Accuracy in Media

In AIM Report 2000 # 9, “Cooking the Books at Education,” we cited reports from Department of Education whistleblower, John Gard and others that the amount of missing, mismanaged or stolen money at the department is as high as $6 billion. Gard was escorted from agency property by armed federal security guards for exposing this waste, mismanagement and corruption. Now a report, “Government at the Brink,” issued in June by the Senate Committee on Governmental Affairs, says that the figure is even higher. It states, “The Education Department reported in its financial statements that it had $7.5 billion in the bank when it actually owed that money to the U.S. Treasury.” The department’s books are actually off by $15 billion, about a third of what it spends annually.

Other examples of mismanagement, waste, fraud and abuse cited in the report include an $11 billion cost overrun on a federal road construction project in Boston known as “the Big Dig,;” $3 billion that is missing from a federal trust fund for American Indians; the Pentagon’s failure to pass an audit and account for billions of dollars, at a time when it claims it needs more money for military readiness; and NASA mission failures, including the Mars Polar Lander failure, which stemmed from the use of English measurements by one team and metric measurements by another team to design and program the vehicle. These are four of the federal government’s “Top Ten” management failures cited by the Senate report.

Drawing on work by the General Accounting Office and others, the report says federal overpayments in just the few programs that report them amount to more than $20 billion annually. It says, “Neither the federal government as a whole nor many agencies can pass a basic financial audit. The books don’t add up, major expenditures are missing, large amounts of property and equipment can’t be located, and often, agencies don’t even know how much they have.” Even the Internal Revenue Service is charged with not knowing “how much it actually collects in Social Security and Medicare” taxes.

The Clinton-Gore Legacy

The report indicates that the real legacy of the Clinton-Gore ad- ministration has been to leave the American people an executive branch of government whose “core management problems,” in the words of Senator Fred Thompson, “have persisted for years, and, in fact, have grown worse.” Thompson presented a copy of the report to Bush Office of Management and Budget Director Mitchell E. Daniels, Jr., at a press conference in Washington. In accepting the report, Daniels complained that politicians find it more rewarding to announce a new program than fix an existing one. He could have said that politicians find it more rewarding to spend money on a failing program than fix it. That applies to the Department of Education.

Fox News, the Washington Times, the Washington Post, and USA Today ran stories about this report, and Cal Thomas, whose column is widely syndicated, wrote a good column about it. Since the report was written when Sen. Fred Thompson, R-Tenn., was chairman of the Governmental Affairs Committee, his report got good coverage in Tennessee. ABC, CBS and NBC ignored it on their evening news programs, and the New York Times did not see fit to report this expos? of waste, mismanagement and corruption in the federal government.

Senator Lieberman’s Political Agenda

Any hope of Congress getting to the bottom of these scandals may have been lost when Democrats took control of the U.S. Senate. Senator Joseph Lieberman, the Democrats’ vice presidential candidate in the last election, assumed control of the Senate Governmental Affairs Committee and quickly indicated that he would use it for political purposes, holding hearings to attack the Bush administration’s environmental and energy policies. Senator Larry Craig said Lieberman, who is considering a run for president in 2004, was “turning the Governmental Affairs Committee into a politically charged committee.” Lieberman could use the committee to expose some serious flaws in the education bill backed by the Bush administration that just passed the Senate. But he won’t do that because he and his fellow Democrats, led by Senator Ted Kennedy, want to give even more money to the mismanaged Department of Education than Bush.

As the Thompson report was being released, the Senate was completing work on an education bill that dramatically increases the amount of spending by the education department. A conference committee will iron out the differences between the House and Senate bills sometime this summer so President Bush can sign the final bill before the next school year commences. There is still time to fix the problems at the education department, if the Bush administration finds the political will to bring John Gard back to the agency.

AIM To NewsMax To Fox News

Our AIM Report on the scandal at the Department of Education was republished on the Internet by It caught the attention of Sean Hannity, co-host of the Fox News Channel’s Hannity & Colmes show, and Cliff Kincaid, who wrote the story, appeared on the show on June 13 to discuss it. The Department of Education declined to send a representative to respond to the charges. The task of defending the department was left to Eleanor Clift, a contributing editor of Newsweek and a Fox News political analyst, who agreed to appear even though she was not very familiar with the facts in this case. What follows is an edited transcript of the discussion on Hannity & Colmes.

