[Senate Hearing 107-]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 107- 459
 
                 NOMINATIONS OF: J. JOSEPH GRANDMAISON
                 KENNETH M. DONOHUE, SR., DIANE L. TOMB
                         AND VICKERS B. MEADOWS
=======================================================================

                                HEARINGS

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                                   ON

                            NOMINATIONS OF:

        J. JOSEPH GRANDMAISON, OF NEW HAMPSHIRE, TO BE A MEMBER
          OF THE BOARD OF DIRECTORS OF THE EXPORT-IMPORT BANK
                          OF THE UNITED STATES

                               __________

 KENNETH M. DONOHUE, SR., OF VIRGINIA, TO BE INSPECTOR GENERAL OF THE 
            U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

                               __________

         DIANE L. TOMB, OF VIRGINIA, TO BE ASSISTANT SECRETARY
           OF PUBLIC AFFAIRS, U.S. DEPARTMENT OF HOUSING AND
                           URBAN DEVELOPMENT

                               __________

       VICKERS B. MEADOWS, OF VIRGINIA, TO BE ASSISTANT SECRETARY
           FOR ADMINISTRATION, U.S. DEPARTMENT OF HOUSING AND
                           URBAN DEVELOPMENT

                               __________

                        DECEMBER 6 AND 18, 2001

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs



                     U.S. GOVERNMENT PRINTING OFFICE
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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
                  PAUL S. SARBANES, Maryland, Chairman

CHRISTOPHER J. DODD, Connecticut     PHIL GRAMM, Texas
TIM JOHNSON, South Dakota            RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island              ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York         WAYNE ALLARD, Colorado
EVAN BAYH, Indiana                   MICHAEL B. ENZI, Wyoming
ZELL MILLER, Georgia                 CHUCK HAGEL, Nebraska
THOMAS R. CARPER, Delaware           RICK SANTORUM, Pennsylvania
DEBBIE STABENOW, Michigan            JIM BUNNING, Kentucky
JON S. CORZINE, New Jersey           MIKE CRAPO, Idaho
DANIEL K. AKAKA, Hawaii              JOHN ENSIGN, Nevada

           Steven B. Harris, Staff Director and Chief Counsel
             Wayne A. Abernathy, Republican Staff Director
                  Martin J. Gruenberg, Senior Counsel
                  Jonathan Miller, Professional Staff
      Brian J. Gross, Republican Deputy Staff Director and Counsel
         Melody H. Fennel, Republican Professional Staff Member
   Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator
                       George E. Whittle, Editor

                                  (ii)









                            C O N T E N T S

                              ----------                              

                       THURSDAY, DECEMBER 6, 2001

                                                                   Page

Opening statement of Chairman Sarbanes...........................     1

Opening statements, comments, or prepared statements of:
    Senator Reed.................................................     2
    Senator Miller...............................................     2
    Senator Allard...............................................     2
        Prepared statement.......................................    21

                                NOMINEES

J. Joseph Grandmaison, of New Hampshire, to be a Member of the 
  Board of Directors of the Export-Import Bank of the United 
  States.........................................................     3
    Biographical sketch of nominee...............................    22
Kenneth M. Donohue, Sr., of Virginia, to be Inspector General of 
  the U.S. Department of Housing and Urban Development...........     9
    Biographical sketch of nominee...............................    32

              Additional Material Supplied for the Record

Miscellaneous information........................................    38

                              ----------                              

                       TUESDAY, DECEMBER 18, 2001

Opening statement of Chairman Sarbanes...........................    55

Opening statements, comments, or prepared statements of:
    Senator Gramm................................................    57
    Senator Reed.................................................    57

                                WITNESS

Rob Portman, a U.S. Representative in Congress from the State of 
  Ohio...........................................................    55

                                NOMINEES

Diane L. Tomb, of Virginia, to be Assistant Secretary of Public 
  Affairs, U.S. Department of Housing and Urban Development......    57
    Prepared statement...........................................    65
    Biographical sketch of nominee...............................    66
Vickers B. Meadows, of Virginia, to be Assistant Secretary for 
  Administration, U.S. Department of Housing and Urban 
  Development....................................................    59
    Biographical sketch of nominee...............................    70


                            NOMINATIONS OF:

                         J. JOSEPH GRANDMAISON
                    OF NEW HAMPSHIRE, TO BE A MEMBER
                      OF THE BOARD OF DIRECTORS OF


                     THE EXPORT-IMPORT BANK OF THE

                             UNITED STATES

                                  AND

                        KENNETH M. DONOHUE, SR.
                  OF VIRGINIA, TO BE INSPECTOR GENERAL
                   OF THE U.S. DEPARTMENT OF HOUSING
                         AND URBAN DEVELOPMENT

                              ----------                              


                       THURSDAY, DECEMBER 6, 2001

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.

    The Committee met at 10:05 a.m., in room SD-538 of the 
Dirksen Senate Office Building, Senator Paul S. Sarbanes 
(Chairman of the Committee) presiding.

         OPENING STATEMENT OF CHAIRMAN PAUL S. SARBANES

    Chairman Sarbanes. The Committee will come to order.
    We are here this morning holding nomination hearings on two 
nominees-- Joseph Grandmaison of New Hampshire, to be a Member 
of the Board of Directors of the Export-Import Bank of the 
United States, and Kenneth Donohue of Virginia, to be Inspector 
General of the Department of Housing and Urban Development.
    Since you are in two entirely different bureaucratic 
universes, I think we will take you one at a time instead of as 
a panel. And we will start with Mr. Grandmaison.
    The most relevant thing to note is that he has literally 
just finished serving as the Director of the U.S. Trade and 
Development Agency, where he was for 7\1/2\ years, I think the 
longest term of service of any Director of the TDA.
    The TDA funds feasibility studies and provides other 
assistance to U.S. companies seeking to become involved in the 
planning stages of infrastructure and industrial projects in 
middle-income and developing countries.
    In carrying out that work, of course, the TDA works closely 
with large and small U.S. exporters, with U.S. financial 
institutions, works closely actually with the Export-Import 
Bank, Overseas Private Investment Corporation, OPIC, the 
Commerce Department, and other Federal agencies, all involved 
in export promotion.
    In addition, under Mr. Grandmaison's leadership, the TDA 
was an important member and strong advocate in the Trade 
Promotion Coordinating Committee, which was established by law 
by this Committee. Since leaving the TDA earlier this year, Mr. 
Grandmaison has served as an international trade consultant.
    Now, obviously, this experience is highly relevant to the 
work of the Export-Import Bank. It is my view that Mr. 
Grandmaison's experience and his demonstrated ability in this--
and I have not gone all the way back through his resume. I do 
note that at one point, he worked for the Commerce Department 
as a Federal Co-Chairman of the New England Regional 
Commission, whose membership included the New England 
Governors.
    He has had a range of experience that is highly relevant, I 
think, to the work of the Export-Import Bank. We want to get 
the Bank up to full strength. We have one other nominee to be a 
Member of the Export-Import Bank whose hearing has been held, 
Eduardo Aguirre of Texas. And so, if we can move forward with 
that nomination and this one, we will be able to bring the 
Export-Import Bank up to full strength. All five members of the 
Bank will then have been nominated and confirmed.
    Senator Reed, do you have an opening statement?

                 COMMENTS OF SENATOR JACK REED

    Senator Reed. Thank you, Mr. Chairman.
    I just want to recognize Mr. Grandmaison, who is an active 
and very distinguished member of the New England community.
    I am pleased to see you here, sir, and I wish you well.
    Chairman Sarbanes. Senator Miller.

                COMMENTS OF SENATOR ZELL MILLER

    Senator Miller. No, Mr. Chairman, I do not have an opening 
statement. I just want to thank you for holding this hearing 
and to welcome today's nominees.
    Chairman Sarbanes. You do not want to get in on this New 
England community thing here?
    [Laughter.]
    Senator Reed. We have to stick together. We do not have a 
lot of territory.
    [Laughter.]
    Chairman Sarbanes. He is from southern New England, maybe.
    [Laughter.]
    Senator Reed. You all are right about that, Mr. Chairman.
    [Laughter.]
    Chairman Sarbanes. Senator Allard has joined us. I am 
pleased to see that. Do you have an opening statement?

                COMMENTS OF SENATOR WAYNE ALLARD

    Senator Allard. Yes, Mr. Chairman, thank you. I would like 
to thank you for holding this hearing. Our witnesses today are 
both nominated to key positions under the Committee's 
jurisdictions. I am pleased that the Chairman has moved to fill 
the vacancies.
    Of course, I would like to welcome Ken Donohue to the 
Banking Committee. Mr. Donohue is nominated to be the Inspector 
General for the Department of Housing and Urban Development. I 
believe that this is one of the most important positions at 
HUD. It is critical that we have an Inspector General in place 
to help ensure that we continue to see progress on management 
reform.
    As the Ranking Member, of the Subcommittee on Housing and 
Transportation, I have seen firsthand how helpful the reports 
of an Inspector General can be. The Inspector General acts as 
the eyes and ears of the Congress and is expert at routing out 
fraud, waste, and abuse.
    I believe that Mr. Donohue's background will serve him well 
in his new position. He has extensive experience in criminal 
investigative matters, and he is a certified fraud examiner.
    We have an obligation to both the taxpayers and to those 
who utilize HUD's programs to ensure that the money is well 
spent. Mr. Donohue understands this obligation, and I look 
forward to the opportunity to work with him.
    I would also like to welcome Mr. Joe Grandmaison to the 
Banking Committee. He is nominated to be a Member of the Board 
of Directors of the Export-Import Bank.
    Thank you, Mr. Chairman.
    Chairman Sarbanes. Thank you.
    Mr. Grandmaison, it is our standard procedure to ask 
witnesses to testify under oath at their nomination hearings. 
If you would please stand and take the oath.
    Do you swear or affirm that the testimony that you are 
about to give is the truth, the whole truth, and nothing but 
the truth, so help you God?
    Mr. Grandmaison. I do.
    Chairman Sarbanes. Do you agree to appear and testify 
before any duly-constituted committee of the U.S. Senate?
    Mr. Grandmaison. I do.
    Chairman Sarbanes. Thank you very much. We would be very 
happy to hear your statement.

