CDC Misled Congress on Spending, Records Show Agency Diverted Funding, Filed False Reports

By Joe Stephens and Valerie Strauss of the WASHINGTON POST

WASHINGTON, Feb. 2 — Seven years ago a long-distance runner from New Mexico caught cold, struggled for breath as liquid flooded her lungs, then suddenly died. Her fiancé died five days later, followed by more than two dozen other residents of the American Southwest.

The Federal Centers for Disease Control and Prevention dentified the killer as a previously unknown strain of hantavirus, a mouse-borne disease with a staggering mortality rate. An alarmed Congress responded by giving the CDC up to $7.5 million a year to fight it. At least, Congress thought it did.

Instead, apparently without asking Congress, the CDC spent much of the money on other programs that the agency thought needed the funds more, interviews and documents show. One official said the total diverted is almost impossible to trace because of CDC bookkeeping practices, but he estimated the diversions involved several million dollars.

SPENDING PRACTICES TROUBLING
Regardless of the amount, the CDC's spending practices have troubled officials within the agency and on Capitol Hill. Agencies are supposed to give Congress accurate reports about the spending of taxpayer dollars. But in the past year, disclosures about secret diversions of CDC funds have incensed some members of Congress and fueled debate over who knows best how to spend federal funds ­the lawmakers who hand out the cash or the bureaucrats who run the government day-to-day.

In the case of hantavirus, records show that once Congress voiced its willingness to fund CDC research, the agency reported year after year that it had spent up to $7.5 million annually battling the deadly germ. Keith Newbold of Colorado, whose 38-year-old wife, Cheri, died from hantavirus two years ago, said the CDC's decision to redirect research funds "surprises me and disturbs me." He said victims and their families had waited anxiously for new research into the disease but "we were led to believe the money wasn't there."

FUNDS REDIRECTED
Senior CDC officials declined to comment on the hantavirus spending. But the agency acknowledged in an unsigned statement that it had spent an undisclosed amount on other diseases. It said the decision was made under "the budgetary discretion given the director."

The hantavirus diversion is strikingly similar to the CDC's controversial decision to redirect money intended for research into chronic fatigue syndrome ­ a matter that last year led to calls for a criminal investigation. It also bolsters the accounts of CDC scientists who have complained of loose bookkeeping at the $2.4 billion agency, which works to prevent and control diseases.

An inspector general's audit last year found that the CDC could not account for or defied congressional intent while spending $12.9 million appropriated to study chronic fatigue syndrome, a debilitating illness characterized by a lack of stamina. While there was no suggestion that the money was stolen or used illegally, Sen. Harry M. Reid, D-Nev., in November asked the Justice Department to investigate whether the agency had violated laws against lying to Congress.

In the aftermath, the CDC promised to restore lost funds and apologized for "a breach of CDC's solemn trust." Director Jeffrey Koplan said at the time that it was an isolated incident and that he knew of no other diversions.

Yet documents show that 16 months ago, the head of the hantavirus program told an auditor that he was worried because no one outside the Atlanta-based agency knew of his program's spending practices. He said other CDC managers were scared as well. "Funds were used consistently to cover other things," explained William Reeves, head of chronic fatigue syndrome research. "That is not a bad way to do things. But you do not lie and hide it." Reeves exposed the manipulation of chronic fatigue money in 1998, saying he refused to participate in a coverup. He charged that his superiors did not consider the disease a serious health threat but were unwilling to air the issue in Congress, which had been heavily lobbied by patients' groups.

AGENCY VOWED TO CHANGE
Last summer, Koplan promised unprecedented changes. He announced mandatory legal training for all budget managers and placed the viral division ­ home of the hantavirus and chronic fatigue programs ­ on budgetary "probation." "We have learned a valuable lesson through this experience," the agency said in a statement at the time. But the vow failed to appease some in Congress. "These bureaucracies get so big, they don't care where Congress wants the money to go," Reid said at the time he requested the criminal probe. "They are kind of above it all; they do what they want to do with the money."

As head of the CDC's Special Pathogens Branch, C.J. Peters directs research into hantavirus and other quick-killing germs. The white-bearded scientist works in a "spacesuit" and an isolation lab, which protect him from exotic viruses. His risky research inspired Dustin Hoffman's character in the movie "Outbreak" and won Peters a prominent spot in the book "The Hot Zone." "C.J. Peters could swim through a bureaucracy like a shark," wrote author Richard Preston. But auditor's notes, obtained under the federal Freedom of Information Act, depict Peters not as a predator but as a frustrated and fearful bureaucrat.

