Grassley Presses for Additional Information on Conference Expenditures Review

WASHINGTON - Senator Chuck Grassley today asked Jacob Lew, the Director of the Office of Management and Budget, to provide further information about his review of conference expenditures throughout the federal government.

The government-wide review comes on the heels of an audit report released by the Department of Justice's Inspector General that revealed the department paid $600,000 for event planners, in addition to paying an average of $32 for snack packs and $16 for muffins at conferences held at venues across the country.  The report also showed a 53 percent increase in conference expenditures at the Justice Department from 2008 to 2009.

The audit included information about conferences held at four-star hotels.  When questioned about the high-priced hotel by the Inspector General, the response from the Justice Department was that a four-star hotel was chosen because, "Only a four or five star hotel was capable of providing the level and quality of services expected by senior executives and other political appointees."

"No economy can rationalize a 53 percent increase in conference expenditures between 2008 and 2009, let alone an economy that is facing 9 percent unemployment and stagnant job growth," Grassley said.  "Whether it's $16 for muffins or $600,000 for event planners, these are expenditures that can and should be looked at for cost savings measures.

The Inspector General's office has stated publicly that it stands by the report.

Here is a copy of the text of Grassley's letter to Lew.  A signed copy can be found here.

September 26, 2011

VIA ELECTRONIC TRANSMISSION

The Honorable Jacob J. Lew

Director

Office of Management and Budget

Eisenhower Executive Office Building

1650 Pennsylvania Avenue, NW

Washington, DC 20503

Dear Mr. Lew:

I am pleased to hear that you are directing a government-wide review of how taxpayer dollars are spent on conferences in response to a report that the Department of Justice (DOJ) paid $16.00 per muffin at a recent conference.  The Office of the Inspector General (OIG) is standing by its report despite arguments by some that it may have miscalculated the figure in its investigation of conference expenditures.

If the OIG made errors in its report, I hope that it will step forward and correct the record.  Nevertheless, I would note that even by Hilton's own accounting, DOJ spent $4,200 on 250 muffins, 200 pieces of fruit, 15 gallons of coffee, and 30 gallons of iced tea.  That amounts to $16 for only one muffin, less than one piece of fruit, 8 ounces of coffee, and 15 ounces of iced tea.   By anyone's account, that's excessive spending.  Additionally, while a DOJ spokesperson has suggested that the package included the cost of meeting space, the OIG report itself made clear that DOJ had negotiated with the hotel to provide that particular meeting space without charge as part of a larger agreement on other conference expenses.

The more important story from the OIG's report is that DOJ increased total conference expenditures by 53% from $47.8 million in 2008 to $73.3 million in 2009.  That's a $25.5 million increase in the first year of the Obama administration.   As I have been saying, this kind of spending is unacceptable given the economic realities most Americans are facing right now.

Please explain why the cost of conference expenditures increased so dramatically at DOJ in 2009.  I also have additional questions about your September 21 memorandum to executive department and agency heads.   Is it intended that each agency's OIG be involved?  Will the findings of these inquiries be made public, in addition to being compiled for the Vice President?  I understand that each agency is to respond back to you by November 1, and I look forward to hearing their reports.

Thank you in advance for ensuring that your response arrives no later than October 3.  Should you have any questions regarding this letter, please contact Tristan Leavitt of my staff at (202) 224-5225.

Sincerely,

Charles E. Grassley

Ranking Member

cc:        The Honorable Eric H. Holder, Jr.

Attorney General

U.S. Department of Justice

Ms. Cynthia A. Schnedar

Acting Inspector General

Q&A on the Securities and Exchange Commission

with U.S. Senator Chuck Grassley

Q:        What's the role of the Securities and Exchange Commission?

A:        The SEC was created during the Great Depression, in the wake of the stock market crash of 1929, when the public's faith in capital markets needed to be restored.  The agency is supposed to strengthen investor confidence by providing transparent, reliable information and rules for fair, orderly and efficient markets.  This should help facilitate the capital formation necessary for economic growth and job creation.  When the agency fails to meet its mission, the negative repercussions can impact anyone with investments monitored by the SEC, including investments in pension and other retirement funds.

Q:        How did you get involved in oversight of the SEC?

A:        I'm committed to the work of congressional oversight, and there's a great need for it with the SEC.  Four years ago, based on information from a whistleblower and the work of my investigative staff, I spelled out in a comprehensive report (with then-Senator Arlen Specter) how the SEC Inspector General failed to investigate credible allegations by a former SEC attorney that his supervisor pulled punches in an investigation because of one Wall Street witness' political clout.  The report hit a nerve and, ultimately, the SEC attorney who blew the whistle was vindicated.  Last year, the SEC finally obtained a $28 million settlement from the capital management company in question and paid the attorney years of back pay in a settlement related to his termination.

