Nation: Biggest Scandal

New revelations at the GSA

His eyes are baggy from lack of sleep, and his speech has quickened and become more salty. Last week, after 100 hectic days as special counsel for the Government Services Administration, former Federal Prosecutor Vincent Alto declared that the web of GSA mismanagement, employee theft and kickbacks from private contractors he has begun to uncover could well turn out to be "the biggest money scandal in the history of the Federal Government."

Under Alto's prodding, the investigation of the GSA, which employs 35,000 and spends $5 billion annually as the renter, builder and purchasing agent for the Federal Government, has spread to grand juries and U.S. Attorneys throughout the country, Investigators in Fort Worth, Dallas and El Paso documented $100,000 worth of fraudulent GSA overpayments after just two weeks of auditing last month. In Bayonne, N.J., investigators have discovered a construction contract that was first awarded to an extremely low bidder for just over $1 million and then was upped substantially in a suspicious change of project plans. In Chicago, a ring of thieves looted the GSA of furniture and office equipment. In New Orleans, the investigation centers on a scheme of multiple payments for building-repair and maintenance work never performed, a rip-off similar to one that has been uncovered in Denver. In Honolulu, $185,000 worth of inventory is missing from a GSA self-service store.

Much of the corruption has emerged in GSA's Region 3, which includes the District of Columbia, Maryland, Pennsylvania, Virginia, West Virginia and Delaware—an area that accounts for 44% of GSA purchasing. Last week GSA Administrator Jay Solomon announced that 50 indictments are expected in a matter of weeks, most of them involving fraud in the repair and maintenance of federal buildings in Region 3. Eventually, more than 500 indictments are expected nationally.

Aside from outright illegality, the GSA, long a haven for lackluster patronage employees, suffers from inefficiency and careless shopping habits. Notes one Government insider: "The GSA operates on a service concept—if you don't like your wooden desk, they'll get you a marble one. Who cares? Nobody has to pay." The Washington Post revealed that the GSA was paying $56.50 for a General Electric cassette tape recorder that was on sale to the public for $46.90 at a Washington discount retailer. The GSA also paid $20.70 for a Texas Instruments pocket calculator that was priced at $14.90 at a discount store.

Bureaucracy, too, has caused problems. Recalls Walter Kallaur, 33, a Harvard-educated financial whiz who served as the GSA's Assistant Administrator before Solomon named him last month as the new chief of Region 3: "A directive went out that federal buildings should be located in downtown areas as part of the Administration's urban policy. We actually had to stop a plan to move a boat-repair shop from the waterfront to the downtown area and have the boats carted to the new location."