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'In a word, reprehensible': USAID contractor billed US $1.1M for luxury parties, retreats

By SCOTT HIGHAM | The Washington Post | Published: March 12, 2015

WASHINGTON — The largest nonprofit contractor working for the U.S. Agency for International Development during the height of the wars in Iraq and Afghanistan billed the government $1.1 million for staff parties and pricey retreats — three of them held at one of the poshest destinations on the East Coast, Nemacolin Woodlands Resort in Pennsylvania.

International Relief and Development Inc. of Arlington, Va., collected hundreds of millions of dollars to work in the war zones and help impoverished nations around the world. At the same time, its executives were using IRD's government overhead account to fund the parties and retreats between 2007 and 2010, according to financial records provided by IRD to The Washington Post.

The previously undisclosed retreats to Nemacolin were the fanciest by far. The five-star spa and resort, 180 miles northwest of Washington, is nestled high in the Allegheny Mountains near Fallingwater, the famous home designed over a waterfall by Frank Lloyd Wright. IRD spent $484,338 on those retreats at the height of U.S. war spending, billing the expenses to the government as "training" and "staff morale," according to the records and current and former employees.

Attendance was compulsory; hundreds of IRD employees went. Among the perks they received at Nemacolin: private rooms; open bars; gala dinner parties; free iPods at one retreat, Nikon Coolpix cameras at another; skeet-shooting outings at the resort's Field Club; extreme-driving classes at its Jeep Off-Road Driving Academy; and complimentary $50 gift certificates to spend on clothing, jewelry, massages — whatever the employees wanted.

"It was scandalous," said Andrea Clarke, IRD's former media and communications officer who attended the 2008 retreat. "I remember thinking: 'We're dealing with issues where people are actually dying overseas, and here we were at this five-star resort and we are living it up.' There were alarm bells going off every day. It was no way to run a nonprofit."

In January, USAID suspended the nonprofit from receiving any more federal work, citing other spending that involved "serious misconduct." The suspension came in the wake of allegations of misspending highlighted in a Post investigation in May 2014.

USAID officials said they are cracking down on contractors who misspend tax money.

"Waste, fraud, and abuse of American taxpayer funds are completely unacceptable, and USAID is taking every measure at our disposal to recover misspent funds," USAID spokesman Ben Edwards said in a statement to The Post. "The Agency suspended International Relief and Development in January from receiving U.S. Government awards based on our ongoing review of IRD's performance, management, and financial controls."

IRD's new chief executive, Roger Ervin, who took over in December, has forced seven of the nonprofit's longtime officers to resign and removed its board members. The nonprofit's annual revenue from USAID has plummeted from $587 million in 2010 to $78 million last year.

Under federal contracting rules, charges for parties and retreats are deemed to be "allowable" overhead costs if the money is used to train staff and build morale. Open bars are not allowable.

In addition to the retreats at Nemacolin, IRD spent $58,828 on "leadership" meetings at the Hyatt Regency Chesapeake Bay Golf Resort, Spa and Marina in Cambridge, Md. The nonprofit also billed the government $63,746 for an awards reception in October 2010 at the Newseum in Washington and $72,530 for a holiday party that December at the Smithsonian National Air and Space Museum on the Mall.

"This is, in a word, reprehensible," said Doug White, an expert on nonprofit organizations at Columbia University. "I can't imagine that an organization that holds itself out as helping poor people in foreign lands would spend money this way."

The couple who presided over IRD — Arthur Keys, an ordained minister, and his wife, Jasna Basaric-Keys — retired from the nonprofit last summer. Attorneys for the couple have denied any wrongdoing, saying, "Dr. Keys made sure that things were charged correctly."

Ervin, the new chief executive, said he is streamlining IRD and shoring up its finances and hopes to persuade USAID to lift the suspension. He also said IRD is cooperating with investigators from three federal agencies — the inspectors general for USAID and the State Department and the Special Inspector General for Afghanistan Reconstruction.

Citing the investigations, Ervin declined to discuss IRD's previous spending.

"I deplore any allocation of resources that detracted from IRD's ability to deliver vital programming for beneficiaries," Ervin said in a statement to The Post. "IRD's number one priority since I became CEO has been providing the strongest possible support to our field staff and partners around the world to empower vulnerable communities."

IRD was one of the biggest beneficiaries of U.S.-financed projects in Iraq and Afghanistan designed to rebuild the countries and quell the insurgency after the U.S. invasions. Of the more than $2.4 billion IRD has collected from USAID since 2007, 82 percent went toward projects in the battle zones.

