was the status of that investigation as it is right
now, briefly?
Mr. Darling. Yes. My understanding, and I hope I am clear
in my own mind about this--forgive me if I misstate the matter,
but my understanding is, first, the matter was referred to the
FBI and the U.S. Attorney's Office. I believe--I hope I am
right in saying they decided not to prosecute.
My understanding was then it was referred to the DOE
Inspector General, and just, I believe, either earlier this
week or the end of last week, it was referred back to the lab.
We are now pursuing the issue. We have put together a case
review board to investigate the charges, and we will be taking
action, personnel actions, based on that case review board's
determination.
Mr. Radanovich. Thank you very much. Now we all agree that
the missteps and the theft and fraud is intolerable under
situations like that, but I do want to kind of want to put an
emphasis on the research, the critical research that is
important to national security that is conducted in the UC labs
right now.
Could you do me a favor and summarize the key areas of
research currently underway at Los Alamos and the extent to
which they relate to counterterrorism and homeland security
missions, and also please highlight to me to what extent a
change in the management during wartime would risk disrupting
research.
Mr. Darling. Yes. I will just cite three examples. The Los
Alamos laboratory has trained the International Atomic Energy
nuclear inspectors who look at how it is that nations use
nuclear reactors and what they do with the spent fuel rods. Of
course, that is a concern, because one doesn't want to have
those available to be transformed into nuclear weapons.
Second, both of our laboratories in cooperation have
developed a very small miniaturized biological threat detection
devices which have been installed around this city and around
the 2002 Winter Olympics, for example, to detect any potential
biological threats through airborne means.
Third, we have developed a so called EMP weapon,
electromagnetic pulse weapon. You may have read about it in the
newspaper recently, that if we do send in troops to Iraq, this
weapon will enable the U.S. forces to knock out any system that
uses either electricity or computer chips and, therefore,
disable the ability of Iraqi or any other opponent forces to
communicate and coordinate their response to a U.S. attack. I
am told that it does that without harming individuals.
So these are just a few examples, but you know, the core
mission is really developing nuclear weapons in the past and
then maintaining the current stockpile of nuclear weapons so
that, if they are ever called upon to be used, we are able to
do that.
In addition, we monitor nuclear proliferation in countries
around the world to make sure that the U.S. is fully informed
about the status and, as Congresswoman Eshoo said earlier, it
was the Lawrence Livermore lab that notified the U.S.
Government about the developments in North Korea.
As to what would happen if the contract were changed, let
me just say that the University employs the vast majority, if
not all, of the Nation's nuclear weapons physicists. The Nation
as a whole, 44 percent of the Nation's PhDs in science and
engineering are over the age of 50. So we are going to
experience a generational shift.
That is true also of the Nation's nuclear weapons
designers. The older ones are the only ones who have ever had a
chance to test a nuclear device, because the Nuclear Test Ban
Treaty has since prevented any further testing.
The younger scientists who have come forward to develop
weapons have only designed them on computers. They have never
seen them actually work. The younger ones are worried that, if
the University's contract expires or the University is
terminated, that the older ones will do what many of them have
indicated they might do, which is to simply retire, and we
would leave the Nation denuded of one of its most strategic
scientific and weapons manpower forces that we have.
Mr. Radanovich. Mr. Darling, how long has UC had the
contract to do this research?
Mr. Darling. It began in 1943 when the U.S. Government
turned to Ernest O. Lawrence, the Nobel Laureate in physics,
and at the Berkeley campus of the University, and asked him
first to organize our radar effort in World War II, and then
asked him to develop an atomic bomb, because the Germans had
one of the leading nuclear fission research programs.
They controlled most of the heavy water supply of the
world. They controlled occupied France where the Curie
laboratory and the Curies were, and they had an armaments and
munitions capability that was frightening to the rest of the
world, and had we not developed the atomic bomb first, I think
all of us only have to pause and imagine what our world and our
lives would be like if the Nazis had done so first. So it has
been since 1943.
Mr. Radanovich. And as I understand it, the contracts dome
due every 5 years, a 5-year period, and it's really not under
competitive bid?
Mr. Darling. That is correct.
Mr. Radanovich. I'd bid on it but, you know, I had the
opportunity. I chose Congress instead of nuclear physics. But
can you answer for me or give me other examples of different
types of contracts like these that are so specialized that they
are not put up for bid?
Mr. Darling. Yes. I'll give you one example. Admiral Nanos
who used to head the Navy nuclear weapons program has indicated
that Lockheed Martin has had a contract for the Trident missile
program for more than 20 years. The reason is that, for these
very strategic assets of the Nation, it is not like buying
shoes where you can find quality and determine the best price.
You have an asset. You have given a challenge that is one
of the most difficult challenges that human beings know how to
achieve, and turning over the contractors on any kind of a
regular basis creates a real threat of disruption to our basic
security.
So Lockheed Martin has had this Trident contract, I'm told,
for more than 20 years, and there may be other examples that we
could give you later. That's the one I know off the top of my
head.
Mr. Radanovich. One last question, if I may. Is the
University making a profit off these contracts?
Mr. Darling. The University, from 1943 until today, has
done this on a no gain, no loss. We have not wanted to receive
any additional money beyond our costs, and we have not wanted
to spend any University money beyond what it cost to run these
programs.
Mr. Radanovich. All right. Thank you very much, Mr.
Darling. Appreciate your testimony. Thank you, Mr. Chairman.
Mr. Greenwood. The Chair thanks the gentleman. Just on that
last point to clarify something: I was told by our staff that
the University receives a performance fee in the vicinity of
$8-$9 million. Is that----
Mr. Darling. That is correct. But can I explain how it's
used, to show you?
Mr. Greenwood. Yes.
Mr. Darling. The University decided it never wanted to be
financially dependent upon managing these laboratories, partly
because at the beginning it was viewed as something that would
just be done for a few years, and after the war was over, there
would be no further need for nuclear weapons.
So the University does two things with its fee. One is it
pays for the Office of the President's Oversight Office for the
laboratory administration, and then it takes the majority of
that money, and we give it back to the Directors of the two
nuclear weapons laboratories so that they may use it to do
science where a scientist has a very good idea. They are not
yet able to obtain funding, and so initiate new scientific
programs that in many cases have turned out to be the core, the
bedrock, of future nuclear weapons work.
So we put it all back into the mission for which the Nation
has hired us, in the first place.
Mr. Greenwood. Okay. A couple of more questions that I
have, and then we will let you go, Mr. Darling.
What did Mr. Salgado tell you about his concerns about Walp
and Doran obtaining whistleblower status?
Mr. Darling. He informed us that the timing of their
termination related to an impending Washington, DC, DOE
Inspector General visit to the laboratory, and that he was
concerned--he felt that their performance was not adequate, and
he was concerned that, if they were allowed to meet with the
DOE inspector on that occasion, that that would give them in
some technical sense whistleblower status, and it would make it
harder for the laboratory to terminate them for the reasons
they felt they should be terminated.
Mr. Greenwood. Okay. You made reference to the loyalty oath
that you have dispensed with. Could you tell us what that is?
Mr. Darling. I don't recall it well, but I think the DOE
Inspector General's report said that, in addition to the
professional standards and code of conduct of auditors, which
all auditors in all organizations follow, there was a statement
that one should--that auditors should be loyal to the
laboratory. That's a despicable comment. That is unacceptable.
It is intolerable, and it is outrageous.
Mr. Greenwood. Where did it come from? Was that the
University that inserted that?
Mr. Darling. No. It was a Los Alamos audit employee, and
I'm glad you asked the question. I don't know, but I will
pursue it to find out who put that in.
Mr. Greenwood. And to your knowledge, do any of your other
facilities that you manage have comparable loyalty oath?
Mr. Darling. I'm not aware of it, and it would be
reprehensible if we did, and we will stop it immediately, if we
do.
Mr. Greenwood. Yes, I would appreciate if you would check
on that.
My final question is this. With regard to cases of, for
instance--I think her name is Mary Wood who apparently has been
accused of using a purchase card to obtain funds at a casino,
and I believe there were $2500 worth of inappropriate charges
they attributed to her. Is the University making an effort to
get recovery of funds in these cases such as hers?
Mr. Darling. I need to look into that. I don't know the
answer, but we certainly should. And now that you have brought
up the question, we will investigate that and see if we can do
so.
Mr. Greenwood. I'm asking you one more question now,
because I am curious, because Mr. Deutsch is on his way here,
and he will be here in a second.
Gene Tucker, formerly Deputy Director of LANL Security,
told Mr. Walp that the money involved in the situation was UC
money and not taxpayer money. So LANL could handle this matter
in any way it saw fit. Do you agree with that statement?
Mr. Darling. No, I do not. The University of California is
a public trust organized under the constitution of the State of
California. Every dollar, whether it comes from public or
private sector sources, should be treated as though it were a
public dollar and given the utmost respect.
Mr. Greenwood. Okay. What is the status of the Lillian
Anaya case involving the attempt to purchase a Ford Mustang,
which I believe was valued at about $30,000?
Mr. Darling. Yes. First of all, that purchase never
occurred, because, fortunately, a check and balance did work,
and that is that the Bank of America, I believe it was, did not
permit the transaction to go through. So there was never a car
delivered, and there was never any loss of money by the lab or
the U.S. Government.
As I think I said to Mr. Radanovich, the case was referred
to the FBI and the U.S. Attorney. I believe they did not choose
to prosecute, and--oh, I'm sorry. I was thinking about--I am
confusing this with the Clarissa Rodriguez case. Excuse me. Am
I right? I'm glad they think I'm right, because I'm a little
confused at the moment.
So I believe it has been referred to the FBI and the DOE
Inspector General, and I'm sorry, I just don't recall what the
status is, but I believe it is with them.
Mr. Greenwood. What about the Rodriguez matter then? What
is the status of that?
Mr. Darling. As I informed Mr. Radanovich, it has now been
back--it is back in the hands of the laboratory, and we are
pursuing a personnel action through our case review board.
Mr. Greenwood. Now I'm getting you even more confused. The
first case that I asked you about was the Anaya Mustang case.
Mr. Darling. Yes, and here I have----
Mr. Greenwood. The Rodriguez case is a separate case. Can
you tell us the status of that investigation?
Mr. Darling. Yes. So the Anaya case is the Inspector
General. As of the 19th of February, we are commencing an
investigation to determine whether discipline is appropriate
and what it should be, and that is for Lillian Anaya.
Clarissa Rodriguez, I am now recollecting, was the woman
who falsified a travel voucher. She was allowed to resign by
the laboratory, I believe, inappropriately. There are other
people who have different opinions. And she is prohibited--she
was allowed to retire-excuse me--yes, resign in lieu of
termination. She is prohibited from being employed by the
laboratory for a period of 7 years, and I need to see whether
we are seeking--no, no, I'm sorry. We did receive $1800. Her
check did clear, and the laboratory has been repaid. Sorry, I'm
stumbling a bit here.
Mr. Greenwood. That's okay. Are criminal prosecutions
anticipated in either one of these two cases?
Mr. Darling. Criminal prosecution? We have reported both of
them to the proper law enforcement authorities, and my
understanding is that that is a decision that rests with them
and that we really have no jurisdiction to be able to determine
that.
Mr. Greenwood. Okay.
Mr. Darling. The Clarissa Rodriguez case, I'm told, as of
February 19 does reside with the FBI. That is the $1800 case.
We are getting a little below my level of knowledge here.
Mr. Greenwood. Recently, the Inspector General at
Department of Energy issued a report regarding firearms
inventory control at LANL. The IG concluded, ``Significant
internal control weaknesses exist in the receiving process and
the administration of the firearms inventory.''
Further, the report noted that, ``The inability of LANL to
provide accurate firearms inventory, the lack of reconciliation
of the LANL inventory with the protective force inventory, and
the acknowledged problems in the process for receipt of
firearms and their inclusion in the formal LANL inventory raise
additional doubt about the property control system at LANL.''
Does anyone at LANL have an accurate account of the lab's
firearms?
Mr. Darling. I'm told, first of all, that all of the
firearms were properly controlled in secure areas and were
never out of control. There was, clearly, a lack of proper
systems inventory accountability. I am told, for example, that
the name and make of each of the weapons was listed rather than
saying weapon, and then with a subheading. So when they
searched the data base, they were not able to find them on the
data base, but they were under proper control.
I'm told that, although there was an initial large
discrepancy between our records and the DOE's, I'm told those
have been reconciled, and that we now understand that they are
not only under control, but we have the full count.
We will not permit anyone to purchase a firearm in the
future without proper management authority, and they will have
to be accounted for in the way that we and you would expect of
us.
Mr. Greenwood. The gentleman from Florida.
Mr. Deutsch. Thank you, Mr. Chairman.
The Deputy Director of the laboratory has been removed, but
the legal counsel, who insisted that Mr. Walp and Mr. Doran be
fired, is still in his position, even though, obviously, his
role in this issue. Could you explain why that decision?
Mr. Darling. Yes. As I explained a few moments ago, one of
the confusing points about the dismissals of Mr. Walp and Mr.
Doran was a difference of opinion between the general counsel
and the principal deputy director of the laboratory about the
FBI's and U.S. Attorney's views of Mr. Walp and Mr. Doran's
performance. That is something we sought immediately to try to
find out the FBI and U.S. Attorney's perspective.
That meeting will take place early next month. I think that
meeting will provide us the kind of information about Mr.
Dickson's role that will allow us to make a decision. But just
like with Mr. Walp and Mr. Doran, we feel the need to collect
the information before we make a decision. So we are reserving
judgment.
Mr. Deutsch. I guess the question really is focus,
apparently at least, based upon what we are aware. This
gentleman actually was working on a daily basis to try to get
these two gentlemen fired.
Mr. Darling. I don't know that, but I do know that there
was certainly--I think that the general counsel, instead of
providing legal advice, also had an operating role. I think it
confused the role of the general counsel at the laboratory, and
that is among the issues that we will be looking at and
discussing as we go forward.
Mr. Deutsch. You stated in your testimony that only $3,000
in fraudulent purchase card purchases had been referred to the
authorities. Our staff, just by looking at invoices, there are
big differences between allowable purchases and legitimate
ones.
If your operation didn't direct me to buy something, I'd
buy it myself. Whether it was allowable or not is irrelevant.
So how do you make that distinction between allowable and
legitimate?
Mr. Darling. I'm sorry, Mr. Deutsch. I don't remember that
in my testimony.
Mr. Deutsch. It's actually apparently--you know, what I'm
told is in your written statement, it actually is included in
that. I mean, at this point----
Mr. Darling. I would not make a distinction between
allowable and appropriate.
Mr. Deutsch. All right. But apparently, again the audit
did. I mean, at this point--you know what. At this point on
that particular issue, you know, if you want to get back to us
in writing on that.
Mr. Darling. Thank you, sir. I'd be pleased to.
Mr. Deutsch. We've been told that no other University
operation has a purchase card program where people can go to
local vendors and give their Z-number and buy things. Is that
correct?
Mr. Darling. You mean no other University of California?
Mr. Deutsch. No other operation at the University.
Mr. Darling. I believe that is true. To the best of my
knowledge, yes.
Mr. Deutsch. And we have been told that this is a way to
support local vendors. I mean, is that the purpose of it?
Mr. Darling. I believe there are two purposes. One is, I
believe, under the contract we are required to provide business
opportunities for business in the immediate area around the
laboratory.
Second, because when the lab--the lab was purposely sited
there, because it was a remote area for both security reasons
and given the nature of the work, and over time as the lab has
grown, it needs a business and other kind of infrastructure
nearby to meet its needs.
This was an attempt to do that, but the controls are not
adequate, and that is something we are having an external
review team review now as they expand their review beyond the
purchase card program into all areas of procurement.
Mr. Deutsch. And again, I mean, obviously, it is self-
evident that the other way is to help the local economy.
Mr. Darling. Absolutely.
Mr. Deutsch. Again, just to save a little bit of time, my
understanding is Pricewaterhouse is going to be looking at the
whole process of this local vendor agreement where right now, I
guess, there is no oversight on that. Is that also correct?
Mr. Darling. When you say no oversight----
Mr. Deutsch. Well, we have been told that no one looks at
what is being bought through the local vendor agreements. Is
that accurate?
Mr. Darling. Well, Mr. Walp and Mr. Doran were extremely
helpful to us in understanding the local vendor agreements and
both how they have been used and perhaps how they have been
misused. So that is an area that we immediately responded to,
we are looking into.
We have brought in PricewaterhouseCoopers to look at it,
and we will be--we have already begun to tighten up what can be
purchased and making sure----
Mr. Deutsch. Let me just ask a quick question. Could you
purchase Nike sneakers?
Mr. Darling. Pardon me?
Mr. Deutsch. Nike sneakers?
Mr. Darling. Sir, you've gotten beyond my level of detailed
knowledge. I do know that safety boots, safety goggles, and
other things that are needed on a very quick turnaround time,
for obvious reasons, are available to be purchased, but I
cannot tell you about whether Nike----
Mr. Deutsch. Just yesterday our staff discovered that,
until August of this year, lab employees could get a travel
advance just by filling in an electronic form. It did not
require any supervisory approval.
One of your former employees just did that--in fact, did
that, and we still have to find the form. That employee
falsified a travel statement and converted $1800 in Federal
funds to a personal use which, obviously, are Federal crimes.
The lab Human Resources Department, reporting this to Mr.
Walp's unit but without checking with anyone, has decided that
it would take a restitution check, and allowed the employee to
resign before any investigation was done, and no investigation
was done. Would you view that as an appropriate decision?
Mr. Darling. No. I have told the committee staff, and I
will say it to the committee as well, I do not believe that was
an appropriate decision. I believe that she should have been
terminated.
Mr. Deutsch. Okay. My last question: There is a former
whistleblower from the S Division who was fired. An
administrative law judge found that the dismissal was based on
untruths of Mr. Busboom and Mr. Tucker. During this
investigation, we heard from a person involved in the lab's
action that he just went along with the others.
We want to look at this case, and we would like your
cooperation. The man's name is James Russell. Are you familiar
with that at all?
Mr. Darling. I am not, but we would be happy to cooperate
with you.
Mr. Deutsch. All right. Thank you very much.
Mr. Greenwood. The Chair thanks the gentleman. The chair
would ask unanimous consent that the opening statement of
Representative Anna Eshoo be incorporated into the record.
Without objection, it will, and also unanimous consent that the
disk, the CD with the photographs presented by Mr. McDonald be
part of the record. Without objection, it will be.
Without objection, a statement by Mr. Waxman will be
incorporated into the record as well.
With that, we thank you again, Mr. Darling, and the other
witnesses for their participation.
This hearing is adjourned.
Mr. Darling. Thank you, Mr. Greenwood, Mr. Deutsch, and
other members of the committee. Thank you very much.
[Whereupon, at 5:19 p.m., the subcommittee was adjourned.]
INVESTIGATION OF MANAGEMENT PROBLEMS AT LOS ALAMOS NATIONAL LABORATORY
----------
WEDNESDAY, MARCH 12, 2003
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Oversight and Investigations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m., in
room 2322 Rayburn House Office Building, Hon. James C.
Greenwood (chairman) presiding.
Members present: Representatives Greenwood, Walden,
Deutsch, and Davis.
Also present: Representative Radanovich, Markey, Eshoo, and
Udall.
Staff present: Ann Washington, majority counsel; Michael
Geffroy, majority counsel; Yong Choe, legislative clerk; Edith
Holleman, minority counsel; and Turney Hall, minority staff
assistant.
Mr. Greenwood. The hearing will come to order. I ask our
guests to find seats, please. Let me alert everyone to the fact
that Mr. Deutsch and I will make opening statements. Then,
unfortunately, we are going to have to recess for about a half
an hour and come right back and take testimony. I apologize for
that in advance. The Chair recognizes himself for an opening
statement.
This morning we embark on the second day of our hearing
concerning reports of mismanagement and theft of Government
property at Los Alamos National Laboratory. Two weeks ago we
heard very troubling testimony from investigators at the lab
who uncovered an amazing level of problems given the sensitive
operation at this facility.
For example, at that hearing we were presented with a
pictorial essay on the alleged theft perpetrated by two LANL
employees to include sleeping bags, cots, coolers, automatic
gate openers, compact disks describing how to operate lock-
picking equipment, and Slim Jims, devices used to break into
locked cars.
I am still waiting to hear how one could possibly explain
the use of these items for lab related business. Or, to go a
step further, to hear if anyone even asked these employees to
explain their questionable purchases.
Although we have evidence of a few peripheral inquiries
into some of their actions, it does not appear that anyone took
a serious look at this until an employee was forced due to lab
securities in action to go to the FBI.
To take another example, committee staff recently received
a report generated in December 2002 that identifies all the lap
top computers purchased in fiscal years 2001 and 2002 that did
not get the property barcode. The report identified more than
$1.5 million in lap tops all deemed sensitive property that
were not correctly tagged which meant the computers would not
be tracked in LANL inventory.
Of course, we also have the treatment of the two expert
investigators who did attempt to bring procurement and theft
problems to management only to be shown the door for doing so.
These are just a few reasons why this committee has serious
questions about procurement and property management oversight
at LANL.
Our search for answers leads us, first of all, to the lab's
management. We will turn today to the people who are supposed
to make sure the problems we have been investigating did not
happen. We will hear their response to the evidence and
allocations of theft and abuse of funds and property.
We will also hear from the people with responsibility for
the lab's overall management which will allow us to review more
broadly the effectiveness of oversight of the lab by both the
University of California and the National Nuclear Security
Administration.
We have serious questions on this level as well. The NNSA's
fiscal year 2000 appraisal of Los Alamos states in part,
``Notwithstanding the NNSA original assessment of outstanding
in the procurement and property management areas, systemic
weaknesses demonstrated in these two areas dictate that these
functional areas should be rated no higher than excellent.''
I have to ask how could NNSA rate any part of the
procurement and property management areas as excellent given
the testimony we heard 2 weeks ago from Jaret McDonald, the man
who frustrated by lab inaction, brought his concerns to the
FBI.
Our witnesses today can expect some tough questions. Let me
note that they all come before us voluntarily and I appreciate
their cooperation as we get to the bottom of this mess. Their
views of events and answers to our questions should help fill
out the picture of what was going on at Los Alamos.
Our first panel today consist of individuals who had
immediate oversight of the issues at hand. We will hear from
Mr. Stan Busboom who hired Glenn Walp and Steve Doran, the two
lab investigators who were fired after they raised concerns
about management's response to these crimes. Mr. Busboom
ultimately signed their termination letters. He says he was
ordered by his supervisor to do so.
In his previous role as Director of Security he was
involved in the inquires into many of the cases discussed in
our first hearing. He also is responsible for investigating
security incidents such as a recent missing hard drive case, as
well as other incidents involving unaccounted for classified
media that this committee has uncovered during the course of
our investigation.
Mr. Busboom is joined by Mr. Frank Dickson, Laboratory
Counsel; Mr. Joe Salgado, former Principal Deputy Director of
LANL. Both of these men took on roles in these procurement and
property cases that were seemingly outside the scope of their
regular job responsibilities. They were also instrumental in
the termination of Walp and Doran.
Our second panel will have officials responsible for
managing procurement at the lab. We will hear from Mr. John
Hernandez who oversaw the contract administrator responsible
for the Mesa blanket purchase agreement which was the primary
procurement tool two employees used to purchase tens of
thousands of dollars of goods for personal use.
Additionally, we have Mr. Stan Hettich, LANL's Director of
Procurement. Mr. Hettich was also involved to some degree in
one of the procurement abuse cases last year when his own
secretary was caught using her procurement card at local
casinos.
We will have Mr. Richard Marquez, LANL's Associate Director
for Administration, who oversees all procurement and property
management programs at the lab. Mr. Marquez has advised our
staff that he believes the recent steps taken by the lab to
improve its procurement card system will help solve many of the
current problems. I look forward to hearing exactly how he
believes these procedures will succeed where so many past
attempts have failed.
Finally, we will take testimony today from higher level
management. We will hear on our third panel from Dr. John
Browne who was the lab's director during the relevant time and
has since been replaced. We also have the former and current
University of California Vice President of Laboratory
Management, Dr. John McTague, and a reappearance, Mr. Bruce
Darling.
This lab management position was actually created to ensure
that the improved management provisions required in what is
known as Appendix O to the lab DOE contract was carried out.
Joining them is Mr. Ralph Erickson from the NNSA's LANL
site office. I am looking forward to their testimony that what
was going on at a facility that pursues some of the Nation's
most sensitive research.
We thank the witnesses for attending this important hearing
and recognize the ranking member for his opening statement.
Mr. Deutsch. Thank you, Mr. Chairman. In the fall of 2000
the University of California agreed to amend its contract with
the DOE to add more performance requirements for the management
of its two national nuclear weapons laboratories.
These commitments known as Appendix O were made to save
California's contracts when it went alee in the lost hard drive
security debacles at Los Alamos and the repeated mismanagement
which resulted in huge hidden cost overruns at the facility at
Lawrence Livermore National Laboratory.
According to the contract Appendix O was intended to
strengthen the university's management of and accountability
for Los Alamos and Lawrence Livermore National Laboratory in
three areas. Those were management accountability safeguards,
security management, and facility safety.
It required the use of outside subject matter experts to
establish a Vice President for Laboratory Management, provide
leadership management and integration of the initiatives in
Appendix O, and be accountable for institutionalizing the
changes, improvements, and the benefits gained from infusion of
industry expertise.
The vice president would also chair a new Laboratory Senior
Management Council which would be an effective forum to review
issues. The president of UC himself would be accountable to DOE
for overall management and operating performance. All the
requirements in Appendix O had to be completed for the
university to be eligible for any of its at-risk fee of $4.7
million.
On October 9, 2002, DOE stated that all the requirements of
Appendix O had been met and UC received $3.7 million of its
performance rating. UC said it had received the highest rating
ever from DOE, even though there were significant procurement
and property fraud of control allegations at Los Alamos.
PricewaterhouseCoopers and two former inspector generals
had already been hired to review the entire purchase card
system because of systemic weaknesses. The investigation
subsequently would be expanded to the entire procurement
system.
Within 6 weeks of this finding the new staff hired to
professionalize the security division were fired because they
did not fit in with the lab's self-protective culture. Within 3
months most of the top leadership of the Laboratory would be
removed from their positions because they had refused to
confront and fix management and security problems as they
surfaced. The two security professionals were rehired.
Have the goals of Appendix O been met? Not according to
Joseph Salgado, the former Principal Deputy Director of Los
Alamos. His testimony refers repeatedly to the lack of
management accountability in the security area, although the
key purpose was to instill public confidence and safeguards in
security at both labs. The implementation under Appendix O
appears to have been incomplete at best.
The final strategic plan prepared by Mantac Ajas, the
outside expert, were not ready for review until December 2002.
By July 2002 the lab had deleted all work requirements on
promising best management practices, assessment of training
needs and review of outsourcing possibilities.
Although Mantac Ajas was required to brief the Laboratory
Counsel and its vice president only once a year, the university
decided after the first briefing that it did not need another
briefing at the end of the contract. DOE apparently made Los
Alamos' last quarterly report the final one. Based on this
information of our investigation, I would argue that the
security operation was, and is, in shambles.
In addition to the well-publicized shortcomings in the
criminal area, our staffs are finding disturbing issues in the
handling of security incidents including the handling of
missing hard drives and flash cards.
In 2001 Stanley Busboom, then head of Safeguards and
Security Division, decided to readdress the situation that
resulted from internal failures to implement an earlier
reorganization. Mr. Busboom stated in his 2001 division
reengineering memorandum that we have had several
organizational structures that failed over the last 18 months
of crisis.
The computer and technical security section and information
on personal security had not removed from the security and
stand-downs during 1999 and the hard drive incident of 2000.
The Special Projects Office, the predecessor to the Office of
Security Inquiries, was described as ineffective with little
cooperation of local law enforcement agencies and property
protection investigations that were neither thorough or timely.
Mr. Busboom proposed true strategic staffing with
nationwide advertising to find a new OSI office leader to
organize investigations and inquiries. He wanted someone who
could investigate and develop root cause analysis and
solutions. The white hats, consumer service, and the black
hats, inquiries, were to be sharply defined and
organizationally separated.
The hiring of Mr. Walp and Mr. Doran as black hats was a
direct result of this effort. Quickly they were expected to
serve Mr. Dickson and Mr. Salgado, the main customers inside
the Laboratory, rather than to work with law enforcement
agencies to root out and fix the problem. Despite Mr. Busboom
name if black hats, they just did not fit in.
Mr. Chairman, one of the reasons people like Glenn Walp and
Steve Doran did not fit in was because they uncovered problems
and told people about them. They did not put their loyalty to
UC above that of the taxpayer. The university, the Department
of Energy, and these laboratories have a long and, frankly,
vicious record of pursuing employees who try to fix problems.
Demoting the Laboratory Director will not stop that, nor will
hiring back Mr. Walp and Mr. Doran.
Mr. Darling, your employees are afraid to speak out. That
is why you have the management by accommodation that Mr.
Salgado refers to. If you are really committed to change, I
suggest you revisit each of the whistleblower cases in the past
10 years and report back to this committee on whether you think
they were treated fairly. Thank you.
Mr. Greenwood. Thank you.
Mr. Deutsch. Mr. Chairman, Ms. Eshoo, I believe, by
combination will be able to sit in the hearing?
Mr. Greenwood. Ms. Eshoo can sit in on any of my hearings
any time she wishes.
Mr. Deutsch. Thank you very much.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Greg Walden, a Representative in Congress
from the State of Oregon
Thank you, Mr. Chairman. I commend you for holding this hearing
today. It is my hope that by the end of today's hearing we will have
gotten to the heart of what led to the acute problems that the Los
Alamos National Laboratory (LANL), the University of California (UC),
the National Nuclear Security Administration (NNSA) and the Department
of Energy (DOE) had in handling issues pertaining to the severe
procurement irregularities, gross property mismanagement and theft at
the laboratory.
To say the least, today's hearing will be interesting. Two weeks
ago members of the subcommittee were able to learn from Messrs.
McDonald, Walp and Doran how senior officials at LANL reacted to
serious allegations of theft and loss of government property and how
they responded to the misuse of government procurement mechanisms by
personnel at LANL. The subcommittee subsequently learned how these
allegations led to the start of an alleged cover-up by senior officials
at LANL, which, amongst other things, led to the dismissals of Mr. Walp
and Mr. Doran. These terminations by the laboratory were later
characterized by the DOE's Inspector General as being
``incomprehensible,'' and moreover, he found LANL's reasons for these
terminations to be unsupported by the available evidence.
I will be particularly interested to hear how Mr. Busboom explains
the rational behind these firings. How could these two security
officials be terminated from their positions in light of the fact that
about a month and a half prior to their respective terminations, on
November 25, 2002, Mr. Walp was given a performance evaluation and
subsequently received a $5,000 raise? It is also important to note that
the FBI thought very highly of Mr. Walp and Mr. Doran, which is
highlighted in Mr. Busboom's notes from a conversation he had with an
FBI agent in which the latter states that ``Steve and Glen are the most
professional.'' That compliment coupled with DOE's IG characterization
of the terminations definitely leaves some questions to be answered by
our witnesses on the rational behind these firings.
Though an explanation of what led to the terminations of Mr. Walp
and Mr. Doran is important, I also hope the subcommittee gets answers
from our panelists about what the laboratory, UC and the NNSA have done
to remedy the acute procurement problems that have existed at LANL. I
will be particularly interested to understand how the NNSA fiscal year
2002 appraisal of LANL rated the lab's procurement and personal
property management areas as ``excellent'' despite the fact that this
same system had such critical flaws that two lab employees were
allegedly able to walk off LANL grounds with over $50,000 in government
property. I will be even more interested in learning how a Los Alamos
employee could use their government provided purchase card to not only
buy miscellaneous items at local retail establishments, but also at
several area casinos. I imagine Mr. Hettich might be asked to shed some
light on this particular incident.
With that said, Mr. Chairman, I would like to thank our witnesses
for being here today and I look forward to hearing their answers to the
issues I have raised in my statement.
Thank you, Mr. Chairman. I yield back the balance of my time.
______
Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee
on Energy and Commerce
Thank you Chairman Greenwood. And let me say, once again, that the
thorough, bipartisan work you are doing here--the evidence and
information and explanations you are gathering--is going to be very
helpful in resolving what is a very, very disturbing situation at Los
Alamos National Laboratory.
At the first part of this hearing into theft and mismanagement two
weeks ago, I explained why I was so alarmed about what amounts to
looting at the lab. Theft of taxpayer dollars and property is bad
enough, but this goes beyond that. This is not some insignificant
facility. Los Alamos is considered to be one of the gems of our
national research infrastructure--and a facility that Americans trust
to perform some of our most valuable national security research.
It doesn't take a nuclear physicist to understand why this is so
important. Just look at the world situation today. We cannot afford to
have slipshod management at a facility that performs such sensitive
national security work.
What I learned from the first part of this hearing did not ease my
concerns. We heard sworn testimony about efforts to obstruct special
Lab investigators and the FBI. We heard what was described as a total
failure of Laboratory management to do anything about, and I quote,
``massive'' theft at the Lab.
We heard descriptions of a permissive atmosphere that sought to
protect the Lab's image by ignoring evidence of deep-seated problems--
for fear that exposure of the problems would generate negative
publicity that would harm the Lab, its management, and ultimately its
billion-dollar contract with DOE.
Mr. Chairman, I can tell you what was harming the Lab, and it was
not the efforts of the few to fight fraud and expose waste. Rather, it
was what was allowed to go on outside the public eye, within the walls
of this facility, a culture of permissiveness and lack of discipline.
Today we hear from the people who were in charge. I look forward to
learning why they at one point hired special investigators to reform
security at the Lab and then decided, essentially, to fire these
investigators after the theft was identified.
I look forward to learning why management and procurement
procedures failed, why employees were able to get away with the
purchases they made. We do have some tough questions. The witnesses
before us today are among those who were accountable for what was
happening at Los Alamos.
Let me say that I also appreciate the witnesses coming before this
Committee, voluntarily, to account for their actions and to explain
what reforms are under way. It's not always pleasant to come before
this Subcommittee as a witness to answer tough questions, and it's not
always pleasant to be up here asking the tough questions. But this
process is a good one, and one that over time will help to ensure that
gaps in security and fraud protection at the Lab are closed.
Today's hearing, Mr. Chairman, should help us move in this positive
direction. I yield back the remainder of my time and look forward to
discussing our concerns with the panels. Thank you.
Mr. Greenwood. As I mentioned at the outset of the hearing,
unfortunately we have to recess now because of an unavoidable
obligation that I have. We should readjourn in about 30
minutes. Please be back here at 10:45 and we will hear from our
first panel then. The hearing is recess.
[Whereupon, at 10:20 a.m. the subcommittee recessed to
reconvene at 10:45 am.]
Mr. Greenwood. Okay. Now you know why not much gets done
here in Washington but we should have a good solid 1\3/4\ hours
without further interruptions. Again, I apologize to all.
Let me welcome our first panel which consists of Mr.
Stanley Busboom, Staff Member and Former Director of the
Security Division at Los Alamos. Welcome, sir. Mr. Joseph
Salgado, former Principal Deputy Director at Los Alamos. Thank
you for being with us this morning. And Mr. Frank Dickson,
Laboratory Counsel at Los Alamos. I thank all of you for your
presence and for your patience.
You should be informed this is an investigative hearing and
it is our practice to take testimony under oath. I would ask if
any of you have any objections to giving your testimony under
oath?
Witness. No objection.
Witness. No.
Mr. Greenwood. No objection? Okay. Pursuant to the rules of
this committee and the rules of the House, you are entitled to
be represented by counsel. Do any of you wish to be represented
by counsel this morning?
Witness. Not at this time Witness. Negative.
Mr. Greenwood. Okay. If you would stand and raise your
right hands.
[Witnesses sworn.]
Mr. Greenwood. You are under oath and we will start with
you, Mr. Busboom. You are recognized for your opening
statement.
TESTIMONY OF STANLEY L. BUSBOOM, STAFF MEMBER AND FORMER
DIRECTOR, SECURITY DIVISION, LOS ALAMOS NATIONAL LABORATORY;
JOSEPH F. SALGADO, FORMER PRINCIPAL DEPUTY DIRECTOR AT LOS
ALAMOS NATIONAL LABORATORY; AND FRANK P. DICKSON, JR.,
LABORATORY COUNSEL, LOS ALAMOS NATIONAL LABORATORY
Mr. Busboom. Good morning, Mr. Chairman, Mr. Deutsch, and
members of the committee. Thank you for this opportunity to
address the issues that your committee has been looking into.
Mr. Greenwood. Can I ask you to bring the microphone a
little bit closer to you and point it toward your mouth. Thank
you very much.
Mr. Busboom. My name is Stan Busboom and I was the Director
of Security at Los Alamos for 5 years up until January 8 of
this year. Prior to that, I served my country in uniform
retiring at the rank of Colonel from the United States Air
Force. My record in the military service was exemplary, and my
service at Los Alamos was recognized as outstanding for my
entire tenure.
To fulfill its promise of full cooperation with Congress
and its investigation, Los Alamos National Laboratory and the
University of california have ordered me to appear here to give
testimony under oath today as a condition of my employment. The
terms of this order are contained in a letter from James L.
Holt, Laboratory Associate Director for Operations, which I
have attached to my written testimony.
At this time I would like to give you a brief summary of
the written testimony that I have submitted for the record. The
Office of Security----
Mr. Greenwood. I should remind you that you do have the
right to invoke your 5th Amendment rights if you do not wish to
testify this morning.
Mr. Busboom. I am aware of that, sir, and I understand I am
entitled to counsel as well.
Mr. Greenwood. Very well, sir.
Mr. Busboom. The Office of Security Inquiries, commonly
called OSI, came within my purview. This office is where Mr.
Walp and Mr. Doran worked. The members of this office work
directly for my deputy, Mr. Tucker, and they had a broad range
of duties at the Laboratory which did include providing
inquiries into property theft and liaison to law enforcement.
I first became aware of serious problems in OSI in
September of last year. Mr. Tucker reported to me on several
occasions during that period that there were ongoing disputes
between his OSI staff and the lab's legal counsel.
At one point in mid-September Mr. Tucker had to intercede
with the lab's Chief Operating Officer on Mr. Walp's and Mr.
Doran's behalf to prevent them from being taken off ongoing
inquiries. That incident led me to meet with Mr. Tucker, Mr.
Walp, and Mr. Doran to express my concern that the disputes be
resolved professionally, quickly, and permanently.
I also met with the Chief Operating Officer and the Senior
Legal Counsel around this time who expressed concerns about the
suitability of Mr. Walp and Mr. Doran for those positions.
Approximately 6 weeks later I was directed by the Chief
Operating Officer to remove Mr. Walp and Mr. Doran from their
law enforcement liaison duties with the FBI. I did that and
then I moved quickly to provide the FBI with alternative points
of contact.
This incident occurred after a meeting between senior lab
management, the FBI, and the U.S. Attorney which I did not
attend. I was told at the time that Mr. Walp and Mr. Doran no
longer had the trust of senior management. At that point I
began to seriously consider Mr. Walp and Mr. Doran's position
as probationary employees and to contemplate their future with
the lab.
On November 20 the issues surrounding Mr. Walp's and Mr.
Doran's performance came to a head when my supervisor handed me
a draft memorandum that provided detailed justification from
senior management for terminating the two under their
probationary period.
I consulted in detail on this with my supervisor, his
deputy, Senior Laboratory Legal Counsel, and the Deputy
Director for Human Resources. I also met with the Chief
Operating Office and expressed my concern about the inevitable
media and political firestorm. I was given assurances that that
had been taken into consideration and with those assurances I
accepted my responsibility as division leader to take the
determination actions.
On November 25 with my supervisor in attendance, I asked
for Mr. Walp's and Mr. Doran's resignations. When they were not
forthcoming, my supervisor and I signed the terminations
approximately 2 weeks later. The media and political fallout
that I was concerned about occurred almost immediately and a
number of investigations and inquiries were launched including
your committee, sir.
On January 3 of this year my supervisor told me that I
would be removed from my position. On January 8 that did occur.
For my part in this matter I have acted in good faith every
step of the way and I have taken my actions based on the best
information I had at the time. I have cooperated fully with all
investigating agencies including your committee, sir. I have
kept a complete an accurate record of all the proceedings I was
involved in which was provided to your committee's staff.
Thank you for your time.
[The prepared statement of Stanley L. Busboom follows:]
Prepared Statement of Stanley L. Busboom, Special Staff Member, Los
Alamos National Laboratory
To fulfill its promise of full cooperation with Congress and its
investigation, Los Alamos National Laboratory and University of
California have ordered me to appear here and give testimony under oath
as a condition of my employment. The terms of this order are contained
in a letter from James L. Holt, Laboratory Associate Director for
Operations, which I have attached to my testimony.
I was the Director of Security at Los Alamos National Laboratory
(LANL) for 5 years, up until January 8th of this year. Prior to that, I
served my country in uniform for 26 years. My record as a Colonel in
the Air Force was exemplary, and my service at Los Alamos was
recognized with outstanding performance ratings for my entire tenure as
a division leader.
The Office of Security Inquiries (OSI) at Los Alamos came within my
purview. OSI members worked directly for my deputy, Gene Tucker. I did
not supervise this function on a day-to-day basis, but I did have
supervisory contact with them when Mr. Tucker was absent from the
Laboratory. I was also involved in the terminations of Mr. Walp and Mr.
Doran.
I first became involved in events leading up to the termination of
these two persons in mid-September of 2002. On September 17th, Frank
Dickson, LANL Chief Legal Counsel, informed my deputy (Mr. Tucker) that
he was dissatisfied with the work of OSI on the pending property cases
and that he wanted Mr. Walp and Mr. Doran off the cases. Mr. Tucker
told me he would handle the situation and he interceded directly with
Joe Salgado, LANL Chief Operating Officer, on Mr. Walp and Mr. Doran's
behalf. The next day (September 18th) I met with Mr. Dickson at
11:30AM, and he outlined his dissatisfaction with the OSI staff in no
uncertain terms, saying that Mr. Doran was not trusted by the legal
office and that the ``jury was still out'' on Mr. Walp. He expressed
particular concern that Mr. Walp and Mr. Doran's contacts in the field
should not be inconsistent with his interface with the FBI and the U.S.
Attorney offices in Albuquerque.
I was extremely concerned by this discussion and I arranged to meet
with Mr. Tucker and Mr. Walp later that afternoon at 4:00PM. During
that meeting, Mr. Tucker asked Mr. Walp straight out if he was being
asked to anything improper, illegal, or unethical. Mr. Walp said
``no.'' Mr. Tucker also confronted Mr. Walp about an incident that Mr.
Tucker considered to be insubordination. Mr. Tucker said that Mr. Walp
had denounced Mr. Dickson in front of his OSI subordinates, and that
this was an inappropriate way to handle a dispute with a colleague. Mr.
Tucker also made the point that he had just gone to bat for Mr. Walp. I
told Mr. Walp that Mr. Dickson regarded him as uncooperative and that
OSI could not be successful in the long run if they did not have a good
working relationship with the LANL Chief Legal Counsel and his staff.
We then asked Mr. Doran to join the meeting. I repeated Mr.
Dickson's concerns to Mr. Doran, including the express concern that the
relationship with the FBI and the U.S. Attorney must be maintained. At
one point in the conversation, when I did not think Mr. Doran was
listening to me, I did offer my opinion that Mr. Dickson would ``level
you him both barrels'' if the dispute between OSI and LC continued. I
believe later events have proven my observation to be correct. I did
not threaten to fire Mr. Doran. I did tell him that Mr. Dickson was
inquiring about his status as a probationary employee, and I am certain
that Mr. Doran found that to be of great concern. I also found it to be
of great concern, as I wanted Mr. Tucker's efforts on his behalf to be
successful.
As a manager, I was obligated to let Mr. Walp and Mr. Doran know
where they stood with Mr. Dickson, without sugar coating it. The
context of this conversation was forward-looking, not punitive. My view
was that Mr. Tucker had successfully interceded on their behalf and
that if they took the time and made the effort to rebuild their
relationship with LC, we could put the disputes behind us. None of this
discussion in any way touched on Mr. Walp and Mr. Doran not being
allowed to do their jobs or not pursuing the cases they were working.
It was only about learning to cooperate with LC.
My next personal encounter with Mr. Walp and Mr. Doran came about
six weeks later. On October 24th, 2002, at 10:20AM, I received a
message that Mr. Dickson needed to speak with me urgently. I got
through to him 20 minutes later on his cell phone number and answered
this question from him: ``When did the FBI first begin investigations
into thefts at Los Alamos, and when did management know about it?'' The
answer I gave him, after consulting with Mr. Walp, was, ``Sometime
around June 24th and July 1st, respectively.'' I asked him where he
was, and he said that he and Mr. Salgado were meeting with the US
Attorney and the FBI in Albuquerque.
Later that day, at 4:00PM, Mr. Salgado held a meeting in his office
with Mr. Dickson, Mr. Marquez, Associate Director for Administration,
Mr. Holt, Associate Director for Operations, and me. Mr. Salgado said
words to the effect of, ``We screwed up the `Mustang' Case,'' and
therefore, the US Attorney would not prosecute it. He then immediately
directed me to take Mr. Walp and Mr. Doran out of liaison with the FBI
and therefore off the remaining FBI case, the so-called ``TA-33'' case.
By ordering Mr. Walp and Mr. Doran off FBI liaison just after
describing the screw-up of the ``Mustang'' case, Mr. Salgado implied
that that Mr. Walp and Mr. Doran's handling of the case caused their
removal from FBI liaison. I suggested that it was not wise to ``change
horses in the middle of the stream'' but was told that based on the
meeting in Albuquerque, Mr. Walp and Mr. Doran no longer had the trust
of senior management. The rationale was that Mr. Walp and Mr. Doran had
provided incomplete and inaccurate information to Mr. Dickson and Mr.
Salgado.
Accordingly, I told Mr. Walp that evening at about 5:45PM that he
was off liaison with the FBI. Mr. Doran was not available, so he was
told the same thing the next day, October 25th, around noon. I could
only tell them that senior management had lost confidence in them. At
09:30AM, I had an acrimonious meeting with Mr. Dickson about being
``ambushed'' the day before. I had not known about the meeting with the
US Attorney or the FBI the day before and that left me completely
unprepared for the outcome affecting my employees. In that meeting, he
explained that there would be a meeting the following Tuesday (October
29th), in which the roles of LC, OSI, the FBI, and the DOE IG would be
sorted out.
