when they were asked, and by whom to work for Northrop. Will you do that? Mr. JONES. I will. And to be correct, perhaps the proper answer would be other than Burchinal who was firsthand because I was the one that offered the job. The other two, others offered the jobs. I asked that a review be made myself and I asked were there any conflicts or were there any improprieties and I was assured not-advised not by my people. Senator PROXMIRE. Who did the review for you? Mr. JONES. Legal counsel, outside counsel, senior vice president, administration and operations. Senator PROXMIRE. Identify those people for the record-not now, but for the record-when you give us this information. Will you do that? Mr. JONES. I will. [Additional information submitted by Mr. Jones follows:] Question. Please provide summaries of any pre-retirement job discussions between corporate officials and General Hansen, General Burchinal, and Captain Whidden. Which corporate officials reviewed these cases? What did they find? Answer. Hansen Mr. Hansen began his terminal leave from the Air Force on or about December 22, 1973 and retired on December 31, 1973. He was offered a consulting position with Northrop's Aircraft Division by letter dated December 19, 1973 and signed by Welko E. Gasich. There were no other pre-retirement job discussions. Burchinal There were no pre-retirement job discussions with Mr. Burchinal. Whidden Mr. Whidden was scheduled for mandatory retirement after 30 years' service in June 1973. However, Mr. Whidden was hospitalized in late 1972 for a kidney ailment; the Navy then began processing him for an early, medical retirement. While hospitalized, Mr. Whidden submitted his résumé to Northrop. In January 1973, while Mr. Whidden was still in the hospital and while his medical retirement was being processed, Mr. Holcombe of Northrop offered Mr. Whidden a position with the corporation. In March 1973, Mr. Whidden's medical retirement was approved by the Medical Evaluation Board, effective April 1, 1973. Mr. Whidden did not accept Mr. Holcombe's offer until after the processing of his retirement had been completed, and he began work for Northrop on April 12, 1973. The duties performed for Northrop by Whidden and Burchinal were reviewed by Frank R. Smith, Assistant General Counsel, and John Richardson, Corporate Director of Industrial Relations, with ultimate review by Frank W. Lynch, Senior Vice President-Administration. They concluded that the duties performed by Whidden and Burchinal do not involve any conflicts of interest. As a consultant rather than an employee, Mr. Hansen was not part of the review. Senator PROXMIRE. Now your company seems to have hired an inordinate number of retired military officers who were put to work in some sort of intelligence gathering or customer relations position. As you may know, there are two laws which limit the activities of retired military officers. One in particular, the noncriminal law against selling supplies and materials to the Department of Defense, has been interpreted as applying quite broadly. To your knowledge, have any retired military officers employed by Northrop forfeited their pensions so that they could engage in prohibited activities under this law? Mr. JONES. I have no knowledge of that. I would like to comment that I, too, was-when I saw in one of the reports that Northrop had a large number of military hirees reporting-two thingsI looked into it. One, that our deployment of airplanes requiring officers or individuals experienced in logistics support, supply and maintenance, we find that the Air Force retirees who have had that direct experience had nothing to do with selling. The largest portion of these officers that were hired in the last 3 years, by far the largest portion, were in those areas of technical maintenance, logistics support and product support. I also would like to say that we do have a policy and enacted it after your law passed which, although we weren't required to, our policy was to require that each hiree notify the proper people in the service that he left. We made sure that his job description was accurate and our policy then follows up afterwards to hear what the response of that service is. So I think it's fair to say that we have tried very hard to adhere to the specific analysis of each case through this policy and through other means. Senator PROXMIRE. How many former Defense Department employees do you have on your payroll? Can you tell us, roughly? Mr. JONES. I can't give you that number accurately. Senator PROXMIRE. Will you tell us that for the record and also indicate how many generals, admirals or flag-rank people you have? Mr. JONES. Yes. [Additional information submitted by Mr. Jones follows:] Question 1. How many retired military officers or former DoD civilian employees are currently employed by the company? Answer. Northrop has 190 retired regular military officers on its payroll, eleven of whom are flag rank. Northrop employs five former officials of the Department of Defense. Senator PROXMIRE. Colonel G. J. O'Rourke's duties are described as "providing information concerning changes in customer