When Kenneth Eickmann was a three-star general in charge of the U.S. Air Force’s Aeronautical Systems Center, a defense contractor invited him to lunch. The man’s company was competing for a major weapons contract the general’s center was overseeing, so Eickmann declined the social contact.
Two days later an old friend, a retired general, phoned to get together for lunch. When Eickmann arrived at the restaurant, a surprise awaited him: The contractor accompanied his friend, who, it turned out, also worked for the company. “I never sat down at the table,” says Eickmann, recalling the 1997 incident. He is now retired from the military.
Senior officers once faded away after active duty, says Senator Jack Reed, a company commander in the 82nd Airborne Division during the 1970s. Not now. For many generals and admirals, “professional success no longer means just reaching flag rank,” says the Rhode Island Democrat. The bigger prize is a high-paying defense industry job that comes after hanging up the uniform.
The Government Accountability Office reported in 2008 that 52 U.S. defense contractors employed 2,435 retired generals, admirals, top Pentagon officials, and midlevel bureaucrats who had overseen arms procurement programs before leaving government. Retired officers will likely be even more in demand as defense budgets face cuts and companies hunt for an edge in the competition for once-plentiful contracts.
The defense industry finds retired flag officers useful as rainmakers who contact friends still in the military to try to steer contracts a company’s way. The revolving door is lubricated by what watchdog groups say are weak conflict-of-interest rules, lucrative salaries, and reliance on the military’s deference to rank.
Generals and admirals find the defense industry to be a natural fit for their talents. They’re proven managers, having led thousands and often overseen multibillion-dollar budgets.
For a high-ranking officer, industry’s financial lure can be powerful. Top executives at the largest U.S. defense contractors are paid from $1 million to $11 million a year; the annual base salary for the chairman of the Joint Chiefs of Staff is $243,162.
The top 10 U.S. defense contractors have 30 retired senior officers or former national security officials serving on their boards. Press releases issued by those companies since 2008 announced the hiring of almost two dozen prominent flag officers or senior officials as high-ranking executives.
One of the latest is General James L. Jones, former commandant of the Marine Corps and former national security adviser to President Barack Obama. On Aug. 3, Jones was elected to the board of General Dynamics (GD). Retired Air Force General Joseph Ralston (former NATO commander), Admiral James Ellis Jr. (former head of the U.S. Strategic Command), and Admiral James Loy (former Coast Guard commandant) sit on the board of Lockheed Martin (LMT), the largest U.S. defense contractor. L-3 Communications Holdings (LLL), the Pentagon’s eighth-largest contractor, has added four senior flag officers to its payroll since 2008, including Richard Cody, a former Army vice-chief of staff who serves as corporate senior vice-president in charge of Washington operations. Jones, Ellis, Ralston, and Loy declined to comment. Cody turned down a request for an interview.
Watchdog groups are troubled by the trend. Are the retired officers “providing an unfair competitive advantage for their private employer that’s based on whom you know rather than what’s in the best interest of the Defense Dept. and the public?” asks Scott Amey, general counsel for the Project on Government Oversight in Washington.
In 2004, Darleen Druyun, a senior Air Force procurement official, was sentenced to nine months in prison after pleading guilty to favoring Boeing (BA) in contract negotiations while arranging a post-government job with the Chicago-based aircraft manufacturer.
Such high-profile scandals are rare. From 2007 to 2009, the most recent figures available, the Justice Dept. successfully prosecuted about 1,000 public corruption cases annually. Only five involved defense officials accused of revolving-door violations. “There have been some abuses, but for the most part, I think people who did transfer to industry have conducted themselves honorably,” says William Kernan, an Army four-star general who retired in 2002 and worked for a subsidiary of L-3.
Amey says the convictions are rare because questionable behavior is easily hidden and conflict-of-interest laws are riddled with legal loopholes. Federal law bars a senior officer from contacting his service on behalf of a new employer for a year after he retires. But the one-year cooling-off period doesn’t prevent the officer from contacting other services.
Defense contractors aren’t the only opportunity for ex-military. At least a dozen rent-a-general consulting groups are open for business, eager to advise the Pentagon and help clients navigate the weapons procurement maze. Founded in 1979, Burdeshaw Associates in Bethesda, Md., is one of the oldest. Its website boasts a stable of 53 retired U.S. generals and admirals as well as eight senior foreign officers. General William Hartzog, who retired as head of the Army Training and Doctrine Command in 1998 and is Burdeshaw’s president, did not respond to requests for an interview.
Senior Pentagon officials on the receiving end of the schmoozing don’t always appreciate it. Thomas Christie, who was director of Operational Test and Evaluation for the Defense Dept. from 2001 to 2005, recalls retired Marine generals from Textron (TXT) trooping into his office “to convince me they had turned the corner on the V-22 and it was a safe plane.” Textron and Boeing build the tilt-rotor aircraft. At the time, the plane had problems with its design, safety, and reliability, which were discovered after two crashes in 2000 killed 23 Marines.
Textron and Boeing eventually fixed the problems, and Christie’s agency declared the V-22 “operationally effective.” Christie says the retired brass Textron deployed didn’t impress him or influence his agency’s oversight of the testing. “They were hired to work their old contacts,” he said. “We do hire former military personnel because of their expertise in military operations, not because of any ability they have to sway decisions,” says Textron spokesman Dave Sylvestre.
Midlevel officers may find visits from ex-brass more intimidating. Waldo Freeman recalls working as an Army colonel in the Joint Chiefs Chairman’s office when a retired three- or four-star flag officer “would come in and sort of twist my arm to get something in front of the chairman on behalf of his company,” says Freeman, who retired as a major general in 1996 and is now at the Institute for Defense Analyses, a federally funded research organization.
A retired officer can get contracting intelligence for an employer in the many months before a request for proposal, or RFP, is issued on a new weapons system. He can also work his contacts to shape the requirements they’re drafting for a new weapon so it fits what his company can successfully produce, a defense lobbyist and a senior executive at one of the top 10 defense contractors told Bloomberg Businessweek. Both declined to speak on the record because they still seek Pentagon business. If a company isn’t shaping those requirements before the RFP comes out, they said, it’s already behind.
There’s little appetite in Congress for more controls. “We can draft all kinds of rules,” says Senator Reed, “but the officer corps ultimately must police its ranks.” Blatant or subtle, revolving door abuses strike at “the heart of the military profession,” he says.