Profiteering at the Top

[Guest guest]

" MARI ANDERSON " <itisimari

Fri, 02 Jun 2006 11:55:08 -0400

[GranniesAgainstGeorge] BU$H relatives 'Profiteering at the

Top' by Margie Burns

 

 

 

 

Thanks Jan for telling me about this article. It is disturbing that

these profits are ongoing (last paragraph) even past 2008! How much

ca$h do they need they already have more than they can spend. Well

maybe not The Merchant of Death did manage to blow the surplus left by

Clinton and put us into debt for trillions!

 

Granny Mari

 

 

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Published on AfterDowningStreet.org (http://www.afterdowningstreet.org)

Profiteering at the Top

By davidswanson

Created 2006-05-22 14:21

 

Bush Relatives Keep Cashing In With Military Contracts

By Margie Burns, http://www.washingtonspectator.com [1]

 

While U.S. military personnel fight and die, and Iraqis die from

injury or disease in their war-blighted communities, Washington

insiders, including relatives of the president, continue to benefit

financially from the war.

 

The total extent of war profiteering under this administration exceeds

the scope of a newsletter or even of a full-length book. Halliburton,

the giant oil-field-services corporation—headed by Vice President

Cheney for five years—continues to receive Iraq contracts, even

following public exposure of at least $170 million in overbilling.

Halliburton recently announced that its first quarter profit for this

year rose 34 percent, and the company told analysts in April that it

is beginning a series of price increases " driven by strong demand. "

Halliburton's subsidiary Kellogg Brown & Root (KBR), associated with

the most controversial Iraq contracts, intends to go public with a

stock offering, expected to raise some $550 million. KBR was the

biggest U.S. contractor in Iraq from 2002 through 2004, according to

the Center for Public Integrity.

 

The major U.S. oil companies, including Chevron, where Secretary of

State Condoleezza Rice was a director, garner record profits from

war-boosted crude oil prices while the White House opposes a

windfall-profits tax. (The combined profits for just the first quarter

of 2006 for ExxonMobil, Chevron and ConocoPhillips totaled some $16

billion.) Lynne Cheney, wife of the vice president, formerly sat on

the board of top U.S. defense contractor Lockheed Martin. Condi Rice

and I. Lewis Libby, Cheney's now indicted former chief of staff, sat

on the board of the Rand Corporation, another immense federal

contractor. Secretary of Defense Donald Rumsfeld went to Iraq to visit

Saddam Hussein, back in the dictator's palmy days, partly to put in a

word on behalf of pipeline work for Bechtel, the giant construction

company, which is now a major Iraq contractor.

 

ALL IN THE FAMILY—As the Washington Spectator previously reported,

financial ties connecting the First Family to the " war on terror " have

been numerous and pervasive. Former president George H.W. Bush served

until fall 2003 on the board of defense giant the Carlyle Group, now

broken up, which won billions of U.S. tax dollars in military and

security contracts. A limited liability company in D.C. called New

Bridge Strategies, established to generate business in Iraq, put Neil

M. Bush, a younger brother of the president, under contract at $60,000

per year. An obscure, short-lived company named Nour USA, based in

Virginia and connected to Marvin P. Bush, youngest brother of the

president, received a controversial $327 million contract from the

U.S. Coalition Provisional Authority in Iraq. The broad-ranging

contract for a raft of products from a new company raised so many

questions that it was canceled. However, a new private company called

Anham Joint Venture replaced Nour and comprises most of the same

members. Members of joint ventures, unlike those of corporations, are

not required under Virginia law to be listed in the public record. The

revised company also has received Iraq contracts.

 

A TALE OF CONTRACTS AND CONNECTIONS—In St. Louis, Missouri, Engineered

Support Systems (ESSI), where an uncle of the president, William H.T.

Bush, joined the board of directors in election year 2000, illustrates

the nexus between White House policy and companies that benefit from

it. ESSI, now merged with another major contractor, advertises itself

as offering " advanced sustainment solutions, including the design,

manufacture and supply of integrated military electronics, support

equipment and technical and logistics services for all branches of

America's armed forces and certain foreign militaries, homeland

security forces and selected government and intelligence agencies. "

 

After experiencing a jump in sales from $365 million in 2001 to $1

billion in 2005 under the Bush administration, largely from government

contracts, ESSI was sold in January 2006 to DRS Technologies of New

Jersey. The Los Angeles Times reported that William Bush, the uncle,

reaped $2.7 million from the sale. Bush, who told the Times that he

never makes telephone calls to the " 202 [Washington, D.C.] area code, "

received about $1.9 million in cash and $800,000 worth of stock in the

merged company, which continues to acquire sizable military contracts.

