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US: Pensions from Leading Defense Contractors Impede Confirmation of Pentagon Official

Senate Armed Services Chairman John Warner and Defense Secretary Donald Rumsfeld met behind closed doors this week to work out questions of pension plans for Gordon England, who is up for the Pentagon's No. 2 civilian official. England is a former executive at two of the largest U.S. defense contractors. His pensions are valued at $280,000 a year.

by Megan Scullygovexec.com
June 17th, 2005

Senate Armed Services Chairman John Warner and Defense Secretary Donald Rumsfeld met behind closed doors this week to try to resolve financial conflict-of-interest concerns that are delaying the confirmation of Gordon England as the Pentagon's No. 2 civilian.

Their goal is to quickly work around questions surrounding England's pension plan and bring his nomination to the Senate floor for a vote before the July 4 recess, Warner said Thursday, one day after he met with Rumsfeld.

England's nomination for deputy Defense secretary has been caught in a holding pattern for two months over a 25-year-old committee rule requiring senior Pentagon officials with pensions from private companies to purchase an insurance policy, or surety, that locks the value of their benefits.

The requirement is unique to the Senate Armed Services Committee and was put in place to make sure senior Pentagon leaders do not make decisions on multibillion-dollar defense contracts that might affect their finances.

The rule applies only to pensions held with companies that do business with the Defense Department. Nominees also are required to divest their holdings in those firms.

England, who sailed through an April 19 confirmation hearing, is a former executive at Lockheed Martin and General Dynamics -- two of the largest U.S. defense contractors. Combined, his pensions are valued at $280,000 a year, a Pentagon spokesman said.

MetLife, the sole company that has insured pensions for Defense Department officials, recently made an internal decision to no longer do so, a congressional aide said.

"All wheels" are turning to settle the issue and officially put England in place as Rumsfeld's deputy, Warner said, adding that he is a "quality candidate" for the position.

England, one of the secretary's closest advisers, is dual-hatted as Navy secretary and acting deputy Defense secretary, a position he took over from Paul Wolfowitz last month. Wolfowitz left the Pentagon to serve as president of the World Bank.

During the meeting Wednesday, Rumsfeld told Warner that the Pentagon's general counsel is working on the issue and talking with other companies to find another insurer for Pentagon officials' pension plans, the chairman said.

A less-attractive alternative to Warner and other committee members is to use government funds to insure the pension. The chairman said he is not considering that option "at this time."

Striking or otherwise changing the committee's unique rule also is not on the table, Warner added.

Other Senate committees require nominees to divest holdings in companies related to their posts, and some require a recusal from decisions that might affect the person's finances.

In recent years, the defense industry has become increasingly consolidated, with a large chunk of defense contracting dollars resting in the hands of a few major players. Such an environment would make it difficult for senior Pentagon officials to take themselves out of the contracting process.

Unlike his more polarizing predecessor, England shares wide bipartisan support on the committee and within the Senate. During his two-hour confirmation hearing, England fielded tough questions on Navy shipbuilding and acquisition programs, but committee members expressed general support for his nomination.

"He's a wonderful nominee. He's got bipartisan support," Armed Services ranking member Carl Levin, D-Mich., told reporters earlier this month. "But it is a bipartisan committee position that all nominees that are up for Defense Department positions ... make sure that their own financial interests ... will not create conflicts of interest down the road."





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