policies and practices which might affect Northrop business prospects." Do his duties include contacting DOD officials to determine changes in their thinking? Mr. JONES. I'm not familiar with this man's duties and operations. Senator PROXMIRE. Yes, sir. Mr. JONES. I cannot-I do not have that knowledge. Senator PROXMIRE. Will you find that out and let us know for the record. Major General Winston Wilson's duties are similarly described. Do his duties include any contacts with Department of Defense officials to determine changes in their plans or their possible future needs? Mr. JONES. I would prefer to respond with his activity report. Senator PROXMIRE. You're saying you do not know in his case and will find out? Mr. JONES. I can't firsthand give you the total range of the activities of each of these employees with accuracy; no. [Additional information submitted by Mr. Jones follows:] Question. Describe, in detail, the duties of Colonel G. J. O'Rourke, General Winston Wilson, Captain Wynn Whidden, and Colonel S. W. Towle with the company. Have any of these officials at any time had any liaison duties with the Department of Defense or a military service? Have any been involved in the provision of or planning for corporate entertainment of government officials? If so, please describe such duties. Mr. Whidden's job description is submitted. (See Appendix III (B) p. 194.) Mr. Wilson's duties are described in his consulting agreement dated September 23, 1975 and the Statement of Work attached thereto. (See Appendix III (B) p. 196.) Mr. Towle's duties are described in his consulting agreement dated January 13, 1976 and the Statement of Work attached thereto. (See Appendix III (B) p. 203.) As of January 31, 1976, Mr. O'Rourke's consulting relationship with Northrop was terminated. Mr. O'Rourke's duties were to provide Northrop with analyses of the Federal budget and of DOD's planning, programming and budgeting. Mr. Whidden's duties include some liaison with DOD, which consists of obtaining information and providing information on general trends and requirements and general Northrop capabilities. His duties do not include providing or planning corporate entertainment for government officials. Mr. Wilson has no DOD liaison duties. Provision and planning of corporate entertainment for government officials is an ancillary part of Mr. Wilson's functions. In prior years, he was involved in the planning of hunting activities at the Northrop facility and, in 1974–75, in making arrangements for the Masters Golf Tournament. (See p. 57.) Mr. Towle maintains liaison with DOD to obtain information about DOD planning and requirements. An ancillary part of Mr. Towle's activities is the provision of corporate entertainment to government officials in the form of meals. It should be noted that Mr. Towle retired from military service in 1946. Mr. O'Rourke's duties included some liaison with DOD, although his analyses of the Federal budget and DOD planning were based largely on data gleaned by Mr. O'Rourke from public documents. Mr. O'Rourke's duties did not involve the provision of or planning for corporate entertainment of government officials. Senator PROXMIRE. Now the draft DCAA audit report of August 6, 1975, quotes a Northrop official as saying "Colonel Towle represents a unique capability to Northrop in terms of discreet liaison with very senior Air Force officers." Did his duties include discreet liaison to discuss service procurement plans, needs, or company programs? Mr. JONES. No, I don't believe so. Colonel Towle was a longtime employee of Northrop in the Washington area and we are always concerned, especially if we find something is going awry in one of our systems, that we want to pick up as soon as possible problems before they develop and so Colonel Towle is a person who just served relatively small Senator PROXMIRE. What bothers me and I think would bother almost anybody else is this word "discreet." Why not out in the open and let everybody know about it? Mr. JONES. It is out in the open. I don't know why people use words like "discreet." All of these things are really in the open, for anyone who wants to find out. Senator PROXMIRE. These aren't my words. These are from the DCAA audit report. It says, "He represents a unique capability to Northrop in terms of discreet liaison with very senior Air Force officers." This is what a Northrop officer told them. Mr. JONES. He was our representative in Washington for years and it was known that we carried him as a consultant and I don't think he wore a nametag but it wasn't intended to be covert. Senator PROXMIRE. Well, we're not talking about whether he's well known. I'm sure as a high former official and perhaps a high official in your company he might be well known. I'm talking about whether his relationship with various procurement officials in the Air Force was discreet or well known and if it was discreet, why was it? Mr. JONES. I don't think it was procurement. Senator PROXMIRE. How many people do you carry as consultants in the Washington, D.C. area? Mr. JONES. I'd have to provide that number to be accurate. Senator PROXMIRE. Now