Page 2: The Politics of Contracting (continued)

On April 20, 2004, Druyun pled guilty of conspiracy to defraud the United States, which carries a maximum penalty of five years imprisonment, a $250,000 fine, full restitution, a special assessment, and three years of supervised release.19 (Appendix C).

In February 2004, Secretary Rumsfeld testified that the Department of Defense Inspector General (DoD IG) was expanding its investigation into the possible inappropriate influence exerted by former and current government officials to broker the tanker lease. In addition to investigating Darleen Druyun, the DoD IG is considering expanding its inquiry into whether or not personnel including retired Navy Admiral David Jeremiah and former Air Force Chief of Staff General Ronald Fogleman, both on the Defense Policy Board and both paid Boeing consultants, applied undue pressure to seal the Boeing tanker deal.

 b. Godmother of the C-17

While still with the U.S. Air Force, Druyun (who referred to herself as the Godmother of the C-17) was a staunch supporter of the December 2000 proposal to acquire additional C-17 Boeing cargo aircraft under circumstances that would result in a $200 million annual giveaway to the company. The proposal would have made the airlift plane a commercial item, which, in contracting terms, means that the product would be exempt from important contract oversight requirements. Although the acquisition proposal would have been a financial bonanza for Boeing, it would also have ultimately placed billions of taxpayer dollars at risk of abuse.

2. Aldridge & Lockheed Martin
 a. The Controversial F/A-22

Edward C. "Pete" Aldridge is the former Undersecretary of Defense for Acquisition, Technology, and Logistics. He was also head of a DoD review board which made the decision to pursue procurement of the F-22. In January 2003, Aldridge approved the contract for the controversial F/A-22 program.20 Two months later, he secured a position on the Board of Directors of Lockheed Martin - the federal government's top contractor and maker of the F/A-22. On March 15, 2004, the General Accounting Office (GAO) released a report documenting that the cost for the F/A-22 program continues to skyrocket, while DoD failed to justify why this aircraft is needed given current and projected threats.21

b. The Space Commission

On January 27, 2004, President Bush signed an Executive Order establishing the Commission on Implementation of United States Space Exploration Policy. Days later, President Bush announced that Aldridge would chair the nine-member Commission. Senator John McCain (R-AZ) spoke out against Aldridge's appointment, asserting that the former top weapons buyer and current Lockheed board member had too many conflicts of interest to serve as a Commission member. Because Lockheed is one of NASA's largest contractors, Aldridge is placed in a position to influence public policies that could benefit the company he serves. Aldridge remains the chair.

 3. Heebner & General Dynamics' Stryker

Army Lt. General David K. Heebner was a top assistant to the Army Chief of Staff, General Eric Shinseki, and played a significant role in drumming up support and funding for Shinseki's plan to transform the Army.

One of the key elements in Shinseki's transformation "vision" was a plan to move the Army away from tracked armored vehicles toward wheeled light-armored vehicles. In October 1999, only three months before Heebner retired, Shinseki's "Army Vision" statement called for an interim armored brigade: "We are prepared to move to an all-wheel formation as soon as technology permits." General Dynamics, which manufactures the wheeled Stryker, was the beneficiary of this new vision, essentially putting United Defense, which produced tracked vehicles, out of the running.

General Dynamics formally announced the hiring of Heebner, as Senior Vice President of Planning and Development, on November 20, 1999, only one month after Shinseki announced his "army vision" and more than a month prior to Heebner's official retirement date of December 31, 1999. The $4 billion Stryker contract was awarded to General Dynamics in November 2000. Heebner was present in Alabama for the April 2002 rollout of the first Stryker and was recognized by Shinseki for his work in the Army on the Stryker project.

The DoD IG investigated Heebner in 2001, and recently stated:

In conducting that review, we found that we had completed a preliminary inquiry into similar allegations regarding LTG [Lieutenant General] Heebner's post-retirement employment over two years earlier. The preliminary inquiry established that, by notice of disqualification dated July 28, 1999, LTG Heebner advised the Army Vice Chief of Staff and the Army Standards of Conduct Office of his intent to seek employment with General Dynamics and eleven other corporations. In providing that notice, LTG Heebner recused himself from participating in official matters that involved any of those corporations.22

4. Floyd & Lockheed Martin's HC-130P

In 1997, Air Force General Bobby O. Floyd led the government's investigation into a fatal HC-130P Hercules plane crash. According to press reports, in October 1998, Floyd was investigating the crash and was contacted by the plane's manufacturer, Lockheed Martin.23 He filed a letter of recusal, which disqualified him from taking any official actions involving Lockheed, in November 1998. Despite that recusal, Floyd continued to investigate the crash until March 1999.24 Despite the appearance of impropriety, the Air Force concluded that Floyd did not violate conflict of interest or ethics laws.25 Floyd then joined Lockheed Martin Aircraft & Logistics Centers in May 1999 as Deputy General Manager of the Greenville Aircraft Center. He was promoted to Vice President and General Manager of the Center in May 2000, then to President and General Manager of Logistics for the Centers in November 2001.

