The Fourteenth Major Frank B. Creekmore Lecture

• Author: Brigadier General (ret.) Richard J. Bednar
• Pages: 06

286 MILITARY LAW REVIEW [Vol. 175

THE FOURTEENTH MAJOR FRANK B. CREEKMORE LECTURE1

BRIGADIER GENERAL (RET.) RICHARD J. BEDNAR2

5 December 2002

Thank you for that warm and generous introduction. I can hardly wait to hear what I have to say. I am glad for a couple of things this morning. Number one, I did not fall and drive cinders into my face as I did one time when I was scheduled to speak at the JAG School. That was the running accident I had that was mentioned a moment ago. Second of all, I was si

ting up here on this stage, with one leg over the other, and I said, "Thank God my socks match today," which is not always true, is it?

When I agreed to be your Creekmore lecturer, I had heard about this event. I was very much taken with the fact that a number of very distinguished persons have preceded me, almost all of whom I know personally, which says only that I have been around in this business for a very long time. But then I read the fine print, and I saw that long ago Major Creek-more actually pursued a fraud case against one of our clients. I wondered whether I had to get a conflict clearance in order to come here and make this presentation. But those were days long ago. Lockheed is now part of Lockheed Martin, of course, and a leading aerospace and defense contra

tor insofar as procurement dollars are concerned, and certainly a leader of the DII.

What I have tried to do and what I intend to do with you for the next hour and a half or so is to build on the theme of Creekmore's legacy, and that is a judge advocate who took on government contract fraud, and also a theme that is in keeping with the general subject of this seminar, namely, the Contract and Fiscal Law Seminar. So I have gone back in history for twenty years, and in doing that I do not mean to suggest for a moment that we had no contract fraud in the Defense Department prior to twenty years ago. I am not suggesting that at all, but we needed a beginning point. I could have gone back to the Revolution because I am sure the farmers were ripping off the Patriots as they marched into battle even then because the history of government contracting is a history of abuse and reform in a very real sense. I went back twenty years, first of all, because that spans a very interesting time frame, and also it gives us a reasonable period of time within our history to consider.

Another reason for going back twenty years is that the early 1980s were really the best of times in a very real sense. Procurement dollars were literally pouring into the Pentagon at a rate faster than they could be wisely spent. This was the Reagan era. President Reagan's vision was to build up our national defense apparatus so that we would eventually end the Cold War in one way or another. I do not think Reagan ever had in mind exactly the way the Cold War did end; namely, by the implosion of the Soviet Union in circumstances where we literally outspent them.

I do not think that President Reagan ever had that vision, but I do think that by building up the defense of this country the way he did in the early 1980s, it contributed strongly to the demise of the Soviet Union and the end of that era. It was a boom period in defense spending; literally a billion dollars a day were being poured into not only procurement, but were also being spent by the Defense Department. We had the vision of a 600-ship Navy, and a lot of aircraft were under development and were going into production. So those were the good times.

In addition to that, the early 1980s were, in a very real sense, the worst of times because the defense industry was mired in corruption, both inside and outside the Pentagon. The typical form of wrongdoing in the early 1980s was that unscrupulous procurement executives, all of whom were civilian and none of whom were Army, if that should make any difference to our consideration, would steal and convert to their own use precious

procurement information and sell it to corrupt "consultants" outside the Pentagon who, in turn, would resell that precious procurement information to defense contractors. Some of these defense contractors bought it unwittingly, not knowing that the information they were buying from the consultant was acquired in the manner I just described. But, I think a number of them also knew that what they were buying had to have been stolen from within the procurement planning apparatus within the Pentagon. It was terrible corruption. Not only that, but it was also an era when bribes and gratuities were frequently being paid in order to steer the award of important defense contracts to the payer of the bribes and the gratuities.

