ICYMI: At Hearing, Warren Blasts Revolving Door Between DoD and Giant Defense Contractors, Calls for Sweeping Ethics Legislation
Warren’s New Report Uncovers Widespread Abuse of Revolving Door; Underscores Need for Immediate Reform
Washington, D.C. – Chairing a hearing of the Senate Armed Services Subcommittee on Personnel, U.S. Senator Elizabeth Warren (D-Mass.) questioned Pentagon officials and ethics experts about problems with the revolving door, retired military officers working for foreign governments, and issues with executive branch officials owning stocks in companies impacted by their official actions after releasing alarming findings this week about the revolving door between the Pentagon and giant defense contractors.
The hearing comes after Senator Warren released a new report uncovering nearly 700 instances of former high-ranking DoD and other government officials now working at the top 20 defense contractors and highlighting the need to close the revolving door for ex-government and military officials hired to executive board and lobbyist positions at large defense contractors. New information Senator Warren requested from DoD reveals troubling cases of former government officials working for foreign governments.
Senator Warren called for sweeping ethics legislation across the Department of Defense and the federal government. Senator Warren’s Department of Defense Ethics and Anti-Corruption Act would enforce limits to the influence of contractors on the military, restrict foreign influence on retired senior military officers, and assert greater transparency over contractors and their interaction with the DoD. Her Anti-Corruption and Public Integrity Act would overhaul ethics, campaign finance, and open records laws to comprehensively combat corruption across the federal government.
Transcripts and videos from four rounds of Senator Warren’s questions and closing remarks below:
Transcript: To receive testimony on public integrity and anti-corruption laws at the Department of Defense
U.S. Senate Committee on Armed Services Subcommittee on Personnel
Wednesday, April 26, 2023
Panel 1, Round 1 of Questions below and video HERE:
Senator Elizabeth Warren: So I’m going to recognize myself here for first round of questions. Decisions made at the Department of Defense and other federal agencies should be based on one thing and one thing only: what's in the best interests of the American public.
But big defense contractors have a different set of incentives. They are responsible to their shareholders. And that means their job is to make as much as they can in profits. Mr. Wilkerson, you have decades of experience in Republican and Democratic administrations, both in uniform at DoD, ultimately, as Special Assistant for the Chairman of the Joint Chiefs, Colin Powell, and as a civilian in the State Department.
So you've seen the relationship between the federal government and private industry up close and personal. Now, there are a lot of different ways that industry seeks to influence decision making at the Pentagon, and a key one is by use of the revolving door. So Mr. Wilkerson, let me just ask you, were you lobbied by former colleagues who were hoping to influence your decision making when you worked either at the Pentagon or the State Department?
Colonel Lawrence B. Wilkerson, USA (Ret.), Former Special Assistant to the Chairman of the Joint Chiefs of Staff: While I was a both places, I was asked legally, in view of the administrative instructions I had received when I became Director and Deputy Director of the Marine Corps War College at Quantico, Virginia. In other words, they came to me after I retired.
At State, it was quite the opposite. I had to tell them mid-sentence as it were, stop, motion my Staff Assistant to come in, escort this gentleman out please, because he's getting ready to make an offer of employment to me, and I can't, I can't even listen to it. And that was my administrative instructions.
When I did my financial disclosure form and went through the White House background investigation, everything else, I knew that I could not entertain an offer for civilian employment, post my position, until I was out of it.
Senator Warren: So you're telling me, I'm just making sure I'm following you as we go through this. So you're saying while you were still working for the government, that there were defense contractors who were pretty clearly willing to step over the line to try to make you an offer of employment while you were still a government employee?
Mr. Wilkerson: Yes, ma'am.
Senator Warren: How about on the other side, were they lobbying you about contracts, other things?
Mr. Wilkerson: Not directly. It's a little, a little bit more pernicious than that. For example when I would sit down at lunch with Turki al Faisal, who at that time was head of Saudi intelligence, with David Ignatius from the Washington Post on the other side of me, and listen to the conversation at the table. I knew there was influence being peddled, was there an exchange of money? I don't know.
I myself was offered a couple thousand dollars from a Saudi official in order to do this, that and the other thing, and I told him simply, I can't take it. If there is a really, truly pernicious relationship with flag officers, and I'm sad to say colonels do, I'm sad to say, it seems to predominate in the Air Force. It's everywhere, but in the Air Force, it’s really bad. It's Saudis going to work for the Saudis, and whatever it is they do for the Saudis.
