The Scrutinizer Finds Himself Under Scrutiny

When Joseph E. Schmitz took over as the Pentagon’s inspector general in 2002, the largest watchdog organization in the federal government was under fire for failing to fully investigate a senior official, falsifying internal documents and mistreating whistle-blowers. He publicly pledged to clean it up.

Three years later, similar accusations now surround Schmitz.

Schmitz slowed or blocked investigations of senior Bush administration officials, spent taxpayer money on pet projects and accepted gifts that may have violated ethics guidelines, according to interviews with current and former senior officials in the inspector general’s office, congressional investigators and a review of internal e-mail and other documents.

Schmitz also drew scrutiny for his unusual fascination with Baron Friedrich Von Steuben, a Revolutionary War hero who is considered the military’s first true inspector general. Schmitz even replaced the official inspector general’s seal in offices nationwide with a new one bearing the Von Steuben family motto, according to the documents and interviews.

The case has raised troubling questions about Schmitz as well as the Defense Department’s commitment to combating waste, fraud and abuse of taxpayers’ money, especially in politically sensitive cases.

Schmitz comes from a family that is no stranger to controversy. His father was the ultraconservative Orange County congressman John G. Schmitz, who once ran for president but whose political career ended after he admitted having an affair with a German immigrant suspected of child abuse. Schmitz’s sister is Mary Kay Letourneau, the Washington state teacher who served more than seven years in prison after a 1997 conviction for rape after having sex with a sixth-grade pupil with whom she had two children. After Letourneau’s release from prison, she and the former pupil, now an adult, married each other.

Schmitz, who resigned on Sept. 10 to take a job with the parent company of defense contractor Blackwater USA, is now the target of a congressional inquiry and a review by the President’s Council on Integrity and Efficiency, the oversight body responsible for investigating inspectors general, according to the documents and interviews.

“I’ve seen this office become involved in many questionable projects despite strong and persistent opposition from senior staff,” said Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Finance Committee, whose office is pursuing complaints about Schmitz. “It appears to me that this has created a lack of respect and trust, and has resulted in an ineffective Office of the Inspector General.”

In a brief response to written questions, Schmitz said it had been “an honor to serve the American people as inspector general of the Department of Defense.” He listed a series of accomplishments, from eliminating three layers of management to establishing a “new mission, vision and core values.”

Without giving specifics, Schmitz also said that some of The Times’ questions “appear to include false or misleading assumptions and/or law enforcement sensitive information.” He directed further inquiries to the inspector general’s office, which declined to answer the questions.

Schmitz’s allies said he was being persecuted. One senior Pentagon official defended Schmitz by saying that he was concerned about protecting the reputation of senior officials in Washington, where political enemies can cause trouble with an anonymous hotline tip.

At a ceremony earlier this month, acting Deputy Defense Secretary Gordon R. England presented Schmitz with a distinguished public service award for “inspiring a culture of integrity, accountability and intelligent risk-taking.” The White House said his five years in the Navy and 18 years as a reservist qualified him for the job.

Current and former colleagues described Schmitz, a former attorney for the Washington law firm Patton Boggs, as an intelligent but easily distracted leader who seemed to obsess over details.

They described a management style in which Schmitz asked for updates on personal projects -- such as a new bathroom in his executive suite or the hiring of a speechwriter -- while avoiding substantive issues such as tight budgets. Schmitz never won approval for the bathroom or the speechwriter.

He paid close attention, however, to the investigations of senior Bush administration appointees. At one point, investigators even stopped telling Schmitz who was under investigation, substituting letter codes for the names of individuals during weekly briefings for fear that Schmitz would leak the information to Pentagon superiors, according to a senior Pentagon official.

“He became very involved in political investigations that he had no business getting involved in,” said another senior official in the inspector general’s office.

The Times has previously reported on Grassley’s allegations that Schmitz intervened in investigations of senior Bush officials. A review of e-mail messages and documents provides new details.

One case involves John A. “Jack” Shaw, a deputy undersecretary of Defense accused by whistle-blowers in Iraq of directing a lucrative telecommunications contract to a company whose board members included friends. Shaw has denied wrongdoing. His attorney did not respond to a request for comment.

Schmitz, who had signed an unusual agreement giving Shaw limited investigative powers, sent the case to the FBI over the objections of his own investigators and then blocked them from assisting the FBI, according to interviews and e-mails obtained by The Times.

“It’s a safe bet you can bury something at the FBI, because they won’t have time to look at it,” said one Pentagon official.

