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Government Ethics Watchdogs Fear Amazon’s Web Of Influence May Have Tainted Pentagon’s $10 Billion JEDI Cloud Deal

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Andrew Kerr Investigative Reporter
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  • A senior adviser to Secretary of Defense James Mattis, Sally Donnelly, received payments from the sale of her consulting firm while she worked for the Department of Defense.
  • The firm, SBD Advisors, provided consulting to Amazon Web Services, which many have said has an unfair advantage to obtain the Pentagon’s $10 billion JEDI contract.
  • Donnelly didn’t recuse herself from involvement in crafting the contract.

A former senior adviser to Secretary of Defense James Mattis was receiving payments from her sale of a consulting firm she founded that worked with Amazon’s cloud computing arm, while the Pentagon simultaneously crafted a $10 billion contract that many say is tilted in favor of the tech giant, a Daily Caller News Foundation investigation has found.

Sally Donnelly’s financial disclosure filings do not clearly state that she was receiving payments from the purchaser of her firm during her stay at the Pentagon, nor did she file a written recusal from involvement with the Department of Defense’s cloud computing contract. Government ethics experts say those factors taint the landmark deal with the specter of impropriety.

“It sounds that she was not fully paid off, which would be a violation of conflicts of interest if she took any official action that affected that business,” government affairs lobbyist Craig Holman of Public Citizen, a liberal watchdog, told TheDCNF.

In 2012, Donnelly founded SBD Advisors, a self-described “stealth” consulting firm that specialized in facilitating “engagements between the technology and defense sectors” and sported a star-studded advisory team comprised of former high-ranking defense officials. One former Defense Intelligence Agency Principal Adviser, Anthony DeMartino, was integrated into Mattis’ inner circle as his deputy chief of staff and also served as chief of staff to Deputy Secretary of Defense Patrick Shanahan.

Both Donnelly and DeMartino consulted for Amazon’s cloud computing arm, Amazon Web Services (AWS), as a client of SBD Advisors before entering government service, according to their financial disclosure forms. DeMartino’s job duties as SBD’s managing director included helping his clients implement business plans by “building relationships within the U.S. Government,” according to his LinkedIn page.

The Pentagon aggressively maneuvered to issue a $10 billion, single-vendor commercial cloud contract known as the Joint Enterprise Defense Infrastructure (JEDI) during Donnelly and DeMartino’s time in the upper echelons of the DoD. Shanahan issued a memo in September titled “Accelerating Enterprise Cloud Adoption” that directed the department to “provide all reasonable support necessary to make rapid enterprise-wide cloud adoption a reality.”

Shanahan’s memo came one month after Mattis was pictured alongside Amazon CEO Jeff Bezos at the tech giant’s headquarters in August 2017 as part of his tour of Silicon Valley that included a visit with Google’s leadership.

DoD spokeswoman Heather Babb would not tell TheDCNF whether Donnelly or DeMartino organized Mattis’ summit with Bezos. Instead, she generally said the two were involved in “arranging meetings and travel.”

“These are ministerial functions and do not constitute substantial participation in a particular matter,” Babb continued. Mattis “expects his leaders to engage with industry … to reform our business practices and build a more lethal force.”

Two days before Donnelly departed the DoD for the private sector on March 9, the Pentagon issued the first request for proposal for JEDI, which many in the IT industry complained provided an unfair advantage for AWS.

The DoD’s requirements for the contract “will effectively prevent all but one vendor from bidding on this contract,” the Information Technology Alliance for Public Sector said in comments reacting to the proposal. The group later commented that the Pentagon’s winner-take-all approach could negatively impact “innovation, costs and security” concerns that were echoed by many in the industry.

“The Pentagon would never limit the Air Force to flying only cargo planes for every mission,” IBM U.S. Federal General Manager Sam Gordy said in March. “Locking the entire U.S. military into a single, restrictive cloud environment would be equally flawed.”

Mattis personally defended the contract’s approach in testimony before Senate in April. But it did little to assuage widespread concern from Congress.

