[Semiannual Report to Congress]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 04-S-03

Title: Semiannual Report to Congress

  
Date:  April 1, 2003

**********DISCLAIMER********** 
This file contains an ASCII representation of an OIG report. No attempt has been made to display graphic images or illustrations. Some tables may be included, but may not resemble those in the printed version. A printed copy of this report may be obtained by referring to the PDF file or by calling the Office of Inspector General, Program Support Division (202) 208-4599. ******************************

Subject:  Semiannual Report to Congress (No. 04-S-03)

I am pleased to present the results and accomplishments of the Office of Inspector General from October 1, 2002, through March 31, 2003. During this reporting period, as well as our last, we concentrated our efforts on helping the Department of the Interior address its most serious management challenges. We are confident that focusing on these issues will help the Department detect and correct vulnerabilities in its programs and operations.

For this reporting period, we have a considerable amount of money to report in restitutions and recoveries ï¿½ approximately $7.8 million. Much of this recovered money resulted from investigations of gas royalty underpayments to the Minerals Management Service. Since 1998, our office has reported over $500 million in oil and gas royalty underpayments ï¿½ a portion of which has been used to fund state education, Indian reservations, and water projects in the western United States. Additionally, our investigations over the last 6 months have resulted in numerous charges of embezzlement, conspiracy, bribery, false claims, and wire fraud ï¿½ yielding a total of eight new indictments and 16 convictions.

In our last two Semiannual Reports, we expressed a concern with the management of grant funds by Insular Area governments, which include Guam, the U.S. Virgin Islands, American Samoa, the Commonwealth of the Northern Mariana Islands, the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau. We highlighted financial accountability deficiencies in these governments, reporting that they generally ignore our audit recommendations and fail to sufficiently respond to our audit reports. We reported similar deficiencies during the last 6 months as well. We found that the Virgin Islands Government has failed to use funds totaling $29.6 million effectively or appropriately, which resulted in a school construction project that was delayed for nearly 2 years ï¿½ with cost overruns of over $17 million ï¿½ and a mental health facility that never opened. We also found that wastewater disposal projects were delayed because of poor planning for contracting out projects. We believe that these problems with fiscal accountability in Insular Area governments continue to exist because the Department lacks the authority to enforce audit recommendations.  

In March 2003, we moved our field office in Tamuning, Guam, to Honolulu, Hawaii, in an effort to expand our audit and investigative coverage of the Department. The relocation offers an excellent opportunity to maintain an effective presence in Hawaii, while at the same time addressing the longstanding challenges facing Insular Area governments as a whole. We also appointed liaisons to help Pacific Island governments understand and implement previous audit recommendations and to assist in capacity-building.

Thus far, we have been pleased with the progress reported by these liaisons, who have reported improvements in systems and controls that account for grant monies and the closing out of unresolved audit recommendations. We believe this new concerted effort will help combat the general lack of response by these governments to our audit findings.

In addition, we have provided training for auditors in the Pacific Insular Public Auditor Offices, and we have high expectations that this training will assist the Pacific Island governments in becoming more selfsustaining and help in identifying internal control weaknesses in programs and operations.
Our office is dedicated to ensuring that the Department of the Interior attains a higher level of integrity through our audit and investigative activity, and we are committed to not only reporting waste, fraud, and abuse, but also working with the Department to prevent it. 

Department of the Interior
Civil Complaint Filed Against DOI Employee and Watchdog Group
A five-count civil complaint was filed in U.S. District Court of the District of Columbia
against Robert Alan Berman, economist, Office of Policy Analysis (OPA), Assistant
Secretary, Policy, Management and Budget, DOI, Washington, D.C., and the Project on
Government Oversight (POGO) for the following violations:
ï¿½ Supplementing the Salary of a Government Official
ï¿½ Receiving a Share in a Claim Against the United States
ï¿½ Breach of Fiduciary Duty
ï¿½ Unjust Enrichment
ï¿½ Declaratory Injunctive Relief
The civil complaint alleged that POGO, a nonprofit organization and government
watchdog group, paid Berman $383,600 for work he performed as a federal employee and for his assistance in qui tam litigation filed against major oil companies for the underpayment of royalties to the Minerals Management Service (MMS). POGOï¿½s payment to Berman was his share in the proceeds from an oil settlement with Mobil Oil Corporation.  

Despite Unqualified Opinion, Significant Internal Weaknesses Hinder Progress
The independent certified public accounting firm of KPMG LLP (KPMG), under
contract with the Office of Inspector General, rendered an unqualified (ï¿½cleanï¿½) opinion on the consolidated financial statements of the Department of the Interior for fiscal year 2002.

KPMG also rendered unqualified opinions on the financial statements of six of the nine DOI bureaus. KPMG issued qualified opinions on the fiscal year 2002 financial statements of the U.S. Fish and Wildlife Service (FWS) and the Departmental Offices and did not express an opinion on the financial statements of the U.S. Geological Survey (USGS). FWS could not provide adequate documentation to support its general property, plant, and equipment balances, and the Departmental Offices could not provide timely documentation to support its accounts receivable and advances from others for its Interior Franchise Fund. As a result, the Interior Franchise Fund received a disclaimer of opinion on its financial statements. The USGS did not issue financial statements for fiscal year 2002 because of significant internal control deficiencies.

