[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
   THE RESPONSIBILITY OF THE DEPARTMENT OF HOMELAND SECURITY AND THE 
 FEDERAL PROTECTIVE SERVICE TO ENSURE CONTRACT GUARDS PROTECT FEDERAL 
                     EMPLOYEES AND THEIR WORKPLACES

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

                                (110-53)

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
    ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS AND EMERGENCY MANAGEMENT

                                 OF THE

                              COMMITTEE ON
                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 21, 2007

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure



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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                 JAMES L. OBERSTAR, Minnesota, Chairman

NICK J. RAHALL, II, West Virginia    JOHN L. MICA, Florida
PETER A. DeFAZIO, Oregon             DON YOUNG, Alaska
JERRY F. COSTELLO, Illinois          THOMAS E. PETRI, Wisconsin
ELEANOR HOLMES NORTON, District of   HOWARD COBLE, North Carolina
Columbia                             JOHN J. DUNCAN, Jr., Tennessee
JERROLD NADLER, New York             WAYNE T. GILCHREST, Maryland
CORRINE BROWN, Florida               VERNON J. EHLERS, Michigan
BOB FILNER, California               STEVEN C. LaTOURETTE, Ohio
EDDIE BERNICE JOHNSON, Texas         RICHARD H. BAKER, Louisiana
GENE TAYLOR, Mississippi             FRANK A. LoBIONDO, New Jersey
ELIJAH E. CUMMINGS, Maryland         JERRY MORAN, Kansas
ELLEN O. TAUSCHER, California        GARY G. MILLER, California
LEONARD L. BOSWELL, Iowa             ROBIN HAYES, North Carolina
TIM HOLDEN, Pennsylvania             HENRY E. BROWN, Jr., South 
BRIAN BAIRD, Washington              Carolina
RICK LARSEN, Washington              TIMOTHY V. JOHNSON, Illinois
MICHAEL E. CAPUANO, Massachusetts    TODD RUSSELL PLATTS, Pennsylvania
JULIA CARSON, Indiana                SAM GRAVES, Missouri
TIMOTHY H. BISHOP, New York          BILL SHUSTER, Pennsylvania
MICHAEL H. MICHAUD, Maine            JOHN BOOZMAN, Arkansas
BRIAN HIGGINS, New York              SHELLEY MOORE CAPITO, West 
RUSS CARNAHAN, Missouri              Virginia
JOHN T. SALAZAR, Colorado            JIM GERLACH, Pennsylvania
GRACE F. NAPOLITANO, California      MARIO DIAZ-BALART, Florida
DANIEL LIPINSKI, Illinois            CHARLES W. DENT, Pennsylvania
DORIS O. MATSUI, California          TED POE, Texas
NICK LAMPSON, Texas                  DAVID G. REICHERT, Washington
ZACHARY T. SPACE, Ohio               CONNIE MACK, Florida
MAZIE K. HIRONO, Hawaii              JOHN R. `RANDY' KUHL, Jr., New 
BRUCE L. BRALEY, Iowa                York
JASON ALTMIRE, Pennsylvania          LYNN A WESTMORELAND, Georgia
TIMOTHY J. WALZ, Minnesota           CHARLES W. BOUSTANY, Jr., 
HEATH SHULER, North Carolina         Louisiana
MICHAEL A. ACURI, New York           JEAN SCHMIDT, Ohio
HARRY E. MITCHELL, Arizona           CANDICE S. MILLER, Michigan
CHRISTOPHER P. CARNEY, Pennsylvania  THELMA D. DRAKE, Virginia
JOHN J. HALL, New York               MARY FALLIN, Oklahoma
STEVE KAGEN, Wisconsin               VERN BUCHANAN, Florida
STEVE COHEN, Tennessee
JERRY McNERNEY, California
VACANCY

                                  (ii)

  


 Subcommittee on Economic Development, Public Buildings and Emergency 
                               Management

        ELEANOR HOLMES NORTON, District of Columbia, Chairwoman

MICHAEL H. MICHAUD, Maine            SAM GRAVES, Missouri
JASON ALTMIRE, Pennsylvania          BILL SHUSTER, Pennsylvania
MICHAEL A. ARCURI, New York          SHELLEY MOORE CAPITO, West 
CHRISTOPHER P. CARNEY, Pennsylvania  Virginia
TIMOTHY J. WALZ, Minnesota           CHARLES W. DENT, Pennsylvania
STEVE COHEN, Tennessee               JOHN R. `RANDY' KUHL, Jr., New 
JAMES L. OBERSTAR, Minnesota         York
  (Ex Officio)                       JOHN L. MICA, Florida
                                       (Ex Officio)

                                 (iii)

                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................    vi

                               TESTIMONY

Carney, James D., Acting President, United Government Security 
  Officers of America............................................    35
Faye, Assane B., Washington, D.C. District Director, Security, 
  Police and Fire Professionals of America International Union...    35
Lewis, Ashley J., Director, Office of Acquisition Policy and 
  Oversight, U.S. Immigration and Customs Enforcement, U.S. 
  Department of Homeland Security................................    58
Messner, Ann Marie, Former Chief Operating Officer and General 
  Manager, Startech International Security.......................     5
Montgomery, Latanya, Former Startech International Security Guard    35
Schenkel, Gary W., Director, Federal Protective Service, U.S. 
  Department of Homeland Security................................    58
Skinner, Hon. Richard L., Inspector General, U.S. Department of 
  Homeland Security..............................................    58
Smith, Brian, Former Startech International Security Guard.......    35
Waites, Weldon, Vice President for Business Development, Startech 
  International Security.........................................     5

          PREPARED STATEMENT SUBMITTED BY MEMBERS OF CONGRESS

Norton, Hon. Eleanor Holmes, of the District of Columbia.........    67
Oberstar, Hon. James L., of Minnesota............................    69
Walz, Hon. Timothy J., of Minnesota..............................    73

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

Carney, James D..................................................    74
Faye, Assane.....................................................   100
Lewis, Ashley J..................................................   106
Messner, Ann Marie...............................................   111
Montgomery, Latanya..............................................   125
Schenkel, Gary W.................................................   129
Skinner, Richard L...............................................   167
Smith, Brian.....................................................   182
Waites, Weldon D.................................................   185

                       SUBMISSIONS FOR THE RECORD

Schenkel, Gary W., Director, Federal Protective Service, U.S. 
  Department of Homeland Security, response to questions from the 
  Subcommittee...................................................   138
Skinner, Hon. Richard L., Inspector General, U.S. Department of 
  Homeland Security, response to questions from the Subcommittee.   174
Waites, Weldon, Vice President for Business Development, Startech 
  International Security, response to questions from the 
  Subcommittee...................................................   188

                        ADDITIONS TO THE RECORD

National Association of Special Police and Security Officers, 
  Caleb A. Gray-Burriss, written testimony.......................   194

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 HEARING ON THE RESPONSIBILITY OF THE DEPARTMENT OF HOMELAND SECURITY 
 AND THE FEDERAL PROTECTIVE SERVICE TO ENSURE CONTRACT GUARDS PROTECT 
                 FEDERAL EMPLOYEES AND THEIR WORKPLACES

                              ----------                              


                        Thursday, June 21, 2007

                   House of Representatives
    Committee on Transportation and Infrastructure,
Subcommittee on Economic Development, Public Buildings, and 
                                      Emergency Management,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:17 a.m., in 
Room 2167, Rayburn House Office Building, the Honorable Eleanor 
Holmes Norton [Chairwoman of the Subcommittee] presiding.
    Ms. Norton. We are pleased to welcome today's witnesses and 
our visitors to this hearing entitled The Responsibility of the 
Department of Homeland Security and the Federal Protective 
Service to Ensure Contract Guards Protect Federal Employees and 
Federal Facilities.
    This hearing was made necessary because of evidence and 
serious allegations of wrongdoing, chaos, and irregularities in 
the contracting and employment of private security guards who 
protect Federal employees and facilities.
    Contract security guards are a critical component of the 
Federal strategy to protect the safety and security of Federal 
employees where they work, and many Federal facilities as well. 
In the Federal sector, security guards, many of whom carry 
guns, are as essential to protecting Federal employees as 
members of the Federal Protective Service. Security guards are 
a necessary supplement to, although not a replacement, for 
public law enforcement officers, whether local police officers 
or FPS law enforcement officers and others engaged in counter-
terrorism activities.
    In the post-9/11 Federal environment, the Committee and 
this Subcommittee are mindful that security guards have neither 
police powers nor the extensive training of sworn peace 
officers, and that they cannot make arrests. Because of 9/11, 
the FPS was transferred to the Department of Homeland Security, 
yet we have seen the Federal growth of contract security 
guards, who do not have police powers or arrest powers, go to 
15,000, while FPS has been slashed by hundreds of officers, 
down from an authorized number of 1,450 to between 1,100 and 
1,150, with a goal of getting down to 950.
    The risk to security posed by this downsizing of the FPS 
and the conversion of police officers to security inspectors 
has led to action by both our Committee and the Homeland 
Security Committee, on which I also serve.
    Today we will learn about the work of security guards 
nationwide. Recently, STARTECH failed to pay 600 D.C.-area 
Federal security guards or to make other important benefit 
payments to pensions, health benefits and the like. This 
Committee intervened when inaction by the FPS and the 
Immigration and Customs Enforcement, the division of DHS where 
FPS is placed, was reported to us. Ultimately, I was unable to 
get direct intervention by FPS Chief Gary Schenkel and had to 
call Deputy Secretary Michael Jackson to get any action.
    Today we will hear firsthand about the effect on the 
employees and the Federal agencies involved. We are indebted to 
the contract security officers, most of whom continue to come 
to work to protect Federal workers, the visiting public, and 
their work sites. However, as the shooting incident between 
Department of Defense contract guards at Walter Reed yesterday 
highlights, concerns about the management, oversight, and 
professionalism of some Federal contract guards is widespread.
    Apparently, STARTECH experienced serious financial problems 
during the past six months. However, we have been unable to 
find that FPS or DHS took action or interceded until security 
guard payroll checks bounced three times. Yet, a year-end audit 
by the Defense Contract Audit Agency in 2005 concluded that, 
and I am quoting: ``STARTECH's accounting system is nonexistent 
for Government contract accounting purposes.'' Why was the red 
flag not raised then? If FPS forwarded funds to STARTECH to pay 
its personnel, the Subcommittee would be concerned about 
possible misuse of Federal funds.
    In preparing for this hearing, the Subcommittee discovered 
that although STARTECH changed ownership two years ago, one of 
the new owners had served a five-year jail sentence for money 
laundering and fraud. Weldon Waites, the Vice President for 
Business Development at STARTECH, who, with his wife Sharon, is 
a majority owner of STARTECH, has agreed to give his own 
accounting of STARTECH, and we thank him for coming.
    The Federal Acquisition Regulations require that contracts 
be awarded only to contractors who are ``capable, responsible, 
and ethical.'' It is the responsibility of the FPS and DHS to 
make sure that these contractors are capable, responsible, and 
ethical both at the start and throughout the life of the 
contract, and that they treat their personnel, including 
guards, with the professionalism and respect they have earned.
    FPS inspectors were required to visit STARTECH guards at 
least weekly, yet our Committee learned nothing of the unpaid 
guards who were protecting Federal buildings until a contract 
guard union, the United Government Security Officers of 
America, alerted us. We continue to find the Administration's 
plan to reduce the number of FPS officers from 1250 to 950 
entirely unacceptable. If anything, failures like those 
uncovered by our investigation call for the strengthening of 
the Federal law enforcement and security guards.
    If the STARTECH officers had decided that they could no 
longer protect the Federal workforce and buildings without pay, 
the FPS contingency plan was to staff the security posts with 
FPS officers, many of whom DHS hopes to eliminate as part of 
FPS restructuring.
    Contract security guards are charged with protecting some 
of our most secure facilities, including military 
installations, nuclear power plants, and classified sites. They 
are tasked with preserving the lives and safety of our judges 
and other Federal employees. Had it not been for the loyalty 
and dedication of the contract security officers to their posts 
and their profession, the security and safety of Federal 
workers, their workplaces, and the visiting public would have 
been at risk after STARTECH defaulted on its payroll.
    On behalf of the Federal Government and Federal employees, 
I want to express our gratitude to the guards who remained on 
duty, despite assuredly personal hardship. We commend them and 
our other witnesses for coming forward and allowing our 
Subcommittee to get to the bottom of what appears to be an FPS 
contract guard program that needs top-to-bottom reform.
    I would like to ask our Ranking Member, Mr. Graves, if he 
has any opening remarks.
    Mr. Graves. Thank you, Madam Chair. I want to also thank 
all of our witnesses for being here today.
    I do appreciate your coming out. I am looking forward to 
hearing about the Federal Protective Service and its role in 
ensuring that our Federal buildings remain protected.
    This is the second hearing I think we have had on FPS this 
Congress, and I hope today's hearing is going to clarify some 
of the process FPS uses to monitor security guard contracts and 
help assure this Committee that our Federal buildings and 
employees who occupy them are kept safe.
    I would also like to thank Inspector General Skinner for 
being here today. Mr. Skinner will testify on the IG's role in 
evaluating FPS's oversight on the contract guard program.
    We will also hear from representatives of STARTECH who will 
address the allegations against the company, its recent loss of 
several security guard contracts, and its affect on employees 
of the company who are on the front line when it comes to 
protecting our Government buildings. I look forward to hearing 
the testimony from officers and employees at the company this 
morning.
    The main responsibility of FPS is to protect Federal office 
buildings and its employees. It is this Committee's job to see 
that this happens. We have shown our strong support for the 
inclusion of physical security measures in the construction of 
Federal buildings and courthouses across the Country. 
Additionally, over the past several Congresses, we have held 
hearings and marked up legislation to upgrade FPS and address 
the funding shortfall in its operating budget.
    We are here today to see that the appropriate oversight 
tools are in place so that FPS can accurately monitor all of 
its security guard contracts. As the Ranking Member of this 
Subcommittee that oversees Federal buildings, I am greatly 
interested in their security and the security of the Government 
workforce. We must be certain that those who are charged with 
protecting Federal buildings are carrying out their 
responsibilities as spelled out in their contract. Anything 
else would be a disservice to those who work in our over 9,000 
Federal buildings across the Country.
    Again, I want to thank all of our witnesses for being here 
and look forward to the testimony.
    Thank you, Madam Chair.
    Ms. Norton. Mr. Carney, do you have any opening statement?
    Mr. Carney of Pennsylvania. Yes, I do. Thank you, Madam 
Chairwoman. I want to thank you for holding this hearing today.
    We all know that the protection of the Federal workforce is 
extremely important, especially in light of yesterday's events 
at Walter Reed. News reports out of Walter Reed regarding the 
shooting there are extremely disturbing.
    Madam Chairwoman, I know you share my sentiments about 
that.
    Yesterday's incident begs the question of whether we should 
be augmenting our security forces at all Federal and military 
installations, as opposed to cutting them. Employing private 
security forces from private entities must be scrutinized. I 
don't think anybody would disagree with that. The brave men and 
women that work in the service of our Nation deserve the peace 
of mind that we are doing everything possible to ensure their 
safety while at work.
    Frankly, I believe that the wounded men and women at Walter 
Reed and other places would rest easier knowing that they have 
military police as well as private security guards guarding 
them. As somebody who still wears a uniform, I would feel 
better myself about that. Not to suggest anything about the 
private security folks, but yesterday's incident was troubling. 
It brings to the front questions about the screening process, 
especially about the mental health screening process, that 
security folks undergo.
    I do recognize that the vast, vast majority of security 
officers are dedicated, trained professionals. We should never 
cease in our vigilance to train and recruit the very best for 
the job. An incident like yesterday is one too many when it 
comes to guarding our Federal workforce and the brave men and 
women who fought and are wounded on behalf of this Nation.
    Again, Madam Chairwoman, I thank you for holding the 
hearing today. I look forward to the testimony. Thank you very 
much.
    Ms. Norton. I understand Mr. Kuhl does not have an opening 
statement, so we have no more opening statements.
    I would like to invite our first panel to begin. I am 
pleased to welcome Weldon Waites, who is the Vice President for 
Business Development at STARTECH International Security, which 
is based in Columbia, South Carolina; and Ann Marie Messner, 
who is the Former Chief Operating Officer and General Manager 
of STARTECH International Security. She is now in Waynesboro, 
Pennsylvania.
    We thank you both for coming. Let us begin with Mr. Waites.

    TESTIMONY OF WELDON WAITES, VICE PRESIDENT FOR BUSINESS 
    DEVELOPMENT, STARTECH INTERNATIONAL SECURITY; ANN MARIE 
 MESSNER, FORMER CHIEF OPERATING OFFICER AND GENERAL MANAGER, 
                STARTECH INTERNATIONAL SECURITY

