Blackwater to Faux-Billionaires: Fed’s Exec Pay Data Flawed

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By Sam Skolnik and Llewellyn Hinkes-Jones

Dec. 13 — The federal website that publicly displays the salaries of top contractor executives is riddled with faulty data, a Bloomberg BNA investigation shows.

The massive stream of data housed in the Treasury Department website USAspending.gov includes a wide range of contractor compensation figures that are clearly off-kilter, including some executives who allegedly earned billions of dollars in a given year and others who made only $200.

This has made it difficult for watchdog groups, government agencies and the public to use the site as it’s partly intended — as a tool to monitor the compensation rates of taxpayer-backed government contractor executives — prompting cries from some to kill the database and from others to fix the shortcomings.

Bloomberg BNA’s look at executive compensation data from fiscal 2010 through 2016, which includes listings for more than 400,000 mostly private, midsize vendors, comes amid a renewed effort by a contractor trade group to scrap the 2008 executive compensation sunshine law that Congress passed with strong bipartisan support. Their primary concern is that the law has infringed on the privacy of executives and has had no benefit for the government.

Although Sen. Chris Murphy (D-Conn.), the main sponsor of the bill that mandated the compensation reporting requirement, said he’s “incredibly concerned” about the inaccuracies found throughout the website, his aim now is to fix the site rather than repeal the law.

The Government Funding Transparency Act was introduced soon after a top official with the private military contractor Blackwater Worldwide, now known as Academi, in late 2007 refused to tell a congressional panel exactly how much he earned the year before, or how much Blackwater profited from its government contracting work in Iraq and Afghanistan.

Yet despite the bill’s goal of transparency for businesses that contract with the government, including how much their leaders earn, the system isn’t working.

Several contractors said the compensation figures they report appear vastly different when made public. But although the Treasury Department declined to comment directly on the topic, a General Services Administration (GSA) spokeswoman — whose agency operates two websites that collect executive compensation data and forward it to USAspending.gov — said agency officials couldn’t find any evidence to support the notion that a computer glitch has been arbitrarily inflating numbers.

Keeping Watch

Bloomberg BNA’s investigation found:

  •  More than 1,000 private contractor executives earned $1 million or more in fiscal 2016, out of 21,079 executives listed on USAspending.gov. The median top contracting executive compensation level that year was $350,000, which includes salaries, bonuses and other awards.
  •  Out of the 401,566 vendors found on the site, just 5,537 companies, or 1.4 percent, submitted compensation data on behalf of their executives. Many private contracting businesses aren’t big enough to be required to list executive salary data or don’t earn a large enough percentage of their business from the government. But it’s unclear how many contractors fit those parameters, yet are skirting the law.
  •  USAspending.gov displays some massive — and clearly erroneous — compensation levels for a number of contractor executives. According to the website, 30 executives each earned at least $100 million in a single year. That list includes a former NASA administrator who, if the site is to be believed, earned $953,842,270,208 in one year, or just shy of $1 trillion, as the CEO of an Arlington, Va.-based contractor.
  •  Because of the honor code system that’s used, which relies on contractors to be truthful, there is no way to know if the numbers reported into the system are accurate, including figures that fall within the range of what other surveys have found to be normal. And to the degree that faulty data are in the system, it’s often impossible to know whether contractor error, technical glitches, or intentional inflating or deflating of compensation figures are to blame.
  •  No contractor has ever been suspended, debarred or prosecuted — or even taken to task — for filing false compensation data or for failing to file it when required, government contracts attorneys said.
  •  Finally, no one in the government, that Bloomberg BNA could find, appears to be keeping watch over executive compensation data, except the Government Accountability Office (GAO). Yet in its most recent report on the topic, the GAO — which estimated that fewer than 10 percent of the awards on USAspending.gov contained information fully consistent with agency records — conceded that because it couldn’t verify the compensation information provided by contractors, the agency couldn’t even test whether the data the companies had listed was accurate.

When told of some of these findings, Murphy, who wrote the Government Funding Transparency Act as a congressman and has since become a senator, said he plans to raise the issue with the Trump administration.

“I’m incredibly concerned by this investigation and the Government Accountability Office report that found widespread inaccuracies and potential outright lying by these companies,” Murphy told Bloomberg BNA in an e-mailed statement.