Significant weaknesses in the DOI were identified in the following areas:
ï¿½ Financial Management Systems. DOIï¿½s lack of adequate information
technology and general controls over its financial information systems could
adversely affect its ability to prevent unauthorized changes to financial information,
control electronic access to sensitive information, and protect information
resources.
ï¿½ Property, Plant, and Equipment. Weaknesses were reported in acquisitions and
disposals; reconciliation of subsidiary ledgers to general ledgers; property, land, and
land rights inventories; recording property transfers and depreciation; and
accounting for construction in progress.
ï¿½ Financial Reporting. After year-end recording transactions, DOI spent significant
time analyzing financial records and reconciling accounts due to its failure to
record financial transactions consistantly and in a timely manner, analyze financial
records, and reconcile general ledger accounts to subsidiary ledgers or other
supporting documentation. DOI also did not apply activity-based costing
methodologies to allocate costs in accordance with accounting standards.
ï¿½ Reconciliation of Intradepartmental and Intragovernmental
Transactions. DOIï¿½s failure to reconcile its intradepartmental and
intragovernmental activity on a timely basis throughout the year required significant
time and resources after year-end to reconcile intradepartmental activity to within
an acceptable level. DOI was also unable to reconcile its nonfiduciary
intragovernmental activity with other federal agencies.
ï¿½ Trust Fund Management. DOIï¿½s procedures and controls were inadequate to
ensure the proper and timely recording of Indian trust activity and balances.
ï¿½ Financial Processes at the U.S. Geological Survey. USGS lacked adequate
procedures to ensure the proper and timely recording of its financial transactions. It
also lacked the financial personnel needed to manage its financial operations.
To address the weaknesses identified in the audit reports, DOI is requiring its bureaus
and offices to prepare corrective action plans for each weakness, including monthly
milestones and target dates for completing the actions.

Bureau of Indian Affairs
Former BIA Contracting Officer Sentenced; Son-in-law Pleads Guilty
Stephen J. Calvin, a former Bureau of Indian Affairs (BIA) contracting officer who
previously pleaded guilty to a charge of mail fraud concerning the steering of government
contracts to his son-in-law, Anthony L. Dohi, was sentenced in U.S. District Court of New Mexico to 18 months of imprisonment and 36 months of supervised release. He was
ordered to pay restitution in the amount of $242,036. Dohi also pleaded guilty to theft from the Federal Government relative to a contract Calvin awarded to him, which Dohi was not qualified to perform. Sentencing of Dohi is pending.  As reported in our October 2002 Semiannual Report, Calvin used his position at the BIA to award three contracts to Dohi and his company, Dohi Industries, by circumventing proper bidding and bonding requirements and providing confidential pricing information.
One such contract, the construction of an overpass, caused the BIA to demolish and rebuild the bridge due to structural deficiencies. The demolition and new construction cost the BIA nearly a million additional dollars.

Tribal Chairman Sentenced in $100,000 Embezzlement Case
Former Tribal Chairman Orlando Anthony Largo, Santa Rosa Band of Mission
Indians, Santa Rosa, California, was sentenced following a guilty plea to charges that he
diverted tribal funds to his personal use by issuing 186 checks totaling more than $100,000 to himself from the tribal checking account. Largo was sentenced to 1 year and 1 day of imprisonment and 3 years of supervised release. He was ordered to pay restitution in the amount of $96,500. This investigation was a joint effort with the FBI.
Court Convicts Turtle Mountain Band of Chippewa Indian Officials Sentences were imposed on three Turtle Mountain Band of Chippewa Indian (TMBCI) officials as the result of a joint investigation by the OIG, FBI, and IRS Criminal Investigation Division into a series of fraudulent activities by current and former officials of the TMBCI. Sentencing of one defendant is still pending. The four individuals were convicted of various crimes, including conspiracy, theft, money laundering, witness tampering, and perjury, as reported in our October 2002 Semiannual Report.
ï¿½ Ronald S. Morin, contract administrator of Uniband ï¿½ a TMBCI-owned and
controlled business providing data entry service ï¿½ was convicted at trial as a coconspirator with Raphael DeCoteau, the former tribal chairman of TMBCI. Morin
was sentenced to 21 months of imprisonment, 24 months of supervised release, and
250 hours of community service. He was ordered to pay restitution in the amount
of $69,412.

