More questions were raised than answered Tuesday at the long-awaited continuation of the Senate Finance Committee hearing on the Bureau of Internal Revenue with the appearance of its star witness, former IRB director Claudette Farrington.
Subpoenaed to appear July 6, Farrington didn't, nor was the scheduled Finance Committee hearing held – because on July 5, Gov. Charles W. Turnbull removed her from office, transferred her to the Office of Management and Budget, and appointed Louis Willis as acting IRB director. Committee chair Lorraine Berry then canceled the July 6 meeting and scheduled another for July 26. At that session, it was decided to hold a further hearing to take testimony from Farrington.
On Tuesday, Farrington started the proceedings by reading a 45-minute statement in which she chastised the Legislature, calling the proceedings a "a political witch hunt," and defended her role as director. She said there was no need for melodrama and sensationalism and "no need to 'rape' an agency, degrade and drag them down."
She cited union interference with her employees concerning overtime. She said the IRB had made "great strides" with its Y2K efforts. "We worked around the clock," she said, to get the bureau's computers Y2K compliant, although time and other factors weren't on her side. She concluded by thanking IRB retirees who "worked without pay" to assist her and added, "Accept my apologies if your names were included in this Senate melee."
Accusations and counter-accusations by those testifying sparked the hearing throughout the long day. One witness after another gave conflicting testimony as to IRB procedures, Y2K contracts, a series of events surrounding the picking up of a check to pay a Y2K contractor and IRB operations in preparing the Y2K computer work.
Those testifying in addition to Farrington included Willis, Finance Commissioner Bernice Turnbull, Government House information technology aide Roy McFarlane, territorial Y2K program manager Don Johnson, federal Inspector General Arnold vanBeverhoudt, and deputy solicitor general Elliott McIver Davis, representing Attorney General Iver Stridiron.
Y2K contracts are center of controversy
Bernice Turnbull, in response to a request from Berry, submitted a list of Y2K contracts and drawdowns broken down by agency, amount and date. As of Aug. 8, she said, $20.3 million in drawdowns had been made, and $1.9 million more were pending. The Finance commissioner said she had no knowledge or evidence of irregularities regarding any Y2K contract.
A major issue discussed was payment to Independent Consulting Services Inc. for computer installation work that Farrington said was not completed, but for which a check was issued by the Finance Department. The check was picked up by McFarlane and sent to the company.
Farrington said she had written to Stridiron last December asking his advice on handling the matter. Berry read into the record a letter from Stridiron stating that he advised Farrington to hold payment for ICSI until the work was completed. However, Farrington learned that the check had already been sent to ICSI.
As the day wore on, McFarlane claimed he hadn't known the work wasn't completed when he sent off the check. Farrington challenged this, saying she didn't see "how he couldn't have known."
Davis said he was referring the matter to the Public Employees Corruption Task Force, an option Stridiron had mentioned in his letter. Stridiron said he had received an IRB request last week for the Justice Department to investigate the matter.
David Verdi, ICSI president, was to have testified at an Aug. 22 hearing that was canceled by Hurricane Debby. Invited to speak Tuesday, he didn't appear. Near the close of the day Berry said she had heard from him and he would appear at the next hearing, tentatively in early September. Verdi had written to Farrington in January defending ICSI's position. Berry said the committee needed Verdi's testimony to try to clear up the situation.
Audits cite 15 years of IRB ills
VanBeverhoudt submitted a litany of critical IRB audits over 15 years. He cited embezzlement, a breakdown of internal controls on collections, lack of coordination between IRB and U.S. Customs regarding collecting excise taxes, failure to maintain current records on receivables, and failure to utilize collection practices effectively.
His report cited inventory findings that some of the federally funded computers "may have been diverted for personal use." He said a 1988 audit report on income taxes found delinquent taxes totaling $14.3 million, but the amount had increased to $34.3 million by a 1991 audit and to $82.4 million by the 1997 audit. "That represents a 476 percent increase in less than a 10-year period – those numbers speak for themselves," he said.
Willis presented his plan to modernize the IRB. As software from Guam had been a controversial issue in the Y2K computer system, he said, he brought in personnel from Guam to do training. "It's up and running," he said. At a previous hearing, senators were told that nobody at IRB knew how to run the system, and so all work was being done manually.
Some senators criticized Willis's plan as imitating vanBeverhoudt's recommendations. Willis countered that "the audit doesn't know anything about the IRB when it comes to taxes." He said he hadn't read vanBeverhoudt's report "in depth."
Spats, absent specialist blamed for delay
Late in the day, Y2K program manager Johnson said disputes between IRB project manager Granville Smith and ICSI project manager Joseph Mantovani held up the work of implementing the ICSI program. Johnson also said someone named "Bobby," who was supposed to be the IRB's technical specialist, was almost never at work. At an earlier hearing, it was stated that the specialist was in the states for medical care.
Johnson said that Smith worked "as best as he could, and many hours," but didn't understand the scope of the work, and so delayed the process. Johnson said many memos from Mantovani would clarify the situation, and Berry vowed to get them for the next meeting.
Berry took issue with Farrington's statements, saying, "I don't subscribe to her description of 'melee,'" All of the Finance Committee members defended their oversight role in the investigation.
Berry reminded Farrington that it was the governor, not the Finance Committee, who had removed her as IRB director. "In fact," Berry said, "it wouldn't surprise me if you were sabotaged." Sen. Alicia "Chucky" Hansen had said earlier that she thought Farrington had "possibly been a victim of a double-cross," adding that she was pleased Farrington finally had an opportunity to "spill her guts."
At the hearing's end, Berry said "very serious conflicts" remained unresolved and another session would be needed to deal with them, at a time to be announced.
All Finance Committee members were present Tuesday: Berry, Hansen, Gregory Bennerson, Roosevelt David, David Jones, Violet Anne Golden and George Goodwin. Non-members Adelbert "Bert" Bryan and Donald "Ducks" Cole also attended.