In June, the Senate Committee on Armed Services demanded in its version of the 2019 National Defense Authorization Act that the DoD abide by a regulation that requires the government to award contracts like JEDI to multiple vendors whenever possible.

And the House Committee on Appropriations insisted the DoD be more transparent in its justification for its winner-take-all approach.

Yet TheDCNF has learned that neither Donnelly nor DeMartino recused themselves from discussions surrounding the Amazon-favored JEDI program, despite Mattis and Shanahan’s personal involvement in the program and the former SBD employees’ prior consulting work for AWS.

“Neither Ms. Donnelly nor Mr. DeMartino’s duties involved personal and substantial participation in decisions, approvals, recommendations or advice relating to the JEDI program,” Babb told TheDCNF. “Since their duties did not involve substantive JEDI program participation, no written recusal was necessary.”

The general counsel for the Project on Government Oversight, a nonpartisan watchdog, saw problems with Donnelly and DeMartino’s non-recusal.

“DoD’s finding that Donnelly didn’t require a written recusal speaks volumes about the department’s tolerance for being in bed with contractors,” general counsel Scott Amey told TheDCNF. “DoD ignores the basic ethics obligations of public service that promote public trust, honesty and impartially and that require government employees to avoid conflicts, even the appearance of a conflict, and preferential treatment to any private entity or individual.”

“There should be a complete review of the JEDI procurement to ensure that Donnelly, and any other senior officials coming or going from DoD who had an affiliation with Amazon Web Services, were not involved with this contract at any point,” Amey continued. “If they were, even if legally not requiring a recusal, DoD should come clean.”

Donnelly Sold Her Consulting Firm, But Kept Receiving Payments While Working For DoD

Donnelly sold her entire stake in her company just before she went into government service, Price Floyd, a principal and spokesman for SBD Advisors, which was renamed ITC Global Advisors in June, told TheDCNF.

“SBD Advisors was sold to a group of investors led by Win Sheridan in January 2017,” Floyd said.

Sheridan is a venture capitalist known primarily as the owner of concert venues and clubs following his 2012 sale of an IT staffing firm that he founded in the 1990s. TheDCNF did not find that Sheridan had any prior experience in the defense sector.

Donnelly did divest of her share in SBD Advisors in January 2017, however, she did not receive full payment from the sale until months into her stay at the DoD or longer.

“The purchaser paid Sally over time,” Floyd said. “The first payment was $390,000. Remaining payments were $1.17 [million] for a total sale price of $1.56 [million], all fully disclosed in her filings.”

Floyd added that the firm continued to consult for AWS until March or April 2018. An industry source told TheDCNF that AWS used SBD Advisors as “advisers and strategic consultants” on government defense work, “specifically in cloud technologies.”

This means Donnelly received payments for her sale of a company that performed consulting services for AWS for the entirety of her service as senior adviser to Mattis, who is personally involved in a $10 billion acquisition deal that many fear favors Amazon’s cloud platform.

Those payments, combined with the fact that Donnelly did not recuse herself from the JEDI program, has all the makings of a “classic image of conflict of interests violations,” Holman told TheDCNF. “As long as she is receiving financial stake or any financial benefit from her former business, she is sworn off of doing any official actions that affect that business.”

“I’d be highly suspicious of this, given the extent of the value of the contract and the close financial arrangements and business arrangements that Sally Donnelly has held that would be directly impacted by that huge defense contract,” Holman said. “I’m exceedingly suspicious.”

Donnelly’s attorney, Michael Levy, told TheDCNF that Donnelly “sold her entire stake in SBD Advisors before setting foot in the Pentagon on Jan. 21, 2017. From that moment forward, she has had absolutely no financial or other interest in SBD Advisors or its clients.”

“Ms. Donnelly was honored to serve alongside the men and women of the Department of Defense for 14 months and always adhered to all ethical and legal obligations,” he continued. “She is rightfully proud of her service.”