 5. Perle & Boeing

Richard Perle served as Assistant Secretary of Defense in the Reagan Administration and was a member of the Defense Policy Board from 1987-2004, serving as its Chair from 2001-2003. He resigned as Chairman in March 2003, after a conflict of interest controversy involving a consulting job he took with the bankrupt telecommunications firm, Global Crossing Ltd.

During the summer of 2003, Perle expressed his support for the Boeing tanker deal - a deal that would direct billions of dollars to Boeing. His support for the tankers came just sixteen months after Boeing committed to invest $20 million with Perle's venture capital firm, Trireme Partners.26

In a recent Washington Post article described Perle as the "ultimate insider" and discussed the inherent nature of the revolving door and the access that it provides. William Happer, a former Energy Department official stated that the revolving door is "an old American tradition, and Richard Perle I think is doing it in an honest way. He's one of hundreds and hundreds who do it."27 Perle denied Happer's characterization that he was hired by any company because of his connection to policymakers. Subsequently, Perle contradicted himself when recounting the role he played in assisting a company in its effort to obtain a foreign contract:

"Was [his contact with foreign ambassadors] a result of my influence? Yeah, it was. It was a result of the fact that they, the people I went to, knew me so they took my phone call."28

B. Federal Advisory Boards

One major conflict of interest and ethics concern is the government's use of advisory committees to formulate new government policies. In many cases, advisory board recommendations have overshadowed the analysis by internal government and independent overseers, such as the GAO. For example, rather than using advisory board recommendations as a secondary resource to evaluate future policies and programs, evaluations by the Defense Policy Board and Defense Science Board have become the definitive solution. As a result, those recommendations are oftentimes implemented by the government.

Trouble arises because, for the most part, advisory committee members [also known as "special government employees" (SGEs)] also concurrently work for federal contractors and, as a result, personal and employer financial interests may be at stake.29 Advisory committee members include former government officials who have passed through the revolving door and other private contractor officials . This "old boys" network creates a shared culture with common values, common ways of thinking, and common economic incentives.

Advisory board members are prohibited from using their official title, position, organization name, or authority associated with their government appointment to imply a government endorsement of any non-federal product, service, or enterprise.30 Nevertheless, advisory board members are in a position where they may support a specific policy that would benefit their private employer. In addition, an advisory committee member has the benefit of being privy to the government's future needs and can advise his or her employer or client about likely future policies or programs.

Despite the possibility that advisory committee policies may be driven by contractors seeking procurement awards, conflict of interest and ethics laws have waiver and exemption provisions for advisory board members. For example, 18 U.S.C. § 207(j) provides exemptions that could apply to advisory committee members and § 208(b) provides exemptions from financial conflict of interest restrictions when the "interest is not so substantial as to be deemed likely to affect the integrity of the services which the Government may expect from such officer or employee."31

Due to the inherent conflict of interest that is created by placing private contractor executives and directors on government advisory boards, POGO examined the members of the Defense Policy Board and the Defense Science Board to determine who passed through the revolving door and therefore had the direct ability to promote government policies that would ultimately provide their employers with contract award dollars.

 1. Defense Policy Board

Members of the Defense Policy Board (DPB) are selected by the Undersecretary of Defense for Policy with the approval of the Secretary of Defense. They offer advice and opinions concerning matters of defense policy, including a focus on strategic planning, research, and analysis on weapons systems. DPB members, primarily employed by defense contractors,32 have access to classified information and to senior government policymakers.

The following is a list of current and former (since 1997) DPB members who also serve or served as an executive, board member, lobbyist or consultant for one of the top 20 contractors:

2. Defense Science Board

The Defense Science Board (DSB) is one of the most influential advisory committees when it comes to defense strategy, as it advises the Secretary of Defense, the Deputy Secretary of Defense, the Undersecretary of Defense for Acquisition, Technology, and Logistics (DATL), and the Chairman of the Joint Chiefs of Staff. The DSB is made up of approximately 35 members and six senior fellow members, all of whom are chosen by the DATL Undersecretary. DSB members have knowledge and experience in the fields of science, technology, and its application to military operations, research, engineering, manufacturing, and the acquisition process. Members work for both defense contractors and the federal government.