               STATEMENT OF J. JOSEPH GRANDMAISON

            OF NEW HAMPSHIRE, TO BE A MEMBER OF THE

          BOARD OF DIRECTORS OF THE EXPORT-IMPORT BANK

                      OF THE UNITED STATES

    Mr. Grandmaison. Mr. Chairman, Members of the Senate, I am 
honored to appear before you as the President's nominee to 
become a Director at the Export-Import Bank of the United 
States.
    I am deeply appreciative to President Bush for giving me 
the unexpected opportunity to continue in public service. I am 
also most appreciative to Majority Leader Daschle, to you, 
Senator Sarbanes, and to my friend, Senator Dodd, for their 
support of my nomination. My promise to the President and to 
each Member of this Committee is that, if confirmed, I will 
serve with the same dedication, zeal, and purposefulness as I 
have in my previous Government service.
    When I was first asked whether I would be interested in 
possible service on the Ex-Im Bank Board, my first thought was 
how perfect that would be to use my 7-plus years of experience 
as Director of the Trade and Development Agency. Not only is 
Ex-Im Bank TDA's sister trade finance agency, along with the 
Overseas Private Investment Corporation, OPIC, TDA's success is 
inextricably linked to Ex-Im Bank. In fact, about a third of 
the exports facilitated by TDA feasibility studies are financed 
by the Bank.
    To have the chance to bring my experience and enthusiasm to 
Ex-Im Bank; to assist in strengthening our U.S. economy; and to 
help create and preserve jobs here at home is a singular and 
special personal and professional opportunity. And U.S. jobs 
are what it is all about at the Bank.
    Last year, Ex-Im Bank financed or insured over $15 billion 
of U.S. exports. In today's competitive international market, 
often it is whoever provides the financing that gets the 
business. American companies need to be assured they can depend 
on their Government as their partner in further growing their 
company's share of the worldwide market. Ex-Im Bank will 
continue and, with the Administration's and Congress' support, 
will further strengthen that partnership.
    If confirmed, I will have the opportunity and honor to join 
the President, the Congress, Ex-Im Bank's Chairman John Robson, 
and his colleagues at the Bank, in serving our Nation's 
interest.
    I would welcome that opportunity and ask for your support.
    Thank you.
    Chairman Sarbanes. Thank you very much.
    You have been nominated to serve a term that expires in 
January 2005. Is it your intention to serve the full length of 
that term?
    Mr. Grandmaison. Yes, it is, Senator.
    Chairman Sarbanes. While you were at TDA, you served as a 
Member of the Trade Promotion Coordinating Committee. What is 
your view of the work of the Coordinating Committee, and how 
important do you think it is to the U.S. export effort?
    Mr. Grandmaison. I believe it is very important, Senator. 
Among other things, what it does is it sends a message 
throughout the operating bureaucracies of each of the member 
agencies that they are supposed to be working together.
    I was pleased when I learned of Secretary Evans' commitment 
to a renewed TPCC. Obviously, it is leadership that is 
necessary and having the new Secretary of Commerce fulfill that 
role is going to be exciting.
    Also, as you know, Mr. Robson, as President of the Ex-Im 
Bank, serves as Vice Chair at the TPCC. And if called upon, I 
would obviously do whatever he asked of me to help further 
those relationships among agencies.
    Chairman Sarbanes. I am interested in your view about the 
tied-aid credit fund, whereby we seek to match credit terms 
offered by other foreign export credit agencies. What is your 
view of the need for the fund and how it should be utilized?
    Mr. Grandmaison. Senator, the fund is terribly important as 
a tool. In many ways, what it does is it helps us fulfill the 
broader Government policy, our Government's policy, relative to 
concessional financing, having it available to use. Now it is 
an even better tool if, when called upon for very specific 
reasons, it is actually put into play.
    I think one has to use it wisely. I think one has to be 
conscious of the overall Government policy relative to 
concessional financing. But, again, as a constructive mechanism 
to help us fulfill and assist our companies in being 
competitive, it is very important.
    Chairman Sarbanes. What do you understand the overall 
Government policy toward concessional financing to be?
    Mr. Grandmaison. Well, as I understand it, Senator, it is 
that concessional financing should not be granted and that the 
market should prevail. And that is an exemplary matter of 
public policy. Many of our competitors observe and abide by the 
OECD rules. Others perhaps often work at the margin. That is 
where having the ability to use the tied-aid fund I would think 
comes into play.
    Actually, I think it is our perception that the use of the 
tied-aid fund, or its potential use, has been very helpful in 
getting the OECD to adopt limitations and restrictions on the 
use of concessional financing by its member nations.
    Chairman Sarbanes. I would like to explore with you the 
issue of market windows, the government-sponsored enterprises 
used by foreign countries, Canada and Germany are two leading 
examples, to provide subsidized export credits outside of the 
requirements of the OECD arrangement on export credits. Do you 
have any view on how serious this problem is and how the United 
States should respond to it?
    Mr. Grandmaison. Senator, it is my understanding that the 
threat of it becoming serious is there. Now, we do not as yet 
know that for a fact. Therefore, at this point in time, what 
would appear to make most common sense and business sense is to 
continue to track and to identify what are the transactions 
that are falling into that classification when it comes to our 
competitors who are using market windows to, if you will, 
expand what they consider to be their horizons.
    Chairman Sarbanes. Well, I see that my time is almost 
expired. I will yield to Senator Allard.
    Senator Allard. Thank you, Mr. Chairman.
    As I think I indicated to you in our previous 
conversations, I have been working to establish an Office of 
the Inspector General at the Export-Import Bank. Do you support 
establishing an IG at the Bank?
    Mr. Grandmaison. Senator, you expressed to me your belief 
that whoever becomes a Director at the Bank must walk in with 
an open mind. And I promised you that I would do so.
    I share your belief in the accountability factor, in always 
keeping in mind that it is taxpayer money that the Bank is 
using. And should that become the case, you have my commitment 
that I will do everything possible to make it work 
successfully.
    Senator Allard. In our conversation, you also mentioned 
that the relationship of conflicts is less productive for both 
offices. I just want to make it clear that you would pledge to 
strive for a productive and coordinated relationship, if we 
should have the inspector general, with the inspector general. 
Is that right?
    Mr. Grandmaison. Yes, sir.
    Senator Allard. Thank you. Mr. Chairman, I yield my time.
    Chairman Sarbanes. Senator Reed.
    Senator Reed. Thank you very much, Mr. Chairman.
    And thank you, Mr. Grandmaison, for your willingness to 
come forward again and serve this country. You have a very 
distinguished career, both as a businessman and also as a civic 
leader, and we thank you for that.
    One of the criticisms that we hear about Government all the 
time is that it has to be run more like a business. This agency 
seems to be one of those agencies that can and should run a lot 
like a business, a financial institution. And some criticism I 
have heard is that there is not either the resources or the 
ability to leverage the private sector to help out in your 
mission. Could you comment upon that as you go forward?
    Mr. Grandmaison. Senator, I agree with the philosophy that 
there are many things in Government that should be run more 
like a business and there are business practices that can be 
adopted. But I would add that one has to also keep in mind that 
there are public policy issues and that it is not a business in 
the normal use of the word.
    The cooperation between the Ex-Im Bank and its clients, the 
American business community, has to be a partnership. And ever-
increasingly, you see where U.S. companies would prefer that it 
would be a level playing field overseas in every sense of the 
word so that they would not have to come to us with their 
business.
    Often that is just not as practical as one would hope, 
particularly when it comes to small businesses. Those are the 
ones that have the most difficult time maximizing 
opportunities.
    Senator Reed. I think, Mr. Grandmaison, coming from our 
part of the country, most of our businesses are small 
businesses. It is encumbent upon Ex-Im Bank to, I think, more 
aggressively reach out to indicate to businesses what you are 
able to provide for them in terms of assistance, and I hope you 
can do that. In terms of not only reaching out to your 
potential clients, but also being part of a larger, sort of 
financial support to the export business.
    Some criticism I have had is that there is not that, you 
know, your mission and you pursue it, but sometimes Ex-Im Bank 
does not look to see if they can bring other banking 
institutions in to do deals that will use some of your credits 
with some other straight financing.
    And I wonder if you might have a comment or just simply 
store that away for reference as you go forward.
    Mr. Grandmaison. What I would like to do is choose the 
storing it away, Senator.
    Senator Reed. That is fine. That is fine.
    Mr. Grandmaison. I am not that well acquainted with it. But 
I assure you that I will become better informed.
    Senator Reed. Well, since we are confirmed automatic 
expertise in everything by virtue of where we sit, I will 
accept that response very gratefully.
    [Laughter.]
    But one further point, and it goes back I think also to the 
issue that you mentioned in your initial response. I believe 
that the agency needs to do a lot more of getting the message 
down to the small businesses of America--north, south, east, 
and west--who now increasingly depend upon the export market 
for their livelihood and survival going forward. That would 
require resources. It might require different programmatics 
that you do not have at the moment. And again, I would urge you 
to let us know if you feel that there is something that we 
should do in terms of trying for additional resources, 
additional programmatic responsibilities, or discretion.
    I wish you well, and thank you for your service to the 
country.
    Chairman Sarbanes. Good. Thank you, Senator Reed.
    Senator Miller.
    Senator Miller. Thank you, Mr. Chairman. And thank you, 
sir, for continuing to serve in the arena.
    I know that you believe that TDA's success is very much 
linked to Ex-Im Bank's, and I believe that also. And I would be 
interested if you would care to elaborate a little on how you 
see the working relationship between the Ex-Im Bank and TDA and 
the other sister agencies, and how you think that could be 
improved and how you intend to go about that.
    Mr. Grandmaison. Well, thank you for that question, 
Senator, because it is an area I have a deep dedication toward, 
if you will.
    One of the frustrations is that often you run into problems 
when you ask agencies to cooperate with one another. What I 
learned at TDA, to be quite honest with you, is perhaps because 
of how small it is, there was a tendency that you began with 
the recognition that you could reach into other agencies, that 
all the expertise was not on the same floor within your agency, 
so that you aggressively went out and worked with agencies, 
whether it be the FAA or FEMA or whoever, and called upon that 
expertise to help you.
    What the TPCC does is it sends the message, as I said, 
right straight through that agency, cooperation is supposed to 
be the order of the day. And cooperation is even more important 
when it comes to the three sister trade finance agencies--that 
the heads of the three agencies, if you will, actually like one 
another, that they are open to suggestions from one another--
and that as often as possible and practical, they meet to find 
ways to work together, particularly on Senator Reed's point 
relative to marketing the agencies domestically.
    So that is where you can be far more effective, if you go 
in and conduct a training session in Atlanta utilizing all 
three agencies together, so that the attendees get a full view 
of the type of U.S. Government export services that are 
available to them.
    It is less so sometimes on the projects because, to a great 
extent, that is controlled by the applicant, the person that 
you are actually assisting. But especially on the marketing 
side, you can maximize your time and your cost, resource-wise, 
by working together. And quite honestly, that is one of the 
more rewarding aspects of being involved in this particular 
field.
    Senator Miller. Thank you. That is what I wanted to hear. I 
wish you well.
    I do not have anything else, Mr. Chairman.
    Mr. Grandmaison. Thank you, Senator.
    Chairman Sarbanes. Do you have a view on how important the 
support for small business on the part of Ex-Im Bank should be?
    Mr. Grandmaison. I believe that 90 percent of the 
transactions that Ex-Im Bank in authorized fiscal year 2001 
were with small business. Now the only way that comes about is 
through aggressive marketing and is through taking your 
product, if you will, your services, and being able to explain 
to people how they can make use of it quickly.
    Now part of the explanation as to why Ex-Im Bank has been 
that successful, I would respectfully suggest, is because of 
the oversight by Congress that has continually underlined that 
it be a priority of the agency.
    The truth is that it is often easier to work with large 
companies. It is not as rewarding, however. It does not feel as 
good. It is not as satisfying as when you work with a small 
company and help them break into the international market and 
we get that sale.
    So it is a combination of both. But what it takes more than 
anything else is discipline, discipline and maintaining it as a 
priority and not forgetting that that is what you are being 
paid to do.
    Chairman Sarbanes. Senator Allard.
    Senator Allard. I have no further questions, Mr. Chairman. 
Thank you.
    Chairman Sarbanes. Thank you very much. We appreciate your 
coming before the Committee.
    Mr. Grandmaison. Thank you, Senators.
    Chairman Sarbanes. Mr. Donohue, if you would come on up and 
take a place at the table.
    [Pause.]
    Our second nominee that we will be considering this morning 
is Kenneth Donohue, who has been nominated to be the Inspector 
General for the Department of Housing and Urban Development.
    Mr. Donohue had a long and distinguished career in the 
Secret Service from 1969 to 1990. He then worked for the 
Resolution Trust Corporation as an Assistant Director for 
Investigations. And when he left Government service just a few 
years ago, he started his own security firm.
    If confirmed, Mr. Donohue will be taking the helm of an 
office that, according to many observers, including the GAO, 
has experienced some significant troubles. For example, the 
IG's office ran a program called Operation Safe Home, which, of 
course, raised important questions about whether the Office of 
Inspector General should be in the business of running a 
program at all, whether that is not a basic conflict with their 
fundamental role.
    The GAO found significant problems with the IG's accounting 
for the Safe Home fund. In fact, the Congress has now 
eliminated that program from the IG's purview.
    We have been fortunate, and I want to express my 
appreciation to David Williams, who is the Inspector General at 
Treasury for Tax Enforcement, and who has been doing double-
duty by serving as Acting IG at HUD. He has been doing two jobs 
at the same time and, by all accounts, he has been doing them 
very well. And I want to express publicly the Committee's 
appreciation to David Williams for undertaking this 
responsibility.
    He is a very highly regarded Inspector General amongst what 
I guess one could term the inspector general corps.
    Senator Allard, do you have an opening statement?
    Senator Allard. I do not, no. I included my comments in my 
previous statement.
    Chairman Sarbanes. Does anyone else?
    [No response.]
    Mr. Donohue, if you would stand, I want to administer the 
oath.
    Do you swear or affirm that the testimony that you are 
about to give is the truth, the whole truth, and nothing but 
the truth, so help you God?
    Mr. Donohue. I do.
    Chairman Sarbanes. Do you agree to appear and testify 
before any duly-constituted committee of the U.S. Senate?
    Mr. Donohue. I do.
    Chairman Sarbanes. Thank you very much, sir. Please take a 
seat and we would be happy to receive your statement.

