US: Former Pentagon Officials Find Wealth with Contractors
SHORTLY before the terrorist attacks of 2001, Gen. H. Hugh Shelton, then the chairman of the Joint Chiefs of Staff and the top military adviser to President Bush, met at an undisclosed location in California with Gen. Richard B. Myers, who later succeeded him in that job, and Gen. Michael E. Ryan, the Air Force chief of staff.
For eight hours, a special Pentagon representative briefed them on matters of strategy and the future. But the briefing was not about national security. Rather, it was about their own financial future - how to get seats on corporate boards, what kinds of pay packages to ask for, how to approach future employers and how to gain perks, stock options and lucrative consulting contracts.
Unlike old soldiers who once just faded away, as Gen. Douglas MacArthur famously said, today's old soldiers - or at least the best-known four-star generals, full admirals and other top military brass - are finding new wealth and celebrity. It comes not just in the form of book deals, speaking tours and stints as television commentators but also, increasingly, positions as executives and on the boards of companies that do business with the Pentagon and other parts of the government.
"The day I left the military," General Shelton said in an interview at his waterfront home here, "my phone started to ring off the hook."
Those calls came from corporations eager to get a slice of business from a Pentagon that will spend $78 billion next year on weapons - out of a total 2006 budget that is just more than $400 billion - as well as from a Department of Homeland Security that has a $32 billion budget for next year.
Aside from the obvious players like Lockheed Martin, Northrop Grumman and Boeing , which have long had retired top military officers on their boards, there is also interest from lesser-known Pentagon contractors. These newer competitors - such as DynCorp, Acxiom and M.I.C. Industries - are attracted by the opportunities created as the United States scrambles to cope with new and different threats in the war on terrorism.
Companies seek out retired military brass both for their stature and their easy access to decision makers at the Pentagon, Congress and the White House. Once on board, the soldiers are often only a phone call away from Pentagon officials with whom they once worked.
"Why do you think they are wanted on corporate boards?" asked Lawrence J. Korb, a military analyst at the Center for American Progress, a liberal policy research group in Washington. "It's not because someone led the Persian Gulf war, but for who they know, and their contacts. They can open the door."
Even more, their presence - and their image of rectitude and probity - can add luster to a corporate image. And, having spent so many years inside the Pentagon, they can also help corporations understand how the government works and what it really wants. General Shelton, for instance, is still on a first-name basis with many in the Pentagon and at the White House and, because he still has his security clearances, is in the flow of important Pentagon information.
This trend has hardly gone unnoticed in Congress. The Senate, prodded by Senator John McCain, Republican of Arizona, has included a provision in the latest defense spending bill requiring military contractors to disclose the names of all former Defense Department officials they hire. Senator McCain, a former naval aviator and the son and grandson of admirals, has long been a critic of the Pentagon's revolving door.
The move for greater disclosure gained momentum after an Air Force official was found to have been negotiating jobs at the Boeing Company for herself and members of her family while overseeing Boeing contracts for the Pentagon. The Pentagon official, Darleen A. Druyun, was hired, and later fired, by Boeing, and was eventually sentenced to nine months in prison. Boeing's former chief financial officer, Michael M. Sears, was sentenced to four months in prison, and was also fined $250,000.
No one has suggested that any recently retired four-star generals and admirals have done anything wrong. The officers themselves say they are mostly interested in providing for themselves and their families, as well as taking on new challenges.
Since retiring from the Army in October 2001, General Shelton has fashioned a new career as a director of five large corporations, including Anheuser-Busch. All of these companies do business with the government, which they say is one reason they sought him out. He is also a consultant to Cisco Systems and Northrop Grumman and a director at two smaller companies, one of which is a military contractor.
He has found work outside the military-industrial complex, too. Early on in the current Iraq war, for example, he was a paid commentator for NBC News. He also has set up a leadership institute at his alma mater, North Carolina State University, and gives about 20 speeches a year - most of them for what his booking agent said were "five figure" fees.
EVEN Wall Street is finding retired military officers useful. Robert B. McKeon, the president of Veritas Capital, an investment firm in New York that owns military companies with $3 billion in sales, has put retired officers on the boards of his portfolio companies because "it gives comfort to the government."
