BY MICHAEL M. O’BRIEN, ON JANUARY 5TH, 2011
MPRI is one of hundreds of firms catering to the Department of Defense. The single main reason it gets so much business is because of who runs it: two retired 4-star generals, one of them a former US Army Chief of Staff. As I say in my book, even in retirement a former 4-star general carries a huge amount of clout. No one is going to make him wait outside their office.
Today, generals command as many contractors as they do soldiers, so it’s no wonder they go into the defense contracting field as soon as they retire. The money is so good for these former 3- and 4-star generals, their lust for cash far outweighs their conflict of interest. But they are able to get away with it all, and say with a straight face they are doing nothing wrong. They’re splitting hairs on legalities, and everyone knows it, most of all them. They are going straight into private industry in what has become one of the biggest conflict of interest scams going. The only ones who beat them are retired members of Congress who become lobbyists.
Once an officer makes 3- or 4-star general he’s set for life. This is fine, and in most cases they have the right to be proud of their accomplishments. (I can name a few who don’t have the right to be proud of their accomplishments while generals. Please read some of my earlier posts.) But it’s the abuse of this power and influence after they retire that is at issue. The “military-industrial complex” Eisenhower warned us about in 1961 has arrived. There is no distinction between the Department of Defense and the corporations that supply it. They are at the point of being complete equals. They are nearing the point where the corporations are in control of the Defense Department, if we aren’t already there.
The attached article by Bryan Bender of the Boston Globe (December 26, 2010) describes the extent to which retired generals and admirals impact defense contracting. It is interesting to note that only 3- and 4-star generals are discussed. This is due to the extremely high amount of power they have within the military. Although making 1-star general is a major accomplishment, it pales in comparison to making 3- and 4-star. It is these officers who are courted by the major defense contractors and offered incredible amounts of money to influence decisions regarding purchases and contracts by the Department of Defense.
“The Globe analyzed the career paths of 750 of the highest ranking generals and admirals who retired during the last two decades and found that, for most, moving into what many in Washington call the “rent-a-general’’ business is all but irresistible.
“From 2004 through 2008, 80 percent of retiring three- and four-star officers went to work as consultants or defense executives, according to the Globe analysis. That compares with less than 50 percent who followed that path a decade earlier, from 1994 to 1998.
“In some years, the move from general staff to industry is a virtual clean sweep. Thirty-four out of 39 three- and four-star generals and admirals who retired in 2007 are now working in defense roles — nearly 90 percent.”
In the Federal government, if a procurement official leaves the civil service, he/she can’t be involved in a procurement they worked on before they left. The most egregious case of this was when Darleen Druyun, a senior Air Force procurement executive, accepted a bribe in the form of future employment with Boeing in return for awarding the firm a contract for 100 air tankers, a contract worth $23.5 billion. She was found guilty and sentenced to Federal prison, but kept her retirement. The Boeing official who bribed here, Michael Sears, was found guilty and sentenced to prison as well.
But generals and admirals have no such problems. So blatant is their ability to steer contracts, they are courted by firms they do business with before they even retire.
“Dozens of retired generals employed by defense firms maintain Pentagon advisory roles, giving them unparalleled levels of influence and access to inside information on Department of Defense procurement plans.
“The generals are, in many cases, recruited for private sector roles well before they retire, raising questions about their independence and judgment while still in uniform.
“The Pentagon is aware and even supports this practice.
“The feeder system from some commands to certain defense firms is so powerful that successive generations of commanders have been hired by the same firms or into the same field. For example, the last seven generals and admirals who worked as Department of Defense gatekeepers for international arms sales are now helping military contractors sell weapons and defense technology overseas.
“When a general-turned-businessman arrives at the Pentagon, he is often treated with extraordinary deference — as if still in uniform — which can greatly increase his effectiveness as a rainmaker for industry. The military even has name for it — the “bobblehead effect.’’
“ ‘We are changing the perception and maybe the reality of what it means to be a general,’’ said retired General Robert “Doc’’ Foglesong, who retired as the second-ranking Air Force officer in 2006.
“ ‘The fundamental question,’’ he said, “is whether this is shaping the acquisition system and influencing what the Pentagon buys. I think the answer is yes.’ ’’
Making 3- and 4-star general is a blank check to do whatever you want. You make decisions about what weapons systems to purchase, then turn right around and work for the firm that was awarded the contract. Unlike Ms. Druyun above, generals are considered above reproach due to their “integrity.” This is another way of saying they can do whatever they want, and nobody is supposed to ask any questions because they served their country in uniform. It’s another example of the favorable treatment the military gets. But the military is supposed to be the cream of the crop, and its integrity is supposed to be without question. This is changing for one very big reason: money.
“ ‘A lot of these guys earn two to three times their retirement money,’’ said Senator Jack Reed, a Rhode Island Democrat and West Point graduate. “If you are deriving a significant portion of your nonpension income from defense companies actively engaged in contracting — especially if you are also involved in these advisory panels — that should be disclosed.