ï¿½ Raphael DeCoteau was convicted at trial to charges of conspiracy and theft related
to various schemes to defraud the TMBCI and was sentenced to 21 months of
imprisonment, 24 months of supervised release, and 250 hours of community
service. He was ordered to pay restitution in the amount of $69,412, which is to be
paid jointly and severally with Ronald Morin. In addition, DeCoteau was sentenced
to 6 months of imprisonment and 24 months of supervised release to be served
concurrently with his previous conviction. He was ordered to perform an additional
50 hours of community service and to pay restitution in the amount of $7,300 on a
separate charge of misapplication of tribal funds. This additional sentence related to
DeCoteauï¿½s guilty plea for using tribal funds to purchase approximately 15 acres of
land for his family members. DeCoteau attempted to conceal his theft by recording
the expense as ï¿½business grants.ï¿½
ï¿½ Douglas J. Delorme, a current TMBCI councilman, pleaded guilty to charges of
theft from an Indian tribal organization and witness tampering. He was sentenced to
12 months of imprisonment and 36 months of supervised release. He was ordered
to pay restitution in the amount of $7,800. Delorme was convicted of providing a
tribal check to an enrolled member of the TMBCI on the condition that he kickback
a portion of the money to Delorme. Delorme also pleaded guilty to encouraging the
enrolled member to make a material false declaration, intimidating him, and inducing
him to change and withhold his testimony regarding the theft. In addition, Delorme
was convicted of embezzling another $3,800 of tribal funds by issuing TMBCI
checks to repay personal loans.
ï¿½ Raymond Poitra, former Chief Executive Officer of Uniband Inc., pleaded guilty to
charges of theft, money laundering, and criminal asset forfeiture in connection with a
scheme to defraud Uniband. The scheme to defraud both Uniband and TMBCI
was accomplished, in part, through the submission of fictitious, fraudulent, inflated,
or double-billed invoices related to a series of companies established by Poitra as
mediums to divert Uniband monies for his own personal use. While preparing for
Poitraï¿½s trial, investigating agents discovered that Poitra embezzled an additional
$282,000 in Uniband funds through a heavy equipment scheme, bringing the total
amount stolen by Poitra to $577,000. Sentencing of Poitra is pending.
Former BIA Employees Sentenced in Indian Education Fraud
Rosalie B. Yazzie, former business manager of the Seba Dalkai Boarding School,
and Alberta J. Bitsoi, former business manager of the BIAï¿½s Office of Indian Education
Programs, were sentenced in a U.S. district court after systematically defrauding the Federal Government by submitting false vouchers for stipend payments. As reported in our October 2002 Semiannual Report, stipend payments are made to BIA employees for work that is performed above and beyond the tour of duty.

Yazzie was sentenced in U.S. District Court of Arizona to 6 months home confinement
and 60 months of supervised release. She was ordered to pay restitution in the amount of
$57,401. Bitsoi was sentenced to 36 months supervised release and ordered to pay
restitution in the amount of $21,700.
ï¿½Operation Card Trixï¿½ Investigation Yields Four Guilty Pleas
Four individuals were accused by a federal grand jury in Montana in five separate indictments on charges of conspiracy, bribery, wire fraud, false claims, and false statements in connection with a scheme to defraud the government by misusing government credit cards and accepting kickbacks.  Charles C. Dillon, a BIA supervisor for the Crow Agency Facilities Management Branch; Emmett Old Bull, a BIA accounting technician at the Facilities Management Branch; Kirm G. Kath, co-owner of JJ&K Enterprises and sales representative for West Lite Corporation; and David D. Bauman, vice president of Pro Tech Mechanical, entered guilty pleas in U.S. District Court of Montana related to their participation in the kickback scheme.  As reported in the October 2002 Semiannual report, Dillon and Old Bull solicited and received payments from Kath and Bauman in exchange for using a government credit card to purchase products or services from West Lite and Pro Tech. Dillon structured the purchases, totaling $133,000, into amounts smaller than the $2,500 limit to avoid having to get BIA approval ï¿½ in effect, creating a practical monopoly for the companies, according to the indictments. Old Bull used his BIA credit card to purchase $68,230 from Pro Tech and accepted kickbacks in return.  Old Bull entered a plea of guilty to a charge of bribery. Dillon pleded guilty to three counts of bribery, two counts of wire fraud, and one count of making a false statement.  Dillon was also removed from federal service. Kath entered a plea of guilty to one count of bribery and two counts of conspiracy. He was sentenced to 78 months of imprisonment and 36 months of supervised release. He was ordered to pay restitution in the amount of $77,216. Bauman was sentenced to 12 months and 1 day of imprisonment and 36 months of supervised release. He was ordered to pay a fine in the amount of $5,000 following his plea of guilty to charges of bribery and accessory after the fact. Sentencing of Dillon and Old Bull is pending.
Members of our investigations and audits divisions were joined in this task force 
investigation by the Department of Health and Human Services OIG, the Department of
Housing and Urban Development OIG, the IRS Criminal Investigation Division, and
investigators of the U.S. Attorneys Office in Montana.


