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Project on Government Oversight

POGO Calls on Congress to Monitor Bailout Conflicts of Interest

2009 Volume 13-2

In This Issue

POGO Calls on Congress to Monitor Bailout Conflicts of Interest
Letter from the Executive Director
Oversight Pros Share Tips and Tales in POGO’s New Congressional Oversight Handbook
Will There Finally Be Adequate Protections for Federal Whistleblowers?
POGO Earns Sunshine Award
F-22 Fight Takes Wing
How Stimulus Funds Are Being Overseen
Support Accountability by Supporting POGO through CFC (#10785)
In the Next Newsletter

 

POGO Calls on Congress to Monitor Bailout Conflicts of Interest

POGO has long been concerned with conflicts of interest between private interests and the federal government. Now, with the Federal Reserve and Treasury Department relying heavily on contractors to implement the unprecedented bailout of Wall Street, the need to oversee these conflicts is greater than ever.

In May, POGO wrote to Congress about the serious potential for conflicts of interest involving firms that are being hired by the Fed and Treasury to manage and provide “independent” advice on the valuation of toxic assets. These assets, many of which are tied to distressed loans and mortgages, are clogging up the balance sheets of financial institutions across the country, and are at the heart of the current economic crisis.

Many of the firms being hired by the government to manage and valuate these toxic assets were already Wall Street titans. Take BlackRock, for instance: it now manages over $2.7 trillion in assets, making it the largest asset manager in the world. Early on in the financial crisis, the firm received three no-bid contracts from the New York Fed. BlackRock is also co-managing a $1.25-trillion securities purchase program for the Fed, and was recently named as an asset manager for Treasury’s Public Private Investment Program.

The potential for conflicts of interests under this system is enormous. The firms often have access to insider information, and could potentially inflate the price of assets in which they have a direct financial interest. Of course, the companies claim that they segregate the employees working for the government and the employees working for the private sector. BlackRock, for example, has publicly stated that that the two teams operate in separate buildings and on isolated computer networks, and are unable to communicate about their respective tasks. However, Fed Chairman Ben Bernanke has testified to Congress that “it’s probably impossible to completely separate” the two functions.

What’s worse, it appears that the government is mostly relying on the companies themselves to disclose and manage their own conflicts of interest. Without proper oversight, these conflicts could lead to financial losses for the American taxpayer, and could further erode the public’s confidence in the government’s ability to stabilize the financial system.

POGO’s letter was mentioned in The New York Times and has generated a great deal of interest among the congressional committees tasked with bailout oversight.

 


Letter from the Executive Director

Dear Friends,

As long as I’ve worked in D.C. (and I think I can now safely call myself an old-timer) there has been a lot of talk about protecting whistleblowers. However, this talk has not turned into real protections. This is incredible, given that it is largely only because of whistleblowers that the Congress, the media, or the public know the truth about the government’s operations.

Although formal briefings and testimony at hearings are essential, they will never reveal the whole, stark truth. Bureaucracies tend to keep bad news to themselves. I will never forget leaving what turned into a four-hour briefing by two whistleblowers for a then-Senate Armed Services Committee member. The Senator turned to me and said, “I get it now. I’ve had endless presentations from agency heads on these issues, but I’ve learned more in these few hours than I did in years of briefings and hearings.”

It is for this reason that Congress must finally knuckle down and pass a bill that will be more than just protection in name only—it must provide actual protections and encourage federal employees to speak up and tell the truth. It is not merely out of altruism for whistleblowers that we must protect them, but also out of necessity if we intend to be an informed citizenry. Given our two wars and unprecedented spending through the stimulus and bailout, we need to ditch the patchwork of protections and protect all federal employees and contractors, including those in the intelligence agencies with whom we entrust our nation’s secrets. (For more information, see our articles on pages 4 and 5.)

Whistleblower protection is one of the most important issues before Congress. The Democrats and Republicans in both the House and Senate are working hard on whistleblower protections, and the White House is engaged. Let’s get real whistleblower protections passed now so that good government reforms stand a chance of ensuring an effective, accountable, open, and ethical federal government.

