The Project On Government Oversight (POGO) Blog

IG Investigation Spurred by POGO Found Former NRC Commissioner Merrifield Violated Ethics Laws

After raising concerns more than two years ago, POGO has just received hundreds of pages of internal documents, which are a part of a Nuclear Regulatory Commission (NRC) Inspector General investigation, that outline how recently departed Commissioner Jeffrey Merrifield disregarded advice from the NRC’s General Counsel and voted on two matters that “could have potentially” financially benefited three companies—Shaw Group, Westinghouse, and General Electric—during the time he was directly involved in employment negotiations with those companies. The IG investigation found that in the two months before accepting a job created for him at the Shaw Group, Commissioner Merrifield voted both to approve China’s purchase of AP 1000 reactors (in which the Shaw Group had a financial interest) and to change criteria of emergency cooling systems that would directly benefit Westinghouse (of which the Shaw Group owned a 20 percent interest). The Washington Post has already picked up the story.

The IG investigation shows that months before he left his post, Commissioner Merrifield tore down the firewall, which he said he had set up in order to protect himself from potential conflicts of interest, and started making calls and visits to potential employers while he was still a voting Commissioner. The IG determined that Commissioner Merrifield participated in 27 final decisions (votes or opinions on policy proposals that can have binding action) that could have benefited nuclear power plant licensees or licensee contractors and “did not take effective measures to prevent a potential conflict of interest during the last 2 months of his term.” Instead, Commissioner Merrifield designed his own recusal process, which was described in the IG interviews with a former staffer as “weird” and with an industry VP as “odd.” This included verbally informing his staff of recusals but not sharing with them a list of the companies he was recusing himself from voting upon, because as the IG learned when interviewing one of Commissioner Merrifield’s staffers:

Obama's Revolving Door Promise Put to the Test (Again)

Unfortunately, despite President Obama's new restrictions and bans on the revolving door, it could very well be that the spinning never comes to a complete halt. A current cause for concern, highlighted by a recent ProPublica article, involves the nomination of Ignacia Moreno as the head of the Department of Justice's environmental division. While she does have experience there from the days of the Clinton administration, Moreno spent the following five years defending corporations in pollution lawsuits. Her most recent position, and the one raising the most eyebrows, was as environmental counsel for General Electric (GE).

The EPA has a long history of bumping heads with GE. The company has been linked to an astounding 116 toxic waste Superfund sites, but never acquiesces easily. It has spent the past nine years protesting the constitutionality of the Superfund law and continues to drag the battle out with appeals.

Because of Moreno's role defending GE in Superfund cases, several EPA attorneys interviewed by ProPublica question her ability to now enforce that and other important environmental laws. Yet many others don't see a problem, arguing that true professionals can work both sides of an issue and that Moreno's experiences may even give her an advantage in enforcement. Brian Leinbach, a lawyer who has gone up against Moreno several times in court, is one such individual, stating, “She has been one of the big players in defending large corporations against Superfund lawsuits. She is going to have to change her focus 180 degrees, but there is no reason to believe she is not capable of doing that."

Moreno, for her part, has complied with Obama's new revolving door policies by promising that “two years after my resignation from my position with GE, I will not participate personally and substantially in any particular matter involving specific parties in which GE is a party or represents a party unless I am first authorized to participate.” Her nomination has progressed rather quietly thus far, without vocal opinions from national environmental or public interest groups, although ProPublica notes that some smaller groups with closer ties to GE pollution have expressed disapproval.

Despite her vow to recuse herself when appropriate, Ignacia Moreno's nomination should still be evaluated with caution. It's quite possible that her three-line pledge just might not be enough to protect the public interest. If confirmed, however, her case could be a good initial test for Obama's new policies. Since most of his current revolving door bans apply exclusively to lobbyists, clear problems with Moreno would confirm that extra measures are needed to cover more general conflicts of interest.

