U.S. GOVERNMENT PRINTING OFFICE

74–927 DTP WASHINGTON : 2001

ANTI-DRUG MEDIA CAMPAIGN: PROGRAM AND

CONTRACT ACCOUNTABILITY AND ADMINISTRATION

HEARING

BEFORE THE

SUBCOMMITTEE ON CRIMINAL JUSTICE,

DRUG POLICY, AND HUMAN RESOURCES

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

OCTOBER 4, 2000

Serial No. 106–272

Printed for the use of the Committee on Government Reform

(

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

http://www.house.gov/reform

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: (202) 512–1800 Fax: (202) 512–2250

Mail: Stop SSOP, Washington, DC 20402–0001

(II)

COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

DAVID M. MCINTOSH, Indiana

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

STEVEN C. LATOURETTE, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

BOB BARR, Georgia

DAN MILLER, Florida

ASA HUTCHINSON, Arkansas

LEE TERRY, Nebraska

JUDY BIGGERT, Illinois

GREG WALDEN, Oregon

DOUG OSE, California

PAUL RYAN, Wisconsin

HELEN CHENOWETH-HAGE, Idaho

DAVID VITTER, Louisiana

HENRY A. WAXMAN, California

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

CHAKA FATTAH, Pennsylvania

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

HAROLD E. FORD, JR., Tennessee

JANICE D. SCHAKOWSKY, Illinois

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

JAMES C. WILSON, Chief Counsel

ROBERT A. BRIGGS, Chief Clerk

PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON CRIMINAL JUSTICE, DRUG POLICY, AND HUMAN RESOURCES

JOHN L. MICA, Florida, Chairman

BOB BARR, Georgia

BENJAMIN A. GILMAN, New York

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

MARK E. SOUDER, Indiana

STEVEN C. LATOURETTE, Ohio

ASA HUTCHINSON, Arkansas

DOUG OSE, California

DAVID VITTER, Louisiana

PATSY T. MINK, Hawaii

EDOLPHUS TOWNS, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

JANICE D. SCHAKOWSKY, Illinois

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

SHARON PINKERTON, Staff Director and Chief Counsel

STEVE DILLINGHAM, Special Counsel

RYAN MCKEE, Clerk

SARAH DESPRES, Minority Counsel

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C O N T E N T S

Page

Hearing held on October 4, 2000 ............................................................................ 1

Statement of:

Hast, Robert H., Director, Office of Special Investigations, General Accounting Office, accompanied by Pat Sullivan, Assistant Director, Office

of Special Investigations, and John Cooney, Senior Special Agent, Office

of Special Investigations ............................................................................... 20

Twyon, Jane, president, Worldwide Media Directors, Consultant to

ONDCP .......................................................................................................... 119

Vereen, Donald, M.D., Deputy Director, Office of National Drug Control

Policy, accompanied by Alan Levitt, Campaign Director, ONDCP; and

Richard Pleffner, Project Contracting Officer, ONDCP ............................. 39

Letters, statements, etc., submitted for the record by:

Cummings, Hon. Elijah E., a Representative in Congress from the State

of Maryland, prepared statement of ............................................................ 162

Hast, Robert H., Director, Office of Special Investigations, General Accounting Office, prepared statement of ....................................................... 23

Mica, Hon. John L., a Representative in Congress from the State of

Florida:

Letter dated September 21, 2000 ............................................................. 4

Memo dated April 13, 2000 ...................................................................... 13

Prepared statement of ............................................................................... 8

Twyon, Jane, president, Worldwide Media Directors, Consultant to

ONDCP, prepared statement of ................................................................... 122

Vereen, Donald, M.D., Deputy Director, Office of National Drug Control

Policy, prepared statement of ...................................................................... 42

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ANTI-DRUG MEDIA CAMPAIGN: PROGRAM

AND CONTRACT ACCOUNTABILITY AND ADMINISTRATION

WEDNESDAY, OCTOBER 4, 2000

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON CRIMINAL JUSTICE, DRUG POLICY,

AND HUMAN RESOURCES,

COMMITTEE ON GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:09 a.m., in room

2154, Rayburn House Office Building, Hon. John L. Mica (chairman of the subcommittee) presiding.

Present: Representatives Mica, Gilman, Barr, Burton, Ose, Mink,

Kucinich, and Cummings.

Staff present: Sharon Pinkerton, staff director and chief counsel;

Steve Dillingham, special counsel; Carson Nightwine, investigator;

Michael Garcia, senior technology advisor; Chris Morrow, intern;

Sarah Despres, minority counsel; and Jean Gosa, minority assistant clerk.

Mr. MICA. Good morning. I would like to call this hearing of the

House Subcommittee on Criminal Justice, Drug Policy, and Human

Resources to order.

We will be joined by other Members during the hearing. But the

order of business today will be, first, I will start with an opening

statement and then we will recognize other Members for their

opening statements. I am pleased to welcome the other Members

and, as I said, I will recognize them after I have given my opening

statement.

The topic of today’s hearing is the National Youth Anti-Drug

Media Campaign, program and contract accountability and administration. We will be reviewing some problems we have had with

the administration of the National Anti-Drug Media Campaign.

Today’s hearing will focus on the administration and financial

management of our billion dollar National Anti-Narcotics Media

Campaign. This program was funded by Congress in 1997 to deal

with the dramatic increase in illegal narcotic abuse experienced

since 1993. While the anti-drug media campaign began with some

self-admitted mishandling by the Office of National Drug Control

Policy [ONDCP], Congress and our oversight committee have supported the goal of this much needed Federal effort to better educate

the public and our young people about the serious consequences of

drug abuse.

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It is important that I remind everyone that I have been a strong

supporter of an effective public media campaign to help fight drug

abuse and misuse across this Nation. This anti-drug program is far

too important for even $1 to be wasted or misspent. We cannot

allow recent drug use and human destruction trends to continue.

Administration officials lately have attempted to put a happy

face on an increasingly sad situation. Unfortunately, the Office of

National Drug Control Policy has set a goal of reducing overall

drug use to 3 percent by the year 2002. However, information from

ONDCP indicates that overall drug use actually has increased from

6.4 percent in 1997 to 7 percent in 1999. That is important because, again, their goal was, and their objective was, in fact to get

overall drug use down to 3 percent by 2002 and, unfortunately, it

has risen in the last 3 years to 7 percent, going in the wrong direction overall. The age at which our youth first use heroin has

dropped from the mid-20’s to age 17. Additionally, methamphetamine, ‘‘ecstasy,’’ and ‘‘designer drugs’’ use has skyrocketed both for

youths and adults. Sadly, our Nation now experiences more druginduced deaths than murders. We released at a hearing just a few

weeks ago the fact that 16,926 Americans died in our last recorded

year, which I believe was 1998, of drug-induced deaths as opposed

to murders, which was a lower figure for the first time since we

have been collecting those statistics.

Accordingly, I have worked with our leadership in Congress and

with ONDCP and with other officials to support efforts to reduce

the demand for drugs. That is very important that we address demand.

With that cooperative spirit, we withheld formal review of the

ONDCP media campaign by our subcommittee until October 14,

1999, more than a year into the program’s operation.

At our October 14, 1999 hearing and after a preliminary review

of the administration of the anti-drug media campaign, some concerns were raised relating to contract mismanagement, financial

oversight of the billion dollar program, the adequacy of the match

donation as required by law, and effectiveness of the media message that had been produced to date. One area of particular concern was oversight of a growing number of contracts, ONDCP had

issued somewhere in the neighborhood I believe of 19 contracts, but

the growing number of contracts and subcontracts for handling various tasks of the program and the management and administration

of those contracts and oversight of those contracts.

In my opening statement last October, a year ago, I advised, and

I will quote from my opening statement at that hearing 1 year ago,

‘‘I see a very tangled web of contracts that appears overly complicated, expensive, bureaucratic and untested.’’ The subcommittee

expressed concern about the program management effectiveness

and instances of contract flipping, where we found in the information that ONDCP had provided us, in fact, I think it was 15 boxes

that we went through and they provided us that background, but

we found that there was in fact the practice of contract flipping,

where contracts were subcontracted, no work done, but payment

was made to the original contractor. We raised this as a concern.

Several months ago the subcommittee was informed by the Office

of Special Investigation of the General Accounting Office [GAO],

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about issues associated with the largest ONDCP contract. This is

a pretty substantial contract, a 5-year contract which totals up to

$175 million annually, certainly the lion’s share of our billion dollar

campaign, and that is actually a multibillion campaign when we

take into consideration that we also require a match. This large

contract’s primary purpose was to buy media time. I might say that

issues were identified by multiple anonymous sources to the General Accounting Office, citing problems of financial mismanagement, over-billing, possible contract fraud, and negligent administration of contract funds for the billion dollar ad campaign.

I spoke to Barry McCaffrey, our Director of ONDCP, this morning. He had sent me a letter, and I would like that letter to be

made part of the record, it is a letter of September 21, which begins ‘‘Members of your staff were apparently instrumental in assigning two special agents from the General Accounting Office’s Office of Special Investigations to examine ONDCP, the HHS Program Support Center, and our primary youth anti-drug media campaign contractors.’’ Without objection, I would like this to be made

a part of the record.

Mrs. MINK. No objection.

[The information referred to follows:]

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5

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Mr. MICA. But, again, I spoke to General McCaffrey this morning. Our staff did not sick anyone on anyone. Information came to

us from multiple sources and to GAO about some very serious allegations relating to the ad program and its administration and financing. So, again, I am sorry that this has had to come before the

subcommittee, but it is an oversight responsibility of the subcommittee. Issues, as I said, were identified by the General Accounting Office, citing problems of financial mismanagement, overbilling, possible contract fraud, and I will say possible, we have not

identified that to date, we will find out more about that today, and

negligent administration of contract funds for the billion dollar ad

campaign that certainly should raise legitimate concerns by every

member of this panel.

Based on the information provided to me by GAO investigators,

I believe that these very serious allegations should have been properly reviewed by GAO. I also resent recent press statements that

have attempted to put a political spin on the GAO investigation or

this subcommittee’s legitimate oversight responsibility. The charges

of possible over-billing, contract fraud, and financial mismanagement are most serious and require attention and concern of and

oversight of our oversight subcommittee, and certainly of the General Accounting Office when allegations are presented to that agency.

Among the concerns that have arisen are some of the following:

Why did the ONDCP contract officers raise serious concerns about

the costs being charged under the contract? Why has ONDCP refused to pay millions of dollars in submitted bills? And we have

read some headlines over the weekend that they are now refusing

to pay some of these bills.

Why did ONDCP officials express cost concerns to the Department of HHS contract officers who were responsible and who had

oversight responsibilities? We must determine that.

Was contract administration management within ONDCP and

arrangements within HHS sufficient to oversee this complex contract? The HHS contract officer and the assigned contract specialist

were employees of the HHS Program Service Center. The Center

is paid to help administer these contracts. The assigned specialist

reportedly had a caseload of almost 60 contracts.

Why didn’t ONDCP push for an immediate audit? In April, the

ONDCP consultant identified cost issues, with some cost estimates

at over 200 percent of industry standard. And additionally, we have

an internal memo that was provided to us dated April 13 that

raised serious questions about the conduct of the billing and overpayments, some very legitimate and well-documented concerns.

Why were these not investigated?

Finally, are appropriate safeguards in place or underway for effective monitoring and controlling costs? What steps have been

taken by ONDCP to deal with what obviously is a situation that

needs some attention?

The basic issues we have before us today are simple. Has

ONDCP been negligent in its administration of the contract? Is the

public being gouged? And what is being done to remedy the situation and prevent future problems? Today, we are not evaluating

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whether the media campaign is having its anticipated impacts.

That will be a topic for future discussion and for future oversight.

We all hope that the media campaign’s demand reduction efforts

are a success. Everyone on this panel wants this program to be a

success. Congress authorized the program. Congress funded the

program. And with the tragic deaths we are seeing across the Nation and in so many of our districts and the heartbreak this brings

to so many families, we have a responsibility to make certain this

program is a success. It is important to hold managers accountable

to ensure investment, and this is an investment, to ensure investment integrity, and to achieve an absolute maximum return on taxpayer dollars that are being put into this important program. That

is why we are having the hearing today.

It does interest me that, according to the Washington Post, the

ONDCP program manager who will be testifying before us today

was quoted as saying, and this is from the Washington Post dated

September 30, page A–2, ‘‘There is absolutely no over-billing.’’ I

find the program manager’s conclusion perplexing and bothersome,

as an audit has just been done, an audit that really will determine

I think what has been going on here. After all, it is his own contracting officer, the person who actually reviews the bills, who presented the issues to his senior management and requested an audit

many months ago. I look forward to learning how these statements,

memoranda, and actions can be reconciled.

Today, we need to determine whether ONDCP’s media campaign

management has both the talent and objectivity to oversee effectively the Nation’s largest public media campaign ever undertaken

and that the contract with one of the largest advertising companies

in the United States is properly managed.

There is not a person on this panel who would not like to see our

national media campaign work and be successful. By the same

token, we have a responsibility both as overseers of this program

and as stewards and trustees of hard earned taxpayer dollars to

see that this Government sponsored billion dollar campaign is

properly administered.

Unfortunately, rather than to cooperate to resolve financial mismanagement problems, correct administrative negligence, and assist in proper investigation of possible criminal misconduct, some

in the administration have attempted to thwart the congressional

hearing process, attack the GAO investigative staff, and block the

proper review of very significant problems of a very important Federal program. I believe that is very unfortunate.

Today’s hearing will focus on the management, financial administration, and current problems facing our national anti-drug media

campaign programs. We will hear from the General Accounting Office, we will also hear from ONDCP, and we will hear from its consultant. Hopefully this hearing can help us identify specific areas

that need our attention and that will improve both the effectiveness and performance of our anti-drug media campaign.

[The prepared statement of Hon. John L. Mica follows:]

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Mr. MICA. With those comments, I am pleased at this time to

yield to the gentlelady and ranking member from Hawaii, Mrs.

Mink.

Mrs. MINK. Thank you very much, Mr. Chairman. I have had an

opportunity to discuss the issues that are before this subcommittee

both with the Office of National Drug Control Policy staff as well

as the GAO investigators. I believe that this hearing which has

been called today is absolutely premature. The GAO investigators

have been given a very narrow assignment which they are about

to report on to this committee today, and that is the role of the Director of the Office of National Drug Control Policy with reference

to what he did or did not do upon being advised that there was potential fraud being committed with respect to this contract that the

chairman has just described.

The issue really before this Congress and this committee and

subcommittee ought to be whether the allegations that have been

made about fraud are in fact true. To what extent the Director of

this agency acted in one way or another it seems to me is not the

crux of the issue. Those matters can be discussed much later. The

more important issue is whether these anonymous sources that

have brought this charge of fraud and doctoring of billing and so

forth is true and can be proven. From what I have gathered in my

discussions with the investigators and with GAO, any such conclusions are premature. It will take the agency many more months to

investigate the so-called doctored sheets and to investigate the 300-

plus employees who submitted these worksheets. We also need to

go to the contractor and find out exactly what their contracting

practices were.

At this point, we should be sitting here commending the ONDCP

for having alert, conscientious staff that decided to withhold payment of $13 million or so before all of this broke because they were

insistent that the Government contracting practices with reference

to justification of billing was actually proven by the contractor who

sought payment rather than point to this withholding of the moneys allegedly due the contractor as some proof that there was

knowledge of fraud. It seems to me that the employees who function in this capacity were doing exactly what the law expected of

them; and that is, to require all contractors dealing with the Federal Government to provide proof that the payment was justified.

I have no idea because we have no facts before us as to exactly

what proof was lacking which caused the agency not to make these

payments to the contractor. But all of that needs to be looked into

by the GAO. And as I understand it, there is an ongoing inquiry.

It is sad that a subcommittee hearing has to be called based

upon anonymous tips from whomever, either in the contractor’s

agency or in the drug policy agency. I never understood why the

whistle-blower law required the agencies to refrain from disclosing

the people who are coming forth with important valuable information that could lead to the prosecution of individuals. If the matter

is still under investigation, that is fine, then anonymity is probably

a valuable requirement. But if we are to have a congressional hearing upon which these charges are based, it seems to me that the

identity of these individuals is required. The whistle-blower law

then protects these individuals from intimidation and harassment

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and other kinds of possible negative employment consequences

within the agency or within the contractor’s office or wherever they

work. But to have a hearing today and to be faced with the crux

of the issues that we are discussing, coming from anonymous

sources which we on this side have not had the opportunity to investigate, to interrogate, to discuss these matters to understand

the enormity of the charges being made, I find that extremely tenuous and difficult to justify.

I am of course, as are my colleagues on this side of the aisle,

equally concerned about any charges of fraud and mismanagement

and lack of propriety in terms of any employees inside and outside

the Government. And it is our function as an oversight committee

to investigate those. But it seems to me that this hearing today is

premature and is really an effort to single out the agency and exactly what they did with the information that came to them about

these charges of fraud. That matter has been turned over to the

GAO. It is being investigated. It seems to me that we ought to wait

for that investigation to conclude.

The Special Investigators Office of the GAO is charged with investigating criminal conduct. And here we are talking about these

matters without a shred of evidence from this special investigating

unit to indicate that fraud did occur, who is responsible for this

fraud, and to what extent this Congress and this subcommittee can

now move to make sure that those kinds of things never occur

again. The investigation of the criminal conduct is not our responsibility. Our responsibility is policy directed. And to that extent, to

have a hearing before we know whether there has been in fact deliberate criminal conduct on the part of anybody it seems to me is

an inappropriate investigation.

But be that as it may, we are here today. I hope that we can elicit from the witnesses who have been called their frank and honest

opinion as to what we are doing here today and why, and where

do we go from here. Thank you very much, Mr. Chairman.

Mr. MICA. I thank the gentlelady and ranking member.

We are joined this morning by the chairman of the full Committee, Mr. Burton, the gentleman from Indiana. You are recognized,

sir.

