[Congressional Record Volume 155, Number 28 (Wednesday, February 11, 2009)]
[Senate]
[Pages S2103-S2123]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
EXECUTIVE SESSION
______
NOMINATION OF WILLIAM J. LYNN, III, TO BE DEPUTY SECRETARY OF DEFENSE
Mr. LEVIN. Mr. President, I ask unanimous consent now that the Senate
proceed to executive session to consider Calendar No. 14, the
nomination of William Lynn to be Deputy Secretary of Defense; that
there be 3 hours of debate with respect to the nomination, with 1 hour
each under the control of Senator Grassley and Senator McCain or his
designee, 1 hour under my control or my designee's, and that upon the
use or yielding back of time, the Senate proceed to vote on
confirmation of the nomination; that upon confirmation, the motion to
reconsider be laid upon the table, no further motions be in order, that
the President then be immediately notified of the Senate's action and
the Senate resume legislative session.
The PRESIDING OFFICER. Without objection, it is so ordered.
The clerk will report the nomination.
The bill clerk read the nomination of William J. Lynn, III, of
Virginia, to be Deputy Secretary of Defense.
[[Page S2104]]
The PRESIDING OFFICER. Who yields time?
The Senator from Michigan is recognized.
Mr. LEVIN. Mr. President, I yield myself as much time as I utilize.
Mr. President, I urge my colleagues to join me in supporting the
nomination of Bill Lynn to be Deputy Secretary of Defense. This
nomination was reported to the Senate by the Armed Services Committee
by voice vote on February 5, without objection or dissenting vote.
Since the time that he received his law degree from Cornell Law
School and his master's degree in public affairs from the Woodrow
Wilson School more than 25 years ago, Mr. Lynn has devoted his life to
public service and the national defense. For 6 years, Mr. Lynn worked
as the military legislative assistant and legislative counsel to
Senator Ted Kennedy. In 1993, he moved to the Department of Defense,
where he served first as director of program analysis and evaluation,
and then as comptroller until 2001. Over the years, he has also served
as a senior fellow at the National Defense University, on the
professional staff at the Institute for Defense Analyses, and as an
executive director of the Defense Organization Project at the Center
for Strategic and International Studies.
At the end of the Clinton administration, Mr. Lynn went to the
private sector for the first time, working first for DFI international
and then for Raytheon Corporation, where he has served as senior vice
president of government operations and strategy, overseeing the
company's strategic planning and government relations. As a result of
the senior positions he has held with Raytheon, Mr. Lynn has vested and
unvested stock in the company, as well as salary, bonus, and retirement
payments that are due now and in the future
Mr. Lynn's situation is of course not unique. Numerous nominees to
senior positions in prior administrations--including nominees to serve
as Secretary of Defense, Deputy Secretary of Defense, Under Secretary
of Defense for Acquisition, Technology and Logistics, Secretaries of
the Military Departments, and Service Acquisition Executives--have
served in similar industry positions and held similar financial
interests at the time of their nominations.
Over the years, the Senate Armed Services Committee has developed a
strict set of ethics guidelines to address potential conflicts of
interest, and the appearance of conflicts of interest, arising out of
such nominations. These guidelines are tougher and more comprehensive
than the rules historically imposed by the executive branch or by other
congressional committees. When I say ``These guidelines'' are tougher
and more comprehensive, I am referring here to the guidelines that the
Senate Armed Services Committee has developed.
For example, under generally applicable executive branch ethics
rules, a nominee could address actual or potential conflicts without
divesting stock or other financial interests by recusing himself from
matters involving his former employer--subject to a waiver by DOD
ethics officials. However, the Armed Services Committee of the Senate
takes a stricter approach. We require that nominees to Senate-confirmed
positions divest themselves of stock, stock options, and other
financial interests in companies that do business with the Department
of Defense. In the case of stock options that have not yet vested, and
will not vest within 90 days after confirmation, the committee insists
that the nominee renounce the options--in other words, forfeiting the
entire value of the stock options.
The committee's strict divestiture requirements are added to the
requirements of statutory and regulatory ethics rules applicable to all
executive branch officials. Our rules require senior executive branch
officials to recuse themselves from decisions impacting their former
employers for a period of 1 year, even if they have already divested
all financial interest. When I said ``our rules'' I was referring here
to the executive branch rules. As a result, nominees to senior DOD
positions are subject to both divestiture and recusal requirements.
These ethics requirements have been effective. Over the 12 years that
I have served as chairman or ranking member of the Armed Services
Committee, I am not aware of a single instance in which a Senate-
confirmed defense official who previously served in industry has even
been alleged to have taken an action favoring his former employer. We
may agree or disagree with some of the decisions that these senior
officials have made, but conflict of interest does not appear to have
been alleged in any of those disagreements.
Mr. Lynn has complied with all of the committee's requirements. In
accordance with our ethics guidelines, Mr. Lynn has agreed to divest
his financial interest in his former employer within 90 days of his
confirmation. In order to accomplish this purpose, he has agreed to
forfeit restricted stock. By the way, this stock has a value between
$250,000 and $500,000. But that stock does not vest until late in 2009
or 2010. In short, Mr. Lynn has agreed to forfeit that restricted stock
and thereby make a significant financial sacrifice in order to return
to Government service.
In addition, Mr. Lynn will be subject to the statutory and regulatory
recusal requirements that I have already discussed. These recusal
requirements are subject to waiver by the senior ethics official in the
Department of Defense. However, Mr. Lynn has taken an additional step
by agreeing not to seek any waiver of the recusal requirements during
his first year in office with regard to any matter on which he
personally lobbied either Congress or the executive branch. This
commitment on Mr. Lynn's part goes beyond the steps taken by previous
nominees to senior positions at the Department of Defense.
The bottom line is this. Mr. Lynn, if confirmed, will be subject to
ethics restrictions that are stricter than those historically imposed
by the executive branch, stricter than those applied by other
congressional committees, and stricter even than those applied by the
Armed Services Committee to previous nominees with similar backgrounds.
On January 21, 2009, President Obama issued an Executive order on
ethics commitments by executive branch personnel. This Executive order
includes a provision that would, for the first time, preclude
registered lobbyists from seeking or accepting employment with an
agency that they had lobbied within the previous 2 years. Because Mr.
Lynn was a registered lobbyist for Raytheon, he could not have been
appointed Deputy Secretary of Defense without a waiver of this
prohibition.
On January 23, 2009, the Director of the Office of Management and
Budget approved a waiver to two paragraphs of the executive order,
clearing the way for Mr. Lynn to serve.
Mr. Lynn will still be subject to the tough new postemployment
restrictions in the executive order. Those would preclude him from
lobbying any DOD official for 2 years after leaving office, and from
lobbying any political appointee in the Obama administration for the
duration of the administration, should he leave his position before the
end of the administration.
This waiver was appropriate: Mr. Lynn is a career public servant
whose recent history in the private sector was more of an exile than a
calling. He didn't leave the Department of Defense 8 years ago because
he wanted to cash in on inside connections or information, but because
the Clinton administration came to an end. When Mr. Lynn hopefully
passes through the doors of the Pentagon as Deputy Secretary of
Defense, he will return to his roots as a public servant, put his
relationships in industry behind him, and recognize that his sole duty
and obligation is to his country and the national defense.
Today, the Department of Defense faces huge management challenges.
The Government Accountability Office reported last year that the cost
overruns on the Department's 95 largest acquisition programs alone now
total almost $300 billion over the original program estimate, even
though the Department has cut unit quantities and reduced performance
expectations on many programs in an effort to hold down costs.
The Department's financial system remains incapable of producing
timely, accurate information on which sound business decisions can be
based. The Department's civilian workforce has been decimated by
decades of freezes and cuts, leaving us dependent on contractors who
perform many functions
[[Page S2105]]
that should be performed by Government personnel.
Mr. Lynn's background in senior management positions in the
Department of Defense and in industry over the last two decades gives
him the kind of knowledge and experience that will be useful to address
these challenges. In the course of the committee's consideration of Mr.
Lynn's nomination, I have spoken to him about the challenges facing the
Department of Defense. I have been impressed by his grasp of the
problems the Department faces and his ideas for addressing them.
Under these circumstances, and those are the circumstances I have
outlined about cost overruns, we cannot afford a Deputy Secretary who
is either disengaged or ineffectual. We need someone with the kind of
experience and background Mr. Lynn will bring to the job. His
nomination, again, was approved by the Senate Armed Services Committee
without a single dissenting vote. I hope our colleagues will support
this nomination.
I yield the floor.
The PRESIDING OFFICER. The Senator from Arizona is recognized.
Mr. McCAIN. Mr. President, I intend to vote in favor of the
nomination of Mr. Lynn to be the Deputy Secretary of Defense. Mr. Lynn
has an extensive record of public service. He has served as the
Director of Program Analysis and Evaluation in the Pentagon during the
Clinton administration, and following that he was the Under Secretary
of Defense, Comptroller, from 1997 to 2001. He served as, obviously,
the chief financial officer for the Department of Defense.
After his DOD service, Mr. Lynn, as we know, became a registered
lobbyist and the Raytheon Company's senior vice president of government
operations. In that position he led Raytheon's strategic planning and
oversaw all of their Government relations activities.
Mr. Lynn has served as I mentioned, but nowhere, I might point out,
does he have in his resume any extensive managerial experience. One of
the major functions of the Deputy Secretary of Defense is to make the
Pentagon run. Mr. Lynn does not have that executive managerial
experience.
Having said that, elections have consequences, as we all know, and
this is the selection that the President of the United States made, and
the Secretary of Defense also supports his nomination.
I do not view the fact that Mr. Lynn became a lobbyist for Raytheon
as, per se, disqualifying. Mr. Lynn has indicated his willingness to
comply with the ethical requirements of the executive branch aimed at
preventing conflicts of interest, and he has agreed to the additional
stock divestment obligations that the Committee on Armed Services has
consistently required of nominees.
I have been concerned, however, about the practical problems that
would arise from Mr. Lynn's past lobbying activities and the legitimate
concerns the American people would have if Mr. Lynn made decisions
related to the programs for which he lobbied.
I sent a letter to Mr. Lynn on January 26, with a follow-up letter on
January 29, asking him to articulate in detail what specific matters
would be affected. Mr. Lynn responded on January 30 indicating that he
had worked on the DDG-100 surface combatant, the AMRAAM air-to-air
missile, the F-15 airborne radar, the Patriot Pure Fleet Program, the
Future Imagery Architecture, and the Multiple Kill Vehicle. He provided
me with written assurances that he would refrain from participating in
any decisions regarding those programs for 1 year if he is confirmed.
I believe these assurances and with ongoing reviews within DOD that
encompass rigorous screening Mr. Lynn will endeavor to perform
effectively as the Deputy Secretary of Defense.
I am aware, as I mentioned, that he has the support of Secretary
Gates, and I obviously consider that to be an endorsement in Mr. Lynn's
favor. President Obama, as we all know, signed an Executive order on
January 21, 2009, that established a praiseworthy ``revolving door
ban'' that would bar any lobbyist from working for an agency they
lobbied within 2 years of an appointment. The Executive order included
a provision for granting a public interest waiver, and Mr. Lynn was
given a waiver.
It is disappointing that President Obama, who pledged continuously
throughout the campaign to change the culture of Washington and the
influence of lobbyists, then almost immediately chose to nominate
several individuals, including Mr. Lynn, who required a waiver.
So after proudly trumpeting a new change and the new rules and
regulations, several individuals--and a couple have had to withdraw
their nominations--that Mr. Lynn required a waiver or exemption to that
policy. Obviously, the American people were promised one thing but
delivered another.
My colleague, Senator Grassley, who will be speaking later, sent a
letter on January 29 to OMB Director Peter Orszag asking for a
justification for the granting of the waiver. I ask unanimous consent
that Mr. Orszag's response on February 3 be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
The White House,
Washington, DC, February 3, 2009.
Hon. Charles E. Grassley,
U.S. Senate,
Washington, DC.
Dear Senator Grassley: Thank you for giving the
Administration the chance to address the questions you raise
in your letter of January 29, 2009 regarding the granting of
a waiver that exempts Mr. William J. Lynn from certain
provisions in President Obama's Executive Order on Ethics
Commitments by Executive Branch Personnel (the ``Order''). We
appreciate your concerns and are glad to have the opportunity
to fully explain the decision to grant this waiver, which we
strongly believe to be the correct one.
I. Background
The President signed the Executive Order on Ethics
Commitments by Executive Branch Personnel on January 21,
2009. The Order includes some of the strictest ethics rules
ever imposed on executive branch personnel. In addition to
barring appointees from accepting gifts from registered
lobbyists, the Order places sharp limitations on individuals
traveling back and forth between government service and the
private sector, using their government service for personal
enrichment at the expense of the public interest.
The Order takes an especially strong stand against
lobbyists moving into and out of the executive branch. The
Order restricts registered lobbyists who are appointed to an
executive agency from participating in any particular matter
on which they lobbied within the past two years and from
participating in the specific issue area in which that
particular matter falls, subject to the waiver provision
discussed below. Registered lobbyists are also restricted
from seeking or accepting any employment within an executive
agency that they lobbied within the past two years.
The Order has been roundly praised by commentators and
leading good government advocates as the toughest ever of its
kind. To cite just a few, Democracy 21 said that ``the new
Executive Order contains the toughest and most far reaching
revolving door provisions ever adopted,'' and went on to say
that the Order ``goes further than any previous action taken
by a President to restrict the ability of presidential
appointees who serve in the Executive Branch from coming back
to lobby the Administration, and also to limit the role of
lobbyists coming in to serve in the Administration.'' The
Washington Post reported that experts viewed the Order as
``considerably broader than those other presidents imposed,''
and Meredith McGehee, policy director of the Campaign Legal
Center, said in a statement that ``[no] two ways about it,
the revolving-door provisions in the new executive order
issued by President Obama are very tough.''
Even the toughest rules, however, need reasonable
exceptions. That is why the Order provides that a waiver of
these restrictions may be granted in limited circumstances.
The waiver may be granted when it is determined ``(i) that
the literal application of the restriction is inconsistent
with the purposes of the restriction, or (ii) that it is in
the public interest to grant the waiver.'' Sec. 3(a). The
Order goes on to explain that the ``public interest'' may
include, but is not limited to, exigent circumstances
relating to national security or to the economy. Sec. 3(b).
The Order also instructs the Director of the Office of
Management and Budget to consult with the White House Counsel
when determining whether a waiver is necessary and
appropriate.
Experts have praised the inclusion of a waiver provision in
the Order. For example, Norman Ornstein, a Resident Scholar
at the American Enterprise Institute stated that: ``This
tough and commendable new set of ethics provisions goes a
long way toward breaking the worst effects of the revolving
door. There are many qualified people for the vast majority
of government posts. But a tough ethics provision cannot be
so tough and rigid that it hurts the country unintentionally.
Kudos to President Obama for adding a waiver provision, to be
used sparingly
[[Page S2106]]
for special cases in the national interest. This is all about
appropriate balance, and this new executive order strikes
just the right balance.''
Similarly, Thomas Mann, Senior Fellow of Governance Studies
and the Brookings Institution notes: ``The new Obama ethics
code is strict and should advance the objective of reducing
the purely financial incentives in public service. I applaud
another provision of the EO, namely the waiver provision that
allows the government to secure the essential services of
individuals who might formally be constrained from doing so
by the letter of the code. The safeguards built into the
waiver provision strike the right balance.''
II. Responses to Your Questions
In considering the waiver for Mr. Lynn so that he might
serve as Deputy Secretary of Defense, we believe the right
balance has been struck by granting a waiver at the request
of the Secretary of Defense to a qualified candidate whose
service to the country is critical to our national security.
With that in mind, we want to address your specific
questions.
First, you asked what criteria were used in determining
that Mr. Lynn's waiver was necessary to further ``the public
interest.'' As noted above, the Order specifically states
that the public interest includes ``exigent circumstances
relating to national security.'' These circumstances include
the urgent need to have the best-qualified individuals
serving at the highest levels of the President's national
security team. As Secretary Gates stated with regard to
asking the President to nominate Mr. Lynn to be the Deputy
Secretary: ``I interviewed Bill Lynn; I was very impressed
with his credentials; he came with the highest
recommendations of a number of people that I respect a lot.
And I asked that an exception be made, because I felt that he
could play the role of the deputy in a better manner than
anybody else that I saw.''
Mr. Lynn's qualifications for the Deputy position are well
known. Mr. Lynn served as Under Secretary of Defense
(Comptroller) under President Clinton, before which he had
served as the Director for Program Analysis and Evaluation in
the office of the Secretary of Defense. Prior to that, he
served as an Assistant to the Secretary of Defense for
Budget. High-level experience in managing Pentagon budgetary,
finance and procurement functions is extremely rare, and
it was particularly important to Mr. Lynn's selection
here.
As you are aware, the Department of Defense faces enormous
management challenges. During Mr. Lynn's previous tenure at
DoD, there were significant efforts to improve financial
reporting, including two major initiatives. First, in 1998,
DoD adopted for the first time a Financial Management
Improvement Plan, which was a strategic framework for
improving critical financial systems and feeder systems in
the future. Second, the DoD Senior Financial Management
Council was reconstituted during 2000 and adopted a
comprehensive program management plan in January 2001.
Mr. Lynn was generally credited with putting appropriate
managerial emphasis on improving financial reporting. For
example, on February 17, 2000, the Deputy Inspector General
testified to Congress that ``the DoD has seldom, if ever,
been so committed to across the board management improvement
. . . . with continuous management emphasis, th[e]
initiatives should dramatically improve the efficiency of DoD
support operations over the next several years.'' DOD IG
Report No. D-2000-077 at 4.
Similarly, on May 9, 2000, Jeffrey Steinhoff from the
General Accounting Office (now the Government Accountability
Office) testified that ``DOD has made genuine progress in
many areas throughout the department. . . . We have seen a
strong commitment by the DOD Controller and his counterparts
in the military services to addressing long-standing, deeply
rooted problems.'' GAO/T-AIMD/NSIAD-00-163 at 2.
This progress could be seen in several areas. For example,
when Mr. Lynn took over as Comptroller, DoD could not even
generate a list of its finance and accounting systems. GAO/
AIMD-97-29 (Jan. 31, 1997). By the time he had left, DoD had
identified 167 critical systems, had achieved compliance with
federal financial management standards in 19 of those
systems, and had a plan to achieve compliance for the balance
of its systems by FY 2003. To take another example, under Mr.
