[Congressional Record (Bound Edition), Volume 145 (1999), Part 19]
[Senate]
[Pages 27762-27779]
[From the U.S. Government Publishing Office, www.gpo.gov]



                         DOD INSPECTOR GENERAL

  Mr. GRASSLEY. Mr. President, it is with a feeling of disappointment 
that I come to the floor today. What's bothering me is a disturbing 
report I am releasing today on the Office of the Inspector General, or 
IG, at the Department of Defense, DOD.
  This is about a report prepared by the Majority Staff of the 
Judiciary Subcommittee on Administrative Oversight and the Courts, of 
which I am the Chairman.
  I have always had such great respect for the DOD IG. I have always 
thought that we could rely on that office to be fair and independent 
and thorough, and above all, honest.
  In the past, I always felt like I could trust the DOD IG's judgment.
  This report, Mr. President is disturbing.
  The evidence in this report questions the credibility of the IG's 
investigative process. And it raises questions about the judgment of 
the Acting IG, Mr. Donald Mancuso.
  It is a report on the Oversight Investigation of allegations of 
misconduct at the Defense Criminal Investigative Service, or DCIS. DCIS 
is the criminal investigations arm of the DOD IG.
  The allegations examined by the Staff involve possible misconduct by 
DCIS agents between 1993 and 1996.
  The current Acting DOD IG, Mr. Mancuso, is associated with the 
allegations. Mr. Mancuso was the Director of DCIS from 1988 until 1997, 
when he became the Deputy DOD IG.
  I also understand that Mr. Mancuso is a potential candidate for 
nomination to be the next DOD IG.

[[Page 27763]]

  In June 1999, the Staff was approached by a former DCIS agent, Mr. 
William G. Steakley.
  Mr. Steakley raised numerous allegations regarding prohibited 
employment practices at DCIS, but these were far too extensive and 
complex to be examined by my small Subcommittee staff.
  However, one of Mr. Steakley's allegations caught our attention. This 
was the allegation that DCIS officials had ``made false statements'' in 
adverse reports on his conduct.
  Mr. Steakley alleged that an agent assigned to the DCIS internal 
affairs unit, Mr. Mathew A. Walinski, had a history of falsifying 
investigative reports to damage the reputations of fellow agents.
  Mr. Steakley further alleged that senior DCIS management, including 
Mr. Mancuso, was fully aware of the allegations about this agent's 
unethical practices, yet failed to take appropriate corrective action.
  And Mr. Steakley claimed he had proof to back up the allegations.
  The staff conducted a careful examination of these allegations and 
concluded that some have merit.
  To evaluate the allegations, the staff reviewed numerous documents to 
include the extensive files at the Office of Special Counsel, OSC, DOD 
personnel files, and DCIS investigative reports. The staff also 
conducted a number of formal interviews.
  A careful review of all pertinent material makes one point crystal 
clear:
  The evidence shows that Mr. Walinski fabricated his reported 
interview of the Air Force payroll technician, Ms. Nancy Gianino, on 
May 21, 1993. This reported interview was conducted in connection with 
the investigation of possible tax evasion charges against Mr. Steakley.
  In addition, OSC files contain numerous references to a second 
internal affairs case handled by Mr. Walinski, in which he apparently 
fabricated another report.
  When the staff asked the DOD IG for this case file--known as the 
Johanson stolen gun case, they discovered that Mr. Walinski had 
apparently fabricated the reported interview of Agent Jon Clark on 
March 2, 1994 and possibly others. This file contains sworn statements 
by the agents involved that Walinski's reported interview with Clark 
never took place.
  These two cases--when taken together--show that Mr. Walinski has a 
history of falsifying reports.
  And more importantly, the record shows that rank and file complaints 
about Mr. Walinski's unethical investigative practices went directly to 
top DCIS management, including Mr. Mancuso.
  The record also shows DCIS management knew about the Walinski problem 
but failed to take appropriate corrective action.
  Yet despite rank and file complaints, Mr. Walinski's false reports 
were used by DCIS management to discredit and punish Agents Johanson 
and Steakley.
  In January 1999, Mr. Walinski was allowed to transfer to another 
federal law enforcement agency--the Treasury IG--with no record of 
punishment or accountability. In his new assignment, Mr. Walinski is 
still responsible for investigating employee misconduct.
  In fact, the record shows that at least 3 weeks after DCIS management 
was informed that Mr. Walinski had fabricated the Clark interview, he 
was given a generous cash bonus award.
  Moreover, Mr. Walinski was assigned to conduct an inspection of the 
field office where rank and file complaints about his false reports had 
originated.
  While investigating Mr. Steakley's allegations, the staff discovered 
that the DCIS internal affairs unit--to which Mr. Walinski was 
assigned--was directed by Mr. Larry J. Hollingsworth.
  Mr. Hollingsworth was convicted of a felony in U.S. District Court in 
March 1996. He was apprehended and confessed to filing a fraudulent 
passport application after a fellow agent recognized his photo in a law 
enforcement bulletin.
  The government authorities, who investigated Mr. Hollingsworth's 
criminal conduct, believe that he committed about 12 overt acts of 
fraud. These overt acts of fraud were committed while Mr. Hollingsworth 
was Director of the DCIS internal affairs unit--Mr. Walinski's office.
  Mr. President, can you imagine that? The head of the internal affairs 
unit of DOD's criminal investigative division was committing passport 
fraud. That's certainly a confidence builder in that organization, 
isn't it?
  These authorities further believe Mr. Hollingsworth's actions were 
especially disturbing since passport fraud is usually committed in 
furtherance of a more serious crime, but the underlying crime was never 
discovered.
  Although Mr. Mancuso and Mr. Hollingsworth were considered friends by 
associates, Mr. Mancuso failed to recuse himself from administrative 
actions affecting Mr. Hollingsworth.
  Mr. Mancuso even aided in Hollingsworth's defense during criminal 
trial proceedings--even though Mr. Hollingsworth was considered 
uncooperative.
  What's more, Mr. Mancuso endorsed an outstanding performance rating 
for Mr. Hollingsworth three weeks after he confessed to felonious 
activity to U.S. State Department special agents.
  Mr. Mancuso even wrote a letter on official DOD IG stationary to the 
sentencing judge, Judge Ellis, on the convicted felon's behalf.
  In this letter, he asked the judge to consider extenuating 
circumstances. He told the judge that Mr. Hollingsworth had taken a 
half day's leave to file the fraudulent passport application. 
Evidently, Mr. Mancuso thought that taking leave to commit a crime was 
somehow exculpatory.
  This is what Mr. Mancuso said in his letter to Judge Ellis, and I 
quote: ``Mr. Hollingsworth could have come and gone as he pleased,'' 
but he ``took leave to commit a felony.''
  Mr. Mancuso concluded with this telling remark: ``To this day, there 
is no evidence that Mr. Hollingsworth has ever done anything improper 
relating to his duties and responsibilities as a DCIS agent and 
manager.''
  Coming from a law enforcement officer like Mr. Mancuso, these words 
defy understanding. The last time I checked, part of doing your job as 
a law enforcement officer is not committing crimes.
  Mr. Hollingsworth confessed to and was convicted of felonious 
activity while employed by DCIS as a criminal investigator.
  As State Department agents put it, these crimes were committed in the 
furtherance of a more serious crime that was never discovered.
  Unfortunately, Mr. Mancuso seems to have been completely blind to the 
problem.
  As a result of a series of decisions--personally approved by Mr. 
Mancuso, Mr. Hollingsworth was allowed to remain in an employed status 
at DCIS for 6 months after his felony conviction. He was then allowed 
to retire with a full federal law enforcement annuity exactly on his 
50th birthday in September 1996.
  Had Mr. Mancuso exercised good judgement and other available legal 
options, Mr. Hollingsworth could have been removed from DCIS 
immediately after conviction--in March 1996. Under these circumstances, 
he would have been forced to wait 12 years--until the year 2008--to 
begin receiving a non-law enforcement annuity commencing at age 62. Had 
Mr. Mancuso exercised this option, he would have saved the taxpayers at 
least $750,000.00, which is the amount of money Mr. Hollingsworth will 
collect thanks to the generous treatment he received from his friend 
and colleague, Mr. Mancuso.
  Think of the signal this sends to rank and file law enforcement 
officers who look to their managers for leadership and fair treatment.
  The office of the DOD IG demands the highest standards of integrity, 
judgment, and conduct.
  Does Mr. Mancuso meet those standards?
  Given Mr. Mancuso's poor judgment and his irresponsible handling of 
the three cases examined in the staff report, I believe it is 
reasonable to question:
  (1) Whether Mr. Mancuso should now be nominated and confirmed as the 
DOD IG;
  (2) Whether Mr. Mancuso should be allowed to remain in the post he 
now occupies--Acting DOD IG;

[[Page 27764]]

  And given the evidence that Mr. Walinski falsified several 
investigative reports, it is reasonable to question whether he should 
be assigned to a position at the Treasury Department in which he is 
responsible for conducting criminal and administrative inquiries.
  Mr. President, today I am forwarding the Majority Staff report to the 
appropriate committees, the Secretaries of Defense and Treasury and 
other officials.
  These officials must evaluate Mr. Mancuso's fitness to serve as the 
DOD IG as well as Mr. Walinski's continued assignment as a criminal 
investigator.
  I hope they will take the time to review this report before making a 
final decision on these matters.
  Mr. President, I now ask unanimous consent to have printed two 
documents in the Record: (1) A letter of comment from Mr. Mancuso; and 
(2) the Majority Staff report. I know it's a lengthy report, and the 
GPO says it will cost $2,282.00 to print. But leaving no stone unturned 
in ensuring that a person of the highest integrity occupies the key 
watch dog post of DOD IG is well worth that cost, in my view.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

 Majority Staff Report to the Chairman on the Oversight Investigation--
   The Defense Criminal Investigative Service, Department of Defense

(U.S. Senate Judiciary Subcommittee on Administrative Oversight and the 
      Courts, October 1999, Senator Charles E. Grassley, Chairman)

                           Executive Summary

       The Majority Staff for the Senate Judiciary Subcommittee on 
     Administrative Oversight and the Courts has conducted an 
     inquiry into the personnel practices and conduct of certain 
     agents within the Defense Criminal Investigative Service 
     (DCIS). The DCIS is an agency in the Office of the Department 
     of Defense (DOD) Inspector General (IG). The former Director 
     of DCIS--a sworn federal law enforcement officer--is now 
     Acting DOD IG, Mr. Donald Mancuso. Mr. Mancuso was Director 
     of DCIS from 1988-1997. Mr. Mancuso is currently a potential 
     candidate for nomination to be the next DOD IG.
       This staff report contrasts DCIS personnel management 
     practices that condoned and encouraged maltreatment of rank 
     and file agents, including the use of falsified investigative 
     reports, while protecting and rewarding a fellow manager who 
     was a convicted felon. Management's favorable treatment of 
     the convicted felon, Mr. Larry J. Hollingsworth, will result 
     in his receiving substantial sums of money in federal law 
     enforcement retirement annuities between 1996 and the year 
     2008. If DCIS management had exercised good judgment and 
     other more reasonable options, Mr. Hollingsworth would not 
     have been allowed to retire on his 50th birthday and receive 
     the $750,000.000 in benefits. He would have had to wait 12 
     years to retire. In another matter, a criminal investigator, 
     who falsified reports, Mr. Mathew A. Walinski, also received 
     a cash bonus award after this misconduct was brought to the 
     attention of senior DCIS management.
       The staff report cites three separate personnel cases 
     brought to the Subcommittee's attention involving DCIS. Each 
     of these cases involves questionable personnel practices that 
     were either condoned or ignored by DCIS management between 
     1993 and 1996.
       The Subcommittee on Administrative Oversight and the Courts 
     has primary jurisdiction and oversight authority for 
     administrative practices and procedures throughout the 
     Federal Government. As part of the process of conducting its 
     oversight responsibilities, the Subcommittee has been 
     examining administrative procedures followed by various 
     inspectors general. This report reflects the Subcommittee 
     Majority Staff's review of questionable administrative 
     decisions and misconduct within the criminal investigative 
     branch in the DOD IG's office--DCIS, while Mr. Mancuso was 
     the director of the organization.


                               background

       In June of 1999, the Subcommittee Majority Staff was 
     approached by a former agent of DCIS, Mr. Gary Steakley. Mr. 
     Steakley alleged that a DCIS internal affairs Special Agent, 
     Mr. Walinski, had a history of falsifying official reports to 
     damage the reputations of fellow agents. Mr. Steakley also 
     alleged that senior officials at DCIS were fully aware of 
     this agent's questionable practices, yet failed to take 
     appropriate corrective action.
       It should be noted that an investigator in the Office of 
     Special Counsel (OSC), Mr. William Shea, also looked into Mr. 
     Steakley's allegations of DCIS misconduct. OSC concluded that 
     Mr. Steakley was not a victim of prohibited personnel 
     practices. While the staff examined the conduct of DCIS 
     supervisors in regard to several specific decisions, it did 
     not attempt to examine the numerous other allegations raised 
     by Mr. Steakley.
       While investigating Mr. Steakley's allegations, the staff 
     learned that Mr. Walinski was supervised by Mr. 
     Hollingsworth--the director of internal affairs. Mr. 
     Hollingsworth was convicted of a felony in April 1996. 
     Nonetheless, management allowed him to retire with full 
     federal law enforcement retirement benefits six months after 
     his felony conviction. Federal law enforcement agencies 
     commonly remove an employee on criminal misconduct alone, or 
     at a minimum, immediately after a felony conviction. Had 
     management availed itself of other appropriate legal removal 
     options, Mr. Hollingsworth would not have been allowed to 
     retire on his 50th birthday, which gave him entitlement to 
     benefits amounting to more than three quarters of a million 
     dollars.
       The staff reviewed numerous documents to include the above-
     referenced OCS investigation, DOD personnel files, DOD 
     investigative reports, a Subcommittee-requested review by the 
     Office of Personnel Management (OPM), State Department 
     Diplomatic Security investigative reports, and public court 
     papers registered in the U.S. District Court for the Eastern 
     District of Virginia. The Subcommittee Majority Staff also 
     conducted the following formal interviews:
     Former DOD personnel:
       Mr. Matthew Walinski, DCIS Special Agent Internal Affairs
       Mr. Larry Hollingsworth, DCIS Director of Internal Affairs
       Mr. William Dupree, Deputy Director of DCIS
       Ms. Eleanor Hill, Former DOD Inspector General
     Current DOD personnel:
       Mr. Donald Mancuso, Former Director of DCIS and Current 
     Acting IG for DOD
       Ms. Jane Charters, DCIS Investigative Support
       Ms. Donna Seracino, Director of Personnel for DCIS
       Ms. Linda Martz, Employee Relations Specialist
       Mr. Paul Tedesco, DCIS liaison agent in Hollingsworth 
     criminal case
       Mr. John Keenan, Current Director of DCIS, formerly Dir., 
     DCIS Operations
       Mr. Thomas Bonner, Current Agent in Charge Dallas Office, 
     DCIS, Assist. Dir DCIS Internal Affairs
       Ms. Nancy Gianino, Air Force Payroll Specialist
       Lt. Col. Greg McClelland, DOD IG Administrative 
     Investigator
     State Department Personnel:
       Special Agent Robert Starnes and Special Agent Sean O'Brien
     Office of Special Counsel:
       Investigator William Shea
       Current and former DCIS Special Agents were also 
     interviewed on a confidential basis. They requested 
     confidentiality out of fear of reprisal. This report will 
     show fears of such reprisal are plausible based on the facts 
     developed by the Subcommittee.


                    summary of significant findings

     The case of convicted felon Mr. Hollingsworth
       Mr. Hollingsworth was the Director of internal affairs for 
     DCIS from April 1991 to September 1996. This unit routinely 
     conducted investigations regarding the integrity and conduct 
     of agents in DCIS. As stated above, in at least two cases, 
     DCIS management had knowledge of false witness statements by 
     an internal affairs agent, Mr. Walinski.
       Former Director of DCIS, Mr. Donald Mancuso, assisted Mr. 
     Hollingsworth in remaining in an employed status--as Director 
     of internal affairs--for six months after his felony 
     conviction in U.S. District Court. Law enforcement 
     authorities, who investigated Mr. Hollingsworth's criminal 
     activities, believe that he committed at least 12 acts of 
     overt fraud while head of the DCIS internal affairs unit.
       Mr. Mancuso, a sworn federal law enforcement officer, aided 
     in the defense of this particular subordinate at his criminal 
     trial. At no time did Mr. Mancuso offer to recuse himself 
     from administrative or personnel actions in regards to Mr. 
     Hollingsworth--even though they were considered ``close 
     personal friends.''
       Mr. Mancuso endorsed an outstanding performance evaluation 
     of Mr. Hollingsworth three weeks after he confessed to 
     felonious activity to the U.S. State Department special 
     agents.
       Using official DOD IG stationery, with DOD IG emblem, Mr. 
     Mancuso wrote to the sentencing judge on the convicted 
     felon's behalf, even though the State Department 
     investigators opined Mr. Hollingsworth was an uncooperative 
     defendant. Mr. Mancuso signed the letter in his official 
     capacity as an Assistant Inspector General.
       Former DOD Inspector General Eleanor Hill stated that Mr. 
     Mancuso did not advise her of pertinent facts in the case. 
     Ms. Hill had directed Mr. Mancuso to remove Mr. Hollingsworth 
     from his position ``as soon as legally possible.''
       Mr. Mancuso directly assisted Mr. Hollingsworth in 
     obtaining over three quarters of a million dollars in full 
     federal law enforcement retirement benefits six months after 
     a felony conviction. OPM retirement experts, legal counsel at 
     DOD's Washington Headquarters Service, and Inspector General

[[Page 27765]]

     regulations all state that Mr. Mancuso had options to remove 
     this employee immediately after conviction. In fact, the law, 
     DOD regulations, and an OPM opinion all suggest that Mr. 
     Hollingsworth could have been removed based on the criminal 
     conduct alone, and not on criminal court procedures.
       The retirement benefits given to Mr. Hollingsworth were 
     extremely generous, since federal law enforcement officials 
     may retire at ago 50 instead of age 62, and computation of 
     their general schedule grade has law enforcement availability 
     pay of up to 25% added in on top of regular pay. This 
     resulted in a convicted felon being able to obtain 
     approximately $750,000.00 in additional annuity payments 
     (excluding cost-of-living allowances) as compared to what he 
     would have received had he been terminated immediately after 
     conviction and allowed only non-law enforcement civil service 
     retirement benefits commencing at age 62 in the year 2008.
     Falsification of Witness Statements by Agent Walinski in 
         Steakley Case
       There were numerous claims of misconduct made by Mr. 
     Steakley in regard to the conduct of the DCIS office of 
     internal affairs. Several of Mr. Steakley's allegations were 
     substantiated.
       There is credible evidence that at least one agent assigned 
     to DCIS internal affairs, Agent Walinski, falsified a witness 
     statement in support of a tax evasion charge against Mr. 
     Steakley, and was reprimanded and reassigned for a similar 
     problem in another internal affairs case. Agent Walinski even 
     acknowledged that the tax evasion charge was ``unresolved'' 
     and that his inconclusive findings were not made apparent in 
     his report to the DCIS Administrative Review Board (ARB).
       The false tax evasion charge in which Mr. Steakley was 
     eventually exonerated was instigated by DCIS management, to 
     include Mr. Mancuso, in an area in which DCIS had no 
     authority or jurisdiction. The States of California and 
     Virginia repeatedly informed DCIS that the agency could not 
     obtain Mr. Steakley's tax records without a court order or 
     authorization from the taxpayer involved. DCIS had neither.
       In an interview with the Subcommittee staff, Lt. Col. Greg 
     McClelland, an independent DOD IG investigator assigned to 
     review allegations by Mr. Steakley, characterized the conduct 
     of Agent Walinski in this case as ``egregious.'' The 
     Subcommittee staff has substantiated evidence that Agent 
     Walinski made false statements to Lt. Col. McClelland in 
     sworn testimony in 1997.
       Mr. Steakley's attorney, Mr. Luciano A. Cerasi of the 
     Federal Law Enforcement Officers Association (FLEOA), 
     notified DCIS management that Agent Walinski's witness 
     interview of an Air Force payroll technician was falsified. 
     DCIS management ignored Mr. Cerasi's allegations despite the 
     fact that it had received another FLEOA letter alleging that 
     Agent Walinski had falsified witness statement in a separate 
     internal affairs investigation.
     Falsification of Witness Statements by Agent Walinski in 
         Johanson Case
       Prior to the adjudication of the Steakley case, Agent 
     Walinski had falsified witness statements against another 
     DCIS agent.
       DCIS Agent Stephen Johanson had his undercover weapon 
     stolen from his residence near Los Angeles, California while 
     he was participating in the execution of a search warrant in 
     another California city. In the investigation that followed 
     the theft of Johanson's weapon. Agent Walinski falsified more 
     witness statements. His false reports resulted in a 
     recommendation that Agent Johanson be suspended without pay 
     for 8 calendar days for failing to secure and return an 
     issued weapon. DCIS supervisors and rank and file agents 
     protested to management at DCIS headquarters in Washington 
     that Agent Walinski's interviews were either inaccurate or 
     never took place.
       FLEOA attorney Cerasi wrote a second letter to top DCIS 
     management supporting rank and file agents' complaints about 
     Agent Walinski's reports in the Johanson case. Mr. Cerasi 
     alleged that Agent Walinski has falsified his interview of 
     Agent Jon Clark.
       DCIS officials claim that Agent Walinski was reprimanded 
     for ``failing to show due diligence and accuracy'' in 
     reporting witness interviews in the Johanson case. Agent 
     Walinski reported an interview of DCIS Agent Clark that never 
     took place. Despite these allegations, personnel records 
     indicate that Agent Walinski received a cash award--at least 
     18 days after rank and file agents had formally complained to 
     senior management at DCIS headquarters that Agent Walinski 
     falsified reports. The staff could find no evidence that DCIS 
     management ever attempted to determine if the allegations 
     about Mr. Walinski's reports had merit. In fact, immediately 
     following the first Johanson investigation and while the re-
     investigation was in progress, Mr. Walinski was assigned a 
     leadership role in the inspection of the field office where 
     the complaints about his reports had originated. This could 
     be viewed as a retaliatory measure to silence the agents who 
     had ``blown the whistle'' on Agent Walinski.
       DCIS now records all witness interviews for accuracy. Some 
     DCIS Agents refer to this new practice as ``the Walinski 
     rule.''.


