- The Washington Times - Wednesday, August 25, 2010

The U.S. postmaster general and his top officials gave investigators varying accounts about the decision to allow a top executive to retain his six-figure outside corporate jobs while working full time, earning more than $230,000 as president of shipping and mailing, for the U.S. Postal Service, records show.

Newly released memos of extensive interviews conducted earlier this year by the U.S. Postal Service’s office of inspector general with Postmaster John E. Potter and other executives provide a rare look into the operations in the top reaches of the Postal Service.

The documents also suggest that executives deferred to their former top marketing officer, Robert Bernstock, even as some inside the agency began raising questions about his outside business interests.

“In the sports world, a new player with a big contract is still treated as a rookie,” said David Hendel, a lawyer at Husch Blackwell Sanders law firm in Washington, who specializes in postal contracting matters.

“Bernstock was a new player at USPS, but he wasn’t treated as a rookie. He was treated as the young phenom, the experienced coach, and the savvy general manager all in one. He was untouchable until the inspector general, acting like the commissioner, stepped in.”

Mr. Bernstock resigned earlier this year before an inspector general’s report concluded that he awarded no-bid contracts to former business associates, failed to report information on a financial disclosure form, and used Postal Service staff and resources for private business activities. The U.S. attorney’s office in Washington declined to press charges.

Mr. Bernstock declined to comment on the inspector general’s report when it was released, saying he was proud to have worked for Mr. Potter and that he’s “moved on.” According to a memo of his interview with investigators, he said he thought he was allowed to use his staff to schedule meetings, print material for outside board meetings and help with occasional travel, but was later told he couldn’t do so by USPS General Counsel Mary Anne Gibbons.

“Bernstock said he is only as good as his advisers,” investigators summed up after their interview.

The Postal Service, through a spokeswoman, said it cooperated fully with the inspector general’s office and tightened existing contract rules as a result of the report, but declined to comment on statements that executives gave to the inspector general.

The records of the inspector general’s interviews conducted with Mr. Potter, Ms. Gibbons and other top executives were recently obtained by The Washington Times through the Freedom of Information Act.

During his talk with investigators, Mr. Potter at times defended Mr. Bernstock, saying he hired him in 2008 after an extensive search because the Postal Service had become “stale,” according to an eight-page memo of Mr. Potter’s February interview. He said Mr. Bernstock had given the Postal Service a “phenomenal lift” and that he was responsible for world-class commercials and growth in the Priority Mail campaign.

He also said the hiring of Mr. Bernstock, a former top executive at Scotts Miracle-Gro and pickle manufacturer Vlasic, drew a lot of negativity, which Mr. Potter attributed to “the nature of the beast.”

When asked about Mr. Bernstock’s business associates getting postal contracts, Mr. Potter praised the contractors, saying he viewed the contractors’ skill sets as higher than what Mr. Bernstock had available at the Postal Service, records show.

“Potter added that the Postal Service ‘in general does a lot of contracting out, like in IT and programming and systems development.’ Potter said he did not believe that the Postal Service employees could keep their programming skill-sets fresh enough to compete with the private sector contractors,” the summary of his interview states.

When he hired Mr. Bernstock, Mr. Potter said, he allowed him to retain his paid, outside corporate directorships at publicly traded Nutrisystem Inc. and the Pantry Inc., which combined paid Mr. Bernstock more compensation than the $232,500 he received in his Postal Service job.

Mr. Bernstock took home more than $270,000 in cash and other compensation combined in fiscal 2008 by serving on the corporate boards for weight-loss giant Nutrisystem Inc. and Pantry Inc., which runs the Kangaroo Express convenience store chain, according to U.S. Securities and Exchange Commission filings.

The arrangements later came under scrutiny when the inspector general’s office said Mr. Bernstock was using postal staff and resources for his outside work, an arrangement Mr. Potter and others later said they did not permit.

“For compensation, Bernstock was to receive one of the highest salaries in the Postal Service, complete with recruitment and retention bonuses,” the inspector general’s office wrote in a memo summarizing the Potter interview. “Potter also agreed, after the lawyers vetted it, that Bernstock would be permitted to remain on two external boards.”

