There is also evidence that S/LPD participated in a group with other organizations which conducted activities which S/LPD would have been prohibited from performing (e.g. a targeted telephone campaign in selected congressional districts). One example is reflected in a document titled "Chronological Event Checklist" which was located in the S/LPD administrative files and IBC files. The document, dated March 1, 1985, lists week-by-week activities, along with the person or organization responsible for carrying them out. Three of the entries on the checklist are as follows: Event Send resource book on the Contodora process Prepare themes for approaches to Congressmen based on overall listed perceptions which will directly attack the publicly and privately expressed objections to voting for financial aid. Targeted telephone campaign begins in 120 encouraging them to vote for aid to the freedom Responsibility State/LPD NSC (Private citizen) We were unable to establish the authorship of this document and others like it even though we found them in both S/LPD and IBC files. None of the officials we contacted could recall specifically where the documents came from or how they came to be filed with other related documents. We found no evidence that S/LPD funds, either directly or through its contracts with Frank Gomez and IBC, were used for the activities listed as the responsibility of the NSC and the private citizen. The preparation and dissemination of the publication on the Contodora process was a legitimate activity for S/LPD. The SECRET classification of the IBC contract for FY 1986 probably gave rise to suspicions among the media and in Congress that illegal or improper activities were contemplated under the contract. The suspicions were enhanced by later revelations that IBC, while under contract to S/LPD, was simultaneously involved in questionable dealings with Lt. Col. Oliver North, et al. On May 7,1987 one of the IBC partners, Richard Miller, 25 pleaded guilty to one count of conspiracy to defraud the government of income tax for his work with Carl R. (Spitz) Channell. There is no evidence, however, that IBC used any S/LPD contract funds for prohibited lobbying activities. Also, according to press reports of the testimony of Messrs. Channell and Miller to the Independent Counsel, they seem to have had no need of State Department funds for their other activities because of the generous funding available to them from the National Endowment for the Preservation of Liberty (NEPL), the tax exempt foundation of Mr. Channell. Comments of Department Officials In commenting on a draft of this report the former head of S/LPD objected to our inclusion of the Chronological Event Checklist. He stated that the document was irrelevant to S/LPD's activities and was not prepared by anyone in S/LPD or the Department of State. He stated that the use of the document could give the impression that S/LPD in some way condoned or coordinated the activities listed. The current head of ARA/LPD suggested that the document, and others like it, were provided to the office by IBC. He stated that all such documents were marked CONFIDENTIAL when received from IBC. The document in question was only one of several we identified in S/LPD's and IBC's files. Other documents covered different time periods and described different activities of different organizations. Some of the documents, even those in S/LPD's files, were marked as classified and some were not. We acknowledged in the report that the authorship of the document was not established and that S/LPD's activity described in the document was an acceptable one; however, we believe that the document itself is relevant and that it accurately reflects S/LPD's association with other groups and organizations involved in activities which S/LPD would have been prohibited from performing or from paying IBC to perform. E. Ethical/Conflict of Interest Considerations The special inquiry disclosed a potential violation of ethical standards of conduct and a potential conflict of interest. The ethical question involved a Department of Defense employee detailed to S/LPD. The potential conflict of interest involved activities of Frank Gomez during the period immediately preceding his retirement from the U.S. Information Agency. 1. Ethical Considerations The Code of Federal Regulations (22 CFR Part 10.735-201) lists various proscribed actions under Ethical and Other Conduct and Responsibilities of Employees. The section states that an employee shall avoid any action, whether or not specifically prohibited by the regulations in this part, which might result in, or create the appearance of: (1) giving preferential treatment to any person or (2) losing independence or impartiality. A Department of Defense detailee to S/LPD, who served as a Senior Military Advisor from June 1984 through June 1986, and as Executive Officer from about June 1985 to June 1986, may have violated these regulations. This individual introduced his sister, who was a specialist in establishing and operating mail distribution systems, to the head of S/LPD and to Frank Gomez of IBC. Both the head of S/LPD and Frank Gomez confirmed that she was introduced by the Senior Military Advisor as his sister. At the time of the introduction, she was employed by a private firm in New York. S/LPD subsequently contracted with INSI and with IBC for analysis, design, and operation of a mail distribution system. The sister was hired by IBC to direct the work under such contracts. By virtue of his position as the Executive Officer, the Senior Military Advisor was in a position to influence S/LPD's decision to contract for the services and IBC's decision to hire his sister. Also, even though Frank Gomez and IBC had 'performed various activities for LPD under several previous purchase orders and contracts, operating a mail distribution system was not one of such activities. The analysis, establishment, and operation of S/LPD's distribution system was contracted for on a sole-source basis. In addition, the Senior Military Advisor was involved in the decision by S/LPD officials to classify the final contract with IBC, which included about $150,000 for design and operation of the mail distribution system. He informed us that he probably made the suggestion to classify the contract although the final decision was made at a higher level. As previously stated, we found that the classification of the contract was done, without justification, apparently to avoid competition and public disclosure of the contract in the CBD. Since the Senior Military Advisor is a Department of Defense employee who was on a nonreimbursable detail to the Department, we referred the matter to the DOD Inspector General for further consideration and appropriate action on May 18, 1987. 