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S. HRG. 109–653

VETERANS AFFAIRS DATA PRIVACY BREACH:

TWENTY-SIX MILLION PEOPLE DESERVE ASSURANCE OF FUTURE SECURITY

HEARING

BEFORE THE

COMMITTEE ON VETERANS’ AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

JULY 20, 2006

Printed for the use of the Committee on Veterans’ Affairs

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/senate 

(II)

COMMITTEE ON VETERANS’ AFFAIRS 

LARRY E. CRAIG, Idaho, Chairman 

ARLEN SPECTER, Pennsylvania 

KAY BAILEY HUTCHISON, Texas 

LINDSEY O. GRAHAM, South Carolina 

RICHARD BURR, North Carolina 

JOHN ENSIGN, Nevada 

JOHN THUNE, South Dakota 

JOHNNY ISAKSON, Georgia 

DANIEL K. AKAKA, Hawaii, Ranking Member 

JOHN D. ROCKEFELLER IV, West Virginia 

JAMES M. JEFFORDS, (I) Vermont 

PATTY MURRAY, Washington 

BARACK OBAMA, Illinois 

KEN SALAZAR, Colorado 

LUPE WISSEL, Majority Staff Director 

BILL BREW, Minority Staff Director 

(III)

C O N T E N T S 

JULY 20, 2006

SENATORS 

Page 

Craig, Hon. Larry E., Chairman, U.S. Senator from Idaho ................................. 1

Letter dated July 18, 2006 from James H. Burrus, Federal Bureau of 

Investigation, regarding the recovered stolen records ............................... 3

Akaka, Hon. Daniel K., Ranking Member, U.S. Senator from Hawaii ............... 4

Murray, Hon. Patty, U.S. Senator from Washington ........................................... 5

Salazar, Hon. Ken, U.S. Senator from Colorado ................................................... 6

Burr, Hon. Richard, U.S. Senator from North Carolina ....................................... 25

Thune, Hon. John, U.S. Senator from South Dakota ........................................... 28

WITNESSES 

Nicholson, Hon. R. James, Secretary, Department of Veterans Affairs; accompanied by Robert Howard, Senior Advisor to the Deputy Secretary; Tim 

McClain, General Counsel; and Robert Henke, Assistant Secretary for Management, Department of Veterans Affairs ......................................................... 7

Prepared statement .......................................................................................... 10

Response to written questions submitted by Hon. Daniel K. Akaka ........... 11

Opfer, Hon. George J., Inspector General, Department of Veterans Affairs; 

accompanied by Jon A. Wooditch, Deputy Inspector General; and Maureen 

Regan, Counselor to the Inspector General, Department of Veterans Affairs 12

Prepared statement .......................................................................................... 14

Response to written questions submitted by Hon. Daniel K. Akaka ........... 19

APPENDIX 

Newsweek article, ‘‘The Best Medical Care in the U.S.’’ ...................................... 38

(1)

VETERANS AFFAIRS DATA PRIVACY BREACH: 

TWENTY-SIX MILLION PEOPLE DESERVE

ASSURANCE OF FUTURE SECURITY 

THURSDAY, JULY 20, 2006

U.S. SENATE, 

COMMITTEE ON VETERANS’ AFFAIRS, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:04 a.m., in room 

SD–418, Russell Senate Office Building, Hon. Larry E. Craig, 

Chairman of the Committee, presiding. 

Present: Senators Craig, Burr, Thune, Akaka, Murray, and 

Salazar. 

OPENING STATEMENT OF HON. LARRY E. CRAIG, CHAIRMAN, 

U.S. SENATOR FROM IDAHO 

Chairman CRAIG. Good morning, everyone. The Senate Committee on Veterans’ Affairs will come to order. I want to welcome 

all of you to this very important hearing. Secretary Nicholson, Inspector General Opfer, welcome, and thank you for taking the time 

to be with us this morning. 

On May 3rd, theft of a laptop computer and external hard drive 

from the home of a VA employee has been reported as an embarrassing and expensive management failure of VA. While that may 

be true, in the 8 weeks since our joint hearing with the Homeland 

Security and Governmental Affairs Committee, there has been 

much news, both good and bad, on the issue. 

We have learned that the employee was not authorized to take 

the data home and did not safeguard the data once he brought it 

home. We have learned that the appropriate people within VA were 

not informed of the stolen data in a timely manner. We have 

learned that VA policies, practices, and procedures are inadequate 

to safeguard personnel and proprietary information. And we have 

learned that VA has insufficiently address long-standing OIG-reported information security weaknesses. 

We have also learned that law enforcement officials recovered 

the stolen data and hard drive. That is a good news indeed. And 

even better news is that based on computer forensics examinations, 

both the FBI and the OIG have a high degree of confidence that 

the data was not accessed or compromised after the burglary, and 

they foresee no reason for that assessment to change. And that is 

very good news for America’s veterans. 

However, the issue is, I believe, far from closed. This incident 

has had far-reaching implications. America, I believe, is watching 

2

VA and what VA does to learn from and correct its mistakes, because the issue of data security is a problem not only across Government, but within the private sector as well. I think what happened at VA should be an awakening to all of Government. There 

is not a single American who does not expect and, frankly, does not 

deserve assurances from their Government, one of the world’s largest custodians of sensitive personal information. They deserve a 

vigilant security program to protect that information. 

So we are here today to talk about what needs to be done to improve data security and how VA intends to make that happen. How 

do we ensure that the policies, practices, and procedures at VA discourage the potential compromise of sensitive data? How do we 

prevent another wholesale failure to recognize the importance of a 

potential breach of security? And can VA more accurately assess 

the extent and scope of an incident in order to report these incidents to VA and Congressional leadership in a timely manner? 

And, finally, how do we leverage this enormous success that VA 

has had with electronic medical records to become the gold standard in information and cyber security as well? That ought to be a 

real and important challenge. 

The solution to some of these problems may lie in more strictly 

enforced policies, increased education about those policies, and increased utilization of data encryption and passwords. Some would 

argue that the solution lies in increased legislation and appropriations. But at the heart of it all, VA must resolve its repeatedly 

identified vulnerabilities, establish a clear chain of command, and 

implement an accountability structure for the security of its information. 

VA will testify today that they have an implementation strategy 

that is the road map to success and that they are on their way. 

Clearly, that puts their testimony at odds with historic patterns. 

I look forward to understanding the mechanics of this road map, 

so much so, in fact, that I will take this opportunity to post my 

first question of the hearing. Is this implementation strategy something which every single VA employee understands? Can I have a 

chat with the systems administrator at the Boise VA about the implementation strategy for securing VA information or perhaps even 

a claims supervisor at that same facility? Even bigger than the 

challenge of finding lost data is the challenge of making the security of those in the VA system everyone’s top priority. 

I hope this hearing, like the one we held 2 months ago, will shed 

some more light on the situation, provide clarity to some of my concerns and the Committee’s concerns—I think we hold this jointly—

and, most importantly, provide 26 million veterans with answers 

they deserve. 

Before I turn to the Ranking Member, I would like to bring to 

the Committee’s attention the July 18, 2006, letter from the FBI 

reiterating its high degree of confidence that the files on the external hard drive where the VA data was stored was not compromised. This letter will be made a part of the hearing record 

today. 

[The letter from James H. Burrus, Jr., Federal Bureau of Investigation (FBI) follows:]

3


29717.001
4

Chairman CRAIG. Also, before I turn to our Ranking Member and 

other Members for their comments, I want to recognize Tim 

McClain, our VA General Counsel who is with us today. Tim is 

leaving us September 1 to join the private sector. He has been an 

integral part of VA’s senior leadership team as the chief legal counsel since 2001. He was in the Navy’s Judge Advocate General 

Corps and retired from active duty in 1990. He has been the point 

person to handle crises such as Hurricanes Katrina and Rita. His 

tireless leadership in support of the Secretary and the VA in addressing the data issues has been key. 

Tim, on behalf of the Committee, I want to thank you for your 

service to VA, to America’s veterans, and thank you for your service to the country. 

Mr. MCCLAIN. Thank you, Mr. Chairman. 

Chairman CRAIG. Thank you very much. 

[Applause.] 

Chairman CRAIG. Now let me turn to the Ranking Member of the 

Committee, Senator Danny Akaka. 

Danny. 

STATEMENT OF HON. DANIEL K. AKAKA, RANKING MEMBER, 

U.S. SENATOR FROM HAWAII 

Senator AKAKA. Thank you. Thank you very much, Mr. Chairman. And I want to take this opportunity to wish my brother well. 

Chairman Craig, happy birthday. 

Chairman CRAIG. Thank you. 

[Laughter.] 

Chairman CRAIG. Well, it will depend on how the hearing goes 

today how my birthday is, Mr. Secretary. 

[Laughter.] 

Chairman CRAIG. Please proceed, Danny. 

Senator AKAKA. Mr. Chairman, thank you very much for calling 

this hearing. It is important. I am with you and with the Committee in trying to assure that we can improve data security for the 

Veterans’ Administration. 

I want to welcome Secretary Nicholson and Mr. Opfer in joining 

us today, and I look forward to their testimony. 

I know there was a collective sigh of relief when the computer 

equipment containing the stolen data was recovered. It was great 

news to learn that the FBI reached the conclusion that it is highly 

unlikely that the data was compromised. Mr. Opfer, I thank you 

and your office for aggressively pursuing this investigation and the 

timeliness with which you completed it. Your hard work has provided the Secretary and us with recommendations that should go 

a long way toward fixing VA’s information security problems. 

I note that the President’s budget for the coming fiscal year calls 

for a serious cut of funding and staff for your office. Yet your office’s response to this incident shows that VA needs more oversight 

of its internal workings and not less. 

It should not have taken the loss of personal information affecting 26.5 million veterans, guardsmen, reservists, and active-duty 

servicemembers, nor the expenditure of millions of dollars for me 

to realize that VA needs to take drastic steps to improve its cyber 

and information security. 

5

For the past 6 years, VA’s IG has reported that information technology security is a major management challenge. VA has also received failing grades from its Federal Information Security Management Act audits. It should not have taken almost 2 weeks for 

the Secretary to learn of a problem of this magnitude. The slow reaction which characterized the Department’s response to the theft 

is unacceptable. I am very concerned about the state of VA’s internal organization and how the Department functions. 

As VA recovers from this incident, it must have information of 

security policies, procedures, and practices that are standardized 

for all of its employees. I remain distressed that the removal of 

data was not a violation of any law or regulation. 

As I noted at our Committee’s hearing on the data loss, the incident that brings us here today could have easily involved other 

Government departments and agencies. VA must establish safeguards to prevent any loss of data in the future. Secretary Nicholson, I hope you will be proactive in your efforts to remedy these 

problems. Veterans have entrusted the Department with their personal information and deserve nothing less, and I know you will 

certainly be working on it, and this Committee will be interested 

in how we do that. 

Mr. Chairman, I will continue to work with you to ensure that 

we provide effective oversight of VA’s remediation plan. I look forward to hearing from our witnesses and hearing their testimony 

this morning. 

Thank you very much, Mr. Chairman. 

Chairman CRAIG. Senator Akaka, thank you very much. 

Now let us turn to Senator Patty Murray. 

Patty. 

STATEMENT OF HON. PATTY MURRAY, U.S. SENATOR

FROM WASHINGTON 

Senator MURRAY. Well, thank you very much, Mr. Chairman, 

and happy birthday. I hope it is a good one as well. 

Chairman CRAIG. Thank you. 

Senator MURRAY. Thank you, Senator Akaka, especially, too, for 

holding this hearing, and welcome to Secretary Nicholson and the 

Inspector General. 

I know that Chairman Craig and Senator Akaka share my concerns about the recent data theft and how it has been handled, and 

we all gave a sigh of relief when obviously the data was found. But 

I was very frustrated to hear that the VA was not going to be providing the credit monitoring to veterans whose credit may be at 

risk, and I read the letter from the FBI and know that they say 

it is a high level of certainty that the data was not accessed. But, 

frankly, I would not bet my credit on it. And, more importantly, because the VA still does not have an adequate security system, I 

really think until that is fixed, the VA should keep its commitment 

to providing veterans with the credit monitoring, and I hope that 

we can change that direction and move forward on that. I will ask 

you about that later. 

