Some managers of General Services Administration supply centers in federal buildings here have been receiving color television sets, stereo equipment and clothing from some wholesale firms that sell office supplies to the government, federal investigators have found.
In return, according to sources with knowledge of the investigation being supervised by federal prosecutors in Baltimore, the suply store managers involved allowed the wholesale firms to be paid by the government for supplies that were never delivered.
Evidence gathered by FBI and GSA investigators, which is being presented to a federal grand jury in Baltimore, shows that GSA supply store managers in Washington, the Maryland suburbs and Baltimore have been receiving the gifts and other kickbacks from some office supply wholesalers, according to the sources.
These store managers, according to the allegations, then ordered office supplies from the wholesalers and, in some cases, certified that they had received the supplies when, in fact, they had not. The wholesalers were paid by GSA for supplies they never provided the government, the investigators have found.
These findings are strikingly similar to those in a separate federal investigation of GSA employes who manage federal buildings here and arrange contracts for their repairs.
That probe, directed by federal prosecutors here in Washington, has produced evidence that the building managers were receiving cash payments from repair and painting contractors. In return, according to sources, the building managers allowed the contractors to bill the government for much more repair and painting work than was actually performed.
GSA provides federal workers with office space through its public building service, in which the building managers under investigation here work. GSA also provides federal workers with office furnishings and supplies through its federal supply service, in which the supply center manager under investigation work.
The GSA supply centers, which resemble large office supply stores, are located in most federal buildings. Employes authorized to "shop" in them - usually clerks or secretaries for agency department heads - load their own shopping carts with goods displayed on the shelves. They pay for the items at check-out counters with special credit cards for the agencies buying the supplies from GSA. The supply centers do $78 million in business annually.
By reviewing records obtained with grand jury subpoenas from the whole sale firms htat sell the supplies to GSA, investigators have been able to determine that supplies supposedly ordered by the supply center managers were never shipped or were supplied in smaller quantities than verified as received by the store managers.
Faced with such evidence, at least six store managers or assistant managers in Washington, the Maryland suburbs and Baltimore have admitted receiving kickbacks and making false statements on GSA invoices, according to sources. GSA operates 27 such stores in the Washington area.
Owners of some of the wholesale firms, which are relatively small in size, have offered to provide evidence against others in return for being allowed to plead guilty to lesser criminal charges according to sources.
Investigators said the practices have been made possible, in part, by GSA policies that encourage supply center managers to "sell" more. Until 1976, the managers in the Washington area were given award certificates if their monthly volume exceeded certain levels. GSA also bases salary increases for supply center managers in part on whether the "sales" in their stores have increased.
Asked why GSA supply center managers in his jurisdiction were given awards for increased sales, Jerald Sternburg, GSA's federal supply regional commissioner for the Washington area said, "We wanted to create a feeling of belonging on the part of the store manager."
GSA Administrator Jay Solomon has expressed the merchandizing approach store rooms in 1958. Some of Solomon's appointees have been critical of stocking such easily abused items on Polaroid film and expensive brief cases.
Last year, GSA classified such good as film, briefcases, and hand tools as "sensitive items" that can be obtained only when certain forms are filled out. It also instructed the stores to discontinue accepting cash for purchases.
In addition to the emphasis on increasing volume, investigators have found that the supply centers were audited infrequently and only after the audits, were announced to the store managers well in advance. GSA now audits each store at least once a year, but some of the audits are still announced in advance.
The investigations into the supply centers were begun last year when auditors from the Internal Revenue Service, checking their agency's disbursements, came across large purchases of a photocopying paper in Cleveland not used by IRS copying machines.
The information was turned over to GSA's office to investigations, which obtained sufficient evidence to notify the U.S. attorney's office. As a result, of the investigation, indictments were handed down by federal grand jury in Cleveland last month against two former managers of a GSA supply center there and the president of a private stationary store.
GSA subsequently found similar Practices in other cities, including Washington.