GAO

United States General Accounting Office

Report to the Chairman, Committee on 

Governmental Affairs, U.S. Senate

September 1999 TENNESSEE VALLEY 

AUTHORITY

Facts Surrounding 

Allegations Raised 

Against the Chairman 

and the IG

GAO/OSI-99-20

Page 1 GAO/OSI-99-20 Opposing Allegations by TVA Board and IG

United States General Accounting Office

Washington, D.C. 20548

Office of Special Investigations

B-283001 Letr

September 15, 1999

The Honorable Fred Thompson

Chairman, Committee on Governmental Affairs

United States Senate

Dear Mr. Chairman:

The Tennessee Valley Authority (TVA), a wholly owned government 

corporation, is responsible for developing and conserving the natural 

resources of the Tennessee River Valley and supplying power throughout a 

seven-state area, presently through 159 distributors, or customers. TVA is 

governed by a three-member Board of Directors appointed by the President 

and confirmed by the Senate for a 9-year term. Chairman Craven Crowell is 

currently the sole member of the Board because Director Johnny H. Hayes 

resigned on February 1, 1999, and Director William Kennoy’s term expired 

on May 18, 1999.

The current Inspector General (IG), George Prosser, began his tenure in 

April 1994. As 1 of 33 statutory offices initially established by Congress 

under the Inspector General Act Amendments of 1988,1

 he was appointed 

by TVA’s Board of Directors. The act gives the agency head, in this case the 

TVA Board, general supervisory authority over the IG but provides that the 

agency head cannot interfere with the audit and investigative functions of 

the Office of Inspector General (OIG). The 1988 amendments also provide 

that only federal audit entities, including GAO and other IGs, may perform 

a review to determine whether an IG has internal quality controls and is 

complying with audit standards established by the Comptroller General as 

required by section 4(b)(1)(A) of the Inspector General Act of 1978.2

On May 26, 1999, the TVA IG issued a report (otherwise known as a 7-day 

letter) to the TVA Board of Directors and the Congress pursuant to

1

 Pub. L. No. 100-504, 102 Stat. 2515 (1988).

2

 Pub. L. No. 95-452, 92 Stat. 1101 (1978).
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section 5(d) of the Inspector General Act.3 In that report, the IG alleged that 

the Board Chairman, the sole Board member, had “harassed him” and 

attempted to impede the independence of the OIG. Shortly thereafter, the 

Chairman of TVA, on advice of the Office of Management and Budget 

(OMB) and in accordance with Executive Order No. 12933, referred two 

matters to the Integrity Committee of the Executive Council on Integrity 

and Efficiency (ECIE)4

 relating to questionable credit card charges by the 

IG5

 and concerns about the management of the OIG. On June 2, 1999, you 

requested that we assist the Committee in investigating the IG’s allegation 

against the Chairman and the Chairman’s allegation regarding the IG’s 

credit card usage.

Results in Brief With regard to the IG’s allegation against the Chairman, we found that it 

was based on the disagreement between the IG and the Chairman over the 

Chairman’s authority to both direct a broad management review of the OIG 

and contract with a nonfederal entity to conduct the review. The 

Chairman’s actions as discussed below could be viewed as an attempt to 

undermine the independence of the IG.

Not knowing that a peer review of the OIG had been conducted only 

months previously, the Chairman decided to initiate a management review 

of the OIG based in part on two anonymous allegations. These allegations 

concerned the lack of performance appraisals and merit increases in the 

OIG and an OIG manager’s abuse of time and attendance policies. When the 

Chairman discussed the review with the IG, the IG initially agreed to it; and 

3

 Section 5(d) requires IGs to report immediately to the head of their respective 

establishments whenever they become aware of particularly serious or flagrant problems, 

abuses, or deficiencies regarding the establishment’s administration of programs or 

activities. Within 7 days of receipt of the report, the head of the establishment is required to 

send the report to the appropriate congressional committees or subcommittees along with a 

report containing appropriate comments. (Inspector General Act of 1978, as amended, 5 

U.S.C. App. 3, § 5(d) (1994))

4

 ECIE consists of statutory IGs appointed by the heads of designated federal entities. As a 

result of Executive Order No. 12805, which was signed in 1992, ECIE became a member of 

the President’s Council on Integrity and Efficiency (PCIE). PCIE is an interagency council 

that is charged with promoting integrity and effectiveness in federal programs. The PCIE is 

chaired by the Deputy Director for Management at the Office of Management and Budget.

5

 As a member of TVA’s senior management, the IG was authorized to use a TVA Visa Gold 

Card for hospitality expenses including, but not limited to, meals, refreshments, and 

entertainment. TVA pays for these expenses.
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TVA contracted with a nonfederal entity to conduct the review. However, 

when the IG was presented with an OIG legal counsel opinion and after 

discussions with other IGs and members of Congress, he became 

concerned about the appropriateness of such a review and informed the 

Chairman of his reversal of opinion. The Chairman later decided to use 

another OIG to conduct the review and believed that the IG would accept 

such an arrangement. The Chairman was unaware that this offer was not 

communicated to the IG as he had directed. However, before it was 

determined that the IG had not been informed about the Chairman's 

decision, TVA’s Chief Administrative Officer (CAO) initiated a separate 

review of the IG’s use of his TVA credit card during his 5-year tenure (1994-

1999). To our knowledge, the proposed management review of the OIG has 

been suspended.

As a result of his separate conversations with the Chairman and the CAO, 

the IG felt that the Chairman was threatening the OIG’s ability to conduct 

investigations and wanted to remove him from office. One reason the IG 

provided for feeling threatened was his May 25, 1999, conversation with the 

CAO regarding the Chairman’s reaction to the May 14, 1999, acquittal of 

TVA’s former Chief Operating Officer on criminal charges. Thus, the IG sent 

the 7-day letter to the Chairman. To counter his belief that the IG would 

release the 7-day letter to the press, the Chairman released to the press his 

recent letter to a member of Congress. In that letter, the Chairman alleged 

that the IG had abused his use of the TVA-issued credit card. Subsequently, 

the Chairman referred the following allegations to the ECIE for its 

consideration: the previously mentioned OIG mismanagement, the IG’s lack 

of independence, and the IG’s misuse of his TVA credit card. This referral 

was based on the two anonymous allegations and a cursory review of the 

IG’s credit card charges. However, the OIG had reviewed the management 

issues that the Chairman referred to the ECIE and had taken action on 

them prior to the referral. Details of the initial TVA allegations along with 

additional allegations were leaked or released to the media. Then on 

August 20, 1999, the Chairman placed the IG on paid leave pending 

resolution of the allegations referred to the ECIE.

