Executive Summary........

While candidate [Barack] Obama ran for the Democratic nomination and subsequently for President on a platform based in part on increased national and community service, CNCS Inspector General Gerald Walpin was overseeing an investigation of St. HOPE Academy, a charter school founded and operated by Kevin Johnson, a former NBA star and self-described friend of Barack Obama.

Based on evidence gathered by the Office of the Inspector General, Kevin Johnson was suspended from eligibility to receive federal grants on September 24, 2008.

The U.S. Attorney’s Office for the Eastern District of California and the Corporation’s leadership began working on a settlement that would reinstate Johnson’s eligibility to receive federal funds. Acting U.S. Attorney Lawrence Brown excluded the Office of the Inspector General from settlement negotiations. Despite IG Walpin’s repeated requests to participate in settlement negotiations, he was ignored, apparently because of his opposition to any settlement that would remove Johnson from the suspended parties list.

With Walpin shut out of the process, the settlement reinstated Johnson and St. HOPE Academy’s eligibility to receive federal funds. The settlement also included a payment schedule by which the school, not Johnson, would repay half of the total grant amount. The settlement includes no meaningful guarantee that the United States will actually collect any payments from the cash-strapped school.

On May 20, 2009, Gerald Walpin appeared before the Corporation’s Board of Directors to express his displeasure with the settlement negotiated by CNCS’s General Counsel Frank Trinity and the U.S. Attorney’s Office. Walpin also criticized the complacency of the Corporation’s leadership under Acting CEO Nicola Goren.

During his presentation to the Board, Walpin explained his intention to issue a statement calling for an FBI investigation into the destruction of Kevin Johnson’s e-mails while they were under subpoena as part of a federal investigation. This was the first the Board heard of e-mail destruction by St. HOPE personnel, leading members to ask Walpin for further explanation. Walpin then appeared confused and disoriented to some Board members while attempting to respond to their questions. There was concern among Board members that Walpin had experienced some sort of unspecified medical event.

Following Walpin’s presentation at the May 20 Board meeting, Board Chairman Alan Solomont immediately contacted the White House Counsel’s Office. Solomont, whose New England Obama fundraising committee raised more money per capita than any other region during the 2008 campaign, arrived at the White House on the afternoon of May 20 unannounced and shared concerns about Walpin’s fitness to continue serving as IG with White House Counsel Gregory Craig. Craig directed Solomont to take his concerns to Special Counsel to the President for Ethics and Government Reform Norman Eisen.

Within hours of making remarks critical of the Corporation’s leadership, the process by which Walpin would be removed from his post was in motion. Eisen’s investigation of Solomont’s concerns appears to have been limited to speaking only with Goren and Trinity, the very people Walpin criticized in his remarks at the May 20 Board meeting that precipitated Solomont’s trip to the White House.

In the following weeks, no one from the White House contacted Walpin or anyone else from his office to confirm the accuracy of the information Solomont says led him to contact the White House Counsel. Nor did the White House contact each of the other Board members to obtain their recollection of events. On June 10, 2009 at approximately 5:20 p.m., Eisen informed Walpin by telephone that the President wished to remove him from his post as Inspector General and presented Walpin with a choice: resign or be terminated. Walpin would not resign, and so he was terminated within 45 minutes of the phone call.

Removing Gerald Walpin based solely on complaints from leadership of the Agency he was charged with overseeing undermines the IG Act, especially in the absence of any serious effort to obtain both sides of the story. The President is required by law to give 30-days notice to Congress before removing an IG and to explain the reasons for doing so. These requirements serve to protect the independence of IGs, whose relationship with agency management is necessarily adversarial at times. Moreover the legislation requiring prior notice to Congress was co-sponsored by then-Senator Barack Obama.

In response to concerns voiced by a bipartisan group of Senators and Congressmen, the White House first relied on a complaint filed by Acting U.S. Attorney Lawrence Brown to justify its action. Subsequently, the White House pointed to Walpin’s behavior at the May 20 Board meeting to justify his removal. Finally, Norman Eisen urged House and Senate investigators to conduct their own inquiry into Walpin’s fitness for the IG post. Eisen assured staff their own investigation would confirm that the President acted prudently and with the full consultation and consent of the Board.

