HUD EEO Investigation: Contracting and Process Irregularities in HUD's
Investigation of the IG (Letter Report, 09/08/1999, GAO/OSI-99-6).

Pursuant to a congressional request, GAO examined the complaint alleging
that the Department of Housing and Urban Development's (HUD) Inspector
General (IG), Susan Gaffney, had discriminated against the Deputy
Assistant Inspector General for Investigations because of his race,
focusing on whether: (1) HUD had awarded contracts concerning the Equal
Employment Opportunity (EEO) complaint to outside firms in accordance
with applicable government standards; and (2) HUD's actions were
justified when it deviated from its standard EEO process by contracting
with firms not on the General Services Administration's (GSA) schedule
of contractors.

GAO noted that: (1) HUD's awarding of contracts to two law firms to
investigate the Deputy Assistant IG's EEO complaint deviated from HUD's
standard EEO investigation process and did not comply with the
requirements of the Federal Acquisition Regulation (FAR); (2) from
February 12, 1998, to August 5, 1998, HUD followed its standard EEO
process of reviewing the complainant's allegation for acceptance,
contracting with a GSA-schedule firm to investigate the accepted
allegations and conducting the investigation; (3) on August 5, 1998,
however, HUD officials put the investigation on hold; (4) HUD deviated
from its normal EEO process and requested proposals from a limited
number of non-GSA-schedule firms to conduct this same investigation; (5)
HUD violated the FAR when it failed to synopsize this requirement in the
Commerce Business Daily and inappropriately limited the competition to
seven firms; (6) HUD awarded contracts to two law firms on August 26,
1998; (7) its last-minute amendment to the request for quotations to
accommodate a joint proposal from the two firms and other actions by HUD
officials contributed to an appearance that HUD manipulated the
procurement process in order to direct the contract awards to the firms;
(8) Howard Glaser, then Deputy General Counsel for Programs and
Regulations, took the lead in suspending the GSA-schedule firm's
investigation and contracting with the non-GSA-schedule firms; (9) his
actions included compiling the list of potential contractors, contacting
the Deputy Assistant IG's counsel to request an extension of time to
complete the investigation, evaluating the proposals, reviewing the
investigative plan, and consulting with firms during the investigation;
(10) HUD officials told GAO that they deviated from the standard EEO
process for a number of reasons, including their perception of an
environment of pervasive racial discrimination in the Office of the
Inspector General and the high rank and unique positions of both the
Deputy Assistant IG and IG Gaffney; (11) the justifications HUD provided
for deviating from its usual EEO process were largely subjective and
therefore difficult to assess; (12) however, information GAO found
substantially contradicts several factors cited as justifications for
HUD's deviation; and (13) certain HUD officials served to impede GAO's
investigation.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  OSI-99-6
     TITLE:  HUD EEO Investigation: Contracting and Process
	     Irregularities in HUD's Investigation of the IG
      DATE:  09/08/1999
   SUBJECT:  Irregular procurement
	     Employment discrimination
	     Inspectors general
	     Racial discrimination
	     Qualified bidders list
	     Noncompliance
	     Fair employment programs
IDENTIFIER:  Commerce Business Daily

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OS99006 A Report to the Chairman, Committee on Governmental
Affairs, U. S. Senate

September 1999 HUD EEO INVESTIGATION

Contracting and Process Irregularities in HUD's Investigation of
the IG

GAO/OSI-99-6

  GAO/OSI-99-6

Office of Special Investigations Lett er

B-282123 September 8, 1999 The Honorable Fred Thompson Chairman,
Committee on Governmental Affairs United States Senate

Dear Mr. Chairman: In February 1998, the Deputy Assistant
Inspector General (IG) for Investigation for the U. S. Department
of Housing and Urban Development (HUD) filed an Equal Employment
Opportunity (EEO) complaint with HUD's Office of Departmental EEO.
The complaint alleged that HUD's IG,

Susan Gaffney, had discriminated against him because of his race.
On December 14, 1998, you requested that we assist the Committee
in reviewing matters concerning that EEO complaint. Specifically,
you asked that we determine (1) whether HUD had awarded contracts
concerning the EEO complaint to outside firms in accordance with
applicable government standards and (2) whether HUD's actions were
justified when it deviated

from its standard EEO process by contracting with firms not on the
General Services Administration's (GSA) schedule of contractors. 1
Results in Brief HUD's awarding of contracts to two law firms to
investigate the Deputy

Assistant IG's EEO complaint deviated from HUD's standard EEO
investigation process and did not comply with the requirements of
the Federal Acquisition Regulation (FAR). From February 12, 1998,
to August 5, 1998, HUD followed its standard EEO process of
reviewing the complainant's allegations for acceptance,
contracting with a GSA- schedule firm to investigate the accepted
allegations, and conducting the investigation. On August 5, 1998,
however, HUD officials put the investigation on hold. On that same
day, HUD deviated from its normal EEO process and requested
proposals from a limited number of non- GSA1

GSA directs and manages the Federal Supply Schedule program, which
provides federal agencies with a simplified process for obtaining
commonly used commercial supplies and services at prices
associated with volume buying. GSA issues Federal Supply Schedules
containing information necessary for ordering. Ordering offices
then place delivery orders directly with schedule contractors for
the supplies and services they require. (48 C. F. R. 8. 401)

schedule firms to conduct this same investigation. HUD violated
the FAR when it failed to synopsize this requirement in the
Commerce Business Daily (CBD) and inappropriately limited the
competition to seven firms. HUD awarded contracts to two law firms
on August 26, 1998. Its lastminute

amendment to the Request for Quotations (RFQ) to accommodate a
joint proposal from the two firms and other actions by HUD
officials contributed to an appearance that HUD manipulated the
procurement

process in order to direct the contract awards to the two firms.
Although the usual cost for any type of EEO investigation at HUD
is approximately $3, 000, these contracts totaled about $100,000.