When the Chairman initiated his attempt for a management review of the 

OIG, all three Board positions were occupied. However, he began his most 

aggressive actions when his staff completed the analysis of the IG’s credit 

card usage. By that time, the two other Board members had vacated their 

positions. The Chairman’s actions included the release of unsubstantiated 

allegations to the media and the referral to ECIE.
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With regard to the Chairman’s allegations concerning the IG’s lack of 

independence, the IG recognized that his closeness to TVA management 

and his attendance at TVA social functions could have led observers to 

construe that his independence had been compromised. However, he had 

investigated allegations involving all three directors, including an audit of a 

$30-million, irrevocable trust created and controlled by the Chairman and 

funded by TVA. This audit resulted in the revocation of the trust and the 

funds’ return to TVA. Further, the audit assisted a criminal investigation by 

the Federal Bureau of Investigation (FBI) on this matter, which the 

Department of Justice declined to prosecute. In addition, we found no 

evidence of TVA credit card misuse by the IG for the period we analyzed in 

depth (Jan. 1998 through mid-May 1999). On the issue of whether the 

expenditures were in accord with applicable TVA policy, we determined 

that all of the questioned charges—including charges for hotels, 

restaurants, golf and liquor—had been incurred as a result of activities 

undertaken at Director Hayes’ direction and conformed to TVA’s policies.

Allegations That the 

Chairman Impeded the 

IG’s Independence

Two OIG Personnel 

Complaints Triggered 

Broad-Based Management 

Review

On November 19, 1998, the Chairman received an anonymous allegation 

that the OIG had not given performance appraisals and merit increases to 

support staff. After receiving the allegation, the Chairman asked the 

General Counsel to determine whether the allegation had merit and 

whether the Board could award a contract for an independent review of the 

OIG. The General Counsel informed the Chairman that his office had 

recently received an anonymous allegation that an OIG branch manager 

had abused the OIG’s time and attendance policies. He added that the 

allegation had been referred to the OIG because it was a management 

issue. When the Chairman learned of the second allegation, he requested 

the General Counsel to advise the Board how to handle these allegations.

By memorandum dated December 3, 1998, the General Counsel responded, 

advising the Chairman that the Board should not refer the anonymous 

allegations to the ECIE because they raised management issues rather than 

the type of “wrongdoing” set forth in Executive Order No. 12933 that 

warranted referral. However, he opined that the Board could seek an 
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outside review by a contractor to determine whether the OIG was 

functioning properly. The General Counsel added that the Board had hired 

an outside contractor to review the OIG in 19936

 during William Hinshaw’s 

tenure as IG.

By memorandum dated December 7, 1998, the Chairman notified the Board 

about the two anonymous allegations he had received involving the OIG. 

The Chairman advised the Board that he planned to ask the CAO, a 

previous TVA IG, to recommend an outside firm to independently evaluate 

the OIG because it had been 5years since the last review. When the other 

Board members did not respond to the memorandum, the Chairman 

concluded that they had concurred with his belief that a review of the OIG 

was necessary.7

According to the Chairman, two factors led him to believe that a review of 

the OIG was warranted: (1) the General Counsel had advised him that the 

allegation regarding the OIG’s failure to provide performance appraisals 

was “troubling” and (2) the OIG had not been reviewed in 5 years. The CAO 

and General Counsel told us that the allegations against the OIG had 

triggered the Chairman’s interest in a review of the OIG. According to the 

CAO, other underlying reasons might have existed. For example, the 

Chairman had stated that the IG spent too much time socializing with 

Directors Hayes and Kennoy.

On December 11, 1998, the Chairman sent his December 7 memorandum to 

the IG. However, the OIG had previously reviewed and acted upon the first 

anonymous complaint, received from the Office of General Counsel, 

concerning the alleged abuse of time and attendance. The OIG’s action 

included informing all OIG staff of time and attendance policies and 

counseling the individual employee named in the allegation. Upon receipt 

of the memorandum containing the second allegation concerning 

6

 The Chairman requested, and the Board approved, the 199 3review of the OIG. Dempsey 

and Associates and TVA were the contracting parties. Under the contract, the contractor 

agreed to review the OIG's resources, procedures, training, and operations. The contract did 

not contain any provisions regarding the Board's oversight of the review.

7

 Former Director Hayes told us that he did not raise any concerns about the review because 

the Chairman and the CAO had informed him that it was a routine management review 

aimed at helping the OIG run better. He explained that he did not respond to the 

memorandum because he anticipated that the Board would discuss the issue before signing 

the contract. Former Director Kennoy did not explain why he had not responded to the 

memorandum.
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performance appraisals and merit increases for support staff, the OIG 

reviewed each OIG employee’s file to determine if performance reviews for 

the previous 4 years were included. This review determined that a few 

employees did not have all their service reviews, and the IG worked with 

the respective managers to obtain the missing reviews. Further, the OIG 

updated its human resources computer system to reflect current 

performance review information.

After the IG’s receipt of the December 7 memorandum, the Chairman and 

the IG met to discuss the proposed management review. The Chairman told 

the IG that he had tasked the CAO to recommend an outside auditor. The 

IG advised the Chairman that it would be inappropriate for 

PriceWaterhouseCoopers to conduct the review since the firm audits TVA’s 

financial statement, which the OIG then reviews. In addition, the IG told 

the Chairman that the CAO, as a former TVA IG, should not prepare the list 

of potential contractors from which the IG would select. The Chairman 

agreed with the IG that PriceWaterhouseCoopers should not conduct the 

review but disagreed that the CAO should not take part in identifying 

potential contractors.

According to the IG, he did not raise any concerns at the meeting about the 

review of the OIG because he knew that an outside entity had conducted 

the 1993 review of the OIG. He explained, however, that when he met with 

the Chairman, he did not know that the OIG’s legal counsel had advised the 

previous IG that the Board lacked the authority to contract for the 1993 

review of the OIG. The IG added that he has always had a good relationship 

with all Board members and noted that the Board never interfered with any 

audit or investigation he had initiated. He stated that his office had 

investigated a number of senior TVA officials, including all three Board 

members, and issued reports that were critical of TVA’s administration. For 

example, he audited a $30-million, irrevocable trust that the Chairman had 

created and controlled.8

 This trust was funded by TVA. The results of the 

OIG audit assisted in the FBI’s criminal investigation, which the 

Department of Justice declined to prosecute; the revoking of the trust; and 

the funds’ return to TVA.

