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OIC SMALTZ FINANCIAL PAGE INVESTIGATION COSTS 1. Summary A. Total costs from September 9, 1994 inception through September 30, 1999: $22,272,788 B. Estimated costs for next 6-month period (October 99 - March 2000): $696,327 C. Approximately $6.2 million (27.8%) of the $22,272,788 spent through September 1999 were costs Acharged@ for the use of personnel from and services other federal agencies (Aintergovernmental transfers@). D. As of September 30, 1999, this Office=s convictions and referrals have resulted in the imposition of $11,594,581 in criminal fines, civil penalties, damages and reimbursement of costs. Approximately $9,924,025 of that amount has been received and deposited into the U.S. Treasury. 2. Discussion: An Independent Counsel investigation starts from "ground zero." At the time of his appointment, the Independent Counsel has no office, no staff, no attorneys, no agents, and no equipment. He must locate and lease appropriate office space and then assemble from scratch a fully functioning investigative office. His statutory mandate is to fully investigate the matters referred by the Attorney General, and all matters and individuals whose acts may be related to those subject matters. He is also under statutory command to complete his investigation and any prosecutions promptly. During the course of the investigation, numerous allegations may require additional investigation that do not result in Independent Counsel prosecutions and does not become a matter of public knowledge until the Independent Counsel publishes his Final Report at the conclusion of the investigations, trials, and appeals (unless there is an indictment or a public statement concerning matters the Independent Counsel referred to the Department of Justice). The costs of Independent Counsel investigation are frequently mentioned -- but seldom analyzed. The three phases that generate the major expenditures for the Independent Counsel investigations are: (1) the investigation, which includes collection and analysis of relevant documents, questioning witnesses and bringing witnesses before the grand jury; (2) indictment and trial of cases which, in some instances, requires opening field offices where the trial will occur, and extended staff time in preparation and trial; and (3) the post-trial and appellate phase. The last phase is the least costly because significant agent expenses and witness costs are not incurred. Expenses of the Independent Counsel =s investigation are primarily driven by two separate but related factors: (1) the costs of personnel to operate the office, agents and lawyers to conduct the investigations and prosecutions, and equipment and office rental costs; and (2) the length of time to conduct and complete the investigations, trials, and appellate matters, and the preparation and publication of the final report.While an Independent Counsel can control, to a certain extent, the size of his investigative staff, he does not, and cannot control the length of his investigation. Length of investigations depends on the Independent Counsel =s ability to get the relevant documents and testimony of witnesses, which depends in substantial part on the degree of cooperation of the witnesses. When an Independent Counsel encounters delays in the investigative, trial, or appellate phases of the investigation, the delays increase the costs because they lengthen the process. When the investigative process encounters obstructive challenges, e.g., protracted litigation to quash grand jury subpoenas, the investigative process is lengthened and the cost increased; moreover, the Independent Counsel must often increase his staff to meet these obstructive tactics which also increase costs.Independent Counsels are required by statute to submit a Statement of Expenditures every six months. The reporting periods coincide with the Federal Government =s fiscal year: October 1 through March 31, and April 1 through September 30. Auditors from the U.S. General Accounting Office (GAO) audit each statement. Upon completion of the audits of all current independent counsels (IC), GAO publishes all IC financial statements, and its opinions and discussions, in a publication entitled FINANCIAL AUDIT-- Independent Counsel Expenditures for the Six Months Ended (date). The latest audit report, its fifteenth, covering the period October 1, 1998 through March 31, 1999, was published on September 30, 1999.Audit reports are available to the public. They can be ordered from GAO by telephone (202-512-600) or by Internet (http//www.gao.gov). Independent Counsels are also required to provide a semiannual Statement of Expenses to the Special Division of the U.S. Court of Appeals for the District of Columbia. An estimate of future expenses is also required with each submission. The Statement of Expenses differs from the Statement of Expenditures in that the Expenditure Statement includes only cash or equivalent disbursements (cash basis accounting). The Expense Statement includes all costs as incurred and recorded, whether the corresponding bills have been paid or not (accrual basis accounting). So that the reader has some idea of the amount, type, and nature of expenditures incurred by this office =s operations section 3 below presents a graph showing the expenses incurred in each of the 6-month reporting periods (September 1994 through September 1999). A brief explanation of the major Independent Counsel expenses -- salaries, rent, capital equipment expenses, and estimated expenditures -- is set forth in section 4.