Warmly,

Danielle Brian
Executive Director

 


Oversight Pros Share Tips and Tales in POGO’s New Congressional Oversight Handbook

In response to requests from Hill staffers for a compilation of the materials from our Congressional Oversight Training Series (COTS), POGO has published The Art of Congressional Oversight: A User’s Guide to Doing It Right. This handbook is designed for congressional staffers who are new to oversight, as well as for those who are more experienced yet want to brush up on oversight skills. Its purpose is to empower congressional staff to tap into Congress’s numerous oversight tools, and inspire a new generation of investigators to pick up the baton from many of the oversight greats who have since left the Hill.

With cartoons, photos, excerpts from remarkable hearings, and vignettes from veteran Hill staffers, the handbook has a playful and humorous tone. It includes concrete advice about topics such as “Not being fooled by pseudo-classifications” and “Cultivating contacts within the agencies and companies you cover,” and even provides an investigation case study, where a longtime Senate investigator walks the reader through all the stages of an effective investigation.

POGO held a book release party on June 1 at the Capitol Visitor Center, with more than 100 people in attendance to help us celebrate. On July 16, POGO also co-hosted an event with the Constitution Project at the National Press Club to highlight our new book as well as that of the Constitution Project, When Congress Comes Calling: A Primer on the Principles, Practices, and Pragmatics of Legislative Inquiry, written by Mort Rosenberg. Panel speakers Mort Rosenberg, former Representative Mickey Edwards, Assistant Attorney General for Legislative Affairs Ronald Weich, and former Representative Christopher Shays spoke to a packed room about “Congress vs. the President: The Scope and Limits of Congressional Oversight Powers.”

POGO is distributing copies of the handbook free to all Members of Congress and Committees, as well as to staff who attend COTS seminars. POGO is also encouraged by interest from professors who are considering using the handbook in their curricula. For those who are not Hill staffers, you can purchase a copy of the handbook via POGO’s website or by completing the order form below. For more information, please contact Danni Downing at danni@pogo.org. 


Will There Finally Be Adequate Protections for Federal Whistleblowers?

Congress has long recognized that federal employees and contractors who report waste, fraud, and abuse in government need legal protections against retaliation, and has unanimously passed whistleblower protection legislation on three separate occasions. However, each time, the law not only failed to protect, but ended up creating far more retaliation victims than it helped. As a result, federal workers have very little chance of successfully challenging the retaliation and intimidation stemming from their warnings of misspent tax dollars or danger to the public.

Despite these past failures, it is possible to effectively protect whistleblowers. For instance, Congress recently passed eight laws granting millions of private sector employees strong protections, such as access to jury trials. Since 1999, Congress has been trying to pass credible whistleblower protections for federal workers that address the past failures. Efforts had stalled because the Senate balked on two fronts: allowing the whistleblowers the right to a jury trial should the administrative process fail, and providing national security whistleblowers any whistleblower protections.

Now, after seven hearings, eight committee approvals, four unanimous House or Senate votes, constant veto threats, and consistent frustration due to procedural objections or secret holds, legislation has a new lease on life in the form of the bipartisan Whistleblower Protection Enhancement Act of 2009. The Act has been introduced in the House (H.R. 1507) and the Senate (S. 372). On July 29, the Senate Homeland Security and Governmental Affairs Committee (HSGAC) unanimously approved an amended S. 372, which now provides government workers the right to bring reprisal complaints to a federal court for a jury trail. The legislation also included language to protect intelligence-agency employees. Watchdog groups praised the Senate for taking this historic step forward.

However, as far as the Senate has come, there remain significant improvements necessary to accomplish real whistleblower protections. POGO, and the Make It Safe Coalition of which we are a member, will continue to wage a vigorous advocacy campaign as the House begins consideration of its language. POGO believes that, after a decade of debate, both the House and Senate want results. We hope the stage is now set for the strongest possible outcome when the two bills are reconciled.

As Danielle Brian testified before HSGAC, “Finally, we cannot forget these people whose careers—or even lives—have been shattered because this law has been so late in coming. For real reform, we not only need to pass real protections so that there are no future [Richard] Barlows, [Robert] MacLeans, or [Thomas] Tamms, but we also need to review cases such as these and find some way to make amends for the untenable situation we forced these people into—people who were just doing their jobs and upholding their oath of service to their country. That would be a message sent around the federal government that whistleblower protections are more than a campaign promise, they are a reality.”

