Leaky Defense: Pentagon's Empire Is Laden With Thievery and Fraud Continued From First Page military men have "sort of a conflict of interest." He adds, "Their main mission is to get the ships built, to get the meat purchased. There's an attitude that maybe there's a tolerable amount of stealing that's going on." Besides, the official says, "It probably doesn't do a military commander any good to discover a fraud on his watch." Sometimes, commanders pay so little attention to stopping fraud and theft that they don't even miss items when they are stolen. The Naval Supply Center at Norfolk, Va., a complex of warehouses serving the Atlantic fleet, discovered it didn't have $174 million. of stuff that its computers said it should have Among the missing items were 83 dummy torpedoes and 25,000 pounds of lob ster. The mess attracted bad publicity and an embarrassing congressional hearing last year. So the Navy conducted its first thor ough inventory in many years, only to discover it had more goods than appeared on its records. It found 3:16 million of goods it didn't know it had, and couldn't find $89 mil lion of things it was supposed mostly to have in storage. Navy men attributed the discrepancies to paper work foul-ups, not theft. But at about the same time, the government was convicting a local scrap-dealer who had been caught with $2 million in military property. including helicopter engines, a forklift and a boat. The Navy decided to fence in its warehouses, which were lightly guarded and eas ily approachable. Some military money systems seem practically designed to be defrauded. Take the "fast-pay" system ordered by Congress to help small businesses. It allows payment by the military as soon as qualified busi nesses say they have shipped an order, and before anything has been received. About $4 billion a year is already sold this way, and the maximum amount for individual "fastpay" orders has just gone up from $10,000 to $25.000 An Admiral's Battle Rear Adm. H.C. Donley, who commands a construction supply center in Columbus. Qhio, complained to the local US attorney not long ago that in a great number of instances suppliers were simply not shipping the goods they were getting paid for, or were sending substandard goods. Adm. Donley complained that the federal prosecutor generally wouldn't press charges unless more than $8,000 had been stolen. "A number of suppliers are caught again and again, without any economic or criminal sanctions being invoked," he said. On the other hand, investigators contend that prosecutors also won't take cases that are too big. They say some U.S. attorneys shy away from overly complex cases that would consume months of effort and pit them against platoons of highly paid private! lawyers. Some of the biggest military contractors have been suspected of fraud. Boeing Com puter Services, a unit of Boeing Co., was in vestigated in 1979 and 1980 by the Air Force! after auditors turned up what appeared to them to be systematic mischarging of com mercial overhead costs to the government, according to documents recently uncovered through the Freedom of Information Act. Pentagon officials estimated the loss to the government at $25 million. An investiga tive summary signed by Maj. Michael L Powell, in charge of the investigation, said the irregularities turned up by auditors "are good indicators of possible unethical or ille gal activities" by some Boeing managers. "We suspect that (Boeing) buys in on com mercial contracts knowing that it charge the extra effort needed to overhead and, therefore, pass the cost on to the gov ernment. Maj. Powell wrote. can Prosecution Is Declined Air Force criminal investigators inter viewed hundreds of Boeing employees and officials during 1979 and 1980. But Justice Department officials twice declined to pros ecute the company on the ground that crimi nal intent hadn't been established. A spokesman for Boeing Computer Services declines to comment on the case. The Air Force ne gotiated with the company for a refund of the alleged overcharges, but reclaimed only $3 million of the total $25 million questioned by auditors, the Air Force says. Sometimes prosecutors just don't see much "jury appeal" in a crime that involves selling shoddy goods to an amorphous agency like the Department of Defense. Investigators say federal prosecutors twice declined to prosecute Mr. Splinter, the rope merchant, despite numerous complaints about him. Finally, Pentagon agents dug up additional evidence of defective parachute cord and found a prosecutor - Assistant U.S. Atty. William Cook-who took the case at onice. Mr. Cook is a Vietnam combat veteran and a former paratrooper. Prosecutors often blame investigators if a case isn't taken to court. They say investi gators seldom appreciate what a good defense lawyer can do to a case that may seem airtight to an investigator. "There's been a history of mutual bitching." says Richard Sauber, a Justice Department law yer. Compounding all the other problems has been, until recently, the lack of any central coordination of anti-fraud efforts. But a new team headed by Mr. Sauber began operating at the Justice Department Oct. 1. devoted solely to military procurement cases. The Pentagon also started last year a new, elite corps of investigators, many of them veterans of the Internal Revenue Service's enforcement division, trained in cracking complex frauds. The unit has 100 agents and plans to expand to 200 within a year. Unlike the investigative agencies of the Army, Navy and Air Force, the new or ganization won't have to defer to military commanders. For the moment, however, hiring has been suspended because of delays in ap proval of the current year's Pentagon bud get. Some investigators grumble that even 200 agents wouldn't come close to what is needed. "We have situations where we have multimillion-dollar fraud and we don't have the people to investigate," says one Pentagon investigator. "A thousand agents wouldn't be too many." Top Pentagon officials are advertising a "get tough" policy on fraud, and inviting Pentagon employees, military people or defense industry workers to come forward if they suspect a fraud or theft. A telephone hot line has been set up to receive such tips: 800-424-9098 (693-5080 in the Washington, D.C., area). Indictments Expected Brian Bruh, head of the new investigative unit, says indictments are expected soon in a half dozen multimillion-dollar