[House Hearing, 106 Congress]
[From the U.S. Government Printing Office]




                               before the


                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION


                            OCTOBER 4, 2000


                           Serial No. 106-272


       Printed for the use of the Committee on Government Reform

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

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                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
JOHN L. MICA, Florida                PATSY T. MINK, Hawaii
THOMAS M. DAVIS, Virginia            CAROLYN B. MALONEY, New York
DAVID M. McINTOSH, Indiana           ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
JOE SCARBOROUGH, Florida             CHAKA FATTAH, Pennsylvania
    Carolina                         ROD R. BLAGOJEVICH, Illinois
BOB BARR, Georgia                    DANNY K. DAVIS, Illinois
DAN MILLER, Florida                  JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
LEE TERRY, Nebraska                  THOMAS H. ALLEN, Maine
JUDY BIGGERT, Illinois               HAROLD E. FORD, Jr., Tennessee
GREG WALDEN, Oregon                  JANICE D. SCHAKOWSKY, Illinois
DOUG OSE, California                             ------
PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont 
HELEN CHENOWETH-HAGE, Idaho              (Independent)

                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                     James C. Wilson, Chief Counsel
                     Robert A. Briggs, Chief Clerk
                 Phil Schiliro, Minority Staff Director

   Subcommittee on Criminal Justice, Drug Policy, and Human Resources

                    JOHN L. MICA, Florida, Chairman
BOB BARR, Georgia                    PATSY T. MINK, Hawaii
MARK E. SOUDER, Indiana              ROD R. BLAGOJEVICH, Illinois
STEVEN C. LaTOURETTE, Ohio           JOHN F. TIERNEY, Massachusetts
ASA HUTCHINSON, Arkansas             JIM TURNER, Texas
DOUG OSE, California                 JANICE D. SCHAKOWSKY, Illinois

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
           Sharon Pinkerton, Staff Director and Chief Counsel
                   Steve Dillingham, Special Counsel
                           Ryan McKee, Clerk
                    Sarah Despres, Minority Counsel

                            C O N T E N T S

Hearing held on October 4, 2000..................................     1
Statement of:
    Hast, Robert H., Director, Office of Special Investigations, 
      General Accounting Office, accompanied by Pat Sullivan, 
      Assistant Director, Office of Special Investigations, and 
      John Cooney, Senior Special Agent, Office of Special 
      Investigations.............................................    20
    Twyon, Jane, president, Worldwide Media Directors, Consultant 
      to ONDCP...................................................   119
    Vereen, Donald, M.D., Deputy Director, Office of National 
      Drug Control Policy, accompanied by Alan Levitt, Campaign 
      Director, ONDCP; and Richard Pleffner, Project Contracting 
      Officer, ONDCP.............................................    39
Letters, statements, etc., submitted for the record by:
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............   162
    Hast, Robert H., Director, Office of Special Investigations, 
      General Accounting Office, prepared statement of...........    23
    Mica, Hon. John L., a Representative in Congress from the 
      State of Florida:
        Letter dated September 21, 2000..........................     4
        Memo dated April 13, 2000................................    13
        Prepared statement of....................................     8
    Twyon, Jane, president, Worldwide Media Directors, Consultant 
      to ONDCP, prepared statement of............................   122
    Vereen, Donald, M.D., Deputy Director, Office of National 
      Drug Control Policy, prepared statement of.................    42



