IG, Report on BOEE and OCF, May 22, 2003

REPORT OF INVESTIGATION CONCERNING INADEQUATE OVERSIGHT AND MISCONDUCT AT THE DISTRICT OF COLUMBIA BOARD OF ELECTIONS AND ETHICS AND THE OFFICE OF CAMPAIGN FINANCE

THIS REPORT IS PROVIDED TO YOU FOR OFFICIAL PURPOSES ONLY AND THE CONTENTS MAY NOT BE RELEASED WITHOUT THE PRIOR WRITTEN APPROVAL OF THE INSPECTOR GENERAL OF THE DISTRICT OF COLUMBIA

GOVERNMENT OF THE DISTRICT OF COLUMBIA
Office of the Inspector General
717 14th Street, N.W., Washington, D.C. 20005 (202) 727-2540

Benjamin F. Wilson, Esq.
Chairman
Board of Elections and Ethics
441 0 Street, N.W., Suite 250-N
Washington, D.C. 20001

Transmitted with this letter is a report captioned "Report of Investigation Concerning Inadequate Oversight and Misconduct at the District of Columbia Board of Elections and Ethics and the Office of Campaign Finance, Investigation 2002-0252."

The enclosed report includes 14 recommendations concerning issues identified in the report for you to address. Please review the report and advise this Office, by July 7, 2003, as to what actions will be taken with regard to these recommendations. When responding, please refer to OIG Control Number 2002-0252.

If you have any questions or need additional information, please contact me or Robert G. Andary, Assistant Inspector General for Investigations, at (202) 727-1039.

Report of Investigation Concerning Inadequate Oversight and Misconduct at the District of Columbia Board of Elections and Ethics and the Office of Campaign Finance

Overall, the investigation disclosed a significant number of serious issues at the District of Columbia Board of Elections and Ethics and the Office of Campaign Finance, which indicate that oversight of these offices is limited and ineffective. Our contacts with the Chairman of the Board of Elections and Ethics during the investigation demonstrated that the Chairman lacks the objectivity to exercise effective oversight or to address the issues disclosed by our investigation.

We found that executive-level officials of the District of Columbia Board of Elections and Ethics (BOEE) and Office of Campaign Finance (OCF) have used their positions improperly to enrich themselves at the expense of District of Columbia taxpayers and to selectively enforce campaign finance laws. In addition, we found that these same officials failed to refer potential violations of law to the appropriate authorities, failed to cooperate with the OIG investigation, and may have retaliated against employees who did cooperate with our investigation. A synopsis of these findings is set forth below.

The lack of cooperation from responsible District officials made an administrative remedy in this case more practical than a prosecution. The United States Attorney decided against a criminal prosecution regarding the scheme by Cecily Collier-Montgomery and Alice P. Miller to obtain improper salary increases and back pay. The decision was made on April 22, 2003, and communicated to the OIG on April 23, 2003. In his letter memorializing the decision, United States Attorney Roscoe C. Howard, Jr. told the Inspector General that --

1. BACKGROUND

The Initial Complaint. Information from a confidential source was initially received by the OIG Audit Division, which referred the information to the OIG Investigations Division. The confidential source alleged several improprieties in the Office of Campaign Finance (OCF).

Specifically, the source alleged that Councilmember Vincent Orange had made unauthorized withdrawals of approximately $36,000 from his 1998 election committee funds. When the Supervisory Auditor referred this information to the OCF General Counsel, no action was taken. The source also alleged that procurements were a problem at OCF.

The source further informed the OIG that Collier-Montgomery, the Director of OCF, and Miller, the Executive Director of the Board of Elections and Ethics (BOEE), had engaged in a scheme to adjust the payroll system in order to increase their annual salaries from $109,515 to $121,406. It was alleged that Vialetta Graham, now the Chief Technology Officer at BOEE, assisted them in the scheme. In addition to the salary increases, the alleged scheme resulted in Collier-Montgomery and Miller each receiving $22,880 in back pay. Finally, the source alleged that Councilmembers Jack Evans and Carol Schwartz had improperly permitted members of their staff, who are District employees, to work on their election campaigns in 2000.

The OIG Investigation. Based on this information, a case was opened in the Investigations Division on April 4, 2002, and initially focused on the allegation that Collier-Montgomery and Miller engaged in a scheme with Graham to obtain improper salary increases and back pay.

During April 2002, the OIG conducted interviews of various officials at OCF and BOEE, and a series of Inspector General subpoenas were issued in April and May, 2002, for personnel and payroll records, e-mail records, records of BOEE sessions, and other material relevant to the investigation.

The OIG presented the facts of this matter to the Office of the United States Attorney for the District of Columbia (USAO). The USAO accepted the case for investigation and possible prosecution. Thereafter, Special Agents from the Investigations Division continued to investigate the pay raises and back pay issues under the direction of the Assistant United States Attorney (AUSA) assigned to the case.

As part of this continuing investigation, on July 19 and August 2, 2002, the OIG and the Federal Bureau of Investigation (FBI) executed District of Columbia Superior Court search warrants at BOEE offices. Computer diskettes, servers; and back-up tapes were seized pursuant to the warrants, and were later examined by FBI and the United States Secret Service Computer forensic computer experts.

The Management Alert Reports. The OIG issues Management Alert Reports (MARS) to identify serious matters revealed during an audit, inspection, or investigation that require immediate attention. This investigation disclosed that Vialetta Graham, the Chief Technology Officer at the BOEE; had apparently falsified her academic achievements on two District government employment applications, including the application she filed with the BOEE at the time she was hired by the BOEE in December 2001. As a result, on August 6, 2002, the Inspector General sent a Management Alert Report (MAR-1) to the Chairman Wilson, informing him of Graham's misconduct, and recommending that he evaluate the matter and take disciplinary action as appropriate. See Exhibit A. The Inspector General asked Chairman Wilson to inform the OIG in writing of the action taken concerning Graham. MAR-1 noted that § 1603.3 of the DPM's Standards of Conduct, for the purpose of determining cause for disciplinary action, defines the term "cause" as, inter alia, "any knowing or negligent material misrepresentation on an employment application."

On August 22, 2002, Chairman Wilson responded that the Board would conduct an investigation into whether Graham misrepresented her academic qualifications or experience to obtain her position as Chief Technology Officer at the BOEE. On November 18, 2002, Chairman Wilson wrote that the Board had decided to suspend Graham without pay for 60 consecutive calendar days. However, Graham was allowed to charge any of her accrued annual leave for each day of absence, until such leave was exhausted. Wilson wrote that this was done pursuant to DPM §1615.11. However that section of the DPM concerns "enforced leave," which appears inappropriate to Graham's situation. Enforced leave is used when a decision on disciplinary action is pending, as when a criminal charge made against an employee has not yet been resolved. See id. § 1615.14 (requiring employees to remain on enforced leave until disciplinary action is taken on the event that gave rise to the same). Since this was not the case, the administrative action taken appears to be inadequate.

During the course of the OIG investigation, several other allegations of mismanagement and misconduct were reported to the OIG by third parties. Therefore, on January 7, 2003, the Inspector General issued a second Management Alert Report (MAR-2) to Chairman Wilson. See Exhibit B. MAR-2 directed the following six additional personnel and management issues to the Chairman:

On March 13, 2003, the Chairman responded to MAR-2 by transmitting a report of an investigation conducted by the Board's General Counsel, Kenneth McGhee. In his investigation, McGhie addressed the various issues identified by the Inspector General, and he reported .no mismanagement or improper actions on the part of any OCF employee, except for the employee who embezzled funds. That case was never reported to the OIG, he found, because Collier-Montgomery believed that the OIG would have ultimately returned the case to the OCF for administrative action.

Finally, on March 17; 2003, McGhie referred the issue raised in MAR-2 regarding the embezzlement of agency funds to the OIG. The referral included a copy of a September 27, 2000, memorandum from Collier-Montgomery to the Supeivisory Auditor explaining her decision not to refer this same matter to the OIG. Collier-Montgomery wrote that, based on her experience, the OIG would have returned the matter to her for disposition anyway. See Exhibit C.

Collier-Montgomery's decision violated the clear requirements of the D.C. Personnel Regulations, Chapter 18, Section 1803.9, which require an agency head to immediately report information concerning conduct involving criminal activity to the OIG. As a result of her failure to refer the matter, information concerning the embezzlement of District funds was not officially reported to a law enforcement agency for over two years.