fraud cases: that started with tips called in to the hot line Tipsters include privates and generals. people out for revenge and "people who have very pure motives." Mr. Bruh says. Some, he says, have risked their careers to call. Congress has created the post of Defense Department Inspector General to oversee the new investigations operations, among other things. The new office has increased authority to investigate fraud and to recom mend corrections for the management prob lems that make the military vulnerable to rip-offs The Pentagon's Mr. Sherick, who has been performing somewhat similar tasks under a different title for the past year, hopes to be appointed to the new inspector general Job He vows to put the hammer down" on the "creeps' and 'cockroaches" who de fraud the military. Mr. KLECZKA. Thank you for your testimony, Mr. Cony. We would now like to hear from Jerry Friedheim, executive vice president of the American Newspaper Publishers Association. STATEMENT OF JERRY W. FRIEDHEIM, EXECUTIVE VICE PRESIDENT, AMERICAN NEWSPAPER PUBLISHERS ASSOCIATION, ACCOMPANIED BY TONDA F. RUSH, COUNSEL, GOVERNMENT AFFAIRS Mr. FRIEDHEIM. Thank you, Mr. Chairman. Let me summarize just a few points of the formal testimony and say that we look forward to continuing to work with the subcommittee and particularly with the expert staff in coming months on these problems. ANPA generally opposes S. 774. We prefer the current Freedom of Information Act which includes nine specific and wise exemptions in the legitimate interests of national security and of personal and business privacy, and which stands as proof of the principle of open government in our free society. As you know, ANPA is a nonprofit trade association of some 1,400 newspapers. I am a former newspaper reporter, editor and journalism teacher. Before becoming ANPA's executive vice president, I worked on both House and Senate staffs and held public affairs positions in private business and within the Government. Those positions included service as Assistant Secretary of Defense for Public Affairs, the office which administers the Freedom of Information Act as it applies to the Department of Defense. I am a graduate of the University of Missouri Journalism School and currently serve as director of several professional organizations, including the American Society of Association Executives and the Washington Journalism Center. Over a span of some 30 years, Mr. Chairman, your predecessors on this subcommittee and my predecessors representing the newspaper business have sat facing each other many times to discuss the problems of secrecy in an open society. When the House of Representatives first created the special Subcommittee on Government Information in 1955, it began an 11-year process of analyzing this problem. It called many times upon members of the press in assessing agency practices and in recognizing the need of the public to have information necessary for self gov ernment. Members of the press expressed frustration on their own behalf and as surrogates for the public in calling for a new law about Government information practices. Members of this subcommittee brought bipartisan support to the leadership of Chairman Moss and conducted exhaustive inquiry into the legitimate need for secrecy and into the bureaucratic inclination to treat information as a proprietary matter. It took the House 11 years and the Senate 6 years, cheered on by the people in our business, to strike a balance, and it took another 8 years to engineer the Freedom of Information Act into real working order. But despite all that congressional thought and work, it will come as no surprise to this subcommittee that the Freedom of Informa tion Act is not a popular law with the executive branch. As you know, President Johnson campaigned against the law and signed it only under pressure. President Ford facing the 1974 amendments to correct the bureaucracy's foot dragging refused to sign and his veto was overcome by a 371 to 31 vote in this chamber, and 65 to 27 in the Senate. And now the current executive branch is unhappy. And here we are again, this subcommittee and the press, trying to figure out how to make Freedom of Information work best. The fact that this discussion has covered 30 critical years in our Nation's history instructs us that continued vigilance about the public's right to know is required of us and of you. Frankly, I think the Congress and the press have done this cooperative job rather well over the years. But the bill before you today would have us believe not that our long effort has done well, but that our 30 years of careful work have gone too far, that the public has access to too much, that our people know too much. S. 774 seeks to make Government information harder to come by, as if it were not hard enough already. S. 774 would give the Executive agencies more time to drag their feet, more loopholes into which they could tuck the embarrassing and the uncomfortable, and more dark corners from which they might be tempted to operate. You may have heard that the press supports this bill, which came out of the Senate by a unanimous vote. Mr. Chairman, let me make it quite clear that ANPA has consistently opposed this bill and said so in a letter to the Senate earlier this year. The Senate's unanimous vote was a testament to legislative progress, not to perfection. This bill does strike a more fair balance for information than its predecessor bill, and we have applauded that. But for us, the bottom line is that S. 774 does have little to tell the public more about its Government, but it does a great deal to tell the public less. And S. 774 certainly is not better than existing law. Let me repeat. S. 774 is not better than existing law, properly executed, with existing safeguards and carefully drawn exceptions. For instance, this bill in section 14 would create a blanket exemption for the FBI's organized crime files for as long as 8 years. We oppose this provision. It would drape a number of events of public importance and interest with a very great deal of mystery for far too long. Existing law enforcement provisions in the Freedom of Information Act have sufficient breadth to cover extensive law enforcement data if current provisions are adequately enforced. If any further tinkering with those provisions is needed, it should be approached on a case-by-case basis and not by sweeping entire investigations