HANNITY: The Department of Education has lost up to 450 million of American taxpayer dollars in the past few years due to what education secretary Roderick Paige calls ‘mismanagement and fraud.’ He has assured that the department will have a clean audit within 18 months but many say that the department should be deprived of funding until all the money is accounted for. All this as Congress and the White House are looking to increase the department’s budget significantly. Should the department be trusted with your tax dollars in light of these problems? Joining us from Washington, Cliff Kincaid. He’s with the group Accuracy in Media. And Eleanor Clift, Fox News political analyst and Newsweek contributing editor, is back with us. Cliff, I read your report, the L.A. Times report, the Washington Post had a report. I’ve got to tell you it should anger each and every American taxpayer out here because what we’re really talking about is waste, fraud, abuse and mismanagement at an agency that even President Bush is thinking of increasing spending 11 percent. Democrats want a 35 percent increase. But they can’t manage the money we give them.

KINCAID: That’s right. I recently interviewed an Education Department whistleblower, John Gard, who has documented incredible examples of waste, fraud, and corruption and abuse in the department. His case has been upheld by the Office of Special Counsel, which says there’s been gross mismanagement in the department. As you say, the department hopes to pass an audit in 18 months. The agency has not passed an audit for 3 straight years and the amount of missing, stolen or unaccounted for money could go up as high as 15 billion ? that’s with a B ? 15 billion dollars.

HANNITY: Let me go to Eleanor. Eleanor, here they failed, the Department of Education. These are our tax dollars and I know some people on the left aren’t as concerned about these things. But hardworking Americans contribute to this. They have failed 3 straight audits. One, two, three. Why should we give them one additional dollar until they start accounting for the money we already give them?

CLIFT: First of all, in Washington you have to get accustomed to seeing millions in perspective. The department of education has, I believe, a 44 billion dollar budget. So this is a relatively small sum.

HANNITY: Up to six billion dollars is almost one-seventh of that 44 billion.

CLIFT: I think it’s 450 million in the account that I read. The Los Angeles Times points out that this audit also says that most of these sums have been recovered. I take my cue from Secretary of Education Rod Paige who declines to blame his predecessor. He points out that these kinds of problems have existed for some time.

HANNITY: As far as Cliff’s reporting, and he interviewed one of the leading accountants in this case, a whistleblower who paid a political price, it could be 6 billion. Cliff is saying as much as 15 billion. That amounts to a minimum of one-seventh of the total budget of the Department of Education. And if they can’t manage or if they’re mismanaging the funds we give them, Cliff, I don’t think they have earned our trust to turn over billions more which is what they’re asking for.

KINCAID: That’s exactly right. This whistleblower, John Gard, was a systems analyst in the office of the Chief Financial Officer. As I point out, his case has been upheld. But when he started blowing the whistle on the corruption under former education secretary Richard Riley, he was escorted from agency property by armed federal security guards. He has offered to the Bush administration to come back to education to help clean up the mess, make sure the money goes for the children. The Bush administration and most of Congress are not interested.

COLMES: Let me first of all agree with you in principle. I think if this amount of waste is taking place, it’s horrendous. I am a leftist who does care about taxpayer dollars and how they’re spent. Not all liberals want to see mismanagement and waste. But look, many people I fear will use your work to try to argue that we should do away with the department. And I don’t think this is a reason to do away with the education department, is it?

KINCAID: That’s not John Gard’s purpose in going public with these allegations. He just wants to make sure that the agency lives by the laws and the constitution. He wants to make sure the mess is cleaned up and he’s been offering to the Bush administration, “Bring me back, I’ll help you clean up the mess.” Let me remind you that literally two weeks ago the U.S. attorney in Washington, D.C. issued a grand jury indictment of 11 people, four of them current members of the education department, for a million-dollar fraud scheme. That’s just the tip of the iceberg. Senator Thompson just last week issued a report, “Government at the Brink,” about waste, fraud and abuse in the department, pointing out the education department said they had $7.5 billion on the plus side in their account when they actually owed that money.

COLMES: You raise the specter of officials of the Clinton administration embezzling money. You say that in your report. Do you have any proof of that? Can you point the finger at who might have done this?

KINCAID: We’ve just had the indictments of 11 people for a one million dollar fraud scheme, four of them education department employees. John Gard says the system has been so bad in education in terms of disbursing money that it may be impossible to determine who stole money and how much money was stolen. But he’s willing to go back and help put people in jail.