I spent a lot of time in this building lobbying to get the Senate to pass and then in the House, to get the House to pass the legislation under the War Powers Resolution that would get us out of the war in Yemen. We got it passed in both houses. Unfortunately, President Trump vetoed it. I encountered people all the time who were being influenced by Saudi money that was exercised, if you will, in order to keep that boat from being successful.
Senator Warren: So, so let me just back it up a little bit. I very much appreciate your firsthand account here. To ask you that, based on your experience in government, I just want to focus on the part about why defense contractors, not not just foreign governments, but defense contractors like Boeing or Raytheon. Why is it they want to hire former Pentagon employees to work for them as lobbyists? What do they see is the benefit? Why is it better to have someone who, for instance, they could hire people whose profession is lobbying, someone who's lobbied in another field, say for another 10 years for the last 10 years. But they don't want that, they'll take somebody who's never lobbied before, but who's been employed at the Pentagon. Why is that?
Mr. Wilkerson: Well, there are a number of reasons, but I think the number one reason is because they know they know people who are their contemporaries who are in the building as it were, or whatever it happens to be. And they also know that that individual, usually O-6, O-7, O-8 or up, has contacts elsewhere in the defense contracting business, now really just about (inaudible).
And they know that that person knows how to work those contacts. And if it's specific program like the F-35, for example, which I'm somewhat familiar, then you get people who are very familiar with that on the inside know all about the lies that you've been telling the federal government with regard to the program, and will come out and reinforce those lies, deceit, if you will, from their position with your business. It's a very insidious, pernicious thing.
Senator Warren: So I take it that this is really why federal law has long recognized the importance of trying to insulate the work of the federal government from the influence of private industry. We've, we've been driving in this direction for a long time, just not very successfully. You know, federal law requires government officials, depending on where you are, wait one year or two years based on their seniority, before lobbying their former agency. I think this is called a cooling off period. Ms. Brian, let me ask you about this, you run an organization called POGO that works as a nonpartisan government watchdog. Is a two year cooling off period sufficient to address concerns about conflicts of interest?
Danielle Brian, Executive Director and President, Project On Government Oversight (POGO): It's a step in the right direction, Chairwoman, but it's not enough. It's been clear to us that you really need to, especially when you're talking about political appointees, look to the end of an administration, the length of the time of an administration, which is often four or even longer, depending if the person is reelected.
And this is something that we have done an analysis of the past Presidential ethics orders all the way back to President Clinton. Each President has had some form of ethics order, often applying as much as a five year cooling off period. But we do think a four year or at least to the end of the administration, when it comes to those appointees is important. And I'd love to include for the record, sort of our evaluation of those, those various considerations and how they could be applied through legislation.
Senator Warren: Without objection. TYou know, one of the common arguments that some of my colleagues make about cooling off periods, is that if we lengthen them, it will make it tougher to recruit talented people to work and at DoD.
Now, I always want to pause when I hear that argument and say, think about that for a minute. The claim is, if somebody knew that federal law would prevent them from becoming a lobbyist after they left their federal job, that they would choose not to come to work at the DoD in the first place.
Ms. Wilkerson, based on your experience, if we told people who were in line for top Pentagon jobs that they would need to wait four years instead of three years or two years before they could become lobbyists after they left that job, do you think this would make it harder for DoD to attract the talent that they need?
Mr. Wilkerson: I don't, and I go back to Admiral Spruance, Admiral Nimitz, Admiral Halsey, General Eisenhower, and a host of other characters whom we all know from World War II, who weren't so motivated. They didn't have that incentive to do what it was they did, which was quite phenomenal, if you think about it.
Senator Warren: And is it your experience, or your, your sense that extending our cooling off period would strengthen or weaken our national security?
Mr. Wilkerson: I don't know what the exact time would be that would be most effective. But I think it is a measure, it is a measure. I would rather see, frankly, I would rather see the military reinstitute what I got at the Naval War College from Admiral Stockdale and a guy by the name of Joe Brennan, which was ethics and military service, and be a subject of a seminar, for example, that had standing room only crowds in it, because that's not something we teach as a country anymore.