DSB advises DoD on defense strategy rather than specific procurement issues. The Board's Charter states: "No matter shall be assigned to the Board for its consideration that would require any Member of the Board to participate personally and substantially in the conduct of any specific procurement or place him or her in the position of acting as a 'procurement official,' as that term is defined pursuant to law." This Charter, not withstanding, the DSB was tasked to review the underlying premises of the Boeing tanker lease.

The following is a list of current and former (since 1997) DSB members who also serve or served as an executive, board member, or lobbyist for one of the top 20 contractors:

C. Lobbying: The Retirement Community for Members of Congress

A lobbyist promotes their clients' agendas by "educating" Members of Congress and using government agency connections to pressure policymakers. Lobbying firms have become the most popular retirement community for former Members of Congress, illustrated by the nearly 90 former Members of Congress hired to lobby for the top 20 government contractors since 1997.

According to a recent study authored by Dr. Adolfo Santos, a Professor of Political Science at the University of Houston, the number of former Members of Congress who have become registered lobbyists jumped from 11 in 1955 to approximately 135 in 1994.33 These are former policymakers with vast government connections - hired guns who know whom to approach in order to promote a contractor's agenda. Dr. Santos asserted:

Of greatest significance is the role of post-congressional lobbying. Those who went on to become lobbyists remained significantly more active during their last term in office than those who did not become lobbyists. Controlling for other factors, post-congressional lobbyists sponsored on average 2.2 more bills than those representatives that did not become lobbyists for the time period and criteria considered. This modest, statistically significant increase suggests that the behavior of members of Congress may be dependent on their post-congressional ambitions. Members of Congress who expect to become lobbyists sponsor more bills during their last term, while those who do not expect to become lobbyists sponsor fewer.34

The occurrence of former Members of Congress and government officials becoming lobbyists has become a Washington institution. The public has become complacent to concerns of influence peddling as can be seen by these two examples of lobby shops - one Republican and one Democratic.

 1. Rep. Robert Livingston (R-LA) (ret.)

Former House Appropriations Committee Chairman Robert L. Livingston (R-LA) created his own lobbying firm, The Livingston Group, in 1999. The Livingston Group lobbies for Lockheed Martin, Raytheon, Northrop Grumman (three of the top five government contractors), and General Electric. The Livingston Group's overview boasts: "The firm has an extensive network of over 40 principals, consultants and international associates - including Republican and Democratic former Members of Congress, staff, Administration officials, staff of Governors, other state and local representatives and corporate executives."35 It further claims: "Whether preserving competitive advantages or opening doors to new market opportunities, The Livingston Group's network of experienced consultants, principals and international associates invests a range of core competencies to achieve the client's objectives."36

 2. Rep. Vic Fazio (D-CA) (ret.)

Former House Member Vic Fazio (D-CA) and the lobbying firm of Clark & Weinstock present a great example of the influence and access that lobbyists provide to their clients. Fazio, who anchors Clark & Weinstock's Washington, D.C. office, was a senior member of the House Appropriations and Armed Services, Budget, Ethics and House Administration Committees and Chairman of the House Democratic Caucus. He represented Lockheed Martin, General Electric, and Health Net and currently serves on Northrop Grumman's Board of Directors.

Clark & Weinstock's web site declares that it "help[s] clients enhance their relationships and positioning with the institutions, individuals, and audiences that will influence the outcome of business objectives."37 Clark & Weinstock also asserts that its Washington D.C. office "is uniquely positioned to advocate client concerns before the highest levels of the Administration and both Houses of the Congress, including both the Majority and Minority leadership teams."38

D. "Consultants:" Lobbyists by Another Name

Another example of the detriments of the revolving door are illustrated in the recent Boeing tanker lease case. An internal e-mail shows the power wielded by government contractors. Boeing's Vice President of Aircraft & Missiles Programs, Andrew Ellis, sent an e-mail to the President and Chief Executive Officer of the Integrated Defense Systems, Jim Albaugh, which stated that the company was using its paid consultants Donald Fogleman and David E. Jeremiah, who also sit on the Pentagon's Defense Policy Board, to "engag[e] in osd [Office of the Secretary of Defense] circles." The e-mail also stated that Boeing officials had met with Dr. William Schneider, the Chairman of the Defense Science Board, who Ellis believed was supporting the tanker deal and lobbying for it in the Office of the Secretary of Defense. (Appendix D).