On March 3, 1999, the CAO notified the IG that he had identified 

PriceWaterhouseCoopers and Verner Liipfert, Bernhardt, McPherson & 

8

 This audit resulted from a GAO referral to the TVA OIG of an allegation that the GAO 

FraudNet had received.
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Hand (Verner Liipfert) as the two potential contractors. Because of his 

previous objection to PriceWaterhouseCoopers as the contracting party, 

the IG’s only option was Verner Liipfert.

IG Raised Concerns About 

Management Review

On March 20, 1999,9 the IG reviewed a copy of a 1993 memorandum from 

the OIG legal counsel to the then IG. In the memorandum, the legal counsel 

questioned whether the Inspector General Act, as amended, allowed 

nonfederal entities to perform reviews of OIGs.10 The OIG legal counsel 

told us that he provided the memorandum to the IG as soon as he 

remembered that he had provided advice concerning the propriety of the 

1993 proposed review. On March 22, 1999, the IG met with a TVA Assistant 

General Counsel and advised her that he had concerns about the legality of 

the review based on the 1993 memorandum.

The next day, March 23, 1999, representatives from Verner Liipfert and its 

subcontractor Deloitte & Touche signed a contract with TVA to review the 

OIG. The IG had no input into any aspect of the review, including its scope, 

and did not know that the contract was being signed. Prior to the award of 

the contract, the CAO provided copies of the two anonymous allegations to 

the contractor, which it was to consider during the management review. 

Under the contract, Verner Liipfert agreed to perform a broad-based review 

of the audit, investigation, and inspection activities of the OIG and to 

prepare a report of its findings for the Chairman. Verner Liipfert’s 

responsibilities included, among other things, reviewing (1) OIG practices 

and procedures, including manuals, memoranda, and correspondence; 

(2) fiscal management procedures, with a selective analysis of budgets and 

expenditures; (3) structure and organization, including the tracking of 

ongoing projects and follow-up after the completion of an audit or 

9

 Also on Mar. 20, 1999, TVA issued a press release announcing that the Board had ordered a 

review of the OIG and stating that nothing in particular had prompted the review. According 

to the press release, the review would look at performance efficiency and monitor the IG's 

operations. The IG reportedly had no objection to the review.

10 5 U.S.C. App. 3, § 4(b)(2).
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investigation; (4) training programs; and (5) management goals, strategies, 

and procedures.11

After the contract was signed, the Chairman asked the IG to meet with him 

and the contractor. At the meeting, the IG informed the Chairman that he 

had specific concerns that the review by a nonfederal entity might violate 

the Inspector General Act. The IG told us that the Chairman was very upset 

and “chewed him out” for questioning the Board’s authority to hire a 

contractor to perform the review. As a result of the IG’s objection, the 

contractor told the Chairman and the IG that it would not start the review 

until it received notice that the issue concerning the review’s legality had 

been resolved. Subsequently, the Chairman called the IG to inform him that 

the General Counsel would research the matter further.

Negotiations Concerning 

Contract Were Unsuccessful

On March 26, 1999, the OIG legal counsel informed the General Counsel 

that the IG would accept Verner Liipfert as the entity to perform the review 

if the IG, rather than the Board, was the contracting party. The OIG legal 

counsel added that a representative of the President’s Council on Integrity 

and Efficiency (PCIE) at OMB had told the IG that this arrangement was 

permissible.

On April 30, 1999, the General Counsel sent a memorandum to the 

Chairman outlining the options available to the Board for a management 

review of the OIG. According to the memorandum, the issue was discussed 

with representatives from GAO,12 OMB, Department of Justice, and Office 

of Government Ethics. The General Counsel told the Chairman that the 

most desirable course would be for the Board to reach an agreement with 

the IG as to the review’s necessity, the party to perform it, and the scope of 

the review. However, the General Counsel recommended that the contract 

include specific provisions pertaining to the flow of information to and 

from the Board and Verner Liipfert.

11 In addition to these tasks, the contractor was required to determine the extent to which 

the OIG supported TVA’s goal of being “customer-driven, employee-sensitive, 

environmentally responsible and growth-oriented”; examine the existing procedures for 

measuring performance and productivity; and examine criteria for allocating resources and 

establishing priorities.

12 On Mar. 25, 1999, TVA’s Office of General Counsel contacted GAO’s Director of Audit 

Oversight and Liaison, who was responsible for GAO work on IG matters, to discuss various 

options available to the Board for a review of the TVA OIG.
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The Chairman agreed that the IG should be the contracting party as long as 

the Chairman could request the contractor to review specific matters 

identified during the review. At the Chairman’s request, on May 5, 1999, the 

General Counsel provided an outline of his proposed contract 

modifications to the IG. In the document, the General Counsel proposed 

that the OIG be the contracting party. He also proposed requiring Verner 

Liipfert to (1) hold entrance and exit conferences with, and to provide 

weekly reports to, the IG and the Chairman; (2) review and fully address in 

the final report matters that the IG or the Chairman requested; and 

(3) provide copies of the final report to the IG and the Chairman.

The IG reviewed the General Counsel’s proposals and obtained advice from 

the OIG legal counsel. On May 6, 1999, the OIG legal counsel sent the IG’s 

counter proposals to the TVA Office of General Counsel. While the IG 

agreed that his office should be the contracting party, he wanted to limit the 

Board’s involvement in the review and/or oversight of the contractor. 

Specifically, the IG proposed modifying the contract to state that the IG 

would keep the Board apprised of the status of the review and would 

provide a copy of the final report to the Board for its dissemination. The IG 

told us that although he opposed adding language to the contract regarding 

the Chairman’s role, he agreed to allow the Chairman to have unrestricted 

access to the contractor.

The Chairman, however, did not agree that this later proposal should be left 

to an oral understanding, believing instead that the written contract should 

require the contractor to review the matters that he identified. The General 

Counsel informed the IG of this on the same day that he received the IG’s 

proposals.

