Education Official Got Secret Cash Bonuses as Office Lost Billions to Fraud, Corruption

The senior Obama Education Department official who resigned this month to avoid testifying before Congress got hundreds of thousands of dollars in bonuses despite his well-documented failures, sources inside the agency tell Judicial Watch. The extra cash was kept off the books, away from the public, and doesn’t appear on his official government salary record but Judicial Watch has obtained the figures with yearly breakdowns. The official, James Runcie, ran the scandal-plagued Federal Student Aid (FSA) office, the government’s $1.4 trillion financial aid program. It includes, among other things, administering more than $150 billion in loans, grants and work-study funds to help students pay for college.

Under Runcie’s leadership there was pervasive fraud and corruption at the FSA, government sources tell Judicial Watch, including skirting federal rules to hire friends and family and hefty off-the-books cash bonuses despite the FSA’s documented transgressions. Just last week the Education Department Inspector General told Congress that the FSA made an astounding $6 billion in improper payments in 2016 alone as part of federal student aid programs. The figure includes $2.21 billion in improper Pell Grant payments and $3.86 billion as part of the Direct Loan program. These are disbursements that either shouldn’t have been made, went to the wrong recipient, were for an incorrect amount or were not properly documented. Each year the problem gets worse, according to Kathleen Tighe, Inspector General for the Education Department. Improper payments for the Federal Direct Loan program swelled from $1.28 billion in 2015 to $3.86 billion in 2016 and from $562 million to $2.21 billion for the federal Pell Grant program, all under Runcie’s leadership.

As chief operations officer for the troubled financial aid program Runcie, a political appointee of the Obama administration, was scheduled to testify at the same hearing before the House Subcommittee on Government Operations. Instead, he resigned abruptly to avoid congressional scrutiny. The disgraced education official tried to portray himself as the victim of a new administration that wants to dismantle the FSA. In a resignation memo obtained by an online news outlet, Runcie wrote this: “I cannot in good conscience continue to be accountable as Chief Operating Officer given the risk associated with the current environment at the [Education] Department.” He went on to write that he has been “consistently on record and clear about not testifying at the upcoming hearing on improper payments” and that he had “not heard a single compelling reason” the Education Department would need him to testify.

It’s difficult not to conclude that Runcie is hiding something. During his tenure as head of FSA there was a “massive amount of corruption,” one high-ranking government official told Judicial Watch. FSA has a special hiring authority called administratively determined (AD), which permits it to hire outside of the normal competitive federal hiring process. This means FSA doesn’t have to advertise positions, interview or apply laws like veterans’ preference. “Accordingly, it is being abused to hire whoever they want in all sorts of positions,” a veteran Education Department official told Judicial Watch. “It is being used to hire friends and family and directly avoid hiring veterans under the veterans’ preference.” Another government official, who works at a different agency but deals with FSA regularly, said its hiring practices permit it to “hire people outside the General Schedule (GS) and set their pay abnormally high.”

Runcie was appointed under the AD authority, according to sources inside the Education Department, and the FSA has not disclosed the exorbitant bonuses for any of the individuals hired under AD. The federal government’s public employee salary website only lists Runcie’s annual salary from 2010 to 2015 and lists $0 in the bonus category for each year. In 2010, his salary was $176,500 and increased slightly over the years, topping off at $183,300. What the public record omits is that, despite his office’s many failures, Runcie got “insane” bonuses, according to one government source who had to dig the figures out of Runcie’s FSA personnel file. Here is the annual breakdown: 2010—$33,535; 2011—$38,350; 2012—$60,000; 2013—$75,000; 2014—$75,000; 2015—$75,000; 2016—$76,000. That means that, while his office was an out-of-control cash cow losing billions of taxpayer dollars to fraud and corruption, Runcie was secretly rewarded with cash bonuses. No wonder he doesn’t want to testify before Congress.