MIST OF TIME: Assistant Town Manager took part in scam to bilk Federal Government

Cape Charles Mirror Report – Wayne Creed

Based on a year 2000 internal report by the U.S. Navy Inspector General, Cape Charles Assistant Town Manager Robert Panek, then a high ranking civilian in the Navy Budget Office, was part of a scam that attempted to allow two friends to retire prematurely and start taking pensions early. The report is quoted as stating that the scam is a case of senior Navy executives “taking care of their own.” The report charges “manipulation of the federal retirement system.” The Inspector General’s report notes that three top Navy civilians attempted to manipulate the retirement system to help their friends retire early. Cape Charles Assistant Town Manager, Robert Panek was one of the members involved in the scheme.

Editor’s Note: After this topic was thrown over the transom by unlikely sources, some of this was confirmed by a Defense Week article by John M. Donnelly in August 2002, “Top Navy Execs Tried To Bilk Retirement System”. Most, if not all information in this Mirror story is derived from that year 2000 Defense Week article. The original article can be found on Free Republic here: http://www.freerepublic.com/focus/f-news/735634/posts.

Defense Week obtained the Navy Inspector Generals (IG) report and the bonus information via the Freedom of Information Act.

According to details of the Navy Inspector Generals report, Mr. Panek, along with Charles Nemfakos, the then-No. 3 official in the Navy, and Betty Welch, one of the Navy’s top executives for the civilian-personnel system, worked to instantiate federal jobs for their two friends, only these positions apparently did not fulfill any function, and were basically straw men jobs. The jobs were closed very soon after they were created. The plan was to make the ‘filled’ positions appear to be involuntary terminations—the standard terminology is “discontinued service retirements”. With that in place, these folks could start taking retirement—which enabled them to reap benefits before they otherwise could.

Although the plan was discovered before monies were shelled out, the report says that these individuals held the potential to defraud the government out of $1 million in annuities and benefits. Despite being caught, at the time Navy Under Secretary Jerry Hultin took no action against Panek (Nemfakos and Welch did have administrative action taken against them, which may have included counseling, putting a “non-punitive letter of admonition” in the person’s file, or reducing bonuses). To the contrary, Panek received a $24,480 bonus for FY 2000, and close to $25,000 for FY 2001.

According to the report, Welch made the remark to IG investigators: “I don’t think ethics; it’s not my job to determine the ethics.” To which the IG responded: “Particularly alarming is the fact that Ms. Welch, the most senior [personnel official] in the Department of the Navy, is not willing to concern herself with the ethical implications of a personnel action.” Welch justified the scheme by saying, “I know they do it in OSD [the Office of the Secretary of Defense] all the time. If there are ways we can support managers, my job is to say, `Yes’—if we take the law and tie it into a knot or a pretzel and don’t break it”

“This wasn’t even a carefully crafted sham,” the investigators wrote.

An OPM official interviewed by the investigators said the scheme may have amounted to “conspiracy to defraud the government” and that OPM would ” `bring pressure to bear’ upon the Navy to sanction the culpable individuals.” In the end, Panek was exonerated, though the IG had found that he “shared accountability” for what happened.

When the Mirror was first alerted to this event, we thought that it was too far in the past to be relevant to anything happening in Cape Charles today. Discussions did lead us to believe that it was not our decision, and that folks should at least be made aware, and they could form their own opinions as to what is relevant, or what isn’t. The point being, even as Mr. Panek is not an elected official, no single person has had more influence on the current state of Cape Charles affairs than he. The considerable amount of debt we find ourselves in occurred during Mr. Panek’s watch, such as the waste water plant, community trail, and harbor breakwaters. To be fair, he was, and is given the latitude to operate by the Mayor and Town Council (past and present).

The question is, had the Mayor and Council been aware of this attempt to bilk the federal government, would they have provided him so much rope, allowing him to move forward and create what many in town jokingly refer to as the Panek Doctrine? Historically, Mr. Panek has served the town as a consultant, going back to when he served as interim Town Manager, and eventually full-time Assistant Town Manager. One bone of contention is that, after he was given the full-time position as Assistant Town Manager, we have been unable to find any record of job advertisements, public hearings, workshops, or executive sessions undertaken by Town Council relative to hiring Panek. Instead, Council, in the back rooms, just made the decision to hand the keys over to him.

Reader Correction: Just to clarify: According to the Charter of the Town of Cape Charles, the position of the Assistant Town Manager is not an appointed position. The hiring of the person to fill this position is the responsibility of the Town Manager with or without the sanction of the Mayor and Council. The Town Manager, however, is appointed by Council and reports directly to Council.

Anyone that has ever attended a Council regular meeting or work session will quickly become aware that Mr. Panek is the only one on 2 Plum Street that has any idea of what is going on. If there is a question about any topic, Mr. Panek is usually the only one with enough background and business knowledge to answer it (like it or not, given that, Panek has to be considered one of the town’s valuable assets). And this is not a new thing. Going back to when Councilman Burdiss was still working the room, Mr. Panek was right there, working especially at those monthly ‘Citizen’s meetings’.

Taken as a body of work, recent events such as selling or turning the harbor over to a third party, the massive shortfalls at the harbor, the town’s odd attachment to the PSA pipeline to Route 13, the selling of deep water harbor lots to Southport for pennies on the dollar, more millions being spent on the community trial, as well as Councilman Bennett’s unrequited wish to sell or lease the harbor, certainly provides context and perspective on the current Cape Charles landscape.

Maybe a little too much perspective.

Editor’s Note: Several folks have commented to me about this article, and about whether it is even relevant, and we do see the point. When we were alerted to this, we were not even sure what to do with it. Even as Mr. Panek, who by all accounts had a distinguished career as a civilian in the Department of Navy, serving 34 years, and was honored for his service in the House of Representatives, we still thought this event was also a part of the narrative as it pertains to Cape Charles. We tried to be as fair as possible, and made sure to point out that Panek was even exonerated in the end.