              STATEMENT OF KENNETH M. DONOHUE, SR.

          OF VIRGINIA, TO BE INSPECTOR GENERAL OF THE

        U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Mr. Donohue. Thank you, Chairman Sarbanes.
    Before proceeding further, Mr. Chairman, please allow me 
the pleasure to introduce the members of my family that are 
with me here today.
    First, let me introduce my wife, Kathleen, who currently 
works at the State Department and raised our wonderful sons 
while I was traveling the world. Without her support and love, 
I would not be here today.
    Next is my eldest son, Kenneth Martin, who is a military 
veteran and currently a Police Officer with the U.S. Mint. 
Timothy Patrick is a Special Agent with the U.S. Secret 
Service. And finally, my son, Brian Richard, who is a die-hard 
Hokie of Virginia Tech and now a finance person with a 
worldwide computer corporation.
    I have been blessed with this family that has made many 
untold sacrifices for me over the years. I am very proud and 
love them very much.
    You can gather by their names that I am of Irish ancestry 
and I can assure you that my foreign-born parents would be 
pleased to see their youngest son sitting before this 
distinguished group of U.S. Senators.
    As a child of immigrants--raised in a borough of New York--
I know that when my parents sought their dream in America, they 
found opportunity in the city. That opportunity must continue 
for others less fortunate.
    I am deeply grateful to President Bush and Secretary 
Martinez for according me the honor of this nomination and, if 
confirmed, I will serve in this position with enthusiasm and 
humility.
    Chairman Sarbanes and Members of this Committee, I thank 
you for your willingness to schedule this hearing given the 
stress of other business during these very difficult times for 
our country.
    During my 21 years of Federal law enforcement with the U.S. 
Secret Service, I have testified hundreds of times in Federal 
court and before grand juries relating to criminal 
investigations. First and foremost, I was taught that a good 
witness should be brief and to the point.
    Members of the Committee, I sit before you with admiration 
to you for your service to the citizens of this country. The 
potential opportunity to work with you in the future is an 
enormous privilege and responsibility.
    I can assure you that I am up to the challenge.
    In my previous role as Section Chief of a headquarters 
staff for the Office of Investigations at the Resolution Trust 
Corporation, the RTC, and later as the Assistant Director, I 
spearheaded our efforts and successful outcome of working with 
the other related regulatory and Federal law enforcement 
agencies from both the Department of Justice and the Department 
of the Treasury.
    When I arrived at the RTC in 1980, we had very few 
employees assigned to investigations. Those numbers would later 
grow to approximately 500 staff members located throughout 16 
field offices that I indirectly supervised through four 
regional directors.
    By 1996, with a Congressional sunset mandate, we 
successfully closed these offices and I returned to the Federal 
Deposit Insurance Corporation. As a member of the national bank 
fraud working group, we collectively addressed and reported our 
efforts to Congress on the investigation of the failed savings 
and loans.
    This past governmental experience is not only relevant to 
my prospective position at the Department of Housing and Urban 
Development, but will prove to be extremely valuable in 
performing the duties of Inspector General, if I am confirmed.
    My past 5 years have been in the private sector consulting 
on law enforcement and investigative issues. This also provides 
a strong foundation for the task that lies ahead, if I am 
confirmed. For example, I recently completed a multiyear 
contract with a classified program at the Central Intelligence 
Agency that interrelated with U.S. corporations.
    I have learned firsthand that the corporate world, even 
though guarded at times toward the Federal Government, has 
enormous respect for those Government agencies that are 
responsive to the will and concerns of the American people.
    I am aware that HUD has been designated as high risk by the 
General Accounting Office and criticized by its former 
Inspector General. If confirmed, I pledge to you and our 
citizens that I will be a strong manager and my office will 
commit to the task of aggressively investigating waste, fraud, 
and abuse. I intend to recruit the best talent to this office 
and set the highest standards.
    I will work with Secretary Martinez in achieving the shared 
goal of eliminating fraud, waste, and abuse, and ensure that 
taxpayer dollars go to the programs intended. I will do this 
while jealously guarding the independence of the office of 
Inspector General.
    If confirmed, I will maintain an open and forthright 
dialogue with both the Secretary and the Congress during my 
tenure.
    This I pledge and this I promise.
    Finally, I enjoy a close relationship with many other 
current Inspector Generals, and I will seek their advice and 
counsel.
    In this regard, I want to acknowledge and to thank the 
current Inspector General for the Treasury Tax Administration, 
Mr. David Williams, who has also served for the past 6 months 
as the Acting Inspector General at HUD.
    Thank you for the opportunity to appear before you this 
morning. I stand ready to answer any questions you may have.
    Chairman Sarbanes. Thank you very much, sir.
    Let me just say at the outset that I think you are going 
into a very challenging position that is not only the range of 
activities in which HUD is engaged and the interaction it has 
with both State and local governments and with the private 
sector that require an active Inspector General's office, but 
also at least some of us are very troubled by reports we have 
received in terms of the functioning of the Inspector General's 
office at HUD in recent years. I would like to explore that 
with you a bit.
    You have been, I take it, over at HUD now as a consultant 
for how long a period of time?
    Mr. Donohue. Four or five weeks, Senator.
    Chairman Sarbanes. First of all, the previous Inspector 
General had her own press operation. There was actually a press 
operation in the Inspector General's office. Do you regard this 
as an appropriate function for an Office of Inspector General?
    Mr. Donohue. Senator, I see no need for a press office in 
the Office of the Inspector General. I will address matters 
that come to my attention from the press. In most cases, I 
would suspect when they involve the work that we do, it will be 
collectively done between ourselves and the Department of 
Justice and we will respond to those accordingly. But I see no 
reason to have such a press program in the Office of the 
Inspector General.
    Chairman Sarbanes. I think David Williams closed it down, 
did he not, when he went over there?
    Mr. Donohue. I am not aware of that, Senator.
    Chairman Sarbanes. Operation Safe Home, which has now been 
eliminated in the Fiscal Year 2002 HUD Appropriation Bill, I 
just want to ask you about it so that we get some sense of how 
you would go at the Inspector General's job.
    Robert Murphy, General Counsel of the General Accounting 
Office, in a letter to Representative Walsh on the House side, 
August a year ago, raised concerns about the OIG taking 
responsibility for running a program. Murphy wrote to Walsh: 
We--meaning the GAO--are concerned about the impact the IG's 
exercise of such programmatic authority may have on the IG's 
personal and organizational independence. The letter went on to 
point out the conflict of interest that this situation could 
pose to the Office of Inspector General.
    Now the previous Inspector General disagreed with those 
conclusions, and I am interested in your view about the 
appropriateness of the Inspector General's office itself 
actually running a program. Do you have any view on that 
question?
    Mr. Donohue. Yes, Senator. I have been briefed about the 
program. My understanding is that this program has been phased 
out by Congress. I am also aware that they are moving forward 
with regard to resolving the cases that they may have and hope 
to have those resolved and transferred to the respective 
Federal and State agencies by the end of March of next year.
    I read the GAO report and I do find issue with the notion 
of having an operational component such as this within the IG's 
office. It seems to me that the IG's office must have total 
uninvolved oversight of programs within the agency itself.
    Chairman Sarbanes. Its job is to review the conduct of 
programs by others, not to actually run programs itself, which 
of course raises the question, if it does that, who reviews the 
operation of those programs if the agency which is supposed to 
be doing the review is running the program?
    The GAO earlier this year released a report on Operation 
Safe Home and found that the IG's office at HUD diverted some 
$3.9 million from normal operations to pay the salaries and 
expenses for that program. In addition, the report found that 
of the $37.5 million in funding allocated to the Safe Home task 
forces, 50 percent remained unspent and 25 percent remained 
unobligated. Do you know the present status of the unobligated 
and unspent funds?
    Mr. Donohue. Senator, I do not. I need to look at the 
expenditure. I am aware what the intention is, and my intention 
would be to--Congress has seen fit to continue the budget for 
this coming year and to reallocate those resources, I believe, 
to programs that best serve HUD. And that is, programs such as 
predatory lending and flipping tactics that have gone on 
nationwide.
    Chairman Sarbanes. Finally, let me just close out this 
issue. My time is running out here.
    Besides the questions about conflict in management of the 
Operation Safe Home program, we have had called to our 
attention a memorandum from an IG special agent to the prior 
Inspector General, who was the special agent in charge, saying 
that the IG agents must be instilled with a combat mindset and 
a certain degree of ruthlessness.
    The memo goes on to say that the civilized mindset of many 
agents in the field will have to change. It must be replaced by 
the fighting man's requisite ruthlessness. This means that our 
agents may very well have to rip the mortal coil off a 10-year-
old kid or light up a woman, end of quote.
    Now the thrust of this memo was trying to say, well, you 
know, we are doing this Operation Safe Home. This is a 
dangerous business and our agents really have to sort of be up 
to it, which is a very important point that needs to be 
registered on the agents.
    On the other hand, this may underscore why Operation Safe 
Home should not be done by the IG. That kind of work should be 
done, it seems to me, increasingly by well-trained professional 
law enforcement people who gear up to do exactly that kind of 
activity and go through a very severe training program in that 
regard. Are you at all familiar with this issue?
    Mr. Donohue. I am a bit, Senator. And I can assure you that 
what you refer to as cowboy tactics will not be tolerated.
    I had the privilege of working for an agency that at one 
moment, agents would be involved in sensitive investigations 
and the next minute involved in the protection of the President 
of the United States. The notion of presenting a professional, 
thorough, committed organization that can do the task at hand 
and that I believe the Inspector General is charged to do is 
what their task will be.
    If it involves training, training will be administered. But 
they will apply their wares in the audit and investigations 
area specifically to the true task that I see the IG has 
responsibility over.
    Chairman Sarbanes. Senator Allard.
    Senator Allard. Thank you, Mr. Chairman.
    It is no secret that I have been a strong advocate of the 
Government Performance and Results Act, or simply some people 
refer to it as the Results Act. This is an Act that requires 
the Government agencies to create strategic plans based on 
outcomes rather than processes. And these are measurable, which 
is very key to outcomes as you set out some goals where you can 
measure whether there is success or failure. Are you familiar 
with the Results Act?
    Mr. Donohue. Yes, in a way I am, Senator.
    Senator Allard. Part of the responsibility that I view of 
the Inspector General is to make sure that there is adequate 
oversight on the programs and that the agency is following 
through with what Congress intended. Will you work to ensure 
