How to Put Rove Behind Bars for Years: David Swanson

Last August, a group of Congressman Henry Waxman's constituents met with him and urged him to make use of inherent contempt. They were then obliged to explain to him what inherent contempt is. While the current (110th) Congress has probably seen more requests, subpoenas, and contempt citations ignored than all previous Congresses combined, Waxman has certainly endured more such insult than all other committee chairs combined in the current Congress. He's single-handedly destroyed whole forests with the flood of letters and requests and subpoenas he's sent down Pennsylvania Avenue, and yet he was apparently unaware of a procedure commonly used by Congress through most of this nation's history that would actually compel people to show up and answer questions and produce documents.

Over the past 12 months a vague sort of awareness of inherent contempt has crept into the minds of certain committee members and party leaders, almost entirely as a result of thousands of citizens demanding that they immediately make use of it. Quasi-grass-roots groups afraid to demand impeachment have taken up the cry for inherent contempt, but pro-impeachment groups have not all paid sufficient attention to it, their eyes set on a bigger and better prize. And, of course, in a sane world we would see impeachment happening. The latest overwhelming piece of evidence of the most egregious impeachable offense conceivable comes from Ron Suskind's book released this week reporting that Iraq's intelligence chief had informed the United States prior to the 2003 invasion of Iraq that Iraq possessed no weapons of mass destruction. George Tenet and the White House have admitted the truth of this, but absurdly dismissed it as unimportant.

However, here's an additional vital piece of information: our so-called representatives only intend to pretend to work for two more weeks this year, and those two weeks are scheduled for September. If anything could move them to impeachment (and more days at the office), perhaps a fight over inherent contempt could. Therefore, I propose we all demand one. (And if you bear with me, I'll tell you exactly what inherent contempt is.)

Congresswoman Zoe Lofgren recently wrote the following dismissive letter to her constituents who were demanding inherent contempt:

"Thank you for contacting me about Karl Rove's failure to appear before the Judiciary Committee. I appreciate that you took the time to share your thoughts with me. The Judiciary Committee is taking Karl Rove's failure to testify very seriously, and we are currently considering all options - including contempt proceedings -- to compel him to answer important questions regarding the firing of several U.S. attorneys. Some have suggested that Congress implement 'inherent contempt' as if that is a viable option. The jail cell in the basement of the Capitol doesn't exist and the Sergeant at Arms is an over 60 year old executive. Congress is not a police force, and we will likely need to continue to utilize the courts and system of justice to pursue these matters. Again, thanks for being in touch. Please do not hesitate to let me know if I may ever be of assistance to you or your family."

Congresswoman Lofgren is very badly informed or chooses to pretend to be. The age of the Sergeant at Arms is not a decisive factor in the question of whether the Congress will engage in what for most of its history was understood as "inherent self-protection". There is a Sergeant at Arms for the House and one for the Senate, there are deputies, and there is an entire Capitol police force. In one of the earliest uses of "inherent contempt" a prisoner of the United States Congress argued that a warrant used to arrest him was invalid because it had been addressed to the Sergeant at Arms and had been enforced by the Deputy Sergeant at Arms. The U.S. Supreme Court ruled that the warrant was still valid; and that practice was subsequently followed for many decades. The Sergeant at Arms is not on his own, but is permitted and required to employ subordinates as needed. In 1877 a Deputy Sergeant at Arms was instructed to accompany a Congressional prisoner to New Orleans to procure telegrams he had hitherto refused to produce when subpoenaed, and to accompany another prisoner to New York to be seen by his physicians. In addition, a Sergeant at Arms incapable of performing his duties can be reassigned. With labor unions banned on Capitol Hill, there shouldn't be any legal difficulties in immediately rearranging a few employees of the government.

When inherent contempt began to be discussed in 2007, having not been heard of in some 75 years, the Politico (never a publication overly careful with facts) reported that the jail had been razed in 1929. Congresswoman Lofgren, on the other hand, maintains that "the jail cell in the basement of the Capitol" doesn't exist. She seems to take no position on whether such a thing ever did exist. Both of these replies wildly miss the mark. The House or the Senate or, in fact, any committee thereof, has the power, according to tradition and to rulings of the U.S. Supreme Court, to instruct the Sergeant at Arms of the House or Senate to imprison anyone being charged with contempt of Congress or being thereby punished for contempt of Congress. The difficulty of finding a place to imprison them has been easily solved in a variety of ways and could be again quite quickly.

The reference to 1929 may be a reference to the building that stood on the current site of the Supreme Court building, construction of which began that year. The Old Capitol Prison was not the only thing housed in that building when it was there, was not among the initial uses for that building, and had long since ceased to be used by Congress when the building was razed. During the latter part of the 19th Century and the early part of the 20th, the common jail of the District of Columbia was routinely used by the Sergeants at Arms of the House and Senate. While the jail did not belong to Congress, an arrangement was made to use it, housing the occasional "contumacious witness" in the same building with the general DC prison population. The District Jail is described in this 1897 New York Times article. This 1934 article from Time Magazine discusses the Senate's use of the District Jail to punish contempt in both 1860 and 1934.

In 1872 a Congressional committee discussed the problem of the DC jail not being controlled by Congress, but apparently concluded that the Sergeant at Arms could keep control of a prisoner in that jail. In other instances, including that same case, a prisoner of Congress was summoned to appear by a court, and Congress instructed the Sergeant at Arms to transport the prisoner to the court to explain the situation but not to release the prisoner from his control.

Congress has not always made use of outside jails. In 1868 this measure was approved: "Resolved, That Rooms A and B, opposite the room of the solicitor of the Court of Claims, in the Capitol, be, and are hereby, assigned as guardroom and office of the Capitol police and are for that purpose placed under charge of the Sergeant-at-arms of the House with power to fit the same up for purpose specified.... Resolved, That said Wooley, for his repeated contempt of the authority of the House, be kept until otherwise ordered by the House in close confinement in the guardroom of the Capitol police by the Sergeant-at-Arms until said Wooley shall fully answer the questions above recited, and all questions put to him by said committee in relation to the subject of the investigations with which the committee is charged, and that meanwhile no person shall communicate with said Wooley, in writing or verbally, except upon the order of the Speaker."

The U.S. Capitol and the House and Senate office buildings are full of rooms that could easily be transformed into guard rooms, and are in fact almost certainly full of guard rooms already. The room where we held the Downing Street Minutes hearing in June of 2005 would work fine with very few modifications. And -- I'm sure this will surprise you -- DC is chock full of jails, several of them quite close to the Capitol. In fact, the Capitol Police make extensive and frequent use of them under an ongoing understanding with the custodians of the jails. The Capitol Police also hold people, at least temporarily, in a building very near the Senate office buildings.

Reviewing the early history of Congressional contempt reveals a mixture of offenses, including refusing to answer questions (on various topics), refusing to produce documents, failing to appear, etc., but also libeling Congress, assaulting a Congress member, beating a congress member with a cane, even Congress members themselves beating up a senator, and the case of a drunken citizen applauding inappropriately. While use of police force has disappeared as a response to recalcitrant witnesses, it is still routinely used for people who applaud inappropriately. When about 50 of us held a sit-in in Chairman John Conyers' office last summer to urge impeachment, he had us taken to a nearby jail by the Capitol Police. The age of the Sergeant at Arms didn't seem to get in the way. When Cindy Sheehan was arrested for wearing an unacceptable T-shirt to a "State of the Union" speech, the Capitol Police sent us and the media on a wild goose chase to several different jails that they use before arriving at the one from which they actually released her.

But if use of the police has vanished since 1934 as a tool for enforcement of Congressional contempt, then what did Congresswoman Lofgren mean by suggesting that her committee was contemplating "contempt proceedings"? Well, she meant that -- in fulfillment of the popular "definition" of insanity -- Congress would consider doing with Karl Rove what it has long been doing with Harriet Miers and Josh Bolten, that is: waiting for the executive branch of our government to go through some sort of magical conversion and begin prosecuting its own most loyal criminals.

In the early years of this country inherent contempt was not distinguished as "inherent". It was simply called contempt. But it was enforced exclusively by Congress, just as contempt of a court was enforced by a court, just as contempt of a state legislature or an earlier colonial legislature or the British Parliament was enforced by the very same body. While the Constitution did not mention contempt, it was the consensus of Congress, later supported by multiple U.S. Supreme Court rulings, that Congress had the inherent right to this form of "self-protection". This was understood most often as protection from disruptions and assaults, but also as protection from insult and from the erosion of Congressional power through the refusal to comply with requests or subpoenas. (Interestingly, the record shows that a citation of contempt by Congress, or rather a warrant to arrest someone charged with contempt in order to put him [or her, Miers may be the first her] on trial, does not have to be preceded by a subpoena. That answers another question asked aloud by Rep. Waxman in a recent hearing.)

Common Cause recently advocated inherent contempt with this statement: "Under the inherent contempt power, the House Sergeant-at-Arms has the authority to take Karl Rove into custody and bring him to the House where his contempt case can be tried, presumably, by a standing or select committee. If he is found by the House to be in Contempt of Congress, he can be imprisoned for an amount of time determined by the House (not to exceed the term of the 110th Congress which ends the beginning of January 2009) or until he agrees to testify. The Supreme Court has recognized the power of the House to enforce its own subpoenas through the inherent contempt provision, stating that without it, Congress 'would be exposed to every indignity and interruption that rudeness, caprice or even conspiracy may mediate against it.' Before Congress asked the Justice Department to try contempt cases on its behalf, the inherent contempt power was used more than 85 times between 1795 and 1934, mostly to compel testimony and documents."

Even the Washington Post agrees: "Both chambers also have an 'inherent contempt' power, allowing either body to hold its own trials and even jail those found in defiance of Congress. Although widely used during the 19th century, the power has not been invoked since 1934 and Democratic lawmakers have not displayed an appetite for reviving the practice."

Before moving on, and before I forget, I should point out that there is a reason my title claims we can put Rove away for years, while the proposal from Common Cause would only lock him up until next January. While the House must release all prisoners at the end of each two-year Congress (and has traditionally done so), the Senate need not and can hold them into the next Congress. And, remember that while the House Judiciary Committee just recently voted to hold Rove in contempt, the Senate Judiciary Committee voted to do that last December. It simply hasn't yet done it, choosing to defer to the full Senate, which chooses to shut its eyes, cover its ears, and hum.