Moreover, Collier-Montgomery allowed the employee suspected of the embezzlement to resign in October 2000, without making restitution for any of the embezzled funds. Over two years later, the individual has moved to Georgia, complicating OIG efforts to resolve the case.

The Final Stage of the OIG Investigation. Because Chairman Wilson's response to MAR-2 did not adequately resolve the issues identified in the report, the Investigations Division continued the investigation of improprieties at the OCF and the BOEE. Beginning on March 27, 2003, employees from both agencies were subpoenaed to testify at the OIG and to provide a variety of official documents. However, as described more fully below, the agencies resisted the Inspector General's efforts to investigate. Consequently, no progress could be made in resolving the remaining issues. An OIG investigation was conducted into the embezzlement of funds issue, and the results of that OIG investigation are also set forth below.

On April 22, 2003, the United States Attorney decided against a criminal prosecution regarding the scheme by Collier-Montgomery and Miller to obtain improper salary increases and back pay. The OIG continued its investigation; however, the investigation was no longer criminal but administrative in nature. After the threat of prosecution had been removed, Miller and Collier-Montgomery could now be required to testify to the OIG about their roles in the scheme to obtain pay raises. A request that they appear at the OIG on April 28 and 29, 2003, was delivered to Chairman Wilson on April 24, 2003. Chairman Wilson, however, declined to make them available.

In light of these serious allegations, the OIG expected Chairman Wilson to demonstrate a commitment to help investigators ascertain all of the facts that would enable him to review the OIG findings objectively and to implement reform at the two agencies immediately. That commitment did not materialize. Instead, he has condoned an adversarial posture that has constrained the progress of this investigation. A few examples of actions by Chairman Wilson and his subordinates that are counterproductive to the spirit of our investigation are as follows: attempting to ratify the spurious raises rather than confront the underlying misconduct; asserting the attorney-client privilege for audit reports and other government records that should be produced under the Inspector General statute; refusing to permit employee interviews except in the presence of OCF or BOEE general counsels; threatening to report OIG attorneys to the bar counsel; and intimidating whistleblowers and others.

Although the lack of cooperation from OCF and BOEE officials -and certain Council members - made the continuation of this investigation impractical, the OIG findings set forth below provide convincing evidence that the present Board failed to provide proper oversight for the two agencies.

2. FINDINGS

a. Scheme to Obtain Pay Raises and Back Pay

This investigation centered around the successful efforts of the District's top two ethics officials - Alice Miller, Executive Director, BOEE, and Cecily Collier-Montgomery, Director, OCF - to enrich themselves by fraudulent and secretive means. Each obtained salary increases that raised their annual salaries from $109,515 to $121,406. Additionally, each received a retroactive supplemental gross payment of $22,880. The retroactive supplemental payment represented twenty-three months of retroactive pay designed to account for the monetary difference that existed between their former and their current annual compensation pursuant to service re-classification.

Background. The District of Columbia Merit Personnel System (MPS) sets forth the rules and regulations relating to District employee compensation. Among the provisions in the MPS are various "Schedules" which set forth the salaries (grades/steps) for District government employees. Examples of these schedules are " Excepted Service," "Management Supervisory Service," and, starting in 1999, the "Legal Service." The salary for each of the services, as well as their respective salary limitations, are governed by law, and administrative safeguards are used to ensure compliance.

The salary increases were a direct result of the reclassification of Miller and Collier-Montgomery out of the District's General Schedule (DS) for Excepted Service personnel (Series 301, Service Code A01), and placement into the DS-Special Rate Schedule for Corporation Counsel (Series 905, Service Code A33). The reclassification was done in a manner that circumvented administrative safeguards intended to ensure that employees receive the appropriate salary levels. The latter employment classification (Series 905) is entitled Legal Service (LS). Attorneys within the LS classification, in addition to their base salary, receive an Annual Retention Allowance (ARA), which is a payment allowance tied to the employee's performance appraisal and is specifically reserved for attorneys. The Service Code A33 corresponds to a rating of "Exceeds Expectations" and entitles an employee to compensation in the amount of twenty percent of his or her base salary.

According to D.C. Code § 1-608.51(2) (2001), a Legal Services "attorney" is one whose position is classified as part of the 905 Series Code, except for those positions that involve hearing cases as an administrative law judge or as an administrative hearing officer. Although Miller and Collier-Montgomery are both attorneys and members of the District of Columbia Bar, their positions historically have not been classified in the 905 series because the BOEE and OCF Directors do not perform the functions of an attorney. Therefore, they were not entitled to be paid as if they were in the Legal Service schedule.

The MPS specifically addresses the Director position within OCF. D.C. Code § 1-609.08(3) (2001) provides that the Director of Campaign Finance shall be in the Excepted Service. Moreover, D.C. Code §1-1103.01(a)¹ states "the Director of the Office of Campaign Finance shall be entitled to receive compensation at the maximum rate for Grade 16 for the District Schedule pursuant to subchapter XI of Chapter 6 of this title." There is no specific statute providing for the salary for Miller.

Findings. In early 2000, Kenneth McGhie, the General Counsel of BOEE, received a salary increase as a direct result of the re-classification of the District's general schedule for attorneys from Excepted Service positions to the LS schedule. This change in service entitled McGhie, with Board approval, to a pay increase from $109,515 to $121,406, and was made retroactive to October 1999, in accordance with the legislation implementing the Legal Services.

In the summer of 2000, shortly after McGhie's salary increase, both Miller and Collier-Montgomery sought pay increases. According to BOEE Chairman Wilson, this was not unusual because pay parity among the three positions was "historical," and McGhie's salary increase upset the parity of the three individuals' salaries.

The investigation revealed that during a BOEE Executive Session, Miller and Collier-Montgomery raised the issue of receiving salary increases equal to that of McGhie. At that meeting, McGhie informed the Board that he did not object to giving Miller a salary increase, but that Collier-Montgomery could not receive an increase in salary due to statutory constraints. Then, in early August 2000, at Wilson's instruction, McGhie prepared proposed legislation to amend the statute to permit the increase for Collier-Montgomery. The proposed legislation was addressed to the attention of Councilmember Kathy Patterson, then Chairperson for the D.C. Council's Committee on Government Operations. Entitled the "Director of Campaign Finance Compensation Amendment Act of 2000," the proposed legislation sought to delete the language in D.C. Code §11103.01(a) that addressed the salary limit for the OCF Director, and replace the cap with language granting the Board the authority to fix the salary for this position. See Exhibit D. However, this legislation was never enacted by the D.C. Council.

In an interview with the OIG, McGhie recalled that after Miller and Collier-Montgomery first presented the subject of their pay raises to the Board in June or July 2000, he researched the issue and discovered that the Board had the authority to raise Miller's salary, but that Collier-Montgomery needed statutory permission. He stated that he shared this information with Miller, and that, " [t]hey went to Wilson and got it done."

BOEE Board member Stephen Callas recalled in an OIG interview that he understood at the time of the Board's Executive Session meeting that McGhie had received a raise through the Legal Service and that Miller and Collier-Montgomery were going to "take appropriate action" (e.g., complete the necessary research and forms) in regard to their request for pay parity. Approximately eight months later, he received a call from the Directors who inquired if he was still in favor of the salary increases. At the time, his only concerns were whether the Board had the authority and funds to complete the action. He stated that the Board approved the pay raises "based on our authority and unanimity." He remarked that "they were lawyers," and he understood that they were going from Excepted Service to Legal Service. However, according to Callas, "The Board was never provided any specifics regarding the methodology, and no one brought up the technical factors." When shown a copy of Wilson's April 28, 2001, memorandum authorizing the pay increases (discussed infra), Callas stated that he never saw the document.