Those associated with Veritas include three former retired generals, Anthony C. Zinni of the Marines, Barry R. McCaffrey of the Army and Richard E. Hawley of the Air Force, and two former Navy admirals, Joseph W. Prueher and Leighton W. Smith Jr.
"When you have a distinguished four-star," said Mr. McKeon, referring to the most senior ranks in all four branches of the military, "our government customer knows a company is in good hands."
"Besides getting their insights," he added, "they really can pick up the phone and call someone."
This warm embrace by corporate America is a new twist on Washington's ever-spinning revolving door between government service and private gain. But high-ranking officers like General Shelton, a former Special Forces paratrooper who has risked his life and led military campaigns, say they see it differently. They say they have little to show financially for decades of public service.
"It's a misperception that we are very wealthy and are paid well," said General Shelton, who served for 38 years before retiring at the age of 60. "Most people are astonished that after you get out of the service, we need to work if we want to accumulate wealth or live more comfortably."
That said, four-star generals are hardly on the road to the poorhouse. Top base pay for a general at that level is $150,000, with retirees getting 75 percent of that each year, indexed for inflation. And, unlike many civilians, military officers do not have to contribute to their own retirement plans or cover many health care costs. They get health care for life, often at top military hospitals, and can shop at military stores that one Pentagon spokesman said "make Costco look expensive."
STILL, for someone like General Shelton, who has been the nation's top military strategist and who slept for years with a beeper and next to a "hot line" phone to the White House, his retirement income pales next to the multimillion-dollar retirement packages of civilians at the top of the corporate game.
Military officers often ask their families to pay a heavy price for the sake of their careers. General Shelton, for example, moved his family 29 times before settling here, just months ago, into his lovely but hardly lavish waterfront home where portraits of Robert E. Lee and Ulysses S. Grant decorate the dining room and photographs of General Shelton with world leaders are displayed elsewhere.
In recent American history, few retired generals have scored as big as Dwight D. Eisenhower, who got the ultimate chief executive's job: president of the United States. World War II provided plenty of other big names like George S. Patton, Omar N. Bradley, Chester W. Nimitz and General MacArthur, but they are celebrated mainly in history books and not at shareholders' meetings.
After the Vietnam War, most top generals retired quietly, largely because the war was so unpopular. When asked to account for the difference today, General Shelton responded with one word: "media."
The Persian Gulf war, the first war to be televised internationally and live, created a new generation of telegenic generals, far more marketable than those before them.
"When you are running a major military operation and every day something is happening, you get a lot of attention," said General Shelton, whose daily briefings during a humanitarian campaign in Haiti in 1994 were seen worldwide. "The more exposure we got, the more people appreciated that there are a lot of high-quality people, and in some cases some brilliant people, serving in uniform."
Retired officers and other Defense Department employees, including civilians, must be careful to conform to federal conflict-of-interest rules that forbid direct lobbying of former Pentagon colleagues, an activity that many former four-stars say they find distasteful anyway. The rules, however, do permit former officers to advise and represent military contractors, and that, government watchdog groups say, is a far more subtle - and quietly powerful - use of their status.
"When public service meets private gain," said Danielle Brian, executive director of the Project on Government Oversight, a nonprofit group that monitors government contracts, "you have to question whether leaving it up to personal honesty is adequate."
General Shelton, like other retired officers, bristled at any hint of impropriety. "I'd rather be shot than do something illegal, immoral or wrong," he said.
In some ways, the two most famous veterans of the Persian Gulf war - Colin L. Powell, then the chairman of the Joint Chiefs of Staff, and H. Norman Schwarzkopf, the battlefield commander who headed Operation Desert Storm - opened the door for General Shelton and today's other celebrity generals. As a result, General Shelton and his peers have a broader array of business options available to them.
General Zinni, for example, is the president for international operations of M.I.C. Industries, which makes temporary structures for the military, and a director of BAE Systems and DynCorp, both Pentagon contractors. He is also on the board of the MHI Hospitality Corporation , which operates Hilton and Holiday Inn hotels, and is an adviser to Veritas, the military contractor.
