Audit finds telecom agency board broke contracting rules, flouted disclosure law

Sam Ginn (Handout/McClatchy)
Sam Ginn (Handout/McClatchy) McClatchy

Story updated: 12/10/14, 4:29 p.m.

The agency tasked with building the nation’s first emergency communications network broke contracting regulations in hiring consultants, and several of its board members with telecommunications industry ties flouted rules for disclosing financial conflicts, auditors reported Tuesday.

Four unidentified board members of the First Responder Network Authority from the commercial cellular industry continued to participate in decision making “even though they were not in compliance with the financial disclosure requirements,” the auditors found. One director initially missed a deadline for filing a disclosure form and then failed to disclose an investment that posed a conflict of interest, they wrote.

One director improperly influenced the hiring of 16 consultants, some of whom failed to produce any “deliverables” as defined by contracting regulations, the sharply critical audit by the inspector general’s office at the U.S. Commerce Department found. It described as “unsupported costs” the $11 million paid to the firm that hired the consultants for their work.

The audit of the fledgling agency widely known as FirstNet did not name the board member alleged to have intervened to recruit consultants – technical experts who McClatchy reported last fall were hired through a different Commerce Department agency and paid at annualized rates as high as $600,000. But two people familiar with the matter, and who spoke on condition of anonymity to avoid harming relationships, identified the director as Craig Farrill, a longtime lieutenant to FirstNet’s first chairman, Samuel Ginn.

Farrill, a former executive of the London-based telecom giant Vodafone, served as acting general manager of FirstNet in the first months after its creation in 2012. He was placed on administrative leave before resigning last summer, said the two people familiar with the matter. Farrill could not be reached for comment.

The audit findings clouded the image of an agency created with considerable hoopla in 2012, when Congress committed an initial $7 billion toward creation of one of the biggest telecommunications projects ever. While the newborn agency’s assignment was to create a high-speed broadband network that could beam data and videos to law enforcement officers, firefighters and medics coast to coast, its primary intent was to ensure that first responders in every region can talk with one another during a disaster.

The inspector general’s report vindicates Sheriff Paul Fitzgerald of Story County, Iowa, one of four public safety representatives initially named to FirstNet’s board. Fitzgerald set off sparks in April 2013 by publicly questioning whether the board was operating with integrity and transparency.

At a FirstNet board meeting, Fitzgerald submitted a formal motion demanding investigations of possible board conflicts of interest, contracting violations, and what he assailed as the board’s insufficient consultation with representatives of the millions of first responders who would use the network.

Tuesday’s report disclosed for the first time that Inspector General Todd Zinser ordered the audit upon learning of Fitzgerald’s motion. Five months later, after first appointing a board committee to investigate the most serious allegations, Chairman Ginn publicly requested an audit.

The report also is an embarrassment for top officials at the Justice and Homeland Security departments and the Office of Management and Budget, who sit on the board as ex-officio members and failed to join Fitzgerald in demanding accountability.

Commerce Department spokesman Jim Hock contended that the audit report “does not identify actual conflict of interest violations or circumstances that affected FirstNet decision-making.”

He said that the issues raised in the audit “were specific to the unique circumstances that existed during FirstNet’s early start-up operations, and we continue to take the steps necessary to ensure the integrity of the ethics program and contracting policies.”

In September, Fitzgerald learned a tough lesson about whistle-blowing. Commerce Secretary Penny Pritzker declined to reappoint him to another term on the board, as he had desired.

The National Telecommunications and Information Administration, the Commerce Department agency that oversees FirstNet, contended that the shortcuts in hiring consultants were warranted because the agency faced a compelling urgency to get off to a fast start, the audit said. The report noted, however, that the consultants were hired even before the first of two contracts were awarded to Workforce Resources Inc., a Washington-based firm hired by the National Institute of Standards and Technology to put the initial consulting team together.

McClatchy reported in September that at least 20 board members, staffers and private consultants had worked previously for Vodafone or AirTouch, which Ginn headed before it was acquired by Vodafone.

Congress had specified in creating FirstNet that any outside consultants must be hired “in a fair, transparent and objective manner.”

The auditors found, however, that Workforce Resources was not even aware of the hiring of some consultants and didn’t receive copies of 20 reports that they delivered. They said that the company failed to assign half of its staff to the project, in violation of Small Business Administration contracting rules.

Ginn, for whom Auburn University’s business school is named, appointed a committee of four board members to investigate Fitzgerald’s allegations about lack of transparency. The panel, chaired by former Denver Mayor Wellington Webb, later largely dismissed Fitzgerald’s assertions – a report that Fitzgerald called “a whitewash.”

In a brief emailed response to McClatchy’s questions, Ginn said only that Webb’s committee had investigated some of Fitzgerald’s allegations.

Susan Swenson, another former telecom executive, has succeeded Ginn as the board’s chair.

In an internet blog posting, Swenson acknowledged that “administrative missteps” were made in the agency’s early days, but she said that “both the Department and FirstNet have instituted a comprehensive and effective ethics program and are taking the appropriate measures to help ensure first-rate procurement practices to assist in FirstNet’s mission.”

“I am confident that the FirstNet of today is on the right path forward for these and many other reasons, “ she wrote.

Fitzgerald, a former president of the National Sheriffs Association, said he has been criticized by other public safety officials for not working within the system.

“I did make many attempts,” he said, “but I was shut down.”

Fitzgerald said Tuesday that he only turned to investigators “after months of trying to convince the board that we had a massive problem on our hands and painstakingly exhausting all internal options.”

Related stories from McClatchy DC