This report describes our work regarding the former PBGC Director’s involvement in the procurement process used to select investment managers responsible for executing aspects of the new Investment Policy. We performed this audit after we became aware of allegations about the former Director’s involvement in the procurement process.
We identified serious questions regarding the integrity of the procurement process because the former PBGC Director inappropriately communicated with bidders during the time when such contact was forbidden by PBGC policy and the Federal Acquisition Regulation. Phone records and email show that the former Director was communicating directly with some bidders at the same time that he actively evaluating their proposals. Further, the former Director took an unprecedented role in the procurement process, to include serving on technical evaluation panels to formally assess some of the same Wall Street firms with whom he was in frequent contact; at a minimum, this violated the principle of separation of duties.
Our findings and recommendations are directed to ensuring that PBGC develops and implements internal controls to foster impartiality in future procurement activities and compliance with existing contracting laws and regulations. The recommendations are made to the PBGC Board of Directors, as the actions that are needed will require implementation at a level higher than the PBGC Director. The PBGC Board has provided a written response with proposed corrective actions. We agree with the actions proposed by the Board.
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