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WASHINGTON -- At a private breakfast in December, executives from an Alabama defense contractor, Digital Fusion Inc., met with the House intelligence committee chairman, Silvestre Reyes. They handed over checks totaling $24,000 for his re-election campaign.
Just five weeks earlier, Congress had approved a $461 billion defense-spending bill, which included a provision inserted by the Texas Democrat that would direct $2.6 million to Digital Fusion to fund a no-bid engineering contract at a Texas military base in his district.
Both the congressman and company say there is no connection between the contract and the contribution, which was made at the Monocle, a restaurant near the Capitol. Both parties say their actions were legal and commonplace.
Every day in Washington, defense contractors such as Digital Fusion legally give money to the politicians they are lobbying for federal contracts. Often, these companies are seeking earmarks -- spending items backed by individual lawmakers, usually bypassing federal-contracting and competition rules.
A spokesman for Rep. Reyes defended the earmark, which funded training-software work at the base, Fort Bliss. He said it "will enhance existing Fort Bliss capabilities and provide immediate feedback on soldiers' training."
Digital Fusion, Huntsville, Ala., is a publicly held technology and professional-services firm with 300 employees and annual revenue of $45 million. It has been among the fastest-growing local contractors working with NASA and the Huntsville-based Army Space and Missile Defense Command.
The company has forged ties with military officials and lawmakers. Its largest investor is a Washington lobbyist and former Senate staffer. Two retired generals are on its board, including Jay Garner, former U.S. administrator of Iraq; Mr. Garner through a company spokesman declined to comment. A retired lieutenant general is chief executive.
In the past five years, its executives have given more than $150,000 to lawmakers, including Sen. Richard Shelby and Rep. Terry Everett, both Republicans, and Rep. Robert "Bud" Cramer, a Democrat, and Rep. Reyes. In the same period, the company got at least $31 million in contracts funded by earmarks, according to Taxpayers for Common Sense, a nonprofit that tracks federal spending. The lawmakers said there was no connection between contributions to their campaigns and the contracts they funded through earmarks.
Digital executives were encouraged to contribute in emails widely distributed within the company and reviewed by The Wall Street Journal. "We will be supporting a fundraiser for Sen. Shelby's Defend America PAC," said one email. While donations are voluntary, executives were reminded of "the support provided by our senator to the Huntsville area" and were asked to tell the corporate secretary "of your intent to contribute, and the amount."
A spokesman said the company's contributions to Messrs. Reyes, Shelby, Everett and others "are based solely on their long-term support for Huntsville and for the missile command."
Some of the contributions may have been reimbursed to executives, which is illegal, according to current and former employees and a lawsuit filed last year.
In the first half of 2006, the top dozen Digital Fusion executives often contributed as a group, typically $2,000 each on the same day, to Rep. Everett, Republican Rep. Henry Bonilla of Texas and to Sen. Shelby's PAC. Company documents reviewed by the Journal show that on March 31 of that year, Digital's board approved $10,000 bonuses to the top 12 executives.
More recently, executives who contributed the $24,000 in December to Rep. Reyes were scheduled to get higher year-end bonuses than they otherwise would have, according to two people familiar with these plans.
Federal investigators are reviewing the matter.
A spokesman said the company isn't aware of any investigation; he denied that the resignation of a top executive last month was linked to the allegations.
In a statement, Frank Libutti, chief executive, said: "I have never instructed an employee to contribute to an elected official. Executives are awarded bonuses several times throughout the year for exceptional work and nothing else."
The lawsuit, filed in a federal court in Huntsville by the firm's former ethics officer, Elena Crosby, alleged among other things that executives were being reimbursed for contributions. She claimed she was fired unfairly in 2006 after she raised concerns about reimbursements, contract irregularities and other issues. The suit was settled last year.
Ms. Crosby declined to comment on the case. In an email, she said, "the matter has been resolved to the mutual satisfaction of the parties."
Digital Fusion agreed, adding that it hired an outside law firm to conduct an investigation, "which found there was no basis for her allegations."
