MEETING WITH MR. CHARLES W. MADDOX RE HSC INQUIRY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-00300R000100040040-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 6
• Document Creation Date: December 12, 2016
• Document Release Date: August 20, 2002
• Sequence Number: 40
• Publication Date: October 24, 1975
• Content Type: MFR

Approved For Release 2002/08/28 CIA-RDP78-00300001 ( ~J
24 October 1975
SUBJECT: Meeting with Mr. Charles W. Maddox re HSC.Inquiry
1. A meeting was held at 3:30 p.m., 20 October 1975,
in Room 5-E-62, to brief Mr. Charles W. Maddox on the opera-
tions of Government Employees Health Association, Inc. (GEHA); STAT
Public Service Aid Society (PSAS); Educational Aid Fund (EAF);
and Employees Activity Association, Inc. (EAA). Present for
STAT thp meeting were Mr. F. W. M'. Janney,' Director of Personnel-,
Deputy Director of Personnel; and g=7 1
STAT y Chief of Benefits and Services .
2. GEHA
STAT
STAT
began the meeting with an explanation
of the purpose of GEHA's existence. He indicated that GEI-4A
was an.employee association initially organized-and incor-
porated in 1947 for.the primary purpose of providing group
term health insurance for its members, all of whom are
Agency employees. (The Federal Government provided no
health insurance coverage for its employees until July
1960.) explained that from this beginning,
GEHA expanded its services to its members so that it today
provides a variety of insurance plans including life, health,
accidental death and dismemberment, travel, and income
replacement insurance. Mr. Maddox asked who underwrites
these plans and was told that they are underwritten by
Mutual and United of Omaha.
The manner in which GEHA's various reserves (trust
liabilities) were accumulated was explained; i.e., through
refund of premiums from the underwriter of the plans in those
years when claims experience was good, plus invest income on
these refunds. Discussion focused primarily on the United
Benefit Life Insurance Company (UBLIC) plan because it has
'a reserve far in excess of the total of all other reserves
held by GEHA. The reason for this was also explained.
Figures were presented to show that until 1.964, UBLIC
Approved For Release 2002/08/28 : CIA-RDP78-00300R000100040040-4
 Approved For Release 2002/08/28 : CIA-RDP78-00300.0100040040-4
refunds of premiums were passed on to individual participants
of the plan. Thereafter, the GEHA Board of Directors elected
t.o use this money for improving the benefits of the UBLIC
plan rather than make annual cash refunds. Increased life
insurance for the employee and free life insurance for his
dependents were the first improvements made. Thereafter,
in May 1966, a free life insurance was made available to
retirees who had participated in the UBLIC plan for at least
10 years prior to their retirement. Details of this retiree
life insurance, including computation and funding, were
explained.
This led to a discussion of GEHA's investment port-
folio, the majority ($2.1 million) of which is attributable STAT
.to the funding of the UBLIC retiree insurance. It was
disclosed that management of the portfolio is by a committee
of three members who are chosen by the GEHA Board of Directors
and responsible to them. In response' to a uestion regarding
their expertise in financial management, tated
that since the Directors are elected by true urmA ship,
there is no assurance that any of them would have any special
.investment experience; however, most of the time there is
usually-at least one Board member who is knowledgeable through
experience with his own personal investments. It was pointed
out that GEHA investments had been in Government securities
in the early years, in insured savings and loan accounts in
the early and mid-1960's, and thereafter in a combination of
commercial bonds, FNMA's, and a limited holding of common
stocks. Charts of current holdings and past sales were shown
to Mr. Maddox. He indicated that GEHA's investment record
was not particularly outstanding and remarked that we might
be better off following VIP's practice. indi- STAT
cated that this was a possibility since e THILIMEng of the
current GEHA Board and Investment Committee was to sell its
holdings when the market is favorable and then reinvest in
safe securities that provide a reasonable return and require
less frequent attention.
Thereafter, there followbd a brief discussion of
GEHA's other insurance programs. It was pointed out that
.GEHA's Association Benefit Plan (ABP) is a participant of
the Federal Employees Health Benefits Program and as such
is subject to the law and regulations of that program as
implemented by the U. S. Civil Service Commission. Conse-
quently, there is another reserve, attributable to the ABP,
but it is held, invested and controlled by the CSC.
