[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]




 
 INVESTIGATION OF MANAGEMENT PROBLEMS AT LOS ALAMOS NATIONAL LABORATORY

=======================================================================

                                HEARINGS

                               before the

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                     FEBRUARY 26 and MARCH 12, 2003

                               __________

                           Serial No. 108-13

                               __________

       Printed for the use of the Committee on Energy and Commerce


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

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                    COMMITTEE ON ENERGY AND COMMERCE

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                      Ranking Member
FRED UPTON, Michigan                 HENRY A. WAXMAN, California
CLIFF STEARNS, Florida               EDWARD J. MARKEY, Massachusetts
PAUL E. GILLMOR, Ohio                RALPH M. HALL, Texas
JAMES C. GREENWOOD, Pennsylvania     RICK BOUCHER, Virginia
CHRISTOPHER COX, California          EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                 FRANK PALLONE, Jr., New Jersey
RICHARD BURR, North Carolina         SHERROD BROWN, Ohio
  Vice Chairman                      BART GORDON, Tennessee
ED WHITFIELD, Kentucky               PETER DEUTSCH, Florida
CHARLIE NORWOOD, Georgia             BOBBY L. RUSH, Illinois
BARBARA CUBIN, Wyoming               ANNA G. ESHOO, California
JOHN SHIMKUS, Illinois               BART STUPAK, Michigan
HEATHER WILSON, New Mexico           ELIOT L. ENGEL, New York
JOHN B. SHADEGG, Arizona             ALBERT R. WYNN, Maryland
CHARLES W. ``CHIP'' PICKERING,       GENE GREEN, Texas
Mississippi                          KAREN McCARTHY, Missouri
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
STEVE BUYER, Indiana                 LOIS CAPPS, California
GEORGE RADANOVICH, California        MICHAEL F. DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire       CHRISTOPHER JOHN, Louisiana
JOSEPH R. PITTS, Pennsylvania        TOM ALLEN, Maine
MARY BONO, California                JIM DAVIS, Florida
GREG WALDEN, Oregon                  JAN SCHAKOWSKY, Illinois
LEE TERRY, Nebraska                  HILDA L. SOLIS, California
ERNIE FLETCHER, Kentucky
MIKE FERGUSON, New Jersey
MIKE ROGERS, Michigan
DARRELL E. ISSA, California
C.L. ``BUTCH'' OTTER, Idaho

                  David V. Marventano, Staff Director

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

              Subcommittee on Oversight and Investigations

               JAMES C. GREENWOOD, Pennsylvania, Chairman

MICHAEL BILIRAKIS, Florida           PETER DEUTSCH, Florida
CLIFF STEARNS, Florida                 Ranking Member
RICHARD BURR, North Carolina         DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire       JIM DAVIS, Florida
GREG WALDEN, Oregon                  JAN SCHAKOWSKY, Illinois
  Vice Chairman                      HENRY A. WAXMAN, California
MIKE FERGUSON, New Jersey            BOBBY L. RUSH, Illinois
MIKE ROGERS, Michigan                JOHN D. DINGELL, Michigan,
W.J. ``BILLY'' TAUZIN, Louisiana       (Ex Officio)
  (Ex Officio)

                                  (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Hearings held:
    February 26, 2003............................................     1
    March 12, 2003...............................................    91
Testimony of:
    Browne, John C., Senior Research Scientist and former 
      Laboratory Director, Los Alamos National Laboratory........   181
    Busboom, Stanley L., Staff Member and former Director, 
      Security Division, Los Alamos National Laboratory..........    97
    Darling, Bruce B., Senior Vice President, University Affairs 
      and Interim Vice President, Laboratory Management, 
      University of California:
        February 26, 2003........................................    66
        March 12, 2003...........................................   149
    Dickson, Frank P., Jr., Laboratory Counsel, Los Alamos 
      National Laboratory........................................   114
    Doran, Steven L., Consultant, Office of the President, 
      University of California...................................    20
    Erickson, Ralph E., Manager, Los Alamos National Laboratory 
      Site Office, National Nuclear Security Administration, U.S. 
      Department of Energy, Los Alamos...........................   190
    Friedman, Gregory H., Inspector General, U.S. Department of 
      Energy.....................................................    50
    Hernandez, John, former BUS-5 Team Leader, Los Alamos 
      National Laboratory........................................   171
    Marquez, Richard A., Associate Director for Administration, 
      Los Alamos National Laboratory.............................   171
    McDonald, Jaret..............................................    23
    McTague, John P., Professor of Materials, Materials 
      Department, former Vice President for Laboratory 
      Management, University of California, Santa Barbara........   184
    Salgado, Joseph F., former Principal Deputy Director, Los 
      Alamos National Laboratory.................................   104
    Walp, Glenn A., Consultant, Office of the President, 
      University of California...................................    12
Additional material submitted for the record:
    Salgado, Joseph F., former Principal Deputy Director, Los 
      Alamos National Laboratory, letter dated April 10, 2003, 
      enclosing material for the record..........................   209

                                 (iii)




 INVESTIGATION OF MANAGEMENT PROBLEMS AT LOS ALAMOS NATIONAL LABORATORY

                              ----------                              


                      WEDNESDAY, FEBRUARY 26, 2003

                  House of Representatives,
                  Committee on Energy and Commerce,
              Subcommittee on Oversight and Investigations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 1 p.m., in 
room 2322, Rayburn House Office Building, Hon. James C. 
Greenwood (chairman) presiding.
    Members present: Representatives Greenwood, Walden, 
Ferguson, Rogers, Tauzin (ex officio), Deutsch, and Schakowsky.
    Also present: Representatives Wilson, Radanovich, Markey, 
Eshoo, Tauscher, and Tom Udall.
    Staff present: Ann Washington, majority counsel; Dwight 
Cates, majority staff; Michael Geffroy, majority counsel; Young 
Choe, legislative clerk; and Edith Holleman, minority counsel.
    Mr. Greenwood. Good afternoon. I apologize for the delay. 
This hearing of the Oversight and Investigations Subcommittee 
will come to order.
    Without objection, the subcommittee will proceed pursuant 
to committee rule 4(e). Is there objection to proceeding 
pursuant to rule 4(e)? What is it? We need to know that. 
Committee rule 4(e) is the new rule that allows that those 
members who are present at the time the hearing is gaveled to 
order who wish to forgo an opening statement will have an extra 
3 minutes accorded to them for questions. Without objection, we 
will pursue according to rule 4(e).
    This afternoon we hold the first day of our hearing to 
examine allegations of mismanagement and theft of government 
funds and property at Los Alamos National Laboratory. The focus 
of today's hearing will be on the evidence and allegations of 
what went wrong.
    We will hear from the people who first discovered these 
problems and first investigated the situation at Los Alamos, as 
well as others brought in to investigate as matters quickly 
spun out of control.
    The situation we begin to confront today is not your run of 
the mill theft and misuse of taxpayer property, as much as that 
demands our urgent attention in its own right. We also must 
examine what our committee investigators have learned is a 
disturbing breakdown in management controls and oversight at, 
of all places, an institution that pursues research critical to 
the Nation's security.
    At our next hearing, which we will hold within the next 
couple of weeks, we will be able to raise these serious 
questions directly with the management at the lab, those people 
charged with ensuring that things like don't happen. But today 
we turn to the people who identified the problems and their 
experiences in doing so.
    By way of background, as many of you know, the committee 
has been involved in an ongoing investigation of fraud, waste 
and abuse in government procurement through the purchase card 
program since July 2001. In fact, we had the Department of 
Energy before us just last April.
    At that hearing, DOE testified that they had little or no 
idea how the purchase card programs are operated at their 
contractor run facilities such as Los Alamos. Unfortunately, 
soon thereafter, we all got a close look at what DOE didn't 
know.
    The committee quickly became involved in the situation at 
Los Alamos in November of 2002 when press reports began to 
surface that several laboratory employees were under 
investigation by the FBI for misusing a government supply 
contract to buy goods for personal use. Our investigation soon 
discovered that was just the tip of the iceberg.
    We have learned that the property theft and mismanagement 
problems at Los Alamos extend far beyond the misuse of this one 
government supply contract by two lab employees. We have 
learned of a lab employee who allegedly attempted to use her 
government purchase card to buy a $30,000 Ford Mustang, another 
employee who used her purchase card at a local casino, and 
another employee who altered a travel voucher to obtain 
additional funds.
    We have learned of hundreds of thousands of dollars in 
unchecked theft of government property, including scores, if 
not hundreds, of lab computers and hundreds of other lost 
items, simply written off the lab's books each year.
    This property management system is surely in need of an 
overhaul. I find it astonishing that a laboratory that can 
develop the most advanced nuclear weapons systems on the face 
of the earth and technologies to rapidly detect radiological, 
biological or chemical attacks by terrorists cannot develop a 
system to simply keep track of its sensitive property and 
prevent theft of government property by its own employees.
    Our other key finding is a lack of accountability among 
both the lab's officers and employees with respect to poor 
inventory and fiscal controls. Simply put, cases of theft, 
misuse or loss of government property are not aggressively 
investigated, and usually no one is held accountable when it 
occurs.
    Indeed, the most decisive action taken by the lab to deal 
with this issue was its decision to unceremoniously fire the 
two security officials who were aggressively investigating 
these instances of mismanagement, misuse and theft.
    These two gentlemen, Mr. Glenn Walp and Mr. Steve Doran, 
both of whom are very experienced law enforcement officers, are 
here with us today. I very much look forward to hearing their 
testimony about their experiences at the lab when attempting to 
look into allegations of wrongdoing, and their suspicions as to 
why they were terminated from their positions.
    Also with us today on the first panel is Mr. Jaret 
McDonald, who works for a Los Alamos facilities management 
subcontractor and who was the first person to raise with Los 
Alamos management the concerns about theft. The determination 
to see these concerns addressed ultimately led to the current 
FBI investigation into the misuse of a government supply 
contract to buy personal camping and hunting equipment, among 
other things. He will describe his lengthy, until recently, 
unsuccessful efforts to get anyone at the lab to take his 
concerns seriously, and why he ultimately decided to contact 
the FBI directly in June of 2002.
    We will also hear today from the Honorable Greg Friedman, 
Inspector General for the Department of Energy. Mr. Friedman's 
office opened an inquiry in November into the allegations of 
management coverup of property and procurement problems and the 
terminations of Mr. Walp and Mr. Doran.
    Its initial report, issued last month, clearly expresses 
strong reservations about the manner in which senior laboratory 
management responded to these problems, including the 
terminations. I am pleased to have Mr. Friedman with us today 
and look forward to a more detailed discussion of his office's 
findings and recommendations.
    We are also joined today by Mr. Bruce Darling, the Interim 
Vice-President of Laboratory Management for the University of 
California, which operates Los Alamos under contract with the 
Department of Energy.
    Mr. Darling also became intimately involved in the matter 
before us when he traveled to the lab in November at the 
request of University of California President Richard Atkinson 
to review management concerns at the lab. We should note that, 
since UC's direct involvement in this matter began under Mr. 
Darling, UC has taken a series of personnel administrative 
actions in an attempt to begin reforming the lab management and 
systems, including replacing the lab's director and deputy 
director and the lab's director and deputy director of 
security.
    UC has also rehired Mr. Walp and Mr. Doran to advise the 
Office of the UC President as it continues its investigation 
into management problems at the laboratory. I am pleased to 
have Mr. Darling here today to add his insight into what 
exactly happened at the lab and what further plans UC has to 
correct these problems in the future.
    I thank all of the witnesses for attending. I now recognize 
the ranking member of the committee, Mr. Deutsch, for his 
opening statement.
    Mr. Deutsch. Thank you, Mr. Chairman. For many years this 
committee has been investigating the management at the Los 
Alamos National Laboratory by the University of California. The 
University and the laboratory's attempt to cover up management 
failures and its treatment of loyal employees who try to bring 
problems to management's attention and get them fixed has been 
a continuing theme of those hearings.
    Two years ago, the University promised that many changes 
would be made. It set up a special laboratory management 
council and committed to making changes in the Security 
Division. Our first two witnesses, Glenn Walp and Steve Doran, 
were hired to professionalize the criminal investigations and 
to make changes.
    What they found is that the laboratory did not want change. 
As a senior lab manager warned Mr. Walp a few months before he 
was fired, the laboratory is famous for eating its own 
children. Mr. Walp was told that he would be leveled with both 
barrels if he did not keep management happy and protect the 
lab's contract with the Department of Energy and, as we will 
hear later, he was leveled with both barrels.
    Today, however, we are looking at an unprecedented 
situation. Mr. Walp and Mr. Doran were actually rehired by the 
University, while the laboratory's director, deputy director, 
the director and deputy director of security and the head of 
audits and assessments were removed from their positions 
because of their management incompetence in controlling 
procurement and property and their failure to address the 
problems brought to their attention.
    This incompetence was only exacerbated when they tried to 
control Mr. Walp's and Mr. Doran's investigation into what was 
basically relatively routine criminal activity. The laboratory 
did not want any of this known, especially by this committee.
    What we are going to hear today is that in less than 2 
years these systems allowed three people in just one division, 
by using numerous suppliers and procurement vehicles, to buy 
all kinds of camping and hunting gear, including 251 knives, 18 
pair of binoculars, sleeping bags, Arctic jackets, hiking 
boots, Coleman lanterns, battery operated ice chests, and 
global positioning systems.
    They were not cheap. The binoculars cost up to $3,300 each, 
some of the knives $266 each. There were helmets and boxes of 
gloves for all-terrain vehicles, floor sanding equipment for 
facilities that had no wood floors, auto supplies when vehicles 
were maintained by the GAS, railroad ties for retaining walls 
that weren't built, welding tools for people who weren't 
supposed to weld, and over $5,000 of lock picking equipment, 
plus a CD containing instructions on how to pick locks, enough 
hand and shop tools to maintain an army. The perpetrators 
couldn't even figure out how to use it all.
    In addition, Mr. Chairman, our Federal dollars were going 
to pay these lab employees--actually, there is a receipt that 
actually went through the procurement process for Oakley 
sunglasses that, obviously, as you see from the copy, were 
approved, directly approved. Thank you.
    These were all ordered by a small group of people whose 
main job was to supervise a subcontractor that did the actual 
maintenance work and brought its own tools and supplies. 
Shockingly, the manager of this group was given high marks 
during these years for his ability to control costs.
    Even more shockingly, these purchases were rarely 
questioned by any of the contract administrators, even though 
the purchase of knives, for example, is not allowed in the 
laboratory, and what conceivable reason could they have for 
lock picking equipment.
    Where did all these purchases go? It is difficult to tell, 
since the majority of them do not appear to have gone through 
the regular inventory delivery system to be marked, and most of 
them did not require inventory controls, because they cost less 
than $5,000. But some of them were found in the houses of the 
implicated managers when the FBI raided them.
    How did the lab handle this? When Jaret McDonald, who is 
one of our witnesses today, went to the Security Division to 
ask for an investigation, the investigator, who remains on the 
lab's payroll today, received a list of all these purchases, 
agreed that they were suspicious, made a call to the FBI. But 
they did no serious follow-up for 7 months until Mr. McDonald 
went directly to the FBI.
    The FBI has focused on one contract, but our investigation 
shows that these same types of purchases were also made under 
several other contractors and vendor agreements. This is not 
the only instance in which procurement and financial controls 
were weak or nonexistent.
    Another employee working directly for the head of 
procurement used her credit card to get cash advances, as has 
been mentioned by the chairman, at various casinos. Why wasn't 
this picked up immediately, because like several other 
employees, she was both the buyer and the approver of purchases 
on her credit card. The same situation has been mentioned 
regarding purchase of a Mustang vehicle.
    Yet another employee was able to convert $1,800 to her own 
personal use by simply sending electronically a bogus travel 
plan and asking for an advance check. No supervisory approval 
was required. However, instead of allowing these instances to 
be handled by the appropriate law enforcement agencies, Mr. 
Walp and Mr. Doran, Joe Salgado, the lab's principal deputy 
director, and Frank Dickson, the lab's counsel, quickly and 
personally took over the management of the investigation.
    When Mr. Walp and Mr. Doran tried to do their job and work 
with outside law enforcement agencies to prosecute, Mr. Salgado 
and Mr. Dickson had them fired based on a flimsy 
justifications, some of which they knew were false. The real 
reason was that they were not protecting the laboratory and its 
contract with the DOE.
    Mr. Chairman, the procurement and property systems, but 
more importantly, the entire management of Los Alamos National 
Laboratory needs a complete overhaul. It is not enough to say 
that there is a great science at the lab. Employees have to 
remember that they are public servants with public trust, and 
those individuals who bring fraud, waste, abuse and 
mismanagement to the lab's attention should be honored, not 
pursued and ostracized in their community.
    I hope this hearing will be the beginning of such a 
process. Thank you.
    Mr. Greenwood. The Chair thanks the gentleman and 
recognizes----
    Mr. Deutsch. Mr. Chairman, may I also just mention, the 
ranking Democrat on the full committee, Mr. Dingell, probably 
will not be here, and if I could submit his statement for the 
record.
    Mr. Greenwood. Without objection, the statement will be 
made a part of the record.
    [The prepared statement of Hon. John D. Dingell follows:]
    Prepared Statement of Hon. John D. Dingell, a Representative in 
                  Congress from the State of Michigan
    Thank you, Mr. Chairman, for holding this hearing, which I 
understand is the first of three hearings on the University of 
California's and the Department of Energy's management of the Los 
Alamos National Laboratory. We have been holding hearings on the lab 
for many years, with many promises of reform, mostly unfulfilled. 
Today, we will hear more promises. The question that everyone, 
including the Department, must answer is whether they are too little, 
too late.
    Over two years ago, the University promised the Congress and this 
Committee that it would make major changes in its management of its 
Laboratories, particularly in the area of property control. Appendix O 
was added to the University's contract. A senior laboratory management 
council was established that was going to shape up the management. 
Security and safeguard efforts were going to be strengthened.
    This management council did put the National Ignition Facility at 
Lawrence Livermore National Laboratory back on track, but the day-to-
day management of Los Alamos--a billion-dollar business--appears to be 
worse than ever. There are still no basic controls. It is still 
operating with its ``unique'' procurement systems left over from the 
Manhattan Project days and outside of standard University operating 
practices.
    I am particularly pleased that Glenn Walp, Steven Doran, and Jaret 
McDonald are testifying today. They each have compelling stories. For 
example, Mr. Walp was told when he went to Los Alamos that he was there 
to change things in security, particularly in the investigation of 
property theft. But when he tried to make changes that would hold 
Laboratory employees responsible for their criminal behavior, he was 
fired because his ``customers''--the top management of the Laboratory--
didn't want the FBI or any other law enforcement agencies on its 
premises. This management tried to run the investigations themselves, 
and when the FBI said they had ``screwed up,'' they blamed Mr. Walp, 
firing him and his colleague Mr. Doran. That was an outrage.
    So now there is yet another management council and more promises 
that we will hear about today. Two management consulting firms are at 
Los Alamos as we speak. They will recommend more changes. But, once 
again, we cannot know if these are only promises to make us go away, or 
if they have real meaning and will actually be implemented.
    And will people who in good faith try to make these changes be held 
in high repute in the Los Alamos community, or will they be seen as 
troublemakers and ostracized when the lights of the press fade? 
Already, one of our witnesses has been told that his actions may not be 
good for his career. This reactionary attitude must be rooted out. 
People who bring environmental, safety, procurement and property 
management, and fraud, waste and abuse to their managers' attention 
should be rewarded.
    The University of California must do better, or we must find 
someone who can. There are many universities, government agencies and 
businesses that can do research without letting their property 
management, procurement, travel and other systems be run like the 
proverbial cookie jar.
    One last thing, Mr. Chairman. When Bill Richardson was Secretary of 
Energy, he was pilloried mercilessly, and very often unfairly, by some 
on this Committee and others for security and property control 
shortcomings at Los Alamos. The lab and the University were, frankly, 
largely let off the hook in Congressional hearings. The Department of 
Energy is ultimately responsible for what happens at Los Alamos, but I 
also hope everyone now understands the University of California and the 
lab management played the key role in these chronic management 
shortcomings. Now the University has one last chance to fix things.

    Mr. Greenwood. The gentleman from Louisiana, chairman of 
the full committee, Mr. Tauzin.
    Chairman. Tauzin Thank you, Chairman Greenwood.
    Let me first point out, as we've done very often, one of 
the most essential functions of this subcommittee is to cast 
the bright light of sunshine upon areas within our full 
committee's jurisdiction that are susceptible to waste, abuse 
of taxpayer dollars, and outright fraud and theft, as this case 
may be.
    The serious and disturbing problems with management and 
theft of government property at Los Alamos National 
Laboratories demonstrate very clearly why this investigative 
function is so important to this committee, to the Congress, 
and to the public at large.
    The facts that this committee and its investigation have 
uncovered, which we will begin to explore today, reveal a 
troubling story of looting at the lab. They also reveal what 
appears to be an utter lack of interest by senior laboratory 
managers to do anything the theft and fraud that was apparently 
going on right under their noses.
    In fact, we will hear today that the lab's management not 
only ignored this malfeasance, but in some cases actually tried 
to prevent others from exposing this malfeasance. Management 
actually turned its back on the good guys trying to make 
matters right.
    I won't repeat the chairman's discussion of the committee's 
findings in detail except to say there appears to have been 
inadequate inventory controls and oversight at Los Alamos.
    Now I do have two other questions. How long has this gone 
on at the facility, and what other gaps in property management 
and, by extension, what other gaps in security exist at this 
vital lab?
    What I found most astonishing in this investigation is that 
this theft, this fraud, this abuse, takes place in such a vital 
facility for this Nation. It is a facility this country, this 
Nation, puts an awful lot of trust in with some of the most 
sensitive information that our government and our people are 
entrusted with.
    Mr. Chairman, we will begin the examination today, as you 
suggested, and give this our most close--our closest scrutiny, 
but we must understand as best we can what happened and why, 
and then do everything in our power to fix it.
    Now we have some serious matters, obviously, before us, but 
I am confident that you as chairman of this important 
subcommittee--I've seen your work before. We are going to get 
to the bottom of this, and we will have some recommendations 
about how to make sure this doesn't happen anymore. But I want 
to extend my personal welcome to the witnesses before us.
    I want you to know how much the committee appreciates the 
fact that some of you had to go through an awful lot in recent 
months as you've tried to do what was right, and particularly 
to Mr. Walp and Mr. Doran, I want to thank you for being here 
and for doing your job.
    I was pleased that our committee--our committee letter 
insisting that you be rehired and put back on the job was 
honored and that you've had a chance to follow through on your 
investigation.
    I am particularly pleased to welcome Mr. McDonald. Like 
Sherron Watkins before us in the Enron investigations, we 
learned the importance of whistleblowers, of people who put 
themselves in the terrible, awkward position we know you feel 
yourself in today, Mr. McDonald, who went not once, but twice, 
to management trying to tell them what was going on and, 
frustrated with the lack of response you got, eventually had to 
go to the authorities, as you have to the FBI.
    I realize you are here under friendly subpoena, and that is 
kind of interesting that we had to do this to facilitate your 
attendance here, and the information you bring us also had to 
be delivered by subpoena.
    I note that for the record, but I most of all want to say 
thank you to you and emphasize again, Mr. Chairman, and to all 
the members of this most important committee of our full 
committee how critical it is that this country protect 
whistleblowers who try to do the right thing and who come 
forward, as you have, Mr. McDonald, and try to protect 
investigators such as the other two, to make sure that we honor 
and respect the role you play in this most awkward 
circumstance.
    I want to say one more time that we will not tolerate any 
ill treatment of any DOE, Los Alamos or subcontract employee 
who is willing to assist this committee as we move forward with 
this investigation. We will not tolerate it. We will insist 
that you be treated fairly and that anyone else who wants to 
assist us is not harmed in any way by their willingness to 
assist this committee in its work, and this country in solving 
the problems that are presented to us in this awful mess.
    Again, Mr. McDonald, you are to be commended, as we 
commended Sherron Watkins, and I notice that Time magazine 
commended whistleblowers like yourself. You are critical to 
this country and to the taxpayers of this country, and we honor 
and respect you for being here today. Thank you.
    [The prepared statement of Hon. W.J. ``Billy'' Tauzin 
follows:]
 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce
    Thank you, Chairman Greenwood. You know that I've pointed out 
before that one of the essential functions of this Subcommittee is to 
cast a bright light on areas within the Full Committee's jurisdiction 
that are susceptible to waste and abuse of taxpayer dollars--and 
outright fraud and theft, as this case may be.
    The serious and disturbing problems with mismanagement and theft of 
government property at Los Alamos National Laboratory demonstrate very 
clearly why this investigative function is so important to the 
Committee and to the public.
    The facts that this Committee's investigation has uncovered, which 
we will begin to explore today, reveal a troubling story of looting at 
the lab. They also reveal what appears to be an utter lack of interest 
by senior laboratory managers to do anything about the theft and fraud 
going on right under their noses.
    In fact, we'll hear today that the lab's management not only 
ignored this malfeasance, but in some cases actually tried to prevent 
others from exposing this malfeasance. Management actually turned its 
back on the good guys trying to make matters right.
    I won't repeat the Chairman's discussion of the Committee's 
findings in detail, except to say that there appears to be very 
inadequate inventory controls and oversight at Los Alamos. But I do 
have two other questions: How long has this gone on at this facility? 
And what other gaps in property management and--by extension--security 
exist here?
    What I find most astounding about this management and oversight 
mess, this fraud and theft and abuse, is that it takes place at such a 
vital facility. It takes place at a facility that our Nation trusts 
with some of our most sensitive information.
    Mr. Chairman, what we begin to examine today, as you suggested, 
requires our closest scrutiny. We must understand as best we can what 
has happened and why--and then do everything within our power to ensure 
that it is fixed.
    We have serious matters before us. But I am confident that, with 
the help of Members on both sides of the aisle, this Committee will 
pursue them and help fix them.
    Let me extend my welcome to the witnesses. And let me also add that 
the Committee appreciates very much that some of you have gone through 
quite a lot in recent months as you tried to do what was right. 
Sometimes it does just take a few good men (and women, of course) to 
set things right. We commend you for that. And let me assure you that 
this Committee will not tolerate any ill treatment of any DOE, Los 
Alamos or subcontractor employee who assists this Committee and this 
Nation in getting to the bottom of this mess at Los Alamos.
    Thank you again, Mr. Chairman. I look forward to the testimony and 
the questions, and yield back the remainder of my time.

    Mr. Greenwood. But we can't guaranty you to be on the cover 
of Time magazine.
    The gentlelady from Illinois, Ms. Schakowsky. Do you wish 
to make an opening statement or have 3 extra minutes?
    Ms. Schakowsky. I would like to.
    Mr. Greenwood. The gentlelady is recognized for an opening 
statement.
    Ms. Schakowsky. Thank you, Mr. Chairman and ranking member 
Deutsch, for convening today's hearing and for your leadership 
on this important subject.
    In my previous role as the ranking Democrat on the 
Government Reform Subcommittee on Government Efficiency and 
Financial Management, I had the opportunity, along with my 
chairman, Steve Horn, to look at government procurement 
practices and, unfortunately, the numerous cases of abuse that 
exist. We were particularly focusing on the Department of 
Defense, but it suggested that this may be occurring throughout 
the U.S. Government.
    The committee today will review findings that are even more 
concerning, because it suggests a lack of attention to critical 
information at one of the Nation's most critical national 
security installations, the Los Alamos National Laboratory.
    We will hear about illegal use of taxpayer funds, theft of 
government property, lax to nonexistent inventory controls, and 
a culture of denial and deceit at Los Alamos. What is most 
troubling to me, though, is the fact that management at the Los 
Alamos National Laboratory knew about the problems and were 
more concerned with self-preservation and the image of the lab 
than with their responsibility to the American public.
    One would think that news of individuals using government 
funds to procure items such as lockpicking sets, hunting 
knives, golf equipment, and numerous other illegitimate 
purchases would immediately raise flags and touch off 
disciplinary and other actions.
    What little we have seen at Los Alamos in that regard came 
only after inquiries by this committee, the press, and the 
Department of Energy's Inspector General. Energy and Commerce 
Committee staff uncovered serious problems. The staff 
investigation brought to light the fact that Los Alamos 
National Laboratory has no system in place to conduct inventory 
review for items that are either not sensitive, computers and 
the like, or cost less than $5,000.
    In fact, the Department of Energy does not require 
inventory controls for such items. According to committee 
documents, as of February 2002 items that were either sensitive 
or worth more than $5,000 went unaccounted for to the tune of 
$723,000, and millions of dollars worth of very expensive 
equipment were stolen as well.
    This leads me to the question whether the problems we are 
seeing at Los Alamos extend to the broader Energy Department, 
and Mr. Chairman, I hope you will consider calling Secretary 
Abraham and Acting National Nuclear Security Administration 
Administrator Brooks to come to discuss these issues with the 
subcommittee.
    Beyond the staff mismanagement and illegal procurement 
issues, what troubles me most is the retaliation against Los 
Alamos personnel who tried to investigate allegations of abuse 
of taxpayer funds, and it sounds like from the opening 
statements so far that this is a major concern to the committee 
and its leadership.
    These individuals were doing their patriotic duty by 
raising concerns over Los Alamos' serious management failures, 
and instead of being commended and encouraged, they were fired.
    Mr. Chairman, I want to thank you again for convening this 
important hearing. Improving homeland security and taking care 
of our struggling economy are top priorities for my 
constituents and those around the country. What went on at Los 
Alamos undermines both of those important efforts, and I look 
forward to working with you to improve the situation.
    If we cannot at least root out theft and mismanagement at 
Los Alamos, how can we confidently guaranty the security of the 
Nation's nuclear weapons stockpile to the American people? I 
welcome our witness and look forward to their testimony.
    Mr. Greenwood. The Chair thanks the gentlelady. The 
gentleman from Oregon, the vice chairman of the subcommittee, 
Mr. Walden, do you wish to make an opening statement?
    Mr. Walden. Thank you, Mr. Chairman. I am going to waive my 
opening statement under our rules to give my time at Q&A.
    Mr. Greenwood. Very well. Mr. Ferguson has come and gone. 
Mr. Rogers?
    Mr. Rogers. I will waive my statement, Mr. Chair.
    Mr. Greenwood. All righty. Now we are joined by other 
members of the full committee who are not members of the 
subcommittee, Mr. Radanovich, Ms. Wilson, Ms. Eshoo. Mr. Markey 
is expected. We are also joined by Ms. Tauscher of California 
and Mr. Udall of New Mexico who will be observing. Glad to have 
their presence as well.
    [Additional statements submitted for the record follow:]
   Prepared Statement of Hon. George Radanovich, a Representative in 
                 Congress from the State of California
    Mr. Chairman, today's hearing is a vital step in restoring and 
maintaining confidence in the national security of our nation. I 
strongly believe in the outstanding work of Los Alamos and in its 
employees.
    The most unfortunate aspect of the issue before us today is that 
the apparent wrongdoing by a few employees has reflected badly on the 
exceptional work by so many others who devote themselves to the 
nation's security.
    I continue to have confidence in the high quality of the weapons 
program and the scientific and technical work of Los Alamos. By taking 
many corrective steps, I believe the lab recognizes that the business 
and administrative practices of the laboratory need to be revamped so 
that they will rise to a level of quality similar to the quality of the 
science at the lab.
    In order to restore the confidence of the nation, the lab has 
implemented numerous oversight changes involving administrative and 
business operations:

 The University has made sweeping management changes at Los 
        Alamos, and senior University administrators have taken on 
        direct, personal responsibility for managing Los Alamos 
        functions;
 President Atkinson has established an interim Oversight Board 
        of University Regents and scientific experts to guide the 
        Interim Director;
 All administrative and business operations will report to the 
        University of California Office of the President, for the 
        purpose of ensuring that the recommended changes to laboratory 
        business practices are implemented in a timely and effective 
        manner;
 the University has directed an External Review Team to expand 
        its recently completed review of the Lab's purchase card 
        system;
 As soon as the expanded work is done, the Lab will report the 
        results to the Committee and to the public and will immediately 
        address any deficiencies identified by the External Review 
        Team.
    These changes reflect the University's deep concern about the 
allegations that have been made about Los Alamos business practices and 
their absolute and steadfast commitment to addressing them in a timely 
manner.
    I trust the Lab will continue to cooperate fully with the 
legislative bodies and agencies investigating these matters, and to 
support the thousands of dedicated employees at Los Alamos so that they 
can remain focused on their valuable work on behalf of the American 
people in a time of war.
    Mr. Chairman, I look forward to working with you to ensure that 
Congress and this committee are satisfied that the University of 
California lives up to its long history of exceptional service to this 
nation.
                                 ______
                                 
Prepared Statement of Hon. Mike Ferguson, a Representative in Congress 
                      from the State of New Jersey
    I would like to thank the Chairman for holding this important 
hearing and for his ongoing work investigating fraud and the abuse of 
government procurement procedures.
    My constituents expect their tax dollars to be managed properly, 
and I know they appreciate the Chairman's scrutiny of matters where the 
public's trust is broken.
    We are here today to investigate possible wrongdoing at a vital 
national institution, where order, secrecy and adherence to regulation 
are essential.
    Last fall, word of procurement improprieties at the Los Alamos 
National Laboratory came to the Committee's attention, prompting swift 
and necessary action.
    The allegations surfacing from Los Alamos are startling. It is 
reported that audits have revealed that the lab has lost $2.7 million 
in computers and other technical equipment. In addition, a lab-
sponsored audit has uncovered millions of dollars in unsubstantiated 
procurement credit card purchases, allegedly ranging from camping 
equipment to a Ford Mustang.
    Mr. Chairman, Homeland Security must be one of our highest 
priorities, and it goes without saying that security at our nation's 
nuclear institutions is essential. I look forward to hearing from the 
witnesses today, identifying the problems at the lab and working to 
continue the process of securing the Los Alamos facility.
    It is crucial that corruption and wrongdoing are rooted out from 
our most sensitive facilities, and I believe that this hearing is a 
step toward that goal. Thank you again, Mr. Chairman for you continued 
scrutiny of this matter.
                                 ______
                                 
Prepared Statement of Hon. Anna G. Eshoo, a Representative in Congress 
                      from the State of California
    I'd like to thank Chairman Greenwood and Ranking Member Deutsch as 
well as the Chairman and Ranking Member of the full Committee Mr. 
Tauzin and Mr. Dingell for allowing me to participate in this important 
hearing.
    The accusations of fraud, mismanagement, and reprisals against 
whistleblowers at the labs managed by the University of California, 
both Los Alamos and Lawrence Livermore Labs, are extremely serious and 
sobering.
    Clearly, there have been errors that the University of California 
must take full responsibility for.
    Systemic changes must be instituted to ensure that whistleblowers 
are protected, respected and never against.
    The University of California must also resolve these serious abuses 
in a way that provides the Members of this Committee, the full Congress 
and the American people a certainty that they will not occur again.
    This hearing offers the University of California the opportunity to 
tell the Congress and the American people what it has found and what 
they are doing to remedy the serious problems at Los Alamos.
    It is important for this hearing to be followed by six-month 
progress reports for the foreseeable future.
    It is critical that the University of California demonstrably 
reaffirm that the protection of our national security is its highest 
priority and that it has not been compromised.
    The work done by the labs includes some of our nation's most 
guarded secrets.
    We must be confident that these secrets and the work of the labs 
has not and will not be compromised.
    As we examine the management problems that have been uncovered by 
this Committee, the Inspector General, and through the University of 
California's own internal investigation, we must also keep the 
important work done at the labs in proper perspective.
    This important work and the research that the labs conduct are 
critical to protecting America from hostile regimes and terrorist 
organizations.
    Recent events have illuminated this work.
    For example, shortly after the September 11th terrorist attacks, 
Lawrence Livermore National Laboratory reported that North Korea was 
resuming its nuclear weapons program.
    The International Atomic Energy Agency weapon's inspectors who are 
currently in Iraq were trained at Los Alamos.
    We've recently read about a new weapon developed jointly at 
Lawrence Livermore and Los Alamos that could knock out a region's 
electric circuitry without harming civilians.
    The work the Labs is ongoing and critically important to our 
collective homeland security.
    Finally, the University of California must demonstrate their 
commitment to changing the culture of mismanagement that has existed at 
the Labs over the years. This is indisputable.
    I encourage this Committee to continue its important role in 
overseeing this commitment, affording the University of California the 
opportunity to see them through.

    Mr. Greenwood. With that, I would ask unanimous consent. 
One of the witnesses, Mr. Jaret, has photographs that 
supplement his testimony, and without objection--well, I would 
ask for unanimous consent that he be permitted to show the 
photographs. Seeing no objections, that will be in order.
    At this time, I would advise our witnesses that, pursuant 
to the rules of this subcommittee and the rules of this House, 
you are entitled--well, we take our testimony under oath here. 
Do you have any objections to giving your testimony under oath? 
Okay.
    You are also entitled to be represented by counsel. Do any 
of you wish to be represented by counsel this afternoon? In 
that case, if you would stand and raise your right hands, I 
will swear you in.
    [Witnesses sworn.]
    Mr. Greenwood. So saying, you are all under oath, and we 
will recognize Mr. Walp first for your opening statement, sir. 
Welcome.

     TESTIMONY OF GLENN A. WALP, CONSULTANT, OFFICE OF THE 
 PRESIDENT, UNIVERSITY OF CALIFORNIA; ACCOMPANIED BY STEVEN L. 
   DORAN, CONSULTANT, OFFICE OF THE PRESIDENT, UNIVERSITY OF 
                CALIFORNIA; AND JARET McDONALD.

    Mr. Walp Thank you. Honorable Chairman Greenwood and 
Honorable Members of the subcommittee, ladies and gentlemen, 
good afternoon. My name is Glenn Walp. I was Director of the 
Office of Security Inquiries (OSI) at the Los Alamos National 
Laboratory from January 22, 2002, until Laboratory officials 
terminated my employment on November 25, 2002.
    I hold a bachelor's and a master's degree in criminal 
justice, and I am in the proposal stage of my doctorate in 
criminal justice. I am graduate of the FBI National Academy, 
the FBI National Executive Institute. Among the many law 
enforcement positions I have held, I was Commissioner of the 
Pennsylvania State Police, the largest State police 
organization in America, a member of the Governor's cabinet, 
and responsible for administering a budget of over $400 
million.
    When I first came to Los Alamos, Mr. Stanley Busboom, my 
second level manager, and Mr. John Tucker, my immediate 
supervisor, told me that I was hired because of my expertise in 
law enforcement. They told me to professionalize all OSI 
operations, and candidly acknowledged to me that much of the 
OSI staff was incompetent, and their work product was severely 
deficient.
    They told me to bring in new staff, which I did. In the 
first few months, I improved the OSI reporting system, which 
was in disarray, ensured training of OSI personnel in good 
investigative practices, and initiated investigations on major 
security and safeguards issues.
    Although many lab employees told me that they were 
delighted to see my office address the serious and pervasive 
problems of theft and gross waste of government funds, it was 
not long before my supervisors began to obstruct my efforts and 
those of other OSI employees.
    With the encouragement of senior management, on March 26, 
2002, I completed a report that identified the total failure of 
laboratory management to do anything about massive theft at the 
laboratory. I later proposed to Mr. Tucker a plan to have the 
FBI get involved in investigating these problems. Mr. Tucker 
adamantly rejected my proposal on the ground that the lab did 
not want the FBI back at the lab after the Wen Ho Lee case and 
missing hard driver computer case--or missing hard drive 
incident.
    Mr. Tucker also told me, in what became a very common 
refrain, that if I pursued the theft problems, it could not be 
good for upper management or the laboratory's image. When I 
found that much of the stolen property at the lab was 
deliberately mischaracterized as lost, salvaged or dismantled, 
my findings were ignored.
    When Mr. Steve Doran, working under my supervision, 
corroborated that two facility managers had purchased almost 
$400,000 in questionable goods through the laboratory's 
purchase order system, Mr. Frank Dickson, the lab's chief 
counsel, told me that Mr. Joseph Salgado, the Deputy Director, 
and he were concerned that my investigation could bring 
negative publicity to the lab and adversely affect the 
University of California's contract with the Department of 
Energy.
    When I continued to pursue the issue, Mr. Dickson 
obstructed my office and the FBI's efforts to obtain necessary 
documents. When we persevered in our efforts, Mr. Busboom told 
Mr. Doran and me directly that Mr. Dickson would level me with 
both barrels and would fire Mr. Doran if we interfered with Mr. 
Dickson's relationship with the FBI, the DOE IG or the U.S. 
Attorney.
    It was the same with all of our other investigations. That 
is, inquiries into problems with local vendors, the credit card 
system, and the purchase order system. Mr. Salgado, Mr. 
Dickson, Mr. Tucker and Mr. Busboom obstructed our 
investigations, administratively resolved matters so as to 
cover up Federal felonies, and ultimately fired Mr. Doran and 
me. The reasons the managers gave for their actions were always 
the same: Our job was to protect UC and UC's contract, not the 
United States taxpayer.
    What we know now is that Mr. Salgado and other lab managers 
believed that Mr. Doran and I were the source of documents 
leaked to the press that revealed massive fraud by lab 
employees, and in order to prevent us from talking to DOE 
Inspector General investigators which came to investigate the 
fraud allegations, they willfully fired Mr. Doran and I. The 
only reason they gave later was that we did not fit.
    They were accurate about that. We did not fit. We were 
intent on doing our jobs with integrity and stopping the 
massive fraud and mismanagement at the lab. Even today, despite 
all the publicity, the Congressional interest, and the DOE 
investigations, the lab has not changed.
    Many of the same lab managers responsible for obstructing 
us and the FBI are still at the lab, drawing their same 
salaries. Although administrative regulations and laws have 
been violated, no action has been taken against these 
individuals.
    It is time for Congress, the DOE, and the American public 
to call a halt to the lab's activities and make a long overdue 
change.
    A written statement is attached to my opening statement, 
clarifying the details of the obstruction and the 
mismanagement, and I will gladly respond to any questions that 
you may have in this matter, and I thank you for inviting me 
here today to this assembly.
    [The prepared statement of Glenn A. Walp follows:]
    Prepared Statement of Glenn A. Walp, Consultant, Office of the 
                  President, University of California
    In mid-2001 I applied for a nationally advertised position as 
Office Leader of the Office of Security Inquiries (OSI) at the Los 
Alamos National Laboratory (LANL). Publicized responsibilities included 
conducting investigations into thefts, protecting property, and being 
responsible for the strategic and tactical planning of all OSI 
operations.
    I was selected for the position with a $10,000.00 bonus if I could 
arrive by mid-January, 2002; I was hired on January 22, 2002. I learned 
that one of the reasons I was hired, and with specificity prior to the 
end of January, was because my employment fulfilled a standard within 
the Department of Energy (DOE) Appendix O mandate, ensuring the Lab 
would receive supplemental funding (multi-million dollars) from DOE.
    I was advised by my Division Leader, Stanley Busboom and my Deputy 
Division Leader, John (Gene) Tucker that the reason I was hired was 
because of my extensive law enforcement experience and expertise, 
especially in criminal investigations. I was told by Busboom and Tucker 
to professionalize all OSI functions as I deemed appropriate, and they 
would support me in my efforts.
    I fulfilled all job requirements and supervisory directions in 
totality, receiving a 100%-plus rating for my performance of duty on 
October 2, 2002. Statements within that rating included: ``Mr. Walp has 
not faltered''; . . . ``applied . . . hands-on leadership and 
management''. ``A pro-active and caring leader . . . a strong and 
professional manager . . . very effective performer''.
    Shortly after my arrival I was contacted by the Office Leader of 
the Office of Internal Security, Ken Schiffer, who proposed there was 
significant theft occurring at the Lab. Tucker agreed with Schiffer's 
postulation, stating theft has been so rampant at the Lab ``it has been 
making the valley green for years''. Subsequently I was ordered by 
Busboom to conduct research and submit a written report on the theft 
issue.
    Preliminary data disclosed that OSI inquiry reports were severely 
lacking in investigatory analysis; property was inappropriately handled 
as lost, salvaged or dismantled when in fact it was stolen; major theft 
occurred at unsecured drop points; and most importantly, there was a 
severe problem with lost property. That is, although it was the spring 
of 2002, the Business Division did not have accountability of over 700 
pieces of property that was identified as lost in 1999 through 2001, 
amounting to approximately $2.7 million. Lost items included: nearly 
260 computers; 124 printers; 48 radios; 37 cameras; a $25,000.00 
thermal analyzer; $25,000.00 control milling machine; $35,000.00 2-ton 
magnet; $32,000.00 magnet lifting unit; $33,000.00 wire brush; $23,000 
water tank; $27,000 remote terminal; $11,000 copier; $20,000 
spectometer; $20,000.00 module oscillator; 2 work stations worth 
$47,000.00; $11,000.00 cryogenic refrigerator; 2 trailer vans worth 
$19,000.00; and a $6,000.00 forklift. It was investigatory speculation 
that many of the items reported as lost were actually stolen.
    The requested theft report was submitted to Busboom on March 26.
    After submitting the March theft report I learned that theft was 
occurring within the purchase card and purchase order programs, but the 
most egregious area was most likely in the Local Vendor Agreement (LVA) 
and Just In Time (JIT) systems. The LVA and JIT systems allows a Lab 
employee to use their personal identification badge as a credit card, 
with little to no audit controls. Lab personnel proposed that the LVA 
and JIT systems were so flagrant that any employee, for example, could 
have a computer installed in their residence and no one would ever 
know. These same personnel advised me that they had been telling their 
supervisors and administrators about this theft for years, but these 
Lab officials would not take any action to resolve the problems.
    Memorandums had been prepared by Business Division personnel in the 
fall of 2001, warning of the problems associated with the purchase card 
system, yet their supervisors failed to take any action. Other BUS 
Division memorandums were prepared after the release of the March theft 
report, confirming the severity of the theft, and the egregious 
mismanagement of Lab auditing and property control systems.
    I asked Tucker to allow me to work with the FBI to address this 
blatant theft. Tucker rejected my request, stating that because of the 
Wen Ho Lee and hard drive cases the Lab did not like the FBI coming 
into their domain. Tucker also proposed that if I continued in my 
efforts I am liable to determine that high level Lab management are 
involved in these thefts and that would not be good for the Lab's 
image.
                      criminal incidents uncovered
    Between June and September, 2002, five major criminal incidents 
were disclosed.
NIS Incident
    Unbeknownst to me, during 2001, major theft was occurring in the 
Nonproliferation International Security (NIS) area. Information on this 
criminal activity had been given to Lab authorities Bill Sprouse, 
Tucker, Katherine Brittian, and Scott Gibbs, by certain Lab employees, 
but these authorities failed to take any substantive action. The 
employees became disenchanted with the cavalier approach of these Lab 
officials, consequently making a complaint with the FBI on June 24, 
2002. On July 1, 2002, the FBI assumed the NIS investigation in 
conjunction with OSI.
    The major method of theft used by the NIS suspects was the purchase 
order system. A review of purchase order transactions by the suspects 
in the last 18 months revealed over $400,000.00 in questionable 
purchases. Purchases included:
    Ninety-two hunting knives; 72 hunting-type jackets and shirts; 26 
GPS systems; 32 pairs of fishing/hunting-type boots; 22 cameras; 6 
Rototillers; and 56 different types of lock pick and glass cutting 
devices. Other items included a go-cart; motorcycle helmets (2 
children); model airplanes; sleeping bags; plumbing fixtures; truck 
beds; and shock absorbers.
    The FBI apprehended two suspects in this case on October 31, 2002.
Mustang Incident
    Lab employee Lillian Anaya was suspected of attempting to purchase 
a Ford Mustang with parts, amounting to nearly $30,000.00, using a 
government credit card. Stanley Hettich, a Business Division 
administrator willfully failed to report this crime to OSI, indicating 
he had not reported any similar type situations to OSI in the last 
three years. Hettich suggested that the ESA Division had gone native, 
and the whole system of property purchase was out of control. Hettich 
blamed Mr. Richard Marquez and Mr. Joseph Salgado for this failing, 
because they ordered him to give Lab employees anything they wanted; 
customer satisfaction was the key.
Casino Credit Card Incident
    Lab employee Mary Wood used a government credit card to purchase 
personal items, and secure cash at local casinos. Salgado directed that 
Wood should not be interviewed and she should just be fired. Tucker 
recommended that she not be interviewed because she would not confess 
and it would be a waste of time. Security Specialist Steven Doran, OSI, 
interviewed the subject at which time she confessed. Immediately after 
the confession Dickson ordered that all the reports be submitted to him 
and he would determine what would happen to the case.
Tool Incident
    Lab employee Orlando Smith was suspected of improperly purchasing 
tools amounting to approximately $1.2 million in 12 months, from an 
unauthorized vendor, while misusing a government vehicle.
Forged Voucher Incident
    Lab employee Clarissa Rodriguez forged a government voucher for 
$1,800.00.
    The aforesaid investigations were initiated in accordance with 
professional investigatory processes, but were quickly tainted by 
persistent interference and obstruction by multiple Lab officials. This 
interference and obstruction included:
                  overall interference and obstruction
    Contrary to an original agreement between the FBI and the Lab, all 
documentary reports needed by OSI or the FBI had to be reviewed and 
approved by Frank Dickson, the Lab Chief Counsel prior to distribution. 
This system severely hampered investigative processes, and in one case 
the FBI waited for approximately six weeks to receive a much-needed 
report because Dickson failed to act on the request.
    Dickson verbally oppressed Doran and me to reveal all confidential 
FBI investigative information to individuals who had no need to know 
and should not have known. Dickson had been previously warned by the 
FBI not to tell anyone about this information especially anyone in the 
Audits and Assessments Division because there was suspect in that 
division. Notwithstanding, Dickson forcefully ensured confidential 
information was given to a member of the Audits and Assessments 
Division, placing multiple OSI/FBI investigations in jeopardy.
    Ms. Chris Chandler, an employee of Dickson, attempted to forcefully 
secure confidential FBI investigative notes from me, through verbal 
intimidation; she was refused access to the notes. During the discourse 
she stated that she did not care about anyone's constitutional rights 
or the successful prosecution of an FBI investigation. If Chandler 
would have obtained these notes it could have jeopardized multiple OSI/
FBI investigations.
    Dickson attempted to force the FBI to take premature investigative 
action against multiple suspects, threatening he would place the 
suspects on investigative leave unless the FBI acquiesced to his 
demands. The threatening action of Dickson, if brought to fruition, 
would have placed the NIS and Mustang cases in jeopardy.
                              nis incident
    Dickson attempted to gain entry into an area that contained 
suspected NIS stolen property placing an FBI investigation in jeopardy. 
After being refused by the FBI, Dickson became irate at Doran and Walp 
because they failed to cajole the FBI into allowing him access.
    Salgado and Dickson directed, through Busboom and Tucker, to remove 
Doran and Walp from the NIS investigation two days before culmination 
of that investigation. Despite the pleas of the FBI to allow Walp and 
Doran to remain on the case because they were integral to the success 
of that investigation, Busboom adamantly refused. The only reason given 
by Busboom for this action was that it was ``Dickson's payback against 
Walp'' for Walp challenging Dickson's improprieties in the forged 
voucher incident.
                                mustang
    Dickson directed that potential FBI criminal evidence held in 
official OSI investigatory control, be taken from OSI, thereby breaking 
the chain of evidence and jeopardizing an FBI investigation.
    Chandler conducted a dual inquiry on this case that had the 
potential of obstructing the FBI investigation.
                             forged voucher
    Dickson, Tucker and Phillip Kruger of the Laboratory Human 
Resources Division, conspired to cover up this federal felony by 
failing to immediately notify an appropriate criminal justice 
authority, and handled the case administratively. Although Tucker 
originally agreed this was a federal felony that must be investigated 
by a federal law enforcement agency, he then recanted, explicating to 
me, since the property did not belong to the United States taxpayers, 
but rather the University of California (UC), there was no crime. 
Hence, that is why Dickson has the authority to do anything he wants 
with any crime that occurs on Lab property. Tucker also said that all 
property and monies in control of the Los Alamos National Lab does not 
belong to United States taxpayers because it is UC property and monies.
   walp and doran warned to comply with lanl's corporate philosophy/
                                culture
    Doran and I were consistently warned that our major job was not 
inquiry into crime, but rather, protection of the Lab, its image, and 
ultimately the UC contract. Concerning this issue paraphrased comments 
included:
    Dickson stated to Walp--
        Salgado is concerned about the NIS case bringing negative PR to 
        the Lab, which may negatively affect the UC contract, therefore 
        I (Dickson) will keep a pulse on all FBI activity.
    While preparing a news release on the Anaya and Wood cases, Dickson 
wanted to keep information out of the release concerning the total 
amount of thefts committed by Wood, stating ``what we're looking at is 
protecting the Lab here''.
    Dickson stated to Walp and Doran--
        We need to remember who we work for, who is our boss and that 
        is the Lab, not the FBI. That is the way it is, we must look 
        out for the Lab and its image first, not the FBI investigation.
    Salgado stated to Walp--
        I am concerned that the Mustang and tool cases may generate bad 
        PR for the Lab, which may negatively affect the Lab's contract.
    The critical aspect of the Mustang case is the bad PR for the Lab, 
not the illegal attempt to purchase the vehicle.
    Chandler stated to Walp--
        I am not concerned about violating anyone's constitutional 
        rights or interfering with an FBI prosecution; my job and your 
        job is to protect our employer, the Lab.
    Busboom stated to Walp and Doran--
        Of critical importance is protecting the UC contract, and it 
        should be the primary concern of you as you perform your OSI 
        functions; your major job is not law enforcement or helping the 
        FBI, but to protect the Lab and its contract.
    Tucker stated to Walp--
        If you continue your efforts in ferreting out Lab theft you may 
        find that high management personnel are implicated and that 
        would not be good for the Lab's image.
    Dickson doesn't want UC to be embarrassed concerning the Mustang 
case, so they are going to take action that forces the FBI to move on 
the case, because Lab officials must look out for the Lab first, its 
image, and not the FBI investigation.
    Your main job and that of OSI is to protect the Lab, Lab people, 
the Lab contract and the Lab image above anything else; Tucker 
identified this concept as ``corporate philosophy'' and/or ``corporate 
rules''. The corporate rules must be followed by you and other OSI 
members if they are to be successful as Lab employees.
    Tucker states to Walp and Doran--
    You need to know that your major responsibility is to your 
employer, the people who pay your checks, therefore you must ensure 
that you protect them, their image, and the UC contract.
                        reason for terminations
    Lab officials have progressively espoused multiple reasons for the 
terminations of Doran and Walp, to include: (a) They didn't fit 
(contained in their termination papers); yet Busboom refused to 
elaborate on what that meant; (b) Doran and Walp didn't get along with 
certain groups and/or individuals at the Lab. The groups and/or 
individuals identified in a Lab press release as the groups and/or 
individuals they did not get along with, were groups or individuals who 
were either suspects in crimes, or were interfering or obstructing OSI/
FBI investigations; (c) Salgado proposed that the reason was that a 
chronology of the Mustang case contained incorrect telephone data 
obtained from OSI. This insignificant issue was an inadvertent error of 
an OSI employee, not Walp or Doran. The issue was quickly corrected, 
and had no significance to the relevant factors associated with the 
case; (d) Salgado said it had to do with FBI investigatory issues 
concerning the wearing of a body wire, and the number of suspects 
involved in the NIS case. All data on these matters were accurately and 
completely forwarded to Salgado in a timely manner, with the 
clarification that these issues were under the control of the FBI, not 
OSI; and (e) Dickson proposed the reason was because Doran and Walp had 
a poor relationship with the FBI. Recent investigation into this 
allegation by a federal investigator found this accusation to be 
totally erroneous.
    In January of 2003, it was disclosed by a UC official that the 
actual reason for our terminations was, as originally proposed by Doran 
and Walp, a willful attempt by Lab officials to prevent Doran and Walp 
from talking to DOE Inspector General
    Investigators. The reason, according to the official, was because 
they were fearful of what we would reveal to these investigators 
concerning the crime, mismanagement and corruption at the Los Alamos 
National Lab.
                                threats
    During the course of our employment Doran and I were consistently 
threatened that our efforts to approach our responsibilities from a 
point of integrity, without regard for the Lab contract, would cause us 
problems. For example:

1. Tucker stated to Doran and me, that we must be careful in 
        challenging the ethics of Lab officials because the Lab is 
        famous for sacrificing its children for the sake of its image.
2. Busboom told Doran and me, Dickson would level me with both barrels 
        and would fire Doran if we interfered with Dickson's 
        relationship with the FBI, the DOE IG, or the U.S. Attorney.
3. Busboom, Tucker and John Tapia told Doran and me they believed 
        Dickson was attempting to make us scapegoats; that Dickson was 
        trying to blame Walp and OSI for his own shortcomings; and 
        Dickson was conspiring to get people to falsely accuse Walp of 
        being uncooperative.
                 issues that still need to be addressed
    Although much has been accomplished in addressing the theft, 
mismanagement and corruption of the Lab, there is still much to do. For 
example:

1. All lost reports for the last decade need to be reviewed item-by-
        item, to ascertain, with specificity, their locations. The Lab 
        uses a classification system that identifies property as 
        salvaged, dismantled and retired. It is hypothesized that these 
        classifications have been used to cover up for lost and stolen 
        items. It is speculated that if these classification reports 
        were reviewed, the microscope would reveal significant fresh 
        ink.
2. Since Johnson Control of Northern New Mexico never reported any item 
        of theft under $5,000, the details of this unknown needs to be 
        analyzed.
3. A November 7 Price-Waterhouse-Coopers (PWC) perfunctory report, 
        illustrated $153 million dollars of questionable ``purchase 
        card'' transactions, while a review of questionable ``purchase 
        order'' transactions by NIS personnel amounted to approximately 
        $400,000.
      Thus, all Lab ``purchase card'' and ``purchase order'' 
        transactions need to be analyzed item-by-item, purchaser-by-
        purchaser, for at least the last decade. It is theorized that 
        the attempted Mustang purchase and the illegal purchase orders 
        within NIS were not the first situations of this type 
        effectuated by these illegal processes.
4. All voucher transactions for the last decade should be reviewed for 
        illegalities.
5. It is proposed that the most egregious area of theft is contained 
        within the LVA and JIT systems. A comprehensive analyses of 
        these purchases for the last decade needs to be completed.
    Doran and I had multiple cases we had no opportunity to 
investigate, but need to be addressed. They include:

1. Significant theft of gasoline.
2. Two cases of potential fraud that may involve kickbacks to present 
        and former employees of the Lab.
3. Steve and I were recently contacted by multiple individuals, 
        proposing that they were aware of major fraud and theft that 
        had occurred at the Lab in previous years, amounting to 
        multiple millions of dollars in theft and fraud.
4. There are outstanding issues concerning criminal matters. Such as: 
        (a) theft of FBI evidence from an OSI office; (b) the 
        possibility of federal/state crimes being committed by Lab 
        officials; and (c) that crimes although known by Lab officials, 
        were never reported to an appropriate authority. As of this 
        date, Security Specialists James Mullins and Doran, and I, have 
        never been contacted by any law enforcement agency for official 
        interviews, notwithstanding we are critical witnesses to these 
        matters.
    I attempted to effectuate a Federal Bureau of Investigation (FBI) 
investigative task force to address these blatant failings, but the 
plan was soundly rejected by my immediate supervisor.
    Between June 24th and September 20th five major criminal 
investigations were unraveled.
    Although these investigations commenced in accordance with 
professional investigatory processes, by August these systems began to 
be tainted by interference and obstruction by certain Lab officials. 
Namely:

1. Contrary to an original agreement between the FBI and the Lab, Frank 
        Dickson, the Lab Chief Counsel, ordered that all documentary 
        evidence had to be personally approved by him prior to 
        distribution; he attempted to force the FBI to take premature 
        investigative actions; he verbally oppressed Steven Doran and I 
        to reveal confidential FBI investigative information to people 
        who should have not known; he directed that potential FBI 
        criminal evidence held in official OSI investigatory control be 
        forcefully taken from the custody of OSI, thereby breaking the 
        chain of evidence control; and he ineptly attempted to gain 
        access into an area where suspected stolen property was stored. 
        These acts either hampered or had the potential of obstructing 
        FBI investigations.
2. Chris Chandler, an employee of Dickson, through verbal intimidation, 
        attempted to secure confidential FBI written notes from me, 
        indicating within that discourse that she was not concerned 
        about a person's constitutional rights or a successful FBI 
        prosecution; and, she conducted a dual inquiry that had the 
        potential of obstructing an FBI investigation.
3. Stanley Hettich, a Business Division administrator, willfully failed 
        to report criminal activity occurring within his area of 
        responsibility, admitting he had not reported any similar 
        situations in the last three years.
4. John (Gene) Tucker, my immediate supervisor inappropriately forced 
        Doran and me to remove certain ``spy type'' information from an 
        official OSI inquiry report; and, advised Doran and me that we 
        would be sacrificed as children of the Lab for the sake of the 
        Lab's image, if we challenged the ethics of Lab officials.
5. Dickson, Tucker, and Phillip Kruger of the Laboratory Human 
        Resources Division, willfully failed to immediately notify an 
        appropriate criminal justice authority, as it pertained to the 
        crime of forgery of a federal voucher.
6. Stan Busboom, my Division Leader, and Tucker, removed Doran and 
        myself from an official FBI investigation two days before 
        culmination of that investigation, and to the potential 
        detriment of that investigation.
7. Busboom stated to Doran and me that unless we ensured there was a 
        positive relationship between Dickson and the U.S. Attorney and 
        the FBI, Dickson would level me with both barrels and Doran 
        would be fired.
8. Busboom and Tucker opined that Salgado and Dickson were attempting 
        to make Doran and me scapegoats.
9. Doran and I were warned by a Lab official that Dickson was 
        attempting to fabricate negative information against Doran and 
        me and that Tucker was involved in this conspiracy.
    Doran and I were consistently advised by multiple Lab officials 
that our major role was not inquiry into crime, but the protection of 
the Lab and its image, for the purpose of protecting the University of 
California contract.
    Although much has been accomplished in addressing the theft, 
mismanagement and corruption of the Lab, there is still much to do. For 
example:

1. All lost reports for the last decade need to be reviewed item-by-
        item, to ascertain, with specificity, their locations. The Lab 
        uses a classification system that identifies property as 
        salvaged, dismantled and retired. It is hypothesized that these 
        classifications have been used to cover up for lost and stolen 
        items. It is speculated that if these classification reports 
        were reviewed, the microscope would reveal significant fresh 
        ink.
2. Since Johnson Control of Northern New Mexico never reported any item 
        of theft under $5,000, the details of this unknown needs to be 
        analyzed.
3. A November 7 Price-Waterhouse-Coopers (PWC) perfunctory report, 
        illustrated $153 million dollars of questionable ``purchase 
        card'' transactions, while a review of questionable ``purchase 
        order'' transactions by NIS personnel amounted to approximately 
        $400,000.
      Thus, all Lab ``purchase card'' and ``purchase order'' 
        transactions need to be analyzed item-by-item, purchaser-by-
        purchaser, for at least the last decade. It is theorized that 
        the attempted Mustang purchase and the illegal purchase orders 
        within NIS were not the first situations of this type 
        effectuated by these illegal processes.
4. All voucher transactions for the last decade should be reviewed for 
        illegalities.
5. It is proposed that the most egregious area of theft is contained 
        within the LVA and JIT systems. A comprehensive analyses of 
        these purchases for the last decade needs to be completed.
    Doran and I had multiple cases we had no opportunity to 
investigate, but need to be addressed. They include:

1. Significant theft of gasoline.
2. Two cases of potential fraud that may involve kickbacks to present 
        and former employees of the Lab.
3. Steve and I were recently contacted by multiple individuals, 
        proposing that they were aware of major fraud and theft that 
        had occurred at the Lab in previous years, amounting to 
        multiple millions of dollars in theft and fraud.
4. There are outstanding issues concerning criminal matters. Such as: 
        (a) theft of FBI evidence from an OSI office; (b) the 
        possibility of federal/state crimes being committed by Lab 
        officials; and (c) that crimes although known by Lab officials, 
        were never reported to an appropriate authority. As of this 
        date, Security Specialists James Mullins and Doran, and I, have 
        never been contacted by any law enforcement agency for official 
        interviews, notwithstanding we are critical witnesses to these 
        matters.
    Most recently Steve and I, and our attorney were informed by a top 
administrator of the University of California that he has direct 
evidence that we were wrongfully terminated because Lab officials did 
not want us speaking to DOE Inspector General Investigators.
    The aforesaid is an overview of the issues I encountered when 
employed by the Lab.
    I am prepared to answer any questions that you may have concerning 
these and associated matters.
    Thank you.

    Mr. Greenwood. Thank you, Mr. Walp.
    Mr. Doran.

                  TESTIMONY OF STEVEN L. DORAN

    Mr. Doran. Good afternoon, Chairman Greenwood, members of 
the subcommittee, ladies and gentlemen. Thank you for inviting 
me here to testify. My name is Steven Doran.
    Los Alamos Laboratory recruited me to work as an 
investigator in the Safeguards and Security Division in the 
spring of 2002. The recruiter who approached me told me the lab 
was having serious problems with national security and theft 
and needed people like me to come in and help them clean it up.
    The lab recruiter encouraged me to take the job, because 
working at the lab would be a service not only to the 
laboratory but to my country as well. I went to Los Alamos with 
the hope that I could be part of a broad effort to stop the 
rampant theft at the lab and protect the security of the 
country's most important nuclear secrets.
    I started work on July 15, 2002. A few days later I began 
work with the FBI on the Bussolini and Alexander case where the 
two managers at the lab had misused the government purchase 
order system to steal hundreds of thousands of dollars in 
property.
    In the following days and months, I saw the FBI and my 
successful investigative efforts in this case and all other 
cases I was working on thwarted by the lab's upper level 
management, Joseph Salgado, Frank Dickson, Gene Tucker and Stan 
Busboom. Lab managers from other departments including Richard 
Marquez, Stan Hettich, Dick Stickler, Vernon Brown and John 
Tapia attempted to cover up, change and conceal information 
from our office.
    These lab managers and lab counsel Dickson continue to make 
innuendos and threats to Mr. Walp, and my employment could be 
in jeopardy if we continued investigating the rampant misuse of 
government credit cards and the purchase order system.
    Because of the productive working relationship that I 
developed with the FBI, Special Agent Jeffrey Campbell, Mr. 
Busboom told me specifically I had to protect the lab's 
relationship with the FBI and the United States Attorney or I 
would be fired. He made it clear that he wanted me to 
participate in the cover-up of major crimes at the lab and use 
my good relationship with the FBI to prevent them from 
investigating these matters on their own.
    Although I always followed orders given to my by my 
superiors, I refused to cooperate in their cover-up. My upper 
level managers refused to provide me and the FBI with documents 
we needed for our investigations, discouraged me from 
interviewing key witnesses, disseminated information about our 
investigation to the targets of those investigations, and 
administratively settled cases so that the United States 
government could not criminally prosecute the wrongdoers.
    By October, almost all of my investigations had been 
stopped or bottlenecked in Mr. Dickson's office. Less than 3 
months after I started work at Los Alamos, I spent most of my 
day defending my position that we were working to protect the 
taxpayer funds and national security rather than the University 
of California contract.
    This meant I had to do my real work at night and on the 
weekend. Despite the FBI's repeated requests that the 
laboratory management reconsider and assign us to help them, 
the managers refused to let us help the FBI. Dedicated former 
and current employees at the laboratory supported us and kept 
on reporting things to us, even after management began to 
retaliate against us.
    I received a call about a possible espionage matter which I 
passed on to the Counterintelligence Division. When the 
division did nothing, I called and e-mailed again. As far as I 
know, the laboratory never followed up on this matter.
    After I was terminated I got calls from former employees 
who had documented millions of dollars in frauds but were 
ignored by lab management. All of these people responsible for 
management of the lab, all but one, still have a job at Los 
Alamos. A number of the managers who thwarted our 
investigations remain in positions of authority, and are 
working actively to conceal the enormity of the problem of 
theft and misuse of government monies.
    Just before I left New Mexico to come to this hearing, a 
number of Los Alamos employees brought me new documentation 
that they believe demonstrate that these same managers are 
giving false information to UC and the Department of Energy 
about expenses charged on purchase cards as late as January of 
2003.
    To me, this demonstrates why UC needs to take these 
managers out of their positions of responsibility at the lab. 
It is unfortunate that it took the current crisis of competence 
to put the lab's problems on the national agenda. By now 
Congress and DOE are actively exercising oversight and 
requiring accountability.
    It looks as though the University of California is trying 
to do something about these problems. Another step in UC's 
accountability to the lab has to be to take these managers out 
of their current jobs and put in fully reliable and honest 
employees.
    I hope that Mr. Walp and my termination has a silver 
lining. It brought Los Alamos to its senses about putting some 
order into its house so that it can go about doing important 
work in the way that best serves the citizens of the United 
States.
    Thank you.
    [The prepared statement of Steven L. Doran follows:
   Prepared Statement of Steven L. Doran, Consultant, Office of the 
                  President, University of California
    Good afternoon. Chairman Greenwood, members of the Subcommittee, 
ladies and gentlemen:
    Thank you for inviting me here to testify. My name is Steven Doran. 
Los Alamos Laboratory recruited me to work as an investigator in the 
Safeguards and Security Division in the Spring of 2002. The recruiter 
who approached me told me that the Lab was having serious problems with 
national security and theft, and needed people like me to come in and 
help them clean it up.
    After interviewing with Mr. Walp, Mr. Michael Wismer and Ms. Nina 
Epperson, the Lab offered me the job. The Lab recruiter encouraged me 
to take the job, because working at the Lab would be a service to the 
Laboratory as well as the country. I went to Los Alamos with the hope 
that I could be part of a broad effort to stop the rampant theft at the 
Lab, and protect the security of the country's most important nuclear 
secrets.
    I started work on July 15, 2002. A few days later, I began to work 
with the FBI on the Bussolini and Alexander case, where two managers at 
the Lab had misused the government purchase order system to steal 
hundreds of thousands of dollars in property. In the following days and 
months, I saw the FBI's and my successful investigative efforts in this 
case and all the other cases I was working on thwarted by the Lab's 
upper level management--Joseph Salgado, Frank Dickson, Gene Tucker, and 
Stan Busboom. Lab Managers from other departments, including Richard 
Marquez, Stan Hettich, Dick Stickler, Vernon Brown, and John Tapia 
attempted to cover up and change and conceal information from our 
office.
    These managers and Lab counsel Dickson continued to make innuendos 
and threats that Mr. Walp's and my employment could be in jeopardy if 
we continued investigating the rampant misuse of government credit 
cards and the purchase order system. Because of the productive working 
relationship that I developed with FBI special agent Jeff Campbell, Mr. 
Busboom told me specifically that I had to protect Lab counsel's 
relationship with the FBI and the United States Attorney, or I would be 
fired. What he meant was that I should participate in the cover-up of 
major crimes at the Lab, and use my good relationship with the FBI to 
prevent them from investigating these matters on their own.
    Although I always followed the orders given me by my superiors, I 
refused to cooperate in their cover-up. My upper level managers refused 
to provide me and the FBI with documents we needed for our 
investigations, discouraged me from interviewing key witnesses, 
disseminated information about our investigations to the targets of 
those investigations, and administratively settled cases so that the 
United States government could not criminally prosecute the wrongdoers. 
By October, almost all of my investigations had been stopped, or 
bottlenecked in Mr. Dickson's office. Less than three months after I 
started work at Los Alamos, I spent most of my workday defending my 
position that we were working to protect taxpayer funds and the 
national security, rather than the University of California contract. 
This meant that I had to do my ``real work'' at nights and on the 
weekend. Despite the FBI's repeated requests that Lab management 
reconsider and assign us to help them, the managers refused to let us 
help the FBI.
    Dedicated former and current employees at the Laboratory supported 
us, and kept on reporting things to us, even after management began to 
retaliate against us. I received a call about a possible espionage 
matter, which I passed on the Counterintelligence Division. When the 
Division did nothing, I called and e-mailed again. As far as I know, 
the Laboratory never followed up on this matter. After I was 
terminated, I got calls from former employees who had documented 
millions of dollars in fraud, but were ignored by Lab management.
    It is unfortunate that it took the current crisis of confidence in 
the University of California to put these problems on the national 
agenda. But now that Congress and the DOE are actively exercising 
oversight and requiring accountability, it looks as though the 
University of California is trying to do something about these 
problems. I hope that Mr. Walp's and my termination has a silver 
lining--it brought Los Alamos to its senses about putting some order in 
its house so that it can go about doing its important work in a way 
that best serves the citizens of the United States.

    Mr. Greenwood. Thank you, Mr. Doran.
    Mr. McDonald.

                  TESTIMONY OF JARET McDONALD

    Mr. McDonald. Thank you. Mr. Chairman and members of the 
committee, my name is Jaret McDonald, and I am an employee of 
KSL at Los Alamos National Laboratory. KSL is a joint venture 
between the following companies: Halliburton, Kellogg, Brown & 
Root; Shaw, and Los Alamos Technical Associates.
    KSL holds the support service subcontract for the 
maintenance and construction operations of LANL facilities. My 
current job duties include oversight of more than 70 
maintenance and construction employees. I have been an employee 
of KSL since January 2003.
    Prior to my employment with KSL, I was an employee of 
Johnson Controls Northern New Mexico, a subsidiary of Johnson 
Controls, Incorporated. JCNNM held the support services 
subcontract prior to KSL. Prior to my current work assignment 
as Zone Manager for Zone 13, I worked at TA-35 and Technical 
Area 33. My duties were very similar to my job 
responsibilities.
    While working at TA-35 and TA-33, I became suspicious of 
purchases made by University of California employees that did 
not appear to be related to facility maintenance tasks or 
general LANL business, as it related to the operations and 
maintenance of the facilities under their oversight.
    I suspected that these purchases were made using blanket 
purchase orders, BPOs. The items I saw being purchased struck 
me as highly unusual. In approximately January 2002, I brought 
my suspicions to the attention of my Johnson Controls 
supervisor, who instructed me to contacted an individual at 
Safeguard and Securities Division at the University of 
California, which I did do.
    After a couple of months and several communications with 
authorities at the University of California, it did not appear 
that action was being taken to address the situation. 
Consequently, in March 2002, I contacted the FBI through the 
agency's anonymous online tip. Subsequently, I was contacted by 
the FBI and a representative from the University of 
California's Security and Safeguards Division.
    I was instructed by the University of California and 
Johnson Controls to cooperate with the FBI in their ensuing 
investigation into the suspicious purchases. The FBI asked me 
to provide information and documentation accordingly, as that 
information related to the suspicious purchases, which I did. 
Mr. Chairman, members of the committee, this concludes my 
statement. I would be happy to answer any questions.
    [The prepared statement of Jaret McDonald follows:]
                  Prepared Statement of Jaret McDonald
    Mr. Chairman and Members of the Committee, my name is Jaret 
McDonald and I am an employee of KSL at Los Alamos National Laboratory 
(LANL). KSL is a joint venture between the following companies: 
Halliburton, Kellogg, Brown & Root; Shaw, and Los Alamos Technical 
Associates. KSL holds the support services subcontract for the 
maintenance and construction operations of the LANL facilities. My 
current job duties include oversight of more 70 maintenance and 
construction employees. I have been an employee of KSL since January 
2003. Prior to my employment with KSL, I was an employee of Johnson 
Controls Northern New Mexico (JCNNM), a subsidiary of Johnson Controls 
Incorporated (JCI). JCNNM held the support services subcontract prior 
to KSL. Prior to my current work assignment as Zone Manager for Zone 
13, I worked at Technical Area 35 and Technical Area 33 and my duties 
were similar to my current job responsibilities.
    While working at TA-35 and TA-33, I became suspicious of purchases 
made by University of California employees and that did not appear to 
be related to facility maintenance tasks or general LANL business as it 
related to the operations and maintenance of the facilities under their 
oversight. I suspected these purchases were made using blanket purchase 
orders (BPO). The items I saw being purchased struck me as highly 
unusual. In January 2002 (approximate date), I brought my suspicions to 
the attention of my JCNNM supervisor who instructed me to contact 
Safeguard and Securities Division at the University of California, 
which I did. After a couple of months and several communications with 
authorities at the University of California, it did not appear that 
action was being taken to address the situation. Consequently, in March 
2002 (approximate date), I contacted the Federal Bureau of 
Investigation (FBI) through the agency's anonymous on-online tip/
hotline. Subsequently, I was contacted by the FBI and a representative 
from the University of California's Security and Safeguards Division. I 
was instructed by the University of California and JCNNM officials to 
cooperate with the FBI in their ensuing investigation into the 
suspicious purchases. The FBI asked me to provide information and 
documentation accordingly, as that information related to the 
suspicious purchases--which I did. Mr. Chairman, Members of the 
Committee, this concludes my statement. I would be happy to answer 
questions.