Zero-Sum Game

Bloomberg BNA’s survey of the USAspending.gov compensation data appears to show that a range of contractor executives, in a wide variety of professions, have been making millions or billions of dollars on the federal dime. But contractors said the numbers on the site are faulty.

For example, USAspending.gov claims that the five highest-paid employees of the Sandtown-Winchester nursing home in Baltimore earned between $8.2 million and $11 million, while the nursing home was fulfilling a 2011 Veterans Affairs Department contract.

Sandtown’s director laughed when a reporter asked her about the salaries. The nursing home employees, including a director of nursing, a registered nurse unit manager and a dietitian, earned roughly between $82,000 to $110,000, Barbara Clauser, administrator of FutureCare Sandtown, told Bloomberg BNA. Somewhere in the process, two zeroes must have been inadvertently added, she said.

“They would like it, but no,” Clauser said of the higher salaries listed on the government website. “None of these people earned anything other than the market salary rate” for their position, she said.

Holly O’Shea, vice president of human relations and corporate counsel for FutureCare Health, which runs a string of nursing homes and rehabilitation centers in Maryland, told Bloomberg BNA she believed an error occurred after the numbers were input into the Central Contractor Registration (CCR), a system that preceded the GSA’s System for Award Management (SAM) website, which transfers the data to USAspending.gov. The transition to SAM came in June 2012.

The zeroes could have been added when the government moved the data — which were input correctly into the CCR system, O’Shea said.

Help Wanted

Other contractors the website alleges earned millions or billions of dollars tell similar stories.

“It’s a very convoluted mess, is what it sounds like to me,” Bob Waldron, executive vice president and chief operating officer of Research Analysis and Maintenance, Inc., an El Paso, Texas, contractor, told Bloomberg BNA.

USAspending.gov alleges Waldron earned $155 billion in 2016. He noted that if six zeroes were taken away from that figure, you’d get $155,000 — about what he actually earns per year and the figure his colleague entered into the system. “If I had made the amount they’re suggesting, I wouldn’t have taken your call,” he said.

Waldron said his colleague typed his company’s executive compensation numbers correctly into the SAM system — but when his colleague looked at how they appeared on the site, several zeroes had been added. He said his colleague then called the SAM system’s help desk, which assured him the system took all of this into account, and understood what the correct figures were, he said.

“The help desk said, ‘We know what this means,’” Waldron said.

The Reluctant Trillionaire

Other executive compensation data found on the site defy easy explanation. The site lists Barbara Eisenhour of Advanced Storage Systems in El Reno, Okla., as having earned $50,000 from a 2016 Justice Department contract worth about $205,000. No other executives are listed.

Yet the site lists Eisenhour as having been compensated $5 million in the fulfillment of a 2014 contract, and lists two other executives with the same last name as having earned zero dollars. She couldn’t be reached for comment.

The top earner over the past seven years, according to USAspending.gov — the trillionaire-in-waiting — is Michael Griffin, one of two former permanent NASA administrators during the George W. Bush presidency. He now works as CEO of Schafer Corp., an engineering and technology contractor whose clients include Defense Department (DOD) units and other agencies, according to the company’s website.

According to USAspending.gov data from 2016, Griffin is listed as being compensated $825,006, $953,842 and $1.25 million. But at the same time, between July 2015 and April 2016, he was listed as earning $953 billion in the fulfillment of Schafer contracts for DOD and NASA.

Given that the first six numbers are the same in both Griffin’s $953,842 and $953 billion compensation listings, it would seem a good possibility that the system added some numbers erroneously, but there’s no way to know. When asked about this by e-mail, Griffin responded, “With all respect, I would prefer not to comment.”

Millionaire Blues

To be sure, many of the compensation claims on USAspending.gov seem impossible to believe. But the core of the data, and the size of the data pool, allowed Bloomberg BNA to reach several valid conclusions about the state of contractor pay.

During the most recent complete fiscal year, 1,037 contractor executives earned more than $1 million annually in the data studied by Bloomberg BNA — to the chagrin of the man who wrote the compensation disclosure law.

“It’s outrageous that some CEOs are pocketing millions of taxpayer money,” Murphy said. “When I found out that the CEO of Blackwater was becoming filthy rich from Department of Defense contracts, I wrote a law to make sure the public knew where their money was going.”

The significant majority earned well below the million-dollar mark.

The median salary for top executives in 2016 was $350,000, according to the Bloomberg BNA data probe. It was $250,000 for the second top executive, and around $150,000 to $200,000 for others.

