September 28, 2023

Senator Warren Renews Calls for Transparency and Oversight at DoD’s Investment Office

“I remain concerned that DoD has not taken sufficient steps to prevent profiteering by Office of Strategic Capital Special Government Employees” working for defense consulting and investment firms

Text of Letter (PDF) | Response from OSC (PDF)

Washington, D.C.  – United States Senator Elizabeth Warren (D-Mass.) sent a letter to Heidi Shyu, Under Secretary of Defense for Research and Engineering at the Department of Defense (DoD), reiterating her request for increased transparency from the Office of Strategic Capital (OSC) and seeking clarification on how DoD is interpreting ethics restrictions. The letter follows up on a July letter that raised concerns that OSC’s use of special government employees (SGEs) who simultaneously work for defense consulting and investment firms creates clear conflicts of interest.

“DoD has made an important commitment to accountability and transparency in promising to publicly release OSC’s investment strategy, but further action is necessary,” wrote Senator Warren. “I urge DoD to tighten its rules, make these SGEs financial disclosure forms public, and require these SGEs to publicly list all of their firms’ clients and investments that could stand to benefit from OSC’s activities.”

Last year, DoD created the OSC to help integrate efforts across the Department to develop and implement partnered capital strategies that would result in shaping investments in critical technologies. Since then, reports have revealed that OSC employs two consultants working simultaneously for defense consulting and investment firms, giving them access to information to benefit their investments. In their response to Senator Warren’s July letter, OSC indicated that these SGEs may help establish selection criteria or other policies.

“This creates a direct and predictable effect for companies, which is likely to include WestExec clients and New Vista Capital investments,” wrote Senator Warren. “The ability to monitor and prevent these conflicts of interest is further undermined since their financial disclosure forms are not made available to the public.”

In the letter, Senator Warren also raised concern “that DoD’s interpretation of current ethics law restrictions is overly narrow, creating a massive – and absurd – ethics loophole” and highlighted her Anti-Corruption and Public Integrity Act which would require most executive branch employees, including SGEs, to recuse themselves from matters that are likely to financially benefit a current or previous employer, or current or previous client from the preceding four years.

“While Congress continues to consider DoD’s request to fund and authorize this office we need more evidence that the responsible use of any new authorities will include meaningful checks on self-dealing and revolving door influence-peddling,” concluded Senator Warren.

Senator Warren has been consistent in her fight to strengthen ethics rules to fundamentally change the way our federal agencies and their employees do business.

  • In June 2023, Senator Warren and Representative Andy Kim (D-N.J.) introduced the Department of Defense (DoD) Ethics and Anti-Corruption Act to limit the influence of contractors on the military, constrain foreign influence on retired senior military officers, and assert greater transparency over contractors and their interaction with DoD.
  • In June 2023, Senator Warren and Representative Jayapal reintroduced the bicameral Judicial Ethics and Anti-Corruption Act, legislation to strengthen our nation’s judicial ethics laws, impose an enforceable code of conduct on the Supreme Court, and ban federal judges from owning individual stock.
  • In December 2022, Senator Warren sent a letter to Defense Secretary Lloyd Austin raising a series of questions for the Department of Defense (DoD) regarding press reports that former Google chief executive officer Eric Schmidt used his positions on defense advisory boards to further his own financial interests. 
  • In October 2022, Senator Warren sent two letters to Under Secretary of Defense for Acquisition and Sustainment, Bill LaPlante urging the Department of Defense (DoD) to insist on receiving certified cost data to justify any adjustments for inflation to current contracts and another to David Norquist, President and Chief Executive Officer of the National Defense Industrial Association (NDIA), expressing concerns that their lobbying efforts to increase the Pentagon’s budget to account for inflation could be violating post-government ethics restrictions.
  • Senator Warren has also fought to preserve existing ethics laws, including defeating a DoD provision in the fiscal year 2021 National Defense Authorization Act to weaken post-government lobbying restrictions.
  • In May 2022 Senator Warren and Representative Jayapal introduced their Judicial Ethics and Anti-Corruption Act (S. 4177, 117th Congress) to overhaul our nation’s judicial ethics laws and restore public faith in our court system.
  • In February 2022, Senator Warren introduced the Political Corruption Review of Infractions for Misconduct by Executive Servants (CRIMES) Act (S. 3582, 117th Congress), to strengthen the Hatch Act, which is a federal law that bars executive branch employees from engaging in partisan political activities using their official title, or taxpayer-funded government resources, and prevents sitting presidents from using the federal government as an arm of their political campaigns. 
  • In July 2021, Senator Warren released a statement on the Senate Armed Services Committee’s bipartisan adoption of her amendment to raise the recusal standard for Department of Defense employees. Under her amendment, Pentagon officials will be prohibited from participating in matters that affect the financial interests of their former employer, former clients, or former direct competitors for four years.
  • In March 2021, Senator Warren sent a letter to Secretary of Defense Lloyd Austin praising his decision to suspend dozens of Defense Department advisory boards and relieve hundreds of appointees to these boards pending a “zero-based review.” In the letter, Senator Warren also called for improvements as the Department of Defense (DoD) considers candidates for repopulating the boards that survive DoD's review.
  • In December 2020, Senator Warren and Representative Pramila Jayapal (D-Wash.) reintroduced the Anti-Corruption & Public Integrity Act to fundamentally change the way Washington does business and restore the American public's faith in democracy, including by creating a new, independent anti-corruption agency dedicated to enforcing federal ethics laws and by expanding an independent and empowered Congressional ethics office insulated from Congressional politics.