Approved For Release 2002/08/28 : CIA-RDP78-0030OR000100040040-4
 0
Approved For Release 2002/08/28 : CIA-RDP78-003008 0100040040-4
3. PSAS and EAF
Having completed discussion of GEHAJ
described the'origin, purpose and methods of operation o
PSAS and EAF. This was somewhat simplified by use of a copy
of the pamphlet that accompanies this year's Combined Federal
Campaign materials. Mr. Maddox requested that he be permitted
to keep a copy of this unclass)find et and it was given
to him. (See copy attached.) indicated that
the shares of stock held in the EAF investment were donations
and that there is no intention to engage in this type of
investment. Recent financial.statements of both PSAS and
EAF were shown.to Mr. Maddox. He asked if directors of these
activities were also-on any other investment committees. To
the knowledge of those present, this was not the case,
although Mr. Janney and others served as Directors on other
programs. Mr. Maddox also asked for examples of circumstances
under which an employee qualified for a PSAS loan and how it
was eventually determined to write off certain loans of the
program as losses.
The final activity discussed with Mr. Maddox was the
EAA. Having audited similar activities in other Government
agencies, the EAA operation of clubs and hobby groups, ticket
sales, athletic programs, and a store were not new to him.-
He was shown a copy of the complete EAA financial report for
calendar year 1974. Although not a concern of his current
review, Mr. Maddox volunteered that the GAO has a particular
interest in seeing that the Government is reimbursed for the
floor space and utilities used by such sales activities in
Government buildings and that we should review our policy.
on this subject and somewhere record it.
5. The meeting was concluded with Mr. Maddox stating
that he saw no particular. problem with GEHA, PSAS, EAF, or
EAA, all of which he considered normal operations. He did
take notes, and particularly recorded the dollar levels and
.specific breakouts of the UBLIC reserves ahd the PSAS, EAF
and EAA accounts. When we mentioned the Credit Union, he
indicated he was not interested since Credit Unions are
controlled by other laws.
Deputy Chief
Benefits and Services Division
Att
Approved For Release 2002/08/28 : CIA-RDP78-00300R000100040040-4
 Approved For Release 2002/08/28: CIA-RDP78-003000&100040040-4
28 October 1975
Distribution:
Orig & 1 - Chief, Review Staff
1 - DDA
1 - O/DDA
ject
I- D/Pers Chrono
1 - DD/Pers
1 - BSD
Approved For Release 2002/08/28 : CIA-RDP78-00300R000100040040-4
 Approved For Release 2002/08/28 : CIA-RDP78-0030OR000100040040-4
3. ] Billing: Fill in the total amount of TAX DEDUCTIONS
your annual pled ge on your card and indicate
the amount in the box provided for Direct Billing.
Also print your room number in the box on the
top line. You may make payments on your pledge
any time during 1976. Quarterly statements will
be sent to you on the unpaid balance (April,
July, October 1976, and January 1977 prior to
closing our books).
4. You may pay your pledge by a combination
of theabove plans.
EXAMPLE: A $25.00 pledge may be paid
by a deduction of 500 per pay period if you
are paid every 2 weeks and the remaining
$12.00 may be paid in cash or check during
the Drive, or by Direct Billing in quarterly
payments.
1. Contributions to CFC, EAF, and PSAS are
tax deductible items.
2. Contributions to CFC and EAF paid by
payroll deduction may be deducted on your 1976
tax return. If you wish to deduct your contribu-
tions to CFC and EAF on your 1976 tax return,
you should pay the balance of your pledge in cash
or check before 31 December 1976.
3. If you are making a contribution by payroll
deduction, you should retain your earning state-
ments to verify the amount to be used on your
tax return. You may obtain a statement of with-
holding from the payroll office if you are re-
quired by a tax authority to show proof of the
amount withheld for charitable purposes.
5. Personnel paid every four weeks may con- PUBLIC SERVICE AID SOCIETY
tribute to CFC and/or EAF only by cash, check, (PSAS)
or Direct Billing.
CONTRIBUTIONS
1. Your contribution to PSAS may be made
either by check or cash. Payroll Deductions and
Direct Billing plans are not available for PSAS
contributions.