During her interview with the inspector general’s office, Ms. Gibbons said that at the time of Mr. Bernstock’s hiring, she was “unaware of any specific agreements Potter made with Bernstock regarding his outside interests.”

Ms. Gibbons said that before Mr. Bernstock started work, she recalled attending a meeting with Helen Grant, managing counsel of the Postal Service’s civil practice, who handles ethics matters; Anthony Vegliante, the Postal Service’s chief of human resources; and Mr. Potter about Mr. Bernstock’s desire to stay on outside corporate boards and participate in meetings and teleconferences.

Ms. Grant told investigators that she took a firm position on what Mr. Bernstock “could and couldn’t do” and that she prepared a letter for Mr. Vegliante to give to Mr. Bernstock.

Asked to comment on a letter prepared by Ms. Grant for Mr. Bernstock, Mr. Vegliante said he did not issue the letter to Mr. Bernstock, telling the inspector general’s office, “I don’t give ethics advice,” records show.

“According to Vegliante, there would not be any written expectations of employment given to someone at Bernstock’s level,” the memo summarizing Mr. Vegliante’s interview stated. “Bernstock is subject to ethical limitations, which were discussed with him, so a letter would not make any difference, according to Vegliante,” the memo said.

“The legal department did vet and offer an opinion on Mr. Bernstock’s board commitments that drove the Postal Service decision to allow Mr. Bernstock to continue to serve on boards,” spokeswoman Joanne Veto wrote in an e-mail to The Times.

“It would not be appropriate for the Postal Service to comment on statements out of context or without having personal knowledge of or participation,” she also wrote. “It should also be noted that the comments you forwarded demonstrate executives answering questions to the best of their knowledge and within their respective roles.”

The top postal officials also spoke to investigators about various ethics and conflict-of-interest rules during their interviews. Ms. Gibbons, for instance, said the subject of Mr. Bernstock’s potential ethics conflicts came up during a July 2008 meeting.

“She said his financial advisers trade all the time and she recalled thinking of someone in his role, meeting with customers, had to have a conflict because every company in the country is a customer,” the memo of the Gibbons interview states. “She instructed Grant to talk to OGE (the Office of Government Ethics) to see if there was some kind of blanket waiver for the very wealthy.”

On a separate ethics-related topic, Mr. Potter said during his interview that he never authorized Mr. Bernstock to use his staff to conduct outside business activities, saying only that he saw no problem if Mr. Bernstock occasionally transferred e-mails to his postal e-mail account to print out or read.

Concerning the so-called “deminimus use” policy governing the use of postal resources for personal activities, he said the policy refers to “limited use, like people taking calls from their family, or people working on your house. I don’t know how or where to draw the line. In the past, you had to pay for personal long distance calls from USPS phones, but now there is a deminimus rule.”

Ms. Veto said Mr. Potter stands by his comments.

Mr. Potter also said during his February interview that his staff hadn’t informed him that Mr. Bernstock had failed to report various outside affiliations on his financial disclosure form. Records show that officials had Mr. Bernstock file an amended form after an inquiry from The Times about Mr. Bernstock’s outside affiliations from December 2009. At the time, postal officials gave no indication that Mr. Bernstock was filing an amended financial disclosure form.

Melanie Sloan, executive director of the watchdog group Citizens for Responsibility and Ethics in Washington, said the statements suggest that top postal officials made exceptions for Mr. Bernstock when it came to enforcing ethics rules.

“It sounds like people at the Postal Service aren’t educated enough and when faced with potential problems they didn’t act quickly or efficiently enough,” she said.

Mr. Hendel also said the memos underscore the difficulty faced by the Postal Service in trying to act like a private business when it is subject to various governmental rules and requirements.

“They knew from the get go that he was not going to give up these outside interests and they thought they could work with that,” he said.

• Jim McElhatton can be reached at jmcelhatton@washingtontimes.com.

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