But deferring to the full House or Senate is part of the tradition of statutory contempt, not inherent contempt. It has been solidly established that inherent contempt resides in a full house or a committee. So, what is statutory contempt? Well, in 1857 Congress passed a law criminalizing contempt of Congress (and the maximum jail time is 12 months). It did so in large part precisely because of the need to free prisoners at the end of each Congress, but also because of the time-consuming nature of putting people on trial for contempt, something that was commonly done by committee, with the accused often permitted legal counsel and witnesses. Given what Congress spends its precious time on these days, who wouldn't wish for it to have back its inherent contempt power? Well, our wish is granted. Congress never lost that power, and in fact continued to exercise it up through 1934since when it has simply chosen not to. Inherent contempt is a power that resides in what the U.S. Constitution created to be the most powerful branch of the government. It cannot be overruled in court, and it cannot be vetoed or pardoned. It can also not be endlessly delayed by court appeals, which is where the House's contempt citations for Miers and Bolten now are. Delaying that court decision until the next Congress, which seems likely, makes the possibility of enforcement unlikely. And if a decision were reached, it would fall to Congress to use inherent contempt to enforce it anyway.

On April 15, 2008, the Congressional Research Service (CRS) laid out its understanding of contempt powers in an updated report: http://www.fas.org/sgp/crs/misc/RL34097.pdf

This report describes the first use of Congressional contempt in 1795. Bizarrely, to the modern eye, the matter arose when a number of Congress Members protested that someone had attempted to bribe them. While today's members of Congress will hardly deign to speak with anyone who has not properly bribed them through our "campaign financing" system, at that time this action was considered an insult to the dignity of Congress. Yes, Congress was believed to possess dignity. (Another early case involved a newspaper falsely reporting that the Senate had passed a bill. Nowadays it's acceptable for the president to falsely sign a bill that wasn't passed. False reporting these days is almost considered a patriotic duty.)

The CRS report disagrees with the Bush administration's assertions of "executive privilege" but cannot change the fact that they are likely to be raised again as often as needed. And the report suggests that the Fifth Amendment right to avoid self-incrimination applies in certain contexts. However, past tradition makes that claim debatable, and the statute reads:

"U.S. CODE

TITLE 2--THE CONGRESS

CHAPTER 6--CONGRESSIONAL AND COMMITTEE PROCEDURE; INVESTIGATIONS

Sec. 193. Privilege of witnesses

No witness is privileged to refuse to testify to any fact, or to produce any paper, respecting which he shall be examined by either House of Congress, or by any joint committee established by a joint or concurrent resolution of the two Houses of Congress, or by any committee of either House, upon the ground that his testimony to such fact or his production of such paper may tend to disgrace him or otherwise render him infamous."

The power of Congress that I am proposing it use or lose is not the sort of power the White House has claimed to randomly kidnap, detain, disappear, torture, and murder. Everything Congress does in this regard must be open and public. It must not randomly, even if publicly, arrest someone for an offense unrelated to contempt of Congress - or for no offense at all. It must allow communication with legal counsel and family. It must treat everyone humanely. It must not abuse its power, and such abuses must be checked by the judicial branch. The purpose of Congress detaining prisoners is to compel them to produce information believed to be of potentially vital importance to the governance of our nation.

The CRS report provides very little background on this, but a great deal can easily be had. Simply look up Hinds Precedents, especially chapters 53 and 51, and Cannon's Precedents, especially chapters 184-185. You'll find numerous detailed cases of Congress asserting its power, arresting people, holding them until they agreed to answer questions, and then releasing them. Some of these people did not refuse to appear, but simply failed to satisfactorily answer questions. One has to wonder how a previous Congress might have responded to Alberto Gonzales's endless recitations of "I do not recall."

In 1857, a New York Times reporter refused to say which members of Congress had asked him to get them bribes (protecting his "sources" just as various Judith Millers today protect the people who feed them proven lies that costs thousands of lives), so Congress locked him up until he answered and then banned him from Congress. Imagine trying that with ABC News executives until they revealed who fed them the anthrax-is-from-Iraq lies.

In 1924 an oil executive appeared but refused to answer certain questions, so the Senate held -- literally held -- him in contempt. Senator Thomas Walsh of Montana argued that this question of contempt was of the gravest importance, and that it involved "the very life of the effective existence of the House of Representatives of the United States and of the Senate of the United States." The matter was taken to court, and the witness fined and imprisoned. Imagine locking up the attendees of Cheney's secret energy task force meetings until they explained how our supposedly democratic government arrived at some of its worst recent decisions.

Various cases of contempt in the past have involved perceived insults to Congress and have been resolved by a simple apology. This may strike people today as humorous and vain. I find less fault in it than I do in today's Congress, which appears completely incapable of feeling either shame or self-respect. If impeachment is off the table, inherent contempt is in the past, contempt citations are delayed until moot, subpoenas are laughed at, FISA requests are tossed in the trash, and other appeals to the executive branch to please allow itself to be overseen are simply ignored, then I must agree with Senator Walsh that we are witnessing the very death of the House and Senate. The capacity to hold someone in contempt, on its own, in September, would be a sign of life in what otherwise appears a motionless corpse.

Take action -- click here to contact your local newspaper or congress people:
Lock Up Rove

Click here to see the most recent messages sent to congressional reps and local newspapers

http://www.davidswanson.org

DAVID SWANSON is a co-founder of After Downing Street, a writer and activist, and the Washington Director of Democrats.com. He is a board member of Progressive Democrats of America, and serves on the Executive Council of the Washington-Baltimore Newspaper Guild, TNG-CWA. He has worked as a newspaper reporter and as a communications director, with jobs including Press Secretary for Dennis Kucinich's 2004 presidential campaign, Media Coordinator for the International Labor Communications Association, and three years as Communications Coordinator for ACORN, the Association of Community Organizations for Reform Now. Swanson obtained a Master's degree in philosophy from the University of Virginia in 1997.

Update on Pat Tillman story

Committee says fuzzy memories hurt Tillman probe

By SCOTT LINDLAW, Associated Press Writer 2 hours, 22 minutes ago

SAN FRANCISCO - A "striking lack of recollection" by White House and military officials prevented congressional investigators from determining who was responsible for misinformation spread after the friendly fire death of Army Ranger Pat Tillman, a House committee said Monday.

Although military investigators determined within days that the onetime NFL player was killed by his own troops in Afghanistan following an enemy ambush, five weeks passed before the circumstances of his death were made public. During that time, the Army claimed Tillman was killed by enemy fire.

Rep. Henry Waxman, chairman of the House Committee on Oversight and Government Reform, said in April 2007 that his goal was to discern the genesis of the misinformation. "Was it the result of incompetence, miscommunication or a deliberate strategy?" he said.

The panel acknowledged Monday it had fallen short of this goal. The committee received a flurry of White House e-mails sent as the Bush administration responded to Tillman's death, but no documents about friendly fire. The committee interviewed several top White House officials about the case, but "not a single one could recall when he learned about the fratricide or what he did in response," it said in its 48-page report.

The committee reported a similar lack of information relating to misinformation surrounding Pvt. Jessica Lynch, who was rescued from an Iraqi hospital after she was badly injured and captured in a 2003 ambush. The committee examined how the story of the ambush of her convoy was changed into a tale of heroism on her part.

"As the committee investigated the Tillman and Lynch cases, it encountered a striking lack of recollection," the report said.

The panel concluded that the lack of information "makes it impossible for the committee to assign responsibility for the misinformation in Corporal Tillman's and Private Lynch's cases."

Jim Wilkinson, a onetime White House official who was communications director for U.S. Central Command, told the committee he did not know where the false information on Lynch originated, or who disseminated it.

In the case of Tillman's April 22, 2004, death, White House officials generated nearly 200 e-mails on the matter the day after, the committee found. Politics seemed to fuel the administration's interest: Several of the e-mails came from the staff of President Bush's re-election campaign, urging Bush to respond publicly.

The White House "rushed" to release a public statement of condolence at about noon on April 23.

But in doing so, the White House violated a military policy enacted into law by Bush himself in 2003, the committee found. The Military Family Peace of Mind Act bars the announcement of a casualty until 24 hours after a family is notified.

The Defense Department, adhering to the policy, had not yet publicly confirmed Tillman's death when the White House released Bush's statement of condolence.

Realizing this belatedly, White House spokewoman Claire Buchan warned her colleagues in an e-mail: "alert — do not use Tillman statement." But news services were already running the White House statement.

The White House also failed to determine whether information about Tillman's death was classified, the committee found. Tillman's Ranger unit was routinely involved in sensitive operations along the Afghanistan-Pakistan border.

Then-White House communications director Dan Bartlett told the committee he had approved release of the president's statement because of intense news media interest.

The committee cited one exchange between White House political chief Karl Rove and Ron Fournier, then a political reporter for The Associated Press.

In a chain under the subject line "H-E-R-O," Rove replied to an e-mail from Fournier by saying, "How does our country continue to produce men and women like this?"

Fournier replied, "The Lord creates men and women like this all over the world. But only the great and free countries allow them to flourish. Keep up the fight."

Fournier, now the AP's acting Washington bureau chief, said Monday: "I was an AP political reporter at the time of the 2004 e-mail exchange, and was interacting with a source, a top aide to the president, in the course of following an important and compelling story. I regret the breezy nature of the correspondence."

The story of Tillman, a man who gave up a lucrative career in professional sports to serve in the Army, "made the American people feel good about our country ... and our military," Bartlett told the committee. But he acknowledged the statement might "set a precedent."

Another frenzy of White House activity took place, well out of public view, in the days leading up to a Bush speech on Tillman to the annual White House Correspondents' Association dinner, the committee found.

While Bush and other presidents have often delivered humorous remarks to the gathering, Bush had "got singed pretty bad" the previous year for making what some critics perceived as inappropriate joking remarks during wartime, Bartlett said. So the White House made a deliberate decision to "pay tribute to the troops," and made Tillman's death the week before the centerpiece, he said.