that HUD utilizes this tool?
    Mr. Donohue. Yes, I will.
    Senator Allard. I understand you have been working at HUD 
as a consultant for about 3 or 4 months. Is that correct?
    Mr. Donohue. It seems like 5 weeks. It might very well be 6 
or 7 weeks, I believe, after September 11.
    Chairman Sarbanes. It seems like a lifetime sometimes.
    [Laughter.]
    Senator Allard. Apparently, you have been assessing 
security issues at the agency. What has been your role in this 
assessment?
    Mr. Donohue. Yes, Senator. Thank you for the question.
    I was asked to come over by the Deputy Secretary following 
the September 11 events. I have an expertise in security. My 
objective was to first bring together the HUD components that 
have a direct involvement in the security requirements.
    We have done that and created a working group. We have 
addressed emergency evacuation plans. And probably best of all 
is that I have had the opportunity to go out to various 
colleagues at the Veterans Administration, Department of Labor, 
and Justice, to team-up with them, and with some of their 
concepts and notions, to ultimately ensure a safe environment 
for the employees at HUD.
    It is being proposed, that we will have people with 
expertise going out to the field sites, which I believe is 85 
sites, to look at their needs, their requirements, and to come 
back and make those recommendations to an executive group to 
implement those programs, where applicable.
    One thing, I am also proud of, is that I had asked Mr. 
Williams in the Inspector General's office to create an 
Incident Assessment Center. Think of it as a command post where 
employees can go, call up, address concerns, such as EAP 
matters, but particularly concerns of anthrax scares and the 
like.
    They have become a central repository to be able to guide 
those people through the appropriate address and to report to 
911 or Federal protective service.
    So it has worked effectively. They will create an office of 
security, permanent office of security, to address these 
matters following this terrible tragedy.
    Senator Allard. Apparently, you think that this is very 
important. Can you discuss why you think this is so important, 
security at HUD?
    Mr. Donohue. Senator, following September 11, as you I am 
sure you will agree, is that employees were frightened. The 
focus at HUD with regard to security had not existed and, for 
the most part, the requirement did not necessarily exist.
    I think that the need for this is great. I think the 
Secretary, the Deputy Secretary have truly recognized the need. 
One of the by-products, is that I have had a chance to work 
with the senior staff and get to know them. As far as getting 
them to know how I am and they are, and I think realizing that 
this new job will require my need for independence and 
objective response.
    I think it has proven favorable as well.
    Senator Allard. You have an extensive background in 
investigations. I think it would help this Committee if you 
could elaborate on your history and describe how this would tie 
in to your work as Inspector General.
    Mr. Donohue. Senator, I can identify with these agents. I 
was a field agent for many years with the U.S. Secret Service. 
I interviewed, I collected evidence and maintained that 
evidence and worked closely with the Department of Justice. I 
was fortunate, based on my ability, to be a Section Chief on 
occasions in the U.S. Secret Service, where I managed agents to 
perform fraud and forgery and counterfeit investigations.
    I think I was a good manager.
    I would later go on to the Resolution Trust Corporation. 
When I got there, it was a very small organization. I was asked 
to be a Section Chief and then asked later to be promoted to 
the Assistant Director level.
    That was a remarkable task because the agency had really 
not existed before. So, I had to create programs. I had to 
create programs like an Asset Search Program to address the 
need for due diligence and how much of value it was to pursue 
some of these wrongdoers in civil litigation.
    I had to be responsible for the training of the personnel. 
Many of the personnel had come out of the failed institutions, 
but many came out of an investigative background, and paired 
them up. We had to train them, train them in criminal 
investigations, train them on civil fraud investigations.
    The focus was to deal with the respective offices, to work 
closely with the Department of Justice and the FBI to further 
these cases along. That represented a community of probably 
400-plus employees which would later be downsized and, by 
Congressional mandate, terminated as was the RTC.
    I returned to the FDIC and transferred what restitution 
collections we had back to try and pursue those cases.
    In 1997, as a result of the downsizing of the FDIC, I left 
and went in to the private industry.
    Senator Allard. Mr. Chairman, I have just one more 
question.
    Chairman Sarbanes. Sure. Go ahead.
    Senator Allard. And then I will be finished.
    Chairman Sarbanes. Yes.
    Senator Allard. Have you thought about how you may apply 
the Results Act to the Inspector General's office? You have a 
separate entity out here and if you are going to ask of 
everybody else how you put in measurable results and maybe 
discuss that a little bit in your own Inspector General's 
operation.
    Mr. Donohue. Senator, that is a very good question. I think 
I became sensitive to the results-based programs, after I left 
the Government and went into private industry for the past 5 
years. I came quickly to find out that your work better be of 
top quality or you do not get paid.
    So the notion of basing my resources, basing it on 
performance, it seems to me, and will be, hopefully, the 
benchmark. I know it is going to take some work. Dave Williams 
and I both share the same sentiments.
    I think it is a practical way to do it. This is taxpayers' 
dollars, which I am very sensitive to. And I hope to have a 
strategic plan in place shortly into my term, if I am 
confirmed. I do see it as very important. I will make it 
important in my program.
    Senator Allard. Thank you, Mr. Chairman.
    Chairman Sarbanes. Thank you, Senator Allard.
    Senator Reed.
    Senator Reed. Thank you very much, Mr. Chairman.
    Welcome, Mr. Donohue, and good luck.
    Your discussion of security issues, that is the current 
assignment you have as a consultant to the Department. Is that 
correct?
    Mr. Donohue. That is right.
    Senator Reed. Looking at security. To what extent do you 
believe that will be an important part of your role as the IG? 
Is it discrete, different functions?
    Mr. Donohue. No, Senator. My intention is, if I am 
confirmed, that the security responsibility will stay behind 
and transfer on to a newly created Director of Security 
position. I see no role with respect to the Inspector General 
other than oversight.
    Senator Reed. Thank you, Mr. Donohue. One other question. 
In your analysis, do you have a bottom-line number of how much 
money you believe that HUD needs to fully protect itself and 
its employees?
    Mr. Donohue. I am sorry, Senator. It is a bit premature. We 
are just about ready to send some experts out to the field.
    There has been vulnerability assessments returned 
previously from the field. But these people are not experts. I 
think we are going to have to have a hands-on. That is my 
recommendation and I suspect that will--hopefully, conclude 
itself. It begins January 2 and will wrap itself up sometime in 
mid-June.
    Senator Reed. Good. You have a very difficult job ahead of 
you, if you are confirmed by the Senate. In some respects, you 
are responsible for very little. In fact, I concur with the 
feeling expressed by the Chairman that the programmatic 
responsibilities of the IG should be close to zero. But, then, 
again, you are responsible for everything because if something 
goes wrong in the Department, it could have been avoided by an 
effective IG.
    You are an advisor to the Secretary, but you are also 
charged with telling the Secretary some difficult truths at 
times. You have to be perceived as someone who is open to 
everyone in the organization, from the entry-level clerk to the 
senior assistant if they feel that something is wrong in the 
Department.
    You have to be a colleague of the Secretary, give, in this 
case, Mr. Martinez, good advice. But at some time, you might be 
compelled publicly to communicate with the Congress and the 
larger public.
    I come to this appreciation not so much from looking at 
civilian departments, but from spending some time in the Army.
    Do you disagree with any of those characteristics of your 
job?
    Mr. Donohue. Absolutely not, Senator.
    Senator Reed. And you are prepared to do all those things?
    Mr. Donohue. I am, Senator. I have no hidden agenda, and I 
will tell things as they are. I have had the opportunity to 
meet with the Secretary. He has indicated to me, and I have no 
reason to question his support, for independent investigations 
and audits with regard to the Inspector General, and has also 
indicated a willingness to implement such recommendations on a 
timely basis.
    Senator Reed. Good. It strikes me that a great deal of your 
responsibilities will be looking at essentially financial 
transactions--housing programs and whether funds have been used 
appropriately, either by members of the administration or by 
developers out in the country, in the cities, doing their work. 
Do you feel that your background has prepared you for that? I 
know you were at the RTC. Can you comment a bit about your 
ability to manage people who have financial expertise?
    Mr. Donohue. I understand. Senator, there is no question 
that my strong side is investigations. I truly have a strong 
sensitivity to the audit work. When I was in the U.S. Secret 
Service, when we had requirements of that sort involving 
financial reviews, we would call upon those agencies that had 
audit experience.
    At the Resolution Trust Corporation, we had components with 
audit programs within the General Counsel's office. We would 
hire that kind of expertise.
    I found that the outcomes of my investigations and 
recommendations were based on good audit review, and in a 
timely way good reporting.
    I do have a great deal of appreciation for that and I will 
place that as the focus of my term, if confirmed.
    Senator Reed. Part of your role, too, is to, again, 
maintain this very delicate balance between being a colleague 
and being a watchdog without one consuming the other.
    I am sure there are examples of IG's that were so 
collegial, that nothing got looked at. And then there are 
examples that we have seen of IG's that were such watchdogs, 
that they could not effectively communicate with their 
colleagues, could not effectively do anything because they 
became paralyzed in sort of personal, in some cases, acrimony.
    Again, there is no formula for this or right answer, but I 
would feel comfortable if you could appreciate that very 
difficult balance.
    Mr. Donohue. I do, Senator.
    Senator Reed. Then, finally, too, you are going into an 
organization, and Senator Sarbanes, the Chairman, has alluded 
to certain issues, programmatic facts, some of the very 
harrowing description of ripping the mortal coil of a 10-year-
old, et cetera, some of the ongoing controversy. One, do you 
have an assessment at this point of the morale of the 
organization; and two, do you go into that organization with a 
very specific agenda to improve the morale? And I do not know 
what the morale is. I am just asking you.
    Mr. Donohue. Yes, Senator. I do have some thoughts.
    First of all, I want to assure you that the senior staff 
that I select, and I will have that opportunity, will be the 
absolute best and qualified for that position. I demand that 
and I insist upon that.
    As to the agency itself, I think I must ensure the fact 
that the audit and investigations staff are working 
collectively, I was told by Mr. Williams, that the housing 
fraud initiative is an example. They have worked together 
collectively and have been very successful. I will encourage 
that cooperation.
    I do believe that there has been some communications 
issues. We have had an Acting IG since June. If I am confirmed, 
I will instill a professional policy and leadership of that 
program to ensure that issues of this type will not happen, to 
the best of my ability.
    Senator Reed. Thank you very much, Mr. Donohue.
    Mr. Donohue. Thank you, Senator.
    Chairman Sarbanes. Mr. Donohue, I would like to pursue some 
personnel issues with you because I think the challenge is just 
