U.S. GOVERNMENT PRINTING OFFICE

67–979 cc WASHINGTON : 2000

S. HRG. 106–856

JOINT HEARING ON PENSION TENSION:

DOES THE PENSION BENEFIT GUARANTY

CORPORATION DELIVER FOR RETIREES

JOINT HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING

AND THE

COMMITTEE ON SMALL BUSINESS

UNITED STATES SENATE

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

WASHINGTON, DC

SEPTEMBER 21, 2000

Serial No. 106–38

Printed for the use of the Special Committee on Aging

(

For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC. 20402

SPECIAL COMMITTEE ON AGING

CHARLES E. GRASSLEY, Iowa, Chairman

JAMES M. JEFFORDS, Vermont

LARRY CRAIG, Idaho

CONRAD BURNS, Montana

RICHARD SHELBY, Alabama

RICK SANTORUM, Pennsylvania

CHUCK HAGEL, Nebraska

SUSAN COLLINS, Maine

MIKE ENZI, Wyoming

TIM HUTCHINSON, Arkansas

JIM BUNNING, Kentucky

JOHN B. BREAUX, Louisiana

HARRY REID, Nevada

HERB KOHL, Wisconsin

RUSSELL D. FEINGOLD, Wisconsin

RON WYDEN, Oregon

JACK REED, Rhode Island

RICHARD H. BRYAN, Nevada

EVAN BAYH, Indiana

BLANCHE L. LINCOLN, Arkansas

THEODORE L. TOTMAN, Staff Director

MICHELLE EASTON, Minority Staff Director

COMMITTEE ON SMALL BUSINESS

CHRISTOPHER S. BOND, Missouri, Chairman

CONRAD BURNS, Montana

PAUL COVERDELL, Georgia

ROBERT F. BENNETT, Utah

OLYMPIA J. SNOWE, Maine

MIKE ENZI, Wyoming

PETER G. FITZGERALD, Illinois

MIKE CRAPO, Idaho

GEORGE V. VOINOVICH, Ohio

SPENCER ABRAHAM, Michigan

JOHN F. KERRY, Massachusetts

CARL LEVIN, Michigan

TOM HARKIN, Iowa

JOSEPH I. LIBERMAN, Connecticut

PAUL WELLSTONE, Minnesota

MAX CLELAND, Georgia

MARY L. LANDRIEU, Louisiana

JOHN EDWARDS, North Carolina

(II)

C O N T E N T S

Page

Opening statement of Senator Charles E. Grassley ............................................. 1

Statement of Senator John Breaux ........................................................................ 12

Prepared statement of Senator Christopher Bond ................................................ 177

PANEL I

Thomas A. Parks, Cedar Rapids, IA ...................................................................... 14

Bonne McHenry, former Pension Benefit Guaranty Corporation Contract Employee, Merrimack, NH ........................................................................................ 21

Wayne Robert Poll, Inspector General, Pension Benefit Guaranty Corporation,

Washington, DC ................................................................................................... 31

Barbara D. Bovbjerg, Associate Director, Education Workforce, and Income

Security Issues, Health Education, and Human Services Division, U.S. General Accounting Office, Washington, DC ............................................................ 49

Robert H. Hast, Assistant Comptroller General, Office of Special Investigations, U.S. General Accounting Office, Washington, DC .................................. 128

David Strauss, Executive Director, Pension Benefit Guaranty Corporation,

Washington, DC ................................................................................................... 140

APPENDIX

GAO responses to questions ................................................................................... 191

Pension Benefit Guaranty Corporation letter and responses to questions ......... 201

Testimony of John W. Wilde ................................................................................... 230

Statement from Kenneth Lyons of the National Association of Government

Employees ............................................................................................................. 234

Letter from Richard Brooks, Association of Former Pan Am Employees ........... 239

Letter from David W. Kuhnsman, Attorney-Advisor ............................................ 247

Investigations into Allegations of Contract Improprieties from Pension Benefit

Guaranty Corporation .......................................................................................... 252

(III)

(1)

JOINT HEARING ON PENSION TENSION:

DOES THE PENSION BENEFIT GUARANTY

CORPORATION DELIVER FOR RETIREES

THURSDAY, SEPTEMBER 21, 2000

U.S. SENATE,

SPECIAL COMMITTEE ON AGING,

AND THE COMMITTEE ON SMALL BUSINESS,

Washington, DC.

The committee met jointly, pursuant to notice, at 8 a.m., in room

SD–562, Dirksen Senate Office Building, Hon. Charles Grassley

(Chairman of the Committee) presiding.

Present: Senators Grassley, Breaux and Bond.

OPENING STATEMENT OF SENATOR CHARLES GRASSLEY,

CHAIRMAN

The CHAIRMAN. Thank you all for coming. And as everybody who

observes Congress to any great extent, and that is probably a

large—like I was about to say, there is unusual things happening.

[Laughter.]

And the most unusual is that we are meeting at 8 in the morning. And you can see that even the mechanical aspects of Congress

do not operate very well at 8 o’clock in the morning. This is necessary because Senator Breaux and I are members of the Senate

Finance Committee. And a meeting that was scheduled for yesterday at 10 o’clock was postponed to today at 10 o’clock, which interfered with our hearing. And so we called this at 8 o’clock in the

morning to be able to accommodate all of our responsibilities for

today.

So those of you who have come out early, we thank you very

much for doing that, particularly those who had to come, members

of this committee, as well as our witnesses.

I thank Senator Bond, Chairman of the Committee on Small

Business, and I thank the ranking members of both committees,

Senator Breaux and Senator Kerry, for their support of this oversight hearing, and I thank my fellow members on both sides of the

aisle for taking time out of their busy schedule at the end of the

session to attend this hearing and also a second thank you for accommodating us by starting at 8 in the morning, for a second time,

and I think they deserve it to thank our witnesses for being here

today and again earlier than usual.

Your testimony as witnesses will assist the committee greatly in

determining how best to address the matters that are raised by you

and by our investigators. I appreciate everyone’s cooperation in

2

permitting me to start so early, and I have explained why we are

here, and I would appreciate members who normally are not ranking member or chairmen who I would defer to give statements, that

today we will pass up those statements as a matter of time. So only

Senator Breaux and I, and Senator Kerry and Senator Bond will

have statements.

There’s been a lot of discussion throughout the 106th Congress

about retirement income security. It has been a theme of my chairmanship of this committee. As this Congress comes to a close, we

continue to work to pass legislation to help Americans create secure retirement. Next week, the Senate is going to debate the Comprehensive Pension Reform bill as an example. But what if you do

not have a secure retirement or what if you will only receive a

small pension from the Social Security Administration and your

company’s pension makes all of the difference in the world then to

the quality of life you have in retirement.

Imagine retiring and applying to receive your pension benefit

from a company that you worked for very early in your career, and

you find that that plan has gone bankrupt. Imagine collecting a

pension check for a decade only to receive notice stating that you

have been overpaid for several years. Now you owe several thousand dollars, and your monthly pension will be reduced drastically.

Imagine receiving an IRS notice that you underpaid your taxes because of the lump sum you received as a result of somebody’s miscalculation. Now that individual faces higher taxes and a 20-percent penalty.

Imagine receiving a $473,000 check by mistake, as did the mother of one of today’s witnesses. A copy of the check sent to the PBGC

to return the mistaken money is demonstrated over here on this

chart at my right. But the problem did not end there. Next, you

will hear from the IRS because they get involved wanting taxes

and penalties on a $470,000 mistake, and that is evidenced here by

the letter from the IRS.

This hearing then focuses upon the Pension Benefit Guaranty

Corporation, the PBGC, as we will refer to it. It is a wholly owned

Government corporation that manages $19 billion. The PBGC’s

core mission is to provide timely and accurate benefits to millions

of Americans who are covered by private sector-defined benefit

plans. Today, we will examine how effectively the PBGC has carried out its missions.

We are going to hear a lot about the Corporation’s benefit determination process. To simplify this discussion, I have over here another chart that we prepared, which reflects an overview of the

Corporation’s benefit process. I plan to leave this chart up throughout the hearing for any witnesses who may wish to refer to it. The

chart shows seven stages of the benefit determination process. We

are primarily concerned with five stages, which are numbered on

the chart.

Today, we will hear various statistics about the length of time it

takes the corporation to process final benefit determinations, and

it is important to keep in mind four dates: The date of plan determination, and that is called Stage One; date of trustee is reflected,

also, at Stage One; the date of actuarial valuation reflected in

3

Stage Three; and the date of the initial or final determination letter is sent, and that is at Stage Four.

Regardless of the dates used to analyze the efficiency of the Corporation’s benefit process, it is important for us to keep one simple

fact in mind: A retiring individual needs to know the amount of his

or her retirement at the earliest possible date, preferably right

after plan determination. Let me be clear that I recognize many

people are satisfied with the Corporation’s management. I am

thankful for that. I further recognize that the Corporation has a

difficult job in assessing plan records from bankrupt companies in

calculating benefits.

However, other people have had less satisfactory experiences,

and we will hear from some of those stories today. Our purpose is

not to embarrass anybody, but to focus on how we can continue to

improve delivery of this vital service to millions of Americans. The

committee has learned that it takes the corporation approximately

6 years from the date that a retirement plan terminates to determine the amount of a person’s retirement benefit. Remember that

that is an average time. From the chart to my right, you can see

that some determinations might take as long as 15 to 20 years, and

that is Chart No. D. That is a very long time for someone to wait

before they know what their retirement is going to be.

It is true that the Corporation does an excellent job of ensuring

that people’s payments continue through the determination process. The problem, however, arises with the uncertainty people can

face from year to year. People need to know, as quickly as possible,

the amount of their monthly retirement check. I believe that a corporation chartered by Congress can do much, much better. I intend

to see that this situation improves dramatically.

The hearing will cover two additional topics that are directly related to the benefits determination process: contract management

and computer security. The Corporation’s contract management is

important to this discussion because more than one-half of the Corporation’s 1,300 employees are contract employees located in 12 offices. These contract employees process the bulk of the Corporation’s benefit determinations.

Today, I and Senator Bond are releasing a General Accounting

Office report on the Corporation’s contract practices. In addition,

the Corporation’s Inspector General will discuss five reports that

he has conducted on the length of time it takes the Corporation to

process benefit determinations. The Inspector General will also discuss his computer penetration study that hacked into the Corporation’s computer system and demonstrated its lack of security. The

Corporation has reported to our two committees monthly and has

made great strides to ensure that its computer system is more secure.

[The prepared statement of Senator Grassley follows:]

PREPARED STATEMENT OF SENATOR CHARLES GRASSLEY

I want to begin by thanking Senator Bond, Chairman of the Committee on Small

Business, as well as the Ranking Members of both committees, Senator Breaux and

Senator Kerry, for their support on this oversight hearing. I want to thank my fellow Members, on both sides of the aisle, for taking time out of their busy schedules

at the end of the session to attend this important hearing. In addition, I want to

4

thank the witnesses for being here today. Your testimony today will assist the Committee greatly in determining how best to address the matters you raise.

I appreciate everyone’s cooperation in permitting me to start the hearing earlier

today. I have been called to a Finance Committee mark-up on important legislation

beginning at 10 a.m. Therefore, I want to try to complete this hearing by 10 a.m.

today.

There has been a lot of discussion throughout the 106th Congress about retirement income security. It has been a theme for me in my chairmanship of the Aging

Committee. As this Congress comes to a close we continue to work to pass legislation to help Americans create a secure retirement. (Next week, the Senate will debate the comprehensive pension reform bill that I cosponsored.)

But what if you don’t have a secure retirement? Or, what if you will only receive

a small pension from the Social Security Administration and your company’s pension makes all the difference? Imagine retiring and applying to receive your pension

benefits from a company that you worked for early in your career. You find it has

since gone bankrupt. Imagine collecting a pension check for a decade only to receive

a notice stating that you have been overpaid all these years. Now you owe several

thousand dollars and your monthly pension will be reduced drastically. Imagine receiving an IRS notice that you underpaid your taxes because of the lump sum you

received as a result of somebody’s miscalculation. Now you face higher taxes and

20 percent penalties. Imagine receiving a $473,000 check by mistake, as did the

mother of one of today’s witnesses. But, the problem didn’t end there. Next, you will

hear how the IRS got involved, wanting taxes and penalties on the $473,000 mistake.

This hearing focuses on the Pension Benefit Guaranty Corporation, or PBGC,

which is a wholly-owned government corporation that manages $19 billion. PBGC’s

core mission is to provide timely and accurate benefits to millions of people who are

covered by private sector defined benefit plans. Today we will examine how effectively PBGC has carried out its mission.

