Exclusive: U.S. agency FinCEN rejected veterans in bid to hire lawyers

ST LOUIS/NEW YORK Fri May 9, 2014 4:15pm EDT

A U.S. Army officer listens to a speaker with the U.S. flag in the background at the Hiring our Heroes job fair in New York March 27, 2014. REUTERS/Brendan McDermid

A U.S. Army officer listens to a speaker with the U.S. flag in the background at the Hiring our Heroes job fair in New York March 27, 2014.

Credit: Reuters/Brendan McDermid

ST LOUIS/NEW YORK (Reuters) - A U.S. Treasury Department division charged with policing money laundering may have run afoul of federal regulations that require military veterans to be given preference for jobs in the government if they are qualified, according to sources and documents seen by Reuters.

Most U.S. government positions fall into a standard set of job bands, which determine things such as pay and minimum qualifications. Federal law bars the government from screening candidates for qualifications that go beyond the job's standard requirements.

The Financial Crimes Enforcement Network (FinCEN), in the midst of a hiring campaign, however, screened candidates to hire only lawyers for certain jobs, even though the positions did not require a law degree, Reuters reported last week.

Now, interviews with current and former government officials and messages sent to job applicants show that while hiring for three top positions in its enforcement division last year, FinCEN rejected pools of candidates made up entirely of qualified veterans.

Instead, it re-posted the jobs with new experience requirements that typically only prosecutors have, without properly reclassifying the positions, the sources said.

Further details about why the veterans did not make the cut, such as their other qualifications and suitability for the jobs, couldn't be learned. FinCEN eventually hired three former federal prosecutors for the positions.

FinCEN spokesman Stephen Hudak said in an emailed statement that last year 25 percent of FinCEN's new hires were veterans, including several management positions both within and outside its enforcement division. "We are extremely proud of our record of hiring veterans," he said. "FinCEN is also committed to complying with all federal rules and regulations regarding federal hiring."

Treasury spokeswoman Hagar Chemali declined to comment and referred questions to FinCEN.

Federal agencies have to cope with a cumbersome system that complicates the hiring process, forcing recruiters to work around regulations to hire people with the skill sets that they actually need, employment consultants said. Still, news that FinCEN's alleged workaround may have hurt veterans' chances at finding government jobs could become an embarrassment for the Obama administration.

The administration came under fire separately on Thursday over reports about shoddy treatment of veterans at some Veterans Administration hospitals.

The Office of Personnel Management, an independent federal agency that governs labor practices in the government, has determined that FinCEN illegally screened candidates and recommended further investigations by two other federal agencies, Treasury's Inspector General and the Office of Special Counsel. Treasury temporarily froze all recruitment by FinCEN and forced it to rescind 11 job offers, sources have previously said.

A spokesman for the inspector general said earlier this week his office had referred the matter to the Office of Special Counsel, which told Reuters on Tuesday it had received the referral and opened a case.

OSC and OPM declined to comment on Friday, while the inspector general was not immediately available on Friday.

Earlier this week, U.S. Senator Chuck Grassley, an Iowa Republican and ranking member of the Senate Judiciary Committee, said he is taking steps to make sure authorities were probing FinCEN and looking into whether Treasury officials knew about the practice of screening candidates.

"The latest allegation of rejecting qualified veterans adds to the concerns over FinCEN's hiring," Grassley said in an email. "My impression so far is the authorities investigating FinCEN's hiring practices are taking the concerns seriously. More than ever, the investigations need to cover whether it's accurate, as alleged, that Treasury officials knew about the hiring problems and did nothing until OPM forced their hand.''

Sources have said that some senior Treasury officials knew about FinCEN's practice but it was not halted until OPM identified the problem.

"Destroying or disregarding applications submitted by veterans could be a very serious violation," said Jason Zuckerman, a Washington lawyer who worked as senior legal adviser to the Special Counsel at OSC until last November.

OSC is tasked with protecting whistleblowers and disciplining government employees for labor misconduct.

"OSC could potentially bring a disciplinary action case against the officials who were responsible for a willful violation of the veteran preference rules," Zuckerman said. "Penalties include suspension, removal and debarment from federal employment."

The government's recruitment rules sometimes make hiring the right people needlessly difficult, said a former FinCEN enforcement official who didn't want to be named because of his private sector work.

"Regulators are under intense pressure from the Hill to more vigorously enforce AML laws," the former official said, referring to anti-money laundering laws. "How is FinCEN supposed to beef up enforcement without having staff with enforcement experience? Who has such experience? Former prosecutors."

In the statement, FinCEN's Hudak said, "Our goal is to make sure that FinCEN has the people and tools that it needs to continue to be the best in the world at what we do; fighting financial crime, money laundering, and terrorist finance."

The hiring issue comes a year and a half into FinCEN Director Jennifer Shasky Calvery's efforts to reorganize the agency. She has said in public speeches that FinCEN is trying to strengthen its ties to law enforcement and counterterrorism authorities.

In March last year, for example, Reuters reported FinCEN had made preliminary plans to build a link between the database it manages, which contains reports about activity by bank customers including U.S. citizens, and the Joint Worldwide Intelligence Community System, the internal network U.S. intelligence agencies use to share classified documents with each other. (here)

One of the sources said that plan was scrapped after inquiries by Treasury Secretary Jack Lew and members of Congress about the Reuters story.

Under Shasky Calvery, the agency has also participated in some of the largest anti-money laundering cases against global banks, including a record $875 million settlement with HSBC Holdings Plc.

PROSECUTORS HIRED

In June last year, FinCEN advertised for chiefs of its money services business section, depository institutions section and office of compliance and enforcement, all of which fall within the division of enforcement, the sources said.

Messages to applicants for the jobs on the federal government's hiring website, which were seen by Reuters, show that "only qualified veterans were referred" for further consideration.

In August, the agency again posted ads for the three positions, two of the sources said.

This time, the job ads had a new requirement: "Select the one statement that most accurately represents your experience drafting civil enforcement investigative demands or related documents, criminal search warrants, criminal or civil seizure warrants, or applications for Title III electronic surveillance." Title III electronic surveillance refers to wiretaps.

People who have worked as prosecutors typically have such experience, and the three people who eventually got the jobs are former federal prosecutors.

Greg Lisa, a former trial attorney in the Justice Department's criminal division, became the new head of the money services business section.

Andrea Sharrin, now FinCEN's director of the office of compliance and enforcement, was previously the deputy chief of the computer crime and intellectual property section in DOJ's criminal division.

Michelle Zamarin, a former assistant U.S. attorney for the District of Columbia, became chief of the depository institutions section at FinCEN.

None of them have been accused of any wrongdoing, and there is no indication that they had any involvement in the hiring process other than applying for the jobs. FinCEN's Hudak declined to comment on their behalf.

According to one of the sources, the OPM found these hirings violated federal regulations. Unlike the 11 other job offers FinCEN had to revoke, the agency was not forced to renege on these three because the officials had already started working for the agency, the source said.

(Reporting by Brett Wolf of the Compliance Complete service of Thomson Reuters Accelus in St. Louis and Emily Flitter in New York. Editing by Paritosh Bansal and John Pickering)