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Biden Preserves Key Ethics Loopholes For New Appointees

Biden’s ethics order will limit one revolving door loophole, but not the loopholes his cabinet picks used to make their fortunes.
Biden Preserves Key Ethics Loopholes For New Appointees
Chip Somodevilla / Getty Images

This report was written by Julia Rock and Andrew Perez.

President Joe Biden’s new administration is cracking down on “shadow lobbying” and closing revolving door loopholes — but the initiative preserves at least some of the loopholes that many of his cabinet picks used to enrich themselves after their service in the Obama administration. It also allows the ethics rules to be waived by an office run by Biden’s political appointees.

Biden issued an ethics order Wednesday evening that would poke holes in a notorious Washington con — one where former government officials quickly join lobbying firms and devise strategies to influence their former government colleagues without making any official lobbying contacts themselves, a common way to evade post-employment restrictions and avoid having to register to lobby.

Under the new order, executive branch appointees must agree not to lobby their former agencies for two years. Further, the pledge adds, appointees must say that “for a period of one year following the end of my appointment, I will not materially assist others in making communications or appearances that I am prohibited from undertaking myself.”

But there are other forms of shadow lobbying. Several Biden nominees, for instance, worked as high-priced corporate consultants.

“One of the biggest gaps in ethics laws is that we don’t require strategic consultants to register as lobbyists,” Mandy Smithberger of the Project on Government Oversight told The American Prospect.

Other Biden picks served on corporate boards, easy jobs that pay extremely well. Some gave paid speeches to corporate giants and industry lobbying groups, while others worked at corporate-funded think tanks. So far, senators have demonstrated little interest in exploring Biden nominees’ private sector work, at least publicly.

On Thursday, more than 40 advocacy groups sent a letter to the Biden administration arguing that the financial disclosure filings published so far “provide insufficient details on the nature of work your nominees and appointees have performed for their clients, making it nearly impossible to determine the full scope of the potential conflicts.” The coalition demanded more information about appointees’ consulting work and their investments.

The Biden ethics order, like the two previous administrations’ codes, prohibits appointees from participating in matters involving their former employers or clients for a period of two years. But the order allows the administration to grant waivers releasing officials from the code if they decide “it is in the public interest.”

Waiver decisions will be made by the Office of Management and Budget (OMB) in consultation with the counsel to the president, according to the order. Biden’s OMB director nominee, Neera Tanden, leads the Center for American Progress, a think tank that has been funded by corporate and foreign interests.

Clients With Business Before Their Agencies

Senate committees have already held hearings on Biden’s secretary of state pick Tony Blinken, defense secretary nominee Lloyd Austin, and his newly-confirmed director of national intelligence, Avril Haines. The trio faced few questions during their hearings about their work on behalf of defense contractors.

Blinken, a former deputy secretary of state, co-founded the strategic consulting firm WestExec Advisors. As The Daily Poster previously reported, WestExec marketed itself to big corporations as “a diverse group of senior national security professionals with the most recent experience at the highest levels of the U.S. government.” They used the motto: “Bringing the Situation Room to the board room.”

WestExec kept its client list secret, though Blinken had to disclose his clients as part of his government financial disclosure. Some of the companies Blinken worked with regularly have business before the State Department — including the aerospace manufacturer and massive defense contractor Boeing, private equity firm Blackstone, and social media giant Facebook.

According to his ethics pledge, Blinken plans to sell his stakes in WestExec companies, which are worth as much as $6 million, within 90 days of being confirmed.

Blinken has also been a partner at a private equity firm called Pine Island Capital that has been investing in the defense sector and building a team of former top national security officials and congressional leaders.

The firm has told investors it is uniquely poised to capitalize on “increased demand in the U.S. defense market for advanced electronics, communications, sensor and detection processing and other technologies that enhance the modernization efforts of the Department of Defense’s military readiness.”

Senators on the Foreign Relations committee did not ask Blinken any questions about his work for WestExec Advisors or his affiliation with Pine Island Capital during Tuesday’s hearing.

The committee has not yet released records of any written questions submitted to Blinken, but is reportedly seeking more information about the work that Blinken did for his WestExec clients, as well as a full client list for the firm.

"How Do You Pronounce It?"

Haines, the new director of national intelligence, worked alongside Blinken at WestExec, and listed her title as “principal” on financial disclosures.

The Senate Intelligence Committee asked Haines in written questions to disclose who her clients were at WestExec and the topics she advised those clients on. Her clients at WestExec included JPMorgan, Microsoft, Open Philanthropy, and Facebook, according to the disclosures.

Haines said that she does not have any relationships or investments that would create conflicts of interest in her response to the committee’s general questionnaire.

Only one senator asked Haines during her confirmation hearing Tuesday about her work with WestExec, and it was mostly embarrassing.

Sen. John Cornyn, R-Texas, first had a bit of a Hilaria Baldwin moment, stumbling over the name WestExec, before asking Haines: "How do you pronounce it?" The firm’s name is pronounced exactly like any normal person would expect. Haines helped Cornyn anyway, and told him “well done” after he gave it another try.

Cornyn then asked Haines whether she was a “principal” or a “contractor” at WestExec — both terms that she had used in her written disclosures. Cornyn suggested that a person could not be both a “principal” and a “contractor.” Haines said her title didn’t have a substantive meaning, and that she only consulted for the firm about “one day a month.”

The Texas senator later asked if Haines had been involved in conversations at the company regarding its China-related consulting projects. Haines said she had not.

Haines separately consulted for the controversial data-mining firm Palantir, which has worked with U.S. intelligence and law enforcement agencies, but she received no questions about her work for the company.

Haines was confirmed by the Senate Wednesday evening.

Not Seeking An Ethics Waiver (Yet)

Austin, the defense secretary pick, served on the board of defense contractor United Technologies Corp. and later Raytheon after the companies merged. He’s also been a partner at the defense-focused private equity firm Pine Island Capital.

Austin has pledged to divest his holdings from Raytheon within 90 days of his confirmation, and could make up to $1.7 million from selling his shares in the company.

During Austin’s confirmation hearing before the Senate Armed Services Committee, Sen. Elizabeth Warren, D-Mass., asked Austin to clarify whether he plans to recuse from matters involving Raytheon for a period of four years — two years beyond the period required by Biden’s ethics rules. Warren also pressed Austin to commit to avoiding seeking a waiver to get out of recusing.

Austin said that he will extend his recusal to four years. He added that “with respect to the issue of seeking a waiver, I do not expect to do that or to need one. But if such an unanticipated circumstance were to arise, I would consider available alternatives to a waiver before seeking one, and would consult very carefully with agency ethics officials.”

Warren also asked whether Austin would make any commitments regarding the private sector work he would do after his time in the Biden administration. Austin said he would not seek a job as a lobbyist or sit on the board of a defense contractor again after leaving office.


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