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S. Hrg. 112–507 

FOOD SERVICE MANAGEMENT CONTRACTS: 

ARE CONTRACTORS OVERCHARGING 

THE GOVERNMENT? 

HEARING 

BEFORE THE

AD HOC SUBCOMMITTEE ON CONTRACTING 

OVERSIGHT 

OF THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

OCTOBER 5, 2011 

Available via http://www.fdsys.gov 

Printed for the use of the Committee on Homeland Security 

and Governmental Affairs 

( 

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(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

MARK BEGICH, Alaska 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

SCOTT P. BROWN, Massachusetts 

JOHN MCCAIN, Arizona 

RON JOHNSON, Wisconsin 

ROB PORTMAN, Ohio 

RAND PAUL, Kentucky 

JERRY MORAN, Kansas 

MICHAEL L. ALEXANDER, Staff Director 

NICHOLAS A. ROSSI, Minority Staff Director and Chief Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

JOYCE WARD, Publications Clerk and GPO Detailee 

AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT 

CLAIRE MCCASKILL, Chairman 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

JON TESTER, Montana 

MARK BEGICH, Alaska 

ROB PORTMAN, Ohio 

SUSAN M. COLLINS, Maine 

JOHN MCCAIN, Arizona 

JERRY MORAN, Kansas 

MARGARET DAUM, Staff Director 

BRIAN CALLANAN, Minority Staff Director 

KELSEY STROUD, Chief Clerk 

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C O N T E N T S 

Opening statement: Page 

Senator McCaskill ............................................................................................ 1 

Prepared statement: 

Senator McCaskill ............................................................................................ 21 

WITNESSES 

WEDNESDAY, OCTOBER 5, 2011 

Phyllis K. Fong, Inspector General, U.S. Department of Agriculture ................. 4 

John F. Carroll, Assistant Attorney General, Office of the Attorney General 

of the State of New York ..................................................................................... 6 

Charles Tiefer, Professor of Law, University of Baltimore School of Law, 

and Former Commissioner, Commission on Wartime Contracting in Iraq 

and Afghanistan ................................................................................................... 7 

ALPHABETICAL LIST OF WITNESSES

Carroll, John F.: 

Testimony .......................................................................................................... 6 

Prepared statement .......................................................................................... 30 

Fong, Phyllis K.: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 23 

Tiefer, Charles: 

Testimony .......................................................................................................... 7 

Prepared statement .......................................................................................... 45 

APPENDIX 

Questions and Responses for the Record from: 

Ms. Fong ............................................................................................................ 55 

Mr. Carroll ........................................................................................................ 59 

Mr. Tiefer .......................................................................................................... 62 

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FOOD SERVICE MANAGEMENT CONTRACTS: 

ARE CONTRACTORS OVERCHARGING 

THE GOVERNMENT? 

WEDNESDAY, OCTOBER 5, 2011 

U.S. SENATE,

AD HOC SUBCOMMITTEE ON CONTRACTING OVERSIGHT,

OF THE COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2 p.m., in Room 

SD–342, Dirksen Senate Office Building, Hon. Claire McCaskill, 

Chairman of the Subcommittee, presiding. 

Present: Senator McCaskill. 

OPENING STATEMENT OF SENATOR MCCASKILL 

Senator MCCASKILL. I want to welcome everyone to this hearing 

today. I have an opening statement that I will give. 

I have to say, before I begin this opening statement, though, that 

I am not shocked that this is not a full room. As I began to prepare 

for this hearing today, I began to understand the nature of the 

problem. This is really complicated and hard, and it is precisely 

when something is complicated and hard that bad things happen. 

Today, we seek clear direction and transparency because that usually translates into better accountability. And I think the lack of 

accountability in this particular area can be traced directly to the 

complexity of this issue. 

So I am really glad that we have the three of you here today. 

This is going to be one of those hearings that I talk about a lot in 

this Subcommittee. That is, this subject matter is, as you can tell 

by the room, not the sexiest in Washington. We are not going to 

have breaking news online about this hearing today. But this is important work. This really brings ‘‘getting into the weeds’’ new 

meaning. 

The irony is, everyone is running around this building giving political statements about how we have to bring down the spending 

of the Federal Government. Well, here we have a line item in the 

Federal Government that is north of billions and billions and billions of dollars, and yet it is not going to garner the attention as 

some other sexy headline that I am sure others are covering as we 

speak over in the main building. 

So let me give the formal opening statement that has been prepared and then we will get to your testimony and questions. Unfortunately, and Senator Portman asked me to convey to you that he 

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cannot be here today even though he thinks this is a terrific subject 

for this Subcommittee to go at. I think he would have liked to have 

been here to discuss even the complexities of this, but he could not, 

and so he asked me to convey that to you and I am happy to do 

so. He and I are working well together on this Subcommittee. 

Today’s hearing focuses on how the government buys food. Every 

day, the government provides meals to our soldiers at home and 

overseas, veterans, government employees, and to our children 

through the National School Lunch Program (NSLP). Every year, 

billions of taxpayer dollars are paid to the food service contractors 

who supply the food for dining facilities on military ships, bases, 

and on the battlefield, as well as at government buildings, hospitals, and schools. 

When food service contractors buy food for the government they 

get rebates from the manufacturers, suppliers, and vendors. In 

their simplest form, rebates often are based on volume purchases 

that contractors make from food manufacturers and distributors. 

For example, a contractor may order cases of cereal from a food 

manufacturer, for which it will receive a rebate in the form of a 

discounted price or a cash payment from the manufacturer. 

In cost reimbursable contracts, the contractor will then submit 

invoices for its food purchases to the contracting agency. The problem is that the invoice price may not include the rebates received 

from the manufacturer or the distributor. So the agency then pays 

the full amount of the invoice and the contractor pockets the difference. When contractors buy food with the taxpayers’ money, they 

should not be able to keep the change. 

Recently, reports of fraud and other abuses on food service contracts have snowballed. Last July, the New York Attorney General’s Office announced a $20 million settlement with Sodexo, one 

of the largest food service management contractors in the world, regarding allegations that the company failed to pass along rebates 

that it received through its contracts with the New York public 

schools participating in the National School Lunch Program. 

In September 2010, the Department of Justice (DOJ) announced 

a $30 million settlement with U.S. Food Service, another major 

contractor, based on allegations that it had overcharged the government by inflating food prices on contracts with the Defense Department (DOD) and the Veterans Administration (VA). 

