Self-Dealing and the War Service Industry, Part III: The Payoff

Part of the Series

Solutions

For the past two weeks, this column has outlined two scandals that took place early in the Iraq war concerning the now well-known Army contractor, Kellogg, Brown and Root, also known as KBR. Two government employees, Charles M. Smith (a co-author of this series of articles) and Bunny Greenhouse, both worked to prevent KBR, one of the largest war service industry contractors, from manipulating their government contracts to gain more money than what they earned. Both Smith and Greenhouse, long-term government employees, were thwarted in their efforts to make sure that KBR did their job for the troops and the taxpayers; in repayment for their work on the matter, their careers were stymied.

Their stories have been told elsewhere in the press in the past, but in this third installment of our series, we will go back and find out where their fellow government protagonists went after shamelessly helping KBR to the detriment of the government. It is a tale of government employees like Smith and Greenhouse trying to do the right thing but not being able to follow it through because of the brazen behavior of their bosses and fellow workers. Many of the people who were responsible for the lack of oversight and the acquiescence to KBR’s demands flagrantly used their cozy relationships with KBR and other companies to land great post-retirement jobs. Their self-dealing shows a corrupted system that eats up honest government workers while rewarding those who don’t rock the boat for contractors.

LOGCAP Contract

In Part I of this series, Charles M. Smith, who was the civilian for the Army overseeing the main KBR logistics contract (LOGCAP) for the Iraq and Afghanistan wars, tried in 2004 to legally withhold 15 percent of KBR’s money because their atrocious records and audits prevented the government from monitoring where the billions of dollars were going. KBR, instead of working to fix the problems, decided to fight back by hiring a retired general, Paul Cerjan, to go around the government employees and play politics with the largest private logistics contract ever used in a war.

It worked, and Smith, who was the Army overseer of the contract, was shunted aside while the Army gave KBR what they wanted. The Army brass decided to push aside the Defense Contract Audit Agency (DCAA), which was assisting Smith in his quest to find out where the money was going. Instead, the Army brass hired a private contractor to go in and declare KBR’s audit system adequate so they could get paid. It worked, and KBR received millions of dollars in bonuses they didn’t deserve. More details on this scandal can be found in Part I of this series.

So, how did the government employees who went along with the giveaway to KBR fare after their retirement from government?

First, we need to follow the career of retired Lt. Gen. Cerjan, the retired general KBR hired to manipulate the government instead of solving their auditing problems. Cerjan had already been through the revolving door of self-dealing even before he came to work for KBR. After retiring from the military, Cerjan did a stint at televangelist Pat Robertson’s Regent University and then worked for Loral and Lockheed before he was asked to come to the rescue for KBR.

After he successfully intimidated the military and civilian government employees into not pushing KBR to follow the law, he went to work for another US private contractor in Iraq, L-3, who provided, among other things, translators for the war zones. He then joined the Department of Defense (DoD) contractor Agility.

in 2008 to help them with their contract to supply food to the troops in Iraq and Kuwait. Later, he also joined Dawson & Associates, a government advisory consulting (read: lobbying) firm in 2010. In April 2011, Cerjan died at the age of 72, but at that point, he had spent more than 17 years in lucrative jobs based on his connections from his tenure within the US government. Cerjan showed other government workers that you can make good post-retirement choices and make good money – if you don’t fight the contractors while you are still a general. He showed them, and everyone else, how generals can develop their self-dealing skills to greatly supplement their already generous military retirement pay.

The newly appointed Army sustainment commander who was responsible for the KBR LOGCAP contract, Maj. Gen. Jerome Johnson, was the major government authority who overturned the 15 percent withholding recommendation and hired an outside firm to give KBR a clean bill of health. He went on to a very comfortable retirement from the military. After he had taken Smith off of the main oversight job and put him into a backwater job, Johnson retired in 2009 and went to work for Honeywell, a large defense contractor that makes weapons but was also involved in Iraq logistics contracts. Johnson became vice president of operations at Honeywell Technology Solutions, Inc. and, according to his Linked In page, still holds that position.

