by Tyler Durden
June 10, 2013
from
ZeroHedge Website
The short but profitable tale of how 483,000
private individual have "top secret" access to the nation's most non-public
information begins in 2001.
"After 9/11, intelligence budgets were
increased, new people needed to be hired, it was a lot easier to go to
the private sector and get people off the shelf," and sure enough
firms like Booz Allen Hamilton - still
two-thirds owned by the deeply-tied-to-international-governments
investment firm The Carlyle Group - took full advantage of Congress'
desire to shrink federal agencies and their budgets by enabling outside
consultants (already primed with their $4,000 cost
'security clearances') to fulfill the needs of an
ever-more-encroaching-on-privacy administration.
Booz Allen (and other security consultant
providing firms) trade publicly with a cloak of admitted opacity due to the
secrecy of their government contracts ("you may not have important
information concerning our business, which will limit your insight into a
substantial portion of our business") but the actions of Diane Feinstein
who
promptly denounced "treasonous" Edward Snowden, "have
muddied the waters," for the stunning 1.1
million (or 21% of the total) private consultants with access to
"confidential and secret" government information.
Perhaps the situation of gross government
over-spend and under-oversight is summed up best,
"it's very difficult to know what
contractors are doing and what they are billing for the work - or even
whether they should be performing the work at all."
First, Diane Feinstein's take on it all...
“I
don't look at this as being a whistleblower. I think it's an act of
treason,” the chairwoman of the Senate
Intelligence Committee told reporters. The California lawmaker went on
to say that Snowden had violated his oath to defend the Constitution.
“He violated the
oath, he violated the law. It's treason.”
So how did all this get started?... (via
AP)
The
reliance on contractors for intelligence work ballooned after the 9/11
attacks. The government scrambled to
improve and expand its ability to monitor the communication and movement
of people who might threaten another attack.
"After 9/11, intelligence budgets were
increased, new people needed to be hired," Augustyn said.
"It was a lot easier to
go to the private sector and get people off the shelf."
The
reliance on the private sector has grown since then, in part because of
Congress' efforts to limit the size of federal agencies and
shrink the budget.
Which has led to what appears to be major
problems.
But critics say
reliance on contractors hasn't reduced
the amount the government spends on defense, intelligence or other
programs.
Rather, they say it's just shifted work to
private employers and reduced
transparency. It becomes harder to track the work of those
employees and determine whether they should all have access to
government secrets.
"It's very
difficult to know what contractors are doing and what they are billing
for the work - or even whether they should be performing the work at
all,"
...and to
the current PRISMgate whistleblowing
situation:
Of the 4.9 million people with clearance to
access "confidential and secret" government information,
1.1 million, or 21 percent, work for
outside contractors, according to a report from Clapper's
office.
Of the 1.4
million who have the higher "top secret" access, 483,000, or 34 percent,
work for contractors.
...
Because clearances can take months or even
years to acquire, government
contractors often recruit workers who already have them.
Why not - it's lucrative!!
Snowden says he accessed and downloaded the
last of the documents that detailed
the NSA surveillance program while
working in an NSA office in Hawaii for Booz Allen, where he says he was
earning $200,000 a year.
Analysts caution that
any of the 1.4 million people with access
to the nation's top secrets could have leaked information about the program
- whether they worked for a contractor or the government.
For individuals and firms alike.
Booz Allen
has long navigated those waters well.
The firm was founded in 1914 and began
serving the U.S. government in 1940, helping the Navy prepare for World
War II. In 2008, it spun off the part of the firm that worked with
private companies and abroad.
That firm, called Booz & Co., is held
privately.
Booz
Allen was then acquired by
the Carlyle Group, an investment firm with
its own deep ties to the government. In
November 2010, Booz Allen went public.
The Carlyle Group still
owns two-thirds of the company's shares.
Or, a full-majority stake.
Curiously once public, The Booz Allens of
the world still operate like a pseudo-private company, with extensive
confidential cloaks preventing the full disclosure of financial data.
But
don't worry - we should just trust them...
Via Bloomberg's Jonathan Weil.
Psst, here's a stock tip for you.
There's a company near Washington with
strong ties to the U.S. intelligence community that has been around for
almost a century and has secret ways of
making money - so secret that the company can't tell you what they are.
Investors who buy just need to have faith.
To
skeptics, this might seem like a pitch for an investment scam.
But as anyone who has been paying attention to the news might have
guessed, the company is Booz Allen Hamilton Holding Corp.
...
"Because we are limited in our ability
to provide information about these contracts and services," the
company said in its latest annual report,
"you may not have important
information concerning our business, which will limit your insight
into a substantial portion of our business, and therefore
may be less able to fully evaluate the risks related to that portion
of our business."
This seems like it would be a
dream arrangement for some corporations:
Not only is Booz Allen allowed to keep investors uninformed, it's
required to. I suppose we should give the company credit for being
transparent about how opaque it is.
