Bureaucratic Oversight The control board and the CFO were sent to untangle the overfed D.C. bureaucracy, but they have addressed the problem by creating a bureaucracy of their own.

District residents breathed a sigh of relief in spring 1995 when Congress created the powerful Financial Responsibility and Management Assistance Authority (aka the financial control board). The presidentially appointed five-member volunteer panel--assisted by an independent chief financial officer (CFO) and a small cadre of professionals--would reach into city agencies, whipping both the managers and the bureaucracy into shape. District residents knew full well that the control board's creation constituted a practical suspension of home rule, but most didn't care. All they wanted was a dramatic improvement in municipal services and an end to decades of political shenanigans at their expense.

The control board has gone to work with a vengeance, taking on the city government for its tendency to sprout bureaucracy at every turn. The drone about the city's overspending is constant and often orchestrated for maximum effect. But when control board members finish sniping at District bureaucrats for their spendthrift ways, they return to their plush offices and plot the expansion of their own bureaucracy, which consists of highly paid cherries picked from the federal government, industry, and the military. The independent CFO has been leading a similarly privileged life amid the budgetary ruin of the District.

The city's appointed helmsmen come cloaked in nebulous job descriptions that insulate them from the very accountability they claim is absent from city government. And 18 months into their tenure, board members and staff have shown an amazing proficiency for expanding their turf and extending their reach.

The board and its kin, the untouchables in CFO Anthony Williams' office, have awarded high salaries, awarded noncompetitive contracts, and duplicated existing municipal functions--just the sort of bureaucratic sprawl that made their appointment a must for the city in the first place. To be sure, the control board bureaucracy won't dwarf the city's legendary $5.1-billion org-chart anytime soon. With 30 staffers and a $5-million budget, the unpaid board can still lay claim to the sleek, authoritarian image in which the Republican Congress conceived it.

The new brass and its six-figure salaries would be palatable if it was aggressively preparing the District for an eventual return to self-governance. But like U.S. peacekeepers parachuting into Bosnia, the control board and CFO are blasting away at ready targets and making no real plan for what happens when they pull out. They argue that once the city has a realistic budget and a leaner bureaucracy, everything should go just fine. But the same gang that created this mess will be scrambling for the leather chairs vacated by the new bureaucrats once the experiment in enlightened autocracy is over. The control board has met the challenge of one of the most intransigent bureaucracies in the history of Western civilization with a whole new tier of bureaucracy.

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"I see the signs of them laying down some permanence in their roles. They are operating unlike any control board this country has seen," says Ward 7 Councilmember Kevin Chavous. "The troubling signs are there."

The carpet is new, freshly laid. The glass-fronted conference room, complete with mahogany table and maroon leather chairs, would fit seamlessly in a top-five law firm. Down the hall, in a more expansive and finely furnished room, sits Williams, who calmly explains why he splurged on his office renovation.

"The office was designed for two people. I have a complement of folks I think is reasonable. I thought we needed space commensurate with the duties and personnel complement," says Williams.

"The [$93,000] allocated for this is by no means lavish," he continues. "Yeah, you can look at the time this is happening, but the District had not devoted resources or made a commitment to financial management. This is part of building that infrastructure."

Williams, in the silky tones that have become familiar to local reporters, says that if you're looking for spending restraint, all you have to do is check his proposed budgets.

"The amount for personnel will go down in '97 and '98. You're looking at initial investments that will return benefits to the District," Williams asserts.

But Williams, who has bashed everyone from the mayor on down for budgetary lapses, seems to lack a grip on his own numbers.

He proposes to increase--not decrease--his fiscal 1997 budget by $3 million, up from a projected $65 million, according to documents provided by his office. The CFO's budget is approved directly by Congress, so neither the mayor nor the council can balance it against other spending priorities. Up on the Hill, Williams has godlike status; a rubber stamp awaits any request he sends.

With carte blanche from his District-bashing overseers, Williams is free to hire aides at will, pay hefty salaries, pass out inflated titles, and create new offices in the District government, several of which duplicate the functions of existing offices.

For example, the CFO has created his own office of legal and intergovernmental affairs, which performs the same functions as the city's existing office of corporation counsel: defending city agencies and officials in court and offering opinions on the legality of proposed initiatives. Williams' captive legal organ is staffed by three new lawyers, including a new general counsel, Max Brown, who earns $75,000 a year. Williams told his legal staff that he couldn't trust the mayor's legal team to protect his interests.