The Scheme. The OIG investigation determined that, in August 2001, Miller along with Vialetta Graham, then Comprehensive Automated Payroll and Personnel Systems (CAPPS) Coordinator for the Office of the Chief Financial Ofcer's (OCFO) Enterprise Office, prepared and submitted deceptive and misleading documents to Wilson to justify pay raises for Miller and Collier-Montgomery and their retroactive supplemental compensation. To convince Wilson that the pay raises were permissible (both prospectively and retroactively), Miller drafted two memoranda for Wilson's review.²

The first of these documents was drafted on OCFO letterhead, addressed to Wilson from Graham, and dated August 21, 2001. See Exhibit E. In full, the memorandum assures Wilson that:

This memorandum is deceptive for several reasons. First, the purported author of the memorandum, Graham, had no authority to approve District personnel matters, nor did she have any background in this area. Indeed, when Graham was interviewed by the OIG and this document was presented to her for review, she denied drafting the body of the memorandum, or having any knowledge of personnel matters. However, Graham did admit that she signed the memorandum.

Second, the document omits reference to the fact that a salary of $121,406 is available only to an attorney classified in the Legal Service who, upon enactment of the Legal Services Establishment Amendment Act of 1998 (D.C. Law 12-260), was entitled to a salary on the Legal Services scale retroactively to October 1, 1999. As stated supra, neither the BOEE Executive Director position nor the OCF Director position are attorney positions classified within the 905 Series.

Third, the memorandum's assertion that retroactive pay is consistent with District government policy "when generated by an adjustment to salary and approved by the appropriate personnel authority" is incorrect. The DPM provides that an employee may only receive back pay where the employee has "undergone an unjustified or unwarranted personnel action that has resulted in the withdrawal or reduction of all or any pay...." DPM, Chapter 11B, Subpart 8, § 8.1 (emphasis supplied). Furthermore, the DPM -- specifically prohibits retroactive promotions, and affirmatively states that promotions are "effective only from the date administrative action is taken by the administrative officer vested with the proper authority to take such action." Id. at Subpart 2, § 2.15( J)(1). In this case, the pay raises did not meet the criteria set forth by the DPM and, therefore, were inconsistent with District policy.

The second document, dated August 28, 2001, is equally deceptive. This document is addressed to Graham from Wilson and requests that the salaries of Miller and Collier-Montgomery "be adjusted to be commensurate with the statutory provisions creating the position held by these employees." See Exhibit F. The memorandum then goes on to cite these statutory provisions; however, Miller selectively chose language from the D.C. Code to justify the request and failed to mention applicable statutory impediments. This was done by deleting pertinent parts of the relevant statutes as quoted.

In reference to the statutory provisions governing Collier-Montgomery's salary, Miller quotes the "salary cap" language in D.C. Code § 1-1103.01(a), but omits that the OCF Director is to be paid "pursuant to subchapter XI of Chapter 6 of this Title." Subchapter XI sets forth the District government's classification and compensation policies, which mandate that all positions must be grouped by classes and grades according to specific duties and responsibilities and "indexed and cross referenced in the incumbent classification and compensation system." D.C. Code § 1-611.01(a)(1). By simply deleting the "pursuant to" language and replacing it with ellipses, Miller left out qualifying language that provides that Collier-Montgomery is to be paid in accordance with the appropriate classification corresponding to her duties as OCF Director.

Miller also omitted the D.C. Code provision that specifically designates the OCF Director position as an Excepted Service position. See D.C. Code § 1-609.08(3) (2001). Had Wilson been apprised of this statute, he would have been put on notice that Collier-Montgomery could not receive the same salary as an attorney in the Legal Service.

In regard to her salary, Miller quoted the statute that authorizes the Board to set the salary for the BOEE Executive Director, but she omitted language limiting the Board's authority to do so. Miller simply states that this D.C. Code provision "authorizes the Board to 'select, employ, and fix the compensation for an Executive Director. . .'", where the provision actually provides that "The Board shall select, employ, and fix the compensation for an Executive Director and such staff the Board deems necessary, subject to the pay limitations of §1-611.16." D.C. Code § 1-1001.05(e)(1) (2001) (emphasis supplied).³ Section 1-611.16 generally provides (with exceptions not applicable here) that "no employee of the District government shall be authorized to receive pay in excess of that provided for in [Subchapter XI], and any such provision of law that is inconsistent with this section shall be deemed superseded to the extent of such inconsistency." Accordingly, similar to Collier-Montgomery's position, Wilson was not informed that the Board could not set Miller's salary in excess of the amount for which the position had been classified (e.g., Excepted Service).

Finally, Miller misrepresented that Graham worked in "Payroll and Retirement," thus giving Wilson the impression that Graham was authorized to increase the Directors' salaries. As stated above, Graham acknowledged in her OIG interview that she did not possess any knowledge of payroll or personnel matters. Judy Banks, former Director of Payroll and current Interim Director for the D.C. Office of Personnel, confirmed that Graham did not work in the payroll office and that Graham did not have any authority over such matters as CAPPS Coordinator.

In an attempt to hide the illegal pay raises, Miller engaged the assistance of Marvin Ford, BOEE Chief of Staff, and Graham to circumvent normal personnel procedures. Miller knew Ford through her association with Nativity Catholic Church, Washington, DC., a church where Ford was the Director of Liturgical Services. Ford had few qualifications for the position of BOEE Chief of Staff. He had no college degree and before being hired at BOEE, served as the Director of Liturgical Services for approximately 8 years. Ford began his BOEE employment in November 1999, at a salary of $56,510, and in June 2000, Miller approved a $10,000 cash award to Ford for outstanding performance. On August 1, 2001, Miller awarded Ford another bonus of $7,500. Ford's salary at the time was $63,436. Both of Ford's awards exceeded the District's bonus limit of 10% of an employee's salary. See D.C. Code § 1-619.02 (2001).

On August 20, 2001,⁴ Ford, at the direction of Miller, entered information into the District's CAPPS to change Miller's employment classification from Excepted Service to Legal Service and increase her salary from $109,515 to $121,406. See Exhibit G.

However, because Ford could not gain access necessary to implement the salary and employment classification changes in CAPPS for employees outside of the BOEE, Ford obtained the assistance of Graham to effectuate Collier-Montgomery's pay raise on August 27, 2001. See Exhibit H. Graham informed the OIG that "When he [Ford] brought me the memo, I told him I don't make salary changes." As the CAPPS Coordinator for the OCFO, Graham was one of the few individuals in the government who could effectuate the change for Collier-Montgomery. It should be noted that the appropriate person within OCF who should have effectuated the salary change for Collier-Montgomery - the Chief of Staff - was left out of this process because Collier-Montgomery did not want her employees in OCF involved.

While it is the practice of the District government to execute a D.C. Form 52 to provide support and authority for any changes in employee personnel status (e.g., promotions, pay adjustments, and employment classifications), this form was not properly completed for either Miller's or Collier-Montgomery's pay raise. Historically, the completion of a Form 52 was a routine practice within BOEE and OCF, as a review of the agencies' Official Personnel Folders revealed that each salary change prior to the subject pay raises for Miller and Collier-Montgomery was supported by a Form 52 with appropriate signatures.

The investigation determined that Ford drafted a Form 52 sometime in September 2001 for Miller's pay raise, but failed to obtain Wilson's signature to authorize the personnel action. See Exhibit I. Similar to any official personnel document, a Form 52 must possess the appropriate signature of authority in order to be executable. No Form 52 was ever prepared in support of Collier-Montgomery's pay raise.

In or about October 2001, Ford prepared and submitted two District Supplemental Adjustment Forms for retroactive payments for Miller and Collier-Montgomery to the District's payroll office. This action was supported by the August 21, 2001, memorandum from Graham to Wilson outlining the District's authorization for the issuance of retroactive pay. See Exhibit E.

According to Barbara Jumper, Deputy Chief Financial Officer, OCFO, a Form 52 must be generated before an employee can receive a promotion or a salary increase. Her office receives the Form 52 to ensure that funds are available to meet the fiscal needs precipitated by the action. Prior to "signing off' on the form, Jumper reviews it for the appropriate authorizations from the head of the requesting agency. When the OIG informed Jumper that Form 52s were not executed in the subject case to change Miller and Collier-Montgomery from Excepted to Legal Service, she replied, "That's impossible. It goes through us before [DC] personnel. It's my understanding that only personnel could make the change." Jumper did recall that Ford sought her advice as to how to make the salary changes. She further recalled that she informed him that he needed a Form 52, .in addition to agency authorization.

When interviewed about his role in implementing the pay raises, Ford informed OIG investigators that the raises were done at the Board's request pursuant to its budget and personnel authority. He further asserted that, "[t]here are no checks and balances for me, I do what the Board tells me to do." Ford claimed that he was involved in both Collier-Montgomery's and Miller's pay raises because he services both BOEE and OCF. He additionally stated that the Board did not want a lot of people involved in the matter, and Collier-Montgomery specifically did not want her employees involved.

