EPA Was Warned of Fraudster’s Illegal Bonuses

IG finds ‘management inaction’ allowed EPA employee to collect illegal salary

John Beale / C-Span screenshot
December 12, 2013

The Environmental Protection Agency waited three years to act on warnings that a senior official who pretended to be a CIA spy was collecting illegal and excessive salary bonuses, the agency’s Office of Inspector General said in a report to be released Thursday.

The OIG said "ineffective internal controls" and "management inaction" enabled John C. Beale to collect unauthorized retention bonuses that boosted his salary above the legal limit.

The EPA’s human resources department flagged the salary of Beale, a deputy assistant administrator in the agency’s Office of Air and Radiation, as early as July 2010 according to a copy of the report obtained by the Washington Free Beacon.

Auditors warned that Beale’s salary exceeded the "Executive level I" statutory pay limit—a federal salary schedule reserved for cabinet members—in 2008 and 2009.

The EPA Office of General Counsel recommended in January 2011 that retention bonuses be canceled and requested the then-Assistant Administrator Gina McCarthy hold an "information exchange" with Beale.

However, in April 2012 McCarthy confirmed that there were "no actions taken" on retention bonuses at the advice of the human resources department.

Beale’s retention bonus would not be cancelled until February 2013, more than a year after he announced his retirement.

Beale pled guilty in September to time card and travel fraud spanning two decades and amounting to nearly $900,000 in taxpayer dollars. Beale also spent a total of two and half years absent from work, claiming he was away on CIA business.

The latest Inspector General report appears to contradict the EPA’s earlier narrative that McCarthy, who is now the EPA administrator, stopped Beale’s fraud when she first discovered it.

Republican investigators in Congress said the new report raises more questions about McCarthy’s knowledge of Beale.

"We now know that all three senior officials directly supervised by Gina McCarthy in her previous role with the EPA have been implicated in this egregious fraud," House Oversight and Government Reform Committee Chairman Darrell Issa (R., Calif.) said in a statement to the Free Beacon. "This raises serious questions about her capabilities as a manager and leader, which the Committee will investigate along with other systemic problems at the EPA."

Sen. David Vitter (R., La.), who requested the Inspector General report, said, "I don't care how manipulative the individual was, somebody at the agency had to approve and sign off on leave, travel, salary, and bonuses."

"This clearly shows some severe mismanagement problems at the EPA and my guess is that it's just the tip of the iceberg," Vitter continued.

The EPA maintains that McCarthy was key to discovering Beale’s fraud and said it has reformed its practices.

"This is a convicted felon who went to great lengths to deceive and defraud the U.S. government over the span of more than a decade," the EPA said in a statement. "Since learning of the fraud, which was uncovered by Administrator McCarthy during her time as head of the Office of Air and Radiation, EPA has worked in coordination with its Inspector General and the U.S. Attorney's office."

"The agency has also put in place additional safeguards to help protect against fraud and abuse related to employee time and attendance, including strengthening supervisory controls of time and attendance, improved review of employee travel and a tightened retention incentive processes," the EPA continued.

The EPA did not answer questions of whether McCarthy saw the reports warning of Beale’s illicit retention bonuses.

During an October hearing held by the House Oversight Committee, investigators from the Office of Inspector General painted a different timeline of how Beale was discovered.

"To our knowledge, prior to [current EPA Administrator] Gina McCarthy expressing her concerns, no one at EPA ever checked to see if Mr. Beale worked for the CIA," said Assistant Inspector General Patrick Sullivan, who led the investigation into Beale.

Beale had been telling his coworkers he was CIA spy since 1994, and the air of mystery surrounding him led many of his supervisors to accept his long absences.

Witnesses said McCarthy first became suspicious of Beale in March 2012.

"I think that Administrator McCarthy was suspicious" for a while, EPA Deputy Administrator Bob Perciasepe said during October’s hearing. According to him, McCarthy was the first person since 2001 to seriously question Beale’s absences.

