Defense contractors capture Pentagon officials through the revolving door
Governments and corporations want to make sure their leaders and employees act in the best interest of the organization. The private sector has a number of tools for protecting itself from conflicts of interests or otherwise compromising confidential business information.
Law firms have conflict-of-interest reviews, and it’s pro forma for major corporations to require departing executives to sign non-disclosure and non-compete agreements. Even fast food restaurants can be exceedingly strict about employees taking jobs with competing chains or with other franchises in the same chain. Private sector companies do this to protect themselves and their bottom lines.
When it comes to government officials, there are ethics laws that are supposed to protect the public interest. These laws should prevent government officials from using their public service to advance their personal or financial interests at the expense of the public. These laws are frequently insufficient, however.
For instance, laws regulating the revolving door—the practice of government officials leaving public service to work for companies they oversaw or regulated—have been ineffective at slowing or stopping it. The revolving door between the government and the corporations it does business with often creates the appearance that government officials are improperly favoring a company in awarding or managing federal programs and contracts.
Without transparency and more effective protections of the public interest the revolving door between senior Pentagon officials and officers and defense contractors may be costing American taxpayers billions. Taxpayers deserve protecting just as private sector companies do.
In his 1961 farewell address, Pres. Dwight D. Eisenhower warned that the influence of the military-industrial complex could “endanger our liberties or democratic processes.” The revolving door of Pentagon officials and senior military leaders seeking lucrative post-government jobs does exactly that.
It often confuses what is in the best financial interests of defense contractors—excessively large Pentagon budgets, endless wars, and overpriced weapon systems—with what is in the best interest of military effectiveness and protecting citizens.
The Project On Government Oversight has consistently found federal ethics laws to be a tangled mess and insufficient to prevent conflicts of interest. Our first in-depth look into those laws, “The Politics of Contracting,” revealed how the revolving door leads to trends of agency capture and large defense contractors gathering more monopoly power.
While those trends may benefit defense industry executives and their stockholders, they undermine competition and performance, lead to higher prices for the military and taxpayers, and can diminish military effectiveness. While there have been some improvements to the laws since we published our first report on the revolving door in 2004, our investigation found the tangled mess remains.
The leadership of the Senate Armed Services Committee expressed concerns in 2017 that the department was too close to and depended too much on its largest contractors. “Ninety percent of the spending of the taxpayers’ dollars comes out of five different corporations,” then-Senate Armed Services Committee Chair John McCain noted at a confirmation hearing for Patrick Shanahan, a former Boeing executive nominated to be Deputy Secretary of Defense. “That’s not what our Founding Fathers had in mind.”
“If you’re drawing from one sector alone, you get this group-think possibility, which could be dangerous,” Ranking Member Jack Reed told reporters. Despite those concerns, the Senate confirmed Shanahan.
Following World War II, several five-star generals chose not to go through the revolving door. Gen. George Marshall led the Red Cross. Before becoming president, General Eisenhower became president of Columbia University.
“[A]n officer who has had procurement duties going with any company which does business with the government presents a problem to the government, to the company with which he goes, and to himself,” Gen. Omar Bradley told the House Armed Services Special investigations subcommittee in 1959. “[N]o former member of the Government should take advantage of his previous position to bring any influence on members of the Defense Department, or any department of government, to grant contracts to the company with which he is now affiliated.”
A number of contemporary retired officers have also found lucrative positions in the private sector that do not create a conflict of interest. Adm. Mike Mullen, the former chairman of the Joint Chiefs of Staff, joined the board of Sprint. Vice Adm. William Burke, formerly the deputy chief of naval operations for warfare systems, became the chief maritime officer for the Carnival cruise company.
Lt. Gen. Thomas P. Bostick, the 53rd Army Chief of Engineers, became an executive at Intrexon, a biotechnology company. “I have committed to myself to never do business with the U.S. Army Corps of Engineers,” Bostick told POGO. “I do not want to use my past position to do business with [the U.S. Army Corps of Engineers] either for myself or as a consultant for anyone else.”
Although it is clear there are opportunities for post-Pentagon service that do not pose conflicts, sadly it is equally clear that a growing number of former military and civilian officials are choosing to take a different path. The vast majority of the individuals identified in this report did not violate any law or regulation.
Many of these instances do, however, show the revolving door spinning out of control due to ethics laws that are insufficient to protect the public interest. We should be able to have confidence that government officials are making informed decisions based on what’s best for national security, for men and women in uniform and for the American people.
Instead, the system is skewed by undue influence, rewarding those public officials who favor a future employer or industry with contracts or lucrative jobs. The public is rightfully concerned about the concentration of wealth and self-dealing in the Capitol, with five of the 10 richest counties in the United States located within an hour of Washington, D.C.