Soon after the salary increase/retroactive pay scheme was a fait accompli, Graham was initially hired as a Management Supervisory Service (MSS) employee as BOEE's Information Technology Manager on December 4, 2001. See Exhibit J. On February 2, 2002, Miller appointed her as BOEE's and OCF's Chief Technology Officer. District personnel regulations stipulate that all MSS positions must be advertised and fairly competed. See D.C. Code § 1609.53 (2001). In Graham's hiring, neither personnel requirement was met.

This transfer created at least an appearance. of a quid pro quo payback for Graham since Graham's assistance was necessary to enter Collier-Montgomery's salary increase into the payroll database and to pose as the relevant authority to authorize the salary increases and retroactive supplemental payments for each Director.

Conclusion. The investigation revealed that high-level officials at BOEE and OCF devised a scheme to place the Directors into the Legal Services salary schedule to achieve pay parity with the BOEE General Counsel that was not authorized by law. Not only were the Directors able to increase their annual salaries by approximately $12,000, but they also ensured that the salary changes applied retroactively for two years (approximately $22,000 for each).

When first approached with the facts of this issue in an OIG interview, Wilson attempted to justify Miller and Collier-Montgomery's actions as follows:

Soon after the interview, Wilson informed the OIG that Miller and Collier-Montgomery were put in the Legal Service by mistake. Wilson then "corrected" the situation by transferring Miller and Collier-Montgomery back to the Excepted Service via the execution of two Form 52s. See Exhibits K and L. However, he placed both Directors at Grade 17, and justified his action by offering a new interpretation of D.C. Code § 1-1103.01(a); specifically, that the statute provided a "floor" for the OCF Director's salary and not a maximum limits.⁵

In contradictory fashion, McGhie revised BOEE/OCF's legislative proposal to delete the salary cap language from the statute. In May 2002, in an effort to thwart the OIG investigation, McGhie transmitted his draft of the "Director of Campaign Finance Compensation Amendment Act of 2002," in a package with several other proposed bills, to Councilmember Vincent Orange.⁶ See Exhibit M. It is noteworthy to mention that the BOEE/OCF sought this legislative change even though they - in response to this investigation - requested and received a conclusory and nonbinding opinion from the D.C. Council's General Counsel on May 31, 2002, that agreed with the Board's "floor" interpretation. See Exhibit N.

Regardless of this opinion, the legislation (Bill 14-735) was introduced by Councilmember Orange on June 21, 2002, and discussed at a televised Public Roundtable on November 21, 2002. For reasons unknown, the Bill never made it out of committee and, thus, never became law.

It is important to note that when Collier-Montgomery was interviewed by the OIG on April 26, 2002, she recognized that she holds a statutory position as OCF Director, and confirmed that "I should be paid in the Excepted Service at the highest level of a grade 16." However, as of the date of this report, the statute remains unchanged and Collier-Montgomery's salary continues to be in excess of "the maximum rate for a Grade 16 of the District Schedule."

b. Failure to Complete Audits/Selective Enforcement

Requirements were established in District law since 1974 that OCF conduct periodic audits and field investigations of the campaign finance reports of candidates for elective office. D.C. Code § 1-1103.03(8) (2001). In 2000 OCF hired an experienced supervisory auditor who was tasked to redefine and enhance the function of the agency's Reports Analysis and Audit Division. The auditor supplemented the "desk audits" of campaign forms with a more robust audit conducted in the field. These investigative, or "field audits," were intended to be a comprehensive review of all underlying campaign finance documentation designed to verify information submitted by candidates to OCF.

Several of these field audits were conducted and resulted in the discovery of significant numbers of irregularities and possible violations of campaign finance and other laws. According to the auditor, these possible violations should have been presented to the candidates for resolution. Instead, many of the findings were squelched and, to date, no field audit report has been issued. As a result of a:: interim OIG Management Alert Report which addressed this matter, Chairman Wilson has committed to issue reports publicly by the end of June 2003.

In a March 13, 2003, response to MAR-2, Chairman Wilson and General Counsel McGhie stated that there was no statutory requirement to make audits available for public. inspection, to conduct audits in a particular manner, or to conduct audits at periodic intervals. The response asserted that since February 2002, OCF conducted six field investigations into the 2000 election cycle campaign finances of one former Councilmember and two current Councilmembers, as well as of two School Board members. The BOEE has directed that all reports be completed and posted on the OCF website by the end of June 2003.

According to the March 13, 2003, response, OCF conducts a large number of desk audits of campaign finance reports, and the lack of completed field audits was the result of staffing issues that were resolved by the beginning of 2002. The Chairman and the General Counsel found nothing irregular in the processing of the six field audits, and found that the auditing procedures used by OCF are consistent with the governing statutes and regulations.

Because the March 13, 2003, letter did not respond sufficiently to the issues identified in MAR2, the OIG was required to investigate the allegation. However, our investigation was hindered by the refusal of OCF to turn over any documents relating to ongoing field audits or to permit its Supervisory Auditor or the General Counsel to testify about ongoing audits. By letter of April 4, 2003, in response to an OIG subpoena for such documents and testimony, McGhie stated: " [h]owever, please be advised that any ongoing audits or investigations will not be turned over until closed... [t]he OIG has absolutely no oversight as to how or when the OCF conducts its audits and investigations." However, information previously received by the OIG indicated that the OCF Supervisory Auditor had discovered numerous violations of law and regulations when he audited the campaign finance reports of Councilmembers Carol Schwartz and Jack Evans for their 2000 election campaigns, and of Councilmember Vincent Orange's 1998 election campaign. See Exhibits O, P, and Q.⁷When the violations were set forth in draft audits to be sent to Councilmembers Schwartz and Evans, the OCF General Counsel, Acting OCF Director at the time, ordered the deletion of several of the Supervisory Auditor's significant findings.. Deleting findings which reveal potential violations of law and regulations violate OCF's own audit policies and procedures, as well as the Government Auditing Standards issued by the General Accounting Office, and adopted by the OCF for use in conducting audits.⁸

(1) Councilmember Carol Schwartz

With respect to Councilmember Carol Schwartz, the auditor found that her campaign committee failed to exercise adequate controls over campaign contributions in that it accepted contributions after the November 2000 General Election although total receipts were sufficient to cover debts and obligations at the time the contributions were received; and received campaign contributions from individuals and business entities that were excessive and violated the campaign contribution thresholds.

The committee's July 31, 2001, Report of Receipts and Expenditures Report (R&E) filed with OCF disclosed a beginning cash-on-hand balance of $7,462.56 as of January 31, 2001, and total debts and obligations totaling $7,000.00. The report further disclosed that the committee nevertheless continued to receive $14,513.89 in contributions between January 2001 and April 2001.

On September 8, 2000, the accounting firm of Thompson, Cobb, Bazilio, and Associates (TCB), Washington, DC, made a corporate contribution to the committee in the amount of $500.00. On October 17, 2000, Jeffrey E. Thompson made a personal contribution in the amount of $500.00, and two additional contributions in the same amount for D.C. Chartered Health Plan, Inc. (CHP), Washington, DC, and Chartered Family Health Center (CFC), of the same address. On October 30, 2000, the committee received a contribution in the amount of $500.00 from Rapidtrans, Inc., Washington, DC. Photocopies of the five checks totaling $2,500.00 appear to bear Thompson's signature.

The OCF Auditor learned that Thompson owned 79.5% of TCB, and was the Chairman, Chief Executive Officer, and sole stockholder for CHP and CFC, and that Rapidtrans, Inc. is a wholly owned subsidiary of CHP. As a result, the audit found that Thompson exceeded the campaign contribution limit by $1,397.50.⁹

It was also discovered that Alexandra Armstrong! contributed $1,000.00 to the committee on July 2, 2000, and October 9, 2000, respectively, thereby exceeding the threshold by $1,000. Between October 2000 and December 2000, Robert J. Kable made five separate donations totaling $1,050, thus exceeding the limit by $50.

