Audit Finds Ethical Lapses In U.S. Reading Program

· Did not let states see the comments of experts who reviewed their applications.

· Required states to meet conditions that weren't part of the law.

· Tried to play down elements of the law it didn't like when working with states.

The report does not name Doherty, referring to him as the Reading First director. It says he repeatedly used his influence to steer money toward states that used a reading approach he favored called Direct Instruction (DI). In one case, the report says, he was told that a review panel was stacked with people who backed that program.

"That's the funniest part -- yes!" he responded in an e-mail in 2002. "You know the line from Casablanca, 'I am SHOCKED that there is gambling going on in this establishment!' Well, 'I am SHOCKED that there are pro-DI people on this panel!' "

Spellings took issue with the use of such e-mails in the audit. The IG said the e-mails were written by Doherty in his role as director, and it said there is no evidence that they were inaccurate or pulled out of context.

The audit also faults other officials who had a big hand in Reading First, including Susan B. Neuman, the former assistant secretary of elementary and secondary education.

Spellings, who became secretary in 2005, said she is not aware of any effort to favor certain reading programs. "I'm doing everything I can at this point," she said. "I can't undo what's been done."