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GAO: Treasury Watchdog Broke Laws

October 31, 1997

WASHINGTON (AP) _ The Treasury official responsible for investigating waste, fraud and abuse was scolded at a Senate hearing Friday for insisting her award of two no-bid contracts was only a technical violation of the law.

The General Accounting Office found that Valerie Lau, the Treasury’s inspector general, violated the contracting law because she couldn’t justify awarding the two contracts without putting them up for competitive bids.

``I accept GAO’s professional judgment that the contracting process on these two contracts did not meet the technical requirements of the relevant″ law and regulations, Lau told the Senate Permanent Subcommittee on Investigations.

``It distresses me to hear you describe them as technical requirements,″ interjected Sen. Susan Collins, R-Maine, the panel’s chairwoman.

A $345,000 contract to improve staff morale ended up costing almost four times the original amount and produced seminars and 1,000 6-inch rulers for distribution to the 300-member staff, the GAO said. Lau said the rulers bear the agency’s mission statement _ a powerful reminder of the employees’ responsibilities.

A $90,776 management study awarded to a friend who had recommended Lau for the job was ``virtually identical″ to one costing $28,920 that the Interior Department commissioned by competitive bid, GAO officials said.

Collins told Lau she should take more responsibility for the inflated cost of the employee-moral contract that went ``from $85,000 to $345,000 without competitive bidding.″

``These are more than minor missteps, they are more than insignificant errors,″ Collins said. ``They are of grave concern to me ... because you are the person that we look to to be the watchdog to be the person who sets the highest standards of guarding against waste, fraud, abuse and mismanagement.″

Lau said she didn’t put the contracts up for competitive bidding because that process was too time consuming and ``time was of the essence.″ But Lau conceded that she never tried to find out just how long competitive bidding would take.

After the hearing, Collins said that Lau didn’t seem at all contrite and ``continues to believe these issues are mere technical problems.″

Collins said she was withholding judgment on whether to ask for Lau’s resignation. The lawmaker said she first wants to hear testimony Monday about allegations Lau misled Congress when she twice denied in testimony that her office had investigated two Secret Service agents who contradicted the White House in the FBI files controversy.

That controversy erupted over revelations that the Clinton White House security office had requested FBI background dossiers on former executive-mansion employees, many of whom worked in the Bush administration.

Lau had told Senate and House subcommittees in December 1996 and February 1997 that the two Secret Service agents were not subjects of criminal investigations. The office only reviewed the preparation of their congressional testimony, Lau had said.

In April, Lau acknowledged she had given incorrect information, citing a staff e-mail she says she had not seen that listed the agents as subjects of a criminal investigation.

But James Cottos, a former assistant inspector general, has told Senate investigators that he was directed by Lau’s counsel, Laurie Vassar, to open the inquiry, said a Senate aide, speaking on condition of anonymity. Cottos, scheduled to testify Monday, quotes Vassar as saying Lau ordered the investigation, the aide said.

Cottos that he then sent an e-mail to a colleague ordering that the investigation be opened, noting it was at the request of Lau. Vassar does not recall directing Cottos to open the investigation, the aide said.

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