FOR IMMEDIATE RELEASE
Friday, November 22, 2002
Scott Sudduth (202) 974-6302
Michael Reese (510) 987-9179
UNIVERSITY PROVIDES UPDATE ON LABORATORY INVESTIGATIONS
President Atkinson expresses deep concern with and
commitment to resolving allegations about Los Alamos National
Laboratory financial activities
Amid a continuing review of the Los Alamos National Laboratory
property management system and purchasing processes, University
of California President Richard C. Atkinson pledged his continuing
commitment to take decisive action to address all allegations
regarding the financial activities at the UC-managed lab.
"Los Alamos National Laboratory has a long history of
contributions to our nation in defense, science and now in
the area of homeland security," Atkinson said. "We
are very concerned about the recent allegations. They are
being addressed and appropriate actions will be taken in a
Three separate investigations have been instituted into purchasing/property
tracking issues at the Los Alamos National Laboratory (LANL).
UC has placed three employees on leave, terminated the employment
of one contract employee and brought in independent auditors
in a widening investigation of LANL business practices. Atkinson
said, "The university will not tolerate theft or mismanagement
at Los Alamos or in any other part of the university. We intend
to find out what occurred, correct any deficiencies and discipline
anyone who has engaged in improper activity.
"Individual integrity is the basis for national security,"
Atkinson continued. "There will be zero tolerance for
any level of illegal activity by those entrusted with safeguarding
our national security."
Atkinson further instructed senior university officials to
travel to Los Alamos to review the situation with senior laboratory
management and to recommend any additional actions that may
UC is undertaking an extensive review of procurement practices
at LANL. These include the inappropriate use of purchase cards,
allegations of criminal activities involving the laboratory
purchasing system and improprieties involving property management.
Both UC and LANL officials are cooperating fully with the
U.S. Department of Energy, the National Nuclear Security Administration
and the Department of Justice in their roles in the investigation.
UC and LANL initiated the investigations into the purchase
card irregularities last August. Former Inspector General
of the Department of Energy John C. Layton leads the Purchase
Card Program External Review Team, which includes former Department
of Labor Inspector General Charles Masten and members from
the accounting firm of PriceWaterhouse Coopers. In a preliminary
briefing, the team finds that LANL management has already
implemented corrective actions that they believe will substantially
address most of the observed control weaknesses. The team
recommends further audit of accounts under question; these
will be undertaken immediately by UC auditor Patrick V. Reed
and the UC audit staff, in cooperation with the laboratory's
staff. Further recommendations will be contained in the final
report that is due later this month.
"We look forward to receiving these recommendations,
and will act on them to ensure the integrity of our system,"
said John C. Browne, director of Los Alamos National Laboratory.
He added that he has referred specific matters to appropriate
law enforcement agencies.
Browne said he was also providing updated information regarding
other areas of the laboratory's property management system.
This is attached as a fact sheet to this release.
"The American people expect high standards of conduct
for the national laboratories and our employees are committed
to living up to these high standards," said Browne. "They
are deserving of the trust our nation has placed in them.
It is my hope that this information we are providing today
will clarify these issues and allow LANL employees to remain
focused on their work."
Summary of issues:
1. Inappropriate use of purchase cards:
Purchase cards account for approximately $30 million in purchases
per year. Approximately 740 laboratory employees currently
hold the cards, down from nearly 900 in early August 2002.
That same month, the laboratory reported to the NNSA that
irregularities had been identified in the purchase card system.
At the behest of the University of California, the laboratory
immediately contracted with PriceWaterhouse Coopers and former
DOE IG John Layton to investigate the purchase card program.
The ongoing review brings the to-date total of suspected inappropriate
payments to $3,500.
An attempt by another employee to use a purchase card to
buy an automobile was stopped with no loss. The laboratory
employee to whom the purchase card was issued was placed on
administrative (investigative) leave. The Federal Bureau of
Investigation has completed its review and the U.S. attorney
has declined to prosecute, based on minimal loss. The laboratory
is pursuing follow-up action.
2. Allegations of criminal activities involving the
laboratory purchasing system:
This matter is still under investigation by the Federal Bureau
of Investigation. Published reports on the court documents
filed in a federal investigation into alleged abuse of the
laboratory's purchase order system have shown, to date, approximately
$50,000 in potentially misappropriated funds. Laboratory officials
have cooperated fully since being notified of the investigation
and have kept University of California, NNSA and DOE officials
informed since they were first notified of that investigation.
Because this is an ongoing federal investigation, the laboratory
cannot comment further. However, at this point, we have seen
no evidence of any compromise to national security.
3. Allegations involving property management:
All LANL property must be properly cared for, used for official
purposes only and properly disposed of regardless of the condition
of the property. In addition to the normal controls, property
used in a secure capacity is also accounted for consistent
with federal, DOE and NNSA regulations. The laboratory is
required by DOE rules to account for all of its inventory-controlled
property (in excess of $1 billion) each year. Inventory-controlled
property is base-lined annually in a self-assessment against
DOE-specified review criteria. Results are validated by UC
and DOE and have consistently shown that LANL is in compliance
with all applicable statutory and contractual requirements.
While the department, the university and the laboratory work
to account for all of the laboratory's property, inventory
tracking systems seldom achieve 100 percent due to employee
turnover, employee and management tracking errors, and losses,
as well as theft. The management contract requires the laboratory
to account for at least 99.5 percent of its inventory for
it to achieve a performance rating of "outstanding."
The laboratory has met that standard in each of the last three
years; in fact, it has improved its performance over that
period, with unaccounted for inventory in 2002 below one-tenth
of one percent.
Los Alamos National Laboratory is operated by the University
of California for the National Nuclear Security Administration
(NNSA) of the U.S. Department of Energy and works in partnership
with NNSA's Sandia and Lawrence Livermore national laboratories
to support NNSA in its mission.
Los Alamos enhances global security by ensuring the safety
and reliability of the U.S. nuclear stockpile, developing
technologies to reduce threats from weapons of mass destruction,
and solving problems related to energy, environment, infrastructure,
health, and national security concerns.
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