At 2:35PM that same day, Agent Jeff Campbell, FBI, telephoned me
and asked for assistance on an inquiry about an Australian citizen who
had once visited Los Alamos. He said Mr. Doran, who had informed him
that he was no longer in the position of FBI liaison, had referred him
to me. I told Agent Campbell I would assist him personally. At the
close of our conversation, Agent Campbell said: ``Nothing I said at
yesterday's meeting should have gotten Steve [Doran] in trouble,'' and
``Steve and Glenn [Walp] were very professional in my dealings with
them.'' I only told him their removal from liaison was a decision by
senior laboratory management.
I met again with Mr. Dickson later that day, to go over where we
stood on each area of concern. Following the meeting, I emailed Mr.
Dickson and my supervisor, Mr. Holt, that 1) Mr. Doran and Mr. Walp had
been removed from FBI liaison as directed by senior management; 2) we
would hold new liaison appointments in abeyance until the Tuesday
meeting per Mr. Dickson's direction; and 3) I passed on my conversation
with Agent Campbell.
The next Monday, October 28th, I telephoned Agent Campbell and gave
him everything he needed on the ``Australian'' case. As we closed the
conversation, he proposed to have Mr. Walp and Mr. Doran participate in
pending interviews and search warrants on the ``TA-33'' case (the sole
FBI case at LANL at that time, to the best of my knowledge). I told him
I could not agree to that. As I have described, the decision to remove
them had been made by senior management, and it was clear to me that I
did not have the authority to change that decision. I did leave it open
ended and told him ``we'll back to you,'' reasoning that the next day
this could be resolved in the joint LANL/IG/FBI meeting, where senior
management would attend. Agent Campbell said that without Mr. Walp and
Mr. Doran's participation, he could not assure me we would have 24
hours notice prior to the warrants being served in the ``TA-33'' case.
I made note of this, as at the time, I did not know any such agreement
was in place. I had only one purpose in my dealings with Agent Campbell
as liaison in the absence of Mr. Tucker, who was away on vacation: to
assure that the removal of Mr. Walp and Mr. Doran did not in any way
impede, obstruct, hinder or thwart any FBI investigation at the Lab.
The following day (October 29th, at 1:45PM) when I attended the
joint meeting, the FBI was not present. Mr. Salgado said that the FBI
had ``backed out.'' The first input I made at the meeting was to
recount my conversation with Agent Campbell and point out that a firm
FBI liaison was needed. Mr. Salgado said he didn't care if we had prior
notice of the warrants being served, but to go ahead and appoint new
liaisons. I appointed Mr. Tucker and Mr. Mullens to those duties
following the meeting, succeeding my own personal stint of three
working days as the liaison.
At 9:00AM on the morning of Thursday, October 31st, the FBI
conducted the interviews and served the warrants without prior notice
to LANL. Between Mr. Tucker and me, we immediately assembled a team
from OSI, produced the suspects, and provided full and successful
support to the FBI effort. I noted this on my calendar for the day:
``Where are Glenn and Steve?'' It turned out that Mr. Doran had
scheduled that day off, and Mr. Walp had called in sick.
I was later questioned by the DOE IG on this entire matter. The
inspector asked me if I had prohibited Mr. Walp and Mr. Doran from
speaking to the FBI. My reply was ``no,'' and I characterized that
proposition as ``ridiculous.'' If Agent Campbell needed any assistance
from anyone in OSI, he could have contacted Mr. Tucker or me, and we
would have provided whatever information or access he requested.
Alternately, he could have treated Mr. Walp and Mr. Doran as material
witnesses, and if they cooperated he would have all the access he
wished, without ever needing my consent or knowledge. In my 32 years of
experience in law enforcement, the FBI will label such persons as
supportive witnesses and/or criminal/confidential informants, and do
whatever they legally need to do in terms of access and interviews.
What I did not do was to interfere with Agent Campbell's investigation.
What I did do, and the only thing I did, was instruct Mr. Walp and
Mr. Doran not to interact with the FBI as liaisons on behalf of the
Laboratory, as I was instructed to do so by Mr. Salgado and Mr.
Dickson. The IG also asked me if I had been told by anyone that I was
not cooperating with the FBI. My answer was ``no,'' and the facts are
that the FBI got everything they needed in terms of support from my
division, when they needed it.
Throughout the period of late October and early November, both Mr.
Salgado and my immediate supervisor, Jim Holt, had discussions with me
about the probationary status of Mr. Walp and Mr. Doran. I was under
pressure to make a decision on them, and it was clear to me that
preferred outcome was to let them go. What I did not know at the time
was that plans to terminate Mr. Walp and Mr. Doran had been made at
meetings where I was not present, and did not know about.
The matter came to a head on November 20th, at 8:30AM, when Mr.
Holt handed me a draft memorandum that outlined senior managements'
concerns on Mr. Walp and Mr. Doran. It was in the form of a memo from
me to Mr. Holt, recommending their termination, and he told me to work
on it on a ``close hold'' basis. That same morning, I met with Mr. Holt
and his deputy, Barb Stine, at 10:00AM, and we edited the memo line-by-
line. The next morning, I took the memo to Mr. Dickson at 8:30AM, and
he edited it line-by-line with me. I asked for an explanation of each
point in the memo and Mr. Dickson attributed most of the points to
himself and Mr. Salgado.
I finalized the memo and sent it to Mr. Holt on November 21st,
recommending that Mr. Walp and Mr. Doran be terminated. I was prepared
to accept my responsibility under the LANL Administrative Manual, which
says dismissing probationary employees is done at the division leader
level, but I nevertheless had serious concerns. At 10:00AM, I met with
Mr. Salgado, and expressed the following reservations: 1) that this
action would start a media and political firestorm; 2) that Mr. Walp
and Mr. Doran would almost certainly become ``whistleblowers,'' and; 3)
that a senior management must participate in the actual terminations as
I was relying on their input for taking the action. He acknowledged my
concerns, but told me that these matters had been taken into
consideration. At 3:25PM that same day, Mr. Salgado told Mr. Holt and
me to proceed with the terminations on Monday and to start on
restructuring the OSI office; it was specifically agreed at this
meeting that Mr. Holt would be present during the terminations.
The next day, November 22nd, I received instructions from the
Deputy Division Leader of Human Resources (Phil Kruger) on how to
conduct the termination session. He advised me, among other procedural
matters, not to have Mr. Holt present. I certainly thought otherwise
and on Sunday, November 24th, at 3:05PM, I telephoned Mr. Holt at his
home to receive an assurance that he would be participating in the
action. On Monday, November 25th, commencing at 8:45AM, I asked both
Mr. Walp and Mr. Doran for their resignations, with Mr. Holt present as
a witness. Two weeks later, when no resignations were forthcoming, Mr.
Holt and I both signed the personnel action forms that formally
terminated them.
Almost immediately following the dismissal of Mr. Walp and Mr.
Doran, the media and political firestorm I had predicted materialized.
As I also forecast, they assumed the status of ``whistleblowers'' and
took their side of the story effectively and continuously to the media
and eventually, to this committee. I was told on January 3rd, 2003,
that I would be removed from my position as Director of Security, and
that did take place on January 8th. I believe this action was taken as
a direct result of the media coverage and political ``fallout'' I had
specifically warned senior management about.
The news media coverage of my removal at one point centered on the
alleged loss of a hard drive in my division in October of 2002. On
October 24th, 2002, at 4:30PM, I met with Mary Margaret Trujillo (OSI)
and Steve Croney (S-4 Group Leader), and they told me that an ongoing
inventory of classified removable electronic media (CREM) in Mr.
Croney's group had not been reconciled. I believe Mr. Croney had first
discovered the problem sometime earlier in the day. Mr. Croney said
that a bar coded CREM was not in the safe it should be, and that a
search of that safe did not result in finding it; the item was listed
as a hard drive.
At 4:45PM the same day, I telephoned Frank Ward of the local DOE
office, and informed him that I was formally reporting an incident of
security concern (a ``security incident''), and explained an item in
the S-4 CREM inventory was not where it should be. I told him that we
would be reporting it in writing the next morning, within 24 hours, as
procedures called for. I immediately called in Leigh Barnes to assist.
Mr. Barnes' group was in charge of the CREM inventory lab-wide, and
were on-call, like a SWAT team, to respond to any anomalies during
inventories.
At 5:15PM, I met with Mr. Croney, Mr. Barnes, Ms. Trujillo, and Ms.
Trujillo's supervisor, Mr. Walp. I sent Mr. Barnes and Mr. Croney off
to continue the search in S-4, and we agreed to reconvene in the
morning. At about 7:30PM, I reached Ken Schiffer, head of the Internal
Security Office, by telephone. I told him I had a security incident in
my own division and that I might need an inquiry official from his
office (An inquiry official investigates a security incident). To avoid
the appearance of a conflict of interest in the inquiry, I wanted an
inquiry official from outside S Division. Mr. Schiffer agreed to
assist.
The next morning, October 25th, at 7:00AM, Mr. Croney and Mr.
Barnes came to my office and presented a plan to do a wall-to-wall
search of the entire group. They estimated it would take well into the
weekend to check and recheck all of the inventory and to search all of
the physical space. I told them to proceed and sent Mr. Croney to get
started. At this meeting, Mr. Croney could not articulate in any way
what the missing item was used for, or what information it might
contain.
At 7:45AM, I met with Mr. Barnes, Mr. Walp, and Ms. Trujillo and
told them we would putting the report in writing, but also that I was
going to ask Mr. Holt to appoint an outside inquiry official to avoid a
conflict of interest in ``investigating ourselves.'' A draft of the
written report was reviewed at this meeting, and it did not make sense
to me on two accounts: 1) It said the hard drive was lost or missing,
when clearly in point of fact, the search was still ongoing; and 2)
That someone was in the hospital, and that is why we could not explain
the inventory difference. In either case, it would require a full
inquiry to determine if something was lost or missing, and if all
pertinent witnesses had been contacted. I asked Mr. Walp, Mr. Barnes,
and Ms. Trujillo to come up with more factual wording for the report. I
signed out the written report within two hours, and Mr. Walp faxed it
to DOE. It now correctly stated that we could not locate the item and
that we were continuing to attempt to reconcile the inventory. I
approved the classification of Impact Measurement Index 2 (IMI-2), the
highest and most serious classification I could assign without knowing
for certain that there was a confirmed compromise of classified
information.
Mr. Barnes and I met with Mr. Holt at 10:15 AM, and he agreed to
appoint an inquiry official outside of S Division for the reasons I had
put forward: I was both the responsible line manager and the Director
of Security and that constituted at least the appearance of a conflict
of interest. He communicated with a Mr. Roth in Mr. Schiffer's absence,
and then appointed Ms. Mary Ann Lujan from the Internal Security Office
as the inquiry official for the incident.
On Sunday, October 27th, I met with Mr. Croney and Mr. Barnes to
hear their report on the wall-to-wall search. They explained their
methodology for the search and detailed their activities over the
previous 72 hours. They then told me that they had found the bar coded
item and that it was a carrier without a hard drive in it. This was an
interesting development in terms of reconciling the inventory, but it
did not address the fundamental question of whether or not classified
information was potentially compromised. On October 28th, Mr. Walp, Mr.
Barnes, and I met with Ms. Lujan as she started her inquiry. They told
her what they knew up to that point, and I instructed them to give her
all necessary support.
On November the 1st, I was present when Ms. Lujan gave an update to
Scott Gibbs, who was acting on behalf of Mr. Holt. I asked Ms. Lujan if
my people were cooperating, and although she said ``yes,'' she also
said words to the effect that some people could be more forthcoming. As
I recall, her point was that some were not volunteering information,
but only answering direct questions. I immediately took this back to
Mr. Croney and instructed him to reinforce with all of his people that
full cooperation was essential, and I would not tolerate anything less.
I followed up with Mr. Croney from time to time after that to ensure
this was done. On November 15th, I performed a second-level managers
review of Mr. Croney's CREM inventory, checking safes and inventory
records along with him and his custodians. I found no issues. I believe
I sat in on one other update, but I do not recall the date or the
specifics discussed.
After being removed from the position of Director of Security, I
was questioned about taking part in, as it was described to me,
rescinding this report. This is completely untrue; I did not in any
way, orally or in writing, rescind the report. The ``rescission'' was
also attributed to Mr. Tucker, my Deputy. This is also patently false,
as he was out of town on vacation; in fact, the only reason I was
involved in reporting this incident was that in his absence, I was
covering his duties as the supervisor of OSI. Further, I cannot
understand why anyone would credit this assertion of a ``rescission,''
as clearly a full inquiry proceeded to its conclusion. What I did do
was immediately launch a massive effort to reconcile the inventory,
properly report the incident, classify it at the highest level of
concern I could, appropriately remove myself from the inquiry chain at
the earliest opportunity, keep careful records of the proceedings, and
ensure the cooperation of my division in the inquiry.
This committee's staff questioned me for the first and only time to
date about these matters on February 7th, 2003. Although I have first
hand knowledge of these events, no one at LANL or UC has interviewed
me. To the best of my knowledge, no one has interviewed Mr. Barnes
either, although he clearly has first hand knowledge of what happened
during the initial stages of the inquiry. I have never seen Ms. Lujan's
report; she completed it after I was removed from my position, and in
any case it was prepared on behalf of Mr. Holt. I have not read it, nor
have I been consulted on its content or conclusions. I therefore have
no knowledge of actions pending or taken as a result of the inquiry.
In conclusion, throughout all of these matters, I have not
participated in, nor observed, any actions that could remotely be
described as a management cover-up. I never harbored any motive of
``thwarting'' Mr. Walp and Mr. Doran's work. On the contrary, I
provided appropriate resources and support for OSI throughout this
period, and assisted Mr. Tucker in interceding with legal counsel and
senior management when they needed support. I kept an extensive record
of the events as they occurred and I have shared that record fully and
cooperatively with all the concurrent investigations.
For my own part, I participated in the terminations with caution
and reservation; Mr. Tucker did not participate in the terminations at
all. I took all of my actions with consistency and in good faith and I
used the information provided to me about Mr. Walp and Mr. Doran in a
manner appropriate to the seriousness with which it was presented to
me. I took no independent action in this matter; I recommended the
terminations based on what I was told, but I did not make the decision.
I had no reason at the time to suspect the motives of my chain of
command or the veracity of the information they gave me. When the
terminations were effected, I saw to it that the extraordinary steps
were taken of having a senior manager present, and of having him sign
the personnel action forms.
Thank you for the opportunity to assist in you investigation of
this matter.
Mr. Greenwood. Thank you, Mr. Busboom.
Mr. Salgado.
TESTIMONY OF JOSEPH F. SALGADO
Mr. Salgado. Mr. Chairman, members of the committee, My
name is Joe Salgado. I am here voluntarily and at my own
expense. I was the former Principal Deputy Director of Los
Alamos National Laboratory. I had been at the Laboratory
approximately 3 years.
For brief moments here I would like to address a little bit
of my background since that is germane probably to the ongoing
inquiries of this committee. I have over 17 and close to 20
years of law enforcement experience starting as a police
officer in Oakland, California as Sergeant of Police. Ten years
as a prosecutor in Alameda County as senior trial attorney. As
a branch manager and special prosecutor in Humboldt County in
an impeachment trial of a duly elected law enforcement
official.
I had the privilege to come to the Department of Justice
after approximately 10 years as a prosecuting attorney and
served as the Associate Director for Enforcement at the
Immigration and Naturalization Service. I sat on the board of
directors of EPIC, El Paso Intelligence Center. Then the
Associate Attorney General on the Coordinating Committee on
Organized Crime.
I served in the Reagan Administration as the Chief
Operating Officer of the Department of Energy for 4 years. In
that capacity had the ability and the responsibility for the
management of the National Laboratory and ironically also with
part of the decisionmaking process for the extension of the
contract with the University of California in 1985.
I would like to make five brief points if I might, Mr.
Chairman, pursuant to my testimony. I would ask that my
submitted testimony be incorporated and part of the official
record.
Mr. Greenwood. It will be.
Mr. Salgado. Thank you, sir. The first point I would like
to make is on a personal basis and professional basis there was
absolutely no cover-up or attempted cover-up of theft or
criminal activity at Los Alamos Laboratory via myself and, as
far as I know, by anyone else at the Laboratory. I believe that
these allegations are absolutely not true and I categorically
reject all such statements.
I have described in my statement Dr. Browne and I promptly
and completely informed all appropriate authorities at the
University of California, NNSA, DOE, and appropriate law
enforcement agencies. We kept them informed of our activities
and progress through all the issues that are before this
committee today.
The second point that I would like to make is that I firmly
believe that the descriptions of the Laboratory, Los Alamos
National Laboratory, as a Den of Thieves, or having a culture
of crime and theft that has been keeping the valley green for
years, is inaccurate and not founded on fact. I believe, sir,
that it does a disservice to the thousands of honest, dedicated
science, technical and support people at the Laboratory.
Obviously the improper and illegal activities and criminal
activity of a few individuals out of a work force of over
10,000 are extremely serious and should be well investigated.
But they should not be used to tarnish the entire Laboratory
and its work force. Personally I am disappointed that the
University of California has chosen not to defend the
Laboratory and its work force.
Point No. 3. In late 1999 when I joined the Laboratory I
did bring a well-founded belief that the historical culture of
the University of California and the Los Alamos Laboratory had
to change to ensure that it is management performance would be
as excellent as its scientific performance.
It was my personal opinion and voice within the
institution, as well as the University of California, that the
Laboratory had lost its credibility and was losing its
credibility with both the executive and legislative branches of
government.
My views were consistent with Dr. Browne's vision of
transforming the Laboratory into a disciplined organization
capable of meeting the public expectation for accountability
with fiduciary relationship with the American taxpayer.
As a result of my prior service at the Department of
Energy, I firmly believe that the University of California Lab
had to regain its lost confidence and could only do so by
substantially transforming the culture of the Laboratory and
its management practices. Management practices have
historically been one of management by accommodation to one
marked by formality of operation, openness, and, among other
things, that it was variably free from a culture of theft
including theft and mismanagement.
Fourth. I take the responsibility for the dismissals of Mr.
Walp and Mr. Doran. I believe their dismissals were warranted
based on repeated instances of inaccurate and incomplete
reporting, their apparent inability to gain the trust and
confidence of executives and senior managers at the Laboratory,
as well as external reviewers with backgrounds both in law
enforcement and the Federal Government. And management failures
in properly securing, I believe, sensitive information dealing
with ongoing criminal investigations.
I am aware that Mr. Walp and Doran have accused me of
significant obstruction and interferences with their work. It
would be worth nothing that over the period of the 6 months to
a year that Mr. Walp and Doran were at the institution I
personally met with Mr. Walp twice for approximately 60 minutes
and Mr. Doran attended a meeting I was in.
There were issues concerning the October 24 meeting with
the FBI and the U.S. Attorney that did lead me to the position
of requesting and demanding that they be removed from liaison
on that particular case.
Mr. Doran and Mr. Walp see the Laboratory and its issues on
one hand, and I see it on another hand that the conditions at
the Laboratory must and need to be improved. We are
diametrically opposed, I believe, as to our conclusions as to
those conditions.
Finally, Mr. Chairman and members, this committee would
have no way of knowing what I refer to as an insidious and
prejudicial phrase of ``keeping of the valley green'' and
similar expressions. I have discussed this issue at length in
my statement.
Let me summarize it here by saying that the phrase is
tantamount to racial profiling of the Hispanic workers at the
institution of Los Alamos and the Hispanics residents of the
Espanola Valley. Uses of phrases like ``greening the valley''
as our surrogate for accusation of thief in connections to the
drug trade and absent any substantiating evidence or wrong.
As an individual who has lived in the valley and is of
Hispanic decent, I personally, professionally are offended and
believe that the university and the Laboratory ought to cease
using these phrases unless they can demonstrate substantial
evidence they are, in fact, true. I am not aware that such
evidence does exist.
I welcome your questions, Mr. Chairman, and I appreciate
the opportunity to be here.
[The prepared statement of Joseph F. Salgado follows:]
Prepared Statement of Joseph F. Salgado, Former Principal Deputy
Director, Los Alamos National Laboratory
Mr. Chairman, Members of the Committee: I appreciate the
opportunity to testify about performance failures at Los Alamos
National Laboratory and related issues. I am here without subpoena and
at my own expense because I believe these hearings are important to the
future of the Laboratory.
introduction
I came to the Laboratory in August, 1999 as an ``outsider'' and a
manager, with a successful track record in the private sector and
before that in the public sector, including 17 years in law enforcement
as a police officer, prosecuting attorney, and Associate Commissioner
for Enforcement at INS in the Department of Justice. While at the
Department of Energy in the late 1980s as Under Secretary and Deputy
Secretary, I was involved in the decision to extend the University of
California's contract to operate three national laboratories, including
Los Alamos.
When I joined the Laboratory, it was with a well-founded belief
that it is important for the country that the University of California
continue to manage Los Alamos Laboratory. BUT, I also believed that it
was imperative that historical cultural issues at the Laboratory needed
to change. These beliefs were consistent with John Browne's vision for
transformation of the Laboratory. As Director, he realized that the
culture that had existed at the Laboratory for nearly 60 years could
not satisfy public expectations for accountability and management
excellence and therefore that change was imperative. Long-standing
cultural issues at Los Alamos included:
Lack of operational formality;
Lack of a sense of the fiduciary relationship between the
Laboratory and the taxpayers;
Lack of responsibility and accountability;
Lack of management discipline;
Lack of an understanding that competent managers and good
science are not incompatible.
During the three years I was employed at the Laboratory, I spoke
out frequently about the need to transform the Laboratory from what one
DOE official correctly observed was ``13 labs with one name'' and a
system of management by accommodation to an organization that would
speak with one voice and be governed by disciplined management. There
is nothing I am testifying to today regarding the need for change that
I have not repeatedly said to Laboratory employees, the University of
California's Office of the President, and, as well, to the NNSA and
DOE.
allegations of cover-up and obstruction
Before proceeding with the details of my statement, I want to
address allegations of cover-up, attempted cover-up, obstruction, and
interference with fact-finding and investigative processes. These
allegations are absolutely not true, and I categorically reject all
such statements as they relate to my actions. To the best of my
knowledge, no one else at the Laboratory engaged in any cover-up or
interference with investigative processes. As will be clear throughout
my testimony, Director Browne and I promptly and consistently took the
initiative to fully inform the University of California, the NNSA, and,
as appropriate, the DOE Inspector General's office of all of the
information available to us about proven or alleged misdeeds at the
Laboratory. We were determined and proactive in addressing each issue
as it came to our attention.
As soon as these allegations appeared in the November 5 edition of
The Energy Daily, I discussed the matter with DOE Inspector General
Greg Friedman and then recommended to Director Browne that we ask NNSA
to request a review by the Inspector General. Director Browne, who was
in Washington, D.C. at the time, made the request to Linton Brooks,
Acting NNSA Administrator, that day. These calls were completed within
a period of 4 to 6 hours on November 5. Mr. Brooks asked for an IG
review on the same day, and the Laboratory received written notice from
the IG on the following day that an investigation would be done. Mr.
Friedman called me a day later to acknowledge that the Laboratory had
acted very quickly.
As I will discuss later, I believe that in the specific instances
of misconduct--TA33, purchase card activity and property management--
the Laboratory moved aggressively and proactively to address these
issues. In the discussion that follows, ``executives'' refers to the
Director, Deputy Directors, Associate Directors, and Laboratory
Counsel. ``Senior managers'' refers to Division Leaders; ``managers''
refers to all other managers.
laboratory is not a ``den of thieves''
I have been deeply disappointed that so few efforts have been made
over the past several months to acknowledge what is right with Los
Alamos National Laboratory. Notions that the Laboratory is a ``den of
thieves'' which has been ``keeping the Valley green'' for years, or
that its culture is one of ``theft and criminality,'' I believe are
wrong, and should be explicitly and firmly rejected. The fraudulent
activities of a few individuals out of a workforce of over 10,000 in a
half dozen specific cases are extremely serious. But they are not
reason for condemning the entire Laboratory or its culture.
The workforce at the Laboratory is among the most rigorously
screened workforces in the country. It consists of literally thousands
of dedicated, hard-working, honest individuals. Among them are some of
the brightest minds and most accomplished scientific and technical
talents in the country--probably in the world. But the scientists and
engineers are not the only honest, committed workers at the Laboratory.
There also are thousands of non-scientists and non-engineers who are
every bit as committed and patriotic as their scientific and
engineering colleagues and who work extremely hard to support the
fundamental science, technology and national security missions of the
Laboratory. I believe they have been unfairly tarnished by the events
of the recent past, by the near exclusive focus of personnel actions on
administrative and support personnel, and by the failure of the
University to defend their work and their contributions.
how the performance failures happened
Given its exceptionally strong workforce, why did Los Alamos
Laboratory have the kinds of performance failures that it did? The
cultural issues I described above led to several root cause problems:
Management excellence and good managers have not been highly
valued, either by the University or at the Laboratory itself.
Skills that are not valued will not thrive in any organization.
In my judgment, Los Alamos National Laboratory does not have
the depth and breadth of managerial skills that one of the
Nation's premier national security installations with an annual
budget in excess of $1.5 billion must have.
The culture over many years at Los Alamos has been one of
``management by accommodation''. Administrative and operational
policies were often converted to ``guidance'' rather than
``requirements''. Procedures were modified to accommodate the
preferences or conveniences of program managers and division
leaders. And, administrative and support staff were led to
believe that aggressive enforcement of policies and rules would
be criticized, not supported, by successive levels of
management.
Insufficient management skills and a long-standing culture of
accommodation affected--undermined, in fact--a broad range of
controls and checks and balances that were on the books, but in
many cases were not rigorously observed. Too often, dollars
were used almost like ``monopoly money'' instead of as a
fiduciary trust.
These conditions are not new. They have been typical to a greater
or lesser extent of Laboratory operations for most of its history. In
part, they have their origins in past federal management systems that
involved less demanding public expectations and therefore less rigorous
accountability. And, I want to be very clear on one point: Throughout
my tenure at the Laboratory, I saw no evidence that these conditions
resulted in a ``culture of theft'' or widespread personal
aggrandizement. I say this not just as a former Laboratory manager but
as a former law enforcement official with extensive investigative
experience.
Each of the performance failures that have lately been the subject
of intense attention by the Congress, the press, and more recently the
University of California illustrate clearly the cultural issues at the
Laboratory. Each case also demonstrates our prompt, proactive
determination to address wrongdoing and to assure immediate and
continuous reporting of problems and what we were doing about them.
ta-33, use of purchase orders to acquire items for personal use
The Director and I first learned of this case in July 2002 when
Laboratory Counsel Frank Dickson informed me that the FBI had opened an
investigation at TA-33.
Throughout the course of this investigation, we were faced with the
need to balance cooperation with the FBI's criminal investigation and
our obligation to protect national security interests at this highly
classified site. I had three separate meetings with the FBI, one of
which included the U.S. Attorney's office, between July and October in
order to insure maximum cooperation and to raise issues and concerns in
an expeditious manner.
As soon as we became aware of the investigation, we immediately
informed Laboratory executives and senior managers and took steps to
assure that national security interests would be protected while the
investigation proceeded. At the same time, Dr. Browne and I notified
the University of California and the NNSA of what we knew.
No system of internal controls will guarantee against conspiracies
to circumvent it. Alexander and Bussolini were apparently able to do
what they did because they conspired to violate procurement
regulations. Management vigilance and the honesty of fellow workers are
the best hope for thwarting conspiracies. In this case, management was
not vigilant.
Had it not been for Jaret McDonald's determination to do what he
could to end wrongdoing by Alexander and Bussolini, it is possible that
their fraudulent activities would have continued for years,
inadvertently abetted by a culture of accommodation. The result would
have been far greater losses than will finally be determined in this
case. I believe that McDonald deserves to be commended for his report
and for his persistence in pursuing it.
My understanding is that Mr. McDonald made his first report to the
Office of Security Inquiries in S Division in September 2001. The
mishandling of that report is an example of the lack of discipline and
formality of operations that has typified Laboratory operations. The
fact that the Director's office did not learn of McDonald's report
until October 24, 2002, and that we learned of it, not from Laboratory
managers, but from the U.S. Attorney's office, is indicative of the
vulnerabilities that the absence of formality and discipline creates.
When I asked about the history of this case after my meeting on October
24 with the FBI and the Deputy U.S. Attorney, I was told that
McDonald's report had been discussed with the FBI in September 2001 and
that the FBI had decided against opening an investigation at that time.
When I asked for documentation of these discussions, I was told there
was none.
None of the line managers responsible for program activities at TA-
33 or for the procurement function were informed of Mr. McDonald's
report until I did so after learning of the FBI investigation in July
2002. As far as I know, there had been no report to the Associate
Director whose responsibilities include security, in spite of the fact
that TA-33 is arguably among the most highly classified sites at the
Lab. There had been no report to the Office of Audits and Assessments,
the Laboratory's official point of contact with the DOE Inspector
General. There had been no report directly to the DOE Inspector
General. There had been no report to local law enforcement. To the best
of my knowledge, even after Mr. Walp joined the Laboratory in January
2002 and reportedly learned of this major theft case within a couple of
weeks of starting on the job, there were no reports to the Associate
Director responsible for security, or to other executives, the
Inspector General, or local law enforcement. The Laboratory had a
breakdown of process that should never have happened.
Alexander and Bussolini were able to conduct their fraudulent
activities partly because of procurement actions intended to
accommodate the Division to which they were assigned. A blanket
contract award for specified types of equipment was issued with a
ceiling of $100,000 in November 2000 to support requirements at TA-33.
This was to have been a temporary contract for no more than 6 months.
As an accommodation to facility managers and program offices, the
contract term was repeatedly extended by the procurement staff to a
final term of 24 months. In addition, it was modified 4 times to
increase the ceiling from $100,000 to $2.7 million. None of these
modifications, to term, scope and ceiling, as far as I know, received
any review by the group leader or higher level management.
More intense management vigilance by those responsible for
facilities, program management, and procurement at TA-33 might have
uncovered the activities of Alexander and Bussolini before Mr. McDonald
felt compelled to report them. Certainly, formality of operations in
terms of reporting and documenting allegations of wrongdoing would have
assured prompt response to Mr. McDonald's first report in the fall of
2001. If the information available to me is correct, I cannot explain
why the Office of Security Inquiries, under either of its 2 previous
directors ( Sprouse and Walp), did not feel compelled to assure that
Laboratory executives were aware of McDonald's report.
attempted purchase of a mustang automobile
As in the TA-33 case, as soon as we became aware of the attempted
purchase of the Mustang, we took prompt, assertive action:
We immediately established an internal review team to
determine whether there were systemic problems with the
purchase card program. As a result of this review, we
implemented a series of reforms and controls, including limits
on authorization levels for all cardholders to $2,500 per
transaction and $25,000 per month.
I also personally discussed with Inspector General Friedman at
the Department of Energy our intent to establish the External
Review Team and to have it chaired by a former Inspector
General.
John Layton, former Inspector General at the Department of
Energy agreed to chair the External Review Team and recommended
that another former IG, Charles Masten, be added to the team.
We agreed with Mr. Layton's recommendation.
A letter for UC Vice President McTague's signature confirming
these discussions and authorizing us to proceed was drafted in
my office; faxed to Dr. McTague; signed by him; and returned to
the Laboratory Director.
I notified the FBI and discussed the case with them in the 2nd
of the three meetings I had with them between July and October.
Dr. McTague followed our progress closely and expected frequent
reports on the status of the investigations and the related reviews of
procedures and practices. But, it was Dr. Browne who took the
initiative to propose the External Review Team and to have it chaired
by a former Inspector General.
We learned about the attempted purchase of the Mustang automobile
about a month after the TA-33 case had come to our attention. The bank
that administered the purchase card program on behalf of the Laboratory
initially reported the matter to the Laboratory Procurement Group.
The Mustang case provides a near textbook-quality illustration of
the culture of accommodation at Los Alamos National Laboratory. The
policies governing purchase card use, all of which are easily
accessible on the Laboratory's web page, could not have been more
clear: the standard authorization limit was $2,500/transaction and
$25,000/month. These limits could be raised to $5,000/transaction and
$50,000/month if the Group Leader provided justification and the
cardholder completed special training and there were no findings in an
audit of their account. The policies on the web page also explicitly
prohibited the purchase of tools with purchase cards.
In the Mustang case, Division managers requested and procurement
managers agreed to raise the authorization limits for the card-holding
individual to $50,000/transaction and $900,000/month, based on the high
volume of purchases made in the Division. This decision did not come to
the attention of the Laboratory's executives until after we learned of
the Mustang issue. It is worth noting that these authorization levels
were granted not to a manager, but to an individual classified as an
OS/7--approximately the equivalent of a GS-7 to GS-9 administrative
secretary in the federal service. There was no formality requiring
review of purchase card authorization limits or of the performance of
those to whom higher-than-standard limits had been granted.
Division managers also requested and procurement managers agreed to
provide an exception to the prohibition against acquiring tools with
purchase cards. The exception was accompanied by certain conditions to
which Division management agreed. However, I know of no indication once
the exception was in place that either Division or procurement
management paid any attention to whether the conditions on which the
exception was based were being observed and, if they were, whether they
were effective.
When we reviewed the cardholder's account, we found that an
exceptionally large number of tools had been purchased with the same
card used for the Mustang. The volume of the purchases, the fact that
all were made from a single vendor who was located in Albuquerque, and
the fact that a Laboratory employee apparently always drove to
Albuquerque to pick up the tools raised a number of questions. I
discussed these issues with the FBI in the 2nd of the three meetings I
had with them and sought their assistance, given that they had opened a
case on the Mustang and the fact that the tools had been purchased by
the same cardholder. Mr. Dickson and Mr. Tucker subsequently met with
the Bureau's white collar crime unit regarding the tools, but the
Bureau decided not to pursue the matter. At the time I left the
Laboratory, these issues were still under review by the DOE Inspector
General.
Taken together, the TA-33 and Mustang cases are examples of a
historic pattern of operations at Los Alamos Laboratory: Exceptions to
established policies and controls were made to accommodate group and
division managers. The exceptions were not reviewed or approved by
executives--in part because the culture had long since made such
exceptions part of routine activity.
missing property
Los Alamos National Laboratory covers an area of about 43 square
miles (roughly the size of the District of Columbia) traversed by about
200 miles of roads and occupied by roughly 2,000 buildings. These
conditions make property management at Los Alamos far more complicated
than at more compact sites, such as Lawrence Livermore and Sandia
National Laboratories. This does not mean that the standards for
property management ought to be less stringent at Los Alamos; it does
mean that management rigor, discipline and formality of operations are
critically important.
The first time the Director and I became aware of or saw the
property reports attached to Mr. Walp's March 26, 2002 memorandum was
on November 8, 2002 when a copy was faxed to the Laboratory by Adam
Rankin of the Albuquerque Journal. As the Committee knows, Mr. Walp's
memo alleged widespread theft based on the subject reports, all of
which, I was told, had been previously filed with and reviewed by DOE/
NNSA. To the best of my knowledge, Mr. Walp's memo had never been
brought to the attention of anyone above Division management at the
Laboratory or to anyone in NNSA or to the DOE Inspector General despite
the seriousness of his allegations.
As soon as we became aware of the property reports attached to
Walp's March 26 memorandum, we established an internal task force to
review property management procedures and reporting. As a result of
this review, Director Browne directed that a wall-to-wall inventory be
conducted. This is a time-consuming and expensive procedure and
therefore requires approval by NNSA. NNSA approved the proposed
inventory, and I understand it is now in process.
In addition, I ordered a review of classified computers to
determine whether any of the computers listed as lost, stolen or
otherwise unlocated contained classified information and to validate
that all classified computers in the current inventory could be
located. That report had not been completed prior to my leaving the
Laboratory. A preliminary report in mid-December 2002 indicated that
one computer used for classified work--a Sun Microsystems workstation
that did not contain a hard drive--had been tagged for destruction but
could not be verified as having been destroyed. The mid-December report
indicated that all other computers used for classified work had been
located and that none had been reported as missing or stolen. I was
informed that because the Sun machine contained no hard drive, it was
not possible that it contained any classified information. It should be
noted that computers used for classified work are controlled separately
from all other computers at the Laboratory.
Earlier in the year, in an effort to verify controls on classified
information, Director Browne had implemented an inventory of so-called
CREM (Classified Removable Electronic Media) as recommended by a
Strategic Security Working Group he had chartered. I asked for signed
statements certifying the results of the CREM inventory from the
leaders of all Divisions to which CREM were assigned.
Questions have been raised about my decision to rescind a
memorandum on property management issued by the BUS Division Leader to
Laboratory's ``leaders'' in April. By issuing the memorandum directly
to ``leaders''--rather than through line management--the Division
Leader circumvented the management chain and undermined the
accountability structure that I had emphasized for the past three
years. Therefore, I instructed him to withdraw his original memorandum
and then to re-issue it through the Associate Director for
Administration to the cognizant Associate Directors. The memorandum was
re-issued within a few days with an explicit statement that Associate
Directors would be accountable for property management performance in
the Divisions within their line management responsibilities. The
Inspector General's January 2003 report cites the rescission of this
memorandum as indicative of management's failure to create a climate
that encouraged prompt and open reporting by Laboratory employees.
Unfortunately, the IG's report does not note that the memorandum was
re-issued a few days later and that there were subsequent quarterly
property management reports to all Associate Directors.
termination of messrs. walp and doran
I take responsibility for the dismissal of Mr. Walp and Mr. Doran
before the end of their New Employee Evaluation Periods. I view the
issue of their dismissals as strictly a management issue. I believe the
decision to dismiss them was the right one, based on:
Repeated instances of inaccurate and incomplete reporting;
Their apparent inability to gain the trust and confidence of
executives and senior managers at the Laboratory as well as
external reviewers with backgrounds in law enforcement; and
Management failure in the custody of investigative
information.
I had no knowledge that they had claimed whistleblower status and
no reason to believe that they had any legitimate grounds for doing
so.It is important to recall the circumstances as they existed at the
end of November 2002, without benefit of today's hindsight. We were
faced with two on-going criminal investigations involving Divisions in
which classified work on sensitive matters was the norm. In the recent
past, the Laboratory, and Director Browne specifically, had been
severely criticized for what was viewed as a failure to act promptly
and effectively in two other cases: Wen Ho Lee and the missing hard
drives.
I was determined that the Laboratory not do or fail to do anything
that would, once again, result in criticism of our management of
national security or of investigative processes that might involve
national security. Members of this Committee, as well as others, have
expressed similar concerns or raised questions about the reliability of
security management in light of the apparent failure of controls in
connection with functions less complicated than the protection of
classified information, materials, and equipment. It was in this
context that the Laboratory was confronted with what action to take in
connection with Walp's and Doran's New Employee Evaluation Periods.
My judgment that the decision to dismiss Messrs. Walp and Doran was
the right and best course of action was based on several factors:
Repeated instances of inaccurate or incomplete information.
These mistakes, individually and together, are not consistent
with good investigative performance.
Laboratory Counsel Frank Dickson reported on several
occasions that information provided to him by Messrs. Walp
and Doran about the progress and status of the TA-33 and
Mustang investigations turned out to be wrong or
incomplete.
In the Mustang case, Walp and Doran inaccurately reported
the number of phone calls made by the card holder to the
vendor; and mistakenly identified the address to which the
Mustang either was delivered or was scheduled to be
delivered, having confused the cardholder with another lab
employee with the same name but different middle initial.
Ten days to 2 weeks after we learned of the attempt to
purchase a Mustang, we still had not acted, in my judgment,
to preserve whatever evidence was at or available to the
Laboratory. I was increasingly concerned that evidence at
or available to the Laboratory might be lost due to delay
and inaction.
Walp and Doran incorrectly accused a Laboratory manager of
having obstructed justice and committed a federal felony
for having accepted a resignation and personal check from
an individual who had filed a fraudulent travel claim.
Walp incorrectly identified as ``larceny'' all property on
a list of missing property that included items unlocated at
the time the list was prepared and/or items known to be
lost.
On October 24, I met with the FBI and the US Attorney's
Office to discuss the TA-33 and Mustang investigations.
Information provided at that meeting reinforced my judgment
that Mr. Walp and Mr. Doran had continued to report
inaccurate information to Mr. Dickson and to me concerning
issues such as the number of suspects, the investigative
approach being used at the Laboratory, timing and related
matters.
Inability to earn and maintain the trust and confidence of
executives and senior managers at the Laboratory or on the part
of external reviewers.
From about mid-September until late November, Lab
executives and senior managers I knew to be individuals who
consistently worked well with others expressed a lack of
trust and confidence in Mr. Walp and Mr. Doran. These
problems were reported to me, either directly or
indirectly, by S Division managers, the Laboratory Counsel,
other attorneys within the Lab Counsel's office, and the
Deputy Director of Human Resources.
Two former Inspectors General, both of whom are ex-FBI
agents, and who were at Los Alamos as members of the
External Review Team, expressed similar judgments about
lacking trust and confidence in Messrs. Walp and Doran.
Walp and Doran first refused to cooperate with the
External Review Team's examination of purchase card
procedures and then made access to purchasing documents by
the Team's forensic auditors subject to unnecessary and
burdensome conditions.
My understanding is that S Division managers counseled Mr.
Walp and Mr. Doran about their performance and their
working relationships sometime in the September timeframe.
Lack of trust and confidence in their work did not improve,
however. In fact, if anything, it continued to deteriorate.
Custody of investigative information.
On November 8, 2002 we learned that a 30-lb. box of
documents apparently related to on-going investigations and
property management at the Laboratory had been anonymously
delivered to Adam Rankin, a reporter for the Albuquerque
Journal. To the best of my knowledge, no one at the
Laboratory has ever seen the contents of the box. We do not
know if it contains any classified information. We know
that it contains evidence about on-going criminal
investigations. What we know about the contents is
information that has been shared with us by Mr. Rankin.
I do not know who sent the box to Mr. Rankin, nor do I
know who copied the documents in the first place. I am
certainly NOT accusing either Mr. Walp or Mr. Doran of
having done so. In fact, my first instinct was that as
former law enforcement officers, they were least likely
among those who had access to the information to have sent
it to a reporter--a judgment that reflects my past
experience in law enforcement. I know something about the
culture of law enforcement, and I know that leaking
information to reporters runs contrary to that culture.
Regardless of who sent the box to Mr. Rankin, I was very
concerned about two things: First, the information had been
sent to a reporter and not to the Inspector General, law
enforcement authorities or even Congressional
investigators.
Second, the only place in the Laboratory where all of this
information was collected and maintained was the Office of
Security Inquiries in S Division, headed by Mr. Walp. The
fact that adequate controls of sensitive and potentially
classified information related to on-going criminal
investigations were not maintained is a serious management
failure.
I was not aware at any time that Walp and Doran had claimed
whistleblower status. I also had no reason to think they might
legitimately be whistleblowers because from my perspective all of the
information about wrongdoing that they claim to have uncovered had been
identified and reported to appropriate authorities by others before it
was noted by Walp and Doran. I am well aware that this view runs
counter to news accounts and, I am told, to public comments and
testimony. My view is based on the following:
The TA-33 case was reported to OSI by Mr. McDonald in
September 2001, before either Walp or Doran had been hired. As
I understand, McDonald repeated his report directly to the FBI
in March 2002. I reported the TA-33 case to the University's
Office of the President and Dr. Browne reported it to NNSA as
soon as we learned of it.
The Procurement Group reported the Mustang case to the
Director and me in August 2002 after the bank had alerted them.
I reported the Mustang case to the University's Office of the
President, the NNSA, the DOE Inspector General and the FBI as
soon as we learned of it.
I was told that all of the property reports attached to Mr.
Walp's March 26, 2002 had previously been filed with and
reviewed by NNSA and/or the Department of Energy. For each of
the fiscal years involved, I was shown memoranda from NNSA/DOE
acknowledging receipt and approval of property reports. I
notified the University's Office of the President about Walp's
memorandum as soon as I was aware of it.
I know of no other cases that were identified, opened or
pursued by Messrs. Walp or Doran.
All of the information available to me about Messrs. Walp and Doran
led me to conclude that the chances for a successful employment
relationship were virtually nil. Accordingly, I approved their
dismissals. Once the decision was made, Mr. Dickson, Laboratory
Counsel, and I, in separate conversations with different individuals,
notified the University's Office of the President of the decision.
I believe that reasonable people can and do disagree, and I respect
the opinions of those who believe the decision to dismiss Walp and
Doran was wrong. Messrs. Walp and Doran on the one hand, and I on the
other hand see conditions and practices at the Laboratory that need to
be changed. Our judgments about what those conditions represent,
however, are diametrically opposed. I believe that the notion of
``greening the Valley'' accounts in some measure for our different
perspectives and may even have influenced Walp and Doran to have less
than full trust in me and the senior managers who reported to and were
accountable to me.
``keeping the valley green''
Members of this Committee would have no way of knowing the
particular significance of statements like ``keeping the Valley green''
or that these statements, as made in the previous hearing, may
unfortunately prejudice some of the judgments and conclusions about
theft at the Laboratory.
At Los Alamos National Laboratory, ``the Valley'' is a very
specific and clearly understood term that refers to the Espanola Valley
of Northern New Mexico. It is an area that is overwhelmingly Hispanic.
By far the largest portion of the Laboratory's Hispanic employees, most
of whom are not scientists and engineers, come from Espanola and
surrounding areas, collectively referred to as ``the Valley''. Many of
its inhabitants' ancestors settled the area 300 or 400 years ago. They
are extremely and justifiably proud of their heritage and the
contributions they have made to the State, the Laboratory, the Nation
and national security over the years.
Overall, ``the Valley'' is a place of significant rural poverty. It
has none of the natural resources that are more common to southern New
Mexico; it does not have a robust industrial base; and it does not
share in the benefits of the tourism industry enjoyed by Santa Fe and
Albuquerque to the south. Unfortunately, parts of ``the Valley'' are
plagued by the types of drug problems that accompany poverty in too
many areas of the country.