enormous. And a number of personnel issues have arisen at the 
OIG at HUD in recent years.
    The Boston Globe, in February of this year, had a headline, 
and I will read briefly from the article: ``Black Agent Claims 
Retaliation At HUD. Latest Suit Seeks To Block Job Transfer.''
    The agency that is supposed to root out crime in Federal 
housing programs is being accused of institutional racism 
carried out by an Inspector General who allegedly has ignored 
wrong-doing by white executives while retaliating against black 
agents who speak out about bias.
    This is a suit that was brought by the highest-ranked black 
agent in the Inspector General's office, saying he was being 
sidelined into a new position as punishment for his suit 
against Gaffney. He brought suit saying that she had recruited 
and installed as her top investigator a white man with no law 
enforcement background instead of him. He then brought suit 
that she was then taking retaliation against him.
    The Black Caucus in the House became very energized about 
this issue, the NAACP, and the National Organization of Black 
Law Enforcement Executives.
    In the end, he received quite a substantial settlement from 
the Government to resolve this dispute about the prior 
Inspector General's conduct. This was not the only racial bias 
issue that had been raised at the OIG under Ms. Gaffney.
    So, I want to ask you first, just your own commitment to a 
working environment that is an open and tolerant one. Are you 
familiar with these various episodes taking place within the 
IG's office? Have they been brought to your attention in your 
preparation to take over this job?
    Mr. Donohue. No, they have not, Senator Sarbanes. However, 
I am familiar with what you just referenced from several 
Washington Post articles, I believe, in May of this past year, 
and prior to Ms. Gaffney's departure from HUD, which involved 
the lawsuit of a senior staff member within the Inspector 
General's office.
    My response, Senator, is that I will not tolerate racist 
behavior. I will not tolerate sexual harassment. That is 
something that I will not accept. The advancement of my 
personnel or my appointments will be based solely on their 
capability and the knowledge of the job at hand. I assure you 
that I will advise my senior staff that this is unacceptable 
and that this will not happen, to the best of my ability.
    Chairman Sarbanes. We are very concerned about what has 
been going on down there.
    Actually, Ms. Gaffney earlier this year wrote a memo 
outlining disciplinary action against OIG's employees, driving 
Government vehicles after drinking, misusing Government 
computers for personal reasons, including downloading sexually 
explicit material, altering the price of merchandise, 
mishandling and misuse of firearms, misuse of Government 
property. These are all things that she enumerated were going 
on within her office. I think virtually all of the senior staff 
down there either resigned or were forced out or took 
retirement. It is pretty vacant at the top ranks, is it not, 
down at the OIG's office at HUD?
    Mr. Donohue. Yes, sir, it is.
    Chairman Sarbanes. Of course, that gives you a real 
opportunity to bring in some top-notch people who won't fool 
around.
    We had brought to our attention an affidavit filed by one 
employee. I do not know if you have seen it. We are going to 
refer it over to you, about engaging in sexual intercourse in 
the office, all the rest of that. I do not know what kind of 
hijinks were going on down there in the IG's office. So, you 
have a Herculean task to clean out the stables.
    Mr. Donohue. According to Mr. Williams, Senator, they 
realize and know that a new person is coming into this 
position. It has become rather clear to them, and it will 
become clear to them as I come on, that this behavior will not 
be acceptable and tolerated and will be dealt with very quickly 
and effectively.
    Chairman Sarbanes. Well, there is a strong feeling that her 
favorites were not punished and the ones that were not her 
favorites were punished, even though they engaged in the same 
conduct, that sort of double-standard, which I do not think any 
good administrator can have taking place within their 
organization.
    I really commend to you the idea of reviewing all of this 
wrong-doing to make sure that the right decisions were made. 
That thing has to be set back in the proper order. And I think 
that is one of the major initial challenges that will confront 
you.
    I am not aware, and I do not know if you are, of other IG 
offices that seem to have had such extensive personnel 
problems.
    Mr. Donohue. Nor am I, Senator.
    Chairman Sarbanes. Let me just ask. I was curious about one 
question. Do you know how other Inspector Generals handle 
personnel decisions regarding disciplinary actions within their 
office? In other words, the IG goes in and reviews the people 
in the Department. So if you get allegations of this sort 
taking place, the IG becomes an agency that reviews that. But 
how do we get a review of the IG's office if this sort of thing 
is going on? Do you have any thoughts on that?
    Mr. Donohue. I do, Senator. What I am accustomed to, and my 
notion supports this, is to have--call it an Office of 
Inspection or Special Investigations, that will target matters 
of this type.
    It seems to me, Senator, that the IG, like all Federal and 
State law enforcement agencies, must be above reproach. They 
must set the standard with regard to the agencies. How can they 
possibly go back and conduct investigations of HUD 
organizations and not be able to stand up to the same scrutiny?
    So, I believe Mr. Williams has begun that process. I will 
install an Office of Inspection that will target such matters, 
and, prevent them from happening. But when they do, they will 
go to that matter directly and respond back to me for rapid 
action.
    Chairman Sarbanes. Have you had any conversations with Mr. 
Williams as to whether he could remain available to you to 
consult with and counsel with as you move into your 
responsibilities?
    Mr. Donohue. Mr. Williams and I have not only become 
colleagues, but also good friends.
    Chairman Sarbanes. I understand that because Mr. Williams 
has indicated to us that you have established a good working 
relationship. We value that opinion very highly because we 
have, as I indicated earlier, a very high regard for Mr. 
Williams.
    Mr. Donohue. Also, there seems to be, what I have found, a 
collegiality among the Inspector Generals throughout and within 
the PCIE program. I have met them. Senator, I hope to call upon 
them for ideas, suggestions, and possibly mimic some of their 
programs that have effectively worked. I am a very open-minded 
person and I would look upon them, and Dave Williams has 
indicated a willingness to do that as we go along.
    Chairman Sarbanes. I think that is a very constructive 
attitude on your part as you move into these important 
responsibilities.
    Also, the General Counsel at the Department, Dick Hauser, 
who we think is quite able, has also indicated his willingness 
to work in an effort to clean up this IG's office.
    Let me touch on one other issue.
    We have received reports that the previous OIG undertook an 
extensive effort to develop an information tracking system 
separate and apart from the rest of HUD. The system was to be 
called the OIG Audit Support Investigative System--OASIS. 
Apparently, the system was in development for over 2 years at a 
cost of $4 to $5 million. The system was never put on line. 
Have you had a chance to become acquainted with this failed 
effort?
    Mr. Donohue. Senator, I have not.
    Chairman Sarbanes. If you could take a look at that, I 
think it would be important to do that. It is my understanding 
that the OIG continued to contract out its IT function, rather 
than use HUD's existing system, even though using HUD's system 
would have been considerably cheaper.
    It sounds like the IT systems at the IG's office are a 
mess. I commend that to you. In fact, I think after you have a 
reasonable period of time to try to straighten out the office, 
we might want to have a hearing just to see where things are. 
You would have a chance to review things very carefully and put 
in an action program in order to correct a lot of these 
deficiencies.
    There was a constant clash going on between the IG and the 
previous Secretary at HUD. That was attributed to personality 
clashes and so forth and so on. But it seems that what happened 
is that in the furor of the personality clash, not enough 
attention was being paid really to the workings of the IG's 
office--on personnel, on information technology, of this whole 
range of issues that we have touched upon here.
    You have a double-challenge, it seems to me. First is to 
get the IG's office itself into shape. And the other, of 
course, and the real responsibility of the IG's office, is to 
supervise, to review, and to oversee the workings and the 
programs in the Department.
    You should not have to do the first, but that is the 
situation that has been left to you, unfortunately, although I 
think that David Williams has been addressing at least some of 
those issues.
    I have no further questions.
    Senator Allard.
    Senator Allard. No further questions, Mr. Chairman.
    Chairman Sarbanes. Well, thank you very much, sir.
    Mr. Donohue. Thank you, Senator.
    Chairman Sarbanes. We appreciate your appearance before the 
Committee, and we are also very pleased to welcome your family 
that is here with you today.
    The hearing stands adjourned.
    [Whereupon, at 11:12 a.m., the hearing was adjourned.]
    [Prepared statement, biographical sketches of nominees, and 
additional material supplied for the record follow:]
               PREPARED STATEMENT OF SENATOR WAYNE ALLARD
    I would like to thank Chairman Sarbanes for holding this hearing. 
Our witnesses today are both nominated to key positions under the 
Committee's jurisdictions, and I am pleased that the Chairman has moved 
to fill the vacancies.
    First, I would like to welcome Ken Donohue to the Banking 
Committee. Mr. Donohue is nominated to be the Inspector General for the 
Department of Housing and Urban Development. I believe that this is one 
of the most important positions at HUD. It is critical that we have an 
Inspector General in place to help ensure that we continue to see 
progress on management reform.
    As the Ranking Member, of the Subcommittee on Housing and 
Transportation, I have seen firsthand how helpful the reports of an 
Inspector General can be. The Inspector General acts as the eyes and 
ears of the Congress and is expert at rooting out fraud, waste, and 
abuse.
    I believe that Mr. Donohue's background will serve him well in his 
new position. He has extensive experience in criminal and investigative 
matters, and he is a certified fraud examiner.
    We have an obligation to both the taxpayers and those who utilize 
HUD programs to ensure that money is well spent. Mr. Donohue 
understands this obligation, and I look forward to the opportunity to 
work with him.
    I would also like to welcome Mr. Joe Grandmaison to the Banking 
Committee. He is nominated to be a Member of the Export-Import Bank's 
Board of Directors.
    The Banking Committee has spent a good deal of time this year 
working on the reauthorization of the Export-Import Bank. During this 
work I have raised several concerns. First, I would like to see the 
Bank increase its small business work. Although I am pleased that the 
Bank does a significant volume of its deals with small business, I 
would like to see the dollar value of those deals increase. I sponsored 
an amendment to increase the small business goals, and I was pleased to 
have it accepted by the Committee.
    My second amendment concerned establishing an Office of the 
Inspector General at the Bank. As my previous comments have indicated, 
I strongly believe in accountability and in good government. The 
Export-Import Bank is the only Government agency offering direct loans 
and loan guarantees that does not have an Inspector General. I believe 
that an Inspector General will give the Bank greater credibility and 
will bolster the work that they do to oversee themselves. I am hopeful 
that Mr. Grandmaison can be helpful as we continue to work to resolve 
this matter.
    I look forward to hearing from our witnesses today. I am very 
hopeful that the Committee will be able to schedule a markup quickly so 
that these nominees can be confirmed by the Senate before we complete 
our business for the year.

































