    Mr. Greenwood. Thank you, Mr. McDonald. I appreciate that.
    You have provided us with photographs of items purchased by 
lab employees using one of the several available procurement 
tools at the lab, such as purchase order, Just-in-Time 
contract, blanket purchase agreement or government purchase 
card. I would like to look at these items now and ask you to 
explain what each of them is and why someone might need or not 
need this item for work purposes at the laboratory, 
particularly interested in knowing why they needed fly rods.
    Mr. McDonald. Mr. Chairman, would you like to ask me 
questions or would you like to narrate?
    Mr. Greenwood. Why don't you just go right ahead and 
narrate what you see in the pictures there.
    Mr. McDonald. Okay. Mr. Chairman, members, basically what 
we are looking at here is some of the questionable items 
concerned. As an example, if you look, you can see a Ramsey 
winch on the back of this John Deere mower and John Deere 
trailer. To the left, you see some snowblowers and perhaps 
another tractor around behind some Craftsman boxes.
    As far as what this could be used for at the laboratory, I 
think it would be difficult to make a judgment what a person 
could use this for at the laboratory in a work related 
environment.
    Mr. Greenwood. Let me understand that. Did the gentleman 
who purchased these items and who had them placed in this 
storage facility have responsibilities that would include 
mowing the lawn or blowing snow?
    Mr. McDonald. No, sir.
    Mr. Greenwood. Okay. Why don't you proceed?
    Mr. McDonald. I guess that's about all I really have to say 
about this picture.
    Mr. Greenwood. Okay.
    Mr. McDonald. Moving on to picture number 2, one of the 
items that struck my eye as I was taking these pictures was a 
sleeping bag. I am pretty sure that most laboratory folks do 
not need a sleeping bag.
    Mr. Greenwood. They sleep on the job without a sleeping 
bag?
    Mr. McDonald. Yes, sir.
    Mr. Greenwood. Do you have any idea what the cost of that 
sleeping bag was?
    Mr. McDonald. I do not, sir.
    Mr. Greenwood. What is this facility? If you could also 
name the facility, the buildings, if you could explain what 
they are.
    Mr. McDonald. Sure. This facility that we took pictures of 
is Technical Area 33. This is, I believe, Bunker 23.
    Mr. Greenwood. What is it used for?
    Mr. McDonald. This particular bunker is used for a shop for 
the University of California employees and storage area.
    Some of the other items that I thought were questionable 
was--I believe that's a cooler, an Igloo cooler, and a Coleman 
heater.
    Mr. Greenwood. Okay, next slide.
    Mr. McDonald. Once again, sir, more coolers that I found 
questionable, automatic plug-in coolers.
    Mr. Greenwood. Go back. That toolbox on wheels there, is 
that an item that you suspected was purchased improperly, or 
not?
    Mr. McDonald. I don't have an opinion, sir.
    I guess you can read from the box here, American Angler 
fishing type equipment.
    Mr. Greenwood. Okay.
    Mr. McDonald. Lawn mowers--you know, KSL or Johnson 
Controls, we do perform, you know, facility maintenance and 
such at the laboratory, and we do use lawn mowers. However, I 
took this picture because I didn't understand why laboratory 
folks would need a lawn mower.
    Mr. Greenwood. Okay.
    Mr. McDonald. We are looking at some Rancho shocks and some 
DeWalt tools. The Rancho shocks----
    Mr. Greenwood. These are shock absorbers for a motor 
vehicle?
    Mr. McDonald. Yes, sir, would be used, you know, obviously, 
on a motor vehicle, and since the facility--vehicle maintenance 
was done by GSA. It didn't really make sense that somebody 
would have shocks.
    Mr. Greenwood. Were those the same shock absorbers that 
were found on Mr. Alexander's car? Do you know?
    Mr. McDonald. I do not know that. This picture--I found it 
ironic that laboratory folks would need CDs on how to instruct 
lockpicking.
    Mr. Greenwood. How to instruct lockpicking?
    Mr. McDonald. This picture was taken. I questioned the 
volume of gloves in the drawer, and I couldn't imagine. We 
didn't have nearly that many people working out there. So I 
took this picture, really, with trying to get some sort of 
understanding why you would need so many pairs of gloves.
    This might be self-explanatory. I felt that this was 
questionable as well.
    Mr. Greenwood. It's a tool for breaking into an automobile?
    Mr. McDonald. Yes, sir.
    Mr. Greenwood. In case you couldn't pick a lock.
    Mr. McDonald. automatic gate opener--I don't know of an 
area where we could have used one of these.
    Mr. Greenwood. All right.
    Mr. McDonald. Some miscellaneous Honda engines. I don't 
want to speculate, but anyway, the Honda engines could be used 
for any number of things. Like I said, the majority of the 
facility and maintenance work my people actually performed, and 
we didn't have any Honda generators. So----
    Here is another picture of a Warren winch. I believe these 
are all-terrain vehicle or four-wheeler winches that you are 
seeing there. There's two of them stacked on top of each other. 
Then off to the left, of course, there is a Big Cot.
    Mr. Greenwood. Your big sleeping bag?
    Mr. McDonald. Yes, sir. Inside this bunker, I believe this 
is Bunker 22--housed some TVs and VCRs, questionable items. 
Coleman equipment, Cabela's equipment, more coolers. Looks like 
an air conditioning unit. I took some pictures of the internal, 
and here are some Cabela's armchairs, which struck me as 
unusual.
    Mr. Greenwood. Deluxe armchairs?
    Mr. McDonald. Yes, sir. Motorola two-way radios, not 
something that we can typically use at the laboratory.
    Mr. Greenwood. Why? I've been at the laboratory. I can 
imagine--I'm sure that security personnel, for instance, may 
have had need for portable radios. Explain why the 
responsibilities of the gentleman in question would not--could 
not be presumed to include the need for these kinds of radios.
    Mr. McDonald. I believe that all the Federal communications 
there at University of California is regulated, and we are not 
allowed to just use any type of two-way radio in order to 
communicate. The facility that I was with, we actually did 
have, you know, very expensive radios which to use to 
communicate with each other.
    Mr. Greenwood. Okay. Is that the last slide? Okay. Thank 
you.
    We understand that you wished to appear here voluntarily 
and offered to provide this committee with these photographs, 
the property being observed being purchased with government 
funds, but kept for personal use by lab employees. Yet the 
committee had to issue you a subpoena both for your personal 
appearance and also for the photographs that you brought with 
you, and that was at the request of your current employer.
    What exactly did your employer advise you regarding your 
appearance here, and what did he advise you regarding your 
photographs?
    Mr. McDonald. Sir, my employer didn't especially advise me 
at all on this particular matter. Part of the reason why I 
needed a subpoena to get here, I guess, is I wanted to make 
sure that I was friendly to the committee and the members. But 
I also did not want to appear to be too familiar or--sorry--too 
friendly. So----
    Mr. Greenwood. Okay. In your statement to the committee, 
you stated that you approximated your first contact with lab 
security personnel regarding the Bussolini and Alexander 
situation as around January 2002. Through staff interviews, we 
have been told that the Office of Security Inquiries, OSI, was 
first contacted by you in September of 2001. Do you believe 
that to be correct?
    Mr. McDonald. Yes, sir, that could very well be correct.
    Mr. Greenwood. What did you tell the OSI inquirer?
    Mr. McDonald. The individual--I met with him, and 
originally it was via e-mail, and then we met a number of times 
after in person. But the first time we met in person, I 
mentioned to him what was going on in my particular area as far 
as what I thought was waste, fraud and abuse, theft.
    He said people have turned these people in before, and I 
didn't believe it.
    Mr. Greenwood. Okay. All right. During the course of our 
investigation, staff were told in interview with Robert Garcia, 
who is the Mesa Equipment representative for the lab, that 
Bussolini and Alexander advised him they were setting up a 
secret and anti-terrorism center out at TA-33 or TA-35. This 
was the reason for their excessive purchases and the reason 
that some of the items' descriptions on invoices had to be 
changed.
    Do you know anything about this anti-terrorism center, and 
were Bussolini and Alexander ever given that kind of direction 
from management?
    Mr. McDonald. I did not know anything about that, sir. As 
far as I know, they did not get direction from the laboratory 
to do anything like that.
    Mr. Greenwood. Mr. Walp, according to your statement, you 
were told that when you were hired at LANL, you were selected 
because of your expertise in law enforcement. What did your 
management team, Mr. Busboom and Mr. Tucker, advise you would 
be your daily role?
    Mr. Walp. They told me that, as indicated, they hired me 
because of my background and my expertise, made comments that 
one of the reasons I was hired, because they didn't have that 
knowledge in that area, told me to basically go over into OSI, 
if you will, and professionalize and bring expertise to it, do 
whatever you feel is necessary to bring it under appropriate 
professionalism, and that they would support me in that effort. 
Not really definitive as to specifics other than saying that 
the current individuals that were there doing an investigation 
didn't really have the backgrounds or the expertise to do the 
jobs the way they wanted them done, and there were problems 
with reporting systems, and just basically go over there and do 
the job that was necessary to professionalize it.
    Mr. Greenwood. What kind of problems did they identify?
    Mr. Walp. They identified, again, the weaknesses in the 
current investigators. They touched on the reporting system to 
a degree, but had also told me--In my posting, it was indicated 
that part of my job would be the investigation of theft, the 
protection of property, but didn't go anything with specificity 
as to exactly what I should do in that arena.
    Mr. Greenwood. What is your understanding of the reasons 
you were asked to resign and you were subsequently terminated? 
What did they say to you?
    Mr. Walp. Well, through the course of the multiple months 
they said a lot to me. I guess I could couch it in the terms 
that, when I began to--when I first arrived there, I was 
approached within a few days by a gentleman, Mr. Ken Shiffer, 
who indicated--former FBI agent--that he felt there was a lot 
of theft going on. He arranged a meeting between Mr. Tucker and 
myself, at which time he talked about theft of a whole 
truckload of lumber and many other ideas.
    Mr. Tucker agreed, and made the statement to me that he 
agreed there was rampant theft, that it had been making the 
valley green for years. Therefore, they were knowledgeable, and 
then asked me to go on my way of trying to find out and get a 
grasp on what was going on there.
    Later on, Mr. Busboom asked me actually to make an official 
report on that. Then when I found out through my efforts as to 
the degree of the theft and the mischaracterization of actually 
lost property, missing property, dismantled, salvaged or 
whatever, was actually stolen, I attempted to approach it from 
an FBI investigative perspective.
    In fact, Mr. Shiffer and I--Mr. Shiffer felt there may--
wanted to approach it from a RICO perspective, felt that it may 
tied in with the drug trade in that area, and asked me to 
approach Mr. Tucker, which I did, because I knew at that point, 
having experience in white collar crime, that my evidence would 
be buried in the bowels of the reports.
    It took me a while to find out where those reports were, 
because in law enforcement you have the uniformed crime reports 
which are easy to go to, to get a profile, but I finally found 
out after some consternation that it was buried in BUS 6 and 
BUS 5, the Business Division, and that's where I got my report 
then when I submitted a report on March 26.
    When that happened and I approached Mr. Tucker, because I 
knew I had to have enough personnel, I needed quality personnel 
that would do investigative audit, not just audit but 
investigative audit, and the FBI certainly has that expertise, 
I was soundly rejected at that time.
    The first inclination that there were some problems there, 
because I'm beginning to unravel things, and the more I 
unraveled, the more disturbance it caused by higher command 
like Mr. Dickson and Mr. Salgado, that if this stuff is 
revealed--constantly, from the time we were there before Steve 
got there and then, of course, while Steve was there, we were 
constantly reminded that our job, even though you help the FBI, 
your main job is to protect the lab, its image, its PR, and 
ultimately the protection of the contract. That was our main 
job.
    We were told that on multiple occasions. We were warned on 
August 14 that, if I--Steve and I were in a meeting--that if we 
continued to pursue this, that the lab is famous for 
sacrificing its children for the sake of its image. When I 
tried to get the FBI task force, Tucker, the caveat to that 
was--and he said, Glenn, if you continue in these efforts of 
trying to find the theft, you are liable to find that high 
management is involved, and that is not good for the lab's 
image.
    So we ultimately ended up in, oh, around the month of 
September where Mr. Tucker explained to me in detail what 
corporate philosophy meant there, and again very distinct said 
it was protecting the lab, its image, its PR and ultimately the 
contract.
    Of course, as we unraveled these things, we had 
interference from Dickson, Busboom and Tucker. I'll just give 
you a few examples what I felt led up to this termination then.
    For example, the first problem we encountered was the 
reporting. When we first established the system would work with 
the NIS case--that is the Bussolini and Alexander case--we had 
a plan set up where the FBI could easily get reports, and that 
worked well for about 2 weeks, and then Dickson passed an order 
down that before we could get those reports, he had to 
personally review them before they would pass down.
    In one case, the FBI was waiting over 6 weeks for a report 
and never did get it until they made a complaint to Mr. 
Salgado, because Mr. Dickson was sitting on it, refused to pass 
that information down.
    Mr. Dickson wanted personally to get in one of these 
bunkers, to go down one night and get into the bunkers, and the 
FBI did not want him to, in fact refused to allow him, because 
he said all they need is to see the lab counsel down there 
looking at this stolen property, and it would jeopardize the 
case.
    We collected evidence on the Mustang case. I personally 
went in with my people and collected evidence out of Lillian 
Anaya's office. Immediately upon collecting that evidence--and 
at that time they didn't have an evidence control system; they 
had evidence in lockers and in drawers and under desks and 
whatever. So I set up a specific law enforcement type 
structured system.
    Immediately Dickson wanted to get into those evidence 
boxes, and I told him that the FBI needs to review them first, 
because there may be prosecutorial evidence in those boxes. 
Ultimately, the FBI was going to serve a search warrant, and 
their comment to me was they had become so frustrated with 
Dickson interfering with it that, if we could do it in OSI, 
look and see what's in those boxes and pass it on to them.
    The day I appointed two investigators to look into it, Mr. 
Tucker called me and said they are coming over and grabbing all 
those boxes and taking them from my official investigatory 
control, which they did that day. The FBI was not pleased with 
that, even though I warned Tucker that they may be ordering an 
obstruction of justice, because the FBI had just sent Dickson a 
letter indicating that, before they would go into the boxes or 
interview anybody, they would need to get together with them to 
make sure they weren't interfering with their cases.
    We had Chris Chandler, who works for Mr. Dickson. She came 
to me 1 day, and the FBI in the beginning said that they would 
give me their official notes, because of my law enforcement 
experience that I may be able to help them tell them where to 
go in this direction.
    She came into my office 1 day and demanded to have those 
notes so she could take them back to her office, and I refused 
her, I said, because they can't--that wasn't the deal, and I 
can't let them out of my possession. At that time she became 
argumentative with me and said that she did not care about 
anybody's constitutional rights or that it would interfere with 
an FBI prosecution.
    She began to do an investigation behind the back of Steven 
Doran--this was on the Mustang case--and the FBI, interviewing 
people that she shouldn't have interviewed. She may have 
interfered, totally obstructed with that case.
    One of the most egregious things that Mr. Dickson did 1 
day, even though he was previously warned by the FBI, once we 
got into these investigations, that he was not to reveal any 
information to anybody, especially anybody in Assessments and 
Audits, because there was a suspect that was connected to the 
NIS case in there, Mr. Dickson arranged a meeting which Steve 
and I attended, and he verbally intimidated us, that we tell 
everybody in that room everything we know about every case we 
have, including all FBI confidential information.
    I challenged him at that time again that they may be 
bordering on obstruction of justice, this is an FBI case. His 
comment was to me--and I'll paraphrase, but it is in my batch 
notes--was--the way he quoted was this way. He says don't go 
there, boys. He says you need to know who you work for, who 
pays your check, and that's the University of California. Your 
job is to protect the lab, its contract, and not the FBI 
investigation. He made it very clear at that time.
    Obviously, we were given threats that, again, we would be 
leveled or fired. The FBI--Mr. Dickson gave them an ultimatum 
on the Mustang case with Lillian Anaya that either they 
interview her by August 19 or they were going to put her on 
investigative leave. They were going to seal her office and, if 
you will, blow the case before they had the opportunity of 
interviewing her.
    On the Bussolini-Alexander case, they gave them another 48 
hour ultimatum. Either they bring this case to a conclusion 
within that 48 hours or they were going to put them on 
investigative leave before they even had the opportunity.
    The FBI was extremely upset about that, that they were 
interfering with their case, because their timetable wasn't 
ready at that point. So all these things culminating together 
ultimately ended in the Clarissa Rodriguez case where it was a 
forged voucher.
    On September 20, we----
    Mr. Greenwood. I'm going to cut you off here, because there 
are other members that need to ask questions. Just one 
question, and I ask you to answer it just very briefly, because 
my time has long expired.
    There was mention of early on being told that this lab, 
this theft at the lab had been making the valley green for a 
long time. Do you have any sense as to how--we talked about 
specific cases, but how rampant this problem is?
    Mr. Walp. The theft? To me, my observation, sir, was the 
lab was riddled with theft. I believe it still is riddled with 
theft. You have yet to uncover the real theft, and I believe 
that is in the LVA systems and the just-in-time systems. I 
think that is going to be hundreds and hundreds of thousands of 
dollars of theft when you finally get into it. But most 
egregious of all was management knew about it. Tucker--I was 
only there a few days. It's been going on for years. Shiffer 
says it's been going on for years.
    Tucker never said it wasn't going on. Mr. Tapia agreed it 
was going on for years. They knew about it, but they did 
nothing about it. Then when I tried to do something about it, 
that's when they tried to shut us down and stop us.
    Mr. Greenwood. Okay, thank you. The gentleman from Florida, 
Mr. Deutsch.
    Mr. Deutsch. Mr. Walp, really just to continue exactly on 
that line of questioning, when you say they knew about, did 
they know specifics or just--I mean, it was so flagrant that it 
was obvious it was going on?
    Mr. Walp. I think the one thing--you need to go back to Mr. 
McDonald's statement. In the fall of 2001, this information was 
reported to Bill Sprouse who worked in OSI at that time before 
me getting there. He said--I have a memo from him--he told 
Tucker. They were aware of it.
    There also was information given to a Mr. Scott Gibbs who 
works in the Associate Director's office under Mr. Holt who was 
given an e-mail on it. He did nothing about it. They gave it to 
Katherine Brittian in Assessments and Audits, and they did 
nothing about it.
    So they were very well aware of the NIS case in 2001. Mr. 
Sprouse told me that he told the FBI. The FBI says they never 
told us anything. So as it deals with NSI, to me they 
definitely knew about that.
    There is no doubt, because the property manager regarding a 
report with the lost property, was identified as lost, the 2.7 
between 1999 and 2001--the property manager in S Division when 
I questioned him trying to get a background on this, his 
comment was, well, the way they take are of that is there is a 
form you fill out, and you can either put dismantled, salvaged, 
missing. They even have one called retired.
    He says, the way you take care of it is, if you are doing 
an audit and you can't find it, you just fill out a form, and 
that takes care of it. It just goes away.
    As it dealt with the LVA systems and the JIT systems----
    Mr. Greenwood. Explain what LVA is.
    Mr. Walp. Yes. Local Vendor Agreements, and the JIT is the 
just-in-time where, if you need something in a hurry, you can 
buy computers or clothing, shoes or whatever.
    In my meeting in July with Mr. Tapia and his crew, when I 
explained to him what we were going to do to try to correct 
this problem, there was about 12 people in that room from the 
Business 6 unit, and they almost stood up and cheered. They 
said, finally, finally someone is interested in this. We've 
been telling our supervisors and administrators for years. They 
won't help us, and they gave me a sample of how bad it is.
    They said, Glenn, we can take you down to Santa Fe today. 
We can have a whole computer system in your house this 
afternoon, and no one will know, and no one will ever know, 
because of the system that is set up and the controls that are 
not there.
    Paul Mirey, financial area, attempted to send a memo out 
after my report in March to try to get people to comply with 
the way it should be done, and that was rescinded. I attempted 
to get a young lady by the name of Meredith Brown to put out 
this information in a--it's a LANL pamphlet to tell people to 
report thefts. I went to Tucker, and Tucker said, no. He said, 
that's not good to distribute that information lab-wide; you 
shouldn't have that information.
    A Ms. Roybal and a Mr. Martinez in the fall of 2001 
identified severe problems with the purchase card system, made 
three memos, sent it to their bosses, and their bosses rejected 
it: Basically, thank you, but no, thank you, we don't want to 
know about it.
    When I interviewed Mr. Stanley Hettich, who is currently 
working in the same position in Procurement in BUS 5, when 
Steve and I went to interview him regarding the Mustang case, 
because he had no intentions of telling me--Mr. Tapia had 
called me, and he asked me, he said, did Mr. Hettich call you 
yet about that Mustang case. I said, no. He said, well, he 
doesn't want to; he doesn't want to tell you anything, but he 
said, I told him, because he was a higher authority.
    So I went to interview him----
    Mr. Deutsch. Again, I was focusing--I'm convinced. Okay? 
I'm convinced.
    Mr. Doran, I understand that you were in a little 
convenience store recently where a Los Alamos employee was 
using his credit card to buy a bunch of little flashlights. Can 
you describe that interaction?
    Mr. Doran. Actually, he was using his ID card to buy 
flashlights. They have a system set up at the laboratory where 
you use your employee identification number, known as a Z-
number, your identification card, and they have what they call 
cost codes and program codes to make purchases.
    He had a basket full of the little Mini-Mag flashlights 
and, when he approached the register, the girl behind the 
counter said to him, you better purchase everything that you 
need or want, because this program will probably be ending very 
soon, and they just laughed.
    Mr. Deutsch. You have settled your case the University and 
going to be the Director of Security work out at the 
President's office. In that new position, what do you hope to 
accomplish, and do you think you can actually fix what is going 
on?
    Mr. Doran. Well, I hope with this new position that I will 
be very instrumental in fixing these problems. As I've said 
from the beginning, I don't care who does it, as long as it 
gets done.
    Mr. Deutsch. Mr. Salgado, then the lab's deputy director, 
and Mr. Frank Dickson, the legal counsel, said several times 
that you and Mr. Walp gave them incorrect information. One of 
the often repeated allegations is that you said there were 
three suspects in the TA-33 case, and there were only two. Who 
told you that there were three?
    Mr. Doran. From the beginning, sir, there were three 
individuals identified as prime suspects, Mr. Bussolini--sorry.
    Mr. Deutsch. Oh, okay. Actually, apparently, you are not 
supposed to identify those people.
    Mr. Doran. Okay.
    Mr. Deutsch. Not the third person.
    Mr. Doran. Okay. There were three suspects identified 
initially. One of those suspects actually is now a witness for 
the government.
    Mr. Deutsch. There was some discussion about that witness 
wearing a wire. Is that correct?
    Mr. Doran. There was a discussion early on that, if we were 
able to turn that suspect into a witness, that we would ask him 
to wear a wire as part of an investigative technique. However, 
that never occurred.
    Mr. Deutsch. And it never occurred, because?
    Mr. Doran. There was no need to have him do that.
    Mr. Deutsch. You've spent a great deal of time learning 
about the control system at the lab. Is that correct?
    Mr. Doran. Yes, sir.
    Mr. Deutsch. Can you explain to us the bar coded inventory 
control system?
    Mr. Doran. The bar coded inventory control? Basically, bar 
codes are placed on items that are considered either sensitive 
and/or over the $5,000 dollar amount.
    Mr. Deutsch. Okay. And is that in a central location or how 
does it actually function?
    Mr. Doran. Once the items are bar coded, they are placed on 
what they call an accountability statement, so that they can be 
tracked throughout the system, and those items can be anywhere 
within the laboratory and even off of laboratory property, 
depending on what their use is.
    Mr. Deutsch. Okay. Now Mr. Alexander and another employee 
purchased several cameras and pairs of binoculars. Should they 
have been bar coded as attractive items for the supplier who 
delivered them not to the central receiving point but directly 
to Mr. Alexander, or were they bought by local vendors in an 
attempt to avoid the bar coding system?
    Mr. Doran. Okay. You know, that brings us to a whole 
'nother set of problems, because Mr. Bussolini and Alexander 
were purchasing items through Mesa, Mesa Contracting, which was 
not an approved vendor to sell those types of items, like the 
high speed digital cameras and what-not. Those items were 
able--they were able to sneak those items through without 
having them bar coded.
    Mr. Deutsch. The tractors and the asphalt pavers, would 
they be bar coded as well?
    Mr. Doran. If they were over $5,000, yes, they should have 
been.
    Mr. Deutsch. Okay. And when property is bar coded, is it 
assigned to a certain person?
    Mr. Doran. Typically, it is. Whenever--they have what they 
call accountability statements, and whatever is issued to you 
for your own use is assigned to you. If it is something that is 
used like within an office like a copy machine as an example, 
it is assigned to that office.
    Mr. Deutsch. Now Mr. Alexander--we have actually--our staff 
has looked at his assigned property list, and it doesn't 
include the asphalt paver and the cameras. What would make you 
believe it is outside of the lab's inventory system? He did not 
have that, obviously, through the system. Again, it's a 
conscious effort to keep it out of the system?
    Mr. Doran. Okay. In a lot of cases, you know, like Glenn 
has mentioned and Mr. McDonald has mentioned, it just--because 
the system is so archaic and in such disarray, just about 
anything can slip through the system at any one time, and it 
doesn't take a whole lot of effort to do that.
    Mr. Deutsch. I guess also, Mr. Alexander had a Rototiller. 
What is a Rototiller? I mean, how would you use that?
    Mr. Doran. A gardening tool.
    Mr. Deutsch. I mean, is there any use that you can envision 
it being in the----
    Mr. Doran. No, not in his division. Again, as Mr. McDonald 
mentioned, JCNNM is the contractor who provides those services, 
and they provide their own tools and equipment. So there would 
be no need for Mr. Bussolini and/or Alexander to have any of 
those items.
    Mr. Deutsch. Mr. McDonald, would you want to respond to 
that as well? I mean, why would Mr. Alexander have a 
Rototiller?
    Mr. McDonald. To me, it doesn't make sense.
    Mr. Deutsch. Okay. And why is that?
    Mr. Mcdonald. Well, just the fact that, as far as Johnson 
Controls or KSL that I currently work for, if there was going 
to be some need for that type of work to be done, we would do 
it. It would not be a University issue. So for having 
Rototillers, it would be pretty difficult to be able to use.
    Mr. Deutsch. What about the type of grounds? I mean, is 
there an issue about the grounds themselves being toxic or 
radioactive? Apparently, my understanding is that an actual 
environmental plan would have to be implemented before the use 
of that type of equipment?
    Mr. McDonald. That is correct.
    Mr. Deutsch. Did you ever see anyone use a Rototiller at 
the lab?
    Mr. McDonald. No, never have.
    Mr. Deutsch. Last night you showed the staff a picture of 
several fire extinguishers just lying on the ground. What would 
be the environmental issues of that?
    Mr. McDonald. Certainly not good. I believe that, if the 
New Mexico Environmental Department could get hold of that, 
there could be some serious issues, since the fire 
extinguishers were Halon.
    Mr. Greenwood. The time of the gentleman has expired. The 
gentleman from Oregon, Mr. Walden.
    Mr. Walden. Thank you very much, Mr. Chairman. Gentlemen, 
thank you for being here today.
    Mr. McDonald, I want to ask you what you are feeling right 
now about being here. Are you concerned that--given what I've 
heard already about retribution and all and all the threats, 
intimidation, are you concerned about being here today and what 
it may mean to the company for whom you work?
    Mr. McDonald. I am, but not to the point, I guess, where I 
would lose my job. I am still concerned.
    Mr. Walden. All right. Mr. Doran, I want to ask you a 
little bit about what you do now for the system, but especially 
as a result of the meeting with UC officials, you and Mr. Walp 
were rehired, I understand, by the University?
    Mr. Doran. Yes, sir.
    Mr. Walden. As consultants to the Office of the President?
    Mr. Doran. Yes, sir.
    Mr. Walden. And are you dealing with the current problems 
at the lab?
    Mr. Doran. To be perfectly honest with you, sir, I just 
accepted the Director of Security for the President's office 
yesterday. So I haven't been assigned any files at this time. 
Prior to that, Mr. Walp and myself have been generating reports 
based on our previous investigations at the laboratory and 
meeting with the UC investigatory team and providing them with 
information to move forward.
    Mr. Walden. One the reasons that was cited for your firings 
was perhaps the way the Mustang was handled.
    Mr. Doran. Yes, sir.
    Mr. Walden. Or some would say mishandled, and that that 
hurt the lab's relationship with the FBI. Mr. Doran, how would 
you describe the relationship you had with the FBI?
    Mr. Doran. I have a wonderful relationship with the FBI. It 
has been stated by all of the agents that we've worked with 
that the relationship that they had with Glenn and myself was 
the best relationship that the FBI has ever had with the 
laboratory in its history.
    Mr. Walden. I was reading through your report dated 
February 14, the Los Alamos National Laboratory investigative 
summary. You make some comments at the beginning of it about 
how it is mainly written from memory, that you haven't had 
access to personnel records. You don't know what's been 
destroyed or not.
    Mr. Doran. Right.
    Mr. Walden. Will you have access to personnel and records 
under your current hiring arrangement?
    Mr. Doran. I can't answer that question, sir, because it 
hasn't been discussed.
    Mr. Walden. One of the incidents that you discuss here is 
the G&G Industrial Supply.
    Mr. Doran. Yes, sir.
    Mr. Walden. Now I've been in small business 17 years 
nearly. If I were the only employee in my company, as 
apparently Mr. George is in his----
    Mr. Doran. Yes, sir.
    Mr. Walden. [continuing] I think I would know that a lab 
had spent $800,000 with my company.
    Mr. Doran. I think you would, too, sir.
    Mr. Walden. Yet you indicate he didn't seem to know that.
    Mr. Doran. He claimed not to.
    Mr. Walden. Can you describe--I mean, I understand some of 
these tools were allegedly just basically bought from K-Mart or 
other local vendors and then he was the middle man, basically.
    Mr. Doran. Yes, sir.
    Mr. Walden. Because of his, ``tremendous customer 
service.'' That is what is reported.
    Mr. Doran. I was hoping he would take me on as a partner, 
sir, but----
    Mr. Walden. Does he have a profit sharing plan? That's a 
serious question.
    Mr. Doran. Well, I guess when you are the sole owner, you 
do.
    Mr. Walden. Is this something that is going to be 
investigated as to--what was the 800,000 in tools for? What was 
purchased? Where did they go?
    Mr. Doran. We have no idea sir. None.
    Mr. Walden. Is that something the FBI is looking into?
    Mr. Doran. I believe, at the point we were terminated, the 
Inspector General's Office had that file.
    Mr. Walden. This is so outrageous, it's hard to know where 
to start, frankly, as a taxpayer.
    Mr. McDonald, have you in your other work--have you worked 
with other labs or other Federal facilities over time?
    Mr. McDonald. No. Los Alamos National Laboratories are the 
first one I've worked with.
    Mr. Walden. And at what point--these photos that we saw 
here, at what point in your work there at the lab did you 
decide to start taking photos? Had you witnessed other things 
that raised alarm bells first?
    Mr. McDonald. Yes, sir. Initially, the first thing that 
raised an alarm for me was having one of these people that you 
guys referred to before had taken me out to one of these 
bunkers for the first time to see what was sort of out there, 
and that struck me odd as some of the materials, tools and 
equipment that were inside or housed within this bunker.
    One of the things that really caught my eye was some 
aluminum tubing, because we just hardly have a use for aluminum 
tubing, you know. Electricians use steel conduit and so on and 
so forth.
    I asked somebody what it was used for. A man told me that 
it was used to build a go-cart for his nephews.
    Mr. Walden. A go-cart for his nephews?
    Mr. McDonald. Yes, sir.
    Mr. Walden. What about--there's some reference in the 
materials about some organization approaching the lab for 
donations of used equipment or things that they were going to 
get rid of, and it is reported that, well, they already donated 
it to a nonprofit or they have a specific nonprofit or Pueblo 
that they donate to.
    Mr. Mcdonald. I believe that was the State of New Mexico 
had approached the laboratory for donations.
    Mr. Walden. Okay. And can you describe more fully what you 
have witnessed, either--any of you, in terms of that 
relationship and where equipment went? Mr. Walp?
    Mr. Walp. Right before our terminations, a gentleman came 
forward to us. I had spoken at a national property managers 
meeting in Albuquerque. After I gave my presentation, he came 
forward to Steve and explained it to him. Quite frankly, we 
never had the opportunity to investigate it. It is still 
sitting on the table at Los Alamos to be investigated. Never 
had the opportunity.
    Mr. Walden. Speaking of Los Alamos, you add in your 
testimony that part of what you were encouraged to do when you 
got there was to hire new people as inspectors, according to 
Mr. Doran. Correct? I mean, you brought him in as associate.
    Mr. Walp. Yes.
    Mr. Walden. How many new people did you hire?
    Mr. Walp. They originally gave me the authority to hire 
one. I had two individuals who were extremely qualified, and I 
convinced Mr. Busboom to allow me to hire the two, which I did, 
Mr. Doran and a Mr. Mullins. Then we brought in an entry level 
individual, Mr. Thanh Nguyen, who was helping me. Then I also 
brought in some secretarial help. So probably about four or 
five in all.
    Mr. Walden. what is their status today?
    Mr. Walp. Mr. Mullins left.
    Mr. Walden. Why?
    Mr. Walp. He was not satisfied. He was only there a few 
short weeks and got involved in these situations. In fact, he 
was the investigator in the Clarissa Rodriguez case, the 
voucher case, and he got so disgusted, he said I'm out of here.
    Mr. Walden. When did he leave?
    Mr. Walp. He left about a week after we were terminated.
    Mr. Walden. So last fall or last winter?
    Mr. Walp. Yes, and Mr. Thanh Nguyen--I spoke to him, and he 
may be leaving.
    Mr. Walden. Why?
    Mr. Walp. Same thing. He felt there was corruption.
    Mr. Walden. Still?
    Mr. Walp. That's what he told me. Yes.
    Mr. Walden. Mr. Doran, you are at work for the President 
now, but you don't know what your authority is going to be?
    Mr. Doran. The agreement was just made yesterday, sir, 
actually late yesterday evening. So in preparing for this 
session today, we haven't had an opportunity to discuss it.
    Mr. Walden. So you agreed to take the job without really 
knowing what the responsibilities are?
    Mr. Doran. I have a basic knowledge of what the 
responsibilities will be.
    Mr. Walden. Does the timing of that agreement have anything 
to do with the date of this hearing?
    Mr. Doran. No, sir.
    Mr. Walden. Okay. I guess I have heard so much about how 
things have been suppressed over time, allegedly, and I am 
hearing today that there are still employees perhaps still 
working there today doing these same investigations you two 
gentlemen were doing and then subsequently got fired for after 
you talked to the Inspector General, and those individuals now 
are concerned they are not getting anywhere.
    Why should the University of California continue to have 
this contract? Maybe you are not the ones to ask that question, 
especially you, Mr. Doran, since you are working for the big 
President.
    Mr. Walp. I can answer it, if you want me to.
    Mr. Walden. You bet. Are you working for UC?
    Mr. Walp. No, just as a consultant to the President.
    Mr. Walden. You're working for UC then.
    Mr. Walp. I'm working for UC, but I'll certainly answer 
that question.
    Mr. Walden. All right. Give me your answer.
    Mr. Walp. Okay. I would preface my statement by saying with 
specificity, Mr. Darling, I met him and I think he is a very 
honorable man.
    Mr. Walden. And he is?
    Mr. Walp. And he works for the University of California 
directly under the President, and I think he is attempting to 
correct problems there. I never met Mr. Nanos, but he appears 
to be attempting to make some changes there, but my personal 
opinion is I think it's time to gut the place. I think it is so 
infected, it's a culture that has been ingrained in that place 
for decades, and I think it's a time for change.
    Again, I would say as I said before that, if they are truly 
serious about changing this, then they need to get rid of the 
people that are there. These are the same people who interfered 
and obstructed.
    Mr. Walden. I couldn't agree more. Are any of the people 
who have been removed from their positions being personally 
held accountable for what walked away from facility at taxpayer 
expense?
    Mr. Walp. Not to my knowledge. In fact, I think there's 
Federal crimes that have been committed that need to be 
investigated.
    Mr. Walden. Well, Mr. Doran, I hope when you go to meet 
with whoever is going to tell you what your authorities are 
that you will press the limits and get back into the case you 
know well.
    Mr. Doran. Yes, sir. Just to answer your question, since 
the beginning of this entire situation, you know, I have been 
upright and honest. I was in the process of losing my home over 
this entire ordeal. I have said this time and time again. My 
accepting this position has nothing to do with the situation 
that has occurred or any situation that will occur in the 
future.
    Mr. Walden. Have they made up your salary from the past, 
and have they paid you any kind of lump sum to come back?
    Mr. Doran. Yes, and they did recover my home. But it has--
there was no agreement that I would, you know, not continue 
to----
    Mr. Walden. Right. I'm not questioning your ethics on this 
at all. I'm just curious.
    Mr. Doran. Yes, they did.
    Mr. Greenwood. The Chair thanks the gentleman.
    Mr. Walden. Thank you, Mr. Chairman.
    Mr. Greenwood. The gentlelady from Illinois is recognized.
    Ms. Schakowsky. First of all, let me reiterate my great 
thanks to you for having the courage to pursue this and to 
bring this to the public light. I think that the notion that 
you work for the American taxpayers, first and foremost, is so 
important, and it is so unacceptable that you would get 
punished for doing just that. So let me express my personal 
thanks, and on behalf of my constituents as well.
    Knives, 451 knives costing $19,127, were purchased. In 1 
week, 27 boning knives were purchased. Is there any use for 
boning knives at the lab?
    Mr. Doran. Not to our knowledge, no.
    Ms. Schakowsky. When you discovered these things and you 
brought--what exactly was said to you? What was the response? I 
mean, there clearly is no excuse for it. So what was the 
response?
    Mr. Walp. The response was, as we encounter from the very 
beginning, they took a very cavalier approach. I was in a 
meeting one time. It was a supervisory meeting, and they talked 
about an individual who every year bought a full set of hunting 
clothes and boots and knives through the JIT and the LVA 
systems, and I was just young there at that time, and I ask 
him. I said, do you ever approach this. Actually, there was 
laughter in the room: Oh, he does this every year.
    There was that type of approach, a very, very cavalier 
approach. When we began to check the items these people were 
purchasing, the people in the----
    Ms. Schakowsky. But let me just ask you this. This is in 
the context of some sort of a management meeting. I'm trying to 
picture a room where people are laughing at these inappropriate 
expenditures. What was the context and the setting for that 
kind of conversation?
    Mr. Walp. That specific conversation was in a training 
room, probably contained about 40 to 50 people and a presenter 
who was actually in charge of the audit system, and it was 
brought up. Again, I'm a new kid in the block, and to me, I 
mean, I was astonished that they were even laughing about this. 
But it was a comical approach. It was a cavalier, comic one.
    When I brought to Mr. Tucker's attention how serious the 
problem in NIS, and understand, the FBI through the U.S. 
Attorney had identified $50,000 just to reach that standard. I 
said, you know, this is a major crime. His response to me was, 
Glenn, that's not a major crime. He said, it's only $50,000. I 
said, well, any law enforcement environment I worked, $50,000 
is a big theft. But it was the cavalier approach to--and quite 
frankly, comical, that that's the price of doing business here.
    Ms. Schakowsky. To me, it's reflective of a culture--we 
dealt with this at the Department of Defense, too--a culture 
that would allow this. You are saying that there are 40 people 
in the room. They are all involved in some way or another with 
auditing?
    Mr. Walp. No. No, the subject dealt with auditing, but the 
other people represented a multiplicity, scientists, you know, 
S Division, whatever. It was a multiplicity within that room, 
but that was the attitude that was taken. It was not a serious 
issue.
    To those, as I indicated, that were involved in it--it's 
like when I had another meeting with BUS 6 people and I told 
them what my plan was to begin to develop evidence to try to 
prosecute these people and bring a halt to it, those people 
cheered me, if you will, and indicated finally someone is 
interested in taking care of these thefts, because nobody cares 
about it. We've been telling our supervisors for years, and no 
one cares, because they just didn't care. It's an ingrained 
culture. It's ingrained within the philosophy of the people 
there. It wasn't a big issue.
    Ms. Schakowsky. And so explicit that people felt free to 
talk about it in any setting, really, that it wasn't something 
that just some managers would get together and whisper about. 
But you could say in a public setting, ha, ha, ha, what's the 
big deal.
    Mr. Walp. Yes. In fact, as I indicated, my property manager 
when I began to look into this, his comment was, well, this is 
how you take care of it; you just make up a dismantled report 
or salvage report, and I would get a lot of them, and I would 
go back to the people and say, well, show me the salvage 
report; because there is supposed to be, by the rule, a salvage 
report. We don't have any.
    We had people who are scientists who are retired, and all 
their computer equipment went with them. I said, well, you 
know, that's Federal taxpayer money. Said, no, he's retired, 
he's retired. Retired with him. Goes with him. That's just the 
attitude here.
    Ms. Schakowsky. So as a consequence, we are--let's go back 
to these 40 people. How did they react to you then, too? Were 
you just kind of this odd man out, and that was not the way we 
do things around here? Did they scorn you? How were you treated 
by those individuals?
    Mr. Walp. I wasn't scorned, but I knew I was a loner. It 
just jumped from that when I brought my philosophy to the fore. 
It was like, you know, okay, but we're moving on. It was just 
the way it was.
    Ms. Schakowsky. Two hundred twenty-five pairs of gloves 
costing over $7,000. Were 255 pairs of the most expensive 
gloves really needed in any way?
    Mr. Doran. Part of the information that came out of this 
investigation was the theft, but the waste as well. We found 
garbage cans full of those expensive gloves with just minimal 
amounts of dirt on the fingertips. They were just almost used 
like----
    Ms. Schakowsky. They were being tossed?
    Mr. Doran. Yes. Basically, almost being used like 
disposable latex gloves. We found garbage cans full of them. We 
found them still sealed in their packages, scattered around the 
different work sites and things of that nature.
    Ms. Schakowsky. So what were they purchased for originally?
    Mr. Doran. Well, again it was just, because they had this 
budget that was almost a bottomless pit, a lot of things that 
they were purchasing were just misused and abused. I mean, we 
found air conditioning units that were worth thousands of 
dollars just rotting in the boxes, and power washers. They just 
had such a free hand with purchases and equipment, a lot of it 
was just wasted.
    Ms. Schakowsky. And did you talk to--in addition to the 
people who were--I'm trying to get at this culture question, 
how deep it goes, how embedded it is. When you would have 
conversations about this, what was just the general tone?
    Mr. Doran. Well, the general tone, at least in my case, not 
with Glenn, of course, but with most of the employees that I 
spoke with, was you know, Steve, you make good money; you got 
an easy job, if you want it to be an easy job. Just keep your 
mouth shut, and come into work, spend the day, you know, play 
on the Internet and go home and don't worry about it. It's the 
way it's always been, and nobody cares.
    Ms. Schakowsky. So this was a tone that was pretty 
pervasive throughout?
    Mr. Doran. Pretty much. We were constantly being thwarted, 
you know, by saying, well, you know, you are not a policeman 
anymore, which we understood. You have no law enforcement 
authority anymore, which we understood. But the main issue was, 
even though we didn't take the crime to the prosecutorial 
stage, we did report crime, and what we were seeing was a 
tremendous amount of crime, a tremendous amount of waste, and 
it was our duty to report it, and we told them we were going to 
report it.
    Ms. Schakowsky. Mr. McDonald, how did Mr. Alexander and 
Bussolini buy so much stuff they didn't use at the lab? Didn't 
they ever run out of money?
    Mr. McDonald. It did not appear so. They would use these 
blanket purchase orders. These people had always been commended 
in the past for having such a great budget. So----
    Ms. Schakowsky. So don't you think we ought to be taking a 
closer look at that budget?
    Mr. McDonald. Yes, ma'am.
    Ms. Schakowsky. I wondered if you wanted to comment at all 
on this question of a pervasive culture.
    Mr. McDonald. Other than that I would agree with these 
gentlemen, that is correct. I would see that throughout the 
hill, even at a support service subcontract level.
    Ms. Schakowsky. And does anyone want to comment? What do we 
need to do first? Do we need to change the leadership at the 
top, just wholesale, in order to improve this situation?
    Mr. Walp. Quick answer, yes. That is my opinion. I think it 
even goes further than that as it deals with property. I know 
we are zeroing in on property, but to me, it is also a security 
incident, and I will not go into any specifics. That wouldn't 
be appropriate for this forum, but an extreme concern of Steve 
and I dealt with the NIS case, Bussolini and Alexander. Here we 
people who changed the light bulbs, who had keys to the kingdom 
of the blackest area.
    They had items in their possession such as GPS systems, GPS 
locator systems. If you lose something, you can find it. The 
high tech night vision binoculars, high tech cameras, RF 
detectors which means that you can--you identify if someone is 
in the room with you that has a bug on, it would be identified.
    I know the lab has come out and attempted to defend that 
and, as we hear, gee, this can be--this is hunting stuff. That 
may be true for certain items, but my question is when is the 
last time, because they bought over 56 different type of lock-
pick items and glass cutting--you know, when is the last time a 
hunter needs a lock-pick to get into a national forest, and 
when is the last time a hunter needs an RF detector to find out 
if an elk is wearing a bug?
    So we are concerned from a security perspective. So we 
asked ourselves this question: How can the premier lab in the 
world allow this to happen for almost 2 years where anything 
was purchased, and without reservation, and the people doing 
the auditing--we had to show it to them, that they didn't even 
know they bought model airplanes, and they said, you know, 
what's the big deal? And you say, well, what about this, and 
what about this, and what about this? They said, well, you 
know--they never challenged it.
    So I have great concern that that lab that was supposed to 
be producing--you know, it deals with national defense, and 
there are many people there doing an outstanding job, but yet 
the unit, the Security and Safeguards Division that are 
supposed to be the guardians of the gates to make sure that 
those types of evidence does not get out to the enemy, and that 
high tech accomplishments that they make, they are the same 
ones that were involved in the cover-up, self-preservation and 
protectionism. They were the ones that are there.
    It is our position, and I think Steve will confirm this, 
that we wholeheartedly believe, just as--when the 1978 
Inspector General Act was passed, in Chapter 5 it states words 
to this effect. It makes no sense to have the people who are 
doing the auditing and investigating report to and be 
supervised by people you are auditing and investigating. That's 
exactly what is happening when you deal with safeguards and 
securities under the umbrella of a contractor.
    It is time to take--I'm sorry, sir.
    Mr. Walden [presiding]. Yes. We have gone over a couple of 
minutes. So now we will need to go to Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman. I just want to follow 
up on that thought that you are having there. My concern is, if 
you are willing to steal, you are willing to sell information 
as well. How close are they to the information? Well, let me 
back up.
    You did not have a security clearance when you arrived, but 
I understand you have attained one.
    Mr. Walp. I did, yes.
    Mr. Rogers. So you would understand which individuals 
involved in this would have security clearances and those who 
would not?
    Mr. Walp. Yes.
    Mr. Rogers. To the best of your knowledge, which 
individuals--not by name, but give me a number of individuals 
who had security clearances that may have in some way been 
involved in this? Is it pervasive?
    Mr. Walp. I would say this. I'll take--I will couch it in 
these terms. There were seven that I knew of. However, it is 
down to these two individuals that Mr. McDonald was speaking 
about, and the other ones may be used as state's evidence, but 
yet you had that arena of seven.
    Also important to me, in addition to the equipment, was the 
vulnerability. These people had the highest clearance you can 
get, and one of the factors when you do background is to make 
sure people are not involved in gambling, prostitution, because 
they are vulnerable.
    Here are individuals who are walking away with the farm 
and, if you had someone from the outside walk up to them and 
say, look, I know what you are doing and you either give me 
what I want or we are going to report you to the police, it 
placed these individuals in an extremely high vulnerability.
    Did anything like that happen? Probably not. Could have? 
Yes, it could have happened. How can you let that happen in the 
premier lab in the world, to let that go on without anybody 
knowing about it?
    Mr. Rogers. Well, you say probably didn't happen, but you 
don't know for sure if it did or did not.
    Mr. Walp. I do not know. I do not know.
    Mr. Rogers. How does a clerk in the store know when a 
program is coming to an end?
    Mr. Doran. Since our termination, a lot of program changes 
have been made, and one of the things that we have noticed 
around town--I live in Los Alamos--is that, where before you 
could pretty much purchase whatever you wanted using the ID 
card system--I'll put it in those terms--now they have like 
lists of what you can buy and what you can't buy. So they see 
that the noose is tightening and that, more than likely, that 
program will come to an end relatively soon.
    Mr. Rogers. To the best of any of your knowledge, is any of 
the security clearances been on hold? Is anyone getting 
rechecked at this time, given any information that's been 
provided?
    Mr. Doran. Not that I am aware of, sir.
    Mr. Rogers. So anybody that was close to this still 
continues to hold and enjoy the privileges of a security 
clearance with sensitive information?
    Mr. Doran. As far as I know.
    Mr. Rogers. That concerns me greatly, Mr. Chairman. That 
gets my blood going. I used to be an FBI agent. So I know what 
you do.
    Second, if you would, Mr. Doran, you worked on the Mary 
Frances Wood case.
    Mr. Doran. Yes, I did.
    Mr. Rogers. This is the individual who used the card at a 
casino.
    Mr. Doran. Yes.
    Mr. Rogers. You were given some direction on that case from 
your management. Is that correct?
    Mr. Doran. Yes, sir, I was.
    Mr. Rogers. Can you tell me what direction that was?
    Mr. Doran. Originally when that information was brought to 
our attention that the credit card was being used at casinos 
for cash advances, I was basically given a green light to do 
whatever necessary to bring that case to fruition.
    Once I started gathering information that proved she was 
guilty of those crimes, I was advised through Mr. Tucker--or 
Mr. Tucker advised me that Mr. Salgado had advised him that I 
was not to go through with an interview of Mrs. Wood.
    Mr. Rogers. So you conducted that interview anyway, as I 
understand it.
    Mr. Doran. Well, basically, what happened is I conducted 
the interview of Ms. Anaya with the FBI agent, Jeff Campbell, 
and at that time she refused to give us any information. I 
called Mr. Tucker, gave him a brief of what had occurred during 
that interview, and he said, well, go ahead and interview Ms. 
Wood, because, you know, she probably won't tell you anything 
either. When I brought her in for the interview, she gave us a 
full confession of what she had done. So I think it kind of 
backfired on them.
    Mr. Rogers. Interesting. Is she still employed?
    Mr. Doran. No. She worked for a contractor. She didn't work 
for the University of California, and the day that they asked 
me to take her credit card, keys, ID card, and then they just 
told her or had me tell her not to report to work the following 
day. So as far as I know, she could still be working for that 
contractor.
    Mr. Rogers. To the best of your knowledge, does she have 
access to any confidential, secret or elevated material?
    Mr. Doran. No, sir.
    Mr. Rogers. What is the status--well, before I do that, I 
know we've got a vote here, and I want to get this on the 
record. You were also investigating the fact that some of the 
vehicles that belonged to the lab were being fueled twice, in 
some cases three times every day.
    Mr. Doran. Yes, sir. I just got the peripheral information 
on that. We were terminated just as we began that 
investigation. Supposedly, the P-cards were being used to 
purchase large quantities of fuel for like fuel tanker type 
trucks. You know, they were using the credit cards to purchase 
that.
    Also, we were told that the GSA cards were being misused. 
Vehicles were being filled two and three times a day. Fuel 
purchases exceeded the amount of fuel that the vehicle could 
hold, and that type of thing. But I have no--again, we never 
started that investigation. So I have no hard copy 
documentation to prove any of that.
    Mr. Rogers. But on the face of what you were told and on 
the basis of that information that you received in the receipts 
of those, it indicated to you that there was probably some 
misuse of those gas cards, in your estimation?
    Mr. Doran. If the statements that were given to me by the 
individuals who gave them to me were true, yes. But we never--
we continued to request the hard copy documentation. We wanted 
receipts. We wanted to know which--we wanted them to identify 
the vehicles, identify the vendors, and we never got any of 
that.
    Mr. Rogers. Mr. McDonald, to your knowledge, what is the 
status of the equipment that you showed us here in the slides?
    Mr. McDonald. After--I have actually met with some of the 
people who are still in kind of control of the equipment, and 
the equipment that we've seen in the pictures, for the most 
part, are still there where it is being inventoried and so on 
and so forth, and determined in some means of property 
redistribution.
    Mr. Rogers. At this point, do you think it is being handled 
properly? When you say redistribution is being handled, sent to 
another institution that may be able to use that equipment in 
its proper use?
    Mr. McDonald. Correct.
    Mr. Rogers. Someone, I think, mentioned, and forgive me--
you said it is easy to sneak through on the bar code. Maybe it 
was you, Mr. Doran.
    Mr. Doran. Yes.
    Mr. Rogers. When you say that, did you identify any process 
that they were using that was consistent throughout the lab to 
avoid getting on the accountability statement?
    Mr. Doran. Basically, what Bussolini and Alexander used is 
they had the equipment delivered to an unauthorized location so 
that it didn't go through the central warehouse and, therefore, 
it wasn't accounted for.
    Mr. Rogers. So, obviously, they had other individuals 
involved who were receiving that as well.
    Mr. Doran. The salesman at Mesa was definitely helping them 
to purchase items, changing invoices, you know, using part 
numbers versus what the actual item was, and delivering it to 
offsite locations.
    Mr. Rogers. Now was there any investigation? Do you have 
any information on where this material went after it left the 
lab? Was it in people's homes? Could you determine if it was 
resold?
    Mr. Doran. Well, the only thing I can give you is just 
hearsay. After Glenn and I were ordered not to deal with the 
FBI, some of the individuals who were then assigned to deal 
with the FBI said a good deal of those items were found in the 
homes of Bussolini, Alexander, Mr. Bussolini's girlfriend, and 
other offsite locations.
    Mr. Rogers. Thank you for being here today. Mr. Chairman, I 
will yield back the time.
    Mr. Walden. The gentleman yields back his time. For the 
witnesses, the audience, and the members, we have two votes on 
the floor. We have about 10 minutes to go.
    So we will recess for approximately 30 minutes to 
accommodate those two votes and time to get back to resume. If 
there are no other subcommittee members who haven't already 
done a round of questioning, we will go to full committee 
members, and Ms. Eshoo will be the first member.
    [Brief recess.]
    Mr. Walden. Ladies and gentlemen, why don't we resume the 
hearing. Before we give Ms. Eshoo an opportunity to ask 
questions, I understand Mr. Doran wanted to make a clarifying 
comment regarding a question that Mr. Rogers raised. So I would 
like to give you the opportunity to do that, and then we will 
go to Ms. Eshoo, who is a member of the full committee.
    I would remind you all that you are still under oath. Mr. 
Doran, if you would like to go ahead and clarify for the 
record.
    Mr. Doran. Okay. So far as the gas purchases were 
concerned, it was an issue where my last contact on that issue 
was with Mr. Jay--I am drawing a blank on his last name.
    Mr. Walden. Johnson?
    Mr. Doran. Jay Johnson, thank you. We were told by Mr. 
Johnson that Mr. Marquez had shut down that investigation for 
the time being, that they had pretty much bigger fish to fry 
and that they would be gathering the documents at a later date 
to give to us to begin our investigation.
    Mr. Walden. It's my understanding Mr. Johnson was fired a 
week--no, you were fired a week----
    Mr. Doran. I was fired a week--or actually, 2 weeks later.
    Mr. Walden. Thank you. Ms. Eshoo, for your round of 
questioning, the full committee, 10 minutes.
    Ms. Eshoo. Thank you, Mr. Chairman. Let me begin by 
thanking you, the chairman of the full committee and the 
ranking member of the full committee as well as the 
subcommittee chairman and ranking person of the committee for 
extending the legislative courtesy to me to join you in the 
very important investigation in oversight committee hearing 
today. I appreciate it, and I believe that my constituents do 
as well. So my thanks to you.
    To the panelists, thank you to you. Since I didn't get to 
make an opening statement, let me just make a couple of 
observations about where we are and what has brought us here 
today.
    As a Californian, I think I speak for many, not only in 
California but across the country and around the world, that 
the University of California is one of the great public 
universities of the world. This hearing today is not a source 
of pride to us.
    The mismanagement that has been spoken, the evidence of 
abuse, of neglect, of fraud--these are not things that we 
value. This is not a source of pride to us. So I commend you 
for coming forward. It is important that we have brave 
citizens, I think, that are willing to stand up publicly and 
say we are here to protect the investment of the American 
people through their tax dollars, and that is what this 
contract represents.
    So I salute you for doing it. I think that you have paid a 
price for it, but I think that at the end of this, what I hope 
and, I believe, will be or is the case is that we will come 
through this better, because we can weed this out.
    So my questions to you are in that arena. In your testimony 
you have done, I think, an excellent job of informing the 
subcommittee of the mismanagement, of the abuse, all of the 
things that have been part of your testimony. I am not going to 
repeat it. I think it just sounds in many ways that the wheels 
have come off. I mean, I don't know all of this equipment and 
whatever--this just doesn't belong anywhere.
    In your work at the lab, can you establish any kind of 
nexus between what you uncovered, what you blew your whistle 
about, with great legitimacy, with the issue of anything that 
impinges on our national security? Either Mr. Walp or Mr. 
Doran?
    Mr. Walp. Okay. From my position----
    Ms. Eshoo. And I have some more questions. So if you could 
just be as brief as possible.
    Mr. Walp. I'll be brief, and perhaps I won't go into it. As 
I explained, I believe, to Mr. Rogers, our extreme concern as 
it dealt with security was the NIS, the spy type of equipment, 
these people having the keys to the kingdom, and just very 
quickly, it happened about the end of October where Mr. 
Bussolini was taken on a tour and was not allowed into a 
certain area. He immediately goes back and attempts to get keys 
to get in there, making the statement I need to know what's 
behind that door.
    Putting all that together, this whole situation, how it was 
let to happen, has extreme concern to us as it deals with 
national security, with the caveat that the people in charge, 
Safeguards and Securities, who are supposed to protect us from 
our secrets getting out, allowed this to happen, if you will. 
They knew about it in 2001 and did nothing about it, and then 
after we bring it to the fore, accept it.
    Ms. Eshoo. I'm going to ask--because I have some follow-up 
questions--Mr. Doran, if you would like to add anything to it.
    Mr. Doran. No. I mean, basically, it is just the--it's a 
situation where it is more of a campus environment than a 
national laboratory environment, and that is, in fact, a major 
problem.
    Ms. Eshoo. Do you find this to be the case in all 
departments or in specific areas? I know that you used some 
acronyms to describe different parts of the organization in 
your testimony. I am not so sure if you are referring to the 
entire lab or the business/bookkeeping/supervisorial oversight 
of employees. What is it that you--I mean, is it all of it? Is 
it some of it?
    Mr. Walp. As it deals with the theft and mismanagement, you 
are talking about?
    Ms. Eshoo. Well, all the things that you have testified 
about.
    Mr. Walp. Yes. The theft and mismanagement, to me, covers 
the whole spectrum of the lab as it deals with all the 
different systems, purchase cards, purchase orders.
    Ms. Eshoo. But is it throughout the lab or is it in that 
purchasing area?
    Mr. Walp. No, because the people who are doing the 
illegalities are beyond the purchasing area or the procurement 
area. It's just that----
    Ms. Eshoo. Which leads me to my next question. Of the 
people that have been relieved or fired to date, I think that 
your testimony, both of you, said that you still believe that 
there are some or many others that still have to go. Do you 
want to comment on that? Is it a whole layer of management? Are 
they rank and file?
    I hope that a lot of people from the lab are tuned in 
today, most frankly, and I'm glad the cameras are here, because 
I think everyone at that place needs to know how seriously we 
are taking this and that we are committed to cleaning it up.
    So is it certain departments or is it pervasive to the 
entire lab? Is it purchasing?
    Mr. Walp. Okay. To me, it deals with the top layer. I'll 
give you one specific example. Mr. Stanley Hettich, the 
individual we had the Mustang case on, told Steve and I very 
emphatically he had no intentions of telling us about that 
Federal crime. In fact, he has not told us----
    Ms. Eshoo. Mr. Walp, what I am looking for is I want to 
just--it's very important to give the specifics, and I 
appreciate that, but because of the time constraints, I want 
your big picture thinking about--and advice to the Congress. 
That is, do you, either one of you, see that all of this has 
been taken care of in terms of the people that have been fired 
or put on leave or are there many more to go?
    The point that I am trying to get at is how much do we need 
to do to cut the cancer out of the organization?
    Mr. Walp. Two quick things from my end: You need to get rid 
of the whole top layer in order to----
    Ms. Eshoo. And how many does that represent?
    Mr. Walp. It might be 15 to 20, and then change the 
culture.
    Ms. Eshoo. Do you agree, Mr. Doran?
    Mr. Doran. Yes. I believe everybody in the upper echelons 
of the financial area should be removed. They were there before 
the problems started. They were there during the problem, and 
they continue to hold their positions today.
    Ms. Eshoo. Do you believe, with your considerable knowledge 
and investigation and experience to date at the lab, that if 
this were the case, what you just stated to us--do you believe 
that that would cleanse the culture that one of the members, or 
more than one member, touched on, to cut this out of the 
organization so that it can move on under leadership that is 
committed to not only reforms but also to sustain the reforms?
    Mr. Walp. If you've got it, and bring in leadership, you 
need leadership who will change that culture. If you bring in 
the same type of thinking, it is going to go back to exactly 
where it was before.
    Mr. Doran. And I would concur with Glenn. I mean, 
basically, they need strong financial leadership, people who 
are concerned about the taxpayer dollar, who know how to manage 
money on a grand scale.
    Ms. Eshoo. Again, I want to go back to this, because the 
labs do the critical, important work. They provide the 
research. They are critical to protecting our country. So I 
want this to be as clear as possible, and I know that you don't 
have knowledge about every single thing.
    I understand, and I know that you said for the record that 
you have an anxiety and concerns about the national security 
area based on what you observed, and I think that that is 
legitimate. Is there anything else that you need to add to 
that, because if you don't, I think that is a consideration in 
this as well.
    Mr. Doran. Well my only comment would be is that the entire 
system needs to be looked at from top to bottom. Some very 
common sense, basic security procedures can be added and 
changed to make it tremendously more effective than what it is 
today.
    Ms. Eshoo. See, I think that when you look at an 
organization and they have trouble keeping their books, you 
can't help but raise the question, and the American people 
would legitimately raise the question, well, why would we have 
confidence on this other side. But I do think, given this 
mismanagement and all of the other things that are a part of it 
that are not pretty, that are not good and that we have to 
clean out and get rid of, should not impinge on the whole 
national security area. So I appreciate that.
    I also want to, for the record, state today that there are 
recent events that have illuminated the critical work that the 
lab does. One of them is that, shortly after September 11 and 
the attacks on our country, the Lawrence Livermore national 
Laboratory was the one that reported that North Korea was 
resuming its nuclear weapons program.
    Many of the International Atomic Energy Agency weapons 
inspectors were trained at Los Alamos and are in Iraq today. So 
I think that, as we seek to root this out, we've got to 
appreciate the larger picture and the larger stage that we set 
this up.
    Again, I want to thank the chairman, and I hope that 
someone is going to ask some questions about the whistleblowers 
and if what the University of California has put into place is 
satisfactory, but that will have to wait. Thank you, Mr. 
Chairman, and thank you to the courageous witnesses that are 
here today.
    Mr. Greenwood. The Chair thanks the gentlelady and 
recognizes for 10 minutes the gentleman from Massachusetts, Mr. 
Markey.
    Mr. Markey. I thank you, Mr. Chairman, very much, and I 
thank you so much for the courtesy in allowing us to ask 
questions.
    They are courageous. I agree with the gentlelady from 
California. I think everyone here admires the courage of Mr. 
Walp and Mr. Doran and what they have gone through to bring 
this information to us. You are like latter day Paul Reveres, 
bringing the warning. You are whistleblowers. It is a very 
difficult position to place yourself and your families in.
    With apologies, Mr. Chairman, to Henry Wadsworth 
Longfellow, I would like to offer the following brief remarks. 
Listen, my children, and you shall hear tales of two latter day 
Paul Reveres, who were asked by Los Alamos to expose fraud and 
security weaknesses and dangerous flaws, and to blow the 
whistle when danger appeared.
    Today Paul Revere is a hero for all, and those here today 
have echoed his call. They've risen up to warn of dangers that 
prey on the nuclear lab near Santa Fe. They warned DOE of 
problems galore. Yet at first their warnings were largely 
ignored. They warned of theft, lost computers, and more, and 
instead of rewarding these brave two, they were fired. Their 
careers were through.
    Through day and night ride these Paul Reveres, and we must 
protect their right to sound the alarm, instead of causing them 
personal harm. A cry of warning when trouble is near. They are 
a voice in the darkness, a warning at the door, and their 
rights should be protected forevermore. But borne on the night 
wind of the past through all of our history to the last.
    In the hour of darkness and peril and need, the people will 
waken and listen to hear warnings of waste, wrongdoing and 
greed to protect our modern day Paul Reveres. And you can be 
assured that from this day forward, this committee will be 
monitoring anything and everything that does happen to you.
    Now let me ask this. In your opinion, has the University of 
California accepted the reality that national security may have 
been compromised, in your opinion? Do you think they now accept 
that?
    Mr. Walp. Of course, I can't speak for them, sir, but I 
would say in the meetings that I had, I believe there is 
extreme, grave concern on the part of Mr. Darling and his staff 
as to the functions that were effectuated at Los Alamos. Quite 
frankly, I would couch it in these terms. I believe they would 
say that, in many senses, it was a rogue aspect of their whole 
operation.
    Mr. Markey. But they do accept it?
    Mr. Walp. I believe they do.
    Mr. Markey. Do you agree with that, Mr. Doran?
    Mr. Doran. I would have to agree. And I would just like to 
make one quick comment. Glenn and myself have never insinuated 
that the people at the laboratory--that everyone at the 
laboratory is corrupt and, you know, that they do not love 
their country, that they do not do their jobs. There are a lot 
of tremendous employees at that laboratory who have helped us 
tremendously in doing our job and in bringing this thing to 
you.
    So I would never want anyone to think that the people--that 
the majority of the people at that laboratory do not work to 
the better ends of their country.
    Mr. Markey. Do you believe that any criminal laws have been 
broken?
    Mr. Walp. There is no doubt, absolutely. From a Federal 
end, Title 18, Section 641, as it deals with theft, obviously; 
Title 18, Chapter 1.4, misprison of a felony, not reporting a 
felony, absolutely.
    Mr. Markey. How about in the national security area?
    Mr. Walp. I would say this, that those laws that were 
violated--you know, it may not deal with specificity with an 
issue that deals with security, but holistically I believe it 
does, because these are crimes that occurred at the premier lab 
in the world. Therefore, I think, holistically, it certainly 
has an umbrella effect over all security.
    Mr. Markey. Do you agree with that, Mr. Doran?
    Mr. Doran. Yes, I would agree.
    Mr. Markey. My understanding is that seven desktop 
computers, three laptop computers, and other equipment was 
reported stolen. Other computers were reported lost. Could 
there have been any classified information on any of those 
computers or other devices?
    Mr. Doran. There's always a possibility that that 
information was contained on those computers.
    Mr. Markey. Mr. Walp?
    Mr. Walp. And I would agree with Mr. Doran. We don't have 
any specific case saying this case had classified information 
on it, but if there are computers out there, which there are, 
that they have no idea where they are at, that possibility 
certainly exists, that it could occur.
    Mr. Markey. Mr. Walp, the University of California has 
announced that they are reorganizing the division which you 
worked in, to report elsewhere in the lab. Is that a good idea?
    Mr. Walp. No. It is my very adamant position that, if the 
United States citizens want true security of their labs as it 
deals with national security, they must take action to take 
that division out of the umbrella of a contractor. Absolutely 
imperative, because it was infested with self-preservation and 
protectionism for the bottom line of their salaries and their 
retirements. You must take it out of that environment. That's 
my opinion.
    Mr. Markey. I want to thank both of you. You are each 
patriots, and I very much appreciate the courage it took to do 
what you have done. Thank you, Mr. Chairman.
    Mr. Greenwood. The Chair thanks the gentleman. Someday you 
will tell me how long you tried to find a word that rhymed with 
Los Alamos before you gave up. You know you did.
    We thank all three of our witnesses for your time and for 
your service to your country. It is appreciated. It will 
enable--and only because of your cooperation will we be enabled 
to do our job and make sure that this doesn't happen in the 
future at Los Alamos, at any other lab or, in fact, at any 
other Federal facility or program.
    So thank you again, and you are excused.
    We will now call the Honorable Gregory H. Friedman, 
Inspector General, U.S. Department of Energy. Mr. Friedman, 
thank you for joining us. I believe you are aware that the 
Oversight and Investigations Subcommittee takes testimony from 
witnesses under oath. Do you object to giving your testimony 
under oath?
    Mr. Friedman. I do not.
    Mr. Greenwood. Pursuant to the rules of the committee, you 
are entitled to be represented by counsel. Do you choose to be 
represented by counsel?
    Mr. Friedman. I do not.
    Mr. Greenwood. If you would raise your right hand.
    [Witness sworn.]
    Mr. Greenwood. You are under oath, and we look forward to 
your opening statement, and you are recognized.