The Laboratory, and the State Government located in Santa Fe, are
the principal employers for ``the Valley's'' residents. And, I am sorry
to say, there are those at the Laboratory who assume that the drug
problem in ``the Valley'' and the fact that many employees come from
``the Valley'' means there is an inevitable problem of theft at the
Laboratory and a connection to the drug problem. These assumptions are
expressed by phrases such as ``greening the Valley.''
Might the Laboratory be a target for thieves involved in drug use?
Common sense would say that it might. But, allegations that it is
actually happening, without substantiating evidence or clear
indications of such, are irresponsible and risk a kind of ``racial
profiling'' that all of us ought to reject out of hand.
Such allegations ignore the rigorous screening of the Laboratory's
workforce, including random drug testing. If the alleged problems were
as common as some suggest, there should be security clearance, drug
test, and performance statistics that would, at least, give credence to
such suspicions. To the best of my knowledge, no such statistics exist.
If they do, they were never brought to my attention. As a result, I
find statements like ``keeping the Valley green'' personally and
professionally offensive.
Throughout my tenure I worked to improve the University's record of
providing opportunities for Hispanic and other ethnic and minority
employees who work at Los Alamos and who are under-represented in
management positions relative to their proportion of the total
workforce. I am confident that there are others who will continue to
advocate for more opportunities for all of the Laboratory's minority
and ethnic populations. And, I hope that the University and the
Laboratory will cease using terms like ``greening the Valley'' that
result in stereotyping and profiling Hispanic employees and the
Espanola Valley.
conclusion
I am extremely proud and honored to have worked with the
exceptionally fine people at Los Alamos National Laboratory. I regret
that time and circumstances prevented Director Browne and me from
completing the efforts we began to transform the culture and management
practices of the Laboratory.
I categorically reject and deny that there was any cover-up,
attempt to cover-up, obstruction or interference by me or, to the best
of my knowledge, by others at the Laboratory. Such statements are
absolutely wrong as evidenced by the consistently proactive approach to
reporting and review taken by me and by Director Browne.
I left the Laboratory with the same beliefs I brought when I
started working there in 1999:
that it is in the national interest and important for national
security that the University of California continue to be
involved in the science and technology mission of the
Laboratory;
that longstanding Laboratory cultural issues must be
addressed, including:
operational formality and management discipline;
fiduciary responsibility;
accountability; and
a commitment to train and develop competent managers.
I take responsibility for the dismissal of Messrs. Walp and Doran.
From my perspective, their dismissal was strictly a management issue. I
believe the decision to dismiss them was the right one based, as it
was, on repeated instances of inaccurate and incomplete reporting;
apparent inability to gain the trust and confidence of executives and
senior managers at the Laboratory as well as external reviewers with
backgrounds in law enforcement; and management failure in the custody
of investigative information. I had no knowledge that they had claimed
whistleblower status and no reason to believe that they had any
legitimate grounds for doing so.
The term ``keeping the Valley green'' as a surrogate for
allegations of theft and a presumed connection to the drug problem in
the Valley should either be immediately substantiated with evidence or
publicly rejected by the University and the Laboratory.
Much more is right than is wrong at Los Alamos National Laboratory.
And, I firmly believe that we should all be grateful to the thousands
of dedicated, honest, patriotic workers at Los Alamos, present and
past, who are committed to making the world a better and more secure
place.
Mr. Greenwood. Thank you, Mr. Salgado.
Mr. Dickson.
TESTIMONY OF FRANK P. DICKSON, JR.
Mr. Dickson. Good morning, Mr. Chairman.
Mr. Greenwood. Good morning.
Mr. Dickson. Distinguished members of the committee. My
name is Frank Dickson and I am a lawyer. After 24 years in
private practice I joined the legal staff of the Los Alamos
National Laboratory in 1990 and was named its Laboratory
Counsel in 1997. I am proud to serve in this position and I
view it as a significant opportunity for public service.
I am very conscious of the important responsibility that we
at the Laboratory have to the Federal Government and I believe
that the great majority of my colleagues at the Laboratory
share those beliefs.
It is staggering to me that I am accused by men who worked
with me for a very few weeks of dishonesty and conduct
bartering on obstruction of justice. These allegations are
false. Because of the attorney/client privilege I have not
previously spoken out publicly on these matters. I sincerely
appreciate the opportunity to appear before you today, testify
under oath as to my impressions, and to answer your questions.
I first became aware of the various investigations at the
Laboratory in late June 2002 when the FBI began investigating
theft at TA-33. Later Lab management put our office, the Office
of Laboratory Counsel, in charge of coordinating with the FBI
our mutual efforts in these cases. This coordination role is an
important responsibility and one that I take very seriously.
Any review of my interactions with the FBI will, I believe,
show that our office carefully coordinated the Laboratory's
efforts with those of the FBI in all respects. I do acknowledge
that I was anxious for the TA-33 and Mustang investigations to
proceed. These cases involve long-term Laboratory employees in
sensitive positions and we could not allow them to remain
indefinitely.
I knew from past experience that the University could not
count on the availability of an FBI investigation to address
national security concerns for the Laboratory's administrative
needs, and I knew the Laboratory would need its own independent
investigation.
The Laboratory Office of Security Inquires was charged with
being the lab's day-to-day liaison with the FBI when Walp was
the OSI's office leader and Steve Doran worked with him. I
welcomed their investigative skills. Our office was also
directed to facilitate the external review team, the team that
was looking into the purchase card issues to expedite their
efforts in support of that review.
OSI was assigned to assist my office in doing this job. In
August Messrs. Walp and Doran and I met to discuss the status
of the TA-33 and Mustang investigations. I outlined for them
the need for an independent investigatory file for the
Laboratory and for the need for full cooperation with the
purchase card review team.
As time passed I found the information they provided both
insufficiently thorough and unreliable. More importantly, on
the external review team assignment, OSI made it unreasonably
difficult for the team to have access to information it needed
to perform its important work despite the fact that Mr. Salgado
and I had made specific arrangement with the FBI's Special
Agent-in-Charge in Albuquerque for the review team's access to
the records pertaining to the investigation.
Mr. Walp did not accept this in spite of the arrangements
that had been made. In my conversations I am sure I did say
that our employer was the University of California and the
university had independent interest in obtaining the facts. I
see nothing wrong with those statements even today.
I never told Mr. Walp nor Mr. Doran that our job was to
protect the Laboratory's image and the university's contract.
That is not the way I look at my job. In mid-September Stan
Busboom, Mr. Walp's division leader, met with me and asked for
my opinion on the performance of Messrs. Walp and Doran.
I told Mr. Busboom that I was concerned that I no longer
felt I could work with them. After discussing the matter
further with their immediate supervisor, Mr. Gene Tucker, I
relented and agreed to try again to work with them, which I
did.
About a month later Deputy Director Salgado and I attended
a meeting at the U.S. Attorney's Office in Albuquerque with
both representatives of the FBI and the U.S. Attorney. Our
purpose was to learn the status of anticipated prosecutions in
the TA-33 and Mustang cases.
At that meeting we were told that a third TA-33 employee
was neither a suspect nor cooperating witness in the
investigation. This was directly contrary to information
provided to me by Messrs. Walp and Doran and was especially
troubling to me because it raised the possibility that this
third employee would have to be dealt with by the Laboratory
after the FBI investigation with little help from the thin
investigative record compiled by Messrs. Walp and Doran.
I concurred that day with Mr. Salgado's judgment that they
should be removed from their FBI liaison roles. I did not make
the decision to terminate Messrs. Walp and Doran. However, it
is very clear that my stated observations about their work were
important factors in the decision relating to their
termination.
Putting aside the concerns that I have expressed regarding
Messrs. Walp and Doran, I do recognize that the circumstances
that these men confronted when they came to the Laboratory were
less than ideal. Upon reflection I realized that we could and
should have done more to provide them with a better
understanding of the Laboratory and their roles.
In retrospect I believe the Laboratory should have
attempted to work through the difficulties with Messrs. Walp
and Doran.
In closing, I want to emphasize that my sole intention in
connection with all the matters being discussed today was to
ensure that thorough investigations were conducted that
appropriate remedial actions were taken at the Laboratory with
respect to the problems that were identified. Thank you.
[The prepared statement of Frank P. Dickson follows:]
Prepared Statement of Frank P. Dickson, Laboratory Counsel, Los Alamos
National Laboratory
Mr. Chairman, Mr. Deutsch, and distinguished members of the
Committee. Thank you for the opportunity to address the Committee
today.
My name is Frank P. Dickson. I am a native of Corsicana, Texas, and
I graduated from Baylor University Law School in 1965. From 1966 until
1990, I practiced law in Santa Fe and Albuquerque, New Mexico; and in
1990, I came to the Los Alamos National Laboratory where I became
Laboratory Counsel in 1997.
Throughout 2002, I had a ``dual report'' to the General Counsel of
the University of California, and to the Director of the Laboratory
(including his Principal Deputy Laboratory Director).
Messrs. Walp and Doran have testified to this committee that I
obstructed justice, interfered with FBI investigations, impeded their
investigations, and attempted to cover up fraud, theft, and wrongdoing
at the Laboratory. These allegations are incorrect and misstate the
complex role relating to these investigations assigned to me and the
Office of Laboratory Counsel.
In all of my actions as Laboratory Counsel on these matters, I had
three goals: (1) to make sure the Laboratory had accurate and
sufficient information to make appropriate decisions regarding national
security concerns; (2) to make sure I provided accurate and timely
information to the various entities (the FBI, the DOE, and the United
States Attorney's Office) so they could take appropriate actions; and
(3) to make sure the Laboratory had accurate information upon which to
make appropriate employment decisions regarding its workforce.
Shortly after discovery of the ``Mustang case'' which involved the
apparent use of a Laboratory purchase card to acquire a Mustang
automobile, Laboratory management recommended that the University
undertake a comprehensive, independent review of its entire purchase
card program to identify vulnerabilities and develop recommendations
designed to prevent future abuses and to identify cases of fraud, waste
and abuse. Based upon this recommendation, the University directed the
charter of a review team consisting of two former and highly regarded
inspectors general from federal agencies and a forensic unit from the
University's outside auditor, PricewaterhouseCoopers, to conduct the
review.
Because this review team would be working in areas that would
overlap with known or expected federal investigations, I was asked to
coordinate with these external agencies and within the Laboratory to
assure that the Purchase Card Review Team had the information it needed
to perform its important work and to assure appropriate coordination
with affected law enforcement and other agencies.
As Laboratory Counsel, I represented the Laboratory's legal
interests throughout the Wen Ho Lee investigation in 1999-2000, and
during the ``missing hard drive'' incident in the spring and summer of
2000. Both of these cases involved extremely complicated interactions
with people throughout the government, the University and the
Laboratory. Through this experience, I developed a thorough
understanding of the multiple important issues that arise in these
situations and an understanding of the requirements and limits on what
we should and should not do.
Although cooperation with law enforcement, including the FBI, is of
prime importance, there are other issues of extreme importance to the
Laboratory and the government in these situations, including: (1) the
Laboratory's responsibility for national security, which includes
ensuring that only reliable persons have access to classified
information and sensitive facilities; (2) the Laboratory's
responsibility to keep DOE and other program sponsors fully informed of
unusual events that might impact the safety and security of their
programs; (3) the Laboratory's need to have accurate information to
make appropriate employment decisions and protect the safety and
security of its workforce; and (4) the Laboratory's responsibility to
protect government property. There are often no easy answers to many of
the situations that arise, because of the multiple, parallel and
somewhat competing interest of the various individuals and entities
that may become involved; and the role of Laboratory Counsel is to help
chart a path that deals with all of these issues as effectively as
possible.
I believe that a careful study of all of the facts will demonstrate
that I and the members of Laboratory Counsel staff carefully
coordinated our efforts with the DOE Office of the Inspector General
and the FBI. I believe that the facts will demonstrate that our efforts
were directed to advancing the work of the purchase card review team
and following up on efforts to deal with problems disclosed by its
work. Another major effort was to assure that Laboratory management had
access to all information necessary to perform its role.
It was clear to me that Messrs. Walp and Doran were primarily
focused on possible criminal prosecutions and did not agree with,
appreciate or understand the importance of the other elements of my
responsibilities. The resistance I encountered from Messrs. Walp and
Doran, and the inadequate information I received from them, impeded my
ability to do my job.
I have never prevented anybody from uncovering fraud, theft or
other wrongdoing at the Laboratory. In fact, the Purchase Card Review
Team was publicly announced and its work was, from the beginning,
intended to be fully disclosed to all interested government entities as
well as the public. I believe the aggressive response to the Mustang
issue designed by the University and Laboratory management was a
strong, open and creative response to the obvious concerns raised by
the Mustang issue; and my goal has been to do what I could to assure
that the review team had everything it needed to do its work completely
and in a timely fashion. My goal was, is, and will be to provide
complete and accurate information to the FBI, the United States
Attorney, the DOE, and the University, to assist them in their roles.
Principal Deputy Laboratory Director Joseph Salgado directed that
information and documents be sent to my office for transmittal to the
interested agencies. This was done not to censor or withhold
information, but to keep track of what information was being provided,
and to ensure that information was provided.
The following narrative describes my involvement in the specific
matters that have been the subject of this committee's investigation.
the ``ta-33 incident''
I first became aware of the ``TA-33 incident'' around July 1, 2002,
from S Division Leader Stanley Busboom, shortly after the FBI decided
to open a criminal investigation into the matter.
The allegations were that several (three to eight) Laboratory
employees were stealing government property and storing the material at
TA-33. TA-33 is a highly sensitive area at the Laboratory. The
Laboratory's Office of Security Inquiries (OSI) was responsible to act
as liaison with FBI Special Agent Jeff Campbell. Mr. Walp, as office
leader at OSI, was directed by Laboratory management to work closely
with the Office of Laboratory Counsel and to keep me advised of the
progress of the investigation. The continuing presence in the workplace
of Laboratory employees who were suspected of theft and who worked in a
highly sensitive and secure location was of great concern to me. It
raised national security concerns and employment concerns. I remember
that Congress criticized the FBI and the Laboratory for permitting Wen
Ho Lee to remain in a position where he had access to classified
information.
In order to understand the issues involved and to determine the
appropriate action to take, it was necessary for the Laboratory to
investigate and have access to information regarding these allegations.
Therefore, at my request, a senior staff attorney, Christine Chandler,
initiated discussions with Mr. Walp and Mr. Campbell, and it was agreed
that Mr. Walp or Mr. Doran would be permitted to participate in FBI
interviews on this matter, and would develop and make available to my
office written summaries of those interviews. The FBI recognized the
need for the Laboratory to have access to this information, and to
conduct a parallel investigation with the FBI. However, Messrs. Walp
and Doran apparently viewed my efforts to obtain this information as
unwarranted interference with their role in assisting the FBI, and they
were reluctant to share the information they gathered with me.
On August 7, 2002, Mr. Salgado and I met with the FBI's Special
Agent-in-Charge for New Mexico at his office in Albuquerque to
coordinate the TA-33 matter, the Mustang case, and other related
issues. The principal results of that meeting were an agreement that
representatives of OSI would assist the FBI in its investigations,
conduct a parallel investigation to keep management informed of the
circumstances and assure the Laboratory of an investigatory record if
administrative action were required. An agreement was reached that OSI
staff would keep a parallel set of notes. During that meeting, the FBI
was informed of the very sensitive nature of the activities at TA-33
and the Laboratory's concerns about leaving employees suspected of
criminal conspiracy in that location.
On August 12, 2002, I met with FBI Special Agent Mike Lowe, Special
Agent Jeff Campbell, John E. ``Gene'' Tucker, Deputy Director of the
Laboratory's Security Division, and Kenneth Schiffer, the Laboratory's
Internal Security Officer, to talk further about security and
counterintelligence concerns that might exist at TA-33 and how that
might effect the on-going investigation. The FBI was informed that the
Laboratory had certain reporting requirements regarding highly
sensitive work and that at some point, the sponsors of the work in TA-
33 would need to be informed of the situation there.
Because of security concerns, the Laboratory wanted to remove the
suspects from the workplace as soon as possible. I had several
discussions with the FBI about their plans to serve search warrants on
the suspects and search their residences. We were told that until the
warrants were served, it was important that the suspects remain unaware
that they were under investigation.
Because of the continuing presence of suspects at TA-33, Mr.
Salgado and I met with the FBI Special Agent in Charge in Albuquerque
and representatives of the Office of the U.S. Attorney on October 24,
2002. The FBI indicated that it was not yet prepared to serve the
warrants, and requested that the Laboratory not take any action against
the suspect employees for another forty-five days. In response to our
questions concerning the status of the investigation, Mr. Salgado and I
were informed (1) that the investigation focused on two Laboratory
employees only, (2) that sufficient evidence existed for the indictment
and conviction of those two employees, (3) that the FBI was not
inquiring into other potential suspects which might delay the
investigation and (4) that the purpose of the requested delay was to
see if the suspects would take more property which might enhance the
possibility of a conviction or the severity of the sentence.
Mr. Salgado asked the FBI and the U.S. Attorney whether we were
being told to defer action to remove the suspects from the sensitive
areas. After some discussion, we were told that the decision rested
with the Laboratory and we were not being directed to do anything. Mr.
Salgado informed the FBI and the U.S. Attorney that we needed to
discuss the issue with other Laboratory managers and would reply after
having met with those managers in Los Alamos.
Upon returning to the Laboratory, Mr. Salgado convened a series of
meetings with involved Laboratory managers to assess the magnitude of
the security issues. Those managers conferred with program sponsors who
were concerned about the presence of the suspects in the sensitive
areas and wanted them removed. I was instructed by Mr. Salgado to
inform the FBI that the Laboratory would read the two suspects out of
the program, thereby denying them access to TA-33, and assign them to
other work, on October 31, 2002. This was not an effort to ``force the
FBI to take premature investigative action,'' as Mr. Walp alleges. It
was an effort to remove criminal suspects from access to ultra-
sensitive classified information while the FBI continued its
investigation.
Mr. Walp has told this committee that I ``attempted to gain entry''
into TA-33, thereby placing the FBI investigation in jeopardy. John
Tapia, a Laboratory employee who was working with Messrs. Walp and
Doran, told me that Messrs. Walp, Doran and Campbell thought it was
important that I personally visit TA-33. I agreed to the request;
however, on the evening scheduled for the visit, I received a call from
Special Agent Campbell asking me not to make such a visit, because of
the risk of being observed. The FBI was concerned that the suspects not
be alerted that they were under suspicion. I readily agreed with Mr.
Campbell, and never visited the site. Mr. Walp's statement that I
``became irate at Doran and Walp because they failed to cajole the FBI
into allowing [me] access'' is not correct. I have never discussed this
issue with either Mr. Walp or Mr. Doran.
The Laboratory's Audits and Assessments Office was also conducting
investigations into activity at TA-33. I informed Katherine Brittin,
the director of Audits and Assessments, that an employee on her shift
was a potential suspect. I informed her of this after consultations
with the FBI and senior Laboratory managers, because I did not want Ms.
Brittin inadvertently to make any statements to this potential suspect
that might alert him to the ongoing criminal investigation, and thereby
compromise it. My action was an effort to protect, not to jeopardize,
the FBI's investigation.
the ``mustang case''
I became aware of the ``Mustang case'' on or about July 29, 2002,
when I returned from vacation. I was told that a Laboratory employee
was suspected of having attempted to purchase a Ford Mustang
automobile, and various auto parts, on a Laboratory credit card from a
company in Arizona named ``All Mustang.'' Mr. Salgado took an active
interest in the investigation of this case. He directed Mr. Walp or Mr.
Doran to travel to Phoenix to interview the company that had recorded
the charge, and directed OSI to provide its investigative reports
directly to me.
The FBI took over investigation of this case on or about August 2.
I informed the DOE OIG of the case in late August. On August 7, 2002,
Mr. Salgado and I met with FBI Special Agent in Charge Andreas Stephens
and Mr. Campbell at FBI headquarters in Albuquerque. There were several
topics of discussion at the meeting: (1) Mr. Salgado informed the FBI
of the importance of the Mustang case to the Laboratory and the need
for the FBI to move forward with the investigation as quickly as
possible. (2) Mr. Salgado informed the FBI that he was concerned about
the national security implications of having suspected felons
continuing to work in TA-33, a sensitive area, and that there was a
need to move the TA-33 investigation forward quickly, as well. (3) Mr.
Salgado informed the FBI that the Laboratory had security
responsibilities that may impose limitations on FBI access to people
and facilities, and that may require the Laboratory to make reports of
the situation through their own chain of command. It would be important
for the Laboratory and the FBI to coordinate. (4) Mr. Salgado and I
informed the FBI that the Laboratory was conducting internal
investigations into the purchase card program and the Mustang case, and
that we would need to review our own records and meet with our own
employees to gather information. Mr. Stephens agreed that the
Laboratory should have access to its own records, but that it should
coordinate with the FBI before interviewing witnesses. (5) The
Laboratory was interested in getting reports of information discovered
in the FBI investigations and would either need access to FBI reports,
or be allowed to prepare its own reports. We agreed that Mr. Doran
would accompany Mr. Campbell on witness interviews and prepare his own
investigation reports for Laboratory internal use. Finally, we agreed
to meet again on August 12, 2002.
On August 12, I met with Mr. Walp, Mr. Doran and Mr. Tucker to
discuss the status of the Mustang investigation and other ongoing
investigations. The two purposes of the meeting were (1) to obtain the
latest, most reliable information about whether the suspected employee
had committed fraud; and (2) to explain to Messrs. Walp and Doran
specifically what the Laboratory needed from them in terms of providing
reports on the status of the investigations so that the Laboratory
could fulfill its national security obligations to the DOE and take
whatever personnel actions were necessary.
During the August 12 meeting, I asked Mr. Walp for records that had
been collected as part of the investigation. Mr. Walp specifically said
he would not discuss what had been learned about the Mustang case and
that he would not produce the records to me unless and until the FBI
approved it. I explained that at a meeting on August 7, the FBI had
already given the Laboratory permission to get information about the
Mustang and the TA-33 incidents. It was apparent to me that Mr. Walp
did not appreciate that as liaison for the Laboratory his duties
included sharing information with senior Laboratory managers, not
withholding information. I re-emphasized to Messrs. Walp and Doran the
importance of their keeping their own investigation notes and providing
that information to me as it was generated.
I believed that at this August 12 meeting, I had sufficiently
explained OSI's liaison role to Mr. Walp and that there would be no
further problems with getting current information from him and Mr.
Doran. Although Mr. Walp agreed to provide me with the records and
reports, he argued against having to do so. Nevertheless, there
continued to be substantial delays in my receipt of written reports
prepared by Messrs. Walp and Doran, and in some important cases I
received no report of their investigative activities. Current
information was necessary for Laboratory managers and me to do our
jobs.
casino credit card incident
In early August 2002, in the course of an internal inquiry into
purchase card use arising from the Mustang investigation, a Laboratory
Purchase Card Administrator discovered that a Laboratory sub-contract
worker had used her purchase card to buy gas and groceries and obtain
cash advances at local casinos. The total suspected loss has been
determined to be approximately $2,000.
On August 12, 2002, the Purchase Card Administrator notified OSI of
her discovery and Doran immediately opened an inquiry. The FBI was
notified and FBI Special Agent Campbell attended the interview of the
worker. On August 19, 2002, the worker admitted that she had used her
purchase card to obtain cash advances at a casino, and that she had
used the cash to gamble. Because she was a contract worker, and not a
Laboratory employee, the Laboratory could not fire the worker. However,
the worker's contract employer was immediately directed to remove the
worker from the Laboratory, which it did. She is not eligible to work
at the Laboratory either as an employee or as a contract worker.
I notified the DOE OIG of this case verbally on August 27, and in
writing on September 12, 2002. Contrary to Mr. Walp's and Mr. Doran's
assertions, there was no effort to cover up this matter. The matter was
investigated, the appropriate agencies were notified, and the worker
was removed from the work site. Efforts are under way to recover the
misappropriated amounts from the contract employer.
the forged voucher incident
In September 2002, a Laboratory employee reported to the
Laboratory's Human Resources Division that an employee had wrongfully
authorized, drawn and cashed a Laboratory check to herself for $1,800.
It is my understanding that HR immediately referred the matter to S
Division, so OSI could investigate. On September 23, the employee
appeared at work, admitted to the misappropriation, tendered a check to
reimburse the Laboratory for the entire amount of the misappropriation,
and resigned. The Laboratory told the employee she might be criminally
prosecuted, and made no agreements whatsoever about whether any other
action would be taken against her. The record of the employment
separation states that this was a ``resignation in lieu of discharge.''
The employee is not eligible for re-employment at the Laboratory for a
period of seven years. This matter was handled by the HR and S
Divisions. I did not become aware of the case until after the employee
had resigned, and did not have knowledge of the circumstances before
the check was accepted.
Upon learning that the employee had resigned and tendered back the
misappropriated funds, Mr. Walp told HR Deputy Division Leader Philip
I. Kruger that he may have committed the federal criminal offense of
obstruction of justice. Mr. Kruger consulted with me and asked my legal
opinion about whether he had acted inappropriately or had committed the
federal offense of obstruction of justice by allowing the resignation
and repayment. I responded that in my opinion there was nothing illegal
or inappropriate about how Human Resources had handled the matter, and
that Mr. Walp was wrong in his assertions. By resigning, the employee
had relinquished any right to file an internal grievance, as she could
if she had been terminated. The Laboratory had recovered the
misappropriated money. Nothing prevented law enforcement from going
forward with criminal charges. The employee had admitted her guilt. The
Laboratory treated the resignation as an involuntary termination for
cause, and the employee is ineligible for rehire. The DOE OIG was
informed of the matter, and the matter was referred to the DOE OIG for
investigation.
This event contributed to the erosion of my confidence in Mr.
Walp's judgment and his ability to interact and communicate effectively
with personnel at all levels at the Laboratory.
Media reports have suggested that because these employment
terminations were not made public, there must have been some attempt to
cover up their crimes. This allegation is incorrect. The Laboratory, as
part of the University of California, substantially complies with the
California Information Practices Act and does not disclose personal
information, including performance assessments and corrective or
disciplinary actions, to the general public, except under limited and
specific circumstances. The Laboratory does not disclose to the general
public the details of the basis for a termination or information about
the circumstances leading to a resignation, unless that individual
authorizes such a disclosure. By not disseminating the circumstances of
individual personnel actions, the Laboratory is simply observing best
employment practices and acting consistently with California law.
purchase card and procurement investigations
When the Mustang case surfaced, Mr. Salgado instructed me to lead a
team to conduct an internal review of the Laboratory's purchase card
program. The team and I collected and reviewed relevant records,
including purchase card procedures and memoranda from other agencies
such as the U.S. Navy regarding their own experiences with purchase
cards.
As a result of this internal review, the Laboratory instituted an
immediate corrective action plan to mitigate misuse and abuse. On
August 23, 2002, Associate Director of Administration Richard Marquez
ordered specific revisions to the purchase card. The revised procedures
included new requirements for purchasing authority, review and approval
of monthly statements and training for cardholders and business team
leaders. Mr. Salgado and I also recommended to Laboratory Director John
Browne that an external review team be appointed to conduct a more
comprehensive review of the purchase card program.
Director Browne requested University approval for an independent
review. The University agreed and on August 16, 2002, UC Vice President
John McTague instructed Director Browne to proceed with the proposal to
establish an external review team to examine irregularities in the
Laboratory's purchase card program. The team included auditors from the
firm of PricewaterhouseCoopers (``PwC''). Former DOE Inspector General
John Layton chaired the team, assisted by former Department of Labor
Inspector General Charles C. Masten.
The team was charged with conducting a comprehensive review of the
purchase card program. By charter, the external review team was to have
access to all LANL documents and records. All Laboratory leaders were
informed to cooperate fully with the team, provide the team documents
and be interviewed as requested.
So as not to interfere with the FBI's ongoing investigations, the
external review team's activities were carefully coordinated with the
FBI, as evidenced by the numerous communications (meetings, telephone
calls and correspondence) between the Laboratory and the FBI on this
subject.
On August 22, 2002, Mr. Salgado, Mr. Tucker, Mr. Doran and I met
with the FBI, to inform it about the external review team. We told the
FBI that the team would be investigating fraud, waste and abuse in the
purchase card program, including the Mustang case and the purchase of
tools from G&G, a vendor in Albuquerque. We told the FBI that the team
would conduct an end-to-end review of the purchase card program and a
forensic evaluation of whether there had been any misappropriation. The
FBI was invited to provide input so that its investigation would be
coordinated with the external review team's investigation. We
specifically discussed the boxes of documents that had been collected
from the office of the suspect in the Mustang case and the fact that
the external review team would review those documents as part of its
investigation. The FBI agreed that it was appropriate for the external
review team to review those documents. The FBI requested that the
Laboratory preserve the documents as they would any other business
record.
In September, October and November, there were correspondence and
meetings between my office and the FBI to establish the external review
team's interview list and to insure that it did not interfere with the
FBI's investigation. By letter dated September 11, 2002, FBI Special
Agent in Charge Andreas Stephens concurred with the Laboratory's
decision to have the external review team audit purchase card program
records and, with advance approval, conduct interviews. My office
provided the FBI with lists of Laboratory employees whom the external
review team wished to interview and the FBI approved the list, with
some exceptions.
Any allegation that the Laboratory was not cooperating with the FBI
in the investigation of purchase card misuse completely ignores these
numerous interactions between my office and the FBI. Indeed, Agent
Stephens specifically expressed his gratitude to me for the
Laboratory's continued cooperation in coordinating the investigations.
The OSI was reluctant to permit the external team access to the
suspect's records, asserting that the records were FBI evidence. Mr.
Walp permitted PwC auditor Kristin Rivera to examine the documents, but
under such stringent conditions that it was difficult for the team to
effectively review the material.
Eventually, Mr. Layton directed Mr. Masten (himself a former FBI
agent) to go to OSI and determine whether the records appeared to be
impounded by the FBI and whether the tape protecting the records was
FBI tape. Mr. Masten inspected the records and determined that the FBI
had not taped the records, that they were not FBI records, and that
they had not been impounded by the FBI. After several phone calls, the
records were transferred that day to the Office of Laboratory Counsel
for the external review team to examine there, without restriction.
Thus, although the external review team did eventually get to
review the documents it needed, it was only after a prolonged struggle
with OSI, which appeared to mistakenly believe that its investigation
work was immune from review and use by Laboratory managers. In my
opinion, this demonstrates a fundamental misconception by Mr. Walp
about his job duties and responsibilities. It is also inexplicable to
me, because I had previously obtained FBI permission to review these
records, and I had so informed Mr. Walp. This incident was one of the
final factors that led to my request that Messrs. Walp and Doran be
removed from their roles as liaison with the FBI.
the employment terminations of messrs. walp and doran
Initially, I welcomed the opportunity to work with investigators
with the backgrounds and experience of Messrs. Walp and Doran, However,
as I continued to try to work with them on the purchase card and
related investigations, I became increasingly disappointed and
frustrated over my inability to secure the cooperation and assistance I
expected from OSI. I frankly did not understand their reluctance to
cooperate with what I perceived to be our common goals. Their
resistance hampered my ability to do my job, which was to provide the
FBI, the DOE and the University with accurate and timely information
about possible misconduct, so those entities could make appropriate
decisions regarding criminal prosecutions, national security, and
employment matters.
It was never my purpose or intent to cover up or withhold any
information, nor to impede the FBI or DOE from investigating any
misconduct, and I never did so. In October 2002, following a meeting
with the United States Attorney in Albuquerque, I concurred with Mr.
Salgado's decision to remove Messrs. Walp and Doran from their roles as
liaison with the FBI. They did not appear to understand that my office
had a legitimate interest in obtaining the information necessary to
determine the Laboratory's legitimate concerns. Instead, Messrs. Walp
and Doran appeared to view me, the Office of Laboratory Counsel, and
the purchase card review team as adversaries.
I did not make the decisions to terminate the employment of Messrs.
Walp and Doran. However, it is clear that my complaints about their
assistance and cooperation were important factors in the ultimate
decision. I provided information and opinions about their performance,
I expressed my frustration in working with them, I participated in
discussions about their removal, I reviewed and commented on documents
regarding their termination, I told Mr. Salgado I could not work with
them on the assignment he had given me, and I provided legal advice to
the Laboratory about the risks of terminating their employment.
Putting aside the concerns that I have expressed regarding the
performances of Messrs. Walp and Doran, I do recognize that the
circumstances these men confronted were less than ideal. Upon
reflection, I realize that we at the Laboratory could and should have
done more to provide Mr. Walp and Mr. Doran with a better understanding
of the Laboratory and their roles, including an understanding of all
the parties with a legitimate oversight interest at the Laboratory, and
the importance of comity between these parties. If they had been
provided with adequate guidance regarding the specifics of their job
duties, perhaps they might have better appreciated the inter-
relationship between law enforcement concerns and national security and
other legitimate concerns. In retrospect, I believe the Laboratory
should have attempted to work through the difficulties with Mr. Walp
and Mr. Doran.
It has always been my sole intent to preserve and protect the law,
and to provide my client, the University, with my best legal advice and
services, to promote and protect the interest of the government in the
performance of my job, and to uphold the ethics of my profession. I
have tried very hard to do that, and I believe I have done so.
Thank you for the opportunity to present my views on these matters.
Mr. Greenwood. Thank you.
We thank Mr. Udall for joining us and Mr. Walden for
joining us as well. The Chair recognizes himself for 10 minutes
for questions.
Let me address a question to Mr. Salgado first. Several
times in your written statement you claim that you had ``no
knowledge that Walp and Doran had claimed whistleblower status
and no reason to believe that they had any legitimate grounds
for doing so.'' I think that is a direct quote.
During our first hearings on these matters, Mr. Darling
testified that shortly after the firings he asked you to
explain why you fired Mr. Walp and Mr. Doran. He told this to
me, that you said you were afraid that Walp and Doran would
achieve whistleblower status and that you felt that their new
status would prevent LANL from firing them within their 1-year
probationary period.
Mr. Darling also told committee staff that you told him
that you suspected Walp and Doran had anonymously sent the 30-
pound box of documents to the Albuquerque Journal and that you
wanted to stop the leaks so you fired Walp and Doran. Your
testimony is inconsistent with Mr. Darling's. I would remind
you that you are under oath here. Do you wish to amend your
testimony in anyway or can you explain these differences?
Mr. Salgado. No, I do not care, Mr. Chairman, to amend my
testimony. Let me address the first issue. The first issue
dealt with timing. The question by Mr. Darling and his staff,
as I recollect, during the course of their investigation is
they wanted to know why was the timing important in the
process.
I indicated to Mr. Darling that the discussion about the
release of Mr. Walp and Doran, they were on probationary status
and the Laboratory needed no justification to let them go. I
said that we had had this discussion on their status in the
early part of September and October timeframe.
I indicated to him that with the IG coming out and with the
IG that we at the institution had requested to come out
pursuant to the article that appeared in Energy Daily about the
senior management cover-up. I indicated to him that one of the
reasons for the timing of that was that I wanted to make sure
that we did it so that it did not appear to be that they were
being terminated because of a retaliatory component, i.e.,
whistleblower status.
To this day, sir, I still have no indication, No. 1, that
they either have claimed and/or are whistleblowers pursuant to
the instructions of the California sketch or the administrative
process.
The second component dealt with, sir, as to the 30-pound
box of documents. I do not believe that I have ever accused--I
have ever accused Mr. Walp or Doran of releasing those
documents. But what I have addressed is I believe that the
documents that were released, the 30 pounds of pages or 30
pounds of documents were released did come out of the OSI or
into that group of which Mr. Walp had supervisor
responsibilities.
The issues with those documents were twofold, sir. No. 1,
that obviously any time that 30 pounds of internal documents
are released it would be a concern to any institution. Second
point is I did not know, and still to this day do not know
whether those documents being released that were, in my
opinion, in the supervision of that unit within the security
division had any classified material in them whatsoever. That,
of course, would be a concern both to this committee and other
committees at the Hill.
The second component of that box that was released, it did
raise issues and concerns to me that I was led to believe, and
do believe, that that box contained sensitive information
concerning ongoing criminal investigations that were undertaken
both internally and externally by the Laboratory.
Nowhere have I ever indicated that I thought that I would
personally accuse, as my statement indicates, that either Walp
or Doran were responsible for the release of those documents,
though there is a responsibility if the documents came from
that group.
Mr. Greenwood. Did you tell Mr. Darling that you
suspected--I heard you clearly say twice that you did not
accuse them. Did you tell Mr. Darling that you suspected that
they were the source of this document leak?
Mr. Salgado. I believe and my indication to Mr. Darling is
that out of that unit upon which Mr. Doran was employed and
being supervised by Mr. Walp that out of that unit it was my
professional opinion, and I believe supported by other members
at this table, that is where the information came from.
Mr. Greenwood. Okay. So you did not accuse them but you did
suspect them?
Mr. Salgado. I suspected it was out of that unit. As my
statement indicate, as prior law enforcement, and I mentioned
to various staff members, I have not and will not impugn their
integrity as to releasing those documents. It is not the
culture of law enforcement and, as a ex-cop, I would not do
that.
Mr. Greenwood. And you just raised the issue of the
possibility of there being classified information among those
documents. Did you raise that concern with anyone in law
enforcement or anyone else?
Mr. Salgado. Yes, sir. I did. Before I left it was an
issue. I raised it with the University of California. During
this time things were moving quickly. I personally contacted
the IG and raised the issue. They were not sure how to handle
it given 1st Amendment rights and reporters. Then I also
contacted NNSA and put it in DOE's court basically to assume
any responsibility for follow-up indications on were there any
classified documents in there or additional sensitive
documents.
Mr. Greenwood. When did you make the decision to fire Walp
and Doran?
Mr. Salgado. Actually, Mr. Busboom probably has the better
dates. The discussion and the decision, I do not have the exact
date, sir. I really do not. It was sometime obviously after the
October 24 meeting with the U.S. Attorney and the FBI. It was
sometime in the first part of November is my recollection.
There was a decision made for the termination of Mr. Walp
and Doran. Then it was delayed at least a week plus because one
of the individuals, I believe, had gone on vacation so we
backed that up a week.
Mr. Greenwood. Who participated in making the decision to
fire these two gentlemen?
Mr. Salgado. There as a meeting, I believe, that took place
between myself and Mr. Dickson. I believe Mr. Busboom was
there. I believe that Mr. Holt was there and I believe that Mr.
Marquez was at the meeting when the discussions took place
about, No. 1, the underlying reasons for the terminations and,
No. 2, the process that should be engaged in.
Mr. Greenwood. Who drafted the letter that ultimately went
to them?
Mr. Salgado. There was a draft letter that was proposed out
of my office that accumulated the information from various
components of the Laboratory. That draft letter was sent
through the chain of command through Mr. Holt down, I believe,
to Mr. Busboom. Mr. Busboom deleted some areas and added
additional facts in that letter and I believe that is the final
document that went forward, if I am not mistaken.
Mr. Greenwood. Did you have conversations with Mr. Busboom
about whether or not he should sign that letter?
Mr. Salgado. Whether he should sign the letter? I do not
believe that I had conversation with Mr. Busboom about if he
should sign that letter.
Mr. Greenwood. Okay.
Mr. Salgado. I do not recall.
Mr. Greenwood. What conversations did you have with Mr.
Dickson regarding the November 20 letter?
Mr. Salgado. If it was the November 20 letter, there were
conversations that took place in a general form. I believe that
the draft letter that was submitted was vetted through the
appropriate individuals that had input into the letter and the
meeting that we had with a discussion over the termination.
Mr. Greenwood. Did you have conversations with Dr. Browne
about this matter?
Mr. Salgado. Yes, sir.
Mr. Greenwood. Could you describe those conversations for
us?
Mr. Salgado. Yes, sir. My recollection is that after we had
the meeting when there was the decision made about the
termination of the individuals. I would like as a sense of
background to backup that the first part in the October/
September timeframe I had a discussion with Mr. Holt through
the associate director and Mr. Busboom of trying to get to a
reasonable position of a path forward for Walp and Doran to see
whether or not their tenure within the Laboratory could be
successful. Subsequent to that I had asked--I did ask them to
make a determination whether they were going to keep them or
not.
After the Dr. Browne conversation, as I recollect, it took
place in an evening. Mr. Dickson was there with myself. We had
a discussion about the reasons, the rationale for the
terminations. That was in the evening. We went through what I
have articulated partially in my statement.
Mr. Greenwood. You made the statement that there seemed to
be an attitude among various lab managers that they were
playing with, these are your words, Monopoly money. What do you
mean by that?
Mr. Salgado. I want this to come across. I was brought to
the lab--as I indicated in my oral statement, there was an
awareness by the director of the Laboratory, John Browne, that
the transformation of this Laboratory was important. There were
cultural issues to deal with at the institution, sir. These are
cultural issues that maybe some would like to believe started
with me but they did not. They go back 30, 40, 50, 60 years.
What I am saying now before this committee I have said to
every senior manager at the institution. I have said it to the
University of California. I have said it in training classes
and I have said it to NNSA.
The Laboratory had a culture, in my opinion, that the money
that the taxpayers give them, a fiduciary relationship that we
should have with the taxpayers, was not treated in an
appropriate fashion. At times it was treated like Monopoly
money, play money. It was part of the theme of trying to
transform and change the management of the institution. Again,
what I am saying today----
Mr. Greenwood. Let me understand what you mean by that. Do
you mean that it was spent with disregard to its value? That
managers paid too much for things? That managers bought things
that weren't necessary?
Mr. Salgado. Yes.
Mr. Greenwood. Does that include concern about taking
personal possessions of property? Does it include a culture
that includes--are you describing a culture in part that has to
do with misappropriating Federal property for personal use?
Mr. Salgado. No, it is not. This is where it is a delegate
balance. Let me, if I might, because I know it is important to
the committee and it is important that I be reasonably clear.
There is a fiduciary relationship and the relationship that
deals between the taxpayers and us to spend their money is one
that it should be spent efficiently and effectively in the best
manner possible.
That leads us into a gray area of activity. If you move
into a new office you use the furniture that is there or you go
off and have a brand new set of furniture and design furniture
put into your office. It means to me the fact of the matter is
when I came to the institution little things like if you are
going to have food delivered, do you know how much it is
costing you to do these things. The question of meals at the
institution. The question of gray areas.
Again, I have said this to everybody up front. The question
of if we have a great safety record, is it efficient and
effective to spend $15,000 to buy ourselves shirts. That is the
type of thing that I am addressing, Mr. Chairman. It is a
mindset and it is a culture that has existed, I believe, at
that institution since Oppenheimer and Graves established it.
It is important because the world changed.
The executive branch, the legislative branch, and the
taxpayers of this country expect more. They do great science.
They do great engineering but we need to do it effectively and
efficiently. I have lectured on this issue of Monopoly.
In fact, one particular time I paid out of my own pocket,
bought a Monopoly game and laminated it and I was going to hand
it out to managers to try to raise the awareness of this fiscal
responsibility and this fiduciary relationship. I think it
underpins and undermines our credibility as an institution and
does a disservice to the taxpayers.
Mr. Greenwood. Let me understand one other thing because
you made a comment that could be considered as controversial
about others who have described a culture that included in that
description harsher charges about personal misappropriation of
funds and materials.
You referred to those kind of comments as being racially
profiling of Spanish Americans, I think you said. I am trying
to understand how it would be that describing a culture as you
have is different than describing the culture as others have
and why one is a racial matter and one is not.
Mr. Salgado. Well, do the racial component of ``greening of
the valley,'' the valley itself has been well defined as the
Hispanic population that primarily is in support service of the
institution. That has a racial connotation to is.
The ``greening of the valley'' as I interpret the phrase,
No. 1, is in connection with a culture of theft which there is
not at the institution. I respectfully will believe that
sincerely. There is not a culture of theft. The ``greening of
the valley'' on the assumption of the culture of theft is that
there is a nexus between that and the drug activity in the
valley which is, in my personal opinion, tantamount to racial
profiling.
The distinction I am making, Mr. Chairman is the fact that
the culture that I have talked about, the culture of this lack
of a sense of fiduciary relationship is not for personal gain
of individuals. It is not that people are buying computer and
taking them home for their children. But it is a culture by
which I think people have failed to release that they are--
there is a responsibility of the institution to effectively and
efficiently spend those dollars.
Hypothetically if it is costing $15,000 to buy everybody
shirts because we did a great job, that may be a morale issue
but is that what the taxpayers expect of us to do, particularly
if it is not pursuant to our contract and is that mindset--our
meal policy and things of that nature.
I mean, there are constant issues here of that issue and
trying to change to the mindset. When you sign off on something
to pay for it, are you doing with a mindset that you do have
that relationship and that responsibility. That culture has not
been there. It is not a criminal culture but it is culture that
has to be addressed. Dr. Browne has noted it. It was part of
Dr. Browne's vision of where this Laboratory had to get to.
But there is a distinction, sir, between a criminal culture
of theft and stealing and taking money and doing those things
as evidence in the TA-33 issue versus what I would call this
area of this lack of real awareness of our fiduciary
relationship. As I said, I have said this in front of God,
country, and everybody at that institution for the 3 years that
I have been there. I believe it firmly.
Mr. Greenwood. I think it is not hard to imagine how loose
fiscal controls that allow the kind of waste and abuse of
taxpayer's dollars that, as you have described, could slide in
among those who are so constituted toward personal
misappropriation because the fiscal controls were not there to
protect against it. My time has expired. I recognize the
gentleman, Mr. Walden, for 10 minutes.
Mr. Walden. Thank you very much, Mr. Chairman.
Mr. Salgado, I want to pick up on a point of a statement
you made and just see if I understand it. You said that the
Inspector General request is one that you made, or your folks
made, to have the Inspector General come in.
Mr. Salgado. Yes, sir.
Mr. Walden. If I heard you right, you said that was after
the story ran in Energy Daily.
Mr. Salgado. If I may clarify, there were two requests of
the Inspector General, the Department of Energy Inspector
General, the very day, the morning that there was an allegation
in print concerning that their senior management cover-up or
criminal activity of the Laboratory.
I personally contacted Greg Freedman, the IG, seeking some
advice and council on how to address it. He rightly told me,
sir, that I could not request an IG investigation. Within an
hour I contacted Dr. Browne within Washington, DC that was
going in to meet with the acting administrator for NNSA,
Ambassador Brooks.
