Trump Security Aide Flynn Has Deep Ties to Defense Contractors

(Bloomberg) -- Donald Trump’s selection of Michael Flynn as national security adviser caused concern last month when it was revealed that Flynn represented a business with ties to the Turkish government while getting classified briefings during the campaign. He promised to sever those ties before Inauguration Day.

But Flynn has other potential conflicts. Just last week, he was re-elected to a paid position on the board of a surveillance drone company with Department of Defense contracts, federal filings show. And while taking part in the classified briefings for Trump last August, he revamped his consulting company -- Flynn Intel Group, or FIG -- by adding one senior executive whose firm does extensive cybersecurity work for government agencies and another who was soliciting defense department aviation contracts.

Public records, government contracts and documents posted online by Flynn and his partners show that they have vied in recent months for federal contracts to supply overseas military bases, fly diplomats in and out of conflict zones and provide cybersecurity and technology for defense and intelligence agencies.

Flynn’s recent moves at FIG -- as well as his partnerships with companies and private-equity executives who have military and intelligence contracts -- could conflict sharply with his government role. Ethics experts say that as the president’s top military-security aide, he will handle classified information on a daily basis and help lead the country’s military, diplomatic and intelligence response around the globe.

Reducing Activities?

Visits to two of Flynn’s offices in Virginia suggest they are reducing their activities: One was empty and being repainted. But neither Flynn, his partners, nor the Trump transition team responded to repeated questions during the past week about how he plans to comply with federal ethics rules that forbid executive-branch employees from having a financial interest in companies that do business with the agencies they lead.

The transition team also hasn’t provided information about Flynn’s business dealings in response to congressional requests. Representative Elijah Cummings, a Maryland Democrat who sits on the House Oversight Committee, wrote to Vice President-elect Mike Pence last month asking for details of Flynn’s business ties and steps he intends to take to avoid a conflict. A Cummings aide said none have been provided.

‘Potential for Pressure’

On Dec. 14, two Democratic senators, Richard Blumenthal of Connecticut and Jeanne Shaheen of New Hampshire, sent a letter to the nation’s top intelligence officials arguing that Flynn’s ongoing ownership of his consulting company “creates the potential for pressure, coercion, and exploitation by foreign agents.” The letter said FIG is now run by Flynn’s son, Michael Flynn Jr., who was removed from the Trump transition team earlier this month after spreading false internet conspiracies that led to a shooting at a Washington pizzeria.

Flynn is a retired Army lieutenant general who was fired from his post as director of the Defense Intelligence Agency by President Barack Obama in 2014. His designation as Trump’s national security adviser offers him a key White House role requiring no Senate confirmation. He has been widely scrutinized for his brashness in the two years since leaving the military. He made a paid speech for RT, a news agency run by the Russian government, sat at a table with Russian President Vladimir Putin at a 2015 dinner celebrating RT’s anniversary, shared internet conspiracies on social media and last February tweeted that “Fear of Muslims is RATIONAL.”

Leveraged Experience

But little has been publicly disclosed about the path Flynn has forged in the business world. Like many retired officers, he leveraged expertise he developed in the service into a private-sector career. Rather than join a big defense company, however, he set up his own.

“I didn’t walk out like a lot of guys and go to big jobs in Northrop Grumman or Booz Allen [Hamilton] or some of these other big companies [like] Raytheon,” he told Foreign Policy magazine in 2015. “I’m very independent, and it’s very liberating actually.” He added, “I’m not going to be a general that just fades away.”

In 2014, he founded his company with Bijan Kian, a prominent Iranian-American banker who served on the board of the Export–Import Bank, was a senior fellow at the U.S. Naval Postgraduate School and a member of the White House Business Council.

Federal ethics rules say that executive-branch employees who are in partnerships must avoid potential conflicts with businesses owned by fellow partners. Kian is a principal at Global Capital Markets, a mergers-and-acquisitions firm that has brokered deals involving an assortment of military contractors, and chairman and chief executive officer of GreenZone Systems Inc., a technology company that sells secure communications chips and computers designed for military and intelligence agencies.

Kian didn’t respond to numerous attempts to reach him.

Cybersecurity Experts

FIG positioned itself as an elite operation with the state-of-the-art skills to protect global businesses and government agencies. Flynn hired a handful of cybersecurity experts who worked under him in the Defense Intelligence Agency and other military posts. Much of their business centered around providing training and information-technology design advice to corporate executives concerned with protecting their companies from hacks.

By late 2015, Flynn had raised his public profile through an assortment of speeches and media appearances critical of the Obama administration’s anti-terror strategy, and he started advising several Republican presidential candidates. He also began to expand his own circle of business associations and his company’s portfolio.

Win Contracts

FIG brought in Phil Oakley, who ran Quaestor Federal Consulting, a contractor that provides training and advice to military and intelligence operations. FIG was hired by Levyx, a data-storage startup, which announced that the partnership was intended to help it win government and defense contracts. Flynn also joined the advisory board of Patriot Defense Group, the military-contracting subsidiary of Patriot Capital LLC.

In May 2016, Flynn took a paid position on the board of a company that makes surveillance drones, which grew out of a business that President-elect Trump’s son, Donald Trump Jr., represented until 2014. As a board member of Drone Aviation Inc., he has been paid $3,000 per month and also received 100,000 shares of restricted stock, now valued at more than $275,000, which will become fully vested next spring. Flynn continued to hold his seat after he began receiving classified intelligence briefings on August 17. Securities and Exchange Commission filings and federal-contract databases show the company was awarded one Department of Defense contract in late August and two more in October.

Ownership Stake

FIG worked as a lobbyist for Inovo BV, a Dutch company with close ties to Turkish President Recep Erdogan. When that arrangement was reported last month by The Daily Caller, Flynn responded by having FIG leave the field of lobbying and said he would “sever ties” with his company. But it isn’t clear whether he will retain an ownership stake. Because Flynn is a partner in the closely held business, and his son Michael is its chief of staff, he and his family would stand to gain financially from any business it does with the government.

He also was re-elected to his paid position on the board of Drone Aviation on December 6th, according to SEC filings.

Ethicists urge Flynn to end such arrangements and sell his company. Jordan Libowitz, communications director for Citizens for Responsibility and Ethics in Washington, a watchdog group, said even severing ties isn’t enough.

People in such positions “still know the company and how its business works, so they would know how a policy decision would affect it,” he said. “The only way to avoid that is for them to sell their interest and make a totally clean break.”

To contact the reporter on this story: David Kocieniewski in New York at dkocieniewsk@bloomberg.net. To contact the editors responsible for this story: David Gillen at dgillen3@bloomberg.net, Ethan Bronner, Melinda Grenier