----- Original Message ----- From: John A Imani To: May 19th Movement Sent: Thursday, December 30, 2010 4:14 PM Subject: Retiring generals are taking lucrative defense-firm jobs
(JAI: Sounds a lot like Wall Street and Washington.) >From the Pentagon to the private sector In large numbers, and with few rules, retiring generals are taking lucrative defense-firm jobs By Bryan Bender Globe Staff / December 26, 2010 video and graph at: http://www.boston.com/news/nation/washington/articles/2010/12/26/defense_firms_lure_retired_generals/?page=full WASHINGTON - An hour after the official ceremony marking the end of his 35-year career in the Air Force, General Gregory "Speedy'' Martin returned to his quarters to swap his dress uniform for golf attire. He was ready for his first tee time as a retired four-star general. But almost as soon as he closed the door that day in 2005 his phone rang. It was an executive at Northrop Grumman, asking if he was interested in working for the manufacturer of the B-2 stealth bomber as a paid consultant. A few weeks later, Martin received another call. This time it was the Pentagon, asking him to join a top-secret Air Force panel studying the future of stealth aircraft technology. Martin was understandably in demand, having been the general in charge of all Air Force weapons programs, including the B-2, for the previous four years. He said yes to both offers. In almost any other realm it would seem a clear conflict of interest - pitting his duty to the US military against the interests of his employer - not to mention a revolving-door sprint from uniformed responsibilities to private paid advocacy. But this is the Pentagon where, a Globe review has found, such apparent conflicts are a routine fact of life at the lucrative nexus between the defense procurement system, which spends hundreds of billions of dollars a year, and the industry that feasts on those riches. And almost nothing is ever done about it. 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. And in many cases there is nothing subtle about what the generals have to sell - Martin's firm is called The Four Star Group, for example. The revolving-door culture of Capitol Hill - where former lawmakers and staffers commonly market their insider knowledge to lobbying firms - is now pervasive at the senior rungs of the military leadership. Among the Globe findings: ? 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.'' A postretirement business Some members of Congress who served in the military said the system needs much stricter disclosure rules. With few exceptions, all the Pentagon requires now is for retired officers to wait one year before directly advocating for a contract before the specific military branch they served in. "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.'' Martin and Northrop Grumman declined to discuss the details of his activities on behalf of the company. Martin said his ongoing role as chairman of the Air Force Studies Board is mostly limited to deciding what to study, not making specific recommendations. "I do not substantially influence the findings of studies that could help my clients,'' Martin said. Yet judging the validity of such assertions is difficult. Even fellow participants in the two-year stealth aircraft study, for example, said they were not told of Martin's industry clients. Seth Bonder, a member of the National Academy of Engineering who also participated on the panel, said, "I never knew what Speedy was doing elsewhere. I don't inquire what he has in terms of industry connections.'' Bonder said disclosure of potential conflicts would be desirable, to prevent confidential data from reaching contractors at an early stage. "You get privied information,'' he said. Clear potential for conflict There was a clear sense of urgency as top Army officials and advisers converged on the National Defense University's campus on the banks of the Potomac River for a high-level meeting in June 2009. Their goal: develop ideas for the Army's next ground combat vehicle. The Army badly needed to get a new tank program rolling after its previous effort resulted in an embarrassing, $14 billion flop. A veil of secrecy surrounded the event. The Army did not publicly disclose the guest list for the meeting. It required participants to sign nondisclosure agreements. And to block potential bidders from gaining an unfair advantage, defense contractors were pointedly excluded. Yet, defense contractors had a robust presence inside. At least six retired generals invited by the Army were also consultants or executives of defense companies that would bid on the new tank contracts, according to a meeting roster obtained by the Globe. The roster did not list their private-sector affiliations. Each was listed by the Army only as "distinguished participant.'' Contacted by the Globe, several generals said they disclosed their potential conflicts of interest to the Army, on ethics questionnaires, before arriving at the meeting. The Army refused to comment on the ethical issues raised by the generals' presence and declined to release copies of the ethics disclosure forms, citing privacy concerns. It confirmed, however, that no one was disqualified from participation based on their responses. A look at some of those attending suggests that there was ample potential for direct conflicts. Retired Army Lieutenant General William H. Campbell oversaw all of the Army's information systems before leaving the service in 2000. Since 2002, he has been employed as a senior vice president at BAE Systems, one of the Army's primary weapons suppliers and a major bidder for the new ground combat vehicle. Campbell said in e-mail responses that he did not have a conflict of interest because he works in the electronics