I discussed the issue with Dr. Browne and Dr. Browne
immediately made a request that afternoon, the very day the
article ran, to have the NNSH request the IG on our behalf to
come in and institute an investigation on senior management
coverup.
Mr. Walden. The Energy Daily story, was its genesis clear
back to the Albuquerque leaks?
Mr. Salgado. No, sir. I believe the Energy Daily story, as
far as I know, and some of this is hearsay, was a first letter.
There was a letter sent out with a series of allegations, an
anonymous letter. I have never seen the original letter. That
was the first time that we heard about that. The box of
documents was subsequently--I believe approximately a week
later is that I learned that this box of documents.
Mr. Walden. You believe that the two are connected or came
from the same individuals or same part of----
Mr. Salgado. I think they probably came--I have not read
the entire letter, to be honest, but I believe that the genesis
and much of the information appears to be in the same vein.
Mr. Walden. Would it be appropriate to say then that the IG
request never would have taken place had these stories never
been leaked or the anonymous letter sent? You would have had no
reason to ask the IG to come in otherwise?
Mr. Salgado. I would have had no reason, nor would I have
believed that there was any coverup or criminal activity going
on at the institution.
Mr. Walden. I want to go to the issue of Mr. Walp and Mr.
Doran. Mr. Doran testified in front of this committee under
oath about 2 weeks ago that he was advised by FBI agents that
he worked with in New Mexico. The FBI's relationship with Mr.
Walp and Mr. Doran was the best relationship the FBI has had
with the lab in its history.
I am told in your calendar notes for October 28, 2002, you
indicate a conversation with the FBI agent, Jeff Campbell,
where he states, and I quote, ``Steve and Glenn are the most
professional, etc.'' I am sorry. This is Mr. Busboom. My
apology. ``Steve and Glenn are the most professional.''
Additionally, DOJ has advised this committee that to its
knowledge no law enforcement agency has had any concerns about
Mr. Walp and Mr. Doran's performance. However, one of the
circumstances constantly used an example of why Mr. Walp and
Mr. Doran were fired as the U.S. Attorney and the FBI advised
the lab, ``Blew the Mustang case.'' Senior management blamed
Mr. Walp and Mr. Doran for this statement. Did you relay to
senior management the excellent report given to you by the FBI
of Mr. Walp's and Mr. Doran's performance, Mr. Busboom?
Mr. Busboom. Did I relay that particular comment?
Mr. Walden. To senior management.
Mr. Busboom. I believe I did. We had a meeting that
Tuesday. I received that comment, I believe, on a Friday. We
had a meeting that next Tuesday to discuss the role of the FBI,
the IG, and our own staff. The FBI, it turned out, was not at
that meeting, but at that meeting we discussed the need to
appoint a new liaison. I am certain that it did come up. Yes,
sir.
Mr. Walden. How could senior management place the blame on
them for blowing the case?
Mr. Salgado. Two things. I think, first of all, that--
first, in fairness, I will indicate in the October 24 meeting
that I requested, and that was the FBI and the U.S. Attorney, I
was personally advised by Jeff Campbell, not by his
supervisors, that he was very comfortable and felt that Walp
and Doran were doing a competent job. That was on the 24th. I
don't recollect the meeting that Mr. Busboom engaged in.
Mr. Walden. So you both heard basically the same thing from
the FBI.
Mr. Salgado. I heard that from Jeff Campbell, the agent in
charge, that had the day-to-day liaison going forward, No. 1.
The issue of the case being blown was an issue that was raised
in passing during a whole series of other activities taking
place at the October 24 meeting between myself and the U.S.
Attorney and the FBI. It was a statement made not by the FBI.
It was a statement made by the U.S. Attorney. I never pursued
what was actually meant by that statement given the other tenor
of the conversation that was taking place on some other
matters.
The U.S. Attorney merely looked at me and said, ``You, the
Laboratory, blew the case.'' That was essentially what they
said. It has been--I am not sure whether I--I do not know if I
ever put credence in part of the issues of the termination of
Walp and Doran on that particular aspect.
Mr. Walden. If you have got somebody telling you that you,
the lab, blew the case, did you ask for specifics? What they--
--
Mr. Salgado. No. I am sorry.
Mr. Walden. My natural reaction would be, ``What do you
mean we blew it? How did we blow it? Tell me more.'' Did
anybody ask that of them?
Mr. Salgado. No. At that particular time we were engaged in
a series of other activities. That was minor in passing. It was
really dealing with whether or not the FBI that had assumed the
Mustang case, whether they were going to pursue this or whether
we were going to take it and refer it to the IG or local law
enforcement officials.
We tried to get to closure on several issues at that
meeting. One of them was, ``Either you are going to decline the
Mustang case or not.'' They indicated they were going to
decline the Mustang case after a brief conversation given the
facts of the case, the evidence in the case, and the lack of
criminal history on proposed suspect.
The declination with an offhand comment that the U.S.
Attorney said, ``We are not going to pursue the case because A,
B, C. Besides that, you blew the case.'' To be honest,
Congressman, we moved on to some other areas that were of much
more importance to us at that particular date and time.
Mr. Walden. I want to go to the issue of Mr. Walp's
termination because I got a copy of his performance summary
that was done here that I understood was supposed to be done by
July that was actually conducted, I believe, in October. Is
that correct?
As I look at it, and I am not familiar with these, but if
you go through it says, ``Implement ISSN, 100 percent effort
effectuated. Safety performance, 100 percent effort. Human
capital, 100 percent effort. Walk-arounds, 100 percent
accomplishment. Employee communications, over 100 percent
accomplishment. Effective cost schedule management, 100 percent
attainment. Financial management, 100 percent attainment. Time
management, office leader visible to all SI personnel on a
daily basis.'' It is a pretty positive finding. Is it not?
Mr. Busboom, did you do the evaluation?
Mr. Busboom. Yes, sir, I did, in conjunction with my
deputy, Mr. Tucker. I believe I did sign it, yes.
Mr. Walden. I understand this is supposed to be for the
first 6 months but if you are doing it in October, were there
issues on your mind then about performance that would differ
from this?
Mr. Busboom. At that time the answer is yes, sir. That
report closed out on July 31 as did every other employee in the
lab. That is the normal cycle. Then there is a period of time
while salaries are considered before the information is
actually present to the employee.
That was presented to Mr. Walp in late September of early
October, but the closeout period was for July 31. It is a very
positive report. The overall rating, I believe, is an eight.
That was consistent with his peer group. That was an average
score within his peer group.
Mr. Walden. And that is on a scale of one to 10?
Mr. Busboom. That is correct. The managers tend to get
higher aggregate scores.
Mr. Walden. It is a good report, sir?
Mr. Busboom. Yes, sir.
Mr. Walden. He also got a $5,000 year bonus or raise or
something at that point?
Mr. Busboom. He received a pay raise and it is not a bonus.
It was a pay raise consistent with that score during that
salary exercise. Yes, sir.
Mr. Walden. What happened between then and when he was
dismissed that turned this all upside down? Something must have
gone dramatically different the following couple of months.
Right?
Mr. Busboom. Yes, sir. As I have noted in my testimony, it
was first brought to my attention in mid-September that for the
previous few weeks there had been an ongoing dispute between
some of the outside auditors, our own legal counsel, and our
staff, OSI, which includes Mr. Walp and Mr. Doran.
The principal matter was about access of records and
information by a PricewaterhouseCoopers group. That had been an
issue of great discussion and great debate between my staff,
our own legal counsel, and the forensic auditors who were on
the ground.
Mr. Walden. My time has expired. Thank you, sir.
Mr. Greenwood. The gentlelady from California, Ms. Eshoo,
recognized for 10 minutes.
Ms. Eshoo. Thank you, Mr. Chairman. Once again, I
appreciate your extending legislative curtesy to me to take
part in these very, very important hearings relative to the
University of California and the operation of the labs. I
appreciate it.
I would like to begin by just asking each one of you how
long you have served at the lab. Mr. Busboom.
Mr. Busboom. Yes, ma'am. I have been at the lab for 6
years.
Ms. Eshoo. Six years?
Mr. Salgado. Three years, 3 months.
Mr. Dickson. Twelve years.
Ms. Eshoo. Twelve. Can anyone of you give me the short
version of why Mr. Doran and Mr. Walp were fired? I have heard
a lot of references so far today but there isn't anything that
is clear about it. What was it that they had done that merited
firing?
Mr. Salgado. I accept the responsibility for that.
Ms. Eshoo. I know you do, but what was the reason for it?
Mr. Salgado. The reasons were primarily two fold. No. 1,
they were in a probationary period when it was time for the
institution to make----
Ms. Eshoo. I have people that serve on my staff that are in
a probationary period but that is not the reason. You don't use
that as a reason to fire someone.
Mr. Salgado. I am just setting the background, if I might.
The reasons were two fold essentially. First of all, through
the period of time of the intense--from the July period to the
November period of time there was incomplete, inaccurate
information that was being provided to the University and the
Laboratory needed upon which to base sound judgments affecting
both personnel activities and natural security issues.
Ms. Eshoo. All right. Let me ask this as a follow-up to
that, Mr. Salgado. You talked about shirts, shoes, food, and
furniture. Other than thinking about laminating Monopoly
dollars, and firing the whistleblowers, what did each one of
you accomplish on your watch for this culture that you oversaw?
I mean, it seems to me that your testimony today reminds me of
someone from the outside looking in rather than people that
were in charge, even though it is after the fact because you
are gone and there has been a reduction in your salary. How
much is your salary now?
Mr. Busboom. I was told last week. I was given a form
saying it was $140,000.
Ms. Eshoo. During your time did you oversee and route out
of this culture that you refer to?
Mr. Salgado. Well, first and foremost was----
Mr. Greenwood. Mr. Salgado, could you move forward and use
the microphone?
Mr. Salgado. Sorry, sir. I apologize. I was thinking. No.
1, I think that Dr. Browne and myself commenced a
reorganization of the institution to put lines of authority and
responsibility in place.
Ms. Eshoo. Did it go past an organizational chart into
actual effectiveness to route out the things that you have come
here and referred to today? Obviously you had a knowledge of it
because you are referring to it.
Mr. Salgado. Yes. I believe those things were put into
place a year ago and those are part of the transition.
Ms. Eshoo. When you say put into place, what does that
mean?
Mr. Salgado. That means that----
Ms. Eshoo. On paper?
Mr. Salgado. No. That the institution was reorganized. The
roles and responsibilities and lines of authority were changed.
There were movements of divisions in various activities.
Ms. Eshoo. And what was the result of what you were just
referring to, though?
Mr. Salgado. Well----
Ms. Eshoo. How did the credit card--how could a credit card
be used for the kinds of things that have obviously become more
than public? And when you refer to reforms, what are you
referring to? What are the specifics?
Mr. Salgado. I am getting a little bit lost. On the credit
card issues, once those issues were basically brought to the
attention of the institution, several things occurred
immediately.
Ms. Eshoo. Don't refer to the institution. You are
referring to the institution like it is a glob. There were
people that were paid taxpayer money to run this place. Now,
you have come here and you have outlined, as I said, shirts,
shoes, food, furniture, laminated--you have made a reference to
all of that. What did you do on your watch? In my view, not
very much. Otherwise, we wouldn't be here. But I want to give
you an opportunity to tell me. What did you root out?
Mr. Salgado. When the purchase card activity surfaced, No.
1, I personally contacted, No. 1, the--on the purchase card
activity I personally contacted the former IG to basically
bring an external group in to help us basically look at the
process procedures and to root out those activities that you
have addressed. I notified the IG of the Department of Energy
of a process----
Ms. Eshoo. I need to interrupt because I only have 10
minutes and I am a guest of the subcommittee. My observation so
far is that you were very adept at knowing who to call outside
the institution, as you refer to it. But there is a dereliction
of duty here. You have more than made reference to what you
knew to be wrong, except you didn't do anything about it.
Now, maybe it is looking over your shoulder but I don't
know what was rooted out. I think that the public light that
shines on this is a very important one because it then is
instructive in terms of what needs to be done. I appreciate the
fact, Mr. Salgado, that you have come from a law enforcement
background but this sounds like the Keystone Cops to me. Now,
lab employees describe a culture of fear. Now that you are on
your way out do you have any comments about that?
Mr. Salgado. Well, if I may, first of all, I would address
the fact that we did do things and we were proactive and
aggressive.
Ms. Eshoo. I don't know what they are, though, because you
are not able to be specific.
Mr. Salgado. Well, if I could submit it for the record
then, I would ask that I be allowed to submit for the record
those proactive things in the transformation of the
institution, the reorganization, putting lines of authority and
accountability in place, and bringing in people to basically
help us----
Ms. Eshoo. I need you to answer my question, though,
because you are on my time here.
Mr. Salgado. Okay. I am sorry. I apologize. Is the question
on my way out of a culture of fear?
Ms. Eshoo. Been stated by employees.
Mr. Salgado. I have heard that from the day I got there.
Ms. Eshoo. Do you agree or disagree?
Mr. Salgado. I agree that there is a perception of a
culture of fear.
Ms. Eshoo. No. Do you believe that is a truthful statement?
And, if not, you can say you don't agree.
Mr. Salgado. I believe that the people who have made that
statement believe it to be true.
Ms. Eshoo. You believe it to be true?
Mr. Salgado. No. I believe that the people that made that
statement, they believe it to be true, that there is a culture
of fear.
Ms. Eshoo. I would think that they believe it to be true,
too. That is not what I am asking you. I am asking you if you
find that statement to be correct. If you don't, say so.
Mr. Salgado. I do not agree.
Ms. Eshoo. Okay. That is enough.
Mr. Busboom, do you have reflections about this statement?
Mr. Busboom. Yes, ma'am. Certainly we moved forward in the
OSI office to address these issues by, first, establishing the
office, as Mr. Deutsch read in his opening statement. Second,
we doubled the staff there within that 1 year and we added many
hundreds of thousands of dollars in budget. I do believe we
were on our way in terms of the security participation. .
Ms. Eshoo. Was there ever anything--this is, I think, a
question that is on many individual's minds. When you met with
Mr. Doran and Mr. Walp, did you find anything in their work
that was laudatory or did you just think that they didn't know
what they were talking about? Was there anything that you said,
``Well, one out of 10 we agree with you and we are going to
pursue this.''
Mr. Busboom. There were certainly positive things, yes.
Ms. Eshoo. There were positive things. Did any of you ever
follow up on them?
Mr. Busboom. I followed up on the positive part, certainly.
I wrote that report that said that Mr. Walp had done a good job
in organizing the new office.
Ms. Eshoo. Was there any dissension between the
decisionmakers on the firing? Was there kind of a minority
view, so to speak, or were you all in agreement with each
other?
Mr. Deutsch. I supported the decision, or did not oppose
it.
Ms. Eshoo. Mr. Salgado?
Mr. Salgado. I supported it.
Ms. Eshoo. You supported it. Mr. Busboom?
Mr. Busboom. I supported it after--it is Busboom. Thank
you. I supported it after the discussions that I had with by
boss and his deputy and with chief legal counsel and Mr.
Salgado.
Ms. Eshoo. Mr. Salgado, you testified that the lab
essentially can be improved. Now, obviously you are gone. Do
you have some clarity around what the reforms should be? Any of
you?
Mr. Salgado. The answer is yes. I think the University of
California needs to address its governance model, No. 1. And I
think, No. 2, the fact of the matter is that the process,
believe it or not, in the systems that are being put in place
need to continue. The change of culture of an institution does
not take place over night. That culture of that institution it
will probably take 2 to 3 years moving on a forward path of
aggressive change.
Ms. Eshoo. I think if we keep observing culture and don't
do something about it is why it doesn't change. That is my own
take on it.
With that, I see that my time has been used up. Thank you,
Mr. Chairman. Thank you, gentlemen.
Mr. Greenwood. The Chair thanks the gentlelady from
California and advises you we will do a second round and I will
begin that second round now.
There is at tab 47, and if the staff would hand it to Mr.
Salgado. Tab 47 is an e-mail written by Jo Ann Milum to James
Holst at the University of California. It is dated December 11,
2002. This is 15 days after Walp and Doran were fired. Its
subject line reads, ``Rationale for terminations.'' I am going
to ask Mr. Salgado, can you tell us who Jo Ann Milum and James
Holst are?
Mr. Salgado. Jo Ann Milum----
Mr. Greenwood. Milum?
Mr. Salgado. Milum.
Mr. Greenwood. I am going to ask you to sit forward.
Mr. Salgado. I am sorry, sir. Jo Ann Milum was my chief of
staff previously and then took over as executive staff director
for the Office of the Director.
Mr. Greenwood. Which position was she on December 11?
Mr. Salgado. She was the Executive Staff Director for the
Office of the Director. In all candor, sir, she was also my
Chief of Staff when I was at the Department of Energy so there
is a long history there.
Mr. Greenwood. Okay. Mr. Holst?
Mr. Salgado. Mr. Holst is the General Counsel, I believe is
his title, for the University of California, Office of the
President and is a direct line supervisor for Mr. Dickson.
Mr. Greenwood. Okay. So why would she send this e-mail to
Mr. Holst, do you think?
Mr. Salgado. To be honest, sir, I don't know. I mean, I am
assuming that it was requested by somebody. ``Per your
request'' it says so I am assuming that Mr. Holst requested
some information to be provided. That is my supposition.
Mr. Greenwood. Okay. Among the rationale for the
termination of probationary employees Walp and Doran, there is
an allegation that Walp and Doran failed to follow up on the
Mustang case in a timely manner. Mr. Walp, however, first
learned of the case on July 25, 2002 a week after the BUS
division first learned of the case. The FBI took over the
investigation on July 29, 2002. During a 4-day period before
the FBI opened its investigation into the matter, how did Walp
and Doran fail to follow up on the Mustang case?
Mr. Salgado. I can't say in that context that they failed
to follow up. There were other issues with the Mustang case
that were of concern to us but on that particular issue. For
the record, there was a meeting. The second time they met I
directed Mr. Walp to go to Arizona to follow up on that case.
The case was taken away from Mr. Walp and the FBI assumed
investigation of the case and told us we were not to send
anybody there to follow up on that part of the investigation.
As to wording, I am not sure. There were other issues in the
Mustang case but in that short period of time Mr. Walp agreed
to go to Arizona. It was terminated by the FBI and they took
over the case. Am I making myself clear?
Mr. Greenwood. I am not sure that you are. If you had a
case for 4 days--am I accurate when I say that Walp and Doran
had responsibility for this case for 4 days?
Mr. Salgado. I don't know the time, sir. I really don't. I
am assuming but I don't know when the case came to them or
anything.
Mr. Greenwood. Mr. Busboom, can you shed light on that?
Mr. Busboom. That sounds correct, sir. I think July 25 was
the day it was reported. As far as July 29 being the date the
FBI took over, I couldn't say from memory.
Mr. Greenwood. The e-mail says that among the things that
they did were foot dragging on the Mustang case. Now, I am not
sure but how much foot dragging can you do in 4 days?
Mr. Busboom. Me, sir?
Mr. Greenwood. Yes, Mr. Busboom.
Mr. Busboom. Again, I do not know if July 29 is the second
date. I haven't seen this e-mail before so this is the first
time I have read it.
Mr. Greenwood. Do you think he dragged his foot on this? Do
you think Walp and Doran dragged their feet, all four of them,
in 4 days? Isn't it the case that your office was informed
about this case in September of the year before?
Mr. Busboom. Of the Mustang case?
Mr. Greenwood. Yes.
Mr. Busboom. No, sir. That is not correct.
Mr. Greenwood. I am sorry. The Bussolini case. When did
your office become aware of that matter?
Mr. Busboom. The TA-33 case?
Mr. Greenwood. Yes.
Mr. Busboom. I became aware in July 2002. Subsequent to
that----
Mr. Greenwood. When were your employees aware of it?
Mr. Busboom. Subsequent to that I have seen memoranda, two
memos, that talk to someone knowing about it as early as fall
of 2001.
Mr. Greenwood. When was action taken?
Mr. Busboom. When was action taken, sir?
Mr. Greenwood. Yes.
Mr. Busboom. Again, according to the memoranda that we have
on file, the person who knew about it in 2001 did call the FBI.
Mr. Greenwood. When?
Mr. Busboom. In September 2001.
Mr. Greenwood. Okay. And did anything happen as a result of
that?
Mr. Busboom. I don't know, sir.
Mr. Greenwood. Mr. Salgado, do you know the answer to that
question? Mr. Dickson, do you know the answer to that question?
Mr. Dickson. I don't believe anything happened.
Mr. Greenwood. That employee is still there. Is that right?
Mr. Salgado. My understanding that it is and that your are
correct, sir, that as far as I know that there was a
notification made to the FBI and that nothing happened after
that internally.
Mr. Greenwood. Here is what I am trying to reconcile. Okay?
An employee of the Laboratory is aware that it appears that two
other employees of the Laboratory are ordering tens of
thousands of dollars of personal camping, hunting, sporting
equipment and hoarding it in a bunker somewhere.
How many months go by between the time that people at the
lab become aware of this issue and something is ultimately done
to propagate this case and to take some action on this case?
How much time goes by?
Mr. Salgado. As far as I know, it was until the FBI in July
2000.
Mr. Greenwood. Mr. Salgado, would you sit forward, please?
Mr. Salgado. As far as I know, it was not until Mr.
McDonald went to the FBI personally in the year 2002. It was
between September 2001 and July 2002 that any active
investigative component----
Mr. Greenwood. Let us call that 10 months. Ten months go by
in that case and nobody is fired for foot dragging. Four days
go by in the Mustang case and we have got to get rid of these
guys for dragging their feet and blowing the case. Can you
understand how that looks to us? Can any reconcile--why should
we not look at that and say we have got two extraordinarily
different standards here.
In one case we are acutely aware--people at the lab are
acutely aware of what appears quite obviously to be thievery.
Ten months go by before anything happens. In another case, Walp
and Doran come into town and you give them the Mustang case and
4 days later you accuse them of dragging their feet, blowing
it. How can you reconcile those two matters? Anybody? Mr.
Busboom?
Mr. Busboom. I wouldn't attempt to reconcile it for you,
sir. I haven't seen this e-mail so I wasn't familiar with this
logic here. I will say on the other case that I have been told
after the fact that the FBI was immediately notified. My deputy
told me that the information was----
Mr. Greenwood. Was a record made of that initial contact to
the FBI? Is it possible to document it that, in fact, the FBI
was, indeed, notified?
Mr. Busboom. The only thing I have seen, sir, were
memoranda written after the fact.
Mr. Greenwood. Written after the fact.
Mr. Busboom. That is correct, sir.
Mr. Greenwood. Mr. Salgado, can you understand how we
would--is that the standard procedure? If you contact the FBI
about a matter as serious as that, is it standard procedure at
the lab to not make any contemporaneous record of that contact?
Mr. Busboom. I would have expected a contemporaneous
record. I have not seen one.
Mr. Greenwood. Okay. Have you asked the individual why it
was that he did not make--how he reconciles his statement after
the fact that he notified the FBI in September with the fact
that he made no record of that contact?
Mr. Busboom. Yes, sir. We certainly did ask that question.
Mr. Salgado asked us in October who knew what when and I
personally was sent off by Mr. Salgado to get that answer. That
is when the memoranda were written. One was written in October
by Mr. Walp which outlined who, what, when.
It referred to a second memorandum written by Mr. Sprouse
in July of that year which had similar information. Mr.
Sprouse's version of it was that it was, indeed, turned over to
the FBI but they were extraordinarily busy with September 11
stuff because that is exactly when it was reported and nothing
happened.
Mr. Greenwood. I am just waiting for someone to explain to
me how you can look at the 4 days of responsibility that Walp
and Doran had on the Mustang case and say they dragged their
feet and they blew the case. What did they specifically do
wrong in those 4 days, Mr. Salgado?
Mr. Salgado. I have never said that they blew the case, No.
1. No. 2, I don't know anything about dragging their feet in
this arena. I may have seen e-mail before. I don't recollect
it, to be honest with you.
Mr. Greenwood. What did they do wrong in the Mustang case?
Mr. Salgado. I think in the Mustang case there was a series
of issues in the Mustang case that were difficult for us to
deal with which was tied itself to misinformation, inaccurate
information.
Mr. Greenwood. Provided by Walp and Doran in 4 days?
Mr. Salgado. In my opinion, provided by Walp and Doran in 4
days and the continuing period of time in which there were
further engagement, No. 1.
Mr. Greenwood. Be specific. What misinformation did they
provide?
Mr. Salgado. There was----
Mr. Greenwood. I am going to ask you to sit forward. I am
going to have to tie your chair forward.
Mr. Salgado. May if I move this, a little bit. There were a
series of issues, sir, that dealt with it. There were things,
and Mr. Dickson has probably a little bit more of the details,
but there were issues about where the vehicle was to be
delivered, who lived at the location, were the names the same
or were they not the same, was there----
Mr. Greenwood. And this was all the information that was
gathered during that 4 days?
Mr. Salgado. I am not sure. As I indicated to you, sir,
there were issues of inaccurate and incomplete information that
was delivered both within the 4 days and beyond because there
was a continuation of information.
Mr. Greenwood. Mr. Dickson, can you shed any light on this?
Mr. Dickson. I do not subscribe to the notion that there
was foot dragging with respect to the Mustang case. That was
not the complaint that I had made.
Mr. Greenwood. My time is up but, Mr. Salgado, you just
testified that the sender of this e-mail, Milum, is someone who
have known for a very long time.
Mr. Salgado. Yes.
Mr. Greenwood. They have worked closely with you. Are you
aware that she says they were foot dragging?
Mr. Salgado. I am aware now.
Mr. Greenwood. You were not aware until this moment?
Mr. Salgado. Sir, I really don't remember looking at that
e-mail. I may have but I don't remember that. I really don't.
Mr. Greenwood. Would you concur that they dragged their
feet?
Mr. Salgado. On the Mustang case? No. There was not a foot
dragging in the Mustang. There was a lot of issues surrounding
that case but foot dragging is not how I would describe it.
Mr. Greenwood. The gentleman from Washington is recognized.
Mr. Walden. Oregon.
Mr. Greenwood. Oregon. I am sorry.
Mr. Walden. One of those northwest states. Thank you, Mr.
Chairman. Mr. Dickson, I want to have you refer to Tab 87 which
is an e-mail from--the sender says [email protected].
It is addressed to you, Mr. Busboom, and to Mr. Tucker from
Kenneth Schiffer. I want to read it for the record.
I says, ``Subject: IG. FYI I was called this morning by
Peter Schleck from the IG's office in the Forrestal. He made an
appointment to meet with me on 12/17/02 to discuss my knowledge
of the issues surrounding Walp and Doran. I proposed to limit
my remarks to the documentation I have from 8/00 concerning
meetings we held with the Bureau and LAPD regarding the issue
of lost/theft of lab property.
The thrust of my message would be to point out that as
early as 8/00 the lab surfaced this problem to law enforcement
and worked with them to address it. This was not something
``new'' which Walp and Doran discovered. I recollect also that
I mentioned this meetings to Glenn when he was hired and
provided him with a general background of the meetings we had
had.
I also recall saying this was not a simple matter and that
there were sensitivities Glenn would have to consider when
moving forward with it. I further explained my role in the
matter. Let me know how this sits with you all. Ken.'' Mr.
Dickson, I guess the question I have, it would appear from an
outsider that maybe Mr. Schiffer is trying to get the story
straight about what you and Mr. Busboom and Mr. Tucker should
tell the IG. Doesn't this e-mail seem a little odd to you from
a legal standpoint?
Mr. Dickson. No, it actually does not, Congressman Walden.
It is not uncommon for Mr. Schiffer in particular, and some
others around the Laboratory, who are going off to become
involved in some interview or something to just give me a heads
up about what they are dong.
I remember this e-mail. I never responded to it. I never
talked to Mr. Schiffer about it. He is an experienced FBI agent
and for some reason or the other from time to time if he is
doing something, he will just let me know what it is I guess on
the theory that if I hear about it, I will at least know what
is going on. There is no effort on his part, as best I can
remember, to ever clear anything that he is trying to do with
me, or to ask for my input as to what he ought to say.
Mr. Walden. Mr. Busboom, did you respond?
Mr. Busboom. I don't recall if I responded but I certainly
did get this e-mail. I have seen this. Yes, sir.
Mr. Walden. What about the concept that the IG's interviews
are confidential? Doesn't this raise an issue with that? Tell
me how the IG process works. Maybe I don't understand. I
thought it was supposed to be confidential.
Mr. Dickson. Mystically. I am not aware and was never told
by the IG that their process was confidential. I have looked at
the IG orders and have not seen anything that suggested
confidential. If it is confidential, I did not know about it
and was not instructed that way when I was interviewed by the
IG myself.
Mr. Walden. Do you know, to the best of your knowledge, did
Mr. Tucker respond to this e-mail?
Mr. Dickson. No, I don't know.
Mr. Busboom. I don't know, sir.
Mr. Walden. You don't know? All right. Mr. Salgado, I want
to go into the issue of the stolen items because you have taken
offense to the concept of the ``greening of the valley'' or
whatever. I have never been there. I don't have a clue but I
watched the digital pictures they displayed here for us of the
equipment the chairman referenced that was allegedly stolen
equipment and all of that.
As a taxpayer I get kind of upset about that. We have heard
also reports of some $800,000 in hand tools being purchased
from a sole source contractor, an individual. I don't know if
that is still under investigation or not but it is a little
difficult to understand.
You state in your testimony that Los Alamos is not a den of
thieves who are keeping the valley green. We know that the
majority of lab employees are honest people. I fully believe
that. That is generally the case in most organizations.
But can you explain why our staff can go through
procurement records and in a few hours find purchase after
purchase of knives, camping gear, sleeping cots, top of the
line Gore-Tex camping gear, auto equipment, and many other of
what would appear to us to be obviously personal purchases that
the Laboratory and the Federal Government have paid for. I have
got a list here that the staff has provided me of card
transactions for Boundary Waters tent. It is Tab 136 if that
would be helpful.
While you're looking that up, I want to give you a couple
of examples that we received just last night. These purchases
do not involve any of the people whose names have already been
in the press. Tab 136 there are photos included for your
viewing convenience.
This is just for one vendor of camping supplies. Let us
start with $1,435 Boundary Waters two-person tent. We can go on
to the hunting knife sharpener, two bought in a month. There is
my personal favorite, a pet heating pad for $119.99. Women's
lined slippers, apparently necessary at the lab, as are
GameView digital cameras which can sense game hundreds of yards
away. This just goes on and on. These are pretty obvious ones.
Did you find it, Mr. Salgado?
Mr. Salgado. I have the chart. For clarification of my
point, are the items that we are addressing at this Tab 136,
are those items that are outside the scope of what I refer to
as the TA-33 investigation?
Mr. Walden. The answer, I am told, is yes.
Mr. Salgado. I have no knowledge of these. I will say this.
There were a lot of items that were purchased subsequent to the
Sierra Grande fire. Many of these things, I believe, that the
former IGs, Mr. Layton and Mr. Masten, also looked at to see
whether or not--they raised issues, I know, for instance, about
water coolers and things like that that were needed for
environmental work.
I know nothing about these. The first time I believe I have
just seen this is right now. I have no indication, but I would
assume that if it was done in 2002 this was part of the study
that was undertaken by the former IGs but I don't know that.
Mr. Walden. It actually says fiscal year 2001.
Mr. Salgado. I am sorry, fiscal year 2001. The former IGs
that we brought in, John Layton and Charles Masten, and the
PricewaterHouse group, I believe, went back 48 months. I would
think this should have been included in that review but I don't
have personal know of it, sir.
Mr. Dickson. Mr. Walden, may I?
Mr. Walden. Certainly, Mr. Dickson.
Mr. Dickson. If I may, in August of this year one of the
responsibilities I was assigned was to work with the purchase
card review team in its efforts to try to get to the bottom of
the Mustang and other related vulnerabilities. As a part of
that work, the PricewaterHouseCoopers team developed withering
lists of items, like you're talking about, as a way of trying
to test the system and see if there was glitch.
I interceded because I learned not to jump to any
conclusions about some of these more exotic sounding items in
terms of their business purpose at the Los Alamos National
Laboratory. You will find as you go through many--I don't know
about these obviously but if you were to pull the string on
these, there is a very good chance that you would find,
although at this point they are seemingly ridiculous purchases,
they turn out to have a very legitimate business purpose.
PricewaterhouseCoopers did, in fact, work their way through
page after page of these items.
Mr. Walden. Let me interrupt you for a second. I am sorry.
Who made the determination that they have legitimate purposes?
The people who purchased them?
Mr. Dickson. No. The PricewaterHouse did selected searches,
identified seemingly inappropriate items, made phone calls,
made visits, looked at items, and strangely found explanations
for the great majority of those items.
Mr. Walden. A great majority. Okay.
Mr. Dickson. I think it is very appropriate to look at
those and question them, but I don't think you're at the end of
the process by just having looked.
Mr. Walden. I understand that. Let me switch subjects for a
minute. Prior to firing Mr. Walp and Doran, did you discuss
with Mr. Salgado the possibility they could achieve
whistleblower status and, if so, did Mr. Salgado say to you--
what did he say to you about that prospect? Did you discuss it
with him?
Mr. Dickson. Yes, I did. What we talked about was the
notion that there was risk in any action that had to do with
Mr. Walp and Doran. My position with respect to those two
gentlemen was that we should assume for purposes of making the
decision that they would be looked upon as whistleblowers and
then decide whether or not the reason that the Laboratory was--
the decision that the Laboratory was making was based upon
ground unrelated to their disclosure of information.
Mr. Walden. What role did Dr. Browne play in the decision
to fire Walp and Doran?
Mr. Dickson. I would say that he relied upon other and was
provided with information before the decision was made and
incurred in it based upon the recommendation.
Mr. Walden. Was he actively involved in considerations to
fire Mr. Walp and Mr. Doran?
Mr. Dickson. He was informed before the action took place.
I would say that of all of the managers of the Laboratory who
were involved, John was not the principal person.
Mr. Walden. Why were there so many folks at the lab in
management involved in this decision in your perspective?
Mr. Dickson. Well, you know, there really aren't that many
when you think about it. The S Division, Stan Busboom reports
to Jim Holt. He is one of the people that was listed. Jim Holt
then reports to Mr. Salgado who reports to Director Browne. I
am the Laboratory counsel and provide legal services for the
Laboratory. It is sort of really chain of command type issue.
Mr. Walden. Is that the standard practice for probationary
employee dismissals?
Mr. Dickson. No. It can be. It depends on the
circumstances.
Mr. Walden. How often?
Mr. Dickson. I am not involved in a great number of these
decisions but in cases that have a propensity to be high
profile, they can go all the way up to the top. The rationale--
the problem with this particular one, Congressman Walden, is
that the purchase card review team in this activity were
considered to be extremely important to the Laboratory.
A lot of people were interested in and involved in that
process. The fact that Mr. Walp and Mr. Doran were supposed to
be supporting that team had the tendency to elevate their work
perhaps to an abnormal level.
Mr. Walden. Given that it was so high profile, or you
indicate that was a concern, why was Mr. Busboom involved?
Mr. Dickson. He is my manger. The division leader.
Mr. Greenwood. The time, gentlemen, has expired. The
gentlelady from California is recognized for 10 minutes.
Ms. Eshoo. Thank you, Mr. Chairman. I would like to ask the
panelists today if there is anything that you know of, relative
to all of the mismanagement that we are reviewing, and the
abuse, and what I think is fraud as well, and I really think a
dereliction of duty on the part of the top team at the lab.
Does any of this in your assessment impinge on any national
security issues? Mr. Busboom first.
Mr. Busboom. I am not aware of any direct connection. I
haven't seen any security incidents connected with the thefts.
The only time I know that took place was the TA-33 had a
concurrent security incident with the suspects involved in the
case itself Ms. Eshoo. Is that resolved that you are referring
to?
Mr. Busboom. I don't know, ma'am, because I didn't conduct
that inquiry.
Ms. Eshoo. Whose responsibility is it to check it out?
Mr. Busboom. That particular inquiry was conducted by Mr.
Hawkins.
Ms. Eshoo. Who is Mr. Hawkins?
Mr. Busboom. He is the division leader of Nonproliferation
and International Security who owns TA-33.
Ms. Eshoo. Where is that now?
Mr. Busboom. I don't know, ma'am.
Ms. Eshoo. Does anyone follow up on any of these things?
Can any of you inform the committee?
Mr. Salgado. Yes. I would advise the committee that the
security violations or infractions were addressed by line
management and appropriate action was taken pursuant to those.
Ms. Eshoo. When was that?
Mr. Salgado. That was taken immediately following the
October 24 meeting I had with the U.S. Attorney and the FBI.
Ms. Eshoo. So that has been resolved?
Mr. Salgado. Yes. And, in my opinion, there has been no
jeopardy of national security in either of these activities. It
was a high profile for the Laboratory and myself to be the
balance of activity.
Ms. Eshoo. I would appreciate that. I have in the previous
hearing asked everyone that came to testify that same question
because I think that obviously we have to keep our eye on the
main ball, so to speak, not that today's testimony we are
discussing today isn't important.
I think in the last question that was asked by my
colleague, the term ``abnormal level'' was used by you, Mr.
Dickson. What do consider abnormal level? What did you mean by
that? They raised their concerns to an abnormal level.
Mr. Dickson. The intention to the dismissal of what we
would call probationary employees had greater level of
attention just because of who they were and what they were
involved in at the time. I was asked the question is it normal
for all of these terminations or dismissals of probationary
employees to be at that level. He answered no. The next
question was why was this one and that was the answer to that
question.
Ms. Eshoo. Have any of you ever participated in prior to
Mr. Doran's and Mr. Walp's firings in anything like this before
that we perhaps didn't know about that you can tell us about
today? Is this the very first time on your watch that anyone
that raised serious questions, were they caught in some
probationary period? Were there others that were fired that we
may not know about?
Mr. Dickson. I think I may have created a misapprehension.
What I meant when I used the word raised is that the
decisionmaking process of Mr. Walp and Doran was at a higher
level than perhaps might be typical. That is all I meant. It
has nothing to do with the fact that they claimed to have
raised issues.
Ms. Eshoo. Well, the issues that they raised were clearly
not appreciated. Otherwise, I don't think you would be here
today. I mean, that, to me, is one of the more obvious things.
It is like a 10,000 pound gorilla in the middle of the room.
What I am very disappointed in today, I must say this, is
that if I were to entitle or to characterize this panel, with
all due respect to each one of you, is that this is the panel
of denial. I think that goes to the heart of why the abuses
that we are reviewing why we are even reviewing them. And refer
to the place as the institution.
We have a probationary period and people that maybe their
style of communicating you found objectionable. As stewards of
a public place and a public contract, I don't know what it
would take to get your attention to the things that really
mattered.
You are saying the things that were charged on the credit
card, where was it appropriate? Did anyone ever see that there
was an attempt for a Mustang? Does that fit into something that
is kind of regular order or regular business at your place?
Mr. Salgado. Of course not.
Ms. Eshoo. Whose attention did that come to before it was
Mr. Walp or Mr. Doran? Let me ask you that. Mr. Busboom, do you
know anything about it? Anyone ever bring it to your attention?
Mr. Busboom. Specifically about the list there?
Ms. Eshoo. The Mustang.
Mr. Dickson. The Mustang came to the attention of the card
holder who disputed the charge. The charge was reversed by the
credit card company and there has been no loss to the
Government. That is the answer.
Ms. Eshoo. How about the person that tried to charge this?
Did that say anything to you? I have to tell you, if someone on
my staff tried to charge a Mustang on the Federal credit card I
have, it would have raised a real flag. Now, maybe I am
unusual. All right? Then again, maybe you are in the way you
have run this place. Doesn't that just violate you?
Mr. Salgado. Ma'am, if I may respond.
Ms. Eshoo. Yes.
Mr. Salgado. Absolutely Ms. Eshoo. Do.
Mr. Salgado. Absolutely. First of all, it was raised
basically by the BUS Division who brought it immediately to our
attention. We immediately at that time put an internal review
team to start looking at all the purchase card activity that we
had looked at.
We immediately also then decided that we needed to bring in
an external review team in immediately to start looking at and
questioning the process, procedures, and activities that were
going on. That immediately raised a red flag to us. It wasn't
brought to us by Walter Doran. It was brought to us by the BUS
Division operations and we put the internal team in place and
then an external team in place immediately.
Ms. Eshoo. External, internal, but Walp and Doran didn't
count into this. I have to tell you that I think that in an
organization who is at the top counts. Why? Because by what
they say, what they do to help create a transparent
organization, an organization that understands that rules
matter, that conduct matters, and that it starts from the top.
You see?
So I think you have failed, with all due respect, the good
people that are part of this place. But that is not enough.
That is not enough. In order to restore confidence both to the
policymakers and to the American taxpayer, this place has to be
hosed out. I don't think people should be rewarded by
contracts. I stated this in the last hearing.
I think that the University of California has to go tier by
tier through the management however that is done. That is up to
the University of California to do that. There has been a
contract in place for decades. The University of California is
a great university. I think that you have failed her by what
you have done and what you have not done.
I think if there is anything that has underscored that
today, it is what I would call the denial panel. It is doing
this. I raised two children and it is instructive to raise
children. I remember going into a room and saying, ``Who
spilled the milk on the rug?'' One would say, ``I wasn't even
here.'' He was standing in the room. The other one would say,
``It is my brother.'' You see? This panel reminds me of that.
I think there is serious denial on your part. I am sorry to
say that but I think that it is absolutely the case. I also
think that if I thought so last time around that the university
has to go tier by tier in terms of the management team because
this is not a management team. This is not a management team in
my view.
Mr. Chairman, thank you for allowing me again to
participate in the subcommittee's investigation in oversight.
It is an important one. I believe that this can be fixed but I
don't have confidence in terms of the people that are still
left in charge. With that, I know that my time is up. The red
light is blinking. Thank you.
Mr. Greenwood. Thanks, gentlelady. I want to go back, Mr.
Salgado, to the e-mail from Milum. Is it your testimony that
you had nothing to do with the preparation of this e-mail?
Mr. Salgado. I have no recollection of this e-mail. There
were a lot of facts that went into it. Mr. Chairman, could you
give me the number again?
Mr. Greenwood. Yes. It is 47. Did she say to you, ``The
University of California wants to know why you fired Walp and
Doran and I have to respond to them,'' and ask you any
questions as to why they were fired?
Mr. Salgado. I have no recollection of the request coming
in, No. 1, and so----
Mr. Greenwood. My question is did you have conversations
with her about a request or about her communicating to the
University of California about why Messrs. Walp and Doran were
fired?
Mr. Salgado. I don't have a recollection of that
conversation specifically, but there were--I am not even sure
of the date of this--December 11. Previous to that that she had
been engaged in the conversations and helped draft the proposed
letter of dismissal so there were conversations that took
place. I really have no recollection of this. I don't know
whether the request came to her. I guess it came to her
specifically. I don't know.
Mr. Greenwood. In there she says among the complaints
against Walp and Doran was that they had ``no plan for bringing
the review to closure.'' This is the Mustang case. Now, to this
day LANL has failed to addressed Ms. Anaya's employment status
at LANL. She has been on paid leave for over 6 months. The
question is is there a plan for bringing this matter to a
closure 6 months later?
I mean, Walp and Doran were criticized for not bringing it
to closure in 4 days. It is still not in closure. It is 6
months later. The woman who is suspect in this case, or at
least people suspect that she is responsible for this conduct,
is on paid leave.
The question is is the pot calling the kettle black here?
If these guys are criticized for not bringing this to closure
in 4 days, and the Laboratory hasn't closed it for 6 months,
should everyone involved in this case be dismissed in the same
unceremonious way?
Mr. Salgado. Obviously the answer to that question is no. I
don't know where that case is.
Mr. Greenwood. Do you, Mr. Busboom?
Mr. Busboom. No, I don't, sir.
Mr. Greenwood. Mr. Dickson?
Mr. Dickson. I do, Mr. Chairman. The action on the Lillian
Anaya matter was deferred for a number of months with the
specific request first of the Federal Bureau of Investigation
and, second, request of the DOE IG. Two weeks ago----
Mr. Greenwood. Was that request before or after the 4 days
that Messrs. Doran and Walp had responsibility?
Mr. Dickson. It was. Those were later.
Mr. Greenwood. Afterward. Okay.
Mr. Dickson. Those requests were, let us just say, relieved
for lack of a better words, about 2 weeks ago. The discipline
process has been invoked and it is expected that there will be
a review board which is convened next week for the purpose of
asking whatever division is to be made with respect to her
employment status.
Mr. Greenwood. Okay. The e-mail also says that, ``Walp lost
or misplaced evidence in his custody. This rationale actually
refers to two knives that were stolen from the S Division after
they had been received by S Division employee James Mullens
from Michael Alexander, the brother of one of the T-33
suspects.
At the time that Mullens received items from Mr. Alexander
he was serving as the LANL liaison with the FBI. In fact, at
this point Mr. Busboom had removed Mr. Walp from his role as
FBI liaison and instructed Mr. Walp to have no involvement in
the TA-33 matter.
Mr. Mullens was holding the Alexander items pursuant to the
instructions of FBI Special Agent Camel.'' Mr. Busboom, do you
really mean to hold Mr. Walp responsible for the theft of
evidence from the investigation from which he had specifically
been instructed to stay away?
Mr. Busboom. Not as the FBI liaison but as the office
leader, certainly. I expected all the property issues to be
properly addressed.
Mr. Greenwood. In fact, isn't it true that Mr. Walp took
immediate action to determine who stole the knives from the
evidence custodian and even offered to take a lie detector test
regarding this matter.
Mr. Busboom. I don't know about the lie detector test but
my understanding was that the Inspector General was
investigating.
Mr. Greenwood. Did Mr. Walp take immediate action?
Mr. Busboom. I don't know what immediate action he took.
No, sir.
Mr. Greenwood. Is it true that following the discovery of
the theft of the knives that one of S divisions long-time
employees, Bill Sprouse, went home sick for the afternoon and
later refused to take a lie detector test regarding the theft
of the knives?
Mr. Busboom. I am not aware of that, sir. No.
Mr. Greenwood. Anybody else aware of that? All right. Do
you think that Mr. Walp is responsible for the theft of the
knives?
Mr. Busboom. No, sir. I think he is responsible for the
safeguarding of the evidence.
Mr. Greenwood. Okay. And did he--has evidence been
safeguarded historically in a different way at the lab?