Senator Warren: Fair point, fair point. I'm going do one last question, because I'm way over time. I was filling in while everybody was voting here. But my last question is to you, Ms. Brian. POGO has been around for over 40 years that you've been looking at this issue, you've been investigating these problems for nearly that long. Do you think we need more studies before we take steps to strengthen Pentagon ethics requirements?
Ms. Brian: My plea is not for us to do any more studying. As you mentioned, POGO ourselves have been doing this work since the 1980s with analyses. The GAO has at least 40 years of reports, more than 40 years of reports studying this, the Inspectors General have as well.
We don't really need to be studying this anymore. We really do know the problem here. We just need to fix the problem. If I could add to the to the point you raised before about those who, who might not want to come into government, if they are into the, into the Defense Department if they know they can't become lobbyists afterwards, I would, I would argue I don't want them in the Defense Department then and I'm glad that they're reluctant to go in.
Senator Warren: So, thank you. You know, I just want to close this by saying I have a bill that would combat giant defense contractors capture the Pentagon by making some ethics reforms. We should close influence-peddling loopholes so the definitions of lobbying capture all of the work that corporations do to try to tilt the system in their favor. We should extend recusal periods for people who come to DoD from giant Pentagon contractors, and we should require more public reporting on these companies about their hiring of former Department of Defense officials. A good place to start this is by extending those cooling off periods for at least four years. And with that, I apologize to my colleagues for going so long and turn this over to Mr. Scott.
Panel 1, Round 2 of Questions below and video HERE:
Senator Warren: So I want to do a second round of questions for anybody who wants to do it. As I mentioned in my opening statement, and Senator Kaine referred to it, there was a recent investigation by the Washington Post and POGO that found that hundreds of retired military officers have gone to work for foreign governments. And Senator Grassley and I launched our own bipartisan investigation, it was not intended to be partisan. We wrote to the Department of Defense, we asked for detailed information about DoD processes for how they approved of this work, and how much these retired officers expected to receive in payment from foreign governments.
And what we discovered is that the approval rate from DoD is in excess of 95%, as you underscored Senator Kaine, and that the officers themselves made a lot of money. An Air Force General working for Saudi Arabia was getting paid $24,000 a month, which just about doubled what he was already receiving from his military pension.
What troubles me in particular about this is how hard it is to get the information. Senator Grassley and I were successful because we were able to bear down on it with some Senate elbow grease on this. But the information is not made public and Washington Post and POGO had to dig this out in other ways. So now that we've got this information, I just want to do a little bit more on the summary, high approval rates by DoD. Ms. Brian, can you just say a word about the kinds of countries that are employing our former generals, colonels, admirals?
Ms. Brian: Well, I think that's that's the thing that was most shocking to me was, when we're talking about countries, not only that are serial violators of human rights, the United Arab Emirates, for example, with 280 of these people on their payroll, but the fact that we were able to find four people who were approved to work for entities owned by China, which is obviously a rival to our country. That to me was what, what standard are they using to approve these?
Senator Warren: Right, so a little troubling about the particular countries that are, are being approved here. The number of retired officers working for foreign governments was made public by your outside investigation, can you just say a word about what it would mean if we required from the get go, that any employment by a former high level Department of Defense official by a foreign government had to be made public and available for anyone in the public to see? What would be the consequence of that, in your view?
Ms. Brian: I think it would be extremely valuable, in part because remember, these people are not just on the payroll, but as you noted, some of them are very high level, including the former National Security Advisor or the head of the NSA. And then they are also commenting in the media, but it is not also identified in their comments that they are on the payroll of a foreign country. They're just acknowledged as a former national security official. And, and so the public needs to know and the Congress needs to know who's, who's paying you for these comments?
Senator Warren: And, and just to make clear, so everybody's kind of following what happens here. Does the United States government place restrictions on our ability as a government to help countries, for example, that are identified as having terrible human rights records, or to help the Chinese government for example?
Ms. Brian: Certainly, I mean there's certainly all kinds of considerations that the State Department and DoD go into before they're evaluating whether those agreements are agreed to. But in this case, clearly, that's not what's happening.
Senator Warren: Well, I am particularly concerned that what's happened is there's been, this has become a way to bypass those restrictions and to be able to communicate with and influence government, and evade the sanctions or the restrictions that are otherwise in place.
