Two weeks after being suspended from government work, the leading development nonprofit for the United States in Iraq and Afghanistan has purged numerous longtime senior executives amid a widening investigation of allegations of “serious” financial misconduct.
International Relief and Development, headquartered in Arlington, Va., allegedly used taxpayer money for Redskins season tickets, personal travel and meals, and alcohol at company receptions and retreats, according to current and former government and nonprofit officials.
Last May, The Washington Post examined allegations of poor performance and excessive pay at IRD, which has collected $2.4 billion since 2007 to undertake some of the most ambitious projects in the war zones and elsewhere for the U.S. Agency for International Development.
USAID’s inspector general, the FBI and the Special Inspector General for Afghanistan Reconstruction are investigating the expenses of IRD’s founder and former president, Arthur B. Keys, and his wife, Jasna Basaric-Keys, IRD’s director of operations, according to people familiar with the case, who spoke on the condition of anonymity because they were not authorized to discuss it publicly. The couple, who retired from the organization last summer, received $5.9 million in total compensation between 2008 and 2012.
On Jan. 26, USAID suspended IRD, saying the organization’s “Office of the President mischarged USAID over a period of least four years,” according to a copy of the suspension notice obtained by The Post. USAID gave IRD 30 days to respond to its suspension and said IRD officials who should have been aware of the mischarges remained in positions of power.
On Friday, more than half a dozen senior IRD officials agreed to resign amid steps by the nonprofit to bring accountability to the organization. The officials included the chief financial officer, the general counsel and the chief administrative officer.
Keys, an ordained minister with the United Church of Christ who started the nonprofit with his wife in 1998, did not respond to requests from The Post to discuss the allegations of mischarges. Many of the alleged mischarges were made on Keys’s American Express card, according to the officials, who spoke on the condition of anonymity, citing the ongoing investigation.
Keys’s attorney, Frederic M. Levy, said that “multiple people” at IRD had access to the American Express card and that it is too soon to tell who made the alleged mischarges. He said an auditing firm he retained examined alleged personal charges by Keys and found that they were “properly reimbursable.” He added that IRD has not provided his law firm with other alleged mischarges.
“I’m not sure how much of this was charged by my client,” Levy said. “We haven’t seen all of the information, and I don’t know when we will see it.”
IRD officials said they are trying to convince USAID that they have tightened financial controls and restructured contracting and monitoring operations, and deserve another chance. Friday’s resignations came as part of that effort, they said.
IRD’s new president, Roger Ervin, said the nonprofit has turned over financial documents to the USAID inspector general and is making employees available for interviews.
“We are fully cooperating with the inspector general on an expedited schedule so they can make whatever assessments they need to make as soon possible,” said Ervin, who held senior positions at the State Department and other organizations before joining IRD in December.
Jean M. Hacken, who served as IRD’s chief of compliance from 2009 until her departure last year, said she frequently told senior officials in the organization about charges that she thought were not permitted. Organizations that receive federal funding are entitled to reimbursements for overhead costs, but only certain costs are allowable.
Hacken said in a recent interview that tickets to sporting events; expenses for the Yale Club and the Rotary Club; and bills for personal dinners, hotel rooms and travel were being charged by IRD as overhead.
Hacken said that her concerns were dismissed and that Keys removed her from IRD’s executive management team.
“Every time I said, ‘Let’s make some changes,’ they would say, ‘Jean, stay within your lane,’ ” Hacken said. “I was marginalized and excluded.”
“I deeply regret that I didn’t get the support from senior management at IRD to do the job I was hired to do, to make sure the work was being performed in an ethical manner.”
Although not a household name like Save the Children or Catholic Relief Services, IRD became the go-to nonprofit organization for USAID during the height of the wars in Iraq and Afghanistan, taking on large-scale stabilization and infrastructure projects.
IRD long has been the subject of critical audit findings and allegations of misspending. Its employees pulled down six-figure compensation packages and occupied spacious offices in downtown Kabul on what became known as “IRD Street.”
In 2009, the organization hired a new chief financial officer, Beverly Morris Armstrong, to keep track of the increasing revenue. She began to flag some of IRD’s expenses, former employees said. Armstrong confronted Keys, telling the president that he could no longer bill the government for Redskins season tickets, alcohol at IRD receptions and retreats, and per diem expenses that were not directly related to government work, the former employees said. The ticket purchases were stopped.
Armstrong began conducting workshops for employees on allowable costs. The former employees said Keys viewed the workshops as undermining his authority. In 2011, he asked Armstrong to leave. She declined to comment.
Following allegations of fraud and poor contract performance in Iraq and Afghanistan, government auditors began to examine IRD’s projects in 2008. They included a $675 million community-stabilization program in Iraq and a road-building project in Afghanistan that cost $317 million.
Most of the projects came to IRD through grants and cooperative agreements, which carried few deadlines and benchmarks for performance. The agency now requires that major projects be awarded through the traditional contracting process.
In 2011, USAID created a contractor compliance unit to monitor performance and spending. Since then, the agency has issued more than 240 suspensions and debarments, including the most recent one against IRD.
“USAID has zero tolerance for the mismanagement of American taxpayer funds and took action based on information obtained during an ongoing review of IRD’s performance, management and financial controls,” agency spokesman Ben Edwards said.
As Keys and his wife neared their retirement last summer, IRD’s new board members balked at their scheduled payouts. Keys was slated to receive $690,000 in compensation, plus a $900,000 contribution to his retirement account. His wife, as chief of IRD’s operations, received $1.1 million in compensation in 2013, including a $289,273 bonus.
“The amounts were way too high,” board member Steve Bartlett, a former congressman, said in a recent interview.
After months of negotiations, Keys and his wife agreed to return or forfeit $1.7 million in retirement pay and bonuses, according to IRD officials and the organization’s most recent tax filing.
Kris Manos, who became IRD’s interim president after Keys retired in July, said IRD also hired an outside monitoring firm to help it restructure. In the fall, IRD retained an outside forensic accounting firm to audit its finances, including charges on Keys’s American Express card.
“We wanted to understand what happened in the past, make it right with the government and make sure this would never happen again,” Manos said.
The auditors examined $3 million worth of expenses and identified nearly $1 million in charges that they considered questionable, according to IRD and government officials, who spoke on the condition of anonymity because of the ongoing investigation. The expenses included charges for travel, staff retreats, entertainment and meals.
The auditors’ preliminary findings were delivered to USAID in December. A month later, the agency notified IRD of its suspension decision.
“We have to deal with this,” said Ervin, IRD’s president. “We are going to be forthright and efficient and open about our problems, and we’re going to show to USAID in a short period of time that we can be relied upon.”
Alice Crites contributed to this report.