Mr. Busboom. Oh, absolutely. You put in the chain of
custody and you lock it up in the evidence locker or in a
vault. Yes, sir. Absolutely.
Mr. Greenwood. It was in a locked office in a secure
building. Was it not?
Mr. Busboom. It was in a locked office as far as I
understand. Yes, sir. But it was not in the property locker and
it was not in chain of custody.
Mr. Greenwood. Let me ask this question. I would like you
to describe, Mr. Salgado, the interaction with Messrs. Walp and
Doran with regard to their firing. This letter was written.
They were given the letter. Were they afforded the opportunity
to defend themselves?
Mr. Salgado. I was not part of that process so I can't
answer the question.
Mr. Greenwood. Mr. Busboom, do you know the answer to that
question?
Mr. Busboom. The answer is no. They asked for their
resignations and then when they weren't forthcoming, they were
terminated 2 weeks later.
Mr. Greenwood. Okay. Ms. Anaya has taken 6 months, is going
before a board. Will she have the opportunity to present her
side of the story?
Mr. Dickson. Yes, she will.
Mr. Greenwood. Okay.
Mr. Dickson. Ultimately.
Mr. Greenwood. Okay. Let us assume that hypothetically that
the conclusion is that she did wrong and she is terminated
here. Okay? Now, I would like you to compare the way that she
is handled. She is allegedly a perpetrator of a crime.
Messrs. Walp and Doran are people looking for perpetrators
of crimes. They are given no opportunity whatsoever to defend
themselves. They are told to leave, to resign. They don't
resign and they are told that they are fired. I think they are
given half an hour to get out.
Now, Ms. Anaya, on the other hand, has been waiting 6
months. She is going to come before a board. Why would these
two matters of dismissal of an employee be handled in such
radically different fashions?
Mr. Dickson. The answer is basically a creature of lab
policy which is not dissimilar to Government policies all over
the place. Congressman, it is normal for Government employers
to have what are referred to as probationary period. These
employees in these probationary periods are treated as
employees at will and they do not have all the due process
rights that long-service employees such as Mrs. Anaya had.
The problem with Mrs. Anaya's termination all along has
been the request and the demands of law enforcement agencies
not to disturb the status quo while ultimate decisions are
being made with respect to her employment. We would love to
have taken action with respect to her entirely back in October.
Mr. Greenwood. Let me ask this question. I am sure that--my
guess is that Messrs. Doran and Walp were not the first
probationary employees to be asked to resign or fired. Is that
a fair statement?
Mr. Dickson. I am sorry? I think I missed the----
Mr. Greenwood. My guess is that over the course of time
other employees at LANL who have been on probationary status
have been terminated.
Mr. Dickson. That is right.
Mr. Greenwood. My question is because they are on
probationary status is it the policy of the Laboratory they
don't get an opportunity to defend themselves? They can make
allegations against probationary employees? Is that the way it
works?
Mr. Dickson. Well, what that really means is that there is
no formal process by which they can complain over their
termination. That is not to say that managers will turn a deaf
hear if a probationary employee would----
Mr. Greenwood. My question is this. I asked why it was that
Messrs. Walp and Doran were not afforded the opportunity to
respond to the charges made against them and the causes given
to them for why they were fired. The answer is because they
were on probation.
Mr. Dickson. Yes.
Mr. Greenwood. So if that is the answer, then I would
assume that is the way you treat all probationary employees.
You make allegations about them, they are not afforded an
opportunity to respond, and out they go. The allegations
against them could be absolutely false but because they are on
probationary status, they don't get to offer up their side of
the story or defend themselves in any kind of a process. Is
that the way it is?
Mr. Dickson. That is correct.
Mr. Greenwood. That sounds like a terrible policy.
Mr. Dickson. Congressman Greenwood, that is in my
experience the rule or the policy that exist in every
governmental entity in the State of New Mexico and, as far as I
know, throughout the country. There is a period of time during
which employees come to an organization which they do not
accrue the due process rights. We call it the new employee
evaluation period. A lot of other places call it probation.
That is the way the rule is and whether it is fair or not is
open to question.
Mr. Greenwood. Mr. Salgado, did you want to make a point?
Mr. Salgado. I just want to make a point, Mr. Chairman,
that this did not happen in somewhat of the stark vacuum we are
talking about. It is my recollection that there were issues of
performance that were raised in the early part of September and
that those were basically--those issues were gone through the
chain of command and that I believe Mr. Busboom or Mr. Tucker
had ongoing discussions with Mr. Walp and Doran about their
performance. There were these issues that did take place I know
in the early part of September and October timeframe. I believe
that is correct.
Mr. Greenwood. Mr. Busboom, did you have a comment?
Mr. Busboom. That is correct, yes.
Mr. Greenwood. All right. Mr. Dickson, you want to make a
comment?
Mr. Dickson. I would like to address the notion of the
aggressiveness with which these disciplinary actions have
taken. Since the beginning of the Mustang case there have been
a lot of attention focused on the Laboratory. The first thing
that the Laboratory did in order to rectify the situation was
to establish the purchase card review team.
In my view that was an aggressive, open, thorough process
by which we were going to specifically deal with some of these
issues that have been raised by Congresswoman Eshoo. It was an
expected outgrowth of that activity that we would discover
other acts of misconduct if you are auditing you might find.
Parallel to these ongoing events with the purchase card
review team was the theft of TA-33. We have coordinated that
investigation with the FBI very closely. As a matter of fact,
you may recall from your review of the record that we were
criticized for having threatened the FBI by saying we are going
to move Mr. Bussolini and Mr. Alexander out and thereby disturb
the FBI investigation.
We needed to get those people out of TA-33. We needed to
make sure that the security was preserved and that we didn't
suffer any further loss. We gave the FBI a window of time and
after a point said this is as far as we can go and took them
out. They were dealt with within a matter of days. They are no
longer employed by the Laboratory.
The force of circumstances in order to accommodate the law
enforcement needs, accommodate the security needs and
accommodate just the operational needs, we have to make
accommodations between the law enforcement and all of these
people in order to do things. Some of these delays built into
the system are caused by the collaboration among those various
entrants.
Mr. Greenwood. Okay. I want to thank all the panelists for
your testimony, for being here with us voluntarily today. We
are going to have to recess now because we have votes on the
floor. I would also without objection include into the record
Congressman Walden's introductory opening statement.
With apologies to the second and third panels, this recess
will have to continue until 4. We will return here at 4.
[Whereupon, at 1:31 p.m. the subcommittee recessed to
reconvene at 4 p.m]
Mr. Greenwood. We will reconvene and we will call forth Mr.
Darling.
Mr. Darling, if you would come and be seated.
Mr. Bruce Darling is the Senior Vice President of
University Affairs and Vice President for Laboratory
Management, University of California.
Welcome back.
Mr. Darling. Thank you, Mr. Chairman.
Mr. Greenwood. We appreciate you being here and we are
trying to accommodate your schedule so we will try not to delay
you too much.
As you recall from the last panel, this is an investigative
hearing. We take testimony under oath. Do you have objection to
giving your testimony under oath?
Mr. Darling. I do not, sure.
Mr. Greenwood. Okay. Pursuant to the rules of the committee
and the House, you are entitled to be represented by counsel.
Do you wish to be represented by counsel?
Mr. Darling. I do not.
Mr. Greenwood. Okay. Then if you would stand, raise your
right hand.
[Witness sworn.]
Mr. Greenwood. You are under oath and recognized for your
opening statement, sir.
TESTIMONY OF BRUCE B. DARLING, SENIOR VICE PRESIDENT,
UNIVERSITY AFFAIRS, INTERIM VICE PRESIDENT FOR LABORATORY
MANAGEMENT, UNIVERSITY OF CALIFORNIA
Mr. Darling. Thank you, Mr. Chairman. Good afternoon, Mr.
Chairman, Mr. Deutsch, and members of the committee. First of
all, I appreciate your willingness to accommodate me. My father
died at the beginning of January, my uncle died at the end of
January, and unfortunately my great uncle suffered a stroke
Monday. We had to make a difficult decision of terminating life
support and I would like to go home and visit him before he
dies in the next day or two so I really appreciate your
willingness to accommodate me.
What I would like to do with your permission is to read my
brief oral testimony and then perhaps respond to one or two
questions that came up this morning for which I don't think you
received a complete answer. Then I would be happy to answer any
questions that you might have.
Mr. Greenwood. Excellent. Thank you.
Mr. Darling. What I would like to do today is to
reemphasize to the committee and to the American people that
the University of California is committed to reforming the
business and management practices at Los Alamos National
Laboratory; that senior University officials continue to
investigate potential abuses at the Laboratory and to institute
appropriate reforms. Our goal remains to raise our business
practices to the level of our science and weapons programs and
to restore public confidence in the Laboratory and the
University.
As you know, I was appointed Interim Vice President for Lab
Management in addition to my other role at the university on
January 8 of this year. At the first hearing on February 26 I
provided you with a comprehensive list of options that the
University has taken to address the business, procurement, and
property problems at the lab.
With your permission, what I would like to try to do today
is to address several specific issues raised by the committee
during the hearing on February 26, 2003. I would just note that
on a number of these issues, I have consulted with Steven Doran
in the last few days prior to coming here so that you know we
are maintaining open communications as we go forward.
I would also say that we intend to review each of the
answers that we come up with in response to these questions
that were raised by Mr. Walp and Mr. Doran and the committee
with them and with you and will do so in complete candor. If
you have additional information that leads us down another
track, we will be happy to pursue that with the same level of
diligence.
We have continued to make additional management changes at
Los Alamos. Most recently we reached settlement agreements with
former Security Division Director Stanley Busboom and his
Deputy Gene Tucker, as well as with the former Audits and
Assessments Director Katherine Brittin. All three will be
leaving the Laboratory in April, two retirements and one
separation.
In addition, our Deputy General Counsel is meeting, as we
speak, with the U.S. Attorney in Albuquerque to obtain the
additional information we need to make decisions about further
management changes at the Laboratory and to better understand
some of the circumstances that are still in question about the
relationship between the U.S. Attorney and the FBI and Senior
Laboratory managers.
Another important issue is the current status of the
individual who is alleged to have misused her purchase card to
attempt to buy a Ford Mustang, Lillian P. Anaya. With the
Department of Energy Inspector General's permission the
Laboratory is now investigating possible disciplinary action.
There was an interview with her on Friday, March 7, and
although this requires due process, we expect the matter to be
completed and the individual's employment status to be
qualified in April.
Additionally, I now have more information about Mary
Francis Wood and Clarissa Rodriguez in response to Chairman
Greenwood's questions during the last hearing. At my direction
the Laboratory this week did send a letter to Ms. Wood's
employer demanding repayment of the nearly $2,000
inappropriately charged on her purchase card at a casino and
elsewhere. We have referred this matter and the Clarissa
Rodriguez case, which involved a fraudulent travel voucher, to
the Los Alamo District Attorney for possible law enforcement
action and we wait his decision.
There were a number of additional questions raised about
the misuse of the Laboratory's procurement systems. Let me
address a number of them:
First, the allegation regarding excessive gasoline
purchases seems to be explained by an improperly calibrated
compressed natural gas pump meter. That meter has been
corrected and is now dispensing the same amount of fuel as it
shows on the meter.
And, further, there was the fact that one of the vehicles
that was receiving fuel was a fuel tanker that would take
gasoline up to the Laboratory, distribute it then to emergency
vehicles that were not supposed to leave the premises,
generators and other onsite machinery. This might well explain
why there was a high level of gasoline usage that did not
correspond with the very low mileage on that tanker truck.
Again, we are pursuing these issues and if there is additional
information that comes to light, we will pursue that as well.
Second, there has been no settlement to date with the
Contract Associates matter. I think there was a statement made
that the university and the lab had settled up for $50,000.
However, the University's Audit Office has confirmed poor
controls and record keeping both by the lab and the vendor, and
that inadequate controls were built into the contract terms.
The new controls are now in place and we have contracted
with PricewaterhouseCoopers to conduct a comprehensive contract
closeout audit of that contract so we know whether there are
any disputed issues that need to be resolved and how to do so.
Based on the findings, we will seek appropriate
reimbursement from Contract Associates. I might add, we have
encouraged competition from a number of other vendors so we are
not relying solely on that company to make the purchase of the
goods that were previously bought from that company.
Finally, questions were raised about the ineffectiveness of
the Laboratory's controls over its Local Vendor Agreements
(LVAs) and Just-in-Time contracts (JITs). The external review
team that was led by two former Federal Inspectors General and
PricewaterhouseCoopers did begin a review in mid-January of
those procurement practices and it is scheduled to issue its
report in April. The University will act aggressively to
implement any and all necessary reforms.
In the meantime, I should let you know that we have reduced
the number of LVAs from 35 to 27, set new restrictions on their
use, reviewed each agreement to determine its continued value
to the Laboratory, and we are developing additional controls to
strengthen these agreements.
On security matters, it was alleged that the security
clearances of those involved in the thefts at the TA-33
facility had not yet been revoked. We have looked further into
this matter and, as I testified before, the clearances were
suspended by the Department of Energy at our request a full 6
weeks before they were officially terminated from the
Laboratory on December 17, 2002.
Finally, there was testimony 2 weeks ago about the current
state of morale in the Office of Security Inquiries. While this
has been a continuing concern of Interim Director Nanos, I
should also note that the University independently dispatched
its Director of Security to speak to the OSI staff both as a
group and individually.
He concluded that morale of the office is indeed poor, that
the unit is understaffed and has a large backlog of work. We
intend immediately to address these problems, both through
reorganization and other steps Interim Director Nanos will
take.
A number of allegations were made regarding time card and
work order fraud. While a 2001 audit does not suggest systemic
problems, we intend to expand our 2002 audit procedures to more
aggressively look for time and materials overstatements.
Additionally, we have discussed this matter with Steven
Doran to see if there are any other avenues that he thinks are
available that we might pursue.
In closing, I want to emphasize, as I did 2 weeks ago, that
the University has not and will not let its focus on the
important business and management issues that we are discussing
today distract the Laboratory from fulfilling its mission to
the Nation. We remain focused on ensuring that the Laboratory's
scientific and weapons programs continue to meet their
objectives.
These objectives include ensuring the continued viability
of the Nation's nuclear stockpile, monitoring nuclear
proliferation around the globe, and helping prevent and prepare
for nuclear, biological, and chemical attacks. The work being
done at Los Alamos today is as important as at any time in the
60 years that the University has had the privilege and
responsibility of managing the Laboratory. We remain honored to
oversee this important work on behalf of the Nation.
I would like to just conclude by thanking you again for
this opportunity to address you. I would be pleased to answer
your questions. If I may, I will just respond to some of the
items that came up this morning.
[The prepared statement of Bruce B. Darling follows:]
Prepared Statement of Bruce B. Darling, Senior Vice-President,
University Affairs, University of California
Good afternoon, Mr. Chairman, Mr. Deutsch, and members of the
Committee: I would like to take this opportunity to reemphasize to the
Committee and to the American people that the University of California
is committed to reforming the business and management practices at Los
Alamos National Laboratory that are the focus of this hearing. I would
also like briefly to address several specific issues raised the last
time I appeared before you about which I now have additional
information.
Senior University officials continue to investigate potential
abuses at the Laboratory and to institute appropriate reforms. As I
said the last time I appeared before you, our goal is to raise our
business practices to the level of our science and weapons programs--
which all of us agree the nation can be proud of--and in so doing,
restore public confidence in the Laboratory and the University.
With your permission, I will now address several specific issues
raised during the Committee's hearing on February 26, 2003. On a number
of these issues, I have consulted with Steven Doran for clarification
and additional information.
management changes
We have continued to make additional management changes at Los
Alamos. Most recently we reached settlement agreements with security
division director Stanley Busboom and his deputy Gene Tucker. Both will
be separated from the Laboratory.
We have begun discussions with Katherine Brittin and we expect
resolution of her status in the very near future. In addition, our
Deputy General Counsel is meeting, as we speak, with the U.S. Attorney
in Albuquerque to obtain the additional information we need to make
decisions about further management changes.
Another important issue is the current status of the individual who
is alleged to have misused her purchase card to attempt to buy a Ford
Mustang. For some time, the Laboratory refrained from pursuing a
personnel action against this individual because of a pending
investigation by the Department of Energy Inspector General. The
Laboratory recently obtained the Inspector General's assurance that a
Laboratory investigation could be conducted without interfering with
the Inspector General's investigation.
Since receiving the Inspector General's permission, the University
has directed the Laboratory to investigate whether disciplinary action
is appropriate. As you know, the Laboratory and the University must
observe certain requirements of due process in conducting such an
investigation. The Laboratory's human resources division is expected to
complete its formal investigation by the end of this week. The result
may be to convene a Case Review Board to evaluate the findings underway
by the human resources division investigation, and to recommend
disciplinary action against the individual in question. We expect this
process to be completed--and the individual's employment status to be
finally resolved--in April.
Additionally, I now have more information about Mary Francis Wood
and Clarissa Rodriguez in response to Chairman Greenwood's questions
during the last hearing. Ms. Wood was a contract employee at the
Laboratory who used her purchase card to make cash advances and other
inappropriate purchases. The Laboratory terminated her employment on
August 19, 2002, and the matter was later referred to the DOE Inspector
General. At my direction, the Laboratory this week sent a letter to Ms.
Wood's employer demanding repayment of the amounts inappropriately
charged on her purchase card. The University has referred this matter
to the local New Mexico District Attorney for possible law enforcement
action.
Clarissa Rodriguez was a Laboratory employee who cashed a
fraudulent travel voucher. The Laboratory accepted Ms. Rodriguez's
resignation on September 23, 2002, and she repaid the Laboratory on
that date. The Rodriguez matter was referred to the DOE Inspector
General shortly after the Laboratory learned about it. The University
has referred this matter as well to the local District Attorney. To the
best of our knowledge, the Inspector General's investigations into the
Wood and Rodriguez matters are ongoing.
procurement matters
There were a number of additional questions raised about the misuse
of the Laboratory's procurement systems. Let me address a number of
them:
First, it was asserted that purchase cards were used to purchase
more fuel than fire trucks and other similar vehicles could hold. In
looking into this matter, we were informed that some of the purchases
involved compressed natural gas that was being dispensed from a gas
pump with a miscalibrated meter. (The meter has been re-calibrated to
properly record the amount of fuel that is dispensed.) The other
purchases involved a dual-tank fuel truck that dispenses fuel to
emergency response vehicles, emergency generators and other critical
machinery at the Laboratory. This explains the unusually high amount of
fuel that was used. In neither case does it appear that there was any
fraud or abuse involved.
A second issue was the allegation that Contract Associates
``overbilled'' the Lab for millions of dollars and yet the Lab is
prepared to settle the case for only $50,000. For the record, there has
not been a $50,000 settlement. However, the University's Audit Office
has confirmed poor controls and record keeping both by the Lab and the
vendor, and that inadequate controls were built into the contract
terms. The new controls are now in place and we have contracted with
PricewaterhouseCoopers to conduct a comprehensive contract closeout
audit, which will be supervised by the UC Auditor. Based on the
findings, we will seek appropriate reimbursement from Contract
Associates. In addition, several other vendors are now providing the
goods provided by Contract Associates so that there is competition in
obtaining the goods.
Finally, questions were raised about the ineffectiveness of the
Laboratory's controls over its Local Vendor Agreements (LVAs) and Just-
in-Time contracts (JITs). The University learned about these concerns
from Mr. Walp and Mr. Doran several weeks prior to the last hearing. We
took these concerns seriously and pursued them immediately, as we have
with every other issue that has been raised by Mr. Walp and Mr. Doran.
In response, we asked the External Review Team chaired by two
former federal Inspectors General, and aided by a dozen forensic
accountants from PricewaterhouseCoopers to expand its review of the
Laboratory's purchase card program to include a review of all
Laboratory procurement, including LVA and JIT contracts to determine
whether these agreements are vulnerable to abuse.
The External Review Team began this project in mid-January; it is
scheduled to complete its review and issue a report in April. When the
External Review Team's review is completed and its report is issued,
the University will act aggressively to implement any and all necessary
reforms. In the meantime, we have reduced the number of LVAs from 35 to
27, set new restrictions on their use, reviewed each agreement to
determine its continued value to the Laboratory, and we are developing
additional controls to strengthen these agreements.
security matters
It was alleged that the security clearances of those involved in
the thefts at the TA-33 facility had not yet been revoked. We have
looked further into this matter and, as I testified before, the
clearances were suspended by the Department of Energy on October 31,
2002--a full six weeks before the employees' official terminations on
December 17, 2002.
Finally, there was testimony two weeks ago about the current state
of morale in the Office of Security Inquiries. While this has been a
continuing concern of Interim Director Nanos, the University
independently dispatched a representative to speak to the OSI staff
both as a group and individually. He concluded that morale is indeed
``poor,'' that the unit is understaffed and has a large backlog of
work, and that it remains divided between those who share Mr. Walp and
Mr. Doran's concerns and those who reject the allegations made about
inadequate reporting and poor accountability. We intend immediately to
address these problems, both through reorganization and other steps
Interim Director Nanos will take.
time card and work order fraud
A number of allegations were made regarding time card and work
order fraud. While a 2001 audit does not suggest systemic problems, we
intend to expand our 2002 audit procedures to more aggressively look
for time and materials overstatements. Additionally, we have discussed
this matter with Steven Doran, in his new capacity as the Director of
Security for the Office of the President, to determine other avenues
for possible investigation.
In closing, I want to emphasize, as I did two weeks ago, that the
University has not and will not let its focus on the important business
and management issues that we are discussing today distract the
Laboratory from fulfilling its mission to the nation. We remain focused
on ensuring that the Laboratory's scientific and weapons programs
continue to meet their objectives. These objectives include ensuring
the continued viability of the nation's nuclear stockpile, monitoring
nuclear proliferation around the globe, and helping prevent and prepare
for nuclear, biological, and chemical attacks. The work being done at
Los Alamos today is as important as at any time in the 60 years that
the University has had the privilege and responsibility of managing the
Laboratory. We remain honored to oversee this important work on behalf
of the nation.
Thank you again for this opportunity to address the Committee. I
would be pleased to answer your questions.
Mr. Greenwood. Why don't you just go right ahead and do
that.
Mr. Darling. Thank you. One of the questions that came up
this morning was is any of the material that appeared in the
30-pound box of Laboratory documents that went to the
Albuquerque Journal classified information.
This was an area of concern to us and with the cooperation
of both the attorney for the Albuquerque Journal and the
publisher of the Albuquerque Journal we were able to have a
national nuclear security administration classifying official
go out, review the documents, and determine that there are no
classified documents in that material and so we are all
comforted to know that there was no breach of national security
by the release of those documents to the newspaper.
In addition, you asked about two key meetings. One was the
meeting with the FBI and senior Laboratory management
officials. Just to clarify, that was a meeting that took place
on October 24, to the best of my recollection. It was a meeting
between Mr. Salgado and Mr. Dickson from the Laboratory and the
U.S. Attorney, and I believe some FBI agents.
That remains a very important meeting because that is the
meeting at which there continue to remain differences of
opinion about what the U.S. Attorney and the FBI conveyed to
the Laboratory officials about either their satisfaction or
dissatisfaction with Mr. Walp's and Mr. Doran's performance.
You also asked about the date of the meeting in which
senior Laboratory officials met to determine the fate of Mr.
Walp and Doran. To be clear, to the best of my knowledge, that
was on November 18. There was some confusion about who was
present at that meeting. I believe it was said that Mr. Busboom
and Mr. Marquez were present. To the best of my knowledge they
were not present.
In previous meetings they told us that they were not
members of that meeting in which Mr. Walp and Mr. Doran's fate
were discussed. I believe the participants in that meeting were
Mr. Salgado, Ms. Milum, Mr. Dickson, Mr. Holt, and Mr. Kruger.
So I would be happy at this point, Mr. Chairman, to answer any
other questions you might have.
Mr. Greenwood. Thank you, Mr. Darling. The Chair recognizes
himself for 10 minutes. On December 18, 2002, you interviewed
several people including Mr. Salgado. At that time you took
extensive notes. During your interviews you asked Mr. Salgado
to explain why LANL fired Mr. Walp and Mr. Doran.
You previously testified that Mr. Salgado told you he was
concerned that Walp and Doran would obtain whistleblower status
following their anticipated meeting with the Department of
Energy Inspector General.
Reportedly he also told you that he suspected that they
were the source of the anonymous 30-pound box of documents that
were delivered to the Albuquerque Journal to which you just
referred. Can you tell the subcommittee about your interview
with Mr. Salgado and whether any of the other people you
interviewed told you that they had discussed Walp and Doran's
potential whistleblower status with Mr. Salgado prior to their
firing.
Mr. Darling. Yes, I would be pleased to. As I indicated at
the last hearing, we interviewed 14 officials both at Los
Alamos and at the university over a 2-day period, December 18
and 19. What emerged was a story with many consistencies and a
few striking differences.
Mr. Salgado was very candid with us. He told us that the
meeting that I just described on November 18 had taken place.
He described that Mr. Busboom, who was Mr. Walp's and Mr.
Doran's immediate supervisor, was not present in the room. He
indicated that there were two issues that were discussed that
was related to their termination during their new employee
evaluation period.
One of those items was that the Inspector General had sent
an official from Washington, DC to Los Alamos to interview
employees at the lab. That Mr. Salgado had spoken to the DOE
Inspector General. That the DOE Inspector General refused to
tell him who the representative was going to interview at the
lab and that he suspected that it was going to be Mr. Walp and
Mr. Doran.
He did indicate to us, as he said today, that he thought
there were a number of performance issues which contributed to
the decision to terminate their employment. But he did go on to
say that he was concerned that if Mr. Walp and Mr. Doran were
interviewed by the Inspector General, that would somehow
confer, I think the term he used was technical whistle blower
status on them and that it would make it more difficult for
them to be terminated after that meeting. One of the reasons
for making the decision to terminate them when they did was
because of that forthcoming meeting.
Second--I am sorry. I have forgotten your second point.
Mr. Greenwood. So have I. Oh, the 30-pound box of
documents. Yes. Did he raise that issue?
Mr. Darling. Yes, he did. He indicated--no, I am sorry.
There was a separate meeting on December 12 at which some of us
met with Secretary Abraham, Deputy Secretary Costello and NNSA
Administrator Brooks. It was in that meeting that he told the
Secretary that he suspected, though I think the term he used
was it is very likely that it was Mr. Walp and Mr. Doran who
had provided the materials to the Albuquerque Journal and that
he was certain that the box of documents had come from the
Office of Security Inquiries.
Mr. Abraham, the Secretary, I think captured all of our
feelings at that meeting when he responded by saying, ``If you
do not know that to be a fact, you should not be raising that
issue. It undermines your case and it is not something that you
should be saying.'' As I said, I think that echoed the
sentiments of everyone else in the room at that time.
Mr. Greenwood. The University of California terminated Mr.
Busboom's association with the lab yesterday. Is that correct?
Mr. Darling. Mr. Busboom will retire on April 2. I believe
the agreement with Mr. Busboom was reached at the end of last
week if I recall correctly.
Mr. Greenwood. And why did the university want Mr. Busboom
to retire?
Mr. Darling. We had three options. One option was to
terminate Mr. Busboom. A second option was to allow him to take
the position that I described at the last hearing with a
reduced salary. I think his salary currently is $190,000 and
the law practice would have been to reduce it to, in this case,
$140,000 commensurate with responsibilities of the new position
that had been identified. The third was to reach a legal
settlement.
Given his prior performance as reflected in the performance
evaluations that are in Laboratory files, our general counsel
said that if we did terminate him, that he would have strong
grounds for a wrongful termination suit. In these wrongful
termination suits he would prevail and that the Laboratory
would be responsible for paying many, many multiples of what it
is that we have agreed to settle for.
If you pursue the second option, which was to allow Mr.
Busboom to be reassigned to an additional position--a new
position at the lab at a lower salary, we would then be faced
with paying that lower salary for an indefinite period of time.
As you might imagine, as the years would roll on that would
also amount to a very large amount of money. What we decided is
in view of the recent events, the best thing that we could do
for Mr. Busboom and for the Laboratory and for the American
people would be to allow him to retire and to provide him with
a fair settlement.
Mr. Greenwood. And what was that?
Mr. Darling. That fair settlement is a 12-month
compensation equal to his current compensation of $190,000 per
year, COBRA health insurance benefits for that same period of
time, and his attorney's fees.
Mr. Greenwood. Okay. You just explained to me how you could
terminate the relationship or change the relationship with Mr.
Busboom. My question is why? In other words, Mr. Busboom sat
here and you were here and basically said he didn't do anything
wrong. Your attorney said he advised you that if he had a
strong wrongful termination case, that he could win. Under
those circumstances why did the university want him to be gone?
Mr. Darling. Well, we believe that the circumstances
surrounding the termination of Mr. Walp and Mr. Doran were
inappropriate. That we received discrepant views from Mr.
Busboom and Mr. Tucker in our meeting with them on December 18
about why they were hired in the first place. What degree of
authority they were to be given at the Laboratory for
conducting their investigations.
And I would just summarize it by saying that if we were
told they were only to do inquiries and not investigations and
that was an important distinction for the Security Division. On
the plane home that night as we reviewed documents, what we
found was that the job description, the job announcement, and
the job advertisement all suggested that they were being hired
to do investigations which I think conveys a different level of
seriousness about the matter than just an inquiry.
And that we did not believe that either the Laboratory
Security Division or the senior management of the lab took
appropriate steps to guide them, to try to reconcile the issues
that came up that caused the conflict that you heard about
today, and ultimately the decision to terminate them was an
unwarranted decision and so we have made that decision for that
reason.
Mr. Greenwood. How about Mr. Salgado? Tell us about his
separation.
Mr. Darling. I was not directly involved with Mr. Salgado.
Dr. McTague, who will appear on a later panel, was the Vice
President for Lab Management at that time. When Dr. Browne
informed President Atkinson, I believe, on December 23 that he
intended to resign from the Laboratory, Dr. McTague spoke to
Mr. Salgado. Mr. Salgado had not yet heard the news.
My notes reflect the fact that Mr. Salgado told Dr. McTague
that Mr. Salgado would step down as well. He was prepared to
assume responsibility for what had happened. The understanding
between them, I believe, was that Mr. Salgado would come to
work in Dr. McTague's office for a period of 6 months or be
compensated for a period of 6 months.
There was somehow a breakdown in communication because Mr.
Salgado says that he did not learn that he was separating from
the Laboratory until January 2 when the university issued the
press announcement. I can't explain that discrepancy but then
the university began a series of negotiations with Mr. Salgado.
Those negotiations concluded on January 31 without reaching
agreement and the president decided on January 31 to terminate
Mr. Salgado who is an at-will employee and, therefore, could be
terminated whereas Mr. Salgado and others, that I am sure we
will be talking about, were not at-will employees. Excuse me,
Mr. Busboom. Thank you, Mr. Walden.
Mr. Greenwood. You testified that Charles Lobello, one of
the University of California's outside counsel, was scheduled
to meet with the U.S. Attorney's Office in New Mexico today.
What do you hope to learn from the U.S. Attorney in New Mexico
and has the University of California had any other substantive
discussions with the U.S. Attorney or the FBI regarding the
LANL investigations of 2002?
Mr. Darling. Yes. Both Mr. Lobello, former U.S. Attorney,
and Mr. Lumburg, our Deputy General Counsel, are in Albuquerque
today to meet with a number, I think four or five members of
the U.S. Attorney's Office there.
This is something that we sought to do beginning of
December right after December 18 when we learned more details
about the terminations of Mr. Walp and Doran, but this is the
first occasion that it was possible to hold that meeting.
We had no substantive discussions up until then. There have
been a number of discussions trying to explain what our
intentions our, trying to schedule the meetings, etc. This will
be the first meeting. The purpose of the meeting is to try to
find out, one, what were the relationships between the
Laboratory and the U.S. Attorney and the FBI. Were they good.
Were they not. Were there differences in the relationship
between Mr. Walp and Mr. Doran, on the one hand, and the senior
Laboratory management on another.
Is it possible that senior FBI officials were saying one
thing to Mr. Dickson and Mr. Salgado and yet the agent involved
in the case was saying something different to Mr. Walp and
Doran that specifically relates to the question of whether Mr.
Walp and Mr. Doran were authorized or not authorized to provide
information about cases being reviewed by the FBI to senior
Laboratory management.
Third, how might we keep that relationship strong and more
productive in the future. Last, whatever information they might
have about the cases that Mr. Walp and Mr. Doran were pursuing
and how is it that they view the professionalism and the
competence of Mr. Walp and Mr. Doran.
Mr. Greenwood. Thank you, Mr. Darling.
The Chair recognizes the gentleman from Florida, Mr. Davis,
for 10 minutes.
Mr. Davis. Mr. Darling, before it becomes painfully obvious
I will confess to you that I have stepped into the middle of
this and I will do my best to try to handle this in a competent
fashion. I am going to read you some questions that have been
prepared by our staff and perhaps some of these points have
been covered if I am not being sufficiently clear. I am sure
you will help me.
One of the points that was surprising to us this morning is
Mr. Salgado stated that the cultural issues at Los Alamos
including the lack of operational formality and management
discipline caused many of the problems. But the evidence
further suggest that neither Mr. Salgado nor Mr. Dickson really
practiced operational formality or management discipline in
their dealings with Mr. Walp and Mr. Doran.
Both of them moved outside their designated roles to try to
run criminal investigations instead of leaving that job to the
professionals the lab had hired. Mr. Salgado wanted to direct
on a daily basis the Mustang investigation. Mr. Dickson wanted
to be in charge of the TA-33 investigation and control all the
communications with the FBI and the U.S. Attorney's Office. Is
this the way you view the situation as well?
Mr. Darling. One of the conclusions that I think came--
there were five people who met with me at the Laboratory to
pursue these matters. I think it is fair to say that all of our
view was that Mr. Walp and Mr. Doran were being held to more
exacting standard of competence than Laboratory management was
holding either other employees or holding itself. I will give
you a couple of examples that were brought up this morning.
You will recall that Mr. Dickson and Mr. Salgado said that
Mr. Walp and Mr. Doran provided inaccurate information about an
address for Lillian P. Anaya. The confusion arose because there
is another employee that I should add very clearly here was not
involved in any of these matters but who has the name of
Lillian M. Anaya.
There was some initial confusion during that short period
on which they were working on the Mustang case about whose
address should be examined for the purposes of finding out
where the Mustang had been delivered. We were told that was
inaccurate information because they provided Lillian M. Anaya's
address.
Yet, that night on the plane flying home when we reviewed a
Laboratory document that was being supported by the Laboratory
administration, we found four separate addresses for Lillian P.
and Lillian M. Anaya, none of which corresponded to the address
that the Laboratory had told us was the correct address.
Now, if there was that much confusion on the part of the
Laboratory management and its advisors about the address, yet
they did not hold themself to that same standard of accuracy,
we did not understand why it was that Mr. Walp and Mr. Doran
were being held to that standard of accuracy and why it was
that that fact was a fact that was used for their termination.
That is one example of the type of issues that we found
very troubling that led us to pursue the matter with the degree
that we have and finally to reinstate the employment of both of
these individuals. There were other discrepancies like this.
That wasn't the only one.
Mr. Davis. One of the surprising points is that Mr. Walp
and Doran were never allowed to attend meetings with Mr.
Salgado and Mr. Dickson. Mr. Walp's counterpart at the FBI
often attended, however. How was Mr. Walp supposed to
understand the agreements made or have any input into them if
he couldn't attend these meetings?
Mr. Darling. Well, I think the Laboratory administration
would say that Mr. Dickson was assigned the responsibility for
liaison to the FBI and the U.S. Attorney so it was appropriate
for that to take place. Like you, I come to the conclusion that
the people who are working on issues need to be deeply
involved.
They are the ones who hold the facts and it is very
important that those work as a team. I, again, do not believe
that the Laboratory administration reflected that sense of a
team involving the people who had the greatest responsibility
in these matters and I think that was a misjudgment on their
part.
Mr. Davis. I believe it was Mr. Salgado who said he had
only spoken to Mr. Walp a few times. Yet, he had a strong
opinion that Mr. Walp was not competent. Does it surprise you
that he never asked Mr. Walp about any of his complaints?
Mr. Darling. That is one of the troubling issues. As I say,
the October 24 meeting was a key meeting that was cited as a
reason for terminating Mr. Walp and Mr. Doran. Mr. Salgado told
us that he came back from that meeting having heard from those
officials that the lab had blown the Mustang case.
Mr. Salgado came back from that meeting telling us that he
believed that meant that Mr. Walp and Mr. Doran had blown the
Mustang case. Mr. Salgado came back from that meeting thinking
that the U.S. Attorney and the FBI were saying that Mr. Salgado
had blown the case by the aggressive nature in which he pursued
it. Am I misusing names again?
Mr. Walden. I think you meant either Mr. Dickson or Mr.
Busboom came back.
Mr. Darling. I meant Mr. Dickson came back. Mr. Dickson,
who had accompanied Mr. Salgado had a different interpretation
of the message. I am sorry for confusing names here today. Mr.
Dickson believed it was Mr. Salgado who was being pointed to by
the U.S. Attorney for blowing the case by pursuing it before
the FBI was able to develop a case.
Now, our question was why did they not speak to each other
about that? Why did they not speak to Mr. Walp and Mr. Doran
about that? Why did they not ask the U.S. Attorney and the FBI
about that?
Therefore, when you take the action to terminate someone
and you do it on the ground that you are going to cite later,
it seems to me you have a deep responsibility to inquire a
little bit further than just wondering about what someone said.
You have the responsibility to go back and be sure of what
someone said.
Mr. Davis. Just one more question. If you will bear with
me, I am going to read you something that our counsel is
attempting to write right now more abbreviated. There has been
discussion about changing the 60-year-old culture at Los
Alamos. Yesterday at a hearing in the California State Senate
the university's treatment of whistleblowers was challenged.
Mr. Nanos admitted that he had not been kind to whistleblowers.
I want to refer you to a case we have begun to look into as
an example of what can happen. With reference to Tab 132, this
is a report from an administrative law judge concerning the
termination of Jimmy Russell from S Division. Mr. Russell was a
contract employee who had worked at S Division for 15 years. He
was a self-assessment team leader, did audits and assessments
of security programs.
In 1999 he had a dispute over whether certain data should
be identified as security infractions or security incidents.
Shortly thereafter he was terminated and removed from the work
place for threatening behavior. His group leader, Kevin
Leifheight and Mr. Busboom were specifically cited as playing a
crucial role in collecting and transmitting unfounded
allegations of Mr. Russell's threatening behavior.
The Judge further found the consensus for the immediate
termination of Mr. Russell. It was reached by an emergency
advisory panel at LANL, was substantially tainted by the
selective and misleading information that it received from
these UC managers. Mr. Russell won in court but lost his job.
No disciplinary action was ever taken against either one of
these gentlemen.
One of the members of the emergency panel told us that Mr.
Russell was not dangerous and that he simply went along with
Mr. Busboom and Leifheight. We are going to look into this
further and want you to promise that you will also look into
the treatment of Mr. Russell and his accusers who were found in
the wrong.
Mr. Russell was unemployed for 2 years and lost an
opportunity to become a lab employee because of these actions
by Mr. Busboom, Mr. Leifheight. He is not the first Los Alamos
contractor employee who has found himself in the street as the
barrier of bad tidings. This is what you need to deal with if
you are going to change the culture at the Laboratory. What can
you do in this situation?
Mr. Darling. Mr. Davis, let me just say that Admiral Nanos
is the new interim director so he has only been on the job
since January 6 so I don't think he has helped create that
culture. I think he is one of the individuals who is involved
in trying to change that. He has been very open. He has been
holding meetings with all Laboratory employees receiving
hundreds of e-mails from employees. I think there is a sincere
belief on the part of the lab employees that he will help open
up the communication for the reasons that you mentioned.
With regard to Mr. Russell I first learned about the case
in a question from Mr. Deutsch at the hearing on February 26.
We have reviewed the decision by the representative of the
Department of Energy. We have not talked to counsel that
represented the Laboratory which is something we are seeking to
do and we need to do.
Unfortunately, it appears to be a case in which the
personnel in the Office of Securities Inquiries failed to
sufficiently analyze the underlying fact of the case. It
appeared there was a failure to resolve issues short of an
administrative hearing.
It appeared that there was an underlying distrust reflected
in what I briefly read in the decision from the Department of
Energy official toward the Laboratory officials who were
dealing with Mr. Russell so we need to understand a few more
facts which we are trying to do in order to address your
question. The first fact why the supervisors in the Office of
Security Inquiries did not do an in depth analysis of the facts
prior to termination.
Second, why the deficiencies in the evidence and why was
there no effort made to reconcile these differences before the
termination. I think we have some of the same questions in this
case that I alluded to in the case of Mr. Walp and Mr. Doran
and it is something we are pursuing right now.
Mr. Davis. Once you conclude your analysis, what
conceivably is the best thing you could do to compensate Mr.
Russell and to send the appropriate message about how people
will be treated henceforth in situations like that?
Mr. Darling. That is a good question, Mr. Davis, but I
think it would be premature of me to try to respond. We really
don't know the full set of facts. We are pursing them
seriously. Once we have them, I think as you have seen in many
of our options, we are prepared to take action. We will not be
reluctant to do so. I think it is important that we look at the
facts first.
Mr. Walden. Thank you, Mr. Davis.
Mr. Darling, let me just read for the record here part of a
statement from the decisionmaker in the case. It says, ``I find
the UC based its decision to terminate his assignment [meaning
Mr. Russell] on the alleged incident of threatening behavior by
Mr. Russell which lacked any substantial factual basis and
other incidents were grossly exaggerated. Moreover, I find that
Mr. Russell's supervisor, his group leader, and his division
director appeared to have played a crucial role in collecting
and transmitting unfounded allegations of Mr. Russell's
threatening behavior.'' It goes on from there. I am sure you
have read.
Mr. Darling. I have skimmed it.
Mr. Walden. Who is his supervisor or who made the decision
to terminate? Was that Mr. Busboom?
Mr. Darling. Mr. Walden, you are taking me beyond a level
of knowledge that I have. As I said, I have just learned about
this. I have not read the full case so I am not able to answer
that question.
Mr. Walden. That goes back to July 2000, I think. It would
be interesting to know. That is a pretty damning indictment,
frankly, from an administrative law judge.
Mr. Darling. It is a very troubling statement.
Mr. Walden. I don't envy the task that you have agreed to
walk into either, Mr. Darling. You have a lot on your plate. I
have a question, though. Several of them. Maybe we can move
through them. So Mr. Busboom is going to get paid $191,000
salary, his insurance for a year, and his attorney's fees?
Mr. Darling. Yes. I believe the figure is $190,000 but I am
not going to quibble.
Mr. Walden. $190. Okay. Mr. Salgado is terminated without
any compensation because he is an at-will employee.
Mr. Darling. That is correct.
Mr. Walden. What about Mr. Doran? What is his status right
now in terms of settlement?
Mr. Darling. I am glad you asked. You asked that question
at the last hearing and I had to go off and attend to other
duties. Mr. Doran is someone with whom we were negotiating
since we reinstated him on January 17. He is now employed by
the President's Office of the University of California as
Director of Security for the Office of the President to do two
things.
One is to oversee the security guards that we have in the
building. The second is to assist Senior Vice President Molinex
who is responsible for business and financial matters and the
university auditor who reports to Mr. Molinex and any special
investigations that they deem appropriate at any of our 10
campuses or three national laboratories.
Mr. Walden. So his status is settled?
Mr. Darling. It was settled. I learned this morning from
his attorney, Ms. Bonabe--we though we had an agreement in
terms of the settlement. I learned from her this morning that
there is one outstanding issue. I believe she is here, or at
least was here. It is something we are trying to understand and
resolve as quickly as possible in the same sense of openness
and fairness in which we have pursued his rehiring in the first
place.
Mr. Walden. How much compensation is he seeking?
Mr. Darling. Let me see if my memory will serve me well
here. I believe his compensation is $105,000 per year. That is
for working at the university.
Mr. Walden. Right. In terms of a settlement?
Mr. Darling. There is a settlement amount. I am sorry but I
am just drawing a blank on the dollar amount.
Mr. Walden. Perhaps we can get that at some point.
Mr. Darling. If you will bear with me for a moment I have
something here but I don't know if it has--no, I am sorry. I do
not have those details. I would be happy to report back to you.
Mr. Walden. I guess at least the fundamental question with
these sorts of settlements, who actually ends up paying that?
Mr. Darling. I am glad you asked that question.
Mr. Walden. Does that get billed back to the Federal
Government?
Mr. Darling. No. With many of the costs that we have taken
on whether it be hiring in PricewaterhouseCoopers, whether it
is hiring Ernst & Young, all of these settlement agreements
will be paid for by the university. We will not seek
reimbursement from the Federal Government for them.
Mr. Walden. Mr. Darling, I am told that recently LANL
disclosed that an employee came forward to declare that for a
number of years he had been selling LANL computer source codes
and then using the proceeds to purchase new computers for his
section routing the money through his personal bank account.
Who is handling this matter? What is the status of the review?
Have you determined whether any LANL funds or computers were
converted to this employee or others for personal gain or
benefit?
Mr. Darling. Yes. I learned about this, I believe, about
the time of the last hearing or shortly thereafter. There was
an individual who was writing unclassified computer code. I
just want to emphasize that so we don't get confused with any
national security issues.
Apparently we have an apparatus where one can take
technology and license it to the private sector so that we get
good ideas into the market place and that way, I think, do the
American public a great service from inventions developed with
Federal funds.
He instead apparently chose to go around that process
either out of frustration with it or for some other reason. I
don't know. I don't want to attribute motives. He did, indeed,
license that software code to a number of firms. We are looking
into that. The university auditor is looking into that
aggressively.
One of the issues we had to deal with was whether to put
him on investigatory leave while this was going on. The
decision was made that since he was very cooperative there was
no need to do that. We have learned that there are at least
$100,000 involved. Perhaps more. He says he used it solely to
make purchases at the Laboratory and that is one of the things
we will be investigating along with, frankly, reviewing all of
his bank records and any other financial transactions and see
if that is true.
Mr. Walden. I appreciate that, Mr. Darling. I guess the
entrepreneurial spirit is alive and well at the lab. We have
seen a number of different examples, this being among them.