    Mr. Waites. Good morning, Madam Chair. I am Weldon Waites. 
I appreciate the opportunity to come here and visit with you 
and tell you my version of what happened that could help 
prevent this from happening in the future. Thank you again for 
inviting me again. My experience and thoughts regarding this 
topic I hope to share. I can give you only limited perspective, 
but perhaps it can be helpful, and offer insight into the 
limitations and challenges of a small contract company.
    Several years ago,--a few years back, matter of fact--two 
retired Army officers, Marion Pinckney and Randall Ford, formed 
STARTECH Security, known as Systems Training and Resource 
Technologies. That was approximately 18 years ago. In the early 
years, STARTECH experienced steady moderate growth, until they 
entered into the 8(a) setaside business program and really 
escalated their growth after the events of 9/11.
    In the fall of 2004, I was asked by Mr. Pinckney and Mr. 
Ford if I would assist them as they attempted to reorganize and 
modernize the company's administrative policies and procedures. 
I did that for several months for no pay, just in an effort to 
help them.
    Shortly after our initial discussion, Mr. Pinckney and Mr. 
Ford both were diagnosed with cancer. It was during that time 
that both owners suggested to me that it would be interesting 
if I could purchase the shares of outstanding stock with 
STARTECH. I was interested but very reluctant, as I had no 
knowledge of the security business or Government contracting, 
plus the fact that I simply didn't have the money.
    Anticipating my dilemma, they provided me with a contact at 
Bank of America who agreed to entertain the idea of my family 
purchasing STARTECH, and the underwriting process began. During 
the underwriting process, Mr. Pinckney died and left his stock 
to his wife.
    After Mr. Pinckney's death and Mr. Ford's health issues 
slowed the process and it took over eight months to finalize 
the sale of STARTECH, which closed in late May of 2005. Mr. 
Ford insisted on keeping 25 percent of the stock, as well as an 
employment agreement that provided him office headquarters and 
an annual salary of $125,000 a year.
    I might add, Madam Chairman, that STARTECH went through an 
extensive audit at that time and audited our accounts 
receivable. As we plowed through the due diligence prospects, 
it became obvious that administrative and operating changes 
were necessary if STARTECH were to remain competitive in the 
Federal Government showplace.
    In particular, we discovered dozens of invoices that 
company records showed unpaid. We also discovered invoices that 
had not even been prepared. At that time, we also did our post-
due diligence work and acquired the services of a contract law 
firm called Whitwire and Garvin to do a report for us to let us 
know exactly how we were to operate a business that we knew not 
too much about.
    We received the report, and it was at that point in time 
when my wife, Sharon Waites, was appointed President and CEO, 
and I remained in the background as a business development 
member of the STARTECH family.
    I will also admit to you that the initial reason for this 
report was if we ever incurred any secured contracts, what 
would my role, based on my past record, be, and would it be 
possible for me to obtain a security clearance. The reports, 
which I will be glad to offer, all suggested that it was 
perfectly permissible for me to work, and I could even hold an 
office, although I elected not to.
    In regard to the Bank of America loan, they granted us a 
$12 million facility comprised of a 5-year term loan with a 
borrowing base that offered us about two months of operating 
capital after the purchase price was considered. It was during 
that time that the Government payment process began to slow 
down, thereby causing our borrowing base to shrink. Our 
eligible receivables aged more than 90 days, thereby reducing 
our operating capital.
    As a result, Bank of America called our loan and we had to 
seek a new lending partner. It was at that time, through our 
personal funds, we had to make the first company payroll, which 
was over $400,000, that we put into the company to cover a 
payroll during that ugly period of exiting Bank of America and 
moving on to our next lender.
    Please note also, Madam Chair, that during the same period 
of time, Region 11 experienced several administrative changes. 
This meant that we worked with three contracting officers, two 
interim contracting officers, several contracting specialists, 
and the facility was moved from the Navy Yard to downtown. In 
other words, we went from a very good contracting officer to 
one mediocre to two that I didn't even know and one that was 
doing a good job but he was going to retire in eight months.
    After Bank of America called our loan, we interviewed 
several banks, all of which complete internal audits as part of 
their due diligence. We passed every audit. We were approved 
for a $10 million facility this time that included the unpaid 
balance for the purchase price and 45 days of working capital. 
The experience with First Horizon, the second bank, became 
quite similar to that of Bank of America. This time it took 
only six months for our borrowing base to shrink so that there 
was no availability for cash to cover our 90-day accounts 
receivable, which were increasingly difficult to collect and 
once again reduced our borrowing availability.
    First Horizon did the same thing, they called our loan two 
weeks before Christmas of 2006. Having been through this 
horrible experience one time before, we knew that the process 
to secure new funding would be long and tedious and expensive 
due to attorneys' fees, accounting fees, and fees associated 
with bank workout specialists. We kept all options open on 
funding, this time selecting Marquette Commercial Financing, a 
factoring company who would purchase outstanding invoices.
    I might also add that at that time STARTECH became so 
desperate that we sought the services of two of your fellow 
congressmen to initiate a congressional investigation to find 
out what it would take to get us paid, because if we got paid, 
we wouldn't be having this problem today.
    As we looked for new financing, as I said, we got new 
financing from Marquette, and two of your colleagues helped us. 
After a complete review of our accounts receivable, they 
initiated a congressional inquiry on the outstanding 
receivables.
    In mid-March of 2006, during Marquette's post-audit 
process, it was discovered that a few invoices that had been 
certified by a contracting officer from Department of Homeland 
Security Region 11 had actually been paid. I have the e-mail 
track that shows the last day that this loan was closed that 
the invoices were not only alive, but they had not been paid. 
Some people contend that, but I will be glad to furnish this 
and any other information that you want, including a full 
accounting review that we have undertook on our own.
    About the same time, I went to the hospital for some heart 
surgery and I was out of work for about a three-week period of 
time, and during that period of time I got some repercussions 
from that and my brother died, so I was out of the office for 
about three weeks during that period of time. After Marquette 
called the loan, they came to meet with us, my wife and I, and 
we discussed the situation that caused the alarm of the 
invoices that they had factored that had been paid, that the 
Government certified that had been paid. We left the meeting 
with an understanding that they were not in the business of 
closing down small businesses and they would work with us.
    Shortly after that meeting--matter of fact, it was on a 
Wednesday--on a Thursday, they called us and said that 
Marquette had made a decision to call our loan, and at that 
moment they stopped every dime that was flowing from the 
Government to STARTECH. They took $5 million of accounts 
receivable that we could have used to operate on and applied it 
to the loan and basically froze us out. At that time, through 
additional loans from my family and my wife, we put in another 
$2 million and made two more or three more payrolls, with the 
anticipation that we would have a new funding arrangement 
within days.
    As you might well imagine, May 2007 was painful, stressful, 
intense to me and my family. We borrowed every cent that we 
could borrow. We mortgaged our home. We did everything we could 
to keep STARTECH alive.
    I deeply regret the failure of STARTECH on June 1st and the 
resulting distress to so many of our employees that I too 
learned to love and respect. There is no doubt in my mind that 
I did everything absolutely possible to save it. Perhaps it is 
merely ironic, but right now, today, I am negotiating to sell 
what remains of STARTECH, and preliminary figures provided by 
an independent CPA firm suggest that if this sale were to go 
through, or if the Government paid its invoices, there would be 
enough to pay all of the employees first, all of the loan with 
Marquette, and any other expenses that we have.
    STARTECH was never bankrupt. I had a meeting with our CPAs 
yesterday. It never was bankrupt. We had money that we were 
expecting from the Government that just has not come. That is 
going to be debatable, and I would be glad to furnish you 
accounting records and anything you want to clear this matter.
    I appreciate, Madam Chairman, the opportunity to let me 
make this statement, and I look forward to entertaining any 
questions that I can give you.
    Ms. Norton. Thank you very much, Mr. Waites.
    Ms. Messner?
    Ms. Messner. Good morning, Chairwoman Norton, Ranking 
Member Graves, and distinguished Members of the Committee. 
Thank you for the opportunity to provide testimony on the 
protection of Federal employees and their workplaces.
    My comments this morning will be brief. However, I have 
provided a written statement for the record which cites 
specific examples and includes supporting documentation.
    In February of 1990, I began my career as a contract guard 
as part of a team that protected a Level IV Federal facility. 
Sixteen years later, STARTECH was replaced by another company 
through the procurement process.
    I elected to remain with STARTECH and was moved to the 
corporate headquarters as an administrative assistant. At the 
time of my resignation less than two years later, I was Chief 
Operating Officer and General Manager.
    Although my dealing with the Federal Protective Service was 
limited to the last few months of my tenure with STARTECH, my 
experience in the contract security industry is extensive. 
Please take that into consideration when determining the value 
of my testimony.
    The mission of contract guards and the Federal Protective 
Service is one and the same, that is, the protection of Federal 
facilities and occupants. The means by which that mission is 
accomplished differs. Contract guards protect through 
prevention by detection, providing services such as access 
control, package inspection, and identification of potential 
hazards. The Federal Protective Service protects through 
regulation, inspection, investigation, and enforcement. They 
are the primary emergency responder called for by contract 
guards. Contract guards and the Federal Protective Service are 
not mutually exclusive; they are separate entities on a single 
mission, and the mission is clear: protect the assets of the 
United States Government.
    The true value of security is illusive and is predicated 
upon what didn't happen. In order to prove the value of 
security, you must prove a negative. I don't have to do that in 
this case.
    STARTECH was incorporated in the District of Columbia in 
April 1989. Weldon Waites purchased 75 percent of the company 
in May 2005. In tax year 2006, five contracts with the 
Department of Homeland Security generated over $13 million, 
roughly half the company's annual revenue. Yet, there was not 
enough money to fund payroll on more than one occasion.
    It is highly likely, and you have already heard some form 
of testimony in which the demise of STARTECH is at least in 
part due to the failure of DHS to pay valid invoices in a 
timely manner. I do not believe that is the case now and hasn't 
been since the 1st of the fiscal year. There have been some 
occasional delays in payments recently, but certainly nothing 
that would jeopardize an otherwise viable company.
    My theory of the demise of STARTECH is in stark contrast to 
any attempt to blame late payments from DHS or anyone else. It 
is my considered opinion that STARTECH died at the hands of its 
controlling owner, Mr. Weldon Waites.
    In September 2005, the DCAA prepared an audit report citing 
the identification of ``nine significant deficiencies in the 
contractor's accounting system.'' Two years later, I could find 
no evidence of any progress on the correction of any deficiency 
noted in that report.
    In June 2006, financier number one, the Bank of America, 
issued a default notice to STARTECH. In addition to several 
areas of noncompliance with the terms and conditions of that 
loan, the default notice was caused by Weldon Waites' failure 
to report a prior criminal history, including an indictment for 
29 counts of conspiracy, bank fraud, false statements, and 
money laundering.
    In December, financier number two, First Horizon, issued a 
notice of default for, among other things, the failure of the 
financial statements to be complete and correct in all material 
aspects. Within two weeks of signing an agreement to provide 
funding, financier three, Marquette Commercial Finance, 
identified several DHS invoices that had been sold to them but 
had already been paid directly to STARTECH. Marquette was a 
factoring company. Payment for invoices was an outright sale to 
Marquette, it was not a loan. In essence, STARTECH was paid for 
the same invoices twice. Those invoices totaled over $1.8 
million.
    The fruitless search for finance began again. Multiple 
financiers were contacted; multiple financial consultants were 
retained or continued; and multiple accounts receivable reports 
were identified. Needless to say, any financier who conducted a 
due diligent audit of STARTECH quickly realized the true 
financial state of the company and withdrew any offers made.
    The company's accounts payable presented another challenge. 
STARTECH has not paid most of its considerable expenses since 
prior to January of 2007. Weldon Waites' personal expenses were 
paid regularly. These expenses include mortgages for 
condominiums in Washington, D.C. and Myrtle Beach, South 
Carolina. Other South Carolina expenses, like parking spaces at 
the Gamecock Pavilion and storage facilities, which reportedly 
include a slip for his 46-foot boat, were paid for by STARTECH.
    The May 4th payroll was late. Weldon Waites continuously 
asserted the funds were available, but they were not. Most of 
the paychecks issued May 18th and all of them issued May 24th 
were returned due to insufficient funds. On May 31st, DHS sent 
a notice of post-vacancies caused by the payroll issues in the 
morning and a show cause notice in the afternoon. On June the 
1st I responded to the show cause notice. Part of my June 1st 
response to that notice included the lines: ``It is my opinion 
that STARTECH is not only financial bankrupt, but morally and 
ethically as well. It is in the best interest of the Federal 
Government to revoke all STARTECH contracts and to immediately 
issue them to another reliable contractor.'' All five DHS 
contracts were contacted for cause on June the 3rd.
    Five hundred and thirty-three STARTECH employees still have 
not been paid, most since May the 4th. Since January of 2007, 
payroll deductions made for employee benefits, including health 
insurance, 401(k), pension, and union dues, have not been 
forwarded to the providers of those benefits.
    The stated purpose of this hearing is the responsibility of 
the Department of Homeland Security and the Federal Protective 
Service to ensure contract guards protect Federal employees and 
their workplaces. I respectfully submit to you that the Federal 
Protective Service cannot possibly protect 8900 Federal 
buildings with 1200 officers. The people that are protecting 
you, that are standing post, are contract guards, 15,000 
strong. The contract guard program absolutely needs tighter 
regulation, advanced training, more inspections, and follow-
through on any sanctions levied.
    Anyone who is in the position of controlling the work of 
contract guards or handling any of the money associated with 
the guard contract must be subjected to at least the same level 
of background check as the guards who work for them. Annual 
financial audits will keep the money where it is needed and 
where it was intended to go.
    Weldon Waites sacrificed his company, his employees, and 
your security on the alter of his greed. I beg you to ensure 
that this never happens again. I have been honored by the 
opportunity you have given me to speak before you today, and I 
thank you from the bottom of my heart. I would be happy to 
answer any questions.
    Ms. Norton. Thank you, Ms. Messner.
    Actually, I want to thank you both and say it took some 
courage for both of you to come forward, Mr. Waites to not 
simply be accused, but to come forward and to give his own 
accounting, and certainly Ms. Messner, who has played a 
valuable role, in her terms, at least, as a whistleblower. I 
think she has certainly uncovered important issues for Federal 
contracting, and not alone for this particular contractor
    First let us establish, Mr. Waites, whether you are still 
in business. Do you have any contracts? Are you technically 
insolvent?
    Mr. Waites. Madam Chair, the CPAs that were working with us 
had a debate with our attorneys yesterday, and I understand 
that there are three definitions of insolvent. If it is the one 
that means that you have no money in the bank, then absolutely 
we are. But based on our accounts receivable, we are not.
    Ms. Norton. Are those accounts receivable entirely from the 
Federal Government?
    Mr. Waites. No, ma'am.
    Ms. Norton. To whom else do you provide services?
    Mr. Waites. We had some commercial accounts also.
    Ms. Norton. Were those employees paid over the past several 
weeks?
    Mr. Waites. To my knowledge, none of the employees have 
been paid since the first payroll that was missed after we 
personally made the three payrolls prior to that.
    Ms. Norton. None of the employees of the Federal Government 
or your private contracting services have been paid?
    Mr. Waites. No, ma'am, not since the first payroll that we 
missed a portion of.
    Ms. Norton. Well, you have been paid, have you not?
    Mr. Waites. I have not.
    Ms. Norton. You have continued to pay on your condominiums 
here and in South Carolina and your other obligations?
    Mr. Waites. I would like to address the Committee on that. 
I mentioned in my opening statement that I worked for Mr. 
Pinckney and Mr. Ford for about a year before we had the 
opportunity to purchase STARTECH, and it was in my employment 
agreement, since I lived elsewhere, that they would provide me 
a place to stay. So we have had this for my entire stay here, 
which has been over three years. It hasn't been something that 
just recently happened. Last year, I made 48 trips, most of 
which lasted three to five days, so I am here a lot, and the 
condo payment was part of my compensation package. As far as 
the Myrtle Beach condo, we have a presence with an original 
thought to move the corporate office one day, and we are going 
after the business in South Carolina that requires a South 
Carolina presence, and in that regard we paid the entire down 
payment out of our own personal funds back in November--I mean, 
October, excuse me, late October, and since we were going to 
maintain an office on the coast of South Carolina, it was our 
decision, ,along with counsel and CPAs, that we should invest, 
rather than pay rent.
    Ms. Norton. So you believe that, in 2006, when you and your 
wife registered a deed in North Myrtle Beach for a $530,000 
beachfront condominium, that was that was necessary for your 
business? That was 2006.
    Mr. Waites. Yes. I think it was in November of 2006. As I 
said, we made the down payment of $125,000 for this and talked 
to our accountants about it to find out if this is the best way 
for us to develop business in South Carolina. So that was the 
decision. By the way, I might add that----
    Ms. Norton. Well, excuse me--oh, go ahead.
    Mr. Waites. I might add that I don't think but one or two 
payments have been made by STARTECH on that condo, because it 
is now in foreclosure.
    Ms. Norton. Oh, that too is in foreclosure now.
    Mr. Waites. Yes, ma'am.
    Ms. Norton. That same month, the same month that you were 
buying the North Myrtle Beach property, you say in your own 
testimony that First Horizon called its loan because of 
STARTECH's financial position. Even though they were calling 
its loan, you thought you could invest in beachfront property 
at the time?
    Mr. Waites. That is a two-way street for STARTECH. In order 
for us to maintain stability, we had to grow, and we had the 
right people in place in South Carolina to develop business 
to----
    Ms. Norton. In beachfront property?
    Mr. Waites. Beg your pardon?
    Ms. Norton. You had the right people in South Carolina in 
beachfront property?
    Mr. Waites. Well----
    Ms. Norton. I mean, you had no office there at the time.
    Mr. Waites. We did not have an office----
    Ms. Norton. So why does the beachfront property amount to 
having people in place to set up a headquarters in South 
Carolina?
    Mr. Waites. The prospects that we were going after in South 
Carolina required, just like with D.C., through the procurement 
process, that you have a presence or have office space in South 
Carolina or near the properties that we were trying to get 
contracts for. So it served as an office and a condo. Matter of 
fact, I have been to it three times.
    Ms. Norton. Your account of not getting paid by the Federal 
Government is something this Committee takes very seriously. 
This is not the first time we have heard it. In my opening 
statement I indicated that I believed that Federal contracting 
needs top-to-bottom reform, and it is clear to me that that is 
the case. However, Ms. Messner has testified that much of your 
blues and problems predated this six-month period that we are 
particularly focused on; that many of the problems that you 
speak of date back to early this year.
    Are you saying that your company has been in continued 
difficulty and unable to perform its services without taking 
extraordinary financial steps, some of which appear to have 
been marginal? Is that the way you stayed in business?
    Mr. Waites. As I said in my opening remarks, looking back, 
I feel like STARTECH was underfunded from the day that we 
decided to make the purchase.
    Ms. Norton. Are you saying undercapitalized?
    Mr. Waites. Undercapitalized, because the agreement was to 
furnish the acquisition cost in the loan. Now, we made that 
loan every month and was current with it for 12 months, and the 
reason that Ms. Messner stated that Bank of America called that 
loan is not correct, about my record. They put that in their 
complaint, but it was decided that it was a covenant violation 
and our ratios were not what they were supposed to be; and we 
dispelled that argument in the negotiations with them right up 
front.
    Ms. Norton. Mr. Waites, let me move on to what immediately 
brings us here. During the past six months, tens of thousands 
of dollars in employee contributions to 401(k)s, health care 
benefit plans, union dues, pensions were withheld from 
paychecks, but apparently never passed along to the appropriate 
benefit administrators. What happened to these funds?
    Mr. Waites. I would like to expand on that a little bit, if 
I could, because I had a meeting on Tuesday in Baltimore with 
the Department of Labor to discuss these very issues. You have 
to keep in mind that since Marquette called our loan, we were 
not afforded one cent to operate on. They took all of the 
Government payments, which have now started to come forward, 
and applied them to our loan.
    Ms. Norton. Well, did you inform the Federal Protective 
Service or anyone in the Department of Homeland Security that 
all of these funds were being taken for a loan and that you had 
no funds to pay for these benefits which are required by 
Federal law? And what did you do with the funds? Who took the 
funds out of the checks?
    Mr. Waites. We never got the funds.
    Ms. Norton. For six months you never got the funds from the 
Department of Homeland Security? You didn't pay for the month 
of June or much of the month of May or June, but what about 
before that time, when apparently you were paying, at least 
some of the time, for Federal contract employees? What happened 
to the funds for the benefit payments that have not yet been 
received for union dues, 401(k)s and the like?
    Mr. Waites. From the time that First Horizon called our 
loan, they did a similar thing that Marquette did, in that they 
kept the funds and they worked with us----
    Ms. Norton. So you are saying that though these funds were 
withheld from employees, they went to Horizon?
    Mr. Waites. I would like for you to hear me out on this. 
The funds during the period of time that First Horizon called 
our loan, naturally, they had an assignment of claims on it, so 
they held the funds. At that time, I sent a variety of e-mails 
and was in constant contact with the workout person that we 
were dealing with employee benefits. So sometimes they would 
send the net amount to the payroll and other times they would 
send the entire amount, and when they were sent, they were 
wired directly to the third-party administrator who paid the 
benefits, and that is why there it is sort of a gap in the way 
they were paid, because we were at the mercy of the bank and 
they paid basically what they wanted to.
    Ms. Norton. So it's the bank's fault that these employees 
have not received their benefit plans--union dues, 401(k)s--
because you turned all of the funds over to the bank to meet a 
loan. And you did not use any of these funds for any other 
purpose?
    Mr. Waites. No, ma'am, we did not. In fact, the entire----
    Ms. Norton. Ms. Messner, you were sitting right there. Is 
that your view of how these funds were handled?
    Ms. Messner. No, ma'am, it is not. In the transference 
between Bank of America and First Horizon, in about July or 
August of 2006, Bank of America had an escrow account set up 
for employee benefits. When it switched over to First Horizon, 
that escrow account was not set up. When the lady who did the 
payroll would finish her payroll, she would do a status sheet 
that would say this much for payroll, this much for taxes, this 
much for garnishments, and this much for employee benefits.
    Every week, before payroll went, either I or Ms. Case, the 
payroll lady, would speak to Mr. Waites about it. From about 
October to December it wasn't paid and every week we were faced 
with the same argument that I don't know why ADP, the payroll 
company, doesn't just do it. We explained to him that we had 
contacted ADP on numerous occasions, that ADP would do 
garnishment taxes and payroll only; they wouldn't do what they 
determined employee voluntary contributions.
    In about December of 2006, we were $185,000 in arrears on 
employee benefits. There was a $185,000 check written to the 
third-party administrator, who had basically been floating us a 
loan for that period of time. After that check bounced twice, I 
believe it was a wire, but the money was made good by January. 
From January to present, I have heard we don't have the money 
to do it; when we get the financing, it will be done; and Ed 
Riley, the third-party administrator, owes me money. This is 
Mr. Waites telling me, Ed Riley owes me money, he can pay it.
    Ms. Norton. That is a pretty factual rendition, as opposed 
to an opinion, Mr. Waites. Do you doubt the accuracy of what 
you just heard?
    Mr. Waites. Certain things I certainly do disagree with 
entirely. First of all, I took over a company that I really 
didn't know at the time how they handled their benefits, you 
know, the benefit payments. So when we found out the way--you 
can't find out everything the first day--it was my suggestion 
that we handle the employee benefits differently. Now, when it 
comes to Bank of America and----
    Ms. Norton. Handle it differently how?
    Mr. Waites. Well, by setting up a trust account, like she 
said, because the money was never ours. But the point I am 
trying to make is that this was Ms. Messner's administrative 
duties to work this out. As far as arguing with me, I am going 
to provide the Committee with records that if I ever got a cent 
out of any of it or had any benefit from it, it will be right 
there for you. The point is that from the Bank of America loan 
calling up until this date STARTECH never had control over like 
one or two pay periods or a month of its accounts receivable; 
the banks controlled them all. I had to beg the banks each week 
on a payroll----
    Ms. Norton. Mr. Waites, we just heard testimony that the 
banks would not control these benefit payments. And I don't 
want to go into a who-struck-John here, but it does look like 
you are saying, look, I got a business; I didn't know how to do 
the business; I was learning on the job how to do business. 
That is one alibi. The next alibi is that it was Ms. Messner's 