-- Nina Brekelmans

New Administration, Time for New Downblending Plans

Yesterday, NNSA announced that it has selected a contractor team--WesDyne International, LLC and Nuclear Fuel Services, Inc.--to downblend 12 metric tons (MT) of surplus highly enriched uranium (HEU) into a safer form of uranium, referred to as low enriched uranium (LEU). Frank Munger's Atomic City Underground reports that most of the material is coming from the Y-12 National Security Complex in Tennessee. We are pleased to see that a contractor has been selected, as this particular downblending effort has suffered delays.

However, we would challenge the NNSA's assertion that this contract "is a clear demonstration of our leadership of nuclear nonproliferation efforts." These 12 MT of HEU were actually in the pipeline for downblending before the Obama Administration took office.

If the NNSA really wants to demonstrate "President Obama's unprecedented commitment to strengthening and leading international nuclear nonproliferation efforts," it should immediately designate the approximately 300 MT of HEU at Y-12 excess to defense needs so it can be downblended by 2012.

-- Ingrid Drake

POGO Applauds President Obama's Selection for NRC Chair

POGO is encouraged that President Obama has designated Nuclear Regulatory Commission (NRC) Commissioner Gregory Jaczko to serve as the NRC Chair, thus bumping Dale Klein to a Commissioner's seat. In response to the NRC's botched handling of allegations of sleeping guards at the Peach Bottom nuclear power plant, Commissioner Jaczko pushed for the NRC to change the way it handles allegations and interacts with allegers and their employers, as well as "broadening [the NRC's and power plants] safety culture to include security issues."

We hope that Chair Jaczko will take action to address many of the security vulnerabilities that have been identified by the security forces that guard the nuclear power plants and other experts. However, it's unlikely that Jaczko can make any real change until President Obama appoints a Commissioner to fill the vacant seat, thus breaking the 2-2 tie vote that has resulted in a rejection of recent staff recommendations to improve security at nuclear power plants. This is an opportunity for President Obama to appoint a Commissioner who is dedicated to improving nuclear security, and to show that he is serious about his commitment to preventing nuclear terrorism.

-- Ingrid Drake

New Acquisition Czar Nominee Seems to Get the Problems with Weapons Acquisitions

The Senate Armed Services confirmation hearing for Dr. Ashton B. Carter for Under Secretary of Defense for Acquisition, Technology, and Logistics, Dr. James N. Miller, Jr. for Deputy Under Secretary of Defense for Policy, and Ambassador Alexander R. Vershbow for Assistant Secretary of Defense for International Security Affairs just wrapped up a little while ago. A couple of notes on the hearing for those who missed it:

- Perhaps the most exciting note, consistent with the rumors swirling around in the press, was Dr. Carter saying he will consider cutting programs as he does a "program by program" review. As he said in his advance questions: "If the Department has done its job properly, the cancellation of a multiyear contract should be a rare event. However, there are circumstances under when it could occur. One such event would be the failure to fund a program year. Another would be the failure of the contractor to perform, which ultimately would lead to a decision to terminate for default" (emphasis POGO’s). Additionally, he believes that the Nunn-McCurdy provision already provides the authority to terminate a program breaches this provision.

- Many of the Senators were concerned about getting adequate competition for contracts, given the concentration of the defense industry. Dr. Carter frequently said that competition is the best management tool--"the great discipliner"--in ensuring that the Defense Department and taxpayers get what they need at a reasonable price--we certainly don't disagree. On this note, NextGov's twitter feed points out that President Obama was challenged about the issue of unbundling contracts in order to increase competition in all contracting. Again, something POGO's a big proponent of. President Obama said it's not something we're going to be able to do on everything.

- Dr. Carter said he would support treating missile defense like an acquisition program, which would mean that it would have to meet testing milestones before it could expand.

- When Senator John McCain (R-AZ) asked Dr. Carter about using fixed price contracts, he said that should certainly be the Department's aspiration for programs that have reached maturity.