Lynn's watch, DoD continued its progress in significantly
consolidating and streamlining its financial centers and
financial systems. Between 1991 and 2000, DoD consolidated
330 accounting and finance locations into 26, and reduced the
number of finance and accounting systems from 648 to 190.
Accomplishments like these led John Hamre, who was Mr. Lynn's
predecessor as Comptroller and who also served as Deputy
Secretary, to state that ``I don't know anybody who did the
job better than Bill Lynn.''
Mr. Lynn's experience is not limited to the Pentagon. From
1987 until 1993, Mr. Lynn served on the staff of Senator
Edward Kennedy as the legislative counsel for defense and
arms control matters and as the Senator's staff
representative on the Senate Armed Services Committee. Prior
to 1987, he was a senior fellow in the Strategic Concepts
Development Center at National Defense University, where he
specialized in strategic nuclear forces and arms control
issues. He was also on the professional staff of the
Institute of Defense Analyses. From 1982 to 1985, he served
as the executive director of the Defense Organization Project
at the Center for Strategic and International Studies.
In short, Mr. Lynn's executive branch experience, combined
with his legislative, think-tank and private sector
experience, gives him the precise set of skills that are not
only necessary to the job, but are rare in their breadth and
depth. That is why former Secretary of Defense William Cohen,
who served as Mr. Lynn's supervisor during the Clinton
Administration, commented that he has ``precisely the kinds
of skills required'' to serve as the Deputy Secretary. We
share both the current and former Secretaries' views that Mr.
Lynn's experience and skill set would make him an exceptional
Deputy Secretary of Defense.
Second, you asked about the potential for conflicts of
interest given Mr. Lynn's past position at Raytheon Company
(``Raytheon''). These issues were carefully reviewed as part
of the consideration of Mr. Lynn, and we believe that strong
safeguards have been erected that address these concerns and
allow Mr. Lynn to serve. We note that these arrangements were
structured in conformance with the Armed Services Committee's
longstanding requirements and practices. These arrangements
have also been approved by the Defense Department's ethics
official as eliminating potential conflicts and providing for
appropriate protective measures.
Specifically, Mr. Lynn will divest his Raytheon stock
within 90 days of his appointment, including his shares in
the Raytheon Savings and Investment Plan. He also will
forfeit all of his restricted stock units that he holds under
the 2007-2009 Raytheon Long-Term Performance Plan (LTPP) and
the 2008-2010 LTPP, and will divest those shares he holds
under the 2006-2008 LTPP within 90 days of their vesting in
February. To ensure there are no conflicts regarding the
stock, he will not participate personally and substantially
in any particular matter that has a direct and predictable
effect on the financial interests of Raytheon until he has
divested the stock, unless he first obtains a written waiver,
pursuant to 18 U.S.C. Sec. 208(b)(1), or qualifies for a
regulatory exemption, pursuant to 18 U.S.C. Sec. 208(b)(2).
Further, for a period of one year after his resignation
from Raytheon, he will not participate personally and
substantially in any particular matter involving specific
parties in which Raytheon is a party, unless first authorized
to participate, pursuant to 5 C.F.R. 2635.502(d).
As an additional precaution, Mr. Lynn has promised not to
seek authorization to participate in decisions on any of the
six specific programs where he personally lobbied: the DDG-
1000 surface combatant, the AMRAAM air-to-air missile, the F-
15 airborne radar, the Patriot Pure Fleet program, the Future
Imagery Architecture, and the Multiple Kill Vehicle.
Finally, consistent with the customary practice for
departing executives of Raytheon, Mr. Lynn will continue to
participate in the Raytheon Defined Benefit Plan, which would
pay him about $4,300 monthly beginning on January 1, 2019. In
accord with the letter signed by the Chairman and Ranking
Member of the Senate Committee on Armed Services dated
September 23, 2005, Mr. Lynn has agreed that prior to acting
in any particular matter that is likely to have a direct,
predictable, and substantial effect on the financial interest
of Raytheon, he will consult with his Designated Agency
Ethics Official, and will not act in the matter unless that
official determines that the interest of the Government in
his participation outweighs any appearance of impropriety,
and issues a written determination authorizing his
participation. Mr. Lynn understands that such an
authorization does not constitute a waiver of 18 U.S.C.
Sec. 208 and does not affect the applicability of that
section.
Under the circumstances, we believe this arrangement
accomplishes the twin goals of enforcing tough ethical
standards that protect the public interest, while also
assuring that the nation is not deprived of a talented and
badly-needed public servant to assist with the defense of our
nation.
Third, you ask about the process for selecting Mr. Lynn. We
can assure you that the selection of Mr. Lynn came at the end
of an extensive process that resulted in a consensus opinion
that Mr. Lynn was the best-qualified candidate for this job.
Multiple candidates were considered and interviewed over the
course of what was a long and rigorous review. Ultimately,
though, this is a position for which there is a short list of
truly qualified applicants who have the kind of experience we
detailed earlier in response to your first question. Taking
into account all of the factors, including the concerns
raised in your letter, the President and Secretary Gates felt
that Mr. Lynn was the best person for the job.
Fourth and finally, you have asked whether Mr. Lynn's
ability to perform his job will be impaired by any necessary
recusals. We do not believe the ethics compliance process
described above will hinder Mr. Lynn from doing his job. The
process strikes a reasonable balance under the circumstances.
It waives the need for Mr. Lynn to recuse himself from issues
that would otherwise be implicated by paragraphs 2 and 3 of
the ethics pledge, but still requires him to follow the
remainder of the Order, including the revolving door exit
provisions and the gift ban, as well as the other
restrictions detailed in this letter.
Again, thank you for this opportunity to address these
issues. As the Ethics Executive
[[Page S2107]]
Order and the other Orders and Presidential Memoranda signed
on the same day reflect, President Obama and all of us in the
Executive Office of the President are committed to running a
highly transparent and accountable administration. We look
forward to working with you on these issues and on government
reform issues more broadly.
Sincerely,
Peter R. Orszag,
Director, Office of Management and Budget.
Gregory B. Craig,
Counsel to the President.
Mr. McCAIN. With respect to the waiver, Mr. Orszag stated:
The selection of Mr. Lynn came at the end of an extensive
process that resulted in a consensus opinion that Mr. Lynn
was the best qualified candidate for the job.
He went on to say:
Mr. Lynn's executive branch experience, combined with his
legislative, think tank and private sector experience--
As you note, he did not mention a managerial role that he might have
had in his career--
gives him the precise set of skills that are not only
necessary to do the job, but are rare in their breadth and
depth.
I hope Mr. Lynn will be a rare exception to the new rule--you know,
one of the things I had hoped would happen because of the deep
disapproval the American people have in the way we do business is this
kind of cycle of lobbyists to executive branch, to legislative branch,
to lobbyists. It goes on in this town with enormous frequency and has
led to scandals, indictments, and convictions of former staff members,
former Members of Congress, and former members of the executive branch.
I had hoped that somewhere in America there would be someone who had
the experience and knowledge and background in running what probably, I
believe, is the largest organization in the world, the Department of
Defense, rather than again having to go inside the beltway.
But as I mentioned, elections have consequences. The President has
designated Mr. Lynn and others to positions which are in violation of
the much heralded Executive order he made concerning not having
lobbyists serve in Government.
So I will give him at least, in my opinion, my vote, the benefit of
the doubt, and will vote in favor of Mr. Lynn's nomination.
He responded to, albeit belatedly, the questions I submitted to him.
I wish him well. We face enormous challenges both in the way the
Department of Defense operates, the acquisition programs--and many of
them are completely out of control, with cost overruns that are
staggering--to a lack of efficiency in a number of areas.
I not only wish Mr. Lynn well, but I look forward to working with him
as we do whatever we can to defend this Nation's vital national
security interests as well as manage the functions of a bureaucracy
which, in all candor, has defied sound management under both Republican
and Democratic administrations.
I know Senator Coburn and Senator Grassley will be over later on. I
am confident that Mr. Lynn's nomination will be voted out
overwhelmingly by the Senate. I hope Mr. Lynn will do well in his new
position of responsibility. I pledge to work with him as much as
possible, as I have done with Secretaries of Defense and Deputy
Secretaries of Defense in Republican and Democratic administrations.
I yield the floor.
The PRESIDING OFFICER. The Senator from Michigan is recognized.
Mr. LEVIN. I wanted to thank Senator McCain for his support. It is
exceedingly important, and his very thoughtful statement makes a real
contribution to the debate.
I yield the floor, and I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Merkley). Without objection, it is so
ordered.
Mr. GRASSLEY. Mr. President, I come to the floor to raise questions
about whether Mr. Lynn ought to be Deputy Secretary of Defense. I do it
with the normal courtesy, that a President ought to be able to name
people to his team, and I do it based upon two questions: One, the use
of the waiver for him to be in this position contrary to the Executive
order of President Obama; and, secondly, to raise questions about his
activity as chief financial officer in the second Clinton
administration, and now coming to be Deputy Secretary of Defense. I
will try to lay this out as best I can with documentation.
I will not be able nor do I need to document the first consideration
on the waiver. I wanted to express views on it.
I thought I had seen the last of Mr. Lynn when President George W.
Bush first took office. I was dead wrong. So I had to send my staff out
to where the Senate buries old skeletons. It is the Records Center out
in Maryland, the scenic countryside about 20 miles from the Capitol.
There I had my staff dig up the remains of what came to be known, and
what I came to know about Mr. Lynn's activities as chief financial
officer about 10 years ago.
I would give a little bit of word of advice to my colleagues,
archival of your materials. I found that political nominees, good and
bad, come back like Australian boomerangs. Some take longer than others
to return, but eventually you will see them again.
Mr. Lynn is currently employed as senior vice president, government
operations, of a major defense contractor, Raytheon. Until June 2008,
Mr. Lynn was registered as Raytheon's principal lobbyist to the
Department of Defense.
I have serious questions about the nomination. My first area of
concern is that Mr. Lynn does not appear to meet President Obama's
strict new ethical standards for executive branch appointees. Those
standards were laid down in an Executive order of January 21, 2009.
It is important for me to say what ethics means to me. Everyone has a
different idea as to what ethics represents. This is a complicated
issue, and I don't want there to be any confusion about this word or
principle. The Merriam Webster dictionary defines the word ``ethics,''
one, as the discipline dealing with what is good and bad, with moral
duty and obligation. This definition is very clear, but I want to go a
step further to say that, to me, ethics are very uncomplicated
principles of life. Simply put, when faced with tough choices or
decisions, we must always do what is true and correct.
Throughout the Presidential campaign, candidate Barack Obama
repeatedly promised to close the revolving door and change the
political culture in Washington. This was one of his top priorities.
Consistent with those promises, within 24 hours of being sworn in, he
signed the Executive order that set new ethical standards in stone.
Under the ``revolving door ban'' section of those rules, Mr. Lynn
should have been barred from serving as Deputy Secretary of Defense
until July 2011. I understand Mr. Lynn has been given a special order
by the administration to further the public interest.
According to a letter I have received from OMB Director Peter Orszag
of February 3, 2009--and I have it here if anybody is interested in
reading it. Senator Levin has already had this letter printed in the
Record.
According to this letter from OMB Director Peter Orszag of February
3, 2009, Mr. Lynn's waiver was based on ``exigent circumstances
relating to national security.''
Director Orszag stated:
Mr. Lynn is uniquely qualified for this position and is
urgently needed to serve on the President's national security
team.
Mr. Orszag was responding to my letter of January 29, 2009, asking
for the justification of the waiver.
I ask unanimous consent to have that letter printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
U.S. Senate,
Committee on Finance,
Washington, DC, January 29, 2009.
Hon. Peter Orszag,
Director, Office of Management and Budget, Washington, DC.
Dear Director Orszag: I write today to express my concerns
with the recent decision to grant a waiver for Mr. William J.
Lynn, exempting him from the strict new ethics rules outlined
in President Obama's Executive Order titled ``Ethics
Commitments by Executive Branch Personnel,'' signed on
January 21, 2009.
[[Page S2108]]
Mr. Lynn has been nominated by the President to serve as
the Deputy Secretary of Defense. He is currently employed as
a senior vice president at a major Department of Defense
(DOD) contractor--Raytheon Company. Until very recently, he
was also registered as Raytheon's principal lobbyist to the
DOD.
Throughout the presidential campaign, President Obama
repeatedly promised the American voters that he would ``close
the revolving door'' in order to greatly limit the role of
lobbyists in his administration. He warned lobbyists, they
``won't find a job in my White House'' and [lobbyists] ``will
not run my White House, and they will not drown out the
voices of the American people.'' He also stated: ``If you are
a lobbyist entering my administration, you will not be able
to work on matters you lobbied on or in the agencies you
lobbied during the previous two years [emphasis added].''
Further, President Obama explained why it was important to
close the revolving door: ``Lobbyists spend millions of
dollars to get their way. The status quo sets in. . . . They
use their money and influence to stop us from reforming
[government policies]''. He added, ``. . . together, we will
tell the Washington lobbyists that their days of setting the
agenda are over.''
President Obama's message was crystal clear: allowing
lobbyists to pass freely through the revolving door was
simply not in the public interest. He espoused that lobbyists
in government ``are a problem'' because they block needed
reforms--reforms that Mr. Obama promised to the American
people.
President Obama's promises to ``close the revolving door''
seemed to be a top priority. He meant what he said. He kept
his promise. In fact, within 24 hours of being sworn in,
President Obama signed a new Executive Order titled, ``Ethics
Commitments by Executive Branch Personnel'' to cement his
campaign pledge into an official order. Paragraphs two and
three of Section One--entitled ``Revolving Door Ban''--
appeared to solidify President Obama's pledge to ``close the
revolving door.''
However, exactly two days after signing the Executive
Order, you exercised authority delegated to you under Section
3 of the Executive Order and issued a waiver to Mr. Lynn,
which effectively gutted the ethical heart of the President's
``Revolving Door Ban.'' I find it difficult to reconcile Mr.
Lynn's nomination to be the Deputy Secretary of Defense with
the purpose and intent of the Executive Order.
Mr. Lynn was a registered Raytheon lobbyist for six years.
His lobbying reports clearly indicate that he lobbied
extensively on a very broad range of DOD programs and issues
in both the House and Senate and at the Department of
Defense. If confirmed, Mr. Lynn would become the top
operations manager in the Pentagon. He would be the final
approval authority on most--if not all--contract, program and
budget decisions. Surely, a number of Raytheon issues would
come across his desk. Mr. Lynn's conflict of interest has
been characterized by some as an ``impossible conflict.'' The
Chairman of the Armed Services Committee, Senator Levin, has
stated that Mr. Lynn will have to recuse himself from those
decisions for one year. Since Raytheon is a big defense
contractor, those recusal requirements could limit Mr. Lynn's
effectiveness as Deputy Secretary of Defense.
Based upon President Obama's statements made during the
presidential campaign and leading up to and following the
signing of the Executive Order, I simply cannot comprehend
how this particular lobbyist could be nominated to fill such
a key position at DOD overseeing procurement matters, much
less be granted a waiver from the ethical limitations listed
in the Executive Order.
Additionally, I have serious questions about the message
that this waiver sends to other lobbyists seeking employment
in President Obama's administration. Despite strong language
limiting the role of lobbyists in the Executive Order, it
appears to me that Mr. Lynn's nomination and the waiver
granted to him leaves ``the barn door wide open'' for other
potential nominees with lobbying backgrounds to circumvent
the Executive Order. This is a giant loophole that places the
burden of granting waivers strictly with the Director of the
Office of Management and Budget (OMB). As such, I believe a
detailed explanation of the reason for granting the waiver is
warranted in order to ensure that the granting of future
waivers is done in a fully transparent manner and given the
sunshine such an important decision deserves.
The waiver provision in the Executive Order provides that
the OMB Director may grant a waiver for two reasons, (1)
``that the literal application of the restriction is
inconsistent with the purposes of the restriction'' or (2)
``that it is in the public interest to grant the waiver''.
These provisions are general and provide wide latitude in
determining when a waiver is applicable. For instance, in Mr.
Lynn's case, the waiver simply states: ``After consultation
with Counsel to the President, I hereby waive the
requirements of Paragraphs 2 and 3 of the Ethics Pledge of
Mr. William Lynn. I have determined that it is in the
public interest [emphasis added] to grant the waiver given
Mr. Lynn's qualifications for his position and the current
national security situation. I understand that Mr. Lynn
will otherwise comply with the remainder of the pledge and
with all preexisting government ethics rules.''
While I am glad to see that the waiver does not appear to
fully circumvent the Executive Order or other existing
government ethics rules, the broad language used in
determining that the waiver is in the ``public interest'' is
a concern. Little detail is provided as to why the waiver is
necessary. Only general criteria used in the analysis and
justification for the waiver are given. Accordingly, I
strongly urge OMB to publicly set forth a list of criteria
utilized to examine whether a waiver would be in ``the public
interest.'' Further, OMB should also publicly set forth
criteria examined to determine when ``literal application of
the restriction is inconsistent with the purposes of the
restriction.'' By making these criteria public, it will go a
long way toward making OMB decisions transparent and
providing the American people with a full accounting of why
waivers to the Executive Order are necessary. I strongly
encourage OMB to do this as soon as possible to ensure those
decisions do not merely become an arbitrary basis to
circumvent the Executive Order.
Additionally, I respectfully request that OMB provide
responses to the following questions:
(1) What criteria did OMB use to determine that Mr. Lynn's
waiver was necessary to further ``the public interest''?
(2) Does OMB believe there are no inherent conflicts of
interest to have Mr. Lynn serve as the Deputy Secretary of
Defense overseeing procurement from a company he formerly
lobbied for? If not, why not?
(3) Given President Obama's position on lobbyists serving
in government positions, did anyone in OMB ask the President
or his Counsel to consider whether other candidates for the
position would be better qualified before granting the Lynn
waiver?
(4) Does OMB believe Mr. Lynn's requirement that he recuse
himself in certain instances under provisions of the
Executive Order not impacted by the waiver will hinder him
from doing the job? Why or why not?
The idea behind President Obama's promise to close the
revolving door and ban lobbyists from his administration had
one purpose: to protect the public interest. The new rules
are designed to protect the taxpayers against wasteful and
unnecessary expenditures and policies that might be advocated
by ``special interests'' inside the government. By granting
Mr. Lynn's waiver, it appears that OMB has undermined the
principal purpose of the new ethics rules--to protect the
public interest. It seems like the OMB waiver embraces the
lobbyist culture that President Obama promised to change. As
Director of OMB, your decisions set the tone for the entire
federal bureaucracy. By making the waiver process more
public, OMB would send a clear and unambiguous message:
transparency is first and foremost when it comes to dealing
with ethics rules.
