Inter-American Foundation: Allegations of Improper Contracting and Personnel Actions at the Foundation

Published by the Government Accountability Office on 1999-05-20.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

      United States
GAO   General Accounting Office
      Washington, D.C. 20648

      Office of Special Investigations


      May 20,1999

      The Honorable Ted Stevens
      Committee on Appropriations
      United States Senate

      The Honorable Mitch McConnell
      Subcommittee on Foreign Operations
      Committee on Appropriations
      United States Senate

      Subject: Inter-American Foundation: Allegations of Improver Contracting and
               Personnel Actions at the Foundation

      This letter contains the results of our investigation into allegations that Adolf0
      France, Senior Vice President and General Counsel for the Inter-American
      Foundation @IF), violated contracting regulations and personnel policies in his
      attempts to hire Carlos Urquidi for the auditor position at LW. Specifically, you
      requested that we determine if IAF violated (1) Federal Acquisition Regulations
      (FAR) in procuring the services of Mr. Urquidi and (2) Office of Personnel
      Management (OPM) regulations or personnel policies in its attempts to fill the
      auditor position.

      Results in Brief

      Our investigation determined that IAF improperly issued a sole source purchase
      order to a temporary-help firm in violation of the FAR. IAF also violated an OPM
      regulation that limits an agency’s use of an individual employee of a temporary-help
      firm to 240-days.

      In addition to IAF’s violation of the FAR and OPM regulation, Mr. France, the
      agency’s Senior Vice President and General Counsel, manipulated the hiring process
      in an unsuccessful attempt to appoint Mr. Urquidi to the permanent auditor position.
      Mr. France canceled a vacancy announcement, delayed issuing another vacancy
      announcement, and then allowed the resulting certification to expire in order to
      allow Mr. Urquidi to obtain his U.S. citizenship and resolve outstanding criminal
      allegations in Bolivia. Throughout this process, LAP contracted for Mr. Urquidi to

                          GAO/OSI-99-1lR      Alleged   Improper   ContractinglPersonnel   Actions   at IAF’


temporarily fill the auditor position until Mr. France could appoint him to the
permanent position. Due to Mr. France’s actions, IAF did not appoint a permanent
auditor despite receiving applications from a total of 20 applicants in response to 3
vacancy announcements over a period of almost 2 years. The position currently
remains vacant.

We requested assistance from the U.S. Department of State to determine whether
Mr. Urquidi is a fugitive wanted by the Bolivian government. The State Department
is currently investigating the matter. We also contacted the Immigration and
Naturalization Service (INS) to determine whether Mr. Urquidi had failed to disclose
his pending criminal complaint in Bolivia on his application for U.S. citizenship. INS
is currently investigating this matter.


Congress created the I.AF in 1969 as an independent U.S. government corporation, to
promote self-help efforts in Latin America and the Caribbean. IAF responds directly
to self-help initiatives through grants to local and private organizations. IAF’s
appointing authority is delegated from OPM and IAF’s procurements must comply
with the FAR.’

IAF is governed by a nine-member Board of Directors appointed by the President
with the advice and consent of the Senate. The Board of Directors appoints the IAF
President who directs the agency operations with the assistance of a Senior Vice
President, three Vice Presidents, and two Directors. The Senior Vice President and
General Counsel is Mr. France. He also serves as the agency’s Secretary to the
Board of Directors, Ethics Officer, and Competition Advocate and supervises the
Office of Contracts. The two directors are the Director of Personnel/Equal
Employment Opportunity/ Personnel Security and the Director of Financial
Management and Systems (FMS). The Director of FMS is responsible for a staff of
financial specialists including the auditor position that Mr. Urquidi filled on a
temporary basis for almost 2 years.

Chronology    of Contracting    and Personnel       Actions

On February 28,1997, IAF’s auditor resigned her position. On March 3,1997, IAF’s
Director of Personnel advertised a vacancy announcement for the auditor position,
open only to federal government employees. On March 6,1997, IAF’s Personnel

’IAF was created as a wholly owned Government corporation by 22 U.S.C. 3 29Of(a)(1994).
OPM delegated examining authority to IAF by Interagency Agreement Number IF-l, dated
January 30,1996, pursuant to 5 U.S.C. $ 1104 (1994),which allows the director of OPM to
delegate examining authority to the heads of executive agencies. 5 U.S.C. 8 105 (1994)
defines an executive agency to include a Government corporation, which is defined by
5 U.S.C. 0 103 (1994) as a corporation owned or controlled by the U.S. Government. The FAR
is applicable to executive agenciespursuant to FAR Q 1.01and the FAR deftition of
executive agency, FAR 0 2.101,includes wholly owned Government corporations.