                             report format

       This report has been divided into three separate DCIS 
     personnel cases as follows:

           --The Case of Mr. Hollingsworth
           --The Case of Mr. Steakley
           --The Case of Mr. Johanson

       In addition, the report includes written comments from the 
     Acting DOD IG, Mr. Mancuso, along with an extensive list of 
     the source documents used in preparing the report.
       On September 27, 1999, Mr. Mancuso requested that he be 
     given the opportunity to review this report prior to its 
     release and to provide written comments. In response, the 
     Subcommittee Chairman, Senator Charles E. Grassley, assured 
     Mr. Mancuso that his written response would be attached to 
     the staff report. Consistent with the Chairman's commitment, 
     Mr. Mancuso's written response, dated October 1, 1999, is 
     included at the end of the report.
       The attachments listed at the end of each section of the 
     report are far too voluminous to reproduce in the printed 
     report. A complete set of the attachments will be maintained 
     in the Subcommittee files and available on Judiciary 
     Committee's web site along with other Committee documents.


                              conclusions

       The three personnel cases, which the staff reviewed, 
     demonstrate disparate treatment given to DCIS employees by 
     senior management.
       Mr. Hollingsworth, a high ranking DCIS official, was 
     convicted of a felony but protected by Mr. Mancuso and 
     allowed to retire 6 months later--on his 50th birthday--with 
     a full law enforcement annuity. Mr. Walinski falsified 
     reports to such a degree that several witness statements 
     appearing in his investigative reports never took place. He 
     even claimed in sworn testimony in 1997 that a DOD employee, 
     whom he had interviewed and reported absent from her office 
     due to ``extended illness,'' had ovarian cancer, despite the 
     fact there was no evidence that this person suffered from 
     such a disease. Mr. Walinski received a cash bonus award 
     weeks after allegations about his falsified reports reached 
     senior DCIS management. DCIS management never attempted to 
     determine whether those allegations had merit, and Mr. 
     Walinski was allowed to transfer to another law enforcement 
     agency--Treasury IG--with no record of accountability.
       Two other DCIS employees were the subject of disciplinary 
     action by DCIS management for significantly less serious 
     offenses, and in one case, based on no evidence. Mr. 
     Steakley, repeatedly and unjustly accused of numerous 
     misconduct charges, is now retired with a damaged reputation 
     among the federal law enforcement community that was 
     undeserved. Similarly, Mr. Johanson was undeservedly punished 
     for having a gun stolen from his residence during a burglary. 
     This gun was issued to him by his own agency. The initial 
     punishment proposed for Mr. Johanson was based on false 
     witness interviews and a distorted interpretation of 
     disciplinary guidelines.
       The Office of the DOD Inspector General is a position that 
     requires a very high standard of integrity, with equal 
     treatment for all departmental employees. When information is 
     developed on the criminal misconduct of a senior employee 
     such as Mr. Hollingsworth, that employee should be removed 
     ``as soon as legally possible'' to ensure that the morale of 
     all employees is maintained. When allegations are made of 
     misconduct such as against Mr. Walinski, the IG's office 
     should ensure that allegations are professionally and 
     thoroughly investigated, and all discrepancies are resolved. 
     When allegations are made against employees such as Mr. 
     Steakley and Mr. Johanson, charges should be investigated, 
     witnesses should be accurately interviewed, and bias should 
     not interfere with the integrity or facts in the 
     investigation.
       If DCIS--under Mr. Mancuso's management--could not 
     investigate its own employees honestly and fairly, then how 
     could the much larger Office of the DOD IG--if managed by Mr. 
     Mancuso--be expected by the American people to investigate 
     honestly and fairly misconduct and fraud within the entire 
     Department of Defense?
       Given Mr. Mancuso's poor judgment and his irresponsible 
     handling of the three cases examined in this report, it is 
     reasonable to question: 1) Whether Mr. Mancuso should now be 
     nominated and confirmed as the DOD IG--an office that demands 
     the highest standards of integrity, judgment, and conduct; 
     and 2) Whether Mr. Mancuso should be allowed to remain in the 
     post of Acting DOD IG. In addition, given the evidence that 
     Mr. Walinski falsified several witness interviews, it is 
     reasonable to question whether Mr. Walinski should be 
     assigned to a position in which he is responsible for 
     conducting criminal or administrative inquiries.


                            recommendations

       1. The Majority Staff recommends that Members consider a 
     change in legislation regarding federal law enforcement 
     officers convicted of felonies. Consideration should be given 
     to whether federal law enforcement officers should be 
     immediately dismissed after their conviction of a felony.
       Under current law, agencies have considerable discretionary 
     authority in determining

[[Page 27766]]

     how to handle such cases. In the Hollingsworth case, a series 
     of personnel actions approved by DOD Acting Inspector General 
     Mancuso raise serious questions about his integrity and 
     judgment. The proposed change in legislation could eliminate 
     any discretionary authority on the part of individual law 
     enforcement agencies in dismissing employees convicted of 
     felonies.
       2. The Majority Staff recommends that the Chairman forward 
     this report to appropriate committees, the Secretaries of 
     Defense and the Treasury and other officials who must 
     evaluate Mr. Mancuso's fitness as a potential candidate to be 
     DOD IG, as well as Mr. Walinski's continued assignment as a 
     GS-1811 criminal investigator.


                     THE CASE OF MR. HOLLINGSWORTH

       Mr. Larry J. Hollingsworth, former GS-15 Director of 
     internal affairs, DCIS, was convicted of a felony charge in 
     1996 in U.S. District Court for the Eastern District of 
     Virginia. Mr. Hollingsworth was never terminated by DCIS and 
     allowed to retire on his 50th birthday--six months after a 
     felony conviction. He is currently receiving full federal law 
     enforcement retirement benefits totaling approximately 
     $750,000.00 he would not otherwise have received had 
     management exercised other more reasonable options.
     Background on felonious activity by Mr. Hollingsworth
       According to State Department law enforcement agents, Mr. 
     Hollingsworth's criminal activity in this case commenced on 
     or about September, 1992, when he reviewed the local 
     obituaries in Florida and obtained the name of Charles W. 
     Drew, who was born in 1944 and died in 1948. Mr. 
     Hollingsworth, with a Top Secret security clearance, 
     requested from the State of Florida a copy of the death 
     certificate, representing himself as the deceased's half-
     brother. Mr. Hollingsworth leased a mailbox in Springfield, 
     Virginia under the alias of Charles and Maureen Drew and 
     Harold Turner.
       Mr. Hollingsworth then obtained a birth certificate for 
     Charles Drew from the State of Georgia and had it sent to the 
     mailbox in Springfield, Virginia. Mr. Hollingsworth then 
     leased another mailbox under the alias of Charles and Mary 
     Drew in Arlington, Virginia. Mr. Holingsworth submitted an 
     application and received a social security card under the 
     alias Charles Drew Jr. by posing as the applicant's father. 
     Mr. Hollingsworth, accompanied by his spouse, applied for and 
     received a Virginia Department of Motor Vehicles 
     identification card in the name of Charles Drew. Using the 
     DMV identification card in the name of Charles Drew, Mr. 
     Hollingsworth applied for a U.S. Passport. It should be noted 
     that his wife, Mrs. Jaureen Hollingsworth, a DOD IG employee 
     at the time, was never implicated or charged in this 
     felonious activity. She was not a suspect in the 
     investigation by the U.S. State Department. Mr. Hollingsworth 
     stated to State Department law enforcement agents that he 
     procured approximately eight to ten false identify documents, 
     to include an international drivers license and a priest ID, 
     by means of mail order.
       In April of 1995, U.S. State Department law enforcement 
     officials placed a photo of Mr. Hollingsworth in law 
     enforcement bulletins as an unidentified suspect in passport 
     fraud. The local Philadelphia office of DCIS notified DCIS 
     headquarters in Washington, D.C. that a photo of Mr. 
     Hollingsworth was found in a bulletin. Officials at DCIS in 
     Washington, D.C. notified Mr. Mancuso who in turn immediately 
     notified Inspector General Eleanor Hill. Mr. Mancuso was then 
     ordered by DOD IG Eleanor Hill to notify the State Department 
     Office of Inspector General.
       [See Attachment #1--Sentencing memorandum date stamped 06/
     04/96]
       [See Attachment #2--State Department Investigative 
     Timeline]
     Statements made by State Department law enforcement agent
       On July 16, 1999, the Subcommittee Majority Staff 
     interviewed Sean O'Brien, Special Agent with the State 
     Department Diplomatic Security Service. Agent O'Brien was one 
     of the agents assigned to the Hollingsworth case. Agent 
     O'Brien stated that there were at least 12 overt acts of 
     fraud perpetrated by Mr. Hollingsworth over the course of 
     several years. Agent O'Brien felt that the actions of Mr. 
     Hollingsworth were disturbing in light of the fact that 
     passport fraud is usually committed in furtherance of a more 
     serious crime, and a credible motive had never been 
     established.
       Mr. O'Brien added that family members of the deceased boy, 
     Charles Drew, whose identify was used by Mr. Hollingsworth, 
     were very upset and prepared to testify at trial. Agent 
     O'Brien also opined that various motions to dismiss the case 
     were delaying tactics used by Mr. Hollingsworth until he 
     reached his 50th birthday--when he could retire with law 
     enforcement benefits.
       The State Department Supervisor of the Hollingsworth case, 
     Special Agent Robert Starnes, stated that DCIS management 
     initially refused to let him examine the contents of Mr. 
     Hollingsworth's government computer under the pretense that 
     Mr. Hollingsworth may have had personal and/or classified 
     material on a government computer. Despite possessing a Top 
     Secret security clearance, Agent Starnes had to raise the 
     possibility of a search warrant with DCIS management before 
     they acquiesced and allowed a consent search of the computer.
       DCIS management assigned DCIS Agent Paul Tedesco as the 
     point of contact in this case for the State Department. 
     Relevant information regarding Mr. Hollingsworth's criminal 
     conduct was provided by State Department investigators 
     directly to DCIS Agent Tedesco during all criminal 
     proceedings. Agent Tedesco also provided certified court 
     documents to then Director of Operations and current Director 
     of DCIS John Keenan. These court documents described the 
     criminal conduct of Mr. Hollingsworth. Agent Tedesco stated 
     that DCIS management was kept fully informed of the criminal 
     conduct of Mr. Hollingsworth from the time of his confession 
     through sentencing.
       In the experienced opinion of State Department Case Agent 
     Sean O'Brien, State Department Special Agent Case Supervisor 
     Starnes and DCIS Case Liaison Agent Paul Tedesco, this 
     fraudulent activity was most probably in furtherance of 
     another crime that was never discovered or proven.
       [See Attachment #3--Subcommittee memorandum of 07/16/99 
     interview with agent O'Brien]
     Chronology of judicial and personnel actions in the case of 
         Mr. Hollingsworth
       07/28/95: Larry J. Hollingsworth's home is searched by U.S. 
     State Department law enforcement agents and he subsequently 
     confesses to fraudulently applying for a U.S. Passport. [See 
     Attachment #4--Time line provided by DOD 7/27/95-9/20/96]
       01/27/96: Larry J. Hollingsworth is indicted in U.S. 
     District Court on two felony counts.
       03/18/96: Larry J. Hollingsworth pleads guilty and is 
     convicted of a felony, 18 USC 1001.
       06/4/96: Convicted felon Larry J. Hollingsworth is 
     sentenced to 30 days imprisonment on weekends, 2 years 
     probation, 200 hours community service and a $5,000.00 fine. 
     [See Attachment #5--U.S. District Court Criminal Docket]
       08/12/96: Larry J. Hollingsworth is notified by DOD DCIS of 
     a ``Proposed Removal'' and given thirty days to respond. [See 
     Attachment #6--DOD OIG notice of Proposed Removal dated 08/
     12/96]
       09/19/96: Larry J. Hollingsworth retires on his 50th 
     birthday citing a reason of ``pursuing other interests''. 
     [See Attachment #7--DOD Notice of Personnel Action form 50-B 
     dated 09/19/94]
       09/20/96: Larry J. Hollingsworth's attorney notifies then 
     DOD Assistant Inspector General Mancuso that he waives his 
     right to appeal the removal. [See Attachment #8--Letter from 
     Hollingsworth's attorney to Mr. Mancuso dated 09/20/96]
     DOD General Counsel claims conditional plea prevented removal 
         of Mr. Hollingsworth
       On September 14, 1999, Mr. Mancuso and the Deputy General 
     Counsel (Inspector General), Mr. Kevin Flanagan, stated to 
     the Subcommittee that the reason Mr. Hollingsworth was never 
     removed and allowed to retire, was that his guilty plea was 
     ``conditional'' and that he could withdraw his plea at any 
     time at his own initiative.
       The Federal Rules of Criminal Procedure Rule 11(A)(2) 
     states; ``with the approval of the court and the consent of 
     the government, a defendant may enter a conditional plea of 
     guilty or nolo contendere, reserving in writing the right, on 
     appeal from the judgment, a review of the adverse 
     determination of any specified pretrial motion. A defendant 
     who prevails on appeal shall be allowed to withdraw the 
     plea.''
       The plea agreement in this case acknowledges a conditional 
     plea by Mr. Hollingsworth reserving ``his right to appeal the 
     Court's adverse March 8, 1996 ruling denying defendant's 
     motion to suppress his statement to State Department 
     Agents''. The plea agreement also states; ``the defendant 
     knowingly waives his right to appeal any sentence.''
       Therefore, Mr. Hollingsworth never had unilateral authority 
     to withdraw his plea at anytime, as Mr. Mancuso and DOD 
     General Counsel argued. Their reason for not terminating Mr. 
     Hollingsworth after conviction appears to be invalid.
       [See Attachment #20--Rules of Criminal Procedure 11(a)(1)]
       [See Attachment #21 Plea Agreement dated 03/15/96 page 3]
       Mr. Hollingsworth was never removed by DOD and as stated in 
     the chronology, remains a convicted felon despite the 
     numerous motions to dismiss. Federal Law, DOD IG regulations, 
     legal counsel at the DOD Washington Headquarters Services 
     (WHS) and OPM General Counsel stated that Mr. Hollingsworth 
     could have been removed based on his criminal misconduct 
     alone. The misconduct must be proved with a ``preponderance 
     of the evidence'' and not ``beyond a reasonable doubt.'' 
     Preponderance of the evidence is a much lower threshold than 
     a criminal court procedure wherein criminal conduct must be 
     proved ``beyond a reasonable doubt.''
     Federal law states Mr. Hollingsworth could be dismissed 
         within 7 days
       5 U.S.C. 7513, (b), regarding removals of federal employees 
     states:

[[Page 27767]]