Please bring transparency and accountability to Mr. Lynn's
waiver and all future waivers of the Executive Order by
providing details about why waivers have been granted and the
criteria used to determine them.
I would very much appreciate a prompt answer to my
questions.
Sincerely,
Charles Grassley,
Ranking Member.
Mr. GRASSLEY. I also understand that President Obama's picks for
these key positions should be respected. I said that about President
Bush. I have to say it about President Obama. They were elected. They
have a certain respect of the people, and that respect should not be
questioned by the Senate except under extraordinary circumstances. I
think these are extraordinary circumstances, and I am bringing it up.
Mr. Lynn has informed me that he would be divesting his financial
stakes in Raytheon in the next 90 days. He also said he would not
engage in any Raytheon-related decisions for 1 year at DOD unless he
receives a special waiver.
Regrettably, for Mr. Lynn and for American taxpayers, getting rid of
conflicts of interest is not as easy as it might sound. The Raytheon
Corporation has hundreds of potential contracts and programs with the
Department of Defense. As such, the Office of Government Ethics will
have to set up a full-time department just to handle Mr. Lynn's
conflict-of-interest Raytheon waivers.
On the one hand, I believe the best leaders lead by example. So mean
what you say. For that reason, I challenge Mr. Lynn to take control of
this ethical debate and demonstrate true leadership on this issue by
sticking to the principles set forth by President Obama's Executive
order on ethics commitments by executive branch personnel. Special
waivers and exemptions undermine the basic principle of good
government.
Changing the rules as you go along tends to foster a basic sense of
distrust of the Government of all Americans. We all know that is a
problem. We have to be cautious to make sure we don't make the
situation worse. Why make rules if you know you are going to break
them? How can gutting the ethical heart of the new ethics rule be in
[[Page S2109]]
the public interest when those very same rules were created in the
first place in the public interest?
Even the best qualified nominees with the highest recommendation
should recognize when serving in his or her post would not be in the
public interest. I believe the American people expect nominees to be
true and honest. Given his chosen career path, Mr. Lynn should know he
does not comply with the spirit or intent of the Executive order on
ethics.
If he is seriously devoted to serving his country and this President,
Mr. Lynn should consider withdrawing his nomination and ask to be
reconsidered when he is within the ethics ``revolving door'' principles
laid down by my President, Mr. Obama. Then he would come back in 2
years to seek such appointment. This country will always need good
leaders who lead by example. By doing this, he would set the standard
of excellence for all other nominees to follow. It would restore
integrity and credibility to President Obama's new ethics rules. As it
stands now, unfortunately, the Lynn nomination is rolling down a very
low road at high speed. By setting the new rules aside for the first
top-level appointee to come down the pike, President Obama and his
administration appear to embrace the very same culture President Obama
promised to change.
None of us knows for sure whether Mr. Lynn's nomination is truly in
the public interest. We can only hope it is. In time, we will find out.
What is going to take me longest to explain is documentation of some
activity of Mr. Lynn when he was Chief Financial Officer and how that
fits into some questions I have about the position to which he was
nominated.
My second area of concern pertains to Mr. Lynn's financial management
record at the Pentagon. Mr. Lynn served as Chief Financial Officer at
the Department of Defense from November 1997 through 2000. I first came
to know Mr. Lynn in 1998, after he was appointed to the position.
Between June 1997 and July 1998--1 month, approximately--I conducted an
in-depth investigation of internal financial controls at the Department
of Defense. I was testing basically internal controls within the
Department. I reviewed about 200 financial transactions from Pentagon
offices where the fraud had occurred. We examined purchase orders,
contracts, invoices, delivery verifications or receipts, and, finally,
we examined final payments. We even checked to see if remit addresses
were correct. In short, we looked at the whole ball of wax.
The results of this investigation were presented in a report in
September 1998. This is a report my staff and other people put
together. The report concluded, in September 1998, involving the Chief
Financial Officer and/or things under his command or jurisdiction:
Internal controls at the Department of Defense were weak or
nonexistent.
The Government Accountability Office, then called the General
Accounting Office, concurred with my assessment.
Our investigations found that not one of the accounts payable files
examined was 100 percent up to snuff. I was alarmed to find they all
had either minor or major accounting deficiencies. If the Department of
Defense had followed standard accounting practices, none of the bills
should have been paid. Unfortunately, all went out the payment door.
The most glaring and persistent shortcoming observed was the near
total absence of valid receiving reports in the accounts examined at
the Defense Finance and Accounting Service Center in Denver, CO. A
receiving report is one of the most important internal control devices.
They provide written verification that the goods and services billed on
an invoice were received and matched with what was ordered. In all the
files examined, we found only 6 out of 200 genuine receiving reports,
or what they call DD-250 forms. The rest of the files contained none.
Of the six receiving reports found, all were either invalid or
incorrect.
We also noticed gaping holes in another key control mechanism, remit
addresses. A remit address is important because it is at the end of the
money trail, where the money goes. The review found zero control over
remit addresses. A total of 286 technicians in the Dallas center had
authority to alter remit addresses. This was a violation of another
basic internal control principle--separation of duties. A person
responsible for paying bills should never be allowed to change a remit
address.
On September 23, 1998, I met with Mr. Lynn to discuss the findings of
my investigation. I provided him with a draft of the report. I asked
him to review it and provide comment. In his response, dated 5 days
later, September 28, 1998, Mr. Lynn did not challenge the findings in
this report. So we have this report I have been referring to, and I
asked Mr. Lynn for comment on that report. I have his letter here not
challenging the findings.
I ask unanimous consent that it be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Under Secretary of Defense,
Washington, DC, September 28, 1998.
Hon. Charles E. Grassley,
U.S. Senate,
Washington, DC.
Dear Senator Grassley: At our meeting of September 23,
1998, you requested that I review and comment on the ``Joint
Review of Internal Controls at Department of Defense'' draft
report dated September 21, 1998.
I am very troubled by the problems cited in this report, as
well as the related General Accounting Office (GAO) report.
Effective internal controls are essential to the detection
and prevention of fraudulent activity in our vendor payment
operations. Without question, the Krenick and Miller fraud
cases, which are at the core of both reports, indicate that
there are unacceptable weaknesses in our internal control
programs. Although both individuals were caught and
convicted, and funds were recovered, we must ensure that the
appropriate actions are taken to prevent further abuses. Let
me briefly describe for you the measures that the Defense
Finance and Accounting Service (DFAS) is taking to improve
internal management controls.
First, we are taking steps to ensure that the vendor pay
process establishes positive control over payment-related
information. An important step in this regard is to tighten
controls over remittance addresses through use of a Central
Contractor Registration database maintained by the
acquisition community. Eliminating the ability of personnel
in the paying offices to change the addresses to which
payments are sent will correct a critical weakness that was
exploited in the fraud cases cited.
Second, to reinforce the principle that there must be a
strong separation of responsibilities for providing and
verifying payment information, we are strengthening the
processes that preclude a single individual from controlling
multiple critical portions of the payment process. In
particular, pursuant to a GAO recommendation, DFAS is
reducing by at least half the number of employees who have
the highest level of access to the Integrated Accounts
Payment System.
Third, a critical internal control is the positive check of
payment information with accounting data prior to
disbursement. To ensure the effectiveness of this control, we
will make systems changes to eliminate the ability of a
single individual to have concurrent access to both the
vendor payment system and the accounting system.
No internal control system will work if it is not
rigorously adhered to throughout the organization. During
August of this year, a top to bottom review of the various
vendor pay operations was accomplished at each DFAS center
and operating location. This review concentrated on
identifying weaknesses in the application of these controls
and business practices. At the same time, DFAS has conducted
a stand down of all vendor pay operations to provide formal
training in internal controls and fraud awareness. Finally,
earlier this month, I met personally with all of the
directors of the DFAS centers and operating locations to
stress the need to strengthen our management controls.
To ensure a more permanent senior level oversight of
internal controls, DFAS has established a separate
organization which reports directly to the Director's office.
The mission of this organization will be internal review,
fraud prevention, fraud detection, and audit follow-up. One
of the primary functions of this office is to track and
ensure that accepted recommendations from existing fraud
oases, GAO audits, along with other internal and external
reviews and reports are implemented. This unit will be
operational within the next 30 days.
In closing, Senator, I want you to know that I place the
highest priority on ensuring that we have the best possible
protections against fraud and wrongful payments. We have more
to do, but I believe that we have made a strong start in
responding to the lessons of the Miller and Krenick cases. I
have conveyed these thoughts to Senator Durbin as well.
Sincerely,
William J. Lynn.
Mr. GRASSLEY. In this letter, Mr. Lynn appeared to agree with all of
my findings and recommendations 100 percent. That is a conclusion I
make. The letter will be in the Record, so Members can read it for
themselves. He said
[[Page S2110]]
that he was ``very troubled'' by every one of the control weaknesses
cited in the report.
Mr. Lynn further stated:
There are unacceptable weaknesses in our internal control
programs.
He promised me he would be taking aggressive corrective action to
improve and tighten controls. He concluded by saying:
I want you to know that I place the highest priority on
ensuring that we have the best possible protections against
fraud and wrongful payments.
I also shared my concerns with Secretary of Defense Bill Cohen in a
letter dated October 5, 1998. In his response on November 16, 1998--and
I have that response from Secretary Cohen here--he offered identical
assurances.
I ask unanimous consent to have that letter printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
U.S. Senate,
Committee on the Judiciary,
Washington, DC, October 5, 1998.
Hon. William S. Cohen,
Secretary of Defense, Pentagon,
Washington, DC.
Dear Bill, I am writing to follow up on my recent
Subcommittee hearing that examined the results of the Joint
Review of Internal controls at the Department of Defense.
First, I would like to extend my sincere appreciation to
the Department of Defense (DOD) for excellent cooperation and
support throughout the Joint Review of Internal Controls. The
person who is most responsible for energizing this project is
Mr. Bob Hale, Assistant Secretary of the Air Force for
Financial Management and Comptroller. We first met on June
27, 1997 to lay the ground work for the project. At that
meeting, Mr. Hale agreed--with the full backing of the
Secretary of the Air Force--that this would be a joint review
between his office and my Subcommittee on Administrative
Oversight and the Courts. As part of this arrangement, Mr. A.
Ernest Fitzgerald, Management Systems Deputy of the Air
Force, was authorized to participate. Mr. Fitzgerald was a
key asset, since internal controls are one of his primary
areas of responsibility. The ``jointness'' of this project
contributed greatly to its success. Despite some rough spots,
this approach could serve as a model for future cooperative
efforts. Due largely to Mr. Fitzgerald's active
participation, the department directed some corrective action
as problems were being discovered and documented.
Second, I have the distinct impression that no one in the
department takes much exception to the findings and
recommendations contained in either the Joint Staff Report or
the accompanying reports issued by the General Accounting
Office. The attached letter from the Under Secretary of
Defense, Mr. Bill Lynn, is testimony to that fact. He admits
that he is ``very troubled'' by the control weaknesses that
were uncovered by the Joint Review and is taking aggressive
corrective action. Those efforts appear to be focused in one
critical area--tightening controls over the process for
placing ``remittance addresses'' on checks and electronic
fund transfers. I am encouraged by Mr. Lynn's positive
attitude and his determination to address these problems in
meaningful ways. However, my long experience with the
department causes me to feel some skepticism. In the past, I
have found wide disconnects between what is promised by
senior DOD officials and what is really done. I hope you will
personally make sure that Mr. Lynn and other responsible
officials fix this terrible problem.
I intend to follow up until I feel that the taxpayers'
money is adequately protected.
Third, as Mr. Lynn said, he was ``very troubled'' by the
problems cited in the reports. The Joint Staff Report, for
example, states that the control environment within the
Defense Finance and Accounting Service (DFAS) is
characterized by ``fraud and deceit''--to use the exact words
of a senior DFAS official. Between late 1995 and early 1997,
there were repeated reports and allegations of fraudulent
activity in DFAS--particularly at the OPLOC at Dayton, Ohio.
In at least three instances, the Director of the Denver
center, Mr. John Nabil, ordered the Director of Internal
Review, LTC Boyle, to investigate. In each case, LTC Boyle
confirmed the existence of fraudulent activity within DFAS.
Mr. Nabil even signed a memorandum (attached) on September
30, 1996 that substantiates the existence of criminal
activity within his organization. Yet every one of these
``red warning flags'' was ignored, and DFAS management failed
to report suspected violations of 18 U.S.C. 1001 and other
laws to the proper authorities--as required by law. The end
result of this mismanagement was costly to the taxpayers.
Embezzlers like SSGT Miller--and certainly others--were
allowed to tap into the DOD money pipe--unrestricted--and
steal huge sums of money--undetected. Eventually, an employee
at Dayton blew the whistle and called the law directly. Maybe
those persons who raised red flags at Dayton deserve awards?
In conclusion, I don't believe that the problems at the
Dayton OPLOC are an isolated case. I think they are part of a
general pattern of fraud and abuse within DFAS. The Joint
Staff Report uncovered evidence of similar kinds of
fraudulent activities at the Denver center in 1997 and 1998.
I intend to refer this matter and other related matters to
investigative and audit agencies for further investigation.
Bill, someone needs to be held accountable for what
happened at the Dayton OPLOC and for what appears to be
happening at the Denver center today. Who is responsible?
Without some accountability, Mr. Lynn's promises will, in
fact, come to nothing. Please let me know what you decide to
do.
Sincerely,
Charles E. Grassley, Chairman,
Subcommittee on Administrative Oversight and the Courts.
Attachment.
The Secretary of Defense,
Washington, DC, November 16, 1998.
Hon. Charles Grassley,
Chairman, Subcommittee on Administrative Oversight and the
Courts, U.S. Senate, Washington, DC.
Dear Chuck: This is in response to your recent letter
following your Subcommittee hearing regarding internal
controls at the Department of Defense (DoD). Be assured we
take this matter very seriously. I know my Comptroller, Mr.
Bill Lynn, has discussed with you measures the Defense
Finance and Accounting Service (DFAS) is taking to improve
internal management controls.
Your letter made specific mention of the DFAS Denver Center
in Colorado, and the fraud case at its subsidiary office in
Dayton, Ohio. Even though the perpetrator at Dayton was
caught and convicted, the case indicates weaknesses in
internal management controls that must be remedied. Toward
that end, DFAS has implemented a number of very specific,
system-oriented improvements to strengthen existing controls,
establish new controls, and ensure that published procedures
are followed. In addition, we have instituted an extensive,
in-depth internal review of the entire Denver Center network.
DFAS also established a separate office to strengthen
internal controls and ensure compliance at all levels.
DFAS, as an organization, is 7 years old and is composed of
approximately 20,000 personnel located in 17 states. We
should acknowledge the dedicated public servants who go out
of their way every day to ensure that the taxpayers' money is
protected. Bill Lynn and I will help them in every way we can
to make sure that the suggestions for improvement, which have
been presented in the various reports, hearings, and
meetings, are evaluated and implemented where necessary.
Chuck, you and I share a common interest in protecting
scarce financial resources, while supporting the great men
and women of our armed forces. The hard work by you and your
staff has assisted significantly in the progress we have
made. We will continue to work to improve our financial
management.
Sincerely,
Bill.
Mr. GRASSLEY. While Secretary Cohen and Chief Financial Officer Lynn,
the nominee now under consideration, both assured me over and over that
they were taking steps to tighten internal controls--I am shocked to
say this--they were already quietly moving in the opposite direction.
They were busy pushing other policies to weaken and undermine internal
financial controls.
So I want to get into that. In 1998, when Mr. Lynn was chief
financial officer, something we call pay-and-chase was the Pentagon
lingo used to describe the Department of Defense vendor paying process.
With pay-and-chase, the Pentagon paid bills under $2,500 first, and
then worried about chasing down receipts later. You get it--pay-and-
chase: pay without worrying about what you are buying or the invoice
and then, after you pay, go out and find some justification for the
payment.
Ever wonder why there is waste in the Defense Department? Sometimes
receipts were found under pay-and-chase, sometimes not. Nobody seems to
care either way. This is how the Department of Defense ended up with
not $2,500 here and there but with billions of dollars in what they
refer to as unmatched disbursements--another big control problem with
which chief financial officer Bill Lynn was thoroughly familiar.
Pay-and-chase accurately characterized the core DFAS problem I
witnessed during my review of internal controls from 1997 through 1998.
I saw pay-and-chase up close and personal. Pay-and-chase was not an
official policy; it was an unofficial policy. It was actively practiced
but not authorized by any Government regulation or laws.
As I understand it, pay-and-chase was supposed to end in October 1997
[[Page S2111]]
when the Department of Defense general counsel determined it was
illegal. But it did not stop. Secretary Cohen wanted to, instead,
legalize pay-and-chase and make it the law of the land.
On February 2, 1998, when Mr. Lynn was chief financial officer,
Secretary Cohen asked the Senate for legal authority to pay bills
without receipt with no dollar limit. Now, that is pretty high up in
the Department that you are deciding that we ought to have a policy to
pay bills without receipts, and to do it not with a $2,500 limit but
with no dollar limit. This proposal was embodied in section 401 of the
Defense Reform Initiative. It was touted--can you believe it--as a
measure to ``streamline'' the DOD payment process.
Fortunately, the Congress rejected this absurd and misguided
legislative proposal. But you know what the thinking was at the highest
levels of the Defense Department. So I discussed Secretary Cohen's pay-
and-chase proposal in great detail in a speech on the floor of this
body on May 5, 1998. You will find that on pages S4247 through S4250. I
placed, at that time, Secretary Cohen's request in the Record.
So what was Mr. Lynn's position on section 401 of Secretary Cohen's
Defense Reform Initiative? I asked him this question on February 5,
2009. This is what he said: He could not ``recall'' taking a position
on it but agreed it was wrong ``to pay bills without a receipt.''
This seems like a real cop-out. I responded this way:
In February 1998, you had been [chief financial officer]
for several months. This issue fell directly under your
purview. How could you possibly avoid taking a position on an
issue the Secretary of Defense was urging the Senate to
adopt? As the Chief DOD Lobbyist for Raytheon, you say it was
wrong. As the DOD [chief financial officer] back in 1998, why
didn't you know it was wrong and speak up about it [at that
time]?