division of BAE, not the ground combat division, which is bidding to build the new tank. Campbell and BAE declined to say how much, if any, of the electronics system in the new tank might be produced by Campbell's division at BAE. But Campbell suggested that other generals at the meeting may have been skating closer to the edge. "I think there is a danger of a real or perceived conflict of interest when an individual who is working on a defense program provides external advice to the military on the very same program, in either an official or unofficial capacity,'' he said. Campbell did not name names. BAE had another representative in the meeting room: 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. It was Yakovac who had overseen, while in uniform, the failed, $14 billion "future combat system'' program. And the office he once ran was in charge of devising the new combat vehicle. Some of the active-duty officers now running the unit previously worked for Yakovac, including Major General John Barley. Nevertheless, Yakovac said he was assured by Army lawyers he could offer advice without running afoul of any ethics rules. The new system is considered a separate contract by the military, freeing him to take an advisory role. 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.'' Another retired general at the session was General John H. Tilelli, who was the vice chief of staff of the Army before retiring in 2000. He now runs Cypress International, which has a consulting agreement with Science Applications International Corporation, another bidder on the ground combat vehicle program, confirmed Melissa L. Koskovich, a corporation spokeswoman. Retired General William S. Wallace, who ran the Army's Training and Doctrine Command before retiring in 2008, said he was not representing one of the prospective bidders at the time of the meeting. Like the other participants, however, one of the ethics questions he was asked to answer, according to a blank copy, was whether he intended to consult in the future for a client that may have a direct interest in bidding on the new tank. Wallace declined to say how he answered that question. Wallace confirmed that he 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. Navigating ethical issues The one-year "cooling off'' period prohibits a retired general or admiral from directly making a sales pitch to their former military branch. For two years after retirement, the Pentagon prohibits them from participating in "particular matters,'' meaning ongoing contracts greater than $10 million that were under their command. New editions of older weapon systems - like the new ground combat vehicle - are not considered "particular matters.'' "Even if restrictions apply, 'behind the scenes' work is permitted, so essentially they can assist a new employer as long as they don't place the call or show up at meetings,'' said Scott Amey, the general counsel at the Project on Government Oversight, a watchdog group. 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. Air Force Lieutenant General Kenneth E. Eickmann, who frequently dealt with defense contractors when he was on active duty, is among them. "I always felt uncomfortable dealing with former generals working for those companies,'' said Eickmann, who retired in 1998 and is now a senior fellow at the Energy Institute at the University of Texas. "Sometimes I felt like they were relying on a past friendship to get me to do something.'' 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.'' Navy Admiral William J. Fallon said he turned down consulting offers after learning that defense industry clients were seeking "tactical'' information from inside the Pentagon. Said Fallon: "I didn't want to be a walking Rolodex.'' Humvee lobbying pays off The Humvee is perhaps the most visible icon of modern warfare - bulky, tough, and ubiquitous on battlefields in Afghanistan and Iraq. But this year the Army said it would build them no more. Instead, it proposed shifting half a billion dollars in money for new Humvees to a program of fixing up old models, which Army officials determined would be more cost-effective. Whether or not it was a good move for the Army, it was a looming debacle for the Humvee's exclusive manufacturer. The firm - AM General, of South Bend, Ind. - fielded a trio of former military leaders with major Beltway clout, including retired Army General Jack Keane, to try to reverse the plan. A commanding presence at 6 foot 5, 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. Chiarelli declined through a spokesman to be interviewed for this article. Keane also helped AM General make its case to influential members of Congress, according to a former defense industry official with direct knowledge of the discussions. 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. In addition to Keane, AM General was paying the Spectrum Group, a defense consulting firm with a roster of retired generals, about $20,000 a month to help arrange access to key decision makers, according to a former Pentagon official with direct knowledge of the contract. According to a former AM General executive, the AM General account at Spectrum was overseen by retired Army Lieutenant General John Caldwell. Caldwell's last job before retiring in 2004 was as the deputy to the service's top acquisition official. Before that he served as commander of the Army's Tank-Automotive Command, the Michigan-based unit that is responsible for acquiring Humvees and all other ground vehicles in the Army. Spectrum did not return several calls for comment. A third retired general helping AM General was General Paul J. Kern, a member of the Pentagon's Defense Science Board, an official military advisory panel. Kern, who declined a request for an interview, retired