Mr. BURTON. Thank you, Mr. Chairman. I will not take very

much time. I would maybe like to take a little issue with my colleague, the gentlelady from Hawaii. I have before me from the Executive Office of the President, the Office of National Drug Control

Policy a memo from the project officer who indicates that there are

suspicions of fraudulent conduct. That is not anonymous. That is

something that we have as a matter of fact. I hope this has been

entered into the record. If it has not been, it should be.

Mr. MICA. Without objection, the April 13th memo will be made

a part of the record.

[The information referred to follows:]

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Mr. BURTON. The other thing, Mr. Chairman, is that we do have

a responsibility as an oversight committee over the executive

branch to ferret out waste, fraud, abuse, and if there is criminal

activity, to investigate that as well. We have some very fine legal

minds on this committee, like Mr. Cummings on the other side. If

we see something that is illegal that has been going on, we should

investigate that, we have the responsibility to investigate it, and if

we find there is some criminal activity, send a referral to the Justice Department. So there is no question that this falls within the

jurisdiction of your subcommittee. And I congratulate you for holding this hearing.

I would just like to say one thing. This shows that this whole

program of advertising and bringing more awareness to the youth

of America about the perils of using drugs is not working as well

as we would have hoped. We have taken a tremendous number of

resources that were used for interdiction and for eliminating drugs

at their source and fighting the drug war in places like Colombia,

Bolivia, and Peru and we put them over into this new program.

The results have been, at best, questionable. As I understand it,

there have been more drug deaths in 1998, that is the last report

we have, than there have been murders. And so, the program has

not been as beneficial as we would have hoped.

The staff over at ONDCP has been increased but the number of

people that have been involved in the other programs has been reduced dramatically. We have been trying, Chairman Gilman and I

and Chairman Mica along with others, to get equipment down to

the Colombian national police and the people in power down in Colombia so they could fight the producers of the cocaine and heroin

that is flooding our country and killing our young people. Much of

that money has been very, very difficult to get. We finally have the

President and the administration on board. But, unfortunately, we

were just informed the other day in the Foreign Affairs Committee

on which I serve that the helicopters probably will not get down

there until after 2002 and the drug war could very well be lost by

that time. So we are very concerned about that, especially when we

have plenty of helicopters already in our inventory that we could

send down there, the Blackhawks and the Hueys.

So I think we need a more balanced approach. I think this apparent evidence of wrongdoing in the advertising is another manifestation of a program that is not working well. We need a more balanced approach in the war against drugs. Obviously, we need education. I do not downgrade that request from the administration

and where they are heading at all. I am just saying that we have

put too much emphasis on the educational aspects and not enough

on interdiction and eradication. We need to have a three-pronged

approach instead of focusing primarily on this one area. We know

from the statistics that we have so far that this one approach and

focusing more on that than the others simply is not working. We

are still losing the war on drugs, if you want to call it that, and

I think it is unfortunate. We need to have a balanced approach,

and I think this is one more manifestation of reasons why we need

a balanced approach.

I thank you once again, Mr. Chairman, for holding this hearing.

Mr. MICA. I thank the chairman.

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I am pleased to recognize the gentleman from Maryland, Mr.

Cummings.

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I am certainly very pleased that Mr. Burton is here with us, and I do appreciate what he just said with regard to prevention/education. We

need to stick in there treatment, something that I have been very

concerned about, and certainly interdiction.

Mr. Chairman, I would first like to take a moment to thank the

Office of National Drug Control Policy for their strong leadership

and cooperation with Congress in fighting this war against drugs.

I believe it is important to note that ONDCP Director General

Barry McCaffrey personally sat down with youth in Baltimore for

a half-day town hall meeting to hear how the drug war and the

media campaign have impacted their lives. I was sitting there as

they talked with the director and they made it clear that these ads

were having an impact on them. But the reason why he was there

was to find out how he could be even more effective, how the ads

could strike even more of their classmates. These were high school

students sitting down for half a day with the No. 1 drug officer in

the world to find out how we could take these tax dollars that citizens are giving our Government and spend them in a cost efficient

and effective manner. And I thank Dr. Vereen, the ONDCP Deputy

Director, who I have also worked with, for all of your assistance as

well.

Now, to the issue at hand. It is unfortunate that despite its good

work, ONDCP has to again be placed in a defensive position as a

result of unsubstantiated allegations. I might add that when I first

came to Congress 41⁄2 years ago, one of the first hearings that I had

in this committee was an attack on this agency. Since the inception

of the National Youth Anti-Drug Media Campaign in 1998, this

subcommittee has closely monitored the campaign to determine its

efficiency and effectiveness. According to a recent GAO report,

‘‘ONDCP has met most mandates’’ regarding the media campaign

funds and program guidelines.

In July of this year, GAO, the revered investigative authority,

found that survey data on drug abuse, focus groups, and community input supported the notion that ONDCP’s anti-drug media

campaign has met its congressional mandates. According to numerous studies released this year, the campaign has had real results

in meeting campaign goals to reduce drug use among its target

populations. According to the most recent Monitoring the Future

Survey, as anti-drug ads have risen, so have attitudes about the social disapproval and perceived risk of illegal drug use. The 1999

National Household Survey on Drug Abuse reported that drug use

by 12 to 17 year-olds dropped by 21 percent over a 2-year period,

from 1997 to 1999. Additionally, the PRIDE, that is the Parent’s

Resource Institute for Drug Education, survey reported that, between 1996 and 1999, annual use of any illicit drug declined by a

third among junior high school students.

Over the years, we have held numerous hearings to investigate

allegations. I have noticed that this subcommittee in some ways resembles our full committee—one that has continually sought to

find wrongdoing in this administration. Sadly, allegations have not

only been levied against ONDCP, but also one of the top public reVerDate 11-MAY-2000 10:20 Sep 28, 2001 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 C:\DOCS\74927.TXT HGOVREF1 PsN: HGOVREF1
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lations firms in the Nation, Ogilvy and Mather, an important partner in the media campaign.

These allegations may be sensational but they do not assist in

combating the drug war, and further, have potential to strain a

successful partnership between Ogilvy and Mather and our Office

of National Drug Control Policy that will eventually affect our Nation’s youth, the very youth that I talked about a little bit earlier

who sat down with the drug czar.

The allegations raised today question whether Ogilvy and

Mather over-billed for labor or falsified records, and whether

ONDCP and HHS contract management did not adequately followup once alerted to the concerns. I have worked closely with General

McCaffrey and his staff on numerous issues. I know that he is running a tight ship because he is very concerned about the effectiveness and cost-efficiency of all the dollars given to ONDCP by this

Congress. As such, I believe that ONDCP should be afforded the

opportunity to find solutions and answers when questions arise— before our subcommittee jumps in to investigate and point fingers.

I would like to outline a timeline that highlights when the irregularities at question were raised and how ONDCP addressed them.

On April 13, 2000, a memo from Richard Pleffner, ONDCP

project contracting officer, who will testify today, to General McCaffrey stated concerns regarding Ogilvy’s management practices and

possible billing irregularities. These uncertainties were reinforced

when a former Ogilvy employee raised those concerns.

Three weeks later, on May 4, 2000, ONDCP sent a letter to

Ogilvy expressing concern about labor costs in their year 2000

project plan and asked that Ogilvy reassess the plan to make the

costs in line with the original proposal.

ONDCP then went on to hire an independent media consultant,

who will testify today, Ms. Jane Twyon. Her findings concluded

that there were cost-savings that Ogilvy could have made based on

industry traditions and standards. Subsequently, ONDCP withheld approximately $14 million in

payments to Ogilvy. Although Ogilvy provided several reasons for

their costs in a June 2000 letter, ONDCP asked Ogilvy to break

down its costs more thoroughly to assist in determining what were

reasonable expenses.

Since that time, General McCaffrey approved the recommendation by ONDCP’s Office of Legal Counsel for ONDCP to conduct an

internal audit of the management practices of the media campaign

to identify areas that need improvement. My understanding is that

General McCaffrey also approved a recommendation that HHS conduct an audit of all media campaign contractors.

All this to say, what is the problem? I will review, and I close:

ONDCP was alerted to a potential problem, ONDCP took necessary

steps to investigate the issue, and ONDCP took steps to address

the problem. As such, I believe that instead of attacking and

launching new investigations, ONDCP should be commended for

taking action.

Mr. Chairman, I look forward to hearing from today’s witnesses

so that we may clear up this issue and get back to the business

of saving our Nation’s youth. Thank you.

Mr. MICA. I thank the gentleman from Maryland.

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I am pleased to recognize the vice chairman of our subcommittee,

the gentleman from Georgia, Mr. Barr.

Mr. BARR. Thank you, Mr. Chairman. I love the way folks on the

other side approach these hearings. They reach the conclusion that

nobody has done anything wrong and then they blast us for holding

a hearing. Thank goodness, folks with that sort of outlook are not

running the Department of Justice. Actually, they are.

Mr. Chairman, this is a very important hearing. You posed, and

I repeat these since apparently some folks on the other side did not

hear them during your opening remarks, some very important

questions regarding possible over-billing, contract fraud, and financial mismanagement. These are questions I am sure that came to

your mind not simply sitting around with nothing better to do, but,

as always in these hearings, based on your careful consideration of

evidence before you, interviews, and materials submitted to you by

the staff, and, in this case, including your review of extensive materials provided by the General Accounting Office [GAO], not the

General Anonymous Office, as another member apparently thinks

we are dealing with here, anonymous evidence. We are dealing

with a report from the General Accounting Office.

The questions that you pose, Mr. Chairman, I think at least

some of them are worth repeating because every one of them clearly falls within the jurisdiction of this committee. Now I know that

it might be easier if we just sit back the way Government operated

up until 6 years ago and just let these things roll merrily along

and, as former Senator Everett Dirksen used to say, a billion here,

a billion there, and pretty soon you might be talking about real

money. Those of us on this side take our fiscal responsibility seriously and a billion here and a billion there requires very strong

oversight on behalf of the taxpayers of this country. And if we just

sit back and let these things roll merrily along and wait until this

great Department of Justice that we have conducts an investigation, not only would we be through the next administration but

probably two or three administrations after that, and billions of

dollars would have been lost.

It is entirely appropriate, Mr. Chairman, indeed, it would not be

responsible not to conduct an investigation at this time, to start

asking some questions in order to uncover any potential problems

and assist rather than fight the GAO in attempting to remedy

them, and assist ONDCP rather than fight it or sweep it under the

rug if problems exist and help them resolve them. Some of the

questions you pose, Mr. Chairman, and apparently these are irrelevant to the other side, but I think they fall clearly within your interpretation and very clear mandate for jurisdiction of this committee: Why has ONDCP refused to pay millions of dollars in submitted bills?

Why did ONDCP officials express cost concerns to Department of

Health and Human Service contract officers who also had contract

oversight responsibilities?

Was contract administration management within ONDCP and

arrangements with HHS sufficient to oversee this complex contract?

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Why didn’t ONDCP push for an immediate audit? In April, the

ONDCP consultant identified significant cost issues, with some

costs estimated at over 200 percent of industry standards.

Finally, are appropriate safeguards in place or underway for effectively monitoring and controlling costs?

I would ask my colleagues on the other side, what do you find

so offensive and inappropriate about these questions? These are

standard oversight questions that ought to be answered. And when,

as in this case, evidence comes before this committee, not by some

anonymous source but by memos and by notations by the highest

officials in ONDCP, that raise questions, maybe that can be very

well answered, but raise questions substantiated by GAO that

there are some problems here, why the people on the other side of

this aisle find this so offensive is very, very strange indeed. These

are simply straightforward oversight questions posed by you and

this subcommittee on this side as early on in this process as we became aware of them in an effort to straighten this out and to continue the good work of ONDCP. But if there are problems there,

to make an effort, rather than wait until all the money has been

spent, until all of the horses have left before we close the barn

door, to address these questions now.

I commend you, Mr. Chairman, for stepping forward and conducting appropriate and timely oversight as good stewards of the

public’s money. Thank you.

Mr. MICA. I thank the gentleman.

I would like to recognize another member of our subcommittee,

the gentleman from California, Mr. Ose.

Mr. OSE. Thank you, Mr. Chairman. I think Mr. Barr has very

eloquently stated why we are doing this. It is interesting, I was

studying this material the staff has put forward the last couple of

days regarding the actual contract. And while I have a number of

questions on the contract, not the least of which is that the pages

that would otherwise detail the unit costs within the contract seem

to be missing, I am looking forward to this discussion and am particularly interested in getting all the way back to the time sheets

of the Ogilvy Mather employees. I think that is where the crux of

this matter lays.

With that, I would like to go straight to questions if we could,

having read Mr. Hast’s testimony.

Mr. MICA. I thank the gentleman.

There being no further opening statements, Mrs. Mink moves

that we leave the record open for a period of 2 weeks for additional

statements, comments, information through the Members and the

Chair.

Mrs. MINK. Fine. Great.

Mr. MICA. Without objection, so ordered.

We will turn now to our panel of witnesses that we have assembled this morning, all of whom I believe will be testifying at some

point. We are pleased to have Mr. Robert H. Hast, who is the Director of Office of Special Investigations of the General Accounting

Office. He is accompanied by Pat Sullivan, the Assistant Director,

Office of Special Investigations, and John Cooney, a Senior Special

Agent, Office of Special Investigations. We are also pleased to have

back the Honorable Donald Vereen. Dr. Vereen is the Deputy DiVerDate 11-MAY-2000 10:20 Sep 28, 2001 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 C:\DOCS\74927.TXT HGOVREF1 PsN: HGOVREF1
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rector of the Office of National Drug Control Policy. Dr. Vereen is

accompanied by Mr. Alan Levitt, who is the Campaign Director

under the ONDCP for the media campaign, and Mr. Richard

Pleffner, Project Contracting Officer of ONDCP. We also have Ms.

Jane Twyon, who is with Worldwide Consulting, and she is a consultant to ONDCP.

For those of you who have not appeared before our subcommittee

before, this is an investigations and oversight subcommittee of the

House of Representatives. In that regard, we do swear in our members and you will be under oath. Also, if you have lengthy statements or documents to submit, I am not going to run the clock because I think we are just going to hear from three and then use

others as resources, but if you have lengthy statements, data that

you would like made part of the record, if you would request so

through the Chair it will be so ordered.

With that, if you would please stand to be sworn, everyone who

is going to testify.

[Witnesses sworn.]

Mr. MICA. Let the record reflect that all the witnesses answered

in the affirmative.

I am pleased now to recognize Mr. Robert H. Hast, the Director

of the Office of Special Investigations, the General Accounting Office. Welcome, sir, and you are recognized.

STATEMENT OF ROBERT H. HAST, DIRECTOR, OFFICE OF SPECIAL INVESTIGATIONS, GENERAL ACCOUNTING OFFICE, ACCOMPANIED BY PAT SULLIVAN, ASSISTANT DIRECTOR, OFFICE OF SPECIAL INVESTIGATIONS, AND JOHN COONEY,

SENIOR SPECIAL AGENT, OFFICE OF SPECIAL INVESTIGATIONS

Mr. HAST. Mr. Chairman and members of the subcommittee, we

are here to discuss the investigation you asked us to undertake

concerning the Office of the National Drug Control Policy’s contract

with Ogilvy-Mather, which is the lead media campaign contractor

for the National Youth Anti-Drug Media Campaign. I respectfully

ask that my written statement be entered into the official hearing

record at the conclusion of my summary remarks.

Mr. MICA. Without objection, your entire statement will be made

part of the record. Please proceed.

Mr. HAST. You received allegations that the ONDCP had learned

that Ogilvy was allegedly inflating its labor costs and, as a result,

was over-billing the Government for its services under the contract

by falsifying time sheets. In response, ONDCP’s Chief of the Media

Branch hired a consultant to study the Ogilvy contract. This consultant reported that Ogilvy’s labor costs were far above industry

standards.

Further, in April of this year, the Director of ONDCP, General

Barry McCaffrey, U.S. Army, retired, was informed about these allegations and the results of the consultant’s study. This allegedly

resulted in General McCaffrey’s decision that an external audit be

conducted of the Ogilvy contract. However, according to the allegation, after the General met privately with the contractor’s project

director, the project director announced that General McCaffrey

was satisfied with the contract’s costs and that no external audit

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was to be conducted. In addition, you received information that

Ogilvy allegedly had provided assistance to General McCaffrey concerning matters not involving ONDCP and billed for this service

under the contract.

Beginning in July, we investigated the facts and circumstances

surrounding actions that ONDCP took after receiving the allegations that Ogilvy may have over-billed the Government. We also investigated allegations that Ogilvy had provided services unrelated

to the contract and submitted invoices under the contract for those

services. We did not investigate the allegation that Ogilvy had

over-billed the Government under this contract; however, GAO is

currently conducting a review and audit of ONDCP’s contracting

operations which will include these issues.

In summary, we found that General McCaffrey knew about the

fraud allegations concerning Ogilvy’s billing practices; and there is

evidence to suggest that he agreed with the need for an external

audit of the contract. When we interviewed General McCaffrey, he

initially stated he had no recollection of the accusations of fraud related to the Ogilvy contract. After reviewing the April 13th memorandum that showed he had been informed of these allegations, he

did recall receiving the allegations. He then told us that after receiving the April 13th memorandum and a report by a consultant

that questioned Ogilvy’s costs, he traveled to New York City where

he met with Ogilvy executives and told them that their costs were

growing and that they needed to get them under control.

Regarding the allegation that he had ordered an external audit,

General McCaffrey stated that he had never ordered such an audit.

He added that he had no knowledge of any written order for an external audit or an annotated memorandum with a handwritten

comment stating the need for an external audit. He was then asked

if he ever used the words ‘‘we need an external audit,’’ and stated

that he did not recall that. However, after reviewing again the annotated April 13, 2000, memorandum, General McCaffrey acknowledged that the handwritten comments, which included the statement ‘‘we need an external audit,’’ were his. He told us that although he admittedly wrote that phrase on the document, he did

not at that time recollect the document and he never did order an

independent audit to be carried out on the Ogilvy contract but it

was his intention to conduct an audit at some point in time.