Adding to that, last March, a new Inspector General of the SEC issued a stinging rebuke of an agency program created more than 20 years ago to help target insider trading and securities fraud by rewarding agency employees who spoke up and shared valuable information.  Last summer, knowing that the SEC missed the biggest Ponzi scheme in U.S. history in the Bernard Madoff case, a colossal mishap that might have been avoided if the SEC had paid attention to whistleblower information, Congress passed legislation I authored to dramatically beef up a whistleblower office inside the SEC.  I'm still working to make sure that office is strengthened as the law calls for, and not weakened by institutional ego.  Every source of information is needed to combat financial fraud.  Both investors and taxpayers are exposed by wrongdoing.  I want to see the SEC embrace whistleblowers because they can help with the mission.  Whistleblowers could help stop another Madoff.

Q:        How can the public have confidence that the SEC isn't too close to the industry it oversees, especially the big players?

A:        A revolving door between agency staff and the investment firms and banks they oversee has led to concerns of coziness and the soft-pedaling of potential criminal cases.  Last year, the SEC Inspector General identified cases where the revolving door appeared to be a factor in staving off enforcement actions and other types of oversight, including cases involving Bear Stearns and the Stanford Ponzi scheme.  I offered an amendment to the 2010 Dodd-Frank financial services reform bill to extend the cooling-off period at financial agencies to two years and to require a list of former agency employees who are representing clients before their former agencies.  Unfortunately, my amendment was blocked by the bill sponsors.  These reforms plus better record-keeping by the SEC are needed to help maintain the regulator's integrity and preserve the public trust in a balanced playing field.

This year, I'm working to make sure the SEC is held accountable for what it does with referrals of suspicious trading activity from one of the biggest and most powerful hedge funds.  How the SEC handled specific referrals will shed light on how the enforcement system works.

I also highlighted the big divide between the stated policy of the SEC and its actual practice of providing information to the securities industry about the criminal law enforcement intentions of the Department of Justice.  The SEC enforcement manual, which was revised after the 2007 Grassley-Specter report, is undermined if the SEC relays to potential targets of investigation exactly what the Justice Department has in store for them.

Separately, I've helped to shed light on the actions of the SEC's former General Counsel David Becker.  After missing the Madoff scam, the top leadership of the SEC let one of its own who profited from a Madoff account craft the commission's position on how to treat Madoff victims.  The agency let this major conflict of interest slide and then tried to cover it up.  After a comprehensive report, the Inspector General has referred Mr. Becker's case to the Justice Department, but the SEC's ethical standards need to be stronger, consistent and uniformly applied from the executive suite to the rank-and-file employees.

Q:        Where else have you scrutinized what's going on inside the SEC?

A:        This year, an enforcement lawyer at the agency wrote to me and outlined what he said was the agency's destruction of least 9,000 files between 1993 and 2010, all related to initial inquiries into possible wrongdoing on Wall Street.  The lawyer said these files were destroyed as a routine matter of internal SEC policy, but that the shredding might have compromised enforcement cases against Madoff, Goldman Sachs, Wells Fargo, Bank of America, Deutsche Bank, Lehman Brothers, and the SAC Capital hedge fund.  I pressed for a full accounting.  In response, the National Archives said the SEC "did not have the authority to dispose of" the records in question under federal law.  And, the SEC directed staff to stop destroying preliminary investigative documents until further notice.  Keeping records is common sense in law enforcement.  You never know what might be valuable information.  Complete records also may help keep the agency honest and inoculate against compromised ethics and biases.

The promises of financial system reform will be empty if the top enforcement agency for free and fair markets is ineffective.  I will continue to work for accountability and necessary reforms of the SEC.

Feinstein, Grassley Release Senate Caucus on International Narcotics Control

Report on Central America Violence

Outlines strategies for Congress, administration to help reduce violence, improve security in Central America

Washington?U.S. Senators Dianne Feinstein (D-Calif.) and Chuck Grassley (R-Iowa), co-chairs of the Senate Caucus on International Narcotics Control, today released Responding to Violence in Central America, a new report outlining key steps that the United States can take to support Central America to help reduce escalating drug-related violence.

The murder rates in Central America last year were significantly higher than Mexico. In 2010, there were 18 homicides per 100,000 people in Mexico. In comparison, there were 50 murders per 100,000 people in Guatemala, 66 in El Salvador and 77 in Honduras.

"Violence in Central America has reached crisis levels as drug trafficking organizations, youth gangs and other illegal criminal groups take advantage of weak governance and underperforming justice systems," said Senator Feinstein. "Like Mexico, Central America's location between the world's largest producers of illicit drugs in South America and the world's largest drug consuming nation in the United States makes it particularly vulnerable to drug traffickers. It will only escalate if we do not take action."

