Dick Cheney and the Self-Licking Ice Cream Cone

The Carlyle Group: Crony Capitalism without Borders

excerpted from the book

How Much Are You Making On The War Daddy?

A Quick and Dirty Guide to War Profiteering in the Bush Administration

by William D. Hartung

Nation Books, 2003, paper

This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence-economic, political, even spiritual-is felt in every city, every State house, every office of the Federal government ...

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist

We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.

President Dwight D. Eisenhower, in a televised Farewell Address to the Nation, January 17, 1961

It is simply not possible to have a multi-billion-dollar, multi-year tax cut, a Pentagon budget that will top $500 billion by the end of this decade, a seemingly endless string of wars for "regime change" that are paid for through emergency appropriations over and above the Pentagon's massive annual spending, plus massive new expenditures for intelligence and homeland security, and still expect the government to meet its traditional responsibilities in the areas of education, income security, transportation, health care, housing, environmental protection, and energy development.

... when 50 percent of Americans don't even bother to vote, when most Americans get their news from the "shouting heads" and slick sound bites they hear on TV news, it's an open question whether the American public can rise to the occasion to restore and revive American democracy from the deep wounds suffered in November and December of 2000 ...


Dick Cheney and the Self-Licking Ice Cream Cone

The revolving door between the government and weapons contractors isn't new, but it has reached new heights (monetarily) and depths (ethically), in recent years.[Richard] Cheney's relationship with Halliburton is a perfect case study of all that is wrong with the relationship between our democratic form of government and the corporations that finance our elections and feed at the government trough on a daily basis.

Halliburton's biggest "cash cow" during his [Cheney's] tenure was definitely in the area of military support services, and the company's ability to earn so much in this area was directly tied to a decision Cheney had made back when he was secretary of defense in the first Bush administration. It was under Cheney's watch that the decision was made to privatize not only specific services in support of U.S. troops overseas-such as food services, or doing the laundry, or repairing vehicles-but to privatize the actual planning process that went into providing logistics for U.S. troops when they had to be sent into an inhospitable foreign hot spot on short notice.

In 1992, near the end of Cheney's tenure as defense secretary, Halliburton won a contract from the U.S. Army's Logistics Civil Augmentation Program (LOGCAP), which P.W. Singer has described as a deal to "work with the military in planning the logistical side of contingency operations." Singer notes that "it was the first time the U.S. military had ever contracted such global planning to a private organization." In a pattern that would mark both Halliburton's and Cheney's business paths, the firm got the LOGCAP contract after conducting a top secret $3.9 million report for the Pentagon on how private companies could essentially provide the bulk of the logistics involved in major U.S. contingency deployments, from transportation and base-building to cooking the food and doing the laundry. The initial study contract called for a plan for how a private company could bear the bulk of the logistical burden for deploying 20,000 troops to 5 separate bases overseas within a 1 80-day period. Later in the year, Halliburton got a $5 million follow-on study contract to outline how a private firm might supply logistics for a series of more specific contingencies. By the end of the year, Halliburton had been selected to receive a five-year contract to be the U.S. Army's "on call" private logistics arm.

The work started almost immediately. Halliburton was called upon to provide support services for U.S. forces deployed to Somalia as part of "Operation Restore Hope," an operation that began at the end of the Bush administration and carried over into the first Clinton term. As Singer notes, "Brown and Root employees arrived in Mogadishu just 24 hours after the first U.S. troops arrived and stayed until the final withdrawal in March 1995, when its employees left with the last U.S. marines." The company did everything from hiring local women to hand wash Army laundry to importing "a mortician to clean up the bodies of killed UN peacekeepers before shipping them out of the country." Singer notes that for a good portion of its time in country, Halliburton was "the largest employer in Somalia, with some 2,500 local employees."