Even if Donnelly did divest of her entire stake in SBD Advisors prior to entering the Pentagon, the revelation that she received payments for the firm while she was serving in the DoD is not clearly disclosed in Donnelly’s financial disclosures.

Ethics Experts Voice Concerns About Donnelly’s Financial Disclosure Forms

Floyd’s assertion that Donnelly received an initial payment of $390,000 for the sale of her stake in SBD Advisors aligns with her first financial disclosures to the government, which covered her financial activities up to May 17, 2017.

An agency ethics official commented on the disclosure, saying SBD Advisors was worth $0 to her as of the filing date, as she no longer had any stake in the company after selling her partial interest in the firm.

Pictured is a screenshot from Sally Donnelly’s New Entrant Report showing comments made on Aug. 30, 2017, by government ethics official Kurt Gerlach.

But Donnelly’s financial disclosures submitted after she left the DoD, which covers the time period between May 18, 2017, through March 9, 2018 — the day she exited the Trump administration — shows that she received another $1.17 million in “sale proceeds” for SBD Advisors.

Pictured is a screenshot from Sally Donnelly’s Termination Report covering the time period between May 18, 2017, and March 9, 2018.

Consequently, that would mean Donnelly was still owed $1.17 million at the time she submitted her initial financial disclosure on May 17, 2017 — an asset she should have reported on that form.

“If payments were owed in the future, Donnelly should have appropriately disclosed any such arrangements, and those circumstances provide more reasons why she shouldn’t have had any level of participation in DoD matters that involved the JEDI contract, her company, former clients, or parties with connections to any or all of them,” Amey told TheDCNF.

It’s unclear if the DoD was aware at the time Donnelly filed her initial disclosure that she was expecting additional future payments of $1.17 million from her sale of SBD Advisors. The Office of Government Ethics and DoD did not respond to multiple requests for comment.

“If she misled the ethics office, or lied on her financial disclosure forms, that is a felony,” Holman, who looked over the documents, told TheDCNF. “I don’t know who made the mistake here, but if there was any kind of deliberate misrepresentation by Sally Donnelly of her financial interest, that would cross the line of a felony violation.”

Markkula Center for Applied Ethics Director of Government Ethics Hana Callaghan told TheDCNF she was unsure whether or not the arrangement surrounding Donnelly’s sale of SBD Advisors ran afoul legally, but said it does raise ethics concerns.

“Not disclosing that obligation, particularly in light of continuing relationships having to do with Amazon, really raises the specter of impropriety that she may be acting in her former firm’s best interests and not necessarily in the people’s best interests,” Callaghan said.

Callaghan added that government officials like Donnelly have “a duty to avoid even the appearance of impropriety” in order to preserve trust in government.

“It has to do with public perception because we don’t know what’s in the public official’s mind,” she said. “But the public perception is that they’re acting in their own interest and not the public’s interest, and that reduces trust.”

JEDI Remains Largely Unchanged Five Months After Donnelly’s Departure From DoD

Donnelly earned the rare honor of receiving a going-away statement from Mattis shortly before her departure from the DoD. He thanked his senior adviser for playing a “critical role in the Department of Defense throughout this important first year,” emphasizing her contributions to “building international partnerships and bringing essential business reform to the Pentagon.”

The Pentagon released its final solicitation for JEDI in late July, just prior to Congress’ August recess.

Despite widespread concern from IT contractors and members of Congress, the DoD stuck with its controversial, winner-take-all approach for the contract worth up to $10 billion over up to 10 years. And Amazon is still seen as the runaway favorite to win the deal, despite a “full top-down, bottom-up review” of the program by DoD CIO Dana Deasy.

“It’s no secret that AWS is considered the favorite to win the contract, and with so many links between DoD personnel and AWS, I’m concerned that we’re seeing another example of the detriments of the revolving door and the competitive advantage that it provides to companies,” Amey told TheDCNF.

DeMartino and Sheridan did not respond to requests for comment.

Eric Lieberman and Richard Pollock contributed to this report. 

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