We are going to hear a lot about PBGC’s benefit determination process. To simplify this discussion, we have prepared the next chart which reflects an Overview

of PBGC’s Benefit Process. I plan to leave this chart up throughout the hearing for

any of the witnesses who may wish to refer to it. The chart shows seven stages of

the benefit determination process. We’re primarily concerned with five stages, which

are numbered on the chart. Today we will hear various statistics about the length

of time it takes PBGC to process final benefit determinations. It is important to

keep in mind four key dates:

• date of plan termination (reflected at Stage I);

• date of trusteeship (reflected at Stage I);

• date of actuarial valuation (reflected at Stage III); and

• date on which the initial (or final determination) letter is sent (at Stage IV).

Regardless of the dates used to analyze the efficiency of PBGC’s benefit process,

it is important for us to keep one simple fact in mind—a retiring individual needs

to know the amount of his or her retirement at the earliest possible date—preferably right after plan termination.

Let me be clear that I recognize many people are satisfied with PBGC. I am

thankful for that. I further recognize that PBGC has a difficult job in accessing plan

records from bankrupt companies and calculating the benefit. However, other people

have had less satisfactory experiences. We will hear some of those stories today. Our

purpose is not to embarrass an agency but to focus on how we can continue to improve the delivery of this vital service to millions of Americans.

The Committee has learned that it takes PBGC approximately 6 years from the

date that a retirement plan terminates to determine the amount of a person’s retirement benefit. Remember—that’s the average time. From the chart to my right, you

can see that some determinations take from 15 to 20 years!!. That’s a very long time

for someone to wait before they know what their retirement income will be.

It is true that PBGC does an excellent job of ensuring that people’s payments continue throughout the determination process. The problem arises with the uncertainty people can face for years and years. People need to know as quickly as possible the amount of their monthly retirement check. I believe that a corporation,

chartered by Congress, can do much, much better. I intend to see that this situation

improves dramatically.

The hearing will cover two additional topics that are directly related to the benefits determination process: contract management and computer security. PBGC’s

contract management is important to this discussion because more than one-half of

PBGC’s 1,300 employees are contract employees located in 12 offices. These contract

employees process the bulk of PBGC’s benefit determinations. Today, Senator Bond

5

and I are releasing a GAO report on PBGC’s contract practices. In addition PBGC’s

Inspector General will discuss five reports he has conducted on the length of time

it takes PBGC to process benefit determinations. The Inspector General will also

discuss his computer penetration study that hacked into PBGC’s computer system

and demonstrated its lack of security. PBGC has reported to our two Committees

monthly and has made great strides to ensure that its computer system is secure.

[Charts on Overview of PBGC]

6

7

8

9

10

11

12

I now would refer to Senator Breaux, the distinguished ranking

minority member of this Committee on Aging.

STATEMENT OF SENATOR JOHN B. BREAUX

Senator BREAUX. Thank you, Mr. Chairman. I am delighted to

join with you in participating in this hearing. I am glad the charts

have cleared up how the Agency operates. I am not sure it is totally clear yet. Today, after reading that chart, it looks like how

Congress operates, which is not very clear at all. [Laughter.]

But I think it is important that we look at the agencies that we

have jurisdiction over, particularly in the area of retirement security. The average American probably has never heard of a corporation called the Pension Benefit Guaranty Corporation. Most Americans would not be able to tell you what that Agency does. But for

millions of Americans who rely on the Pension Benefit Guaranty

Corporation for a check every month, they certainly understand it

and know how important it is to their daily lives. They are dependent on it.

In my own State of Louisiana, as an example, there are 302

plans, I think, that pay premiums to cover over a half a million

participants just in my State of Louisiana. This is a corporation

that manages millions and millions of dollars and serves a very

critical purpose for a large number of Americans. And I think,

therefore, it is appropriate and proper that this committee, in particular, which has taken the leadership I think in so many areas

dealing with retirement and pension benefits and issues of particular concern to the elderly in our country, that it is appropriate

that we have this oversight committee.

I think the executive director, Mr. Strauss, would be the first to

admit that any agency in Government, indeed, can always do better than they have. And what we look for is a trend line of improving performance in serving the American public. I think it is important for this Agency, this Corporation, to know that Congress is

looking at their operations and want to ensure that the movement

is in the right direction in order to continue to improve services.

And I think over the past years there has been an improvement in

the quality of the services to the American people. This is an issue

that is far too important to take lightly. Pensions are the life blood

of many families in America. So we have to continue to do a better

job than we did in the previous year.

There has been some concern about the tardiness in coming up

with a final determination of what the actual benefits would be on

a month-to-month basis, and we need to do better in that area. I

do note, however, that I don’t think we’ve ever missed any payments, and people have always been able to depend on that pension check. And in most cases, the initial determination and the

final determination are actually very close to being the same thing.

Americans can depend on getting their pension from the Pension

Guaranty Corporation.

Customer services is a priority. I mean, this Agency, as we and

the Congress, work for the American people. I have reviewed Mr.

Strauss’s testimony. I have been impressed that a person who is

executive director has actually spent such an incredible amount of

time in personally meeting with people who use this Corporation

13

and depend on it. I think that is admirable. Too often, in Washington, people who run agencies have a disconnect with the people

that they serve. It is very important to reestablish that, and I

think they have done that.

There has also been about 21 years of budget shortfalls in this

Agency, which has been very disturbing. And it is good to note that

over the last four consecutive years we have had a surplus. I think

that is a major and very positive indication of movement in the

right direction, as well as a downturn in the number of pending

benefit determinations that are still pending and have been going

down in each of the last 5 years.

So there is progress that is being made. Is it a perfect Agency?

No. Is there a perfect Agency in Washington? No. I mean, everybody can stand improvement, and that is what we are looking for

here today. And I look forward to all of our witnesses and their recommendations.

Thank you, Mr. Chairman.

The CHAIRMAN. I will try to accommodate Senator Bond or Senator Kerry if they are under tight schedules when they show up,

if they want to make statements, because they have to go to another committee meeting. Both staff can inform them that I am

willing to do that to help them. Because we need to conclude the

hearing at 10 a.m. to attend the Finance Committee mark-up, as

I have already suggested, I thank the Inspector General for his

preparation to provide an introductory overview of the PBGC. And

in the interest of time, I want to dispense with that opening and

make it a part of the record.

Now, I introduce the panel, and I will introduce the entire panel,

and then we will start with Mr. Parks and end with Mr. Strauss.

Thomas A. Parks is a constituent of mine from Cedar Rapids, IA.

And he has come here under extreme circumstances because he has

been with a friend who is ill in Alaska, and we appreciate very

much your taking time out of your schedule to come.

Now, we have another person, Dr. Wilde, who evidently because

of plane problems may not be able to get here. He happens to be

from Dale City, CA, but is now in Chicago, it is my understanding.

He is going to, if he gets here, will testify on behalf of his mother,

Dorothy Jasco. If he does not come, we will be able to put his statement in the record.

Then we have Bonne McHenry, a former contract employee of the

Corporation, PBGC. She is from Merrimack, NH. Then, we have

the Inspector General of the Corporation, Wayne Robert Poll.

Thank you for coming.

And Barbara Bovbjerg, Associate Director of Income Security at

the General Accounting Office. Thank you.

Robert H. Hast, Assistant Comptroller General for Special Investigations at the General Accounting Office.

And then David Strauss, our Executive Director of the Pension

Benefit Guaranty Corporation. Thank you.

Now, we will start with Mr. Parks.

14

STATEMENT OF THOMAS A. PARKS, CEDAR RAPIDS, IA

Mr. PARKS. Thank you, Senator. Let me also preface my remarks

that I have no interest in negatively complicating the lives of anyone at the Pension Benefit Guaranty Corporation. My sole motivation is to illuminate past problems with and within the PBGC,

based on my experience, so as to hopefully benefit what I suspect

are probably thousands of retirees highly dependent upon the

PBGC.

That philosophy was enunciated in my letter to the PBGC of

April 3, 1996, after approximately 41⁄2 years had elapsed before my

situation was finally resolved in August 2000. That final determination, incidently, came after approximately 8 years after the

PBGC became involved in this plan. In that 1996 letter, I stated:

‘‘My experience suggests to me that problems of this nature reflect much greater problems at the top. This does not necessarily

mean at the supervisory level, it may be a funding issue or something comparable and equally difficult to resolve.’’

‘‘For that reason alone, I am writing to you to ask that my unanswered letters be answered and my case resolved with rational expediency and that you allow me the benefit of your insight into the

overall question before I take this matter up with others who I am

reasonably certain will act.’’

To that April 1996 letter I attached an earlier fax to the PBGC

in which I recited a litany of mistakes, some of which involve my

receiving, without explanation, a substantial check drawn on a

bank other than that which the PBGC had indicated would be

transmitting funds and against a company pension plan unrelated

to me in any way. Subsequently, I received another check duplicating the amount of the first check, drawn upon the correct PBGC

bank. I returned these funds to the PBGC via a certified check.

Like other communications with the PBGC, these received no

clarifying response. Instead, in April 1996, I received a request for

documents that duplicated documents first supplied November 27,

1995. Subsequently, I received a surprising telephone inquiry from

the PBGC asking if I could illuminate the cause of errors that were

obviously internal to them and about which I was understandably

uninformed. My response simply reiterated details previously supplied.

Following months of frustrating absence of any closure on questions and issues put before the PBGC, in January 1997, I requested

the assistance of Congressman Jim Leach. In my judgment, the initial response to the Congressman’s office was evasive and of little

assistance, except to confirm that some undefined action was in

progress. Subsequently, in a letter dated February 3, 1997, a full

5 years after the applicable pension plan had been terminated with

the PBGC’s involvement and 11⁄2 years after my retirement and filing for benefits, the PBGC confirmed their appointment as trustee,

which had actually happened 6 months previously.

The PBGC then, in February 1997, proceeded to send auditors to

my former employer’s office to audit materials readily available

from Aetna from 1992 forward. Nothing further was heard from

them until 8 months later, when they telephoned my employer’s

former plan administrator, asking questions previously answered

many times and suggesting that they had ‘‘misplaced’’—their

15

words—applicable files and were ‘‘temporarily stymied.’’ Consequently, on November 12, 1997, I requested assistance from the

office of Senator Charles Grassley and provided that office with a

detailed recap of pertinent communications with the PBGC extending from September 1991, over 6 years. That communication and

attachments are included herewith as a matter of record.

The PBGC, in December 1997, responded to Senator Grassley,

stating, among other things, that ‘‘our processing schedule calls for

final benefits to be calculated by the end of 1998,’’ which actually

did not occur until August 2000. In this response, the PBGC expressed concern over the length of the process and further stated

that their problems resolution officer had been asked to monitor

my case to ensure that it stays on track.

I regret having to add to this litany of problems the fact that the

final determination letter, ultimately received on August 14, 2000,

was found to be incorrect and was superseded by what I presume

is the ultimate final determination letter, dated August 18, 2000.

In all fairness, I must add that this error was found by the PBGC

without input from me and that they acted quickly to make the

necessary corrections.

This quick action suggestions or appears to suggest some internal improvements have taken place, but this appearance of improvement is so recent that I am hesitant to rely upon it.

The fact remains that eight long years were consumed in the

process between when the PBGC first became involved and their

final determination of my case. During much of this time, I was uncertain as to benefits due me and aware that, upon final determination, I might have a partial repayment obligation rather than

an increase in the monthly interim payment being received. Those

interim payments began at $1,006 in May 1996 and were provisionally adjusted upwards to $1,257 in February 1998. In their final

determination letter, the PBGC advised that my final entitlement

would be increased by 83 cents.

Your attention is drawn to Attachment 1 to my November 12,

1997, letter to Senator Charles Grassley. That attachment, dated

June 4, 1992, authored by my former employer’s pension plan administrator, states that upon my retirement my benefit payment

will be $1,257.88, only a nickel variance from the number determined by the PBGC to be applicable after 8 years of expended resources.

When one compares the years and resources consumed to arrive

at such an insignificant change, it is difficult to make a positive

statement, even given that I do have an appreciation for fiscal and

accounting procedures which might justify such a modest adjustment. The 1992 estimate authored by my former employer’s plan

administrator was not mere speculation. It was predicated upon

the facts that Aetna’s actuaries had monitored and reported upon

the applicable plan for benefits for many years. Additionally, in

compliance with Department of Labor requirements, the company’s

plan numbers and Aetna’s numbers had been audited and verified

annually by auditors such as Price Waterhouse and Arthur Anderson.

The PBGC’s refusal to work with this certified data and thus

save years of expensive efforts, only to essentially arrive at an

16

identical conclusion, appears to reflect that other situations possibly surfaced unsatisfactory detail. However, to consequently

adopt an attitude that one rule or experience fits all is tunnel vision, causing corporate and human misery best avoided by working

with more commonly accepted business practices. My decades of experience working for and operating small businesses dictates a

strong position opposing such waste.