The e-mail concluded that Boeing had "ghost" authored several published editorial commentaries, including one from Admiral Archie Clemins, a paid Boeing consultant and the former Commander-in-Chief of the U.S. Pacific Fleet, in which Clemins supported the Air Forces' plan to lease 100 tankers from Boeing. In November 2003, Defense News published an editorial regarding Clemins' commentary, stating: "We failed to do some things we should have done. We should asked Clemins if he had a financial relationship with the program or the contractor. We should have asked if he had, in fact, written the article himself. And we should have weighed his answers in our thinking, because that information is essential to the context of his article."39 (Appendix E). This example highlights the sources used by contractors to win government money and the weight that former senior government employees are afforded when they promote or oppose government projects or policies.

Post-government consulting is commonplace. Perhaps because there is not transparency - unlike lobbyists, consultants do not have to register or report their clients. As illustrated above, consultants are hired by contractors to influence policy and program decisions. In other words, a bright line no longer exists between lobbyists and consultants, making it even more difficult to be aware of someone going through the revolving door.
IV. REGULATING THE REVOLVING DOOR

 A. Revolving Door Regulations: A Spaghetti Bowl

Federal conflict of interest and ethics laws have been implemented piecemeal over the past fifty years, and they have become a tangled mess of statutes and regulations as well as exemptions and waivers. For instance, some of the system's statutes and regulations governing executive branch officials are based on their pre and post-government jobs and salaries. Some agencies further supplement those statutes and regulations by adopting additional limitations on their respective employees. To further complicate matters, presidential orders and agency directives govern post-government employment as well. In all, government employees struggle with a decentralized system of ethics laws and regulations - a multiple layer system so convoluted that ethics officers and specially-trained lawyers hired to enforce them have exasperatedly pushed for a more simplified system. (Appendix F).

The complexity in the revolving door system can cause government employees to unintentionally violate the law, although there also are examples of those willing to flaunt the rules as well. The system has become so complex that honest government employees, as well designated ethics officers, have a difficult time maneuvering through the applicable employment prohibitions. Without simplification of the system and a model rule of ethical conduct, employees who tried to do the right thing appear as dishonest as former government employees who willfully violated the law. Lost in the mix is an effective mechanism to protect the public interest from being subverted for private gain.

Major Kathryn Stone, a former Army ethics attorney, reached the following conclusions about the DoD's ethics system in 1993:

In recent years, defense contractors and DOD officials have criticized the multiplicity of DOD ethics laws as a labyrinth of confusing and overlapping requirements. Former DOD officials are subject to upwards of five different postgovernment employment conflict of interest laws, each of which applies to different subclasses of persons, restricts different activities, and imposes different administrative procedures

No reason exists to have different standards for executive branch officers and employees as a whole, DOD procurement officials (who differ depending on the particular statute at issue), retired military officers, and retired regular military officers. The net result of the accretion of these five statutes subjects DOD officials to a complex, multitiered system of incomprehensible and seemingly inconsistent statutory restrictions that are counter-productive to an effective and meaningful ethics training and counseling program. 40 (Emphasis added).

The complexity of the revolving door system is further illustrated by DoD JER 5500.7-R, which "provides a single source of standards of ethical conduct and ethics guidance, including direction in the areas of financial and employment disclosure systems, post-employment rules, enforcement, and training."41 The following list of references is cited in addition to DoD's supplemental regulations:

(a) Federal Acquisition Regulation, Part 3.104, current edition

(b) Title 41, United States Code, Section 423

(c) Public Law 95-521, "Ethics in Government Act of 1978," October 26, 1978, as amended

(d) Title 5, Code of Federal Regulations, Part 2635, "Standards of Ethical Conduct for Employees of the Executive Branch," current edition

(e) Title 5, United States Code, Chapter 53, Subchapter 11, and Sections 552 and 5305

(f) DoD Directive 5400.7, "DoD Freedom of Information Act Program," May 13, 1988

(g) Title 5, Code of Federal Regulations, Part 2638, "Office of Government Ethics and Executive Agency Ethics Program Responsibilities," current edition

(h) DoD Directive 1344.7, "Personal Commercial Solicitation on DoD Installations," February 13, 1986

(I) Title 18, United States Code, Sections 203, 205, 207, 208, and 209

(j) Title 3, United States Code, Sections 105 and 106

(k) Title 37, United States Code, Section 201

(l) Title 32, United States Code

(m) Title 5, Code of Federal Regulations, Part 2634, "Financial Disclosures, Qualified Trusts, and Certificates of Divestiture for Executive Branch Employees," current edition

(n) Title 5, Code of Federal Regulations, Part 2639, "Interpretation of 18 U.S.C. 209," current edition