So thank you, again, very much. Thank you for initiating the study and bringing this to light so that Senator Grassley and I could follow up and we could do more to highlight what's happening here. Senator Scott, do you have anything more Senator Kaine? All right. With that, thank you very much, both of you for being here and I call up the second panel.
Panel 2, Round 1 of Questions below and video HERE:
Senator Warren: Thank you very much. So I'm going to start with the first round of questions and I just want to say how glad I am to have all four of you here today – that we have four general counsels for the Department of Defense, the Army, the Navy and the Air Force. The four of you are the top lawyers at the Pentagon, and it is your job to oversee compliance with our ethics laws.
I am deeply grateful for your work, I obviously believe it is very important. And I appreciate your being here to explain to us and to say publicly how these laws work. So what I want to do is I just want to kind of run through some examples and make sure I understand exactly how some of these pieces go.
One of the key guard rails in our conflict of interest laws says that if a program if an official is “personally and substantially involved” in a Pentagon program, and then leaves to go to work for a defense contractor, they are permanently barred from coming back and lobbying the Pentagon on behalf of the company on issues related to the program that they used to work on. Boy, do I get what we were trying to accomplish with that and I think that's terrific. I just want to look at maybe some loopholes in that. So Ms. Krass, let's say that a Pentagon official helped write the contracts between the Pentagon and Lockheed Martin for a multibillion dollar weapons program. Under current law, as written, would that person be prohibited from leaving the Pentagon and joining Lockheed Martin's board?
Caroline Krass, General Counsel, Department of Defense: Thank you, Senator and I absolutely share your commitment to maintaining the public's trust and to avoiding any appearance of conflicts. Applying these laws is very context-dependent, and fact specific, but in general, the procurement integrity laws would prevent an acquisition official from accepting any compensation from a defense contractor –
Senator Warren: So anybody who helped write those contracts. So when Jim Mattis was told that he couldn't represent Theranos on a particular matter, but that he was free to go join their board of directors. That was okay.
Ms. Krass: So I can't opine on that particular situation, but –
Senator Warren: That's what happened.
Ms. Krass: But generally speaking, if somebody has left, if they have worked on a particular matter, involving specific parties, they may not come back to the government on that particular matter.
Senator Warren: But they can join the board of directors of the company that's talking to the government.
Ms. Krass: So, as I mentioned, if they are a former acquisition official, then they would not be able to if they were involved in a contract of $10 million or more.
Senator Warren: So you don't think Jim Mattis was involved in any contracts worth $10 million or more? This is just public record. I'm just going by what's public here. It looks like, to me, there is a big loophole for people who go off and just join the board of directors. Which by the way, is a pretty good job, because it turns out, according to their SEC filings, Lockheed paid its board members more than $300,000 a year. So it's a nice gig. So let me ask you another one. Ms. Krass, under our current ethics laws, would this person be allowed to be a consultant paid by Lockheed Martin to advise Lockheed Martin on how to respond to DoD in order to win future contracts from the Pentagon so long as they personally didn't come in and lobby? Would that be okay?
Ms. Krass: So they would not be able to – and again, you know, these are all context dependent –
Senator Warren: I understand that and we'll keep that as a running objection.
Ms. Krass: But, you know, they would not be allowed to use any proprietary information, or any other –
Senator Warren: The question I'm asking is, can they come in? Can they consult and tell you how to do it, as long as they're not the ones who show up in the office?
Ms. Krass: I think, under existing law, they have to be careful not to use any proprietary or other nonpublic information –
Senator Warren: But otherwise, they get to do that. Let me try one more. Under current ethics laws, could this former Pentagon official's consulting work include helping Lockheed Martin develop a public campaign to win new contracts, including targeting former colleagues? Again, so long as they don't do any direct lobbying themselves? Would that be okay?
Ms. Krass: I think that, again, this the same laws would apply in terms of not being able to use any proprietary –
Senator Warren: I understand that, but the question I'm asking is, can they come and do this under the current rules? You sound like you're reluctant to say yes, but we know it's happening. It's in the public domain. We've already read these stories. People have testified to it directly.
Ms. Krass: What I can say is that on the DoD side of the equation, we are committed to and our officials are committed to upholding the ethics laws and making sure that they –
Senator Warren: I understand that you're committed to upholding them as written and I'm not trying to give you a hard time here. I'm just trying to see how effective what is written and what you've got to deal with. I get it that you can't enforce laws that don't exist. What I'm trying to do is figure out from the point of view of the Congress, whether or not we need to do a little more with those laws so that there aren't as many holes in them.