   TESTIMONY OF GREGORY H. FRIEDMAN, INSPECTOR GENERAL, U.S. 
                      DEPARTMENT OF ENERGY

    Mr. Friedman. Thank you very much, Mr. Chairman, and 
members of the subcommittee. Thank you for the opportunity to 
appear today to testify on the Office of Inspector General's 
recent inquiry concerning Los Alamos National Laboratory.
    In February 2002, my office issued a report entitled ``U.S. 
Department of Energy's Purchase Card Programs--Lessons 
Learned.'' In May 2002, I testified before this subcommittee 
regarding the results of that effort. Specifically, we 
identified a number of concerns with respect to the 
Department's management of purchasing activities. In recent 
months, of course, our focus has turned to Los Alamos in light 
of allegations about potential abuses at that facility.
    On November 5, 2002, the Acting Administrator of the 
National Nuclear Security Administration requested that the 
Office of Inspector General review allegations that management 
of the laboratory was engaged in a deliberate cover-up of 
illegal activity and security concerns. We interviewed over 60 
laboratory officials and other parties, and reviewed thousands 
of pages of pertinent records.
    One of our first steps was to interview two laboratory 
security officials, Glenn Walp and Steve Doran, who testified 
just a few minutes ago. Both men are former law enforcement 
officers and had been hired by the laboratory in 2002 to help 
address an acknowledged deficiency in Los Alamos' handling of 
property loss and theft. Both men were vocal in their 
criticisms of the laboratory's management of these issues.
    Approximately 1 week after we interviewed the two security 
officials, the laboratory terminated their employment. This 
raised the specter that the terminations could have been 
retaliatory. Consequently, we incorporated these actions into 
our inquiry.
    Our recently issued report disclosed a series of actions by 
laboratory officials that obscured serious property and 
procurement management problems and weakened relevant internal 
controls. These actions created an environment in which Los 
Alamos employees were discouraged from, or had reason to 
believe they were discouraged from, raising concerns to 
appropriate authorities.
    In short, management's actions resulted in delayed 
identification and resolution of underlying property and 
procurement weaknesses and related security concerns.
    For example, we found that laboratory management published 
materials distributed to laboratory employees in advance of a 
2002 Department of Energy cyber security review. These 
materials contained such phrases as ``resist the temptation to 
spill your guts;'' ``Handwritten notes can be especially 
damaging; they are not easily disavowed;'' and ``Finger 
pointing will just make the program look bad.''
    Our inquiry also corroborated a number of the concerns 
expressed by the two terminated security officials. The 
laboratory's decision to terminate the employment of the two 
security officials during ongoing external reviews that were 
addressing some of the very same issues raised by these 
officials was an incomprehensible action on the part of the 
University of California.
    In our view, these events raised doubts about Los Alamos' 
commitment to solving noted problems, and fostered a chilling 
effect on employees who may have been willing to speak out on 
matters of concern.
    Our inquiry also disclosed that, even after considering 
recent events at Los Alamos, in December 2002 the NNSA rated 
Los Alamos excellent in both procurement and property 
management. Although we did not review the particular process 
by which NNSA arrived at such a rating, we believe the process 
should be reevaluated in light of events.
    Our report of inquiry contained specific recommendations 
for corrective action. We feel it is especially important that 
Department of Energy officials ensure that the University of 
California and the laboratory's management are held accountable 
for implementing and executing corrective actions resulting 
from the situation at the laboratory.
    In addition to this special inquiry, we have a number of 
ongoing efforts at the laboratory. Our most recent report 
issued on February 21, 2003, examined internal controls over 
firearms at Los Alamos. We found weaknesses in the 
administration of the firearms inventory, which included over 
1600 guns. We noted, for example, that 12 firearms received in 
1999 were not entered into the laboratory's inventory. Also, 
separate firearms inventories maintained by Los Alamos and the 
security subcontractor were inconsistent and had not been 
reconciled. In addition, all firearms were not processed 
through a central receiving point, resulting in delays in 
entering some firearms into the Los Alamos property management 
data base. In fact, some firearms never made it into the data 
base. Management asserted that the problems we encountered 
concerned receipt of firearms and not accountability of 
firearms. However, in our judgment, the failure of Los Alamos 
to provide an accurate firearms inventory, the lack of 
reconciliation of the Los Alamos inventory with the security 
force inventory, and the acknowledged problems in the process 
for receipt of firearms and their inclusion in the official 
laboratory inventory raised doubt about the property control 
system at Los Alamos. In response to our report, management 
indicated that corrective actions would be taken.
    Other ongoing Office of Inspector General reviews and 
investigations, as well as matters under the purview of the 
Federal Bureau of Investigation, are continuing to address a 
number of the related concerns. These efforts include: A review 
of laboratory controls over laptop and desktop computers; a 
review of allowability of costs claimed by the University of 
California under its contract to manage the laboratory for the 
Department of Energy; and a number of criminal investigations 
regarding misuse of purchase authority.
    The criminal investigations are being closely coordinated 
with the United States Attorney's Office in New Mexico. Due to 
the sensitive nature of the ongoing investigations, we will be 
unable to provide specific information on individual cases.
    Mr. Chairman, as I indicated previously, our work at Los 
Alamos continues. Our objective is to address the concerns that 
have been raised regarding laboratory operations.
    This concludes my statement, and I would be pleased to 
answer any questions. One apology at the outset, if you will. I 
am suffering from a chest cold and a head cold. So if my voice 
is especially unappealing, I trust you will understand why.
    Mr. Greenwood. No, it's just normally unappealing.
    Mr. Friedman. You must have been speaking to my wife, Mr. 
Chairman.
    [The prepared statement of Gregory H. Friedman follows:]
 Prepared Statement of Hon. Gregory Friedman, Inspector General, U.S. 
                          Department of Energy
    Mr. Chairman and Members of the Subcommittee. Thank you for the 
opportunity to appear today to testify on the Office of Inspector 
General's recent inquiry concerning Los Alamos National Laboratory.
                              introduction
    For 60 years, the University of California (University) has 
operated the Los Alamos National Laboratory (Los Alamos) for the 
Department of Energy (Department) and its predecessor agencies. Among 
its many important missions and functions, Los Alamos has critical 
national security responsibilities, including helping to ensure the 
safety, security, and reliability of the nation's nuclear weapons 
stockpile.
    In recent years, Los Alamos has been the subject of intense 
scrutiny during a number of controversies regarding allegations of 
espionage, lax security, and related internal control failures. The 
Department and Los Alamos initiated actions intended to ensure that the 
Laboratory was carrying out its missions with a heightened emphasis on 
protecting national security interests. Realignment of Los Alamos' 
security function, or ``S'' Division, was one such action. On a broader 
scale, Congress and the President created the National Nuclear Security 
Administration (NNSA) as a semi-autonomous agency within the 
Department.
    In 2001, Los Alamos undertook a nationwide search to recruit an 
experienced leader for the Office of Security Inquiries within the 
``S'' Division. In addition to various security responsibilities, the 
job announcement for this position provided that the person hired would 
conduct investigations into theft and property protection. Given the 
sensitive nature of much of the work at Los Alamos, imbuing this 
position with a sense of urgency for the protection of property--
especially computers and other technology that may store classified and 
other national security information--was consistent with the 
Laboratory's stated goal to heighten national security awareness. The 
nationwide search culminated with the hiring of a new Security 
Inquiries Team Leader (Security Inquiries Leader) in January 2002.
    In February 2002, my office issued a report entitled, ``U.S. 
Department of Energy's Purchase Card Programs--Lessons Learned.'' In 
May 2002, I testified before this Subcommittee regarding the results of 
that effort. Specifically, we identified a number of concerns with 
respect to the Department's management of purchasing activities. In 
recent months our focus has turned to Los Alamos in light of 
allegations about potential abuses at that facility.
    On November 5, 2002, the NNSA Acting Administrator requested that 
the Office of Inspector General review allegations that management of 
the Laboratory was engaged in a deliberate cover up of illegal activity 
and security concerns. We interviewed over 60 Laboratory officials and 
other parties, and reviewed thousands of pages of pertinent records. 
One of our first steps was to interview two Laboratory security 
officials, Glenn Walp, the Security Inquiries Leader, and Steven Doran. 
Both men are former law enforcement officers, and had been hired by the 
Laboratory in 2002 to help address an acknowledged deficiency in Los 
Alamos' handling of property loss and theft. Both men were vocal in 
their criticisms of Laboratory management's handling of these issues.
    Approximately one week after we interviewed the two security 
officials, the Laboratory terminated their employment. This raised the 
specter that the terminations could have been retaliatory. 
Consequently, we incorporated these actions into our inquiry.
                      summary of inquiry findings
    Our recently-issued report of inquiry disclosed a series of actions 
by Laboratory officials that obscured serious property and procurement 
management problems and weakened relevant internal controls. These 
actions created an atmosphere in which Los Alamos employees were 
discouraged from, or had reason to believe they were discouraged from, 
raising concerns to appropriate authorities. In short, management's 
actions resulted in delayed identification and resolution of the 
underlying property and procurement weaknesses, and related security 
concerns. Specifically, we found that Laboratory management:

 Failed to take appropriate or timely action with respect to a 
        number of identified property control weaknesses. There was:
(1) inadequate or untimely analysis of, and inquiry into, property loss 
            or theft and security issues;
(2) lack of personal accountability for property;
(3) a substantial degree of dysfunction in the Laboratory's 
            communication and assignment of responsibilities for the 
            handling of property loss and theft concerns; and
(4) inadequate controls over procurement and property systems.
    We also found that Laboratory management:

 Had inadequate policies governing when and under what 
        circumstances activities must be reported to law enforcement.
 Issued, then immediately rescinded without adequate 
        explanation, a memorandum requiring corrective actions to 
        address ``disturbing negative trends regarding Laboratory 
        management of Government property.'' Another memorandum was 
        later reissued in modified form, but a number of the corrective 
        action mandates were never fully effectuated.
    We found, as well, that the Laboratory:

 Published certain materials distributed to Laboratory 
        employees, in advance of a 2002, Department cyber security 
        review, containing such phrases as
1. ``Resist the temptation to `spill your guts' '';
2. ``Handwritten notes can be especially damaging . . . They are not 
            easily disavowed''; and
3. ``Finger pointing will just make the program look bad.''
    Our inquiry corroborated a number of the concerns expressed by the 
two terminated security officials. The Laboratory's decision to 
terminate the employment of the two security officials during ongoing 
external reviews that were addressing some of the very same issues 
raised by these officials, was, in our judgment, an incomprehensible 
action on the part of the University of California. These events:

 Raised doubts, in our judgment, about Los Alamos' commitment 
        to solving noted problems;
 Fostered a chilling effect on employees who may have been 
        willing to speak out on matters of concern; and
 Were inconsistent with Laboratory and University of California 
        obligations under its contract with the Department of Energy.
    As you know, the University recently announced that the two 
security officials had been re-hired, albeit on a temporary basis, as a 
part of the Office of the President.
    Our report of inquiry contained specific recommendations for 
corrective action. In particular, responsible Department officials must 
ensure that the University of California and the Laboratory's 
management is held accountable for implementing and executing 
corrective actions resulting from the current situation at the 
Laboratory.
                      details of inquiry findings
A. Allegations of Cover-up/Questionable Management Actions
    Laboratory officials took a number of actions that, in our 
judgment, obscured serious property management and security problems. 
These actions created an atmosphere in which Los Alamos employees were 
discouraged from, or had reason to believe they were discouraged from, 
raising concerns about property loss and theft, or other concerns, to 
the appropriate authorities.
    In short, management's actions made successful identification and 
resolution of the underlying property, procurement, and security 
weaknesses problematic. The most overt action taken by Los Alamos was 
the firing of the two security officials. This action, taken amidst 
ongoing reviews of allegations of lax security controls, was clearly 
and predictably controversial. Moreover, the officials were fired soon 
after they spoke with the Office of Inspector General. It is impossible 
to imagine that this action would not have had a chilling effect on 
other employees who might have contemplated speaking out about problems 
at the Laboratory. In our judgment, the terminations undermined 
management's actions to address the core issue: identifying and 
correcting weaknesses in controls over national security assets.
    In addition to the firings, our inquiry disclosed that Laboratory 
management:

 Issued, then immediately rescinded, a memorandum requiring 
        corrective actions to address problems regarding the management 
        of Government property.
 Published Laboratory documents that could be interpreted as 
        discouraging Los Alamos employees from reporting on the extent 
        or severity of control weaknesses.
                          Rescinded Memorandum
    In an April 2002, memorandum, addressed to all Laboratory 
``Leaders,'' the Laboratory's Office of the Chief Financial Officer 
(CFO Office) cited the need to ``call your attention to disturbing 
negative trends regarding Laboratory management of Government property 
and to engage your support in taking corrective action.'' According to 
the CFO Office, the concerns were that the amount of property missing 
during the Fiscal Year 2001 inventory had nearly tripled from the 
previous year, to $723,000; and, that substantial amounts of property, 
valued at $533,000, had been reported lost or stolen during Fiscal Year 
2001.
    The CFO Office's memorandum further stated that neither Los Alamos 
nor the Department could accept $1.3 million (the approximate total of 
the two categories listed previously) in unaccounted property. The CFO 
Office noted that the issue would negatively impact the Laboratory's 
rating in property management. Attached to this memorandum was 
organization-specific listings reflecting property losses.
    To address these concerns, the CFO Office described four new 
quarterly tracking and trend reports that this office would be 
responsible for issuing. The memorandum requested that each Los Alamos 
division develop a corrective action plan to raise awareness of 
property accountability and safeguards. The memorandum also suggested 
the initiation of a root cause analysis and planned training, and 
recommended review of instances of multiple losses or lack of 
accountability by the same individual. On December 18, 2002, we asked 
the CFO Office to provide us copies of each of these reports, including 
copies of each division's corrective action plan.
    In a memorandum dated December 19, 2002, we were informed that the 
April 10, 2002, memorandum had actually been rescinded the day after it 
was distributed. We were told that Los Alamos management decided that 
it would be more appropriate to provide each division leader only the 
information relevant to his or her division and that it served no 
purpose and was insensitive to people's privacy to publish the entire 
list. Thus, an e-mail was sent asking division leaders to disregard the 
memo of the previous day. Although a version of this memorandum was 
subsequently reissued a number of the corrective action mandates were 
never fully effectuated.
    This chain of events raised doubts as to management's commitment to 
address identified control weaknesses.
                          Laboratory Documents
    During our inquiry, two other significant documents came to our 
attention that could be interpreted as discouraging Los Alamos 
employees from reporting on the extent or severity of control 
weaknesses.
    We reviewed briefing materials for a training course to be attended 
by Los Alamos employees in anticipation of a November/December 2002 
Department of Energy Inspection & Evaluation (I&E) review on Laboratory 
cyber security. The briefing materials, which were prepared by the 
Laboratory's Office of Chief Information Officer (CIO Office), were 
titled, ``Surviving the [I&E] Audit,'' and included the following 
suggestions:

 ``Resist the temptation to `spill your guts'.''
 ``Handwritten notes can be especially damaging . . . They are 
        not easily disavowed.''
 ``Finger pointing will just make the program look bad.''
    When shown these materials, a senior Los Alamos management official 
said that he had not previously seen them and that they were 
``stupid.'' Subsequently, on December 16, 2002, a memorandum was sent 
to certain employees clarifying the purpose of these materials in light 
of their ``potential for misinterpretation.''
    A second document was a Code of Ethical Conduct statement. The 
document was based on the Institute of Internal Auditors (IIA) Code of 
Ethics, but departed from the IIA code by requiring auditors not to use 
information in a manner that could be perceived as ``. . . detrimental 
to the University of California, the Los Alamos National Laboratory, or 
the Audits and Assessments Office.'' While it may not have been the 
intent of the document, reporting erroneous payments or surfacing other 
internal control weaknesses--traditional responsibilities of internal 
auditors--could be perceived as ``detrimental'' to Los Alamos. Los 
Alamos auditors were also asked to ``exhibit loyalty in all matters 
pertaining to the affairs of the University of California, the Los 
Alamos National Laboratory, and the Audits and Assessments Office . . 
.'' The conduct statement created, in our opinion, the appearance of a 
lack of independence for Los Alamos auditors.
B. Security Officials' Terminations
    We endeavored to evaluate the Laboratory's decision to terminate 
the employment of the two security officials consistent with the 
Department's standards for protecting contractor employees from 
retaliatory actions. Based on our evaluation, we believe it will be 
difficult for the University of California to sustain its burden under 
the prevailing standard for adjudicating these matters.
    Specifically, under the Department's procedures, once an initial 
case of retaliatory termination is established, the burden shifts to 
the contractor entity to demonstrate, by clear and convincing evidence, 
that the contractor entity would have taken the same action without the 
contractor employee's disclosure or other protected activity.
    In this regard, our inquiry disclosed that:

 The two security officials were vocal in their criticisms of 
        the Laboratory's management of property loss and theft 
        concerns.
 Laboratory management acknowledged that prior to the arrival 
        of the Security Inquiries Leader, Laboratory efforts to inquire 
        into these matters were inadequate.
 Recent external reviews, including this inquiry, corroborated 
        a number of the fundamental concerns previously expressed by 
        the two terminated security officials relating to property and 
        management systems.
 As late as October 2002, the Security Inquiries Leader had 
        received a favorable performance evaluation.
    The timing of the terminations was, itself, suspect. A memorandum 
documenting the Laboratory's stated rationale for the terminations is 
dated the same day (November 20, 2002) as the Office of Inspector 
General's interview of one of the two security officials. We were 
advised by the Security Inquiries Leader, and Laboratory documentation 
confirmed, that he had informed his management, in advance, that he and 
his staff were to be interviewed by the Office of Inspector General 
inquiry team.
    In the November 20, 2002, memorandum cited above, a senior Los 
Alamos official documented what he believed to be valid reasons for the 
terminations. We evaluated these reasons, and concluded that a 
substantial number of them do not withstand scrutiny.
C. Internal Control Weaknesses
    In a March 26, 2002, memorandum to Los Alamos management, the 
Security Inquiries Leader expressed significant concern with the manner 
in which Los Alamos addressed property loss and potential theft. Our 
inquiry corroborated a number of those concerns. Specifically, we 
found:

(1) inadequate or untimely analysis of, and inquiry into, property loss 
        or theft and security issues;
(2) lack of personal accountability for property;
(3) a substantial degree of dysfunction in the Laboratory's 
        communication and assignment of responsibilities for the 
        handling of property loss and theft concerns; and
(4) inadequate controls over procurement and property systems.
                      Property and Security Issues
    We noted that property loss and theft issues, and related security 
considerations, were not subject to thorough and consistent analysis. 
For example, in 2001, a report documenting the loss of a security radio 
was inadequate. It did not provide information concerning what 
frequencies might have been compromised.
    The Security Inquiries Leader expressed this and related concerns 
in his March 2002 memorandum, including those with respect to the entry 
into a law enforcement tracking system of Laboratory property theft 
reports. Although he noted that such reports were being provided to the 
Los Alamos Police Department and the FBI, the Security Inquiries Leader 
asserted that those agencies were not entering the property information 
into the National Crime Information Center records because the reports 
were of poor quality.
    As noted by a counterintelligence official, the theft of Laboratory 
property can have national security implications. In this vein, with 
respect to previous Laboratory property reports he reviewed, the 
Security Inquiries Leader observed:
        ``The reports indicate that no questions were asked pertaining 
        to the type of data that may have been on stolen computers, 
        laptops, PDAs,1 and digital cameras. It is possible 
        that they may have had sensitive or proprietary materials on 
        those systems, but inquiry personnel failed to explore that 
        potential; at least one can assume this view based on the data 
        contained in the inquiry reports.''
---------------------------------------------------------------------------
    \1\ ``Personal Digital Assistants.''
---------------------------------------------------------------------------
    Based on these concerns, we requested that Los Alamos explain the 
steps taken to account for lost computers and other sensitive 
equipment. We also inquired as to any efforts made to evaluate whether 
classified or other protected information had been compromised as a 
result. The Laboratory produced a draft memorandum, dated December 18, 
2002, in which the Chief Information Office (CIO) concluded that none 
of the lost, stolen, or unlocated computers identified by Los Alamos 
contained classified information. The CIO's memorandum also concluded 
that there were at least 258 computers lost, 44 computers stolen, and 
61 computers unlocated for Fiscal Years 1999, 2000, 2001, and 
2002.2 We did not validate these numbers, or the CIO's 
conclusion concerning the non-compromise of classified information. In 
fact, a CIO official told us that there were inconsistencies between 
these numbers and previous reports provided by the CFO and the Office 
of Security Inquiries.
---------------------------------------------------------------------------
    \2\  The memorandum identified an additional 75 computers requiring 
follow up and resolution status.
---------------------------------------------------------------------------
    A CIO official acknowledged that the Laboratory's processes for 
reporting lost, stolen, and unlocated computers are ``fragmented.'' He 
noted inconsistencies between computers reported lost and stolen to the 
Office of Security Inquiries and data available to property management 
officials. Another Laboratory official confirmed that these reporting 
mechanisms are not integrated throughout the Laboratory, and both of 
these key officials asserted that they have recently recommended 
corrective action to ensure that appropriate systems are integrated.
    The timing of the Laboratory's effort to reconcile these important 
questions is, in and of itself, troubling. It was not until the 
November-December 2002 timeframe that there was intensive effort in 
this regard.
                        Property Accountability
    According to a Los Alamos official, Laboratory employees have not 
been routinely held liable or accountable for lost property under their 
control. This official explained that when an employee first takes 
custody of an item of property, the employee signs an 
``accountability'' statement. However, Los Alamos management generally 
chose not to enforce the statements, according to this official, but 
rather chose to ``write off'' the missing property at the end of an 
inventory cycle. An accounts receivable official could not recall ever 
receiving any restitution from any Los Alamos employee for a lost or 
stolen item for which he or she was responsible. The Security Inquiries 
Leader made a similar point in his March 2002 memorandum.
    Another issue we identified relates to Los Alamos' use of ``drop 
points'' for the delivery of new equipment. Under the drop point 
system, Laboratory property is not delivered, uniformly, to a central, 
secure location. At such a secure central location, the equipment can 
be tagged, inventoried, and consistently tracked. We were told that 
many of these Laboratory drop points are in open spaces with little or 
no security. A number of key officials advised that there have been 
insufficient Laboratory efforts to ensure that equipment delivered to 
Laboratory drop points is safeguarded. We were also told that property 
would be left at these locations for inordinate amounts of time, 
without being checked by property administrators.
                   Communication and Responsibilities
    Our inquiry disclosed a substantial degree of dysfunction in Los 
Alamos' communication and assignment of responsibilities and 
authorities for the handling of property loss and theft concerns. For 
example, Laboratory management sent mixed messages to the two former 
security officials with respect to the scope of their authorities and 
responsibilities. Security Inquiries officials were told that they were 
not ``investigators.'' At the same time, our inquiry disclosed that one 
of the terminated security officials was directed by a senior Los 
Alamos official to travel off site, to another state to interview a 
private citizen, to obtain information concerning a matter (the alleged 
improper purchase of a Mustang automobile), which included the 
possibility that it was criminal in nature. This appeared inconsistent 
with previous direction, and other management communications to these 
officials, about the scope of their responsibilities and authorities.
    Further, Laboratory management acknowledged that there were 
inadequate Laboratory policies that governed when and under what 
circumstances Laboratory activities must be reported to law 
enforcement. Laboratory officials had been drafting such a policy since 
the spring of 2002, but the policy remained in draft at the time of our 
inquiry.
    Our inquiry also disclosed organizational inconsistency between the 
roles of the Office of Audits and Assessments and the Office of 
Security Inquiries. The Office of Audits and Assessments was tasked 
with the internal review of Laboratory ``waste, fraud, and abuse'' 
concerns, whereas the Office of Security Inquiries was responsible for 
reviewing alleged ``theft.'' This left not only the potential for 
``overlap'' in responsibilities, but ``underlap,'' as one senior 
security official characterized this condition to our inquiry team.
                    Procurement and Property Systems
    As we completed our inquiry fieldwork, the final report of the 
Laboratory's external review team was completed. That report noted a 
number of Laboratory ``programmatic weaknesses'' with respect to Los 
Alamos' controls over purchase cards, including:

 Failure to reconcile and approve monthly statements;
 Failure to resolve disputed transactions;
 Failure to properly account for controlled property;
 Purchase of restricted items in violation of Laboratory 
        policies;
 Insufficient documentation of items purchased;
 Inadequate or ineffective sanctions for non-compliance;
 Insufficient training, especially for approvers;
 Insufficient program audit and review procedures;
 Failure to properly manage cardholder spending limits; and,
 Failure to safeguard card information.
    The external review team recommended a number of corrective 
actions, and noted that they had not validated the Laboratory's 
implementation of recent corrective actions.
    We also noted during our inquiry that NNSA had completed an 
assessment of the Laboratory's ``Personal Property Management'' and 
``Procurement Management,'' in December 2002, and rated the Laboratory 
as ``excellent'' in both categories. Although we did not evaluate the 
process by which NNSA arrived at such a rating, we believe the process 
should be re-evaluated in light of events.
                            recommendations
    In our report, we made specific recommendations for corrective 
action. In particular, responsible Department officials must ensure 
that the University of California and the Laboratory's management are 
held accountable for implementing and executing corrective actions 
resulting from the situation at the Laboratory.
                           other oig reviews
    Beyond this special inquiry, Mr. Chairman, we have a number of 
recently completed reviews and ongoing efforts at the Laboratory. Our 
most recent report, issued on February 21, 2003, examines internal 
controls of firearms at Los Alamos. We concluded that weaknesses exist 
in the administration of the firearms inventory, which included over 
1,600 guns. We found, for example, that 12 firearms received in 1999 
were not entered into the Laboratory's inventory. Also, separate 
firearms inventories maintained by Los Alamos and the security 
subcontractor were inconsistent and had not been reconciled. In 
addition, all firearms were not processed through a central receiving 
point, resulting in delays in entering some firearms into the Los 
Alamos property management database. In fact, some firearms never made 
it into the database. Management asserted that the problems we 
encountered concerned receipt of firearms and not accountability of 
firearms. However, in our judgment, the failure of Los Alamos to 
provide an accurate firearms inventory; the lack of reconciliation of 
the Los Alamos inventory with the security force inventory; and the 
acknowledged problems in the process for receipt of firearms and their 
inclusion in the official Laboratory inventory raised additional doubt 
about the property control system at Los Alamos. In response to our 
report, management indicated that corrective actions would be taken.
    Other ongoing Office of Inspector General reviews and 
investigations, as well as matters under the purview of the Federal 
Bureau of Investigation, are continuing to address a number of relevant 
concerns. The OIG efforts include:

 A review of laboratory controls over laptop and desktop 
        computers;
 A review of the allowability of costs claimed by the 
        University of California under its contract to manage the 
        Laboratory for the Department of Energy; and
 A number of criminal investigations regarding misuse of 
        purchase authority.
    The criminal investigations are being worked in coordination with 
the United States Attorney's Office in New Mexico. Due to the sensitive 
nature of ongoing investigations, we will be unable to provide specific 
information on the individual cases.
    Mr. Chairman, as noted previously, our work at Los Alamos National 
Laboratory continues with the objective of addressing a number of 
concerns that have been raised regarding Laboratory operations.
    This concludes my statement and I would be pleased to answer any 
questions.

    Mr. Greenwood. Thank you, Mr. Friedman.
    Your special inquiry report points out that you 
corroborated a number of Mr. Walp's and Mr. Doran's fundamental 
concerns about property controls at the laboratory. What was 
the most significant concern there that you were able to 
corroborate?
    Mr. Friedman. Well, over and above the notion that the 
laboratory did not countenance very well whistleblowers, people 
who brought problem information to their attention. There was 
the general lack of accountability, and I think they had a very 
good point on that, and that is the main point that we have 
corroborated through our reviews.
    Mr. Greenwood. Did you sense this culture that Misters 
Doran and Walp referred to?
    Mr. Friedman. There was a tone at the laboratory that, I 
think, parallels the description that they gave you today.
    Mr. Greenwood. Okay. In its letter in response to a list of 
questions from the committee, the University of California 
asserts, ``No classified information was contained on the hard 
drives of the hundreds of computers that have been lost or 
stolen at Los Alamos over the past 3 years.''
    Do you believe that Los Alamos has accurately accounted for 
these computers and can rightly assert that none of them 
contained classified information?
    Mr. Friedman. Well, at this point, given what we have found 
to date, Mr. Chairman, I don't have any confidence that they 
have the total number, and I am not sure they ever will get the 
total number. As has been indicated, there may very well have 
been computers that were procured but never made it into the 
inventory data base. So, therefore, I don't know how you 
necessarily would know they are missing.
    With regard--did your question pertain as well to the 
question of the classified information?
    Mr. Greenwood. Yes.
    Mr. Friedman. We found, or they have identified that at 
least 400 computers in 3 years were lost, missing or stolen or 
unlocatable. Given the fact that they don't have the computers, 
I would not necessarily express a great deal of confidence in 
the final conclusion that there was no sensitive or classified 
information compromised.
    I don't have an instance in which that was the case, but I 
certainly couldn't assure you that that was not the case.
    Mr. Greenwood. According to a February 5, 2003, memo from 
you to Acting Administrator Linton Brooks at the National 
Nuclear Security Administration, your office encounter, 
``significant dysfunction at Los Alamos during your review.''
    Specifically, you note that lab management failed to comply 
with your request for information regarding an April 10, 2002, 
internal lab memo. Could you describe the significant 
dysfunction that you encountered in your review?
    Mr. Friedman. Well, the memo in question, Mr. Chairman, 
came to our attention through a third party and, when we talked 
to the purported author of the memo, he didn't have a copy of 
the memo nor was he able to provide the five data points that 
had been requested as a result of the memo. He was not able to 
provide any of that information.
    We departed that day with a commitment on his part to get 
us the information and to provide it to us. It was very 
surprising that this person, who was in a fairly senior 
position at the lab, could not provide us the information at 
that instant.
    Subsequently, in fact, we received an e-mail message from 
this individual stating that, in fact, the earlier memorandum 
that had been referred to had been withdrawn. We still have a 
data request, and we do to this day have a data request for all 
the information that may have resulted, as had been requested 
by the original memorandum.
    Basically, we then found after our review had been 
completed that, in fact, the memo had been re-issued 
subsequently. We still have not received the substance of the 
information. Of the five data points, three of the five data 
points, we don't believe, have ever been fully complied with.
    So as a result, we don't have confidence in the system. 
Even if there was a significant misunderstanding, a lack of 
candor with the Office of Inspector General or a 
miscommunication within the lab, that is a dysfunction in and 
of itself.
    Mr. Greenwood. The committee's investigation of problems at 
Los Alamos has focused on the University of California, the 
contractor in charge of operating Los Alamos. In your opinion, 
is the Department of Energy and National Nuclear Security 
Administration also at fault for management breakdowns at Los 
Alamos?
    Mr. Friedman. There certainly are shared responsibilities. 
The Department of Energy and the NNSA specifically is the 
contract manager for the University of California contract at 
Los Alamos. So absolutely, they have a responsibility.
    Mr. Greenwood. You have looked at this pretty thoroughly. 
If it was your job to make sure that this kind of thing doesn't 
happen, not only at Los Alamos or anywhere else within DOE or, 
for that matter, the Federal Government, what kinds of things 
would you do? How do we fix this?
    Mr. Friedman. Well, first, there needs to be--and this is 
going to require a sustained effort, Mr. Chairman--a change in 
the culture with regard to encouraging people who have 
legitimate concerns to raise those concerns, and they should 
know that it is done in an environment in which they will not 
be retaliated against.
    Second, it is the responsibility of management to act on 
those concerns. Once they are brought to your attention, they 
need to be addressed.
    Third, it seems to me, we have to make sure that the 
processes, or at least the University of California at this 
point needs to make sure that the processes that are in place, 
procurement, financial, inventory, at the various laboratories 
under its management are first class, that they operate as 
intended, and that they are doing the job, and that the 
interest of the taxpayers is ensured as a result of those 
processes.
    Mr. Greenwood. Just wondering what would happen if we had 
an immunity day and asked everybody to just please bring back 
all the stuff they have stolen over the last 20 years, and make 
a big pile.
    Are you satisfied the University of California has recently 
announced corrective actions?
    Mr. Friedman. Well, this is going to take some time. It is 
a good start. The jury is out, and we will go back and take a 
look at it at some point in the future to see if, in fact, they 
are operating as intended.
    Mr. Greenwood. I would like unanimous consent to enter 
these documents into the record. Without objections.
    The Chair recognizes the gentleman from Florida for 10 
minutes.
    Mr. Deutsch. Thank you, Mr. Chairman. Now I think 
underlying all of our investigations is actually what the 
laboratory does, and I think all of us have this concern, that 
if this level of scrutiny is done on the criminal activity in 
terms of devices, how much serious is there out there that we 
don't know about?
    I think that really is the anxiety I think all of us has, 
is as awful as all of this is, whether it is a Rototiller or a 
sleeping bag, it would be a lot worse if it were enriched 
uranium.
    Have you independently looked at those issues in terms of 
the entire structure and the system that they have in place for 
protection of not just, as you had acknowledged, with stolen or 
the unaccounted for computers. We have no idea what was on 
those computers.
    It just raises the stakes more than just criminal activity, 
but really espionage and national security, which obviously 
are, in fact, as significant as all these other issues are, 
much more troubling.
    Mr. Friedman. Well, we are attempting to address that, Mr. 
Deutsch, and let me give you one example. One of the reviews 
that we have ongoing right now, as I indicated, is a 
comprehensive review of the controls over desktop and laptop 
computers, and we are going to follow them to the core, as they 
were purchased, through the process, as they are disposed of.
    Those that are identified as being stolen, lost or 
unlocatable, we will follow those as well and really examine 
the controls over those computers. So I hope we will get to the 
issue, the core issue, that you are referring to.
    Mr. Deutsch. Do you feel you as the Inspector General have 
enough resources to do that?
    Mr. Friedman. That is a loaded question. The answer, Mr. 
Deutsch, is that we don't have enough resources. We are doing 
the best we can with what we have. We are spread over 14 
different Department of Energy locations around the country. 
Our objective is to do the maximum with the people that we 
have.
    We recognize the fact that resources are tight throughout 
government.
    Mr. Deutsch. But again, let me just kind of--have you seen 
any change in the resources available to you post 9-11, either 
in last year's budget or in this year's budget?
    Mr. Friedman. This year's budget, I am pleased to say, we 
had a fairly substantial increase. But the delay in getting the 
budget has worked against us in terms of hiring.
    Mr. Deutsch. I mean, could you be more specific with what 
that increase was?
    Mr. Friedman. I am embarrassed to tell you, I don't know 
the precise number.
    Mr. Deutsch. Do you have a ballpark, 10 percent, 20 
percent?
    Mr. Friedman. It was about a 20 percent increase.
    Mr. Deutsch. And is that more directed toward these types 
of issues that we are discussing?
    Mr. Friedman. Unfortunately, we have an obligation under 
statute to audit the financial statements of the U.S. 
Department of Energy, and that is the most labor intensive and 
dollar intensive effort that we undergo. So a disproportionate 
part of our budget is directed toward the financial statements 
of the Department of Energy.
    Mr. Deutsch. And what percentage of your budget, would you 
say, is directed toward that versus these other type of 
activities?
    Mr. Friedman. Well, it is about 20 percent of our entire 
budget, and we think that is quite high.
    Mr. Deutsch. Now can I--I mean, just to try to get a feel 
for this, how many people would you say--how many person time 
are you allocating to the Los Alamos situation at this point? 
How many full time positions?
    Mr. Friedman. How many full time positions? Probably 20 to 
25. Let me just expand on that for a second. We are also doing 
sensitive property reviews at the other University of 
California labs as well.
    Mr. Deutsch. And in terms of the other facilities that you 
have responsibility for, do you have any sizable people in 
terms of property evaluation at any of the other locations?
    Mr. Friedman. Well, yes. You know, obviously, we have----
    Mr. Deutsch. You have jurisdiction, but I mean, is there 
anything that large in terms of numbers of people?
    Mr. Friedman. No. No, there is nothing that large, not by a 
long shot.
    Mr. Deutsch. Have you uncovered anything similar to what's 
happened in Los Alamos?
    Mr. Friedman. Well, it is too early to tell, but the 
firearms review was the first step in a series of steps to look 
at property controls.
    Mr. Deutsch. At this point, do you think the laboratory has 
taken sufficient personnel action to deal with the problems 
that you've identified?
    Mr. Friedman. Well, as I indicated earlier, certainly, a 
number of personnel actions have taken place. There are a 
number of reorganizations that have taken place. But it is too 
early for us to judge whether those are really effective in 
addressing the problem.
    Mr. Deutsch. When would you want to come back for us where 
you feel you can actually judge those?
    Mr. Friedman. Well, let's look at 6 months, and maybe we 
will have a chance to look at it in that timeframe. It may be a 
little longer than that. Did you ask for a timeframe? Did I 
answer you correctly?
    Mr. Deutsch. Yes, you did. In your longer statement you 
said that the firing of Mr. Walp and Mr. Doran while they were 
ongoing reviews of property and procurement controls undermined 
management's action to address the core issue, identifying and 
correcting weaknesses in controls over national security.
    Would you explain how exactly this undermined the core 
issue?
    Mr. Friedman. Well, basically, we felt that these people 
were on the front line of identifying these problems, and 
taking them out of the loop undermined this very process that 
was designed to get to the bottom of these issues and to 
investigate and prosecute those cases where there was 
wrongdoing.
    Mr. Deutsch. And the core issue being?
    Mr. Friedman. The core issue being people on the inside 
with the investigative information to provide to us or to the 
FBI as to wrongdoing at the laboratory.
    Mr. Deutsch. Right. But I guess the thing that raised just 
my concern again is that weakness in controls over national 
security, not over theft but over national security. What were 
you alluding to there?
    Mr. Friedman. Oh, what we were alluding to is--and as I 
indicated, we have not found a computer that contained 
classified information that was lost or stolen. What I am 
alluding to is that the national security mission of Los Alamos 
is inextricably tied to the day to day business of the 
laboratory.
    So to the extent that you have people who are involved in 
misdeeds, who are even responsible for common inventory, it 
sends a very, very important message to the rest of the 
laboratory.
    Mr. Deutsch. How helpful would Mr. Palmieri's April 10 memo 
have been in implementing the necessary correction actions?
    Mr. Friedman. He laid out five different steps. I thought 
they were good steps, the most important of which was 
corrective action plans for all of the divisions at the 
laboratory in terms of their dealing with property. I thought 
that was the most impressive. To date, we have not received any 
of those corrective action plans.
    Mr. Deutsch. And controlling the property on the inventory 
list really doesn't address the abuse in the procurement 
system. Most of the property isn't even on that list. Is that 
not correct?
    Mr. Friedman. I don't think it is most of the property. I 
think there is a fair amount of the property that is not on 
that list. I don't know the precise percentage.
    Mr. Deutsch. And finally, under the new reorganization 
plan, Mr. Walp's former office is going to be merged into the 
Audits and Assessments Section. Audits does not have a good 
reputation for prosecuting fraud, waste and abuse, particularly 
criminal cases.
    Does this appear to just be another attempt to put the 
investigators into an office much more acceptable to upper 
management?
    Mr. Friedman. Frankly, until I heard it today, I did not 
know that is the way it was going to be reorganized, and I'd 
like to take a look at that, and I would be more than happy to 
give you my opinion after I have done that. I don't have an 
opinion on it right now. Unless the Audits and Assessments unit 
is girded up and given authority, I'm not sure that it is a 
good idea.
    Mr. Deutsch. Thank you.
    Mr. Greenwood. Before we go to Ms. Eshoo, just one quick 
question.
    I want to understand something. University of California 
manages about $2 billion worth of Federal money in this 
program, and they get a performance fee that totals around $8-
$9 million. If property is stolen from the lab, does that come 
out of the funds that would otherwise enure to the benefit of 
the University of California or, in fact, does it just get 
moved--pushed along to the Treasury?
    Mr. Friedman. This is a question, Mr. Chairman, that really 
ought to be addressed to the Department itself. But in general, 
unless the most senior members of the contractor staaff are 
aware of the fraud, the taxpayers carry the burden of those 
losses.
    Mr. Greenwood. Thank you. The gentlelady from California.
    Ms. Eshoo. Thank you again, Mr. Chairman. for the 
legislative courtesy that you have extended to me. Thank you, 
Mr. Friedman, for your excellent testimony and your very 
important work.
    I have two questions. Are you aware of the reforms that the 
University has undertaken relative to this scandal and, if so, 
do you believe they are the soundest policies to cure the ills 
that you have investigated and reported?
    Mr. Friedman. Well, as I indicated, there have been a 
number of personnel changes. There have been a number of 
reorganizations. For example, the University's auditor is now 
directly involved at Los Alamos. So it's impressive, 
Congresswoman, but I want to withhold judgment on the final 
analysis until we have a chance to look at it after it has been 
executed for a period of time to see if it is doing the job.
    Ms. Eshoo. In the analysis that you did, can you tell us 
what the dollar figure is that--as you just mentioned in the 
answer to the last question that was posed to you, who picks up 
the tab. The American taxpayer. How much have they been ripped 
off?
    Mr. Friedman. Well, I don't have an independent number, but 
relying upon the number that has been referred to in the April 
10 memorandum, at least $1.3 million.
    Ms. Eshoo. And the contract is for how much?
    Mr. Friedman. The contract is in the nature of about $1.3 
billion a year. I am not precisely sure of the exact amount.
    Ms. Eshoo. And it is a 5-year contract?
    Mr. Friedman. I'm sorry?
    Ms. Eshoo. Is it a 5-year contract?
    Mr. Friedman. It is a 5-year contract, as I understand it.
    Ms. Eshoo. I would still like to have that amount in my 
checking account, but I think that context is also important 
here.
    do you believe that, with the most stringent reforms and 
the commitment to sustain them, that what has been uncovered 
can be permanently eradicated?
    Mr. Friedman. I'm sorry. I'm not sure I understand your 
question. Could you repeat it?
    Ms. Eshoo. Reforms placed on the books that University of 
California has to accept this, and it's up to them to do, to 
put the reforms into place, to develop the confidence of the 
Congress that they can indeed sustain the reforms. I mean, some 
reforms sound terrific, but they are not worth the paper that 
they are written on.
    Mr. Friedman. Right.
    Ms. Eshoo. So not only to recognize that reforms need to be 
made, that they can indeed and will be sustained. Do you 
believe that those reforms can actually cure the ills that we 
know about? So much talk, excuse me, about the culture, and 
that's a lot of times a lot more difficult to get at. Do you 
believe it can be weeded out?
    Mr. Friedman. I think, if there is a sustained effort, it 
is going to take a fair amount of time. It is not going to be a 
quick fix, and I suspect that the changes proposed by the 
University of California are evolving, and there will be more 
of them, is my expectation. Mr. Darling, I think, is going to 
succeed me on the panel, and I think he can answer that more 
directly, but I think there is a chance they can address the 
underlying issues, sure.
    Ms. Eshoo. Well, that's positive. In the examination of 
security and audit divisions or departments, whatever the right 
word is, I don't have the sense that moving one person from one 
to the other is really what is going to fix this. Do you think 
that an outside--a private security company would be better and 
that you wouldn't have the situation that sounds to me like the 
fox in charge of the chicken coop.
    It is very difficult to, I think, given the situation, and 
I think under a whole set of normal circumstances, that that is 
an easy thing to carry out. Do you think the University would 
be better off going outside to do this?
    Mr. Friedman. Well, respectfully, there are at least two 
outside investigative organizations with appropriate authority. 
One is my office. The other is the Federal Bureau of 
Investigation. One of the findings which is most unfortunate is 
that there was a reluctance to share information with our 
office, a delay in sharing with our office and the FBI.
    Ms. Eshoo. How do you think that is best addressed, though?
    Mr. Friedman. Well, I think in part that is a cultural 
issue----
    Ms. Eshoo. They have probably learned by now.
    Mr. Friedman. And I suspect, with Congressional pressure, 
and more emphasis on the part of the NNSA, I think those issues 
can be addressed.
    Ms. Eshoo. I think that investigation and oversight--and I 
always say this to my constituents in town hall meetings--is 
really one of the most important roles that the Congress can 
play, and I think that what I have learned from you and from 
the other witnesses, but especially from you, is that the 
accountability in the review that comes with investigation and 
oversight can indeed happen.
    I am pleased to hear you say that you--to give you 6 months 
or a little more to take a look and to come back. But I think 
the seriousness with which this situation is taken and then 
turn that into something is really very important.
    Let me just ask you one more question, and it is one that I 
have continued to pursue with whomever is testifying, and I 
plan to ask this of the University people as well. I think it 
is very, very important to know about this nexus of national 
security and the work, the contract that the University has.
    While there is a question about the computer that contained 
classified information, and I think that is still part of the 
work that you are doing, to pursue that, to chase that down, is 
there anything else that you can point to that raises serious 
questions about what I am asking you?
    Mr. Friedman. There is nothing that comes to mind. Let me 
clarify one thing so I'm not misleading you. We are not 
investigating the loss of a particular computer that we think 
may have had classified information at this time.
    Ms. Eshoo. Thank you. Thank you, Mr. Chairman. Thank you 
for your good work.
    Mr. Greenwood. Thank you. One final question, Mr. Friedman. 
The University of California has operated Los Alamos for 60 
years. It is my understanding that each time the contract comes 
up for renewal, it has been extended noncompetitively to the 
University of California. Do you think that it is time for the 
Department of Energy to put the Los Alamos contract up for 
competition?
    Mr. Friedman. Well, I don't have a position on this 
particular contract, Mr. Chairman, but my general position is 
and the position of my office has been, based on the work that 
we've done, is that maximizing competition is in the best 
interest of the taxpayers.
    So, certainly, you never know who is out there or who might 
have some good ideas. So I wouldn't rule it in or rule it out, 
but I think generally, maximum competition is in the best 
interest of the taxpayers.
    Mr. Greenwood. Okay. Well, thank you, sir. We appreciate 
your testimony.
    I call our final witness, Mr. Bruce Darling, Senior Vice 
President, University Affairs, and the Interim Vice President 
for Laboratory Management at the University of California. 
Welcome, Mr. Darling. Thank you for being with us.
    Mr. Darling. Thank you, sir.
    Mr. Greenwood. You may have heard me say to the other 
witnesses that it is the custom of this committee to take 
testimony under oath. Do you object to giving your testimony 
under oath?
    Mr. Darling. No, I do not.
    Mr. Greenwood. Also pursuant to the rules of the House and 
this committee, you are entitled to be represented by counsel. 
Do you wish to be represented by counsel?
    Mr. Darling. I do not. I should note, however, that the 
University has retained Covington & Burling in the person of 
Lanny Breuer. He has been assisting the University and the 
committee in its investigation, but I do not wish counsel.
    Mr. Greenwood. Okay, thank you. In that case, if you would 
rise and raise your right hand.
    [Witness sworn.]
    Mr. Greenwood. You are under oath, Mr. Darling, and you may 
give your statement.

     TESTIMONY OF BRUCE B. DARLING, SENIOR VICE PRESIDENT, 
   UNIVERSITY AFFAIRS AND INTERIM VICE PRESIDENT, LABORATORY 
              MANAGEMENT, UNIVERSITY OF CALIFORNIA

    Mr. Darling. Good afternoon, Mr. Chairman, Mr. Deutsch, and 
members of the committee. I'd like to thank you for this 
opportunity to address the business, property management, and 
procurement problems at Los Alamos National Laboratory. With 
your permission, I'd like to give you a brief summary of the 
written testimony that I have submitted for the record.
    First, let me say that I am not here to offer any excuses 
whatsoever. To the contrary, the University of California 
accepts full responsibility, and we are aggressively making the 
changes to restore public confidence in Los Alamos and in the 
University of California.
    Our efforts have benefited greatly from the information 
made available to us by Glenn Walp and Steven Doran, other 
laboratory employees, the Department of Energy Inspector 
General, and this committee. All of you have helped us identify 
problems, expose abuses, and to begin to resolve them in an 
effective and decisive manner.
    If I may say, along with Mr. Tauzin, I, too, would like to 
recognize Jaret Mcdonald for identifying the thefts at the 
facility known as TA-33 and for fully pursuing the matter, 
including when he had to go to the FBI outside of the 
laboratory.
    In particular, Mr. Chairman, I would like to acknowledge 
your leadership, and I would like to say that the information--
new information that has come out of today's hearing is 
something that we will pursue vigorously and immediately.
    In my remarks, I will briefly describe what actions we have 
taken to date to resolve the problems at Los Alamos. In doing 
so, I would like to touch on personnel changes, increasing 
financial integrity at the lab, property controls, as well as 
the University's governance of these three national assets.
    The University's actions began last August with the 
appointment of an external review team to examine the lab's 
purchase card program. Then late last year President Atkinson 
dispatched a team of senior University officials, first to 
review the laboratory business practices, and subsequently the 
dismissals of Mr. Walp and Mr. Doran.
    As a result of our findings, the University has made 
sweeping management changes, beginning in late December with 
the appointment of Vice Admiral George P. Nanos as Interim 
Director of Los Alamos.
    Admiral Nanos brings to Los Alamos a strong management 
background as commander of the Naval nuclear weapons program as 
well as the Naval Sea Systems Command which had more than 
40,000 employees and over a $20 billion annual budget--so a 
factor of 10 greater than Los Alamos in terms of budget.
    To date, 15 lab managers and employees have either been 
terminated, removed from management positions and/or reassigned 
to new positions. These include the laboratory Director, the 
Principal Deputy Director of the laboratory, the Chief 
Financial Officer of the laboratory, the Security Director and 
Deputy Director of the laboratory, and the Audit Director of 
the laboratory. In addition, the University rehired Mr. Walp 
and Mr. Doran, as you heard previously.
    Among the other steps we have taken, Senior University 
officials are directly managing Los Alamos' business functions, 
both the business activities and the audit activities. We have 
strengthened the independence of the audit office. We have 
rescinded the audit office's so called loyalty oath that you 
may have read about in Inspector General Friedman's report, and 
we have activated an independent whistleblower hotline.
    In addition, we initiated a comprehensive property 
inventory that is now underway, and we have reviewed every 
property delivery site, known as drop points, an issue that was 
brought to our attention by Mr. Walp and Mr. Doran; and we have 
improved the lab's business organization, procedure and 
financial systems and controls.
    In addition, we have brought in external resources to bear 
on these problems. First, we created an external review team, 
which you know began in August, looking at the purchase card 
program. It was made up of two former Federal Inspectors 
General, along with a dozen forensic auditors from 
PricewaterhouseCoopers, and we have recently expanded that 
effort to include all procurement at the laboratory, not just 
the purchase card system. So the just-in-time contracts, 
regular procurement, blanket purchase orders, as well as the 
local vendor agreements that you heard about earlier from Mr. 
Walp and Doran.
    I should also add that another external resource we have 
brought to bear is Ernst & Young that currently have 30 
consultants on the ground at Los Alamos today, looking at 
business processes, financial controls and organization 
structure to do a comprehensive review of the entire business 
operations of the lab, for many of the reasons you have heard 
from the previous witnesses.
    To sustain these changes, and I do mean sustain them, 
President Atkinson has established an interim oversight board 
for Los Alamos. We are revamping the University's laboratory 
governance structure. What we want to do is create a clear set 
of expectations for everyone involved and a very clear culture 
of accountability for all of us in this process.
    Let me underscore that the lab financial controls did 
indeed have serious weaknesses. The purchase card program 
differed from those at the University's 10 campuses and the 2 
other laboratories that we manage for the Federal Government. 
It lacked strong controls and, unfortunately, the controls that 
did exist were not enforced adequately.
    It is also clear that Los Alamos did not impose the kind of 
sanctions that would have encouraged employees to better 
account for laboratory property in the way that all of us 
should be doing. And the dismissals of Mr. Walp and Mr. Doran 
were both unwarranted and, to use the Inspector General's 
words, incomprehensible.
    While we address these problems, I want to assure you that 
we are also focused on fulfilling the mission of the laboratory 
to the Nation, especially at this critical time in world 
events. The lab's science and weapons programs must meet their 
objectives, and the security operations must meet the Nation's 
expectations.
    Managing Los Alamos is a privilege for the University of 
California. It allows us to contribute to the Nation's defense 
in innumerable ways, from weapons development to the 
stewardship of the Nation's nuclear stockpile, and to homeland 
security. Our challenge is now to raise the business practices 
to the quality of our science and our weapons programs. We owe 
this to the American people who, after all, are paying for it, 
and whose security is also dependent upon the work of the 
laboratory.
    Finally, let me just say that Interim Director Nanos, 
joined by many honest and hard working lab employees, are 
working diligently to bring about a change in the culture of 
the laboratory. The challenge now is to solidify his efforts 
and to sustain them over the long term.
    In conclusion, I would like to apologize to you on behalf 
of President Atkinson, myself, and the University's Board of 
Regents for these business practice failures. They detract from 
the very real and valuable contributions that thousands of Los 
Alamos scientists, technicians and support personnel are making 
to our Nation. We are a stronger and safer Nation because of 
their efforts, and we regret what has taken place.
    Mr. Chairman, I would be pleased to answer any questions 
that you or members of the committee may have.
    [The prepared statement of Bruce B. Darling follows:]
   Prepared Statement of Bruce B. Darling, Senior Vice President of 
              University Affairs, University of California
    Mr. Chairman, Mr. Deutsch and members of the Committee: My name is 
Bruce Darling, Senior Vice President of University Affairs for the 
University of California. On January 8, President Atkinson also 
appointed me interim Vice President for Laboratory Management.
    I appreciate the opportunity to appear before the Committee today 
to address the management problems at Los Alamos National Laboratory. 
Let me assure you at the outset that I am not here to offer any excuses 
for the business, property management, and procurement problems at the 
Laboratory. On the contrary, the University of California takes full 
responsibility for these problems and is aggressively implementing the 
changes necessary to strengthen financial controls and restore the 
American public's confidence in Los Alamos and the University's 
management of it.
    Our efforts have benefited greatly from the information made 
available by Glenn Walp and Steven Doran, other Laboratory employees, 
the Department of Energy Inspector General, the media and this 
Committee. All have been invaluable in the University's effort to 
identify problems, to expose abuses, and to resolve them in an 
effective and decisive manner. I want to acknowledge in particular the 
leadership of Chairman Greenwood in this effort. If additional 
information becomes available today or at any other time, we will 
pursue it immediately. And we will continue to work with the Committee, 
the Department of Energy, and current and former employees at Los 
Alamos, including Mr. Walp and Mr. Doran, to accomplish our corrective 
actions.
    Since the problems at Los Alamos have been reported in the media 
and discussed at this hearing, I will focus initially on the actions we 
have taken to date and then I will describe why we did so:
                      sweeping management changes
    The University made sweeping management changes at Los Alamos 
starting in late December with the appointment of Vice Admiral George 
P. Nanos as Interim Director following the resignation of the 
Laboratory Director and the removal, and later termination, of the 
Principal Deputy Director. Admiral Nanos brings to Los Alamos a strong 
management background and valuable experience leading the U.S. Navy's 
nuclear weapons program. He also commanded the Naval Sea Systems 
Command, the Navy's largest acquisition command responsible for the 
design, construction, support and maintenance of all Navy ships and 
shipboard weapons systems, with four nuclear repair shipyards, seven 
Navy laboratories, 40,000 employees, and a $23 billion budget.
    Soon thereafter, we removed the director of the Lab's Audit Office. 
We removed and reassigned the Chief Financial Officer and his two 
deputies, and both the director and the deputy director of the Lab's 
Security Division. We also rehired Mr. Walp and Mr. Doran, with full 
back pay to the date they had been dismissed by the former Laboratory 
management.
    At the same time, senior University administrators took on direct, 
personal responsibility for managing Los Alamos functions.
            university management of los alamos audit office
    The University Auditor is now directly managing the Audit Office. 
In that capacity, he has already taken a number of significant steps:

 He has strengthened the independence of the audit function by 
        having the auditors of all three laboratories report directly 
        to him.
 He rescinded the so-called ``loyalty oath'' prior to its 
        mention in the DOE Inspector General's Special Inquiry on Los 
        Alamos operations.
 He has commenced peer reviews of the critical audit and 
        assessments functions and redefined the internal audit 
        reporting structures.
 He has developed a plan to bring current the substantial 
        backlog of audit and investigation work utilizing existing 
        staff, UC audit managers, and outside experts.
 He added an independent whistleblower hotline (1-800-403-4744) 
        that improves confidentiality in order to encourage employees 
        to report improper activities without fear of retaliation. This 
        is intended to give employees confidence that their concerns 
        will be investigated fully and in a timely manner. He is also 
        implementing at Los Alamos recent University policies for 
        reporting and investigating irregularities and protecting 
        whistleblowers from retaliation.
        university management of los alamos business and finance
    The Laboratory's finance and business operations are also now being 
managed by the University's Vice President for Financial Management, 
who has extensive corporate finance experience. In that capacity, she 
has taken the following actions:

 She organized a ``red team'' consisting of property, 
        procurement and technology specialists from Lawrence Livermore 
        National Laboratory to conduct a high level review of the 
        organizational structure, business procedures and financial 
        systems of the procurement and property functions.
 She is conducting an internal risk assessment of key financial 
        and business processes, including a ``cradle-to-grave'' 
        assessment of property acquisition.
 She adopted a more effective transitional organizational 
        structure in the Business Division that includes enhancements 
        to financial controls and business processes.
 She will integrate the financial control and business process 
        improvements with the Enterprise Resource Project of the 
        Laboratory.
 She named a senior procurement officer from the University as 
        interim head of the Procurement Office and installed a new 
        administrator to lead the purchase card program.
           external review of purchase cards and procurement
    Meanwhile, the University has directed an External Review Team--
made up of two distinguished former federal Inspectors General and more 
than a dozen forensic accountants from PricewaterhouseCoopers--to 
expand its recently completed review of the Lab's purchase card system 
to include all other procurement practices at the Laboratory, including 
Just-in-Time contracting, blanket purchase agreements, and local vendor 
agreements. As soon as the expanded work is done, we will report the 
results to the Committee and to the public and we will immediately 
address any deficiencies identified by the External Review Team.
               external review of key business processes
    The University has also retained Ernst & Young to conduct a 
comprehensive review and validation of the Laboratory's key financial 
processes; to review systems integration and controls; to assess the 
business organization and recommend the optimal organizational 
structure; to evaluate core competencies of the business organization 
personnel; and to recommend required employee skill sets. A team of 
over 30 Ernst & Young consultants has been at Los Alamos for several 
weeks now and is expected to report back to us next month.
                           property inventory
    Property management is another high priority. To that end, we are 
moving forward with a comprehensive property inventory--the first since 
1998. As you can imagine, at a facility like Los Alamos, which covers 
43 square miles and includes some 2,000 buildings and $943 million in 
controlled property inventory, a wall-to-wall inventory is a massive 
but important and necessary undertaking. We have also conducted a 
survey of all Laboratory delivery sites, known as ``drop points,'' in 
order to assess vulnerabilities in security. Our external consultants 
will recommend additional property management controls that we will be 
instituting.
                        interim oversight board
    More strategically, President Atkinson has established an interim 
Oversight Board of University Regents and scientific experts to guide 
Interim Director Nanos and to ensure that necessary reforms are 
vigorously pursued at Los Alamos. Its membership includes three members 
of the Board of Regents, Richard Blum, Peter Preuss and Gerald Parsky; 
UC San Diego Chancellor Robert Dynes, a physicist; and Sidney D. Drell, 
a Stanford University professor emeritus and a noted arms control 
advisor.
    Both Blum and Parsky are highly regarded financial experts with 
long experience in financial management. Parsky's firm acquires and 
builds middle-market companies in the industrial sector of the economy. 
Under his leadership, Blum's firm has helped to build numerous 
publicly- and privately-owned companies both in the United States and 
abroad.
    Drell served in 2001-2002 as chair of the senior review board for 
the Intelligence Technology Innovation Center and also served from 
1992-2001 as a member of the President's Foreign Intelligence Advisory 
Board.
    Dynes is a physicist specializing in semiconductor research. He 
came to UC San Diego in 1991 after a 22-year career with AT&T Bell 
Laboratories. He has two decades of experience consulting and advising 
on national laboratory oversight issues, including as vice chair of the 
President's Council on National Laboratories.
    Preuss is President of the Preuss Foundation, which is involved in 
brain tumor research. In 1970, he founded Integrated Software Systems 
Corporation, the first software company specializing in computer 
graphics. He is chairman of the Regents' Committee on Oversight of 
Department of Energy Laboratories.
                  university governance and oversight
    At the same time, we are working on a larger revamping of the 
University's governance structure for the three national laboratories 
it operates for the federal government.
    External Oversight. We are examining various national laboratory 
management models for elements that we can draw upon to improve our own 
oversight: DOE's Sandia National Laboratories, Argonne National 
Laboratory, Oak Ridge National Laboratory, and Brookhaven National 
Laboratory; DOD's Draper Laboratory; and NASA's Jet Propulsion 
Laboratory. Our goal is stronger oversight by people with expertise in 
science and weapons, technology businesses, and corporate governance 
who will hold the Labs and the University accountable.
    For the new governance board, we are currently developing a list of 
candidates with experience relevant to national security laboratories. 
We are developing a charter and initial definition of roles and 
responsibilities for this oversight structure and its relationship to 
the UC Board of Regents, to the University President and Vice President 
for Laboratory Management, and to the Laboratory Directors. We will 
include a list of expectations for Laboratory Directors in creating and 
maintaining a culture of accountability at the Laboratories.
    Internal Oversight. To ensure that the University remains fully 
engaged in oversight, not just at Los Alamos but also at the other two 
Laboratories, we are designing an improved internal University 
structure. It will integrate a broader array of University management 
expertise--business and finance, audit, legal counsel, and human 
resources--into the oversight of the Laboratories, create a strong 
support function and staff for the external oversight body, integrate 
external expertise into the University's oversight, and create our own 
clear set of expectations and culture of accountability.
    That's where we are today. Now let me explain the events that led 
us to this point.
    Without addressing every allegation you may have read about in the 
press or heard about in the hearing today, we clearly determined that 
the general thrust of many of the allegations concerning control 
weaknesses are valid. It is clear, for example, that the purchase card 
program at Los Alamos, which differed from the program used at the 
University's ten campuses and two other UC-managed laboratories, lacked 
strong controls. The controls that did exist were not adequately 
enforced. It is also clear that Los Alamos did not impose the kinds of 
sanctions and accountability that would have encouraged employees to 
keep track of property for which they were responsible. And it is clear 
that the dismissals of Mr. Walp and Mr. Doran were unwarranted.
    As I explained earlier, we have been aggressively correcting these 
problems. We also accept the challenge posed to us by Chairman 
Greenwood during his visit to Los Alamos last month to make our 
purchase card program a model for the nation.
                   purchase card external review team
    Last August, when we first heard allegations of procurement card 
abuse at Los Alamos, the University immediately directed the Lab to 
establish the External Review Team (described on Pages 4-5) to examine 
the Lab's purchase card program. This team reviewed 45 months of 
transactions totaling $120 million and 170,000 separate transactions. 
Following issuance of the External Review Team's final report in 
December 2002, the University Auditor, Patrick Reed, was dispatched to 
verify the Lab's efforts to reconcile and review all questionable 
transactions raised by the External Review Team.
    The University Auditor, in turn, submitted his interim report in 
February. It concludes that there were approximately $320,000 in costs 
that were questioned as to allowability. These costs, including some 
that cannot be documented because of records lost in the 2000 Cerro 
Grande fire, will be fully reimbursed to the Department of Energy 
immediately upon a determination by the DOE contracting officer that 
this represents a full and fair accounting of the questioned 
transactions. In addition, the Lab adopted the University's purchase 
card program in June 2002 and has reduced the number of purchase cards 
in use by the Lab's 8,500 employees from 1,100 to 561. Furthermore, all 
current cardholders and ``approving officials'' have been trained on 
purchase card policies and procedures. Numerous changes have been made 
in the policies and procedures governing the purchase card program in 
order to tighten internal controls and reduce the risk of fraud. We 
have decreased cardholder-spending limits and imposed requirements that 
each transaction be approved by a supervisor. We have also banned the 
use of purchase cards to buy inventory-controlled items. Finally, we 
have implemented sanctions such as revocation and suspension of cards 
for inappropriate card usage or non-completion of training 
requirements.
                     university special review team
    While the External Review Team was conducting its initial review, 
President Atkinson directed me on November 21, 2002 to lead a Special 
Review Team of senior University administrators to assess first-hand 
the scope of the problems at the Laboratory. During our visit to Los 
Alamos four days later, we identified weaknesses in the Laboratory's 
purchasing, property management, audits and assessments, financial 
management, security, and public communications programs and issued a 
report with nine findings and recommendations. To cite a few examples, 
we learned that:

 $4.9 million in purchase card transactions either had not been 
        electronically reconciled in a timely manner or were otherwise 
        under question;
 There was no systematic process to ensure that controlled 
        property items purchased via alternative procurement methods 
        (e.g., purchase cards, Just-in-Time contracts), were entered 
        into the property inventory;
 There was an urgent need to evaluate the Laboratory's business 
        systems, financial controls and accountability;
 There were ineffective processes to ensure that senior 
        Laboratory officials were notified of inappropriate business 
        activity at the Laboratory. In addition, there was an 
        inadequate process to ensure that inappropriate activity, such 
        as waste, fraud, abuse or theft, was reported to Laboratory 
        management, the DOE Inspector General, and UC officials.
 There were unacceptable audit practices, both in terms of the 
        timeliness of addressing audit findings and a serious backlog 
        of unresolved repetitive audit findings.
     termination and subsequent rehiring of mr. walp and mr. doran
    In addition, our report to the President strongly recommended that 
the circumstances surrounding the dismissals of Mr. Walp and Mr. 
Doran--which, unbeknownst to us, occurred the morning of November 25 
when the first Special Review Team met in Los Alamos--be referred for 
investigation to the Inspector General and that the University also 
investigate the dismissals, but in a way that would not interfere with 
the Inspector General's investigation. Both investigations subsequently 
concluded that the dismissals were unwarranted.
    On December 16, President Atkinson directed me to lead a second 
University Special Review Team to explore the circumstances related to 
the dismissals of Mr. Walp and Mr. Doran. We had already written both 
gentlemen on December 11 to request their assistance in addressing the 
procurement and property problems. On December 18, we interviewed ten 
Los Alamos officials and departed with serious questions about the 
events leading to, and the judgments exercised in, terminating their 
employment. We interviewed four additional witnesses the following day 
and, as a result, on December 20 we took two actions:

 First, we placed a call to their attorney to arrange a meeting 
        to hear their allegations and to understand their views of the 
        Laboratory and its management;
 Second, we hired a former U.S. Attorney to contact the U.S. 
        Attorney and the FBI in New Mexico to seek a better 
        understanding of the Laboratory's on-going relationships with 
        the FBI and the U.S. Attorney, and to discuss steps necessary 
        to solidify a good working relationship for the future.
           fulfilling the laboratory's mission to the nation
    I want to assure you that, while we have been identifying and 
remedying these problems at Los Alamos, we have also been focused on 
fulfilling the Lab's and the University's mission to the nation, 
especially at this critical time in world events. We are focused on 
ensuring that:

 Los Alamos' scientific and weapons programs continue to meet 
        their objectives;
 Security operations of the Laboratory meet the nation's 
        expectations;
 The Lawrence Livermore and Lawrence Berkeley Laboratories, 
        which the University also manages, meet the same high standards 
        the University is setting for Los Alamos;
 The University continues to strengthen its governance and 
        oversight of the three national laboratories it manages for the 
        Department of Energy.
 And, lastly, that there are open and timely communications 
        with the Department of Energy, the National Nuclear Security 
        Administration, this Committee and Congress, as well as the 
        media, to promptly apprise all interested parties of our 
        findings and actions.
    As you know, since the days of Professor and Nobel Laureate Ernest 
O. Lawrence and his colleague Robert Oppenheimer, the University of 
California has had the privilege of managing Los Alamos to contribute 
to our nation's security. Over the last 60 years, the University and 
the Lab have become an integral system, both through the research 
collaborations conducted with our ten campuses, as well as the lasting 
ties to the Los Alamos workforce. Through this unique partnership with 
the federal government, the University is proud to have contributed to 
every area of science and technology related to national defense.
    The Lab has developed two-thirds of the nuclear weapons in the U.S. 
arsenal. When nuclear weapons testing ended, the nation looked to Los 
Alamos and Livermore to find ways to use the most advanced scientific 
and computational assets to simulate nuclear testing and to ensure the 
continued viability of our nuclear weapons stockpile. And today, as the 
Committee knows, Los Alamos is front-and-center in the effort to 
bolster homeland security, especially in the areas of counter-
terrorism, non-proliferation, and prevention and preparedness for 
nuclear, biological, and chemical attacks. The International Atomic 
Energy Agency inspectors that are in Iraq at this very moment were 
trained at Los Alamos, and scientists at the Lawrence Livermore Lab 
provide broad country analyses of potential proliferant countries, such 
as recent information about North Korea's nuclear developments.
    I raise all this to underscore the University of California's 
continuing commitment to the nation even as we resolve the business and 
administrative deficiencies at Los Alamos. The business practices need 
to be raised to the same level of quality as the science and weapons 
programs. We owe this to the American people, who are paying for the 
work of the Lab, and whose security is dependent on the Lab. Let me 
reemphasize that managing the national security laboratories for the 
last 60 years has been an honor and an awesome responsibility, and we 
will address any challenges that might detract from our ability to 
fulfill our obligations to the American people.
    Finally, I would be remiss not to mention the dedication and 
commitment with which Interim Director Pete Nanos has tackled his 
responsibilities at such a difficult time. He and Los Alamos National 
Laboratory's employees are energized and working diligently to bring 
about a change in the culture of Los Alamos to one that welcomes open 
communication and encourages employees--without threat of retaliation--
to step forward with their concerns. Every indication is that he is 
succeeding, but the challenge will be to solidify his efforts and 
sustain them over the long-term.
    In conclusion, let me apologize to you on behalf of President 
Atkinson and the University's Board of Regents. The problems I have 
outlined reflect poorly on Los Alamos and on the University, and 
detract from our many accomplishments on behalf of the nation. 
Moreover, they are a disservice to the thousands of honest and 
hardworking scientists, technicians and support personnel who are 
working to protect American troops and the American homeland. They 
deserve better from the Laboratory's management and the University of 
California.
    Let me assure you that the University of California, including the 
new management team at Los Alamos, shares with the Committee, the 
Department of Energy, and the National Nuclear Security Administration 
the urgency to fix the problems that have emerged. This has been a 
difficult time, both for the University and for the Laboratory, but we 
have benefited enormously from the intense scrutiny and from the active 
involvement of the Secretary of Energy, the NNSA Administrator, and 
this Committee in helping to identify the problems we are discussing 
today and to develop appropriate remedies. Far from weakening us, this 
experience has strengthened us; it has further bolstered our resolve to 
restore the confidence of the Nation in the service we are determined 
to perform in time of peace and in time of war.
    Thank you again for this opportunity to address the Committee. I 
would be pleased to answer your questions.

