The report's findings clear the way for President Donald Trump to officially nominate Shanahan as permanent defense secretary, a post that must be confirmed by the Senate.

"We determined that Mr. Shanahan fully complied with his ethics agreements and his ethical obligations regarding Boeing and its competitors," the Pentagon's Inspector General's office said in a statement.

In March, the government watchdog Citizens for Responsibility and Ethics in Washington (CREW) filed a complaint to the Inspector General's office following media reports that Shanahan, when serving as deputy defense secretary, had privately promoted Boeing over its main rival Lockheed, which is building the F-35 fighter jet.

"Mr. Shanahan reportedly praised Boeing in discussions about government contracts, said that Boeing would have done much better than its competitor Lockheed Martin had it been awarded a fighter jet contract, and repeatedly 'dumped on' the jet Lockheed produced," CREW said.

"Through his conduct and comments, Acting Secretary Shanahan may have violated (Pentagon) ethics rules," it said.

Shanahan was the Pentagon's number two until Defense Secretary Jim Mattis, a former Marine Corps general, quit in December after disagreeing with Trump's Syria withdrawal decision.

When he started at the Pentagon in June 2017, Shanahan signed an agreement promising not to weigh in on discussions involving Boeing.

As well as interviewing Shanahan, the Inspector General's office said it had also talked to 33 other witnesses, consulted 5,600 pages of unclassified documents and 1,700 pages of classified material.

"We did not substantiate any of the allegations," it said.

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