Again, the corruption was not limited to defense contractors alone. The corruption extended, unfortunately, to within the walls of the Pentagon, as well. You will remember some of these instances, I am sure. Some of you are old enough to remember the era of the four-hundred dollar hammer, the seventy-four hundred dollar coffee maker, and some of those other abuses. I can remember the four- or five-hundred dollar toilet seat. Those were some of the abuses that were going on. Incidentally, we looked into the reason why the coffee maker for the C-5A aircraft cost so much, and the real reason is that it was designed to withstand 17 Gs. When you design anything to withstand 17 Gs, that is going to cost a lot of money. Now the wings of the airplane would fall off at 17 Gs, but the coffee maker would survive, so the aircraft accident investigators would be assured of hot coffee when they arrived on the scene. That is the inside story about that. So, again, that was a time of abuse.

Another reason for these expensive spare and replacement parts, quite frankly, is that too often the people inside the Pentagon were lazy. They would order these things from the aerospace contractor. For example, if you order a box of screws from the XYZ Corporation, and they pass it through all of their engineering and evaluation and acquisition process and add all that overhead to it, you are going to come up with a pretty expensive end item. That is part of the explanation why the spare parts in particular cost so much money.

Operation Ill Wind was the largest procurement fraud investigation in the history of our nation, bar none. "Operation Ill Wind" was the term used because that investigation was initiated to pull us out of the mire. The operation was led by a colleague named Henry Hudson, who at the time was the U.S. Attorney for the Eastern District of Virginia. Cases brought involving defense procurement fraud quite commonly are brought in the

District Court for the Eastern District of Virginia because of its proximity to the Pentagon.

Here are some statistics illustrating the magnitude of the investigation. Operation Ill Wind involved a thousand investigators and prosecutors. Many of the investigators, by the way, were Defense Criminal Investigative Service (DCIS) and Army CID personnel. I do not know if we had any judge advocates involved in that or not, quite frankly. Over 800 subpoenas were issued by the grand juries (plural) that Henry Hudson worked with, and the investigation included two million documents. Ninety companies and individuals were ultimately convicted, and a good number of those were debarred from government contracting. This whole process took a long number of years. They were still gaining convictions when I went to Crowell & Moring in 1987. Operation Ill Wind was still bearing the fruit of its efforts.

With respect to the wire taps, they got authority to wire tap a number of people inside the Pentagon and some of these consultants. The first couple of weeks after I went to Crowell & Moring in 1987, I had occasion to listen to some of those wire taps because the firm was representing some of these individuals who ultimately were prosecuted, and some of them were convicted. The funniest one I remember is a discussion between a guy on the outside and this procurement executive inside the Pentagon. The conversation goes something like this: "Did you deposit the money yet?" "Yeah, it's been deposited." "Where is it?" "Well, just like we arranged. It's deposited in your Swiss banking account." "My Swiss banking account, huh? Is that right?" "Yeah." At the other end, "Well, tell me how do I get the money out?" So as sophisticated as some of these crooks were, they didn't know the answer to that question; and by the way, the guy on the phone didn't know either. So that was always an entertaining thing to consider.

The major forms of wrongdoing that were unearthed during this era- we are still in the early 1980s-were these crimes: bribery and illegal gratuities; misuse of procurement information; mail and wire fraud; a lot of conversion of government documents, including classified documents, which was the subject of a companion investigation because there were so many classified documents that were stolen and sold under this process that I earlier described to you; and, of course, false claims and false state-

ments. The Office of the U.S. Attorney did a wonderful job and eventually cleaned that mess up.

I think, and you will agree with me after we go through the review that I am about to make, that in the last twenty years we have seen more success in combating procurement fraud, and we have had fewer scandals and problems. I really believe that. I really believe that we have risen from the mire of twenty years ago. It has been a slow process. It has taken a lot of resources. It has taken a lot of new statutes and regulations, but the defense industry has pulled out of that mire. At the same time, I personally fear that we are on the edge of the mire again, and I think there is a real danger that we are about to slide into that slop in short order. Why do I say that? Well, first of all, almost all of our investigative resources at the federal level are now being devoted not to procurement fraud, but to chasing the terrorists-to...