 


POGO Earns Sunshine Award

POGO is honored to announce that we have been awarded the Society of Professional Journalists’ (SPJ) Sunshine Award for our “important contributions in the area of open government.”

SPJ based its decision on POGO’s investigations into the Department of Interior’s failure to collect oil and gas royalties; our Federal Contractor Misconduct Database, which tracks civil, criminal, and administrative misconduct by the federal government’s top contractors; and our work uncovering wasteful spending in the Air Force.

“Being recognized by our colleagues in the media is particularly meaningful to us,” said POGO Executive Director Danielle Brian.

 


F-22 Fight Takes Wing

In July, POGO was engaged full-throttle in the lead up to the historic vote that canceled further production of the F-22 fighter jet. While POGO generally does not lobby Congress on legislation, this fight was so essential we made the conscious decision to make an exception and throw all of our energy into this battle. Incredibly, despite two Presidents, two Secretaries of Defense, three Chairmen of the Joint Chiefs of Staff, and the current Secretary and Chief of Staff of the Air Force all calling for the elimination of F-22 production, it looked likely the program would survive.

POGO has long advocated that it is not in the best interest of our national security to procure additional F-22s at the expense of other, more pressing priorities. The F-22 program exhibited the worst of the defense procurement system: wasteful spending that only serves parochial interests, and irresponsible, smoke-and-mirrors budgeting on a program that no longer meets the goals it was originally intended to fulfill.

POGO, along with allies including WAND, Business Leaders for Sensible Priorities, and Taxpayers for Common Sense, worked around the clock leading up to the Senate vote contacting Senate offices to ensure they were well informed, and to let them know we were all watching how they would vote.

In the end, the Senate voted 58-40 to strip F-22 funding from the annual defense authorization bill. Following that vote, House Defense Appropriations Chairman John Murtha (D-PA) successfully removed funding for the F-22 from the House version of the Defense Appropriations act, and Senate Defense Appropriations Chairman Dan Inouye (D-HI) agreed to end funding for the F-22. POGO particularly congratulates President Obama, Secretary Gates, Senators Carl Levin (D-MI) and John McCain (R-AZ), and Representative Barney Frank (D-MA) for their leadership in the face of a massive defense industry lobbying campaign.

 


How Stimulus Funds Are Being Overseen

POGO has not eased its efforts to mend a glaring flaw in the American Recovery and Reinvestment Act (Recovery Act): the lack of protection for federal whistleblowers. These individuals, who play a critical role in detecting fraud and other misconduct in general, are of particular importance in Recovery Act oversight because so much money is at stake and such a worrisome potential for misconduct exists. POGO Executive Director Danielle Brian recently testified before the House Science Subcommittee on Investigations and Oversight stressing the need for Congress to resolve this problem.

To further illustrate the issues raised by Danielle’s testimony, in May POGO released an analysis of how effectively state Recovery websites solicit tips from the public and explain procedures and protections for whistleblowers. The investigation, which generated a number of news stories across the U.S., found that only seven states listed clear guidance for whistleblowers, such as what information to report and who to report it to, while only fourteen states offered a hotline number to report waste, fraud, and abuse. Since we released our findings, thirteen more states added whistleblower procedure information on their Recovery Act websites and eleven states’ sites were updated to include a hotline.

POGO’s foray into state and local government is important because when stimulus funds filters down to state contracts and grants, each recipient has their own oversight mechanisms in place. For example, conflict of interest laws vary by jurisdiction, and no state has a database to identify prior misconduct of state and local contractors working on stimulus projects. However, POGO hopes to tap into the increased public attention for transparency and accountability generated by the stimulus, and identify good government policies and practices from the state and local level that could be replicated by others states, and even by the federal government.

 


Support Accountability by Supporting POGO through CFC (#10785)

If you are a federal or military employee, you can take a stand for accountability and oversight by supporting POGO through the Combined Federal Campaign. Donations to POGO through CFC (#10785) make a huge difference in how much work we can take on. In addition, asking your human resources or CFC coordinator to invite POGO to your kick off campaign event will help us spread the word about what POGO does.

If you have any questions about POGO and CFC, please contact Abby Evans at 202-347-1122 or aevans@pogo.org.

Thank you for your support!

 


In the Next Newsletter

Watch for our article on POGO’s investigation into the State Department’s oversight (or lack thereof) of the security contractor for the U.S. Embassy in Kabul!