Oregon Treasury officers repaid for free meals, exceed lodging limits, The Oregonian finds
Yet those same officers routinely seek reimbursement from state coffers for those meals, The Oregonian found in its ongoing investigation of Treasury travel practices. The agency also regularly paid for lodging at costs exceeding state limits.
The meal claim practice is commonly called double dipping. Other state agencies in Oregon don’t allow it.
At Treasury, it’s standard procedure.
Last September, Treasury investment officer Sam Green attended the annual meeting of Apax Partners in Vienna, Austria. The night before the meeting, Apax bought dinner for a group of investors at the sumptuous, five-star Hotel Imperial.
The next day, Apax provided breakfast and lunch between business presentations at Vienna’s Albertina Museum.
That evening, the investment firm laid on cocktails and dinner at one of the city’s masterpieces of baroque architecture, the Palais Daun-Kinsky, which promises online that its chefs’ international cuisine “satisfies the highest demands and turns every course into a culinary extravaganza.”
All those meals were free. Yet Green’s expense form shows that he claimed a meal allowance for every meal on the five-day trip, including those on his business-class flights to and from the meeting. The cost to taxpayers: $756.
Green did not respond to questions about his travel, including whether he attended any of the meals. At the request of Treasury officials, The Oregonian submitted detailed
Ted Wheeler.JPGTed Wheelerfactual statements regarding investment officers’ trips. The agency didn’t contest the accuracy of any of the statements, instead saying it had decided not to provide responses.
“The hope was to avoid anything that would be personally damaging appearing in the paper in a story about questioning Treasury policy,” explained James Sinks, Treasury’s communications director. He said State Treasurer Ted Wheeler was aware of the newspaper’s submissions.
Seeking state reimburs
Ron Schmitzement for free meals is "acceptable practice within the agency," said Ron Schmitz, chief investment officer for Treasury's investment division.
The agency allows Schmitz and his 12 investment officers to use the meal allowances of as much as $168 a day for other travel costs. And they don't have to account for those expenses.
Treasury officials do face one narrow restriction on double dipping: Investment officers aren't supposed to claim the daily allowance if the state pays a fee for a conference that includes meals. The Oregonian's investigation, however, found employees violated that restriction.
The newspaper's investigation of travel expenses also found Treasury operates under special rules for its hotel costs. Spending limits meant to hold down hotel costs for other state employees are considered only guidelines at Treasury.
In addition, Treasury makes infrequent use of procedures imposed on other agencies to ensure the most economical travel is undertaken with public money.
Treasury follows its own rules
The 13 investment officers in Treasury's investment division are the state's analysts and watchdogs when it comes to investing money from Oregon's pension, accident insurance and common school funds.
The state employs an armada of outside investment managers to put that cash to work and pays them handsomely to do so. Last year, the state pension system spent $335 million in investment fees and expenses.
The outside managers, in turn, deploy Oregon's cash in a wide array of investments, from publicly traded stocks and bonds to real estate, corporate buyouts and distressed loans.
State investment officers, paid on average just shy of $200,000 last year, logged some 500,000 air miles in 2009 on trips to monitor the portfolio. They made on-site visits to investment fund managers, went to annual and advisory board meetings for private partnerships, and attended investment-related conferences and seminars.
The investment firms frequently foot the bill for that travel -- including meals.
Treasury officials acknowledged their officers typically claim per diem for those same meals.
In June 2009, investment officer Brad Child attended Lone Star Funds' annual meeting in Dallas, where the investment firm bought dinner for members of its advisory committee at Del Frisco's, widely considered the city's top steak house. When Child returned to Oregon, he made a $32 expense claim for the meal.
Child didn't respond to written questions and Treasury refused to confirm his attendance at the dinner.
» Oregon State Treasury limits perks to investment officers
» Oregon Treasury employees wined and dined by investment firms they oversee
» Oregon Treasurer Ted Wheeler calls for travel audit, agency reformOn Oct. 28, investment officer Tony Breault attended a real estate conference in Beverly Hills that featured a dinner at the Beverly Wilshire where Jay Leno was the speaker. When Breault returned to Oregon, he claimed the $32 meal per diem covering that dinner -- legitimate under Treasury policy.
Breault didn't respond to written questions and Treasury refused to confirm his attendance at the dinner.
On Oct. 12, John Hershey attended Alinda Infrastructure's annual meeting, where the investment manager hosted dinner at New York's Café at Le Cirque. When Hershey returned to Oregon, he claimed the $35.50 meal per diem covering that dinner.
Hershey didn't respond to written questions and Treasury refused to confirm his attendance at the dinner.
Investment officers often claim meal allowances on trips from the moment they leave their front door until the moment they return. On multi-day trips, they add up fast.
On a 16 day-trip to Seoul, Hong Kong and Sydney last November, investment officer Andy Hayes claimed $2,300 for meal allowances. That covered every meal on the trip, though Treasury records show he was to attend multiple meetings and a conference where meals were provided, not to mention meals provided on several flights.
That's not how it works for other state employees.
The statewide policy set by the state Department of Administrative Services requires state employees to deduct any free meal from their daily allowance.
"You should not make a claim for reimbursement if you've not made a personal outlay for an allowable expenditure," said Kathryn Ross, a DAS manager.
Other states have similar rules. Calpers, California's pension fund, prohibits investment officers claiming per diems for free meals. So does the Washington State Investment Board, which tries to reduce any potential for conflicts of interest by making sure its investment officers pay for their own meals.
"If they bring in lunch, we ask them to separate out the sandwich and we write a check for it," said Theresa Whitmarsh, executive director of the Washington State Investment Board. The investment funds "all know it. They're used to dealing with it."