Congress’s investigation revealed Eisen’s inquiry was limited to such an extent that it appears the President removed Gerald Walpin based on incomplete and misleading information. Eisen relied entirely on information provided by Solomont and Walpin’s chief adversaries Nicola Goren and Frank Trinity. In many cases, their concerns about Walpin’s fitness to serve as IG lacked merit. Often, their concerns amounted to complaints that Walpin was difficult to work with. Because Eisen apparently did no further investigation and engaged in no genuine consultation with Congress, the White House failed to implement the IG Act as intended.

Eisen’s failure to thoroughly and authentically investigate the basis of the

complaints about Gerald Walpin and the White House’s refusal to provide details about

its inquiry fueled speculation that Walpin was removed for pursuing a political ally of the

President. A request for intervention from a Member of Congress and the involvement of

the First Lady in the Corporation’s management further complicated the effort to

determine the basis for the President’s action.

Eisen admitted to Congressional investigators that before the President removed

Gerald Walpin, he was sensitive to the possibility that Walpin’s firing would appear to

have been politically motivated. He claimed that (1) the firing was an act of “political

courage” because the White House expected that perception, (2) the firing was necessary

because Walpin was incapable of being aggressive enough, and (3) the firing was

intended to send a message to the IG community that the Administration wanted more

aggressive watch dogs, rather than passive lap dogs.

Eisen’s claims are not credible. Despite his stated concern that the dismissal

would look political, he took no steps to consult with or even notify Congress prior to

giving Walpin an ultimatum. The White House’s loose interpretation of the requirements

of the IG Act and failure to use a transparent process to effectuate Walpin’s removal

deprived the President of an opportunity to explain his action in an appropriate way. The

fallout from the sloppy handling of complaints from the Corporation’s management is

likely to have a chilling effect on the IG community, which must now operate more

cautiously in light of the Administration’s swift response to criticisms of agency

leadership and allies of the President without affording any due process to the Inspector

General.

II. Findings

The President’s plans to increase the size and scope of AmeriCorps make it clear

that CNCS and its mission are important to the White House.

Kevin Johnson often described himself as a personal friend of the President and

First Lady. According to Johnson, “I’m friendly with Barack.”

The decision by the Corporation’s Suspension and Debarment Official to suspend

St. HOPE Academy and former Chief Executive Kevin Johnson was based on

sufficient evidence gathered by the Office of the Inspector General (“OIG”). The

decision to suspend protected the Corporation from further misappropriation of

funds while OIG and the Justice Department completed their respective

investigations.

Because the U.S. Attorney’s Office was not open to a settlement that did not

remove Kevin Johnson from the list of suspended parties, Acting U.S. Attorney

Lawrence Brown and CNCS General Counsel Frank Trinity cut Gerald Walpin

out of settlement negotiations.

Faced with mounting political pressure, the U.S. Attorney’s Office and the

Corporation’s General Counsel set aside the financial interests of the United

States in favor of a politically palatable settlement. Because the settlement

reached collects payment from St. HOPE and not Johnson, and because of the

school’s precarious financial condition, there is no assurance the United States

will ever be repaid.

In a complaint to the Integrity Council of the Council of Inspectors General on

Integrity and Efficiency (“CIGIE”), Brown alleged Walpin’s interaction with

Sacramento media was inappropriate. Brown also alleged Walpin failed to

disclose exculpatory evidence. Documents and testimony obtained by

congressional investigators do not support the substance of Brown’s complaint.

At a May 20, 2009 CNCS Board meeting, Gerald Walpin complained about the

settlement of the St. HOPE matter to the Corporation’s Board. Walpin also stated

his intention to call for an FBI investigation into destruction of evidence under

subpoena in a federal investigation by St. HOPE personnel. When asked to

clarify this statement, Walpin suddenly appeared confused and disoriented to

CNCS Board members and staff. However, the OIG’s Deputy said he merely

appeared to have lost his place in his notes. The IG went home early later that

day due to a strong headache and upset stomach.

