Pentagon Audit Found Connection Between Mattis-Era Defense Department and Amazon-Linked British Consultant

A closer inspection of a Pentagon audit last year shows that Sally Donnelly was serving as a senior adviser to former Defense Secretary James Mattis when she received more than $1 million in payments for her share of an Amazon consulting firm from British financier André Pienaar — not from an American investor, as previously reported. One of those payments arrived the same month Pienaar and his partner, former Amazon executive Teresa Carlson, attended a dinner meeting with Donnelly and Mattis as the Pentagon was developing a $10 billion contract for cloud computing services that Amazon sought.

The Joint Enterprise Defense Infrastructure, or JEDI, contract has been subject to numerous investigations and lawsuits regarding the Pentagon’s alleged preferential treatment of Amazon while drafting the solicitation and surprise decision to issue the $10 billion award to Microsoft in October 2019. Prospective bidders like Oracle were incensed that the solicitation’s terms supposedly favored Amazon, while Amazon has argued that former President Donald Trump’s contempt for Jeff Bezos and purported intervention in the program tipped the scale to Microsoft. The Bezos-owned company is currently challenging the JEDI contract in the U.S. Court of Federal Claims, delaying the program so significantly that military services have begun pursuing their own cloud service agreements with Amazon, Microsoft, and others. The Defense Department may now decide to abandon the JEDI program altogether.

Previous reports suggested that Donnelly’s share was purchased by an American investor. The revelation that Pienaar was the true buyer of Donnelly’s 80 percent share of the consulting firm, SBD Advisors, was buried in an audit released last year by the Pentagon’s inspector general into alleged ethical misconduct in the JEDI procurement. The audit has received little public attention despite adding a new twist in the myriad of ethical concerns surrounding the contract and a military-industrial complex that was made even more powerful by the pipeline of Trump-era defense officials to Donnelly’s new firm, Pallas Advisors.

Pallas Advisors, which Donnelly founded in 2018 with Tony DeMartino, former deputy chief of staff to Mattis, who also worked as the managing director at SBD Advisors, has become a haven for Trump-era Defense Department officials. Former Navy Secretary Richard Spencer, Director of Cost Assessment and Program Evaluation Bob Daigle, Principal Deputy Chief Information Officer Essye Miller, and Principal Deputy Director of National Intelligence Sue Gordon are all on staff or the firm’s advisory board. Separately, President Joe Biden’s Senate-confirmed Under Secretary of Defense for Intelligence and Security Ron Moultrie is a former Pallas Advisors board member.

Pallas Advisors did not reply to a request to connect with Donnelly about the inspector general’s report into the JEDI procurement.

Donnelly sold her majority share in SBD Advisors, which helped educate Amazon and other clients on the inner workings of the Pentagon, in January 2017, prior to joining Mattis in the Defense Department. (Donnelly had intimate knowledge of the Department of Defense as a result of her work in the early 2010s running the Washington office for Mattis, then head of U.S. Central Command.) It wasn’t until the summer of 2018, shortly after Donnelly left the Pentagon to start Pallas Advisors, that a possible conflict of interest involving the payments from the sale came to light.

Donnelly had sold her 80 percent share of SBD Advisors and received $390,000 in January 2017 before joining the Defense Department, which she revealed in her mandatory financial disclosure form in May of that year. What the form did not reveal, the Daily Caller reported, was that Donnelly received another $390,000 in March, when the dinner with Carlson and Mattis occurred, and would go on to receive two more payments while still working for the Pentagon. Donnelly did not report the payments until she filed a new financial disclosure upon departing the Defense Department.

A spokesperson for SBD Advisors, Price Floyd, told the Daily Caller that Donnelly sold her share to a group of investors led by Win Sheridan, an American venture capitalist with minimal if any past experience in the defense sector. Pienaar was not mentioned.

That was a glaring omission. The Pentagon’s audit doesn’t mention any involvement by Sheridan in the purchase of Donnelly’s share; it only names Pienaar, the head of U.K.-based investment firm C5 Capital, a client of SBD Advisors that’s done business with Amazon. Pienaar was also dating, and is now married to, Carlson, then an Amazon executive, when the two attended a London dinner in March 2017 with Mattis and Donnelly. That’s the same month Donnelly received one of the $390,000 payments from Pienaar for the sale of SBD Advisors that she left out of her financial disclosure form.

Amazon has refuted claims of wrongdoing as a result of its relationship with C5 Capital. After an apparent campaign during the JEDI bidding process to smear Amazon due to C5 Capital’s supposed ties with a Russian oligarch, the Bezos-owned company in December 2018 publicly denied that its work with Pienaar’s firm had anything to do with the Department of Defense’s cloud services program.

Nevertheless, the Wall Street Journal reported that Mattis and Carlson met at the London dinner. An organizer of that dinner said cloud computing was not discussed, according to the Journal, though the dinner did supposedly lay the groundwork for a future meeting between Mattis and Bezos. ProPublica reported that the two met again in January 2018 just as the Pentagon was finalizing a draft solicitation for the JEDI contract. An Amazon spokesperson denied that the meeting had anything to do with the cloud services program.

Regardless, the Pentagon isn’t shy to acknowledge that it has adopted a deliberate strategy in recent years to strengthen relations with contractors so defense officials can better understand industry’s offerings and vendors can better understand the military’s needs. The goal is to improve the Defense Department’s notoriously slow and opaque acquisition process that only traditional, major defense corporations are able to navigate — ironic given the delays that investigations into ethical misconduct surrounding such tight relations have caused the JEDI program. The Department of Defense did not immediately respond to a request for comment.

Despite no indication that the Defense Department’s inspector general interviewed Pienaar while reviewing the cloud services procurement, the auditor found that Donnelly did not violate ethical obligations regarding her financial disclosures or give preferential treatment to Amazon. That hasn’t assuaged the concerns of Sen. Mike Lee, R-Utah, and Rep. Ken Buck, R-Colo., ranking members of the Senate and House Judiciary Antitrust subcommittees, respectively, who last month requested that the Justice Department conduct an antitrust investigation into Amazon’s behavior and wrote a letter to the Pentagon arguing that Donnelly’s conduct indicated “laws were broken.”