The Department of Justice also has a major case pending against 

Public Warehousing Company (PWC), now known as Agility, based 

in part on allegations that Public Warehousing Company submitted 

false information, manipulated prices, and overcharged the government for food and related services under its contract to supply fruit 

to the military in Iraq. 

This June, the Department of Agriculture’s (USDA) Inspector 

General (IG) announced that it would be conducting its third audit 

of food service management contracts in the last decade. Both of its 

previous audits, conducted in 2002 and 2005, found serious problems with companies overcharging schools by withholding rebates. 

The message that these reports and investigations send is clear. 

We are not doing enough to make sure that the government is not 

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bates on to the government or to pad their own profits. One such 

method is to simply call the rebate another name, such as ‘‘marketing incentives’’ or ‘‘vendor consideration.’’ 

What is more, it seems obvious that the problem is even more 

widespread. For example, some companies have said that their accounting practices prevent them from accounting for the rebates 

owed to individual clients. Even if the company is giving the government the rebates that may be attributable for the individual 

contract, there is no way for the government to recoup the overall 

rebates that may be attributable to discounts based on purchases 

made by an entire Federal agency or the Federal Government overall. 

We are here today to learn from some of the Nation’s experts on 

this issue on how contractors can manipulate their prices and invoices. We will discuss barriers to effective oversight of these contracts, including the complexity of the contractors’ relationships 

with their vendors and suppliers and the ambiguities in the Federal regulations relating to rebates. We will also discuss whether 

the practices that they have seen are exceptions or part of a pattern of fraud in these types of contracts across the Federal Government. 

In this time of belt-tightening, we need to be more careful than 

ever to ensure that taxpayer dollars are not being wasted—particularly because every dollar that is lost through rebate schemes is a 

dollar that we cannot use to feed our soldiers and the children who 

need nutrition. 

I thank the witnesses for being here today and I look forward to 

their testimony. 

Senator MCCASKILL. And now let me introduce the witnesses and 

we will begin the testimony. 

It is the custom of this Subcommittee to swear in all witnesses 

that appear before us, so before I do your introductions, if you do 

not mind, I would ask you to stand. 

Do you swear that the testimony you will give before this Subcommittee will be the truth, the whole truth, and nothing but the 

truth, so help you, God? 

Ms. FONG. I do. 

Mr. CARROLL. I do. 

Mr. TIEFER. I do. 

Senator MCCASKILL. Thank you all. 

Phyllis Fong was sworn in as the Inspector General of the U.S. 

Department of Agriculture on December 2, 2002. Prior to her appointment at USDA, Ms. Fong served as the Inspector General of 

the U.S. Small Business Administration (SBA) from 1999 until 

2002. Among many other positions of distinction, Ms. Fong also 

served as the Assistant General Counsel for the Legal Services 

Corporation and an attorney with the U.S. Commission on Civil 

Rights. Ms. Fong is also currently serving as Chair of the Council 

of Inspectors General on Integrity and Efficiency. 

John Carroll is an Assistant Attorney General in the Criminal 

Division of the New York’s Attorney General, where he is leading 

an investigation of billing and marketing practices among food 

service companies. He is also the Deputy Chief of the recently 

formed Taxpayer Protection Bureau. Mr. Carroll specializes in civil 

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1The prepared statement of Ms. Fong appears in the appendix on page 23. 

and criminal investigations involving allegations of public corruption as well as complex corporate investigations. 

Charles Tiefer is currently a professor at the Baltimore School of 

Law, where he teaches government contracting and legislative 

process. Professor Tiefer also recently served as a Commissioner on 

the Commission for Wartime Contracting in Iraq and Afghanistan, 

a commission that is very near and dear to my heart, and did excellent work. 

By the way, I should tell you, Professor Tiefer, that yesterday, 

Jim Webb and I hosted here at the Capitol one of the investigators 

for the Truman Committee. She was one of the first women ever 

hired in Congress to be an investigator for a congressional Committee and she was in charge of investigating on the Truman Committee the civilian manpower issues. She was a 1943 graduate of 

Vassar—and came to work for the Committee for several years. So 

Senator Webb and I had a chance to visit with her. She is anxious 

to see the report of the Commission, and asked us to send her one. 

She lives in Virginia and is a fascinating woman, and if you are 

interested, I would be glad to give you her contact information, because she told some great stories about the Truman Committee and 

the work it did and it was terrific. 

Professor Tiefer has also served in both Chambers of Congress as 

Legal Counsel and investigated controversies related to Bosnia as 

well as the Iran Contra Affair. 

We would ask that your testimony be around 5 minutes, but take 

as long as you would like, and we will begin with you, Inspector 

General Fong. 

TESTIMONY OF PHYLLIS K. FONG,1 INSPECTOR GENERAL, U.S. 

DEPARTMENT OF AGRICULTURE 

Ms. FONG. Thank you, Madam Chairman, for the opportunity to 

testify today about the work that our office has done to help improve the Food and Nutrition Service’s (FNS) oversight of the 

School Lunch and Breakfast Programs and the relationships with 

food service management companies (FSMC). 

You have my full statement for the Record, so let me just highlight the key points. 

In fiscal year (FY) 2010, approximately 43 million children participated in the School Lunch and Breakfast Programs, which together served an estimated 7.2 billion meals in 14,000 school districts around the country involving $12.5 billion in Federal funds. 

Generally, as you note, the food service management companies 

who contract to provide these meals are required to pass discounts, 

rebates, and credits for USDA-donated commodities back to the 

local school food authorities (SFA), and those savings can then be 

used to benefit the students and the local school meal programs. 

Over the last 10 years, we have issued several reports identifying 

problems in this program. As you note, in 2002, we audited eight 

food service management companies contracting with 65 local authorities in seven States and we found that five of those eight companies improperly retained $6 million in cost savings that should 

have been passed on to the local food authorities. 

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The management companies, who had fixed-rate contracts, re- ceived $5.8 million in USDA-donated food, but they did not credit 

this amount to their local food authorities’ accounts. This happened 

because the FNS requirements on these programs were not clear 

and because some companies revised their contracts to allow themselves to retain savings that should have gone to the local food authorities. 

