The decision by the Defense Department inspector general appears to open the door for President Donald Trump to nominate Shanahan to succeed Jim Mattis as defense secretary. The White House, however, has not said whether Trump intends to do so. Shanahan is not thought to face any organized opposition to Senate confirmation, although his career service in the defense industry and limited government experience could be issues.
After Mattis quit last December in protest of Trump's policies, the president installed Shanahan as acting secretary but did not nominate him. Although he has publicly praised Shanahan's work, Trump has seemed content letting him remain in limbo, as he has with a number of other Cabinet-level officials and others.
"I like acting. It gives me more flexibility," Trump said in January.
Shanahan, who spent 31 years at Boeing, has been serving as the interim Pentagon chief since Jan. 1, after Mattis resigned. The allegations of bias toward Boeing stemmed from his 18 months as deputy defense secretary, beginning in July 2017.
In a written statement summarizing the outcome of its probe, which began on March 15, the inspector general's office said it "did not substantiate any of the allegations and determined that Acting Secretary Shanahan fully complied with his ethical obligations and agreements regarding Boeing and its competitors."
Glenn Fine, the interim inspector general, issued a separate statement saying the probe had been conducted "fairly, thoroughly and expeditiously."
A spokesman for Shanahan, Army Lt. Col. Joe Buccino, said Shanahan's ethics agreement "ensures no potential for a conflict of interest with Boeing on any matter." He said Shanahan is focused on "retooling the military for great power competition," executing the national defense strategy and caring for service members and their families.
Among the allegations investigated: That Shanahan had "boosted" Boeing in Pentagon meetings; that he made disparaging remarks about Boeing competitors; and that he "repeatedly dumped" on Lockheed Martin's F-35 aircraft.
"We did not substantiate any of the allegations," the IG report said.
The 47-page report cited examples of Shanahan strictly adhering to the commitment he made in June 2017 not to be involved in Boeing matters. It said that in September 2017, Air Force Gen. John Hyten, the commander of U.S. Strategic Command, approach Shanahan to brief him on a Boeing program.
"General Hyten told us that Mr. Shanahan said, 'Stop. That's a Boeing program. I can't talk about it.' General Hyten told us that he asked Mr. Shanahan, 'Not even conceptually about future capabilities?' and that Mr. Shanahan said, 'No, I can't talk about that at all.'"
It quoted Mattis, who was among former officials interviewed by the IG's office, as calling Shanahan "my ethical standard bearer" and "part of my solution when it came to ethical endurance." Members of the Joint Chiefs of Staff also were interviewed and said they had seen no instance of ethical slips by Shanahan.
The report said the IG received allegations about Shanahan from several sources. On Feb. 7, 2019 a Senate Armed Services Committee attorney forwarded an anonymous allegation to the IG that alleged bias toward Boeing. A week later, the staff of Sen. Elizabeth Warren, a Massachusetts Democrat who is a candidate for the Democratic presidential nomination, forwarded three additional allegations to the IG that asserted Shanahan pressured the military services to buy Boeing aircraft. Several newspaper articles reported similar anonymous allegations against Shanahan.
In March, a watchdog group called Citizens for Responsibility and Ethics in Washington filed an ethics complaint with the IG. It alleged that Shanahan has appeared to make statements promoting Boeing and disparaging competitors, such as Lockheed Martin. This and all other allegations investigated by the IG were found to be unsubstantiated.
Shanahan had publicly welcomed the decision to investigate the allegations.
At the time, Sen. Richard Blumenthal, D-Conn., said that scrutiny of Shanahan's Boeing ties was necessary. "In fact, it's overdue. Boeing is a behemoth 800-pound gorilla - raising possible questions of undue influence at DOD, FAA and elsewhere," Blumenthal said.
Shanahan signed an ethics agreement in June 2017, when he was being nominated for the job of deputy defense secretary, a job he held during Mattis' tenure. The agreement outlined the steps he would take to avoid "any actual or apparent conflict of interest," and said he would not participate in any matter involving Boeing.
Shanahan, 56, joined Boeing in 1986, rose through its ranks and is credited with rescuing a troubled Dreamliner 787 program. He also led the company's missile defense and military helicopter programs.
Trump has seemed attracted to Shanahan partially for his work on one of the president's pet projects - creating a Space Force. He also has publicly lauded Boeing, builder of many of the military's most prominent aircraft, including the Apache and Chinook helicopters, the C-17 cargo plane and the B-52 bomber, as well as the iconic presidential aircraft, Air Force One.
This is only the third time in history that the Pentagon has been led by an acting chief, and Shanahan has served in that capacity for longer than any of the others.
Presidents typically take pains to ensure the Pentagon is being run by a Senate-confirmed official, given the grave responsibilities that include sending young Americans into battle, ensuring the military is ready for extreme emergencies like nuclear war and managing overseas alliances that are central to U.S. security.
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