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me.

The third charge raised by the IG is that by your action as Chairman of the Retirement Board and the Board's response in seeking outside counsel prior to turning over documents to the Inspector General, that somehow the TVA Board was deprived of the advice and counsel of your office, as chief counsel of TVA.

Were you allowed to review Mr. Zigrossi's report on the allegations against you or to respond to those allegations?

Mr. SANGER. No. When the Board called me in on Monday they said Zigrossi had some kind of report and described what it was. And I said, well, I would like to see the report, and the Board indicated, no, Zigrossi doesn't like to give out his reports. And I said, well, wait a minute. You can't hide behind that.

Mr. SIKORSKI. So the Inspector General wouldn't give the Board report that he made pursuant to their request?

Mr. SANGER. He gave it to the Board. He wouldn't give it to me, nor would the TVA Board, nor has it ever been given by TVA to

Mr. SIKORSKI. The Board wouldn't give it to you even though it was in their possession, and you still don't have it?

Mr. SANGER. No.

Mr. SIKORSKI. Is there anyone here from the TVA Board? Anyone here that is here representing the TVA? Anyone here representing the Swidler law firm? Anyone here representing the Strauss law firm? Anyone here employed by the Tennessee Valley Authority?

Sir?

Mr. GRAY. Mr. Chairman, I am Jim Gray. I am the Washington representative of the Tennessee Valley Authority.

Mr. SIKORSKI. Okay. Mr. Gray, I want you to know that the subcommittee would like a copy of that Zigrossi report and any other supporting evidence.

Mr. GRAY. Yes, sir, I will convey that.
Mr. SIKORSKI. Thank you.

Now looking at this IG, who put off doing anything on TVA's conflict of interest problems but came on like a tiger on you, when was that position created?

Mr. SANGER. It was created, I think he started in about January. Mr. SIKORSKI. January of this year?

Mr. SANGER. 1986, yes. Prior to that time TVA had not had an IG. There had been some considerable efforts by various Congressmen to have TVA subject to the IG. I think Congressman Brooks was interested in it. And TVA generally opposed the statutory IG and created their own IG.

It is interesting, by the way, Mr. Chairman, that when TVA created this IG the present two Board members voted for the creation. Director Freeman, who resigned in February, abstained from voting.

Mr. SIKORSKI. Was any reason provided to you as to why Mr. Zigrossi decided on August 4th to audit the General Counsel's Office and the Retirement System Board—the first which you were head of, and the second which you were chairman of?

Mr. SANGER. No. That was one of the problems. I think if, as a director of the Retirement System, if I had understood what he was trying to do I think I could have determined under certain circumstances that an audit might be proper. I certainly wouldn't have stood on ceremony because the Retirement System for years, since its inception, has been audited by an outside company. But the point is the Retirement System made that determination, not TVA.

And it is important to maintain that the Retirement System funds are distinct from TVA.

Mr. SIKORSKI. Well, what do you think was the purpose of the socalled investigations?

Mr. SANGER. If you think of the timing-the Board came to me after I first offered to resign and the Board said no. Then they retained outside counsel Swidler. Then they came to me-well, the next thing would be David Martin said he had met with outside counsel, Swidler, and Swidler had said something about Herb's future being uncertain now at TVA. Then shortly after that Dean comes in and says, Herb, we now want you to resign.

We started talking about that and the Board became increasing, ly worried about the Board getting saddled with the notion that I was being run off because of my ethics advice. And then Zigrossi shows up with his rapid work.

I think it is astounding, if the chairman please. Zigrossi since May certainly has been saying he was looking at the conflicts issue. Many, many times they said they were going to be finished in two weeks. TVA had all of these intimidation and harassment claims. As far as I know, Zigrossi has never completed an investigation on one of them. But this was one investigation that was timely.

Mr. SIKORSKI. Mr. Gray, the subcommittee also requests all of the Inspector General's reports on this conflict-of-interest issue as well. I assume there hasn't been a report, according to Mr. Sundquist, but anything in that file.

You have heard us demand from the two gentlemen here the memos of February 13 and May 5th. We would also like to receive copies from the TVA Board as well.

Now turning from the Inspector General and his activity with regards to both the conflict issue and the attempt to impugn your integrity, I would like to focus on our concern with the Office of Government Ethics and its response to this issue.

You sent them the May 5th memo and the February 13th memo when?

Mr. SANGER. It was about May 20-something.
Mr. MASON. May 23rd.

Mr. SIKORSKI. How come you didn't send OGE the February 13th memo earlier?

Mr. SANGER. The first answer is I didn't think of it and no one reminded me to. The second answer is we had had a real good history in TVA of resolving our ethical problems there. When the Office of Government Ethics had come down and reviewed us from time to time we had the highest reports, and we would get sufficiently satisfactory publicity on that. I really had not assumed at that point that we weren't going to handle the matter. And perhaps we didn't do that as timely as we should have, but I just didn't think of sending them the February-

Mr. SIKORSKI. I think that was a mistake.
Mr. SANGER. I think that is probably so.

Mr. SIKORSKI. If you had to do it over again, that memo should have gone in February.

Mr. SANGER. We had a good program up to that point, Congressman.

Mr. SIKORSKI. You did send the memo to the Inspector General for the TVA?

Mr. SANGER. I did.