Immediately following the May 20, 2009 Board meeting, Chairman Alan

Solomont arrived unannounced at the White House to complain about Gerald

Walpin. Solomont is a powerful Democratic fundraiser. Under Solomont, the

New England Obama committee raised more money per capita than any other

region. Whether an Agency head without fundraising background would have

had such unfettered access to the White House Counsel is unknown, but

Solomont’s history creates the appearance that political considerations may have

played a role in the process that led to Walpin’s removal from office.

On May 20, 2009, Solomont met with White House Counsel Gregory Craig.

Craig assured Solomont the matter would be reviewed by his office and referred

him to Special Counsel to the President Norman Eisen. At the time, Eisen was

not in his office. As Solomont was leaving the White House on his way through

the parking lot, he ran into Eisen. There, he initially made his case for the

removal of Gerald Walpin.

In an effort to comply with the requirements of the IG Act, the White House sent

a letter to House and Senate leadership on the evening of June 11, 2009 stating

that Walpin would be removed in 30 days. The White House’s letter did not

comply with the notice and reason requirements of the Inspector General Act.

Rather, Walpin received an ultimatum on June 10, 2009 and communicated that

ultimatum to members of Congress himself beginning the evening of June 10,

2009.

According to Norman Eisen, his inquiry into the allegations against Gerald

Walpin involved speaking with members of the CNCS Board to confirm that a

consensus existed. In fact, the White House’s “investigation” appears to have

consisted entirely of conversations with Board Chairman Alan Solomont and

CNCS Acting CEO Nicola Goren and General Counsel Frank Trinity. In some

cases, Eisen’s statements during briefings to Congress are explicitly contradicted

by witness testimony.

Conclusion

The IG Reform Act was passed due to Congress’s concerns about improper

political motivation, or the appearance thereof, in the IG removal process. The White

House’s failure to strictly adhere to the Act’s requirements put the concerns of Congress

on full display.

In lieu of meeting the requirements of the IG Act, the White House relied on a

haphazard process set in motion just hours after Gerald Walpin made remarks critical of

the Corporation’s Board and management. In response to complaints from a prominent

fundraiser with disproportionate access to the White House, Norman Eisen conducted an

inadequate investigation that gathered only one side of the story. Instead of engaging in a

thorough and deliberate examination of Walpin’s fitness for the job at a time when the

Administration planned an unprecedented expansion of the Corporation’s programs,

Eisen opted to rely on information provided by individuals with adversarial relationships

with the IG. Notably, Eisen’s investigation did not include conversations with anyone

from the Office of the Inspector General, including Walpin himself. Eisen did not afford

Walpin an opportunity to be heard. In other words Walpin was given no due process.

Eisen’s failure to conduct an actual investigation deprived the President the

opportunity to faithfully adhere to the IG Act. Essentially, the IG Reform Act requires

transparency — the President must give advance notice to Congress before removing an

IG and explain the reasons for that action. Because the White House failed to comply

with the requirements of the IG Act in its initial letter to Congress, and because there

were no findings from a thorough investigation to fall back on in response to

congressional inquiries, the White House Counsel’s Office orchestrated an after-the-fact

smear campaign to justify the President’s action. That approach ultimately led to a

controversial public relations battle in the media and a federal lawsuit by the former

Inspector General.397 The result is decreased public confidence in the integrity of CNCS

programs and the non-partisan, non-political mission of its Office of Inspector General.

Because Norman Eisen’s investigation was incomplete and the White House has

withheld hundreds of pages of documents from Congress, the claim that Gerald Walpin

was removed for legitimate, non-political reasons is unsupported and unpersuasive.

There is simply insufficient evidence to conclusively reject the notion that the removal

may have been motivated by a desire to exert greater control over the Corporation

without interference from an aggressive, independent IG.

The President’s action leaves three top positions at CNCS — Chief Executive

Officer, Chief Financial Officer and Inspector General — vacant or filled temporarily, at

a time when the Corporation is charged with growing to manage 250,000 volunteers

while the annual budget rises from $1.19 billion to $6 billion.399