both Captain Whidden and General Wilson appear to have been highly involved in the entertainment of Government officials at the hunting lodge. It is particularly interesting to note that Captain Whidden was at the hunting lodge several times when two officials from the Navy Aircraft Plans and Requirements Division, his former division, were also present. These two officials were Macon S. Snowden and Humphrey B. Lansden. Did he at any time, to your knowledge, discuss future Navy aircraft plans or Northrop capabilities with these two officials or any other Navy officials? Mr. JONES. I couldn't answer that. Senator PROXMIRE. You don't know whether he did or not? Senator PROXMIRE. Did you order him not to discuss such matters either at the hunting lodge or any other place? Mr. JONES. No. Senator PROXMIRE. He was free to do it? There was no restriction on it? Mr. JONES. I don't know what his superior instructed him. I did not. I know Captain Whidden and Wilson both liked to shoot geese. [Information submitted for the record follows:] Question. Did Captain Whidden at any time discuss the F-18, VFAX, company production plans and problems, future Navy aircraft needs, elements of Northrop or Northrop's competitor's bids, or any other business matters with Captain Snowden, Captain Lansden, or any other officials of the Navy Aircraft Plans and Requirements Division? Did the corporation take any steps to assure that he would not contact former subordinates or other employees of this division on such matters? Answer. Mr. Whidden has discussed none of the referenced subjects with any officials of the Navy Aircraft Plans and Requirements Division except future Navy aircraft needs, which Mr. Whidden has discussed only in terms of general performance criteria and general budgetary considerations. At the outset of his employment by Northrop, Mr. Whidden was instructed by James V. Holcombe, Vice President and Manager of Domestic Field Marketing, not to do anything with his former Navy colleagues that might give rise to a conflict of interest. Senator PROXMIRE. Mr. Jones, I have introduced legislation as you may have heard when I asked the previous witness, which would temporarily ban the employment after retirement of any Government procurement official by a company which had a direct interest in a contract he had helped award or administer. Do you have any comments on the desirability of such legislation? Mr. JONES Yes. I think it needs to be specified very carefully so it actually does what you want, but I think it would be helpful if it was specified carefully what is meant by a procurement officer and what is meant by direct involvement with the company. With that, I think it would be helpful; yes. [Additional questions and answers for the record, see Appendix III (C), p. 209.] Senator PROXMIRE. Well, gentlemen, I want to conclude by saying that the record we have made here this morning has begun to bring into the light of day a problem that's been growing for several years in the dark corners of industry-government relations. The problem is pressure and influence, not overt pressure, but an insidious variety that stems from consciously cultivating a network for friendships and obligations through numerous favors and benefits such as offers of employment. We have heard that these relations between industry and Government are merely the results of normal needs to exchange information between buyer and seller, but the record shows that these activities go far beyond exchanging information and far beyond what is permitted by Federal policy. We have heard that this buyer-seller collaboration is of necessity very close during the planning and production phases of procurement, but that "an arm's-length" posture exists during source evaluation and selection. That may be the ideal-certainly it should be, but in fact what we see is that defense contractors and agency personnel are locked in the same hospitable embrace doing the minuet as well as the waltz and two-step. We are always being told that the industry is fiercely competitive, yet the evidence shows that some of the competition is to see who can lavish the greatest number of "freebies" on the broadest number of officials under the guise of public relations or Government relations or product promotion. There is a question of whether some of these firms are in the airframe business or the resort business. It's hard to escape the conclusion that these cozy relationships between buyers and sellers distort and enfeeble competition and they generate cost overruns and disguise them. They collaborate to frustrate the spending of every taxpayer's dollar. Earlier today, we heard that the Government has tough standards to prevent prejudice to the procurement process through this kind of insiduous influence. Tomorrow, we will examine how tough those standards really are and what some agencies are doing to put teeth in these standards. Gentlemen, I want to thank you very much for your testimony. The hearings are recessed until 10 o'clock tomorrow in room 1114. in the first floor of this building. [Whereupon, at 1:05 p.m., the hearing was adjourned.] |