Retired generals getting rich from conflicts of interest

This corruption has increased over the years, and the press refuses to use the correct English term, kickback, to inform the public. While the WashPost covered retired Army General Keane's efforts to promote the failed surge in Iraq, it ignored the money he made off "security" contracts in Iraq.

G2mil.com has covered this. From 2001:

Unfortunately, this scandal was ignored and the director of the Army's Program Analysis and Evaluation, Major General David K. Heebner, was promoted to Lieutenant General in 1997 and became the Assistant Vice Chief of Staff of the Army. In 1999, just one month after General Shinseki announced a newly created requirement for billions of dollars of LAVs, General Dynamics announced hiring General Heebner to a newly created vice president position. The amount of his pay was not disclosed, but it was negotiated while he was on active duty. However, an SEC insider trading report shows that Heebner acquired $300,000 worth of General Dynamics stock within a year of leaving the Army. General Heebner didn't slide out the back gate to join General Dynamics. The Army proudly hosted a large retirement party at Fort Myer, complete with Congressmen, the US Army band, and marching soldiers to celebrate Heebner's success.

One year later, a lucrative $4 billion LAV contract was awarded to a General Dynamics/General Motors partnership, prompting Harry J. Pearce, Vice Chairman, of General Motors to proclaim "On behalf of General Motors and our defense unit, I’d like to commend General Shinseki, Chief of Staff of the U.S. Army, for his vision to transform the army for the 21st century into a more agile force through the use of wheeled vehicles". Mr. Pearce was thrilled since the Army chose to pay more than twice as much as the current LAV price, three times more than it would have cost to upgrade Army M113s for the role, and forty times more than General Reimer's idea to use HMMWV light trucks. During the Pentagon briefing to announce the contract, Lieutenant General Paul Kern anticipated reporter questions and proclaimed: "I will not discuss source selection. You probably would all like to go into that part of the process, but that is protected by the federal acquisition regulations, so we will not go into that part of it, other than to tell you that this has been a very exciting time..."

http://www.g2mil.com/Sept2001.htm

And from 2008, in an article on the Pentagon's biggest failure:

While the V-22 was reviewed for cancellation in 2001, there was heavy political lobbying to save it. The Boeing effort was led by General Richard Hearny, the former head of Marine Aviation, who retired in 1996 and was Vice President for business development at Boeing. The lobby effort for Boeing's partner, Bell Helicopter, was led by its Vice President for government relations, General Terrence R. Dake, who retired from the Marines in 2000 after heading Marine Aviation. The effort at Headquarters Marine Corps was led by the head of Marine Aviation, General Fred McCorkle (right).

Soon after retiring from the Marines in October 2001, McCorkle joined the board of directors and as a senior advisor for GKN Aerospace Services (V-22 fuel tanks). He also serves on the Rolls-Royce North America board of directors (V-22 engines), and is a member of the board of directors of Lord Corporation (V-22 components). In addition, he has served as a consultant for Boeing Aerospace (V-22 maker) and Optical Air Data Systems (V-22 low airspeed indicator).

While these Generals receive an $8000 a month retirement check from the Marines, a tradition emerged in which the head of Marine Aviation is financially rewarded after retirement for not rocking the boat. General Clay Comfort said that his older generation of retired Generals consider this practice despicable.

http://www.g2mil.com/V-22survive.htm

This is not intended to defend anyone, but George Marshall served most of his career on active duty in a peacetime Army that didn't have that many generals. When he ran the Army during World War II, Army generals who became well-known were generally combat commanders. The expertise and experience of these men was not generally transferable to the civilian sector in quite the same way as we see with retiring senior officers today.

What we have today is essentially a peacetime military establishment with a large number of senior officers, many of whom devote most of their careers to the various components of the procurement process. George Marshall's example may mean considerably less to these officers than it does to civilian military buffs outside the Pentagon.

Small wonder that the US President who warned us about the corrupting influence of the military-industrial complex--so much so that he included it in his farewell address--was a former five-star general.

Could not help noticing that General Marshall looks more squared in his Army uniform from that era than do Army officers today. He almost looks like Marines always do. There are not so many patches,ribbons,bars, badges, etc. The cut, fit, and appearance of the uniform is good. He is not shown wearing a cover but as I recall it would not have been a beret made in China.

In the wake of the recent credit bubble and derivatives meltdown, it has been suggested that the financial sector should be managed as a public utility.

That’s a concept which might also be applied to military production and procurement.

General Marshall was the greatest administrator the armed forces ever had. He was honorable (in a era when that meant something) incorruptible, a task master, intolerant of fools, apolitical and actually knew how to manage Admiral King. He was by every definition the perfect staff officer.

Fortunately, some of his wild schemes like Operation Sledgehammer (a landing in France in 1942 which would have been a blunder of colossal and bloody proportions) or his scheme to land the American Airborne Corps outside of Paris in the summer of 1944 where it would be immobile and totally out gunned never came to fruition.