                       WEDNESDAY, OCTOBER 4, 2000

                  House of Representatives,
Subcommittee on Criminal Justice, Drug Policy, and 
                                   Human Resources,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:09 a.m., in 
room 2154, Rayburn House Office Building, Hon. John L. Mica 
(chairman of the subcommittee) presiding.
    Present: Representatives Mica, Gilman, Barr, Burton, Ose, 
Mink, Kucinich, and Cummings.
    Staff present: Sharon Pinkerton, staff director and chief 
counsel; Steve Dillingham, special counsel; Carson Nightwine, 
investigator; Michael Garcia, senior technology advisor; Chris 
Morrow, intern; Sarah Despres, minority counsel; and Jean Gosa, 
minority assistant clerk.
    Mr. Mica. Good morning. I would like to call this hearing 
of the House Subcommittee on Criminal Justice, Drug Policy, and 
Human Resources to order.
    We will be joined by other Members during the hearing. But 
the order of business today will be, first, I will start with 
an opening statement and then we will recognize other Members 
for their opening statements. I am pleased to welcome the other 
Members and, as I said, I will recognize them after I have 
given my opening statement.
    The topic of today's hearing is the National Youth Anti-
Drug Media Campaign, program and contract accountability and 
administration. We will be reviewing some problems we have had 
with the administration of the National Anti-Drug Media 
    Today's hearing will focus on the administration and 
financial management of our billion dollar National Anti-
Narcotics Media Campaign. This program was funded by Congress 
in 1997 to deal with the dramatic increase in illegal narcotic 
abuse experienced since 1993. While the anti-drug media 
campaign began with some self-admitted mishandling by the 
Office of National Drug Control Policy [ONDCP], Congress and 
our oversight committee have supported the goal of this much 
needed Federal effort to better educate the public and our 
young people about the serious consequences of drug abuse.
    It is important that I remind everyone that I have been a 
strong supporter of an effective public media campaign to help 
fight drug abuse and misuse across this Nation. This anti-drug 
program is far too important for even $1 to be wasted or 
misspent. We cannot allow recent drug use and human destruction 
trends to continue.
    Administration officials lately have attempted to put a 
happy face on an increasingly sad situation. Unfortunately, the 
Office of National Drug Control Policy has set a goal of 
reducing overall drug use to 3 percent by the year 2002. 
However, information from ONDCP indicates that overall drug use 
actually has increased from 6.4 percent in 1997 to 7 percent in 
1999. That is important because, again, their goal was, and 
their objective was, in fact to get overall drug use down to 3 
percent by 2002 and, unfortunately, it has risen in the last 3 
years to 7 percent, going in the wrong direction overall. The 
age at which our youth first use heroin has dropped from the 
mid-20's to age 17. Additionally, methamphetamine, ``ecstasy,'' 
and ``designer drugs'' use has skyrocketed both for youths and 
adults. Sadly, our Nation now experiences more drug-induced 
deaths than murders. We released at a hearing just a few weeks 
ago the fact that 16,926 Americans died in our last recorded 
year, which I believe was 1998, of drug-induced deaths as 
opposed to murders, which was a lower figure for the first time 
since we have been collecting those statistics.
    Accordingly, I have worked with our leadership in Congress 
and with ONDCP and with other officials to support efforts to 
reduce the demand for drugs. That is very important that we 
address demand.
    With that cooperative spirit, we withheld formal review of 
the ONDCP media campaign by our subcommittee until October 14, 
1999, more than a year into the program's operation.
    At our October 14, 1999 hearing and after a preliminary 
review of the administration of the anti-drug media campaign, 
some concerns were raised relating to contract mismanagement, 
financial oversight of the billion dollar program, the adequacy 
of the match donation as required by law, and effectiveness of 
the media message that had been produced to date. One area of 
particular concern was oversight of a growing number of 
contracts, ONDCP had issued somewhere in the neighborhood I 
believe of 19 contracts, but the growing number of contracts 
and subcontracts for handling various tasks of the program and 
the management and administration of those contracts and 
oversight of those contracts.
    In my opening statement last October, a year ago, I 
advised, and I will quote from my opening statement at that 
hearing 1 year ago, ``I see a very tangled web of contracts 
that appears overly complicated, expensive, bureaucratic and 
untested.'' The subcommittee expressed concern about the 
program management effectiveness and instances of contract 
flipping, where we found in the information that ONDCP had 
provided us, in fact, I think it was 15 boxes that we went 
through and they provided us that background, but we found that 
there was in fact the practice of contract flipping, where 
contracts were subcontracted, no work done, but payment was 
made to the original contractor. We raised this as a concern.
    Several months ago the subcommittee was informed by the 
Office of Special Investigation of the General Accounting 
Office [GAO], about issues associated with the largest ONDCP 
contract. This is a pretty substantial contract, a 5-year 
contract which totals up to $175 million annually, certainly 
the lion's share of our billion dollar campaign, and that is 
actually a multibillion campaign when we take into 
consideration that we also require a match. This large 
contract's primary purpose was to buy media time. I might say 
that issues were identified by multiple anonymous sources to 
the General Accounting Office, citing problems of financial 
mismanagement, over-billing, possible contract fraud, and 
negligent administration of contract funds for the billion 
dollar ad campaign.
    I spoke to Barry McCaffrey, our Director of ONDCP, this 
morning. He had sent me a letter, and I would like that letter 
to be made part of the record, it is a letter of September 21, 
which begins ``Members of your staff were apparently 
instrumental in assigning two special agents from the General 
Accounting Office's Office of Special Investigations to examine 
ONDCP, the HHS Program Support Center, and our primary youth 
anti-drug media campaign contractors.'' Without objection, I 
would like this to be made a part of the record.
    Mrs. Mink. No objection.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T4927.001
    [GRAPHIC] [TIFF OMITTED] T4927.002
    Mr. Mica. But, again, I spoke to General McCaffrey this 
morning. Our staff did not sick anyone on anyone. Information 
came to us from multiple sources and to GAO about some very 
serious allegations relating to the ad program and its 
administration and financing. So, again, I am sorry that this 
has had to come before the subcommittee, but it is an oversight 
responsibility of the subcommittee. Issues, as I said, were 
identified by the General Accounting Office, citing problems of 
financial mismanagement, over-billing, possible contract fraud, 
and I will say possible, we have not identified that to date, 
we will find out more about that today, and negligent 
administration of contract funds for the billion dollar ad 
campaign that certainly should raise legitimate concerns by 
every member of this panel.
    Based on the information provided to me by GAO 
investigators, I believe that these very serious allegations 
should have been properly reviewed by GAO. I also resent recent 
press statements that have attempted to put a political spin on 
the GAO investigation or this subcommittee's legitimate 
oversight responsibility. The charges of possible over-billing, 
contract fraud, and financial mismanagement are most serious 
and require attention and concern of and oversight of our 
oversight subcommittee, and certainly of the General Accounting 
Office when allegations are presented to that agency.
    Among the concerns that have arisen are some of the 
following: Why did the ONDCP contract officers raise serious 
concerns about the costs being charged under the contract? Why 
has ONDCP refused to pay millions of dollars in submitted 
bills? And we have read some headlines over the weekend that 
they are now refusing to pay some of these bills.
    Why did ONDCP officials express cost concerns to the 
Department of HHS contract officers who were responsible and 
who had oversight responsibilities? We must determine that.
    Was contract administration management within ONDCP and 
arrangements within HHS sufficient to oversee this complex 
contract? The HHS contract officer and the assigned contract 
specialist were employees of the HHS Program Service Center. 
The Center is paid to help administer these contracts. The 
assigned specialist reportedly had a caseload of almost 60 
    Why didn't ONDCP push for an immediate audit? In April, the 
ONDCP consultant identified cost issues, with some cost 
estimates at over 200 percent of industry standard. And 
additionally, we have an internal memo that was provided to us 
dated April 13 that raised serious questions about the conduct 
of the billing and overpayments, some very legitimate and well-
documented concerns. Why were these not investigated?
    Finally, are appropriate safeguards in place or underway 
for effective monitoring and controlling costs? What steps have 
been taken by ONDCP to deal with what obviously is a situation 
that needs some attention?
    The basic issues we have before us today are simple. Has 
ONDCP been negligent in its administration of the contract? Is 
the public being gouged? And what is being done to remedy the 
situation and prevent future problems? Today, we are not 
evaluating whether the media campaign is having its anticipated 
impacts. That will be a topic for future discussion and for 
future oversight.
    We all hope that the media campaign's demand reduction 
efforts are a success. Everyone on this panel wants this 
program to be a success. Congress authorized the program. 
Congress funded the program. And with the tragic deaths we are 
seeing across the Nation and in so many of our districts and 
the heartbreak this brings to so many families, we have a 
responsibility to make certain this program is a success. It is 
important to hold managers accountable to ensure investment, 
and this is an investment, to ensure investment integrity, and 
to achieve an absolute maximum return on taxpayer dollars that 
are being put into this important program. That is why we are 
having the hearing today.
    It does interest me that, according to the Washington Post, 
the ONDCP program manager who will be testifying before us 
today was quoted as saying, and this is from the Washington 
Post dated September 30, page A-2, ``There is absolutely no 
over-billing.'' I find the program manager's conclusion 
perplexing and bothersome, as an audit has just been done, an 
audit that really will determine I think what has been going on 
here. After all, it is his own contracting officer, the person 
who actually reviews the bills, who presented the issues to his 
senior management and requested an audit many months ago. I 
look forward to learning how these statements, memoranda, and 
actions can be reconciled.
    Today, we need to determine whether ONDCP's media campaign 
management has both the talent and objectivity to oversee 
effectively the Nation's largest public media campaign ever 
undertaken and that the contract with one of the largest 
advertising companies in the United States is properly managed.
    There is not a person on this panel who would not like to 
see our national media campaign work and be successful. By the 
same token, we have a responsibility both as overseers of this 
program and as stewards and trustees of hard earned taxpayer 
dollars to see that this Government sponsored billion dollar 
campaign is properly administered.
    Unfortunately, rather than to cooperate to resolve 
financial mismanagement problems, correct administrative 
negligence, and assist in proper investigation of possible 
criminal misconduct, some in the administration have attempted 
to thwart the congressional hearing process, attack the GAO 
investigative staff, and block the proper review of very 
significant problems of a very important Federal program. I 
believe that is very unfortunate.
    Today's hearing will focus on the management, financial 
administration, and current problems facing our national anti-
drug media campaign programs. We will hear from the General 
Accounting Office, we will also hear from ONDCP, and we will 
hear from its consultant. Hopefully this hearing can help us 
identify specific areas that need our attention and that will 
improve both the effectiveness and performance of our anti-drug 
media campaign.
    [The prepared statement of Hon. John L. Mica follows:]
    [GRAPHIC] [TIFF OMITTED] T4927.003
    [GRAPHIC] [TIFF OMITTED] T4927.004
    [GRAPHIC] [TIFF OMITTED] T4927.005
    Mr. Mica. With those comments, I am pleased at this time to 
yield to the gentlelady and ranking member from Hawaii, Mrs. 
    Mrs. Mink. Thank you very much, Mr. Chairman. I have had an 
opportunity to discuss the issues that are before this 
subcommittee both with the Office of National Drug Control 
Policy staff as well as the GAO investigators. I believe that 
this hearing which has been called today is absolutely 
premature. The GAO investigators have been given a very narrow 
assignment which they are about to report on to this committee 
today, and that is the role of the Director of the Office of 
National Drug Control Policy with reference to what he did or 
did not do upon being advised that there was potential fraud 
being committed with respect to this contract that the chairman 
has just described.
    The issue really before this Congress and this committee 
and subcommittee ought to be whether the allegations that have 
been made about fraud are in fact true. To what extent the 
Director of this agency acted in one way or another it seems to 
me is not the crux of the issue. Those matters can be discussed 
much later. The more important issue is whether these anonymous 
sources that have brought this charge of fraud and doctoring of 
billing and so forth is true and can be proven. From what I 
have gathered in my discussions with the investigators and with 
GAO, any such conclusions are premature. It will take the 
agency many more months to investigate the so-called doctored 
sheets and to investigate the 300-plus employees who submitted 
these worksheets. We also need to go to the contractor and find 
out exactly what their contracting practices were.
    At this point, we should be sitting here commending the 
ONDCP for having alert, conscientious staff that decided to 
withhold payment of $13 million or so before all of this broke 
because they were insistent that the Government contracting 
practices with reference to justification of billing was 
actually proven by the contractor who sought payment rather 
than point to this withholding of the moneys allegedly due the 
contractor as some proof that there was knowledge of fraud. It 
seems to me that the employees who function in this capacity 
were doing exactly what the law expected of them; and that is, 
to require all contractors dealing with the Federal Government 
to provide proof that the payment was justified. I have no idea 
because we have no facts before us as to exactly what proof was 
lacking which caused the agency not to make these payments to 
the contractor. But all of that needs to be looked into by the 
GAO. And as I understand it, there is an ongoing inquiry.
    It is sad that a subcommittee hearing has to be called 
based upon anonymous tips from whomever, either in the 
contractor's agency or in the drug policy agency. I never 
understood why the whistle-blower law required the agencies to 
refrain from disclosing the people who are coming forth with 
important valuable information that could lead to the 
prosecution of individuals. If the matter is still under 
investigation, that is fine, then anonymity is probably a 
valuable requirement. But if we are to have a congressional 
hearing upon which these charges are based, it seems to me that 
the identity of these individuals is required. The whistle-
blower law then protects these individuals from intimidation 
and harassment and other kinds of possible negative employment 
consequences within the agency or within the contractor's 
office or wherever they work. But to have a hearing today and 
to be faced with the crux of the issues that we are discussing, 
coming from anonymous sources which we on this side have not 
had the opportunity to investigate, to interrogate, to discuss 
these matters to understand the enormity of the charges being 
made, I find that extremely tenuous and difficult to justify.
    I am of course, as are my colleagues on this side of the 
aisle, equally concerned about any charges of fraud and 
mismanagement and lack of propriety in terms of any employees 
inside and outside the Government. And it is our function as an 
oversight committee to investigate those. But it seems to me 
that this hearing today is premature and is really an effort to 
single out the agency and exactly what they did with the 
information that came to them about these charges of fraud. 
That matter has been turned over to the GAO. It is being 
investigated. It seems to me that we ought to wait for that 
investigation to conclude.
    The Special Investigators Office of the GAO is charged with 
investigating criminal conduct. And here we are talking about 
these matters without a shred of evidence from this special 
investigating unit to indicate that fraud did occur, who is 
responsible for this fraud, and to what extent this Congress 
and this subcommittee can now move to make sure that those 
kinds of things never occur again. The investigation of the 
criminal conduct is not our responsibility. Our responsibility 
is policy directed. And to that extent, to have a hearing 
before we know whether there has been in fact deliberate 
criminal conduct on the part of anybody it seems to me is an 
inappropriate investigation.
    But be that as it may, we are here today. I hope that we 
can elicit from the witnesses who have been called their frank 
and honest opinion as to what we are doing here today and why, 
and where do we go from here. Thank you very much, Mr. 
    Mr. Mica. I thank the gentlelady and ranking member.
    We are joined this morning by the chairman of the full 
Committee, Mr. Burton, the gentleman from Indiana. You are 
recognized, sir.
    Mr. Burton. Thank you, Mr. Chairman. I will not take very 
much time. I would maybe like to take a little issue with my 
colleague, the gentlelady from Hawaii. I have before me from 
the Executive Office of the President, the Office of National 
Drug Control Policy a memo from the project officer who 
indicates that there are suspicions of fraudulent conduct. That 
is not anonymous. That is something that we have as a matter of 
fact. I hope this has been entered into the record. If it has 
not been, it should be.
    Mr. Mica. Without objection, the April 13th memo will be 
made a part of the record.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T4927.006
    [GRAPHIC] [TIFF OMITTED] T4927.007
    Mr. Burton. The other thing, Mr. Chairman, is that we do 
have a responsibility as an oversight committee over the 
executive branch to ferret out waste, fraud, abuse, and if 
there is criminal activity, to investigate that as well. We 
have some very fine legal minds on this committee, like Mr. 
Cummings on the other side. If we see something that is illegal 
that has been going on, we should investigate that, we have the 
responsibility to investigate it, and if we find there is some 
criminal activity, send a referral to the Justice Department. 
So there is no question that this falls within the jurisdiction 
of your subcommittee. And I congratulate you for holding this 
    I would just like to say one thing. This shows that this 
whole program of advertising and bringing more awareness to the 
youth of America about the perils of using drugs is not working 
as well as we would have hoped. We have taken a tremendous 
number of resources that were used for interdiction and for 
eliminating drugs at their source and fighting the drug war in 
places like Colombia, Bolivia, and Peru and we put them over 
into this new program. The results have been, at best, 
questionable. As I understand it, there have been more drug 
deaths in 1998, that is the last report we have, than there 
have been murders. And so, the program has not been as 
beneficial as we would have hoped.
    The staff over at ONDCP has been increased but the number 
of people that have been involved in the other programs has 
been reduced dramatically. We have been trying, Chairman Gilman 
and I and Chairman Mica along with others, to get equipment 
down to the Colombian national police and the people in power 
down in Colombia so they could fight the producers of the 
cocaine and heroin that is flooding our country and killing our 
young people. Much of that money has been very, very difficult 
to get. We finally have the President and the administration on 
board. But, unfortunately, we were just informed the other day 
in the Foreign Affairs Committee on which I serve that the 
helicopters probably will not get down there until after 2002 
and the drug war could very well be lost by that time. So we 
are very concerned about that, especially when we have plenty 
of helicopters already in our inventory that we could send down 
there, the Blackhawks and the Hueys.
    So I think we need a more balanced approach. I think this 
apparent evidence of wrongdoing in the advertising is another 
manifestation of a program that is not working well. We need a 
more balanced approach in the war against drugs. Obviously, we 
need education. I do not downgrade that request from the 
administration and where they are heading at all. I am just 
saying that we have put too much emphasis on the educational 
aspects and not enough on interdiction and eradication. We need 
to have a three-pronged approach instead of focusing primarily 
on this one area. We know from the statistics that we have so 
far that this one approach and focusing more on that than the 
others simply is not working. We are still losing the war on 
drugs, if you want to call it that, and I think it is 
unfortunate. We need to have a balanced approach, and I think 
this is one more manifestation of reasons why we need a 
balanced approach.
    I thank you once again, Mr. Chairman, for holding this 
    Mr. Mica. I thank the chairman.
    I am pleased to recognize the gentleman from Maryland, Mr. 
    Mr. Cummings. Thank you very much, Mr. Chairman. I am 
certainly very pleased that Mr. Burton is here with us, and I 
do appreciate what he just said with regard to prevention/
education. We need to stick in there treatment, something that 
I have been very concerned about, and certainly interdiction.
    Mr. Chairman, I would first like to take a moment to thank 
the Office of National Drug Control Policy for their strong 
leadership and cooperation with Congress in fighting this war 
against drugs. I believe it is important to note that ONDCP 
Director General Barry McCaffrey personally sat down with youth 
in Baltimore for a half-day town hall meeting to hear how the 
drug war and the media campaign have impacted their lives. I 
was sitting there as they talked with the director and they 
made it clear that these ads were having an impact on them. But 
the reason why he was there was to find out how he could be 
even more effective, how the ads could strike even more of 
their classmates. These were high school students sitting down 
for half a day with the No. 1 drug officer in the world to find 
out how we could take these tax dollars that citizens are 
giving our Government and spend them in a cost efficient and 
effective manner. And I thank Dr. Vereen, the ONDCP Deputy 
Director, who I have also worked with, for all of your 
assistance as well.
    Now, to the issue at hand. It is unfortunate that despite 
its good work, ONDCP has to again be placed in a defensive 
position as a result of unsubstantiated allegations. I might 
add that when I first came to Congress 4\1/2\ years ago, one of 
the first hearings that I had in this committee was an attack 
on this agency. Since the inception of the National Youth Anti-
Drug Media Campaign in 1998, this subcommittee has closely 
monitored the campaign to determine its efficiency and 
effectiveness. According to a recent GAO report, ``ONDCP has 
met most mandates'' regarding the media campaign funds and 
program guidelines.
    In July of this year, GAO, the revered investigative 
authority, found that survey data on drug abuse, focus groups, 
and community input supported the notion that ONDCP's anti-drug 
media campaign has met its congressional mandates. According to 
numerous studies released this year, the campaign has had real 
results in meeting campaign goals to reduce drug use among its 
target populations. According to the most recent Monitoring the 
Future Survey, as anti-drug ads have risen, so have attitudes 
about the social disapproval and perceived risk of illegal drug 
use. The 1999 National Household Survey on Drug Abuse reported 
that drug use by 12 to 17 year-olds dropped by 21 percent over 
a 2-year period, from 1997 to 1999. Additionally, the PRIDE, 
that is the Parent's Resource Institute for Drug Education, 
survey reported that, between 1996 and 1999, annual use of any 
illicit drug declined by a third among junior high school 
    Over the years, we have held numerous hearings to 
investigate allegations. I have noticed that this subcommittee 
in some ways resembles our full committee--one that has 
continually sought to find wrongdoing in this administration. 
Sadly, allegations have not only been levied against ONDCP, but 
also one of the top public relations firms in the Nation, 
Ogilvy and Mather, an important partner in the media campaign.
    These allegations may be sensational but they do not assist 
in combating the drug war, and further, have potential to 
strain a successful partnership between Ogilvy and Mather and 
our Office of National Drug Control Policy that will eventually 
affect our Nation's youth, the very youth that I talked about a 
little bit earlier who sat down with the drug czar.
    The allegations raised today question whether Ogilvy and 
Mather over-billed for labor or falsified records, and whether 
ONDCP and HHS contract management did not adequately followup 
once alerted to the concerns. I have worked closely with 
General McCaffrey and his staff on numerous issues. I know that 
he is running a tight ship because he is very concerned about 
the effectiveness and cost-efficiency of all the dollars given 
to ONDCP by this Congress. As such, I believe that ONDCP should 
be afforded the opportunity to find solutions and answers when 
questions arise--before our subcommittee jumps in to 
investigate and point fingers.
    I would like to outline a timeline that highlights when the 
irregularities at question were raised and how ONDCP addressed 
    On April 13, 2000, a memo from Richard Pleffner, ONDCP 
project contracting officer, who will testify today, to General 
McCaffrey stated concerns regarding Ogilvy's management 
practices and possible billing irregularities. These 
uncertainties were reinforced when a former Ogilvy employee 
raised those concerns.
    Three weeks later, on May 4, 2000, ONDCP sent a letter to 
Ogilvy expressing concern about labor costs in their year 2000 
project plan and asked that Ogilvy reassess the plan to make 
the costs in line with the original proposal.
    ONDCP then went on to hire an independent media consultant, 
who will testify today, Ms. Jane Twyon. Her findings concluded 
that there were cost-savings that Ogilvy could have made based 
on industry traditions and standards.
    Subsequently, ONDCP withheld approximately $14 million in 
payments to Ogilvy. Although Ogilvy provided several reasons 
for their costs in a June 2000 letter, ONDCP asked Ogilvy to 
break down its costs more thoroughly to assist in determining 
what were reasonable expenses.
    Since that time, General McCaffrey approved the 
recommendation by ONDCP's Office of Legal Counsel for ONDCP to 
conduct an internal audit of the management practices of the 
media campaign to identify areas that need improvement. My 
understanding is that General McCaffrey also approved a 
recommendation that HHS conduct an audit of all media campaign 
    All this to say, what is the problem? I will review, and I 
close: ONDCP was alerted to a potential problem, ONDCP took 
necessary steps to investigate the issue, and ONDCP took steps 
to address the problem. As such, I believe that instead of 
attacking and launching new investigations, ONDCP should be 
commended for taking action.
    Mr. Chairman, I look forward to hearing from today's 
witnesses so that we may clear up this issue and get back to 
the business of saving our Nation's youth. Thank you.
    Mr. Mica. I thank the gentleman from Maryland.
    I am pleased to recognize the vice chairman of our 
subcommittee, the gentleman from Georgia, Mr. Barr.
    Mr. Barr. Thank you, Mr. Chairman. I love the way folks on 
the other side approach these hearings. They reach the 
conclusion that nobody has done anything wrong and then they 
blast us for holding a hearing. Thank goodness, folks with that 
sort of outlook are not running the Department of Justice. 
Actually, they are.
    Mr. Chairman, this is a very important hearing. You posed, 
and I repeat these since apparently some folks on the other 
side did not hear them during your opening remarks, some very 
important questions regarding possible over-billing, contract 
fraud, and financial mismanagement. These are questions I am 
sure that came to your mind not simply sitting around with 
nothing better to do, but, as always in these hearings, based 
on your careful consideration of evidence before you, 
interviews, and materials submitted to you by the staff, and, 
in this case, including your review of extensive materials 
provided by the General Accounting Office [GAO], not the 
General Anonymous Office, as another member apparently thinks 
we are dealing with here, anonymous evidence. We are dealing 
with a report from the General Accounting Office.
    The questions that you pose, Mr. Chairman, I think at least 
some of them are worth repeating because every one of them 
clearly falls within the jurisdiction of this committee. Now I 
know that it might be easier if we just sit back the way 
Government operated up until 6 years ago and just let these 
things roll merrily along and, as former Senator Everett 
Dirksen used to say, a billion here, a billion there, and 
pretty soon you might be talking about real money. Those of us 
on this side take our fiscal responsibility seriously and a 
billion here and a billion there requires very strong oversight 
on behalf of the taxpayers of this country. And if we just sit 
back and let these things roll merrily along and wait until 
this great Department of Justice that we have conducts an 
investigation, not only would we be through the next 
administration but probably two or three administrations after 
that, and billions of dollars would have been lost.
    It is entirely appropriate, Mr. Chairman, indeed, it would 
not be responsible not to conduct an investigation at this 
time, to start asking some questions in order to uncover any 
potential problems and assist rather than fight the GAO in 
attempting to remedy them, and assist ONDCP rather than fight 
it or sweep it under the rug if problems exist and help them 
resolve them. Some of the questions you pose, Mr. Chairman, and 
apparently these are irrelevant to the other side, but I think 
they fall clearly within your interpretation and very clear 
mandate for jurisdiction of this committee: Why has ONDCP 
refused to pay millions of dollars in submitted bills?
    Why did ONDCP officials express cost concerns to Department 
of Health and Human Service contract officers who also had 
contract oversight responsibilities?
    Was contract administration management within ONDCP and 
arrangements with HHS sufficient to oversee this complex 
    Why didn't ONDCP push for an immediate audit? In April, the 
ONDCP consultant identified significant cost issues, with some 
costs estimated at over 200 percent of industry standards.
    Finally, are appropriate safeguards in place or underway 
for effectively monitoring and controlling costs?
    I would ask my colleagues on the other side, what do you 
find so offensive and inappropriate about these questions? 
These are standard oversight questions that ought to be 
answered. And when, as in this case, evidence comes before this 
committee, not by some anonymous source but by memos and by 
notations by the highest officials in ONDCP, that raise 
questions, maybe that can be very well answered, but raise 
questions substantiated by GAO that there are some problems 
here, why the people on the other side of this aisle find this 
so offensive is very, very strange indeed. These are simply 
straightforward oversight questions posed by you and this 
subcommittee on this side as early on in this process as we 
became aware of them in an effort to straighten this out and to 
continue the good work of ONDCP. But if there are problems 
there, to make an effort, rather than wait until all the money 
has been spent, until all of the horses have left before we 
close the barn door, to address these questions now.
    I commend you, Mr. Chairman, for stepping forward and 
conducting appropriate and timely oversight as good stewards of 
the public's money. Thank you.
    Mr. Mica. I thank the gentleman.
    I would like to recognize another member of our 
subcommittee, the gentleman from California, Mr. Ose.
    Mr. Ose. Thank you, Mr. Chairman. I think Mr. Barr has very 
eloquently stated why we are doing this. It is interesting, I 
was studying this material the staff has put forward the last 
couple of days regarding the actual contract. And while I have 
a number of questions on the contract, not the least of which 
is that the pages that would otherwise detail the unit costs 
within the contract seem to be missing, I am looking forward to 
this discussion and am particularly interested in getting all 
the way back to the time sheets of the Ogilvy Mather employees. 
I think that is where the crux of this matter lays.
    With that, I would like to go straight to questions if we 
could, having read Mr. Hast's testimony.
    Mr. Mica. I thank the gentleman.
    There being no further opening statements, Mrs. Mink moves 
that we leave the record open for a period of 2 weeks for 
additional statements, comments, information through the 
Members and the Chair.
    Mrs. Mink. Fine. Great.
    Mr. Mica. Without objection, so ordered.
    We will turn now to our panel of witnesses that we have 
assembled this morning, all of whom I believe will be 
testifying at some point. We are pleased to have Mr. Robert H. 
Hast, who is the Director of Office of Special Investigations 
of the General Accounting Office. He is accompanied by Pat 
Sullivan, the Assistant Director, Office of Special 
Investigations, and John Cooney, a Senior Special Agent, Office 
of Special Investigations. We are also pleased to have back the 
Honorable Donald Vereen. Dr. Vereen is the Deputy Director of 
the Office of National Drug Control Policy. Dr. Vereen is 
accompanied by Mr. Alan Levitt, who is the Campaign Director 
under the ONDCP for the media campaign, and Mr. Richard 
Pleffner, Project Contracting Officer of ONDCP. We also have 
Ms. Jane Twyon, who is with Worldwide Consulting, and she is a 
consultant to ONDCP.
    For those of you who have not appeared before our 
subcommittee before, this is an investigations and oversight 
subcommittee of the House of Representatives. In that regard, 
we do swear in our members and you will be under oath. Also, if 
you have lengthy statements or documents to submit, I am not 
going to run the clock because I think we are just going to 
hear from three and then use others as resources, but if you 
have lengthy statements, data that you would like made part of 
the record, if you would request so through the Chair it will 
be so ordered.
    With that, if you would please stand to be sworn, everyone 
who is going to testify.
    [Witnesses sworn.]
    Mr. Mica. Let the record reflect that all the witnesses 
answered in the affirmative.
    I am pleased now to recognize Mr. Robert H. Hast, the 
Director of the Office of Special Investigations, the General 
Accounting Office. Welcome, sir, and you are recognized.


    Mr. Hast. Mr. Chairman and members of the subcommittee, we 
are here to discuss the investigation you asked us to undertake 
concerning the Office of the National Drug Control Policy's 
contract with Ogilvy-Mather, which is the lead media campaign 
contractor for the National Youth Anti-Drug Media Campaign. I 
respectfully ask that my written statement be entered into the 
official hearing record at the conclusion of my summary 
    Mr. Mica. Without objection, your entire statement will be 
made part of the record. Please proceed.
    Mr. Hast. You received allegations that the ONDCP had 
learned that Ogilvy was allegedly inflating its labor costs 
and, as a result, was over-billing the Government for its 
services under the contract by falsifying time sheets. In 
response, ONDCP's Chief of the Media Branch hired a consultant 
to study the Ogilvy contract. This consultant reported that 
Ogilvy's labor costs were far above industry standards.
    Further, in April of this year, the Director of ONDCP, 
General Barry McCaffrey, U.S. Army, retired, was informed about 
these allegations and the results of the consultant's study. 
This allegedly resulted in General McCaffrey's decision that an 
external audit be conducted of the Ogilvy contract. However, 
according to the allegation, after the General met privately 
with the contractor's project director, the project director 
announced that General McCaffrey was satisfied with the 
contract's costs and that no external audit was to be 
conducted. In addition, you received information that Ogilvy 
allegedly had provided assistance to General McCaffrey 
concerning matters not involving ONDCP and billed for this 
service under the contract.
    Beginning in July, we investigated the facts and 
circumstances surrounding actions that ONDCP took after 
receiving the allegations that Ogilvy may have over-billed the 
Government. We also investigated allegations that Ogilvy had 
provided services unrelated to the contract and submitted 
invoices under the contract for those services. We did not 
investigate the allegation that Ogilvy had over-billed the 
Government under this contract; however, GAO is currently 
conducting a review and audit of ONDCP's contracting operations 
which will include these issues.
    In summary, we found that General McCaffrey knew about the 
fraud allegations concerning Ogilvy's billing practices; and 
there is evidence to suggest that he agreed with the need for 
an external audit of the contract. When we interviewed General 
McCaffrey, he initially stated he had no recollection of the 
accusations of fraud related to the Ogilvy contract. After 
reviewing the April 13th memorandum that showed he had been 
informed of these allegations, he did recall receiving the 
allegations. He then told us that after receiving the April 
13th memorandum and a report by a consultant that questioned 
Ogilvy's costs, he traveled to New York City where he met with 
Ogilvy executives and told them that their costs were growing 
and that they needed to get them under control.
    Regarding the allegation that he had ordered an external 
audit, General McCaffrey stated that he had never ordered such 
an audit. He added that he had no knowledge of any written 
order for an external audit or an annotated memorandum with a 
handwritten comment stating the need for an external audit. He 
was then asked if he ever used the words ``we need an external 
audit,'' and stated that he did not recall that. However, after 
reviewing again the annotated April 13, 2000, memorandum, 
General McCaffrey acknowledged that the handwritten comments, 
which included the statement ``we need an external audit,'' 
were his. He told us that although he admittedly wrote that 
phrase on the document, he did not at that time recollect the 
document and he never did order an independent audit to be 
carried out on the Ogilvy contract but it was his intention to 
conduct an audit at some point in time.
    ONDCP's General Counsel informed us that after we 
interviewed General McCaffrey, the director approved a closeout 
audit of all media campaign contracts, including the Ogilvy 
contract. This was to be done in conjunction with the proposed 
transfer of contracting responsibilities to the Navy. In 
addition, General McCaffrey has also approved an internal audit 
of the management practices of the Media Campaign.
    With regard to the allegation of a private meeting with 
Ogilvy's project director, we found that General McCaffrey had 
a private meeting with her in June after internal ONDCP 
discussions of the need for an external audit. General 
McCaffrey's description of the meeting and the project 
director's description vary as to whether excessive costs were 
discussed. However, we found no evidence that this meeting 
impacted any decision with respect to an external audit of the 
Ogilvy contract; and we were told by General McCaffrey that he 
never ordered an audit.
    Further, concerning the allegations that Ogilvy provided 
services beyond those covered by its contract, we found that 
Ogilvy did not write congressional testimony for ONDCP 
employees. Ogilvy did provide ONDCP with figures, research, and 
documentation for use in responding to congressional inquiries 
and testimony. Ogilvy billed for the service under the 
    Ogilvy did not provide any services to General McCaffrey 
involving his response to an article in the New Yorker magazine 
that was critical of General McCaffrey when he was in the 
military. General McCaffrey told us that no one had assisted 
him in response to this article. However, we found that an 
official of another ONDCP contractor, Fleishman-Hillard, had 
spent 3 or 4 hours advising General McCaffrey on this matter. 
Fleishman-Hillard, however, did not charge the time to its 
ONDCP contract. We were told that this time was considered a 
personal favor to General McCaffrey. We also found a May 16, 
2000, memorandum to General McCaffrey from Alan Levitt 
informing him that Fleishman-Hillard officials had told company 
staff that it was assisting General McCaffrey on that matter.
    This concludes my prepared statement. I am happy to respond 
to any questions you or members of the subcommittee may have.
    [The prepared statement of Mr. Hast follows:]
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    Mr. Mica. Thank you. I have no questions at this time. I 
understand Mr. Sullivan and Mr. Cooney were involved in the 
investigation but have no statement at this time. Is that 
    Mr. Hast. That is correct.
    Mr. Mica. Then we will recognize at this point Dr. Donald 
Vereen, who is the Deputy Director of the Office of National 
Drug Control Policy. Welcome, sir, and you are recognized.