ONDCP’s General Counsel informed us that after we interviewed

General McCaffrey, the director approved a closeout audit of all

media campaign contracts, including the Ogilvy contract. This was

to be done in conjunction with the proposed transfer of contracting

responsibilities to the Navy. In addition, General McCaffrey has

also approved an internal audit of the management practices of the

Media Campaign.

With regard to the allegation of a private meeting with Ogilvy’s

project director, we found that General McCaffrey had a private

meeting with her in June after internal ONDCP discussions of the

need for an external audit. General McCaffrey’s description of the

meeting and the project director’s description vary as to whether

excessive costs were discussed. However, we found no evidence that

this meeting impacted any decision with respect to an external

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audit of the Ogilvy contract; and we were told by General McCaffrey that he never ordered an audit.

Further, concerning the allegations that Ogilvy provided services

beyond those covered by its contract, we found that Ogilvy did not

write congressional testimony for ONDCP employees. Ogilvy did

provide ONDCP with figures, research, and documentation for use

in responding to congressional inquiries and testimony. Ogilvy

billed for the service under the contract.

Ogilvy did not provide any services to General McCaffrey involving his response to an article in the New Yorker magazine that was

critical of General McCaffrey when he was in the military. General

McCaffrey told us that no one had assisted him in response to this

article. However, we found that an official of another ONDCP contractor, Fleishman-Hillard, had spent 3 or 4 hours advising General McCaffrey on this matter. Fleishman-Hillard, however, did not

charge the time to its ONDCP contract. We were told that this

time was considered a personal favor to General McCaffrey. We

also found a May 16, 2000, memorandum to General McCaffrey

from Alan Levitt informing him that Fleishman-Hillard officials

had told company staff that it was assisting General McCaffrey on

that matter.

This concludes my prepared statement. I am happy to respond to

any questions you or members of the subcommittee may have.

[The prepared statement of Mr. Hast follows:]

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Mr. MICA. Thank you. I have no questions at this time. I understand Mr. Sullivan and Mr. Cooney were involved in the investigation but have no statement at this time. Is that correct?

Mr. HAST. That is correct.

Mr. MICA. Then we will recognize at this point Dr. Donald

Vereen, who is the Deputy Director of the Office of National Drug

Control Policy. Welcome, sir, and you are recognized.

STATEMENT OF DONALD VEREEN, M.D., DEPUTY DIRECTOR,

OFFICE OF NATIONAL DRUG CONTROL POLICY, ACCOMPANIED BY ALAN LEVITT, CAMPAIGN DIRECTOR, ONDCP;

AND RICHARD PLEFFNER, PROJECT CONTRACTING OFFICER, ONDCP

Dr. VEREEN. Thank you very much, Chairman Mica and members of the subcommittee. We welcome this opportunity to explain

important aspects of the management and oversight of the National Youth Anti-Drug Media Campaign. I am here representing

the White House Office of National Drug Control Policy. I am the

Deputy Director there, a physician with a public health background, and I have been actively involved with the media campaign. I would also like to introduce two of my colleagues, Mr. Alan

Levitt, the program manager for the media campaign, and Mr. Rick

Pleffner, the contract manager for the media campaign, and recognize a couple of partners who are with us, the Community AntiDrug Coalitions of America, the National Association of Drug Court

Professionals, partners that have been working with and are invested in the media campaign.

As you know, the campaign is an integrated, science-based public

health communications effort designed to reach youth and adult

audiences with messages that influence attitudes and action. Many

indicators point to a positive trend and a generation of teenagers

are increasingly choosing to stay away from drugs. So we are here

today to ensure that this committee is provided with detailed understanding of ONDCP’s media campaign management and oversight structure. So allow me to submit at this time my detailed

written testimony for the record.

Mr. MICA. Without objection, your entire statement will be made

part of the record. Please proceed.

Dr. VEREEN. What I will do at this time is highlight three critical

components expressed in the written testimony, which is actually

already available on the Web.

ONDCP is meeting Congress’ intent and we are appreciative of

your confidence in our ability to design, implement, and manage

this vitally important public health campaign. We welcome the

oversight. We take very seriously our management responsibilities

for this campaign. Let there be no doubt that Director McCaffrey

is the accountable public official for this 5-year, $1 billion effort.

We welcome close public scrutiny of our operations and will continue to cooperate fully with all oversight functions, including the

General Accounting Office review, committee inquiries, as well as

congressional hearings like this one. This is the seventh hearing to

focus on the media campaign since March 1999.

We take great pride in the GAO’s recent conclusion that ONDCP

had processes in place to monitor and approve all paid advertising

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expenditures before paying vendors. We are involving experts in

prevention in the campaign. As I said before, the campaign is firmly grounded in science. We have the use of a behavioral change expert panel, as well as Wesstat Corp., the University of Pennsylvania’s Annenberg School of Communications, and our own National

Institute on Drug Abuse which is evaluating the campaign to show

that it is actually having the desired effects for the American public.

Is ONDCP negligent in administering this contract? Is the public

being gouged? The answers to those questions are, no. We are diligently protecting the public purse. From the campaign’s inception,

ONDCP has relied on other Federal agencies to provide administrative contract support for the campaign’s paid advertising contracts. We made this decision because of our conclusion that neither ONDCP nor the larger Executive Office of the President had

contract administration capabilities necessary to support this extensive contract. The Department of Health and Human Services

Program Support Center provides administrative contract support

for this media campaign. They have the sole responsibility for determining allowability and reasonableness of expenses billed to the

Government by contractors.

Nevertheless, ONDCP ensures that only valid campaign expenses are paid by monitoring all of the contractors’ costs and

spending. We execute this responsibility by attending planning

meetings with contractors, obtaining periodic financial status reports, and reviewing and approving all campaign expenditures. We

make recommendations to the contract administrators in HHS, and

our experience is that they agree with most of our recommendations.

Our media campaign has enjoyed a tremendous amount of support. You have that information in front of you in a number of

slides. This is to demonstrate that we are fulfilling the promise

that we have established, a model for a public-private sector collaboration. There are a host of collaborators who are involved with

this who are invested in this program.

We are proud of the campaign’s significant accomplishments. We

have exceeded the pro bono match requirements which you helped

us to develop and establish. Since July 1998, over 425,000 public

service announcements have run because of the campaign. And in

terms of banner ads on Web sites, there have been an impressive

586 million total impressions between 1999 and the year 2000. And

we have bought advertising in more than 2,000 media outlets.

These accomplishments have been critical to achieving the positive

trends toward attitude and behavior change among our national

youth. You have required that of us. Drug use, according to the National Household Survey, has declined 21 percent. Sixty-three percent of teens reported their parents were talking to them about

drugs.

And last, I want to mention that we are enormously proud of the

accomplishments of our contractors. Ogilvy and Mather is one of

the largest and most respected advertising companies in the world.

They bring significant negotiating leverage to the table, allowing

the Government to attain the lowest possible market rates and access to substantial and unique media match opportunities. We estiVerDate 11-MAY-2000 10:20 Sep 28, 2001 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 C:\DOCS\74927.TXT HGOVREF1 PsN: HGOVREF1
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mate that the ONDCP has saved 10 to 50 cents for every taxpayer

media dollar invested. So we are getting a great bang for our buck

with Ogilvy. The company has been considered experienced in social marketing campaigns, having been responsible for the highly

successful America Responds to AIDS campaign. Fleishman-Hillard

is the other large contractor, one of the largest and most well-respected communications firms in the world. And we work with the

Ad Council and they are the quarterback of our campaign’s public

service component.

Mr. Chairman, I want to thank you and this committee for the

opportunity to address your concerns. We welcome the committee’s

leadership and continued interest in reviewing the progress and

achievements of the media campaign. We continue to forge ahead

to maintain a strong management and oversight structure for this

campaign. But more importantly, we are fully committed to securing the mission and effectiveness of this campaign to change drug

use attitudes and behavior among our Nation’s youth.

We will be happy to take your questions. I will let Mr. Levitt introduce himself and Mr. Pleffner introduce himself.

[The prepared statement of Mr. Vereen follows:]

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Mr. MICA. Mr. Levitt.

Mr. LEVITT. I am a 30-year career employee, a member of the

Senior Executive Service. My whole career has been focused on developing and implementing public education programs on energy

independence, conservation, science, drugs, public issues. I have

two degrees in communications. I have attended the Kennedy

School of Government’s program for senior managers in Government, and the Federal Executive Institute.

Mr. MICA. Mr. Pleffner, do you have a statement, or are you just

going to do a self-introduction?

Mr. PLEFFNER. Yes. I serve as the project officer for the media

campaign. I have the primary responsibility for day-to-day technical administration of the contract, act as the facilitator, communicating with the contracting officer at HHS. I have roughly 20

years of Federal procurement and acquisition experience.

Mr. MICA. Thank you.

We will now recognize for a statement Ms. Jane Twyon. She is

with the Worldwide Consulting group, a consultant to ONDCP. You

are recognized, Ms. Twyon. Welcome.

STATEMENT OF JANE TWYON, PRESIDENT, WORLDWIDE

MEDIA DIRECTORS, CONSULTANT TO ONDCP

Ms. TWYON. Thank you, Mr. Chairman. I am a bit of a fish out

of water here, so just help me along if I do something improper.

I would like to ask that my written testimony be included in the

record as well as what I am going to say.

Mr. MICA. Without objection, your entire written statement will

be made part of the record. Please proceed, and you will not be

scaled just yet. [Laughter.]

Ms. TWYON. Thank you. I should correct before I go any further

that the spelling of my name is T-W-Y-O-N, no E, and that my

company is Worldwide Media Directors.

What I am going to do with my time here today with you is just

to try and put my report into the proper frame where it should be

and how it should be looked at. So I am going to go pretty quickly

and hopefully will make things clearer to all of you.

I believe that I bring great value to my clients. The objective of

my analysis is to evaluate the work product and the cost and,

where possible, bring about improved relationships, improved work

process, and improved efficiencies. As stated in my report, I do not

presume to direct the exact manpower costs to be realigned.

As a consultant, I cannot give you any magic answers as to

where you specifically need to make changes. This is for two major

reasons. First, I am using industry standards and industry averages and all businesses are unique in their advertising requirements. You should be aware that I did not give any special

weighting for the possible differences between a private versus a

Government sector advertising agency cost of service. I did adjust

for the requirement of matched media, but not for any unique Government contracting procedures. Second, I do not have any handson day-to-day experience on this business. My evaluation is based

upon specific documentation from Ogilvy, industry reports, surveys,

as well as my experience and stated assumptions. Making assumpVerDate 11-MAY-2000 10:20 Sep 28, 2001 Jkt 000000 PO 00000 Frm 00123 Fmt 6633 Sfmt 6633 C:\DOCS\74927.TXT HGOVREF1 PsN: HGOVREF1
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tions was necessary to complete the report and give it grounding

for future analysis.

My report delivers the best information and recommendations

that I could provide, and I take my work very seriously. Additionally, my report puts a stake in the ground and estimates a savings

of $8.5 to $14.8 million in compensation. This savings was based

on specific documentation that I had to evaluate and the assumptions that I made in my evaluation. However, you cannot use these

figures as real savings. They need to be viewed as a snap shot estimate that indicates further work needs to be done to find real savings or to clearly understand why this business is operating above

the industry average.

The ONDCP understands that I applaud their conscientious

management of this assignment and for seeking advice on how to

improve the media product and costs. Additionally, you must also

be aware that I have stated several times to the ONDCP that my

report does not see any delinquency from any party on costs. I realize that the current compensation grew out of the needs of the

ONDCP and the desire by Ogilvy to respond to and service these

needs and this very important piece of business for them.

I see my report, and I think this is very important to all, I see

my report as the beginning, it is not an end. It is the start of a

process for the ONDCP and Ogilvy to work to find ways to become

more efficient. It is an evolutionary process. As a media consultant

on this assignment, I do believe that we can improve the work

process, relationship, and costs.

My compensation report was part of a larger report. Part of that

was to look at Ogilvy media costs. And as I stated to ONDCP in

my presentation on May 11th, Ogilvy’s media rates looked competitive. I am sharing this fact with you today because I do not want

to see a compensation report destroy good work. It would be the

tail wagging the dog. As a consultant, my interest is in finding

ways to raise the bar and bring this account closer in line to the

industry on manpower compensation. I believe my report shows

you can do better. But the report does not do the job.

I must state again that I see no fault with Ogilvy or the ONDCP,

and I hope that my report is not used to derail a good relationship

and excellent work from Ogilvy. I want the ONDCP to continue all

the good aspects of the campaign, keep and grow a strong agency

relationship, and, yes, let’s work together to lower the compensation.

I also want to make an aside to the committee and this is on a

personal note. I am, I guess the best word to use, angry with this

committee because I believe that you have compromised me as a

consultant. By handing out what was my confidential and a very,

very technical report and handing it out to the press without a

cover note and without putting it in any context, it opens the door

for this information to be misused and misquoted. And we cannot

be surprised that this has happened.

Yesterday I read from Ad Age, which is in my business one of

the premier trade publications, on their Web site they talk about

the issues with ONDCP, they identify me as the consultant. And

let me just read one little piece from what they said, and people

in my business are reading this. It says that I have said that a savVerDate 11-MAY-2000 10:20 Sep 28, 2001 Jkt 000000 PO 00000 Frm 00124 Fmt 6633 Sfmt 6633 C:\DOCS\74927.TXT HGOVREF1 PsN: HGOVREF1
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ings of from $8.5 million to $14.5 million a year would be ‘‘reasonable to expect’’ by letting less senior account people buy at Ogilvy.

Now I know this information is wrong because account people do

not make media buys. And I would never be so ridiculous as to tell

a client that they are going to get major savings by compromising

on senior manpower. I know it is wrong but the people who read

this report will not know it. The article is full of data from my report; the information is out of context, it is misused, and it is misquoted. And I feel that because of that you have compromised me

and you have embarrassed me. And for that, I am angry.

That is the end of my report. Thank you.

[The prepared statement of Ms. Twyon follows:]

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Mr. MICA. Thank you. We will get back to you in just a moment.

We will start with some questions that I have and then proceed

to other Members. First of all, let’s begin with you, Mr. Levitt, you

are the media campaign manager. When and how did you first become aware of cost and billing concerns with the contractor Ogilvy

and Mather?

Mr. LEVITT. Well, sir, we have four major contracts and under

those probably 20 or 25 subcontractors are working for those contractors. In virtually every single instance, we have recommended

withholds from billing. I think it is a total of about $18 million.

Mr. MICA. My question was with the Ogilvy and Mather contractor, when did you first become aware of cost and billing concerns.

Do you recall?

Mr. LEVITT. It was not necessarily billing concerns, but billing

irregularities. They did not bill for labor for about 10 months. So

it would be about September 1999.

Mr. MICA. You first became aware of some over-billing—— Mr. LEVITT. No, it—— Mr. MICA. I am sorry, billing irregularities in October 1999?

Mr. LEVITT. They had not billed for everything. And may I just

correct one point. When I say over-billing, I am talking about

fraudulent over-billing. When I put in a travel voucher when I go

on a trip, I do not consider it fraud if I make a mistake. I am talking about deliberate cooking the books. We have no evidence of that

whatsoever.

Mr. MICA. OK. Were you aware of the external analysis of costs

by the outside consultant who has testified today?

Mr. LEVITT. There are two different issues here. One is the past

billings, which continue and have—— Mr. MICA. But I do not think she dealt with—— Mr. LEVITT. Her analysis was about the future and it was the

Ogilvy labor structure and do we need the different components of

it.

Mr. MICA. And when were you aware of her report?

Mr. LEVITT. We commissioned that report I believe in March or

April 2000. But we had concerns about costs for the campaign long

before that.

Mr. MICA. When was that commissioned, Ms. Twyon?

Ms. TWYON. I actually gave the report on the 27th. Late March

was the first time I was contacted. I do not know the exact date

but it was late March.

Mr. MICA. Thank you.

When, Mr. Levitt, were you aware of the memorandum dated

April 13th from the contract technical representative Mr. Pleffner,

who is with you today. When were you first made aware of the

memo? I think we have got a copy of it up here.

Mr. LEVITT. I believe he started writing that memo in March,

sometime in late March.

Mr. MICA. So you were aware of it before he put it on paper on

April 13th?

Mr. LEVITT. I was aware of the five different issues he raised in

that memo.

Mr. MICA. And did you agree or disagree with the concerns?

Were you concerned?

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Mr. LEVITT. I agreed with all of them.

Mr. MICA. You did?

Mr. LEVITT. I think I differed to some degree with—— Mr. MICA. Who presented the memo of the 13th stating these

concerns and problems to the Director?

Mr. LEVITT. Mr. Pleffner.

Mr. MICA. Mr. Pleffner.

Mr. LEVITT. It went from him, through our legal counsel, through

our chief of staff Janet Crist, directly to General McCaffrey.

Mr. MICA. So, first, the legal counsel was made aware.

Mr. LEVITT. That is just the process we would use for something

that would include these issues.

Mr. MICA. Mr. Pleffner, there are some pretty serious questions

raised about billing practices and over-billing in your memo of the

13th. It appears that Ogilvy and Mather had initially provided you

and informed you—if you want to read this, it says ‘‘Ogilvy contract

manager informed me that the invoice included all labor costs incurred during the period January 4, 1999 through June 30, 1999.

Subsequently, several months later, they submitted two additional

labor bills for this same period.’’ And it said that Ogilvy increased

its claimed effort by 27 percent, the number of people working on

the contract rose by some 33 percent, and by 33 percent for invoice

costs. Is that correct?

Mr. PLEFFNER. Yes, that is correct.

Mr. MICA. And I guess you had gotten some information from an

anonymous source, where it says ‘‘when a former Ogilvy employee

related facts to ONDCP supporting suspicions of fraudulent conduct.’’ And you said ‘‘our review of time sheets led to increasing

concerns.’’ So you and Mr. Levitt were aware of problems before

and then you were presented with these new billings. You said

many of the time sheets for invoices 14 and 16 were illegible and

contained an inordinate number of changes, alterations, almost always increasing the time charged to the ONDCP contract. Is that

correct?