I have also held management positions in Fortune 500 companies

and can attest that their ability and resources to deal with such

problems are more in tune with these bureaucratic procedures,

which have the potential of crushing small businesses. In most

cases, where one rule or procedure is assumed applicable to all

businesses, small or large, the small company operates at a distinct

disadvantage.

In summary, the delays and absence of communication over

many years perpetuated uncertainties and prolonged determination

of benefits to which I was, and am, entitled. I am fortunate that

my financial survival was not at stake, but I suspect that many

others suffering this treatment are injured or at least highly insecure.

As I reflect upon this experience, I am led to speculate that the

root problem is or was a lack of adequate resources to cope with

a crescendo of plan failures during the 1990’s. If that is the case,

the fault rests not with line personnel, but rather with top management or funding sources or both for having failed to recognize the

magnitude of the needs.

Thank you very much.

[The prepared statement of Mr. Parks follows:]

17

18

19

20

21

The CHAIRMAN. Thank you, Mr. Parks.

Now, Ms. McHenry.

STATEMENT OF BONNE McHENRY, FORMER PENSION BENEFIT GUARANTY CORPORATION CONTRACT EMPLOYEE,

MERRIMACK, NH

Ms. MCHENRY. I, Bonne Ann McHenry, respectfully submit the

following testimony on September 21, 2000, before the Senate Special Committee on Aging and the Senate Committee on Small Business.

I worked for Integrated Management Resources Group, Incorporated, IMRG, as a Senior Pension Administrator for the Atlanta

PBGC office. My testimony is based on my experiences and observations. Since I was a member of the Pan American Cooperative

Retirement Income Plan—Pan Am CRIP—team for most of this

time, I would like to address the process, timeliness and accuracy

of the issuance of these Initial Determination Letters.

An Initial Determination Letter, IDL, is a communication to a

participation in a PBGC-administered defined benefit pension plan

that states the amount of his or her benefit at normal retirement

age. If the participant is already receiving a pension, an IDL confirms or refutes the amount that is being paid. An IDL is the most

important document that the participant will receive from the

PBGC because a participant who disagrees with PBGC’s determination cannot appeal PBGC’s decision until an IDL is issued. In

other words, PBGC prevents participants from appealing any disputed benefit amount by simply failing or refusing to issue an Initial Determination Letter.

Those participants who believe they are entitled to a higher benefit, must put their financial future on hold because the major

source of income from their pensions is uncertain. If a participant

does not respond to his or her IDL within 45 days, the right to appeal is lost. The Pan American World Airways Cooperative Retirement Income Plan was frozen on December 31, 1983, and the company filed bankruptcy and this plan was retroactively terminated

on July 31, 1991.

In my view, and based upon my experience, there was no

justification for the delays in providing IDLs to the Pan Am

participants. When I began working at the Atlanta PBGC office,

over 7 years after PBGC assumed responsibility for this plan, the

majority of the 20,000 participants in the CRIP plan had not yet

received an Initial Determination Letter, yet I was able to look at

a stand-alone PC screen connected to the Pan Am data base and

see the work and salary history, as well as the calculated accrued

benefit/IDL information for most Pan Am employees. Neither

PBGC nor IMRG expressed concern for the impact of their poor

management on participants. In my opinion, it should not have

taken PBGC so long to issue IDLs.

PBGC did not appear to take particular care with regard to accuracy, did not make the best use of both Pan Am’s records and its

own technology. Although the calculations for those who were receiving benefits had already been scanned into the PBGC IPS system and could have been used to verify benefit amounts, options

chosen and spousal information, the PBGC sent out IDLs with inVerDate 11-MAY-2000 10:42 Jun 12, 2001 Jkt 010199 PO 00000 Frm 00025 Fmt 6633 Sfmt 6602 E:\HEARINGS\67979 pfrm04 PsN: 67979
22

correct benefit amounts, inaccurate options chosen, wrong name or

‘‘unknown’’ for spouse’s name. The IDLs were issued with incorrect

Social Security numbers. IDLs were sent to former Pan Am employees who are already being paid by CIGNA, Prudential, or Johnson Controls. IDLs were sent to people who had never worked for

Pan Am. Letters were sent to retirees with the language, ‘‘Due to

unresolved issues, we cannot determine the amount of your benefit

at this time.’’

When the PBGC office in Washington issued these IDLs in

batches, it used its automated letter system called ALG. As a result, there were spelling and grammar mistakes and dates in fields

were benefit amounts should be and vice versa. In every instance

where I talked to someone who had received one of the above letters, I could almost always verify what the correct information

should have been using the records that had been imaged or the

Pan Am data base.

Participants who elected the level income option, which drops

down at the Social Security retirement age of 65, were incorrectly

paid the same initial amount long after age 65, leading them to believe they were entitled to this amount, when they were given IDLs

which recouped this overpayment, leaving them with little or no

pension. Others were put into pay by PBGC with estimated benefits and then told to repay the difference when they were issued

their IDLs for lower amounts. In my experience, there were far too

many mistakes.

IDLs were not sent to all participants who have a lump sum

cash-out value between $3,500 and $5,000, notifying them that

these funds are eligible to be rolled over into Individual Retirement

Accounts. There are probably thousands of these participants. I

could look them up on the PBGC data base under their respective

CRIP groups: IUFA, flight attendants; TWU, mechanics; IBT,

Teamsters; and management. Those who were called in were given

IDLs and lump sums on a case-by-case basis. There were thousands of IDLs omitted.

PBGC sent participants IDLs that gave them only 45.2 percent

of their benefits at age 55—or 50, if they were a flight attendant.

This caused concern among the Atlanta administrators because we

were given plan documents, and IUFA, TWU and IBT pamphlets

that stated that the Pan Am early retirement percentage was 79

percent for those who met certain service requirements. Participants who lost this additional 33.8 percent of their benefit were extremely upset. I could not get an explanation for this discrepancy

between Pan Am policy and PBGC practice. A benefit of $300 a

month was reduced by PBGC to only $135.60 a month, instead of

the $237 a month that would have been paid by Pan Am.

I believe that those who met the Pan Am service requirements

should have received 79 percent of their pension at early retirement.

Since the Pan Am participants who were hired after December

31, 1983, were not eligible for any pension benefit, their records

should have been deleted from the IDL data base. These extraneous records triggered error messages on reports and were of no

use, other than to confuse the process.

23

As you can imagine, the incorrect IDLs generated an extremely

high volume of calls. Those of us who tried to answer questions

about these letters often could not even view a copy of what had

been sent. Batches of these IDLs disappeared and were not

scanned. No record exists except for the mailed original. In my

opinion, PBGC issued IDLs regardless of quality, solely to meet the

court-ordered deadline.

IMRG was not prepared to manage payroll, benefits and screening of candidates for employment or the training of existing employees in a reliable or responsible manner. I saw Myrna Cooks onsite only twice in a year-and-a-half. In my experience, she did not

show any knowledge of or concern for either her employees or the

work in progress. Myrna did not return our phone calls or respond

to our e-mails. She kept more than 20 percent of the hourly wage

she was receiving from PBGC.

When I began work on the first day of Myrna’s contract, I was

the only new employee. The rest of the office had been employed

by Office Specialists and continued with IMRG.

I am not sure whether I should——

The CHAIRMAN. How much do you have left?

Ms. MCHENRY. I have about three pages.

The CHAIRMAN. Would you maybe make two or three points that

you have yet to make, please, because I think your testimony is

very important.

Ms. MCHENRY. The only real concern of management was that

they not be embarrassed. There was no leadership. IMRG’s management had no interest in ensuring that the work was completed

in a timely and competent manner.

The working conditions became so bad that employees banded together and sent an e-mail to David Strauss, the Executive Director

of PBGC. We tried to address work-related issues, as well as the

low morale. Barbara Mitchell was asked to send this compilation

of our grievances because we felt that she would not be retaliated

against. Barbara, herself a retiree from Pan Am, was an extremely

knowledgeable and hardworking employee. She had worked for Office Specialists since 1992. Barbara and I both spoke to Joe Grant

on the phone.

When David Strauss, Joe Grant and Bennie Hagans came to Atlanta and met with the Pan Am CRIP team, there was an emphasis on open communication and bringing forward problems and

issues. Administrators were then told by Bennie Hagans and

Francis Emmanuel, the Manager, after David Strauss and Joe

Grant had left, that all communications with Washington had to go

through the Atlanta management. Employees were forbidden to

communicate with PBGC directly or bring up issues at the weekly

video conferences without prior clearance from Atlanta managers.

This was a gag order.

When Barbara expressed concern that she would be fired for

being a spokesperson and telling what she knew, Joe Grant assured her that this would not happen. Barbara was fired shortly

afterwards on November 8, 1999. She has been seeking redress

from the Inspector General’s Office since this time and has heard

no decision.

24

IMRG did not provide a defined benefit pension plan for its employees. There was a 401(k) plan for employee contributions only.

I find it disheartening that David Strauss gives talks around our

Nation promoting defined benefit plans and then PBGC gives a

contract to IMRG which has none. This means that contract employees who are poorly and inconsistently paid, not well trained

and have no pension plan, are expected to give good customer service to those who do. I believe that PBGC knows how poorly the Atlanta office is run and that thousands, if not millions, of dollars

have been wasted as a result of not confronting the poor management that exists.

In my opinion, pensioners of bankrupt companies should not be

caught between an inefficient, incompetent bureaucracy and an inferior, covetous contractor.

[The prepared statement of Ms. McHenry follows:]

25

26

27

28

29

30

31

The CHAIRMAN. Thank you, Ms. McHenry.

Mr. Poll.

STATEMENT OF WAYNE ROBERT POLL, INSPECTOR GENERAL,

PENSION BENEFIT GUARANTY CORPORATION, WASHINGTON, DC

Mr. POLL. Good morning, Mr. Chairman and members of the

committee. My office has been working with your committees over

the past several years, and I appreciate this opportunity to discuss

some of that work today. Today, I will be discussing computer security and the benefit determination process.

During the past 5 years, we have performed a wide range of security reviews over information technology resources. These reviews have clearly pointed out that PBGC lacks a comprehensive

IT security program. Without an effective and proactive IT security

program, PBGC is exposed to risks. For example, someone with unauthorized access may modify, destroy and disclose sensitive information. To determine how vulnerable the Agency was to these

risks, we conducted tests of the security environment. This is referred to as network penetration testing.

We were glad to discover and report to PBGC that we were unable to penetrate its information systems using the Internet. However, we were able to access systems through both dial-in from remote locations and unauthorized access inside the Agency. This

test revealed flaws in the security over computer resources and in

employees’ awareness of their security responsibilities.

For example, during our testing, we obtained the highest security

access and were able to create, delete and modify data and deny

service to critical networks/systems. We were able to achieve a systems administrator level of access without being detected. These

tests demonstrate that PBGC did not have an effective program

that defined, implemented and enforced security strategy.

Further, security standards for new systems need to be defined

earlier in the development process to ensure that there is appropriate security before the system is placed into production. Then,

PBGC needs to oversee the systems development process to ensure

that contractors are complying with the improved system’s design.

In addition, in fiscal year 1997, Chairman Grassley, you asked

my office to address certain questions regarding initial benefit determinations or IDLs. We looked at the efficiency and effectiveness

of the benefit determination process and identified key areas of improvement. Our report included findings that PBGC could not attest that IDLs had been issued to all participants. We also completed two reviews on the length of time it had taken the Agency

to issue IDLs. Our review revealed that PBGC continued to issue

approximately one-half of the IDLs more than 7 years after it became trustee.

We also looked at how long it took PBGC to issue the IDLs after

it had determined participants’ benefit amounts. We found improvement. In our first report, we noted that only 35 percent of the

IDLs were issued within one year of PBGC completing its evaluation. Our follow-on report noted that approximately 80 percent of

the IDLs were issued within a comparable 1-year period. In these

two reports, we identified problems in the IDL data maintained in

32

a data base called PRISM. Information in PRISM is used to pay

benefits and answer participant questions. We found that the

PRISM contained duplicate, incomplete and erroneous data, which

this called into question the reliability of the data that PBGC used

to report its operational performance.

Our evaluation of whether participants are impacted by the delay

in IDL issuance revealed that there is a gap between how participants and PBGC view delayed IDLs. We asked Agency management, ‘‘How are participants impacted by your delay in issuing

IDLs?’’ PBGC’s answer focused on the payment of estimated benefits. They suggested that a delayed IDL was very little impact because the participants are receiving their estimated monthly

checks. Some participants, however, stated that they were financially or emotionally harmed by delayed IDLs. Participants also reported economic hardship, such as the possibility of having to repay

PBGC’s overpayment benefit amount.

