Eric Lipton / New York Times – 2006-06-19 23:26:47

http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2006/06/18/MNG36JG8831.DTL&type=politics

High Pay is Draw, but Potential Conflict Arises
As Many Deal with Agencies They Used to Run

WASINGTON (June 18, 2006) — Dozens of members of the Bush administration’s domestic security team, assembled after the 2001 terrorist attacks, are now collecting bigger paychecks in different roles: working on behalf of companies that sell domestic security products, many directly to the federal agencies the officials once helped run.

At least 90 officials at the Department of Homeland Security or the White House Office of Homeland Security — including the department’s former secretary, Tom Ridge; the former deputy secretary, Adm. James Loy; and the former undersecretary, Asa Hutchinson — are executives, consultants or lobbyists for companies that collectively do billions of dollars’ worth of domestic security business.

More than two-thirds of the department’s most senior executives in its first years have moved through the revolving door. That pattern raises questions for some former officials.

“People have a right to make a living,” said Clark Kent Ervin, the former inspector general of the department, who now works at the Aspen Institute, a nonpartisan public policy research center. “But working virtually immediately for a company that is bidding for work in an area where you were just setting the policy — that is too close. It is almost incestuous.”

Federal law prohibits senior executive branch officials from lobbying former government colleagues or subordinates for at least a year after leaving public service. But by exploiting loopholes in the law — including one provision drawn up by department executives to facilitate their entry into the business world — it is often easy for former officials to do just that.

Michael Petrucelli, for example, who was once acting director of citizenship and immigration services, moved within months of leaving his post in July 2005 to a job in which he lobbied the Coast Guard, another unit of the department, to test a power-supply device made by his new employer, GridPoint.

Victor Cerda, within a few months of his 2005 departure as acting director of the agency that handles the detention of illegal immigrants, was hired by a company that is a top contractor for that agency. With Cerda’s help, the company is now seeking millions of dollars in new agency business.

In their new roles, former department officials often command salaries that dwarf their government paychecks. Carol DiBattiste, who made $155,000 in 2004 as deputy administrator at the Transportation Security Administration, earned more than $934,000 last year from ChoicePoint, a Homeland Security Department contractor she joined in April 2005, the same month she left the agency.

Ridge, the former secretary, stands to profit handsomely now that Savi Technology, a maker of radio frequency identification equipment that the department pushed while he was secretary, is being bought by Lockheed Martin. He was appointed to the Savi board three months after resigning from the department and has been compensated with an undisclosed number of stock options that Lockheed will presumably need to buy back. In the coming weeks, Ridge says, he plans to open his own domestic security and crisis management consulting firm.

The shift to the private sector is hardly without precedent in Washington, where generations of former administration officials have sought higher-paying jobs in industries they once regulated. But veteran Washington lobbyists and watchdog groups say the exodus of such a sizable share of an agency’s senior management before the end of an administration has few modern parallels.

“It is almost like an initial public offering in the stock market,” Scott Amey, general counsel at the Project on Government Oversight, based in Washington, said of the booming domestic security market. “Everyone wants a piece of it.”

For two years, Hutchinson, a onetime U.S. senator and a current candidate for Arkansas governor, served as undersecretary for border and transportation security, supervising the 110,000 employees charged with guarding the nation’s borders, ports and airports. His transition from public service to the for-profit world could serve as a primer for others.

Hutchinson began his negotiations to enter private industry months before he resigned. On March 2, 2005, the day after he officially left the department, he began work at Venable LLP, a Washington law and lobbying firm that represents major domestic security contractors like Lockheed Martin.

Federal law prohibits executive branch officials from negotiating for a future job with companies they oversee. Hutchinson complied with this provision by signing a waiver in December 2004, vowing to be “disqualified from participating personally in any particular matter that would have a direct and predictable effect on Venable.”

Hutchinson was soon representing clients including Intelligenxia, a data-mining software company seeking domestic security business; ImmuneRegen BioSciences, a pharmaceutical company that sells anti-radiation drugs; and Global Computer Enterprises, which wants to expand its computer software and systems sales to the department.