I also share the concern of the Chairman and the Ranking Member about the past failures with data security. We know that the 

IG has warned time and time again that the systems were not seVerDate 0ct 09 2002 10:50 Jan 04, 2007 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 H:\RD41451\DOCS\29717.TXT SENVETS PsN: ROWENA
6

cure about the lack of protection for this vital, sensitive information about health care and benefits. And these are really institutional problems within the VA, and it is going to take more than 

just words about it. We are going to have to really hear some very 

concrete plans, and I hope to ask questions about that at this 

morning’s hearing. And I appreciate your being here so we can 

really get to the heart of why this investigation took so long to 

begin, and what changes have been made and what the future 

plans are to make sure that this problem does not happen again. 

Mr. Secretary, as we talked about when you came in, I hope that 

we can also take a few minutes to talk about your recent trip to 

Walla Walla 2 weeks ago when you came through my State on a 

series of campaign stops and stopped in Walla Walla. You made an 

announcement—actually both in Northwest Washington about a 

Northwest Washington CBOC and the Walla Walla hospital. And 

as you know, your visit to our State raised more questions than it 

answered, and I hope that I can have the opportunity to really define what some of that meant, because I know the people in Walla 

Walla. They are committed; their community is committed; the 

business community is committed; the veterans community is committed. They have really worked hard to have a seat at the table 

and want to know what the details are because that is really what 

matters. 

I did send you a letter. I got an answer to it last night, but I 

still feel that there are a number of questions that are unanswered, 

and I hope to get those answers today as well. 

So thank you, Mr. Chairman. 

Chairman CRAIG. Patty, thank you very much. 

Now let’s turn to Senator Ken Salazar. 

Ken. 

STATEMENT OF HON. KEN SALAZAR, U.S. SENATOR

FROM COLORADO 

Senator SALAZAR. Thank you very much, Mr. Chairman, and 

happy birthday to you. 

Chairman CRAIG. Thank you. 

Senator SALAZAR. And thank you, Senator Akaka, for holding 

this hearing. 

I also want to thank Tim McClain for the service that he has performed for the VA, and I have very much enjoyed working with 

him. Sometimes I think when we come to these hearings, it seems 

that we get into combat, if you will, with the VA on issues that are 

of concern to Members of this Committee. But I think it is also important, from time to time, to remember that there is a lot of good 

that goes on with the VA. 

I had a long conversation with Under Secretary Perlin yesterday 

about the latest article in Business Week, and I think it demonstrates that there is a lot of good in the VA. And I think that 

has come about through the joint efforts of this Committee and the 

Congress working closely with the VA. 

I am very appreciative of the fact that we are looking at the 

issue of security breaches at the VA. We all breathed a very deep 

sigh of relief when the FBI recovered the computer. We were all 

very, very lucky on that incident, but I think the central question 

7

still remains. It was a very troubling incident. I know that Secretary Nicholson shares that concern, and I am very hopeful that 

today we will hear more from Secretary Nicholson about how we 

make sure that this problem does not occur again. It has always 

been my view when these major mistakes occur and people’s lives 

are affected that what we have to do is make sure that you prevent 

the problem from ever happening again. And I am hopeful that the 

ideas and policy directions that Secretary Nicholson is taking in 

the Department will address these issues effectively. 

Thank you, Mr. Chairman. 

Chairman CRAIG. Ken, thank you very much. 

Before I turn to the Secretary, let me thank you all for your kind 

wishes. In the aging process, there is also some humor, and it happened yesterday. We were in the Speaker’s meeting room prior to 

the final ceremony on the 75th anniversary of the VA in the Rotunda. There was a gentleman there from Maryland who is 104 

years old. He fought in World War I. He enlisted when he was 16 

years old to serve in the Navy and is in just amazingly good shape, 

but he could not hear very well. And when I bent over to say hello 

to him, he looked up at me, and he said, ‘‘And you fought in World 

War II.’’ And I had to remind him that I was not yet born. 

[Laughter.] 

Chairman CRAIG. So that is part of the positive side of this memory as we work through the aging process. 

Anyway, with that, Mr. Secretary, thank you again for coming 

before the Committee. You have heard our Members’ concern about 

the good news and the bad news and where we go from here. And 

I think that is going to be what this Committee focuses on now and 

into the future as we work with VA to get this right and prevent 

this problem from happening again. 

Please proceed. 

STATEMENT OF HON. R. JAMES NICHOLSON, DEPARTMENT OF 

VETERANS AFFAIRS; ACCOMPANIED BY ROBERT HOWARD, 

SENIOR ADVISOR TO THE DEPUTY SECRETARY; TIM 

McCLAIN, GENERAL COUNSEL; AND ROBERT HENKE,

ASSISTANT SECRETARY FOR MANAGEMENT, DEPARTMENT 

OF VETERANS AFFAIRS 

Secretary NICHOLSON. Well, thank you, Mr. Chairman, and let 

me add my greetings and happy birthday to you. I recall that incident yesterday slightly differently, however. He asked you if you 

fought in World War I. 

[Laughter.] 

Chairman CRAIG. Yes, I know. 

[Laughter.] 

Chairman CRAIG. Something about both—I did not want to suggest that his ears were failing and his eyes were failing. 

Secretary NICHOLSON. I appreciate being here before you and the 

Members of the Committee to follow up on what has occurred with 

the Department of Veterans Affairs since the unfortunate theft of 

data from the home of a VA employee on May 3rd. I appeared before you at a hearing on May 25th to tell you what I knew about 

this situation at that time. Since then much has happened and, as 

you know and have noted, on Thursday, June 29, 2006, I anVerDate 0ct 09 2002 10:50 Jan 04, 2007 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 H:\RD41451\DOCS\29717.TXT SENVETS PsN: ROWENA
8

nounced that Federal law enforcement authorities had recovered 

the stolen laptop and external hard drive. 

The FBI’s forensic examination of the recovered laptop and hard 

drive is complete, and the FBI has a high degree of confidence, 

based on the results of the forensic tests, and other circumstantial 

information gathered during the investigation that the data contained in that equipment was not accessed or compromised in any 

way. 

This is good news for the VA, most importantly for our veterans 

and our active-duty military personnel, and we believe should alleviate the concerns that they may have. But it is important that 

we remain vigilant. And for that reason, we will be retaining the 

services of a company that specializes in data breach analysis to 

monitor this situation. 

I know that the Members of this Committee have digested the 

VA Inspector General’s report on events related to the data breach. 

That report is accurate, and it is harshly critical of the situation 

that has existed at the VA for years where we simply did not have 

in place proper procedures, regulations, guidelines, and directives. 

Nor did we have a culture of data security that should have precluded an occurrence like this. And once the event occurred, we did 

not show sufficient urgency in dealing with it. As you know, I was 

not informed of the theft until nearly 2 weeks after it had occurred. 

So I concur with the recommendations contained in the Inspector 

General’s report and am fully committed to seeing them implemented in the shortest possible time line. Last October, I approved 

a major restructuring of information security within the Department—far, far before this incident occurred and reached the light 

of day. This restructuring ordered the centralizing of almost all of 

the information technology within the Department to come under 

the Chief Information Officer. This process was and, of course, still 

is underway and will greatly facilitate control, training, responsibility, and accountability. This consolidation of IT has been accelerated as a result of this incident. 

There have been several changes that have already been implemented, and as we continue this effort, we can make the VA the 

‘‘Gold Standard’’ in the area of information security, just as we 

have done in the area of electronic medical records. The VA is the 

recognized leader in electronic health records, and I appreciate that 

being noted in the recent article in Business Week. VA is also the 

recognized leader in health safety and is setting the standards for 

others to follow. I am committed to doing the same in the area of 

information security. 

We have developed a plan with corrective actions and execution 

time lines necessary to fix the deficiencies cited in the IG report. 

It is a multi-phased effort which includes actions in the technical 

area, such as encryption processes and tools, actions in the management area, such as a complete overhaul of policies and directives, and actions focused on operational area, such as procedures 

and tools for monitoring the extraction of sensitive information. 

We will, of course, be pleased to brief the Committee in greater 

detail on that at your convenience. 

On June 28, 2006, I issued a memorandum delegating to the VA 

Chief Information Officer all authority and responsibilities given to 

9

me by the Federal Information Security Management Act, or 

FISMA. This delegation does not relieve me of the ultimate responsibility, but it does empower the CIO with the authority he needs 

to do his job. 

This delegation restructures responsibilities and authorities for 

information security at the VA, bringing them together in one individual. It also is the first step in bringing about the cultural 

changes within the VA generally, and more particularly, within the 

arena of information technology. That must occur. I have made it 

clear to all senior managers in the Department that information security, cyber security, and the reorganization of the Office of Information Technology are top priorities. These senior leaders know 

that every employee must be committed to ensure the safety of veterans’ personal information. Performance evaluations and executive 

bonuses will reflect the leaders’ and employees’ level of commitment. 

When I commit to becoming the ‘‘Gold Standard,’’ I mean VA 

must be the best in the Federal Government in protecting personal 

and health information, training and educating our employees to 

achieve that goal. The culture must put the custody of veterans’ 

personal information first—over and above expediency. And I expect nothing less. 

The IG report has highlighted serious deficiencies. We have a 

plan for transformation. I realize, however, the recommendations 

contained in this report are just a start. Achieving our goal of leadership will require much more. 

I have reached outside our ranks and enlisted the assistance of 

leading experts in the field of data security to assist us in defining 

our path. With their guidance and VA resources, we will become 

the system for all other agencies to emulate. 

Training in the area of information and cyber security will be a 

vital component of our transformation. To ensure quality and consistency in such a broad-based training program, I have directed 

the establishment of a new Office of Cyber and Information Security Training within the Office of Information Technology. 

This office will be responsible for developing and implementing 

a training program which will begin with new employee orientation 

and continue through such programs as Leadership VA, the Senior 

Executive Service Candidate Development Program, and the Senior 

Leadership Academy. I expect a continual emphasis on information 

security throughout an employee’s career. 

Excellence in information security will take the full commitment 

of VA’s senior leadership, both political appointees and career senior executives. It will also take money, and we will seek the budgetary resources we need for success from the Administration and 

from you, the Congress. And it will take time, but my sense of urgency is clear. 

Measurable progress will require a steady and consistent message for—and from—all who work for this agency. 

Industry experts will help our own IT professionals develop program changes and validate our time lines. Employees will be held 

accountable for safeguarding the sensitive information entrusted to 

us by veterans and other beneficiaries. Even now we are conducting an inventory to determine appropriate access needs for evVerDate 0ct 09 2002 10:50 Jan 04, 2007 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 H:\RD41451\DOCS\29717.TXT SENVETS PsN: ROWENA
10

eryone within VA. And we will be instituting background checks 

appropriate to those access levels. 

In fact, it is our people that will make all of this happen. There 

is nothing more important than having people with training and 

character to assume the responsibility to implement the changes 

needed. 

Mr. Chairman, unfortunately a very bad thing happened. A 

monumentally awful thing, and I am outraged by it and by the 

slow response of some in our Department. But I am the responsible 

person, and it is to me that you are entitled to look to see that this 

is fixed. It will not be easy, and it will not be overnight. But I am 

absolutely convinced that we can do it. As I have said, I think we 

can turn the VA into the model for information security, just as it 

has become the model for health care in the United States. 

Finally, Mr. Chairman, thank you for your kind words for Tim 

McClain. We wish him well and will miss him. 

That concludes my testimony, and I would be pleased to answer 

any questions the Committee may have. 

[The prepared statement of Secretary Nicholson follows:]

PREPARED STATEMENT OF HON. R. JAMES NICHOLSON, SECRETARY, DEPARTMENT OF

VETERANS AFFAIRS

Mr. Chairman and Members of the Committee. 