 2                  GAO/OSI-99-11R   Alleged   Improper   Contracting/Personnel   Actions   at IAF

Office contacted AccounTemps, a temporary accounting services firm, seeking to
temporarily fill the position until a permanent employee could be appointed.
AccounTemps provided Carlos Urquidi’s resume to LAP,which made no attempt to
identify any other sources for this service. On March 10,1997, IAF’s Deputy General
Counsel signed a sole source Justification and Approval (J&A) for obtaining auditing
services from AccounTemps.

On March 11,1997, LW issued a purchase order to AccounTemps, in the amount of
$5,200 for Mr. Urquidi to provide 200 hours of auditing service ending April 14,1997.
KF subsequently modified the purchase order five tunes, extending the period of
performance to 273 days and increasing the total cost to $57,616 plus $16,965 in
travel costs.

Pleased with Mr. Urquidi’s qualifications, Mr. F’ranco decided to extend the closing
date and expand the area of consideration for the vacancy announcement issued in
March so that Mr. Urquidi, a nongovernment employee, could apply. The closing
date of the announcement was extended from March 21,1997, to April 4,1997, and
the area of consideration was changed to “all sources.”

Mr. Urquidi subsequently submitted an application, but his application was rejected
because he was not a U.S. citizen. Mr. F’ranco then canceled the announcement to
allow Mr. Urquidi to obtain his citizenship and reapply.* Although none of the
applicants were rated, Mr. F’ranco told us that he had reviewed the applications and
considered Mr. Urquidi to be the best qualified.3 Mr. France stated that he wanted to
consider Mr. Urquidi for the position but that he intended to select the best applicant
who applied when the next vacancy announcement was issued.

On July 29,1997, in accordance with its policy, IAF’s Office of Personnel requested
an OPM background investigation of Mr. Urquidi, the results of which would be used
for a security/suitability determination on Mr. Urquidi as a contractor.4 In August
1997, OPM requested that the State Department assist in its investigation by
conducting an investigation of Mr. Urquidi in Bolivia.

In December 1997 OPM provided an interim report to IAF of its investigation,
consisting of records checks and reports of interviews with acquaintances of
Mr. Urquidi. Although OPM did not express an opinion regarding Mr. Urquidi’s
suitability for employment, the interim report indicated that Mr. Urquidi had

’ Mr. Urquidi applied to the INS for U.S. citizenship on May 1,1997.
3 At our request, I@% Office of Personnel rated the applicantsfor the March 3,1997, vacancy
announcement and found that five of the six applicants were eligible for the position.
4 In accordance with 5 C.F.R. 0 731.101(1999),a determination of “suitability” for federal
employment is based on an individuaI’s character or conduct that may impact on the
efficiency of the service. Pursuantto 5 C.F.R. 0 731.201(1999),OPM may deny an applicant
examination, deny an eligible appointment, or direct an agencyto remove an appointee or
employeebased on the results of a suitability investigation.

3                  GAO/OSI-99-11R    Alleged   Improper   Contracting/Personnel   Actions   at IAF

financial debts in the United States and had allegedly been involved in criminal
activity in Bolivia. The Director of Personnel reviewed the OPM report but
overlooked the allegations of criminal activity in Bolivia. Accordingly, she informed
Mr. F’ranco only about Mr. Urquidi’s indebtedness. Mr. F’ranco told us that this
information, though serious, did not diminish his desire to appoint Mr. Urquidi. He
explained that he assessedthe auditor position as low risk because it did not provide
access to IAF’funds and that he was satisfied with Mr. Urquidi’s assurances that his
financial situation was under control.

