Gates ordered Deputy Secretary William Lynn in December to review the military's practice of paying retired officers hundreds of dollars an hour to act as "senior mentors," helping run war games and advising active-duty officers.
Lynn has completed the review and will present his recommendations to Gates, Adm. Michael Mullen, chairman of the Joint Chiefs of Staff, and the chiefs of the military services, Pentagon press secretary Geoff Morrell said.
Gates was responding to a USA TODAY investigation, which reported that most of the mentors had ties to defense contractors and that there were few ethics rules governing potential conflicts of interest. The newspaper reported that some mentors were earning more as advisers than they did as active-duty generals, even as they collected six-figure pensions and consulted with defense companies seeking Pentagon contracts.
In the months leading up to the review, Gates has expressed concern about mentors' pay, which can reach $486 an hour. Mullen said in November that mentors must avoid even the appearance of a conflict of interest.
Sen. Claire McCaskill, the Missouri Democrat whose subcommittee is investigating military mentors, told Gates in November that there must be public disclosure of mentors' outside interests.
Public disclosure is essential, said Mandy Smithberger, national security investigator for the Project On Government Oversight, a Washington watchdog group.
"Any time you're talking about someone who might have a significant potential financial conflict of interest, you have to have sunshine there in order to eradicate it," she said.
However, many Pentagon advisers do not have to file public financial-disclosure forms. For example, unpaid advisers, such as those working on a study of the Pentagon's Quadrennial Defense Review, file disclosures that are reserved for a closed-door inspection by Pentagon lawyers.
Secret financial-disclosure forms "would not be consistent with the other open-government initiatives of the Obama administration," Smithberger said.
Some mentors are concerned any new rules would require too much information about their business relationships or place too low a cap on how much money they can be paid as government advisers, Gregory "Speedy" Martin, a retired Air Force general and senior mentor, said in an e-mail.
"Keeping (defense) consulting separate from mentoring is important, and we probably need to make the rules much more visible and appropriately restrictive," Martin said. "But I would caution against making them so exclusive that we imply retired flag officers are not trustworthy."
USA TODAY found that of the 158 retired generals and admirals identified as mentors, 80% had financial ties to defense contractors, including 29 who were full-time executives of defense companies. The retired officers, hired as contractors, have not been subject to the ethics rules that would apply if they were brought in as part-time federal employees. They have not had to disclose, to the military or the public, their ties to defense contractors.