Thank you for the opportunity to appear before you to follow up on what occurred 

within the Department of Veterans Affairs since the unfortunate theft of computer 

equipment containing VA data from the home of a VA employee on May 3rd. I appeared before you at a hearing on May 25th to tell you of what I knew about this 

situation at that time. Since then, much has happened. 

On Thursday, June 29, 2006, I announced that Federal law enforcement authorities had recovered the stolen laptop and external hard drive. The FBI’s forensic examination of the recovered laptop and hard drive is complete. The FBI has a high 

degree of confidence—based on the results of the forensic tests and other information gathered during the investigation that the data contained on that equipment 

was not accessed or compromised. 

This is good news for our veterans and active duty military personnel and should 

alleviate any concerns they may have. But, identity theft is the fastest growing 

white-collar crime in this country, and it is important that we remain vigilant. For 

that reason, we will be retaining the services of a company that specializes in data 

breach analysis to monitor this situation. 

I know the Members of this Committee have digested the VA Inspector General’s 

report on events related to the data breach. 

I concur with the recommendations contained in the Inspector General’s report, 

and am fully committed to seeing them implemented in the shortest possible time. 

Last October I approved a major restructuring of information security within the 

Department, centralizing almost all of it under the Chief Information Officer. This 

process was, and of course, still is underway and will greatly facilitate control, training, responsibility and accountability. This consolidation of IT has been accelerated 

as a result of this incident. There have been several changes that have already been 

implemented, and, as we continue this effort, we can make VA the ‘‘Gold Standard’’ 

in the area of information security. VA has made great strides forward in the area 

of health care and today is the recognized leader in health records and safety and 

is setting the standards for others to follow. I am committed to doing the same in 

the area of information security. 

We are formulating an action plan that is a multi-phased effort which includes 

actions in the technical area such as encryption processes and tools; actions in the 

management area such as a complete overhaul of policies and directives; and actions 

focused on operational areas such as procedures and tools for monitoring the extraction of sensitive information. 

On June 28, 2006, I issued a memorandum delegating to the VA Chief Information Officer (CIO) all authority and responsibilities given to me by the Federal Information Security Management Act (FISMA.) This delegation does not relieve me of 

11

the ultimate responsibility but it does empower the CIO with the authority he 

needs. 

This delegation restructures responsibilities and authorities for information security at the VA, bringing them together in one individual. It also is the first step 

in bringing about the cultural changes within VA generally, and more particularly, 

within IT at VA, that must occur. I have made it clear to all senior managers in 

the Department that information security, cyber security and the reorganization of 

the Office of Information Technology (OIT) are top priorities. These senior leaders 

know that every employee must be committed to ensure the security of veterans’ 

personal information. Performance evaluations and executive bonuses will reflect 

the leaders’ and employees’ level of commitment. 

When I commit to becoming the ‘‘Gold Standard,’’ I mean VA must be the best 

in the Federal Government in protecting personal and health information, training 

and educating our employees to achieve that goal. The culture must put the custody 

of veterans’ personal information first . . . over and above expediency. I expect 

nothing less. 

The IG Report has highlighted serious deficiencies. We have a plan for transformation. I realize, however, the recommendations contained in this report are just 

a start. Achieving our goal of leadership will require much more. 

I have reached outside our ranks and enlisted the assistance of leading experts 

in the field of data security to assist us in defining our path. With their guidance 

and VA resources, we will become the system for all other agencies to emulate. 

Training in the area of information and cyber security will be a vital component 

of our transformation. To ensure quality and consistency in such a broad-based 

training program, I have directed the establishment of a new Office of Cyber & Information Security Training within the Office of Information Technology. 

This office will be responsible for developing and implementing a training program which will begin with new employee orientation and continue through such 

programs as Leadership VA, the SES Candidate Development Program and the Senior Leadership Academy. I expect a continual emphasis on information security 

throughout an employee’s career. 

Excellence in information security will take the full commitment of VA’s senior 

leadership, both political appointees and career senior executives. It will take time, 

but my sense of urgency is clear. 

Measurable progress will require a steady and consistent message for—and 

from—all who work for this agency. 

Industry experts will help our own IT professionals develop program changes and 

validate our time lines. Employees will be held accountable for safeguarding the 

sensitive information entrusted to us by veterans and beneficiaries. Even now we 

are conducting an inventory to determine appropriate access needs for everyone 

within VA. And we will be instituting background checks appropriate to those access 

levels. 

In fact, it is our people that will make all of this happen. There is nothing more 

important than having people with training and character, who assume the responsibility to implement the changes needed. 

Mr. Chairman, unfortunately a very bad thing happened. A monumentally awful 

thing. I am outraged by it and the slow response of some of our Department. But 

I am the responsible person, and it is to me that you are entitled to look to see that 

this is fixed. It won’t be easy, and it won’t be overnight, but I am absolutely convinced that we can do it. As I’ve said, I think we can turn VA into the model for 

information security, just as it has become the model for health care in the United 

States, as most recently attested to in an article in Business Week magazine dated 

July 17th. 

Mr. Chairman, that concludes my testimony. I would be pleased to answer any 

questions that the Committee may have. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. DANIEL K. AKAKA TO

HON. R. JAMES NICHOLSON

Question 1. Based on the FBI’s findings that it is unlikely that the data on the 

hard drive was compromised, VA has withdrawn its plan for providing free credit 

monitoring for those whose personal information was on the stolen equipment. VA 

has stated it will continue with a contract for data breach analysis. Please detail 

when the contract will start and exactly what services will be contracting for. 

Answer. Failed to respond within allotted time. 

12

Question 2. As a result of the data breach analysis contract, if a breach is identified concerning a veteran’s credit or identity, does VA intend to then provide credit 

monitoring to that veteran? What is VA’s response plan? 

Answer. Failed to respond within allotted time. 

Question 3. The IG report identified thirteen different memorandums and directives that have been issued in response to the data theft. The report stated they 

found a patchwork of policies pertaining to information security that were fragmented and difficult to locate. What is VA doing to standardize and simplify the 

policies and procedures that pertain to protecting personal and proprietary data so 

that they are clearly understood by all VA employees and contractors? 

Answer. Failed to respond within allotted time. 

Question 4. The IG recommended that the Secretary take ‘‘whatever administrative action’’ deemed appropriate in connection with individuals involved in ‘‘the inappropriate and untimely handling of the notification of stolen VA data.’’ In your 

response to IG, you indicated that you had directed administrative investigations for 

some employees and for some political appointees on your immediate staff. Please 

explain about the administrative investigations—who is carrying them out, how 

they are being conducted, and what the current status is of their progress? With 

respect to those on your immediate staff, what is the timetable for the completion 

of these reviews? 

Answer. Failed to respond within allotted time. 

Question 5. The IG identified that there is a problem with position level designations not being done or being inaccurate for VA and contract employees. They also 

identified a problem of background checks for those with access to sensitive data. 

Please explain the size of the problem, how long it will take to fix it, and how much 

it will cost. 

Answer. Failed to respond within allotted time. 

Question 6. How long does VA intend on maintaining the call centers to answer 

data theft questions from veterans and their families? 

Answer. Failed to respond within allotted time.

Chairman CRAIG. Mr. Secretary, thank you very much for that 

testimony. 

Now let us turn to the Honorable George Opfer, Inspector General, Department of Veterans Affairs. George, welcome to the Committee. 

STATEMENT OF HON. GEORGE J. OPFER, INSPECTOR

GENERAL, DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY JON A. WOODITCH, DEPUTY INSPECTOR GENERAL; AND MAUREEN REGAN, COUNSELOR TO THE INSPECTOR GENERAL, DEPARTMENT OF VETERANS AFFAIRS 

Mr. OPFER. Thank you, Mr. Chairman and Members of the Committee. Thank you for the opportunity to testify on the results of 

our reviews of the issues related to the loss of VA information concerning the identity of millions of veterans. 

As you know, on May 3rd, the home of a VA employee was burglarized resulting in the theft of approximately 26.5 million personal identification information on veterans and active-duty military personnel. The Secretary was not informed until May 16th. 

Congress and the veterans were not informed until May 22nd. 

Since then, this Committee, as well as other committees and Members of Congress, have expressed considerable interest in the incident involving the theft and loss of the data. 

When I testified before this Committee on May 25th, I described 

the OIG approach as three-pronged: An ongoing criminal investigation which is still continuing regarding the theft of the data; an administrative investigation into the handling of the incident once it 

was reported to VA; and a review of the policies and procedures in 

VA regarding information security and the process that was used 

to try to safeguard data. 

13

I am pleased to acknowledge that through the diligent and coordinated efforts of the VA OIG, the FBI, and the Montgomery 

County police, the stolen data was successfully recovered on June 

28th. Based on the facts that we have gathered during this criminal investigation and the computer forensics examinations, we are 

highly confident that the data has not been compromised. 

My July 11th report addresses whether or not the employee had 

authorization to access the data, take the data home, whether management responded appropriately to the reported theft, and whether VA policies and procedures were adequate to protect the VA information. The report also discusses long-standing information security weaknesses in VA. 

Because this employee was responsible for projects involving all 

aspects of VA, he was authorized to have access to VA databases. 

However, at the time of the burglary, his supervisors were not 

aware that he had taken the data home or was working on a selfinitiated project. In addition, this data was not password-protected 

or encrypted in any way. Although a senior manager in the Office 

of Policy, Planning, and Preparedness was informed of the possible 

loss of VA data on May 3rd, it was not communicated up the chain 

of command to the Chief of Staff until May 9th. This is 6 days after 

the incident had been reported. Poor communication, partially resulting from a dysfunctional working relationship among senior executives, contributed to this delay. The lack of urgency was also impacted by a false assumption that other parts of VA had the responsibility to investigate and report this incident and make the 

required notifications. 

On May 10th, a day after learning of the incident, the Chief of 

Staff requested legal advice from the General Counsel’s office. He 

decided to wait for that legal advice before notifying the Secretary. 

Yet during the 6 days that transpired afterwards, there was no follow-up to determine the status of that request. The Chief of Staff 

notified the Deputy Secretary on May 10th, and he, too, decided 

not to notify the Secretary until more information was gathered. 

The information security officials with responsibility for receiving, assessing, or notifying higher level officials of the data loss reacted with indifference and little sense of urgency. Efforts to investigate the matter were further impeded by errors and omissions in 

the original incident report. 

Twelve days after receiving the incident report, no meaningful 

progress was made in determining the magnitude of the event. Coincidentally, the incident ended up being referred back down to the 

individual who originally referred it in the first place. 

We were able to determine in the OIG after one interview with 

the employee the significance of the stolen data. I immediately notified the Chief of Staff on May 16th. The Chief of Staff notified 

the Secretary shortly after my call. It is unexplainable to us from 

the period of May 3rd through the 16th why no one in the chain 

of command reinterviewed the employee to determine the extent of 

the damage of the potential data loss. 

VA policies and procedures were not adequate in preventing the 

loss. We found that employees were not sufficiently trained, required background checks were not performed, contracts needed 

14

better safeguards to protect data, and incident-reporting procedures needed improvement. 

Since the incident, the Secretary has taken many positive steps 

toward strengthening the policies to prevent similar disclosures. 

We have made additional recommendations to the Secretary. Our 

report covers many recommendations aimed at taking appropriate 

administrative action and establishing an effective, comprehensive 

policy that will safeguard protected information. 

The Secretary has agreed with our findings and recommendations in the report and has provided an acceptable improvement 

plan. 

In closing, I would like to assure the Committee that we will follow up on the implementation of all these recommendations until 

they are fully completed. Mr. Chairman and distinguished Members of the Committee, thank you again for the opportunity to appear, and I would be pleased to answer any questions. 