What are the safeguards? How do you know that somebody else
isn't doing this that hasn't come forward or hasn't been
caught? How do you keep track of that? Do you feel the system
is adequate?
Mr. Darling. Mr. Walden, I don't know the system at Los
Alamos very well. The University of California has one of the
most--let me just back up and say this comes about as a result
of the Bayh Act in the early 1980's. The idea was to take ideas
that at that point languished within the realm of the Federal
Government, put them to work in the market place, and drive the
creation of new companies, jobs for people, and much of what
you have seen.
The University of California is the largest licenser of
technology of any university in the United States. I believe
our revenues last year were around $80 million from licensing
everything from technology, etc. We have a very good system.
You are obliged as an employee when you go to work at the
university, or one of our labs, to sign an agreement that you
will turn over all of your patentable inventions to the
University of California.
We then have a process that provides an incentive back to
the scientists so that they will receive personally some of the
money in return. The department will receive the money and the
university will receive some money in order to achieve that. We
have a process that is reviewed, audited, and so forth in order
to try to ensure the sanctity of that.
Mr. Walden. Yes. I understand. I guess my question would be
the process for somebody who wants to play by the process is
pretty easy to follow. The question is what are the safeguards
to make sure that somebody doesn't go around that. I assume you
will be looking into that.
Mr. Darling. Yes.
Mr. Walden. Reportedly the FBI recently interviewed Janet
Campbell, an architect formerly employed by UCSF regarding
allegations that certain construction engineering contractors
violated California law regarding bids for UC construction
projects. Are you aware of any lawsuits or allegations of bid
rigging, price bundling, or improper drafting of proprietary
building specifications at recent UC construction projects at
LANL or Sandia?
Mr. Darling. I am not. I did learn from Mr. Molinex that
there was a complaint. I don't know whether it was by this
individual. We are looking into a complaint. I was not aware
that it was at Los Alamos. Sandia is a separate Laboratory. I
am not aware of anything to do with Sandia.
Mr. Walden. Reportedly the plaintiff in one of these
lawsuits against UC is scheduled to meet with the
representatives of the UC Office of the President and has asked
that Mr. Doran attend this meeting. Apparently UC has denied
this request. Do you have any information on that?
Mr. Darling. That is the first I have heard about this, Mr.
Walden. I would be happy to inquire about it as soon as the
hearing is over.
Mr. Walden. Mr. Busboom was paid to retire. What about
Tucker and Katherine Brittin?
Mr. Darling. Mr. Tucker is a very similar circumstance to
Mr. Busboom. He will also be retiring on April 2. The terms of
the agreement are quite similar. One year of compensation at
his compensation which I believe is $165,000 per annum, 1 year
of COBRA insurance benefits, and, in this case, partial
attorney's fees.
Mr. Walden. And Katherine Brittin?
Mr. Darling. Katherine Brittin will be departing from the
Laboratory on April 17. We have provided, again, for the same
reasons that I explained earlier, 1 year of salary, 18 months
of COBRA benefits but no attorney's fees or other costs.
Mr. Walden. All right.
Mr. Darling. I realize that these are very large numbers.
For many Americans these are salaries that they might never be
able to aspire to in a lifetime. I don't want to minimize in
any way the dollar amounts involved, but I do want to just to
reiterate that when we looked at the alternatives, they would
have indeed been much, much more expensive.
Mr. Walden. There are a lot of people in my district who
would love to come there and get fired or retire early.
Mr. Darling. I understand that.
Mr. Walden. It is outrageous. I understand, I guess, what
you face. It seemed to me that given the issues that are
involved in the lab and the people that have not been held
responsible in any measure seem to be able to milk this system
and walk out the door with an extraordinary settlement and----
Mr. Darling. Mr. Walden, your display is one that my
colleagues that are here with me today have seen me express in
recent weeks as I have pursued how it is that we might come to
a different conclusion here. They will tell you that I pushed
very hard for termination. It was only after repeated attempts
on my part to find a way to do so that we ended up where we are
today.
Mr. Walden. Do you concur with the IG's comment that it
was, I believe the term was, incomprehensible that Mr. Walp and
Mr. Doran were fired?
Mr. Darling. I do. In my oral testimony on February 26 I
said that not only was it unwarranted, but that we did agree
with the DOE Inspector General's term that we found it utterly
incomprehensible.
Mr. Walden. If everybody agrees that it is
incomprehensible, why isn't the person who did the firing and
signed the letter fired without compensation?
Mr. Darling. Mr. Salgado was terminated without
compensation.
Mr. Walden. Mr. Busboom signed the letter. Didn't he?
Mr. Darling. Yes, he did. I think, however, he testified
today that he did not make the decision and that is one of the
points of discrepancy that became evident on December 18. Mr.
Busboom told us initially that he had made the decision to
terminate them for a variety of performance reasons.
Then as we progressed through the day and informed Mr.
Busboom that there had been a meeting on November 18 at which
their termination was discussed and ultimately settled, we
asked Mr. Busboom whether he had been aware of that meeting.
Mr. Busboom expressed great surprise. He had not only not
participated in the meeting, he had not been aware that the
meeting had taken place.
He had not been aware that the chief of staff, the director
and deputy director of the Laboratory, had offered the
termination letter. He only knew that it came from his
immediate supervisor, Mr. Holt. I think Mr. Busboom would
acknowledge as he did today that he did not make the
termination decision, that it was made by Mr. Salgado. I think
I heard him say that earlier this morning.
Mr. Walden. But it sounds like you just said that he told
you initially that he made it based on a series of reports.
Mr. Darling. I believe he thought he did. Then I think as
we pursued our interviews with the 14 people and new
information came out, I think we gave Mr. Busboom information
that caused him to realize that he had not after all made the
decision, that the decision had been made for him and the
letter had been drafted for him.
I would say what he did was he probably believed there were
performance inadequacies that might have justified the
termination and he edited very slightly the letter but the
decision was made by Mr. Salgado as he said to us, and as he
said to you.
Mr. Walden. My time has expired but that is the most
bizarre story I have ever heard in employment and I have been a
private employer for 17 years. I don't understand how somebody
thinks they are letting somebody go and then discovers they
really didn't do it.
Mr. Darling. It is another instance of troubling issues
that left us not only perplexed but troubled and why it is that
we pursued the issues well before we knew that your committee
was even interested. This was a very troubling matter to the
five of us as you might imagine.
Mr. Walden. I can.
Mr. Greenwood. My wife just got me to buy her new drapes
and she convinced me it was my idea.
Mr. Darling. I think the chairman had seen the movie ``My
Big Fat Greek Wedding'' where one can see an example of that
transaction taking place.
Mr. Walden. And now for either a song or a poem, I hope.
The gentleman from Massachusetts, Mr. Markey, is recognized for
10 minutes.
Mr. Markey. I can actually go to ``My Big Fat Greek
Wedding'' and I think I am going to go to that for my opening
moment then. I will say that the problem with the University of
California, Mr. Darling, is that they thought they could spray
Windex on anything and it would make it okay like the father in
``My Big Fat Greek Wedding.'' It is important ultimately to
have to deal with the issues. You just can't spray it away and
hope that it is gone.
The questions I have for you relate to the way the
University of California treats whistleblowers. In the case of
Mr. Walp and Mr. Doran, their stories were all over the press.
Congress weighed in. UC has, at least, partially remedied the
situation.
Not all whistleblowers at UC get much attention. Take, for
example, Dee Kotla who worked for Livermore until 1997. She was
fired after she testified that she had witnessed sexual
harassment at the lab. The lab said she hadn't been retaliated
against but rather was fired for ``improperly using her
telephone and computer.''
It turned out she made a whopping $4.30 worth of personal
calls. She sued and she won $1 million. The university
appealed. She then asked for her legal fees, about $700,000 to
be paid by UC, and she won that, too. The University of
California continues to appeal. The University has run up at
least $800,000 in legal fees fighting this case for 6 years,
all over $4.30 worth of personal calls bringing the grand total
to $2.5 million, all supposedly because of a $4.30 telephone
call.
In the meantime, Dee Kotla has to live each day of her life
explaining why she was fired to perspective employers. Now, my
question is, Mr. Darling, are you going to pay for all these
legal fees or is the Federal Government going to pay for all
the legal fees?
Mr. Darling. I do not know the answer to that question, Mr.
Markey, because I am not familiar with the case, but I assure
you I will look into it.
Mr. Markey. Well, again, you said earlier, ``We are going
to pay for the legal fees'' in this one case that we were
talking about. I wouldn't want anyone to get the misimpression
that you are willing to assume all of these legal fees since
the Federal Government ultimately reimburses you, the
Department of Energy. Unfortunately, that creates a
disincentive for you to settle since the Department of Energy
will reimburse you for continuing on with this case
indefinitely over a $4.30 phone call.
I will get to my question momentarily, but before I do I
want to name just a few other whistleblowers that the
University of California has forced to fight for justice for
years since they have not had the benefit of major press
attention or a congressional hearing.
Michele Doggett. I would like to say her name. She was
fired by Livermore in 1999 after she disclosed waste, fraud,
and mismanagement. Don Adrian who alleges that in 1997
Livermore conspired to steal a defense contract from his
company after he reported waste, fraud, and mismanagement of
funds that the lab was supposed to use as part of a cooperative
research and development agreement.
Janet Benson who has had a whistleblower case pending
against Livermore since 1994. Charles Quinones, a security
guard, fired by Livermore right after September 11 after he
disclosed security and safety problems. And you have already
been talking about Jimmy Russell, a former Los Alamos employee
who was fired after making disclosures of security violations
who had to fight for years with no income before he finally
won.
Is the University of California, Mr. Darling, committed to
quickly resolving these and the other whistleblower cases?
Mr. Darling. Mr. Markey, you bring these to my attention
for the first time. I have only been in this position since
January 8, as I mentioned before you came into the room. If you
bring them to our attention, we will look into them with a
degree of seriousness that we have shown thus far.
Mr. Markey. The university often argues in court that it
has State sovereign immunity and, therefore, can't be sued
under Federal statutes even though these activities occurred at
a Federal nuclear weapons lab. It then turns around and bills
DOE and American taxpayers for its legal fees. How do you
justify that?
Mr. Darling. I am not an attorney and I am simply not in
the position to have the information to comment in response to
your question.
Mr. Markey. Okay. Now, in each of these cases that I have
just listed, is it your understanding that the Department of
Energy will bear the legal cost or will the University of
California will bear the legal costs?
Mr. Darling. Since this is the first time I have heard of
them, I am in no position to answer you either way.
Mr. Markey. Again, I continue to believe that 95 percent of
these costs are passed onto the Department of Energy, again
creating a tremendous disincentive for you to ever settle since
the Federal taxpayer will pick up the legal fees. As a result,
you could continue harassing these poor people forever at
Federal taxpayers' expense. I just think there is a point in
time at which this just has to end.
If you are willing to put these bills on the University of
California, these incredible legal bills, that is one thing,
but if you going to try to continue to put this on the Federal
tab, believe me, okay, it is not going to last much longer
because I think there is a bipartisan commitment here to end
this practice of harassing these people indefinitely.
Now, you said earlier that one of the individuals who fired
the two Los Alamos whistleblowers just agreed to leave the lab
for settlement of $190,000, health insurance, and all his legal
fees. This is the guy who fired the whistleblowers. Have you
ever offered a year's salary, health insurance, and legal fees
to Mr. Walp or to the other whistleblowers who were wrongly
fired?
Mr. Darling. Mr. Markey, we had an extended discussion
about this right before you walked into the room. I did say
that the individual who terminated their employment was
terminated himself with no compensation whatsoever. Second, we
have rehired both Mr. Walp and Mr. Doran at their full former
salaries. I think we have shown the seriousness of intent here
to try to redress these improper activities.
Mr. Markey. So Walp is a consultant and you have rehired
him?
Mr. Darling. We rehired both Mr. Walp and Mr. Doran. Let me
just back up and walk you through the sequence. We learned
about their determination on November 25 midday. They had been
terminated and escorted off the lab property that morning. We
immediately began to pursue information because we did not feel
that the reasons that were offered to us for their termination
were appropriate.
In late December after we learned that they had an attorney
we started meeting with them. That meeting occurred on January
17. As I explained at the last hearing, once we had an
opportunity to meet with them and hear their story, we
immediately offered to rehire them and did so that very day.
Coincidentally, that was the day a letter arrived from, I
believe, this committee urging us to do that same thing. Your
investigators had met with them beforehand and I think it was a
display of our honesty and integrity that we came to the same
conclusion that you did and decided to rehire them.
They were rehired not only from that day forward, Mr.
Markey, but we did pay their retroactive pay back to the date
they were originally fired and we immediately entered into
settlement discussions to try to compensate them financially
for the fact that they had been terminated improperly in our
judgment.
In addition to that, we have with the exception of the one
item I mentioned a moment ago to your colleagues reached
agreement with Mr. Darling going forward to assume the new
position at the university. With regard to Mr. Walp, Mr. Walp's
attorney and our attorney are still in settlement discussions
so I am not able to comment further on that.
Mr. Markey. I guess what I would say is that if the guy who
fired the whistleblowers gets $190,000, health insurance, and
all his legal fees, somebody who gets fired should at least be
offered the same deal. If it is not that as a minimum, then you
have to question whether or not there is an uneven playing
field still in existence at UC in terms of how you view these
two groups of people, the perpetrator and the victim.
Mr. Darling. You make an important point. What I did say is
that while Mr. Walp and Mr. Doran are being compensated, the
individual who fired them is receiving no compensation
whatsoever. That is Mr. Salgado. Mr. Salgado was terminated
without compensation.
Mr. Markey. So the $190,000 is going to Busboom?
Mr. Darling. Not to Mr. Salgado.
Mr. Markey. Not to Mr. Salgado. But Busboom did sign the
letter that canned these people.
Mr. Darling. That is correct. This morning Mr. Busboom
testified, and as I was describing the scenario to your
colleagues before you walked in, that is not our judgment, nor
is it the judgment of Mr. Busboom that it was Mr. Busboom who
terminated them. Mr. Busboom was handed a letter that he
signed. Mr. Salgado made the decision. Mr. Salgado has admitted
to making that decision.
Mr. Markey. So you consider him to be an innocent party
here?
Mr. Darling. I do not consider him to be an innocent party.
What I did say is that we had three options. We had the option
to terminate Mr. Busboom. We had the option to allow him under
Laboratory policy to be reassigned to another position at the
Laboratory at a lower salary. Or we had the opportunity or the
option to settle the matter.
Based on a review by general counsel of Mr. Busboom's
previous employment and performance evaluations at the
Laboratory, I was informed after extended discussions that if
we had terminated him, he would have grounds for successful
wrongful termination suit that would have cost the university
many, many multiples of the $190,000 figure you just described.
Second, if we had reassigned him at a lower salary, he
would have had indefinite employment which would have kept him
on the payroll at a very large dollar amount ultimately, or the
option of settling as we did. I explained to Mr. Walden a
moment ago, I realize these are very large dollar amounts and I
in no way wish to minimize them. I do wish to say that was the
lowest dollar amount that we felt we could conclude this
matter--with which we could conclude this matter.
Mr. Greenwood. The time of the gentleman has expired. The
gentleman from California, Mr. Radanovich, is recognized for 10
minutes.
Mr. Radanovich. Thank you, Mr. Chairman. I will be brief,
Mr. Darling, with my questions. They are really surrounding the
questions that I have on CREM devices. My first is regarding
that incident and wanting to know whether there was any
classified material that was missing or vulnerable. Was it
classified material or was it declassified? What was the nature
of the material?
Mr. Darling. Let me back up and say that in, I believe,
November or December 2002 Los Alamos did a complete and
comprehensive inventory of all classified removable media. That
is what CREM stands for, classified removable electronic media;
disks, flash cards, etc.
There were over 61,000 items. They found none to be
missing. What I understand is there are a number of instances
that came up prior to that. There was one hard drive carrier
that had been bar coded improperly, was maintained in a
properly secured and stored area where it was not accessible to
anyone who did not have access to that area.
But as I think Admiral Nanos indicated on January 15, the
person who put that barcode on unfortunately did not check to
see whether there was an electronic media with classified
information in it. To this day we do not know whether there was
such an item. It does not show up on the inventory.
Every effort to try to determine whether it existed is
negative so I cannot answer your question but we do not believe
after checking to the best of our ability that there was any
classified information missing.
Mr. Radanovich. Has the system that you have set up since
then, has it shown itself to be effective?
Mr. Darling. We are changing the system. It is becoming
much more robust for the very purposes that you allude to. We
will be checking it thoroughly to make sure that it does. I
would ask you to hold us accountable for doing that.
Mr. Radanovich I am going to be quick because we have a
vote going on, but has Los Alamos officials followed Department
of Energy and NNSA procedures in self-assessing whether any of
the classified material was missing or vulnerable and did the
lab report the incidents to the DOE?
Mr. Darling. My understanding, Mr. Radanovich, is that the
Laboratory reported the items to DOE within the time period in
accordance with DOE guidelines and that the lab is following
DOE guidelines.
Mr. Radanovich. Were any classified material mislabeled or
destroyed during routine Laboratory efforts to discard old CREM
devices?
Mr. Darling. My understanding is that any classified
material whether on a hard drive or on removable medium is put
through an extensive and very carefully monitored process to
first erase any information from the medium, second to sanitize
it, and third to destroy it so that there is no possibility
whatsoever after doing that that anyone can obtain the material
that was originally stored on those devices.
Mr. Radanovich. All right. Thank you very much.
Mr. Greenwood. Thank you, gentlemen. At the risk of causing
our future witnesses to pull out their hair, let me mention
that we have three votes on the floor. We will recess and we
will return here at 5:30. We will then bring Mr. Hernandez and
Mr. Marquez forward and we will try to speed up the process
thereafter. We don't have anymore votes on the floor tonight so
that should go more quickly.
Mr. Darling, thank you again for your testimony. You are
excused and the committee is in recess.
Mr. Darling. Thank you, Mr. Greenwood, for accommodating my
schedule. I appreciate it.
[Whereupon, at 5:06 p.m. the subcommittee recessed to
reconvene at 5:43 p.m.]
Mr. Greenwood. Okay. The committee will return to order
again. I apologize to all of you gentlemen for the long day.
Wisely, the staff has decided we are going to combine
panels two and three so welcome to John Hernandez who is the
former BUS-5 team leader at Los Alamos; Mr. Richard A. Marquez,
Associate Director for Administration at the lab; Dr. John
Browne, Senior Research Scientist and former Laboratory
Director; Mr. John P. McTague, Professor of Materials,
Materials Department, former Vice President of Laboratory
Management, University of California; Mr. Ralph Erickson,
Manager of Los Alamos National Laboratory Site Office at the
NNSA.
I should note that Mr. Marquez is accompanied by Mr. Stan
Hettich, Director of Procurement at Los Alamos. Welcome. You
gentlemen have heard me say that this is an investigative
hearing and it is our custom to take testimony under oath. Does
anyone object to testifying under oath?
Witnesses. No.
Mr. Greenwood. You are permitted pursuant to the rules of
the House and this committee to be represented by counsel. Do
any of you wish to be represented by counsel?
Witnesses. No.
Mr. Greenwood. Okay. If you would stand and raise your
right hands.
Okay. Please be seated. You are under oath. I suspect that
we will start here with Mr. Hernandez.
Mr. Hernandez, you don't have testimony? Is that correct?
Mr. Hernandez. Not an opening statement, sir.
Mr. Greenwood. Not an opening statement. Okay. Very well.
Then Mr. Marquez.
TESTIMONY OF JOHN HERNANDEZ, FORMER BUS-5 TEAM LEADER, LOS
ALAMOS NATIONAL LABORATORY; RICHARD A. MARQUEZ, ASSOCIATE
DIRECTOR FOR ADMINISTRATION, LOS ALAMOS NATIONAL LABORATORY;
JOHN C. BROWNE, SENIOR RESEARCH SCIENTIST AND FORMER LABORATORY
DIRECTOR, LOS ALAMOS NATIONAL LABORATORY; JOHN P. McTAGUE,
PROFESSOR OF MATERIALS, MATERIALS DEPARTMENT, FORMER VICE
PRESIDENT FOR LABORATORY MANAGEMENT, UNIVERSITY OF CALIFORNIA,
SANTA BARBARA; AND RALPH E. ERICKSON, MANAGER, LOS ALAMOS
NATIONAL LABORATORY SITE OFFICE, NATIONAL NUCLEAR SECURITY
ADMINISTRATION, U.S. DEPARTMENT OF ENERGY, LOS ALAMOS
Mr. Marquez. Mr. Chairman, my name is Rich Marquez and I am
the Associate Laboratory Director for Administration, Los
Alamos National Laboratory. Thank you for the opportunity to
provide testimony today regarding the Laboratory's procurement
and property management issues.
I have submitted a written statement and I would like that
to be included as part of the record.
Mr. Greenwood. It will be.
Mr. Marquez. Thank you. Within 90 days of beginning my
assignment in February 2002 I directed the development of a 3-
year strategic plan to address what I considered to be
weaknesses surrounding the procurement function. Simply stated,
the Laboratory's procurement function had not kept pace with
the robust science and technical side of the house.
When we did develop a procurement excellence plan, in
hindsight it is clear we prescribed a tune-up when an overall
was probably required. The special inquiry of the DOE Office of
the Inspector General found no evidence of coverup. However,
there were concerns and allegations that the laboratory had
obscured or even concealed issues regarding property and
procurement vulnerabilities. I would like to address a number
of these issues.
First is the so-called Palmieri memo dated April 10, 2002.
According to the IG the Laboratory issued and immediately
rescinded a memorandum requiring corrective actions to address
problems regarding the management of Government property.
While this has raised some doubt about management's
commitment to address control weaknesses, the fact is that the
memo was reissued by me after full and formal coordination with
the Laboratory senior executive team as well as with Mr.
Palmieri and his subordinate staff. And, I might add, in my
humble opinion, between fiscal year 2001 and fiscal year 2002 I
think it contributed significantly to the reduction in the
unlocated, lost, and stolen property.
The next issue I would like to address is the Mesa
contract. Sometime in mid to late July 2002 I became aware that
the FBI had begun an investigation regarding alleged theft in
connection with purchases made under the Mesa contract. Mesa
contract is a blanket order agreement which was awarded on
November 1, 2000. In 16 months the contract had grown from a
simple $100,000 task order to $2.7 million.
As I have indicated to the staff of this subcommittee and
their field investigations, I cannot defend the manner in which
this contract was administered. The contract has now expired
but we have taken a number of important corrective steps
including reassignment of Mr. Hernandez' team leader.
To his credit his wrote a letter to his management
acknowledging his responsibility and accountability and by his
own admission his skills are more suited to major procurement
staff work than to supervision and management. In addition, as
Mr. Darling has now reported twice at this subcommittee, the
Layton-PricewaterhouseCoopers team is now conducting an
extensive review of the entire procurement function.
Now I will address the various purchase card transactions
that have come to the attention of this subcommittee. On July
25, 2002 I was advised about the attempt to purchase a Ford
Mustang using a laboratory purchase card. At the same time I
was told of $1 million of other purchases made by the same card
holder over a 2-year period from a company called G&G
Industrial Supply. I later earned that the card holder had
virtually unlimited purchasing authority levels.
Within a couple of weeks I also learned about casino
advances made under a Laboratory purchase card issued to a
secretary in the Procurement group. To compound the problem, I
discovered that she was a subcontractor employee and as a
member of the Procurement organization she could self-approve
her purchases on the card.
Shortly thereafter Mr. Salgado and I agreed to pursue a
twofold strategy for dealing with the purchase issues. First,
we appointed an internal committee to take a critical look at
our current purchase card procedures and recommend immediate
changes. As a result, within shortly over a month I issued
revised purchase procedures on August 26, 2002.
Second, we established an external review committee led by
John Layton to do a thorough review of the Laboratory's
purchase card program. This team and its work has been
described to you in previous testimony by Mr. Darling.
Now that we have the Layton report and the UC audit report,
we will develop a formal corrective plan that meets the
challenge given us by Chairman Greenwood when he visited the
Laboratory. That is, we are committed to constructing a model
purchase card program.
We continue to aggressively pursue property management
corrective actions as well including the beginning on February
3 or a wall-to-wall inventory and the formation of a cross-
cutting team to take a hard look at the entire cradle-to-grave
supply chain management process at the laboratory.
We need to manage our property acquisition in a more
integrated fashion. In conclusion, let me say that new
processes and technology are only part of the solution. The
real lesson learned from this experience is that people are our
most effective internal control.
It is precisely because we do not have a culture of thieves
that there was not a great exploitation of the flaws in our
processes and the breakdown of our business practices. The most
recent Harvard Business Review has an article entitle,
``Predictable surprises and disasters you should have seen
coming.'' The article makes the point that by actively
encouraging people to speak up, executives can bring to the
surface many problems that might otherwise go unmentioned.
I think Interim Director Nanos recognizes this and has
taken actions to create an open environment that celebrates the
fact that people are now bringing issues forward. This is the
point that DOE Inspector General Greg Freedman made in his
testimony about changing the culture and acting on employee
concern.
Thank you for the opportunity to present testimony.
[The prepared statement of Richard A. Marquez follows:]
Prepared Statement of Richard Marquez, Associate Laboratory Director
for Administration, Los Alamos National Laboratory
My name is Richard Marquez, and I am the Associate Laboratory
Director for Administration, Los Alamos National Laboratory, a position
I have held since February of 2002.
I am joined today by John Hernandez and Stan Hettich of the
Laboratory's Business Operations Division, which reports to me.
I thank you for the opportunity to provide testimony regarding the
procurement and property management issues reported in this and other
public forums.
Virtually all of my career has been directly or indirectly related
to the nuclear weapons complex and to federal resources management.
Because of that, I keenly appreciate that the road to strong mission
and program performance at a national laboratory leads through the
effective and efficient buying of goods, services, construction, and
equipment.
Within 90 days of beginning my assignment, I directed the
development of a three-year strategic plan to address what I considered
to be weaknesses surrounding the procurement function at the
Laboratory. I did this after reviewing the internal and external audit
reports on file and after considering some key metrics on volume of
procurement activity versus staffing.
I was struck by the fact that from 1996 to 2002, the procurement
volume had virtually doubled from $620 million to well over $1 billion.
But I was concerned when I discovered that staffing over that same
period had remained almost static. Moreover, attrition and leadership
changes were continual. When I arrived at the Laboratory the third
procurement director in a three-year time frame had only recently taken
the helm.
I also found very critical audit reports that were somewhat dated
and that reputedly had been responded to with corrective actions by
management.
Of note, I also found ``Outstanding'' performance evaluation
ratings under the contract for procurement as well as virtually all
business management functions, including property management.
In spite of what I regarded as somewhat conflicting indicators, it
was my view then that the Laboratory's procurement function had not
kept pace with the robust science and technical side of the house. That
view, and my resolve to upgrade the procurement function, has only
increased since that strategic plan was developed. What has changed is
the understanding of the depth of the problems and the extent of
commitment required to fix those problems--the diagnosis was for a
tuneup and an overhaul is required.
As Bruce Darling testified to this Subcommittee two weeks ago, the
University of California has taken a very active and strong role in
correcting the deficiencies that have been reportedly publicly. I am
heartened by the commitment and resolve that the University has shown
in tackling the many issues we face. Coupled with Pete Nanos's
leadership, I believe that we can and will make changes and that we can
sustain those changes over time.
I am not surprised by the special inquiry of the DOE Office of
Inspector General (OIG) in that it found no evidence of coverup
regarding the problems at the Laboratory. However, I would like to
address reported concerns and allegations that the Laboratory
``obscured'' or even concealed issues regarding property management or
procurement vulnerabilities.
property management
In the January 28, 2003, DOE OIG report on their special inquiry of
Los Alamos National Laboratory operations, the report concluded that
the Laboratory took a number of actions that ``obscured'' serious
property management and security problems.
Palmieri Memo Rescinded and Reissued
One area of OIG concern involved the finding that the Laboratory
``issued, then immediately rescinded without adequate explanation'' a
memorandum requiring corrective actions to address problems regarding
the management of Government property. In the opinion of the OIG, this
raised doubts about management's ``commitment to address identified
control weaknesses''. The memorandum has also been the subject of
various news media reports.
Let me list a quick chronology regarding that memorandum:
The memorandum in question was issued by the former Laboratory
Chief Financial Officer, Thomas Palmieri. Mr. Palmieri's
memorandum was dated April 10, 2002, but not formally issued
until April 18, when it was distributed via e-mail.
The memorandum was retracted by Mr. Palmieri on April 19 as a
result of direction I received from Joe Salgado, former
Principal Deputy and Chief Operating Officer. He was sensitive
to a wide-spread distribution of employees' names beyond those
who had a need to know this information and, because of the
importance of the subject, Mr. Salgado wanted a more formal
``top down'' discussion and dissemination of the memorandum
from me to each of the other Associate Laboratory Directors.
With respect to his concern for a more formal distribution, on
Sunday, April 28, I wrote an e-mail to the Laboratory's senior
executive team in advance of an April 29 weekly senior
executive meeting conducted by the Laboratory Director every
Monday morning. The e-mail covered four topics, three of which
were related to business and financial management, which I
intended to discuss as agenda items for that meeting. The e-
mail also included an advance copy of a memorandum that I
formally distributed April 29.
On April 29, I did, in fact, re-issue the memorandum to the
Laboratory's senior executive team.
It is significant to note that, on the morning of April 29, prior
to the senior executive team meeting, I forwarded my April 28 e-mail to
Mr. Palmieri, his deputy Dennis Roybal, his chief of staff, and the
Laboratory's two principal property managers, Allen Wallace and John
Tapia. It should also be noted that the formal distribution of the
April 29 memorandum also included those same individuals as well as the
60 Laboratory property administrators and the 120 Laboratory business
team leaders deployed across the Laboratory.
OIG Interview of Mr. Palmieri
I mention this because Mr. Palmieri, when interviewed on December
18, apparently forgot that the memorandum had been re-issued and
advised the OIG otherwise. I do not agree with the DOE OIG's conclusion
that we ``obscured'' serious property management problems but it would
appear that we did obscure the very serious manner in which we followed
up on property management issues.
The April 29 Memorandum
My April 29 memorandum was virtually the same as the Palmieri
memorandum except that each Laboratory Associate Director was given the
relevant unlocated, lost, and stolen property lists for each Division
that reported to him. It included the guidance that all reasonable
efforts be made to locate such property and provided that, after review
of the circumstances for the loss, managers ``may deem that individuals
should be held accountable or otherwise disciplined''.
Attached to the memorandum were the same four reporting mechanisms
intended by the Palmieri memorandum:
missed assignment of property to accountability statements
within 60 days as required by Laboratory policy;
lost and stolen property per Division;
inventory exceptions, by which we intended to report
discrepancies between assignment of property and exceptions
taken by the assigned custodian; and,
trend reports.
Of these four reports, the Property Management Group did issue the
60-day assignment report and the inventory exceptions report was
produced in accordance with Appendix F requirements of the prime
contract. The property group produced trend reports on request of
management. The lost and stolen report was sent with my April 29
memorandum. Also, I received two corrective actions plans, one for a
Division with unusually high levels of property unaccounted for and one
for an Associate Director covering all of the Divisions reporting to
him.
The Year-End Results
I think any fair assessment of the results of the re-issued
memorandum and the Property Management Group's follow up actions would
conclude that the memorandum was highly effective in raising the
management level of attention to property management.
At the time the memorandum was distributed, the cost of
``unlocated'' property in the inventory was $735 thousand and by
September 30, 2002, that number was down to $484 thousand. With respect
to lost or stolen property, we dropped from $533 thousand at the time
of the memorandum to $206 thousand by September 30, 2002.
Clarification of Reporting Lost and Stolen Property
The DOE OIG special inquiry found a substantial degree of
``dysfunction'' with respect to roles and responsibilities regarding
lost and stolen property. As indicated by Mr. Darling in his February
26 testimony, the Laboratory has clarified that lost and stolen
property is to be reported to the Office of Audits and Assessments,
which now directly reports to the University of California Office of
the President.
the mesa contract
The next issue I would like to address is the Mesa Contract and the
involvement by people in the Business Operations Division. That
involvement was two fold. One, Business Operations Division
administered the contract. And, two, personnel in Business Operations
Division supported Security Division and the Federal Bureau of
Investigation in the criminal investigation of property purchased under
that contract for personal use.
Some time in mid-to-late July, 2002, Joe Salgado, then Principal
Deputy and Chief Operating Officer of the Los Alamos National
Laboratory, advised me that the Federal Bureau of Investigation (FBI)
had begun an investigation regarding alleged criminal improprieties in
connection with purchases made under the Mesa Contract. Mr. Salgado did
not share with me many details but advised me that my ``need to know''
was in order to make sure the FBI and our security organization had
appropriate support from the Business Operations Division in terms of
getting access to contractual records.
Security Division and FBI investigation
Shortly after this meeting, Stan Busboom, then Security Division
Director for the Laboratory, called me and requested support from John
Tapia, Deputy Group Leader for Property Management. Mr. Busboom advised
me that John's expertise in property management would be useful to Glen
Walp and Busboom as they worked with the FBI on the TA33 case. I agreed
to that support and notified John Tapia that he was to provide any
support required from the Security Division.
To my knowledge, Mr. Tapia provided excellent support to Mr. Walp,
Mr. Doran, Mr. Sprouse, Mr. Tucker, and even the FBI agent in charge.
According to Mr. Tapia, his support included a description of the
buying and property functions, copies of the Mesa Contract, credit card
transactions, and Local Vendor Agreement records.
Because Mr. Tapia required information from the procurement
organization as well as his own property management group, Mr. Tapia
would call me and ask me to advise procurement officials that he was
authorized to request business records. I did that and, so far as was
ever reported to me, the security investigation on the TA33 case was
fully supported by the Business Operations Division and the staff in my
directorate.
Procurement Background
I would like to make some observations about how the Mesa Equipment
& Supply contract got to where it was and where the contract stands
now.
Before it had its own contract with the Laboratory, Mesa was a
supplier to the Laboratory as a sub-tier contractor to a Just in Time
vendor known as Frank's Supply. Their volume of sales under the Just in
Time arrangement was reportedly on the average of $400 thousand per
year.
The Mesa Contract was awarded by the Laboratory as a small business
contract on November 1, 2000, with a not-to-exceed ceiling of $100
thousand. On March 6, 2001, the contract was modified to increase the
ceiling to $500 thousand. On January 23, 2002, the fourth and final
change to the dollar ceiling increased the ceiling to $2.7 million. In
sixteen months, the contract had grown from $100 thousand to $2.7
million.
The contractual arrangement is referred to as a Blanket Order
Agreement which, in simple terms, means that employees with purchase
authorization across the Laboratory can make purchases under the
contract.
As I have indicated to the staff of this Subcommittee in their
field investigations, I cannot defend the manner in which this contract
was administered. I know that our procurement personnel questioned some
individual purchases with at least one of the individuals who was
terminated and is under FBI investigation. But we could have, and
should have, done more.
I was advised by Laboratory Counsel to leave the contract open
pending the FBI field investigation. The contract term expired October
31, 2002. The FBI executed search warrants in this case on October 31,
2002.
Follow up Actions
What have we done since the FBI action?
As the purchase card events unfolded and after my own review
of the Mesa contract file, I directed the Business Operations
Division to create a separate procurement review organization
that would serve as a quality assurance office for Laboratory
procurements. I wanted this office to serve as the agent of
standardized policies, consistent terms and conditions,
training requirements for staff, and, perhaps most importantly,
institution of periodic desk-top audits of contract
administration files and management of trend data. My
experience as well as management literature tells me that just
the fact that management is reviewing files and transactions
eliminates a substantial percentage of internal control
vulnerabilities.
The University of California and the Laboratory are reviewing
what can be done relative to eligibility of Mesa Supply &
Equipment to do business at the Laboratory, including an
evaluation of breach of contract and what debarment policies
apply. Preliminary evaluation indicates that our policy is to
utilize federal government debarment actions as the operative
determinant for precluding contractors from doing business with
the Laboratory. Given that, I will engage in further
discussions with DOE and NNSA procurement officials on this
matter.
We have reassigned the Team Leader who had direct oversight of
the administrator of that contract. John Hernandez was that
Team Leader and he is here with me today. Similar to the Team
Leader who had oversight of our purchase card program, Mr.
Hernandez wrote a letter to his management acknowledging his
accountability. By his own admission, Mr. Hernandez' skills are
more suited to major procurement staff work than to supervision
and management and his long career at the Laboratory reflects
this.
I plan to determine the amount that represents fraudulent
transactions and, to the extent they are not within the scope
of the Mesa contract, I plan to present a claim to that firm in
that amount. For those items for which I cannot substantiate
that they are out of scope, then we will go through a process
of finding items of use by our facilities support contractor or
by the Laboratory. After that, we would consider those items
unallowable costs and so advise the NNSA Contracting Officer.
Finally, as reported by Mr. Darling, the University of
California has engaged the Layton/Price Waterhouse Coopers team
to do an extended review of the entire procurement function, to
include two years of data mining in connection with the various
procurement mechanisms utilized by the Laboratory. Those
include Blanket Purchase Orders, Just in Time contracting, and
Local Vendor Agreements. The University of California and the
Laboratory are committed to acting on any findings and
recommendations resulting from that review, similar to the
review of the purchase cards.
the mustang case, g&g tools, and casino advances
Now I will turn my attention to the various purchase card
transactions that have come to the attention of this Subcommittee.
The Ford Mustang case
With regard to the attempt to purchase a Ford Mustang using a
Laboratory purchase card, I was advised of that case on July 25, 2002,
by Stan Hettich, Procurement Group Leader, and Dennis Roybal, Deputy
Division Leader for the Business Operations Division. They informed me
that the Purchase Card Administrator, Ms. Arleen Roybal, had received a
call from Bank of America on July 18 that informed her of the attempted
Mustang purchase as well as vehicle accessories. The attempted
purchases occurred during a period from May 3 through May 23, 2002,
using the Laboratory purchase card issued in the name of a Laboratory
purchasing official.
I was also told that the cardholder disputed the charges with Bank
of America when the May purchase card statements were issued by the
bank.
G&G Tools
At the same June 25 meeting, Mr. Hettich advised me of other
purchases made by the same cardholder over a two-year time frame. These
included over $1 million in tools for our Engineering, Sciences and
Application Division. I was not particularly surprised by the volume of
tool purchases given the scope of engineering effort by this Division.
I was taken aback by the fact that tools were purchased under our
purchase card program instead of our Just in Time Program, which is the
appropriate mechanism for tool purchases.
The Just in Time Program requires dye-marking of tools by vendors.
The purchases were made under a limited exception granted by the
procurement organization but the terms of the exception were not met.
Moreover, I was surprised to find out that the cardholder had virtually
unlimited purchasing authority levels. This particular cardholder had a
single transaction limit of $50 thousand and her monthly limit was $900
thousand.
I directed Mr. Hettich to notify both Audits and Assessments and
Security Division. I followed up a few days later with Mr. Hettich and
he advised me that he had, in fact, notified Mr. Walp and Gil Griego of
the Audits and Assessments office. Also on July 25, 2002, I notified
Mr. Salgado and advised him that I had directed Mr. Hettich to notify
Audits and Assessments and Security Division. Mr. Salgado pointed out
to me that the Department of Defense was undergoing critical reviews of
their purchase card programs and he asked me for a briefing on the
purchase card process and procedures. Mr. Vern Brown, Mr. Hettich and I
briefed Mr. Salgado on July 29.
The Casino Advances
On or about August 9, Dennis Roybal, Deputy Division Director of
the Business Operations Division, advised me of casino advances made
under a Laboratory Purchase Card issued to Ms. Mary Frances Wood.
Apparently this surfaced as a result of a desktop audit done by the
Purchase Card Office on past transactions. Eleven cash withdrawals at
three New Mexico casinos were made in the amount of $1,400 between
March 19 and April 26, 2002. I was told that the purchase card office
had directly notified Mr. Doran but, similar to the Mustang case, I
asked Mr. Roybal to notify Audits and Assessment and Security Division
and I notified Mr. Salgado. Ms. Wood was placed on administrative leave
on August 19 and subsequently terminated.
What particularly troubled me about this notification was that Ms.
Wood was a contractor employee assigned to the Procurement Group
Leader's Office. I was even more concerned that Mr. Stan Hettich,
Procurement Group Leader, was listed as the approving official for Ms.
Wood's purchases. I later discovered that Ms. Wood, as well as other
personnel in the procurement organization, could ``self approve'' their
purchases.
Some time between the date (July 25, 2002) I was informed of the
Mustang case, and August 26, 2002, I took two actions that are relevant
to your inquiry here.
One, I assigned John Tapia as the single point of contact for
purposes of information flow to Security Division regarding
property management, purchase cards, as well as the Mesa
contract. Frankly, I was concerned about a possible conflict of
interest in the procurement group given the fact Stan Hettich
was shown as an approving official for Ms. Wood. I did not want
to compromise any ongoing law enforcement investigations. I
personally called the Purchase Card Administrator, Arleen
Roybal, and advised her that she was to give full cooperation
to Mr. Tapia and the Security Division.
Two, I advised Mr. Salgado on the details I had regarding the
Mesa Contract and the purchase card incidents. It was difficult
at that time to know whether any of these were related
incidents or how rampant the problem was. Mr. Salgado was
equally concerned and he and I agreed to a two-fold strategy,
which involved an immediate fix to the purchase card policies
and procedures and an in-depth review of purchase card
transactions to see how widespread the purchase card abuse
problem was.
Purchase Card Policies & Procedures
First, we agreed to appoint an internal committee to take a
critical look at our current purchase card procedures and recommend
immediate changes that addressed problems such as the purchase card
authorities and limits, lack of approving officials, and receipt of
property ordered. That committee consisted of John Tapia, Laboratory
Counsel Frank Dickson, and the former Contracts and Procurement
Director of the NNSA's Albuquerque Operations Office, Mr. William
Meyers, who serves as a consultant to me on special assignments. I
chartered that committee and directed them to thoroughly study the most
current Department of Defense OIG reviews and the recommendations from
those studies. Based on those recommendations, and after feedback from
Laboratory Division Directors, I issued revised Purchase Card
Procedures on August 26, 2002.
The Layton Committee
Second, it was agreed that Joe Salgado would have a conversation
with John McTague, the former University of California Vice President
for Laboratory Management about the establishment of an external review
committee to do a thorough review of the Laboratory's purchase card
program. After Mr. Salgado and Mr. McTague discussed the idea, it was
decided that McTague would direct the Laboratory to form such a team
and direction was given accordingly. A team was put in place by the
Laboratory which was led by former DOE Inspector General John Layton
and supported by the University of California's audit firm of Price
Waterhouse Coopers to do a thorough review of purchase card purchases
over the past few years.
On August 26, 2002, Mr. Salgado chartered that committee and the
committee began its methodical review of some 170 thousand transactions
and $120 million dollars worth of purchase card activity covering the
period from October 1, 1998, through June 30, 2002, a forty-five month
period. The Layton Committee issued a formal report of its findings on
December 12, 2002, and, in addition to several findings and
recommendations, referred $4.9 million in transactions to the
Laboratory for further disposition, including several which they
suggested for referral to the Office of Inspector General.
The Laboratory's Management Response to the Layton Committee Report
By memorandum dated December 9, former Laboratory Director John
Browne formally tasked me to respond to the Layton Committee report.
The memorandum was premised upon a November 20 draft report issued by
the Layton Committee to Joe Salgado. My assignment was to reconcile all
purchase card accounts that had not been reconciled, resolve all
questionable purchase card transactions, and otherwise address the
Layton report findings and recommendations. Shortly after that time,
Joe Salgado requested that the University of California independently
audit the Laboratory's management response to the Layton Committee
report.
In anticipation of that requirement, on December 4, I issued a
Laboratory-wide data call for documentation required to validate
purchases called into question. On December 6, I formed a Project Team,
led by Jay Johnson, Acting Controller in Business Operations Division,
to methodically address each and every questioned transaction and
account. On December 13, I again made a Laboratory-wide request for
documentation based on preliminary conversations with Patrick Reed as
to the extent of documentation he required to satisfy his audit
methodology. He wanted convincing documentation relative to software
licensing purchases and items that the Layton Committee considered
questionable. The Laboratory cooperation was overwhelmingly positive,
the project team worked incredibly long hours under arduous conditions,
and we concluded our project on January 31, 2003.
Mr. Reed issued an interim audit report on February 10, 2003. His
report concluded that we had provided adequate documentation or
justification to support all but around $200 thousand in purchase card
purchases. As reported by Mr. Darling, the University of California
plans to reimburse the NNSA for those costs.
Laboratory Purchase Card Program Corrective Actions
Now that we have both the Layton report and the Reed report, we are
developing an action plan that integrates the recommendations and
implements corrective actions. In addition to the changes articulated
in my August 26 announcement of purchase card changes, we have
implemented many fixes already but I know we still have a ways to go
before we have a program that is sustainable.
We have made current all of our reconciliations, eliminating a
significant backlog of reconciliations.
We have re-formed the Purchase Card Program office, providing
new interim leadership and staff to work off the corrective
actions and develop robust administrative tools including
monthly and quarterly audits.
We have completed purchase card refresher training for all
Laboratory card holders and approving officials. We have
suspended cards for failure to meet the training requirements.
We have dropped the number of purchase card holders from over
a thousand to around 585.
We have begun to design automated systems changes that will
eliminate the need for manual reconciliation and to enhance
internal controls features.
We have collaborated with Livermore National Laboratory and
Lawrence Berkeley Laboratory to establish standardized
University of California purchase card policies.
In addition, I have shared with NNSA Headquarters and the Los
Alamos Site Office some Lessons Learned which might be of use to the
rest of the Nuclear Weapons Complex M&O contractor sites.
corrective actions
Wall-to-Wall Inventory
When John Browne tasked me to respond to the Layton Committee
report on December 9, he also assigned me several actions related to
property management. The key assignment required revised Laboratory
procedures for:
ensuring that controlled property is entered into the
inventory at the time of receipt, regardless of how purchased;
periodic reconciliation of property records with procurement
records;
ensuring that the Security Division, line managers, and
property custodians take prompt action to find unlocated
property;
ensuring that spot and random property audits are completed;
and
addressing any other property management issues that I found
warranted action.
