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After months of discussions with the Pentagon, the Senate Armed Services Committee has lifted a 25-year-old rule designed to limit financial conflict-of-interest issues among the Defense Department's top nominees.

The rule, unique to the defense panel, required senior Pentagon officials holding pensions from defense contractors to buy an insurance policy, or surety, to lock away the value of their benefits.

Committee leaders outlined a new standard in a Friday letter to Defense Secretary Donald Rumsfeld, stipulating that senior Pentagon officials with pensions must consult with the department's ethics office before acting "in any particular manner which is likely to have a direct, predictable, and substantial effect on the financial interest of the former employer."

Defense Department ethics officials must then determine whether the benefits of an appointee participating in a certain action outweigh "any appearance of impropriety." If it does, the ethics official must authorize the officials' participation in writing.

The sole company used by the Defense Department to insure pensions decided earlier this year to no longer do so, a move that initially held up the nomination of Navy Secretary Gordon England to be deputy defense secretary, the Pentagon's No. 2 civilian position. England is a former executive at Lockheed Martin and General Dynamics, and holds pensions from those major defense contractors.

Armed Services Committee Chairman John Warner, R-Va., has said over the last several months that he did not want to change the rule. On Tuesday, he told reporters potential conflict-of-interest issues remain a concern to the committee.

While the pension-surety policy is pulled for the foreseeable future, the committee's new standard requires the Defense Department to "continue to actively pursue the possibility of attaining private surety." The department must report its progress to the panel at least on a yearly basis.

So far, the department has been unable to find a firm with affordable premiums, according to the letter, signed by both Warner and Armed Services ranking member Carl Levin, D-Mich.

The Armed Services Committee eventually waived its policy for England's nomination, approving it in late July.

But the nomination has been tied up since then by Sen. Olympia Snowe, R-Maine, who initially placed a hold on England because of concerns surrounding base-closure recommendations.

Despite a decision by the independent commission to save one of two Maine bases targeted for closure, Snowe has continued the hold, largely due to concerns about plummeting shipbuilding budgets. England continues to hold his previous position as Navy secretary, while also serving as the acting deputy defense secretary.

COMMENTS

• Once again the great Congress has missed the point! "England is a former executive at Lockheed Martin and General Dynamics, and holds pensions from those major defense contractors." Appointees and civil servants at the top level of Defense should not be allowed to come from any major defense contractor or the military! Major would be a firm (including its subs) with contracts exceeding $50 million. Also, Defense top management positions should not be filled with retirees! The insurance policy is old news and bad policy to begin with. The positions should not be filled by players from the military-industrial complex. It is no wonder that the Defense Department and services attempt to never change - their top management only knows the current ways and there is little hope to fill meaningful policy decision positions with people who might have new ideas that are better! It is seen in the new attempt to get unqualified audits on financial statements. The Defense financial people and those in the services have no clue of what is involved in accrual accounting and we are highly unlikely to get anyone in a policy position that does! The Defense Department cannot even differentiate between an expense being when payment is made or when the goods are delivered. taxpayer Posted September 29, 2005 6:03 AM