The next day, the IG told the General Counsel that he was withdrawing his 

offer that the OIG be the contracting party. He explained that members of 

Congress and the IG community had expressed strong objections to 

proceeding with any review that the Chairman could direct. The IG 

suggested that the General Counsel request an opinion from OMB 

regarding the Chairman’s authority to oversee the contractor’s actions 

during a review of the OIG. However, no such request was made.13

13 Although there was no document terminating the Mar .23, 1999, contract with Verner 

Liipfert, officials of both TVA and Verner Liipfert informed us that it had been terminated.
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According to the IG, he concluded that the review was inappropriate in part 

because TVA had used an OIG management review to remove William 

Hinshaw, the previous IG. Both Mr. Hinshaw and former Director Kennoy 

told us that the purpose of the prior OIG review was to remove 

Mr. Hinshaw as IG. However, because Mr. Hinshaw subsequently resigned 

from TVA, the review was discontinued before the contractor issued a final 

written report to the Board.

Chairman Opted to Request 

Federal Entity’s Review of 

the OIG

On May 5 or 6, 1999, after negotiations between the Chairman and the IG 

had reached an impasse over whether the Chairman could share oversight 

of the review with the IG, the Chairman requested advice from the U.S. 

Attorney for the Eastern District of Tennessee on how to proceed. 

According to the Chairman, the U.S. Attorney recommended that TVA 

identify three other federal IGs and let the IG select one to conduct the 

review. The Chairman accepted this advice, instructed the CAO to prepare 

the list, and asked the General Counsel to tell the IG about the new 

proposal.

On the morning of May 14, before the list was completed, the IG called the 

Chairman to advise him that a federal district court jury had acquitted Joe 

Dickey, TVA’s former Chief Operating Officer, of all criminal charges.14 The 

Chairman admitted to us that he had harshly criticized the IG and the OIG 

during the conversation because of the acquittal. The Chairman explained 

that he was upset because the OIG had spent approximately 2 years 

investigating Mr. Dickey and he believed that the acquittal might expose 

TVA and the IG to a civil lawsuit. During the conversation, the Chairman 

told the IG that he should now cooperate with the management review. The 

IG did not respond to this comment.

At the time, the Chairman assumed that the IG knew about his decision to 

allow an IG to review the TVA OIG. However, the General Counsel had not 

told the IG about the Chairman’s decision. To our knowledge, the 

management review of the OIG has been suspended.

14 During an OIG audit of TVA contracts that started in Sept. 1996, issues were raised 

concerning a contract awarded by Mr. Dickey, TVA’s Chief Operating Officer. These issues 

were referred to OIG Investigations in Jan. 1997. Mr. Dickey resigned from TVA on Aug. 14, 

1998, and was indicted on Sept. 15, 1998. This indictment was superceded on Nov. 4, 1998. 

The trial ended in an acquittal of all charges on May 14, 1999.
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TVA Initiated Review of IG’s 

Credit Card Use 

On the afternoon on May 14, 1999, after hearing the conversation between 

the Chairman and IG regarding the Dickey case, the CAO directed two 

senior members of his staff to obtain copies of all of the IG’s TVA credit 

card statements from 1994 to 1999 (the entire time the IG had served as IG) 

and analyze them. Based on this analysis, one staff member prepared a 

memorandum for the CAO on May 27, 1999, questioning the propriety of 

the IG’s golf, restaurant, and liquor charges since, in the employee’s view, 

the IG had no obvious business reason to be so heavily involved in such 

activities. The staff member who prepared the memorandum admitted he 

had conducted only “a very brief preliminary review of charges” on the IG’s 

credit card statements and recommended that a further detailed review be 

performed before any final determination was made.

According to the CAO, he requested the review because he considered the 

IG’s use of his TVA credit card for golf fees to be inappropriate. In his view, 

these actions compromised the IG’s independence as the IG was socializing 

with distributors and with managers whom he was charged with 

monitoring. The CAO further stated that he first learned about the IG’s golf 

expenses when TVA was preparing a response to a Januar y13, 1999, 

request from the Knoxville News Sentinel for the Board members’ 1998 

calendar year travel, entertainment, and golf charges. He said that while the 

Chairman was reviewing the charges that were made by the Board 

members, 12 TVA executives were identified who frequently traveled, 

played golf, and socialized with former Director Hayes. Information 

regarding the 12 employees’ 1998 golf credit card charges, that included the 

IG, was compiled on March 16, 1999, with no further action taken.

The IG learned about the review of his credit card usage in a meeting with 

the CAO on May 25, 1999. Based on the May 14 meeting with the Chairman, 

the IG asked the CAO for the meeting to discuss his options regarding his 

future at TVA. According to the IG, the CAO suggested that he retire and 

take a severance package, because the Chairman would spend every day of 

the next 3 years “screwing” with him. As an example of this, the CAO told 

the IG that TVA had reviewed his credit card statements and found he had 

improperly charged golf expenses. According to the IG, the CAO informed 

him that the Chairman had referred his golf charges to the U.S. Attorney for 

the Eastern District of Tennessee.15 The IG also said that the CAO 

15 The IG subsequently contacted the U.S. Attorney, who denied knowing about a referral 

involving the IG’s credit card use. We attempted to talk with the U.S. Attorney about this 

matter, but the Department of Justice declined our request for an interview.
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mentioned the Chairman’s conversation with the U.S. Attorney regarding 

the identification of three IGs to conduct the review and the IG’s selection 

of one to conduct the review. However, the IG did not interpret this as an 

offer for him to select an IG to conduct the review.

The CAO described the conversation somewhat differently. According to 

the CAO, he told the IG that the Chairman had 3 more years until his term 

expired, he knew that the relationship between the Chairman and IG was 

not good, and it was not going to improve. The CAO stated that they 

discussed two options: the IG could retire or stay and fight the 

management review. He added that the IG raised the subject of whether a 

severance package was available. The CAO admitted telling the IG that his 

credit card charges had been reviewed but denied telling the IG that the 

matter had been referred to the U.S. Attorney. The CAO also stated that, for 

informational purposes only and not as an offer to the IG, he had told the 

IG that the Chairman had spoken with the U.S. Attorney regarding the use 

of another IG to conduct the management review.

