ALEXANDRIA, Va.–NCUA’s former general counsel and former deputy general counsel consumed alcohol, made multiple trips to strip clubs and consumed edible marijuana during work hours and during work-related travel—to the point they were “out of it” during a train trip, according to an investigation conducted by NCUA’s Office of Inspector General (OIG) and released to CUToday.info as part of a Freedom of Information Act request.
The Report of Investigation centered upon the alleged activities of former General Counsel Michael McKenna, who has since retired, and former Deputy General Counsel Lara Daly-Sims, who is now in private practice. The report, published on Feb. 10, 2020, probed misuse of official time, illegal drug use and, in the case of Daly-Sims, attendance fraud issues.
According to NCUA, on Nov. 25, 2019 the United States Attorney's Office for the Eastern District of Virginia declined to prosecute McKenna and Daly-Sims for the alleged violations, and on Jan. 23, 2020, the same Attorney’s Office declined to prosecute Daly-Sims for alleged time and attendance fraud.
As CUToday.info reported earlier, ahead of the release of the report, NCUA Chairman Rodney Hood issued a statement saying he was “surprised and disappointed” to learn of the allegations,” adding that in November of 2019 the agency first heard about the “allegations of behaviors that may have constituted harassment, which were immediately reported to the Office of Inspector General.”
In a recorded message also sent to NCUA’s employees, Hood said the news “may be emotional to some based on personal perspectives or experiences whether at the NCUA or elsewhere.”
Sources told CUToday.info NCUA has retained a firm called Top Priority Care Services and has counselors on its premises available to meet with agency employees who wish to address any issues they may have.
Basis for Investigation
The reporting below is based on the documents released to CUToday.info by NCUA. Portions of the documents are redacted, including, according to NCUA, information about personnel referenced during investigative interviews that did not relate to the purpose of the investigation and whom the agency “accordingly did not interview,” identifying information related to a criminal investigator, and “material that raises heightened privacy interests that outweigh public interest in disclosure.”
In total, 37 pages of information were released to CUToday.info.
The findings stem from an investigation launched on Nov. 19, 2019, after NCUA Executive Director Mark Treichel and Deputy Executive Director John Kutchey informed the Office of Inspector General that Kutchey had learned from then-Deputy General Counsel Daly-Sims that she and McKenna had engaged int the activities. The agency said the scope of the investigation expanded to include an examination of Daly-Sims' time and attendance after the Reporting Agent (RA) discovered Daly-Sims' NCUA daily parking garage duration was routinely less than eight hours.
Concerns Over Being Discovered
Allegedly, both Daly-Sims and McKenna were concerned the activities would be discovered.
“Daly-Sims stated in her interview that when she raised her concerns of getting in trouble, McKenna said that if they were reported to the Inspector General, they should just say they were offsite at a planning session,” according to the Report of Investigation. “When interviewed, McKenna initially claimed to have no knowledge of anyone from the Office of General Counsel drinking heavily at offsite meetings until the RA asked him if he attended offsite planning meetings.”
In its report, NCUA said its Personnel Suitability and Security Program provides that all NCUA staff are responsible for “maintaining an environment where personal conduct, trustworthiness, and character are known to be important and compliance with this instruction is expected and required.” And that the use of illegal drugs whether on duty or off, is prohibited.
The OIG said its investigation substantiated the allegations and that both McKenna and Daly-Sims stated in their interviews they drank alcohol and went to strip clubs during work hours.
The report further found Daly-Sims stated during her interview that she and McKenna consumed edible marijuana during work hours while they were on work-related travel in New York City.
Michael McKenna
“McKenna stated in his interview that he had not used marijuana during the workday at the NCUA or at all since joining the Army in 1985, and that he did not remember consuming edible marijuana during the New York trip,” the OIG report states. “The day following his interview, November 19, 2019, McKenna retired from the NCUA after being informed by Executive Director Treichel that McKenna might be drug tested. Treichel also informed McKenna that he expected McKenna would not be at the NCUA board meeting on November 21 because he would have been placed on administrative leave. During a second interview with McKenna on January 2, 2020, the RA read McKenna a document Daly-Sims had provided the OIG, in which McKenna wrote to her: ‘We smoke a joint in your hot tub.’ McKenna told the RA that this was a joke.”