The Somalia operation led to additional, more limited work on behalf of smaller U.S. deployments to Rwanda and Haiti. But the big payoff came in the Balkans, where Halliburton's Brown and Root Services unit started out supplying logistical support for Operation Deny Flight, the United Nations-mandated no-fly zone in Bosnia, and ended up building and operating bases and refugee camps in Croatia, Bosnia, and, most lucratively of all, in KOSOVO. The firm's Balkan adventures started during the same year that Cheney took over as CEO of the company, and accounted for a good deal of the company's growth on the military side of its operations during his five-year tenure at the head of the firm.

The Army contract to provide logistical support for 20,000 U.S. troops deployed as part of the NATO IFOR forces in Bosnia came in at a cool $546 million, and it resulted in Halliburton doing work on behalf of U.S. and allied forces in Hungary, Bosnia, and Croatia. Just as it seemed that Halliburton had struck pure gold, there was a setback in 1997 when the company lost in its bid to renew its overall LOGCAP contract with the Army to a competitor, DynCorp, who had underbid them for the next round of work. But the sting was taken out of the loss when the Army decided to remove the BaIkans work from the larger LOGCAP contract, allowing Halliburton to go full speed ahead on its lucrative support operations there.

The Bosnia work set the stage for an even bigger role for Halliburton in Kosovo, where the company was involved in everything from building make-shift refugee quarters to building two major Army bases from scratch. The company's contract for its first year in Kosovo alone ballooned from the base level fee of $180 million to $1 billion. During its first three months in Kosovo alone, Singer reports that the company did the following: "built 192 barracks . . . thirteen helipads, two aviation-maintenance facilities, twelve mess-kitchen dining facilities, two large base dining facilities, and 37 temporary bathing facilities," even as it was delivering over I million meals, providing more than 55 million gallons of water, supplying over 383,000 gallons of diesel fuel, collecting over 89,000 cubic meters of trash, and loading and off-loading over 4,200 containers with needed supplies.

Halliburton's growth under Cheney's leadership is nothing compared to what it has done since he became vice president. In 2001, it won back the Army's LOGCAP contract, just in time to cash in on the logistical bonanza involved in providing facilities and provisions for U.S. troops in Afghanistan, Uzbekistan, Qatar, Kuwait, Iraq, and all the other far-flung outposts of the Bush administration's war on terrorism. The company is also in charge of making the cages used to house Taliban members and terror suspects at Guantanamo Bay, Cuba. A late August 2003 analysis in the Washington Post estimated that Halliburton had raked in $1.7 billion in military contracts in Iraq, Afghanistan, and beyond since the start of the Bush administration.

The company's biggest prize-which it was awarded on a no-bid basis by the Army Corps of Engineers after Halliburton officials had helped the Defense Department write the specs for the contract-was an open-ended, two year contract worth up to $7 billion for putting out oil fires and repairing oil infrastructure in Iraq.

It was only after dogged questioning from Rep. Henry Waxman that it was revealed that the no-bid Halliburton contract was not merely for putting out oil fires, but for rebuilding and operating Iraq's extensive oil infrastructure.

Halliburton has been quick to show its gratitude to its Republican friends, earmarking 95 percent of its more than $708,000 in campaign donations from 1999 to 2002 to Republican candidates. And there's plenty more where that came from, heading straight for the Bush/Cheney 2004 campaign and the campaigns of their former CEO's Republican colleagues in the House and Senate.



The Carlyle Group: Crony Capitalism without Borders

The Carlyle Group is the most politically connected investment firm in the world. The company has mastered the art of influence peddling on a global scale, hiring executives and consultants ranging from Republican power broker James Baker and former president George Herbert Walker Bush to foreign leaders like former British prime minister John Major and former Philippine president Fidel Ramos.

Carlyle's CEO, Frank Carlucci, served as secretary of defense and head of the National Security Council under Ronald Reagan and was Rumsfeld's college roommate at Princeton. His special relationship with Rumsfeld puts him in a perfect position to size up U.S. defense policies and programs for purposes of crafting Carlyle's investment strategy. There is circumstantial evidence to suggest that Rumsfeld has helped out his old college friend by giving him a heads-up on the likely status of the Crusader artillery system, a major multi-billion dollar project which prior to its cancellation in the spring of 2002 was the most lucrative project at United Defense, a major weapons maker owned by Carlyle.

