Exclusive: Inside the effort to turn Trump against Amazon’s bid for a $10 billion contract

Posted at 2:47 PM, Jul 26, 2019
and last updated 2019-07-27 08:16:14-04

Tech giant Oracle’s push to scuttle a bid by its rival Amazon to win a highly sought-after defense contract has reached President Donald Trump’s desk — a possible attempt to appeal to the President’s well-known animosity toward the online retail giant and its founder, Jeff Bezos.

White House officials in recent weeks have shown Trump a document that alleges a large conspiracy to award Amazon a 10-year, $10 billion contract to build the Pentagon’s cloud computing network, according to three sources familiar with the matter. The document, obtained by CNN, is identical to one created by Oracle’s top Washington lobbyist, Kenneth Glueck, an executive vice president with the company, Glueck tells CNN.

The one-page document was presented to Trump along with other information in a meeting in the last week where the contract and Amazon’s possible award were discussed, one of the sources said. It’s unclear how the document made it to the White House.

The document contains a flow chart titled “A Conspiracy to Create a Ten Year DoD Cloud Monopoly,” and provides a visual representation of a narrative that Oracle has been pushing for months — that a web of individuals inside and outside the Defense Department were greasing the wheels for Amazon to win a cloud computing contract known as the Joint Enterprise Defense Infrastructure (JEDI). Oracle’s own bid did not make it to the final stage.

Amazon declined to comment for this story.

READ: Amazon executives slam Oracle and Microsoft as the cloud wars heat up

The chart features the faces of a number of former Pentagon officials, current Amazon employees and executives, as well as consultants working on behalf of Amazon, connecting them together in a criss-cross of business and professional ties. The version shown to the President includes photographs of the previous two secretaries of Defense, Ash Carter (featured alongside President Obama) and Trump’s former Defense Secretary, James Mattis.

With images of dollar signs, arrows, and a heart linking the various figures, the chart leaves the overall impression of corruption and conflicted interests. A blown-up copy of the chart is visible from the street, perched in Glueck’s window at Oracle’s K Street office in downtown Washington. But while the chart is heavy on graphics and innuendo, there is no specific charge of wrongdoing.

Many of the implied and explicit allegations have been addressed by an internal Pentagon investigation or in a legal challenge by Oracle in federal court. Neither have determined them to be problematic.

In recent weeks, the President has indicated he has concerns over the JEDI contract, and that the administration will be reviewing the matter. The decision to revisit the contract, however, ultimately lies with the Secretary of Defense.

When asked by a reporter about the contract during a July 18 appearance in the Oval Office with the prime minister of the Netherlands, Trump said, he’d been getting “tremendous complaints about the contract with the Pentagon and with Amazon,” including from Microsoft, Oracle and IBM.

“Great companies are complaining about it,” Trump said. “So we’re going to take a look at it. We’ll take a very strong look at it.”

On July 22, Trump retweeted a Fox News segment criticizing the JEDI contract as “The Bezos Bailout.” It’s not clear if the President had already seen the Oracle document by then.

While it would be highly unusual for a president to intervene on the awarding of a big government contract, during Trump’s time in office, companies have learned that appealing to him on a personal level can help secure his attention.

He’s also discussed the deal with senators, while other members of Congress have written appeals to him both in support and against Amazon’s getting the contract.

Trump has regularly blasted Bezos and Amazon, claiming the company does not pay enough in taxes and has taken advantage of the US Postal Service to grow its business. Bezos also owns the Washington Post, which Trump has repeatedly characterized as unfair to him and his administration.

Oracle, on the other hand, has a close relationship with the Trump administration. The company’s CEO, Safra Catz, served on Trump’s transition team, has dined at the White House and was once under consideration for a job in the administration. Officials who work for Oracle have been spotted in the West Wing as recently as last month, according to a person with direct knowledge.

Glueck tells CNN neither he nor anyone at Oracle, including Catz, gave his chart to the White House and that he does not know how it ended up on the President’s desk. He has distributed the chart widely to other lobbyists and journalists. “I’m not upset that it’s in front of him,” Glueck said.

The White House did not reply to requests for comment.

Oracle’s anti-Amazon push

Oracle’s flow chart is part of a months-long endeavor to disrupt the JEDI contract and undercut Amazon, which is widely seen as the front-runner to win the bid.

Amazon and Microsoft are both finalists for JEDI, which, according to one Pentagon source, could be awarded as early as August 23. Microsoft declined to comment.

After failing to successfully bid on the contract, Oracle mounted a legal challenge to the Pentagon’s process, alleging its rival had an unfair advantage due to Amazon’s close relationships inside the department. That challenge was rejected by a federal claims judge last month.

One source close to the White House says the President has mentioned revisiting the JEDI contract to other White House officials. “Trump wants to scuttle this process and possibly reopen it back up again with extra guardrails,” the source told CNN.

The source also notes a White House intervention into the JEDI bid process could be an important first test for Trump’s newly sworn-in Defense secretary, Mark Esper, who indicated this week he would be looking into the contract.

“I’ve heard from everybody about JEDI Cloud, that’s one of the things I’m going to take a hard look at,” Esper told reporters at the Pentagon Wednesday.

“Trump has inserted himself in other deals as well but this particular deal especially with Amazon and Bezos and the Washington Post…could land at the desk of Esper,” the source close to the White House said.