On January 1,1998, LAP modified the AccounTemps purchase order, extending the
period of performance to 248 days. Because OPM regulations limit using an
individual employee of a temporary help firm to 240 workdays in a 24month period,
Mr. France and the contracting officer decided that they would not extend the
AccounTemps purchase order once the period of performance was completed.5
Instead on March 9,1998, IAF’issued a sole source purchase order to Mr. Urquidi in
the amount of $12,772,for 103 days of auditing services. The statement of work
accompanying the purchase order was drafted by Mr. France and stated that
Mr. Urquidi was to investigate allegations of misconduct in Nicaragua and Costa
Rica.’ Mr. Urquidi commenced work under the purchase order on March 9,199s.
IAF’subsequently modified the purchase order seven times, extending the period of
performance to 216 days and increasing the total cost to $30,024 plus $7,849 in travel

In early July 1998, the Director of F’hIS reviewed the December 1997 OPM interim
report regarding Mr. Urquidi and this time discovered the criminal allegations that
had been previously overlooked. The Director of FMS told us that she immediately
apprised the Director of Personnel and Mr. F’ranco of these allegations.

Unconcerned with these allegations, on July 7,1998, in anticipation of Mr. Urquidi’s
imminent naturalization, Mr. F’ranco instructed the Director of F’MS to advertise a
second time to fill the auditor position. The Director of Personnel stated that she
confronted Mr. Urquidi on July 8,1998, questioning him regarding the criminal
allegations. Mr. Urquidi explained that as a former bank official in Bolivia, he had
been erroneously included in a legal action brought against the owner and managers
of the bank. IAF advertised the vacancy announcement on July 13,1998.

5 5 C.F.R. $300.504@)(l) (1999)limits agenciesto using an individual employee of a
temporary help firm initially for no more than 120workdays during a 24month period.
5 C.F.R. 3 300.504(b)(2)(1999)permits an agency to extend this period for up to 240
workdays if the agency determines that using the services of the same individual will prevent
significant delay.
6 By a letter dated December 12,1997,Mr. France learned of allegations of fraud, waste, and
abuse by &F’s Nicaraguan in-country service provider. By a memorandum dated
February 18,1998, Mr. France learned of an allegation that IAF’s Costa Rican in-country
service provider had executed a trust agreementwith IAF grantees, in violation of the grant
agreementsbetween IAF and the grantees.

 4                  GAO/OSI-99-1lR    Alleged   Improper Contracting/Personnel Actions   at IAJ?

On July 16,1998, OPM forwarded the State Department’s June 1,1998, investigative
report to LAF. In part, the report stated the following:

“A criminal complaint has been filed by the government of Bolivia against applicant [Mr. Urquidi] with
nine other individuals for a lengthy list of alleged fmancial crimes, including criminal association,
material falsification, falsification of private documents, use of false instruments, suppression and
destruction of documents and fraud and misappropriation. The 11 Ihcourt in La Paz, Bolivia found
Urquidi in contempt of court for failure to appear following a proclamation issued August 14,1995. It is
expected that Urquidi will be sentenced in absentia in the near future.. ..

“Attempts by police to locate and arrest Urquidi in Bolivia in 1995 were unsuccessful.. ..

“In supreme resolution #215473,dated March 15,1995, Superintendent of Banks and Financial Institute
of Bolivia initiated criminal complaints against.. . [Mr. Urquidi]. The complaint charges that he was the
principal actor for the Banco de Inversion S.A. (BIBOA) with 8O?kcontrolling interest and was directly
responsible for the bank failure.. ..

“. . . [ N]o arrest warrant currently exists.. . .n

Even though the Bolivian government had filed a criminal complaint against
Mr. Urquidi, Mr. France did not change his opinion of Mr. Urquidi’s suitability, as
Mr. F’ranco believed the Bolivian justice system to be extremely corrupt.
Additionally, Mr. France assumed that the INS had thoroughly investigated
Mr. Urquidi and would not have decided to naturalize him if there had been any
substance to the complaint. Mr. France felt that Mr. Urquidi should be presumed
innocent but had warned him that he would be dismissed if convicted.

Mr. Urquidi was naturalized on July 17,1998. On or about July 23,1998, Mr. Urquidi
submitted a job application (SF 171), answering “no” in response to the question,
“Are you now under charges for any violation of law?“’

After reviewing Mr. Urquidi’s application and based on her prior discussions with
him, the Director of Personnel questioned Mr. Urquidi regarding his omission of the
fact that a criminal complaint had been lodged against him in Bolivia. Mr. Urquidi
claimed that it was an oversight and changed the answer on his application to the
question regarding pending legal charges against him to “yes.”