The significant role played in this procurement by Harold Glaser,
then Deputy General Counsel for Programs and Regulations, was also
extraordinary. Mr. Glaser took the lead in suspending the GSA-
schedule firm's investigation and contracting with the non- GSA-
schedule firms. His actions included compiling the list of
potential contractors, contacting the Deputy Assistant IG's
counsel to request an extension of time to complete the
investigation, evaluating the proposals, reviewing the
investigative plan, and consulting with the firms during the
investigation.

HUD officials told us that they deviated from the standard EEO
process for a number of reasons, including their perception of an
environment of pervasive racial discrimination in the Office of
the Inspector General (OIG) and the high rank and unique positions
of both the Deputy Assistant IG and

IG Gaffney. The justifications HUD provided for deviating from its
usual EEO process were largely subjective and therefore difficult
to assess. However, information we found substantially contradicts
several factors cited as justifications for HUD's deviation.

Certain HUD officials served to impede our investigation.
Specifically, HUD insisted on having an outside attorney present
as agency counsel during interviews of HUD employees and prevented
us from interviewing several HUD employees who may have possessed
information critical to our investigation. While we would have
preferred to have access to these

individuals, we were able to gather sufficient information by
employing other procedures.

Introduction HUD's Standard EEO

Both Sandra Chavis, Director of HUD's Office of Departmental EEO,
and Process Sandra Hobson, Director of HUD's EEO Division (within
the Office of Departmental EEO), explained to us the steps that
are involved in handling

any EEO complaint. According to the two directors, the first step
in HUD's EEO process is the filing of an informal complaint by an
employee. One or more EEO counselors are then assigned to the case
in this initial stage. Their job includes advising the complainant
concerning the EEO process, reviewing each of the allegations in
the complaint, and attempting to resolve them. If any allegation
in an informal complaint cannot be resolved at this stage, the
complainant may file a formal complaint. 2

If a formal complaint is filed, it is reviewed within the Office
of Departmental EEO, which informs the complainant of the
allegations it has accepted for investigation. The next step,
according to Ms. Chavis, is to contract with an appropriate firm
on the GSA schedule for an investigation. The investigation must
be completed within 180 days of the formal complaint filing date
unless the complainant agrees to an additional 90 days. After the
investigation, Ms. Chavis, as Director of the Office of
Departmental EEO, renders a final agency decision concerning the
case, which may be appealed to the Equal Employment Opportunity
Commission (EEOC) or a district court. A complainant may file a
civil action in a district court if HUD has not issued a final
agency decision after 180 days from the time that the formal
complaint was filed.

Chronology of Subject On November 12, 1995, IG Gaffney appointed
an African- American male as Complaint and Contracting the OIG's
Deputy Assistant IG for Investigation. The Deputy Assistant IG
Events subsequently applied and was not accepted for the position
of Assistant IG for Investigation. On December 9, 1997, the IG
selected a white male, who

had served as Associate Counsel to the IG, for the position. That
same day the Deputy Assistant IG learned that he would not receive
a Senior Executive performance- based bonus.

2 According to Ms. Chavis, only the allegations that the
counselors have received, reviewed, and attempted to resolve
become part of the formal investigation.

On January 14, 1998, the Deputy Assistant IG filed an informal
complaint, alleging that he was discriminated against because of
his race when he was not selected for the position of Assistant IG
for Investigation, when he was not awarded a Senior Executive
performance- based bonus, and when management treated him
disparately in work assignments. The complaint further alleged
that these actions were part of a pattern and practice of
discrimination in the OIG involving many aspects of employment. On

February 12, 1998, after attempts to resolve the informal
complaint through counseling had failed, the Deputy Assistant IG
filed a formal complaint. On May 15, 1998, Ms. Hobson accepted the
first two allegations in the complaint for investigation but
rejected the third because the Deputy Assistant IG had declined to
complete the counseling process for this allegation. 3

Following its standard process, on May 26, 1998, HUD contracted
for a formal investigation of the two accepted allegations with a
GSA- schedule investigative firm, Counter Technology Inc. (CTI),
for $2,700. HUD's usual

cost for any EEO investigation is approximately $3, 000. Ms.
Chavis and Ms. Hobson told us that because they had believed this
to be a high- profile case, they contracted with CTI, a firm that
had a record of providing HUD

with high- quality investigative reports. Additionally, Ms. Hobson
insisted that CTI assign its best investigator. CTI began its
investigation by June 11, 1998, and proceeded, with an approved
investigative plan, to schedule and conduct interviews of
pertinent individuals. CTI fully expected to complete the
investigation by August 11, 1998, HUD's 180- day deadline for
issuing a

final agency decision. However, in the middle of July 1998, the
General Counsel asked Howard Glaser, then HUD's Deputy General
Counsel for Programs and Regulations and now Counsel to the
Secretary, to review a request from IG Gaffney for legal
representation in the EEO investigation. Mr. Glaser told us that
in responding to the IG's request he had asked Ms. Chavis and Ms.
Hobson

about the status of the investigation. According to Mr. Glaser,
they told him that no investigator had been assigned and no
investigation was underway. Mr. Glaser stated that he became very
concerned because at this time the 180- day deadline for
completing the investigation was only 10 or 20 days 3 On Sept. 25,
1998, Ms. Chavis informed the Deputy Assistant IG's attorney that
HUD had reversed its earlier decision and accepted all of the
complainant's allegations for investigation.

away. Mr. Glaser told us that he had reported this information to
HUD's Deputy Secretary, Saul N. Ramirez, Jr. After Mr. Glaser
contacted Deputy Secretary Ramirez to discuss the complaint, Mr.
Ramirez asked Ms. Hobson about the status of the case. 4 According
to Deputy Secretary Ramirez, she told him that no investigation

was underway. Deputy Secretary Ramirez told us that he called a
meeting with Mr. Glaser, Ms. Hobson, and Ms. Chavis. 5 He recalled
that the meeting had focused on the high level of the officials
involved and the timeliness of the EEO process, among other
matters. At this meeting, Deputy Secretary Ramirez decided to
deviate from the normal process and hire a non- GSAschedule

firm to investigate the complaint. According to Mr. Ramirez, Mr.
Glaser recommended the decision, Ms. Chavis concurred with the
decision, and Ms. Hobson disagreed.