 

DRS spokesperson Patricia Williamson said in response to e-mailed

questions to her about the president's uncle that William Bush's

presence on the ESSI board was " absolutely not " a factor in the

acquisition of the company.

 

According to DRS, Bear Stearns, the brokerage company " served as

financial advisor to DRS on the transaction. Merrill Lynch & Co., Inc.

also served as financial advisor to DRS for the purpose of rendering a

fairness opinion. Lehman Brothers Inc. served as financial advisor to

ESSI on the transaction. "

 

All three companies—Bear Stearns, Merrill Lynch, and Lehman

Brothers—are linked to the Bush team personally and financially. Among

other connections, the president's brother Marvin P. Bush once worked

at the brokerage then called Shearson Lehman; Merrill Lynch

incorporated the former G.H. Walker firm, founded by the president's

grandfather George Herbert Walker; and Bear Stearns chairman and CEO

James Cayne was a Bush " Pioneer, " raising over $100,000 for the 2004

Bush campaign. According to Texans for Public Justice, a

public-interest group, " Bear Stearns's threats to move to New Jersey

in the 1990s netted $105 million in tax breaks and other corporate

welfare from New York City. In 1997 Mayor Rudolph Giuliani's

administration awarded $75 million of this welfare to Bear, which in

2003 hired Giuliani to launch a new investment fund of companies that

sell anti-terrorism products. " Hiring these firms to monitor a merger

of defense contractors would seem to resemble hiring an escort service

to chaperone a fraternity party.

 

A company spokesman told the press that the sale moved DRS from " the

Standard & Poor's Small-Cap 600 Index to the Standard & Poor's Mid-Cap

400 Index. " The company predicts that " approximately $2.9 billion in

annual revenues [are] expected for fiscal 2007. "

 

Among the products DRS has offered are the so-called Chem-Bio

Protective Shelters, purchased by the U.S. Army on going into Iraq but

proven to be unneeded once the troops invaded, there being no caches

of WMDs around. The company continued to receive contracts for these

chem-bio shelters, as well as for various chemical decontamination

products, through the entire period of the unsuccessful search for

biological and chemical weapons in Iraq.

 

The company has also received multiple contracts from the armed

services for its mobile field power generators. The generators are

designed to go wherever needed to provide electrical power in

locations where it would otherwise not be available. In July 2001, the

company announced that it had received a U.S. Army contract worth up

to $175 million for tactical quiet generator sets, stating that " bids

were solicited on Dec. 19, 2000. " Thus the ink was barely dry on Mr.

Justice Scalia's opinion letting Team Bush into the White House when

these bids for quiet generators were solicited. Evidently someone in

the Pentagon foresaw that there would be a demand for them.

 

According to a company representative for the division of DRS that

produces mobile generators, DRS has not sent any generators to

Baghdad, even though there's a power shortage. Generators were also

not deployed in the great blackout of 2003 in the U.S. or sent to the

Gulf Coast after Hurricane Katrina hit in 2005. When asked about why

the company had not donated any mobile power generators during these

calamities, DRS's Patricia Williamson responded: " DRS is a defense

contractor and as such, is requested by the government via formal

contracts to build a specified number of units. . . . If the

government requests the company to build spares, it will, if that is

part of a contract's requirements. . . . DRS cannot decide on its own

to deliver government property elsewhere. "

 

AIR FORCE ALERT—Assuming that the mobile generators work, the question

arises as to why they would not be deployed by government agencies in

any large-scale disaster affecting power supply. But the question also

arises as to whether they really do work. Both the Air Force and the

Army awarded contracts to Engineered Support Systems for supplying

some mobile generators to them, but in November 2004, the Air Force

issued a stop-work order on the contracts because of reliability

issues with the generators.

 

For several months, ESSI did not make public this Air Force stop-work

order, which was eventually lifted. In the meantime, in January 2005,

William H.T. Bush received about $450,000 for selling some of his

stock in ESSI. As the Los Angeles Times reported in an item not

covered by the press in the nation's capital, several insiders sold

stock in the months before the stop-work order was disclosed, the

president's uncle among them. When ESSI finally announced the

existence of the stop-work order, in June 2005, its stock dropped 11

percent. The SEC informed ESSI in September 2005, while its proposed

sale to DRS was moving forward, that it was broadening its

investigation of the company to include the stop-work order and the

interim stock sales.

 

ESSI continued to receive contracts. The stop-work order was lifted in

October 2005. On October 11, 2005, it announced that it had been

awarded another $24.5 million contract to supply Chem-Bio Protective

Shelters to the Army, and a $3 million contract for heating and

air-conditioning upgrades for reserve intelligence units, including

installing uninterruptible power supplies.

