Justice Department, TSP Board in turf battle over lawsuit

The Federal Retirement Thrift Investment Board, which runs the Thrift Savings Plan, is accusing the Bush administration of obstructing its authority in litigation involving the failed modernization of a computer system. At issue is whether the board has independent authority to sue Fairfax, Va.-based American Management Systems for alleged breach of contract. On Jan. 25, the Justice Department asked a federal appeals court to dismiss the case, arguing that only it--and not the Federal Retirement Thrift Investment Board--has authority to sue the company. The TSP board and AMS have been locked in a legal battle since July, when the board's executive director, Roger Mehle, canceled a software development contract with the company. In 1997, the TSP board awarded AMS a $30 million contract to install a new system that would have managed TSP investments and allowed employees to more easily control their accounts. But the contract ran into frequent delays; costs had ballooned to an estimated $87 million with no completion date in sight when the board fired AMS and filed suit seeking $350 million in damages.

AMS has filed a contract claim in the U.S. Court of Federal Claims against the TSP board and the federal government, challenging the board's decision to terminate the contract for default and its refusal to pay some invoices.

Last November, U.S. District Court Judge James Robertson threw out AMS' suit, ruling that the board could not file it without the backing of the Justice Department. The board is appealing the case. But in its Jan. 25 filing before the appeals court, the Justice Department argued the TSP shouldn't be allowed to appeal a case it shouldn't have brought in the first place.

"For the same reasons that Mr. Mehle lacked authority to bring the complaint, he also lacks authority to pursue this appeal," the department wrote. "Justice Department authorization for the appeal has neither been sought nor obtained." In case the court decides to hear the appeal, Justice, in a concurrent brief, asked for permission to intervene and participate in the case. According to a source at the Labor Department, which oversees the TSP board's activities, the board has the authority to act in the best interest of plan participants, including filing lawsuits. "But no one ever told the board who their lawyer had to be," the source said. Most departments have agreements with the Attorney General allowing them to file lawsuits so long as they first consult with Justice. In the board's case, Mehle did not want to be confined by the "whims of any administration" and never sought such an agreement, according to the source. Mehle is particularly distrustful of this administration and its close ties to AMS, the source said. Charles Rossotti, IRS commissioner, is a co-founder of AMS. "Bush administration officials at the Department of Justice seem intent on obstructing and opposing the independent litigating authority of the [Thrift Savings] Plan," Mehle said in a statement. "On behalf of the millions of current and future plan participants, including the 2.7 million members of the uniformed services now eligible to join, the five board member fiduciaries and I cannot allow that to be successful." Late last year, the board sent draft legislation to members of Congress seeking express permission to file suit independent of the Justice Department. Interviews with Senate and House staffers on the relevant committees indicated that lawmakers were not fully aware of the dispute. Further, few lawmakers had been briefed on the legislation. A staffer on the Senate Appropriations Committee said the budget and other priorities will be front and center for the near future.