The company declined to disclose the amount paid to Ms. Crosby in the settlement.
Write to John R. Wilke at john.wilke@wsj.com
Just five weeks earlier, Congress had approved a $461 billion defense-spending bill, which included a provision inserted by the Texas Democrat that would direct $2.6 million to Digital Fusion to fund a no-bid engineering contract at a Texas military base in his district.
Both the congressman and company say there is no connection between the contract and the contribution, which was made at the Monocle, a restaurant near the Capitol. Both parties say their actions were legal and commonplace.
Every day in Washington, defense contractors such as Digital Fusion legally give money to the politicians they are lobbying for federal contracts. Often, these companies are seeking earmarks -- spending items backed by individual lawmakers, usually bypassing federal-contracting and competition rules.
A spokesman for Rep. Reyes defended the earmark, which funded training-software work at the base, Fort Bliss. He said it "will enhance existing Fort Bliss capabilities and provide immediate feedback on soldiers' training."
Digital Fusion, Huntsville, Ala., is a publicly held technology and professional-services firm with 300 employees and annual revenue of $45 million. It has been among the fastest-growing local contractors working with NASA and the Huntsville-based Army Space and Missile Defense Command.
The company has forged ties with military officials and lawmakers. Its largest investor is a Washington lobbyist and former Senate staffer. Two retired generals are on its board, including Jay Garner, former U.S. administrator of Iraq; Mr. Garner through a company spokesman declined to comment. A retired lieutenant general is chief executive.
In the past five years, its executives have given more than $150,000 to lawmakers, including Sen. Richard Shelby and Rep. Terry Everett, both Republicans, and Rep. Robert "Bud" Cramer, a Democrat, and Rep. Reyes. In the same period, the company got at least $31 million in contracts funded by earmarks, according to Taxpayers for Common Sense, a nonprofit that tracks federal spending. The lawmakers said there was no connection between contributions to their campaigns and the contracts they funded through earmarks.
Digital executives were encouraged to contribute in emails widely distributed within the company and reviewed by The Wall Street Journal. "We will be supporting a fundraiser for Sen. Shelby's Defend America PAC," said one email. While donations are voluntary, executives were reminded of "the support provided by our senator to the Huntsville area" and were asked to tell the corporate secretary "of your intent to contribute, and the amount."
A spokesman said the company's contributions to Messrs. Reyes, Shelby, Everett and others "are based solely on their long-term support for Huntsville and for the missile command."
Some of the contributions may have been reimbursed to executives, which is illegal, according to current and former employees and a lawsuit filed last year.
In the first half of 2006, the top dozen Digital Fusion executives often contributed as a group, typically $2,000 each on the same day, to Rep. Everett, Republican Rep. Henry Bonilla of Texas and to Sen. Shelby's PAC. Company documents reviewed by the Journal show that on March 31 of that year, Digital's board approved $10,000 bonuses to the top 12 executives.
More recently, executives who contributed the $24,000 in December to Rep. Reyes were scheduled to get higher year-end bonuses than they otherwise would have, according to two people familiar with these plans.
Federal investigators are reviewing the matter.
A spokesman said the company isn't aware of any investigation; he denied that the resignation of a top executive last month was linked to the allegations.
In a statement, Frank Libutti, chief executive, said: "I have never instructed an employee to contribute to an elected official. Executives are awarded bonuses several times throughout the year for exceptional work and nothing else."
The lawsuit, filed in a federal court in Huntsville by the firm's former ethics officer, Elena Crosby, alleged among other things that executives were being reimbursed for contributions. She claimed she was fired unfairly in 2006 after she raised concerns about reimbursements, contract irregularities and other issues. The suit was settled last year.
Ms. Crosby declined to comment on the case. In an email, she said, "the matter has been resolved to the mutual satisfaction of the parties."
Digital Fusion agreed, adding that it hired an outside law firm to conduct an investigation, "which found there was no basis for her allegations."
The company declined to disclose the amount paid to Ms. Crosby in the settlement.
Write to John R. Wilke at john.wilke@wsj.com