[The prepared statement of Mr. Opfer follows:]

PREPARED STATEMENT OF HON. GEORGE J. OPFER, INSPECTOR GENERAL, DEPARTMENT OF VETERANS AFFAIRS

INTRODUCTION

Mr. Chairman and Members of the Committee, thank you for the opportunity to 

testify today on the results of the Office of Inspector General (OIG), Department of 

Veterans Affairs (VA), review of issues related to the loss of VA information involving the identity of millions of veterans. I am accompanied by Jon Wooditch, Deputy 

Inspector General, and Maureen Regan, Counselor to Inspector General. 

As you know, on May 3, 2006, the home of a VA employee was burglarized resulting in the theft of a personally owned laptop computer and an external hard drive, 

which was reported to contain personal information on approximately 26 million 

veterans and U.S. military personnel. The VA Secretary was not informed of the incident until May 16, 2006, almost 2 weeks after the data was stolen. The Congress 

and veterans were notified on May 22, 2006. Since then, the Senate Veterans’ Affairs Committee, as well as other Congressional committees and Members of Congress, have expressed considerable interest in how this incident occurred and in how 

VA management responded after being notified of the loss of data. 

When I testified before this Committee on May 25, 2006, I described the OIG’s 

involvement as a three-pronged approach including: (1) a criminal investigation, (2) 

an administrative investigation of the handling of the incident once reported to VA, 

and (3) a review of VA policies and procedures for using and safeguarding personal 

and proprietary data. I am pleased to announce that we completed the administrative investigation and the review of policies and procedures, and issued our final report on July 11, 2006. 

More importantly, I am also pleased to acknowledge that through the diligent and 

coordinated efforts of the VA OIG, the Federal Bureau of Investigation, and the 

Montgomery County Police Department in Maryland, the stolen data was successfully recovered on June 28, 2006. Based on all the facts gathered thus far during 

the criminal investigation, as well as the results of computer forensics examinations, 

we are highly confident that the data was not compromised after the burglary. I 

would also like to point out that we are continuing to pursue the criminal investigation into the burglary. 

The July 11, 2006, report essentially addresses whether the employee had authorization to access and take the data home, whether management responded appropriately to the incident, and whether VA policies and procedures were adequate to 

protect information. The report also discusses long-standing information security 

weaknesses in VA, even though OIG reports have repeatedly made recommendations for corrective action. 

EMPLOYEE NOT AUTHORIZED TO TAKE DATA HOME

Because the employee was responsible for planning and designing analytical 

projects and supporting surveys involving all aspects of VA policies and programs, 

he was authorized access to, and use of, VA databases. The employee explained that 

much of the data that he had stored on the stolen external hard drive was for his 

15

‘‘fascination project’’ that he self-initiated and worked on at home during his own 

time. Because of past criticism on the reliability of the National Survey of Veterans, 

his project focused on identifying approximately 7,000 veterans who participated in 

the 2001 survey, in order to compare the accuracy of their responses with information VA already had on file. He began the project in 2003, but could not recall 

spending time working on it during 2006. 

To conduct this project, the employee took home vast amounts of VA data and 

loaded it on an external hard drive. The stolen laptop did not contain VA data. The 

employee reported that the external hard drive that was stolen likely included large 

record extracts from the Beneficiary Identification and Records Locator Subsystem 

that contained records on approximately 26 million living veterans. The extract contained veterans’ social security numbers, names, birth dates, service numbers, and 

combined degree of disability. He also reported that the stolen hard drive likely contained an extract of the Compensation and Pension file, containing personal identifiers of over 2.8 million living veterans. 

While the employee had authorization to access and use large VA databases containing veterans’ personal identifiers in the performance of his official duties, his 

supervisors and managers were not aware that he was working on the project, and 

acknowledged that if they had, they would not have authorized him to take such 

large amounts of VA data home. By storing the files on his personal external hard 

drive and leaving it unattended, the employee failed to properly safeguard the data. 

While the employee stored the laptop and the external hard drive in separate areas 

of the house, he acknowledged that he took security of the data for granted. 

The loss of VA data was possible because the employee used extremely poor judgment when he decided to take personal information pertaining to millions of veterans out of the office and store it in his house, without encrypting or passwordprotecting the data. This serious error in judgment is one for which the employee 

is personally accountable. The Department proposed administrative action prior to 

issuance of our report. 

MANAGEMENT RESPONSE TO THE INCIDENT WAS NOT APPROPRIATE OR TIMELY

The burglary was reported to the local police on May 3, 2006. When the employee 

discovered that the computer equipment was among the items stolen, he immediately notified VA management in the Office of Policy, Planning, and Preparedness 

(OPP&P), including Security and Law Enforcement personnel, that the stolen computer equipment contained VA data. 

Mr. Michael McLendon, Deputy Assistant Secretary for Policy, was one of the 

managers notified on May 3, 2006. However, it was not until May 5, 2006, that the 

Information Security Officer (ISO) for OPP&P interviewed the employee to determine more facts about the loss. The ISO reported that the employee was so flustered 

that the ISO decided not to discuss the matter; rather he asked the employee to 

write down what data was lost. The employee’s written account of the lost data was 

an identification of database extracts with little quantified information concerning 

the significance or magnitude of the incident. This is important because this report 

served as the basis for all further notifications in VA up to, and including, the Deputy Secretary. 

Mr. McLendon received the report of the stolen data on May 5, 2006. Instead of 

providing the report to higher management, Mr. McLendon advised his supervisor, 

Mr. Dennis Duffy, Acting Assistant Secretary for Policy, Planning, and Preparedness, of his intent to rewrite the report because it was inadequate and did not appropriately address the event. He submitted his revised report to Mr. Duffy on May 

8, 2006. 

Our review of Mr. McLendon’s revisions determined that his changes were an attempt to mitigate the risk of misuse of the stolen data. He focused on adding information that most of the critical data was stored in files protected by a statistical 

software program, making it difficult to access. This, however, was not the case because we were able to display and print portions of the formatted data without 

using the software program. Mr. McLendon made these revisions without consulting 

with the programming expert on his staff or with the employee who reported the 

stolen data. Mr. Duffy provided the revised report to Mr. Thomas Bowman, VA 

Chief of Staff, on May 10, 2006. Mr. Duffy also did not attempt to determine the 

magnitude of the stolen data nor did he talk to the employee. 

Mr. McLendon also did not inform his direct supervisor, Mr. Duffy, when he 

learned of the incident on May 3, 2006. Mr. Duffy advised us that he did not learn 

of the theft until Friday morning, May 5, 2006, when he spoke with the OPP&P 

ISO, in what Mr. Duffy described as a rather ‘‘casual hallway meeting.’’

16

Mr. Duffy did not discuss the matter initially with Mr. McLendon, noting that 

there had been a long and very strained relationship with him. Mr. Duffy said that 

Mr. McLendon had a very strong belief that, as a political appointee, he reported 

in some fashion to the Secretary and that there was no need for a ‘‘careerist’’ to supervise him. Mr. McLendon characterized the office as one of the most dysfunctional 

organizations in VA, and that it was one of the most hostile work environments he 

ever worked in. 

Mr. Duffy said he just did not perceive this as a crisis. In hindsight, he added 

that his greatest regret is that he ‘‘failed to recognize the magnitude of the whole 

thing.’’ Both Mr. Duffy and Mr. McLendon bear responsibility for the impact that 

their strained relationship, which both acknowledged, may have had on the operations of the office in handling this incident. 

We also concluded that Mr. John Baffa, Deputy Assistant Secretary for Security 

and Law Enforcement, who was notified of the incident on May 4, 2006, also failed 

to take appropriate action to determine the magnitude and significance of the stolen 

data. 

Shortly after Mr. Bowman received the report from Mr. Duffy on May 10, 2006, 

he provided it to Mr. Jack Thompson, Deputy General Counsel, and asked him to 

provide legal advice on the agency’s duties and responsibilities to notify individuals 

whose identifying information was compromised. On May 10, 2006, Mr. Bowman 

also informed Mr. Gordon Mansfield, Deputy Secretary. While the Deputy Secretary 

does not recall discussing the magnitude of the number of veterans affected by the 

theft, he too decided not to raise the issue to the Secretary until they knew more 

information on what VA’s legal responsibilities were and more about the magnitude 

of the problem. Once again, no attempt was made to contact the employee who reported the theft to determine the magnitude of the stolen data. 

The OIG was able to determine the extent of the stolen data after one interview 

with the employee on May 15, 2006. As soon as I learned of the magnitude of the 

incident on the morning of May 16, 2006, I immediately notified the Chief of Staff 

that the stolen data most likely contained personal identifiers on approximately 26 

million records. The Chief of Staff then notified the Secretary. 

The delay in notifying the Secretary was spent waiting for legal advice from the 

Office of General Counsel (OGC). This 6-day delay can be attributed to a lack of 

urgency on the part of those requesting this advice and those responsible for providing the response. This is not to say that everyone who was notified of the incident failed to recognize its importance, but no one clearly identified it as a high priority item and no one followed up on the status of the request until after I notified 

the Chief of Staff on May 16, 2006. 

INFORMATION SECURITY OFFICIALS ACTED WITH INDIFFERENCE AND LITTLE

SENSE OF URGENCY

On May 5, 2006, the OPP&P ISO forwarded information concerning the theft to 

the District ISO, who is responsible for coordinating ISO activities among VA Central Office staff offices. He also submitted it to the Security Operations Center 

(SOC), which has responsibility for assessing and resolving reported information security incidents. However, the OPP&P ISO’s incident report had significant errors 

and omissions, and information security officials did not adequately attempt to identify the magnitude of the incident or elevate it until May 16, 2006. 

At nearly every step, VA information security officials with responsibility for receiving, assessing, investigating, or notifying higher level officials of the data loss 

reacted with indifference and little sense of urgency or responsibility. At no time 

did the District ISO or SOC attempt to interview the employee who reported the 

data stolen to clarify omissions in the OPP&P ISO’s report or to gain a better understanding of the scope and severity of the potential data loss. While the District ISO 

elevated the matter to Mr. Johnny Davis, Acting Associate Deputy Assistant Secretary for Cyber Security Operations, this occurred as another ‘‘hallway conversation,’’ and he was not provided any details on the nature of the missing data. No 

further notifications were made up the chain-of-command. 

Twelve days after receiving the original incident report, the SOC had made no 

meaningful progress in assessing the magnitude of the event and, ironically, had 

passed responsibility to gather information on the incident back to the OPP&P ISO 

to review it as a possible privacy violation, an area outside the jurisdiction of the 

SOC. The OPP&P ISO also serves as the Privacy Officer (PO). 

17

POLICIES AND PROCEDURES DID NOT ADEQUATELY SAFEGUARD PROTECTED

INFORMATION

The potential disclosure of Privacy Act protected information resulting from the 

theft raised the issue of whether VA policies adequately safeguard information that 

is not stored on a VA automated system. Based on our review of VA policies that 

existed at the time of the incident; policies that have been issued since the incident; 

and interviews with VA employees, Chief Information Officers, POs, and ISOs; we 

concluded that VA policies, procedures, and practices do not adequately safeguard 

personal or proprietary information used by VA employees and contractors. 

We found a patchwork of policies that were difficult to locate and fragmented. 

None of the policies prohibited the removal of protected information from the worksite or storing protected information on a personally owned computer, and did not 

provide safeguards for electronic data stored on portable media or a personal computer. 

The loss of protected information not stored on a VA automated system highlighted a gap between VA policies implementing information laws and those implementing information security laws. We found that policies implementing information laws focus on identifying what information is to be protected and the conditions 

for disclosure; whereas, policies implementing information security laws focus on 

protecting VA automated systems from unauthorized intrusions and viruses. As a 

result, VA did not have policies in place at the time of the incident to safeguard 

protected information not stored on a VA automated system. 

Although policies implemented by the Secretary since the incident are a positive 

step, we determined that more needs to be done to ensure protected information is 

adequately safeguarded. We found that VA’s mandatory Cyber Security and Privacy 

Awareness training are not sufficient to ensure that VA and contract employees are 

familiar with the applicable laws, regulations, and policies. We also found that position sensitivity levels designations for VA and contract employees are either not 

done or are not accurate. In addition, we found that VA contracts do not contain 

terms and conditions to adequately safeguard protected information provided to contractors. 