After the publication of Times articles about the accusations leveled at Shaw, Schmitz helped to draft a press release in August 2004 that appeared to exonerate Shaw. The release said that Shaw “is not now, nor has he ever been, under investigation by the [Department of Defense inspector general].”

Schmitz’s own staff strenuously objected. Chuck Beardall, head of the agency’s criminal investigative service, said the release was “dead wrong and needs to be removed ASAP. Failure to do so reflects poorly on the DOD’s and our integrity,” according to an Aug. 13 e-mail.

But Schmitz told an assistant, Gregg Bauer, that he was inclined to “let the sleeping dog lie.”

“We did the right thing by recommending a less-inclined-to-misinterpretation” version of the press release, Schmitz wrote in an e-mail response.

When confronted later by congressional staff about the accuracy of the release, Schmitz told the Senate Armed Services Committee in August 2004 that the release was “technically correct.” But this year, when asked again, he acknowledged that the release was “inaccurate.” The Department of Defense has also acknowledged that the information in the press release “may not have been accurate.”

Another case in which Schmitz intervened came when the inspector general’s office began examining the jobs received by Pentagon officials who left for the private sector, according to another U.S. official, who also declined to be identified because of the sensitivity of the issue.

One of those on the list was Edward “Pete” Aldridge, the former Pentagon procurement chief who took a job with defense contractor Lockheed Martin. Schmitz would not sign a subpoena allowing investigators to examine employment documents, the official said.

Instead, the official said that Schmitz created a new policy that made it more difficult to get information by subpoena by requiring additional bureaucratic steps. During his tenure, Schmitz also made it harder to initiate an investigation of a political appointee, requiring high-ranking approval before investigators could proceed.

A Lockheed Martin spokesman confirmed the company had received a request that the firm “voluntarily provide” information regarding Aldridge. It said it had “promptly and fully” responded to the request.

Among other complaints about Schmitz, several senior officials also said he did not aggressively pursue more funds for the agency. Although the Defense budget jumped almost 30% between 2002 and 2005, the number of agents in the inspector general’s office increased only 7%, from 307 to 329, according to department statistics. Investigations into procurement, healthcare fraud and environmental crimes have declined precipitously as agents focused on terrorism-related inquiries.

Some of the more unusual complaints regarding Schmitz deal with what senior officials called an “obsession” with Von Steuben, the Revolutionary War hero who worked with George Washington to instill discipline in the military. Von Steuben reportedly fled Germany after learning that he was going to be tried for homosexual activities.

Shortly after taking office, Schmitz made Von Steuben’s legacy a focus. He spent three months personally redesigning the inspector general’s seal to include the Von Steuben family motto, “Always under the protection of the Almighty.”

He dictated the number of stars, laurel leaves and colors of the seal. He also asked for a new eagle, saying that the one featured on the old seal “looked like a chicken,” current and former officials said.

In July 2004, he escorted Henning Von Steuben, a German journalist and head of the Von Steuben Family Assn., to a U.S. Marine Corps event. He also feted Von Steuben at an $800 meal allegedly paid for by public funds, according to Grassley, and hired Von Steuben’s son to work as an unpaid intern in the inspector general’s office, a former Defense official said.

He also called off a $200,000 trip to attend a ceremony at a Von Steuben statue earlier this year in Germany after Grassley questioned it.

Finally, Schmitz’s son, Phillip J. Schmitz, has a business relationship with a group tied to Von Steuben. Schmitz, who runs a technology firm, provides web-hosting services for the World Security Network, a nonprofit news service focused on peace and conflict issues. Von Steuben serves on the network’s advisory board.

Hubertus Hoffmann, a German businessman who founded the network, said Von Steuben played no role in assigning the contract to Phillip Schmitz, who is paid a “modest sum” for his work. Schmitz said he first made contact with Hoffmann through his father but that he had never met Von Steuben.

The relationships troubled many at the Pentagon.

“He was consumed with all things German and all things Von Steuben,” said the former Defense official, who did not want to be identified because of the ongoing inquiries. “He was obsessed.”

At Grassley’s request, the President’s Council on Integrity and Efficiency, the inspector general oversight body, is reviewing two occasions when Schmitz accepted gifts, one involving plane tickets on Asiana Airlines and a second when he accepted baseball tickets to a Washington Nationals game.

On both occasions, Schmitz said that he had had the gifts approved by an ethics officer.

Still, Grassley said the gifts raised concerns.

“As the watchdog of our federal agencies, inspectors general must be held to a higher standard,” Grassley said in a statement. “They must always set an example of excellence and must be beyond reproach.”