We were unable to determine whether Mr. Glaser or Deputy Secretary
Ramirez knew that CTI was already investigating the complaint when
they decided to hire a non- GSA- schedule firm. They told us that
Ms. Chavis and/ or Ms. Hobson had informed them that no
investigation was underway

when they first inquired about the status of the EEO case, even
though this information was incorrect. Moreover, both officials
said Ms. Chavis and Ms. Hobson were in the meeting in which the
decision was made to hire a non- GSA- schedule firm; and yet, here
again, they did not learn that an investigation was underway.
Instead, Mr. Glaser told us that he learned sometime after the
non- GSA- schedule firms had begun their investigation

that a CTI investigator had been assigned to the case and that he
immediately directed the EEO office to suspend CTI's contract.
Deputy Secretary Ramirez, on the other hand, told us that it was
later on the day that the meeting was held with Mr. Glaser, Ms.
Hobson, and Ms. Chavis that

Ms. Hobson told him for the first time that HUD had contracted
with a GSAschedule contractor a few days earlier but that HUD had
already terminated the contract. The CTI investigation, however,
was put on hold on August 5, 1998 after the meeting at which the
hiring of a non- GSA4

Deputy Secretary Ramirez told us that he first became aware of the
Deputy Assistant IG's complaint in the summer of 1998 when he
received a copy of the complaint in the normal course of business.
His next involvement occurred when he was contacted by Mr. Glaser.

5 We asked Deputy Secretary Ramirez to check his calendar to
ascertain the exact date of the meeting, but he was unable to find
the meeting scheduled on his calendar. He was able to tell us only
that the meeting had occurred in the summer of 1998.

schedule firm was decided upon and well before those firms began
their investigation. The CTI contract was thereafter terminated.

When we attempted to determine what Ms. Hobson and Ms. Chavis had
told Deputy Secretary Ramirez and Mr. Glaser about the status of
the investigation, HUD officials refused to allow us to
reinterview Ms. Hobson and Ms. Chavis. Mr. Glaser told us,
however, that it made no difference when he learned of the CTI
investigation because HUD officials had

decided that they wanted to contract with a more credible outside
investigator. Once the decision was made to procure the services
of a non- GSA- schedule contractor, Mr. Glaser became deeply
involved in the reprocurement of the investigative services. Mr.
Glaser told us that he wanted to issue a solesource contract to
Deval Patrick or someone of similar stature. Mr. Patrick, a
partner with the firm Day, Berry & Howard, LLP, had previously
served as an Assistant Attorney General in the U. S. Department of
Justice's Civil Rights Division and had gained national
recognition as chairman of Texaco Inc. 's Equality and Fairness
Task Force, formed as part of the 1996 settlement of a race
discrimination suit brought by Texaco's AfricanAmerican employees.
However, on the advice of HUD procurement personnel, Mr. Glaser
decided to conduct a limited competition. To do this, Mr. Glaser
contacted the Deputy Assistant IG's lead attorney

sometime before August 11, 1998, the original deadline of the EEO
complaint investigation, and asked if he would agree to a 90- day
extension to complete the EEO investigation. During the
conversation, Mr. Glaser stated that HUD was contracting with Mr.
Patrick to conduct the investigation. The lead attorney agreed
verbally to the extension. 6 Mr. Glaser also wrote a Statement of
Work (SOW), tailored after the

standard GSA- schedule EEO investigation SOW, specifically adding
a requirement that an attorney conduct the investigation. Mr.
Glaser then contacted Kumiki Gibson, an attorney with Williams &
Connolly who had

worked as a trial attorney in the Justice Department's Civil
Rights Division and as Counsel to Vice President Albert Gore, Jr.,
and asked her to provide a list of potential contractors. Mr.
Glaser developed a source list based on this conversation. Despite
the fact that the SOW called for an attorney to conduct the
investigation, the final list of seven sources included only two

6 On Aug. 12, 1998, the complainant's lead attorney agreed in
writing to an Aug. 11, 1998, formal request from HUD's EEO
Division for a time extension to complete the investigation.

law firms, Mr. Patrick's and Ms. Gibson's. The other sources on
the list were investigative and accounting firms. Mr. Glaser
provided the list to HUD procurement personnel to prepare an RFQ 7
to each firm, which was issued on August 5, 1998. It required all
proposals to be submitted by August 11, 1998.

HUD received a proposal from Decision Strategies/ Fairfax
International on August 10, 1998, and Day, Berry & Howard, LLP on
August 11, 1998. Day, Berry & Howard, LLP's proposal was expressly
contingent upon the award

of a separate contract to Ms. Gibson and Williams & Connolly.
Because the RFQ called for only one contractor, that same day the
HUD Contracting Officer signed an amendment, 8 allowing HUD to
award separate contracts for portions of the SOW and extending the
time for receipt of proposals to August 12, 1998. HUD received
Williams & Connolly's proposal on

August 12, 1998. Although the proposals of Williams & Connolly and
Day, Berry & Howard, LLP were conditioned upon dividing the tasks
in the SOW between the two firms, neither proposal described how
the tasks were to be divided. By a letter dated August 20, 1998, 8
days after the extended time for receipt of proposals, Ms. Gibson
informed HUD that Williams &

Connolly would focus on specific incidents or acts of alleged
discriminatory conduct and Day, Berry & Howard, LLP would focus on
alleged systematic problems, such as discriminatory practices. Mr.
Glaser and two other HUD officials evaluated the three proposals
and recommended awarding separate contracts to Williams & Connolly
and Day, Berry & Howard, LLP.