Asphalt Company Indicted in Relation to Highway Repair Scheme
Asphalt Supply & Service, Inc., and the companyï¿½s president, Robert R. Zimmerman,
of Laurel, Montana, were indicted by a federal grand jury in Billings, Montana, on charges of making a false claim and false statements. According to the indictment, Asphalt Supply & Service submitted altered and fictitious invoices to support a claim to the BIA for reimbursement for expenses that were, in fact, not incurred. The investigation revealed that the company was awarded a contract for the supply and delivery of asphalt materials needed for the repair of a highway on the Pine Ridge Indian reservation.
Due to circumstances beyond the control of the BIA and Asphalt Supply & Service,
the delivery of the materials could not be made. Nonetheless, Asphalt Supply & Service
submitted a claim for reimbursement for the cost of the perishable materials it never
procured and justified the claim by presenting altered and fictitious invoices to support its
claim for more than $175,000. Trial is pending.

Private Financial Advisor Indicted in Fraudulent Investment Scheme
Howard Eugene Liner, a private financial advisor from Katy, Texas, was indicted by a
federal grand jury in the U.S. District of Minnesota on 24 counts of false statements, wire
fraud, and money laundering. According to the indictment, Liner allegedly solicited more
than $400,000 in investments from the Upper and Lower Sioux Tribes of Minnesota in a
scheme that falsely represented to the tribes and other investors that their investments would be placed in secret trading programs that would produce greater-than-market-rate returns.  The indictment alleged that Liner diverted those investments to his own personal benefit and use.

Individual Indicted in False Application for Tribal Recognition
Ronald Roberts, also known as Chief Golden Eagle and/or Sachem, Western
Mohegan Tribe and Nation, was indicted by a federal grand jury in the Northern District of New York on five charges of misusing his sonï¿½s social security number in making
applications to financial institutions and in a sworn bankruptcy filing.
More recently, a superseding indictment added a charge of making and using a false
document within the jurisdiction of the United States. Roberts allegedly filed an official
petition with the President of the United States and the Secretary of the Interior, seeking
federal recognition as an Indian Tribe. The petition, required to meet the federal regulations to establish that an American Indian group exists as an Indian tribe, contained several fraudulent documents.

We initiated our investigation when the BIAï¿½s Branch of Acknowledgment and
Research identified the questionable materials submitted with the petition and referred the matter to our investigators. Roberts also allegedly submitted the falsified documents to the U.S. District Court for the Northern District of New York.

Former Kiowa Tribe Vice Chairman Pleads Guilty to Bribery Charges
Phillip C. ï¿½Yogieï¿½ Bread, the former vice chairman of the Kiowa Tribe of Oklahoma,
pleaded guilty in U.S. District Court of Oklahoma to charges that he accepted bribes in
exchange for business opportunities with Oklahoma Indian tribes, including the Kiowa
Tribe. As reported in our October 2002 Semiannual Report, Bread held his elected office
with the Kiowa Tribe while actively employed with the Oklahoma Department of
Commerce as the director of tribal assistance, and, as such, abused both positions by
accepting nearly $12,000 in bribes. As a result, Bread fraudulently deprived the citizens of Oklahoma of their right to honest services by accepting money from companies seeking to do business with Oklahoma Indian tribes while being paid for that same work by the state Commerce Department. Sentencing is pending.

Tribal Chairman and Brother Plead Guilty in Vehicle-Swapping Scheme
Crow Tribal Chairman Clifford G. BirdinGround, who was indicted by a federal grand
jury in Billings, Montana, on charges of conspiracy, bribery, and theft, entered a guilty plea and awaits sentencing. A $559,000 vehicle-swapping scheme that began less than 2 weeks after BirdinGround took office allowed vehicles owned by the tribe to be traded in to a local car dealership for credit against which BirdinGroundï¿½s friends and relatives purchased vehicles for their personal use. BirdinGround also used proceeds from the scheme to pay for repairs on his personal vehicles. BirdinGround pleded guilty to one count of bribery concerning programs receiving federal funds.  Alexander R. BirdinGround, brother of Clifford BirdinGround, pleaded guilty to charges of conspiracy and theft from an Indian tribal organization and was sentenced to 3 years of probation and ordered to pay restitution to the Crow Tribe in the amount of $26,444.  Former BIA School Superintendent Accused of Embezzling School Funds Joyce Burr, the former superintendent of the Circle of Nations School (CNS) in Wahpeton, North Dakota, was charged by a federal grand jury in a two-count indictment with theft from a tribal organization.  Burr allegedly used a CNS credit card to withdraw approximately
$70,000 in cash at casinos and embezzled another $40,000 from CNS by obtaining two fraudulent loans. Burr used money from the loans to partially pay off her credit card debt at the school.

As the superintendent, Burr was responsible for ensuring that $3.8 million in BIA
monies to the CNS was properly administered. The investigation of Burr was worked
jointly with the FBI. Burr was terminated from CNS and is awaiting trial.