That year, the nonprofit held a "Leadership Meeting" at the Hyatt resort in Cambridge along the banks of the Choptank River. That five-day meeting, attended by 57 employees, cost $37,770.

In December 2007, the nonprofit held an "Annual Staff Conference" at Nemacolin. The three-day conference, attended by 78 employees, cost $129,902.

"It was heartbreaking," said one former IRD employee who attended the Nemacolin conference and spoke on the condition of anonymity because of the ongoing investigations. "We had all of these people working on programs in Third World countries, and then there were all of these people trying to get as much money as they could out of the programs."

Owned by the founder of 84 Lumber, Nemacolin is a 2,000-acre playground for the well-to-do. The main lodge is designed after the Ritz Hotel in Paris. It features Tiffany lamps and Baccarat crystal chandeliers, and works by Henri de Toulouse-Lautrec, Alexander Calder and Norman Rockwell adorn the walls.

A short walk away is the Holistic Healing Center and the Woodlands Spa, where a guest can pay $460 for "The High Roller Deluxe," which includes a Swedish massage, facial, scrub, manicure, pedicure and shampoo and style. Down the lane is the Wildlife Academy, home to one of the world's few remaining white tigers, and the Lady Luck Casino, filled with 600 slot machines and 28 gambling tables.

Clarke, the former IRD communications officer, joined the nonprofit in May 2008 and quickly became concerned by its free-spending culture. Clarke said she met with a "crisis communications expert" and cautioned that the spending could become a news story.

"If IRD has a big enough reputational crisis which is not managed properly," she warned in the July 14, 2008, memo, "it is likely to suffer a funding crisis that could threaten the very foundation of the organization."

Five months later, IRD returned to Nemacolin for another leadership conference. It was a seminal year for the nonprofit. Keys, IRD's president, held a champagne toast celebrating the nonprofit's most recent award, a $300 million project to improve agricultural production in Afghanistan.

It was also IRD's 10th anniversary. To mark the occasion, IRD handed out iPod Shuffles to its employees at Nemacolin inscribed: "IRD Celebrating Ten Years."

During the day, there were buffet breakfasts and lunches and work-related seminars. At night, there were gala dinners, open bars, sing-a-longs in the karaoke bar and late-night parties in the hotel rooms of the staffers, according to former employees.

The cost of the 2008 retreat for 123 employees: $178,000.

In 2009, IRD executives held another leadership conference at Nemacolin; 110 employees attended, including workers who were flown in from posts around the world.

Several former employees said they were troubled by the luxurious surroundings.

"It was like an amusement park for adults," said one former IRD employee who spoke on the condition of anonymity because of the investigations. "There was a fully open bar. There was karaoke. So many people got really drunk. They were on a spending spree."

Jean Hacken had been hired that year as the nonprofit's chief compliance officer.

"They were spending so much money," said Hacken, who left IRD in December. "I really didn't understand. It seemed very lavish to me. I didn't think a nonprofit organization should be doing that."

Beverly Morris Armstrong was another new employee invited to Nemacolin in 2009. She had been hired as IRD's chief financial officer. After the retreat, Armstrong warned Keys that he could not bill the open bars as overhead, according to former and current IRD employees.

Armstrong later removed those charges and other costs associated with the 2009 retreat, reducing the bill from $358,160 to $176,436. Keys eventually asked Armstrong to leave IRD. She recently declined to comment.

In 2010, when the nonprofit reported a record $704 million in annual revenue, the organization held a "Leadership Meeting" in Gulfport, Miss. Also that year, IRD threw the parties at the Air and Space Museum and the Newseum. The nonprofit spent $522,737 on the three events.

In the four years after 2010, spending on parties ended and expenses for retreats dropped by nearly two-thirds to $475,579.

During this time, IRD's work was coming under fire. The media and government auditors were examining reports of fraud and waste in its programs in Iraq and Afghanistan. USAID ended several of those projects.

The nonprofit launched a public relations offensive. IRD hired one of Washington's most influential lobbying firms, Wexler & Walker.

On May 21, 2010, the firm provided IRD with its media strategy.

The most important message for senior IRD officials to remember: "We help the most vulnerable people in some of the most insecure parts of the developing world."

Washington Post researcher Alice Crites contributed to this report.

A screen capture from a Nemacolin Woodlands Resort overview video posted on its YouTube channel.
SCREEN CAPTURE FROM NEMACOLIN WOODLANDS RESORT YOUTUBE VIDEO

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