So let me try another one. Mr. Beshar, let's say we have an Army colonel who worked at the Defense Security Cooperation Agency, which is responsible for overseeing arms sales to foreign countries. So Mr. Beshar, let's say that Raytheon hires this colonel one week after he retires from the military to help them lobby to speed up approval of a patriot weapon system, that will make them a lot of money, and he reaches out to the Air Force, you get where I'm going with this, for a meeting? Is there any reason an Air Force official can't take that meeting?
Peter Justus Beshar, General Counsel, Department of the Air Force: Senator Warren, Ranking Member Scott, Senator Kaine, I appreciate the opportunity to be here today. And I'm joined this morning by a number of my colleagues from the ethics department within the Air Force, and they provide a vital service to the department and they do it well. To your specific example, provided that the hypothetical colonel is not subject to a lifetime bar or a two year –
Senator Warren: That's my question. Is he subject to a lifetime bar if he goes over and lobbies the Army instead of DSCA?
Mr. Beshar: Yeah, and assuming that he's not subject to such a bar or a supervisory bar, then he could have such a meeting. Because at that 06 level, he's not subject to the cooling off period.
Senator Warren: I'm just trying to get how skinny this thing is. And the last question I want to ask is about the one we were talking about earlier about going to work for Saudi Arabia and other foreign countries.
So I just have a question around that and maybe Ms. Krass, you're the one to ask this. When this more than 95% approval rating that's coming through on the DoD approval of our high ranking military officials going to work for foreign governments. I just want to ask, is there any requirement under current law for the Pentagon to consider whether this work would enhance the national security of the United States of America?
Ms. Krass: Senator Warren, so the the way that the system, as I'm sure you will know is set up is that the Emoluments Clause precludes accepting compensation from working for a foreign government unless Congress consents, and Congress has consented to that, in certain circumstances when the Secretary of the military department has approved and the Secretary of State as –
Senator Warren: I understand that, and I appreciate it, and I'm way over time, and my colleagues are being very generous with me. The question I'm trying to ask you is, is there anything that requires the Pentagon to look at whether or not it is in our national interest to permit this general or admiral to go work for a foreign country?
Ms. Krass: So what I'd like to do is to defer to any one of my colleagues, perhaps –
Senator Warren: Mr. Coffey?
John P. “Sean” Coffey, General Counsel, Department of the Navy: In fairness to Ms. Krass, Congress delegated the approval authority to the MilDep secretaries and really don't include the Secretary of Defense, although we're always happy to get guidance from our friends on the third deck.
Senator Warren: Fair enough. Glad to have the help.
Mr. Coffey: The answer is yes. In the Department of the Navy, there are – the standard is: would approving the employment be inimical to the national security interests of the United States? That's sort of the headline.
Senator Warren: Okay, that's inimical, though.
Mr. Coffey: Yes it is. There are four sub-standards, which I'm happy to share with you at the department. But remember, we're talking about whether somebody who served their country and has retired, what restrictions, if any, we're gonna put on their employment. Obviously, we have the Emoluments Clause and then we have permission from Congress, if two federal entities, two executive branch entities approve it: The Department of the Navy and the Secretary of State. So the questions that are posed and there's a very rigorous process, which I'm happy to share with you, either today during questions or questions for the record afterwards, but among the questions that in the Navy and the Marine Corps are the following: whether the foreign civil employment will adversely affect –
Senator Warren: Okay, I get adversely. You heard my question. You can just answer my one question. Do you, as part of your routine questions, ask: does having this Admiral or General go work for a company that works for the People's Republic of China or for Saudi Arabia or for the UAE, enhance the national security for the United States of America? Is that one of your questions?
Mr. Coffey: On the files that I have reviewed, I have seen that discussion. Frr example –
Senator Warren: Okay. Is that one of the questions you are internally required to ask? This shouldn't be that hard.