We determined that VA needs to enhance its policies for identifying and reporting 

incidents involving information violations and information security violations to ensure that incidents are promptly and thoroughly investigated; the magnitude of the 

potential loss is properly evaluated; and that VA management, appropriate law enforcement entities, and individuals and entities potentially affected by the incident 

are notified in a timely manner. 

INFORMATION SECURITY CONTROL WEAKNESSES HAVE PERSISTED FOR YEARS

For the past several years, we have reported vulnerabilities with information 

technology security controls in our Consolidated Financial Statements (CFS) audit 

reports, Federal Information Security Management Act (FISMA) audit reports, and 

Combined Assessment Program (CAP) reports. The recurring themes in these reports support the need for a centralized approach to achieve standardization, remediation of identified weaknesses, and a clear chain-of-command and accountability 

structure for information security. Each year, we continue to identify repeat deficiencies and repeat recommendations that remain unimplemented. These recommendations, among other issues, highlight the need to address security 

vulnerabilities of unauthorized access and misuse of sensitive data, the accuracy of 

position sensitivity levels, timeliness of background investigations, and the effectiveness of Cyber Security and Privacy Awareness training. We have also reported information technology security as a Major Management Challenge for the Department each year for the past 6 years. 

CONCLUSION

Because the employee was responsible for planning and designing analytical 

projects and supporting surveys involving all aspects of VA policies and programs, 

he was authorized access to, and use of, these and other large VA databases. However, at the time of the burglary his supervisors were not aware of the employee’s 

self-initiated project and, as such, had no official need or permission to take the 

data home. In addition, the employee reported that the data stored on the stolen 

external hard drive was neither password-protected nor encrypted. 

Although senior managers and other OPP&P staff were informed of the possible 

loss of data on May 3, 2006, the incident was not communicated up the chain-ofcommand until the VA Chief of Staff was notified 6 days later. Poor communication, 

partially resulting from a dysfunctional working relationship among senior OPP&P 

18

executives, contributed to the delay. While there was considerable rhetoric among 

management concerning the need to identify the extent and scope of the stolen data, 

there was virtually no follow-up with the employee to obtain results. Also, the lack 

of urgency in addressing this issue was impacted by the false assumption that the 

SOC had the responsibility to investigate the incident and make all required notifications. 

On May 10, 2006, Mr. Bowman requested legal advice from OGC. Yet, during the 

6 days following this request, Mr. Bowman did not follow up to determine the status 

of the request, or task anyone to develop a more definitive description of how many 

veterans’ records may have been stolen. Although Mr. Bowman acknowledged he 

knew the data stolen could potentially affect millions of veterans, he demonstrated 

no urgency in notifying the Secretary of the incident and decided to wait for OGC’s 

response before doing so. 

Mr. Bowman also notified Mr. Mansfield on May 10, 2006, but Mr. Mansfield too 

decided not to raise the issue to the Secretary until they knew more information 

on what VA’s legal responsibilities were and more about the magnitude of the problem. 

At nearly every step, VA information security officials with responsibility for receiving, assessing, investigating, or notifying higher level officials of the data loss 

reacted with indifference and little sense of urgency or responsibility. Efforts to investigate the incident were further impeded by errors and omissions in the ISO’s 

incident report and were delayed due to ineffective coordination between the 

OPP&P ISO and the SOC. Twelve days after receiving the original incident report, 

the SOC had made no meaningful progress in assessing the magnitude of the event 

and had attempted to pass responsibility to gather information on the incident back 

to the OPP&P PO. Coincidentally, this is the same individual who referred the matter to the SOC in the first place, which he did in his dual capacity as ISO for 

OPP&P. 

The OIG was able to determine the magnitude and extent of the stolen data after 

one interview with the employee on May 15, 2006, and I notified the Chief of Staff 

on the morning of May 16, 2006. The Chief of Staff notified the Secretary shortly 

after my call. It is unexplainable why no one in the management chain-of-command 

ever attempted to re-interview the employee to gain a better understanding of the 

scope and severity of the potential data loss, prior to my call. 

While no policy was violated in the handling of the incident, staff and senior managers who were notified of the theft failed to take appropriate action to determine 

the magnitude of what was stored on the stolen external hard drive, or whether it 

was properly safeguarded. The failure to determine this resulted in not recognizing 

the potential significance on VA programs, operations, and veterans. Since the local 

police were not told for 13 days that VA data was stolen during the burglary, valuable forensic evidence was most likely lost. The delay also prevented the burglary 

from receiving the urgency it warranted from Federal law enforcement agencies. 

We found that VA’s policies and procedures for safeguarding information and data 

were not consolidated or standardized to ensure all employees were following all applicable requirements in a similar fashion, and that policies and procedures were 

not adequate in preventing the loss of the data. We also found that VA employees 

and contractors were not adequately trained and reminded of the policies and procedures to follow to safeguard personal or proprietary information, sensitivity level 

designations were not always accurate, information and data provided to contractors 

need to be better safeguarded, and VA incident reporting procedures and controls 

need improvement. 

Since the incident VA managers have attempted to strengthen policies, procedures, and controls to prevent similar disclosures, but additional actions need to be 

taken to safeguard protected information and VA’s automated systems. 

Our CFS audits, FISMA audits, and individual CAP reports of VA medical facilities and regional offices all highlight specific vulnerabilities that can be exploited, 

but the recurring themes in these reports are the need for a centralized approach 

to achieve standardization in VA, remediation of identified weaknesses, and accountability in VA information security. Specific recommendations were not made 

in our July 11, 2006, report because 17 recommendations are listed in previously 

issued OIG reports and are being followed up on separately. 

RECOMMENDATIONS

We recommend that the Secretary: 

• Take whatever administrative action deemed appropriate concerning the individuals involved in the inappropriate and untimely handling of the notification of 

stolen VA data involving the personal identifiers of millions of veterans. 

19

• Establish one clear, concise VA policy on safeguarding protected information 

when stored or not stored in VA automated systems, ensure that the policy is readily accessible to employees, and that employees are held accountable for non-compliance. 

• Modify the mandatory Cyber Security and Privacy Awareness training to identify and provide a link to all applicable laws and VA policy. 

• Ensure that all position descriptions are evaluated and have proper sensitivity 

level designations, that there is consistency nationwide for positions that are similar 

in nature or have similar access to VA protected information and automated systems, and that all required background checks are completed in a timely manner. 

• Establish VA-wide policy for contracts for services that requires access to protected information and/or VA automated systems, that ensures contractor personnel 

are held to the same standards as VA employees, and that information accessed, 

stored, or processed on non-VA automated systems is safeguarded. 

• Establish VA policy and procedures that provide clear, consistent criteria for reporting, investigating, and tracking incidents of loss, theft, or potential disclosure 

of protected information or unauthorized access to automated systems, including 

specific timeframes and responsibilities for reporting within the VA chain-of-command and, where appropriate, to OIG and other law enforcement entities, as well 

as appropriate notification to individuals whose protected information may be compromised. 

The Secretary agreed with the findings and recommendations in our report and 

provided acceptable improvement plans. 

CLOSING

In closing, I would like to assure the Committee that we will follow up on the 

implementation of these recommendations until they are completed. Mr. Chairman 

and other distinguished Members of the Committee, thank you again for this opportunity and I would be pleased to answer any questions. 

RESPONSE TO WRITTEN QUESTIONS SUBMITTED BY HON. DANIEL K. AKAKA TO

HON. GEORGE J. OPFER

Question 1. Please provide an explanation for the apparent breakdown within the 

Office of Information and Technology in responding to this incident. 

Answer. The breakdown was attributable to a number of factors, not the least of 

which was the lack of a single coherent policy for investigating incidents in which 

protected information was inappropriately disclosed, lost, or stolen. Existing VA 

policies focused more on incidents involving the breach or attack into VA’s automated systems, and less on Privacy Act violations. Also, the incident report initially 

filed contained errors and omissions which made it difficult to determine if this was 

an information system or privacy violation. The distinction was not made for 12 

days. 

Question 2. Please provide any details on the specifics of the FBI’s forensic examination of the stolen hard drive. 

Answer. It is my understanding that when you copy or access computer files, 

there is evidence of it in the form of a time/date stamp. The FBI computer forensics 

examinations did not reveal any date stamp on any of the stolen files after May 2, 

2006, the day before the burglary. The FBI cannot give 100 percent assurance because there are highly technical ways to access or copy files without leaving a time/

date stamp. However, we do not believe the thieves possessed the necessary technical skills for the following reasons. 

• The string of burglaries around the same time and in the same general area 

suggests that the thieves were targeting items such as laptops and other computer 

equipment that are in demand and could be easily sold. The fact that the computer 

equipment was purchased off the street for such a negligible amount indicates that 

the individual selling it was unaware of what was contained on the hard drive. 

• Multiple computer disks with VA files, which were used to download the VA 

data onto the external hard drive, were in the employee’s house but not taken during the burglary. This suggests that the computer equipment and not the data was 

the target of the theft. 

Given all these factors, we are highly confident that the data was not accessed.

Chairman CRAIG. Well, Mr. Secretary and Inspector General, I 

am sure we can dwell on the past, and we have just heard a recapitulation of the past and the failures of the system and the perVerDate 0ct 09 2002 10:50 Jan 04, 2007 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6601 H:\RD41451\DOCS\29717.TXT SENVETS PsN: ROWENA
20

sonnel involved to deal with this in a timely fashion. Or we can 

focus on the future and where we go from here. 

By your own expression and by the consistent expression of observers of the past, this system had shortfalls, could fail, did fail. 

So let me proceed with those thoughts in mind to a series of questions of how we go forward. 

First and foremost, Mr. Secretary, you say you are retaining a 

company for the purpose of monitoring information or breach flows. 

Is that a result of the lack of absolute confidence that the information was not breached or a risk that there could have been some 

breaches? 

Secretary NICHOLSON. More the former, Mr. Chairman. There is 

a company out there—and there may be more than one—that has 

a proprietary software that analyzes large banks of data and looks 

for correlations of incidents and can by doing that determine these 

identity thefts are being sourced from a common data bank. 

One company that we are very familiar with and have talked to 

in great detail is called ID Analytics. ID Analytics subsequently donated its services to VA at no cost. But that gives us, a suspendersand-belt sort of feeling that, while the FBI has told us that they 

say with a very high degree of probability this has not been compromised, they do not say it is 100 percent. So by engaging this 

company, it gives us another line of reconnaissance, if you will, to 

see if anything would start popping up that could be traced back 

to this bank of data. If that happened, then we can take actions 

with respect to monitoring and so forth, notifications. 

Chairman CRAIG. Do you know or have a general idea of what 

this monitoring will cost? And do you have the money to accomplish that? 

Secretary NICHOLSON. I do have a general idea of what it will 

cost, and we do have the money, yes. It is, I can say, we are bidding it, so we would like to protect our position. 

Chairman CRAIG. That is why I asked the way I asked. 

Secretary NICHOLSON. It is relatively inexpensive. It is surprisingly inexpensive. 

Chairman CRAIG. OK. Mr. Secretary, you have begun to outline 

for us a great deal of what you are putting into place as a result 

of this failure, and before asking this series of questions, I think 

it is tremendously important for this Committee to gain from you 

and from VA a detailed plan as to what you plan to do and how 

you plan to implement it for a lot of reasons. 

First of all, you have said it will take time, and that is appropriate, to get it right and to develop a consistency inside VA and 

a culture and a protocol and all of that. And my guess is it will 

be a time in which you may be long gone from here, as may I and 

others. But it is important for this Committee and those of us who 

will monitor it—because we will—to understand that procedure, 

that process, for a couple of reasons: To be critical of it, yes, to be 

observant of it, to monitor it, to check it along the way, to work 

with VA to make sure this happens. As you know, the House is 

moving, I think today, to mark up legislation directing and mandating a certain procedure. 

