The Cable

Fake CIA Spy's $900,000 Fraud Leaves Congress Gobsmacked

An ex-Environmental Protection Agency official who for nearly 20 years masqueraded as a CIA officer and bilked the government out of nearly $1 million refused to testify today before a House committee investigating his epic fraud. But statements from federal investors, as well as the disgraced employee's co-worker, raised new questions about ethical shenanigans at the agency and what senior leaders knew about a decades-long con.

John C. Beale has already pleaded guilty to impersonating a CIA officer, telling co-workers that he was flying around the world on top-secret missions, including to Pakistan, and charging the government for first-class airline tickets, luxury hotel rooms, and other perks along the way.

Beginning in the mid-1990s, Beale told senior EPA managers that he was working for the spy agency on secret assignments that required him to spend significant amounts of time out of the office. In reality, Beale was hanging out at his vacation home in Massachusetts, taking trips to California and London, or staying home reading books and doing housework. He admitted to spending at least two and a half years not working but still collecting a salary from the EPA.

Beale sat expressionless at a dais as an investigator recounted his ruse for members of the House Oversight and Government Reform Committee. More than one member compared Beale's escapades to the film Catch Me if You Can, about a notorious globe-trotting grifter. When it came time for Beale to testify about his crimes, he asserted his Fifth Amendment right not to incriminate himself.

Beale worked on clean-air policy, hardly the stuff of spy novels. But he was so persuasive about his other life that "it was absolutely, universally accepted throughout the agency that he worked for the CIA," said Patrick Sullivan, the EPA's assistant inspector general for investigations. Sullivan said Beale's ostensibly clandestine work was "an open secret" among senior leaders of the EPA.

This raises the question of whether the senior leaders of the nation's premier environmental regulatory agency are the most gullible lot in Washington. Or maybe they've seen one too many bad espionage flicks. The idea that Beale, a meek, bald air-policy analyst was secretly Jason Bourne was enough to make some committee members laugh out loud.

Beale was well-liked by co-workers and highly regarded for his work. He was given a Presidential Rank Award and other professional accolades, which helped him earn EPA leaders' trust, the investigation revealed. Beale had also told colleagues that he served in Vietnam (a lie), which bolstered his claims that he was doing secret side-work for the government. Practically no one who worked with him at the EPA questioned why Beale would advertise those clandestine operations.

Sullivan told committee members that Beale began falsely impersonating a CIA employee in 1994. His successful career as a top-level environmental policy official wasn't satisfying, so he made up tales of his cloak-and-dagger exploits "to puff up the image of myself," he confessed to investigators.

Beale told colleagues he was traveling on CIA business in Pakistan, when he was actually in Virginia or Massachusetts. At one point he told a co-worker that he needed to stay on at the CIA longer than expected because his replacement, who had been "tortured in Pakistan," needed more time to recuperate. Beale's extended absence from the EPA cost taxpayers $350,000, Sullivan testified.

Beale took lavish trips, including a first-class flight to London, which he justified by saying he had a back problem. The ticket cost the government $14,000, 10 times the coach fare. Beale repeatedly flew first class because of his medical condition, which he documented with a letter from a chiropractor.

Beale charged the EPA more than $80,000 for trips to California, all of them fraudulent. He paid top dollar for a hotel room in London ($1,066 per night for four nights), when he could have secured a federal government rate of $375 per night.

The EPA employee who approved Beale's travel expenses "never looked at the vouchers. She never looked at the receipts … because [Beale] was an [EPA] executive and because he worked for the CIA," Sullivan said.

"This was a person who had a positive reputation in the federal government," said EPA Deputy Administrator Bob Perciasepe, who had previously approved bonuses for Beale based on his performance.

Beale, who retired with a pension from the EPA this year, faces up to 37 months in prison and has agreed to pay more than $886,000 in restitution. A court has not scheduled his sentencing date.

Beale finally admitted to his lies when investigators in the EPA inspector general's office, who were probing his travel and expenses, called his bluff about being a clandestine intelligence officer. They arranged for him to visit CIA headquarters and explain his work in a secure, classified setting. He never showed up and admitted to his lawyer that he didn't work for the intelligence agency.

After Beale refused to answer questions at the hearing on Tuesday, committee chairman Darrell Issa turned his sights on Robert Brenner, a former senior EPA official and Beale's boss during the 1990s. The two were also friends and co-owned the vacation home in Massachusetts. Committee members grilled Brenner about his relationship with Beale and questioned why he recommended a retention bonus for the confessed scam artist. Brenner said that Beale had been considering a new job outside government and that he wanted to persuade Beale to stay in government. An investigator said there was never a written record of the bonus.