On August 26, 1998, HUD awarded purchase orders to Williams &
Connolly in the amount of $49,875 and to Day, Berry & Howard, LLP
in the amount of $48,000. Mr. Glaser told us that he reviewed the
investigative plan and

spoke with the investigators concerning various issues during the
investigation. Despite his deep involvement in the formation and
administration of these contracts, Mr. Glaser denied being the
Government Technical Representative (GTR) and referred to his role
as such as a myth.

After IG Gaffney testified before your Committee concerning Mr.
Glaser's involvement in the EEO process, Mr. Glaser instructed
that the contract be

7 Although HUD identified the solicitation as a Request for
Quotations, HUD and the offerors referred to their responses as
proposals. 8 Although the amendment was signed on Aug. 11, 1998,
its effective date was Aug. 10.

modified to remove his name as the GTR and to substitute Ms.
Chavis's name in that role. Upon learning of the contracts with
outside law firms for the EEO investigation, IG Gaffney sent two
letters to the EEOC dated

September 1, 1998, and September 2, 1998 requesting that EEOC
assume responsibility for the subject EEO complaint. As the basis
for her request, the IG accused senior HUD management of
misconduct in hiring outside firms to investigate the EEO
complaint and in creating an environment in which she was unable
to obtain a fair investigation regarding that

complaint. EEOC denied this request on September 11, 1998. IG
Gaffney renewed her request on September 15, 1998. On October 28,
1998, HUD contracted with Donald Bucklin of Squire, Sanders &
Dempsey, in the amount of $100, 000, to assist HUD in defending
against the Deputy Assistant IG's EEO complaint. Among other
tasks, Mr. Bucklin was to prepare a report defending HUD's
handling of the EEO investigation. On

November 10, 1998, the EEOC again denied IG Gaffney's request that
EEOC assume responsibility for the EEO investigation. On December
23, 1998, Mr. Bucklin issued his report, which concluded that
HUD's contracting procedures for the outside investigators were
appropriate and

consistent with federal acquisition law and regulations. 9 On
December 29, 1998, Deputy Secretary Ramirez referred the subject
EEO case to EEOC for final decision. As impetus, the referral
letter cited what HUD considered to be inappropriate intervention
in that agency's decisionmaking process by a HUD OIG audit of the
EEO complaint process and by our investigation. On January 29,
1999, EEOC declined the referral, stating that despite HUD's
request, EEOC does not draft final agency decisions because it is
an appellate body concerning such decisions.

On April 20, 1999, based on HUD's failure to issue a final agency
decision, the Deputy Assistant IG filed suit in the District Court
for the District of Columbia. The Deputy Assistant IG alleged in
his complaint that the EEO

investigation had been completed in December 1998. On June 28,
1999, a HUD official confirmed that the investigation was complete
but told us that 9 In reviewing HUD's contracting procedures
relative to the Deputy Assistant IG's EEO complaint, we reviewed
Mr. Bucklin's report. We found that the report contained factual
errors and incorrect legal citations. See HUD: Review of Bucklin
Report Prepared to Assist HUD in Defending Against EEO Complaint
by HUD's Deputy Assistant Inspector General (GAO/OSI-99-16R, Aug.
3, 1999).

because HUD is no longer required to issue a final agency
decision, the report will not be finalized.

FAR Violations in HUD The Competition in Contracting Act (CICA)
(41 U. S. C.  253 (a)( 1)( A)

Purchase Orders for (1994)) requires full and open competition in
government procurements. A

few exceptions to this requirement are authorized by 41 U. S. C.
section 253 EEO Investigation of (c)( 3)( C); FAR section 6. 3.
Before awarding a contract using IG

noncompetitive procedures, an agency must prepare a written
Justification and Approval (J& A) containing sufficient facts and
rationale to justify the specific exemption relied upon. (41 U. S.
C.  253 (f)( 3); FAR  6. 303- 2) HUD's J& A for limiting the
competition to seven offerors cites the expert exception to full
and open competition (41 U. S. C.  253( c)( 3)( C); FAR  6. 302-
3( a)( 2)( iii)) as authority for limiting competition and not
synopsizing in the CBD. However, HUD did not present in its J& A,
or in its subsequent submission to us, any justification for
concluding that the contractors should be considered experts for
the purpose of the expert exception to full and open competition.

The expert exception to full and open competition was added to
CICA by section 1055 of the Federal Acquisition Streamlining Act
of 1994 (Pub. L. No. 103- 355,  1055, 108 Stat. 3243, 3265 (1994))
to allow agencies to acquire the services of an expert for any
current or anticipated litigation or dispute. 10 Neither the
statute nor its legislative history defines the term expert or
indicates any reason for the addition of the exception, and

CICA is similarly silent. While the FAR provides a few examples of
the services an expert might provide, neither it nor any other
section of the FAR defines the term expert.