"John—was just filling out paperwork … and came across your file," McCarthy wrote in a November 2012 email to Beale. "How are you? Maybe we should reconnect so you can catch me up on your plans."

Investigators said it was around this time that another staffer brought Beale’s continuing paycheck to McCarthy’s attention.

Beale had announced his retirement In May 2011 and even had a going-away dinner cruise on the Potomac River that September, which McCarthy attended.

According to the Inspector General’s report, Beale’s "supposed retirement delayed agency action by the EPA" because it was assumed this would solve his pay problems.

However, staff at the Office of Air and Radiation "mass approved" time cards, including Beale’s, without any supervisory review.

Beale had a special code on his timecard that allowed his salary to exceed legal limits, according to the Inspector General report.

After McCarthy realized Beale was still on the payroll, she relayed her concerns to the EPA’s general counsel, rather than notifying the Office of Inspector General, which is equipped to handle criminal investigations.

According to the latest Inspector General report, a staff attorney at the general counsel office declined to be interviewed for the investigation, despite being required to do so under the Inspector General Act.

As a result, the Office of Inspector General was "limited in our ability to determine [the Office of General Counsel's] involvement in, knowledge of, and actions related to the Beale matter," the report says.

The general counsel then referred the matter to the EPA’s Office of Homeland Security, due to its contacts with the intelligence community.

McCarthy wrote again to Beale on Feb. 5, notifying him that she had discovered he was still receiving retention bonuses and had canceled them.

McCarthy and the EPA finally passed on their suspicions to the Office of Inspector General on Feb. 11. By that time, three months had passed, and Beale had been interviewed twice.

Sullivan testified that the delay and the probe by the agency’s office of homeland security, which has no criminal investigative authority, harmed their own investigation.

"That’s basic law enforcement 101," Sullivan said. "You never interview the suspect until you have all your facts lined up."

The hearing also revealed that Robert Brenner, a longtime colleague and friend of Beale’s at the EPA, was previously investigated for accepting an $8,000 discount on a Mercedes-Benz allegedly arranged by a lobbyist who did business with the EPA.

The Office of Inspector General believed it could prove that a crime was committed, but the Justice Department declined to pursue the case. Brenner retired before the office could interview him, Sullivan said.

Brenner was Beale’s supervisor in the early ‘90s and first recommended him for the retention bonus.

Beale retired for real on April 30 this year, entitling him to a full federal pension. Overall, he received roughly $500,000 in retention bonuses that should have been subject to annual reviews.

Democrats and liberal news outlets praised McCarthy for her allegedly swift action in stopping Beale.

"How EPA Head Gina McCarthy Uncovered A Million-Dollar Fraudster," the liberal blog ThinkProgress declared in a headline.

"According to a source that spoke with E&E News, McCarthy uncovered Beale’s fraud earlier this year while she was still head of the Air and Radiation Office," ThinkProgress wrote. "After spotting discrepancies on time sheets and internal reports, McCarthy brought the matter to authorities and eventually pushed Beale to resign this past Spring."

A separate OIG report on Beale’s travel fraud, also obtained by the Free Beacon, found that lax oversight and poor controls allowed Beale to rack up travel expenses without consequence.

As previously reported by the Free Beacon, Beale spent thousands of dollars on five-star hotels and airfare.

Travel vouchers reviewed by the Free Beacon, which covered 2008 through 2011, all lacked certification signatures and dates.

Additionally, the EPA redacted the names of the supervisors who approved Beale’s travel expenses in the vouchers obtained by the Free Beacon through a Freedom of Information Act request.

Overall, Beale took 33 trips between 2003 and 2011 that cost taxpayers $266,190. He flew first class on 70 percent of those trips, even though he was required to use business class if available.

Beale also secured a parking spot for the disabled at EPA headquarters, claiming he had contracted malaria while serving in Vietnam.

Beale is scheduled to be sentenced in federal court on Dec. 18. As part of his plea deal, he has agreed to pay more than $1 million in restitution and civil forfeitures.

Published under: EPA