After his May 25, 1999, meeting with the CAO, the IG called a congressional 

member of the Tennessee Valley Authority Congressional Caucus, to inform 

him that the Chairman wanted the IG to retire. The IG and the Chairman 

told us that another member of Congress had called them shortly after the 

IG’s conversation with the caucus member. According to the Chairman, the 

second member informed him that the IG had asserted at an IG conference 

in April that the proposed review of the OIG was an impediment to the IG’s 

independence. The Chairman also told us that the second member had 

advised him that he should not proceed with the review of the OIG and that 

he planned to discuss the matter with GAO.

The Chairman told us that he viewed this conversation with a member of 

Congress as a threat, so he instructed the General Counsel to prepare a 

“defensive” letter responding to the member’s call. The letter was sent to 

the member on May 26. In the letter, the General Counsel provided 

background information concerning TVA’s proposed review of the OIG, 

starting with a discussion concerning the Chairman’s receipt of the 

anonymous management complaint. The General Counsel explained that 

he had initially advised the Chairman that the Board had the authority to 

hire an outside contractor to review the OIG but subsequently suggested 

that the Chairman seek a mutually satisfactory agreement with the IG in 

which the IG would have contracted for the review. He noted that during 

this period, the Chairman had received information from an independent 

source that the IG had abused his TVA credit card “to pay for charges at 
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golf courses, the purchase of liquor and excessive restaurant charges.” We 

determined that these allegations had not come from an independent 

source but instead were the result of a preliminary review of the IG’s credit 

card statements by the CAO’s office.

On the afternoon of May 26, 1999, the IG sent the Chairman a 7-day letter 

claiming that the Chairman was interfering with the operations of the OIG 

and engaging in harassment. As evidence of this, the IG pointed to the 

proposed independent review of the OIG. He also noted his discussion with 

the Chairman regarding the Dickey acquittal and opined that the Chairman 

essentially had threatened him not to investigate any more cases involving 

senior TVA officials. Further, he felt that the Chairman intended to hold the 

threat of an outside review over his head if he did so. The IG also provided 

details about the May 25 conversation with the CAO, in which the CAO had 

told him the Chairman was reviewing his travel expenses.

On June 2, 1999, the Chairman sent you a letter responding to the IG’s 7-day 

letter. The Chairman asserted that he had acted in a manner that was 

sensitive to the status of the IG but did not respond on a point-by-point 

basis to the IG’s allegations.

TVA and IG Used Media to 

Publicize Their Opposing 

Allegations

According to the Chairman, on May 26, 1999, he ordered that the TVA letter 

to the Representative be released to the press because he knew that the 

IG’s 7-day letter would be released to the public within the next 7 days. 

After the letter to the Representative was released, a reporter with the 

Knoxville News Sentinel interviewed the IG about the allegations 

concerning his abuse of the TVA credit card. During the interview, the IG 

described the issues he raised in his 7-day letter, including a description of 

the May 14 and 25 conversations with the Chairman and CAO, respectively.

On May 27, 1999, the CAO issued a statement to the media denying the IG’s 

allegations. In part, the CAO said,

“TVA takes the position there is no justification for the Inspector General to be spending his 

time during the work day socializing and playing golf with managers whose operations he is 

charged with monitoring as TVA’s independent watchdog. In our view, the Inspector General 

should be independent of management and avoid even the appearance of any actions that 

might be deemed inappropriate and would result in an OIG investigation.”

On May 28, 1999, the news media received information contained in the 

May 27 memorandum prepared for the CAO, which analyzed the IG’s credit 

card charges. This memorandum alleged that the IG had incurred $15,150 in 
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Page 14 GAO/OSI-99-20 Opposing Allegations by TVA Board and IG

potentially questionable charges from a casino/hotel, resorts, golf course 

fees, liquor purchases, and restaurants. The memorandum failed to 

disclose that these particular charges had been incurred over an 

approximately 5-year period (1994-1999).16 TVA officials have denied 

providing this information to the media.

TVA Referred Issues 

Involving IG to ECIE

After receiving a facsimile copy of the newspaper article entitled “Prosser: 

TVA wants me out of there,” an OMB official spoke to the TVA General 

Counsel about the allegations raised in the article. The OMB official 

indicated that the issues between the IG and TVA should not be fought in 

the newspapers. She added that if TVA had serious concerns about the IG’s 

actions, the matter should be referred to the PCIE Integrity Committee.

As a result of OMB’s advice, by letter dated June 1, 1999, the Chairman 

referred the matter concerning the IG’s questionable credit card charges to 

ECIE’s Chairman. In the referral, the TVA Chairman requested a review of 

the IG’s credit card charges including questionable country club, 

hotel/casino, golf, liquor, and other charges. The Chairman also provided 

information about the two anonymous OIG personnel complaints.

On June 7, 1999, the ECIE Chairman forwarded the matter to the Chairman 

of PCIE’s Integrity Committee. On June 25, the CAO’s office provided 

documents to the Integrity Committee regarding the IG’s alleged 

misconduct. Included was the May 27, 1999, “Preliminary Credit Card 

Review” with attached schedules. Based on the unsubstantiated 

information provided by the TVA Chairman, the Integrity Committee 

forwarded the matter to the Department of Justice. The FBI is currently 

reviewing the matter.

On August 20, 1999, after being informed that the FBI was investigating 

allegations against the IG, the Chairman placed the IG on paid leave.

Press Release and Media 

Leaks Occurred After 

Referral to ECIE

On June 2, 1999, TVA released to the press (1) the letter to the Chairman of 

the ECIE requesting the investigation of credit card charges by the IG and 

(2) the two anonymous complaints raising management issues within the 

OIG.

16 This disclosure was made in the May 20, 1999, draft of this memorandum from the senior 

manager to his supervisor, the CAO.
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Page 15 GAO/OSI-99-20 Opposing Allegations by TVA Board and IG

On July 23, 1999, TVA announced in a press release that it had revised its 

policy on the employees’ use of agency credit cards for business travel and 

entertainment. The announcement stated that additional controls would be 

placed on TVA’s hospitality policy and that the number of TVA credit cards 

would be decreased. The announcement added that the Chairman was 

requiring the OIG to develop a similar entertainment policy for the OIG for 

the Chairman’s approval. The Chairman stated in the release that these 

changes were prompted by allegations that the IG had more than $10,000 in 

charges on his credit card for meals, liquor, golf, and other entertainment.