2. Checks are to be made payable to "CON-
SOLIDATED CHARITIES."
CONFIDENTIAL CONTRIBUTIONS
1. Enclose your pledge card with your contri-
bution in a sealed envelope. Write the control
number of the card on the envelope and turn
it in to your Keyperson. This envelope will then
be delivered, UNOPENED, to the Fund Drive
Coordinator.
RECEIPTS
1. The Fund Drive Coordinator will furnish
you a receipt for cash contributions to CFC,
EAF, and PSAS if you write "Receipt Requested-
and your name and office address.
2. Receipts for Direct Billing pledges will be
issued by the Office of the Fund Drive Coordi-
pator when payment is made in cash.
The Public Service Aid Society is a non-profit
corporation organized under the laws of the
District of Columbia on 31 December 1955 for
the purpose of rendering assistance, financial
and otherwise, to eligible individuals in urgent
need of assistance who have exhausted every
reasonable means of self help.
POLICIES -
The Public Service Aid Society assists de-
serving individuals through financial and other
means; each request is considered in confidence
on an individual basis.
Direct financial assistance is offered as a non-
interest bearing loan. Loans are generally made
on a deferred payment basis and with a level of
payment which takes into account the individual's
particular circumstances.
When financial assistance is not required, aid
may be in the form of advice and counseling or
guidance in contacting appropriate health or
other assistance organizations.
Typical of the needs for which PSAS has pro-
vided assistance are the following:
? Emergency or unusually heavy medical or
hospital expenses, not covered by insurance.
? Emergency travel funds when critical ill-
ness or death occurs in the immediate
family.
Aral expenses of a member of the im-
mediate family.
Relief from indebtedness under circum-
stances meriting assistance and beyond
individual's capacity for- repayment in
normal period of time.
PSAS will not make loans that would normally
be obtained from the Credit Union, banks or
other sources, or for matters which are primarily
under the control of the individual for his per-
sonal economic convenience, such as financing
the purchase of personal property. The applicant
must demonstrate a pressing need and must have
exhausted every reasonable means of self-assist-
ance. Requests for assistance should be submitted
by the applicant directly to the Personal Affairs
Branch, Office of Personnel, Room 5 E 11 Head-
quart 1 such requests will be
handled in coence.
SOURCE OF FUNDS
PSAS obtains its funds entirely through volun-
tary contributions. Such contributions are de-
ductible for income tax purposes. PSAS would
have been unable to achieve its objective without
the support it has received from many individ-
uals. During the 1974-1975 Consolidated Fund
Campaign, PSAS received $9,412.84.
ADMINISTRATION
The Society is administered by a Board of
Trustees composed of officials from various
components of the Agency. The Board meets
annually to consider policies and affairs of the
Society and to elect officers. An Executive Com-
mittee is empowered to act for the Board in the
consideration and approval of requests for
During the Fiscal Year 1975, eighteen loans
were approved for a total of $21,354.69. -
LOAN ACTIVITIES AS OF
30 JUNE 1975
Loans receivable. ........... 65
New loans 1 Jan-30 June ..... 9
Paid up loans 1 Jan-30 June 8
Payments received in 1975... 171
Average monthly income from
$94,366.34
10,112.43
3,964.61
9,557.61
loan repayments in 1975 ... 1,592.93
TAT
Approved For Release 2002/08/28 : CIA-RDP78-0030OR000100040040-4
 Approved For
EDUCATIONAL AID FUNDAF)
Through the Educational Aid Fund, EAF, you
help the sons and daughters of deceased, retired,
and active Agency employees fulfill their hopes
and plans for further education. Your generosity
is a warm and friendly act; a manifestation of
faith in the future.
EAF awards come either in the form of direct
grants or interest-free loans, which are not repay-
able until after the student graduates. The vast
majority of awards are loans, and the principal
source of funds for the awards is the annual EAF
Camai
Factors taken into consideration. in selecting
EAF awards are: financial need; academic
achievement; motivation, as demonstrated by
part-time work and extracurricular activities; and
a personal essay written by the applicant. All
applications are reviewed . and considered in
anonymous form by the EAF Selection Commit-
tee and, in turn, the EAF Board of Trustees.