    Dr. Vereen. Thank you very much, Chairman Mica and members 
of the subcommittee. We welcome this opportunity to explain 
important aspects of the management and oversight of the 
National Youth Anti-Drug Media Campaign. I am here representing 
the White House Office of National Drug Control Policy. I am 
the Deputy Director there, a physician with a public health 
background, and I have been actively involved with the media 
campaign. I would also like to introduce two of my colleagues, 
Mr. Alan Levitt, the program manager for the media campaign, 
and Mr. Rick Pleffner, the contract manager for the media 
campaign, and recognize a couple of partners who are with us, 
the Community Anti-Drug Coalitions of America, the National 
Association of Drug Court Professionals, partners that have 
been working with and are invested in the media campaign.
    As you know, the campaign is an integrated, science-based 
public health communications effort designed to reach youth and 
adult audiences with messages that influence attitudes and 
action. Many indicators point to a positive trend and a 
generation of teenagers are increasingly choosing to stay away 
from drugs. So we are here today to ensure that this committee 
is provided with detailed understanding of ONDCP's media 
campaign management and oversight structure. So allow me to 
submit at this time my detailed written testimony for the 
    Mr. Mica. Without objection, your entire statement will be 
made part of the record. Please proceed.
    Dr. Vereen. What I will do at this time is highlight three 
critical components expressed in the written testimony, which 
is actually already available on the Web.
    ONDCP is meeting Congress' intent and we are appreciative 
of your confidence in our ability to design, implement, and 
manage this vitally important public health campaign. We 
welcome the oversight. We take very seriously our management 
responsibilities for this campaign. Let there be no doubt that 
Director McCaffrey is the accountable public official for this 
5-year, $1 billion effort. We welcome close public scrutiny of 
our operations and will continue to cooperate fully with all 
oversight functions, including the General Accounting Office 
review, committee inquiries, as well as congressional hearings 
like this one. This is the seventh hearing to focus on the 
media campaign since March 1999.
    We take great pride in the GAO's recent conclusion that 
ONDCP had processes in place to monitor and approve all paid 
advertising expenditures before paying vendors. We are 
involving experts in prevention in the campaign. As I said 
before, the campaign is firmly grounded in science. We have the 
use of a behavioral change expert panel, as well as Wesstat 
Corp., the University of Pennsylvania's Annenberg School of 
Communications, and our own National Institute on Drug Abuse 
which is evaluating the campaign to show that it is actually 
having the desired effects for the American public.
    Is ONDCP negligent in administering this contract? Is the 
public being gouged? The answers to those questions are, no. We 
are diligently protecting the public purse. From the campaign's 
inception, ONDCP has relied on other Federal agencies to 
provide administrative contract support for the campaign's paid 
advertising contracts. We made this decision because of our 
conclusion that neither ONDCP nor the larger Executive Office 
of the President had contract administration capabilities 
necessary to support this extensive contract. The Department of 
Health and Human Services Program Support Center provides 
administrative contract support for this media campaign. They 
have the sole responsibility for determining allowability and 
reasonableness of expenses billed to the Government by 
    Nevertheless, ONDCP ensures that only valid campaign 
expenses are paid by monitoring all of the contractors' costs 
and spending. We execute this responsibility by attending 
planning meetings with contractors, obtaining periodic 
financial status reports, and reviewing and approving all 
campaign expenditures. We make recommendations to the contract 
administrators in HHS, and our experience is that they agree 
with most of our recommendations.
    Our media campaign has enjoyed a tremendous amount of 
support. You have that information in front of you in a number 
of slides. This is to demonstrate that we are fulfilling the 
promise that we have established, a model for a public-private 
sector collaboration. There are a host of collaborators who are 
involved with this who are invested in this program.
    We are proud of the campaign's significant accomplishments. 
We have exceeded the pro bono match requirements which you 
helped us to develop and establish. Since July 1998, over 
425,000 public service announcements have run because of the 
campaign. And in terms of banner ads on Web sites, there have 
been an impressive 586 million total impressions between 1999 
and the year 2000. And we have bought advertising in more than 
2,000 media outlets. These accomplishments have been critical 
to achieving the positive trends toward attitude and behavior 
change among our national youth. You have required that of us. 
Drug use, according to the National Household Survey, has 
declined 21 percent. Sixty-three percent of teens reported 
their parents were talking to them about drugs.
    And last, I want to mention that we are enormously proud of 
the accomplishments of our contractors. Ogilvy and Mather is 
one of the largest and most respected advertising companies in 
the world. They bring significant negotiating leverage to the 
table, allowing the Government to attain the lowest possible 
market rates and access to substantial and unique media match 
opportunities. We estimate that the ONDCP has saved 10 to 50 
cents for every taxpayer media dollar invested. So we are 
getting a great bang for our buck with Ogilvy. The company has 
been considered experienced in social marketing campaigns, 
having been responsible for the highly successful America 
Responds to AIDS campaign. Fleishman-Hillard is the other large 
contractor, one of the largest and most well-respected 
communications firms in the world. And we work with the Ad 
Council and they are the quarterback of our campaign's public 
service component.
    Mr. Chairman, I want to thank you and this committee for 
the opportunity to address your concerns. We welcome the 
committee's leadership and continued interest in reviewing the 
progress and achievements of the media campaign. We continue to 
forge ahead to maintain a strong management and oversight 
structure for this campaign. But more importantly, we are fully 
committed to securing the mission and effectiveness of this 
campaign to change drug use attitudes and behavior among our 
Nation's youth.
    We will be happy to take your questions. I will let Mr. 
Levitt introduce himself and Mr. Pleffner introduce himself.
    [The prepared statement of Mr. Vereen follows:]
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    Mr. Mica. Mr. Levitt.
    Mr. Levitt. I am a 30-year career employee, a member of the 
Senior Executive Service. My whole career has been focused on 
developing and implementing public education programs on energy 
independence, conservation, science, drugs, public issues. I 
have two degrees in communications. I have attended the Kennedy 
School of Government's program for senior managers in 
Government, and the Federal Executive Institute.
    Mr. Mica. Mr. Pleffner, do you have a statement, or are you 
just going to do a self-introduction?
    Mr. Pleffner. Yes. I serve as the project officer for the 
media campaign. I have the primary responsibility for day-to-
day technical administration of the contract, act as the 
facilitator, communicating with the contracting officer at HHS. 
I have roughly 20 years of Federal procurement and acquisition 
    Mr. Mica. Thank you.
    We will now recognize for a statement Ms. Jane Twyon. She 
is with the Worldwide Consulting group, a consultant to ONDCP. 
You are recognized, Ms. Twyon. Welcome.