On August 17, 1999, two documents were leaked to the media. One was a 

June 24, 1999, memorandum identifying a number of new allegations 

against the IG. The other was a July 21, 1999, letter from the Chairman to 

GAO in which the Chairman opined that it would appear inappropriate for 

an inspector general to spend significant time or resources on customer 

relations. TVA denied releasing both documents to the media.

The allegations that the June 24 memorandum contained included, among 

others, that the IG had participated in sports betting while at work, was 

absent from his office frequently because he was socializing and playing 

golf, and had failed to investigate a matter involving a TVA executive 

because of their close relationship. We reviewed several of the allegations 

in the memorandum and found them generally to be without merit. For 

example, we found that the IG had investigated allegations against all three 

Board members, including the official alluded to, and against friends of this 

official.

Chairman and IG Did Not 

Receive Crucial Information

During our investigation, we determined that in two instances the 

Chairman and the IG had failed to receive crucial information that might 

have impacted on the resolution of the management-review issue. The 

Chairman based his decision for a management review in part on the belief 

that the OIG had not been reviewed in 5 years. We determined that during 

this 5-year period, the OIG had had two peer reviews. The last peer review 

was completed on August 21, 1998. It concluded that the TVA OIG had a 

system of quality controls that provided with reasonable assurance for the 

OIG’s conformance with professional standards in the conduct of its audits. 

According to the Chairman, he was not aware that a peer review had been 

completed in August; and if he had known, it would have affected his 

decision to order a management review of the OIG. He added that he most 

likely would have postponed the review. The IG told us that he never 

thought to inform the Chairman about the peer review.
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Page 16 GAO/OSI-99-20 Opposing Allegations by TVA Board and IG

According to the IG, he was never offered the option of selecting from 

three other OIGs to conduct this review. Further, he would not have 

objected to such a review because, in his opinion, any IG conducting the 

review would have remained independent and would not have allowed the 

Chairman to have oversight of the review. However, this information was 

not conveyed to the Chairman; and the disagreements between the IG and 

the Chairman escalated significantly. After the Chairman criticized the IG 

about the Dickey case, TVA initiated an extensive review of the IG’s credit 

card expenses; and the IG concluded that the Chairman wanted to get rid of 

him.

The Chairman alone initiated the process for a management review of the 

OIG. When the Chairman received the analysis of the IG’s credit card usage 

for the IG’s entire tenure, he began his most agressive actions against the 

IG. This occurred after Directors Hayes and Kennoy had left TVA. The 

Chairman’s actions against the IG included the release of unsubstantiated 

allegations to the media and the referral of unsubstantiated allegations to 

the ECIE. These actions could be viewed as an attempt to undermine the 

IG’s independence.

Chairman’s Allegations 

Concerning IG’s Credit 

Card Expenses

Based on its “brief preliminary review” of the IG’s credit card statements, 

TVA questioned a total of $15,150 in charges for the years 1994 through 

1999. (See table 1.) We reviewed in depth the IG's most recent charges—

$14,197—from January 1, 1998, to May 12, 1999. As to these, we did not find 

that the IG had violated any TVA travel policy or rule. However, as the IG 

himself recognized, his actions could have created the appearance that his 

independence had been compromised. Based on this analysis, we 

determined that a further analysis of credit card charges for the period 1994 

through 1997 was not warranted. In addition, for comparison purposes, we 

requested TVA to compile credit card expenses for calendar year 1998 for 

the three Board members and the senior executives that report directly to 

the Board. This comparison indicated that the IG’s credit card expenses 

were consistent with those of other TVA executives. See appendix I for this 

comparison.

IG’s Travel Activities Were 

for Business Purposes or 

“Customer Relations”

As the head of a major office at TVA, the IG often traveled in connection 

with his position. For example, he traveled to attend meetings in his 

capacity as an ECIE representative on a PCIE committee. In other 

instances, he attended TVA Board meetings or met with congressional 

members and staff to present OIG reports. These activities clearly do not 
B-283001

Page 17 GAO/OSI-99-20 Opposing Allegations by TVA Board and IG

raise questions as to the purpose of the travel and were reimbursable as 

long as the expenses fell within the guidelines set out in TVA’s travel 

policies.17

The IG also incurred expenses as a result of activities that involved 

“customer relations.” The IG was a member of TVA’s Business Council and, 

as did the other Council members, participated in the customer outreach 

activities. These activities were done at the specific behest of former 

Director Hayes, who was most concerned with TVA’s maintaining or 

increasing its market share for electric power. Director Hayes also 

emphasized that it would be beneficial for the IG to take part in 

recreational events, such as golf outings that were ancillary to various 

meetings, that TVA planned as part of its program of customer relations. 

Moreover, he specifically encouraged the IG to bill the charges to TVA. The 

IG had initially paid for his own golf and charged the cost to TVA only when 

Director Hayes told him that such charges were consistent with TVA’s 

policy regarding allowable expenses for hospitality.

The Chairman was aware of the IG’s involvement in the customer relations 

program and told us that he considered this activity completely appropriate 

for the IG as long as his activity had been coordinated with Director Hayes. 

Director Kennoy also told us that it was appropriate for the IG to engage in 

customer relations.

The IG’s involvement in the customer relations program was coordinated 

with Director Hayes. The IG never reached out to any distributors but 

attended functions only when requested by the Customer Relations and 

Marketing Group, which had responsibility for administering the customer 

relations program. Essentially, the IG attended various meetings with 

distributors at which the IG would discuss the IG Act, his background, and 

the role of the OIG at TVA. The IG also assisted certain customers in 

dealing with problems that were similar to those encountered by an IG. For 

17 TVA travel policy required that TVA pay for travel expenses incident to business purposes 

for such things as transportation, lodging, meals, and other approved expenses in 

accordance with TVA guidelines and the Federal Travel Regulations, which are applicable to 

most civilian employees of the federal government. In this regard, TVA reimbursed business 

travelers for such items as meals, local transportation, lodging, laundry/dry cleaning, 

parking, phone expenses, and other incidentals. The reimbursement for meals, lodging, and 

laundry/dry cleaning was limited to 150 percent of the locality rate set by the General 

Services Administration (GSA) for civilian employees of the federal government in a travel 

status. However, since 1997, in special and unusual circumstances the maximum 

reimbursement can be up to 300 percent of the locality rate set by GSA.
B-283001

Page 18 GAO/OSI-99-20 Opposing Allegations by TVA Board and IG

example, the IG assisted one company in setting up an ethics program and 

another company in setting up an improved financial control system. He 

felt that all of these activities were beneficial to his office.

