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EPA bosses dragged feet on concerns over fraudster employee’s bonuses, documents show

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FILE: Oct. 1, 2013: Former EPA official John Beale at a hearing on Capitol Hill, Washington, D.C.

Top EPA managers were aware as early as 2011 about serious problems with a high-ranking official who would later be sentenced to prison for defrauding the agency, but did not crack down for more than two years, newly released documents show. 

The documents were released by Sen. David Vitter, R-La., who has accused EPA Administrator Gina McCarthy of looking the other way when fraudster John Beale was collecting improper payments. At the time, McCarthy was Beale's boss at the Office of Air and Radiation. 

Beale was sentenced in December to 32 months in prison for bilking taxpayers of nearly $1 million by pretending to be a CIA agent. About half of that came from $500,000 Beale received in questionable bonuses. How Beale was able to get away with his bogus story, and his hefty payouts, for so long is a question that continues to vex congressional investigators. 

"Senior officials, including McCarthy, did not take action until the problem grew so large it could no longer be ignored," a Vitter memo claimed. 

Though McCarthy has been credited with initially flagging Beale's activities and expenses, triggering the internal investigation which unraveled the scheme, documents show that a human resources official flagged concerns over Beale's pay in late 2010 and early 2011. 

Scott Monroe, the director of human resources in the Office of Air and Radiation, wrote in a December 2010 email that he wanted to "intervene" and prevent the bonus from taking effect in 2011. 

The same official sent a Jan. 12, 2011, memo to McCarthy summing up his concerns. He noted that Beale had been getting a 25 percent "retention bonus" every year since 1991, with little review or oversight. 

"EPA policy requires that OAR re-certify the bonus annually and re-establish the bonus every three years," Monroe wrote. "EPA has no records to show that these re-certifications occurred except for one in 2000." 

Monroe wrote that "due to quirks" in the payroll system, the bonus was added every year and "went undetected until last summer." Monroe recommended in the note that the bonus be canceled. 

According to Vitter's office, though, McCarthy "did not follow through" to stop the bonuses, apparently waiting on an official in the Office of Administration and Resource Management to give "her the okay that the White House is aware and there will not be any political fallout." 

Further, according to Vitter's office, McCarthy claimed she was advised to stand down because it was a "criminal matter," though other documents question whether it was ever treated that way.   

McCarthy did not cancel the bonuses until February 2013. 

An EPA spokeswoman, in response to the documents, stressed that McCarthy was the one who "uncovered" the fraud, and that she "has worked in coordination with its Inspector General and the U.S. Attorney's office" since learning about it. 

"John Beale is a convicted felon who went to great lengths to deceive and defraud the U.S. government over the span of more than a decade," spokeswoman Alisha Johnson said. "The Agency has also put in place additional safeguards to help protect against fraud and abuse related to employee time and attendance, including strengthening supervisory controls of time and attendance, improved review of employee travel and a tightened retention incentive processes." 

Another memo from Vitter's office, obtained by FoxNews.com, points to concerns with another senior EPA official, Bob Perciasepe, who was Beale's supervisor and who approved the reauthorization of his bonuses in 2000. Though the bonus should have expired in 2003, it continued until 2013. 

The Vitter memo claimed that "it looks as if Perciasepe was also a barrier to resolving questions that arose in 2010" about those payments. The memo again cited the December 2010 note from HR official Scott Monroe, and included a February 2011 response from another EPA official that referenced "Bob P." -- saying staff wanted to first "speak with him about this employee" before making any recommendation on the bonus. 

Vitter's office is continuing to look into the Beale case, as additional details emerge about his work at EPA. 

Recently released transcripts of Beale's deposition before the House Oversight and Government Reform Committee show him speaking in great detail about meetings he supposedly had with McCarthy, back when she was heading the Office of Air and Radiation. 

Beale said they started meeting in mid-2009. At a lunch, he claimed his "fabricated story about working at CIA came up," but that they also discussed various projects. Beale recalled telling her about a project he wanted to work on, which he described as "green economics." 

This, he said, involved "coming up with specific proposals that could be -- could have been proposed either legislatively or things which could have been done administratively to kind of modify the DNA of the capitalist system." 

He said McCarthy was aware of the project, but the project was eventually "scrapped." He also claimed the project began under the George W. Bush administration.