More than one member of the same family
< May receive awards and awards may be given
ca the same individual in successive years if the
student reapplies. Moreover, the EAF Board
within the past two years has instituted a new
Cltolicy of considering applications from students
Cptering or attending junior colleges and post-
Cighschool-vocational schools, rather than limit-
ing the awards to four-year college students as
i previous years.
C The EAF also awards four special grants each
l,,,ayear:
The Matthew Baird Award is granted ex-
clusively to the student who demonstrates un-
usually high personal motivation through self-
help.
The John A. McCone Award is granted to the
stu ent whose ? ancia need is particularly
significant.
The Frank G. Wisner Scholarship is awarded
on the basis of outstanding aca emic and per-
sonal achievement.
The Lawrence K. White Award is granted to
? e student who has 'demonstrated unusual
en leadership qualities.
0 Last year, your contributions totaled $31,036.30
and helped make possible the awarding of 35
loans ranging from $750 to $1,000, 5 special
grants of $300 each and five special awards
totaling $8,500. In its eleven years of existence,
the EAF has given 406 awards valued at $244,400.
Ia
3'$
IInA
s$
ai p
~8~$8885$$
MM ~1tl11/)U)NC-C-
+0 MMMMMMesMOa
t. C9 NONIli NS
N M M M Vi 4aN 41!7
-4 14
S C' C O' OO N N 0. N- I.. W. N
NNNN Cl M M M 0)
I I I I I I u I l I
Cl ~Q LOS, $ N to $ Ci
IO
000+-4,-4..4N NN
N H -. -. N -. H N N
..od.r..C~yy~y-jICC-C')
W N N N N N N N N N
I II I II I I I I I I
~8N0U)0N0N
t- 00 N N CO N N 07 CA0
I~$?07, $Ip?OI~B W $
m 070 NNNNNIll
MI' 'SN OP 0700N
.ea
RtA
I n I I l I I l I l
4 N U2 N Cl N N$ N$
?OOE`?8Ira8a8I$.8
t-ao~iwo,~-. fy'oa
ii
ea
Bn
I I II I U I I I l l
L claps
P70') MN0)'I' I I. Ip
a48$$$$8:~ $
b ca ao v N 109428
*+-'IN14RVtf11O0
I'1 I II I I I I I I
,-4??-4??NNell
1975-1976 CONSOLIDATIO
FUND CAMPAIGN PAMPHLET
Enclosed is your CFC/EAF/PSAS Consoli-
dated Fund Campaign pledge card. Return the
pledge card to your Keyperson whether or not
you make a contribution. Return of all pledge
cards is required for audit purposes and to en-
sure that no contribution is lost.
Consolidated Fund Campaign is the combi-
nation of the Agency's fund drive for the Edu-
cational Aid Fund and the Public Service Aid
Society being conducted concurrently with the
Metropolitan Washington Area's Combined Fed-
eral Campaign.
Combined Federal Campaign ( CFC) repre-
sents many charitable organizations and agen-
cies. You may designate a specific agency or
agencies to receive your contributions by enter-
ing that Agency's assigned number in the box
on the back of the pledge card. A listing of CFC
organizations and agencies with assigned num-
bers are listed in the CFC contributor's leaflet.
HOW TO MAKE YOUR
CFC/EAF/PSAS CONTRIBUTION
1. Cash or Check: Contributions by check for
CFC, EAF, or PSAS should be made payable to
CONSOLIDATED CHARITIES only. Indicate
the dollar amount bein contributed in the block
marked "Cash or Check" on the pledge card.
2. Payroll Deduction: Complete your pledge
card and return it to your Keyperson. In order
for the Payroll Branch to deduct your contribu-
tion each payday, you must sign the card.
a. When you use the payroll deduction plan,
you authorize the deduction of a Specific
amount from your pay each pay period during
1976. This authorization remains in effect un-
less terminated by you in writing.
b. Indicate on your card the total annual
amount you wish to pledge and the amount
to be deducted each pay od. The minimum
deduction is 25? biweekly for a total annual
pledge of $6.50. A table showing various bi-
weekly deductions and the corresponding total
annual pledge is located on the last page of
this pamphlet.
Approved For, Release 2002/08/28 : CIA-RDP78-0030OR000100040040-4