21

So having said all of that, does this plan give veterans, in your 

opinion, the assurance they deserve that information and cyber security has become your top priority? 

Secretary NICHOLSON. I would say unequivocally yes to that. You 

know, this is the order of the day at the VA, and since this has 

occurred, I have traveled out and about and talked to hospital directors and regional office directors, and they have the word. They 

have the sense of urgency. 

But, it is still in the nascent stage; you know, we are talking and 

we are getting the talk right, and we are beginning to confront the 

culture. But there is a great deal now that has to be done. I mean, 

the real implementation, then transformation has to be done. 

But I would point out—and I think it is fair to do that and to 

give acknowledgment of it, that we started—last October we started a major change in this agency, and that was a very big decision 

I made, resisted in many quarters of the vast organization, because 

it is bringing about a big change. On October 1st, some 5,050-some 

people will be moved and over $400 million will be moved to the 

CIO, consistent with the centralization of responsibility and control 

over information technology and information security. 

Chairman CRAIG. I will come back with additional questions. Let 

me turn to Senator Akaka. 

Senator AKAKA. Thank you very much, Mr. Chairman. 

Mr. Secretary, I am sure that you appreciate that, as a result of 

the data theft, veterans’ confidence in VA has been low. The veterans my office is hearing from are not certain about VA and what 

VA is trying to do to help them, and it gives me a feeling that they 

will not be easily reassured. 

As I am sure you know, many veterans organizations are opposed to the decision to not provide credit monitoring, and so my 

question to you is: What is the status of that about credit monitoring? You did mention that you will retain from the private sector a company that will continue to monitor this situation. Can you 

give me a status of that? 

Secretary NICHOLSON. Yes, I can, Senator. The decision was 

made both at OMB with engagement by us, the VA, that the credit 

monitoring that was moving forward as a result of the recovery of 

the data and the FBI’s prognosis that it was not compromised 

caused us to conclude that individual monitoring was not necessary 

at this time. And then we were affirmatively going to engage this 

data bank monitoring. And that is the case, and we have had conversations with the VSOs. Some of them do oppose our decision, 

and some concur with it, think that it would be a waste of $160 

million at this time based on the FBI’s analysis. 

Senator AKAKA. Is the company that you are retaining to continue this monitoring of the situation the same group that was 

dealing with the credit monitoring? 

Secretary NICHOLSON. No, sir. It is a different company. There 

may be other companies. We are putting it out for proposal, you 

know, a request for bids. But we know of the one, we have talked 

to them. 

Senator AKAKA. Thank you. 

Mr. Opfer, your investigation found that a number of senior VA 

officials did not seem to have a sense of urgency in reporting the 

22

missing data to the Secretary who has, again, said that he did not 

know about it until 2 weeks after the theft. Do you have any explanation for that? 

Mr. OPFER. Yes, Senator. Most of the senior officials that we 

interviewed seemed to be unfamiliar with the databases believed to 

have been stolen and records that they contained. The initial notification of the incident did not quantify the magnitude of the potential for the loss. And it did not seem to trigger a sense of urgency 

on the part of any of them to look into it or to take control of the 

issue to try to determine what potentially could be the harm. Several of them told us that they were working on the mistaken assumption that someone else in VA was going to be following up and 

doing an investigation and making the notifications to higher management and that they were waiting for additional information. It 

really comes down to a failure to recognize the magnitude of the 

potential loss and taking control of the issue and trying to determine exactly what potentially could have been compromised by the 

employee losing that data. 

Senator AKAKA. Mr. Secretary, I am sure you appreciate one of 

the concerns that Congress has is that we learned of the data loss 

only shortly before hearing about it on CNN and other media outlets. If you had to do it over again, once you learned of the data 

breach, would you at least have come to the leadership of the 

Veterans’s committees and let us know about the problem earlier? 

Secretary NICHOLSON. That is a good question, Senator. Here 

was the dilemma: After I did learn about it, of course, I immediately informed the White House about it, and then, the Department of Justice and the FBI and a lot of very senior people got involved in it. But one of the dilemmas was if you go public with this, 

you will inform whoever has that of what they have, thinking they 

may not know what they have. As it turned out, as I have often 

said, through good law enforcement and the grace of God, they did 

not know what they had and we got it back. They fenced it and 

somebody turned it in for the reward. 

But that was the dilemma, and on the eve of the day—that is, 

the 21st of May—we had a very big powwow about that, and there 

were pros and cons. I made the decision that we needed to inform 

you, the veterans, that this had happened. And so on the 22nd, we 

did it. 

Senator AKAKA. Thank you very much. Before I give it up, I want 

to add my gratitude to General Counsel McClain for your service 

and I want to wish you well. 

Mr. MCCLAIN. Thank you, Senator. 

Senator AKAKA. Thank you, Mr. Chairman. 

Chairman CRAIG. Thank you, Danny. 

Senator Murray. 

Senator MURRAY. Thank you very much, Mr. Chairman, and I do 

want to follow up Senator Akaka’s question on credit monitoring. 

But before I do that, I wanted to return to the question about your 

trip to Walla Walla, because as you know, I have a community that 

cares deeply about this. They have followed the process very, very 

closely, and they want to have a real voice in the process. And I 

specifically wanted to ask you about the plan to involve the local 

community. They have followed the CARES process very, very 

23

closely. They expect that the VA will follow it, too, and that means 

sending a plan to the local advisory committee for review. Can you 

commit to us that you will follow the CARES process and work 

with that Local Advisory Panel? 

Secretary NICHOLSON. Yes, I can, Senator Murray. We have followed it, and we have been through the first two stages, and our 

analysis based on that, I make those decisions. I made a decision 

on Walla Walla that we would keep that campus open. And the 

purpose of my visit there was to tell them—the community, the patients, and the staff, all of whom had anxiety—about whether or 

not we were going to close this. For the benefit of the others, it is 

a very small VA hospital complex. And I made a decision to keep 

it open, and that was my purpose of going there. 

Now, we are going to go into the third stage, which is being justifiable to keep it open. What will it look like? And as you know, 

when I went there, I assured them that we were going to have a 

new ambulatory outpatient clinic facility there. We have other 

issues that we will be dealing with, and we will be engaging the 

Local Advisory Panel on those issues, such as long-term care, inpatient medicine and inpatient mental. We have those capabilities 

there, but as you know, the populations are very small. For example, the average daily census in the nursing home is 22, in the 

mental health it is 18, and in medicine it is 10. 

Senator MURRAY. OK. But you will follow the LAP process so 

that that plan will go to the LAP committee and they will have 

their official——

Secretary NICHOLSON. Yes. 

Senator Murray [continuing].—responsibility to have a response 

back? 

Secretary NICHOLSON. Yes, we will. 

Senator MURRAY. The questions that are raised are really—I 

mean, we have been dealing with for a long time. There aren’t any 

facilities in the local community to outsource this to. And maybe 

more to the point, as you know, your announcement came as a surprise because many of us have been working very, very closely on 

this for a number of years now with the community and did not 

know that you were coming out there. I am glad that you have 

taken the first step to do that, and now the second step to continue 

the LAP process and send the plan. 

But could I get your commitment to come in and talk with me, 

bring your staff, so that I can talk with you about the proposal and 

learn where we are going to go from here? 

Secretary NICHOLSON. Yes, indeed. Sure, we will do that. 

Senator MURRAY. OK. I would really appreciate that because this 

is obviously a very involved community. Senator Craig has been 

out there. He knows as well as I do, and we would like to work 

with you to get us to where we need to be. I would appreciate that. 

I also wanted to ask you about Bellingham because when you 

were there, we were told that you committed to bringing a VA clinic to Northwest Washington and that some kind of announcement 

would be coming within the week. And I have been unable to get 

any clarification from your staff, and I wanted to find out from you 

here, can you tell me what you said in Bellingham about the new 

clinic so that we all are on the same page? 

24

Secretary NICHOLSON. I can. What I said to the veterans there 

with whom I met was that we have made a decision in the CBOC 

business plan analysis that we would put a new community-based 

outpatient clinic, CBOC, in Northwest Washington, somewhere between Seattle and the Canadian border. I did not specify where it 

would be located, and I would be happy, when we have our meeting, to discuss that with you, but we have not made a decision as 

to where to site it. 

Senator MURRAY. But the decision has been made to site one 

there? 

Secretary NICHOLSON. Yes. 

Senator MURRAY. Is there a time on that, a time commitment? 

Secretary NICHOLSON. We hope to make the decision about where 

to put it before the end of the year, and then, you know, it usually 

takes us 6 months or so then to open one. 

Senator MURRAY. Well, I appreciate that, and, again, part of the 

reason there has been such a flare-up over this is that our veterans 

are very well aware of politics and policy. They care deeply about 

policy, and the confluence there has really riled a lot of people, as 

you probably know now from the press. But one of the problems, 

I think, that I am hearing back and I think you should be aware 

of is that people are aware that clinics are a promise to veterans 

and they need to be part of a policy that we are all aware of. And 

there is a deep concern that many of these promises that are being 

made for clinics are being made in Republican districts and not in 

Democratic districts. And maybe it is just a confluence of where 

things are, but are you aware that since you have been announcing 

clinics, 80 percent of them are in Republican districts? And I think 

that has brought some question to whether or not we are going to 

have politics become part of the VA process. I do not want that to 

happen. I do not think anybody does. But I just wanted you to be 

aware that is part of what some of the backlash has been on this. 

But I do appreciate your commitment to work with us. As you 

know, having been in Walla Walla, this is a really caring community. They have worked very hard on this, and I really appreciate 

your commitment to the LAP process and to having that community continue to be involved. And I will work with you on the western Washington CBOC, and I am really glad that is part of the 

process that you are going in as well. So thank you very much. 

Secretary NICHOLSON. I was not aware of that statistic. I have 

never done that calculus. In fact, I am quite sure that district is 

a Democratic district. 

Senator MURRAY. It currently is, but, unfortunately, the announcement was made on a political campaign rather than bringing the veterans in who have been following this, believe me, day 

by day. 

Chairman CRAIG. Senator Murray, thank you. 

Senator Burr, thanks for joining us, and please proceed with any 

opening comments you would like to make and questions of the 

Secretary and the IG. 

25

STATEMENT OF HON. RICHARD BURR, U.S. SENATOR

FROM NORTH CAROLINA 

Senator BURR. Thank you, Mr. Chairman, and my congratulations on one additional notch on your age. I understand it is your 

birthday today. 

Chairman CRAIG. Thank you so much. 

Senator BURR. Mr. Secretary, I really only had one question, but 

Senator Akaka has stimulated me to make a statement, and I will 

try to do this as diplomatically and delicately as I can. 

Your answer to his question basically said that there was a 

lengthy debate with a lot of people about whether and when to notify Congress, and you won. I would tell you, just as a Member of 

Congress and of this Committee, a debate on whether that happens 

and when is not a debate that needs to happen. Notification of this 

body is an automatic thing. 

You were not served well, I think you have acknowledged that, 

from a standpoint of the lag time it took for the information to get 

to you. I also look at what you considered to be a quick decision 

in this debate at issue, and I consider the lag time between the 

16th and the 22nd, the notification of us, as unacceptable. So my 

intent was not to rehash any old stuff. It is just to make the point 

that we are partners, and we serve the veterans, you serve the veterans. We each have a piece of the responsibility. Ours is policy 

and financially. It takes all partners to make it work, and I would 

hope that in the future, regardless of what area of Government, 

there would not be a debate about whether or when Congress was 

included in good news or bad news. 

My question is a very simple one. You have gone through an exhaustive process to find what the correct path from here is, and I 

commend you for that. I think it has been done very thoroughly. 

