Monday, July 26, 2004

When the Bush administration took over the Pentagon’s beleaguered inspector general office in 2002, officials found something startling: The director’s office, at some point, had been electronically bugged.

Sorting out why the listening device was inside the walls of the office, with a cord leading to another office, is just one issue that had to be addressed by Joseph E. Schmitz, President Bush’s pick three years ago to be the Defense Department’s top cop.

A Naval Academy graduate and civil litigation lawyer, Mr. Schmitz was tapped to run the office responsible for investigating million-dollar fraud in the far-flung defense industry and criminal misconduct by senior Defense Department employees.

His nomination delayed by Senate Democrats, Mr. Schmitz finally came on board a year into the Bush administration. He set out to right a ship dogged by charges of corruption and cronyism.

But he also had to deal with an electronic bug apparently left over from eight years of the Clinton administration.

An internal “info memo,” a copy of which was obtained by The Washington Times, was written by a staffer in Mr. Schmitz’s office:

“On June 19, 2002, during a routine meeting with the director of security for the Department of Defense, it was reported to my staff and me that a potential ‘listening device’ was previously discovered in the infrastructure of DoDIG.

“The DoD directorate of security conducted a routine sweep for electronic listening devices in certain areas of the ninth and tenth floors of the DoDIG on Aug. 7, 2000. The sweep revealed that a wire had been installed inside the wall structure leading to and from the ninth and tenth floors of the DoDIG (areas which comprise the Defense Criminal Investigative Service and the personal office space of the inspector general).”

And there was another touchy issue for Mr. Schmitz.

A second series of internal memos from his staff showed that a Muslim who was employed as an auditor and granted a “top-secret” security clearance was not an American citizen.

“He possesses a Social Security number tied to multiple confirmed aliases,” a May 2002 memo said. Another paper said, “Using the improper granted interim clearance, [the employee] visited numerous installations where he had access to sensitive information. … The Department of Justice Joint Terrorism Task Force is currently considering a criminal investigation into this matter.”

The Times faxed copies of the memos to Mr. Schmitz’s office for comment.

John R. Crane, his spokesman, responded in an e-mail: “Both matters contained in your fax … have been addressed and resolved.”

“The memos provided contain information that is not releasable to you. In particular, the Privacy Act protects the personal information contained in one of the memos,” he continued. “I would note that DoD [regulations] state ‘unauthorized disclosure of … information that is protected by the Privacy Act may also result in civil and criminal sanctions against responsible persons.’ ”

A U.S. official later said the employee in question had resigned.

On the bugging issue, this official said, “No one knows who was spying on who. They just removed it.”

Mr. Schmitz’s biggest public headache was corruption inside an agency that is supposed to be a model for weeding out fraud.

Sen. Charles E. Grassley, Iowa Republican and a longtime investigator of Defense Department wrongdoing, conducted an investigation that highlighted an inspector general office that falsified its investigative reports and fabricated witness statements in at least two investigations in the mid-1990s.

Mr. Schmitz, a former aide to Attorney General Edwin Meese III in the Reagan presidency, did not take office until the second year of the Bush era, because Democrats leery of his conservative credentials delayed a final confirmation vote.

He inherited a bureaucracy of auditors and investigators that Republicans think is more loyal to Democrats than to their party.

But Mr. Schmitz appears to have overcome objections by vigorously investigating corporate fraud, while bringing in an independent assessment team to proposed reforms.

“No member of the team has seen an organization, civil or military, manned by so many talented people, so ill-served by its senior leadership,” the assessment team subsequently reported.

A government official who has worked with Mr. Schmitz said, “He inherited a total mess and did a … good job of turning that sinking ship around. He reorganized in order to eliminate offices that had demonstrated a refusal to operate as a unified team. He empowered and motivated midlevel and lower-level folks and brought back an esprit de corps the agency hadn’t had in nearly a decade.”

In early June, Mr. Schmitz traveled to Iraq to advise the new government on how to set up a system of inspectors general to play watchdog.

“I have a high level of hope,” the Pentagon quoted him as saying. “The issue isn’t whether these folks want to do it. They clearly want to do it. They want to go through the transition; they want to assume a sense of the rule of law. But it’s going to be hard. It’s going to take time. It might take a generation.

“They are scared for their professional success … and they are physically scared for their own lives and their families’ lives,” he said.

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