The remaining $280,000 involved companies with cost reimbursable contracts, and in those situations, the bid solicitations would 

require that rebates and credits be passed along to the food authorities. In those situations, the companies that won the bids either modified their contracts or they ignored the contract requirements. 

So in 2005, we did another audit to take a closer look. We looked 

at one management company that had cost reimbursable contracts 

in 22 States and we found that the company violated its contracts 

with 106 food authorities in eight States by not crediting them with 

discounts, rebates, and other cost savings of about $1.3 million. 

Together, when you look at the recommendations that our audits 

made, we recommended that FNS needed to develop specific contract terms for State agencies and local authorities to use when 

contracting with food service management companies. We felt that 

the terms should ensure that SFAs benefit from the value of the 

food donated by USDA and also that the SFAs benefit from any 

discounts or rebates that companies received. We also recommended that FNS amend its regulations to require that these 

contract terms be included in specific contracts, to require that 

State agencies approve contracts before the local districts sign 

them, and to require State agencies to have the local districts enforce the contract provisions. In response to our recommendations, 

FNS revised its regulations in 2007, and in 2009 issued updated 

guidance to the State agencies and local authorities. 

The issue of food service management companies improperly retaining savings, however, continues to be a concern, and due to express concerns that we have received from Congress and others, we 

have decided to initiate a new audit to assess the effectiveness of 

these corrective actions that FNS has implemented and to assess 

the effectiveness of State agency action. We will also be looking to 

see if the food service management companies with cost reimbursable contracts are passing along the discounts and savings as they 

should be. 

So, in conclusion, we are committed to working with USDA to 

strengthen this program. We welcome the opportunity to answer 

your questions and appreciate the opportunity to be here today. 

Thank you. 

Senator MCCASKILL. Thank you, Ms. Fong. Mr. Carroll. 

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1The prepared statement of Mr. Carroll appears in the appendix on page 30. 

TESTIMONY OF JOHN F. CARROLL,1 ASSISTANT ATTORNEY 

GENERAL, OFFICE OF THE ATTORNEY GENERAL OF THE 

STATE OF NEW YORK 

Mr. CARROLL. Madam Chairman, please accept the greetings and 

the thanks of Attorney General Eric Schneiderman for taking testimony on this important topic, what are known as in the industry 

sometimes as off-invoice rebates. And indeed, Senator McCaskill, 

you raised the issue of transparency and the Attorney General believes that is exactly the problem with this practice, because it is 

inherently opaque. 

I am an Assistant Attorney General and the Deputy Chief of 

General Schneiderman’s Taxpayer Protection Bureau. Our focus, 

like that of this Subcommittee, is to investigate and prosecute allegations of fraud and waste in government contracting. 

The United States and local governments provide millions of 

Americans with meals every day, and as a general proposition, individuals who are receiving meals from the government are among 

the most vulnerable. The meals provided by the government include through the National School Lunch Program, meals in health 

care facilities, and meals for soldiers in the field. 

The meals are often provided through government contractors 

known in this industry as the food service management companies. 

Typically, such companies assume complete operational responsibility for delivering meals in a facility, whether in a Marine mess 

hall or a local elementary school. One task delegated to food service 

companies which contract with schools and others to provide this 

service is the daily task of ordering food to make meals for children, hospital patients, and soldiers. Food is bought either directly 

from food manufacturers or through distributors. These food vendors pay food service management companies millions of dollars to 

buy food from them. These payments are called rebates or, 

tellingly, off-invoice rebates. 

The Attorney General’s investigation has identified several problems with the system which, in other contexts, has been labeled as 

an unlawful kickback. First, the most obvious problem. Many food 

service contracts, as, Senator, you pointed out, are some version of 

cost-plus arrangements, but rebates are most often off-invoice. So, 

in other words, government customers who should be getting credit 

for rebates have no way to actually account for the numbers because the entire rebating process takes place behind the scenes, 

and so they have no way to police their contracts. 

But there is a second, almost more important and definitely more 

insidious issue, which is that the rebates create a conflict of interest, and our investigation has seen the conflict of interest play out 

in such a way that very often food service companies will make 

food choices driven by the chase for rebates, which for some companies can amount to hundreds of millions of dollars in income, rather than issues of quality or other preferences. So, for example, food 

service companies are more likely to enter into rebating agreements with large agribusiness and may thereby forego entering 

into business arrangements with local farmers, which would serve 

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1The prepared statement of Mr. Tiefer appears in the appendix on page 45. 

to thwart the National School Lunch Program’s efforts to create 

farm-to-school efforts. 

So, in conclusion, I am happy to take questions, and once again, 

the Attorney General expresses his gratitude for your interest. 

Senator MCCASKILL. Thank you very much, Mr. Carroll. Mr. 

Tiefer. 

TESTIMONY OF CHARLES TIEFER,1 PROFESSOR OF LAW, UNIVERSITY OF BALTIMORE SCHOOL OF LAW, AND FORMER 

COMMISSIONER, COMMISSION ON WARTIME CONTRACTING 

IN IRAQ AND AFGHANISTAN 

Mr. TIEFER. Senator McCaskill and Subcommittee, thank you for 

the opportunity to testify today. I am a Professor of Law, as you 

noted, at the University of Baltimore Law School and the author 

of a case book on Federal Government contracting. For 3 years, I 

was Commissioner on the Commission on Wartime Contracting in 

Iraq and Afghanistan. Senator McCaskill, you understated what 

you did for that Commission. You were one of the two cosponsors. 

You created it. You nurtured it. You inspired it. And, not least, you 

never let us forget the spirit of Senator Truman and the Truman 

Committee during World War II. That was a very high standard 

you asked us to measure up to. 

For the Defense Department operations in the war zone, the government purchases the necessary food by its prime vendor contract 

managed by the Defense Logistics Agency (DLA). In recent years, 

massive criminal and civil fraud charges have been brought against 

the food services contractor Public Warehousing Company, renamed Agility. The scale of these schemes is breathtaking. Public 

Warehouse Contracting earned $8.5 billion in revenue from its Iraq 

food supply contracts, and press accounts have discussed that a settlement of the charges would be on the order between $500 million, 

$600 million, lawyers said $750 million. Trial has not yet occurred, 

so I will use the word ‘‘alleged,’’ as you did, for purposes of the 

criminal case, but that does not prevent DLA or GAO or this Subcommittee from taking advantage of what is set forth in the indictment to make the necessary repairs in the program so that this 

does not recur. 