A reason that retiring flags are so tone deaf to conflicts of interest is that they were not raised in a major for-profit corporation. The ethics required in the typical Fortune 500 company are generally equal to or superior to those found in the military, and these companies are more sensitive to obvious conflicts than the typical flag.

I've been both places. In the military, that which is not illegal is generally OK. In the private sector, that which reflects badly on the corporation is dangerous and untoward antics that get the company above the fold on the front of the WSJ are fatal.

Federal Acquisition Regulations (the FAR) proscribe not only direct conflicts but also the appearance of conflict. That standard applies to any company doing business with the government and that describes most major corporations in America.

Exceptions? Bad examples? Sure. They validate the old saw that exceptions proof the rule - you read about them because they are abhorrent, not because they are common.

Interesting point about what I call the ‘Petraeus look’. Today generals and even admirals seem to wear decorations, ribbons, badges and other paraphernalia in inverse proportion to their combat and command experience and responsibility.

Marshall in the photograph looks professional, understated and no nonsense with his trim balanced uniform. Take a look at the egoist Gen. MacArthur (WW1, WW2, Korea) apparently satisfied with wearing merely his rank. Or look at Adm. Chester Nimitz (CINPAC in WW2 and then CNO) seemingly happiest with his rank, submarine service medal and a ribbon or two. Or Ike, wearing just about the absolute minimalist uniform even though he was Supreme Allied Commander of a formidable multi-national host in a global war.

There is something strange here where modern general officers manufacture uniform regulations patterned after the Boy Scouts or tin pot Latin American dictators rather than the tastes of their own distinguished forbearers.

Nota bene the paltry ribbons on Marshall's chest. Now look at the chest (and indeed the entire torso) of Messrs Petraeus, Ordiorno, whoever and wherever. Heck, I'll bet Major Nidal Hassan in dress uniform would have qualified for more spinach than Marshall or Eisenhower in their five-star days.

Worse, as best I can determine, most of it is phony. Gen Petraeus wears the Combat Action Badge (as the Combat Infantryman Badge is now sadly called), an Airborne assault badge, and a divisional patch on his right shoulder, supposedly denoting service with that division in combat. He was the commanding general. Has an American general actually been in combat since 1945?

Blue skies! -- Dan Ford

First, another good example of a citizen-soldier worth following in retirement is Admiral Nimitz. According to E.B. Potter, in his biography of Admiral Nimitz, the admiral eschewed many opportunities to join the defense industry after WWII and relied on other employment, savings and his relatively modest pension in order to avoid any hit of compromising his relationship with the military. His friend, Admiral Halsey, did not husband his money as well on active duty and was helped by Nimitz in obtaining lucrative defense-related work. I do not know if Admiral Halsey was ever viewed as having compromised his relationship with the military.

Second, as a former aide de camp, I can personally attest to the signficant effor that at least the commanding general I worked for go to avoid ethical

Frame it, you are 50-55, your pay is equal to that a Harvard or Yale law graduate working as an associate. You haven't been exposed to derivatives, hedge funds, portfolios, spreadsheets. You can neither deliver a vote nor hold the franchise to give out patronage. You have traveled so much that the kids grew and went; and, the wife long ago set up home back in the seed land where you first met.

So what is your asset going forward. What is going to give you the cash flow so you can avoid dealing only with the greeters at Wal-Mart for all you needs?

Military career is now an incomplete life. You have to keep on earning to stay living at your former pay grade. So if you have the character with just half the greed of Goldman Sachs or Carlyle, you have to work the same part the vineyard of God you worked before over decades just on the other side.

You won't really get the big bucks; but, you will hold with the next year law associates.

Sorry, in the American mercantile economy where at the top sits the high end financial rent taker, the investment annuity receiver; the retired general becomes another entitlement cost if he or she has no offered asset for the rent taker to exploit.

Journalists or journeymen face the same challenges so don't throw the stones so hard.

It seems to me that the discussion about Flag Officers and how they look in their uniforms has missed the point of Mr. Ricks’ post and the article to which it refers. Let me put it more succinctly. A group of Flag Officers meets to determine who, out of the hundreds of O-6s eligible has demonstrated the necessary skills requisite to be promoted to one of their own, a Flag Officer. One would assume that those requisites included (among others) leadership, technical knowledge in their field, dedication to their mission, and dedication to those who serve below them in the chain of command.

So why does it seem odd that after these Flag Officers choose the “new” Flag officers, that the “new” Flag Officers feel it necessary to employ the retired “old” Flag Officers to mentor them and their organizations? If this is in fact true, the “old” Flag Officers should not have selected the eligible O-6s to become the “new” Flag Officers. They should have picked O-6s who were competent enough to do the jobs to which they would eventually be assigned.

