March 1, 2017

Trump pick for Air Force boss frustrated auditors with lucrative, murky consulting for nuclear weapons labs


South Dakota School of Mines & Technology

Heather Wilson.

A federal inspector contacted the Energy Department fraud hotline a few years back to flag irregularities in contracts that several nuclear weapons laboratories had signed with a former New Mexico Congresswoman whom President Trump has designated to become the new Air Force Secretary.

A far-reaching probe ensued in Washington after the hotline contact, which ended in a demand that the weapons labs give back nearly a half-million dollars to the government. The former Congresswoman, Heather Wilson, has said she did not do anything wrong in trading on her Washington experience to become a “strategic adviser” to the labs.

But internal Energy Department documents newly obtained by the Center for Public Integrity make clear that some of the contracting irregularities stemmed from demands specifically made by Wilson in her negotiations with the labs.

Wilson’s nomination now represents the last chance for President Trump to get one of his first choices for service secretary installed. Army secretary nominee Vincent Viola, a Wall Street trader with a personal net worth estimated at $1.8 billion, withdrew from consideration on Feb. 3. The challenges of breaking ties with his businesses “have proven insurmountable,” Viola’s camp said in a written statement. Then on Sunday, Navy secretary nominee Philip Bilden stepped aside. He cited worries that submitting required ethics documents describing his business connections would cause “undue disruption and materially adverse divestment of my family’s private financial interest.”

If confirmed, Wilson would oversee billions of dollars-worth of military work by the Lockheed Martin Corp., whose subsidiary ran one of the nuclear weapons labs that hired her from 2009 to 2011, starting a day after she left Congress. Wilson’s work involved using her contacts in Washington to try to gin up new federal business opportunities for the privately run weapons labs.

But the labs got into trouble by billing the government for her work, and one of them was accused of effectively using federal funds to lobby for more federal funds, a violation of law, according to the Energy Department’s Inspector General. The lab’s manager, the Sandia Corporation, agreed to pay a total of $4.7 million dollars to the government to settle the case, although it too denied any wrongdoing.

According to investigators, Wilson refused from the outset to provide a detailed accounting — at any time — of how she did her work while earning fees from Sandia and from the Los Alamos National Laboratory totaling $20,000 a month.

Refusing to account for her time constituted an exception to DOE contracting rules, and it flummoxed some of those within the department, and even within the labs, who were tasked with ensuring that taxpayer funds were being prudently spent, according to notes kept by the investigators who probed the contracts. The contracting officials became upset about the arrangement, and one of them eventually rebelled by blowing a whistle through the hotline.

Two paychecks for one meeting, auditors said

They complained in part that Wilson’s silence about how she spent her time had blocked their efforts to determine whether she was billing the labs fairly or improperly collecting fees from more than one laboratory for doing essentially the same work. They also expressed uncertainty that Wilson had met a contractual requirement that she devote 50 hours a month to meeting each of the labs’ needs.

On at least two occasions while working as the head of a consulting firm she established after leaving Congress, for example, Wilson occupied a single seat at government meetings in Washington, but collected two paychecks from firms running separate labs, which subsequently each billed the government for these expenses.

Wilson “billed both LANL [Los Alamos] and SNL [Sandia] full consultant costs,” inspector general investigators wrote about a June 2010 White House meeting Wilson attended. “Invoices do not describe work performed that was unique to each laboratory.” She billed the labs in the same way after unspecified December 2010 meetings in Washington, DC.

“Due to the lack of work product, we were unable to prove or disprove the potential issue of duplicative services,” said Felicia Jones, a spokeswoman for the Energy Department’s Inspector General Office, in a Feb. 16 email to the Center for Public Integrity about the notes, which were obtained under the Freedom of Information Act.

The contracts that govern federal payments to the private firms that operate the Sandia laboratory, based in Albuquerque, and the nearby Los Alamos National Laboratory require clear evidence of the work that subcontractors such as Wilson conduct, as one of several conditions for reimbursement by the government. “Examples of such evidence are work products and invoices with sufficient detail regarding the time expended and nature of the actual services provided,” an Energy Department Inspector General’s report in June 2013 said.

But a Sandia laboratory contracting official told investigators in an interview on Jan. 29, 2013, that when Sandia requested that Wilson fill out a time record, “Ms. Wilson refused to do it.” An official at Los Alamos similarly told the investigators that “Ms. Wilson was very direct with him, stating that she was not going to account for her time in any detail.”

“He said…Ms. Wilson stated…she does not need to do that for Sandia and she was not going to do it for them,” according to the investigator’s notes. Wilson also asserted “the $10,000 a month fee was not negotiable. That…was her fee to government clients, and her regular fee to commercial accounts was much higher,” said the official, whose name was redacted from the documents.

Asked this month in emails for comment about this account, Wilson did not respond. She also did not respond to phone calls.

A contract arranged at the top

According to the investigators’ notes, Wilson wasn’t pressed further by the labs to detail her work because her contract had been blessed by the labs’ top officials. At the time, Los Alamos was reeling from a $300 million budget cut handed down by the Congress that Wilson had just left, a contracting official told investigators during an interview on Oct. 11, 2012. Los Alamos’ managers also understood Wilson had consulting arrangements with intelligence agencies in Washington that they hoped would give the lab new work, according to the investigator’s notes.

“The director wanted an agreement with Ms. Wilson,” another Los Alamos contract administrator told investigators on Oct. 22, 2012. He was referring to then-director Michael Anastasio, who left his position in June 2011. Several telephoned requests for Anastasio’s comment were not returned.