    Mr. Greenwood. Thank you. Thank you, Mr. Darling. 
Appreciate that.
    Let me ask you a general question before I get a little bit 
more specific. You have been here since 1 o'clock, and you have 
listened to the other witnesses, and particularly the first 
panel talked about a longstanding culture, an endemic system 
here where it was widely understood that, for years, the lab 
had been, ``greening the valley.''
    The question is: How could this have been so widely 
understood at the site and the University of California 
oblivious to it? I'm assuming that the University of California 
was oblivious to it, but you tell me.
    Mr. Darling. Yes. I believe we were. I first heard the term 
``greening the valley'' from Mr. Shiffer, the Director of 
Counterintelligence at Los Alamos on November 25 when we 
interviewed him. That was a very troubling assertion, because 
the point was that the lab is one of the largest economic 
forces in that part of northern New Mexico, and therefore, he 
said it made a very attractive target for thieves, drug trade 
or others who might want to prey on the laboratory.
    So that was a very troubling assertion. This was the first 
time that I had ever heard about it. When I asked others in the 
University of California, President's Office, it was the first 
time that they had.
    I will just say very bluntly that I don't think the lab was 
forthcoming to the University about the extent of the problems 
that have been revealed to date, and indeed on occasions 
rebuffed the University when it sought to inquire and obtain 
further information.
    Mr. Greenwood. Do you mean by that last statement with 
regard to these most recent allegations or do you mean that 
with regard to allegations in previous years?
    Mr. Darling. No, I mean with regard to the allegations that 
have come forward today. I do know that at times the 
University's auditor sought to obtain information from the lab 
auditor. I know that that was not forthcoming. I know----
    Mr. Greenwood. With regard to these issues or in previous 
years?
    Mr. Darling. These issues. Then I will just give you an 
example of that. I think it was December 24 when suddenly a 
large number of so called G-29 reports that are required to be 
filed by the audit office suddenly landed on the University 
auditor's desk for the first time with no prior warning or no 
prior information. That was only because we were moving, and we 
had already--although we did not announce it until January 6, 
we had already made a number of the management changes that I 
have outlined here on December 21.
    Mr. Greenwood. At the conclusion of your written statement, 
you noted Admiral Nanos' efforts to change the culture at LANL. 
Testimony we heard earlier today indicates that the culture 
problems so widely examined during the Wen Ho Lee and missing 
hard drive investigation are alive and well.
    What are your views on the culture that Admiral Nanos is 
attempting to change, and what is the University of California 
to effect that profound change?
    Mr. Darling. As you know, sir, my involvement with the 
laboratories is very recent. It dates only to January 8. So I 
cannot give you a historical perspective, but what we have 
observed is that there is a lack of accountability, personal 
and institutional; and I think that is a cultural issue that 
needs to change. I think that----
    Mr. Greenwood. To what would you attribute that? How does 
that happen? What is your sense of how that came to be?
    Mr. Darling. I can only speculate, but I think the only 
thing that I can say is to have a culture of accountability 
requires rigor, discipline, and relentlessness, day in and day 
out, year after year after year. And, sir, I do not think that 
was there. I do not think the senior managers of the laboratory 
created those expectations, enforced those expectations, and 
demanded those expectations.
    Mr. Greenwood. Do you think it has anything to do with who, 
if anyone, had anything at risk? In other words, in most 
enterprises, particularly in the private sector, shoplifting, 
theft by employees has a real and serious impact on the bottom 
line, and management works assiduously to rout it out, because 
it has to.
    As you heard me ask Mr. Friedman and based on his response, 
quite frankly, the University of California had, as I 
understand it, nothing at risk economically, nor, obviously, 
did the management at the laboratory. Everything that walked 
away from the laboratory just was picked up by the taxpayers, 
and there was no limiting factor whatsoever.
    Mr. Darling. Well, I think the best way for me to answer 
your question is to draw a comparison with our other two 
laboratories and our 10 campuses of the University of 
California. The University is a $16 billion enterprise, one of 
the largest organizations in the Fortune 500, were it a 
company. We do not permit that at our campuses. We do not 
permit that at our other two laboratories, nor do we see the 
extent of the problems at those other campuses or laboratories 
that we have seen here at Los Alamos.
    So I don't think it is the matter of having financial 
resources at risk. We are able to invest that without having 
financial resources at risk at those other elements of the 
University.
    Mr. Greenwood. And how do you know that it is not happening 
at other labs that you supervise?
    Mr. Darling. The day that we--well, let me back up. The day 
that the President asked me to take a team to Los Alamos, I 
included a representative of Livermore National Laboratory, the 
Executive Officer of the lab, for exactly that purpose. We 
wanted someone who knew the labs.
    From that day forward, we have informed both labs about 
exactly what we found. We have asked them to look into the 
issues there. We have asked the University auditor to pursue 
each of the issues that were brought up at Los Alamos that you 
have heard about today, and thus far--we are not completed, but 
thus far, we do not see the extent of the problems that we've 
seen at Los Alamos.
    Mr. Greenwood. Following the allegations raised by Mr. Walp 
and Mr. Doran, Dr. Browne sent an e-mail to LANL employees that 
states in part, ``Allegations currently being made about the 
laboratory by two individuals who do not know the laboratory's 
operations or its people are simply wrong. I am confident that 
current investigations as well as future reviews will find that 
allegations of widespread theft, cover-up or interference with 
law enforcement at the laboratory simply are not true.''
    The allegations, of course, were accurate. Do you agree 
that Dr. Browne's e-mail is part of the problem?
    Mr. Darling. I don't know if it is part of the problem or 
if it is reflective of the problem, but it is certainly true 
that it seemed to have excused behavior and issues that should 
not have been excused. It seemed to have failed to look into 
issues in adequate depth, because I believe that, had that 
happened, I think that this information would have come out 
before Mr. Walp and Mr. Doran were dismissed, and the 
laboratory could have done something about it.
    Mr. Greenwood. Over the past 3 months, the University of 
California has dismissed or reassigned a number of LANL 
employees. Indeed LANL's former Director, Dr. Browne, just 
referred to, stepped down from his position as a direct result 
of the investigation of the matters before the committee.
    Can you tell me why the following individuals moved from 
their positions at LANL, their current status and, if you can, 
the salaries of those who remain there: Dr. Browne, the former 
Director, what is he doing now?
    Mr. Darling. He has returned to being a scientist. He is a 
very eminent scientist in nuclear weapons and other scientific 
areas. His salary was reduced. That was effective January 6. 
His salary was reduced from $335,700 to $272,500.
    Mr. Greenwood. Joe Salgado, the former Deputy Lab Director?
    Mr. Darling. Joseph Salgado was terminated from the 
laboratory on January 31 of this year.
    Mr. Greenwood. Why was he treated differently than Dr. 
Browne?
    Mr. Darling. Because he was responsible for the--in a 
very--he was responsible for the business and operational 
aspects of the laboratory.
    Mr. Greenwood. Wasn't Dr. Browne responsible as well?
    Mr. Darling. Yes, he was, but he was responsible for, you 
know, both the scientific and the business, and we felt the 
responsibilities fell more squarely on the shoulders of Mr. 
Salgado.
    Mr. Greenwood. Okay. Katherine Brittian, the former head of 
Audits and Assessments?
    Mr. Darling. Yes. She was removed from her position as 
Director of Audits and Assessments on January 13 of this year. 
We are reassigning her to another position. If that occurs, her 
salary will decline from $175,000 per year to $140,000 per 
year. The adjustment----
    Mr. Greenwood. Say that again.
    Mr. Darling. From 175 to 140. I'm not sure what I said, but 
that is what I meant to say.
    Mr. Greenwood. I thought you said from 174 to 240.
    Mr. Darling. I may have, and I apologize, if I did.
    Mr. Greenwood. Stanley Busboom, former head of security.
    Mr. Darling. Yes. A position has been identified for Mr. 
Busboom outside of the security area, but we are in 
negotiations with Mr. Busboom's attorney. So I can't speak to 
what the status is beyond that, but if that position--if he 
stays, salary will go from $190,000 per year to $140,000 per 
year.
    Mr. Greenwood. Now did he make the decision to fire Misters 
Walp and Doran?
    Mr. Darling. I think that is a very good question, Mr. 
Chairman. I think he--he certainly signed the letter, and 
whether he made the decision or whether Mr. Salgado made the 
decision, I think there is some difference of interpretation 
about. I think both might claim responsibility.
    Mr. Greenwood. Well, why wouldn't he be out on his ear?
    Mr. Darling. Well, I am told that he has a long track 
record of--I'm too distant from this to speak from personal 
experience, but of high service to the laboratory, and I should 
say that that is one of the reasons--the policies provide that 
people who have had distinguished service and who are no longer 
effective managers but can serve the lab in another role, not 
in a management role, have that opportunity. But I would also 
just say that that is why we are in negotiations.
    Mr. Greenwood. Gene Tucker, former Deputy head of LANL 
security.
    Mr. Darling. Yes. He was removed from his position as 
Deputy head of security on January 8 of this year. The 
situation is exactly the same as for Mr. Busboom.
    Mr. Greenwood. In negotiation?
    Mr. Darling. In negotiation. Salary would drop from 165 to 
130, $1,000 per year, if he were to stay. But negotiations are 
underway.
    Mr. Greenwood. By the way, have you looked at whether these 
salaries are comparable to the private sector, to begin with?
    Mr. Darling. Yes, sir. They are considerably below the 
private sector.
    Mr. Greenwood. I'm in the wrong business. Thomas Palmieri, 
former Business Operations Division leader and Chief Financial 
Officer?
    Mr. Darling. Yes. Mr. Palmieri was removed from the 
position of head of--I'll just call him the CFO for that 
shorthand title on January 24 of this year. His salary, 
effective March 2, will decline from 180,000 to 140,000, and he 
would become manager of the budget but not of all the financial 
operations. He has a long distinguished history in doing 
budgeting and is viewed as someone who is very capable in that 
area.
    Mr. Greenwood. As part of UC's effort to address LANL's 
most recent problems, the University has retained several law 
firms, consultants, independent investigators and accountants. 
Does UC intend to seek reimbursement from the Department of 
Energy for the costs of these firms and, if so, on what grounds 
does the University intend to base such claims?
    Mr. Darling. We do not intend to seek reimbursement from 
the Department of Energy.
    Mr. Greenwood. Whose idea was that?
    Mr. Darling. The President's and mine.
    Mr. Greenwood. During your own inquiries, did you learn of 
any support----
    Mr. Darling. I should also say--excuse me for 
interrupting--but the Board of Regents shares that opinion as 
well.
    Mr. Greenwood. Okay. During your own inquiries, did you 
learn of any support for the claim made by certain LANL 
officials that the FBI and U.S. Attorney's Office is 
dissatisfied with the assistance provided to them by Misters 
Walp and Doran?
    Mr. Darling. We have not, and I would say that this is a 
very important issue, because one of the reasons given for 
dismissing Mr. Walp and Mr. Doran was exactly that matter. So 
on December 18 when we met with 10 lab--on our second visit to 
Los Alamos to meet with 10 lab managers to inquire about the 
dismissal of Mr. Walp and Mr. Doran, that was an issue that was 
very much on our mind.
    So we sought immediately thereafter to open a dialog with 
the U.S. Attorney and with the FBI in New Mexico to find out 
what their perspectives are. That has not yet occurred. I 
believe it is occurring in early March. Our Deputy General 
Counsel and the former U.S. Attorney that we have hired to 
assist us in opening that door will be meeting with them for 
exactly that reason.
    Mr. Greenwood. And who was it that said that, in fact, the 
FBI and the U.S. Attorney's Office were dissatisfied with the 
gentlemen?
    Mr. Darling. I may get this wrong, but there was a--I 
believe there was a November 18 meeting between Mr. Salgado and 
Mr. Dickson of the laboratory with the Special Agent in Charge 
of the FBI and the U.S. Attorney. Upon return from that 
meeting, there were two different versions of what the FBI had 
said.
    Mr. Salgado told us that the FBI thought that the 
laboratory had blown the so called Mustang case, the Lillian 
Anaya attempt to purchase a Mustang using a purchase card, and 
he attributed the blame to Mr. Walp and Mr. Doran for not 
pursuing it aggressively enough.
    Mr. Dickson returned from that meeting and told us in our 
private interview that he felt the FBI was saying that Mr. 
Salgado had blown the case by pushing too hard and preventing 
the FBI from doing the necessary investigative work that it 
needed to do before having a case that it could refer to long 
enforcement officials.
    Mr. Greenwood. Thank you, sir. The gentlelady from 
California, Ms. Eshoo.
    Ms. Eshoo. Thank you, Mr. Chairman. Thank you, Mr. Darling, 
for the work that you have done and for your testimony today.
    Given the testimony of both Mr. Walp and Mr. Doran--and I 
note that Mr. Doran's son is here. It is your son with him?
    Mr. Darling. Louis.
    Ms. Eshoo. I think that he has a lot to be proud of in his 
father. Talk about role models.
    Given their testimony relative to what is needed in 
addition to some of the action that's been taken relative to 
personnel, and I have found it quite interesting the list that 
you just went through with the chairman, do you agree that more 
need to go?
    Mr. Darling. What I'd like to do, Congresswoman Eshoo, is 
reserve judgment until we have had an opportunity for the 
external review team that is looking into procurement and the 
Ernst & Young consultants that are looking at all of the 
business practices to report on their findings and 
recommendations. But I would say, as Mr. Friedman said, this is 
only a beginning.
    I would urge you to also reserve judgment about our 
performance, and I would urge you to be skeptical about our 
reforms until you have had a chance to see us implement them 
over time in a sustained way.
    Ms. Eshoo. The reason I raise the question is because I 
think that it was offered as a reform, in the reform column, 
and it was relative to culture and how this is going to change 
and that, if it is going to change, that that needed to be 
done. So that's why I offer the question to you.
    Do you believe that there needs to be any outside security 
company that is brought in rather than the internals that you 
have?
    Mr. Darling. I do understand----
    Ms. Eshoo. Internal mechanisms.
    Mr. Darling. Yes. I do understand why Mr. Walp and Mr. 
Doran have expressed skepticism about transferring their former 
office, OSI, into Audits and Assessments, given the past 
history. So I share on a historical perspective their concerns.
    I will tell you that the University of California auditor 
who is heading up that office at the moment has done a number 
of the things I indicated to you, rescinding the loyalty oath 
in the audit office, establishing hotlines, demanding that the 
auditors act in the way that they should. He is an individual 
who is above reproach. He has had 22 years of experience at 
KPMG and auditing financial and governmental institutions. But 
again, we have begun, and I think over time you should ask us 
to prove to you that we are going to make the changes that will 
cause Mr. Walp and Doran perhaps to change their minds over 
time.
    Ms. Eshoo. Did you find the timeframe that the Inspector 
General mentioned when I asked him the question about the 
amount of time that it would take--does that fit with what--the 
reforms that you are putting in, and then a review of them, 6 
months to a year?
    Mr. Darling. I think 6 months to a year would be a very 
good time for us to come back and have this further discussion 
and for you to ask us not only what we have done but how we 
have sustained it and how we intend to sustain it for the 
future.
    Ms. Eshoo. Are there golden parachutes that are offered to 
the employees that are asked to leave?
    Mr. Darling. Well, there may be negotiated settlements. I 
indicated that we----
    Ms. Eshoo. Well, I mean----
    Mr. Darling. But no golden parachutes that I know of.
    Ms. Eshoo. Well, what is a negotiated settlement? Is it 
something other than what someone's salary is? I mean, do they 
get something more than their salary when they are asked to 
leave?
    Mr. Darling. The University, in negotiations--the 
University--if employees have a long service with the 
University, the University upon settlement will occasionally 
contribute as much as 1 month of salary per year of service.
    Ms. Eshoo. Well, the reason I ask this is obvious. The 
chairman asked the question about, you know, why wasn't 
someone, whomever it was, just put out of the organization. So 
it seems to me that, if in fact this is going to be reformed, 
that fresh air is brought in. I mean, you have the job of Pope 
John XXIII who had to throw open the windows and say that we 
are going to have some fresh air come through this institution, 
which is a very difficult thing for institutions to do, first 
to acknowledge, which I applaud you for doing.
    It seems to me that, if part of the organization looks over 
their shoulder and sees people that have not served the 
organization well being somehow rewarded, then that doesn't 
clean out the culture that we want to reform, you see. That is 
the intent with which I ask the question, and while I don't 
want to get into specific personnel issues, that is why I offer 
it. So I----
    Mr. Darling. Well, I appreciate--sorry to interrupt. I 
appreciate your raising the issue. There are also a number of 
other individuals who have been terminated whose names I was 
not asked about, including the two individuals involved in the 
TA-33 case, including Mary Wood, and there are a number of 
other names. But I am very sympathetic with your point. Indeed, 
I have been making the same case internally.
    Ms. Eshoo. I think it needs to be taken very seriously, 
because we don't want to come back here and revisit these 
things.
    My final question, and the same question I have asked of 
everyone: Do you have any knowledge of, in terms of these 
shortcomings, the abuse, the fraud, that can be connected to a 
diminishment of the national security of our country?
    Mr. Darling. Thank you for asking the question. I do not, 
and I would like, if I may, just give you a few points of 
recent reviews. In August the Department of Energy site office 
reviewed security at Los Alamos. In December there was an in 
depth review by the DOE office headed by Mr. Glenn Podonsky, 
I'm told, involved 30 to 45 experts who concluded that there 
was effective national security performance.
    Third, in January we brought in an outside firm that we use 
to assist us with security, a firm by the name of ManTech 
Aegis, to review Los Alamos and Livermore and to help us 
improve any reporting of security incidents. They did not 
identify any issues.
    We also brought in security experts from Lawrence Livermore 
National Laboratory to Los Alamos, again to look at this issue. 
We have had a work group on cyber security probing to make sure 
that, in terms of computer and other kind of access, we don't 
have vulnerabilities, and we are issuing this week a strategic 
plan for security at both of our national security 
laboratories. It has been in development for the last year.
    As I indicated, we have removed the Director and the Deputy 
Director of the Security Division, and we have also examined 
every one of the security issues that Mr. Walp and Mr. Doran 
raised with us in our last meeting in late January to make sure 
that we left no lead uninvestigated in exploring these issues.
    Thus far, we have not found an issue, but I can't go beyond 
that.
    Ms. Eshoo. Thank you. Has my time expired, Mr. Chairman?
    Mr. Greenwood. Well, apparently, we didn't start the clock.
    Ms. Eshoo. All right. Can I ask one more quick question?
    Mr. Greenwood. Certainly.
    Ms. Eshoo. Thank you very much. Can you comment on--let me 
just back this up with an observation first before I ask the 
question, very quickly.
    That is that, if in fact--going back to the culture of an 
organization, if whistleblowers are not honored, respected, and 
paid attention to, that sends a very broad and bad message. Can 
you enlarge upon the whistleblower issue and how people in the 
organization will have confidence that, when they make an 
observation and they act on it, that there won't be punitive 
action taken against them. In fact, I don't want to say 
celebrated, but honored--honored. It takes a lot of guts to 
step up and say something.
    So there has to be confidentiality. In many ways, there is 
a parallel to be drawn with the whole area of sexual abuse in 
the workplace, and I've had some experience in setting up 
systems in what I did before I came to the House.
    So can you tell this committee with some confidence what 
you have set up and why you have the confidence that it is 
going to work, because it has these principles built into it?
    Mr. Darling. Yes.
    Ms. Eshoo. Thank you.
    Mr. Darling. Congresswoman, I agree that terminating a 
whistleblower sends a chilling message. It creates a climate in 
an organization that is ultimately very destructive to the 
organization itself and to the mission that it carries out.
    So we have attempted to, both at the University and at the 
three labs that we manage for the Federal Government, to set up 
whistleblower information and reporting and protection systems 
to accomplish the very goals that you have outlined.
    Now the University has had in place for some time a 
whistleblower policy. It was just updated in October because of 
a new State law that was passed in California to strengthen 
that, and it does apply to our three labs, including the one in 
New Mexico, because we as the contractor in California impose 
those same requirements.
    What it provides is that any person may report allegations 
of improprieties, whether they are known or suspected, that any 
good faith disclosure automatically triggers an investigation. 
It automatically triggers protection of the individual, and it 
also provides for a follow-up system so the individual has a 
way to find out what action the institution is taking on it.
    Similarly, for anonymous whistleblowers--for example, we 
have implemented a Pinkerton Company whistleblower hotline. An 
individual may call up on that hotline, never mention their 
name, provide the information. Pinkerton will relay it 
immediately to the University's corporate audit office. A case 
number will be assigned to it. The individual who called 
anonymously will be informed of that case number, and the 
individual may then call to follow-up to find out what has been 
done on that case number and still maintain the individuals 
anonymity.
    Furthermore, we will provide information to Pinkerton so 
that, when that individual does call, they will know on a 
regular basis what the status of that is.
    Second, we have tried to make reporting very easy. It 
doesn't have to be in writing or to a designated person. We 
want people to complain through the chain of command, because 
as I told your investigators, if people do not step forward, if 
people do not express their concerns, it really does create a 
chilling environment, and all of us have the obligation to do 
that up the line, and we also have the obligation to create an 
environment in which people who work for us may do that, and we 
must listen to them carefully, because if not, we have the kind 
of incidents that occur here.
    I will just say that Admiral Nanos has been very open about 
this. He has held a number of all-hands meetings at the lab 
where more than 700 people at each time come in to an 
auditorium. He said he has been receiving regular e-mails from 
people. So he is reassured that, at least for the time being, 
people feel comfortable. They are coming directly to him.
    Our auditor is also receiving those. I can't remember. We 
have received in the last few weeks 156 different reports from 
people. Now that may send a shock wave through you, but I think 
that is a very, very healthy statement.
    Ms. Eshoo. Thank you, Mr. Darling. Thank you again, Mr. 
Chairman, for your courtesy.
    Mr. Greenwood. The gentleman from California, Mr. 
Radanovich.
    Mr. Radanovich. Thank you very much, Mr. Chairman. Mr. 
Darling, thanks for being in front of the panel today. Please 
forgive me for being gone for a portion of this hearing. We 
were having a security briefing on the House floor, and some of 
these questions you may have answered, but I just want to kind 
of reiterate some of them just to make sure, just so I am clear 
that there were no confirmed security breaches or loss of 
classified information as a result of these reported thefts at 
Los Alamos. Am I correct?
    Mr. Darling. That is correct, Mr. Radanovich. I think you 
walked in as I was walking through the list of security steps 
we have taken to ensure that. So I won't repeat it, but the 
answer is we know of nothing.
    Mr. Radanovich. Okay. And in your protocol in the 
structural steps that you have taken for stronger oversight on 
the laboratory, I would imagine that would be of general--well, 
say, for example, there was a Frank Dickson, who is LANL's long 
time General Counsel, who could not give a straight answer 
about the proper means to report a potential situation of 
fraud, waste, and abuse. I assume that you have taken the time 
to explain all that.
    Mr. Darling. I have not, and I appreciate your raising 
that. On our November 25 visit one of the disturbing issues 
that we faced was, when we asked how do people report issues, 
and how do they get followed up at the laboratory, we found a 
disconnect between the Office of Security Investigations, the 
Audits and Assessments office, and the General Counsel's 
office, and I believe that is one of the reasons that Mr. Walp 
and Doran found the kind of resistance that they did, because 
they were both people--one office elbowing the other out of the 
way, and other cases where they simply weren't addressed at 
all.
    So we are--that is why we have put all of this into the 
Office of Audits and Assessments under new leadership to try to 
make sure that we address that for the long term in a clear, 
simple, easy way that every employee will know how to pursue.
    Mr. Radanovich. Okay, thank you. You may have addressed 
this one also. I do need to ask it. Am I correct in 
understanding that the University and the laboratory were both 
investigating through internal and external review teams the 
procurement fraud issues at Los Alamos as early as August 2002, 
several months prior to the publicity surrounding Mr. Walp and 
Mr. Doran, and this committee's own investigation? Was this a 
case of your sweeping the issues under the rug until they 
appeared in papers?
    Mr. Darling. No. I don't--again, my involvement is quite 
recent, but my understanding, as soon as the lab became aware 
of purchase card programs in August and the University was 
notified, we demanded that an external review team chaired by 
two former Federal Inspectors General and 
PricewaterhouseCoopers get involved to review that.
    So I don't believe that the University of California, 
Office of the President, did anything other than act 
immediately to bring an outside group in to review these issues 
the moment it heard about them.
    Mr. Radanovich. Okay. Thanks. Also, in the case of Lillian 
Anaya who tried to buy the Mustang, I hear she never got it, 
but what was the status of that investigation as it is right 
now, briefly?
    Mr. Darling. Yes. My understanding, and I hope I am clear 
in my own mind about this--forgive me if I misstate the matter, 
but my understanding is, first, the matter was referred to the 
FBI and the U.S. Attorney's Office. I believe--I hope I am 
right in saying they decided not to prosecute.
    My understanding was then it was referred to the DOE 
Inspector General, and just, I believe, either earlier this 
week or the end of last week, it was referred back to the lab. 
We are now pursuing the issue. We have put together a case 
review board to investigate the charges, and we will be taking 
action, personnel actions, based on that case review board's 
determination.
    Mr. Radanovich. Thank you very much. Now we all agree that 
the missteps and the theft and fraud is intolerable under 
situations like that, but I do want to kind of want to put an 
emphasis on the research, the critical research that is 
important to national security that is conducted in the UC labs 
right now.
    Could you do me a favor and summarize the key areas of 
research currently underway at Los Alamos and the extent to 
which they relate to counterterrorism and homeland security 
missions, and also please highlight to me to what extent a 
change in the management during wartime would risk disrupting 
research.
    Mr. Darling. Yes. I will just cite three examples. The Los 
Alamos laboratory has trained the International Atomic Energy 
nuclear inspectors who look at how it is that nations use 
nuclear reactors and what they do with the spent fuel rods. Of 
course, that is a concern, because one doesn't want to have 
those available to be transformed into nuclear weapons.
    Second, both of our laboratories in cooperation have 
developed a very small miniaturized biological threat detection 
devices which have been installed around this city and around 
the 2002 Winter Olympics, for example, to detect any potential 
biological threats through airborne means.
    Third, we have developed a so called EMP weapon, 
electromagnetic pulse weapon. You may have read about it in the 
newspaper recently, that if we do send in troops to Iraq, this 
weapon will enable the U.S. forces to knock out any system that 
uses either electricity or computer chips and, therefore, 
disable the ability of Iraqi or any other opponent forces to 
communicate and coordinate their response to a U.S. attack. I 
am told that it does that without harming individuals.
    So these are just a few examples, but you know, the core 
mission is really developing nuclear weapons in the past and 
then maintaining the current stockpile of nuclear weapons so 
that, if they are ever called upon to be used, we are able to 
do that.
    In addition, we monitor nuclear proliferation in countries 
around the world to make sure that the U.S. is fully informed 
about the status and, as Congresswoman Eshoo said earlier, it 
was the Lawrence Livermore lab that notified the U.S. 
Government about the developments in North Korea.
    As to what would happen if the contract were changed, let 
me just say that the University employs the vast majority, if 
not all, of the Nation's nuclear weapons physicists. The Nation 
as a whole, 44 percent of the Nation's PhDs in science and 
engineering are over the age of 50. So we are going to 
experience a generational shift.
    That is true also of the Nation's nuclear weapons 
designers. The older ones are the only ones who have ever had a 
chance to test a nuclear device, because the Nuclear Test Ban 
Treaty has since prevented any further testing.
    The younger scientists who have come forward to develop 
weapons have only designed them on computers. They have never 
seen them actually work. The younger ones are worried that, if 
the University's contract expires or the University is 
terminated, that the older ones will do what many of them have 
indicated they might do, which is to simply retire, and we 
would leave the Nation denuded of one of its most strategic 
scientific and weapons manpower forces that we have.
    Mr. Radanovich. Mr. Darling, how long has UC had the 
contract to do this research?
    Mr. Darling. It began in 1943 when the U.S. Government 
turned to Ernest O. Lawrence, the Nobel Laureate in physics, 
and at the Berkeley campus of the University, and asked him 
first to organize our radar effort in World War II, and then 
asked him to develop an atomic bomb, because the Germans had 
one of the leading nuclear fission research programs.
    They controlled most of the heavy water supply of the 
world. They controlled occupied France where the Curie 
laboratory and the Curies were, and they had an armaments and 
munitions capability that was frightening to the rest of the 
world, and had we not developed the atomic bomb first, I think 
all of us only have to pause and imagine what our world and our 
lives would be like if the Nazis had done so first. So it has 
been since 1943.
    Mr. Radanovich. And as I understand it, the contracts dome 
due every 5 years, a 5-year period, and it's really not under 
competitive bid?
    Mr. Darling. That is correct.
    Mr. Radanovich. I'd bid on it but, you know, I had the 
opportunity. I chose Congress instead of nuclear physics. But 
can you answer for me or give me other examples of different 
types of contracts like these that are so specialized that they 
are not put up for bid?
    Mr. Darling. Yes. I'll give you one example. Admiral Nanos 
who used to head the Navy nuclear weapons program has indicated 
that Lockheed Martin has had a contract for the Trident missile 
program for more than 20 years. The reason is that, for these 
very strategic assets of the Nation, it is not like buying 
shoes where you can find quality and determine the best price.
    You have an asset. You have given a challenge that is one 
of the most difficult challenges that human beings know how to 
achieve, and turning over the contractors on any kind of a 
regular basis creates a real threat of disruption to our basic 
security.
    So Lockheed Martin has had this Trident contract, I'm told, 
for more than 20 years, and there may be other examples that we 
could give you later. That's the one I know off the top of my 
head.
    Mr. Radanovich. One last question, if I may. Is the 
University making a profit off these contracts?
    Mr. Darling. The University, from 1943 until today, has 
done this on a no gain, no loss. We have not wanted to receive 
any additional money beyond our costs, and we have not wanted 
to spend any University money beyond what it cost to run these 
programs.
    Mr. Radanovich. All right. Thank you very much, Mr. 
Darling. Appreciate your testimony. Thank you, Mr. Chairman.
    Mr. Greenwood. The Chair thanks the gentleman. Just on that 
last point to clarify something: I was told by our staff that 
the University receives a performance fee in the vicinity of 
$8-$9 million. Is that----
    Mr. Darling. That is correct. But can I explain how it's 
used, to show you?
    Mr. Greenwood. Yes.
    Mr. Darling. The University decided it never wanted to be 
financially dependent upon managing these laboratories, partly 
because at the beginning it was viewed as something that would 
just be done for a few years, and after the war was over, there 
would be no further need for nuclear weapons.
    So the University does two things with its fee. One is it 
pays for the Office of the President's Oversight Office for the 
laboratory administration, and then it takes the majority of 
that money, and we give it back to the Directors of the two 
nuclear weapons laboratories so that they may use it to do 
science where a scientist has a very good idea. They are not 
yet able to obtain funding, and so initiate new scientific 
programs that in many cases have turned out to be the core, the 
bedrock, of future nuclear weapons work.
    So we put it all back into the mission for which the Nation 
has hired us, in the first place.
    Mr. Greenwood. Okay. A couple of more questions that I 
have, and then we will let you go, Mr. Darling.
    What did Mr. Salgado tell you about his concerns about Walp 
and Doran obtaining whistleblower status?
    Mr. Darling. He informed us that the timing of their 
termination related to an impending Washington, DC, DOE 
Inspector General visit to the laboratory, and that he was 
concerned--he felt that their performance was not adequate, and 
he was concerned that, if they were allowed to meet with the 
DOE inspector on that occasion, that that would give them in 
some technical sense whistleblower status, and it would make it 
harder for the laboratory to terminate them for the reasons 
they felt they should be terminated.
    Mr. Greenwood. Okay. You made reference to the loyalty oath 
that you have dispensed with. Could you tell us what that is?
    Mr. Darling. I don't recall it well, but I think the DOE 
Inspector General's report said that, in addition to the 
professional standards and code of conduct of auditors, which 
all auditors in all organizations follow, there was a statement 
that one should--that auditors should be loyal to the 
laboratory. That's a despicable comment. That is unacceptable. 
It is intolerable, and it is outrageous.
    Mr. Greenwood. Where did it come from? Was that the 
University that inserted that?
    Mr. Darling. No. It was a Los Alamos audit employee, and 
I'm glad you asked the question. I don't know, but I will 
pursue it to find out who put that in.
    Mr. Greenwood. And to your knowledge, do any of your other 
facilities that you manage have comparable loyalty oath?
    Mr. Darling. I'm not aware of it, and it would be 
reprehensible if we did, and we will stop it immediately, if we 
do.
    Mr. Greenwood. Yes, I would appreciate if you would check 
on that.
    My final question is this. With regard to cases of, for 
instance--I think her name is Mary Wood who apparently has been 
accused of using a purchase card to obtain funds at a casino, 
and I believe there were $2500 worth of inappropriate charges 
they attributed to her. Is the University making an effort to 
get recovery of funds in these cases such as hers?
    Mr. Darling. I need to look into that. I don't know the 
answer, but we certainly should. And now that you have brought 
up the question, we will investigate that and see if we can do 
so.
    Mr. Greenwood. I'm asking you one more question now, 
because I am curious, because Mr. Deutsch is on his way here, 
and he will be here in a second.
    Gene Tucker, formerly Deputy Director of LANL Security, 
told Mr. Walp that the money involved in the situation was UC 
money and not taxpayer money. So LANL could handle this matter 
in any way it saw fit. Do you agree with that statement?
    Mr. Darling. No, I do not. The University of California is 
a public trust organized under the constitution of the State of 
California. Every dollar, whether it comes from public or 
private sector sources, should be treated as though it were a 
public dollar and given the utmost respect.
    Mr. Greenwood. Okay. What is the status of the Lillian 
Anaya case involving the attempt to purchase a Ford Mustang, 
which I believe was valued at about $30,000?
    Mr. Darling. Yes. First of all, that purchase never 
occurred, because, fortunately, a check and balance did work, 
and that is that the Bank of America, I believe it was, did not 
permit the transaction to go through. So there was never a car 
delivered, and there was never any loss of money by the lab or 
the U.S. Government.
    As I think I said to Mr. Radanovich, the case was referred 
to the FBI and the U.S. Attorney. I believe they did not choose 
to prosecute, and--oh, I'm sorry. I was thinking about--I am 
confusing this with the Clarissa Rodriguez case. Excuse me. Am 
I right? I'm glad they think I'm right, because I'm a little 
confused at the moment.
    So I believe it has been referred to the FBI and the DOE 
Inspector General, and I'm sorry, I just don't recall what the 
status is, but I believe it is with them.
    Mr. Greenwood. What about the Rodriguez matter then? What 
is the status of that?
    Mr. Darling. As I informed Mr. Radanovich, it has now been 
back--it is back in the hands of the laboratory, and we are 
pursuing a personnel action through our case review board.
    Mr. Greenwood. Now I'm getting you even more confused. The 
first case that I asked you about was the Anaya Mustang case.
    Mr. Darling. Yes, and here I have----
    Mr. Greenwood. The Rodriguez case is a separate case. Can 
you tell us the status of that investigation?
    Mr. Darling. Yes. So the Anaya case is the Inspector 
General. As of the 19th of February, we are commencing an 
investigation to determine whether discipline is appropriate 
and what it should be, and that is for Lillian Anaya.
    Clarissa Rodriguez, I am now recollecting, was the woman 
who falsified a travel voucher. She was allowed to resign by 
the laboratory, I believe, inappropriately. There are other 
people who have different opinions. And she is prohibited--she 
was allowed to retire-excuse me--yes, resign in lieu of 
termination. She is prohibited from being employed by the 
laboratory for a period of 7 years, and I need to see whether 
we are seeking--no, no, I'm sorry. We did receive $1800. Her 
check did clear, and the laboratory has been repaid. Sorry, I'm 
stumbling a bit here.
    Mr. Greenwood. That's okay. Are criminal prosecutions 
anticipated in either one of these two cases?
    Mr. Darling. Criminal prosecution? We have reported both of 
them to the proper law enforcement authorities, and my 
understanding is that that is a decision that rests with them 
and that we really have no jurisdiction to be able to determine 
that.
    Mr. Greenwood. Okay.
    Mr. Darling. The Clarissa Rodriguez case, I'm told, as of 
February 19 does reside with the FBI. That is the $1800 case. 
We are getting a little below my level of knowledge here.
    Mr. Greenwood. Recently, the Inspector General at 
Department of Energy issued a report regarding firearms 
inventory control at LANL. The IG concluded, ``Significant 
internal control weaknesses exist in the receiving process and 
the administration of the firearms inventory.''
    Further, the report noted that, ``The inability of LANL to 
provide accurate firearms inventory, the lack of reconciliation 
of the LANL inventory with the protective force inventory, and 
the acknowledged problems in the process for receipt of 
firearms and their inclusion in the formal LANL inventory raise 
additional doubt about the property control system at LANL.''
    Does anyone at LANL have an accurate account of the lab's 
firearms?
    Mr. Darling. I'm told, first of all, that all of the 
firearms were properly controlled in secure areas and were 
never out of control. There was, clearly, a lack of proper 
systems inventory accountability. I am told, for example, that 
the name and make of each of the weapons was listed rather than 
saying weapon, and then with a subheading. So when they 
searched the data base, they were not able to find them on the 
data base, but they were under proper control.
    I'm told that, although there was an initial large 
discrepancy between our records and the DOE's, I'm told those 
have been reconciled, and that we now understand that they are 
not only under control, but we have the full count.
    We will not permit anyone to purchase a firearm in the 
future without proper management authority, and they will have 
to be accounted for in the way that we and you would expect of 
us.
    Mr. Greenwood. The gentleman from Florida.
    Mr. Deutsch. Thank you, Mr. Chairman.
    The Deputy Director of the laboratory has been removed, but 
the legal counsel, who insisted that Mr. Walp and Mr. Doran be 
fired, is still in his position, even though, obviously, his 
role in this issue. Could you explain why that decision?
    Mr. Darling. Yes. As I explained a few moments ago, one of 
the confusing points about the dismissals of Mr. Walp and Mr. 
Doran was a difference of opinion between the general counsel 
and the principal deputy director of the laboratory about the 
FBI's and U.S. Attorney's views of Mr. Walp and Mr. Doran's 
performance. That is something we sought immediately to try to 
find out the FBI and U.S. Attorney's perspective.
    That meeting will take place early next month. I think that 
meeting will provide us the kind of information about Mr. 
Dickson's role that will allow us to make a decision. But just 
like with Mr. Walp and Mr. Doran, we feel the need to collect 
the information before we make a decision. So we are reserving 
judgment.
    Mr. Deutsch. I guess the question really is focus, 
apparently at least, based upon what we are aware. This 
gentleman actually was working on a daily basis to try to get 
these two gentlemen fired.
    Mr. Darling. I don't know that, but I do know that there 
was certainly--I think that the general counsel, instead of 
providing legal advice, also had an operating role. I think it 
confused the role of the general counsel at the laboratory, and 
that is among the issues that we will be looking at and 
discussing as we go forward.
    Mr. Deutsch. You stated in your testimony that only $3,000 
in fraudulent purchase card purchases had been referred to the 
authorities. Our staff, just by looking at invoices, there are 
big differences between allowable purchases and legitimate 
ones.
    If your operation didn't direct me to buy something, I'd 
buy it myself. Whether it was allowable or not is irrelevant. 
So how do you make that distinction between allowable and 
legitimate?
    Mr. Darling. I'm sorry, Mr. Deutsch. I don't remember that 
in my testimony.
    Mr. Deutsch. It's actually apparently--you know, what I'm 
told is in your written statement, it actually is included in 
that. I mean, at this point----
    Mr. Darling. I would not make a distinction between 
allowable and appropriate.
    Mr. Deutsch. All right. But apparently, again the audit 
did. I mean, at this point--you know what. At this point on 
that particular issue, you know, if you want to get back to us 
in writing on that.
    Mr. Darling. Thank you, sir. I'd be pleased to.
    Mr. Deutsch. We've been told that no other University 
operation has a purchase card program where people can go to 
local vendors and give their Z-number and buy things. Is that 
correct?
    Mr. Darling. You mean no other University of California?
    Mr. Deutsch. No other operation at the University.
    Mr. Darling. I believe that is true. To the best of my 
knowledge, yes.
    Mr. Deutsch. And we have been told that this is a way to 
support local vendors. I mean, is that the purpose of it?
    Mr. Darling. I believe there are two purposes. One is, I 
believe, under the contract we are required to provide business 
opportunities for business in the immediate area around the 
laboratory.
    Second, because when the lab--the lab was purposely sited 
there, because it was a remote area for both security reasons 
and given the nature of the work, and over time as the lab has 
grown, it needs a business and other kind of infrastructure 
nearby to meet its needs.
    This was an attempt to do that, but the controls are not 
adequate, and that is something we are having an external 
review team review now as they expand their review beyond the 
purchase card program into all areas of procurement.
    Mr. Deutsch. And again, I mean, obviously, it is self-
evident that the other way is to help the local economy.
    Mr. Darling. Absolutely.
    Mr. Deutsch. Again, just to save a little bit of time, my 
understanding is Pricewaterhouse is going to be looking at the 
whole process of this local vendor agreement where right now, I 
guess, there is no oversight on that. Is that also correct?
    Mr. Darling. When you say no oversight----
    Mr. Deutsch. Well, we have been told that no one looks at 
what is being bought through the local vendor agreements. Is 
that accurate?
    Mr. Darling. Well, Mr. Walp and Mr. Doran were extremely 
helpful to us in understanding the local vendor agreements and 
both how they have been used and perhaps how they have been 
misused. So that is an area that we immediately responded to, 
we are looking into.
    We have brought in PricewaterhouseCoopers to look at it, 
and we will be--we have already begun to tighten up what can be 
purchased and making sure----
    Mr. Deutsch. Let me just ask a quick question. Could you 
purchase Nike sneakers?
    Mr. Darling. Pardon me?
    Mr. Deutsch. Nike sneakers?
    Mr. Darling. Sir, you've gotten beyond my level of detailed 
knowledge. I do know that safety boots, safety goggles, and 
other things that are needed on a very quick turnaround time, 
for obvious reasons, are available to be purchased, but I 
cannot tell you about whether Nike----
    Mr. Deutsch. Just yesterday our staff discovered that, 
until August of this year, lab employees could get a travel 
advance just by filling in an electronic form. It did not 
require any supervisory approval.
    One of your former employees just did that--in fact, did 
that, and we still have to find the form. That employee 
falsified a travel statement and converted $1800 in Federal 
funds to a personal use which, obviously, are Federal crimes. 
The lab Human Resources Department, reporting this to Mr. 
Walp's unit but without checking with anyone, has decided that 
it would take a restitution check, and allowed the employee to 
resign before any investigation was done, and no investigation 
was done. Would you view that as an appropriate decision?
    Mr. Darling. No. I have told the committee staff, and I 
will say it to the committee as well, I do not believe that was 
an appropriate decision. I believe that she should have been 
terminated.
    Mr. Deutsch. Okay. My last question: There is a former 
whistleblower from the S Division who was fired. An 
administrative law judge found that the dismissal was based on 
untruths of Mr. Busboom and Mr. Tucker. During this 
investigation, we heard from a person involved in the lab's 
action that he just went along with the others.
    We want to look at this case, and we would like your 
cooperation. The man's name is James Russell. Are you familiar 
with that at all?
    Mr. Darling. I am not, but we would be happy to cooperate 
with you.
    Mr. Deutsch. All right. Thank you very much.
    Mr. Greenwood. The Chair thanks the gentleman. The chair 
would ask unanimous consent that the opening statement of 
Representative Anna Eshoo be incorporated into the record. 
Without objection, it will, and also unanimous consent that the 
disk, the CD with the photographs presented by Mr. McDonald be 
part of the record. Without objection, it will be.
    Without objection, a statement by Mr. Waxman will be 
incorporated into the record as well.
    With that, we thank you again, Mr. Darling, and the other 
witnesses for their participation.
    This hearing is adjourned.
    Mr. Darling. Thank you, Mr. Greenwood, Mr. Deutsch, and 
other members of the committee. Thank you very much.
    [Whereupon, at 5:19 p.m., the subcommittee was adjourned.]


 INVESTIGATION OF MANAGEMENT PROBLEMS AT LOS ALAMOS NATIONAL LABORATORY

                              ----------                              


                       WEDNESDAY, MARCH 12, 2003

                  House of Representatives,
                  Committee on Energy and Commerce,
              Subcommittee on Oversight and Investigations,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2322 Rayburn House Office Building, Hon. James C. 
Greenwood (chairman) presiding.
    Members present: Representatives Greenwood, Walden, 
Deutsch, and Davis.
    Also present: Representative Radanovich, Markey, Eshoo, and 
Udall.
    Staff present: Ann Washington, majority counsel; Michael 
Geffroy, majority counsel; Yong Choe, legislative clerk; Edith 
Holleman, minority counsel; and Turney Hall, minority staff 
assistant.
    Mr. Greenwood. The hearing will come to order. I ask our 
guests to find seats, please. Let me alert everyone to the fact 
that Mr. Deutsch and I will make opening statements. Then, 
unfortunately, we are going to have to recess for about a half 
an hour and come right back and take testimony. I apologize for 
that in advance. The Chair recognizes himself for an opening 
statement.
    This morning we embark on the second day of our hearing 
concerning reports of mismanagement and theft of Government 
property at Los Alamos National Laboratory. Two weeks ago we 
heard very troubling testimony from investigators at the lab 
who uncovered an amazing level of problems given the sensitive 
operation at this facility.
    For example, at that hearing we were presented with a 
pictorial essay on the alleged theft perpetrated by two LANL 
employees to include sleeping bags, cots, coolers, automatic 
gate openers, compact disks describing how to operate lock-
picking equipment, and Slim Jims, devices used to break into 
locked cars.
    I am still waiting to hear how one could possibly explain 
the use of these items for lab related business. Or, to go a 
step further, to hear if anyone even asked these employees to 
explain their questionable purchases.
    Although we have evidence of a few peripheral inquiries 
into some of their actions, it does not appear that anyone took 
a serious look at this until an employee was forced due to lab 
securities in action to go to the FBI.
    To take another example, committee staff recently received 
a report generated in December 2002 that identifies all the lap 
top computers purchased in fiscal years 2001 and 2002 that did 
not get the property barcode. The report identified more than 
$1.5 million in lap tops all deemed sensitive property that 
were not correctly tagged which meant the computers would not 
be tracked in LANL inventory.
    Of course, we also have the treatment of the two expert 
investigators who did attempt to bring procurement and theft 
problems to management only to be shown the door for doing so. 
These are just a few reasons why this committee has serious 
questions about procurement and property management oversight 
at LANL.
    Our search for answers leads us, first of all, to the lab's 
management. We will turn today to the people who are supposed 
to make sure the problems we have been investigating did not 
happen. We will hear their response to the evidence and 
allocations of theft and abuse of funds and property.
    We will also hear from the people with responsibility for 
the lab's overall management which will allow us to review more 
broadly the effectiveness of oversight of the lab by both the 
University of California and the National Nuclear Security 
Administration.
    We have serious questions on this level as well. The NNSA's 
fiscal year 2000 appraisal of Los Alamos states in part, 
``Notwithstanding the NNSA original assessment of outstanding 
in the procurement and property management areas, systemic 
weaknesses demonstrated in these two areas dictate that these 
functional areas should be rated no higher than excellent.''
    I have to ask how could NNSA rate any part of the 
procurement and property management areas as excellent given 
the testimony we heard 2 weeks ago from Jaret McDonald, the man 
who frustrated by lab inaction, brought his concerns to the 
FBI.
    Our witnesses today can expect some tough questions. Let me 
note that they all come before us voluntarily and I appreciate 
their cooperation as we get to the bottom of this mess. Their 
views of events and answers to our questions should help fill 
out the picture of what was going on at Los Alamos.
    Our first panel today consist of individuals who had 
immediate oversight of the issues at hand. We will hear from 
Mr. Stan Busboom who hired Glenn Walp and Steve Doran, the two 
lab investigators who were fired after they raised concerns 
about management's response to these crimes. Mr. Busboom 
ultimately signed their termination letters. He says he was 
ordered by his supervisor to do so.
    In his previous role as Director of Security he was 
involved in the inquires into many of the cases discussed in 
our first hearing. He also is responsible for investigating 
security incidents such as a recent missing hard drive case, as 
well as other incidents involving unaccounted for classified 
media that this committee has uncovered during the course of 
our investigation.
    Mr. Busboom is joined by Mr. Frank Dickson, Laboratory 
Counsel; Mr. Joe Salgado, former Principal Deputy Director of 
LANL. Both of these men took on roles in these procurement and 
property cases that were seemingly outside the scope of their 
regular job responsibilities. They were also instrumental in 
the termination of Walp and Doran.
    Our second panel will have officials responsible for 
managing procurement at the lab. We will hear from Mr. John 
Hernandez who oversaw the contract administrator responsible 
for the Mesa blanket purchase agreement which was the primary 
procurement tool two employees used to purchase tens of 
thousands of dollars of goods for personal use.
    Additionally, we have Mr. Stan Hettich, LANL's Director of 
Procurement. Mr. Hettich was also involved to some degree in 
one of the procurement abuse cases last year when his own 
secretary was caught using her procurement card at local 
casinos.
    We will have Mr. Richard Marquez, LANL's Associate Director 
for Administration, who oversees all procurement and property 
management programs at the lab. Mr. Marquez has advised our 
staff that he believes the recent steps taken by the lab to 
improve its procurement card system will help solve many of the 
current problems. I look forward to hearing exactly how he 
believes these procedures will succeed where so many past 
attempts have failed.
    Finally, we will take testimony today from higher level 
management. We will hear on our third panel from Dr. John 
Browne who was the lab's director during the relevant time and 
has since been replaced. We also have the former and current 
University of California Vice President of Laboratory 
Management, Dr. John McTague, and a reappearance, Mr. Bruce 
Darling.
    This lab management position was actually created to ensure 
that the improved management provisions required in what is 
known as Appendix O to the lab DOE contract was carried out.
    Joining them is Mr. Ralph Erickson from the NNSA's LANL 
site office. I am looking forward to their testimony that what 
was going on at a facility that pursues some of the Nation's 
most sensitive research.
    We thank the witnesses for attending this important hearing 
and recognize the ranking member for his opening statement.
    Mr. Deutsch. Thank you, Mr. Chairman. In the fall of 2000 
the University of California agreed to amend its contract with 
the DOE to add more performance requirements for the management 
of its two national nuclear weapons laboratories.
    These commitments known as Appendix O were made to save 
California's contracts when it went alee in the lost hard drive 
security debacles at Los Alamos and the repeated mismanagement 
which resulted in huge hidden cost overruns at the facility at 
Lawrence Livermore National Laboratory.
    According to the contract Appendix O was intended to 
strengthen the university's management of and accountability 
for Los Alamos and Lawrence Livermore National Laboratory in 
three areas. Those were management accountability safeguards, 
security management, and facility safety.
    It required the use of outside subject matter experts to 
establish a Vice President for Laboratory Management, provide 
leadership management and integration of the initiatives in 
Appendix O, and be accountable for institutionalizing the 
changes, improvements, and the benefits gained from infusion of 
industry expertise.
    The vice president would also chair a new Laboratory Senior 
Management Council which would be an effective forum to review 
issues. The president of UC himself would be accountable to DOE 
for overall management and operating performance. All the 
requirements in Appendix O had to be completed for the 
university to be eligible for any of its at-risk fee of $4.7 
million.
    On October 9, 2002, DOE stated that all the requirements of 
Appendix O had been met and UC received $3.7 million of its 
performance rating. UC said it had received the highest rating 
ever from DOE, even though there were significant procurement 
and property fraud of control allegations at Los Alamos.
    PricewaterhouseCoopers and two former inspector generals 
had already been hired to review the entire purchase card 
system because of systemic weaknesses. The investigation 
subsequently would be expanded to the entire procurement 
system.
    Within 6 weeks of this finding the new staff hired to 
professionalize the security division were fired because they 
did not fit in with the lab's self-protective culture. Within 3 
months most of the top leadership of the Laboratory would be 
removed from their positions because they had refused to 
confront and fix management and security problems as they 
surfaced. The two security professionals were rehired.
    Have the goals of Appendix O been met? Not according to 
Joseph Salgado, the former Principal Deputy Director of Los 
Alamos. His testimony refers repeatedly to the lack of 
management accountability in the security area, although the 
key purpose was to instill public confidence and safeguards in 
security at both labs. The implementation under Appendix O 
appears to have been incomplete at best.
    The final strategic plan prepared by Mantac Ajas, the 
outside expert, were not ready for review until December 2002. 
By July 2002 the lab had deleted all work requirements on 
promising best management practices, assessment of training 
needs and review of outsourcing possibilities.
    Although Mantac Ajas was required to brief the Laboratory 
Counsel and its vice president only once a year, the university 
decided after the first briefing that it did not need another 
briefing at the end of the contract. DOE apparently made Los 
Alamos' last quarterly report the final one. Based on this 
information of our investigation, I would argue that the 
security operation was, and is, in shambles.
    In addition to the well-publicized shortcomings in the 
criminal area, our staffs are finding disturbing issues in the 
handling of security incidents including the handling of 
missing hard drives and flash cards.
    In 2001 Stanley Busboom, then head of Safeguards and 
Security Division, decided to readdress the situation that 
resulted from internal failures to implement an earlier 
reorganization. Mr. Busboom stated in his 2001 division 
reengineering memorandum that we have had several 
organizational structures that failed over the last 18 months 
of crisis.
    The computer and technical security section and information 
on personal security had not removed from the security and 
stand-downs during 1999 and the hard drive incident of 2000. 
The Special Projects Office, the predecessor to the Office of 
Security Inquiries, was described as ineffective with little 
cooperation of local law enforcement agencies and property 
protection investigations that were neither thorough or timely.
    Mr. Busboom proposed true strategic staffing with 
nationwide advertising to find a new OSI office leader to 
organize investigations and inquiries. He wanted someone who 
could investigate and develop root cause analysis and 
solutions. The white hats, consumer service, and the black 
hats, inquiries, were to be sharply defined and 
organizationally separated.
    The hiring of Mr. Walp and Mr. Doran as black hats was a 
direct result of this effort. Quickly they were expected to 
serve Mr. Dickson and Mr. Salgado, the main customers inside 
the Laboratory, rather than to work with law enforcement 
agencies to root out and fix the problem. Despite Mr. Busboom 
name if black hats, they just did not fit in.
    Mr. Chairman, one of the reasons people like Glenn Walp and 
Steve Doran did not fit in was because they uncovered problems 
and told people about them. They did not put their loyalty to 
UC above that of the taxpayer. The university, the Department 
of Energy, and these laboratories have a long and, frankly, 
vicious record of pursuing employees who try to fix problems. 
Demoting the Laboratory Director will not stop that, nor will 
hiring back Mr. Walp and Mr. Doran.
    Mr. Darling, your employees are afraid to speak out. That 
is why you have the management by accommodation that Mr. 
Salgado refers to. If you are really committed to change, I 
suggest you revisit each of the whistleblower cases in the past 
10 years and report back to this committee on whether you think 
they were treated fairly. Thank you.
    Mr. Greenwood. Thank you.
    Mr. Deutsch. Mr. Chairman, Ms. Eshoo, I believe, by 
combination will be able to sit in the hearing?
    Mr. Greenwood. Ms. Eshoo can sit in on any of my hearings 
any time she wishes.
    Mr. Deutsch. Thank you very much.
    [Additional statements submitted for the record follow:]
 Prepared Statement of Hon. Greg Walden, a Representative in Congress 
                        from the State of Oregon
    Thank you, Mr. Chairman. I commend you for holding this hearing 
today. It is my hope that by the end of today's hearing we will have 
gotten to the heart of what led to the acute problems that the Los 
Alamos National Laboratory (LANL), the University of California (UC), 
the National Nuclear Security Administration (NNSA) and the Department 
of Energy (DOE) had in handling issues pertaining to the severe 
procurement irregularities, gross property mismanagement and theft at 
the laboratory.
    To say the least, today's hearing will be interesting. Two weeks 
ago members of the subcommittee were able to learn from Messrs. 
McDonald, Walp and Doran how senior officials at LANL reacted to 
serious allegations of theft and loss of government property and how 
they responded to the misuse of government procurement mechanisms by 
personnel at LANL. The subcommittee subsequently learned how these 
allegations led to the start of an alleged cover-up by senior officials 
at LANL, which, amongst other things, led to the dismissals of Mr. Walp 
and Mr. Doran. These terminations by the laboratory were later 
characterized by the DOE's Inspector General as being 
``incomprehensible,'' and moreover, he found LANL's reasons for these 
terminations to be unsupported by the available evidence.
    I will be particularly interested to hear how Mr. Busboom explains 
the rational behind these firings. How could these two security 
officials be terminated from their positions in light of the fact that 
about a month and a half prior to their respective terminations, on 
November 25, 2002, Mr. Walp was given a performance evaluation and 
subsequently received a $5,000 raise? It is also important to note that 
the FBI thought very highly of Mr. Walp and Mr. Doran, which is 
highlighted in Mr. Busboom's notes from a conversation he had with an 
FBI agent in which the latter states that ``Steve and Glen are the most 
professional.'' That compliment coupled with DOE's IG characterization 
of the terminations definitely leaves some questions to be answered by 
our witnesses on the rational behind these firings.
    Though an explanation of what led to the terminations of Mr. Walp 
and Mr. Doran is important, I also hope the subcommittee gets answers 
from our panelists about what the laboratory, UC and the NNSA have done 
to remedy the acute procurement problems that have existed at LANL. I 
will be particularly interested to understand how the NNSA fiscal year 
2002 appraisal of LANL rated the lab's procurement and personal 
property management areas as ``excellent'' despite the fact that this 
same system had such critical flaws that two lab employees were 
allegedly able to walk off LANL grounds with over $50,000 in government 
property. I will be even more interested in learning how a Los Alamos 
employee could use their government provided purchase card to not only 
buy miscellaneous items at local retail establishments, but also at 
several area casinos. I imagine Mr. Hettich might be asked to shed some 
light on this particular incident.
    With that said, Mr. Chairman, I would like to thank our witnesses 
for being here today and I look forward to hearing their answers to the 
issues I have raised in my statement.
    Thank you, Mr. Chairman. I yield back the balance of my time.
                                 ______
                                 
 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce
    Thank you Chairman Greenwood. And let me say, once again, that the 
thorough, bipartisan work you are doing here--the evidence and 
information and explanations you are gathering--is going to be very 
helpful in resolving what is a very, very disturbing situation at Los 
Alamos National Laboratory.
    At the first part of this hearing into theft and mismanagement two 
weeks ago, I explained why I was so alarmed about what amounts to 
looting at the lab. Theft of taxpayer dollars and property is bad 
enough, but this goes beyond that. This is not some insignificant 
facility. Los Alamos is considered to be one of the gems of our 
national research infrastructure--and a facility that Americans trust 
to perform some of our most valuable national security research.
    It doesn't take a nuclear physicist to understand why this is so 
important. Just look at the world situation today. We cannot afford to 
have slipshod management at a facility that performs such sensitive 
national security work.
    What I learned from the first part of this hearing did not ease my 
concerns. We heard sworn testimony about efforts to obstruct special 
Lab investigators and the FBI. We heard what was described as a total 
failure of Laboratory management to do anything about, and I quote, 
``massive'' theft at the Lab.
    We heard descriptions of a permissive atmosphere that sought to 
protect the Lab's image by ignoring evidence of deep-seated problems--
for fear that exposure of the problems would generate negative 
publicity that would harm the Lab, its management, and ultimately its 
billion-dollar contract with DOE.
    Mr. Chairman, I can tell you what was harming the Lab, and it was 
not the efforts of the few to fight fraud and expose waste. Rather, it 
was what was allowed to go on outside the public eye, within the walls 
of this facility, a culture of permissiveness and lack of discipline.
    Today we hear from the people who were in charge. I look forward to 
learning why they at one point hired special investigators to reform 
security at the Lab and then decided, essentially, to fire these 
investigators after the theft was identified.
    I look forward to learning why management and procurement 
procedures failed, why employees were able to get away with the 
purchases they made. We do have some tough questions. The witnesses 
before us today are among those who were accountable for what was 
happening at Los Alamos.
    Let me say that I also appreciate the witnesses coming before this 
Committee, voluntarily, to account for their actions and to explain 
what reforms are under way. It's not always pleasant to come before 
this Subcommittee as a witness to answer tough questions, and it's not 
always pleasant to be up here asking the tough questions. But this 
process is a good one, and one that over time will help to ensure that 
gaps in security and fraud protection at the Lab are closed.
    Today's hearing, Mr. Chairman, should help us move in this positive 
direction. I yield back the remainder of my time and look forward to 
discussing our concerns with the panels. Thank you.

    Mr. Greenwood. As I mentioned at the outset of the hearing, 
unfortunately we have to recess now because of an unavoidable 
obligation that I have. We should readjourn in about 30 
minutes. Please be back here at 10:45 and we will hear from our 
first panel then. The hearing is recess.
    [Whereupon, at 10:20 a.m. the subcommittee recessed to 
reconvene at 10:45 am.]
    Mr. Greenwood. Okay. Now you know why not much gets done 
here in Washington but we should have a good solid 1\3/4\ hours 
without further interruptions. Again, I apologize to all.
    Let me welcome our first panel which consists of Mr. 
Stanley Busboom, Staff Member and Former Director of the 
Security Division at Los Alamos. Welcome, sir. Mr. Joseph 
Salgado, former Principal Deputy Director at Los Alamos. Thank 
you for being with us this morning. And Mr. Frank Dickson, 
Laboratory Counsel at Los Alamos. I thank all of you for your 
presence and for your patience.
    You should be informed this is an investigative hearing and 
it is our practice to take testimony under oath. I would ask if 
any of you have any objections to giving your testimony under 
oath?
    Witness. No objection.
    Witness. No.
    Mr. Greenwood. No objection? Okay. Pursuant to the rules of 
this committee and the rules of the House, you are entitled to 
be represented by counsel. Do any of you wish to be represented 
by counsel this morning?
    Witness. Not at this time Witness. Negative.
    Mr. Greenwood. Okay. If you would stand and raise your 
right hands.
    [Witnesses sworn.]
    Mr. Greenwood. You are under oath and we will start with 
you, Mr. Busboom. You are recognized for your opening 
statement.

   TESTIMONY OF STANLEY L. BUSBOOM, STAFF MEMBER AND FORMER 
 DIRECTOR, SECURITY DIVISION, LOS ALAMOS NATIONAL LABORATORY; 
  JOSEPH F. SALGADO, FORMER PRINCIPAL DEPUTY DIRECTOR AT LOS 
    ALAMOS NATIONAL LABORATORY; AND FRANK P. DICKSON, JR., 
       LABORATORY COUNSEL, LOS ALAMOS NATIONAL LABORATORY

    Mr. Busboom. Good morning, Mr. Chairman, Mr. Deutsch, and 
members of the committee. Thank you for this opportunity to 
address the issues that your committee has been looking into.
    Mr. Greenwood. Can I ask you to bring the microphone a 
little bit closer to you and point it toward your mouth. Thank 
you very much.
    Mr. Busboom. My name is Stan Busboom and I was the Director 
of Security at Los Alamos for 5 years up until January 8 of 
this year. Prior to that, I served my country in uniform 
retiring at the rank of Colonel from the United States Air 
Force. My record in the military service was exemplary, and my 
service at Los Alamos was recognized as outstanding for my 
entire tenure.
    To fulfill its promise of full cooperation with Congress 
and its investigation, Los Alamos National Laboratory and the 
University of california have ordered me to appear here to give 
testimony under oath today as a condition of my employment. The 
terms of this order are contained in a letter from James L. 
Holt, Laboratory Associate Director for Operations, which I 
have attached to my written testimony.
    At this time I would like to give you a brief summary of 
the written testimony that I have submitted for the record. The 
Office of Security----
    Mr. Greenwood. I should remind you that you do have the 
right to invoke your 5th Amendment rights if you do not wish to 
testify this morning.
    Mr. Busboom. I am aware of that, sir, and I understand I am 
entitled to counsel as well.
    Mr. Greenwood. Very well, sir.
    Mr. Busboom. The Office of Security Inquiries, commonly 
called OSI, came within my purview. This office is where Mr. 
Walp and Mr. Doran worked. The members of this office work 
directly for my deputy, Mr. Tucker, and they had a broad range 
of duties at the Laboratory which did include providing 
inquiries into property theft and liaison to law enforcement.
    I first became aware of serious problems in OSI in 
September of last year. Mr. Tucker reported to me on several 
occasions during that period that there were ongoing disputes 
between his OSI staff and the lab's legal counsel.
    At one point in mid-September Mr. Tucker had to intercede 
with the lab's Chief Operating Officer on Mr. Walp's and Mr. 
Doran's behalf to prevent them from being taken off ongoing 
inquiries. That incident led me to meet with Mr. Tucker, Mr. 
Walp, and Mr. Doran to express my concern that the disputes be 
resolved professionally, quickly, and permanently.
    I also met with the Chief Operating Officer and the Senior 
Legal Counsel around this time who expressed concerns about the 
suitability of Mr. Walp and Mr. Doran for those positions.
    Approximately 6 weeks later I was directed by the Chief 
Operating Officer to remove Mr. Walp and Mr. Doran from their 
law enforcement liaison duties with the FBI. I did that and 
then I moved quickly to provide the FBI with alternative points 
of contact.
    This incident occurred after a meeting between senior lab 
management, the FBI, and the U.S. Attorney which I did not 
attend. I was told at the time that Mr. Walp and Mr. Doran no 
longer had the trust of senior management. At that point I 
began to seriously consider Mr. Walp and Mr. Doran's position 
as probationary employees and to contemplate their future with 
the lab.
    On November 20 the issues surrounding Mr. Walp's and Mr. 
Doran's performance came to a head when my supervisor handed me 
a draft memorandum that provided detailed justification from 
senior management for terminating the two under their 
probationary period.
    I consulted in detail on this with my supervisor, his 
deputy, Senior Laboratory Legal Counsel, and the Deputy 
Director for Human Resources. I also met with the Chief 
Operating Office and expressed my concern about the inevitable 
media and political firestorm. I was given assurances that that 
had been taken into consideration and with those assurances I 
accepted my responsibility as division leader to take the 
determination actions.
    On November 25 with my supervisor in attendance, I asked 
for Mr. Walp's and Mr. Doran's resignations. When they were not 
forthcoming, my supervisor and I signed the terminations 
approximately 2 weeks later. The media and political fallout 
that I was concerned about occurred almost immediately and a 
number of investigations and inquiries were launched including 
your committee, sir.
    On January 3 of this year my supervisor told me that I 
would be removed from my position. On January 8 that did occur. 
For my part in this matter I have acted in good faith every 
step of the way and I have taken my actions based on the best 
information I had at the time. I have cooperated fully with all 
investigating agencies including your committee, sir. I have 
kept a complete an accurate record of all the proceedings I was 
involved in which was provided to your committee's staff.
    Thank you for your time.
    [The prepared statement of Stanley L. Busboom follows:]
  Prepared Statement of Stanley L. Busboom, Special Staff Member, Los 
                       Alamos National Laboratory
    To fulfill its promise of full cooperation with Congress and its 
investigation, Los Alamos National Laboratory and University of 
California have ordered me to appear here and give testimony under oath 
as a condition of my employment. The terms of this order are contained 
in a letter from James L. Holt, Laboratory Associate Director for 
Operations, which I have attached to my testimony.
    I was the Director of Security at Los Alamos National Laboratory 
(LANL) for 5 years, up until January 8th of this year. Prior to that, I 
served my country in uniform for 26 years. My record as a Colonel in 
the Air Force was exemplary, and my service at Los Alamos was 
recognized with outstanding performance ratings for my entire tenure as 
a division leader.
    The Office of Security Inquiries (OSI) at Los Alamos came within my 
purview. OSI members worked directly for my deputy, Gene Tucker. I did 
not supervise this function on a day-to-day basis, but I did have 
supervisory contact with them when Mr. Tucker was absent from the 
Laboratory. I was also involved in the terminations of Mr. Walp and Mr. 
Doran.
    I first became involved in events leading up to the termination of 
these two persons in mid-September of 2002. On September 17th, Frank 
Dickson, LANL Chief Legal Counsel, informed my deputy (Mr. Tucker) that 
he was dissatisfied with the work of OSI on the pending property cases 
and that he wanted Mr. Walp and Mr. Doran off the cases. Mr. Tucker 
told me he would handle the situation and he interceded directly with 
Joe Salgado, LANL Chief Operating Officer, on Mr. Walp and Mr. Doran's 
behalf. The next day (September 18th) I met with Mr. Dickson at 
11:30AM, and he outlined his dissatisfaction with the OSI staff in no 
uncertain terms, saying that Mr. Doran was not trusted by the legal 
office and that the ``jury was still out'' on Mr. Walp. He expressed 
particular concern that Mr. Walp and Mr. Doran's contacts in the field 
should not be inconsistent with his interface with the FBI and the U.S. 
Attorney offices in Albuquerque.
    I was extremely concerned by this discussion and I arranged to meet 
with Mr. Tucker and Mr. Walp later that afternoon at 4:00PM. During 
that meeting, Mr. Tucker asked Mr. Walp straight out if he was being 
asked to anything improper, illegal, or unethical. Mr. Walp said 
``no.'' Mr. Tucker also confronted Mr. Walp about an incident that Mr. 
Tucker considered to be insubordination. Mr. Tucker said that Mr. Walp 
had denounced Mr. Dickson in front of his OSI subordinates, and that 
this was an inappropriate way to handle a dispute with a colleague. Mr. 
Tucker also made the point that he had just gone to bat for Mr. Walp. I 
told Mr. Walp that Mr. Dickson regarded him as uncooperative and that 
OSI could not be successful in the long run if they did not have a good 
working relationship with the LANL Chief Legal Counsel and his staff.
    We then asked Mr. Doran to join the meeting. I repeated Mr. 
Dickson's concerns to Mr. Doran, including the express concern that the 
relationship with the FBI and the U.S. Attorney must be maintained. At 
one point in the conversation, when I did not think Mr. Doran was 
listening to me, I did offer my opinion that Mr. Dickson would ``level 
you him both barrels'' if the dispute between OSI and LC continued. I 
believe later events have proven my observation to be correct. I did 
not threaten to fire Mr. Doran. I did tell him that Mr. Dickson was 
inquiring about his status as a probationary employee, and I am certain 
that Mr. Doran found that to be of great concern. I also found it to be 
of great concern, as I wanted Mr. Tucker's efforts on his behalf to be 
successful.
    As a manager, I was obligated to let Mr. Walp and Mr. Doran know 
where they stood with Mr. Dickson, without sugar coating it. The 
context of this conversation was forward-looking, not punitive. My view 
was that Mr. Tucker had successfully interceded on their behalf and 
that if they took the time and made the effort to rebuild their 
relationship with LC, we could put the disputes behind us. None of this 
discussion in any way touched on Mr. Walp and Mr. Doran not being 
allowed to do their jobs or not pursuing the cases they were working. 
It was only about learning to cooperate with LC.
    My next personal encounter with Mr. Walp and Mr. Doran came about 
six weeks later. On October 24th, 2002, at 10:20AM, I received a 
message that Mr. Dickson needed to speak with me urgently. I got 
through to him 20 minutes later on his cell phone number and answered 
this question from him: ``When did the FBI first begin investigations 
into thefts at Los Alamos, and when did management know about it?'' The 
answer I gave him, after consulting with Mr. Walp, was, ``Sometime 
around June 24th and July 1st, respectively.'' I asked him where he 
was, and he said that he and Mr. Salgado were meeting with the US 
Attorney and the FBI in Albuquerque.
    Later that day, at 4:00PM, Mr. Salgado held a meeting in his office 
with Mr. Dickson, Mr. Marquez, Associate Director for Administration, 
Mr. Holt, Associate Director for Operations, and me. Mr. Salgado said 
words to the effect of, ``We screwed up the `Mustang' Case,'' and 
therefore, the US Attorney would not prosecute it. He then immediately 
directed me to take Mr. Walp and Mr. Doran out of liaison with the FBI 
and therefore off the remaining FBI case, the so-called ``TA-33'' case. 
By ordering Mr. Walp and Mr. Doran off FBI liaison just after 
describing the screw-up of the ``Mustang'' case, Mr. Salgado implied 
that that Mr. Walp and Mr. Doran's handling of the case caused their 
removal from FBI liaison. I suggested that it was not wise to ``change 
horses in the middle of the stream'' but was told that based on the 
meeting in Albuquerque, Mr. Walp and Mr. Doran no longer had the trust 
of senior management. The rationale was that Mr. Walp and Mr. Doran had 
provided incomplete and inaccurate information to Mr. Dickson and Mr. 
Salgado.
    Accordingly, I told Mr. Walp that evening at about 5:45PM that he 
was off liaison with the FBI. Mr. Doran was not available, so he was 
told the same thing the next day, October 25th, around noon. I could 
only tell them that senior management had lost confidence in them. At 
09:30AM, I had an acrimonious meeting with Mr. Dickson about being 
``ambushed'' the day before. I had not known about the meeting with the 
US Attorney or the FBI the day before and that left me completely 
unprepared for the outcome affecting my employees. In that meeting, he 
explained that there would be a meeting the following Tuesday (October 
29th), in which the roles of LC, OSI, the FBI, and the DOE IG would be 
sorted out.
    At 2:35PM that same day, Agent Jeff Campbell, FBI, telephoned me 
and asked for assistance on an inquiry about an Australian citizen who 
had once visited Los Alamos. He said Mr. Doran, who had informed him 
that he was no longer in the position of FBI liaison, had referred him 
to me. I told Agent Campbell I would assist him personally. At the 
close of our conversation, Agent Campbell said: ``Nothing I said at 
yesterday's meeting should have gotten Steve [Doran] in trouble,'' and 
``Steve and Glenn [Walp] were very professional in my dealings with 
them.'' I only told him their removal from liaison was a decision by 
senior laboratory management.
    I met again with Mr. Dickson later that day, to go over where we 
stood on each area of concern. Following the meeting, I emailed Mr. 
Dickson and my supervisor, Mr. Holt, that 1) Mr. Doran and Mr. Walp had 
been removed from FBI liaison as directed by senior management; 2) we 
would hold new liaison appointments in abeyance until the Tuesday 
meeting per Mr. Dickson's direction; and 3) I passed on my conversation 
with Agent Campbell.
    The next Monday, October 28th, I telephoned Agent Campbell and gave 
him everything he needed on the ``Australian'' case. As we closed the 
conversation, he proposed to have Mr. Walp and Mr. Doran participate in 
pending interviews and search warrants on the ``TA-33'' case (the sole 
FBI case at LANL at that time, to the best of my knowledge). I told him 
I could not agree to that. As I have described, the decision to remove 
them had been made by senior management, and it was clear to me that I 
did not have the authority to change that decision. I did leave it open 
ended and told him ``we'll back to you,'' reasoning that the next day 
this could be resolved in the joint LANL/IG/FBI meeting, where senior 
management would attend. Agent Campbell said that without Mr. Walp and 
Mr. Doran's participation, he could not assure me we would have 24 
hours notice prior to the warrants being served in the ``TA-33'' case. 
I made note of this, as at the time, I did not know any such agreement 
was in place. I had only one purpose in my dealings with Agent Campbell 
as liaison in the absence of Mr. Tucker, who was away on vacation: to 
assure that the removal of Mr. Walp and Mr. Doran did not in any way 
impede, obstruct, hinder or thwart any FBI investigation at the Lab.
    The following day (October 29th, at 1:45PM) when I attended the 
joint meeting, the FBI was not present. Mr. Salgado said that the FBI 
had ``backed out.'' The first input I made at the meeting was to 
recount my conversation with Agent Campbell and point out that a firm 
FBI liaison was needed. Mr. Salgado said he didn't care if we had prior 
notice of the warrants being served, but to go ahead and appoint new 
liaisons. I appointed Mr. Tucker and Mr. Mullens to those duties 
following the meeting, succeeding my own personal stint of three 
working days as the liaison.
    At 9:00AM on the morning of Thursday, October 31st, the FBI 
conducted the interviews and served the warrants without prior notice 
to LANL. Between Mr. Tucker and me, we immediately assembled a team 
from OSI, produced the suspects, and provided full and successful 
support to the FBI effort. I noted this on my calendar for the day: 
``Where are Glenn and Steve?'' It turned out that Mr. Doran had 
scheduled that day off, and Mr. Walp had called in sick.
    I was later questioned by the DOE IG on this entire matter. The 
inspector asked me if I had prohibited Mr. Walp and Mr. Doran from 
speaking to the FBI. My reply was ``no,'' and I characterized that 
proposition as ``ridiculous.'' If Agent Campbell needed any assistance 
from anyone in OSI, he could have contacted Mr. Tucker or me, and we 
would have provided whatever information or access he requested. 
Alternately, he could have treated Mr. Walp and Mr. Doran as material 
witnesses, and if they cooperated he would have all the access he 
wished, without ever needing my consent or knowledge. In my 32 years of 
experience in law enforcement, the FBI will label such persons as 
supportive witnesses and/or criminal/confidential informants, and do 
whatever they legally need to do in terms of access and interviews. 
What I did not do was to interfere with Agent Campbell's investigation.
    What I did do, and the only thing I did, was instruct Mr. Walp and 
Mr. Doran not to interact with the FBI as liaisons on behalf of the 
Laboratory, as I was instructed to do so by Mr. Salgado and Mr. 
Dickson. The IG also asked me if I had been told by anyone that I was 
not cooperating with the FBI. My answer was ``no,'' and the facts are 
that the FBI got everything they needed in terms of support from my 
division, when they needed it.
    Throughout the period of late October and early November, both Mr. 
Salgado and my immediate supervisor, Jim Holt, had discussions with me 
about the probationary status of Mr. Walp and Mr. Doran. I was under 
pressure to make a decision on them, and it was clear to me that 
preferred outcome was to let them go. What I did not know at the time 
was that plans to terminate Mr. Walp and Mr. Doran had been made at 
meetings where I was not present, and did not know about.
    The matter came to a head on November 20th, at 8:30AM, when Mr. 
Holt handed me a draft memorandum that outlined senior managements' 
concerns on Mr. Walp and Mr. Doran. It was in the form of a memo from 
me to Mr. Holt, recommending their termination, and he told me to work 
on it on a ``close hold'' basis. That same morning, I met with Mr. Holt 
and his deputy, Barb Stine, at 10:00AM, and we edited the memo line-by-
line. The next morning, I took the memo to Mr. Dickson at 8:30AM, and 
he edited it line-by-line with me. I asked for an explanation of each 
point in the memo and Mr. Dickson attributed most of the points to 
himself and Mr. Salgado.
    I finalized the memo and sent it to Mr. Holt on November 21st, 
recommending that Mr. Walp and Mr. Doran be terminated. I was prepared 
to accept my responsibility under the LANL Administrative Manual, which 
says dismissing probationary employees is done at the division leader 
level, but I nevertheless had serious concerns. At 10:00AM, I met with 
Mr. Salgado, and expressed the following reservations: 1) that this 
action would start a media and political firestorm; 2) that Mr. Walp 
and Mr. Doran would almost certainly become ``whistleblowers,'' and; 3) 
that a senior management must participate in the actual terminations as 
I was relying on their input for taking the action. He acknowledged my 
concerns, but told me that these matters had been taken into 
consideration. At 3:25PM that same day, Mr. Salgado told Mr. Holt and 
me to proceed with the terminations on Monday and to start on 
restructuring the OSI office; it was specifically agreed at this 
meeting that Mr. Holt would be present during the terminations.
    The next day, November 22nd, I received instructions from the 
Deputy Division Leader of Human Resources (Phil Kruger) on how to 
conduct the termination session. He advised me, among other procedural 
matters, not to have Mr. Holt present. I certainly thought otherwise 
and on Sunday, November 24th, at 3:05PM, I telephoned Mr. Holt at his 
home to receive an assurance that he would be participating in the 
action. On Monday, November 25th, commencing at 8:45AM, I asked both 
Mr. Walp and Mr. Doran for their resignations, with Mr. Holt present as 
a witness. Two weeks later, when no resignations were forthcoming, Mr. 
Holt and I both signed the personnel action forms that formally 
terminated them.
    Almost immediately following the dismissal of Mr. Walp and Mr. 
Doran, the media and political firestorm I had predicted materialized. 
As I also forecast, they assumed the status of ``whistleblowers'' and 
took their side of the story effectively and continuously to the media 
and eventually, to this committee. I was told on January 3rd, 2003, 
that I would be removed from my position as Director of Security, and 
that did take place on January 8th. I believe this action was taken as 
a direct result of the media coverage and political ``fallout'' I had 
specifically warned senior management about.
    The news media coverage of my removal at one point centered on the 
alleged loss of a hard drive in my division in October of 2002. On 
October 24th, 2002, at 4:30PM, I met with Mary Margaret Trujillo (OSI) 
and Steve Croney (S-4 Group Leader), and they told me that an ongoing 
inventory of classified removable electronic media (CREM) in Mr. 
Croney's group had not been reconciled. I believe Mr. Croney had first 
discovered the problem sometime earlier in the day. Mr. Croney said 
that a bar coded CREM was not in the safe it should be, and that a 
search of that safe did not result in finding it; the item was listed 
as a hard drive.
    At 4:45PM the same day, I telephoned Frank Ward of the local DOE 
office, and informed him that I was formally reporting an incident of 
security concern (a ``security incident''), and explained an item in 
the S-4 CREM inventory was not where it should be. I told him that we 
would be reporting it in writing the next morning, within 24 hours, as 
procedures called for. I immediately called in Leigh Barnes to assist. 
Mr. Barnes' group was in charge of the CREM inventory lab-wide, and 
were on-call, like a SWAT team, to respond to any anomalies during 
inventories.
    At 5:15PM, I met with Mr. Croney, Mr. Barnes, Ms. Trujillo, and Ms. 
Trujillo's supervisor, Mr. Walp. I sent Mr. Barnes and Mr. Croney off 
to continue the search in S-4, and we agreed to reconvene in the 
morning. At about 7:30PM, I reached Ken Schiffer, head of the Internal 
Security Office, by telephone. I told him I had a security incident in 
my own division and that I might need an inquiry official from his 
office (An inquiry official investigates a security incident). To avoid 
the appearance of a conflict of interest in the inquiry, I wanted an 
inquiry official from outside S Division. Mr. Schiffer agreed to 
assist.
    The next morning, October 25th, at 7:00AM, Mr. Croney and Mr. 
Barnes came to my office and presented a plan to do a wall-to-wall 
search of the entire group. They estimated it would take well into the 
weekend to check and recheck all of the inventory and to search all of 
the physical space. I told them to proceed and sent Mr. Croney to get 
started. At this meeting, Mr. Croney could not articulate in any way 
what the missing item was used for, or what information it might 
contain.
    At 7:45AM, I met with Mr. Barnes, Mr. Walp, and Ms. Trujillo and 
told them we would putting the report in writing, but also that I was 
going to ask Mr. Holt to appoint an outside inquiry official to avoid a 
conflict of interest in ``investigating ourselves.'' A draft of the 
written report was reviewed at this meeting, and it did not make sense 
to me on two accounts: 1) It said the hard drive was lost or missing, 
when clearly in point of fact, the search was still ongoing; and 2) 
That someone was in the hospital, and that is why we could not explain 
the inventory difference. In either case, it would require a full 
inquiry to determine if something was lost or missing, and if all 
pertinent witnesses had been contacted. I asked Mr. Walp, Mr. Barnes, 
and Ms. Trujillo to come up with more factual wording for the report. I 
signed out the written report within two hours, and Mr. Walp faxed it 
to DOE. It now correctly stated that we could not locate the item and 
that we were continuing to attempt to reconcile the inventory. I 
approved the classification of Impact Measurement Index 2 (IMI-2), the 
highest and most serious classification I could assign without knowing 
for certain that there was a confirmed compromise of classified 
information.
    Mr. Barnes and I met with Mr. Holt at 10:15 AM, and he agreed to 
appoint an inquiry official outside of S Division for the reasons I had 
put forward: I was both the responsible line manager and the Director 
of Security and that constituted at least the appearance of a conflict 
of interest. He communicated with a Mr. Roth in Mr. Schiffer's absence, 
and then appointed Ms. Mary Ann Lujan from the Internal Security Office 
as the inquiry official for the incident.
    On Sunday, October 27th, I met with Mr. Croney and Mr. Barnes to 
hear their report on the wall-to-wall search. They explained their 
methodology for the search and detailed their activities over the 
previous 72 hours. They then told me that they had found the bar coded 
item and that it was a carrier without a hard drive in it. This was an 
interesting development in terms of reconciling the inventory, but it 
did not address the fundamental question of whether or not classified 
information was potentially compromised. On October 28th, Mr. Walp, Mr. 
Barnes, and I met with Ms. Lujan as she started her inquiry. They told 
her what they knew up to that point, and I instructed them to give her 
all necessary support.
    On November the 1st, I was present when Ms. Lujan gave an update to 
Scott Gibbs, who was acting on behalf of Mr. Holt. I asked Ms. Lujan if 
my people were cooperating, and although she said ``yes,'' she also 
said words to the effect that some people could be more forthcoming. As 
I recall, her point was that some were not volunteering information, 
but only answering direct questions. I immediately took this back to 
Mr. Croney and instructed him to reinforce with all of his people that 
full cooperation was essential, and I would not tolerate anything less. 
I followed up with Mr. Croney from time to time after that to ensure 
this was done. On November 15th, I performed a second-level managers 
review of Mr. Croney's CREM inventory, checking safes and inventory 
records along with him and his custodians. I found no issues. I believe 
I sat in on one other update, but I do not recall the date or the 
specifics discussed.
    After being removed from the position of Director of Security, I 
was questioned about taking part in, as it was described to me, 
rescinding this report. This is completely untrue; I did not in any 
way, orally or in writing, rescind the report. The ``rescission'' was 
also attributed to Mr. Tucker, my Deputy. This is also patently false, 
as he was out of town on vacation; in fact, the only reason I was 
involved in reporting this incident was that in his absence, I was 
covering his duties as the supervisor of OSI. Further, I cannot 
understand why anyone would credit this assertion of a ``rescission,'' 
as clearly a full inquiry proceeded to its conclusion. What I did do 
was immediately launch a massive effort to reconcile the inventory, 
properly report the incident, classify it at the highest level of 
concern I could, appropriately remove myself from the inquiry chain at 
the earliest opportunity, keep careful records of the proceedings, and 
ensure the cooperation of my division in the inquiry.
    This committee's staff questioned me for the first and only time to 
date about these matters on February 7th, 2003. Although I have first 
hand knowledge of these events, no one at LANL or UC has interviewed 
me. To the best of my knowledge, no one has interviewed Mr. Barnes 
either, although he clearly has first hand knowledge of what happened 
during the initial stages of the inquiry. I have never seen Ms. Lujan's 
report; she completed it after I was removed from my position, and in 
any case it was prepared on behalf of Mr. Holt. I have not read it, nor 
have I been consulted on its content or conclusions. I therefore have 
no knowledge of actions pending or taken as a result of the inquiry.
    In conclusion, throughout all of these matters, I have not 
participated in, nor observed, any actions that could remotely be 
described as a management cover-up. I never harbored any motive of 
``thwarting'' Mr. Walp and Mr. Doran's work. On the contrary, I 
provided appropriate resources and support for OSI throughout this 
period, and assisted Mr. Tucker in interceding with legal counsel and 
senior management when they needed support. I kept an extensive record 
of the events as they occurred and I have shared that record fully and 
cooperatively with all the concurrent investigations.
    For my own part, I participated in the terminations with caution 
and reservation; Mr. Tucker did not participate in the terminations at 
all. I took all of my actions with consistency and in good faith and I 
used the information provided to me about Mr. Walp and Mr. Doran in a 
manner appropriate to the seriousness with which it was presented to 
me. I took no independent action in this matter; I recommended the 
terminations based on what I was told, but I did not make the decision. 
I had no reason at the time to suspect the motives of my chain of 
command or the veracity of the information they gave me. When the 
terminations were effected, I saw to it that the extraordinary steps 
were taken of having a senior manager present, and of having him sign 
the personnel action forms.
    Thank you for the opportunity to assist in you investigation of 
this matter.

    Mr. Greenwood. Thank you, Mr. Busboom.
    Mr. Salgado.