In the only judicial or GAO decision interpreting the expert
exception to full and open competition, the Comptroller General
sustained a bid protest against the U. S. Air Force, finding that
a sole- source contract to an incumbent litigation- support
contractor was not justified by the expert exception to full and
open competition. (SEMCOR, Inc.; H. J. Ford Associates, Inc., B-
279794, B-279794.2, B-279794.3 July 23, 1998.) After

considering several definitions of the term expert proposed by the
10 An expert exception to full and open competition for armed
services acquisitions was also added to CICA by the Federal
Acquisition Streamlining Act of 1994 (Pub. L. No. 103- 355,  1005,
108 Stat. 3243, 3254 (1994)).

parties as well as 31A Am. Jur. 2d at 19- 20, 61- 65, Expert and
Opinion Evidence, sections 1, 55- 58 the Comptroller General
concluded the following: For the purpose of the exception  experts
may be individuals who possess special skill or knowledge of a
particular subject, that may be combined with experience, which
enables them to provide opinions, information, advice, or
recommendations to those who call upon them. Regardless of whether
the investigation of the Deputy Assistant IG's EEO complaint
constituted a current or anticipated litigation or dispute, we do
not believe that the services provided by the law firms here meet
this definition. While providing legal advice could qualify an
individual as an

expert, it is not at all clear how much of the work performed for
HUD involved this service. Indeed, HUD hired the law firm of
Squire, Sanders & Dempsey exclusively to provide expert services
to the Department officials and attorneys to assist in the defense
of claims asserted in the EEO case brought by the Deputy Assistant
IG. Furthermore, there is no

reason to believe that EEO investigators possess the special skill
or knowledge that would render them experts for the purpose of the
CICA exception, since it is reasonable to conclude that many
competent providers of such services exist and that such
investigations are

commonplace. Accordingly, we believe that HUD could not properly
rely upon the expert exception to limit competition in this
procurement. In a March 9, 1999, memorandum to us, HUD maintained
that even if it improperly relied upon the expert exception, HUD
properly conducted the procurement using the simplified
acquisition procedures of FAR part 13. While the simplified
acquisition procedures allow limited competition for contracts
with an anticipated value of less than $100,000, FAR section
5.101( a)( 1) requires that agencies synopsize contract actions
with an anticipated value in excess of $25,000 in the CBD. HUD
argues that because synopsis in the CBD can add up to 45 days to
the procurement process, its urgent need for the services would
have justified an exception to the synopsis requirement.

FAR section 5.202( a)( 2) provides an exception to the requirement
for synopsis in situations of unusual or compelling urgency where
the government would be seriously injured if the agency complies
with the requirement. We do not believe that sufficient urgency
existed to justify an exception to the synopsis requirement.

HUD prepared the J& A for this procurement on August 4, 1998, 6
days before the deadline for completing the investigation. The J&
A explains the urgency of the procurement as follows:

It is also crucial that the investigation be accomplished in a
timely manner in view of the potential consequences (i. e. the
integrity of the Department in fulfilling it's [sic] mission) of
having a highly visible individual (the HUD IG) charged with
allegations' and no action being taken immediately by the
Department. This explanation ignores the fact that HUD contracted
with an investigative firm through GSA's multiple- award- schedule
contract on May 26, 1998, to conduct the EEO investigation. After
receiving HUD's approval of its

investigative plan, that firm began conducting interviews with the
expectation of completing the investigation within the 180- day
limit. As HUD had processed the complaint in a timely fashion, no
urgent requirement existed to contract with another investigator;
and HUD cannot

justify its failure to synopsize on that basis. Deputy Secretary
Ramirez stated that he was unaware of these facts in the summer of
1998 when he decided to hire a law firm to conduct the
investigation. Moreover, Deputy General Counsel Glaser informed us
that, for several reasons, including his perception of an
environment of pervasive racial discrimination in the OIG and the
need for a more credible investigator, HUD would have hired
another contractor regardless of

whether he and Deputy Secretary Ramirez knew that another firm had
begun the investigation. Assuming these statements are true,
Deputy Secretary Ramirez's tardy decision, which was based on
facts known to HUD since February 1998, did not create a
compelling urgency that would

allow HUD to deviate from procurement procedures. An agency may
not avoid competition requirements, such as synopsis of proposed
contract actions, on the basis of a lack of advance acquisition
planning. (10 U. S. C.  2304( f)( 5)( A); FAR  6. 301( c)( 1).)
FAR section 7.101 defines acquisition planning as the following:

[ T] he process by which the efforts of all personnel responsible
for an acquisition are coordinated and integrated through a
comprehensive plan for fulfilling the agency need in a timely
manner and at a reasonable cost.

The Deputy Assistant IG filed his EEO complaint on February 12,
1998, placing HUD on notice of the need for an investigation to be
completed within 180 days. Cognizant that this was a high- profile
case, the Director of HUD's EEO Division handpicked an
investigative firm off the GSA

schedule. Coordination with Deputy Secretary Ramirez in a timely
fashion would have enabled the agency to decide whether the EEO
Director's selection of a GSA firm was appropriate. Since Deputy
Secretary Ramirez

claimed, however, that he was not aware of the complaint until the
summer of 1998, when he received a copy in the normal course of
business, HUD officials did not engage in proper advance planning.
HUD therefore created the urgency on which it now relies. Given
these circumstances, we do not believe that HUD has shown a
reasonable basis for avoiding competition

requirements. 11 Deviations From

The decision to use non- GSA- schedule firms to conduct the EEO
Standard Procedures

investigation was a significant deviation from HUD's standard EEO
process. Ms. Chavis told us that she was shocked that HUD spent
approximately $100,000 on this investigation when the typical EEO
investigation, including those against Senior Executive Service
(SES) members, costs approximately $3,000. She also informed us
that other high- ranking HUD officials had filed EEO complaints
since the Deputy Assistant IG's complaint and that HUD assigned
GSA- schedule contractors to investigate each of these complaints.
In a separate case, according to Ms. Chavis, one complainant
specifically requested the same type of

investigation that the Deputy Assistant IG had received. The
degree of involvement in this matter by Mr. Glaser is equally
extraordinary. As Mr. Glaser acknowledged during our interview, he
is widely perceived as Secretary Andrew Cuomo's right- hand man
and his

hammer. In his position as Deputy General Counsel for Programs and
Regulations, Mr. Glaser had served as the GTR for legal service
contracts but had had no responsibility for EEO or procurement
matters. Nonetheless, he took the lead in terminating the CTI
contract and

contracting with Mr. Patrick and Ms. Gibson, to include compiling
the list of potential contractors, contacting the Deputy Assistant
IG's counsel to request an extension of time to complete the
investigation, evaluating the 11 Each of the reasons advanced by
Deputy Secretary Ramirez and Deputy General Counsel Glaser for
contracting with the law firms existed at the time HUD contracted
with the GSAschedule firm on May 26, 1998.