- Not surprisingly, there was a lot of discussion surrounding the Weapon Systems Acquisition Reform Act of 2009 (S. 454), introduced by Sens. Carl Levin (D-MI) and McCain. Senator McCain said that he doesn't even believe the bill gets at the "magnitude of the problem," including the need for a culture change at DoD. Dr. Carter said that he thought that the proposed legislation addressed many of the problems that occur in the earlier stages of the procurement process, but agreed that there is much more to be done. In the advance questions, Dr. Carter said that he is not satisfied that technology readiness assessments adequately address systems integration and engineering issues at this point in the process that are considered to be the the cause of many cost overruns and schedule delays: "If confirmed, I will direct the appropriate USD(AT&L) offices to ensure that systems integration, systems engineering, and technology maturity issues are properly addressed and coordinated."

Dr. Carter seems to know the challenges he faces. Only time will tell if he can meet them, but we wish him luck.

-- Mandy Smithberger

President Obama Wants to Fix the Broken Contracting System

Today, President Obama announced that he wants new rules to reform the federal contracting system and cut as much as $40 billion in federal spending. Citing procurement overruns, fraud, sole source contracts, a lack of transparency and accountability, and outsourcing concerns, the President hopes to change the old ways of doing business in Washington. His policy shift will hopefully save money and improve government services. This effort makes good on a campaign promise to save billions of dollars.

We will have to wait to see how today's announcement will trickle down through contracting wonks and work in practice. This step, however, is great news given that budgets are getting tighter, and that the government spent over $534 billion for goods and services last year, including contracts for companies that have been convicted of serious misconduct.

The President's actions follow many of POGO's recommendations in its presidential transition paper and the cost savings predicted by POGO in its recent report on increasing revenue and cutting costs.

-- Scott Amey

UPDATE: Click here to watch a video of the President's remarks.

White House No Longer Considering Former Lobbyist for Key DOJ Position

We were very pleased to read in Roll Call today (subscription required) that the Obama administration is no longer considering appointing a former lobbyist to head an important Department of Justice (DOJ) office that oversees legal policy and judicial nominations.

Earlier this month, press reports suggested that the administration's top candidate to head DOJ's Office of Legal Policy was Mark Gitenstein, who as recently as August 2008 was employed by Mayer Brown lobbying on behalf of the Chamber of Commerce, AT&T, Merrill Lynch, and other corporate clients.  The Office of Legal Policy plays a crucial role in advising the administration on judicial selection, and Gitenstein's lobbying disclosure forms indicate that he worked on issues that would almost certainly confront a judicial nominee, including class-action and other legal reforms, and federal preemption of lawsuits filed in state courts.

In January, the Obama administration issued an Executive Order imposing a two-year ban on appointees working on issues for which they had previously lobbied.  It's hard to see how Gitenstein could have possibly been effective at his position if he had to recuse himself from working on issues like class-action reforms.  POGO blog readers might also be interested to learn that from 1999 to 2001, Gitenstein lobbied on behalf of Boeing, Lockheed Martin, General Dynamics, and other defense contractors to weaken the False Claims Act.

Public Citizen took the lead (and POGO and others joined them) in opposing Gitenstein's nomination, and given all the other "uniquely qualified" lobbyists who have received waivers in order to serve in the administration, we're certainly glad to see the revolving door spin a little slower.

-- Michael Smallberg

Not Yet a Junkyard Dog But...

It's no secret to friends of POGO that we were not enamored of the appointment of Mary Schapiro to head the Securities and Exchange Commission (SEC).  We were afraid she had spent too much time working for toothless self-regulatory outfits like the National Association of Securities Dealers (NASD) and the Financial Industry Regulatory Authority (FINRA) to be able to reinvigorate the battered and limping SEC.

But a speech she delivered last Friday gives us hope.  She is making some very strong noises here.  Yes, of course, her actions ultimately will speak more loudly than any words.  But for now we are willing to admit we like what we hear.

For one thing, there was none of that magic-of-the-marketplace talk.  She promised: "A strong and reinvigorated SEC will be on the beat like never before to catch wrongdoers.  But there needs to be a new era of responsibility on Wall Street and throughout our markets to ensure that wrongs don't occur in the first place."