fault that somehow these benefit payments, these 401(k) 
payments, these health care payments were not made. Do you take 
any responsibility for running this company, sir?
    Mr. Waites. I was always in an advisory capacity. I did the 
best that I could.
    Ms. Norton. You are the owner of the company.
    Mr. Waites. No, ma'am, I am not.
    Ms. Norton. Who owns the company?
    Mr. Waites. Sharon Waites and Randy Ford.
    Ms. Norton. So your name is not on any ownership document 
of the company?
    Mr. Waites. No.
    Ms. Norton. I am going to have one or two questions before 
going on.
    Is the reason for that your felony conviction? The reason 
that you are not an owner of the company your felony 
conviction?
    Mr. Waites. No, it was not.
    Ms. Norton. What was his conviction in relation to, was it 
in connection to a business that you owned?
    Mr. Waites. No.
    Ms. Norton. What was it in connection to, please?
    Mr. Waites. It was in connection with a land deal that I 
was in with several other people.
    Ms. Norton. Was your wife on the premises as the sole owner 
of the company and are you not listed as joint owners of the 
company?
    Mr. Waites. I am not.
    Ms. Norton. You are not listed as joint owners of the 
company?
    Mr. Waites. No.
    Ms. Norton. Your wife is the sole owner of the company?
    Mr. Waites. No. She owns 75 percent of the stock and Mr. 
Ford, Randall Ford, owns 25 percent of the stock.
    Ms. Norton. Who ran the company, your wife?
    Mr. Waites. Yes.
    Ms. Norton. She was on the premises, and not you?
    Mr. Waites. Well, we were both on the premises.
    Ms. Norton. We ought to have your wife here, then, 
shouldn't we? Because you are not the owner and you don't take 
responsibility here because it is your wife who is the 75 
percent owner of this company, is that right?
    Mr. Waites. That is correct. But I do accept full and 
complete responsibility for any errors that we made----
    Ms. Norton. Well, how can you? It is your wife's 
responsibility if she ran the company and owns the company.
    Mr. Waites. Well, because she is my wife.
    Ms. Norton. And why didn't you ask her to come and testify? 
Is she here?
    Mr. Waites. No, she is not.
    Ms. Norton. Well, I don't understand why you didn't ask the 
owner of the company. It seems to me, forthright in coming 
forward in the sense that you wanted to take responsibility, 
but you just testified that you are not the one who owns the 
company and that the 75 percent ownership is by someone else.
    Mr. Waites. Well, the invitation came from you and it asked 
for me.
    Ms. Norton. Now, is it not true that you were once the 
owner and that the ownership was transferred because of bank 
involvement?
    Mr. Waites. I said in my opening statement that the day we 
closed I was the owner. We then sought counsel to find out----
    Ms. Norton. The day you closed what? Excuse me.
    Mr. Waites. Closed the loan to buy it. We closed the loan 
in my name and Mr. Ford's name.
    Ms. Norton. That is when you purchased the company.
    Mr. Waites. That was the day of the closing.
    Ms. Norton. And then somebody told you that, with a felony 
conviction, you probably couldn't get Federal contracts?
    Mr. Waites. Well, we sought counsel to find out exactly----
    Ms. Norton. And did counsel advise you that, with a felony 
conviction, you probably couldn't get Federal contracts?
    Mr. Waites. That is not exactly what they said. I would be 
glad to provide the Committee with what they said, but that is 
not exactly what they said.
    Ms. Norton. Would you both stand? We did not swear 
witnesses in. It doesn't have anything to do with you. I was 
not in regular order. Would you raise your right hand?
    Do you swear to tell the truth, the whole truth, and 
nothing but the truth?
    [Witnesses answer in the affirmative.]
    Ms. Norton. Would you sit down?
    You have testified that you are not the owner of this 
company, your wife is the owner of this company; that your wife 
was on the premises as often as you; and that you did not run 
this company. Now that you have been sworn, would you like to 
maintain that testimony?
    Mr. Waites. With the exception of as much as I was.
    Ms. Norton. How much was she on the premises and how much 
were you on the premises in approximate percentage terms?
    Mr. Waites. I would say 75/25.
    Ms. Norton. Was your wife ever in the District of Columbia, 
where this company is registered?
    Mr. Waites. Yes.
    Ms. Norton. Seventy-five/twenty-five, I am sorry, who?
    Mr. Waites. I was on this premises about 75 percent and she 
was on the South Carolina office premise about 75 percent of 
the time.
    Ms. Norton. Was she in the District of Columbia 75 percent 
of the time?
    Mr. Waites. No, I would say she was probably in the 
District of Columbia 40 percent of the time.
    Ms. Norton. How about you, how much of the time were you in 
the District of Columbia?
    Mr. Waites. Probably 75 percent of the time.
    Ms. Norton. Let me ask you this, finally, about the 
employees. That is what brought us here, frankly. Did you or 
anybody on behalf of your company contact the employees who 
were not paid for three weeks and indicate to them anything 
about why they were not being paid or what was going to be done 
about it? Did you have any communication whatsoever with them?
    Mr. Waites. I probably talked to a couple of hundred that 
called me individually.
    Ms. Norton. So when they called you individually you 
talked, but you never initiated any conversations with them?
    Mr. Waites. My conversations have been through the 
Department of Labor to find the funds----
    Ms. Norton. No, no, no, no. My question has to do with 
three weeks, or about three weeks, when people weren't being 
paid. Was there any communication from STARTECH--I guess I 
should say from your wife, since she was the owner of the 
company--to employees concerning the failure to pay people 
their wages?
    Mr. Waites. If you are asking did we send out a 
communication? We did not.
    Ms. Norton. Of any kind?
    Mr. Waites. I spoke with union leaders and I spoke with key 
people that----
    Ms. Norton. What did you tell the union leaders?
    Mr. Waites. I told them that we were doing our best to get 
funds to pay the employees.
    Ms. Norton. Ms. Messner, do you have any comment, before I 
move to Mr. Graves, on the failure to pay employees for--first 
of all, what was the period of time, the exact period of time 
during which employees were not paid?
    Ms. Messner. May the 4th paychecks were late, they weren't 
actually issued until May the 18th. Excuse me, May the 8th. On 
May the 18th, payroll went out, but probably about 75 percent 
of it was returned due to non-sufficient funds. May the 24th 
was another payroll that went out; 100 percent returned due to 
insufficient funds.
    Ms. Norton. So you are saying checks went out.
    Ms. Messner. Yes, ma'am.
    Ms. Norton.--to employees.
    Ms. Messner. Yes, ma'am.
    Ms. Norton. And that these employees would then go to cash 
them----
    Ms. Messner. Yes, ma'am
    Ms. Norton.--and the bank would not cash the check because 
there was not enough money to pay the wage that was recorded on 
the check.
    Ms. Messner. Generally what happened, ma'am, if an employee 
deposited at the bank, it would show in their account as 
available, but because the payroll checks at that time were 
being drawn off a South Carolina bank account, the employee's 
personal bank would pull that money back, after about five or 
seven days, when they figured out that there was no money in 
the South Carolina account.
    Ms. Norton. Is this the first time this has happened, Mr. 
Waites and Ms. Messner?
    Mr. Waites. Yes.
    Ms. Norton. Ms. Messner, do you know of any other period 
during which employees were not paid?
    Ms. Messner. Payroll has been late a couple of time, 
especially over the last year, but this is the first time it 
was insufficient funds, with the exception of a few--I want to 
say maybe back in March there were a few checks that were 
written off the South Carolina account that bounced, so we had 
to replace those checks. But it wasn't the entire payroll, it 
was maybe 10 checks.
    Ms. Norton. Were employees paid late?
    Ms. Messner. Employees were paid late several times. I 
believe the officers can answer that better than I can.
    Ms. Norton. Thank you.
    Mr. Graves?
    Mr. Graves. Thank you, Madam Chairman.
    You still have contracts out there. Are you still providing 
any security services anywhere?
    Mr. Waites. No.
    Mr. Graves. I am curious as to when your financial problems 
started and through this whole process, at least. Was there 
ever any security gaps that resulted or any performance issues 
that resulted? That is what concerns me as much as anything 
else, is, you know, obviously, the job is to protect those 
Federal employees, protect those facilities, and I am worried 
about security gaps and gaps in the performance based on what 
was supposed to be provided.
    Mr. Waites. To my knowledge, there were no gaps.
    Mr. Graves. Was there ever a time that STARTECH ever failed 
to provide any required security guards? Was there ever a time 
that there was ever any--I am sure when folks aren't getting 
paid, you know, it gets a little hard for you to show up or 
even want to get motivated. Was there any time that you didn't 
have guards there at any facility?
    Mr. Waites. I don't know of any other than in the end, when 
the payroll issues arose.
    Mr. Graves. Well, then was there a gap in security levels 
at that time?
    Mr. Waites. I am not quite sure. I feel certain that there 
were, but I don't know who they were and how it was covered. 
But for the most part I was told that about 80 percent of the 
posts were covered.
    Mr. Graves. I am a little concerned by the comment ``I feel 
certain.'' That concerns me a lot, again, because the job is to 
protect those Federal employees in those buildings, and ``I 
feel certain,'' that concerns me.
    Thanks, Madam Chair.
    Ms. Norton. Thank you, Mr. Graves.
    Just to follow up one question before I go to the next 
person, and I need to know who the next person is.
    You say 80 percent of the posts were covered?
    Mr. Waites. I said approximately, and I don't know that for 
a fact; that was one figure that I----
    Ms. Norton. So you didn't have any supervisors on site 
assuring that these posts in Federal buildings, which you were 
hired to keep secure, were being covered?
    Mr. Waites. Well----
    Ms. Norton. I mean, where does your 80 percent figure come 
from?
    Mr. Waites. I really don't know where the 80 percent; I saw 
it somewhere as I was talking to the contracting officers or 
somewhere as we were winding down the----
    Ms. Norton. But you took no responsibility to make sure 
that people were on the job and that they were--you already 
have said you didn't communicate with them about being paid. 
You also took no responsibility to make sure that they were on 
the job.
    Mr. Waites. That is not so. On Thursday, before the 
contracts were pulled on Friday, we had a conference call with 
FPS. We had a company, Wackenhut, and their chief executive 
officer on the phone willing to take over the contracts at that 
time.
    Ms. Norton. Just a moment. I am asking now not about 
willingness to take over the contract. I am asking about what 
Mr. Graves raised, that his greatest concern would be whether 
or not these posts were covered. And you say approximately 80 
percent, though you have no personal knowledge of that and 
apparently assigned no supervisor of any kind to report to you 
whether the posts were being covered.
    Mr. Waites. I did not say that. I did talk with all of the 
site supervisors and went through regular checks with them to 
find out how many guards he had and how many posts that he had 
covered, and we were also prepared to----
    Ms. Norton. Mr. Waites, did anyone do a roll call in your 
behalf during the weeks when these employees went unpaid? A 
straightforward question. Did anyone take a roll call, come 
back to you and say, Mr. Waites, tell your wife, who is the 
owner, that this many people are on the job and this many 
people are not on the job? That is my question.
    Mr. Waites. The answer to that is I think Ms. Messner had 
meetings with them. She just said she was the Chief Operating 
Officer at the time that you are suggesting. Not only was I 
calling the guards and the supervisors, but I was also----
    Ms. Norton. No, you said the guards called you. You did not 
say you were calling the guards. You said the guards called you 
and you answered questions from the guards.
    Mr. Waites. Well, I misstated, then. I did call guards and 
I talked----
    Ms. Norton. You called each of these 600 guards who weren't 
being paid?
    Mr. Waites. No, I called guards.
    Ms. Norton. Called who?
    Mr. Waites. I called guards.
    Ms. Norton. You called who?
    Mr. Waites. I called several guards myself.
    Ms. Norton. How did you choose which guards to call among 
those who weren't being paid?
    Mr. Waites. Some that I knew and some that I didn't. You 
know, I don't know personally every one of them.
    Ms. Norton. Ms. Messner, would you clear some of this up?
    In other words, you, in some kind of ad hoc fashion, said 
to some of the guards something.
    Ms. Messner, he said you were the Chief Operating Officer.
    Ms. Messner. Yes, ma'am.
    Ms. Norton. Did you communicate with the guards? Did you 
take roll?
    Ms. Messner. Yes, ma'am, I did. On May 24th, for that 
payroll, Mr. Waites had assured--the ending result was he had 
assured that there would be money in the bank by the following 
Tuesday, which I believe was the 29th. It was over Memorial Day 
weekend. He assured that the money would be in the bank by 1500 
hours, or 3:00 p.m. I sent a notice out to all project managers 
and all corporate staff that this is the information that I 
have, that the money will be there for both payrolls by 1500 on 
the 29th; that, contrary to popular belief, Mr. Waites is not 
hiding, he does return phone calls; and various things like 
that.
    After I sent that, I sent another e-mail out. That e-mail I 
requested the project managers to disseminate to all personnel 
by any means necessary. After that, I sent an e-mail to the 
project managers asking for a status report every morning and 
every afternoon of how many officers that were not showing up 
because they hadn't been paid. The word that I had gotten was 
that officers wanted to come to work; however, couldn't afford 
the gas money to get there.
    On May the 31st, I had a meeting with--I invited project 
managers, site supervisors, and shop stewards to a meeting on 
May 31st at the Department of Education building, which was one 
of the ones that we protected. At that meeting, I said we are 
not going to get paid. The next pay date was the next day.
    Ms. Norton. You were on the premises then?
    Ms. Messner. Yes, ma'am. And I explained to the officers 
that were there that there is no money; we are not going to get 
paid tomorrow because corporate staff has not been paid either. 
I stepped out of the room to allow them a few minutes to talk 
amongst themselves, and when I came back I saw people who had 
nothing giving to people who had less than nothing. They 
reached into their own pockets for gas money for fellow 
officers so that they could show up. And Mr. Waites, at a union 
meeting via conference call on May 23rd, explained to the shop 
stewards present that it was not his fault if they mismanaged 
their money, and it was not his fault if they got evicted or 
didn't pay their car payment. That is what he told the guards.
    So I explained to the people, I figured they deserved to 
know. If you are not going to get paid, you deserve to know so 
you can make alternative arrangements. I told them May 31st. 
They pledged to stand post as long as they could without pay. 
On June 1st I sent the notice to the FPS take our contracts, 
because it was unfair to the 500 people to keep working without 
being paid, which they would have done.
    Ms. Norton. Well, in this post-9/11 climate, we can only 
thank you for having encouraged people to stay on the job.
    Mr. Waites, did you contribute to the funds for employees 
who needed gas money to get to work? What is the average wage 
of these employees?
    Mr. Waites. Well, we put $2,500,000 of borrowed money and 
made the payrolls that led up this; didn't get paid ourselves--
--
    Ms. Norton. Mr. Waites, you know, you might try answering 
my question. You just heard testimony that some of the 
employees, who have little themselves, were essentially passing 
the hat to help others who had even less. I am asking you did 
you contribute anything to these employees who had not been 
paid and perhaps had even less than you?
    Mr. Waites. Not directly.
    Ms. Norton. All right.
    Let me move on. I guess Mr. Carney was first, actually.
    Mr. Carney of Pennsylvania. Thank you, Madam Chair. I have 
several questions. This is quite startling testimony, actually. 
I am amazed.
    Mr. Waites, who replaced your wife's company in fulfilling 
these contracts, which agency was that, do you know? Who filled 
in?
    Mr. Waites. Oh, I think Frontier Security did part of them 
and Coastal Security did the other part.
    Mr. Carney of Pennsylvania. Did their employees get paid, 
do you know?
    Mr. Waites. Yes.
    Mr. Carney of Pennsylvania. Yes, they did get paid?
    Mr. Waites. I am not sure I understand.
    Mr. Carney of Pennsylvania. Do you know if their employees 
got paid?
    Mr. Waites. The Coastal employees?
    Mr. Carney of Pennsylvania. Yes.
    Mr. Waites. Yes.
    Mr. Carney of Pennsylvania. Okay. Okay.
    Ms. Messner, have you heard of similar problems at other 
security firms, private security firms?
    Ms. Messner. In the 16 years that I was a guard, I had 
worked for one other company that went bankrupt and bounced 
payroll, and that would have been in the late 1980s, and that 
was due to fiscal malfeasance.
    Mr. Carney of Pennsylvania. Ms. Messner, what was morale at 
STARTECH? How precipitously did it slide? I am sure that it had 
to.
    Ms. Messner. Individual morale was low because when you--it 
is hard to protect others when you think that your stuff might 
be on the street before you get off shift. But, honestly, 
believe it or not, morale kind of improved because we had a 
common enemy.
    Mr. Carney of Pennsylvania. Interesting phrase.
    I am going to ask just a basic question, Mr. Waites. Who is 
responsible here?
    Mr. Waites. The ultimate responsibility would have to fall 
on our shoulders.
    Mr. Carney of Pennsylvania. What does that mean? What are 
you going to do to make this right?
    Mr. Waites. We have done several things. I met with the 
Department of Labor on Tuesday and signed all the documents.
    Mr. Carney of Pennsylvania. What kind of documents?
    Mr. Waites. To assure that the remaining invoices that we 
have outstanding, that the guards are paid first, and their 
benefits. That was a meeting all day long in Baltimore on 
Tuesday. I have negotiations with a company that is interested 
in helping us, and that would be the first priority, is to pay 
the employees.
    Mr. Carney of Pennsylvania. All right.
    I have no further questions at this time, Madam Chair.
    Ms. Norton. Thank you, Mr. Carney.
    Mr. Dent, pleased to welcome you for any questions.
    Mr. Dent. Thank you, Madam Chairman.
    My question is for Ms. Messner. When did you originally 
have your concerns about STARTECH's ability to perform as a 
legitimate security guard contractor for the Federal 
Government? And I think you might have answered it, but when 
did you report those suspicions?
    Ms. Messner. My first concerns actually started when I was 
in the field, because we were never inspected by the company; 
basically, we were in no man's land. With this particular 
situation, I became very concerned in March of 2007, and the 
reason why I became concerned in March of 2007 was prior to the 
closing of the Marquette deal in which the invoices were sold, 
both the Chief Financial officer and me personally explained to 
Mr. Waites that the Federal Government had already paid for 
those invoices. There were two people authorized to sign to 
sell those invoices to Marquette; I was one and Sharon Waites, 
Mr. Waites' wife, was the other. She was in South Carolina. I 
refused to sign the document because it was theft. He signed 
her name.
    Mr. Dent. So it was in March of 2007 is when you first had 
your suspicions and concerns. And when did you report those 
concerns or suspicions that you just outlined?
    Ms. Messner. Sir, I reported it immediately upon suspicion. 
I asked for clarification, I said, this can't be right. I 
explained it to Mr. Waites. I talked to everybody who would 
listen. And if I had had the money, I would have hired a sky 
writer. I didn't know who else to go to. I talked to Marquette. 
After it was done, I talked to Marquette, I spoke to attorneys. 
I told everybody immediately.
    Mr. Dent. I guess my next question, then, to Ms. Messner is 
when did you learn first about Mr. Waites' criminal background, 
and do you think that that should automatically disqualify a 
company from being considered for Federal Government contracts, 
particularly security guard contracts?
    Ms. Messner. I first learned part of his history in or 
about June of 2006, when Bank of America closed the loan. Mr. 
and Mrs. Waites called me into their officer, they advised me 
that he had a blip in his past, and they asked me to be ``the 
face of STARTECH.'' They signed legal documents saying that 
they had no power or control; they made it very clear to me 
that it was paper only. After that, I didn't have any reason to 
question him.
    As far as exclusionary practices from Federal contracts, 
especially security, absolutely. Without a doubt. Contract 
guards must pass a background check. If you have too many 
traffic tickets, you can't be a guard. Yet, you give control of 
530 guards to a convicted felon. It does not make sense to me.
    Mr. Dent. And, finally, it is pretty clear from your rather 
extensive background in Government contracting work that you 
have got a pretty good understanding about what works and what 
doesn't. What recommendations, with respect to contract 
oversight, do you have for this Committee? It is our job, of 
course, to see that our Federal buildings and employees are 
protected, so what would you recommend to us?
    Ms. Messner. I would recommend that this be the last study 
or the last investigation, that STARTECH be held up as the 
example of exactly what not to do. I believe that if you want 
to know the true picture of security in Federal buildings, that 
you need to go to the Federal Protective Service officers and 
the contract security guards, and find out from them what they 
need to do the job. They are professionals and they will tell 
you. And, primarily, any funding that is done, you need to make 
sure that it is the right amount at the right time to the right 
people for the right reason. Inspect, investigate, and train.
    Mr. Dent. Thank you very much. I guess the Federal 
Protective Service will be in the next panel, so thank you for 
your comments.
    I yield back to the Chair.
    Ms. Norton. Thank you, Mr. Dent.
    Mr. Arcuri.
    Mr. Arcuri. Thank you, Madam Chair, and thank you for 
having this hearing.
    Mr. Waites, what was the peak employment of STARTECH?
    Mr. Waites. About 750, I think.
    Mr. Arcuri. And when did the peak employment take place?
    Mr. Waites. In late 2006.
    Mr. Arcuri. Late 2006. November, December of 2006?
    Mr. Waites. Sort of like that.
    Mr. Arcuri. After your financial problems started to 
develop?
    Mr. Waites. Well, no. The peak might have been a little bit 
before that. As I said earlier----
    Mr. Arcuri. Well, I just want to know when was your peak 
employment. About what time?
    Mr. Waites. 2006. Early 2006 or late May, I would guess. 
The reason I say that is we had a couple of contracts that we 
lost----
    Mr. Arcuri. Okay, first part of 2006.
    Mr. Waites. Yes.
    Mr. Arcuri. Okay. And when did your financial problems 
start, in your opinion?
    Mr. Waites. May 31st, 2005.
    Mr. Arcuri. Okay, so your peak employment came after your 
financial problems began to develop? Just yes or no.
    Mr. Waites. Yes.
    Mr. Arcuri. Okay. Now, at the time of your peak employment, 
what was your percentage of Federal employment as opposed to 
private sector employment or other employment that you had
    Mr. Waites. Ninety-five percent Federal and 5 percent.
    Mr. Arcuri. Okay. Now, the pay that you would receive for 
Federal contracts relative to the private contracts, was it the 
same, higher, lower? What was the percentage?
    Mr. Waites. It is higher because of collective bargaining 
agreements in the Federal arena.
    Mr. Arcuri. So you would receive more money as a result of 
your Federal contracts.
    Mr. Waites. The employees got paid more, yes.
    Mr. Arcuri. Okay. And you would receive more, I take it.
    Mr. Waites. Yes.
    Mr. Arcuri. Okay. Now, what was your profit margin in your 
business? Generally, what is your profit margin?
    Mr. Waites. Less than 3 percent.
    Mr. Arcuri. Ms. Messner, would you agree with that?
    Ms. Messner. The peak for STARTECH business was the last 
quarter of 2001, post-attack. The profit margin for STARTECH is 
between 3 and 5 percent. It can go as high as 7 and a half.
    Mr. Arcuri. And would you say that is about the general 
percentage for the industry?
    Ms. Messner. Probably, yes.
    Mr. Arcuri. Okay.
    Now, Mr. Waites, during the period of your peak performance 
or your peak employment, I should say, in early 2006, did you 
take any loans? Was that a period that you applied for any of 
your loans?
    Mr. Waites. We applied for a loan in 2005, was the first 
loan.
    Mr. Arcuri. Was that to purchase the company?
    Mr. Waites. Yes.
    Mr. Arcuri. Okay. And how much was that loan for?
    Mr. Waites. Eight million dollars.
    Mr. Arcuri. Okay. And what was the purchase price of the 
company?
    Mr. Waites. I think it was $7.5 million.
    Mr. Arcuri. Okay. What was the additional half million 
dollars for?
    Mr. Waites. Operating capital.
    Mr. Arcuri. Okay. What is the purpose of operating capital? 
I mean, I understand the guard business is pretty labor 
intensive and low in terms of capital investment. What was the 
purpose of that additional half million dollars for capital 
investment?
    Mr. Waites. Well, our expenses that we call G&A is usually 
about 5 percent.
    Mr. Arcuri. What is G&A?
    Mr. Waites. Your operating income is about 5 percent of the 
contract.
    Mr. Arcuri. Okay.
    Mr. Waites. And if you maintain overtime, keep it low--
because you can't budget for overtime--you can pay all of your 
administrative expenses plus overtime out of G&A.
    Mr. Arcuri. Did you take any of that $8 million out for the 
owners?
    Mr. Waites. No.
    Mr. Arcuri. Was any of that taken out?
    Mr. Waites. The only amount that was ever taken out as far 
as the two owners was at the end of 2005----
    Mr. Arcuri. We will get to that. My question was with 
respect to the first loan, did you take anything out?
    Mr. Waites. No.
    Mr. Arcuri. Okay.
    Is that right, Ms. Messner?
    Ms. Messner. I am sorry, sir, I wasn't in the office at 
that time.
    Mr. Arcuri. Okay.
    Now, when did you take the second loan out?
    Mr. Waites. The second loan, we were with Bank of America 
from May 31st, 2005 to----
    Mr. Arcuri. My question was when did you take the second 
loan out. I don't get a lot of time to ask questions----
    Mr. Waites. I think it was June or July or 2006.
    Mr. Arcuri. Okay. So it would be about six to eight months 
later, a year later?
    Mr. Waites. A year later.
    Mr. Arcuri. Okay. And what was the purpose of the second 
loan?
    Mr. Waites. Our first loan was called.
    Mr. Arcuri. Okay. And how much was the second loan for?
    Mr. Waites. Almost the same amount. We had paid it down, 
but our borrowing base had gone back up, so it was about the 
same amount, about $8 million.
    Mr. Arcuri. Okay, so you paid it down. How much did you pay 
down from the first loan?
    Mr. Waites. We had a revolving loan and a term loan, and, 
with interest, it was paid down a couple million dollars, I 
think, during that period of time.
    Mr. Arcuri. But you borrowed $8 million again?
    Mr. Waites. We had to----
    Mr. Arcuri. What did you do with the excess at this point?
    Mr. Waites. Any excess that we ever had was put in the 
operating account and we used it for payroll.
    Mr. Arcuri. Was any of that used to purchase the condo in 
South Carolina?
    Mr. Waites. No.
    Mr. Arcuri. Okay, where did the money come from to purchase 
the condo in South Carolina?
    Mr. Waites. Out of our personal savings.
    Mr. Arcuri. Okay. In whose name was the condo in South 
Carolina?
    Mr. Waites. Mine and my wife's
    Mr. Arcuri. Okay. So you bought it in your name and used 
your money, but it was being paid for, the mortgage was being 
paid for, I take it, by STARTECH?
    Mr. Waites. STARTECH paid two payments, I think.
    Mr. Arcuri. Okay. And your purpose in doing that was to set 
a business up in South Carolina?
    Mr. Waites. Correct.
    Mr. Arcuri. All right, now, why did you purchase a 
beachfront condo as an office or as a place to set up? Couldn't 
you have found someplace cheaper in order to set up a business 
or in order to set up an office in South Carolina?
