Report Cites Mismanagement in 4 Trade Trips by O’Leary

Four large-scale trade missions led by Energy Secretary Hazel O’Leary were replete with mismanagement and wasteful spending, according to a draft report by the department’s inspector general that was released Wednesday.

The 182-page report, based on a six-month investigation of O’Leary’s foreign travel, also said that in justifying the trips, the Energy Department greatly overstated the economic benefits that they brought to participating U.S. businesses.

Although O’Leary said she has already taken action to correct deficiencies, the report seems certain to reinvigorate congressional scrutiny of her travels and make her a more likely target for criticism by Republicans in the November elections. O’Leary is to testify next week before a House committee looking into her travel expenses.

The draft report said the department had been charged for a $7,085 South Africa reception that was double-billed, paid for hotel rooms in China that were never used and did not provide invoices for $53,564 it had charged for a Pakistan trade mission but was primarily incurred during an O’Leary trip to Vienna, Austria.

Investigators also said that the Department of Energy paid for some private participants who should have paid their own way and failed to collect tens of thousands of dollars owed by others. Record-keeping was so deficient that the department “could not accurately account for who actually participated [in] the secretary’s 16 foreign trips,” the report says.

In one instance, the auditors said, the department may have broken laws by spending $17,190 on receptions and banquets in South Africa from an account that had a balance of only $142 for the fiscal year. Department officials said that O’Leary was not involved in deciding which account would be tapped for those funds and that the matter is under review by the department’s counsel.

Overall, Inspector General John C. Layton found that the department spent $4.57 million on O’Leary’s 16 overseas trips, including $3.42 million on four trade missions, each of which involved scores of Energy employees and private participants. He recommended 29 separate administrative and management reforms for international travel.

O’Leary, who was traveling in California on Wednesday on Energy Department business, said in a prepared statement: “I accept the thrust of the inspector general’s findings and I accept responsibility for the identified accounting and administrative problems. I have already directed that action be taken to fix these problems.”

Undersecretary Thomas Grumbly said that O’Leary had no intention of resigning.

White House Chief of Staff Leon E. Panetta said in a statement that the White House had reviewed the draft report and that President Clinton “continues to have full confidence in Secretary O’Leary’s ability to carry out the important mission of the Energy Department.”

Nonetheless, the highly critical report is certain to be the focus of renewed attacks on O’Leary’s travel by the Republican-controlled Congress.

Rep. Joe L. Barton (R-Texas), chairman of the Commerce subcommittee on oversight and investigations, said that the draft report “was far worse than we expected. It raises more questions than it answers.”

O’Leary is to testify before Barton’s panel about her foreign travels next week.

Republicans have indicated that O’Leary’s costly trips may be an issue in the coming election campaign. On Sunday, House Speaker Newt Gingrich (R-Ga.) cited her travels on a nationally televised talk show as an example of wasteful spending by the Clinton administration.

O’Leary requested Layton’s inquiry last December in response to a story in The Times examining her overseas trips and other management issues.

Layton had set July 1 as a target date to release the completed report but Energy officials provided copies of the draft Wednesday after a reporter had obtained parts of it.

Even as they continued to defend the legitimacy and benefits of the trade missions, the officials acknowledged that the findings are damaging.

“These trips cost more than they should have cost,” Grumbly said. “It’s clear there are a lot of problems.”

The legal issue concerns a possible violation of the anti-deficiency act, which prohibits overspending in an appropriated account. Virtually all of the department’s $35,000 fund for entertaining had been spent or obligated when $17,190 from it was used for events in South Africa, the report says.

Department officials said that the cost of the South Africa events were to have been covered by a foundation, the United States Chamber of Commerce in South Africa, and by private business executives on the trip. The officials said that the department was “incorrectly charged” for those events and is seeking to collect from those who should have paid.

Eric Fygi, Energy’s deputy general counsel, said that “nothing we have seen in the report” would indicate a criminal violation.

The draft also took the department to task for the claims it made about the economic benefits of the trade missions.

It noted that the department had claimed credit for “the signing of 143 business agreements, with a potential value of $19.7 billion and an estimate of tens of thousands of new jobs created in the United States.”

The inspector general said that not all of the 143 agreements were firm contracts and that the $19.7 billion “does not represent actual dollars going to U.S. companies.” The report also said that the claim about job creation “was not supported by the department’s records.”

*

While the inspector general said that Energy could have legitimately taken credit for helping “move many of these agreements forward,” the report states that “the department cannot quantify the value of its role in helping to bring business agreements to signing” or breaking down barriers overseas for U.S. companies.

Grumbly noted that the report confirms that O’Leary had the legal authority to undertake the trade missions to promote U.S. businesses abroad. And he insisted: “These missions were a success. They achieved the objectives that were set out for them.”

However, he said that O’Leary was not planning to conduct any further trade initiatives until all of Layton’s recommendations are carried out.

Earlier this year, Layton criticized the department for undertaking new trade missions before making improvements to correct shortcomings that he had pointed out in a previous audit. But his criticisms in the new report go well beyond earlier statements.