She said that the SEC would move with the sense of urgency demanded by investors who need the SEC to protect them: "Those who break the law and take advantage of investors need to know that they will face an unrelenting law enforcement agency in the SEC--an agency that will pursue them until the full force of the law is the sure, certain, and sole reward for their wrongdoing.  No one should be heard credibly to question whether enforcement is a priority at the SEC.  It is, and always will remain, a foundation of our mission."

Schapiro announced several steps to free Commission staff from rules imposed by her predecessor, Christopher Cox, that had slowed down SEC investigators and impeded their ability to jump quickly into investigations:

1) Ending the so-called "penalty pilot" program which had forced Enforcement staff to obtain special approval from the Commission in cases involving securities fraud where the staff is demanding monetary penalties.  Schapiro said the program had sent the "wrong message" to corporate wrongdoers by introducing major delays and demoralizing the staff.

2) Providing for more rapid approval of formal orders of investigation, without the necessity of a full review at a meeting of all five Commissioners.  This will enable the staff to issue subpoenas for witness testimony and document production without having to wait, sometimes weeks, for a full Commission meeting.

3) Discussing other ways to "reinvigorate the SEC's enforcement program, including improving the handling of tips and whistleblower complaints," something I hardly need say POGO very much applauds.

4) Formation of an Investor Advisory Committee so that the SEC will have early warning of issues of concern to investors.

Schapiro also announced a series of initiatives she wants to pursue "as priorities," including improving the quality of credit ratings by addressing inherent conflicts of interest; reducing systemic risk to investors by promoting and regulating centralized clearinghouses for credit default swaps; strengthening risk-based oversight of brokers and investment advisers; and improving the quality of audits and promoting safe and sound custody of customer assets.

It has also been announced that Linda Chatman Thomsen, the much-criticized head of Enforcement, is leaving that post.  We think it's good that Schapiro will have the chance to name a new chief to that all-important position.  We will be carefully watching to see whom she chooses, and whether she can achieve her goals, but we must admit, we're pleased with the sound of her bark.

-- Beverley Lumpkin

Nothing Is Certain but Death and Taxes--The Revolving Door Doesn't Have To Be

One interesting footnote to Michael's post about Daschle and Killefer withdrawing their nominations: The Hill and many others are harping on how today's New York Times editorial calling for Daschle to withdraw his nomination played heavily on his mind.  And it made me realize that William Lynn must not read the Times. From a Times editorial on January 22:

The new president's actions provided a burst of executive sunshine that Washington badly needs.  Unfortunately, Mr. Obama already wants to make an exception for William Lynn, a former lobbyist for the defense contractor Raytheon, to become deputy secretary of defense.  Mr. Lynn, a respected Pentagon official in the Clinton administration, has the right résumé--except that he was a lobbyist until last year.  This clearly violates the mint-new standard, especially since the Pentagon job is so wide-ranging that recusal on specific issues is impossible.

The White House is hoping for Senate approval nevertheless, arguing that while the president sought the firmest ethics rules, he also believes that "any standard is not perfect," that "a waiver process that allows people to serve their country is necessary." Maybe the Senate will concur that Mr. Lynn is "uniquely qualified" and a waiver is justified.  But this is not an ideal first test of Mr. Obama's exemplary rules.  Voters who heeded the president's campaign message of openness must demand any exceptions to be few and far between. (Emphasis POGO's)

And reconsidering that editorial, I think it raises a question we've asked many times implicitly, that should be raised again explicitly: What is more valuable to the American people: William Lynn, or meaningful ethics reforms to restore integrity to government?

-- Mandy Smithberger

The Taxman Strikes Again: Daschle and Killefer Are Out

Another day, another tax headache for President Obama.

Just a few hours after Nancy Killefer withdrew her candidacy to serve as Chief Performance Officer, we've learned that Tom Daschle has now withdrawn his nomination to head up the Department of Health and Human Services.