    Mr. Waites. Most likely, I could.
    Mr. Arcuri. But you didn't.
    Mr. Waites. I did not. We selected this place.
    Mr. Arcuri. And STARTECH paid the two payments for it.
    Mr. Waites. I am not sure, but I think it was two.
    Mr. Arcuri. Two. And it probably would have continued if 
STARTECH didn't get into problems with their financing, 
correct?
    Mr. Waites. Yes.
    Mr. Arcuri. Now, you indicated that your wife was in South 
Carolina 75 percent of the time?
    Mr. Waites. Yes.
    Mr. Arcuri. But you also said she was in D.C. 40 percent of 
the time. Is that your position?
    Mr. Waites. I think I either misstated or somebody 
misunderstood.
    Mr. Arcuri. I wrote it down, so I know that is what you 
said, but----
    Mr. Waites. Well, if I did, I stand corrected.
    Mr. Arcuri. Okay.
    Mr. Waites. She is here about 25 percent of the time, 
period.
    Mr. Arcuri. Okay. And she is in South Carolina 75 percent 
of the time.
    Mr. Waites. Yes.
    Mr. Arcuri. Okay. Now, what did you do with the extra money 
from the second loan, that $2.5 million that wasn't needed to 
pay off the first loan?
    Mr. Waites. It went back into operating capital, and there 
was never enough excess in our borrowing base to last over two 
payrolls, which is about $2 million.
    Mr. Arcuri. Did you ever pay yourself or your wife back any 
money that you lent to the company during that period of time?
    Mr. Waites. No.
    Mr. Arcuri. Okay. Did any of that money get paid out to you 
and your wife in salaries or bonuses or in any way?
    Mr. Waites. We had a salary.
    Mr. Arcuri. Okay.
    Mr. Waites. We did not take a bonus in 2006. We called it a 
distribution. Mr. Ford and I took out a distribution in 2005 
because it is a sub-S and we had to pay taxes.
    Mr. Arcuri. Okay. And how much did you take out in 2005?
    Mr. Waites. I think it was about--we used to prepay 
everything, but we found out that there was a certificate of 
deposit somewhere----
    Mr. Arcuri. My question was how much did you pay for 
yourself.
    Mr. Waites. I think it was 75 percent of $500,000.
    Mr. Arcuri. Okay. That was your cut on it?
    Mr. Waites. Yes.
    Mr. Arcuri. Okay. So it was over 400,000.
    Mr. Waites. Yes.
    Mr. Arcuri. Okay. And how much did you pay yourself in 
salary in 2006?
    Mr. Waites. The combined salary for both of us is about 
$185,000 a year.
    Mr. Arcuri. When you say both of us, you and your wife?
    Mr. Waites. Yes.
    Mr. Arcuri. Ms. Messner, is that the case?
    Ms. Messner. No, sir, it is not. Mrs. Waites bills STARTECH 
by invoice for any work she does for the newsletter or the 
website. She gets paid $50 an hour by invoice only. Mr. Waites' 
salary is $360,000 a year.
    Mr. Arcuri. Okay.
    Mr. Waites. My response to that, if I may reply, is that 
for accounting purposes we were advised for me to take the 
income because of our tax situation, so----
    Mr. Arcuri. Did you receive that money or did you not 
receive it?
    Mr. Waites. I did.
    Mr. Arcuri. Okay. My next question is with respect to the 
loan that the banks placed through the assignment on your 
collateral, on your accounts receivable, did they also place an 
assignment on your private sector accounts receivable?
    Mr. Waites. Yes.
    Mr. Arcuri. Okay. All accounts receivable?
    Mr. Waites. Yes.
    Mr. Arcuri. Okay.
    Ms. Messner, is that correct?
    Ms. Messner. Yes, it is.
    Mr. Arcuri. Okay. And you took a third loan as well, Mr. 
Waites?
    Mr. Waites. The third loan was with the factoring company.
    Mr. Arcuri. Okay. And how much was that for?
    Mr. Waites. I think it was about $8 million.
    Mr. Arcuri. And what was the purpose of that loan?
    Mr. Waites. To pay off the First Horizon loan and give us 
half a month of operating capital.
    Mr. Arcuri. Okay, the First Horizon loan was actually the 
second loan that you took, though, right?
    Mr. Waites. Yes.
    Mr. Arcuri. Okay. And how much had you paid that down to?
    Mr. Waites. As you know, it would go up and down on the 
borrowing base, but it was about $8 million. I mean at one time 
it was probably $7 million and at the end it was near 8.
    Mr. Arcuri. Okay. And what would you do with this extra 
money? If you were taking money out of the revolving loan fund, 
what would you do with this extra money?
    Mr. Waites. There was never any extra money. Every check 
that was written is accounted for; it was for business expenses 
that were deductible and certified by our accountants.
    Mr. Arcuri. You just said it went up and down and it was a 
revolving loan fund, that you would pay it down to about 7 and 
then it would go up again.
    Mr. Waites. Well, a lot of the time, since that was a 
monthly revolver, if we would get paid on certain invoices, the 
loan would go down. If we wouldn't get paid, it would go up and 
it would eventually reach your maximum borrowing base, and you 
couldn't exceed that.
    Mr. Arcuri. All right, my last question is this. What other 
personal expenses did STARTECH pay for you and your wife?
    Mr. Waites. They paid personal expenses----
    Mr. Arcuri. Did they pay for your house, for your rents, 
for your cars?
    Mr. Waites. No.
    Mr. Arcuri. None of those?
    Mr. Waites. They paid for no cars.
    Mr. Arcuri. Did they pay for your home here in D.C., your 
apartment?
    Mr. Waites. They paid the rent on that, yes.
    Mr. Arcuri. Okay. And your mortgage in South Carolina.
    Mr. Waites. No, they did not pay for the mortgage in South 
Carolina.
    Mr. Arcuri. You just said that on your beachfront condo in 
Myrtle Beach.
    Mr. Waites. Oh, I thought you meant where we lived. I am 
sorry.
    Mr. Arcuri. Okay.
    I have nothing further. Thank you, ma'am.
    Ms. Norton. Thank you very much, Mr. Arcuri.
    Just to wind up for the record, in retrospect, Mr. Waites, 
don't think we are unsympathetic to the plight of small 
business people. On both sides of the aisle, people look first 
to the problems of small business, people we know. Most of them 
go out of business, the problems are so great. Much of it is 
miscalculation. A lot of it comes from what you encountered. 
You took over a business that you have testified you had no 
experience in. Yet, you felt you could operate the business. 
And some of the problems you encountered may have come from 
that fact.
    Were any funds from the Federal Government, Mr. Waites, 
ever used to meet other accounts or expenses other than Federal 
accounts or expenses?
    Mr. Waites. I am not sure I understand that.
    Ms. Norton. Monies paid from the Federal Government, were 
those monies ever used to pay for other expenses other than 
Federal expenses incurred in connection with STARTECH and its 
Federal responsibilities or other accounts other than your 
Federal account, Federal STARTECH account.
    Mr. Waites. Well, we had, as I stated earlier, commercial 
accounts.
    Ms. Norton. Yes. And my question is were any of the Federal 
funds ever used, even temporarily, to cover some of those 
commercial accounts.
    Mr. Waites. I really couldn't answer that because it all 
went into one operating account.
    Ms. Norton. So there was not an attempt to keep those funds 
separate----
    Mr. Waites. No.
    Ms. Norton.--so that the Federal accounts could be paid?
    Mr. Waites. No.
    Ms. Norton. Ms. Messner?
    Ms. Messner. That is correct. And there were several 
accounts.
    Ms. Norton. I noted in your testimony, Mr. Waites, that you 
said that there were preliminary figures from your CPA, the 
independent CPA, that what remains of the company would be 
adequate--and here I am quoting from you--``to pay previously 
unpaid salaries, outstanding employee benefits, and accounts 
payable.'' Would you forward those figures to this Committee, 
please?
    Mr. Waites. Yes, I will.
    Ms. Norton. Ms. Messner, did you testify that on only one 
occasion, did I hear you correctly, was there enough for 
payroll?
    Ms. Messner. Since May? Since May the 4th, May the 4th 
payroll was okay; May the 11th was okay. After that it was----
    Ms. Norton. How about before that? How about in your 
previous employment with the company?
    Ms. Messner. There was one occasion in which they had to 
bring the checks to us from D.C. I can't remember what that was 
about, but that would have been in probably 2000, 2001.
    Ms. Norton. Mr. Waites, sorry, did you want to answer?
    Mr. Waites. Yes, ma'am. Those payrolls that you were--the 
two previous payrolls that she was speaking of are the ones 
that we made and wired the proceeds from our funds directly to 
ADP.
    Ms. Norton. Mr. Waites, I am curious when you say a loan 
was called you got $2 million from your wife. Would you explain 
that, please? The company got $2 million from your wife?
    Mr. Waites. I don't recall--I recall----
    Ms. Norton. Do you recall $2 million from your wife in the 
testimony?
    Mr. Waites. I thought that I said that we put over $2 
million of our personal funds to fund the two payrolls that I 
just described.
    Ms. Norton. I see. Those funds would have come from where?
    Mr. Waites. Our personal funds, and then we borrowed from--
--
    Ms. Norton. How much in Federal funds do you have and 
personal funds do you have, then, sir?
    Mr. Waites. I have none.
    Ms. Norton. Well, then where did you get $2 million in 
personal funds from?
    Mr. Waites. Well, I thought the question was how much do I 
have today. The payrolls that we made came from my retirement, 
personal retirement that I have had all my life, and our 
personal assets that we saved. And my wife was a Federal 
Government employee, so we put all that together and made the 
next to the last payroll. And then the last payroll we went to 
a personal investment group and borrowed it, and they made that 
payroll.
    Ms. Norton. Mr. Waites, Ms. Messner has testified and tried 
to make us understand the link to Marquette, that essentially 
you were paid for invoices twice, and she explains in her 
testimony that, unlike the two banks mentioned in your 
testimony, Bank of America and First Horizon, Marquette was not 
a bank, but a factoring company. Without getting too technical, 
these are not people who make loans. The invoices, however, 
less than a certain age, in this case 90 days old, would be 
sold outright, with 90 percent of the proceeds immediately 
available, in this case to STARTECH in the form of cash; and 
that such a deal was finalized March 6th, 2007, which meant 
that you were selling the invoices and getting paid by the 
Federal Government, then getting paid by Marquette as well.
    Do you believe that was an appropriate arrangement and an 
appropriate way to handle Federal funds that you received? And 
what happened to the funds?
    Mr. Waites. Prior to the Marquette closing, we were with 
First Horizon. When they called our loan, they had a full 100 
percent assignment of claims of all funds, so they all went 
directly to First Horizon. We didn't have access to any except 
what they would release to us to make these payrolls.
    Ms. Norton. Who was the Marquette deal between?
    Mr. Waites. I was coming to that. After we sought 
additional financing and went with Marquette, they agreed to 
factor the accounts receivable, which in essence means that 
they purchase the invoices once you have owned them and they 
have the assignment of claims. They actually own the invoices 
and they also take a personal guarantee from any other funds. 
So STARTECH, from the problem that we had with First Horizon 
through the Marquette deal, never got the opportunity, but like 
on one or two occasions, to enjoy the benefit of the factoring 
and operate out of our own funds.
    The other thing that you mentioned was I have been accused 
of signing off on the Marquette loan, and it is important for 
you, the Committee, to understand that we used a loan broker to 
help us find this financing, and he handled the transactions. 
In my hand I am holding a copy of the invoices that Marquette 
sent to the Federal Government and the dialogue that the 
Federal Government exchanged that led up to the funding of the 
loan, and the last word of the last sentence says ``I just 
spoke with Jackie Jones and she confirmed that the invoices 
have been approved and none are paid yet.`` That was the basis 
that I made the decision to sign off on the loan that she 
alluded to. I didn't make it on the----
    Ms. Norton. You mean the Marquette deal.
    Mr. Waites. Yes, ma'am.
    Ms. Norton. So you are testifying that the Federal 
Government was complicit in this arrangement?
    Mr. Waites. I have the document here from the Federal 
Government.
    Ms. Norton. Well, that is perfectly fair, sir, if they knew 
about it, and, of course, we will ask them about it.
    Mr. Waites. Yes. I relied 100 percent on----
    Ms. Norton. Wasn't that some indication, though, that the 
company was in some financial difficulty, that perhaps DHS or 
the Federal Government should have taken note of?
    Mr. Waites. Absolutely.
    Ms. Norton. Yes, sir. In retrospect, Mr. Waites, if you had 
to do it over again, would you forego expenses charged to 
STARTECH like the BSI properties, two BSI properties, $1600 per 
month for a boat slip and the parking spots charged through 
Kawliga, $550, for a tailgate spot at the University of South 
Carolina charged to STARTECH?
    Mr. Waites. I would like to address both of those, if I 
could. First of all, the boat slip is 10 years old and was paid 
for two years ago. That $1600 had nothing to do with the boat 
slip.
    Ms. Norton. Excuse me. So the $1600 which is on the 
STARTECH account was not being paid for by STARTECH?
    Mr. Waites. No, ma'am. You made a statement that the $1600 
was to pay for a boat slip. That is incorrect.
    Ms. Norton. Monthly.
    Mr. Waites. No, ma'am. There is no boat slip. The boat slip 
that we own has been paid for for a year and a half.
    Ms. Norton. What is it doing on a STARTECH account?
    Mr. Waites. The $1,600 was not for the boat slip, it was 
for the office for Columbia, South Carolina rental.
    Ms. Norton. Ms. Messner, are you aware of this office 
rental?
    Ms. Messner. There are actually, I guess, now three offices 
in South Carolina: it is the home office at 4637 Limestone in 
Columbia; there is a second office at, I think, 4844 Forest 
Drive in Columbia; and then the beach house.
    Ms. Norton. Well, I thought the beach house was there in 
order to be the office.
    Ms. Messner. Ma'am, we have no business in South Carolina. 
We do not have one guard; we do not have one contract in South 
Carolina.
    Mr. Waites. That is not true. We have a contract with the 
University of South Carolina, and we provide guard service for 
a parking facility that you mentioned earlier. So we do have 
contracts in South Carolina.
    Ms. Norton. You paid $550 for that tailgate parking spot at 
the University of South Carolina and charged it to STARTECH, 
just like the $1600 shows. You say it is for rental, but you 
say the boat slip didn't have anything to do with it, it was 
for rental, but not the beachfront property?
    Mr. Waites. May I elaborate on that so I can clear it? Our 
mortgage payment in South Carolina where we live is about 
4,000-something dollars a month. For that we have two offices 
built in a separate location that STARTECH rents. It was set up 
to do that way because that percentage of the mortgage payment 
that we make is attributable to STARTECH work. I spend 25 
percent of my time there and my wife spends 75 percent of her 
time there. The $1600 is the mortgage payment for--I mean is 
the rental for the mortgage payment for the Columbia, South 
Carolina office.
    The other office that this lady referred to is a P.O. Box 
where we get corporate mail. So there are two offices in South 
Carolina.
    I would like to get the record straight on these. If we are 
going to make sworn statements, they should be accurate because 
there is no boat slip in the picture. The boat slip has been 
owned for 10 years.
    Ms. Norton. Well, I am glad you corrected the record on 
that, if that be the case.
    Ms. Messner, were you paid all of your salaries before you 
left the company?
    Ms. Messner. No, ma'am. The last time I was paid was on May 
the 4th.
    Ms. Norton. How much are you owed by the company?
    Ms. Messner. If you included unpaid vacation time that was 
accrued but not taken, I am owed somewhere between $12,000 and 
$15,000.
    Ms. Norton. Mr. Waites, you say you bought this company 
from owners who had gotten it as a part of the 8(a) process?
    Mr. Waites. No, ma'am. I think they were in the 8(a) 
process, but over the course of the period of time that my wife 
and I had an interest in the company, they graduated from the 
8(a) program and went into big business.
    Ms. Norton. Were these members of minority groups or women?
    Mr. Waites. Yes. You asked earlier the reason. The main 
reason, back when we decided to reorganize the structure of the 
company was to make us competitive, because my wife is a 
minority and minority ownership gave certain credits as far as 
the procurement process was concerned.
    Ms. Norton. So your wife, because she was a woman, could 
inherit the 8(a) designation?
    Mr. Waites. You couldn't inherit the 8(a), but in the 
procurement process, if you are a woman-owned business, you get 
certain credits that you would not get had you not been woman-
owned.
    Ms. Norton. So she did in fact get those.
    Mr. Waites. Yes, we did.
    Ms. Norton. Is that the reason why she was the owner of the 
property?
    Mr. Waites. That was the primary reason. Back when we 
decided to step back and look what we had ``gotten into,'' the 
main priority was how can we be competitive in the procurement 
field, and our counsel advised us that it would be better if we 
were minority/female-owned.
    Ms. Norton. Ms. Messner, you testified that, in point of 
fact, there were some noticeable improvements in the timely 
payments of invoices by the Federal Government since 2006. 
Would you elaborate on that, please, since Mr. Waites seems to 
ascribe much of the concern and problems of his company to late 
payments?
    Ms. Messner. Yes, ma'am. In the summer of 2006 there was a 
reorganization with our contracting officers in which all of 
STARTECH's contracts were placed under one contracting officer. 
Once she was in place, she started doing a scrub of each 
contract through her contract specialist. She identified for 
the contract for the National Building Museum, she identified 
several payments that had not been made, that were owed, that 
were related to temporary additional services. She also 
identified several that were owed for a secondary contract.
    She told me that the way to get the money was to file a 
claim. I had no idea how to do it. She walked me through it; 
she helped me; she gave me advice; and those payments were 
paid.
    In addition, there were----
    Ms. Norton. Were payments being received on time during the 
last six months?
    Ms. Messner. Yes, ma'am. Yes, ma'am. As a matter of fact, 
we were beginning to get some older payments, and our accounts 
receivable report was down to about $4 million when I left 
there.
    Mr. Waites. May I comment?
    Ms. Norton. Yes, indeed.
    Mr. Waites. During this same period of time, matter of 
fact, one of the last documents that this lady provided for me, 
on May 31st, was an aging. She gave me the document. We refer 
to it as what it is, is what it is. Naturally, I wanted it to 
be higher, but she did the document. And the May 31st document, 
that I would be more than happy to furnish the Committee, said 
that we have an accounts receivable of $5.2 million. That was 
the basis that we were to close our last loan on on the Friday 
that STARTECH was closed down. They had verified those 
receivables. That was platinum funding.
    The other point I wanted to make is that two of your 
esteemed colleagues, Jim Clyburn and John Spratt, Congressman 
Spratt, agreed and looked at our accounts receivable and sent a 
letter to Congress, signed off on them after we had them 
audited, and agreed that that was eventually going to put 
STARTECH out of business.
    Ms. Norton. What were the dates on----
    Mr. Waites. I can furnish you the letters, but I don't have 
them in front of me.
    Ms. Norton. You know, because I indicated earlier in my 
questioning that we have no excuses here. The Federal 
Government, Department of Homeland Security and others, are 
accused habitually of late payments. That is one of the reasons 
why were are looking at the way in which the Federal 
Government, not just one department, does business.
    Mr. Waites. Well, you all have asked Ms. Messner all the 
questions about that, but I have a comment about the new FPS 
office. Once it was transferred from Region 11, was transferred 
from D.C. to Philadelphia, positive things began to happen; 
invoices started getting paid; we knew exactly the status of 
the contract----
    Ms. Norton. What is the difference between D.C. and 
Philadelphia? I am sorry, I don't understand.
    Mr. Waites. During this whole process----
    Ms. Norton. Is there a different regional----
    Mr. Waites. No, ma'am. They moved the procurement office 
from Downtown D.C. to Philadelphia during this process, and so 
now these contracts are administered out of Philadelphia, and 
that is a professional group that is doing a good job, and a 
lot of the invoices that she is speaking of have been paid in 
the last few weeks because of the good job that they are doing.
    Ms. Norton. Yes, of course, it was in the last few weeks 
that people were unpaid.
    Mr. Waites. But that is the point I am trying to make, 
Congresswoman, is that all of the money that was being paid was 
going to Marquette, and they were applying it toward the loan 
rather than releasing any funds for us to operate on. In the 
meanwhile----
    Ms. Norton. Ms. Messner, would you care to comment on that, 
funds were all going to Marquette and, therefore, they didn't 
have the funds to pay their employees? I mean, that is what I 
am getting from this. I am talking about in the last few weeks.
    Ms. Messner. Yes, ma'am. But it was Marquette's money. 
Marquette had given STARTECH the money up front.
    Ms. Norton. I thought you had sold, in fact,----
    Ms. Messner. Yes, ma'am.
    Ms. Norton.--the invoices to----
    Ms. Messner. Yes, ma'am, we had sold the invoices to them 
and there was a loan component of it when they identified----
    Ms. Norton. So they got 90 percent of the money up front.
    Ms. Messner. Yes, ma'am.
    Ms. Norton.--from Marquette.
    Ms. Messner. Yes, ma'am. And when Marquette identified $1.8 
million worth of invoices that were sold to them that had 
already been paid and they had no way to collect, they made 
that a loan.
    Mr. Waites. May I comment on that?
    Ms. Norton. Certainly.
    Mr. Waites. The $1.8 million is the same ones that the 
Government signed off on that told me that they were legitimate 
invoices. They are listed on this piece of paper that I will 
provide for you.
    Ms. Norton. We are not questioning the legitimacy of the 
invoices; we are questioning the people not being paid, even 
though you were given money. Apparently, they got 10 percent 
but you got 90 percent of the funds up front. That is what we 
are questioning.
    Mr. Waites. Well, I don't know how much clearer I can make 
it except that STARTECH got none of that, it was all applied--
they did buy the invoices; they advanced 90 percent on them, 
but the deal in the agreement was that we would factor new 
invoices each month, and those new invoices that were to be 
factored would be operating income. So it was a revolving 
thing; whatever comes in pays down the old invoices; we send in 
new invoices for payment. And that is the way we operated.
    Ms. Norton. Ms. Messner, would you kindly----
    Mr. Waites. And they stopped that.
    Ms. Norton. Let's clear this circle up, then. Do you agree 
with Mr. Waites' notion of why the invoices which were paid up 
front, nevertheless, didn't go to salaries?
    Ms. Messner. No, ma'am, I don't. I believe that Mr. Waites 
was playing fast and loose with the finance. I received an e-
mail that was forwarded to me by the CFO in which First Horizon 
was trying to identify the true owner of an invoice in the 
amount of just over $323,000. First Horizon wanted to make sure 
it belonged to STARTECH and, if so, to wire it to Marquette. 
Mr. Waites responded to the CFO, via e-mail by his personal 
account in South Carolina, do not respond to this e-mail. The 
CFO sent it to me. I sent I back to Mr. Waites and said this 
invoice belongs to Marquette; it was factored. He sent an 
answer back to me saying, okay, I surrender, I wanted to use it 
as leverage. That is how he did finance.
    Mr. Waites. May I comment?
    Ms. Norton. You certainly may.
    Mr. Waites. This was the $350,000, or whatever the number 
was, that I was trying to get Marquette to release from us to 
payroll, to cover payroll. So when an invoice hit First Horizon 
Bank, which is a lockbox for Marquette, my strategy was to tell 
Marquette, rather than send it up to them to apply to a loan 
that was already almost paid off, send it to cover the payroll. 
If that is called juggling of finances, I call it trying to 
figure out a way to survive and keep the company alive. Perhaps 
it was an invoice that they had purchased. We didn't know 
because they couldn't tell us immediately which invoices were 
paid.
    Ms. Norton. Well, Mr. Waites, it didn't keep the wages 
alive after all. I guess the bottom line is, as you say in 
business, the people weren't paid.
    Let me just ask you one final question. Are you under 
investigation----
    Mr. Waites. No.
    Ms. Norton. You are not aware that you are under 
investigation by any Federal agency?
    Mr. Waites. No.
    Ms. Norton. Do you think you should be to clear this matter 
up?
    Mr. Waites. I don't mind it.
    Ms. Norton. All right.
    Mr. Graves, do you have any further questions?
    [No response.]
    Ms. Norton. This has been an unusual hearing. Normally, a 
witness like Ms. Messner comes forward and the witness in the 
shoes of Mr. Waites is afraid to show his face.
    Mr. Waites, first thing I have to say is that I respect you 
for coming forward, testifying alongside Ms. Messner, rather 
than hiding in the bushes. I do believe that much of what has 
happened has been of your own doing. There is no such thing as 
being a victim of being a small business. When you are a small 
business, you take on the responsibility of being a small 
business. We have seen some expenses that we think were not 
prudent, but we don't think you were trying simply to drive the 
company into the ground.
    You have testified that you essentially weren't qualified 
to run the business, that you had never run such a business; 
you were a felon and could not have, in fact, applied to run 
this business for the Federal Government. By taking steps to 
conceal that, even though they appear to have been legal, you 
kept from the Federal Government a material fact. Out of this 
hearing, one of the bills that will come out of this hearing is 
one that, in fact, keeps a company from essentially hiding a 
felon on the payroll and indicating that the ownership is by 
someone who does not have a record.
    I am not one of those who believe that if you have a record 
you should never be able to own a company or never be able to 
do business, even with the Federal Government, but I do believe 
that transparency is required. I do think, if you will forgive 
me, that a company being partially run by a felon has no 
business in charge of security guards for the Federal 
Government, if I can say so on the record. Therefore, there is 
huge Federal culpability here. There is Federal culpability 
particularly in late payments; there is Federal culpability in 
failing to monitor your business closely; and I think it 
behooves the Committee, which is doing an investigative hearing 
and not simply an oversight hearing, to come forward with 
remedies.
    Let me say to both of you we would be pleased to receive in 
writing any remedies you think are appropriate for the kind of 
situation a small businessman in your case, Mr. Waites, finds 
himself, and the kind of situation you, Ms. Messner, believes 
that someone charged with your responsibility has. I am very 
impressed with how candid you have been about what the Federal 
Government should have done as well.
    So we are not here throwing stones at anybody. We are 
having an investigative hearing because we believe that the 
contract system for the Federal Government is broken. I don't 
know how many newspaper articles from how many agencies one 
needs to have before one comes to the conclusion that this 
needs fixing top to bottom.
    Please regard your testimony here as valuable in helping us 
fix a system not of your own making. Thank you for coming 
forward.
    I am pleased to call the next witnesses. These witnesses 
are Latanya Montgomery, a former STARTECH security guard; Brian 
Smith, also a former security guard from STARTECH; James 
Carney, the Acting President of the United Government Security 
Officers of America; and Assane Faye, Washington, D.C. District 
Director of Security, Police and Fire Professionals of America 
International Union.
    Let us hear first from the two former STARTECH guards, Ms. 
Montgomery and Mr. Smith.
    Would you please stand? I should swear all four of you in.
    Do you swear that the testimony you are about to give is 
truthful, so help you God?
    [Witnesses answer in the affirmative.]
    Ms. Norton. Let the record indicate that the witnesses 
answered in the affirmative.
    Ms. Montgomery.