Mr. SIKORSKI. And he did not send it to the Office of Government Ethics.

Mr. SANGER. He did not.
Mr. SIKORSKI. You came to Washington and, according to Mr.
Martin's testimony yesterday, met with people at the Office of Gov-
ernment Ethics; is that correct?

Mr. SANGER. I think that was on or about June the 25th.
Mr. MASON. Correct.
Mr. SANGER. Yes.

Mr. SIKORSKI. You had had conversations with the Office of Government Ethics by telephone prior to that?

Mr. SANGER. Many conversations. And by that time the Office of Government Ethics had sent its June 23rd letter.

Mr. SIKORSKI. So they had sent the strong letter just on the basis of your conversations?

Mr. SANGER. Yes, and the memos that they had. Yes.

Mr. SIKORSKI. Right. And who were you talking with at the Office of Government Ethics?

Mr. SANGER. My principal person there that I talked with was Jane Ley.

Mr. SIKORSKI. OK. And did you have a conversation with Mr. Martin by telephone prior to the June 23rd letter?

Mr. SANGER. I don't think so.

Mr. SIKORSKI. That letter says, in part, that Mr. Martin confirms the concerns he expressed in his conversation with Mr. Dean, the Chairman of the Board of Directors of TVA, regarding the matter set forth in the Sanger memo of May 5th. As TVA's Designated Agency Ethics Official, the DAEO,

Mr. Sanger has properly provided us with a copy of the memoranda pursuant to the 5 CFR 738 section. Although we have not seen any of the underlying documents mentioned in Mr. Sanger's memorandum, a member of my staff was present at the June 11 hearing at which the panel of TVA representatives did confirm crucial facts in that opinion.

That was a hearingMr. SANGER. Before Congressman Dingell. Mr. SIKORSKI. Very good. Mr. White is considered a TVA employee. He does have contractual and financial relationships with Stone & Webster, and he has already taken action affecting them through the use of their services in analyzing certain data. We need not see the terms of a waiver to believe that actions of this magnitude by an employee which specifically involves his or her private employer is wrong from an appearance sake. Those actions should not have occurred, nor should they continue.

Further, we agree with Mr. Sanger's analysis of the application of 18 U.S.C. Section 208 to the actions taken by employees of TVA with regard to their private employing companies, and agree that it is imperative that Mr. White, Mr. Kelly and other employees of private companies working for TVA in employee capacities immediately cease participating in any matter through decision, approval, disapproval, recommendation, the rendering of advice, or investigation, of which their private employers have a financial interest. Such participation should cease without regard to any waivers which may have been given.

And Martin's letter goes on to warn of a loss in credibility in TVA's program and the personal liability of the employers and the employees.

Without objection, the June 23 letter and the July 1st follow-up letter from Mr. Dean will be part of the record; also a subsequent July 7 letter from Mr. Martin to Mr. Zigrossi, the Inspector General; a cover letter from Mr. Martin to Mr. Sanger of July 25; and a letter from Mr. Martin to Mr. Dean of July 16th; and an August 15, 1986 letter to Mr. Joe Swidler from Mr. Martin.

[The letters follow:]

United States
Office of Government Ethics

P.O. Box 14108
Washington, D.C. 20044

Adlic Service - Public Trust

JUN 23 1985

Mr. C. H. Dean, Jr.
Chairman, Board of Directors
Tennesscc Valley Authority
400 West Summit Hill Drive
Knoxville, TN 37 902

Dcar Mr. Dcan:

This letter is to confirm the concerns I expressed in my conversation with you on Friday the 20th regarding the matters set forth in Mr. Sanger's memorandum da ted May 5, 1986 discussing the contract between TVA, Stone and Webster Engineering Corporation and Stemar. As TV A's designa ted agency ethics official, Mr. Sanger had properly provided us with a copy of the memorandum pursuant to 5 C.F.R. S 738.313.

Although we have not seen any of the underlying documents mentioned in Mr. Sanger's memorandum, a member of my staff was present at the June 11 hearing at which the panel of TVA representatives did confirm crucial facts in that opinion. Mr. White is considered a TVA employee, he does have contractual and financial relationships with Stone and Webster, and he has alrcady taken action affecting them through the use of their services in analyzing certain data. We need not see the terms of a waiver to believe that actions of this magnitude by an employce which specifically involves his or her privato employer is wrong from an appearance sake. Thosc actions should not have occurred nor should they continue. Further, we agree with Mr. Sanger's analysis of the application of 18 U.S.C. S 208 to the actions taken by employees of TVA with regard to their private employing companies and agrce that it is imperative that Mr. White, Mr. Kelly and any other employees of private companics working for TVA in employee capacities immediately ccase participating in any matter through decision, approval, disapproval, recommendation, the rendering of advice, or investigation in which their private employers have a financial interest. Such participation should ccase without regard to any waivers which may have been given. We believe at a minimum, continued actions on the part of these TVA employces will severely damage the credibility of TVA's program. It may also subject the employees personally to additional difficulties under the restrictions of section 208, subject their private employers to contractual challenges, and further exacerbate whatever difficulties the Board may face personally because of their participation in these arrangements.

You stated in our conversation that TVA's General Manager, Mr. Willis, issued in April a written direction that contract cmployees ccasc taking all official actions affecting their private employers. I appreciate your offer to send that document to us.

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