On August 51998, the Director of Personnel issued a selection certificate certifying
Mr. Urquidi and two other applicants to be the best-qualified candidates for the
auditor position.’ Although the Director of FMS was the designated selecting official

’Approximatelya year earlier, when he submitted Form 85P, Questionnairefor Public Trust
Positions,Mr. Urquidi had answered“no”to the question, “In the last sevenyears,have you
been arrested,or chargedwith, or convicted of any offense(s)?”
’ Seven other candidates applied. IAF rated Mr. Urquidi and five others as eligible for the

5                         GAO/OSI-99-11R          Alleged   Improper   Contracting/Personnel   Actions   at IAF

and would supervise the new auditor, Mr. France selected Mr. Urquidi while the
Director of FMS was on leave and without her knowledge. Subsequently, OPM
inquired about the hiring status of Mr. Urquidi in light of the State Department’s
findings and cautioned LAF to take no action concerning employment of Mr. Urquidi
until OPM issued its final suitability report. Based on OPM’s advice, Mr. France did
not appoint Mr. Urqmdi and allowed the selection certificate to expire.

In anticipation of OPM’s final suitability report, Mr. France directed that IAF
advertise a third vacancy announcement. Aware of our investigation into allegations
that he was inappropriately attempting to appoint Mr. Urquidi, Mr. France
determined that the Director of FMS should serve as the selecting official. On
January 25,1999, IAF advertised a vacancy announcement with a closing date of
February 17,1999. Mr. Urquidi and five other candidates applied. The Director of
Personnel certified Mr. Urquidi and two others as the best-qualified applicants.

On January 28,1999, OPM provided IAF the results of an Interpol inquiry through
Bolivian authorities that determined that Mr. Urquidi “. . . does not register a police,
judicial, or narcotics trafficking record.” Based on the uncertain reliability of the
results of the Interpol inquiry, OPM did not consider this information to be

In its final report to the IAF, OPM warned IAF: “There are potentially actionable
issues which, standing alone, would be disqualifying under security/suitability
considerations. You are required to coordinate with OPM before you take
adjudicative action.” OPM advised the Director of Personnel that if LAP hired
Mr. Urquidi, OPM would consider taking jurisdiction over the personnel action and
terminating Mr. Urquidi’s employment for a material falsification on his job
application and unsuitability.g

LAF took no further action until April 21,1999, when the Director of FMS decided
not to select any of the candidates for the auditor position. She informed Mr. France
that Mr. Urquidi was unsuitable, one candidate interviewed poorly, and the other had
withdrawn from consideration. Mr. France questioned the Director’s decision not to
select Mr. Urquidi, explaining that he considered the absence of a criminal record to
be a vindication of Mr. Urquidi’s suitability. Notwithstanding Mr. France’s
objections, the Director did not fill the position.

Contracting    Issues

AccounTemns Purchase Order

IAF improperly issued a sole source purchase order to AccounTemps for the
services of Mr. Urquidi in violation of the FAR and extended the period of

’&e note 4, sutxa.

 6                   GAO/OSI-99-11R   AUeged Improper   Contracting/Personnel   Actions   at IAF

performance beyond the limit set forth in OPM regulations for using an individual
employee of a temporary-help firm.

The Competition in Contracting Act requires, with certain limited exceptions, that
contracting officers provide for full and open competition in government
procurements.‘o For acquisitions not exceeding the simplified acquisition threshold
of $100,000, agencies may orally solicit quotations and may solicit from a single
source if the contracting officer determines that due to urgency, exclusive licensing
agreements, industrial mobilization, or a similarly compelling reason, only one
source is reasonably available.”

IAF prepared a sole source J&A for the AccounTemps purchase order stating that
the auditor position had to be immediately filled in order to avoid a backlog of grant
audits, that would adversely affect IAF’s efficiency and effectiveness. Without
explanation, the J&A stated that AccounTemps was the only reasonably available
source for the required accounting services. In subsequent interviews, Mr. Franc0
and the IAF contracting officer told us that the sole source purchase order to
AccounTemps was justified by unusual and compelling urgency.