Criminal Investigator Resigns After Misusing Credit Card
A criminal investigator for the Internal Affairs Division of the Office of Law Enforcement Services, BIA, resigned from his position after paying restitution for
$13,500 in unauthorized purchases made on a government credit card. He admitted
to making personal purchases on the card for over a year and a half, claiming financial difficulties, depression, and alcohol abuse as reasons for using the card. The investigatorï¿½s purchases included groceries, meals at restaurants, and cash advances used at a casino. At one point, the investigator was $5,000 behind on credit card payments.
Court Convicts Loan Program Employees, Orders $34,000 in Restitution
The Tribal Loan Program of the Lac Vieux Desert Band of Lake Superior Chippewa
Indians of Watersmeet, Michigan, arranged over a million dollars in loans to 166 individuals, half of whom defaulted on the loans. Our previous Semiannual Reports detailed, in part, the sentencing of the former tribal chairman and the former tribal receptionist. Since then, Rhea
Reno, the former tribal payroll clerk, was sentenced to 2 years of probation, ordered to pay restitution in the amount of $3,329, and ordered to pay a $750 fine. Ultimately, our
investigation resulted in the indictment, arrest, and conviction of four tribal staff members, collectively 19 months of imprisonment and 132 months of probation, and orders to pay restitution totaling nearly $340,000.  Court Charges BIA Investigator With Theft After Agents Find Rifle The U.S. District Court of Montana sentenced BIA criminal investigator Marlin D. Yarlott after he pleaded guilty to taking
evidence for personal use. Yarlott, who was employed by Crow Agency Law Enforcement Services of the BIA, confiscated a rifle during a trespassing investigation and kept the weapon for personal use after the owner was convicted in court. OIG investigators found the rifle in the front seat of Yarlottï¿½s pickup truck. Yarlott resigned from his position and was sentenced to 2 years of probation and 192 hours of community service. He was also ordered to pay a $1,250 fine.

Bureau of Land Management
Father and Son Accused of Product Substitution Scheme Boyd Goble, president of Goble Seed Company, and his son, Jeffrey Goble, were indicted by a federal grand jury in the District of Colorado on charges of wire fraud, mail fraud, false statements, aiding and abetting, and false claims in connection with a product substitution scheme.  The Bureau of Land Management (BLM) contracted for the delivery of nearly 155,000 pounds of fourwing saltbush seed, collected from plants growing at higher altitudes in northern states, which is considered vital to the successful stabilization and restoration of lands debilitated by forest fires. According to the 39-count indictment, the Gobles submitted invoices to the BLM totaling more than $3 million after deliberately substituting inferior, less expensive seed, which would die or fail to thrive in the locations where the seed
was to be planted.  The BLM terminated all contracts with the Gobles and the Goble Seed Company and, based on a referral by the OIG, the DOI Office of Acquisition and Property Management administratively suspended them from all Federal Government business transactions pending the outcome of the legal proceedings. Trial is pending.

Bureau of Reclamation
BOR Budget Officer Sentenced After Accessing Pornography at Work Roger Schlosser, a budget officer in the Bureau of Reclamationï¿½s (BOR) Billings, Montana, office, was
sentenced in U.S. District Court of Montana to 10 months of imprisonment and 36 months of supervised release following his conviction to charges that he
billed the government for hours of time that he spent surfing pornographic Web sites. He was ordered to pay restitution in the amount of $25,000. Over a 28-month period, Schlosser charged the government for salary and compensation derived from core duty, overtime, and holiday hours he actually spent accessing Internet pornography.

Minerals Management Service
Investigation Uncovers Multi-Million Dollar Royalty Underpayment  The Minerals Management Service (MMS) received more than $7 million from SEECO, Inc., a subsidiary of Southwestern Energy Company of Houston, Texas, following trial in the Circuit Court of Sebastian County, Arkansas. With assistance from MMS, our investigation uncovered a multi-million dollar royalty underpayment scheme by SEECO Inc., in which SEECO and another subsidiary company of Southwestern conspired to underpay royalties on natural gas produced from federal leases. The United States leases certain federal properties to oil companies to develop oil and gas resources. The oil company produces and sells the minerals, then pays the MMS a percentage of the sales value as a royalty. In this case, SEECO did not enforce the minimum pricing and volume provisions of a gas sales contract with the other subsidiary, and accepted substantially less than it was entitled to. The court found that SEECO defrauded its royalty interest owners of millions of dollars; the MMSï¿½s share of the award was $7,085,642.
Deficiencies Weaken Minerals Management Service Audit Offices Problems in quality control and audit quality affected the integrity of MMSï¿½s audit offices ï¿½ the Offshore and Onshore Compliance and Asset Management Offices. Our audit of these offices revealed that MMS failed to perform audits in accordance with all required professional standards and had control deficiencies that could seriously affect MMSï¿½s ability to comply with required auditing standards. For example, MMS recreated a set of working papers that it had lost and improperly presented the documents as the originals.  Additionally, MMS auditors could not provide working paper files for five audits.  MMS agreed with all of our recommendations and has already begun to take corrective action, which included disciplinary action for certain employees. MMS has also arranged for an external peer review during 2003.  Texaco Settles Royalty Issue on Production of Condensate An audit of the royalty rate reduction program for operators of
stripper oil well properties revealed that Texaco Exploration and Production, Inc., failed to pay proper royalties to the MMS on the production of condensate from the Texaco Table Rock Unit in Wyoming. A subsequent investigation resulted in Texaco reaching a settlement with the Department of Justice and MMS in the amount of $211,286 to resolve claims of underpayment of royalties on condensate production from the Table Rock Unit. In addition, based on information developed during the investigation, the State of New Mexico is seeking substantial additional royalties.  