Pay for the chief executive of a government contractor is well above the $185,850 an average CEO makes, according to numbers from the Bureau of Labor Statistics. But it’s far below the $10.8 million the typical chief executive from a company in the Standard & Poor’s 500 index earns, according to a study released last May by The Associated Press.

The data uncovered from USAspending.gov generally align with a 2015 survey of government contractor pay by Grant Thornton, an audit, tax and advisory firm, although the government data did not include reliable numbers for company size.

USAspending.gov shows that executives earned within the same range as those surveyed by Grant Thornton who worked at medium-sized companies — those with $11 million to $150 million in yearly revenue.

However, the 75th percentile of executives listed on USAspending.gov swings sharply above median values in Grant Thornton’s survey, potentially because of what appear to be unreliable numbers in the USAspending.gov data set showing executive wages in the tens of millions and sometimes billions.

Upper-Tier Defense Contractors

Among the highest-paid contracting businesses, Defense Department contractors proliferated. No other agencies appeared nearly as often as those that are part of DOD, with Homeland Security and the Department of Justice coming in second and third.

Three in four contractors on that list were defense contractors, with a median pay of $7.8 million for the top five executives, or about $1.5 million per executive. Many of these businesses are larger companies with more than 12,000 employees, on average. None was listed as veteran-owned. One-third were public companies made up of the subsidiaries of large defense contractors Northrop Grumman, BAE Systems and General Dynamics.

The majority of contractors were classified as engineering or engineering service companies, although the most common service provided was automated data processing software and telecommunication services.

In an effort to reduce redundancy, contractors that already are required to report their executive compensation to the Securities and Exchange Commission (SEC) — that is, public companies — are excluded from having to report that same information on USAspending.gov.

Because most of the largest companies do not report to USAspending.gov, and because of other provisions of the law that allow many of the smallest contractors to bypass the compensation reporting requirement, it is, in effect, a system aimed mostly at private, midsize contractors.

That means publicly held contracting behemoths such as Lockheed Martin aren’t required to report to this system. But a few, such as Northrop and BAE, choose to do so anyway. According to the site, Northrop listed that Wesley Bush, its CEO and president, was compensated $24.4 million for every year between 2010 and 2015, except for 2014, when he was listed as earning $18.6 million in some entries. Yet according to published reports, Bush was compensated, in total, millions less than that amount during at least one of the past several years, further calling into question the accuracy and usefulness of the compensation data found on USAspending.gov.

Contractor Transparency

The Government Funding Transparency Act amended the Federal Funding Accountability and Transparency Act of 2006, which had mandated that information on government contracts be available on a single free, public, searchable website.

The law requires that contractors report the names and total compensation of each of their five most highly compensated executives for the preceding completed fiscal year if:

  •  the contractor received 80 percent or more of its annual gross revenues from federal contracts and other forms of federal financial assistance;
  •  it earned $25 million or more in annual gross revenues from federal contracts; and
  •  it isn’t a public company that already reports such information to the SEC.

The law also stipulates that prime contractors report the executive compensation data from first-tier subcontractors on a separate GSA website, fsrs.gov, if those subcontracts are worth $30,000 or more. The data from the SAM and FSRS sites is electronically transferred to USAspending.gov.

USAspending.gov is due for another overhaul in May 2017. The site will include expanded data, per the requirements of the Digital Accountability and Transparency Act (DATA Act), which was designed in part to address the website’s overall data reliability issues.

But it’s unclear to what degree the coming transformation of the USAspending.gov website will specifically affect the executive compensation reporting system, which isn’t mentioned in the text of the law.

This concerns Hudson Hollister, the executive director of the Data Coalition, an industry group that advocated for the passage of the DATA Act. If government actually used the contractor compensation information it collects, it would encourage more contractors to submit data and to make sure that it’s accurate, he said.

“If Congress wants this data out there, there should be some intent to use the data,” Hollister said. “Give the law some teeth or repeal it.”

The Treasury Department declined to answer most of the questions about USAspending.gov, including queries about specific instances of faulty data appearing on the site. A spokesman did tell Bloomberg BNA that the agency is implementing the DATA Act “to provide more accessible, searchable, and reliable spending data.”