       1. At least 30 days advance written notice, unless there is 
     reasonable cause to believe the employee has committed a 
     crime for which a sentence of imprisonment may be imposed, 
     stating the specific reasons for the proposed action.
       2. A reasonable time, but not less than seven days, to 
     answer orally and in writing and to furnish affidavits and 
     other documentary evidence in support of the answer. [See 
     Attachment #9--5 United States Code 7513]
       The DOD Time Line cites this law as reason for a 60 day 
     delay in issuing a 30 day ``proposed removal.'' Mr. 
     Hollingsworth had already served a considerable amount of 
     time in jail before the proposed removal was issued.
     DOD Inspector General Regulations state Mr. Hollingsworth 
         could have been terminated after Indictment.
       IGDR 1400.4, Displinary and Adverse Action dated December 
     30, 1994, page 7, states an immediate removal can be 
     initiated ``when the agency has reasonable cause to believe 
     that an employee has committed a crime for which a sentence 
     of imprisonment may be imposed. Reasonable cause to believe 
     is not established by the mere fact either of an arrest or an 
     ongoing agency investigation of possible criminal misconduct. 
     A criminal indictment will usually constitute reasonable 
     cause.''
       [See Attachment #10--IGDR--dated 12/30/94, Page 7]
     DOD WHS Legal Counsel advises Mr. Hollingsworth may be 
         terminated after his guilty plea
       On March 14, 1996, Gilda Goldsmith, legal counsel at the 
     DOD WHS, advised that ``the indefinite suspension, which 
     suspends Mr. Hollingsworth from duty until final disposition 
     of criminal charges and any administrative proceedings, does 
     not bar the agency from terminating him based on his guilty 
     plea . . . the agency could remove Mr. Hollingworth for both 
     the guilty plea and underlying conduct, but would have to 
     prove the conduct by a preponderance of the evidence if the 
     conviction is reversed.''
       [See Attachment #11--DOD WHS Legal Counsel memo dated 03/
     14/96]
     OPM General Counsel cites other options available to DCIS 
         management
       The Subcommittee Majority Staff requested the assistance of 
     OPM in determining whether Mr. Hollingsworth, a convicted 
     felon, was entitled to a federal law enforcement retirement 
     six months after conviction and two months after serving his 
     senence of jail on weekends. He received retirement credit 
     and remained in an employed status as Director of Internal 
     Affairs durng the six months in question to include two 
     months of jail time on weekends.
       On July 20, 1999, DOD Personnel Director Donna Seracino 
     stated that Mr. Hollingsworth could not be immediately 
     removed after his guilty plea and felony conviction because 
     ``he had rights to due process under OPM guidelines''.
       On September 13, 1999, OPM General Counsel Suzanne Seiden 
     stated in her legal opinion: ``Instead of seeking to remove 
     him because of the criminal conviction, it is possible that 
     DCIS appropriately could have charged him with, among other 
     things, an action under 5 U.S.C., 7513, on grounds of general 
     criminal misconduct or failure to maintain his security 
     clearance. Further, DCIS might have chosen to expedite his 
     removal following Mr. Hollingsworth's guilty plea.''
       [See Attachment #12--OPM General Counsel opinion dated 09/
     13/99]
     Outstanding evaluation for Mr. Hollingsworth endorsed by 
         Director of DCIS Mancuso
       On August 18, 1999, approximately three weeks after Mr. 
     Hollingsworth's home was searched and he confessed to at 
     least three years of felonious activity (07/27/95), Mr. 
     Mancuso signed and approved an ``outstanding'' performance 
     evaluation for Mr. Hollingsworth. Mr. Hollingsworth replied 
     on the evaluation form; ``I appreciate your comments on my 
     appraisal, especially in light of my recent actions.''
       [See Attachment #13--Employee Performance rating signed by 
     Mr. Mancuso 08/18/95]
     Mr. Mancuso places Mr. Hollingsworth on Paid Leave
       On November 22, 1995, Mr. Mancuso decided to hold 
     indefinite suspension of Mr. Hollingsworth in abeyance and 
     advised ``Mr. Hollingsworth he would be carried on sick leave 
     for any period of time that was supported by acceptable 
     medical documentation, carried on annual leave as long as he 
     had an annual leave balance and requested such leave, and 
     that the indefinite suspension would become effective when 
     his annual leave was exhausted and he no longer met the 
     requirements for sick leave.''
       [See Attachment #4--Time line provided by DOD 7/27/95-9/20/
     96]
     Mr. Mancuso advises Mr. Hollingsworth to meet with a 
         physician
       On November 22, 1995, ``Mr. Mancuso advises Mr. 
     Hollingsworth to schedule an appointment with the Independent 
     Medical Evaluation (IME) physician. The agency would approve 
     sick leave through November 30, 1995, and any request for 
     additional sick leave would be held in abeyance pending 
     receipt and review of the additional medical documentation.''
       [See Attachment #4--Time line provided by DOD 7/27/95-9/20/
     96]
     Assistant United States Attorney opposes use of physician as 
         Defense Witness
       On March 8, 1996, Assistant United States Attorney Thomas 
     G. Connolly for the Eastern District of Virginia stated in 
     his legal brief to the U.S. District Court in regards to the 
     testimony of the IME physician for the defense:
       ``This testimony is not relevant to a determination of any 
     issue to be tried in this case. It is a patent attempt at 
     jury nulifcation by presenting evidence in the hope of making 
     the defendant sympathetic to the jury. It is a backdoor 
     attempt to raise issues of mental condition prohibited by 
     law; and it is prejudicial, confusing, and misleading. This 
     court should exclude any proposed psychiatric testimony from 
     evidence at trial.''
       [See Attachment #14--Government's motion to exclude 
     psychiatric testimony page 2]
     Mr. Seldon, Attorney for Mr. Hollingsworth, contacts DOD 
         Employee Relations concerning retirement
       On February 7, 1996, the defense attorney for Mr. 
     Hollingsworth contacts DOD Employee Relations Specialist 
     Linda Martz. She states the attorney said ``he wanted to 
     ensure that his client was technically on the agency rolls. I 
     said yes. Mr. Seldon said the U.S. Attorney wanted his client 
     to plead guilty to one felony count. He said he understood 
     that if the criminal matter ended and Mr. Hollingsworth was 
     convicted, removal was probable. He asked if that was 
     correct. I said most likely. He said his client's hope was to 
     stay on the agency rolls until September 1996 at which time 
     he would retire. I said he could retire now, but not under 
     law enforcement. Mr. Seldon said he understood that, but 
     there would be a substantial reduction.''
       [See Attachment #15--Memorandum for the record of Linda 
     Martz dated 02/07/96]
     Defendant Hollingsworth makes motion to dismiss case
       On March 12, 1996, Mr. Hollingsworth's defense attorney 
     made a motion in U.S. District Court to dismiss the charges, 
     citing Mr. Mancuso's request for medical information. He said 
     Mr. Mancuso had ``directed him to provide sufficient medical 
     information which will be reviewed by the medical consultant 
     for the Office of Inspector General, to assist him in making 
     a decision on the proposed suspension.''
       [See Attachment #16--Motion to dismiss indictment page 3 
     section 7]
     Assistant United States Attorney comments on sick leave 
         status and use of a physician
       On March 12, 1996, Assistant United States Attorney Thomas 
     G. Connolly for the Eastern District of Virginia stated in 
     his legal brief to U.S. District Court:
       ``The defendant's motion to dismiss the indictment is not 
     only untimely, it is frivolous . . . The government (in the 
     form of the United States Attorneys Office) was not party to 
     any negotiations concerning the defendants sick leave. In 
     fact, the first time we head about this was on March 7, 1996, 
     when defense counsel faxed us a letter detailing Dr. 
     Holland's findings.''
       ``The United States Attorneys Office had no opportunity, 
     whatsoever to be heard in the negotiations between Mr. 
     Hollingsworth's lawyers and the Department of Defense 
     concerning whether Mr. Hollingsworth should be granted sick 
     leave because he was allegedly suffering from depression a 
     year-and-a-half after he had committed the crimes and 4 
     months after he had been caught.''
       [See Attachment #17--Opposition to Defendant's Motion to 
     Dismiss page 3]
     Attorney for Mr. Hollingsworth contacts DOD Employee 
         Relations one day after motion to dismiss and compliments 
         Mr. Mancuso for assistance.
       On March 13, 1996, Linda Martz, DOD Employee Relations 
     Specialists took a call from Mr. Seldon, attorney for Mr. 
     Hollingsworth. She stated; ``Mr. Seldon wanted to know what 
     Larry's sick and annual leave balances were. . . . I went on 
     to explain that when he was indicted the situation took on 
     another look. He said he understood and believed Mr. Mancuso 
     did what he could be help Mr. Hollingsworth''.
       [See Attachment #18--Linda Martz memo dated 03/13/96]
     Mr. Mancuso acknowledges Mr. Hollingsworth's criminal conduct 
         was perpetrated in furtherance of another unknown crime
       On September 14, 1999, during a Subcommittee Majority Staff 
     interview regarding the criminal misconduct of Mr. 
     Hollingsworth, Mr. Mancuso stated he now believes that 
     logically, the criminal misconduct of Mr. Hollingsworth 
     appeared to be in furtherance of another crime.
     Mr. Mancuso writes letter to sentencing judge on behalf of 
         Mr. Hollingsworth
       Mr. Mancuso wrote a letter dated April 29, 1996, to 
     sentencing Judge Ellis on official DOD Assistant Inspector 
     General stationery. Mr. Mancuso wrote this letter ``on behalf 
     of Mr. Hollingsworth . . . one of the few individuals in whom 
     I placed complete confidence and trust.'' In writing the 
     letter, Mr. Mancuso asked the judge to consider extenuating 
     circumstances. For example, he told

[[Page 27768]]

     the judge that Mr. Hollingsworth took a half day's leave to 
     file the fraudulent passport application. Mr. Mancuso said he 
     was not surprised by this action. He said: ``Mr. 
     Hollingsworth could have come and gone as he pleased,'' but 
     he ``took leave to commit a felony.'' Mr. Mancuso went on to 
     say: ``To this day, there is no evidence that Mr. 
     Hollingsworth has ever done anything improper relating to his 
     duties and responsibilities as a DCIS agent and manager.''
       In concluding the letter, Mr. Mancuso added: ``I do ask, 
     however, that you consider all these things as well as his 
     stated remorse and acceptance of responsibility for his 
     actions . . . it is our intention to consider removal action 
     against him after the conclusion of the criminal charges. In 
     this regard, I would ask that you consider the severity of 
     these administrative actions as you pronounce sentencing.''
       The letter was signed; ``Sincerely, Donald Mancuso, 
     Director, Defense Criminal Investigative Service''.
       [See Attachment #19--Letter from Mr. Mancuso to Judge Ellis 
     dated 04/29/96]
     Mr. Mancuso comments on letter to Judge Ellis
       In a Majority Staff interview on September 14, 1999, Mr. 
     Mancuso claimed that the stationery used in the letter to 
     Judge Ellis was ``personal, bought with my own money'' and 
     not official DOD Inspector General stationery. It was pointed 
     out to Mr. Mancuso that the letterhead had a government seal 
     which contained the words; ``Inspector General--Department of 
     Defense.'' In addition, Mr. Mancuso signed the letter in his 
     official capacity as an Assistant Inspector General. The 
     letter was made a part of the sentencing report by Judge 
     Ellis.
       [See Attachment #19--Letter from Mr. Mancuso to Judge Ellis 
     dated 04/29/96]
       [See Attachment #1--Sentencing memorandum date stamped 06/
     04/96]
     Assistant United States Attorney comments on lack of remorse 
         by Mr. Hollingsworth
       On March 12, 1996, Assistant United States Attorney Thomas 
     G. Connolly for the Eastern District of Virginia stated in 
     his legal brief to U.S. District Court:
       ``The defendant's appreciation of the wrongfulness of his 
     conduct in April of 1994 has never been determined in any 
     hearing at which the United States Attorneys Office (or any 
     other government agency, including the Department of Defense) 
     was a party.''
       [See Attachment #17--Opposition to Defendant's Motion to 
     Dismiss page 3]
     Assistant United States Attorney comments on Mr. 
         Hollingsworth's mental state
       ``Mr. Hollingsworth's condition, whatever it is, is not 
     found in DSM IV, the 886-page tome that lists every 
     psychosis, neurosis, syndrome, and personality disorder known 
     to man.''
       [See Attachment #14--Government's motion to exclude 
     psychiatric testimony page 5]
     Mr. Dupree, former Deputy Director of DCIS, stated Mr. 
         Hollingsworth was considered a cooperative defendant by 
         DCIS management
       On August 24, 1999, Mr. Dupree, a former Deputy Director of 
     DCIS, and under the direct supervision of Mr. Mancuso, was 
     interviewed by the Majority Staff. Mr. Dupree reviewed 
     proposals to remove DCIS employees for misconduct based on 
     internal investigations. He characterized Mr. Hollingsworth 
     as a ``cooperative defendant''. Mr. Dupree stated that it 
     would have been easier to remove Mr. Hollingsworth if he had 
     misused a government vehicle.
     9/13/96--Mr. Hollingsworth requests extension on proposal 
         removal
       On August 23, 1996, Mr. Hollingsworth asks Mr. Mancuso for 
     an extension of his proposed removal pending an oral reply to 
     be made on 09/13/96.
       [See Attachment #4 Time line provided by DOD 7/27/95-9/20/
     96]
     Mr. Mancuso grants requested extension and schedules oral 
         response for 09/23/96, four days after Mr. 
         Hollingsworth's 50th Birthday
       On August 26, 1996, Mr. Mancuso grants the extension 
     request and schedules the oral reply for September 23, 1996, 
     the first available date because Mr. Mancuso claimed that he 
     would ``be on travel much of September and will not be 
     available to hear Mr. Hollingsworth's oral response'' until 
     that date.
       A review of Mr. Mancuso's travel vouchers suggests that the 
     projected travel conflicts--outlined in his August 26, 1996 
     memo--never materialized and that he would have been 
     available to hear the case at any point during the month of 
     September--with several minor exceptions. During an interview 
     on September 14, 1999, Mr. Mancuso was asked if he was aware 
     of Mr. Hollingsworth's birthday when he signed the August 26, 
     1996 memo. Initially, he denied having that knowledge, but 
     with coaching from Deputy DOD General Counsel Flanagan, he 
     admitted that he did, in fact, know that Mr. Hollingsworth's 
     50th birthday was in September 1996.
       [See Attachment #4 Time line provided by DOD 7/27/95-9/20/
     96]
     Convicted Felon Mr. Hollingsworth retires with full federal 
         law enforcement retirement benefits totaling over 
         $750,000.00
       On September 19, 1996, Mr. Hollingsworth retired on his 
     50th birthday and first date of eligibility for federal law 
     enforcement retirement, citing his desire ``to pursue other 
     interests.'' Mr. Hollingsworth currently receives full 
     federal law enforcement retirement benefits.
       [See Attachment #7 notice of personnel action]
       According to OPM, if Mr. Hollingsworth had been removed 
     immediately after his felony conviction, he would have been 
     entitled to an annuity commencing at age 62. Since Mr. 
     Hollingsworth was not removed by DOD after his conviction and 
     was allowed to retire six months after his conviction at age 
     50, Mr. Hollingsworth immediately began receiving a federal 
     law enforcement yearly annuity of over $60,000. Not including 
     cost of living adjustments, these annuities will total over 
     750,000.00 for 1996-2008--annuities he would not have 
     received had DCIS management exercised other more reasonable 
     options.
       On September 20, 1996, Mr. Hollingsworth's attorney 
     ``waives his right to any further proceedings in connection 
     with the proposed removal due to his retirement.''
       [See Attachment #8--Letter from Hollingsworth Attorney 
     dated 09/20/96]
     Mr. Mancuso characterizes State Department Investigators as 
         ``Horse's Asses''
       On September 14, 1999 the Majority Staff interviewed Mr. 
     Mancuso to review his role in Mr. Hollingsworth's retirement.
       Mr. Mancuso claimed that State Department investigators did 
     not brief DCIS on the details of the criminal case against 
     Mr. Hollingsworth until after sentencing. The State 
     Department's failure to share this information in a timely 
     manner was another reason for delay in removal action against 
     Mr. Hollingsworth. Mr. Mancuso characterized State Department 
     investigators in this case as ``Horses' Asses.''
     DCIS Agent Tedesco keeps DCIS management informed and 
         compliments performance of State Department investigators 
         in the Hollingsworth case
       As stated previously, DCIS Agent Tedesco provided all 
     relevant certified court documents to DCIS Director of 
     Operations John Keennan throughout the judicial proceedings 
     against Mr. Hollingsworth. These documents were passed to 
     senior DCIS management as they became available. These 
     documents fully described the criminal conduct for which Mr. 
     Hollingsworth was being prosecuted. Agent Tedesco described 
     his relationship with State Department investigators as 
     ``excellent,'' resulting in a timely, accurate, and 
     professional flow of information between the two law 
     enforcement agencies. Agent Tedesco refutes any assertion 
     that DCIS management was not informed during any part of the 
     judicial process.
     DOD Inspector General Eleanor Hill orders Mr. Hollingsworth 
         to be removed ``as soon as legally possible''
       Eleanor Hill was the DOD Inspector General during the 
     Hollingsworth criminal procedures. On September 21, 1999, 
     Eleanor Hill stated to the Subcommittee Majority Staff that 
     shortly after Mr. Hollingsworth confessed, she had ordered IG 
     personnel, including Mr. Mancuso, ``to remove Hollingsworth 
     as soon as legally possible.''
     DOD Inspector General Eleanor Hill was unaware of several 
         decisions by Mr. Mancuso regarding Mr. Hollingsworth
       Ms. Hill stated she was unaware that DCIS management 
     initially refused to allow State Department investigators a 
     consent search of Mr. Hollingsworth's government computer.
       Ms. Hill stated she was unaware that Mr. Mancuso endorsed 
     an outstanding evaluation of Mr. Hollingsworth after his 
     confession to criminal conduct.
       Ms. Hill stated she was unaware that Mr. Mancuso wrote a 
     letter as an Assistant Inspector General on official 
     stationery to the sentencing judge on Mr. Hollingsworth's 
     behalf.

                    Hollingsworth Case--Attachments

       1. Sentencing Memorandum filed in U.S. District Court, 
     dated 06/04/96
       2. State Department Investigative Time line
       3. Subcommittee interview of State Department Special Agent 
     O'Brien
       4. Timeline provided by DOD 7/27/95-9/20/96
       5. U.S. District Court Criminal Docket
       6. DCIS Proposal for Removal
       7. Notice of Personnel Action
       8. Letter from Mr. Hollingsworth's attorney waiving right 
     to appeal removal
       9. Copy of 5 U.S.C. 7513
       10. DOD IG Regulations on Disciplinary and Adverse Action 
     Page 7
       11. DOD General Counsel memo dated 3/14/96
       12. OPM response to subcommittee request
       13. Evaluation of Mr. Hollingsworth dated 08/18/95.
       14. Government's motion to exclude Defendant's Proposed 
     Psychiatric Testimony
       15. Memorandum of Linda Martz dated 02/07/96
       16. Motion to Dismiss Indictment
       17. Opposition to Defendant's Motion to dismiss
       18. Memorandum of Linda Martz dated 03/13/96
       19. Letter to Judge Ellis written by Mr. Mancuso on behalf 
     of Mr. Hollingsworth dated 04/29/96
       20. Rules of Criminal Procedure 11(a)(1)

[[Page 27769]]