My records appear to indicate that pay-and-chase continued as the
unofficial policy through 1998 and eventually evolved into another more
troublesome policy known as ``straight pay.'' This policy was even more
dangerous for the taxpayers. The straight pay policy had much higher
dollar thresholds than the old pay-and-chase plan. Believe it or not,
it was a whopping half million dollars.
Straight pay was Mr. Bill Lynn's baby. This policy was personally
approved by Mr. Lynn in a memorandum on December 17, 1998, and
reauthorized in another memo on March 9, 1999, and possibly again
later. This is that document:
Memorandum for Director, Defense Finance and Accounting
Service
Subject: Prevalidation Threshold
In a memorandum dated December 17, 1998, I authorized a
temporary $500,000 threshold on new contracts paid by the
Mechanization of Contract Administration Services (MOCAS)
system. This temporary authorization is scheduled to expire
on March 22, 1999. However, while the Defense Finance and
Accounting Service Columbus Center has made significant
improvements in the backlog of payments, we are not at the
point where we can lower the threshold to $2,500. Therefore,
the temporary threshold of $500,000 is extended for another
90 days for Columbus MOCAS payments only.
I request you continue to provide me with a monthly report
showing progress in resolving the current prevalidation
process delays. The monthly report should include your plan
to lower the threshold at the appropriate pace to reach the
goal of total prevalidation by July 2000. As we improve our
systems capabilities, we will continue to aggressively reduce
the threshold until all payments are prevalidated.
William J. Lynn.
On January 19, 1999, I addressed a letter to Mr. Lynn expressing
grave concern about straight pay and requesting verification of certain
facts surrounding this policy. The facts in question were provided to
me anonymously by a DFAS employee. I wanted Mr. Lynn to check out all
of this for me.
Prior to the implementation of straight pay, the DFAS center in
Colombia, OH, had a prevalidation policy that required that all
disbursements over $2,500 be matched with obligations or contracts
prior to payment, which is the way it ought to be--well, no; it ought
to be for every dollar, but at least over $2,500 it had to be matched.
When an invoice was submitted to the center for payment, a DFAS
technician searched the database for supporting obligations and
receipts.
If supporting documentation could not be found, a red warning flag
was supposedly run up the pole. Accounting due diligence was needed to
confirm if this particular invoice was valid, a duplicate, or
fraudulent payment. In theory, these red flags had to be resolved. As
you would expect, in practice, that did not always happen.
Mr. Lynn's straight pay policy raised the prevalidation threshold by
$497,500, up to finally a half million dollars. This allowed the DFAS
technicians to make payments up to a half million dollars without a
valid obligation. To cover these payments, technicians were ordered to
create a bogus account known as negative unliquidated obligations. Now,
that is a Harvard word, isn't it. But they called it NULO for short,
the acronym. So we have these negative unobligated obligations. Bills
were then paid from these bogus NULO accounts which carried negative
balances.
Mr. Lynn's policy gave DFAS accountants up to 6 months to link the
payments to valid supporting obligations in the accounting records. If
valid supporting documentations could not be found in that timeframe,
then the center was authorized to cover the payments with other
available funds with no further investigation. This is how the
unmatched disbursements of the Department of Defense were born and
eventually built into the billions of dollars.
In my January 19, 1999, letter to Mr. Lynn, I drew some comparisons
between straight pay and the case of Air Force SSgt Robert L. Miller.
Now, Robert L. Miller may not be a very famous name to most people
around here, and he would not be to me if I had not run into him
through this investigation. So I wanted to draw a comparison between
the straight pay policy and the case of this Air Force staff sergeant.
I think Mr. Lynn and others in the Pentagon at the time remember the
Miller case, and remember it all too well, or at least they did at that
time. I examined that case and several others just like it in great
detail at a hearing before my Judiciary Subcommittee on Oversight on
September 28, 1998.
As chief of vendor pay at a DFAS center, then-Staff Sergeant Miller
had pursued his own unlawful versions of straight pay. Miller had full
access to the Integrated Accounts Payable System. As such, Miller was
able to manipulate Department of Defense systems to create obligations
and invoices where none existed and generate nearly $1 million in
allegedly fraudulent payments to his mother and his girlfriend. Miller
was not apprehended because internal controls at DFAS were effective,
the things that were under the control of Mr. Lynn; he was caught
because a coworker blew the whistle on him. She was one of Miller's
subordinates who had allegedly been sexually harassed by him.
At that time, I told Mr. Lynn--the same Mr. Lynn whose confirmation
we are considering now--that his straight pay policy appeared to
authorize DFAS accountants to do essentially what Staff Sergeant Miller
did: create false bookkeeping entries to cover large payments in the
absence of valid obligations. DFAS and Miller obviously had different
goals, but there was a common denominator, and that common denominator
was manipulation of the accounting system.
DFAS payment policies practiced on Mr. Lynn's watch left the barn
door wide open to fraud and outright theft of the taxpayers' dollars.
The Government Accountability Office, which provided excellent
support all the way through my investigation, fully agreed with this
assessment.
There was another disturbing facet of the Miller case that I took up
with Mr. Lynn. On October 19, 1995, the date that Staff Sergeant Miller
became chief of vendor pay at the Dayton center--a position considered
far above his rank--he was already under investigation in connection
with, one, the alleged disappearance of Government checks at Castle Air
Force Base and, two, allegedly directing at least eight fraudulent
checks valued at $50,769 to his mother.
On October 26, 1995, just 1 week after Staff Sergeant Miller became
chief of vendor pay at Dayton, an investigating officer at Castle Air
Force Base made this recommendation about Miller:
Management should not place SSgt Miller in a position where
he is entrusted with funds again . . .
[[Page S2112]]
After this report was issued, Miller should have been removed from
his position at the Dayton center immediately. But it took 2 years,
until June 1997, when Miller was arrested for allegedly stealing the
million dollars.
The whole Miller story, of course, is unbelievable.
In view of his problems at Castle Air Force Base, why did the DFAS
center place him in charge of vendor pay? Why did DFAS keep him there
after an official report indicated he could not be trusted with the
money? That makes as much sense as hiring a bank robber to be the bank
teller.
On September 18, 1998, I wrote another letter that I have. This is
letter No. 9, which I ask unanimous consent be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
U.S. Senate,
Committee on the Judiciary,
Washington, DC, September 18, 1998.
Hon. William J. Lynn III,
Comptroller and Chief Financial Officer,
Pentagon, Washington, DC.
Dear Bill: I am writing to thank you for providing the
``Investigation of Major Loss of Funds'' at Castle AFB
involving Staff Sergeant (SSGT) Robert L. Miller, Jr. and to
raise several additional questions.
I am very disturbed by what I found in the investigative
report on the disappearance of U.S. Treasury checks at Castle
AFB. The very obvious red warning flag raised by this report
was totally ignored by management at the Defense Finance and
Accounting Service (DFAS).
The report states that ``SSGT Miller was negligent in the
loss of the two treasury checks entrusted to him.'' It says:
``He breached his duty,'' and it says ``he failed to
safeguard his funds.'' For a military pay agent, that would
normally be a death sentence. And if those words didn't ruin
SSGT Miller's career in money matters forever, the report's
recommendation number one should have done it. The
investigating officer recommended that: ``Management should
not place SSGT Miller in a position where he is entrusted
with funds again. . . .'' Those are strong words.
The recommendation that SSGT Miller not be trusted with
money again was made on October 26, 1995. That recommendation
came exactly one week after SSGT Miller was ``forced'' into a
position at the DFAS/Dayton finance center that was far above
his rank. A much more senior civilian--Mr. Chuck Tyler--who
occupied that position, was summarily removed to make room
for SSGT Miller. Although official organizational charts
indicate that SSGT Miller was just Chief of the Data Entry
Branch, officials familiar with SSGT Miller's operation
contend that he was, in fact, Chief of the entire Vendor Pay
Department. In that position, he had direct control over
billions of dollars in payments. In addition, for unknown
reasons, SSGT Miller was given unrestricted access to the
check generating system known as the Integrated Accounts
Payable System or IAPS. This was a clear violation of
internal control procedures. His predecessor--Mr. Tyler--had
much more limited access.
On October 19, 1995--the date on which SSGT Miller was
``forced'' into Mr. Tyler's position, SSGT Miller was under
active investigation for the disappearance of a large sum of
money at Castle AFB. Unfortunately, his suspicious and
improper conduct at Castle was not limited to the two missing
Treasury checks. He had also generated at least 8 fraudulent
checks worth $50,769.00, which were addressed to his mother,
Ruby J. Miller. Only these facts were apparently not known at
the time. Furthermore, on October 19, 1995, he was just a few
days away from generating his first fraudulent check at
Dayton. This one was for $12,934.67 and was also addressed to
his mother.
All the new information that surfaced in connection with
SSGT Miller's court-martial clearly shows that the
investigating officer's concerns about SSGT Miller and money
were based on sound judgement. SSGT Miller could not be
trusted with money again. If the investigating officer's
advice had been followed, SSGT Miller's criminal activities
could have been brought to a screeching halt in October 1995
instead of June 1997. In November 1995, a trusted employee at
the Dayton center, Mr. Otas Horn, even warned Colonel Berger
about the dangers of placing SSGT Miller in Mr. Tyler's
position with unrestricted access to IAPS. This early warning
was followed by repeated reports of criminal conduct at
Dayton throughout 1996, including an internal DFAS memo
signed by Mr. Nabil, Director of the Denver Center, on
September 30, 1996. Most involved fraudulent documents
created in SSGT Miller's section. All involved criminal
conduct--violations of 18 U.S.C. 1001--as noted in Mr.
Nabil's memo. Why didn't DFAS management report this criminal
activity to the law as required by every rule in the book?
Bill, I would like to return to the investigating officer's
recommendations: ``Management should not place SSGT Miller in
a position where he is entrusted with funds again. . . .''
When this report was issued, SSGT Miller should have been
removed from his new position at Dayton--on the spot. Who in
SSGT Miller's chain of command at Dayton was responsible for
acting on the findings and recommendations in the
investigative report? Was it Mr. Nabil? Was it the Commander
at Dayton, Colonel Berger? Or was it Captain Brown, SSGT
Miller's immediate supervisor? Who at Dayton had knowledge of
this report? Who in DFAS management was responsible for
totally ignoring this very dangerous red warning flag?
Bill, the responsible person or persons in your
organization need to be held accountable for ignoring obvious
and repeated warning signals about SSGT Miller's
trustworthiness and giving him unrestricted access to your
department's money vault.
I respectfully request a response to my questions by
September 23, 1998.
Sincerely,
Charles E. Grassley, Chairman,
Subcommittee on Administrative
Oversight and the Courts.
Mr. GRASSLEY. I wrote this letter to Mr. Lynn and asked him two
questions: Who at Dayton--that means the financial center at Dayton--
had knowledge of the Castle Air Force Base report on Miller? Who in the
finance center management was responsible for totally ignoring this
very dangerous red warning flag? I ended my letter to Mr. Lynn this
way:
Bill, the responsible person or persons in your
organization need to be held accountable for ignoring obvious
and repeated warning signals about SSGT Miller's
trustworthiness and giving him unrestricted access to your
department's money vault.
I asked for answers to these two questions by September 23, 1998.
That would have been 5 days after I wrote the letter. None ever
arrived, as far as I know.
When I did not get a prompt response to my January 19 letter to Mr.
Lynn on straight pay, I raised those same issues with Secretary Cohen.
I did that at a hearing before the Budget Committee on March 2,
1999. This is what Secretary Cohen said at the time:
There is no authorized procedure called Straight Pay.
Now, get that. You have straight pay that people talk about, and you
have a Secretary of Defense saying there is no authorized procedure
called straight pay.
The process described is not correct and is not authorized.
These answers do not square with the evidence I have tried to lay
out.
Then, on March 9, came further explanation from Chief Financial
Officer Lynn. He said essentially the same thing but with a slightly
different twist:
The Straight Pay policy you refer to in your letter is not
used at our Columbus Center. . . .
There are some words left out. It goes on to say:
``Straight Pay,'' as reported to you, does not exist at the
Columbus Center.
This letter No. 10 explains that in great detail, and I ask unanimous
consent to have printed in the Record letter No. 10.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Under Secretary of Defense,
Washington, DC, March 9, 1999.
Hon. Charles B. Grassley,
U.S. Senate,
Washington, DC.
Dear Senator Grassley: This is in reply to your recent
letter on my decision to raise the prevalidation dollar
threshold for payments of contracts paid using the
Mechanization of Contract Administration System (MOCAS) at
the Defense Finance and Accounting Service (DFAS) Columbus
Center.
In the prevalidation plan that we submitted to Congress, we
stated we would gradually lower the threshold until all
payments were prevalidated by July 2000. We took an
aggressive approach in our attempt to reach the goal of 100
percent prevalidation before July 2000. Contracts awarded
before FY 1997 are now prevalidated at the current statutory
level of $1,000,000. Since March 1997, we have attempted to
prevalidate all contracts above $2,500 that were issued in FY
1997 and later.
Unfortunately, we could not sustain the new prevalidation
level in MOCAS and meet our obligations under the Prompt
Payment Act. The imposition of the $2,500 prevalidation
threshold, together with other factors, caused critical
delays in our connector payments. In December 1998, after
carefully considering the need to reduce our payment backlogs
while complying with the Prompt Payment Act, I temporarily
raised the prevalidation dollar threshold to $500,000 for
centrally administered contracts paid through MOCAS. I also
recently extended this threshold increase until June 1999.
However, we still plan to meet our July 2000 goal to
prevalidate all payments. We will continue to lower the
prevalidation threshold, but at a deliberate pace to achieve
our goal
[[Page S2113]]
of prevalidating all payments by July 2000 and ensuring
compliance with the Prompt Payment Act.
The ``Straight Pay'' policy you refer to in your letter is
not used at our Columbus Center. Before a payment is made in
Columbus using MOCAS, the system must have entries that
validate a contract exists, an invoice has been presented,
and goods or services have been received or accepted.
Increasing the prevalidation threshold does not waive the
requirement to have these items before a payment is made. In
addition, MOCAS does not allow one person to enter all three
data elements into the system. I have enclosed a description
of the MOCAS payment process. I believe that after you review
our contract payment process, you will agree that some
critical elements of the process were not provided to you and
that ``Straight Pay,'' as reported to you, does not exist at
the Columbus Center.
You also expressed concern that with the threshold raised
to $500,000, DFAS experience the same type of fraud in MOCAS
that SSgt Miller perpetuated using the Integrated Accounts
Payable System (IAPS) in Dayton. The MOCAS payment
environment is significantly different from the IAPS
environment. The MOCAS system architecture does not permit
multiple levels of access. The internal controls built into
MOCAS that force separations of functions all but eliminate
the possibility of one person creating fraudulent payments.
I am still committed to reaching the goal of total
prevalidation by July 2000. As we improve our systems
capability, we will combine to aggressively reduce the
threshold until all payments are prevalidated. I appreciate
your interest and look forward to working with you to improve
our operations.
Sincerely,
William J. Lynn.
Mr. GRASSLEY. I felt as though then-Secretary Cohen on the one hand
and Chief Financial Officer Lynn were trying to convince me that
straight pay did not exist. Their statements appear to be, even today,
misleading and inaccurate.
Just because I didn't explain the policy exactly right did not mean
the policy did not exist. Everything that was coming over the transom
at night to me was telling me that I was on the right track.
I responded to the denials this way--and they are in this letter, my
letter No. 11. I wish to quote a couple of sentences:
If this statement is indeed accurate--and ``Straight Pay''
doesn't exist, then why do I have official DFAS documents
establishing ``Straight Pay Procedures?'' Are these documents
a fake?
Are these documents I am getting a fake if they come directly from
the financial center?
I later discovered another DFAS document, dated March 8, 1999, which
states:
Due to concerns over the use of the term ``straight pay''
and its connotation, we must delete all references to
``straight pay'' the from the policy. . . .
Now, how does that square with what the Secretary of Defense Cohen
told me? How does that square with the exchange I had with Bill Lynn,
Chief Financial Officer at that time? Those things are in this document
No. 12.
I ask unanimous consent to have document No. 12 printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Defense Finance
and Accounting Service,
March 8, 1999.
memorandum for see distribution
Subject: Policy for Processing Unmatched Disbursements
Effective November 1, 1999, you were authorized to post
unmatched disbursements (UMDs) without posting a negative
unliquidated obligation (NULO) offset for transactions
meeting criteria described in the attached policy. Due to
concerns over the use of the term ``straight pay'' and its
connotation, we must delete all references to ``straight
pay'' from the policy, and clarify that the policy does not
create an environment for fraudulent payments. Terms such as
unmatched disbursements or direct disbursements were
substituted.
Operating location (OPLOC) recommendations to add other
categories under paragraph F, ``Unmatched Disbursements Which
May Be Recorded Without Research, Approval, and NULO
Offset,'' were incorporated. For example, Fund Type K
transactions for Deposit/Suspense Accounts and disbursements
posted under processing center ``Y,'' etc., were added. The
inclusion of these categories did not change the intent or
scope of the policy. We also clarified that for disbursements
made against obligations recorded as Miscellaneous Obligation
Reimbursement Documents (MORD) where the difference exceeds
$3,000, Financial Service Office/Accounting Liaison office
(FSO/ALO) approval is not required, but the FSO/ALO should be
notified within 4 work days.
The revised policy is attached for your action. OPLOCs will
continue to maintain a log on unmatched disbursements
requiring FSO/ALO review. Copies of attached Missing
Commitment/Obligation form (Atch 1) may be kept in lieu of a
log.
We are requesting you to submit another report from the log
statistics you gather for UMDs processed between February 1--
May 31, 1999. The UMD Report, in Excel 5.0 format, is due to
DFAS-DE/ASP on June 11, 1999. Please submit report via
cc:mail to address indicated on attached report format. At
that time we will decide whether another reporting cycle is
necessary.
These procedures were coordinated with the Office of the
Assistant Secretary of the Air Force for Financial
Management-Air Force Accounting and Finance Office (AFAFO/
FMF). If you have any questions, my project officer is Ms.
Mirta Valdez, DFAS-DE/ASP, (303) 676-7708 or DSN 926-7708.
Sally A. Smith,
Dierctor for Accounting.
Mr. GRASSLEY. I say to my colleagues, is the March 8, 1999, date on
this document a coincidence or was this a bureaucratic tactic to
suppress, to bury or to rename the policy to conform with the highest
level of rhetoric that I heard in March of that year?