Speechwriters and fact-checkers expended hundreds of words in e-mail memos trying to confirm that Tillman and his brother Kevin had joined the Army because of the attacks of Sept. 11, but could not do so, because the brothers had rarely or never spoken publicly about it.

Nevertheless, Bush's remarks to the correspondents' association contained what one White House official admitted was a "speculative" statement by Bush: "Friends say that this young man saw the images of September the 11th, and seeing that evil, he felt called to defend America."

White House spokesman Trey Bohn said Monday that officials there cooperated extensively with the committee during its investigation.

"The report contains no evidence that the White House said anything incorrect or misleading regarding the death of Corporal Tillman," Bohn said. "Our thoughts and prayers remain with the Tillman family."

The authors of the new report carefully avoided assigning blame or intent in either the Tillman or Lynch cases. But, they concluded: "In both cases, affirmative acts created new facts that were significantly different than what the soldiers in the field knew to be true. And in both cases, the fictional accounts proved to be compelling public narratives at difficult times in the war."

The committee also looked into the case of Army Spc. Jesse Buryj of Canton, Ohio. It took nine months for his family to learn that his death in Iraq in May 2004 was not the result of an accidental vehicle crash as they were first told. He was killed by fire from U.S. or Polish soldiers in Karbala after a dump truck hurtled through a checkpoint and crashed into the armored vehicle in which he was riding.

Buryj's parents accepted an invitation to meet Bush at a July 2004 campaign rally. They told investigators they had pressed Bush to help them find answers about their son's death, and said Bush agreed to help.

"A few months later, a Bush-Cheney campaign official contacted the family," the congressional investigators found. "Rather than offer assistance, the official asked Specialist Buryj's mother to appear in a campaign commercial for the president. Mrs. Buryj refused."

___

On the Net:

http://oversight.house.gov/story.asp?ID2084

Dem wants to ban future Roves from the White House

From CNN Ticker Producer Alexander Mooney

Rove is a former top Bush aide.

(CNN) – The future Karl Roves of the world may be outlawed from working in the White House.

Democratic Rep. Henry Waxman, the chairman of the powerful House Oversight and Government Reform Committee, suggested to a Capitol Hill newspaper that he is considering legislation that bans the use of federal money to fund a position similar to the one the longtime Bush aide held in the White House.

Rove, who orchestrated both of the president's successful electoral victories, headed the White House's Office of Political Affairs and the Office of Public Liaison during Bush's first term. Democrats have long accused Rove of using those offices — which include interacting with political committees and interest groups — to essentially run the president's 2004 reelection campaign.

“Why should we be using taxpayer dollars to have a person solely in charge of politics in the White House?” Waxman told The Hill. “Can you imagine the reaction if each member of Congress had a campaign person paid for with taxpayer dollars?”

Ethics rules in the Senate are considerably clearer when it comes to conducting political business: congressional aides are banned from using government phones, e-mail, and computers for any politically-related job.

Waxman's office confirmed the accuracy of the quotes, but would not comment further.

Filed under: Karl Rove

White House invokes executive privilege on EPA investigation regarding California's vehicle emission standards

Los Angeles Times

2008-06-22

"I don't think we've had a situation like this since Richard Nixon was president," Congressman Henry Waxman said yesterday after the Bush administration invoked executive privilege in order to refuse to turn over subpoenaed documents in an investigation of the Environmental Protection Agency's decision to deny California permission to implement its own vehicle emission standards.

Waxman was referring to the fact that the House Oversight and Government Reform Committee was deciding on whether to bring contempt-of-Congress proceedings against EPA Administrator Stephen L. Johnson and Susan Dudley, administrator of regulatory affairs in the White House Office of Management and Budget, for refusing to honor the subpoena.

In asserting executive privilege in the EPA inquiry, the administration made public a copy of a letter sent to the president by Atty. Gen. Michael B. Mukasey saying that releasing internal documents "could inhibit the candor of future deliberations among the president's staff."

EPA spokesman Tim Lyons said the agency had provided the committee with more than 7,000 documents and devoted 2,200 hours of staff time to responding to requests for information, and he called it "disappointing" that the committee had decided to "politicize environmental regulations."

"We don't know whether this privilege that's being asserted is valid or not," Waxman said yesterday and is currently deciding what the committee's next move will be.

-- Tony Pierce

IMPEACHMENT TOOLKIT: House panel subpoenas FBI interviews of Bush, Cheney

WASHINGTON - A House committee has issued a subpoena for FBI reports from interviews with President Bush and Vice President Dick Cheney in the CIA leak investigation.

The subpoena to Attorney General Michael Mukasey from the House Oversight and Government Reform Committee is the latest move by Congress to shed light on Cheney's precise role in the leak of Valerie Plame's CIA identity.

On Friday, former White House press secretary Scott McClellan is scheduled to testify to the House Judiciary Committee.

He is expected to talk about White House higher-ups directing him to publicly deny that Cheney's chief of staff and White House political adviser Karl Rove played any role in leaking the CIA employment of Plame, who is married to Bush administration war critic Joseph Wilson.

Cheney's chief of staff, I. Lewis "Scooter" Libby, and Rove were among the leakers of the CIA identity of Wilson's wife. Both have since left the White House.

In publicly released grand jury testimony, Libby acknowledges having told the FBI early in the Plame probe that "it's possible" he spoke to Cheney about whether to share information with the press about Wilson's wife.

The House Oversight and Government Reform Committee chaired by Rep. Henry Waxman, D-Calif., has been trying to get FBI interviews of Bush and Cheney since last year. Waxman renewed the request June 3 and Mukasey says the department is considering a response. Monday's subpoena also seeks other documents related to the Plame probe, the committee said in announcing the action.

Libby was convicted of perjury, obstruction and lying to the FBI.

Last July, Bush commuted Libby's 2 1/2-year sentence, sparing him from serving any prison time.

BBC uncovers lost Iraq billions

By Jane Corbin BBC News

Waxman: "It may well turn out to be the largest war profiteering in history."

A BBC investigation estimates that around $23bn (£11.75bn) may have been lost, stolen or just not properly accounted for in Iraq.

The BBC's Panorama programme has used US and Iraqi government sources to research how much some private contractors have profited from the conflict and rebuilding.

A US gagging order is preventing discussion of the allegations.

The order applies to 70 court cases against some of the top companies.

War profiteering

While President George W Bush remains in the White House, it is unlikely the gagging orders will be lifted.

To date, no major US contractor faces trial for fraud or mismanagement in Iraq.

The president's Democratic opponents are keeping up the pressure over war profiteering in Iraq.

Henry Waxman, who chairs the House committee on oversight and government reform, said:

"The money that's gone into waste, fraud and abuse under these contracts is just so outrageous, it's egregious.

"It may well turn out to be the largest war profiteering in history."

In the run-up to the invasion, one of the most senior officials in charge of procurement in the Pentagon objected to a contract potentially worth $7bn that was given to Halliburton, a Texan company which used to be run by Dick Cheney before he became vice-president.

Unusually only Halliburton got to bid - and won.

Missing billions

The search for the missing billions also led the programme to a house in Acton in west London where Hazem Shalaan lived until he was appointed to the new Iraqi government as minister of defence in 2004.

Judge Radhi al Radhi: "I believe these people are criminals."

He and his associates siphoned an estimated $1.2bn out of the ministry. They bought old military equipment from Poland but claimed for top-class weapons.

Meanwhile they diverted money into their own accounts.

Judge Radhi al-Radhi of Iraq's Commission for Public Integrity investigated.

He said:

"I believe these people are criminals.

"They failed to rebuild the Ministry of Defence, and as a result the violence and the bloodshed went on and on - the murder of Iraqis and foreigners continues and they bear responsibility."

Mr Shalaan was sentenced to two jail terms but he fled the country.

He said he was innocent and that it was all a plot against him by pro-Iranian MPs in the government.

There is an Interpol arrest warrant out for him but he is on the run - using a private jet to move around the globe.

He stills owns commercial properties in the Marble Arch area of London.

Ever more BuZh admin. sheenanigans - EPA testimony

Your Daily Politics Video Blog: Stonewall Johnson was born on January 21, 1824 in Clarksburg, West Virginia. He went on to become one of the most revered Confederate generals of the American Civil War. Wait, that's Stonewall Jackson. Stonewall Johnson was born on March 21, 1951 in Washington D. C. and went on to become one of the most controversial and obstinate Administrators of the Environmental Protection Agency, whose testimony before Congress has given him the inside track for this year's Golden Duke Award for Outstanding Achievement in Corruption-based Chutzpah.

READ THIS! John Conyers! It's time to ACT!

Oh, yeah, and no US money for SCHIP.

When does this all stop?

Veeger

Iraq Spending Ignored Rules, Pentagon Says

By JAMES GLANZ

Published: May 23, 2008

A Pentagon audit of $8.2 billion in American taxpayer money spent by the United States Army on contractors in Iraq has found that almost none of the payments followed federal rules and that in some cases, contracts worth millions of dollars were paid for despite little or no record of what, if anything, was received.

Reach of War

The audit also found a sometimes stunning lack of accountability in the way the United States military spent some $1.8 billion in seized or frozen Iraqi assets, which in the early phases of the conflict were often doled out in stacks or pallets of cash. The audit was released Thursday in tandem with a Congressional hearing on the payments.

In one case, according to documents displayed by Pentagon auditors at the hearing before the House Committee on Oversight and Government Reform, a cash payment of $320.8 million in Iraqi money was authorized on the basis of a single signature and the words “Iraqi Salary Payment” on an invoice. In another, $11.1 million of taxpayer money was paid to IAP, an American contractor, on the basis of a voucher with no indication of what was delivered.

Mary L. Ugone, the Pentagon’s deputy inspector general for auditing, told members of the committee that the absence of anything beyond a voucher meant that “we were giving or providing a payment without any basis for the payment.”

“We don’t know what we got,” Ms. Ugone said in response to questions by the committee chairman, Henry A. Waxman, Democrat of California.

