STATEMENT BY BRUCE B. DARLING BEFORE THE
HOUSE ENERGY & COMMERCE COMMITTEE
SUBCOMMITTEE ON OVERSIGHT & INVESTIGATIONS
March 12, 2003

Good afternoon, Mr. Chairman, Mr. Deutsch, and members of the Committee: I would like to take this opportunity to reemphasize to the Committee and to the American people that the University of California is committed to reforming the business and management practices at Los Alamos National Laboratory that are the focus of this hearing. I would also like briefly to address several specific issues raised the last time I appeared before you about which I now have additional information.

Senior University officials continue to investigate potential abuses at the Laboratory and to institute appropriate reforms. As I said the last time I appeared before you, our goal is to raise our business practices to the level of our science and weapons programs – which all of us agree the nation can be proud of — and in so doing, restore public confidence in the Laboratory and the University.

With your permission, I will now address several specific issues raised during the Committee’s hearing on February 26, 2003. On a number of these issues, I have consulted with Steven Doran for clarification and additional information.

MANAGEMENT CHANGES
We have continued to make additional management changes at Los Alamos. Most recently we reached settlement agreements with security division director Stanley Busboom and his deputy Gene Tucker. Both will be separated from the Laboratory.

We have begun discussions with Katherine Brittin and we expect resolution of her status in the very near future. In addition, our Deputy General Counsel is meeting, as we speak, with the U.S. Attorney in Albuquerque to obtain the additional information we need to make decisions about further management changes.

Another important issue is the current status of the individual who is alleged to have misused her purchase card to attempt to buy a Ford Mustang. For some time, the Laboratory refrained from pursuing a personnel action against this individual because of a pending investigation by the Department of Energy Inspector General. The Laboratory recently obtained the Inspector General’s assurance that a Laboratory investigation could be conducted without interfering with the Inspector General’s investigation.

Since receiving the Inspector General’s permission, the University has directed the Laboratory to investigate whether disciplinary action is appropriate. As you know, the Laboratory and the University must observe certain requirements of due process in conducting such an investigation. The Laboratory’s human resources division is expected to complete its formal investigation by the end of this week. The result may be to convene a Case Review Board to evaluate the findings underway by the human resources division investigation, and to recommend disciplinary action against the individual in question. We expect this process to be completed — and the individual’s employment status to be finally resolved — in April.

Additionally, I now have more information about Mary Francis Wood and Clarissa Rodriguez in response to Chairman Greenwood’s questions during the last hearing. Ms. Wood was a contract employee at the Laboratory who used her purchase card to make cash advances and other inappropriate purchases. The Laboratory terminated her employment on August 19, 2002, and the matter was later referred to the DOE Inspector General. At my direction, the Laboratory this week sent a letter to Ms. Wood’s employer demanding repayment of the amounts inappropriately charged on her purchase card. The University has referred this matter to the local New Mexico District Attorney for possible law enforcement action.

Clarissa Rodriguez was a Laboratory employee who cashed a fraudulent travel voucher. The Laboratory accepted Ms. Rodriguez’s resignation on September 23, 2002, and she repaid the Laboratory on that date. The Rodriguez matter was referred to the DOE Inspector General shortly after the Laboratory learned about it. The University has referred this matter as well to the local District Attorney. To the best of our knowledge, the Inspector General’s investigations into the Wood and Rodriguez matters are ongoing.

PROCUREMENT MATTERS
There were a number of additional questions raised about the misuse of the Laboratory’s procurement systems. Let me address a number of them:

First, it was asserted that purchase cards were used to purchase more fuel than fire trucks and other similar vehicles could hold. In looking into this matter, we were informed that some of the purchases involved compressed natural gas that was being dispensed from a gas pump with a miscalibrated meter. (The meter has been re-calibrated to properly record the amount of fuel that is dispensed.) The other purchases involved a dual-tank fuel truck that dispenses fuel to emergency response vehicles, emergency generators and other critical machinery at the Laboratory. This explains the unusually high amount of fuel that was used. In neither case does it appear that there was any fraud or abuse involved.

A second issue was the allegation that Contract Associates “overbilled” the Lab for millions of dollars and yet the Lab is prepared to settle the case for only $50,000. For the record, there has not been a $50,000 settlement. However, the University’s Audit Office has confirmed poor controls and record keeping both by the Lab and the vendor, and that inadequate controls were built into the contract terms. The new controls are now in place and we have contracted with PricewaterhouseCoopers to conduct a comprehensive contract closeout audit, which will be supervised by the UC Auditor. Based on the findings, we will seek appropriate reimbursement from Contract Associates. In addition, several other vendors are now providing the goods provided by Contract Associates so that there is competition in obtaining the goods.

Finally, questions were raised about the ineffectiveness of the Laboratory’s controls over its Local Vendor Agreements (LVAs) and Just-in-Time contracts (JITs). The University learned about these concerns from Mr. Walp and Mr. Doran several weeks prior to the last hearing. We took these concerns seriously and pursued them immediately, as we have with every other issue that has been raised by Mr. Walp and Mr. Doran.

In response, we asked the External Review Team chaired by two former federal Inspectors General, and aided by a dozen forensic accountants from PricewaterhouseCoopers to expand its review of the Laboratory’s purchase card program to include a review of all Laboratory procurement, including LVA and JIT contracts to determine whether these agreements are vulnerable to abuse.

The External Review Team began this project in mid-January; it is scheduled to complete its review and issue a report in April. When the External Review Team’s review is completed and its report is issued, the University will act aggressively to implement any and all necessary reforms. In the meantime, we have reduced the number of LVAs from 35 to 27, set new restrictions on their use, reviewed each agreement to determine its continued value to the Laboratory, and we are developing additional controls to strengthen these agreements.

SECURITY MATTERS
It was alleged that the security clearances of those involved in the thefts at the TA-33 facility had not yet been revoked. We have looked further into this matter and, as I testified before, the clearances were suspended by the Department of Energy on October 31, 2002 — a full six weeks before the employees’ official terminations on December 17, 2002.

Finally, there was testimony two weeks ago about the current state of morale in the Office of Security Inquiries. While this has been a continuing concern of Interim Director Nanos, the University independently dispatched a representative to speak to the OSI staff both as a group and individually. He concluded that morale is indeed “poor,” that the unit is understaffed and has a large backlog of work, and that it remains divided between those who share Mr. Walp and Mr. Doran’s concerns and those who reject the allegations made about inadequate reporting and poor accountability. We intend immediately to address these problems, both through reorganization and other steps Interim Director Nanos will take.

TIME CARD AND WORK ORDER FRAUD
A number of allegations were made regarding time card and work order fraud. While a 2001 audit does not suggest systemic problems, we intend to expand our 2002 audit procedures to more aggressively look for time and materials overstatements. Additionally, we have discussed this matter with Steven Doran, in his new capacity as the Director of Security for the Office of the President, to determine other avenues for possible investigation.

In closing, I want to emphasize, as I did two weeks ago, that the University has not and will not let its focus on the important business and management issues that we are discussing today distract the Laboratory from fulfilling its mission to the nation. We remain focused on ensuring that the Laboratory’s scientific and weapons programs continue to meet their objectives. These objectives include ensuring the continued viability of the nation’s nuclear stockpile, monitoring nuclear proliferation around the globe, and helping prevent and prepare for nuclear, biological, and chemical attacks. The work being done at Los Alamos today is as important as at any time in the 60 years that the University has had the privilege and responsibility of managing the Laboratory. We remain honored to oversee this important work on behalf of the nation.

Thank you again for this opportunity to address the Committee. I would be pleased to answer your questions.