National Park Service
United States Seeks Extradition in a $3.5 Million Fraud Case Gregory E. G. Thomlison of Ontario, Canada, was arrested by the Royal Canadian Mounted Police in Toronto, based on an extradition request by the United States, and currently awaits an extradition hearing. The extradition request was issued following Thomlisonï¿½s indictment by a federal grand jury in the Southern District of California, charging him with 67 counts of wire fraud, money laundering, and theft of government property and illegal transfer of bankruptcy assets.  As we reported in our September 2002 Semiannual Report, the indictment alleges that Thomlison, owner/president of Destinet Services Corporation, defrauded his former clients ï¿½ the National Park Service (NPS) and the California State Department of Parks and Recreation.  According to the indictment, Destinet Services contracted with clients to manage reservations and ticketing for campgrounds, sports venues, and other entertainment ventures. Thomlison is accused of collecting reservation and ticketing fees from 1994 to 1997 and illegally transferring $3.5 million to bank accounts of shell companies in Canada, which he controlled. Thomlison allegedly used the funds to support his lifestyle and his other personal business interests. This continuing case is a joint effort of our audits and investigations staff.

NPS Contract Computer Specialist Pleads Guilty to Embezzling
Mitchell A. Nicholas, former NPS contract computer specialist in Washington, D.C., pleaded guilty in U.S. District Court of the District of Columbia to charges that he stole NPS property and embezzled NPS money. For 3 years, while working for the Park Service, Nicholas made unauthorized purchases of nearly $50,000 of computer equipment using the government-issued credit cards of three other employees. The purchases were transacted through a personal friend at a local computer supply company. Nicholas personally picked up the computer equipment; however, he never delivered the property to the NPS. Instead, Nicholas sold the computer equipment.  In addition, Nicholas created a fictitious computer supply business and then used the company to set up an account with an electronic credit card processing company to accept credit card purchases. Nicholas processed more than $80,000 in NPS credit card purchases for supplies and services through the fictitious business, which were never provided. He also created and submitted false work orders and billing statements to the NPS in support of his fraudulent scheme. Nicholas primarily used the money he embezzled to pay his personal debts.

Deficiencies in Contract Administration Lead to Excessive Costs
Poor business decisions by the former park superintendent and contracting officer in the administration of a contract for construction at the Bryce Canyon Visitor Center led to excessive costs, as follows:
ï¿½ NPS selected a fixed unit-price contract that did not provide incentive to
the contractor for cost control or labor efficiency. This required significant
monitoring of contractor performance by the Federal Government.
ï¿½ NPS did not sufficiently monitor the contract and performed only limited
construction supervision of the project.
ï¿½ NPS used rough estimates of quantities and materials to prepare the bid
schedule. As a result, contract specifications were inaccurate, and, after
contract award, NPS had to increase 60 line items and add 45 new line
items for changes and additions to the project. Consequently, project costs
increased almost a million dollars, from $3.9 to $4.8 million ï¿½ a 24 percent
increase.
The excessive contract costs contributed to deficit balances in the parkï¿½s recreation fee
demonstration account in fiscal years 2000 and 2001. (Congress authorized the fee
demonstration program to enable national parks and other federal agencies to test new fee
programs to raise funds for infrastructure repair).
The above deficiencies resulted primarily from poor business decisions made by the
former contracting officer and the former park superintendent.

River Rafting Concessionaire Contracted by NPS Debarred Following Sentencing
Black Canyon Inc., a former river rafting concessionaire contracted by the NPS to operate on the
Colorado River, was administratively debarred for a period of 3 years by the DOI Office of Acquisition and Property Management. This action followed the companyï¿½s
conviction for underreportting nearly $1.5 million in gross revenues on its financial reports. The corporation president, Larry Opfer; treasurer, Tim Richner; and secretary, Ronald Opfer, were also debarred for a period of 3 years. As we previously reported in our October 2002 Semiannual Report, Black Canyon, Inc., was required to pay a franchise fee to NPS based on its gross revenue receipts. Black Canyon, Inc., entered into a contract with NPS in 1988 that gave it exclusive rights to operate tours from the Hoover Dam in Nevada to Willow Beach in Arizona.
NPS Has Not Established Priorities For the Use of Franchise Fees An audit of franchise fees collected from park concessionaires disclosed that NPS had not implemented our previous recommendation that it prioritize its use of these fees. We could not assess whether individual parks, which can keep up to 80 percent of the fees they collect, in fact used the fees to address high-priority park needs. In addition, the parks we visited were not reconciling financial data to ensure that concessionaires were paying promptly or in the correct amounts. We notified DOI that the prior audit recommendation should not be considered implemented and offered two suggestions to strengthen controls over projects funded with franchise fees.  NPS Employees Disciplined for Violating Federal Travel Regulations Twelve senior NPS employees were disciplined for violating Federal Travel Regulations after inappropriately charging travel
expenses to the government in order to attend a retirement party.  Our investigation revealed that a variety of business meetings were intentionally scheduled and coordinated to coincide with the party.  Although business meetings were scheduled to begin on a Monday, many employees arrived the previous Saturday to attend the party and included these additional expenses on their travel vouchers for reimbursement. In addition to the 12 members who were disciplined, two additional employees retired prior to the issuance of disciplinary actions.