TESTIMONY OF LATANYA MONTGOMERY, FORMER STARTECH INTERNATIONAL 
  SECURITY GUARD; BRIAN SMITH, FORMER STARTECH INTERNATIONAL 
   SECURITY GUARD; JAMES D. CARNEY, ACTING PRESIDENT, UNITED 
   GOVERNMENT SECURITY OFFICERS OF AMERICA; ASSANE B. FAYE, 
 WASHINGTON, D.C. DISTRICT DIRECTOR, SECURITY, POLICE AND FIRE 
          PROFESSIONALS OF AMERICA INTERNATIONAL UNION

    Ms. Montgomery. Good morning, ladies and gentlemen. My name 
is Latanya Montgomery. I am a former employee of the now 
defunct STARTECH International Security and shop steward for 
the SPFPA International Union, serving the membership at the 
Food and Drug Administration, College Park, Maryland.
    I do not wish to pontificate, but to speak to you this 
morning from the point of view of a single mother of four. Even 
though I reported for work everyday that I was scheduled over 
the past eight weeks or more, I have been compensated for a 
mere total of 40 hours of those hours of service, and I must 
say that that was from another company altogether.
    As I mentioned before, I am the single mother of four 
children, one of whom recently graduated from high school on 
June 1st, 2007. My daughter was deprived of the graduation 
celebration for the biggest day of her young life due to my 
current financial situation. My savings have been depleted and 
my checking account stands overdrawn.
    I want each of you to imagine the disappointment in the 
faces of my children when I have to explain to them that mommy 
doesn't have the money to do normal everyday things such as a 
trip to the grocery store to buy milk when we have run out. The 
feeling for me is inexplicable. I want each of you to imagine 
the embarrassment I have felt on a continuous basis having to 
burden family members and friends for favors and loans that I 
am unsure of when or if I could pay back.
    I struggled every morning with impetuous thoughts of why 
should I go to work, when I didn't know if or when I would be 
compensated for the service I provided for and under STARTECH 
International Security. My children, family, and friends asked 
the same question of me. I had to make a conscious decision 
everyday to be an exemplar example for my children, that it was 
my duty and to have faith that I would make it through this 
detrimental hardship, struggle, stress, and strife.
    I am not a Government official, military personnel, or even 
a police officer, but I am essential. I am the first defense, 
the eyes and ears for the Federal Protective Service and 
Homeland Security; a deterrent, if you will. So even as the 
morale of myself and that of many other contract guards is at 
an all-time low, I, we continue to report for duty.
    I feel further victimized, indirectly, if you will, by the 
red tape, investigation, and the time it takes to devise and 
implement a plan of action to right the wrongs that have been 
done. How long does it take to reconcile this situation? This 
is the United States of America, where I, as a citizen, depend 
on you, the powers that be, to protect me from unhealthy and 
unfair labor practices.
    I have waited and wondered where is the Government. Surely, 
they must know my present predicament. There must be someone 
who monitors the contracting companies after awarding multi-
million dollar contracts. We, as contract guards, have quality 
assurance personnel from the Department of Homeland Security 
come into our respective workplaces and Government facilities 
to ensure that the offices are in compliance on a constant, 
everyday basis, without warning. The quality assurance 
personnel check everything, especially the credentials you must 
obtain and keep valid in order to continue to work on that 
Government contract. Where is the quality assurance for the 
actual companies? Who goes to the offices and checks the 
financial status of the heads of the companies to make certain 
that they are in compliance? Who makes sure that the heads of 
these companies have obtained and maintained all of the 
requirements to continue to do business with the United States 
Government?
    With respect to the matter at hand and the reason for this 
hearing today, I propose that the morale of the contract guard 
is the solution for safe and secure Federal employees and 
Federal office space. I also implore you to form a direct means 
to expediently deal with those companies who would continually 
violate the Service Contract Act and collective bargaining 
agreements in place, respectively, and to bring forth and 
resolve these situations as they arise to expedite and 
facilitate these results in such a manner so that we, as 
essential contract guards, do not have to suffer lengthy 
periods of time without results and compensation.
    I believe that I can speak for my fellow officers when I 
say the feeling of the impact of the current state of affairs 
is one of annihilation. I feel that examples need to be made 
and exemplary damages should apply and are in order.
    I pray that I will never experience such hardship again. My 
family and I have suffered long enough. Thank you.
    Ms. Norton. Thank you, Ms. Montgomery.
    Mr. Smith.
    Mr. Smith. Good morning. My name is Brian Smith. I am a 
former employee of STARTECH Security, as well as Union steward 
for the SPFPA International Union, and I served my tour of duty 
at the Food and Drug Administration in College Park, Maryland.
    I would like to take a few moments of your time to 
respectfully and directly address the current issues regarding 
security, namely, to ensure that security professionals are 
able to effectively protect Federal employees and their 
workplaces.
    Although addressed in first person, I not only represent 
myself and my personal experiences, but the sum total of the 
voice and petition of all former STARTECH employees and 
security personnel.
    For the past 12 to 24 months, STARTECH International 
Security has repeatedly failed to pay salaries to its employees 
in a timely manner and in accordance with their collective 
bargaining agreements. The most notable occurrences trail back 
to February 24th of 2006, with concurrent dates to include June 
16th of 2006, March 23rd, 2007, May 4th, 2007, May 18th, 2007, 
and June 1st of 2007. On each occasion payroll has either been 
shortened, delayed, or simply not available.
    As a result, I have endured massive and elongated 
hardships. I have been penalized by my respective banking and 
financial institutions for the numerous overdraft and 
insufficient funds fees that are on my accounts. I have had to 
resort to pay-day loans and high interest cash advances in 
order to get through from one pay period to the next. I have 
even had to borrow money from friends and relatives in order to 
help pay bills and provide food for my wife and three boys.
    On June 9th I became an alumnus of Nyack College, with a 
bachelor's in organizational management. However, due to the 
negative status of my bank account and a dishonored payment to 
the college, I was almost unable to participate in my own 
graduation. All of the hard work, dedication, time off from 
family, amongst other great sacrifices made, seemed somewhat to 
no avail. The anticipation of celebrating one of the most 
monumental educational achievements in my life is sadly 
overtaken by disappointment. Today, I am still unable to 
receive my degree or transcript as a result.
    To say the least, I, as well as my fellow colleagues, have 
been humiliated, embarrassed, defamed of character, and are 
experiencing credit damage resulting from negative and 
derogatory reporting. Hence, this entire experience has left 
STARTECH employees ultimately devastated. This is in fact 
enough to hinder effective job performance and damper morale, 
but with a sense of duty, I myself and many of my colleagues 
have continued to go to work, as prescribed by the Federal 
Protective Service, in order to protect the Government's 
assets, which include the employees of the United States 
Government within various Government facilities on United 
States Federal properties.
    Amongst other monetary issues, union dues have been 
deducted from employee paychecks each pay period, but not 
submitted to the union since September of 2006. Health 
insurance and 401(k) contributions have also been deducted, but 
not properly administered on behalf of the employees. For many 
contract sites, to include Oxon Hill Data Center, Landover 
Warehouse, AOL in Reston, Virginia, and the FDA in College 
Park, Maryland, as well as others, a total of $528 monthly per 
employee has been allotted by the Federal Government for health 
and welfare, but no adequate plan was ever put in place. Many 
covered employees were even denied medical coverage or mailed a 
bill with demands for payments from doctor's offices. To that 
extent, I am gravely concerned about the sick and personal 
leave and vacation time that was accrued, unused, and never 
paid. Also, the employer pension contributions, where are they? 
Is all yet lost? In regards to protecting people and property, 
the biggest questions of the day are: Who is going to protect 
us, the security professional, or our property when we have not 
been compensated for the work that we do? How long do we have 
to wait or our families have to suffer before we are properly 
recompensed for our circumstances? How much more are we to 
endure?
    Undoubtedly, there is a very serious problem, as STARTECH 
International Security is not the first or only company to 
steal monies from the employees, as well as the Federal 
Government, put its employees in such dire straights, and hide 
under the veil of bankruptcy. Thus, it is imperative that a 
solution is found to prevent these occurrences from ever 
happening again.
    In conclusion, this literary correspondence represents the 
disgruntled and discontented, but diligent, dedicated, and 
loyal security professionals who have endured these tumultuous 
circumstances, working without pay or compensation throughout 
the duration of the past four to six weeks. Thank you.
    Ms. Norton. Thank you, Mr. Smith.
    Before I move on to Mr. Carney and Mr. Faye, could I just 
once again thank you for your service, thank you for remaining 
on the job when you would have been within your rights, 
obviously, when you were not paid, not to continue to serve.
    Congratulations to you, Mr. Smith, for obtaining your 
degree. We are aware that many security guards are just like 
you, young people trying to improve themselves, often working 
part-time, sometimes full-time and going to school at the same 
time. That you persevered and got your degree only adds to the 
admiration we have for you. I do want not say that both of you 
have indicated the highest level of professionalism, for which 
the Federal Government is indeed grateful.
    I will move on to Mr. Carney. Mr Carney represents the 
United Government Security Officers of America.
    Mr. Carney. Madam Chairwoman, Ranking Member Graves, my 
name is James Carney. I am the Acting President for UGSOA.
    Ms. Norton. Please pull your microphone close. See, you can 
hear me because I hold my microphone close. Sometimes I have 
trouble hearing witnesses, we up here, because the room is so 
large. Please hold the microphone close and speak into it.
    Mr. Carney. I thank you for your invitation to be present 
and testify before the Committee. I also thank you for your 
scrutiny into this matter; it is indeed serious and requires 
your immediate attention. I want to especially thank you, Madam 
Chairwoman, for your decisive and immediate action to intervene 
in the STARTECH matter.
    In the days following the failed payroll of STARTECH, I 
wrote you and the Department of Labor and the Department of 
Agriculture. I have not seen this kind of concern come from a 
congresswoman before, or any Member of Congress; and this has 
happened all too many times before. So, again, I thank you. 
Without your involvement, these guys wouldn't be this far along 
in recovery of what is owed to them.
    I would like to remind everyone that the alternative was to 
strike STARTECH and take up picket signs right out there on the 
streets. How unfortunate that would have been.
    UGSOA represents 12,000 security officers nationwide. When 
properly trained and certified, we are the professional 
security force that augments the FPS mission. We work 
effectively with the Federal Protective Service police 
officers, many of which are our friends and colleagues. In many 
cases, we have had to operate with arrest authority, as opposed 
to what you were hearing on this Committee, as there are no 
FPOs in many of the localities to effectuate an arrest. The 
contractors we work for come and go and we, the contract 
security officers, always remain.
    The security forces that you have out there right now on 
Federal contracts are loyal to the mission, they are loyal to 
the contract, and they are loyal to a fault; and that fault has 
never become more apparent than now. We have worked to protect 
Federal buildings in many cases without being paid and for 
extraordinary amounts of time. We have heard about the 
testimony of the STARTECH matter, but I can provide other 
examples where this has happened in other localities throughout 
the United States. Here, it happens all too often on Federal 
contracts, let alone the pure private sector.
    What could be more fundamental to labor than being paid for 
time worked? This is the kind of stuff we were talking about in 
the early 20th century; even back in the 19th century. You do 
not hear about this abuse among security guards protecting 
malls that you shop in or the apartment complexes that we live 
in. Yet, right here, on Federal contracts, it is happening. The 
most recent example just happened a few weeks ago, as we have 
heard, right here in Washington, D.C. We look closely and, lo 
and behold, Mr. Waites has a criminal record for fraud. How did 
he get ownership of this contract? Even if his ownership is in 
question, how did he get this much control? It has to be asked 
and it cannot be ignored.
    Recently, I have never felt more inclined to be adversarial 
in our representation to these security contractors than I do 
right now. How could anyone fault us for taking action in the 
face of such events? We have shown great restraint.
    I read the testimony of Chuck Canterbury, President of 
Fraternal Order of Police, which was submitted to this 
Committee on April 18th. His pursuit to advocate for the 
position of the Federal Police officers in opposition to the 
reduction in forces that they were facing, he pointed to a 
system of contract guards that are unqualified. Without solid 
examples, the easiest thing to do is point to a ``unqualified 
guard,'' which is nothing more than a stereotype. I have worked 
these jobs as a security officer. I was proud to put on that 
uniform and that gun belt every day. I knew the responsibility 
and the goals of our mission.
    As a union representative, I have argued the complexity of 
our duties in wage cases before judges at wage variance 
hearings before the Department of Labor. The result of those 
wage hearings, after showing the work that we really do, has 
reclassified us. Our jobs are something more than just a guard. 
We are security officers, security police officers, and special 
police officers. Those classifications exist on a Government 
contract.
    The STARTECH security officers were classified as security 
police officers over a year ago by a decision and order of the 
administrative law judge of the Department of Labor. Prior to 
that, they were classified as Guard 2s. Much of the training 
for a contract security officer mirrors the level of an FPS 
officer. For example, the use of deadly force, the same pistol 
course as the FPOs, and we must fill out, many times, a Form 
3155, which is a criminal report, the same as the FPOs. Please 
take me very literal here. We are not saying we are Federal 
police officers, we augment the FPS police force, but our 
duties are more important and complex now than ever.
    Admittedly, we are finding huge deficiencies between the 
training and the qualification that we are supposed to be 
provided by the contractor and what we are actually getting. 
This is none of the security officers' fault. I have been to 
every major city in the United States, and the contract 
security officers take their jobs seriously. They are wanting 
and wishing to receive the very best training and meet the 
higher standards that the Government expects, but in many cases 
the doors to this training are not open to us.
    You do not need to look any further than the Inspector 
General's report in October of last year, where he discusses 
the problems with the agency as it relates exactly to the 
oversight of these contracts and the failure of these 
contractors to train and qualify the security officers. That IG 
report shows what the security officers have known for years. 
From our own evaluation at UGSOA, we have learned something 
very interesting, however: where we have a solid and 
longstanding labor relationship with our employers, the Federal 
contractors, the incidents of failed training and other 
security contract failures are decisively less. That speaks 
volumes to the labor stability and the direct correlation to 
improve security and performance on these contracts.
    If you look at the correlation, you will see that it works 
the other way as well. There is a contractor right now in 
Colorado before the 10th Circuit Court of Appeals habitually on 
labor violations. In concert with that report, you will find a 
contractor who had to pull all their security officers out of 
the Federal buildings in April after the contractor, Amguard, 
let their credentials and certifications expire.
    Last year alone, certain security contractors have stopped 
paying their security officers. In Tampa and Miami, Florida, 
Superior Protection, Inc., head up by CEO Jack Heard, failed to 
meet payroll for two months. Now, we have heard about a failed 
payroll here. Imagine going for two months. I reported this to 
GSA and DHS because Superior had a history going back clear to 
2000. These abuses are chronicled in various forms: arbitration 
cases; districts of the Department of Labor; the national 
office of the Department of Labor, where I flew out and met 
with their teams back in 2004; the U.S. District Court in 
Miami; the U.S. District Court in Tampa; the 5th Circuit Court 
of Appeals; the U.S. Supreme Court. The list goes on. And there 
is pending litigation against Superior, even though they have 
defaulted.
    It was no surprise to me last year that Superior's 
paychecks began reporting insufficient funds. These 
insufficient funds were to my members in Tampa, Florida in May 
and June of 2006. Here is what did surprise me: the character 
and integrity and the heart and souls of the DHS contract 
security officers in Tampa and Miami, who remained working for 
eight weeks without a paycheck, protecting Federal buildings. 
Eight weeks.
    Six weeks into this fiasco, after I had tried the system by 
calling DHS and DOL and everything we could do to think of to 
stop this thing, we decided with our local members that enough 
was enough, and we were prepared to strike. I notified DHS at 
all levels. When I landed in Tampa on July 6, I had a voice 
message from Department of Homeland Security in D.C., Ms. Nina 
Ferraro, which was just short of a guarantee of a new 
contractor. She stated, ``That we shouldn't strike because 
security guards would be happy with the outcome the next day.''
    I waited that extra day. In the meantime, I went to all the 
security officers I could find and assure them. One more day, I 
kept telling them, one more day, based on this call from Ms. 
Ferraro. Can you imagine six weeks without a paycheck and your 
international union official has to go around to the sites--not 
the Government officials, not the company--having to tell 
everyone let's just wait one more day?
    The Tampa security officers should be commended and 
decorated for staying there, working without pay that long. I 
mentioned this to the FPS commander in Tampa while I was there. 
They have not been formally commended, but a year later they 
finally got their pay.
    UGSOA should have your attention. If not, it gets worse, 
and we have already heard the story about what happened here in 
Washington, D.C. with STARTECH. You have heard from the 
witnesses who are here that have lived it. What we are talking 
about from Mr. Waites in his criminal history was not petty 
cash fraud, it was bank fraud. In the criminal record, it is 
$2.7 million buying a Corvette for his daughter, a condominium, 
and a Rolex watch with fraudulent money, and that list goes on. 
It is in the court record.
    According to Ms. Messner, who you heard a moment ago, the 
bank default notice was caused by the failure of Mr. Waites to 
report his criminal record to the bank.
    We have more examples about how these contractors are 
failing. The list could go on.
    I am going to skip ahead because of time----
    Ms. Norton. Yes, if you could just summarize, Mr. Carney, 
because we kept the first panel very long for the record.
    Mr. Carney. I understand.
    Ms. Norton. But your testimony is very important to us as 
well.
    Mr. Carney. Just, for the record, understand I can provide 
other examples to the Committee upon your request.
    Ms. Norton. Examples of other companies are you saying?
    Mr. Carney. Yes.
    Ms. Norton. Yes, I wish you would provide just that kind of 
information as extensively as you can for the record.
    Mr. Carney. A preview of it is in my written testimony, 
Congresswoman.
    Ms. Norton. Yes.
    Mr. Carney. What I have reported would be a tragedy in the 
private sector, but on Government contracts it should never 
happen. Government security contracts ought to be not run this 
way. It is wrong in the private sector and it is doubly wrong 
here. It is like we were having our own mini Enrons and Tycos 
right here on Federal contracting.
    Collective bargaining works and it has a positive and 
meaningful impact not only for the employees, but for the 
greater security network in the United States, and I can 
provide examples of that to the Committee as well. We can work 
together, but it has to come through a reciprocal process of 
communication and an inclusive process where labor has a voice.
    I have been tracking various issues before this Committee. 
Some of the recent highlights are the recommendations of the 
Department to cut back the Federal Protective Service staff. In 
the face of these many problems, FPS already has more than 
enough to handle. Actually, they don't have enough security or 
police officers to cover the work that they do have. Those are 
