An Investigation of Travel Reimbursements in Connection with the INS’s Operation Safeguard

December 2002
Office of the Inspector General

EXHIBIT 5

U.S. Department of Justice Immigration and Naturalization Service Office of Internal Audit 425 I Street NW Washington, DC 20536   ORIG: MR. BOHLINGER cc: MCGEE FILE DEC 12, 2001

MEMORANDUM FOR	GEORGE H. BOHLINGER III EXECUTIVE ASSOCIATE COMMISSIONER MANAGEMENT MICHAEL A. PEARSON EXECUTIVE ASSOCIATE COMMISSIONER FIELD OPERATIONS
FROM:	[Signed] John P. Chase Director Office of Internal Audit
SUBJECT:	Procedural Reform Recommendation - Lodging During Detail Assignments

The purpose of this memorandum is to provide information regarding findings in several investigations of allegations of employee misconduct related to lodging arrangements and claims for reimbursement. The allegations were lodged primarily in areas in which there are a large number of detailed employees, such as at the Service's training academics or in long term, large scale enforcement operations. These findings have ethical and misconduct implications for individual employees, and highlight the agency's obligation to disseminate information to detailees and permanant staff in the location of the detail, in a manner that protects employees from inadvertently becoming involved in situations that represent violations. It is recommended that this information be reviewed with an eye toward correcting systemic weaknesses.

The information presented below is based upon prior and current investigations by the Office of Internal Audit (OIA) and the Office of Inspector General (OIG) into situations described below. Under each allegation is a discussion of the potential violation or ethical consideration.

• Service employees coming to a detail assignment were put in contact with by other employees or learned of by word of mouth, local property management companies which provided lodging at a lower rate than the allowable daily lodging rate, and were issued receipts reflecting the full allowable amount. They then vouchered the full allowable daily lodging rate and were reimbursed.

This scenario, in which employees were issued a receipt which did not accurately reflect the amount they paid for lodging is 3 clear violation, which can subject the employee to criminal penalties (18 United States Code 287, False, Fictitious or Fraudulent Claims), or disciplinary or adverse action. Employees are authorized to claim up to the allotted lodging amount in a particular location. If they are not charged the full amount, they are not entitled to claim it.

• Service employees coming to J, detail assignment were put in contact with by other employees or learned of by word of mouth, a local commercial establishment or property management company which provided lodging at the full allowable daily lodging rate, but were given a "rebate" each day. These rebates took various forms depending upon the location: vouchers usable at hotel dining, bar and barber facilities; vouchers usable at local grocery stores; cash; and also a certain dollar amount per day that an employee could charge to their room for food and incidentals at the hotel. The rebate amount was not, included in or deducted from the lodging rate in any of these situations.

In these scenarios, the rebate or credit falls into the category of promotional material received in conjunction with official travel from a commercial activity. This is not the equivalent of a hotel offering a continental breakfast or happy hour to all guests, built into the lodging rate, for which a federal traveler would not have to account. Title 41 of the Code of Federal Regulations (CFR) Section 101-25.103-2 states that, "All promotional materials, (e.g.. bonus flights, reduced fare coupons, cash, merchandise, gifts, credits toward future free or reduced costs of services or goods. etc.) received by employees in conjunction with official travel and based on the purchase of a ticket or other services (e.g.. car rental) are properly considered to be due the government and may not be retained by the employee. The Comptroller General of the United states has stated that employees are obligated to account for any gift, gratuity or benefit received from private sources incident to the performance of official duties (sec Compo Gen. Decision 5- 199656. July 15, 1981).' When an employee receives promotional material, the employee shall accept the material on behalf of the United Stares and relinquish it to an appropriate agency official." If an employee uses a coupon or credit provided by a lodging establishment, they should adjust the Meals and Incidental Expenses (M&I£) claimed on their voucher accordingly (e.g., subtract the amount of the credit or value of the coupon per day from their M&IE claim).

Another alternative would be for management to negotiate a favorable market rate for lodging with the providers, and disallow gratuities up front. It is noted that the INS is not currently in compliance with 41 CFR 101-25.103-1, which states that federal agencies in a position to receive promotional materials shall establish internal procedures for the receipt and disposition of same.

• Service employers rented rooms in private residences located for them by spouses of permanent academy or Sector employees. Additionally, some of the rental properties were owned by Service employees. In some cases, employees were charged the full allowable daily lodging rate, in others, they were charged less than the full daily rate, but were issued a receipt of the full rate amount.

• The spouses of permanent academy staff operated as "relocation" entities and provided lodging for incoming detail instructors. Some of the spouses were operating as an incorporated business entity, others were not and were simply issuing monthly lodging receipts under a fictitious business name. Some of the spouses paid a "finders fee" to staff who forwarded names or potential detailee renters to them.

While there is no prohibition against owning a rental property and renting to other employees (or through a rental company). some factors should be considered.
The first scenario, above, again represents a clear violation in the form of a false claim if the employee submits a voucher claiming the full allowable lodging rate. The issue of employee or spousal employment in the real estate business, and either locating or providing rental properties to other employees who come to the area on an official detail, has several ethical-implications. If the rental business was not an ongoing concern before the details started, the employee could be construed to be profiting from knowledge related to their official duties (e.g., the number and identity of incoming detailees), a possible conflict of interest under 18 USC 208, prohibition against participating in matters affecting an employee's own financial interests (See also, 5 CFR Part 2635, Use of Nonpublic Information). Even if the rental business is managed by the spouse, the spousa1 relationship still equates it with an employee's own financial interests.

Evidence obtained in these investigations disclosed that employees who claimed there was an "arms length" relationship with their spouse's business in that the business was in the spouse's name only, actually engaged in showing properties to other employees and served as intermediaries for messages about properties and rental payments. This confirmed that the situation reflected upon their own financial interests.

There may also be an inappropriate supervisor/subordinate relationship if a permanent supervisory employee (or spouse) is engaging in a financial transaction with someone under their supervision. The "finders fee" is inappropriately offered and accepted. Employees should not be profiting from information obtained by virtue of their official positions.

• Service employees rented rooms in the private residences of permanent employees of a detail location, and were charged and issued a receipt for the full daily lodging rate, which they then claimed for reimbursement on a voucher.

Again, there is no prohibition against owning rental property and renting to other employees, however, the Federal Travel Regulations speak to the issue rentals in one's primary residence.