Mr. PLEFFNER. That is correct.

Mr. MICA. Now we have asked for copies of these time sheets.

Mr. Hast, did you get copies of these time sheets that are in question?

Mr. HAST. The Office of Special Investigations has not. We did

not request them. I do not know whether the ongoing GAO audit

has them yet or not.

Mr. MICA. OK. I requested copies I think of some pretty specific

documents. Have we received copies? Have you produced these yet,

Dr. Vereen?

Dr. VEREEN. If they have been produced, we have sent them.

Mr. MICA. Has the Office of Drug Control Policy provided the

subcommittee or GAO the time sheets in question?

Dr. VEREEN. We have seen them. They are being produced. They

are in the process of being produced, but I do not know if you have

actually received them.

Mr. MICA. Well I want these time sheets and I would like

them——

Mr. BARR. Will the chairman yield?

Mr. MICA. Yes.

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Mr. BARR. I was having difficulty. You said ONDCP has not received them?

Dr. VEREEN. No. We have seen them. They have been examined.

But the request for them was made and I do not know if they——

Mr. MICA. Well I want these time sheets. I want them turned

over to us and I would also like them turned over to the investigators.

Dr. VEREEN. Sure.

Mr. MICA. When information was presented to me initially, if

this had just been an anonymous report unsubstantiated about

over-billing and irregularities, I might not have paid much attention to it. But with the documentation that we have, with this internal memo—this is an official memo that you prepared, is that

right, Mr. Pleffner?

Mr. PLEFFNER. Yes, it is.

Mr. MICA. Do you still stand by the comments that you put into

this memo? Is there anything incorrect in this memo?

Mr. PLEFFNER. There is nothing incorrect. I still stand by it.

Mr. MICA. Mr. Levitt, you testified that you were aware of this

even before the 13th, some of these allegations. The next question

I would have is, I see handwriting on there, Mr. Hast, has GAO

determined whose handwriting it is? It says discuss, need, and

then down at the bottom, ‘‘Yes. We need an external audit.’’

Mr. HAST. Yes.

Mr. MICA. Whose handwriting is it?

Mr. HAST. General McCaffrey identified that as his handwriting.

Mr. MICA. OK. Dr. Vereen, was an external audit ordered at that

point immediately after April 13th and this memo was initialled by

the Director?

Dr. VEREEN. No. An audit was discussed. At the same time, we

were making arrangements to change the contracting activity from

HHS to another entity and at that time an audit would be done.

Mr. MICA. First of all, GAO, were you told that an audit would

not be conducted until the end of the contract, that was the term

of the contract, and is that 4 years?

Mr. HAST. That was not clear. General McCaffrey said he intended to have an audit at some time.

Mr. MICA. Mr. Pleffner, did you get a copy of this memo back

that said yes, we need an external audit?

Mr. PLEFFNER. Yes, I did.

Mr. MICA. And what was done then? Did you order the external

audit? Did anyone proceed with an external audit?

Mr. PLEFFNER. No. The decision, as I noted in the memo, was to

request an audit once the contracting function was transferred out

of HHS. At that time we were discussing the possibility of moving

it to the Navy, as we currently are.

Mr. MICA. What was your opinion of that procedure of waiting

until the end? Did you have any other recommendation?

Mr. PLEFFNER. My preference at the time was for an immediate

audit given the irregularities that we had and the allegations that

were made. But, again——

Mr. MICA. It also says the contracting officer’s initial response

was ‘‘their policy was to perform an audit only at the end of the

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contract—in this case, at the end of 5 years.’’ and I see a large

handwritten ‘‘No.’’ Was that also your opinion?

Mr. PLEFFNER. To wait for 5 years?

Mr. MICA. Right.

Mr. PLEFFNER. No, sir, that is not my opinion.

Mr. MICA. It looks like again, I am not sure, this is the ONDCP

Director’s ‘‘No.’’ Is that correct, Mr. Hast?

Mr. HAST. Yes.

Mr. PLEFFNER. And I do agree with the Director’s position that

it cannot wait for 5 years. As a matter of fact, I had requested in

early March or mid-March that HHS initiate an audit. It was before I prepared this memorandum.

Mr. MICA. And what did they say?

Mr. PLEFFNER. The contracting officer informed me that it was

HHS policy to conduct audits only after the conclusion of the contract, in this case it would have been 5 years.

Mr. MICA. There was also a meeting that some people have referred to of the ONDCP Director with Ms. Seifert, I believe it is,

she is with Ogilvy and Mather, and this took place I guess after

the production of this memo from you to the Director. Is that correct?

Mr. PLEFFNER. Correct.

Mr. MICA. Is anyone familiar with that meeting?

Mr. LEVITT. Which meeting was this, sir?

Mr. MICA. Director McCaffrey had a meeting with Shona Seifert.

Mr. LEVITT. Seifert, yes.

Mr. MICA. Right. And she had a conversation with Alan Levitt

and Jill Bartholomew. Is anyone aware of that meeting?

Mr. LEVITT. Well, I am Alan Levitt. I should be. Yes, she had a

meeting with Director McCaffrey I think it was on June 5th. Is

that what you are talking about?

Mr. MICA. Right.

Mr. LEVITT. The meeting was on June 5th. That was after a

meeting, a long briefing on another topic completely. And what had

happened before then is Ogilvy had responded to the Jane Twyon

report and gave their view of it and did an analysis for us. Our

management team——

Mr. MICA. You stayed in the whole meeting?

Mr. LEVITT. I was not in the meeting with the Director.

Mr. MICA. You were not in the meeting but you are aware——

Mr. LEVITT. No. Afterwards, she came down and told me that because of her briefing the Director felt more comfortable with some

of the labor issues—not billing—some of the labor issues that were

being discussed in Jane Twyon’s report.

Mr. MICA. Did you say uncomfortable or comfortable?

Mr. LEVITT. A little more comfortable.

Mr. MICA. More comfortable.

Mr. LEVITT. Right.

Mr. MICA. And what was communicated then to you, Mr.

Pleffner?

Mr. PLEFFNER. On June 6th, I met with Alan Levitt and Ms.

Bartholomew at which time they informed me of the visit they had

with Ms. Seifert the day before.

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Mr. MICA. I am sorry, can you repeat that? For some reason, this

seems to be coming across garbled.

Mr. PLEFFNER. I met with Alan Levitt and Jill Bartholomew on

June 6th, the day following the briefing and the meeting

between—— Mr. MICA. The meeting was on the 5th, right?

Mr. PLEFFNER. Correct. On the morning of the 6th, Mr. Levitt

and Ms. Bartholomew informed me of the visit and told me that

Ms. Seifert had told them the Director had no problem with the

contract costs and that Ogilvy would continue being the advertising

contractor for ONDCP.

Mr. MICA. That is different than what Mr. Levitt said.

Mr. LEVITT. I do not recall that. What I recall is she said the Director felt more comfortable because of their report. Now, the Director was not in the meeting when she gave her report. That was

reported to him by the management team chaired by Janet Crist.

Mr. MICA. We have got a vote, a couple of votes. I am a little bit

concerned about the status of management of this whole program.

We are moving now from HHS you said to the Navy. The only

audit we have being conducted at this point is by GAO and that

has been instituted really since some of this has come to the attention of the subcommittee. Is that correct, Mr. Hast?

Mr. HAST. Yes.

Mr. MICA. Dr. Vereen, where are we in the status of who is in

charge of the contract?

Dr. VEREEN. We tried to evaluate several other sources in the

Federal Government. Our first choice at this point is the Navy and

we are meeting with them I believe on Monday to try to finalize

that contracting relationship so we can switch it over. That will

start an audit and we will proceed from there.

Mr. BARR. Excuse me. Mr. Chairman.

Mr. MICA. Yes?

Mr. BARR. Would you yield for just a moment please?

Mr. MICA. Real quickly. Go ahead.

Mr. BARR. Are you saying, Dr. Vereen, that you still have not

made a final decision on changing over to the Navy?

Dr. VEREEN. Well, it is not just our decision. We had to go and

look for appropriate contracting agency. We had started looking

earlier in the year, predating this memo, and we have decided upon

the Navy as the best choice for us. We are providing them with information and doing a final meeting I believe on Monday so that

transfer can be finalized.

Mr. MICA. It appears that the contract administration is in disarray. We went to HHS and asked them simple questions; they do

not have a clue, it is strictly a ‘‘que pasa?’’ situation. This is a very

expensive contract. We want it to succeed. So we need somebody

in charge. We cannot have an audit at the end of a 4-year period

when we have these reports. And this is not an anonymous report.

Mr. Levitt, who is in charge of the program, and Mr. Pleffner, the

financial officer, knew about problems with the contract. And we

did not have an audit in place until this was raised to the level of

GAO investigators and the subcommittee.

So there is something dramatically wrong with the administration and financial management. I do not know if there is any crimiVerDate 11-MAY-2000 10:20 Sep 28, 2001 Jkt 000000 PO 00000 Frm 00132 Fmt 6633 Sfmt 6633 C:\DOCS\74927.TXT HGOVREF1 PsN: HGOVREF1
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nal misconduct here by anybody. But I want to see the time sheets

and I want to see them in a timely fashion. And I want GAO to

continue reviewing this matter. Our subcommittee is not an investigative staff at the level of these folks. I think you all are former

Secret Service agents, is that right?

Mr. HAST. Yes, sir. We are all retired Secret Service, FBI, or

from other investigative agencies.

Mr. MICA. So it is not a bunch of people that fell off the wagon

during pumpkin season or something. We have competent people

whose responsibility is as independent investigators of the General

Accounting Office of the U.S. Government. So I want this pursued.

If someone is ripping off the taxpayers, I want that pursued. I want

those documents. And they can put on a media campaign against

me, but this is not political, this is not anything, it is my oversight

responsibility and I take it very seriously. I want the program to

succeed.

So that is the end of my questions at this point. Dr. Vereen, I

want you to deliver the message I am not playing games. I just

want to make certain that this thing that we have created—we created it, we authorized it, financed it, you administer it—that it is

properly administered. Short and simple.

I apologize to the minority for taking longer, I wanted to give you

a shot. But maybe we should go ahead and vote and come back and

I will recognize you immediately.

We will stand in recess until 5 minutes after the last vote.

[Recess.]

Mr. MICA. I would like to call the Subcommittee on Criminal Justice, Drug Policy, and Human Resources back to order.

I have additional questions which I will submit in writing, I do

not know if we will do a second round today, to the drug czar’s office, ONDCP, and some of the others who have testified today.

Let me yield at this time to the ranking member, the gentlelady

from Hawaii, Mrs. Mink.

Mrs. MINK. Thank you very much, Mr. Chairman.

First, I would like to express my apologies and concern to Ms.

Jane Twyon for the release of her confidential memorandum to

ONDCP and consequent embarrassment that such a release has

caused her. I just am very, very sorry. I do not know what else the

subcommittee can do to ease the situation and to respond to your

concerns with respect to your professional integrity. So I certainly

am very sensitive to those kinds of abrogations of our release of information that could cause someone harm.

Ms. TWYON. Thank you.

Mrs. MINK. My question to you, Ms. Twyon, is when were you

asked to do this particular review of the Ogilvy contract?

Ms. TWYON. I was contacted in late March and then I have a contract with the Ad Council who actually hired me at the request of

ONDCP on April 4th.

Mrs. MINK. When did the Ad Council get the request, if you got

the request in March?

Ms. TWYON. I think it was just a short period of time there, so

say at the end of March.

Mrs. MINK. And so who compensated you for this report?

Ms. TWYON. I am paid through the Ad Council who hired me.

130

Mrs. MINK. And the Ad Council was paid by the ONDCP people

presumably?

Ms. TWYON. Yes.

Mrs. MINK. And what was your specific charge when you were

asked to undertake this investigation? Was it fraud?

Ms. TWYON. No.

Mrs. MINK. At any time were you instructed to look at this particular situation from a fraud perspective?

Ms. TWYON. No.

Mrs. MINK. Was there any suggestion that there was deliberate

tampering with work sheets and over-billing and all the rest of

what we have heard today?

Ms. TWYON. No. That was not really part of my assignment.

Mrs. MINK. Did you investigate that as any part of your report?

Ms. TWYON. No. That area is not part of my assignment.

Mrs. MINK. So then your report should not be cited in any way

as legitimizing any of these communications to this subcommittee

or to others that there is evidence of fraudulent conduct?

Ms. TWYON. That is right.

Mrs. MINK. Now in your examination, did you come across anything that was fraudulent in your estimation?

Ms. TWYON. No, I did not.

Mrs. MINK. So that as far as you are concerned the only inquiry

that you investigated and reported on was the comparison of the

charges that Ogilvy made to the Government as they related to industry-wide charges for the same type of work. Is that correct?

Ms. TWYON. Correct.

Mrs. MINK. OK. So the agency then, from what we have heard

from Mr. Levitt, became concerned about the submission of these

billing sheets and accounting from Ogilvy back in September 1999.

Is that correct, Mr. Levitt?

Mr. LEVITT. Right. Correct.

Mrs. MINK. And what did you do when you found out that they

were not billing you at the appropriate intervals and had waited

9 months to submit their first comprehensive billing?

Mr. LEVITT. Our project officer, Mr. Pleffner could probably better answer that. He had been in conversation with Ogilvy for I

think some months before.

Mrs. MINK. Mr. Pleffner, would you answer that question.

Mr. PLEFFNER. Yes. After receipt of their first labor invoice——

Mrs. MINK. Which was when, what date?

Mr. PLEFFNER. That was mid-September 1999.

Mrs. MINK. Was that unusual for a contractor to wait 9 months

into their contract to submit their first pay sheets?

Mr. PLEFFNER. Extremely unusual.

Mrs. MINK. And what did you do about it?

Mr. PLEFFNER. There is really not much you can do to force

them——

Mrs. MINK. Did you contact them and say what is going on here,

why are you so late?

Mr. PLEFFNER. I had been in communication with the Ogilvy financial and contracting folks since February 1999 encouraging

them to bill for their labor.

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Mrs. MINK. Now is there any evidence to show that the lateness

was due to their transition problems of one contractor to another?

Mr. PLEFFNER. I have no evidence of that.

Mrs. MINK. No evidence of that.

Mr. PLEFFNER. No.

Mrs. MINK. So did they give you any reason to believe that they

understood the gravity of their situation and that they were going

to take care of it promptly?

Mr. PLEFFNER. I really cannot speak to—— Mrs. MINK. Well, were you concerned that they did not give you

any response or indication that they were going to take care of this

delinquency?

Mr. PLEFFNER. Extremely concerned. Again, I had numerous discussions with not only the financial and contracting folks but the

project director.

Mrs. MINK. Was it your decision then to withhold payment when

they finally did submit their vouchers for payment?

Mr. PLEFFNER. It was my recommendation to the contracting officer, yes.

Mrs. MINK. And the contracting officer is who?

Mr. PLEFFNER. Janet Miller with the Health and Human Services Program Support Center.

Mrs. MINK. And she then followed up on your recommendation

and withheld payment. Is that correct?

Mr. PLEFFNER. Correct.

Mrs. MINK. And this $13, $14, $18 million, whatever the figure

is, that was withheld constituted what account for Ogilvy? Was it

their money that they had spent themselves as an agency? Was it

advertising money? Was it their operational money? Is it part of

their contract proceeds that was withheld?

Mr. PLEFFNER. The $13.4 million to date that I have recommended for withhold are costs that Ogilvy states they have incurred.

Mrs. MINK. So by your withholding it, they are hurting because

they are not getting reimbursed for out of pocket costs. Is that a

correct general conclusion?

Mr. PLEFFNER. Out of pocket labor. Yes, ma’am.

Mrs. MINK. Now when was the first withholding?

Mr. PLEFFNER. The first withholding was roughly August-September 1999.

Mrs. MINK. And you have continued to withhold additional sums

till today it is about $14 million. Is that correct?

Mr. PLEFFNER. Correct.

Mrs. MINK. Is there any indication that you are about to release

any of this money because they have performed to your satisfaction

in terms of giving you the tear sheets or whatever it is that is missing in the various billings that they have sent you?

Mr. PLEFFNER. Obviously, upon receipt of supporting documentation, any withholds that are determined reasonable, yes, release

would——

Mrs. MINK. So how much of their out of pocket costs since they

became the contractor in this instance have actually been released

and paid to Ogilvy? I want to get a comparison. You have withheld

$13-$14 million. What have they actually been paid?

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Mr. PLEFFNER. To date, they have billed for approximately $187

million.

Mrs. MINK. But that is moneys they have spent in the media

buys. I am talking about out of pocket operational expenses for

Ogilvy.

Mr. PLEFFNER. For the labor to date, they have billed roughly

$23 million. I have recommended withhold of approximately $7.8

million. Media purchases—you were not interested in the media.

Out of pocket or production expenses I believe they have invoiced

for roughly $6-$7 million. I have recommended withhold of a little

over $1 million.

Mrs. MINK. So, if you add that up, it is about $8 million that you

are currently withholding?

Mr. PLEFFNER. Close to $9 million for labor and——

Mrs. MINK. Now at any time that you made those requests for

withholding, did anyone else step in and intervene and suggest

that you were being overly strict and asked you not to withhold

these moneys?

Mr. PLEFFNER. Yes.

Mrs. MINK. Who?

Mr. PLEFFNER. The contracting officer at Health and Human

Services.

Mrs. MINK. Asked you to be more understanding? And did you

then comply?

Mr. PLEFFNER. The contracting officer felt that I was over zealous in the request for supporting documentation, yes.

Mrs. MINK. So who prevailed, you or the HHS?

Mr. PLEFFNER. To the best of my knowledge, all but a couple of

the recommended withholds the contractor has in fact withheld.

Mrs. MINK. Now, under the law, who has the responsibility to

make those recommendations with respect to payment? Is it you or

is it the contracting officer in HHS?

Mr. PLEFFNER. I have been appointed by the contracting officer

as project officer. I make the recommendations, the contracting officer makes the final decision.