the guys that we count on to inspect these contracts and ensure 
that no more STARTECHs happen, no more Superiors happen, no 
more Amguards happen, ELAs, MVMs, Sooner Process and 
Investigation; and the list goes on.
    The question before this hearing and before this Committee 
is what was DHS's responsibility to ensure, DHS must ensure, 
absolutely. The responsibility is shared with the contractor, 
but the authority in the process, the authority in the process 
is the Department. And it is painfully obvious to me that we 
are lacking oversight in the resources, the funding in the 
budget at all layers in this procurement system.
    I read Inspector General Mr. Skinner's report, his most 
recent annual performance plan of April 2007. On page 14 he 
describes the objectives he has identified for the 
acquisitions, Training and Qualifications of the Acquisitions 
Workforce--he is talking about us--and the objective being to 
what determine to what extent the acquisitions workforce must 
meet education, experience, training, certification 
requirements, adequacy of measures used to oversee compliance 
with acquisition workforce, training and qualification 
requirements. I would like to see that certain criteria applied 
to the contractors who own and operate these contracts, 
including their executive officers.
    In conclusion, finally, what doesn't translate to me in the 
broader security perspective is that we are doing a surge of 
troops overseas right now and we are cutting back the homeland 
security troops right here in our homeland. Shouldn't we be 
talking about a buildup of our troops on the homeland who are 
protecting the United States and its critical Government 
infrastructure? In light of that, my opinion is that if we can 
afford to do it overseas, we can afford to do it right here. To 
do a cutback now would appear to be a huge mistake.
    Madam Chairwoman, I would not make these recommendations in 
seemingly critical observations without an extension of UGSOA's 
promised assistance in this process to the Committee, to Mr. 
Skinner, and to Ashley Lewis, Director of Acquisition Policy. 
Whatever we can do to assist in these evaluations, either by 
providing your agents access to our local leaders or our 
members who have seen the violations, please take advantage of 
that. But, also, please protect them. Improve those 
whistleblower protection laws that you guys have been pushing. 
It would be a huge resource to utilize what we are seeing in 
your audits.
    I know there are some questions about small versus large 
contractors and things like that. I thank you for your time, 
and I would be glad to answer any questions you might have.
    Ms. Norton. Thank you very much, Mr. Carney.
    Mr. Faye.
    Mr. Faye. Good morning. My name is Assane Faye, 
International Security, Police and Fire Professionals of 
America, SPFPA, Washington, D.C. District Director. I have been 
in that position for two and one half years, and been employed 
by the International Union for three years. In the Washington, 
D.C./Maryland area, the International Union represents nearly 
2,000 security officers and, on their behalf, I would like to 
thank Madam Congresswoman Norton and Ranking Member Mr. Sam 
Graves for allowing our case to be heard without much delay on 
this prestigious law today.
    I also would like to thank the Mayor of Washington, D.C., 
Adrian Fenty; Corlis Sellers, Regional Administrator of 
Department of Labor, Wage and Hour Division; and particularly 
Enrique Lopez for working so diligently to bring our issue to 
the forefront of their agenda in the past six weeks; and Ms. 
Nina Ferraro, Contracting Officer for the U.S. Department of 
Homeland Security for the show cause notice she issued so 
promptly to STARTECH, the day after her office received the 
Union's complaint.
    Between April 26, 2006 and March 28, 2007, I negotiated the 
collective bargaining agreement between SPFPA and STARTECH, 
covering the security officers at the Food and Drug 
Administration building in College Park; the Washington, D.C. 
Navy Yard; the National Data Center in Oxon Hill, Maryland; the 
USDA Center in Riverdale; the Potomac Center in Washington, 
D.C. and Wheaton; the Department of Education FOB6 in 
Washington, D.C.; and International Trade Commission in 
Washington, D.C., as well.
    Shortly after the negotiations in 2006, the employer began 
to show patterns of lateness on the payroll schedule. On a few 
occasions, employees were unable to get their paychecks until 
four days later and the employer namely, Mr. Weldon Waites, 
continually put the blame on the Government for failing to make 
these funds available to the appropriate bank. He said his 
company was now doing business with the National Bank of South 
Carolina, but the U.S. Government sent the funds to the wrong 
bank. As a good faith gesture, Mr. Waites offered the employees 
an additional paid vacation day.
    In May 2007, the problem reoccurred, except this time there 
were no funds available for the entire month. For two 
consecutive pay periods, the employer failed to meet its 
obligations under the collective bargaining agreement as set 
forth in Article 26. A grievance was then filed by Chief Shop 
Steward Brian Smith, sitting here today, underlining, 
furthermore, the employer's failure to remit the health and 
welfare, and pension fund contributions to the respective 
accounts. In most cases, these accounts were never contributed 
to in accordance with Article 25 of the collective bargaining 
agreement. Additionally, the employer stopped remitting the 
dues contributions to the International Union since August of 
2006, which again violated Article 2, Section 1 of the 
collective bargaining agreement.
    On or about May 20th, 2007, I spoke with Mr. Waites and 
requested a meeting. He agreed to meet with the union 
leadership on May 23rd, 2007, to explain the problems 
associated with the company's failure to pay wages on the first 
pay period of the month. On the day in question, Mr. Waites 
decided to join us via speaker phone, and there he spoke for 45 
minutes, responding confidently to all the questions that were 
asked and said with assurance that he had an overdraft 
protection account of $1 million set aside solely for the 
purpose of covering unanticipated payroll deficiencies. He also 
said that he had to use $2 million from Sharon and Weldon 
Waites' personal bank to fund payroll. He further noted that 
this incident was merely ADP's negligence to send unsigned 
checks on a Friday. He said ADP also failed to print the bank's 
routing number on the checks, and that naturally made it 
impossible for the company to pay the employees. Interestingly 
enough, the employees did not receive their wages even two 
weeks after, and Mr. Waites' bank account with the National 
Bank of South Carolina showed a negative balance of minus 
$1,334.31 on June 7, 2007.
    Later on, during the meeting, I asked Mr. Waites to tell us 
about the pension fund, the health and welfare, and the union 
dues contributions. He asked to be given some time to reconcile 
the figures in order to be able to make the payments. He once 
again put the blame on STARTECH's former Operations Manager, 
namely, Mr. Melvin Mobley, who he characterized as a poor 
performer, and consequently promoted Ann Marie Messner, the 
General Manager, who was here earlier today, Ms. Messner. As a 
result, the previous Operations Manager resigned and everything 
would now be back on track.
    Two days later I found out that Mr. Waites himself wrote 
the resignation letter for Mr. Mobley and demanded that he sign 
it, which, of course, Mr. Mobley refused to do. Mr. Waites 
tactfully put his own staff out of work, starved the security 
personnel, and managed to avoid answering my question, which 
originally related to health and welfare, pension, and dues 
contributions, for which he was liable.
    For clarity, I took the liberty of calculating an 
approximate dollar amount owed to the bargaining unit employees 
using the hourly wage rate as a unit of measure, assuming that 
all monies, earmarked alike, were already paid out to STARTECH. 
If we use roughly a population of 1,000 employees, which is 
about the capacity of STARTECH, give or take, union and non-
union employees included, times 160 hours of the month times 
$20.10 an hour, the answer would be $3,216,000 for the month of 
May alone. If we add to that $3.60 per hour for health and 
welfare times 160 hours of the month times 12 months--although 
the employer has misappropriated this money for longer than 12 
months--times the 1,000 employees, the answer would be 
$6,912,000 for 2006. Let's add again 75 cents per hour for the 
401(k) pension plan times 160 hours of the month times 12 
months times 1,000 employees, the answer would be $1,440,000 
for the year 2006 alone. The sum of all three totals is equal 
to $11,568,000 in a 12-month period, without including 10 sick 
days, 10 vacation days, assuming every employee has worked for 
the company for only one year. The approximate total would then 
be $11,568,000 plus $3,216,000, which add up to $14,748,000.
    It is my hope that the Government will not let STARTECH get 
away with this sum of money, since the sole access to remedy 
for the union in this instance seems to be the Service Contract 
Act and the Fair Labor Standards Act, or to respectively appeal 
to the resources of the Wage and Hour Division of the 
Department of Labor and the National Labor Relations Board.
    Unfortunately, under the bankruptcy shield, where Mr. 
Waites will presumably seek refuge, there is little assurance 
his corporate assets will meet the debt requirements, unless 
the negative balance of June 1st, 2007 finds its way up above 
par in a very dramatic way.
    While the qualification prerequisites of security 
professionals are getting tougher to acquire, post orders are 
getting more stringent, and the post-9/11 era is yet to live 
past the first decade, we cannot allow foreclosures and bill 
collectors' threats and harassment to ruin the lives of our 
security professionals and their families.
    We are at the dawn of a new generation of security and law 
enforcement, not only in the United States, but globally, and 
we must demonstrate quality leadership by example; but to do so 
we need our pride, dignity, and respect restored.
    Madam Congresswoman, Mr. Ranking Member, the guard force 
needs your help to collect these unpaid wages from STARTECH, 
and it needs it urgently. Thank you.
    Ms. Norton. Thank you, Mr. Faye. I thank both you and Mr. 
Carney. Clearly, these employees benefitted from having 
representation, somebody to speak for them, to represent them 
in a moment of crisis, and your own representation appears to 
have contributed to their professionalism, as well.
    I am going to move to the Ranking Member. Before I do so, I 
recognize that there are some security officers in the room who 
remained on duty in the Federal agencies involved who were 
unpaid. May I just ask all of you who meet that description, 
would you stand up so we could see you and give you our 
personal thanks?
    [Applause.]
    Ms. Norton. Mr. Graves.
    Mr. Graves. Thank you, Madam Chairman.
    I too want to add my thanks to all of the officers that are 
here today and your colleagues. Thank you for the commitment to 
Federal employees and to the visitors that visit the facilities 
that you all protect. Your willingness and just the simple fact 
that you showed up for work even though you weren't getting 
paid says a lot about your integrity and speaks volumes about 
your personal commitment to what you do, and it doesn't go 
unnoticed, I have to tell you.
    I just have a couple questions real quick, and they are 
directed at Ms. Montgomery and Mr. Smith. Has the FPS helped to 
place you and your colleagues with other companies or in other 
roles as a result of this?
    Ms. Montgomery. Well, starting June 4th, I believe it was, 
we have a company called Frontier that has taken over the 
contract temporarily, until October, the beginning of October, 
when STARTECH would have had to give up the contracts.
    Mr. Graves. So they basically just picked right up. Did 
they pretty well hire everybody? Did they just pick everything 
right up as far as the employees, the guards, the folks that 
are doing the work?
    Ms. Montgomery. Yes, sir.
    Mr. Graves. How about the union? Mr. Carney, you might be 
able to answer this, about back benefits, back pay, that sort 
of thing. Are you guys helping them with that or is there an 
opportunity to?
    Mr. Carney. Here is where that process is at. The 
Department of Labor has seized the final payroll. Not payroll, 
invoices to STARTECH. So there is money there to be had to get 
these guys paid. At UGSOA we have been through this many times 
with these contractors; that is part of the stuff I want to 
give to the Committee. I have already given it in part to the 
Chairwoman. So the money is there to be had. If he were to file 
for bankruptcy, my experience in the Sooner Process and 
Investigation case that happened, I would say 2001, 2002, 
payroll moves right to the top of the list in a bankruptcy 
proceeding, so we are going to get paid first. The problem is 
it just takes so long. The guys down in Tampa that I gave 
testimony about, those guys didn't get paid until just this 
last payroll, I think, almost a year later. What the Department 
of Labor has to do is they have to go in, find out who is owed 
what. If they get the cooperation of STARTECH to work those 
payroll records, they can process it a lot faster. But the 
money has been seized, as I understand it; it is there to be 
had; it just needs to be delineated and disseminated.
    Mr. Graves. Thank you.
    Madam Chair?
    Ms. Norton. Thank you very much.
    Mr. Smith, I think you said you had to take a high interest 
loan when you weren't paid. Are you speaking of those pay-day 
loans?
    Mr. Smith. Yes, ma'am.
    Ms. Norton. Oh, my goodness. I hoped everyone who is a 
Federal employee belonged to a credit union. You know, we now 
have citywide and county-wide credit unions because of the 
terrible interest for the pay-day loans, and there ought to be 
other ways to deal with this.
    Did either of the unions contribute in any way to the 
hardship these employees encountered?
    Mr. Faye. In the case of our union, the system is somewhat 
difficult to utilize in terms of time, because it has to be put 
through the executive board, and then after they meet they will 
then pass it through membership at large before it gets 
approved.
    Ms. Norton. Say that again, I am sorry. They have to do 
what?
    Mr. Faye. This is coming to helping the membership 
financially, but the turnaround is too long, because you have 
got to go through the executive board members first.
    Ms. Norton. So there is no fund. There is no fund out of 
which----
    Mr. Faye. Exactly.
    Mr. Carney. I believe what he is trying to say is the IRS 
prohibits cash disbursements from union treasuries, it is an 
IRS regulation, you can't do that. So now you might ask 
yourself why do strikers get a strike fee or something.
    Ms. Norton. Strike fund.
    Mr. Carney. That is because that is already written into 
our constitution. What he is describing is we would have to go 
back, amend our constitutions, amend our bylaws to do a cash 
disbursement, which, in a union, being a bureaucratic 
structure, it is a process you have to go through. So the 
immediate payment to these guys is not there. The second thing, 
most importantly, is he has our money. You know, what money do 
you hand out to the employees when they have been----
    Ms. Norton. It would have to be a preexisting fund, you are 
certainly right about that.
    Mr. Carney. That is the money we operate on as a union, and 
if we are not getting the dues deducted from the employees' 
paychecks routed to us, which has not been the case, and it is 
the same with UGSOA, as Mr. Faye testified for SPFPA, back to 
September. I mean, they owe us money, so that is the same money 
you are talking about where we would be able to help the 
employees.
    Mr. Faye. Right.
    Ms. Norton. You heard Mr. Faye rather extensively how much 
in liability and what the basis for that liability would be and 
how you calculate it. I wonder if you, Ms. Montgomery or you, 
Mr. Smith, can say how much, at least in compensation, you are 
still due from STARTECH. I am not referring to what Mr. Faye 
did, health benefits, union dues, and the rest, just in 
straight out pay, base pay. How much would you calculate you 
are still due for time worked but not paid?
    Mr. Smith. I am owed roughly about $4,000.
    Ms. Norton. And you have not received any of that?
    Mr. Smith. No, I have not.
    Ms. Norton. Ms. Montgomery?
    Ms. Montgomery. I want to include June 15th as well, 
because we worked through the 30th for STARTECH, so we should 
have been expecting a check on the 15th of June. So I think I 
would take that about $2,000 more than what Mr. Smith is 
saying.
    Ms. Norton. So Mr. Smith would have to add $2,000.
    Ms. Montgomery. He would need to add $2,000, so that is 
roughly, maybe, before tax, about $6,000.
    Ms. Norton. I just asked staff about the Labor Department 
involvement. I understand that takes a whole year. They have to 
figure out who is involved. Meanwhile, there is no cash that 
flows to people who are unpaid.
    Mr. Carney. If I might add, when they settle those things, 
that is just for payroll; they don't cover the interest loans. 
You are not going to get a payback on that as a security 
officer.
    Ms. Norton. Do they cover the past compensation?
    Mr. Carney. Payroll.
    Ms. Norton. Yes, payroll.
    Mr. Carney. The benefits----
    Ms. Norton. Including benefits, do they cover?
    Mr. Carney. Health benefits and those things, we have never 
been able to recover those in our experiences, even in the 
bankruptcy courts.
    Ms. Norton. So you are saying that these employees who have 
lost how many weeks of pay, approximately?
    Mr. Carney. Six.
    Ms. Norton. About six weeks of pay. That would mean six 
weeks worth of health benefits, pension benefits----
    Mr. Carney. Pensions you might as well forget about; they 
are gone. If they had money going in----
    Ms. Norton. That is gone from their pensions.
    Mr. Carney. In the Sooner Process and Investigation case 
where he went to default, Larry Ferguson, we went to the 
bankruptcy court. We got our payroll, but we didn't get 
anything else; and we had money that was supposedly going into 
401(k)s and things like that.
    Ms. Norton. So are you on the Federal, the same one I am 
on, the FEBPC? Are these employees covered by the FEBPC, the 
Federal employees, or are they privately covered?
    Mr. Carney. No, since they are private contracts, the 
contractor set up the benefit plan.
    Ms. Norton. So they can't even buy into our Federal health 
insurance.
    Mr. Carney. No, no. That is the benefit the Government gets 
from contracting out, is we don't get the same benefits you do.
    Ms. Norton. I am not talking about the benefit now. I am 
just saying they can't even buy into the Federal Employee 
Benefit Plan. They have to have a private plan outside of that.
    Mr. Carney. That is correct.
    Ms. Norton. Ms. Montgomery, you had a comment on that?
    Ms. Montgomery. Madam Chairman, I was going to say we would 
love that, though.
    [Laughter.]
    Ms. Norton. Yes, we do need universal health care, don't 
we? We certainly now see what happens.
    Let me just ask what health care plan are you part of? Are 
you part of a health care plan? Is it a union provided health 
care plan?
    Mr. Faye. No. Mr. Waites wanted to provide his own plan, 
and----
    Ms. Norton. Oh, heaven help us.
    Mr. Faye. Right. And in this case he offered a substantial 
increase on the wages, and that was quite attractive and the 
membership, you know, liked it; they said, okay, well, in this 
case at least our wages are good, they are high enough. In some 
cases the wages were bumped from 15 and change to $20 so that 
he could just run the health and welfare. In doing so, he went 
and got a mini plan and people were rejected at the doctor's 
office. All kinds of problems occurred and eventually he just 
gave it up. In the following collective bargaining agreement 
that we negotiated, he gave it up and the money now was to be 
disbursed back as cash to the employees' paychecks and there 
would be no plan. Then they would go and shop for their own 
coverage.
    Ms. Norton. Oh, goodness.
    Mr. Faye. But even that he didn't make good.
    Ms. Norton. But even that he didn't make good, because he 
would have had to put that money back in to their pay.
    Mr. Faye. Exactly.
    Ms. Norton. In other words, these employees are not covered 
by a plan, a health care plan, but must seek in the private 
market?
    Mr. Faye. Yes, with cash.
    Mr. Carney. Madam Chairwoman?
    Ms. Norton. As individuals?
    Mr. Faye. Yes.
    Mr. Carney. Madam Chairwoman, that is one of the bigger 
problems we are seeing. At the tail-end of my testimony I 
talked about the differences between the small contractors 
versus the large contractors. The larger contractors, they 
still have problems with their benefit programs, but, by and 
large, they can operate, understand, and manage those plans in 
the administration of getting employees into them.
    Ms. Norton. Do you have health insurance coverage? Do 
either of you have health insurance coverage now?
    Ms. Montgomery. No, ma'am.
    Mr. Smith. We thought we had a plan, but it was ineffective 
since the commencement of it, and the money that was allotted 
by the Federal Government to cover the plan is in question now.
    Ms. Norton. Well, if all that happened was you were 
remitted a sum to try to fish for yourself in the private 
market, you can get individual plans, and that is exactly why 
nobody does it, because almost nobody can afford to do it that 
way. This is a very serious issue. Frankly, this is a serious 
security issue.
    What is the turnover, Mr. Carney or Mr. Faye, among----
    Mr. Faye. Well, our ratio slowed down greatly because of 
the wages, but prior to that the turnover was quite high. But 
when the hourly rate became $20 and up, then it stabilized a 
little; there was less turnover than the year before.
    Mr. Carney. I concur. In my experience in other contracts 
around the United States, when you finally get a livable wage 
on the contract negotiated over a period of time, the turnover 
rate goes down.
    Ms. Norton. Well, the wages here, is it like the average 
wage, about $20 an hour?
    Mr. Faye. No, about 16, 17.
    Ms. Norton. Now, that is undoubtedly because these 
employees are unionized or represented by a union. How typical 