Finally, as stated in our report on the appeals process, we found

that PBGC’s assertions regarding appeals of IDLs were fairly presented. Notably, in fiscal year 1997, approximately one-half of the

appeal decisions were favorable to the appellants.

In conclusion, Mr. Chairman, over the years, my office has issued

multiple reports commenting on weaknesses relating to PBGC’s

benefit determination process. The common theme of these reports

is that there are systematic weaknesses in controlling participant

information. More timely and reliable information would enable

PBGC to better perform the benefit determination process and

issue IDLs in a timely manner.

I thank you for this opportunity to discuss our audit work and

would be glad to answer your questions.

[The prepared statement of Mr. Poll follows:]

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

The CHAIRMAN. Thank you, Mr. Poll.

Now, Ms. Bovbjerg.

STATEMENT OF BARBARA D. BOVBJERG, ASSOCIATE

DIRECTOR, EDUCATION, WORKFORCE, AND INCOME SECURITY ISSUES, HEALTH, EDUCATION, AND HUMAN SERVICES

DIVISION, U.S. GENERAL ACCOUNTING OFFICE, WASHINGTON, DC

Ms. BOVBJERG. Thank you, Mr. Chairman. Mr. Chairman, Senator Breaux, I am pleased to be here today to discuss the Pension

Benefit Guaranty Corporation’s management of its contracting responsibilities.

The Corporation relies heavily on contractors to perform its functions, spending over 60 percent of its operating budget on contracting. In fact, contractors comprise half the PBGC workforce and

staff all of its field operations.

Today, I would like to focus my remarks on three aspects of

PBGC’s contract management, the basis for PBGC’s decision to use

contractors, the contractor selection process and monitoring contractor performance. My testimony summarizes results of work we

have done over the past year at PBGC headquarters and at field

locations, and this work is discussed in more detail in our report

released today by both committees.

First, the decision to use contractors. PBGC’s contracting decisions have been heavily influenced by rapidly increasing workloads.

In the mid-eighties, bankruptcies at LTV Steel, Pan American Airlines, and other large corporations more than doubled the number

of pension beneficiaries under PBGC administration. Rather than

request new Federal hiring authority during what was then a period of Federal downsizing, the Corporation moved quickly to bring

in contract help. Over time, PBGC continued to use contractors to

address a growing backlog of work.

Although the outlook for PBGC workloads has changed over

time, the Corporation continues to rely heavily on contractors. Use

of contractors in the past, indeed, helped PBGC address a growing

workload, but today things look different. Improvements in plan

funding, changes in pension law and a declining number of defined

benefit plans all suggest changes in PBGC’s future workload. Accompanying changes in staffing levels and organizational structure

may be warranted and should be considered in the Agency’s planning efforts. However, PBGC lacks a blueprint for organizing its

contractor and Federal staff to meet current and future needs costeffectively and risks being unprepared for a changing future pension environment. We believe that this must change.

My second point deals with contractor selection. In our review of

PBGC’s most recent field services procurements, we identified

weaknesses that could affect competition which, in turn, could

cause PBGC to pay too much for these services. While PBGC competed operations at four field locations in 1997, it continued its

practice of making sole-source awards in seven other field locations.

PBGC asserts that the incumbent contractors are uniquely qualified, but we found no indication that the Agency conducted the outreach or market research necessary to assure that, indeed, no other

providers would qualify.

50

And in the four field locations where the procurements were competed, we found other weaknesses that may have affected competition. PBGC consolidated requirements for three geographically remote contractor offices into a single procurement and excluded the

services for the fourth office from the consolidation. Corporation

staff stated that requiring the successful offeror to perform at all

three locations would not restrict competition, but simultaneously

acknowledged that the fourth site was kept separate so that the incumbent contractor could compete. PBGC did not provide a sound

rationale for structuring the procurement this way, and in the end,

incumbent contractors won these bids. PBGC could have done more

to ensure competition in these instances, and by extension, ensure

more cost-effective contracts.

I just give these as examples of our findings. We have detailed

several more concerns with contractor selection in our report. In

addition, we also obtained information that involved possible improprieties and referred it for investigation, an investigation which

is the subject of Mr. Hast’s statement today.

Finally, let me turn to contract monitoring. In recent years,

PBGC has taken actions to better oversee its contractors in field

locations. However, we identified several key management weaknesses, including a lack of centrally compiled field location data

that we feel is necessary to truly monitor performance, deficiencies

in field office quality reviews and an organizational alignment that

could affect the objectivity of contract review. Such weaknesses left

uncorrected could affect the Corporation’s ability to monitor and

hold contractors accountable for their performance.

In our report, we have recommended a number of actions that,

based on our work, we believe would improve PBGC’s use of contractors. The Corporation has said it agrees with most of our recommendations and plans to act in several areas to improve contract management. And, indeed, absent meaningful action, PBGC

risks being unprepared for future workloads, risks contracts that

cost too much for too little and ultimately risks a deterioration of

service to plan participants.

Mr. Chairman, that concludes my statement. I ask that my written statement be submitted to the record, please, and I would be

happy to answer any questions.

[The prepared statement of Ms. Bovbjerg follows:]

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

107

108

109

110

111

112

113

114

115

116

117

118

119

120

121

122

123

124

125

126

127

128

The CHAIRMAN. Let me make clear that everybody’s written

statement, if it is longer or different than your oral remarks, are

automatically included in the record.

Now, Mr. Hast.

STATEMENT OF ROBERT H. HAST, ASSISTANT COMPTROLLER

GENERAL, OFFICE OF SPECIAL INVESTIGATIONS, U.S. GENERAL ACCOUNTING OFFICE, WASHINGTON, DC

Mr. HAST. Chairman Grassley and Senator Breaux, I am pleased

to be here to discuss the investigation you requested into the alleged contracting irregularities at the Pension Benefit Guaranty

Corporation. As a result of information and documentation obtained by Ms. Bovbjerg’s group during its previously discussed review of PBGC, she referred certain contracting irregularities to us.

Those irregularities appear to involve improprieties or potentially

illegal activity.

We investigated whether PBGC’s award of two contracts to Integrated Management Resources Group was improper. The two contracts, an auditing contract and a field benefits administration contract for the FBA office in Atlanta, GA, were worth approximately

$40 million combined. Specifically, we investigated allegations that

Bennie L. Hagans, PBGC’s Director of the Insurance Operations

Department, which oversees the administration of FBA, had improperly influenced the award of these contracts to IMRG. IMRG

has been owned and operated by Myrna Cooks since April 1997,

when she resigned from Office Specialists, a PBGC contractor. Ms.

Cooks had been a Manager and Vice President of Office Specialists,

which at the time of her resignation held the two contracts we investigated.

In brief, Mr. Hagans’ actions demonstrated a lack of impartiality

with respect to IMRG and created the appearance of improperly influencing the award of the two contracts in question. What follows

is some of the evidence we discovered. IMRG was awarded its first

contract, an auditing contract, on October 10, 1997. It had an estimated maximum value of almost $14 million. However, between

the time she left Office Specialists and was awarded her first contract, 34 telephone calls were logged from either Mr. Hagans’

PBGC office telephone or his PBGC cellular telephone to Ms.

Cooks’ home, the location of IMRG.

Ms. Cooks told us that she had both received many calls from

Mr. Hagans and made many calls to him during this period. For

example, on July 10, 1997, after IMRG submitted its auditing contract proposal, PBGC phone records show two calls were made from

Mr. Hagans’ office to Ms. Cooks’ hotel room in Atlanta. Hotel

records indicate four calls from Ms. Cooks’ hotel room to Mr.

Hagans’ hotel after he had arrived in Atlanta the same day. Two

of these calls were made on the evening of July 10th. The second

two were made early the next morning at 5:50 a.m. and 6:33 a.m.,

just before Mr. Hagans visited the Atlanta office of Office Specialists.

Ms. Cooks told us she was in Atlanta to recruit Office Specialist

employees for IMRG and that the purpose of the hotel room calls

were to request Mr. Hagans to intercede with Office Specialists’

management to stop them from interfering with their employees’

129

discussion with her about possible employment with IMRG. Ms.

Cooks told us that Mr. Hagans resolved this problem for her. She

also stated that her other calls with Mr. Hagans concerned personnel problems at Office Specialists, but she was unable to detail

what she meant by this. Mr. Hagans also cannot explain the content of the many phone conversations he had with Ms. Cooks.

Additionally, on or about August 29, 1997, after IMRG had submitted its contract proposals, but before the auditing contract was

awarded that October, Ms. Cooks met with an officer of a Maryland

bank to seek financing for IMRG. We interviewed the bank officer

who processed the loan application and reviewed the loan file with

his contemporaneous notes and memos of contacts with Ms. Cooks

and Mr. Hagans.

According to the bank officer and his notes, Ms. Cooks informed

him that she was competing for the PBGC contracts held by Office

Specialists. The bank officer told Ms. Cooks that before approving

the loan, he wanted assurances directly from PBGC officer responsible for awarding the contracts that IMRG would be awarded the

contracts she claimed to be taking over from Office Specialists. In

response, Ms. Cooks provided Mr. Hagans as a reference. The bank

officer stated that after he had a telephone conversation with Mr.

Hagans, he was convinced that Ms. Cooks’ claim was truthful.

PBGC telephone records show a 16-minute telephone call from Mr.

Hagans’ office to the bank officer on September 9, 1997.

In October 1997, Ms. Cooks notified the bank officer that IMRG

had been awarded only the audit contract of the three she had bid

on. The bank officer told her that he could not understand why she

was unsuccessful getting the other two. In response, Ms. Cooks asserted that Office Specialists had substantially underbid IMRG.

Ms. Cooks also told the bank officer that Mr. Hagans had pledged

to give IMRG $3 million in additional work from the savings between the IMRG and Office Specialists bids. Ms. Cooks also told

him that PBGC was acting to remove Offices Specialists from the

Atlanta FBA contract for nonperformance, and that once this occurred, the Atlanta contract would be given to IMRG. This is reflected in the bank officer’s memo to support approving the loan.

The bank officer’s memo also reflects his very frank discussion

with Mr. Hagans in early September 1997, about IMRG and Ms.

Cooks. In that discussion, Mr. Hagans said that he campaigned

continuously for Office Specialists’ removal from all three contracts

in favor of Ms. Cooks. It continued that Mr. Hagans was a very big

fan of Ms. Cooks and politicked within the Agency for her company

to receive the bid.

After we presented Ms. Cooks with the above evidence, she

claimed no knowledge of the statements attributed to her and was

not aware that the bank officer had contacted Mr. Hagans, even

though she had used him as a reference. Mr. Hagans told us that

he did not know that he was listed as a bank reference and did not

remember speaking to the bank officer. He added that if he had

spoken with the bank officer, that it may look wrong and, in hindsight, it would have been bad judgment.

This concludes my prepared statement. I will be happy to respond to any questions of you or other members of the committee.

Thank you.

130

131

132

133

134

135

136

137

138

139

140

The CHAIRMAN. Thank you, Mr. Hast.

Now, Mr. Strauss. You might want to pull the microphone a little

bit closer to you.

Thank you.

STATEMENT OF DAVID M. STRAUSS, EXECUTIVE DIRECTOR,

PENSION BENEFIT GUARANTY CORPORATION, WASHINGTON, DC

Mr. STRAUSS. Thank you, Mr. Chairman. I appreciate the opportunity to respond. I am a notorious micro-manager, and so it is killing me not to be able to take each one of these items and respond

to each with some specificity.

Mr. Chairman, I was grateful for the opportunity to meet with

your staff for about an hour-and-a-half last week to go over many

of these issues in much greater detail. And, because of your time

constraints today, what I would like to do is limit myself to four

points this morning. I have five charts here which I think will help

us with some of the mind-numbing complexity. So my charts will

probably be helpful in terms of answering some of these questions.

The four points that I want to make, Mr. Chairman, are, first,

I want to publicly apologize to Dr. Wilde for the way we handled

his mother’s case. She should not have had to go through this upsetting experience, and for that I am very sorry. And, Mr. Chairman, I want to assure you that shortly after Dr. Wilde’s mother received that erroneous check in 1997, we fixed the glitch in what

was then a new computer system to prevent this kind of error from

ever occurring again.

Mr. Chairman, some of the details in Dr. Wilde’s testimony about

the phone calls to PBGC are very disturbing to me, and I want to

assure you that I want to find out exactly what happened in each

case and report back to you because I want you to know that in

every office of the PBGC and every contract office, and you can go

into the Waterloo office, you will see our service pledge posted on

the wall. Calls are to be responded to in 24 hours. Letters are to

be answered within a week, and I think that this has become an

important part of our culture. And so, if there are problems with

PBGC phone calls, that would be something that would be of great

interest to me, and I want to assure you that I will investigate this

personally and report back to the committee.

