The Spook that Never Was

How an EPA employee stole $900K by pretending to be a CIA agent

October 2, 2013

The strange and sordid saga of John Beale, a top Environmental Protection Agency (EPA) official who defrauded the federal government out of nearly $900,000, has by turns outraged, flabbergasted, and sickened members of Congress, but on Tuesday it achieved something even rarer: It left them speechless.

Rep. Darrell Issa (R., Calif.), the head of the powerful House Committee on Oversight and Government Reform, had asked one of Beale’s former supervisors, Robert Brenner, if he had seen Beale lately.

"I've seen Mr. Beale," Brenner testified, pausing to chew over his next sentence. "Well, I've seen him a lot over the last two weeks. He's renting out his home, so he's staying in my guest house right now."

For a brief moment, the oversight committee, usually full of bluster, was left gob smacked.

Over the course of two congressional hearings Monday and Tuesday, new details emerged about Beale, a former top EPA official who over the course of 13 years bilked the agency out hundreds of thousands of dollars in fraudulent travel vouchers and illegal bonuses. Along the way, Beale falsely claimed to be an agent for the Central Intelligence Agency, a Vietnam War veteran, and remained on payroll for over a year after a retirement party on a Potomac dinner cruise.

Overall, Beale spent two and a half years absent from work while still getting paid. According to investigators, he committed time card fraud, travel fraud, impersonated a federal agent, and misused a government passport, among other crimes.

He pled guilty on Friday to charges of felony theft of government property, which carry a maximum sentence of 10 years in federal prison.

Because of his clean record and guilty plea, his probable prison sentence will be 30 to 37 months. He will also pay restitution of $886,186 to the EPA and civil forfeitures of $507,207.

With criminal proceedings mostly out of the way, Congress has begun piecing together the details of how a con man gamed the system for over a decade in what the EPA Inspector General’s office called an "egregious and almost unbelievable case."

EPA Inspector General Arthur Elkins and Assistant Inspector General Patrick Sullivan first briefed the Senate Environment and Public Works Committee on Monday, followed by testimony before the House Oversight Committee on Tuesday.

During the course of Monday’s hour-long briefing, chairwoman Sen. Barbara Boxer (D., Calif.) compared Beale’s story to "Alice in Wonderland," "Catch Me If You Can," and "Monty Python."

"What the heck happened?" Boxer asked.

Beale, 64, got his foot in the door at the EPA thanks to his friend and fellow Princeton alumnus Brenner.

"In my years at WWS, I especially enjoyed the opportunity to learn from (and play softball and tennis with) a talented and fun group of fellow students," Beale wrote on his graduate alumni page. "And, when the opportunity arose to help develop the new Clean Air Act, I was able to convince my best friend from those days, John Beale M.P.A. '77, to join me in the effort."

Brenner testified that he and Beale vacationed at a house they co-owned in Massachusetts about once a year from the period of about 1983 to 1989.

Brenner hired Beale as a consultant in 1988. He was promoted to a full-time position in 1989. It was then, investigators say, that his deceptions began.

The inspector general’s office has said that Beale’s lies date back to 1989, when he falsely said on his employment application that he had worked for former Sen. John Tunney (D., Calif).

Brenner recommended Beale for a 25 percent "retention bonus" in 1991. The bonuses are meant to incentivize EPA employees to stay with the agency if they have another job offer. Investigators found no documentation of another job offer.

"I don't remember if we had it in writing or if we obtained the info through a phone call, but there was an offer," Brenner said.

"There is no job offer if it’s not in the file," Rep. Carolyn Maloney (D., N.Y.) said.

"I can answer that," Sullivan interjected. "Mr. Beale told us he never had an offer."

By all accounts, Beale distinguished himself in the EPA’s Office of Air and Radiation in the early ‘90s through his work on the Clean Air Act. It was around 1994 when Beale began claiming, even to his wife, that he was a CIA agent. He told investigators it was "to puff up the image of myself." According to investigators, he missed the limelight as his work on the Clean Air Act wrapped up.

Beale continued to receive an annual retention bonus until 2000, despite a three-year limit on the perk.

Beale bought out Brenner’s share of their vacation house in 1997. Under testimony, Brenner initially couldn’t recall how much he was paid, but when pressed, he said between $30,000 and $40,000.

Three years later, Brenner recommended Beale again for the retention bonus. Brenner’s lawyer insisted "there is simply no link between the two" actions.

Jeff Holmstead became the head of the Office of Air and Radiation in 2001. By that time, Beale’s clandestine activities were an open secret around the water cooler. "It was absolutely, universally accepted throughout the agency that he worked for the CIA," Sullivan said.

Holmstead was the first senior official Beale told about his CIA work. Telling political officials "made the lie kind of official or sanctioned," Beale said to investigators.

"The word that kept coming up was 'I presumed,’" Sullivan said of investigators’ interviews with Beale’s colleagues.

Indeed, before his downfall, the only person to question his extended absences and travel expenses was an executive assistant in 2001, who was told by her supervisors to ignore it because Beale was a CIA man.

Beale’s absences and extravagances increased dramatically over the decade that followed. He arranged a four-day work week for himself, explaining to Holmstead that he was part of a special advisory group working on a project with the Directorate of Operations at the CIA.

"I'm sorry, but I'm not in a position to talk about John Beale," Holmstead, who is now the head of environmental strategy for the firm Bracewell & Giuliani, wrote in an email to the Free Beacon when reached for comment.