                 TESTIMONY OF JOSEPH F. SALGADO

    Mr. Salgado. Mr. Chairman, members of the committee, My 
name is Joe Salgado. I am here voluntarily and at my own 
expense. I was the former Principal Deputy Director of Los 
Alamos National Laboratory. I had been at the Laboratory 
approximately 3 years.
    For brief moments here I would like to address a little bit 
of my background since that is germane probably to the ongoing 
inquiries of this committee. I have over 17 and close to 20 
years of law enforcement experience starting as a police 
officer in Oakland, California as Sergeant of Police. Ten years 
as a prosecutor in Alameda County as senior trial attorney. As 
a branch manager and special prosecutor in Humboldt County in 
an impeachment trial of a duly elected law enforcement 
official.
    I had the privilege to come to the Department of Justice 
after approximately 10 years as a prosecuting attorney and 
served as the Associate Director for Enforcement at the 
Immigration and Naturalization Service. I sat on the board of 
directors of EPIC, El Paso Intelligence Center. Then the 
Associate Attorney General on the Coordinating Committee on 
Organized Crime.
    I served in the Reagan Administration as the Chief 
Operating Officer of the Department of Energy for 4 years. In 
that capacity had the ability and the responsibility for the 
management of the National Laboratory and ironically also with 
part of the decisionmaking process for the extension of the 
contract with the University of California in 1985.
    I would like to make five brief points if I might, Mr. 
Chairman, pursuant to my testimony. I would ask that my 
submitted testimony be incorporated and part of the official 
record.
    Mr. Greenwood. It will be.
    Mr. Salgado. Thank you, sir. The first point I would like 
to make is on a personal basis and professional basis there was 
absolutely no cover-up or attempted cover-up of theft or 
criminal activity at Los Alamos Laboratory via myself and, as 
far as I know, by anyone else at the Laboratory. I believe that 
these allegations are absolutely not true and I categorically 
reject all such statements.
    I have described in my statement Dr. Browne and I promptly 
and completely informed all appropriate authorities at the 
University of California, NNSA, DOE, and appropriate law 
enforcement agencies. We kept them informed of our activities 
and progress through all the issues that are before this 
committee today.
    The second point that I would like to make is that I firmly 
believe that the descriptions of the Laboratory, Los Alamos 
National Laboratory, as a Den of Thieves, or having a culture 
of crime and theft that has been keeping the valley green for 
years, is inaccurate and not founded on fact. I believe, sir, 
that it does a disservice to the thousands of honest, dedicated 
science, technical and support people at the Laboratory.
    Obviously the improper and illegal activities and criminal 
activity of a few individuals out of a work force of over 
10,000 are extremely serious and should be well investigated. 
But they should not be used to tarnish the entire Laboratory 
and its work force. Personally I am disappointed that the 
University of California has chosen not to defend the 
Laboratory and its work force.
    Point No. 3. In late 1999 when I joined the Laboratory I 
did bring a well-founded belief that the historical culture of 
the University of California and the Los Alamos Laboratory had 
to change to ensure that it is management performance would be 
as excellent as its scientific performance.
    It was my personal opinion and voice within the 
institution, as well as the University of California, that the 
Laboratory had lost its credibility and was losing its 
credibility with both the executive and legislative branches of 
government.
    My views were consistent with Dr. Browne's vision of 
transforming the Laboratory into a disciplined organization 
capable of meeting the public expectation for accountability 
with fiduciary relationship with the American taxpayer.
    As a result of my prior service at the Department of 
Energy, I firmly believe that the University of California Lab 
had to regain its lost confidence and could only do so by 
substantially transforming the culture of the Laboratory and 
its management practices. Management practices have 
historically been one of management by accommodation to one 
marked by formality of operation, openness, and, among other 
things, that it was variably free from a culture of theft 
including theft and mismanagement.
    Fourth. I take the responsibility for the dismissals of Mr. 
Walp and Mr. Doran. I believe their dismissals were warranted 
based on repeated instances of inaccurate and incomplete 
reporting, their apparent inability to gain the trust and 
confidence of executives and senior managers at the Laboratory, 
as well as external reviewers with backgrounds both in law 
enforcement and the Federal Government. And management failures 
in properly securing, I believe, sensitive information dealing 
with ongoing criminal investigations.
    I am aware that Mr. Walp and Doran have accused me of 
significant obstruction and interferences with their work. It 
would be worth nothing that over the period of the 6 months to 
a year that Mr. Walp and Doran were at the institution I 
personally met with Mr. Walp twice for approximately 60 minutes 
and Mr. Doran attended a meeting I was in.
    There were issues concerning the October 24 meeting with 
the FBI and the U.S. Attorney that did lead me to the position 
of requesting and demanding that they be removed from liaison 
on that particular case.
    Mr. Doran and Mr. Walp see the Laboratory and its issues on 
one hand, and I see it on another hand that the conditions at 
the Laboratory must and need to be improved. We are 
diametrically opposed, I believe, as to our conclusions as to 
those conditions.
    Finally, Mr. Chairman and members, this committee would 
have no way of knowing what I refer to as an insidious and 
prejudicial phrase of ``keeping of the valley green'' and 
similar expressions. I have discussed this issue at length in 
my statement.
    Let me summarize it here by saying that the phrase is 
tantamount to racial profiling of the Hispanic workers at the 
institution of Los Alamos and the Hispanics residents of the 
Espanola Valley. Uses of phrases like ``greening the valley'' 
as our surrogate for accusation of thief in connections to the 
drug trade and absent any substantiating evidence or wrong.
    As an individual who has lived in the valley and is of 
Hispanic decent, I personally, professionally are offended and 
believe that the university and the Laboratory ought to cease 
using these phrases unless they can demonstrate substantial 
evidence they are, in fact, true. I am not aware that such 
evidence does exist.
    I welcome your questions, Mr. Chairman, and I appreciate 
the opportunity to be here.
    [The prepared statement of Joseph F. Salgado follows:]
   Prepared Statement of Joseph F. Salgado, Former Principal Deputy 
                Director, Los Alamos National Laboratory
    Mr. Chairman, Members of the Committee: I appreciate the 
opportunity to testify about performance failures at Los Alamos 
National Laboratory and related issues. I am here without subpoena and 
at my own expense because I believe these hearings are important to the 
future of the Laboratory.
                              introduction
    I came to the Laboratory in August, 1999 as an ``outsider'' and a 
manager, with a successful track record in the private sector and 
before that in the public sector, including 17 years in law enforcement 
as a police officer, prosecuting attorney, and Associate Commissioner 
for Enforcement at INS in the Department of Justice. While at the 
Department of Energy in the late 1980s as Under Secretary and Deputy 
Secretary, I was involved in the decision to extend the University of 
California's contract to operate three national laboratories, including 
Los Alamos.
    When I joined the Laboratory, it was with a well-founded belief 
that it is important for the country that the University of California 
continue to manage Los Alamos Laboratory. BUT, I also believed that it 
was imperative that historical cultural issues at the Laboratory needed 
to change. These beliefs were consistent with John Browne's vision for 
transformation of the Laboratory. As Director, he realized that the 
culture that had existed at the Laboratory for nearly 60 years could 
not satisfy public expectations for accountability and management 
excellence and therefore that change was imperative. Long-standing 
cultural issues at Los Alamos included:

 Lack of operational formality;
 Lack of a sense of the fiduciary relationship between the 
        Laboratory and the taxpayers;
 Lack of responsibility and accountability;
 Lack of management discipline;
 Lack of an understanding that competent managers and good 
        science are not incompatible.
    During the three years I was employed at the Laboratory, I spoke 
out frequently about the need to transform the Laboratory from what one 
DOE official correctly observed was ``13 labs with one name'' and a 
system of management by accommodation to an organization that would 
speak with one voice and be governed by disciplined management. There 
is nothing I am testifying to today regarding the need for change that 
I have not repeatedly said to Laboratory employees, the University of 
California's Office of the President, and, as well, to the NNSA and 
DOE.
                allegations of cover-up and obstruction
    Before proceeding with the details of my statement, I want to 
address allegations of cover-up, attempted cover-up, obstruction, and 
interference with fact-finding and investigative processes. These 
allegations are absolutely not true, and I categorically reject all 
such statements as they relate to my actions. To the best of my 
knowledge, no one else at the Laboratory engaged in any cover-up or 
interference with investigative processes. As will be clear throughout 
my testimony, Director Browne and I promptly and consistently took the 
initiative to fully inform the University of California, the NNSA, and, 
as appropriate, the DOE Inspector General's office of all of the 
information available to us about proven or alleged misdeeds at the 
Laboratory. We were determined and proactive in addressing each issue 
as it came to our attention.
    As soon as these allegations appeared in the November 5 edition of 
The Energy Daily, I discussed the matter with DOE Inspector General 
Greg Friedman and then recommended to Director Browne that we ask NNSA 
to request a review by the Inspector General. Director Browne, who was 
in Washington, D.C. at the time, made the request to Linton Brooks, 
Acting NNSA Administrator, that day. These calls were completed within 
a period of 4 to 6 hours on November 5. Mr. Brooks asked for an IG 
review on the same day, and the Laboratory received written notice from 
the IG on the following day that an investigation would be done. Mr. 
Friedman called me a day later to acknowledge that the Laboratory had 
acted very quickly.
    As I will discuss later, I believe that in the specific instances 
of misconduct--TA33, purchase card activity and property management--
the Laboratory moved aggressively and proactively to address these 
issues. In the discussion that follows, ``executives'' refers to the 
Director, Deputy Directors, Associate Directors, and Laboratory 
Counsel. ``Senior managers'' refers to Division Leaders; ``managers'' 
refers to all other managers.
                 laboratory is not a ``den of thieves''
    I have been deeply disappointed that so few efforts have been made 
over the past several months to acknowledge what is right with Los 
Alamos National Laboratory. Notions that the Laboratory is a ``den of 
thieves'' which has been ``keeping the Valley green'' for years, or 
that its culture is one of ``theft and criminality,'' I believe are 
wrong, and should be explicitly and firmly rejected. The fraudulent 
activities of a few individuals out of a workforce of over 10,000 in a 
half dozen specific cases are extremely serious. But they are not 
reason for condemning the entire Laboratory or its culture.
    The workforce at the Laboratory is among the most rigorously 
screened workforces in the country. It consists of literally thousands 
of dedicated, hard-working, honest individuals. Among them are some of 
the brightest minds and most accomplished scientific and technical 
talents in the country--probably in the world. But the scientists and 
engineers are not the only honest, committed workers at the Laboratory. 
There also are thousands of non-scientists and non-engineers who are 
every bit as committed and patriotic as their scientific and 
engineering colleagues and who work extremely hard to support the 
fundamental science, technology and national security missions of the 
Laboratory. I believe they have been unfairly tarnished by the events 
of the recent past, by the near exclusive focus of personnel actions on 
administrative and support personnel, and by the failure of the 
University to defend their work and their contributions.
                 how the performance failures happened
    Given its exceptionally strong workforce, why did Los Alamos 
Laboratory have the kinds of performance failures that it did? The 
cultural issues I described above led to several root cause problems:

 Management excellence and good managers have not been highly 
        valued, either by the University or at the Laboratory itself. 
        Skills that are not valued will not thrive in any organization. 
        In my judgment, Los Alamos National Laboratory does not have 
        the depth and breadth of managerial skills that one of the 
        Nation's premier national security installations with an annual 
        budget in excess of $1.5 billion must have.
 The culture over many years at Los Alamos has been one of 
        ``management by accommodation''. Administrative and operational 
        policies were often converted to ``guidance'' rather than 
        ``requirements''. Procedures were modified to accommodate the 
        preferences or conveniences of program managers and division 
        leaders. And, administrative and support staff were led to 
        believe that aggressive enforcement of policies and rules would 
        be criticized, not supported, by successive levels of 
        management.
 Insufficient management skills and a long-standing culture of 
        accommodation affected--undermined, in fact--a broad range of 
        controls and checks and balances that were on the books, but in 
        many cases were not rigorously observed. Too often, dollars 
        were used almost like ``monopoly money'' instead of as a 
        fiduciary trust.
    These conditions are not new. They have been typical to a greater 
or lesser extent of Laboratory operations for most of its history. In 
part, they have their origins in past federal management systems that 
involved less demanding public expectations and therefore less rigorous 
accountability. And, I want to be very clear on one point: Throughout 
my tenure at the Laboratory, I saw no evidence that these conditions 
resulted in a ``culture of theft'' or widespread personal 
aggrandizement. I say this not just as a former Laboratory manager but 
as a former law enforcement official with extensive investigative 
experience.
    Each of the performance failures that have lately been the subject 
of intense attention by the Congress, the press, and more recently the 
University of California illustrate clearly the cultural issues at the 
Laboratory. Each case also demonstrates our prompt, proactive 
determination to address wrongdoing and to assure immediate and 
continuous reporting of problems and what we were doing about them.
    ta-33, use of purchase orders to acquire items for personal use
    The Director and I first learned of this case in July 2002 when 
Laboratory Counsel Frank Dickson informed me that the FBI had opened an 
investigation at TA-33.
    Throughout the course of this investigation, we were faced with the 
need to balance cooperation with the FBI's criminal investigation and 
our obligation to protect national security interests at this highly 
classified site. I had three separate meetings with the FBI, one of 
which included the U.S. Attorney's office, between July and October in 
order to insure maximum cooperation and to raise issues and concerns in 
an expeditious manner.
    As soon as we became aware of the investigation, we immediately 
informed Laboratory executives and senior managers and took steps to 
assure that national security interests would be protected while the 
investigation proceeded. At the same time, Dr. Browne and I notified 
the University of California and the NNSA of what we knew.
    No system of internal controls will guarantee against conspiracies 
to circumvent it. Alexander and Bussolini were apparently able to do 
what they did because they conspired to violate procurement 
regulations. Management vigilance and the honesty of fellow workers are 
the best hope for thwarting conspiracies. In this case, management was 
not vigilant.
    Had it not been for Jaret McDonald's determination to do what he 
could to end wrongdoing by Alexander and Bussolini, it is possible that 
their fraudulent activities would have continued for years, 
inadvertently abetted by a culture of accommodation. The result would 
have been far greater losses than will finally be determined in this 
case. I believe that McDonald deserves to be commended for his report 
and for his persistence in pursuing it.
    My understanding is that Mr. McDonald made his first report to the 
Office of Security Inquiries in S Division in September 2001. The 
mishandling of that report is an example of the lack of discipline and 
formality of operations that has typified Laboratory operations. The 
fact that the Director's office did not learn of McDonald's report 
until October 24, 2002, and that we learned of it, not from Laboratory 
managers, but from the U.S. Attorney's office, is indicative of the 
vulnerabilities that the absence of formality and discipline creates. 
When I asked about the history of this case after my meeting on October 
24 with the FBI and the Deputy U.S. Attorney, I was told that 
McDonald's report had been discussed with the FBI in September 2001 and 
that the FBI had decided against opening an investigation at that time. 
When I asked for documentation of these discussions, I was told there 
was none.
    None of the line managers responsible for program activities at TA-
33 or for the procurement function were informed of Mr. McDonald's 
report until I did so after learning of the FBI investigation in July 
2002. As far as I know, there had been no report to the Associate 
Director whose responsibilities include security, in spite of the fact 
that TA-33 is arguably among the most highly classified sites at the 
Lab. There had been no report to the Office of Audits and Assessments, 
the Laboratory's official point of contact with the DOE Inspector 
General. There had been no report directly to the DOE Inspector 
General. There had been no report to local law enforcement. To the best 
of my knowledge, even after Mr. Walp joined the Laboratory in January 
2002 and reportedly learned of this major theft case within a couple of 
weeks of starting on the job, there were no reports to the Associate 
Director responsible for security, or to other executives, the 
Inspector General, or local law enforcement. The Laboratory had a 
breakdown of process that should never have happened.
    Alexander and Bussolini were able to conduct their fraudulent 
activities partly because of procurement actions intended to 
accommodate the Division to which they were assigned. A blanket 
contract award for specified types of equipment was issued with a 
ceiling of $100,000 in November 2000 to support requirements at TA-33. 
This was to have been a temporary contract for no more than 6 months.
    As an accommodation to facility managers and program offices, the 
contract term was repeatedly extended by the procurement staff to a 
final term of 24 months. In addition, it was modified 4 times to 
increase the ceiling from $100,000 to $2.7 million. None of these 
modifications, to term, scope and ceiling, as far as I know, received 
any review by the group leader or higher level management.
    More intense management vigilance by those responsible for 
facilities, program management, and procurement at TA-33 might have 
uncovered the activities of Alexander and Bussolini before Mr. McDonald 
felt compelled to report them. Certainly, formality of operations in 
terms of reporting and documenting allegations of wrongdoing would have 
assured prompt response to Mr. McDonald's first report in the fall of 
2001. If the information available to me is correct, I cannot explain 
why the Office of Security Inquiries, under either of its 2 previous 
directors ( Sprouse and Walp), did not feel compelled to assure that 
Laboratory executives were aware of McDonald's report.
               attempted purchase of a mustang automobile
    As in the TA-33 case, as soon as we became aware of the attempted 
purchase of the Mustang, we took prompt, assertive action:

 We immediately established an internal review team to 
        determine whether there were systemic problems with the 
        purchase card program. As a result of this review, we 
        implemented a series of reforms and controls, including limits 
        on authorization levels for all cardholders to $2,500 per 
        transaction and $25,000 per month.
 I also personally discussed with Inspector General Friedman at 
        the Department of Energy our intent to establish the External 
        Review Team and to have it chaired by a former Inspector 
        General.
 John Layton, former Inspector General at the Department of 
        Energy agreed to chair the External Review Team and recommended 
        that another former IG, Charles Masten, be added to the team. 
        We agreed with Mr. Layton's recommendation.
 A letter for UC Vice President McTague's signature confirming 
        these discussions and authorizing us to proceed was drafted in 
        my office; faxed to Dr. McTague; signed by him; and returned to 
        the Laboratory Director.
 I notified the FBI and discussed the case with them in the 2nd 
        of the three meetings I had with them between July and October.
    Dr. McTague followed our progress closely and expected frequent 
reports on the status of the investigations and the related reviews of 
procedures and practices. But, it was Dr. Browne who took the 
initiative to propose the External Review Team and to have it chaired 
by a former Inspector General.
    We learned about the attempted purchase of the Mustang automobile 
about a month after the TA-33 case had come to our attention. The bank 
that administered the purchase card program on behalf of the Laboratory 
initially reported the matter to the Laboratory Procurement Group.
    The Mustang case provides a near textbook-quality illustration of 
the culture of accommodation at Los Alamos National Laboratory. The 
policies governing purchase card use, all of which are easily 
accessible on the Laboratory's web page, could not have been more 
clear: the standard authorization limit was $2,500/transaction and 
$25,000/month. These limits could be raised to $5,000/transaction and 
$50,000/month if the Group Leader provided justification and the 
cardholder completed special training and there were no findings in an 
audit of their account. The policies on the web page also explicitly 
prohibited the purchase of tools with purchase cards.
    In the Mustang case, Division managers requested and procurement 
managers agreed to raise the authorization limits for the card-holding 
individual to $50,000/transaction and $900,000/month, based on the high 
volume of purchases made in the Division. This decision did not come to 
the attention of the Laboratory's executives until after we learned of 
the Mustang issue. It is worth noting that these authorization levels 
were granted not to a manager, but to an individual classified as an 
OS/7--approximately the equivalent of a GS-7 to GS-9 administrative 
secretary in the federal service. There was no formality requiring 
review of purchase card authorization limits or of the performance of 
those to whom higher-than-standard limits had been granted.
    Division managers also requested and procurement managers agreed to 
provide an exception to the prohibition against acquiring tools with 
purchase cards. The exception was accompanied by certain conditions to 
which Division management agreed. However, I know of no indication once 
the exception was in place that either Division or procurement 
management paid any attention to whether the conditions on which the 
exception was based were being observed and, if they were, whether they 
were effective.
    When we reviewed the cardholder's account, we found that an 
exceptionally large number of tools had been purchased with the same 
card used for the Mustang. The volume of the purchases, the fact that 
all were made from a single vendor who was located in Albuquerque, and 
the fact that a Laboratory employee apparently always drove to 
Albuquerque to pick up the tools raised a number of questions. I 
discussed these issues with the FBI in the 2nd of the three meetings I 
had with them and sought their assistance, given that they had opened a 
case on the Mustang and the fact that the tools had been purchased by 
the same cardholder. Mr. Dickson and Mr. Tucker subsequently met with 
the Bureau's white collar crime unit regarding the tools, but the 
Bureau decided not to pursue the matter. At the time I left the 
Laboratory, these issues were still under review by the DOE Inspector 
General.
    Taken together, the TA-33 and Mustang cases are examples of a 
historic pattern of operations at Los Alamos Laboratory: Exceptions to 
established policies and controls were made to accommodate group and 
division managers. The exceptions were not reviewed or approved by 
executives--in part because the culture had long since made such 
exceptions part of routine activity.
                            missing property
    Los Alamos National Laboratory covers an area of about 43 square 
miles (roughly the size of the District of Columbia) traversed by about 
200 miles of roads and occupied by roughly 2,000 buildings. These 
conditions make property management at Los Alamos far more complicated 
than at more compact sites, such as Lawrence Livermore and Sandia 
National Laboratories. This does not mean that the standards for 
property management ought to be less stringent at Los Alamos; it does 
mean that management rigor, discipline and formality of operations are 
critically important.
    The first time the Director and I became aware of or saw the 
property reports attached to Mr. Walp's March 26, 2002 memorandum was 
on November 8, 2002 when a copy was faxed to the Laboratory by Adam 
Rankin of the Albuquerque Journal. As the Committee knows, Mr. Walp's 
memo alleged widespread theft based on the subject reports, all of 
which, I was told, had been previously filed with and reviewed by DOE/
NNSA. To the best of my knowledge, Mr. Walp's memo had never been 
brought to the attention of anyone above Division management at the 
Laboratory or to anyone in NNSA or to the DOE Inspector General despite 
the seriousness of his allegations.
    As soon as we became aware of the property reports attached to 
Walp's March 26 memorandum, we established an internal task force to 
review property management procedures and reporting. As a result of 
this review, Director Browne directed that a wall-to-wall inventory be 
conducted. This is a time-consuming and expensive procedure and 
therefore requires approval by NNSA. NNSA approved the proposed 
inventory, and I understand it is now in process.
    In addition, I ordered a review of classified computers to 
determine whether any of the computers listed as lost, stolen or 
otherwise unlocated contained classified information and to validate 
that all classified computers in the current inventory could be 
located. That report had not been completed prior to my leaving the 
Laboratory. A preliminary report in mid-December 2002 indicated that 
one computer used for classified work--a Sun Microsystems workstation 
that did not contain a hard drive--had been tagged for destruction but 
could not be verified as having been destroyed. The mid-December report 
indicated that all other computers used for classified work had been 
located and that none had been reported as missing or stolen. I was 
informed that because the Sun machine contained no hard drive, it was 
not possible that it contained any classified information. It should be 
noted that computers used for classified work are controlled separately 
from all other computers at the Laboratory.
    Earlier in the year, in an effort to verify controls on classified 
information, Director Browne had implemented an inventory of so-called 
CREM (Classified Removable Electronic Media) as recommended by a 
Strategic Security Working Group he had chartered. I asked for signed 
statements certifying the results of the CREM inventory from the 
leaders of all Divisions to which CREM were assigned.
    Questions have been raised about my decision to rescind a 
memorandum on property management issued by the BUS Division Leader to 
Laboratory's ``leaders'' in April. By issuing the memorandum directly 
to ``leaders''--rather than through line management--the Division 
Leader circumvented the management chain and undermined the 
accountability structure that I had emphasized for the past three 
years. Therefore, I instructed him to withdraw his original memorandum 
and then to re-issue it through the Associate Director for 
Administration to the cognizant Associate Directors. The memorandum was 
re-issued within a few days with an explicit statement that Associate 
Directors would be accountable for property management performance in 
the Divisions within their line management responsibilities. The 
Inspector General's January 2003 report cites the rescission of this 
memorandum as indicative of management's failure to create a climate 
that encouraged prompt and open reporting by Laboratory employees. 
Unfortunately, the IG's report does not note that the memorandum was 
re-issued a few days later and that there were subsequent quarterly 
property management reports to all Associate Directors.
                 termination of messrs. walp and doran
    I take responsibility for the dismissal of Mr. Walp and Mr. Doran 
before the end of their New Employee Evaluation Periods. I view the 
issue of their dismissals as strictly a management issue. I believe the 
decision to dismiss them was the right one, based on:

 Repeated instances of inaccurate and incomplete reporting;
 Their apparent inability to gain the trust and confidence of 
        executives and senior managers at the Laboratory as well as 
        external reviewers with backgrounds in law enforcement; and
 Management failure in the custody of investigative 
        information.
    I had no knowledge that they had claimed whistleblower status and 
no reason to believe that they had any legitimate grounds for doing 
so.It is important to recall the circumstances as they existed at the 
end of November 2002, without benefit of today's hindsight. We were 
faced with two on-going criminal investigations involving Divisions in 
which classified work on sensitive matters was the norm. In the recent 
past, the Laboratory, and Director Browne specifically, had been 
severely criticized for what was viewed as a failure to act promptly 
and effectively in two other cases: Wen Ho Lee and the missing hard 
drives.
    I was determined that the Laboratory not do or fail to do anything 
that would, once again, result in criticism of our management of 
national security or of investigative processes that might involve 
national security. Members of this Committee, as well as others, have 
expressed similar concerns or raised questions about the reliability of 
security management in light of the apparent failure of controls in 
connection with functions less complicated than the protection of 
classified information, materials, and equipment. It was in this 
context that the Laboratory was confronted with what action to take in 
connection with Walp's and Doran's New Employee Evaluation Periods.
    My judgment that the decision to dismiss Messrs. Walp and Doran was 
the right and best course of action was based on several factors:

 Repeated instances of inaccurate or incomplete information. 
        These mistakes, individually and together, are not consistent 
        with good investigative performance.
     Laboratory Counsel Frank Dickson reported on several 
            occasions that information provided to him by Messrs. Walp 
            and Doran about the progress and status of the TA-33 and 
            Mustang investigations turned out to be wrong or 
            incomplete.
     In the Mustang case, Walp and Doran inaccurately reported 
            the number of phone calls made by the card holder to the 
            vendor; and mistakenly identified the address to which the 
            Mustang either was delivered or was scheduled to be 
            delivered, having confused the cardholder with another lab 
            employee with the same name but different middle initial.
     Ten days to 2 weeks after we learned of the attempt to 
            purchase a Mustang, we still had not acted, in my judgment, 
            to preserve whatever evidence was at or available to the 
            Laboratory. I was increasingly concerned that evidence at 
            or available to the Laboratory might be lost due to delay 
            and inaction.
     Walp and Doran incorrectly accused a Laboratory manager of 
            having obstructed justice and committed a federal felony 
            for having accepted a resignation and personal check from 
            an individual who had filed a fraudulent travel claim.
     Walp incorrectly identified as ``larceny'' all property on 
            a list of missing property that included items unlocated at 
            the time the list was prepared and/or items known to be 
            lost.
     On October 24, I met with the FBI and the US Attorney's 
            Office to discuss the TA-33 and Mustang investigations. 
            Information provided at that meeting reinforced my judgment 
            that Mr. Walp and Mr. Doran had continued to report 
            inaccurate information to Mr. Dickson and to me concerning 
            issues such as the number of suspects, the investigative 
            approach being used at the Laboratory, timing and related 
            matters.
 Inability to earn and maintain the trust and confidence of 
        executives and senior managers at the Laboratory or on the part 
        of external reviewers.
     From about mid-September until late November, Lab 
            executives and senior managers I knew to be individuals who 
            consistently worked well with others expressed a lack of 
            trust and confidence in Mr. Walp and Mr. Doran. These 
            problems were reported to me, either directly or 
            indirectly, by S Division managers, the Laboratory Counsel, 
            other attorneys within the Lab Counsel's office, and the 
            Deputy Director of Human Resources.
     Two former Inspectors General, both of whom are ex-FBI 
            agents, and who were at Los Alamos as members of the 
            External Review Team, expressed similar judgments about 
            lacking trust and confidence in Messrs. Walp and Doran.
     Walp and Doran first refused to cooperate with the 
            External Review Team's examination of purchase card 
            procedures and then made access to purchasing documents by 
            the Team's forensic auditors subject to unnecessary and 
            burdensome conditions.
     My understanding is that S Division managers counseled Mr. 
            Walp and Mr. Doran about their performance and their 
            working relationships sometime in the September timeframe. 
            Lack of trust and confidence in their work did not improve, 
            however. In fact, if anything, it continued to deteriorate.
 Custody of investigative information.
     On November 8, 2002 we learned that a 30-lb. box of 
            documents apparently related to on-going investigations and 
            property management at the Laboratory had been anonymously 
            delivered to Adam Rankin, a reporter for the Albuquerque 
            Journal. To the best of my knowledge, no one at the 
            Laboratory has ever seen the contents of the box. We do not 
            know if it contains any classified information. We know 
            that it contains evidence about on-going criminal 
            investigations. What we know about the contents is 
            information that has been shared with us by Mr. Rankin.
     I do not know who sent the box to Mr. Rankin, nor do I 
            know who copied the documents in the first place. I am 
            certainly NOT accusing either Mr. Walp or Mr. Doran of 
            having done so. In fact, my first instinct was that as 
            former law enforcement officers, they were least likely 
            among those who had access to the information to have sent 
            it to a reporter--a judgment that reflects my past 
            experience in law enforcement. I know something about the 
            culture of law enforcement, and I know that leaking 
            information to reporters runs contrary to that culture.
     Regardless of who sent the box to Mr. Rankin, I was very 
            concerned about two things: First, the information had been 
            sent to a reporter and not to the Inspector General, law 
            enforcement authorities or even Congressional 
            investigators.
     Second, the only place in the Laboratory where all of this 
            information was collected and maintained was the Office of 
            Security Inquiries in S Division, headed by Mr. Walp. The 
            fact that adequate controls of sensitive and potentially 
            classified information related to on-going criminal 
            investigations were not maintained is a serious management 
            failure.
    I was not aware at any time that Walp and Doran had claimed 
whistleblower status. I also had no reason to think they might 
legitimately be whistleblowers because from my perspective all of the 
information about wrongdoing that they claim to have uncovered had been 
identified and reported to appropriate authorities by others before it 
was noted by Walp and Doran. I am well aware that this view runs 
counter to news accounts and, I am told, to public comments and 
testimony. My view is based on the following:

 The TA-33 case was reported to OSI by Mr. McDonald in 
        September 2001, before either Walp or Doran had been hired. As 
        I understand, McDonald repeated his report directly to the FBI 
        in March 2002. I reported the TA-33 case to the University's 
        Office of the President and Dr. Browne reported it to NNSA as 
        soon as we learned of it.
 The Procurement Group reported the Mustang case to the 
        Director and me in August 2002 after the bank had alerted them. 
        I reported the Mustang case to the University's Office of the 
        President, the NNSA, the DOE Inspector General and the FBI as 
        soon as we learned of it.
 I was told that all of the property reports attached to Mr. 
        Walp's March 26, 2002 had previously been filed with and 
        reviewed by NNSA and/or the Department of Energy. For each of 
        the fiscal years involved, I was shown memoranda from NNSA/DOE 
        acknowledging receipt and approval of property reports. I 
        notified the University's Office of the President about Walp's 
        memorandum as soon as I was aware of it.
 I know of no other cases that were identified, opened or 
        pursued by Messrs. Walp or Doran.
    All of the information available to me about Messrs. Walp and Doran 
led me to conclude that the chances for a successful employment 
relationship were virtually nil. Accordingly, I approved their 
dismissals. Once the decision was made, Mr. Dickson, Laboratory 
Counsel, and I, in separate conversations with different individuals, 
notified the University's Office of the President of the decision.
    I believe that reasonable people can and do disagree, and I respect 
the opinions of those who believe the decision to dismiss Walp and 
Doran was wrong. Messrs. Walp and Doran on the one hand, and I on the 
other hand see conditions and practices at the Laboratory that need to 
be changed. Our judgments about what those conditions represent, 
however, are diametrically opposed. I believe that the notion of 
``greening the Valley'' accounts in some measure for our different 
perspectives and may even have influenced Walp and Doran to have less 
than full trust in me and the senior managers who reported to and were 
accountable to me.
                      ``keeping the valley green''
    Members of this Committee would have no way of knowing the 
particular significance of statements like ``keeping the Valley green'' 
or that these statements, as made in the previous hearing, may 
unfortunately prejudice some of the judgments and conclusions about 
theft at the Laboratory.
    At Los Alamos National Laboratory, ``the Valley'' is a very 
specific and clearly understood term that refers to the Espanola Valley 
of Northern New Mexico. It is an area that is overwhelmingly Hispanic. 
By far the largest portion of the Laboratory's Hispanic employees, most 
of whom are not scientists and engineers, come from Espanola and 
surrounding areas, collectively referred to as ``the Valley''. Many of 
its inhabitants' ancestors settled the area 300 or 400 years ago. They 
are extremely and justifiably proud of their heritage and the 
contributions they have made to the State, the Laboratory, the Nation 
and national security over the years.
    Overall, ``the Valley'' is a place of significant rural poverty. It 
has none of the natural resources that are more common to southern New 
Mexico; it does not have a robust industrial base; and it does not 
share in the benefits of the tourism industry enjoyed by Santa Fe and 
Albuquerque to the south. Unfortunately, parts of ``the Valley'' are 
plagued by the types of drug problems that accompany poverty in too 
many areas of the country.
    The Laboratory, and the State Government located in Santa Fe, are 
the principal employers for ``the Valley's'' residents. And, I am sorry 
to say, there are those at the Laboratory who assume that the drug 
problem in ``the Valley'' and the fact that many employees come from 
``the Valley'' means there is an inevitable problem of theft at the 
Laboratory and a connection to the drug problem. These assumptions are 
expressed by phrases such as ``greening the Valley.''
    Might the Laboratory be a target for thieves involved in drug use? 
Common sense would say that it might. But, allegations that it is 
actually happening, without substantiating evidence or clear 
indications of such, are irresponsible and risk a kind of ``racial 
profiling'' that all of us ought to reject out of hand.
    Such allegations ignore the rigorous screening of the Laboratory's 
workforce, including random drug testing. If the alleged problems were 
as common as some suggest, there should be security clearance, drug 
test, and performance statistics that would, at least, give credence to 
such suspicions. To the best of my knowledge, no such statistics exist. 
If they do, they were never brought to my attention. As a result, I 
find statements like ``keeping the Valley green'' personally and 
professionally offensive.
    Throughout my tenure I worked to improve the University's record of 
providing opportunities for Hispanic and other ethnic and minority 
employees who work at Los Alamos and who are under-represented in 
management positions relative to their proportion of the total 
workforce. I am confident that there are others who will continue to 
advocate for more opportunities for all of the Laboratory's minority 
and ethnic populations. And, I hope that the University and the 
Laboratory will cease using terms like ``greening the Valley'' that 
result in stereotyping and profiling Hispanic employees and the 
Espanola Valley.
                               conclusion
    I am extremely proud and honored to have worked with the 
exceptionally fine people at Los Alamos National Laboratory. I regret 
that time and circumstances prevented Director Browne and me from 
completing the efforts we began to transform the culture and management 
practices of the Laboratory.
    I categorically reject and deny that there was any cover-up, 
attempt to cover-up, obstruction or interference by me or, to the best 
of my knowledge, by others at the Laboratory. Such statements are 
absolutely wrong as evidenced by the consistently proactive approach to 
reporting and review taken by me and by Director Browne.
    I left the Laboratory with the same beliefs I brought when I 
started working there in 1999:

 that it is in the national interest and important for national 
        security that the University of California continue to be 
        involved in the science and technology mission of the 
        Laboratory;
 that longstanding Laboratory cultural issues must be 
        addressed, including:
     operational formality and management discipline;
     fiduciary responsibility;
     accountability; and
     a commitment to train and develop competent managers.
    I take responsibility for the dismissal of Messrs. Walp and Doran. 
From my perspective, their dismissal was strictly a management issue. I 
believe the decision to dismiss them was the right one based, as it 
was, on repeated instances of inaccurate and incomplete reporting; 
apparent inability to gain the trust and confidence of executives and 
senior managers at the Laboratory as well as external reviewers with 
backgrounds in law enforcement; and management failure in the custody 
of investigative information. I had no knowledge that they had claimed 
whistleblower status and no reason to believe that they had any 
legitimate grounds for doing so.
    The term ``keeping the Valley green'' as a surrogate for 
allegations of theft and a presumed connection to the drug problem in 
the Valley should either be immediately substantiated with evidence or 
publicly rejected by the University and the Laboratory.
    Much more is right than is wrong at Los Alamos National Laboratory. 
And, I firmly believe that we should all be grateful to the thousands 
of dedicated, honest, patriotic workers at Los Alamos, present and 
past, who are committed to making the world a better and more secure 
place.

    Mr. Greenwood. Thank you, Mr. Salgado.
    Mr. Dickson.

               TESTIMONY OF FRANK P. DICKSON, JR.

    Mr. Dickson. Good morning, Mr. Chairman.
    Mr. Greenwood. Good morning.
    Mr. Dickson. Distinguished members of the committee. My 
name is Frank Dickson and I am a lawyer. After 24 years in 
private practice I joined the legal staff of the Los Alamos 
National Laboratory in 1990 and was named its Laboratory 
Counsel in 1997. I am proud to serve in this position and I 
view it as a significant opportunity for public service.
    I am very conscious of the important responsibility that we 
at the Laboratory have to the Federal Government and I believe 
that the great majority of my colleagues at the Laboratory 
share those beliefs.
    It is staggering to me that I am accused by men who worked 
with me for a very few weeks of dishonesty and conduct 
bartering on obstruction of justice. These allegations are 
false. Because of the attorney/client privilege I have not 
previously spoken out publicly on these matters. I sincerely 
appreciate the opportunity to appear before you today, testify 
under oath as to my impressions, and to answer your questions.
    I first became aware of the various investigations at the 
Laboratory in late June 2002 when the FBI began investigating 
theft at TA-33. Later Lab management put our office, the Office 
of Laboratory Counsel, in charge of coordinating with the FBI 
our mutual efforts in these cases. This coordination role is an 
important responsibility and one that I take very seriously.
    Any review of my interactions with the FBI will, I believe, 
show that our office carefully coordinated the Laboratory's 
efforts with those of the FBI in all respects. I do acknowledge 
that I was anxious for the TA-33 and Mustang investigations to 
proceed. These cases involve long-term Laboratory employees in 
sensitive positions and we could not allow them to remain 
indefinitely.
    I knew from past experience that the University could not 
count on the availability of an FBI investigation to address 
national security concerns for the Laboratory's administrative 
needs, and I knew the Laboratory would need its own independent 
investigation.
    The Laboratory Office of Security Inquires was charged with 
being the lab's day-to-day liaison with the FBI when Walp was 
the OSI's office leader and Steve Doran worked with him. I 
welcomed their investigative skills. Our office was also 
directed to facilitate the external review team, the team that 
was looking into the purchase card issues to expedite their 
efforts in support of that review.
    OSI was assigned to assist my office in doing this job. In 
August Messrs. Walp and Doran and I met to discuss the status 
of the TA-33 and Mustang investigations. I outlined for them 
the need for an independent investigatory file for the 
Laboratory and for the need for full cooperation with the 
purchase card review team.
    As time passed I found the information they provided both 
insufficiently thorough and unreliable. More importantly, on 
the external review team assignment, OSI made it unreasonably 
difficult for the team to have access to information it needed 
to perform its important work despite the fact that Mr. Salgado 
and I had made specific arrangement with the FBI's Special 
Agent-in-Charge in Albuquerque for the review team's access to 
the records pertaining to the investigation.
    Mr. Walp did not accept this in spite of the arrangements 
that had been made. In my conversations I am sure I did say 
that our employer was the University of California and the 
university had independent interest in obtaining the facts. I 
see nothing wrong with those statements even today.
    I never told Mr. Walp nor Mr. Doran that our job was to 
protect the Laboratory's image and the university's contract. 
That is not the way I look at my job. In mid-September Stan 
Busboom, Mr. Walp's division leader, met with me and asked for 
my opinion on the performance of Messrs. Walp and Doran.
    I told Mr. Busboom that I was concerned that I no longer 
felt I could work with them. After discussing the matter 
further with their immediate supervisor, Mr. Gene Tucker, I 
relented and agreed to try again to work with them, which I 
did.
    About a month later Deputy Director Salgado and I attended 
a meeting at the U.S. Attorney's Office in Albuquerque with 
both representatives of the FBI and the U.S. Attorney. Our 
purpose was to learn the status of anticipated prosecutions in 
the TA-33 and Mustang cases.
    At that meeting we were told that a third TA-33 employee 
was neither a suspect nor cooperating witness in the 
investigation. This was directly contrary to information 
provided to me by Messrs. Walp and Doran and was especially 
troubling to me because it raised the possibility that this 
third employee would have to be dealt with by the Laboratory 
after the FBI investigation with little help from the thin 
investigative record compiled by Messrs. Walp and Doran.
    I concurred that day with Mr. Salgado's judgment that they 
should be removed from their FBI liaison roles. I did not make 
the decision to terminate Messrs. Walp and Doran. However, it 
is very clear that my stated observations about their work were 
important factors in the decision relating to their 
termination.
    Putting aside the concerns that I have expressed regarding 
Messrs. Walp and Doran, I do recognize that the circumstances 
that these men confronted when they came to the Laboratory were 
less than ideal. Upon reflection I realized that we could and 
should have done more to provide them with a better 
understanding of the Laboratory and their roles.
    In retrospect I believe the Laboratory should have 
attempted to work through the difficulties with Messrs. Walp 
and Doran.
    In closing, I want to emphasize that my sole intention in 
connection with all the matters being discussed today was to 
ensure that thorough investigations were conducted that 
appropriate remedial actions were taken at the Laboratory with 
respect to the problems that were identified. Thank you.
    [The prepared statement of Frank P. Dickson follows:]
Prepared Statement of Frank P. Dickson, Laboratory Counsel, Los Alamos 
                          National Laboratory
    Mr. Chairman, Mr. Deutsch, and distinguished members of the 
Committee. Thank you for the opportunity to address the Committee 
today.
    My name is Frank P. Dickson. I am a native of Corsicana, Texas, and 
I graduated from Baylor University Law School in 1965. From 1966 until 
1990, I practiced law in Santa Fe and Albuquerque, New Mexico; and in 
1990, I came to the Los Alamos National Laboratory where I became 
Laboratory Counsel in 1997.
    Throughout 2002, I had a ``dual report'' to the General Counsel of 
the University of California, and to the Director of the Laboratory 
(including his Principal Deputy Laboratory Director).
    Messrs. Walp and Doran have testified to this committee that I 
obstructed justice, interfered with FBI investigations, impeded their 
investigations, and attempted to cover up fraud, theft, and wrongdoing 
at the Laboratory. These allegations are incorrect and misstate the 
complex role relating to these investigations assigned to me and the 
Office of Laboratory Counsel.
    In all of my actions as Laboratory Counsel on these matters, I had 
three goals: (1) to make sure the Laboratory had accurate and 
sufficient information to make appropriate decisions regarding national 
security concerns; (2) to make sure I provided accurate and timely 
information to the various entities (the FBI, the DOE, and the United 
States Attorney's Office) so they could take appropriate actions; and 
(3) to make sure the Laboratory had accurate information upon which to 
make appropriate employment decisions regarding its workforce.
    Shortly after discovery of the ``Mustang case'' which involved the 
apparent use of a Laboratory purchase card to acquire a Mustang 
automobile, Laboratory management recommended that the University 
undertake a comprehensive, independent review of its entire purchase 
card program to identify vulnerabilities and develop recommendations 
designed to prevent future abuses and to identify cases of fraud, waste 
and abuse. Based upon this recommendation, the University directed the 
charter of a review team consisting of two former and highly regarded 
inspectors general from federal agencies and a forensic unit from the 
University's outside auditor, PricewaterhouseCoopers, to conduct the 
review.
    Because this review team would be working in areas that would 
overlap with known or expected federal investigations, I was asked to 
coordinate with these external agencies and within the Laboratory to 
assure that the Purchase Card Review Team had the information it needed 
to perform its important work and to assure appropriate coordination 
with affected law enforcement and other agencies.
    As Laboratory Counsel, I represented the Laboratory's legal 
interests throughout the Wen Ho Lee investigation in 1999-2000, and 
during the ``missing hard drive'' incident in the spring and summer of 
2000. Both of these cases involved extremely complicated interactions 
with people throughout the government, the University and the 
Laboratory. Through this experience, I developed a thorough 
understanding of the multiple important issues that arise in these 
situations and an understanding of the requirements and limits on what 
we should and should not do.
    Although cooperation with law enforcement, including the FBI, is of 
prime importance, there are other issues of extreme importance to the 
Laboratory and the government in these situations, including: (1) the 
Laboratory's responsibility for national security, which includes 
ensuring that only reliable persons have access to classified 
information and sensitive facilities; (2) the Laboratory's 
responsibility to keep DOE and other program sponsors fully informed of 
unusual events that might impact the safety and security of their 
programs; (3) the Laboratory's need to have accurate information to 
make appropriate employment decisions and protect the safety and 
security of its workforce; and (4) the Laboratory's responsibility to 
protect government property. There are often no easy answers to many of 
the situations that arise, because of the multiple, parallel and 
somewhat competing interest of the various individuals and entities 
that may become involved; and the role of Laboratory Counsel is to help 
chart a path that deals with all of these issues as effectively as 
possible.
    I believe that a careful study of all of the facts will demonstrate 
that I and the members of Laboratory Counsel staff carefully 
coordinated our efforts with the DOE Office of the Inspector General 
and the FBI. I believe that the facts will demonstrate that our efforts 
were directed to advancing the work of the purchase card review team 
and following up on efforts to deal with problems disclosed by its 
work. Another major effort was to assure that Laboratory management had 
access to all information necessary to perform its role.
    It was clear to me that Messrs. Walp and Doran were primarily 
focused on possible criminal prosecutions and did not agree with, 
appreciate or understand the importance of the other elements of my 
responsibilities. The resistance I encountered from Messrs. Walp and 
Doran, and the inadequate information I received from them, impeded my 
ability to do my job.
    I have never prevented anybody from uncovering fraud, theft or 
other wrongdoing at the Laboratory. In fact, the Purchase Card Review 
Team was publicly announced and its work was, from the beginning, 
intended to be fully disclosed to all interested government entities as 
well as the public. I believe the aggressive response to the Mustang 
issue designed by the University and Laboratory management was a 
strong, open and creative response to the obvious concerns raised by 
the Mustang issue; and my goal has been to do what I could to assure 
that the review team had everything it needed to do its work completely 
and in a timely fashion. My goal was, is, and will be to provide 
complete and accurate information to the FBI, the United States 
Attorney, the DOE, and the University, to assist them in their roles.
    Principal Deputy Laboratory Director Joseph Salgado directed that 
information and documents be sent to my office for transmittal to the 
interested agencies. This was done not to censor or withhold 
information, but to keep track of what information was being provided, 
and to ensure that information was provided.
    The following narrative describes my involvement in the specific 
matters that have been the subject of this committee's investigation.
                         the ``ta-33 incident''
    I first became aware of the ``TA-33 incident'' around July 1, 2002, 
from S Division Leader Stanley Busboom, shortly after the FBI decided 
to open a criminal investigation into the matter.
    The allegations were that several (three to eight) Laboratory 
employees were stealing government property and storing the material at 
TA-33. TA-33 is a highly sensitive area at the Laboratory. The 
Laboratory's Office of Security Inquiries (OSI) was responsible to act 
as liaison with FBI Special Agent Jeff Campbell. Mr. Walp, as office 
leader at OSI, was directed by Laboratory management to work closely 
with the Office of Laboratory Counsel and to keep me advised of the 
progress of the investigation. The continuing presence in the workplace 
of Laboratory employees who were suspected of theft and who worked in a 
highly sensitive and secure location was of great concern to me. It 
raised national security concerns and employment concerns. I remember 
that Congress criticized the FBI and the Laboratory for permitting Wen 
Ho Lee to remain in a position where he had access to classified 
information.
    In order to understand the issues involved and to determine the 
appropriate action to take, it was necessary for the Laboratory to 
investigate and have access to information regarding these allegations. 
Therefore, at my request, a senior staff attorney, Christine Chandler, 
initiated discussions with Mr. Walp and Mr. Campbell, and it was agreed 
that Mr. Walp or Mr. Doran would be permitted to participate in FBI 
interviews on this matter, and would develop and make available to my 
office written summaries of those interviews. The FBI recognized the 
need for the Laboratory to have access to this information, and to 
conduct a parallel investigation with the FBI. However, Messrs. Walp 
and Doran apparently viewed my efforts to obtain this information as 
unwarranted interference with their role in assisting the FBI, and they 
were reluctant to share the information they gathered with me.
    On August 7, 2002, Mr. Salgado and I met with the FBI's Special 
Agent-in-Charge for New Mexico at his office in Albuquerque to 
coordinate the TA-33 matter, the Mustang case, and other related 
issues. The principal results of that meeting were an agreement that 
representatives of OSI would assist the FBI in its investigations, 
conduct a parallel investigation to keep management informed of the 
circumstances and assure the Laboratory of an investigatory record if 
administrative action were required. An agreement was reached that OSI 
staff would keep a parallel set of notes. During that meeting, the FBI 
was informed of the very sensitive nature of the activities at TA-33 
and the Laboratory's concerns about leaving employees suspected of 
criminal conspiracy in that location.
    On August 12, 2002, I met with FBI Special Agent Mike Lowe, Special 
Agent Jeff Campbell, John E. ``Gene'' Tucker, Deputy Director of the 
Laboratory's Security Division, and Kenneth Schiffer, the Laboratory's 
Internal Security Officer, to talk further about security and 
counterintelligence concerns that might exist at TA-33 and how that 
might effect the on-going investigation. The FBI was informed that the 
Laboratory had certain reporting requirements regarding highly 
sensitive work and that at some point, the sponsors of the work in TA-
33 would need to be informed of the situation there.
    Because of security concerns, the Laboratory wanted to remove the 
suspects from the workplace as soon as possible. I had several 
discussions with the FBI about their plans to serve search warrants on 
the suspects and search their residences. We were told that until the 
warrants were served, it was important that the suspects remain unaware 
that they were under investigation.
    Because of the continuing presence of suspects at TA-33, Mr. 
Salgado and I met with the FBI Special Agent in Charge in Albuquerque 
and representatives of the Office of the U.S. Attorney on October 24, 
2002. The FBI indicated that it was not yet prepared to serve the 
warrants, and requested that the Laboratory not take any action against 
the suspect employees for another forty-five days. In response to our 
questions concerning the status of the investigation, Mr. Salgado and I 
were informed (1) that the investigation focused on two Laboratory 
employees only, (2) that sufficient evidence existed for the indictment 
and conviction of those two employees, (3) that the FBI was not 
inquiring into other potential suspects which might delay the 
investigation and (4) that the purpose of the requested delay was to 
see if the suspects would take more property which might enhance the 
possibility of a conviction or the severity of the sentence.
    Mr. Salgado asked the FBI and the U.S. Attorney whether we were 
being told to defer action to remove the suspects from the sensitive 
areas. After some discussion, we were told that the decision rested 
with the Laboratory and we were not being directed to do anything. Mr. 
Salgado informed the FBI and the U.S. Attorney that we needed to 
discuss the issue with other Laboratory managers and would reply after 
having met with those managers in Los Alamos.
    Upon returning to the Laboratory, Mr. Salgado convened a series of 
meetings with involved Laboratory managers to assess the magnitude of 
the security issues. Those managers conferred with program sponsors who 
were concerned about the presence of the suspects in the sensitive 
areas and wanted them removed. I was instructed by Mr. Salgado to 
inform the FBI that the Laboratory would read the two suspects out of 
the program, thereby denying them access to TA-33, and assign them to 
other work, on October 31, 2002. This was not an effort to ``force the 
FBI to take premature investigative action,'' as Mr. Walp alleges. It 
was an effort to remove criminal suspects from access to ultra-
sensitive classified information while the FBI continued its 
investigation.
    Mr. Walp has told this committee that I ``attempted to gain entry'' 
into TA-33, thereby placing the FBI investigation in jeopardy. John 
Tapia, a Laboratory employee who was working with Messrs. Walp and 
Doran, told me that Messrs. Walp, Doran and Campbell thought it was 
important that I personally visit TA-33. I agreed to the request; 
however, on the evening scheduled for the visit, I received a call from 
Special Agent Campbell asking me not to make such a visit, because of 
the risk of being observed. The FBI was concerned that the suspects not 
be alerted that they were under suspicion. I readily agreed with Mr. 
Campbell, and never visited the site. Mr. Walp's statement that I 
``became irate at Doran and Walp because they failed to cajole the FBI 
into allowing [me] access'' is not correct. I have never discussed this 
issue with either Mr. Walp or Mr. Doran.
    The Laboratory's Audits and Assessments Office was also conducting 
investigations into activity at TA-33. I informed Katherine Brittin, 
the director of Audits and Assessments, that an employee on her shift 
was a potential suspect. I informed her of this after consultations 
with the FBI and senior Laboratory managers, because I did not want Ms. 
Brittin inadvertently to make any statements to this potential suspect 
that might alert him to the ongoing criminal investigation, and thereby 
compromise it. My action was an effort to protect, not to jeopardize, 
the FBI's investigation.
                          the ``mustang case''
    I became aware of the ``Mustang case'' on or about July 29, 2002, 
when I returned from vacation. I was told that a Laboratory employee 
was suspected of having attempted to purchase a Ford Mustang 
automobile, and various auto parts, on a Laboratory credit card from a 
company in Arizona named ``All Mustang.'' Mr. Salgado took an active 
interest in the investigation of this case. He directed Mr. Walp or Mr. 
Doran to travel to Phoenix to interview the company that had recorded 
the charge, and directed OSI to provide its investigative reports 
directly to me.
    The FBI took over investigation of this case on or about August 2. 
I informed the DOE OIG of the case in late August. On August 7, 2002, 
Mr. Salgado and I met with FBI Special Agent in Charge Andreas Stephens 
and Mr. Campbell at FBI headquarters in Albuquerque. There were several 
topics of discussion at the meeting: (1) Mr. Salgado informed the FBI 
of the importance of the Mustang case to the Laboratory and the need 
for the FBI to move forward with the investigation as quickly as 
possible. (2) Mr. Salgado informed the FBI that he was concerned about 
the national security implications of having suspected felons 
continuing to work in TA-33, a sensitive area, and that there was a 
need to move the TA-33 investigation forward quickly, as well. (3) Mr. 
Salgado informed the FBI that the Laboratory had security 
responsibilities that may impose limitations on FBI access to people 
and facilities, and that may require the Laboratory to make reports of 
the situation through their own chain of command. It would be important 
for the Laboratory and the FBI to coordinate. (4) Mr. Salgado and I 
informed the FBI that the Laboratory was conducting internal 
investigations into the purchase card program and the Mustang case, and 
that we would need to review our own records and meet with our own 
employees to gather information. Mr. Stephens agreed that the 
Laboratory should have access to its own records, but that it should 
coordinate with the FBI before interviewing witnesses. (5) The 
Laboratory was interested in getting reports of information discovered 
in the FBI investigations and would either need access to FBI reports, 
or be allowed to prepare its own reports. We agreed that Mr. Doran 
would accompany Mr. Campbell on witness interviews and prepare his own 
investigation reports for Laboratory internal use. Finally, we agreed 
to meet again on August 12, 2002.
    On August 12, I met with Mr. Walp, Mr. Doran and Mr. Tucker to 
discuss the status of the Mustang investigation and other ongoing 
investigations. The two purposes of the meeting were (1) to obtain the 
latest, most reliable information about whether the suspected employee 
had committed fraud; and (2) to explain to Messrs. Walp and Doran 
specifically what the Laboratory needed from them in terms of providing 
reports on the status of the investigations so that the Laboratory 
could fulfill its national security obligations to the DOE and take 
whatever personnel actions were necessary.
    During the August 12 meeting, I asked Mr. Walp for records that had 
been collected as part of the investigation. Mr. Walp specifically said 
he would not discuss what had been learned about the Mustang case and 
that he would not produce the records to me unless and until the FBI 
approved it. I explained that at a meeting on August 7, the FBI had 
already given the Laboratory permission to get information about the 
Mustang and the TA-33 incidents. It was apparent to me that Mr. Walp 
did not appreciate that as liaison for the Laboratory his duties 
included sharing information with senior Laboratory managers, not 
withholding information. I re-emphasized to Messrs. Walp and Doran the 
importance of their keeping their own investigation notes and providing 
that information to me as it was generated.
    I believed that at this August 12 meeting, I had sufficiently 
explained OSI's liaison role to Mr. Walp and that there would be no 
further problems with getting current information from him and Mr. 
Doran. Although Mr. Walp agreed to provide me with the records and 
reports, he argued against having to do so. Nevertheless, there 
continued to be substantial delays in my receipt of written reports 
prepared by Messrs. Walp and Doran, and in some important cases I 
received no report of their investigative activities. Current 
information was necessary for Laboratory managers and me to do our 
jobs.
                      casino credit card incident
    In early August 2002, in the course of an internal inquiry into 
purchase card use arising from the Mustang investigation, a Laboratory 
Purchase Card Administrator discovered that a Laboratory sub-contract 
worker had used her purchase card to buy gas and groceries and obtain 
cash advances at local casinos. The total suspected loss has been 
determined to be approximately $2,000.
    On August 12, 2002, the Purchase Card Administrator notified OSI of 
her discovery and Doran immediately opened an inquiry. The FBI was 
notified and FBI Special Agent Campbell attended the interview of the 
worker. On August 19, 2002, the worker admitted that she had used her 
purchase card to obtain cash advances at a casino, and that she had 
used the cash to gamble. Because she was a contract worker, and not a 
Laboratory employee, the Laboratory could not fire the worker. However, 
the worker's contract employer was immediately directed to remove the 
worker from the Laboratory, which it did. She is not eligible to work 
at the Laboratory either as an employee or as a contract worker.
    I notified the DOE OIG of this case verbally on August 27, and in 
writing on September 12, 2002. Contrary to Mr. Walp's and Mr. Doran's 
assertions, there was no effort to cover up this matter. The matter was 
investigated, the appropriate agencies were notified, and the worker 
was removed from the work site. Efforts are under way to recover the 
misappropriated amounts from the contract employer.
                      the forged voucher incident
    In September 2002, a Laboratory employee reported to the 
Laboratory's Human Resources Division that an employee had wrongfully 
authorized, drawn and cashed a Laboratory check to herself for $1,800.
    It is my understanding that HR immediately referred the matter to S 
Division, so OSI could investigate. On September 23, the employee 
appeared at work, admitted to the misappropriation, tendered a check to 
reimburse the Laboratory for the entire amount of the misappropriation, 
and resigned. The Laboratory told the employee she might be criminally 
prosecuted, and made no agreements whatsoever about whether any other 
action would be taken against her. The record of the employment 
separation states that this was a ``resignation in lieu of discharge.'' 
The employee is not eligible for re-employment at the Laboratory for a 
period of seven years. This matter was handled by the HR and S 
Divisions. I did not become aware of the case until after the employee 
had resigned, and did not have knowledge of the circumstances before 
the check was accepted.
    Upon learning that the employee had resigned and tendered back the 
misappropriated funds, Mr. Walp told HR Deputy Division Leader Philip 
I. Kruger that he may have committed the federal criminal offense of 
obstruction of justice. Mr. Kruger consulted with me and asked my legal 
opinion about whether he had acted inappropriately or had committed the 
federal offense of obstruction of justice by allowing the resignation 
and repayment. I responded that in my opinion there was nothing illegal 
or inappropriate about how Human Resources had handled the matter, and 
that Mr. Walp was wrong in his assertions. By resigning, the employee 
had relinquished any right to file an internal grievance, as she could 
if she had been terminated. The Laboratory had recovered the 
misappropriated money. Nothing prevented law enforcement from going 
forward with criminal charges. The employee had admitted her guilt. The 
Laboratory treated the resignation as an involuntary termination for 
cause, and the employee is ineligible for rehire. The DOE OIG was 
informed of the matter, and the matter was referred to the DOE OIG for 
investigation.
    This event contributed to the erosion of my confidence in Mr. 
Walp's judgment and his ability to interact and communicate effectively 
with personnel at all levels at the Laboratory.
    Media reports have suggested that because these employment 
terminations were not made public, there must have been some attempt to 
cover up their crimes. This allegation is incorrect. The Laboratory, as 
part of the University of California, substantially complies with the 
California Information Practices Act and does not disclose personal 
information, including performance assessments and corrective or 
disciplinary actions, to the general public, except under limited and 
specific circumstances. The Laboratory does not disclose to the general 
public the details of the basis for a termination or information about 
the circumstances leading to a resignation, unless that individual 
authorizes such a disclosure. By not disseminating the circumstances of 
individual personnel actions, the Laboratory is simply observing best 
employment practices and acting consistently with California law.
              purchase card and procurement investigations
    When the Mustang case surfaced, Mr. Salgado instructed me to lead a 
team to conduct an internal review of the Laboratory's purchase card 
program. The team and I collected and reviewed relevant records, 
including purchase card procedures and memoranda from other agencies 
such as the U.S. Navy regarding their own experiences with purchase 
cards.
    As a result of this internal review, the Laboratory instituted an 
immediate corrective action plan to mitigate misuse and abuse. On 
August 23, 2002, Associate Director of Administration Richard Marquez 
ordered specific revisions to the purchase card. The revised procedures 
included new requirements for purchasing authority, review and approval 
of monthly statements and training for cardholders and business team 
leaders. Mr. Salgado and I also recommended to Laboratory Director John 
Browne that an external review team be appointed to conduct a more 
comprehensive review of the purchase card program.
    Director Browne requested University approval for an independent 
review. The University agreed and on August 16, 2002, UC Vice President 
John McTague instructed Director Browne to proceed with the proposal to 
establish an external review team to examine irregularities in the 
Laboratory's purchase card program. The team included auditors from the 
firm of PricewaterhouseCoopers (``PwC''). Former DOE Inspector General 
John Layton chaired the team, assisted by former Department of Labor 
Inspector General Charles C. Masten.
    The team was charged with conducting a comprehensive review of the 
purchase card program. By charter, the external review team was to have 
access to all LANL documents and records. All Laboratory leaders were 
informed to cooperate fully with the team, provide the team documents 
and be interviewed as requested.
    So as not to interfere with the FBI's ongoing investigations, the 
external review team's activities were carefully coordinated with the 
FBI, as evidenced by the numerous communications (meetings, telephone 
calls and correspondence) between the Laboratory and the FBI on this 
subject.
    On August 22, 2002, Mr. Salgado, Mr. Tucker, Mr. Doran and I met 
with the FBI, to inform it about the external review team. We told the 
FBI that the team would be investigating fraud, waste and abuse in the 
purchase card program, including the Mustang case and the purchase of 
tools from G&G, a vendor in Albuquerque. We told the FBI that the team 
would conduct an end-to-end review of the purchase card program and a 
forensic evaluation of whether there had been any misappropriation. The 
FBI was invited to provide input so that its investigation would be 
coordinated with the external review team's investigation. We 
specifically discussed the boxes of documents that had been collected 
from the office of the suspect in the Mustang case and the fact that 
the external review team would review those documents as part of its 
investigation. The FBI agreed that it was appropriate for the external 
review team to review those documents. The FBI requested that the 
Laboratory preserve the documents as they would any other business 
record.
    In September, October and November, there were correspondence and 
meetings between my office and the FBI to establish the external review 
team's interview list and to insure that it did not interfere with the 
FBI's investigation. By letter dated September 11, 2002, FBI Special 
Agent in Charge Andreas Stephens concurred with the Laboratory's 
decision to have the external review team audit purchase card program 
records and, with advance approval, conduct interviews. My office 
provided the FBI with lists of Laboratory employees whom the external 
review team wished to interview and the FBI approved the list, with 
some exceptions.
    Any allegation that the Laboratory was not cooperating with the FBI 
in the investigation of purchase card misuse completely ignores these 
numerous interactions between my office and the FBI. Indeed, Agent 
Stephens specifically expressed his gratitude to me for the 
Laboratory's continued cooperation in coordinating the investigations.
    The OSI was reluctant to permit the external team access to the 
suspect's records, asserting that the records were FBI evidence. Mr. 
Walp permitted PwC auditor Kristin Rivera to examine the documents, but 
under such stringent conditions that it was difficult for the team to 
effectively review the material.
    Eventually, Mr. Layton directed Mr. Masten (himself a former FBI 
agent) to go to OSI and determine whether the records appeared to be 
impounded by the FBI and whether the tape protecting the records was 
FBI tape. Mr. Masten inspected the records and determined that the FBI 
had not taped the records, that they were not FBI records, and that 
they had not been impounded by the FBI. After several phone calls, the 
records were transferred that day to the Office of Laboratory Counsel 
for the external review team to examine there, without restriction.
    Thus, although the external review team did eventually get to 
review the documents it needed, it was only after a prolonged struggle 
with OSI, which appeared to mistakenly believe that its investigation 
work was immune from review and use by Laboratory managers. In my 
opinion, this demonstrates a fundamental misconception by Mr. Walp 
about his job duties and responsibilities. It is also inexplicable to 
me, because I had previously obtained FBI permission to review these 
records, and I had so informed Mr. Walp. This incident was one of the 
final factors that led to my request that Messrs. Walp and Doran be 
removed from their roles as liaison with the FBI.
         the employment terminations of messrs. walp and doran
    Initially, I welcomed the opportunity to work with investigators 
with the backgrounds and experience of Messrs. Walp and Doran, However, 
as I continued to try to work with them on the purchase card and 
related investigations, I became increasingly disappointed and 
frustrated over my inability to secure the cooperation and assistance I 
expected from OSI. I frankly did not understand their reluctance to 
cooperate with what I perceived to be our common goals. Their 
resistance hampered my ability to do my job, which was to provide the 
FBI, the DOE and the University with accurate and timely information 
about possible misconduct, so those entities could make appropriate 
decisions regarding criminal prosecutions, national security, and 
employment matters.
    It was never my purpose or intent to cover up or withhold any 
information, nor to impede the FBI or DOE from investigating any 
misconduct, and I never did so. In October 2002, following a meeting 
with the United States Attorney in Albuquerque, I concurred with Mr. 
Salgado's decision to remove Messrs. Walp and Doran from their roles as 
liaison with the FBI. They did not appear to understand that my office 
had a legitimate interest in obtaining the information necessary to 
determine the Laboratory's legitimate concerns. Instead, Messrs. Walp 
and Doran appeared to view me, the Office of Laboratory Counsel, and 
the purchase card review team as adversaries.
    I did not make the decisions to terminate the employment of Messrs. 
Walp and Doran. However, it is clear that my complaints about their 
assistance and cooperation were important factors in the ultimate 
decision. I provided information and opinions about their performance, 
I expressed my frustration in working with them, I participated in 
discussions about their removal, I reviewed and commented on documents 
regarding their termination, I told Mr. Salgado I could not work with 
them on the assignment he had given me, and I provided legal advice to 
the Laboratory about the risks of terminating their employment.
    Putting aside the concerns that I have expressed regarding the 
performances of Messrs. Walp and Doran, I do recognize that the 
circumstances these men confronted were less than ideal. Upon 
reflection, I realize that we at the Laboratory could and should have 
done more to provide Mr. Walp and Mr. Doran with a better understanding 
of the Laboratory and their roles, including an understanding of all 
the parties with a legitimate oversight interest at the Laboratory, and 
the importance of comity between these parties. If they had been 
provided with adequate guidance regarding the specifics of their job 
duties, perhaps they might have better appreciated the inter-
relationship between law enforcement concerns and national security and 
other legitimate concerns. In retrospect, I believe the Laboratory 
should have attempted to work through the difficulties with Mr. Walp 
and Mr. Doran.
    It has always been my sole intent to preserve and protect the law, 
and to provide my client, the University, with my best legal advice and 
services, to promote and protect the interest of the government in the 
performance of my job, and to uphold the ethics of my profession. I 
have tried very hard to do that, and I believe I have done so.
    Thank you for the opportunity to present my views on these matters.