Second, witnesses at today’s hearing have raised questions about

specific contracts with the Integrated Management Resources

Group. Mr. Chairman, I want to make two comments about these

allegations. One, I would never tolerate, for one moment, the kind

of conduct contained in these allegations, and I want the committee

to know that. Second, over the last 3 years, the GAO, the Department of Justice, the PBGC’s Inspector General and the PBGC’s

General Counsel have all conducted investigations and no one has

been able to substantiate any of these allegations of misconduct.

And so I want you to know that this is something that we have

looked at for 3 years. I have looked at these procurements myself.

I spent a day-and-a-half looking at each one of these procurements,

and none of these allegations have been substantiated.

I want you to know that we continue to cooperate fully with all

of these investigations. And, today, I am submitting for the record

141

a full report on this matter, which was prepared by PBGC’s General Counsel.

Mr. Chairman, I want you to know that I remain confident in the

integrity of our employees, and I am satisfied that we are correctly

following the Federal Acquisition Regulation process. While I have

not had the opportunity to see the OSI report released this morning, I welcome anything, any further review that will finally put

these allegations to rest.

The third point that I want to make is to correct any

misimpression from the earlier testimony that there is a delay in

our participants receiving their benefits and that a delay in receiving these final determination letters has anything to do with our

adherence to our ERISA statutory mandate, which is to provide

continuous and uninterrupted benefits to each of the participants

in these PBGC plans. Let me assure you that, when we take over

a plan, we pay retiree benefits without interruption. And, as other

participants become eligible for benefits, we pay them without

delay. In other words, no participant ever has to wait to receive

their benefits.

Mr. Chairman, I have attended almost 100 participant meetings

and personally met with over 8,000 PBGC participants, and many

of them are like Mr. Parks here. I mean, I have heard those same

concerns, and I am acutely aware that the primary concern of these

individuals is to receive their benefits promptly. And each month

the PBGC pays over $75 million in benefits to more than 215,000

participants. As I explained in great detail in my written testimony, the benefit amounts participants receive are considered to be

estimated. And before we can calculate final benefits, we must satisfy the requirements of ERISA by verifying all of the plan records

and participant data. In most cases, as with Mr. Parks, and I am

very sympathetic with Mr. Parks, there is little or no difference between the estimated benefit and the final benefit amounts.

The other misimpression that I want to correct is with regard to

benefit estimates. Benefit estimates have been a passion of mine at

the PBGC. And I want you to know that you can call us up, and

we can give you a ballpark benefit estimate in 5 minutes. And so,

if someone is 20 years away from retirement and we have just

trusteed a plan, and they are wondering what the benefit might be,

we can give you a ballpark benefit estimate in 5 minutes. If you

are getting closer to retirement and it is important for you to have

a precise benefit estimate, we now can provide those precise benefit

estimates within 15 days.

Over the last 25 years, during the history of ERISA, obviously,

technology has changed dramatically. We have much better technological tools now that help us to do these things. And I just want

you to know that there should be no concern on the part of any

PBGC participant about benefit estimates. You can get a ballpark

one in 5 minutes. If you want a precise one, we can give it to you

within 15 days.

My final point, Mr. Chairman, is that your committees, the

PBGC’s Inspector General and the GAO have made a number of

recommendations over the past several years concerning PBGC

benefit determinations, contract management and computer security. Mr. Chairman, we found these recommendations to be most

142

helpful. I am pleased to report to you that we have already implemented most of them, and we are following up on the rest. And as

you know, Mr. Chairman, we have been reporting monthly to your

committee on our computer security efforts. And as promised, we

will complete our corrective action plan by September 30.

With that, I want to thank you, again, Mr. Chairman, for giving

me an opportunity to appear this morning, and I welcome your

questions.

[The prepared statement of Mr. Strauss follows:]

143

144

145

146

147

148

149

150

151

152

153

154

155

156

157

158

159

160

161

162

163

164

165

166

167

168

169

170

171

172

The CHAIRMAN. Thank you. If it is OK with Senator Breaux, I

think what we will do is, even though there are only two of us

here, do 5-minute turns so if other members come in, they will not

miss a chance. So will the staff make sure that I do not take more

than 5 minutes, at least in the first round.

Mr. Parks, I have already said how you are assisting a friend

during a time of ill health, and so I want to thank you for coming

here away from that trying time for you. Today, you testified that

PBGC’s delays and absence of communication caused uncertainties

about your benefits since April 1996. I know you finally received

your final benefit notice just last month. Do you know whether all

of the 250 kwik-way participants have received a determination of

their benefits as well?

Mr. PARKS. Mr. Chairman, I do not know if all. I have checked

and quite a number of them have and all approximately at the

same time that I received mine. But I am sure there are others

that received it as well.

The CHAIRMAN. Do you have recommendations for the PBGC on

how it can improve communication with participants once it assumes responsibility for the administration of a plan?

Mr. PARKS. Well, without desiring to offend anyone, I have to— refer to the 17 attachments to my testimony which clearly indicate

that we have telephone calls that are not responded to, we have

letters that are not answered. It would seem to me that just the

common courtesy of proceeding to respond to those would be a step

in the right direction.

The CHAIRMAN. So the 24-hour rule that Mr. Strauss has referred to is not necessarily followed in the people you have had contact with.

Mr. PARKS. That is correct, sir.

The CHAIRMAN. To Inspector General Poll, in your November

24th, 1998, report, and it was titled, ‘‘Pension Plan Participants

Impacted by Delays in Initial Determination Letter Issuance,’’ the

Corporation asserted a 3-year goal for processing plan determinations, as adopted in its Results Act Strategic Plan. Has that goal

been achieved?

Mr. POLL. I have not had a chance to audit that particular situation at this point in time. Because of the last follow-up report, we

had indicated that it takes about 7 years or 6 to 7 years to be able

to produce that. That is something that is on my radar screen to

be doing in the future.

The CHAIRMAN. Is it fair to say that if the Corporation supplied

the necessary human resources to gather participant information

and facilitate actuarial valuations of plan determination, that the

Corporation would be able to meet this 3-year goal?

Mr. POLL. I think it certainly is possible. I think you have to arrange your resources, as you had indicated, and also have the proper systems in place to be able to do that. But, again, I have not

looked at that. And there are probably some additional efficiencies

that could be derived from reengineering their process or looking

at their processing in different ways.

The CHAIRMAN. Mr. Strauss, how long does it take?

Mr. STRAUSS. How long does it take us to do these final benefit

determinations? I am sorry, Mr. Chairman?

173

The CHAIRMAN. Yes, that is right, and particularly in regard to

the 3-year goal that you have set.

Mr. STRAUSS. What I can tell you, Mr. Chairman, is that, for

plans that we are taking in today, we should be able to meet the

3-year goal.

The CHAIRMAN. I want to visit with you, Mr. Strauss, about the

actuarial valuation completion date. Can you explain why it can

take a year or more to issue the letter after—and I want to emphasize after—the valuation is complete? Because it seems to me that

once all of the hard work is done, then the letter could go out immediately.

Mr. STRAUSS. Mr. Chairman, up to now, our most important task

has been to work down these backlogs. And I think that this is

where my charts would be helpful.

The CHAIRMAN. OK. Take your time.

Mr. STRAUSS. To try to make some sense out of this for the committee, I think that there are a couple of charts here that will be

helpful in terms of understanding this process. I do not want to say

anything here that would reflect poorly on my predecessors in any

way, because when ERISA was passed in 1974, our statutory mandate was to provide continuous and uninterrupted benefits to the

participants in the plans that we trusteed. And so the Corporation’s critical priority was to make sure that participants were

paid.

And so you see here, in 1994, the average age of the oldest plans

in our inventory are about 20 years because the priority, up to this

time, has been to make sure that when we trustee a plan we put

the participants in pay status. And so doing the final benefit determinations was never a Corporate priority. Now that we have been

able to work down this backlog, and thanks to improved technology, you can see that we are making pretty steady progress here

in terms of working down this aging inventory.

And while this is going on, Mr. Chairman, you can see from my

second chart here that the number of final benefit determinations

that were produced each year was somewhere around 10,000,

15,000, 20,000. For the last 6 years, we have been able to push out

about 60,000 final benefit determinations each year. And so I think

that we have been able to take advantage of these perfect economic

conditions, where we have not been taking in large plans, to work

down these historical backlogs. And as you can see, we have improved our output.

The CHAIRMAN. Let me follow up before you ask your first question because I think it fits right in here, a continuation.

Now, you have asserted that in fiscal year 1999 the average age

of the IDLs issued after date of trusteeship was five and sevententh years. Now, the Inspector General stated in his written testimony that the Corporation uses a standard averaging method

which masks the number of letters, IDLs, that take longer to process. So I would like to give you an opportunity to respond to that

statement. The five and seven-tenth years is the average age of the

IDLs that were issued in fiscal year 1999, so half took longer than

that, and obviously took a much shorter time; is that correct?

Mr. STRAUSS. Mr. Chairman, I think what I would like to do on

this point is to provide you with detailed information for the record

174

that explains all of these various numbers. Even I, as the Executive Director of the Corporation, can tell you generally the progress

that we are making and that the age of the inventory has come

down dramatically, that we are doing these benefit determinations

much faster, and that we are producing many more of them each

year. But once we get beyond that level of detail, what I would like

to do is provide for the record answers to the more detailed questions, if you would be so kind.

The CHAIRMAN. That is OK. Could you be specific on this,

though, whether or not the average includes some IDLs that have

been issued or all IDLs in your backlog?

Mr. STRAUSS. Yes, sir, I would be happy to provide you with

whatever specificity would be helpful.

The CHAIRMAN. Senator Breaux.

Senator BREAUX. Thank you very much. I thank all of the panelists for their presentations.

Mr. Parks, I apologize for the difficulties you have had. I was impressed with the fact that when you got the check and thought it

was not a correct amount, you sent it back. I know a number of

my constituents who have accepted it, cashed it and then called me

up to try and find out a way for them to keep it. [Laughter.]

And to your credit, you did the right thing, and hopefully things

will work out.

I take it that after all of this, you ended up getting 80 cents a

month more; is that in your testimony?

Mr. PARKS. I think it is 83 cents, yes.

Senator BREAUX. Eighty-three cents more. So I guess the good

news and bad news—the bad news, it took so long to get the final

determination, but the good news is was not far off the initial target.

Mr. PARKS. I would comment, just for the edification of the committee, that all of this was transpiring in our lives, our corporate

lives, as a result of a reorganization in 1992 which, incidently, was

successful. But a lot of us, myself included, at that point in time

were in an insecure status because we put everything we could

find, beg, borrow or steal, into reorganizing and supporting the

company.

Senator BREAUX. Sure.

Mr. PARKS. So having any additional insecurity, we really did not

need.

Senator BREAUX. And, Mr. Poll, it was interesting to see, I mean,

we are all struggling, and we are trying to make certain that all

of our computer systems are secure. We have seen this, the top of

the news lately is with regard to what we do with our computers.

And your job, I guess, is to check various Federal agencies to see

how we are doing in this regard.

What you found at the Corporation, do you think it was in much

worse condition, about the same or better than most of them that

you are looking at? I think we are all struggling to make sure that

our computer systems are secure, and all of these are very important. Do you have a comparison of what you have found here in

comparison to, perhaps, other agencies?

Mr. POLL. The only comparison I would have is what I read in

the newspapers because I——

175

Senator BREAUX. Oh, Lord. [Laughter.]

Mr. POLL. Which I do not take, you know, with much stock in.

Senator BREAUX. But from your personal looking and your Department, you do not have enough to compare—— Mr. POLL. We do not look at other agencies and things of that

nature dealing with any security—computer security. What we did

find, I felt it was serious, and I notified the Corporation as quickly

as I could about the results of the tests that we conducted. And

they agreed with us that it was serious. Because when you kind

of hang your keys out there outside your house and say, ‘‘Come on

in,’’ and that is one serious problem, and that is what they basically did.

And the other thing that we—— Senator BREAUX. So the—I am sorry.

Mr. POLL. The other thing is that we did hack into the system,

not using through the Internet, but other means, and we were able

to be in there for about a 2-week period undetected by anyone in

the Corporation. And we could have conducted serious damage on

any of the IT systems that they had. We could have downloaded

information. But that was not the objective. The objective was to

get into the system and see if there were holes and then report

that. And that is what we did.