In performing his customer relations function, the IG sometimes paid the 

bill for other TVA employees, Board members, and customers. In some 

instances, the IG paid the bill when another TVA official could also have 

paid it. In other situations, the IG was the only TVA person present who 

could have paid the bill.

As part of its business practices, TVA had hospitality guidelines, which 

provided that hospitality was available to official visitors, candidates for 

employment, guests, and employees as a part of its business activities when 

it was determined to be in TVA's best interest. The guidelines further 

provided the following:

“Hospitality services provided for and paid for by TVA may include but are not limited to:

− Meals.

− Refreshments.

− Banquet or food services.

− Room and equipment rental associated with hospitality.

− Lodging, meal and travel expenses for visitors and guests.

− Entertainment.

− Flowers and decorations for events (as determined by the TVA organization).

− Recognition awards.

− Gifts.”

OIG had written policies indicating that the OIG followed TVA policy 

except for some modifications based on the OIG's unique role under laws 

and regulations. Nothing in these laws and regulations precluded the IG 

from engaging in hospitality functions and incurring the type expenses 

provided for in the hospitality policy. Indeed, the OIG policy specifically 

indicated that, in accordance with TVA policy, OIG employees may pay 

hospitality expenses for non-OIG individuals for a business purpose, such 

as to improve relations with individuals that TVA worked with on a regular 

basis.

The IG did acknowledge that his close relationship with members of the 

Board and his participation in TVA-sponsored social events could have 

created the appearance that his independence had been compromised. He 

continued, however, that he had participated at the Directors’ behest. He 

felt that participating in these activities enabled him to maintain a good 

working relationship with the Board. He concluded that his participation 

did not impede his independence.
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Page 19 GAO/OSI-99-20 Opposing Allegations by TVA Board and IG

Contested Charges for 1998-

1999 Were Appropriate

Table 1 details the TVA-questioned expenditures by category and the cost 

incurred for each year from 1994 through mid-May 1999.

Table 1: IG's Questioned Charges Based on TVA's Preliminary Review

a

We examined 1999 charges made through May 12.

Source: May 27, 1999, TVA memorandum to the CAO, entitled “Preliminary Credit Card Review −

George Prosser.”

We reviewed the charges in each category for 1998 and 1999. Based on the 

TVA travel and hospitality policies, we found that none of these charges 

violated TVA policies regarding the incurring of expenses for business and 

hospitality purposes. Specifically, we found the following as to these 

charges.

Hotel/Casino TVA alleged that the IG had incurred hotel and casino expenses in 

Philadelphia, Mississippi, on three occasions in 1998 and 1999, totaling 

$394. In 1998, the IG went to Philadelphia twice: in February, for a TVA 

Board meeting followed by other business meetings and in October, for an 

OIG presentation that he made in Philadelphia and a contiguous city. The 

expenses charged for these trips were for lodging. In 1999, the IG went to 

Philadelphia for a Joint OIG/TVA presentation made at Mississippi State 

University. On this trip, the IG charged the room expenses for himself and 

the Chief Financial Officer, who also made a presentation. These expenses 

were all appropriate.

Golf Resorts On seven occasions in 1998 and once in 1999, the IG played golf following 

either an official TVA meeting, such as the monthly meeting of the TVA 

Board, or an OIG presentation involving customer relations. His expenses 

for these golf activities during this period totaled $892 and ranged from $45 

Category of expenditure 1994 1995 1996 1997 1998 1999a Total

Hotel/casino $0 $0 $68 $68 $247 $147 $530

Golf resorts 489 480 218 629 2,384 180 $4,380

Liquor 0 0 0 0 303 0 $303

Nonlocal restaurant charges 493 254 1,793 1,548 1,669 162 $5,919

Local restaurant charges 225 621 0 1,139 1,013 385 $3,383

Other questionable charges 0 95 32 328 0 180 $635

Total $1,207 $1,450 $2,111 $3,712 $5,616 $1,054 $15,150
B-283001

Page 20 GAO/OSI-99-20 Opposing Allegations by TVA Board and IG

to $276. In several instances, the IG paid the golf fees for TVA customers, as 

he did when he incurred the $276 expense. The IG’s golf expenses were 

consistent with the TVA hospitality policy.18

The IG also charged $1,672 at the Power Play Golf Tournament, a major 

event sponsored by TVA and its customers to raise scholarship money. This 

amount covered the IG’s lodging and golf fees. In addition, some of this 

amount covered the expenses of another OIG employee who attended in 

order to ensure the accountability of the funds raised at the event. This 

employee did not have a TVA credit card, and the IG charged all the 

employee’s expenses. The IG also paid certain expenses for customers. As 

a senior official at TVA, the IG’s payment of these expenses was consistent 

with the TVA’s hospitality policy. Indeed, other TVA executives incurred 

charges on their TVA credit cards for golf fees and lodging similar to those 

of the IG.

Liquor On one occasion, the IG purchased liquor, which cost about $303, as an 

accommodation for Director Hayes who was going to make the purchase 

so that alcohol would be available at an official TVA dinner in a “dry” 

county. At the time, Director Hayes had a family emergency, which 

prompted the IG to make the purchase. Clearly Director Hayes could have 

purchased this liquor under the TVA hospitality policy, and we found no 

policy or rule that would prohibit the IG from substituting for a Director.

Nonlocal Restaurant Charges During 1998 and 1999, the IG allegedly charged a total of $1,831 at 

restaurants on 15 different occasions. These charges ranged from $35 to 

$163, except for one of $500. In every instance, the IG was on official 

business including meetings involving audits, with confidential informants 

and members of Congress, or attendance at official TVA functions. In 

certain instances, the IG paid for meals for others. For example, the

$500 charge occurred in Washington, D.C., when the IG charged the cost of 

a meal served at a business meeting he attended with members of the 

Congressional Committee having oversight of TVA. All of these expenses 

were consistent with TVA travel policy and rules.