I would add one other item. To me, the most offensive quote in the article was that attributed to Admiral Johnson who said, “With mentoring alone, ‘you can't make enough money.’" The average American’s household income is around $50,000. Admiral Johnson is making at least twice that in his military retirement income, another two times that in his board of directors income and yet he still feels it necessary to make even more money by “mentoring.”

Even if we forget the conflict of interest part of the argument, these Flag Officers are just plain greedy. I believe, given their retirement benefits, they should be doing any “mentoring” deemed necessary to ensure a skilled military force for free. By the way, if they need a place to stay they should stay in the BOQ (or whatever it is currently called).

And finally, retired Flag Officers should not be part of the "American mercantile economy." If they wanted to do that, they should have exited the military long before they were in the running to be Flag Officers.

My two cents from a retired Navy O-5.

Yes, I've heard some flag officers claim they deserve to cash in because of all the moves their families endured while in service. However, they are the ones who run this system of musical chairs. The military would be better off if senior officers served at least three years at each post, but they don't change the system.

I recall one four-star Army General excusing his kickbacks by claiming he needed to care for his family, which is the exact same excuse corrupt foreign Generals give when they are caught padding their income.

Yes, there is always some singer or athlete or law school grad with family connections that allow them to make a lot of money. Greedy officers like to use those as examples, rather than the average income of taxpayers. You never see a retired General become a CEO or any real corporate officer despite their paper qualifications, they only fill insider contact roles, what are called "fixers" in corrupt third world nations.

Go to www.bls.gov to discover that the average American with an advanced degree (like a Masters) earns around $65,000 a year, and go to www.defenselink.mil to discover that an E-9 can earn over $100,000 a year, excluding bonuses and special pays, and without contributing a cent toward his generous retirement plan. And that is a senior enlisted, not an officer. Very few pilots leave the military for lower paying airline jobs nowadays.

If I were in charge, I'd freeze military pay for a couple of years to save money for other areas. It would improve the service, because everyone is making more than twice as much as they could outside, so everyone is uptight, risk adverse, and back stabbing for promotion.

I'd prefer an underpaid military that was twice as big, was forced to allow for mistakes (NJP, Art. 15, DUIs) and retained people who love the military and have an interest in warfare. Today, most love the big money they make as one sees parking lots jammed with new cars near navy ships. 25 years of pay raises at twice the inflation rate was a good policy to buy votes, but has hurt our military and our national deficit.

Yes, many GIs suffer and work hard, but most work less than 40 hours a week, and much of work is getting a haircut, reading the paper, playing softball, surfing the net, and working out. I was part of that racket for years. In the Marines, almost everyone is off by 3pm on Fridays, plus at least a week of uncounted days off for Christmas, plus 30 days paid leave, 12 fed holidays, several days off for special long weekends. In contrast, the bls says the average American gets just 13 paid days off a year.

as in China, the military when without capital ownership was just another seller of life's time, like a farmer, groundskeeper, service worker in the canteen, auto mechanic. Time has low financial value; integrity, no position on the trading floor, no access to the insider info desk. Babbitt was no general officer but had more lucrative option rights.

In China, the PLA owns capital and knows that Adam Smith was not the pie maker on the mess decks.

It's either/or for these flags: either work for industry or work for the government. This cries out for law and regulation lest the flags - unable to discern simple conflict of interest - find they have earned the same comment made by John Randolph's in describing Henry Clay:

"He is a man of splendid abilities but utterly corrupt. He shines and stinks like rotten mackerel by moonlight."

...that much of this conversation (and a previous post) has been dedicated to uniforms. C'mon.

I don't care what these guys wear as long as they are proficient at their job. Petraeus gets a bye for that one (he's been thus far successful), Casey not so much (also not successful).

When we argue about ribbons and ASUs and ACUs we are re-arranging deck chairs on the Titanic. I like the fact that the Army is consolidating uniforms to nominally save money and save soldier time. Maintaining multiple sets of uniforms takes plenty of time, money and energy better spent on other things. I don't necessarily like their choices - but that's life in the service.

Whining about tabs, and heritage is silly. The Marines wear very little on their uniforms and they seem to be able to their job fine. Many division patches are going away in favor of BCTs. There is a good argument that the ASU blue uniform is more in line with the Army heritage; in any case it is better than that lame civilian business suit Green. (Ok the Class B is bus driver goofy, oh well - its green equivalent ain't much better). In the end the only constant is change, every choice comes with compromises, advantages and disadvantages.

Finally, no one is obligated to wear all of their medals - it's in the regulations. The only place you are 'sort of' obligated to do so is in a DA photo. Generals have particular flexibility in constructing their uniform, although none have gone so far (like good old George Patton) in recent memory.

But isn't there more important matters to discuss - like the original Tom Ricks post about money matters?