The President's father, George Herbert Walker Bush, is on retainer to Carlyle, using his reputation and contacts as ex-president to help the firm recruit new investors in the Middle East, Asia, and beyond. He holds meetings with Saudi potentates, makes speeches or plays golf with potential investors in South Korea, and so forth. Press reports indicate that he may receive $100,000 or more a pop for every speech he gives on Carlyle's behalf. "Bush 41" is engaged in Influence Peddling 101, except instead of lobbying the U.S. government to help a specific company or land a specific contract, Carlyle uses its accumulated connections to garner inside information that enables them to "play the market" for defense and security companies. Without its ability to give investors the impression that it has inside dope on the direction of U.S. government policy that no other firm can get, there would be no rationale for the Carlyle Group to exist.

James Baker, whose leadership of the Republican recount effort in Florida in November and December of 2000 paved the way for George W. Bush's selection as president, is a senior counselor with the Carlyle Group. According to Dan Briody's excellent profile of Carlyle, The Iron Triangle, it was Baker's addition to the firm in March of 1993 that catapulted it into the top ranks of global investment firms. His political connections, developed during his years as secretary of commerce, secretary of state, and White House chief of staff in the administrations of Ronald Reagan and George H. W. Bush, are unparalleled among his colleagues in the global investment field. Executives like Baker are like gold to a company like Carlyle, which depends on major members of the global political and economic elites to steer business their way. Like Dick Cheney, Baker can parlay the connections he made in Saudi Arabia and other oil-rich Persian Gulf states during the 1991 Gulf War into contracts and investments from a motley array of wealthy sheiks, bankers, and potentates in the region. But instead of shaking them down for contracts to build up their oil facilities, as Cheney and Halliburton have done, Carlyle's key Republican front man tries to persuade his Middle Eastern counterparts to put money into one of the firm's investment funds. In that sense Baker and his colleagues at Carlyle are "confidence men," wooing potential investors with the promise that Carlyle has inside governmental information that can guide them toward rich returns.

Other individuals on Carlyle's team of politically connected advisors are former British prime minister John Major, former Philippines president Fidel Ramos, former South Korean prime minister Park Taejoon, and former Thai prime minister Anand Panyarachun.



The true story behind Carlyle's ever expanding empire is complex, although not as sinister as some accounts imply. The principals in Carlyle-Frank Carlucci, James Baker, George H. W. Bush-are by and large moderate internationalists who differ in policy and ideology from neo-cons like Frank Gaffney and Paul Wolfowitz. (This may be one case in which corporate influence might actually have a moderating effect on the administration of George W. Bush, for the simple reason that global businessmen often take a more sophisticated view of international politics than ideologues of the Frank Gaffney school do. James Baker is no Richard Perle. ) H. W. Bush's association with Carlyle drew international attention in the aftermath of September 11 when it was revealed that the construction company owned by Osama bin Laden's family, the Saudi Bin Ladin Group, was an investor in the Carlyle Group. Furthermore, Bush may have been involved in convincing the Saudi conglomerate to place its funds with Carlyle. On September 11, 2001,

Carlyle was in the midst of its annual investors conference at the Ritz-Carlton Hotel in Washington, D.C. At that same meeting, alongside James Baker, Frank Carlucci, and other members in good standing of the world's economic and political elite, was Osama Bin Laden's half-brother, Shafiq Bin Laden. He was there to keep an eye on the Saudi Bin Ladin Group's investment in one of Carlyle's global funds.

On September 27, 2001, the Wall Street Journal brought George Herbert Walker Bush's Carlyle connection into the international media spotlight. In an article entitled, "Bin Laden Family is Tied to U.S. Group," Daniel Golden, James Bandler, and Marcus Walker reported that "If the U.S. boosts defense spending in its quest to stop Osama Bin Laden's alleged terrorist activities, there may be one unexpected beneficiary Mr. Bin Laden's family." They noted that the Saudi Bin Ladin group had invested at least $2 million, and possibly much more, with the Carlyle Group, and it quoted an executive's assertion that the Bin Laden family business was in line to receive a 40 percent rate of return on its investment. It also made clear that George H. W. Bush had met with Bin Laden family members in Saudi Arabia at least twice on Carlyle business, once in 1998 and once in 2000.