A GSA spokeswoman said its system is not the cause of inflated compensation figures. After a thorough review, she said, “we did not find any issues that detail a problem related to the system inadvertently adding zeroes to compensation figures input by contractors thereby inflating the numbers. The database is correctly storing the values entered by the user and the application is displaying those entered values correctly.”

A federal regulation requires contractors to ensure the correctness of the information it submits, the spokeswoman said. But GSA is committed to working with contractors to ensure that federal award management systems accurately collect and display the registration data they enter, she said.

‘More Than $1 Million.’

The main supporters of the Government Funding Transparency Act made it clear that they were spurred to action by the Oct. 2, 2007, testimony of then-Blackwater USA CEO Erik Prince.

The private contractor, which had a substantial role as a protective services contractor for the State Department in Iraq, had earned hundreds of millions of dollars in the process. The month before the hearing, several American private security guards fired their weapons into a Baghdad square. In 2014, four Blackwater contractors were convicted of killing of 14 unarmed Iraqi civilians.

“Is Blackwater, a private military contractor, helping or hurting our efforts in Iraq?” asked then-House Oversight and Government Reform Committee Chairman Henry Waxman (D-Calif.), who has since left Congress. “Is the government doing enough to hold Blackwater accountable for alleged misconduct? And what are the costs to the federal taxpayers?”

House Democrats grilled Prince on a range of topics, such as how much the contractor had profited from the government — and how much Prince was paid. But Prince declined to be specific on both fronts, telling Rep. Peter Welch (D-Vt.) only that he estimated that he made “more than $1 million” in 2006.

Murphy questioned Prince next. “[A]s a representative of my constituents that pay 90 percent of your salary, pay 90 percent of the salaries of your employees, I think it’s a little difficult for us to fathom how that information isn’t relevant to this committee or this Congress,” he told Prince.

Three weeks later, Murphy introduced the Government Funding Transparency Act.

The bill passed the House by voice vote. Many echoed Waxman, who wrote in a report that accompanied the bill that “taxpayers should be able to review how their money is being spent.”

But the bill wasn’t without its detractors.

Rep. Tom Davis, a Republican who represented many government contractors in his northern Virginia district before stepping down from Congress in late 2008, slammed the measure for having no real acquisition function.

“The only purpose of this bill is to ‘punish’ and embarrass privately held firms,” Davis wrote in the bill report. “It will accomplish nothing other than to discourage the participation of privately held firms in the government market — which will decrease competition and, ultimately, increase government costs.”

When apprised of Bloomberg BNA’s findings, Davis, now the director of federal government affairs for the consulting and financial advisory company Deloitte, reiterated that requiring contractors to disclose executive compensation does more harm than good.

“Who cares what they make? What should matter is if they offer the best value for the taxpayer,” Davis told Bloomberg BNA. “That’s what should drive federal procurement.”

Discord and Envy

Contracting groups have argued that an executive compensation reporting requirement provides few benefits for the government and is fundamentally unfair and burdensome to contractors — which, in some cases, have remained private precisely to avoid having to publicly disclose that kind of information.

The Professional Services Council’s Smart Contracting Working Group laid out a comprehensive argument to repeal the 2008 compensation reporting law in a May 2016 white paper.

The PSC — an Arlington, Va.-based trade group that represents contractors that sell services to the government — argued that the requirements have served as an “unnecessary burden and annoyance” for existing contractors.

Reporting executive compensation also has acted as a deterrent to some businesses thinking about entering the government marketplace, the PSC said. “Again, this is in direct conflict with the desired outcomes for implementation of this regulation,” the PSC paper argues. “Limiting competition is directly counter to the government’s goal of increasing value for taxpayer money.”

Commenters to a proposed final rule in the Federal Acquisition Regulation published in 2012 expressed other concerns, according to the white paper, including loss of key personnel to competitors; inappropriate release of proprietary company information; safety issues for executives; and “potential discord, envy, turnover, etc. that could be created by the rule and have a detrimental impact on working relationships.”

Although the PSC has taken the lead in calling for the repeal of the disclosure law, it’s become an industrywide concern. The Acquisition Reform Working Group, a coalition of 10 trade groups that represent federal contractors, has expressed concerns about compensation requirements and the recently lowered cap on agency spending to reimburse companies for contracting work.

Legislative Priorities

The PSC and its members submit one argument in favor of repeal ahead of the others.

“It’s an onerous requirement with no perceptible benefit for the government,” Lisa Ashcraft, vice president of contract operations for Abt Associates, a Bethesda, Md.-based global research firm, told Bloomberg BNA. “What in the world are they going to do with all that information?”

