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