Mr. President, I come to the floor to talk about the nomination of Mr. Bill Lynn to be Deputy Secretary of Defense.
I thought I'd 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's scenic countryside about 20 miles from the Capitol. There they dug up the remains of what I came to know about Mr. Lynn some ten years ago.
A little word of advice to my colleagues; archive all of your materials. I have found that political nominees, good and bad, come back like Australian boomerangs. Some take longer than others to return, but eventually you'll see them again.
Mr. Lynn is currently employed as a Senior Vice President of Government Operations at a major Department of Defense (DOD) contractor – Raytheon. Until June 2008, Mr. Lynn was registered as Raytheon's principal lobbyist to the DOD.
I have serious questions about this 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 signed on January 21, 2009.
I think it is important for me say to what ethics means to me. Everyone has different ideas as to what ethics represent. This is a complex issue, and I don't want there be any confusion about this word or principle.
The Merriam-Webster Dictionary defines the word - ethic – 1. "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 a very uncomplicated principle of life. Simply put, when faced with tough choices or decisions, we must always do what is true and correct.
Throughout the presidential campaign, then Senator 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" sections of those rules, Mr. Lynn should be barred from serving as Deputy Secretary of Defense until July 2011.
At a recent press conference, President Obama again stated, "Everyone will acknowledge that we have set up the highest standards ever for lobbyists not working in the administration."
I don't see how Mr. Lynn fits the new standard.
I understand Mr. Lynn has been given a special waiver by this Administration to further "the public interest." He is also not the only nominee to get a waiver.
President Obama, will you ever draw the line on your ethics waivers?
According to a letter I have received from OMB Director Peter Orszag on 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.
I must note that Mr. Lynn's former colleague at Senator Kennedy's office and current White House Counsel, Mr. Gregory Craig, signed off the ethics waiver.
I also clearly understand that President Obama's picks for these key positions should be respected, but he is applying double-standards to his nominees.
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 one year at DOD unless he receives a special waiver.
Regrettably, for Mr. Lynn, and for the American taxpayers, getting rid of conflicts of interest is not as easy at is sounds. The Raytheon Corporation has hundreds of potential contracts and programs with the DOD. As such, I think the Office of Government Ethics will have to set up a full-time department just to handle Mr. Lynn's conflicts of interest Raytheon waivers.
On the other hand, I believe the best leaders lead by example. Say what you mean. 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 Ethic Commitments by Executive Branch Personnel.
Special waivers and exemptions undermine the basic principles of good government. Changing the rules as you go along tends to foster a basic sense of distrust of the government in all Americans.
Why make rules if you know you are going to break them?
How can gutting the ethical heart of the new ethics rules be in the public interest when those very same rules were created in the first place to protect the public interest?
Even the "best-qualified" nominee with the "highest recommendations" 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 in two years. 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 ethic rules.
As it stands now, unfortunately, the Lynn nomination is now rolling down the low road at high speed.
By setting the new rules aside for the first top-level appointee to come down the pike, the Obama administration appears to embrace the very same culture President Obama promised to change.
Now, none of us know for sure whether Mr. Lynn's nomination is truly in the public interest.
We can only hope it is.
My second area of concern pertains to Mr. Lynn's financial management record at the Pentagon.
Mr. Lynn served as the Chief Financial Officer (CFO) at the Defense Department from November 1997 through 2000.
I first came to know Mr. Lynn in 1998 after he was appointed CFO. Between June 1997 and July 1998, I conducted an in-depth investigation of internal financial controls at the Defense Department. I was testing DOD internal controls.
I reviewed about 200 financial transactions from a Pentagon office where fraud had occurred. We examined purchase orders, contracts, invoices, delivery verifications or receipts, and finally 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. The report concluded that internal controls at DOD were weak or non-existent. The Government Accountability Office (GAO) [then called the General Accounting Office] concurred with my assessment.
Our investigation 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 DOD 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 (DFAS) center in Denver, Colorado.
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 DD-250 forms. The rest of the files contained none. Of the 6 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 Denver center had authority to alter remit addresses and were doing it. This was a violation of another basic internal control principal - 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 comments.
In his response dated September 28, 1998, Mr. Lynn did not challenge the findings.
In this letter, Mr. Lynn appeared to agree with all my findings and recommendations – 100 percent.
He said 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 that 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, Secretary Cohen offered identical assurances.
While Secretary Cohen and CFO Lynn were assuring me - over and over again - that they were taking steps to tighten internal controls, they were already quietly moving in the opposite direction. They were busy pushing other policies to weaken and undermine internal financial controls.
In 1998, when Mr. Lynn was CFO, "Pay and Chase" was the Pentagon lingo used to describe the DOD vendor payment process. With "Pay and Chase," the Pentagon paid bills under $2,500 first and then worried about chasing down receipts later. Sometimes receipts were found; sometimes not; and nobody seemed to care either way.
This is how DOD ended up with billions of dollars in unmatched disbursements - another big control problem with which CFO Lynn was thoroughly familiar.
"Pay and Chase" accurately characterized the core DFAS problem that I witnessed during my review of internal controls in 1997-1998. I saw "Pay and Chase" up close and personal.
"Pay and Chase" was unofficial policy. It was actively practiced but not authorized by any government regulations or laws.
As I understand it, "Pay and Chase" was supposed to end in October 1997 when the DOD General Counsel determined that it was illegal. But it didn't.
Secretary Cohen wanted to legalize "Pay and Chase" and make it the law of the land.
On February 2, 1998, when Mr. Lynn was CFO, Secretary 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). It was touted as a measure to "streamline" DOD payments.
Fortunately, the Congress rejected this absurd and misguided legislative proposal.
I discussed Secretary Cohen's "Pay and Chase" proposal in great detail in a speech on the floor on May 5, 1998 [pages S4247-4250]. I placed Secretary Cohen's request in the Record at that time.
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 to him this way: "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?
Today, as the Chief DOD Lobbyist for Raytheon, Mr. Lynn says it was wrong. As the DOD CFO back in 1998, why didn't Mr. Lynn know it was wrong and speak up about it?
My records appear to indicate that "Pay and Chase" continued as the unofficial policy through 1998 and eventually evolved into or merged with another more troublesome policy known as "Straight Pay." This policy was more dangerous. The "Straight Pay" policy had a much higher dollar threshold than the old "Pay and Chase" plan. Believe it or not, it was a whopping half-million dollars.
"Straight Pay" was Mr. Lynn's baby. This policy was personally approved by Mr. Lynn in a memorandum on December 17, 1998 and re-authorized in another memo on March 9, 1999 and possibly again later on.
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 them out for me.
Prior to the implementation of "Straight Pay," the DFAS center at Columbus, Ohio, had a pre-validation policy that required that all disbursements over $2,500.00 be matched with obligations or contracts prior to payment. 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. In practice, that did not always happen.