For immediate release: Feb 18, 2010
WASHINGTON — In a marketplace awash in consulting firms that help defense companies sell to the Pentagon, the Durango Group has a unique advantage.
The Colorado-based firm has become a base of operations for retired officers who also are handsomely paid by the military for their advice. No other defense consulting firm employs more “senior mentors” than Durango. Of the 59 former officers who work for Durango, 15 also serve as mentors, a USA TODAY investigation found.
As Durango associates, the retired officers are paid to help private companies win and administer Pentagon contracts. As mentors, the retirees are paid by the military to help run war games, which also gives them access to classified strategies and weapons systems. Durango cites these mentoring assignments on its website as signs of its associates’ unique connections.
Along with their work for Durango and the military, these retired officers, mostly from the Air Force, are paid advisers, consultants and corporate directors on the boards of at least 20 companies, according to public records. Three of them work for private equity firms to help them identify, buy and then run defense contractors.
Durango’s ability to mix mentoring and consulting work illustrates how closely the private interests of some mentors overlap with their military advisory jobs. The firms’ mentors move seamlessly between roles as paid advisers to the services and paid consultants to defense companies in the same subject areas, USA TODAY found.
As a result, Durango and the mentors it employs draw income from multiple sources. Both get paid by the military for advice and by defense contractors who want consulting help. The firm also benefits from having its mentors serve as corporate directors or advisers for other companies.
That kind of overlap is not illegal. But some analysts say it should be.
“That is an amazing conflict of interest,” said Craig Holman of the non-partisan watchdog group Public Citizen. “They are working for two masters. Are they pursuing the public interest, or are they pursuing the contractors’ interests? … The conflict of interest law ought to be expanded to cover this.”
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Durango is not the only consulting firm staffed by retired generals and admirals who specialize in helping companies win Pentagon contracts. Many such firms, such as Burdeshaw Associates, the Spectrum Group, Dayton Aerospace and Cypress International, include one or more senior mentors.
The military’s senior mentor programs are now the subject of a high-level review ordered by Defense Secretary Robert Gates. Earlier this month, he asked Deputy Secretary William Lynn to review whether mentors are overpaid and whether their work poses a conflict of interest.
In advertising its expertise in space and cyberwarfare, Durango says on its website that its consultants “have led and operated across the full spectrum of command” for the Pentagon. “Durango Group associates can deliver exquisite advice and counsel to government leaders in the space and cyber domains, and help industry fill their most urgent and critical needs.”
For example, Tracking Innovations, a Buffalo-based defense firm, announced in May that it chose Durango’s Robert Bishop as a consultant to help the company add military business. Bishop, a former Air Force lieutenant general, also is a mentor “instructing Air Force and Army senior leaders on Command and Control of Air and Space,” the company said. Durango “has … relationships and strategic insight into Department of Defense and military services,” it said.
Other Durango associates mentor at the nation’s major space war games, public records show, even as they’ve worked for companies, such as aviation giant Boeing, that sell products being tested at those games.
Last month, USA TODAY reported that the military’s senior mentor programs have grown significantly in recent years, with little scrutiny from Pentagon leadership and none from Congress.
In addition to pensions of up to $220,000 a year, retired generals and admirals are being paid up to $1,600 a day to be mentors, and many are earning far more consulting for defense firms.
About 80% of the 158 mentors identified through public records had financial ties with defense firms, but they’re not required to disclose those ties to the military or the public. Because they are retained as contractors, mentors aren’t subject to the conflict-of-interest provisions that would apply if they were brought in as temporary federal employees.
Defense consultants are not required to register as lobbyists if they don’t spend more than 20% of their time talking to Congress or the executive branch political appointees covered by lobbying disclosure rules. Therefore, their fees, clients and activities typically are not disclosed to the public.
A Senate subcommittee led by Sen. Claire McCaskill, D-Mo., also is investigating the mentor programs. Sen. John McCain, R-Ariz., said retired generals should be prohibited from participating in war games that have a bearing on the financial interests of their defense clients.
Such a ban could change the way the Durango Group and others do business.
From its inception, the Durango Group sold itself as a clearinghouse for both military mentors and defense consultants.
The firm’s founder, former Air Force chief of staff Ronald Fogleman, retired in 1997. After leaving the Air Force, Fogleman became “a military-industrial legend,” military columnist William Arkin has written, advising the Pentagon and representing aerospace companies.
Fogleman, now 67, launched Durango in 2005 because, “he was receiving calls all the time from people to do consulting or board work or mentoring,” said retired Air Force general Gregory “Speedy” Martin, Durango’s chairman and fellow senior mentor.
