(The following story by Jim McElhatton appeared on The Washington Times website on September 2, 2010.)
WASHINGTON, D.C. Top Amtrak officials declined to participate in an internal investigation until they were provided private lawyers on the government-owned company's dime, an unusual request considering they were not even targets of the probe.
Records obtained through the Freedom of Information Act show that Amtrak Treasurer Dale Stein, General Counsel Eleanor Acheson and others requested their own attorneys before agreeing to sit for interviews with the agency's own Office of Inspector General, which was looking into potential conflicts of interest in the rail service's 2008 hiring of a consulting firm.
Officials steadfastly decline to say how much money Amtrak paid to hire outside counsel, insisting that such indemnification amounts are confidential.
While federal agencies have a policy, at times, of providing legal services for government employees in lawsuits or legal actions arising from their official duties, Amtrak's decision is different because the executives were told before the interviews they weren't targets in the investigation, records show.
Andrew C. Selden, vice president of law and policy at the United Rail Passenger Alliance, a nonprofit corporation that seeks to improve America's passenger rail system, questioned the need to hire outside firms to represent employees if they were not targets.
"Employees are welcome to hire lawyers to represent them, but it doesn't mean they're entitled to indemnification," he said in a phone interview.
Amtrak, which receives more than a billion dollars a year in federal funds, defended its responsiveness to the Office of Inspector General (OIG). In an e-mail, Amtrak spokesman Steve Kulm said all documents and every employee sought by the OIG were made available.
"The relationship between Amtrak and its OIG is very positive and constructive."
He also called the indemnification policy of providing lawyers for employees a standard corporate policy, adding that those fees aren't a matter of public record.
The interviews with the top executives stemmed from an inquiry into Amtrak's hiring in early 2008 of a consulting firm, Babcock & Brown, for advice on a series of lease deals brokered a decade earlier. Amtrak also paid legal bills for Babcock & Brown in connection with the investigation, records show.
Under the leasing arrangements, Amtrak sold hundreds of rail cars to various investors, who in turn leased them back to Amtrak while taking tax breaks on their depreciation value. Transit agencies across the nation were engaged in similar deals as a way to raise cash, but the arrangements ran into trouble during the subprime mortgage meltdown in 2008 when insurers backing the deals, such as American International Group (AIG), saw their credit ratings downgraded, which in turn put Amtrak at risk of default.
Amtrak hired Babcock & Brown for advice on how to resolve the lease deals. But that hiring later came under scrutiny when officials learned the firm had previously been retained by two of the same banks involved in Amtrak lease deals.
When a Transportation Department official later asked if Amtrak was getting "clean, independent" advice, Mr. Stein, Amtrak's treasurer, assured the official that "all was well," the inspector general's office found.
"OIG's investigation concluded that Stein's representation at that time may have been less than fully candid, based on incomplete fact validation and insufficient expertise to determine whether a conflict or other risk to Amtrak existed," investigators later wrote in a 2009 report obtained by The Times.
Mr. Stein declined an interview request.
Mr. Kulm said there was nothing amiss in hiring Babcock & Brown, calling it "appropriate" and saying it "did not constitute a conflict of interest." He said the firm's selection and retention were "consistent with Amtrak's policies and procedures" and the rail service "received appropriate, indeed, necessary and well-executed assistance from [Babcock], which contributed essentially to resolving the defeased lease transactions that [Babcock] worked on."
William Campbell, Amtrak's former chief financial officer, who is now running as a Republican for comptroller in Maryland, also was questioned about the leases. In a recent phone interview, he said he wasn't as involved in the issue as Mr. Stein, but added that he was concerned about Amtrak's debt.
Amtrak also provided outside legal services for Mr. Campbell, as well as another official whose name was redacted in documents provided to The Times, records show.
Keith McWalter, the Babcock & Brown official who worked on the Amtrak project, said the firm only "crunched numbers" for two of the investors in the lease deals in 1999 and 2000, but hadn't done any work for the investors since. Amtrak hired Babcock & Brown for advice on the lease deals in 2008.
A draft report by a law firm hired by Amtrak's law department concluded there was "little or no risk of a disqualifying conflict" in Amtrak's hiring of Babcock & Brown. But the Inspector General's Office concluded that using consultants who previously worked for two of the investors "put Amtrak at a greater business risk, which should not have been treated cavalierly by Amtrak management and should have been fully vetted prior to continuing the relationship with Babcock & Brown."