Mrs. MINK. So actually we should have another seat here for

them to respond to this question since they have the ultimate decision.

Mr. PLEFFNER. They would be better suited to respond to their

actions, yes.

Mrs. MINK. Has anyone in a supervisory capacity over your work

at any time suggested that you were being over zealous?

Mr. PLEFFNER. No.

Mrs. MINK. Did anyone attempt to interfere in the exercise of

your due diligence requirements with respect to this account within

the agency?

Mr. PLEFFNER. No one has interfered with it at ONDCP.

Mrs. MINK. Now with respect to the tasking, this is to Mr. Hast

at the Office of Special Investigations, GAO, with respect to the

task that you were assigned to investigate, who made that request?

Is it in writing? What were the dimensions of that request? What

was your mission? What prompted it? I think that is important to

know in the record.

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Mr. HAST. Let me start with what prompted it. In the GAO audit

that has been mentioned at this hearing—— Mrs. MINK. Well, first, who requested the GAO audit?

Mr. HAST. I think that was Chairman Kolbe of the Subcommittee

on Treasury, Postal, and General Government.

Mrs. MINK. Not this committee?

Mr. HAST. Not this committee.

Mrs. MINK. I was just told by counsel it is not an audit, it is a

management review. Is there a difference?

Mr. HAST. I am sure there is but I do not think I could explain

it.

Mrs. MINK. On the one hand, the Director of this agency is being

called down for not having an audit, so we had better have a definition of what was actually done by the GAO.

Mr. HAST. I would have to leave it that it was a management review. But I do not think I can go a lot deeper than that.

Mrs. MINK. What is the difference? Well, you can submit that response. I am told there has not been a financial audit.

Maybe Mr. Vereen can answer that question.

Dr. VEREEN. It is a general audit of the media campaign that

was requested by Congressman Kolbe. And there were some conclusions that were drawn about how well we were administering the

campaign.

Mrs. MINK. Was it a financial audit or a program audit?

Dr. VEREEN. No.

Mr. HAST. Program audit.

Mrs. MINK. Right. OK. All right, Mr. Hast, describe what a special investigation is in the GAO. Is it a criminal investigation division of the GAO?

Mr. HAST. Yes.

Mrs. MINK. You wear badges and you walk around with guns

and so forth?

Mr. HAST. No guns, Congresswoman.

Mrs. MINK. No guns. OK.

Mr. HAST. But we do have badges. The Office of Special Investigations is a small unit in GAO, approximately 25 criminal investigators, all of them senior criminal investigators that have been

hired from other investigative agencies such as the Secret Service,

the FBI, IRS, and various IG offices. When there are allegations of

fraud or criminality we are asked by the Congress to conduct investigations into these allegations. The other way we get into investigations is how we got into this one. When our audit teams or

management review teams are out in agencies, if they develop allegations of fraud or criminality, they bring our office in. That is

what happened in this case.

Mrs. MINK. So who brought you in, let’s try to be specific?

Mr. HAST. The General Government Division team that was

doing the management review had allegations brought to them by

individuals they talked to that wanted to remain anonymous at

this time. We interviewed those individuals and not only did we

find their statements credible, when we reviewed our files we had

another anonymous tip that had come in on the GAO FraudNet,

our hotline, that kind of parallelled the allegations that were here.

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committee because of its oversight responsibilities and presented

the information and were requested by Chairman Mica to conduct

an investigation.

Mrs. MINK. What was the scope of your investigation? Was it

based upon the anonymous tips and the hotline?

Mr. HAST. It was to determine what ONDCP did when they had

allegations of fraud.

Mrs. MINK. Why were you not charged to look at the fraud since

we had two tips?

Mr. HAST. We actually are looking at the fraud. We went back

to Chairman Kolbe and presented our findings, the information to

him, since it started with his committee, and our General Government Division is now conducting a financial audit to determine

whether these allegations of fraud have merit. And if they do, our

office will continue its criminal investigation.

Mrs. MINK. But you were never charged with conducting an investigation to see whether there was any fraud?

Mr. HAST. No.

Mrs. MINK. So that is not the reason for your presence here

today?

Mr. HAST. That is correct.

Mrs. MINK. And your charge then was what?

Mr. HAST. To determine what actions were taken to react to the

allegations that ONDCP received.

Mrs. MINK. So we are not here today to make any determination

with reference to whether the hotline tips and the informers and

so forth brought in credible accusations that could end up in

charges being brought against certain individuals for fraud. We are

not here doing that today, are we?

Mr. HAST. We are not. No, ma’am.

Mrs. MINK. I think that should be made perfectly clear, that the

limits of this investigation only go to the agency response. And in

that connection, Mr. Chairman, I want to note that it seems to me

from the record, the dates, the concerns that have been expressed

by the responsible staff people in the ONDCP indicate that they

acted promptly and that the steps they had taken in hiring a consultant and in making all of the internal reviews that they made

were quite appropriate. So I do not understand why we are here

today and why the GAO has not been given precise instructions by

this committee to investigate the fraud and report back to us, because that is of course our concern. I hope that is the outcome.

With respect to the time sheets, I understand that the agency

has a copy, that Ogilvy has the originals and that the agency does

in fact have a copy of these time sheets. Is that correct, anybody

from the agency?

Mr. PLEFFNER. That is correct. I have copies.

Mrs. MINK. That is correct. So if the committee makes a request

for a copy of these time sheets, that is not a problem. Is that a

problem? Is that an invasion of privacy? Are we then going to be

charged with having looked at records that we should not have

looked at?

Dr. VEREEN. The request for those time sheets came in late yesterday. We are prepared to turn them over. They do contain some

135

proprietary information related to Ogilvy, so some things we do

have to be careful about.

Mrs. MINK. Are you working with your legal counsel with respect

to what can be turned over and what cannot?

Dr. VEREEN. Yes. They are actually working on that as we speak.

The request came in yesterday.

Mrs. MINK. When do you expect those will be delivered to the

subcommittee for our examination?

Dr. VEREEN. We suspect in just a couple of days.

Mrs. MINK. We may be out of here in a couple of days.

Dr. VEREEN. They may be on the way.

Mrs. MINK. Thank you. Thank you very much, Mr. Chairman.

Mr. MICA. Just to respond to the gentlelady. We have requested

these and I think it would be appropriate, we can discuss this

later, to turn them over to GAO. We are not criminal investigators

and I do not want to infer that there is even——

Mrs. MINK. I understood that the GAO has it.

Mr. MICA. GAO does not have it.

Mr. HAST. We do not have it.

Mr. MICA. So, again, there are several parts to this. We are concentrating on management administration today.

Mrs. MINK. Mr. Chairman, I would be happy not to have them

then and have it turned over to the GAO.

Mr. MICA. Well, we are going to get them. I requested them.

Mrs. MINK. Oh, you want them. All right.

Mr. MICA. We have been joined by the chairman of the full International Relations Committee who is also a member of our subcommittee. If I may, I would like to recognize him because I think

he is going to have to leave to go and chair another meeting. You

are recognized for an opening statement or whatever.

Mr. GILMAN. Thank you, Mr. Chairman. I regret that I could not

be here earlier. We were conducting a hearing and I have to go on

to another one. I want to thank you, Mr. Mica, for calling this important and timely hearing on our Nation’s Anti-Drug Youth Media

Campaign and the expenditure of taxpayer funds in this very worthy and important effort to keep our youngsters off of illicit drugs.

And as you know, we have worked with you consistently and for

a long period of time in our war against drugs, both domestically

and internationally.

The 5 year $1 billion educational campaign for our young people

is an important tool in our fight against teen drug use. I think the

concerns expressed by some on alleged excessive billing and possible mismanagement of some of these precious media funds that

are hard to come by, especially when the lives of our young people

are at stake, is certainly worthy of a very careful review and analysis. These funds are intended to help keep our young people off of

illicit drugs here at home. These dollars need to be used wisely, judiciously since we have cut both our source nation and transit

drug-fighting dollars in recent years. In turn, we have seen more

and more illicit drugs entering our Nation from abroad, such as

deadly cocaine and the heroin from Colombia. Only now is the administration about to help Colombia. It may be too little, too late.

We hope not.

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Alleged ONDCP print media costs of 238 percent above the industry average, along with ad buying and placement fees far above

an industry average of 3.5 percent, and local broadcast media costs

of 179 percent above industry average, if true, certainly require response from ONDCP and those managing this important anti-drug

media program. We, the American taxpayers, and the parents of

our young people are entitled to an accountability and transparency in this important media effort. We certainly need to see an

independent, unbiased, external audit of these funds now in light

of these many concerns, as called for by General McCaffrey back

in I guess it was April when that letter was first presented to him

and not after 5 years and the contract expires. We must effect

change before, not after, the 5-year timeframe.

I hope we can get assurances today that such an external audit

is in fact going to be done by the executive branch. And I understand GAO is already involved in doing some auditing. There is already far too much unfounded skepticism about our war on drugs

and whether or not we can win or even do something effective

about it. I hope the media campaign we intended to help to win our

war on illicit drugs here at home and keep our kids off illicit substances does not prove to be yet another unfortunate cause for despair and skepticism. And we hope and trust that today’s hearing

can alleviate some of these concerns.

So I look forward to reviewing the testimony of today’s witnesses.

Getting an honest assessment of the media campaign’s management, and the results in advancing our vital national interest of

keeping our young people off these deadly illicit substances are two

goals I am sure we can all agree upon.

Mr. Chairman, with your permission, just one question. General

McCaffrey wisely noted after reading your April 13th memo that

we need an external audit, as depicted on that display there. Do

you still share that view, Mr. Pleffner? And why has there not been

an audit of that nature?

Mr. PLEFFNER. Yes, I do share the General’s view that there

needs to be an external audit.

Mr. GILMAN. And why was that audit not conducted?

Mr. PLEFFNER. It was decided early this year—HHS’ policy was

to wait until the end of the contract—and it was decided by

ONDCP to wait until after transfer of the contracting function to

another Government agency. At that point an audit would be requested.

Dr. VEREEN. To clarify, sir. The rules regarding HHS and an

audit was that an audit would be done at the end of the contract.

We did not want to wait that long. So we took steps predating the

memo to change the contracting activity to some other entity. And

at this point, we are very close to changing that contract to the

Navy. When that transfer takes place, an audit will be requested.

Mr. GILMAN. Why do you have to wait till the end of the contract

to conduct an audit if you see some problems?

Dr. VEREEN. Well, the problems that were identified we have

known about for more than a year. We have taken steps to protect

the public purse by withholding payment on bills sent to us—— Mr. GILMAN. You are withholding payments. Why isn’t an audit

appropriate then?

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Dr. VEREEN. Well, an audit is appropriate.

Mr. PLEFFNER. We believe an audit is appropriate.

Dr. VEREEN. Yes. We have taken steps.

Mr. PLEFFNER. The contracting officer stated that HHS had a

policy that an interim audit would not be conducted, that we would

have to wait until the conclusion of the contract.

Mr. BARR. Excuse me. Would the chairman yield?

Mr. GILMAN. I am pleased to yield to the gentleman.

Mr. BARR. You all are I think confusing us up here. Is it a policy

or was it a specific term of the contract that no audit would be performed before the expiration of the 5-year contract? You all have

used different terms and the legal significance of them is significant.

Mr. PLEFFNER. The contracting officer sent me an e-mail, after

I requested that an interim audit be performed, she sent me an email telling me that HHS policy was to wait until the conclusion

of a contract, the end of the contract before an audit could be performed.

Mr. BARR. So it was not that there was any legal prohibition on

you all demanding that an audit be performed, which would be the

appropriate way to protect the taxpayers, you are saying that HHS

said we are just not going to do it because it goes against our policy.

Mr. PLEFFNER. Correct. Now I must add that HHS would have

performed an audit——

Mr. BARR. If they got more money.

Mr. PLEFFNER. If they got more money, yes, sir.

Mr. BARR. That is big of them. I yield back.

Mr. GILMAN. Thank you. And thank you for your comments, Mr.

Barr.

HHS was prepared to do an audit, all they wanted from ONDCP

is to get paid for it. So there was no obstruction, is that correct,

in doing the audit at any time? Is that right?

Mr. PLEFFNER. Yes, sir.

Mr. GILMAN. I cannot understand then why an external audit

was not ordered right after General McCaffrey suggested that.

There is no explanation apparently that is logical, unless you have

another explanation for it.

Mr. PLEFFNER. I would like to add that to date ONDCP had paid

HHS roughly $1 million in fees. We believed, and the MOU that

we have with HHS states, all contract administration functions

would be performed. One function is contract audits. We believed

that the fees that we had already paid them should have covered

the audit.

Mr. GILMAN. Did anyone pursue that with them and say, look,

we have paid this money, why isn’t an audit being conducted?

Mr. PLEFFNER. Beyond the communications I had with HHS back

in March 2000, it was at that point we decided that we were going

to be moving the contracting function, we decided not to pursue the

action.

Mr. GILMAN. Not to pursue an audit?

Mr. PLEFFNER. Correct, through HHS.

Mr. GILMAN. Why?

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Mr. PLEFFNER. Again, they were requesting additional compensation.

Mr. GILMAN. But you felt they had been given the compensation,

is that correct?

Mr. PLEFFNER. Correct.

Mr. GILMAN. So did anyone try to resolve that issue, that you

had paid them and they were not doing an audit. Did anyone try

to resolve that? Did you ask General McCaffrey to resolve that

issue?

Mr. PLEFFNER. No, sir, I did not.

Mr. GILMAN. Thank you. Thank you, Mr. Chairman.

Mr. MICA. I thank the gentleman from New York.

I am pleased to recognize the vice chairman of our subcommittee,

Mr. Barr, the gentleman from Georgia.

Mr. BARR. Thank you.

Let me followup on the very insightful questions of Chairman

Gilman just to make sure for the record that we understand what

is going on here. In the exhibit over here, at the bottom of page

2, there is a handwritten notation by Director McCaffrey which is

to the right of the following sentence, ‘‘The contracting office’s initial response was that their policy was to perform an audit only at

the end of the contract—in this case, at the end of 5 years.’’ The

notation off to the side is ‘‘No.’’ Not just no, but ‘‘No!’’ with exclamation point. That to me indicates, and does it indicate the same

thing to you, Mr. Pleffner, as the author of this document, that Director McCaffrey was saying no, we are not going to wait until the

end of the end of the contract?

Mr. PLEFFNER. That was my feeling, he did not want to wait.

Mr. BARR. And then further on down, it says ‘‘Since we are considering changing contracting offices’’—which you all are still apparently considering several months later, this is 6 months ago— ‘‘(from HHS to Navy—blue folder is on its way)’’—what is a blue

folder on its way?

Mr. PLEFFNER. That is the mechanism in which to forward documents up through the chain of command.

Mr. BARR. Did the blue folder ever get there?

Mr. PLEFFNER. Yes, sir.

Mr. BARR. But the process still has not taken place, changing

this responsibility from HHS to Navy?

Mr. PLEFFNER. The Director has approved the change to the

Navy.

Mr. BARR. But it has not actually taken place. I thought that was

what Dr. Vereen testified.

Mr. PLEFFNER. We are currently negotiating costs and terms of

the arrangement, the MOU.

Mr. BARR. So the authorization has been given but the details

have not been worked out.

Mr. PLEFFNER. The final details, correct.

Mr. BARR. OK. Then it says, ‘‘we decided to wait before initiating

an audit.’’ And then down at the bottom of the page there is a notation, as testified to by GAO this is General McCaffrey’s notation, ‘‘Yes. We need an external audit.’’ To me, Mr. Pleffner, and I would

like to see whether you agree with this, that to me clearly indicates

when you put those two notations together that General McCaffrey

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was saying no, we are not going to wait for 5 years to conduct an

audit, and we need one immediately.

Mr. PLEFFNER. Yes, I agree.

Mr. BARR. But again, as we have learned with this administration that you have to ask, what does ‘‘immediate’’ mean to this administration, do you know? What does immediate mean to you as

a public servant and somebody who has written a very lucid and

straightforward memo here?

Mr. PLEFFNER. Well, I believe—— Mr. LEVITT. Sir, as program manager, can I just make a comment here?

Mr. BARR. I am sorry. I want Mr. Pleffner to explain to me what

immediate means to him.

Mr. PLEFFNER. Immediately meant to me immediately after

transfer of the contracts out of HHS.

Mr. BARR. In other words, you were seeing something that concerned you here, and that is very possibly, to put it mildly, significant waste of taxpayer money and significant activity by Ogilvy

that raised very serious questions in your mind about billing practices. Is that correct?

Mr. PLEFFNER. Correct.

Mr. BARR. And based on that, as a public servant, you recommended to the Director that an immediate audit be performed.

Is that correct?

Mr. PLEFFNER. That is correct.

Mr. BARR. That immediate audit has not been performed. Is that

a fact?

Mr. PLEFFNER. That is a fact.

Mr. BARR. OK. That is why we are concerned up here. If I could,

Ms. Twyon, you testified earlier I think in response to a question

by the gentlelady from Hawaii that you have a contract or you contracted with the Ad Council.

Ms. TWYON. Correct.

Mr. BARR. And that is the basis on which your report was performed or drafted?

Ms. TWYON. Yes.

Mr. BARR. And were you compensated for that service?

Ms. TWYON. Yes.

Mr. BARR. How much? Approximately.

Ms. TWYON. Let me look because I do not know the answer to

that. Let’s see if it is in here. I have $15,000.

Mr. BARR. OK. And that $15,000 more or less, I am not trying

to pin you down to a specific amount, was received by you from the

Ad Council pursuant to moneys that they received from ONDCP?

Ms. TWYON. Yes.

Mr. BARR. So this report was paid for by the taxpayers of this

country?

Ms. TWYON. Yes. I assume so.

Mr. BARR. OK. Your document is not a classified document, is it?

Ms. TWYON. You are asking me something I do not know how to

answer. It was a confidential document. I do not know what classified means here, so I do not know how to answer you.