In brief, and the pattern is very similar to what my fellow witnesses described, the contract is supposed to charge the government a delivered price, which is what the suppliers are supposed 

to charge, plus the fee charged by PWC, or the prime vendor. And 

we are talking about, even though this is a wartime supply program, United States food. It is easy to parse the indictment and see 

that the bulk of what is being talked about is food that—meat, 

chicken, desserts—are produced in the United States, supplied in 

the United States, from U.S. suppliers. And PWC was forbidden to 

keep rebates or discounts from suppliers. Its pricing intended that 

this be passed along to the U.S. Government. But instead, it used 

its marketing muscle to obtain and to keep such discounts, and 

what made it a fraud case, a criminal fraud case, was covering this 

up by false statements. 

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I am going to take one of the indictment’s examples in a little 

detail. In 2005, I am quoting from the indictment—‘‘U.S. manufacturer S.L. engaged in discussions with defendant PWC.’’ This was 

about discounts. I might say parenthetically, the indictment refers 

to these suppliers with initials, but the press and blogs have attributed the initials to well-known food suppliers like Sara Lee. 

‘‘Through the discussions between defendant PWC and S.L. 

about discounts, PWC insisted that the discount be called an early 

payment discount, even though S.L. did not want to use that term 

and suggested any discount offer to PWC be called what it was, a 

marketing allowance, a rebate. Defendant PWC insisted the allowance be labeled an early payment discount. Ultimately, S.L. agreed 

to use the label.’’ 

I could tick off the other U.S. suppliers mentioned in the indictment. My statement covers these. 

To me, the allegations in the indictment show—just as Mr. Carroll pointed out—that there were conflicts of interest here. I would 

point out that this amounts to corruption, that the prime contractor who is engaging in kickbacks makes false reports to the 

government in words, in numbers, and even creates an entire false 

stream of reporting. It corrodes the whole system of supply for the 

government and it develops a whole network of suppliers who may, 

to some extent, be witting in this and are willing to comply with 

the crookedness, to cooperate in it. 

I have some suggestions for what can be done about this. I think 

certifications by the prime vendor and declarations of what they receive would box them in. It would make it extremely easy to prosecute them or have False Claims Act cases qui tam brought against 

them. There is also an extensive study, an internal study by DLA 

which is extremely embarrassed that this happened on its watch. 

It could be helped to remember the reforms that it knows it needs 

to do. 

Thank you, Senator. 

Senator MCCASKILL. Thank you very much. 

I have a lot of specific questions, and I promise you I will not 

ask all of them, but this is an interesting concept, that someone 

buys a lot of volume from what essentially is a broker, a type of 

middleman, and the middleman service they are providing is going 

to go out and locate the various foods that this program needs. But 

the volume that is necessary is dictated by the size of the customer—the fact that it is the Federal Government, the military or 

School Lunch Program or whatever. Are they engaging in getting 

this kind of extra padding when they are dealing with potential 

folks that are not the government? Is this like the common practice 

in this industry, that you get an extra padding on the contract because you are buying more than one case of Cheerios? 

Mr. CARROLL. May I? 

Senator MCCASKILL. Sure. 

Mr. CARROLL. The agreements can run with food distributors, between food distributors and food service companies, so, for example, 

not to—just to use the name, just an example, a Cisco or U.S. 

Foods would be examples of distributors, and rebates can run between the distributors, like Cisco or U.S. Foods, and the Sodexos 

of the world. Or it can run between a chicken wholesaler, a large 

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national chicken wholesaler and the food service company. And the 

agreements are not limited to particular customers, the ones that 

the Attorney General’s Office has reviewed. They run—so, in other 

words, the agreement could be 25 cents rebate on every case of 

chicken delivered to Sodexo, and so they—— 

Senator MCCASKILL. So it does not matter who is buying it? 

Mr. CARROLL. Exactly. 

Senator MCCASKILL. And is that the excuse they use? 

Mr. CARROLL. That is one excuse, that the agreements actually 

have to do with volume across all business lines. So, for example, 

it could be business for the Senate mess hall or it could be business 

for a company, and what the food service companies will say is, 

well, we buy for so many different entities, that is why we are entitled to these discounts. But the excuse kind of starts to fall apart 

if you consider that the buying power of the United States, based 

on that, the United States would certainly also be entitled to those 

discounts. 

Senator MCCASKILL. Right. So let me start with you, Ms. Fong. 

What recommendations are still outstanding on your audits that 

were done in 2002 and 2005? I mean, how many findings do you 

have with recommendations that they have not yet implemented? 

Ms. FONG. We went back to our audit records in preparation for 

this hearing, and currently, FNS has addressed all of our recommendations and has said to us that they have implemented all 

the corrective actions that are necessary. And by redoing their regulations that they issued in 2007, they believe that they have addressed the specific recommendations we made. Now, one of the 

purposes of our new audit is to actually go out and see whether 

their actions have been effective in dealing with the problems that 

we had seen earlier in the decade. 

Senator MCCASKILL. They certainly clarified it in 2007. 

Ms. FONG. Yes. 

Senator MCCASKILL. I mean, no one can say that is ambiguous 

at this point. 

Ms. FONG. That is right. 

Senator MCCASKILL. Mr. Carroll, for the investigations that you 

have done on the rebate withholding, can you give some estimate 

on the amount of dollars we are talking about in terms of what percentage of the overall contract price could you attribute to these 

withheld rebates? 

Mr. CARROLL. Generally, the rebate amounts that the food service companies receive on particular products—so it could be anything from a jar of a particular spice or it could be, as I said, a 

case of chicken—run between 5 and 50 percent of the price that is 

charged to the customer. So, generally, they fall on average—in the 

National School Lunch Program, for example, it could be around 10 

to 15 percent of the price. But there is a lot of variability because, 

obviously, you are buying very different foods to serve in a school 

program as opposed to a corporate dining room. 

Senator MCCASKILL. When they are asked for the excuse for 

keeping the rebates when they are aware that it is in violation of 

the contracts, do any of you have any—can you articulate what 

their excuse is, even though it appears fairly clear the contracts are 

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obviously trying to make sure those rebates are passed on to the 

taxpayers, what is the excuse? Is the excuse the accounting issue? 

Mr. CARROLL. One issue certainly is the accounting, especially for 

a large multinational corporation. But, the response there is the 

system is kind of designed to be complicated. So, in other words, 

they enter into agreements—— 

Senator MCCASKILL. Right. 

