WHITE HOUSE DRUG CZAR TARGET OF FRAUD PROBE

Auditors Claim Ad Costs Inflated

Washington --- Congressional investigators opened a criminal investigation
of the White House drug czar's office this spring after uncovering evidence
that contractors improperly inflated advertising costs for the $1 billion
national anti-drug campaign.

Robert Hast, head of the congressional General Accounting Office's elite
criminal fraud unit, told the House Government Reform criminal justice
subcommittee Wednesday that GAO auditors uncovered evidence involving an
estimated $8 million in inflated charges submitted in 1999 involving
government advertising contracts.

The charges involve inflated billing for work done on the anti-drug
contracts, payments of bonuses to executives, and improper travel charges.
Hast said a former employee of the giant New York advertising agency Ogilvy
& Mather also gave investigators testimony of other improprieties.

"We are looking at the fraud," he said.

Hast said that the progress of the investigation has been hampered since
April by Barry McCaffrey, the White House drug policy director, who has
refused to allow Department of Health and Human Services auditors to
complete an audit of the drug office contracts. That department oversees
government drug programs.

Aides to the retired Army general say McCaffrey wants to transfer the
auditing responsibilities for his office to the Navy, but has not yet
received approval for the Navy to do the work.

Hast also recounted how McCaffrey was involved in several other curious
activities in the case. Although McCaffrey was told of the contracting
irregularities in a two-page staff memo dated April 13, Hast said McCaffrey
initially denied to his investigators that he knew anything about the matter.

He then changed his testimony after the investigators showed McCaffrey a
copy of the April 13 memo, which contains McCaffrey's own handwritten
comments in the margin.

Hast also testified that in June, McCaffrey met privately with an Ogilvy &
Mather representative, and told drug office subordinates after the meeting
that he was "satisfied with the contractor's costs."

Howard Pleffner, the drug office's project officer supervising the
contracts, said the audit is needed to close the books on a backlog of more
than $13 million in pending bills from Ogilvy, and $5 million from other
contractors. Some of the bills are a year overdue, he said.

Pleffner, who authored the April 13 memo to McCaffrey detailing the
contract irregularities, found that some vouchers submitted for payment
were 33 percent higher than those submitted earlier for the same services.