Furthermore, the auditor found that employees from Councilmember Schwartz's D.C. Council office may have violated provisions of the Hatch Act10 and District regulations by participating in the candidate's partisan re-election campaign activities in 2000. Jim Slattery, a Council employee, served as the Schwartz Committee's finance director and was compensated a total of $13,300 for full time campaign-related work covering the period of July 2000 - November 2000. According to employment information obtained from the Secretary of the Council on March 13, 2002, Slattery was not on leave-without-pay status from his Council position while serving as the committee's finance director.

Committee documents disclosed that on July 3, 2000, Slattery was reimbursed $116.76 for leave. However, there was no supporting documentation to establish the designated leave category or that: (a) Slattery was in leave-without-pay status; (b) the amount of leave time Slattery was reimbursed; (c) Slattery resigned from his official position at the Council at any time.

It was also disclosed that City Council employees Sharona D. Morgan and John Abbot each entered into leave-without-pay status for a period covering June 12, 2000 November 18, 2000, and were compensated by the Schwartz Committee $17,169.00 and $18,854.00, respectively. However, both Morgan and Abbot continued to earn sick and annual leave while in leave-without-pay status.

For all three employees, the audit determined that the District government did not derive any direct benefit from the employees' leave. The audit also determined that because the employees took leave solely to participate in Schwartz's re-election campaign, their leave may have violated provisions of the Hatch Act.¹¹

The audit also indicated that Schwartz regularly tasked her staff employees to perform multiple campaign-related activities from her City Council office during normal government business hours. These activities included traveling to vendor locations to purchase miscellaneous supplies for campaign operations and coordinating an election night (November 2000) party. Although the Schwartz committee entered into a lease for office space in June 2000, Schwartz and her Council employees continued to use her City Council office for campaign-related activities.

The auditor's draft also disclosed that Councilmember Schwartz's committee failed to implement adequate internal controls governing campaign-related expenditures in accordance with OCF regulations. On several occasions, the committee failed to adhere to OCF regulations regarding petty cash transactions, and failed to, maintain supporting documentation for campaign-related expenditures.

A review of the committee's petty cash fund records uncovered eight petty cash transactions totaling $939.95. The audit deduced that the committee did not have sufficient supporting documentation to validate the expenditures. It also discovered that four of the aforementioned transactions involved cash expenditures to a single individual in excess of the $50 limit, and one single transaction was in the amount of $450.

The audit identified 10 transactions, totaling $2,382.05, that were not properly documented. Three of these transactions, totaling $1,002.56, were for advertising, but the committee did not produce an invoice or a copy of an advertisement to support the transactions. Committee records also disclosed a payment in the amount of $500 for a band to perform at an election night party, and a $100 payment to an individual for campaign poster assistance, but neither transaction was supported by an invoice or any other form of documentation.

Committee records revealed that during the calendar year 2000, the committee disbursed $48,923 in salaries to three employees, $19,050 in rent to a private landlord, and payments to three vendors of $1,750, $1,160, and $2,280, respectively. Yet, the audit disclosed that the committee may have failed to file Internal Revenue (IRS) Form SS-4, Application for Employer Identification Number, and IRS Form 96, Annual Summary and Transmittal of United States Information Returns, to permit the committee to prepare and issue IRS Form 1099, Miscellaneous Income, to committee employees and other individuals who earned at least $600 in rents, services, prizes, awards, and other income during a calendar year.

It was reported that the committee was unaware of its requirement to file the necessary forms with the IRS, but the audit did not indicate that the committee took any corrective measures. As a result, campaign employees and other individuals may have failed to report income received from the committee ors their personal income tax returns.

The OIG also received information that Cecily Collier-Montgomery and Kathy Williams ordered that much of the information developed in the audits of Councilmembers Schwartz's and Evans' campaign finances be removed from the draft audit reports prior to the reports being submitted to the Councilmembers for comment. With respect to Councilmember Schwartz, Williams¹² instructed the auditor to remove information relating to: (a) Hatch Act violations and unpaid leave of District government employees without an identifiable benefit to the District government; (b) contributions from corporations; and (c) the committee's lack of administrative controls over campaign operations.

As a result, in March 2003, OCF issued a Discussion Draft of the audit to the candidate which omitted all issues involving Hatch Act violations, potential acts of misconduct, excessive contributions by a ,contributor, and the committee's failure to file the necessary forms with the IRS. Over -the Supervisory Auditor's objections, the total of monetary exceptions was reduced from $30,378.15 to $15,563.89 in the Discussion Draft. Set forth below in Table 1 is a side-by-side comparison of the two draft audits, which illustrates the changes the Supervisory Auditor was instructed to make.

Table 1

Committee to Re-elect Carol SCHWARTZ 2000 Discussion Draft September 2002	Committee to Re-elect Carol SCHWARTZ 2000 Discussion Draft March 2003
Finding 1: Council employees may have violated provisions of the Hatch Act by participating in a partisan election campaign. Candidate used her City Council office for campaign-related activities in violation of the District's Standards of Conduct. City Council employee was compensated $13,300.00 for duties as campaign's Finance Director while simultaneously remaining employed with the District government. Monetary Exception: $13,300.00	DELETED
Finding 2: City Council employees performed campaign-related activities during normal District government business hours.	DELETED
Finding 3: Candidate used her City Council office to facilitate campaign-related activities despite leasing separate office space.	DELETED
Finding 4: City Council employee was reimbursed $116.76 by campaign for unspecified leave; however, personnel records failed to indicate that leave, of any kind, was actually taken by the employee. Monetary Exception: $116.76	DELETED
Finding 5: City Council employees were granted unpaid leave without any identifiable benefit derived by the District government.	DELETED
Finding 6: Committee received contributions totaling $14,513.89 after the November 12, 2000 General Election although debts and obligations were less that the total receipts on hand. Committee received contributions totaling $14,513.89 after the November 12, 2000 General Election although debts and obligations were less that the total receipts on hand. Monetary Exception: $17,061.39	Finding 1: Committee also received $2,547.50 in excessive contributions from individuals that exceeded the $1,000.00 threshold. Committee also received $1,050.00 in excessive contributions from individuals that exceeded the $1,000.00 threshold. Monetary Exception: $15,563.89
Finding 7: Committee failed to adhere to OCF regulations mandating the establishment of a Petty Cash Fund and the facilitation of petty cash transactions. Committee did not maintain sufficient supporting documentation to validate petty cash transactions.	Finding 2: Committee failed to adhere to OCF regulations mandating the establishment of a Petty Cash Fund and the facilitation of petty cash transactions. Committee did not maintain sufficient supporting documentation to validate petty cash transactions.
Findine 8: Committee did not maintain proper documentation in support of campaign related expenditures.	Finding 3: Committee did not maintain proper documentation in support of campaign related expenditures.
Finding 9: Committee may have failed to file necessary forms with the Internal Revenue Service (i.e. Form SS-4, Application for Employee Identification Number; Form 1096, Transmittal of U.S. Information Returns; and Form 1099, Miscellaneous Income for campaign employees and vendors that received more than $600.00 for their respective services rendered during the tax year.)	DELETED
Total Monetary Exception: $30,478.15	Total Monetary Exception: $15,563.89

(2) Councilmember Jack Evans

With respect to Councilmember Evans, the auditor found that John Ralls, an employee in Evans' City Council office, also served as the campaign manager for the Evans Committee, and that Councilmember Evans used employees from his District Council office to perform a variety of campaign-related activities during normal District government business hours. On March 13, 2002, the Secretary to the D.C. Council confirmed for the auditor that a total of six Evans Committee employees were simultaneously employed by the Council. According to the Secretary, Ralls entered into a leave without pay status on August 27, 2000.¹³ Evans Committee payroll records disclosed that Ralls received compensation in the amount of $3,000.00 for the period of July 30, 2000, through August 26, 2000. There was no indication that Ralls took leave of any kind from his D.C. Council position prior to August 27, 2000, raising the issue of how Ralls was able to serve as the Evans Committee Campaign Manager while being employed as a full-time D.C. Council employee. On March 25, 2001, Ralls was compensated $20,000 in performance bonuses from campaign funds.

The audit also discovered that another D.C. Council employee, Karen Armagost, entered into a leave without pay (LWOP) status on July 3, 2000, through September 30, 2000. However, Evans Committee records revealed that Armagost was participating in campaign-related activities for approximately six months prior to her change in leave status. Records further revealed that after her return to work on October 1, 2000, she continued to work for the Evans Committee as a volunteer. On March 16, 2001, Armagost received $5,000 as a performance bonus from Evans' campaign fund.

