Last week, retired four-star Army General David Petraeus announced he was joining the New York-based investment firm KKR & Co. to run the firm’s new Global Institute, a group dedicated to studying how government policies impact investments.
Petraeus, who served 37 years in the Army and is credited with developing and implementing strategies that turned around the wars in Iraq and Afghanistan, resigned as chief of the Central Intelligence Agency last year after an extramarital affair became public. This new post is widely seen as an attempt to rehabilitate his image, paving the way for a political comeback.
But Petraeus’ new job didn’t exactly come out of the blue.
After the announcement, reports emerged that in 2009 KKR had quietly purchased defense and intelligence consultant TASC from Northrup Grumman for $1.6 billion. Melanie Sloan, executive director of Citizens for Responsibility and Ethics (CREW) in Washington, said TASC has been trying to grow its business.
“TASC is trying to expand,” Sloan told The Fiscal Times. “If he’s going to be working with TASC and trying to build up their business, you couldn’t think of someone better for the job.”
It’s still not clear what Petraeus role at KKR will be. But if he is there do help bring in defense dollars, he would be just one of many retired DOD officers to make big money by taking private sector jobs, board appointments and consulting gigs related to their former careers in the military.
Lawmakers and their aides take the majority of heat for using the connections they made in public office to get rich. Former Obama White House officials are also cashing in on private sector jobs and lucrative speaking fees, drawing criticism from government watchdog groups.
According to a recent report by CREW, former Pentagon officials are quietly doing the same thing. In “Strategic Maneuvers: The Revolving Door from the Pentagon to the Private Sector,” CREW outlines how officers are steering money to private businesses they join after retiring.
CREW found that “70 percent (or 76) of the 108 three-and-four star generals and admirals who retired between 2009 and 2011 took jobs with defense contractors or consultants. In at least a few cases, the retirees have continued to advise the Department of Defense while on the payroll of defense contractors, suggesting the Pentagon may not always be receiving unbiased counsel.”
Sloan said she is not opposed to retired military brass making money based on their expertise. They all made less as generals or admirals than their skills would have drawn in the private sector and are entitled to cash in after their military service. But she said retired officers that use their connections at the Pentagon to win big contracts risk exploiting the American taxpayer.
“Are they used for marketing or were they hired because of the skill set?” Sloan asked, referring to the reasons these officers were hired. “A lot of former military officers do trade on their connections to go back and benefit the companies that hire them at very high salaries. They’re looking for every way they can to leverage their military posts into high paying careers by bringing in federal government dollars.”
A NEW PHENOMENON
The revolving door between DOD and private industry did not always exist.
According to a 2010 Boston Globe investigation, only 50 percent of three-and-four star generals who retired from 1994 to 1998 took positions at defense companies.
But as DOD spending grew during the war on terrorism, so did the percentage of retired generals entering the private sector after their military careers. Between 2004 and 2008, 80 percent of generals at these ranks joined a defense company after leaving the military.
These positions are substantially more lucrative than current pay levels for generals - $164,221 per year for a three-star general and $179,700 for a four-star general. Private companies do not have to disclose salaries, but executives at defense contractors often make hundreds of thousands of dollars per year.
And former Pentagon officials are not just joining companies as full-time employees. Many join as part-time consultants or board members, drawing enormous fees for a few annual appearances at company events. This relationship then allows the company to trade off a well-known name.
For instance, according to the CREW report, Gen. James Cartwright retired from the Marine Corp in 2011 and was elected to the Raytheon Co. board of directors soon after, a post that paid an $85,000 annual retainer. He received a $1,500 speaker fee for each appearance, even if he spoke via teleconference, as well as $120,000 in stock options.
That same year, Raytheon was paid $14 billion by the Pentagon. Cartwright is also a member of TASC’s board and is on the advisory board of Accenture Federal Services.
BIG AND SMALL NAMES
The Pentagon did not return a request for comments on this story. But it does have rules in place to prevent conflicts of interest. A 2009 rule published in the Federal Register requiring any official who was involved with awarding $10 million worth of business to a company gets a written opinion from an ethics counselor outlining what job functions he or she can perform in the first two years at that same company.
However, the rule has done little to slow the rush to defense firms. Petraeus is the biggest name, but there are many others that have taken the same route. CREW found that the top five defense contractors - General Dynamics, Raytheon, Lockheed Martin, Boeing, and Northrop Grumman, which take in a combined $100 billion in DOD spending - hired at least nine former high-ranking Pentagon officers who left the military from 2009 to 2011. CREW also found that 12 generals who left during that same period now work at Burdeshaw Associates, a firm that helps companies win defense contracts.
This includes Lt. Gen. David Deptula, who retired from the Air Force on October 1, 2010 as the deputy chief of staff for intelligence, surveillance and reconnaissance. After he left DOD, he was hired as chief executive officer at defense contractor Mav6, a company that subsequently won an $86.2 million drone contract. CREW says the program was subsequently canceled when Mav6 fell behind schedule.
After he retired in 2011, Northrop Grumman hired Vice Adm. David Dorsett as vice president of cyber security, an area he was responsible for as director of naval intelligence. Northrop subsequently won a $16.3 million cyber warfare contract.
LACK OF ACTION, OUTRAGE
Despite the prospect of conflict of interest and the potential for waste, fraud and abuse, lawmakers on Capitol Hill have done little to stop the revolving door from spinning. And public outrage is lacking, despite the negative attention the link between K Street and Capitol Hill has received.
CREW’s Sloan attributes political and public apathy to the revered place the military now occupies in the American psyche.
“People have been very hesitant to criticize high-level military officers. They have an aura around them, unless they are involved in personal wrongdoing,” like Petraeus, Sloan said. “There are very few people who command that high level of respect.”