What's more, the CFO has created a special division called "mission support," a 10-employee section that will gobble up $1.2 million in taxpayer dollars this year. According to Elizabeth Brown, director of mission support, the division centralizes all financial administrative and clerical positions throughout the District government; the organizational concept is similar to the one behind the typing pools used by private companies.

It sounds like a good idea, but Brown is unable to identify the agencies that will contribute to Williams' mission support division. Nor can she identify the agency from which the CFO's office snatched her own position or the amount budgeted for her post. However, she insists that the 10 positions slated for the office are not new and don't overlap with existing positions.

In a fancy piece of double talk, the CFO's office later clarifies that Brown's position was once a full-time slot, but since the division did not exist, there was no previous salary and it is considered a new post. It sounds like a familiar gambit to anyone who has covered the District's ever-burgeoning bureaucracy.

Within city government, the bureaucracy is actually beginning to shrink. In a little-discussed October 1996 report to Congress, the control board noted that the District eliminated almost 7,500 jobs, exceeding by nearly 900 the target set by the board.

The CFO's ranks, however, are moving in the opposite direction. Williams proposes in his own fiscal 1997 budget to hire an additional 24 people for his office. More than half of the new hires will wind up in the office of grants management, which will balloon from 14 to 29 employees. Peggy Armstrong, the CFO's $70,000-a-year spokesperson, says federal grants will fund all of the positions.

Williams' conduct of his office is particularly interesting because he is a city employee and is forced to deal with the same constraints as other city administrators. For instance, city regulations prevent Williams from hiring aides at salaries exceeding the $81,200 cap. With the help of the control board, however, Williams circumvented the law and added seven administrators at $100,000 each, excluding benefits. Three of the CFO's other employees earn wages higher than the city's salary cap, and five others earn between $70,000 and $81,000.

In order to slide the big bucks to his associates, Williams pulled off a deft trick worthy of the most seasoned D.C. bureaucrat. The director of the Department of Finance and Revenue (DFR) was only entitled to $81,200, so Williams decided to call him the deputy CFO for finance and revenue, a paper promotion worth about $20,000 a year. The lowly DFR treasurer now answers to the costlier title of deputy CFO for finance. A similar raise accrued to the budget-director-turned-deputy-CFO for budget and planning. And while they all perform basically the same duties as their predecessors, with title comes prerogative: They have acquired new assistants.

Williams offers no apologies: "I have been upfront with everyone. I think you should pay people what they deserve. We should pay our executives more. We have to hold our executives accountable, and to hold them accountable we should offer them professional business working conditions, which includes comparable wages."

"I don't believe in beggar thy neighbor," he adds.

Ward 1 Councilmember Frank Smith says the largess has not gone unnoticed inside city government.

"The control board and CFO salaries are a slap in the face of District government employees," he says.

Williams insists that his new financial management system, which features "better forecasting and better reporting" capabilities, is well worth the salaries he and his underlings are drawing from the kitty.

"Agency heads and managers are getting good financial information and advice they could use. With the '97 budget, we put in place a new way of thinking," Williams says.

Not everyone feels enlightened, however. "They are spending a lot of money and time to reinvent the wheel," says one agency manager who requested anonymity.

Beyond the issue of salaries, Williams has raised eyebrows with his vast appetite for territory. Time and again he has forsaken the accountant's eye shade and donned the hat of property manager, lottery board overseer, and school system administrator.

"I have confidence in the [CFO's] ability, but I don't have a good sense of what he's doing and how he's going about doing it," says government watchdog Dorothy Brizill. "I pick up the paper--he's getting in[to] real estate, the lottery board....He might be a superman, but even a superman can only do so many jobs at the same time and do them well."

It's becoming clear that Williams is having trouble keeping track of his core tasks amid his various responsibilities. In his Sept. 25, 1996, testimony before the control board, Williams said he planned to introduce monthly financial reports to serve as the basis for quarterly and year-end financial statements. The reports, he said, would provide a financial management prototype for state and local governments nationwide. But agency managers and council staffers are still waiting for the reports.

"We have made a commitment to start those," says Armstrong.

