Sen. Grassley may hold up Pentagon nominee

WASHINGTON (Reuters) - Charles Grassley, the top Republican on the U.S. Senate Finance Committee, may hold up the nomination of William Lynn, a former Raytheon Co lobbyist, to become deputy secretary of defense, a spokeswoman for the senator said on Wednesday.

“He hasn’t decided what his next action on Mr. Lynn might be,” said spokeswoman Beth Levine, when asked about the possible use of Grassley’s senatorial privilege to delay Senate consideration of the nomination indefinitely.

Lynn served as the Pentagon’s chief financial officer from November 1997 to January 2001 under former president Bill Clinton. Then as an executive at Raytheon, the Pentagon’s No. 5 supplier by sales, he was a registered lobbyist from July 2002 to March 2008.

Lynn drew heightened scrutiny after the White House granted him a waiver from new Obama administration rules that ban appointees from agencies they had sought to persuade in the previous two years.

“Mr. Lynn’s past performance at the Department of Defense raises many concerns for Senator Grassley, let alone the possible conflicts of interest with a big-time defense contractor that have been brought to the attention of the American people by President Obama’s new executive order on this issue,” Levine said.

Grassley, an Iowa Republican noted for demanding accountability from federal officials, “will be detailing all of this prior to Senate consideration of Mr. Lynn’s nomination,” Levine said.

Sen. John McCain of Arizona, who also had raised questions about how Lynn would handle conflict-of-interest rules, is allowing the nomination to proceed in the Armed Services Committee where he is the top Republican, said a spokeswoman, Leah Geach.

Lynn has said he will steer clear for a year of decisions involving six arms programs on which he lobbied on behalf of Raytheon if confirmed by the Senate, the White House told Grassley in a letter dated February 2.

At issue are the DDG-1000 multi-mission combat ship, Advanced Medium-Range Air-to-Air missile, F-15 airborne radar, Patriot missile “Pure Fleet” modernization, the National Reconnaissance Office’s Future Imagery Architecture and the Missile Defense Agency’s Multiple Kill Vehicle.

“Mr. Lynn has promised not to seek authorization to participate in decisions on any of the six specific programs where he personally lobbied,” wrote Peter Orszag, director of the White House Office of Management and Budget, and Gregory Craig, counsel to President Barack Obama.

They quoted Defense Secretary Robert Gates, Obama’s sole holdover from the cabinet of former President George W. Bush, as saying that Gates had sought the waiver from Obama’s new ethics rules because “I felt that he could play the role of deputy in a better manner than anybody else that I saw.”

In a separate letter to Grassley, Lynn explained two payment practices he had allowed as the Pentagon’s budget chief, known as “Pay and Chase” and “Straight Pay.”

“Pay and Chase,” he wrote, was a limited test that allowed certain payments under $2,500 to be made based on matching a proper invoice to the corresponding contract. Grassley has been critical of the practice for paying bills without strict accountability.

“Straight Pay” involved payments based on a three-way match of invoice, “receiving report” and contract even before an obligation was recorded in accounting records.

“At a time when the Department (of Defense) faced a backlog of unpaid invoices and mounting interest costs due to late payments, ‘Straight Pay’ was an attempt to draw the right balance,” Lynn wrote.

Reporting by Jim Wolf; editing by Tim Dobbyn