    Mr. Greenwood. Thank you.
    We thank Mr. Udall for joining us and Mr. Walden for 
joining us as well. The Chair recognizes himself for 10 minutes 
for questions.
    Let me address a question to Mr. Salgado first. Several 
times in your written statement you claim that you had ``no 
knowledge that Walp and Doran had claimed whistleblower status 
and no reason to believe that they had any legitimate grounds 
for doing so.'' I think that is a direct quote.
    During our first hearings on these matters, Mr. Darling 
testified that shortly after the firings he asked you to 
explain why you fired Mr. Walp and Mr. Doran. He told this to 
me, that you said you were afraid that Walp and Doran would 
achieve whistleblower status and that you felt that their new 
status would prevent LANL from firing them within their 1-year 
probationary period.
    Mr. Darling also told committee staff that you told him 
that you suspected Walp and Doran had anonymously sent the 30-
pound box of documents to the Albuquerque Journal and that you 
wanted to stop the leaks so you fired Walp and Doran. Your 
testimony is inconsistent with Mr. Darling's. I would remind 
you that you are under oath here. Do you wish to amend your 
testimony in anyway or can you explain these differences?
    Mr. Salgado. No, I do not care, Mr. Chairman, to amend my 
testimony. Let me address the first issue. The first issue 
dealt with timing. The question by Mr. Darling and his staff, 
as I recollect, during the course of their investigation is 
they wanted to know why was the timing important in the 
process.
    I indicated to Mr. Darling that the discussion about the 
release of Mr. Walp and Doran, they were on probationary status 
and the Laboratory needed no justification to let them go. I 
said that we had had this discussion on their status in the 
early part of September and October timeframe.
    I indicated to him that with the IG coming out and with the 
IG that we at the institution had requested to come out 
pursuant to the article that appeared in Energy Daily about the 
senior management cover-up. I indicated to him that one of the 
reasons for the timing of that was that I wanted to make sure 
that we did it so that it did not appear to be that they were 
being terminated because of a retaliatory component, i.e., 
whistleblower status.
    To this day, sir, I still have no indication, No. 1, that 
they either have claimed and/or are whistleblowers pursuant to 
the instructions of the California sketch or the administrative 
process.
    The second component dealt with, sir, as to the 30-pound 
box of documents. I do not believe that I have ever accused--I 
have ever accused Mr. Walp or Doran of releasing those 
documents. But what I have addressed is I believe that the 
documents that were released, the 30 pounds of pages or 30 
pounds of documents were released did come out of the OSI or 
into that group of which Mr. Walp had supervisor 
responsibilities.
    The issues with those documents were twofold, sir. No. 1, 
that obviously any time that 30 pounds of internal documents 
are released it would be a concern to any institution. Second 
point is I did not know, and still to this day do not know 
whether those documents being released that were, in my 
opinion, in the supervision of that unit within the security 
division had any classified material in them whatsoever. That, 
of course, would be a concern both to this committee and other 
committees at the Hill.
    The second component of that box that was released, it did 
raise issues and concerns to me that I was led to believe, and 
do believe, that that box contained sensitive information 
concerning ongoing criminal investigations that were undertaken 
both internally and externally by the Laboratory.
    Nowhere have I ever indicated that I thought that I would 
personally accuse, as my statement indicates, that either Walp 
or Doran were responsible for the release of those documents, 
though there is a responsibility if the documents came from 
that group.
    Mr. Greenwood. Did you tell Mr. Darling that you 
suspected--I heard you clearly say twice that you did not 
accuse them. Did you tell Mr. Darling that you suspected that 
they were the source of this document leak?
    Mr. Salgado. I believe and my indication to Mr. Darling is 
that out of that unit upon which Mr. Doran was employed and 
being supervised by Mr. Walp that out of that unit it was my 
professional opinion, and I believe supported by other members 
at this table, that is where the information came from.
    Mr. Greenwood. Okay. So you did not accuse them but you did 
suspect them?
    Mr. Salgado. I suspected it was out of that unit. As my 
statement indicate, as prior law enforcement, and I mentioned 
to various staff members, I have not and will not impugn their 
integrity as to releasing those documents. It is not the 
culture of law enforcement and, as a ex-cop, I would not do 
that.
    Mr. Greenwood. And you just raised the issue of the 
possibility of there being classified information among those 
documents. Did you raise that concern with anyone in law 
enforcement or anyone else?
    Mr. Salgado. Yes, sir. I did. Before I left it was an 
issue. I raised it with the University of California. During 
this time things were moving quickly. I personally contacted 
the IG and raised the issue. They were not sure how to handle 
it given 1st Amendment rights and reporters. Then I also 
contacted NNSA and put it in DOE's court basically to assume 
any responsibility for follow-up indications on were there any 
classified documents in there or additional sensitive 
documents.
    Mr. Greenwood. When did you make the decision to fire Walp 
and Doran?
    Mr. Salgado. Actually, Mr. Busboom probably has the better 
dates. The discussion and the decision, I do not have the exact 
date, sir. I really do not. It was sometime obviously after the 
October 24 meeting with the U.S. Attorney and the FBI. It was 
sometime in the first part of November is my recollection.
    There was a decision made for the termination of Mr. Walp 
and Doran. Then it was delayed at least a week plus because one 
of the individuals, I believe, had gone on vacation so we 
backed that up a week.
    Mr. Greenwood. Who participated in making the decision to 
fire these two gentlemen?
    Mr. Salgado. There as a meeting, I believe, that took place 
between myself and Mr. Dickson. I believe Mr. Busboom was 
there. I believe that Mr. Holt was there and I believe that Mr. 
Marquez was at the meeting when the discussions took place 
about, No. 1, the underlying reasons for the terminations and, 
No. 2, the process that should be engaged in.
    Mr. Greenwood. Who drafted the letter that ultimately went 
to them?
    Mr. Salgado. There was a draft letter that was proposed out 
of my office that accumulated the information from various 
components of the Laboratory. That draft letter was sent 
through the chain of command through Mr. Holt down, I believe, 
to Mr. Busboom. Mr. Busboom deleted some areas and added 
additional facts in that letter and I believe that is the final 
document that went forward, if I am not mistaken.
    Mr. Greenwood. Did you have conversations with Mr. Busboom 
about whether or not he should sign that letter?
    Mr. Salgado. Whether he should sign the letter? I do not 
believe that I had conversation with Mr. Busboom about if he 
should sign that letter.
    Mr. Greenwood. Okay.
    Mr. Salgado. I do not recall.
    Mr. Greenwood. What conversations did you have with Mr. 
Dickson regarding the November 20 letter?
    Mr. Salgado. If it was the November 20 letter, there were 
conversations that took place in a general form. I believe that 
the draft letter that was submitted was vetted through the 
appropriate individuals that had input into the letter and the 
meeting that we had with a discussion over the termination.
    Mr. Greenwood. Did you have conversations with Dr. Browne 
about this matter?
    Mr. Salgado. Yes, sir.
    Mr. Greenwood. Could you describe those conversations for 
us?
    Mr. Salgado. Yes, sir. My recollection is that after we had 
the meeting when there was the decision made about the 
termination of the individuals. I would like as a sense of 
background to backup that the first part in the October/
September timeframe I had a discussion with Mr. Holt through 
the associate director and Mr. Busboom of trying to get to a 
reasonable position of a path forward for Walp and Doran to see 
whether or not their tenure within the Laboratory could be 
successful. Subsequent to that I had asked--I did ask them to 
make a determination whether they were going to keep them or 
not.
    After the Dr. Browne conversation, as I recollect, it took 
place in an evening. Mr. Dickson was there with myself. We had 
a discussion about the reasons, the rationale for the 
terminations. That was in the evening. We went through what I 
have articulated partially in my statement.
    Mr. Greenwood. You made the statement that there seemed to 
be an attitude among various lab managers that they were 
playing with, these are your words, Monopoly money. What do you 
mean by that?
    Mr. Salgado. I want this to come across. I was brought to 
the lab--as I indicated in my oral statement, there was an 
awareness by the director of the Laboratory, John Browne, that 
the transformation of this Laboratory was important. There were 
cultural issues to deal with at the institution, sir. These are 
cultural issues that maybe some would like to believe started 
with me but they did not. They go back 30, 40, 50, 60 years.
    What I am saying now before this committee I have said to 
every senior manager at the institution. I have said it to the 
University of California. I have said it in training classes 
and I have said it to NNSA.
    The Laboratory had a culture, in my opinion, that the money 
that the taxpayers give them, a fiduciary relationship that we 
should have with the taxpayers, was not treated in an 
appropriate fashion. At times it was treated like Monopoly 
money, play money. It was part of the theme of trying to 
transform and change the management of the institution. Again, 
what I am saying today----
    Mr. Greenwood. Let me understand what you mean by that. Do 
you mean that it was spent with disregard to its value? That 
managers paid too much for things? That managers bought things 
that weren't necessary?
    Mr. Salgado. Yes.
    Mr. Greenwood. Does that include concern about taking 
personal possessions of property? Does it include a culture 
that includes--are you describing a culture in part that has to 
do with misappropriating Federal property for personal use?
    Mr. Salgado. No, it is not. This is where it is a delegate 
balance. Let me, if I might, because I know it is important to 
the committee and it is important that I be reasonably clear. 
There is a fiduciary relationship and the relationship that 
deals between the taxpayers and us to spend their money is one 
that it should be spent efficiently and effectively in the best 
manner possible.
    That leads us into a gray area of activity. If you move 
into a new office you use the furniture that is there or you go 
off and have a brand new set of furniture and design furniture 
put into your office. It means to me the fact of the matter is 
when I came to the institution little things like if you are 
going to have food delivered, do you know how much it is 
costing you to do these things. The question of meals at the 
institution. The question of gray areas.
    Again, I have said this to everybody up front. The question 
of if we have a great safety record, is it efficient and 
effective to spend $15,000 to buy ourselves shirts. That is the 
type of thing that I am addressing, Mr. Chairman. It is a 
mindset and it is a culture that has existed, I believe, at 
that institution since Oppenheimer and Graves established it. 
It is important because the world changed.
    The executive branch, the legislative branch, and the 
taxpayers of this country expect more. They do great science. 
They do great engineering but we need to do it effectively and 
efficiently. I have lectured on this issue of Monopoly.
    In fact, one particular time I paid out of my own pocket, 
bought a Monopoly game and laminated it and I was going to hand 
it out to managers to try to raise the awareness of this fiscal 
responsibility and this fiduciary relationship. I think it 
underpins and undermines our credibility as an institution and 
does a disservice to the taxpayers.
    Mr. Greenwood. Let me understand one other thing because 
you made a comment that could be considered as controversial 
about others who have described a culture that included in that 
description harsher charges about personal misappropriation of 
funds and materials.
    You referred to those kind of comments as being racially 
profiling of Spanish Americans, I think you said. I am trying 
to understand how it would be that describing a culture as you 
have is different than describing the culture as others have 
and why one is a racial matter and one is not.
    Mr. Salgado. Well, do the racial component of ``greening of 
the valley,'' the valley itself has been well defined as the 
Hispanic population that primarily is in support service of the 
institution. That has a racial connotation to is.
    The ``greening of the valley'' as I interpret the phrase, 
No. 1, is in connection with a culture of theft which there is 
not at the institution. I respectfully will believe that 
sincerely. There is not a culture of theft. The ``greening of 
the valley'' on the assumption of the culture of theft is that 
there is a nexus between that and the drug activity in the 
valley which is, in my personal opinion, tantamount to racial 
profiling.
    The distinction I am making, Mr. Chairman is the fact that 
the culture that I have talked about, the culture of this lack 
of a sense of fiduciary relationship is not for personal gain 
of individuals. It is not that people are buying computer and 
taking them home for their children. But it is a culture by 
which I think people have failed to release that they are--
there is a responsibility of the institution to effectively and 
efficiently spend those dollars.
    Hypothetically if it is costing $15,000 to buy everybody 
shirts because we did a great job, that may be a morale issue 
but is that what the taxpayers expect of us to do, particularly 
if it is not pursuant to our contract and is that mindset--our 
meal policy and things of that nature.
    I mean, there are constant issues here of that issue and 
trying to change to the mindset. When you sign off on something 
to pay for it, are you doing with a mindset that you do have 
that relationship and that responsibility. That culture has not 
been there. It is not a criminal culture but it is culture that 
has to be addressed. Dr. Browne has noted it. It was part of 
Dr. Browne's vision of where this Laboratory had to get to.
    But there is a distinction, sir, between a criminal culture 
of theft and stealing and taking money and doing those things 
as evidence in the TA-33 issue versus what I would call this 
area of this lack of real awareness of our fiduciary 
relationship. As I said, I have said this in front of God, 
country, and everybody at that institution for the 3 years that 
I have been there. I believe it firmly.
    Mr. Greenwood. I think it is not hard to imagine how loose 
fiscal controls that allow the kind of waste and abuse of 
taxpayer's dollars that, as you have described, could slide in 
among those who are so constituted toward personal 
misappropriation because the fiscal controls were not there to 
protect against it. My time has expired. I recognize the 
gentleman, Mr. Walden, for 10 minutes.
    Mr. Walden. Thank you very much, Mr. Chairman.
    Mr. Salgado, I want to pick up on a point of a statement 
you made and just see if I understand it. You said that the 
Inspector General request is one that you made, or your folks 
made, to have the Inspector General come in.
    Mr. Salgado. Yes, sir.
    Mr. Walden. If I heard you right, you said that was after 
the story ran in Energy Daily.
    Mr. Salgado. If I may clarify, there were two requests of 
the Inspector General, the Department of Energy Inspector 
General, the very day, the morning that there was an allegation 
in print concerning that their senior management cover-up or 
criminal activity of the Laboratory.
    I personally contacted Greg Freedman, the IG, seeking some 
advice and council on how to address it. He rightly told me, 
sir, that I could not request an IG investigation. Within an 
hour I contacted Dr. Browne within Washington, DC that was 
going in to meet with the acting administrator for NNSA, 
Ambassador Brooks.
    I discussed the issue with Dr. Browne and Dr. Browne 
immediately made a request that afternoon, the very day the 
article ran, to have the NNSH request the IG on our behalf to 
come in and institute an investigation on senior management 
coverup.
    Mr. Walden. The Energy Daily story, was its genesis clear 
back to the Albuquerque leaks?
    Mr. Salgado. No, sir. I believe the Energy Daily story, as 
far as I know, and some of this is hearsay, was a first letter. 
There was a letter sent out with a series of allegations, an 
anonymous letter. I have never seen the original letter. That 
was the first time that we heard about that. The box of 
documents was subsequently--I believe approximately a week 
later is that I learned that this box of documents.
    Mr. Walden. You believe that the two are connected or came 
from the same individuals or same part of----
    Mr. Salgado. I think they probably came--I have not read 
the entire letter, to be honest, but I believe that the genesis 
and much of the information appears to be in the same vein.
    Mr. Walden. Would it be appropriate to say then that the IG 
request never would have taken place had these stories never 
been leaked or the anonymous letter sent? You would have had no 
reason to ask the IG to come in otherwise?
    Mr. Salgado. I would have had no reason, nor would I have 
believed that there was any coverup or criminal activity going 
on at the institution.
    Mr. Walden. I want to go to the issue of Mr. Walp and Mr. 
Doran. Mr. Doran testified in front of this committee under 
oath about 2 weeks ago that he was advised by FBI agents that 
he worked with in New Mexico. The FBI's relationship with Mr. 
Walp and Mr. Doran was the best relationship the FBI has had 
with the lab in its history.
    I am told in your calendar notes for October 28, 2002, you 
indicate a conversation with the FBI agent, Jeff Campbell, 
where he states, and I quote, ``Steve and Glenn are the most 
professional, etc.'' I am sorry. This is Mr. Busboom. My 
apology. ``Steve and Glenn are the most professional.''
    Additionally, DOJ has advised this committee that to its 
knowledge no law enforcement agency has had any concerns about 
Mr. Walp and Mr. Doran's performance. However, one of the 
circumstances constantly used an example of why Mr. Walp and 
Mr. Doran were fired as the U.S. Attorney and the FBI advised 
the lab, ``Blew the Mustang case.'' Senior management blamed 
Mr. Walp and Mr. Doran for this statement. Did you relay to 
senior management the excellent report given to you by the FBI 
of Mr. Walp's and Mr. Doran's performance, Mr. Busboom?
    Mr. Busboom. Did I relay that particular comment?
    Mr. Walden. To senior management.
    Mr. Busboom. I believe I did. We had a meeting that 
Tuesday. I received that comment, I believe, on a Friday. We 
had a meeting that next Tuesday to discuss the role of the FBI, 
the IG, and our own staff. The FBI, it turned out, was not at 
that meeting, but at that meeting we discussed the need to 
appoint a new liaison. I am certain that it did come up. Yes, 
sir.
    Mr. Walden. How could senior management place the blame on 
them for blowing the case?
    Mr. Salgado. Two things. I think, first of all, that--
first, in fairness, I will indicate in the October 24 meeting 
that I requested, and that was the FBI and the U.S. Attorney, I 
was personally advised by Jeff Campbell, not by his 
supervisors, that he was very comfortable and felt that Walp 
and Doran were doing a competent job. That was on the 24th. I 
don't recollect the meeting that Mr. Busboom engaged in.
    Mr. Walden. So you both heard basically the same thing from 
the FBI.
    Mr. Salgado. I heard that from Jeff Campbell, the agent in 
charge, that had the day-to-day liaison going forward, No. 1. 
The issue of the case being blown was an issue that was raised 
in passing during a whole series of other activities taking 
place at the October 24 meeting between myself and the U.S. 
Attorney and the FBI. It was a statement made not by the FBI. 
It was a statement made by the U.S. Attorney. I never pursued 
what was actually meant by that statement given the other tenor 
of the conversation that was taking place on some other 
matters.
    The U.S. Attorney merely looked at me and said, ``You, the 
Laboratory, blew the case.'' That was essentially what they 
said. It has been--I am not sure whether I--I do not know if I 
ever put credence in part of the issues of the termination of 
Walp and Doran on that particular aspect.
    Mr. Walden. If you have got somebody telling you that you, 
the lab, blew the case, did you ask for specifics? What they--
--
    Mr. Salgado. No. I am sorry.
    Mr. Walden. My natural reaction would be, ``What do you 
mean we blew it? How did we blow it? Tell me more.'' Did 
anybody ask that of them?
    Mr. Salgado. No. At that particular time we were engaged in 
a series of other activities. That was minor in passing. It was 
really dealing with whether or not the FBI that had assumed the 
Mustang case, whether they were going to pursue this or whether 
we were going to take it and refer it to the IG or local law 
enforcement officials.
    We tried to get to closure on several issues at that 
meeting. One of them was, ``Either you are going to decline the 
Mustang case or not.'' They indicated they were going to 
decline the Mustang case after a brief conversation given the 
facts of the case, the evidence in the case, and the lack of 
criminal history on proposed suspect.
    The declination with an offhand comment that the U.S. 
Attorney said, ``We are not going to pursue the case because A, 
B, C. Besides that, you blew the case.'' To be honest, 
Congressman, we moved on to some other areas that were of much 
more importance to us at that particular date and time.
    Mr. Walden. I want to go to the issue of Mr. Walp's 
termination because I got a copy of his performance summary 
that was done here that I understood was supposed to be done by 
July that was actually conducted, I believe, in October. Is 
that correct?
    As I look at it, and I am not familiar with these, but if 
you go through it says, ``Implement ISSN, 100 percent effort 
effectuated. Safety performance, 100 percent effort. Human 
capital, 100 percent effort. Walk-arounds, 100 percent 
accomplishment. Employee communications, over 100 percent 
accomplishment. Effective cost schedule management, 100 percent 
attainment. Financial management, 100 percent attainment. Time 
management, office leader visible to all SI personnel on a 
daily basis.'' It is a pretty positive finding. Is it not?
    Mr. Busboom, did you do the evaluation?
    Mr. Busboom. Yes, sir, I did, in conjunction with my 
deputy, Mr. Tucker. I believe I did sign it, yes.
    Mr. Walden. I understand this is supposed to be for the 
first 6 months but if you are doing it in October, were there 
issues on your mind then about performance that would differ 
from this?
    Mr. Busboom. At that time the answer is yes, sir. That 
report closed out on July 31 as did every other employee in the 
lab. That is the normal cycle. Then there is a period of time 
while salaries are considered before the information is 
actually present to the employee.
    That was presented to Mr. Walp in late September of early 
October, but the closeout period was for July 31. It is a very 
positive report. The overall rating, I believe, is an eight. 
That was consistent with his peer group. That was an average 
score within his peer group.
    Mr. Walden. And that is on a scale of one to 10?
    Mr. Busboom. That is correct. The managers tend to get 
higher aggregate scores.
    Mr. Walden. It is a good report, sir?
    Mr. Busboom. Yes, sir.
    Mr. Walden. He also got a $5,000 year bonus or raise or 
something at that point?
    Mr. Busboom. He received a pay raise and it is not a bonus. 
It was a pay raise consistent with that score during that 
salary exercise. Yes, sir.
    Mr. Walden. What happened between then and when he was 
dismissed that turned this all upside down? Something must have 
gone dramatically different the following couple of months. 
Right?
    Mr. Busboom. Yes, sir. As I have noted in my testimony, it 
was first brought to my attention in mid-September that for the 
previous few weeks there had been an ongoing dispute between 
some of the outside auditors, our own legal counsel, and our 
staff, OSI, which includes Mr. Walp and Mr. Doran.
    The principal matter was about access of records and 
information by a PricewaterhouseCoopers group. That had been an 
issue of great discussion and great debate between my staff, 
our own legal counsel, and the forensic auditors who were on 
the ground.
    Mr. Walden. My time has expired. Thank you, sir.
    Mr. Greenwood. The gentlelady from California, Ms. Eshoo, 
recognized for 10 minutes.
    Ms. Eshoo. Thank you, Mr. Chairman. Once again, I 
appreciate your extending legislative curtesy to me to take 
part in these very, very important hearings relative to the 
University of California and the operation of the labs. I 
appreciate it.
    I would like to begin by just asking each one of you how 
long you have served at the lab. Mr. Busboom.
    Mr. Busboom. Yes, ma'am. I have been at the lab for 6 
years.
    Ms. Eshoo. Six years?
    Mr. Salgado. Three years, 3 months.
    Mr. Dickson. Twelve years.
    Ms. Eshoo. Twelve. Can anyone of you give me the short 
version of why Mr. Doran and Mr. Walp were fired? I have heard 
a lot of references so far today but there isn't anything that 
is clear about it. What was it that they had done that merited 
firing?
    Mr. Salgado. I accept the responsibility for that.
    Ms. Eshoo. I know you do, but what was the reason for it?
    Mr. Salgado. The reasons were primarily two fold. No. 1, 
they were in a probationary period when it was time for the 
institution to make----
    Ms. Eshoo. I have people that serve on my staff that are in 
a probationary period but that is not the reason. You don't use 
that as a reason to fire someone.
    Mr. Salgado. I am just setting the background, if I might. 
The reasons were two fold essentially. First of all, through 
the period of time of the intense--from the July period to the 
November period of time there was incomplete, inaccurate 
information that was being provided to the University and the 
Laboratory needed upon which to base sound judgments affecting 
both personnel activities and natural security issues.
    Ms. Eshoo. All right. Let me ask this as a follow-up to 
that, Mr. Salgado. You talked about shirts, shoes, food, and 
furniture. Other than thinking about laminating Monopoly 
dollars, and firing the whistleblowers, what did each one of 
you accomplish on your watch for this culture that you oversaw? 
I mean, it seems to me that your testimony today reminds me of 
someone from the outside looking in rather than people that 
were in charge, even though it is after the fact because you 
are gone and there has been a reduction in your salary. How 
much is your salary now?
    Mr. Busboom. I was told last week. I was given a form 
saying it was $140,000.
    Ms. Eshoo. During your time did you oversee and route out 
of this culture that you refer to?
    Mr. Salgado. Well, first and foremost was----
    Mr. Greenwood. Mr. Salgado, could you move forward and use 
the microphone?
    Mr. Salgado. Sorry, sir. I apologize. I was thinking. No. 
1, I think that Dr. Browne and myself commenced a 
reorganization of the institution to put lines of authority and 
responsibility in place.
    Ms. Eshoo. Did it go past an organizational chart into 
actual effectiveness to route out the things that you have come 
here and referred to today? Obviously you had a knowledge of it 
because you are referring to it.
    Mr. Salgado. Yes. I believe those things were put into 
place a year ago and those are part of the transition.
    Ms. Eshoo. When you say put into place, what does that 
mean?
    Mr. Salgado. That means that----
    Ms. Eshoo. On paper?
    Mr. Salgado. No. That the institution was reorganized. The 
roles and responsibilities and lines of authority were changed. 
There were movements of divisions in various activities.
    Ms. Eshoo. And what was the result of what you were just 
referring to, though?
    Mr. Salgado. Well----
    Ms. Eshoo. How did the credit card--how could a credit card 
be used for the kinds of things that have obviously become more 
than public? And when you refer to reforms, what are you 
referring to? What are the specifics?
    Mr. Salgado. I am getting a little bit lost. On the credit 
card issues, once those issues were basically brought to the 
attention of the institution, several things occurred 
immediately.
    Ms. Eshoo. Don't refer to the institution. You are 
referring to the institution like it is a glob. There were 
people that were paid taxpayer money to run this place. Now, 
you have come here and you have outlined, as I said, shirts, 
shoes, food, furniture, laminated--you have made a reference to 
all of that. What did you do on your watch? In my view, not 
very much. Otherwise, we wouldn't be here. But I want to give 
you an opportunity to tell me. What did you root out?
    Mr. Salgado. When the purchase card activity surfaced, No. 
1, I personally contacted, No. 1, the--on the purchase card 
activity I personally contacted the former IG to basically 
bring an external group in to help us basically look at the 
process procedures and to root out those activities that you 
have addressed. I notified the IG of the Department of Energy 
of a process----
    Ms. Eshoo. I need to interrupt because I only have 10 
minutes and I am a guest of the subcommittee. My observation so 
far is that you were very adept at knowing who to call outside 
the institution, as you refer to it. But there is a dereliction 
of duty here. You have more than made reference to what you 
knew to be wrong, except you didn't do anything about it.
    Now, maybe it is looking over your shoulder but I don't 
know what was rooted out. I think that the public light that 
shines on this is a very important one because it then is 
instructive in terms of what needs to be done. I appreciate the 
fact, Mr. Salgado, that you have come from a law enforcement 
background but this sounds like the Keystone Cops to me. Now, 
lab employees describe a culture of fear. Now that you are on 
your way out do you have any comments about that?
    Mr. Salgado. Well, if I may, first of all, I would address 
the fact that we did do things and we were proactive and 
aggressive.
    Ms. Eshoo. I don't know what they are, though, because you 
are not able to be specific.
    Mr. Salgado. Well, if I could submit it for the record 
then, I would ask that I be allowed to submit for the record 
those proactive things in the transformation of the 
institution, the reorganization, putting lines of authority and 
accountability in place, and bringing in people to basically 
help us----
    Ms. Eshoo. I need you to answer my question, though, 
because you are on my time here.
    Mr. Salgado. Okay. I am sorry. I apologize. Is the question 
on my way out of a culture of fear?
    Ms. Eshoo. Been stated by employees.
    Mr. Salgado. I have heard that from the day I got there.
    Ms. Eshoo. Do you agree or disagree?
    Mr. Salgado. I agree that there is a perception of a 
culture of fear.
    Ms. Eshoo. No. Do you believe that is a truthful statement? 
And, if not, you can say you don't agree.
    Mr. Salgado. I believe that the people who have made that 
statement believe it to be true.
    Ms. Eshoo. You believe it to be true?
    Mr. Salgado. No. I believe that the people that made that 
statement, they believe it to be true, that there is a culture 
of fear.
    Ms. Eshoo. I would think that they believe it to be true, 
too. That is not what I am asking you. I am asking you if you 
find that statement to be correct. If you don't, say so.
    Mr. Salgado. I do not agree.
    Ms. Eshoo. Okay. That is enough.
    Mr. Busboom, do you have reflections about this statement?
    Mr. Busboom. Yes, ma'am. Certainly we moved forward in the 
OSI office to address these issues by, first, establishing the 
office, as Mr. Deutsch read in his opening statement. Second, 
we doubled the staff there within that 1 year and we added many 
hundreds of thousands of dollars in budget. I do believe we 
were on our way in terms of the security participation. .
    Ms. Eshoo. Was there ever anything--this is, I think, a 
question that is on many individual's minds. When you met with 
Mr. Doran and Mr. Walp, did you find anything in their work 
that was laudatory or did you just think that they didn't know 
what they were talking about? Was there anything that you said, 
``Well, one out of 10 we agree with you and we are going to 
pursue this.''
    Mr. Busboom. There were certainly positive things, yes.
    Ms. Eshoo. There were positive things. Did any of you ever 
follow up on them?
    Mr. Busboom. I followed up on the positive part, certainly. 
I wrote that report that said that Mr. Walp had done a good job 
in organizing the new office.
    Ms. Eshoo. Was there any dissension between the 
decisionmakers on the firing? Was there kind of a minority 
view, so to speak, or were you all in agreement with each 
other?
    Mr. Deutsch. I supported the decision, or did not oppose 
it.
    Ms. Eshoo. Mr. Salgado?
    Mr. Salgado. I supported it.
    Ms. Eshoo. You supported it. Mr. Busboom?
    Mr. Busboom. I supported it after--it is Busboom. Thank 
you. I supported it after the discussions that I had with by 
boss and his deputy and with chief legal counsel and Mr. 
Salgado.
    Ms. Eshoo. Mr. Salgado, you testified that the lab 
essentially can be improved. Now, obviously you are gone. Do 
you have some clarity around what the reforms should be? Any of 
you?
    Mr. Salgado. The answer is yes. I think the University of 
California needs to address its governance model, No. 1. And I 
think, No. 2, the fact of the matter is that the process, 
believe it or not, in the systems that are being put in place 
need to continue. The change of culture of an institution does 
not take place over night. That culture of that institution it 
will probably take 2 to 3 years moving on a forward path of 
aggressive change.
    Ms. Eshoo. I think if we keep observing culture and don't 
do something about it is why it doesn't change. That is my own 
take on it.
    With that, I see that my time has been used up. Thank you, 
Mr. Chairman. Thank you, gentlemen.
    Mr. Greenwood. The Chair thanks the gentlelady from 
California and advises you we will do a second round and I will 
begin that second round now.
    There is at tab 47, and if the staff would hand it to Mr. 
Salgado. Tab 47 is an e-mail written by Jo Ann Milum to James 
Holst at the University of California. It is dated December 11, 
2002. This is 15 days after Walp and Doran were fired. Its 
subject line reads, ``Rationale for terminations.'' I am going 
to ask Mr. Salgado, can you tell us who Jo Ann Milum and James 
Holst are?
    Mr. Salgado. Jo Ann Milum----
    Mr. Greenwood. Milum?
    Mr. Salgado. Milum.
    Mr. Greenwood. I am going to ask you to sit forward.
    Mr. Salgado. I am sorry, sir. Jo Ann Milum was my chief of 
staff previously and then took over as executive staff director 
for the Office of the Director.
    Mr. Greenwood. Which position was she on December 11?
    Mr. Salgado. She was the Executive Staff Director for the 
Office of the Director. In all candor, sir, she was also my 
Chief of Staff when I was at the Department of Energy so there 
is a long history there.
    Mr. Greenwood. Okay. Mr. Holst?
    Mr. Salgado. Mr. Holst is the General Counsel, I believe is 
his title, for the University of California, Office of the 
President and is a direct line supervisor for Mr. Dickson.
    Mr. Greenwood. Okay. So why would she send this e-mail to 
Mr. Holst, do you think?
    Mr. Salgado. To be honest, sir, I don't know. I mean, I am 
assuming that it was requested by somebody. ``Per your 
request'' it says so I am assuming that Mr. Holst requested 
some information to be provided. That is my supposition.
    Mr. Greenwood. Okay. Among the rationale for the 
termination of probationary employees Walp and Doran, there is 
an allegation that Walp and Doran failed to follow up on the 
Mustang case in a timely manner. Mr. Walp, however, first 
learned of the case on July 25, 2002 a week after the BUS 
division first learned of the case. The FBI took over the 
investigation on July 29, 2002. During a 4-day period before 
the FBI opened its investigation into the matter, how did Walp 
and Doran fail to follow up on the Mustang case?
    Mr. Salgado. I can't say in that context that they failed 
to follow up. There were other issues with the Mustang case 
that were of concern to us but on that particular issue. For 
the record, there was a meeting. The second time they met I 
directed Mr. Walp to go to Arizona to follow up on that case.
    The case was taken away from Mr. Walp and the FBI assumed 
investigation of the case and told us we were not to send 
anybody there to follow up on that part of the investigation. 
As to wording, I am not sure. There were other issues in the 
Mustang case but in that short period of time Mr. Walp agreed 
to go to Arizona. It was terminated by the FBI and they took 
over the case. Am I making myself clear?
    Mr. Greenwood. I am not sure that you are. If you had a 
case for 4 days--am I accurate when I say that Walp and Doran 
had responsibility for this case for 4 days?
    Mr. Salgado. I don't know the time, sir. I really don't. I 
am assuming but I don't know when the case came to them or 
anything.
    Mr. Greenwood. Mr. Busboom, can you shed light on that?
    Mr. Busboom. That sounds correct, sir. I think July 25 was 
the day it was reported. As far as July 29 being the date the 
FBI took over, I couldn't say from memory.
    Mr. Greenwood. The e-mail says that among the things that 
they did were foot dragging on the Mustang case. Now, I am not 
sure but how much foot dragging can you do in 4 days?
    Mr. Busboom. Me, sir?
    Mr. Greenwood. Yes, Mr. Busboom.
    Mr. Busboom. Again, I do not know if July 29 is the second 
date. I haven't seen this e-mail before so this is the first 
time I have read it.
    Mr. Greenwood. Do you think he dragged his foot on this? Do 
you think Walp and Doran dragged their feet, all four of them, 
in 4 days? Isn't it the case that your office was informed 
about this case in September of the year before?
    Mr. Busboom. Of the Mustang case?
    Mr. Greenwood. Yes.
    Mr. Busboom. No, sir. That is not correct.
    Mr. Greenwood. I am sorry. The Bussolini case. When did 
your office become aware of that matter?
    Mr. Busboom. The TA-33 case?
    Mr. Greenwood. Yes.
    Mr. Busboom. I became aware in July 2002. Subsequent to 
that----
    Mr. Greenwood. When were your employees aware of it?
    Mr. Busboom. Subsequent to that I have seen memoranda, two 
memos, that talk to someone knowing about it as early as fall 
of 2001.
    Mr. Greenwood. When was action taken?
    Mr. Busboom. When was action taken, sir?
    Mr. Greenwood. Yes.
    Mr. Busboom. Again, according to the memoranda that we have 
on file, the person who knew about it in 2001 did call the FBI.
    Mr. Greenwood. When?
    Mr. Busboom. In September 2001.
    Mr. Greenwood. Okay. And did anything happen as a result of 
that?
    Mr. Busboom. I don't know, sir.
    Mr. Greenwood. Mr. Salgado, do you know the answer to that 
question? Mr. Dickson, do you know the answer to that question?
    Mr. Dickson. I don't believe anything happened.
    Mr. Greenwood. That employee is still there. Is that right?
    Mr. Salgado. My understanding that it is and that your are 
correct, sir, that as far as I know that there was a 
notification made to the FBI and that nothing happened after 
that internally.
    Mr. Greenwood. Here is what I am trying to reconcile. Okay? 
An employee of the Laboratory is aware that it appears that two 
other employees of the Laboratory are ordering tens of 
thousands of dollars of personal camping, hunting, sporting 
equipment and hoarding it in a bunker somewhere.
    How many months go by between the time that people at the 
lab become aware of this issue and something is ultimately done 
to propagate this case and to take some action on this case? 
How much time goes by?
    Mr. Salgado. As far as I know, it was until the FBI in July 
2000.
    Mr. Greenwood. Mr. Salgado, would you sit forward, please?
    Mr. Salgado. As far as I know, it was not until Mr. 
McDonald went to the FBI personally in the year 2002. It was 
between September 2001 and July 2002 that any active 
investigative component----
    Mr. Greenwood. Let us call that 10 months. Ten months go by 
in that case and nobody is fired for foot dragging. Four days 
go by in the Mustang case and we have got to get rid of these 
guys for dragging their feet and blowing the case. Can you 
understand how that looks to us? Can any reconcile--why should 
we not look at that and say we have got two extraordinarily 
different standards here.
    In one case we are acutely aware--people at the lab are 
acutely aware of what appears quite obviously to be thievery. 
Ten months go by before anything happens. In another case, Walp 
and Doran come into town and you give them the Mustang case and 
4 days later you accuse them of dragging their feet, blowing 
it. How can you reconcile those two matters? Anybody? Mr. 
Busboom?
    Mr. Busboom. I wouldn't attempt to reconcile it for you, 
sir. I haven't seen this e-mail so I wasn't familiar with this 
logic here. I will say on the other case that I have been told 
after the fact that the FBI was immediately notified. My deputy 
told me that the information was----
    Mr. Greenwood. Was a record made of that initial contact to 
the FBI? Is it possible to document it that, in fact, the FBI 
was, indeed, notified?
    Mr. Busboom. The only thing I have seen, sir, were 
memoranda written after the fact.
    Mr. Greenwood. Written after the fact.
    Mr. Busboom. That is correct, sir.
    Mr. Greenwood. Mr. Salgado, can you understand how we 
would--is that the standard procedure? If you contact the FBI 
about a matter as serious as that, is it standard procedure at 
the lab to not make any contemporaneous record of that contact?
    Mr. Busboom. I would have expected a contemporaneous 
record. I have not seen one.
    Mr. Greenwood. Okay. Have you asked the individual why it 
was that he did not make--how he reconciles his statement after 
the fact that he notified the FBI in September with the fact 
that he made no record of that contact?
    Mr. Busboom. Yes, sir. We certainly did ask that question. 
Mr. Salgado asked us in October who knew what when and I 
personally was sent off by Mr. Salgado to get that answer. That 
is when the memoranda were written. One was written in October 
by Mr. Walp which outlined who, what, when.
    It referred to a second memorandum written by Mr. Sprouse 
in July of that year which had similar information. Mr. 
Sprouse's version of it was that it was, indeed, turned over to 
the FBI but they were extraordinarily busy with September 11 
stuff because that is exactly when it was reported and nothing 
happened.
    Mr. Greenwood. I am just waiting for someone to explain to 
me how you can look at the 4 days of responsibility that Walp 
and Doran had on the Mustang case and say they dragged their 
feet and they blew the case. What did they specifically do 
wrong in those 4 days, Mr. Salgado?
    Mr. Salgado. I have never said that they blew the case, No. 
1. No. 2, I don't know anything about dragging their feet in 
this arena. I may have seen e-mail before. I don't recollect 
it, to be honest with you.
    Mr. Greenwood. What did they do wrong in the Mustang case?
    Mr. Salgado. I think in the Mustang case there was a series 
of issues in the Mustang case that were difficult for us to 
deal with which was tied itself to misinformation, inaccurate 
information.
    Mr. Greenwood. Provided by Walp and Doran in 4 days?
    Mr. Salgado. In my opinion, provided by Walp and Doran in 4 
days and the continuing period of time in which there were 
further engagement, No. 1.
    Mr. Greenwood. Be specific. What misinformation did they 
provide?
    Mr. Salgado. There was----
    Mr. Greenwood. I am going to ask you to sit forward. I am 
going to have to tie your chair forward.
    Mr. Salgado. May if I move this, a little bit. There were a 
series of issues, sir, that dealt with it. There were things, 
and Mr. Dickson has probably a little bit more of the details, 
but there were issues about where the vehicle was to be 
delivered, who lived at the location, were the names the same 
or were they not the same, was there----
    Mr. Greenwood. And this was all the information that was 
gathered during that 4 days?
    Mr. Salgado. I am not sure. As I indicated to you, sir, 
there were issues of inaccurate and incomplete information that 
was delivered both within the 4 days and beyond because there 
was a continuation of information.
    Mr. Greenwood. Mr. Dickson, can you shed any light on this?
    Mr. Dickson. I do not subscribe to the notion that there 
was foot dragging with respect to the Mustang case. That was 
not the complaint that I had made.
    Mr. Greenwood. My time is up but, Mr. Salgado, you just 
testified that the sender of this e-mail, Milum, is someone who 
have known for a very long time.
    Mr. Salgado. Yes.
    Mr. Greenwood. They have worked closely with you. Are you 
aware that she says they were foot dragging?
    Mr. Salgado. I am aware now.
    Mr. Greenwood. You were not aware until this moment?
    Mr. Salgado. Sir, I really don't remember looking at that 
e-mail. I may have but I don't remember that. I really don't.
    Mr. Greenwood. Would you concur that they dragged their 
feet?
    Mr. Salgado. On the Mustang case? No. There was not a foot 
dragging in the Mustang. There was a lot of issues surrounding 
that case but foot dragging is not how I would describe it.
    Mr. Greenwood. The gentleman from Washington is recognized.
    Mr. Walden. Oregon.
    Mr. Greenwood. Oregon. I am sorry.
    Mr. Walden. One of those northwest states. Thank you, Mr. 
Chairman. Mr. Dickson, I want to have you refer to Tab 87 which 
is an e-mail from--the sender says [email protected]. 
It is addressed to you, Mr. Busboom, and to Mr. Tucker from 
Kenneth Schiffer. I want to read it for the record.
    I says, ``Subject: IG. FYI I was called this morning by 
Peter Schleck from the IG's office in the Forrestal. He made an 
appointment to meet with me on 12/17/02 to discuss my knowledge 
of the issues surrounding Walp and Doran. I proposed to limit 
my remarks to the documentation I have from 8/00 concerning 
meetings we held with the Bureau and LAPD regarding the issue 
of lost/theft of lab property.
    The thrust of my message would be to point out that as 
early as 8/00 the lab surfaced this problem to law enforcement 
and worked with them to address it. This was not something 
``new'' which Walp and Doran discovered. I recollect also that 
I mentioned this meetings to Glenn when he was hired and 
provided him with a general background of the meetings we had 
had.
    I also recall saying this was not a simple matter and that 
there were sensitivities Glenn would have to consider when 
moving forward with it. I further explained my role in the 
matter. Let me know how this sits with you all. Ken.'' Mr. 
Dickson, I guess the question I have, it would appear from an 
outsider that maybe Mr. Schiffer is trying to get the story 
straight about what you and Mr. Busboom and Mr. Tucker should 
tell the IG. Doesn't this e-mail seem a little odd to you from 
a legal standpoint?
    Mr. Dickson. No, it actually does not, Congressman Walden. 
It is not uncommon for Mr. Schiffer in particular, and some 
others around the Laboratory, who are going off to become 
involved in some interview or something to just give me a heads 
up about what they are dong.
    I remember this e-mail. I never responded to it. I never 
talked to Mr. Schiffer about it. He is an experienced FBI agent 
and for some reason or the other from time to time if he is 
doing something, he will just let me know what it is I guess on 
the theory that if I hear about it, I will at least know what 
is going on. There is no effort on his part, as best I can 
remember, to ever clear anything that he is trying to do with 
me, or to ask for my input as to what he ought to say.
    Mr. Walden. Mr. Busboom, did you respond?
    Mr. Busboom. I don't recall if I responded but I certainly 
did get this e-mail. I have seen this. Yes, sir.
    Mr. Walden. What about the concept that the IG's interviews 
are confidential? Doesn't this raise an issue with that? Tell 
me how the IG process works. Maybe I don't understand. I 
thought it was supposed to be confidential.
    Mr. Dickson. Mystically. I am not aware and was never told 
by the IG that their process was confidential. I have looked at 
the IG orders and have not seen anything that suggested 
confidential. If it is confidential, I did not know about it 
and was not instructed that way when I was interviewed by the 
IG myself.
    Mr. Walden. Do you know, to the best of your knowledge, did 
Mr. Tucker respond to this e-mail?
    Mr. Dickson. No, I don't know.
    Mr. Busboom. I don't know, sir.
    Mr. Walden. You don't know? All right. Mr. Salgado, I want 
to go into the issue of the stolen items because you have taken 
offense to the concept of the ``greening of the valley'' or 
whatever. I have never been there. I don't have a clue but I 
watched the digital pictures they displayed here for us of the 
equipment the chairman referenced that was allegedly stolen 
equipment and all of that.
    As a taxpayer I get kind of upset about that. We have heard 
also reports of some $800,000 in hand tools being purchased 
from a sole source contractor, an individual. I don't know if 
that is still under investigation or not but it is a little 
difficult to understand.
    You state in your testimony that Los Alamos is not a den of 
thieves who are keeping the valley green. We know that the 
majority of lab employees are honest people. I fully believe 
that. That is generally the case in most organizations.
    But can you explain why our staff can go through 
procurement records and in a few hours find purchase after 
purchase of knives, camping gear, sleeping cots, top of the 
line Gore-Tex camping gear, auto equipment, and many other of 
what would appear to us to be obviously personal purchases that 
the Laboratory and the Federal Government have paid for. I have 
got a list here that the staff has provided me of card 
transactions for Boundary Waters tent. It is Tab 136 if that 
would be helpful.
    While you're looking that up, I want to give you a couple 
of examples that we received just last night. These purchases 
do not involve any of the people whose names have already been 
in the press. Tab 136 there are photos included for your 
viewing convenience.
    This is just for one vendor of camping supplies. Let us 
start with $1,435 Boundary Waters two-person tent. We can go on 
to the hunting knife sharpener, two bought in a month. There is 
my personal favorite, a pet heating pad for $119.99. Women's 
lined slippers, apparently necessary at the lab, as are 
GameView digital cameras which can sense game hundreds of yards 
away. This just goes on and on. These are pretty obvious ones. 
Did you find it, Mr. Salgado?
    Mr. Salgado. I have the chart. For clarification of my 
point, are the items that we are addressing at this Tab 136, 
are those items that are outside the scope of what I refer to 
as the TA-33 investigation?
    Mr. Walden. The answer, I am told, is yes.
    Mr. Salgado. I have no knowledge of these. I will say this. 
There were a lot of items that were purchased subsequent to the 
Sierra Grande fire. Many of these things, I believe, that the 
former IGs, Mr. Layton and Mr. Masten, also looked at to see 
whether or not--they raised issues, I know, for instance, about 
water coolers and things like that that were needed for 
environmental work.
    I know nothing about these. The first time I believe I have 
just seen this is right now. I have no indication, but I would 
assume that if it was done in 2002 this was part of the study 
that was undertaken by the former IGs but I don't know that.
    Mr. Walden. It actually says fiscal year 2001.
    Mr. Salgado. I am sorry, fiscal year 2001. The former IGs 
that we brought in, John Layton and Charles Masten, and the 
PricewaterHouse group, I believe, went back 48 months. I would 
think this should have been included in that review but I don't 
have personal know of it, sir.
    Mr. Dickson. Mr. Walden, may I?
    Mr. Walden. Certainly, Mr. Dickson.
    Mr. Dickson. If I may, in August of this year one of the 
responsibilities I was assigned was to work with the purchase 
card review team in its efforts to try to get to the bottom of 
the Mustang and other related vulnerabilities. As a part of 
that work, the PricewaterHouseCoopers team developed withering 
lists of items, like you're talking about, as a way of trying 
to test the system and see if there was glitch.
    I interceded because I learned not to jump to any 
conclusions about some of these more exotic sounding items in 
terms of their business purpose at the Los Alamos National 
Laboratory. You will find as you go through many--I don't know 
about these obviously but if you were to pull the string on 
these, there is a very good chance that you would find, 
although at this point they are seemingly ridiculous purchases, 
they turn out to have a very legitimate business purpose. 
PricewaterhouseCoopers did, in fact, work their way through 
page after page of these items.
    Mr. Walden. Let me interrupt you for a second. I am sorry. 
Who made the determination that they have legitimate purposes? 
The people who purchased them?
    Mr. Dickson. No. The PricewaterHouse did selected searches, 
identified seemingly inappropriate items, made phone calls, 
made visits, looked at items, and strangely found explanations 
for the great majority of those items.
    Mr. Walden. A great majority. Okay.
    Mr. Dickson. I think it is very appropriate to look at 
those and question them, but I don't think you're at the end of 
the process by just having looked.
    Mr. Walden. I understand that. Let me switch subjects for a 
minute. Prior to firing Mr. Walp and Doran, did you discuss 
with Mr. Salgado the possibility they could achieve 
whistleblower status and, if so, did Mr. Salgado say to you--
what did he say to you about that prospect? Did you discuss it 
with him?
    Mr. Dickson. Yes, I did. What we talked about was the 
notion that there was risk in any action that had to do with 
Mr. Walp and Doran. My position with respect to those two 
gentlemen was that we should assume for purposes of making the 
decision that they would be looked upon as whistleblowers and 
then decide whether or not the reason that the Laboratory was--
the decision that the Laboratory was making was based upon 
ground unrelated to their disclosure of information.
    Mr. Walden. What role did Dr. Browne play in the decision 
to fire Walp and Doran?
    Mr. Dickson. I would say that he relied upon other and was 
provided with information before the decision was made and 
incurred in it based upon the recommendation.
    Mr. Walden. Was he actively involved in considerations to 
fire Mr. Walp and Mr. Doran?
    Mr. Dickson. He was informed before the action took place. 
I would say that of all of the managers of the Laboratory who 
were involved, John was not the principal person.
    Mr. Walden. Why were there so many folks at the lab in 
management involved in this decision in your perspective?
    Mr. Dickson. Well, you know, there really aren't that many 
when you think about it. The S Division, Stan Busboom reports 
to Jim Holt. He is one of the people that was listed. Jim Holt 
then reports to Mr. Salgado who reports to Director Browne. I 
am the Laboratory counsel and provide legal services for the 
Laboratory. It is sort of really chain of command type issue.
    Mr. Walden. Is that the standard practice for probationary 
employee dismissals?
    Mr. Dickson. No. It can be. It depends on the 
circumstances.
    Mr. Walden. How often?
    Mr. Dickson. I am not involved in a great number of these 
decisions but in cases that have a propensity to be high 
profile, they can go all the way up to the top. The rationale--
the problem with this particular one, Congressman Walden, is 
that the purchase card review team in this activity were 
considered to be extremely important to the Laboratory.
    A lot of people were interested in and involved in that 
process. The fact that Mr. Walp and Mr. Doran were supposed to 
be supporting that team had the tendency to elevate their work 
perhaps to an abnormal level.
    Mr. Walden. Given that it was so high profile, or you 
indicate that was a concern, why was Mr. Busboom involved?
    Mr. Dickson. He is my manger. The division leader.
    Mr. Greenwood. The time, gentlemen, has expired. The 
gentlelady from California is recognized for 10 minutes.
    Ms. Eshoo. Thank you, Mr. Chairman. I would like to ask the 
panelists today if there is anything that you know of, relative 
to all of the mismanagement that we are reviewing, and the 
abuse, and what I think is fraud as well, and I really think a 
dereliction of duty on the part of the top team at the lab. 
Does any of this in your assessment impinge on any national 
security issues? Mr. Busboom first.
    Mr. Busboom. I am not aware of any direct connection. I 
haven't seen any security incidents connected with the thefts. 
The only time I know that took place was the TA-33 had a 
concurrent security incident with the suspects involved in the 
case itself Ms. Eshoo. Is that resolved that you are referring 
to?
    Mr. Busboom. I don't know, ma'am, because I didn't conduct 
that inquiry.
    Ms. Eshoo. Whose responsibility is it to check it out?
    Mr. Busboom. That particular inquiry was conducted by Mr. 
Hawkins.
    Ms. Eshoo. Who is Mr. Hawkins?
    Mr. Busboom. He is the division leader of Nonproliferation 
and International Security who owns TA-33.
    Ms. Eshoo. Where is that now?
    Mr. Busboom. I don't know, ma'am.
    Ms. Eshoo. Does anyone follow up on any of these things? 
Can any of you inform the committee?
    Mr. Salgado. Yes. I would advise the committee that the 
security violations or infractions were addressed by line 
management and appropriate action was taken pursuant to those.
    Ms. Eshoo. When was that?
    Mr. Salgado. That was taken immediately following the 
October 24 meeting I had with the U.S. Attorney and the FBI.
    Ms. Eshoo. So that has been resolved?
    Mr. Salgado. Yes. And, in my opinion, there has been no 
jeopardy of national security in either of these activities. It 
was a high profile for the Laboratory and myself to be the 
balance of activity.
    Ms. Eshoo. I would appreciate that. I have in the previous 
hearing asked everyone that came to testify that same question 
because I think that obviously we have to keep our eye on the 
main ball, so to speak, not that today's testimony we are 
discussing today isn't important.
    I think in the last question that was asked by my 
colleague, the term ``abnormal level'' was used by you, Mr. 
Dickson. What do consider abnormal level? What did you mean by 
that? They raised their concerns to an abnormal level.
    Mr. Dickson. The intention to the dismissal of what we 
would call probationary employees had greater level of 
attention just because of who they were and what they were 
involved in at the time. I was asked the question is it normal 
for all of these terminations or dismissals of probationary 
employees to be at that level. He answered no. The next 
question was why was this one and that was the answer to that 
question.
    Ms. Eshoo. Have any of you ever participated in prior to 
Mr. Doran's and Mr. Walp's firings in anything like this before 
that we perhaps didn't know about that you can tell us about 
today? Is this the very first time on your watch that anyone 
that raised serious questions, were they caught in some 
probationary period? Were there others that were fired that we 
may not know about?
    Mr. Dickson. I think I may have created a misapprehension. 
What I meant when I used the word raised is that the 
decisionmaking process of Mr. Walp and Doran was at a higher 
level than perhaps might be typical. That is all I meant. It 
has nothing to do with the fact that they claimed to have 
raised issues.
    Ms. Eshoo. Well, the issues that they raised were clearly 
not appreciated. Otherwise, I don't think you would be here 
today. I mean, that, to me, is one of the more obvious things. 
It is like a 10,000 pound gorilla in the middle of the room.
    What I am very disappointed in today, I must say this, is 
that if I were to entitle or to characterize this panel, with 
all due respect to each one of you, is that this is the panel 
of denial. I think that goes to the heart of why the abuses 
that we are reviewing why we are even reviewing them. And refer 
to the place as the institution.
    We have a probationary period and people that maybe their 
style of communicating you found objectionable. As stewards of 
a public place and a public contract, I don't know what it 
would take to get your attention to the things that really 
mattered.
    You are saying the things that were charged on the credit 
card, where was it appropriate? Did anyone ever see that there 
was an attempt for a Mustang? Does that fit into something that 
is kind of regular order or regular business at your place?
    Mr. Salgado. Of course not.
    Ms. Eshoo. Whose attention did that come to before it was 
Mr. Walp or Mr. Doran? Let me ask you that. Mr. Busboom, do you 
know anything about it? Anyone ever bring it to your attention?
    Mr. Busboom. Specifically about the list there?
    Ms. Eshoo. The Mustang.
    Mr. Dickson. The Mustang came to the attention of the card 
holder who disputed the charge. The charge was reversed by the 
credit card company and there has been no loss to the 
Government. That is the answer.
    Ms. Eshoo. How about the person that tried to charge this? 
Did that say anything to you? I have to tell you, if someone on 
my staff tried to charge a Mustang on the Federal credit card I 
have, it would have raised a real flag. Now, maybe I am 
unusual. All right? Then again, maybe you are in the way you 
have run this place. Doesn't that just violate you?
    Mr. Salgado. Ma'am, if I may respond.
    Ms. Eshoo. Yes.
    Mr. Salgado. Absolutely Ms. Eshoo. Do.
    Mr. Salgado. Absolutely. First of all, it was raised 
basically by the BUS Division who brought it immediately to our 
attention. We immediately at that time put an internal review 
team to start looking at all the purchase card activity that we 
had looked at.
    We immediately also then decided that we needed to bring in 
an external review team in immediately to start looking at and 
questioning the process, procedures, and activities that were 
going on. That immediately raised a red flag to us. It wasn't 
brought to us by Walter Doran. It was brought to us by the BUS 
Division operations and we put the internal team in place and 
then an external team in place immediately.
    Ms. Eshoo. External, internal, but Walp and Doran didn't 
count into this. I have to tell you that I think that in an 
organization who is at the top counts. Why? Because by what 
they say, what they do to help create a transparent 
organization, an organization that understands that rules 
matter, that conduct matters, and that it starts from the top. 
You see?
    So I think you have failed, with all due respect, the good 
people that are part of this place. But that is not enough. 
That is not enough. In order to restore confidence both to the 
policymakers and to the American taxpayer, this place has to be 
hosed out. I don't think people should be rewarded by 
contracts. I stated this in the last hearing.
    I think that the University of California has to go tier by 
tier through the management however that is done. That is up to 
the University of California to do that. There has been a 
contract in place for decades. The University of California is 
a great university. I think that you have failed her by what 
you have done and what you have not done.
    I think if there is anything that has underscored that 
today, it is what I would call the denial panel. It is doing 
this. I raised two children and it is instructive to raise 
children. I remember going into a room and saying, ``Who 
spilled the milk on the rug?'' One would say, ``I wasn't even 
here.'' He was standing in the room. The other one would say, 
``It is my brother.'' You see? This panel reminds me of that.
    I think there is serious denial on your part. I am sorry to 
say that but I think that it is absolutely the case. I also 
think that if I thought so last time around that the university 
has to go tier by tier in terms of the management team because 
this is not a management team. This is not a management team in 
my view.
    Mr. Chairman, thank you for allowing me again to 
participate in the subcommittee's investigation in oversight. 
It is an important one. I believe that this can be fixed but I 
don't have confidence in terms of the people that are still 
left in charge. With that, I know that my time is up. The red 
light is blinking. Thank you.
    Mr. Greenwood. Thanks, gentlelady. I want to go back, Mr. 
Salgado, to the e-mail from Milum. Is it your testimony that 
you had nothing to do with the preparation of this e-mail?
    Mr. Salgado. I have no recollection of this e-mail. There 
were a lot of facts that went into it. Mr. Chairman, could you 
give me the number again?
    Mr. Greenwood. Yes. It is 47. Did she say to you, ``The 
University of California wants to know why you fired Walp and 
Doran and I have to respond to them,'' and ask you any 
questions as to why they were fired?
    Mr. Salgado. I have no recollection of the request coming 
in, No. 1, and so----
    Mr. Greenwood. My question is did you have conversations 
with her about a request or about her communicating to the 
University of California about why Messrs. Walp and Doran were 
fired?
    Mr. Salgado. I don't have a recollection of that 
conversation specifically, but there were--I am not even sure 
of the date of this--December 11. Previous to that that she had 
been engaged in the conversations and helped draft the proposed 
letter of dismissal so there were conversations that took 
place. I really have no recollection of this. I don't know 
whether the request came to her. I guess it came to her 
specifically. I don't know.
    Mr. Greenwood. In there she says among the complaints 
against Walp and Doran was that they had ``no plan for bringing 
the review to closure.'' This is the Mustang case. Now, to this 
day LANL has failed to addressed Ms. Anaya's employment status 
at LANL. She has been on paid leave for over 6 months. The 
question is is there a plan for bringing this matter to a 
closure 6 months later?
    I mean, Walp and Doran were criticized for not bringing it 
to closure in 4 days. It is still not in closure. It is 6 
months later. The woman who is suspect in this case, or at 
least people suspect that she is responsible for this conduct, 
is on paid leave.
    The question is is the pot calling the kettle black here? 
If these guys are criticized for not bringing this to closure 
in 4 days, and the Laboratory hasn't closed it for 6 months, 
should everyone involved in this case be dismissed in the same 
unceremonious way?
    Mr. Salgado. Obviously the answer to that question is no. I 
don't know where that case is.
    Mr. Greenwood. Do you, Mr. Busboom?
    Mr. Busboom. No, I don't, sir.
    Mr. Greenwood. Mr. Dickson?
    Mr. Dickson. I do, Mr. Chairman. The action on the Lillian 
Anaya matter was deferred for a number of months with the 
specific request first of the Federal Bureau of Investigation 
and, second, request of the DOE IG. Two weeks ago----
    Mr. Greenwood. Was that request before or after the 4 days 
that Messrs. Doran and Walp had responsibility?
    Mr. Dickson. It was. Those were later.
    Mr. Greenwood. Afterward. Okay.
    Mr. Dickson. Those requests were, let us just say, relieved 
for lack of a better words, about 2 weeks ago. The discipline 
process has been invoked and it is expected that there will be 
a review board which is convened next week for the purpose of 
asking whatever division is to be made with respect to her 
employment status.
    Mr. Greenwood. Okay. The e-mail also says that, ``Walp lost 
or misplaced evidence in his custody. This rationale actually 
refers to two knives that were stolen from the S Division after 
they had been received by S Division employee James Mullens 
from Michael Alexander, the brother of one of the T-33 
suspects.
    At the time that Mullens received items from Mr. Alexander 
he was serving as the LANL liaison with the FBI. In fact, at 
this point Mr. Busboom had removed Mr. Walp from his role as 
FBI liaison and instructed Mr. Walp to have no involvement in 
the TA-33 matter.
    Mr. Mullens was holding the Alexander items pursuant to the 
instructions of FBI Special Agent Camel.'' Mr. Busboom, do you 
really mean to hold Mr. Walp responsible for the theft of 
evidence from the investigation from which he had specifically 
been instructed to stay away?
    Mr. Busboom. Not as the FBI liaison but as the office 
leader, certainly. I expected all the property issues to be 
properly addressed.
    Mr. Greenwood. In fact, isn't it true that Mr. Walp took 
immediate action to determine who stole the knives from the 
evidence custodian and even offered to take a lie detector test 
regarding this matter.
    Mr. Busboom. I don't know about the lie detector test but 
my understanding was that the Inspector General was 
investigating.
    Mr. Greenwood. Did Mr. Walp take immediate action?
    Mr. Busboom. I don't know what immediate action he took. 
No, sir.
    Mr. Greenwood. Is it true that following the discovery of 
the theft of the knives that one of S divisions long-time 
employees, Bill Sprouse, went home sick for the afternoon and 
later refused to take a lie detector test regarding the theft 
of the knives?
    Mr. Busboom. I am not aware of that, sir. No.
    Mr. Greenwood. Anybody else aware of that? All right. Do 
you think that Mr. Walp is responsible for the theft of the 
knives?
    Mr. Busboom. No, sir. I think he is responsible for the 
safeguarding of the evidence.
    Mr. Greenwood. Okay. And did he--has evidence been 
safeguarded historically in a different way at the lab?
    Mr. Busboom. Oh, absolutely. You put in the chain of 
custody and you lock it up in the evidence locker or in a 
vault. Yes, sir. Absolutely.
    Mr. Greenwood. It was in a locked office in a secure 
building. Was it not?
    Mr. Busboom. It was in a locked office as far as I 
understand. Yes, sir. But it was not in the property locker and 
it was not in chain of custody.
    Mr. Greenwood. Let me ask this question. I would like you 
to describe, Mr. Salgado, the interaction with Messrs. Walp and 
Doran with regard to their firing. This letter was written. 
They were given the letter. Were they afforded the opportunity 
to defend themselves?
    Mr. Salgado. I was not part of that process so I can't 
answer the question.
    Mr. Greenwood. Mr. Busboom, do you know the answer to that 
question?
    Mr. Busboom. The answer is no. They asked for their 
resignations and then when they weren't forthcoming, they were 
terminated 2 weeks later.
    Mr. Greenwood. Okay. Ms. Anaya has taken 6 months, is going 
before a board. Will she have the opportunity to present her 
side of the story?
    Mr. Dickson. Yes, she will.
    Mr. Greenwood. Okay.
    Mr. Dickson. Ultimately.
    Mr. Greenwood. Okay. Let us assume that hypothetically that 
the conclusion is that she did wrong and she is terminated 
here. Okay? Now, I would like you to compare the way that she 
is handled. She is allegedly a perpetrator of a crime.
    Messrs. Walp and Doran are people looking for perpetrators 
of crimes. They are given no opportunity whatsoever to defend 
themselves. They are told to leave, to resign. They don't 
resign and they are told that they are fired. I think they are 
given half an hour to get out.
    Now, Ms. Anaya, on the other hand, has been waiting 6 
months. She is going to come before a board. Why would these 
two matters of dismissal of an employee be handled in such 
radically different fashions?
    Mr. Dickson. The answer is basically a creature of lab 
policy which is not dissimilar to Government policies all over 
the place. Congressman, it is normal for Government employers 
to have what are referred to as probationary period. These 
employees in these probationary periods are treated as 
employees at will and they do not have all the due process 
rights that long-service employees such as Mrs. Anaya had.
    The problem with Mrs. Anaya's termination all along has 
been the request and the demands of law enforcement agencies 
not to disturb the status quo while ultimate decisions are 
being made with respect to her employment. We would love to 
have taken action with respect to her entirely back in October.
    Mr. Greenwood. Let me ask this question. I am sure that--my 
guess is that Messrs. Doran and Walp were not the first 
probationary employees to be asked to resign or fired. Is that 
a fair statement?
    Mr. Dickson. I am sorry? I think I missed the----
    Mr. Greenwood. My guess is that over the course of time 
other employees at LANL who have been on probationary status 
have been terminated.
    Mr. Dickson. That is right.
    Mr. Greenwood. My question is because they are on 
probationary status is it the policy of the Laboratory they 
don't get an opportunity to defend themselves? They can make 
allegations against probationary employees? Is that the way it 
works?
    Mr. Dickson. Well, what that really means is that there is 
no formal process by which they can complain over their 
termination. That is not to say that managers will turn a deaf 
hear if a probationary employee would----
    Mr. Greenwood. My question is this. I asked why it was that 
Messrs. Walp and Doran were not afforded the opportunity to 
respond to the charges made against them and the causes given 
to them for why they were fired. The answer is because they 
were on probation.
    Mr. Dickson. Yes.
    Mr. Greenwood. So if that is the answer, then I would 
assume that is the way you treat all probationary employees. 
You make allegations about them, they are not afforded an 
opportunity to respond, and out they go. The allegations 
against them could be absolutely false but because they are on 
probationary status, they don't get to offer up their side of 
the story or defend themselves in any kind of a process. Is 
that the way it is?
    Mr. Dickson. That is correct.
    Mr. Greenwood. That sounds like a terrible policy.
    Mr. Dickson. Congressman Greenwood, that is in my 
experience the rule or the policy that exist in every 
governmental entity in the State of New Mexico and, as far as I 
know, throughout the country. There is a period of time during 
which employees come to an organization which they do not 
accrue the due process rights. We call it the new employee 
evaluation period. A lot of other places call it probation. 
That is the way the rule is and whether it is fair or not is 
open to question.
    Mr. Greenwood. Mr. Salgado, did you want to make a point?
    Mr. Salgado. I just want to make a point, Mr. Chairman, 
that this did not happen in somewhat of the stark vacuum we are 
talking about. It is my recollection that there were issues of 
performance that were raised in the early part of September and 
that those were basically--those issues were gone through the 
chain of command and that I believe Mr. Busboom or Mr. Tucker 
had ongoing discussions with Mr. Walp and Doran about their 
performance. There were these issues that did take place I know 
in the early part of September and October timeframe. I believe 
that is correct.
    Mr. Greenwood. Mr. Busboom, did you have a comment?
    Mr. Busboom. That is correct, yes.
    Mr. Greenwood. All right. Mr. Dickson, you want to make a 
comment?
    Mr. Dickson. I would like to address the notion of the 
aggressiveness with which these disciplinary actions have 
taken. Since the beginning of the Mustang case there have been 
a lot of attention focused on the Laboratory. The first thing 
that the Laboratory did in order to rectify the situation was 
to establish the purchase card review team.
    In my view that was an aggressive, open, thorough process 
by which we were going to specifically deal with some of these 
issues that have been raised by Congresswoman Eshoo. It was an 
expected outgrowth of that activity that we would discover 
other acts of misconduct if you are auditing you might find.
    Parallel to these ongoing events with the purchase card 
review team was the theft of TA-33. We have coordinated that 
investigation with the FBI very closely. As a matter of fact, 
you may recall from your review of the record that we were 
criticized for having threatened the FBI by saying we are going 
to move Mr. Bussolini and Mr. Alexander out and thereby disturb 
the FBI investigation.
    We needed to get those people out of TA-33. We needed to 
make sure that the security was preserved and that we didn't 
suffer any further loss. We gave the FBI a window of time and 
after a point said this is as far as we can go and took them 
out. They were dealt with within a matter of days. They are no 
longer employed by the Laboratory.
    The force of circumstances in order to accommodate the law 
enforcement needs, accommodate the security needs and 
accommodate just the operational needs, we have to make 
accommodations between the law enforcement and all of these 
people in order to do things. Some of these delays built into 
the system are caused by the collaboration among those various 
entrants.
    Mr. Greenwood. Okay. I want to thank all the panelists for 
your testimony, for being here with us voluntarily today. We 
are going to have to recess now because we have votes on the 
floor. I would also without objection include into the record 
Congressman Walden's introductory opening statement.
    With apologies to the second and third panels, this recess 
will have to continue until 4. We will return here at 4.
    [Whereupon, at 1:31 p.m. the subcommittee recessed to 
reconvene at 4 p.m]
    Mr. Greenwood. We will reconvene and we will call forth Mr. 
Darling.
    Mr. Darling, if you would come and be seated.
    Mr. Bruce Darling is the Senior Vice President of 
University Affairs and Vice President for Laboratory 
Management, University of California.
    Welcome back.
    Mr. Darling. Thank you, Mr. Chairman.
    Mr. Greenwood. We appreciate you being here and we are 
trying to accommodate your schedule so we will try not to delay 
you too much.
    As you recall from the last panel, this is an investigative 
hearing. We take testimony under oath. Do you have objection to 
giving your testimony under oath?
    Mr. Darling. I do not, sure.
    Mr. Greenwood. Okay. Pursuant to the rules of the committee 
and the House, you are entitled to be represented by counsel. 
Do you wish to be represented by counsel?
    Mr. Darling. I do not.
    Mr. Greenwood. Okay. Then if you would stand, raise your 
right hand.
    [Witness sworn.]
    Mr. Greenwood. You are under oath and recognized for your 
opening statement, sir.

     TESTIMONY OF BRUCE B. DARLING, SENIOR VICE PRESIDENT, 
   UNIVERSITY AFFAIRS, INTERIM VICE PRESIDENT FOR LABORATORY 
              MANAGEMENT, UNIVERSITY OF CALIFORNIA

    Mr. Darling. Thank you, Mr. Chairman. Good afternoon, Mr. 
Chairman, Mr. Deutsch, and members of the committee. First of 
all, I appreciate your willingness to accommodate me. My father 
died at the beginning of January, my uncle died at the end of 
January, and unfortunately my great uncle suffered a stroke 
Monday. We had to make a difficult decision of terminating life 
support and I would like to go home and visit him before he 
dies in the next day or two so I really appreciate your 
willingness to accommodate me.
    What I would like to do with your permission is to read my 
brief oral testimony and then perhaps respond to one or two 
questions that came up this morning for which I don't think you 
received a complete answer. Then I would be happy to answer any 
questions that you might have.
    Mr. Greenwood. Excellent. Thank you.
    Mr. Darling. What I would like to do today is to 
reemphasize to the committee and to the American people that 
the University of California is committed to reforming the 
business and management practices at Los Alamos National 
Laboratory; that senior University officials continue to 
investigate potential abuses at the Laboratory and to institute 
appropriate reforms. Our goal remains to raise our business 
practices to the level of our science and weapons programs and 
to restore public confidence in the Laboratory and the 
University.
    As you know, I was appointed Interim Vice President for Lab 
Management in addition to my other role at the university on 
January 8 of this year. At the first hearing on February 26 I 
provided you with a comprehensive list of options that the 
University has taken to address the business, procurement, and 
property problems at the lab.
    With your permission, what I would like to try to do today 
is to address several specific issues raised by the committee 
during the hearing on February 26, 2003. I would just note that 
on a number of these issues, I have consulted with Steven Doran 
in the last few days prior to coming here so that you know we 
are maintaining open communications as we go forward.
    I would also say that we intend to review each of the 
answers that we come up with in response to these questions 
that were raised by Mr. Walp and Mr. Doran and the committee 
with them and with you and will do so in complete candor. If 
you have additional information that leads us down another 
track, we will be happy to pursue that with the same level of 
diligence.
    We have continued to make additional management changes at 
Los Alamos. Most recently we reached settlement agreements with 
former Security Division Director Stanley Busboom and his 
Deputy Gene Tucker, as well as with the former Audits and 
Assessments Director Katherine Brittin. All three will be 
leaving the Laboratory in April, two retirements and one 
separation.
    In addition, our Deputy General Counsel is meeting, as we 
speak, with the U.S. Attorney in Albuquerque to obtain the 
additional information we need to make decisions about further 
management changes at the Laboratory and to better understand 
some of the circumstances that are still in question about the 
relationship between the U.S. Attorney and the FBI and Senior 
Laboratory managers.
    Another important issue is the current status of the 
individual who is alleged to have misused her purchase card to 
attempt to buy a Ford Mustang, Lillian P. Anaya. With the 
Department of Energy Inspector General's permission the 
Laboratory is now investigating possible disciplinary action. 
There was an interview with her on Friday, March 7, and 
although this requires due process, we expect the matter to be 
completed and the individual's employment status to be 
qualified in April.
    Additionally, I now have more information about Mary 
Francis Wood and Clarissa Rodriguez in response to Chairman 
Greenwood's questions during the last hearing. At my direction 
the Laboratory this week did send a letter to Ms. Wood's 
employer demanding repayment of the nearly $2,000 
inappropriately charged on her purchase card at a casino and 
elsewhere. We have referred this matter and the Clarissa 
Rodriguez case, which involved a fraudulent travel voucher, to 
the Los Alamo District Attorney for possible law enforcement 
action and we wait his decision.
    There were a number of additional questions raised about 
the misuse of the Laboratory's procurement systems. Let me 
address a number of them:
    First, the allegation regarding excessive gasoline 
purchases seems to be explained by an improperly calibrated 
compressed natural gas pump meter. That meter has been 
corrected and is now dispensing the same amount of fuel as it 
shows on the meter.
    And, further, there was the fact that one of the vehicles 
that was receiving fuel was a fuel tanker that would take 
gasoline up to the Laboratory, distribute it then to emergency 
vehicles that were not supposed to leave the premises, 
generators and other onsite machinery. This might well explain 
why there was a high level of gasoline usage that did not 
correspond with the very low mileage on that tanker truck. 
Again, we are pursuing these issues and if there is additional 
information that comes to light, we will pursue that as well.
    Second, there has been no settlement to date with the 
Contract Associates matter. I think there was a statement made 
that the university and the lab had settled up for $50,000. 
However, the University's Audit Office has confirmed poor 
controls and record keeping both by the lab and the vendor, and 
that inadequate controls were built into the contract terms.
    The new controls are now in place and we have contracted 
with PricewaterhouseCoopers to conduct a comprehensive contract 
closeout audit of that contract so we know whether there are 
any disputed issues that need to be resolved and how to do so.
    Based on the findings, we will seek appropriate 
reimbursement from Contract Associates. I might add, we have 
encouraged competition from a number of other vendors so we are 
not relying solely on that company to make the purchase of the 
goods that were previously bought from that company.
    Finally, questions were raised about the ineffectiveness of 
the Laboratory's controls over its Local Vendor Agreements 
(LVAs) and Just-in-Time contracts (JITs). The external review 
team that was led by two former Federal Inspectors General and 
PricewaterhouseCoopers did begin a review in mid-January of 
those procurement practices and it is scheduled to issue its 
report in April. The University will act aggressively to 
implement any and all necessary reforms.
    In the meantime, I should let you know that we have reduced 
the number of LVAs from 35 to 27, set new restrictions on their 
use, reviewed each agreement to determine its continued value 
to the Laboratory, and we are developing additional controls to 
strengthen these agreements.
    On security matters, it was alleged that the security 
clearances of those involved in the thefts at the TA-33 
facility had not yet been revoked. We have looked further into 
this matter and, as I testified before, the clearances were 
suspended by the Department of Energy at our request a full 6 
weeks before they were officially terminated from the 
Laboratory on December 17, 2002.
    Finally, there was testimony 2 weeks ago about the current 
state of morale in the Office of Security Inquiries. While this 
has been a continuing concern of Interim Director Nanos, I 
should also note that the University independently dispatched 
its Director of Security to speak to the OSI staff both as a 
group and individually.
    He concluded that morale of the office is indeed poor, that 
the unit is understaffed and has a large backlog of work. We 
intend immediately to address these problems, both through 
reorganization and other steps Interim Director Nanos will 
take.
    A number of allegations were made regarding time card and 
work order fraud. While a 2001 audit does not suggest systemic 
problems, we intend to expand our 2002 audit procedures to more 
aggressively look for time and materials overstatements.
    Additionally, we have discussed this matter with Steven 
Doran to see if there are any other avenues that he thinks are 
available that we might pursue.
    In closing, I want to emphasize, as I did 2 weeks ago, that 
the University has not and will not let its focus on the 
important business and management issues that we are discussing 
today distract the Laboratory from fulfilling its mission to 
the Nation. We remain focused on ensuring that the Laboratory's 
scientific and weapons programs continue to meet their 
objectives.
    These objectives include ensuring the continued viability 
of the Nation's nuclear stockpile, monitoring nuclear 
proliferation around the globe, and helping prevent and prepare 
for nuclear, biological, and chemical attacks. The work being 
done at Los Alamos today is as important as at any time in the 
60 years that the University has had the privilege and 
responsibility of managing the Laboratory. We remain honored to 
oversee this important work on behalf of the Nation.
    I would like to just conclude by thanking you again for 
this opportunity to address you. I would be pleased to answer 
your questions. If I may, I will just respond to some of the 
items that came up this morning.
    [The prepared statement of Bruce B. Darling follows:]
    Prepared Statement of Bruce B. Darling, Senior Vice-President, 
              University Affairs, University of California
    Good afternoon, Mr. Chairman, Mr. Deutsch, and members of the 
Committee: I would like to take this opportunity to reemphasize to the 
Committee and to the American people that the University of California 
is committed to reforming the business and management practices at Los 
Alamos National Laboratory that are the focus of this hearing. I would 
also like briefly to address several specific issues raised the last 
time I appeared before you about which I now have additional 
information.
    Senior University officials continue to investigate potential 
abuses at the Laboratory and to institute appropriate reforms. As I 
said the last time I appeared before you, our goal is to raise our 
business practices to the level of our science and weapons programs--
which all of us agree the nation can be proud of--and in so doing, 
restore public confidence in the Laboratory and the University.
    With your permission, I will now address several specific issues 
raised during the Committee's hearing on February 26, 2003. On a number 
of these issues, I have consulted with Steven Doran for clarification 
and additional information.
                           management changes
    We have continued to make additional management changes at Los 
Alamos. Most recently we reached settlement agreements with security 
division director Stanley Busboom and his deputy Gene Tucker. Both will 
be separated from the Laboratory.
    We have begun discussions with Katherine Brittin and we expect 
resolution of her status in the very near future. In addition, our 
Deputy General Counsel is meeting, as we speak, with the U.S. Attorney 
in Albuquerque to obtain the additional information we need to make 
decisions about further management changes.
    Another important issue is the current status of the individual who 
is alleged to have misused her purchase card to attempt to buy a Ford 
Mustang. For some time, the Laboratory refrained from pursuing a 
personnel action against this individual because of a pending 
investigation by the Department of Energy Inspector General. The 
Laboratory recently obtained the Inspector General's assurance that a 
Laboratory investigation could be conducted without interfering with 
the Inspector General's investigation.
    Since receiving the Inspector General's permission, the University 
has directed the Laboratory to investigate whether disciplinary action 
is appropriate. As you know, the Laboratory and the University must 
observe certain requirements of due process in conducting such an 
investigation. The Laboratory's human resources division is expected to 
complete its formal investigation by the end of this week. The result 
may be to convene a Case Review Board to evaluate the findings underway 
by the human resources division investigation, and to recommend 
disciplinary action against the individual in question. We expect this 
process to be completed--and the individual's employment status to be 
finally resolved--in April.
    Additionally, I now have more information about Mary Francis Wood 
and Clarissa Rodriguez in response to Chairman Greenwood's questions 
during the last hearing. Ms. Wood was a contract employee at the 
Laboratory who used her purchase card to make cash advances and other 
inappropriate purchases. The Laboratory terminated her employment on 
August 19, 2002, and the matter was later referred to the DOE Inspector 
General. At my direction, the Laboratory this week sent a letter to Ms. 
Wood's employer demanding repayment of the amounts inappropriately 
charged on her purchase card. The University has referred this matter 
to the local New Mexico District Attorney for possible law enforcement 
action.
    Clarissa Rodriguez was a Laboratory employee who cashed a 
fraudulent travel voucher. The Laboratory accepted Ms. Rodriguez's 
resignation on September 23, 2002, and she repaid the Laboratory on 
that date. The Rodriguez matter was referred to the DOE Inspector 
General shortly after the Laboratory learned about it. The University 
has referred this matter as well to the local District Attorney. To the 
best of our knowledge, the Inspector General's investigations into the 
Wood and Rodriguez matters are ongoing.
                          procurement matters
    There were a number of additional questions raised about the misuse 
of the Laboratory's procurement systems. Let me address a number of 
them:
    First, it was asserted that purchase cards were used to purchase 
more fuel than fire trucks and other similar vehicles could hold. In 
looking into this matter, we were informed that some of the purchases 
involved compressed natural gas that was being dispensed from a gas 
pump with a miscalibrated meter. (The meter has been re-calibrated to 
properly record the amount of fuel that is dispensed.) The other 
purchases involved a dual-tank fuel truck that dispenses fuel to 
emergency response vehicles, emergency generators and other critical 
machinery at the Laboratory. This explains the unusually high amount of 
fuel that was used. In neither case does it appear that there was any 
fraud or abuse involved.
    A second issue was the allegation that Contract Associates 
``overbilled'' the Lab for millions of dollars and yet the Lab is 
prepared to settle the case for only $50,000. For the record, there has 
not been a $50,000 settlement. However, the University's Audit Office 
has confirmed poor controls and record keeping both by the Lab and the 
vendor, and that inadequate controls were built into the contract 
terms. The new controls are now in place and we have contracted with 
PricewaterhouseCoopers to conduct a comprehensive contract closeout 
audit, which will be supervised by the UC Auditor. Based on the 
findings, we will seek appropriate reimbursement from Contract 
Associates. In addition, several other vendors are now providing the 
goods provided by Contract Associates so that there is competition in 
obtaining the goods.
    Finally, questions were raised about the ineffectiveness of the 
Laboratory's controls over its Local Vendor Agreements (LVAs) and Just-
in-Time contracts (JITs). The University learned about these concerns 
from Mr. Walp and Mr. Doran several weeks prior to the last hearing. We 
took these concerns seriously and pursued them immediately, as we have 
with every other issue that has been raised by Mr. Walp and Mr. Doran.
    In response, we asked the External Review Team chaired by two 
former federal Inspectors General, and aided by a dozen forensic 
accountants from PricewaterhouseCoopers to expand its review of the 
Laboratory's purchase card program to include a review of all 
Laboratory procurement, including LVA and JIT contracts to determine 
whether these agreements are vulnerable to abuse.
    The External Review Team began this project in mid-January; it is 
scheduled to complete its review and issue a report in April. When the 
External Review Team's review is completed and its report is issued, 
the University will act aggressively to implement any and all necessary 
reforms. In the meantime, we have reduced the number of LVAs from 35 to 
27, set new restrictions on their use, reviewed each agreement to 
determine its continued value to the Laboratory, and we are developing 
additional controls to strengthen these agreements.
                            security matters
    It was alleged that the security clearances of those involved in 
the thefts at the TA-33 facility had not yet been revoked. We have 
looked further into this matter and, as I testified before, the 
clearances were suspended by the Department of Energy on October 31, 
2002--a full six weeks before the employees' official terminations on 
December 17, 2002.
    Finally, there was testimony two weeks ago about the current state 
of morale in the Office of Security Inquiries. While this has been a 
continuing concern of Interim Director Nanos, the University 
independently dispatched a representative to speak to the OSI staff 
both as a group and individually. He concluded that morale is indeed 
``poor,'' that the unit is understaffed and has a large backlog of 
work, and that it remains divided between those who share Mr. Walp and 
Mr. Doran's concerns and those who reject the allegations made about 
inadequate reporting and poor accountability. We intend immediately to 
address these problems, both through reorganization and other steps 
Interim Director Nanos will take.
                     time card and work order fraud
    A number of allegations were made regarding time card and work 
order fraud. While a 2001 audit does not suggest systemic problems, we 
intend to expand our 2002 audit procedures to more aggressively look 
for time and materials overstatements. Additionally, we have discussed 
this matter with Steven Doran, in his new capacity as the Director of 
Security for the Office of the President, to determine other avenues 
for possible investigation.
    In closing, I want to emphasize, as I did two weeks ago, that the 
University has not and will not let its focus on the important business 
and management issues that we are discussing today distract the 
Laboratory from fulfilling its mission to the nation. We remain focused 
on ensuring that the Laboratory's scientific and weapons programs 
continue to meet their objectives. These objectives include ensuring 
the continued viability of the nation's nuclear stockpile, monitoring 
nuclear proliferation around the globe, and helping prevent and prepare 
for nuclear, biological, and chemical attacks. The work being done at 
Los Alamos today is as important as at any time in the 60 years that 
the University has had the privilege and responsibility of managing the 
Laboratory. We remain honored to oversee this important work on behalf 
of the nation.
    Thank you again for this opportunity to address the Committee. I 
would be pleased to answer your questions.

