The Honorable Elias Zerhouni, M.D.
Director, National Institutes of Health
9000 Rockville Pike
Bethesda, MD 20892

Dear Dr. Zerhouni:

The Committee is investigating management and ethics concerns at the National Institutes of Health (NIH). The area of concern is whether NIH is properly implementing ethics laws and regulations relating to prizes or "lecture awards," cash awards ostensibly for recognition of public service given to NIH officials upon deliverance of a lecture to an organization giving the award.

Our examination stems from instances of "lecture awards" identified by Committee staff where the organization making the award was at the time, continues to be the recipient of substantial funds from the official's agency, seeks funds from the agency, does business or seeks to do business with the agency, or has interests that may be substantially affected by performance or nonperformance of the official's duties.

A case in point is the receipt of a cash award in 2000 by Dr. Richard D. Klausner, Director of the National Cancer Institute (NCI) at the National Institutes of Health 1995-2001, from the Arizona Cancer Center, a recipient of substantial funds from the NCI. In December 1999, the Arizona Cancer Center invited Dr. Klausner to give the Waddell Award Lecture on January 13, 2000 in Tucson, Arizona. In response to this invitation, on December 17, 1999 Dr. Klausner executed a written recusal, disqualifying himself from participation in matters involving the Arizona Cancer Center effective December 15, 1999 until January 15, 2000 or later, if all associated financial transactions have not been completed by that date (See Attachment 1). In addition, Dr. Klausner signed a Form for Review/Approval of Awards on December 21, 1999 (See Attachment 2). In Part II of this form, Dr. Klausner identifies the following cash and other expenses provided personally to him to be received at or in conjunction with the award/event: $3000 cash award; $50 awards ceremony dinner, reception, and/or entertainment; and $1000 travel expenses for meals, lodging, and /or transportation provided in-kind or through cost reimbursement. The information on travel expenses was subsequently amended, with a written notation (apparently by the NCI Deputy Ethics Counselor) as follows: "In preparation of this award travel was estimate using coach fares per Dr. Von Hoff Di Az Cr Ctr the award included 1st class travel coverage $2885.02" (See Attachment 3).

In addition, Dr. Klausner certified to other award information, including the following: "This award is not being offered by an entity that has interests, or an association or organization the majority of whose members have interests, that may be substantially affected by the performance or nonperformance of the employee's official duties." Under Part IV "Notices" of the approval form, certification is described as follows: "The signature of the employee/authorized representative in Part II of this form certifies that the statements made and information provided on this form are true, complete, and correct to the best of the individual's knowledge. Failure to provide the requested information will result in the denial of the request for approval. Falsification of information required to be reported for this purpose may subject the employee to disciplinary action by the employing agency or other appropriate authority. Knowing and willful falsification of information required to be reported may also subject the employee to criminal prosecution."

On December 29, 1999, the NIH authorized a travel order for Dr. Klausner to go to the Arizona Cancer Center and made funds available to cover the travel expenses, per diem, and other expenses at a total estimated cost of $2,961 (See Attachment 4).

On January 13, 2000, Dr. Klausner received the Arizona Cancer Center's 12th Donald Ware Waddell Award, and delivered a lecture. According to the Arizona Daily Wildcat, Dr. Klausner's lecture was entitled, "The War on Cancer: Where We Are and Where Research is Taking Us." At the time Dr. Klausner received the award, the Arizona Cancer Center received grants from NCI in the amount of $25.249 million and contracts in the amount of $486,000 in Fiscal Year 2000.

On June 7, 2000, it appears the NIH authorized payment under a "348" voucher in order for the Arizona Cancer Center to reimburse NIH for $2553.91 in travel expenses and authorize receipt by Dr. Klausner from the Arizona Cancer Center of $136 in cash/kind (probably to cover meals and lodging). On June 9, 2000, the traveler, Dr. Klausner, signed a certification to this "348" voucher stating as follows: "I certify to the best of my knowledge, this voucher is correct and complete. I received no honoraria and/or cash, for my retention, from the sponsor(s)" (See Attachment 5).

On June 15, 2001, Dr. Klausner signed and submitted his public financial disclosure report for Calendar Year 2000. On page 3 of his report, Schedule A, "Assets and Income," Dr. Klausner reported receipt of a $3000 cash prize from the Arizona Cancer Center. It appears that the reviewing ethics official handwrote and initialed the date of receipt of the award as "3/27/00." This information was reported in the date column used in Schedule A to be in filled in only for honoraria (See Attachment 6). [See Footnote 1]

In light of this information, the Committee staff asked the American Law Division, Congressional Research Service (CRS), to analyze the legal issues concerning the receipt of a lecture award by the Director of NCI from the Arizona Cancer Center, an NCI grantee (See Attachment 7). The CRS lawyer in his memorandum to Committee staff reached the following conclusions:

1. The Director of NCI is a Presidential appointee and as such an appointee appears to be prohibited by executive order from receiving any outside earned income during the course of his appointment. Thus, the NCI Director could not accept private payment as compensation or consideration for giving a speech or lecture.