(o) Title 5, Code of Federal Regulations, Part 2640, "Interpretation of 18 U.S.C. 208," current edition

(p) Title 5, Code of Federal Regulations, Part 2641, "Post Employment Conflict of Interest Restrictions," current edition

(q) Executive Order 12674, "Principles of Ethical Conduct for Government Officers and Employees," April 12, 1989, as amended.42


 B. Revolving Door Loopholes

Conflict of interest and ethics laws and regulations are based on a government employee's involvement with specific transactions (e.g., contracts),43 representation before an employee's former office,44 and financial conflicts of interest.45 However, the first significant loophole in the system involves high-ranking government officials who are employed in policy positions - positions that develop rules and determine requirements. These officials truly are not restricted from accepting employment with contractors who benefitted from the policies that these employees helped formulate. One problem is that senior procurement policy-making officials (especially those nearing retirement or considering leaving government service) can be heavily influenced by contractors who they oversee to develop or promote policies that favor contractor interests. In fact, these people are often in more of a position to influence a contractor's bottom line than those whose work is limited to a specific contract, as these decisions can affect many contracts.

The second loophole is the provision that allows a government employee to accept compensation from a "division or affiliate" of the contractor so long as that entity "does not produce the same or similar products or services" as the barred contracting division.46 In other words, a government official can work for Contractor A's missile division if he or she handled contracts with Contractor A's aircraft division and therefore avoid the one-year ban from post-government employment pursuant to 41 U.S.C. § 423. The current system does little to stop a contractor from rewarding a government employee for favorable treatment with post-government employment in a different division of the same company. It also creates the opportunity for the former government employee to advise the other division within the company's walls.

A third loophole involves the lack of Executive Branch rules that require reporting of disqualifications or recusal. Executive Branch regulations obligate an employee to disqualify themself from conflicted matters.47 The prohibition on prospective employment (18 U.S.C. § 208), however, does not require an employee to file a disclosure or recusal statement when a conflict arises.48 It is only after multiple layers of regulations that certain agencies mandate that notice of a conflict be provided to a government employee's supervisor.49

 C. Recent Presidential Attempts to Slow the Revolving Door

 1. The Bush Administration

Some changes in revolving door policies arrive with each new administration. On January 6, 2004, in reaction to issues raised by the Darleen Druyun/Boeing case, the White House issued a "Memorandum for the Heads of Executive Departments and Agencies," establishing "a new Administration policy concerning waivers for senior Administration appointees who intend to negotiate for outside employment."50 The memorandum ordered:

To ensure these policy interests are completely considered effective immediately [sic], agency personnel are prohibited from granting waivers under 18 U.S.C. 208(b)(1) to Senate confirmed Presidential appointees for the purpose of negotiating for outside employment unless agency personnel have first consulted with the Office of the Counsel to the President.

Our most senior Presidential appointees deserve the protection afforded by consultation with the White House. White House officials have an administration-wide perspective and often know relevant facts unavailable to agency personnel; thus, they can be of tangible assistance when consulted. The decision to grant a waiver also involves a balancing test. The fulcrum of that balance is a determination of whether or not the appointee's financial interest is "so substantial as to affect the integrity of the appointee's services to the Government." See 5 C.F.R. § 2640.301(a). Because a senior Presidential appointee may be called upon to advise the White House, it is appropriate that White House personnel have the opportunity to assess the substantiality of the senior appointee's financial interest and how it affects the integrity of the appointee's service to the President.51

The Bush Administration's policy, however, applies to political appointees only. Many senior civil service officials will remain under the radar if they receive an agency conflict of interest or ethics waiver for post-government employment.

Days after the Administration's policy shift, Defense Secretary Donald Rumsfeld ordered the General Counsel's office to investigate whether senior government officials are complying with agency regulations when they seek contractor jobs.

 2. The Clinton Administration

One of the most recent dramatic shifts in revolving door policies was temporarily promulgated by President William J. Clinton who strengthened conflict of interest laws on the day of his inauguration, January 20, 1993. By signing E.O. 12,834,52 also known as the "Senior Appointee Pledge," Clinton placed numerous post-employment restrictions on senior executive agency appointees. Specifically, the order extended the one-year ban to five-years, prohibiting former employees from lobbying their former agencies after they left office. Additionally, former employees of the Executive Office of the President (EOP) were prohibited from lobbying any other executive for which that the employee had "personal and substantial responsibility as a senior appointee in the EOP."