                            NOMINATIONS OF:


                       DIANE L. TOMB, OF VIRGINIA
                      TO BE ASSISTANT SECRETARY OF
                   PUBLIC AFFAIRS, U.S. DEPARTMENT OF
                     HOUSING AND URBAN DEVELOPMENT

                                  AND

                    VICKERS B. MEADOWS, OF VIRGINIA
                     TO BE ASSISTANT SECRETARY FOR
                   ADMINISTRATION, U.S. DEPARTMENT OF
                     HOUSING AND URBAN DEVELOPMENT

                              ----------                              


                       TUESDAY, DECEMBER 18, 2001

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.

    The Committee met at 2:50 p.m., in room SD-538 of the 
Dirksen Senate Office Building, Senator Paul S. Sarbanes 
(Chairman of the Committee) presiding.

         OPENING STATEMENT OF CHAIRMAN PAUL S. SARBANES

    Chairman Sarbanes. The Committee will come to order.
    I am sorry that we were delayed in getting the hearing 
started. I think before I make my opening statement and turn to 
Senator Gramm, other Members of the Committee, and swear in the 
witnesses, I will turn to Congressman Portman because I know 
that he may well have some conflicting obligations over on the 
House side, and we very much appreciate his coming today. Why 
don't you go ahead. We will be happy to hear from you.

                    STATEMENT OF ROB PORTMAN

             A U.S. REPRESENTATIVE IN CONGRESS FROM

                       THE STATE OF OHIO

    Representative Portman. Mr. Chairman, thank you very much 
for the privilege of being able to be here this afternoon to 
talk a little bit about my former colleague, Diane Tomb.
    Senator Gramm, good to see you again. Thank you for having 
me. Senator Reed, good afternoon.
    Diane has been nominated for the position of Assistant 
Secretary of Housing and Urban Development for Public Affairs. 
She has a strong background in housing matters. Her most recent 
position is as Senior Vice President for Communications at the 
Fannie Mae Foundation, which had her overseeing efforts to 
educate the public about affordable housing and homebuying 
processes. They are the biggest housing foundation in America 
and she received good experience there.
    In addition to that, she has a lot of experience in public 
affairs, having worked prior to Fannie Mae as the Director in 
the public affairs practice at the Washington office of 
Burston, Marstellar.
    I got to know her in the Bush Administration a few years 
ago, the first Bush Administration, where I was in legislative 
affairs and she was in the press office. We worked on a number 
of projects together and I was always impressed with her work 
ethic, her creativity, her approach to problems, and her 
effectiveness.
    She is a person who gets things done and has the kind of 
strong character with that background that I think would be 
appropriate for this very important position.
    She also cares a lot about housing. We talked a little bit 
before the hearing, Mr. Chairman, about some of her efforts at 
Fannie Mae and some of her objectives at HUD.
    I think that she would be a great asset, not just to the 
Bush Administration, but also to this Committee, frankly, and 
to the House Committee, to promote issues that we all care 
about in terms of availability of housing.
    She is the person who has the kind of background skills 
that I think we should encourage in terms of public service.
    I am delighted she is interested in reentering public 
service, and I urge that she be given favorable treatment by 
this distinguished panel, and go on to be able to serve 
President George W. Bush.
    I thank you again, Mr. Chairman, for allowing me to be able 
to be here this afternoon.
    Chairman Sarbanes. Thank you very much for coming. We 
appreciate it. I know that you have to excuse yourself, but 
thank you.
    Representative Portman. Thank you, sir.
    Chairman Sarbanes. This afternoon, the Committee meets in 
order to consider the nominations of Diane Tomb, the nominee to 
be the Assistant Secretary for Public Affairs, and Vickers 
Meadows, the nominee for the position of Assistant Secretary 
for Administration, both at the Department of Housing and Urban 
Development.
    Secretary Martinez spoke to us about his desire to try to 
get his people into place before this Congress concludes, and 
so, we have scheduled this hearing on rather short notice in 
order to try to respond to the Secretary's request. In fact, 
these nominations came to us only recently, and we are very 
willing to try to assist the Secretary in his efforts to get 
his team into place. I want to thank my colleagues for their 
response in that regard.
    Diane Tomb has had extensive experience in the field of 
public relations, most recently, as Congressman Portman 
indicated, as Senior Vice President for Communications at the 
Fannie Mae Foundation. Prior to that, she was a Vice President 
and Director for Burston Marstellar, and has held a number of 
positions in the public affairs field.
    Vickers Meadows--another Texan, I might observe, to my 
colleagues--was in charge of administration in the office of 
then-Governor Bush in Texas. She's originally, though, from 
Alexandria, Virginia, and she's had previous work in the White 
House. In fact, she has been working in White House management 
for the first part of this year.
    So, we are very pleased to have both nominees before us.
    Senator Gramm, I yield to you for any statement.

