The Pentagon Gave $350 Million in Contracts to a Firm Closely Tied to a Senior Defense Department Official

 

Among a cadre of Wall Street executives brought into the Pentagon during President Donald Trump’s second term, George K. Kollitides II has emerged as a powerbroker with a broad mandate to improve procurement of weapons and critical minerals.

The longtime partner at the private equity firm Alvarez & Marsal Capital has framed his tour of duty in government as a service to the country. But the work he’s leading has also been a boon to his old friends in the private sector, government procurement records show.

In April, months after Kollitides had started work at the Pentagon, he was listed on a securities filing as continuing to work for his old company as a senior adviser. Two months later, the Defense Department finalized a $281 million no-bid consulting contract with an affiliate firm, Alvarez & Marsal Federal, to advise Kollitides’ new Pentagon office, the records show.

That contract, large for consulting work even by Defense Department standards, is the second in a pair of deals that since December have awarded almost $350 million in military spending to the firm — about five times more than Alvarez & Marsal entities had received from all U.S. agencies combined in the two decades before Trump returned to office, according to federal spending data. Both of those contracts have been for work connected to Pentagon offices where Kollitides is the head or has a senior role.

The deals remain shrouded in secrecy, records show, because they were signed under an unusual contracting method the Defense Department uses to fund experimental weapons — work A&M has never claimed to do. 

They have begun to send unprecedented sums of taxpayer money to a company that boasts helping government agencies create a “customer-centric culture” and that is deeply intertwined with the private equity firm where Kollitides was a partner for almost 10 years. The two partner firms tag-team investment deals and share back-office support, company documents and federal filings show.

Kollitides was still working with A&M Capital when the deals were signed. It’s unclear if he will benefit financially from the windfall of military spending on A&M consulting. His employment at the Pentagon is under a special classification that allows him to keep his financial disclosures confidential.

Ethics experts said it’s generally illegal for executive branch officials to play a role in awarding contracts that would have a direct impact on their own finances, unless they were granted a waiver. “It looks way too cozy to be legitimate. I think taxpayers should be appalled,” said Virginia Canter, a former federal government ethics lawyer. “There are a million consulting firms in D.C. and New York. Why would you sole source this contract? They’re not sending replacement parts for a ship that is sinking.”

After ProPublica sent questions to the Pentagon, Kollitides and both A&M entities early this  week, A&M Capital said Kollitides had just stopped working there days earlier.

In a statement, A&M Capital said it is a “separately capitalized and separately managed firm from the Alvarez & Marsal consulting business” and its “management and employees have no involvement in the day-to-day operations of the consulting business, and vice versa.” The firm said that none of Kollitides’ work for it related to the “defense industry, the Department of War or Mr. Kollitides’ government service.”

The Alvarez & Marsal consulting business did not answer any of ProPublica’s questions, including how it became aware of the possibility that it could seek the $281 million no-bid contract and what services it is providing to Kollitides’ Pentagon team. The Wall Street Journal on Thursday reported the existence of some of the Alvarez & Marsal contracting.

“We are proud to serve clients across all industries, and all levels of government,” the company said in a statement. “The common denominator is always the same: we help solve difficult problems.”

“It looks way too cozy to be legitimate. I think taxpayers should be appalled.” Virginia Canter, former federal government ethics lawyer.

Kollitides did not respond to questions about whether he played a role in A&M securing contracts to work for his office, but a Pentagon spokesperson replied for the department and on Kollitides’ behalf saying they both followed all applicable rules.

“The Department of War maintains a rigorous, multi-layered ethics framework that includes financial disclosure reviews, divestitures where appropriate, and screening to prevent conflicts of interest,” Deputy Pentagon Press Secretary Jacob Bliss wrote in an email. Kollitides, he added, “is in full compliance with all ethical laws and regulations. Any claims otherwise are false.”

There is widespread bipartisan agreement that the Pentagon’s procurement systems are in need of radical reform and private-sector know-how could help the country better secure supply lines and accelerate the development of new weapons to ensure the military is prepared to fight future wars.

But current and former defense officials say the massive spending for connected consultants is a reflection of a changed Defense Department under Trump. They say a clubby and politicized culture has taken hold in a wing of the Pentagon controlled by Kollitides and other former Wall Street executives recruited by Steve Feinberg, the billionaire private-equity titan who is now the deputy defense secretary. It’s an operation, they say, that favors people and companies that have close ties to the administration.

This year, ProPublica reported that the Office of Strategic Capital, a unit at the Pentagon that Kollitides helps lead, granted a small North Carolina startup linked to Donald Trump Jr. a $620 million loan after a top aide to the president intervened on the company’s behalf. A group of Democratic lawmakers accused the office of “a staggering level of corruption and influence peddling.”

ProPublica also reported that the same Pentagon unit was considering a loan to Unusual Machines, a second company connected to the president’s son. A defense official told ProPublica recently that the unit is now in the late stages of a $220 million loan for the Florida drone parts maker, where Trump Jr. sits on the advisory board and was granted a stake.

The Pentagon did not respond to a question about the advancing loan process for Unusual Machines and if Trump Jr.’s connections were playing a part. After the earlier loan to a Trump-connected company, the Pentagon said “no company receives preferential treatment” and “political connections play absolutely no role in the Department’s funding decisions.” Pentagon Press Secretary Kingsley Wilson pushed back on criticism, saying the Defense Department is conducting extensive due diligence on potential lending.

That Pentagon lending unit was launched during the Biden administration with an open application process for interested companies. Current and former officials and people who have interacted with the office say Kollitides and other leaders now rely more on their own personal networks to choose companies to fund — as well as the consultants to vet those deals…

-by Aaron Davis and Robert Faturechi ProPublica