Obama Senior Official Resigns Amid Corruption Investigation

NEWYou can now listen to Fox News articles!

An assistant secretary at the Department of Labor has resigned after an internal investigation found that he improperly steered federal contracts to friends and former colleagues.

Raymond Jefferson, who headed the department's Veterans Employment and Training Service since 2009, used his position to coerce or intimidate other employees to make the awards without open competition, according to a July 21 report by the agency's acting inspector general, Daniel Petrole.

Jefferson resigned his post on Tuesday, Labor Department spokesman Carl Fillichio said.

A former Army officer who lost all five fingers on his left hand when a hand grenade detonated prematurely during Special Forces training, Jefferson was tapped by President Barack Obama to head the office that helps veterans find jobs and employment training programs.

The report said that Jefferson and other lower ranking officials engaged in conduct "which reflects a consistent disregard of federal procurement rules and regulations, federal ethics principles and the proper stewardship of appropriated dollars."

The investigation was prompted after a whistleblower reported irregularities last year to Sen. Claire McCaskill, D-Mo.

In one case, the report found that Jefferson and a deputy pressured colleagues to hire Stewart Liff, an employee management author and speaker who specializes in boosting employee performance. When that didn't work, Jefferson told subordinates to instruct other contractors to hire Liff as a subcontractor at the highest possible rates.

Liff ultimately received about $700,000 over 16 months, twice as much as other firms were paid for similar work, the report said.

Liff billed $275 an hour to prepare one consulting report "that talked about how you should light the work place and what color you should paint the walls and what the furniture should be," McCaskill said.

"The irony in this particular management consultant report was the color he told them to paint the walls was not allowed under government regulations," McCaskill said. "This is the kind of boondoggle that taxpayers have every right to expect would come to a screeching halt."

Liff did not immediately return a call seeking comment.

The report also found that Jefferson coerced employees into hiring Ron Kaufman, a consultant who conducted training seminars as part of his company, "Up! Your Service." Kaufman and his wife traveled from Singapore to three U.S. cities to provide "customer service" training to veterans office employees. Kaufman has sought more than $100,000 for his services, but has not been paid.

Jefferson also violated procurement rules to hire Mark Tribus, a former West Point classmate, to provide a leadership training session, the report said. Jefferson tried to get a sole-source contract awarded to Tribus, but it was rejected.

Agency employees raised concerns about each of the contractors directly with Jefferson, the report found. In an interview with the inspector general's office, Jefferson said he instructed his staff to procure all these services "legally and ethically." But the report found that statements by other office employees "cast serious doubt upon the sincerity of Assistant Secretary Jefferson's assertion."

Fillichio said the department has already taken steps to increase oversight and restrict the procurement authority of the veterans office. The department's lawyers and human resources staff are also reviewing several lower level officials whose conduct was called into question in the report.

"Poor stewardship of appropriated dollars is unacceptable at the U.S. Department of Labor and will not be tolerated," Fillichio said.

Jeff Lagda, a spokesman for the Labor Department's acting inspector general, said the office has decided not to refer the case to the Justice Department for further investigation.

"It was a situation where someone decided not to follow procurement or ethics rules," Lagda said.

Jefferson earned an MBA from Harvard Business School, served as a White House Fellow and later was deputy director for Hawaii's Department of Business, Economic Development and Tourism. He worked as a consultant for McKinsey & Company in Singapore before Obama appointed him to the veterans office.

McCaskill, who heads a Senate subcommittee that oversees government contracting, said she doesn't fault the Obama administration for appointing Jefferson, given his impressive resume. But she plans to take a hard look at what she sees as wasteful management consultant contracts that appear to offer little benefit to government agencies.

"We can't afford that right now," McCaskill said. "It's just wildly inappropriate."