Not getting the straight story from the Pentagon, I brought the issue
of straight pay to the attention of one of our colleagues now and a
colleague back then, Senator Inhofe, who was chairman of the Readiness
Subcommittee on Armed Services. My letter to Senator Inhofe is dated
April 8, 1999, and I have that letter here as No. 13 document.
I ask unanimous consent to have document No. 13 printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
U.S. Senate,
Washington, DC, April 8, 1999.
Hon. James M. Inhofe,
Chairman, Subcommittee on Readiness and Management Support,
Committee on Armed Services, U.S. Senate, Washington, DC.
Dear Jim: In view of your upcoming hearing on financial
management at the Department of Defense (DOD) along with my
continuing interest in these matters, I am submitting several
questions bearing on internal control issues for your
consideration.
Back on January 19, 1999, I wrote a letter to DOD's Chief
Financial Officer (CFO), Mr. Bill Lynn, to verify certain
facts pertaining to a policy known as ``straight pay.'' The
facts in question were provided anonymously by an employee at
the Defense Finance and Accounting Service (DFAS). In a
nutshell, this policy authorizes DFAS to make payments up to
$500,000.00 when no corresponding obligation or contract
could be located in the database or otherwise identified.
When bills are paid in the absence of contracts, how does
DFAS know how much money, if any, is owed? As I understand
it, this policy was personally approved by Mr. Lynn.
In my mind, this is a very dangerous policy. But it is not
only dangerous. It is also misguided, and it may violate the
law. It is certainly helping to erode one of the last visible
traces of internal controls at DOD, and its continued use
will undermine any hope of a ``clean'' audit opinion on the
department's annual financial statements--as required by the
Chief Financial Officers Act.
Last year, during my investigation of the breakdown of
internal controls at DOD, I learned that Air Force Staff
Sergeant (SSGT) Robert L. Miller, Jr. had pursued his own
version of ``straight pay'' while Chief of Vendor Pay at
DFAS' Dayton center during 1995-1997. With full access to the
Integrated Accounts Payable System, SSGT Miller was able to
create obligations, where none existed, and generate nearly a
$1,000,000.00 in fraudulent payments to his mother and
girlfriend. Now, Mr. Lynn's ``straight pay'' policy
authorizes DFAS technicians to do exactly what SSGT Miller
did--create false bookkeeping entries to cover large payments
in the absence of supporting contracts. This policy leaves
the door wide open to fraud and mismanagement.
I am attaching a copy of my letter to Mr. Lynn on
``straight pay'' dated January 19, 1999. Since Mr. Lynn never
answered this letter, I had to verify the facts on my own in
consultation with the General Accounting Office. According to
a March 8, 1999 DFAS memorandum, Mr. Lynn's ``straight pay''
policy is still in place today, though its name has been
changed to avoid any negative connotations. DFAS is concerned
that the term ``straight pay'' may suggest a permissive
``environment for fraudulent payments.''
I would very much appreciate it if you would place a copy
of my letter in the hearing record and raise my enclosed
questions on DOD's ``straight pay'' policy. My questions
should be directed to Mr. Lynn.
Again, thank you very much for giving me the opportunity to
submit questions for your upcoming hearing on DOD Financial
Management problems.
In addition, in the very near future, I expect to be
submitting ``a legislative reform package'' to you and other
colleagues for consideration. The rationale for this draft
legislation is outlined under the heading ``The Need for DOD
Financial Reforms'' on pages 25 to 29 of the Budget
Committee's report on the Concurrent Resolution on the
[[Page S2114]]
Budget for FY 2000 (Senate Report No. 106-27).
I look forward to having Mr. Lynn's responses to my
questions on ``straight pay'' and working with you in the
future on these matters.
Sincerely,
Charles E. Grassley,
U.S. Senator.
Mr. GRASSLEY. I told my friend from Oklahoma that I considered
straight pay to be ``a very dangerous and misguided policy that might
violate the law.'' I also told him about the Miller case heretofore
referenced. I urged Senator Inhofe to ask Secretary Cohen and Chief
Financial Officer Lynn five questions on straight pay at an upcoming
hearing.
Mr. Lynn attempted to clarify the Department of Defense position on
straight pay in a letter dated June 18, 1999. That is document No. 14.
I ask unanimous consent to have document No. 14 printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Under Secretary of Defense,
Washington, DC, June 18, 1999.
Hon. Charles E. Grassley,
U.S. Senate,
Washington, DC.
Dear Senator Grassley: This is in reply to your recent
letter to the Honorable William S. Cohen, Secretary of
Defense, concerning the Department of Defense responses to
your questions submitted for the record following a March 2,
1999, hearing before the Senate Budget Committee. Enclosed is
the Department's response to your questions.
Sincerely,
William J. Lynn.
Enclosure.
Responses to the Questions of Senator Charles E. Grassley
Question. The General Accounting Office (GAO)--in report
No. AIMD-99-19--states that Mr. Hamre's policy authorizes the
Navy to delay recording obligations in excess of available
budget authority for up to five years. The GAO further
indicates that the purpose of the policy allowing such delays
in recording obligations in the books of account is to avoid
a potential over obligation and violation of the
Antideficiency Act. Are these two statements accurate and
correct?
Answer. The policy referenced in GAO report No. AIMD-99-19
is not intended to and, in fact, in no way does, shield any
DoD Component from a violation of the Antideficiency Act.
Similarly, in no instance is the policy intended to allow any
DoD Component to willingly defer the recording of a known
valid obligation in excess of available budget authority.
The Department's policies require that an obligation be
established at the time a contract is entered into or a good
or service is ordered, and to be recorded within 10 days of
the date on which the obligation is incurred. Additionally,
prior to making a disbursement, the applicable technician is
required to verify that an appropriate contract or other
ordering instrument exists, that a government official has
verified that the goods or services have been received and
that a proper invoice requesting payment has been received.
Also, depending on the amount of the payment, the technician
may be required to prevalidate an obligation. (Prevalidation
is the process of checking to ensure that a matching
obligation has been recorded in the accounting records prior
to making a disbursement.) Additionally, the technician also
is required to identify the proper appropriation to be
charged and the accounting office responsible for the related
obligation. Further, the disbursement should be matched to
the applicable obligation at the time the disbursement is
made, if feasible, or as soon thereafter as is feasible.
The GAO report referred to above addresses in-transit
disbursements. In-transit disbursements occur when the paying
office (the office making the disbursement) is different than
the accounting office (the office accounting for the
obligation). In such instances, in addition to determining
the existence of a contract or ordering document and
verifying the receipt of the goods or services before making
the payment, and deducting the amount of the payment from the
cash balance of the appropriation involved, the paying office
also must forward the disbursement information to the
accounting office to enable the disbursement to be recorded
against the related obligation. (Only the applicable
accounting office, and not the paying office, can record a
disbursement against its related obligation. Thus, this
latter action is required irrespective of whether the
disbursement was prevalidated prior to payment.)
Since the amount of in-transit disbursements is deducted
from the cash balance of the applicable appropriation at the
time of disbursement, the Department can determine if the
cash balance of the appropriation involved is positive or
negative. Since a negative cash balance is an indication of a
potential Antideficiency Act violation, if an appropriation
has a negative cash balance, the Defense Finance and
Accounting Service is required to stop making any further
payments chargeable to the appropriation. Additionally, the
DoD Component involved is required to initiate an
investigation of a potential Antideficiency Act violation.
Except in very rare instances, in-transit disbursements do
not result in a negative cash balance in the applicable
appropriation. Since the appropriations charged have a
positive cash balance that means that amounts disbursed from
those appropriations are not in excess of available budget
authority.
As stated above, when the paying office is different than
the accounting office, the paying office must forward the
disbursement information to the accounting office to enable
the disbursement to be recorded against the related
obligation. During the time that the information is being
transmitted from the paying office to the accounting office
the information is said to be in-transit, and the
disbursement is said to be an in-transit disbursement. Once
the information is received by the accounting office, the
accounting office attempts to match the disbursement to an
obligation, and the disbursement no longer is considered to
be an in-transit disbursement. At that point, the
disbursement becomes a matched disbursement, an unmatched
disbursement or a negative unliquidated obligation.
Over 90 percent of in-transit disbursements are matched to
an obligation within 60 days of arriving at the applicable
accounting station. However, in some instances the
information does not arrive at the applicable accounting
office or the information that does arrive is not sufficient
to allow the applicable accounting office to attempt to match
the disbursement to an obligation. In such circumstances, the
accounting office must take additional steps to research and
obtain the information required to allow it to attempt to
match the disbursement to an obligation.
Until the 1990s, the Department had no policy regarding
such research efforts and did not require that obligations be
recorded for unresolved in-transit disbursements. The policy
addressed in the referenced GAO report recognized that,
consistent with DoD policy, in most instances, obligations
are established at the time an applicable contract is entered
into or goods or services are ordered. However, in those
instances where an accounting office does not receive
detailed information on an in-transit disbursement, this lack
of detailed information often precludes the accounting office
from being able to attempt to identify the disbursement to an
obligation. Establishment of a new obligation for such
disbursements, in many instances, could result in a duplicate
obligation. In order to avoid such duplicate obligations, the
Department allows the DoD Components time to conduct
additional research. Often, this requires a considerable
period of time and involves significant manual research. This
is especially so for those in-transit disbursements made by
one of the over 300 former paying offices that now have been
closed.
Question. If a bill for $499,999.99 is submitted to the
Defense Finance and Accounting Service (DFAS) Columbus Center
for payment and the responsible technician is unable to
identify a matching obligation, and Mr. Lynn's waiver is used
to authorize the payment, exactly how is the payment posted
in the books of account? Without a valid, matching
obligation, there are just three options: (a) post it to a
bogus account; (b) post it to the wrong account; or (c) don't
post it. How does DFAS do it?
Answer. In the example described above, the technician at
the DFAS Columbus Center would not be required to validate
that an obligation was recorded in the official accounting
records prior to making the payment because the dollar amount
would be below the prevalidation threshold amount in effect
at the DFAS Columbus Center. (However, at any DFAS location
other than the Columbus Center, this amount would be above
the prevalidation threshold amount and the technician would
be required to match the proposed disbursement to the
applicable obligation prior to making the disbursement.)
Although in the above example, the technician at the DFAS
Columbus Center would not be required to match the payment to
an obligation prior to payment, the technician would be
required to determine that the payment otherwise is valid.
This would require that the technician verify that an
appropriate contract or other ordering instrument exists and
that a government official verified that the goods or
services were received. Also, the technician would be
required to identify the proper appropriation to be charged
and the accounting station where the related obligation is
recorded. Generally, this information would reside, and could
be found, in the payment system at the DFAS Columbus Center.
Irrespective of whether a disbursement is matched to an
obligation prior to payment, once a payment is made by the
DFAS Columbus Center, the amount of the disbursement would be
deducted from the cash balance of the applicable
appropriation charged and information concerning the
disbursement would be forwarded to the applicable accounting
station. When that information arrived at the applicable
accounting station, the accounting station would: match the
disbursement to the applicable obligation recorded in the
accounting system; or if the amount of the disbursement
exceeded the amount of the applicable obligation, match the
disbursement to the applicable obligation but record a
negative unliquidated obligation against the same account for
the amount of the difference between the disbursement and the
obligation; or if no corresponding obligation record can be
found in
[[Page S2115]]
the accounting system, treat the disbursement as an unmatched
disbursement.
Question. While the DFAS attempts to identify the matching
obligation, is the payment placed in the ``in-transit''
status?
Answer. The Columbus Center, using the Department's
existing finance network, would forward information on the
disbursement to the applicable accounting station. That
information would be considered to be ``in-transit'' for the
period of time necessary for the information to be forwarded
from the Columbus Center to the applicable accounting
station. Once the information arrived at the accounting
station, the accounting station would match the disbursement
to the applicable obligation and the transaction no longer
would be considered to be in an in-transit disbursement.
Question. If a valid, matching obligation cannot be found,
how is the problem resolved?
Answer. If a valid, matching obligation cannot be found,
the disbursement is treated as an unmatched disbursement. In
the case of an unmatched disbursement, the applicable
accounting station and DoD Component involved are given 180
days to conduct research to identify the matching obligation.
If, after the 180-day period, a valid matching obligation
cannot be found, the DoD Component involved is required to
establish a new obligation for the disbursement.
Mr. GRASSLEY. In his followup letter, Mr. Lynn backed away from his
assertion that straight pay did not exist. So they said it didn't
exist, and now you see an assertion backing away from that. While he
never used the term ``straight pay,'' he did not try to disassociate
himself from the policy. His description of the policy was generally
accurate, though somewhat incomplete.
I raised essentially the same question with Mr. Lynn in a recent
letter, dated January 29, 2009, because of his appointment to this
position of Deputy Secretary of Defense. Regrettably, he provided
essentially the same answers in a letter dated February 3, 2009.
I ask unanimous consent to have printed in the Record those two
letters, documents 15 and 16.
There being no objection, the material was ordered to be printed in
the Record, as follows:
U.S. Senate,
Committee on Finance,
Washington, DC, January 29, 2009.
Mr. William J. Lynn,
Senior Vice President, Raytheon Company, Arlington, VA.
Dear Mr. Lynn: I am writing to follow-up on six questions I
submitted for the record at your nomination hearing before
the Senate Armed Services Committee earlier this month.
Two of my questions pertain to a potential conflict of
interest flowing from your status as a registered lobbyist
with the Raytheon Company. Four of the questions pertain to
your efforts as the Department of Defense (DOD) Chief
Financial Officer (CFO) to bring the department into
compliance with the CFO Act. I am eagerly waiting for your
answers to my six questions.
Since submitting those questions for the record, I have had
an opportunity to retrieve and examine certain archived files
on DOD financial management issues that I investigated in the
late 1990's while you were the DOD CFO and Comptroller. I
came across two files of particular interest as follows: 1)
``Straight Pay;'' and 2) ``Pay and Chase.'' These are DOD
payment policies that were either attributed to you and/or
adopted while you were the department's Chief Financial
Officer in charge of such matters. My follow-up questions
pertain to these matters.
In 1998, when you were CFO, ``Pay and Chase'' was a term
used to describe DOD vendor payment policy. With ``Pay and
Chase,'' the Pentagon paid bills first and worried about
tracking down the receipts later. Sometimes receipts were
found; sometimes not; And sometimes no effort was made to
look. This is how DOD ended up with billions of dollars in
unmatched disbursements. As I understand it, this was SOP
when you were CFO. It was unofficial policy. It was practiced
but not authorized in government regulations or law.
Secretary of Defense Cohen attempted to legalize ``Pay and
Chase.'' He wanted to make it the law of the land. He
forwarded his proposal to the Senate on February 2, 1998 as
part of a larger package of so-called defense reforms. At
that point in time, you were CFO, and this matter fell
directly under your area of responsibility. ``Pay and Chase''
was just one small piece of the Defense Reform Act of 1988--
also known as the Defense Reform Initiative (DRI). ``Pay and
Chase'' was embodied in Section 401 of that bill. It was
touted as a measure to ``streamline'' DOD payment practices.
Section 401 would have authorized DOD to pay bills without
receipts with no dollar limit. It would have required only
random after-the-fact verification of some receipts. And it
would have relieved disbursing officers of all responsibility
for fraudulent payments that might have resulted from the
policy.
There is nothing in my files to indicate Section 401 of
Secretary Cohen's DRI became law. I believe ``Pay and Chase''
continued as an unofficial policy and evolved into another
troublesome one known as ``Straight Pay.'' This policy was
initially approved by you in a signed memorandum on December
17, 1988.
On January 19, 1999, I wrote to you, expressing grave
concern about ``Straight Pay.''
Prior to the implementation of ``Straight Pay,'' the
Defense Finance and Accounting Center (DFAS), Columbus, Ohio
had a pre-validation policy that required all disbursements
over $2,500.00 be matched with obligations prior to payment.
When a bill was submitted to the center for payment, a
technician searched the database for the supporting
obligation or contract. If one could not be found, a red
warning flag was allegedly run up the pole. Was it a
duplicate or fraudulent payment? Your ``Straight Pay'' policy
raised the pre-validation threshold to $500,000.00.
``Straight Pay'' allowed the technician to ignore the warning
signals and make payments up to $500,000.00 without checking
documentation. Then the accountants at the center were
directed to create bogus accounts for negative unliquidated
obligations or ``NULO'' to cover the payment. The bill was
then paid from the bogus account with a negative balance. The
center had six months to locate valid supporting obligation.
If a valid, matching obligation could not be found within
that time frame, then the center would cover the payment with
other available funds with no further investigation.
In my letter to you, I drew some comparisons between
``Straight Pay'' and the scenario in the case of Air Force
Staff Sergeant (SSGT) Robert L. Miller, Jr. You may remember
the Miller case. I examined that case--and others like it--in
great detail at a hearing before my Judiciary Oversight
Subcommittee on September 28, 1998. As Chief of Vendor Pay at
another DFAS Center, SSGT Miller had pursued his own version
of ``Straight Pay.'' With full access to the Integrated
Accounts Payable System, SSGT Miller was able to create
obligations, where none existed, and to generate nearly a
$1,000,000.00 in allegedly fraudulent payments to his mother
and girlfriend. He was not caught until a co-worker blew the
whistle.
Mr. Lynn, on the surface at least, your ``Straight Pay''
policy appeared to authorize DFAS technicians to do
essentially what SSGT Miller allegedly did--create false
bookkeeping entries to cover large payments in the absence of
supporting documentation. Your policy left the barn door wide
open to fraud and mismanagement. At the time, the General
Accounting Office agreed with that assessment.
Also, at the time, I told you and other senior officials--
and spoke extensively about this problem on the floor--that
``Straight Pay'' was a dangerous, misguided, irresponsible,
and unbusinesslike policy. Furthermore, it was totally
inconsistent with various provisions of Title 31 of the U.S.
Code, Money and Finance.
American taxpayers deserved to know that their hard earned
money was being protected and properly accounted for under
your leadership at DOD. So please help me understand your
position on ``Straight Pay.'' It seemed to be completely
inconsistent with your responsibilities under the CFO Act. As
CFO, how could you endorse such a policy?
Your prompt response to my questions would be appreciated,
Sincerely,
Charles E. Grassley,
Ranking Member.
____
February 3, 2009.
Hon. Charles E. Grassley,
Ranking Member, Committee on Finance, U.S. Senate,
Washington, DC.
