Senator Warren probes Pentagon program hiring Wall Street recruits with $400k+ salaries

Sen. Elizabeth Warren, D-Mass., is raising concerns about the Defense Department's plan to recruit private sector professionals in a bid to improve contracting and capital allocation, warning in a letter shared first with CNBC that it could present "significant conflict of interest and revolving door concerns."

Key Points

• Sen. Elizabeth Warren is raising concerns about the Defense Department's plan to recruit private sector professionals to improve contracting and capital allocation.
• The Pentagon has taken several steps to lure individuals away from top banks on Wall Street and into the government as it reshapes its relationships with industry.
• The letter is addressed to Pentagon No. 2 Stephen Feinberg and Office of Strategic Capital Director David Lorch.

U.S. Secretary of Defense Pete Hegseth and Sen. Elizabeth Warren (D-MA). Alex Wong | Tasos Katopodis | Getty Images

Background on the Program

The Pentagon created the Business Operators for National Defense (BOND) program in February to embed private sector talent within the department's acquisition process. Reporting from The New York Times and The Wall Street Journal has since revealed that the Office of Strategic Capital (OSC) is also seeking private-sector help and offering salaries of more than $400,000, along with opportunities for access to capital in the future, to lure employees away from Wall Street.

Warren's Concerns

"I have held longstanding concerns over potential conflicts of interest, revolving door abuse, and national security concerns in DoD's acquisition process," Warren said in the letter sent late Tuesday. "Now I am concerned about the national security implications and the corruption concerns posed by DoD's BOND initiative and Wall Street investor team and urge DoD to implement the necessary guardrails and oversight to fully address these concerns."

Warren took particular concern with reporting from The New York Times that said a headhunting firm had prepared slides for Pentagon recruiting that dangled both access to high-level U.S. and international government officials and access to fundraising channels. It is not clear that the DoD approved the slides.

Broader Context

Warren sent the letter as the Trump administration continues to blend the private sector and government in often unprecedented ways — including by taking equity stakes in companies producing goods essential to the national interest. The administration has also come under intense scrutiny for some of its dealmaking, some of which has muddled the line between typical government work and self-enrichment for the president, his family and cabinet members.

The Pentagon did not immediately respond to a CNBC request for comment.

Specific Questions Raised

In the letter, which is addressed to Deputy Defense Secretary Stephen Feinberg and Office of Strategic Capital Director David Lorch, Warren asked nearly three-dozen questions about the Pentagon's courting of private industry professionals. Before his current role as No. 2 in the Pentagon, Feinberg was co-CEO of Cerberus Capital Management, and Lorch was a managing director.

Jim Watson | AFP | Getty Images

Feinberg set up the Economic Defense Unit at the Pentagon, which works with the Office of Strategic Capital.

Warren asked the pair to:

• List all industry experts associated with the BOND program, along with all of the companies they are affiliated with.
• Clarify whether BOND participants will be classified as government employees.
• Detail the ethics rules and vetting requirements for participants.
• Disclose whether any BOND participants or individuals hired from Wall Street to the OSC previously worked at Cerberus.

The senator also asked for:

• A line-by-line budgetary description of how the Pentagon plans to use the $88 million it requested for BOND.
• How the department plans to use the $189 million it requested for the Economic Defense Unit.
• How the department plans to use the $20.2 billion it requested for "it" (further details not specified in the original text).