proposals, reviewing the investigative plan, and consulting with
the firms during the investigation. Both Ms. Hobson and Ms. Chavis
told us that Mr. Glaser's involvement in this investigation was
unprecedented. According to Ms. Chavis, she was so concerned by
Mr. Glaser's order to terminate the CTI contract that she met with
Deputy Secretary Ramirez to confirm the independence of her
office. The Deputy Assistant IG's attorney told us that he had
never before been contacted by an agency's Office of General
Counsel, rather than the EEO

office, to request an extension of an EEO investigation. Mr.
Glaser had so clearly taken control of the investigation that the
Contracting Officer listed Mr. Glaser, rather than a
representative of the EEO office, as the GTR.

HUD's Justifications HUD officials acknowledged that the
contracting and investigative

for Deviating From procedures employed in this case deviated from
HUD's usual EEO process but insisted that the deviation was
justified for a number of reasons. HUD Standard Procedures

officials told us that they deviated from the normal process
because of their perception that there is an environment of
pervasive racial discrimination in the OIG. Those officials told
us that a contributing factor to this perception is that HUD
headquarters is staffed predominantly by AfricanAmericans, that
HUD serves a predominantly minority clientele, and that minorities
have been traditionally underrepresented in the OIG. According

to the officials, this perception was reinforced by recent
congressional and mayoral complaints against the IG for racial
bias in the OIG's selection of three cities with African- American
mayors as sites for HUD's Urban Fraud Initiative. 12 HUD officials
told us that it was their understanding that the OIG had an
excessive number of EEO complaints when compared with other HUD
entities. However, they did not specify the number of complaints
upon which they were relying. These officials also referred to a

recent meeting with members of the OIG staff who had complained
about discrimination problems in the OIG. The officials further
stated that they had taken these concerns seriously.

HUD officials further told us that they had no choice but to
contract for an outside investigator with unquestionable
credentials to conduct the EEO investigation. They felt this was
necessary in part because of the persons 12 To combat fraud
involving HUD funding, HUD mortgage insurance, and public housing
in urban areas, the HUD OIG, with assistance from the U. S.
Department of Justice, developed the HUD Urban Fraud Initiative.

involved and the serious nature of the allegations. They noted
that the complainant is the Deputy Assistant IG for Investigation,
a member of the SES, and the highest- ranking African- American
official in OIG. For further support, they stated that the
allegations involve a presidentially appointed

member of the SES who they feared would retaliate against OIG
employees for participating in the EEO process. In support of
their position, they also asserted that the allegations are broad
in scope, focusing not only on discrete personnel actions but also
on the environment in the OIG, which was described by the
complainant as containing pervasive racism. HUD officials
additionally told us that HUD's African- American employees wanted
a credible outside investigator and would judge the senior

management's commitment to equal opportunity by how this case was
handled. Many of the justifications HUD provided to us for
deviating from its usual EEO process are subjective in nature and
therefore difficult to assess. Moreover, some of the
justifications HUD presented to us appear to be based on only the
speculation of the HUD officials. For example, Deputy Secretary
Ramirez's perception that the OIG had an environment of pervasive
racial discrimination was based solely on what he had heard and
read in the newspapers. Although his perception had existed for
some time prior to the Deputy Assistant IG's complaint, he
admitted that he had never inquired of HUD employees if such
conditions existed nor had HUD's Office of Departmental EEO told
him that the OIG had extensive problems

concerning EEO issues. Indeed, when we inquired, we found that the
OIG did not have an excessive number of EEO complaints, which
contradicted what Mr. Glaser and others had told us. Additional
information we found

substantially contradicted several other factors cited as
justifications for HUD's actions. Not an Excessive Number of

Mr. Glaser expressed concern about the high number of EEO
complaints by EEO Complaints in the OIG

employees in the OIG especially when compared with the number of
complaints in other HUD units. He cited this as a factor
supporting the choice to contract with non- GSA- schedule law
firms. Mr. Glaser added that during Secretary Cuomo's tenure
(1997- present), HUD's Office of General

Counsel, with about half as many EEO complaints as the OIG, was a
good basis for comparison when considering the two offices'
relative size and personnel composition.

The Director of HUD's EEO Division provided us data indicating
that the rate of EEO complaints filed by OIG employees was equal
to or below that

of HUD's overall filing rate for 3 of the 5 fiscal years,
including the most recent 3 years, since IG Gaffney was sworn in
in 1993. Further, since the IG's confirmation, the OIG's rate of
complaint filing had never been the highest in HUD and had always
been much lower than that of HUD's Office of the Secretary.
Indeed, the OIG's rate of EEO complaint filings was never twice
that of the Office of General Counsel during Secretary Cuomo's
administration. In fiscal year 1998, it was lower than that of the
Office of

General Counsel. See table 1.

