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Bureaucrats Live It Up in Moscow on Your Tax Dollars Phil Brennan, NewsMax.comIt seemed like a great idea: invest in projects to convert Soviet factories from making consumer goods instead of weapons of mass destruction, a modern-day version of beating swords into plowshares. It was called the Defense Enterprise Fund, created by Congress in 1994 and given a substantial amount of tax dollars – no less than $66.7 million – over the years to get those new plowshare enterprises up and running. According to the Moscow Times, things didn't quite work out as planned. The idea of making hard-headed investments into "conversion" – business projects that would move an institution or its personnel out of the Soviet military past and into the free-market future – somehow went awry. Reporter Matt Bivens wrote that "according to an audit published on New Year's Eve by the Pentagon's Office of the Inspector General, the DEF spent 'at least' $35.6 million solely on the managing of that $66.7 million – or about 53 percent of the fund. The audit quotes a government official who says 'acceptable' money-managing costs typically range from 1 percent to 2 percent of a portfolio's size," not half its size. "Nor did spending 53 cents of every dollar on managing investments bring very exciting returns. Today, the audit says, the DEF's investment portfolio is worth just $11 million, plus about $4 million in cash," Bivens added. Hogs at the Trough Where did all the money go? Some of it, about $1 million of the taxpayers' money, paid for gourmet meals, tennis matches, golf club memberships, vacations to sunnier climates and tickets to theaters and the symphony for a handful of American DEF staffers, government auditors report. According to Bivens, "Among DEF spending from just the examined period of 1997-1999, the audit highlighted:
The DEF did make some investments. In April, the Moscow Times reported such "ill-fated and ill-considered investments" as a scheme to extract gold from trash and a bungled telecom venture that led to behind-the-scenes feuding between the U.S. and Russian governments. In 1999 the DEF fired nearly its entire staff. Among those fired was a Russian-born American and whistle-blower, Matthew Maly, who complained to the DEF board of mismanagement and the high living by his bosses. He now says his whistle-blowing has damaged his career, and questions whether the board of the DEF investigated his concerns in good faith. Maly went to work for the DEF in 1996. He was fired in 1999 after complaining about the corruption and mismanagement. He found the waste of money so huge that he complained to the U.S. State Department, which prompted it to investigate. Today he is unemployed, and he says he has been blacklisted for "lack of loyalty" to DEF. "I brought the bad news, and had my head chopped off," Maly says. He said in an e-mail reply to Bivens' questions about the audit that he wondered what has come of a criminal investigation the Pentagon is conducting into the DEF. "The Pentagon would not comment on that investigation other than to confirm its existence," according to Bevins. "But as The Moscow Times reported in April, defense investigators are studying, among other things, Maly's allegations that DEF managers bribed Russian government officials. Maly said he has never once been contacted by the Defense Department's criminal investigators."
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