       21. Plea Agreement dated 03/15/96


         walinski: criminal investigator, dcis internal affairs

       Mr. Matthew A. Walinski worked at the Defense Criminal 
     Investigative Service (DCIS) as a criminal investigator (GS-
     1811) from August 1987 through 1998. Since January 1999, he 
     has been employed as a criminal investigator (special agent) 
     in the Office of the Inspector General at the Department of 
     the Treasury. His assigned duties at the Treasury Department 
     include investigating employee misconduct and fraud. Although 
     Walinski was promoted to the grade of GS-14 at DCIS in August 
     1991, he accepted a reduction in grade to GS-13 at the 
     Treasury Department. He told the Subcommittee on September 8, 
     1999 that he left DCIS because he was informed by the DCIS 
     Director Keenan that his goal of becoming a manager was 
     unattainable.
     DCIS Internal Affairs
       In June 1999, the Subcommittee received a complaint from a 
     former DCIS agent that Walinski had falsified official 
     reports of investigation while employed at DCIS. The 
     complaints about the falsification of reports by Walinski 
     relate to investigations he conducted while assigned to DCIS' 
     Program Review and Analysis Directorate. This office is known 
     informally as ``internal affairs.'' Walinski was assigned to 
     internal affairs from August 1991 until July 1994.
       Throughout Walinski's tour of duty in the office of 
     internal affairs, the unit was headed by Mr. Larry J. 
     Hollingsworth. As Director of internal affairs, Hollingsworth 
     held a key position in DCIS's organizational structure--along 
     with the Director (Mancuso), Deputy Director (Dupree), and 
     the Director of Operations (Keenan). Though important 
     internal affairs was a small office. It normally consisted of 
     three investigators (Hollingsworth, Bonnar, and Walinski). 
     However, the office could be augmented--as needed--with 
     special agents from the field.
       Hollingsworth directed the DCIS office of internal affairs 
     from April 1991 until his retirement in September 1996, 
     according to a document provided by the IG's office. That 
     Hollingsworth was technically listed as the director of 
     internal affairs until his retirement in September 1996 
     defies understanding, since Hollingsworth was convicted of a 
     felony (18 USC 1001) in March 1996 and sentenced to 30 days 
     in jail on the weekends in June 1996.
       The authorities, who conducted the investigation (Bureau of 
     Diplomatic Security) of Hollingsworth's criminal activities, 
     believe Hollingsworth committed about 12 overt acts of fraud 
     between October 1992 and April 1994. The 12 alleged overt 
     acts of fraud committed by Hollingsworth were perpetrated 
     while he was the director of DCIS' office of internal 
     affairs. Hollingsworth's criminal conduct while director of 
     internal affairs must inevitably raise questions about the 
     overall integrity of the work performed by this office while 
     Hollingsworth was director.
       Mr. Thomas J. Bonnar was the Assistant Director of Program 
     Review. Bonnar was Mr. Walinski's immediate supervisor.
       While Hollingsworth was in charge of the day-to-day 
     operations of the office of internal review, the DCIS 
     Director, Mr. Donald Mancuso, exercised overall management 
     control of all internal investigations. As DCIS Director, 
     Mancuso was the person chiefly responsible for the conduct of 
     internal inquiries. His position description (DDES0466) 
     states under ``Major Duties,'' paragraph (1): Mancuso 
     ``provides staffing and direction for the conduct of internal 
     investigations, as needed.'' Once allegations were received 
     about potential misconduct by DCIS agents, Mancuso and the 
     Deputy DCIS Director, Mr. William Dupree, would usually 
     decide if an inquiry would be conducted, and what its scope 
     would be. As a rule, those decisions were reached in 
     consultation with Hollingsworth.
       Mancuso and Dupree would normally receive periodic 
     briefings or status reports on each internal investigation 
     still in progress. If a problem arose during an inquiry, 
     Mancuso and Dupree would know about it. When Walinski 
     completed his report of investigation, it would usually be 
     forwarded up the chain of command by Hollingsworth to an 
     Administrative Review Board (ARB). The ARB then made 
     recommendations. Either Mancuso or Dupree would review those 
     recommendations and make the final decision on what--if any--
     disciplinary action was needed.
       While assigned to DCIS' office of internal review, Walinski 
     was tasked to complete about 30 ``administrative inquiries'' 
     concerning allegations of misconduct by DCIS agents. The 
     complaints about the falsification of his reports pertain to 
     two ``administrative inquiries'' conducted by Walinski in 
     1993 and 1994 as follows: (1) the tax fraud case involving 
     Special Agent (SA) William G. Steakley--Administrative 
     Inquiry 91; and (2) Stolen gun case involving Special Agent 
     (SA) Stephen J. Johanson--Administrative Inquiry 108.
       The purpose of this portion of our review was to assess the 
     validity of the allegations against Walinski and to search 
     for the answers to three questions: (1) Did Walinski falsify 
     his reports on the Steakley and Johanson cases? (2) If 
     Walinski falsified reports, did senior management at DCIS 
     know about it? And (3) If DCIS management knew about it, did 
     management take appropriate corrective action?
       To answer the three questions, the Majority Staff examined 
     all pertinent General Counsel, IG, and U.S. Office of Special 
     Counsel (OSC) files, including reports of investigations and 
     E-mails. The staff also conducted a number of separate 
     interviews.
     The Case of Mr. Steakley
       On May 11, 1993, Walinski opened the tax evasion case 
     against Steakley. This was Administrative Inquiry 91. It was 
     opened ``based on information that SA Steakley made 
     misleading statements to the DCIS payroll support activity 
     regarding his actual place of residence in an apparent effort 
     to circumvent his state income tax obligations.''
       [See Attachment 1--page 1 of Report of Investigation (ROI)]
       The foundation for Walinski's ROI on the Steakley tax fraud 
     case was his interview with a payroll specialist at Bolling 
     AFB, Washington, D.C.--Mrs. Nancy Gianino. At the time, 
     Gianino was responsible for handling all DCIS payroll 
     matters. Walinski's official witness interview report, dated 
     June 1, 1993, states that Gianino was interviewed at Bolling 
     AFB on May 21, 1993 ``concerning her knowledge of the payroll 
     deductions of SA Steakley.''
     Gianino Interview
       Since the Gianino interview is such a crucial piece of 
     evidence in evaluating the accuracy of Walinski's reports, it 
     is quoted here in its entirety:
       ``Mrs. Gianino said that sometime in late November 1991 she 
     received a letter from SA Steakley which instructed her to 
     discontinue payroll withholding on SA Steakley's salary by 
     the Commonwealth of Virginia. After receiving the letter, 
     which is appended as attachment 1, she contacted SA Steakley 
     via telephone and he informed her that he was being 
     transferred and had, in conjunction with his transfer, 
     established residency in the State of Tennessee. At the time 
     she thought it was strange that an employee who lived and 
     worked in Virginia could move his residency to another state, 
     but because SA Steakley told her he was being transferred in 
     December 1991 she was not concerned. On December 11, 1991, 
     Mrs. Gianino changed SA Steakley's state tax code from 
     Virginia to Tennessee. Mrs. Gianino stated that very shortly 
     after her discussions with SA Steakley she became very ill 
     and was off work for an extended period of time. Because of 
     her illness she was unable to follow-up concerning SA 
     Steakley and his move as would be her normal practice. 
     Normally, Mrs. Gianino makes sure that state income taxes are 
     withheld from the state where the individual's duty 
     assignment is located, especially a state as strict as 
     California.
       In the Spring of 1993, after her return from the extended 
     illness, Mrs. Gianino started to reconcile the payroll 
     records for the Defense Criminal Investigative Service. 
     During this reconciliation she reviewed and compared the 
     permanent duty station location for each employee from their 
     Notification of Personnel Action Standard Form 50; the state 
     code of each employee utilized by the Air Force for 
     deductions for state income taxes; and the current mailing 
     address for each employee. She then discovered that SA 
     Steakley was permanently assigned to California, had a state 
     tax code for Tennessee, and a mailing address in Virginia. 
     Mrs. Gianino stated that she brought this discrepancy to the 
     attention of DCIS management as the Air Force considers this 
     situation to be unacceptable under applicable payroll 
     guidelines.
       Mrs. Gianino said that in retrospect she felt that both SA 
     Steakley's letter and the subsequent telephone call were 
     vague and very misleading.''
       [See Amendment 1, Witness Interview/Gianino]
     DCIS Contacts State Tax Authorities
       Based on the information provided by Gianino, DCIS 
     officials, including Walinski and Hollingsworth, contacted 
     the departments of taxation in the states of California and 
     Virginia to determine whether Steakley had unpaid income tax 
     liabilities in either state. In addition, they contacted the 
     State of Tennessee to determine whether Steakley was a 
     resident of that state.
       DCIS made repeated attempts to obtain information on 
     Steakley's tax obligations in California and Virginia. 
     Letters were sent to the tax authorities in both states on 
     July 27, 1993, July 30, 1993 and December 2, 1993. The 
     letters were followed up by telephone calls.
     Access To Tax Records Blocked
       In a memo dated December 23, 1993, Walinski reported that 
     he was unable to obtain any information from Virginia on 
     Steakley's tax liabilities. Walinski reported:
       On December 22, 1993, an official in Virginia's Department 
     of Taxation informed DCIS: The Commonwealth of Virginia will 
     not acknowledge or provide documentation to generic tax 
     liability issues unless the writer of the correspondence is 
     the Commonwealth of Virginia taxpayer . . . . . Per 
     Commonwealth of Virginia Statute the information in question 
     could not be released to DCIS because DCIS was not the 
     taxpayer in question.''

[[Page 27770]]

       [See Amendment 1, Contact Report with Department of 
     Taxation, Commonwealth of Virginia]
       In an E-mail message to his supervisor, Bonnar, on July 8, 
     1994, Walinski reported that identical restrictions applied 
     to access on individual tax liability data in California. 
     Walinski reported:
       On May 5, 1994, California tax authorities informed DCIS: 
     By law, California can not release any information concerning 
     an individual taxpayer without a court order or a release 
     from the individual in question.''
       [See Attachment 1, Contact Report with California Franchise 
     Tax Board]
     DCIS Continues to Pursue Tax Data
       Even though DCIS was prohibited by state law from obtaining 
     information on Steakley's state tax liabilities, DCIS 
     Director Mancuso and Hollingsworth pressed Walinski to find a 
     way to obtain that information.
       During an interview on August 24, 1999, Hollingsworth 
     reacted strongly to the suggestion that DCIS lacks authority 
     to obtain information on Steakley's unpaid state tax 
     liabilities. He insisted that DCIS had all the authority it 
     needed to get the job done. He said: ``I could have done that 
     investigation.'' Both Mancuso and Hollingsworth were formerly 
     employed criminal investigators at the Internal Revenue 
     Service.
       Mancuso's E-mail to Hollingsworth on July 7, 1994 
     demonstrates something more than a passing interest in the 
     Steakley tax evasion case. Mancuso's message conveys a sense 
     of urgency on the need to obtain Steakley's state tax data. 
     It also seems to suggest that DOD legal counsel may have 
     advised DCIS not to pursue tax fraud charges against 
     Steakley. Mancuso made this request:
       ``Please copy me on all transmittals between our office and 
     the states of California and Virginia relative to Mr. 
     Steakley's taxes. It has been a ridiculous amount of time 
     since you told me that we were waiting to hear back from 
     them. At the time of our last discussion I directed you to 
     document your contacts so that I could refer to them if some 
     quick action did not ensue. I've spoken to OGC [Office of the 
     General Counsel] and I think I can get their support despite 
     Perkul [Deputy General Counsel, Washington Headquarters 
     Services] and crew.''
       ``I'd also like to start making phone calls to the two 
     states and finding out what they're doing with our 
     information.''
       [See Attachment 1, E-mail from Mancuso to Bonnar and 
     Hollingsworth]
       When asked by an independent DOD investigator, Mr. Greg 
     McClelland, why DCIS would pursue tax charges against 
     Steakley when prohibited by state law from obtaining that 
     information, Mancuso replied: ``We'll pursue anything that 
     goes to the integrity of the agent.''
       [See Attachment 2, Greg McClelland interview, March 13, 
     1997, p. 35]
       Mancuso's reply to McClelland's question in March 1997 
     suggests that he may have known that DCIS lacked authority to 
     gain access to Steakley state tax records. During an 
     interview on September 14, 1999, Mancuso provided a 
     completely different answer to essentially the same question. 
     He was asked why DCIS would pursue charges against Steakley 
     in an area--individual state tax obligations--where it had no 
     authority or jurisdiction to operate. He claimed ignorance. 
     He replied: ``I did not know that DCIS was not authorized 
     access to individual state income tax data.''
     Walinski Complains about Pressure on Tax Data
       One day after Mancuso's E-mail to Hollingsworth--July 8, 
     1994, Walinski complained about the pressure from Mancuso to 
     his supervisor, Bonnar. In this E-mail, Walinski stated:
       ``I do not understand what he [Mancuso] wants us to do. . . 
     . Without a release from Steakley, which both he and his 
     attorney(s) stated will not be provided or a court order of 
     some kind there is nothing else that I can do. I am sorry!''
       [See Attachment 1, Walinski E-Mail to Bonnar]
     Steakley's Tax Attorney Responds
       DCIS attempted to interview SA Steakley's tax accountant/
     lawyer, Mr. John T. Ambrose, but Steakley refused to waive 
     attorney-client privilege, and Mr. Ambrose refused to be 
     interviewed. However, after further discussion, Steakley's 
     tax attorney provided DCIS with a letter addressing various 
     tax issues bearing on the potential charges against his 
     client. The letter was dated February 22, 1994 and hand 
     delivered to Dupree. Mr. Ambrose stated:
       ``For tax year 1992, based on a determination that Mr. 
     Steakley was a resident of Tennessee, I prepared three (3) 
     state income tax returns for the Steakleys, one resident 
     state income tax return for Virginia and two (2) nonresident 
     state income tax returns for Virginia and California. In 
     determining how to complete those returns, I reviewed the tax 
     instructions published by the respective state tax agencies 
     and consulted with personnel at those agencies.''
       [See Attachment 3]
     Tennessee Residency
       A DCIS records check in Tennessee did show that SA Steakley 
     owned two homes in the state; was registered to vote there 
     and, in fact, voted in the November 1992 general elections; 
     and applied for and received a state driver's license. Mr. 
     Walinski's report of investigation contains the general 
     guidelines in Tennessee tax law that are used as the standard 
     for determining whether a person can claim they are a 
     resident of the state. According to the information contained 
     in Walinski's report, Steakley appears to meet most of the 
     state residency requirements.
     No Proof of Tax Fraud
       At the conclusion of Walinski's investigation, DCIS had no 
     credible evidence or proof that Steakley had unpaid tax 
     liabilities in either California or Virginia.
       In our interview on September 8, 1999, Walinski 
     acknowledged that his report of investigation on the tax 
     evasion case against Steakley was inconclusive and 
     unsubstantiated.
       Walinski characterized the tax fraud case against Steakley 
     as ``an unresolved case.'' The investigation had serious 
     shortcomings: ``We couldn't nail him,'' Walinski said. 
     Walinski's inconclusive findings are not apparent in his 
     report. In fact, the report suggests DCIS had an airtight 
     case against Steakley. Walinski also claims Mancuso and 
     Dupree were aware of the flaw. Despite these known 
     deficiencies, Walinski said that he was ``not surprised'' to 
     learn that the ARB Board had subsequently recommended that 
     Steakley ``be removed from his position at DCIS'' for failing 
     to meet his state tax obligations--a recommendation based on 
     Walinski's incomplete report. ``That's just the way DCIS did 
     things,'' he said.
       In our interview on September 14, 1999, Mancuso 
     contradicted Walinski's assertion that management knew the 
     tax case against Steakley was weak. Mancuso insisted that he 
     was not aware of the lack of credible evidence to support tax 
     evasion charges that were eventually brought against 
     Steakley. He said: ``I didn't know about that.''
     Decisions on Tax Investigation Questioned
       The staff does not understand why Mancuso and Dupree 
     decided to pursue the tax evasion charges given the 
     prohibitions in place that effectively blocked access to 
     Steakley's state tax records. If DCIS believed that this 
     matter needed further investigation, it should have referred 
     the matter to an external organization that had the authority 
     and jurisdiction to examine those records and determine if 
     Steakley had unpaid tax liabilities. In the absence of that 
     information, the tax evasion charge would be unjustified.
     ARB Board Recommends Removal
       The DCIS ARB met on February 7, 1994 to consider the 
     Steakley tax evasion case.
       In a memo dated March 7, 1994, the ARB recommended that SA 
     Steakley ``be removed from his position with DCIS for 
     violating Executive Order 12674.'' The Board concluded that 
     ``SA Steakley has a tax liability to the State of California 
     and he took overt steps to avoid paying this tax from 
     December 1991 through February 1993.'' The Board's report was 
     signed by James J. Hagen, Special Agent in Charge.
       [See Attachment 4, page 2]
     Tax Fraud Charges
       On August 4, 1994, after reviewing the ARB's 
     recommendations, DCIS management issued Steakley a ``Notice 
     of Proposed Suspension.'' The notice was signed by Mr. John 
     F. Keenan, Director of Investigative Operations. Mr. Keenan 
     was also previously employed by the Internal Revenue Service 
     as a special agent. He is the Director of DCIS today.
       Mr. Keenan rejected the ARB's recommendation to remove 
     Steakley. Instead, he proposed that SA Steakley be 
     ``suspended without pay for fourteen (14) calendar days.'' 
     The proposed suspension was based on: (1) SA Steakley's 
     failure to pay income taxes in the states of California and 
     Virginia; and (2) SA Steakley's failure to comply with 
     Executive Order 12730 [Section 101, paragraph (1)] that 
     requires employees to pay federal, state, and local taxes--
     ``that are imposed by law.''
       [See Attachment 5, page 1]
       In presenting their case against Steakley, both Mr. Keenan 
     and the ARB relied heavily on Walinski's reported interview 
     of Gianino. Key portions of that interview were incorporated 
     in both memos. For example, after reviewing the 
     communications between Steakley and Gianino in 1991 about 
     payroll deductions--as summarized in Walinski's report, 
     Keenan's memo cites her alleged reconciliation of DCIS 
     payroll records as the event that triggered the whole 
     investigation:
       ``In the spring of 1993, during a reconciliation of payroll 
     records for DCIS, it was discovered that you were permanently 
     assigned to California, had a state tax code for Tennessee, 
     and a mailing address in Virginia. This discrepancy was 
     brought to the attention of DCIS management as the Air Force 
     considers this situation to be unacceptable under applicable 
     payroll guidelines.
       [See Attachment 5, page 2]
     Adjudication--Charges Dropped
       On October 25, 1994, Mancuso's deputy, Dupree, informed 
     Steakley that the tax fraud charges against him would be 
     dropped.
       In a memo addressed to Steakley, Mr. Dupree attempted to 
     provide an explanation for his decision to drop the charges:

[[Page 27771]]