2. Potential Conflict of Interest Prior to being employed by S/LPD on a purchase order in February 1984, Frank Gomez was employed as the Director of Foreign Press Centers for USIA. He retired from that agency on February 14, 1984 and the performance date for the work called for by the purchase order with S/LPD was February 14, 1984 through May 31, 1984. Documents contained in the S/LPD files indicate that, while he was employed by USIA, Frank Gomez established the Institute for North-South Issues and negotiated with USIA and the State Department for contract work after he retired. The purchase order discussed above was also negotiated with S/LPD while he was employed by USIA. - 27 This matter was referred to the USIA IG along with available documentation on May 15, 1987 to determine whether any conflict of interest laws or regulations were violated. F. Congressional and Press Guidance A relatively small, but important, portion of information provided to Congressional requesters and as press guidance was either inaccurate, incomplete, or potentially misleading. was no evidence that mistakes were made intentionally. There The first external interest in the Department's contracts with IBC and its principals was by Senator John Kerry of the Senate Foreign Relations Committee on December 17, 1986. On December 19, 1986, Representative Edward Feighan of the House Foreign Affairs Committee requested information about the IBC and other contracts. Since that time numerous` additional requests have been made by: Congressman Dante Fascell, House Foreign Affairs, 2/9/87 Senator Kerry's December 17, 1986 request was for "any and all contracts between the State Department, or any agency or entity under its aegis, and International Business Communications, *** or Richard Miller or Frank Gomez, two of IBC's principals, entered into at any time from 1981 to the present." In responding to the request on January 29, 1987 the Department's correspondence stated: "A search of our contract files covering the year 1981 through the present has surfaced the two enclosed contract documents." The documents referred to were the last two contracts with IBC--the FY 1986 contract for $276,186 and the contract for the 7 months ending September 30,1985, for $90,000. As discussed above, our work shows that there were four earlier purchase orders and contracts with Frank Gomez and IBC totalling $69,400 between February and December 1984. Press guidance was prepared on several occasions in February, March, and April 1987. Press guidance prepared by ARA on February 7, 1987 included a series of questions and answers, one of which was as follows: "Q. Why was the State Department contract with IBC backdated? Is this normal practice? "A. The contract with IBC was not backdated. The contract was signed in September 1986 to cover the period from October 1985 to September 1986. 28 "The contract was negotiated well in advance of being signed. However, its terms required that the contracting firm obtain specific security clearances before the contract could be signed. Procurement regulations allow unclassified work to be performed in such cases pending the receipt of the security clearances necessary to allow the signing of the contract." The inference that IBC delayed the classified activities and worked only on unclassified activities pending receipt of its security clearance is erroneous. The records show, and anyone familiar with the contract should have known, that IBC was conducting allegedly "classified" activities before receiving its clearance and, in fact, had completed all such activities before receiving the clearance. We believe that officials providing information for Congressional requesters and press briefings should be reminded to exercise caution to insure that such information is accurate and complete. (Recommendation 13). G. Departmental Cooperation with Congressional Requesters Responsiveness to requests for information by members of the Congress and their staffs has been somewhat slow and fragmented, although the volume of information requested has been considerable. The role of the Office of the Legal Adviser in providing information to the requesters was not completely understood and was a source of some friction with some members of Congress and Congressional staff. Departmental procedures for providing information to Congressional requesters are described in 5 FAM 110 and the Secretariat Handbook. The procedures require Congressional correspondence to be answered, or at least acknowledged, within 3 workdays from receipt in the action office. Concerning requests for information, the stated policy is that all officers are authorized and encouraged to provide prompt and forthcoming support. The Department has been criticized, mainly by staff of the House Foreign Affairs Committee (HFAC), for not cooperating with Congressional requesters attempting to obtain information about the contracts with IBC and Frank Gomez. On February 19, 1987, in testimony before the HFAC, the Secretary was asked about the Department's unresponsiveness to the Committee's request. The Chairman and Ranking Minority Member stated that "Apparently, the Department is following an internal review process before documents are furnished to the Committee that has effectively choked off the flow of information to the Committee. In the interest of comity, we respectfully request the Department to speed up the process." The criticism of the Department focuses on two main issues--first, the length of time taken in responding to |