Mr. BARR. OK. I have a copy of it here and I would ask unanimous consent to have it included in the record.

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Mr. MICA. Without objection, so ordered. It is now a public document.

Mr. BARR. Do you have a copy of it?

Ms. TWYON. Yes, I do.

Mr. BARR. Do you see any markings on there that indicate that

it is a classified document or that any portion of it is classified?

Ms. TWYON. No, it is my copy.

Mr. BARR. OK. Neither does our copy. On page 19, under your

summary it states that ‘‘The savings range of $8.5 to $14.8 million

is reasonable to expect. The agency can always add to staff to help

the ONDCP better perform and at the same time increase the

agency revenue. The point is not in justifying the staffing, but in

finding ways to realign the manpower to industry standards.’’ You

do not disavow that finding, do you? You stand by it?

Ms. TWYON. No, not at all. I support that.

Mr. BARR. OK. Thank you.

Continuing on with your report of April 13th, Mr. Pleffner, in the

middle of page 2 you state, ‘‘He stated that last summer, Bill Gray,

president of Ogilvy New York, held a meeting with the most senior

account staff and complained about the lack of revenue with this

contract.’’ And a little bit further down you seem to indicate that

there might be a connection between the senior official at Ogilvy,

Mr. Gray, complaining about the lack of money coming in on the

contract and then additional time sheets and altered time sheets

coming back in. Is that correct?

Mr. PLEFFNER. That is correct.

Mr. BARR. Further on down in the next paragraph, the last sentence reads: ‘‘The fact that an outside source, particularly an executive level employee, corroborates these concerns, prompts me to formally document these issues in this communication.’’ Did you believe at that time, and do you believe as you sit here today, that

there was credible evidence to substantiate your concerns as related to the Director of ONDCP? Did you feel that there was a substantial basis and credible evidence on which to base your conclusions that there were questions here and that there ought to be an

immediate audit?

Mr. PLEFFNER. At that time, yes, I did believe.

Mr. BARR. Do you still believe that there is sufficient evidence,

credible evidence on which to base that conclusion?

Mr. PLEFFNER. Of billing irregularities, the Ogilvy practices associated with financial and contract management, yes, I still believe

it is necessary.

Mr. BARR. If I could, Mr. Hast, turn to your testimony today, a

copy of which I believe, Mr. Chairman, has been placed in the

record. One thing that caught my attention, on the bottom of page

2, you say, ‘‘However, we found that an official of another ONDCP

contractor, Fleishman-Hillard, spent 3 to 4 hours advising Director

McCaffrey on this matter. This time was not charged to the

ONDCP contract. We were told that this time was considered a

personal favor to Director McCaffrey.’’ Would that be covered by

ethics and be required to be reported? In other words, if an outside

contractor provides services and does not charge them, that would

be considered——

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Mr. HAST. I am not enough of an expert on ethics to know. We

were reporting the facts. But I do not know what the ethics rules

would be on that.

Mr. BARR. Dr. Vereen, are you aware of whether or not that has

been reported?

Dr. VEREEN. No, I am not.

Mr. BARR. OK. Are there any lawyers from DEA here with you

all today?

Dr. VEREEN. Lawyers from ONDCP, yes, I believe there is one.

Mr. BARR. OK. Would you consult with him and ask if that has

been reported under ethics.

Dr. VEREEN. Not to his knowledge.

Mr. BARR. OK. Would you suggest to him that the Director may

want to check into that.

Dr. VEREEN. Noted.

Mr. BARR. Mr. Hast, I would like to draw your attention for a

couple of minutes here to what has happened after the April 13th

memo. We have some concerns that are based on credible evidence

that there are serious discrepancies in billing practices and costs.

But nothing happens. There seems to be some dispute here as to

the position of the head of ONDCP with regard to whether or not

the contract would continue, whether or not costs are an issue or

not an issue. You deal with some of this in your complete testimony

on pages 4, 5, and 6.

The conclusion, at least the partial conclusion that you reach on

page 6, is that ‘‘Ms. Seifert stated that sometime after the May 23,

2000, meeting, Ogilvy received another letter from Ms. Crist, which

included a form to be filled out in order to have Ogilvy explain its

labor costs.’’ But thereafter, there were additional meetings that

you document. For example, on page 8, you say ‘‘Ms. Seifert told

us that on June 5, 2000, she had a private meeting with Director

McCaffrey for approximately 20 minutes. She stated that she had

met with Director McCaffrey alone approximately 4 to 5 times in

the past 2 years and that on other occasions she had met with Director McCaffrey when someone else was present.’’ Then continuing

on down on your page 8, in the middle there is a paragraph that

reads, ‘‘Mr. Pleffner told us that after Ms. Seifert left the June 5,

2000, meeting with General McCaffrey, she met with Mr. Levitt

and Ms. Bartholomew where, according to them, she announced

that Director McCaffrey was satisfied with the contract costs and

that the Ogilvy contract would continue. Mr. Levitt and Ms. Bartholomew deny that this conversation occurred. Ms. Seifert denies

making this statement.’’

What was the basis on which you included these references in

here, and do you believe that those conversations took place?

Mr. HAST. I believe when we interviewed Mr. Levitt and Ms.

Bartholomew we were under the impression that when Ms. Seifert

came up she said that the General was satisfied with the billing

and no audit would take place, and they said she did not say that.

I think they were technically correct that she did not come out and

say no audit would take place. What she said was the General was

satisfied with the price. And I think that is what Mr. Pleffner and

Mr. Levitt——

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Mr. LEVITT. Congressman Barr, I said nothing whatsoever about

any audit.

Mr. BARR. Excuse me just a minute. And that is precisely what

your testimony says. It does not say that somebody said that the

audit would not be performed. It simply says, as you have just testified orally, that Ms. Seifert announced that Director McCaffrey

was satisfied with the contract costs and that the Ogilvy contract

would continue. Was that corroborated by information or answers

or testimony given to you by Mr. Pleffner?

Mr. HAST. Yes.

Mr. BARR. OK, Mr. Levitt?

Mr. LEVITT. As I said before, Ms. Seifert told me that in the

meeting that she had with General McCaffrey he expressed more

comfort with the issues of the labor, not billing, but the labor, the

Jane Twyon report. She said nothing whatsoever about an audit.

There was no discussion of an audit.

Mr. BARR. Mr. Pleffner, you authored the original memo here on

April 13th. It is my impression that you testified that Mr. Levitt

said that costs were not an issue based on the results of that meeting. Is that correct?

Mr. PLEFFNER. That is correct.

Mr. BARR. This is why, Mr. Chairman, there are so many questions about this. We have a memo that is based on very clear and

convincing evidence, credible evidence that an audit should take

place. Then we have some meetings that appear unusual, at least

according to standards of previous practice in that there were no

witnesses there. And then we have essentially an announcement

that the contract costs were OK, Mr. McCaffrey was satisfied with

them, and the contract would continue. And here we come 4

months later and still no audit has been taken. This stretches the

meaning of immediate beyond even I think the standards laid down

by the head of this administration.

Mr. MICA. Will the gentleman yield?

Mr. BARR. Yes.

Mr. MICA. One of the things that concerns me is the report by

Ms. Twyon that highlights the costs for this program. She identified, and she is sort of an expert consultant to come in and look

at that, ONDCP costs is 179 percent above industry average. Is

that correct?

Ms. TWYON. I have to find the page that you are——

Mr. MICA. And then a commission rate of 14 percent versus industry rate of 3.5 percent.

Mr. CUMMINGS. Mr. Chairman, she was trying to answer the

question. I just think it would be beneficial to all of us——

Mr. MICA. I am just trying to help identify the page.

Ms. TWYON. Yes. It is just that I have a lot of numbers in the

report. So if you will just give me a minute, I will be able to answer

you more clearly, I can try to answer you more clearly.

Mr. MICA. I can have a staff person bring this down.

Ms. TWYON. No, I have it. I have it right here.

Mr. MICA. Our vice chairman was making some points and I just

wanted to confirm that this is what you found in your examination

and were paid for.

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Ms. TWYON. The answer is what you are reading there is what

I found based upon the information that I was given, and I was

given specific information from Mr. Pleffner of what I was going to

look at, and the assumptions which are listed in my report that I

made.

Mr. MICA. That is all I wanted to confirm. Thank you. I will yield

back to the gentleman.

Mr. BARR. Thank you. Mr. Hast, have you all interviewed Mr.

Bill Gray, president of Ogilvy New York?

Mr. HAST. We have not yet.

Mr. BARR. Do you have plans to?

Mr. HAST. I believe that we are going to wait till we see how the

financial audit goes. And if they determine there are suspicions of

fraud, we will be back to interview people at Ogilvy about this.

Mr. BARR. That might be some period of time it appears.

Mr. HAST. It could be, yes.

Mr. BARR. Do you believe there might be a case to be made based

on just the information contained in Mr. Pleffner’s memo to interview Mr. Gray before some indefinite point in the future?

Mr. HAST. Yes, I think there could be a case made for us to do

that.

Mr. BARR. Would you be in a position to take such steps?

Mr. HAST. Absolutely.

Mr. BARR. OK, if you would please. Thank you.

I yield back.

Mr. MICA. I thank the gentleman.

I would like to recognize the gentleman from Maryland, Mr.

Cummings.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

Mr. Hast, I am just curious. Something just happened that I

found very interesting. At first, I thought you had indicated that

you were going to go through a certain procedure to wait for certain documents before the interview was conducted with Mr. Gray.

Then when Mr. Barr suggested that you do it, did you say you were

going to do it now? I am just trying to figure out what happened.

Mr. HAST. Yes. I believe that we were going to wait before we

conducted any more interviews until we see how the audit came

out. But since this question was raised and it can be a yes or no

answer from Mr. Gray as to whether—the only thing we would

interview him about is did he have a meeting with his executives

where he told them that they were not making enough money on

this contract, and did he give them any instructions. I think we

could do a very simple interview and pin that down.

Mr. CUMMINGS. I understand that and that makes a lot of sense.

Can you tell me why it is that your plan was to wait for the audit?

Why did you want to do that before possibly interviewing Mr.

Gray? I am just putting aside what you just said and am now going

on to the original plan?

Mr. HAST. The original plan would be if the audit completely exonerated Ogilvy, and the audit found absolutely nothing irregular

with the billing sheets, and all of the people that we interviewed

whose sheets have been changed had answers that absolutely made

sense and there was no suspicion of fraud, there would not really

be a necessity to do it.

144

Mr. CUMMINGS. I see.

Ms. Twyon, first of all, I do not know whether anybody did it,

but around here we are very concerned about our reputations too.

They are the things that get us elected. If you have been harmed

in any way, I apologize for us.

Ms. TWYON. Thank you.

Mr. CUMMINGS. Let me just ask you this for the record. Your report, did you have a finding of over-billing?

Ms. TWYON. I did not look at any billing of manpower. That was

not part of my charge.

Mr. CUMMINGS. And what were you doing? Since your report is

so significant, I want to make sure that we have it clear. We have

got C-Span looking at this and maybe some of your comrades are

looking at it. I want to make sure you are very clear because I

think it is important to everybody involved.

Ms. TWYON. It is non-media compensation. It is the cost of manpower and the number of manpower hours is what I was looking

at.

Mr. CUMMINGS. So I take it that you would not have found any

fraudulent activity by anyone because that was not in your purview. Is that right?

Ms. TWYON. That is correct. I did not have any documentation of

anything like that I was even evaluating.

Mr. CUMMINGS. I guess this would be directed to Mr. Vereen or

Mr. Levitt. Ms. Twyon reports that a 15 percent commission rate

is traditional for the purchase of advertising time and space. Is

that correct, Ms. Twyon?

Ms. TWYON. Yes. It is a historic number. Today it is no longer

true, but years ago that was the number that agencies earned, 15

percent.

Mr. CUMMINGS. In addition, the report states that a consumer

could even negotiate a commission as low as 7.5 percent on a large

advertising purchase due to increasing advertising industry competition. Is that correct?

Ms. TWYON. Yes, but I am isolating then specific assignments. It

may not be the total assignment of doing creative and media and

PR and everything that an agency might do. So that there are varied commissions depending upon what the assignment is to the

agency.

Mr. CUMMINGS. Mr. Levitt or Mr. Vereen, who negotiates the

commission? How is that done, do you know? Is it your legal department?

Mr. LEVITT. Mr. Pleffner is actually the person to ask.

Mr. CUMMINGS. Mr. Pleffner, how is that determined?

Mr. PLEFFNER. Early on in the second year of the contract, I requested that Ogilvy submit a project plan, a proposal for media and

non-media costs. That was submitted to ONDCP on March 8th. It

was as a result of that media plan and the increased costs that we

had identified that we retained Jane Twyon to assist us in analyzing. We have been in discussions with Ogilvy since spring of 2000.

Mr. LEVITT. Congressman Cummings, let me make one comment?

Mr. CUMMINGS. Sure.

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Mr. LEVITT. I think there have been many misunderstandings

here and also in the media about Ms. Twyon’s report, which I think

is a very, very good report. It is a directional report. It helps us

focus on what kind of labor structure we want in the future—do

we want so much behavioral component, do we want so much of

the media buy.

There are a couple of things that Ms. Twyon did not realize at

the time. First of all, the report that she was asked to analyze had

about $1.5 million more I think of labor and overhead costs than

was reality, because during the time that she analyzed it, Ogilvy

came down about $1.5 million in their costs. So it is inflated from

that point of view. She also had to make certain assumptions,

which she clearly mentions in her report, and she also mentions

that there are certain unique things to every advertiser that she

may not be aware of.

This campaign is for all Americans. We have 11 languages. We

have a science-based approach. One ad, one time on ER or a program like that can cost a half million bucks for 30 seconds of taxpayer’s funds. There is a greater accountability on the part of the

Government. So we require a higher level of testing, a higher level

of behavioral components, audience focus groups, much more so

than if you are just selling Kleenex. This is a behavior/attitude

change campaign. It is not a consumer product marketing campaign. And there are a lot of differences. That is what the experts

told us was going to work.

Mr. CUMMINGS. Does that affect the rates?

Mr. LEVITT. I do not know if it affects the rates. It affects the

labor structure, and I do know it affects the pro bono match. Congress has mandated a pro bono match, and Ms. Twyon has accommodated a big chunk of that. But what she probably did not know

is that when you traffic an ad, when you—let me just give you an

example. If you win a gold medal 1 day in the Olympics, you could

be on TV in 2 days with a commercial. In our program, because it

is evaluated by the National Institute of Drug Abuse, and because

we have all these accountability measures, it will take at least 2

months and testing and coordinating with a dozen organizations in

the behavioral science field, in NIH, with the Annenberg School of

Communications. So it is a lot more labor intensive. And some of

that she may not have taken into account and that may have

skewed why it is so much above average.

I think what is unfortunate here is that advertising clients have

people like Jane Twyon come in, she has a wonderful reputation,

she was recommended by the Ad Council, and her report is being

taken out of context completely. What happens when the next Government agency wants to bring in an outside consultant?

Mr. CUMMINGS. All right. I understand.

Ms. Twyon.

Ms. TWYON. I have to agree with what Mr. Levitt said. I do the

absolute best I can, but, as I state in my report, I make assumptions. That is required. I am very careful to list my assumptions,

which I did. It does not mean that they are right; they are just the

best I could make so that we can move forward. So there is information that I do not have because I am not working in the field,

I am just given a report and I go away and do my analysis. I will

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give you one of the specifics that I did not realize when I first did

my report. When I initially did my report on the manpower issue

area, there was a line called ‘‘production.’’ I made the assumption,

since everything else was manpower, that was manpower. In the

end, I found out that was not manpower, that was actual production cost. So I can make mistakes because I do not know pieces of

information.

My report, let me say again, is the beginning. It is not the final

product. Think of it like a roadmap. You now take this roadmap

and you work with the agency, Ogilvy, and ONDCP to figure out

what is there. It lists everything very clearly so now you have a

place to go. You know if you are going to move manpower from one

discipline you have to put it someplace else. If you change an assumption, you know why you are going to change the assumption.

That is the point, it is a very good base to move forward from.

Mr. CUMMINGS. Mr. Levitt, you said something that I am just curious about. You said that while Ms. Twyon was doing her report

the costs, and correct me if I am wrong or misquoting you, the costs

from Ogilvy came down. Did you say something to that effect?

Mr. LEVITT. Yes. The proposed cost for the following year’s budget was reduced by Ogilvy. We had been talking to Ogilvy a couple

of months before this, not just Ogilvy but all of the contractors in

the media campaign. There was huge inflation because of the rich

ad climate in the last several years. There was actually increased

costs because of our success—we have had a million phone calls

into our clearinghouse from parents asking for information. All

these things jack up the costs for printing or other kinds of labor.

We have looked at all our contractors, including Ogilvy because

they are the biggest one, and we have had a series of meetings. In

fact, we are talking now about possibly taking a number of other

activities and transferring them to other organizations or maybe

we do not need that level of effort this year in the campaign. It is

not a matter of this over-billing or are we paying for labor that we

do not need, rather, do we need this level of effort at this stage of

this campaign.

We have asked Ogilvy to do a lot more work for us. We have

asked them to do ads on ecstasy and meth and heroin. We have

asked them to do a huge Internet component. The Internet is surging. For African-American and Hispanic families, Internet use has

surged almost 500 percent in the last 4 years. The previous campaign, by the Partnership for Drug-Free America, as good as it

was, did not have a huge Internet component. We are doing a variety of other things with this campaign. Reaching out to the entertainment industry. Last week, actually somebody from Chairman

Mica’s district, Tinker Cooper, spoke to 20 writers and producers

on ecstasy, about the unfortunate problems her son had with it. So

Ogilvy is involved with a lot of these other activities that may not

be apparent. This is not just an ad campaign. It is a comprehensive

public health communication campaign.

And can I just add one other thing?

Mr. CUMMINGS. Briefly, because I want to get to Mr. Hast. I have

a number of questions.

Mr. LEVITT. We are extremely proud of this program. It is working, including the financial component of it. We have had seven

147

hearings, we have provided this committee with 18,000 pages of

documents, and we have cooperated with the GAO, and we will

continue to. But we are very comfortable with what we have done.

