GSA head resigns amid reports of lavish spending at Las Vegas conference

WASHINGTON -- A senior government official resigned Monday after a report concluded that her agency had improperly paid for an "over-the-top" training session in the Las Vegas area that featured a mind reader, bicycle giveaways and lavish after-hour receptions in resort suites for federal workers.

The White House accepted General Services Administration chief Martha Johnson's resignation after she dismissed two deputies and suspended other career employees over an $820,000 conference in October 2010.

The 300-person event at the M Resort in Henderson included a $95-per-person dinner and reception and various violations of federal laws and policies.

"As the agency Congress has entrusted with developing the rules followed by other federal agencies for conferences, GSA has a special responsibility to set an example, and that did not occur here," the inspector general concluded in its report.

Public Buildings Service chief Robert Peck and Johnson's top adviser, Stephen Leeds, were forced out. Four GSA employees who organized the five-day conference for the Public Buildings Service's western region have been placed on administrative leave pending further action, a White House official said.

The official spoke on condition of anonymity to discuss details of the embarrassing episode in the federal agency that oversees office space and supplies, transportation and management tasks.

"On his first day in office, President (Barack) Obama made clear that the people who serve in his administration are keepers of the public trust and that public service is a privilege," White House chief of staff Jack Lew said in a statement. "He was outraged by the excessive spending, questionable dealings with contractors and disregard for taxpayer dollars."

NEVADANS SUPPORT ACTION

Sens. Harry Reid and Dean Heller of Nevada were troubled by the inspector general's findings but defended Las Vegas as a conference destination.

"I applaud President Obama for protecting taxpayer dollars and his understanding that the convention business is so important to Nevada's economy. Las Vegas is the best place in the world to hold a convention, and it's understandable why people want to have business meetings here. However, this situation demonstrates a complete lack of common sense," said Reid, a Democrat.

Heller, a Republican, said: "Taxpayers' dollars should be spent responsibly, and those responsible for any misuse should be held accountable. However, it should be noted that it was not the location that caused the misuse of taxpayer funds."

White House officials called Rep. Shelley Berkley, D-Nev., on Monday morning to reassure her that the convention business in Las Vegas would not "pay the price" for the mistakes of a few "irresponsible actors."

"Congresswoman Berkley commends President Obama for taking swift action to safeguard taxpayer dollars after uncovering such waste and abuse. This was an outrageous use of taxpayer funds no matter what city it was spent in. However, she appreciates the call to her office from the White House," said Eric Koch, a spokesman for Berkley. "It's clear that President Obama understands that Nevada's economy depends on responsible government agencies continuing to come to our city to conduct the business of the country."

The Las Vegas Convention and Visitors Authority offered a similar statement.

"We are always happy when people choose to visit Las Vegas. However, we're even happier when people choose to visit responsibly. Taxpayers need to know that their money is being spent wisely, no matter where that is," Jeremy Handel, spokesman for the convention authority, said in a statement.

Nevada's gaming and convention industries are struggling through an economic downturn and remain sensitive to any negative publicity -- especially from Washington.

Two years ago, Reid told Obama to "lay off Las Vegas" after the president said at a New Hampshire town hall meeting that spending a bunch of cash in Las Vegas was not the wisest move "when you're trying to save for college."

A year earlier, Obama said Wall Street bankers seeking federal bailouts shouldn't be going to Las Vegas or the Super Bowl at taxpayer expense.

The GSA inspector general report went after the organizers of this particular conference and did not suggest that conferences held in Las Vegas were a problem.

FOLLOWING THE MONEY

The planners spent more than $136,000 on a pre-conference visit to Las Vegas that included $57 lunches, according to an internal review first reported by The Washington Post.

That report also found "redundant and wasteful" practices, such as hiring outside event planners when the agency already has in-house workers for those tasks.

Those outside planners received a $12,000 commission from the resort, which the investigators said "strongly indicates that further discounts might have been available to GSA if GSA had contracted the hotel directly."

The report also found costs that exceeded the original projections and officials who skirted federal rules that set aside some contracts for small businesses. The internal review found questionable actions, such as the event planner asking the hotel that an agency employee who arrived a day early get "a friend of a friend of the owner rate (wink)."

Another agency employee sought a discount on a $98 purse from the hotel gift shop. She received a $30 break.

The conference also spent $75,000 for a training exercise to assemble 24 bicycles that were later donated at the agency's direction to the Boys' and Girls' Club.

Any equipment purchased with taxpayer dollars is supposed to be sold during government sales, but planners tried to skirt those rules by having the trainers claim ownership of the bikes.

Planners spent $31,000 on a "networking reception" that featured a $19-per-person "American artisanal cheese display" and $7,000 in sushi.

Taxpayers also footed the bill for a $3,200 session with a mind reader, $5,600 for in-room parties, $3,700 for T-shirts and nearly $2,800 in water bottles.

A separate cocktail reception included $1,500 for "Boursin scalloped potato with Barolo wine-braised short ribs" and a $525 bartender fee for a cash bar. A senior official spent $2,700 to entertain other employees after the closing dinner. And three officials spent almost $400 for rented tuxedos.

All of this occurred during a conference that a regional administrator had directed to be " 'over the top,' bigger and better than previous conferences."

Sen. Susan Collins, the top Republican on the Senate Homeland Security and Governmental Affairs Committee, called the conference a "junket."

"It is never appropriate for an agency to fund lavish conferences that waste tax dollars," she said. "This is especially true at a time when American families are struggling to put food on their own tables and the U.S. government is piling up debt at an historic pace."

Johnson seemed to agree.

"I find the information in your report to be very troubling as it outlines potential violations of federal procurement laws and agency policy," she said in a memo that accompanied the inspector general's report.

The White House learned of the draft internal report in early March, and Lew, the chief of staff, and White House Counsel Kathryn Ruemmler investigated the conference for GSA employees.

Obama later was told of the findings and demanded accountability.

Johnson put in place new rules to prevent future spending, but they were not enough to keep her in her job.

"I feel I must step aside as administrator so that the agency can move forward at this time with a fresh leadership team," she wrote in her resignation letter. "Collectively, the people of GSA now must review, repair and rebuild."

Johnson served as a co-leader for the Obama transition team and previously was a vice president at 90,000-employee Computer Sciences Corp.

During the Clinton administration, she was a White House aide, an official at the Commerce Department and the chief of staff at the General Services Administration.

Review-Journal writer Laura Carroll and Stephens Washington Bureau reporter Peter Urban contributed to this report.