                 COMMENTS OF SENATOR PHIL GRAMM

    Senator Gramm. Mr. Chairman, first of all, let me thank you 
for holding this timely hearing. There are various complaints 
raised about whether or not we are moving fast enough on 
nominees, and some chairmen perhaps are subject to the 
complaint that we are not. But none of that would apply to you, 
and I want to thank you very much.
    Chairman Sarbanes. Thank you.
    Senator Gramm. It seems to me, Mr. Chairman, we have two 
people before us that have extensive experience in the 
Department of Transportation, the Department of Commerce, and 
various parts of the White House, the Executive Branch of 
Government. I believe they are eminently qualified and I again 
want to thank you for this timely hearing.
    Chairman Sarbanes. Thank you.
    Senator Reed.

                 COMMENTS OF SENATOR JACK REED

    Senator Reed. Thank you, Mr. Chairman.
    Mr. Chairman, I want to thank you for expeditiously holding 
this hearing. I also want to congratulate the nominees before 
us today. I do not have an opening statement.
    Chairman Sarbanes. It is the practice of this Committee to 
place nominees under oath. So, I would ask you both to stand so 
that I can administer the oath.
    Do you swear or affirm that the testimony that you are 
about to give is the truth, the whole truth, and nothing but 
the truth, so help you God?
    Ms. Meadows. I do.
    Ms. Tomb. I do.
    Chairman Sarbanes. Do you agree to appear and testify 
before any duly-constituted committee of the U.S. Senate?
    Ms. Meadows. I do.
    Ms. Tomb. I do.
    Chairman Sarbanes. Thank you very much. Please take your 
seats and we would be happy to hear from you.
    Ms. Tomb, why don't we start with you, and then we will go 
to Ms. Meadows.

            STATEMENT OF DIANE L. TOMB, OF VIRGINIA

          TO BE ASSISTANT SECRETARY OF PUBLIC AFFAIRS

        U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Ms. Tomb. Thank you, sir.
    Chairman Sarbanes, Ranking Member Gramm, and distinguished 
Committee Members, it is a privilege to appear before you today 
as the nominee for Assistant Secretary for Public Affairs for 
the U.S. Department of Housing and Urban Development. And thank 
you, Congressman Portman, for your kind introduction.
    I am honored that Secretary Martinez and President Bush 
have nominated me to serve in this position, and, sir, I would 
like to thank you again for taking this time out of your busy 
schedule. I appreciate your going forward with this.
    I would like to introduce my parents, my husband, and my 
in-laws who are here with me today, sitting behind me. Paul and 
Beth Tomb, my husband, Mark Tomb, and my parents, Sally and 
Tony Leneghan. They came down from Philadelphia this morning by 
train. The timing worked very well for us.
    Chairman Sarbanes. We are very pleased to have them here.
    Ms. Tomb. My children are not here today. I thought I would 
spare you all two year-olds running around wildly, but I would 
like to acknowledge my daughter, Emma, and my son, Shane, 
because they are a big part of our lives as well.
    My parents came to this country from Ireland in 1959, in 
search of opportunities. They chose America on my behalf and I 
cannot be more grateful for that choice than I am today.
    The U.S. Department of Housing and Urban Development's core 
mission is to help families find decent, affordable housing and 
to find solutions to community development challenges in 
America. Creating opportunities for all Americans to become 
homeowners is a fundamental component of HUD's mission.
    Of course, the other issues considering affordability, 
availability, and educating people on predatory lending 
practices and other things, are other areas that HUD focuses 
on.
    The Public Affairs Office at HUD plays a very essential 
role in educating and in informing the public about HUD's 
initiatives. If confirmed, I look forward to keeping the media 
and all interested parties informed on HUD's work. I believe an 
informed public is crucial to the democratic process and leads 
to better policymaking from which we all benefit.
    My career has been centered around communications, most 
often and most rewardingly, on public education campaigns. I 
have spent the last 4 years developing ways to communicate the 
importance of homeownership and demonstrating how owning a home 
is a gateway to opportunity and improvement for individuals, 
families, and communities. It is an honor to continue to focus 
on these important issues at HUD, if confirmed.
    Work in the realm of housing becomes a lot more personal 
when we remember that it all boils down not to numbers and 
reports, but to a real and unmistakable impact on the lives of 
individuals, families, and kids. At the end of the day, HUD 
exists for one reason only--to make life better for people.
    There is, of course, much more on the agenda, and I hope 
you will see fit to approve my appointment so that I might 
contribute to this work.
    With your approval, my role will be to keep the public 
informed of this agenda, as directed by the Administration.
    Thank you again for this opportunity to address you today. 
This concludes my testimony. I am prepared to answer any 
questions or comments you may have.
    Chairman Sarbanes. Thank you very much.
    Ms. Meadows.

