DARPA director under investigation for conflict of interest

The Pentagon's Defense Advanced Research Projects Agency is the subject of a new series of audits by the Defense Department inspector general, after a complaint from the watchdog nonprofit Project on Government Oversight.

The audits, which POGO revealed on its website Tuesday, will examine DARPA's general policies on conflict of interest as well as a specific concern that DARPA Director Regina Dugan retains financial ties to her former firm, which has won some $6 million in contracts with the agency.

On May 9, POGO challenged DARPA's ethics policies in a letter to Defense Inspector General Gordon Heddell. "Recent revelations in the press concerning DARPA Director Regina Dugan's continued financial and familial relationship with DARPA contractor RedXDefense raise concerns as to whether DARPA effectively prevents conflicts of interest," wrote POGO Executive Director Danielle Brian. "In addition, press reports about public comments by DARPA Deputy Director Kaigham 'Ken' Gabriel indicate that DARPA changed its interpretation of ethics and conflict-of-interest rules within DARPA to become more permissive."

The letter notes that Dugan's June 15, 2010, financial disclosure form reports that RedXDefense owes Dugan $250,000 for a "loan/note" and that she retains between $151,000 and $305,000 in assets and income from RedXDefense.

The Rockville, Md.-based RedXDefense was founded in 2005 by Regina Dugan and her father, Vince Dugan, who is now chief executive officer. Her uncle John Dugan is on the company's board, POGO notes. "Director Dugan testified to Congress in March that there has also been an acceleration of contract and grant proposal approvals," the letter continued. "POGO wonders if this acceleration reflects, in part, changes to DARPA's interpretation of ethics rules."

The Defense IG's office replied to POGO on Aug. 12. Assistant Inspector General John Crane wrote that "in partial response to your letter, the deputy inspector general for audits has initiated a series of planned audits involving DARPA." Crane went on to confirm that the IG is examining the involvement of Director Dugan in the sole-source contract.

POGO at first reported that the IG would review 2,000 DARPA contract-related actions. On Wednesday, the Defense IG's spokesman Gary Comerford released a clarifying statement: "At our request DARPA has provided us a list of approximately 2,000 actions valued at $4.3 billion performed during FY 2010 and FY 2011 which include contracts, modifications, task orders for services, delivery orders for products, grants and cooperative agreements. We are reviewing these actions to identify a reliable number of significant actions that allow for appropriate audit coverage and will also allow us to complete the project in a timely and relevant manner. We are not, however, auditing all 2,000 actions."

DARPA, based in Arlington, Va., is famed for giving birth to the Internet and for launching, just last week, the world's fastest aircraft, the Falcon Hypersonic Technology Vehicle 2.

Dugan was appointed in 2009 by then-Defense Secretary Robert Gates. A specialist in counterterrorism and defense against explosive threats, she was a DARPA program manager from 1996 to 2000. In 1999, she was named DARPA Program Manager of the Year.

The DARPA public affairs office did not respond to Government Executive's requests for comment. But according to news reports, DARPA representatives say Dugan recused herself in decisions about contracts for RedXDefense. In March, DARPA spokesman Eric Mazzacone told Wired magazine's Danger Room blog that "at no time did Dr. Dugan participate in any dealings between the agency and RedXDefense related to the contract."

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