McKenna joined NCUA in 1989 as an attorney, and as senior policy adviser for two administration board members in 2001 and 2002. In 2003, McKenna became deputy executive director, and at the end of 2004 was named deputy general counsel. He was appointed general counsel in 2011. At the end of 2017, agency information shows he was paid $279,000 plus a $1,500 bonus in 2017.
Frank Kressman is currently the agency's acting general counsel.
Work-Hour Shortage
According to the OIG, the investigation of Daly-Sims's time and attendance determined that Daly-Sims worked 374 fewer hours than what she claimed on her timesheets for the period of April 3, 2017, through November 9, 2019, which amounted to $46,951.96 in salary that she should not have received.
“The hours she spent drinking and going to strip clubs with McKenna during the workday was not part of, but on top of, her 374-hour shortage, except for 45 minutes on June 9, 2017, which was included in the shortage calculation,” the OIG stated.
Daly-Sims resigned from NCUA on Jan. 10, 2020, while on administrative leave, and is now in private practice. According to the OIG, on Jan. 27, 2020, in response to a request by the RA, through her attorney Daly-Sims declined to be interviewed about the discrepancies in her time and attendance.
Interview with Daly Sims
As part of an interview conducted on Nov. 18-19, 2019, the Reporting Agent and the Assistant Inspector General for Investigations (AIGI) interviewed Daly-Sims, and on Dec. 4, 2019, the AIGI further interviewed Daly-Sims regarding allegations that she and McKenna drank and went to strip clubs during the workday, the OIG said.
“Daly-Sims and McKenna first started drinking and going to strip clubs during the workday on February 16, 2017, after McKenna took Daly-Sims and other Office of General Counsel (OGC) attorneys to lunch to fulfill a bet she had with him on the New England Patriots winning the Super Bowl,” the report states. “After lunch, McKenna told Daly-Sims to give him 30 minutes and they would go somewhere else to collect on the second part of their bet. Around 1:00 p.m. or 1:30 p.m., Daly-Sims and McKenna went to a restaurant in downtown Washington, D.C., and had a couple of beers and some shots of alcohol. After that, Daly-Sims and McKenna went to the strip club next door, Camelot. McKenna had single dollar bills that he gave Daly-Sims to give to the entertainers. She believed they returned to the NCUA around 4:00 p.m. or 4:30 p.m. because that was when McKenna's workday usually ended. Daly-Sims said she felt very uncomfortable drinking and being at a strip club during work hours but did not think someone could tell that she felt uncomfortable. She thought they went to the strip club because she had told McKenna previously that she had never been to a strip club and also thought that McKenna was trying to make her feel better because she (redacted).”
The Camelot Club, Washington
In all, the OIG said it found McKenna and Daly-Sims went together to strip clubs seven times over a 22-month period, the last in December 2018. “They went to Camelot four times, to another Washington, D.C. strip club near the St. Regis Hotel once, and to a strip club in New York City, Rick's Cabaret, twice over two days,” the report states. “On average, their visits to strip clubs, including travel, were at least three to four hours long. The strip club visits also involved drinking a lot of alcohol, except for a time Daly-Sims did not drink…”
The OIG said McKenna and Daly-Sims used personal credit cards for expenses and no government funds were used.
Not ‘Hardcore’
“Twice during this period, they drank alcohol heavily during the workday without visiting a strip club. Daly-Sims said that drinking alcohol during the workday continued until McKenna left the NCUA in November 2019, but it was not ‘hardcore,’” the report states. “McKenna and Daly-Sims sometimes would have a late lunch on Wednesdays to discuss work issues at Theismann's Restaurant next to the office or an outdoor café and they usually would have two beers. She said that McKenna insisted that her last performance appraisal, on October 26, 2019, at 3:00 p.m., be over drinks, and during her performance appraisals in 2017 and 2018, McKenna had her drink a shot of whiskey.”
