Raymond Jefferson leaves Labor Department after ethics finding

July 28, 2011

A high-ranking Labor Department official appointed by President Obama to oversee a job-training program for veterans has resigned after an inspector general’s investigation found that he had violated federal procurement rules and ethics principles.

Raymond M. Jefferson, assistant secretary of the Labor Department’s Veterans’ Employment and Training Service, submitted his resignation Tuesday.

Jefferson engaged in “a pattern of conduct . . . which reflects a consistent disregard of federal procurement regulations, federal ethics rules and the proper stewardship of appropriated dollars,” according to the report from the Labor Department’s inspector general.

Peter Choharis, a lawyer representing Jefferson, said Thursday: “This report . . . relies on hearsay, has many internal inconsistencies and contradictions, and omits substantial exculpatory evidence. We look forward to rebutting the report in its entirety when we have full access to the record.”

The charismatic Jefferson, a West Point graduate and former Army Ranger who lost all the fingers on his left hand in a training accident, was considered a rising star in veterans’ circles. Jefferson, a Fulbright fellow with an MBA from Harvard Business School, was nominated by Obama in April 2009 to head the Veterans’ Employment and Training Service program, which is meant to help veterans prepare for the civilian job market.

The report said that Jefferson and his deputy, John McWilliam, “abused their authority” by “coercing” VETS employees into awarding contracts to consultant Stewart Liff, a former colleague of Jefferson’s.

Liff, a human resources and management consultant who was paid as much as $275 an hour, received approximately $700,000 over a 16-month period for services that could have been secured at a much lower cost through open competition, according to the report. The services included advice on the proper color scheme for offices.

“This is the kind of boondoggle that taxpayers have every right to expect would come to a screeching halt,” said Sen. Claire McCaskill (D-Mo.), who in December requested that the inspector general investigate whistleblowers’ allegations of misconduct within the VETS program.

“They shouldn’t be hiring management consultants at 700 grand, and hiring friends, when there are thousands of veterans out there on modest incomes,” McCaskill said. “It’s just wildly inappropriate.”

‘Positive momentum’

Jefferson had gained a reputation in the veterans community as someone who was trying to shake the bureaucracy and address the high unemployment rates among veterans of Iraq and Afghanistan. “He had generated a lot of positive momentum with VETS,” said Ryan M. Gallucci, deputy director of national legislative service for the Veterans of Foreign Wars.

Jefferson told investigators that he did not receive any training in federal government contracting or procurement. He said he told his deputies “to move quickly, and also legally, ethically and properly” in hiring Liff.

The report says that McWilliam and VETS Chief of Staff Amit Magdieli “placed VETS employees in untenable positions, forcing them to utiltize existing federal contracts in order to hire Liff without competition.”

Jefferson waved off concerns that too much money was being paid to Liff, insisting that it was worth the expense, the report said. “I had been told that his rates are higher than ‘normal,’ but don’t know how much ‘normal’ was or is either,” Jefferson told investigators in a written statement.

McWilliam told investigators that he was concerned about the perception that they were “paying a lot of money for a management consultant” but said he “does not think VETS did anything illegal,” according to the report.

Jefferson and Liff both worked at the consulting firm McKinsey & Co. Jefferson told investigators that the two are not friends, but that he thought Liff could help transform the culture at VETS. Liff did not respond to requests for comment.

The report also says that Jefferson circumvented procurement rules to hire Mark Tribus, a former Army lieutenant colonel, West Point classmate and friend for 25 years, to provide leadership training. Jefferson told investigators that Tribus is “the best in his field.”

Jefferson twice asked his staff to award a sole-source contract to Tribus, but they rejected the request, according to the report. Tribus did not respond to requests for comment.

“Poor stewardship of appropriated dollars is unacceptable at the U.S. Department of Labor and will not be tolerated,” said Carl Fillichio, a spokesman for the Labor Department. The matter was not seen as warranting referral to the Justice Department, according to a spokesman for the inspector general’s office.

The conduct of McWilliam and Magdieli is “under review by the department’s lawyers and human resources staff,” according to Fillichio. The department did not make them available for comment.

The department has placed all contracting activity by VETS under special oversight and made other management changes, according to officials. “We are reviewing the report to determine appropriate fixes and necessary corrective actions to ensure that a situation like this does not happen again,” Fillichio said.

‘It’s unfortunate’

Jefferson served as a White House Fellow and later was deputy director for Hawaii’s Department of Business, Economic Development and Tourism. He worked as a consultant for ­Mc­Kinsey & Co. in Singapore.

McCaskill said that Jefferson’s appointment to the job by the White House was appropriate, given his qualifications. “I would challenge anybody to look at his resume and not be impressed,” she said.

“It’s unfortunate,” she added. “He thought it was okay to circumvent the rules with shoddy contracting practices.”

“We had, and still have, a lot of work to be done to improve VETS’ performance and help address veterans’ unemployment,” Jefferson told investigators in his written statement.

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