Sept. 25 (Bloomberg) -- A Democratic congressman called for a criminal investigation after an audit found that a $1 billion federal program to improve reading among grade-school children was run by staff who steered contracts to favored publishers.

The Education Department's inspector-general last week recommended an overhaul of the ``Reading First'' program, part of the ``No Child Left Behind'' law, including removing directors and reviewing the propriety of their contract awards.

``The inspector-general's report raises serious questions about whether Education Department officials violated criminal law, and those questions must be pursued by the Justice Department,'' said Representative George Miller of California, the top-ranking Democrat on the House Education Committee.

Miller, in his statement, called the audit part of pattern in which the Education Department under President George W. Bush ``has repeatedly run afoul of ethical standards.''

Miller's office also cited an independent analysis published last year by the Washington-based American Institutes for Research that found the program favored by Reading First directors, a product of the McGraw-Hill Companies Inc., was one of only two programs to receive AIR's highest rating.

Billion-Dollar Program

Reading First distributes about $1 billion a year to states to spend on reading programs that the government agrees have scientifically proven effectiveness.

The head of the program, Chris Doherty, resigned in advance of the release of the audit, and others involved also have left, Education Department spokeswoman Katherine McLane said.

The audit describes Doherty as a former executive director of the Baltimore Curriculum Project, which has implemented the McGraw-Hill product, known as ``Direct Instruction,'' or DI, in the Baltimore schools system since 1996.

Auditors said they reviewed the resumes of 25 people who served on the panels charged with evaluating eligible reading programs. Six of them had ``significant professional connections'' to DI, and Doherty ``personally nominated'' three of them, the audit said.

The audit cited examples such as Massachusetts, where Doherty questioned the quality of reading programs in four school districts, while state authorities approved them. One district refused to change and lost its federal funding; the other three agree to change and kept their funding, the audit said. None use the DI program, said Cheryl Liebling, director of Reading First in Massachusetts.

Liebling said she agreed with Doherty that the programs chosen by the four Massachusetts school districts were of lesser value to struggling readers.

`Highest Regard'

``There was nothing in our situation that would suggest any impropriety,'' Liebling said. ``I have the highest regard for Chris Doherty.''

Michael Petrilli, who helped the administration implement the No Child Left Behind law and now serves as vice president at the Thomas Fordham Foundation, a Washington-based research group, said he believes Education Secretary Margaret Spellings ``is hanging Chris Doherty out to dry.''

Both Petrilli and Liebling said they believe Spellings wanted Doherty to run the program strictly. Federal officials were justifiably rejecting reading programs that emphasize literary skills ahead of those stressing basic skills, which are more important to struggling readers, Liebling said.

Baltimore Program Cited

The report issued last November by the American Institutes for Research gave only DI and the Baltimore-based Success for All program its top rating, ``moderately strong evidence of positive effects,'' out of 22 popular comprehensive elementary school reform models. Miller's office cited the report to highlight Success for All as a quality alternative.

The counsel to the Education Department's inspector-general, Mary Mitchelson, said she could not comment on the findings. At Miller's urging, the inspector-general plans within coming weeks to publish five more reports on the Reading First program, including examinations of its operations in Wisconsin, Georgia and New York.

Education is a prime topic of concern for voters, and such allegations may have some effect on the Nov. 7 congressional elections, especially in states or districts where the incumbent already faces accusations of impropriety, said Larry Sabato, a political scientist at the University of Virginia.

``Reading this makes anyone angry, assuming it's true,'' Sabato said.

McLane today reiterated that Spellings supported Doherty's work and said he left voluntarily.

Spellings's Response

Miller cited investigations last year showing the department used taxpayer dollars to pay media commentators for friendly coverage, and an audit this year showing the department directed education grants to political allies rather than alternatives endorsed by career peer reviewers.

A Justice Department spokeswoman, Jaclyn Lesch, said she had no immediate reaction to Miller's request.

Spellings, in her response to last week's audit, defended the Reading First program as proven effective, while promising to make all changes recommended in the audit.

``I am deeply committed to the highest levels of integrity and ethics for the Department of Education and all its programs,'' Spelling said. Some department actions described in the report ``reflect individual mistakes,'' she said.

``Our reading programs have been successful in driving student achievement for decades, and that's why there are held in such high regard,'' McGraw-Hill spokeswoman Mary Skafidas said.

To contact the reporter on this story: Paul Basken in Washington at pbasken@bloomberg.net

Last Updated: September 25, 2006 16:46 EDT