The Environmental Protection Agency is out to change the very foundations of capitalism, according to sworn testimony from a former agency official.

The EPA had been working on a project to make capitalism more conducive to environmentalism.

Former EPA official John Beale told House investigators in his sworn deposition that while at the agency he worked on a project meant to find ways the government could “kind of modify the DNA of the capitalist system.”

“This is the smoking gun,” said Dan Kish, senior vice president with the free-market Institute for Energy Research. “For years, we have been saying the real agenda behind this administration’s energy and environmental policies is the just what President Obama has said it is: to fundamentally transform America.”

Beale was sentenced to 32 months in prison last year for defrauding the EPA out of nearly $900,000 while pretending to be working for the Central Intelligence Agency. He convinced co-workers, friends and even his wife that he worked as a CIA agent, but his deception was discovered 18 months after his retirement when he continued to get paid.

“I own this. This is on me,” Beale told Judge Ellen S. Huvelle last December, expressing regret for the shame he brought upon himself and other public officials.

Beale’s fraud brought a political firestorm to the doors of the EPA. Republicans took aim at Beale as an example of the agency’s lack of oversight and accountability.

“The case this morning highlights a massive problem with the EPA, and figuring out why this corruption occurred with apparently no one the wiser needs to remain a priority of our Committee,” said Louisiana Republican Sen. David Vitter last month. “This sentencing and the recent reports release begin to shed light on something perhaps far larger than even the initial investigations indicated. At minimum, $900,000 of the taxpayers’ money was stolen right under Administrator Gina McCarthy’s nose. We need to know just how vulnerable is this Agency.”

According to one of the EPA’s internal reports, Beale’s fraudulent activity was discovered as early as June 2010 and as early as January 17, 2011 current EPA administrator Gina McCarthy was aware of the excessive payments. McCarthy was then head of the EPA’s air and radiation office, which she was brought on to lead in 2009. She told investigators that she suspected Beale in March 2012.

“In his testimony under oath, Beale, perhaps unwittingly, has laid bare the administration’s end goal,” Kish said. “The President’s policies are not about carbon, they are not about coal, they are not even about energy and the environment. They are about fundamentally altering the DNA of the capitalist system. These policies are not about energy, but power.”

Here is what Beale said in his deposition:

Beale: “I’d been working in the environmental business for a long time, and although generally the western world has made good progress, and the United States has been particularly successful in improving the environment in terms of things like water quality and air quality, we’re reaching the limits of the traditional regulatory process to do that, largely because the fundamental dynamic of the capitalistic system is for businesses and individuals to externalize all costs. That’s the way the system and individuals can maximize profits and minimize costs.”

“In addition to that, pollution is being transported globally around the planet, and we’re reaching the limits of what we can do technologically to protect our citizens without having more impact on other countries. In other words, we need to get reductions from some of these other countries. This is the type of project I wanted to work on. That’s what [Beale and McCarthy] talk about.”

Investigator: “Did you ever indeed work on that project?”

B: “I certainly did.”

I: “Did any work product ever get produced as a result of that work, any tangible –”

B: “It depends on how one defines work projects. There were several phases of this project as we had outlined it. There’s an enormous body of literature on the subject. Sometimes it’s referred to as sustainability literature, sometimes it’s referred to as green economics. And so phase 1 of the project was for me to become very familiar and transversant with that literature. Phase 2 would have been going out and interviewing academic experts, business experts, people in other countries that are doing things.”

“And then phase 3 have been coming up with specific proposals that could be — could have been proposed either legislatively or things which could have been done administratively to kind of modify the DNA of the capitalist system, which is not new. It’s happened tens of times through the history of the capitalist system being there. It’s not a God-given system that was created once and never changes. It changes all the time.”

“So I had repeated meetings and discussions about the progress with various of the AA’s who were involved in this. If you’re asking if there was ever a set of proposals developed, no, because the project was scrapped before we got to that point.”

I: “So you were really just in the planning phases of the project the whole time.”

B: “Oh, planning, and then in the execution of the first phase.”

I: “Okay, and so Ms. McCarthy was aware of this project?”

B: “Yes.”

I: “Did she ask for status updates on the project?”

B: “We met frequently to talk about it and had actually quite deep discussions. She had good insights into it, but the other thing you need to know is this project began under Jeff Holmstead, so this began in a Republican administration.”

Former EPA assistant administrator Jeff Holmstead, however, told The Daily Caller News Foundation that he had no idea what project Beale was referring to, let alone one to change the DNA of capitalism.

“He never told me about any project about changing the DNA of the capitalist system,” Holmstead told TheDCNF. “I don’t know what he means by that or what he thought he was doing. It was certainly nothing that I approved.”

Beale was one of three deputies Holmstead inherited from the Clinton administration. Since he was a senior employee, he couldn’t easily be moved around.

“When I was there, he only worked on the international, non-regulatory stuff,” Holmstead said. “He was expected to be gone and had very little oversight because he was a senior career guy.”

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