    Mr. Greenwood. Why don't you just go right ahead and do 
that.
    Mr. Darling. Thank you. One of the questions that came up 
this morning was is any of the material that appeared in the 
30-pound box of Laboratory documents that went to the 
Albuquerque Journal classified information.
    This was an area of concern to us and with the cooperation 
of both the attorney for the Albuquerque Journal and the 
publisher of the Albuquerque Journal we were able to have a 
national nuclear security administration classifying official 
go out, review the documents, and determine that there are no 
classified documents in that material and so we are all 
comforted to know that there was no breach of national security 
by the release of those documents to the newspaper.
    In addition, you asked about two key meetings. One was the 
meeting with the FBI and senior Laboratory management 
officials. Just to clarify, that was a meeting that took place 
on October 24, to the best of my recollection. It was a meeting 
between Mr. Salgado and Mr. Dickson from the Laboratory and the 
U.S. Attorney, and I believe some FBI agents.
    That remains a very important meeting because that is the 
meeting at which there continue to remain differences of 
opinion about what the U.S. Attorney and the FBI conveyed to 
the Laboratory officials about either their satisfaction or 
dissatisfaction with Mr. Walp's and Mr. Doran's performance.
    You also asked about the date of the meeting in which 
senior Laboratory officials met to determine the fate of Mr. 
Walp and Doran. To be clear, to the best of my knowledge, that 
was on November 18. There was some confusion about who was 
present at that meeting. I believe it was said that Mr. Busboom 
and Mr. Marquez were present. To the best of my knowledge they 
were not present.
    In previous meetings they told us that they were not 
members of that meeting in which Mr. Walp and Mr. Doran's fate 
were discussed. I believe the participants in that meeting were 
Mr. Salgado, Ms. Milum, Mr. Dickson, Mr. Holt, and Mr. Kruger. 
So I would be happy at this point, Mr. Chairman, to answer any 
other questions you might have.
    Mr. Greenwood. Thank you, Mr. Darling. The Chair recognizes 
himself for 10 minutes. On December 18, 2002, you interviewed 
several people including Mr. Salgado. At that time you took 
extensive notes. During your interviews you asked Mr. Salgado 
to explain why LANL fired Mr. Walp and Mr. Doran.
    You previously testified that Mr. Salgado told you he was 
concerned that Walp and Doran would obtain whistleblower status 
following their anticipated meeting with the Department of 
Energy Inspector General.
    Reportedly he also told you that he suspected that they 
were the source of the anonymous 30-pound box of documents that 
were delivered to the Albuquerque Journal to which you just 
referred. Can you tell the subcommittee about your interview 
with Mr. Salgado and whether any of the other people you 
interviewed told you that they had discussed Walp and Doran's 
potential whistleblower status with Mr. Salgado prior to their 
firing.
    Mr. Darling. Yes, I would be pleased to. As I indicated at 
the last hearing, we interviewed 14 officials both at Los 
Alamos and at the university over a 2-day period, December 18 
and 19. What emerged was a story with many consistencies and a 
few striking differences.
    Mr. Salgado was very candid with us. He told us that the 
meeting that I just described on November 18 had taken place. 
He described that Mr. Busboom, who was Mr. Walp's and Mr. 
Doran's immediate supervisor, was not present in the room. He 
indicated that there were two issues that were discussed that 
was related to their termination during their new employee 
evaluation period.
    One of those items was that the Inspector General had sent 
an official from Washington, DC to Los Alamos to interview 
employees at the lab. That Mr. Salgado had spoken to the DOE 
Inspector General. That the DOE Inspector General refused to 
tell him who the representative was going to interview at the 
lab and that he suspected that it was going to be Mr. Walp and 
Mr. Doran.
    He did indicate to us, as he said today, that he thought 
there were a number of performance issues which contributed to 
the decision to terminate their employment. But he did go on to 
say that he was concerned that if Mr. Walp and Mr. Doran were 
interviewed by the Inspector General, that would somehow 
confer, I think the term he used was technical whistle blower 
status on them and that it would make it more difficult for 
them to be terminated after that meeting. One of the reasons 
for making the decision to terminate them when they did was 
because of that forthcoming meeting.
    Second--I am sorry. I have forgotten your second point.
    Mr. Greenwood. So have I. Oh, the 30-pound box of 
documents. Yes. Did he raise that issue?
    Mr. Darling. Yes, he did. He indicated--no, I am sorry. 
There was a separate meeting on December 12 at which some of us 
met with Secretary Abraham, Deputy Secretary Costello and NNSA 
Administrator Brooks. It was in that meeting that he told the 
Secretary that he suspected, though I think the term he used 
was it is very likely that it was Mr. Walp and Mr. Doran who 
had provided the materials to the Albuquerque Journal and that 
he was certain that the box of documents had come from the 
Office of Security Inquiries.
    Mr. Abraham, the Secretary, I think captured all of our 
feelings at that meeting when he responded by saying, ``If you 
do not know that to be a fact, you should not be raising that 
issue. It undermines your case and it is not something that you 
should be saying.'' As I said, I think that echoed the 
sentiments of everyone else in the room at that time.
    Mr. Greenwood. The University of California terminated Mr. 
Busboom's association with the lab yesterday. Is that correct?
    Mr. Darling. Mr. Busboom will retire on April 2. I believe 
the agreement with Mr. Busboom was reached at the end of last 
week if I recall correctly.
    Mr. Greenwood. And why did the university want Mr. Busboom 
to retire?
    Mr. Darling. We had three options. One option was to 
terminate Mr. Busboom. A second option was to allow him to take 
the position that I described at the last hearing with a 
reduced salary. I think his salary currently is $190,000 and 
the law practice would have been to reduce it to, in this case, 
$140,000 commensurate with responsibilities of the new position 
that had been identified. The third was to reach a legal 
settlement.
    Given his prior performance as reflected in the performance 
evaluations that are in Laboratory files, our general counsel 
said that if we did terminate him, that he would have strong 
grounds for a wrongful termination suit. In these wrongful 
termination suits he would prevail and that the Laboratory 
would be responsible for paying many, many multiples of what it 
is that we have agreed to settle for.
    If you pursue the second option, which was to allow Mr. 
Busboom to be reassigned to an additional position--a new 
position at the lab at a lower salary, we would then be faced 
with paying that lower salary for an indefinite period of time.
    As you might imagine, as the years would roll on that would 
also amount to a very large amount of money. What we decided is 
in view of the recent events, the best thing that we could do 
for Mr. Busboom and for the Laboratory and for the American 
people would be to allow him to retire and to provide him with 
a fair settlement.
    Mr. Greenwood. And what was that?
    Mr. Darling. That fair settlement is a 12-month 
compensation equal to his current compensation of $190,000 per 
year, COBRA health insurance benefits for that same period of 
time, and his attorney's fees.
    Mr. Greenwood. Okay. You just explained to me how you could 
terminate the relationship or change the relationship with Mr. 
Busboom. My question is why? In other words, Mr. Busboom sat 
here and you were here and basically said he didn't do anything 
wrong. Your attorney said he advised you that if he had a 
strong wrongful termination case, that he could win. Under 
those circumstances why did the university want him to be gone?
    Mr. Darling. Well, we believe that the circumstances 
surrounding the termination of Mr. Walp and Mr. Doran were 
inappropriate. That we received discrepant views from Mr. 
Busboom and Mr. Tucker in our meeting with them on December 18 
about why they were hired in the first place. What degree of 
authority they were to be given at the Laboratory for 
conducting their investigations.
    And I would just summarize it by saying that if we were 
told they were only to do inquiries and not investigations and 
that was an important distinction for the Security Division. On 
the plane home that night as we reviewed documents, what we 
found was that the job description, the job announcement, and 
the job advertisement all suggested that they were being hired 
to do investigations which I think conveys a different level of 
seriousness about the matter than just an inquiry.
    And that we did not believe that either the Laboratory 
Security Division or the senior management of the lab took 
appropriate steps to guide them, to try to reconcile the issues 
that came up that caused the conflict that you heard about 
today, and ultimately the decision to terminate them was an 
unwarranted decision and so we have made that decision for that 
reason.
    Mr. Greenwood. How about Mr. Salgado? Tell us about his 
separation.
    Mr. Darling. I was not directly involved with Mr. Salgado. 
Dr. McTague, who will appear on a later panel, was the Vice 
President for Lab Management at that time. When Dr. Browne 
informed President Atkinson, I believe, on December 23 that he 
intended to resign from the Laboratory, Dr. McTague spoke to 
Mr. Salgado. Mr. Salgado had not yet heard the news.
    My notes reflect the fact that Mr. Salgado told Dr. McTague 
that Mr. Salgado would step down as well. He was prepared to 
assume responsibility for what had happened. The understanding 
between them, I believe, was that Mr. Salgado would come to 
work in Dr. McTague's office for a period of 6 months or be 
compensated for a period of 6 months.
    There was somehow a breakdown in communication because Mr. 
Salgado says that he did not learn that he was separating from 
the Laboratory until January 2 when the university issued the 
press announcement. I can't explain that discrepancy but then 
the university began a series of negotiations with Mr. Salgado.
    Those negotiations concluded on January 31 without reaching 
agreement and the president decided on January 31 to terminate 
Mr. Salgado who is an at-will employee and, therefore, could be 
terminated whereas Mr. Salgado and others, that I am sure we 
will be talking about, were not at-will employees. Excuse me, 
Mr. Busboom. Thank you, Mr. Walden.
    Mr. Greenwood. You testified that Charles Lobello, one of 
the University of California's outside counsel, was scheduled 
to meet with the U.S. Attorney's Office in New Mexico today. 
What do you hope to learn from the U.S. Attorney in New Mexico 
and has the University of California had any other substantive 
discussions with the U.S. Attorney or the FBI regarding the 
LANL investigations of 2002?
    Mr. Darling. Yes. Both Mr. Lobello, former U.S. Attorney, 
and Mr. Lumburg, our Deputy General Counsel, are in Albuquerque 
today to meet with a number, I think four or five members of 
the U.S. Attorney's Office there.
    This is something that we sought to do beginning of 
December right after December 18 when we learned more details 
about the terminations of Mr. Walp and Doran, but this is the 
first occasion that it was possible to hold that meeting.
    We had no substantive discussions up until then. There have 
been a number of discussions trying to explain what our 
intentions our, trying to schedule the meetings, etc. This will 
be the first meeting. The purpose of the meeting is to try to 
find out, one, what were the relationships between the 
Laboratory and the U.S. Attorney and the FBI. Were they good. 
Were they not. Were there differences in the relationship 
between Mr. Walp and Mr. Doran, on the one hand, and the senior 
Laboratory management on another.
    Is it possible that senior FBI officials were saying one 
thing to Mr. Dickson and Mr. Salgado and yet the agent involved 
in the case was saying something different to Mr. Walp and 
Doran that specifically relates to the question of whether Mr. 
Walp and Mr. Doran were authorized or not authorized to provide 
information about cases being reviewed by the FBI to senior 
Laboratory management.
    Third, how might we keep that relationship strong and more 
productive in the future. Last, whatever information they might 
have about the cases that Mr. Walp and Mr. Doran were pursuing 
and how is it that they view the professionalism and the 
competence of Mr. Walp and Mr. Doran.
    Mr. Greenwood. Thank you, Mr. Darling.
    The Chair recognizes the gentleman from Florida, Mr. Davis, 
for 10 minutes.
    Mr. Davis. Mr. Darling, before it becomes painfully obvious 
I will confess to you that I have stepped into the middle of 
this and I will do my best to try to handle this in a competent 
fashion. I am going to read you some questions that have been 
prepared by our staff and perhaps some of these points have 
been covered if I am not being sufficiently clear. I am sure 
you will help me.
    One of the points that was surprising to us this morning is 
Mr. Salgado stated that the cultural issues at Los Alamos 
including the lack of operational formality and management 
discipline caused many of the problems. But the evidence 
further suggest that neither Mr. Salgado nor Mr. Dickson really 
practiced operational formality or management discipline in 
their dealings with Mr. Walp and Mr. Doran.
    Both of them moved outside their designated roles to try to 
run criminal investigations instead of leaving that job to the 
professionals the lab had hired. Mr. Salgado wanted to direct 
on a daily basis the Mustang investigation. Mr. Dickson wanted 
to be in charge of the TA-33 investigation and control all the 
communications with the FBI and the U.S. Attorney's Office. Is 
this the way you view the situation as well?
    Mr. Darling. One of the conclusions that I think came--
there were five people who met with me at the Laboratory to 
pursue these matters. I think it is fair to say that all of our 
view was that Mr. Walp and Mr. Doran were being held to more 
exacting standard of competence than Laboratory management was 
holding either other employees or holding itself. I will give 
you a couple of examples that were brought up this morning.
    You will recall that Mr. Dickson and Mr. Salgado said that 
Mr. Walp and Mr. Doran provided inaccurate information about an 
address for Lillian P. Anaya. The confusion arose because there 
is another employee that I should add very clearly here was not 
involved in any of these matters but who has the name of 
Lillian M. Anaya.
    There was some initial confusion during that short period 
on which they were working on the Mustang case about whose 
address should be examined for the purposes of finding out 
where the Mustang had been delivered. We were told that was 
inaccurate information because they provided Lillian M. Anaya's 
address.
    Yet, that night on the plane flying home when we reviewed a 
Laboratory document that was being supported by the Laboratory 
administration, we found four separate addresses for Lillian P. 
and Lillian M. Anaya, none of which corresponded to the address 
that the Laboratory had told us was the correct address.
    Now, if there was that much confusion on the part of the 
Laboratory management and its advisors about the address, yet 
they did not hold themself to that same standard of accuracy, 
we did not understand why it was that Mr. Walp and Mr. Doran 
were being held to that standard of accuracy and why it was 
that that fact was a fact that was used for their termination.
    That is one example of the type of issues that we found 
very troubling that led us to pursue the matter with the degree 
that we have and finally to reinstate the employment of both of 
these individuals. There were other discrepancies like this. 
That wasn't the only one.
    Mr. Davis. One of the surprising points is that Mr. Walp 
and Doran were never allowed to attend meetings with Mr. 
Salgado and Mr. Dickson. Mr. Walp's counterpart at the FBI 
often attended, however. How was Mr. Walp supposed to 
understand the agreements made or have any input into them if 
he couldn't attend these meetings?
    Mr. Darling. Well, I think the Laboratory administration 
would say that Mr. Dickson was assigned the responsibility for 
liaison to the FBI and the U.S. Attorney so it was appropriate 
for that to take place. Like you, I come to the conclusion that 
the people who are working on issues need to be deeply 
involved.
    They are the ones who hold the facts and it is very 
important that those work as a team. I, again, do not believe 
that the Laboratory administration reflected that sense of a 
team involving the people who had the greatest responsibility 
in these matters and I think that was a misjudgment on their 
part.
    Mr. Davis. I believe it was Mr. Salgado who said he had 
only spoken to Mr. Walp a few times. Yet, he had a strong 
opinion that Mr. Walp was not competent. Does it surprise you 
that he never asked Mr. Walp about any of his complaints?
    Mr. Darling. That is one of the troubling issues. As I say, 
the October 24 meeting was a key meeting that was cited as a 
reason for terminating Mr. Walp and Mr. Doran. Mr. Salgado told 
us that he came back from that meeting having heard from those 
officials that the lab had blown the Mustang case.
    Mr. Salgado came back from that meeting telling us that he 
believed that meant that Mr. Walp and Mr. Doran had blown the 
Mustang case. Mr. Salgado came back from that meeting thinking 
that the U.S. Attorney and the FBI were saying that Mr. Salgado 
had blown the case by the aggressive nature in which he pursued 
it. Am I misusing names again?
    Mr. Walden. I think you meant either Mr. Dickson or Mr. 
Busboom came back.
    Mr. Darling. I meant Mr. Dickson came back. Mr. Dickson, 
who had accompanied Mr. Salgado had a different interpretation 
of the message. I am sorry for confusing names here today. Mr. 
Dickson believed it was Mr. Salgado who was being pointed to by 
the U.S. Attorney for blowing the case by pursuing it before 
the FBI was able to develop a case.
    Now, our question was why did they not speak to each other 
about that? Why did they not speak to Mr. Walp and Mr. Doran 
about that? Why did they not ask the U.S. Attorney and the FBI 
about that?
    Therefore, when you take the action to terminate someone 
and you do it on the ground that you are going to cite later, 
it seems to me you have a deep responsibility to inquire a 
little bit further than just wondering about what someone said. 
You have the responsibility to go back and be sure of what 
someone said.
    Mr. Davis. Just one more question. If you will bear with 
me, I am going to read you something that our counsel is 
attempting to write right now more abbreviated. There has been 
discussion about changing the 60-year-old culture at Los 
Alamos. Yesterday at a hearing in the California State Senate 
the university's treatment of whistleblowers was challenged. 
Mr. Nanos admitted that he had not been kind to whistleblowers.
    I want to refer you to a case we have begun to look into as 
an example of what can happen. With reference to Tab 132, this 
is a report from an administrative law judge concerning the 
termination of Jimmy Russell from S Division. Mr. Russell was a 
contract employee who had worked at S Division for 15 years. He 
was a self-assessment team leader, did audits and assessments 
of security programs.
    In 1999 he had a dispute over whether certain data should 
be identified as security infractions or security incidents. 
Shortly thereafter he was terminated and removed from the work 
place for threatening behavior. His group leader, Kevin 
Leifheight and Mr. Busboom were specifically cited as playing a 
crucial role in collecting and transmitting unfounded 
allegations of Mr. Russell's threatening behavior.
    The Judge further found the consensus for the immediate 
termination of Mr. Russell. It was reached by an emergency 
advisory panel at LANL, was substantially tainted by the 
selective and misleading information that it received from 
these UC managers. Mr. Russell won in court but lost his job. 
No disciplinary action was ever taken against either one of 
these gentlemen.
    One of the members of the emergency panel told us that Mr. 
Russell was not dangerous and that he simply went along with 
Mr. Busboom and Leifheight. We are going to look into this 
further and want you to promise that you will also look into 
the treatment of Mr. Russell and his accusers who were found in 
the wrong.
    Mr. Russell was unemployed for 2 years and lost an 
opportunity to become a lab employee because of these actions 
by Mr. Busboom, Mr. Leifheight. He is not the first Los Alamos 
contractor employee who has found himself in the street as the 
barrier of bad tidings. This is what you need to deal with if 
you are going to change the culture at the Laboratory. What can 
you do in this situation?
    Mr. Darling. Mr. Davis, let me just say that Admiral Nanos 
is the new interim director so he has only been on the job 
since January 6 so I don't think he has helped create that 
culture. I think he is one of the individuals who is involved 
in trying to change that. He has been very open. He has been 
holding meetings with all Laboratory employees receiving 
hundreds of e-mails from employees. I think there is a sincere 
belief on the part of the lab employees that he will help open 
up the communication for the reasons that you mentioned.
    With regard to Mr. Russell I first learned about the case 
in a question from Mr. Deutsch at the hearing on February 26. 
We have reviewed the decision by the representative of the 
Department of Energy. We have not talked to counsel that 
represented the Laboratory which is something we are seeking to 
do and we need to do.
    Unfortunately, it appears to be a case in which the 
personnel in the Office of Securities Inquiries failed to 
sufficiently analyze the underlying fact of the case. It 
appeared there was a failure to resolve issues short of an 
administrative hearing.
    It appeared that there was an underlying distrust reflected 
in what I briefly read in the decision from the Department of 
Energy official toward the Laboratory officials who were 
dealing with Mr. Russell so we need to understand a few more 
facts which we are trying to do in order to address your 
question. The first fact why the supervisors in the Office of 
Security Inquiries did not do an in depth analysis of the facts 
prior to termination.
    Second, why the deficiencies in the evidence and why was 
there no effort made to reconcile these differences before the 
termination. I think we have some of the same questions in this 
case that I alluded to in the case of Mr. Walp and Mr. Doran 
and it is something we are pursuing right now.
    Mr. Davis. Once you conclude your analysis, what 
conceivably is the best thing you could do to compensate Mr. 
Russell and to send the appropriate message about how people 
will be treated henceforth in situations like that?
    Mr. Darling. That is a good question, Mr. Davis, but I 
think it would be premature of me to try to respond. We really 
don't know the full set of facts. We are pursing them 
seriously. Once we have them, I think as you have seen in many 
of our options, we are prepared to take action. We will not be 
reluctant to do so. I think it is important that we look at the 
facts first.
    Mr. Walden. Thank you, Mr. Davis.
    Mr. Darling, let me just read for the record here part of a 
statement from the decisionmaker in the case. It says, ``I find 
the UC based its decision to terminate his assignment [meaning 
Mr. Russell] on the alleged incident of threatening behavior by 
Mr. Russell which lacked any substantial factual basis and 
other incidents were grossly exaggerated. Moreover, I find that 
Mr. Russell's supervisor, his group leader, and his division 
director appeared to have played a crucial role in collecting 
and transmitting unfounded allegations of Mr. Russell's 
threatening behavior.'' It goes on from there. I am sure you 
have read.
    Mr. Darling. I have skimmed it.
    Mr. Walden. Who is his supervisor or who made the decision 
to terminate? Was that Mr. Busboom?
    Mr. Darling. Mr. Walden, you are taking me beyond a level 
of knowledge that I have. As I said, I have just learned about 
this. I have not read the full case so I am not able to answer 
that question.
    Mr. Walden. That goes back to July 2000, I think. It would 
be interesting to know. That is a pretty damning indictment, 
frankly, from an administrative law judge.
    Mr. Darling. It is a very troubling statement.
    Mr. Walden. I don't envy the task that you have agreed to 
walk into either, Mr. Darling. You have a lot on your plate. I 
have a question, though. Several of them. Maybe we can move 
through them. So Mr. Busboom is going to get paid $191,000 
salary, his insurance for a year, and his attorney's fees?
    Mr. Darling. Yes. I believe the figure is $190,000 but I am 
not going to quibble.
    Mr. Walden. $190. Okay. Mr. Salgado is terminated without 
any compensation because he is an at-will employee.
    Mr. Darling. That is correct.
    Mr. Walden. What about Mr. Doran? What is his status right 
now in terms of settlement?
    Mr. Darling. I am glad you asked. You asked that question 
at the last hearing and I had to go off and attend to other 
duties. Mr. Doran is someone with whom we were negotiating 
since we reinstated him on January 17. He is now employed by 
the President's Office of the University of California as 
Director of Security for the Office of the President to do two 
things.
    One is to oversee the security guards that we have in the 
building. The second is to assist Senior Vice President Molinex 
who is responsible for business and financial matters and the 
university auditor who reports to Mr. Molinex and any special 
investigations that they deem appropriate at any of our 10 
campuses or three national laboratories.
    Mr. Walden. So his status is settled?
    Mr. Darling. It was settled. I learned this morning from 
his attorney, Ms. Bonabe--we though we had an agreement in 
terms of the settlement. I learned from her this morning that 
there is one outstanding issue. I believe she is here, or at 
least was here. It is something we are trying to understand and 
resolve as quickly as possible in the same sense of openness 
and fairness in which we have pursued his rehiring in the first 
place.
    Mr. Walden. How much compensation is he seeking?
    Mr. Darling. Let me see if my memory will serve me well 
here. I believe his compensation is $105,000 per year. That is 
for working at the university.
    Mr. Walden. Right. In terms of a settlement?
    Mr. Darling. There is a settlement amount. I am sorry but I 
am just drawing a blank on the dollar amount.
    Mr. Walden. Perhaps we can get that at some point.
    Mr. Darling. If you will bear with me for a moment I have 
something here but I don't know if it has--no, I am sorry. I do 
not have those details. I would be happy to report back to you.
    Mr. Walden. I guess at least the fundamental question with 
these sorts of settlements, who actually ends up paying that?
    Mr. Darling. I am glad you asked that question.
    Mr. Walden. Does that get billed back to the Federal 
Government?
    Mr. Darling. No. With many of the costs that we have taken 
on whether it be hiring in PricewaterhouseCoopers, whether it 
is hiring Ernst & Young, all of these settlement agreements 
will be paid for by the university. We will not seek 
reimbursement from the Federal Government for them.
    Mr. Walden. Mr. Darling, I am told that recently LANL 
disclosed that an employee came forward to declare that for a 
number of years he had been selling LANL computer source codes 
and then using the proceeds to purchase new computers for his 
section routing the money through his personal bank account. 
Who is handling this matter? What is the status of the review? 
Have you determined whether any LANL funds or computers were 
converted to this employee or others for personal gain or 
benefit?
    Mr. Darling. Yes. I learned about this, I believe, about 
the time of the last hearing or shortly thereafter. There was 
an individual who was writing unclassified computer code. I 
just want to emphasize that so we don't get confused with any 
national security issues.
    Apparently we have an apparatus where one can take 
technology and license it to the private sector so that we get 
good ideas into the market place and that way, I think, do the 
American public a great service from inventions developed with 
Federal funds.
    He instead apparently chose to go around that process 
either out of frustration with it or for some other reason. I 
don't know. I don't want to attribute motives. He did, indeed, 
license that software code to a number of firms. We are looking 
into that. The university auditor is looking into that 
aggressively.
    One of the issues we had to deal with was whether to put 
him on investigatory leave while this was going on. The 
decision was made that since he was very cooperative there was 
no need to do that. We have learned that there are at least 
$100,000 involved. Perhaps more. He says he used it solely to 
make purchases at the Laboratory and that is one of the things 
we will be investigating along with, frankly, reviewing all of 
his bank records and any other financial transactions and see 
if that is true.
    Mr. Walden. I appreciate that, Mr. Darling. I guess the 
entrepreneurial spirit is alive and well at the lab. We have 
seen a number of different examples, this being among them. 
What are the safeguards? How do you know that somebody else 
isn't doing this that hasn't come forward or hasn't been 
caught? How do you keep track of that? Do you feel the system 
is adequate?
    Mr. Darling. Mr. Walden, I don't know the system at Los 
Alamos very well. The University of California has one of the 
most--let me just back up and say this comes about as a result 
of the Bayh Act in the early 1980's. The idea was to take ideas 
that at that point languished within the realm of the Federal 
Government, put them to work in the market place, and drive the 
creation of new companies, jobs for people, and much of what 
you have seen.
    The University of California is the largest licenser of 
technology of any university in the United States. I believe 
our revenues last year were around $80 million from licensing 
everything from technology, etc. We have a very good system. 
You are obliged as an employee when you go to work at the 
university, or one of our labs, to sign an agreement that you 
will turn over all of your patentable inventions to the 
University of California.
    We then have a process that provides an incentive back to 
the scientists so that they will receive personally some of the 
money in return. The department will receive the money and the 
university will receive some money in order to achieve that. We 
have a process that is reviewed, audited, and so forth in order 
to try to ensure the sanctity of that.
    Mr. Walden. Yes. I understand. I guess my question would be 
the process for somebody who wants to play by the process is 
pretty easy to follow. The question is what are the safeguards 
to make sure that somebody doesn't go around that. I assume you 
will be looking into that.
    Mr. Darling. Yes.
    Mr. Walden. Reportedly the FBI recently interviewed Janet 
Campbell, an architect formerly employed by UCSF regarding 
allegations that certain construction engineering contractors 
violated California law regarding bids for UC construction 
projects. Are you aware of any lawsuits or allegations of bid 
rigging, price bundling, or improper drafting of proprietary 
building specifications at recent UC construction projects at 
LANL or Sandia?
    Mr. Darling. I am not. I did learn from Mr. Molinex that 
there was a complaint. I don't know whether it was by this 
individual. We are looking into a complaint. I was not aware 
that it was at Los Alamos. Sandia is a separate Laboratory. I 
am not aware of anything to do with Sandia.
    Mr. Walden. Reportedly the plaintiff in one of these 
lawsuits against UC is scheduled to meet with the 
representatives of the UC Office of the President and has asked 
that Mr. Doran attend this meeting. Apparently UC has denied 
this request. Do you have any information on that?
    Mr. Darling. That is the first I have heard about this, Mr. 
Walden. I would be happy to inquire about it as soon as the 
hearing is over.
    Mr. Walden. Mr. Busboom was paid to retire. What about 
Tucker and Katherine Brittin?
    Mr. Darling. Mr. Tucker is a very similar circumstance to 
Mr. Busboom. He will also be retiring on April 2. The terms of 
the agreement are quite similar. One year of compensation at 
his compensation which I believe is $165,000 per annum, 1 year 
of COBRA insurance benefits, and, in this case, partial 
attorney's fees.
    Mr. Walden. And Katherine Brittin?
    Mr. Darling. Katherine Brittin will be departing from the 
Laboratory on April 17. We have provided, again, for the same 
reasons that I explained earlier, 1 year of salary, 18 months 
of COBRA benefits but no attorney's fees or other costs.
    Mr. Walden. All right.
    Mr. Darling. I realize that these are very large numbers. 
For many Americans these are salaries that they might never be 
able to aspire to in a lifetime. I don't want to minimize in 
any way the dollar amounts involved, but I do want to just to 
reiterate that when we looked at the alternatives, they would 
have indeed been much, much more expensive.
    Mr. Walden. There are a lot of people in my district who 
would love to come there and get fired or retire early.
    Mr. Darling. I understand that.
    Mr. Walden. It is outrageous. I understand, I guess, what 
you face. It seemed to me that given the issues that are 
involved in the lab and the people that have not been held 
responsible in any measure seem to be able to milk this system 
and walk out the door with an extraordinary settlement and----
    Mr. Darling. Mr. Walden, your display is one that my 
colleagues that are here with me today have seen me express in 
recent weeks as I have pursued how it is that we might come to 
a different conclusion here. They will tell you that I pushed 
very hard for termination. It was only after repeated attempts 
on my part to find a way to do so that we ended up where we are 
today.
    Mr. Walden. Do you concur with the IG's comment that it 
was, I believe the term was, incomprehensible that Mr. Walp and 
Mr. Doran were fired?
    Mr. Darling. I do. In my oral testimony on February 26 I 
said that not only was it unwarranted, but that we did agree 
with the DOE Inspector General's term that we found it utterly 
incomprehensible.
    Mr. Walden. If everybody agrees that it is 
incomprehensible, why isn't the person who did the firing and 
signed the letter fired without compensation?
    Mr. Darling. Mr. Salgado was terminated without 
compensation.
    Mr. Walden. Mr. Busboom signed the letter. Didn't he?
    Mr. Darling. Yes, he did. I think, however, he testified 
today that he did not make the decision and that is one of the 
points of discrepancy that became evident on December 18. Mr. 
Busboom told us initially that he had made the decision to 
terminate them for a variety of performance reasons.
    Then as we progressed through the day and informed Mr. 
Busboom that there had been a meeting on November 18 at which 
their termination was discussed and ultimately settled, we 
asked Mr. Busboom whether he had been aware of that meeting. 
Mr. Busboom expressed great surprise. He had not only not 
participated in the meeting, he had not been aware that the 
meeting had taken place.
    He had not been aware that the chief of staff, the director 
and deputy director of the Laboratory, had offered the 
termination letter. He only knew that it came from his 
immediate supervisor, Mr. Holt. I think Mr. Busboom would 
acknowledge as he did today that he did not make the 
termination decision, that it was made by Mr. Salgado. I think 
I heard him say that earlier this morning.
    Mr. Walden. But it sounds like you just said that he told 
you initially that he made it based on a series of reports.
    Mr. Darling. I believe he thought he did. Then I think as 
we pursued our interviews with the 14 people and new 
information came out, I think we gave Mr. Busboom information 
that caused him to realize that he had not after all made the 
decision, that the decision had been made for him and the 
letter had been drafted for him.
    I would say what he did was he probably believed there were 
performance inadequacies that might have justified the 
termination and he edited very slightly the letter but the 
decision was made by Mr. Salgado as he said to us, and as he 
said to you.
    Mr. Walden. My time has expired but that is the most 
bizarre story I have ever heard in employment and I have been a 
private employer for 17 years. I don't understand how somebody 
thinks they are letting somebody go and then discovers they 
really didn't do it.
    Mr. Darling. It is another instance of troubling issues 
that left us not only perplexed but troubled and why it is that 
we pursued the issues well before we knew that your committee 
was even interested. This was a very troubling matter to the 
five of us as you might imagine.
    Mr. Walden. I can.
    Mr. Greenwood. My wife just got me to buy her new drapes 
and she convinced me it was my idea.
    Mr. Darling. I think the chairman had seen the movie ``My 
Big Fat Greek Wedding'' where one can see an example of that 
transaction taking place.
    Mr. Walden. And now for either a song or a poem, I hope. 
The gentleman from Massachusetts, Mr. Markey, is recognized for 
10 minutes.
    Mr. Markey. I can actually go to ``My Big Fat Greek 
Wedding'' and I think I am going to go to that for my opening 
moment then. I will say that the problem with the University of 
California, Mr. Darling, is that they thought they could spray 
Windex on anything and it would make it okay like the father in 
``My Big Fat Greek Wedding.'' It is important ultimately to 
have to deal with the issues. You just can't spray it away and 
hope that it is gone.
    The questions I have for you relate to the way the 
University of California treats whistleblowers. In the case of 
Mr. Walp and Mr. Doran, their stories were all over the press. 
Congress weighed in. UC has, at least, partially remedied the 
situation.
    Not all whistleblowers at UC get much attention. Take, for 
example, Dee Kotla who worked for Livermore until 1997. She was 
fired after she testified that she had witnessed sexual 
harassment at the lab. The lab said she hadn't been retaliated 
against but rather was fired for ``improperly using her 
telephone and computer.''
    It turned out she made a whopping $4.30 worth of personal 
calls. She sued and she won $1 million. The university 
appealed. She then asked for her legal fees, about $700,000 to 
be paid by UC, and she won that, too. The University of 
California continues to appeal. The University has run up at 
least $800,000 in legal fees fighting this case for 6 years, 
all over $4.30 worth of personal calls bringing the grand total 
to $2.5 million, all supposedly because of a $4.30 telephone 
call.
    In the meantime, Dee Kotla has to live each day of her life 
explaining why she was fired to perspective employers. Now, my 
question is, Mr. Darling, are you going to pay for all these 
legal fees or is the Federal Government going to pay for all 
the legal fees?
    Mr. Darling. I do not know the answer to that question, Mr. 
Markey, because I am not familiar with the case, but I assure 
you I will look into it.
    Mr. Markey. Well, again, you said earlier, ``We are going 
to pay for the legal fees'' in this one case that we were 
talking about. I wouldn't want anyone to get the misimpression 
that you are willing to assume all of these legal fees since 
the Federal Government ultimately reimburses you, the 
Department of Energy. Unfortunately, that creates a 
disincentive for you to settle since the Department of Energy 
will reimburse you for continuing on with this case 
indefinitely over a $4.30 phone call.
    I will get to my question momentarily, but before I do I 
want to name just a few other whistleblowers that the 
University of California has forced to fight for justice for 
years since they have not had the benefit of major press 
attention or a congressional hearing.
    Michele Doggett. I would like to say her name. She was 
fired by Livermore in 1999 after she disclosed waste, fraud, 
and mismanagement. Don Adrian who alleges that in 1997 
Livermore conspired to steal a defense contract from his 
company after he reported waste, fraud, and mismanagement of 
funds that the lab was supposed to use as part of a cooperative 
research and development agreement.
    Janet Benson who has had a whistleblower case pending 
against Livermore since 1994. Charles Quinones, a security 
guard, fired by Livermore right after September 11 after he 
disclosed security and safety problems. And you have already 
been talking about Jimmy Russell, a former Los Alamos employee 
who was fired after making disclosures of security violations 
who had to fight for years with no income before he finally 
won.
    Is the University of California, Mr. Darling, committed to 
quickly resolving these and the other whistleblower cases?
    Mr. Darling. Mr. Markey, you bring these to my attention 
for the first time. I have only been in this position since 
January 8, as I mentioned before you came into the room. If you 
bring them to our attention, we will look into them with a 
degree of seriousness that we have shown thus far.
    Mr. Markey. The university often argues in court that it 
has State sovereign immunity and, therefore, can't be sued 
under Federal statutes even though these activities occurred at 
a Federal nuclear weapons lab. It then turns around and bills 
DOE and American taxpayers for its legal fees. How do you 
justify that?
    Mr. Darling. I am not an attorney and I am simply not in 
the position to have the information to comment in response to 
your question.
    Mr. Markey. Okay. Now, in each of these cases that I have 
just listed, is it your understanding that the Department of 
Energy will bear the legal cost or will the University of 
California will bear the legal costs?
    Mr. Darling. Since this is the first time I have heard of 
them, I am in no position to answer you either way.
    Mr. Markey. Again, I continue to believe that 95 percent of 
these costs are passed onto the Department of Energy, again 
creating a tremendous disincentive for you to ever settle since 
the Federal taxpayer will pick up the legal fees. As a result, 
you could continue harassing these poor people forever at 
Federal taxpayers' expense. I just think there is a point in 
time at which this just has to end.
    If you are willing to put these bills on the University of 
California, these incredible legal bills, that is one thing, 
but if you going to try to continue to put this on the Federal 
tab, believe me, okay, it is not going to last much longer 
because I think there is a bipartisan commitment here to end 
this practice of harassing these people indefinitely.
    Now, you said earlier that one of the individuals who fired 
the two Los Alamos whistleblowers just agreed to leave the lab 
for settlement of $190,000, health insurance, and all his legal 
fees. This is the guy who fired the whistleblowers. Have you 
ever offered a year's salary, health insurance, and legal fees 
to Mr. Walp or to the other whistleblowers who were wrongly 
fired?
    Mr. Darling. Mr. Markey, we had an extended discussion 
about this right before you walked into the room. I did say 
that the individual who terminated their employment was 
terminated himself with no compensation whatsoever. Second, we 
have rehired both Mr. Walp and Mr. Doran at their full former 
salaries. I think we have shown the seriousness of intent here 
to try to redress these improper activities.
    Mr. Markey. So Walp is a consultant and you have rehired 
him?
    Mr. Darling. We rehired both Mr. Walp and Mr. Doran. Let me 
just back up and walk you through the sequence. We learned 
about their determination on November 25 midday. They had been 
terminated and escorted off the lab property that morning. We 
immediately began to pursue information because we did not feel 
that the reasons that were offered to us for their termination 
were appropriate.
    In late December after we learned that they had an attorney 
we started meeting with them. That meeting occurred on January 
17. As I explained at the last hearing, once we had an 
opportunity to meet with them and hear their story, we 
immediately offered to rehire them and did so that very day.
    Coincidentally, that was the day a letter arrived from, I 
believe, this committee urging us to do that same thing. Your 
investigators had met with them beforehand and I think it was a 
display of our honesty and integrity that we came to the same 
conclusion that you did and decided to rehire them.
    They were rehired not only from that day forward, Mr. 
Markey, but we did pay their retroactive pay back to the date 
they were originally fired and we immediately entered into 
settlement discussions to try to compensate them financially 
for the fact that they had been terminated improperly in our 
judgment.
    In addition to that, we have with the exception of the one 
item I mentioned a moment ago to your colleagues reached 
agreement with Mr. Darling going forward to assume the new 
position at the university. With regard to Mr. Walp, Mr. Walp's 
attorney and our attorney are still in settlement discussions 
so I am not able to comment further on that.
    Mr. Markey. I guess what I would say is that if the guy who 
fired the whistleblowers gets $190,000, health insurance, and 
all his legal fees, somebody who gets fired should at least be 
offered the same deal. If it is not that as a minimum, then you 
have to question whether or not there is an uneven playing 
field still in existence at UC in terms of how you view these 
two groups of people, the perpetrator and the victim.
    Mr. Darling. You make an important point. What I did say is 
that while Mr. Walp and Mr. Doran are being compensated, the 
individual who fired them is receiving no compensation 
whatsoever. That is Mr. Salgado. Mr. Salgado was terminated 
without compensation.
    Mr. Markey. So the $190,000 is going to Busboom?
    Mr. Darling. Not to Mr. Salgado.
    Mr. Markey. Not to Mr. Salgado. But Busboom did sign the 
letter that canned these people.
    Mr. Darling. That is correct. This morning Mr. Busboom 
testified, and as I was describing the scenario to your 
colleagues before you walked in, that is not our judgment, nor 
is it the judgment of Mr. Busboom that it was Mr. Busboom who 
terminated them. Mr. Busboom was handed a letter that he 
signed. Mr. Salgado made the decision. Mr. Salgado has admitted 
to making that decision.
    Mr. Markey. So you consider him to be an innocent party 
here?
    Mr. Darling. I do not consider him to be an innocent party. 
What I did say is that we had three options. We had the option 
to terminate Mr. Busboom. We had the option to allow him under 
Laboratory policy to be reassigned to another position at the 
Laboratory at a lower salary. Or we had the opportunity or the 
option to settle the matter.
    Based on a review by general counsel of Mr. Busboom's 
previous employment and performance evaluations at the 
Laboratory, I was informed after extended discussions that if 
we had terminated him, he would have grounds for successful 
wrongful termination suit that would have cost the university 
many, many multiples of the $190,000 figure you just described.
    Second, if we had reassigned him at a lower salary, he 
would have had indefinite employment which would have kept him 
on the payroll at a very large dollar amount ultimately, or the 
option of settling as we did. I explained to Mr. Walden a 
moment ago, I realize these are very large dollar amounts and I 
in no way wish to minimize them. I do wish to say that was the 
lowest dollar amount that we felt we could conclude this 
matter--with which we could conclude this matter.
    Mr. Greenwood. The time of the gentleman has expired. The 
gentleman from California, Mr. Radanovich, is recognized for 10 
minutes.
    Mr. Radanovich. Thank you, Mr. Chairman. I will be brief, 
Mr. Darling, with my questions. They are really surrounding the 
questions that I have on CREM devices. My first is regarding 
that incident and wanting to know whether there was any 
classified material that was missing or vulnerable. Was it 
classified material or was it declassified? What was the nature 
of the material?
    Mr. Darling. Let me back up and say that in, I believe, 
November or December 2002 Los Alamos did a complete and 
comprehensive inventory of all classified removable media. That 
is what CREM stands for, classified removable electronic media; 
disks, flash cards, etc.
    There were over 61,000 items. They found none to be 
missing. What I understand is there are a number of instances 
that came up prior to that. There was one hard drive carrier 
that had been bar coded improperly, was maintained in a 
properly secured and stored area where it was not accessible to 
anyone who did not have access to that area.
    But as I think Admiral Nanos indicated on January 15, the 
person who put that barcode on unfortunately did not check to 
see whether there was an electronic media with classified 
information in it. To this day we do not know whether there was 
such an item. It does not show up on the inventory.
    Every effort to try to determine whether it existed is 
negative so I cannot answer your question but we do not believe 
after checking to the best of our ability that there was any 
classified information missing.
    Mr. Radanovich. Has the system that you have set up since 
then, has it shown itself to be effective?
    Mr. Darling. We are changing the system. It is becoming 
much more robust for the very purposes that you allude to. We 
will be checking it thoroughly to make sure that it does. I 
would ask you to hold us accountable for doing that.
    Mr. Radanovich I am going to be quick because we have a 
vote going on, but has Los Alamos officials followed Department 
of Energy and NNSA procedures in self-assessing whether any of 
the classified material was missing or vulnerable and did the 
lab report the incidents to the DOE?
    Mr. Darling. My understanding, Mr. Radanovich, is that the 
Laboratory reported the items to DOE within the time period in 
accordance with DOE guidelines and that the lab is following 
DOE guidelines.
    Mr. Radanovich. Were any classified material mislabeled or 
destroyed during routine Laboratory efforts to discard old CREM 
devices?
    Mr. Darling. My understanding is that any classified 
material whether on a hard drive or on removable medium is put 
through an extensive and very carefully monitored process to 
first erase any information from the medium, second to sanitize 
it, and third to destroy it so that there is no possibility 
whatsoever after doing that that anyone can obtain the material 
that was originally stored on those devices.
    Mr. Radanovich. All right. Thank you very much.
    Mr. Greenwood. Thank you, gentlemen. At the risk of causing 
our future witnesses to pull out their hair, let me mention 
that we have three votes on the floor. We will recess and we 
will return here at 5:30. We will then bring Mr. Hernandez and 
Mr. Marquez forward and we will try to speed up the process 
thereafter. We don't have anymore votes on the floor tonight so 
that should go more quickly.
    Mr. Darling, thank you again for your testimony. You are 
excused and the committee is in recess.
    Mr. Darling. Thank you, Mr. Greenwood, for accommodating my 
schedule. I appreciate it.
    [Whereupon, at 5:06 p.m. the subcommittee recessed to 
reconvene at 5:43 p.m.]
    Mr. Greenwood. Okay. The committee will return to order 
again. I apologize to all of you gentlemen for the long day.
    Wisely, the staff has decided we are going to combine 
panels two and three so welcome to John Hernandez who is the 
former BUS-5 team leader at Los Alamos; Mr. Richard A. Marquez, 
Associate Director for Administration at the lab; Dr. John 
Browne, Senior Research Scientist and former Laboratory 
Director; Mr. John P. McTague, Professor of Materials, 
Materials Department, former Vice President of Laboratory 
Management, University of California; Mr. Ralph Erickson, 
Manager of Los Alamos National Laboratory Site Office at the 
NNSA.
    I should note that Mr. Marquez is accompanied by Mr. Stan 
Hettich, Director of Procurement at Los Alamos. Welcome. You 
gentlemen have heard me say that this is an investigative 
hearing and it is our custom to take testimony under oath. Does 
anyone object to testifying under oath?
    Witnesses. No.
    Mr. Greenwood. You are permitted pursuant to the rules of 
the House and this committee to be represented by counsel. Do 
any of you wish to be represented by counsel?
    Witnesses. No.
    Mr. Greenwood. Okay. If you would stand and raise your 
right hands.
    Okay. Please be seated. You are under oath. I suspect that 
we will start here with Mr. Hernandez.
    Mr. Hernandez, you don't have testimony? Is that correct?
    Mr. Hernandez. Not an opening statement, sir.
    Mr. Greenwood. Not an opening statement. Okay. Very well.
    Then Mr. Marquez.

  TESTIMONY OF JOHN HERNANDEZ, FORMER BUS-5 TEAM LEADER, LOS 
   ALAMOS NATIONAL LABORATORY; RICHARD A. MARQUEZ, ASSOCIATE 
 DIRECTOR FOR ADMINISTRATION, LOS ALAMOS NATIONAL LABORATORY; 
JOHN C. BROWNE, SENIOR RESEARCH SCIENTIST AND FORMER LABORATORY 
  DIRECTOR, LOS ALAMOS NATIONAL LABORATORY; JOHN P. McTAGUE, 
   PROFESSOR OF MATERIALS, MATERIALS DEPARTMENT, FORMER VICE 
PRESIDENT FOR LABORATORY MANAGEMENT, UNIVERSITY OF CALIFORNIA, 
   SANTA BARBARA; AND RALPH E. ERICKSON, MANAGER, LOS ALAMOS 
  NATIONAL LABORATORY SITE OFFICE, NATIONAL NUCLEAR SECURITY 
     ADMINISTRATION, U.S. DEPARTMENT OF ENERGY, LOS ALAMOS

    Mr. Marquez. Mr. Chairman, my name is Rich Marquez and I am 
the Associate Laboratory Director for Administration, Los 
Alamos National Laboratory. Thank you for the opportunity to 
provide testimony today regarding the Laboratory's procurement 
and property management issues.
    I have submitted a written statement and I would like that 
to be included as part of the record.
    Mr. Greenwood. It will be.
    Mr. Marquez. Thank you. Within 90 days of beginning my 
assignment in February 2002 I directed the development of a 3-
year strategic plan to address what I considered to be 
weaknesses surrounding the procurement function. Simply stated, 
the Laboratory's procurement function had not kept pace with 
the robust science and technical side of the house.
    When we did develop a procurement excellence plan, in 
hindsight it is clear we prescribed a tune-up when an overall 
was probably required. The special inquiry of the DOE Office of 
the Inspector General found no evidence of coverup. However, 
there were concerns and allegations that the laboratory had 
obscured or even concealed issues regarding property and 
procurement vulnerabilities. I would like to address a number 
of these issues.
    First is the so-called Palmieri memo dated April 10, 2002. 
According to the IG the Laboratory issued and immediately 
rescinded a memorandum requiring corrective actions to address 
problems regarding the management of Government property.
    While this has raised some doubt about management's 
commitment to address control weaknesses, the fact is that the 
memo was reissued by me after full and formal coordination with 
the Laboratory senior executive team as well as with Mr. 
Palmieri and his subordinate staff. And, I might add, in my 
humble opinion, between fiscal year 2001 and fiscal year 2002 I 
think it contributed significantly to the reduction in the 
unlocated, lost, and stolen property.
    The next issue I would like to address is the Mesa 
contract. Sometime in mid to late July 2002 I became aware that 
the FBI had begun an investigation regarding alleged theft in 
connection with purchases made under the Mesa contract. Mesa 
contract is a blanket order agreement which was awarded on 
November 1, 2000. In 16 months the contract had grown from a 
simple $100,000 task order to $2.7 million.
    As I have indicated to the staff of this subcommittee and 
their field investigations, I cannot defend the manner in which 
this contract was administered. The contract has now expired 
but we have taken a number of important corrective steps 
including reassignment of Mr. Hernandez' team leader.
    To his credit his wrote a letter to his management 
acknowledging his responsibility and accountability and by his 
own admission his skills are more suited to major procurement 
staff work than to supervision and management. In addition, as 
Mr. Darling has now reported twice at this subcommittee, the 
Layton-PricewaterhouseCoopers team is now conducting an 
extensive review of the entire procurement function.
    Now I will address the various purchase card transactions 
that have come to the attention of this subcommittee. On July 
25, 2002 I was advised about the attempt to purchase a Ford 
Mustang using a laboratory purchase card. At the same time I 
was told of $1 million of other purchases made by the same card 
holder over a 2-year period from a company called G&G 
Industrial Supply. I later earned that the card holder had 
virtually unlimited purchasing authority levels.
    Within a couple of weeks I also learned about casino 
advances made under a Laboratory purchase card issued to a 
secretary in the Procurement group. To compound the problem, I 
discovered that she was a subcontractor employee and as a 
member of the Procurement organization she could self-approve 
her purchases on the card.
    Shortly thereafter Mr. Salgado and I agreed to pursue a 
twofold strategy for dealing with the purchase issues. First, 
we appointed an internal committee to take a critical look at 
our current purchase card procedures and recommend immediate 
changes. As a result, within shortly over a month I issued 
revised purchase procedures on August 26, 2002.
    Second, we established an external review committee led by 
John Layton to do a thorough review of the Laboratory's 
purchase card program. This team and its work has been 
described to you in previous testimony by Mr. Darling.
    Now that we have the Layton report and the UC audit report, 
we will develop a formal corrective plan that meets the 
challenge given us by Chairman Greenwood when he visited the 
Laboratory. That is, we are committed to constructing a model 
purchase card program.
    We continue to aggressively pursue property management 
corrective actions as well including the beginning on February 
3 or a wall-to-wall inventory and the formation of a cross-
cutting team to take a hard look at the entire cradle-to-grave 
supply chain management process at the laboratory.
    We need to manage our property acquisition in a more 
integrated fashion. In conclusion, let me say that new 
processes and technology are only part of the solution. The 
real lesson learned from this experience is that people are our 
most effective internal control.
    It is precisely because we do not have a culture of thieves 
that there was not a great exploitation of the flaws in our 
processes and the breakdown of our business practices. The most 
recent Harvard Business Review has an article entitle, 
``Predictable surprises and disasters you should have seen 
coming.'' The article makes the point that by actively 
encouraging people to speak up, executives can bring to the 
surface many problems that might otherwise go unmentioned.
    I think Interim Director Nanos recognizes this and has 
taken actions to create an open environment that celebrates the 
fact that people are now bringing issues forward. This is the 
point that DOE Inspector General Greg Freedman made in his 
testimony about changing the culture and acting on employee 
concern.
    Thank you for the opportunity to present testimony.
    [The prepared statement of Richard A. Marquez follows:]
 Prepared Statement of Richard Marquez, Associate Laboratory Director 
           for Administration, Los Alamos National Laboratory
    My name is Richard Marquez, and I am the Associate Laboratory 
Director for Administration, Los Alamos National Laboratory, a position 
I have held since February of 2002.
    I am joined today by John Hernandez and Stan Hettich of the 
Laboratory's Business Operations Division, which reports to me.
    I thank you for the opportunity to provide testimony regarding the 
procurement and property management issues reported in this and other 
public forums.
    Virtually all of my career has been directly or indirectly related 
to the nuclear weapons complex and to federal resources management. 
Because of that, I keenly appreciate that the road to strong mission 
and program performance at a national laboratory leads through the 
effective and efficient buying of goods, services, construction, and 
equipment.
    Within 90 days of beginning my assignment, I directed the 
development of a three-year strategic plan to address what I considered 
to be weaknesses surrounding the procurement function at the 
Laboratory. I did this after reviewing the internal and external audit 
reports on file and after considering some key metrics on volume of 
procurement activity versus staffing.
    I was struck by the fact that from 1996 to 2002, the procurement 
volume had virtually doubled from $620 million to well over $1 billion. 
But I was concerned when I discovered that staffing over that same 
period had remained almost static. Moreover, attrition and leadership 
changes were continual. When I arrived at the Laboratory the third 
procurement director in a three-year time frame had only recently taken 
the helm.
    I also found very critical audit reports that were somewhat dated 
and that reputedly had been responded to with corrective actions by 
management.
    Of note, I also found ``Outstanding'' performance evaluation 
ratings under the contract for procurement as well as virtually all 
business management functions, including property management.
    In spite of what I regarded as somewhat conflicting indicators, it 
was my view then that the Laboratory's procurement function had not 
kept pace with the robust science and technical side of the house. That 
view, and my resolve to upgrade the procurement function, has only 
increased since that strategic plan was developed. What has changed is 
the understanding of the depth of the problems and the extent of 
commitment required to fix those problems--the diagnosis was for a 
tuneup and an overhaul is required.
    As Bruce Darling testified to this Subcommittee two weeks ago, the 
University of California has taken a very active and strong role in 
correcting the deficiencies that have been reportedly publicly. I am 
heartened by the commitment and resolve that the University has shown 
in tackling the many issues we face. Coupled with Pete Nanos's 
leadership, I believe that we can and will make changes and that we can 
sustain those changes over time.
    I am not surprised by the special inquiry of the DOE Office of 
Inspector General (OIG) in that it found no evidence of coverup 
regarding the problems at the Laboratory. However, I would like to 
address reported concerns and allegations that the Laboratory 
``obscured'' or even concealed issues regarding property management or 
procurement vulnerabilities.
                          property management
    In the January 28, 2003, DOE OIG report on their special inquiry of 
Los Alamos National Laboratory operations, the report concluded that 
the Laboratory took a number of actions that ``obscured'' serious 
property management and security problems.
Palmieri Memo Rescinded and Reissued
    One area of OIG concern involved the finding that the Laboratory 
``issued, then immediately rescinded without adequate explanation'' a 
memorandum requiring corrective actions to address problems regarding 
the management of Government property. In the opinion of the OIG, this 
raised doubts about management's ``commitment to address identified 
control weaknesses''. The memorandum has also been the subject of 
various news media reports.
    Let me list a quick chronology regarding that memorandum:

 The memorandum in question was issued by the former Laboratory 
        Chief Financial Officer, Thomas Palmieri. Mr. Palmieri's 
        memorandum was dated April 10, 2002, but not formally issued 
        until April 18, when it was distributed via e-mail.
 The memorandum was retracted by Mr. Palmieri on April 19 as a 
        result of direction I received from Joe Salgado, former 
        Principal Deputy and Chief Operating Officer. He was sensitive 
        to a wide-spread distribution of employees' names beyond those 
        who had a need to know this information and, because of the 
        importance of the subject, Mr. Salgado wanted a more formal 
        ``top down'' discussion and dissemination of the memorandum 
        from me to each of the other Associate Laboratory Directors.
 With respect to his concern for a more formal distribution, on 
        Sunday, April 28, I wrote an e-mail to the Laboratory's senior 
        executive team in advance of an April 29 weekly senior 
        executive meeting conducted by the Laboratory Director every 
        Monday morning. The e-mail covered four topics, three of which 
        were related to business and financial management, which I 
        intended to discuss as agenda items for that meeting. The e-
        mail also included an advance copy of a memorandum that I 
        formally distributed April 29.
 On April 29, I did, in fact, re-issue the memorandum to the 
        Laboratory's senior executive team.
    It is significant to note that, on the morning of April 29, prior 
to the senior executive team meeting, I forwarded my April 28 e-mail to 
Mr. Palmieri, his deputy Dennis Roybal, his chief of staff, and the 
Laboratory's two principal property managers, Allen Wallace and John 
Tapia. It should also be noted that the formal distribution of the 
April 29 memorandum also included those same individuals as well as the 
60 Laboratory property administrators and the 120 Laboratory business 
team leaders deployed across the Laboratory.
OIG Interview of Mr. Palmieri
    I mention this because Mr. Palmieri, when interviewed on December 
18, apparently forgot that the memorandum had been re-issued and 
advised the OIG otherwise. I do not agree with the DOE OIG's conclusion 
that we ``obscured'' serious property management problems but it would 
appear that we did obscure the very serious manner in which we followed 
up on property management issues.
The April 29 Memorandum
    My April 29 memorandum was virtually the same as the Palmieri 
memorandum except that each Laboratory Associate Director was given the 
relevant unlocated, lost, and stolen property lists for each Division 
that reported to him. It included the guidance that all reasonable 
efforts be made to locate such property and provided that, after review 
of the circumstances for the loss, managers ``may deem that individuals 
should be held accountable or otherwise disciplined''.
    Attached to the memorandum were the same four reporting mechanisms 
intended by the Palmieri memorandum:

 missed assignment of property to accountability statements 
        within 60 days as required by Laboratory policy;
 lost and stolen property per Division;
 inventory exceptions, by which we intended to report 
        discrepancies between assignment of property and exceptions 
        taken by the assigned custodian; and,
 trend reports.
    Of these four reports, the Property Management Group did issue the 
60-day assignment report and the inventory exceptions report was 
produced in accordance with Appendix F requirements of the prime 
contract. The property group produced trend reports on request of 
management. The lost and stolen report was sent with my April 29 
memorandum. Also, I received two corrective actions plans, one for a 
Division with unusually high levels of property unaccounted for and one 
for an Associate Director covering all of the Divisions reporting to 
him.
The Year-End Results
    I think any fair assessment of the results of the re-issued 
memorandum and the Property Management Group's follow up actions would 
conclude that the memorandum was highly effective in raising the 
management level of attention to property management.
    At the time the memorandum was distributed, the cost of 
``unlocated'' property in the inventory was $735 thousand and by 
September 30, 2002, that number was down to $484 thousand. With respect 
to lost or stolen property, we dropped from $533 thousand at the time 
of the memorandum to $206 thousand by September 30, 2002.
Clarification of Reporting Lost and Stolen Property
    The DOE OIG special inquiry found a substantial degree of 
``dysfunction'' with respect to roles and responsibilities regarding 
lost and stolen property. As indicated by Mr. Darling in his February 
26 testimony, the Laboratory has clarified that lost and stolen 
property is to be reported to the Office of Audits and Assessments, 
which now directly reports to the University of California Office of 
the President.
                           the mesa contract
    The next issue I would like to address is the Mesa Contract and the 
involvement by people in the Business Operations Division. That 
involvement was two fold. One, Business Operations Division 
administered the contract. And, two, personnel in Business Operations 
Division supported Security Division and the Federal Bureau of 
Investigation in the criminal investigation of property purchased under 
that contract for personal use.
    Some time in mid-to-late July, 2002, Joe Salgado, then Principal 
Deputy and Chief Operating Officer of the Los Alamos National 
Laboratory, advised me that the Federal Bureau of Investigation (FBI) 
had begun an investigation regarding alleged criminal improprieties in 
connection with purchases made under the Mesa Contract. Mr. Salgado did 
not share with me many details but advised me that my ``need to know'' 
was in order to make sure the FBI and our security organization had 
appropriate support from the Business Operations Division in terms of 
getting access to contractual records.
Security Division and FBI investigation
    Shortly after this meeting, Stan Busboom, then Security Division 
Director for the Laboratory, called me and requested support from John 
Tapia, Deputy Group Leader for Property Management. Mr. Busboom advised 
me that John's expertise in property management would be useful to Glen 
Walp and Busboom as they worked with the FBI on the TA33 case. I agreed 
to that support and notified John Tapia that he was to provide any 
support required from the Security Division.
    To my knowledge, Mr. Tapia provided excellent support to Mr. Walp, 
Mr. Doran, Mr. Sprouse, Mr. Tucker, and even the FBI agent in charge. 
According to Mr. Tapia, his support included a description of the 
buying and property functions, copies of the Mesa Contract, credit card 
transactions, and Local Vendor Agreement records.
    Because Mr. Tapia required information from the procurement 
organization as well as his own property management group, Mr. Tapia 
would call me and ask me to advise procurement officials that he was 
authorized to request business records. I did that and, so far as was 
ever reported to me, the security investigation on the TA33 case was 
fully supported by the Business Operations Division and the staff in my 
directorate.
Procurement Background
    I would like to make some observations about how the Mesa Equipment 
& Supply contract got to where it was and where the contract stands 
now.
    Before it had its own contract with the Laboratory, Mesa was a 
supplier to the Laboratory as a sub-tier contractor to a Just in Time 
vendor known as Frank's Supply. Their volume of sales under the Just in 
Time arrangement was reportedly on the average of $400 thousand per 
year.
    The Mesa Contract was awarded by the Laboratory as a small business 
contract on November 1, 2000, with a not-to-exceed ceiling of $100 
thousand. On March 6, 2001, the contract was modified to increase the 
ceiling to $500 thousand. On January 23, 2002, the fourth and final 
change to the dollar ceiling increased the ceiling to $2.7 million. In 
sixteen months, the contract had grown from $100 thousand to $2.7 
million.
    The contractual arrangement is referred to as a Blanket Order 
Agreement which, in simple terms, means that employees with purchase 
authorization across the Laboratory can make purchases under the 
contract.
    As I have indicated to the staff of this Subcommittee in their 
field investigations, I cannot defend the manner in which this contract 
was administered. I know that our procurement personnel questioned some 
individual purchases with at least one of the individuals who was 
terminated and is under FBI investigation. But we could have, and 
should have, done more.
    I was advised by Laboratory Counsel to leave the contract open 
pending the FBI field investigation. The contract term expired October 
31, 2002. The FBI executed search warrants in this case on October 31, 
2002.
Follow up Actions
    What have we done since the FBI action?

 As the purchase card events unfolded and after my own review 
        of the Mesa contract file, I directed the Business Operations 
        Division to create a separate procurement review organization 
        that would serve as a quality assurance office for Laboratory 
        procurements. I wanted this office to serve as the agent of 
        standardized policies, consistent terms and conditions, 
        training requirements for staff, and, perhaps most importantly, 
        institution of periodic desk-top audits of contract 
        administration files and management of trend data. My 
        experience as well as management literature tells me that just 
        the fact that management is reviewing files and transactions 
        eliminates a substantial percentage of internal control 
        vulnerabilities.
 The University of California and the Laboratory are reviewing 
        what can be done relative to eligibility of Mesa Supply & 
        Equipment to do business at the Laboratory, including an 
        evaluation of breach of contract and what debarment policies 
        apply. Preliminary evaluation indicates that our policy is to 
        utilize federal government debarment actions as the operative 
        determinant for precluding contractors from doing business with 
        the Laboratory. Given that, I will engage in further 
        discussions with DOE and NNSA procurement officials on this 
        matter.
 We have reassigned the Team Leader who had direct oversight of 
        the administrator of that contract. John Hernandez was that 
        Team Leader and he is here with me today. Similar to the Team 
        Leader who had oversight of our purchase card program, Mr. 
        Hernandez wrote a letter to his management acknowledging his 
        accountability. By his own admission, Mr. Hernandez' skills are 
        more suited to major procurement staff work than to supervision 
        and management and his long career at the Laboratory reflects 
        this.
 I plan to determine the amount that represents fraudulent 
        transactions and, to the extent they are not within the scope 
        of the Mesa contract, I plan to present a claim to that firm in 
        that amount. For those items for which I cannot substantiate 
        that they are out of scope, then we will go through a process 
        of finding items of use by our facilities support contractor or 
        by the Laboratory. After that, we would consider those items 
        unallowable costs and so advise the NNSA Contracting Officer.
 Finally, as reported by Mr. Darling, the University of 
        California has engaged the Layton/Price Waterhouse Coopers team 
        to do an extended review of the entire procurement function, to 
        include two years of data mining in connection with the various 
        procurement mechanisms utilized by the Laboratory. Those 
        include Blanket Purchase Orders, Just in Time contracting, and 
        Local Vendor Agreements. The University of California and the 
        Laboratory are committed to acting on any findings and 
        recommendations resulting from that review, similar to the 
        review of the purchase cards.
            the mustang case, g&g tools, and casino advances
    Now I will turn my attention to the various purchase card 
transactions that have come to the attention of this Subcommittee.
The Ford Mustang case
    With regard to the attempt to purchase a Ford Mustang using a 
Laboratory purchase card, I was advised of that case on July 25, 2002, 
by Stan Hettich, Procurement Group Leader, and Dennis Roybal, Deputy 
Division Leader for the Business Operations Division. They informed me 
that the Purchase Card Administrator, Ms. Arleen Roybal, had received a 
call from Bank of America on July 18 that informed her of the attempted 
Mustang purchase as well as vehicle accessories. The attempted 
purchases occurred during a period from May 3 through May 23, 2002, 
using the Laboratory purchase card issued in the name of a Laboratory 
purchasing official.
    I was also told that the cardholder disputed the charges with Bank 
of America when the May purchase card statements were issued by the 
bank.
G&G Tools
    At the same June 25 meeting, Mr. Hettich advised me of other 
purchases made by the same cardholder over a two-year time frame. These 
included over $1 million in tools for our Engineering, Sciences and 
Application Division. I was not particularly surprised by the volume of 
tool purchases given the scope of engineering effort by this Division. 
I was taken aback by the fact that tools were purchased under our 
purchase card program instead of our Just in Time Program, which is the 
appropriate mechanism for tool purchases.
    The Just in Time Program requires dye-marking of tools by vendors. 
The purchases were made under a limited exception granted by the 
procurement organization but the terms of the exception were not met. 
Moreover, I was surprised to find out that the cardholder had virtually 
unlimited purchasing authority levels. This particular cardholder had a 
single transaction limit of $50 thousand and her monthly limit was $900 
thousand.
    I directed Mr. Hettich to notify both Audits and Assessments and 
Security Division. I followed up a few days later with Mr. Hettich and 
he advised me that he had, in fact, notified Mr. Walp and Gil Griego of 
the Audits and Assessments office. Also on July 25, 2002, I notified 
Mr. Salgado and advised him that I had directed Mr. Hettich to notify 
Audits and Assessments and Security Division. Mr. Salgado pointed out 
to me that the Department of Defense was undergoing critical reviews of 
their purchase card programs and he asked me for a briefing on the 
purchase card process and procedures. Mr. Vern Brown, Mr. Hettich and I 
briefed Mr. Salgado on July 29.
The Casino Advances
    On or about August 9, Dennis Roybal, Deputy Division Director of 
the Business Operations Division, advised me of casino advances made 
under a Laboratory Purchase Card issued to Ms. Mary Frances Wood. 
Apparently this surfaced as a result of a desktop audit done by the 
Purchase Card Office on past transactions. Eleven cash withdrawals at 
three New Mexico casinos were made in the amount of $1,400 between 
March 19 and April 26, 2002. I was told that the purchase card office 
had directly notified Mr. Doran but, similar to the Mustang case, I 
asked Mr. Roybal to notify Audits and Assessment and Security Division 
and I notified Mr. Salgado. Ms. Wood was placed on administrative leave 
on August 19 and subsequently terminated.
    What particularly troubled me about this notification was that Ms. 
Wood was a contractor employee assigned to the Procurement Group 
Leader's Office. I was even more concerned that Mr. Stan Hettich, 
Procurement Group Leader, was listed as the approving official for Ms. 
Wood's purchases. I later discovered that Ms. Wood, as well as other 
personnel in the procurement organization, could ``self approve'' their 
purchases.
    Some time between the date (July 25, 2002) I was informed of the 
Mustang case, and August 26, 2002, I took two actions that are relevant 
to your inquiry here.

 One, I assigned John Tapia as the single point of contact for 
        purposes of information flow to Security Division regarding 
        property management, purchase cards, as well as the Mesa 
        contract. Frankly, I was concerned about a possible conflict of 
        interest in the procurement group given the fact Stan Hettich 
        was shown as an approving official for Ms. Wood. I did not want 
        to compromise any ongoing law enforcement investigations. I 
        personally called the Purchase Card Administrator, Arleen 
        Roybal, and advised her that she was to give full cooperation 
        to Mr. Tapia and the Security Division.
 Two, I advised Mr. Salgado on the details I had regarding the 
        Mesa Contract and the purchase card incidents. It was difficult 
        at that time to know whether any of these were related 
        incidents or how rampant the problem was. Mr. Salgado was 
        equally concerned and he and I agreed to a two-fold strategy, 
        which involved an immediate fix to the purchase card policies 
        and procedures and an in-depth review of purchase card 
        transactions to see how widespread the purchase card abuse 
        problem was.
Purchase Card Policies & Procedures
    First, we agreed to appoint an internal committee to take a 
critical look at our current purchase card procedures and recommend 
immediate changes that addressed problems such as the purchase card 
authorities and limits, lack of approving officials, and receipt of 
property ordered. That committee consisted of John Tapia, Laboratory 
Counsel Frank Dickson, and the former Contracts and Procurement 
Director of the NNSA's Albuquerque Operations Office, Mr. William 
Meyers, who serves as a consultant to me on special assignments. I 
chartered that committee and directed them to thoroughly study the most 
current Department of Defense OIG reviews and the recommendations from 
those studies. Based on those recommendations, and after feedback from 
Laboratory Division Directors, I issued revised Purchase Card 
Procedures on August 26, 2002.
The Layton Committee
    Second, it was agreed that Joe Salgado would have a conversation 
with John McTague, the former University of California Vice President 
for Laboratory Management about the establishment of an external review 
committee to do a thorough review of the Laboratory's purchase card 
program. After Mr. Salgado and Mr. McTague discussed the idea, it was 
decided that McTague would direct the Laboratory to form such a team 
and direction was given accordingly. A team was put in place by the 
Laboratory which was led by former DOE Inspector General John Layton 
and supported by the University of California's audit firm of Price 
Waterhouse Coopers to do a thorough review of purchase card purchases 
over the past few years.
    On August 26, 2002, Mr. Salgado chartered that committee and the 
committee began its methodical review of some 170 thousand transactions 
and $120 million dollars worth of purchase card activity covering the 
period from October 1, 1998, through June 30, 2002, a forty-five month 
period. The Layton Committee issued a formal report of its findings on 
December 12, 2002, and, in addition to several findings and 
recommendations, referred $4.9 million in transactions to the 
Laboratory for further disposition, including several which they 
suggested for referral to the Office of Inspector General.
The Laboratory's Management Response to the Layton Committee Report
    By memorandum dated December 9, former Laboratory Director John 
Browne formally tasked me to respond to the Layton Committee report. 
The memorandum was premised upon a November 20 draft report issued by 
the Layton Committee to Joe Salgado. My assignment was to reconcile all 
purchase card accounts that had not been reconciled, resolve all 
questionable purchase card transactions, and otherwise address the 
Layton report findings and recommendations. Shortly after that time, 
Joe Salgado requested that the University of California independently 
audit the Laboratory's management response to the Layton Committee 
report.
    In anticipation of that requirement, on December 4, I issued a 
Laboratory-wide data call for documentation required to validate 
purchases called into question. On December 6, I formed a Project Team, 
led by Jay Johnson, Acting Controller in Business Operations Division, 
to methodically address each and every questioned transaction and 
account. On December 13, I again made a Laboratory-wide request for 
documentation based on preliminary conversations with Patrick Reed as 
to the extent of documentation he required to satisfy his audit 
methodology. He wanted convincing documentation relative to software 
licensing purchases and items that the Layton Committee considered 
questionable. The Laboratory cooperation was overwhelmingly positive, 
the project team worked incredibly long hours under arduous conditions, 
and we concluded our project on January 31, 2003.
    Mr. Reed issued an interim audit report on February 10, 2003. His 
report concluded that we had provided adequate documentation or 
justification to support all but around $200 thousand in purchase card 
purchases. As reported by Mr. Darling, the University of California 
plans to reimburse the NNSA for those costs.
Laboratory Purchase Card Program Corrective Actions
    Now that we have both the Layton report and the Reed report, we are 
developing an action plan that integrates the recommendations and 
implements corrective actions. In addition to the changes articulated 
in my August 26 announcement of purchase card changes, we have 
implemented many fixes already but I know we still have a ways to go 
before we have a program that is sustainable.

 We have made current all of our reconciliations, eliminating a 
        significant backlog of reconciliations.
 We have re-formed the Purchase Card Program office, providing 
        new interim leadership and staff to work off the corrective 
        actions and develop robust administrative tools including 
        monthly and quarterly audits.
 We have completed purchase card refresher training for all 
        Laboratory card holders and approving officials. We have 
        suspended cards for failure to meet the training requirements.
 We have dropped the number of purchase card holders from over 
        a thousand to around 585.
 We have begun to design automated systems changes that will 
        eliminate the need for manual reconciliation and to enhance 
        internal controls features.
 We have collaborated with Livermore National Laboratory and 
        Lawrence Berkeley Laboratory to establish standardized 
        University of California purchase card policies.
    In addition, I have shared with NNSA Headquarters and the Los 
Alamos Site Office some Lessons Learned which might be of use to the 
rest of the Nuclear Weapons Complex M&O contractor sites.
                           corrective actions
Wall-to-Wall Inventory
    When John Browne tasked me to respond to the Layton Committee 
report on December 9, he also assigned me several actions related to 
property management. The key assignment required revised Laboratory 
procedures for:

 ensuring that controlled property is entered into the 
        inventory at the time of receipt, regardless of how purchased;
 periodic reconciliation of property records with procurement 
        records;
 ensuring that the Security Division, line managers, and 
        property custodians take prompt action to find unlocated 
        property;
 ensuring that spot and random property audits are completed; 
        and
 addressing any other property management issues that I found 
        warranted action.
    My evaluation of the property management issues surrounding this 
assignment made me realize that, as an institution, we were not 
prepared to implement ``fixes'' without a thorough understanding of the 
problem. In my opinion, it was a matter of ``first things, first'', and 
I thought it would be wise to scope the magnitude of the problem 
through a wall-to-wall inventory. I was not comfortable with the 
current use of accountability statements given the lack of public 
credibility in our property management controls.
    After a follow up meeting in December with John Browne and Joe 
Salgado, we concluded that the appropriate course of action was a wall-
to-wall property inventory. I directed the Property Management Group to 
develop a wall-to-wall inventory project plan, which I subsequently 
approved, and on February 3, that wall-to-wall inventory was initiated. 
The methodology and the results will be validated by Price Waterhouse 
Coopers and the NNSA.
    As of today's date, we have inventoried over 70% of the 84,000 
controlled property items in our inventory. We have accounted for over 
70% of the cost of our controlled inventory, which is approximately 
$940 million.
Cradle-to-Grave Supply Chain Integration Team
    We are also finding items in our Laboratory sweep that were not 
originally bar-coded. This underscores the importance of reviewing the 
cradle-to-grave process of supply chain management at the Laboratory. 
We need to formalize and integrate the steps that lead from ordering, 
to purchase, to receipt, to accounting, to entry into the inventory, to 
reporting as lost or stolen, and, where necessary, the need to 
institute individual accountability.
    In January, I chartered a team of Laboratory personnel to re-
engineer the entire supply chain so that it is integrated and visible 
to the entire Laboratory. That team is led by Carol Smith, our very 
capable Warehouse Manager, and her team is expected to provide a report 
within the next few weeks.
Drop Point Survey
    In my opinion, the single largest vulnerability of the Laboratory's 
property management system is the fact that, at our 43-square-mile 
Laboratory, it is not feasible to have a single warehouse as the sole 
location for delivery of property.
    As a part of the business and financial improvements that Bruce 
Darling discussed at the February 26 Subcommittee hearing, the 
Laboratory has also performed a survey of its 580 property delivery 
points which are referred to as ``drop points''. The Business 
Operations Division surveyed each of those points to assess the 
security, the volume, and the safety and housekeeping issues. I expect 
a report soon with their recommendations for improvement and tighter 
control but in the interim the number of drop points have been reduced 
to 440 and we have re-instituted clear accountability of control of 
these points by building and facility managers.
Clarification of Reporting Lost and Stolen Property
    The DOE OIG special inquiry found a substantial degree of 
``dysfunction'' with respect to roles and responsibilities regarding 
lost and stolen property. As indicated by Mr. Darling in his February 
26 testimony, the Laboratory has clarified that lost and stolen 
property is to be reported to the Office of Audits and Assessments, 
which now directly reports to the University of California Office of 
the President.
Management of Data
    The two external review teams that are reviewing property and 
procurement data have expressed concern regarding the Laboratory's 
ability to produce consistent and reliable data without significant 
manual manipulation of data. In essence, this was the root cause of the 
primary finding of the recent OIG review of our firearms inventory--we 
were unable to document the inventory of a dozen Glock handguns that 
were stuck in a property accounting backlog. In too many instances we 
have Laboratory business and financial personnel trying to ``muscle'' 
inadequate data systems on old information platforms. The Laboratory is 
embarked on an Enterprise Resource Project that will modernize our 
management of business and financial data. This will help us document 
the right kinds of data and provide managers timely access to quality 
data they need to make resource management decisions and better control 
assets and accountability for those assets.
Sanctions and Accountability
    There have been legitimate concerns raised by this Subcommittee and 
others regarding individual accountability for Government property and 
the sanctions in place for violation of Laboratory procedures. I 
believe that our current disciplinary policies provide for such 
accountability but our practice in consistently enforcing sanctions 
needs improvement. Interim Director Nanos has a Laboratory-wide 
initiative in place to study all of our policies and he has indicated 
clear support for enforcing accountability in connection with our 
Federal stewardship responsibilities.
                               conclusion
    Let me close by assuring you that the Laboratory is committed to 
correcting the many vulnerabilities in our business operations. I am 
highly encouraged by the resolve and commitment the University of 
California has shown in vigorously supporting positive change. I am 
proud of my association with the many thousands of honest and dedicated 
employees who have been working long hours, day after day, to regain 
the credibility of our neighbors, our customers, and the American 
taxpayers.
    We can fix processes and we can apply technology to the problem of 
internal controls, but we would fail again as a Laboratory if we don't 
heed the real lesson learned from this experience. People are our most 
effective internal control. It is precisely because we do not have a 
``culture of thieves'' that there was not a greater exploitation of the 
flaws in our processes and the breakdown of our business practices.
    The most recent Harvard Business Review has an article entitled, 
Predictable Surprises: The Disasters You Should Have Seen Coming. It 
makes the point that organizational vulnerabilities are often the 
toughest to overcome but that, by actively encouraging people to speak 
up, executives can bring to the surface many problems that might 
otherwise go unmentioned. I think Interim Director Nanos recognizes 
this as a value and has taken actions that acknowledge this by creating 
an open environment that celebrates the fact that people are now 
bringing issues forward. This is the point that DOE Inspector General 
Greg Friedman made in his testimony about changing the culture and 
acting on employee concerns.
    Thank you for the opportunity to present testimony.

    Mr. Greenwood. Thank you, sir.
    Dr. Browne.

                   TESTIMONY OF JOHN C. BROWNE

    Mr. Browne. Thank you, Mr. Chairman and members of the 
committee for this opportunity to make this statement. I, too, 
would like to submit my written statement for the record.
    I will try to be brief. You have covered a lot of the 
points already in earlier panels. Let me start by saying that 
there are no excuses for theft, waste, fraud, or abuse by 
anybody. That is a strong personal belief that I hold.
    I would like to put a few things in context if I may, Mr. 
Chairman. Los Alamos is a very large complex operation. We have 
on any given day 12,000 to 14,000 people on our site. Our site 
covers 43 square miles. That is about the size of the District 
of Columbia. We have a lot of buildings, over 2,000 buildings, 
hundreds of miles of road. That is not to make an excuse but it 
is to put in context the complexity of the large scale of 
operating this facility.
    We have a very important national security mission which I 
know you are aware of. I spent a lot of my time focused on this 
mission. I had the responsibility as Laboratory Director to 
annually certify the five weapons out of the seven types that 
are in the U.S. nuclear stockpile in a letter that I am 
required to send to the Secretary of Defense and the Secretary 
of Energy. That is a very important responsibility and one that 
takes a lot of time throughout the year to address.
    The second part of our mission is to reduce the threat of 
weapons of mass destruction. Since September 11 we spend a lot 
of time dealing with threats of nuclear, biological, and 
chemical weapons including the DNA analysis that occurred on 
the anthrax attacks that occurred here in Washington, New York, 
and Florida.
    However, having said that, even though I did focus on our 
mission, I felt that I was fully accountable for everything 
that happened at our laboratory. I don't want to make any 
excuses that because I depended on other people to look at 
operations because of the scope of things that somehow I am 
less accountable. I felt that I was fully accountable for all 
the actions of all the people on our site all the time.
    Let me just cover a few issues and then see if I can sum 
up. In terms of the TA-33 theft, I know Mr. McDonald testified 
a couple of weeks ago. When this was first brought to my 
attention that he approached the FBI, which was in late June of 
last year, and Mr. Salgado told me about this, I remember the 
discussion Mr. Salgado had and Mr. Salgado said to me, ``Mr. 
McDonald is a really stand-up guy. He was willing to come 
forward and really take a risk in a sense by saying that there 
were things going on at our Laboratory which were improper.'' I 
just wanted to make it clear that is the discussion we had at 
that time.
    Then in mid-July when I heard about the Mustang case from 
Mr. Marquez and Mr. Salgado, the question came up earlier this 
morning, ``Weren't you outraged?`` I was very outraged. I won't 
use the words that, in fact, I conveyed at the time to some of 
my managers. I was incredulous that anybody would even attempt 
to use a procurement card for this.
    The only good thing I would say is that the control system, 
in a sense, in this one case actually worked because the 
charges were blocked by the system. However, to me it pointed 
out we had other serious problems. As Mr. Marquez has just 
said, we immediately said, ``Let us go look and see if we have 
other problems.'' We had seen what had happened in the 
Department of Defense. We read the GAO reports and the first 
thing we said was, ``Let us take a quick look at what else is 
happening at Los Alamos.'' When we looked we didn't like what 
we saw. We immediately said, ``Let us go get this external team 
together that the former IG John Layton chaired.'' That is the 
situation that I saw.
    Let me just conclude since my time is up by saying that I 
don't believe I allowed any type of coverup to occur at our 
Laboratory. I certainly had no intention of ever preventing any 
information from getting out of our Laboratory to any 
investigatory body, the Department of Energy, the University of 
California, or certainly this committee. The DOE IG report did 
not find any evidence of any coverup by management.
    I wish that these events had not occurred at Los Alamos but 
they did. People who committed illegal acts or inappropriate 
acts should be held accountable for their actions. But I do not 
believe that Los Alamos is a culture of theft. I don't believe 
the facts support that. Instead, I would say that Los Alamos 
really is a culture of public service. That is, at least, the 
Los Alamos that I have been familiar with for the last 24 
years.
    In my opinion, what we all need to do now, and Bruce 
Darling brought this up, is I think we need to make these 
corrections that the University of California and the 
Laboratory are putting in place. But we need to learn from 
these mistakes. What were the root causes of the mistakes, 
learn from them, make the changes, and move on.
    The reason I say that is I believe our mission is very, 
very critical to our country at this time. Maybe as important 
as it has ever been in our history. Thank you, Mr. Chairman.
    [The prepared statement of John C. Browne follows:]
 Prepared Statement of John C. Browne, Former Laboratory Director, Los 
                       Alamos National Laboratory
    Mr. Chairman and distinguished members of the Subcommittee. Thank 
you for the opportunity to present this statement regarding the 
procurement and property issues at Los Alamos National Laboratory.
    There are no excuses for theft, waste, fraud or abuse of government 
property, whatever the amount and whether by University of California 
or subcontractor employees. In many talks and written statements to the 
Laboratory over my 5 years as Director I have stated that integrity 
must be a key value of our institution. We must be good stewards of the 
taxpayers' money.
    LANL is a large, complex operation with a very important national 
security mission. On any given day there are 12-14,000 people on site. 
Our site covers 43 square miles--mesas, canyons connected by hundreds 
of miles of roads. There are over 2000 buildings, some of which require 
high physical and cyber security. To carry our programs we perform many 
hazardous operations--nuclear, high explosives, chemicals, X-ray 
machines, etc. Our FY03 budget is close to $2 billion--roughly one-half 
of which is spent on purchases.
    We have a critical national security mission. Our core mission is 
to ensure the safety and reliability of U.S. nuclear weapons. LANL has 
responsibility for certifying 5 of the 7 different nuclear weapon types 
in the U.S. stockpile. We take this responsibility very seriously and 
it received my highest attention during the past five years. Our other 
major mission area is to reduce threat of weapons of mass destruction 
to our homeland, our troops, and our allies. Since Sept. 11, 2001, we 
greatly increased our work on counter-terrorism--especially against 
weapons of mass destruction. For example, we designed and built nuclear 
detectors that have been deployed in Russian borders and ports; we 
assisted in the DNA analysis of the anthrax attacks in Washington, New 
York, and Florida and fielded biological detectors around the country, 
including at the Salt Lake City Olympics.
    As Lab Director I was accountable for all the activities of the 
laboratory and the actions of all the people on our site--good and 
bad--whether technical, administrative work or operations--a 
challenging job, but a rewarding job.
                           procurement issues
    The possibility of theft at our TA33 site was raised by a 
contractor employee, Mr. McDonald, who testified here a few weeks ago. 
Mr. McDonald did the right thing by being persistent when his earlier 
attempts to report this illegal activity did not result in action. When 
I found out about the TA33 theft allegations in late June 2002, I asked 
Mr. Salgado, my principal deputy, to stay on top of this issue and keep 
DOE, UC, and me informed on a regular basis. We both felt that Mr. 
McDonald's actions were exemplary.
    A few weeks later, Mr. Salgado reported that an attempt to purchase 
a Mustang with a procurement card had been uncovered by our Business 
Services Division and by our bankcard service provider. This seemed 
incredulous to me, but in light of the recently reported procurement 
card abuses in the Department of Defense, we asked Mr. Marquez, my 
Associate Director for Administration, to conduct a quick scan of other 
LANL procurement card activities. This quick review turned up several 
apparent abuses. Based on this information, and after consulting with 
Dr. John McTague, UC Vice President for Laboratory Management, we 
decided to conduct an external review that was set up in August under 
the leadership of two former Inspectors General, John Layton and 
Charles Masten, and auditors from Pricewater-houseCoopers.
    The external review found that, while policies and procedures were 
in place at LANL, internal controls and oversight needed strengthening. 
We made significant changes in our procurement card practices in August 
2002; more changes have been made recently.
                       property inventory issues
    While LANL has received outstanding grades for its property 
inventory results since 1999, questions were raised in the press about 
missing equipment being an indicator of widespread theft at the 
Laboratory. There are over 70,000 property items at LANL, whose 
original value is about $1 billion. Our inventory system accounted for 
over 99.7% of these items in each of the last four years. Many items 
reported in the press, such as large magnets and specialized electronic 
equipment, were located at the Lab after searches were conducted. These 
items had been moved from their original site for new uses and the 
inventory system had not been corrected. There were over 400 computers 
reported missing in the last four years. We have over 33,000 computers 
at LANL used for R&D, as well as administrative matters. I agree with 
our critics that this scale of unaccounted computers is too high and 
steps have been taken to reduce the chances for theft of such 
computers. None of the 400 computers was used for classified 
information.
    There presently is a 100% wall-to-wall inventory being conducted at 
LANL. This should help resolve discrepancies and increase confidence in 
our inventory methodology which follows best industrial and government 
practice.
                        other management changes
    LANL has been an organization in transition since the end of the 
Cold War. In response to changing requirements, improvements in safety 
and security were made in the mid- to late-1990s, including major 
changes following the hard drive incident that this committee 
investigated in 2000. All 61,000 classified removable electronic media 
were bar-coded two years ago and I directed several audits since that 
time. Our Nuclear Emergency team was re-organized, under new leadership 
and with improved procedures. Overall, reports by the DOE Office of 
Independent Assessments show a positive trend of improvements in safety 
and security over the past 5 years at LANL.
    To make further improvements in operations, UC and LANL brought in 
external companies two years ago to review our safety and security 
operations, project management, planning and budgeting systems, and 
nuclear operations. We began to implement the recommendations of these 
reviews last year.
    Based on my previous experience in information systems, I also 
brought in an Information Technology (IT) consulting company, Gartner 
Group, two years ago to recommend changes in our IT systems, which I 
believed to be insufficient to carry out our responsibilities. We began 
to implement IT system changes based on their recommendations last 
year; the IT system was contracted to IBM/Oracle for development. It is 
designed to provide managers administrative and operational information 
in a timely manner. My regret is that all the changes did not come fast 
enough to prevent these present problems.
                           concluding remarks
    LANL does not have a culture of theft. I do not think that the 
facts and data support such a characterization. Yes, we have some 
people who committed some illegal acts. We have fired some employees, 
some are under administrative review by LANL, and some are still under 
FBI investigation. The vast majority of LANL people are dedicated to 
the service of this nation.
    I did not allow or support any cover-up. The DOE IG report did not 
find evidence of any cover-up by management. I believe that I kept the 
DOE and the UC informed of the information on these events as it became 
available to me. I formed internal and external reviews of the 
situation. I approved changes to LANL controls on procurement cards in 
August. When anonymous allegations of cover-up appeared in the press in 
November, I immediately asked Undersecretary Brooks to have the DOE IG 
investigate.
    I wish that these events had not occurred at Los Alamos--but they 
did. Our employees are human and humans make mistakes, and they should 
be held accountable for their actions. But I do not believe Los Alamos 
has a culture of theft--it is a culture of public service.
    The University of California has responded aggressively and is 
making the needed changes. In my opinion, we should learn from these 
mistakes and move on. LANL's mission has never been more important to 
our nation.
    Thank you for the opportunity to make these remarks.

    Mr. Greenwood. Thank you.
    Mr. McTague.