Some of that wealth is connected to increased spending on contracting, with the Washington region receiving 17 percent of all federal procurement spending in fiscal year 2016.
This system of influence-peddling has long been recognized, but speaking out against it can hurt the post-government careers of military and civilian officials. “If a colonel or a general stands up and makes a fuss about high cost and poor quality no nice man will come to see him when he retires,” reads a 1983 internal U.S. Air Force memo. “Even if he has no interest in a post-retirement job in the defense industry he is taking a chance by making a fuss.”
Today, industry programs such as “From Battlefield to Board Room,” match up retired and soon-to-be retired military officers with private companies—including large federal contractors—looking to hire new leadership. One individual who benefited from the Battlefield to Board Room program was Maj. Gen. Mike Boera, who was the Air Force’s director of programs and director of requirements and developed programs and business plans for weapon systems.
After he went through the Board Room program he became the Executive of Intelligence, Information and Services at Raytheon. The year he joined the company they had received approximately $2.9 billion in Air Force contracts.
In some instances laws designed to punish influence-peddling work. One of the most egregious revolving door examples involved the Principal Deputy Under Secretary of the Air Force Darleen Druyun, who oversaw the management of the Air Force’s weapons acquisition program from 1993 to 2002. Druyun helped Boeing win billions of dollars in business while simultaneously negotiating jobs at Boeing for her son-in-law, and eventually herself.
In 2004, Druyun pleaded guilty to a conspiracy charge and was sentenced to nine months in prison. The Congressional Budget Office found that an aerial-refueling aircraft deal Druyun was negotiating with Boeing while seeking employment with the company would have overcharged taxpayers nearly $5.7 billion. In that case, the system ultimately worked, as existing laws did prohibit Druyun’s egregious behavior.
However, that was an unusual case. A study commissioned by the Department’s acquisition office identified an additional eight acquisition actions involving Druyun “where the acquisition process appeared irregular or abnormal and where the results may not have been in the best interest of the Government.” The study specifically questioned justifications for sole-source decisions, contract adjustments made after initial award, and changes resulting in “less stringent requirements for the contractor, but higher costs for the government.”
The revolving door is just one of several forms of undue influence on the operations of the Department of Defense. While beyond the scope of this report, the reverse-revolving door — when defense industry officials join the government, raising concerns they will then give preferential treatment to their former employers — is also a matter of significant concern.
Top contractors have been over-represented in department leadership. At the beginning of his administration, Pres. Barack Obama issued an ethics executive order banning lobbyists form working in agencies they lobbied during the previous two years, only to issue the first waiver shortly thereafter to his first Deputy Secretary of Defense, William Lynn, who was previously a Raytheon lobbyist.
The last Deputy Secretary for that administration, Bob Work, joined Raytheon’s board shortly after he retired from the government. Pres. Donald Trump’s secretary of defense, James Mattis, was a former board member of General Dynamics. His deputy secretary Shanahan came from Boeing, the Pentagon’s second-largest contractor.
Campaign contributions, lobbyists, earmarks, industry-sponsored trips and contracts structured to garner political support for specific contractors’ programs also undermine the fairness and effectiveness of the procurement system. The government and the public have significantly more—though still inadequate—information about those other forms of influence-peddling.
For example, campaign contributions must be periodically disclosed, registered lobbyists must report their expenditures and generic lobbying activities, and incoming executive branch officials have to disclose their positions held outside of government. But the public has significantly less information when it comes to the activities of former government officials.
Trump has spoken out against that conflict of interest. “I think anybody that gives out these big contracts should never ever, during their lifetime, be allowed to work for a defense company, for a company that makes that product,” then-president-elect Trump said.
Companies will utilize all of the tools of the industry to gain
- access to senior government policy and program officials,
- a competitive advantage,
- business opportunities and
- taxpayer dollars.
While all of these influence-peddling methods produce results for companies, the revolving door is truly the quickest and easiest way for a company to get a phone call answered or a person-to-person meeting inside the Pentagon.
“I myself don’t get pressured by outsiders, but they do go higher up and get pressure put on me that way,” then-vice admiral Hyman G. Rickover told a House oversight committee in 1959 when asked about the revolving door. “It is generally in the nature of urging me to undertake new projects which we consider not worthwhile … it is almost subversive not to want to spend government money.”
While ethics restrictions ban some revolving door conflicts, many revolving door instances create an actual conflict of interest, or even the appearance of one, which, although not explicitly illegal, can be just as insidious. Such conflicts can potentially lead to favoritism, ineffective weapons and programs, and bad deals. As a result the conflicts can be detrimental to agencies achieving their mission and waste taxpayer dollars.