                      CONSULTANT TO ONDCP

    Ms. Twyon. Thank you, Mr. Chairman. I am a bit of a fish 
out of water here, so just help me along if I do something 
improper. I would like to ask that my written testimony be 
included in the record as well as what I am going to say.
    Mr. Mica. Without objection, your entire written statement 
will be made part of the record. Please proceed, and you will 
not be scaled just yet. [Laughter.]
    Ms. Twyon. Thank you. I should correct before I go any 
further that the spelling of my name is T-W-Y-O-N, no E, and 
that my company is Worldwide Media Directors.
    What I am going to do with my time here today with you is 
just to try and put my report into the proper frame where it 
should be and how it should be looked at. So I am going to go 
pretty quickly and hopefully will make things clearer to all of 
    I believe that I bring great value to my clients. The 
objective of my analysis is to evaluate the work product and 
the cost and, where possible, bring about improved 
relationships, improved work process, and improved 
efficiencies. As stated in my report, I do not presume to 
direct the exact manpower costs to be realigned.
    As a consultant, I cannot give you any magic answers as to 
where you specifically need to make changes. This is for two 
major reasons. First, I am using industry standards and 
industry averages and all businesses are unique in their 
advertising requirements. You should be aware that I did not 
give any special weighting for the possible differences between 
a private versus a Government sector advertising agency cost of 
service. I did adjust for the requirement of matched media, but 
not for any unique Government contracting procedures. Second, I 
do not have any hands-on day-to-day experience on this 
business. My evaluation is based upon specific documentation 
from Ogilvy, industry reports, surveys, as well as my 
experience and stated assumptions. Making assumptions was 
necessary to complete the report and give it grounding for 
future analysis.
    My report delivers the best information and recommendations 
that I could provide, and I take my work very seriously. 
Additionally, my report puts a stake in the ground and 
estimates a savings of $8.5 to $14.8 million in compensation. 
This savings was based on specific documentation that I had to 
evaluate and the assumptions that I made in my evaluation. 
However, you cannot use these figures as real savings. They 
need to be viewed as a snap shot estimate that indicates 
further work needs to be done to find real savings or to 
clearly understand why this business is operating above the 
industry average.
    The ONDCP understands that I applaud their conscientious 
management of this assignment and for seeking advice on how to 
improve the media product and costs. Additionally, you must 
also be aware that I have stated several times to the ONDCP 
that my report does not see any delinquency from any party on 
costs. I realize that the current compensation grew out of the 
needs of the ONDCP and the desire by Ogilvy to respond to and 
service these needs and this very important piece of business 
for them.
    I see my report, and I think this is very important to all, 
I see my report as the beginning, it is not an end. It is the 
start of a process for the ONDCP and Ogilvy to work to find 
ways to become more efficient. It is an evolutionary process. 
As a media consultant on this assignment, I do believe that we 
can improve the work process, relationship, and costs.
    My compensation report was part of a larger report. Part of 
that was to look at Ogilvy media costs. And as I stated to 
ONDCP in my presentation on May 11th, Ogilvy's media rates 
looked competitive. I am sharing this fact with you today 
because I do not want to see a compensation report destroy good 
work. It would be the tail wagging the dog. As a consultant, my 
interest is in finding ways to raise the bar and bring this 
account closer in line to the industry on manpower 
compensation. I believe my report shows you can do better. But 
the report does not do the job.
    I must state again that I see no fault with Ogilvy or the 
ONDCP, and I hope that my report is not used to derail a good 
relationship and excellent work from Ogilvy. I want the ONDCP 
to continue all the good aspects of the campaign, keep and grow 
a strong agency relationship, and, yes, let's work together to 
lower the compensation.
    I also want to make an aside to the committee and this is 
on a personal note. I am, I guess the best word to use, angry 
with this committee because I believe that you have compromised 
me as a consultant. By handing out what was my confidential and 
a very, very technical report and handing it out to the press 
without a cover note and without putting it in any context, it 
opens the door for this information to be misused and 
misquoted. And we cannot be surprised that this has happened.
    Yesterday I read from Ad Age, which is in my business one 
of the premier trade publications, on their Web site they talk 
about the issues with ONDCP, they identify me as the 
consultant. And let me just read one little piece from what 
they said, and people in my business are reading this. It says 
that I have said that a savings of from $8.5 million to $14.5 
million a year would be ``reasonable to expect'' by letting 
less senior account people buy at Ogilvy. Now I know this 
information is wrong because account people do not make media 
buys. And I would never be so ridiculous as to tell a client 
that they are going to get major savings by compromising on 
senior manpower. I know it is wrong but the people who read 
this report will not know it. The article is full of data from 
my report; the information is out of context, it is misused, 
and it is misquoted. And I feel that because of that you have 
compromised me and you have embarrassed me. And for that, I am 
    That is the end of my report. Thank you.
    [The prepared statement of Ms. Twyon follows:]
    [GRAPHIC] [TIFF OMITTED] T4927.101
    [GRAPHIC] [TIFF OMITTED] T4927.102
    Mr. Mica. Thank you. We will get back to you in just a 
    We will start with some questions that I have and then 
proceed to other Members. First of all, let's begin with you, 
Mr. Levitt, you are the media campaign manager. When and how 
did you first become aware of cost and billing concerns with 
the contractor Ogilvy and Mather?
    Mr. Levitt. Well, sir, we have four major contracts and 
under those probably 20 or 25 subcontractors are working for 
those contractors. In virtually every single instance, we have 
recommended withholds from billing. I think it is a total of 
about $18 million.
    Mr. Mica. My question was with the Ogilvy and Mather 
contractor, when did you first become aware of cost and billing 
concerns. Do you recall?
    Mr. Levitt. It was not necessarily billing concerns, but 
billing irregularities. They did not bill for labor for about 
10 months. So it would be about September 1999.
    Mr. Mica. You first became aware of some over-billing----
    Mr. Levitt. No, it----
    Mr. Mica. I am sorry, billing irregularities in October 
    Mr. Levitt. They had not billed for everything. And may I 
just correct one point. When I say over-billing, I am talking 
about fraudulent over-billing. When I put in a travel voucher 
when I go on a trip, I do not consider it fraud if I make a 
mistake. I am talking about deliberate cooking the books. We 
have no evidence of that whatsoever.
    Mr. Mica. OK. Were you aware of the external analysis of 
costs by the outside consultant who has testified today?
    Mr. Levitt. There are two different issues here. One is the 
past billings, which continue and have----
    Mr. Mica. But I do not think she dealt with----
    Mr. Levitt. Her analysis was about the future and it was 
the Ogilvy labor structure and do we need the different 
components of it.
    Mr. Mica. And when were you aware of her report?
    Mr. Levitt. We commissioned that report I believe in March 
or April 2000. But we had concerns about costs for the campaign 
long before that.
    Mr. Mica. When was that commissioned, Ms. Twyon?
    Ms. Twyon. I actually gave the report on the 27th. Late 
March was the first time I was contacted. I do not know the 
exact date but it was late March.
    Mr. Mica. Thank you.
    When, Mr. Levitt, were you aware of the memorandum dated 
April 13th from the contract technical representative Mr. 
Pleffner, who is with you today. When were you first made aware 
of the memo? I think we have got a copy of it up here.
    Mr. Levitt. I believe he started writing that memo in 
March, sometime in late March.
    Mr. Mica. So you were aware of it before he put it on paper 
on April 13th?
    Mr. Levitt. I was aware of the five different issues he 
raised in that memo.
    Mr. Mica. And did you agree or disagree with the concerns? 
Were you concerned?
    Mr. Levitt. I agreed with all of them.
    Mr. Mica. You did?
    Mr. Levitt. I think I differed to some degree with----
    Mr. Mica. Who presented the memo of the 13th stating these 
concerns and problems to the Director?
    Mr. Levitt. Mr. Pleffner.
    Mr. Mica. Mr. Pleffner.
    Mr. Levitt. It went from him, through our legal counsel, 
through our chief of staff Janet Crist, directly to General 
    Mr. Mica. So, first, the legal counsel was made aware.
    Mr. Levitt. That is just the process we would use for 
something that would include these issues.
    Mr. Mica. Mr. Pleffner, there are some pretty serious 
questions raised about billing practices and over-billing in 
your memo of the 13th. It appears that Ogilvy and Mather had 
initially provided you and informed you--if you want to read 
this, it says ``Ogilvy contract manager informed me that the 
invoice included all labor costs incurred during the period 
January 4, 1999 through June 30, 1999. Subsequently, several 
months later, they submitted two additional labor bills for 
this same period.'' And it said that Ogilvy increased its 
claimed effort by 27 percent, the number of people working on 
the contract rose by some 33 percent, and by 33 percent for 
invoice costs. Is that correct?
    Mr. Pleffner. Yes, that is correct.
    Mr. Mica. And I guess you had gotten some information from 
an anonymous source, where it says ``when a former Ogilvy 
employee related facts to ONDCP supporting suspicions of 
fraudulent conduct.'' And you said ``our review of time sheets 
led to increasing concerns.'' So you and Mr. Levitt were aware 
of problems before and then you were presented with these new 
billings. You said many of the time sheets for invoices 14 and 
16 were illegible and contained an inordinate number of 
changes, alterations, almost always increasing the time charged 
to the ONDCP contract. Is that correct?
    Mr. Pleffner. That is correct.
    Mr. Mica. Now we have asked for copies of these time 
sheets. Mr. Hast, did you get copies of these time sheets that 
are in question?
    Mr. Hast. The Office of Special Investigations has not. We 
did not request them. I do not know whether the ongoing GAO 
audit has them yet or not.
    Mr. Mica. OK. I requested copies I think of some pretty 
specific documents. Have we received copies? Have you produced 
these yet, Dr. Vereen?
    Dr. Vereen. If they have been produced, we have sent them.
    Mr. Mica. Has the Office of Drug Control Policy provided 
the subcommittee or GAO the time sheets in question?
    Dr. Vereen. We have seen them. They are being produced. 
They are in the process of being produced, but I do not know if 
you have actually received them.
    Mr. Mica. Well I want these time sheets and I would like 
    Mr. Barr. Will the chairman yield?
    Mr. Mica. Yes.
    Mr. Barr. I was having difficulty. You said ONDCP has not 
received them?
    Dr. Vereen. No. We have seen them. They have been examined. 
But the request for them was made and I do not know if they----
    Mr. Mica. Well I want these time sheets. I want them turned 
over to us and I would also like them turned over to the 
    Dr. Vereen. Sure.
    Mr. Mica. When information was presented to me initially, 
if this had just been an anonymous report unsubstantiated about 
over-billing and irregularities, I might not have paid much 
attention to it. But with the documentation that we have, with 
this internal memo--this is an official memo that you prepared, 
is that right, Mr. Pleffner?
    Mr. Pleffner. Yes, it is.
    Mr. Mica. Do you still stand by the comments that you put 
into this memo? Is there anything incorrect in this memo?
    Mr. Pleffner. There is nothing incorrect. I still stand by 
    Mr. Mica. Mr. Levitt, you testified that you were aware of 
this even before the 13th, some of these allegations. The next 
question I would have is, I see handwriting on there, Mr. Hast, 
has GAO determined whose handwriting it is? It says discuss, 
need, and then down at the bottom, ``Yes. We need an external 
    Mr. Hast. Yes.
    Mr. Mica. Whose handwriting is it?
    Mr. Hast. General McCaffrey identified that as his 
    Mr. Mica. OK. Dr. Vereen, was an external audit ordered at 
that point immediately after April 13th and this memo was 
initialled by the Director?
    Dr. Vereen. No. An audit was discussed. At the same time, 
we were making arrangements to change the contracting activity 
from HHS to another entity and at that time an audit would be 
    Mr. Mica. First of all, GAO, were you told that an audit 
would not be conducted until the end of the contract, that was 
the term of the contract, and is that 4 years?
    Mr. Hast. That was not clear. General McCaffrey said he 
intended to have an audit at some time.
    Mr. Mica. Mr. Pleffner, did you get a copy of this memo 
back that said yes, we need an external audit?
    Mr. Pleffner. Yes, I did.
    Mr. Mica. And what was done then? Did you order the 
external audit? Did anyone proceed with an external audit?
    Mr. Pleffner. No. The decision, as I noted in the memo, was 
to request an audit once the contracting function was 
transferred out of HHS. At that time we were discussing the 
possibility of moving it to the Navy, as we currently are.
    Mr. Mica. What was your opinion of that procedure of 
waiting until the end? Did you have any other recommendation?
    Mr. Pleffner. My preference at the time was for an 
immediate audit given the irregularities that we had and the 
allegations that were made. But, again----
    Mr. Mica. It also says the contracting officer's initial 
response was ``their policy was to perform an audit only at the 
end of the contract--in this case, at the end of 5 years.'' and 
I see a large handwritten ``No.'' Was that also your opinion?
    Mr. Pleffner. To wait for 5 years?
    Mr. Mica. Right.
    Mr. Pleffner. No, sir, that is not my opinion.
    Mr. Mica. It looks like again, I am not sure, this is the 
ONDCP Director's ``No.'' Is that correct, Mr. Hast?
    Mr. Hast. Yes.
    Mr. Pleffner. And I do agree with the Director's position 
that it cannot wait for 5 years. As a matter of fact, I had 
requested in early March or mid-March that HHS initiate an 
audit. It was before I prepared this memorandum.
    Mr. Mica. And what did they say?
    Mr. Pleffner. The contracting officer informed me that it 
was HHS policy to conduct audits only after the conclusion of 
the contract, in this case it would have been 5 years.
    Mr. Mica. There was also a meeting that some people have 
referred to of the ONDCP Director with Ms. Seifert, I believe 
it is, she is with Ogilvy and Mather, and this took place I 
guess after the production of this memo from you to the 
Director. Is that correct?
    Mr. Pleffner. Correct.
    Mr. Mica. Is anyone familiar with that meeting?
    Mr. Levitt. Which meeting was this, sir?
    Mr. Mica. Director McCaffrey had a meeting with Shona 
    Mr. Levitt. Seifert, yes.
    Mr. Mica. Right. And she had a conversation with Alan 
Levitt and Jill Bartholomew. Is anyone aware of that meeting?
    Mr. Levitt. Well, I am Alan Levitt. I should be. Yes, she 
had a meeting with Director McCaffrey I think it was on June 
5th. Is that what you are talking about?
    Mr. Mica. Right.
    Mr. Levitt. The meeting was on June 5th. That was after a 
meeting, a long briefing on another topic completely. And what 
had happened before then is Ogilvy had responded to the Jane 
Twyon report and gave their view of it and did an analysis for 
us. Our management team----
    Mr. Mica. You stayed in the whole meeting?
    Mr. Levitt. I was not in the meeting with the Director.
    Mr. Mica. You were not in the meeting but you are aware----
    Mr. Levitt. No. Afterwards, she came down and told me that 
because of her briefing the Director felt more comfortable with 
some of the labor issues--not billing--some of the labor issues 
that were being discussed in Jane Twyon's report.
    Mr. Mica. Did you say uncomfortable or comfortable?
    Mr. Levitt. A little more comfortable.
    Mr. Mica. More comfortable.
    Mr. Levitt. Right.
    Mr. Mica. And what was communicated then to you, Mr. 
    Mr. Pleffner. On June 6th, I met with Alan Levitt and Ms. 
Bartholomew at which time they informed me of the visit they 
had with Ms. Seifert the day before.
    Mr. Mica. I am sorry, can you repeat that? For some reason, 
this seems to be coming across garbled.
    Mr. Pleffner. I met with Alan Levitt and Jill Bartholomew 
on June 6th, the day following the briefing and the meeting 
    Mr. Mica. The meeting was on the 5th, right?
    Mr. Pleffner. Correct. On the morning of the 6th, Mr. 
Levitt and Ms. Bartholomew informed me of the visit and told me 
that Ms. Seifert had told them the Director had no problem with 
the contract costs and that Ogilvy would continue being the 
advertising contractor for ONDCP.
    Mr. Mica. That is different than what Mr. Levitt said.
    Mr. Levitt. I do not recall that. What I recall is she said 
the Director felt more comfortable because of their report. 
Now, the Director was not in the meeting when she gave her 
report. That was reported to him by the management team chaired 
by Janet Crist.
    Mr. Mica. We have got a vote, a couple of votes. I am a 
little bit concerned about the status of management of this 
whole program. We are moving now from HHS you said to the Navy. 
The only audit we have being conducted at this point is by GAO 
and that has been instituted really since some of this has come 
to the attention of the subcommittee. Is that correct, Mr. 
    Mr. Hast. Yes.
    Mr. Mica. Dr. Vereen, where are we in the status of who is 
in charge of the contract?
    Dr. Vereen. We tried to evaluate several other sources in 
the Federal Government. Our first choice at this point is the 
Navy and we are meeting with them I believe on Monday to try to 
finalize that contracting relationship so we can switch it 
over. That will start an audit and we will proceed from there.
    Mr. Barr. Excuse me. Mr. Chairman.
    Mr. Mica. Yes?
    Mr. Barr. Would you yield for just a moment please?
    Mr. Mica. Real quickly. Go ahead.
    Mr. Barr. Are you saying, Dr. Vereen, that you still have 
not made a final decision on changing over to the Navy?
    Dr. Vereen. Well, it is not just our decision. We had to go 
and look for appropriate contracting agency. We had started 
looking earlier in the year, predating this memo, and we have 
decided upon the Navy as the best choice for us. We are 
providing them with information and doing a final meeting I 
believe on Monday so that transfer can be finalized.
    Mr. Mica. It appears that the contract administration is in 
disarray. We went to HHS and asked them simple questions; they 
do not have a clue, it is strictly a ``que pasa?'' situation. 
This is a very expensive contract. We want it to succeed. So we 
need somebody in charge. We cannot have an audit at the end of 
a 4-year period when we have these reports. And this is not an 
anonymous report. Mr. Levitt, who is in charge of the program, 
and Mr. Pleffner, the financial officer, knew about problems 
with the contract. And we did not have an audit in place until 
this was raised to the level of GAO investigators and the 
    So there is something dramatically wrong with the 
administration and financial management. I do not know if there 
is any criminal misconduct here by anybody. But I want to see 
the time sheets and I want to see them in a timely fashion. And 
I want GAO to continue reviewing this matter. Our subcommittee 
is not an investigative staff at the level of these folks. I 
think you all are former Secret Service agents, is that right?
    Mr. Hast. Yes, sir. We are all retired Secret Service, FBI, 
or from other investigative agencies.
    Mr. Mica. So it is not a bunch of people that fell off the 
wagon during pumpkin season or something. We have competent 
people whose responsibility is as independent investigators of 
the General Accounting Office of the U.S. Government. So I want 
this pursued. If someone is ripping off the taxpayers, I want 
that pursued. I want those documents. And they can put on a 
media campaign against me, but this is not political, this is 
not anything, it is my oversight responsibility and I take it 
very seriously. I want the program to succeed.
    So that is the end of my questions at this point. Dr. 
Vereen, I want you to deliver the message I am not playing 
games. I just want to make certain that this thing that we have 
created--we created it, we authorized it, financed it, you 
administer it--that it is properly administered. Short and 
    I apologize to the minority for taking longer, I wanted to 
give you a shot. But maybe we should go ahead and vote and come 
back and I will recognize you immediately.
    We will stand in recess until 5 minutes after the last 
    Mr. Mica. I would like to call the Subcommittee on Criminal 
Justice, Drug Policy, and Human Resources back to order.
    I have additional questions which I will submit in writing, 
I do not know if we will do a second round today, to the drug 
czar's office, ONDCP, and some of the others who have testified 
    Let me yield at this time to the ranking member, the 
gentlelady from Hawaii, Mrs. Mink.
    Mrs. Mink. Thank you very much, Mr. Chairman.
    First, I would like to express my apologies and concern to 
Ms. Jane Twyon for the release of her confidential memorandum 
to ONDCP and consequent embarrassment that such a release has 
caused her. I just am very, very sorry. I do not know what else 
the subcommittee can do to ease the situation and to respond to 
your concerns with respect to your professional integrity. So I 
certainly am very sensitive to those kinds of abrogations of 
our release of information that could cause someone harm.
    Ms. Twyon. Thank you.