“ ‘When I was an officer in the 1970s, most general officers went off to some sunny place and retired,’’ he added. “Now the definition of success of a general officer is to move on and become successful in the business world.’’
“Representative Joe Sestak of Pennsylvania, a retired three-star admiral, said that when he was in uniform he saw firsthand the influence retired admirals have when they are brought in to advise the Navy.
“ ‘Rank did mean something. The principal guy in the room really drove the thing. There is a hesitancy to question them,’’ he said. “If there isn’t transparency or knowledge of who they are working for when they are advising the Pentagon, you are building a military that is not all it can be.’ ’’
“Martin and other generals interviewed by the Globe maintain that their postretirement consulting business is ethical and beneficial for America’s defense. They said it matches private-sector expertise with crucial Pentagon missions.
“ ‘Access sounds sleazy, but it brings a value,’’ Martin said. “I am interested in doing things that I think the Air Force or [Department of Defense] might benefit from.’ ’’
But not too sleazy for him. General Martin is splitting hairs, and placing himself above ethical standards. He’s cashing in, and telling the world he’s ethical, and getting away with it because he’s a retired 4-star. If he can look himself in the mirror it only shows he has no compunction about retiring one day and tripling his pay the next, all in the name of national defense. It’s really all in the name of his bank account.
“…retired Lieutenant General Joseph L. Yakovac, formerly the top deputy to the Army’s senior acquisition official, who was advising BAE on the ground combat vehicle as a private consultant.”
“As a rule, Yakovac said, he does not seek to influence former Army colleagues on matters involving his private defense clients. And he said he provides clients with advice that is based solely on publicly available information.
“ ‘You spend 35 years in an ethical place,’’ he said. “You don’t leave that at the door.’ ’’
OK, then what does he do if he isn’t advising his client about Army procurement, advising them on the weather? General Yakovac used the “integrity” card to get the reporter to back off. “I was in the Army for 35 years, so don’t question my integrity.” Really? That implies General Yakovac had integrity when he was in the Army. Based on his behavior after he retired, one has to wonder just how much integrity he had.
“Retired General William S. Wallace, who ran the Army’s Training and Doctrine Command before retiring in 2008… is now a consultant for General Dynamics Land Systems Division, which is seeking to win the ground combat vehicle contract. But he insisted he does not use his Army contacts to further the business interests of his clients.”
“On this point, the public is essentially left to trust the word of Wallace and other retired generals that they do not improperly trade on their influence and access. That’s because they are almost never required to divulge their clients, or say how much they get paid. The few rules that do guide the Pentagon influence trade prohibit only a narrow range of sales activities.”
General Wallace’s statement doesn’t pass the laugh test.
“The generals who navigate these ethical minefields said they are capable of managing potential conflicts without oversight, because of their own integrity.
“ ‘You have to have a firewall in your head,’’ said industry consultant and former Vice Admiral Justin D. McCarthy.
“But a number of retired generals contacted by the Globe said they are uncomfortable with the laxity of the system and refuse to use their Pentagon contacts to win private clients.”
All this means retired generals can do whatever they want after they leave active duty, and they’re not required to follow disclosure rules that others do. If you ask them about it, they say their integrity is beyond reproach, and you’re supposed to buy it and walk away. Retired generals and admirals mentioned in this article are the ones who have no integrity and are cashing in on their past positions. If the appearance of conflict exists, they are supposed to cease the activity. But these guys really don’t care about appearance, or anything else. The money is simply too good.
“William “Buck’’ Kernan, a retired Army four-star general who recently left Military Professional Resources, Inc., a company that provides training, logistics, and other support to the military, believes trading on such access and influence raises difficult questions.
“ ‘I didn’t like people doing it to me when I was a four-star, a three-star, even a two-star — using a previous relationship as an entree to selling me something,’’ he said. “The perception from the outside of a previous superior now dealing with a previous subordinate can cause all kinds of questions.’ ’’
This is very interesting. “Buck” Kernan was the Number 2 guy at MPRI, the firm I worked for in Iraq. How did “Buck” and his boss, former Army Chief of Staff Carl Vuono, get the contracts awarded to MPRI if they didn’t use “a previous relationship as an entree to selling…something?” Like General Wallace, “Buck” Kernan’s lily white claim of innocence doesn’t pass the laugh test either.
“A commanding presence at 6 foot 5, [retired General Jack] Keane, 66, turned in his fatigues seven years ago for a pinstriped suit. He is now one of the most influential retired generals in Washington, holding a seat on a high-level Pentagon advisory panel, the Defense Policy Board, and counting among his defense industry clients McAndrews and Forbes, the New York holding company that owns AM General.
“Keane contacted Army General Peter Chiarelli, as vice chief of staff the Army’s second-ranking officer, to make the case that the service should continue buying new Humvees, Keane confirmed in an interview. He said he told Chiarelli that he believes the Army needs to maintain a “strategic partnership’’ with AM General, whose relationship with the military dates back to building Jeeps during World War II.”