Mr. CARROLL [continuing]. To buy things nationwide and that involves millions of dollars of payments, and then in order to get 

down to how many cases of Cheerios went to this school and how 

much rebates is that school entitled to, it is a complicated exercise, 

but that is the way the system, in the view of the investigation, is 

intentionally designed. In fact, one target I reviewed some accounting records for entered into an agreement with its offshore parent 

in order to further obscure rebate flow of where the revenues were 

going. 

Senator MCCASKILL. And that could be this no value added addition of some company that is there just to be an excuse for a place 

to park the rebate? 

Mr. CARROLL. That is right, and actually, the case that we settled yesterday involved a relatively smaller regional player and 

about $800,000 in rebates, but we settled the claim for $1.6 million 

based on the False Claims Act damages. They entered into what 

they called marketing agreements, as you mentioned, Senator, and 

we reviewed the marketing agreements and the so-called work 

product that they supposedly delivered in exchange for marketing 

services, and in the view of the investigation, at least, the so-called 

marketing services were illusory. 

Senator MCCASKILL. So they called it marketing services, created 

a company and ran it through there in order to add some legitimacy to parking it. 

Mr. CARROLL. They created a special department and—exactly, 

Senator, to disguise the—because if it was called ‘‘rebates,’’ obviously, it would have had to have been returned. But if it is called 

something else—— 

Senator MCCASKILL. Professor Tiefer, did the Public 

Warehousing Company case—are there rebates involved in all of 

the charges involving them? Is this all similar to what you indicated about S.L. and PWC, renaming the rebate an early payment 

bonus? 

Mr. TIEFER. It comes down to a rebate. There were a variety of 

ways that they sort of squeezed a rebate out of the stream as it 

went past them. Another way which is more complicated is that out 

of their fee, the fee they get from the government, which is supposed to be all the things they do, including some processing and 

packaging and consolidating, they can do it themselves or they can 

pay a consolidator. That is supposed to come out of their fee. But 

instead, they found ways to throw—have the suppliers pay for that, 

add it to what the supplier was charging, and so the government— 

which is not supposed to pay for that, it is supposed to be a reduction in what they are making—ends up not being a reduction in 

what they are making. So it is a roundabout rebate. 

Senator MCCASKILL. Right. Was the contract flawed in the PWC 

case? Was there a flaw in the way the contract was drafted? I 

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mean, if you could go back and look at the way—I mean, in so 

many of the wartime contracts, I do not need to tell you, we said 

to people, tell us what we need, write the contract, and tell us what 

we need to pay. It was all on the side of the contractor to do way 

too much of the scoping and the actual purview of the contract. 

Were the underlying contracts in the PWC case actually flawed? 

Mr. TIEFER. They certainly need improvement. I will say this, because when I and a staff team, we talked to DLA, went to their 

center in Philadelphia and delved into it, they said, we are not set 

up to deal with a fraudulent prime vendor. Our assumption is we 

are dealing with people who are honest. And so there is a limit to 

how well you can—they were saying, you can deal with outright 

fraud, people who make false statements, who lie about what they 

are doing. 

With that aside, yes, the contract is designed as a fixed-price contract which has the least visibility for the Federal Government. But 

because of the way that the charges get added together from two 

different streams, it is not as a practical matter fixed price. 

Senator MCCASKILL. Right. 

Mr. TIEFER. The supplier price can go up and down. Things can 

be hidden in it. Things can be subtracted from it. You can move 

the back door from it. So it is drafted without protecting the government. 

Senator MCCASKILL. So it is called a fixed-price contract, but 

really, it is anything but. 

Mr. TIEFER. I agree. Yes. That is the problem. 

Senator MCCASKILL. I mean, and so the irony is that they are 

going to tout this fixed-price contract, oh, it is not cost plus, it is 

not cost plus, it is fixed price, but in reality, it is fixed price just 

masquerading when it is really cost plus. 

Mr. TIEFER. Yes, and therein lies a big problem in changing 

things. As Mr. Carroll said, the industry out there will say that the 

industry practice is to do things by fixed price and we should not 

impose on them any contract but a fixed price. They will fight 

against visibility of their suppliers on behalf of the U.S. Government. 

Senator MCCASKILL. Yes. Well, we are a big customer. We ought 

to have more leverage. You would think that we could bring these 

guys to their knees if we were tough negotiators, but I do not think 

we have been very tough negotiators, obviously, in light of the 

problems that we are hearing about on all of these contracts. 

What kind of contract should we look to? If we were going to 

redo—let us just assume we could wipe the slate clean and we were 

actually going to exert the power that the Federal Government has, 

and we were going to say, this is the way we are going to contract 

to buy food. What input can the three of you give me as to how 

we would design that model? 

Ms. FONG. In the School Lunch Program, as you mentioned, the 

complexity of the relationships between the parties is what really 

comes into play here. One of the issues that the Department faces 

is how can it regulate those kinds of contracts between a third 

party and a local school district, and I think where FNS has ended 

up, after consultations with OMB, is that the only way to really 

reach that is to mandate contract clauses that USDA can enforce 

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against the local school districts, not necessarily against the food 

management company. And so this is going to be a really interesting review that we do to see if those contract provisions are 

going to do the trick. Basically, those provisions would require the 

food service management companies to pass on all rebates and to 

specifically and transparently identify the rebates. A very interesting provision, and I think if it works, it will be a good model. 

Senator MCCASKILL. Well, and we will be anxious to see, because, obviously, they are trying. 

Ms. FONG. Right. 

Senator MCCASKILL. So if it has worked, then that is the time 

that we need to migrate it over to Department of Defense and to 

other places in the Federal Government, because everybody is buying food. 

Is this issue that they cannot account for the rebates—obviously, 

they are keeping track of this stuff internally, right? They are making up companies to park it. This sounds like an unladylike term 

that Harry Truman would use that has to do with farm animals 

and bulls. I have a hard time imagining, with the complexity of the 

accounting that has to be embraced by this kind of contract model, 

if this is the norm in the food service industry, that they could not 

easily pull the thread and tell us how much the rebates are that 

they are getting for these individual contracts within the Federal 

Government. 

Mr. CARROLL. I can tell you, Senator, that is absolutely correct. 

