Military “mentors” quit rather than disclose conflicts of interest

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New disclosure rules, enacted to prevent possible conflicts of interest in the defense department, have prompted seven former top admirals and generals to quit an advisory program, rather than make their business ties public, according to a report in USA Today.

Until recently, retired admirals and generals working as consultants to the Pentagon have not been required to disclose their outside income. Even though the former officers make as much as $340 per hour giving advice on war plans and weapon systems, they have also been receiving payments from outside defense firms.

The military uses about 158 “senior mentors”, about 30 of which advise the Army, Navy, Marine Corps and Air Force; the others work in areas outside the four main branches. About 80 percent of those had financial ties to defense contractors, including 29 who were full time executives of those companies.

Besides receiving monies from defense contractors and consulting fees from the Pentagon at the same time, most of the officers were also collecting six-figure pensions.

Last year, Defense Secretary Robert Gates proposed new rules that would require the former officers to disclose their outside income and business relationships, and cap their military pay at $179,000. This month, President Obama signed the policy into law as part of the defense authorization act.

The seven mentors who quit the program this month said the disclosure requirements were too intrusive. The mentors claim that they police themselves, and would never abuse public trust.

Even so, the mentors were not subject to ethics rules that would apply if they were part-time federal employees. They did not have to disclose the identities of their outside clients or employers, or how much they were being paid.

“This setup invites abuse,” says Janine Wedel, a George Mason University public policy professor and author of a forthcoming book on government contracting. “Everyone in this story is fat and happy. Everyone, of course, except the public, which has virtually no way of knowing what’s going on, much less holding these guys to account.”

USA Today

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Army funnels over $250 million to bogus Alaska native firm with no experience

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Is the U.S. Army getting its money's worth when using unqualified and inexperienced contractors?

A tiny and inexperienced Delaware company has been awarded hundreds of millions of dollars of lucrative contracts by the U.S. Army without any competitive bidding, and for which it has no experience.

A Washington Post investigation found that the small firm, United Solutions and Services, known as US2, has expertly exploited federal laws designed to help impoverished native Alaskans, although nearly all of its revenues, profits and employee compensation has gone directly to non-native Alaskans. In fact, the firm is not located in Alaska, and employs not a single native Alaskan.

The company benefited from a loose association an Alaska Native Corporation (ANC), a special type of entity created by act of Congress in 1971 to help improve the lives of impoverished native Alaskans. Over $29 billion in work has been awarded over the last ten years to companies that have ANC status, many of which through a legal association with an Alaska shell company. A key and extremely valuable feature of ANC status is that companies can receive federal contracts of any size, without any competitive bidding.

In the three-year period between 2005 and 2008, US2 had a total of $33,000 in revenues- largely from janitorial and other work. It had only three employees, and its president, Stephen Hadley, worked from his living room in his Delaware home. Despite its lack of revenues, assets, employees, experience or anything else of apparent value, US2 had one asset of monumental value: its 51% ownership by an ANC called Cape Fox, allowing it to become a major defense contractor overnight.

Before founding US2, Hadley was a lineman and supervisor at Delmarva Power and Light. He told the Post, “When I got into the ‘federal world’ and realized that I had a chance to be entrepreneurial, do public service and help out the Alaskan natives, I fell immediately for the challenge. I am very proud of what we have accomplished. All it took was a good plan, lots of luck, perseverance, people willing to take a chance and God’s will to make it happen.”

Due to its part-ownership by Cape Fox, in 2008, without any competitive bidding, the Army discovered US2 and awarded three lucrative contracts in rapid succession. First was a $7 million contract in April 2008 for “professional, scientific and technical services.” Then in July, it received a $22 million contract to build a 15,000 square-foot high-tech recruiting center in Philadelphia.

Shortly thereafter, the Army awarded a five-year contract to US2 worth as much as $250 million to create a program to handle sexual assault and harassment training, another area in which it had no experience. With full knowledge of the Army, US2 simply subcontracted the work out to other firms to meet the requirements of the contract, as it done on the previous contracts

In 2009, the Army paid US2 a total of $61.7 million under the contract. Of that, nearly all the monies went Hadley and a handful of subcontractors, including Summit Marketing Group, General Dynamics Information Technology, nonprofit government contractor LMI and public relations outfit O’Keefe and Co.  The amount earned by and paid to native Alaskan company Cape Fox amounted to $641,000- about 1% of the total revenues.

Besides the apparent abuse of the ANC laws to funnel lucrative government contracts to firms that provide little or no benefit to impoverished Alaskans, the lack of competitive bidding almost guarantees that taxpayers are also being overcharged on billions of dollars of such contracts. The competitive bidding process affords protection that goods or services are being secured at a reasonable price and help avoid rampant fraud that is so prevalent in government contracting.

The Army claims that it followed proper procedures in its dealings with US2, but said that it would refer the matter to its inspector general for further review.

The Washington Post

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California National Guard Massive Fraud

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According to an exclusive story in The Sacramento Bee, officials at California’s National Guard doled out as much as $100 million to Guard members between 1986 and 2009 in funds intended for federally subsidized student loan repayments and signing bonuses. According to an insider whistler-blower, of payments went to soldiers who didn’t qualify for the incentives, payments were made far in excess of the permitted limits, and amounts were illegally paid to captains and majors.

The investigation reports that the administrator in charge of the payments, Master Sgt. Toni Jaffe worked with little supervision, and operated the payment program as a giant slush fund, fabricating and backdating paperwork and making payments intended for combat vets to soldiers that never served a day at war.

Despite the Guard’s acknowledgement of “serious illegal activity” and “systemic and historic abuse and mismanagement of fiscal law, guidance and policy”, no mention was made of any intent to recover any of the improperly paid monies.

The Sacramento Bee

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