$303 Million In Questionable, Fraudulent, Or Just Plain Stupid Expenses

The TSA may regret asking the Defense Contract Audit Agency to audit just one aspect of its operations -- its expenditures to assess and hire airport passenger screeners in 2001. The DCAA found that over 40% of the money, at least, some $303 million of $741 million lavished on a foreign-owned firm, was spent improperly. (The $741 million was already a renegotiation of an $867 million bill, so TSA had already peeled off another questionable $146 million).

The numbers are so large that they're almost incomprehensible, but some of the casual expenditures by high-living TSA employees and consultants illustrate an agency out of control, with out-of-touch leadership and out-of-mind oversight.

For instance, the TSA knowingly hired $20/hr temp workers by paying a middleman $48/hour. They spent over half a million dollars on renting tents -- tents which didn't work in the rain. (Isn't the whole idea of tents to keep the weather out?) They paid almost $4 a cup for Starbucks coffee -- and they bought it in 20-gallon batches. They rented a bunch of extension cords for $5 a day for three weeks, rather than buy them -- $1,500 worth, and that was just one event at one of scores of luxury hotels.

The TSA and the company charged with squandering most of this money, an American subsidiary of British personnel firm Pearson PLC, don't even agree on why they moved the screener screening from Pearson's training centers -- in which the whole project was supposed to be a "mere" $104 million -- into the hotels, which added at least $343 million in expense to the account (which is not all counted in the $303 million of identified fraud and waste). Pearson says TSA demanded the change. TSA says Pearson did it unilaterally. The question of which to believe hinges on which one has the greater credibility -- which is a bit like comparing virtue in hookers.

There is a lot of competition for the title, but the single most unjustified expense may have been a single phone call from a hotel at O'hare to Iowa City: $526.95. Most people could not make a $500 phone call if they tried their very hardest, but for the TSA it's all in a day's waste. The wasteful phone calls weren't even all in the USA.

There were over $3,400 in international phone calls, of which the auditors could only document less than $400 as legitimate. Pearson's CEO Mac Curtis said in a written response to the Post story that, "For example, telephone charges from the hotel assessment centers were predominately used to securely transmit application data, including digital fingerprints and photographs for each of the applicants." But according to the Post, a significant number of the questionable calls were to Colombia, a strange place to send fingerprints, securely or otherwise.

Another middleman was paid $5.4 million in salary for nine months (if he'd made it a whole year, it would have been $7.2 million at that rate). He was CEO of an "event logistics" company that was homebased in a PO box, and that didn't exist at all when it was awarded the no-bid contract.

TSA paid $4.4 million for job candidates who never even showed up.

There was $1 million in "deficient" spending in Manhattan alone. The $514,000 spent on a giant tent in Boston went to waste when the tent couldn't deal with rain and flooded -- the attempts to keep the tent dry were not even led by TSA or Pearson employees, but by Hilton Hotel staff. Bodyguards and other measures to protect TSA employees from the would-be screeners (a real confidence builder, that) sucked up another
$27.4 million.

The TSA classified the report "For Official Use Only" in an apparent attempt to keep it away from the public. Despite that, the Washington Post obtained a copy.

TSA executive Tom Blank, Acting Deputy Assistant Associate Administrator, defends the charges, blaming terrorists: "We knew we were threatened. There were bad guys out there," he was quoted in the Post. TSA Contracting Officer Richard "Ritchie" Lieber defended his hands-off approach to Pearson PLC's spending: he didn't check up on them because he "paid the contractor to do that," he said; despite the auditors' finding of hundreds of millions in deficient charges, Lieber defends his performance: the $741 million he agreed upon with the contractor was "considered fair and reasonable for the services received."

Pearson PLC, the British company on the receiving end of the contract and ultimately responsible for the massive overcharges, said the change was made “for the purpose of efficiency." But an executive of Pearson recorded a different view in a memo uncovered by the auditors: “There appeared to be serious fraud...."

FMI: www.tsa.gov, www.pearsongovernmentsolutions.com