The new report is especially significant because while other federal auditors have severely criticized the way the United States has handled payments to contractors in Iraq, this is the first time that the Pentagon itself has acknowledged the mismanagement on anything resembling this scale.

The disclosure that $1.8 billion in Iraqi assets was mishandled comes on top of an earlier finding by an independent federal oversight agency, the Special Inspector General for Iraq Reconstruction, that United States occupation authorities early in the conflict could not account for the disbursement of $8.8 billion in Iraqi oil money and seized assets.

“This report is further documentation of the fact that the United States had absolutely no preparation to use contracting on the scale that it needed either at the military or aid level in going to war in Iraq,” said Anthony H. Cordesman of the Center for Strategic and International Studies in Washington.

“We had really allowed ourselves to become more and more dependent on contractors in peacetime,” said Mr. Cordesman, who spoke in a telephone interview on Thursday. “We were unprepared to use contractors in wartime, and all of this had an immense impact.”

The Pentagon report, titled “Internal Controls Over Payments Made in Iraq, Kuwait and Egypt,” also notes that auditors were unable to find a comprehensible set of records to explain $134.8 million in payments by the American military to its allies in the Iraq war.

The mysterious payments, whose amounts had not been publicly disclosed, included $68.2 million to the United Kingdom, $45.3 million to Poland and $21.3 million to South Korea. Despite repeated requests, Pentagon auditors said they were unable to determine why the payments were made.

“It sounds like the coalition of the willing is the coalition of the paid — they’re willing to be paid,” said Mr. Waxman, who later in the day introduced what he called a “clean contracting” amendment to a defense authorization bill being debated on the House floor. The amendment, which was accepted by voice vote, would institute a number of reforms, including new whistleblower protections and requirements on competitive bidding.

The audit was carried out by the Defense Department Office of the Inspector General, which is led by Claude M. Kicklighter, a retired lieutenant general. Mr. Kicklighter was not at the Thursday hearing because of a scheduling conflict. (yeah, right .. )

Many of the previous investigations of payments to contractors in Iraq have focused on the flawed effort to rebuild the country’s decrepit electricity grid, oil infrastructure, transportation network and public institutions. The feeble accountability and spotty paperwork of the contracts examined by Mr. Kicklighter’s office make it difficult to say what many of them were for, but the report indicates that many appeared to be for things as mundane as bottles of water, truck rentals and food deliveries.

According to the report, the Army made 183,486 “commercial and miscellaneous payments” from April 2001 to June 2006 from field offices in Iraq, Kuwait and Egypt, for a total of $10.7 billion in taxpayer money. The auditors focused on $8.2 billion in so-called commercial payments to contractors — American, Iraqi and probably other foreign nationals — although the report does not give details on the roster of companies.

Because the contracts were too numerous to be examined one by one, the auditors said they took a standard approach and examined 702 statistically representative contracts, then extrapolated the results to the full set.

When the results were compiled, they revealed a lack of accountability notable even by the shaky standards detailed in earlier examinations of contracting in Iraq. The report said that about $1.4 billion in payments lacked even minimal documentation “such as certified vouchers, proper receiving reports and invoices,” to explain what had been purchased and why.

Another $6.3 billion in payments did contain information explaining the expenditures but lacked other information required by federal regulations governing the use of taxpayer money — things like payment terms, proper identification numbers and contact information for the agents involved in the transaction. Taken together, those results meant that almost 95 percent of the payments had not been properly documented.

In a separate examination, auditors found that the $1.8 billion in seized Iraqi assets paid out by American military officers had not been properly accounted for.

Examples of the paperwork for some of those payments, displayed at the hearing, depict a system that became accustomed to making huge payments on the fly, with little oversight or attention to detail. In one instance, a United States Treasury check for $5,674,075.00 was written to pay a company called Al Kasid Specialized Vehicles Trading Company in Baghdad for items that a voucher does not even describe.

In another case, $6,268,320.07 went to the contractor Combat Support Associates with even less explanation. And a scrawl on another piece of paper says only that $8 million had been paid out as “Funds for the Benefit of the Iraqi People.”

But perhaps the masterpiece of elliptic paperwork is the document identified at the top as a “Public Voucher for Purchases and Services Other Than Personal.” It indicates that $320.8 million went for “Iraqi Salary Payment,” with no explanation of what the Iraqis were paid to do.

Whatever it was, the document suggests, each of those Iraqis was handsomely compensated. Under the “quantity” column is the number 1,000, presumably indicating the number of people who were to be paid — to the tune of $320,800 apiece — if the paperwork is to be trusted.

Blackwater updates

Background first:
Iraq expels American security contractor Blackwater
March 12, 2008

Blackwater was used in New Orleans after Katrina.

For more on Blackwater, see the work done by The Nation’s Jeremy Scahill.

Also see:
Private Contractors Outnumber US Troops in Iraq by T. Christian Miller of the Los Angeles Times.

Reasons contractors in Iraq are bad news:

• Questionable jurisdiction…no wait, completely free from any legal jurisdiction, according to Order 17 Paul Bremer put in place just before leaving.
• Hides true number of troops and casualties from American public
• Breaks down military order…can refuse to provide troops needs when under fire
• Morale buster.
• Minimum wage troops performing alongside contractors performing similar duties for much more money.

Iraq expels American security firm

By ROBERT H. REID, Associated Press Writer
Monday, September 17, 2007

The Iraqi government Monday ordered Blackwater USA, the security firm that protects U.S. diplomats, to stop work and leave the country after the fatal shooting of eight Iraqi civilians following a car bomb attack against a State Department convoy.

The order by the Interior Ministry, if carried out, would deal a severe blow to U.S. government operations in Iraq by stripping diplomats, engineers, reconstruction officials and others of their security protection.

The presence of so many visible, aggressive Western security contractors has angered many Iraqis, who consider them a mercenary force that runs roughshod over people in their own country.

Sunday’s shooting was the latest in a series of incidents in which Blackwater and other foreign contractors have been accused of shooting to death an unknown number of Iraqi citizens. None has faced charges or prosecution.

Secretary of State Condoleezza Rice telephoned Prime Minister Nouri al-Maliki late Monday and the two agreed to conduct a “fair and transparent investigation” and hold any wrongdoers accountable, said Yassin Majid, an adviser to the prime minister. Rice was expected to visit the Mideast on Tuesday.

Majid made no mention of the order to expel Blackwater, and it was unlikely the United States would agree to abandon a security company that plays such a critical role in American operations in Iraq.

A State Department official confirmed the call but said he could not describe the substance. The U.S. clearly hoped the Iraqis would be satisfied with an investigation, a finding of responsibility and compensation to the victims’ families — and not insist on expelling a company that the Americans cannot operate here without.

Interior Ministry spokesman Abdul-Karim Khalaf said eight civilians were killed and 13 were wounded when contractors believed to be working for Blackwater USA opened fire on civilians Sunday in the predominantly Sunni neighborhood of Mansour in western Baghdad.

“We have canceled the license of Blackwater and prevented them from working all over Iraqi territory. We will also refer those involved to Iraqi judicial authorities,” Khalaf said.

He said witness reports pointed to Blackwater involvement but added that the shooting was still under investigation. One witness, Hussein Abdul-Abbas, said the explosion was followed by about 20 minutes of heavy gunfire and “everybody in the street started to flee immediately.”

U.S. officials said the motorcade was traveling through Nisoor Square on the way back to the Green Zone when the car bomb exploded, followed by volleys of small-arms fire that disabled one of the vehicles but caused no American casualties.

According to TIME.com, which obtained a U.S. incident report, a separate convoy arriving to help was “blocked/surrounded by several Iraqi police and Iraqi national guard vehicles and armed personnel.”

American officials refused to discuss Iraqi casualties, nor would they confirm that Blackwater personnel were involved. They also refused to explain the legal authority under which Blackwater operates in Iraq or say whether the company was complying with the order. It also was unclear whether the contractors involved in the shooting were still in Iraq.

While Blackwater has recently undertaken an effort to improve its image by emphasizing its humanitarian efforts and vision for “a safer world,” it didn’t immediately step forward to defend itself Monday. Several messages left with officials were not returned, and vice chairman Cofer Black, a former director of the CIA’s counterterrorism center, declined to comment when reached at his Virginia home.

The incident drew attention to one of the controversial American practices of the war — the use of heavily armed private security contractors who Iraqis complain operate beyond the control of U.S. military and Iraqi law.

The events in Mansour also illustrate the challenge of trying to protect U.S. officials in a city where car bombs can explode at any time, and where gunmen blend in with the civilian population.

“The Blackwater guys are not fools. If they were gunning down people, it was because they felt it was the beginning of an ambush,” said Robert Young Pelton, an independent military analyst and author of the book “Licensed to Kill.”

“They’re famous for being very aggressive. They use their machine guns like car horns. But it’s not the goal to kill people.”

In one of the most horrific attacks of the war, four Blackwater employees were ambushed and killed in Fallujah in 2004 and their charred bodies hung from a bridge over the Euphrates River.

But Iraqis have long complained about high-profile, heavily armed security vehicles careering through the streets, with guards pointing weapons at civilians and sometimes firing warning shots at anyone deemed too close. And Iraqi officials were quick to condemn the foreign guards.

Al-Maliki late Sunday condemned the shooting by a “foreign security company” and called it a “crime.”

Interior Minister Jawad al-Bolani described the shooting as “a crime about which we cannot be silent.”

“Everyone should understand that whoever wants good relations with Iraq should respect Iraqis,” al-Bolani told Al-Arabiya television. “We are implementing the law and abide by laws, and others should respect these laws and respect the sovereignty and independence of Iraqis in their country.”

Defense Minister Abdul-Qadir al-Obaidi told Iraqi television that “those criminals” responsible for deaths “should be punished” and that the government would demand compensation for the victims’ families.

Despite threats of prosecution, government spokesman Ali al-Dabbagh told Alhurra television that contractors cannot be prosecuted by Iraqi courts because “some of them have immunity.”

In April, the Defense Department said about 129,000 contractors of many nationalities were operating in Iraq — nearly as many as the entire U.S. military force before this year’s troop buildup.

About 4,600 contractors are in combat roles, such as protecting supply convoys along Iraq’s dangerous, bomb-laden highways.