2. The Director of NCI, or any other high-ranking official of the NCI, is prohibited under federal ethics regulations from receiving an honorarium from a private source for a lecture that focused on cancer research funded by NCI.

3. Current federal law prohibits any federal officer or employee from receiving a gift of any amount from a prohibited source, that is, from someone who is "seeking official action from, doing business with" or seeking to do business with, or is "conducting activities regulated by" one's agency, or whose interests "may be substantially affected by the performance or nonperformance" of one's official duties.

4. One of the exceptions to the gifts rule, and also to restrictions on outside earned income and private compensation, is an exception for the receipt by a federal official of a bona fide award or prize, such as the Nobel Prize, when that acceptance does not have conflict of interest implications and where there is no apparent "intent to compensate" the official by the private entity for the official's duties and work for the federal government.

5. The Arizona Cancer Center is arguably not an independent source of an award, such as the Nobel organization, "but rather would appear to fall clearly within the purview and concept of an interested party in the agency and its Director."

6. With respect to the Director of the NCI, "it may be argued that a grantee organization such as the Arizona Cancer Center should be considered to have the status as a prohibited source with respect to 'awards' and cash prizes under 5 C.F.R. sec. 2635.204(d)(1), as the Center clearly has interests that may be affected by the performance or nonperformance of the Director's official duties."

7. Dr. Klausner's recusal appears to be an express recognition that the Arizona Cancer Center, as a NCI grantee, not only has or is seeking business before or action from the agency, but also has financial interests that might be expected to be affected in a direct and substantial way in the course of the normal functions and duties of the Director of the NCI, such that a recusal is necessary under criminal law and regulatory disqualification requirements.

8. The executed recusal does not resolve the conflicts problem inherent in the particular "award" since the recusal is for a very limited, short period of time and does not prevent the Director of NCI from making decisions in the future, immediately after accepting the large cash award, which may affect new grant applications, the renewal of existing grants, and the regular oversight, audit and regulation of activities relating to the continuing grants and the continuing relationship of the Center with the Institute.

9. From information and documents made available to the Committee, the approval form for awards completed by the Director of NCI appears to be a process of self-certification, with no independent determination or review of criteria made by an ethics official nor a written determination by an ethics official that the donor organization and award meet exception requirements, as required by Office of Government Ethics regulations.

10. An issue of whether a violation of the federal criminal false statements statute is raised, if the Director signed and submitted the statement attesting that the donor did not have interests that "may be substantially affected by" his official duties, and if, at the time of submitting the statement, the Director knew, or should have known of the donor's status as a major grantee of his agency.

11. Travel and travel expenses associated with the acceptance of the "award" must also be disclosed. 12. Government-wide regulations direct agencies not to approve private reimbursement for travel if acceptance "would cause a reasonable person with knowledge of all the facts relevant to a particular case to question the integrity of agency programs and operations."

In sum, the CRS memorandum supports the view that cash awards accepted by high-ranking agency officials, such as the Director of the NCI, from a grantee organization "raises precisely the ethics and conflict of interest concerns at which the regulations and statutes on gifts and compensation from interested parties are focused. Such cash awards to those agency officials, such as the Director, with authority over grants and contracts with the private organization not only provide a potential lucrative 'reward' for past official actions of which the grantee organization approves and is appreciative, but also provide an opportunity as a potentially generous 'incentive' for future official conduct favorable to the grantee organization by that official and other agency officials who are potential, future 'awardees.'"

The Committee staff's preliminary and limited review of "lecture awards" appears to show a broader concern than the case in point. The CRS memorandum identifies some of these systemic issues such as the self-certification of ethical requirements in the award approval form as opposed to an independent, written determination by an ethics official. In addition, we also note that Dr. Klausner's receipt of the cash award from the Arizona Cancer Center does not appear to be an isolated case either for him or possibly others at NCI. [See Footnote 2] For example, following Dr. Klausner's receipt of the award from the Arizona Cancer Center in 2000, it appears the then-Director of the NCI's Division of Cancer Control and Population Science received the 13th annual Donald Ware Waddell Award on January 25, 2001 and delivered a lecture titled, "Cancer Control in the New Millennium: What Works, What's Next?" We further note that, according to its web site, the Arizona Cancer Center has received and continues to receive substantial funds from NCI. The Center was ranked 23rd in the NCI's "Top 65 Grantee Institutions" listing for 2001-02. During this time, the Center was awarded more than $42 million in research grants. Grant funding has more than doubled from an annual $17.9 million five years ago.