Committee members also questioned Brenner about an $8,000 discount he received on a Mercedes-Benz, which was negotiated by an attorney who lobbied the EPA. Brenner said he'd agreed to come before the committee voluntarily and was only prepared to talk about Beale. But after repeated questioning he admitted to receiving the discount, which he said he had disclosed on a financial statement.

Members questioned Brenner about the nature of his friendship with Beale and the details of their financial relationship, which Brenner said he could not completely recall. Brenner told lawmakers that Beale is currently living in Brenner's guesthouse in Arlington. By the end of the hearing, lawmakers seemed more interested in Brenner's story than Beale's.

Rep. Elijah Cummings, the committee's ranking member, told Brenner that when the hearing began, he'd felt sorry for Brenner and believed that Brenner had been duped by Beale.

"My sorrow has turned into something else now, because I'm just wondering how much information you might have … since you all are such good buddies and he's laying in our house," Cummings said. The lawmaker seemed incredulous about Brenner's claims that Beale had "betrayed my trust."

"All this time you didn't discuss this case? You didn't say, Man, how did you do that?'" Cummings asked.

Brenner said that he had avoided talking to Beale about the investigation and avoided seeing him while it was still active. He said Beale had only started staying at his house in the past few weeks, after the investigation ended and Beale had pleaded guilty.

Lawmakers said the purpose of the hearing was not only to investigate Beale, but to probe the "negligent culture" at the EPA that led to ethical lapses and fraud.

It is "totally inexcusable to me" that EPA management failed to catch Beale and his web of "fantasies and lies," said Rep. Tammy Duckworth.

Sullivan, from the EPA inspector general's office, said investigators were able to determine in one week, after a few phone calls, that Beale had never worked for the CIA.

Committee members looked bemused by the end of the hearing and appeared genuinely surprised to learn that Beale was living with his former boss and still getting money from the government.

After Beale refused to testify before the committee, he was escorted from the hearing room and was told to watch the proceedings on a monitor from an anteroom. Issa said the committee would attempt to compel Beale's testimony at a future date.

In the meantime, while he awaits sentencing, Beale is collecting retirement pay from the federal government. "We are looking into that," the EPA's Perciasepe said, as part of efforts to recover money that Beale has pleaded guilty to stealing.

Thank goodness the government shutdown didn't stop the work of the House oversight committee. You rarely get theater this good in Washington.

The Cable

The Shutdown Won't Break the U.S. Foreign Policy Machine

Four hundred thousand Defense Department employees, sent home. Internal watchdogs, defanged. Congressional investigations, stymied. A billion dollars a day in government contracts, stopped up.

If there's a government shutdown on Tuesday, the United States will continue to be able to conduct its key foreign policy, national security, and intelligence missions -- at least for a little while. But beyond that, well, it's not going to be pretty.

The effects of political dysfunction in Washington are already reverberating across the globe. Markets in Europe and Asia took a hit on Monday, and both the NASDAQ and Dow Jones industrial average fell sharply this morning when trading got under way in New York. But rattling global markets is only the first of many potential effects of the shutdown.

While government employees engaged in essential national security and intelligence-gathering activities would report to work as usual -- at least in the short term -- many could face considerable personal hardship because of delayed paychecks. Active-duty service members might be compensated; civilians, not so much.

A government shutdown would also affect U.S. foreign policy more subtly by delaying critical foreign-policy related hearings in Congress, paring back nuclear and other critical energy programs to the bare minimum, and interfering with the State Department's ability to police itself.

"Spies will still spy. The machinery will go on," said a retired senior CIA official who spoke on the condition of anonymity. "The problem is if something extra falls into the system. If guys are worried about their paychecks, they're not concentrating on their job."

The Department of Defense will likewise "continue to support all key military operations such as the war in Afghanistan and various other missions around the world," Pentagon spokesman Cmdr. Bill Urban told Foreign Policy. But a shutdown would "place significant hardships on a workforce already strained by recent administrative furloughs.

For the hundreds of thousands of nonessential civilian personnel employed in the U.S. foreign-policy machine, it will most likely mean being furloughed. This includes roughly 400,000 employees at the Defense Department alone.

The length of the shutdown will also partially determine its impact on the conduct of foreign policy. If it's short -- two weeks or less -- intelligence operations won't be slowed down or hindered. "We do a brilliant job at triage in the short term," said Charlie Allen, a retired intelligence officer whose decades-long career included assignments at the CIA and the Homeland Security Department. He noted that during the last shutdown, intelligence employees who were deemed essential, including himself, kept working.