Dear Senator Grassley: Thank you for your letter of January
29, 2009 concerning my tenure as Under Secretary of Defense
(Comptroller) and Chief Financial Officer from November 1997
to January 2001. You asked specifically about two payment
practices: ``Pay and Chase'' and ``Straight Pay''.
The Denver Center of the Defense Finance and Accounting
Service (DFAS) initiated the ``Pay and Chase'' pilot 'in
early 1997 in order to achieve more timely payments. It was a
limited test that allowed certain payments under $2,500 to be
made based on matching a proper invoice to the corresponding
contract. Receipt and acceptance was followed up after the
payment was made. The pilot was discontinued by October 1997
when the DoD General Counsel and DFAS General Counsel found
that matching a proper invoice and contract alone was not
legally sufficient to make a payment. The Department proposed
legislation to Congress in 1998 called Verification After
Payment that would have authorized making payments from the
invoice/contract match, but that request was later dropped
without Congressional action.
``Straight Pay'' is an informal term used to describe the
practice of making payment based on a three way match of a
proper invoice, receiving report and contract when an
obligation has not yet been recorded in the accounting
records. ``Straight Pay'' recognizes the government's legal
obligation to make payment and was used to ensure contractors
were paid on time and to reduce payment backlogs and
associated interest penalties due to late payments. Under
``Straight Pay'' policies, payments could not be made on an
invoice alone. But if DFAS had a proper invoice together with
a valid contract for the goods/services and a valid receiving
report that the goods/services had been delivered, payment
could be made without a matching obligation. DFAS then
contacted the Military Services to update the
[[Page S2116]]
accounting records, ensuring that the expenditure was
recorded and valid.
The Defense Department has two important obligations: to
ensure that those who provide goods and services to the
Department are paid on time pursuant to the Prompt Payment
Act and to make certain there are proper controls that ensure
the Department has received the goods and services pursuant
to a valid contract. At a time when the Department faced a
backlog of unpaid invoices and mounting interest costs due to
late payments, ``Straight Pay'' was an attempt to draw the
right balance between those objectives by reducing late
payments while still ensuring that the Department had
received what it paid for and that the accounting records
were accurate.
Best practices require that all proper invoices be matched
with a receiving report and contract, and that the obligation
be pre-validated in the accounting records prior to payment.
The Department made progress toward this pre-validation
objective while I was Under Secretary. And I understand that
further progress has been made since I left. If confirmed, I
will work with the Chief Financial Officer and the Military
Departments to achieve this important goal.
Finally, you raised the case of Air Force Staff Sergeant
Robert L. Miller, who defrauded the Department in a series of
activities between October 1994 and June 1997. The Miller
case did not actually involve ``Straight Pay''. It did,
however, expose significant internal control weaknesses
within both DFAS and the Air Force. As a consequence of the
Miller case, I directed DFAS to take a series of corrective
actions, including revising internal control guidance to
ensure better segregation of duties, reviewing and adjusting
vendor payment access to the minimum number of personnel
needed to properly conduct business, ensuring proper
documentation existed to pay invoices, and correcting
deficiencies in computer system security. In addition, DFAS
in November 1999 established an Internal Review office to
examine its systems and operations for weaknesses and
potential cases of fraud.
As you requested, I have also included answers to the six
questions you submitted for the record after my nomination
hearing on January 15, 2009. Looking ahead, if confirmed as
Deputy Secretary of Defense, I will do my utmost to
strengthen the Department's financial management and internal
controls designed to prevent fraud. I will also work to
accelerate the modernization and integration of the
Department's management information systems. From my earlier
DoD tenure, I know the obstacles to achieving this, but I
also know its vital importance. In this era of increasing
fiscal strain, financial stewardship at the Department of
Defense is essential, and I look forward to making that
happen.
Sincerely,
William J. Lynn, III.
Senate Armed Services Committee
Questions for the Record
(To consider the following nominations: William J. Lynn III to be
Deputy Secretary of Defense; Robert F. Hale to be Under Secretary of
Defense (Comptroller) and Chief Financial Officer; Michele Flournoy to
be Under Secretary of Defense for Policy; and Jeh Charles Johnson to be
General Counsel, Department of Defense. Witnesses: Lynn, Hale,
Flournoy, Johnson)
Senator Chuck Grassley
Financial Management
93. Mr. Lynn, as the Under Secretary of Defense
(Comptroller), you were the Department's Chief Financial
Officer (CFO). That position was established by the CFO Act
of 1990. Section 902 of the CFO Act states: ``The CFO shall
develop and maintain an integrated agency accounting and
financial management system, including financial reporting
and internal controls.'' This requirement existed for at
least 5 years before you became the DOD CFO. While you were
CFO, did DOD operate a fully integrated accounting and
financial management system that produced accurate and
complete information? If not, why?
Answer: The DoD financial and business management systems
were designed and created before the CFO Act of 1990 to meet
the prior requirements to track obligation and expenditure of
congressional appropriations accurately. The CFO Act required
the Department to shift from its long-time focus on an
obligation-based system designed to support budgetary actions
to a broader, more commercial style, accrual-based system. To
accomplish this transformation, several things needed to be
done. First, the Department created the Defense Finance and
Accounting Service (DFAS) to consolidate financial
operations, which was accomplished in 1991 before my tenure
as Under Secretary. Second, the Department had too numerous
and incompatible finance and accounting systems. From a peak
of over 600 finance and accounting systems, I led an effort
to reduce that number by over two thirds. This consolidation
effort also strove to eliminate outdated financial management
systems and replace them with systems that provided more
accurate, more timely and more meaningful data to decision
makers. The third and most difficult step in developing an
integrated accounting and financial management system has
been to integrate data from outside the financial systems.
More than 80 percent of the data on the Defense Department's
financial statement comes from outside the financial systems
themselves. It comes from the logistics systems, the
personnel systems, the acquisition systems, the medical
systems and so on. On this effort, we made progress while I
was Under Secretary but much more needs to be done. If
confirmed, I will take this task on as a high priority.
94. Mr. Lynn, under section 3515 of the CFO Act, all
agencies, including DOD, are supposed to prepare and submit
financial statements that are then subjected to audit by the
Inspectors General. While you were the CFO, did DOD ever
prepare a financial statement in which all DOD components
earned a ``clean'' audit opinion from the DOD IG? If not,
why?
Answer: In the 1997, the Department of Defense had twenty-
three reporting entities, only one of which, the Military
Retirement Fund, had achieved a clean audit. Over the next
four years, the Department under my leadership as Under
Secretary earned a ``clean'' opinion on three other entities:
most importantly, the Defense Finance and Accounting Service
in 2000, followed by the Defense Commissary Agency and the
Defense Contract Audit Agency in 2001. We were unable to
obtain clean opinions on the other reporting entities. The
primary reason for not earning clean opinions on the
remaining entities was the difficulty of capturing data from
non-financial systems and integrating that data into the
financial systems in an auditable manner. It is my
understanding that the Department still faces the challenge
of integrating financial and non-financial systems to support
the auditability of the DOD financial statements.
95. Mr. Lynn, as CFO, what specific steps did you take to
correct this problem?
Answer: Under my leadership, the DOD instituted several
important efforts to achieve a ``clean'' audit opinion. The
primary effort was described in the Biennial Financial
Management Improvement Plan (FMIP) which was submitted to
Congress in 1998. That plan merged previous initiatives with
new ones into a single comprehensive effort to achieve both
financial management improvement and auditability. To
directly address auditability, the FMIP included an effort in
collaboration with the Office of Management and Budget, the
General Accounting Office, and the Office of the Inspector
General to address ten major issues identified by the audit
community: 1) internal controls and accounting systems
related to general property plant and equipment; 2)
inventory; 3) environmental liabilities; 4) military
retirement health benefits liability; 5) material lines
within the Statement of Budgetary Resources; 6) unsupported
adjustments to financial data; 7) financial management
systems not integrated; 8) systems not maintaining adequate
audit trails; 9) systems not valuing and depreciating
property, plant and equipment; and 10) systems not using the
Standard General Ledger at the transaction level. Due to this
effort, substantial progress was made on most of these issues
and several were resolved, including valuation of the
military retirement health benefits liability, the reduction
of unsupported adjustments to financial data, and the
identification of environmental liabilities.
96. Mr. Lynn, 18 years after the CFO Act was signed into
law, DOD is still unable to produce a comprehensive financial
statement that has been certified as a ``clean'' audit. It
may be years before that goal is met. If DOD's books cannot
be audited, then the defense finance and accounting system is
disjointed and broken. Financial transactions are not
recorded in the books of account in a timely manner and
sometimes not at all. Without accurate and complete financial
information, which is fed into a central management system,
DOD managers do not know how the money is being spent or what
anything costs. That also leaves DOD financial resources
vulnerable to fraud, waste and abuse, and even outright
theft. The last time I looked at this problem billions--and
maybe hundreds of billions--of tax dollars could not be
properly linked to supporting documentation. As Deputy
Secretary of Defense, what will you do to address this
problem? Please give me a realistic timeline for fixing this
problem.
Answer: The Department needs stronger management
information systems. I can assure you that, if confirmed, I
will be committed to improving financial information and
business intelligence needed for sound decision making. I
have not yet completed my review of all the information
needed to provide a specific timeline; however, I will
continue to examine this issue, including consideration of
this and other Committees' views as well as the resources
needed for the audit, before forming my assessment of how
close DoD is to a clean audit.
Potential Conflict of Interest
97. Mr. Lynn, as a Senior Vice President of Government
Operations at the Raytheon Company, you were a registered
lobbyist until July 2008. Correct? How long were you a
registered lobbyist?
Answer: I was a registered lobbyist for Raytheon from July
2002 to March 2008.
98. Mr. Lynn, in his ``Blueprint for Change,'' President-
elect Obama promises to ``Shine Light on Washington
Lobbying.'' He promises to ``Enforce Executive Branch
Ethics'' and ``Close the Revolving Door.'' He promises: ``no
political appointees in an Obama-Biden administration will be
permitted to work on regulation or contracts directly and
substantially related to their prior employer for 2 years.''
Raytheon is one of the big defense contractors. As Deputy
Secretary, Raytheon issues will surely come
[[Page S2117]]
across your desk. If you have to recuse yourself from
important decisions, you would limit your effectiveness as
Deputy Secretary of Defense. How will you avoid this problem
for 2 years?
Answer: I have received a waiver of the ``Entering
Government'' restrictions under the procedures of the
Executive Order implementing the ethics pledge requirements.
The waiver, however, does not affect my obligations under
current ethics laws and regulations. Until I have divested my
Raytheon stock, which will be within 90 days of appointment,
I will take no action on any particular matter that has a
direct and predictable effect on the financial interests of
Raytheon. Thereafter, for a period of one year after my
resignation from Raytheon, I also will not participate
personally and substantially in any particular matter
involving Raytheon, unless I am first authorized to do so
under 5 C.F.R. Sec. 1A2635.502(d). In addition, for the one
year period covered by Section 502, I have agreed not to seek
a written authorization for the handful of issues on which I
personally lobbied over the past two years. If confirmed, I
pledge to abide by the foregoing provisions. I would add that
I have not been exempted from the other Executive Order
pledge requirements, including the ones that restrict
appointees leaving government from communicating with their
former executive agency for two years and bar them from
lobbying covered executive branch officials for the remainder
of the Administration.
Mr. GRASSLEY. Mr. Lynn continues to defend straight pay, a policy
that Secretary Cohen said didn't exist back then. He said it was
necessary ``to ensure that contractors were paid on time.''
Well, can't you pay contractors on time by having invoices and all
the proper documentation to write even a $1 check? That is the
streamlining effect that former Secretary Cohen argued for in his
failed June 2, 1998 DRI legislative initiative.
I exchanged followup Q and A on these matters with Mr. Lynn on
February 5 and 6 this year, and I will include those letters in the
record as well. As Chief Financial Officer at one of our biggest
departments, Mr. Lynn signed the memo authorizing straight pay policy.
It was his policy.
I ask unanimous consent that the followup documents be printed in the
Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
U.S. Senate,
Committee on Finance,
Washington, DC February 5, 2009.
Mr. William J. Lynn,
Senior Vice President, Raytheon Company, Arlington, VA
Dear Mr. Lynn: I am writing to follow-up on our recent
exchange of correspondence regarding your record as the Chief
Financial Officer (CFO) at the Department of Defense (DOD).
I respectfully request that you respond to the following
questions in writing:
(1) On February 2, 1998, when you were CFO, Secretary of
Defense Cohen asked the Senate for legal authority to pay
bills without receipts with no dollar limit. This proposal
was embodied in Section 401 of the Defense Reform Initiative
(DRI). What was your position on this legislative proposal?
(2) In a letter to you dated January 19, 1999, I expressed
grave concern about a DOD payment policy known as ``Straight
Pay.'' This policy was authorized by you in documents that
bear your signature. The purpose of my letter was to verify
the facts pertaining to this policy that was brought to my
attention by a Defense Finance and Accounting Service (DFAS)
employee, Your response to this letter is dated March 9,
1999. In your letter, you report that ``Straight Pay'' does
not exist. This is what you said: ``Straight Pay'' is not
used at our Columbus Center . . . `Straight Pay,' as it was
reported to you, does not exist at the Columbus Center.''
Secretary Cohen made essentially the same statement in
response to questions I raised at a Budget Committee hearing
on March 2, 1999. He stated: ``there is no authorized
procedure called straight pay.'' In your February 3, 2009
letter, by comparison, you provided a description of the
``Straight Pay'' policy. Did ``Straight Pay'' exist at the
Columbus Center in 1998-99?
(3) How do you explain a DFAS Memo dated March 8, 1999 that
contains the following instructions: ``Due to concerns over
the use of the term `Straight Pay' and its connotation, we
must delete all references, to `straight pay' from the policy
and clarify that policy does not create an environment for
fraudulent payments. Terms such as unmatched disbursements or
direct disbursements were substituted.'' Did you instruct
DFAS to get rid of the term ``Straight Pay.''
(4) Do you believe unmatched disbursements were a
satisfactory outcome?
(5) One day after DFAS gave ``Straight Pay'' policy a new
name, you issued orders to keep the policy alive. Your memo
of March 9, 1999 actually re-authorized the policy for
another 90 days beyond the March 22, 1999 expiration date. Is
that true?
(6) When you were CFO, were you knowledgeable or aware of
the arbitrary allocation scheme used by DFAS at the Columbus
Center for making progress payments? That policy also had an
informal name. It was called ``bucket billing.'' Both the
GAO. and IG had conducted numerous audits and reviews of
these procedures and declared them to be illegal. If you knew
about these bill paying practices, what specific steps did
you take to correct the problem?
(7) I note that the waiver granted to you in connection
with President Obama's new ethics rules was co-signed by OMB
Director Orszag and Mr. Gregory B. Craig, Counsel to the
President. I understand that you have past associations with
Mr. Craig. Please characterize your relationship with Mr.
Craig?
(8) According to the Project on Government Oversight
(POGO), Raytheon is ``ranked #4 in a top 50 corrupt list'' of
government contractors. POGO reports numerous instances of
double billing on aircraft maintenance contracts, contractor
kickbacks, defective pricing, False Claims Act violations,
substitution/nonconforming products, violations of SEC rules,
etc. involving Raytheon. As the top Raytheon lobbyist, to
what extent did you know about or become involved with any of
these issues? Did you ever discuss any of these issues with
DOD officials or Members of Congress or congressional staff?
(9) In view of the fact that your nomination appears to be
inconsistent with President Obama's rules pertaining to the
``Revolving Door Ban,'' do you belief you have compromised
any of your personal and/or professional values by accepting
it?
Your continuing cooperation in this matter would be greatly
appreciated.
Sincerely,
Charles E. Grassley,
Ranking Member.
February 5, 2009.
Hon. Charles E. Grassley,
Ranking Member, Committee on Finance, U.S. Senate,
Washington, DC.
Dear Senator Grassley: I am writing to respond to your
letter of February 5, 2009. Following my February 3, 2009
letter, you asked nine additional questions.
(1) Although I took office as Under Secretary just before
the Defense Reform Initiative was submitted to Congress, I
did not participate in the development of Section 401. I do
not recall having taken a position on it. At this time, I
would not support a proposal that with no dollar limit would
allow the Defense Department to pay bills without a receipt.
(2) In your letter of January 19, 1999, you equated an
obligation to a contract, implying that ``Straight Pay''
allowed payment without a valid contract. As I explained in
both my recent February 3, 2009 letter and the earlier March
9, 1999 letter, ``Straight Pay'' required that the Department
be in possession of a valid contract as well as a valid
invoice and a valid receiving report prior to payment being
authorized. If this three way match existed, the policy
allowed payment without a matching obligation in the
accounting records, with the proviso that the Military
Services update the accounting records to ensure that a valid
payment had been made. In short, ``Straight Pay'' did exist
at the Columbus Center in 1998-99, but the process was
different than the one you described in your January 19, 1999
letter.
(3) I am not aware of the March 8, 1999 DFAS memo that you
referenced. To my knowledge, I did not sign or authorize it.
(4) Unmatched disbursements are not a satisfactory outcome.
They reflect the age and inadequacy of some of our finance
and accounting systems. This is one of the primary reasons
that I supported the modernization of our finance and
accounting infrastructure when I was Under Secretary in the
late 1990s and why I will continue to support that
modernization should I be confirmed as Deputy Secretary.
(5) As I stated in my February 3, 2009 letter, ``Straight
Pay'' was an attempt to strike the right balance between
meeting our obligations to pay on time and ensuring the
Department only paid vendors for what was actually received
under a valid contract. The 90-day extension of that policy
on March 9, 1999 was done because the backlog of unpaid
invoices remained at an unacceptable level.
(6) With regard to progress payments, I took steps to
ensure that payment procedures were tightened. In 1998, I
directed that on all new contracts, other than firm fixed
price contracts, the practice of prorating payments
proportionately to all accounting classification reference
numbers be discontinued. Effective August 31, 1998, the
Department began distributing progress payments on the basis
of the best available estimates of the specific work being
performed under the contract. Both the Office of the
Inspector General and the Office of the General Counsel of
the Department of Defense reviewed and approved the new
policy.
(7) I served on the staff of Senator Edward Kennedy in the
late 1980s with Gregory B. Craig, who is now Counsel to the
President.
(8) While at Raytheon, I did not participate in any of the
of the issues that you cite. Nor did I lobby on those issues
with either Defense Department officials or any Members or
staff in Congress.
(9) I am honored that President Obama nominated me to serve
as Deputy Secretary of Defense. If confirmed, I will serve
the Department and the nation to the best of my
[[Page S2118]]
ability. It is fully consistent with my personal and
professional values to return to public service at this time.