Blackwater, a secretive North Carolina-based company run by a former Navy SEAL, is among the biggest and best known security firms, with an estimated 1,000 employees in Iraq and at least $800 million in government contracts.

In May 2007, a Blackwater employee shot and killed a civilian who was thought to be driving too close to a company security detail.

Last Christmas Eve, an inebriated Blackwater employee shot and killed a security guard for an Iraqi vice president, according to Iraqi and U.S. officials. The contractor made his way to the U.S. Embassy where Blackwater officials arranged to have him flown home to the United States, according U.S. officials who spoke only on the condition of anonymity because they were not authorized to speak to the media.

The contractor has been fired and Blackwater is cooperating with federal investigators, company spokeswoman Anne Tyrrell has said.

___

AP correspondents Deborah Hastings in New York, Mike Baker in Raleigh, N.C., and Matthew Lee in Washington contributed to this report.

Did Washington Inquiry Into Blackwater Hasten Its Potrero Retreat?

Posted on March 11th, 2008 by Frank Gormlie

Is it just a coincidence that Blackwater beat a retreat out of Potrero on the eve of a Washington inquiry into claims that it violated tax and labor laws? On March 7th we learned that Blackwater pulled its application for the Potrero mercenary camp, and then, in an Associated Press article by Anne Flaherty that appeared March 10th, it was reported that a senior House Democrat has called for a far-reaching federal investigation into Blackwater Worldwide, alleging that the private security contractor violated tax and labor laws by classifying its guards as independent contractors rather than company employees.

It is very possible that the company decided to cut its losses out in the West in order to concentrate on the upcoming inquiry in the East, which it knew was developing ever since Blackwater reps have faced the Klieg lights of Congressional questionings. If the inquiry in the East goes badly for the company, it won’t be able to afford to even purchase the egg ranch out here an hour’s drive from downtown San Diego.

The AP article quoted Blackwater spokeswoman Anne Tyrrell calling Waxman’s charges “completely without merit, ” and then she continued: “Blackwater’s classification of its personnel is accurate, and Blackwater has always been forthcoming about this aspect of its business with its customer, the U.S. government.”

However, Rep. Henry Waxman, chair of the House Committee on Oversight and Government Reform, said Blackwater’s claims on its business status “appear dubious.” Waxman requested that the Internal Revenue Service and the Labor Department investigate whether Blackwater defrauded the government of tax revenue and violated labor laws. He did this with letters sent Monday, the 10th, to the agencies. Further, Waxman asked the Small Business Administration (SBA) to determine whether the company had violated federal regulations by claiming it was eligible for small business preferences. Waxman is a Democratic House representative from California.

“The implications of Blackwater’s actions are significant,” Waxman said in a memorandum to the Committee. “Committee staff have estimated that Blackwater has avoided paying or withholding up to $50 million in federal taxes by treating its guards as independent contractors rather than employees.”

Waxman asserted that Blackwater’s claim as a small business has earned it more than $144 million in contracts, despite being one of the largest private military contractors and receiving nearly $1.25 billion in federal business since 2000.

Blackwater mouthpiece Tyrell stated that the company “looks forward to continuing its cooperation with all inquiries that may result from these letters” and that “the company regrets the chairman’s decision to publicly air misleading information.”

Blackwater is unlike other security companies operating in Iraq in that it claims that the guards that it trains, equips and deploys to Iraq and elsewhere are independent contractors, not company employees - independent contractors that are hired directly by the federal government, the article reported. Naturally, with U.S. law, companies must pay Social Security and other federal taxes on employees.

Waxman raised this very issue last year, the article said, after he obtained a March letter from the IRS that warned that the company’s classification of a security guard as an independent contractor was “without merit.” This had been the result of an inquiry filed by a Blackwater guard. Upon Blackwater’s appeal, the company alleged that it had received assurances from the SBA that its security guards did not have to be classified as company employees.
The article continued:

the primary factor in determining whether a worker is an employee or independent contractor is the degree of control the business has over its worker. Incorrectly classifying a worker could mean steep penalties for the company, including a $25,000 penalty if the IRS determines an appeal is frivolous or groundless. In its March letter to Blackwater, the IRS noted the company paid all of the guard’s travel expenses and signed a written agreement detailing the type of work required. “A worker who is required to comply with another person’s instructions about when, where and how he or she is to work is ordinarily an employee,” the IRS stated in the letter. Waxman said Blackwater is trying to have it both ways. In defending itself against last year’s shootings involving its security guards, company officials asserted that they retained tight control of its guards and even fired some 122 guards in Iraq due to improper conduct. At the same time, Blackwater contends it does not have enough control over its guards to classify them as company employees, Waxman said.

Blackwater may very well have to pay the federal government millions of dollars. If so, it had a cover to pull the Potrero plan without admitting that it was retreating due to the community’s pressure. It is simply cutting its losses. And the Potrero operation would have been so much easier and cheaper if everyone had just shut up and gone about their own business.

Share This!

Waxman Asks IRS To Investigate Blackwater

By Patrick O'Connor

(The Politico) House Oversight and Government Reform Chairman Henry A. Waxman (D-Calif.) called on the Internal Revenue Service Monday to initiate an investigation into whether Blackwater Worldwide failed to pay millions in federal taxes, reviving a long-dormant congressional inquiry of the North Carolina-based security firm that has protected U.S. personnel in Iraq.

In a letter to acting IRS Commissioner Linda E. Stiff, Waxman asked the agency to review whether Blackwater had complied with federal tax law by designating its security guards as "independent contractors" instead of "employees," directing IRS investigators to "take any appropriate enforcement action." In separate requests, Waxman also asked the Dept. of Labor and the Small Business Administration to open similar investigations.

Aides on the Oversight Committee estimate the security firm has failed to pay $50 million in federal taxes since 2000 under the guidelines of its contract with the State Department, according to an internal memorandum distributed to panel members Modnay. Waxman first notified Blackwater CEO Erik Prince in October 2007 that he believed the company had evaded paying millions of dollars in federal taxes for improperly classifying the security guards who work for his firm. As evidence, committee aides cite more than $144 million in small business set-asides the firm has claimed since 2000 and a series of previous legal arguments, including an IRS ruling from March of last year.

The private security firm has been in the congressional crosshairs since Democrats took power. Prince was forced to testify before the Oversight panel last fall about his company's contracts with the federal government after U.S. media outlets chronicled a spasm of violence in Iraq involving Blackwater security personnel.

Stephen M. Ryan, a lawyer in the Washington office of McDermott, Will & Emery who represented Blackwater before Congress last year, was out of the office Monday morning and unavailable to comment on the oversight chairman's request.

The firm has received nearly $1.25 billion in federal contracts since 2000, according to the Oversight memorandum.

Copyright 2008 POLITICO

Blackwater Under Fire Again

By Laura Palotie, Inc.com

Published: March 11, 2008

House Democrats are calling for an investigation into whether a controversial private security firm working in Iraq and Afghanistan violated federal small-business contract size standards.

In letters to the Internal Revenue Service, the Small Business Administration and the Secretary of Labor, Rep. Henry Waxman (D-Calif.) claimed Blackwater Worldwide had improperly classified its security guards as independent contractors in order to be eligible for federal small-business contracts, among other benefits.

Blackwater says Waxman's claims were unwarranted.

In the past eight years, the company has received about $144 million in federal small-business contracts, despite earning more than $1.25 billion in government business, according to Waxman.

By listing its employees as independent contractors, Blackwater has also sidestepped anti-discrimination and affirmative action laws applied to federal contractors, Waxman said. He added the company has issued contradictory statements on the degree of control it exercises over its security guards overseas.

Last year, Congress tightened rules on federal contractors in Iraq following reports of civilian deaths involving Blackwater workers. In March 2004, four Blackwater workers were killed and dragged through the streets of Fallujah, Iraq.

Sen. John Kerry, the chairman of the Senate Committee on Small Business and Entrepreneurship, has pressed the Bush administration to investigate the company since October. He says Blackwater has avoided over $31 million in taxes by classifying its employees as contractors.

Inc.com, 2007. All Rights Reserved

Yes ,read this whole thing .. Carlyle and Booz Allen Hamilton

Carlyle Group May Buy Major CIA Contractor: Booz Allen Hamilton by Tim Shorrock , Special to CorpWatch March 8th, 2008