In fact, a lot of decisions are made—for example, employees, food 

service company employees are evaluated on the basis of manager 

of school or manager of Marine base, how much of your purchases 

are compliant, and compliant means on a list of products that generate rebates. So the companies have very sophisticated systems to 

keep track of and collect rebates from vendors. 

Senator MCCASKILL. So they are actually encouraging their folks 

to utilize those contracts that are most rebate-heavy internally and 

they are keeping track of it for purposes of judging how well their 

employees are doing at maximizing their profit? 

Mr. CARROLL. Absolutely, Senator, and—— 

Senator MCCASKILL. Are they giving bonuses based on this? Do 

you know? 

Mr. CARROLL. Well, the personnel evaluations that the Attorney 

General’s Office reviewed showed that was a component in the 

form evaluating—— 

Senator MCCASKILL. That makes sense. 

Mr. CARROLL [continuing]. So among other factors, I think, that 

it is fair to say that played a role in whether employees received 

bonuses or not. And we also did see e-mail traffic, for example, 

where one locale manager—because the way the business works is 

you take an employee of the food service company and they are installed in the school or on the base and—or in the hospital and 

they often wear the school’s uniform, the facility’s uniform, and 

there is e-mail traffic where, for example, one food service company 

employee was writing to headquarters saying, ‘‘I found a great 

source for locally grown tomatoes,’’ and the response came back, 

‘‘Don’t do that. That is not where the best rebates are.’’ 

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So to pick up on another issue that Professor Tiefer brought out, 

which is the game that seems to be being played is it is changing 

the name of the revenue flow. So, for example, in our most recent 

subpoena, the length of the definition of the word ‘‘rebate’’ is, I 

think, 250 words, because the name will change and then, for example, in the National School Lunch Program, it calls for rebates 

to be returned, but it does not necessarily say that contingent compensation has to be returned. 

Senator MCCASKILL. Or marketing incentives. 

Mr. CARROLL. Or marketing incentives or whatever the specific 

word is, so—— 

Senator MCCASKILL. Or you get a bigger bonus at Christmas if 

you buy more of this stuff. 

Mr. CARROLL. Exactly, Senator. So the focus kind of as we have 

evolved and started asking smarter questions is, tell us about the 

revenue flow that is going in what seems to be the wrong direction. 

In other words, if I am buying cases of chicken, why is the chicken 

distributor sending me a check? So whatever you call it, you have 

to tell me what is that flow, how much cash is that. 

Senator MCCASKILL. So on accounting, they can keep track of it 

if it is going to be their money. They just cannot keep track of it 

if it is going to be our money. 

Mr. CARROLL. That is correct, Senator. 

Senator MCCASKILL. And you brought up a point about the local 

tomatoes. One of the things we are struggling with in this country 

is how we hold on to independent producers of food in this country. 

We obviously have—my State, for example, we used to have 27,000 

feeder pig operations in Missouri. It was the largest feeder pig operations in the country in my State. Now, I think we are down to 

about 7,000 or fewer, and that is all because they have been bought 

by or are doing contracts solely with the big guys. 

So as I have gotten to know and understand the issue of independent producers versus the mega large multinational food corporations, it is with a sense of urgency that I realize we have to 

hold on to the ability of independent food producers to get a product to market. 

Clearly, this system is not working in their favor, because they 

cannot afford—an independent producer cannot afford to pay a 

quarter on every box of tomatoes, whereas the big guys that are 

dealing with huge, huge volume can. So, I mean, the example you 

gave in that e-mail is a perfect example of how local independent 

farmers are being denied a market in their local schools because 

they cannot compete with the Ciscos of the world in terms of the 

rebate culture. Is that in any way an inaccurate summary of the 

problem? 

Mr. CARROLL. I think that is absolutely right, Senator. You could 

have a situation where a grower has—or there could be a farm two 

blocks away from the school that is growing potatoes, but the food 

service company is not going to enter into rebate agreements with 

every little farmer and every little farmer does not have the wherewithal to engage in that kind of transaction. 

So, for example, we saw one e-mail string where the local school 

manager was saying, we want to buy local apples. It is good for the 

business, it is the right thing to do, et cetera, but we do not have 

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a mechanism to collect rebates. Can we forego the rebate issue? 

And then, interestingly, what happens is the cost of the apples to 

buy them locally goes up so that the producers can pay the rebate. 

Senator MCCASKILL. So what they do is they force a price increase on the local market so that they can take a piece of it? 

Mr. CARROLL. I have seen an example, at least one specific example, of that. 

Senator MCCASKILL. If Kirkwood High School said, there is a 

great nursery that has been in Missouri for years and years and 

has amazing peaches and amazing apples. If they said, we want to 

go out and buy from Eckert’s or from these other nurseries, we 

want to go buy these, can they not do that? Can they just go directly and buy local products, or is it because they are tied to the 

contracts with these big mega in between companies? Do you guys 

know? 

Mr. CARROLL. They are allowed to purchase locally and there are 

rules that permit—this is more a USDA issue than my area of expertise. They are certainly allowed to buy locally, but as I said, it 

is a choice for the food service company whether they buy locally. 

And just to give the full story, in fairness, what the food service 

companies will say is, well, it is much easier for us to police food 

safety issues, uniformity, make sure we are getting what we think 

we are paying for if it is all coming from one giant facility as opposed to if we buy locally from a thousand local farms, so that—— 

Senator MCCASKILL. Well, that may be true, but it seems to me 

that would have a lot more credibility if we took the rebate issue 

off the table. 

Mr. CARROLL. I would agree, Senator. 

Senator MCCASKILL. I mean, if, in fact, they were not getting the 

extra plus-up by going to the big guys, then we really would, pardon the expression, have an apples-to-apples comparison. 

Mr. CARROLL. Very fair. 

Senator MCCASKILL. Yes. OK. Yes. 

Mr. TIEFER. If I can come in on that—— 

Senator MCCASKILL. Yes. 

Mr. TIEFER. Although theoretically it is possible in the prime 

vendor program for the troops in Iraq and Afghanistan to buy from 

a particularly good supplier for whatever reason they think that is 

a good supplier, the actual situation is that there are contractors 

at both ends of the transaction. The dining facilities in Afghanistan 

are run by—it used to be KBR. 

Senator MCCASKILL. Right. 

Mr. TIEFER. Now it is DynCorps and Fluor. 

