Federal investigators are examining a Transportation Security Administration contract for evidence that private contractors committed fraud during a project to hire a workforce of airline passenger screeners, company and government officials said yesterday.
Lawmakers yesterday called for other investigations of the same contract, saying they are troubled by revelations of $303 million in unsubstantiated spending by the contractors at luxury hotels and other facilities in 2002.
"They should be ashamed," said Rep. John L. Mica (R-Fla.), chairman of the House aviation subcommittee.
The spending is detailed in a confidential Defense Contract Audit Agency report, obtained by The Washington Post and reported in Thursday's editions. The agency audited the $741 million contract awarded after the 2001 terrorist attacks to NCS Pearson Inc., a division of Pearson PLC, a British media and publishing company.
A Pearson spokeswoman said company officials were cooperating with federal investigators. "There has been a civil investigation that is being conducted by the Department of Homeland Security," said Eileen Cassidy Rivera, a spokeswoman for the company, now called Pearson Government Solutions.
She said the investigators are examining whether there were violations of the False Claims Act, which imposes civil penalties on anyone who submits fraudulent claims to the U.S. government.
"We expect to be exonerated," Rivera said. She said she did not know whether federal investigators are examining any of Pearson's subcontractors.
The Homeland Security Department inspector general's office declined to comment on the investigation. "We do not discuss ongoing investigative work," spokeswoman Tamara Faulkner said.
The audit questioned spending by Pearson and an array of subcontractors, including $1,180 for 20 gallons of coffee at one hotel, $8,100 for elevator operators at another, and $377,000 in long-distance phone calls.
One subcontractor claimed a $5.4 million salary for nine month's work, the audit said. That same subcontractor, an "event logistics" firm called Eclipse Events Inc., received a contract before it was incorporated and then went out of business after the contract ended.
Congress mandated the creation of the federal screener force after the attacks. The TSA turned to private contractors for help in meeting a Nov. 19, 2002, deadline.
The audit report, which TSA officials have refused to release publicly, faulted Pearson for failing to justify costs, oversee spending or follow proper procedures for awarding subcontracts.
The report showed that a decision endorsed by the TSA to move the hiring process from Pearson's own facilities to 150 hotels and meeting facilities -- including luxury resorts and spas -- added $343 million to the cost of the contract, according to a Pearson estimate.
The TSA, part of the Department of Homeland Security, asked the auditing agency to review the contract in the summer of 2002 to help control the costs of the Pearson contract. When auditors turned up signs of potential fraud, they referred the audit to the department's Office of Inspector General, said officials who spoke on the condition of anonymity because of the sensitivity of the investigation.
The inspector general's office, which is examining the spending for possible civil or criminal violations, has issued subpoenas for documents related to the contract, the officials said.
Mica said he wants the Government Accountability Office also to examine the contract. He said undercover tests of the federal airport screening process consistently show that performance has not improved in a meaningful way since just after the terrorist attacks, when the screeners still worked for private companies.
"The public should have a right to know the magnitude of the waste and inefficiency," Mica said. "Now we're spending more money, and we still have the same kinds of [spending] problems, and the system doesn't work."
Two lawmakers who have been sharply critical of the passenger screening contract yesterday asked TSA officials to release the audit, which the agency has been withholding from the public.
Sens. Byron L. Dorgan (D-N.D.) and Ron Wyden (D-Ore.) also asked the agency to release records that document how the government reached its final $741 million settlement with Pearson.
"The American people deserve a full accounting of this boondoggle," Dorgan and Wyden said in a statement. "This is a textbook argument for ongoing, expanded, closer scrutiny of TSA's dealings with contractors and taxpayer dollars."
Sens. Susan Collins (R-Maine) and Joseph I. Lieberman (D-Conn.), the chairwoman and the ranking member of the Senate Homeland Security and Government Affairs Committee, respectively, also requested the audit.
Rep. Henry A. Waxman (D-Calif.), ranking member of the House Government Reform Committee, asked the panel's chairman to investigate spending under the contract. "This kind of waste is inexcusable," Waxman said in his letter to Rep. Thomas M. Davis III (R-Va.). "It fleeces the taxpayer and undermines efforts to protect our nation."
David Marin, a spokesman for Davis, said that it is too early to open an investigation but that the congressman has requested information about the contract from the DCAA auditors, Pearson and TSA officials. "If he finds out that the lack of information is impeding accountability, he's going to want to get to the bottom of it," Marin said.
TSA spokesman Mark O. Hatfield Jr. said the audit agency helped the transportation administration oversee a number of contracts. "The DCAA is one of our best allies in ensuring good stewardship of taxpayer money," Hatfield said.