And while the media and popular attention is
currently focused on who, if anyone else, may be the next Snowden struck by
a sudden pang of conscience, perhaps a
better question is what PE behemoth Carlyle, with a gargantuan $170 billion
in
AUM, knows, and why it rushed to purchase Booz Allen in the
months after the Bear Stearns collapse, just when everyone else was batting
down the hatches ahead of
the biggest financial crash in modern history.
From
Bloomberg, May 2008:
Carlyle Group, the private-equity firm run
by David Rubenstein, agreed to acquire
Booz Allen Hamilton Inc.'s U.S. government-consulting business for $2.54
billion, its biggest buyout since the credit markets collapsed in July.
The purchase would be Carlyle's biggest
since it agreed to buy nursing-home operator Manor Care Inc. last July
for $6.3 billion. Deal-making may be rebounding from a 68 percent
decline in the first quarter as investment banks begin writing new
commitments for private-equity transactions.
Buyouts ground to a halt last year because
of a global credit freeze triggered by record U.S. subprime-mortgage
defaults.
The Booz
Allen government-consulting unit has more than 18,000 employees and
annual sales of more than $2.7 billion. Its clients include branches of
the U.S. military, the Department of Homeland Security and the World
Bank.
Carlyle, based in Washington, manages $81.1
billion in assets [ZH: that was 5
years ago - the firm now boasts $170 billion in AUM].
Rubenstein founded the firm in 1987 with William Conway and Daniel
D'Aniello. The trio initially focused on deals tied to government and
defense.
Carlyle and closely held Booz Allen
have attracted high-level officials from the government.
Carlyle's senior
advisers have included former President George H.W. Bush, former British
Prime Minister John Major, and Arthur Levitt, the ex-chairman of the
U.S. Securities and Exchange Commission.
R. James
Woolsey, who led the U.S. Central Intelligence Agency from 1993 to 1995,
is a Booz Allen executive. Mike McConnell, the U.S. director of national
intelligence, is a former senior vice president with the company.
...
Carlyle last year sold a minority interest
in itself to Mubadala Development Co., an investment fund affiliated
with the government of Abu Dhabi, capital of the United Arab Emirates.
And in addition to the UAE, who can possibly
forget Carlyle's Saudi connection.
From the
WSJ circa 2001:
If the U.S.
boosts defense spending in its quest to stop Osama bin Laden's alleged
terrorist activities, there may be one unexpected beneficiary: Mr. bin
Laden's family.
Among its far-flung business
interests, the
well-heeled Saudi Arabian clan - which says it is estranged from Osama - is an investor in a fund established by Carlyle Group, a
well-connected Washington merchant bank specializing in buyouts of
defense and aerospace companies.
Through this investment and its ties to
Saudi royalty, the bin Laden family has become acquainted with some of
the biggest names in the Republican Party.
In recent
years, former President
Bush,
ex-Secretary of State James Baker
and ex-Secretary of Defense Frank Carlucci
have made the pilgrimage to the bin Laden family's headquarters in
Jeddah, Saudi Arabia.
Mr. Bush makes speeches on behalf of Carlyle
Group and is senior adviser to its Asian Partners fund, while Mr. Baker
is its senior counselor. Mr. Carlucci is the group's chairman.
Osama is one of more than 50 children of
Mohammed bin Laden, who built the
family's $5 billion business, Saudi Binladin Group, largely
with construction contracts from the Saudi government. Osama worked
briefly in the business and is believed to have inherited as much as $50
million from his father in cash and stock, although he doesn't have
access to the shares, a family spokesman says.
Because his Saudi citizenship was revoked in
1994, Mr. bin Laden is ineligible to own assets in the kingdom, the
spokesman added.
...
People familiar with the family's finances
say the bin Ladens do much of their banking with National Commercial
Bank in Saudi Arabia and with the London branch of Deutsche Bank AG.
They also use Citigroup Inc. and ABN Amro,
the people said.
"If there were ever any company closely connected to the U.S. and
its presence in Saudi Arabia, it's the Saudi Binladin Group,"
says Charles Freeman, president of the
Middle East Policy Council, a Washington nonprofit concern that
receives tens of thousands of dollars a year from the bin Laden
family.
"They're the establishment that Osama's
trying to overthrow."
...
A Carlyle executive said the bin Laden
family committed $2 million through a London investment arm in 1995 in
Carlyle Partners II Fund, which raised $1.3 billion overall.
The fund has purchased several
aerospace companies among 29 deals. So far, the family has received $1.3
million back in completed investments and should ultimately realize a
40% annualized rate of return, the Carlyle executive said.
But a foreign financier with ties to
the bin Laden family says
the family's overall investment with Carlyle is
considerably larger.
He
called the $2 million merely an initial contribution.
"It's like plowing a field," this person said. "You seed it once.
You plow it, and then you reseed it again."
The Carlyle executive added that he
would think twice before accepting any future investments by the bin
Ladens.
"The situation's changed now," he
said. "I
don't want to spend my life talking to reporters."
We can clearly see why.
We can also clearly see why nobody has mentioned
Carlyle so far into the Booz Allen fiasco.
A
U.S. inquiry into bin Laden family business dealings could brush against
some big names associated with the U.S. government.
