Amtrak’s ouster of IG puts heat on rail service

Amtrak officials pushed the agency’s longtime inspector general to resign — without telling Congress — after the watchdog official exposed wrongdoing, mismanagement and criminal activity inside the taxpayer-funded rail service, a congressional probe has found.

The finding is among the key disclosures in a joint staff report by ranking Republicans of the Senate Finance and House Oversight and Government Reform committees into the sudden departure last year of Amtrak Inspector General Fred Weiderhold.

“Because of his expertise, the [Amtrak] Board viewed Weiderhold as a threat,” concluded a draft copy of the report, which was reviewed by The Washington Times.

The probe also found that Amtrak’s law department, while under scrutiny by the inspector general for paying excessive fees to outside law firms, undertook a “systematic campaign” to control the inspector general by insisting that he sign off on “unusual” protocol concerning access to documents and information.

“Amtrak failed to comply with the Inspector General Act for way too long,” said Sen. Charles E. Grassley, Iowa Republican and ranking minority member of the Senate Finance Committee. “Forcing its inspector general out of office without notice or consultation with Congress is only the latest example.”

Rep. Darrell Issa of California, the ranking Republican on the House Oversight and Government Reform Committee, said that “Amtrak interfered with and ultimately decided to get rid of its inspector general for the worst reason: to stop an investigation.”

Amtrak officials did not respond to questions by The Times about the findings, saying they had not been provided a copy of the report. Officials addressed Mr. Weiderhold’s departure in a statement issued last year after learning that the House Committee on Oversight and Government Reform was investigating.

“The Amtrak Board is committed to having an [Office of the Inspector General] that operates under best practices consistent with the Inspector General Act,” the company stated in a news release last year. “The board has been concerned for some time about whether best practices are currently in use in the OIG.”

In the same statement, Amtrak management said officials were cooperating fully with the congressional committee’s investigation into “what has been characterized as conflicts between Amtrak management and the inspector general within Amtrak.”

“These issues and others prompted the Amtrak chairman’s decision, with the board’s concurrence, to seek a change of leadership with the former inspector general retired,” Amtrak management said.

Mr. Weiderhold departed in June 2009 after more than two decades as inspector general. His office had issued several findings that raised questions about practices inside Amtrak’s law department, including its role in the restructuring of lease deals that cost Amtrak nearly $100 million and the “excessive use” of outside attorneys, the report found.

The congressional inquiry also concluded that:

• Amtrak Chairman Thomas Carper didn’t know how much the company was spending on outside attorneys and wasn’t aware whether Amtrak had any procedures to limit the legal fees.

• Amtrak interfered with the inspector general by denying the office money made available through the federal economic stimulus package.

• Amtrak delayed Mr. Weiderhold’s plans to hire a chief investigator and later rescinded the position, with similar problems when he sought to hire an assistant inspector general to oversee Amtrak’s use of stimulus funding.

The report also provides details about Mr. Weiderhold’s exit that were not included in Amtrak’s official announcement of his departure, in which officials lauded his “35 years of loyal service” at the company, including more than two decades as inspector general.

According to the report, two months before he was told to resign or be fired during a meeting with Amtrak’s board of directors, Mr. Weiderhold found out he was under investigation over an anonymous complaint that he failed to report vacation time and submit approved travel-expense requests.

The federal Council of Inspectors General on Integrity and Efficiency (CIGIE) investigated, telling Mr. Weiderhold on June 12 last year that “the facts, as set forth in the complaint, lacked the substantial likelihood of a violation of a law, rule or regulation, or gross mismanagement, gross waste of funds or abuse of authority,” the report stated.

Six days later, Mr. Weiderhold showed up at an Amtrak board meeting prepared to talk about a report his office had recently completed. But, he later recalled, he sensed something else afoot after spotting an outside attorney hired by Amtrak’s law department to provide advice on dealings with the inspector general, according to the report.

When Mr. Weiderhold distributed folders to board members at the meeting, nobody looked at them and instead Mr. Carper told him “that they had another matter to discuss with him,” presenting Mr. Weiderhold with a severance package and choice to retire or be removed “for cause,” the report stated.

Mr. Weiderhold was paid a severance of $244,573 and given a lump-sum payment of $38,090 “in consideration, in part, for his agreement not to publicly or privately disparage Amtrak or make any statements regarding his resignation without first clearing those statements with Amtrak management,” the report stated.

The deal also did not allow Mr. Weiderhold to talk to Congress, but that was amended in July 2009 after a request from committee staff looking into his departure from the rail agency, according to documents. In addition, agencies are supposed to notify Congress when removing an inspector general, but the report said Congress wasn’t consulted before Mr. Weiderhold’s departure.

Mr. Grassley and Mr. Issa later questioned the CIGIE about whether such a nondisclosure agreement should apply to Congress and whether any other former inspectors general have received severance payments.

“CIGIE … noted that it was unaware of any other examples of gag agreements or large severance payments and affirmed its support for [inspectors general] to be able to communicate freely with Congress,” the report said.

The report also concluded that facts contradicted Amtrak management’s statements that Mr. Weiderhold had resigned: “It was not a truly voluntary resignation as Amtrak management had suggested in public statements.”

One of Mr. Weiderhold’s key investigations involved a probe into Amtrak’s hiring in early 2008 of a consulting firm, Babcock & Brown, for advice on a series of lease deals brokered a decade earlier that threatened to collapse with the subprime mortgage meltdown.

Under the leasing arrangements, Amtrak had sold hundreds of rail cars to various investors, who in turn leased them back to Amtrak while taking tax breaks on their depreciation value.

Transit agencies across the nation were engaged in similar deals as a way to raise cash, but the arrangements ran into trouble in 2008 when insurers backing the deals, such as American International Group Inc. (AIG), saw their credit ratings downgraded, which in turn put Amtrak at risk of default.

Amtrak hired Babcock & Brown for advice on how to resolve the lease deals. But that hiring later came under scrutiny by the inspector general when officials learned the firm had previously been retained by two of the same banks involved in Amtrak lease deals.

A copy of the inspector general’s report into Babcock & Brown’s hiring was obtained by The Times through the Freedom of Information Act. The Times reported earlier this month that top Amtrak executives initially declined to participate in the investigation until they were provided outside attorneys at Amtrak’s expense to represent them in talks with the inspector general, though the officials were told they were not targets in the probe.

Steve Kulm, an Amtrak spokesman, told The Times that such practices were standard corporate practice and defended the hiring of Babcock & Brown, calling it “appropriate” and saying it “did not constitute a conflict of interest.”