According to the Report of Investigation, Day-Sims said that going out drinking or to a strip club was always McKenna's idea and that she told him that she was concerned about getting in trouble.
“Daly-Sims felt like she was a target in the office because the employees in OGC had low morale due to a change in telework policy and that she was being swept up in the anger about that,” the report states. “As a single mother, Daly-Sims was afraid of losing her job, while McKenna did not have concerns because he was already eligible for retirement. When Daly-Sims raised her concerns, McKenna said that if anyone reported this to the Inspector General, they should just say they were offsite at a planning session. They did talk about work during these times. Daly-Sims cancelled several times with McKenna with the excuse that she was too busy. McKenna sometimes said she really needed to go and he knew that she was not that busy. Daly-Sims worried that she bore some responsibility and did not say no enough to McKenna.”
Who Else Knew?
The OIG said Daly-Sims states she did not know of anyone else in NCUA Office of General Counsel who went drinking or to strip clubs during the workday with McKenna.
“Daly-Sims was unsure of the level of knowledge the rest of OGC had regarding McKenna and her drinking and going to strip clubs. On some occasions, Daly-Sims returned to the office after she went out with McKenna because she was too intoxicated to drive home,” the report states. “On one such occasion, Daly-Sims said she saw Associate General Counsel Frank Kressman and said, ‘Fucking Mike keeps taking me out on these excursions and I don't like it, but I feel like I have to go.’ She did not think she shared any details with Kressman. On another occasion, Daly-Sims told Associate General Counsel Linda Dent that she was uncomfortable because she had ‘just been out with McKenna and wish[ed] [she] hadn't kept agreeing to do it but [she] felt like she could not not go.’”
‘Out of It’ On the Train
Among the other findings from the OIG interview of Daly Sims:
- McKenna and Daly-Sims visited a strip club in New York City in conjunction with an overnight work trip between Christmas and New Year's Day in 2018, with Daly-Sims stating there was "a little bit of a manufactured reason to go." After their meeting, McKenna and Daly-Sims “went to dinner and drank a lot. While she was in the bathroom at the restaurant, she called a friend and told him that McKenna wanted to go to a strip club and that she really did not want to go, but felt that she had to go because McKenna was her friend, her boss, and was helping her get the NCUA General Counsel job (to replace him after he retired). After dinner, they went to Rick's Cabaret strip club. Daly-Sims said that this strip club was much more "touchy" than the ones in Washington, D.C.”
- The next morning while still in New York, “McKenna and Daly-Sims met around 11:00 a.m. or 11:30 a.m. at a pub. McKenna gave Daly-Sims a marijuana edible that he had brought with him. Daly-Sims and McKenna consumed the marijuana edible during work hours before they returned to Alexandria. Daly-Sims did not want the marijuana edible because she was concerned about her top secret clearance. However, McKenna wanted Daly-Sims to consume the edible, although he did not force her to consume it.”
- After consuming the marijuana edible, McKenna and Daly-Sims went back to Rick's Cabaret because McKenna had left his credit card there the night before, according to the OIG report. “Daly-Sims wanted to leave the strip club but McKenna insisted that they stay. After the strip club, McKenna and Daly-Sims caught their train back to Washington, D.C., around 2:00 p.m. or 3:00 p.m. Daly-Sims stated that they were ‘out of it’ on the train ride.
Interview with Michael J. McKenna
On November 18, 2019, the Reporting Agent and the AIGI said they interviewed then General Counsel McKenna regarding allegations that he and Daly-Sims drank and went to strip clubs during the workday.
“The RA informed McKenna that the OIG's office had received allegations that members of OGC had offsite meetings where they drank heavily. McKenna informed the RA that he had no knowledge of this. The RA asked McKenna if he attended offsite strategic planning meetings. McKenna responded that he and Daly-Sims had three to four offsite strategic planning meetings in the last couple of years where they went downtown and to the National Harbor. When questioned on the downtown locations, McKenna stated that one of the locations was a ‘gentlemen's club.’”
During the interview, the OIG said McKenna stated that he and Daly-Sims went to a gentlemen's club two to three times at lunch time or towards the end of the workday, with McKenna’s workday typically running from 6:30 a.m. or 7:00 a.m. to 4:30 p.m. or 5:30 p.m.