Cartoon by Khalil Bendib The Carlyle Group, one of the world’s largest private equity funds, may soon acquire the $2 billion government contracting business of consulting giant Booz Allen Hamilton, one of the biggest suppliers of technology and personnel to the U.S. government’s spy agencies. Carlyle manages more than $75 billion in assets and has bought and sold a long string of military contractors since the early 1990s. But in recent years it has significantly reduced its investments in that industry. If it goes ahead with the widely reported plan to buy Booz Allen, it will re-emerge as the owner of one of America’s largest private intelligence armies. Reports of a potential Carlyle acquisition of Booz Allen’s government unit began circulating among U.S. military contractors in December 2007, after Booz Allen’s senior partners and board members – a group of 300 vice presidents who own the privately-held firm – gathered at company headquarters in McLean, Virginia, for an extraordinary two-day meeting. According to a December 15 letter to Booz Allen employees from CEO Ralph W. Shrader that was released by the firm, the vice presidents signed off on a “new strategic direction” that would involve separating the company’s commercial and government units and operating them as separate companies. That was widely seen, both inside and outside the company, as a sign that a sale of one or both of the units was imminent. Shrader said the company hoped to come to a resolution of the issues involved by March 31, 2008. In January 2008, major newspapers – each quoting unnamed people close to the situation – reported that discussions between Booz Allen and Carlyle about the sale of the government unit were underway. According to the Wall Street Journal, the deal will be “centered on Booz Allen’s influence in defense and intelligence contracting. If an agreement is reached the sale price will likely be around $2 billion.” Christopher Ullman, Carlyle’s chief spokesman, could neither confirm nor deny that a deal was in the works, and declined to comment to CorpWatch about the reports. Because of Carlyle’s long experience in the defense sector, he added, such companies “would be a priority for us when the price is right and it’s the right fit for us.” George Farrar, a Booz Allen spokesman, said his company “has refused to discuss particulars of any ongoing discussions” and would not comment beyond what Shrader wrote in his December 15 missive to Booz Allen’s workforce. Who Is Booz Allen Hamilton? In 2006, Booz Allen Hamilton, a privately held company based in McLean, Virginia, had a global staff of 18,000 and annual revenues of $3.7 billion. Its work for U.S. government agencies accounts for more than 50 percent of its business. Notably Booz Allen is a key adviser and prime contractor to all of the major U.S. intelligence agencies – the Central Intelligence Agency (CIA), the Defense Intelligence Agency (DIA), the National Geospatial-Intelligence Agency (NGA), the National Reconnaissance Office (NRO), the National Security Agency (NSA), and – as well as the Department of Homeland Security (DHS), the National Counterterrorism Center, the Department of Defense and most of the Pentagon’s combatant commands. Shadow Intelligence Agency Booz Allen prides itself on the long-term personal relationships it has forged between its personnel and their government clients. “We stay for a lifetime,” Mark J. Gerencser, the senior vice president in charge of Booz Allen’s government contracting division, remarked in 2006. A quick study of their biographies posted on Booz Allen’s Website suggests that this is indeed true – the senior management have shuttled back and forth between the company and the government for their entire lives. As the director of Booz Allen’s U.S. government business, for example, Gerencser serves in “several broad-based roles,” including “representing industry” to the Office of the Secretary of Defense and the Joint Chiefs of Staff, which manage the Pentagon’s vast intelligence operations. He is also a member of Booz Allen’s leadership team that sets the strategic direction of the company, and has run many of the war games staged by Booz Allen for its government clients. Just below him in the company’s intelligence hierarchy is Ken Wiegand, another senior vice president. Weigand came to Booz Allen in 1983 after working for a decade in Air Force intelligence, and now leads the firm’s work for national intelligence and law enforcement agencies and the Department of Homeland Security. His specialty, the Website says, includes imagery intelligence operations, which are managed by the NGA, one of Booz Allen’s most important clients. Senior vice president Joseph W. Mahaffee, a veteran of naval intelligence, is the leader of Booz Allen’s Maryland procurement office business, which puts him in charge of the company’s contracts with the NSA in Fort Meade. He focuses on “meeting the Information Assurance mission objectives” of the NSA with various technology services, including systems engineering, software development and “advanced telecommunications analysis.” Another key Booz Allen figure at the NSA is Marty Hill, who came to the company after a 35-year career in signals intelligence and electronic warfare and previously served as an expert on “information operations capabilities and policy” for Donald Rumsfeld’s Pentagon. He leads of team of 1,200 professionals engaged in all aspects of “signals intelligence” including technical analysis, systems development and operations. Vice President Pamela Lentz is a former cryptology officer with the Navy and once worked as a program manager for TRW, one of the nation’s oldest intelligence contractors (it is now owned by Northrop Grumman). She is Booz Allen’s “client service officer” for the DIA and other military intelligence markets, which includes intelligence units within the Navy, Air Force, Army, the unified combatant commands and the undersecretary of defense for intelligence. Among other tasks, Lentz manages a 120-person Booz Allen team that supports the NRO, the Pentagon agency that manages the nation’s military spy satellites. She also runs a task force that supports human intelligence collection efforts at the DIA. Vice President Laurene Gallo, a former intelligence analyst at the NSA, leads a Booz Allen “intelligence research and analysis” team that support several agencies, including the CIA, the DNI and the National Counterterrrorism Center. Vice President Richard Wilhelm, whose job at Booz Allen is to work with the CIA and the ODNI, came to the company after a long career in U.S. intelligence that included stints directing the Joint Intelligence Center for Iraq during Operation Desert Storm and the NSA’s first director of information warfare. Vice President William Wansley, a former Army intelligence officer, leads a team of experts in “strategic and business planning” who support the CIA’s National Clandestine Service, the part of the CIA that conducts covert operations and recruits foreign spies, as well as the DNI. Another vice president Robert W. Noonan, a retired Army lieutenant general who once served as the Army’s deputy chief of staff for intelligence and the commanding general of the U.S. Army’s Intelligence and Security Command, is in charge of expanding Booz Allen’s military intelligence business within all the armed services, the combatant commands, the DIA and the Office of the Secretary of Defense. It is each of these vice presidents who are poised to personally profit from a corporate takeover by the Carlyle Group. On its website, Booz Allen describes its intelligence work as part of its broader expertise in information technology. “Whether dealing with homeland security, peacekeeping operations, or the battlefield, success depend on the ability to collect, safeguard, store, distribute, fuse, and share information – on getting the right information to the right place at the right time,” it says. “Our security professionals work in partnership with clients to develop capabilities … for protecting information and networks against cyber and physical threats.” That has not always been the case: Booz Allen Hamilton was founded as a management consultancy in 1914 in Chicago by three businessmen whose surnames gave the firm its name. In 1940, after more than three decades of giving advice to top ranking companies in America’s manufacturing and service economy, such as Montgomery Ward, Goodyear Tire and the Illinois State Railroad, Booz Allen started working for the U.S. military, where its clients included the Army, the Navy, and, after the war, the Air Force and the Pentagon. Its initial contracts with the Navy in 1940 set the pace for its military work: as a management consultant, Booz Allen helped the Navy restructure for World War II and permeated its ranks with contractors (“Each Navy bureau had a Booz rep,” Investors Daily reported in a 2005 profile of the firm). That relationship served as a template for Booz Allen’s later work in intelligence and national security where its personnel worked inside government agencies alongside public employees. Since the late-1990s, Booz Allen has forged a particularly close relationship with the NSA, the spy agency that monitors global telephone, e-mail and Internet traffic for the U.S. military and political leaders, which hired Booz Allen as its chief outside consultant on Project Groundbreaker. This $4 billion project outsourced the NSA’s internal communications and networking systems to a consortium led by Computer Sciences Corporation (CSC) and the IT subsidiary of Northrop Grumman. Today, among the many services Booz Allen provides to intelligence agencies, according to its Website, are war-gaming – simulated drills in which military and intelligence officials test their response to potential threats like terrorist attacks – as well as data-mining and analysis of imagery and intelligence picked up by U.S. spy satellites, the design of cryptographic, or code-breaking, systems (an NSA specialty) and “outsourcing/privatization strategy and planning.” The company’s 2007 annual report spells out several other areas of expertise, including “all source analysis,” an intelligence specialty managed by the CIA and the Office of the Director of National Intelligence (DNI) that draws on public sources of information, such as foreign newspapers and textbooks, to add texture to data gathered by spies and electronic surveillance. According to the company’s annual report, Booz Allen is also working on one of the most important spy initiatives launched in recent years: the Cryptographic Modernization Program. Air Force General John C. Koziol, the commander of the Air Force Intelligence, Surveillance and Reconnaissance Agency, described this program as an attempt to combine a variety of intelligence technologies to pick up tell-tale signs of chemicals and other substances – into a single electronic package that can be used by combat and special operations commanders to track the enemy. Booz Allen is a full partner in the project, according to General Koziol, an idea that has been “fully endorsed” by the Director of National Intelligence Michael McConnell, the nation’s spy chief – himself a Booz Allen alumnus (see box). Revolving Door To carry out its tasks at the intelligence agencies, Booz Allen has hired a dazzling array of former national security officials and foot-soldiers. In 2002, Information Week reported that Booz Allen had more than 1,000 former intelligence officers on its payroll. In 2007, as this reporter was researching a chapter about Booz Allen for his forthcoming book, he asked the company if it could confirm that number or provide a more accurate one, and received an e-mail reply from spokesman George Farrar: “It is certainly possible, but as a privately held corporation we consider that information to be proprietary and do not disclose.” Buried deep on the company's Web site, however, a much larger number is confirmed in an explanation of a Booz Allen information technology contract with the DIA, which carries out intelligence for the Joint Chiefs of Staff and the Office of the Secretary of Defense. It stated that the Booz Allen team “employs more than 10,000 TS/SCI cleared personnel.” TS/SCI stands for top secret-sensitive compartmented intelligence, one of the highest possible security ratings, which would make Booz Allen one of the largest employers of cleared personnel in the United States. Many of these former intelligence officers at Booz Allen, do the same jobs as they did for the government. For example, Keith Hall, a Booz Allen vice president initially worked in Army intelligence and on one of the congressional intelligence committees. In the early 1990s, he was hired by the CIA to manage budgets and policy development for then-Director of Central Intelligence Robert Gates. During that time, he played an instrumental role in creating the National Imagery and Mapping Agency, which was later renamed the National Geospatial-Intelligence Agency. During the Clinton administration, Hall was named Assistant Secretary of the Air Force for space programs and, simultaneously, director of the NRO, the agency that manages the nation’s military satellite program. Now, as a Booz Allen executive, Hall leads a “strategic intelligence initiative” that integrates the company’s extensive contracting activities