    Mrs. Mink. My question to you, Ms. Twyon, is when were you 
asked to do this particular review of the Ogilvy contract?
    Ms. Twyon. I was contacted in late March and then I have a 
contract with the Ad Council who actually hired me at the 
request of ONDCP on April 4th.
    Mrs. Mink. When did the Ad Council get the request, if you 
got the request in March?
    Ms. Twyon. I think it was just a short period of time 
there, so say at the end of March.
    Mrs. Mink. And so who compensated you for this report?
    Ms. Twyon. I am paid through the Ad Council who hired me.
    Mrs. Mink. And the Ad Council was paid by the ONDCP people 
    Ms. Twyon. Yes.
    Mrs. Mink. And what was your specific charge when you were 
asked to undertake this investigation? Was it fraud?
    Ms. Twyon. No.
    Mrs. Mink. At any time were you instructed to look at this 
particular situation from a fraud perspective?
    Ms. Twyon. No.
    Mrs. Mink. Was there any suggestion that there was 
deliberate tampering with work sheets and over-billing and all 
the rest of what we have heard today?
    Ms. Twyon. No. That was not really part of my assignment.
    Mrs. Mink. Did you investigate that as any part of your 
    Ms. Twyon. No. That area is not part of my assignment.
    Mrs. Mink. So then your report should not be cited in any 
way as legitimizing any of these communications to this 
subcommittee or to others that there is evidence of fraudulent 
    Ms. Twyon. That is right.
    Mrs. Mink. Now in your examination, did you come across 
anything that was fraudulent in your estimation?
    Ms. Twyon. No, I did not.
    Mrs. Mink. So that as far as you are concerned the only 
inquiry that you investigated and reported on was the 
comparison of the charges that Ogilvy made to the Government as 
they related to industry-wide charges for the same type of 
work. Is that correct?
    Ms. Twyon. Correct.
    Mrs. Mink. OK. So the agency then, from what we have heard 
from Mr. Levitt, became concerned about the submission of these 
billing sheets and accounting from Ogilvy back in September 
1999. Is that correct, Mr. Levitt?
    Mr. Levitt. Right. Correct.
    Mrs. Mink. And what did you do when you found out that they 
were not billing you at the appropriate intervals and had 
waited 9 months to submit their first comprehensive billing?
    Mr. Levitt. Our project officer, Mr. Pleffner could 
probably better answer that. He had been in conversation with 
Ogilvy for I think some months before.
    Mrs. Mink. Mr. Pleffner, would you answer that question.
    Mr. Pleffner. Yes. After receipt of their first labor 
    Mrs. Mink. Which was when, what date?
    Mr. Pleffner. That was mid-September 1999.
    Mrs. Mink. Was that unusual for a contractor to wait 9 
months into their contract to submit their first pay sheets?
    Mr. Pleffner. Extremely unusual.
    Mrs. Mink. And what did you do about it?
    Mr. Pleffner. There is really not much you can do to force 
    Mrs. Mink. Did you contact them and say what is going on 
here, why are you so late?
    Mr. Pleffner. I had been in communication with the Ogilvy 
financial and contracting folks since February 1999 encouraging 
them to bill for their labor.
    Mrs. Mink. Now is there any evidence to show that the 
lateness was due to their transition problems of one contractor 
to another?
    Mr. Pleffner. I have no evidence of that.
    Mrs. Mink. No evidence of that.
    Mr. Pleffner. No.
    Mrs. Mink. So did they give you any reason to believe that 
they understood the gravity of their situation and that they 
were going to take care of it promptly?
    Mr. Pleffner. I really cannot speak to----
    Mrs. Mink. Well, were you concerned that they did not give 
you any response or indication that they were going to take 
care of this delinquency?
    Mr. Pleffner. Extremely concerned. Again, I had numerous 
discussions with not only the financial and contracting folks 
but the project director.
    Mrs. Mink. Was it your decision then to withhold payment 
when they finally did submit their vouchers for payment?
    Mr. Pleffner. It was my recommendation to the contracting 
officer, yes.
    Mrs. Mink. And the contracting officer is who?
    Mr. Pleffner. Janet Miller with the Health and Human 
Services Program Support Center.
    Mrs. Mink. And she then followed up on your recommendation 
and withheld payment. Is that correct?
    Mr. Pleffner. Correct.
    Mrs. Mink. And this $13, $14, $18 million, whatever the 
figure is, that was withheld constituted what account for 
Ogilvy? Was it their money that they had spent themselves as an 
agency? Was it advertising money? Was it their operational 
money? Is it part of their contract proceeds that was withheld?
    Mr. Pleffner. The $13.4 million to date that I have 
recommended for withhold are costs that Ogilvy states they have 
    Mrs. Mink. So by your withholding it, they are hurting 
because they are not getting reimbursed for out of pocket 
costs. Is that a correct general conclusion?
    Mr. Pleffner. Out of pocket labor. Yes, ma'am.
    Mrs. Mink. Now when was the first withholding?
    Mr. Pleffner. The first withholding was roughly August-
September 1999.
    Mrs. Mink. And you have continued to withhold additional 
sums till today it is about $14 million. Is that correct?
    Mr. Pleffner. Correct.
    Mrs. Mink. Is there any indication that you are about to 
release any of this money because they have performed to your 
satisfaction in terms of giving you the tear sheets or whatever 
it is that is missing in the various billings that they have 
sent you?
    Mr. Pleffner. Obviously, upon receipt of supporting 
documentation, any withholds that are determined reasonable, 
yes, release would----
    Mrs. Mink. So how much of their out of pocket costs since 
they became the contractor in this instance have actually been 
released and paid to Ogilvy? I want to get a comparison. You 
have withheld $13-$14 million. What have they actually been 
    Mr. Pleffner. To date, they have billed for approximately 
$187 million.
    Mrs. Mink. But that is moneys they have spent in the media 
buys. I am talking about out of pocket operational expenses for 
    Mr. Pleffner. For the labor to date, they have billed 
roughly $23 million. I have recommended withhold of 
approximately $7.8 million. Media purchases--you were not 
interested in the media. Out of pocket or production expenses I 
believe they have invoiced for roughly $6-$7 million. I have 
recommended withhold of a little over $1 million.
    Mrs. Mink. So, if you add that up, it is about $8 million 
that you are currently withholding?
    Mr. Pleffner. Close to $9 million for labor and----
    Mrs. Mink. Now at any time that you made those requests for 
withholding, did anyone else step in and intervene and suggest 
that you were being overly strict and asked you not to withhold 
these moneys?
    Mr. Pleffner. Yes.
    Mrs. Mink. Who?
    Mr. Pleffner. The contracting officer at Health and Human 
    Mrs. Mink. Asked you to be more understanding? And did you 
then comply?
    Mr. Pleffner. The contracting officer felt that I was over 
zealous in the request for supporting documentation, yes.
    Mrs. Mink. So who prevailed, you or the HHS?
    Mr. Pleffner. To the best of my knowledge, all but a couple 
of the recommended withholds the contractor has in fact 
    Mrs. Mink. Now, under the law, who has the responsibility 
to make those recommendations with respect to payment? Is it 
you or is it the contracting officer in HHS?
    Mr. Pleffner. I have been appointed by the contracting 
officer as project officer. I make the recommendations, the 
contracting officer makes the final decision.
    Mrs. Mink. So actually we should have another seat here for 
them to respond to this question since they have the ultimate 
    Mr. Pleffner. They would be better suited to respond to 
their actions, yes.
    Mrs. Mink. Has anyone in a supervisory capacity over your 
work at any time suggested that you were being over zealous?
    Mr. Pleffner. No.
    Mrs. Mink. Did anyone attempt to interfere in the exercise 
of your due diligence requirements with respect to this account 
within the agency?
    Mr. Pleffner. No one has interfered with it at ONDCP.
    Mrs. Mink. Now with respect to the tasking, this is to Mr. 
Hast at the Office of Special Investigations, GAO, with respect 
to the task that you were assigned to investigate, who made 
that request? Is it in writing? What were the dimensions of 
that request? What was your mission? What prompted it? I think 
that is important to know in the record.
    Mr. Hast. Let me start with what prompted it. In the GAO 
audit that has been mentioned at this hearing----
    Mrs. Mink. Well, first, who requested the GAO audit?
    Mr. Hast. I think that was Chairman Kolbe of the 
Subcommittee on Treasury, Postal, and General Government.
    Mrs. Mink. Not this committee?
    Mr. Hast. Not this committee.
    Mrs. Mink. I was just told by counsel it is not an audit, 
it is a management review. Is there a difference?
    Mr. Hast. I am sure there is but I do not think I could 
explain it.
    Mrs. Mink. On the one hand, the Director of this agency is 
being called down for not having an audit, so we had better 
have a definition of what was actually done by the GAO.
    Mr. Hast. I would have to leave it that it was a management 
review. But I do not think I can go a lot deeper than that.
    Mrs. Mink. What is the difference? Well, you can submit 
that response. I am told there has not been a financial audit.
    Maybe Mr. Vereen can answer that question.
    Dr. Vereen. It is a general audit of the media campaign 
that was requested by Congressman Kolbe. And there were some 
conclusions that were drawn about how well we were 
administering the campaign.
    Mrs. Mink. Was it a financial audit or a program audit?
    Dr. Vereen. No.
    Mr. Hast. Program audit.
    Mrs. Mink. Right. OK. All right, Mr. Hast, describe what a 
special investigation is in the GAO. Is it a criminal 
investigation division of the GAO?
    Mr. Hast. Yes.
    Mrs. Mink. You wear badges and you walk around with guns 
and so forth?
    Mr. Hast. No guns, Congresswoman.
    Mrs. Mink. No guns. OK.
    Mr. Hast. But we do have badges. The Office of Special 
Investigations is a small unit in GAO, approximately 25 
criminal investigators, all of them senior criminal 
investigators that have been hired from other investigative 
agencies such as the Secret Service, the FBI, IRS, and various 
IG offices. When there are allegations of fraud or criminality 
we are asked by the Congress to conduct investigations into 
these allegations. The other way we get into investigations is 
how we got into this one. When our audit teams or management 
review teams are out in agencies, if they develop allegations 
of fraud or criminality, they bring our office in. That is what 
happened in this case.
    Mrs. Mink. So who brought you in, let's try to be specific?
    Mr. Hast. The General Government Division team that was 
doing the management review had allegations brought to them by 
individuals they talked to that wanted to remain anonymous at 
this time. We interviewed those individuals and not only did we 
find their statements credible, when we reviewed our files we 
had another anonymous tip that had come in on the GAO FraudNet, 
our hotline, that kind of parallelled the allegations that were 
here. Once we determined that these were credible, we went to 
this subcommittee because of its oversight responsibilities and 
presented the information and were requested by Chairman Mica 
to conduct an investigation.
    Mrs. Mink. What was the scope of your investigation? Was it 
based upon the anonymous tips and the hotline?
    Mr. Hast. It was to determine what ONDCP did when they had 
allegations of fraud.
    Mrs. Mink. Why were you not charged to look at the fraud 
since we had two tips?
    Mr. Hast. We actually are looking at the fraud. We went 
back to Chairman Kolbe and presented our findings, the 
information to him, since it started with his committee, and 
our General Government Division is now conducting a financial 
audit to determine whether these allegations of fraud have 
merit. And if they do, our office will continue its criminal 
    Mrs. Mink. But you were never charged with conducting an 
investigation to see whether there was any fraud?
    Mr. Hast. No.
    Mrs. Mink. So that is not the reason for your presence here 
    Mr. Hast. That is correct.
    Mrs. Mink. And your charge then was what?
    Mr. Hast. To determine what actions were taken to react to 
the allegations that ONDCP received.
    Mrs. Mink. So we are not here today to make any 
determination with reference to whether the hotline tips and 
the informers and so forth brought in credible accusations that 
could end up in charges being brought against certain 
individuals for fraud. We are not here doing that today, are 
    Mr. Hast. We are not. No, ma'am.
    Mrs. Mink. I think that should be made perfectly clear, 
that the limits of this investigation only go to the agency 
response. And in that connection, Mr. Chairman, I want to note 
that it seems to me from the record, the dates, the concerns 
that have been expressed by the responsible staff people in the 
ONDCP indicate that they acted promptly and that the steps they 
had taken in hiring a consultant and in making all of the 
internal reviews that they made were quite appropriate. So I do 
not understand why we are here today and why the GAO has not 
been given precise instructions by this committee to 
investigate the fraud and report back to us, because that is of 
course our concern. I hope that is the outcome.
    With respect to the time sheets, I understand that the 
agency has a copy, that Ogilvy has the originals and that the 
agency does in fact have a copy of these time sheets. Is that 
correct, anybody from the agency?
    Mr. Pleffner. That is correct. I have copies.
    Mrs. Mink. That is correct. So if the committee makes a 
request for a copy of these time sheets, that is not a problem. 
Is that a problem? Is that an invasion of privacy? Are we then 
going to be charged with having looked at records that we 
should not have looked at?
    Dr. Vereen. The request for those time sheets came in late 
yesterday. We are prepared to turn them over. They do contain 
some proprietary information related to Ogilvy, so some things 
we do have to be careful about.
    Mrs. Mink. Are you working with your legal counsel with 
respect to what can be turned over and what cannot?
    Dr. Vereen. Yes. They are actually working on that as we 
speak. The request came in yesterday.
    Mrs. Mink. When do you expect those will be delivered to 
the subcommittee for our examination?
    Dr. Vereen. We suspect in just a couple of days.
    Mrs. Mink. We may be out of here in a couple of days.
    Dr. Vereen. They may be on the way.
    Mrs. Mink. Thank you. Thank you very much, Mr. Chairman.
    Mr. Mica. Just to respond to the gentlelady. We have 
requested these and I think it would be appropriate, we can 
discuss this later, to turn them over to GAO. We are not 
criminal investigators and I do not want to infer that there is 
    Mrs. Mink. I understood that the GAO has it.
    Mr. Mica. GAO does not have it.
    Mr. Hast. We do not have it.
    Mr. Mica. So, again, there are several parts to this. We 
are concentrating on management administration today.
    Mrs. Mink. Mr. Chairman, I would be happy not to have them 
then and have it turned over to the GAO.
    Mr. Mica. Well, we are going to get them. I requested them.
    Mrs. Mink. Oh, you want them. All right.
    Mr. Mica. We have been joined by the chairman of the full 
International Relations Committee who is also a member of our 
subcommittee. If I may, I would like to recognize him because I 
think he is going to have to leave to go and chair another 
meeting. You are recognized for an opening statement or 
    Mr. Gilman. Thank you, Mr. Chairman. I regret that I could 
not be here earlier. We were conducting a hearing and I have to 
go on to another one. I want to thank you, Mr. Mica, for 
calling this important and timely hearing on our Nation's Anti-
Drug Youth Media Campaign and the expenditure of taxpayer funds 
in this very worthy and important effort to keep our youngsters 
off of illicit drugs. And as you know, we have worked with you 
consistently and for a long period of time in our war against 
drugs, both domestically and internationally.
    The 5 year $1 billion educational campaign for our young 
people is an important tool in our fight against teen drug use. 
I think the concerns expressed by some on alleged excessive 
billing and possible mismanagement of some of these precious 
media funds that are hard to come by, especially when the lives 
of our young people are at stake, is certainly worthy of a very 
careful review and analysis. These funds are intended to help 
keep our young people off of illicit drugs here at home. These 
dollars need to be used wisely, judiciously since we have cut 
both our source nation and transit drug-fighting dollars in 
recent years. In turn, we have seen more and more illicit drugs 
entering our Nation from abroad, such as deadly cocaine and the 
heroin from Colombia. Only now is the administration about to 
help Colombia. It may be too little, too late. We hope not.
    Alleged ONDCP print media costs of 238 percent above the 
industry average, along with ad buying and placement fees far 
above an industry average of 3.5 percent, and local broadcast 
media costs of 179 percent above industry average, if true, 
certainly require response from ONDCP and those managing this 
important anti-drug media program. We, the American taxpayers, 
and the parents of our young people are entitled to an 
accountability and transparency in this important media effort. 
We certainly need to see an independent, unbiased, external 
audit of these funds now in light of these many concerns, as 
called for by General McCaffrey back in I guess it was April 
when that letter was first presented to him and not after 5 
years and the contract expires. We must effect change before, 
not after, the 5-year timeframe.
    I hope we can get assurances today that such an external 
audit is in fact going to be done by the executive branch. And 
I understand GAO is already involved in doing some auditing. 
There is already far too much unfounded skepticism about our 
war on drugs and whether or not we can win or even do something 
effective about it. I hope the media campaign we intended to 
help to win our war on illicit drugs here at home and keep our 
kids off illicit substances does not prove to be yet another 
unfortunate cause for despair and skepticism. And we hope and 
trust that today's hearing can alleviate some of these 
    So I look forward to reviewing the testimony of today's 
witnesses. Getting an honest assessment of the media campaign's 
management, and the results in advancing our vital national 
interest of keeping our young people off these deadly illicit 
substances are two goals I am sure we can all agree upon.
    Mr. Chairman, with your permission, just one question. 
General McCaffrey wisely noted after reading your April 13th 
memo that we need an external audit, as depicted on that 
display there. Do you still share that view, Mr. Pleffner? And 
why has there not been an audit of that nature?
    Mr. Pleffner. Yes, I do share the General's view that there 
needs to be an external audit.
    Mr. Gilman. And why was that audit not conducted?
    Mr. Pleffner. It was decided early this year--HHS' policy 
was to wait until the end of the contract--and it was decided 
by ONDCP to wait until after transfer of the contracting 
function to another Government agency. At that point an audit 
would be requested.
    Dr. Vereen. To clarify, sir. The rules regarding HHS and an 
audit was that an audit would be done at the end of the 
contract. We did not want to wait that long. So we took steps 
predating the memo to change the contracting activity to some 
other entity. And at this point, we are very close to changing 
that contract to the Navy. When that transfer takes place, an 
audit will be requested.
    Mr. Gilman. Why do you have to wait till the end of the 
contract to conduct an audit if you see some problems?
    Dr. Vereen. Well, the problems that were identified we have 
known about for more than a year. We have taken steps to 
protect the public purse by withholding payment on bills sent 
to us----
    Mr. Gilman. You are withholding payments. Why isn't an 
audit appropriate then?
    Dr. Vereen. Well, an audit is appropriate.
    Mr. Pleffner. We believe an audit is appropriate.
    Dr. Vereen. Yes. We have taken steps.
    Mr. Pleffner. The contracting officer stated that HHS had a 
policy that an interim audit would not be conducted, that we 
would have to wait until the conclusion of the contract.
    Mr. Barr. Excuse me. Would the chairman yield?
    Mr. Gilman. I am pleased to yield to the gentleman.
    Mr. Barr. You all are I think confusing us up here. Is it a 
policy or was it a specific term of the contract that no audit 
would be performed before the expiration of the 5-year 
contract? You all have used different terms and the legal 
significance of them is significant.
    Mr. Pleffner. The contracting officer sent me an e-mail, 
after I requested that an interim audit be performed, she sent 
me an e-mail telling me that HHS policy was to wait until the 
conclusion of a contract, the end of the contract before an 
audit could be performed.
    Mr. Barr. So it was not that there was any legal 
prohibition on you all demanding that an audit be performed, 
which would be the appropriate way to protect the taxpayers, 
you are saying that HHS said we are just not going to do it 
because it goes against our policy.
    Mr. Pleffner. Correct. Now I must add that HHS would have 
performed an audit----
    Mr. Barr. If they got more money.
    Mr. Pleffner. If they got more money, yes, sir.
    Mr. Barr. That is big of them. I yield back.
    Mr. Gilman. Thank you. And thank you for your comments, Mr. 
    HHS was prepared to do an audit, all they wanted from ONDCP 
is to get paid for it. So there was no obstruction, is that 
correct, in doing the audit at any time? Is that right?
    Mr. Pleffner. Yes, sir.
    Mr. Gilman. I cannot understand then why an external audit 
was not ordered right after General McCaffrey suggested that. 
There is no explanation apparently that is logical, unless you 
have another explanation for it.
    Mr. Pleffner. I would like to add that to date ONDCP had 
paid HHS roughly $1 million in fees. We believed, and the MOU 
that we have with HHS states, all contract administration 
