Exclusive: Top Federal Postal Cop Retires in Wake of ABC News Investigation

WATCH: Brian Ross confronts the official with charges of government waste.

October 9, 2008, 3:18 PM

October 17, 2008— -- Two weeks after being questioned by ABC News about his travel expenses and gambling habits, the head of the US Postal Service's Inspection Service abruptly announced his retirement.

Alexander Lazaroff announced his retirement earlier this month saying, "after 37 years of federal service, I feel that it's time for me to begin a new chapter in my life." He made no mention of the ABC News questions nor of an ongoing investigation of his travels by the Postal Service's Inspector General.

The Inspector General investigation of Lazaroff followed complaints from his own inspectors to Senator Charles Grassley (R-Iowa) that the chief inspector squandered postal service money to arrange travel to resorts and other locations near casinos.

(Click here to watch Brian Ross interview Lazaroff)

Grassley says Lazaroff's departure will not stop the Inspector General's investigation.

An ABC News investigative team recorded Lazaroff at a casino in Phoenix in late September, during a conference he arranged at a nearby resort.

Lazaroff spent two hours at the casino and was seen leaving in a white stretch limousine provided by the casino, Casino Arizona.

Asked six days later by ABC News whether he had been at the casino, Lazaroff said he could not recall.

"I'm not sure, I'm not sure," he told ABC News.

When shown pictures of him at the casino, Lazaroff then recalled the evening but insisted he went to the casino on his "own time" and did not have a gambling problem.

"I don't have any debt as a result of gambling, I am not a high roller," Lazaroff said.

Postal Service officials were reportedly taken aback at his failure to recall the evening of gambling and a short time later agents of the Inspector General's office contacted ABC News for further information.

Senator Grassley had initially asked for the Inspector General's investigation following a series of anonymous letters and whistleblower complaints to his office.

"He lives in Philadelphia, works in Washington and he's never moved," said Grassley. "Quite frankly, how can he do his job as postal inspector and the administrator he is, when he's never in the office?"

Grassley said there have been a number of new allegations referred to the Inspector General by employees who felt free to act once they knew Lazaroff was leaving.

Allegations of Government Waste

As the head of an agency with more than 1,700 inspectors and a yearly budget of $464 million, Lazaroff had drawn attention for his frequent absences from the office.

He told ABC News he was on the road "70 percent of the time" because he felt he could accomplish visiting more Postal facilities across the country and around the world.

"I think I travel a reasonable amount," Lazaroff said.

According to Postal Service inspectors, Lazaroff, who was promoted to the top job two years ago, spent at least five times as much money traveling as any of his predecessors.

Lazaroff told ABC News his travel budget for the last two years was around $100,000 although sources in his office said the figure was actually closer to $300,000.

"When stamps are $.42 each," said Grassley, "and they're going to face a $2.5 billion shortfall, we should not have people in the postal service traveling so much."

Postal inspectors had also complained to the Inspector General that Lazaroff put pressure on subordinates to hire friends as private contractors.

Lazaroff denied the allegation and said he did little more than recommend people he knew to be qualified.

Another issued raised by Senator Grassley was reports that Lazaroff had retaliated against suspected whistleblowers.

"He threatens them as an administrator can threaten underlings," Grassley said.

Lazaroff denied the allegations, which he blamed on "disgruntled employees."

The US Postal Inspection Service rarely gets the credit it deserves, according to federal prosecutors who work with all federal law enforcement agencies.

Postal inspectors are charged with investigating scams and thefts through the mail and are often called in to work on complicated financial cases in which documents have passed through the mail.

Postal inspectors helped bring down tele-evangelist Jim Bakker, pursued the Unabomber Ted Kaczynski and were deeply involved in the anthrax investigation.

A Question of Judgment?

Until the ABC News interview, conducted at the Postal Service headquarters in Washington, D.C., the U.S. Postmaster General John E. Potter had been highly supportive of Lazaroff and his spokesperson, Gerry McKiernan, sought to downplay the allegations.

McKiernan told ABC News earlier this month that an "internal" investigation had already cleared Lazaroff and that the Inspector General's report would also find no wrongdoing.

McKiernan also said the complaints against Lazaroff were due largely to "disgruntled employees" who objected to management changes Lazaroff had implemented.

Thursday, Potter praised Lazaroff saying he "has demonstrated a powerful focus on operational excellence and an unwavering commitment to this organization." Potter, or his deputy, according to postal inspectors, had approved all of Lazaroff's many travels.

Senator Grassley said the matter raised questions about the Postmaster General's judgment.

"And it's that attitude that there's nothing wrong that's part of the culture of the agency, that we're going to protect ourselves."

Lazaroff's retirement as Chief Postal Inspector is effective November 3. No successor has yet been named.

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