          STATEMENT OF VICKERS B. MEADOWS, OF VIRGINIA

          TO BE ASSISTANT SECRETARY FOR ADMINISTRATION

        U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

    Ms. Meadows. Chairman Sarbanes, Senator Gramm, and 
distinguished Members of the Committee, thank you for inviting 
me here today.
    I would like to introduce my husband, James Meadows, behind 
me, whose support I very much appreciate.
    It is an honor to be nominated for the position of 
Assistant Secretary for Administration at the U.S. Department 
of Housing and Urban Development. I am very grateful for the 
confidence that President Bush and Secretary Martinez place in 
me.
    My experience in administration spans over 20 years. I have 
served in an administrative management position for over 10 
years in the following organizations: The Office of the Vice 
President; the Office of the Executive Secretary at the U.S. 
Department of Transportation; and the Office of the Governor of 
the State of Texas. My experience in administrative services 
and management provide a solid foundation for the Assistant 
Secretary for Administration position at HUD.
    I am committed to the responsibilities and challenges that 
come with this position. Under Secretary Martinez's leadership 
and, if confirmed, I am confident that we will move the HUD 
organization to a more efficient and effective operation.
    Thank you again for the opportunity to appear before you 
today. Your time and your consideration are appreciated.
    Chairman Sarbanes. Thank you very much. I am going to yield 
to Senator Gramm. He has a conflicting engagement and before he 
goes, I want him to have an opportunity.
    Senator Gramm. Mr. Chairman, thank you, as always, for your 
kindness. We appreciate your holding this hearing.
    I intend to support both our nominees. We have a lot of 
work to do at HUD. I think we are all impressed with our new 
Secretary. I think this Committee is very open to ways we can 
improve on our programs to try to help people have decent 
housing and to maximize the number of people who can have their 
own home.
    I do not have any questions and again, I want to thank you, 
Mr. Chairman.
    Chairman Sarbanes. Thank you.
    Ms. Tomb, your work at the Fannie Mae Foundation, I know 
that the Foundation has done a lot of work on the homeless 
situation. I wondered whether you were involved in that aspect 
of the Foundation's work?
    Ms. Tomb. Yes, sir. Actually, serving the homeless and 
identifying ways to come up with solutions to the homeless 
problem is one of the top priorities of the Fannie Mae 
Foundation.
    I personally was responsible for the Help the Homeless 
Walk, which is done here in Washington every year. Every year 
we have increased--this year I think was the highest. I wasn't 
personally involved because I had already left the Foundation 
by November. But we worked on this throughout the year, and we 
had more than 40,000 individuals, young folks, as well as folks 
like myself, who are much older, involved.
    I believe last year we raised $5 million and the goal this 
year was $6 million, which is the largest effort across the 
country to help the homeless.
    I think that one of the most impressive things of the Help 
the Homeless effort is that 98 percent of that money goes to 
nonprofits here in Washington. So the Fannie Mae Foundation 
covers all of the administrative costs and all the money raised 
goes directly to the nonprofits. There are over 150 service 
providers in the metropolitan area.
    Chairman Sarbanes. It is a terrific program. Do you think 
that the homeless problem is as much of a priority at HUD as it 
is at the Fannie Mae Foundation? Or if it is not, do you think 
you could help make it so?
    Ms. Tomb. If confirmed, sir, I will do my best to address 
the issues as they arise.
    Chairman Sarbanes. I think there is a real opportunity 
there. Do you have any thoughts about this continuum of care 
with respect to the homeless, a sort of comprehensive approach 
to the homeless problems? Do you have any sense about that 
question?
    Ms. Tomb. Again, sir, if confirmed, I will do my best to be 
up to speed on that issue.
    Chairman Sarbanes. Yes.
    Ms. Tomb. From what I know from my background, it is 
obviously something that needs to be addressed. I think there 
are lots of different approaches that would be effective. 
Again, if confirmed at the Department of Housing and Urban 
Development, we will be able to approach that problem.
    Chairman Sarbanes. Ms. Meadows, the GAO has done a number 
of recent studies on issues that would actually involve the 
administration to HUD. Actually, they did two studies late this 
year on problems with the information systems at HUD. Have you 
had a chance to be briefed by the GAO about these studies or 
about the problems that they have identified?
    Ms. Meadows. No, sir, I have not. But I look forward to the 
opportunity. I realize that there are important issues with 
regard to IT and Federal agencies, and I, if confirmed, will 
make that a top priority at Housing and Urban Development.
    Chairman Sarbanes. What is your perception of the current 
state of affairs with respect to administration at HUD? Do you 
have any sense of that?
    Ms. Meadows. Well, I am in the process of ascertaining the 
state of affairs. I have been on board as a consultant for a 
week and am learning as quickly as I can. But I feel that, if 
confirmed for this position, I will have a better opportunity 
to get in and assess the strengths and weaknesses and will get 
to work on fixing what needs to get fixed.
    Chairman Sarbanes. Of course, at one time GAO labelled HUD 
a high-risk agency. They have removed that rating. To what 
extent do you perceive HUD as still being in the high-risk 
status in terms of the operations of the Department?
    Ms. Meadows. I do not know the answer to that and I really 
do not want to speculate on that until I have an opportunity to 
get in and again assess the situation. I haven't had any reason 
to think there are any crises at this time.
    Chairman Sarbanes. Senator Reed.
    Senator Reed. Thank you very much, Mr. Chairman.
    Welcome, ladies, and thank you for your testimony.
    Ms. Tomb, following along on the theme that Senator 
Sarbanes set, and that is, part of your job is to--the right 
term might be or might not be--defend the Department. But one 
of your reforms I think is to try to focus attention on the 
housing issues that Americans confront today. Many of us feel 
that there is a real crisis in housing in terms of 
affordability, accessibility, that not only affects where one 
lives, but also if one can be an effective student in school if 
you are a child and on and on and on. And so, I would ask 
simply, is it your intention not only to defend the Department, 
but also to illuminate the issues of housing in this country?
    Ms. Tomb. Thank you, sir. If confirmed, I think it is 
important that all of those issues become top priority for 
everyone. And so, one of my goals will be, again, if confirmed, 
sir, to communicate the importance of housing and community 
development and how it affects all aspects of people's lives.
    Senator Reed. Thank you.
    Ms. Meadows, what do you believe are the biggest challenges 
you face? Again, Senator Sarbanes, I think set the context very 
well. This is an agency that has been criticized routinely by 
GAO. This is an agency that has been beaten about the head and 
shoulders by many in the Senate and the House, sometimes I 
think as an after-the-fact justification for not putting enough 
money into housing programs in this country. But, nevertheless, 
as you contemplate taking this role, what are the key 
challenges you see in terms of the administration of HUD?
    Ms. Meadows. Well, I see going in and looking at the 
policies and procedures and the systems. It is a big agency.
    Making the Department more accountable for the systems, the 
procurement, the IT, the internal infrastructure, making sure 
that there are accountability measures in place, that there are 
performance measures in place with outcomes, and ensuring that 
the program offices have the resources they need to get their 
jobs done.
    Senator Reed. What are the important procurement issues 
that are facing the Department, since I believe that that will 
be part of your responsibilities?
    Ms. Meadows. If confirmed, that will be one of my top 
priorities, to look at the procurement processes, and the IT 
processes. I have not had the opportunity to get in and really 
assess the strengths and weaknesses of the different programs. 
But that will be a top priority for me if I am confirmed.
    Senator Reed. In your prior experience, and you have 
administrative experience as indicated in your resume, how many 
people generally were you supervising? What was the size of the 
agencies? I know that the Department of Transportation is 
significant. Is that comparable to your responsibilities at 
HUD, in your view?
    Ms. Meadows. No, the staff was not as big in the Office of 
the Executive Secretary. We certainly had responsibility to 
provide support for all of the offices within the U.S. 
Department of Transportation. I have a similar function here. 
If confirmed, my responsibility will be to provide resources to 
all the offices.
    It is a larger staff but I certainly won't be responsible 
for each individual one. They have managers and supervisors. I 
see the Assistant Secretary for Administration having five or 
six direct reporters who will have large staffs and have the 
expertise and have been there a long time and I will rely on 
that.
    Senator Reed. Well, you are entering into this position at 
a time when the agency has improved. That is clear. GAO has 
taken them off their--whatever the proper term.
    Ms. Meadows. High risk.
    Senator Reed. Their high-risk agency list. And your goal is 
not only to keep them off that list, but also to improve the 
performance of the agency dramatically because, ultimately, it 
is about spending resources wisely on housing, not on 
administration. So, you have that task.
    I wish you well.
    Ms. Meadows. Under Secretary Martinez's leadership, I think 
we will leave it better off than we found it.
    Senator Reed. I hope so. We are going to try to make sure 
that happens, in our own meager way.
    Finally, Ms. Tomb, I am just intrigued. Where do your 
parents come from in Ireland?
    Ms. Tomb. They are sitting right here behind me. They are 
from County Mayo in the western part of Ireland.
    Senator Reed. County Mayo. Well, that alone is commendable.
    Ms. Tomb. Yes, I know.
    [Laughter.]
    Senator Reed. Thank you, Mr. Chairman.
    Ms. Tomb. Thank you, sir.
    Chairman Sarbanes. Ms. Meadows, I want to pursue this 
procurement issue which Senator Reed raised.
    One of the reasons HUD received this high-risk rating from 
the GAO was the poor oversight of procurement. Now to deal with 
that, or in response to that, Secretary Cuomo hired a Chief 
Procurement Officer. But he had that officer report directly to 
him or the Deputy Secretary. So they, in effect, elevated the 
Procurement Officer in an effort to sort of clear up that 
problem. The National Academy of Public Administration said 
this change was a key reason for improvement in the procurement 
in the Department.
    Now HUD has restructured the Office of Administration so 
that the Chief Procurement Officer will report to the Assistant 
Secretary instead of directly to the Secretary. And I guess 
there is some concern about what will happen to procurement 
reform under this arrangement.
    I do note that apparently, the Chief Procurement Officer at 
HUD who was the one who sort of did the improvements that 
received this favorable or laudatory comment from the National 
Academy of Public Administration, has retired. So what is your 
thinking on this procurement issue?
    Ms. Meadows. I think procurement is a very important part 
of any Federal agency's functions. I certainly am not well 
versed on the procurement situation at HUD at this point in 
time. I do not really want to speculate on whether that was 
good or bad.
    I was a procurement officer years ago. I understand the 
importance of procurement and I can assure you that I will be 
spending a lot of time making sure that the procurement reforms 
that are in place are still intact.
    Chairman Sarbanes. I guess your immediate challenge will be 
to get a new procurement officer.
    Ms. Meadows. Yes, sir. There are some procedures in place, 
or there are candidates, I understand, that have been brought 
forward. But I have not been part of that process.
    Chairman Sarbanes. It is a tremendous challenge. We have 
had a lot of difficulty with HUD and its administration over 
the years. As Senator Reed has pointed out, it is an issue in 
which this Committee has interested itself, almost by 
necessity. It is an issue that obviously we will be monitoring 
closely as we proceed ahead.
    But it is a very large agency and, unfortunately, it has 
had these problems, so serious at one point that they received 
this high-risk designation, which not all that many--thank 
goodness--agencies--well, I was going to say achieve, but I 
guess a better way to put it would be sink to or something of 
that sort.
    We are very concerned about the operations of HUD.
    Ms. Tomb, the only other thing I want to raise with you is 
many of these HUD programs are very complex. You have probably 
seen that from your work at Fannie Mae, with the Foundation.
    I think some thought needs to be given as to how the 
Department communicates with the general public about what it 
is trying to do and how it is trying to do it.
    I think the public does not fully understand the importance 
of the work and exactly how HUD is going about and trying to 
accomplish its objectives. And presumably, that is a matter 
that will fall under your jurisdiction. Have you had any chance 
to talk with the Secretary about that?
    Ms. Tomb. I have not had a chance to talk to him directly 
about that, sir. But in the interview process, it was 
definitely something that came up. He was very concerned about 
the perception, in many cases, rightfully so, that exists.
    If confirmed, one of the first things I would like to do is 
really work with the current staff there to come up with some 
techniques and some alternative uses of the resources we have 
to communicate to those who we interact with most, and that 
would be the consumers.
    With my background I feel I can bring a lot from the public 
education campaigns that I have worked on. For instance, we did 
one on educating people on the importance of credit, 
particularly in the low- to moderate-income. There were some 
cultural differences in how people approach credit and 
understanding that if you pay your bills late, even if they are 
late, that there still are some adverse effects of that.
    So, I believe, if given the opportunity, that I will make 
it a priority to really be thoughtful about how do we educate 
people on the importance of HUD and the work that we are doing, 
and try to overcome the public perception that exists of HUD, 
and to talk about the good work that we will be doing.
    Chairman Sarbanes. Thank you.
    Senator Reed, any further questions?
    Senator Reed. No, Mr. Chairman. Thank you.
    Chairman Sarbanes. Thank you both very much for appearing 
before the Committee.
    The hearing stands adjourned.
    [Whereupon, at 3:17 p.m., the hearing was adjourned.]
    [Prepared statements and biographical sketches of the 
nominees supplied for the record follow:]
               PREPARED STATEMENT OF DIANE LENEGHAN TOMB
            Assistant Secretary of Public Affairs-Designate
            U.S. Department of Housing and Urban Development
                           December 18, 2001
    Mr. Chairman, Senator Gramm, and distinguished Senators, it is a 
privilege to appear before you today as the nominee for Assistant 
Secretary of Public Affairs for the U.S. Department of Housing and 
Urban Development. And thank you Congressman Portman for your kind 
introduction.
    I am honored that Secretary Martinez and President Bush nominated 
me to serve in this position, and that you are taking the time to 
consider my nomination.
    Joining me are my husband, parents, and in-laws. As proud as I am 
to be here, they are pretty excited, too.
    My parents came to this country from Ireland in 1959 in search of 
opportunities. My parents chose America on my behalf. I could not be 
more grateful for that choice than I am today.
    The U.S. Department of Housing and Urban Development's core mission 
is to help families find affordable, decent housing and to find 
solutions to the housing and community development challenges in 
America. Creating opportunities for all Americans to become homeowners 
is a fundamental component of HUD's mission.
    The Public Affairs Office at HUD plays an essential role in 
educating the public about HUD's initiatives. If confirmed, I look 
forward to keeping the media and all interested parties informed on 
HUD's work. I believe an informed public is crucial to the democratic 
process and leads to better policymaking.
    My career has been centered on communications, and most often on 
public education campaigns. As the Senior Vice President of 
Communications at the Fannie Mae Foundation, I have spent the last 4 
years developing ways to communicate the importance of homeownership 
and demonstrating how owning a home is a gateway to opportunity and 
improvement for individuals, families, and communities. It is an honor 
to continue to focus on these important issues.
    America is now in a renaissance of homeownership. More than 70 
million families own their own home. This is as high as that number has 
ever been, and it encourages us to spread the opportunity to even more 
people. In particular, I look forward to being a part of HUD's effort 
to reach out to America's minority communities that do not yet share in 
the same high level of homeownership. Secretary Martinez has asserted 
that one of HUD's top priorities will be just that, and that it will be 
worth the effort.
    Work in the realm of housing becomes a lot more personal when we 
remember that it all boils down not to numbers and reports, but to a 
real and unmistakable impact on the lives of individuals, families, and 
kids. At the end of the day, HUD exists for one reason only: To make 
life better for people.
    With your approval, my role will be to keep the public informed of 
this agenda as directed by the Administration.
    Thank you again for this opportunity to address you today. This 
concludes my testimony. I am prepared to answer any questions or 
comments you may have.


















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