WHERE DID MONEY GO?
An auditor prepared the memorandum during the inquiry into chronic fatigue funding. It quotes Peters as saying years of budget problems peaked in 1997 when the CDC slashed a quarter of his funding. Even worse, Peters told the auditor, he was not told of the cuts until more than 10 months into the fiscal year, when most of that year's funding had already been spent. "He was very upset," the auditor wrote.

To keep all programs afloat, Peters said in an interview, viral division chief Brian Mahy directed him to use part of the hantavirus money to research Ebola and Lassa fevers, which the agency apparently had been paying for out of discretionary funds. Since then, more than a third of the hantavirus money has gone toward Ebola and other exotic diseases, Peters said.

Peters said Mahy promised to revise reports sent to Congress to reflect the diversion. But there is no evidence that ever happened. In its statement last week to The Washington Post, the CDC announced that it has proposed changes in the report language "to more accurately reflect how these resources are being used."

Ebola fever has killed people in Africa but has never been diagnosed in a human in the United States. In 1989, it tore through a colony of monkeys at a quarantine facility in Reston. It is one of dozens of maladies targeted by the viral division of the National Center for Infectious Diseases, one of 11 centers that make up the CDC.

Mahy, who oversees a budget of more than $40 million, would not discuss uses of the hantavirus money. Mahy's budget officer said he doubted that the branch suffered a 25 percent budget reduction or that news of the cut would have been delivered so late.

Peters said he could not comment further. But auditor's records show Peters complained about the cuts to Mahy and to James Hughes, director of the Center for Infectious Diseases. Mahy "responded by writing him a nasty note which essentially told him to shut up," the auditor wrote.

Hughes told The Post that he was aware of concerns about redirection of the hantavirus money but had not determined whether they were valid.

CONGRESSIONAL REPORTS MISLEADING
There is no evidence that word of the funding issues reached Congress, where annual budget reports continued to cite concern about the hantavirus outbreak. "The [Appropriations] committee encourages CDC to continue to prioritize the prevention and containment of the hantavirus," a 1999 report said.

The CDC supplied Congress with reports showing that the agency's "actual" hantavirus expenses increased 11.7 percent to $7.5 million in fiscal 1997 ­ the same year that Peters said his branch suffered deep cuts. The CDC reported that it spent $7.39 million on hantavirus in fiscal 1998.

But Peters told the auditor that after administrators subtracted hefty overhead charges, his branch appeared to be losing roughly one-fifth of the $5 million a year he expected to cover all his research programs. Peters said determining a more precise figure was impossible because of fractured accounting. The auditor studied funding for Peters' programs in fiscal 1998 and arrived at an even higher estimate: $1.4 million missing.

Wilmon Rushing, who retired about a year ago as associate director for budgeting at the center, agreed that hantavirus money "ideally" should not have been spent elsewhere. But he said that during his six years in the job, the agency sometimes had borrowed from marked money, hoping to repay it later.

Auditor's notes quote Peters as saying he felt legally "at risk" because no one outside the CDC knew of the spending practices. The auditor wrote that "other branch chiefs are nervous as well, because they are afraid they will not actually get the money" needed to run their programs.

NO PAPER TRAIL
In interviews and auditor's reports, other researchers confirmed the outlines of Peters's account: budgets that arrive belatedly, money swapped among programs at the fiscal year's end, an inability to track spending on particular programs.

The agency budget "is almost unfathomable," said Charles Rupprecht, head of the CDC rabies program. "No one can tell us what our balance is day to day." Auditors who tried to track the chronic fatigue money said that when CDC officials shifted the money, they often left no paper trail.

Yet some researchers said the loose system worked well because it allowed scientists to bounce money among programs as needed to fight disease outbreaks or pursue medical discoveries. "It's probably not kosher accounting-wise," William Bellini, head of the CDC measles virus section, said of some of the money juggling. "So much of what always went on I thought was kosher, now I'm finding out wasn't."

Researcher Phil Pellett echoed the sentiments of many scientists. He does not condone misleading the public but said it sometimes would be a "bigger crime" to follow Congress's direction rather than spend money where science dictates.

Pellett grew furious when an auditor questioned the propriety of funding his herpesvirus research with chronic fatigue money. According to the auditor's notes, Pellett demanded, "How can some congressman know better than we what the important public health issues are?"

Researcher Alice Crites contributed to this report.

© 2000 The Washington Post Company