GPO profits go to bonuses and trips
By Bill Gertz
March 27, 2008

Part two of a three-part series on the outsourcing of passports.

When the government's main printing agency booked $100 million in unexpected profit it went on a spending spree: large bonuses to top managers, trips to Paris and Las Vegas, and an official photo of the boss that cost $10,000.

The bonuses, some nearly as high as $13,000, and travel are raising questions among congressional investigators and Government Printing Office officials about whether the agency is misusing its newfound wealth and whether it received the proper authority for some of the larger compensation payments from the Office of Budget and Management.

Additionally, investigators are looking into whether Public Printer Robert C. Tapella paid close to $10,000 for photographs of himself for his office and during his swearing-in ceremony in November.

The spending comes as GPO recorded record profits of about $100 million over the past 16 months by selling blank passports produced by its printing and binding services to the State Department at more than twice the cost. The investigation also has raised security concerns about the use of overseas companies for components and assembly of the computerized electronic passports.

GPO spokesman Gary Somerset said the process for "goal-based performance" bonuses began five years ago and enables employees "to earn bonuses based on performance of the agency as a whole" as well as individual job performance.

The bonuses are part of a 2005 plan by GPO, which is a monopoly printer for the U.S. government, to generate greater revenues under the assumption that a private-sector business model is more efficient, GPO documents show.

Mr. Somerset said all travel was authorized in line with government regulations and funded through GPO's operating budget.

"GPO officials from all business units are continuously researching ideas and innovations in order to stay on the cutting edge of new technology for the 21st century," he said. "That requires GPO officials to travel domestically and internationally to pursue new manufacturing techniques, participate in conferences supporting the agency's mission of digitizing government documents, and meeting with officials from other countries ensuring the interpretability of the e-passport with supporting countries."

Mr. Somerset initially denied Mr. Tapella spent nearly $10,000 for a singled framed photograph.

Later, however, Maria S. Lefevre, GPO's chief of staff, said the work contracted for Mr. Tapella's official portrait, "was expensive," but said the high costs came from securing copyrights for five photos from the photographer. She said the costs were similar to what other government agencies pay for such portraits.

Ms. LeFevre said the purchase order for the photo for $10,000 included about $8,900 for the portrait, and an additional $2,600 for commercial photographs taken at Mr. Tapella's swearing-in ceremony Nov. 6.

Bonus question

Bush administration officials and congressional investigators said they are concerned about some of the travel by senior GPO officials and the bonuses they received.

Investigators say that at least 25 GPO officials received bonuses of between $2,000 and $12,920 that totaled $181,593. The bonuses were paid for fiscal 2005 and fiscal 2006, but have not yet been paid for 2007, investigators said.

Initially, the bonuses were only given to senior level executives, but later payments were given to other officials.

Ben Brink, the GPO official in charge of making secure documents like the e-passport, received a $5,000 bonus. Mr. Brink was the official who worked out a deal with the staff of Sen. Trent Lott, Mississippi Republican, to shift the location of a secure passport production facility from Nevada, to Mississippi's Gulf Coast, an area devastated by Hurricane Katrina and vulnerable to severe weather.

Steven Shedd, GPO's chief financial officer, was paid a $12,920 bonus, and William Boesch Jr., the GPO comptroller, was paid $12,128 in bonuses. GPO Chief Information Officer Reynolds Schweickhardt, was paid $8,816 in bonuses, and Bruce O'Dell, director of technology integration and transformation at GPO, was paid about $8,500 in bonuses.

Gregory Brower, the GPO general counsel until last year, also received a $7,500 bonus. Mr. Brower, now U.S. attorney in Nevada, made a key legal opinion that permitted GPO to make large profits from the sale of passports to the State Department, despite laws restricting GPO to operating at basically a break-even business model.

Chief Human Capital Officer William Harris was paid $10,792, and a GPO production manager, Robert Schwenk, was paid $11,400. Another production manager, Jeffrey Bernazzoli, was paid $9,645.

Beth Telford, secretary to the public printer, also received a $2,000 bonus. Judith Russell, GPO's superintendent of documents was given a $7,500 bonus, and Veronica Meter, GPO's public relations director was given a $6,336 bonus.

Profit limits

Critics, however, said generating large profits is not part of GPO's allowed operating regulations, which limit the agency to operating at a break-even business model.

The pressure to generate GPO revenue has brought results. Investigators say overall revenues generated by GPO increased sharply from $775 million in fiscal 2006, to $888 million last year to a projected level of just over $1 billion this year. All the added revenues come from GPO's Security and Intelligent Document unit, which makes the blank e-passports.

"Encouraging increased revenues is proper for the private sector," said one administration official close to GPO. "But for a government monopoly, it translates into higher costs for customers and for the American taxpayer."

Additionally, records obtained by congressional investigators show unusual travel by senior GPO officials to conferences and other events in such places as Las Vegas; Atlantic City, N.J.; London; Paris; Hamburg, Germany; and Tokyo, among other locations.

Mr. Brink, the assistant public printer for Security and Intelligence Documents, for example, traveled to Paris in June 2006 for an electronic-passport forum that cost more than $5,000. He also traveled to London in May 2006 for a trip that cost $3,800.

Mr. Brower, who was the general counsel and acting inspector general, also traveled extensively throughout the United States, and Rick Grasso, GPO's information technology specialist, made trips to London; Osaka and Tokyo, Japan; Bangkok and numerous domestic U.S. trips between 2003 and 2007, totaling more than $50,000.

Former Public Printer Bruce James logged about $22,000 in travel including a trip to Paris in June 2006 that cost more than $15,000.

James A. "Tony" Ogden, a GPO lawyer and adviser, also made extensive travel costing more than $21,000, including a 2004 trip to Hawaii and a 2006 trip to Paris. He also traveled to Hamburg and Milan, Italy, in 2006. Mr. Ogden is currently the GPO inspector general.

Mr. Tapella, the current public printer in charge of GPO, also traveled extensively when he was GPO chief of staff, spending more than $50,000, including two trips to Paris in 2006 that cost $17,000.

Security question

Additionally, The Washington Times' investigation disclosed that the security of the blank-passport production involves computer chips purchased in Europe and then shipped to Thailand for outfitting with a wire antenna that transmits personal data to an electronic scanner at U.S. border entry points. Security specialists said the use of foreign chips and assembly abroad makes the blank passports, a key travel document, vulnerable to theft or counterfeiting.

GPO officials, however, insist the production process is secure.

A Dutch company that assembles e-passport covers in Thailand, Smartrac Technology Ltd., said it could not guarantee steady production of passports and warned in its annual report that social unrest in Thailand could halt production.

Internal GPO documents obtained by The Times revealed that GPO has faced security problems related to passport production, including the use of unsecure FedEx couriers.

Officials at GPO, the Homeland Security Department and the State Department said they review security of overseas suppliers and that the production process is secure.

GPO said it chose foreign suppliers over U.S. chip manufacturers because no U.S. companies could make the chips needed.

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