Office of Insular Affairs
Pacific Field Liaison Reports Progress Working With Office of Insular Affairs Our Insular Area field liaison for the Pacific, appointed in July 2002, reported progress in several areas: building the capacity of local Offices of Public Auditor in Pacific areas to audit local funds, working with the Office of Insular Affairs (OIA) to look at the adequacy of Insular Area government systems and controls that account for grant monies, and closing out unresolved audit recommendations. In this regard our field liaison reported that as of March 2003, his work with public auditors and elected officials had resulted in closing out 29 open audit recommendations (eight reports). He also reported ongoing resolution efforts for another 18 reports. We believe that this concerted effort will help remedy the general lack of response by Pacific Insular Area governments to past audit recommendations.  Follow-up Reveals Urgency of Working With Other Agencies A follow-up audit on audit findings and recommendations pertaining to Insular Areas underscores a fundamental problem faced by the Department in correcting serious deficiencies. While the OIG is responsible for auditing Insular Area governments, the DOI
does not have authority to enforce audit findings and recommendations for funds provided
by other federal departments or for funds provided by the DOI that have federally imposed
entitlement conditions. Most Insular Area funding falls into one of these two categories.
For example, in our follow-up audit, we looked at findings pertaining to the use of federal
funds totaling $26.5 million. Of this amount, $25.5 million was related to funds over which
DOI had no control. For the remaining $1 million ï¿½ over which DOI has control ï¿½ we
found that the Department did not take sufficient action to resolve findings pertaining to
more than $100,000 of questioned costs. The OIA agreed with our recommendations to
better monitor the disposition of findings and recommendations pertaining to Insular Area
government use of all DOI funds, and it agreed to support efforts to strengthen DOI
controls over departmental financial assistance to Insular Area governments.
This follow-up audit highlights the necessity of continuing to urge other federal agencies
providing funds to the Insular Areas to become more involved in monitoring these funds and
ensuring their proper use.

Audits of Virgin Islands Programs Highlight Continuing Deficiencies
Our five audits of Virgin Island programs and activities during this reporting period
disclosed the serious challenges that we continue to face in encouraging Insular Area
governments to be fiscally responsible in managing grant funds. Serious deficiencies remain
uncorrected, and the government continues to demonstrate a lack of concern in responding
to our audit findings. Of the 34 recommendations made to the Government of the Virgin
Islands during this reporting period, 28 recommendations remain unresolved. The following
are areas of continued concern:
ï¿½ The failure to use funds for their intended purposes. This is a problem that has
a direct adverse effect on the quality of life of Virgin Island residents. For example,
we identified school construction that was delayed for nearly 2 years, a mental
health facility that never opened, wastewater disposal projects that were delayed,
and hurricane-recovery funds that were not effectively managed. Some funds were
mismanaged, such as $29.6 million in operating funds and bond proceeds
administered by the Public Finance Authority. Other funds were not spent at all,
such as most of the $5.4 million available to the Department of Public Works. In
the 2 years following the award, the Department spent only 11 percent, or
$609,000, of the $5.4 million.
ï¿½ The lack of standard business practices essential to financial accountability.
All of our audits identified serious administrative and accounting deficiencies,
including property management practices that were not sufficient to satisfactorily
account for and safeguard equipment purchased with grant funds; improper
procurement practices that allowed purchases without competition; poor records
management; inadequate accounting practices that resulted in questioned costs,
incorrect grant balances, and unreconciled records; and poor reporting practices to
OIA that unnecessarily delayed projects.
Employee Sentenced After Being Charged With Wire Fraud
Sonia M. Foy, former collection agent/secretary for the Virgin Islands Lottery, was
sentenced to 5 years of probation and 100 hours of community service following her
conviction for a charge of wire fraud. As the collection agent for the Virgin Islands Lottery,
Foy was responsible for the collection and receipt of monies payable to the Government of
the Virgin Islands. Foy admitted to embezzling money from these lottery funds and was
ordered to pay restitution in the amount of $11,930.
This investigation was initiated through information received during the successful
investigation and prosecution of Anthony Dizon, former executive director of the U.S. Virgin
Islands Lottery.