On December 28, 2000, one of his last days in office, Clinton revoked the "Senior Appointee Pledge."53 In protest, Senator Charles Grassley (R-IA) stated: "I hope that President Clinton acts in the remaining days of his presidency to reverse the mistake made by revoking the order against the revolving door.... Using the power of the presidency to reverse a policy he put in place to help ensure integrity in government service undermines the public's confidence in political leadership.54

 3. Lack of Congressional Oversight

It has been fourteen years since the Congress has looked into the adequacy of restrictions on government personnel, particularly from the Pentagon, taking jobs with contractors. Interestingly, in the five years between 1986 to 1990, the GAO issued six reports on the DoD's revolving door.55 Those investigations determined that the procurement integrity law exempted many former DoD personnel from reporting requirements, that many DoD employees did not file required post-employment reports, and that DoD contractors did not include all former personnel covered by DOD reporting regulations. Furthermore, congressional attempts to strengthen revolving door legislation were defeated.56

 D. Lack of Enforcement

For many years, the government's enforcement of revolving door laws has been lax. Several factors appear to contribute to the almost complete absence of criminal investigations and prosecutions in this important area. A major challenge is that federal conflict of interest and ethics laws are complex and ambiguous. Additionally, revolving door violations can be difficult to prove, especially because the communications between the government employee and a future employer are not transparent. It is important to remember that the Druyun/Boeing case was only uncovered because of a related Senate investigation that uncovered internal e-mails. Another factor that limits prosecutions is that government attorneys hesitate to prosecute politically connected and well-funded entities, given the government's relatively limited resources. Moreover, the public has become inured to the revolving door, generally accepting that its practice is simply how things are done.

 1. Agency Oversight

Conflict of interest and ethics concerns usually are reported to the government agency for initial review. Therefore, agencies are responsible for investigating and, if necessary, reporting revolving door violations to the Department of Justice (DOJ). A recent study by the Department of Interior Inspector General (DOI IG) illustrates the negligence on the part of agencies in their treatment of conflict of interest and ethics concerns.

The DOI IG stated that it "found both evidence of and the perception that [DOI's] leadership did not take ethics seriously."57 The report further stated that the conflicted government employee is "ultimately responsible for ensuring compliance with a recusal agreement," but neither they nor agency ethics screeners "received adequate training or reliable advice."58 The DOI IG concluded:

Framed in the context of a train wreck waiting to happen, the Department of the Interior was presented with its most complex set of ethical issues with Mr. J. Steven Griles' appointment,[59] at a time that, following years of neglect, demise, and compartmentalization, the ethics program was wholly incapable of addressing them.

As with most political appointees, Mr. J. Steven Griles likely viewed himself as an honest advocate of his administration's agenda. Since political appointees tend to believe that they are good people doing good things for the American public, they sometimes characterize any reasonable review or critique of their ethical behavior as prompted by partisan politics. The federal ethics rules are designed, when properly executed, to both guide and protect the well-intentioned political appointees. Fortunately, the threshold for the criminal ethics statutes is high enough to prevent most appointees from ever reaching it. The most difficult area, however, is the expansive gray area in between, that of "appearances."

Time and time again, the Office of Inspector General has heard from those charged with providing political appointees at the Department with ethical advice that appearance concerns are left to the appointee, reasoning that the appointee is in the best position to make those determinations. This myopic view presumes that the neophyte political appointee fully understands not only the federal government's byzantine ethical standards but also fully appreciates and understands the "fishbowl" mentality of Washington, D.C.

By answering ethics questions from a purely legal perspective, the provider of such advice builds in an inherent defense, should such advice subsequently fail to protect. The resulting disservice to a political appointee is profound. After all, it is not the career of the ethics official or advising SOL attorney that is on the line.

Between the Ethics Office and SOL, the combined failure of the ethics "team" in the Department to provide rigorous ethics advice to the political leadership - leaving them, instead, to assess appearance concerns from their own, subjective perspective, rather than that of the "reasonable person" - is, at once, both cowardly and disingenuous. Unfortunately for the appointee, the "reasonable person" standard is a much harsher judge of their conduct than is their well-intentioned subjective perspective. And thus, Mr. Griles and others now find themselves in a highly defensive posture against a cacophony of charges - even if no actual conflicts are found, the cries against the appearance of conflicts of interest drown out any acquittal - when solid, courageous, thorough advice at the outset might well have prevented these appearance problems altogether.

