A top Trump administration health official violated federal contracting rules by steering millions of taxpayer dollars in contracts that ultimately benefited GOP-aligned communications consultants, according to an inspector general report set to be released today.
The contracts, which were directed by Centers for Medicare and Medicaid Services chief Seema Verma, were only halted after a POLITICO investigation raised questions about their legality and the agency had paid out more than $5 million to the contractors.
The 70-page HHS inspector general report — the result of a 15-month audit — calls on HHS and CMS to take nine separate actions to address the "significant deficiencies" that it identified. Those actions include conducting a review of all the department's contracts, and making a closer examination of whether CMS overpaid several of its contractors.
The report paints a detailed portrait of Verma's use of federal contracts to install allies who managed high-priority projects and exercised broad authority within CMS, while circumventing the agency's career officials and funding projects that ethics experts have said wasted taxpayers’ money.
“CMS improperly administered the contracts and created improper employer-employee relationships between CMS and the contractors,” the inspector general wrote, detailing how Verma leaned on her hand-picked consultants rather than hundreds of civil servants in her communications department. “CMS’s administration of these contracts put the Government at increased risk for waste and abuse.”
For instance, the report cites numerous examples across her first two years leading CMS of Verma personally directing contractors to craft her speeches and remarks, working with them to secure media appearances and even accompanying one for a “Girl’s Night Out” networking event. While the inspector general uses pseudonyms to describe individual contractors, POLITICO has previously identified the individuals cited in the report.
Verma — a close ally of Vice President Mike Pence — has emerged as a key leader of the White House coronavirus task force, overseeing billions of dollars in emergency payments to doctors and hospitals, rolling out new rules affecting nursing homes and championing the use of telemedicine. She also runs the nation's largest health care safety-net programs — Medicare and Medicaid — in addition to overseeing Obamacare, as head of a trillion-dollar agency with sweeping regulatory authority over the U.S. health care system.
Verma has spent more than a year defending the contracts, testifying to Congress that they were “consistent” with previous communications arrangements and focused on promoting the agency, not her.
However, the inspector general concluded that Verma and her team “did not administer and manage the contracts in accordance with Federal requirements.” The watchdog also faulted the health department for failing to adequately manage the contracts, which auditors linked to potential duplicate spending and other “questionable costs,” such as a $150,000 payout for a canceled bus tour.
At other times, Verma’s hand-picked contractors — including her former communications specialist, Marcus Barlow, who had worked as a spokesperson on behalf of Verma’s consulting firm but had been blocked from taking a job at CMS — personally steered federal staff and policies in ways that appeared to flout contracting rules, according to the inspector general.
In one case, the inspector general report recounts, two senior CMS civil servants questioned the legality of the arrangement after Barlow instructed agency staff that he needed to be among the officials clearing tweets before they were posted.
“I’m trying to figure out if it is legal for a contractor to direct federal personnel,” a top communications official wrote in August 2017 to a team member, who responded, “I have been wondering the same thing.”
The communications official later minimized the email to the inspector general, telling the auditors that he’d had an “emotional reaction” and didn’t believe the contractor was directing him.
Still, the episode fit a pattern of Verma charging contractors with directing tasks that ranged from the high-profile to the mundane, from writing major speeches and organizing events to managing media requests and approving tweets.
For example, Verma recommended that contractors hire Pam Stevens, a well-known Washington communications expert, to help set up her media appearances, according to the inspector general’s report. Stevens would go on to devise a publicity plan for Verma that proposed profiles in magazines like Glamour, invitations to prestigious events like the Kennedy Center Honors and recognition on “Power Women” lists. CMS has downplayed the plan and said that many of Stevens’ proposals were not pursued.
In the process, CMS paid those contractors at rates far exceeding those of senior government employees to perform duties that the inspector general said should have been handled by the agency's more than 200 in-house communications officials.
“Improper administration and management of contracts can put the government at increased risk for waste and abuse,” said Tesia Williams, a spokesperson for the inspector general.
In a letter signed by Deputy Secretary Eric Hargan, HHS agreed with the inspector general’s recommendations and committed to an evaluation of its contracts.
But Verma disputed the findings in an extensive response to the inspector general that accompanied the report, calling them “disingenuous” and arguing that auditors cherry-picked their findings.
“Making these conclusions is only possible using an incomplete record of evidence and a misunderstanding of federal contracting requirements,” Verma wrote. “I wholly disagree that the management and execution of the contracts ever gave rise to serious concerns.”
Verma also chastised the inspector general for the timing of its report.
“CMS should be solely focused on responding to an unprecedented global pandemic, but instead had to spend precious time responding to the numerous mischaracterizations and technical inaccuracies” in the report, Verma wrote.
The health department’s top spokesperson defended Verma and echoed her criticism of the report’s timing.
“At the end of the day, CMS should have been solely focused on responding to the unprecedented coronavirus pandemic instead of focusing on alleged infractions of a minor and technical nature that have been the subject of longstanding debate and confusion,” HHS spokesperson Michael Caputo said in a statement.
Caputo did not respond to questions about how the report specifically pulled federal staff away from coronavirus-related work. The inspector general’s office maintains in its report that much of the audit was completed before the pandemic, with all fieldwork wrapping up in February 2020, and that CMS received "all requested extensions," given the current outbreak.
Meanwhile, Caputo took aim at his own department’s watchdog. “The President, Vice-President and the Secretary have enormous confidence in Administrator Verma and the great work she has done, and will continue to do, for the American people,” he said. “But confidence in the Inspector General? Not so much.”
The inspector general opened its probe in April 2019, days after POLITICO first reported about Verma’s extensive use of branding and communications consultants. The health department swiftly froze the contracts, and congressional Democrats have separately worked on an investigation into Verma’s spending.
Verma’s contracts also became a vehicle to compensate multiple Republican communications operatives: At least eight former White House, presidential transition and campaign officials for President Donald Trump were ultimately hired as outside contractors to the federal health department at the cost of hundreds of thousands of dollars per year.
In October 2019, Verma testified to Congress that the contracts were appropriate and "consistent with what previous administrations have done."
"Those contracts that we have in place are consistent with how the agency has used resources in the past, and they're focused on promoting the work," she told the House Energy and Commerce Committee in a fiery exchange with Rep. Joe Kennedy, who argued that Verma had wasted taxpayer funds and should have steered the money toward health services instead.
A half-dozen House Democrats, including Energy and Commerce Chair Frank Pallone, subsequently called for Verma's resignation over her stewardship of taxpayer funds. Verma’s efforts to raise her profile also became a factor in her bitter feud last year with Health and Human Services Secretary Alex Azar — the leader of the health department and Verma’s nominal boss — as the two officials clashed over influence with the White House and in the press.
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