Daschle had neglected to pay over $140,000 in back taxes and interest, while Killefer failed to pay an unemployment compensation tax for her household help, resulting in a tax lien of $946 on her home.  Killefer, who was also lined up to serve as the Deputy Director for Management at OMB, would have worked in a new position aimed at eliminating government waste and improving efficiency (you can read her resignation letter here).

And while it didn't sink his nomination, let's not forget that Timothy Geithner, Obama's pick for Treasury Secretary, had some tax problems of his own.  Do Obama's nominees need a lesson in how to use Turbo Tax??

It should be noted that in Daschle's case, there were also concerns about conflicts of interest stemming from his work as a board member at the Mayo Clinic and as an adviser to a health care lobbying firm.  When you consider the fact that Obama has been filling his administration with former lobbyists like William Lynn, this latest news only raises further questions about the President's commitment to restoring government integrity.  In fact, his first two weeks in office have been riddled with a step forward followed by a giant leap backward on the ethics front.  Sorry, but we're still not convinced by the argument that it's simply too hard to run an ethical government free of private interests and tax scandals.

-- Michael Smallberg

Defense Spending: What Goes Up Still "Goes Down"...But It's Up

Not surprisingly, anxiety about government spending is resulting in increased scrutiny of the defense budget.  The Senate Armed Services committee emphasized the need for procurement reform at the Department of Defense (DoD) last week, and Josh Rogin at CQ reports that the Office of Management and Budget (OMB) is also demonstrating their concern (and not just by issuing ethics waivers) by giving the Pentagon a $527 billion limit, excluding war costs.  While the number reflects an eight 2.7 percent increase from their FY2009 budget, it is significantly lower than the 2010 budget request compiled last fall by the Joint Chiefs of Staff, resulting in some declaring the proposed budget to be a "cut."  And in more budget news, the Washington Post reported that DoD's Quadrennial Roles and Missions Review Report indicates that Defense Secretary Robert Gates "has formally adopted the concept that national security planning and budgeting cannot be done by the Pentagon alone" and that other agencies need to be involved.

Talking to people familiar with the budget process, they emphasized that real reform is going to take more than changing the players in the budget process.  Instead, it will require both President Obama and Secretary Gates to make and enforce a clear commitment to cuts--and not allowing managers at the Pentagon to go to Congress to thwart their efforts.  On the latter point, Rogin reports that a spokesman for the Republican leadership of the House Armed Services Committee is ready to fight Obama on the issue. 

Still, Noah Schachtman at Wired's Danger Room blog thinks that this is consistent with real "rumblings" for major cuts to defense programs.  Gates also insists that the defense spending spigot is closing, but we can't help but remember that there are still many who insist that defense spending walks on water.

-- Mandy Smithberger

We Don't Need Any Additional Plutonium Pits

Mark Thompson's article "Obama's Showdown Over Nukes," published in Time Magazine earlier this week, did a great job of highlighting the controversy over Secretary Gates' statements in favor of developing a new series of nuclear weapons and President Obama's clear statements against such a development.

However, in stating that “there is concern that aging pits may fail to detonate properly, or perhaps at all,” the article fails to acknowledge the most current research findings on plutonium pits.  The scientific authority on nuclear weapons, the JASON panel, as well as studies from DOE's own nuclear labs, have concluded that the plutonium pits in the current U.S. stockpile are viable for up to 100 years.

Unfortunately, despite this research, DOE has paved the way for the production of new pits at the Los Alamos National Laboratory (LANL).  In addition to pit production being unnecessary and costly (at least $130 million apiece)--not to mention the fact that it requires the construction of costly new facilities--it also sends the wrong message to the international community about U.S. efforts to drawdown its stockpile.

Also, POGO has doubts about the quality of the new generation of pits after learning that LANL asked for 72 waivers for the manufacturing specifications of pits, and that the new pits would not be subject to the rigorous testing required of those pits currently in our stockpile.

-- Peter Stockton & Ingrid Drake