is this wage level in the industry?
    Mr. Carney. Oh, it is all over the board. I have argued 
these wage variance cases. In Houston, Texas, where they have a 
low cost of living, they are making $18.50 an hour. By 
comparison, I am arguing a case right now that is going before 
the Department of Labor where NASA security officers, who do 
predominantly the same thing, are getting 18 bucks an hour, but 
at an extraordinarily higher cost of living in San Francisco 
area of California. So you have to kind of weigh it against the 
cost of living for the locality. But, by and large, they are 
all over the board. I have met with the Department of Labor's 
Bill Gross, who proscribes these wage determinations and they 
are high and low all over the place. You can have a high cost 
of living locality with a low wage and a low cost of living 
locality with a high wage. There is seemingly no rhyme or 
reason.
    But the thing about unions who negotiate on these contracts 
is we bring that into parity, and in my testimony that is what 
I was talking about; we have a positive effect which brings the 
overtime down, brings the turnover rates down, improves morale, 
and I could go into a dissertation about how morale affects 
security.
    Ms. Norton. Well, we could see the effect of good morale, 
given what has happened to these employees and their remaining 
on the job.
    Mr. Carney.
    Mr. Carney of Pennsylvania. Thank you, Madam Chairman. I 
just have a couple questions.
    Mr. Carney, I want to congratulate you on your name. It is 
a fine name.
    Mr. Carney. My namesake.
    Mr. Carney of Pennsylvania. How many private security 
contractors are there in the U.S. approximately, do you know?
    Mr. Carney. I would say we deal with--on Federal contracts?
    Mr. Carney of Pennsylvania. Just industry-wide. How many, 
roughly, do we have?
    Mr. Carney. Between private and Federal security 
contractors, I would guesstimate 150.
    Mr. Carney of Pennsylvania. A hundred and fifty. Okay. How 
many STARTECHs do we have out there?
    Mr. Carney. Right now, you have got about five STARTECHs 
operating on Federal contracts, and potential STARTECHs.
    Mr. Carney of Pennsylvania. Okay. Right now. Were there 
more, have there been more in the past?
    Mr. Carney. Yes. In my testimony, if you look at it, I 
worked as a security officer in 19----
    Mr. Carney of Pennsylvania. I will read your support. We 
submit it for the record.
    Mr. Carney. In the past there was ELA, who I worked for in 
Denver, Colorado, when I was a security officer on a Federal 
contract. Then you had Sooner Process and Investigation. We had 
STARTECH, Superior. There are a few that probably slip my mind, 
the actual name of the companies, but there are plenty out 
there that have defaulted.
    Mr. Carney of Pennsylvania. So out of the roughly 150 or 
so, 20, you would estimate, are of STARTECH caliber? Or have 
STARTECH problems, put it that way.
    Mr. Carney. It is hard to estimate because your question 
was, in the broader security industry, how many contractors are 
out there.
    Mr. Carney of Pennsylvania. Right.
    Mr. Carney. The Federal Government has given preference----
    Mr. Carney of Pennsylvania. Let me ask it this way.
    Mr. Carney. Okay.
    Mr. Carney of Pennsylvania. If you know, if you can 
estimate, even roughly, what percentage in the industry have 
problems like STARTECH has had?
    Mr. Carney. Twenty percent. But I would say one percent 
would even be too high if they are bidding Federal contracts 
and operating them.
    Mr. Carney of Pennsylvania. Yes, I agree. I agree. The 
average wage, what is the average wage, starting wage of a 
security guard?
    Mr. Carney. The averages are impossible to tell you because 
it is all weighted by locality and how the Federal Government 
is proscribing their wage determinations. It is kind of like 
spinning the roulette wheel; it is all over the board. And that 
is one of the things UGSOA is trying to do, we are trying to 
bring parity to the industry. The average wage, I would say, if 
I was going to throw out a guess, on a Federal contract for 
security officer classification, between $13 and $16 an hour.
    Mr. Carney of Pennsylvania. That would be about a 
nationwide average, you would say?
    Mr. Carney. Yes.
    Mr. Carney of Pennsylvania. Okay.
    Mr. Carney. It is really wide open.
    Mr. Carney of Pennsylvania. And how long does it take to 
have raises go into effect? I mean, you are with a job three 
years. What can you expect in terms of pay?
    Mr. Carney. Our raises are negotiated usually on an annual 
basis. Some of our collective bargaining agreements are 
structured based on your tenure. If you are a three-year 
security officer, you could get X amount of dollars more than a 
new hire. But, by and large, once you walk onto these 
contracts, you go through the certifications and 
qualifications, you are going to make the same as the guy who 
has been there a long time. We are trying to work a lot of that 
out in our negotiations, but it is something you can't do in 
one collective bargaining session.
    Mr. Carney of Pennsylvania. No, I understand about salary 
compression and things of that nature.
    I do want to get back to something you just mentioned. Can 
you please describe the training process that the security 
guards go through, that your members go through?
    Mr. Carney. It usually starts with being hired. There is an 
extensive background check.
    Mr. Carney of Pennsylvania. The background check is part of 
the pre-hiring?
    Mr. Carney. Usually. At some phase in the two or three 
weeks that you go through training there is the background 
check. For the guys here in D.C., they have to get certain 
clearance paperwork, so then they have to wait on the clearance 
paperwork, and there is a backlog of those, we are hearing from 
one contractor right now. So it ranges from two weeks in 
regions where they are really on the ball. Regions of FPS, 
where they can get the guy's background, get him what is called 
an interim suitability clearance, you are looking at anywhere 
from two weeks to, on the high end, maybe six to eight months, 
I have heard.
    Mr. Carney of Pennsylvania. How many--I guess for lack of a 
better phrase--uncleared personnel are on the job?
    Mr. Carney. You mean with interim suitabilities? I don't 
know that number.
    Mr. Carney of Pennsylvania. Okay. So the training, then, 
involves what?
    Mr. Carney. You go through these Federal contracts line out 
about an 80-hour course that you have to go through. On average 
it is about 80 hours. Some of that time is spent with a 
contract trainer; some of that time is spent with a Government 
employee who is a specialist for that contract who trains you. 
But there is a grand total, on the average, about 80 hours of 
training, which includes your firearms qualification, what your 
authorities are, what our jurisdictions are, because we operate 
on partial, exclusive, and concurrent jurisdictions. So if you 
walk off the corner of the street to grab somebody who is 
trying to escape, you have got to know what jurisdiction you 
are in. So you have got to really understand all those 
dynamics. So they spend a lot of time on that; they spend a lot 
of time on report writing.
    Then you have to go through breakout training that is even 
more specific. You have to learn to run an x-ray machine and 
magnetometer, which are on the high end of industry right now. 
These things are highly technical; they can differentiate 
between organic and inorganic materials, and you have got to be 
able to go through that. You have to go through a simulated 
training course that brings bombs and stuff through so that you 
understand what you are looking for before you ever are on the 
line.
    I could go on.
    Mr. Carney of Pennsylvania. Sure.
    Mr. Carney. That gives you kind of a snapshot of the 
intensity of the training.
    Mr. Carney of Pennsylvania. Typically, who provides this 
training, is it the employer?
    Mr. Carney. Like I said, the employer in concert with 
usually a Government official at various stages. Some of it is 
layered so that you get it twice.
    Mr. Carney of Pennsylvania. All right. And what is the cost 
per person for the training, do you know?
    Mr. Carney. I have actually done some cost overruns when we 
were addressing turnover rates in collective bargaining, and we 
have seen costs to hire an employee, again, depending on 
region, somewhere between $3500 to $6,000 per employee to put 
them through this training.
    Mr. Carney of Pennsylvania. To go through the 80 hour 
course.
    Mr. Carney. Yes. When you factor in--there are a lot of 
things that factor into that.
    Mr. Carney of Pennsylvania. Sure. I appreciate that.
    Okay, I seem my time has already expired. I apologize. I do 
want to personally thank each one of you who stayed on the job 
even though the check wasn't coming. It speaks of your 
character and your dedication to this Nation, and my personal 
thanks to all of you.
    Mr. Smith, Ms. Montgomery, thank you very much. 
Congratulations on your degree. I look forward to you getting 
the diploma and moving on. I appreciate that.
    No further questions, ma'am. I yield back.
    Ms. Norton. Thank you for your questions, Mr. Carney.
    I am going to finish this hearing before 2:00. We have gone 
on for some time. But I do want to say this hearing is laying 
the groundwork for legislation that we regard as important. 
This is not an oversight hearing, this is an investigative 
hearing, trying to get to the bottom of a situation so we can 
do something about it.
    I only have a couple more questions, then I have an 
important announcement.
    One of you testified--it may have been Ms. Montgomery or it 
may have been Mr. Smith--that the FPS--I think it was Ms. 
Montgomery--came without warning to check into this situation. 
How often did they come? I mean, this led you to say so where 
is the Federal Government in all of this. How often did they 
come. Did FPS know? Did anyone from FPS communicate with you 
concerning the failure to pay you? Either of you. Did either of 
you hear from the Federal Protective Service or from anybody in 
the Federal Government?
    Ms. Montgomery. No. We actually didn't. When I was saying--
--
    Ms. Norton. Yet Federal Protective Service officers came to 
monitor you how often?
    Ms. Montgomery. Everyday. It could be an everyday thing----
    Ms. Norton. Well, what did they do in monitoring you? What 
did they do?
    Ms. Montgomery. They may come and just monitor your actions 
as far as dealing with the clients, the employees and such, and 
they would check your credentials to make sure that they are 
valid and that you have everything that you need.
    Ms. Norton. Did they know that you are not being paid? Did 
the people who were monitoring you on a daily basis know that 
you were receiving no pay?
    Ms. Montgomery. Well, towards the end, when most people 
were getting kind of fed up, you don't directly approach them. 
It is almost like a secret society.
    Ms. Norton. Like a what?
    Ms. Montgomery. A secret society, because you can't really 
approach FPS officers. As far as the contracting officer who 
handles the accounts, it is like that person is a secret, you 
can't know, as contract guards. It is like you are at a certain 
level and you can't go above that. Anything that you have to 
deal with or that you need to know or want to know, you would 
have to go through your project manager or the front office, 
and sometimes we----
    Ms. Norton. If they are checking your badge up close and 
personal, is that what it is, they come and check your badge?
    Ms. Montgomery. Yes.
    Mr. Carney. They are there to check their credentials. They 
are there to check and make sure that the security mission is 
being accomplished, which is important. But when you address 
labor issues--I think they ought to take back to the 
contracting officer. When you address labor issues with them, 
though, a lot of times you are labeled as a crybaby and those 
types of things.
    Ms. Norton. Even if you were to mention to an FPS monitor 
that you had received no pay for weeks, that would not be 
considered appropriate?
    Mr. Carney. This one would be the exception. Somebody would 
have to stand up and take notice.
    Ms. Norton. What would be the exception, please?
    Mr. Carney. Where you don't get paid, something so 
egregious as not getting paid. But I am talking about on the 
other matters, like I didn't get my training or things like 
that. You will get disciplined by the contractor for going 
outside your chain of command.
    Ms. Norton. Well, I understand that and I understand how 
the system works, and I wouldn't want to suggest that the 
monitors are there to hear the grievances of the officers.
    Mr. Carney. Right.
    Ms. Norton. I am trying now to find out whether or not, in 
the normal course of monitoring, it ever came to the attention 
of these FPS monitors that people weren't being paid; and 
should it have. I mean, I can understand how an officer----
    Mr. Carney. I can testify about----
    Ms. Norton.--like Ms. Montgomery would be reluctant.
    Mr. Carney. I can testify about the Superior officers in 
Tampa last year. FPS knew through the whole process, I mean, 
they told the two or three main guys down there this is what is 
going on every week. I don't know what their responses were, 
but----
    Ms. Norton. So FPS officers did communicate, at least in 
Tampa, that there was no payment going to the officers on the 
job, but FPS did not respond for two months.
    Mr. Carney. They communicated with us that they were aware 
of it, yes, to the security officers.
    Ms. Norton. Basically, because these officers happen to be 
unionized, the normal course would be to inform your union, and 
perhaps the union could do what you did, which is to try to get 
somebody to listen. Did you ever speak to anybody at the FPS?
    Mr. Carney. Yes, I did. In Tampa, I was on the phone with 
FPS regional contacts out of Atlanta at every step of the way. 
Like I said, I went six weeks into the fiasco of trying to work 
the system before I gave up on the system. The only time 
anybody stood up to take notice is when I gave my intention I 
am flying to Tampa and I am going to go to the Federal building 
and we are going to walk out and take picket signs up. That is 
the only time we ever get any attention to this thing.
    Ms. Norton. Well, what would FPS tell you? Were you in 
touch with FPS here during this three or four or six week, or 
whatever, period it was concerning the failure of the 
contractor to pay the guards?
    Mr. Carney. I am sure they were. I know I was. I mean, we 
sent our letters to the Department of Agriculture, unanswered. 
I think you were cc'd on those letters. I reached out to----
    Ms. Norton. Mr. Faye?
    Mr. Faye. Well, the only time I came in contact with FPS is 
when they called me and asked me how far this issue has gotten.
    Ms. Norton. When was that?
    Mr. Faye. In the past week or so I received about three FPS 
calls.
    Ms. Norton. In the past week or so?
    Mr. Faye. Yes.
    Ms. Norton. After this thing blew up.
    Mr. Faye. Exactly. However----
    Ms. Norton. Well, during the time when people were not 
receiving their pay, although FPS was on the job monitoring 
people, they had no particular knowledge of what was happening; 
their job was to see if people were on the job, and there was 
no indication that FPS had any concern about the failure to pay 
these men and women?
    Mr. Faye. They reacted to the complaints that our union 
filed, because they had my name and they called me and said FPS 
has filed complaints against Weldon Waites and somebody else 
will call you; we are going to pursue this investigation. But 
during the week in question when they were afraid of the guards 
walking off posts, FPS showed up at various locations to make 
sure that the guards were on post. So they came early to 
replace them if they didn't come to work.
    There was also another instance where I believe this 
company----
    Ms. Norton. So they were prepared to replace them if they 
walked off the job,----
    Mr. Faye. Exactly.
    Ms. Norton.--knowing that people could only go so long----
    Mr. Faye. So long.
    Ms. Norton.--without being paid.
    Mr. Faye. Right.
    Ms. Norton. But you know of no intervention by the FPS to 
make sure people were paid----
    Mr. Faye. To get them paid.
    Ms. Norton.--to remain on the job.
    Mr. Faye. No. No. They even brought this other company 
name----
    Ms. Norton. Now, we are going to be told that is because 
they were contract employees, and you know what we are going to 
tell them here? That somebody, we thought it was the FPS, has 
to act like a police force----
    Mr. Faye. Right.
    Ms. Norton.--who is in charge of your men and women no 
matter who--has to act like a cop.
    Mr. Faye. Exactly. And they brought the Decor Company--and 
most of Decor employees watch parking lots; they are not as 
graduates as our----
    Ms. Norton. I have got to move on, that is why I am not 
able to hear the most complete answer.
    Did the FPS ever call you in as union representatives 
since, in fact, they had the advantage of having somebody who 
represented all the employees, and say, look, tell me what you 
know; this is what we know; this is what we are doing? Was 
there any discussion of that kind from the FPS, who could 
easily have had Federal police, FPS officers there instead of 
security guards, since you were doing the same kinds of things 
that the FPS does? Any kind of conversations of that kind going 
on? Were any of those conversations initiated by the FPS? Did 
conversations have to be initiated by you? Could you answer 
those questions directly?
    Mr. Faye. Well, the director of security at the FOB6, her 
name is Wynona--now, I don't know how affiliated she is with 
FPS, but to her credit, she called me and we had about a half 
an hour conversation on the phone with two other--well, they 
were part of----
    Ms. Norton. This was during the six week period?
    Mr. Faye. Right, during. And I think this happened about 
maybe three weeks ago. And when she came across all my letters 
and all the actions that our union was taking, she says, well, 
I have somebody here from your membership who is not aware of 
what was going on, and I think Mr. MacMillan, if he is still in 
the audience, was also part of the conversations. He said, 
well, I don't know what the union is doing. So I showed him 
that we had a petition going on with over 100 signatures and 
that we initiated this whole thing right after it happened, and 
told him how far we had gone.
    So Ms. Wynona, to her credit, then wrote a letter out to 
people and thanked them for not walking off the posts, for 
continuing to go to work, and that this matter is going to 
continue to be investigated.
    Ms. Norton. Who sent the letter? I am sorry.
    Mr. Faye. Ms. Wynona. I only remember Wynona. MacMillan. 
Actually, he was part of the conversation.
    Unidentified Speaker. Department of Education.
    Mr. Faye. Probably, yes.
    Ms. Norton. Oh, this was some agency, someone in the 
agency, not the FPS. So the agency was grateful that it was 
being covered during the time----
    Mr. Faye. Exactly.
    Ms. Norton.--even though the agency had no responsibility 
for providing the guards.
    Mr. Carney. Madam Chairwoman?
    Ms. Norton. Yes.
    Mr. Carney. We are saying a lot what is FPS doing. There 
are layers to the whole thing.
    Ms. Norton. We are aware of that.
    Mr. Carney. And I am just saying I believe it is the 
responsibility, in these types of incidents, of the contracting 
officials, the CO and the COR, to reach out to the union. But 
to answer your question----
    Ms. Norton. The contracting official works for the FPS, for 
ICE, and for DHS.
    Mr. Carney. Correct.
    Ms. Norton. We are not in here getting into the innards of 
the bureaucracy.
    Mr. Carney. No.
    Ms. Norton. We are treating this as a police matter.
    Mr. Carney. Yes, ma'am.
    Ms. Norton. We are treating this as a security matter. We 
don't care who it is supposed to be.
    Mr. Carney. No.
    Ms. Norton. All we know is--I understand what you are 
saying, Mr. Carney.
    Mr. Carney. Okay, thank you.
    Ms. Norton. This is what the concern that the Ranking 
Member indicated. This is the concern of this Chairman, that if 
these people are there for a purpose, to protect us from 
terrorism and from criminals, if they are not there, we are 
unprotected.
    Mr. Faye. That is right.
    Ms. Norton. It is as clear as that. If we don't know if 
they will be there because they are not paid, we have no 
assurance we will be protected.
    Mr. Faye. Right.
    Ms. Norton. My concern is that when somebody has a police 
force, he doesn't say, let me see, who do you report to, 
whether you are contract or not; he acts like he has got a 
police force, and treats everyone as if they are doing the same 
police duties, because guess what; your guards, your security 
guards were doing the exact same duties as FPS officers were 
doing.
    So we are very concerned because these people were 
transferred, transferred to the Department of Homeland Security 
post-9/11 to provide better protection. So when we find that 
there may not be good protection, 9/11 seems to have done us no 
favors in terms of making sure that we are protecting Federal 
employees. It is a matter of great concern to me because I am 
not only a Member of this Committee, I am a Member of the 
Homeland Security Committee, and I represent the nation's 
capital.
    I thank you all for coming. We are going to have to call 
the final witnesses. They are very important to hear from and 
they are Inspector General Richard Skinner, Department of 
Homeland Security; the Director of the Federal Protective 
Service, Gary Schenkel; and the Director of the Acquisition 
Policy and Oversight for ICE. If you would come forward 
quickly.
    Much has been said about Mr. Waites, who is directly 
responsible, but there has been testimony here, obviously, 
concerning the Government, who is primarily responsible 
whenever we are talking about the security of Federal 
employees.
    I am going to ask for you to summarize your testimony, each 
of you, in five minutes. That is what we usually do. Because 
this is an investigative hearing, we have let it go on for much 
longer than that, because we wanted to hear as many facts as 
understood by all sides. We want to make sure that we give you 
a fair opportunity as well, so your testimony will be in the 
record and you can submit any other remarks afterwards. I will 
leave the record open for 30 days.
    I am going to ask Mr. Skinner to summarize his remarks 
first.