The CFO has also had trouble concluding an assessment of the city's automated financial management system, which has been the cause of much of the District's fiscal reporting problem. The 1996 budget allocated money to fund the assessment with an eye toward replacing it. But at the September hearing Williams reported to the control board that the assessment had not been completed.

Control board Chairman Andrew Brimmer blasted Williams for failing to meet the deadline: "I expected this to be much further along," Brimmer said.

Williams created a new deadline for himself, without any objection from the control board. "By Oct. 1 we expect to have completed a thorough analysis that documents the need for a new system and quantifies the costs and benefits of its development....We expect to release the [request for proposal] for the new system by Nov. 1, 1996," he told the board at its Sept. 25 hearing.

But on Nov. 25, Armstrong reported that the assessment was in its "final stage" and would be sent over to the control board "shortly."

One top-level District official doesn't think Williams has been a good role model for how business should get done. "He's just not a good manager," says the official.

The control board might be expected to take an interest in the CFO's growing fiefdom, but it has its own problem with bringing on new people with husky salaries and confusing titles. Take Yolanda Branch, for example. The special assistant to control board Executive Director John Hill, Branch is paid $100,000. When I called to scheduled an appointment with Hill, however, he told me to talk with his assistant, Deborah Hawkins, who makes $38,000 a year. But it was Branch who called back to give me the date and location of the appointment. It was just the kind of duplication that has been a part of District government for years.

Just what do control board assistants do? There are eight people on the control board's staff of 30 with the word "assistant" attached to their title, making salaries between $38,000 and $46,000. Brimmer has an "executive assistant" who earns $46,000. Office managers don't do badly; the two at the control board pull in more than $40,000.

Seven more are listed as "program managers" or "analysts"; they collect anywhere from $39,000 to $88,000--more than some District agency heads managing multimillion-dollar budgets. Eleven of the control board's senior managers make over $100,000. Hill gets $115,000 plus benefits.

Both the control board and the CFO know how to spin an issue. Shortly after Washington City Paper made a request for salary information from the board and the CFO, a pre-emptive response from Brimmer appeared in the Washington Post. "The compensation was set to enable us to attract people of the quality and experience we need. We compete for staff primarily with private-sector employers, not government-sector employers," Brimmer said.

Hill says that the city was not getting it done with the personnel it had in place.

"It took change in the existing structure to be able to attract the people," he adds. That, and lots of cold, hard cash.

In many respects, the control board has assumed the role once performed by the House District subcommittee before Speaker Newt Gingrich's reorganization streamlined that operation. But where the federal government paid the 25 staffers who worked for the subcommittee conducting reviews of city legislation and budgets, District residents now foot the bill.

And while the rest of the city's employees, including the mayor, have taken hits on salary, the control board has offered lavish raises. Since opening its office in the summer of 1995, the control board has provided numerous raises, including a $9,000 bump to one employee, even though his position hadn't changed. According to documents obtained through a Freedom of Information Act request, when Mark Goldstein was hired on Sept. 17, 1995, his salary was $101,000. But by November 1996 Goldstein's salary had risen to $110,000.

Three other executive-level staffers received comparable raises: Edward Stephenson Jr. earned $102,000 when he was hired in August 1995. Today he makes $106,000. Lawyer Francis Smith was hired in September 1995 at $91,500 and now earns $101,000. Marguerite Owen came onto the control board staff as deputy general counsel earning $100,000. Today she pulls in $107,000. All this from a board that has hammered the city repeatedly for providing cost-of-living increases in a time of financial distress.

"They are riding in like knights trying to save the city, and the first thing they do is give themselves $40,000 raises over District government employees. It just looks like they are out of control," says Smith.

Clearly, the large salaries cast the control board as an active participant in the same spendthrift culture it was established to eradicate. But to some extent its freewheeling spending is camouflaged by its use of consultants and contractors.

The control board rarely issues requests for proposals--a staple of clean and efficient government--when a contract is up for grabs. And while the board publicly chastised D.C. Board of Education members for delegating contracting authority to school Superintendent Franklin Smith, the contracts coming out of the control board are controlled by Hill.

"To the extent we can, we will use a competitive process to let contracts for the benefit of the city," explains Hill. "We've done a number of contracts because of [the] speed necessary to get a contract done. Sometimes, because the city has limited ability to do its contracting, they have asked us to do the contract for them and then transfer it over. We did that with the Department of Health, DPW, and for Tony Williams."

