Army General Was Allowed To Accept Free Housing from Contractor

Sen. Claire McCaskill, D-Mo., said the relationship between Brig. Gen. Michael Bobeck and Peduzzi Associates deserves a closer look. Sen. Claire McCaskill, D-Mo., said the relationship between Brig. Gen. Michael Bobeck and Peduzzi Associates deserves a closer look. Manuel Balce Ceneta/AP

The Pentagon’s gift rules allowed an Army National Guard General to accept rent-free living space from a defense contractor because the contractor is a personal friend.

That was the finding of the Defense Department Office of Inspector General in a case involving Brig. Gen. Michael Bobeck, who was terminated from his post with the Joint Staff in September because of an extramarital affair.

As reported on Tuesday by USA Today, the decision in favor of Bobeck came in a letter to Sen. Claire McCaskill, D-Mo., ranking member of the investigations panel of the Homeland Security and Governmental Affairs Committee, who had written the watchdog in September asking whether any improper contracts had been awarded as a result of Bobeck’s living arrangement.

The Alexandria, Va., contactor Peduzzi Associates, which specializes in small business development and government sector strategies for large multinationals, employs an executive vice president, Joe Ferreira, a friend of Bobeck’s.

“Emails obtained by USA Today show that Peduzzi officials kept Bobeck informed about the interest of a key client, Sikorsky, maker of the famed Black Hawk helicopter, as the Army and National Guard wrangled over a reorganization plan that had serious ramifications for Sikorsky's bottom line,” the Nov. 1 article said. “A draft letter in February that Peduzzi helped craft to key members of Congress on behalf of the National Guard Association requested that the Pentagon spend $367 million more on Black Hawks in 2017.”

USA Today also asserted that Bobeck had negotiated a post-retirement job with the consulting firm.

The Defense Department IG’s office was forwarded several complaints about Bobeck this spring. An investigation substantiated the “adulterous relationship” but not complaints that Bobeck had arranged government travel for personal gain, nor that his housing arrangement with Ferreira, which was portrayed as help from a friend while the general was going through a divorce, was a violation.

In an Oct. 25 letter to McCaskill, the Pentagon IG cited the Joint Ethics Regulation provision addressing “Gifts based on a personal relationship.” 

It says, “An employee may accept a gift given under circumstances which make it clear that the gift is motivated by a family relationship or a personal friendship rather than the position of the employee.”

Peduzzi had no contracts with the Joint Staff, wrote Kathie Scarrah, director of legislative affairs and communications for the DoD IG. Investigators did find one contract with the National Guard Bureau, a blanket purchase agreement on services, but “the investigation determined that the general officer was not involved in this contract action.”

McCaskill said in a statement given to Government Executive, “While the inspector general may have found this relationship was legally acceptable, it certainly begs a closer look at whether ethics rules adequately guard against conflicts of interest than can arise from the personal relationships between contractors and military officials."

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