Table 1: EEO Complaints Filed as a Percentage of Total Employees
in Units Unit FY 94 FY 95 FY 96 FY 97 FY 98

Region 1 0. 2 a Region 2 0. 2 a Region 3 0. 4 a Region 4 1. 0 a
Region 5 0. 9 a Region 6 1. 7 a Region 7 0. 8 a Region 8 0. 4 a
Region 9 1. 1 a Region 10 0.5 a Office of the Secretary 5. 0 7. 5
8. 8 10. 3 17. 5 Field Management 30. 0 0. 9 0. 0 0. 6 0. 3
Community Planning and

1.2 0. 7 0.2 2. 5 1. 0 Development Office of General Counsel 1. 9
1. 4 0. 6 1. 4 1. 3

Office of Legislative and 0.0 0. 0 0.0 0. 0 6. 7 Congressional
Relations Government National Mortgage

0.0 0. 0 1.6 0. 0 1. 8 Association Office of Housing 3. 9 1. 3 1.
0 1. 5 1. 7

Office of Public and Indian Housing 1. 7 1. 4 1. 4 2. 3 1. 2
Office of Fair Housing and Equal

10. 4 5.1 2. 8 6.3 3. 5 Opportunity Policy Development and
Research 0.0 0. 0 0.0 0. 0 1. 0

Administration 1.3 0. 7 1.0 1. 8 0. 9

Office of Inspector General 2. 2 2. 0 a 1.0 1. 7 1. 1

Office of the Chief Financial Officer 1. 6 0. 3 0. 0 0. 0 0. 0
Continued

Unit FY 94 FY 95 FY 96 FY 97 FY 98

Office of Lead Based Paint 0. 0 0. 0 4. 0 10. 7 4. 3

HUD as a whole 1. 4 1. 4 1. 0 2. 0 1. 5

Continued from Previous Page Note: Percentages are based on the
number of unit employees at the end of the fiscal year and the
number of complaints filed in the unit during the fiscal year. a
In 1995, part way through fiscal year 1995, HUD began counting its
regional employees (for reporting

purposes) as part of the headquarters- based units in which they
functioned. The OIG, however, had always counted its employees as
headquarters- based; none had been included in previous regional
figures.

Source: GAO analysis of HUD data.

Further, according to Ms. Hobson, OIG did not have a problem
regarding the number of EEO complaints. Nor had the OIG come to
her office's attention as having racial discrimination problems.
According to Ms. Hobson, she also believed that the EEO Division
had not made a

finding of racial discrimination against IG Gaffney in the
previous 5 years. Justice and PCIE Found No

Both Mr. Glaser and Stephen Carbury, HUD's Chief Procurement
Officer, Basis for Complaints of stated that the negative
publicity surrounding IG Gaffney's selection of

Racial Bias in Urban Fraud Baltimore, San Francisco, and New
Orleans as sites for HUD's Urban Fraud

Initiative City Selection Initiative was a factor in breaking with
normal HUD contracting and

investigative procedures and contracting with non- GSA- schedule
law firms. The three cities had African- American mayors; and in
March 1998, a U. S. Representative asked the President's Council
on Integrity and Efficiency (PCIE) 13 to investigate whether a
pattern of racial bias in the OIG had led to the cities'
selection. 14 In April 1998, the National Conference of Black

Mayors and the U. S. Conference of Mayors called on the Congress
and others to authorize an inquiry into the matter.

13 Established by executive order in 1981, PCIE is an interagency
council charged with promoting integrity and effectiveness in
federal programs. Its membership consists primarily of
presidentially appointed and Senate- confirmed IGs. The chairman
of PCIE is the Deputy Director for Management of the Office of
Management and Budget. Among its other members is an official of
the Federal Bureau of Investigation (FBI), designated by the
Director of the FBI.

14 In his letter to PCIE, Representative Elijah Cummings, when
asking for an investigation, also indicated his concern about the
lack of minorities in key positions within the HUD OIG and HUD
itself. HUD officials also raised this and similar congressional
concerns as supporting their decision to select non- GSA- schedule
firms.

As part of its normal process, PCIE initially presented the
complaint it received against IG Gaffney to the Department of
Justice's Public Integrity Section. PCIE requested a determination
of whether the complaint, if proved, would constitute prosecutable
violations of federal criminal law. Prior to HUD's award of the
contracts to the non- GSA- schedule firms, the Justice Department
determined that there was insufficient information to warrant a
criminal investigation. This conclusion was subsequently reported
to PCIE. Further, PCIE's Integrity Committee, 15 after a thorough
administrative review of the complaint, concluded in January 1999
that the complaint was not substantiated. It found no evidence to
support the allegations of racial bias related to the selection of
the three cities.

While HUD officials could not have known that PCIE would conclude
that the complaint was unsubstantiated when they awarded the
contracts, they could have learned that Justice had already
determined that there was insufficient information to warrant a
criminal investigation. HUD officials also could have known that
the HUD OIG's Diversity Liaison Group supported the Urban Fraud
Initiative and IG Gaffney's selection of the three selected cities
when the group met in April 1998. The group, made up of minority
and nonminority OIG employees, reaffirmed its support for the
Urban Fraud Initiative and for the OIG's independence to make its
own decisions, when it met later in April 1998 with the Chairman
and members of the Subcommittee on Veterans Affairs, HUD, and
Independent Agencies, House Committee on Appropriations.

Not Permitted to Determine According to Mr. Glaser, about seven
OIG employees came to Samuel Authenticity of Reported

Hutchinson, HUD's Associate General Counsel for Human Resources,
and OIG Staff Discussions of

him asking to be removed from the OIG because of the office's
racial Discrimination Problems

climate and their treatment by managers. Mr. Glaser did nothing to
address the issue. He cited this meeting and a meeting between
those OIG staff and the Chairman of a congressional committee to
complain about the OIG's racial climate as factors in deviating
from HUD's usual EEO process to investigate the subject EEO
complaint. Mr. Hutchinson repeatedly recommended that we speak
with these and other OIG employees to hear

their views about the OIG's racial climate. Yet when we requested
to speak with the OIG staff who had reportedly spoken with Mr.
Hutchinson, 15 The Integrity Committee, whose chairperson is
PCIE's FBI representative, is responsible for receiving,
reviewing, and referring for investigation allegations of
wrongdoing against IGs and Deputy IGs.

Mr. Glaser, and members of Congress, our request was denied; and
we were told that they all wished to remain anonymous.