Senator MCCASKILL. Right. 

Mr. TIEFER. They may very well have a subcontractor who does 

the actual running of the dining facility and they just sort of coordinate at a higher level. So their subcontractor talks to PWC or 

the other food service, U.S. Food Service, Supreme Food Service, or 

wherever it is. At no point does the desire of U.S. Government people to do the right thing even come into the conversation. 

Senator MCCASKILL. Right, because by the time it gets to where 

the rubber meets the road, it is two or three degrees removed. 

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Mr. TIEFER. Exactly, and it is quite probable that each of the two 

corporations at both ends of the transaction are pursuing their interests rather than anything else. 

Senator MCCASKILL. Right. When you were referring to the indictment in your testimony and you talked about S.L., and whether 

it is Sara Lee or whether it is not. If you think about the environment in this country as it related to contracting in Iraq compared 

to the attitude in this country around contracting in World War II, 

I think my predecessor, Senator Truman, would have an awfully 

hard time getting his arms around how big this problem has become. I think in another year, another time, that company would 

have said, we refuse to change the name on this because it appears 

that maybe you are changing the name on it in order to profit more 

at the expense of men and women who are fighting for our country 

in a foreign land. I just do not think that would have been put up 

with then. 

But now, because everyone is so removed from it and it has gotten so complex, they folded under the pressure from PWC and did 

that. I think all of the companies that are allowing themselves to 

be manipulated in order to plus-up these contractors should be 

ashamed of themselves, particularly in the context of Iraq and Afghanistan. I think it is really inexcusable. 

Why do you think, Professor Tiefer, that we see so often that the 

government keeps doing business with these contractors? I mean, 

it is my understanding, correct me if I am wrong, that the government continued to do business with PWC as they had a lot of evidence in front of them about this fraud. Is that correct, or am I incorrect in those facts? 

Mr. TIEFER. You are, unfortunately, quite correct. PWC not only 

had the giant Iraq food service product, it also was one of KBR’s 

major subcontractors on some stuff for the logistics contract. So, 

yes, we had multiple flows of renewing contracts going out to them. 

Senator MCCASKILL. And are we still doing business with them? 

Mr. TIEFER. That is a good question. 

Senator MCCASKILL. We will find out. 

Mr. TIEFER. Let me say, when the indictment came down, this 

was one of the ones where at least—this has not happened in all 

cases—they were suspended and debarred from obtaining new contracts. So there certainly was a period of time they could not obtain 

new contracts, and I cannot tell you whether that period came to 

an end of not. 

Senator MCCASKILL. OK. And that is extraordinary, because I 

cannot tell you how many times in this Subcommittee we have 

talked about the failure to suspend and debar. 

We have talked about the fact that we believe the guidance is 

pretty clear now, Ms. Fong, about FNS. I am aware there is at 

least one legal case that is casting doubt on FNS’s ability to regulate contracts through the School Lunch Program. Should we be 

concerned now that the regulations that are currently written are 

not enough to hold these contractors in check as this case is working its way through the court? 

Ms. FONG. Right. If you are referring to the decision from Pennsylvania in 2009, we took a look at that and the rebates that were 

the subject of that case were rebates that had been paid between 

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1992 and 2002, which was under the prior regulatory framework—— 

Senator MCCASKILL. I see. 

Ms. FONG [continuing]. Before FNS had the authority in place. 

Our sense is that with the current regulatory framework, there 

should be a way to go after these kinds of situations. But we are 

very happy to work with your staff to flesh out that issue a little 

more. 

Senator MCCASKILL. OK. 

Professor Tiefer, in your view, do the requirements outlined in 

Part 31 of the Federal Acquisition Regulations (FAR) apply to contracts executed under Part 12? 

Mr. TIEFER. They do. I looked into this especially for this hearing. These are commercial contracts. That is why we asked whether Part 31 about payments applies to the Part, I think it is 12 that 

is for commercial, and there was a holding by the GAO. Extraordinarily, it was by PWC itself that protested to the GAO that said, 

we are a commercial company. This is a commercial contract. Requirements should not apply to us. That is getting in the way of 

the commercial way that rebates freely flow around. And the GAO 

stomped on that. It is part of a continuing stream of rulings that 

GAO gives about when—what concessions you have to make to 

commercial contracts and when you keep government safeguards, 

and this is one of the government safeguards that GAO wanted to 

keep. 

Someone mentioned to me, though, that the GAO ruling is not 

the end, you can go to the Court of Federal Claims, and that issue 

is pending in the Court of Federal Claims, so there is still some 

ambiguity. 

Senator MCCASKILL. Since there have been protests with GAO 

and we think those have been resolved appropriately, what, if anything, are things specifically that you all can bring to our attention 

today that you think we need to further investigate in this very 

murky area of rebates or marketing incentives, or extra juice for 

the or middleman, whatever you want to call it? What other investigations do you think we can be doing from this Subcommittee, or 

what legislative fixes could we do that would clarify contracting 

law as it relates to the ability of the Federal Government to enjoy 

the discounts they get because of the amount of volume they are 

purchasing? 

Mr. TIEFER. If I can put one answer to that, I completely agree 

with Inspector General Fong earlier who said that identifying rebates, clearer clauses in the contracts to identify all manner of rebates, is necessary, and I thought that was a very healthy suggestion. 

I would add that there need to be audit clauses, that we need 

to get the auditors in on this situation. Let me say, if someone says 

to me, why, that is ridiculous, of course, the auditor is already in 

on this, it is a fixed-price contract. 

Senator MCCASKILL. Right. 

Mr. TIEFER. There are very limited capacities for auditors to go 

in. If you try to put auditors in now, it is quite possible that the 

industry will challenge this and will say, look, the audit clause 

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tracts, but it does not say fixed-price contracts, so the audit clause 

does not apply. And that applies in spades to the problem of looking at the suppliers, which is often necessary. Unless you have a 

flow-down clause in the main contract that says that the auditors 

can look at the suppliers, a Federal auditor shows up, says, who 

are you, which government are you with—— 

Senator MCCASKILL. Right. 

Mr. TIEFER [continuing]. We never heard of you. The United 

States? Are you somewhere around here? 