Sincerely,
William J. Lynn III
____
U.S. Senate,
Committee on Finance,
Washington, DC, February 6, 2009.
Mr. William J. Lynn,
Senior Vice President,
Raytheon Company, Arlington, VA
Dear Mr. Lynn: I have reviewed your letter of February 5,
2009, in which you attempt to address the questions I raised
in a letter to you also dated February 5th.
I am baffled by some of your answers. You have answered
questions I did not ask; you have not answered questions I
did ask; and some of your answers appear to be incomplete as
follows:
First, in question #1, I asked you about your position on
Section 401 of Secretary Cohen's Defense Reform Initiative
presented to the Senate in February 1998. You responded as
follows: ``I did not participate in the development of
Section 401. I do not recall having taken a position on it.
At this time, I would not support a proposal that with no
dollar limit would allow the DOD to pay bills without a
receipt.'' In February 1998, you had been CFO for several
months. This issue fell directly under your purview. How
could you possibly avoid taking a position on an issue the
Secretary of Defense was urging the Senate to adopt? As the
Chief DOD lobbyist for Raytheon today, you say it was wrong.
My question is: As the DOD CFO back in 1998, why didn't you
know it was wrong and speak up?
Second, in question #2, I asked: ``Did `Straight Pay' exist
at the Columbus Center in 1998-99?'' You responded this way:
``Straight Pay' did exist at the Columbus Center in 1998-99,
but the process was different than the one you described.''
Your response today is a bit different from the one you
provided me in 1999. In early March 1999, both you and
Secretary Cohen reported to me that ``Straight Pay'' did not
exist. Period. This is what Secretary Cohen said in response
to my questions at a Budget Committee hearing on March 2,
1999: ``there is no authorized procedure called straight
pay.'' And he attributed that statement to you. You are
saying it existed but not exactly as I described it. I find
these explanations somewhat confusing. Even if I did not
describe it exactly right, it still existed. And this is why
I raised question #3.
Third, The Defense Finance and Accounting Service (DFAS)
employees were providing me with documents that clearly
indicated that the ``Straight Pay'' did, in fact, exist.
DFAS employees even provided me with an elaborate set of
rules on how this policy was to be implemented. Then I
received a high-level DFAS memo that appeared to constitute a
direct order to suppress the policy, bury it, if necessary,
or re-name it. This memo, dated March 8, 1999, contained the
following instructions: ``Due to concerns over the use of the
term `Straight Pay' and its connotation, we must delete all
references to `straight pay' from the policy and clarify that
policy does not create an environment for fraudulent
payments. Terms such as unmatched disbursements or direct
disbursements were substituted.'' As you know, unmatched
disbursements--like ``Straight Pay''--leave the door wide
open to fraud and theft. But that is a separate issue. In
question #3, I asked: ``Did you instruct DFAS to get rid of
the term ``Straight Pay?'' You did not answer this question.
You responded by saying you are not aware of that memo and
did not sign it or authorize it. I will re-phrase the
question, because some high official was probably creating
pressure for this change. While CFO, did you ever issue any
instructions to DFAS or anyone else regarding use of the term
or words ``Straight Pay''?
Fourth, in question #5, I asked you if you approved and
signed documents authorizing ``Straight Pay.'' In your
response, you tell me why the policy was necessary but do not
accept direct responsibility for approving the policy. While
CFO, did you ever approve and sign documents authorizing
``Straight Pay''?
Fifth, in question #6, I asked you about your knowledge of
the arbitrary allocation scheme--also known as ``Bucket
Billing''--used at the Columbus Center for making progress
payments on contracts. At the time, both the GAO and DOD IG
had declared that this policy was illegal. As you may
remember, I addressed this matter in great detail with your
predecessor, Mr. John Hamre. You now report that a new policy
was put in place on August 31, 1998. You also reported that
the IG reviewed and approved that policy. Having a new policy
is an important first step, but my question is this: Is the
new policy working as advertised? In 1999, did you follow-up
and check to see if payments were being posted to the correct
appropriation accounts?
Sixth, in question #7, I asked you about your association
with Mr. Gregory B. Craig, who was directly involved in the
review and approval of the waiver you were granted in
connection with President Obama's new ethics rules. I asked
this question: ``Please characterize your relationship with
Mr, Craig?'' You answered: ``I served with him on the staff
of Senator Kennedy in the late 1980s.'' Again, please
characterize your relationship with Mr. Craig? What
discussions took place between you and Mr. Craig regarding
this matter?
Seventh, I will re-phrase question #9 as follows: Do you
believe that your nomination is fully consistent with the
spirit and intent of the ``Revolving Door Ban'' in paragraphs
2 & 3 of Section 1 of the new rules?
I very much appreciate your patience and cooperation with
this matter.
Sincerely
Charles Grassley,
Ranking Member.
____
February 9, 2009.
Hon. Charles E. Grassley,
Ranking Member, Committee on Finance, U.S. Senate,
Washington, DC.
Dear Senator Grassley: I am writing in response to your
letter of February 6, 2009. You asked some additional follow
up questions to your letters of February 3, 2009 and February
5, 2009.
(1) You asked about my position on Section 401 of the
Defense Reform Initiative in 1998. As I indicated, the
development of Section 401 took place before I took office as
Under Secretary in late 1997, so I was not engaged in the
process that led to the inclusion of Section 401 in the
Defense Reform Initiative. Further, Section 401 was dropped
before I ever had an opportunity to review or take a position
on the provision.
(2) You asked for further clarification on the issue of
``Straight Pay'' at the Defense Finance and Accounting
Service (DFAS) Columbus Center. To my knowledge, ``Straight
Pay'' was an informal term used to describe a payment process
in the Air Force network. Your March 1999 letter and your
Budget Committee hearing question to Secretary Cohen used the
term ``Straight Pay'' differently, that is to describe the
pre-validation process used by the Mechanization of Contract
Administration System (MOCAS) at the Columbus Center. The
purpose of my response to your letter and Secretary Cohen's
response to your hearing question in 1999 was not to argue
over the term ``Straight Pay'', but rather to explain the
pre-validation process used at Columbus accurately and fully.
Specifically, we both described how the three-way match
procedures worked. They required that no payments could be
made without a valid invoice, a valid contract, and a valid
receiving report. If this three-way match existed, the policy
allowed payment without a matching obligation in the
accounting records, with the proviso that the Military
Services update the accounting records to ensure that a valid
payment had been made.
(3) As I wrote previously, I was not aware of the March 8,
1999 DFAS memo that DFAS employees provided to you. Nor do I
recall ever issuing instructions to DFAS or anyone else
regarding the use of the term ``Straight Pay''.
(4) You asked about documents that I signed authorizing
``Straight Pay''. I am not aware of any official documents
that I signed that included the term ``Straight Pay''. I did,
however, approve and sign documents that authorized the
three-way match process described in my answer in paragraph 2
above. These included the March 9, 1999 memo, to which you
referred in your February 5, 2009 letter. This memo re-
authorized a temporary increase in the threshold on new
contracts paid by the MOCAS system due to the backlog of
payments. The original authority for the temporary increase
in the threshold was a December 1998 memo, which I also
approved and signed.
(5) With regard to the new policy that I directed on
progress payments in 1998, I did follow up and found DFAS was
following the payment distribution instructions required by
that policy. It is my understanding that the policy remains
in practice today with some enhancements to further ensure
payment distribution is made in accordance with the contract.
(6) As I stated in my previous letter, Mr. Gregory Craig
and I were co-workers on Senator Kennedy's staff in the late
1980s. Over the ensuing decades, we have had only very few
contacts. Additionally, my contacts with the review and
approval of my waiver were not with Mr. Craig, but with his
colleagues in the White House Counsel's office, who conducted
the extensive analysis supporting the waiver. Ultimately,
this analysis was then reported and approved by Mr. Craig.
(7) I believe that my nomination is consistent with the
spirit and intent of President Obama's Executive Order. I,
like every nominee, am bound by the Order's provisions.
However, because of my previous work experience, I was
granted a waiver to a portion of Section 1, which is allowed
under Section 3 of the Order. The reasons for receiving the
waiver were described in a February 3, 2009 letter to you
from Mr. Peter Orszag, Director of OMB and Mr. Craig, White
House Counsel. Notwithstanding, I remain bound by the Order's
revolving door exit provisions as well as all other
provisions contained in the Order.
Thank you for the opportunity to respond to your questions.
Sincerely,
William J. Lynn III.
Mr. GRASSLEY. I believe this policy developed under Mr. Lynn's
leadership was dangerous, misguided, and irresponsible. It demonstrated
a lack of sound business judgment. It may have been inconsistent with
various provisions of law. Because don't the taxpayers expect you write
a check, you have a reason for writing it, you have an invoice or
something that says you
[[Page S2119]]
owe X number of dollars? Straight pay left the taxpayers' hard-earned
money vulnerable to fraud and theft, and we have had that.
I was not alone in this assessment. At my subcommittee hearing on
September 28, 1998, the Government Accountability Office witness said
essentially the same thing. DFAS payment policies in Mr. Lynn's watch
left the door wide open to fraud.
For all these reasons, I have to say Mr. Lynn, as Chief Financial
Officer, did not do everything humanly possible to protect the
taxpayers' interests. When he pushed the straight pay policy and went
silent on pay-and-chase, he did not act in the public interest.
As Chief Financial Officer, Mr. Lynn was also supposed to do his part
to develop and integrate a finance and accounting system that would
allow the Department of Defense to produce a financial statement that
could earn a clean audit opinion. I know this is a massive and complex
undertaking, but Mr. Lynn could have gotten the ball rolling in the
right direction, even if he didn't get it under control.
I can guarantee one thing: The principle of straight pay was not
conducive to the creation of an integrated accounting system. One of
the first steps in that process is to link obligations to
disbursements. Straight pay truncated that link and undermined
integration.
Although he claimed to have launched several important reform
initiatives, there appears to be little or no measurable progress
toward the goal of integration on his watch. In fact, his payment
policies probably took us in the wrong and opposite direction and had
an opposite effect. The Department's books of account were a mess when
Mr. Lynn became Chief Financial Officer, they were a mess when he left,
and I have a feeling they remain a mess today, with no fix in sight.
Congress passed the Chief Financial Officers Act in 1990 in an
attempt to fix the problems in accounting of Government finances in
every department. Eighteen years after this legislation, the Department
of Finance, as a whole, has yet to earn a clean audit.
Mr. Lynn should not be the only person held accountable for poor
accounting at the Department of Defense. He was one of many individuals
in a long line of Chief Financial Officers and Comptrollers who, for
whatever reason, were unsuccessful in solving the financial misstep at
the Defense Department. Mr. Hamre, his predecessor, used to say:
``Fixing this problem is like changing a tire on a car going at 100
miles per hour.''
I have shared some of my sentiments on Mr. Lynn's performance as
Chief Financial Officer. I hope these insights are helpful to my
colleagues before they vote yes or no on this nomination. If confirmed,
we hope he will do everything possible to protect our national
security. We hope he will protect the taxpayers' hard-earned money, and
we hope he will make sure the taxpayers' money is wisely spent and,
most importantly, spent according to law. We hope he will usher in a
new era of financial accountability at the Department of Defense. At
this point, we simply don't know what Mr. Lynn will do. I don't own
that crystal ball that would be necessary to make that determination.
It is all about the future, and that is relatively unknown. But we do
know something about what he did in the past as the Department of
Defense Chief Financial Officer.
As Chief Financial Officer, he advocated very questionable accounting
practices that obviously were not in the public interest. Writing a
check in any department without knowing what that check is paying for
is not in the public's interest. It is not a wise expenditure of public
money. We need accounting systems that account for every dollar going
out, having a purpose of a service or a product that it bought. I urge
my colleagues then to weigh those considerations in reaching a decision
on how to vote on the Lynn nomination.
Lastly, I wish to take a moment to thank the Senate Armed Services
Committee leadership, both Republican and Democratic, and their staff
for their patience on this issue. I appreciate the time Chairman Levin
has given me to discuss this nomination. I lay everything I have said
before the Senate for consideration.
I have already sought permission to have some of these documents
printed in the Record, so I don't think I have to do that.
I yield the floor.
Mr. LEVIN. Mr. President, I yield myself 10 minutes.
Let me, first, thank Senator Grassley for his dedication to trying to
change the climate around here. He has been on the forefront. I happen
to disagree with him on the conclusion he has reached--or apparently
reached--relative to Mr. Lynn for reasons I will go into. Nonetheless,
he has been an advocate of reform and he continues to do that. I will
explain why I think, in this instance, his concerns do not fit the
situation.
In the first instance, when he suggested the President is changing
the rules as we go along by providing a waiver to Mr. Lynn as part of
the new Executive order, that is part of the Executive order.
Let's not change the rules during the game. That is part of the rule
President Obama has adopted in the new Executive order. It has some
very stringent requirements. Part of them are waived by the President's
Office of Management and Budget--in this case, for reasons they gave.
Part of the new rule is not waived, the critical postemployment
prohibition that applies to Mr. Lynn. I think that for the reasons
given by President Obama's Budget Director, the waiver is a legitimate
one, central in this case for the reasons given.
By the way, when we talk about waivers, this is not at all unique.
Mr. Lynn's situation is not in the least bit unique. Waivers have been
given and provided in previous cases because senior officers have had
experience in the private sector. Secretary Gates was subject to the
same rule, subject to the same waiver requirement. Secretary Rumsfeld
was subject to the same waiver and the same waiver requirement, as were
Deputy Secretary England and Secretary Wolfowitz. This has been a
common practice. I don't think anybody in those cases, or in any other
case we know about, where either a waiver has been required or the
waiver provision has been applicable--we know of no situation where
there was a conflict of interest.
What President Obama has done is tighten the requirement. He also
provided for the possibility of a waiver for part or all of the new
requirement. Part of the new requirement has been waived by the new
President, but to suggest that he simply has waived his new requirement
is not accurate because part of it was not waived. The critical part
not waived is that the new officeholder, if confirmed--Deputy Secretary
Lynn--will be subject to the prohibition that he may not lobby anybody
in the Government if he leaves before the administration finishes, nor
may he lobby anybody in the Department of Defense for a year after he
leaves. These are very strict, new requirements that are not waived in
the case of Secretary Lynn. What has been waived by the administration
is the other part of the Executive order. That is No. 1.
Senator Grassley has gone into a lot of technical arguments relative
to Mr. Lynn when he previously served. I want to deal with that the
best we can.
These events took place 7 to 10 years ago, but they don't involve
ethics issues at all. They involve what Mr. Lynn said in letters
relative to certain accounting practices at the Department of Defense
at that time. I have reviewed these answers, and the questions were
very appropriate questions asked by Senator Grassley. I commend him for
asking the questions.
There were 4 separate letters to Mr. Lynn, with 30 detailed questions
about practices for validating vendor payments in certain parts of the
Department of Defense more than 10 years ago. Mr. Lynn has responded to
every one of the letters Senator Grassley very appropriately wrote, and
to each of his questions. It is my view, after reading all of the
questions and the answers, that while the vendor payments that were
described by Senator Grassley are real, No. 1, it is not fair to
attribute those problems to Mr. Lynn. Secondly, the problems as
described by Mr. Lynn and the responses he gave were accurate.
First, the description was of the pay-and-chase--the way of paying
vendors. That system was illegal. You cannot pay a vendor without
checking that invoice against the contract or against the receipt of
the goods. That was the
[[Page S2120]]
problem with the pay-and-chase system. There was a failure to check the
invoice that came in, the document that the goods were received and
that they were proper under the contract. That system ended. It had to
end; it was illegal. A new system was put into place where the vendor's
bill was checked against the receipt of the goods and against the
contract. That is a very different deal. It is a legal system. Unlike
so-called pay-and-chase, which preceded it, which was illegal, what
Senator Grassley and others have described as a straight pay system was
legal. The problem is that it was a confusing name because it implied
that the previous system of not checking an invoice against the receipt
of the goods or the contract continued, when it did not continue. It
was dramatically changed from something that was illegal to something
that was legal.
For instance, Senator Grassley, when he wrote Mr. Lynn back on
January 29, 2009, said:
Straight pay allowed the technician to ignore the warning
signals and make payments up to half a million dollars
without checking documentation.
That is not accurate. They had to check documentation. There were
some things they could not check because the systems are deficient at
the Department of Defense, including what is the original source of the
money in the Defense Department's budget. Does it come from R&D or does
it come from acquisition? That part, they still cannot check. Those
systems have been deficient, and continue to be, but with the help of
this body and hopefully real energy in the DOD, that can be corrected.
We all need that.
Senator Grassley has been in the forefront of trying to get these
kinds of controls in place. I commend him for that. But it is not
accurate to say that straight pay, so-called, which was the followup
system, allowed these payments without checking documentation. That is
what Mr. Lynn disagrees with. When you look at his answers, that is the
disagreement between Mr. Lynn's answers and what Senator Grassley
describes as being accurate.
Part of the problem here, by the way, that Senator Grassley had is
not with Mr. Lynn, it is with Secretary Cohen. Repeatedly and
accurately, Senator Grassley points to the action of then-Secretary of
Defense Cohen, saying he didn't do this, and Mr. Lynn didn't change it,
or Secretary Cohen didn't do something, and Mr. Lynn did not disagree.
The problem was with the Secretary of Defense, which is outlined by
Senator Grassley, to the extent that it exists.
It is hard for me to believe Secretary Cohen would not be eligible to
be Secretary of Defense again or would not be confirmed unanimously by
this body. Yet the mistakes attributed to Mr. Lynn are also attributed
to then-Secretary Cohen, for whom Mr. Lynn worked. But does anyone
seriously suggest that if Secretary Cohen were reappointed as Secretary
of Defense, we would not confirm Bill Cohen by a vote of 100 to 0?
So, Mr. President, without getting into a lot more detail--and these
are incredibly complicated and detailed issues--let me summarize by
saying that the difference here has been described--there is a
difference over the description of a system of payment and the way in
which Mr. Lynn describes it. When you look at his complete answers, it
seems to me, there is a fair description of what the problem was.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Rhode Island is recognized.
Mr. REED. Mr. President, I rise to express my support for William
Lynn to be confirmed as Deputy Secretary of Defense. Bill has a
combination of experience and sound judgment. He worked here on Capitol
Hill as a significant policy aide to Senator Kennedy on the Armed
Services Committee. He has been the comptroller of the Department of
Defense. He has detailed and specific knowledge of the vast programs
that will be handed over to the DOD. He has also worked in industry.