Before Johnson retired, he was called up to the Congress to testify about KBR’s audit and performance problems. He gave so many incorrect and pro-KBR answers that part of his testimony had to be recalled by the Army.

That, however, didn’t hurt his chances for a lucrative defense contractor job – in fact, it probably enhanced his image among defense contractors.

Unfortunately, General Johnson was not acting without the knowledge of his superiors. His civilian boss, Jeff Parsons, was the head of contracting at the Army Materiel Command. He and Johnson’s military superior, Lt. Gen. Richard Hack, were briefed repeatedly on Johnson’s actions regarding KBR. Both men went along with Johnson’s acquiescence toward KBR and overruled Smith and the DCAA on any meaningful oversight.

Parsons, a “civilian” who was really a retired Air Force colonel with 26 years in the service, left his civilian job in the government in late 2011 to work for AECOM, a war logistics contractor who had major contracts in Afghanistan. His new title was vice president of government programs, a nice way of saying that he would be using his government knowledge and contracts to do influence peddling with his former government colleagues. AECOM put it in a more politically correct way in the press release announcing his appointment:

Jeffrey P. Parsons will join the company as vice president, federal programs, for its federal services organization on Nov. 1, 2011.

In this role, Parsons will work closely with AECOM senior management in growing the company’s presence in Washington and increasing the company’s brand visibility with government agencies. In addition, he will serve as an active member of AECOM’s Federal Services Group supporting various initiatives, such as the company’s strategic growth plan, AECOM’s Ethics and Compliance programs, and improving a broad range of business systems.

Hack, Johnson’s military superior, was also briefed on the solutions to KBR’s problems. Hack retired from military service in July 2005 and went to work for Booz Allen, “a strategy and technology consulting firm where his responsibilities included Army domain and logistics consulting work.”

But in August 2008, Hack went to work for KBR. According to the KBR press release:

KBR (NYSE:KBR) today announced that Lieutenant General (retired) Richard Hack has been appointed as the Senior Vice President, Operations, Maintenance and Logistics for KBR’s Government and Infrastructure (G&I) business unit. In his new position, Hack will be responsible for global planning and directing all aspects of worldwide contingency operations, providing logistical and engineering support to deployed U.S. Forces and Allies in 8 countries in the Middle East and Central Asia.

Now Hack could go back to the Army and play the same role that General Cerjan did when Hack was overseeing the KBR contract.

However, as KBR’s piece of the wartime logistics pie threatened to get smaller as we withdrew from Iraq, Hack jumped over to Fluor, one of the main logistics LOGCAP contractors in Afghanistan in December 2010. Fluor also knew where to place him for the best bang for their buck:

Fluor Corporation (NYSE: FLR) announced today that Richard A. Hack has joined the company’s Government Group (FGG) as a senior executive overseeing logistics and contingency work for U.S. armed forces serving abroad. He will be based in Fluor’s Greenville, S.C., operations center.

“Serving the men and women of the U.S. Armed Forces is the top priority for our LOGCAP and CETAC work. Fluor has an outstanding record of performing this work well, and Rick Hack’s addition to our senior leadership team will only help solidify our focus on serving the troops on the ground,” said Bruce Stanski, president of Fluor Government Group. “Rick’s military and private sector experience is a welcomed addition to our team and our company.”

According to Hack’s Linked In site, he is still working for Fluor.

Tina Ballard, the deputy assistant secretary of the Army for acquisition, logistics and technology, was also deeply involved with the decision to let KBR off the hook on their financial tracking problems and allow them to get their bonuses and continue to compete for future LOGCAP contracts. She allowed the hazing of Charles Smith and the influence peddling of KBR’s general-for-hire, Cerjan. She stayed in the government to become the executive director of AbilityOne.gov, a government program that encourages federal procurement for people who are handicapped.

But the Army didn’t let Ballard leave empty-handed after she went along with contractors. She was awarded: “the Office of the Secretary of Defense Award for Excellence, two DLA Meritorious Civilian Service Awards, Department of the Army Decoration for Exceptional Civilian Service (2008), Department of the Army Outstanding Civilian Service Medal (2003) and was named the Federal Executive Association Unsung Heroine.”