3. OIC Smaltz Costs (by 6-month period) The following graph displays total costs incurred by this Office in each of the 6-month periods corresponding to the GAO audit periods. The first period shown (Prd 1), ending 9/30/94, reflects costs ($49,000) incurred from Mr. Smaltz = appointment on 9/9/94. Costs increased through the first four full periods, and then receded as the Office completed various activities. The amount of activities correlates with the level of costs shown in the graph. These activities are listed by Period (Prd) number following the graph.
INDEPENDENT COUNSEL SMALTZ GRAPH OF COSTS BY 6-MONTH PERIOD
Period 1: Initial appointment, commence staffing. Period 2: Staffing, commence investigation. Period 3: Investigation. Period 4: Lake Indictment; Blackmore referral Period 5: Indictments (11): 5M; Mitchells; Crop Growers; Hemmingson;
Black; Period 6: Indictments (3): Douglas; Williams; Faust. Trials (5):
Ferrouillet and Period 7: Indictments (2): Blackley; Michael Espy. Civil complaint, Smith
Barney; Period 8: Indictments (3): Tyson Foods, Williams, Schaffer. Trials (2): Douglas, Blackley. Period 9: Trials (2): Williams, Schaffer. Mondavi civil complaint. Period 10: Espy trial; Blackley appeal. Period 11: Schaffer appeal; 5M appeal; Blackley appeal to Supreme Court. Period 12: Submit Final Report; archiving.
Note 1. Of the $10,019,591 in Salaries and Benefits, $1,487,688 (14.9%) are reimbursements to the Department of Justice for attorneys detailed to this Office. Over the course of this investigation twelve attorneys have been detailed for periods of time ranging from one month to three and one-half years. Note 2. Over 27.8% of this Office =s costs derived from "intergovernmental transfers", i.e., costs borne by other federal agencies in support of this investigation. The following is a description of those costs:
1) Government attorneys assigned to OIC Smaltz (thru 9/99): $1,487,688 2) Other Government Employees (Agents, data-entry, interns, etc.): $3,543,374 3) Administrative charges by $1,178,004 ----------------- TOTAL "INTERGOVERNMENTAL TRANSFERS": $6,209,066 Percent of Total Costs ($22,181,698): 27.8%
Note 3. Travel generally includes expenditures for investigation-related travel and lodging costs incurred by personnel employed by this Office, personnel from other agencies on assignment (detailed) to this Office, and witnesses subpoenaed to appear before grand juries and trials. Note 4. Rent, Communications and Utilities includes rent for office space primarily at 103 Oronoco Street, Alexandria, Virginia, as well as telephones and other utilities. Of the $2,305,576 expended for Office Rent, Communications and Utilities, office space rental costs were $1,261,876. Most of this amount ($1,104,928) was lease payments for the Office =s primary office at 103 Oronoco Street, Alexandria, Virginia. This space consists of 8,900 square feet, leased since January 1995 at a cost of $25.40 per square foot per year.The Office =s initial space was in the basement of the Thurgood Marshall Judiciary Building in Washington DC, from September through December 1994 (3,600 square feet, $6.74 per square foot per year).For local investigations and prosecutions, the Office rented temporary satellite offices for various periods of time. The following table lists all offices used by this office:
Note 6. Capital Equipment: Includes furniture, copying, facsimile and computing equipment, and other assets purchased by this Office. All equipment assets are inventoried and sight-audited every six months. At the conclusion of the investigation, these assets will be transferred to the Department of Justice, or another federal government agency. The amount shown, $466,198, represents the actual amount paid for major equipment acquisitions. It does not represent the actual value of equipment inventory held by this Office. A significant amount of furniture and equipment originally purchased by another Independent Counsel was transferred to this office from storage. With reduced operations, the Office has transffered excess furniture and other equipment to other Independent Counsel. Note 7. Administrative Services: AOUSC charges an administrative fee of 3% of all expenditures, for performing disbursement, personnel, payroll and accounting functions. Payment of these fees is automatically recorded in the month following the posting of the expenditures. From inception, this fee totals $521,313. In addition, AOUSC incurs expenditures on behalf of all Independent Counsels, but which are not directly attributable to any specific office. For each six-month audit period, GAO Acharges@ a percentage of these AOUSC costs to each Independent Counsel based on the average number of personnel on each office=s payroll. For this office, GAO has allocated administrative service costs total $656,737.Note 8. Indirect (Unreimbursed) Costs: Includes payroll costs of investigators assigned to this Office by various government agencies. These costs were paid by the investigators = respective agencies. The cumulative amounts (unaudited) provided by each agency are:
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