The Department of Education's Reading First Program has let favoritism guide who gets grants. Four years ago, a nonprofit education firm called Success for All occupied four floors in a Towson office building and employed 500 people. Hundreds of schools across the country were signing up to use its highly regarded reading curriculum, which stresses phonics. Today, Success for All has laid off two-thirds of its employees and shrunk to two floors. A federal inspector general's report appears to explain why. It says the U.S. Department of Education steered federal grant money to certain reading programs and away from others. The report, issued last week, accuses the department of favoritism, conflict of interest and mismanagement in the awarding of $4.8 billion in federal funds.