By Amit R. Paley
Washington Post Staff Writer
Saturday, April 21, 2007; A01
The Justice Department is conducting a probe of a $6 billion reading initiative at the center of President Bush's No Child Left Behind law, another blow to a program besieged by allegations of financial conflicts of interest and cronyism, people familiar with the matter said yesterday.
The disclosure came as a congressional hearing revealed how people implementing the $1 billion-a-year Reading First program made at least $1 million off textbooks and tests toward which the federal government steered states.
"That sounds like a criminal enterprise to me," said Rep. George Miller (D-Calif.), chairman of the House education committee, which held a five-hour investigative hearing. "You don't get to override the law," he angrily told a panel of Reading First officials. "But the fact of the matter is that you did."
The Education Department's inspector general, John P. Higgins Jr., said he has made several referrals to the Justice Department about the five-year-old program, which provides grants to improve reading for children in kindergarten through third grade.
Higgins declined to offer more specifics, but Christopher J. Doherty, former director of Reading First, said in an interview that he was questioned by Justice officials in November. The civil division of the U.S. attorney's office for the District, which can bring criminal charges, is reviewing the matter.
Doherty, one of the two Education Department employees who oversaw the initiative, acknowledged yesterday that his wife had worked for a decade as a paid consultant for a reading program, Direct Instruction, that investigators said he improperly tried to force schools to use. He repeatedly failed to disclose the conflict on financial disclosure forms.
"I'm very proud of this program and my role in this program," Doherty said in the interview. "I think it's been implemented in accordance with the law."
The management of Reading First has come under attacks from members of both parties. Federal investigators say program officials improperly forced states to use certain tests and textbooks created by those officials.
One official, Roland H. Good III, said his company made $1.3 million off a reading test, known as DIBELS, that was endorsed by a Reading First evaluation panel he sat on. Good, who owns half the company, Dynamic Measurement Group, told the committee that he donated royalties from the product to the University of Oregon, where he is an associate professor.
Two former University of Oregon researchers on the panel, Edward J. Kame'enui and Deborah C. Simmons, said they received about $150,000 in royalties last year for a program that is now packaged with DIBELS. They testified that they received smaller royalties in previous years for the program, Scott Foresman Early Reading Intervention, and did not know it was being sold with DIBELS.
Members of the panel said they recused themselves from voting on their own products but did assess their competitors. Of 24 tests approved by the committee, seven were tied to members of the panel.
"I regret the perception of conflicts of interest," said Kame'enui, former chairman of the committee, who now works at the department as commissioner of the National Center for Special Education Research. "But there was no real conflict of interest being engaged in."
The intricate financial connections between Reading First products and program officials extend beyond issues the committee explored yesterday.
Another researcher, Sharon Vaughn, worked with Kame'enui, Simmons and Good to design Voyager Universal Literacy, a program that Reading First officials urged states to use. Vaughn was director of a center at the University of Texas that was hired to provide states advice on selecting Reading First tests and books.
The publisher of that product, Voyager Expanded Learning, was founded and run by Randy Best, a major Bush campaign contributor, who sold the company in 2005 for more than $350 million. Now Best runs Higher Ed Holdings, a company that develops colleges of education, where former education secretary Roderick R. Paige is a senior adviser and G. Reid Lyon, Bush's former reading adviser, is an executive vice president.
"I'm very disappointed and saddened by the information that was provided at the hearing today," said Lyon, who had been a strong defender of Reading First, which he said had nothing to do with his new job. "The issues appear much more serious than I had been led to understand."
Despite the controversy surrounding Reading First's management, the percentage of students in the program who are proficient on fluency tests has risen about 15 percent, Education Department officials said. School districts across the country praise the program.
Members of both parties continue to support the goals of Reading First even as they attack its management. Miller and Senate education committee Chairman Edward M. Kennedy (D-Mass.) joined Republicans yesterday in pledging to tighten restrictions on conflicts of interest in No Child Left Behind.
Education Secretary Margaret Spellings, who declined to comment yesterday, has said management problems with Reading First "reflect individual mistakes." But Doherty said nearly every aspect of the program was carefully monitored by the department and the White House, where Spelling was Bush's top education adviser.
"This program was always firmly under the watch and control of the highest levels of the government," Doherty said.
Staff writer Carol D. Leonnig contributed to this report.
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