Of course, public officials always use speed and expeditiousness as a justification for doing business in noncompetitive ways. For years, District officials spread the butter around to friends using exactly the same excuse. Who is to say that the same approach isn't producing similar results at the control board?

While the control board has played to the prevailing sentiment that every city contractor is in Barry's pocket, it has quietly continued and expanded its contract with KPMG Peat Marwick LLP, where board Vice Chairman Stephen Harlan was once an executive. The relationship may be completely innocent, but the board's practice of awarding noncompetitive contracts certainly creates the appearance of conflict.

As the control board stands poised to conduct its own top-to-bottom review of the city's police department, the contractor in line for the work is Booz-Allen & Hamilton Inc. The company was recommended to the District by Rep. Tom Davis, the Virginia Republican who also chairs the House subcommittee on the District. The exact amount of the contract with Booz-Allen hasn't been released, but congressional and city sources says it is expected to be in the range of $2 million. Those familiar with the behind-the-scenes negotiations between the control board, the police department, and Barry administration officials say passing out the multimillion-dollar contract to Booz-Allen was a way for the control board to ingratiate itself with certain congressional representatives.

Hill defends the control board's contracting policies and denies that there is any effort to influence Congress or that Harlan intruded in the selection of Peat Marwick.

"I'm the only one in the authority who has contracting authority, and all my contracts have to be approved by Dr. Brimmer. So the board does not as a board vote on contracts," says Hill.

Even if appearances of cronyism and waste are explained away, the issue of duplication is unavoidable. Consider the contract with Loretta Harge. A George Washington University employee on leave, Harge is receiving up to $5,000 to help the new school system's CEO, retired Army Gen. Julius Becton, develop a communications/media strategy for the first 90 days of his operation. But the school system already has a highly compensated director of communications, Beverly Lofton.

While the city has a prominent and highly paid CFO in Williams, the control board went out and hired one for itself--Dexter Lockamy, at $109,000 a year. The hire brought the city's outlay for CFOs to $224,700. And just in case Lockamy gets snowed under by budget projections, the board can turn to its pair of financial projects directors--Terry L. Carnahan and Edward Stephenson--who each rake in $106,000 a year.

The contracts entered into by the board seem to bypass many of the requirements that have to be met by the city government. The control board recently signed a 30-day contract for $11,000 with a Salem, Ore., company to help it develop a strategic management plan for the District of Columbia. The firm, MTP Inc., isn't registered to conduct business in the District, as is required by law. Since there was no competitive bid involved in the contracting, it's hard to say how MTP Inc. was selected over a local company.

And a consulting gig can quickly yield a slot with the CFO or the control board. Lawyer Max Brown was hired for a total of $420 from April 1 through April 30, 1996, to provide "Internet and cable consulting services" to the control board, but by the end of that month he was working as the general counsel for the CFO.

"It is so easy to replace old cronies with new cronies," says Chavous.

The control board's staffing and contracting activities echo the way Barry built his bureaucracy in the early days of his administration. First, just a few friends and associates here, a couple of consultants there, and before you know it you've got thousands of employees shuffling papers or tapping on keyboards, making beaucoup money.

According to the law that created the five-member control board, the board funds its operation on the interest earned by holding onto District money. For example, the $12 million recently allocated by Congress to help repair District schools didn't go into the city's bank account; it went to the control board. While the board is holding onto that money, the dough is earning interest. The interest stays with the board, which will use the cash to pay those generous staff salaries, the rent on its comfortable digs at 1 Thomas Circle--where the doors are usually locked—and state-of-the-art equipment.

So far the board is holding $5 million it has earned in interest from keeping city money in its account. But its fiscal 1997 budget only calls for $3.4 million, which means it should have plenty to spare for the little odds and ends that pop up.

So what have District residents received from this investment? It's hard to say. Initially, the control board was to provide oversight. But judging from its report to Congress, the oversight has been sporadic at best. For example, since the creation of the panel, the city has issued 3,000 contracts. But only five of those contracts were rejected; 15 were withdrawn, according to the board's report. When the control board did step up on a contract, like the one to provide lunches for D.C. schoolchildren, it made matters worse, not better. While the control board rescinded the contract the schools had entered into, it failed to find a new contractor, leaving school administrators scurrying around at the last minute to hire temporary kitchen workers to provide meals. The results were atrocious, with some children being served spoiled milk and cold lunches, and others not getting any chow at all. Not until Becton was hired as the school's new CEO was the contract problem addressed.