Alan Chvotkin, PSC executive vice president and counsel, echoes the sentiment: “I’m not aware of any contracting officer or agency that has done anything with this information.”

Chvotkin said the PSC engaged in conversations with members of Congress and staffers earlier in this session about the possibility of sponsoring a bill to repeal the law, but the effort didn’t gain traction. “It’s still an interest and a priority of ours,” he said, adding that the trade group soon will be ranking its legislative priorities for the next congressional session.

When apprised of some of the results of the Bloomberg BNA investigation — including that out of more than 400,000 vendors on the site, just 1.4 percent submitted compensation data on behalf of their executives — he said he was “somewhat surprised that it’s that low.”

Of the number of companies that fit the requirements of the legislation, “there are a fair amount who are unsure of their responsibility,” Chvotkin said.

No matter the reason that some companies — not including PSC members, he stipulated — may not be fulfilling the reporting requirement, “it is their responsibility, and they should be reporting and verifying the data,” he said.

‘Ongoing Inaccuracies.’

The main idea behind USAspending.gov and the executive reporting requirement was “so that there could be 250 million inspectors general,” Brian Waagner, a Washington-based partner at Husch Blackwell, told Bloomberg BNA.

But Waagner said he’s had concerns about how the Treasury Department’s website has taken shape. Soon after it was unveiled, he said he recalls seeing some top executives claiming to make $3,000 per year, and knew there were problems. “It would not surprise me that there’s complete garbage in there,” he said.

Waagner also said he believes no one has ever taken a contractor to task for misrepresenting data on the system — or for simply ignoring the requirement. Not inspectors general, federal or state prosecutors, qui tam or whistle-blower attorneys, the Defense Contract Audit Agency, or other government auditors. “Nobody ever calls them on it,” he said.

The GAO is an exception — but the agency has been stymied by the honor code nature of the reporting process. A June 2014 report, the most recent that touched on USAspending.gov, looked into whether agencies were reporting required contract and award data.

The GAO was critical of the site and the agencies that report into it, concluding that agencies underreported information on assistance awards to the tune of about $619 billion, and that the site suffered from “ongoing inaccuracies” in reported nonfinancial award information.

But the report barely touched on executive compensation — mainly, it seems, because there was no backstop for information submitted by contractors.

“Without agency records on sub-awards and executive compensation, we could not test whether the information reported by prime awardees is accurate,” the report found.

Crying Wolf

Scott Amey, general counsel of the Project on Government Oversight (POGO), a nonpartisan, independent government oversight group in Washington, said during congressional testimony on the compensation disclosure bill in 2008 that in one regard, it didn’t go far enough.

Amey suggested that having a law that applied only to the five highest-paid executives allows companies to charge the government for “excessively high” contractor compensation packages for other mid- to high-level executives.

But he supported the bill, albeit “tepidly,” because of its main concern: accountability. “[A]ny contractor, public or private, that receives the majority of its revenue from the federal government should be held accountable by the public,” Amey testified.

In a recent interview, Amey told Bloomberg BNA that contractors have been crying wolf regarding the effects of such laws on contracting businesses’ bottom lines. “They yell, ‘The sky is falling, the sky is falling’ — but nothing ever changes,” Amey said.

Yet Amey said he didn’t know how important the disclosure law is anymore, especially since the government’s reimbursement cap for contractor work has been nearly halved — to $487,000 per person, from $952,000 — protecting the government and taxpayers from being forced to reimburse private contractor executives at $1 million per year or more.

“Why are we making these companies jump through these hoops when the benefit is questionable?” Amey said.

Shareholder Burden

The chief labor backer of the original compensation disclosure bill, the American Federation of Government Employees (AFGE), sees things differently.

The law provides important benefits, primarily to maintain public awareness of the compensation differences between government workers and contractors sometimes doing similar jobs, said Richard Loeb, an AFGE senior policy counselor.

“The AFGE supports full disclosure of federal contractor executive compensation,” he said. “These executives often are earning multiples of civil servants doing the same jobs.”

High executive compensation rates become an unfair public burden — one that “should be borne by shareholders, not taxpayers,” he said.

To contact the reporters on this story: Sam Skolnik in Washington at sskolnik@bna.com and Llewellyn Hinkes-Jones in Washington at ljones@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

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