The audit further disclosed that Evans used employees from his D.C. Council office to perform a variety of campaign-related activities during normal District government business hours. These activities included: (a) traveling to vendors to purchase miscellaneous supplies pertinent to the campaign's operations; (b) attending campaign-related functions with the candidate; and (c) shipping and receiving campaign-related materials from the D.C. Council office, despite entering into a lease agreement for office space in July 2000.

A review of the Evans Committee's contributor records disclosed excessive contributions in the amount of $29,425.08 from 32 individuals who held a partnership and/or controlling interest in 101 business entities, and 11 companies that had a partnership or individual ownership interest in 19 entities. For example, the audit discovered that seven individuals, who had established a business consortium involving seven corporations with interlocking ownership, contributed personal and corporate contributions to the Evans Committee totaling $7,300.15. The audit identified six contributors who gave excessive contributions totaling $2,750.

The auditor also discovered that the Evans Committee incurred and paid $36,056.12 in expenditures that were not directly related to the campaign, and which occurred after the 2000 General Election. The audit discovered that the Evans Committee expended a total of $6,058.04 for automotive repairs to the candidate's personal vehicles. Evans Committee records documented the use of two vehicles for campaign-related activities; however, there was no documentation available to indicate that the candidate entered into an official lease agreement to use the vehicles for that purpose in violation of 3 DCMR § 3013.2(i), in that campaign funds may not be used for reimbursement for the use of personal property, unless the campaign committee (and not the candidate) holds the title or lease to the vehicle, and vehicle use is directly related to a campaign purpose. In addition, of the total amount spent, $4,095.74 was paid for repairs that occurred after the November 2000 General Election.

The audit recommended that the Evans Committee recover: $4,095.74 expended for automobile repairs to the candidate's personal vehicles; $30,000 in performance bonuses to two Evans Committee employees and two vendors without contractual agreements; and $1,960.38 in other funds expended for courier services, parking meter or other traffic infractions, and phone or internet services. All of these expenses were deemed ineligible expenditures and occurred after the November 2000 General Election.

In addition, the auditor cited the Evans Committee for failing to file a Statement of Candidacy within five days of receiving a contribution or incurring campaign related expenditures. See 3 DCMR §§ 3002.1 and 3002.2. Evans filed his Statement of Candidacy on November 10, 1999. However, on September 30, 1999, the candidate received two contributions in the amount of $500.¹⁴ Moreover, during the period of May 24, 1999, through October 28, 1999, the Evans Committee incurred $4,914.66 in expenses for computer-related services.

Similar to the audit of Councilmember Schwartz discussed above, the Director of OCF and her General Counsel ordered that much of the information developed in the audit of Councilmember Evans campaign finances be removed from the draft audit report prior to the reports being submitted to the Councilmember for comment. The OCF auditor was directed to remove information in his draft report of Councilmember Evans' campaign finance report that related to: (a) potential violations of the Hatch Act and the District's Standards of Conduct; (b) District employees' LWOP status without a clear benefit to the District government; (c) corporate contributions; and (d) ineligible expenditures and the lack of controls over campaign operations.

As a result, in the March 2003 Discussion Draft of the audit that was disseminated to Councilmember Evans' Committee, the monetary exceptions were reduced from $70,294.22 to $11,117.54, over the supervisory auditor's objection. Set forth below in Table 2 is a side-by-side comparison of the two draft audits which illustrates the changes the Supervisory Auditor was instructed to make.

Table 2

Committee to Re-elect City Council Member Jack EVANS 2000 Discussion Draft September 2002	Committee to Re-elect City Council Member Jack EVANS 2000 Discussion Draft March 2003
Finding 1: City Council employees may have violated provisions of the Hatch Act by participating in a partisan election. City Council employee simultaneously served as Campaign Manager. Employee was also compensated $3,000.00 for period covering July 30, 2000 through August 26, 2000. Personnel records indicate that employee did not take leave during that period. Another employee took unpaid leave effective July 1, 2000 through September 30, 2000. Records indicate that employee was performing campaign-related duties as early as February 2000. Monetary Exception: $3,000.00 (Reimbursement of salary disbursement)	DELETED
Finding 2: City Council employees performed campaign-related duties during normal District government business hours in violation of the District's Standard of Conduct.	DELETED
Finding 3: Candidate used his City Council office for campaign-related activities despite having a lease for separate office space.	DELETED
Finding 4: City Council employee took unpaid leave without any direct benefit derived by the District government.	DELETED
Finding 5: Committee awarded bonuses to two employees in the amount of $25,000.00 ($20,000 and $5,000, respectively) without the presence of an official written contractual agreement. Committee also awarded performance bonuses totaling' $5,000.00 ($2,500 each) to two vendors although the Committee had a written contractual agreement with only one of the vendors. Law allows award of $150.00 per individual and aggregate total award of $20,000.00. Monetary Exception: $29,850.00 (Reimbursement of bonuses)	DELETED
Finding 6: Committee received "bundled" contributions from several individuals that held partnership interests in or individual ownership in several business entities that also made corporate contributions, thus exceeding the $1,000.00 threshold. Committee received excessive contributions from six contributors totaling $2,750.00. Monetary Exception: $29,425.80 (Reimburse excessive contributions)	Finding 1: Committee received contributions from individuals and business entities that were excessive and violated CFR contribution limitations. Committee Report of Receipts and Expenditures (R&E) disclosed excessive contributions totaling $5,059.50 from individuals with interlocking corporate interests. Monetary Exception: $5,095.50
Finding 7: Committee paid $6,058.04 for repairs to the candidate's personal vehicle. There was no indication that the Committee entered into a lease with the candidate to utilize the vehicle for official campaign-related purposes. In addition, $4,095.74 of the total amount was expended after the 2000 General Election. Monetary Exception: $6,058.04	Finding 2: Committee paid $6,058.04 for repairs to the candidate's personal vehicle. There was no indication that the Committee entered into a lease with the candidate to utilize the vehicle for official campaign-related purposes. In addition, $4,095.74 of the total amount was expended after the 2000 General Election. Monetary Exception: $6,058.04
Finding 8: Committee incurred and paid $36,056.12 ($30,000 in bonuses; $4,095.74 in auto repairs; and $1,960.38 in misc. phone and computer services, and parking meter and/or other DMV violations) in expenditures that were not directly related to the 2000 General Election due to the fact that the committee failed to terminate in a timely manner. Monetary Exception: $1,960.38 (Reimbursement of ineligible expenditures paid after the election)	Finding 3: Committee incurred and paid $1,960.38 in expenditures not related to the 2000 General Election; however, a written explanation was recommended in favor of monetary recovery.
Finding 9: Committee failed to adhere to CFR regulations pertaining to the establishment of a Petty Cash Fund and limitations on petty cash transaction. Petty cash transactions did not have adequate supporting documentation to validate expenditures.	Finding 4: Committee failed to adhere to CFR regulations pertaining to the establishment of a Petty Cash Fund and limitations on petty cash transaction. Petty cash transactions did not have adequate supporting documentation to validate expenditures.
Finding 10: Committee consistently failed to obtain supporting documentation in support of campaign-related expenditures.	Finding 5: Committee consistently failed to obtain supporting documentation in support of campaign-related expenditures.
Finding 11: Candidate failed to file statement of candidacy in a timely manner.	DELETED
Finding 12: Committee may have failed to file necessary IRS Forms (i.e. Form SS-4, Application for Employee Identification Number; Form 1096, Annual U.S. Information Returns; and Form 1099, Miscellaneous Income for campaign employees and vendors who received $600.00 or more during tax year)	DELETED
Total Monetary Exceptions: $70,294.22	Total Monetary Exceptions: $11,117.54

(3) Councilmember Vincent B. Orange, Sr.

In April 2000, the OCF Supervisory Auditor conducted a desk audit of the financial reports for the "Committee for New Leadership in Ward 5: Orange `98" (the Committee or Orange 98 Committee), Vincent Orange's 1998 election campaign for the Ward 5 seat on the Council of the District of Columbia. The desk audit indicated three principle violations of the D.C. Code and the District of Columbia Municipal Regulations during the course of the campaign and in the financial reports submitted to OCF.