Hutchinson opened a second for-profit venture in Arkansas, his home state, starting a firm he called Hutchinson Security Strategies. He enlisted a former department aide, Betty Anderson Guhman, who was not senior enough at the agency to be subject to the one-year lobbying ban.

Guhman says she interacts regularly with Homeland Security officials on visits to Washington, as she did recently, meeting with W. Ralph Basham after his nomination as commissioner of customs and border protection.

Hutchinson said the presence of a business partner at such meetings was not meant to circumvent the lobbying ban. “When I am not at a meeting,” he said, “I am not at the meeting.”

Nine months after leaving the department, Hutchinson moderated a private briefing and reception in Washington for senior domestic security officials and industry representatives given by Saflink, a Bellevue, Wash., manufacturer of fingerprint and other identification technology. The event focused on two transportation security programs that Saflink intended to bid on and that Hutchinson, who had been named to Saflink’s board, helped create at the department.

Thanks to the participation by Hutchinson and others, the briefing achieved its goal of “solidifying Saflink’s position as a leader in this area in the minds of key government decisionmakers,” Glenn Argenbright, Saflink’s chief executive, said in describing the event to industry analysts.

Hutchinson said he was convinced that the session did not violate the lobbying ban. “A panel discussion forum is not lobbying by any standard whatsoever,” he said.

The biggest potential for profit among Hutchinson’s ventures appears to come from his role as an investor in Fortress America Acquisition, a domestic security investment firm for which he also acts as an adviser. The company raised $42 million last year by selling stock through an initial public offering. Hutchinson, before the stock was sold publicly, bought 200,000 shares for $25,000. At Friday’s trading price the stock was worth more than $1.2 million. (He cannot sell those shares for at least two years.)

Given the demands of running for office, Hutchinson chose not to renew a one-year contract with Venable in March. Calculating how much he earned through all these endeavors over the last year is difficult. His financial disclosure form filed in Arkansas in May as part of the governor’s race says only that in 2005 he made more than $12,500 — the maximum amount available to check off on the state disclosure form — from at least four different domestic-security-related ventures, not including the department itself.

Hutchinson acknowledges that in one year he earned more than he ever did in one year as undersecretary at the Homeland Security Department, but he declined to give an estimate of his earnings.

What troubles Amey of the Project on Government Oversight are not the lucrative paychecks earned by former officials like Hutchinson, but what he sees as an effort to disregard the spirit of the lobbying ban in pursuit of those rewards.

“It is a dirty way to get around the conflict-of-interest and ethics rules,” Amey said. “It is legal. But is it appropriate? I don’t think so.”

The law that governs the so-called post-employment life for federal officials was enacted in 1962. It prohibits senior officials from “any communication to or appearance” before their former government department or agency on behalf of another for one year from the date they leave their job. There is also a lifetime ban on communicating with anyone at the department in connection with “a particular matter” in which the former official “participated personally and substantially.”

A separate law prohibits certain former federal employees, like program managers or contracting officers, from accepting a job with a company they supervised for a year afterward if a contract involved exceeded $10 million.

Robert Coyle, the designated ethics official for the Homeland Security Department, said he believed that former department executives were almost universally honoring the rules. “We can argue about what the law should be,” Coyle said, “but let’s not tar people with misconduct because they are doing something that is permissible under the law.”

But the experience in the short life of the agency shows that the law often does little to prevent former officials from moving quickly to lobby the government on domestic security matters on behalf of their new bosses or clients.

Perhaps the biggest loophole was created in late 2004 at the request of senior department officials, when the first big wave of departures began. The Office of Government Ethics approved a request by the department to split it into seven components for the purposes of the ethics rules. Once in the private sector, most former department officials were prohibited for one year from lobbying the same component where they once worked.

That meant that Petrucelli technically complied with the ethics rules, even though he left the Homeland Security Department and within months started pitching GridPoint products to the Coast Guard. The reason: The Coast Guard is not part of the component that contained Petrucelli’s former agency, Citizenship and Immigration Services.

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