The wholesale failure of the ethics program at the Department emanates from a fundamentally flawed design crafted over time by a cast of negligent architects. Unfortunately, it also threatens to leave a trail of fallen political appointees in its wake.60

2. Prosecutions

Even when agencies are on top of conflict of interest and ethics issues, little action is taken by federal prosecutors. The number of revolving door investigations, prosecutions, and convictions that have been initiated in recent years are documented by DOJ data obtained under the Freedom of Information Act by the Transactional Records Access Clearinghouse (TRAC).61 The government entities theoretically responsible for enforcing revolving door laws include DOJ, the Federal Bureau of Investigations (FBI), agency Inspectors General, and OGE.62

As illustrated below in Chart 3, during the last nine years only a small handful of revolving door cases have been initiated, let alone resulted in a conviction. Although the total number of revolving door cases is minimal, the downward trend for this nine-year period is notable. Despite the increase in the number of total referrals and convictions for all federal matters, there is a significant decline in the number of revolving door referrals. In the most recent available year, FY 2003, of the 153,399 matters referred for prosecutions in federal court for any crime, over 22,785 involved white collar crime and official corruption. Out of those subcategories, only 12 (.05%) involved revolving door allegations and only two revolving door cases resulted in convictions.

 Chart 3.

Enforcement of the Revolving Door
Fiscal Year
1995
1996
1997
1998
1999
2000
2001
2002
2003
Referrals for Prosecutions (Official Corruption & White Collar Crime) 35,549 29,196 26,983 25,699 24,956 23,876 23,808 21,925 22,785
Referrals for Prosecution (Revolving Door)63
76
73
59
44
48
46
19
21
12
Referrals with Prosecution Declined (Revolving Door)64
71
64
60
38
36
47
38
41
28
Convicted After Prosecution (Revolving Door)
9
9
5
10
2
7
2
8
2


Also troubling is that the government declined to prosecute nearly all (28 out of 30) of the revolving door cases. Of those declined cases, approximately eight were disposed of after an investigation lasting no longer than one hour and fourteen were dropped because of lack of evidence of criminal intent or weak/insufficient admissible evidence. For a case to make it out of an agency and be formally referred to DOJ for prosecution is a significant step. Clearly the agency concluded that there was sufficient evidence to make the referral. A question worth exploring is why the DOJ found such a significant proportion of these referrals not worthy of prosecution.

 E. Revolving Door Violations

Despite the loopholes in the current revolving door laws, there have been a few successful prosecutions. The following cases, which involve three of the top 20 contractors, were prosecuted by the DOJ:

F. Defenders of the Revolving Door

Defenders of the revolving door point out that there is nothing inherently improper or illegal when a contractor hires a former government official. Steven Kelman, a former Administrator for the Office of Federal Procurement Policy in the Office of Management and Budget, left the federal government for a teaching position at Harvard University. Since leaving government service, Kelman has become one of the more prominent proponents for the so-called "benefits" that the revolving door provides to the American taxpayer. Kelman, himself, is a lobbyist for Accenture (formerly Andersen Consulting), a recent entry into the government contracting big leagues.

Kelman argues that "the government is better off because many contractors (particularly in the defense and information technology industries) have significant numbers of ex-government employees."68 Kelman bases his opinion on two premises: that "post-employment opportunities based on knowledge of the government one has gained increases the attractiveness of government service for talented people," and that "the presence of these ex-employees increases the odds a contractor will perform well and deal honestly with its government customer."69 He admits, however, that an ex-government employee's "presence on a contractor team surely does make it easier for the contractor to win business from those at the agency who knew, or knew of, the ex-employee."70 Subsequently, Kelman asserts: "This shouldn't be seen (until proven otherwise) as unjustified 'cronyism.' For it to be unjustified, the contract would need to be awarded to the firm without good reason to expect that contractor, with the ex-employee involved, would provide the best value for the governmentt."71

In Washington Post editor Steven Pearlstein's July 7, 2003 column, entitled "A Revolving Door? So What?," he dismisses the revolving door phenomenon as a threat to good government, instead hailing it as a practical competitive solution for awarding government defense contracts.72 He bases his argument on the following assertions. First, the revolving door is so prevalent that no single federal contractor has an advantage over another. Second, the government contracting system works better because procurement officials go to work for contractors. Third, although the United States' defense arsenal is "hardly cheap, [it] is unmatched anywhere else in the world."73

Despite those assurances, POGO's investigation provides examples where questionable decisions have been linked to the revolving door and do not serve the federal government or the taxpayer well. and, in fact, makes it difficult for the public to determine where the government stops and the private sector begins.