                  TESTIMONY OF JOHN P. McTAGUE

    Mr. McTague. Mr. Chairman, members of the committee, at the 
outset I want to say that I regret what transpired at Los 
Alamos. As the University of California Vice President for 
Laboratory Management when many of the events that are being 
investigated occurred, I am ultimately responsible for the 
mistakes and mismanagement by the Laboratory.
    In my written testimony I explain my involvement with the 
science policy and our national labs over the course of my 
varied career and my long-standing belief that the labs must be 
run in a manner that promotes and ensures excellence both from 
a scientific and a business perspective.
    When President Richard Atkinson appointed me Vice President 
for Laboratory Management, I assumed the post with this in 
mind. I took up my duties, determined to see the Laboratory 
implement Appendix O of the contract between the University and 
the Department of Energy, improve their cooperation and 
coordination with the Department, and prioritize proper project 
management and best business practices.
    In many ways I believe that the University and the 
Laboratory made progress toward achieving these goals during my 
time as vice president. When I stepped down from the position, 
for instance, the Laboratory's construction projects were on 
time and either at or below budget. Problems, however, clearly 
exist at Los Alamos.
    I first heard of the weaknesses being explored by this 
committee in August 2002 when Joe Salgado informed me that one 
Laboratory employee had attempted to purchase a Ford Mustang 
using her lab issued purchase card and that another employee 
had received cash advances at a local casino using her card.
    In that same call I was told that some Laboratory employees 
working in a high sensitive area were being investigated by the 
FBI for purchasing goods for their personal use through a 
Laboratory contract. As with Dr. Browne, I found these 
incidents outrageous. Among other actions, I immediately called 
for the creation of an outside review team to evaluate and 
critique the Laboratory's purchase card system. That is what 
became the Layton Committee which I directed the Laboratory to 
do in a letter of August 16.
    I also directed that the other University-managed labs, 
namely Livermore and Berkeley, review their purchase card 
systems for potential abuse. Similarly, the day I first learned 
of allegations that managers at Los Alamos might be conspiring 
to conceal property mismanagement and to stifle ongoing 
investigations, I drove to the Lab--I happened to be in Santa 
Fe that day--to look into the accusations first hand.
    These subsequent steps, however, cannot excuse what 
occurred already at Los Alamos. I regret that I did not detect 
these problems earlier. I spent much of my time as Vice 
President for Laboratory Management addressing what I knew were 
actual or potential weaknesses within the structure of the 
three laboratories. Regrettably, I missed some areas.
    I also want to touch briefly on what I know about the 
terminations of Glenn Walp and Steven Doran. Mr. Salgado told 
me in advance that he intended to recommend to Director Browne 
that Los Alamos terminate Mr. Walp and Mr. Doran. That was in 
the week prior to the actual dismissal.
    Based on what I knew from Laboratory officials at the time, 
I thought that the lab had valid grounds for firing both men 
and told Mr. Salgado to do what he felt was right. However, in 
light of what I subsequently learned from this committee, from 
Secretary Abraham, and others, I now have serious reservations 
about the termination decision.
    In conclusion, I find the conduct at Los Alamos inexcusable 
and I am sorry that these events were not identified and 
corrected earlier in my tenure. Our national labs are 
extraordinary facilities and they must be managed with the 
utmost care and diligence.
    I do believe that the investigations by this committee, the 
Department of Energy, the University and others, will make Los 
Alamos and the University stronger improved institutions. Thank 
you.
    [The prepared statement of John P. McTague follows:]
   Prepared Statement of John P. McTague, Former Vice President for 
            Laboratory Management, University of California
    Mr. Chairman, Mr. Deutsch, and members of the Committee: My name is 
John McTague, and from June 1, 2001, through January 6, 2003, I served 
as the Vice President for Laboratory Management for the University of 
California.
    I am grateful for the opportunity to appear today and address your 
concerns about the property procurement and management systems at Los 
Alamos National Laboratory. I greatly appreciate the diligence and 
dedication this Committee has shown in exposing problems at the 
Laboratory. Let me be clear: I was the University official directly 
responsible for overseeing Los Alamos National Laboratory when the 
events you are investigating occurred; they happened on my watch; I 
accept responsibility. Like you, and like the University, I consider 
the allegations of mismanagement and theft disturbing and inexcusable.
                        professional background
    I come before you today having devoted much of my life to science 
and our national laboratories. In the academic, public, and private 
sectors, I have overseen, managed, and evaluated large-scale technology 
facilities, projects, and organizations requiring a high level of 
scientific and technical expertise. I believe that our national 
laboratories can and must realize scientific excellence while 
simultaneously achieving management accountability, cost effectiveness, 
and efficiency.
    After graduating from Georgetown University and receiving a PhD 
from Brown University, I began my career as a member of the technical 
staff at the North American Rockwell Science Center in California. I 
then joined the faculty of the University of California, Los Angeles as 
a professor of Chemistry and a member of the Institute of Geophysics 
and Planetary Physics. During my twelve years at UCLA, I also served as 
a consultant to the Physics Division at Los Alamos and received 
fellowships from NATO, the Alfred P. Sloan Foundation, and the John 
Simon Guggenheim Foundation. During the course of my academic career, I 
have authored or coauthored over eighty scientific publications.
    In 1982, I left UCLA to become chairman of the National Synchrotron 
Light Source Department at Brookhaven National Laboratory. When I 
arrived at the department, construction was underway on what was 
planned to be the most powerful x-ray ring in the world. The project, 
however, suffered from poor management, cost overruns, and schedule 
delays. By the time I left Brookhaven, the project was back on line.
    From 1983 to 1986, I served as Deputy Director of the White House's 
Office of Science and Technology Policy, and in 1986, I was Acting 
Science Advisor to President Reagan. Following my service in the White 
House, I spent twelve years with the Ford Motor Company, serving first 
as Vice President for Research and then as Vice President for Technical 
Affairs. In both these positions, I came to appreciate even more the 
importance of managing scientific research while balancing cost, 
efficiency, and environmental concerns.
    While at Ford, I continued to play an active role in the nation's 
science policy and national laboratories. In 1990, the first President 
Bush appointed me to the President's Council of Advisors on Science and 
Technology. From 1990 through 2000--under four different Secretaries of 
Energy and two different administrations--I served as a member of the 
Secretary of Energy Advisory Board, an organization that enjoys broad 
input into various energy-related matters, including weapons policy. 
During this same ten-year period, I served as the very first cochairman 
of the Department of Energy Laboratory Operations Board. This position, 
as you might imagine, gave me insight into both the strengths and 
weaknesses in the management of our national laboratories. During the 
mid-1990s, I also chaired the Board of Overseers for Fermi National 
Laboratory and was a charter member of the University of California's 
President's Council on the National Laboratories.
        appointment as vice president for laboratory management
    It was, I believe, because of my varied work experiences and 
longstanding interest in the management of our national laboratories 
that University of California President Richard Atkinson named me the 
University's first Vice President for Laboratory Management.
    In July 2000, as a cochairman of the Department of Energy 
Laboratory Operations Board, I learned of then Energy Secretary Bill 
Richardson's uncertainties about the University's oversight of Los 
Alamos and Lawrence Livermore National Laboratories. The Secretary's 
reservations came at a critical time; he was in the process of deciding 
whether to renew the University's contract to manage both laboratories. 
Consequently, I sent Secretary Richardson a letter describing the 
University's great strengths and weaknesses as a manager.
    I reminded the Secretary--as I remind all of you today-- that the 
two laboratories have for ``over a half century given this nation a 
vastly unmatched superiority in nuclear weapons and nonproliferation 
technology.'' ``There is,'' I told him and tell you, ``no remotely 
close second place contender, either among our allies or our potential 
adversaries.'' Part of the labs' dominance was--and is--directly 
attributable to the University of California's management. I explained 
that UC ``is exceptionally strong in two critical areas: personnel 
systems and technical quality control.'' Both factors, I emphasized to 
the Secretary and reemphasize today, ``are at the heart of the 
superiority we have sustained.''
    Yet for the many positives in the University's management, I noted 
problems also existed. My criticisms of the University were direct and 
blunt. I informed the Secretary that ``unacceptable weaknesses in 
project and security management'' existed at Los Alamos and Lawrence 
Livermore. To remedy these shortcomings, I argued for the establishment 
of a ``single, unambiguous line of authority and accountability.'' I 
recommended that the University create ``a strong vice presidential 
position devoted full time'' to overseeing and working with the 
laboratories. The person holding this office, I told the Secretary, 
``should have the resources and expertise to make the laboratories act 
as a system, to assess and assure the performance of the laboratory 
directors, as well as technical excellence of programs, major project 
management, personnel systems, safety, security, and business 
practices.''
    Secretary Richardson subsequently renewed the University's 
contract, but he conditioned renewal on the University making specific 
improvements in its oversight system. One of these conditions--which 
are identified in Appendix O of the renewed contract--mandated that the 
University establish the office of Vice President for Laboratory 
Management.
    Sometime after sending my letter to Secretary Richardson, I 
received a call from President Atkinson, whom I had known for twenty 
years. He asked if I would consider interviewing for the new position. 
I had not sought the job; I was just beginning to enjoy my new retired 
life in Santa Barbara. Nonetheless, I told President Atkinson that I 
would interview for the post, but that he must understand that, if 
selected, I would only serve for a limited time. I intended, I told 
him, to stay in the position long enough to oversee the establishment 
of the office and regularization of the relationship with the 
Department of Energy, and the successful completion of the Appendix O 
requirements.
    On June 1, 2001, I became the first University of California Vice 
President for Laboratory Management.
                        tenure as vice president
    I assumed my new responsibilities with several systemic goals in 
mind for both Los Alamos and Lawrence Livermore. First, I was 
determined to see the University and the laboratories meet the 
milestones set forth in Appendix O. Second, and from a more 
programmatic perspective, I wanted the two labs to strike a healthy 
balance between competition and cooperation. The labs, I felt, must 
continuously push one another toward excellence. However, the 
competitive frenzy should not obscure the larger point: Both labs play 
a vital role in developing and maintaining our country's nuclear 
weapons arsenal. Therefore, where appropriate, I aimed to have the labs 
share their facilities, balance workloads, and work together toward 
creating unified definitions and safety standards. In essence, I hoped 
that the labs would operate as a system in carrying out their day-to-
day activities. Third, I wanted the laboratories to make proper project 
management and best business practices an integral part of their 
operations. Budget and time constraints, I wanted the laboratories to 
understand, could not be ignored.
    These more overarching concerns were by no means my only 
priorities. The laboratories needed to take preventive measures against 
possible cyber attacks and physical assaults. Lab-specific issues also 
concerned me. For example, I was determined to prevent a recurrence of 
cost overruns and missed deadlines at the National Ignition Facility 
being constructed at Lawrence Livermore. On a less scientific level, 
both labs--but particularly Los Alamos--faced exploding healthcare 
costs that had to be reined in.
    Looking back, I believe the University and the laboratories made 
good strides toward achieving these goals during my nineteen-month 
tenure. On the security front, the University retained Aegis, a 
Washington, D.C. based consulting company, to review and critique the 
labs' security systems. I subsequently ordered the laboratories to 
implement Aegis's recommendations. I note that in the most recent 
simulation of a physical attack, Los Alamos performed extremely well. 
Improvements were also made in project management. When I stepped down, 
the major construction projects at the laboratories--including Lawrence 
Livermore's National Ignition Facility--were meeting the Department of 
Energy's milestones for cost and performance. Some construction 
projects were actually running ahead of schedule and below cost.
    Indeed, I was so pleased with progress being made by the 
laboratories and the University that in February 2002, I informed 
President Atkinson that I intended to resume my retirement by the end 
of the year. In October 2002, a month before I formally announced my 
resignation, the National Nuclear Security Administration completed a 
two-year review of Los Alamos and Lawrence Livermore, during which the 
agency evaluated the laboratories for management accountability, safety 
and security, facilities safety, and project management. The two 
laboratories received the highest possible scores in all categories. 
Therefore, as I prepared to return to Santa Barbara, I believed that 
the University and the labs were well on their way toward fulfilling 
the Appendix O obligations and improving their management operations.
                     recent problems at los alamos
    Sadly, as my tenure drew to a close, I suddenly learned of the 
deficiencies in Los Alamos's property management and procurement 
systems. I must confess, given the high marks received by the Lab's 
property audits in recent years, these discoveries came as a surprise. 
In hindsight, I should have devoted more time and energy to 
investigating the handling of property at Los Alamos.
Purchase Card
    In early August 2002, Joe Salgado, then the Lab's Principal Deputy 
Director, telephoned and informed me that one laboratory employee had 
attempted to purchase a Ford Mustang using her lab-issued purchase 
card, and that another employee had used her card to obtain a cash 
advance at a local casino. Needless to say, I was appalled to hear of 
these incidents. More troubling, however, was Mr. Salgado's warning 
that the Lab's automatic reconciliation process had not detected the 
illicit transactions.
    I took immediate action after receiving Mr. Salgado's report. On 
August 16, 2002, I sent a letter to Director John Browne instructing 
him to establish the External Review Team to evaluate the Lab's 
purchase card system. The Review Team would be headed by two former 
inspectors generals and assisted by the accounting firm of 
PricewaterhouseCoopers. In addition, I instructed Mr. Salgado to give 
me weekly updates on the Lab's progress in resolving the purchase card 
issues. Finally, I ordered the other two national laboratories managed 
by the University, Lawrence Berkley and Lawrence Livermore, to 
investigate their purchase card systems and determine whether they 
suffered from problems similar to those afflicting Los Alamos. 
Fortunately, the reports I received indicated they did not.
TA-33
    In the same conversation that Mr. Salgado first informed me of the 
problems with the Lab's purchase card system, he also told me that some 
Los Alamos employees had purchased goods for their personal use using a 
Lab purchase order contract. Mr. Salgado explained that because the FBI 
was currently investigating the matter, he had limited information and 
the Lab's ability to undertake its own investigations was restricted. 
Mr. Salgado did say, however, that the suspected thieves worked in one 
of the Laboratory's sensitive areas.
    In later conversations with Mr. Salgado, I was told that officials 
in the Lab's Security and Safeguards Division were informed of the 
thefts in September 2001 and had notified the FBI, which did not take 
action for some time. Yet these same officials failed to report the 
matter to the Inspector General or senior managers at Los Alamos. As I 
told Mr. Salgado at the time, I believe the security officials made a 
mistake by not immediately passing the information up to their 
superiors or taking steps to notify the Inspector General.
    Mr. Salgado also subsequently told me that he and Frank Dickson, 
the Lab's Laboratory Counsel, felt that the FBI needed to conclude its 
investigation more rapidly. Allowing suspected thieves to continue 
working in a highly sensitive area of the Lab, he explained, posed an 
unacceptable security risk.
Walp and Doran Terminations
    No discussion of the recent troubles engulfing Los Alamos could 
possibly be complete without mentioning Glenn Walp and Steven Doran. 
Like many of my University of California colleagues, I appreciate that 
Mr. Walp and Mr. Doran did the nation, the Lab, and the University a 
service in publicizing their concerns over the Lab's property 
management system.
    I first heard the names Glenn Walp and Steven Doran on November 5, 
2002, while meeting in Santa Fe, New Mexico, with project managers from 
Los Alamos, Lawrence Livermore, and Lawrence Berkley National 
Laboratories. While in Santa Fe, I was told of an article in the Energy 
Daily newspaper alleging that senior Los Alamos managers were 
concealing property mismanagement at the Lab and interfering with 
ongoing investigations. I found that assertion very troubling, and 
drove that same day to Los Alamos to look into the matter further. Once 
at the Lab, I met individually with Mr. Salgado and Jo Ann Milam. Later 
in the day, I held a much larger meeting involving Mr. Salgado, Frank 
Dickson, James Holt, Stanley Busboom, Gene Tucker, and Scott Gibbs. The 
general discussion of the meeting confirmed many of the details in the 
article. During this meeting, Mr. Dickson stated that he had previously 
lost confidence in Mr. Walp and Mr. Doran and that he did not trust 
either man. As best I could tell, all the other participants agreed 
with Mr. Dickson's assessment.
    The week before Thanksgiving, Mr. Salgado called to give me his 
weekly update on the purchase card system. During the conversation, he 
said that the Lab lacked confidence in Mr. Walp and Mr. Doran, and he 
reported that the Lab had to act at once because both men were 
approaching the end of their probationary periods and about to go on 
vacation. Based on what Mr. Salgado said, I thought the probationary 
periods would expire while Mr. Doran and Mr. Walp were away from the 
Lab. Mr. Salgado pointed out that Mr. Walp had incorrectly accused an 
employee in the Lab's Human Resources Department of obstruction of 
justice, and other reasons offered as justifications for the 
terminations included Mr. Walp's refusal to cooperate with the External 
Review Team and the unreliability of reports submitted by Mr. Doran. 
After listening to Mr. Salgado, I asked whether he had spoken with 
Director John Browne about the terminations. He responded that the 
Director was out of town, but that he would consult him over the 
weekend. I then told Mr. Salgado to do what he felt was right.
    Based on the apparent unity of Laboratory managers, I did not doubt 
Mr. Salgado's actions or motivations when he notified me of his 
intention to recommend termination to Director Browne. Now, however, I 
have serious doubts about the actions. I subsequently learned, for 
instance, that neither Mr. Walp nor Mr. Doran were approaching the end 
of their probationary status. In fact, the probationary periods for 
both men ran into 2003, and both periods could have been extended by 
Laboratory managers.
    Secretary Abraham played an instrumental role in triggering my 
reassessment of the terminations. During the Secretary's December 12, 
2002 visit to Santa Fe, Director Browne explained the Laboratory's 
reasoning for terminating Mr. Walp and Mr. Doran. It was a case I had 
heard before, and a case, frankly, that I had accepted as plausible and 
defensible. Secretary Abraham offered a new, fresh perspective. As his 
probing questions demonstrated, an outsider objectively reviewing the 
situation might wonder if the terminations were warranted. The 
Secretary, as well as this Committee, helped shed new light onto the 
firings.
                          concluding thoughts
    Our national laboratories are extraordinary institutions that 
provide an invaluable service to this country. They have no peer in the 
realm of scientific research and technical expertise. There is always 
room for improvement, however. I have devoted much of my life to 
bettering the project management of our national laboratories so as to 
ensure that their business practices match their scientific excellence. 
During my tenure as Vice President for Laboratory Management, I believe 
the University and Los Alamos made real and substantial progress toward 
improving management, oversight, and programmatic performance.
    Yet the failings at Los Alamos demonstrate that we must do much 
better. The events being investigated by this Committee are 
inexcusable. Theft and mismanagement of government property--regardless 
of size--cannot be tolerated. When I proposed creating the position of 
Vice President for Laboratory Management, I emphasized the importance 
of accountability. Ultimately, I was the University official in charge 
of overseeing Los Alamos, and I regret what occurred at the Lab. But I 
am also grateful to this Committee, to Secretary Abraham, to Mr. Walp 
and Mr. Doran, and to the Inspector General for investigating, 
identifying, and publicizing the weaknesses at the Lab. I am convinced 
that the University and Los Alamos are becoming stronger and improved 
institutions because of these revelations.
    Thank you again for your efforts and for the opportunity to appear 
today. I would be happy to answer your questions.

    Mr. Greenwood. Thank you, sir.
    Mr. Erickson.

                 TESTIMONY OF RALPH E. ERICKSON

    Mr. Erickson. Good afternoon, Mr. Chairman, members of the 
subcommittee. My name is Ralph Erickson. I am the current 
Manager of the National Nuclear Security Administration's Los 
Alamos Site Office. I was assigned to the Los Alamos Site 
Office in July 2002 as Director, reporting to the Manager of 
the Albuquerque Operation Office.
    During the middle of December 2002, as a part of National 
Nuclear Security Administration's restructuring, the 
Albuquerque Operation Office was disestablished and the Los 
Alamos Site Office began reporting directly to the National 
Nuclear Security Administration's Administrator Office in 
Washington, DC. At that time, I became the Manager of the Los 
Alamos Site Office.
    I am now responsible and accountable, to the Administrator, 
for the oversight and contract management for the contract with 
the University of California, related to the Los Alamos 
National Laboratory. My new responsibilities include functions 
that were previously the responsibility of the Manager, 
Albuquerque Operations Office, such as Business Management 
oversight and evaluation.
    Given the events of the past 8 months, which includes the 
Department of Energy's Office of Inspector General Special 
Inquiry, ongoing Federal Bureau of Investigation and other 
related activities, I have taken a number of actions to begin 
to address the findings and recommendation which have come from 
these events:
    I have directed that the Los Alamos National Laboratory 
take appropriate salary action for those individuals reassigned 
to lower-level positions.
    I have directed the Los Alamos National Laboratory to take 
five specific actions related to the recently issued Office of 
Inspector General report on fire arms inventory and report back 
to me in person on a monthly basis as to the status of the 
corrective actions taken by them.
    These corrective actions will be validated by the National 
Nuclear Security Administration.
    I have directed that Los Alamos National Laboratory 
establish an internal tracking system, to capture all findings, 
observations, lessons learned, and recommendations related to 
these and other assessment activities. This tracking system 
will include corrective actions, and a schedule for 
implementing the corrective actions. Los Alamos National 
Laboratory will identify a point of contact for each action. 
The National Nuclear Security Administration will review each 
action for adequacy and validate closure.
    I have taken actions to reengineer the Business Management 
Oversight Process, which is conducted by National Nuclear 
Security Personnel. Formerly, this process was focused on 
performance improvement (efficiency, and economy), and the 
process was functionally aligned.
    Assessments were conducted vertically within functional 
areas such as property, procurement, and finance. I have added 
steps to assure that transactions will be evaluated in a 
cradle-to-grave fashion horizontally across all functional 
areas.
    Thus, transactions involving the acquisition of personal 
property for example, will be assessed from inception to 
completion assuring that approved procedures are properly 
implemented across the Los Alamos National Laboratory business 
management activity. This methodology will insert an element of 
internal control review into the performance assessment 
process.
    Finally, as corrective actions are implemented, and 
validated for closure, I will also review each action and take 
appropriate actions, such as a contracting officers 
determination of allowable costs in order to assure that the 
Government's and the taxpayers funds are recovered as 
appropriate.
    Thank you for the opportunity to appear before this 
committee. This concludes my statement; I would be pleased to 
answer any questions. Thank you.
    [The prepared statement of Ralph E. Erickson follows:]
   Prepared Statement of Ralph E. Erickson, Manager, Los Alamos Site 
 Office, National Nuclear Security Administration, U.S. Department of 
                                 Energy
                              introduction
    Good morning Mr. Chairman and Members of the Subcommittee: My name 
is Ralph Erickson, and I am the current Manager of the National Nuclear 
Security Administration's Los Alamos Site Office. I was assigned to the 
Los Alamos Site Office in July 2002 as Director, reporting to the 
Manager of the Albuquerque Operation Office. During the middle of 
December 2002, as a part of National Nuclear Security Administration's 
restructuring, the Albuquerque Operation Office was disestablished and 
the Los Alamos Site Office began reporting directly to the National 
Nuclear Security Administration's Administrator Office in Washington, 
D.C. At that time, I became the Manager of the Los Alamos Site Office.
    I am now responsible and accountable, to the Administrator, for the 
oversight and contract management for the contract with the University 
of California, related to the Los Alamos National Laboratory. My new 
responsibilities include functions that were previously the 
responsibility of the Manager, Albuquerque Operations Office, such as 
Business Management oversight and evaluation.
    Given the events of the past eight months, which includes the 
Department of Energy's Office of Inspector General Special Inquiry, 
ongoing Federal Bureau of Investigation and other related activities, I 
have taken a number of actions to begin to address the findings and 
recommendation which have come from these events:

 I have directed that the Los Alamos National Laboratory take 
        appropriate salary action for those individuals reassigned to 
        lower level positions.
 I have directed the Los Alamos National Laboratory to take 
        five specific actions related to the recently issued Office of 
        Inspector General report on fire arms inventory and report back 
        to me in person on a monthly basis as to the status of the 
        corrective actions taken by them. These corrective actions will 
        be validated by the National Nuclear Security Administration.
 I have directed that Los Alamos National Laboratory establish 
        an internal tracking system, to capture all findings, 
        observations, lessons learned, and recommendations related to 
        these and other assessment activities. This tracking system 
        will include corrective actions, and a schedule for 
        implementing the corrective actions. Los Alamos National 
        Laboratory will identify a point of contact for each action. 
        The National Nuclear Security Administration will review each 
        action for adequacy and validate closure.
 I have taken actions to reengineer the Business Management 
        Oversight Process, which is conducted by National Nuclear 
        Security Personnel. Formerly, this process was focused on 
        performance improvement (efficiency, and economy), and the 
        process was functionally aligned. Assessments were conducted 
        vertically within functional areas such as property, 
        procurement, and finance. I have added steps to assure that 
        transactions will be evaluated in a cradle to grave fashion 
        horizontally across all functional areas. Thus, transactions 
        involving the acquisition of personal property for example, 
        will be assessed from inception to completion assuring that 
        approved procedures are properly implemented across the Los 
        Alamos National Laboratory business management activity. This 
        methodology will insert an element of internal control review 
        into the performance assessment process.
    Finally, as corrective actions are implemented, and validated for 
closure, I will also review each action and take appropriate actions, 
such as a contracting officers determination of allowable costs in 
order to assure that the Government's and the taxpayers funds are 
recovered as appropriate.
    Thank you for the opportunity to appear before this committee. This 
concludes my statement; I would be pleased to answer any questions.

    Mr. Greenwood. Thank you, Mr. Erickson.
    The Chair recognizes himself for 10 minutes.
    Mr. Marquez, the committee obtained a report that was 
generated in last December. It was requested by BUS-5 team 
leader that shows items that were deemed sensitive that were 
not property tagged as they should be.
    Now, that report says there were over $600,000 in desktop 
computers untagged, $150,000 plus in pocket PCs, $188,000 in 
printers, $20,000 plus in scanners, $193,000 plus in work 
stations, $7,400 in network servers, $751,000 in lap tops. How 
can anyone sit here with a straight face and say that this 
property management system is not severely flawed given these 
numbers?
    Mr. Marquez. I am not familiar with the particular list. I 
do have a list that the University of California provided me. I 
suspect it is probably the same list. The list I have seen has 
roughly 500 individual transactions and it is roughly computers 
and computer peripheral equipment.
    As we speak, I have my staff inventorying that to try to 
track it back to serial numbers and purchases. So far, sir, 
with 65 percent of that complete, we have all of those showed 
up as bar coded and in the inventory. I would like to finish 
that and I would like to provide this committee with that 
report.
    Mr. Greenwood. All right. Which among you had direct 
responsibility for the purchase card program?
    Mr. Hettich. As the procurement manager I would say I had 
direct responsibility.
    Mr. Greenwood. Okay. Reference was made, and I forget which 
one of you testified, to, I think, with regard to the Mustang 
case that the individual in charge had self-approved status.
    Mr. Hettich. Correct.
    Mr. Greenwood. Now, it seems to me so obvious that a system 
in which employees self-approve their expenses is obviously 
flawed. I can't imagine. That is not the way it works in the 
Congress. I can tell you that.
    I can tell you that if I buy a train ticket and put it on 
my Federal credit card, I better bring that stub in and I 
better give it to the woman who puts this report together and 
she sends it off to somebody else who matches it against the 
dates and so forth and approves. If I make a mistake anywhere 
in my reporting, I have got a problem. It seems so self-evident 
that any system that has self-approval is automatically flawed. 
How could you have a system like that?
    Mr. Hettich. I can give you the historic on it. It was 
actually set up that way in 1996 when the credit card system 
was first set up.
    Mr. Greenwood. What were they thinking then?
    Mr. Hettich. The logic at that time was if, in fact, you 
are giving a buyer a warrant to make a purchase under a PO 
system, then you don't--they effectively self-approve that. 
They release that contract action so in the case of a P-card it 
is an equal type of concept. I personally disagree with that 
idea. I agree with you.
    Mr. Greenwood. How long have you personally disagreed with 
that?
    Mr. Hettich. Well, I became the procurement manager in 
January of last year. Just so you have a context, I am the 
third procurement manager the Laboratory has had in 3 years and 
during a period where our growth in procurement actions was 
going up tremendously.
    The problem was, quite honestly, I have to admit and, 
again, you have others say this and I won't use that as an 
excuse, but I didn't realize that actually that is how the 
structure was at that time. When I found out, I was outraged. I 
mean, it just struck me----
    Mr. Greenwood. You know, there was a lot in the news, I 
think somebody mentioned it today, about these kinds of 
problems in other departments, the Department of Defense.
    Mr. Hettich. That is correct.
    Mr. Greenwood. There were stories about somebody in the 
Department of Defense who paid for his girlfriend's breast 
enlargements or something using a credit card. There were all 
kinds of ridiculous abuses of the credit card system.
    Mr. Hettich. I had actually asked for a review of the 
credit card system in January when I first became the 
procurement manager and got a status from the then team leader 
over the small purchasing operation and the purchase card 
administrator on what is the status of our system. At that time 
that was not one of the issues that was raised unfortunately.
    Mr. Marquez. Mr. Chairman, let me just interject. We can 
look backward, and I agree, but it is not defensible. When we 
looked at it, and I had a small committee formed to look at 
this, the first place they looked, as Dr. Browne testified, was 
DOD OIG reports. They were rampant at the time.
    If you will notice in the August 26 revision of the 
procedures, which I issued, there is no continued self-
approval. You have to have separate approvals. I mean, we all 
recognized at the time when we looked at it that it wasn't 
acceptable. I still believe it's not acceptable and we changed 
it.
    Mr. Greenwood. Okay. Let me stay with you, Mr. Marquez. 
Past procurement card audits dating back to 1998 identified the 
same systemic issues with the program time and time again. 
Checklist to ensure cards were closed out properly when 
employees leave the lab do not exist. Regular audits of 
programs not occurring. Property controlled items not properly 
accounted for.
    As I mentioned in my opening statement, I would like to 
know now what about your new procedural changes leads you to 
believe they will assist in solving the problems where none of 
the other audits and suggestions worked?
    Mr. Marquez. If you look at my written testimony, sir, you 
will see that when I started the job, I indicated in my written 
testimony that you had mixed signals. Yes, you had audit 
reports, but you also had corrective actions that were recorded 
that indicated that management had addressed the issues.
    You had ratings from the customer that were outstanding. 
There were mixed signals in this process. Notwithstanding that, 
your challenge is well taken. I believe that the answers are 
really pretty straight forward. First of all, I think you have 
to have sanctions. You have to have sanctions for the card 
holders and the review and approval officials that do not do 
their job. You have to have sanctions for people that abuse 
purchase cards. Our disciplinary procedures----
    Mr. Greenwood. As my daughter would say, ``duh.''
    Mr. Marquez. But my point is we have disciplinary 
procedures that cover that but our practices don't evidence 
that we rigidly enforce and follow up. That is a single 
difference. In January we suspended close to 200 cards for 
people who did not do the requisite training. We have not done 
that in the past. The scope of the cards. You know, we let this 
thing grow to where we had too many card holders.
    We have dropped it from something like 1,100 down to 585. 
We have got problems with our automated system. Every time we 
invent a system, we find ways to manually override it so that 
the internal control checks don't occur. We are going to fix 
that. And then, frankly, two other things that I think are just 
as important.
    We have, in my opinion, an over reliance on audits to do 
internal control's work. I think the answer is that the 
business organizations, whether they be the accounting people, 
the property people, the procurement, they have to do their own 
internal control desktop audits. They have to routinely check.
    As I indicated in my written testimony, experience and 
industry practice tells you that if management is paying 
attention, a lot of the internal control issues should go away. 
And, finally, and this is probably the most important, I really 
insist and maintain in my testimony, and I believe this with 
all of my heart, your best internal control is the very people 
who have the cards who observe others. If we create an 
environment of openness where they can bring forward issues, 
then that is another way to catch----
    Mr. Greenwood. I certainly agree with that. It has been 
testified here that now there is this new spirit of rejoicing 
about bringing information forward. My question is did the 
opposite exist before? Was it your sense that prior to these 
changes that there was--that individuals who felt they were 
aware of wrongdoing going on by their coworkers were 
discouraged from bringing that forward?
    Mr. Marquez. I think you are going to find different views 
by different managers at the Laboratory. I will just share my 
own personal view. I believe that I have seen enough one-on-one 
conversations with people that they do believe that there would 
be retaliation if they brought forth issues. I have heard that 
on more than one occasion.
    Mr. Greenwood. What do you think led them to believe that? 
Can you think of cases where there has been retaliation?
    Mr. Marquez. I have had to review cases that claim 
retaliation in my capacity as the Associate Lab Director.
    Mr. Greenwood. Retaliation by whom?
    Mr. Marquez. By supervisors and managers. I have had people 
come to me and share who, in fact, have been past 
whistleblowers who to this day still claim that they are being 
retaliated against.
    Mr. Greenwood. And you have investigated those claims?
    Mr. Marquez. Yes, I have. Yes, sir.
    Mr. Greenwood. And have you found they have veracity?
    Mr. Marquez. I have found that in most cases a lot of these 
issues don't go away. People go through the process and they 
don't feel like justice was served at the end of that process. 
I am being candid with you. That's frankly my own assessment.
    Mr. Greenwood. You are under oath. You had better be 
candid.
    Mr. Marquez. But I have to tell you, those issues don't go 
away and I think, frankly, part of our problem is that we don't 
cultivate relationships. We don't have relationships amongst 
subordinates. We don't have vertical relationships. We don't 
have relationships even in the business community. We don't 
spend a lot of time on that and I think we need to spend more 
time on that.
    Mr. Greenwood. Mr. McTague, did you want to comment on 
that?
    Mr. McTague. Yes. With respect to the issue of whether 
there is hope that things will be better now with the new 
system, the University of California has a purchase card 
system, a single system at its 10 university campuses and the 
two other national laboratories that it manages. There have not 
been the systemic problems on the campuses or at the other 
laboratories with this new system which is now the one that has 
essentially been put into place at Los Alamos so hope springs 
eternal.
    Mr. Browne. Mr. Chairman, could I make a quick comment?
    Mr. Greenwood. Please.
    Mr. Browne. This whole subject really consumed a lot of my 
energy for a couple of years, this whole question of fear in 
the work place. The way I tried to address this was by a lot of 
employee focus groups. Going out in the laboratory and sitting 
down with employees without their supervisors there. I heard 
the same thing that Mr. Marquez just testified to.
    What I tried to do to address it was to give the employees 
more avenues to come forward, an ombuds office. I put in place 
at the time I became director something called Ask The Director 
where you could ask me anonymously or tell me what you thought 
was the problem and I would answer that publicly in our news 
bulletin.
    We had a series of these things. I think there is still 
some fundamental barriers in our institution that I have 
struggled with that have caused this fear to still exist and it 
goes back a long time. I know 10 years ago when I was in a 
different position at the Laboratory I dealt with the same 
fundamental problem and I talked to employees about what drives 
this fear in the work place.
    I think we have to just continue to do what Dr. Marquez 
says. The Lab Director has to stand up and say that it is okay. 
I have done that. I have done that on many occasions. I 
actually had a policy which I called my zero policy and that 
stood for zero people mistreatment at our Laboratory, zero 
safety incidents, zero security incidents.
    Ironically I got some pushback from our employees because 
technically they said you can never achieve zero. My answer to 
the employees was, ``What number is okay?'' In my opinion, 
there is no other number. You may not ever get there but the 
fact is that should be your goal as a leader of an institution.
    Mr. Greenwood. Thank you.
    The gentleman from Florida.
    Mr. Davis. Thank you. I have a series of questions that, if 
counsel is prepared, I would like to run through.
    Mr. Hettich, I want to start with you and the Mustang 
investigation. Why did you not report this to OSI as soon as 
you found out about it?
    Mr. Hettich. Sir, I have to disagree with the statement 
that was made that I did not. I got to Mr. Marquez as quickly 
as I could. After I talked to Mr. Marquez as the head of AD 
that we ultimately responded to, first of all, he asked me to 
make sure that I informed both AA-4, which was the Waste, 
Fraud, and Abuse Unit, and OSI. Historically, just so you 
have----
    Mr. Davis. I am short on time and I know you will correct 
me if I am not putting this in the appropriate context. He did 
direct you to report this to OSI?
    Mr. Hettich. To both.
    Mr. Davis. And you did so?
    Mr. Hettich. Yes, sir.
    Mr. Davis. And how timely did you do so?
    Mr. Hettich. I called Mr. Walp the next day. We arranged--
--
    Mr. Davis. Can you be specific on the date, if you can 
recall?
    Mr. Hettich. I would say--well, interestingly enough, I had 
found one of the call backs on it. The call back from Steve 
Doran was on the 25th but I had talked to Mr. Walp before that. 
There was also an allegation made that it was only because of 
John Topia which is not correct.
    Mr. Davis. Let me just understand this specific point. My 
information is the problem was discovered on the 18th. Does 
that message help you recall what date you would have talked to 
him?
    Mr. Hettich. It was discovered on the 18th. I was informed 
of it on the Wednesday of the week before the 25th. I talked to 
Mr. Marquez, called Mr. Walp on the Friday. Met with my people 
on the Tuesday for more information on it. Met with Mr. Doran 
actually, I think, the next day. Then with Mr. Walp and Mr. 
Doran on Thursday.
    Mr. Davis. Mr. Dickson's office knew about it in a couple 
of days. Did his office tell you to start your own 
investigation by calling the suspect employee and the suspect 
vendor?
    Mr. Hettich. No. Not me, but I am not sure if they had a 
conversation with either Mr. Holder, who is the team leader, or 
the purchase card administrator.
    Mr. Davis. Are you aware that Mr. Holder gave those 
instructions to the purchase card administrator and, if so, why 
did he do that?
    Mr. Hettich. I am not sure why he gave those instructions 
to the purchase card administrator. I think what he was trying 
to do was establish the facts so that he understood what was 
happening in this. As has been pointed out, she had immediately 
disputed it when the statement came out. Statements are like 
your own. They come out the month after. A May statement would 
have come out in June.
    Mr. Davis. Were you planning to have your people go out and 
get phone records and check on delivery methods? Were you 
planning to call the FBI yourself or were you going to let Bank 
America handle the problem since they had already reimbursed 
the vendor?
    Mr. Hettich. Actually, the first thing I wanted to do was 
talk to senior management as soon as I found out about it what 
they would like me to do with it. I would have automatically 
called AA-4 the same day that I found out about it but I wanted 
to make sure that Mr. Marquez was aware of it. I knew that OSI 
was taking a different role than they had historically taken on 
it. We discussed it and he said that he wanted to make sure 
that we were informing both avenues simultaneously and I did 
that.
    Mr. Davis. Mr. Marquez, do you agree with the description 
of the events?
    Mr. Marquez. I agree with the description relative to Mr. 
Hettich's and my conversation. I have really no knowledge of 
Mr. Holder's actions.
    Mr. Davis. In your capacity as the person in charge of all 
kinds of procurement, can you explain to us how the blanket 
purchase order like the Mesa agreement could have gotten out of 
hand without somebody monitoring it? Different people have told 
us this particular type of method was ripe for abuse.
    Mr. Marquez. As I have said to the staff members, there is 
really no excuse for the Mesa contract. The structure of it by 
its nature was more open than any blanket we had ever put 
together that I could find. It started out as a very small 
contract with a limited scope. It was expanded.
    While there was some review, the oversight was clearly not 
enough. Even though it had been in existence for quite a period 
of time by the time that I became the procurement manager, 
honestly the procurement manager in general should have known 
about it. I should have known about it. I can't defend that 
piece. I mean, I can't defend why that contract was structured 
as open as it was.
    Mr. Davis. I believe you may have said to Mr. Walp at some 
point that the system had become too customer oriented meaning 
the customer got what they wanted. Do you think that explains 
why the system was failing?
    Mr. Hettich. Actually, just so you understand, there was 
another aspect of what I told Mr. Walp and Mr. Doran. There 
were actually three things I said to explain the system 
differences. One was that in the mid-1990's there was a 
decision that the procurement and property personnel that were 
distributed, that were in the field, instead of reporting 
directly to the property management and procurement management, 
actually reported to a different BUS group. So the person that 
was overseeing their salary raises and everything else was not 
necessarily the procurement manager or the property manager.
    That was changed in February 2002. By the way, the other 
thing that I raised with them was the G&G Industries as the 
same time when they came over, at the same time I mentioned 
Mustang.
    Mr. Davis. In your opinion, do contract administrators have 
enough time to monitor the purchases to make sure they are 
legitimate?
    Mr. Hettich. No.
    Mr. Davis. So it's really a matter of personal 
accountability for each of the administrators. If the 
administrator is honest and does their job appropriate, 
everything will work out fine. If they don't, there are 
opportunities for misuse.
    Mr. Hettich. I think one of the things that Mr. Marquez 
said that is probably the most important is the level of 
oversight. Just to give you a comparison, for instance, at 
Lawrence Livermore the BUS organization has four people that 
look specifically at that. That is an independent organization. 
That is what Mr. Marquez has set up for us now also within our 
BUS organization.
    Mr. Davis. Mr. Hernandez, I would like to ask you to 
comment on the same point in terms of the oversight.
    Mr. Hernandez. I think the problem with this blanket, how 
it got out of hand, is due to, one, understaffing within 
procurement. The administrator of this contract is an honest 
person. She does a good job. Spends an abnormal amount of hours 
at work. We are overwhelmed with new requirements from 
requestors. Once you have a full plate of new requests you are 
being pushed to get these things out. Usually you have last 
minute requests. The administration and oversight of the 
contracts end up suffering.
    Mr. Davis. Mr. Marquez, what plans do you intend to 
undertake to deal with this problem that everyone seems to 
agree?
    Mr. Marquez. The staffing issue?
    Mr. Davis. Yes, sir.
    Mr. Marquez. Actually, we have done some things. Our 
organization in procurement is funded out of our G&A, general 
and administrative account. In fiscal year 2002 shortly after I 
got there I mentioned that we formed this procurement 
excellence plan. A tab of that, a section of that has to do 
with staffing.
    In between Stan Hettich and I and his team we laid out a 3-
year plan. It is obvious now looking back it's not aggressive 
enough so with the help of the University of California we were 
going to go out actively and vigorously and recruit MBA level, 
whatever it takes to fix the staffing shortages.
    Mr. Davis. So this was a 3-year plan because you did not 
think it was an immediate problem but a problem with a long-
term solution?
    Mr. Marquez. No. It was a 3-year plan because historically 
at the Laboratory what I saw in terms of procurement profile is 
that since 1996, as I mentioned in my written testimony, they 
had pretty static staffing and I felt like it was going to be 
an uphill battle to try to address the procurement and other 
administrative staffing areas so I put together a modest plan. 
Obviously it wasn't aggressive enough. We actually funded some 
positions both in 2002 and 2003 largely because of my 
intervention relative to the budget.
    Mr. Davis. I think my time is about up so let me close with 
this question. Dr. Browne, Mr. Salgado apparently has told us 
that people at the Los Alamos Lab treated the taxpayer's money 
as ``Monopoly money.'' He told us expensive furniture and food 
were bought as were thousands of dollars for shirts 
congratulating people. Do you agree with Mr. Salgado and what 
has been done or what will be done about this?
    Mr. Browne. I don't think I would have chosen the term 
Monopoly money.
    Mr. Davis. What term would you have chosen?
    Mr. Browne. I think it goes back to this question of 
formality of operations. What I mean by that is whenever you 
have resources to work a problem for the Government, you really 
need to have a system in place that allows you to plan your 
program, to budget what you are going to spend it on, telling 
your customer what you need to carry it out, and you need a 
good evaluation system that says how well you are doing it.
    It's more formality and project management and yet allowing 
enough flexibility for local managers to make some good 
judgment decision, not so rigid. What I think Mr. Salgado was 
saying was that the system, unfortunately, maybe had too much 
flexibility in the sense that some poor judgment by a few 
people in terms of how they use their resources that were at 
their disposal to carry out programs was maybe not with the 
best judgment that they could exhibit.
    For example, we have a program with the Department of 
Energy for morale funds. That is a program that is approved by 
the Department of Energy up to a certain limit. If someone 
chooses to try and go around that system to augment that fund, 
that is an unallowable cost. Mr. Erickson, I know, would tell 
me it is an unallowable cost and we would have to figure out 
another way to cover those expenses.
    Those were Joe Salgado's words. I never would have said 
Monopoly money. It conveys a little different context than I 
would which is more of this you have got to have rigorous 
formality when you are dealing with taxpayer's money.
    Mr. Marquez. Mr. Davis, may I comment?
    Mr. Davis. Please.
    Mr. Marquez. The Congressman from California this morning 
made a point about, ``What are you doing about it? You have got 
these cultural issues.'' I would like to tell you that we are 
doing something about it. I have formed a Business of 
Procedures Practices Council. PP3 we call it. What it is is a 
cross-section of the technical side of the house, all of the 
division leaders.
    As we make the corrective changes that we are proceeding 
with now, they sit on a steering committee and if they have 
objections, they needed to voice them then. If there are going 
to be programmatic impact, they need to let us know.
    What we do by this is get their buy-in each step of the way 
as we change and forge this new culture. To sit and say we have 
got this culture of accommodation, or whatever the term was 
that was used, I wanted to let you know we are doing something 
about addressing that cultural issue.
    Mr. Walden. All right. Where to start? I want to make a 
couple of comments. Dr. Browne, you triggered something that I 
think is important. I fully understand--well, I don't. Nobody 
understands what you have been through because it has probably 
been very difficult.
    You talked about size and scale of the operation. Even 
given that, you are still responsible. I appreciate that, you 
taking responsibility. It seems to me, though, that big 
organizations hire people and pay them pretty significant 
salaries to deal with the scope of the problems that may exist. 
I hear size and scale. We face it all across the Federal 
Government. I don't care how big or small your business is, you 
are going to have bad apples but, dog gone it, at some point.
    I appreciate your comments about Mr. McDonald being a 
stand-up guy. The great irony is, though, that he went with 
Bill Sprouse at OSI apparently. He told us he did at least 
once, if not more than that, to say there's a problem. He felt 
like he had been ignored. How ironic if, indeed, all of that is 
true. If Mr. Sprouse had actually done something about it, who 
knows what would have happened, how all of the lives would have 
been different.
    That's what troubles me is that my understanding is both 
the University system has basically hired back Mr. Walp and is 
working with Mr. Doran. Obviously we have heard today and 
before that there wasn't necessarily just cause to fire them, 
so that leads me to believe they didn't do anything wrong. They 
were the whistleblowers. They identified the problems.
    They were fired inappropriately and, in fact, the people 
who fired them have been dismissed with a nice severance 
parachute. Two weeks ago, I think it was, they sat here, Mr. 
Walp and Mr. Doran, and said the people they hired who were 
still there, the investigators or investigator, reported to 
them basically they are just as frustrated as ever, that 
nothing has changed.
    Now, I hear things are changing. We also hear, though, that 
certain LANL managers have suggested that the University of 
California's actions to rehire Walp and Doran are ``only so 
much window dressing'' and it is just a passing storm.
    Mr. Marquez, do you care to comment on that? That is the 
heart of the issue here. Is there real change or is this just 
wait it out until the storm passes?
    Mr. Marquez. I believe it's real change. I don't believe 
that----
    Mr. Walden. You don't think it is window dressing?
    Mr. Marquez. No, sir. I believe that the University of 
California has demonstrated, at least to me, in the areas that 
I have to administer that they are sincere about the effort to 
make change. They are bringing resources to the table. They are 
bringing support on a daily basis. I have no doubt this is a 
sincere change.
    Mr. Walden. Okay. Mr. McTague and Mr. Marquez, are you 
familiar with the settlement/retirement agreements with 
Busboom, Tucker, and Brittin?
    Mr. McTague. That all occurred after my time.
    Mr. Marquez. That's a University of California action and I 
am not aware of it.
    Mr. Walden. So you don't know whether they included any 
indemnification?
    Mr. Marquez. I have no idea.
    Mr. Walden. Anybody know at the table? No one is in a 
position? Okay.
    Mr. McTague. Might I make a comment on your discussion 
earlier in the questions about that this time around are things 
really going to get fixed. From my perspective, retrospectively 
now, two things that are very important to making the system 
really work are, one, a very good audit line of authority. 
Ultimately the responsibility for running the Laboratory goes 
to the Regents of the University of California.
    The system that was in place for audit up until December, I 
guess, was that the local audit operation at Los Alamos in 
effect reported indirectly to the director and only very weakly 
up through the Office of the President to the Regents where 
there is an important audit office headed by Pat Reed. The 
connection now is that audit function reports directly to Mr. 
Reed so that it is independent of the system at the Laboratory.
    Mr. Walden. That's good.
    Mr. McTague. I think that is extremely important. The other 
important thing is the robustness of management systems. We 
have enough testimony that the management systems were not 
robust, antiquated, etc. Bringing in the Ernst & Young group to 
take a look at the total of the financial and other management 
systems at the Laboratory, I think, is an opportunity that 
would not have come about unless this committee had started the 
investigation.
    Mr. Walden. I appreciate that. Mr. Erickson, the NNSA 
fiscal year 2002 appraisal of the LANL rated the Lab's 
procurement and personal property management areas as 
``excellent'' despite all the problems that had arisen at that 
time. Can you explain what that rating is based on and how it 
is that a system rated as excellent could allegedly allow two 
employees to walk off with lab property of over $150,000 
Government purchased property?
    Mr. Erickson. The actual BMOR report, you may have heard it 
called that, Business Management Operations Report, was 
basically completed in about the August, early September 
timeframe by the portion of the Albuquerque Operations Office 
that at that time had responsibility for reviewing those 
business, procurement, and property activities.
    Based on the information that was available to them at that 
time, none, or very few, of the activities that had come to 
light as a result of the investigations in this hearing process 
were known. The FBI was investigating a number of issues, the 
Mustang case and others, as well as the TA-33 case. Those were 
under investigation.
    Given the fact that they were under investigation by the 
FBI, we weren't aware of all the details at that particular 
time and the people who did that report were not aware. That 
report was then issued at the very beginning of October of last 
year.
    The appraisal was put together in the latter part of 
October. At that point in time a few more of these details had 
come out. I made the decision to lower their rating by one 
grade and that is the rating that was made a part of the actual 
appraisal.
    Mr. Walden. Just one grade?
    Mr. Erickson. Again, because we didn't have the 
information. We did not have the data. This was prior to the 
firings of the two gentlemen. This was before we knew what was 
going to come out of the FBI investigation.
    Mr. Walden. You know, Mr. Erickson, it is probably 
frustrating for you to have me sit here and question all the 
work you are doing but I spent 5 years on a community bank 
board and served on the audit committee.
    We had the regulators in periodically. They were amazing at 
what they could find down to the gnat's eyelash practically. 
They were very rigorous. We welcomed it as a board because it 
kept our tails out of trouble. How do we get that into these 
systems? We had our own internal auditor. We had an external 
auditor. Then they would come in.
    Mr. Erickson. And that is one of the things that we are 
endeavoring to correct as we have moved beyond this. The 
metrics that were used by the BMOR people tended to be very 
vertical in an organization. They didn't take a transactional 
look at how things really crossed the line between procurement 
and property and things like that. This year based on what we 
found and what we learned we are changing that process.
    Mr. Walden. Are you changing auditors?
    Mr. Erickson. We're not changing auditors because we rely 
on two things. One, the Federal employees whom we used before. 
We also use the IG on an annual basis to look at our books.
    Mr. Walden. You don't use an outside Government auditor?
    Mr. Erickson. It's all within house, if you will. The 
internal is our own organization, the NNSA. We also rely on the 
IG as, if you will, the external organization. We don't go to 
Arthur Anderson.
    Mr. Walden. Nobody does that anymore, Mr. Erickson. In part 
as a result of this committee, I might add.
    Mr. Erickson. I recognize that.
    Mr. Walden. We are trying to avoid all those issues. When 
did you find out about the Bussolini-Alexander case?
    Mr. Erickson. I was informed of that toward the latter part 
of August. I had heard about the Mustang and the P-card, as it 
is sometimes is called, issue.
    Mr. Walden. Who told you about it, Bussolini-Alexander?
    Mr. Erickson. That was Joe Salgado.
    Mr. Walden. And what was your response?
    Mr. Erickson. I was astounded, amazed, disappointed, and 
very upset.
    Mr. Walden. Did you notify anybody at NNA or DOE about the 
problem?
    Mr. Erickson. Yes. I immediately notified at that time my 
immediate boss which was John Arthur who was the manager at 
Albuquerque and also----
    Mr. Walden. No relation to Arthur Anderson?
    Mr. Erickson. No relation, sir. Then also the 
administrator's office, Linton Brooks' office, within 
headquarters.
    Mr. Walden. So that is the action you took and then out of 
your hands from there?
    Mr. Erickson. In a sense out of my hands because those are 
ongoing investigations by the FBI. We stand away from that and 
let the FBI do their job until they are complete.
    Mr. Walden. I just want to close my part and turn it over 
to my colleague here. The fact is it still troubles me that 
Walp and Doran were here 2 weeks ago reporting to us that in 
their opinion and what they are hearing the same problems are 
still going on. I just leave you with that. Whether it is 
accurate or not I don't know. I hope you take that to heart.
    Mr. Deutsch.
    Mr. Deutsch. Thank you. Mr. Marquez, I am going to refer to 
an e-mail dated January 23, 2002, from Robert Holder to Dennis 
Roybal. If you want to take a look at it, it is at Tab 107 in 
the book. Who are Mr. Roybal and Mr. Holder?
    Mr. Marquez. I can't find the tab but Mr. Roybal was--what 
was the date?
    Mr. Deutsch. January 23, 2002.
    Mr. Marquez. Until recently Mr. Roybal was the Deputy 
Division Director in the Business Operation Division. Mr. 
Holder until recently was a team leader for the accelerated 
purchasing team in the procurement group of the Business 
Operations Division.
    Mr. Deutsch. Their titles now are?
    Mr. Marquez. Mr. Roybal is a special assistant to my office 
and Mr. Holder, I believe, has been reassigned as a senior 
procurement staff in the procurement group.
    Mr. Deutsch. Do they both work for you?
    Mr. Marquez. They both report to me but they work in the 
Business Operations Division. Mr. Roybal reports directly to me 
now.
    Mr. Deutsch. There is a concern about an IG order, the 
purchase case program. Is that correct?
    Mr. Marquez. I am sorry?
    Mr. Deutsch. There is a concern, or is there a concern 
about an IG order of--in the e-mail itself it talks about that, 
concern about the IG order of the purchase case program. I have 
it right here.
    Mr. Marquez. ``DOE IG just announced they are going to 
initiate a DOE wide audit of contractor purchase card use.'' I 
think this e-mail is a forwarded e-mail that originated within 
NNSA. I think what they are doing is he is forwarding an e-mail 
to give notice that they are doing a--DOE apparently is going 
to do a purchase wide----
    Mr. Deutsch. In this e-mail Mr. Holder tells Mr. Roybal 
that the purchase card system allows the purchase of attractive 
items and cannot demonstrate that they are being properly 
controlled. Could you tell us what attractive property is?
    Mr. Marquez. Sensitive or attractive, if that is what he is 
referring to, is a property control term which means items that 
are under $5,000 which is the normal tracking threshold but 
would be sensitive or attractive in the sense that someone 
might be inclined to steal it, walk off with it. Those would be 
things like, for example, an lap top, cameras, phones, things 
of that nature.
    Mr. Deutsch. And why aren't they being controlled?
    Mr. Marquez. They are being controlled. I am not sure what 
this e-mail is all about. I would have to go through and read 
it. The purchase card regulations that I changed in August 
would exclude purchases of this nature. It would prohibit these 
kinds of purchases. That was one of the key changes in that set 
of requirements that I issued in August.
    Mr. Deutsch. Right. I mean, the words from the e-mail, 
``The reviews are not current and have likely never been 
current.''
    Mr. Marquez. Well, this is Mr. Holder's view of the world, 
but I can tell you that as of the end of February when we 
closed our P-card accounts, we dropped our reconciliations and 
our P-card accounts to a point where we are now within $8,000 
on reconciliation so I am not really familiar----
    Mr. Deutsch. Is that February of this year?
    Mr. Marquez. Yes. February of this year. Yes, sir.
    Mr. Deutsch. So this memo is of January of last year.
    Mr. Marquez. January 2002. Keep in mind that (a) this was 
before my time so you are catching me with an e-mail that I 
have not seen, but (b) in August 2002 we instituted lab wide 
purchase card changes.
    Mr. Deutsch. Right. I guess the question is what happened 
between January and August? Why did it take 8 months to do 
that?
    Mr. Marquez. Well, first of all, to be really honest with 
you, I wasn't aware that we were buying controlled property 
with our P-card process. I wasn't aware of that until I found 
out after we had our purchase incidents in the summer. 
Obviously I didn't agree with that policy and I changed it.
    Mr. Deutsch. We were provided this week with a list of all 
the computers bought on the purchase card system. In January 
Mr. Holder recommended not allowing this type of purchase. 
January 2002 he noted that Sandia didn't allow it nor did any 
other private companies.
    Mr. Marquez. Most companies don't allow it, sir. Most 
Government institutions don't allow it.
    Mr. Deutsch. Right. I guess my question again is this is 
January when he was saying this. Why did it take until August 
to change the system?
    Mr. Marquez. Well, I came on board February 4 and was not 
aware of this issue until the summer of 2002. When I became 
aware of it, within a month we instituted a change procedure.
    Mr. Deutsch. Why would you not be aware of it?
    Mr. Marquez. Because we do $1.3 billion of acquisitions 
every year. It is not that it is insignificant but through the 
chain of command you have to understand that Business 
Operations Division is one or eight or nine divisions that I 
manage on a daily basis. Some of these issues get to my 
attention and when they do, I try to take care of them.
    Mr. Deutsch. All right. It's a control issue. Obviously I 
don't want you to sign off on every purchase. Let me just 
follow up. On July 29 Vernon Brown did another purchase card 
assessment. This is after the Mustang case. It's Tab 138 if you 
want to take a look at it, page 8. He said, ``There is no 
mechanism to ensure that property rules are adhered to and it 
is very easy to bypass or simply ignore the rules.''
    Mr. Marquez. Actually, this copy is a copy, I think, I 
provided. This is my handwriting. These are my notes. What this 
was is this was the briefing that I asked Vern Brown to give to 
Joseph Salgado and I in Joe Salgado's office on July 29 because 
both of us became concerned. On July 25 we became notified of 
the P-card incident, I believe, with the Mustang case. That was 
the first one.
    By the following Monday--I think we were notified on a 
Thursday. By the following Monday Vern Brown had worked all 
weekend and put together a very comprehensive report for us by 
way of this briefing so that we could understand the magnitude 
and scope of the problem.
    Mr. Deutsch. Okay. Did the Inspector General miss all the 
problems with the purchase card programs that have been 
uncovered since? Did he miss the suspicious purchases of 
sporting goods, global positioning systems, digital cameras, 
binoculars, slippers, bicycle helmets, and the clothes that we 
uncovered?
    Mr. Marquez. When you say Inspector General, are you 
talking about the former Inspector General John Layton?
    Mr. Deutsch. No, the Inspector General who investigated 
this at the time.
    Mr. Marquez. Actually, what they did in July--a lot of 
these--this was like the confluence of great rivers. The IG 
had, in fact, launched their review and that came together with 
amazing coincidence at the same time that we discovered the 
Mustang case. The IG did more of a--as I recall, they actually 
pulled up 90 cases on a random basis and they asked us to give 
them all the information that we possibly could. We did that.
    I believe out of that review that the IG did independently, 
some of those cases were referred to the Inspector General. I 
have to tell you then that in August, August 26, I believe, 
John Layton's team began their exhaustive review and they 
covered a 45-month period going backwards from June 30, I 
believe, of 2002. That would have been clear back to 1998.
    They looked through every single purchase card transaction. 
You have to be careful. Some of these items, for example, the 
TA-33, were purchased under a blanket purchase agreement, the 
Mesa contract. John Layton's team did not look at that and 
neither did the Inspector General.
    Mr. Deutsch. We have gone through this but can you just 
quickly explain the local vendor agreements and how they work?
    Mr. Marquez. I may have to rely on Mr. Hettich but I can 
tell you what I do know. At one time we had 35 local vendor 
agreements. These are vendors in the Northern New Mexico 
community. The idea is to provide commodities below a certain 
dollar amount supposedly on an exigent basis. How it operates 
is that by your badge, which the Laboratory issues you, you 
walk into a vendor and you can order supplies.
    In simple terms, that is the local vendor agreement 
process. As Bruce Darling indicated, we have looked at that and 
we believe that has got vulnerabilities and we are in the 
process of trying to increase the internal controls on that 
program.
    Mr. Deutsch. We found knives, cameras, binoculars, Nike 
shoes, and a variety of other questionable purchases on local 
vendor spreadsheets. Has an audit ever been done?
    Mr. Marquez. I can't tell you if an audit has been done on 
local vendor agreements. I can tell you that I, too, have found 
invoices on the local vendor, particularly the Nike shoes. That 
is a fairly recent case. I looked at that. That is KSL 
subcontractor, two individuals that drive taxis for them. They 
tried to characterize those as safety shoes. That is not within 
the normal bound of the Frank's Supply vendor list. We have 
actually challenged that and either KSL will reimburse us or we 
will go back to Frank's Supply and get reimbursement from them.
    Mr. Deutsch. Right. And can you provide a direct answer 
whether or not it has been audited or not?
    Mr. Marquez. I am sorry?
    Mr. Deutsch. Can you supply us with the information if an 
audit has been done.
    Mr. Marquez. I will find that out for you, sir.
    Mr. Deutsch. You are also promising us that 
PricewaterhouseCoopers is going to do an extended review of 
data mining for a 2-year period. We have not been particularly 
impressed by their work at this point. One can data mine for 
suspicious vendors of purchase names.
    It has some value but you need to get out into the field 
and see if the equipment is really there at this point. There 
are many items that Mr. Bussolini and Alexander converted to 
personal use that are not obvious on their face. Are you 
planning at this point to actually do field level 
investigations to deal with this?
    Mr. Marquez. Yes, sir. With respect to the particular 
slides that I got to see at the last testimony, I had a team 
spend this last weekend inventorying those bunkers at TA-33 and 
I believe that within the week I'll know the contents of those 
bunkers and I'll have some cost estimate of the items that were 
acquired.
    Mr. Deutsch. And my final question. You have said that you 
have only accounted for 70 percent of your controlled 
inventory. Is the claim that you accounted for 99.5 percent?
    Mr. Marquez. By DOE performance measure under our prime 
contract, in our controlled inventory we accounted for the past 
several years at above 99.5 which is the outstanding level. The 
70 percent number I am not familiar with.
    Mr. Deutsch. Apparently that is in your testimony.
    Mr. Marquez. Well, I mean, you have to give me--in what 
context?
    Mr. Deutsch. In the wall-to-wall inventory.
    Mr. Marquez. Oh, the wall-to-wall inventory. That was 
started February 3 and as of Friday when I left the office, we 
had hit 70 percent of the items that are in our inventory.
    Mr. Deutsch. So it is an ongoing inventory.
    Mr. Marquez. It is ongoing. It is not scheduled to be 
completed until September 30. I am happy to report that we are 
well ahead of the progress chart on that.
    Mr. Deutsch. Thank you.
    Mr. Walden. We are going to do one more round and I think 
cut it to 5 minutes if that is all right with you.
    Mr. Marquez, I want to go back to one point because I think 
I heard you say that the external team audit looked at every P-
card purchase. My understanding is that it was actually mine 
data using key word. It wasn't absolutely every purchase. Do 
you know that to be different?
    Mr. Marquez. You know, I probably shouldn't venture into 
it. I am not an auditor. The methodology they use I really 
can't get into the details of that. The scope was clearly 45 
months of transactions, 170,000 transactions and roughly $120 
million.
    Mr. Walden. Right. We were just trying to clarify.
    Mr. Marquez. They did do data mining. They did it based on 
our automated system. It has data fields that indicate what 
type of commodity was purchased. A lot of times the signal in 
that data field that you enter in our automated system would 
really leave open to question who in God's name would buy those 
kinds of things.
    Our team that I formed, I believe on December 6, worked 
through January 31 and our challenge was to take the list that 
PricewaterhouseCoopers left us and walk through each of those 
and justify them in advance of a UC audit report.
    Mr. Walden. Another question for you. One of the issues 
that came up were how the P-card accounts have not been 
reconciled. I think there was a major effort to get them all 
reconciled, some $3.8 million worth prior to June 30 or 
something.
    Mr. Marquez. That is correct, sir.
    Mr. Walden. I have a printout here from July 2002 through 
November 2002. It is fiscal year 2003. This shows data that has 
not been reconciled to the tune of $677,200.47.
    Mr. Marquez. At that time that was correct. Our plan was 
always to catch up because we were woefully behind. The same 
resources that I had to use to catch up and then we went and 
started with fiscal year 2003. I am happy to report that as of 
the end of February we are caught up and the discrepancy was at 
around $8,000 which is a significant improvement. It used to be 
in the $300,000 to $400,000 area.
    Mr. Walden. That's good to know.
    Dr. Browne, on December 16, 2002 you were still Director at 
the Lab?
    Mr. Browne. That is correct.
    Mr. Walden. You sent an e-mail to all LANL employees 
declaring that Walp and Doran were ``simply wrong'' and there 
were reports of widespread theft, coverup, and interference 
with law enforcement authorities at LANL. It is Tab 33 if you 
need to----
    Mr. Browne. I remember the e-mail.
    Mr. Walden. Do you still hold to that opinion?
    Mr. Browne. The thing I was trying to convey to our 
employees was that I did not believe that there was this 
culture of theft that Mr. Walp and Mr. Doran were reporting in 
the press. I had not gone to the press and I felt that somehow 
I had to convey to our employees that I did not share this view 
that we had a work force full of thieves. That is what the 
intent of the e-mail was.
    Mr. Walden. Do you think--I guess I am trying to sort out 
here. I hear about Mustang. I hear about Mesa. I think it was 
Mr. Walp or maybe it was Mr. Doran who talked about a case that 
is out there of $800,000 purchase of hand tools from a single 
source. Is all that stuff legitimate?
    Mr. Browne. I think Mr. Marquez can answer the hand tools. 
My understanding was that was also reconciled.
    Is that correct?
    Mr. Marquez. Yes. There were issues and I am not going to 
say they were all hand tools. They were different types of 
tools for machining purposes. We have a large engineering and 
sciences application division.
    Mr. Walden. This guy went to--my understanding is----
    Mr. Marquez. G&G Industry in Rio Rancho, New Mexico. It was 
basically a storefront operation.
    Mr. Walden. Part of what we were told is he would go to K-
Mart and buy the tools.
    Mr. Marquez. It turns out he was somewhat of a pass through 
but I will tell you that the auditors that looked at this found 
that his prices were competitive with what we would have 
normally bought under the Just In Time program. That wasn't my 
concern. My concern was they should never have been bought 
under purchase cards in the first place.
    That was actually in place as a procedure and policy at the 
time and they were done under a so-called exception. If you 
pull the string on the exception, most of the requirements of 
the exception--I think people read the first sentence which 
says, ``You have an exception under the following conditions.'' 
They stopped before the word ``under'' and they characterized 
that as a blanket exception. They went off and purchased tools 
for a couple of years.
    Mr. Walden. You have changed that so that cannot ever 
happen--well, that should never happen again. You have done 
that through some sort of independent cross-approval?
    Mr. Marquez. Actually, we changed the purchase card 
requirements. You cannot buy those. We made it very clear.
    Mr. Walden. Are there limits on how much--if I had a P-card 
at Los Alamos, is there a dollar limit amount on my P-card?
    Mr. Marquez. Yes, now there is. $2,500 per transaction. I 
think it is $25,000 a month.
    Mr. Walden. How do you prevent them from exceeding that?
    Mr. Hettich. The thing you have to do is what you keep on 
saying and what we are saying also, and that is the only way 
you do it is to audit it correctly, honestly. I mean, you have 
to have an independent assessment taking place on a regular 
basis. If you find that somebody violates the instructions, the 
regulations that are out there, then you take appropriate 
remedial action against the person.
    Mr. Walden. Is it not better to go to a purchase order 
system where somebody up the chain sings off on it?
    Mr. Hettich. The difference between the two methodologies 
and the reason that the Federal Government quite honestly 
pushed people toward P-cards is the difference in the cost of 
the two methodologies. If you really look at the cost of doing 
a P-card transaction against doing a PO transaction, there is a 
significant cost difference. The question is is the risk 
factor----
    Mr. Walden. Fraud, waste, abuse.
    Mr. Hettich. That's right. So that is one of the decision 
pieces. In the case of Livermore what they did was establish 
four independent auditors to keep up with this and go out to 
the desk tops, as you point out, do different things like that. 
Put an insurance to their own management that the risk factor 
was prudent.
    Mr. Walden. What an internal auditor would do. Do the 
random checks.
    Mr. Hettich. Correct.
    Mr. Walden. Is that in place now at Los Alamos?
    Mr. Hettich. Yes.
    Mr. Walden. I have way overshot my 5 minutes.
    You don't have any other questions? Mr. Chairman, do you? 
If not, the chairman asks unanimous consent to enter the binder 
into the record. Without objection that is so ordered. Opening 
statements are already approved for entry into the record with 
unanimous consent.
    Gentlemen, thank you for your patience today, your 
forthright comments. We very much appreciate you testifying 
before the committee. With that, we stand adjourned.
    [Whereupon, at 7:02 p.m. the subcommittee adjourned.]
    [Additional material submitted for the record follows:]

                                                     April 10, 2003
The Honorable Jim Greenwood
Chairman
Subcommittee on Oversight and Investigations
Committee on Energy and Commerce
House of Representatives
2125 Rayburn House Office Building
Washington, D.C.
    Dear Mr. Chairman: At the Subcommittee's hearing on March 12, 2003, 
I committed to provide information on my actions and accomplishments to 
change the historical culture at Los Alamos National Laboratory by 
reducing an entrenched ``management by accommodation'' and achieving a 
heightened sense of fiduciary responsibility to the American taxpayer. 
This letter fulfills that commitment, and I request that it be included 
in the official record of the Subcommittee's hearings on Property and 
Procurement Mismanagement at Los Alamos National Laboratory.
    The efforts Director Browne and I made to drive change and address 
management problems at the Laboratory were noted by NNSA in its FY 02 
Appraisal, dated December 13, 2002:
        ``NNSA is encouraged by the aggressive leadership demonstrated 
        by the Laboratory Director and Deputy Director--NNSA recognizes 
        the outstanding effort on the part of Laboratory senior 
        management to organize, drive improvement, and accelerate 
        change in overall Laboratory culture. NNSA recognizes as well 
        that LANL faces challenges such as the alarming trend in Price 
        Anderson Amendment Act violations and the current 
        investigations into irregularities in its purchasing 
        activities. Nonetheless, NNSA is encouraged that LANL senior 
        management has moved swiftly and demonstrated an understanding 
        of the urgency and need for outside assistance as a mechanism 
        to add credibility to the investigation process.''
    The following actions and accomplishments are a representative, not 
exhaustive, sample of my actions and accomplishments, and they are 
consistent with NNSA's evaluation as noted above. The list begins in 
the fall of 1999 when I joined the Laboratory:

 Based on findings by the Office of Audits and Assessments 
        (AA), I directed that reconciliations of bank accounts be 
        brought current and that monthly reconciliation of bank 
        accounts be completed thereafter.
      AA reports for several consecutive years, all of which had been 
        filed with the University's Office of the President (UCOP), 
        noted failure by the BUS Division to complete monthly 
        reconciliations for three accounts--payroll, accounts payable, 
        and travel--for fiscal years 1995 thru 1999. Total activity in 
        the subject accounts over 5 fiscal years was over $7 billion. I 
        provided periodic progress reports to UCOP (Van Ness and 
        Kennedy) and the Regents (Leach) until the reconciliations were 
        completed in August, 2000.
 Upon joining the Laboratory, I directed that each division and 
        office that reported to me (BUS, HR, Audits and Assessments, 
        Industrial Business Development, and others) complete a 
        Vulnerability Analysis within 60 days. The effort resulted in 
        over 200 findings, of which 134 were in the BUS Division. I 
        required that Divisions implement specific corrective action 
        plans for addressing identified vulnerabilities, and I tracked 
        progress in weekly meetings with Division leaders. All 
        Divisions except BUS had completed corrective action plans at 
        the end of one year.
 In 1999 I directed a comprehensive review of the Laboratory's 
        procurement program and procedures, using Laboratory employees 
        and external procurement experts. UCOP directly participated in 
        the review. I was led to believe that the review team's 
        commitment to consensus may have led to a document written, in 
        part, to accommodate the UC representative's preference for a 
        ``softer'' report than some of the LANL representatives would 
        otherwise have produced. I implemented a number of reforms and 
        improvements as a result of the team's report.
 Directed the reorganization of the BUS Division and the 
        addition of two Deputy Division Leaders to strengthen overall 
        division management.
 Implemented a corrective action plan to eliminate over a 
        period of about 6 months a multi-year backlog of about 900 
        contract closeouts. Reviewed progress weekly with Division 
        management.
 Elevated the Small Business Procurement Office to report 
        directly to the BUS Division leader to strengthen management of 
        small business contracts and procurement actions.
 Established a small business point of contact in the 
        Laboratory Ombudsman Office to assure that any small business 
        perceptions of favoritism, procurement irregularities, or 
        inadequate contract administration could be reported without 
        fear of reprisal. I took this action in response to indications 
        from the small business community that the Laboratory was not 
        viewed as a good business partner by some vendors.
 Streamlined the process to assure prompt payments to vendors, 
        subject to appropriate checking and approval by Laboratory 
        users of vendor-supplied equipment, materials and services.
 Engaged The Gartner Group to advise the Laboratory on its 
        business information management and related information 
        technology activities. Implemented The Gartner Group's 
        recommendations, thus avoiding significant expenses that would 
        have resulted in inadequate systems.
 Cancelled the Laboratory's PeopleSoft project on the basis of 
        cost/benefit analysis and ill-conceived scope; avoided planned 
        project expenses.
 Initiated an Enterprise Resource Planning project (ERP) to 
        modernize and streamline the Laboratory's business information 
        management function and to adopt best business practices 
        embedded in related commercial software. This is a multi-year 
        project that is continuing and has been identified by the 
        Interim Director as one of the Laboratory's highest priorities.
 Continued implementation of the ``Sunflower'' system, used by 
        UC at Lawrence Livermore and Berkeley Labs and by other 
        contractors in the DOE system to support property management.
 Continued implementation of the ``TIPS'' system to support the 
        procurement function.
 Established a Laboratory-wide system for IT (Information 
        Technology) governance to provide a central authority and Lab-
        wide coordinating point for policy and procedures and to assure 
        that investments in IT were cost effective and reviewed by the 
        Laboratory Senior Executive Team prior to commitments.
 Initiated three studies of the Laboratory's computer 
        inventory:
   A review of the number of personal computers reported as 
            being used at the homes of employees; a number of computers 
            were returned to Laboratory property as a result of this 
            study;
   An analysis of the number and costs of computer purchases 
            over recent fiscal years; the analysis was intended to 
            guide future decision-making regarding methods and 
            standards for computer purchases;
   A review of classified computers, as mentioned in my written 
            testimony, to assure that none of the computers reported as 
            lost or stolen contained classified information and to 
            assure that all classified computers could be located.
 Required sound business case analysis for a number of ongoing 
        Laboratory investment and acquisition activities, resulting in:
   Cancellation of the Laboratory's agreement with a local 
            developer to guarantee rentals of new luxury townhouses and 
            high quality apartments for use as student housing. 
            Laboratory staff had entered into the agreement without 
            having done a sound business case analysis and without 
            having provided full information to the Laboratory 
            Director.
   Personal assumption of oversight for completion and 
            occupancy of the Laboratory's space at the Los Alamos 
            Research Park to assure compliance with NNSA's conditions 
            of approval and cost beneficial project management. 
            Required weekly status reports. Like student housing, 
            commitments to the Research Park had been made by 
            Laboratory staff without adherence to NNSA requirements, 
            without adequate financial and legal analysis, and without 
            full information to and approval by the Director.
 Established a Blue Ribbon Task Force and related Technical 
        Panels to provide external management and technical expertise 
        to the Laboratory's pit production and manufacturing program. 
        Laboratory and NNSA program managers have acknowledged that the 
        Task Force and technical panels have been instrumental in 
        putting the Laboratory in a position to meet the NNSA-
        determined schedules for this high priority national security 
        program. The Interim Laboratory Director recently converted the 
        Task Force to a comprehensive Program Management Review 
        Committee.
 Strengthened procurement support and service to high priority 
        NNSA and DOE projects, including pit manufacturing, Spallation 
        Neutron Source (SNS--a multi-laboratory project led by Oak 
        Ridge), and the Accelerated Strategic Computing Initiative 
        (ASCI) through which the Laboratory has developed its ``Q'' 
        machine.
 Achieved 10% reduction in overhead ratio from FY 00 to FY 02 
        as a result of having instituted a ``bottoms up'' approach to 
        the annual indirect budget planning process.
 Oversaw implementation of legislatively mandated travel 
        regulations for contractors that resulted in reductions in 
        allowable expenses for official travel; personally reviewed 
        travel expense claims of all Associate Directors.
 Established an internal Advisory Committee on Administrative 
        Policies and Practices to assure input and buy-in from all 
        Directorates in the Laboratory for adoption and implementation 
        of new or modified procedures and practices aimed at making the 
        Laboratory's business systems more accountable.
 Established mandatory management training for all Group 
        Leaders to strengthen management capabilities in the 
        Laboratory. Required each member of the Senior Executive Team 
        (SET) to lead off one of the sessions by clearly articulating 
        SET expectations. The process to design and implement the 
        training took over one year, due in part to resistance by 
        Division and Group Leaders, as well as the Human Resources 
        Division, to ``mandatory'' requirements.
 With Director Browne, designed and implemented a significant 
        reorganization of the weapons program to strengthen line 
        management accountability. NNSA noted in its FY 02 appraisal, 
        ``The reorganization represents a paradigm shift in that line 
        management now owns programs and is central to, accountable and 
        responsible for program success. Planning is now the basis for 
        program execution.''
 Realigned the Laboratory's internal budget planning process to 
        assure that the Director's strategic vision drove program 
        planning and to strengthen the Director's ``ownership'' of the 
        budget.
 Authorized total outsourcing of the Laboratory's supplement 
        secretarial pool and established procedures to assure the pool 
        was used as an avenue to Laboratory employment for local 
        residents.
 Requested NNSA approval and subsequently implemented ``hot 
        skills'' pay to assure that the Laboratory would continue to be 
        competitive in terms of recruiting and retention of staff in 
        specific, critically important scientific and technical areas.
 Implemented salary surveys by external experts in compensation 
        equity to assure equitable pay for ethnic and racial minorities 
        and women. These surveys and related appropriate pay 
        adjustments enabled the Laboratory to avoid litigation, 
        particularly regarding the issue of pay for Asians and Pacific 
        Islanders that arose in the aftermath of the Wen Ho Lee case. 
        Salary surveys were completed for API and Hispanic minorities 
        prior to my leaving the Laboratory; a third survey covering 
        women employees was in planning at the time of my departure.
 Implemented a realignment of facilities management to 
        consolidate approximately 15 separate facility management units 
        and thereby improve accountability and cost effectiveness in 
        facility management operations.
 With Director Browne, established an internal Strategic 
        Security Working Group to review long-term security planning 
        and operations in the aftermath of 9/11.
 Assumed personal oversight of Laboratory activities to satisfy 
        requirements of Appendix O to the University's contract for Los 
        Alamos operations, including:
   Completion of Authorization Basis (AB) documents for 5 
            critical facilities and for the packaging and 
            transportation function. As a result of this effort, NNSA 
            noted ``. . . LANL's increased emphasis and effort to 
            support safety authorization basis preparation (It appears 
            that LANL may be the only NNSA site that is 10 CFR 830 
            compliant by the April 2003 due date).''
   Completion of inventory and gap analysis related to 
            maintenance of critical skills to support mission 
            requirements.
 Implemented procedures to assure that the Laboratory was in 
        full compliance with 10CFR requirements for quality 
        certification of vendors of certain types of equipment, 
        services and materials.
 Established a pilot effort to implement a Programming Planning 
        Budgeting and Evaluation System (PPBES) aligned with NNSA's 
        legislatively mandated PPBES system.
 Initiated review of meal expenses in all Divisions and 
        Directorates and subsequently established more rigorous 
        standards for Laboratory purchase of meals in connection with 
        meetings. Standards were later converted to ``guidance'' to 
        accommodate objections from some Divisions. Required Division 
        or Group Leader certification of working meal expenses and 
        justification/approval of exceptions to standards.
 Based on AA findings during an audit of the former Site 
        Support Services contract, withheld current fee payments and 
        recovered fee previously paid.
 Required recompetition of the site support services contract 
        and acted as Source Selection Official to select a new 
        contractor with emphasis on cost effectiveness and partnering 
        with the Laboratory to improve operational performance.
    In addition to the above, I met weekly--and sometimes more 
frequently--to track progress and monitor performance of all of my 
direct reports on issues ranging from resource management to safety 
performance to delivery on program commitments. In all of these 
sessions, I consistently emphasized fiduciary responsibility, formality 
of operations, and disciplined management. Almost without exception and 
not surprisingly, I found the Laboratory's staff and managers willing 
and eager to respond and to meet expectations. Nonetheless, an 
ingrained culture that had historically under-valued effective 
management, meant that change came more slowly than I would have 
preferred.
    I appreciate the opportunity to supplement my testimony before the 
subcommittee.
            Sincerely yours,
                                                  Joseph F. Salgado
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