What will you do to gain back the trust of veterans? I think that 

was at the root of Senator Akaka’s question. We made an offer to 

veterans that I think was an offer we had to make—credit monitoring. I was not part of that debate as to whether we continued 

it or not. But that decision was made. Now the responsibility still 

falls to you of, over and above, just fixing this system and monitoring to see what happens, how do we gain back the trust of veterans across the country? 

Secretary NICHOLSON. Well, Senator, I think you have to earn it 

and you have to show leadership and commitment and delivery. I 

travel a lot. I meet with a lot of veterans, and I talk to them about 

a lot of things. And I would say that generally, because the VA continues to function very well—I mean, I don’t know if you were in 

here when they mentioned about the Business Week article saying 

that we are not only the biggest, but the best health care system 

in the United States of America. And a week ago Monday night, 

Harvard University awarded the VA its top award that it gives 

every year for the best innovative solutions in Government. And 

1,000 entities competed for that. And the VA won, and they had 

a big banquet up here at the Washington Hilton and awarded that 

to the VA. 

The VA earned that. The VA continues to provide outstanding 

services, medically and benefits and burials, to veterans. So it is 

functioning very well. But this is, no question about it, you know, 

26

a real flaw and a very visible one. So we have to earn that back. 

The best way to do it is every day, you know, getting up, putting 

on your work clothes, and doing a good job, and then making sure 

that we get this right, that this does not happen, and that we do 

indeed become the model for this that we can be depended on. 

Senator BURR. Well, I clearly acknowledge to you, I believe we 

do much more good than we do bad. This is an unfortunate incident. Let me just restate that if there is one organization out there 

that is unhappy with the course that we have laid out, then it 

makes our job that much harder to build that trust back, and I 

would just encourage you today to, as aggressively as you can, 

bring those groups in that represent those veterans. Find a way to 

bring their assurance level high enough that it is not just a cutoff 

mark. And, you know, we all know the realities that we are faced 

with, and if there is $160 million that we do not have to spend on 

that, we can put it into health care. That makes tremendous sense. 

But I think we also have to understand that there is some element 

of the population out there that we also promised that money to 

make sure that their identity, their credit was protected. As long 

as 100 percent of them feel and are told that they should be comforted at what direction we have turned to, I will feel comfortable. 

But unless we have reached that consensus, I think we still have 

some work to do. 

I thank you for your willingness to come up and share your plans 

with us. I thank you for your service, especially at a time that it 

has not been easy as Secretary of the VA. More importantly, I 

thank the Chairman for, I think, the methodical way that this 

Committee has worked through this issue trying to find a common 

solution, and I commend you. 

Chairman CRAIG. Thank you, Senator. 

Mr. Secretary, General Opfer, let me make a couple of comments 

and then go into the plan and where you all are going to go. We 

are tremendously proud of what VA did during Hurricane Katrina, 

the orderly process of evacuating hospitals and removing people 

and taking them out of harm’s way. You did it because you had a 

plan and you had practiced it and executed it. You could do it jointly or hospitals could do it individually. And when communications 

systems broke down, hospitals did it individually. 

I was here on 9/11. Most of us were. Chaos reigned supreme on 

Capitol Hill. Why? No plan of execution, no process, no procedure, 

and, more importantly, no drilling—no establishment within the 

system and within the employees—of how you deal with an emergency crisis. We are now doing that. The bells ring around here. 

People orderly march out. They go to their points of contact. They 

go to garages. They are quarantined. We practice, we drill. And we 

are getting better. And even during that, there is a sense of calm 

now that, if it were real, somehow we would have a way of orderly 

moving through this and getting out of it. That is how you establish a culture. You do not do it by simply putting it on paper. You 

work it. You process it. You proceed. You practice it. And you enforce it amongst those who fail to listen. As much as I respect the 

VA, I also understand the firewalls of a bureaucracy that will resist 

change. 

27

So let me turn to you, General Opfer. Have you had a chance to 

review VA’s implementation plan that the Secretary talks about? 

And if so, what are your comments? 

Mr. OPFER. Yes, Mr. Chairman. The report that we issued covered a lot of issues raised in the FISMA work, the consolidated financial statement audit, as well as the data loss. We made a number of recommendations to the Secretary, and I am very pleased at 

the reaction of the Secretary and his commitment toward the recommendations in our reports. The Secretary has concurred with all 

the findings and the recommendations that we have made and provided us improvement plans. 

In his response, he has extended a commitment to strengthening 

and clarifying all the VA policies which relate to information security and privacy issues, holding employees as well as—I think a 

very important factor—contractors to the same standards and to 

make sure that we are correcting the problems found with contracts, so that they all comply with these policies. 

Improvement plans provided by the Secretary are responsive to 

our recommendations, and I think when they are fully completed 

and fully implemented, they will address the concerns that we 

raised in the report. The Secretary mentioned an issue which I 

think is one that we have to overcome. There is a culture problem 

that we need to address because this change really addresses that 

we need to have the people, all the employees in VA and contractors, those that use the systems change their culture regarding the 

use, the storage, and transmission of the data. And I think that the 

plan will provide us an opportunity, and we will fully review all the 

recommendations as they are being implemented to make sure that 

they are fully implemented. 

Chairman CRAIG. You have walked into my next question, and 

that was: Do you have a plan to follow up and to monitor? 

Mr. OPFER. Yes, usually what we do—and we will in this case, 

Mr. Chairman—is we will not close out any of the recommendations until they are fully implemented. For example, implementation of a new policy and procedures without compliance does not do 

any good. You have to have the compliance with the policies and 

procedures. So we will not accept that they have established a policy and procedure, we will go out to various facilities to make sure 

that there is compliance, not only in headquarters, but whether it 

is in a hospital or another location out in the country. We will aggressively follow up on all those recommendations and make sure 

that they are in compliance. 

In addition, as I mentioned, our FISMA work and consolidated 

financial statements audits, prior to this issue, I had made a decision that I was going to contract out next year for the FISMA work, 

and I wanted to use the staff that the IG had that was doing the 

FISMA work to do additional IT penetration tests and other IT security issues. So this would fall right into it. We will aggressively 

pursue—and as I am testifying here today, we are doing unannounced penetration tests and other compliance audit reviews, and 

we will aggressively continue to do those. 

Chairman CRAIG. Thank you. 

We have been joined by Senator Thune. John, do you have any 

opening comments or questions before we start the second round? 

28

STATEMENT OF HON. JOHN THUNE, U.S. SENATOR

FROM SOUTH DAKOTA 

Senator THUNE. Mr. Chairman, I just want to thank you for 

holding the hearing, and I want to thank Secretary Nicholson—and 

good to have you here, Mr. Opfer—for joining us and hopefully 

shedding some additional light on this very important issue of data 

security. It is something that veterans in South Dakota—one of the 

things when I travel in my State, and I am sure you hear this, 

too—an issue that really got on the radar screen. There is a tremendous concern—it really penetrated the consciousness of our veteran community out there and a real concern. And I guess my 

whole concern here—and I hope that some of the findings and recommendations and issues that have arisen out of this will give us 

an opportunity to address this so that it never happens again. So 

we look forward to working with you on that, and I want to thank 

you, Mr. Chairman, for holding this hearing. 

As we said at the last hearing we had, when initially this was 

disclosed, we have got a lot of work ahead of us, and so we look 

forward to getting that done. I will let you go ahead and some of 

the folks who have been waiting here ask some questions, and I 

will perhaps ask some questions on the second round. So thank you 

for holding the hearing. 

Chairman CRAIG. Senator Thune, thank you. 

Senator Murray. 

Senator MURRAY. Thank you, Mr. Chairman. 

Let me follow up on the credit monitoring issue again, because 

I think Senator Burr spoke to the issue that I think is deeply concerning to all of us, that is, reestablishing trust to our veterans. 

And a promise was made to them, after they felt very violated that 

their records had been gone, that they would have this credit monitoring for a year. So I think the announcement that they would 

then not have it has jarred a lot of feelings, well, how do we trust 

this? I think that is an important point in consideration, and no 

one wants to spend money unwisely. But I would suggest that it 

would be wise money spent. I listened very carefully to the plan, 

and obviously a change of culture with an additional long-term implementation of encryption processes and all the other things that 

are going to go into making sure that the records are not breached 

again, leaving those records vulnerable until all of that is accomplished, it seems to me that the credit monitoring would be a wise 

investment. 

But the other issue that I want to raise as well that tells me that 

we should keep credit monitoring is that we are getting a number 

of veterans calling us telling us that they are getting called by people who say they are with the VA and asking for personal information in order to protect the veteran’s credit. I am very concerned 

that we have left this population vulnerable to those kinds of individuals, and providing the credit monitoring will give them the 

ability to say, ‘‘I already have protection,’’ and make them much 

less vulnerable to those kinds of people who will use this incident 

to go after them. 

So I would like to ask you again, Mr. Secretary, where you stand 

on the individual credit monitoring and how we can perhaps go 

back to that question. 

29

Secretary NICHOLSON. Again, we made a decision that after the 

data had been stolen, was, you know, at large, that we should contract and provide credit monitoring for the affected veterans. Then 

the data was recovered, and the FBI is saying that this data was 

not compromised. And the cost, given the large population of people, is approximately $160 million. So the facts changed. The situation has changed. 

We plan to inform the veterans of that, and we plan to inform 

the veterans in a letter telling them they can still have their credit 

monitored by one of the three monitoring agencies, free for a period 

of, I think it is 90 days by calling them on a 1–800 number. They 

can still get credit reports three times during the year if they have 

any concerns, and that we are doing this overarching analysis of 

this data to——

Senator MURRAY. So is the credit monitoring still available to the 

veterans? Maybe I misunderstood. 

Secretary NICHOLSON. Not in the form that we were going to provide before the data was recovered, no. But all veterans, all citizens 

are entitled to call one of those credit monitoring companies and 

get a copy of their credit report and to have a credit alert put on 

their file for——

Senator MURRAY. But it costs them something. 

Secretary NICHOLSON. No, it does not cost them anything. 

Senator MURRAY. But you are not going to offer the one year free 

credit monitoring that originally was involved. Well, can you give 

this Committee the assurance 100 percent that information was 

not accessed? 

Secretary NICHOLSON. I can only give you, Senator Murray, what 

the FBI has given us, which is that this data, based on their forensic analysis and the expertise that they have, combined with the 

circumstantial part of it, which was that this was, again, random 

burglary that was not seeking this data, and the way it was handled and fenced and somebody bought it and turned it in for a reward——

Senator MURRAY. But it was fenced and someone else had it, so 

it is—I have not seen the FBI report. Obviously, they have not 

shared all the details with us. But there still can be a chance that 

it was accessed by someone who knew what they were doing. 

Secretary NICHOLSON. I think that I could not sit here and say 

to you that it is 100 percent, because the FBI has not told us that. 

Senator MURRAY. OK. And we also know that the VA records 

themselves, still we have not implemented the plan that you have 

now moved forward. You are moving forward on one, but the 

records still are not encrypted. There still has not been the change 

of culture, those kinds of things that we can guarantee people. Correct? 

Secretary NICHOLSON. All of our restructuring and reformation 

and all that are not complete. That is correct. There are many 

things underway. 

Senator MURRAY. And are you aware that some of our veterans 

are getting called by people saying that they are with the VA and 

offering services? 

30

Secretary NICHOLSON. I have heard that on a couple of occasions 

they were being called by the VA because the VA does polling of 

its beneficiaries continuously, both medically and benefit——

Senator MURRAY. They call and ask for personal information over 

the phone? 

Secretary NICHOLSON. We have discontinued that. It is just authentication information that they are talking to the right person. 

But we have discontinued that for now because that was causing 

confusion. But, additionally, it is possible that—I mean, it is not 

only possible, it is probably happening that veterans are getting 

calls from people in this fraudulent world because that happens. 

Last year, I am told that 9 million Americans had their identity 

stolen. 

Senator MURRAY. Right. And, unfortunately, some people are 

using this incident to then call veterans and ask for their personal 

information, saying that they are with the VA, which leads me, 

again, to the conclusion that providing this credit monitoring for a 

year will give some security to veterans at a time when, whether 

it was real or not, whether actually the data was used or not, there 

is a lot of insecurity out there. So I guess I would just ask, Mr. 