Former President Bush said through his chief of staff, Jean Becker, that
he recalled only one meeting with the bin Laden family, which took place
in November1998.
Ms. Becker confirmed that there was a second
meeting in January 2000, after being read the ex-president's subsequent
thank-you note.
"President Bush does not have a
relationship with the bin Laden family," says Ms. Becker. "He's
met them twice."
Mr. Baker visited the bin Laden family
in both 1998 and 1999, according to people close to the family.
In the second trip, he traveled on a
family plane. Mr. Baker declined comment, as did Mr. Carlucci, a past
chairman of
Nortel Networks Corp., which has partnered with Saudi Binladin Group on
telecommunications ventures.
As one can imagine the rabbit hole just gets
deeper and deeper the more one digs. For now, we will let readers do their
own diligence. We promise the results are fascinating.
Going back to the topic at hand, we will however
ask just how much and what kind of confidential, classified, and or Top
Secret information is shared "behind Chinese walls" between a Carlyle still
majority-owned company and the private equity behemoth's employees and
advisors, among which are some of the most prominent political and business
luminaries currently alive.
The following is a list of both current and
former employees and advisors.
We have used
Wiki but anyone
wishing to comb through the firm's full blown roster of over 1,000 employees
and advisors, is welcome to do so at
the firm's website.
Business
-
G. Allen Andreas -
Chairman of the
Archer Daniels Midland Company, Carlyle European
Advisory Board
-
Daniel Akerson -
CEO of General Motors, Board member at 7 companies,
Managing director at Carlyle
-
Joaquin Avila - former
managing director at Lehman
Brothers, Managing director at Carlyle
-
Laurent Beaudoin -
CEO of
Bombardier (1979-), former member of Carlyle’s Canadian
Advisory board
-
Peter Cornelius -
Managing Director of Nielsen
Australia.
-
Paul Desmarais -
Chairman of the
Power Corporation of Canada, former member of Carlyle’s
Canadian Advisory board
-
David M. Moffett -
CEO of Freddie Mac, Former
Senior advisor to the Carlyle
-
Karl Otto Pöhl -
former President of the
Bundesbank, Former Senior advisor to the Carlyle Group
-
Olivier Sarkozy (half-brother
of
Nicolas Sarkozy, former President of France) - co-head
and managing director of its recently launched global financial
services division, since March 2008.
Political figures
-
North America
-
James Baker III, former
United States Secretary of State under George H. W. Bush,
Staff member under
Ronald Reagan and George W. Bush, Carlyle Senior Counselor,
served in this capacity from 1993 to 2005
-
George H. W. Bush,
former U.S. President, Senior Advisor to the Carlyle Asia
Advisory Board from April 1998 to October 2003
-
Frank C. Carlucci,
former
United States Secretary of Defense from 1987 to 1989;
Carlyle Chairman and Chairman Emeritus from 1989 to 2005
-
Richard G. Darman,
Director of the
Office of Management and Budget in the
Bush Administration; Managing director from 1993, later
Senior Advisor
-
William E. Kennard,
chairman of the
Federal Communications Commission from 1997-2001 and
United States Ambassador to the European Union; Carlyle
managing director from 2001-2009
-
Arthur Levitt, Chairman
of the U.S.
Securities and Exchange Commission (SEC) under President
Bill Clinton, Carlyle Senior Advisor from 2001 to the present
-
Luis Téllez Kuenzler,
Mexican economist, former Secretary of Communications and
Transportation under the
Felipe Calderón administration and former Secretary of
Energy under the
Zedillo administration
-
Frank McKenna, former
Premier of New Brunswick,
Canadian Ambassador to the United States between 2005 and
2006 and current Deputy Chairman of
Toronto-Dominion Bank; served on Carlyle's Canadian advisory
board
-
Mack McLarty, Carlyle
Group Senior Advisor (from 2003), White House Chief of Staff to
President Bill Clinton from 1993 to 1994
-
Randal K. Quarles,
former Under Secretary of the U.S. Treasury under President
George W. Bush, now a Carlyle managing director
-
Europe
-
Asia
-
Anand Panyarachun,
former Prime Minister of
Thailand (twice), former member of the Carlyle Asia Advisory
Board until the board was disbanded in 2004
-
Fidel V. Ramos, former
president of the
Philippines, Carlyle Asia Advisor Board Member until the
board was disbanded in 2004
-
Peter Chung, former associate
at Carlyle Group Korea, who resigned in 2001 after 2 weeks on
the job after an inappropriate e-mail to friends was circulated
around the world
-
Thaksin Shinawatra,
former Prime Minister of Thailand (twice), former member of the
Carlyle Asia Advisory Board until 2001 when he resigned upon
being elected Prime Minister
Media
Here is Carlyle, straight from the horse's
recently IPOed mouth, courtesy of its
most recent public presentation:
Perhaps Bloomberg's Jonathan Weil sums it up
best:
There's no easy solution here, aside from
the obvious point that the government keeps way too many secrets.
So what happens when one corporation, owned and
controlled by the same government's former (and in some cases current) top
power brokers, potentially has access to all of the same
government's secrets?