As mentioned in Part I of this series, Ballard, “provided updates to Mr. Claude Bolton, the assistant secretary for acquisition, logistics and technology.” Bolton was also receiving regular briefing papers on the problems with KBR. He also agreed to let KBR have a free ride on their auditing mess.

Bolton was another retired Air Force general who had taken the civilian assistant secretary position after he retired from military service in 2002. He is now teaching what he has learned in the military and as an Army assistant secretary to another generation of contract oversight managers at the Defense Acquisition University.

RIO Contract

In Part II of this series, the Army also wanted Smith and his command to implement another big KBR contract in Iraq – the Restore Iraqi Oil (RIO) contract. This contract was for KBR to fix the Iraqi oil fields after the war and market the oil as quickly as possible. The idea was to do the work under the existing LOGCAP contract, but Smith and others told them that only some of the work could be legal under LOGCAP. This worried the main designer of this program, Michael Mobbs, the leader of the Energy Infrastructure Planning Group. Mobbs was in the inside loop in the DoD as a special adviser to DoD Under Secretary Douglas Feith. Feith was one of the neocon warriors who pushed for an Iraq invasion for years. As we reported in Part II, “Mobbs had been a DoD official in the Reagan White House, and between his appointments in the Reagan administration and the George W. Bush administration, he had been a lobbyist for defense contractors such as Lockheed and foreign governments. “

Mobbs and his group were concerned about the problems that the RIO effort would have under LOGCAP, especially since they realized that Smith planned to stick strictly to the procurement rules. Secretary of the Army Thomas White decided after talking to Lt. Gen. Robert Flowers, the commander of the Army Corps of Engineers (or “the Corps” for short) that there would be fewer problems with zealous overseers if the RIO contract was run through the Corps. It was well known that the Corps had a history of lax rules and cronyism when it came to contractors, so Mobbs and the other political appointees pushed the RIO contract to General Flowers.

There was unknown trouble ahead. As reported in Part II:

However, the Corps ran into their own head of contracting, Ms. Bunnatine Greenhouse. Ms. Greenhouse, the first African-American woman to hold such a position, had been brought into the Corps by a reform-minded general to specifically to stop the sole-source contracting to favorite contractors and to play by the legal contracting rules and regulations. She took her job seriously and was a stickler for the rules despite the good-ol’-boy system that had been in place for years.

The more Greenhouse tried to prevent unfair, and possibly illegal, contracting practices, such as giving the $7 billion-plus contract to KBR without competition, the more General Flowers ignored Greenhouse’s civilian oversight and made commitments without her required signature. She was more and more isolated and kept out of the process, despite her rights as head of contracting.

Bolton set the tone by allowing the rules to be blatantly broken. General Flowers went so far as to totally ignore Greenhouse’s authority. As written in a legal complaint Greenhouse filed against the Army:

Eventually, LTG Flowers, upon obtaining Command of the USACE [Army Corps of Engineers], enacted a policy that no SES [Senior Executive Service, top civilian personnel] could tell a Commander “No” about any action that they wanted to do, regardless of the judgment of the executive. This was accomplished in part by permitting Commanders, by using a “Just Do It Card” issued by the CG [Commanding General], to affect the conduct of contracting because the signed “Just Do It Card” by LTG Flowers allowed individuals outside the contracting lineage of authority to interfere in the contracting process without having to seek the advice from individuals that were statutorily and regulatorily responsible and accountable for contracting actions.

General Flowers also overruled Greenhouse on part of the RIO contract that had KBR buy and deliver fuel. KBR’s accounting and oversight of their subcontractors was so poor that the DCAA estimated that KBR was overpaid $61 million on that part of the contract, but Mobbs, Flowers and Bolton did nothing to fix the problem. Meanwhile, they continued to isolate Greenhouse, and someone went so far as to string an extension cord low across the entrance of her office where it could not be seen. She came to work, tripped on the cord and seriously damaged her knee.

