President Obama Fires Controversial Inspector General

Jun 12, 2009 1:49pm

With little public notice, President Obama Thursday fired the Inspector General of the Corporation for National and Community Service, Gerald Walpin.

Saying he was “exercising my power as president,” Mr. Obama suspended Walpin with pay, saying his termination would be “effective 30 days from now.”

The president wrote that “it is vital that I have the fullest confidence in the appointees serving as Inspectors General. That is no longer the case with regard to this Inspector general.”

The decision was announced, such as it was, in letters the president wrote to House Speaker Nancy Pelosi, D-Calif., and Vice President Joe Biden in his role as president of the Senate.

White House counsel Greg Craig, responding to a letter of concern about Walpin’s termination from Sen. Chuck Grassley, R-Iowa, noted that the “Acting United States Attorney for the Eastern District of California, a career prosecutor who was appointed to his post during the Bush Administration, has referred Mr. Walpin’s conduct for review by the Integrity Committee of the Council of Inspectors General on Integrity and Efficiency.”

Craig said that the White House was “aware of the circumstances leading to that referral and of Mr. Walpin’s conduct throughout his tenure and can assure you that that the president’s decision was carefully considered.” He noted that Walpin’s termination “is fully supported by the Chair of the Corporation (a Democrat) and the Vice-Chair (a Republican).”

Exactly what conduct issues necessitated review was unclear; the White House and the office of the Acting U.S. Attorney for the Eastern District of California would not comment.

A source familiar with the president’s thinking told ABC News that “Mr. Walpin’s overall conduct in a variety of circumstances – well beyond the scope of the Assistant U.S. Attorney’s referral — led the president to conclude that Mr. Walpin should be replaced by someone who could effectively provide the kind of independent oversight that the president values.”

Walpin had been criticized for the way he handled an investigation into Kevin Johnson, former point guard of the Phoenix Suns, who was elected Mayor of Sacramento last November and is an ally of the president’s.

Johnson helped found a community group called St. HOPE Academy, and Walpin investigated how $847,673 in grant funds from AmeriCorps, a division of the Corporation for National and Community Service, were used by St. HOPE.

The funds were approved for St. HOPE to manage one-on-one tutoring for elementary and high school students; managing the redevelopment of one building a year in the Oak Park neighborhood; and for work surrounding Guild Theater and Art Gallery events.

The goals were to improve the reading and math for 100 elementary and high school students, to stimulate economic growth in Oak Park, to increase local arts programming and to recruit and train 500 volunteers to complete 10,000 hours of service.

But in the thick of Johnson’s mayoral run last September, Walpin announced that Johnson, St. HOPE Academy, and former St. HOPE executive director Dana Gonzalez, were suspended from participating in federal contracts or grants until the investigation was complete.

Walpin said in a statement at the time that his initial report "cited numerous potential criminal and grant violations, including diversion of federal grant funds, misuse of AmeriCorps members and false claims made against a taxpayer-supported Federal agency."

The Inspector General investigated whether any of the AmeriCorps funds had been diverted and misused, among them: that AmeriCorps members had been used to recruit students for St. HOPE Academy, for non-AmeriCorps clerical and other services, and for political activities in connection with the Sacramento Board of Education election. AmeriCorps members performed services “personally benefiting… Johnson,” such as “driving [him] to personal appointments, washing [his] car, and running personal errands.”

Grant-funded AmeriCorps members were taken “to New York to promote the expansion of St. HOPE operations in Harlem,” Walpin charged.

"When you instead take the AmeriCorps members to New York for a purpose not within the grant, you are misusing the members and diverting the funds from the purposes intended," Walpin told The New York Sun’s Josh Gerstein.

Johnson called the announcement “politically motivated.” His campaign pointed out that in 2005 Walpin introduced Massachusetts Gov. Mitt Romney at an event in Washington, DC, as the governor of a state run by the "modern-day KKK … the Kennedy-Kerry Klan."

Johnson’s campaign issued a statement saying, "we have said all along that there may have been administrative errors, much like the hundreds of other small nonprofits that have been investigated in the past. We are confident that the U.S. Attorney will decide not to proceed when it conducts a nonpolitical review of the allegations."