Mr. CUMMINGS. Now when Ogilvy appeared in Mr. Mica’s district, did they bill you for that?

Mr. LEVITT. When what?

Mr. CUMMINGS. You just said a few minutes ago they were in

charge of something in Mr. Mica’s district. You did not?

Mr. LEVITT. No.

Mr. CUMMINGS. What did you say?

Mr. LEVITT. One of the people who testified before this committee

I think a year ago, Tinker Cooper, lost her son to ecstasy and heroin. She was from Congressman Mica’s district. We actually

brought her and somebody else to this roundtable discussion last

week and it was very, very successful.

Mr. CUMMINGS. Thank you.

Mr. Hast, I just want to make sure the record is clear. You had

certain findings that you provided us in your opening statement, is

that right?

Mr. HAST. Yes.

Mr. CUMMINGS. You had some findings. I just want to make it

so clear that we have a complete record, and this may not be a

complete record even with the questions I am going to ask you. The

findings that you provided I think are partly why we are here

today. But I want to just ask you about some other ones.

Another GAO inquiry recently found that ONDCP ‘‘has met most

mandates’’ regarding the media campaign funds and program

guidelines. Are you familiar with that?

Mr. HAST. Yes.

Mr. CUMMINGS. And was that a part of the same inquiry?

Mr. HAST. No.

Mr. CUMMINGS. OK. And were you involved in that?

Mr. HAST. I was not.

Mr. CUMMINGS. So did you review that in the process of doing

what you have been doing in regard to your investigation?

Mr. HAST. Yes. We discussed that investigation with the people

that did it. I really did not read it.

Mr. CUMMINGS. OK. You did not read the investigation?

Mr. HAST. I did not read the audit that the other group did. But

I did discuss it with them in our General Government Division.

The management review, I am sorry.

Mr. CUMMINGS. Wait a minute. Let’s rewind. GAO did an audit,

a management review?

Mr. HAST. A management review, I am sorry.

Mr. CUMMINGS. And they reviewed ONDCP?

Mr. HAST. Yes.

Mr. CUMMINGS. And you did not read the document?

Mr. HAST. I did not.

Mr. CUMMINGS. Are Mr. Sullivan and Mr. Cooney with you?

Mr. HAST. Yes.

Mr. CUMMINGS. Did you all read it?

Mr. SULLIVAN. Yes, I read the document. I am the Assistant Director in charge of the squad that handled the investigation. I read

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the document and Mr. Cooney read the document. Mr. Hast is our

boss.

Mr. CUMMINGS. OK. Did you share the information that you

found with Mr. Hast?

Mr. SULLIVAN. Yes, we briefed Mr. Hast after we digested the

document. At every step of the investigation we briefed Mr. Hast

as to how the investigation was progressing.

Mr. CUMMINGS. So, basically, Mr. Hast is over you and you all

are sort of doing the day-to-day work?

Mr. SULLIVAN. Yes, sir, Mr. Cummings, that is correct.

Mr. CUMMINGS. I see. Fine. The question that I just asked Mr.

Hast is, is it correct that report said ONDCP had met most of its

mandates?

Mr. SULLIVAN. Mr. Cummings, that is absolutely correct. However, the management review did not focus on any of the allegations of fraud. So they just looked at, as mandated by the Appropriations Committee, whether this program was following the

guidelines that Congress set.

Mr. CUMMINGS. I see. OK. And this investigation you are talking

about you are saying is zeroing in on fraud. Is that correct?

Mr. SULLIVAN. Our investigation, Mr. Cummings, was we were

specifically requested to examine the allegations that the suspicions of false billing were brought to the attention of ONDCP

management and the allegation was they did nothing with those allegations and the audit was never conducted that was initially ordered by General McCaffrey. That is what we were asked to look

at, whether or not the response of ONDCP was appropriate or not.

Mr. CUMMINGS. So you were asked about whether they responded to these allegations and the response being an audit. Now

that is what I think you just said. Is that right?

Mr. SULLIVAN. No, sir.

Mr. CUMMINGS. OK. Say it again.

Mr. SULLIVAN. Just to narrow the focus, we were asked, within

the very narrow parameter, whether or not ONDCP responded appropriately when the allegations of false billing was first brought

to the attention of senior ONDCP management. In other words,

what did ONDCP management do as a result of the April 13th

memorandum authored by Mr. Pleffner; if an audit was not conducted, why was it not conducted immediately; and what other response was taken in regard to that memo.

Mr. CUMMINGS. Now did Ms. Twyon’s report play a significant

role in what you all have been doing?

Mr. HAST. I would say that it did not. It was part of the memo

that we reviewed, and as much as it played a role in that memo,

I think it played a role in our investigation.

Mr. CUMMINGS. Now is it true that, in evaluating how funds for

paid advertising were managed and dispersed, GAO found that although ONDCP used administrative contract support from other

Federal agencies to assist with paid advertising contracts, it remained responsible for ensuring that only valid campaign expenses

were paid out of from ONDCP, and that ONDCP had processes in

place to monitor and approve all paid advertising expenditures before paying vendors and reporting to Congress?

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Mr. SULLIVAN. Mr. Cummings, that is our understanding. We

ascertained that from the interviews we conducted with Mr.

Pleffner and other officials at ONDCP responsible for managing the

contract. So that is our understanding, sir.

Mr. CUMMINGS. I know, Mr. Hast, the question was asked whether you had met with Mr. Gray. But is it true that Ogilvy and

Mather officials were interviewed by GAO?

Mr. HAST. There were several Ogilvy and Mather officials interviewed.

Mr. CUMMINGS. And during those discussions, I take it those

were extensive interviews?

Mr. HAST. Yes.

Mr. CUMMINGS. Did the question of fraud come up?

Mr. SULLIVAN. Yes, sir, it did.

Mr. CUMMINGS. OK. Is that a part of the 91 page report?

Mr. SULLIVAN. No, sir.

Mr. CUMMINGS. Can you tell us why?

Mr. SULLIVAN. The allegations that we were investigating had

nothing to do with the initial management review that was conducted by the General Government Division. We are the investigative arm of GAO and we were specifically mandated to conduct an

investigation to determine the response to the allegations that were

originally raised in the April 13th memorandum.

Mr. CUMMINGS. Now ONDCP, I guess this would be Mr. Levitt

or probably Mr. Pleffner I would guess, is it customary in your review of invoices, before recommending payment or nonpayment, to

express any concern to the contractor about the costs? I mean, if

you saw something that looked a little irregular, would it be your

custom to say wait a minute, red flag, there is something wrong

here?

Mr. PLEFFNER. It is customary to discuss with the contractor concerns, as I did with Ogilvy.

Mr. CUMMINGS. And as I looked at your memo, the memo that

is on the board there, I take it that there came a point in time

when you brought it to the attention of people in your agency. And

then at what point did you get additional information? In other

words, you had the information that had come to you through the

process of doing your job, and you inquired I think of the Ogilvy

people exactly why do I see these problems. At what point did other

outside sources come—did they come before, did they come later—

to tell you that there might be something wrong here? In other

words, that the information that you may have been given by

Ogilvy was not necessarily accurate.

Mr. PLEFFNER. The issues relating to irregularities with Ogilvy’s

invoices were first raised in September 1999. There were probably

a half dozen labor invoices where I identified these problems, communicated the problems to Ogilvy and the contracting officer. It

was March 2000 that I had a former Ogilvy employee come to me

and make the allegations that prompted me to write this memo to

the Director.

Mr. CUMMINGS. And you knew that person?

Mr. PLEFFNER. Yes, I did.

Mr. CUMMINGS. And you felt comfortable that person’s word was

true?

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Mr. PLEFFNER. I had no reason to not believe him. He did not

provide any evidence. This was a phone conversation we had. But

in my position, you never take this kind of allegation lightly. A

number of the allegations made were consistent with concerns that

I had with regard to the labor billing.

Mr. CUMMINGS. And when you talked to Ogilvy, your first discussions with them were when?

Mr. PLEFFNER. As far as the billing issues?

Mr. CUMMINGS. What you just talked about, yes.

Mr. PLEFFNER. The first discussions on billing issues was late

September 1999, early October 1999.

Mr. CUMMINGS. And what were you told back then by Ogilvy?

Mr. PLEFFNER. By Ogilvy, they stood by the invoices they submitted.

Mr. CUMMINGS. And what was your reaction to that at that time?

Mr. PLEFFNER. At that time, my reaction was to do my job, which

was to recommend withhold of any costs I believed were inappropriate or unsupported, which I did.

Mr. CUMMINGS. Mr. Levitt.

Mr. LEVITT. Can I put into context the kind of withholds that we

would have?

Mr. CUMMINGS. Yes.

Mr. LEVITT. I think there is a nefarious tone in some of the questions and in some of the news accounts about this. Ogilvy had

never worked for the Federal Government before. There are a maze

of issues dealing with the Federal Government; high levels of accountability for media, proof that it ran on your TV station, small

business, EEO, women-owned business, a whole variety of things—

and I could provide that for the record if you want—that are not

difficult to obtain but that are strange in the ad culture, in the ad

industry. In the ad industry, when you produce an ad, or in the

movie business when you shoot a program, you have got a platter

of food in the background, the cameraman and everybody else eats.

You cannot pay for food in the government. You cannot fly firstclass in the government. There are also issues of should the bonus

go in the overhead or direct salary account. A whole range of

issues.

There was not just one issue. Most of them had to do with laborrelated issues. But, again, this could be an innocent thing. And

Ogilvy also has had three different financial people involved in the

billing over this period of time. They now realize they have to get

somebody who really knows about the Federal acquisition process.

But at least the billing part could be completely just part of the

routine financial oversight that a government agency does with its

contractors. As I said before, we have withheld from all of our contractors and subs and even government agencies that we have cooperative agreements with.

Dr. VEREEN. And we would be happy to provide that documentation as well.

Mr. CUMMINGS. I would like to have that, Mr. Chairman.

I just have two more questions. When you got the Twyon report,

and I do not know who is best to answer this, did you have discussions with Ogilvy with regard to that report?

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Mr. LEVITT. Yes. We have had several discussions with Ogilvy.

In fact, Ms. Twyon was in a meeting with Ogilvy discussing her report. They came down, they brought their president, Bill Gray, and

other financial people, as well as Ms. Seifert, the project officer, to

discuss it and respond. And we have had two meetings like that.

We have also had two very lengthy analyses of Ogilvy’s labor structure and proposals. They have come down a little bit, but also proposals of why these things cost so much in different categories and

some options for us to reduce the costs even further.

Mr. CUMMINGS. Did they provide you any explanation on the difference in their costs and those recommended by Ms. Twyon?

Mr. LEVITT. Yes, to some degree. Part of it was what I just mentioned, that there were some things that she did not take into account. And there were legitimate differences of opinion also between Ogilvy and the Federal contracting process.

Mr. CUMMINGS. My last question to Mr. Hast. Is there any other

evidence, and I understand from Mr. Sullivan, and I appreciate

your testimony today by the way, it sounds like the Twyon report

was not a very significant thing in what you all did; is that right?

I think I asked that.

Mr. HAST. Yes. Only in how Mr. Pleffner analyzed it in his document. Other than that, we did not do a lot with the Twyon report.

Mr. CUMMINGS. OK. And do you agree with her, from what you

all have seen, that report does not really deal with over-billing, or

does it? Does it allege over-billing?

Mr. HAST. I am really not an advertising industry expert and

that is really why we did not deal much with that report, because

I think you would have to be in the field to really understand it.

Mr. CUMMINGS. And so, other than the Pleffner memo, I think

that is about it, is there any other reason for you all to believe that

Ogilvy committed any kind of fraudulent activity here? I mean

from stuff that you have.

Mr. HAST. I would not want to say that we believe it. I think we

have interviewed other people that have substantiated the allegations in that memo to the point that I think it requires further investigation. But at this point, we have absolutely no proof of fraud

by anyone.

Mr. CUMMINGS. Thank you. Thank you very much.

Mr. BARR [presiding]. Mr. Sullivan, I think you testified earlier

in response to questions from the gentleman from Maryland that

one of the things that you all were tasked with looking at was

whether or not ONDCP responded appropriately to the allegations

of false billing, as brought to the Director’s attention in early 2000.

At this point, do you believe that ONDCP did or did not respond

appropriately?

Mr. SULLIVAN. We have not formed any final conclusions as to

whether they responded appropriately or not. We were just conducting the investigation and we are presenting the facts for the

subcommittee to draw your own conclusions.

Mr. BARR. You have not formed any conclusion one way or the

other?

Mr. SULLIVAN. No, I have not formalized a final conclusion myself, Mr. Barr.

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Mr. BARR. Do you believe it is appropriate to order an immediate

audit in the face of such allegations and for another 6 months to

go by and no audit is even close to being performed? Do you believe

that is an appropriate response?

Mr. HAST. Mr. Barr, if I could answer that. I believe if someone

thought there were allegations of fraud, they should move very

quickly. I think in a number of our interviews, especially with General McCaffrey, the view of this was billing irregularities. And although fraud was mentioned in the memo, I do not believe from

our interviews that was where his focus was.

This was also sent to his General Counsel. I think that is the

role of attorneys. The attorneys that reviewed this I think should

have taken the fraud more seriously and probably recommended

moving somewhat more quickly.

Mr. BARR. According to your written testimony, the ONDCP General Counsel, Mr. Jurith, told you that they were aware of the billing irregularities. So apparently ONDCP knew that there were billing irregularities. Correct?

Mr. HAST. Yes. And he initialled the memo with the allegation

that there was possible fraud.

Dr. VEREEN. Mr. Barr, may I make a comment?

Mr. BARR. Sure.

Dr. VEREEN. Those billing irregularities led us, well before this

memo, to explore options to change the contract and initiate an

audit. This predates the memo. All of that was in place predating

the memo. And I draw your attention to the end of the second

page, you mentioned the word ‘‘immediate,’’ the immediate refers

to upon the moment that the contract is transferred. We have attempted, as Mr. Pleffner related earlier, attempted to negotiate an

early audit without incurring extra costs. That did not happen. But

we already had a plan in place to change the contract, to initiate

an audit. Unfortunately, that has taken a while, and that is about

to be——

Mr. BARR. That is real unfortunate. That is the whole question

here. This has been going on for over a year. I know immediate

might mean one thing to somebody and maybe 2 or 3 more days

to somebody else. But this has been going on for over a year. This

is taxpayer money we are talking about.

Dr. VEREEN. This is true. But we have talked to the Department

of the Interior, we have talked to the Department of the Navy, and

others to see who else could handle such a complex contract.

Mr. BARR. How about GAO?

Dr. VEREEN. I am not aware that we checked with GAO.

Mr. BARR. This is what they do for a living.

Dr. VEREEN. There is a new GAO review that has started last

month that we are a part of, that we are cooperating with.

Mr. BARR. That is exciting, too. Maybe we will see some results

immediately there too?

Dr. VEREEN. I am sure as fast they can get a report to you. Most

audits take approximately 6 months.

Mr. BARR. Once they get started.

Dr. VEREEN. Yes.

Mr. BARR. This one isn’t even started.

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Dr. VEREEN. But you have from our records and our accounting

to you a full and open discussion. You know exactly what we know

in terms of billing irregularities.

Mr. BARR. Well, let’s see. Mr. Hast, according to your testimony,

you all were told in March of this year, March 2000 that Mr. Dan

Merrick had contacted Mr. Pleffner and Jill Bartholomew,

ONDCP’s Deputy Director for National Media Campaign, and Mr.

Merrick told them in March of this year—that is how many months

ago, 7—that Ogilvy was falsifying billing records. We are not here

to have a legal debate over what constitutes fraud in terms of proving each and every element thereof beyond a reasonable doubt. I

am using your words here. You all were told in March 2000 and

ONDCP knew 7 months ago, at the latest, that Mr. Merrick told

them that Ogilvy was falsifying billing records. Correct?

Mr. HAST. Yes, that is correct.

Mr. BARR. And here we are 7 months later and ONDCP has done

absolutely nothing. Is that an appropriate response?

Mr. HAST. No, I do not think so.

Mr. BARR. And I appreciate that. I think that is a correct answer.

ONDCP has not responded appropriately despite your best intentions. That is the problem. There is evidence of false billing here

involving taxpayer moneys, and this has been going on for a period

of time and you all have known about it for a period of time, and

here we are still worrying about some blue folder floating around

within Department of the Navy and you all have not even ordered

an audit. That is why we are concerned about this.

Dr. VEREEN. Even as that is occurring, sir, the shields are up.

The media campaign is protected and well-run with the exacting

scrutiny that we have illustrated to you. So funds are going nowhere without the proper documentation, sir.

Mr. BARR. The only one that seems to be conducting any exacting

scrutiny was Mr. Pleffner. He had it pegged right. And Mr. Hast

seems to have it pegged pretty right here.

Dr. VEREEN. And thanks to his efforts, we have been aware and

he is continuing to do his job properly.

Mr. BARR. Who is?

Dr. VEREEN. Mr. Pleffner.

Mr. BARR. That is good. But why have you all not conducted an

audit?

[No response.]

Mr. BARR. The silence is deafening, Dr. Vereen.

Dr. VEREEN. We have explained that we had moved to change

the contract and changing the contract at the end of the contract

would come——

Mr. BARR. HHS said that they would conduct an audit.

Dr. VEREEN. No, they said they would not conduct an audit.

Mr. BARR. Now you are changing. They said that they would conduct an audit if they were paid for it, if they were paid for the time

necessary to conduct an audit.

Dr. VEREEN. And we had indicated that we had already paid for

it. That was our understanding. That was not resolved, so we were

in the process of changing the contract completely so that would

not be an issue any longer.

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Mr. BARR. How much money are we talking about for that audit,

$300,000, $325,000?

Mr. PLEFFNER. I would estimate in the neighborhood of $100,000,

$125,000.

Mr. BARR. We are talking about a billion dollar contract here

with evidence of billing irregularities, false billing records.