Similarly, the control board has mostly served as a rubber stamp on council activity. It has reviewed 200 acts of the council; all but 28 have been approved. Changes were made to 16, and 12 were rejected because they lacked sufficient financial impact information.

"The control board has not had an impact, except that it gets a lot of press. It doesn't take a rocket scientist to fix potholes, pick up bulk trash, get recycling back on track," says Ward 7 civic leader Paul Savage, who is annoyed that citizens now have "so many places to go to get answers."

Perhaps the board is guilty of nothing more than trying to respect home governance, but its approach to various city agencies belies real cooperation. Instead of working closely with the people already in those agencies, the control board and Williams have staged various guerrilla campaigns, insinuating their own financial people into agencies as scouts and then parachuting in behind them.

Consider the takeover of the public schools. Before the control board called in the cavalry last month, the CFO sent in his own finance chief, Omer Abdusalam. And as the board prepares to snatch the University of the District of Columbia (UDC), the CFO's Donald Rickford is already there, not trying to help UDC fix what is wrong, but to gather the kind of data that was used to tip over UDC President Tilden LeMelle. It's an MO that will be repeated any time the control board feels it needs to make a move. This week, the CFO placed his handpicked controller in the police department. He plans the same action at the Department of Public Works. The control board has targeted the police department for its next round of management changes.

Instead of helping District officials get their desks in order, the board and CFO have opted to creep into their chairs.

For example, Williams has expressed dissatisfaction with the way the Barry administration is disposing of city property that could bring in much-needed cash. Instead of working more closely with the city's Department of Administrative Services (DAS), the CFO, with the board's blessing, is quietly plotting to annex the city's real estate portfolio from the office.

"[DAS] has the responsibility for managing the District's real estate. If it's not working, go in and clean the sucker up. You don't say we'll deal with the problem by giving Mr. Williams the authority," says civic activist Dorothy Brizill.

"When the lottery board had problems, rather than make the lottery board function as a District government agency, you take it and give it to CFO," continues Brizill. "That's not lasting systemic change in the bureaucracy."

The growth of a parallel bureaucracy, extended by the creation of the separate board of trustees for the school system, is troubling to many people who were looking to the control board and the CFO to help professionalize government in the District.

"In some ways it is setting up the city

and elected bodies to fail," says one top-level District government official. "All to justify

its existence."

Councilmember Smith says that the juicy compensation packages at the CFO's office and the control board have created a "brain drain" that will hurt the city's ability to manage itself in the long run.

"They come and take the good people because they can offer them big salaries. It's self-defeating...to deplete offices of qualified personnel and leave the District government so weak it can't perform adequately," Smith says.

Both Williams and Hill deny that they are building a shadow government instead of fixing the one already here.

"We're not talking about permanent bureaucracy," says Williams, who adds that his broad control over many aspects of city affairs merely aligns the authority of the mayor's office with that of elected leaders in other states and municipalities. And over at the control board, Hill denies they are engaged in a bureaucratic coup.

"We have no operational responsibility for any segment of the District government," says Hill.

It's a nice situation: By suggesting that the control board has no operational responsibility, the board can take credit for everything and responsibility for nothing. It's a privileged status that has been abetted by the Post, which has responded to spoon-feeding from Williams and the control board with reliably uncritical coverage.

While the control board can posture behind its advisory status, the cold fact of the matter is that the board is in the business of running things. Simple oversight does not involve choosing a board of trustees that for all practical purposes replaces the school board. But Hill doesn't see it that way.

"Some might argue that because we set up the board of trustees to oversee the schools that is by extension an operational responsibility. But with the schools, we were actually trying to build capacity to solve the problem," Hill continues. "Then we looked around at the capacity in the current structure, and it wasn't there.

"Where we have issues with the mayor is where there is a direction the mayor wants to go in, but there are no plans or there are no assurances that the mayor will be successful in the implementation," continues Hill. "And then we say, 'Let's put the brakes on. Let's deal with the plan. Let's deal with the capacity issue. Let's put people in place who can make this successful.'"