Similarly, a manager for the contractors that operate Sandia said during an interview on Nov. 15, 2012 that Sandia eyed Wilson immediately as a prospective consultant after she lost a Senate primary the summer before she left Congress. “Ms. Wilson had contacts with people at the highest levels of government” and would be a valuable asset to “assist with strategic planning” by the corporation’s top executives, who were the “end-users” of her services, the manager said.

Sandia also wanted her to set up a national speakers program, which she did. But the contracts with Wilson were done without competition, and “it appeared that there were a number of resources that could have provided these services at a lower cost to the government,” a contracting official at the National Nuclear Security Administration (NNSA), who was responsible for helping oversee Sandia’s work, told investigators during an interview on Jan. 29, 2013. A Los Alamos contracting official who called the deal “weak” similarly said “there were people readily available that could provide the same type of advice as Ms. Wilson.”

At Los Alamos, Wilson’s invoices were supposed to pass through three levels of inspection. However, the language of her work agreement prohibited one of the clerks assigned with that task from contacting Wilson directly. Another clerk tasked with ensuring that Wilson earned her paycheck told investigators she accepted “informal” descriptions of Wilson’s work over the phone. And a manager at Los Alamos responsible for administering Wilson’s contract admitted he had been “lax” by stopping his reviews of her invoices after the first two or three months.

In fact, the manager expressed surprise when he learned from investigators that Wilson’s work for Los Alamos had gone on for 19 months and cost the lab — and consequently the government — $190,000, without required documentation of the work that had been done.

When Wilson’s contracts crossed their desks, some NNSA officials immediately eyed them with suspicion, given how soon they came after she left Congress. One NNSA official working in the agency’s oversight office at Los Alamos shared his impression with investigators “that after Ms. Wilson lost the election she reached into the Treasury for a money grab,” according to a copy of the investigator’s interview notes. Another NNSA official “wondered if this agreement was a ‘soft landing’” for the ex-congresswoman, who had supported the labs’ funding during her congressional tenure.

No monthly tasks specified

The investigators found multiple signs of contract irregularities. A paragraph requiring that all work result in clear “deliverables” appeared in a draft of her work orders, but was removed from the versions she signed. No concrete month-to-month tasks were spelled out in the Los Alamos deal, because the lab’s global and national security divisions refused to endorse any.

One of the NNSA auditors at Los Alamos who approved the wording of these contracts told investigators that “he felt he was pressured” into doing so by more senior officials there “pushing the contract,” and that he feared retaliation if he did not. The claim was not substantiated by the inspector general, however.

Ironically, Wilson’s contracts explicitly stated that she “shall not engage in any activity specifically related to obtaining, retaining, or facilitating business or business opportunities for the respective National Laboratories” — evidently because those are non-reimbursable expenses.

“Despite these prohibitions, our examination of relevant documentation at both Sandia and Los Alamos tend to indicate such activities,” the investigators’ summary said. For example, “At Los Alamos… [Wilson’s firm] arranged meetings with and/or site visits by senior Federal officials who had the ability to impact both funding and future work at the Laboratory in the intelligence area.”

At the same time, Wilson “failed to produce any actual reports,” one of the lead investigators of the Sandia contract said.

In an email to the Center in 2015, Wilson denied she ever directly lobbied on behalf of Sandia. “And I did not contact any federal official – Congressional or Executive – to try to extend the Sandia contract,” Wilson wrote. However, she did not respond to questions about her work for Los Alamos or discuss the issue of drumming up new business for the labs under their existing contracts.

When Wilson announced her second run for the U.S. Senate in 2011, her work with Sandia and Los Alamos was terminated. However, Sandia kept a no-fee agreement with Ms. Wilson “in order for her to keep her clearance,” the same Sandia manager who said Wilson was hired for her high-level political connections told investigators. The arrangement gave Wilson access to classified government secrets for the duration of her candidacy in an election that she ultimately lost to Sen. Martin Heinrich (D-N.M.), who serves on the Senate Armed Services Committee where Wilson faces confirmation.

Sandia spokesperson Heather Clark said Wilson’s clearance through the lab remained active until 2013, when it was transferred to the Department of Energy. Clark called Sandia’s no-fee contract for purposes of keeping Wilson’s clearance active “rare,” but said “Sandia was not seeking to gain any favors.”

“Sandia knows clearances take a long time to reinstate,” Clark said. “In the interest of government efficiency and cost savings for taxpayers, we used this no-fee contract so she could keep her clearance.”

Overseeing federal work by a former client

If confirmed as Air Force Secretary, Wilson would be responsible for negotiating contracts with and holding accountable some of the same contractors that employed her as a consultant. Sandia Corp., the wholly-owned subsidiary of Lockheed Martin that operates Sandia National Laboratory, paid Wilson $226,378 between January 2009 and March 2011.

Wilson’s work for Sandia began Jan. 4, 2009, one day after she left Congress, where she spent 10 years representing a district including Albuquerque, New Mexico. Records from a separate 2014 probe by the inspector general’s office showed Wilson coached lab executives that they could extend their contract to run the lab by telling Washington decision-makers that “competition is not in the best interest of the government.” In August 2015 Sandia reached a settlement with the Justice Department over its use of federal funds to finance her work that called for its payment to the government of $4.7 million, but admitted no wrongdoing.

Los Alamos National Security, LLC, a consortium consisting of Bechtel, BWXT Government Group, URS (since acquired by AECOM) and the University of California that operates Los Alamos National Laboratory, paid Wilson $195,717.52 between August 2009 and February 2011. Wilson also received approximately $30,000 from the contractors that ran the Nevada National Security Site and Oak Ridge National Laboratory during that time.

Trump announced Wilson as his choice for Air Force secretary on Jan. 23. Wilson hasn’t submitted the required pre-confirmation financial disclosure to the Office of Government Ethics. Her confirmation hearing before the Senate Armed Services Committee has not yet been scheduled.