Johnson’s attorney Bill Portanova told reporters that “volunteer organizations are staffed by people with good hearts and intentions and, as a rule, are not accountants by trade.”

Johnson in November won the mayoral race, defeating the incumbent.

In spring of this year, questions began being asked about whether Mayor Johnson could receive stimulus dollars given his suspension from being able to received federal grants.

Johnson's lawyer, Matthew G. Jacobs, wrote to AmeriCorps asking for Mayor Johnson’s suspension to be lifted. ''The idea that somehow these regulations were supposed to apply to a private individual or bar an entire public entity or the Sacramento region on the basis of the private activities of an individual who just happened to become mayor strains credulity,'' Jacobs wrote.

In April of this year, the new Acting Attorney General, Lawrence Brown, settled the case, requiring St. HOPE Academy to pay $423,836.50 — $72,836.50 of which would be paid personally by Mayor Johnson. Walpin complained that he had not been consulted on the settlement.

“The agreement reached strikes a proper balance between accountability and finality,” Brown said in a statement. “St. HOPE Academy must pay a significant amount for its improper handling of AmeriCorps funds. The lifting of the suspension against all parties, including Mayor Johnson, removes any cloud whether the City of Sacramento will be prevented from receiving much-needed federal stimulus funds.”

The settlement included St. HOPE formally acknowledging that it did not adequately document a portion of its expenditures of the grant awards.  In addition Johnson and Gonzalez were to register to take an online course offered by Management Concepts titled “Cost Principles.”

On May 6, Walpin expressed disagreement with the decision to settle.

“The only circumstance that changed was the sudden media and political pressure to settle the matter monetarily and lift the suspension,” Walpin wrote. “These pressures had the desired effect.”

Walpin charged that AmeriCorps made a “180-degree turnaround” on the circumstances in the case “based on the change of circumstances of Respondent Johnson, who had, after directing St. HOPE’s misuse of the grant funds provided to it and receiving the suspension notice, become Mayor of Sacramento. The suspension was lifted because, as one Corporation official put it, the Corporation could not ‘stand in the way of Sacramento’ — thereby effectively stating that, while Respondent Johnson was not sufficiently responsible to receive further Federal funds in his management position as a grantee, he suddenly became sufficiently responsible when elected Mayor of a city receiving substantially more federal funds…”

Walpin said this was “akin to deciding that, while one should not put a fox in a small chicken coop, it is fine to do so in a large chicken coop!”

Walpin charged that the settlement “(s)ends the signal that acceptance of a grantee or its principal as 'responsible' can be purchased in a monetary settlement, overriding all evidence of wrongdoing previously found to warrant a suspension, without the presentation of any contradicting evidence."

He said arguments that the settlement is in the government's interest "is an attempt to pull the wool over the public's eyes.”

Yesterday, Walpin was told to clear out his desk immediately.

Grassley said Walpin needed to be given 30-days notice, which he said is required by the 2008 Inspector General Reform Act that President Bush signed into law and then-Sen. Obama co-sponsored.

Specifically, Section 3 of the law requires that, “the president shall communicate in writing the reasons for any such removal or transfer to both Houses of Congress, not later than 30 days before the removal or transfer.” 

“No such notice was provided to Congress in this instance,” Grassley wrote in a letter to the president.

“Given that you were a cosponsor of this vital legislation I am deeply troubled to learn of the ultimatum given Inspector General Walpin absent Congressional notification,” Grassley wrote. 

Grassley wrote that the Integrity Committee of the Council of the Inspectors General on Integrity and Efficiency had not produced any negative findings against Walpin, and “he has identified millions of dollars in AmeriCorps funds either wasted outright or spent in violation of established guidelines.  In other words, it appears he has been doing his job.”
Noting recent “massive increases in federal spending of late,” Grassley said that “it is more critical than ever that we have an Inspector General community that is vigorous, independent, and active in rooting out waste, fraud, and abuse.  I urge you to review the Inspector General Reform Act you cosponsored and to follow the letter of the law should you have cause to remove any Inspector General.”

Craig disagreed, saying that Walpin’s termination – being suspended for 30 days with pay – was “fully consistent with the Inspector General Act.”

– jpt

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