The issue at hand in the Bin Ladin Group/Carlyle connection was not whether the President's father was somehow in league with Osama Bin Laden. The Bin Laden family has long since disowned their errant brother. As Charles Freeman, a former U.S. ambassador to Saudi Arabia whose organization, the Middle East Policy Council, receives funding from Bin Laden family members, put it, "They're the establishment that Osama is trying to overthrow." This view was shared by former President Jimmy Carter, who met with ten of Osama's brothers in Saudi Arabia in early 2000 and eventually raised $200,000 from Bin Laden family members for the activities of the Carter Center, his Atlanta-based research and public education organization. But a Bush-Bin Laden business link-even if it was with the "good" Bin Ladens-was more than public opinion would bear. By late October 2001, the Carlyle Group and the Saudi Bin Ladin Group had severed their financial ties. A Carlyle official familiar with the decision told the Wall Street Journal that it was driven by "questioning from outside the company about any chance of [the Bin Laden family] profiting because of investments that are going to increase in value because of the war on terrorism. For Carlyle, cutting its ties to the Bin Laden family was a public relations move, not a change of policy or principles. As one Carlyle executive put it when the Bush-Bin Laden link was first revealed, "The situation's changed now. I don't want to spend my life talking to reporters.

Bush the elder has little to say about his Carlyle connection, just as he maintains a carefully controlled silence about what kind of advice he gives his son. But it is precisely this special relationship between Bush 41 and Bush 43 that raises the most troub]ing questions about Bush senior's position with Carlyle. As Dan Briody notes in The Iron Triangle, George H. W. Bush still has access to regular CIA briefings on the state of the world. Although he claims that he doesn't share the details of these briefings with his cronies at Carlyle, the very fact that he has this privileged information means he can steer Carlyle toward certain opportunities, or away from certain companies, based on his special access to classified U.S. government intelligence assessments of key countries, regions, and global trends.

When Dick Cheney was attacked for his revolving door relationship with Halliburton, he hit back at his critics, claiming that his rise to riches as the CEO of an arms and energy conglomerate was "the quintessential American success story." And when former Defense Policy Board chairman Richard Perle was caught not once, not twice, but three times with his hands in the cookie jar, using his governmental position to solicit private contracts and investments for his very own Carlyle-style investment group, Trireme, he viciously attacked the journalists who pointed out his conflicts of interest and wrote a lengthy self-justification in the Wall Street Journal, arguing that if you want advice from folks who know something about defense, you need to tap people with ties to the defense industry.

While the Carlyle-Bush-Baker-Carlucci-Rumsfeld connections are troubling enough in their own right, they look even worse when you consider how many different ways Carlyle is profiting from the war on terrorism. Speaking in particular about Carlucci and his three main partners at Carlyle, Dan Briody has observed that "It is not an exaggeration to say that September 11 was going to make them very, very rich men."

George W. Bush also had a connection to the company prior to becoming president. Back in 1990, Carlyle operative Fred Malek brokered Carlyle's purchase of Caterair, a catering outfit that serviced major airlines. One of the people Malek recruited to serve on the Caterair board was George W. Bush. In effect, young Dubya was "Carlyle's man at Caterair." Carlyle's investment in Caterair did not go well, but the precedent of Carlyle reaching out and hiring a member of a sitting president's family had been established.

Currently the company's best-known arms industry investment is United Defense, a joint venture of the FMC and Harsco corporations that specializes in providing armored vehicles and howitzers to the Pentagon. Until recently, United Defense's big "program of the future" was the Crusader artillery system, a complex, heavy-duty long-range howitzer that was being developed as the U.S. Army's next generation artillery piece. To Donald Rumsfeld's credit, he canceled the project in the spring of 2002 in response to concerns that the Crusader was too bulky to be airlifted to distant combat zones in the U.S. military's existing transport planes. He did so over the objections of his old friend Frank Carlucci and the Carlyle Group, not to mention protests from the top brass of the U.S. Army and key elected officials like Rep. J.C. Watts (R-OK), who was looking forward to having a Crusader assembly facility set up in his congressional district.