City officials would argue that if they could "put people in place," they too could be successful. It's no surprise that city officials covet the control board and the CFO's mandate and access to resources. Barry last week decried the level of control board staff salaries, arguing in the Post that the pay of all high-level D.C. government workers should be increased.

City Administrator Michael Rogers says he does not think the board is constructing a parallel bureaucracy but that it has "equipped itself with resources" necessary for exercising its oversight and management-assistance functions.

But Rogers, who works closely with the board and CFO, is deploying his frequently cited diplomatic skills. Government insiders say there have been times when Rogers has become severely irritated by the tendency of the control board to simply go around city officials.

As an appointed meritocracy, the control board and the CFO believe they can do no wrong, and all the ass-kissing coverage in the Post and other media has only enhanced their feeling of invincibility. The unobstructed access and unbridled authority have warped the players at the control board to the point where they either condescend or scold in their every interaction with the city. The CFO and the control board believe that those who aren't riding with them are either misinformed or corrupt. It's an attitude that has made cooperation difficult.

"In New York, in Philadelphia, those control boards operated more in collaboration with elected officials," says Chavous.

In many ways, the strategy of the control board and CFO--of simply bypassing the bureaucracy and creating their own--spells as much danger to the city government as the repeal of home rule. Because even if you best-case the current scenario and the District balances its books, pays off its loans, and is no longer in a control year four years from now, the government that the board and CFO leave behind may be more crippled than the one they found.

For Jim Gibson, head of the D.C. Agenda Project, who praises both the control board and the CFO, the fundamental question is, "To what extent are they employing alternative systems [of] government? And in those instances, what is their plan for reinstalling it and having an indigenous capability?"

The control board-appointed school board is expected to be in existence for three years. Even though its members are unpaid--as are members of the control board--they will undoubtedly grow their own bureaucracy to execute their mandate of getting the personnel system in order, addressing safety, and improving test scores. That's a tall order for three years, and if they don't pull it off, the school system will be left with two-tiered oversight--one mandated by the control board and the other mandated by the home rule charter--with taxpayers footing the bill for the duplicate systems.

And when the lottery board was unalloted, no one talked about what was to replace it. After the control board is gone, should the office of the CFO continue to provide oversight to the D.C. Lottery? If it is to operate like a business, the lottery must have its own agency-linked board of directors. What is being done to ensure the return to a customary and standard governance structure?

"They are doing these things--creating this permanent shadow government. They better work. If things aren't better a year from now, the control board and the CFO will be held accountable," says one top-level government official. "With power comes risk and potential fallout."

The task of stitching these parallel operations together at the end of the control years will be made more difficult by the secrecy that has surrounded both the CFO and the control board. From sole-source contracts to closed-door meetings, the board has worked largely out of sight of District residents.

Consider the recent public hearing where the board moved to fire school Superintendent Smith and reduce the school board to advisory capacity while installing a new CEO and emergency board of trustees. There was no debate: The entire affair was orchestrated, scripted almost down to the comma and the pause to drink a glass of water. Brimmer made his opening statement, Joyce Ladner offered prepared comments, and Smith got the gate. End of story. Residents were not provided any time prior to or after the vote to voice their concerns about the board's actions.

Last month, the elected school board members got into a shoving match with security guards at the control board's building when they couldn't get up to the board's ninth-floor offices. The elevators had been shut off.

"What I see happening is, this control board unfortunately has done a lot of things behind closed doors and [has] not involved a lot of folks in elected office," says Chavous.

"Power corrupts absolutely," Chavous continues. "If you have an appointed body that doesn't have to answer to people, then they have unfettered discretion to run amok."

Hill says the added "security measures" were recommended by consultants hired by the control board. But government officials, even those who aren't elected, should conduct public business in public.

Further, Hill cites the board's new web site as evidence of its commitment to keeping District residents in the loop--or at least those residents wealthy enough to buy their own computers.

Elected and appointed District officials have to be involved in the management principles and systems being developed by the CFO and control board. If the CFO and the control board don't work with the government they were sent to save, they will have perpetrated a costly, miserable failure, even more damaging than the one they were called in to correct.

Art accompanying story in the printed newspaper is not available in this archive: Darrow Montgomery.

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