Many post-government employment ethics laws focus on limiting lobbying or representation before government agencies and officials. The lobbying/representational ban prohibits former federal employees from personally contacting the government on issues they handled during their public service and imposes a one-year or two-year cooling-off period, or a permanent restriction depending on the matter and their level of involvement.
In 2008 the Government Accountability Office audit found “significant under-reporting of the contractors’ employment of former [Department of Defense] officials.” To try to get a handle on conflicts of interest, Congress required in the fiscal year 2008 National Defense Authorization Act that the Department of Defense create and maintain a database to track its ethics opinions for its senior officials and officers who seek employment with DoD contractors.
Unfortunately, that database—known as the After Government Employment Advice Repository—has never been made public, is limited to certain officials, and, according to several Department of Defense Inspector General reports, is incomplete. Notably, the United Kingdom does allow its citizens to see how its government interprets ethics laws for former members of its cabinet offices.
It’s also illegal for contractors to knowingly provide compensation to covered officials for two years after the official left the government unless the official received a written ethics opinion that would allow them to receive compensation. Contractors must also certify they are in compliance with that restriction. If contractors don’t comply with these requirements they could be subject to rescission of their contract, suspension or debarment.
For this investigation, POGO compiled, and will continue to update, a database of senior department officials and senior officers who go through the revolving door. Our database and this report use publicly available information and information obtained through the Freedom of Information Act to show what AGEAR could look like if the public could see it.
Our database includes anyone who left the Department of Defense from 2008 to the present and was a senior political appointee, a military officer ranking O-6 and above or a civilian equivalent, who went to work for an entity with a significant financial interest in the operations of the Department of Defense within two years—the recommended “cooling off period” between when someone leaves government service and when they join an entity that has a financial interest in the work they performed while in government.
For defense contractors we defined “a significant financial interest” as receiving $10 million or more in Department of Defense contracts in a fiscal year. This financial threshold mirrors the department’s standards for its own ethics regulations. We believe two years is long enough to appropriately balance protecting the integrity of the Department’s decision-making processes and the need for people to make a living.
There is quantitative analysis that supports the idea that the “influence industry” provides financial incentives based on an individual’s relationships with current policymakers. A 2010 London School of Economics study found “lobbyists with past working experience in the office of a U.S. senator suffer a 24-percent drop in revenue—around $177,000—when their ex-employers leave office.” At that point the former official’s value is based less on who they know and more appropriately on their substantive skills and knowledge.
We reviewed department websites and Senate confirmation lists to identify officials who fell within the scope of our study. In some cases we used LinkedIn profiles, and independently confirmed information from those profiles when possible. We also sought comment from the companies, and individuals who could be reached, to confirm that information.
We also submitted Freedom of Information Act requests for ethics decisions and information on retired military officers who received waivers from the State Department and their prior military service to allow them to work on behalf of foreign governments. We are still waiting for responses from the Navy, the Air Force and the State Department.
When available, we referenced agency and employer pages, company and agency press releases, press reports, LinkedIn profiles and financial disclosure documents. Employer names are based on the name of the entity at the time the official joined the company.
For the top 20 contractors we looked at the companies’ senior executives, board members and registered lobbyists to see who had previous government experience. Unsurprisingly, a number of these individuals were former Congressional staffers or legislative liaisons for defense agencies or military services.
Some executives were also lobbyists and counted in each category. A number of the lobbyists were employed by multiple contractors, so there were more instances of the revolving door than people. Many of the lobbyists are not employees of the companies but instead hired through outside firms.
Most of the cases in our database and this report are individuals who went from senior Pentagon positions to work directly for defense contractors as board members or executives, or as lobbyists or consultants on behalf of defense contractors. The definition of lobbyist no longer—if it ever did—captures all the methods of peddling influence, however.
A 2016 Politico investigation revealed that well-intended lobbying reforms enacted in recent years not only failed to slow the revolving door but also “created an entire class of professional influencers who operate in the shadows” as “policy advisers, strategic consultants, trade association chiefs, corporate government relations executives, affiliates of agenda-driven research institutes,” among other positions.
Many of those people occupying those positions aren’t required to register as lobbyists. As another Politico investigation revealed, even Lockheed Martin’s top government affairs official did not register as a lobbyist. Tom Eldridge, who was SAIC’s senior vice president for government affairs until mid-2018, was not registered while in that position, either. SAIC did not respond to a request for comment about why he was not registered.
Then-presidential candidate Trump appeared to recognize this problem and proposed a five-point plan for ethics reform that would “close all the loopholes that former government officials use by labeling themselves consultants and advisors when we all know they are lobbyists.”
We included consultants and strategic advisors when we found evidence that they or their firm were in the business of contracting with the Department of Defense, or they were advising corporations with a significant financial interest in Department of Defense programs. Unless otherwise noted, the entities and individuals mentioned in this report declined to comment or could not be reached for comment on our findings.