“What he did initially was call up people that he knew … and basically place them” as mentors for various exercises, said Martin, who retired in 2005 as head of the Air Force Materiel Command.
The Durango Group offered a way to formalize the referrals, Martin said.
“It became a brokering operation,” he said.
The Air Force and its contractors would hire Durango, which would then send its in-house mentors to work on various war games and exercises. In fact, Durango sometimes is paid taxpayer dollars to provide pre-approved mentors for the military, and sends whichever of its associates is available and suited for the job, Martin said. Durango earns an administrative fee under that arrangement, he said. Neither Martin nor the Air Force would disclose how much.
Fogleman declined to be interviewed for this story.
Both Fogleman and Martin have been senior mentors for the Air Force. That service declined to release information on how it has used mentors and how much it has paid them, including those at Durango.
Martin also mentors for the Joint Forces Command, he said. Martin acknowledged that as a senior mentor, he gets “useful, current information,” while advising the military. But he said he and other mentors are careful not to use that information in a way that would unfairly benefit their companies or defense clients.
“I try very hard to separate my mentoring duties from any consulting that I do,” he said.
Like most Durango consultants, Fogleman has wide-ranging corporate relationships, including service on the board of directors of six defense contractors and as an adviser to a private equity firm that invests in defense contractors.
Martin also has his own consulting firm whose clients include defense contractor Northrop Grumman, he said. He’s also a partner in the Four Star Group, a private equity firm that invests in defense companies. And he’s a member of the Center for Innovation in Government, sponsored by defense contractor Unisys.
Durango’s connections were cited as its most valuable attribute when the company was purchased in 2007 by Galen Capital Corp., a private equity firm. The transaction was private, so financial details weren’t disclosed.
“Durango will give Galen a competitive advantage in the complex and connection-driven homeland security sector,” Galen said in a news release. “In this industry, connections in the defense establishment have as much to do with success as access to capital.”
These days, Durango says it consists of about 70 “senior associates,” including the 59 former senior defense officials. Because it’s a private company, its revenue is not reported.
Mentors and space policy
Every two years, the nation’s pre-eminent space exercise, the Schriever Space War Games, is held either at Schriever Air Force Base in Colorado or Nellis Air Force Base in Nevada.
The five-day classified event, which focuses on strategies, satellites and weapons systems, is “more than a war game,” Col. Larry Chodzko, who directed the 2007 games, said in an Air Force news release. It helps “shape space strategy and planning through 2025” and leads to “real world policies.”
The games include dozens of retired generals as mentors alongside hundreds of active-duty participants, military documents show.
Three Durango associates have been senior mentors there, including Fogleman, retired general Lance Lord, the former head of Space Command, and retired lieutenant general John Baker, the former vice commander of the Air Mobility Command.
In the 2007 news release, Fogleman said the war game was helpful in “developing national space policy.”
The news release identified Fogleman as a retired general and senior mentor but didn’t make reference to his work for several private companies who have an interest in national space policy. One of Fogleman’s clients, Boeing, had a particular stake in the 2007 exercise.
The company is one of the nation’s largest defense contractors and a major seller of military aircraft and satellites,
According to the Army Space Journal, a key aspect of the games was to examine “operational concepts” related to a high-tech drone, known as High Altitude Long Endurance, or HALE — an unmanned aircraft that flies high and stays aloft for long periods.
In May 2007, two months after the war games concluded, Boeing said it was developing such an aircraft for military uses, according to Jane’s Defence Weekly.
There was no connection with Fogleman, Boeing said in a statement to USA TODAY. Fogleman participated in the war games as a retired general officer, not as a Boeing consultant, the statement released by company spokesman Douglas Kennett said.
“No government information learned in these exercises was shared, and to do so would have been contrary to government and Boeing policies,” the statement said. “Therefore, any timing between an announcement by Boeing about a program under development and attendance at a war game … is totally unrelated.”
The Air Force also said there was no conflict. “Fogleman was not in the area where capabilities (of HALE) were discussed,” a statement released by the Air Force said. “Therefore, the Air Force does not believe there is an apparent or perceived conflict of interest.”
Air Force officials did not respond to a follow-up question asking whether Fogleman had access to the information, as a senior mentor, whether or not he was “in the area.”
Mentors’ activities at the exercises such as Schriever are valuable to their defense clients, analysts say.
“If you have a guy who is inside the tent at an event like that, it’s easier to talk up the concept you are selling,” said James Hasik, an independent defense analyst.