My evaluation of the property management issues surrounding this
assignment made me realize that, as an institution, we were not
prepared to implement ``fixes'' without a thorough understanding of the
problem. In my opinion, it was a matter of ``first things, first'', and
I thought it would be wise to scope the magnitude of the problem
through a wall-to-wall inventory. I was not comfortable with the
current use of accountability statements given the lack of public
credibility in our property management controls.
After a follow up meeting in December with John Browne and Joe
Salgado, we concluded that the appropriate course of action was a wall-
to-wall property inventory. I directed the Property Management Group to
develop a wall-to-wall inventory project plan, which I subsequently
approved, and on February 3, that wall-to-wall inventory was initiated.
The methodology and the results will be validated by Price Waterhouse
Coopers and the NNSA.
As of today's date, we have inventoried over 70% of the 84,000
controlled property items in our inventory. We have accounted for over
70% of the cost of our controlled inventory, which is approximately
$940 million.
Cradle-to-Grave Supply Chain Integration Team
We are also finding items in our Laboratory sweep that were not
originally bar-coded. This underscores the importance of reviewing the
cradle-to-grave process of supply chain management at the Laboratory.
We need to formalize and integrate the steps that lead from ordering,
to purchase, to receipt, to accounting, to entry into the inventory, to
reporting as lost or stolen, and, where necessary, the need to
institute individual accountability.
In January, I chartered a team of Laboratory personnel to re-
engineer the entire supply chain so that it is integrated and visible
to the entire Laboratory. That team is led by Carol Smith, our very
capable Warehouse Manager, and her team is expected to provide a report
within the next few weeks.
Drop Point Survey
In my opinion, the single largest vulnerability of the Laboratory's
property management system is the fact that, at our 43-square-mile
Laboratory, it is not feasible to have a single warehouse as the sole
location for delivery of property.
As a part of the business and financial improvements that Bruce
Darling discussed at the February 26 Subcommittee hearing, the
Laboratory has also performed a survey of its 580 property delivery
points which are referred to as ``drop points''. The Business
Operations Division surveyed each of those points to assess the
security, the volume, and the safety and housekeeping issues. I expect
a report soon with their recommendations for improvement and tighter
control but in the interim the number of drop points have been reduced
to 440 and we have re-instituted clear accountability of control of
these points by building and facility managers.
Clarification of Reporting Lost and Stolen Property
The DOE OIG special inquiry found a substantial degree of
``dysfunction'' with respect to roles and responsibilities regarding
lost and stolen property. As indicated by Mr. Darling in his February
26 testimony, the Laboratory has clarified that lost and stolen
property is to be reported to the Office of Audits and Assessments,
which now directly reports to the University of California Office of
the President.
Management of Data
The two external review teams that are reviewing property and
procurement data have expressed concern regarding the Laboratory's
ability to produce consistent and reliable data without significant
manual manipulation of data. In essence, this was the root cause of the
primary finding of the recent OIG review of our firearms inventory--we
were unable to document the inventory of a dozen Glock handguns that
were stuck in a property accounting backlog. In too many instances we
have Laboratory business and financial personnel trying to ``muscle''
inadequate data systems on old information platforms. The Laboratory is
embarked on an Enterprise Resource Project that will modernize our
management of business and financial data. This will help us document
the right kinds of data and provide managers timely access to quality
data they need to make resource management decisions and better control
assets and accountability for those assets.
Sanctions and Accountability
There have been legitimate concerns raised by this Subcommittee and
others regarding individual accountability for Government property and
the sanctions in place for violation of Laboratory procedures. I
believe that our current disciplinary policies provide for such
accountability but our practice in consistently enforcing sanctions
needs improvement. Interim Director Nanos has a Laboratory-wide
initiative in place to study all of our policies and he has indicated
clear support for enforcing accountability in connection with our
Federal stewardship responsibilities.
conclusion
Let me close by assuring you that the Laboratory is committed to
correcting the many vulnerabilities in our business operations. I am
highly encouraged by the resolve and commitment the University of
California has shown in vigorously supporting positive change. I am
proud of my association with the many thousands of honest and dedicated
employees who have been working long hours, day after day, to regain
the credibility of our neighbors, our customers, and the American
taxpayers.
We can fix processes and we can apply technology to the problem of
internal controls, but we would fail again as a Laboratory if we don't
heed the real lesson learned from this experience. People are our most
effective internal control. It is precisely because we do not have a
``culture of thieves'' that there was not a greater exploitation of the
flaws in our processes and the breakdown of our business practices.
The most recent Harvard Business Review has an article entitled,
Predictable Surprises: The Disasters You Should Have Seen Coming. It
makes the point that organizational vulnerabilities are often the
toughest to overcome but that, by actively encouraging people to speak
up, executives can bring to the surface many problems that might
otherwise go unmentioned. I think Interim Director Nanos recognizes
this as a value and has taken actions that acknowledge this by creating
an open environment that celebrates the fact that people are now
bringing issues forward. This is the point that DOE Inspector General
Greg Friedman made in his testimony about changing the culture and
acting on employee concerns.
Thank you for the opportunity to present testimony.
Mr. Greenwood. Thank you, sir.
Dr. Browne.
TESTIMONY OF JOHN C. BROWNE
Mr. Browne. Thank you, Mr. Chairman and members of the
committee for this opportunity to make this statement. I, too,
would like to submit my written statement for the record.
I will try to be brief. You have covered a lot of the
points already in earlier panels. Let me start by saying that
there are no excuses for theft, waste, fraud, or abuse by
anybody. That is a strong personal belief that I hold.
I would like to put a few things in context if I may, Mr.
Chairman. Los Alamos is a very large complex operation. We have
on any given day 12,000 to 14,000 people on our site. Our site
covers 43 square miles. That is about the size of the District
of Columbia. We have a lot of buildings, over 2,000 buildings,
hundreds of miles of road. That is not to make an excuse but it
is to put in context the complexity of the large scale of
operating this facility.
We have a very important national security mission which I
know you are aware of. I spent a lot of my time focused on this
mission. I had the responsibility as Laboratory Director to
annually certify the five weapons out of the seven types that
are in the U.S. nuclear stockpile in a letter that I am
required to send to the Secretary of Defense and the Secretary
of Energy. That is a very important responsibility and one that
takes a lot of time throughout the year to address.
The second part of our mission is to reduce the threat of
weapons of mass destruction. Since September 11 we spend a lot
of time dealing with threats of nuclear, biological, and
chemical weapons including the DNA analysis that occurred on
the anthrax attacks that occurred here in Washington, New York,
and Florida.
However, having said that, even though I did focus on our
mission, I felt that I was fully accountable for everything
that happened at our laboratory. I don't want to make any
excuses that because I depended on other people to look at
operations because of the scope of things that somehow I am
less accountable. I felt that I was fully accountable for all
the actions of all the people on our site all the time.
Let me just cover a few issues and then see if I can sum
up. In terms of the TA-33 theft, I know Mr. McDonald testified
a couple of weeks ago. When this was first brought to my
attention that he approached the FBI, which was in late June of
last year, and Mr. Salgado told me about this, I remember the
discussion Mr. Salgado had and Mr. Salgado said to me, ``Mr.
McDonald is a really stand-up guy. He was willing to come
forward and really take a risk in a sense by saying that there
were things going on at our Laboratory which were improper.'' I
just wanted to make it clear that is the discussion we had at
that time.
Then in mid-July when I heard about the Mustang case from
Mr. Marquez and Mr. Salgado, the question came up earlier this
morning, ``Weren't you outraged?`` I was very outraged. I won't
use the words that, in fact, I conveyed at the time to some of
my managers. I was incredulous that anybody would even attempt
to use a procurement card for this.
The only good thing I would say is that the control system,
in a sense, in this one case actually worked because the
charges were blocked by the system. However, to me it pointed
out we had other serious problems. As Mr. Marquez has just
said, we immediately said, ``Let us go look and see if we have
other problems.'' We had seen what had happened in the
Department of Defense. We read the GAO reports and the first
thing we said was, ``Let us take a quick look at what else is
happening at Los Alamos.'' When we looked we didn't like what
we saw. We immediately said, ``Let us go get this external team
together that the former IG John Layton chaired.'' That is the
situation that I saw.
Let me just conclude since my time is up by saying that I
don't believe I allowed any type of coverup to occur at our
Laboratory. I certainly had no intention of ever preventing any
information from getting out of our Laboratory to any
investigatory body, the Department of Energy, the University of
California, or certainly this committee. The DOE IG report did
not find any evidence of any coverup by management.
I wish that these events had not occurred at Los Alamos but
they did. People who committed illegal acts or inappropriate
acts should be held accountable for their actions. But I do not
believe that Los Alamos is a culture of theft. I don't believe
the facts support that. Instead, I would say that Los Alamos
really is a culture of public service. That is, at least, the
Los Alamos that I have been familiar with for the last 24
years.
In my opinion, what we all need to do now, and Bruce
Darling brought this up, is I think we need to make these
corrections that the University of California and the
Laboratory are putting in place. But we need to learn from
these mistakes. What were the root causes of the mistakes,
learn from them, make the changes, and move on.
The reason I say that is I believe our mission is very,
very critical to our country at this time. Maybe as important
as it has ever been in our history. Thank you, Mr. Chairman.
[The prepared statement of John C. Browne follows:]
Prepared Statement of John C. Browne, Former Laboratory Director, Los
Alamos National Laboratory
Mr. Chairman and distinguished members of the Subcommittee. Thank
you for the opportunity to present this statement regarding the
procurement and property issues at Los Alamos National Laboratory.
There are no excuses for theft, waste, fraud or abuse of government
property, whatever the amount and whether by University of California
or subcontractor employees. In many talks and written statements to the
Laboratory over my 5 years as Director I have stated that integrity
must be a key value of our institution. We must be good stewards of the
taxpayers' money.
LANL is a large, complex operation with a very important national
security mission. On any given day there are 12-14,000 people on site.
Our site covers 43 square miles--mesas, canyons connected by hundreds
of miles of roads. There are over 2000 buildings, some of which require
high physical and cyber security. To carry our programs we perform many
hazardous operations--nuclear, high explosives, chemicals, X-ray
machines, etc. Our FY03 budget is close to $2 billion--roughly one-half
of which is spent on purchases.
We have a critical national security mission. Our core mission is
to ensure the safety and reliability of U.S. nuclear weapons. LANL has
responsibility for certifying 5 of the 7 different nuclear weapon types
in the U.S. stockpile. We take this responsibility very seriously and
it received my highest attention during the past five years. Our other
major mission area is to reduce threat of weapons of mass destruction
to our homeland, our troops, and our allies. Since Sept. 11, 2001, we
greatly increased our work on counter-terrorism--especially against
weapons of mass destruction. For example, we designed and built nuclear
detectors that have been deployed in Russian borders and ports; we
assisted in the DNA analysis of the anthrax attacks in Washington, New
York, and Florida and fielded biological detectors around the country,
including at the Salt Lake City Olympics.
As Lab Director I was accountable for all the activities of the
laboratory and the actions of all the people on our site--good and
bad--whether technical, administrative work or operations--a
challenging job, but a rewarding job.
procurement issues
The possibility of theft at our TA33 site was raised by a
contractor employee, Mr. McDonald, who testified here a few weeks ago.
Mr. McDonald did the right thing by being persistent when his earlier
attempts to report this illegal activity did not result in action. When
I found out about the TA33 theft allegations in late June 2002, I asked
Mr. Salgado, my principal deputy, to stay on top of this issue and keep
DOE, UC, and me informed on a regular basis. We both felt that Mr.
McDonald's actions were exemplary.
A few weeks later, Mr. Salgado reported that an attempt to purchase
a Mustang with a procurement card had been uncovered by our Business
Services Division and by our bankcard service provider. This seemed
incredulous to me, but in light of the recently reported procurement
card abuses in the Department of Defense, we asked Mr. Marquez, my
Associate Director for Administration, to conduct a quick scan of other
LANL procurement card activities. This quick review turned up several
apparent abuses. Based on this information, and after consulting with
Dr. John McTague, UC Vice President for Laboratory Management, we
decided to conduct an external review that was set up in August under
the leadership of two former Inspectors General, John Layton and
Charles Masten, and auditors from Pricewater-houseCoopers.
The external review found that, while policies and procedures were
in place at LANL, internal controls and oversight needed strengthening.
We made significant changes in our procurement card practices in August
2002; more changes have been made recently.
property inventory issues
While LANL has received outstanding grades for its property
inventory results since 1999, questions were raised in the press about
missing equipment being an indicator of widespread theft at the
Laboratory. There are over 70,000 property items at LANL, whose
original value is about $1 billion. Our inventory system accounted for
over 99.7% of these items in each of the last four years. Many items
reported in the press, such as large magnets and specialized electronic
equipment, were located at the Lab after searches were conducted. These
items had been moved from their original site for new uses and the
inventory system had not been corrected. There were over 400 computers
reported missing in the last four years. We have over 33,000 computers
at LANL used for R&D, as well as administrative matters. I agree with
our critics that this scale of unaccounted computers is too high and
steps have been taken to reduce the chances for theft of such
computers. None of the 400 computers was used for classified
information.
There presently is a 100% wall-to-wall inventory being conducted at
LANL. This should help resolve discrepancies and increase confidence in
our inventory methodology which follows best industrial and government
practice.
other management changes
LANL has been an organization in transition since the end of the
Cold War. In response to changing requirements, improvements in safety
and security were made in the mid- to late-1990s, including major
changes following the hard drive incident that this committee
investigated in 2000. All 61,000 classified removable electronic media
were bar-coded two years ago and I directed several audits since that
time. Our Nuclear Emergency team was re-organized, under new leadership
and with improved procedures. Overall, reports by the DOE Office of
Independent Assessments show a positive trend of improvements in safety
and security over the past 5 years at LANL.
To make further improvements in operations, UC and LANL brought in
external companies two years ago to review our safety and security
operations, project management, planning and budgeting systems, and
nuclear operations. We began to implement the recommendations of these
reviews last year.
Based on my previous experience in information systems, I also
brought in an Information Technology (IT) consulting company, Gartner
Group, two years ago to recommend changes in our IT systems, which I
believed to be insufficient to carry out our responsibilities. We began
to implement IT system changes based on their recommendations last
year; the IT system was contracted to IBM/Oracle for development. It is
designed to provide managers administrative and operational information
in a timely manner. My regret is that all the changes did not come fast
enough to prevent these present problems.
concluding remarks
LANL does not have a culture of theft. I do not think that the
facts and data support such a characterization. Yes, we have some
people who committed some illegal acts. We have fired some employees,
some are under administrative review by LANL, and some are still under
FBI investigation. The vast majority of LANL people are dedicated to
the service of this nation.
I did not allow or support any cover-up. The DOE IG report did not
find evidence of any cover-up by management. I believe that I kept the
DOE and the UC informed of the information on these events as it became
available to me. I formed internal and external reviews of the
situation. I approved changes to LANL controls on procurement cards in
August. When anonymous allegations of cover-up appeared in the press in
November, I immediately asked Undersecretary Brooks to have the DOE IG
investigate.
I wish that these events had not occurred at Los Alamos--but they
did. Our employees are human and humans make mistakes, and they should
be held accountable for their actions. But I do not believe Los Alamos
has a culture of theft--it is a culture of public service.
The University of California has responded aggressively and is
making the needed changes. In my opinion, we should learn from these
mistakes and move on. LANL's mission has never been more important to
our nation.
Thank you for the opportunity to make these remarks.
Mr. Greenwood. Thank you.
Mr. McTague.
TESTIMONY OF JOHN P. McTAGUE
Mr. McTague. Mr. Chairman, members of the committee, at the
outset I want to say that I regret what transpired at Los
Alamos. As the University of California Vice President for
Laboratory Management when many of the events that are being
investigated occurred, I am ultimately responsible for the
mistakes and mismanagement by the Laboratory.
In my written testimony I explain my involvement with the
science policy and our national labs over the course of my
varied career and my long-standing belief that the labs must be
run in a manner that promotes and ensures excellence both from
a scientific and a business perspective.
When President Richard Atkinson appointed me Vice President
for Laboratory Management, I assumed the post with this in
mind. I took up my duties, determined to see the Laboratory
implement Appendix O of the contract between the University and
the Department of Energy, improve their cooperation and
coordination with the Department, and prioritize proper project
management and best business practices.
In many ways I believe that the University and the
Laboratory made progress toward achieving these goals during my
time as vice president. When I stepped down from the position,
for instance, the Laboratory's construction projects were on
time and either at or below budget. Problems, however, clearly
exist at Los Alamos.
I first heard of the weaknesses being explored by this
committee in August 2002 when Joe Salgado informed me that one
Laboratory employee had attempted to purchase a Ford Mustang
using her lab issued purchase card and that another employee
had received cash advances at a local casino using her card.
In that same call I was told that some Laboratory employees
working in a high sensitive area were being investigated by the
FBI for purchasing goods for their personal use through a
Laboratory contract. As with Dr. Browne, I found these
incidents outrageous. Among other actions, I immediately called
for the creation of an outside review team to evaluate and
critique the Laboratory's purchase card system. That is what
became the Layton Committee which I directed the Laboratory to
do in a letter of August 16.
I also directed that the other University-managed labs,
namely Livermore and Berkeley, review their purchase card
systems for potential abuse. Similarly, the day I first learned
of allegations that managers at Los Alamos might be conspiring
to conceal property mismanagement and to stifle ongoing
investigations, I drove to the Lab--I happened to be in Santa
Fe that day--to look into the accusations first hand.
These subsequent steps, however, cannot excuse what
occurred already at Los Alamos. I regret that I did not detect
these problems earlier. I spent much of my time as Vice
President for Laboratory Management addressing what I knew were
actual or potential weaknesses within the structure of the
three laboratories. Regrettably, I missed some areas.
I also want to touch briefly on what I know about the
terminations of Glenn Walp and Steven Doran. Mr. Salgado told
me in advance that he intended to recommend to Director Browne
that Los Alamos terminate Mr. Walp and Mr. Doran. That was in
the week prior to the actual dismissal.
Based on what I knew from Laboratory officials at the time,
I thought that the lab had valid grounds for firing both men
and told Mr. Salgado to do what he felt was right. However, in
light of what I subsequently learned from this committee, from
Secretary Abraham, and others, I now have serious reservations
about the termination decision.
In conclusion, I find the conduct at Los Alamos inexcusable
and I am sorry that these events were not identified and
corrected earlier in my tenure. Our national labs are
extraordinary facilities and they must be managed with the
utmost care and diligence.
I do believe that the investigations by this committee, the
Department of Energy, the University and others, will make Los
Alamos and the University stronger improved institutions. Thank
you.
[The prepared statement of John P. McTague follows:]
Prepared Statement of John P. McTague, Former Vice President for
Laboratory Management, University of California
Mr. Chairman, Mr. Deutsch, and members of the Committee: My name is
John McTague, and from June 1, 2001, through January 6, 2003, I served
as the Vice President for Laboratory Management for the University of
California.
I am grateful for the opportunity to appear today and address your
concerns about the property procurement and management systems at Los
Alamos National Laboratory. I greatly appreciate the diligence and
dedication this Committee has shown in exposing problems at the
Laboratory. Let me be clear: I was the University official directly
responsible for overseeing Los Alamos National Laboratory when the
events you are investigating occurred; they happened on my watch; I
accept responsibility. Like you, and like the University, I consider
the allegations of mismanagement and theft disturbing and inexcusable.
professional background
I come before you today having devoted much of my life to science
and our national laboratories. In the academic, public, and private
sectors, I have overseen, managed, and evaluated large-scale technology
facilities, projects, and organizations requiring a high level of
scientific and technical expertise. I believe that our national
laboratories can and must realize scientific excellence while
simultaneously achieving management accountability, cost effectiveness,
and efficiency.
After graduating from Georgetown University and receiving a PhD
from Brown University, I began my career as a member of the technical
staff at the North American Rockwell Science Center in California. I
then joined the faculty of the University of California, Los Angeles as
a professor of Chemistry and a member of the Institute of Geophysics
and Planetary Physics. During my twelve years at UCLA, I also served as
a consultant to the Physics Division at Los Alamos and received
fellowships from NATO, the Alfred P. Sloan Foundation, and the John
Simon Guggenheim Foundation. During the course of my academic career, I
have authored or coauthored over eighty scientific publications.
In 1982, I left UCLA to become chairman of the National Synchrotron
Light Source Department at Brookhaven National Laboratory. When I
arrived at the department, construction was underway on what was
planned to be the most powerful x-ray ring in the world. The project,
however, suffered from poor management, cost overruns, and schedule
delays. By the time I left Brookhaven, the project was back on line.
From 1983 to 1986, I served as Deputy Director of the White House's
Office of Science and Technology Policy, and in 1986, I was Acting
Science Advisor to President Reagan. Following my service in the White
House, I spent twelve years with the Ford Motor Company, serving first
as Vice President for Research and then as Vice President for Technical
Affairs. In both these positions, I came to appreciate even more the
importance of managing scientific research while balancing cost,
efficiency, and environmental concerns.
While at Ford, I continued to play an active role in the nation's
science policy and national laboratories. In 1990, the first President
Bush appointed me to the President's Council of Advisors on Science and
Technology. From 1990 through 2000--under four different Secretaries of
Energy and two different administrations--I served as a member of the
Secretary of Energy Advisory Board, an organization that enjoys broad
input into various energy-related matters, including weapons policy.
During this same ten-year period, I served as the very first cochairman
of the Department of Energy Laboratory Operations Board. This position,
as you might imagine, gave me insight into both the strengths and
weaknesses in the management of our national laboratories. During the
mid-1990s, I also chaired the Board of Overseers for Fermi National
Laboratory and was a charter member of the University of California's
President's Council on the National Laboratories.
appointment as vice president for laboratory management
It was, I believe, because of my varied work experiences and
longstanding interest in the management of our national laboratories
that University of California President Richard Atkinson named me the
University's first Vice President for Laboratory Management.
In July 2000, as a cochairman of the Department of Energy
Laboratory Operations Board, I learned of then Energy Secretary Bill
Richardson's uncertainties about the University's oversight of Los
Alamos and Lawrence Livermore National Laboratories. The Secretary's
reservations came at a critical time; he was in the process of deciding
whether to renew the University's contract to manage both laboratories.
Consequently, I sent Secretary Richardson a letter describing the
University's great strengths and weaknesses as a manager.
I reminded the Secretary--as I remind all of you today-- that the
two laboratories have for ``over a half century given this nation a
vastly unmatched superiority in nuclear weapons and nonproliferation
technology.'' ``There is,'' I told him and tell you, ``no remotely
close second place contender, either among our allies or our potential
adversaries.'' Part of the labs' dominance was--and is--directly
attributable to the University of California's management. I explained
that UC ``is exceptionally strong in two critical areas: personnel
systems and technical quality control.'' Both factors, I emphasized to
the Secretary and reemphasize today, ``are at the heart of the
superiority we have sustained.''
Yet for the many positives in the University's management, I noted
problems also existed. My criticisms of the University were direct and
blunt. I informed the Secretary that ``unacceptable weaknesses in
project and security management'' existed at Los Alamos and Lawrence
Livermore. To remedy these shortcomings, I argued for the establishment
of a ``single, unambiguous line of authority and accountability.'' I
recommended that the University create ``a strong vice presidential
position devoted full time'' to overseeing and working with the
laboratories. The person holding this office, I told the Secretary,
``should have the resources and expertise to make the laboratories act
as a system, to assess and assure the performance of the laboratory
directors, as well as technical excellence of programs, major project
management, personnel systems, safety, security, and business
practices.''
Secretary Richardson subsequently renewed the University's
contract, but he conditioned renewal on the University making specific
improvements in its oversight system. One of these conditions--which
are identified in Appendix O of the renewed contract--mandated that the
University establish the office of Vice President for Laboratory
Management.
Sometime after sending my letter to Secretary Richardson, I
received a call from President Atkinson, whom I had known for twenty
years. He asked if I would consider interviewing for the new position.
I had not sought the job; I was just beginning to enjoy my new retired
life in Santa Barbara. Nonetheless, I told President Atkinson that I
would interview for the post, but that he must understand that, if
selected, I would only serve for a limited time. I intended, I told
him, to stay in the position long enough to oversee the establishment
of the office and regularization of the relationship with the
Department of Energy, and the successful completion of the Appendix O
requirements.
On June 1, 2001, I became the first University of California Vice
President for Laboratory Management.
tenure as vice president
I assumed my new responsibilities with several systemic goals in
mind for both Los Alamos and Lawrence Livermore. First, I was
determined to see the University and the laboratories meet the
milestones set forth in Appendix O. Second, and from a more
programmatic perspective, I wanted the two labs to strike a healthy
balance between competition and cooperation. The labs, I felt, must
continuously push one another toward excellence. However, the
competitive frenzy should not obscure the larger point: Both labs play
a vital role in developing and maintaining our country's nuclear
weapons arsenal. Therefore, where appropriate, I aimed to have the labs
share their facilities, balance workloads, and work together toward
creating unified definitions and safety standards. In essence, I hoped
that the labs would operate as a system in carrying out their day-to-
day activities. Third, I wanted the laboratories to make proper project
management and best business practices an integral part of their
operations. Budget and time constraints, I wanted the laboratories to
understand, could not be ignored.
These more overarching concerns were by no means my only
priorities. The laboratories needed to take preventive measures against
possible cyber attacks and physical assaults. Lab-specific issues also
concerned me. For example, I was determined to prevent a recurrence of
cost overruns and missed deadlines at the National Ignition Facility
being constructed at Lawrence Livermore. On a less scientific level,
both labs--but particularly Los Alamos--faced exploding healthcare
costs that had to be reined in.
Looking back, I believe the University and the laboratories made
good strides toward achieving these goals during my nineteen-month
tenure. On the security front, the University retained Aegis, a
Washington, D.C. based consulting company, to review and critique the
labs' security systems. I subsequently ordered the laboratories to
implement Aegis's recommendations. I note that in the most recent
simulation of a physical attack, Los Alamos performed extremely well.
Improvements were also made in project management. When I stepped down,
the major construction projects at the laboratories--including Lawrence
Livermore's National Ignition Facility--were meeting the Department of
Energy's milestones for cost and performance. Some construction
projects were actually running ahead of schedule and below cost.
Indeed, I was so pleased with progress being made by the
laboratories and the University that in February 2002, I informed
President Atkinson that I intended to resume my retirement by the end
of the year. In October 2002, a month before I formally announced my
resignation, the National Nuclear Security Administration completed a
two-year review of Los Alamos and Lawrence Livermore, during which the
agency evaluated the laboratories for management accountability, safety
and security, facilities safety, and project management. The two
laboratories received the highest possible scores in all categories.
Therefore, as I prepared to return to Santa Barbara, I believed that
the University and the labs were well on their way toward fulfilling
the Appendix O obligations and improving their management operations.
recent problems at los alamos
Sadly, as my tenure drew to a close, I suddenly learned of the
deficiencies in Los Alamos's property management and procurement
systems. I must confess, given the high marks received by the Lab's
property audits in recent years, these discoveries came as a surprise.
In hindsight, I should have devoted more time and energy to
investigating the handling of property at Los Alamos.
Purchase Card
In early August 2002, Joe Salgado, then the Lab's Principal Deputy
Director, telephoned and informed me that one laboratory employee had
attempted to purchase a Ford Mustang using her lab-issued purchase
card, and that another employee had used her card to obtain a cash
advance at a local casino. Needless to say, I was appalled to hear of
these incidents. More troubling, however, was Mr. Salgado's warning
that the Lab's automatic reconciliation process had not detected the
illicit transactions.
I took immediate action after receiving Mr. Salgado's report. On
August 16, 2002, I sent a letter to Director John Browne instructing
him to establish the External Review Team to evaluate the Lab's
purchase card system. The Review Team would be headed by two former
inspectors generals and assisted by the accounting firm of
PricewaterhouseCoopers. In addition, I instructed Mr. Salgado to give
me weekly updates on the Lab's progress in resolving the purchase card
issues. Finally, I ordered the other two national laboratories managed
by the University, Lawrence Berkley and Lawrence Livermore, to
investigate their purchase card systems and determine whether they
suffered from problems similar to those afflicting Los Alamos.
Fortunately, the reports I received indicated they did not.
TA-33
In the same conversation that Mr. Salgado first informed me of the
problems with the Lab's purchase card system, he also told me that some
Los Alamos employees had purchased goods for their personal use using a
Lab purchase order contract. Mr. Salgado explained that because the FBI
was currently investigating the matter, he had limited information and
the Lab's ability to undertake its own investigations was restricted.
Mr. Salgado did say, however, that the suspected thieves worked in one
of the Laboratory's sensitive areas.
In later conversations with Mr. Salgado, I was told that officials
in the Lab's Security and Safeguards Division were informed of the
thefts in September 2001 and had notified the FBI, which did not take
action for some time. Yet these same officials failed to report the
matter to the Inspector General or senior managers at Los Alamos. As I
told Mr. Salgado at the time, I believe the security officials made a
mistake by not immediately passing the information up to their
superiors or taking steps to notify the Inspector General.
Mr. Salgado also subsequently told me that he and Frank Dickson,
the Lab's Laboratory Counsel, felt that the FBI needed to conclude its
investigation more rapidly. Allowing suspected thieves to continue
working in a highly sensitive area of the Lab, he explained, posed an
unacceptable security risk.
Walp and Doran Terminations
No discussion of the recent troubles engulfing Los Alamos could
possibly be complete without mentioning Glenn Walp and Steven Doran.
Like many of my University of California colleagues, I appreciate that
Mr. Walp and Mr. Doran did the nation, the Lab, and the University a
service in publicizing their concerns over the Lab's property
management system.
I first heard the names Glenn Walp and Steven Doran on November 5,
2002, while meeting in Santa Fe, New Mexico, with project managers from
Los Alamos, Lawrence Livermore, and Lawrence Berkley National
Laboratories. While in Santa Fe, I was told of an article in the Energy
Daily newspaper alleging that senior Los Alamos managers were
concealing property mismanagement at the Lab and interfering with
ongoing investigations. I found that assertion very troubling, and
drove that same day to Los Alamos to look into the matter further. Once
at the Lab, I met individually with Mr. Salgado and Jo Ann Milam. Later
in the day, I held a much larger meeting involving Mr. Salgado, Frank
Dickson, James Holt, Stanley Busboom, Gene Tucker, and Scott Gibbs. The
general discussion of the meeting confirmed many of the details in the
article. During this meeting, Mr. Dickson stated that he had previously
lost confidence in Mr. Walp and Mr. Doran and that he did not trust
either man. As best I could tell, all the other participants agreed
with Mr. Dickson's assessment.
The week before Thanksgiving, Mr. Salgado called to give me his
weekly update on the purchase card system. During the conversation, he
said that the Lab lacked confidence in Mr. Walp and Mr. Doran, and he
reported that the Lab had to act at once because both men were
approaching the end of their probationary periods and about to go on
vacation. Based on what Mr. Salgado said, I thought the probationary
periods would expire while Mr. Doran and Mr. Walp were away from the
Lab. Mr. Salgado pointed out that Mr. Walp had incorrectly accused an
employee in the Lab's Human Resources Department of obstruction of
justice, and other reasons offered as justifications for the
terminations included Mr. Walp's refusal to cooperate with the External
Review Team and the unreliability of reports submitted by Mr. Doran.
After listening to Mr. Salgado, I asked whether he had spoken with
Director John Browne about the terminations. He responded that the
Director was out of town, but that he would consult him over the
weekend. I then told Mr. Salgado to do what he felt was right.
Based on the apparent unity of Laboratory managers, I did not doubt
Mr. Salgado's actions or motivations when he notified me of his
intention to recommend termination to Director Browne. Now, however, I
have serious doubts about the actions. I subsequently learned, for
instance, that neither Mr. Walp nor Mr. Doran were approaching the end
of their probationary status. In fact, the probationary periods for
both men ran into 2003, and both periods could have been extended by
Laboratory managers.
Secretary Abraham played an instrumental role in triggering my
reassessment of the terminations. During the Secretary's December 12,
2002 visit to Santa Fe, Director Browne explained the Laboratory's
reasoning for terminating Mr. Walp and Mr. Doran. It was a case I had
heard before, and a case, frankly, that I had accepted as plausible and
defensible. Secretary Abraham offered a new, fresh perspective. As his
probing questions demonstrated, an outsider objectively reviewing the
situation might wonder if the terminations were warranted. The
Secretary, as well as this Committee, helped shed new light onto the
firings.
concluding thoughts
Our national laboratories are extraordinary institutions that
provide an invaluable service to this country. They have no peer in the
realm of scientific research and technical expertise. There is always
room for improvement, however. I have devoted much of my life to
bettering the project management of our national laboratories so as to
ensure that their business practices match their scientific excellence.
During my tenure as Vice President for Laboratory Management, I believe
the University and Los Alamos made real and substantial progress toward
improving management, oversight, and programmatic performance.
Yet the failings at Los Alamos demonstrate that we must do much
better. The events being investigated by this Committee are
inexcusable. Theft and mismanagement of government property--regardless
of size--cannot be tolerated. When I proposed creating the position of
Vice President for Laboratory Management, I emphasized the importance
of accountability. Ultimately, I was the University official in charge
of overseeing Los Alamos, and I regret what occurred at the Lab. But I
am also grateful to this Committee, to Secretary Abraham, to Mr. Walp
and Mr. Doran, and to the Inspector General for investigating,
identifying, and publicizing the weaknesses at the Lab. I am convinced
that the University and Los Alamos are becoming stronger and improved
institutions because of these revelations.
Thank you again for your efforts and for the opportunity to appear
today. I would be happy to answer your questions.
Mr. Greenwood. Thank you, sir.
Mr. Erickson.
TESTIMONY OF RALPH E. ERICKSON
Mr. Erickson. Good afternoon, Mr. Chairman, members of the
subcommittee. My name is Ralph Erickson. I am the current
Manager of the National Nuclear Security Administration's Los
Alamos Site Office. I was assigned to the Los Alamos Site
Office in July 2002 as Director, reporting to the Manager of
the Albuquerque Operation Office.
During the middle of December 2002, as a part of National
Nuclear Security Administration's restructuring, the
Albuquerque Operation Office was disestablished and the Los
Alamos Site Office began reporting directly to the National
Nuclear Security Administration's Administrator Office in
Washington, DC. At that time, I became the Manager of the Los
Alamos Site Office.
I am now responsible and accountable, to the Administrator,
for the oversight and contract management for the contract with
the University of California, related to the Los Alamos
National Laboratory. My new responsibilities include functions
that were previously the responsibility of the Manager,
Albuquerque Operations Office, such as Business Management
oversight and evaluation.
Given the events of the past 8 months, which includes the
Department of Energy's Office of Inspector General Special
Inquiry, ongoing Federal Bureau of Investigation and other
related activities, I have taken a number of actions to begin
to address the findings and recommendation which have come from
these events:
I have directed that the Los Alamos National Laboratory
take appropriate salary action for those individuals reassigned
to lower-level positions.
I have directed the Los Alamos National Laboratory to take
five specific actions related to the recently issued Office of
Inspector General report on fire arms inventory and report back
to me in person on a monthly basis as to the status of the
corrective actions taken by them.
These corrective actions will be validated by the National
Nuclear Security Administration.
I have directed that Los Alamos National Laboratory
establish an internal tracking system, to capture all findings,
observations, lessons learned, and recommendations related to
these and other assessment activities. This tracking system
will include corrective actions, and a schedule for
implementing the corrective actions. Los Alamos National
Laboratory will identify a point of contact for each action.
The National Nuclear Security Administration will review each
action for adequacy and validate closure.
I have taken actions to reengineer the Business Management
Oversight Process, which is conducted by National Nuclear
Security Personnel. Formerly, this process was focused on
performance improvement (efficiency, and economy), and the
process was functionally aligned.
Assessments were conducted vertically within functional
areas such as property, procurement, and finance. I have added
steps to assure that transactions will be evaluated in a
cradle-to-grave fashion horizontally across all functional
areas.
Thus, transactions involving the acquisition of personal
property for example, will be assessed from inception to
completion assuring that approved procedures are properly
implemented across the Los Alamos National Laboratory business
management activity. This methodology will insert an element of
internal control review into the performance assessment
process.
Finally, as corrective actions are implemented, and
validated for closure, I will also review each action and take
appropriate actions, such as a contracting officers
determination of allowable costs in order to assure that the
Government's and the taxpayers funds are recovered as
appropriate.
Thank you for the opportunity to appear before this
committee. This concludes my statement; I would be pleased to
answer any questions. Thank you.
[The prepared statement of Ralph E. Erickson follows:]
Prepared Statement of Ralph E. Erickson, Manager, Los Alamos Site
Office, National Nuclear Security Administration, U.S. Department of
Energy
introduction
Good morning Mr. Chairman and Members of the Subcommittee: My name
is Ralph Erickson, and I am the current Manager of the National Nuclear
Security Administration's Los Alamos Site Office. I was assigned to the
Los Alamos Site Office in July 2002 as Director, reporting to the
Manager of the Albuquerque Operation Office. During the middle of
December 2002, as a part of National Nuclear Security Administration's
restructuring, the Albuquerque Operation Office was disestablished and
the Los Alamos Site Office began reporting directly to the National
Nuclear Security Administration's Administrator Office in Washington,
D.C. At that time, I became the Manager of the Los Alamos Site Office.
I am now responsible and accountable, to the Administrator, for the
oversight and contract management for the contract with the University
of California, related to the Los Alamos National Laboratory. My new
responsibilities include functions that were previously the
responsibility of the Manager, Albuquerque Operations Office, such as
Business Management oversight and evaluation.
Given the events of the past eight months, which includes the
Department of Energy's Office of Inspector General Special Inquiry,
ongoing Federal Bureau of Investigation and other related activities, I
have taken a number of actions to begin to address the findings and
recommendation which have come from these events:
I have directed that the Los Alamos National Laboratory take
appropriate salary action for those individuals reassigned to
lower level positions.
I have directed the Los Alamos National Laboratory to take
five specific actions related to the recently issued Office of
Inspector General report on fire arms inventory and report back
to me in person on a monthly basis as to the status of the
corrective actions taken by them. These corrective actions will
be validated by the National Nuclear Security Administration.
I have directed that Los Alamos National Laboratory establish
an internal tracking system, to capture all findings,
observations, lessons learned, and recommendations related to
these and other assessment activities. This tracking system
will include corrective actions, and a schedule for
implementing the corrective actions. Los Alamos National
Laboratory will identify a point of contact for each action.
The National Nuclear Security Administration will review each
action for adequacy and validate closure.
I have taken actions to reengineer the Business Management
Oversight Process, which is conducted by National Nuclear
Security Personnel. Formerly, this process was focused on
performance improvement (efficiency, and economy), and the
process was functionally aligned. Assessments were conducted
vertically within functional areas such as property,
procurement, and finance. I have added steps to assure that
transactions will be evaluated in a cradle to grave fashion
horizontally across all functional areas. Thus, transactions
involving the acquisition of personal property for example,
will be assessed from inception to completion assuring that
approved procedures are properly implemented across the Los
Alamos National Laboratory business management activity. This
methodology will insert an element of internal control review
into the performance assessment process.
Finally, as corrective actions are implemented, and validated for
closure, I will also review each action and take appropriate actions,
such as a contracting officers determination of allowable costs in
order to assure that the Government's and the taxpayers funds are
recovered as appropriate.
Thank you for the opportunity to appear before this committee. This
concludes my statement; I would be pleased to answer any questions.
Mr. Greenwood. Thank you, Mr. Erickson.
The Chair recognizes himself for 10 minutes.
Mr. Marquez, the committee obtained a report that was
generated in last December. It was requested by BUS-5 team
leader that shows items that were deemed sensitive that were
not property tagged as they should be.
Now, that report says there were over $600,000 in desktop
computers untagged, $150,000 plus in pocket PCs, $188,000 in
printers, $20,000 plus in scanners, $193,000 plus in work
stations, $7,400 in network servers, $751,000 in lap tops. How
can anyone sit here with a straight face and say that this
property management system is not severely flawed given these
numbers?
Mr. Marquez. I am not familiar with the particular list. I
do have a list that the University of California provided me. I
suspect it is probably the same list. The list I have seen has
roughly 500 individual transactions and it is roughly computers
and computer peripheral equipment.
As we speak, I have my staff inventorying that to try to
track it back to serial numbers and purchases. So far, sir,
with 65 percent of that complete, we have all of those showed
up as bar coded and in the inventory. I would like to finish
that and I would like to provide this committee with that
report.
Mr. Greenwood. All right. Which among you had direct
responsibility for the purchase card program?
Mr. Hettich. As the procurement manager I would say I had
direct responsibility.
Mr. Greenwood. Okay. Reference was made, and I forget which
one of you testified, to, I think, with regard to the Mustang
case that the individual in charge had self-approved status.
Mr. Hettich. Correct.
Mr. Greenwood. Now, it seems to me so obvious that a system
in which employees self-approve their expenses is obviously
flawed. I can't imagine. That is not the way it works in the
Congress. I can tell you that.
I can tell you that if I buy a train ticket and put it on
my Federal credit card, I better bring that stub in and I
better give it to the woman who puts this report together and
she sends it off to somebody else who matches it against the
dates and so forth and approves. If I make a mistake anywhere
in my reporting, I have got a problem. It seems so self-evident
that any system that has self-approval is automatically flawed.
How could you have a system like that?
Mr. Hettich. I can give you the historic on it. It was
actually set up that way in 1996 when the credit card system
was first set up.
Mr. Greenwood. What were they thinking then?
Mr. Hettich. The logic at that time was if, in fact, you
are giving a buyer a warrant to make a purchase under a PO
system, then you don't--they effectively self-approve that.
They release that contract action so in the case of a P-card it
is an equal type of concept. I personally disagree with that
idea. I agree with you.
Mr. Greenwood. How long have you personally disagreed with
that?
Mr. Hettich. Well, I became the procurement manager in
January of last year. Just so you have a context, I am the
third procurement manager the Laboratory has had in 3 years and
during a period where our growth in procurement actions was
going up tremendously.
The problem was, quite honestly, I have to admit and,
again, you have others say this and I won't use that as an
excuse, but I didn't realize that actually that is how the
structure was at that time. When I found out, I was outraged. I
mean, it just struck me----
Mr. Greenwood. You know, there was a lot in the news, I
think somebody mentioned it today, about these kinds of
problems in other departments, the Department of Defense.
Mr. Hettich. That is correct.
Mr. Greenwood. There were stories about somebody in the
Department of Defense who paid for his girlfriend's breast
enlargements or something using a credit card. There were all
kinds of ridiculous abuses of the credit card system.
Mr. Hettich. I had actually asked for a review of the
credit card system in January when I first became the
procurement manager and got a status from the then team leader
over the small purchasing operation and the purchase card
administrator on what is the status of our system. At that time
that was not one of the issues that was raised unfortunately.
Mr. Marquez. Mr. Chairman, let me just interject. We can
look backward, and I agree, but it is not defensible. When we
looked at it, and I had a small committee formed to look at
this, the first place they looked, as Dr. Browne testified, was
DOD OIG reports. They were rampant at the time.
If you will notice in the August 26 revision of the
procedures, which I issued, there is no continued self-
approval. You have to have separate approvals. I mean, we all
recognized at the time when we looked at it that it wasn't
acceptable. I still believe it's not acceptable and we changed
it.
Mr. Greenwood. Okay. Let me stay with you, Mr. Marquez.
Past procurement card audits dating back to 1998 identified the
same systemic issues with the program time and time again.
Checklist to ensure cards were closed out properly when
employees leave the lab do not exist. Regular audits of
programs not occurring. Property controlled items not properly
accounted for.
As I mentioned in my opening statement, I would like to
know now what about your new procedural changes leads you to
believe they will assist in solving the problems where none of
the other audits and suggestions worked?
Mr. Marquez. If you look at my written testimony, sir, you
will see that when I started the job, I indicated in my written
testimony that you had mixed signals. Yes, you had audit
reports, but you also had corrective actions that were recorded
that indicated that management had addressed the issues.
You had ratings from the customer that were outstanding.
There were mixed signals in this process. Notwithstanding that,
your challenge is well taken. I believe that the answers are
really pretty straight forward. First of all, I think you have
to have sanctions. You have to have sanctions for the card
holders and the review and approval officials that do not do
their job. You have to have sanctions for people that abuse
purchase cards. Our disciplinary procedures----
Mr. Greenwood. As my daughter would say, ``duh.''
Mr. Marquez. But my point is we have disciplinary
procedures that cover that but our practices don't evidence
that we rigidly enforce and follow up. That is a single
difference. In January we suspended close to 200 cards for
people who did not do the requisite training. We have not done
that in the past. The scope of the cards. You know, we let this
thing grow to where we had too many card holders.
We have dropped it from something like 1,100 down to 585.
We have got problems with our automated system. Every time we
invent a system, we find ways to manually override it so that
the internal control checks don't occur. We are going to fix
that. And then, frankly, two other things that I think are just
as important.
We have, in my opinion, an over reliance on audits to do
internal control's work. I think the answer is that the
business organizations, whether they be the accounting people,
the property people, the procurement, they have to do their own
internal control desktop audits. They have to routinely check.
As I indicated in my written testimony, experience and
industry practice tells you that if management is paying
attention, a lot of the internal control issues should go away.
And, finally, and this is probably the most important, I really
insist and maintain in my testimony, and I believe this with
all of my heart, your best internal control is the very people
who have the cards who observe others. If we create an
environment of openness where they can bring forward issues,
then that is another way to catch----
Mr. Greenwood. I certainly agree with that. It has been
testified here that now there is this new spirit of rejoicing
about bringing information forward. My question is did the
opposite exist before? Was it your sense that prior to these
changes that there was--that individuals who felt they were
aware of wrongdoing going on by their coworkers were
discouraged from bringing that forward?
Mr. Marquez. I think you are going to find different views
by different managers at the Laboratory. I will just share my
own personal view. I believe that I have seen enough one-on-one
conversations with people that they do believe that there would
be retaliation if they brought forth issues. I have heard that
on more than one occasion.
Mr. Greenwood. What do you think led them to believe that?
Can you think of cases where there has been retaliation?
Mr. Marquez. I have had to review cases that claim
retaliation in my capacity as the Associate Lab Director.