First, between June 1998 and September 1998, Orange made five personal loans to his campaign totaling $36,292.48. D.C. Code §1-1131.01(h)(1) states:

Second, on May 26, 1998, Orange's .three minor children, Vincent, Jr., Paul, and Jannie, each made contributions in the amount of $500. The District of Columbia Municipal Regulations (DCMR) provide that contributions from minor children (under the age of 18) shall be attributed to their parents or legal guardians except where the ". . .decision to contribute is made knowingly and voluntarily by the minor child[ren]" and where "the funds, goods or services contributed are owned or controlled exclusively by the minor child[ren]." 3 DCMR § 3011.10 (emphasis supplied).

The third issue concerned a contribution of $500 made by the Committee on October 12, 1998, to the [Marion] Barry Legacy Tribute. The auditor questioned this contribution because 3 DCMR § 3013.1 provides that campaign funds "shall be used solely for the purpose of financing, directly or indirectly, the election campaign of a candidate." (emphasis supplied.)

On May 9, 2000, the OCF Supervisory Auditor and a member of his staff met with Councilmember Orange to discuss the issues identified by the desk audit. Instead of dispelling any questions related to the audit issues, Councilmember Orange's responses to the issues raised additional issues of legality and propriety.

In regard to the first issue, of the personal loans purportedly made by the Orange to his campaign, four were evidenced only by personal checks. Two of these checks, totaling $14,000, appear to have come from the Escrow Account for Orange's law practice, raising issues regarding his compliance with the D.C. Bar Rules of Professional Responsibility relating to attorney escrow accounts and the commingling of personal and client funds. See D.C. RULES of PROF'L CONDUCT R. 1.15(a) (1988).

Moreover, a loan of $2,000 was evidenced only by a receipt for cash signed by the Committee Treasurer, and there was no additional information to indicate that the funds came from Orange personally. In addition, the loan would appear to violate D.C. Code § 11131.01(c), which prohibits any contribution in legal tender in an amount of $25.00 or more.¹⁵ See also 3 DCMR § 3011.5 (same).

Councilmember Orange documented another of his loans with a copy of a NationsBank Cashier's Check Number 0073458, drawn by Orange on August 21, 1998, in the amount of $4,000. Yet, Orange failed to provide any tangible proof that the funds used to purchase the check were actually his.

On or about June 21, 2000, Councilmember Orange officially responded to the OCF audit. In his response, Orange asserted that the OCF Form 16, Schedule E, Loans, was a sufficient loan document and argued that it was a written instrument that contained the information prescribed by law.

In his written response, Councilmember Orange also contended that his sons, Vincent, Jr., and Paul (who were ages 14 and 10 at the time) earned, owned, and controlled their own funds. He also stated that his daughter Jannie (then age 3) had maintained a bank account since 1997, and although she receives funding from him, the account and the funds therein are owned by her. He declared that each of his children had knowingly and willingly contributed $500 each to his political campaign, even though Orange had custodial control over all three accounts, and his daughter Jannie was only three years old at the time her contribution was made.

Councilmember Orange also stated that he openly campaigned at the Barry Legacy Tribute by disseminating Orange '98 campaign material, and by dialoguing with the city's "power brokers." Because this had enhanced his political position, the funds expended were campaign-related, according to Orange.

In the MAR issued to Chairman Wilson on January 7, 2003, the OIG identified the issue of the agency's reluctance and failure to take any action against Councilmember Orange for failing to provide sufficient evidence of a loan instrument with respect to his loans to his campaign. In McGhie's response, he found that Orange publicly disclosed each loan on Schedule E, OCF Form 16, when the Committee filed its campaign financial report, and agreed with Orange that OCF Form 16, Schedule E, qualifies as a written instrument. McGhie concluded that Orange was, therefore, in compliance with the law.

However, OCF's response in regard to this issue contradicts an internal opinion issued by Collier-Montgomery at the time the auditor initially raised these issues. See Exhibit R. Internal OCF opinion 01-02 states that, pursuant to D.C. campaign finance law, a loan or advance made by a candidate or an immediate family member requires the execution of a writing, which discloses the terms, conditions and parties to the loan agreement or advance. Further, Collier-Montgomery opined that the loan or advance must evidence standards that are consistent with repayment policies of lending institutions in the District of Columbia (i.e., a repayment schedule representing dates certain by which payments are due and payable pending full satisfaction of the debt, interest rates, etc.).

The opinion went on to state that, absent any of the aforementioned characteristics, the loan or advance falls into the category of a contribution. Contributions from immediate family members are subject to limitations, while contributions from the candidate are not. Further, where there is no evidence of a loan agreement, neither the candidate nor the immediate family member should have any reasonable expectation of repayment. According to this rationale, OCF should have considered the more than $36,000 in loans from Orange to his campaign as contributions rather than loans, and disallowed Orange from recouping these funds.

Furthermore, the OIG found evidence that loans by other Councilmembers (e.g. Schwartz and Evans) to their 2000 campaigns were evidenced by legally binding documents, separate from Schedule E. On April 28, 2000, Councilmernber Schwartz executed a loan agreement between herself and "The Committee to Re-elect Carol Schwartz" for a loan in the amount of $20,000.00. See Exhibit S. The document clearly delineates the terms, conditions, and parts of the loan. Similarly, on November 4, 1999, Councilmember Evans entered into a loan agreement with "The Committee to Re-elect Jack Evans" in the amount of $15,000. See Exhibit T. The agreement between candidate Evans and his Committee clearly documents the terms prescribed by the statutes, and removes any ambiguity as to whether the transaction is a loan or contribution.

c. Insurance Commissioner's Non-Reporting of Insurance Fees

One of the issues identified in MAR-2 was that OCF did not timely resolve the issue of an Insurance Commissioner (Lawrence H. Mirel) who failed to report $85,000 in insurance fees on the Financial Disclosure Statement (FDS) he filed with the OCF. In his response to the MAR, McGhie asserted that Mirel had earned the fees as a lobbyist before he took office as Insurance Commissioner. Mirel reported the fees on a lobbyist activity report submitted to OCF, but did not include them on his FDS because he wrongly assumed that the FDS applied only to that part of the year when he held office as Insurance Commissioner.

The Insurance Commissioner submitted a notarized letter to Kathy Williams stating that he had misunderstood the FDS form. OCF, in its response, stated that it will accept and implement the recommendation of the BOEE General Counsel that the FDS form clarify that disclosure must be for the whole calendar year, not just for that part of the year in which the filer holds office or is employed by the District government.

In view of the OCF response to this issue, the OIG did not conduct further investigation into the matter.

d. Failure to Deposit Checks

The third issue described in MAR-2 was that approximately 10 checks received by OCF in payment of fines were never deposited. The checks were allegedly held until they were no longer negotiable. McGhie's response addressed this allegation and further investigation by the OIG failed to substantiate this issue as described in the MAR. The OIG interviewed OCF attorney William SanFord and OCF General Counsel Kathy Williams, both of whom stated that no checks became stale because they were held too long within OCF, and that no fines had to be dismissed because a check had not been timely deposited.

e. Embezzlement of Funds

The fourth issue of the MAR concemed an allegation that in or about May 2000, an internal review of OCF petty cash and non-revenue receipts determined that the custodian of these funds could not account for approximately $3,000. Furthermore, it was alleged that Cecily Collier-Montgomery, Director, OCF, had knowledge of the alleged embezzlement yet failed to report it to the OIG or to any other law enforcement agency. In response, McGhie informed the OIG that the embezzlement was never reported to the OIG because Collier-Montgomery believed that the OIG would have ultimately returned the case to the OCF for administrative action.

As stated previously in this report, it was not until March 17, 2003, that McGhie finally referred the matter of the alleged embezzlement to the OIG for review. The OIG reviewed the materials submitted by OCF, which revealed that, on March 8, 2000, the Supervisory Auditor, Report Analysis Audit Division (RAAD), OCF, observed an employee of the Public Information and Records Management Division receive cash for the payment of a fine. The employee issued the customer a receipt, placed the cash in an envelope, and transmitted the envelope to Althea Smith, Auditor/Budget Liaison, OCF, who was responsible for depositing all monies received by OCF into a District Government depository.

