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By: David Cay Johnston

How well that agency operates is now being questioned in a series of audits by the agency's inspector general, which are to be made public this week, and by a lawsuit charging that one of the pension agency's contractors defrauded it.

Two Republican Senators who are familiar with the audit findings, Charles E. Grassley of Iowa and Christopher S. Bond of Missouri, said that hearings would be held by September to investigate how well the agency is run and why, for example, nearly half of the 472,000 people covered by failed pension plans the agency has taken over have not been told how much they are due each month.

Of the 200,000 people waiting for their initial determination of actual benefits, about 19,000 have been waiting for more than 13 years and some have been waiting for 18 years. When these people become eligible to receive pension checks an estimated payment is sent until the actual amount is determined.

The audits, the lawsuit and the hearings come as Congressional Republicans are gearing up for a battle to pass major changes in the Employee Retirement Income Security Act that have long been sought by major corporations and business owners. The Republicans says picayune regulations and poor operation of the pension agency are driving up pension-plan costs and hurting workers who change jobs often.

Advocates for pensioners say the Republican proposals would allow business owners and executives to get bigger tax breaks on larger pensions for themselves, while reducing incentives to pay retirement benefits to workers who receive lower pay.

The audits found that "there were no monitoring controls in place that would enable" the pension agency "to detect potential unauthorized data modifications" like creating ghost retirees in its computers and sending them money.

Robert Wayne Poll, the pension agency inspector general, said he found only one person with such authority and that person had acted properly. "Our concern," Mr. Poll said "is that others, who might not be as forthright as this person," could create ghost pensioners and pay them, or, when a pensioner dies, divert checks to themselves or confederates.

Mr. Poll, who spoke after being told that a critic of the agency had supplied copies of his work to a reporter, said he was continuing this audit.

Mr. Poll said he was also concerned that the pension agency would not certify to him that its records on issuing benefit determinations were reliable.

Joseph Grant, the pension agency's deputy director, did not dispute most of the audit financings, but he said they drew too heavily on conditions that the Clinton Administration inherited in 1993.

Mr. Grant said that the pension agency, which received five awards from Vice President Al Gore for improving efficiency and customer service, had reduced the backlog of people waiting to hear how much they are due to 200,000 from 300,000 and would eliminate it in a few years.

Mr. Grant said there was no harm from delays in determining benefits because when the exact amounts were determined, lump-sum payments with interest were sent to cover shortfalls or pensioners could take months to return overpayments.

Senator Grassley, the chairman of the Select Committee on Aging, said he disagreed. "I think they have forgotten what their mission is, which is to serve pensioners," Mr. Grassley said. "Six to 10 years is just too long for people to wait to find out how much their pension will be. We have to make this agency become more customer-friendly, like we did with the I.R.S."

Senator Grassley said that lump sums to make up for short payments both deprive people of income when they need it and can push them into a higher tax bracket, making their benefits less valuable. And he said cutting benefits by as much as 10 percent per month until overpayments were returned could be cruel to elderly people on fixed incomes.

Mr. Bond, who is chairman of the Small Business Committee, said that his office had talked to pension agency workers who said that it "is not properly doing its job of assuring that people get the pensions they earned."

One employee of the agency, who calls himself Jim Dough, to avoid any retribution, has filed a lawsuit on behalf of the agency against one of its biggest contractors, Official Specialists of Peabody, Mass. He was joined by two former Office Specialists' employees and by the Association of Former Pan Am Employees. Two years ago, the association filed a separate lawsuit accusing the pension agency of mishandling benefits for its 45,000 members.

The Dough lawsuit, unsealed on March 18 by a Federal District Court judge in Baltimore, says that a senior pension agency official, Bennie L. Hagans Jr., steered business to Office Specialists, which received a number of contracts without competitive bidding, and ordered payments to it expedited.

The suit also asserts that Mr. Hagans improperly intervened when Myrna Cooks, the Office Specialists' liaison to the pension agency, quit to form her own company and was sued by Office Specialists for violating her employment contract. Mr. Hagans, the lawsuit asserts, "threatened Office Specialists" with a loss of business from the pension agency unless it dropped its suit against Mrs. Cooks and let her assume an Office Specialists' contract valued at $13.5 million. Office Specialists then settled with Mrs. Cooks, whose business, operated out of her home, was awarded the contract.

Mr. Hagans, in two lengthy interviews, said he had acted properly in every dealing and that his routine actions were being twisted by the plaintiffs, who he said had based their case on faulty assumptions.

Jesse P. Schaudies, general counsel for Randstad North America, a subsidiary of the Dutch Company that owns Office Specialists, said that "we have no basis for believing there was anything improper" in its dealing with the pension agency.