functions would be performed. One function is contract audits. 
We believed that the fees that we had already paid them should 
have covered the audit.
    Mr. Gilman. Did anyone pursue that with them and say, look, 
we have paid this money, why isn't an audit being conducted?
    Mr. Pleffner. Beyond the communications I had with HHS back 
in March 2000, it was at that point we decided that we were 
going to be moving the contracting function, we decided not to 
pursue the action.
    Mr. Gilman. Not to pursue an audit?
    Mr. Pleffner. Correct, through HHS.
    Mr. Gilman. Why?
    Mr. Pleffner. Again, they were requesting additional 
    Mr. Gilman. But you felt they had been given the 
compensation, is that correct?
    Mr. Pleffner. Correct.
    Mr. Gilman. So did anyone try to resolve that issue, that 
you had paid them and they were not doing an audit. Did anyone 
try to resolve that? Did you ask General McCaffrey to resolve 
that issue?
    Mr. Pleffner. No, sir, I did not.
    Mr. Gilman. Thank you. Thank you, Mr. Chairman.
    Mr. Mica. I thank the gentleman from New York.
    I am pleased to recognize the vice chairman of our 
subcommittee, Mr. Barr, the gentleman from Georgia.
    Mr. Barr. Thank you.
    Let me followup on the very insightful questions of 
Chairman Gilman just to make sure for the record that we 
understand what is going on here. In the exhibit over here, at 
the bottom of page 2, there is a handwritten notation by 
Director McCaffrey which is to the right of the following 
sentence, ``The contracting office's initial response was that 
their policy was to perform an audit only at the end of the 
contract--in this case, at the end of 5 years.'' The notation 
off to the side is ``No.'' Not just no, but ``No!'' with 
exclamation point. That to me indicates, and does it indicate 
the same thing to you, Mr. Pleffner, as the author of this 
document, that Director McCaffrey was saying no, we are not 
going to wait until the end of the end of the contract?
    Mr. Pleffner. That was my feeling, he did not want to wait.
    Mr. Barr. And then further on down, it says ``Since we are 
considering changing contracting offices''--which you all are 
still apparently considering several months later, this is 6 
months ago--``(from HHS to Navy--blue folder is on its way)''--
what is a blue folder on its way?
    Mr. Pleffner. That is the mechanism in which to forward 
documents up through the chain of command.
    Mr. Barr. Did the blue folder ever get there?
    Mr. Pleffner. Yes, sir.
    Mr. Barr. But the process still has not taken place, 
changing this responsibility from HHS to Navy?
    Mr. Pleffner. The Director has approved the change to the 
    Mr. Barr. But it has not actually taken place. I thought 
that was what Dr. Vereen testified.
    Mr. Pleffner. We are currently negotiating costs and terms 
of the arrangement, the MOU.
    Mr. Barr. So the authorization has been given but the 
details have not been worked out.
    Mr. Pleffner. The final details, correct.
    Mr. Barr. OK. Then it says, ``we decided to wait before 
initiating an audit.'' And then down at the bottom of the page 
there is a notation, as testified to by GAO this is General 
McCaffrey's notation, ``Yes. We need an external audit.'' To 
me, Mr. Pleffner, and I would like to see whether you agree 
with this, that to me clearly indicates when you put those two 
notations together that General McCaffrey was saying no, we are 
not going to wait for 5 years to conduct an audit, and we need 
one immediately.
    Mr. Pleffner. Yes, I agree.
    Mr. Barr. But again, as we have learned with this 
administration that you have to ask, what does ``immediate'' 
mean to this administration, do you know? What does immediate 
mean to you as a public servant and somebody who has written a 
very lucid and straightforward memo here?
    Mr. Pleffner. Well, I believe----
    Mr. Levitt. Sir, as program manager, can I just make a 
comment here?
    Mr. Barr. I am sorry. I want Mr. Pleffner to explain to me 
what immediate means to him.
    Mr. Pleffner. Immediately meant to me immediately after 
transfer of the contracts out of HHS.
    Mr. Barr. In other words, you were seeing something that 
concerned you here, and that is very possibly, to put it 
mildly, significant waste of taxpayer money and significant 
activity by Ogilvy that raised very serious questions in your 
mind about billing practices. Is that correct?
    Mr. Pleffner. Correct.
    Mr. Barr. And based on that, as a public servant, you 
recommended to the Director that an immediate audit be 
performed. Is that correct?
    Mr. Pleffner. That is correct.
    Mr. Barr. That immediate audit has not been performed. Is 
that a fact?
    Mr. Pleffner. That is a fact.
    Mr. Barr. OK. That is why we are concerned up here. If I 
could, Ms. Twyon, you testified earlier I think in response to 
a question by the gentlelady from Hawaii that you have a 
contract or you contracted with the Ad Council.
    Ms. Twyon. Correct.
    Mr. Barr. And that is the basis on which your report was 
performed or drafted?
    Ms. Twyon. Yes.
    Mr. Barr. And were you compensated for that service?
    Ms. Twyon. Yes.
    Mr. Barr. How much? Approximately.
    Ms. Twyon. Let me look because I do not know the answer to 
that. Let's see if it is in here. I have $15,000.
    Mr. Barr. OK. And that $15,000 more or less, I am not 
trying to pin you down to a specific amount, was received by 
you from the Ad Council pursuant to moneys that they received 
from ONDCP?
    Ms. Twyon. Yes.
    Mr. Barr. So this report was paid for by the taxpayers of 
this country?
    Ms. Twyon. Yes. I assume so.
    Mr. Barr. OK. Your document is not a classified document, 
is it?
    Ms. Twyon. You are asking me something I do not know how to 
answer. It was a confidential document. I do not know what 
classified means here, so I do not know how to answer you.
    Mr. Barr. OK. I have a copy of it here and I would ask 
unanimous consent to have it included in the record.
    Mr. Mica. Without objection, so ordered. It is now a public 
    Mr. Barr. Do you have a copy of it?
    Ms. Twyon. Yes, I do.
    Mr. Barr. Do you see any markings on there that indicate 
that it is a classified document or that any portion of it is 
    Ms. Twyon. No, it is my copy.
    Mr. Barr. OK. Neither does our copy. On page 19, under your 
summary it states that ``The savings range of $8.5 to $14.8 
million is reasonable to expect. The agency can always add to 
staff to help the ONDCP better perform and at the same time 
increase the agency revenue. The point is not in justifying the 
staffing, but in finding ways to realign the manpower to 
industry standards.'' You do not disavow that finding, do you? 
You stand by it?
    Ms. Twyon. No, not at all. I support that.
    Mr. Barr. OK. Thank you.
    Continuing on with your report of April 13th, Mr. Pleffner, 
in the middle of page 2 you state, ``He stated that last 
summer, Bill Gray, president of Ogilvy New York, held a meeting 
with the most senior account staff and complained about the 
lack of revenue with this contract.'' And a little bit further 
down you seem to indicate that there might be a connection 
between the senior official at Ogilvy, Mr. Gray, complaining 
about the lack of money coming in on the contract and then 
additional time sheets and altered time sheets coming back in. 
Is that correct?
    Mr. Pleffner. That is correct.
    Mr. Barr. Further on down in the next paragraph, the last 
sentence reads: ``The fact that an outside source, particularly 
an executive level employee, corroborates these concerns, 
prompts me to formally document these issues in this 
communication.'' Did you believe at that time, and do you 
believe as you sit here today, that there was credible evidence 
to substantiate your concerns as related to the Director of 
ONDCP? Did you feel that there was a substantial basis and 
credible evidence on which to base your conclusions that there 
were questions here and that there ought to be an immediate 
    Mr. Pleffner. At that time, yes, I did believe.
    Mr. Barr. Do you still believe that there is sufficient 
evidence, credible evidence on which to base that conclusion?
    Mr. Pleffner. Of billing irregularities, the Ogilvy 
practices associated with financial and contract management, 
yes, I still believe it is necessary.
    Mr. Barr. If I could, Mr. Hast, turn to your testimony 
today, a copy of which I believe, Mr. Chairman, has been placed 
in the record. One thing that caught my attention, on the 
bottom of page 2, you say, ``However, we found that an official 
of another ONDCP contractor, Fleishman-Hillard, spent 3 to 4 
hours advising Director McCaffrey on this matter. This time was 
not charged to the ONDCP contract. We were told that this time 
was considered a personal favor to Director McCaffrey.'' Would 
that be covered by ethics and be required to be reported? In 
other words, if an outside contractor provides services and 
does not charge them, that would be considered----
    Mr. Hast. I am not enough of an expert on ethics to know. 
We were reporting the facts. But I do not know what the ethics 
rules would be on that.
    Mr. Barr. Dr. Vereen, are you aware of whether or not that 
has been reported?
    Dr. Vereen. No, I am not.
    Mr. Barr. OK. Are there any lawyers from DEA here with you 
all today?
    Dr. Vereen. Lawyers from ONDCP, yes, I believe there is 
    Mr. Barr. OK. Would you consult with him and ask if that 
has been reported under ethics.
    Dr. Vereen. Not to his knowledge.
    Mr. Barr. OK. Would you suggest to him that the Director 
may want to check into that.
    Dr. Vereen. Noted.
    Mr. Barr. Mr. Hast, I would like to draw your attention for 
a couple of minutes here to what has happened after the April 
13th memo. We have some concerns that are based on credible 
evidence that there are serious discrepancies in billing 
practices and costs. But nothing happens. There seems to be 
some dispute here as to the position of the head of ONDCP with 
regard to whether or not the contract would continue, whether 
or not costs are an issue or not an issue. You deal with some 
of this in your complete testimony on pages 4, 5, and 6.
    The conclusion, at least the partial conclusion that you 
reach on page 6, is that ``Ms. Seifert stated that sometime 
after the May 23, 2000, meeting, Ogilvy received another letter 
from Ms. Crist, which included a form to be filled out in order 
to have Ogilvy explain its labor costs.'' But thereafter, there 
were additional meetings that you document. For example, on 
page 8, you say ``Ms. Seifert told us that on June 5, 2000, she 
had a private meeting with Director McCaffrey for approximately 
20 minutes. She stated that she had met with Director McCaffrey 
alone approximately 4 to 5 times in the past 2 years and that 
on other occasions she had met with Director McCaffrey when 
someone else was present.'' Then continuing on down on your 
page 8, in the middle there is a paragraph that reads, ``Mr. 
Pleffner told us that after Ms. Seifert left the June 5, 2000, 
meeting with General McCaffrey, she met with Mr. Levitt and Ms. 
Bartholomew where, according to them, she announced that 
Director McCaffrey was satisfied with the contract costs and 
that the Ogilvy contract would continue. Mr. Levitt and Ms. 
Bartholomew deny that this conversation occurred. Ms. Seifert 
denies making this statement.''
    What was the basis on which you included these references 
in here, and do you believe that those conversations took 
    Mr. Hast. I believe when we interviewed Mr. Levitt and Ms. 
Bartholomew we were under the impression that when Ms. Seifert 
came up she said that the General was satisfied with the 
billing and no audit would take place, and they said she did 
not say that. I think they were technically correct that she 
did not come out and say no audit would take place. What she 
said was the General was satisfied with the price. And I think 
that is what Mr. Pleffner and Mr. Levitt----
    Mr. Levitt. Congressman Barr, I said nothing whatsoever 
about any audit.
    Mr. Barr. Excuse me just a minute. And that is precisely 
what your testimony says. It does not say that somebody said 
that the audit would not be performed. It simply says, as you 
have just testified orally, that Ms. Seifert announced that 
Director McCaffrey was satisfied with the contract costs and 
that the Ogilvy contract would continue. Was that corroborated 
by information or answers or testimony given to you by Mr. 
    Mr. Hast. Yes.
    Mr. Barr. OK, Mr. Levitt?
    Mr. Levitt. As I said before, Ms. Seifert told me that in 
the meeting that she had with General McCaffrey he expressed 
more comfort with the issues of the labor, not billing, but the 
labor, the Jane Twyon report. She said nothing whatsoever about 
an audit. There was no discussion of an audit.
    Mr. Barr. Mr. Pleffner, you authored the original memo here 
on April 13th. It is my impression that you testified that Mr. 
Levitt said that costs were not an issue based on the results 
of that meeting. Is that correct?
    Mr. Pleffner. That is correct.
    Mr. Barr. This is why, Mr. Chairman, there are so many 
questions about this. We have a memo that is based on very 
clear and convincing evidence, credible evidence that an audit 
should take place. Then we have some meetings that appear 
unusual, at least according to standards of previous practice 
in that there were no witnesses there. And then we have 
essentially an announcement that the contract costs were OK, 
Mr. McCaffrey was satisfied with them, and the contract would 
continue. And here we come 4 months later and still no audit 
has been taken. This stretches the meaning of immediate beyond 
even I think the standards laid down by the head of this 
    Mr. Mica. Will the gentleman yield?
    Mr. Barr. Yes.
    Mr. Mica. One of the things that concerns me is the report 
by Ms. Twyon that highlights the costs for this program. She 
identified, and she is sort of an expert consultant to come in 
and look at that, ONDCP costs is 179 percent above industry 
average. Is that correct?
    Ms. Twyon. I have to find the page that you are----
    Mr. Mica. And then a commission rate of 14 percent versus 
industry rate of 3.5 percent.
    Mr. Cummings. Mr. Chairman, she was trying to answer the 
question. I just think it would be beneficial to all of us----
    Mr. Mica. I am just trying to help identify the page.
    Ms. Twyon. Yes. It is just that I have a lot of numbers in 
the report. So if you will just give me a minute, I will be 
able to answer you more clearly, I can try to answer you more 
    Mr. Mica. I can have a staff person bring this down.
    Ms. Twyon. No, I have it. I have it right here.
    Mr. Mica. Our vice chairman was making some points and I 
just wanted to confirm that this is what you found in your 
examination and were paid for.
    Ms. Twyon. The answer is what you are reading there is what 
I found based upon the information that I was given, and I was 
given specific information from Mr. Pleffner of what I was 
going to look at, and the assumptions which are listed in my 
report that I made.
    Mr. Mica. That is all I wanted to confirm. Thank you. I 
will yield back to the gentleman.
    Mr. Barr. Thank you. Mr. Hast, have you all interviewed Mr. 
Bill Gray, president of Ogilvy New York?
    Mr. Hast. We have not yet.
    Mr. Barr. Do you have plans to?
    Mr. Hast. I believe that we are going to wait till we see 
how the financial audit goes. And if they determine there are 
suspicions of fraud, we will be back to interview people at 
Ogilvy about this.
    Mr. Barr. That might be some period of time it appears.
    Mr. Hast. It could be, yes.
    Mr. Barr. Do you believe there might be a case to be made 
based on just the information contained in Mr. Pleffner's memo 
to interview Mr. Gray before some indefinite point in the 
    Mr. Hast. Yes, I think there could be a case made for us to 
do that.
    Mr. Barr. Would you be in a position to take such steps?
    Mr. Hast. Absolutely.
    Mr. Barr. OK, if you would please. Thank you.
    I yield back.
    Mr. Mica. I thank the gentleman.
    I would like to recognize the gentleman from Maryland, Mr. 
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Mr. Hast, I am just curious. Something just happened that I 
found very interesting. At first, I thought you had indicated 
that you were going to go through a certain procedure to wait 
for certain documents before the interview was conducted with 
Mr. Gray. Then when Mr. Barr suggested that you do it, did you 
say you were going to do it now? I am just trying to figure out 
what happened.
    Mr. Hast. Yes. I believe that we were going to wait before 
we conducted any more interviews until we see how the audit 
came out. But since this question was raised and it can be a 
yes or no answer from Mr. Gray as to whether--the only thing we 
would interview him about is did he have a meeting with his 
executives where he told them that they were not making enough 
money on this contract, and did he give them any instructions. 
I think we could do a very simple interview and pin that down.
    Mr. Cummings. I understand that and that makes a lot of 
sense. Can you tell me why it is that your plan was to wait for 
the audit? Why did you want to do that before possibly 
interviewing Mr. Gray? I am just putting aside what you just 
said and am now going on to the original plan?
    Mr. Hast. The original plan would be if the audit 
completely exonerated Ogilvy, and the audit found absolutely 
nothing irregular with the billing sheets, and all of the 
people that we interviewed whose sheets have been changed had 
answers that absolutely made sense and there was no suspicion 
of fraud, there would not really be a necessity to do it.
    Mr. Cummings. I see.
    Ms. Twyon, first of all, I do not know whether anybody did 
it, but around here we are very concerned about our reputations 
too. They are the things that get us elected. If you have been 
harmed in any way, I apologize for us.
    Ms. Twyon. Thank you.
    Mr. Cummings. Let me just ask you this for the record. Your 
report, did you have a finding of over-billing?
    Ms. Twyon. I did not look at any billing of manpower. That 
was not part of my charge.
    Mr. Cummings. And what were you doing? Since your report is 
so significant, I want to make sure that we have it clear. We 
have got C-Span looking at this and maybe some of your comrades 
are looking at it. I want to make sure you are very clear 
because I think it is important to everybody involved.
    Ms. Twyon. It is non-media compensation. It is the cost of 
manpower and the number of manpower hours is what I was looking 
    Mr. Cummings. So I take it that you would not have found 
any fraudulent activity by anyone because that was not in your 
purview. Is that right?
    Ms. Twyon. That is correct. I did not have any 
documentation of anything like that I was even evaluating.
    Mr. Cummings. I guess this would be directed to Mr. Vereen 
or Mr. Levitt. Ms. Twyon reports that a 15 percent commission 
rate is traditional for the purchase of advertising time and 
space. Is that correct, Ms. Twyon?
    Ms. Twyon. Yes. It is a historic number. Today it is no 
longer true, but years ago that was the number that agencies 
earned, 15 percent.
    Mr. Cummings. In addition, the report states that a 
consumer could even negotiate a commission as low as 7.5 
percent on a large advertising purchase due to increasing 
advertising industry competition. Is that correct?
    Ms. Twyon. Yes, but I am isolating then specific 
assignments. It may not be the total assignment of doing 
creative and media and PR and everything that an agency might 
do. So that there are varied commissions depending upon what 
the assignment is to the agency.
    Mr. Cummings. Mr. Levitt or Mr. Vereen, who negotiates the 
commission? How is that done, do you know? Is it your legal 
    Mr. Levitt. Mr. Pleffner is actually the person to ask.
    Mr. Cummings. Mr. Pleffner, how is that determined?
    Mr. Pleffner. Early on in the second year of the contract, 
I requested that Ogilvy submit a project plan, a proposal for 
media and non-media costs. That was submitted to ONDCP on March 
8th. It was as a result of that media plan and the increased 
costs that we had identified that we retained Jane Twyon to 
assist us in analyzing. We have been in discussions with Ogilvy 
since spring of 2000.
    Mr. Levitt. Congressman Cummings, let me make one comment?
    Mr. Cummings. Sure.
    Mr. Levitt. I think there have been many misunderstandings 
here and also in the media about Ms. Twyon's report, which I 
think is a very, very good report. It is a directional report. 
It helps us focus on what kind of labor structure we want in 
the future--do we want so much behavioral component, do we want 
so much of the media buy.
    There are a couple of things that Ms. Twyon did not realize 
at the time. First of all, the report that she was asked to 
analyze had about $1.5 million more I think of labor and 
overhead costs than was reality, because during the time that 
she analyzed it, Ogilvy came down about $1.5 million in their 
costs. So it is inflated from that point of view. She also had 
to make certain assumptions, which she clearly mentions in her 
report, and she also mentions that there are certain unique 
things to every advertiser that she may not be aware of.
    This campaign is for all Americans. We have 11 languages. 
We have a science-based approach. One ad, one time on ER or a 
program like that can cost a half million bucks for 30 seconds 
of taxpayer's funds. There is a greater accountability on the 
part of the Government. So we require a higher level of 
testing, a higher level of behavioral components, audience 
focus groups, much more so than if you are just selling 
Kleenex. This is a behavior/attitude change campaign. It is not 
a consumer product marketing campaign. And there are a lot of 
differences. That is what the experts told us was going to 
    Mr. Cummings. Does that affect the rates?
    Mr. Levitt. I do not know if it affects the rates. It 
affects the labor structure, and I do know it affects the pro 
bono match. Congress has mandated a pro bono match, and Ms. 
Twyon has accommodated a big chunk of that. But what she 
probably did not know is that when you traffic an ad, when 
you--let me just give you an example. If you win a gold medal 1 
day in the Olympics, you could be on TV in 2 days with a 
commercial. In our program, because it is evaluated by the 
National Institute of Drug Abuse, and because we have all these 
accountability measures, it will take at least 2 months and 
testing and coordinating with a dozen organizations in the 