   TESTIMONY OF THE HONORABLE RICHARD L. SKINNER, INSPECTOR 
    GENERAL, U.S. DEPARTMENT OF HOMELAND SECURITY; GARY W. 
SCHENKEL, DIRECTOR, FEDERAL PROTECTIVE SERVICE, U.S. DEPARTMENT 
  OF HOMELAND SECURITY; ASHLEY J. LEWIS, DIRECTOR, OFFICE OF 
ACQUISITION POLICY AND OVERSIGHT, U.S. IMMIGRATION AND CUSTOMS 
       ENFORCEMENT, U.S. DEPARTMENT OF HOMELAND SECURITY

    Mr. Skinner. Thank you, Madam Chair.
    Ms. Norton. Oh, excuse me. I have to swear all three of you 
in.
    Would you please stand and raise your right hand? Do you 
swear that the testimony you are about to give is the whole 
truth and nothing but the truth, so help you God?
    [Witnesses answer in the affirmative.]
    Ms. Norton. Let the record show that all three answered in 
the affirmative.
    And we will begin with Mr. Skinner.
    Mr. Skinner. Thank you, Madam Chair. It is a pleasure to be 
here today. My testimony today will focus on the Federal 
Protective Service's oversight of its contract guard program, 
payments to contract guard programs, and budget shortfalls and 
progress to date to improve contract and financial management.
    Before I begin, however, I would like to preface my 
statement by saying I believe this is very important to 
understand. When DHS was stood up in March 2003, it was 
shortchanged. That is, on one side of the ledger it acquired 
entire operational assets and programs of 22 disparate 
agencies. Yet, on the other side of the ledger it did not 
acquire proportionate share of the management support assets, 
such as procurement and financial specialists, to support these 
programs and operations. This is most evident with the transfer 
of the Federal Protective Service from GSA to DHS.
    Contract guard services represent the single largest item 
in the FPS operating budget, estimated to be $577 million for 
fiscal year 2007. FPS has become increasingly reliant on its 
contract guard force, having less than 1,000 uniformed FPS 
officers nationwide. The contract guard workforce now numbers 
around 15,000, as you heard earlier today.
    FPS's financial and procurement problems are longstanding. 
Prior to its transfer to DHS in 2003, GSA Inspector General and 
GAO reports repeatedly noted deficiencies with the guard 
contracts. In 2006, we too reported contract management 
problems. We audit FPS oversight of guard contracts in the 
National Capital Region, which, at the time of our audit, 
consisted of 54 contracts that provided about 5,700 guards to 
protect 125 buildings.
    We determined that FPS was not consistently deploying 
qualified and certified contract guards. Guards were not on 
post, were on post without current suitability determinations 
or with expired certifications. Thirty percent of the guards in 
our sample had at least one expired, but required, 
certification. For example, FPS employed guards with expired 
background investigations, medical certifications, and expired 
domestic violence certifications. In one instance, a guard was 
still on post seven months after being found unsuitable due to 
a felony assault conviction.
    Security guards were not armed at posts where they should 
have been. Conversely, they were armed at posts where they 
should not have been. Guards did not have security clearances, 
and non-citizen guards did not always carry the required work 
permits.
    We concluded that these deficiencies occurred because FPS 
was not equipped to effectively monitor contract performance. 
While contractors have the primary responsibility for assuring 
that all contract provisions are met, FPS too has the 
responsibility for validating whether or not contractors are 
complying with the explicit terms and conditions of the 
contract. Providing inadequate contract oversight can result in 
the Government paying for services it did not receive and 
placing FPS-protected facilities, employees, and visitors at 
risk.
    We also reported that FPS was not paying invoices for its 
contract guard services in a timely manner. Of the more than 
25,000 invoices paid nationwide from October 1st, 2004 to 
November 21st, 2005, 88 percent were not paid within 30 days, 
as required by the Prompt Payment Act. As a result, FPS paid 
more than $1.2 million in interest penalties to guard 
companies.
    We attributed this problem to the ill-planned transition of 
the guard contract program from GSA to DHS. ICE's financial 
management system simply was not capable of processing the 
thousands of invoices submitted by contractors each month. To 
compound the problem, FPS staff were not adequately trained 
prior to the transition--this is in 2003--to navigate ICE's 
financial management system.
    With regard to recent budget shortfalls, we learned that 
funding issues had been a problem that has plagued FPS for 
years, again, prior to its transfer to the Department of 
Homeland Security. GAO reported that the security fees 
collected by GSA were not sufficient to cover the cost of FPS 
operations, and that the deficits were covered by GSA using 
monies from its Federal Building Fund. This problem was 
compounded when FPS moved to DHS. Not only was DHS not 
financially prepared to subsidize FPS operations, but, also, 
GSA was now charging DHS for the space that FPS occupies 
throughout the Country.
    I will conclude by saying ICE's senior officers are well 
aware of these issues and are in fact taking some bold steps to 
resolve them. For example, FPS is creating a centralized 
procurement organization, increasing the number of procurement 
staff, and creating standard operating procedures in an effort 
to improve its management and oversight of its guard contracts; 
it has made improvements to its invoice payment procedures and 
systems, ensuring that contractor payments are made in a timely 
manner; and it proposes to reallocate its manpower according to 
a risk-based approach to securing Government buildings, which 
will result in an overall reduction in manpower and therefore 
resolving its financial difficulties.
    We are encouraged that ICE recognizes these problems and is 
beginning to take aggressive action to address them. When fully 
implemented, it appears that they could mitigate many of the 
problems that FPS is now experiencing. Nevertheless, we must 
keep in mind that these changes are in their infant stages. A 
lot can go wrong before they are fully implemented. 
Accordingly, my office remains committed to overseeing these 
and other financial and contract management challenges 
confronting ICE. We plan to work closely with ICE management in 
the months and years ahead to promote the economy, efficiency, 
and effectiveness of FPS's programs and operations.
    Madam Chair, that concludes my remarks. I would be happy to 
answer any questions.
    Ms. Norton. Thank you, Mr. Skinner.
    Mr. Schenkel.
    Mr. Schenkel. Chairwoman Norton, thank you for this 
opportunity to appear before you today to discuss the Federal 
Protective Service responsibility to ensure that contract 
guards protect Federal employees and their workplace, along 
with FPS's response to a recent situation within the National 
Capital Region regarding the contract security guard company 
STARTECH.
    The contract guard program is a critical mission 
requirement of the Federal Protective Service. Approximately 
15,000 contract security guards stand post protecting Federal 
facilities under the direction of----
    Ms. Norton. Mr. Schenkel, could you please, in light of the 
time, summarize the meat of your testimony, particularly as it 
pertains to the situation at STARTECH and to any ongoing 
difficulties you still perceive in the contracting operation, 
because we are going to have to leave here before 2:00.
    Mr. Schenkel. Well, let me just offer my personal apologies 
for not contacting you in the appropriate time manner. I did 
not know of that requirement. I will endeavor to ensure that 
you are made aware of any kind of situations like STARTECH 
again, and I am prepared to answer any questions that you have.
    Ms. Norton. Thank you, Mr. Schenkel.
    Ms. Lewis, could I ask you to please summarize what you 
have to say so we can ask questions because of the time problem 
and the prior witnesses?
    Ms. Lewis. Certainly. Thank you for the opportunity to 
appear today.
    As the head of the contracting activity for ICE, I have the 
overall responsibility for managing the contracting activities 
within ICE, including FPS. I have been with ICE about 14 
months, and since my arrival, improving the quality and 
effectiveness of FPS contracting operations has been a top 
priority for me.
    The assistant secretary and other ICE senior leaders----
    Ms. Norton. Ms. Lewis, would you summarize the part of your 
testimony, because of the time frame and because we would like 
to ask some questions, having to do with this situation and 
with contracting, in particular, of FPS officers?
    Ms. Lewis. Okay. With respect to the work done by our 
contract guards, we will work diligently to ensure that they 
are paid in a timely manner and in accordance with the Service 
Contract Act and the terms of the contract. I know recent 
events have raised concerns about the financial stability of 
our contract guard companies and their ability to perform and 
to pay their employees. In conjunction with your staff, we are 
researching methods to strengthen our ability to determine if a 
company may be in jeopardy. We are considering additional 
safeguards, including requiring our contractors to notify us 
when corporate officers change and having the company re-
certify regarding past criminal activities of any new corporate 
officer; requiring notifications if payrolls are missed or if 
there is a material change in the company's financial 
situation; and including, in our newly issued FPS Contracting 
Officers Technical Representatives Guide, the requirement for 
inspectors to closely monitor and communicate with company 
representatives any allegations of missed payrolls or similar 
allegations, and to promptly report these allegations to the 
responsible contracting officer.
    Finally, I do want to inform you that over the last year we 
have been establishing contingency guard contracts to provide 
emergency services in the event of a natural disaster or in the 
event one of our contractors cannot satisfy the terms of the 
contract. We hope to have these contingency contracts in place 
within the next few months.
    I would be happy to answer any questions you may have.
    Ms. Norton. Thank you very much. And, again, I apologize 
that we took so long with the prior witnesses, but, after all, 
that is what brought us here in the first place.
    Mr. Schenkel, on May 30th you told my staff that the 
STARTECH payroll from May 25th had bounced because--and here 
staff has taken this down--payroll funds were sent to the wrong 
bank. But the Committee found from STARTECH officers that this 
was not the case, that the payroll bounced because no funds 
were sent to any bank.
    Now, you are a party to the contract. Yet, my staff 
appeared to have more timely information than you did about 
this contract. Why is that? We understand that you monitor the 
people by going around and seeing if they have the proper 
credentials. How do you monitor the contract----
    Mr. Schenkel. Ma'am----
    Ms. Norton.--so that this kind of elementary information is 
made immediately known at the highest level?
    Mr. Schenkel. Yes, ma'am. We monitor on performance-base, 
and on the 26th of May, when we first heard rumors that there 
may be a problem with STARTECH, because that was the holiday 
weekend, it is difficult to monitor and determine whether or 
not the contract is truly being enacted to its full level of 
performance because of the diminished number of guard posts. 
So, consequently, on Tuesday, after the holiday, we started 
monitoring more effectively. We were able to start noticing 
numbers of guards on posts and started hearing complaints, or 
at least concerns would probably be the better term, concerns 
from the guards themselves, and we continued our investigation 
based on that.
    Ms. Norton. Did you take any action to intervene with 
STARTECH in particular?
    Mr. Schenkel. As far back as the Sunday, the 27th of May, 
that is where I got that information that we got from Mr. 
Gandy, who I believe was their Operations Officer, STARTECH's 
Operations Officer, who gave us the information that he knew 
that he had sent the money to the wrong account and, 
consequently, there was a mixup in the payroll and the guards 
weren't paid.
    Ms. Norton. Well, now, didn't you suspect that somebody 
giving you that kind of reason should give you pause, when 
somebody tells you, sorry, it went to the wrong account, that 
is why people aren't being paid?
    Ms. Lewis, you were the contracting officer. May 10th is 
when these employees, I understand, began not being paid. Did 
you inform anybody at FPS, at ICE, or at DHS about this 
situation? Because Mr. Schenkel says he learned weeks later, 
May 26th.
    Ms. Lewis. I did not become personally aware that there 
were any problems with STARTECH until approximately May 26th. I 
am not----
    Ms. Norton. Well, who in the world--here, we are giving out 
money, sending money, when you do it. Apparently, there are 
some issues with how rapidly people get paid, but that is the 
end of it?
    Ms. Lewis. I can only react to information that I have. If 
that information is not given to me, I can't----
    Ms. Norton. So there is no proactive monitoring of the kind 
that would alert you immediately if officers were not being 
paid.
    Ms. Lewis. Typically, what employees will do that are 
subject to the Service Contract Act, if they are not being 
paid, they will report it to two places: they will report it 
both to the Department of Labor, who has oversight for 
compliance with that particular law; and they will also report 
it to the----
    Ms. Norton. Mr. Schenkel, I understand what Ms. Lewis is 
saying, and she is speaking like a contract employee. You know, 
if somebody isn't getting paid, they say, hey, I am not getting 
paid. These are the functional equivalent of security officers 
charged with the highest level of police responsibility. Don't 
you think there should be some proactive monitoring to make 
sure that these employees are paid so that the posts are always 
covered?
    Mr. Schenkel. Absolutely. And I have the greatest respect 
for the contract security.
    Ms. Norton. But you told me, when I called you up 
personally, which is what led me to call, first, the 
Administrator, who happened to be out of the Country; then I 
called his Deputy. You told me that it was the contractor's 
responsibility, or words to that effect, sir. You told me that, 
leaving me in a state of high frustration that I was talking to 
somebody who didn't know what to do.
    Mr. Schenkel. Yes, ma'am. The contract states that the 
guards must be paid. The contract as to when they get paid is 
between the individual security guard and the contracting 
company. If they fail to pay the guards and we are notified, 
then we can act.
    Ms. Norton. I notified you, but others had notified you 
ahead of time, and you told me, I repeat, that you had done 
what you were supposed to do in having paid the company. And 
you left me with no remedy, Mr. Schenkel, which is one of the 
first reasons I knew I had to have a hearing. I then had to 
call Deputy Administrator Michael Jackson, who then called in 
ICE. You suggested to me no remedy. And, by the way, it is not 
a requirement that I be informed. I was the last resort. I was 
informed because nobody else in the agency had responded on 
this issue.
    You are not required to come to the oversight committee and 
say we have a problem, although it is good form that the 
oversight committee learn of it from the agency rather than 
from employees. But that is not a requirement. The requirement 
is to pay people and the requirement is to act like a police 
chief whose posts may be left uncovered and who will be held 
responsible. That may be somebody else's contract, but if those 
people walk off the job, nobody is going to hold the contractor 
directly responsible; they will hold the police chief 
responsible. Do you understand your job to be that of a police 
chief or do you think of yourself as some other kind of person?
    Mr. Schenkel. No, ma'am, I----
    Ms. Norton. Because you have not been a police chief 
before; you have not walked a beat before. You have not been an 
officer like the officers who you supervise.
    Mr. Schenkel. You are correct, ma'am, I am not a sworn 
officer, but I have law enforcement experience, yes, I do; and 
I have leadership experience, about 37 years of it.
    Ms. Norton. Mr. Schenkel, I just have to say to you that my 
disappointment was personally in you, because it seems to me 
the first thing a police chief does is to act very much like a 
police chief, and he knows that he has got to have everything 
covered; and if somebody tells him that part of his beat isn't 
being covered, he doesn't look to see who the contract is with. 
This was a serious security failing at the top, and you need to 
hear it from this Subcommittee.
    It was exasperating to call the police chief and have the 
police chief tell me he had done all he was supposed to do in 
paying the contract. It was a bureaucratic response; it was not 
the response of a security officer. It was a source of huge 
frustration to me and it caused me to lose real confidence in 
the FPS, because you are the people who supervise the guards. 
You are supposed to be the officers; you are supposed to be the 
people who know how cops are supposed to behave. And, yet, you 
did not behave as a police chief; you believed like a 
government bureaucrat who had let a contract and that was the 
end of it. You need to know just how serious a failing that 
was.
    I have to ask you, Mr. Skinner, you know that ICE is 
announcing plans to downsize very dramatically FPS, eliminating 
many police functions. Do you have any concern about FPS 
reducing its workforce and therefore impacting the kind of 
oversight that seems to be necessary of contracting in the 
Federal Government?
    Mr. Skinner. As part of their initiative, they are 
reorganizing their acquisition function, centralizing it, and 
at the same time actually adding additional resources. In my 
latest understanding, they are going to be adding anywhere from 
30 to 35 additional people into their acquisition----
    Ms. Norton. To do what?
    Mr. Skinner. To provide oversight monitoring of its----
    Ms. Norton. Contractors.
    Mr. Skinner.--its contractors, yes, ma'am.
    Ms. Norton. At the same time, of course, it is eliminating 
police officers, but I hear you. And I know some of this comes 
from appropriations.
    Mr. Skinner. That is correct.
    Ms. Norton. I am not blaming FPS for this at all. Nor am I 
blaming FPS for the shortfalls that you very rightly, very 
justifiably talked about, when FPS was subsidized through 
General Services Account. I would think that the Federal 
Protective Service or ICE or DHS would come forward with a 
recommended remedy for that, because that is a serious problem 
that Mr. Schenkel is left holding the bag for, Ms. Lewis is 
left holding the bag for, but can only be dealt with through 
some arrangement, some other kind of arrangement within the 
Federal Government or more funds. So we can continue to 
complain about that, but the failure of DHS to come forward 
with a remedy, to simply recite that that happened, is a 
failing, a security failing.
    I have to ask you, Mr. Skinner. You heard the small 
businessman complain here. Of course, he offloaded much of the 
responsibility onto the Federal Government, much more of the 
responsibility than he should have, but do you think that the 
way in which contracts are paid,--and you know the Federal 
Government, you know this part of the Federal Government--often 
late, in this case contributed to the downfall of STARTECH?
    Mr. Skinner. It is inexcusable. Any time something like 
this happens, both the contracting officer and the contracting 
technical rep should be right on top of it, and if they suspect 
any foul play, they should be bringing our office into it 
immediately so that we can review it.
    Ms. Norton. So you think this has got to be proactive, 
especially when it comes to security officers.
    Mr. Skinner. Especially when it comes to security officers. 
But, in any case, under any contractual arrangement, if the 
contractor is not fulfilling their legal obligations, and 
particularly not paying their staff.
    Ms. Norton. I am very concerned about expired 
certifications. We know that the Federal Government has its own 
certification program or requirement, quite apart from the 
State requirements. I must ask you both how can we have 
confidence that certified contract officers are in fact 
performing police duties in Federal buildings?
    Mr. Skinner. You cannot have confidence unless you have a 
very good enforcement program, a very good monitoring program. 
You must rely on the contractor to fulfill his fiduciary 
responsibilities and performance responsibilities within the 
terms and conditions of the grant on one hand. But, on the 
other hand, I think the Federal Government has an explicit 
responsibility to provide oversight and monitoring in a very 
proactive way; not reactive, but in a proactive, routine, 
disciplined way to ensure that people that we are employing, 
whether they are contractors or full-time employees, are 
fulfilling their duties and responsibilities.
    Ms. Norton. In this case, even the contract officer didn't 
know about the people not being paid. And, as you say, you 
would expect anybody not being paid could undermine the mission 
of the agency, but here, to undermine this mission is to do 
very serious damage, perhaps to us all.
    Let me ask you a question, Mr. Skinner, about the National 
Capital Region. Here is where al Qaeda central here, in this 
region and in this city. In this National Capital Region, where 
most of the Federal workforce is located, concentrated, the 
number of so-called mission support personnel appears to be 
targeted for reduction by more than 60 percent, from 33 
positions to 13. Overall, that would mean that the number of 
mission support personnel would be projected to decline by 15 
percent, from 244 to 205 positions. Do these reductions concern 
you in terms of security, for the National Capital Region in 
particular?
    Mr. Skinner. Madam Chair, we haven't had an opportunity to 
actually analyze those reductions in their totality because 
they may be reducing--everything is based on a risk-based 
approach----
    Ms. Norton. That is why I said mission support personnel.
    Mr. Skinner. In order for me to respond to that, I would 
have to take a look at the big picture to see----
    Ms. Norton. Would you take a look at these reductions and 
report to us in 30 days? In this region, we would just like to 
hear your unvarnished view of whether or not those reductions 
in this region, given what is located in this region, 
everything from the Supreme Court to very classified 
facilities, whether or not that is a prudent way to downsize.
    Do you believe the downsizing of the Federal Protective 
Service throughout the United States--I am not asking you for a 
budgetary opinion; I am asking you as the Inspector General--
and the growth of security guards relative to FPS is prudent in 
the post-9/11 period?
    Mr. Skinner. Well, the growth of security guards, contract 
guards, if that is what you are referring to, is I think 
probably a prudent way to go. The reduction of FPS, again, you 
would have to look at it in its totality. Is it a reduction or 
is it a transfer of responsibility? And that is a transfer----
    Ms. Norton. Let's take the transfer of responsibility.
    Mr. Skinner. From FPS to the locals.
    Ms. Norton. I understand exactly what you mean. These 
officers at the Department of Education, at the Department of 
Agriculture, they were doing exactly what FPS officers were. I 
have never taken the position you have to have full-time FPS 
officers there. However, the Department takes the position that 
there are whole parts of the Country, 50 cities----
    Let me ask Mr. Schenkel is that still part of the plan, to 
leave 50 cities uncovered by FPS officers?
    Mr. Schenkel. Ma'am, the plan hasn't been finalized, but 
what we did is distribute the available officers based on 
threat risk and then quantifiable numbers, and regardless of 
the numbers that we will have, that would be the proportionate 
distribution based on that risk.
    Ms. Norton. Well, that is the way to do it. And, again, Mr. 
Schenkel, you will never see me hop on you for not having the 
officers. I understand that.
    My second question, though, goes to the conversion of 
officers. It is bad enough that you are downsizing officers. 
But now we have got officers used essentially as building 
inspectors, people who are peace officers, trained exactly as 
you train the D.C. Police Department, the Capitol Police, the 
Park Police, and essentially they are going around with 
flashlights.
    Do you think, Mr. Skinner, that given the downsizing of the 
FPS, that that is a prudent use of fully trained peace officers 
who carry guns and who alone can make arrests in buildings?
    Mr. Skinner. Again, I am sorry, I am just not prepared to 
offer an opinion on that at this point in time. It is something 
that I would like----
    Ms. Norton. I am not asking you for numbers. I am asking 
you whether you think the use of peace officers as building 
inspectors is the highest and best use of people who have full 
police training.
    Mr. Skinner. On the surface, it certainly would not appear 
that that would be the best use.
    Ms. Norton. That is right. Thank you.
    We would like to submit questions, further questions to 
each of you. Yes, I am very concerned. I appreciate the issues 
that Mr. Schenkel confronts, in particular, having inherited 
the FPS, having it thrown at him without the resources, and 
then being confronted with the notion that now I am going to 
downsize what you do have. Neither of those do you have control 
over.
    But you did have control over whether these people got paid 
in the sense of intervening earlier. You do have control over 
how these officers are used; and you do have the obligation to 
tell your own OMB, or whoever will listen, before there are 50 
cities left uncovered by FPS; and you do have the obligation to 
be transparent and, if you intend to do this, to let that be 
known early enough so that appropriate coverage can somehow be 
obtained.
    Let me end this hearing on a more pleasant note than it 
began. The Department of Homeland Security, now--we are not 
talking about Mr. Waites, who we can never expect to get much 
from, given the prior testimony--the Department of Homeland 
Security still owes $1.8 million to STARTECH for past invoices. 
Department of Homeland Security is obligated under law to give 
those funds now to the Department of Labor, which will cover 
back pay first, and, with anything that is left over, the 
benefits and pensions. I only hope that that will be enough.
    You have the apologies of the Federal Government, you who 
stayed on the job. But go from this hearing knowing that DHS 
has $1.8 million, and that is going to come to you first and 
foremost.
    Thank you all for coming to this hearing.
    [Applause.]
    [Whereupon, at 2:00 p.m., the Subcommittee was adjourned.]

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