Mr. Greenwood. Retaliation by whom?
Mr. Marquez. By supervisors and managers. I have had people
come to me and share who, in fact, have been past
whistleblowers who to this day still claim that they are being
retaliated against.
Mr. Greenwood. And you have investigated those claims?
Mr. Marquez. Yes, I have. Yes, sir.
Mr. Greenwood. And have you found they have veracity?
Mr. Marquez. I have found that in most cases a lot of these
issues don't go away. People go through the process and they
don't feel like justice was served at the end of that process.
I am being candid with you. That's frankly my own assessment.
Mr. Greenwood. You are under oath. You had better be
candid.
Mr. Marquez. But I have to tell you, those issues don't go
away and I think, frankly, part of our problem is that we don't
cultivate relationships. We don't have relationships amongst
subordinates. We don't have vertical relationships. We don't
have relationships even in the business community. We don't
spend a lot of time on that and I think we need to spend more
time on that.
Mr. Greenwood. Mr. McTague, did you want to comment on
that?
Mr. McTague. Yes. With respect to the issue of whether
there is hope that things will be better now with the new
system, the University of California has a purchase card
system, a single system at its 10 university campuses and the
two other national laboratories that it manages. There have not
been the systemic problems on the campuses or at the other
laboratories with this new system which is now the one that has
essentially been put into place at Los Alamos so hope springs
eternal.
Mr. Browne. Mr. Chairman, could I make a quick comment?
Mr. Greenwood. Please.
Mr. Browne. This whole subject really consumed a lot of my
energy for a couple of years, this whole question of fear in
the work place. The way I tried to address this was by a lot of
employee focus groups. Going out in the laboratory and sitting
down with employees without their supervisors there. I heard
the same thing that Mr. Marquez just testified to.
What I tried to do to address it was to give the employees
more avenues to come forward, an ombuds office. I put in place
at the time I became director something called Ask The Director
where you could ask me anonymously or tell me what you thought
was the problem and I would answer that publicly in our news
bulletin.
We had a series of these things. I think there is still
some fundamental barriers in our institution that I have
struggled with that have caused this fear to still exist and it
goes back a long time. I know 10 years ago when I was in a
different position at the Laboratory I dealt with the same
fundamental problem and I talked to employees about what drives
this fear in the work place.
I think we have to just continue to do what Dr. Marquez
says. The Lab Director has to stand up and say that it is okay.
I have done that. I have done that on many occasions. I
actually had a policy which I called my zero policy and that
stood for zero people mistreatment at our Laboratory, zero
safety incidents, zero security incidents.
Ironically I got some pushback from our employees because
technically they said you can never achieve zero. My answer to
the employees was, ``What number is okay?'' In my opinion,
there is no other number. You may not ever get there but the
fact is that should be your goal as a leader of an institution.
Mr. Greenwood. Thank you.
The gentleman from Florida.
Mr. Davis. Thank you. I have a series of questions that, if
counsel is prepared, I would like to run through.
Mr. Hettich, I want to start with you and the Mustang
investigation. Why did you not report this to OSI as soon as
you found out about it?
Mr. Hettich. Sir, I have to disagree with the statement
that was made that I did not. I got to Mr. Marquez as quickly
as I could. After I talked to Mr. Marquez as the head of AD
that we ultimately responded to, first of all, he asked me to
make sure that I informed both AA-4, which was the Waste,
Fraud, and Abuse Unit, and OSI. Historically, just so you
have----
Mr. Davis. I am short on time and I know you will correct
me if I am not putting this in the appropriate context. He did
direct you to report this to OSI?
Mr. Hettich. To both.
Mr. Davis. And you did so?
Mr. Hettich. Yes, sir.
Mr. Davis. And how timely did you do so?
Mr. Hettich. I called Mr. Walp the next day. We arranged--
--
Mr. Davis. Can you be specific on the date, if you can
recall?
Mr. Hettich. I would say--well, interestingly enough, I had
found one of the call backs on it. The call back from Steve
Doran was on the 25th but I had talked to Mr. Walp before that.
There was also an allegation made that it was only because of
John Topia which is not correct.
Mr. Davis. Let me just understand this specific point. My
information is the problem was discovered on the 18th. Does
that message help you recall what date you would have talked to
him?
Mr. Hettich. It was discovered on the 18th. I was informed
of it on the Wednesday of the week before the 25th. I talked to
Mr. Marquez, called Mr. Walp on the Friday. Met with my people
on the Tuesday for more information on it. Met with Mr. Doran
actually, I think, the next day. Then with Mr. Walp and Mr.
Doran on Thursday.
Mr. Davis. Mr. Dickson's office knew about it in a couple
of days. Did his office tell you to start your own
investigation by calling the suspect employee and the suspect
vendor?
Mr. Hettich. No. Not me, but I am not sure if they had a
conversation with either Mr. Holder, who is the team leader, or
the purchase card administrator.
Mr. Davis. Are you aware that Mr. Holder gave those
instructions to the purchase card administrator and, if so, why
did he do that?
Mr. Hettich. I am not sure why he gave those instructions
to the purchase card administrator. I think what he was trying
to do was establish the facts so that he understood what was
happening in this. As has been pointed out, she had immediately
disputed it when the statement came out. Statements are like
your own. They come out the month after. A May statement would
have come out in June.
Mr. Davis. Were you planning to have your people go out and
get phone records and check on delivery methods? Were you
planning to call the FBI yourself or were you going to let Bank
America handle the problem since they had already reimbursed
the vendor?
Mr. Hettich. Actually, the first thing I wanted to do was
talk to senior management as soon as I found out about it what
they would like me to do with it. I would have automatically
called AA-4 the same day that I found out about it but I wanted
to make sure that Mr. Marquez was aware of it. I knew that OSI
was taking a different role than they had historically taken on
it. We discussed it and he said that he wanted to make sure
that we were informing both avenues simultaneously and I did
that.
Mr. Davis. Mr. Marquez, do you agree with the description
of the events?
Mr. Marquez. I agree with the description relative to Mr.
Hettich's and my conversation. I have really no knowledge of
Mr. Holder's actions.
Mr. Davis. In your capacity as the person in charge of all
kinds of procurement, can you explain to us how the blanket
purchase order like the Mesa agreement could have gotten out of
hand without somebody monitoring it? Different people have told
us this particular type of method was ripe for abuse.
Mr. Marquez. As I have said to the staff members, there is
really no excuse for the Mesa contract. The structure of it by
its nature was more open than any blanket we had ever put
together that I could find. It started out as a very small
contract with a limited scope. It was expanded.
While there was some review, the oversight was clearly not
enough. Even though it had been in existence for quite a period
of time by the time that I became the procurement manager,
honestly the procurement manager in general should have known
about it. I should have known about it. I can't defend that
piece. I mean, I can't defend why that contract was structured
as open as it was.
Mr. Davis. I believe you may have said to Mr. Walp at some
point that the system had become too customer oriented meaning
the customer got what they wanted. Do you think that explains
why the system was failing?
Mr. Hettich. Actually, just so you understand, there was
another aspect of what I told Mr. Walp and Mr. Doran. There
were actually three things I said to explain the system
differences. One was that in the mid-1990's there was a
decision that the procurement and property personnel that were
distributed, that were in the field, instead of reporting
directly to the property management and procurement management,
actually reported to a different BUS group. So the person that
was overseeing their salary raises and everything else was not
necessarily the procurement manager or the property manager.
That was changed in February 2002. By the way, the other
thing that I raised with them was the G&G Industries as the
same time when they came over, at the same time I mentioned
Mustang.
Mr. Davis. In your opinion, do contract administrators have
enough time to monitor the purchases to make sure they are
legitimate?
Mr. Hettich. No.
Mr. Davis. So it's really a matter of personal
accountability for each of the administrators. If the
administrator is honest and does their job appropriate,
everything will work out fine. If they don't, there are
opportunities for misuse.
Mr. Hettich. I think one of the things that Mr. Marquez
said that is probably the most important is the level of
oversight. Just to give you a comparison, for instance, at
Lawrence Livermore the BUS organization has four people that
look specifically at that. That is an independent organization.
That is what Mr. Marquez has set up for us now also within our
BUS organization.
Mr. Davis. Mr. Hernandez, I would like to ask you to
comment on the same point in terms of the oversight.
Mr. Hernandez. I think the problem with this blanket, how
it got out of hand, is due to, one, understaffing within
procurement. The administrator of this contract is an honest
person. She does a good job. Spends an abnormal amount of hours
at work. We are overwhelmed with new requirements from
requestors. Once you have a full plate of new requests you are
being pushed to get these things out. Usually you have last
minute requests. The administration and oversight of the
contracts end up suffering.
Mr. Davis. Mr. Marquez, what plans do you intend to
undertake to deal with this problem that everyone seems to
agree?
Mr. Marquez. The staffing issue?
Mr. Davis. Yes, sir.
Mr. Marquez. Actually, we have done some things. Our
organization in procurement is funded out of our G&A, general
and administrative account. In fiscal year 2002 shortly after I
got there I mentioned that we formed this procurement
excellence plan. A tab of that, a section of that has to do
with staffing.
In between Stan Hettich and I and his team we laid out a 3-
year plan. It is obvious now looking back it's not aggressive
enough so with the help of the University of California we were
going to go out actively and vigorously and recruit MBA level,
whatever it takes to fix the staffing shortages.
Mr. Davis. So this was a 3-year plan because you did not
think it was an immediate problem but a problem with a long-
term solution?
Mr. Marquez. No. It was a 3-year plan because historically
at the Laboratory what I saw in terms of procurement profile is
that since 1996, as I mentioned in my written testimony, they
had pretty static staffing and I felt like it was going to be
an uphill battle to try to address the procurement and other
administrative staffing areas so I put together a modest plan.
Obviously it wasn't aggressive enough. We actually funded some
positions both in 2002 and 2003 largely because of my
intervention relative to the budget.
Mr. Davis. I think my time is about up so let me close with
this question. Dr. Browne, Mr. Salgado apparently has told us
that people at the Los Alamos Lab treated the taxpayer's money
as ``Monopoly money.'' He told us expensive furniture and food
were bought as were thousands of dollars for shirts
congratulating people. Do you agree with Mr. Salgado and what
has been done or what will be done about this?
Mr. Browne. I don't think I would have chosen the term
Monopoly money.
Mr. Davis. What term would you have chosen?
Mr. Browne. I think it goes back to this question of
formality of operations. What I mean by that is whenever you
have resources to work a problem for the Government, you really
need to have a system in place that allows you to plan your
program, to budget what you are going to spend it on, telling
your customer what you need to carry it out, and you need a
good evaluation system that says how well you are doing it.
It's more formality and project management and yet allowing
enough flexibility for local managers to make some good
judgment decision, not so rigid. What I think Mr. Salgado was
saying was that the system, unfortunately, maybe had too much
flexibility in the sense that some poor judgment by a few
people in terms of how they use their resources that were at
their disposal to carry out programs was maybe not with the
best judgment that they could exhibit.
For example, we have a program with the Department of
Energy for morale funds. That is a program that is approved by
the Department of Energy up to a certain limit. If someone
chooses to try and go around that system to augment that fund,
that is an unallowable cost. Mr. Erickson, I know, would tell
me it is an unallowable cost and we would have to figure out
another way to cover those expenses.
Those were Joe Salgado's words. I never would have said
Monopoly money. It conveys a little different context than I
would which is more of this you have got to have rigorous
formality when you are dealing with taxpayer's money.
Mr. Marquez. Mr. Davis, may I comment?
Mr. Davis. Please.
Mr. Marquez. The Congressman from California this morning
made a point about, ``What are you doing about it? You have got
these cultural issues.'' I would like to tell you that we are
doing something about it. I have formed a Business of
Procedures Practices Council. PP3 we call it. What it is is a
cross-section of the technical side of the house, all of the
division leaders.
As we make the corrective changes that we are proceeding
with now, they sit on a steering committee and if they have
objections, they needed to voice them then. If there are going
to be programmatic impact, they need to let us know.
What we do by this is get their buy-in each step of the way
as we change and forge this new culture. To sit and say we have
got this culture of accommodation, or whatever the term was
that was used, I wanted to let you know we are doing something
about addressing that cultural issue.
Mr. Walden. All right. Where to start? I want to make a
couple of comments. Dr. Browne, you triggered something that I
think is important. I fully understand--well, I don't. Nobody
understands what you have been through because it has probably
been very difficult.
You talked about size and scale of the operation. Even
given that, you are still responsible. I appreciate that, you
taking responsibility. It seems to me, though, that big
organizations hire people and pay them pretty significant
salaries to deal with the scope of the problems that may exist.
I hear size and scale. We face it all across the Federal
Government. I don't care how big or small your business is, you
are going to have bad apples but, dog gone it, at some point.
I appreciate your comments about Mr. McDonald being a
stand-up guy. The great irony is, though, that he went with
Bill Sprouse at OSI apparently. He told us he did at least
once, if not more than that, to say there's a problem. He felt
like he had been ignored. How ironic if, indeed, all of that is
true. If Mr. Sprouse had actually done something about it, who
knows what would have happened, how all of the lives would have
been different.
That's what troubles me is that my understanding is both
the University system has basically hired back Mr. Walp and is
working with Mr. Doran. Obviously we have heard today and
before that there wasn't necessarily just cause to fire them,
so that leads me to believe they didn't do anything wrong. They
were the whistleblowers. They identified the problems.
They were fired inappropriately and, in fact, the people
who fired them have been dismissed with a nice severance
parachute. Two weeks ago, I think it was, they sat here, Mr.
Walp and Mr. Doran, and said the people they hired who were
still there, the investigators or investigator, reported to
them basically they are just as frustrated as ever, that
nothing has changed.
Now, I hear things are changing. We also hear, though, that
certain LANL managers have suggested that the University of
California's actions to rehire Walp and Doran are ``only so
much window dressing'' and it is just a passing storm.
Mr. Marquez, do you care to comment on that? That is the
heart of the issue here. Is there real change or is this just
wait it out until the storm passes?
Mr. Marquez. I believe it's real change. I don't believe
that----
Mr. Walden. You don't think it is window dressing?
Mr. Marquez. No, sir. I believe that the University of
California has demonstrated, at least to me, in the areas that
I have to administer that they are sincere about the effort to
make change. They are bringing resources to the table. They are
bringing support on a daily basis. I have no doubt this is a
sincere change.
Mr. Walden. Okay. Mr. McTague and Mr. Marquez, are you
familiar with the settlement/retirement agreements with
Busboom, Tucker, and Brittin?
Mr. McTague. That all occurred after my time.
Mr. Marquez. That's a University of California action and I
am not aware of it.
Mr. Walden. So you don't know whether they included any
indemnification?
Mr. Marquez. I have no idea.
Mr. Walden. Anybody know at the table? No one is in a
position? Okay.
Mr. McTague. Might I make a comment on your discussion
earlier in the questions about that this time around are things
really going to get fixed. From my perspective, retrospectively
now, two things that are very important to making the system
really work are, one, a very good audit line of authority.
Ultimately the responsibility for running the Laboratory goes
to the Regents of the University of California.
The system that was in place for audit up until December, I
guess, was that the local audit operation at Los Alamos in
effect reported indirectly to the director and only very weakly
up through the Office of the President to the Regents where
there is an important audit office headed by Pat Reed. The
connection now is that audit function reports directly to Mr.
Reed so that it is independent of the system at the Laboratory.
Mr. Walden. That's good.
Mr. McTague. I think that is extremely important. The other
important thing is the robustness of management systems. We
have enough testimony that the management systems were not
robust, antiquated, etc. Bringing in the Ernst & Young group to
take a look at the total of the financial and other management
systems at the Laboratory, I think, is an opportunity that
would not have come about unless this committee had started the
investigation.
Mr. Walden. I appreciate that. Mr. Erickson, the NNSA
fiscal year 2002 appraisal of the LANL rated the Lab's
procurement and personal property management areas as
``excellent'' despite all the problems that had arisen at that
time. Can you explain what that rating is based on and how it
is that a system rated as excellent could allegedly allow two
employees to walk off with lab property of over $150,000
Government purchased property?
Mr. Erickson. The actual BMOR report, you may have heard it
called that, Business Management Operations Report, was
basically completed in about the August, early September
timeframe by the portion of the Albuquerque Operations Office
that at that time had responsibility for reviewing those
business, procurement, and property activities.
Based on the information that was available to them at that
time, none, or very few, of the activities that had come to
light as a result of the investigations in this hearing process
were known. The FBI was investigating a number of issues, the
Mustang case and others, as well as the TA-33 case. Those were
under investigation.
Given the fact that they were under investigation by the
FBI, we weren't aware of all the details at that particular
time and the people who did that report were not aware. That
report was then issued at the very beginning of October of last
year.
The appraisal was put together in the latter part of
October. At that point in time a few more of these details had
come out. I made the decision to lower their rating by one
grade and that is the rating that was made a part of the actual
appraisal.
Mr. Walden. Just one grade?
Mr. Erickson. Again, because we didn't have the
information. We did not have the data. This was prior to the
firings of the two gentlemen. This was before we knew what was
going to come out of the FBI investigation.
Mr. Walden. You know, Mr. Erickson, it is probably
frustrating for you to have me sit here and question all the
work you are doing but I spent 5 years on a community bank
board and served on the audit committee.
We had the regulators in periodically. They were amazing at
what they could find down to the gnat's eyelash practically.
They were very rigorous. We welcomed it as a board because it
kept our tails out of trouble. How do we get that into these
systems? We had our own internal auditor. We had an external
auditor. Then they would come in.
Mr. Erickson. And that is one of the things that we are
endeavoring to correct as we have moved beyond this. The
metrics that were used by the BMOR people tended to be very
vertical in an organization. They didn't take a transactional
look at how things really crossed the line between procurement
and property and things like that. This year based on what we
found and what we learned we are changing that process.
Mr. Walden. Are you changing auditors?
Mr. Erickson. We're not changing auditors because we rely
on two things. One, the Federal employees whom we used before.
We also use the IG on an annual basis to look at our books.
Mr. Walden. You don't use an outside Government auditor?
Mr. Erickson. It's all within house, if you will. The
internal is our own organization, the NNSA. We also rely on the
IG as, if you will, the external organization. We don't go to
Arthur Anderson.
Mr. Walden. Nobody does that anymore, Mr. Erickson. In part
as a result of this committee, I might add.
Mr. Erickson. I recognize that.
Mr. Walden. We are trying to avoid all those issues. When
did you find out about the Bussolini-Alexander case?
Mr. Erickson. I was informed of that toward the latter part
of August. I had heard about the Mustang and the P-card, as it
is sometimes is called, issue.
Mr. Walden. Who told you about it, Bussolini-Alexander?
Mr. Erickson. That was Joe Salgado.
Mr. Walden. And what was your response?
Mr. Erickson. I was astounded, amazed, disappointed, and
very upset.
Mr. Walden. Did you notify anybody at NNA or DOE about the
problem?
Mr. Erickson. Yes. I immediately notified at that time my
immediate boss which was John Arthur who was the manager at
Albuquerque and also----
Mr. Walden. No relation to Arthur Anderson?
Mr. Erickson. No relation, sir. Then also the
administrator's office, Linton Brooks' office, within
headquarters.
Mr. Walden. So that is the action you took and then out of
your hands from there?
Mr. Erickson. In a sense out of my hands because those are
ongoing investigations by the FBI. We stand away from that and
let the FBI do their job until they are complete.
Mr. Walden. I just want to close my part and turn it over
to my colleague here. The fact is it still troubles me that
Walp and Doran were here 2 weeks ago reporting to us that in
their opinion and what they are hearing the same problems are
still going on. I just leave you with that. Whether it is
accurate or not I don't know. I hope you take that to heart.
Mr. Deutsch.
Mr. Deutsch. Thank you. Mr. Marquez, I am going to refer to
an e-mail dated January 23, 2002, from Robert Holder to Dennis
Roybal. If you want to take a look at it, it is at Tab 107 in
the book. Who are Mr. Roybal and Mr. Holder?
Mr. Marquez. I can't find the tab but Mr. Roybal was--what
was the date?
Mr. Deutsch. January 23, 2002.
Mr. Marquez. Until recently Mr. Roybal was the Deputy
Division Director in the Business Operation Division. Mr.
Holder until recently was a team leader for the accelerated
purchasing team in the procurement group of the Business
Operations Division.
Mr. Deutsch. Their titles now are?
Mr. Marquez. Mr. Roybal is a special assistant to my office
and Mr. Holder, I believe, has been reassigned as a senior
procurement staff in the procurement group.
Mr. Deutsch. Do they both work for you?
Mr. Marquez. They both report to me but they work in the
Business Operations Division. Mr. Roybal reports directly to me
now.
Mr. Deutsch. There is a concern about an IG order, the
purchase case program. Is that correct?
Mr. Marquez. I am sorry?
Mr. Deutsch. There is a concern, or is there a concern
about an IG order of--in the e-mail itself it talks about that,
concern about the IG order of the purchase case program. I have
it right here.
Mr. Marquez. ``DOE IG just announced they are going to
initiate a DOE wide audit of contractor purchase card use.'' I
think this e-mail is a forwarded e-mail that originated within
NNSA. I think what they are doing is he is forwarding an e-mail
to give notice that they are doing a--DOE apparently is going
to do a purchase wide----
Mr. Deutsch. In this e-mail Mr. Holder tells Mr. Roybal
that the purchase card system allows the purchase of attractive
items and cannot demonstrate that they are being properly
controlled. Could you tell us what attractive property is?
Mr. Marquez. Sensitive or attractive, if that is what he is
referring to, is a property control term which means items that
are under $5,000 which is the normal tracking threshold but
would be sensitive or attractive in the sense that someone
might be inclined to steal it, walk off with it. Those would be
things like, for example, an lap top, cameras, phones, things
of that nature.
Mr. Deutsch. And why aren't they being controlled?
Mr. Marquez. They are being controlled. I am not sure what
this e-mail is all about. I would have to go through and read
it. The purchase card regulations that I changed in August
would exclude purchases of this nature. It would prohibit these
kinds of purchases. That was one of the key changes in that set
of requirements that I issued in August.
Mr. Deutsch. Right. I mean, the words from the e-mail,
``The reviews are not current and have likely never been
current.''
Mr. Marquez. Well, this is Mr. Holder's view of the world,
but I can tell you that as of the end of February when we
closed our P-card accounts, we dropped our reconciliations and
our P-card accounts to a point where we are now within $8,000
on reconciliation so I am not really familiar----
Mr. Deutsch. Is that February of this year?
Mr. Marquez. Yes. February of this year. Yes, sir.
Mr. Deutsch. So this memo is of January of last year.
Mr. Marquez. January 2002. Keep in mind that (a) this was
before my time so you are catching me with an e-mail that I
have not seen, but (b) in August 2002 we instituted lab wide
purchase card changes.
Mr. Deutsch. Right. I guess the question is what happened
between January and August? Why did it take 8 months to do
that?
Mr. Marquez. Well, first of all, to be really honest with
you, I wasn't aware that we were buying controlled property
with our P-card process. I wasn't aware of that until I found
out after we had our purchase incidents in the summer.
Obviously I didn't agree with that policy and I changed it.
Mr. Deutsch. We were provided this week with a list of all
the computers bought on the purchase card system. In January
Mr. Holder recommended not allowing this type of purchase.
January 2002 he noted that Sandia didn't allow it nor did any
other private companies.
Mr. Marquez. Most companies don't allow it, sir. Most
Government institutions don't allow it.
Mr. Deutsch. Right. I guess my question again is this is
January when he was saying this. Why did it take until August
to change the system?
Mr. Marquez. Well, I came on board February 4 and was not
aware of this issue until the summer of 2002. When I became
aware of it, within a month we instituted a change procedure.
Mr. Deutsch. Why would you not be aware of it?
Mr. Marquez. Because we do $1.3 billion of acquisitions
every year. It is not that it is insignificant but through the
chain of command you have to understand that Business
Operations Division is one or eight or nine divisions that I
manage on a daily basis. Some of these issues get to my
attention and when they do, I try to take care of them.
Mr. Deutsch. All right. It's a control issue. Obviously I
don't want you to sign off on every purchase. Let me just
follow up. On July 29 Vernon Brown did another purchase card
assessment. This is after the Mustang case. It's Tab 138 if you
want to take a look at it, page 8. He said, ``There is no
mechanism to ensure that property rules are adhered to and it
is very easy to bypass or simply ignore the rules.''
Mr. Marquez. Actually, this copy is a copy, I think, I
provided. This is my handwriting. These are my notes. What this
was is this was the briefing that I asked Vern Brown to give to
Joseph Salgado and I in Joe Salgado's office on July 29 because
both of us became concerned. On July 25 we became notified of
the P-card incident, I believe, with the Mustang case. That was
the first one.
By the following Monday--I think we were notified on a
Thursday. By the following Monday Vern Brown had worked all
weekend and put together a very comprehensive report for us by
way of this briefing so that we could understand the magnitude
and scope of the problem.
Mr. Deutsch. Okay. Did the Inspector General miss all the
problems with the purchase card programs that have been
uncovered since? Did he miss the suspicious purchases of
sporting goods, global positioning systems, digital cameras,
binoculars, slippers, bicycle helmets, and the clothes that we
uncovered?
Mr. Marquez. When you say Inspector General, are you
talking about the former Inspector General John Layton?
Mr. Deutsch. No, the Inspector General who investigated
this at the time.
Mr. Marquez. Actually, what they did in July--a lot of
these--this was like the confluence of great rivers. The IG
had, in fact, launched their review and that came together with
amazing coincidence at the same time that we discovered the
Mustang case. The IG did more of a--as I recall, they actually
pulled up 90 cases on a random basis and they asked us to give
them all the information that we possibly could. We did that.
I believe out of that review that the IG did independently,
some of those cases were referred to the Inspector General. I
have to tell you then that in August, August 26, I believe,
John Layton's team began their exhaustive review and they
covered a 45-month period going backwards from June 30, I
believe, of 2002. That would have been clear back to 1998.
They looked through every single purchase card transaction.
You have to be careful. Some of these items, for example, the
TA-33, were purchased under a blanket purchase agreement, the
Mesa contract. John Layton's team did not look at that and
neither did the Inspector General.
Mr. Deutsch. We have gone through this but can you just
quickly explain the local vendor agreements and how they work?
Mr. Marquez. I may have to rely on Mr. Hettich but I can
tell you what I do know. At one time we had 35 local vendor
agreements. These are vendors in the Northern New Mexico
community. The idea is to provide commodities below a certain
dollar amount supposedly on an exigent basis. How it operates
is that by your badge, which the Laboratory issues you, you
walk into a vendor and you can order supplies.
In simple terms, that is the local vendor agreement
process. As Bruce Darling indicated, we have looked at that and
we believe that has got vulnerabilities and we are in the
process of trying to increase the internal controls on that
program.
Mr. Deutsch. We found knives, cameras, binoculars, Nike
shoes, and a variety of other questionable purchases on local
vendor spreadsheets. Has an audit ever been done?
Mr. Marquez. I can't tell you if an audit has been done on
local vendor agreements. I can tell you that I, too, have found
invoices on the local vendor, particularly the Nike shoes. That
is a fairly recent case. I looked at that. That is KSL
subcontractor, two individuals that drive taxis for them. They
tried to characterize those as safety shoes. That is not within
the normal bound of the Frank's Supply vendor list. We have
actually challenged that and either KSL will reimburse us or we
will go back to Frank's Supply and get reimbursement from them.
Mr. Deutsch. Right. And can you provide a direct answer
whether or not it has been audited or not?
Mr. Marquez. I am sorry?
Mr. Deutsch. Can you supply us with the information if an
audit has been done.
Mr. Marquez. I will find that out for you, sir.
Mr. Deutsch. You are also promising us that
PricewaterhouseCoopers is going to do an extended review of
data mining for a 2-year period. We have not been particularly
impressed by their work at this point. One can data mine for
suspicious vendors of purchase names.
It has some value but you need to get out into the field
and see if the equipment is really there at this point. There
are many items that Mr. Bussolini and Alexander converted to
personal use that are not obvious on their face. Are you
planning at this point to actually do field level
investigations to deal with this?
Mr. Marquez. Yes, sir. With respect to the particular
slides that I got to see at the last testimony, I had a team
spend this last weekend inventorying those bunkers at TA-33 and
I believe that within the week I'll know the contents of those
bunkers and I'll have some cost estimate of the items that were
acquired.
Mr. Deutsch. And my final question. You have said that you
have only accounted for 70 percent of your controlled
inventory. Is the claim that you accounted for 99.5 percent?
Mr. Marquez. By DOE performance measure under our prime
contract, in our controlled inventory we accounted for the past
several years at above 99.5 which is the outstanding level. The
70 percent number I am not familiar with.
Mr. Deutsch. Apparently that is in your testimony.
Mr. Marquez. Well, I mean, you have to give me--in what
context?
Mr. Deutsch. In the wall-to-wall inventory.
Mr. Marquez. Oh, the wall-to-wall inventory. That was
started February 3 and as of Friday when I left the office, we
had hit 70 percent of the items that are in our inventory.
Mr. Deutsch. So it is an ongoing inventory.
Mr. Marquez. It is ongoing. It is not scheduled to be
completed until September 30. I am happy to report that we are
well ahead of the progress chart on that.
Mr. Deutsch. Thank you.
Mr. Walden. We are going to do one more round and I think
cut it to 5 minutes if that is all right with you.
Mr. Marquez, I want to go back to one point because I think
I heard you say that the external team audit looked at every P-
card purchase. My understanding is that it was actually mine
data using key word. It wasn't absolutely every purchase. Do
you know that to be different?
Mr. Marquez. You know, I probably shouldn't venture into
it. I am not an auditor. The methodology they use I really
can't get into the details of that. The scope was clearly 45
months of transactions, 170,000 transactions and roughly $120
million.
Mr. Walden. Right. We were just trying to clarify.
Mr. Marquez. They did do data mining. They did it based on
our automated system. It has data fields that indicate what
type of commodity was purchased. A lot of times the signal in
that data field that you enter in our automated system would
really leave open to question who in God's name would buy those
kinds of things.
Our team that I formed, I believe on December 6, worked
through January 31 and our challenge was to take the list that
PricewaterhouseCoopers left us and walk through each of those
and justify them in advance of a UC audit report.
Mr. Walden. Another question for you. One of the issues
that came up were how the P-card accounts have not been
reconciled. I think there was a major effort to get them all
reconciled, some $3.8 million worth prior to June 30 or
something.
Mr. Marquez. That is correct, sir.
Mr. Walden. I have a printout here from July 2002 through
November 2002. It is fiscal year 2003. This shows data that has
not been reconciled to the tune of $677,200.47.
Mr. Marquez. At that time that was correct. Our plan was
always to catch up because we were woefully behind. The same
resources that I had to use to catch up and then we went and
started with fiscal year 2003. I am happy to report that as of
the end of February we are caught up and the discrepancy was at
around $8,000 which is a significant improvement. It used to be
in the $300,000 to $400,000 area.
Mr. Walden. That's good to know.
Dr. Browne, on December 16, 2002 you were still Director at
the Lab?
Mr. Browne. That is correct.
Mr. Walden. You sent an e-mail to all LANL employees
declaring that Walp and Doran were ``simply wrong'' and there
were reports of widespread theft, coverup, and interference
with law enforcement authorities at LANL. It is Tab 33 if you
need to----
Mr. Browne. I remember the e-mail.
Mr. Walden. Do you still hold to that opinion?
Mr. Browne. The thing I was trying to convey to our
employees was that I did not believe that there was this
culture of theft that Mr. Walp and Mr. Doran were reporting in
the press. I had not gone to the press and I felt that somehow
I had to convey to our employees that I did not share this view
that we had a work force full of thieves. That is what the
intent of the e-mail was.
Mr. Walden. Do you think--I guess I am trying to sort out
here. I hear about Mustang. I hear about Mesa. I think it was
Mr. Walp or maybe it was Mr. Doran who talked about a case that
is out there of $800,000 purchase of hand tools from a single
source. Is all that stuff legitimate?
Mr. Browne. I think Mr. Marquez can answer the hand tools.
My understanding was that was also reconciled.
Is that correct?
Mr. Marquez. Yes. There were issues and I am not going to
say they were all hand tools. They were different types of
tools for machining purposes. We have a large engineering and
sciences application division.
Mr. Walden. This guy went to--my understanding is----
Mr. Marquez. G&G Industry in Rio Rancho, New Mexico. It was
basically a storefront operation.
Mr. Walden. Part of what we were told is he would go to K-
Mart and buy the tools.
Mr. Marquez. It turns out he was somewhat of a pass through
but I will tell you that the auditors that looked at this found
that his prices were competitive with what we would have
normally bought under the Just In Time program. That wasn't my
concern. My concern was they should never have been bought
under purchase cards in the first place.
That was actually in place as a procedure and policy at the
time and they were done under a so-called exception. If you
pull the string on the exception, most of the requirements of
the exception--I think people read the first sentence which
says, ``You have an exception under the following conditions.''
They stopped before the word ``under'' and they characterized
that as a blanket exception. They went off and purchased tools
for a couple of years.
Mr. Walden. You have changed that so that cannot ever
happen--well, that should never happen again. You have done
that through some sort of independent cross-approval?
Mr. Marquez. Actually, we changed the purchase card
requirements. You cannot buy those. We made it very clear.
Mr. Walden. Are there limits on how much--if I had a P-card
at Los Alamos, is there a dollar limit amount on my P-card?
Mr. Marquez. Yes, now there is. $2,500 per transaction. I
think it is $25,000 a month.
Mr. Walden. How do you prevent them from exceeding that?
Mr. Hettich. The thing you have to do is what you keep on
saying and what we are saying also, and that is the only way
you do it is to audit it correctly, honestly. I mean, you have
to have an independent assessment taking place on a regular
basis. If you find that somebody violates the instructions, the
regulations that are out there, then you take appropriate
remedial action against the person.
Mr. Walden. Is it not better to go to a purchase order
system where somebody up the chain sings off on it?
Mr. Hettich. The difference between the two methodologies
and the reason that the Federal Government quite honestly
pushed people toward P-cards is the difference in the cost of
the two methodologies. If you really look at the cost of doing
a P-card transaction against doing a PO transaction, there is a
significant cost difference. The question is is the risk
factor----
Mr. Walden. Fraud, waste, abuse.
Mr. Hettich. That's right. So that is one of the decision
pieces. In the case of Livermore what they did was establish
four independent auditors to keep up with this and go out to
the desk tops, as you point out, do different things like that.
Put an insurance to their own management that the risk factor
was prudent.
Mr. Walden. What an internal auditor would do. Do the
random checks.
Mr. Hettich. Correct.
Mr. Walden. Is that in place now at Los Alamos?
Mr. Hettich. Yes.
Mr. Walden. I have way overshot my 5 minutes.
You don't have any other questions? Mr. Chairman, do you?
If not, the chairman asks unanimous consent to enter the binder
into the record. Without objection that is so ordered. Opening
statements are already approved for entry into the record with
unanimous consent.
Gentlemen, thank you for your patience today, your
forthright comments. We very much appreciate you testifying
before the committee. With that, we stand adjourned.
[Whereupon, at 7:02 p.m. the subcommittee adjourned.]
[Additional material submitted for the record follows:]
April 10, 2003
The Honorable Jim Greenwood
Chairman
Subcommittee on Oversight and Investigations
Committee on Energy and Commerce
House of Representatives
2125 Rayburn House Office Building
Washington, D.C.
Dear Mr. Chairman: At the Subcommittee's hearing on March 12, 2003,
I committed to provide information on my actions and accomplishments to
change the historical culture at Los Alamos National Laboratory by
reducing an entrenched ``management by accommodation'' and achieving a
heightened sense of fiduciary responsibility to the American taxpayer.
This letter fulfills that commitment, and I request that it be included
in the official record of the Subcommittee's hearings on Property and
Procurement Mismanagement at Los Alamos National Laboratory.
The efforts Director Browne and I made to drive change and address
management problems at the Laboratory were noted by NNSA in its FY 02
Appraisal, dated December 13, 2002:
``NNSA is encouraged by the aggressive leadership demonstrated
by the Laboratory Director and Deputy Director--NNSA recognizes
the outstanding effort on the part of Laboratory senior
management to organize, drive improvement, and accelerate
change in overall Laboratory culture. NNSA recognizes as well
that LANL faces challenges such as the alarming trend in Price
Anderson Amendment Act violations and the current
investigations into irregularities in its purchasing
activities. Nonetheless, NNSA is encouraged that LANL senior
management has moved swiftly and demonstrated an understanding
of the urgency and need for outside assistance as a mechanism
to add credibility to the investigation process.''
The following actions and accomplishments are a representative, not
exhaustive, sample of my actions and accomplishments, and they are
consistent with NNSA's evaluation as noted above. The list begins in
the fall of 1999 when I joined the Laboratory:
Based on findings by the Office of Audits and Assessments
(AA), I directed that reconciliations of bank accounts be
brought current and that monthly reconciliation of bank
accounts be completed thereafter.
AA reports for several consecutive years, all of which had been
filed with the University's Office of the President (UCOP),
noted failure by the BUS Division to complete monthly
reconciliations for three accounts--payroll, accounts payable,
and travel--for fiscal years 1995 thru 1999. Total activity in
the subject accounts over 5 fiscal years was over $7 billion. I
provided periodic progress reports to UCOP (Van Ness and
Kennedy) and the Regents (Leach) until the reconciliations were
completed in August, 2000.
Upon joining the Laboratory, I directed that each division and
office that reported to me (BUS, HR, Audits and Assessments,
Industrial Business Development, and others) complete a
Vulnerability Analysis within 60 days. The effort resulted in
over 200 findings, of which 134 were in the BUS Division. I
required that Divisions implement specific corrective action
plans for addressing identified vulnerabilities, and I tracked
progress in weekly meetings with Division leaders. All
Divisions except BUS had completed corrective action plans at
the end of one year.
In 1999 I directed a comprehensive review of the Laboratory's
procurement program and procedures, using Laboratory employees
and external procurement experts. UCOP directly participated in
the review. I was led to believe that the review team's
commitment to consensus may have led to a document written, in
part, to accommodate the UC representative's preference for a
``softer'' report than some of the LANL representatives would
otherwise have produced. I implemented a number of reforms and
improvements as a result of the team's report.
Directed the reorganization of the BUS Division and the
addition of two Deputy Division Leaders to strengthen overall
division management.
Implemented a corrective action plan to eliminate over a
period of about 6 months a multi-year backlog of about 900
contract closeouts. Reviewed progress weekly with Division
management.
Elevated the Small Business Procurement Office to report
directly to the BUS Division leader to strengthen management of
small business contracts and procurement actions.
Established a small business point of contact in the
Laboratory Ombudsman Office to assure that any small business
perceptions of favoritism, procurement irregularities, or
inadequate contract administration could be reported without
fear of reprisal. I took this action in response to indications
from the small business community that the Laboratory was not
viewed as a good business partner by some vendors.
Streamlined the process to assure prompt payments to vendors,
subject to appropriate checking and approval by Laboratory
users of vendor-supplied equipment, materials and services.
Engaged The Gartner Group to advise the Laboratory on its
business information management and related information
technology activities. Implemented The Gartner Group's
recommendations, thus avoiding significant expenses that would
have resulted in inadequate systems.
Cancelled the Laboratory's PeopleSoft project on the basis of
cost/benefit analysis and ill-conceived scope; avoided planned
project expenses.
Initiated an Enterprise Resource Planning project (ERP) to
modernize and streamline the Laboratory's business information
management function and to adopt best business practices
embedded in related commercial software. This is a multi-year
project that is continuing and has been identified by the
Interim Director as one of the Laboratory's highest priorities.
Continued implementation of the ``Sunflower'' system, used by
UC at Lawrence Livermore and Berkeley Labs and by other
contractors in the DOE system to support property management.
Continued implementation of the ``TIPS'' system to support the
procurement function.
Established a Laboratory-wide system for IT (Information
Technology) governance to provide a central authority and Lab-
wide coordinating point for policy and procedures and to assure
that investments in IT were cost effective and reviewed by the
Laboratory Senior Executive Team prior to commitments.
Initiated three studies of the Laboratory's computer
inventory:
A review of the number of personal computers reported as
being used at the homes of employees; a number of computers
were returned to Laboratory property as a result of this
study;
An analysis of the number and costs of computer purchases
over recent fiscal years; the analysis was intended to
guide future decision-making regarding methods and
standards for computer purchases;
A review of classified computers, as mentioned in my written
testimony, to assure that none of the computers reported as
lost or stolen contained classified information and to
assure that all classified computers could be located.
Required sound business case analysis for a number of ongoing
Laboratory investment and acquisition activities, resulting in:
Cancellation of the Laboratory's agreement with a local
developer to guarantee rentals of new luxury townhouses and
high quality apartments for use as student housing.
Laboratory staff had entered into the agreement without
having done a sound business case analysis and without
having provided full information to the Laboratory
Director.
Personal assumption of oversight for completion and
occupancy of the Laboratory's space at the Los Alamos
Research Park to assure compliance with NNSA's conditions
of approval and cost beneficial project management.
Required weekly status reports. Like student housing,
commitments to the Research Park had been made by
Laboratory staff without adherence to NNSA requirements,
without adequate financial and legal analysis, and without
full information to and approval by the Director.
Established a Blue Ribbon Task Force and related Technical
Panels to provide external management and technical expertise
to the Laboratory's pit production and manufacturing program.
Laboratory and NNSA program managers have acknowledged that the
Task Force and technical panels have been instrumental in
putting the Laboratory in a position to meet the NNSA-
determined schedules for this high priority national security
program. The Interim Laboratory Director recently converted the
Task Force to a comprehensive Program Management Review
Committee.
Strengthened procurement support and service to high priority
NNSA and DOE projects, including pit manufacturing, Spallation
Neutron Source (SNS--a multi-laboratory project led by Oak
Ridge), and the Accelerated Strategic Computing Initiative
(ASCI) through which the Laboratory has developed its ``Q''
machine.
Achieved 10% reduction in overhead ratio from FY 00 to FY 02
as a result of having instituted a ``bottoms up'' approach to
the annual indirect budget planning process.
Oversaw implementation of legislatively mandated travel
regulations for contractors that resulted in reductions in
allowable expenses for official travel; personally reviewed
travel expense claims of all Associate Directors.
Established an internal Advisory Committee on Administrative
Policies and Practices to assure input and buy-in from all
Directorates in the Laboratory for adoption and implementation
of new or modified procedures and practices aimed at making the
Laboratory's business systems more accountable.
Established mandatory management training for all Group
Leaders to strengthen management capabilities in the
Laboratory. Required each member of the Senior Executive Team
(SET) to lead off one of the sessions by clearly articulating
SET expectations. The process to design and implement the
training took over one year, due in part to resistance by
Division and Group Leaders, as well as the Human Resources
Division, to ``mandatory'' requirements.
With Director Browne, designed and implemented a significant
reorganization of the weapons program to strengthen line
management accountability. NNSA noted in its FY 02 appraisal,
``The reorganization represents a paradigm shift in that line
management now owns programs and is central to, accountable and
responsible for program success. Planning is now the basis for
program execution.''
Realigned the Laboratory's internal budget planning process to
assure that the Director's strategic vision drove program
planning and to strengthen the Director's ``ownership'' of the
budget.
Authorized total outsourcing of the Laboratory's supplement
secretarial pool and established procedures to assure the pool
was used as an avenue to Laboratory employment for local
residents.
Requested NNSA approval and subsequently implemented ``hot
skills'' pay to assure that the Laboratory would continue to be
competitive in terms of recruiting and retention of staff in
specific, critically important scientific and technical areas.
Implemented salary surveys by external experts in compensation
equity to assure equitable pay for ethnic and racial minorities
and women. These surveys and related appropriate pay
adjustments enabled the Laboratory to avoid litigation,
particularly regarding the issue of pay for Asians and Pacific
Islanders that arose in the aftermath of the Wen Ho Lee case.
Salary surveys were completed for API and Hispanic minorities
prior to my leaving the Laboratory; a third survey covering
women employees was in planning at the time of my departure.
Implemented a realignment of facilities management to
consolidate approximately 15 separate facility management units
and thereby improve accountability and cost effectiveness in
facility management operations.
With Director Browne, established an internal Strategic
Security Working Group to review long-term security planning
and operations in the aftermath of 9/11.
Assumed personal oversight of Laboratory activities to satisfy
requirements of Appendix O to the University's contract for Los
Alamos operations, including:
Completion of Authorization Basis (AB) documents for 5
critical facilities and for the packaging and
transportation function. As a result of this effort, NNSA
noted ``. . . LANL's increased emphasis and effort to
support safety authorization basis preparation (It appears
that LANL may be the only NNSA site that is 10 CFR 830
compliant by the April 2003 due date).''
Completion of inventory and gap analysis related to
maintenance of critical skills to support mission
requirements.
Implemented procedures to assure that the Laboratory was in
full compliance with 10CFR requirements for quality
certification of vendors of certain types of equipment,
services and materials.
Established a pilot effort to implement a Programming Planning
Budgeting and Evaluation System (PPBES) aligned with NNSA's
legislatively mandated PPBES system.
Initiated review of meal expenses in all Divisions and
Directorates and subsequently established more rigorous
standards for Laboratory purchase of meals in connection with
meetings. Standards were later converted to ``guidance'' to
accommodate objections from some Divisions. Required Division
or Group Leader certification of working meal expenses and
justification/approval of exceptions to standards.
Based on AA findings during an audit of the former Site
Support Services contract, withheld current fee payments and
recovered fee previously paid.
Required recompetition of the site support services contract
and acted as Source Selection Official to select a new
contractor with emphasis on cost effectiveness and partnering
with the Laboratory to improve operational performance.
In addition to the above, I met weekly--and sometimes more
frequently--to track progress and monitor performance of all of my
direct reports on issues ranging from resource management to safety
performance to delivery on program commitments. In all of these
sessions, I consistently emphasized fiduciary responsibility, formality
of operations, and disciplined management. Almost without exception and
not surprisingly, I found the Laboratory's staff and managers willing
and eager to respond and to meet expectations. Nonetheless, an
ingrained culture that had historically under-valued effective
management, meant that change came more slowly than I would have
preferred.
I appreciate the opportunity to supplement my testimony before the
subcommittee.
Sincerely yours,
Joseph F. Salgado
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