Chairman, if that question could be reconsidered, if we could look 

at the facts. I think it is a time when we have to reassure our veterans. I do not want to spend the money any more than anyone 

else does. I certainly do not want to see it come from benefits or 

health care. But I also know that a climate has been created that 

could be used by someone who is using it fraudulently, but also 

when our veterans themselves still do not know that their information is encrypted, and I think that kind of security would be something that we—I hope we can relook at that decision and do it 

quickly. 

Chairman CRAIG. I thank the Senator, and I do not think any of 

us do not share in your concern. And it is not a perfect world, and 

I think the reality is—and that is when we began to look at this 

in a situation where we believed—we knew that the information 

had been stolen. We did not know that it had been breached yet; 

that veterans, by simply the multiplier that the Secretary spoke to, 

some were going to get their ID stolen, whether it was out of this 

database or whether it was another database; and that how we 

measured that was going to be critical because the Government is 

not responsible for a veteran’s loss of information if it is not out 

of this database, and how we break that out, clarify it, and understand it. 

So I am to date comfortable with the current monitoring that is 

underway and planned for the broad sense to try to assure that 

what we believe is now at hand is valid. And I am willing to live 

with that for the time being. 

If there is any indication that it is not, then I am going to agree 

that there is a responsibility. 

Senator MURRAY. Well, we do have a problem because we have 

all been out there talking to veterans saying, ‘‘Your credit is free 

monitoring.’’ They may not know that the decision has been rescinded, and, you know, for us to go back out there and say, ‘‘Oh, 

never mind now’’ is a very difficult situation. 

31

Chairman CRAIG. That is a communications problem that I think 

we have got to all work collectively at, and I——

Senator MURRAY. Yes, and I am just looking at it, it is just my 

recommendation that we continue it. 

Chairman CRAIG. I appreciate that. 

Senator MURRAY. But we will have the discussion. 

Chairman CRAIG. Yes. 

Mr. Secretary, how do we, how does this Committee, how does 

VA, and how does a new Secretary 3 years from now or 4 years 

from now, sit before this Committee and hold up a brochure like 

this and say, ‘‘Today Harvard has announced that the information 

system of the VA is the best in the Nation and a model for the rest 

of the Federal Government to follow?’’ How over the course of the 

next 3 years do we work with you and a new Secretary to make 

sure that that announcement day comes? We obviously, by the establishment of VA’s electronic medical records success, have it 

within the system’s capability of getting it done. And how do we 

work with you to assure that same thing will happen system wide 

in the information world? 

Secretary NICHOLSON. Well, that is exactly the goal, Mr. Chairman. You have described it. That is what we talk about, our leadership team, when we talk about the change that we are in. We use 

the term the ‘‘Gold Standard,’’ but that is really what we are talking about. If we can win this annual award for innovations and 

Government solutions for our electronic medical records, we can do 

it for our information technology and security systems. 

But, you know, it is going to take a very good plan, that is, good 

architecture. Then it is going to take good implementation and constant monitoring, you know, management, to see that it is functioning the way that it should. And that is the path that we are 

on. 

We have brought in the best, we think, that exists to help us in 

that architecture to design the kinds of systems that we need. And 

as I have said in my testimony, we made the threshold decision 

last October which had to be the predicate for all of this that we 

have centralized the management of information technology in this 

vast bureaucracy where it was decentralized all over the world, 

really, from Maine to Manila. That is all being pulled in, and that 

was underway because of some of the deficiencies that had been 

pointed out for several years by the IG. 

It is accelerating. We have a sense of urgency about this. This 

is a terrible event. I do not think that a lot of it is very technical 

when you talk about the kinds of encryption models that we are 

going to use and those kinds of things, but a lot of it is common 

sense of having people inculcated with this culture. And the model 

that I use, which I am very familiar with, is the military, where 

to have access to classified information, you have to have a clearance and you have to have a need to know. I think that is a model 

that we need for access to all this digitized information that we 

now work with in this agency and so many others. We need to 

know something about the people to whom we are giving this access because you have to—in the end game—you have to trust 

them. You cannot keep it from them. 

32

Somebody asked me at one of the hearings how we could let 

them carry it out, and I held my wallet up, which is larger than 

this hard drive. But they do not have to carry it out, Mr. Chairman. They can send it out. 

Chairman CRAIG. That is right. 

Secretary NICHOLSON. So you have to be able to depend on the 

people, and you have to know something about them, which means 

give them background investigations, clearances. So it is a composite of all those things. It is going to take a lot of management. 

Chairman CRAIG. Have you established a time line? Is that now 

in place? Or are you far enough along to say here are time lines 

in which certain things will be accomplished that we in the Congress can—that you can share with those of us in Congress who are 

focused on this, share with the Inspector General, in a way that 

we can monitor with you those successes? 

Senator Murray talks about a state of confidence. Senator Burr 

talks about a state of confidence. Senator Akaka talks about a state 

of confidence. As I said in my opening statement, the state of confidence on Capitol Hill does not exist today because of repeated 

warnings, repeated observations, and a failure to adhere to that, 

not on your watch, but on many watches before you. Had that state 

of confidence been established, and a procedure and a process, prior 

to your presence as Secretary, there is a strong likelihood that 

what occurred on the 3rd of May would not have occurred. And so 

I do not think this Congress is going to be confident, and my guess 

is that the population that VA serves will not be confident, until 

that plan is monitored, publicized, implemented, and the implementation phases are monitored and publicized. 

When can we expect to see that kind of time line, procedure, and 

process? 

Secretary NICHOLSON. We have that, Mr. Chairman. In fact, it is 

at Tab 3 of the IG’s report, which I am sure you have a copy of. 

Chairman CRAIG. OK. 

Secretary NICHOLSON. It takes pretty good eyesight because it 

is——

Chairman CRAIG. That may be my problem at 61 years of age. 

[Laughter.] 

Secretary NICHOLSON. I was going to say as a World War I veteran——

[Laughter.] 

Secretary NICHOLSON. I would refer you to that, and this is a dynamic document, but it does show the functional things that we are 

doing and time lines that have been affixed to them. And because 

it is dynamic and it is not all cast in bronze yet, I would not submit 

it for the record of this hearing. But the IG has it, and it is in the 

report. 

Chairman CRAIG. We have it. That is why I brought it up. This 

needs to be known.

33

Inspector General, how do you monitor this time line? It is in 

your report. You have a process in place now to follow through? 

Mr. OPFER. Yes, that would be the process I described before, Mr. 

Chairman, of any recommendations or findings that we have in the 

report. We do not clear those recommendations or findings until 

they have been fully implemented and we have verified that they 

have been implemented throughout all the facilities in VA. That is 

part of our follow-up process. 

Chairman CRAIG. OK. Thank you. 

Senator Thune. 

Senator THUNE. Thank you, Mr. Chairman, and I appreciate that 

line of questioning. That is an issue that I have talked about in 

previous hearings here, and that is the issue that was raised with 

the House bill that would centralize everything. And I think we 

talked about at this hearing the efforts that are being made internally to accomplish some of those same objectives at the VA. And 

so I am very interested in the Chairman’s line of questioning with 

respect to timing and how that is proceeding. 

I also am interested in just getting your reaction, because I think 

they are debating in the House today, to legislation that would 

make the CIO at the VA an Under Secretary, and if you think that 

makes sense, to have someone that has got more, I guess, line authority, someone that can oversee this whole effort that is being 

made to get this information centralized. And I know you have different models that have been described at previous hearings. The 

Federated model I think is the one that you are—is that correct? 

Is that the one that you are pursuing right now? 

Secretary NICHOLSON. Yes. 

Senator THUNE. But I guess I would be interested in knowing, 

Mr. Secretary, whether the legislation is something that you would 

support, whether that is a worthwhile course to proceed with, and 

any other thoughts you might have about how we just tighten this 

up so that the information that is there does not have the propensity to be, I guess, lost or stolen like what we experienced here 

with this last event. 

Secretary NICHOLSON. Well, I think that is a very good question, 

Senator Thune, and we have been working with it. The House is 

doing that, with all the best intentions of trying to help this, that 

is, to make the Chief Information Officer an Under Secretary. 

I do not think it is necessary. The importance underlying all of 

this is leadership, the commitment, and sound management. And 

so the title that you give someone, that is not going to fix anything. 

It is how it is implemented and in this cultural change that we 

have been talking about. 

So it violates, frankly, my sense of design of an organization because we have three Under Secretaries and each of them have 

operational responsibility: One is to run a health system; the other 

is to run a benefits system; and the other is to run a burial system. 

They are operators. They are in a military context. They are maneuver element commanders. They are out there, they are fighters. 

And the others, everybody else is a staff supporter. And information technology and information security is a staff function. It is a 

very important one, but it is still a staff function. And by doing the 

centralization that we have done and by empowering the CIO, 

34

which I have done—and for some reason it was never done, but I 

have done it—I have by directive given him not just the responsibility, but the delegated authority commensurate with his responsibilities to manage IT as an Assistant Secretary. And so I do not 

think it is necessary. 

Senator THUNE. Mr. Opfer, are there any other agencies that you 

are aware of that are doing a good job in the information security—

I am sorry—that have—you know, in terms of the way they go 

about this? I guess what I am asking is, in the Government—and 

I realize each agency has unique needs and you have got different 

database requirements and everything else. But are there similarities or differences between the way the VA does and other agencies do it? And are there things that other agencies are doing that 

we could learn from and perhaps implement? 

Mr. OPFER. Senator, I think we would need to look at some of 

the agencies that have gotten good marks on the FISMA reports, 

for example. That would be mostly in IT security and the financial 

statements, I know some of the ones that come to mind to me 

would be the Social Security Administration; the Department of 

Education had problems over the years; they have done a very good 

job in correcting them and the Department of Labor. 

We just recently brought on board the new Deputy Assistant Inspector General in our office. The individual is considered an IT security expert who helped create the program for reviews in the Department of Education. And I think he will help in our role to assist the Department in going along with that. But I think we can 

look at other agencies. It is not exactly a layover, but look at some 

of the problems they have had and how they have addressed it. But 

a lot of it is really making sure that we hold people accountable 

and have policies and procedures in effect. And we have to realize 

that we are living in a digital age, and this is constantly evolving. 

And if we get the policies and procedures in place, we cannot say 

we have accomplished our mission. We have to review them. Are 

they still protecting us with the possible threat that we have now? 

Senator THUNE. Do you contemplate in your analysis when you 

do these sorts of reports some of the things that are happening in 

other agencies? Do you incorporate that? 

Mr. OPFER. Yes, we do. I have actually been requested by some 

of the other Inspectors General and other Departments’ Deputy 

Secretaries, when it is appropriate, to give lessons learned from our 

perspective, and I have already accepted to go and do that. And the 

President’s Council on Integrity and Efficiency has asked us—they 

have what they call an IT Roundtable for all the Inspectors General, and we will put on a presentation of what we have learned 

from our review, and this is to the other IGs of the agencies. 

Senator THUNE. Very good. 

Thank you, Mr. Chairman. 

Chairman CRAIG. Senator Thune, thank you very much. 

Well, Mr. Secretary, General Opfer, thank you for your time before the Committee today. I think this hearing was important not 

just for our record, but for any article or information that may flow 

from it as to where we are in this very important time and process 

as we work with you to transform VA into, I hope, a successful and 

recognizable system that develops the kind of integrity we need in 

35

information and intelligence flow within the agency itself. So remember our goal, Mr. Secretary. 

Secretary NICHOLSON. Yes, sir. 

Chairman CRAIG. Thank you. 

The Committee is adjourned. 

[Whereupon, at 11:34 a.m., the Committee was adjourned.] 

(37)

APPENDIX

38


29717.002
39


29717.003
40


29717.004
41


29717.005
42


29717.006
43

Æ


29717.007