totally out of sight for an arbitrary 8 years. Likewise, we oppose the needless broadening of the privacy exemption as intended in section 9 of this bill. To change the language of this exemption from "would invade" to "could reasonably be expected to invade" can only send a signal to the agencies that the privacy exemption has spread its cloak even further around agency records. This signal is unwarranted, and we oppose it. The existing exemption already contemplates a fully satisfactory bal ancing standard to guard against clearly unwarranted invasions of personal privacy. And although this hearing does not focus specifically on the Privacy Act, let me digress to point out that the intentions of Congress in 1974, in creating new access rights under the Privacy Act and the FOIA, are being thwarted by the recent guidance from the Department of Justice that the one should be used as an exemption for the other. The Privacy Act specifically states that it does not block records required to be released under the Freedom of Information Act. Yet our fears grow, that without action by Congress, the Privacy Act will be used as a barrier in an increasing number of cases. We note also that this bill was amended before the Senate vote to remove some offending language about charging royalty fees for technical information. However, the concept behind the fees remains in the language on fair value fees, which introduces the notion of proprietorship over information, an idea carefully avoided by Congress in the 1976 Copyright Act and in the existing user fee statute. It may be all right for the Government to charge user fees for its property, for its parks, but in our free society Government may not charge a market value fee for information. The concept violates the very idea of public ownership of the Government's records. It can only lead to an agency somewhere down the road asking to charge the attendant costs for an analytical report on a Government housing project or for an audit report on a defense contract. Furthermore, this concept would add more mortar to a growing wall around information, by encouraging the notion of ownership by the bureaucracies, an idea which the Freedom of Information Act has been trying to uproot since its inception. Another new provision in the bill would provide an additional exemption for Secret Service records, and this has provoked some considerable comment from the press_galleries in Washington whose members must submit to Secret Service review as a condition for obtaining press credentials. The Senate Judiciary Committee report pays some heed to that concern but offers little real assurance that the new exemption might not allow withholding of data about a review and denial of credentials by the Secret Service. Mr. Chairman, other problems remain with S. 774. The bill permits agencies to stretch time limits up to 60 days in unusual circumstances. Congress has heard press testimony that the Freedom of Information Act already is too slow for a working journalist to work in timely news gathering. While we recognize the bureaucratic problems in collecting and reviewing massive Government records, we think this bill is headed the wrong way, toward encouraging agencies to extend those tasks over 2 months or more if they wish. If the current 10-day limit can become in reality 18 months at the FBI, 2 years at State, what would a 60-day limit become? S. 774 also would permit agencies to charge for processing requests. Generally we support the recovery of costs by the agencies except where a legitimate case for fee waiver can be made. We are open to the notion of permitting these new charges if we can be shown that the fees will not suddenly be permitted to balloon into a de facto denial of access. With all of these objections in mind, we do find some things in S. 774 to commend. We support the attempt to bring under control the aggravating piecemeal erosion of the Freedom of Information Act through agency-by-agency exemptions. Requiring the agencies to list their exemptions in a central index is a first step toward a solution. The Freedom of Information Act has suffered major losses of late through this slightly sneaky process. New exemptions for the Federal Trade Commission, the Consumer Products Safety Commission, the Department of Energy, the Professional Standards Review Organizations Boards, all of these have crept into law without much examination of the public's interest in knowing about these things. And but for this committee's vigilance, the Commodities Future Trading Commission would have followed the same pattern. These sort of sneak attacks on the Freedom of Information Act must end. We also have supported consistently the fair notice and hearing provision for submitters of business information. But the provisions in S. 774 do seem to require some retooling to alleviate a couple of internal inconsistencies. Furthermore, this bill leaves sufficient doubt about venue requirements to make us think an FOIA requester might, as Mr. Cony pointed out earlier, have to leave his Florida home to prosecute in Alaska, if the submitter got to Alaska first. That seems unfair and should be addressed by the subcommittee. So on the whole, Mr. Chairman, we believe that the Freedom of Information Act is working well enough, as it is written, if properly enforced. This bill essentially falls short of helpful progress. The message is, turn back the clock, back to 1974, in some ways, with its new law enforcement exemptions, back to 1966 in other ways, by its new fee schedules and time limits. We submit that much more study must be done if some useful new balance is to be struck between the executive branch complaints about this law and the principle of open government in a free society. It took the Congress years, Mr. Chairman, to arrive at the present FOIA balance, and that balance seems to us just about right. We urge you to follow the House's tradition of careful deliberation in reviewing the Senate's invitation to weaken the Freedom of Information Act with this bill. The traditional concerns of this committee and of this free society's citizenry and of its free press are not well served by S. 774. We know you will approach your inquiry as you have in the past with the intention of preserving and strengthening the Freedom of Information Act and not of diluting it. Thank you, Mr. Chairman. [The prepared statement of Mr. Friedheim follows:] |