However, Holmstead told the Washington Post last week that Beale "did tell me that he had an assignment with the CIA that would sometimes take him out of the office, but I was never asked to approve this arrangement. Career employees are sometimes detailed to work at other agencies, and I assumed that Mr. Beale’s work at the CIA was done pursuant to such an arrangement."

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

Beale accrued $57,235 in travel expenses for five trips to the Los Angeles area to visit family. Beale told EPA he was in Boston and Seattle. EPA staff never compared his travel vouchers with hotel receipts that showed him in Bakersfield.

In another instance, he expensed a $14,000 first-class ticket to London and a more than $1,000-a-night hotel. Beale always flew first-class on the taxpayer’s dime, having obtained a chiropractor’s note that he had lumbar problems.

An executive assistant told investigators she recalled Beale telling her he had to stay on at the CIA until his replacement, who had been captured in Pakistan, was recovered.

Beale spent six months away from the office in 2008, either working on a research project approved by his manager or "in the field" on secret agent duties.  He never produced any written work on the research project.

An intelligence directive issued during the Bush administration required all federal agency heads to be provided with annual lists of any employees who were also part of the intelligence community. Beale’s name never appeared on the EPA’s list.

Gina McCarthy, now the EPA administrator, took over as the head of the Office of Air and Radiation in 2009. Beale informed her of his undercover work.

McCarthy was aware of Beale’s extended absences based on briefings she received, investigators said, but she believed it was a longstanding agreement.

In one email chain following the narrowly averted government shutdown in April 2011, McCarthy told staff they could resume approved travel.

"Like I was waiting for permission. (Big smile)," Beale wrote back. "Not blizzards, volcanos [sic] nor now government shutdowns stop me from my trips."

By that time, Beale was making in excess of $200,000 a year, more than the vice president of the United State’s salary. In addition to his 25 percent annual retention bonus, which should have expired in 2003, he also received a Presidential Rank Award for $28,000.

In May 2011, Beale announced his retirement and even had a going-away dinner cruise on the Potomac River. Beale emailed McCarthy to let her know he would be overseas for extended periods on CIA business. In reality, he was in Cape Cod, Mass.

Beale continued to pull an EPA paycheck for the next 19 months.

In the House oversight hearing, Issa noted that if Beale had actually retired, he would have gotten away scot-free.

"That is 100 percent correct," Sullivan replied.

"I guess we should be happy he got greedy," Issa said.

According to investigators, 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. She 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."

It was around this time that another staffer brought Beale’s mysteriously never-ending paycheck to McCarthy’s attention.

However, rather than notifying the Office of Inspector General, which is equipped to handle criminal investigations, McCarthy first relayed her concerns to the EPA’s general counsel.

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

"As you are aware, we have been seeking confirmation of your employment status with the other Federal Agency you maintain to have worked (or are currently working) for while employed at EPA," McCarthy wrote to Beale in a Jan. 4 email. "We have coordinated in this matter with EPA's Office of Homeland Security and, at this point, we have been unable to confirm the existence of an interagency detail or any other type of arrangement."

McCarthy directed Beale to return to work and warned him that any continued absence could be subject to disciplinary action.

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

Overall, Beale had received roughly $500,000 in retention bonuses that should have been subject to annual reviews.

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

Elkins and 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."

Despite the initial setback, Elkins said Sullivan said it took only a week to establish that Beale wasn’t a CIA spook. He didn’t have a security clearance. Phone calls he claimed to have taken place in Pakistan were pinging off domestic cell towers.

So what was Beale doing instead of being a secret agent man? Elkins and Sullivan said he told them he was working around the house, riding his bicycle or reading books.

When the investigation first began, Beale's attorney told the United States Attorneys’ Office that he did in fact work for the CIA. Even among his friends, Beale tried to maintain the lie.

"Based on our interviews, after we began our investigation he did tell some of his friends and colleagues that he really was a CIA agent, but he had to take one for the team," Sullivan said.

The Inspector General and U.S. Attorneys’ office offered to set up a meeting in a secure room at Langley with Beale and the CIA. The next day, Beale’s attorney said that wouldn’t be necessary, because his client was not in fact a secret agent.

Beale officially filed for retirement—for real—on April 30, which under law entitles him to a federal pension. A hefty pension, too, given that it is based on his highest average salary for three consecutive years.

"What does it take to actually get fired in this federal government?" Rep. Jason Chaffetz (R., Utah) asked during the Oversight hearing. Chaffetz said he wants to haul McCarthy into the committee to explain why Beale was not immediately fired.

The EPA and the Office of Personnel Management are looking into every avenue to cancel Beale’s pension, Perciasepe said. Meanwhile, Issa has introduced legislation that would cancel federal pensions for convicted thieves.

For now, Beale is awaiting sentencing at Brenner’s guest house. He has already paid back the majority of the money he stole. Brenner said the two have not discussed the case, under advice from both their lawyers.

Beale invoked his Fifth Amendment rights at Tuesday’s House oversight hearing and refused to testify.

Brenner retired from the EPA in August 2011 after 32 years at the agency. He is currently a senior fellow at Duke University’s Nicholas Institute for Environmental Policy Solutions.

Since he is retired, investigators could not compel him to be interviewed.

"We have no evidence that Mr. Brenner assisted in the fraud," Sullivan said. "We have not had the opportunity to interview him, but I can't speculate on that."

Sullivan said Brenner 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.

Elkins and Sullivan said another investigation into "administrative matters" concerning Beale’s fraud is ongoing.

Published under: EPA