COLMES: What about that Eleanor? If this guy is a legitimate whistleblower, should he be protected? Should he…be escorted out with armed guards? And if he is on to something, should be given the opportunity to let that information be heard?

CLIFT: I’m not familiar with Mr. Gard. I would have to know a lot more about what he’s saying because the charges being leveled here tonight sound to me pretty hyperbolic without any evidence to support them. The entire U.S. Congress and the Bush White House would not be ignoring all of this if this was true. Frankly, the Department of Education has been a favorite whipping boy for people from the right for a long time and we’ve got an education bill that’s about to pass, and the timing here is good for the opponents.

COLMES: Cliff, I would think a lot of people who agree with you may want the dissolution of the Department of Education, who may be supporters of President Bush. Why isn’t the President coming forward and being part of what you’re doing? He’s got an education budget that gives that department the largest increase of any other cabinet agency ? a $4.5 billion increase over the 2001 budget. A billion dollars to states to help students with disabilities, a billion to Pell Grants to help disadvantaged students. I could go on and on and on. A lot of additional money being put into the department. You should be going after President Bush.

KINCAID: I have been, and I have criticized the President. I think you answered your own question. That’s why nobody wants to talk about waste, fraud and abuse and corruption because everybody thinks the answer is to spend more money on the Department of Education. It’s like writing enough checks or throwing money out of a helicopter. Perhaps some deserving people will get a few bucks but that’s the way to run a department. If a business ran this way, it would have been shut down years ago. John Gard suggests they ought to take this department, put it into receivership or appoint a grandmaster to run it ? like the old agencies of the D.C. government years ago. It’s beyond control. It’s out of control.

COLMES: There’s been some problems. Everybody knows that. But the department has taken steps. They’ve limited the credit card spending to $2500.

KINCAID: You’re wrong. Let me tell you. John Gard says the main problem over there is the grants payment administration, the computer system for disbursing money and grants. There is no security over it. They have no audit trail. They don’t know where the money’s going, and the problem continues to this day.

COLMES: According to the education department today ? we spoke with them ? that’s been changed. There’s a limit on credit card spending…

KINCAID: I’m not talking about credit cards. I’m talking about the computer system that disburses grants and money. They say they brought in a new software program to solve some of the problem but that doesn’t get to the heart of it.

The comments by Alan Colmes, based on what the education department told him, show that the agency is trying to divert attention away from the massive problems in the accounting system and focus on credit cards, an area of fraud that can be easily fixed.

Conservative Columnist Rips Fraud

As Colmes also indicated, the Bush Administration has worked to spend more federal dollars on education and has been reluctant to tell the truth about the massive fraud and theft in the department. But in addition to our own reporting on this matter, one of the best new conservative columnists, Michelle Malkin, has been speaking out, highlighting the indictment that Cliff mentioned on the Hannity & Colmes show in her own syndicated column under the headline, “The Department of Embezzlement.” In her column, which appeared in the Washington Times, she noted that the indictment came down on the very day that the House of Representatives had passed the president’s “No Child Left Behind” education bill. Malkin said that, in the wake of the indictment, the slogan should be changed to “No Dime Left Behind.”

Calling the education department a “black hole” for money, she noted that the U.S. Attorney for Washington, D.C. had issued indictments against 11 people involved in a theft ring of outside contractors working with Education Department employees. Three former employees have already pled guilty. Malkin said, “I read the federal grand jury’s 64-page indictment papers over the weekend. I wish every member of Congress would do the same. This million-dollar enterprise may just be the tip of the iceberg of fraudulent federal spending ‘for the children.'” Of course, the size of this iceberg has now been estimated at $15 billion by the Thompson report.

For those who claim such theft is rare, Malkin points out that funds intended for education have been embezzled to pay for luxury cars, real estate, diapers and rent. “If this agency were a private company, it would have been shut down by government regulators long ago,” she says. “Instead, it grows fatter and more unaccountable every year. Republicans, who once led the crusade to eliminate the department, are now tripping over each other to feed the beast.”