The question is, did Donald Rumsfeld give his old friend a heads up so he could milk the Crusader for all it was worth prior to the cancellation? He's not telling. A Pentagon spokesperson claimed that anyone who would even suggest improper collusion "doesn't know Donald Rumsfeld and Frank Carlucci."

Carlyle's handling of its United Defense investment is certainly consistent with the idea of Rumsfeld tipping Carlucci off in advance. Carlyle took United Defense public in December of 2001-less than six months from the time the company's biggest program was canceled-and raised $237 million. If Rumsfeld had canceled the Crusader in the spring of 2001 instead of the spring of 2002, United Defense would not have been nearly so attractive an investment for nascent shareholders, and Carlyle probably would have netted much less on its stock offering. As Walter Pincus of the Washington Post pointed out, even before the public stock offering Carlyle took out a loan of $600 million to refinance a portion of the original purchase price that it plunked down to buy United Defense, and promptly distributed $387 million of the borrowed funds to executives and shareholders in the form of bonuses and dividends. Pincus also noted that United Defense would be in line for a big fat cancellation fee from the Pentagon in association with the termination of the Crusader. United Defense would also have an inside track on the new artillery system that the Army is planning to build to replace the Crusader.

As this went to press, Carlyle announced that it was planning to "cash out" of United Defense, selling its remaining 20 percent stake in the firm for somewhere in the area of $300 million. The firm will have made back its initial investment many times over.

United Defense is far from being Carlyle's only major holding in the defense and security sector. Other Carlyle investments that are yielding handsome profits from the war on terrorism include USIS, a former federal agency (which has since been privatized) that specializes in vetting personnel for positions in sensitive, security-related jobs. Since the September 11 attacks, USIS's 3,600 employees are doing a booming business in background checks on potential employees for the Pentagon, U.S. intelligence agencies, the Department of Homeland Security, and the commercial airlines.

EG&G, a 4,500 employee company specializing in weapons testing, maintenance, and support services, was a part of the Carlyle family of companies until August of 2002, when the firm sold it to the San Francisco-based engineering conglomerate URS corporation for $675 million. Carlyle's ability to buy a firm like EG&G and then "flip" it a few years later at a profit greatly enhances its ability to profit from U.S. military and security policies by "riding the wave" of government procurement and research priorities, using its roster of influential former government officials to garner the inside information needed to know when to "pull the trigger' on a given investment.

Two other Carlyle-controlled companies, Composite Structures and Vought Aircraft, are well placed to profit from the boom in aerospace spending that has been fostered by the Bush administration's air power-driven regime changes in Afghanistan and Iraq. The two companies are involved in supplying components for everything from the Army's Apache attack helicopter, to the Air Force's C-117 transport plane, to the B-2 bomber, to both current and next-generation combat jets. With existing aircraft like the Lockheed Martin F- 16, the Boeing F- 18, and the Lockheed Martin F-117 seeing heavy duty-and undergoing substantial wear and tear-in the air wars in Iraq, suppliers of aircraft components like Composite Structures and Vought are well placed to receive more orders to shore up the Air Force's current inventory. Add to that the Pentagon's three new fighter plane programs - the Lockheed Martin/Boeing F-22 fighter, the Lockheed Martin F-35 Joint Strike Fighter, and the Boeing/Northrop Grumman F/A- 1 8E/F aircraft carrier-based combat aircraft and the business in supplying parts for new combat planes will increase. Donald Rumsfeld was allegedly going to reconsider the need for three new combat planes during the defense policy review he conducted when the Bush administration first took office, but he lacked the courage to do more than nibble at the edges of these massive programs, which together may cost U.S. taxpayers $350 billion or more over the next two decades. Never mind the fact that neither Iraq, nor the Taliban, nor any of the other countries on the Pentagon's hit list have any real air power to speak of, or that independent studies have shown that our existing combat aircraft fleet, with the occasional upgrade, can guarantee the United States air superiority for the foreseeable future. The Air Force, the contractors, and the members of Congress in states and districts where these planes are built want their pet programs to be funded.