Senator MCCASKILL. Right. So that would be something that we 

could actually require. And, by the way, I know this is possible to 

do because in Medicare Part D, they actually specified that the government was not allowed to negotiate for volume discounts. If I can 

remember back to legislative construction in law school, which I 

am trying to live every day—I think that would mean that there 

is an assumption that the government can always negotiate for volume discounts unless they are prohibited from doing so by law, like 

they are in Medicare D. So it seems to me that this is something 

that we need to underline and put an exclamation point on. 

Anything else from anyone about what we can be doing? Auditing clauses and identifying the rebates in the contracts. Are there 

other things that you think we need to be doing? 

Mr. CARROLL. Well, if there was a mechanism, and I have no expertise whatsoever in legislative drafting, but if there was a mechanism to move the rebates up so that they appear on invoices. 

Senator MCCASKILL. Transparency. 

Mr. CARROLL. Transparency—— 

Senator MCCASKILL. On the invoice. 

Mr. CARROLL. Right. And then it is hard to see how anybody 

could have any objection to regulating this, if the question is, we 

just want to know what is going on and then we are negotiating 

on fair territory. 

And one other thing I wanted to pick up on what Professor Tiefer 

raised, and I think you also raised, Senator, is this issue of why 

are companies paying this. In some conversations with vendors, the 

sense is if we do not pay them, we do not get access to the markets, 

and food service companies like the large ones have enormous markets. So we may not like paying them, but we are going to get shut 

out if we do not. So I would think that you would have some constituency there. It would not be a completely one-sided battle. I 

think that there are a lot of entities who would like to eliminate 

this practice. 

Senator MCCASKILL. So the vendors would probably be on our 

side? 

Mr. CARROLL. I suspect. 

Senator MCCASKILL. Yes. I bet you that is correct. And I know 

the local independent producers would be. 

Mr. CARROLL. Absolutely, Senator. 

Senator MCCASKILL. Right. 

Ms. FONG. One issue that we would like to put on the table, as 

you mentioned, is suspension and debarment as a remedy. We have 

been trying to give some thought to that, as to whether suspension 

or debarment would be appropriate or available with respect to 

food service management companies. And the sense that we have 

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is that the Federal Acquisition Regulation, would not allow a procurement debarment for an FSMC because the FSMC is not a contractor with the Federal Government and so that is a big issue. 

Then the other question is, is there any way—because the 

food—— 

Senator MCCASKILL. But we could fix that legislatively. We could 

say, if the flow of dollars are Federal dollars, then any agents that 

are hired to run programs that are funded through Federal dollars 

must be subject to Federal laws of suspension and debarment for 

failure to perform under the contract. I would think we could do 

that. 

Ms. FONG. I think that would be worth exploring. 

Senator MCCASKILL. We do an awful lot with putting handcuffs 

on everyone about what they can do and not do if it is Federal 

money. I cannot imagine that we could not do that. It seems like, 

to me, that is much more logical than a lot of the handcuffs we 

have out there right now. So, OK, that is a good suggestion. 

Anything else? Inspector General Fong. Mr. Carroll. Professor 

Tiefer. 

Mr. TIEFER. You talked about what investigations could be done. 

Now, you have a lot on your plate, Senator. You look at a whole 

wide array, and I do not know if I want to bog you down on this 

one, but I would think a survey of some of the contractors here, 

whether it is the suppliers or the main vendors—Mr. Carroll noted 

the wide range of discounts involved, the percentages involved, and 

it would be interesting to get some sense. They have to answer 

under oath if they are surveyed. 

Senator MCCASKILL. That is exactly right. 

Mr. TIEFER. Yes. 

Senator MCCASKILL. I will tell you that the Subcommittee intends to submit document requests at the close of this hearing to 

agencies, to Federal agencies and companies with food service management contracts. We are going to try to get an accounting of the 

retention of rebates by the contractors and an understanding of the 

policies that are in place at the agencies that contract for food service management. We want to address through these document requests the potential issues in domestic contracting, such as that 

seen in the New York Schools contracts and the problems discussed 

by DLA. The investigation should also hopefully shed some light on 

service contracts in contingency operations, as demonstrated by the 

Agility case and the support for further oversight and transparency. 

I cannot go into details, but I got second-and third-hand that 

there was actually a conversation that was had in Afghanistan not 

too long ago about a potential contract and someone mentioned 

that might not be a good idea because of the quote-unquote team, 

and my name was used. But my name should not be used because 

I think they were referring to the team of people who work on this 

Subcommittee who feel very strongly about really shedding the 

light on contracting abuses in the Federal Government and the 

amount of money that is being wasted as a result of those abuses. 

And I want to take this hearing to congratulate the field of government auditors on the arrests that were made yesterday, the Inspector Generals that worked on that case involving the Army 

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Corps of Engineers, an Alaska Native Corporation, and the blatant 

and brazen fraud that was going on between government contracting officials and this company involving massive kickbacks 

and massive over-billings to the Army Corps of Engineers. That 

case came about because of people like you, and I know what you 

would do if you had the opportunity right now. You would point to 

your staff and the great work they do, because there are thousands 

of government auditors out there that deserve the respect and, 

frankly, the funding of this government because they are really 

doing the heavy lifting in this regard. So congratulations to all the 

government auditors involved in that case and the many others 

that do not get the attention they deserve. 

We will continue down this road. If I could ask that you all continue to be cooperative with the staff on this investigation, we are 

going to keep going down this road because I think there is real 

money here. I think there are significant dollars that we can save 

in the purchase of food by the Federal Government if we pull this 

thread all the way to its logical conclusion and clean this area up 

once and for all and provide that transparency. It will allow everyone to figure out what they are paying for and whether they are 

getting the best deal. 

And please convey to your boss, Mr. Carroll, that we appreciated 

his cooperation with allowing you to come here today. I have taken 

that train back and forth and it is easier sometimes than the shuttle. I do not know which you took, but I am glad you came here 

today to help us with this, and we will continue to call on you for 

the expertise you have developed in the cases you have worked on. 

I thank all of you for what you have provided here today and we 

will continue to be in contact with you as we continue down this 

path to try to clean this up once and for all. Thank you all very 

much for today. 

[Whereupon, at 3:03 p.m., the Subcommittee was adjourned.] 

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72486.039
60 

H605-41331-79W7 with DISTILLER


72486.040
61 

H605-41331-79W7 with DISTILLER


72486.041
62 

H605-41331-79W7 with DISTILLER


72486.042
63 

Æ 

H605-41331-79W7 with DISTILLER


72486.043