Therefore, the Committee is initiating a broad examination of "lecture awards" from NIH grantees received by NIH officials because: (1) the Committee has obtained documents that raise serious questions about possible violations of federal criminal and ethics laws, regulations, and executive orders; (2) the ethics system at the time these possible violations may have occurred appears to remain in place; and (3) Dr. Klausner may not have been the only NIH official who received "lecture awards" from grantees and thus such a practice, if found violative, could be a continuing practice. Pursuant to Rules X and XI of the U.S. House of Representatives, please provide the following by July 11, 2003:

1. A list of all "lecture awards" or "prizes" received by NIH employees since January 1, 1998, including the date of the award, the name and position of the NIH employee, the amount of the cash award, the amount of expenses paid by the sponsoring organization, whether those expenses were reimbursed by the sponsoring organization to the NIH, the name of the sponsoring organization giving the award.

2. For each sponsoring organization giving awards identified in Request Item #1, please provide a list of all NIH grants to those institutions, the institute and the specific office approving the grant, and the dates that these grant funds were made available.

3. All records since January 1, 1998 relating to communications to and from any ethics advisors at NIH, including Deputy Ethics Counselors about "lecture awards," prizes, or any kind of cash award or any discussion of the roles of Deputy Ethics Counselors in reviewing ethics issues for NIH Institute Directors.

4. All records since January 1, 1998 relating to the awards identified in Request Item #1, including all background information on the awards and the award program, executed recusals, travel orders, and all travel records.

5. All records since January 1, 1998 relating to financial disclosure reports submitted by the NIH employees identified in Request Item #1.

Please note that, for the purpose of responding to these requests, the terms "records" and "relating" should be interpreted in accordance with the attachment to this letter. In addition, we are requesting that following production of the records to the Committee, you make available NIH employees for Committee staff interviews as requested by Committee staff.

Thank you for your assistance. If you have any questions, please contact Alan Slobodin of the Majority Committee staff at (202) 225-2927.

Sincerely,

W.J. "Billy" Tauzin Chairman

James C. Greenwood, Chairman Subcommittee on Oversight & Investigations

cc: The Honorable John D. Dingell, Ranking Member The Honorable Peter Deutsch, Ranking Member, Subcommittee on Oversight and Investigations

[1] In addition, in his public financial disclosure report for Calendar Year 2000, Dr. Klausner listed receiving the Daniel Nathans Memorial Award, a $4000 cash prize in September 2000 from the Van Andel Research Institute. Dr. Klausner was the first recipient of this award and delivered the keynote lecture at the symposium, "Cancer & Molecular Genetics in the Twenty-first Century." In 2002, the Van Andel Research Institute along with the University of Michigan received a $10 million grant over five years to establish a cancer-imaging center. On August 12, 2000, Dr. Klausner signed a Form for Review/Approval of Awards to request approval to receive a $4000 cash award and $685 in travel expenses associated with the Daniel Nathans Memorial Lecture Award. Dr. Klausner certified to other award information, including the following: "This award is not being offered by an entity that has interests, or an association or organization the majority of whose members have interests, that may be substantially affected by the performance or nonperformance of the employee's official duties." In addition, a special condition was noted in the approval for this award. NIH staff described this special condition in an e-mail to Committee staff as follows: "'Disqualification as indicated on memo. Following are [NCI Deputy Ethics Counselor's] initials. Then it says, 'With respect to supervisory duties concerning George Vandewood [sic] . . .' According to [the NIH Ethics Advisor] George Vandewood was a special volunteer in NCI who was also working for the Van Andel Research Institute." On August 15, 2000, Dr. Klausner executed a written recusal for the Van Andel Research Institute effective August 15, 2000 until September 15, 2000 or later, if all associated financial transactions have not been completed by that date. On November 29, 2000, Dr. Klausner signed a certification on the "348" voucher for the Van Andel Research Institute which stated: "I certify, to the best of my knowledge, this voucher is correct and complete. I received no honoraria and/or cash, for my retention, from the sponsor(s)."

[2] See the examples cited in footnote 1. In addition, Dr. Klausner executed a recusal for the Block Lectureship Award from Ohio State University, and apparently accepted the $15,000 cash award in 1999. However, the $15,000 Block Lectureship Award is not disclosed on Dr. Klausner's public financial disclosure report for 1999. According to information provided by the NIH, Dr. Klausner was compensated for a total of $138,257.78 in calendar year 1999. This total represents the pay received by Dr, Klausner as a grade 07 Public Health Service Commissioned Corps Officer until retiring from the Corps in August 1999, and then being compensated as a member of the Senior Executive Service Level 6 ($125,000 per annum, plus Physicians Comparability Allowance). In March 2000, he converted to Title 42 ($200,000 per annum) and thus was compensated a total of $197,134.36 for calendar year 2000.