Winning the JEDI contract is a top priority for Amazon and decisions related to the program are handled at the highest levels of the company, sources familiar with the topic told CNN. Since 2013, Amazon Web Services (AWS) has operated the Central Intelligence Agency’s cloud network.

AWS is the most profitable arm of Amazon, accounting for 12 percent of the company’s total sales last quarter, according to a company earnings report on Thursday. At $8.3 billion, AWS sales have grown 37 percent compared to this time last year. Amazon’s cloud segment as become a vital part of its success — particularly as its e-commerce business faces growing policymaker and antitrust scrutiny.

Amazon officials have been well aware of Oracle’s efforts to undercut their bid in recent months, which is viewed by many within the company as a last-ditch attempt to derail the award process at a late stage.

Capitol Hill weighs in

Some Republicans in Congress have been encouraging the administration to revisit the JEDI contract. Senators Ron Johnson of Wisconsin and Marco Rubio of Florida have written separate letters to the Pentagon raising concerns about moving ahead with the contract. Trump even discussed JEDI with Johnson on an Air Force One flight to Wisconsin two weeks ago, according to the senator’s office.

Trump also called Rubio earlier this month to share his concerns about the contract, according to a Rubio spokesperson. Trump gave the indication that he may get involved in preventing the awarding of the contract if necessary.

On July 23, a dozen Republican House lawmakers sent Trump a letter urging him to delay awarding the JEDI contract. The letter, which was first reported by Axios, states that awarding the contract would be “premature” because the Pentagon’s Office of Inspector General “is still investigating potential conflicts of interest by DoD employees in awarding the JEDI contract.”

The same day, Dana Deasy, the chief information officer for the Department of Defense, responded to Johnson’s request to delay the award until the inspector general’s office completed its probe, according to a letter obtained by CNN. Deasy wrote that he would “ensure” that Pentagon officials “consult” with the IG office “before finalizing the award decision.”

Defense Department spokeswoman Elissa Smith has said that an internal investigation into conflicts of interest determined there was “no adverse impact” to the JEDI acquisition process. However, Smith said that potential (and unspecified) ethical violations uncovered by the investigation have been referred to the Pentagon’s inspector general. That office is currently reviewing those allegations.

Only one of the 12 signatories to the House letter, Florida GOP Rep. Matt Gaetz, sits on the Armed Services Committee that oversees the Pentagon. Not all Hill Republicans agree. The previous week, four of Gaetz’s GOP colleagues on the committee, including ranking member Texas Rep. Mac Thornberry, sent a letter to Trump urging him to “move forward as quickly as possible with the award and implementation” of the JEDI contract.

“Our committee has conducted oversight of this contract from the beginning. As you know, the courts have upheld DoD’s handling of the competition. While it is understandable that some of the companies competing for the contract are disappointed at not being selected as one of the finalists, further delays will only damage our security and increase the costs of the contract,” the letter states.

JEDI under Mattis

The idea of the Pentagon having its own commercial cloud system had been percolating inside the department since the Obama administration. Yet the formal project didn’t get off ground until after Mattis took a trip to the West Coast in August 2017, where he visited the headquarters of Google and Amazon. According to two former Pentagon officials, Mattis, initially a skeptic of the idea, returned to Washington convinced that the Pentagon needed its own cloud.

That fall, the Pentagon announced that it would be soliciting bids from private companies to build a massive cloud computing system for the entire Defense Department. Four of the five leading cloud computing companies, Amazon, IBM, Oracle and Microsoft, submitted bids. Google did not.

At the heart of Oracle’s allegations is that the Pentagon, under Trump’s first Secretary of Defense Mattis, was predisposed to pick Amazon. Mattis had a high-profile meeting with Bezos during his August 2017 trip to Amazon’s headquarters in Seattle. Also, one of Mattis’ top advisers, Sally Donnelly, counted Amazon Web Services as a client at her national security consulting firm, SBD Advisors.

Donnelly sold the firm upon joining Mattis at the Pentagon in January 2017. She has since left the Pentagon and has started a similar consulting firm, Pallas Advisors.

According to federal ethics forms, Donnelly disclosed her prior work for Amazon when she began working at the Pentagon. “No personnel in the secretary of defense’s front office participated in drafting the requirements or the solicitation. Any assertion or suggestion to the contrary is false,” the Department has said in a previous statement.

Two former Pentagon officials with knowledge say Donnelly did not work on the JEDI contract or acquisition process in her capacity as Mattis’s senior adviser.

Mattis did not respond to request for comment. When reached for comment, Donnelly referred CNN to her lawyer Michael Levy, who said in a statement:

“While at the Department of Defense, Ms. Donnelly had no role in acquisition or procurement. She played no role, and exercised no influence, in connection with any government contract, including — as the Department of Defense has confirmed repeatedly — the JEDI contract.”

A spokesman for former Defense secretary Carter, who is featured on Oracle’s chart, told CNN that he “played no role whatsoever in the JEDI contract competition, which was initiated after he left the Department of Defense.”

As Defense Secretary, Esper has the power to halt the award of any defense contract, though he would have to have a legitimate reason for doing so. “He could let this die on the vine,” said a former Pentagon official who spoke on condition of anonymity. “Contracts don’t get awarded all the time.”

Given the high profile of JEDI, doing so would likely cause a huge firestorm. The Pentagon has strict rules governing the bidding process. Any move by the administration to alter the bidding process would likely elicit lawsuits.