While Composite Structures and Vought supply components for military and civilian aircraft, another Carlyle-owned company, Lier Siegler Services, provides logistical and maintenance services to governments ranging from Saudi Arabia-as part of the Saudi "Peace Hawk" program-to the United States, where it holds Pentagon contracts for work on the F-5 and F-15 combat planes and the Bradley Fighting Vehicle (a product of its fellow Carlyle-owned company, United Defense).

Last but not least, Carlyle's Federal Data Systems Corporation has been described as "the premier provider of information technology services to the U.S. government," with contracts in place with the Internal Revenue Service, the U.S. Air Force, and many other federal agencies.

Not content with its incredible access and influence over the administration of George W. Bush, Carlyle continues to expand aggressively. At the end of the Clinton administration, it picked up two well-connected alumni, outgoing Federal Communications Commission director William Kennard and outgoing Securities and Exchange Commission (SEC) chairman Arthur Levitt, in an effort to "round out" its domestic political portfolio with a few high-profile Democrats. In mid-2002 the company helped launch the China Venture Capital Association, a group that Briody describes as "a nebulous organization charged with warding off corruption in China and strengthening ties with the Chinese government. Later that same year, Carlyle bought Qinetiq, the former research and development arm of the British Ministry of Defense, leading Fiona Draper, a spokesperson for the union that represents the workers at the former government agency, to question whether "given Carlyle's fairly opaque structure, there must be concerns about whether undue influence may be brought to bear on the British government.

At bottom, Carlyle is just an investment firm, with no particular political agenda. However, there is one area where the company's influence could have a negative impact on U.S. security: in our policy toward Saudi Arabia. Not only do many of Carlyle's investors come from the Saudi Kingdom, but for years the company was under contract to run the Saudi "offset" program, a program of targeted investments in Saudi Arabia that recipients of Saudi arms contracts were required to engage in as a condition of sale. For example, when the British government sold Saudi Arabia the Tornado aircraft, or Boeing sold Riyadh a new batch of F-l5s, the exporting entity would be required to invest a certain amount of money into the Saudi economy as an "offset" to the billions that the Saudis were spending on foreign aircraft. It was essentially a system of legalized bribery. Carlyle's contract to help the Saudi regime run this program (which has since lapsed) offered its executives all manner of opportunities to influence and approach members of the royal family about investing in one of Carlyle's funds. Its financial links to the Saudi royal family mean that Carlyle does not encourage or cooperate with investigations into Saudi citizens who may have funded or otherwise aided and abetted the September 11 hijackers. Carlyle's ties to wealthy Saudi investors are undoubtedly one of the reasons that the administration of George W. Bush hasn't pressed the Saudi regime more vigorously to supply information on Saudi citizens who may have helped AI Qaeda.

In fact, Carlyle executive and Bush political confidante James Baker is representing key members of the Saudi government against a $1 trillion law suit being brought against them by family members of victims of the September 11 terror attacks. His law firm, Baker Botts, is defending Saudi defense minister Prince Sultan Bin Abdul Aziz against charges that he funneled regular payments to Islamic charities that were fronts for Osama Bin Laden's terror network. The firm is well-positioned to help its Saudi clients. Not only did Baker Botts go to bat for George W. Bush in the Florida recount wars of November and December 2000, but George W. Bush has chosen Bob Jordan, a former partner at Baker Botts, to be his ambassador to Saudi Arabia.

When it comes time to press members of the Saudi elite for cooperation in cutting off the funding sources of Al Qaeda and other terror groups, whose interests will James Baker and Bob Jordan be acting on, their long-time Saudi clients, or America's?

How Much Are You Making On The War Daddy?

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