KPMG LLP Opinions on Office of the Special Trustee Qualified
The independent certified public accounting firm of KPMG LLP, under contract with
the Office of the Special Trustee for American Indians (OST), rendered qualified opinions
on the fiscal year 2001 Tribal and Other Trust Funds and Individual Indian Monies Trust
Funds financial statements of the OST.
KPMG qualified its opinions because of the following:
ï¿½ Cash balances in the financial statements were materially greater than balances
reported by the U.S. Treasury.
ï¿½ Inadequacies in certain DOI accounting systems made it impractical to extend
auditing procedures to satisfy auditors regarding the fairness of Trust Fund balances.
ï¿½ Certain parties for whom the Office of Trust Funds Management (OTFM) holds
monetary assets in trust do not agree with the balances recorded by the OTFM and
have filed or are expected to file claims against the U.S. Government.
Management agreed with our reportï¿½s three recommendations, which were the
following:
ï¿½ Continue to monitor progress toward completion of the various trust reform
subprojects managed by the BIA.
ï¿½ Resolve financial reporting differences.
ï¿½ Implement adequate controls over information technology systems.
Office of the Special Trustee for American Indians

Questioned Reimbursements Identified For FWS Grants
Our reviews of the U.S. Fish and Wildlife Service (FWS) Sportfish and Wildlife
Restoration program grants, totaling about $504 million for 14 states and two territories,
identified questioned costs and other significant issues, as follows:
ï¿½ Ten states and the two territories claimed $4.9 million that
was ineligible for reimbursement. The grantees with the most
significant problems were Nevada ($1,010,000) and the
Commonwealth of the Northern Mariana Islands
($944,000).
ï¿½ Five states did not offset grant costs of $823,000 with
revenues earned from commercial activities on lands
purchased or managed with grant funds. Texas accounted
for $604,000 of the total.
ï¿½ Five states did not return a total of $2.6 million of interest
earned on hunting and fishing license revenues to their fish
and wildlife programs. Georgiaï¿½s portion accounted for
$1.9 million of the total.
ï¿½ Five states diverted over $5 million of revenue from the sale of state
hunting and fishing licenses for purposes other than administering their fish and
wildlife programs. Michigan alone used about $3 million in license revenues for law
enforcement activities unrelated to its fish and wildlife program.
Based on our reports, FWS is working with the states and territories to resolve these
matters.
Services Rendered by Outside Attorneys Did Not Constitute Legal Work
A U.S. General Accounting Office (GAO) review of FWSï¿½s Endangered Species
Program concluded that FWS inappropriately acquired legal services outside the
Department of the Interior, which, in turn, would be a violation of the Anti-Deficiency Act.
GAO based its conclusion on a legal opinion by the Department of the Interiorï¿½s Office of
the Solicitor. GAO noted that the Solicitor is solely responsible for the Departmentï¿½s legal
work and such services should be procured with the Solicitorï¿½s appropriation.


U.S. Fish and Wildlife Service
At the request of the Department, we conducted an independent evaluation of FWSï¿½s
use of these outside contractors. Our findings did not substantiate GAOï¿½s conclusion.
Rather, we determined that the services rendered by the attorneys did not constitute legal
work but were consultative and investigatory in nature. Nonattorneys, such as human
relations specialists, labor relations experts, and EEO investigators, routinely provide such
services within DOI and other departments and agencies. Therefore, we concluded that the
FWS had the authority to enter into such contracts, and the use of the Resource
Management appropriation was proper.

Biology Technician Embezzles Money Through Nonexistent CompanyScott Rickettson, biology technician, FWS, Medicine Lake, Montana, was indicted bya federal grand jury on charges of wire fraud, theft of money by a federal employee, theft of government property, forgery of a government obligation or contract, and false claims.  According to the indictment, Rickettson made false statements on his application for federal employment. After becoming a biology technician, Rickettson allegedly submitted fraudulent Wildlife Extension Agreements, which caused the Ft. Peck Tribes to receive two FWS grants totaling $36,500 and then embezzled the $36,500 from the Fort Peck Tribes by submitting four fraudulent invoices from Wildlife Veterinary Consulting, a fictitious company that he created. Rickettsonï¿½s trial is pending.


USGS Needs Improve Security Over Critical Information Systems
The U.S. Geological Survey (USGS) needs to secure its critical information technology systems, which are a primary repository of data on the nationï¿½s mineral, geologic, water, energy, and biological resources. The systems also contain critical monitoring data on biological
and toxic contaminants and volcano and earthquake hazards. Protection of these systems is essential to secure the data from unauthorized access, misuse, and disruption of service. We found, however, that USGS management has not sufficiently addressed security or established a
permanent management program to ensure appropriate security practices through the agency. USGS agreed with our recommendations and agreed to take corrective actions to protect its systems.

Scientist Embezzles $34,000, Purchases Scuba Gear and Aquariums
Gary W. Hill, a former USGS scientist in St. Petersburg, Florida, was sentenced in federal court to 5 years probation and 6 months home detention for embezzling funds from the DOI using his government credit card. Investigators uncovered numerous personal purchases made with the card, including custom wheels and a stereo system for his personal vehicle and salt-water aquarium systems for himself and his son. Hill also used the credit card to buy a wet suit for his wife, then brought her along on a work-related, week-long diving trip to Biscayne Bay. He originally claimed that the aquarium systems and wet suit were essential for experiments he was conducting at work. Hill was ordered to pay a $3,000 fine and $34,000 in restitution.