On March 8, 2000, the Supervisory Auditor informed Collier-Montgomery that he had observed the employee accept cash for a fine, which was submitted to Smith without a transmittal document. The Supervisory Auditor concluded that the lack of an effective internal control system over the receipt of monies and their subsequent deposit permitted an employee to misappropriate monies without culpability. On April 6, 2000, the Supervisory Auditor also notified Collier-Montgomery that an audit survey of cash receipts received by OCF employees during the period of November 18, 1998, through March 6, 2000, revealed 26 instances where employees had received cash that totaled $384.20, which could not be traced to a deposit record filed at the D.C Treasurer's Office. (DCTO).

As a result, the survey was expanded into an audit (RAAD-00-0001, Revenue Receipts Program). RAAD performed this audit from March 8, 2000 - April 24, 2000. The audit reviewed OCF revenue receipts for Fiscal Year (FY) 1998 through the date of the audit in FY 2000, and disclosed that $1,540.83 could not be traced to a deposit record at DCTO. In addition, the review disclosed that seven checks totaling $268.40, received during the period September 1998 to November 1998, could not be traced to a deposit ticket at DCTO. The auditors did not determine the disposition of the misappropriated funds. RAAD made four recommendations in this audit. The second recommendation was to contact the OIG's Investigation Division to determine whether the misappropriated monies warranted investigation.

Then, at the request of Collier-Montgomery, a staff attorney in the BOEE Office of General Counsel conducted an investigation into the missing cash receipts identified by the auditors. In a memorandum dated July 18, 2000, the staff attorney submitted the results of her investigation to Collier-Montgomery. In the memorandum, the staff attorney indicated that she reviewed 100% of all receipts issued for cash and checks received by the OCF's employees during FYs 1998 through 2000. The staff attorney identified the amount of missing cash receipts as $1,460.43, rather than the $1,540.83 identified by the auditors. However, similar to RAAD, she was unable to account for the disposition of the missing funds.

During this period, RAAD also performed an Imprest Fund Review (RAAD-00-0003) from April 10, 2000 - July 18, 2000. Consequently, on April 12, 2000, RAAD conducted an unannounced audit of OCF's Imprest Fund. The audit disclosed that there was $51 in cash and coins in the fund. Smith, as the Imprest Fund Custodian, informed RAAD that she did not maintain an accounting log to account for the receipts and expenditures made to the fund. Therefore, RAAD was unable to reconcile the Imprest Fund per the cash vault to an accounting record on this date.

RAAD concluded that Smith removed the funds from the safe without authorization, replaced $122 in cash only after the unannounced audit was conducted, and used nonrevenue funds to supplement the Imprest Fund. Smith failed to maintain adequate records to show the purpose and the amount of non-revenue funds used. Additionally, RAAD could not vindicate Smith in this matter due to the fact that she maintained the accounting log, made reimbursements, and had unregulated access to the safe.

RAAD made two recommendations as a result of its review of the Imprest Fund. The first recommendation was to contact the Inspector General relative to the missing cash from the Imprest Fund's cash vault on the date of the surprise inventory cash count.

In a memorandum dated September 27, 2000, Collier-Montgomery responded, in writing, to RAAD's draft reports relating to their review of the Revenues Receipts Program and the Imprest Fund. Collier-Montgomery stated that she was declining to refer these matters to the OIG. Collier-Montgomery wrote, "Based on my experience, because these matters ultimately involve personnel issues, the OIG would have returned the cases to me for disposition under the personnel regulations. Therefore, I elected to have RAAD-00-0001 investigated by the Office of the Board's General Counsel." Based upon the results of BOEE's investigation and RAAD-00-003, Collier-Montgomery said that she would pursue a personnel action against the employee found to be responsible for the misconduct.

On October 3, 2000, Smith was given 15-day advance notice of termination based on charges of dishonesty, misuse of government funds, and inexcusable neglect of duty. On October 5, 2000, Smith submitted her letter of resignation to Collier-Montgomery. Upon receipt of Smith's resignation letter, however, the Notice of Adverse Action was withdrawn. The OIG found no evidence that OCF required Smith to repay the missing funds, or that these funds were ever repaid.

As a result of the referral, the OIG interviewed each of the OCF employees involved, except for one who was on maternity leave, and Smith, who had moved to Georgia. Smith, who was contacted telephonically, referred us to her attorney who declined to make Smith available for an interview.

f. Failure to Adhere to Contracting and Procurement Rules

The fifth issue reported to Chairman Wilson in the January 7, 2003, MAR was that the OCF and BOEE Directors failed to adhere to contracting and procurement rules and regulations by intentionally splitting a large procurement into segments below the agencies' $10,000 contracting authority in order to avoid scrutiny by the Office of Contracts and Procurement (OCP). It was also alleged that the Directors awarded small contracts to their friends and acquaintances as sole source, non-competitive contracts.

In his March 7, 2003, response, Chairman Wilson adopted McGhie's findings, who was unable to find any pattern of intentionally keeping contracts below the contracting authority of his agency. McGhie did report one contract, for $9,999 that was below the $10,000 threshold for requiring three oral quotations from vendors before a procurement can be made. That contract was with Mark Walcott for Information Technology consulting. The General Counsel suggested that the contract was justified because of Walcott's significant knowledge of the OCF computer system.

McGhie also found no instance where a sole source contract was awarded to a friend or acquaintance of either Director. He stated that Miller has awarded no sole source contracts in the past three fiscal years. OCP, which is a separate agency, did award two sole source contracts. for BOEE for a new optical scan voting system and for ballot cards. Likewise, McGhie found no evidence of contract splitting. He was unable to find recurring contracts for any vendor that in the aggregate amounted to more than $10,000.

Contrary to the findings of the BOEE General Counsel, the OIG investigation found evidence of contract and procurement irregularities, including contract steering, contract splitting, and conflict of interest, at OCF and BOEE.

The OIG received information that, in July 2002, OCF procured the services of an information technology (IT) consultant, TransGlobal, Inc., Lanham, Maryland, to assess the agency's current IT status in anticipation of an overhaul. TransGlobal, Inc. is owned and operated by Mark Walcott, and was initially a subcontractor to OCF's primary IT contractor, Haynes & Associates. The allegation asserted that, although OCF employs an Information Director (Vialetta Graham), TransGlobal, Inc. was contracted to duplicate, not supplement, Graham's professional responsibilities. It was further alleged that TransGlobal, Inc. is not certified to do business in the District of Columbia.

The initial TransGlobal proposal to perform the IT assessment was for $17,535. The OIG received a memorandum dated July 3, 2002, in which the Chief of Staff, OCF, documented a discussion she had with an OCP Contracting Officer. According to the memorandum, the Contracting Officer informed the Chief of Staff that any unsolicited IT proposal that exceeds $10,000 requires that the agency have at least three bids on file for the same services. He further informed her that is an "unofficial" policy of OCTO, and a "waste of government resources," to put any IT contract under $15,000 through the "normal" contracting and procurement process. If the services can be procured for a total of less than $10,000, the agency can execute a Purchase Order without meeting the threebid requirement. The OCF Chief of Staff apparently contacted Walcott, who agreed to perform the assessment for $9,999.

We received no explanation why the parties decided to keep the contract under $10,000 in this case. However, by doing so OCF was able to avoid having to submit the contract to OCP for post-execution review of OCF's justification for the sole source award.¹⁶ Such a review would have revealed that TransGlobal, Inc. is not certified to do business in the District of Columbia, or as a Local Small Disadvantaged Business.

In 2003, OCF decided to contract again with Walcott, this time for the overhaul of the OCF computer system according to the assessment that TransGlobal, Inc. performed under the prior contract. Notes¹⁷ prepared by Kathy Williams, OCF General Counsel¹⁸ regarding a January 7, 2003, meeting with Walcott (See Exhibit U) indicate that OCF intended to award the contract for overhauling the system directly to Walcott without following the District's contracting and procurement procedures, and to bill Walcott in increments of $25,000. By splitting the contract into $25,000 increments, OCF was able to stay within its statutory small purchase authority and avoid review of the sole source procurement prior to solicitation and execution. See D.C. Code §2-303.21 and 27 DCMR §§1701.3(a) and 1705.1.

Inspector General Report of Investigation Concerning Inadequate Oversight and Misconduct at the District of Columbia Board of Elections and Ethics and the Office of Campaign Finance OIG No. 2002-0252 May 22, 2003