Dr. VEREEN. It would still come out, sir. Right now, those payments are being withheld until proper documentation is provided.

And it will come out in an audit if that is the case. At this point,

the campaign is functioning very well, it is continuing to go forward, and we will continue to withhold payments until those billings get cleared up. And an audit will certainly identify those. But

in the meantime, the entire campaign is being properly managed

with a level of scrutiny that you can see is certainly satisfactory.

The campaign is safe and proceeding forward. The audit will happen when the contract changes.

Mr. LEVITT. Congressman, can I make a statement?

Mr. BARR. Sure.

Mr. LEVITT. I managed this contract or have managed the program, or helped General McCaffrey to manage the program. My

goal is giving the best value to the Government, including the financial aspects of it.

Mr. BARR. When was the very first time that you were made

aware that there was possible fraud, there were billing irregularities, false billing? When were you first made aware of that?

Mr. LEVITT. The first time the word fraud came into my

office——

Mr. BARR. Now do not play word games. I am not trying to pin

you down to the word fraud. OK? We have been through all that

before.

Mr. LEVITT. Shortly after Mr. Pleffner was——

Mr. BARR. Not until April?

Mr. LEVITT. End of March, April, I do not know when.

Mr. BARR. You know Mr. Merrick, don’t you?

Mr. LEVITT. Yes, I do. I think he is an outstanding advertising

person.

Mr. BARR. He has done prior work with ONDCP, correct?

Mr. LEVITT. He was our project officer at Bates and also coproject officer at Ogilvy. Outstanding integrity and outstanding

performance.

Mr. BARR. So you were aware that this evidence existed very

early in the year 2000, at the latest. I mean, you tell me.

Mr. LEVITT. At the end of March or April.

Mr. BARR. Not in the fall of 1999?

Mr. LEVITT. No. After he was separated.

Mr. BARR. When was the first time, Mr. Pleffner, that you had

any discussion at all with Mr. Levitt bringing to his attention what

you believed was evidence of false billing and irregularities and/or

fraud?

Mr. PLEFFNER. The irregularities first were identified in early

October, late September or early October 1999. Fraud was never

mentioned until Mr. Merrick came to me in mid to late March in

the year 2000.

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Mr. BARR. Did you have discussions with Mr. Levitt sometime

about these matters and the evidence that was coming to your attention in the fall of 1999?

Mr. PLEFFNER. Immediately upon me recognizing the problems,

I did share it with Mr. Levitt and our Office of Legal Counsel, yes.

Mr. BARR. Thank you.

Mr. LEVITT. Congressman, we, and this may have figured into

the decision not to audit, we were getting exceptional performance

by Ogilvy. They had saved us over $5 million just this year in their

up front media buy over the industry average. They have led people like Tara Lipinski and Women’s World Cup Soccer to us. They

have gotten a contribution from Turner Broadcasting for almost

$900,000.

Mr. BARR. Nobody here is arguing their competence. They may

be the greatest advertisers in the world.

Mr. LEVITT. But I am talking about the value to this program

and to——

Mr. BARR. We are talking about fraud. We are talking about——

Mr. LEVITT. You see, it did not compute.

Mr. BARR. What did not compute? Just because they are doing

a good job, the evidence of false billing does not compute?

Mr. LEVITT. I think allegations by a person who was separated

and with no evidence should be weighed against the exceptional

performance of this thoroughbred agency.

Mr. BARR. Mr. Pleffner looked at the time sheets. They do not

lie.

Mr. LEVITT. That is a different issue, sir.

Mr. BARR. No. I am talking about the false billing.

Mr. LEVITT. I am talking about an allegation of fraud versus billing issues, which we have with all of our contractors, and probably

every Federal agency has with their contractors.

Mr. BARR. Have false billing?

Mr. LEVITT. Questionable bills.

Mr. BARR. No. I am talking about false billing that was brought

to your attention in the fall of 1999.

Mr. LEVITT. Whether you use the word false, over-billed, it is a

question of semantics. I am talking about fraud. We had no evidence of fraud, no convincing evidence of any kind, otherwise we

would have gone up with that in a second.

Mr. BARR. You had evidence that there was false billing. You all

may think there was no false billing. This is the language in GAO’s

report. And Mr. Pleffner has testified to that and he has testified

that he had discussions with you about it.

Mr. LEVITT. Again, as I mentioned, I do not know if you were

here earlier this morning, but if I put in a taxi voucher and I add

it up the wrong way, am I defrauding the Government? There are

mistakes, there are differences in interpretation what could be allowed and what could not be. Some of these were legitimate differences or misunderstandings or sloppiness.

Mr. BARR. You are talking like a defense attorney for this company.

Mr. LEVITT. I do not mean to be.

Mr. BARR. Do you all have any further questions?

156

Mr. PLEFFNER. If I could clarify one point. Until the phone call

from Mr. Merrick, I had never mentioned to anyone any concerns

about fraud or false billing. What I brought to my boss’ attention,

Mr. Levitt’s attention, and Office of Legal Counsel was billing

irregularities. A number of costs, I will admit, a number of the

irregularities were unallowable costs in my opinion. But the word

fraud was never brought up until the conversation in mid to late

March with Mr. Merrick.

Dr. VEREEN. And that was properly reported up the chain of command so that we were all aware. And we proceeded on with our

management of this to protect the media campaign so that it could

go further.

Mr. LEVITT. And Congressman, since HHS disagreed with Mr.

Pleffner on at least some of these bills, it shows that there can be

different interpretations sometimes of Federal Acquisition regulations and contracting rules. It does not mean one is defrauding the

other. It means there could be a legitimate difference of opinion.

Mr. BARR. Isn’t that why an audit is conducted?

Dr. VEREEN. That is why, I will repeat, we were taking steps

with other Federal agencies to change the contract.

Mr. BARR. I know, and you have been taking steps for the last

7 months. That is very reassuring.

Dr. VEREEN. Well, they were telling us to wait till the end of the

fiscal year. We did not want to wait till the end of the fiscal year.

Mr. BARR. Well you have.

Dr. VEREEN. We are just as frustrated.

Mr. BARR. The gentleman from Maryland.

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I have just

some things I need to clear up. First of all, let me say I was very

intrigued with your line of questioning, and I want everybody in

this room to understand that we are dealing with some very, very

serious allegations. The chairman is a former U.S. Attorney, I am

a defense attorney of 20 years, and I can tell you we are dealing

with some serious stuff. That is why I am going to ask the following questions.

Mr. Pleffner, let me ask you, I am glad you cleared up exactly

what information was imparted when. I have read your memo and

I applaud you for bringing this to the attention of the appropriate

authorities. Let us go back to when you first brought it up. Your

immediate supervisor, would that have been Mr. Levitt back there

in late September, October?

Mr. PLEFFNER. That is correct.

Mr. CUMMINGS. All right. First of all, what is considered an irregularity? When you say irregularity, what do you mean?

Mr. PLEFFNER. Irregularity, question cost, unsupported costs.

Mr. CUMMINGS. OK. Do you oversee more than this contract, or

is this the only one that you have been handling in the last 2

years?

Mr. PLEFFNER. I oversee roughly a half dozen media campaign

contracts and MOUs.

Mr. CUMMINGS. OK. I take it is a part of your job to make sure

that Government money is being spent consistently with the contract, and I take it your job is to raise the red flag if you see something that seems a bit out of kilter. Is that correct?

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Mr. PLEFFNER. Yes, it is.

Mr. CUMMINGS. Is it unusual for irregularities to come up in

other contracts?

Mr. PLEFFNER. No, it is not unusual.

Mr. CUMMINGS. And did you bring that to the attention of Mr.

Levitt, those other ones?

Mr. PLEFFNER. Yes, I did.

Mr. CUMMINGS. And what would his normal response be, and

that may be a question stated poorly because there may not be a

normal response, but you bring it to his attention for what purpose?

Mr. PLEFFNER. To keep him informed on a day-to-day basis of the

financial activities.

Mr. CUMMINGS. And do you have authority to take certain actions? In other words, do you go to him and say, look, Mr. Levitt,

I see these irregularities and I am telling you I have got a problem

with it, and what I am going to do is I am not going to pay this.

Is that the way it usually goes?

Mr. PLEFFNER. As a matter of fact, as project officer my determination or my recommendation to HHS is made independently.

Mr. Levitt does not influence my recommendation or decision.

Mr. CUMMINGS. OK. So you are just keeping him informed, is

that right?

Mr. PLEFFNER. Correct.

Mr. CUMMINGS. OK. Now when you presented this information to

Mr. Levitt, were you expecting him to do anything in particular?

First of all, I am not trying to lead you down some rosy path with

a bomb at the end. My concern is we have got several issues going

here. We have got a question of whether Ogilvy committed some

kind of fraud. This is the question I am concerned about here, a

question about whether your agency did what it was supposed to

do and whether what they did was reasonable. We have heard Mr.

Hast say that in his conclusion he felt that—correct me if I am

wrong, Mr. Hast—that the response was inappropriate, it could

have been done a better way. Is that the response to all of this?

Mr. HAST. Yes. Basically, if they believed there was fraud, the

FBI or the HHS IG would have looked into that for free.

Mr. CUMMINGS. OK. Now I want to come back just to make sure

we are clear. So, when you presented this to Mr. Levitt, did you

have an expectation that he would then do something with the information? Now I am going all the way back now to September and

October. Or was that just informing him, is that correct?

Mr. PLEFFNER. That was just informing him.

Mr. CUMMINGS. OK. Now let’s move on up. Between the April 13

memo and the September/October communication about irregularities, were there other communications where you found irregularities with regard to this contract and brought them to Mr. Levitt’s

attention?

Mr. PLEFFNER. Let me first clarify that the irregularities started

in October 1999. The April memo is 2000.

Mr. CUMMINGS. Right.

Mr. PLEFFNER. Yes, there are continuing irregularities with the

Ogilvy invoices.

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Mr. CUMMINGS. And I take it that during this period between

September 1999 and April 2000 you are constantly having conversations with Ogilvy. Is that correct?

Mr. PLEFFNER. Yes.

Mr. CUMMINGS. Saying why are you doing this? What is the problem here? Could you get any satisfaction when you got your answers? Were you getting any satisfaction?

Mr. PLEFFNER. No, I did not. I must also add though that the

HHS contracting officer was also in these discussions and we did

not receive satisfaction from them either.

Mr. CUMMINGS. Now Mr. Levitt said that HHS disagreed with

some of your findings. Is that correct?

Mr. PLEFFNER. That is correct.

Mr. CUMMINGS. Would you say 10 percent, 20 percent of the findings they disagreed with?

Mr. PLEFFNER. I would say as a rule the vast majority, probably

85–90 percent they disagreed with.

Mr. CUMMINGS. HHS disagreed with 85–90 percent of your—— Mr. PLEFFNER. I stand corrected. That was on labor, the withholds that I recommended on labor, the HHS contracting officer

disagreed with my recommendations, the rationale for my withholding.

Mr. CUMMINGS. You are kind of a strict guy, huh?

Mr. PLEFFNER. To all of them, not just Ogilvy.

Mr. CUMMINGS. Now coming on up to April and late March. I

think you said the first time you started thinking fraud and communicating fraud to Mr. Levitt was in late March or early April.

Is that correct?

Mr. PLEFFNER. It was late March.

Mr. CUMMINGS. OK. What did you expect him to do when you

started mentioning fraud? I am just curious. It is one thing for

GAO to come to their conclusions, they are not in the agency. You

are and you were the one to bring this to their attention.

Mr. PLEFFNER. When I brought it to his attention I guess I expected him, I know I expected him to support me in elevating my

concerns to senior management.

Mr. CUMMINGS. And you are saying that he did not do that?

Mr. PLEFFNER. He certainly did do that.

Mr. CUMMINGS. OK. So at that point, he was doing what you expected him to do. And I noted that there was a letter of 3 weeks

after this. What was the first official response that you saw to your

memo of April 13?

Mr. PLEFFNER. Saw from?

Mr. CUMMINGS. From anybody. In other words, you wrote the

memo and you expected a response from somebody. Is that right?

You expected them to take some type of action. I am saying be it

written or be it verbal, what was the first official response that you

had to that memo?

Mr. PLEFFNER. I received a copy of my memo back from the Director with his comments roughly 2, 21⁄2 weeks after I sent it up

to him.

Mr. CUMMINGS. And what were your feelings about those comments? That is the document that is on the board there, correct?

Mr. PLEFFNER. Correct.

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Mr. CUMMINGS. What was your reaction to his comments? And

did you discuss them with him, by the way?

Mr. PLEFFNER. There was a meeting as I recall in late April

where there was a brief discussion. He did support the need for an

external audit. And he did say, as noted on the sidebar there, that

we would not wait 5 years for the audit.

Mr. CUMMINGS. Now did he say when the audit would take place

when you two met?

Mr. PLEFFNER. I do not believe the timing was addressed in that

meeting.

Mr. CUMMINGS. Did you make any recommendations as to when

it should start?

Mr. PLEFFNER. I do not believe I had the opportunity to address

when it should start.

Dr. VEREEN. Congressman, there was a process to change the

contract and do an audit when the contract changed that was already in place. The last line of the memo refers to an immediate

audit upon termination of the contract.

Mr. CUMMINGS. Does that sound reasonable, what he just said?

Mr. PLEFFNER. Yes, it does.

Mr. CUMMINGS. That is your memo, right?

Mr. PLEFFNER. Yes, it is.

Mr. LEVITT. Can I just add something. You cannot terminate a

contract automatically. You have to have HHS’ permission, you

have to have another agency to go to. So it takes some time to do

that. We had pretty much decided on the Navy, but then there

were a couple of other agencies that came up that we had to investigate.

Mr. CUMMINGS. Mr. Pleffner, I do not have much more but I have

got to ask you this. We have heard a lot of testimony here today.

I have two questions. One, Mr. Vereen said a moment ago that he

feels that, as far as the people’s money is concerned, whatever you

all have done so far to kind of freeze—you are stopping payment

on certain things and you are questioning certain things—all the

things that he talked about that you have done while waiting to

get this audit, do you feel comfortable that your agency is doing

what it needs to do so that if there were some type of fraud going

on at least it would be frozen? Are you following my question? Is

there anything else that you all could be doing now?

Mr. PLEFFNER. I think we have done what we are supposed to

do. We are in the process of moving the contracts out of HHS over

to the Navy, at which time an audit will be immediately initiated.

Mr. CUMMINGS. So do you feel comfortable with what has happened since the April 13 memo with regard to you all making sure

that you carry out the full extent of what your job is?

Mr. PLEFFNER. I am comfortable beyond a shadow of a doubt that

I have done what is necessary to protect ONDCP’s, the Government’s, the taxpayer’s interest. We have withheld since April 13 an

additional $8 million. On that date, we had only withheld $5 million. We are now up to $13.4 million. We have done what we could,

if there is any impropriety, we have done what we could to keep

it in check.

Mr. CUMMINGS. And I applaud you for that. And I do not want

you to misunderstand and think this is any kind of negative toward

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you. I applaud what you have done. I guess the question is, do you

feel like you have gotten the cooperation from your superiors in accomplishing what you just stated?

Mr. PLEFFNER. Absolutely. They have supported every withhold

I have recommended.

Mr. CUMMINGS. I do not have anything else.

Mr. BARR. As an example of the basis, Mr. Pleffner, on which you

have recommended the withholding of funds—and this is why I am

a little bit surprised, maybe I should not be a little bit surprised,

that HHS disagrees with you—I refer to your memo to Michelle

Trotter of March 2, 2000. You say that your recommendation to

withhold close to $500,000 at that particular time was based on:

‘‘(1) various employees billed without providing time sheets to support time worked against ONDCP; (2) various salaries charged

without documentation to support the costs incurred; (3) various

salaries exceed the salaries proposed by the contractor.’’

The basis on which you were recommending that funds be withheld were not some theoretical, never heard of, ingenious, imaginative argument. These are just pretty much standard reasons for

withholding funds that anybody should agree with. Correct?

Mr. PLEFFNER. Correct.

Mr. BARR. During these past 7 months, Ogilvy has continued to

bill ONDCP and has continued to receive funds. Is that correct?

Mr. PLEFFNER. That is correct.

Mr. BARR. I would like to thank all of the witnesses for being

here today.

Mr. CUMMINGS. Mr. Chairman, I have two more questions.

Mr. BARR. The gentleman is recognized for 1 minute.

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I may

need just a little bit longer than that.

Mr. BARR. The gentleman is recognized for 2 minutes.

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I really

appreciate this 2 minutes.

Mr. BARR. The record will reflect that the gentleman just a moment ago said that he had no more questions.

Mr. CUMMINGS. Well, you just asked questions, Mr. Chairman,

that caused me to have more questions.

Mr. BARR. The gentleman is recognized for 2 minutes.

Mr. CUMMINGS. Mr. Hast, there is something that has been bothering me and it is part of your findings. When you talked about

General McCaffrey and whether he remembered the audit or not,

because I am always concerned about people’s reputations, I take

it he did not remember at first this memo and notation, is that correct, and you then presented it to him. Did he readily say, oh, yes,

this is my writing? I mean, there was not any——

Mr. HAST. No, there was not.

Mr. CUMMINGS. Did you feel comfortable that he had forgotten,

with your skill and your judgment?

Mr. HAST. Yes.

Mr. CUMMINGS. OK. Thank you.

Mr. LEVITT. Congressman, I know blue folders and I know General McCaffrey, he probably reads 100 documents a night. He is a

workaholic. He probably only sleeps a few hours. It is very common

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for him to forget something like that. And that is why we have the

notations.

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I really

appreciate that.

Mr. BARR. I would like to thank the witnesses for appearing

today.

The record will remain open for 2 weeks for any additional material you all wish to submit for the record.

There being no further business before this subcommittee, this

subcommittee is hereby adjourned.

[Whereupon, at 1:54 p.m., the subcommittee was adjourned, to

reconvene at the call of the Chair.]

[The prepared statement of Hon. Elijah E. Cummings and additional information submitted for the hearint record follows:]

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