Senator BREAUX. Thank you. You say on Page 6 that, in response

to these findings that you made with this investigation, that the

Corporation management has developed both high-level and detailed corrective action plans to address the weaknesses that was

identified, and they are required to report on their actions monthly.

Is that being done? I mean, the report period, are they reporting

back to you? Are you continuing to monitor and check whether the

recommendations are being followed or not?

Mr. POLL. I could validate that I have been to just about every

meeting they have had once a month, where the people who are

working on fixing the problems report to Executive Director

Strauss. And it seems like it is progressing along.

Senator BREAUX. You all have actual meetings? I mean, this is

just not—— Mr. POLL. Yes. He has actual meetings where they present, and

I have gone behind, and I have done some checking, some

verification, validation of it. But it is not quite 9/30 yet, so they

have not really completed everything. And once that is done, and

I have spoken to the committee’s staffers, and I have suggested

that I will write a report as to what my opinion as to how they did

comply with those recommendations that we had made.

Senator BREAUX. Thank you. Ms. Bovbjerg, in your GAO recommendations and with regard to contracting and organizational

field structures, I take it that you all have made a series of recommendations after you have identified the problem areas. Can

you tell the committee how were those received? I mean, has there

been a cooperative relationship or a negative relationship, if you

will, dealing with GAO’s findings with regard to the Corporation?

Ms. BOVBJERG. We have printed in our report a copy of Mr.

Strauss’s letter to us, the Agency comments, as a result of the draft

report we sent him. And I think they are very detailed and largely

positive. They agree with us on most of our recommendations and

176

most of our findings. We detail where there are some disagreements and have stated that there are things that they will be doing

in the near future that should address many of our points.

Senator BREAUX. GAO, gosh, we deal with GAO all of the time,

particularly in the committee that is chaired by Chairman Grassley, and very helpful to us, do you all do a follow-up role normally

with your recommendations with the groups that you do these recommendations to?

Ms. BOVBJERG. Yes, sir, we do. We keep track and work with the

agencies.

Senator BREAUX. And that is being done in this case.

Ms. BOVBJERG. It will be, yes.

Senator BREAUX. Mr. Hast, thank you for your testimony. I

guess, when you were looking into some of the specific contracting

questions that you have looked at, you said that there has been an

appearance of improperly influencing the award of two contracts,

I take it your testimony is that that has now been turned over to

the appropriate people in Justice, I guess, for them to look at it.

Mr. HAST. We have not yet, but at the conclusion of this hearing,

we will meet with Justice and give them this investigation.

Senator BREAUX. And then they take it from there and do their

investigation, I take it, and then you all sort of move back at that

point?

Mr. HAST. Yes, sir.

Senator BREAUX. And that will be done.

Mr. HAST. That will be done.

Senator BREAUX. Mr. Strauss, I guess what you are saying, everybody wants to know what their pension is going to be as quickly

as they can. This chart, I take it, shows me that, in 1994, that is

20 months—20 years—— Mr. STRAUSS. Twenty years.

Senator BREAUX. What does that mean? Twenty years in 1994

what?

Mr. STRAUSS. What this means is that in 1994, the oldest plans

in the inventory with incomplete benefit determinations were about

20 years old.

Senator BREAUX. That means that people were receiving their

pensions in 1994, they just had not gotten a final

determination—— Mr. STRAUSS. They had not gotten their final benefit calculation.

Senator BREAUX. And that 20 years was the age of the longest

number of pensioners that had not received a final determination

or was that the average?

Mr. STRAUSS. Yes, the oldest plans in the inventory.

Senator BREAUX. Were 20 years without getting their final determination.

Mr. STRAUSS. Right. And now the oldest plans in the inventory

are about 5 years old.

Senator BREAUX. So those people that have not gotten a determination, a final determination, after 5 years are still monthly getting an estimated pension every month?

Mr. STRAUSS. That is correct, Senator. The ERISA statutory

mandate is that we provide these participants with a continuous,

uninterrupted payment from the moment we take these plans over.

177

Senator BREAUX. And explain to the committee what happens if

the final determination that they are entitled to is more than they

had been getting or less than they had been getting, what happens.

Mr. STRAUSS. If the final benefit is more, then we make up the

difference, plus interest. If the final benefit is less, if they were getting more than they were entitled to, then we have a very liberal

recoupment policy.

Senator BREAUX. That is when they call their Congressman.

[Laughter.]

Mr. STRAUSS. Senator, we have actually worked with this committee and made changes in our recoupment policy, as a result of

the interest of this committee.

Senator BREAUX. I guess, and I have dealt with these things on

Social Security, when someone has had a determination that they

have gotten too much and then the Government tries to get the

money back, and they find that they are sort of, I mean, they are

destitute or there is just no way they are going to pay it back, we

attempt to try and work something out with them. Does the same

thing—— Mr. STRAUSS. Right. And under no circumstances would we recoup more than 10 percent a month. So no one would have their

benefit cut—— Senator BREAUX. My final question, if it is about 5 years now,

and it used to be twenty years for the age of the oldest, what is

the goal? I mean, is that about as best we can do, considering the

bankrupt plans that we take over, or is there a goal to get it down

further than that?

Mr. STRAUSS. We believe that for the plans that we are taking

in today that we will be able to get these final benefit determinations issued within 3 years.

Senator BREAUX. Three years, OK.

Thank you all. I thank all of the members of the panel.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you.

Senator Bond.

Chairman BOND. Thank you very much, Senator Grassley. And

my apologies. I had commitments this morning until 9 o’clock

which prevented from being here. But I am glad we have this hearing, and I have already submitted a statement for the record, so

I will not enlighten and thrill you with my opening statement. That

will be part of the record. I know you are really disappointed in

that, but I would like to get on with the questions.

The CHAIRMAN. It is a real shame.

Chairman BOND. I could read it if you want to. [Laughter.]

The CHAIRMAN. That is OK.

[The prepared statement of Chairman Bond follows:]

PREPARED STATEMENT OF CHAIRMAN BOND

This morning we continue our on-going look at the Pension Benefit Guaranty Corporation with a hearing to assess where we stand on several issues that have been

under review by the Small Business Committee and by the Special Committee on

Aging.

At the end of the day, the PBGC has one key deliverable item. That is the Initial

Determination Letter (or IDL) that it sends to pensioners of failed plans. The IDL

is the definitive statement of benefits that pensioners will receive. It states the level

of benefits that the PBGC insures under the law, given that the pension plan itself

178

has failed and that its assets are likely unable to deliver the level of benefits that

would have been provided if the plan had not failed.

As Senator from Missouri, I am concerned about unnecessary delays in issuing

IDLs. Missouri has a substantial retired population. The Lake of the Ozarks area

has long been a popular place for retirees to enjoy after a long career of hard work.

If IDLs are not issued promptly, these retirees can be directly affected, as today’s hearing will show.

However, as Chairman of the Senate Committee on Small Business, I am also interested in seeing that small businesses get what they pay for when they pay insurance premiums to the PBGC. The PBGC finances its operations (which include monitoring of endangered plans, as well as closing out those that actually fail) by charging premiums based on the number of pension plan participants. If those funds are

not spent effectively, this means that small business is paying a fee and not getting

enough value from it. That directly affects the ability of small businesses to offer

defined-benefit pension plans to their employees.

In addition to those broader issues, I as Chairman am also interested in the

issues surrounding the support functions at PBGC, such as computer security and

especially contracting. Computer security illustrates a number of issues facing not

only the PBGC but also other agencies, such as the Small Business Administration.

All agencies of government have a continuing battle to keep a little distance ahead

of the hackers. These range from hackers who delight in causing headaches and

mischief, to those who seek to steal personal information to perpetrate identity

thefts, to those who are intent upon ripping off the Government.

With respect to contracting, the Small Business Committee has a long-standing

commitment to enhancing small business participation in procurement. Although

the rules governing the PBGC are not necessarily the same as those that apply to

the regular Executive Branch purchasing agencies, the PBGC nevertheless highlights a number of the broader procurement problems.

As the General Accounting Office will tell us, the PBGC has not done enough

oversight of the contractor personnel at its Field Benefit Administration offices.

They have not collected performance reports on an office-by-office basis, making it

impossible to assess the past performance of incumbent contractors. GAO will also

point to the PBGC’s market outreach and research efforts, which may have done

the minimum work necessary under the law without providing the kind of effort

that enhances competition and ensures small business participation.

It is vital that contracting be done in an ethical manner with the broadest possible outreach to small business. We have heard countless times from small business

that they think some procurements are already ‘‘wired’’ for a predetermined contractor. If the PBGC does a better jobof outreach to small business and does a better

job of assessing the performance of incumbent contractors, the PBGC can help allay

those fears, enhance competition, and deliver better quality services to the pensioners who rely on it.

Ultimately, however, these supporting functions of contracting and computer security are simply pieces of the overall puzzle. Done poorly, they impede the overall

mission. Done correctly, they help the PBGC do its job effectively. In the eyes of

pensioners, though, the central job is the IDL—the ability to resolve failed plans

quickly and with the minimum disruption to the retirees who often have little else

to rely on to pay their bills.

Chairman Grassley, I thank you for your long-standing interest in the PBGC and

for your cooperation and assistance in our joint oversight efforts.

Chairman BOND. Mr. Poll, I understand that you gave the PBGC

management advance warning that you intended to do a penetration study; is that correct? And when did you do that?

Mr. POLL. I did give the Corporation management advance warning, basically, orally, that I was going to do a penetration study.

I did not give them the exact time and date, but they did know.

I did indicate that to at least three people, that I remember. And

we did the penetration study, and then we gave them the results.

I also have suggested to them recently, again, that I may retest,

again. And they do not know when that is going to happen, but I

may retest again.

Chairman BOND. You were able to crack into the system; is that

correct?

Mr. POLL. Yes, we did.

179

Chairman BOND. What could an unauthorized hacker do if they

got access to——

Mr. POLL. An unauthorized hacker could be in the system. If

they are not detected, they would get quite a bit of intelligence

from the system on how to, for example, get into the password files.

We did. We got into the password files, and we had just about

everybody’s password when we did that. We, also, could have

downloaded every piece of information they had in these systems,

and we do not think, at that point—they are a little more aware

now—but at that point, we think we could have downloaded all

kinds of sensitive information, participant information and other

information, financial, also, and they would have not known it had

gone out of their system and outside.

Chairman BOND. Was this one where you could have put a phony

recipient into the system?

Mr. POLL. I believe, yes, that we could, with the systems administrator access that we had. Because the systems administrator access is up here. The Corporation has indicated that they have controls. The controls are down here. Systems administrator access

can manipulate those controls because they are the owner or the

individual who has the security on the system. So that is a real

vulnerability.

Chairman BOND. But did PBGC detect that you were in there

after a certain time?

Mr. POLL. No, they did not, not during the test.

Chairman BOND. You came and went and there was no—you left

no——

Mr. POLL. We came and went several times——

Chairman BOND. No footprints.

Mr. POLL. We did it from a remote dial-up, which is through a

modem, and we attached to a modem and got in. And we also came

into the Corporation, went to a conference room, and we were able

to get into the system while onsite.

Chairman BOND. Let me change to another aspect. Why did your

office decide to refer to the Office of Special Investigation at the

GAO, the matter of the $40 million in contracts?

Ms. BOVBJERG. The focus of the work that I was leading was

really management of the contracts and planning. It is a different

focus than a criminal investigation. When we were presented with

information that, because we are not criminal investigators, we

didn’t know how to handle it, we turned it over to Mr. Hast.

Chairman BOND. Mr. Poll, I understand that you initiated an investigation in the $40 million in contracts a year or two ago; is that

correct?

Mr. POLL. We have looked at PBGC’s contracts over many years.

Yes, I think we did look into, if you are referring to the Office Specialists contract——

Chairman BOND. Yes.

Mr. POLL. Yes, we did look into that, and we do have some investigative issues.

Chairman BOND. How often did Mr. Strauss contact you or seek

input from you about the alleged contract steering matter that was

discussed by the GAO and the Office of Special Investigations?

180

Mr. POLL. Well, I would say that Mr. Strauss has not directly

contacted me or discussed this investigation with me at all.

Chairman BOND. Turning to Mr. Hast, Ms. Cooks needed to obtain resumes to respond to the PBGC’s Request for Proposal; is

that correct?

Mr. HAST. Yes.

Chairman BOND. Do you have any information regarding how

Ms. Cooks obtained resumes for her response to the PBGC?

Mr. HAST. By approaching people that were already working at

Office Specialists, and I am sure there may have been others, but

certainly by approaching people that were already working for Office Specialists.

Chairman BOND. Mr. Strauss, again, welcome this morning. We

are glad to have you here.

Mr. STRAUSS. Thank you, Senator.