Unique Positions of Persons HUD officials also stated that their
deviation from normal procedures was Involved and Seriousness of

justified by the positions of the persons involved in the
complaint and the the Allegations nature of the allegations. The
combination of the Deputy Assistant IG's position as the highest-
ranking African- American in the OIG, the IG's unique position
within the agency, and the serious nature of the allegations

did make this a high- profile case. However, we found that HUD had
previously handled other high- profile cases that shared many of
the same characteristics without resorting to such extraordinary
measures.

High Profile HUD officials cited the high profile, unique nature
of this case as a reason for hiring a non- GSA- schedule
investigator. However, Ms. Chavis and Ms. Hobson recognized early
on that the case had a high profile and had already taken steps to
ensure that it was handled by a high- quality investigator. Thus,
HUD selected an investigative firm with a record of providing
high- quality investigative reports and requested the firm's best
investigator. According to Ms. Hobson, she was comfortable with
the ability of the firm and the investigator. We found nothing to
suggest that the

actions of HUD's EEO professionals were not adequate to address
the seriousness of this complaint. Senior Positions of Persons HUD
officials also cited the senior positions of those involved in the
Involved

subject EEO complaint as a factor in going outside HUD's EEO
procurement norm. The complainant, in an SES position as the
Deputy Assistant IG for Investigation, was the highest- ranking
African- American in the OIG. The official who allegedly
discriminated against him, IG Gaffney, held a presidentially
appointed SES position as head of the OIG. However,

this was not the first time that HUD had dealt with an EEO
complaint involving SES employees. In fact, two other HUD SES
employees filed EEO complaints against other HUD SES officials
during the same period as the subject complaint. The usual GSA-
schedule investigators were assigned to their complaints.

No Indication That IG Would HUD officials referred to IG Gaffney's
ability to retaliate against OIG Retaliate

employees who participate in the EEO process as another reason for
using a non- GSA- schedule firm. They also voiced concern that the
employees'

fears of retaliation would have a chilling effect on their
willingness to participate in the EEO investigation. 16 This was
not the first EEO complaint in which IG Gaffney was alleged to
have discriminated against employees. According to a HUD OIG
summary, between her appointment in 1993 and the subject EEO
complaint in February 1998, IG Gaffney was named eight times in
formal EEO complaints. 17 HUD's Office of Departmental EEO did not
take any special precautions in these complaints to protect the
complainants or witnesses against retaliation or intimidation by
the IG. Nor did we find evidence that IG Gaffney had retaliated
against these employees. OIG's rate of complaints, which
approximates that of HUD as a whole (see table 1),

suggests that OIG employees are not afraid to use the EEO process.
Moreover, when we assessed the minutes of an April 27, 1998,
meeting between members of the Subcommittee on Veterans Affairs,
HUD, and Independent Agencies, House Committee on Appropriations,
and representatives of the OIG's 27- member Diversity Liaison
Group, we found that the group had commented frankly about the
OIG's minority recruiting,

diversity, racial climate, and work environment. This too suggests
that OIG employees feel free to speak their minds without fear of
retaliation or intimidation by the IG.

We also found no evidence that a non- GSA- schedule firm was
better equipped than a GSA- schedule firm to protect employees
against retaliation. Moreover, title VII specifically protects
employees from

retaliation by employees for participating in the EEO process, 18
and we found no evidence that this statutory provision was
inadequate to protect employees from retaliation by the IG.

16 On Oct. 19, 1998, OIG initiated an audit into the procurement
of EEO investigative services by HUD's Office of Procurement and
Contracts (OPC). Although HUD officials have cited this action as
an example of IG Gaffney's abuse of her auditing power, it was an
inquiry into the procurement of the EEO investigative services
rather than an attempt to discourage HUD or OIG employees from
participating in the EEO investigation. Moreover, OPC personnel do
not appear to have been intimidated by IG Gaffney as they refused
to provide the documents requested by the OIG team and promptly
reported the incident to HUD management, who requested a PCIE
investigation. 17 As of July 19, 1999, four of the eight
complaints had been dismissed and the dismissals upheld after
appeal; two complaints had been settled; one complaint had been
dismissed

with the dismissal appealed to the EEOC; and no final agency
decision had been reached regarding the eighth complaint, with the
case thus ongoing. 18 42 U. S. C.  2000e- 3( a) (1994).

Scope and We conducted our investigation between December 1998 and
March 1999. Methodology

During that time, we interviewed HUD senior management officials,
HUD procurement officials, HUD EEO officials, and senior officials
of the HUD OIG. We also interviewed employees of EEOC and the
complainant's attorneys. In addition, we reviewed documents,
contracts, and statistical data pertinent to the scope of our
investigation.

We requested an interview with the Secretary of HUD, Andrew Cuomo.
Our request was denied. In addition, senior HUD management denied
our requests to conduct initial and follow- up interviews of other
pertinent HUD personnel, citing its ongoing EEO investigation, and
insisted that Mr. Bucklin, acting as agency counsel, attend
interviews of other HUD

employees. Mr. Bucklin disrupted an interview with Deputy
Secretary Ramirez by constantly objecting to our questions and
taking breaks to confer with the Deputy Secretary outside of our
presence. Although Gail Laster, HUD's General Counsel, wanted to
talk with us without Mr. Bucklin present, HUD officials refused.
Further, HUD officials requested that we

interview a group of OIG employees who, the officials said, had
complained about the OIG's racial climate. However, when we asked
to do so, we were informed that the individuals wished to remain
anonymous.

As agreed with your office, unless you announce its contents
earlier, we plan no further distribution of this report until 30
days after the date of this letter. At that time, we will send
copies of this report to interested congressional committees and
make copies available to others upon

request. If you have questions about our investigation, please
contact me or Ronald Malfi at (202) 512- 6722. John Ryan was a key
contributor to this case. Sincerely yours,

Robert H. Hast Acting Assistant Comptroller General for Special
Investigations

(600503) Lett er

GAO United States General Accounting Office

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