“In response to the AIGI's question, McKenna said he could not identify what time he was referring to when he said ‘towards the end of the workday,’” the report states. “He said they would spend one hour at the gentleman's club when they went during the workday. McKenna estimated that he had two to three drinks at the gentlemen's club. McKenna thought it was probably his idea the first time they went to a gentlemen's club, but that Daly-Sims had previously mentioned that she had never been to a gentlemen's club and wanted to go. He stated that he and Daly-Sims had an open communication style. Daly-Sims never objected to going and never stated she did not want to go.”
Regarding the trip to New York City, the OIG said McKenna confirmed he and Daly-Sims went to a pub and afterwards to a gentlemen's club, both at night.
McKenna told the OIG during the interview he had not used marijuana during the workday at the NCUA or at all since joining the Army in 1985, and further stated he did not remember taking edible marijuana on the second day of his New York trip, according to the NCUA report.
Daly-Sims' Time and Attendance
The OIG report noted Daly-Sims needed McKenna's approval to telework.
“It was hard for him to remember how often she teleworked because for different years, there were different things going on with her,” the report states. “In November or December 2016, McKenna became concerned that Daly-Sims was not working 40 hours a week. There was a particularly heavy workload in OGC at that time, so McKenna was especially concerned that Daly-Sims might not be working her hours. He arrived at work before 7 a.m. and she did not arrive until 9 a.m., which meant she should be leaving later. Accordingly, he obtained Daly-Sims' garage entrance and exit information. The garage information did not match what she provided on her timesheets.
Lara Daly-Sims
“McKenna confronted Daly-Sims with this information. In 2017, Daly-Sims seemed to be working her hours, but in 2018 and 2019, there were problems again. When McKenna questioned Daly-Sims about her hours, she stated that she worked at night on special projects for board staff on top of her regular work,” the report findings continued. “McKenna only remembered one occurrence of Daly-Sims not coming into the office at all when she was supposed to, which was in 2019. McKenna told Daly-Sims that she had to take leave. Daly-Sims responded that she had been working on a special project for board staff and did not need to take leave.”
The report goes on to state McKenna was too busy with his own work and could not therefore keep track of when Daly-Sims was coming and going, and had to rely on what she told him.
“If Daly-Sims did not work her hours, she misled him. McKenna did not have any recollection of Daly-Sims frequently working from 10 a.m. to 2 p.m., but he noted that he spent a lot of time on the seventh floor (versus the sixth floor, where OGC was located),” the report stated. “If Daly-Sims left the building without telling him, that would have been a problem…Daly-Sims definitely did not telework every night, as he would have had to approve that.”
The report states when NCUA moved to a new software solution, HR Links, it became more difficult to track Daly-Sims’ time and attendance due to a new allowance for a variable work schedule. McKenna was provided with information on Daly-Sims’ garage schedule.
“McKenna shredded the garage information when he was packing up his office prior to retiring,” the report states, adding McKenna was under the impression Daly-Sims worked 80 hours each pay period.
Others Interviewed
The NCUA RA and OIGI said they interviewed Associate General Counsel Linda Dent and Deputy General Counsel Frank Kressman regarding their interactions with McKenna and Daly-Sims. Both said they had not smelled alcohol on Daly-Sims or McKenna during the workday.
During a separate interview on Jan. 27, 2020, conducted by the RA and AIGI with NCUA Executive Director Mark Treichel regarding McKenna's decision to retire, the report states that on Nov. 19, 2019, Treichel told McKenna NCUA Chairman Hood was considering having McKenna drug tested. “Treichel informed McKenna that he expected that McKenna would be required to take a drug test and be placed on administrative leave,” the report states. “McKenna responded by saying he would ‘pee in a cup right now’ and said he went to a strip club twice. Treichel told McKenna that he did not think McKenna would be at the NCUA board meeting on November 21, because he thought McKenna would be on administrative leave before then. McKenna called Treichel a couple hours later and told Treichel that he was retiring.”