"The violence in Central America is beyond what anyone can imagine," said Senator Grassley. "This report recognizes the proliferation of the Mexican drug cartels seeking to expand into Central America and the impact that has on the citizens in Central America, Mexico and the United States. In addition, the report discusses steps that the United States can take to help the Central American nations stand on their feet to combat the drug cartels that are seeking to expand into areas where the governments are unable to respond. It's also important to recognize the economic situation facing our own country, so we pay special attention to focus on ways where we can have great influence with as little fiscal effect as possible."

The report recommends:

Expand Vetted Units

·           Expansion of vetted law enforcement units which work with the Drug Enforcement Administration?known as Sensitive Investigative Units?to all seven countries in Central America.

·           Vetted units provide a trusted partner to U.S. law enforcement in countries where corruption is often rampant.

Speed up Security Assistance

·           Speed up the arrival of security assistance by the State Department to Central America by changing it from being managed remotely by the U.S. Embassy in Mexico to allowing it to be managed directly by each of the U.S. embassies in Central America.

Increase Drug Traffickers' Extraditions

·           Increase the extradition to the United States of Central America nationals who are involved in international drug trafficking.

·           Currently, Panama, Honduras and Costa Rica will not extradite their nationals to the United States.

·           Extradition from Mexico to the United States has been a critical tool in combating Mexican drug trafficking organizations. Bringing these fugitives to the United States for prosecution ensures that they cannot evade justice through bribes or threats of violence in their home countries.

Support Witness, Judge and Prosecutor Protection Programs

·           Use existing State Department and USAID funds to provide support for witness, judge and prosecutor protection programs in Central America.

·           Far too often, witnesses in Central America are afraid to testify at hearings because of corruption in the judicial system and fear of retaliation. Judges and prosecutors are equally afraid to pursue cases against high-profile criminals.

Map Sources of Violence

·           Map the causes and sources of violence in the region. Without a clear understanding of the causes and sources of violence, it will be difficult to provide relevant solutions to the security situation in Central America.

Reduce the U.S. Demand for Drugs

·           Senators Feinstein and Grassley and have asked the Government Accountability Office to conduct a study to evaluate the successes and shortcomings of drug prevention and treatment programs in the United States.

·           Drug consumption in the United States fuels violence in Central America. The United States continues to be the world's largest consumer of illegal drugs. The 2010 National Survey on Drug Use and Health found that 22.6 million Americans aged 12 or older were current illegal drug users.

The report is endorsed by all seven members of the Senate Caucus on International Narcotics Control and makes several recommendations based on information gathered through visits to Guatemala and Honduras, briefings, interviews and a review of documents from government and non-government experts.

The entire report can be found by clicking here.

Grassley's initiative involves regional partnership grants which are competitively distributed by the Administration on Children, Youth, and Families in the U.S. Department of Health and Human Services.  The grants are used to improve the safety, permanency and well-being of children who are not in their homes or are likely to be removed from their homes because of substance abuse by their parents.  The proposal advanced today by the Finance Committee reauthorizes the grant program for five years along with Grassley's provision that would allow current grant recipients to pursue a two-year grant extension.  He said this would help to prevent any lapse where the program is making a positive difference.

"In the many years that I've been working on child welfare issues, especially for children in the foster care system, so many young people have told me what they want most of all is a mom and dad and a permanent, loving home," Grassley said.  "These grants help to keep families together, when possible, so that children are not subjected to the many difficulties that they face in the foster care system."

Since the regional partnership grant program was last reauthorized in 2007, 53 grants have been awarded to partnerships covering 29 states and six tribes.  More than 8,000 adults and 12,000 children have been served by the grants.  The grants support family treatment drug courts, better system-wide collaboration, family-centered treatment, evidence-based practice approaches, parent advocates, and drug treatment monitoring.

The Commissioner of the Administration on Children, Youth, and Families has said that the grants help to discharge children from the foster care system at a faster rate because families are more likely to be reunified within 12 months and are more likely to stay that way after 12 months.

Grassley said his legislation this year also includes a five percent cap on administrative expenses for the grants.

"These grants have helped to bring back together families torn apart by substance abuse," Grassley said.  "Substance abuse is one of the leading reasons why children are forced into the foster care system.  Long term, those kids benefit tremendously if foster care can be avoided or, at the very least, be a short-term detour, with family reunification and, when necessary, adoption."

The legislation included in the overall package passed in the Finance Committee today was part of a bill that Grassley introduced in June, the Partners for Stable Families and Foster Youth Affected by Methamphetamine or Other Substance Abuse Act (S.1234).  The regional partnership grants were created by legislation Grassley authored and moved through the Finance Committee as Chairman in 2006, the Promoting Safe and Stable Families Act.

"Passage of the law in 2006 was a big step forward in efforts to help the young people in the foster care system," Grassley said.

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