Local Restaurant Charges Some expenses that were not incident to travel were called into issue. For 

the period we reviewed, these expenses totaled $1,398 and covered meals 

18In one instance, the IG paid the golf fees for Director Hayes. Since Director Hayes was 

clearly authorized to charge TVA for this expense and the IG was authorized to make such 

payments when in the best interest of TVA, we find the IG's action unobjectionable.
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Page 21 GAO/OSI-99-20 Opposing Allegations by TVA Board and IG

that the IG purchased in the Knoxville area on 17 occasions. The costs of 

the meals ranged from $10 to $156, except for one that was $582. In most 

instances, the IG conducted a business meeting during lunch and paid for 

all participants. For example, he met with the Special Agent in Charge of 

the FBI’s Knoxville Field Office on at least three occasions in 1998 on 

matters of mutual concern and paid for the meals. He also held business 

lunches with confidential informants and paid for these. Three charges 

during 1998 were related to a meeting that the IG had with representatives 

from the OIG of the National Archives and Records Administration. TVA 

policy permitted the IG to charge these meals while he was engaged in 

official business. Lastly, a $582 charge was for an employee appreciation 

luncheon, which was covered under the TVA hospitality policy.

Other Questionable Charges TVA also raised questions about miscellaneous charges the IG had 

incurred. Four of these arose in the 1998 and 1999 time period we reviewed. 

One was a charge of $43 the IG had made for a personal item; he had 

immediately reimbursed TVA even though he was not asked to do so. A 

second charge involved $732 airline tickets that the IG never used. We were 

informed that this was due to an administrative error that eventually 

resulted in TVA’s account being credited for the amount. A third charge 

consisted of $118 for flowers for an official TVA event. In this instance, a 

Director had asked the IG to order the flowers for customer appreciation. 

The fourth charge, for $19, was for publications for the OIG. The purchase 

of flowers was covered under the TVA hospitality policy. We determined 

that the publications purchase was needed for the work of the OIG.

Scope and 

Methodology

We conducted our investigation from June 9, 1999, through September 7, 

1999. We interviewed TVA officials involving both TVA’s attempt to retain a 

nonfederal entity to conduct a management review of the OIG and the 

analysis of the IG’s TVA credit card usage. We also interviewed current and 

former OIG officials regarding the OIG performance review issue and the 

IG’s use of the TVA credit card. Further, we contacted individuals from 

OMB, FBI, Verner Liipfert, and the U.S. Attorney's Office for the Eastern 

District of Tennessee regarding their conversations with TVA officials. The 

Department of Justice denied our request to interview the U.S. Attorney for 

the Eastern District of Tennessee.

We analyzed records related to both the management review and charges 

that the IG made using a TVA credit card. These records included internal 

memoranda, notes, contract files, audit reports, and policy manuals 
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Page 22 GAO/OSI-99-20 Opposing Allegations by TVA Board and IG

regarding OIG travel and hospitality expenses. We also reviewed quality 

standards for IGs. In addition, we reviewed the IG’s calendars for 1994 

through 1999 and invoices for charges to the TVA credit card for 1996 

through 1999. Receipts for 1994 and 1995 were no longer available. Further, 

we reviewed a detailed analysis of the IG’s travel, by trip, for calendar year 

1998 and the first 5 months of 1999. The IG also provided written 

explanations for expenses he had incurred during 1998 and 1999 and for all 

charges for golf resorts for the period 1994 through May 1999.

As agreed with your office, unless you release its contents earlier, we plan 

no further distribution of this report until 30 days after the date of this 

letter. At that time, we will send copies of this report to the Honorable 

Craven Crowell, Chairman, Tennessee Valley Authority; George Prosser, 

Inspector General, Tennessee Valley Authority; and interested 

congressional committees. We will also make copies available to others 

upon request. If you have questions concerning this report, please contact 

me or Donald Fulwider at (202) 512-6722. John Ryan was a key contributor 

to this case.

Sincerely yours,

Robert H. Hast

Acting Assistant Comptroller General

for Special Investigations
Page 23 GAO/OSI-99-20 Opposing Allegations by TVA Board and IG
Page 24 GAO/OSI-99-20 Opposing Allegations by TVA Board and IG

Appendix I

1998 Credit Card Charges by TVA Board, IG, 

and Senior Executives ApendxIi

Table 2: 1998 Domestic Charges by TVA Officials

a

TVA’s General Counsel charged no domestic expenses during 1998.

b

This category does not include direct bills to TVA. It includes only the amount charged on the VISA 

Gold Card.

c

“Transport” includes commercial flights, travel service, car rentals, taxis, gasoline, and parking.

d

“Other” includes conference fees, telephone calls, tips, and facsimiles.

Officiala Hotelb Mealsb Transportc

TVA

plane

Other

business

expense

Personal

vehicle

use Golf Liquor Otherd Subtotal

Chairman 

Crowell $11,309 $3,848 $15,398 $56,294 $0 $491 $0 $0 $1,042 $88,382

Director 

Kennoy 4,341 1,271 7,468 52,860 0 707 0 0 1,661 $68,308

Director 

Hayes 6,134 1,270 8,326 27,042 0 105 90 0 844 $43,811

IG Prosser 4,453 2,758 5,381 0 0 1,342 1,174 303 74 $15,485

Chief 

Financial 

Officer 11,685 4,471 1,089 0 1,304 0 120 0 0 $18,669

Chief 

Operating 

Officer 3,659 79 447 0 1,025 0 120 0 0 $5,330

CAO 3,079 874 549 0 3,994 0 120 0 0 $8,616
Appendix I

1998 Credit Card Charges by TVA Board, IG, 

and Senior Executives

Page 25 GAO/OSI-99-20 Opposing Allegations by TVA Board and IG

Table 3: 1998 International Charges by TVA Officials

a

TVAs General Counsel charged no international expenses during 1998.

b

This category does not include direct bills to TVA. It includes only the amount charged on the VISA 

Gold Card.

c

“Transport” includes commercial flights, travel service, car rentals, taxis, gasoline, and parking.

d

“Other” includes conference fees, telephone calls, tips, and facsimiles.

Officiala Hotelb Mealsb Transportc

Other

business

expense Otherd Subtotal

Total 1998

charges

Chairman Crowell $2,284 $484 $14,678 $0 $8 $17,454 $105,836

Director Kennoy 585 151 1,740 0 12 2,488 $70,796

Director Hayes 0 0 0 0 0 0 $43,811

IG Prosser 0 0 0 0 0 0 $15,485

Chief Financial Officer 1,806 27 0 24 0 1,857 $20,526

Chief Operating Officer 0 0 0 724 0 724 $6,054

CAO 0 0 0 0 0 0 $8,616

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