But if the shutdown drags on, the spy agencies will feel the pinch. "If it lasts more than a couple weeks it could have extremely serious and detrimental effects upon our contractor community, and we depend on [them] in so many areas of our work," said Allen, now a principal at the Chertoff Group, a global security and risk management advisory firm. A wide range of intelligence operations -- from launching satellites to analyzing imagery to keeping technology systems running -- are outsourced, meaning that they cannot continue indefinitely without federal funding.

If contractors aren't paid or if new contracts can't be awarded, intelligence operations could slow down or be put on hold. Bloomberg Government estimates that contractors will lose roughly $1 billion per day if the government closes its doors.

Over at the State Department, operations will likely continue like normal with one major exception: The department's internal watchdog will be forced to close up shop until the money starts flowing again.

Politicians from both parties have suggested that a shutdown would prevent the State Department from handling passport and visa applications, but State Department spokesman John Gerlach said consular services wouldn't be impacted because they're funded through processing fees, not through congressional appropriations.

The impact of a shutdown would also be blunted by the fact that State and USAID have access to some residual money that has already been appropriated and given to the department. Gerlach said that some of those funds were tied to multiyear projects, while others were given to the department to spend over whatever time period it deemed necessary. Both pools of money will be available to the department after Sept. 30, 2013.

That said, Gerlach cautioned that some parts of the department would still need to temporarily halt their operations, most notably the Office of the Inspector General. That would halt any ongoing probes into possible misconduct and prevent the watchdog from launching new ones, making it much harder for the department to police itself in the days, weeks, or even months ahead.

The State Department has also imposed a full hiring freeze, and would-be staffers who have received job offers but not yet started their work will be unable to do so until the shutdown ends.

Outside the handful of executive agencies that conduct the bulk of U.S. foreign policy, however, the impact of a shutdown will be more noticeable. On the Hill, many committee activities, including hearings and bill markups, will come to a halt. That includes things like the House Foreign Affairs Committee's hearing on the Somalia-based militant group al-Shabab, scheduled for Thursday, and its markup of a bill to reform the State Department's internal review process.

Still, the House Permanent Select Committee on Intelligence (HPSCI) will remain open for business. "The HPSCI performs crucial oversight of our nation's intelligence agencies, and those oversight activities will continue, shutdown or no shutdown," committee spokeswoman Susan Phalen told Foreign Policy. Phalen said any potential HPSCI hearings or markups would not be canceled.

The Department of Energy, which oversees the country's stockpile of nuclear weapons as well as its Strategic Petroleum Reserve, would see a particularly dramatic personnel reduction. Out of the department's nearly 14,000 employees, only a couple of hundred will report to work if Congress fails to reach a deal to keep the government open. As a result, numerous programs with foreign-policy relevance -- such as those related to nuclear and renewable energy -- will continue with skeletal employee crews. The Department of Energy's Office of Policy and International Affairs would be completely shuttered.

Finally, Washington's army of government-funded foreign-policy think tanks will not escape unscathed. When the government shuts down, it appears that the nation's capital ceases to think, at least in some cases. The U.S. Institute of Peace (USIP), for example, is preparing to shut down entirely. "Researchers and fellows cannot officially work on anything USIP-related if the Institute shuts down as part of an overall government shutdown," Steven Ruder, a spokesperson for USIP told Foreign Policy by email.

Other think tanks that receive federal funding, like the Woodrow Wilson International Center for Scholars, will keep operating with a reduced staff.

Still others won't know how the shutdown will affect them until it has already happened. Lynda Seaver, deputy director for media and communications at Lawrence Livermore National Laboratory, told FP by email that staff "will report to work on Oct. 1 and await further guidance" from the Department of Energy, which funds Livermore's operations.

In a way, the situation at Lawrence Livermore embodies the absurdity of the entire process of shutting the government down: a high-octane scientific research laboratory held hostage to arbitrary procedural rules in the same way that a global superpower has been brought to its knees by a singularly dysfunctional Congress.

"Aside from making us look like a bunch of fools, the biggest detriment is not the operations of our foreign-policy machinery, but it's the fact that it looks like we cannot govern ourselves," a senior congressional staffer told Foreign Policy. "That's actually the biggest foreign-policy ramifications of the shutdown. How can we with a straight face tell other governments how they can work in a democratic fashion to achieve consensus-based governance and so forth. It's ridiculous."

John Reed, Shane Harris, John Hudson, J. Dana Stuster, and Elias Groll contributed reporting.

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