       ``I have considered the written response submitted by your 
     representative, Mr. Luciano Cerasi, as well as the oral 
     response presented by you and Mr. Cerasi on October 20, 1994. 
     Based on the information you provided concerning the filing 
     date of October 15 for the state of California, I have 
     decided that the charges are not substantiated. Therefore, it 
     is my decision to overturn the proposal to suspend you for 14 
     days.''
       [See Attachment 6]
       Dupree's explanation seems to suggest that the charges were 
     dropped because the California's state tax filing deadline 
     had not yet arrived. His explanation is difficult to 
     comprehend. Senior DCIS officials had consistently claimed 
     that Steakley's misconduct was ``an integrity issue.'' For 
     example, in his memo dated August 4, 1994, Keenan told 
     Steakley:
       ``I find you have violated the trust placed in you as a 
     employee of the OIG [Office of the Inspector General].''
       [See Attachment 5, page 3]
       It very difficult to reconcile Dupree's explanation for 
     dropping the charges with the questions raised about 
     Steakley's integrity--particularly since Dupree's memo was 
     signed ten days after the California filing deadline had 
     passed.
     FLEOA's Allegations Against Walinski
       During the adjudication process on tax fraud charges, 
     Steakley was represented by an attorney with the Federal Law 
     Enforcement Officers Association (FLEOA), Mr. Luciano A. 
     Cerasi.
       As Steakley's defense counsel, Cerasi directed a 10-page 
     letter to Dupree in response to the proposed notice of 
     suspension issued to Steakley in August 1994. Cerasi's letter 
     was hand-delivered to Dupree on September 15, 1994. Cerasi 
     argued that ``the proposed adverse action against SA Steakley 
     must be rescinded due to a lack of preponderant evidence to 
     support the charges.''
       In offering a spirited defense of his client, Cerasi, who 
     represents rank and file agents, also raised explosive 
     allegations about the accuracy of the investigative report 
     underlying the tax evasion charges. He alleged that 
     Walinski's report contained ``false, misleading, and 
     fabricated investigative material.''
       Cerasi alleged that Walinski had ``fabricated the interview 
     in another [Johanson] case.'' He alleged that Walinski 
     ``completely fabricated the results of his interview with 
     Mrs. Nancy Gianino.'' He referred to Walinski as 
     ``management's pit bull.'' He said Walinski was ``willing to 
     fabricate investigative information to destroy the career of 
     a subject of an investigation.'' Cerasi urged Dupree to re-
     open the case and re-investigate the entire matter.
       [See Attachment 7, pages 2 and 3]
       Cerasi's allegations about Walinski's report on the 
     Steakley case in September 1994 followed allegations and 
     complaints, which surfaced two months earlier, about 
     Walinski's report on the Johanson stolen gun case. The 
     Johanson case is discussed in the next section of this 
     report.
     Steakley's Request for Re-Investigation
       On October 20, 1994, both Cerasi and Steakley were given an 
     opportunity to present an oral response to the tax evasion 
     charges. During the oral rebuttal session in Dupree's office, 
     Steakley followed up on Cerasi's written request for a 
     ``reinvestigation of this whole Walinski file.'' Steakley 
     requested ``an internal investigation of SA Walinski's 
     actions.'' Steakley stated once again ``he had proof that SA 
     Walinski had fabricated the results of the administrative 
     inquiry involving his state income taxes.''
       [See Attachments 8, page 1]
     Steakley's ``Proof''
       The ``proof'' referred to by Steakley was a taped telephone 
     conversation he had with Gianino on September 8, 1994 about 
     Walinski's reported interview of her on May 21, 1993. This 
     tape was subsequently provided to and transcribed by the DOD 
     IG, and a copy of the transcription is located in the files 
     of the U.S. Office of Special Counsel (OSC).
       The Majority Staff reviewed the tape transcription in the 
     OSC files.
       Gianino's statements on this tape appear to indicate that 
     Walinski fabricated the entire Gianino interview. Steakley 
     read her Walinski's report of interview. She said that every 
     statement in Walinski's report, which was attributed to her, 
     was ``not true.'' She never had an extended illness, and her 
     leave records would prove it. She said Walinski made several 
     visits to her office to examine Steakley's file. She gave him 
     the file, and he took notes from the file. [Walinski probably 
     made these visits in March or April 1993 when checking 
     Steakley's time and attendance records during the 
     investigation of Steakley's accident with a government 
     vehicle in Administrative Inquiry 86]. At the conclusion of 
     the tape, Gianino said: ``Walinski came over here with his 
     badge and puts false accusations in his report. How am I ever 
     going to trust anybody coming over here [from that office] 
     again.''
       [See Attachment 2, Telephone Conversation between William 
     G. Steakley and Nancy Gianino, September 8, 1994--Tape 
     Transcription, page 78]
     DCIS Rejects Request for Re-Investigation
       Except for what appears to be an exchange of perfunctory 
     phone calls in 1995, requests for an independent review of 
     Walinski's report were largely ignored--and finally 
     dismissed--by senior DCIS management. Another three years 
     would pass before Steakley's allegations about Walinski would 
     be subjected to an independent review.
     IG Request for Independent Review
       The independent review was triggered by a series of letters 
     from Steakley to Ms. Eleanor Hill, DOD IG, and to Senator 
     Fred Thompson. These letters were dated February 9, 1996 and 
     March 12, 1996. In these letters, Steakley renewed his 
     allegations that ``Walinski and Hollingsworth had ``prepared 
     fabricated reports.'' They had ``falsely accused him of tax 
     fraud,'' he alleged. These letters also put a new twist on 
     the allegations. Steakley now alleged that ``Walinski stated 
     directly that the entire matter was directed by Mancuso and 
     Dupree.''
       [See Attachment 9, Steakley letters to Hill and Sen. 
     Thompson multiple pages]
     DOD IG Refers Case to PCIE
       Since Steakley's allegations were ``long-standing in nature 
     and involve a number of individuals in various parts of the 
     IG organization,'' Hill concluded that her office was not 
     capable of conducting ``an objective internal investigation 
     of the allegations.'' She said it simply was ``not 
     feasible.'' Consequently, on May 23, 1996, she referred the 
     entire matter to the President's Council on Integrity and 
     Efficiency (PCIE) for further review.
       [See Attachment 10, Hill's letters to PCIE and Senator 
     Thompson, May 23, 1996, page 1]
     PCIE Response
       On October 16, 1996--five months after Hill's request was 
     made, the PCIE returned the case to the DOD IG ``for 
     appropriate handling,'' because Steakley's complaints 
     concerned IG employees--not the IG herself. [Attachment 10, 
     PCIE letter to Hill, page 2] Following another request from 
     the DOD IG on February 20, 1997, the Integrity Committee of 
     the PCIE agreed to review Steakley's allegations. In her 
     final request, Hill again expressed frustration over her 
     inability to conduct an independent review: ``Our attempts to 
     conduct an impartial internal inquiry have been hampered by 
     the increasing number of senior managers who have recused 
     themselves as a result of the growing allegations, including 
     the Director [Mancuso] of the office which would be 
     investigating this matter internally.''
       [See Attachment 10, PCIE letter to Hill, October 16, 1996]
     Case Referred to OSC
       On June 3, 1997, the case was finally referred to OSC for 
     investigation.
       [See Attachment 10, Hill memo to PCIE, February 20, 1997; 
     OSC letter to DOD IG, June 3, 1997; IC letter to PCIE, 
     January 8, 1999, page 2]
     OSC Report and Conclusions
       On July 21, 1998, the OSC completed a report on Steakley's 
     allegations about senior DCIS officials. The OSC report 
     focused primarily on prohibited employment practices and not 
     whether Walinski had falsified official reports on 
     investigation.
       Despite a mountain of evidence pointing to a number of 
     unresolved issues, the OSC notified DOD in December 1998 that 
     Steakley's allegations ``were without merit,'' and the case 
     was closed in January 1999.
       [See Attahcment 10, IC letter to PCIE, January 8, 1999. 
     page 2.]
     McClelland's Investigation
       On March 27, 1996--two months before Hill initially 
     referred the matter to the PCIE, she attempted to launch an 
     investigation of Steakley's allegations. This investigation 
     continued while Hill worked with PCIE/OSC to assume 
     responsibility for the investigation.
       The job was assigned to the IG's Office of Departmental 
     Inquiries--an organization that is separate from DCIS--and 
     more independent, though both offices report to the same 
     boss--the DOD IG. Mr. Dennis Cullen was initially assigned as 
     the case action officer on April 2, 1996, but Mr. Greg 
     McClelland was placed in charge of the internal inquiry on 
     December 12, 1996.
       Between January and June 1997, McClelland conducted a very 
     extensive set of interviews. The staff has examined the 
     transcripts of McClelland's interviews and believes that 
     McClelland conducted a very thorough and credible 
     investigation. He gathered all pertinent information needed 
     to prepare an independent report on Steakley's allegations. 
     While McClelland actually began drafting a report, it was 
     never finalized. Once the OSC agreed to assume jurisdiction 
     over the case on June 3, 1997, McClelland was directed to 
     terminate his effort and transfer all materials to the OSC. 
     Even though McClelland's report was never finalized, his 
     files contain important information bearing on the 
     allegations against Walinski--information that was completely 
     ignored by OSC.
     McClelland's Investigative Plan
       The guidance given to McClelland was clear. He was to 
     investigate all the allegations raised by Steakley, including 
     ``alleged false statements'' by a DCIS investigator. On the 
     tax fraud inquiry, he intended to address this issue: ``Did 
     DCIS fabricate an ethics violation [suspected tax fraud] 
     against Mr.

[[Page 27772]]

     Steakley?'' He planned to ``review applicable regulations'' 
     to determine whether ``officials acted within the scope of 
     their authority.'' His investigative plan called for 
     questioning Gianino first. If warranted--based on information 
     obtained from Gianino, he would then interview other DCIS 
     officials as follows: Walinski, Hollingsworth, Dupree, and 
     Mancuso.
       [See Attachment 11, page 3]
     Gianino
       On January 28, 1997, McClelland interviewed the key 
     witness--Gianino--regarding the contents of Walinski's 
     reported interview of her on May 21, 1993. In this interview, 
     Gianino disputes and contradicts virtually every point raised 
     in Walinski's report.
       Walinski's report declares that the interview took place at 
     Gianino's Bolling AFB office on May 21, 1993. Gianino, by 
     comparison, testified that she had just one telephone 
     conversation with Walinski; that he called her; but she was 
     unable to remember when the call took place.
       McClelland questioned Gianino about each individual part of 
     Walinski's report of interview. McClelland read her each 
     sentence in Walinski's report. In each case, he asked 
     Gianino: ``Is that accurate?'' And in each case, Gianino 
     replied: ``I did not call him.'' Or ``that's not a true 
     statement.'' Or ``that's not true.'' Or ``I did not do 
     that.'' On the question of sick leave between 1991 and 1993, 
     Gianino testified: ``I had maybe a couple of hours of sick 
     leave. But I was not out for a long extended period of time 
     due to illness.''
       [See Attachment 2, Gianino interview, 1/28/97, pages 4-12]

                        Gianino's Leave Records

       The staff examined Gianino's leave records for 1991 through 
     1993.
       In his report of investigation, Walinski states: ``Very 
     shortly after her discussions with Steakley [in late 1991], 
     she [Gianino] became very ill and was off work for an 
     extended period of time. Because of her illness she was 
     unable to follow-up concerning Steakley. . . . In the Spring 
     of 1993, after her return from the extended illness, Mrs. 
     Gianino. . . .''
       Walinski's assertions about Gianino's absence from her 
     Bolling AFB office due to an extended illness are 
     inconsistent with her official leave records.
       Those records show: (1) Gianino used 54.5 hours of sick 
     leave in 1992; and (2) she used .5 hours in the first half of 
     1993 and a total of 15 hours of sick leave for the balance of 
     the year.
       [See Attachment 12]
     Walinski
       McClelland then interviewed Walinski--first on February 14, 
     1997--and then again on June 6, 1997. After questioning 
     Walinski at length about other parts of his report of 
     investigation on the Steakley tax fraud case, McClelland 
     confronts him with the conflict between his report and 
     Gianino's sworn testimony:
       ``Okay. Well, Mr. Walinski, we have a problem. And the 
     problem is that Ms. Gianino controverts almost everything you 
     say about her in here [Walinski's report], under oath, on 
     tape.''
       [See Attachment 2, Walinski interview, 2/14/97, page 62]
       Walinski replies: ``Okay, Well,--In here somewhere we will 
     find the information that she provided to me, and it will be 
     in her handwriting.''
       [See Attachment 2, Walinski interview, 2/14/97, page 62]
       Walinski never produced any documentation from Gianino that 
     had a bearing on the contents or accuracy of his May 21, 1993 
     report of interview.
       Then McClelland moved to the key question about sick leave. 
     Walinski's report contains a number of references to how 
     Gianino ``became very ill and was off work for an extended 
     period of time.'' McClelland asked this question:
       ``Okay. Ms. Gianino states that she was not out sick from 
     December 1991 to spring 1993, and the records substantiate 
     that.''
       [See Attachment 2, Walinski interview, 2/14/97, page 65]
       McClelland asked Walinski to explain the discrepancy 
     between his report and Gianino's official leave records. Here 
     is Walinski's response:
       ``Well,--well, the remembrance that I have is, folks, is 
     that she was out sick, and I remember everybody at 
     headquarters telling me that . . . I think she had cancer 
     really bad, ovarian cancer, and she would come into work and 
     work a couple of hours, and then she would go home.
       [See Attachment 2, Walinski interview, 2/14/97, pages 14 
     and 65]
       Under intense probing, Walinski admitted that the Gianino 
     interview may not have taken place on May 21, 1993--as stated 
     in his official report. He told McClelland: ``I interviewed 
     her [Gianino], like, two or three times.'' McClelland 
     responded to this revelation with another question: ``Why 
     isn't that reflected in the ROI [report of investigation]?'' 
     Walinski's response helps to shed light on his investigative 
     methods. He told McClelland that his reports do not 
     necessarily reflect the way he conducted the investigation:
       ``Well, because one day I went over there and she told me 
     this information. Another day I went over there and I 
     interviewed her and I was interviewing her about another, 
     you, something else.''
       [See Attachment 2, Walinski interview, 2/14/97, pages 63-
     65]
       During the second interview on June 6, 1997, McClelland 
     attempted to determine if there was any concrete linkage 
     between Walinski's handwritten notes of the Gianino interview 
     and the final version of the interview that accompanied his 
     report of investigation. McClelland determined that there was 
     essentially no linkage. Not one important fact contained in 
     the final report could be traced back to Walinski's 
     handwritten notes. And Walinski agreed with McClelland's 
     assessment. The Majority Staff examined those notes and 
     agreed with McClelland's assessment. Walinski's notes are 
     undated and cannot be considered proof that the interview 
     took place. McClelland asked Walinski about the disconnect. 
     Walinski replied:
       ``I don't write down verbatim what people tell me, so I 
     remember she just said she was out . . . I just write down 
     highlights in my notes . . . Just enough that jogs my memory 
     so I can remember what people said.''
       [See Attachment 2, Walinski interview, 6/6/97, pages 28, 
     37, 69]
     Staff Interviews Gianino
       Gianino was interviewed on June 30, 1999 regarding her 
     knowledge of Walinski's May 21, 1993 witness interview 
     report.
       At the beginning of the interview, the Majority Staff gave 
     her an opportunity to examine Walinski's report. She had 
     never seen it. She re-confirmed all the facts previously 
     developed by McClelland. Point-by-point, she characterized 
     Walinski's report as completely false. She stated that she 
     was never interviewed by Walinski but may have spoken to him 
     briefly on the telephone. She noted that he was even mistaken 
     about her GS grade. Walinski reported that she was a ``GS-12 
     Payroll Specialist'' at the top of the witness interview 
     form. In fact, Gianino was a GS-7 Payroll technician on the 
     date of the interview. When asked why she thought Walinski 
     fabricated his report of interview, she offered this opinion:
       ``DCIS was out to get Steakley. They wanted to destroy 
     him''
       On August 20, 1999, the staff conducted a follow-up 
     interview with Gianino. At that time, she was shown portions 
     of Walinski's sworn testimony to McClelland on February 14, 
     1997 where he attempted to explain the discrepancy between 
     his report and her leave records. In this testimony, Walinski 
     fabricated a new reason for his May 1993 report about her 
     extended absences from the office. He suggested that ``she 
     had cancer really bad, ovarian cancer.'' Gianino was shocked 
     that Walinski had made such a statement under oath. She said: 
     ``that statement is not true. I have never had ovarian 
     cancer.''
     Staff Interviews Walinski
       On September 8, 1999, the Majority Staff questioned 
     Walinski about the accuracy of his May 21, 1993 interview of 
     Gianino. During the meeting, he attempted to offer evidence 
     that his reported interview of Gianino did, in fact, take 
     place.
       This is the explanation offered by Walinski:
       Since Steakley had refused to cooperate with the 
     investigation and provide his state income tax returns, DCIS 
     could not prove that Steakley had failed to meet his state 
     tax obligations. This shortcoming was painfully evident when 
     the ARB Board met to review the Steakley case. Walinski's 
     report did not answer the key question: What were Steakley's 
     total unpaid tax liabilities? Exactly how much did he owe 
     Virginia and California?
       The ARB wanted that question answered. So Walinski was 
     called into the ARB Board meeting and directed to get the 
     missing information. Walinski claims he contacted Gianino on 
     the telephone and then went over to her office at Bolling 
     AFB. At this meeting, she provided the earnings data that he 
     needed to calculate Steakley's unpaid state taxes for the 
     Board. He said there were detailed notes containing the tax 
     calculations. He further stated that some of those notes were 
     in Gianino's handwriting, and they prove that the Gianino 
     interview actually took place as he reported.
       [See Attachment 14]
       Walinski offered essentially the same explanation to 
     McClelland in testimony on February 14, 1997, and June 6, 
     1997.
       Walinski's explanation does not stand up to scrutiny for 
     three reasons:
       First, Walinski's handwritten notes that he purportedly 
     took during his interview of Gianino on May 21, 1993 do not 
     contain tax calculations or references to them.
       Second, The final version of Walinski's report of interview 
     with Gianino on May 21, 1993 contains no reference to income 
     tax calculations.
       Third, since the ARB Board did not meet on the Steakley tax 
     evasion case until February 17, 1994--nine months after the 
     reported Gianino interview, and since Walinski claims the tax 
     calculations were prepared in response to a question that 
     arose during the Board meeting, the notes on tax 
     calculations--if they ever existed--could not constitute 
     proof that the Gianino interview took place as reported by 
     Walinski.
     McClelland's Evaluation of Walinski
       McClelland was interviewed on August 4, 1999 to elicit his 
     impressions on the irreconcilable differences between the 
     testimony of

[[Page 27773]]

     Walinski and Gianino. This is what McClelland stated:
       ``While he was unable to document willful intent on the 
     part of Walinski, he characterized Walinski's conduct and 
     reporting in the Steakley tax fraud case as egregious. 
     Walinski was a sloppy investigator. His report contained 
     widespread discrepancies and inaccuracies.''
     Response by Management
       This portion of the reports addresses the question of how 
     DCIS management responded to allegations that Walinski had 
     fabricated his official report on the Steakley investigation:
       Did DCIS management make an honest attempt to review the 
     allegations about Walinski's report?
       The Majority Staff was unable to find any evidence to 
     suggest that DCIS management attempted to evaluate complaints 
     that Walinski had falsified his report on the Steakley tax 
     fraud case.
       Examples of how DCIS management responded to the 
     allegations are cited below.

                                 Bonnar

       In a memo dated November 15, 1994, Bonnar--Walinski's 
     immediate supervisor--reported that he had received a 
     telephone call from Steakley the previous day--November 14, 
     1994. Bonnar reported that Steakley asked if Dupree had 
     launched an investigation into Mr. Walinski's actions. 
     Steakley had requested the investigation during his meeting 
     with Dupree on October 20, 1994. Bonnar told Steakley: 
     ``there are no pending internal administrative inquiries 
     involving your case.''
       In the memo, Bonnar also reported on Steakley's overall 
     impressions of DCIS' commitment to reviewing Walinski's 
     actions:
       ``It was clear to him [Steakley] that Mr. Dupree had 
     decided not to act on his request for an investigation.
       [See Attachment 8, page 2]

                             Hollingsworth

       According to the OSC report, Dupree asked Hollingsworth to 
     be certain that Walinski's report was consistent with the 
     facts, and Hollingsworth assured him that there was no truth 
     to Steakley's allegations:
       ``Dupree asked Hollingsworth to look into the [Walinski] 
     matter and recalled that he was assured by Hollingsworth that 
     the documents were in support of the information . . . and 
     found the allegation was not correct.''
       [See Attachment 15, pages 15 and 22]
       OSC's assessment does not seem to square with the facts.
       First, there is no evidence to suggest that Hollingsworth 
     investigated the accuracy of Walinski's report. Quite to the 
     contrary, a memo signed by Hollingsworth on November 23, 1994 
     suggests that he had no plan to do it--unless Steakley 
     provided more specific information Hollingsworth stated:
       ``Based on a review of the allegations made by SA Steakley, 
     no action will be taken until he provides written 
     documentation.''
       [See Attachment 16]
       Use of the words ``written documentation'' seems important, 
     since Steakley had taped a conversation with Gianino on 
     September 8, 1994 suggesting that Walinski had falsified the 
     interview. Testimony by Dupree, which is cited in the next 
     section of this report, indicates that management knew about 
     the tape but refused to consider it as a useful piece of 
     evidence.
       Secondly, it seems like Hollingsworth thought he knew the 
     answer to the key question surrounding the accuracy of 
     Walinski's report--Gianino's leave status. In his November 
     23, 1994 memo, Hollingsworth indicated that he had already 
     made up his mind on this core issue:
       ``The one issue that can be readily resolved is the issue 
     of Mrs. Nancy Gianino's leave status. Contrary to SA 
     Steakley's allegations, her lengthy leave was well known at 
     DCIS since she handles the payroll at Bolling AFB for DCIS.''
       [See Attachment 16]
       An independent interview of Gianino and review of her leave 
     records would have quickly resolved all the issues 
     surrounding Walinski's report of investigation. However, 
     Hollingsworth failed to pursue this line of inquiry.

                                 Dupree

       On March 13, 1997, McClelland interviewed Mancuso's Deputy, 
     Mr. William Dupree, about his knowledge of and reactions to 
     allegations that Walinski had falsified his report on the 
     Steakley tax evasion case.
       Initially, Dupree flatly denied having any knowledge about 
     Walinski's fabricated reports. For example, McClelland asked: 
     ``Were you aware of factual inaccuracies in the [Walinski] 
     ROI [report of investigation]?'' Dupree's answer: ``No.'' 
     McClelland's follow-up question: ``You weren't?'' Dupree: 
     ``No.''
       [See Attachment 2, Dupree interview 3/13/97, page 37]
       Fortunately, McClelland pressed Dupree about the issue and 
     succeeded in making Dupree admit he was aware of the problem. 
     From his response, it seems very clear that he never had any 
     intention of examining the accuracy of Walinski's reports.