General Zinni said he did not seek out any of his employers. "In every case they found me," he said in a recent interview from his office at M.I.C. Industries in Reston, Va. (General Shelton, too, is associated with M.I.C., as the vice chairman of its board of advisers.)
Gen. John M. Shalikashvili, a former chairman of the Joint Chiefs of Staff who recently cut back on his activities after a stroke, is on the boards of Boeing, L-3 Communications and United Defense Industries , all military contractors.
Before making his 2004 presidential bid, Gen. Wesley K. Clark, a former supreme allied commander of NATO, had seats on boards of several high-technology companies that worked with the Pentagon. He serves on some of the same boards today and has added others, also government contractors. He has served as a director of Acxiom, a data supplier to the Department of Homeland Security, and Allied Worldwide, which moves military families around the globe.
Military contractors are not the only companies seeking to bask in the glow of retired four-stars. Gen. Tommy R. Franks, the former American commander in Afghanistan and Iraq, for example, recently joined the board of Outback Steakhouse Inc.
For General Shelton, corporate life began on the day in late 2001 when August A. Busch III, chairman of Anheuser-Busch, flew in a corporate jet with his son, August A. Busch IV, to the airport in Manassas, Va., to meet with General Shelton and offer him a board seat.
Last year, Anheuser-Busch paid General Shelton $181,518, according to government filings reviewed by the Corporate Library, a corporate governance research group. (He also has options on 10,001 Anheuser-Busch shares and is a member of the company's nominating and corporate governance committees.)
The general said he felt comfortable with Anheuser-Busch because its support of the military gave him "good vibrations." For the company, whose Budweiser beer is sold on military bases around the world, it doesn't hurt to have a four-star on board.
And General Shelton has been more than willing to lend a helping hand - for instance, advising the company about whom to call to cut red tape and to get thousands of bottles of water and nonalcoholic beer to troops in Iraq, or helping the company navigate the Pentagon as the company planned pro-military events associated with the Super Bowl.
"I only go with companies where I feel that I have shared values with the leader of the organization," he said.
As a consultant to Northrop Grumman and Cisco Systems, General Shelton said he meets with executives two or three times a year to review business proposals before they are sent to the Pentagon and to "see if they pass the common-sense test." He said, for instance, that he might suggest that Cisco redesign products to make them smaller or more rugged, and thus more marketable to the Pentagon, a customer Cisco is pursuing.
He is particularly active at the Anteon International Corporation . The company, based in Fairfax, Va., is one of the largest suppliers of information technology to the government, which accounts for about 80 percent of its $1.5 billion in sales. Anteon helped build NATO's intelligence-gathering operations and helped operate computer systems in the Afghan war.
GENERAL SHELTON is just one of many former Pentagon officials at Anteon, as employees or directors. Along with two fellow board members - William J. Perry, the former defense secretary, and Paul G. Kaminski, a former Pentagon acquisitions official - he serves on an Anteon strategy committee that helps guide the company to government business. He is paid annual board fees of $46,000 and has received options on 15,000 Anteon shares, but owns no stock now, according to government filings.
"Perry, myself and Kaminski, we look at the capability of Anteon and what appears to be developing on the horizon and where Anteon should be playing a role," General Shelton said. "We then help them develop a strategy for approaching various components of the Pentagon."
In that mission, they are aided by the fact that Mr. Kaminski is also a member of the Pentagon's Defense Science Board, an advisory committee. That position gives him a bird's-eye view of future Pentagon needs.
"We don't ask that these military celebrities run around knocking on doors," said Joseph M. Kampf, the company's chief executive. "We discuss our marketing plans with the strategy committee and we look to them for guidance. General Shelton brings a unique military perspective. He was the customer, so he knows how the customer thinks."
General Shelton, too, makes a distinction between his activities and "door knocking."
"It did not appeal to me to be pushing product," he said. "I do no lobbying of Congress to buy our stuff versus the stuff of others. And I want to avoid being put into that position.
He added: "I want to pass on my experience, not sell a tank or an airplane."
- 174 War & Disaster Profiteers Campaign