We find that no unusual or compelling urgency existed in this case. While IAF had a
legitimate interest in promptly filling the vacant auditor’s position, orally soliciting
quotations from several temporary agencies would not have significantly delayed the
procurement process. During our interviews, both Mr. France and the contracting
officer agreed with our conclusion that the need to temporarily fill the auditor
position was not so urgent that IAF could not have solicited oral quotations from
additional sources.

The FAR permits contracting officers to enter into contracts with temporary-help
firms for the brief use of temporary employees. However, these services must not
be used in lieu of regular recruitment under civil service laws and must comply with
OPM limits on the duration of the temporary services.’

An OPM regulation limits agencies to using an individual employee of a temporary
firm initially for no more than 120 workdays during a 24month period.13 An agency
may extend this period for up to 240 workdays if the agency determines that using
the services of the same individual will prevent significant delay.”

IAF incrementally extended its purchase order with AccounTemps for the services
of Mr. Urquidi to 273 days, exceeding the 240-workday limit by 33 workdays. IAF

lo 10 U.S.C. 3 2304(a)(l)(A) (1994);FAR Q 6.101.
l1 FAR 0 13.1061(b).
I2FAR 8 37.112;5 C.F.R. $300.504 (1999).
I3 5 C.F.R. Q 300.504(b)(l) (1999).
I4 5 C.F.R. Q 300.504(b)(2)(1999).

7                   GAO/OSI-99-11R    Alleged   Improper   ContractinglPersonnel   Actions   at IAF

then avoided further violations of the 240-workday limit by issuing a purchase order
directly to Mr. Urquidi.

Manipulation       of the Hiring       Process

Mr. Prance insists that his actions were justifiable because IAF’was in desperate
need of a competent auditor and Mr. Urquidi was an exceptionally well-qualified
applicant. Mr. F’ranco denies that he was motivated by any personal fondness for
Mr. Urquidi and claims that he would have appointed another applicant had one
been better qualified. Nevertheless, Mr. France manipulated the appointment
process in an unsuccessful attempt to appoint Mr. Urquidi to the permanent auditor

To that end, Mr. F’ranco expanded the area of consideration for the March 1997
vacancy announcement position to “ail sources,” extended the deadline to allow
Mr. Urquidi to apply, and canceled the vacancy announcement when he learned that
Mr. Urquidi was not a U.S. citizen and therefore ineligible. Mr. F’ranco also delayed
the advertisement of a second vacancy announcement until July 13,1998, in order to
allow Mr. Urquidi to obtain his citizenship. When OPM questioned Mr. Urquidi’s
suitability after Mr. F’ranco selected him in August 1998,Mr. F’ranco allowed the
certification to expire rather than select one of the other candidates.

In taking these actions, Mr. F’ranco created the appearance that he was attempting to
circumvent the merit systems principle requiring agencies to appoint applicants only
after fair and open competition, which ensures that all receive equal opp~rtunity.‘~

Ahhough Mr. F’ranco maintains that he did nothing wrong, he conceded to us that his
actions created the appearance that he attempted to circumvent the requirement for
fair and open competition in order to appoint Mr. Urquidi.

Scope and Methodology

We contacted the U.S. Department of State in Bolivia and requested the Regional
Security Officer to contact the Bolivian Superintendencia de Banco and the llth
Court to determine Mr. Urquidi’s status. This request is pending.

We interviewed Mr. Urquidi, and he admitted that he knew of these pending charges
in Bolivia. Mr. Urquidi stated that he has obtained legal representation and filed a
motion to dismiss the charges in Bolivia.

We also contacted INS and provided it information that Mr. Urquidi may have
violated federal law by falsifying his application for U.S. citizenship.

l5 5 U.S.C. 0 2301(b)(l)     (1994).

8                          GAO/OSI-99-11R   Alleged   Improper   Contracting/Personnel   Actions   at IAF’

We will send copies of this letter to appropriate Committees and the Honorable
Maria Otero, Chair of the JAI?Board of Directors. We will also make copies available
to others on request. If you have any questions or need additional information,
please contact Assistant Director John Ryan at (202) 512-6722.

Sincerely yours,

Robert H. Hast
Acting Assistant Comptroller General
 for Special Investigations


9                  GAO/OSI-QQ-11R   Alleged   Improper   Contracting/Personnel   Actions   at IA.F
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