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Treasury Dept. Watchdog Probed

September 18, 1998

WASHINGTON (AP) _ The Treasury Department’s top watchdog against waste, fraud and abuse is himself the subject of an inquiry about how he handled a contract.

Just months after his boss resigned under a cloud, Richard Calahan, Treasury’s acting inspector general, is being investigated by a White House advisory panel over his handling of a no-bid contract and his receipt of ``excessive″ bonuses, according to a memo obtained by The Associated Press.

Valerie Lau resigned as Treasury inspector general in February amid allegations by congressional investigators that she broke federal contracting laws by awarding, without competitive bidding, a $90,776 contract to a friend and a $345,000 contract for morale-boosting seminars for department employees in 1995.

Lau had put Calahan, then a deputy assistant, in charge of monitoring the day-to-day performance of the $90,776 contract. He was responsible for reviewing the contractor’s payment invoices and writing an evaluation when the contract ended. The contractor, Sato & Associates, was hired to do a management study.

The advisory panel, the President’s Council on Integrity and Efficiency, is looking into whether Calahan made false statements in his evaluation, provided ``insufficient″ financial oversight of the contract and lacked training to oversee it, the memo said.

``I am cooperating fully with the PCIE and I am confident they will find no wrongdoing,″ Calahan said.

The council, set up to police inspectors general, also is investigating Calahan’s bonuses, the memo said.

Lau awarded him $22,041 in performance bonuses from 1994 to 1997, including a $7,000 bonus while he was overseeing the contract. She promoted him in the middle of the contract and again five months later.

Lau told Senate investigators probing her contract dealings last year that she had known Calahan since the mid-1980s and considered him a friend. In a report issued in January that concluded Lau violated contracting laws, the investigators said ``the close relationship between Lau and Calahan was probably a significant factor″ in Lau’s decision to put him in charge of the contract.

The Senate investigators’ report said Calahan had given Sato the highest rating possible in his evaluation, but it questioned the credibility of the rating, saying investigators found evidence that the management study contained inaccurate information. Investigators also said Calahan should have questioned and possibly disallowed some contract costs.

After reviewing the Senate findings and meeting with investigators who urged the panel to look into the matter, the council’s investigative committee opened an inquiry in July.

``Based on the nature of the allegations ... the committee has appointed a review team to investigate these allegations,″ said Thomas Pickard, committee chairman, in a July 13 memo to panel chairman G. Edward DeSeve.

The panel will refer any findings to Treasury Secretary Robert Rubin, who would decide if any action should be taken.

Linda Ricci, a spokeswoman for the panel, confirmed there was an active investigation but declined further comment, saying ``the memo speaks for itself.″

The Clinton administration has nominated David C. Williams to replace Lau. Williams, now inspector general at the Social Security Administration, must be confirmed by the Senate.

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