Recouping other costs
Treasury officials say there is good reason to let investment officers collect the daily allowance even if they are eating for free.
Meal allowances are often inadequate for business travel, Schmitz said. He cited New York City, where the daily allowance was $64 last year, and said it only suffices "if you eat at the roach coach or McDonald's every day."
"My actual cost may be more than per diem on one trip and on another trip it may be less," Schmitz said. "Over time, the thought is it balances out. That's how I view it."
Deputy State Treasurer Darren Bond said his agency's per diems are also intended to cover incidental expenses. He said those include tips, a magazine at an airport, or getting a shirt pressed. In one case, an investment officer dry cleaned a suit when an airplane passenger vomited on it. The expense was considered incidental and part of the allowance.
"Incidentals are an allowable expense and they are routinely incurred in the course of trips like this," Bond said. State policy "authorizes it, the feds authorize it, and we allow it."
In a written explanation, the agency said the meal allowance was the "only" way investment officers could recoup some costs, such as internet fees.
That example doesn't match Treasury's own policy, which states that internet fees can be directly claimed by employees. Travel records show instances of just that sort of reimbursement -- a direct claim made in addition to the meal allowance.
Treasury's interpretation conflicts with state and federal policy as well.
Ross, the DAS expert, said tips and luggage handling fees are the only other costs that can be covered by meal allowances. She said that restriction is imposed by the Internal Revenue Service.
Treasury officials didn't respond to written questions about why they weren't complying with the federal restriction on how meal allowances can be used. They also didn't explain why the agency is expecting investment officers to use their meal allowances for expenses, such as laundry, that its own policies say can be reimbursed separately.
There is one situation where Treasury clearly prohibits its staff from collecting a meal per diem: when the agency pays a conference fee that includes meals.
"That way you have no double payment," Schmitz said.
Yet The Oregonian found investment officers sometimes collect double payments in violation of Treasury policy.
In March 2009, investment officer Ben Mahon attended an investment conference in Charleston, S.C., where Treasury paid a fee that covered meals. Mahon claimed meal allowances of $73.75 covering three breakfasts and two lunches.
Treasury said his breakfast claims were legitimate because the meals were labeled "continental" on the agenda. In fact, the agenda labeled only one of the three breakfasts that way.
"Mr. Mahon should not have been reimbursed for two lunches," Treasury acknowledged. "We will correct."
In July, Schmitz attended an investment seminar in Monterey, Calif. He later claimed $96 for meals on July 8-9 that were covered by a conference fee. Treasury officials acknowledged the conference provided meals those days, but blamed the error on a clerical mistake by an assistant. Officials said Schmitz, who signed the expense claim, will reimburse the state.
Three months later, Treasury paid a fee for Schmitz to attend a two-day conference in Las Vegas. The fee covered meals, but Schmitz later claimed a $128 reimbursement for two days of meals at the conference.
The agency blamed the per diem claims on an error by the travel coordinator. Schmitz, who signed the expense form, is repaying the state.
In one instance discovered by The Oregonian, an investment officer erroneously claimed meals while on personal time.
Last December, investment officer Mike Viteri traveled to Arizona for an investment conference, taking personal time after arriving the Friday before the conference began.
When he returned to Oregon, he claimed $128 in meal per diem for two days of personal time.
Treasury provided multiple explanations of Viteri's expense report. "Minor mistakes were made on this particular reimbursement and they are being corrected," officials said.
Lodging expenses examined
Most state employees are limited in what they can spend for motels and any exception has to be justified and documented.
Treasury officers play by less stringent rules and sometimes even those aren't followed.
DAS requires virtually every state employee to stay under the nightly room cost that is calculated for virtually every city in the U.S. The "lodging per diem" is intended to keep travel costs under control.
Employees can stay at more expensive hotels, such as when they attend a conference hosted at a headquarters hotel. Under state policy, agencies first have to hunt for "lower cost lodging." If the more expensive room is appropriate, the policy states, than "any approval to exceed lodging rates is to be made on a case-by-case basis, thoroughly documented for audit purposes, and signed by the agency head or designee."
That doesn't happen at Treasury, because by law, the agency can establish its own policies.
"Treasury investment officers are not bound by the ... lodging per diem, especially when staying at a conference hotel," a Treasury official said in a written statement. "It is merely used as an estimate for the cost of the trip."
But the investment officers are expected to answer on their requests for travel approval whether their lodging costs will be under the state limit.
When Schmitz traveled to the July investment conference in Monterey, he signed paperwork that responded "yes" to whether lodging would be within the $133 limit for that city. He later submitted an expense claim for a room at the Monterey Plaza Hotel that cost $370. Treasury said this was legitimate because the conference was at that hotel.
In May 2009, investment officer Tony Breault said his travel to Los Angeles would include lodging that met the limit of $128. Instead, records show he stayed in a $199 room at the Beverly Hilton in Beverly Hills.
Treasury policy does require a "good faith effort" to find lodging that meets state limits. It's unclear, though, when that policy applies to investment officers. In one section, the travel coordinators handling travel for the investment officers are required to "make every effort to obtain commercial lodging for OST management and executive service staff" that meets lodging limits. The rule appears to apply to every trip.
But in another section, Treasury policy states no "good faith effort" is needed if an investment officer is going to a conference or meeting.
Asked about the contradiction, Treasury officials said they live by the less-restrictive policy.
Their records back them up.
For 110 trips taken in 2009, Treasury officials provided The Oregonian the record of just two efforts to meet lodging limits.