Chairman BOND. When the New York Times asked about the results of the penetration study, you described our concerns as ludicrous and said, ‘‘I would say we are on a very high state of alert

here at the PBGC.’’ Do you still believe that way?

Mr. STRAUSS. I believe that we are on a very high state of alert.

And the point that I was trying to make there is that many of the

concerns that were raised were actually addressed in the report.

Some of the issues that were raised were actually being addressed

at that time, and that is the point that I was sort of unartfully trying to make.

Chairman BOND. You advised the staff, both of the Committee on

Aging and Small Business, that you were very active when the allegations reached you regarding possible problems in 1998 with respect to the $40 million in contracts in question, yet the report prepared for you by the general counsel is dated about 3 days ago. Is

that when that report was completed?

Mr. STRAUSS. What I asked the general counsel for a summary

of everything that had gone on up to that point. And so the summary was completed a few days ago to respond to the committee.

But if you would just give me one minute on this issue since—— Chairman BOND. Sure. I would be happy to.

Mr. STRAUSS [continuing]. PBGC contracts are an issue for this

committee.

What I want to assure you, Senator, is that I, personally, have

looked at these four or five procurements that have been an issue

for this committee. And what I have prepared for the committee is

the steps involved in the PBGC’s contracting process and all of the

checks and balances in that system. And I want to assure the committee that we follow the Federal Acquisition Rules, and that if you

look at those steps carefully there is no one person, including the

Executive Director at the PBGC, who can influence those contracts.

There is a step-by-step process and I could go into each of these

things in great detail.

But I want you to know that it is not the head of the Insurance

Operations Division, under No. 5 there, who picks the panel of

technical experts, it is the head of the Procurement Operation at

PBGC. And the way our culture works, these technical experts

function very independently. And then when you look at the next

step in the process there, then these technical experts get together,

181

compare their findings, and they are required to come up with a

consensus recommendation. And so I want you to know that for

each of these procurements that are in question here, that I have

reviewed them myself. And I believe that my employees are entitled to a presumption of innocence until the facts and the conclusions really support that there is some sort of wrongdoing I simply

have not been able to find any, and I want you to know that I have

gone over these procurements myself with a fine-toothed comb.

Chairman BOND. Mr. Strauss, you say that there are system

checks-and-balances in place and that it works. Mr. Hast, is that

what you found?

Mr. HAST. Well, I agree with Mr. Strauss that there should be

a presumption of innocence until something is proven. I would say

that our findings are that there is an appearance that these contracts were steered and that the checks-and-balance systems that

they have in place are not working very well. And I think we are

going to refer our information, both to Mr. Strauss, the additional

information we developed—— Chairman BOND. That will be resolved in another forum.

Mr. HAST. Yes.

Chairman BOND. Mr. Hast, just very briefly, back on the resumes. Were the Office Specialists employees allowed to give Mrs.

Cooks their resumes from the beginning?

Mr. HAST. I am not absolutely sure.

Chairman BOND. Could you just describe for us how Mrs. Cooks

received the Office Specialists resumes.

Mr. HAST. I was just told we were told during interviews that at

the beginning they were told they were not allowed to give her resumes. There were some court actions going on between Office Specialists and Ms. Cooks and that that is when Mr. Hagans was

called and asked to come to Atlanta and intervene, which he did.

And once he intervened, they were able to give her the resumes.

Chairman BOND. Mr. Hagans has intervened with Office

Specialists——

Mr. HAST. Yes.

Chairman BOND [continuing]. To facilitate the delivery of the resumes of the Office Specialists employees to Ms. Cooks; is that correct?

Mr. HAST. Yes.

Chairman BOND. Turning to Mr. Poll, have you all had cooperation with the management of PBGC? How has your cooperation

been?

Mr. POLL. In general, Mr. Chairman, the Agency is resistant to

us in certain areas of receiving information. Specific areas such as

financial statement audits pretty much set out that that information is written down, and they know exactly what we are looking

for.

And audits and investigations requires several times to ask for

the information to get it, and sometimes they like to get involved

in telling us exactly what we should have, as opposed to what we

want. And, also, some departments, like the General Counsel’s Office, has instructed their staffs that they are not to speak to the

IG or the IG’s Office until they notify the general counsel and possibly getting some type of approval for doing that.

182

So I kind of consider that to be a little bit resistant.

Chairman BOND. Thank you, Mr. Poll.

Mr. Chairman, I apologize for going over my time, but I appreciate the chance to ask the questions.

The CHAIRMAN. Thank you very much.

I will start with you, Mr. Strauss, on a second 5-minute turn

here. And this is something I am going to want you to either respond to or clarify, if you would like to. You stated that your general counsel investigated the IMRG contracts. We requested a copy

and received only a summary of the other investigations. I would

like to read from the report that you provided to us. And so this

would be from your general counsel to you, and I would read the

bottom paragraph on the first page.

‘‘Based on the extensive number of investigations that have

taken place, my personal involvement in the various management

inquiries and the checks and balances in the contracting process,

I do not believe that any misconduct took place in the award of

these contracts. In light of the IG’s ongoing investigation, I would

not recommend conducting an additional management investigation, either internally or using outside counsel, as is often done in

the private sector. In my view, there is little we can do, at this

time, other than to await the inspector general to complete his investigation.’’

And this is a follow-up of the litany of investigations you have

said you have looked into that you referred to that there ought to

be a presumption of innocence, and I do not disagree with that. But

you were talking about all of the investigations you made and how

you have looked into it, and you have your General Counsel here

advising you just to wait for the Inspector General.

Mr. STRAUSS. What I can assure the committee is that a number

of these issues have been investigated. And so let us just take the

47 phone calls, for example. Needless to say, I hear these revelations about the same time the committee does, and so I am very

interested in knowing what is going on. And a lot of this information exists somewhere in my organization, either the Inspector

General has already looked at this or this has been part of some

other investigation.

And so when I heard that there had been 47 phone calls between

Mr. Hagans and Ms. Cooks within a very short period of time,

needless to say that was a concern of mine, and I wanted to know

what the facts were. And I found that the facts were not that there

had been 47 calls, but that there had been 34 calls, and that 18

of these calls were a minute or less, and that these calls extended

over an 8-month period. And then I saw a statement that had been

prepared by Mr. Hagans, where he had tried to reconstruct what

they were talking about in each of these phone calls.

And so a bit of evidence here that seems very suspicious on the

surface, when you really investigate what is going on here, there

is a plausible explanation for it, and there was nothing that was

proven that would indicate, in any way, that we are not following

the Federal Acquisition Rules or Regulations to the letter. And I

bet I, personally, investigated 15 different issues like that, where

concerns were brought to my attention, and I investigated them

183

personally and found out that there was a perfectly plausible explanation.

The CHAIRMAN. Are there other general counsel reports not provided to us?

Mr. STRAUSS. I have instructed my people to provide everything.

The CHAIRMAN. Mr. Hast, during your investigation, did you review documentations prepared by the Corporation showing how the

decisions were made to award the two contracts to the Integrated

Management Resource Group, Myrna Cooks’ company that you investigated?

Mr. HAST. Yes. We reviewed the negotiation summaries for the

auditing service contract awarded in 1997 and the Atlanta FBA

contract awarded in 1998.

The CHAIRMAN. Did you identify anything strange or unusual

about the Corporation’s decision to make these awards to the

IMRG?

Mr. HAST. We did. PBGC appeared to use disparate rationales in

making its final selections for these two contracts. The scoring for

each bidder was based upon a combination of technical evaluation

points and cost analysis. In the first contract, valued at about $14

million, IMRG was not the low bidder, but was awarded the contract based on scoring 1.29 points higher than Office Specialists in

the technical evaluation, but IMRG was $590,000 higher in cost.

PBGC justified the award to IMRG with higher costs based on the

technical point difference that favored IMRG.

However, for the second contract, valued at about $25 million,

IMRG was five points lower in the technical evaluation than its

competitor, but it was about $685,000 lower in cost. In this case,

PBGC justified the award based on the lower price by IMRG.

PBGC’s treatment of the evaluations and its justifications appear

inconsistent with one another, and it adds to the appearance of improper influence used in awarding these contracts to IMRG.

The CHAIRMAN. Mr. Hast, referral of criminal investigations obviously a very serious step. What do you believe to be the most appropriate way to proceed there?

Mr. HAST. I believe that we should refer this to the United States

Attorney’s Office in Washington, D.C.

The CHAIRMAN. Ms. McHenry, it has been represented by the

PBGC that its contracts with highly specialized personnel were familiar with terminated plans that the PBGC administers. It is my

understanding, for instance, that many of the Pan Am pension staff

were hired by the contractor. Were you familiar with the particular

plans with which you worked at the Atlanta office?

Ms. MCHENRY. Not before I was actually employed there. But I

am an actuarial analyst and quickly was able to come up to speed

with these plans. There were only two, other than Barbara Mitchell, so that would make three former Pan Am employees who were

actually actively working on Pan Am plans.

The CHAIRMAN. What is your observations about the personnel

that were hired by IMRG in regard to this work?

Ms. MCHENRY. I think that the level of education is low, and I

also believe that the way that the administrators were trained was

very lacking in substance and competency.

184

The CHAIRMAN. One last question of you, since I have had a series of questions. This will be the last one.

You stated that one of your responsibilities at IMRG was to correct and reissue Initial Determination Letters sent out by the Corporation. Do you know what caused the PBGC to mail out so many

incorrect IDLs?

Ms. MCHENRY. I think they were in a great rush, and I think

that the data that they were using was not properly checked because I had the same data and ability to see that data right in Atlanta, and I could see the correct information, but somehow the

data base got scrambled or something happened to cause these various incorrect IDLs to go out. So it just was not managed correctly

I just wanted to say that I, personally, witnessed pensioners waiting for as long as 6 or 7 months to get a first check. It was not

a matter of just sending in an application and having IMRG respond to that in a prompt manner.

The CHAIRMAN. Thank you, Ms. McHenry.

Senator Breaux.

Senator BREAUX. Thank you very much. Let me explore two separate points here.

Mr. Strauss and Mr. Hast had responded to the Chairman’s

question with a prepared, and I appreciate it being a prepared

statement, because what you are talking about has to be very accurately presented here. Can we give you an opportunity to respond

to the comments that Mr. Hast presented to the committee, which

I guess, in essence, said that when he looks at these contracts, it

looks bad, I mean, it looks improper.

Mr. STRAUSS. It is possible that there are some appearance

issues here. What I want to assure the committee is that I believe

in the integrity of our process. We have about 1,400 contract actions every year, and we have very competent people who are involved in this. The head of Procurement at the Pension Benefit

Guaranty Corporation is a 37-year Government veteran. He is a

veteran of the Cuban Missile Crisis, he has worked in Procurement

for the Department of the Navy and for the military before he came

to the PBGC. This is a man who has total integrity. And so when

you look at this process here, we have a lot of procurements. We

have a lot of technical expertise in this area. And I have investigated each of these issues that have been raised, including some

that Mr. Hast raised this morning, and, Senator Breaux, even

though I do not believe that this is the appropriate forum to litigate this issue, that I want you to know that I am aware of each

of these issues. And as these issues have been presented to me, I

have investigated them, personally, to see if anything has happened here that would give me reason to have concern about the

integrity of our process. And I have not seen anything to indicate

to me, in any way, that the integrity of our process was compromised.

Senator BREAUX. I take it that, again, I think both sides are correct. We are not going to litigate this thing here. I take it that you

will pledge your full cooperation with Justice and work with them

and try to get to the bottom of whether there is anything improper,

from a legal standpoint.

185

Mr. STRAUSS. Yes, Senator. And we have cooperated fully in all

of these investigations.

Senator BREAUX. Well, the good news is I just got a note that

said that the Finance Committee’s, Mr. Chairman, mark-up has

been postponed until tomorrow. [Laughter.]

So we can begin this hearing at 10 o’clock instead of at 8 o’clock

in the morning. But I was here. [Laughter.]

Ms. McHenry, let me ask a couple of questions. I am trying to

understand this situation, and it is a little bit confusing.

I take it that you were working with IMRG. You were extremely

critical of what you saw in the office in I take it the 17 months that

you were there. Before IMRG had the contract, Office Specialists

had it in Atlanta; is that correct?

Ms. MCHENRY. Yes, that’s correct.

Senator BREAUX. You didn’t work with Office Specialists, did

you?

Ms. MCHENRY. No. They had a hiring freeze on toward the end

of their contract year.

Senator BREAUX. As far as you knew, did things work better

when Office Specialists had the contract than after IMRG got the

contract?