The indictment charges 11 people, including four employees of the department, and says the defendants conspired to defraud the department by participating in a scheme whereby they would order items on a Bell Atlantic contract, have them paid for by the department, and keep those items for their own use. The items include 10 Gateway computers and accessories, 15 printers, 4 Yamaha CD drives, 9 laptops for family birthday and graduation gifts, a 61″ Sony television, 7 cell phones (on which a total of nearly 12,000 calls were made), 169 cordless phones (46 with caller ID, 5 with headsets), 6 Olympus digital cameras and 4 Olympus printers, 8 Sony digital cameras and accessories, 4 Sony digital camcorders and accessories, 4 Sony Handycams and accessories, 4 Sony video Walkmans, 7 PalmPilot personal organizers, 50 Motorola Talkabouts, and 2 Philips audio CD recorders. The ring allegedly revolved around Elizabeth C. Mellen, an award-winning, high-ranking telecommunications specialist in the department’s Office of the Chief Information Officer. As Malkin puts it, “Mellen and her family apparently turned the Education Department into their own Home Shopping Network.”

Media Suppress Fraud Story

This scandal should have been big news, especially in Washing-ton. The indictments of Department of Education employees for financial fraud were being handed down at a time when Congress was giving the agency more money. But the Washington Post relegated the story to page two of the Metro section. It was the fifth item in a “Crime & Justice” round-up of local news.

The indictments were announced by U.S. Attorney Kenneth Wainstein, who will soon be replaced by a Bush appointee. His office would not comment when we asked if their attorneys had spoken with whistleblower John Gard, who says dozens of agency employees had improper access to millions of Education Department dollars. Gard tells us that he has not been contacted by the office. Whatever the fate of the fraud investigations, the Bush administration can help rectify the situation by bringing Gard back to the department and getting to the bottom of the financial mismanagement. John Gard risked his career by exposing this scandalous misuse of taxpayer dollars. No one knows better than he how the system was abused and manipulated. He has been kept on the payroll, but he has been relieved of his duties. Rather than make use of his expertise to help clean up the mess, the department appears to be planning to terminate him, which is the fate of nearly all whistleblowers.

Secretary Paige’s Empty Rhetoric

Unfortunately, Secretary Roderick Paige has taken a largely “see no evil” approach to the problem and is uncomfortable with even the limited amount of factual reporting about the scandal that has taken place. As Eleanor Clift indicated, he isn’t interested in holding his predecessor or the Clinton-Gore holdovers in the department accountable. Six days after the indictments were handed down, Paige sent the following memo, “Building an Accountability Culture,” to all department employees.

“I want you to know how much I respect and appreciate the dedication, professionalism and integrity with which you go about your important work of ensuring educational opportunity and quality for all Americans. Unfortunately, some media attention lately has been focused on a few isolated events and has ignored the many positive contributions made by ED employees.

“The most important asset of a Government agency is the public’s respect and confidence. As with an individual, an organization’s reputation can be tarnished by even a few incidents of waste or misconduct. You can help build a stronger “accountability culture” in many ways. You can help clarify organizational and individual performance goals; identify positive results we provide for the taxpayer; suggest ways we can improve our program results; and de-sign and embrace improved internal controls?safety procedures that protect against errors or abuse. In addition, if you observe individual behavior that does not meet the high-est ethical standards or work practices that could lead to waste or abuse of public funds, please alert your supervisor or call the Inspector General’s Hotline (1-800-MISUSED).

“As you know, I’ve created a Management Improvement Team (MIT) composed of senior career staff who are looking for ways to strengthen our Department’s fiscal and management systems as well as our cultural values and standards. If you have suggestions, please send an email message to ‘Management Improvement.’ In addition, during the coming weeks the MIT and I will be holding dialogue sessions with managers and staff around the Department.

“As we pursue the President’s ‘No Child Left Behind’ agenda and other important educational goals for the American people, let’s all keep in mind the President’s expectation that Federal officials and staff will be exemplars of civility, common decency and bipartisanship. Please help me and your Department colleagues build a stronger sense of public confidence and trust in this Department and its work.”

Anyone familiar with the treatment of John Gard has to wonder how Secretary Paige could possibly expect Education Department employees to report “behavior that does not meet the highest ethical standards or work practices that could lead to waste or abuse of public funds” when they know that John Gard, who did exactly that, faces the loss of his job for having done so. He filed a complaint about his treatment with the Office of Special Counsel, which ruled that he was in the right, but he remains an outcast. If Paige wants to be taken seriously, he must return John Gard to his job.

What You Can Do

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