V. MONEY & CONTRACTING

Corporations contracting with the federal government received $244 billion dollars in contract awards in FY 2002, to provide the government with goods or services to support the United States' military and civilian needs. For example, since FY 1997, Lockheed Martin has received contract awards totaling $141 billion. (Appendix A). One factor that may influence contract awards is the amount of money spent by contractors to guarantee future government business. depicts the large sums of money that are contributed to federal candidates by the top 20 federal contractors, their total lobbying expenditures, and their contract awards. For example, since 1997, Lockheed Martin ranks first in total campaign contributions (contributing over $7.3 million) and contract awards (receiving over $141 billion).

The statistics leave the impression that by supporting Members of Congress and lobbying for certain programs or laws, government contractors can secure billions of dollars in government business. Indeed, if these expenditures did not result in more federal dollars flowing to the contractor, why else would they spend these millions?

The days when government contractors were barred from making contributions to a political party, committee, or candidate for public office were not that far in the past. That ban was the law of the land until 1976.74 Violations of the law resulted in a fine up to $5,000, imprisonment for up to five years, or both.75 The provision disallowing government contractors from making political contributions prevented:

1. The use of federal funds for political purposes;

2. Contractors from using money to obtain a contracting windfall; and

3. Corruption and bribery of federal officials.

In 1976, however, Congress amended the law prohibiting government contractors from making campaign contributions.76 The change allowed government contractors to establish a "separate segregated fund ... for the purpose of influencing the nomination for election, or election, of any person to Federal office."77 In other words, although a contractor is prohibited from making campaign contributions from company coffers, the contractor may form a PAC, which collects "voluntary" employee donations and then makes contributions to federal candidates. In addition to PAC contributions, contractor stockholders, officers, and employees may make individual contributions (not exceeding $2,000 for the primary and general election for a total of $4,000 per election cycle) to a federal candidate.78 These contributions are identified as coming from that individual's employer, allowing the company to "take credit" in the eyes of the candidate. Therefore, federal contractors distribute hundreds of thousands of dollars in campaign contributions including PAC contributions, individual contributions, and, until the 2004 election cycle, soft money contributions.79 In 2002, the McCain-Feingold Act (the Bipartisan Campaign Reform Act) banned soft money contributions. The United States Supreme Court upheld the soft money ban in 2003.80

VI. POGO's RECOMMENDATIONS

 A. The Revolving Door

1. Simplify the complex system of laws, Executive Branch regulations, department and agency regulations, executive orders, and agency directives that add ambiguity to government ethics laws. Repeal the multi-tiered system of laws and regulations and incorporate required provisions in a clear and consistent model rule of ethical conduct for the entire federal government;

2. Prohibit, for a specified period of time, political appointees and Senior Executive Service (SES) policymakers (people who develop rules and determine requirements) from being able to seek employment from contractors who significantly benefitted from the policies formulated by the government employee;

3. Require government officials to enter into a binding revolving door exit plan that sets forth the programs and projects from which the former employee is banned from working. Like financial disclosure statements, these reports should be filed with the Office of Government Ethics and available to the public. This requirement would benefit government employees who are unaware of or confused by post-government restrictions or who have multiple post-employment bans covering different time periods. It would also enhance public trust in the government;

4. Require recently retired government officials and their new employers to file revolving door reports attesting that the former government employee has complied with his or her revolving door exit plan;

5. Prohibit government employees from overseeing or regulating their former private sector employer;

6. Close the loophole that allows former government employees to work for a department or division of a contractor different from the division or department that they oversaw as a government employee;

7. Establish an Executive Branch-wide law for federal government employees, requiring notification of recusal or disqualification to a supervisor;

8. The Office of Government Ethics should provide enhanced oversight of private sector employees who enter public service. Those types of revolving door cases should receive enhanced oversight because government officials may be placed in positions in which they regulate or oversee programs and policies that may affect their private employer.

B. Money & Contracting

1. Congress should restore the pre-1976 prohibition on contractor campaign contributions thereby assuring the American public that contractors' contributions are not driving contracting decisions.

C. Federal Advisory Boards

1. Remove or modify conflict of interest and Freedom of Information Act exemption and waiver provisions for advisory board members and ensure that unclassified portions of board meeting minutes are publicly available; and

2. Enact Executive Branch-wide law requiring federal advisory committee members to recuse or disqualify themselves from any discussion on matters where they or their private employer or client have a significant financial interest. This disclosure or recusal statement, including name, title and employer should be filed with the Office of Government Ethics and made publicly available;

D. Lobbying

1. Increase the one-year ban on lobbying for Members of Congress and their senior staffers who have a nexus between authorizations or appropriations authority over their post-government employer; and

2. Paid contractor consultants should be required to register with the Office of Government Ethics. Many former government employees are hired to promote a contractors agenda and the current system does not prove any transparency of those actions.



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updated:Tuesday, June 29, 2004