Mr. Coffey: It's certainly in all of the various files that I have looked at, it is there. Ultimately, the State Department decides whether it's in the interest of the United States and whether it should be approved. But it's –
Senator Warren: Well that's what I'm trying to get at. If anybody's actually looking at it. You're telling me it is a question that you answer each time and the 95 plus percent that you approved, you believed that it would enhance the national interest of the United States of America for that General or that Admiral to go work for the UAE or Saudi Arabia? Is that right? That's what you're telling me?
Mr. Coffey: Madam Chair, what I'm saying is that the standard is a negative standard. It's the opposite of what I said before. However, in the files that I've reviewed–
Senator Warren: That was the question I asked.
Mr. Coffey: That is where and I will just say that Undersecretary Cisneros has directed each of the MilDep secretaries to take 90 days to look at this and come up with whether we can do this a better way. And I can tell you, we're all jumping in on that. I've had a chance to look at how Army does it, how Air Force does it. We think we can improve it. We're looking at that.
Senator Warren: Please understand, I'm not your enemy here. And I'm not the enemy of the people who are sitting behind you. I am grateful for the work you do. I just want you to have the tools so that you're getting backed up by the United States Congress, and that you're not in a position where the standard is so flimsy, or where there are so many exceptions, that there are other ways to accomplish what it is that we clearly didn't want to have happen. And I'm just really concerned. I see a 95% plus approval rating to work go work for countries like Saudi Arabia and the UAE, and countries that have terrible human rights abuses. And I think, how could that be good for the United States of America? And that, to me, has to be our standard. So I just want to get us in the right place. Senator Scott.
Panel 2, Round 2 of Questions below and video HERE:
Senator Warren: Thank you, Senator Kaine. In fact, I want to, I want to follow up on Senator Kane's questions. I, I take this one kind of personally, a few years ago, I pushed hard for a law that we passed that barred many Department of Defense officials from owning more than $15,000 in stock in the largest defense contractors. A law that you all are now out there enforcing. That law also says that senior officials who work on contracts can't own or buy large amounts of stock and contractors that were the top 10 recipients of DoD dollars in the last five years. And for everyone, DoD is supposed to make sure that no one is working on a project that has stock holdings that could create a conflict of interest going to your, your general point about this.
But I want to talk a little bit about the big gaps here. We saw a recent Wall Street Journal report that highlighted the case of a DoD policy official who owned between somewhere between 15 and $50,000 of stock in the Chinese company, Alibaba, who was actively working on a policy about whether Alibaba’s ties to China meant that the company should be on a list of companies that Americans could not invest in. Two weeks after the official purchased the stock, Alibaba got what it wanted, it was omitted from the list of prohibited companies, and the company's stock increased immediately by 4%. Nice return in a very short period of time.
So Ms. Krass, Alibaba is not a defense contractor, so current law did not prevent this DoD official from owning its stock. But ethics officers still should have spotted that his position gave him insider information that could boost his personal finances, going to the point that Mr. Coffey made, and could influence the advice that he was giving to the government, a possible conflict of interest here.
So I understand you were not at DoD when this happened. But why didn't DoD officials pick up that this was a conflict of interest? There's clearly is a conflict here, right?
Ms. Krass: Senator, Absolutely. I agree that an employee may not participate in any matter in which they have a financial interest–
Senator Warren: So why didn't they pick this up?
Ms. Krass: –and they need to either have recused themselves from those matters, or they need to have divested of the financial interests so as to avoid the problem. As you mentioned, I was not at the Department at the time. And I'm happy to take back any questions that you have on that.
Senator Warren: I guess that's I don't know.
Ms. Krass: What I do know is that my team works extremely hard. I understand them as Mr. Coffey indicated.
Senator Warren: I understand that. So let me ask about another loophole. Stock ownership limits apply to certain senior Department officials, but they do not apply to everyone. So would the Chief of Staff to Secretary Austin or the Chief to the Chairman of the Joint Chiefs of Staff be allowed to own $30,000 in Lockheed Martin, DoD’s top contractor?
Ms. Krass: So in the review of the, of a financial disclosure form, a, any potential conflicts are identified, and it is determined whether or not an employee would need to divest the stock because they can't perform their duties appropriately. If they were to continue to hold the stock and recuse themselves, that’s the other option, to recuse. If it would interfere with the employee's performance of their official duties in a significant way.
Senator Warren: Well the person has come to you for advice. Are they covered by the current statute? This is somebody who is not confirmed by the Senate and is not an acquisitions officer. Are they covered by this rule?