 

But company problems continued to be disclosed. Tim McLaughlin of the

St. Louis Post-Dispatch reported that when the deal with DRS was

arranged, Engineered Support Systems approved the payment of a

" success fee " of $5 million to its chairman, Michael Shanahan, but did

not disclose the fee to DRS until after the merger, according to SEC

filings. Shanahan's son, Michael Shanahan, Jr., was a member of the

insurance brokerage company that sold ESSI insurance for two years,

resulting in commissions for the younger Shanahanand an investigation

by the Securities and Exchange Commission for the company. According

to the Post-Dispatch, ESSI commissions to Shanahan's son's insurance

brokerage rose 90 percent, to $1.5 million, in fiscal 2005. In

December 2004 the SEC launched a formal investigation of insider

trading by the company and of the insurance commissions it was paying.

 

Federal prosecutors in the U.S. Attorney's Office in St. Louis have

also begun investigating the delayed stop-work order announcement. In

the insider trades after the stop order but before the announcement,

ESSI directors and executives sold more than $30 million worth of

stock; only some of the trades were for transactions necessary to

prevent options from expiring.

 

SUSPICIONS AROUSED—Further difficulties have arisen. The state

attorney general's office in Missouri is also investigating ESSI's

doings. The company is being sued in the state of Maryland over

matters connected to its acquisition of a Maryland company three years

ago. The Inspector General of the Air Force has recommended that the

Air Force suspend a major contract with the company because of

problems connected with fallout from the Darleen Druyun case. Druyun,

a former Pentagon official who was imprisoned for inappropriate

assistance to Boeing, also supervised some ESSI's contracts, including

" sole source, " or no-bid, contracts.

 

Congressman Henry Waxman (D-CA) has submitted two letters about ESSI

to Defense Secretary Donald Rumsfeld, requesting documents pertaining

to its dealings with the armed services. In March 2005, Waxman

requested unredacted copies of all Engineered Support Systems

contracts with the Pentagon or Iraq's Coalition Provisional Authority,

along with " any justification and approval documentation for sole

source contracts " with ESSI. Noting that the president's uncle sat on

the board of the company and that $158 million of company contracts

had been referred to the Air Force Inspector General's office for

investigation, Waxman also requested a DOD briefing regarding the

process by which the contracts had been awarded and managed, and the

rationale for the investigation. No reply.

 

A second letter to Rumsfeld from Waxman, dated April 6, 2006, notes

that the Air Force IG found that Darleen Druyun pushed Engineered

Support Systems from the beginning, recommending that the company

receive a 33-year, $1.7 billion contract instead of the $158 million

contract it received. Waxman also notes that the company received a

$42 million contract for vehicle overhaul, even though the Marines

could do the repairs for $19 million less. Using ESSI increased

transportation costs by $641,000. In an effort to investigate why

Druyun was so determined to assist this company in the first place,

Waxman is also requesting all e-mail correspondence between the

company and Druyun. The requests for documents and information have

not been honored thus far.

 

Over seven days in April 2006, DRS Technologies announced a $142

million contract for infrared systems for the Canadian and Dutch

navies, a $34 million contract for diagnostic systems for U.S. Army

vehicles, a $222 million contract to provide communications services

for multi-national forces in Iraq, an $18 million contract to

refurbish military trailers deployed in Operation Iraqi Freedom, a $21

million contract for driver vision enhancers for U.S. Army vehicles,

and a $20 million contract for electronics test support for Army

ground vehicles. Media outlets in the Washington, D.C., region have

largely disregarded the company's contracts and its problems.

 

It is reasonable to conclude that the interaction of federal policy

and corporate profit that is a pattern for the Bush administration has

not been oriented toward national security. Consider the incongruity

between the administration's fabrications about nonexistent " weapons

of mass destruction " in Iraq, on the one hand, and its negligence and

dereliction of duty, on the other hand, that allowed caches of actual

munitions to be stolen and then used against our troops.

 

It is also only too reasonable to predict that similar

destabilizations are in store for the foreseeable future, under

administration policy. Without much fanfare, the world's single

biggest American embassy is currently being constructed in Baghdad, to

be staffed by 900 Americans and several hundred Iraqis. The U.S. is

erecting several permanent military bases in the region, to be guarded

for years to come by service personnel and privately hired security

squads. Every such project becomes, first, a cachepot for contractors;

then, a target for anti-American feeling intensified by these

projects; and then, a locus for more contracting in the

military-security sector, with a corresponding drain on resources for

all other needs.

 

Thus, Washington's famous " revolving door " is now revolving in a

bloody geopolitical vicious circle.

 

LINK TO ORIGINAL [2]

Source URL:

http://www.afterdowningstreet.org/node/10934

 

Links:

[1] http://www.washingtonspectator.com

[2]

http://www.washingtonspectator.com/articles/20060515profiteering_1.cfm?gp=GNI260\

786096

 

 

 

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