Warren Raises Conflict of Interest Concerns About Pentagon Division, Private Investment

Sen. Elizabeth Warren (D-Mass.) speaks during a hearing on Capitol Hill in Washington on Sept. 28, 2021. Alex Wong/Getty Images

Sen. Elizabeth Warren (D-Mass.) has raised questions about whether parts of the Department of Defense (DOD) could be “too cozy” with private investment firms.

Ms. Warren, who serves as a member of the Senate Armed Services Committee, broached her concerns in a July 9 letter (pdf) to Heidi Shyu, under secretary of defense for research and engineering at the DOD’s Office of Strategic Capital (OSC), in which the senator asserted there’s a lack of safeguards to “prevent conflicts of interests.”

“While I understand that one of the objectives of OSC is to ‘improve the government’s relationship with the venture community,’ I am concerned that this is resulting in a conflation of interests that creates clear conflicts,” Ms. Warren said.

The OSC was established in 2022 with the aim of collaborating with other government departments and agencies to develop investment strategies for critical technologies, as Ms. Warren outlined in her letter. However, the senator pointed out instances where the office appeared to be too closely aligned with private investment firms.

Ms. Warren was specifically concerned about OSC’s involvement in encouraging government intervention during a run on Silicon Valley Bank, which was seen by some experts as favoring certain companies that were affected by the bank’s failure.

The lawmaker also highlighted that consultants hired by the OSC had ties to private firms, raising questions about their independence and the authenticity of their work.

These consultants are designated as special government employees, subject to some ethics laws applicable to federal employees. However, ethics watchdogs have voiced concerns about the challenges of preventing conflicts, given the consultants’ access to nonpublic political intelligence information.

Warren’s Requests

To address these concerns, Ms. Warren requested information from Ms. Shyu regarding the DOD’s policy for reviewing and assessing potential conflicts. Ms. Warren also asked whether any special government employees at the OSC were required to recuse themselves from specific matters that could affect their outside employers, clients, or investments.

In addition, the senator requested details about the companies that reached out to the OSC concerning the collapse of Silicon Valley Bank and whether any of those companies had past or present connections with office personnel, along with other information about the bank.

Additionally, Ms. Warren asked for copies of all financial disclosure forms from special government employees and questioned whether the DOD required the employees to disclose the clients of their outside employers who were not their own clients.

The lawmaker also had a number of questions about how many special government employees work at the department, as well as waivers and policies that could indicate the DOD’s protection level in the face of possible conflicts of interest.

“The OSC appears to be providing these consultants an opportunity to refresh their rolodexes without having appropriate guardrails in place to protect the public interest,” Ms. Warren said. “As one of the consultants has observed, winning defense contracts is ‘about relationships and connectivity.’”

Ms. Warren also pointed to her Anti-Corruption and Public Integrity Act, writing that under her bill, special government employees who serve for 61 days or longer would be subject to the federal ethics rules applicable to federal employees.

“It would also require most executive branch employees, including [special government employees], to recuse themselves from matters that might financially benefit themselves, a previous employer, or client from the preceding four years,” the senator wrote.

The Department of Defense has been given a deadline of July 28 to respond to Ms. Warren’s questions and provide the requested information.

The DOD did not respond to The Epoch Times’ request for comment before press time.