Brig. Gen. Robert Crear of the Corps was supposed to have the RIO contract to be competed, but he placed the contract on the Corps web site with no explanation so that other companies would not know how to join in the competition of the contract. Several contractors tried to compete but realized it was impossible and dropped out. It became clear to Greenhouse that, despite her legal authority, Crear and Flowers were firmly in charge of the process.

In July 2004, Flowers was replaced by a new general, Lt. Gen. Carl Strock, but the attacks on Greenhouse’s authority continued, along with the ignoring of federal procurement rules. Greenhouse finally sued the Army but didn’t get a settlement of almost a million dollars until 2011. She retired out of the Corps in total frustration and the taxpayers lost millions, if not billions, of dollars to KBR and their friendly generals.

So, where are these government servants now? Mobbs was promoted to even more oversight roles on Iraq and Afghanistan. First, he became the deputy general counsel at the Office of the Special Inspector General for Iraq Reconstruction (SIGIR). Then he was promoted again to designated agency ethics official at SIGIR. Now, he is the general counsel at SIGIR, doing oversight on the rebuilding project in Iraq. He is supposed to be the one who makes sure that the contractors rebuilding Iraq stick to the legal rules of contracting.

Secretary of the Army White, who was a retired general, was a key player in the Enron debacle. He also was at war with Secretary of Defense Donald Rumsfeld over the number of troops needed in Iraq and was fired by Rumsfeld. Undeterred, he came up with another energy company that worked to get federal funding using dubious business plans, as exposed by Truthout’s investigative reporter Jason Leopold in a 2005 article.

Flowers retired from the military in 2004 and went to work for ARCADIS in September 2010. ARCADIS calls itself, “the international design, consulting, engineering and management services Company.” They clearly hired Flowers for his government contacts, as they stated in their press release announcing his hiring:

“The experience that Lt. Gen. Flowers adds to our federal program brings ARCADIS to a new level in the federal sector,” said Steve Blake, Chairman and CEO of ARCADIS U.S. “With his clear understanding of the federal programming process and the needs of federal clients, Lt. Gen. Flowers will have a major impact on expanding the combined federal programs of ARCADIS and Malcolm Pirnie into a single, focused effort.”

It is not clear what Flowers did between his retirement from the military in 2004 (he does not list anything) and his hiring by ARCADIS in 2010, but ARCADIS’s press release gives us a clue that Flowers didn’t let his inside contacts and knowledge go to waste: “Most recently, Flowers directed significant programs in the private sector for a variety of large federal service providers.”

Crear went on to other Corps assignments, including commander of the Mississippi Valley Division and president of the Mississippi River Commission (a presidential appointment, confirmed by the Senate) where he, “was responsible for the Nation’s water resources program in the entire 370,000 square miles of the Mississippi river valley with 5,000 employees and an annual budget of $7.5 billion.”

He retired in May 2008, started his own Crear Consulting Group, one of the most efficient ways to cash in with as many contractors as possible. In March 2009, he joined Free Flow Power Corporation, which was involved in the same construction area of his last posting in the Mississippi River Valley. In their press release, the company cites his work on the RIO contract as one of his big accomplishments.

Strock was the chief of engineers during the Katrina disaster failure and accepted responsibility for the failure of the Corps levies. He retired from the Corps in 2007.

He went to work in 2007 as the president of Bechtel Construction Operations, part of the giant construction company Bechtel, one of the largest in the world. According to his Linked In page, he still works there.

Between the government employees who tried to stop the fraud and waste of money and the ones who went along with a powerfully connected contractor, it is obvious that the self-dealing government employees won out. Although these fraudulent activities took place at the beginning of our two wars, it is important to look back and see who won and who lost in the DoD bureaucracy. What happened to Charles Smith and Bunny Greenhouse was not lost on the government workers who watched what happened to them and what happened to the self-dealers who put them down. As long as the winners and losers are set up this way in any government department, it will be very hard to make government work and not have the new government workers chose the self-dealing route because doing the right thing for the country is just too hard and too costly.