It may come as startling news to learn that its not only banks who have been running up large taxpayer-funded bills to pay executive compensation. Government contractors have been quietly fleecing federal coffers by driving a truck through massive loopholes in reimbursement legislation. While Medicaid and defense contractors may be able to claim their services are more noble than banking, their ability to exploit gaps in legislation is equally ruthless.
Medicare and defense contractors, which provide services to the government, are reimbursed for labor and benefits, including a portion of executive pay. Under law, contractors can seek reimbursement for $684,181 in pay for each top officer per year, up from $250,000 when the cap was implemented in 1995.
However, because the statute defining reimbursement is silent on the topic of pension plans, at least one Medicare provider is seeking almost ten times the maximum amount.
"The statute doesn't mention" pension plans, says Richard C. Loeb, who drafted the rules in the 1990s in his role on the Cost Accounting Standards Board and now is an adjunct professor of government contract law at the University of Baltimore School of Law. "Congress left a gaping hole through inattention."
Given the apparent quality of Congress's work, it might finally be time to have an inquiry into their compensation.
Pay Is Scrutinized at U.S. Contractors [WSJ]