Ms. Krass: So by 18, USC 208, everybody is covered by that rule.
Senator Warren: So you're saying you would tell them they have to divest?
Ms. Krass: Yes, either have them divest or recuse, depending on what the scope of their official duties would be?
Senator Warren: Okay.I hope that is the advice that you're giving.
So let me ask one more. If the Chief of Staff to Secretary Austin helps make decisions about whether or not their boss should meet with a company, they don't give advice on acquisitions, but they decide who gets access. This is the gatekeeper. Does that change whether or not they can own $30,000 of Lockheed Martin stock?
Ms. Krass: They would still that's beyond the de minimis amount, and they would not be able to participate in a decision about whether to recommend a meeting unless they had divested of the stock.
Senator Warren: So. Okay, I hope that is the case. That is not what public reporting seems to indicate. But I hope that is the case. You know, I want to do one more, and then I'll quit and hand this over to Senator Scott. Some of the recent biggest procurement fights have been between smaller but still huge tech companies like Oracle, Microsoft, Amazon, who were all fighting over which company was going to get the 10 billion dollar JEDI contract which would have provided cloud computing for DoD.
One of the Pentagon officials involved in deciding which company got the contract owned Microsoft stock. Now Microsoft had received $400 million in DoD contracts, which is not high enough for them to be listed in the prohibited stock list. DoD is just supposed to keep an eye out for problems if they pop up here. So the official disclosed that she owned Microsoft stock to DoD , she disclosed it to DoD. Did anyone at DoD say that this was a problem given her acquisitions role?
Ms. Krass: So, again, as we were discussing–
Senator Warren: It’s a matter of public record.
Ms. Krass: The amount, yes, but it was preceding my tenure, senator, and I cannot speak to the specifics of that. But I'd be happy to again, take any questions.
Senator Warren: Well, I'll just tell you the answer. No, it was not raised by DoD. DoD did not have a problem with this.
You know, look, ultimately, in this case, the person was referred for prosecution. But I am concerned about the process here. And I am concerned that we are keeping too narrow. I understand the overall rule is conflicts rule. But I am concerned that we are too narrow in what we look at, and how we define it, and whether we get enough disclosure that these pop up, and we can see that. And then I am concerned about the fact that we don't have public reporting of this. So that quite frankly somebody look over your shoulder and say, I get it, I see what's happening here, and here's where I disagree, and we need to tighten up the laws. That's the part that I'm worried about. And that's what this is about today.
Panel 2, Round 2 Follow-Up below and video HERE:
Senator Warren: We’re very much in that direction. But let me just ask you, privacy interest? What is the privacy interest? And you work for the Department of Defense and you own defense industry stock? What is the privacy interest?
Mr. Coffey: Well again, I think a part, you know, the trial lawyer in me keeps thinking about causation and the link. There needs to be a link between the financial interest of the person who’s at the Department of Defense and what they do –
Senator Warren: No, if you're a lawyer, you understand appearance of impropriety. We don't ask for lawyers or judges to actually prove that this person has a conflict of interest. We talk about the appearance and why the appearance matters, because our job is to build public confidence. And you build public confidence when everybody knows that every email is going to be disclosed. You build public confidence when you say if you want to invest, have at it, but don’t invest in defense stocks if you work for the Department of Defense. That one is just a no. And if that so crimps your investing style, then go work somewhere else. And I just don't get why this is a privacy issue. I don't know what’s there. Sorry, I interrupted Senator Scott.
Closing remarks below and video HERE:
Senator Warren: And I do, I appreciate the work that you all do. I just want to give you the tools so you can do it even better. I want to thank all of our witnesses for their testimony today in the first and second panel. I also want to thank Jon Clark, Gary Leeling, Andy Scott, Sofia Kamali, Noah Sisk, Jenny Davis, Sean O’Keefe, Katie Magnus, and Brendan Gavin, for their work in putting together today's hearing. These hearings take a lot of work and I appreciate all that they've done.
And we just go into this with a mindset of we want to do better. We want to have complete confidence that when the Department of Defense submits a budget, it’s because the Department of Defense and its top officials believe this is what is best for the United States of America. This is not something that helps out some particular individual in their personal financial circumstances. That’s all we’re looking for here, is the best way to tell that to the American people. So appreciate your work. And with that, we close this hearing.
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