                                Question

       McClelland asked him if he remembered if the subject of 
     ``false information in Walinski's ROI [report of 
     investigation] came up at a meeting in his office [Meeting 
     with Steakley and Cerasi in October 20, 1994].''
       [See Attachment 2, Dupree interview, 3/13 97, page 38]
       This was Dupree's response:

                                Response

       ``Oh, Gary [Steakley] was making all kinds of statements 
     about things. Yeah. The falseness, you know, allegedly there 
     are false statements. But you know, he didn't provide any 
     facts or information.''
       [See Attachment 2, Page 38]

                                Question

       McClelland then began questioning Dupree about his response 
     to allegations that Walinski had falsified the Gianino 
     interview. McClelland asked this question: ``Did you take any 
     action to look into that?''

                                Response

       ``Other than to assure Larry [Hollingsworth], `Let's make 
     sure that what we're doing is something we can support and 
     back it up and everything. But Gary didn't offer anything. He 
     said he had a tape [interview with Gianino on September 8, 
     1994]. And I'm saying, Gary, you know, I need more than 
     that.''
       [See Attachment 2, Page 39]

                                Question

       McClelland turned to the crucial follow-up question: ``Did 
     anybody call Gianino and find out, find out what she had 
     actually said?''

                                Response

       Dupree's response is very revealing. It suggests he never 
     had any intention of checking out the questions about the 
     inaccuracy of Walinski's report. He said:
       ``I have no reason to question the statement that she 
     provided to Walinski, an agent, no different than the 
     statement I provide to you.''

                                Question

       McClelland responded with this question: ``Well, you have 
     an allegation from Gary [Steakley]?''

                                Response

       ``Allegation. With what? He is the person that's being 
     investigated. I had reason to believe Gary [Steakley] was 
     making a speculative allegation without any evidence other 
     than he doesn't like Matt Walinski.''

                             Final Exchange

       McClelland closed this segment of the interview with 
     another question:
       ``If you were to find out that there were inaccuracies in 
     the ROI [report of investigation] with regard to--.''
       However, before McClelland could complete the sentence, 
     Depuree jumped in with this assertion: ``I would do the 
     similar thing we previously did.'' So McClelland asked: And 
     what's that? Dupree's response: ``Investigate it.''
       [See attachment 2, page 41]
       The Majority Staff's puzzled by Dupree's response to the 
     last question. He had allegations--from FLEOA and Steakley--
     about inaccuracies in Walinski's investigation report. Why 
     did he fail to investigate them?
       Hollingsworth provided a partial answer to this question 
     during an interview on August 24, 1999. Hollingsworth 
     asserted:
       ``DCIS gave absolutely no credence to Steakley's 
     allegations.''

                                Mancuso

       McClelland also interviewed DCIS Director Mancuso on March 
     13, 1997.
       Mancuso's responses to McClelland's questions clearly 
     indicate that he was aware of the allegations about 
     Walinski's report.
       This is Mancuso's response to McClelland's question about 
     his knowledge of inaccuracies in Walinski's report of 
     investigation and the Gianino interview:
       ``I know that there was a question that Gary [Steakley] had 
     as to where Matt [Walinski] had gotten the information. I 
     remember something on that  * * * * But it was--what I heard 
     of complaints, I heard from Gary. I'm not aware from Bill 
     [Dupree] or from anyone else that there was anything 
     inaccurate in Matt's report.''
       [See Attachment 2, Mancuso interview, 3/13/97, page 27]
       McClelland then asked Mancuso: ``What did you hear from 
     Gary [Steakley] on that [inaccuracies in Walinski's report]?
       In replying to this question, Mancuso indicates that 
     Steakley's allegations about Walinski's report were coming 
     into his office and being relayed to him through secondary 
     sources:
       ``I would walk down the hall and somebody would say 
     Steakley called me up last night, and he was saying that Matt 
     Walinski had not attributed remarks properly in some way and 
     that kind of thing.''
       [See Attachment 2, Mancuso interview, 3/13/97, page 26]
       McClelland follow up by asking: Did he [Steakley] tell you 
     anything about a woman over at payroll called Nancy Gianino? 
     Mancuso's reply suggests that he was not only familiar with 
     Gianino's name, but more importantly, he heard about her from 
     sources other than Steakley. It also suggests that Mancuso 
     had knowledge of the core problem with Walinski's report. 
     This is Mancuso's reply: ``I've heard that from other people. 
     I did not hear it from Gary.'' Mancuso's response to that 
     question prompted McClelland to suggest that Mancuso had

[[Page 27774]]

     ``some idea of the allegations that Steakley was making with 
     regard to Gianino?'' Mancuso admitted that he did but again 
     claimed that it was coming from Steakley.
       [See Attachment 2, Mancuso interview, 3/13/97, pages 26-27]
       Mancuso's response to these questions is consistent with 
     the assessment presented by the OSC in its report of July 21, 
     1998 on the Steakley case, OSC concluded:
       ``Mancuso was aware of the conflict between the Walinski 
     interview of Gianino and Steakley's version of the interview. 
     However, Mancuso was not aware of any manufactured 
     information relating to Steakley.''
       [See Attachment 15, page 22]
     Mancuso Ignored Walinski Problem
       To summarize, Mancuso admits that he knew about Steakley's 
     allegation that Walinski had fabricated the Gianino 
     interview, but no one in DCIS, including Dupree, had ever 
     suggested to him that there was any truth to those 
     allegations. Clearly, management did not give the allegations 
     much credibility. As Hollingworth put it: ``DCIS gave 
     absolutely no credence to Steakley's allegations.''
       It seems very clear from Mancuso's testimony that he never 
     considered the need to investigate the allegations. The 
     apparent lack of curiosity on the part of the most senior 
     criminal investigator at the DOD IG is astonishing. As a 
     result, the allegations about Walinski were never examined, 
     and no corrective action was taken.


                        the case of mr. Johanson

       Walinski initiated this inquiry--Administrative Inquiry 
     108--on February 23, 1994 after DCIS headquarters, including 
     Bonnar, Hollingsworth, and Nancuso, were officially notified 
     that a DCIS-issued weapon was stolen from the home of Special 
     Agent Stephen Johanson, who was assigned to the Van Nuys 
     Resident Agency office in California.
     Stolen Gun
       DCIS had issued Johanson two weapons: (1) a 9mm Sig Sauer 
     that he normally carried; and (2) a smaller Smith and Wesson 
     revolver for undercover work.
       Sometime between February 14 and February 16, 1994, while 
     Johanson was participating in the execution of a search 
     warrant in San Diego, his home in Palmdale was burglarized. 
     The burglars stole a number of items valued at about 
     $10,000.00, including jewelry and the loaded Smith and Wesson 
     revolver. The stolen revolver was issued to Johanson because 
     of his involvement in an undercover operation the previous 
     year. Since an earthquake had severely damaged the Van Nuys 
     Resident Agency office and made it insecure--and no Class-5 
     safe was available there, Johanson kept this weapon stored on 
     the top shelf of his bedroom closet under a pile of clothing. 
     When he returned from San Diego on February 16th and 
     discovered the burglary, he immediately notified the local 
     police authorities and DCIS management of the break-in and 
     loss of the service weapon.
     Walinski's Report
       Walinski reported that he conducted the following 
     interviews of DCIS officials assigned to the Los Angeles 
     Field Office: (1) Richard Smith, Special Agent in Charge 
     (SAC)--March 4, 1994; (2) Robert Young, Assistant Special 
     Agent in Charge (ASAC)--March 2, 1994; (3); Jon Clark, Group 
     Manager--March 2, 1994; (4) Michael R. Shiohama (RAC)--March 
     2, 1994; (5) Michael D. Litterelle, Firearms Coordinator--
     March 3, 1994; and (6) Stephen J. Johanson, Special Agent--
     March 3, 1994. While all the interviews were conducted during 
     a 3-day period, March 2-4, it took Walinski more than five 
     weeks to sign, date, and finalize these interviews. They are 
     actually dated April 12-13, 1994.
       Based on these interviews, Walinski reached four important 
     conclusions. These conclusions are contained in his report of 
     investigation: First, Johanson's supervisors--RAC, SAC, and 
     ASAC--never authorized Johanson to have the undercover weapon 
     issued to him. Second, his supervisors did not know that 
     Johanson had the undercover weapon until it was reported as 
     stolen. Third, Johanson informed the Group Manager (Clark) on 
     February 10, 1994 that he had the undercover weapon, and the 
     Group Manager ``immediately'' instructed him to turn it in at 
     the next firearms range training session scheduled for March 
     7, 1994. And fourth, neither Johanson nor the Firearms 
     Coordinator could remember who authorized Johanson to have 
     the undercover weapon.
       [See Attachment 1, Report of Investigation, Synopsis]
       Walinski completed this inquiry on April 15, 1994. On that 
     date, Hollingsworth forwarded Walinski's report of 
     investigation and appended interviews to Dupree ``for 
     whatever action you deem appropriate.''
       [See Attachment 1, letter of transmittal]
     ARB Recommendation
       The Administrative Review Board (ARB) met on April 21, 1993 
     to consider Walinski's report on the Johanson case.
       After reviewing Walinski's report, the ARB reached these 
     conclusions: (1) Johanson stored a government-issued weapon 
     at his residence while on ``extended leave or non-duty status 
     for 5 or more consecutive days'' in violation of Section 
     3807.4 of the DCIS Special Agent's Manual; and (2) Johanson 
     was not authorized to possess two issued weapons. The ARB 
     also concluded that Johanson failed to return the weapon at 
     the conclusion of the undercover operation and failed to sign 
     the proper forms when the weapon was issued to him.
       The ARB recommended that Johanson be suspended for 10 days 
     without pay. The ARB's report, dated May 9, 1994, was 
     forwarded to the SAC, Los Angeles Field Office, Richard R. 
     Smith, for consideration.
       [See Attachment 2, page 1]
     Charges
       On June 24, 1994, Smith issued a Notice of Proposed 
     Suspension to Johanson. Smith recommended that Johanson be 
     suspended without pay for 8 calendar days: for failing ``to 
     sign for, properly secure, and return a weapon issued to you 
     for an undercover assignment.''
       Smith's memo to Johanson recited many facts taken directly 
     from Walinski's report of investigation and accompanying 
     interviews. These same facts were subsequently disputed--and 
     formally challenged--by many of the agents involved.
       Smith's decision to discipline Johanson seemed to hinge on 
     one piece of disputed information developed by Walinski. This 
     was a meeting that allegedly occurred in the Van Nuys 
     Resident Agency office on February 10, 1994. At this meeting, 
     Walinski claimed that Group Manager Jon Clark informed 
     Johanson that he would not be assigned to an ongoing 
     undercover operation known as ``Skyworthy.'' According to 
     Walinski, Johanson then informed Clark that he still had an 
     undercover weapon. At this point, Walinski states, Clark told 
     Johanson to bring the weapon to the next firearms 
     qualification session to be held on March 7, 1994. This 
     particular assertion appears in Walinski's interviews of 
     Young, Clark and Johanson as well as in his report of 
     investigation. The February 10, 1994 meeting is the 
     centerpiece of Smith's Notice of Proposed Suspension. Smith 
     used this piece of information as the basis for charging 
     Johanson with failing to return a weapon issued to him for 
     undercover work. This is what Smith said about the alleged 
     February 10, 1994 meeting attended by Clark:
       ``On February 10, 1994, you [Johanson] were informed by 
     Group Manager Clark that you would not be part of the 
     undercover operation relocated from 50PX [Phoenix]. When you 
     told Group Manager Clark that you still had a second weapon 
     in your possession he instructed you to bring it to the next 
     50LA range qualification on March 7, 1994. Before you could 
     return the weapon, your home was burglarized and the gun was 
     stolen.''
       [See Attachment 3, page 1]
     Rank and File Challenge Walinski's Report
       The first formal complaint about Walinski's report on the 
     stolen gun case was initiated on the day Johanson received 
     Smith's Notice of Proposed Suspension--July 6, 1994--and saw 
     the erroneous information about the February 10th meeting.
       The first complaint was embodied in a sworn statement 
     signed jointly by Supervisory Special Agent Jon Clark and Mr. 
     Thomas J. Bonnar--Walinski's immediate supervisor at DCIS 
     Headquarters in Washington. While this statement was signed 
     on July 19, 1994, it concerned a telephone conversation 
     between Johanson and Clark on July 6, 1994. The joint Clark/
     Bonnar statement clearly suggests that Walinski falsified 
     information in this report of investigation on the stolen gun 
     case.
       Portions of the joint statement are summarized below.
       After receiving Smith's Notice of Proposed Suspension on 
     July 6, 1994, Johanson called Jon Clark on the telephone to 
     express alarm and confusion over a statement in Smith's memo 
     that was attributed to Clark. Johanson read the following 
     statement to Clark:
       ``That he [Johanson] was instructed by Group Manager Jon 
     Clark on February 10, 1994, that he was not going to be 
     participating in the undercover operation at LAFO [Los 
     Angeles Field Office] and that he should return the 
     undercover weapon he had at the next firearms 
     qualification.''
       [See Attachment 4, page 1]
       Johanson informed Clark that he had no recollection of 
     receiving this instruction from Clark and asked Clark if he 
     could recall giving it. This is how Clark responded to the 
     news:
       ``I was astonished and confounded by this statement. I 
     asked him to re-read the statement. I said I have no idea how 
     or why that statement was in the letter. I said I had no 
     recollection of providing him those instructions nor had I 
     any recollection of saying that to anyone. Moreover, I was 
     not aware of the fact that he had an undercover weapon.''
       [See Attachment 4, page 1]
       Clark told Johanson that he would check his calendar for 
     the date of February 10, 1994 to verify whether he was at the 
     meeting in the Van Nuys Resident Agency office as reported by 
     Walinski. In checking his calendar, he discovered that he was 
     not in the Van Nuys office that day. Instead, he spent that 
     entire day at the El Segundo Resident Agency office on other 
     business with both Young and Smith [Smith and Young later 
     confirm the fact. Smith and Young were the

[[Page 27775]]

     SAC and ASAC in the Los Angeles Field Office].
       Following the phone conversation with Johanson, Clark 
     contacted Smith and Young in the Los Angeles Field Office to 
     inquire about the origins of the assertions in Smith's letter 
     to Johanson. Smith advised Clark that the information on the 
     February 10, 1994 meeting was extracted for Walinski's 
     ``internal'' report of investigation (ROI). At that point, 
     Clark assured Smith that ``he had not provided a statement on 
     this investigation.'' Clark asked Smith to double-check the 
     ROI ``to be sure that was no mistake.'' Smith re-checked the 
     ROI and ``advised me that there was a DCIS Form 1, Report of 
     Interview of me.''
       Clark denied again that he was ever interviewed by 
     Walinski. This is what he said to Smith:
       ``I was perplexed. I advised SAC Smith that I had no 
     recollection of this report being taken and asked that I be 
     permitted to read it to refresh my recollection. He said no. 
     . . . I informed SAC Smith that these were facts that I not 
     only did not say--but information I did not know. . . . I 
     could not corroborate the statement attributed to me in SAC 
     Smith's letter to Johanson. . . . I cannot believe I made 
     those statements since I had no specific knowledge of those 
     facts. The statements appear to be factually inaccurate, and 
     therefore would not have been stated by me.''
       [See Attachment 4, page 1-2]
       About a week later--on July 5, 1994--Mr. Michael D. 
     Litterelle [Firearms Coordinator] informed Clark that he had 
     a copy of Walinski's ROI, and Litterelle actually gave Clark 
     a copy of Walinski's form 1 Witness Interview of Clark. After 
     reading it, Clark stated:
       ``I read the interview and found it contained statements 
     that were attributed to me that I knew were untrue. . . . I 
     never made this statement.''
       [See Attachment 4, page 3]
       The exact distribution of the joint Bonner-Clark statement 
     is unknown. However, since it was ``solicited'' by Bonner, 
     the Assistant Director of internal affairs, it would not be 
     unreasonable to assume that Hollingsworth--the director--and 
     other DCIS managers knew about it and actually saw it.
     Supervisor Challenges Walinski's Report
       Several weeks after the Bonnar/Clark complaint, another 
     formal complaint about Walinski's report was submitted to 
     Hollingsworth's office. This one was signed on August 4, 1994 
     by ASAC Young in the Los Angeles Field Office. It contained a 
     detailed, line-by-line commentary on inaccuracies in 
     Walinski's interview of Young along with highly critical 
     comments on Walinski's interviews of Clark and Shiohama on 
     the same date [March 2, 1994].
       Young stated that he was ``somewhat shocked'' after reading 
     Walinski's report. He stated that Walinski's report contained 
     statements that were misleading, ``wrong'' and 
     ``inaccurate.'' He said that Walinski attributed statements 
     to him that he never made.
       After alluding to the ``significant discrepancies'' in 
     Walinski's interview of Clark, Young reports that Shiohama 
     had advised him that ``there were subject areas in the report 
     or statements that he had not discussed with SA Walinski. 
     Shiohama stated that the last paragraph of his interview was 
     totally inaccurate.'' However, both Young and Shiohama 
     insisted that portions of their interviews appeared to 
     accurately reflect what they had said to Walinski.
     Appeal to Management About Walinski's Reports
       In asking Hollingsworth to examine the discrepancies in 
     Walinski's report, Young makes an appeal to senior management 
     on behalf of rank and file agents:
       ``I am not trying to cause you or Matt [Walinski] problems. 
     But in this situation I am caught in the middle. I have 
     agents that are in the process of being disciplined and based 
     on what I know now the recommended disciplinary actions may 
     be based on incomplete and inaccurate information. The agents 
     throughout the Field Office know this and are now finding 
     fault with management for not taking some type of action to 
     have this situation re-evaluated.''
       [See Attachment 5, Note from Young to Hollingsworth]
       Young's report was officially moved up the chain of 
     command--to the top. Young forwarded it to Bonnar who, in 
     turn, submitted it to Hollingsworth, and Dupree--Mr. 
     Mancuso's Deputy. However, during an interview on September 
     14, 1999, Mancuso denied having knowledge of the allegation 
     that the Clark interview was fabricated until recently or 
     August 1999.
     FLEOA Letter
       Young's formal complaint to Hollingsworth about Walinski's 
     inaccurate reports was followed almost immediately by a 
     formal complaint from another source.
       During the adjudication phase of the stolen gun case, 
     Johnson was represented by an attorney with the Federal Law 
     Enforcement Officers Association (FLEOA), Luciano A. Cerasi--
     the same lawyer who represented Steakley in the tax evasion 
     case.
       In a letter to Dupree, dated August 8, 1994, regarding the 
     Johanson case, Cerasi raised the possibility that Walinski 
     had falsified his report of investigation. Cerasi's letter 
     contains this explosive allegation:
       ``It is questionable whether SA Walinski even interviewed 
     SA Clark.''
       Cerasi also raised questions about why five weeks elapsed 
     between the dates on which Walinski conducted the disputed 
     interviews and the final dates on the interview reports. 
     Cerasi suggested that this delay violated DCIS policy 
     requiring that witness reports be completed and finalized 
     within 3 working days of the investigative activity. Cerasi 
     characterized Walinski's report as a ``shabby investigative 
     effort'' that would only serve to demonstrate to other agents 
     that in DCIS ``justice is unattainable.''
       [See Attachment 6, pages 3-4]
     Attempted DCIS Coverup Possible
       Initially, DCIS management may have tried to put a lid on 
     the groundswell of adverse information on Walinski's reports 
     that began to surface in mid-1994. First, there were 
     complaints from rank and file agents--Clark, Young, and 
     Shiohama--in July and August 1994. Those were followed 
     immediately by the FLEOA letter. A month later--in September 
     1994--FLEOA filed a second complaint with management. This 
     one concerned allegations that Walinski had fabricated the 
     Gianino interview.
       The sworn statement signed jointly by Bonnar and Clark 
     alludes to a possible attempt by DCIS management to keep a 
     lid on all the complaints about Walinski's reports:
       ``On July 8, 1994, ASAC Young advised me that HQ [DCIS 
     Headquarters] had decided that they would wait and not raise 
     the issue regarding my discrepant interview unless it was 
     raised by SA Johanson. I [Clark] expressed concern that this 
     may be released to agents and that they may conclude that I 
     fabricated this story and it would therefore discredit me. I 
     was informed that the information was controlled in its 
     release.''
       [See Attachment 4, pages 2-3]
       On August 9, 1999, the staff contacted the DOD IG with this 
     question: ``Who at DCIS made this decision?'' The following 
     answer was provided on September 30, 1999: ``We have not been 
     able to determine who, if anyone, made this alleged 
     decision.''
     Re-Investigation
       As a result of all the complaints. DCIS management 
     eventually made a decision to launch a re-investigation of 
     the Johanson stolen gun case. The re-investigation was 
     conducted by SA Timothy L. Shroeder from August 10, 1994 
     until October 5, 1994.
       Unfortunately, the re-investigation was conducted in a 
     complete vacuum--as if the entire matter had never been 
     investigated by Walinski.
       It is easy to understand why DCIS needed to go back to 
     square one and re-examine all the facts bearing on the stolen 
     weapon. The second investigation had to be impartial and 
     independent after Walinski was accused of falsifying 
     information contained in the original investigation. At the 
     same time, DCIS management had a responsibility and an 
     obligation to determine whether Walinski had falsified his 
     report--as alleged by rank and file agents. Unfortunately, 
     there was no attempt to reconcile the facts contained in 
     Walinski's report of investigation with the facts developed 
     in the re-investigation. In fact, the agent in charge of the 
     re-investigation--Shroeder--received specific instructions to 
     steer clear of the disputed interviews. Hollingsworth gave 
     him these instructions: The ``new investigation should be 
     conducted without reviewing the results of the previous 
     interviews.''
       [See Attachment 7]
       Clearly, Shroeder needed to avoid the pitfalls created in 
     first investigation, but management should have assigned 
     another agent to examine the allegations made about 
     Walinski's report. If Walinski bungled his investigation and 
     the case had to be re-investigated, then DCIS management 
     should have determined exactly where and how Walinski's 
     investigation deviated from accepted standards. All the 
     complaints from rank and file agents and the FLEOA attorney 
     required nothing less than that.
     New Charges
       Based on the re-investigation, Smith recommended that 
     Johanson be suspended without pay for 10 calendar days. 
     Smith's second Notice of Proposed Suspension was dated 
     November 23, 1994. Smith charged Johanson with violating two 
     sections of the Special Agents' Manual: (1) Failing to 
     exercise ``utmost caution'' in storing a firearm at his 
     residence; and (2) Storing a weapon at his residence while 
     away from his assigned office for an extended time.
       [See attachment 8, pages 1-2]
       In the final notice on suspension, dated February 9, 1995, 
     Durpee suspended Johanson for 3 calendar days, beginning on 
     February 15, 1995.
       [See attachment 9]
     Need for Investigation Questioned
       It's difficult to understand why DCIS would suspend an 
     agent for losing a gun that was stolen from his home during a 
     burglary. The staff checked with other federal law 
     enforcement authorities to determine how similar cases have 
     been handled in the past. Under normal circumstances, they 
     suggested that a routine administrative inquiry would be 
     conducted. Once it was determined that