Ms. MCHENRY. I think, from the employees’ point of view, yes,

because Office Specialists paid once a week. IMRG paid twice a

month and then withheld 2 weeks of earnings, whereas, Office Specialists did not, and it staggered paydays, which upset everyone’s

budgets, and would not respond to questions about benefits or anything else. They just took a totally ‘‘let us ignore the Atlanta office’’ stance.

Senator BREAUX. What confuses me, to a certain extent, you say

in your testimony that you were the only new employee at IMRG,

that the rest of the office used to work for Office Specialists. It

seems to me that, in essence, the people running the operation in

Atlanta before the new contract was awarded was the same people

running the office after the new contract was awarded because

IMRG apparently hired everybody from the people who had the

contract the first time. In fact, you point out you were the only new

employee. And, in fact, it sounds like to me we still had Office Specialists running the show down there, and you were the only new

employee. I don’t understand why, when Office Specialists was on

the letterhead, it was working OK, and when IMRG became on the

letterhead, all of a sudden it all fell apart. Any kind of comment

as to why?

Ms. MCHENRY. Well, we had a great turnover. The contract

called for over 60 employees, but during the time I was there it

never reached more than 41, 42, 43 people. I think probably between 12, 13, 14 people had left and others had been reemployed

during that time. So although we are starting out with maybe the

same workforce, it changed over with new people coming in.

Senator BREAUX. Can you tell us what led you to leave.

Ms. MCHENRY. I think the very low standards and the inability

to get anyone’s attention.

Senator BREAUX. Was the head person in the office a new employee or was the head person a former Office Specialists employee?

186

Ms. MCHENRY. Former Office Specialists. Francis Emmanuel was

the actuary for Office Specialists.

Senator BREAUX. So the same person that ran it for Office Specialists ended up running it for IMRG?

Ms. MCHENRY. No. I do not know what happened. They—— Senator BREAUX. I thought you said they were the same.

Ms. MCHENRY. Not in the same positions. The same people. Others left. There were quite a number of people who left prior to

IMRG getting the contract.

Senator BREAUX. Well, was the person running the office, I use

that term colloquially—I do not know what running the office

means—but I mean the person in charge.

Ms. MCHENRY. I do not think anyone really ‘‘ran’’ the office, and

that was a great problem.

Senator BREAUX. Was the person in charge, there had to be

somebody that had the titular head of being in charge, was that

person initially a former Office Specialists employee?

Ms. MCHENRY. Yes.

Senator BREAUX. And was that person there the 17 months that

you worked there?

Ms. MCHENRY. Yes. He is now gone.

Senator BREAUX. So they had the same person running the office

for IMRG that ran it for Office Specialists for the time that you

were there. It is kind of interesting.

Ms. MCHENRY. Someone else I think was in the manager’s slot,

and I do not know who that person would have been.

Senator BREAUX. Mr. Strauss, can you comment? It seems to me

that you changed the contract, but essentially the same people

were doing the work.

Mr. STRAUSS. Yes, Senator, I would love to try to shed some light

on this. The Atlanta office is obviously very familiar to me. And

based on some of my testimony this morning, you probably think

that I am the Director of Procurement at the PBGC, rather than

the Agency head. But I want to make a couple of points about the

Atlanta office. In that these contracts that we have, even though

you read these huge dollar figures in the paper, those dollar figures

tend to reflect 5 years. And these contracts have to be evaluated

annually based on costs and performance. And so any PBGC contract that we have has to be evaluated every year.

I was very dissatisfied myself with what was going on in the Atlanta office. The problem that we have is that in a major population center like Atlanta, where unemployment is very low, recruiting people to work on these contracts is a real challenge. I was

dissatisfied with what was going on in the office there. And so, in

I believe it was late 1997, we evaluated the Office Specialists’ contract, and basically let them know that we were dissatisfied and

that we were going to rebid the contract after one year.

And then we had competitive bidding. And people here who have

more expertise than me can tell you how many people actually bid

on this contract, but I believe there were three or four bidders for

this contract. But because ERISA benefits administration of failed

pension plans is a very technical and specialized field, the people

who are bidding here tend to be bidding the same employees. And

so the cost differential is in the overhead, and that is what we are

187

really looking at. And so that is how these operations are staffed.

That is how the operation in Waterloo is staffed. And I still believe,

Senator, that if we can get you to the Waterloo office, you will get

a much better insight into the work that is done there, the quality

of the work that is done there, the quality of the people, and that

that is much more representative of us than this Atlanta office.

And I want to assure the committee that I had town hall meetings myself with the Atlanta employees—Bonne is very familiar to

me. She is an e-mail pal of mine. We have made changes, we have

given them technology, and we have weekly video conferences with

the Atlanta operation. And so we have tried to make a number of

changes with respect to the Atlanta operation, and I believe that

we have addressed many of the issues that Bonne has raised this

morning in her testimony.

Senator BREAUX. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much.

I want to assure everybody that even though the Finance Committee is not meeting at 10 o’clock, I had a simultaneous mark-up

in Judiciary, so I am going to have to hurry along here and get

done regardless.

Thank you very much, Senator Breaux, for your loyalty to this

committee.

To follow up on Senator Breaux’s statement and question, Mr.

Strauss, are you saying that the management of IMRG was worse

than the Office Specialists, despite the fact that some of the same

people were former Office Specialists staff. So management was different, and Ms. Cooks only visited the office a couple of times?

Mr. STRAUSS. I do not know how many times she visited the office. What I can tell you, Senator, is that I had four town hall

meetings myself in the Atlanta office. I am very familiar with the

Atlanta office. Many of the employees there have communicated

with me directly, and I believe, based on the work plans that we

provide these offices and the way in which we measure their work,

that there has been improvement in the Atlanta office. I would be

more than happy to submit that for the record to help to clarify

some of these issues.

The CHAIRMAN. Ms. McHenry, I think I would like to have your

response to the same issue I raised with Mr. Strauss.

Ms. MCHENRY. Let me ask you just to rephrase what—— The CHAIRMAN. Well, basically, we are going over the follow-up

of Senator Breaux’s question. And I asked Mr. Strauss if he was

saying that the management at IMRG was worse than Office Specialists, despite the fact that some of the same people were former

Office Specialists staff, some management was different, and Ms.

Cooks only visited the office a couple of times.

Ms. MCHENRY. Oh, very definitely. She made a very clear statement that she was leaving everything in the hands of Francis Emmanuel, who was a very incompetent manager, as far as the employees were concerned. I think that the employees wanted to do

a good job, but were constantly upset because Myrna Cooks, IMRG,

could not pay them correctly, on time, and then kept changing paydays and would not address any of the issues.

And then Francis Emmanuel just kept everyone subdued by

threats, and intimidation, and notes in files and just trying to

188

make sure that everyone stayed quiet about what they saw and

what was going on.

The CHAIRMAN. Ms. Bovbjerg, since the PBGC is a wholly owned

Government corporation, what laws govern its operation, particularly contracting laws?

Ms. BOVBJERG. PBGC’s procurement activities related to benefit

processing and determination are not subject to the FAR. We have

had a lot of discussion about this this morning, about the Federal

Acquisition Regulation. PBGC voluntarily follows the FAR as a policy, but not as a matter of law, and that is because their funding

is mainly from a nonappropriated source.

The CHAIRMAN. Mr. Strauss testified that FAR applies, which is

it, in your judgment?

Ms. BOVBJERG. It applies as a matter of policy. The Corporation

has chosen to follow the FAR. Now, I want to stress that in our

work, which was a management review, the PBGC met the basic

requirements of the FAR. In the information that we referred to

Mr. Hast, he may be finding other things, but we found that they

met the basic requirements of the FAR. I also want to emphasize

that the FAR is the floor for what you might expect for really good

management of a contracts process; we found that technically those

contracts were competed, they were competitive, but that they

clearly could have done more to get more bidders, to have more

competition on price, on service. And we think that not taking action to really do more and to really go as far as you can toward

full and open competition can result in poor service, it can result

in higher cost, and ultimately, when those contracts are not closely

managed after they are awarded, ultimately, you have more of a

potential for waste, fraud and abuse than you would if they were

closely managed.

The CHAIRMAN. Well, if few Federal laws apply, as you have indicated, then is it fair to say that the PBGC has very little oversight

by the executive and legislative branches of the Federal Government and has free access to spend the trust fund in any matter its

executives see fit?

Ms. BOVBJERG. We have commented in our report that there is

only a very small amount of their budget under direct congressional oversight—this is the limitation amount. It is about $11 million of their $160 million budget. And there is rather general guidance as to what the nonlimited amounts can be spent for. We have

observed in the report that, in some ways, this means that Congress does not have the normal budgetary oversight that it has for

other agencies and that this also contributes to some of the management issues and contracts awards and processes not being very

closely watched.

The CHAIRMAN. When did the General Accounting Office bring

this lack of oversight and the leeway by which there is very little

control over the trust fund money to the attention of Congress?

Maybe never?

Ms. BOVBJERG. Traditionally, when we have done work on PBGC

in the past, we have focused nearly entirely on the finances—and

the premiums and the assets of the plans and the risk of future

problems. In fact, I know that Mr. Strauss had a chart over there

a few minutes ago that showed there was a large deficit around

189

1992–1993, and that was when we designated the PBGC a highrisk program. We felt that there was potential for deficits to go

from $3 billion in that year to something like $18 or $20 billion in

5 to 10 years, and we were concerned about that.

This is the first time, in this review, that we have really looked

at how the Corporation is managed and not at how their balance

sheet looks.

The CHAIRMAN. Following up on the lack of oversight on the part

of Congress, besides conducting more of these activities, what can

Congress do to ensure that the Corporation conducts its operation

in a manner that sufficiently administers trust fund assets, while

still meeting the needs of pension plan participants?

Ms. BOVBJERG. We did not make a recommendation on this, Senator, and that is because that is a much more complex issue than

we could really address in this report. But I do want to say that

I think that asking the kinds of questions that you have been asking and the kind of work that we have begun to do on management

issues goes a long way to increasing oversight. But such an approach is necessarily ad hoc. And we think it is worth considering

how to build a more routine approach to oversight of this Corporation.

The CHAIRMAN. Mr. Strauss, you heard Ms. McHenry state in

her testimony that the Corporation issued determination letters regardless of the quality, solely to meet a court-ordered deadline.

How does the PBGC measure the accuracy of determination letters

it sends out? In other words, while it may take the PBGC less time

to issue determination letters, is accuracy compromised in the interest of speedy delivery?

Mr. STRAUSS. I want to make a couple of points about this. One,

we have a management control unit that looks at this. And when

you look at our historical appeals rate, which would deal with these

sorts of issues, that has not varied much from year to year.

The CHAIRMAN. Do you have any way, though, of measuring the

accuracy of the letters of determination?

Mr. STRAUSS. Well, we have a Corporate standard, where the

Corporate goal is to provide them promptly and to make sure that

they are accurate. And so that is a high priority for the Corporation.

The CHAIRMAN. Well, I think that we will close there. And I may

have some questions to submit for answer in writing. And by the

way, we may also, I should have announced this at the beginning,

for those of you that are not acquainted with the congressional

process and you need some help from my staff, if you get letters

or questions for answer in writing, my staff will help you process

that. Most everybody else here understands that a lot of members

cannot come or even those of us who do come will have some letters

for follow-up. So we will keep the record open for a couple weeks

on that.

I look forward to hearing the results of the action requests that

we made today. The Inspector General’s rigorous testing of the IDL

accuracy and his follow-up penetration tests of the Corporation’s information system I think will give us an updated status report on

how the PBGC is responding to the concerns that we have heard

today. And in light of the grave concerns raised by the Corporation

190

contracting practices, that area also warrants continued scrutiny.

And I understand that the Office of the General Accounting Office

Special Investigations will refer the matter to the Department of

Justice for appropriate action. That is your decision, but I think it

is one that we have heard enough that it is worth that process

ought to go through.

And for Mr. Strauss, I will, as I told you a week ago yesterday

when you and I were involved in a contest, a three-mile contest to

see who could run the fastest and you beat me—— Mr. STRAUSS. I thought you had won, Mr. Chairman. [Laughter.]

The CHAIRMAN. I will be available any Saturday morning from

8 to 9:30 to visit the Waterloo office. It is close to my home, and

I would be glad to do that.

Mr. STRAUSS. We will look forward to having you.

The CHAIRMAN. Thank you.

The meeting is adjourned. Thank you all very much.

[Whereupon, at 10:01 a.m., the committee was adjourned.]

191

192

193

194

195

196

197

198

199

200

201

202

203

204

205

206

207

208

209

210

211

212

213

214

215

216

217

218

219

220

221

222

223

224

225

226

227

228

229

230

231

232

233

234

235

236

237

238

239

240

241

242

243

244

245

246

247

248

249

250

251

252

253

254

255

256

257

258

259

260

261

262

263

264