for the NRO and the NGA. Recently, one of his most important tasks involved chairing a 2005 homeland security study group that recommended a major expansion of information and data-sharing between U.S. spy agencies that work outside the country and domestic law enforcement, like the Federal Bureau of Investigation (FBI). “The study’s findings have become a road map for the government in making decisions related to critical information sharing in support of homeland security,” Booz Allen boasts in its 2007 annual report. (See our article, Domestic Spying, Inc.) Who is the Carlyle Group? The Carlyle Group is a private equity fund – a group of financial advisers that invests large sums of money from pension funds, large corporations, wealthy individuals and foreign banks into privately held companies in many different industries, and then run those companies until the market is right to sell them at a substantial profit. During the early years of the George W. Bush administration, it gained attention – and some notoriety – because of the large number of former high-ranking political figures it had attracted as advisers and managers. They included former President George H.W. Bush, former Secretary of State James Baker and former British Prime Minister John Major. Shortly after the September 11, 2001, attacks on New York and Washington, Carlyle was in the news again when newspapers revealed that Osama Bin Laden’s family in Saudi Arabia – which owns one of the world’s largest construction companies – held a stake in the fund. The stake was quickly liquidated after the news broke. Until the recent slowdown in the financial markets, the private equity industry, with over $160 billion under its control, was widely seen as one of the most important drivers of the global economy, pumping venture capital into high-tech startups and buy-out capital into corporate reorganizations worldwide. They are extremely active in Britain, where more than 20 percent of the private sector workforce is employed by companies that are, or have been, the targets of private equity investments. Business magazines credit them with breaking up some of America’s worst-run conglomerates and bringing competition to Japan’s highly regulated and incestuous banking industry. “Private equity funds now wield much of the transformational power at the heart of the capitalist system,” The Economist magazine recently observed. In addition to Carlyle, which has more than $75 billion under management, industry leaders include the Blackstone Group ($30 billion), Bain Capital ($27 billion), Kohlberg, Kravis, Roberts & Co. ($26 billion) and Texas Pacific Group ($20 billion). Carlyle, the largest of the funds, is best-known for owning large military contractors and aerospace contractors, such as United Defense Industries, the maker of the Bradley Fighting Vehicle and other weapons systems, which it sold to BAE Systems in 2004, and Vought Aircraft Industries, a major producer of structural assemblies for commercial, military and business aircraft, which it still holds. Other military contractors that have gone through Carlyle’s hands include EG&G, LTV Aerospace and Magnavox Electronic Systems. During the 1990s, when it made most of these acquisitions, the fund was led by former Secretary of Defense Frank Carlucci, who served during the Carter administration as deputy director of the CIA. During his tenure, Carlyle bought and sold nearly a dozen companies active in the intelligence industry. They include BDM International, an influential company that, during the 1990s, provided some of the U.S. Army’s first contract interpreters and, through a subsidiary known as Vinnell Corporation, once trained the Saudi National Guard. It was eventually sold to Northrop Grumman and is now part of that company’s huge intelligence division. U.S. Investigative Service, which Carlyle bought in 1996 and sold in 2007, is the largest provider of security investigations for employees and contractors hired by the Pentagon, the National Security Agency and other agencies, and in recent months has been training Iraqi police commandoes under contract to the Pentagon. (See CorpWatch coverage of USIS.) Another spectacular acquisition was QinetiQ, the privatized arm of Britain’s military research corporation. It was acquired by Carlyle in 2003, sold in 2007, and recently emerged as one of the premiere U.S. intelligence contractors – after netting a $470 million profit for Carlyle. (See our article “QinetiQ goes Kinetic”.) Carlyle, however, has divested itself of most of its military holdings. “In our current U.S. portfolio, there’s none,” Carlyle’s Ullman told CorpWatch. Today, most of its investments are concentrated in commercial industries, such as real estate and banking. During a few months’ span in 2006, for instance, Carlyle did a “manufacturing deal, an education deal, a consumer products deal, and buildings deal, and a financial services deal,” according to an account in the Washingtonian magazine. Its holdings are extensive and pervasive: every time you rent a car from Hertz, catch a quick breakfast at Dunkin’ Donuts or get ice-cream at Baskin-Robbins, you’re sending money to Carlyle. A $2 billion acquisition of Booz Allen’s contracting business would therefore put Carlyle back in the big leagues of military contractors. Other key executives who came to Booz Allen from the spy agencies include R. James Woolsey, the former director of the CIA, who was hired in 2003 to run Booz Allen’s “global resilience” division, which advises corporations on security issues, and Joan A. Dempsey, a career U.S. intelligence official and a former top aide to former CIA Director George Tenet, who was hired in 2005 as a Booz Allen vice president with responsibility to advise the DNI and other key intelligence agencies. (See box for list of other key corporate figures that previously worked in government intelligence agencies.) It is these senior managers who would most likely benefit from a sale to Carlyle. Unlike many of its competitors in the intelligence industry, Booz Allen is a privately held company whose shares are owned by its 300 vice presidents of whom “approximately 80 are in government support,” Booz Allen’s Farrar told CorpWatch. For these vice presidents, Carlyle’s infusion of capital, and its $2 billion buyout of their shares, will make them very rich men and women indeed. After all, $2 billion divided by 80 is $25 million; even if Booz Allen’s shares were divided equally, which is unlikely, that’s an astounding windfall for any executive. Booz Allen CEO Ralph Shrader The man most responsible for Booz Allen’s growth as an intelligence contractor is Ralph Shrader, who has been running the company as chairman and CEO since 1998. Shrader, an electrical engineer by training, came to Booz Allen in 1974 after serving at senior management levels of two prominent telecommunications companies – Western Union, where he was national director of advanced systems planning, and RCA, where he served in the company’s government communications system division. These positions prepared him well for his later work at Booz Allen as a consultant to the telecommunications industry. According to his official biography, he “led major assignments” for the industry as a Booz Allen consultant and was deeply involved in the company’s “landmark work for AT&T” when that company was broken up by the government. In those assignments, Shrader may have been exposed to the telecommunications industry’s close ties to U.S. intelligence. During the years he worked for Western Union and RCA, those companies, along with ITT World Communications, were part of a secret surveillance program known as Minaret in which telecommunication companies, with the concurrence of a handful of high-ranking executives, handed over to the NSA information on all incoming and outgoing U.S. telephone calls and telegrams – an early version of the NSA’s warrantless surveillance program launched by the Bush administration after the September 11th attacks. Minaret, and the involvement of the private companies in NSA spying, was exposed by the congressional committees investigating intelligence abuse in the mid-1970s, and was the inspiration behind the 1978 Foreign Intelligence Surveillance Act (FISA), which set the rules – including the important requirement for warrants – for domestic surveillance of telephone traffic. None of this is alluded to in Booz Allen’s official literature, of course; but Shrader, upon his appointment as CEO in 1998, mentioned in a rare press interview (with the Financial Times) that the most relevant background for his new position of chief executive was his experience working for telecommunications clients and doing classified military work for the U.S. government – “something of a Booz specialty,” the FT pointed out. Booz Allen adds on its website that Shrader, as CEO, has also “led important programs for the U.S. National Communications System and the Defense Information Systems Agency,” two of the most important classified intelligence networks in use by the federal government. Under Shrader, Booz Allen also became the NSA’s most important outside consultant, culminating in its advisory role in Project Groundbreaker. That project, which awarded its first contracts in the summer of 2001, put Booz Allen in a prime position to capture NSA and other intelligence work in the aftermath of the September 11th attacks, when intelligence budgets, and NSA surveillance, increased substantially. “War on Terror” Contracts After September 11th, 2001, by Booz Allen’s own account, the firm helped the government reshape its spying capabilities to match the new era of counterinsurgencies and terrorist threats. “The nature of intelligence changed dramatically in the wake of 9/11,” Christopher Ling, a Booz Allen vice president, explains in the company’s most recent annual report. “An entire analytic production system geared to detect large-scale cold war adversarial capabilities was suddenly required to transform.” At Booz Allen, he added, “We are finding innovative ways to integrate intelligence and operations, enabled by advanced visualization and data management capabilities, which has allowed us to pioneer tactics, techniques, and procedures.” In addition to serving as a prime contractor on Admiral John Poindexter’s controversial Total Information Awareness project (see box), Booz Allen was active on both the military and economic fronts on the “war on terror.” For the Pentagon, it helped develop the “blue force” tracking system that allows soldiers and commanders in Iraq and other battlegrounds the ability to electronically identify friendly troops. And in the weeks leading up to the invasion of Iraq, Booz Allen sponsored and organized several conferences aimed at helping U.S. corporations secure contracts in occupied Baghdad, with former CIA director Woolsey, one of the most ardent backers of the war, as a keynote speaker. Michael McConnell Booz Allen Hamilton’s most illustrious alumnus is Michael McConnell, the current Director of National Intelligence, the top spy job in the country, who epitomizes the term revolving door, spinning from government job to industry and back again. McConnell was a senior Pentagon official during George Bush Senior’s administration and the first Gulf War, where he worked for Dick Cheney, then the Secretary of Defense, as the chief intelligence adviser to General Colin Powell, the chairman of the Joint Chiefs of Staff. Cheney was so impressed with McConnell’s work during the war that he appointed him to head the NSA in 1993 (he later intervened personally to convince McConnell to take the DNI job in 2007). McConnell subsequently spent more than 10 years as a Booz Allen senior vice president in charge of the company’s extensive contracts in military intelligence and information operations for the Pentagon. In that job, his official biography states, McConnell provided intelligence support to "the U.S. Unified Combatant Commanders, the Director of National Intelligence Agencies, and the Military Service Intelligence Directors." That made him a close colleague of not only Donald Rumsfeld, who ran the Pentagon from 2001 to 2007, but of Vice President Cheney, who has served President Bush as a kind of intelligence godfather since the earliest days of the administration. As Booz Allen’s chief intelligence liaison to the Pentagon, McConnell was at the center of action, both before and after the September 11 attacks. During the first six years of the Bush administration, Booz Allen’s contracts with the U.S. government rose dramatically, from $626,000 in 2000 to $1.6 billion in 2006. McConnell and his staff at Booz Allen were deeply involved in some of the Bush administration’s most controversial counterterrorism programs. They included the Pentagon’s infamous Total Information Awareness data-mining scheme run by former Navy Admiral John Poindexter, which was an attempt to collect information on potential terrorists in America from phone records, credit card receipts and other databases. (Congress cancelled the program over civil liberties concerns, but much of the work was transferred to the NSA, where Booz Allen continued to receive the contracts.) In 2002, when the CIA launched a financial intelligence project to track terrorist financing with the secret cooperation of SWIFT, the Brussels-based