Pubdate: Thu, 05 Oct 2000 Source: Atlanta Journal-Constitution (GA) Copyright: 2000 Cox Interactive Media. Contact: Journal: Constitution: Website: Forum: Author: Lance Gay, Scripps Howard News Service


Auditors Claim Ad Costs Inflated

Washington --- Congressional investigators opened a criminal investigation of the White House drug czar's office this spring after uncovering evidence that contractors improperly inflated advertising costs for the $1 billion national anti-drug campaign.

Robert Hast, head of the congressional General Accounting Office's elite criminal fraud unit, told the House Government Reform criminal justice subcommittee Wednesday that GAO auditors uncovered evidence involving an estimated $8 million in inflated charges submitted in 1999 involving government advertising contracts.

The charges involve inflated billing for work done on the anti-drug contracts, payments of bonuses to executives, and improper travel charges. Hast said a former employee of the giant New York advertising agency Ogilvy & Mather also gave investigators testimony of other improprieties.

"We are looking at the fraud," he said.

Hast said that the progress of the investigation has been hampered since April by Barry McCaffrey, the White House drug policy director, who has refused to allow Department of Health and Human Services auditors to complete an audit of the drug office contracts. That department oversees government drug programs.

Aides to the retired Army general say McCaffrey wants to transfer the auditing responsibilities for his office to the Navy, but has not yet received approval for the Navy to do the work.

Hast also recounted how McCaffrey was involved in several other curious activities in the case. Although McCaffrey was told of the contracting irregularities in a two-page staff memo dated April 13, Hast said McCaffrey initially denied to his investigators that he knew anything about the matter.

He then changed his testimony after the investigators showed McCaffrey a copy of the April 13 memo, which contains McCaffrey's own handwritten comments in the margin.

Hast also testified that in June, McCaffrey met privately with an Ogilvy & Mather representative, and told drug office subordinates after the meeting that he was "satisfied with the contractor's costs."

Howard Pleffner, the drug office's project officer supervising the contracts, said the audit is needed to close the books on a backlog of more than $13 million in pending bills from Ogilvy, and $5 million from other contractors. Some of the bills are a year overdue, he said.

Pleffner, who authored the April 13 memo to McCaffrey detailing the contract irregularities, found that some vouchers submitted for payment were 33 percent higher than those submitted earlier for the same services.