Frankly, the job of Deputy Secretary of Defense is a place in which all
these roads come together--the relationship with Capitol Hill, the
relationship with industry, and a detailed understanding and knowledge
of the way the Pentagon really works from the inside, not from the
outside.
He is uniquely situated to take on these daunting challenges that
face us, at a time when we are engaged in two conflicts--Afghanistan
and Iraq--and a continuing war against extremists across the globe and
at a time when our budget is going to be challenged because of a
declining economy in the United States and across the globe. The
difficult judgments that have to be made require the expertise and
experience Bill Lynn can bring and few can match.
One other thing that I think is particularly compelling about this
nomination is the enthusiastic support of it by the Secretary of
Defense, Bob Gates. There is no one in Government whom I admire more
for their patriotism, their sacrifice to the Nation, and their service.
The Secretary of Defense has made it very clear that he believes Bill
Lynn is someone whom he not only can work with, but he will aid him
immensely in his extraordinary challenges to face the threats I have
already illustrated. For me, Bob Gates's testimony and endorsement is
compelling evidence that this Senate should confirm Bill Lynn
immediately this afternoon.
As I mentioned before, Bill worked in the Department of Defense. He
has knowledge of the whole range of programs. That is absolutely
critical because he will have to make judgments about these programs to
advise the Secretary of Defense.
For his work at the Department of Defense--which has been talked
about this afternoon, but this wasn't mentioned--he received the Joint
Distinguished Civilian Service Award from the Chairman of the Joint
Chiefs of Staff. Again, the military understands not only the important
duty he is performing but also, in their own conduct and affairs,
understands the values of integrity, character, and commitment to the
national interest. He has won awards from the Army, Navy, and Air
Force. He also received the 2000 Distinguished Federal Leadership Award
from the Association of Government Accountants for his efforts to
improve defense accounting practices.
He also gained valuable experience within private industry. Again,
Bill is not unique in having an industry background. In fact, the
current Deputy Secretary of Defense, Gordon England, came from an
industry background. My observation of Secretary England is that his
performance has been outstanding, aided by the insight he has had into
the multibillion-dollar contracts that industry has with the Department
of Defense, insight he has into the decisionmaking in corporate
America, insight he has into the way business is done in the defense
community. That has aided him, not disabled him, in doing an excellent
job. Once again, Bill Lynn comes from a similar background. As Chairman
Levin pointed out, the Secretary of the Navy, who I also believe has
done an outstanding job, also came from a background in the defense
industry.
This goes also to the other issue raised about the waiver.
Essentially, Bill Lynn stands in the same shoes, I think, as Gordon
England and others--ladies and gentlemen who worked in private industry
but recognized when they took the oath to serve the people in this
country, they had only one boss--the people of the United States. They
are committed to that duty.
Also, I think, frankly, the rules have been followed scrupulously by
his predecessors and will be followed by Bill Lynn regarding conflicts
with his previous employer. I believe he is going to err on the side of
caution when it comes to programs that may be under the purview of his
previous employer, or anyone else, because having gotten to know Bill,
I understand he is not only a man of intelligence but a man of
character.
We have someone uniquely situated to begin to aid the Secretary of
Defense in the important challenges before us: How do we create a
strategy of redeploying forces successfully out of Iraq? How do we
increase our presence in Afghanistan and help military and civilian
agencies to deal with that troubling situation? How do we deal with
issues of defense modernization? How do we prepare for longer term
threats? How do we continue to be active across the globe to, we hope,
preempt terrorist activities, whether it be in the Near East, Far East,
or anyplace on this globe?
[[Page S2121]]
Again, Bill Lynn is superbly qualified to do this. He is a graduate
of Dartmouth with a law degree from Cornell Law School, and a master's
in Public Affairs from the Woodrow Wilson School at Princeton--again,
superb academic preparation and superb life preparation. He is someone
who has, again, the character and the insights to render remarkable
service to the Department of Defense.
I hope my colleagues will join with me in supporting this nomination,
rounding out a team of excellent patriots and professionals in the
Department of Defense. I must commend President Obama. He made a very
sound, I won't say unusual, but unexpected announcement early on by
offering the position of Secretary of Defense to Bob Gates. Bob served
with distinction under President Bush. President Obama recognized,
first, the quality of this Secretary, Secretary Gates, and also the
need for continuity in the operations of the Department of Defense.
That was a strong not only signal of continuity but endorsement of the
work and effort of thousands and thousands of uniformed military
personnel and civilian employees in the Department of Defense. That
choice was amplified in his selection of Bill Lynn. Again, the
endorsement of Secretary Gates speaks volumes about the team President
Obama has put together.
I hope at the conclusion of this debate, we could send a very strong
vote of confirmation and confidence in the team that President Obama
has assembled--Secretary Gates, hopefully Deputy Secretary Lynn, and
the other members--because the tasks before them are, indeed, daunting
and because their success will be our success.
Mr. GRASSLEY. Mr. President, I apologize to Chairman Levin. I had to
leave the floor to attend a conference meeting on the stimulus bill
before he finished his remarks.
I would like to rebut his remarks regarding Mr. Bill Lynn.
In regards to the Executive order on ethics, I agree President Obama
is attempting to set high standards for executive branch appointees;
however, giving special waivers to nominees such as Mr. Lynn water down
the spirit and authority of his own Executive order. I would ask
President Obama: How many more waivers will you grant in the next 4
years?
I say to Chairman Levin, you seemed to blame former Defense Secretary
Cohen for the financial troubles at DOD, not Mr. Lynn. I could not
disagree with you more on this issue. Chief Financial Officer Lynn was
chiefly responsible for the policies and regulations governing
accounting practices. His straight-pay policy went against all
commonsense accounting practices. DFAS technicians should not have paid
bills like they did without first confirming that the proper
obligations were in the books of account.
Mr. President, I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. INHOFE. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. INHOFE. Mr. President, I ask unanimous consent that I be
recognized for 10 minutes.
The PRESIDING OFFICER. The Senator from Oklahoma is recognized.
Mr. INHOFE. I thank the Chair.
(The remarks of Mr. Inhofe pertaining to the introduction of S. 412
are located in today's Record under ``Statements on Introduced Bills
and Joint Resolutions.'')
Mr. INHOFE. I suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Burris). The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. ENSIGN. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. ENSIGN. Mr. President, I ask to speak as if in morning business
and have the time counted against our side.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The remarks of Mr. Ensign are printed to today's Record under
``Morning Business.'')
The PRESIDING OFFICER. The Senator from Oklahoma is recognized.
Mr. COBURN. Mr. President, I thank my friend from Nevada. I wish to
spend just a few minutes. I am not going to talk for a long period of
time, and I will yield back my time.
I am extremely concerned with the nomination of Mr. Lynn. It has
nothing to do with Mr. Lynn. Some can be critical of his time as
Comptroller. Some can be critical of some of the lack of forthrightness
in some of the answers about the accounting and controlling and
auditing systems in the Pentagon, and I think that is rightly so. We
had several hearings on IT improvements and waste in the contracting of
IT through the Pentagon. We had several hearings in the last two
Congresses about the waste in contracting. Mr. Lynn dealt with a large
amount of that.
Let that be as it may. The reason I stand to speak against his
nomination is this is a nomination that is going to be the person who
runs the day-to-day operation of the Pentagon. If you look at
management experience, what there has been in running an organization
that has 2.9 million employees--it is the largest component, even
including mandatory programs, that we have.
It also is the area where we have some of the greatest amount of
waste. We had it during his tenure as Comptroller. We had it during the
Bush administration years. Why would we put someone into that position
who has not performed in a stellar fashion when given the authority to
fix a lot of those problems before? Why would we put someone in charge
who is going to be handicapped? There is no question, given the waiver
he has received, he will be absolutely handicapped in all the
contracting that goes before the Pentagon.
Let me explain. His former company is one of the five largest defense
contractors in the country. It is not just the areas he has lobbied in
the past few years, such as the Aegis Ballistic Missile, the DDG-1000
destroyer, the Excalibur precision-guided munitions, the Joint Land
Attack Cruise Missile Defense Netted Sensor System and the Multiple
Kill Vehicle System, which comes to $41 billion, 10 percent of the
Pentagon's budget, but every other contract that has Raytheon as a
subcontractor from which he is going to have to recuse himself.
What he is going to be limited to is personnel matters and accounting
matters. He will not be able to make those decisions without first
getting a waiver to make them and then, if you are granting a waiver to
make the exception and make a decision, here is what is going to
happen.
Let me give the history of the tanker program in the United States.
We, first, had a contract let to Boeing, which was complicated by some
very bad acting on the part of Boeing and some Defense Department
officials, and it got thrown out.
We last had a contract for the tanker program that was awarded to
EADS. There was a protest filed on it. It got thrown out.
Everything he is not involved with, Raytheon can file a protest that
they were excluded because the management chain was not the same. We
have created the basis for a new protest on everything Raytheon will
not win in the future. If Raytheon does win a contract, we have created
a protest for everyone who wasn't Raytheon to protest because there
is a conflict of interest.
Ask yourself, in this dire economic time we are in, with the largest
agency we have, why we would put somebody in that position who is going
to be--for at least 1 year and probably for 2, if we wanted to
ethically look at it--totally out of the realm of the most important,
outside our military men and women, most important aspect of the
Pentagon, which is purchasing, contracting defense weapons systems.
We are setting a man in a position. It is no reflection on him. He is
very knowledgeable. He has been a good public servant. We are putting
him in a position to fail. We have guaranteed that contracting will not
go smoothly at the Pentagon because we have created two new bases for
protests over contracts. We can go through all the contracting, and it
is going to be raised--and rightly so. There is going to be a
legitimate protest on both sides of these issues that is going to delay
the ability of the American people to
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contract for things we should be contracting for. More importantly, it
is going to significantly raise the cost.
The third point I would make is, because he is going to have to
exclude himself from the vast majority of decisions in contracting and
purchasing, the very position he is meant to fill, to run the day-to-
day operations, means Secretary Gates is going to have to run the
operations. If he has to run the operations himself, why does he need a
Deputy Secretary of Defense?
President Obama, I think rightly, has asked Secretary Gates to stay
on. I think the continuity with that was great. I am sorry he didn't
ask others to stay on until we got past this period of time. In spite
of the good will of Mr. Lynn, a man of character, a man of integrity,
we have set him up to fail.
I have no doubt he is going to be placed in that position today when
we vote. But we ought to think. The biggest problem we have with our
body, in terms of what we do, is we do not think long run. We think
short term. What we have done is totally handicapped him, but we are
also going to handicap our military.
This is not a time we should be doing that. We should be creating a
streamlined procurement process that rebuilds the procurement offices,
which need to be rebuilt--that has no question about the authority of
the Deputy Secretary of Defense to make solid, fair, clear, and
decisive actions and decisions. What we are going to do is ensure that
does not happen.
I thought it was interesting that Senator McCain's main point was he
did not have the managerial experience to do this. Senator McCain is
going to vote for him because he has such high regard for Secretary
Gates. But think about that statement. He does not have the managerial
experience to run a 2.9 million individual organization, and he is
handicapped. We are going to handicap him so he meets the ethical
outlines President Obama so rightly has put in place.
I think it is a bad decision. I think it is a wrong decision. Once
again, the consequences for that will be inefficiency, ineffectiveness,
and a greater cost for this country. Anytime we have a greater cost on
anything now, it goes directly to our kids and our grandkids.
I hope my associates in the Senate will give a rethought to whether
we ought to handicap this man this way. Surely somebody can fill the
bill and let Mr. Lynn wait a year and then come in and do what he wants
to do and what President Obama wants him to do.
Again, we will make a serious mistake if we approve him, not only for
us, not only for our kids but for him as he attempts to run the largest
organization in the world.
Mr. HATCH. Mr. President, today I rise in support of the confirmation
of William J. Lynn to be the next Deputy Secretary of Defense.
I recently had the opportunity to meet with Mr. Lynn and discuss many
of the important defense challenges that face our Nation. I came away
from that meeting duly impressed by his dedication to seek new and
innovative solutions to many of these issues.
Throughout his career, he has demonstrated a singular devotion to our
national defense. In the early 1980s he was the executive director of
the Defense Organization Project at the Center for Strategic and
International Studies. This organization was a major catalyst for the
Goldwater-Nichols Act of 1986 which transformed and modernized the
Department of Defense. Those reforms are still the foundation from
which the Department operates today.
As a senior fellow at the National Defense University, Mr. Lynn
continued his work collecting ideas and crafting solutions to solve a
myriad of national defense issues. Then, prior to entering the
Department of Defense, he worked for 6 years as the military
legislative assistant to my good friend and colleague, Senator Kennedy,
a senior member of the Senate Armed Services Committee.
In 1993, Mr. Lynn joined the Defense Department and served 4 years as
the director of program analysis and evaluation in the Office of the
Secretary of Defense. There he oversaw the Department's ever-evolving
strategic planning progress. He was then appointed as the Under
Secretary of Defense Comptroller where he served 4 years providing
candid advice to the Secretary of Defense on all budgetary and fiscal
matters.
His most recent endeavor was as senior vice president at Raytheon
Company where he focused his energy and expertise on strategic
planning. In this role, he ensured that a major American corporation
developed and produced technologies that met the conflicts of today and
the dangers of tomorrow.
During these challenging times, it is essential we have leaders in
our Defense Department with strength of purpose and a vision for
innovation. William Lynn is such a leader. I am proud to pledge my
support and look forward to working with him to create smart and
effective solutions that support the brave men and women who defend our
Nation.
Mr. FEINGOLD. Mr. President, consistent with my practice of deferring
to Presidents on executive branch nominations, I will vote to confirm
William Lynn to be Deputy Secretary of Defense. I do have some
concerns, however, about Mr. Lynn's longtime service as a lobbyist for
a major defense contractor. I hope that, if confirmed, Mr. Lynn will
take seriously the need for serious reforms to address the Department's
troubling record of financial mismanagement.
Mr. LEVIN. Mr. President, I ask unanimous consent that the vote on
the confirmation of the nomination of William J. Lynn occur at 5 p.m.
today, with the other provisions of the previous order remaining in
effect.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. LEVIN. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. SESSIONS. I ask unanimous consent that the order for the quorum
call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SESSIONS. Mr. President, I am pleased today to support the
confirmation of Mr. William J. Lynn, III, for the important position of
Deputy Secretary of Defense. He will be the chief deputy to the
Secretary of Defense, the largest Department of Government, with great
responsibilities for weapons systems and to our men and women who serve
in harm's way.
If confirmed, Mr. Lynn would be the thirtieth deputy secretary. I
firmly believe that he is uniquely qualified for the position and would
serve well in that post. He served as Under Secretary of Defense-
Comptroller during President Clinton's administration from 1997 to
2001. He was widely commended for providing strong managerial emphasis
on improving the Department's financial management.
In addition to his service as comptroller, he has served as Director
for Program Analysis and Evaluation and as Assistant Secretary of
Defense for the Budget. He has broad experience with many of the core
issues within the Department of Defense.
My meeting with him was positive and I have heard people comment on
his strong character. Many of the issues that come before the
Department of Defense are contentious. Rather than basing decisions on
merit, people often try to infect those decisions with politics. I
believe he will stand firm to ensure that our men and women in uniform
get the best equipment and training for the best value. This type of
judgement is a critical attribute for a deputy. If the deputy is weak;
if he compromises or tries to play politics with a defense contractor,
or allows a Member of Congress or the executive branch to have undue
influence, he can damage the reputation of the Department of Defense.
More importantly, such influence can prevent our servicemembers from
getting the best equipment at the best value in a timely manner.
He also has 6 years of experience working in the defense industry. He
well understands the challenges facing both the defense industry and
the Department of Defense.
I am convinced his experience in DOD, coupled with his experience in
the defense industry, makes him a nominee we can support for this very
important position.
I yield the floor.
The PRESIDING OFFICER. The Senator from Michigan.
Mr. LEVIN. Mr. President, I thank the Senator from Alabama for his
statement. It is a very important and
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valuable statement. He is a highly valued member of the Armed Services
Committee and comments coming from him will have an impact on this
body. I am grateful.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. WICKER. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Nelson of Florida). Without objection, it
is so ordered.
The question is, Will the Senate advise and consent to the nomination
of William J. Lynn, III, of Virginia, to be Deputy Secretary of
Defense?
Mr. LEVIN. Mr. President, have the yeas and nays been ordered?
The PRESIDING OFFICER. The yeas and nays have not been ordered.
Mr. LEVIN. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second? There is a
sufficient second.
The question is, Will the Senate advise and consent to the nomination
of William J. Lynn, III, of Virginia, to be Deputy Secretary of
Defense?
The clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. DURBIN. I announce that the Senator from Massachusetts (Mr.
Kennedy) is necessarily absent.
Mr. KYL. The following Senator is necessarily absent: the Senator
from New Hampshire (Mr. Gregg).
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 93, nays 4, as follows:
[Rollcall Vote No. 62 Ex.]
YEAS--93
Akaka
Alexander
Barrasso
Baucus
Bayh
Begich
Bennet
Bennett
Bingaman
Bond
Boxer
Brown
Brownback
Bunning
Burr
Burris
Byrd
Cantwell
Cardin
Carper
Casey
Chambliss
Cochran
Collins
Conrad
Corker
Crapo
DeMint
Dodd
Dorgan
Durbin
Ensign
Enzi
Feingold
Feinstein
Gillibrand
Graham
Hagan
Harkin
Hatch
Hutchison
Inhofe
Inouye
Isakson
Johanns
Johnson
Kaufman
Kerry
Klobuchar
Kohl
Kyl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Lugar
Martinez
McCain
McConnell
Menendez
Merkley
Mikulski
Murkowski
Murray
Nelson (FL)
Nelson (NE)
Pryor
Reed
Reid
Risch
Roberts
Rockefeller
Sanders
Schumer
Sessions
Shaheen
Shelby
Snowe
Specter
Stabenow
Tester
Thune
Udall (CO)
Udall (NM)
Vitter
Voinovich
Warner
Webb
Whitehouse
Wicker
Wyden
NAYS--4
Coburn
Cornyn
Grassley
McCaskill
NOT VOTING--2
Gregg
Kennedy
The nomination was confirmed.
The PRESIDING OFFICER. Under the previous order, the motion to
reconsider is considered made and laid upon the table.
The President will be immediately notified of the Senate's action.
____________________