international banking consortium, Booz Allen won a contract to serve as an “outside” auditor of the project. In January 2007, McConnell resigned from Booz Allen after he was appointed by President George W. Bush to his current job. He now oversees all 16 U.S. intelligence agencies, and thus much of Booz Allen’s government business. (See this reporter's 2007 Salon article.) Under Shrader’s leadership, Booz Allen played an instrumental role after September 11th in proselytizing for a greater corporate role in national and homeland security. This was important, the Booz Allen CEO said at a CEO summit he organized in 2002, because “business leaders cannot opt out of geopolitics and leave the job of security solely to government and the military.” Deepening the corporate alliance with the Bush administration and its war on terror also had significant advantages for Booz Allen and its fellow corporations: on one hand, it drastically increased their contracts with military and intelligence agencies; and on the other, homeland security provided a convenient excuse for reducing government oversight and regulation. These dual interests were spelled out in unusual detail in 2004 by Richard Wilhelm, a former CIA and NSA officer who once served as national security adviser to former Vice President Al Gore and now leads Booz Allen’s business with the CIA and the Office of the DNI. Speaking to a conference on information-sharing and counterterrorism, Wilhelm explained that the “right mix of policies” for business should include a wide range of “incentives” and “cooperative arrangements,” including “appropriate protections from Freedom of Information Act requirements and other unintended consequences of more open information sharing.” Government, he argued, should “help make the business case, and then sweeten it – because industry will share information when there is a business case to do so.” In other words, corporations were happy to participate in the exchange of information about terrorism and other security threats, but only if there were enough rewards. And for Booz Allen, those rewards have been sweet indeed, as a short list of their recent unclassified contracts attests. They include: • A $6.3 million contract to provide research on 3-D facial recognition biometric software for the Information Assurance Technical Analysis Center at Offut Air Force Base in Nebraska, awarded in 2008. • A $48 million contract with the U.S. Air Force to conduct research on “survivability and lethality implications” of an Air Force vehicle program, awarded in 2008. • In a partnership with CACI International, EDS, Lockheed Martin, SAIC and SRA, the right to bid on $12.2 billion worth of contracts for telecom and IT services for the Defense Information Systems Agency (DISA), awarded in 2007. • Participation in a consortium of seven companies that will bid on up to $20 billion worth of work in Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance – a mouthful of a term usually referred to as C4ISR – for the Army’s Communications Electronics Command, which is based in Fort Monmouth, New Jersey, awarded in 2006. • A five-year, $25o million contract to provide “systems engineering technical assistance” to the Science and Technology Directorate of the Department of Homeland Security, signed in 2005. Little Congressional Scrutiny? In spite of its tremendous power as a contractor, Booz Allen has received very little criticism or even scrutiny from the U.S. Congress. In January 2007, the Senate had a rare opportunity to inquire about the company when it held hearings on Michael McConnell’s nomination as Director of National Intelligence (see box). Prior to the hearing, several senators said they would question McConnell about Booz Allen’s role as a contractor; but the hearing was a desultory affair, and few questions were asked of the new DNI about the high level of contracting among the spy agencies or the specific role of Booz Allen. A month later, a Booz Allen contract with the Department of Homeland Security came under close scrutiny in the House. In February 2007, Henry Waxman, a Democratic Congressman from California, the chairman of the House Committee on Government Oversight and Reform, charged that Booz Allen had a significant conflict of interest over its contract to oversee an $8 billion contract with the DHS Secure Border Initiative known as SBI-Net. Under the contract, Boeing and other companies will build a “virtual fence” of cameras, radar and sensors that will transmit imagery and data to border patrol agents working along the U.S. borders with Canada and Mexico. (See CorpWatch's “Fencing the Border".) The conflict arose, said Waxman, because Booz Allen had long-standing business partnerships with Boeing, the prime contractor for SBI-Net, and could therefore not provide objective oversight of the program. At the hearing, Waxman pointed out to DHS officials that they had hired 98 people to oversee the SBI-Net contract. “But the problem is that 65 of these people don’t work for the government. They work for the contractor,” he said. “You’re relying on them to do the function that a government ordinarily would do.” DHS officials responded that Booz Allen had been hired for advice, not for oversight. Waxman’s criticism could be made of a myriad of contracts Booz Allen holds with intelligence agencies. At the NSA, for example, it has advised the agency about several contracts that involve companies that Booz Allen has close business ties with. That is also true at the NRO, the NGA and the CIA. So far, however, no reports of conflicts of interest have emerged from Congress, which in any case exercises little oversight over intelligence contracts. In another damaging report issued in 2007, the General Accounting Office, the audit arm of the U.S. Congress, found that the Department of Homeland Security was spending nearly $16 billion a year on goods and services from the private sector, making it the third-largest employer of contractors in the federal government. Among the beneficiaries of DHS’ spending was Booz Allen Hamilton, which in 2006 was awarded a $43 million no-bid contract to provide services to the DHS intelligence unit. Upon reading the $16 billion DHS figures in the GAO report, Joseph Lieberman, an independent U.S. senator from Connecticut, angrily commented: “plainly put, we need to know who is in charge at DHS – its managers and workers, or the contractors.” The Washington Post later found that Booz Allen’s no-bid intelligence contract with DHS had ballooned in value from $2 million in 2003 to over $30 million in 2006 – 15 times its original value. When DHS lawyers first examined the Booz Allen deal, the Post said, they found it was “grossly beyond the scope” of the original contract and had violated government procurement rules. An open competition was ordered by DHS lawyers, but delayed for a year. During that time, the Post said, “the payments to Booz Allen more than doubled again under a second no-bid arrangement, to $73 million.” Union Protests So far, the only public criticism of the potential Carlyle-Booz Allen deal has come from the Service Employees International Union (SEIU), one of the country’s largest labor unions. Last year, the union launched a blistering attack on Carlyle and the private equity industry in a widely distributed report called “Behind the Buyouts: Inside the World of Private Equity.” The gist of the report was that Carlyle, Kohlberg, Kravis, Roberts (KKR) and other large private equity funds were undermining the U.S. economy by avoiding taxes and creating “harsh consequences,” such as layoffs, for workers and communities. In late 2007, when Carlyle acquired the assets of Manor Care, a chain of nursing homes where the SEIU is trying to organize workers, the union stepped up its campaign. Of Unions, Pension Funds and the Carlyle Group The SEIU’s campaign material on the Carlyle Group, including a 40-page white paper on private equity issued last year, fails to mention a salient fact: that many SEIU members are affiliated with a pension fund that holds a significant stake in the Carlyle Group. That fund is the California Public Employees Retirement System, the world’s largest public pension fund, often known as CalPERS. It has held a five percent stake in Carlyle’s core management group since 2000, and therefore profits every time Carlyle makes money from one of its investments. Many of the California state officials who sit on CalPERS boards are also members of the SEIU, although they officially only represent their employer, not the union. In 2001, this reporter attended a meeting of the CalPERS investment board where Carlyle’s three founding managers appeared as witnesses. The public meeting took place at a time when Carlyle was a hot media topic because of its close ties to the Bush administration and its prominence as the nation’s 11th largest military contractor. Several SEIU officials attended the meeting, and the questioning of Carlyle was led by a CalPERS official who belonged to the SEIU. However, the investment board didn’t ask about Carlyle’s military industry investments, and instead posed a single, softball question about Carlyle’s views on the U.S. investment climate. Asked why the SEIU hasn’t mentioned CalPERS’ stake in Carlyle in any of its literature, Stephen Lerner, the director of SEIU’s Private Equity Project, replied that the union didn’t start investigating the pension fund’s role in Carlyle until 2007. Until then, “we never really thought about CalPERS’ investment in Carlyle,” he said. “Now that we’re digging in deeper, we’re raising lots of questions.” Under SEIU’s initiative, a California lawmaker has introduced legislation that would prohibit CalPERS from investing in private equity funds owned in part by overseas funds from countries that don’t “generally respect human rights.” According to an SEIU handout, the legislation “is only applicable to private equity firms in which sovereign wealth funds have an ownership stake,” such as Carlyle. Carlyle’s Ullman responded that the legislation could hurt the people it is supposed to protect. California lawmakers “should consider the detrimental impact on California pensioners who have benefited greatly from CalPERS’ investment in, and ownership of, the Carlyle Group,” he told CorpWatch. In January 2008, after rumors of a Carlyle takeover of Booz Allen surfaced in the press, SEIU issued a blistering press release denouncing the potential deal. The union’s criticism of the proposed acquisition didn’t focus on Booz Allen’s role in intelligence outsourcing but on Carlyle’s ties with the Mubadala Development fund of the Government of Abu Dhabi. In 2007, that fund paid $1.35 billion to buy a 7.5 percent ownership stake in Carlyle’s general partnership. As a result of that investment, the SEIU charged, Carlyle was risking national security. “The potential for a Carlyle Group-Booz Allen buyout demands urgency on the part of lawmakers and regulators to examine the risks faced by the U.S. when foreign governments potentially have access to classified and other sensitive national security information through their stake in U.S. companies,” the union declared in a press release. In an interview with CorpWatch, Stephen Lerner, the director of SEIU’s Private Equity Project, said the union launched this nationalist campaign out of concern that classified information from Booz Allen could leak into the hands of the Abu Dhabi fund, thus compromising U.S. security interests. “When you combine buyout firms, which have much less reporting requirements because they are private, with opaque sovereign wealth funds, you get a toxic stew of secrecy,” he said. Asked how or why Booz Allen executives might leak classified information to a foreign government, he replied: “The point is, you have no way of knowing if they would or wouldn’t.” He added that, while the SEIU has not taken a position on Booz Allen’s extensive role in intelligence outsourcing, the issue of “government jobs being done by private contractors” might emerge in the future for the union. (The SEIU does not mention in its material that the California Public Employees Retirement System, the pension fund for California state retirees where the SEIU has significant influence, owns five percent of the Carlyle Group – see box.) Carlyle’s Ullman, who recently discussed the union campaign with SEIU president Andrew Stern during a conference on private equity, rejected the SEIU’s claims. The charges that the Abu Dhabi investment could jeopardize national security “is really an obscene allegation,” he said. Ullman added that the Abu Dhabi fund was a “passive investor” in Carlyle and would have no role in the management of Carlyle companies. “Carlyle’s portfolio companies have a pristine track record in handling sensitive government data,” he said. “Giving top secret and classified data to foreign governments is known as treason, and is punishable by jail and worse. That would be a fairly strong impediment” to leaks. In any case, there is virtually no evidence to suggest that any US intelligence contractor has leaked classified information, and it’s unlikely the union’s allegations will be a factor if the Carlyle Group does decide to acquire Booz Allen Hamilton. Tim Shorrock’s book on the outsourcing of U.S. intelligence, Spies for Hire, will be published in May by Simon & Schuster.