General Keane also has the distinction of personally lobbying to get General David Petraeus the job of running the surge in Iraq in 2007. As I have mentioned in previous posts, David Petraeus married the daughter of the West Point Superintendent (the commanding general) after graduating from the academy. That placed him in the back pocket of the senior Army leadership as a brand new Second Lieutenant. He would make general no matter how his career went. It was written “in the stars,” so to speak.
“Keane was involved in the effort on the Hill even though he is not a registered lobbyist. He maintained in an interview that he was not required to register because he does not spend more than 20 percent of his time contacting Congress, as the lobbying disclosure laws stipulate. He said he only helps clients reach the right decision makers in the Pentagon or on Capitol Hill.”
More hair-splitting. We have to take General Keane at his word that he doesn’t spend more than 20% of his time contacting Congress. What constitutes 20% of his time? Is that a five day work week, at eight hours a day? Or is that the total number of hours in a week. Either way, it’s impossible to define how many hours constitute 20% of General Keane’s time, therefore he can do whatever he wants because the “rules” governing his actions are all but non-existent.
In the end, the Army decided to keep buying new HUMVEE’s, which is what General Keane was hired to make happen. But he doesn’t influence anybody.
“But before Northrop could get to work building Fire Scouts [a new product it was developing], it first needed to convince the Army the project was a good idea. For persuasive assistance, it turned to Burdeshaw Associates Ltd.
“Burdeshaw was founded in 1979 and is one of the oldest “rent-a-general’’ consulting firms. It has a reputation for zealously guarding the identity of its clients, and even its headquarters seems deliberately low profile, housed above a Safeway grocery store in suburban Bethesda, Md.”
“Burdeshaw’s chief executive, retired Army General William Hartzog, who until 1998 commanded the Army Training and Doctrine Command, did not respond to repeated requests to discuss his company’s business.”
In 1979, then-Lieutenant Colonel William Hartzog was my battalion commander in Panama. He showed up to command our airborne unit, but was in terrible physical shape, to include being overweight by probably 75 pounds. Having never completed a parachute jump since Airborne School earlier in his career, he broke his leg on his first jump after taking command of our unit. The jump was part of a joint US-Guardia Nationale operation at Rio Hato near Costa Rica. He was in a cast for months because the break was so severe.
But Lieutenant Colonel Hartzog was groomed for future success. That’s why he got command of the 3rd Battalion, 5th Infantry of the 193rdInfantry Brigade in Panama. It was one of the most prestigious Infantry battalions in the US Army, and he got it to justify his next promotion to full colonel. I do remember Lieutenant Colonel Hartzog as a good man. He helped me on a couple of occasions after I had made bad mistakes as a lieutenant, which I never forgot.
“What sets these retired generals apart in the military consulting world — aside from the blatant way their brand touts their old command authority — is their market niche. They are using their influence and knowledge of the Pentagon to build a business in equity investing.
“The partners in the Four Star Group have an exclusive arrangement with a $3 billion private equity firm in Los Angeles, the Gores Group, which awards them an equity stake in companies that Gores acquires based on their advice. What Gores gets in return is knowledge about which companies are drawing attention from key Washington decision makers, or are developing technologies that will be in demand by the Pentagon.”
Again, it’s all about leveraging their past positions to make as much money as they can in the “military-industrial complex.”
“Retired Army General Wesley K. Clark, who now works as a lobbyist and investment banker for companies seeking alternative energy contracts, believes the growing hunger among private equity firms and Wall Street investors to enlist retired generals is a consequence of a broader phenomenon: the increasing importance of the military to America’s industrial base.
“ ‘It is the militarization of the economy,’’ Clark said in a recent interview.”
He’s 100% correct.
Where do we draw the line between allowing retired officers to do what they want, and allowing them to create huge conflicts of interest? There is no doubt these officers know a lot, and the firms that hire them want that knowledge. But that is not the main reason they’re hired. Low level technicians know as much about a weapons system as they do, probably more. These retired officers are hired for their contacts in the Pentagon. Again, no one is going to make them wait outside their office. That would be disrespectful. They know this, and they use it to their fullest advantage. Who’s kidding who?
These officers are purposely using their influence to pressure others, some formerly under their commands, to do what they want. That’s the conflict. If I was a colonel under the command of a general, and he walks into my office after he retires to get my business, that’s a conflict of interest any way you slice it. Yet these officers get away with it by playing the integrity card, or by claiming they don’t spend more than 20% of their time lobbying Congress, or that they are only providing advice. Nonsense. They will use whatever loophole they want to use that has been written into the regulations that govern their post-military behavior.
In the end it’s all the crony system made up of “good ol’ boys” from the 3- and 4-star ranks, cashing in and laughing all the way to the bank. I don’t expect members of Congress to have integrity (my Congressman is Jim Moran, need I say more?), but I do expect former officers to. Unfortunately, many former 3- and 4-stars don’t, and they’re getting away with it.