Some Washington watchers say some defense contractors also have close ties to Capitol Hill. If a government agency goes after a big defense contractor, claims Rasor, "you get a lot of grief, from members of Congress, lobbyists."

Consider the political forces that Stockton says almost shut down his investigation of General Dynamics. On many of the subpoenaed overhead vouchers, he recalls, the subcommittee found evidence of several senior members of Congress having "two-thirds of their social life paid for by defense contractors: going to the Kennedy Center, playing golf, lavish trips."

What's more, defense contractors tend to be major employers in a number of Congressional districts. The SEC is not likely to make many friends on Capitol Hill by investigating a large defense contractor at a time when companies in other sectors are laying off workers and shuttering factories.

A Higher Standard?
Still, some insiders insist the commission would not shy away from investigating defense contractors. "I don't think the SEC is precluded in any way from doing anything with a government contractor," asserts Gary Illiano, regional director of professional standards for Grant Thornton and former staff member of the New York office of the SEC enforcement division for four years. "They would conduct the investigation in their usual fashion."

Other observers argue that defense contractors answer to a higher standard than securities law. They point out that a slew of government agencies — including the Defense Contract Audit Agency, the Inspector General, and the General Accounting Office — regularly monitor the bookkeeping of defense contractors.

Penalties for sham transactions can be substantial, too. "The accounting and fraud provisions are much tougher under laws other than those over which the SEC has authority," says Marshall Doke, a government contracts attorney at law firm Gardere Wynne Sewell.

But critics say laws governing the bookkeeping of defense contractors are hardly effective. As proof, they point to the lack of suspensions and debarments. "There are plenty of regulations against defense contractors," grants Tinker. "But they don't really serve as much of a deterrent."

Certainly, accounting in the military industrial complex would never pass muster for a Fortune 500 company. In his confirmation hearings two years ago, Secretary of Defense Donald Rumsfeld conceded he had concerns about the bookkeeping for military projects, calling the problem "monumental."

Rumsfeld and those inside the military have set out a plan to improve the Pentagon's internal control systems. The goal? "They're trying to get to a clean audit just like corporations are supposed to do," notes Rasor.

Then again, finance departments at corporations generally have an idea where their payables go. According to Rasor, the Department of Defense still "can't find one out of every four dollars they try to get."

With U.S. Marines now fighting on the streets of Baghdad, however, it seems unlikely that an overworked and understaffed SEC will step into the breach.

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