in 2005 as the chief of the Army Materiel Command and was previously the service's top acquisition officer. Kern, who served as president of AM General from 2009 to 2010, is also an associate at The Cohen Group, the consulting firm that includes a number of high-profile retired generals and admirals. All that muscle appeared to pay off for AM General, which did not respond to a request for an interview. In July of this year, Congress denied the Army's request to shift more than $500 million to the refurbishment of Humvees and ordered the service to use the money to keep buying new ones. Tom Christie, a former senior Pentagon acquisition official, said the Humvee debate is a prime example of how defense companies gain by deploying retired generals. "They are very useful in opening doors.'' A convincing proposal As envisioned by Northrop Grumman, the Fire Scout - a nimble, remote-controlled surveillance helicopter - would help troops pinpoint enemies hiding beneath a jungle canopy. With hovering capability, it could peer into places a Predator drone could not. But before Northrop could get to work building Fire Scouts, 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. To get the Fire Scout off the ground, Burdeshaw did more than just set up meetings with key Army decision makers. It was hired by Northrop Grumman to write a "concept of operations'' for the aircraft, according to retired General William Richardson, a former commander of the Training and Doctrine Command and an adviser to Burdeshaw. The concept of operations is an official document that is a crucial step in defense procurement. It lays out exactly how a weapon is supposed to work and what its mission will be, and provides the justification for pursuing its development. After the Army adopted the concept, it gave Northrop a 10-year deal and paid the firm $109 million to build eight Fire Scouts. But they are still sitting at Northrop Grumman's Mississippi plant, unused. With little explanation, the service decided earlier this year that it didn't need the aircraft after all. The Army would not respond to questions about why it canceled the Fire Scout. Notifying Congress early this year that it was killing the program, it said it was focusing on other priorities. 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. An official at Northrop Grumman's Aerospace Systems Division who was not authorized to speak publicly disputed Richardson's characterization of Burdeshaw's work, saying the firm's consultants crafted a series of briefing papers that helped make the case for the project, not an official concept of operations. Northrop Grumman declined to comment on the record about Burdeshaw's work on the Fire Scout program. The Army Aviation Center in Alabama, which is responsible for all Army aircraft, did not respond to several requests to comment on how the documents provided by Burdeshaw were used. Retired officers frequently help industry and the military branches develop the concept or justification for weapons, according to interviews with military and industry participants. In other cases they try to influence weapons projects more indirectly: by passing along "white papers'' and other documents drafted by their clients that question the rationale for awarding contracts to their competitors. Wallace, the Army four-star who retired in 2008 as the commander of the Training and Doctrine Command, said the phenomenon has grown in recent years. He cautioned that the Army should only use such private-industry analyses as a starting point for further work. "I hope [the Army] wouldn't just take it and put an Army logo on it and say it's ours,'' said Wallace, who now consults for General Dynamics on the ground combat vehicle program, among other companies. "Doesn't sound like a good idea to me.'' Tapping a niche market The Four Star Group certainly lives up to its name. The heavyweights on its consulting roster, all retired from the Air Force, served as chief of staff; deputy chief of staff; chief of the Space Command; head of the Materiel Command (Martin); and commander of the Air National Guard. The newest adviser for the group is former Air Force Secretary F. Whitten Peters. 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. Through their relationship with Gores, the generals own shares, or could own shares in the future, in firms that make communications devices for soldiers, blast-resistant glass for embassies and military installations, and radar equipment. The Globe identified several other equity firms with defense expertise that also are deploying retired generals as part of an investment strategy. Critics say this emerging line of retirement business for generals raises thorny questions about their access to privileged Department of Defense information. "The big question is should they be using their contacts in the military to benefit their new investment?'' said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "At what point does your fidelity to the military dissipate or go away? Do the contacts they have in the military benefit their new operations?'' But Bill Patton, a former corporate executive who helped set up The Four Star Group and is its chairman and chief executive, said the firm's principal owners scrupulously avoid trading on privileged information. "I think this is how a company of ethical retired generals should operate,'' he said. The generals' role, he said, is limited to acting as "assisters, advisers, and introducers.'' The demand for the generals who can guide investment decisions is expected to grow in the future, say observers of the trend. 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. Bryan Bender can be reached at [email protected]. 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