[[Page 27776]]

     the firearm was stolen during a burglary and the theft was 
     duly reported to the proper authorities, the entire matter 
     would be dropped.
     Walinsky ``Disciplined'' for Bungled Investigation
       On July 20, 1999 and again on August 4, 1999, Ms. Jane 
     Charters was interviewed regarding her knowledge of personnel 
     actions taken against Walinski in the wake of the bungled 
     Johanson investigation.
       Ms. Charters is currently the Director of the Investigative 
     Support Branch at DCIS--the same position she occupied in 
     1994 during the Johanson and Steakley investigations. She 
     exercises personnel responsibilities in DCIS.
       During the first interview of July 20, 1994, Charters 
     stated that as a result of mistakes in stolen gun case 
     investigations, DCIS ``lost confidence'' in Walinski and 
     transferred him out of internal affairs and into her office. 
     In the new position, Walinski was no longer conducting 
     internal investigations. Instead, he was to be responsible 
     for DCIS training, physical fitness and security. Charters 
     also reported that Walinski was issued a letter of reprimand 
     that was placed in his file--a fact that was confirmed by 
     Bonnar during an interview on July 12, 1999.
     Walinski's Personnel File
       On two occasions in July--July 7th and again on July 23, 
     1999, the Majority Staff examined Walinski personnel file to 
     determine if the disciplinary actions taken against him for 
     his mistakes in Johanson investigation--as described by 
     Charters and others--were accurately reflected in performance 
     ratings and other personnel actions in his file.
       The Majority Staff found no evidence that Walinski was ever 
     disciplined for the failed Johanson gun case. Quite to the 
     contrary, the available evidence suggests Walinski was 
     actually rewarded for what happened.
       Here is what the Majority Staff found in his file:

                  Employee Performance Rating--1993/94

       For the rating period August 26, 1993 to March 31, 1994, 
     Walinski received an ``outstanding'' rating.
       The outstanding rating applied to the period of time when 
     Walinski conducted two investigations--Steakley and 
     Johanson--where the accuracy of his reports were later 
     questioned. In fact, the rating period included the date--
     March 2, 1994--on Walinski claims he conducted interviews 
     with Young, Clark, and Shiohama. Those reports of interview 
     were later characterized as false, misleading and inaccurate 
     by the agents involved and the FLEOA attorney. The Gianino 
     interview occurred on May 21, 1993--just prior to the 
     beginning of the rating period, but considerable 
     investigative activity on the Steakley case occurred during 
     his rating period.
       The rating officials offered this comment: ``Walinski 
     continues to excel in every aspect of his job. He is a very 
     valued employee of DCIS.'' The outstanding rating was 
     approved by Bonnar and the Director of internal affairs, 
     Hollingsworth, on April 15, 1994--the exact same day that 
     Hollingsworth forwarded Walinski's completed report of 
     investigation on the Johanson case to Dupree.
       [See attachment 10]

               Incentive Award Nomination--Recommendation

       On April 25, 1994, Hollingsworth recommended that Walinski 
     receive a performance award of $1,200.00 to accompany the 
     ``outstanding'' rating he received for the period August 1993 
     to March 1994--the same period when he conducted witness 
     interviews in the Johanson case that were later characterized 
     as false, inaccurate and misleading.
       [See attachment 11]

                       Previous Cash Award--1993

       The form used to recommend the $1,200.00 performance award 
     also noted that Walinski had not received any other 
     performance awards in the preceding 52 weeks. His personnel 
     file indicates otherwise. He received a ``Special Act or 
     Service Award'' of $2,000.00 on May 2, 1993--several weeks 
     before his fabricated interview with Gianino on May 21, 1993.
       [See Attachments 11 & 12]

                    Special Performance Rating--1994

       This a special rating given to Walinski immediately before 
     his sudden transfer out of internal affairs and into the 
     Investigative Support Directorate. It was the last rating he 
     received for his work in internal affairs and covered a 
     ``shortened rating period'' of April 1, 1994 through July 2, 
     1994. This rating period includes the date on which Walinski 
     finalized the report of investigation on the Johanson case--
     April 15, 1994. The closing date for this reporting period--
     July 2, 1994--came one day before his move to Charters' 
     office and just four days before the first known written 
     complaint about Walinski's false and inaccurate reports 
     reached DCIS Headquarters in Washington.
       Bonnar and Hollingsworth gave him a ``fully successful'' 
     rating, but for unexplained reasons, took over three months 
     to approve it. It was finally signed on October 12, 1994. 
     Walinski's other ratings were approved quickly--within two 
     weeks of the end of the rating period.
       [See Attachment 12].
       DCIS says the delay was due to ``an administrative 
     oversight.''
       Walinski stated August 2, 1999 that this is the rating 
     where ``he took a hit'' for his mistakes in the Johanson 
     case. The language in the performance rating documents seemed 
     to support Walinski's assessment:
       ``Unfortunately, during this rating period he failed to 
     show due diligence and accuracy in reporting the results of 
     some interviews with regard to one administrative inquiry. 
     This one shortfall in SA Walinski's performance is not 
     typical of the otherwise high quality and professional level 
     of his work.''
       [See Attachment 13, pages 3-4]
       when Bonnar and Hollingsworth signed this document in 
     October 1994, they had already received the allegations about 
     Walinski's false reports on the Steakley tax evasion case. 
     For that reason, the reference to ``accuracy of reporting'' 
     in just one internal investigation does not appear to square 
     with the facts.

                              Reassignment

       Walinski's personnel records indicate that his transfer 
     from internal affairs to the Investigative Support Branch 
     became effective on July 3, 1994.
       [See Attachment 14]
       As previously reported, Charters suggested during two 
     interviews that DCIS management ``had lost confidence in 
     Walinski'' as an investigator ``and moved him into her 
     office'' as a disciplinary measure. Charters' description of 
     the reasons behind Walinksi's transfer are consistent with 
     those provided by Mancuso during an interview on September 
     14, 1999.
       Hollingsworth and Walinski, by comparison, provided a 
     completely different set of reasons behind the July 1994 
     move.
       During an interview on August 24, 1994, Holllingsworth 
     suggested that the move was not taken for disciplinary 
     reasons: ``It was for his health.'' He said Walinki ``blew'' 
     the Johnason case because ``he was totally stressed out.'' 
     Hollingsworth feared he might ``have a heart attack.''
       Walinski meaintains that the transfer was driven by routine 
     considerations.
       During an interview on September 8, 1999, he gave the 
     following reasons for the move: (1) There was an attractive 
     opening in Charters' organization; (2) The opening offered 
     him some growth potential into a management position in the 
     future; (3) He had completed his planned 3-year tour of duty 
     in internal affairs; and (4) He had a plan for addressing the 
     training deficiencies in Charters' Directorate. When asked if 
     there was any other reasons for the move, he said ``No.''
       [See Attachment 15, pages 1-2]
     Walinski Assigned Inspection Duties
       A personnel document, signed by Bonnar and Hollingsworth on 
     October 12, 1994 suggests that Walinski conduct inspections 
     long after he was reassigned to ``training'' in Charters' 
     office. Along with inquiries of employee misconduct, 
     inspections are the main responsibility of the internal 
     affairs office. This document suggests that Walinski continue 
     to perform, work for the internal affairs office--despite his 
     removal from that office. This document shows that Walinski 
     played a leadership role in various inspections as follows:
       ``He also worked on the preparation for the Los Angeles FO 
     [field office] inspection. Although the Los Angeles FO 
     inspection was conducted after the end of this special rating 
     period when SA Walinski reported to his new assignment in the 
     Investigative Support Directorate, he returned to assist with 
     the LA inspection and played a significant role by leading 
     inspection efforts in the DCIS offices in Phoenix, Tuscon, 
     Albuquerque, and Honolulu as well as Los Angeles. He worked 
     independently on these inspections without the need for any 
     close supervision.''
       [See Attachment 13, page 3]
       During an interview on September 14, 1999, Mancuso 
     expressed surprise that Walinski led the inspection of the 
     Los Angeles field office after his reassignment:
       Mancuso said he had no knowledge of Walinski's involvement 
     in the inspection of the LA Field Office after his transfer. 
     He would be surprised and concerned if true, and said he 
     would be checking on the accuracy of that information.
     Decision on Inspection Duties Questioned
       In an information paper provided on September 30, 1999, 
     Mancuso admitted that Walinski was involved in the inspection 
     of the Los Angeles Field Office. However, Mancuso maintains 
     Walinski was kept on the team only ``to train his 
     replacement'' and ``did not participate in the actual 
     inspection.'' Mancuso's statement conflicts with the 
     personnel document signed by Bonnar, Hollingsworth, and 
     Walinski in 1994 referenced above.
       It is very difficult to understand why Walinski would have 
     been assigned to prepare the inspection report on the Los 
     Angeles Field Office in the wake of all the allegations and 
     complaints flowing from the Johanson case. The re-
     investigation of the Johanson case, which began in August 
     1944 and was concluded in October 1994, was in progress while 
     Walinski conducted the inspection of the Los Angeles Field 
     Office. That re-investigation was specifically triggered by 
     his disputed interviews of at least three agents assigned to 
     the Los Angeles

[[Page 27777]]

     field Office. Those agents made formal complaints to 
     management about the quality of Walinski's reports. In 
     effect, these agents ``blew the whistle'' on Walinski. 
     Assigning Walinski a leadership role in the Los Angeles Field 
     Office inspection could be viewed as a retaliatory measure, 
     and as such, a very questionable management decision.

                        Performance Award--1994

       On July 24, 1994--exactly three weeks after his transfer 
     from internal affairs into training, Walinski received a cash 
     award of $1,200.00.
       [See Attachment 16]
       At our meeting with Charters on August 4, 1997, she offered 
     an explanation for the $1,200.00 cash award--in light of 
     Walinski's mistakes on the Johanson case. She suggested that 
     it was given for the rating period August 26, 1993 through 
     March 31, 1994--``before the problem arose over the Johanson 
     gun case.''
       Charters' explanation is not supported by the facts. The 
     facts cited below clearly indicate that DCIS management was 
     aware of the complaints about Walinski's report at least 
     three weeks before Walinski received the cash award:

       --The rating period for which the cash award was given 
     included the date--March 2, 1994--on which Walinski conducted 
     interviews of agents that were later characterized as false, 
     misleading and inaccurate in rank and file complaints to 
     management;
       --Management claims that Walinski was transferred from 
     internal affairs into training on July 3, 1994 as a 
     disciplinary measure for the mistakes he made in the Johanson 
     case. This indicates that management knew about the 
     allegations prior to that date;
       --Walinski admitted that he received a reprimand for making 
     ``administrative errors'' in his report on the Johanson case 
     while still assigned to internal affairs--or prior to July 3, 
     1999;
       --Clark informed DCIS management, beginning on July 6, 
     1994, that Walinski's March 2, 1994 interview of Clark was 
     completely false;

       The facts show that the $1,200.00 cash award given to 
     Walinski on July 24, 1994 came at least three weeks after 
     DCIS management had knowledge that Walinski had falsified 
     reports on the Johanson case.

                               Reprimand

       The staff was never able to locate the letter of reprimand 
     that was placed in Walinski's file, nor was the staff able to 
     establish the exact date on which the reprimand was given.
       During an interview on July 12, 1999, Walinski's immediate 
     supervisor, Tom Bonnar, stated that he was ``furious'' with 
     Walinski about the Johanson interview statements. He said 
     Walinski ``was verbally and officially reprimanded and a 
     letter was placed in his file.'' Bonnar doubted the reprimand 
     would still be in his personnel file, since it's customary to 
     remove them after a brief period of time.
       [See Attachment 17, page 2]
       On September 8, 1999, Walinski confirmed that Bonnar had 
     indeed ``handed him'' a ``letter of caution'' for making 
     ``administrative errors'' on the Johanson case, but he could 
     not remember if he kept it for 30, 60, or 90 days. In a 
     telephone conversation on August 2, 1999, Walinski claimed 
     that ``Bonnar told him to destroy it in the shredder after 30 
     days.''
       Walinski also seemed somewhat confused about the actual 
     date of the reprimand. Initially, he suggested that it was 
     dated October 12, 1994. However when it was pointed out that 
     date was the exact day Bonnar and Hollingsworth approved his 
     last performance evaluation for internal affairs, he 
     suggested that October 12, 1994 might have seen the day he 
     destroyed the letter of reprimand. Mr. Walinski seemed 
     certain of one fact: he received the reprimand while still in 
     internal affairs. This statement is consistent with 
     statements by Charters and Mancuso that the reprimand was 
     issued before July 3, 1994.
       [See Attachment 15, page 2]
     Walinski's Rebuttal
       Walinski has a simple explanation for the inaccuracies in 
     his report of investigation on the Johanson stolen gun case. 
     His explanation was given during testimony to McClelland on 
     February 14, 1997 and confirmed in a telephone conversation 
     on August 2, 1999.
       He claims it was a clerical error. In a nutshell, this is 
     his explanation:
       ``The headers got switched. The wrong headers ended up on 
     the Form 1 interview sheet. I said that one guy said one 
     thing when I said another guy said another thing. This 
     happened when the interviews got typed up. We had a secretary 
     that wasn't a top quality individual. She typed them up 
     wrong. . . . But it was my mistake.''
       [See Attachment 18, interview, 2/14/97, pages 74-75, and 
     telephone interview 8/2/99]
       During an interview on September 8, 1999, Walinski offered 
     a similar explanation:
       ``It was an administrative error. I roughed out the form 1 
     interview reports on my computer and gave my write up to a 
     secretary. The secretary got the headers mixed up and 
     switched some paragraphs.''
       [See Attachment 15, page 2]
       Walinski's explanation is highly questionable for two 
     reasons: 1) if the Clark interview never took place--as Clark 
     stated, then how could Clark's name end up on a Form 1 
     ``header'' that was only inadvertently ``switched''? Clark's 
     name not should not have appeared on the radar screen; And 2) 
     Both Young and Shiohama contend that portions of their 
     interviews were true and accurate. If portions of the Young 
     and Shiohama interviews were true and accurate, then how 
     could the incorrect portions of their interviews involved 
     ``switched headers''?
       Furthermore, Walinski states that he prepared his write-ups 
     of the interviews on a computer and transferred them to a 
     clerk typist to be finalized. That being the case, a mix up 
     of headers seems improbable.
     Walinski rule
       Following the Johanson investigation, DCIS management 
     instituted investigative reforms, including the so-called 
     ``Walinski rule.'' Under this rule, all interviews have to be 
     recorded and transcripts reviewed and verified by witnesses.
     Management Backs Up Walinski
       During an official DOD IG interview by McClelland on March 
     13, 1997, both Dupree and Mancuso attempted to diminish the 
     significance of the allegations that Walinski had falsified 
     his reports on the Johanson case. They seemed to accept the 
     `'wrong headers'' excuse used by Walinski.
       McClelland questioned Dupree on March 13, 1997 about 
     ``Walinski's ability as an investigator'' and problems with 
     regard to ``factual inaccuracies'' in his reports. During the 
     course of that interview, Dupree offered Walinski's ``wrong 
     header'' excuse. This is what Dupree said:
       ``Matt's [Walinski] probably one of the most capable 
     investigators I know. It wasn't factual inaccuracies. It was 
     in the deliberation of putting a lot of statements together. 
     Unfortunately, some of the comments that were made by 
     individuals were transposed to other individuals. The 
     statements and the facts were absolutely correct. They were 
     just attributed to the wrong person.''
       [See Attachment 18, interview, 3/13/97, pages 45-46]
       During an interview on March 13, 1997, McClelland asked 
     Mancuso if he ever got ``any word from Bill Dupree about 
     inaccuracies in the report of investigation that Walinski 
     prepared.'' Although McClelland appeared to be asking about 
     the Steakley report, Mancuso's response seems to address the 
     Johanson case. Mancuso also accepted the ``switched headers'' 
     excuse:
       ``No. Again, I'm a little bit fuzzy because we had one or 
     two instances where Matt [Walinski] on different cases which 
     were in the same area, where Matt had inaccurately attributed 
     certain remarks--had confused witnesses' names in his notes. 
     But I don't recall any inaccuracies involving Steakley. . . . 
     Gary [Steakley] was saying Walinski's responsible for other 
     cases that are now suspect because of inaccuracies. . . .''
       [See Attachment 18, interview, 3/13/97, pages 25-46]
     Management's Knowledge of Allegations
       The testimony given by Dupree and Mancuso to McClelland on 
     March 13, 1997 clearly indicates that senior management at 
     DCIS was aware of the allegations about Walinski's falsified 
     report on the Johanson case.
       Rank and file complaints about Walinski's false and 
     misleading reports went right to the top at Headquarters as 
     follows:

       --On July 19, 1994, Agent Clark signed a sworn statement, 
     alleging that Walinski had falsified his report [based on 
     complaints received from Johanson on July 6, 1994]; Clark's 
     statement was ``solicited'' and witnessed by Bonnar, the 
     Assistant Director of Internal Affairs and Walinski's 
     immediate supervisor; A document indicates that DCIS 
     headquarters was aware of this complaint on or about July 8, 
     1994;
       --On August 4, 1994, ASAC Young in the Los Angeles Field 
     Office formally complained to Hollingsworth about Walinski's 
     false and inaccurate reports of interview with agents Young, 
     Clark, and Shiohama; Young reports that rank and file agents 
     are ``finding fault with management for not taking some type 
     of action to have this situation re-evaluated;'' 
     Hollingsworth forwarded Young's formal complaint to Mancuso's 
     Deputy, Dupree;
       --On August 8, 1994, FLEOA addressed a formal complaint to 
     Dupree, alleging that Walinski falsified his report of 
     investigation;
       --On August 10, 1994, management launched a re-
     investigation of the Johanson case based on rank and file 
     complaints about Walinski's reports;
     Mancuso's Knowledge of Allegations
       Mancuso's broad responsibilities for internal 
     investigations suggest that he would have been informed 
     immediately of rank and file complaints about the integrity 
     of an ongoing inquiry. Testimony and statements indicate that 
     Mancuso was kept up-to-date on the progress of all ongoing 
     internal investigations. Mancuso's responsibilities as DCIS 
     Director--and the DCIS person chiefly responsible ``for 
     staffing and direction for the conduct of internal 
     investigations''--meant that he would have been informed 
     about the controversy over the Walinski report on the 
     Johanson case and would have been involved

[[Page 27778]]

     in the decision to re-investigate the case and reassign 
     Walinski to Charters' office.
       During an interview on September 14, 1999, Mancuso was 
     questioned about his knowledge and awareness of the 
     allegations about Walinski's reports. This is what Mancuso 
     said:
       Mancuso admitted that he knew about ``the problems of 
     Walinski's reporting'' on the Johanson case back in 1994, but 
     he contends that he was unaware of the allegations that 
     Walinski had fabricated the Clark interview in its entirety 
     ``until a few weeks ago'' or in August 1999.
       Mancuso said that Walinski was given a reprimand and 
     transferred [in July 1994] because of rank and file 
     complaints, of which he was aware, about the credibility of 
     the work being performed by the internal affairs office. He 
     said the ``transfer and reprimand were the culmination of 
     several negative reports on Walinski.'' As a result of these 
     complaints, policy changes--like the need to record and 
     verify interviews--were put in place--and the Johanson case 
     was re-investigated.
       Mancuso insisted that he ``did not know about the extent of 
     Walinski's mistakes.'' He claims that as DCIS Director, he 
     normally ``did not get beyond that level of detail,'' though 
     he admitted he got deeply involved with the Steakley case 
     because of the lack of progress in the investigation.
       [See attachment 19, page 1]
     Decision to Re-Open Case
       The directive that re-opened the Johanson case was dated 
     September 23, 1994. This memo suggests that DCIS managers 
     were aware of rank and file complaints about Walinski's 
     report.
       The memo states that the Johanson case was re-opened 
     ``after allegations of discrepancies were made concerning the 
     original interviews.'' It also states that Charters and 
     Hollingsworth directed the assigned agent [Schroeder] ``to 
     conduct an independent inquiry concerning the circumstances 
     surrounding'' Johanson's stolen firearm.
       [See attachment 7]
     Legal Questions about Walinski's Reports
       There seems to be a consensus within DCIS that Walinski's 
     reports on the Steakley and Johanson were ``inaccurate.'' 
     DCIS thinking seems to suggest that Walinski's reports might 
     have carelessly deviated from the facts, or he may have 
     misinterpreted a statement. He was just mistaken or careless. 
     Or as Walinski put it, he just made ``administrative 
     errors.''
       During an interview on July 12, 1999, Bonnar characterized 
     Walinski's reports this way:
       ``The statements in Walinski's reports were inaccurate and 
     not falsified.''
       [See attachment 17, page 2]
       Mr. John Kennan, the current Director of DCIS, was 
     interviewed on August 4, 1999. He indicated that he was well 
     aware of all the adverse information on Walinski's reports in 
     August 1994, but he attempted to minimize the significance of 
     the problem. He said those reports were not a concern 
     because:
       ``Walinski's inaccurate reports did not affect the outcome 
     of the investigation.''
       McClelland offered a similar view in an interview with OSC 
     on November 5, 1997:
       ``Walinski had been inconsistent and inaccurate in his 
     report on the tax issue (regarding Gianino's testimony) but 
     that it was not harmful. Walinski was just a sloppy 
     investigator.''
       [See Attachment 20]
       The staff believes that Walinski's reports of interview 
     with Gianino and Clark and his sworn testimony to McClelland 
     regarding these matters in 1997 went far beyond simple 
     factual inaccuracies. The staff believes that Walinski 
     invited or fabricated information contained in those reports 
     for the following reasons:
       First, both Gianino and Clark deny that they were ever 
     interviewed by Walinski; they deny making the statements 
     attributed to them by Walinski; and both deny any knowledge 
     of the facts attributed to them by Walinski.
       Second, it is possible to independently verify certain 
     inaccuracies in Walinski's reports.
       --In Gianino's case, Walinski stated ``very shortly after 
     her [Gianino's] discussions with Steakley she became very ill 
     and was off work for an extended period of time.'' Walinski 
     later explained that ``she had cancer really bad, ovarian 
     cancer.'' Gianino's official leave records clearly indicate 
     that she had no ``extended illness'' as reported by Walinski. 
     In fact, she was shocked when told that Walinski had 
     testified in 1997--under oath--that she had ovarian cancer. 
     She stated: ``That statement is not true.''
       --In Clark's case, Walinski stated that Clark had made 
     statements, which Clark said he never made, at a meeting, 
     which Clark said he never attended. Clark's appointment 
     calendar shows that he did not attend the meeting at the DCIS 
     office identified by Walinski. Instead, he spent that entire 
     day at another DCIS office with two other supervisory 
     agents--Young and Smith--who both subsequently confirmed that 
     fact.
       DCIS officials also contend that even if Walinski's reports 
     contained false information, that information was ``not 
     harmful.'' For example, what difference does it make if 
     Gianino did not have an ``extended illness' as reported by 
     Walinski. They argued that the questionable facts generated 
     by Walinski did not affect the outcome of the investigation.
       The level of danger or harm caused by a false statement is 
     not a valid standard for determining whether the law was 
     violated.
       Under the law--18 USC 1001--a person who deliberately makes 
     false statements could be convicted of a felony and sent to 
     prison for up to five years. The law does not make exceptions 
     for the extent of damage or harm caused by a false statement. 
     In fact, a court decision specifically suggests the false 
     statements need not involve loss or damage to the government 
     [U.S. v. Fern, C.A. 11 (Fla.) 1983, 696 F.2d 1269].
       Furthermore, the staff would argue that Walinski's false 
     reports did, in fact, cause damage.
       First, Walinski's reports undermined the integrity and 
     credibility of the investigative process at DCIS--the Defense 
     Department's criminal investigative arm.
       Second, Walinski's reports damage the reputations of two 
     fellow agents--Steakley and Johanson. Walinski's false 
     reports formed the foundation for charges that were 
     eventually made against both individuals. According to 
     Steakley, those reports caused Steakley and Johanson and 
     their families to incur considerable legal expenses and 
     mental anguish.
     Other Cases
       During the course of the inquiry into the Steakley and 
     Johanson cases, the majority Staff received allegations from 
     a current and a former DCIS agent that Walinski had falsified 
     reports during two other internal investigations, but the 
     staff was unable to investigate and substantiate those 
     allegations.
     Conclusion
       Based on a thorough review of all documents bearing on the 
     Steakley and Johanson cases, it is crystal clear that senior 
     DCIS management, including Mancuso, were aware of the 
     allegations about Walinski's witness reports. Although 
     management made certain administrative adjustments in the 
     wake of rank and file complaints about Walinski's reports, 
     management never attempted to determine if those allegations 
     had merit. Management never attempted to reconcile Walinski's 
     reports with the facts. Independent interviews of Gianino and 
     Clark would have quickly established the fact that Walinski 
     had fabricated at least two witness interviews. This very 
     simple step would have led to appropriate corrective action. 
     Instead, the record shows that Walinski was never 
     disciplined. In fact, the record shows that Walinski actually 
     was given a cash award--at least three weeks after management 
     began receiving rank and file complaints about the accuracy 
     of his reports.

                       Steakley Case--Attachments

       (1) Report of Investigation--Administrative Inquiry 91, May 
     1993, with witness interviews and other documents
       (2) McClelland interviews located in Subcommittee and OSC 
     files; Testimony dates and pages cited; Including tape 
     transcriptions
       (3) Letter from Steakley's tax attorney, John T. Ambrose, 
     February 22, 1994
       (4) Recommendation of the Administrative Review Board on 
     Steakley case, March 7, 1994
       (5) Notice of Proposed Suspension, Memo from Keenan to 
     Steakley, August 4, 1994
       (6) Final Decision on Proposed Suspension, Memo from Dupree 
     to Steakley, October 25, 1994
       (7) Letter from Steakley's attorney, Luciano A. Cerasi, to 
     Dupree, Received by DCIS ON September 15, 1994
       (8) Memo from Bonnar to Hollingsworth on telephone call 
     from Steakley, November 15, 1994
       (9) Letters from Steakley to DOD IG Eleanor Hill and 
     Senator Fred Thompson, March 9 & 12, 1996
       (10) Exchange of letters between DOD IG Hill and 
     President's Council on Integrity & Efficiency, May 23, 1996 
     and October 16, 1996; Hill's letter to Sen. Thompson, May 23, 
     1996; Hill's memo to PCIE, February 20, 1997; OSC letter to 
     Hill, June 3, 1997; IC letter to PCIE, January 8, 1999
       (11) Investigative Plan Into Allegations by William G. 
     Steakley, March 27, 1996
       (12) Gianino's official leave records for 1991-1993
       (13) Memo of interview with Gianino, June 30, 1999
       (14) Memo of interview with Walinski, September 8, 1999
       (15) OSC Report on Steakley case, No. MA-97-1477, July 21, 
     1999--Located in Subcommittee files]
       (16) Hollingsworth memo for the record, November 23, 1994

                       Johanson Case--Attachments

       (1) Report of Investigation--Administrative Inquiry 108, 
     April 15, 1994, including witness interviews and other 
     documents
       (2) Recommendation of the Administrative Review Board on 
     the Johnson case, May 9, 1994
       (3) Notice of Proposed Suspension, Memo from Smith to 
     Johnson, June 24, 1994; acknowledged and signed by Johnson on 
     July 6, 1994
       (4) Formal Statement ``signed and sworn'' jointly by Clark 
     and Bonnar, July 19, 1994
       (5) Memo from Bonnar to Dupree and Hollingsworth, dated 
     August 9, 1994 transmitting Young's signed statement, dated 
     August 4, 1994, to Johnson

[[Page 27779]]

       (6) Letter from Johnson's attorney, Luciano A. Cerasi, to 
     Dupree, August 8, 1994
       (7) Case Re-Initiation, Memo signed by SA Timothy L. 
     Schroeder, September 23, 1994
       (8) Notice of Proposed Suspension, Memo from Smith to 
     Johanson, November 23, 1994
       (9) Amendment to Final Decision on Proposed Suspension, 
     Memo from Dupree to Johnson, February 9, 1995
       (10) Employee Performance Rating, IG Form 1400.430-2 for 8/
     26/93 thru 3/31/94
       (11) Incentive Award Nomination and Action, IG Form 
     1400.430-3, for 8/26/93 thru 3/31/94
       (12) Notification of Personnel Action, Form 50-B, Special 
     Act or Service Award, 5/2/93
       (13) Employee Performance Rating, IG FORM 1400.430-2, for 
     4/1/94 thru 7/2/94
       (14) Notification of Personnel Action, Form 50-B, 
     Reassignment, 7/3/94
       (15) Memo of interview with Walinski, September 8, 1999
       (16) Notification of Personnel Action, Form 50-B, 
     Performance Award, 7/24/94
       (17) Memo of interview with Bonnar, July 12, 1999
       (18) McClelland interviews located in Subcommittee and OSC 
     files combined with Subcommittee interview on August 2, 1999
       (19) Memo of interview with Mancuso, September 14, 1999
       (20) OSC (Shea) interview, November 5, 1997
                                  ____

                                                Inspector General,


                                        Department of Defense,

                                   Arlington, VA, October 1, 1999.
     Hon. Charles E. Grassley,
     Chairman, Subcommittee on Administrative Oversight and the 
         Courts, Committee on the Judiciary, United States Senate, 
         Washington, DC.
       Dear Mr. Chairman: I am writing regarding the inquiry of 
     your Subcommittee into certain personnel cases in the Defense 
     Criminal Investigative Service (DCIS). Your letter of 
     September 27, 1999, invited the Office of Inspector General 
     (OIG) to provide a written response based on my interview by 
     your staff on September 14, 1999. I understand that this 
     response will be attached to any final report that you may 
     issue.
       In your letter you state that I was allowed the opportunity 
     to review the factual findings of your staff. I respectfully 
     disagree with that assertion. I have not been given an 
     opportunity to review any written work product, nor did your 
     staff orally share any draft findings. Rather, our meeting 
     consisted of an interview in which I responded to a lengthy 
     series of questions. In light of these facts, the OIG would 
     again request the opportunity to review your final written 
     report and provide comments prior to its release.
       During my nine-year tenure as Director, DCIS, I supervised 
     approximately 500 investigative personnel at any given time 
     and the conduct of nearly 10,000 defense fraud 
     investigations. I have devoted my life to public service and 
     have proudly served for over 27 years. I am committed to 
     integrity in leadership within the Inspector General 
     community and proud of my investigative and management 
     record.
       Given my limited understanding of the scope of the inquiry 
     of your Subcommittee, I will in this letter attempt to 
     furnish you with further insight as to the matters in 
     question. My objective in this matter is to provide you with 
     the information you need to accurately assess these cases. 
     Specifically, I will address actions with respect to the 
     handling of DCIS internal review matters involving Special 
     Agents (SA) Hollingsworth, Steakley and Walinski.
       SA Larry Hollingsworth: SA Hollingsworth was employed by 
     the DCIS from November 1983 until his retirement in September 
     1996. I first met SA Hollingsworth some time after his hiring 
     during which time we were peers, I as Special Agent in Charge 
     (SAC) of the New York Field Office and he as SAC of the 
     Chicago Field Office.
       In July 1995, I identified a photograph in a law 
     enforcement journal as possibly that of SA Hollingsworth. The 
     unidentified individual was being sought by the Department of 
     State (DoS) relative to the filing of a false passport 
     application. I immediately contacted the DoS and reported my 
     suspicions to them and later assisted the DoS in arranging a 
     surveillance of SA Hollingsworth in anticipation of a search 
     of his home. Following the search, he was immediately barred 
     from the worksite and kept from any active service with this 
     organization. Although he was arrested in July 1995, he was 
     not indicted until January 1996. During those seven months, 
     while the DoS investigation was ongoing, SA Hollingsworth was 
     allowed to use sick leave to the extent verifiable by medical 
     authorities and accumulated annual leave. Subsequent to his 
     indictment, he was suspended without pay and denied further 
     use of leave. He entered a conditional guilty plea in March 
     1996 and was sentenced in June 1996.
       During this time period I was involved in a variety of 
     administrative matters in which SA Hollingsworth contested 
     actions proposed by his supervisor. I, as Director, DCIS, at 
     the time was his second level supervisor and acted as 
     deciding official in each of these matters. These 
     administrative actions were separate and distinct from the 
     investigation by the DoS and prosecution by the Department of 
     Justice.
       My next involvement with this matter began when SA 
     Hollingsworth appealed a Notice of Proposed Removal issued by 
     his supervisor. On August 23, 1996, his attorney requested an 
     extension until September 13, 1996, to file a written 
     response and notified us of his intent to make a subsequent 
     oral presentation. As deciding official, I granted this 
     request consistent with past DCIS practice and, to preclude 
     further delay, I simultaneously scheduled the oral 
     presentation for September 23, 1996. However, four days prior 
     to his scheduled oral presentation, SA Hollingsworth retired.
       SA Hollingsworth was provided the same due process afforded 
     to all other DCIS special agents in the form of a review by 
     the Special Agents Administrative Review Board and reasonable 
     time to prepare a written and oral response to a Notice of 
     Proposed Removal. Variation from past practice would have 
     been unwarranted and inconsistent with my experience as a 
     deciding official in dozens of disciplinary proceedings.
       SA Hollingsworth's criminal conduct was both inexcusable 
     and inexplicable. His violation of law was totally out of 
     character and inconsistent with his job performance and 
     lengthy career. I noted this same observation in a letter to 
     the sentencing judge as I went on record describing SA 
     Hollingsworth's job performance.
       Throughout this process, the OIG was provided advice by 
     personnel and legal experts. The course of action taken in 
     this case was one of the several available options permitted 
     by Federal personnel guidelines.
       SA Gary Steakley: SA Steakley began his employment with 
     DCIS in December 1987. From that time until he entered the 
     Worker's Compensation program in February 1993 as a result of 
     a traffic accident involving a Government vehicle, he worked 
     in a variety of positions within DCIS. As Director, DCIS, I 
     selected him for several positions and promoted him to his 
     last job as manager of a DCIS investigative office in 
     California.
       Subsequent to his vehicle accident, SA Steakley was the 
     subject of several adverse personnel and disciplinary 
     actions. With the exception of ensuring that internal reviews 
     proceeded in due course, my actions with respect to SA 
     Steakley were taken as the deciding official in these cases. 
     In addition, as Director, I proposed to involuntarily 
     transfer him in order to ``backfill'' his management billet 
     after his accident. In this case, the then Deputy Inspector 
     General acted as deciding official.
       SA Steakley was treated fairly by DCIS, although he has 
     repeatedly alleged that he was subjected to prohibited 
     personnel practices. His allegations have been reviewed in 
     various venues, including the Office of Special Counsel who, 
     in December 1998, closed their file and declined to pursue 
     the case further.
       SA Matthew Walinski: SA Walinski held a variety of 
     positions in DCIS from his initial hiring in August 1987, 
     until his transfer to the Office of Inspector General, 
     Department of the Treasury, earlier this year. Your staff has 
     questioned the accuracy of several reports of interview 
     prepared by SA Walinski to include a report dealing with SA 
     Steakley. It is my understanding that your staff perceives 
     that allegations concerning SA Walinski were not pursued with 
     the same tenacity shown in the SA Steakley investigations.
       I was not aware of many of the facts alleged in this matter 
     until reviewing documents in response to the inquiry of your 
     Subcommittee. I did, however, have a general concern at the 
     time regarding the handling of internal investigations. As a 
     result, I directed that the internal review process be 
     restructured so as to ensure that all future interviews be 
     taped and transcribed to preclude any further dispute as to 
     reporting. I was also appraised by my deputy that SA Walinski 
     was being transferred from his duties to a position in the 
     DCIS Training Branch. It is my understanding that SA Walinski 
     received a downgraded appraisal as a result of his poor 
     performance as well as a written letter cautioning him as to 
     the importance of accuracy in his reporting.
       In closing, I hope that my insights have provided you the 
     information you need to accurately assess these cases. I 
     appreciate your assurance that this letter will be included 
     in any report that may be issued on this topic and look 
     forward to an opportunity to review your draft report.
           Sincerely,
                                                   Donald Mancuso,
                                         Acting Inspector General.

  Mr. GRASSLEY. Mr. President, I think it is imperative that Congress 
continue to send the strongest possible signal only that the highest 
standards and integrity are acceptable among our law enforcement and 
watchdog communities, the more we will ensure that outcome. I yield the 
floor.

                          ____________________