behavioral science field, in NIH, with the Annenberg School of 
Communications. So it is a lot more labor intensive. And some 
of that she may not have taken into account and that may have 
skewed why it is so much above average.
    I think what is unfortunate here is that advertising 
clients have people like Jane Twyon come in, she has a 
wonderful reputation, she was recommended by the Ad Council, 
and her report is being taken out of context completely. What 
happens when the next Government agency wants to bring in an 
outside consultant?
    Mr. Cummings. All right. I understand.
    Ms. Twyon.
    Ms. Twyon. I have to agree with what Mr. Levitt said. I do 
the absolute best I can, but, as I state in my report, I make 
assumptions. That is required. I am very careful to list my 
assumptions, which I did. It does not mean that they are right; 
they are just the best I could make so that we can move 
forward. So there is information that I do not have because I 
am not working in the field, I am just given a report and I go 
away and do my analysis. I will give you one of the specifics 
that I did not realize when I first did my report. When I 
initially did my report on the manpower issue area, there was a 
line called ``production.'' I made the assumption, since 
everything else was manpower, that was manpower. In the end, I 
found out that was not manpower, that was actual production 
cost. So I can make mistakes because I do not know pieces of 
    My report, let me say again, is the beginning. It is not 
the final product. Think of it like a roadmap. You now take 
this roadmap and you work with the agency, Ogilvy, and ONDCP to 
figure out what is there. It lists everything very clearly so 
now you have a place to go. You know if you are going to move 
manpower from one discipline you have to put it someplace else. 
If you change an assumption, you know why you are going to 
change the assumption. That is the point, it is a very good 
base to move forward from.
    Mr. Cummings. Mr. Levitt, you said something that I am just 
curious about. You said that while Ms. Twyon was doing her 
report the costs, and correct me if I am wrong or misquoting 
you, the costs from Ogilvy came down. Did you say something to 
that effect?
    Mr. Levitt. Yes. The proposed cost for the following year's 
budget was reduced by Ogilvy. We had been talking to Ogilvy a 
couple of months before this, not just Ogilvy but all of the 
contractors in the media campaign. There was huge inflation 
because of the rich ad climate in the last several years. There 
was actually increased costs because of our success--we have 
had a million phone calls into our clearinghouse from parents 
asking for information. All these things jack up the costs for 
printing or other kinds of labor.
    We have looked at all our contractors, including Ogilvy 
because they are the biggest one, and we have had a series of 
meetings. In fact, we are talking now about possibly taking a 
number of other activities and transferring them to other 
organizations or maybe we do not need that level of effort this 
year in the campaign. It is not a matter of this over-billing 
or are we paying for labor that we do not need, rather, do we 
need this level of effort at this stage of this campaign.
    We have asked Ogilvy to do a lot more work for us. We have 
asked them to do ads on ecstasy and meth and heroin. We have 
asked them to do a huge Internet component. The Internet is 
surging. For African-American and Hispanic families, Internet 
use has surged almost 500 percent in the last 4 years. The 
previous campaign, by the Partnership for Drug-Free America, as 
good as it was, did not have a huge Internet component. We are 
doing a variety of other things with this campaign. Reaching 
out to the entertainment industry. Last week, actually somebody 
from Chairman Mica's district, Tinker Cooper, spoke to 20 
writers and producers on ecstasy, about the unfortunate 
problems her son had with it. So Ogilvy is involved with a lot 
of these other activities that may not be apparent. This is not 
just an ad campaign. It is a comprehensive public health 
communication campaign.
    And can I just add one other thing?
    Mr. Cummings. Briefly, because I want to get to Mr. Hast. I 
have a number of questions.
    Mr. Levitt. We are extremely proud of this program. It is 
working, including the financial component of it. We have had 
seven hearings, we have provided this committee with 18,000 
pages of documents, and we have cooperated with the GAO, and we 
will continue to. But we are very comfortable with what we have 
    Mr. Cummings. Now when Ogilvy appeared in Mr. Mica's 
district, did they bill you for that?
    Mr. Levitt. When what?
    Mr. Cummings. You just said a few minutes ago they were in 
charge of something in Mr. Mica's district. You did not?
    Mr. Levitt. No.
    Mr. Cummings. What did you say?
    Mr. Levitt. One of the people who testified before this 
committee I think a year ago, Tinker Cooper, lost her son to 
ecstasy and heroin. She was from Congressman Mica's district. 
We actually brought her and somebody else to this roundtable 
discussion last week and it was very, very successful.
    Mr. Cummings. Thank you.
    Mr. Hast, I just want to make sure the record is clear. You 
had certain findings that you provided us in your opening 
statement, is that right?
    Mr. Hast. Yes.
    Mr. Cummings. You had some findings. I just want to make it 
so clear that we have a complete record, and this may not be a 
complete record even with the questions I am going to ask you. 
The findings that you provided I think are partly why we are 
here today. But I want to just ask you about some other ones.
    Another GAO inquiry recently found that ONDCP ``has met 
most mandates'' regarding the media campaign funds and program 
guidelines. Are you familiar with that?
    Mr. Hast. Yes.
    Mr. Cummings. And was that a part of the same inquiry?
    Mr. Hast. No.
    Mr. Cummings. OK. And were you involved in that?
    Mr. Hast. I was not.
    Mr. Cummings. So did you review that in the process of 
doing what you have been doing in regard to your investigation?
    Mr. Hast. Yes. We discussed that investigation with the 
people that did it. I really did not read it.
    Mr. Cummings. OK. You did not read the investigation?
    Mr. Hast. I did not read the audit that the other group 
did. But I did discuss it with them in our General Government 
Division. The management review, I am sorry.
    Mr. Cummings. Wait a minute. Let's rewind. GAO did an 
audit, a management review?
    Mr. Hast. A management review, I am sorry.
    Mr. Cummings. And they reviewed ONDCP?
    Mr. Hast. Yes.
    Mr. Cummings. And you did not read the document?
    Mr. Hast. I did not.
    Mr. Cummings. Are Mr. Sullivan and Mr. Cooney with you?
    Mr. Hast. Yes.
    Mr. Cummings. Did you all read it?
    Mr. Sullivan. Yes, I read the document. I am the Assistant 
Director in charge of the squad that handled the investigation. 
I read the document and Mr. Cooney read the document. Mr. Hast 
is our boss.
    Mr. Cummings. OK. Did you share the information that you 
found with Mr. Hast?
    Mr. Sullivan. Yes, we briefed Mr. Hast after we digested 
the document. At every step of the investigation we briefed Mr. 
Hast as to how the investigation was progressing.
    Mr. Cummings. So, basically, Mr. Hast is over you and you 
all are sort of doing the day-to-day work?
    Mr. Sullivan. Yes, sir, Mr. Cummings, that is correct.
    Mr. Cummings. I see. Fine. The question that I just asked 
Mr. Hast is, is it correct that report said ONDCP had met most 
of its mandates?
    Mr. Sullivan. Mr. Cummings, that is absolutely correct. 
However, the management review did not focus on any of the 
allegations of fraud. So they just looked at, as mandated by 
the Appropriations Committee, whether this program was 
following the guidelines that Congress set.
    Mr. Cummings. I see. OK. And this investigation you are 
talking about you are saying is zeroing in on fraud. Is that 
    Mr. Sullivan. Our investigation, Mr. Cummings, was we were 
specifically requested to examine the allegations that the 
suspicions of false billing were brought to the attention of 
ONDCP management and the allegation was they did nothing with 
those allegations and the audit was never conducted that was 
initially ordered by General McCaffrey. That is what we were 
asked to look at, whether or not the response of ONDCP was 
appropriate or not.
    Mr. Cummings. So you were asked about whether they 
responded to these allegations and the response being an audit. 
Now that is what I think you just said. Is that right?
    Mr. Sullivan. No, sir.
    Mr. Cummings. OK. Say it again.
    Mr. Sullivan. Just to narrow the focus, we were asked, 
within the very narrow parameter, whether or not ONDCP 
responded appropriately when the allegations of false billing 
was first brought to the attention of senior ONDCP management. 
In other words, what did ONDCP management do as a result of the 
April 13th memorandum authored by Mr. Pleffner; if an audit was 
not conducted, why was it not conducted immediately; and what 
other response was taken in regard to that memo.
    Mr. Cummings. Now did Ms. Twyon's report play a significant 
role in what you all have been doing?
    Mr. Hast. I would say that it did not. It was part of the 
memo that we reviewed, and as much as it played a role in that 
memo, I think it played a role in our investigation.
    Mr. Cummings. Now is it true that, in evaluating how funds 
for paid advertising were managed and dispersed, GAO found that 
although ONDCP used administrative contract support from other 
Federal agencies to assist with paid advertising contracts, it 
remained responsible for ensuring that only valid campaign 
expenses were paid out of from ONDCP, and that ONDCP had 
processes in place to monitor and approve all paid advertising 
expenditures before paying vendors and reporting to Congress?
    Mr. Sullivan. Mr. Cummings, that is our understanding. We 
ascertained that from the interviews we conducted with Mr. 
Pleffner and other officials at ONDCP responsible for managing 
the contract. So that is our understanding, sir.
    Mr. Cummings. I know, Mr. Hast, the question was asked 
whether you had met with Mr. Gray. But is it true that Ogilvy 
and Mather officials were interviewed by GAO?
    Mr. Hast. There were several Ogilvy and Mather officials 
    Mr. Cummings. And during those discussions, I take it those 
were extensive interviews?
    Mr. Hast. Yes.
    Mr. Cummings. Did the question of fraud come up?
    Mr. Sullivan. Yes, sir, it did.
    Mr. Cummings. OK. Is that a part of the 91 page report?
    Mr. Sullivan. No, sir.
    Mr. Cummings. Can you tell us why?
    Mr. Sullivan. The allegations that we were investigating 
had nothing to do with the initial management review that was 
conducted by the General Government Division. We are the 
investigative arm of GAO and we were specifically mandated to 
conduct an investigation to determine the response to the 
allegations that were originally raised in the April 13th 
    Mr. Cummings. Now ONDCP, I guess this would be Mr. Levitt 
or probably Mr. Pleffner I would guess, is it customary in your 
review of invoices, before recommending payment or nonpayment, 
to express any concern to the contractor about the costs? I 
mean, if you saw something that looked a little irregular, 
would it be your custom to say wait a minute, red flag, there 
is something wrong here?
    Mr. Pleffner. It is customary to discuss with the 
contractor concerns, as I did with Ogilvy.
    Mr. Cummings. And as I looked at your memo, the memo that 
is on the board there, I take it that there came a point in 
time when you brought it to the attention of people in your 
agency. And then at what point did you get additional 
information? In other words, you had the information that had 
come to you through the process of doing your job, and you 
inquired I think of the Ogilvy people exactly why do I see 
these problems. At what point did other outside sources come--
did they come before, did they come later--to tell you that 
there might be something wrong here? In other words, that the 
information that you may have been given by Ogilvy was not 
necessarily accurate.
    Mr. Pleffner. The issues relating to irregularities with 
Ogilvy's invoices were first raised in September 1999. There 
were probably a half dozen labor invoices where I identified 
these problems, communicated the problems to Ogilvy and the 
contracting officer. It was March 2000 that I had a former 
Ogilvy employee come to me and make the allegations that 
prompted me to write this memo to the Director.
    Mr. Cummings. And you knew that person?
    Mr. Pleffner. Yes, I did.
    Mr. Cummings. And you felt comfortable that person's word 
was true?
    Mr. Pleffner. I had no reason to not believe him. He did 
not provide any evidence. This was a phone conversation we had. 
But in my position, you never take this kind of allegation 
lightly. A number of the allegations made were consistent with 
concerns that I had with regard to the labor billing.
    Mr. Cummings. And when you talked to Ogilvy, your first 
discussions with them were when?
    Mr. Pleffner. As far as the billing issues?
    Mr. Cummings. What you just talked about, yes.
    Mr. Pleffner. The first discussions on billing issues was 
late September 1999, early October 1999.
    Mr. Cummings. And what were you told back then by Ogilvy?
    Mr. Pleffner. By Ogilvy, they stood by the invoices they 
    Mr. Cummings. And what was your reaction to that at that 
    Mr. Pleffner. At that time, my reaction was to do my job, 
which was to recommend withhold of any costs I believed were 
inappropriate or unsupported, which I did.
    Mr. Cummings. Mr. Levitt.
    Mr. Levitt. Can I put into context the kind of withholds 
that we would have?
    Mr. Cummings. Yes.
    Mr. Levitt. I think there is a nefarious tone in some of 
the questions and in some of the news accounts about this. 
Ogilvy had never worked for the Federal Government before. 
There are a maze of issues dealing with the Federal Government; 
high levels of accountability for media, proof that it ran on 
your TV station, small business, EEO, women-owned business, a 
whole variety of things--and I could provide that for the 
record if you want--that are not difficult to obtain but that 
are strange in the ad culture, in the ad industry. In the ad 
industry, when you produce an ad, or in the movie business when 
you shoot a program, you have got a platter of food in the 
background, the cameraman and everybody else eats. You cannot 
pay for food in the government. You cannot fly first-class in 
the government. There are also issues of should the bonus go in 
the overhead or direct salary account. A whole range of issues.
    There was not just one issue. Most of them had to do with 
labor-related issues. But, again, this could be an innocent 
thing. And Ogilvy also has had three different financial people 
involved in the billing over this period of time. They now 
realize they have to get somebody who really knows about the 
Federal acquisition process. But at least the billing part 
could be completely just part of the routine financial 
oversight that a government agency does with its contractors. 
As I said before, we have withheld from all of our contractors 
and subs and even government agencies that we have cooperative 
agreements with.
    Dr. Vereen. And we would be happy to provide that 
documentation as well.
    Mr. Cummings. I would like to have that, Mr. Chairman.
    I just have two more questions. When you got the Twyon 
report, and I do not know who is best to answer this, did you 
have discussions with Ogilvy with regard to that report?
    Mr. Levitt. Yes. We have had several discussions with 
Ogilvy. In fact, Ms. Twyon was in a meeting with Ogilvy 
discussing her report. They came down, they brought their 
president, Bill Gray, and other financial people, as well as 
Ms. Seifert, the project officer, to discuss it and respond. 
And we have had two meetings like that. We have also had two 
very lengthy analyses of Ogilvy's labor structure and 
proposals. They have come down a little bit, but also proposals 
of why these things cost so much in different categories and 
some options for us to reduce the costs even further.
    Mr. Cummings. Did they provide you any explanation on the 
difference in their costs and those recommended by Ms. Twyon?
    Mr. Levitt. Yes, to some degree. Part of it was what I just 
mentioned, that there were some things that she did not take 
into account. And there were legitimate differences of opinion 
also between Ogilvy and the Federal contracting process.
    Mr. Cummings. My last question to Mr. Hast. Is there any 
other evidence, and I understand from Mr. Sullivan, and I 
appreciate your testimony today by the way, it sounds like the 
Twyon report was not a very significant thing in what you all 
did; is that right? I think I asked that.
    Mr. Hast. Yes. Only in how Mr. Pleffner analyzed it in his 
document. Other than that, we did not do a lot with the Twyon 
    Mr. Cummings. OK. And do you agree with her, from what you 
all have seen, that report does not really deal with over-
billing, or does it? Does it allege over-billing?
    Mr. Hast. I am really not an advertising industry expert 
and that is really why we did not deal much with that report, 
because I think you would have to be in the field to really 
understand it.
    Mr. Cummings. And so, other than the Pleffner memo, I think 
that is about it, is there any other reason for you all to 
believe that Ogilvy committed any kind of fraudulent activity 
here? I mean from stuff that you have.
    Mr. Hast. I would not want to say that we believe it. I 
think we have interviewed other people that have substantiated 
the allegations in that memo to the point that I think it 
requires further investigation. But at this point, we have 
absolutely no proof of fraud by anyone.
    Mr. Cummings. Thank you. Thank you very much.
    Mr. Barr [presiding]. Mr. Sullivan, I think you testified 
earlier in response to questions from the gentleman from 
Maryland that one of the things that you all were tasked with 
looking at was whether or not ONDCP responded appropriately to 
the allegations of false billing, as brought to the Director's 
attention in early 2000. At this point, do you believe that 
ONDCP did or did not respond appropriately?
    Mr. Sullivan. We have not formed any final conclusions as 
to whether they responded appropriately or not. We were just 
conducting the investigation and we are presenting the facts 
for the subcommittee to draw your own conclusions.
    Mr. Barr. You have not formed any conclusion one way or the 
    Mr. Sullivan. No, I have not formalized a final conclusion 
myself, Mr. Barr.
    Mr. Barr. Do you believe it is appropriate to order an 
immediate audit in the face of such allegations and for another 
6 months to go by and no audit is even close to being 
performed? Do you believe that is an appropriate response?
    Mr. Hast. Mr. Barr, if I could answer that. I believe if 
someone thought there were allegations of fraud, they should 
move very quickly. I think in a number of our interviews, 
especially with General McCaffrey, the view of this was billing 
irregularities. And although fraud was mentioned in the memo, I 
do not believe from our interviews that was where his focus 
    This was also sent to his General Counsel. I think that is 
the role of attorneys. The attorneys that reviewed this I think 
should have taken the fraud more seriously and probably 
recommended moving somewhat more quickly.
    Mr. Barr. According to your written testimony, the ONDCP 
General Counsel, Mr. Jurith, told you that they were aware of 
the billing irregularities. So apparently ONDCP knew that there 
were billing irregularities. Correct?
    Mr. Hast. Yes. And he initialled the memo with the 
allegation that there was possible fraud.
    Dr. Vereen. Mr. Barr, may I make a comment?
    Mr. Barr. Sure.
    Dr. Vereen. Those billing irregularities led us, well 
before this memo, to explore options to change the contract and 
initiate an audit. This predates the memo. All of that was in 
place predating the memo. And I draw your attention to the end 
of the second page, you mentioned the word ``immediate,'' the 
immediate refers to upon the moment that the contract is 
transferred. We have attempted, as Mr. Pleffner related 
earlier, attempted to negotiate an early audit without 
incurring extra costs. That did not happen. But we already had 
a plan in place to change the contract, to initiate an audit. 
Unfortunately, that has taken a while, and that is about to 
    Mr. Barr. That is real unfortunate. That is the whole 
question here. This has been going on for over a year. I know 
immediate might mean one thing to somebody and maybe 2 or 3 
more days to somebody else. But this has been going on for over 
a year. This is taxpayer money we are talking about.
    Dr. Vereen. This is true. But we have talked to the 
Department of the Interior, we have talked to the Department of 
the Navy, and others to see who else could handle such a 
complex contract.
    Mr. Barr. How about GAO?
    Dr. Vereen. I am not aware that we checked with GAO.
    Mr. Barr. This is what they do for a living.
    Dr. Vereen. There is a new GAO review that has started last 
month that we are a part of, that we are cooperating with.
    Mr. Barr. That is exciting, too. Maybe we will see some 
results immediately there too?
    Dr. Vereen. I am sure as fast they can get a report to you. 
Most audits take approximately 6 months.
    Mr. Barr. Once they get started.
    Dr. Vereen. Yes.
    Mr. Barr. This one isn't even started.
    Dr. Vereen. But you have from our records and our 
accounting to you a full and open discussion. You know exactly 
what we know in terms of billing irregularities.
    Mr. Barr. Well, let's see. Mr. Hast, according to your 
testimony, you all were told in March of this year, March 2000 
that Mr. Dan Merrick had contacted Mr. Pleffner and Jill 
Bartholomew, ONDCP's Deputy Director for National Media 
Campaign, and Mr. Merrick told them in March of this year--that 
is how many months ago, 7--that Ogilvy was falsifying billing 
records. We are not here to have a legal debate over what 
constitutes fraud in terms of proving each and every element 
thereof beyond a reasonable doubt. I am using your words here. 
You all were told in March 2000 and ONDCP knew 7 months ago, at 
the latest, that Mr. Merrick told them that Ogilvy was 
falsifying billing records. Correct?
    Mr. Hast. Yes, that is correct.