As an officer who depends on your Senior Leders' ability to present a competent image and advocate for funding, endstrength and resources, I certainly hope that you would care about how they are perceived. If Senior Leadership is cowed, outmaneuvered at every term or commonly viewed as buffoons (see Schoomaker, Peter and Cody, Richard) the second and third order effects of their inability to advocate for their service will eventually trickle down to even the Company level.

If you believe this is about "saving money and time", I don't know what to say. All of the other services are still maintaining at least 3 uniforms. If money and time were the issue, the USMC would be leading the charge. Instead, they now issue dress blues along with service uniforms to boot camp grads.

The USMC is a very different culture. Since they are small, the very idea of wearing a USMC uniform with globe and anchor brings cohesion. The Army is very large and historically, our branches and units have been the core of cohesion - not the larger Army. It's why so many folks have "Infantry" or "1st CAV" stickers on their car - it's where we draw our esprit from. No matter how hard you try, you cannot build USMC-style service level esprit between an RA 11B3V and a USAR laundry and bath specialist. Even if you could, why would you even want to try?

The historical justifications for the ASU are tortured and IMHO, quite weak. For starters, over half our battle streamers were earned by any Army that never wore a blue uniform - ever - not even to a dining in. Second, doesn't it make more sense to build a strong sense of service identity around WWIII, Korea, Vietnam, etc. You know, conflicts that there are still living veterans from? Unit patches are a big deal. They are our link to the past and the touchstone of our identity.

I find your criticism of the cut of the Class A as a "lame business suit" utterly bizarre - especially when one considers that the ASU coat is the exact same design. If you want lame, look at the ASU Class B variant - it gets the "mall cop" features down to the perma-military creases sewn in.

You say: "In the end the only constant is change, every choice comes with compromises, advantages and disadvantages." The irony here is that there never was any compromise or discussion of advantages and disadvantages with the ASU. It was pretty much a decree from GEN Schoomaker and SMA Preston that has attracted near universal scorn and derision. That is a fact and the Army Times and Army Magazine are replete with commentary from Privates to Colonels stating this - with names attached. Sadly, GEN Casey views the role of Army Chief as infallible and the foolish decisions of previous Chiefs as irreversible.

Yes, there are indeed important matters to discuss. The effectiveness of our Army leadership to advocate on the service's behalf is one of them. Everything flows from the success or failure yielded on the field of battle known as the beltway.

Tom, I have to confess, I'm agreement with you on this topic.

I worked for many years as a "Beltway Bandit," as DoD-oriented consulting firms that employ former officers in the Washington area are called. My job wasn't to advise the Army on what it should do in its materiel development programs, but rather to ghostwrite documents that by DoD directives and Army regulations are supposed to be prepared by military program management offices. I wrote integrated program summaries (a type of decision document), acquisition strategies, logistics plans, and the like. These should be prepared by Army officers or civil servants within DoD, but because of fat support contracts the work is farmed out to consulting firms.

Two things ought to happen if accountabity is to be restored to the system. First, the DoD and military services should stop producing directives that require the writing of an amount of studies, analyses and documentation in excess of their own internal capability to prepare. Second, military personnel and DoD civilians in positions that involve the preparation of documents required by DoD and service regulations should write them themselves or be compelled to find employment elsewhere.

I hold Chester Nimitz in the same regard as Marshall. He didn't squawk when MacArthur took credit for his victory in the Pacific, and he too refused to make an issue out of the commanders he had to can.

J

The solution to much of this is keep all Generals in uniform until age 62, as explained here.
http://www.g2mil.com/tenured.htm

As part of that concept, when a Colonel accepts promotion to one-star, he also commits to service until age 70, although is normally transferred to the inactive reserves at age 62, sometimes sooner. If he is needed again, like for a major war, he is reactivated. Meanwhile, he is still on the books as a reserve officer, so that will block him from working for corporations that conduct business with DoD.

why do serious army debates always seem to boil down to opinions on fashion?

having seen a bit of this mentorship program at first hand while working on exercises with 1AD in Germany in 2005/2006 (CG MG Fred Robinson, mentor retired LTG Crouch), i think the biggest problem is this: essentially, these retired generals are a shadow chain of command, and still play the decisive role in who gets what rank and what job. it's a system of spoils, so of course they are going to get in order to give. i dont have a solution, but its clear that if you want to change this system of massive conflicts of interest, this shadow chain of command needs to be stopped. and i do think that the retired generals essentially do not think of this as a conflict of interest issue because they feel that whatever they do is in the best interests of the army, whether or not it benefits them, and it often does...

Folks, I'm one of the USA Today reporters on the story. We're very interested in hearing from anyone who has firsthand information about retired officers, particularly mentors, representing companies before the Pentagon. Particularly on procurement matters. You can reach me at kdilanian@usatoday.com Thanks.

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