    Mr. Barr. And here we are 7 months later and ONDCP has done 
absolutely nothing. Is that an appropriate response?
    Mr. Hast. No, I do not think so.
    Mr. Barr. And I appreciate that. I think that is a correct 
answer. ONDCP has not responded appropriately despite your best 
intentions. That is the problem. There is evidence of false 
billing here involving taxpayer moneys, and this has been going 
on for a period of time and you all have known about it for a 
period of time, and here we are still worrying about some blue 
folder floating around within Department of the Navy and you 
all have not even ordered an audit. That is why we are 
concerned about this.
    Dr. Vereen. Even as that is occurring, sir, the shields are 
up. The media campaign is protected and well-run with the 
exacting scrutiny that we have illustrated to you. So funds are 
going nowhere without the proper documentation, sir.
    Mr. Barr. The only one that seems to be conducting any 
exacting scrutiny was Mr. Pleffner. He had it pegged right. And 
Mr. Hast seems to have it pegged pretty right here.
    Dr. Vereen. And thanks to his efforts, we have been aware 
and he is continuing to do his job properly.
    Mr. Barr. Who is?
    Dr. Vereen. Mr. Pleffner.
    Mr. Barr. That is good. But why have you all not conducted 
an audit?
    [No response.]
    Mr. Barr. The silence is deafening, Dr. Vereen.
    Dr. Vereen. We have explained that we had moved to change 
the contract and changing the contract at the end of the 
contract would come----
    Mr. Barr. HHS said that they would conduct an audit.
    Dr. Vereen. No, they said they would not conduct an audit.
    Mr. Barr. Now you are changing. They said that they would 
conduct an audit if they were paid for it, if they were paid 
for the time necessary to conduct an audit.
    Dr. Vereen. And we had indicated that we had already paid 
for it. That was our understanding. That was not resolved, so 
we were in the process of changing the contract completely so 
that would not be an issue any longer.
    Mr. Barr. How much money are we talking about for that 
audit, $300,000, $325,000?
    Mr. Pleffner. I would estimate in the neighborhood of 
$100,000, $125,000.
    Mr. Barr. We are talking about a billion dollar contract 
here with evidence of billing irregularities, false billing 
    Dr. Vereen. It would still come out, sir. Right now, those 
payments are being withheld until proper documentation is 
provided. And it will come out in an audit if that is the case. 
At this point, the campaign is functioning very well, it is 
continuing to go forward, and we will continue to withhold 
payments until those billings get cleared up. And an audit will 
certainly identify those. But in the meantime, the entire 
campaign is being properly managed with a level of scrutiny 
that you can see is certainly satisfactory. The campaign is 
safe and proceeding forward. The audit will happen when the 
contract changes.
    Mr. Levitt. Congressman, can I make a statement?
    Mr. Barr. Sure.
    Mr. Levitt. I managed this contract or have managed the 
program, or helped General McCaffrey to manage the program. My 
goal is giving the best value to the Government, including the 
financial aspects of it.
    Mr. Barr. When was the very first time that you were made 
aware that there was possible fraud, there were billing 
irregularities, false billing? When were you first made aware 
of that?
    Mr. Levitt. The first time the word fraud came into my 
    Mr. Barr. Now do not play word games. I am not trying to 
pin you down to the word fraud. OK? We have been through all 
that before.
    Mr. Levitt. Shortly after Mr. Pleffner was----
    Mr. Barr. Not until April?
    Mr. Levitt. End of March, April, I do not know when.
    Mr. Barr. You know Mr. Merrick, don't you?
    Mr. Levitt. Yes, I do. I think he is an outstanding 
advertising person.
    Mr. Barr. He has done prior work with ONDCP, correct?
    Mr. Levitt. He was our project officer at Bates and also 
co-project officer at Ogilvy. Outstanding integrity and 
outstanding performance.
    Mr. Barr. So you were aware that this evidence existed very 
early in the year 2000, at the latest. I mean, you tell me.
    Mr. Levitt. At the end of March or April.
    Mr. Barr. Not in the fall of 1999?
    Mr. Levitt. No. After he was separated.
    Mr. Barr. When was the first time, Mr. Pleffner, that you 
had any discussion at all with Mr. Levitt bringing to his 
attention what you believed was evidence of false billing and 
irregularities and/or fraud?
    Mr. Pleffner. The irregularities first were identified in 
early October, late September or early October 1999. Fraud was 
never mentioned until Mr. Merrick came to me in mid to late 
March in the year 2000.
    Mr. Barr. Did you have discussions with Mr. Levitt sometime 
about these matters and the evidence that was coming to your 
attention in the fall of 1999?
    Mr. Pleffner. Immediately upon me recognizing the problems, 
I did share it with Mr. Levitt and our Office of Legal Counsel, 
    Mr. Barr. Thank you.
    Mr. Levitt. Congressman, we, and this may have figured into 
the decision not to audit, we were getting exceptional 
performance by Ogilvy. They had saved us over $5 million just 
this year in their up front media buy over the industry 
average. They have led people like Tara Lipinski and Women's 
World Cup Soccer to us. They have gotten a contribution from 
Turner Broadcasting for almost $900,000.
    Mr. Barr. Nobody here is arguing their competence. They may 
be the greatest advertisers in the world.
    Mr. Levitt. But I am talking about the value to this 
program and to----
    Mr. Barr. We are talking about fraud. We are talking 
    Mr. Levitt. You see, it did not compute.
    Mr. Barr. What did not compute? Just because they are doing 
a good job, the evidence of false billing does not compute?
    Mr. Levitt. I think allegations by a person who was 
separated and with no evidence should be weighed against the 
exceptional performance of this thoroughbred agency.
    Mr. Barr. Mr. Pleffner looked at the time sheets. They do 
not lie.
    Mr. Levitt. That is a different issue, sir.
    Mr. Barr. No. I am talking about the false billing.
    Mr. Levitt. I am talking about an allegation of fraud 
versus billing issues, which we have with all of our 
contractors, and probably every Federal agency has with their 
    Mr. Barr. Have false billing?
    Mr. Levitt. Questionable bills.
    Mr. Barr. No. I am talking about false billing that was 
brought to your attention in the fall of 1999.
    Mr. Levitt. Whether you use the word false, over-billed, it 
is a question of semantics. I am talking about fraud. We had no 
evidence of fraud, no convincing evidence of any kind, 
otherwise we would have gone up with that in a second.
    Mr. Barr. You had evidence that there was false billing. 
You all may think there was no false billing. This is the 
language in GAO's report. And Mr. Pleffner has testified to 
that and he has testified that he had discussions with you 
about it.
    Mr. Levitt. Again, as I mentioned, I do not know if you 
were here earlier this morning, but if I put in a taxi voucher 
and I add it up the wrong way, am I defrauding the Government? 
There are mistakes, there are differences in interpretation 
what could be allowed and what could not be. Some of these were 
legitimate differences or misunderstandings or sloppiness.
    Mr. Barr. You are talking like a defense attorney for this 
    Mr. Levitt. I do not mean to be.
    Mr. Barr. Do you all have any further questions?
    Mr. Pleffner. If I could clarify one point. Until the phone 
call from Mr. Merrick, I had never mentioned to anyone any 
concerns about fraud or false billing. What I brought to my 
boss' attention, Mr. Levitt's attention, and Office of Legal 
Counsel was billing irregularities. A number of costs, I will 
admit, a number of the irregularities were unallowable costs in 
my opinion. But the word fraud was never brought up until the 
conversation in mid to late March with Mr. Merrick.
    Dr. Vereen. And that was properly reported up the chain of 
command so that we were all aware. And we proceeded on with our 
management of this to protect the media campaign so that it 
could go further.
    Mr. Levitt. And Congressman, since HHS disagreed with Mr. 
Pleffner on at least some of these bills, it shows that there 
can be different interpretations sometimes of Federal 
Acquisition regulations and contracting rules. It does not mean 
one is defrauding the other. It means there could be a 
legitimate difference of opinion.
    Mr. Barr. Isn't that why an audit is conducted?
    Dr. Vereen. That is why, I will repeat, we were taking 
steps with other Federal agencies to change the contract.
    Mr. Barr. I know, and you have been taking steps for the 
last 7 months. That is very reassuring.
    Dr. Vereen. Well, they were telling us to wait till the end 
of the fiscal year. We did not want to wait till the end of the 
fiscal year.
    Mr. Barr. Well you have.
    Dr. Vereen. We are just as frustrated.
    Mr. Barr. The gentleman from Maryland.
    Mr. Cummings. Thank you very much, Mr. Chairman. I have 
just some things I need to clear up. First of all, let me say I 
was very intrigued with your line of questioning, and I want 
everybody in this room to understand that we are dealing with 
some very, very serious allegations. The chairman is a former 
U.S. Attorney, I am a defense attorney of 20 years, and I can 
tell you we are dealing with some serious stuff. That is why I 
am going to ask the following questions.
    Mr. Pleffner, let me ask you, I am glad you cleared up 
exactly what information was imparted when. I have read your 
memo and I applaud you for bringing this to the attention of 
the appropriate authorities. Let us go back to when you first 
brought it up. Your immediate supervisor, would that have been 
Mr. Levitt back there in late September, October?
    Mr. Pleffner. That is correct.
    Mr. Cummings. All right. First of all, what is considered 
an irregularity? When you say irregularity, what do you mean?
    Mr. Pleffner. Irregularity, question cost, unsupported 
    Mr. Cummings. OK. Do you oversee more than this contract, 
or is this the only one that you have been handling in the last 
2 years?
    Mr. Pleffner. I oversee roughly a half dozen media campaign 
contracts and MOUs.
    Mr. Cummings. OK. I take it is a part of your job to make 
sure that Government money is being spent consistently with the 
contract, and I take it your job is to raise the red flag if 
you see something that seems a bit out of kilter. Is that 
    Mr. Pleffner. Yes, it is.
    Mr. Cummings. Is it unusual for irregularities to come up 
in other contracts?
    Mr. Pleffner. No, it is not unusual.
    Mr. Cummings. And did you bring that to the attention of 
Mr. Levitt, those other ones?
    Mr. Pleffner. Yes, I did.
    Mr. Cummings. And what would his normal response be, and 
that may be a question stated poorly because there may not be a 
normal response, but you bring it to his attention for what 
    Mr. Pleffner. To keep him informed on a day-to-day basis of 
the financial activities.
    Mr. Cummings. And do you have authority to take certain 
actions? In other words, do you go to him and say, look, Mr. 
Levitt, I see these irregularities and I am telling you I have 
got a problem with it, and what I am going to do is I am not 
going to pay this. Is that the way it usually goes?
    Mr. Pleffner. As a matter of fact, as project officer my 
determination or my recommendation to HHS is made 
independently. Mr. Levitt does not influence my recommendation 
or decision.
    Mr. Cummings. OK. So you are just keeping him informed, is 
that right?
    Mr. Pleffner. Correct.
    Mr. Cummings. OK. Now when you presented this information 
to Mr. Levitt, were you expecting him to do anything in 
particular? First of all, I am not trying to lead you down some 
rosy path with a bomb at the end. My concern is we have got 
several issues going here. We have got a question of whether 
Ogilvy committed some kind of fraud. This is the question I am 
concerned about here, a question about whether your agency did 
what it was supposed to do and whether what they did was 
reasonable. We have heard Mr. Hast say that in his conclusion 
he felt that--correct me if I am wrong, Mr. Hast--that the 
response was inappropriate, it could have been done a better 
way. Is that the response to all of this?
    Mr. Hast. Yes. Basically, if they believed there was fraud, 
the FBI or the HHS IG would have looked into that for free.
    Mr. Cummings. OK. Now I want to come back just to make sure 
we are clear. So, when you presented this to Mr. Levitt, did 
you have an expectation that he would then do something with 
the information? Now I am going all the way back now to 
September and October. Or was that just informing him, is that 
    Mr. Pleffner. That was just informing him.
    Mr. Cummings. OK. Now let's move on up. Between the April 
13 memo and the September/October communication about 
irregularities, were there other communications where you found 
irregularities with regard to this contract and brought them to 
Mr. Levitt's attention?
    Mr. Pleffner. Let me first clarify that the irregularities 
started in October 1999. The April memo is 2000.
    Mr. Cummings. Right.
    Mr. Pleffner. Yes, there are continuing irregularities with 
the Ogilvy invoices.
    Mr. Cummings. And I take it that during this period between 
September 1999 and April 2000 you are constantly having 
conversations with Ogilvy. Is that correct?
    Mr. Pleffner. Yes.
    Mr. Cummings. Saying why are you doing this? What is the 
problem here? Could you get any satisfaction when you got your 
answers? Were you getting any satisfaction?
    Mr. Pleffner. No, I did not. I must also add though that 
the HHS contracting officer was also in these discussions and 
we did not receive satisfaction from them either.
    Mr. Cummings. Now Mr. Levitt said that HHS disagreed with 
some of your findings. Is that correct?
    Mr. Pleffner. That is correct.
    Mr. Cummings. Would you say 10 percent, 20 percent of the 
findings they disagreed with?
    Mr. Pleffner. I would say as a rule the vast majority, 
probably 85-90 percent they disagreed with.
    Mr. Cummings. HHS disagreed with 85-90 percent of your----
    Mr. Pleffner. I stand corrected. That was on labor, the 
withholds that I recommended on labor, the HHS contracting 
officer disagreed with my recommendations, the rationale for my 
    Mr. Cummings. You are kind of a strict guy, huh?
    Mr. Pleffner. To all of them, not just Ogilvy.
    Mr. Cummings. Now coming on up to April and late March. I 
think you said the first time you started thinking fraud and 
communicating fraud to Mr. Levitt was in late March or early 
April. Is that correct?
    Mr. Pleffner. It was late March.
    Mr. Cummings. OK. What did you expect him to do when you 
started mentioning fraud? I am just curious. It is one thing 
for GAO to come to their conclusions, they are not in the 
agency. You are and you were the one to bring this to their 
    Mr. Pleffner. When I brought it to his attention I guess I 
expected him, I know I expected him to support me in elevating 
my concerns to senior management.
    Mr. Cummings. And you are saying that he did not do that?
    Mr. Pleffner. He certainly did do that.
    Mr. Cummings. OK. So at that point, he was doing what you 
expected him to do. And I noted that there was a letter of 3 
weeks after this. What was the first official response that you 
saw to your memo of April 13?
    Mr. Pleffner. Saw from?
    Mr. Cummings. From anybody. In other words, you wrote the 
memo and you expected a response from somebody. Is that right? 
You expected them to take some type of action. I am saying be 
it written or be it verbal, what was the first official 
response that you had to that memo?
    Mr. Pleffner. I received a copy of my memo back from the 
Director with his comments roughly 2, 2\1/2\ weeks after I sent 
it up to him.
    Mr. Cummings. And what were your feelings about those 
comments? That is the document that is on the board there, 
    Mr. Pleffner. Correct.
    Mr. Cummings. What was your reaction to his comments? And 
did you discuss them with him, by the way?
    Mr. Pleffner. There was a meeting as I recall in late April 
where there was a brief discussion. He did support the need for 
an external audit. And he did say, as noted on the sidebar 
there, that we would not wait 5 years for the audit.
    Mr. Cummings. Now did he say when the audit would take 
place when you two met?
    Mr. Pleffner. I do not believe the timing was addressed in 
that meeting.
    Mr. Cummings. Did you make any recommendations as to when 
it should start?
    Mr. Pleffner. I do not believe I had the opportunity to 
address when it should start.
    Dr. Vereen. Congressman, there was a process to change the 
contract and do an audit when the contract changed that was 
already in place. The last line of the memo refers to an 
immediate audit upon termination of the contract.
    Mr. Cummings. Does that sound reasonable, what he just 
    Mr. Pleffner. Yes, it does.
    Mr. Cummings. That is your memo, right?
    Mr. Pleffner. Yes, it is.
    Mr. Levitt. Can I just add something. You cannot terminate 
a contract automatically. You have to have HHS' permission, you 
have to have another agency to go to. So it takes some time to 
do that. We had pretty much decided on the Navy, but then there 
were a couple of other agencies that came up that we had to 
    Mr. Cummings. Mr. Pleffner, I do not have much more but I 
have got to ask you this. We have heard a lot of testimony here 
today. I have two questions. One, Mr. Vereen said a moment ago 
that he feels that, as far as the people's money is concerned, 
whatever you all have done so far to kind of freeze--you are 
stopping payment on certain things and you are questioning 
certain things--all the things that he talked about that you 
have done while waiting to get this audit, do you feel 
comfortable that your agency is doing what it needs to do so 
that if there were some type of fraud going on at least it 
would be frozen? Are you following my question? Is there 
anything else that you all could be doing now?
    Mr. Pleffner. I think we have done what we are supposed to 
do. We are in the process of moving the contracts out of HHS 
over to the Navy, at which time an audit will be immediately 
    Mr. Cummings. So do you feel comfortable with what has 
happened since the April 13 memo with regard to you all making 
sure that you carry out the full extent of what your job is?
    Mr. Pleffner. I am comfortable beyond a shadow of a doubt 
that I have done what is necessary to protect ONDCP's, the 
Government's, the taxpayer's interest. We have withheld since 
April 13 an additional $8 million. On that date, we had only 
withheld $5 million. We are now up to $13.4 million. We have 
done what we could, if there is any impropriety, we have done 
what we could to keep it in check.
    Mr. Cummings. And I applaud you for that. And I do not want 
you to misunderstand and think this is any kind of negative 
toward you. I applaud what you have done. I guess the question 
is, do you feel like you have gotten the cooperation from your 
superiors in accomplishing what you just stated?
    Mr. Pleffner. Absolutely. They have supported every 
withhold I have recommended.
    Mr. Cummings. I do not have anything else.
    Mr. Barr. As an example of the basis, Mr. Pleffner, on 
which you have recommended the withholding of funds--and this 
is why I am a little bit surprised, maybe I should not be a 
little bit surprised, that HHS disagrees with you--I refer to 
your memo to Michelle Trotter of March 2, 2000. You say that 
your recommendation to withhold close to $500,000 at that 
particular time was based on: ``(1) various employees billed 
without providing time sheets to support time worked against 
ONDCP; (2) various salaries charged without documentation to 
support the costs incurred; (3) various salaries exceed the 
salaries proposed by the contractor.''
    The basis on which you were recommending that funds be 
withheld were not some theoretical, never heard of, ingenious, 
imaginative argument. These are just pretty much standard 
reasons for withholding funds that anybody should agree with. 
    Mr. Pleffner. Correct.
    Mr. Barr. During these past 7 months, Ogilvy has continued 
to bill ONDCP and has continued to receive funds. Is that 
    Mr. Pleffner. That is correct.
    Mr. Barr. I would like to thank all of the witnesses for 
being here today.
    Mr. Cummings. Mr. Chairman, I have two more questions.
    Mr. Barr. The gentleman is recognized for 1 minute.
    Mr. Cummings. Thank you very much, Mr. Chairman. I may need 
just a little bit longer than that.
    Mr. Barr. The gentleman is recognized for 2 minutes.
    Mr. Cummings. Thank you very much, Mr. Chairman. I really 
appreciate this 2 minutes.
    Mr. Barr. The record will reflect that the gentleman just a 
moment ago said that he had no more questions.
    Mr. Cummings. Well, you just asked questions, Mr. Chairman, 
that caused me to have more questions.
    Mr. Barr. The gentleman is recognized for 2 minutes.
    Mr. Cummings. Mr. Hast, there is something that has been 
bothering me and it is part of your findings. When you talked 
about General McCaffrey and whether he remembered the audit or 
not, because I am always concerned about people's reputations, 
I take it he did not remember at first this memo and notation, 
is that correct, and you then presented it to him. Did he 
readily say, oh, yes, this is my writing? I mean, there was not 
    Mr. Hast. No, there was not.
    Mr. Cummings. Did you feel comfortable that he had 
forgotten, with your skill and your judgment?
    Mr. Hast. Yes.
    Mr. Cummings. OK. Thank you.
    Mr. Levitt. Congressman, I know blue folders and I know 
General McCaffrey, he probably reads 100 documents a night. He 
is a workaholic. He probably only sleeps a few hours. It is 
very common for him to forget something like that. And that is 
why we have the notations.
    Mr. Cummings. Thank you very much, Mr. Chairman. I really 
appreciate that.
    Mr. Barr. I would like to thank the witnesses for appearing 
    The record will remain open for 2 weeks for any additional 
material you all wish to submit for the record.
    There being no further business before this subcommittee, 
this subcommittee is hereby adjourned.
    [Whereupon, at 1:54 p.m., the subcommittee was adjourned, 
to reconvene at the call of the Chair.]
    [The prepared statement of Hon. Elijah E. Cummings and 
additional information submitted for the hearint record