Tuesday, November 16, 2004

More War Profiteers --from SF Gate

President Bush was widely reported last week to be on the verge of nominating local boy Francis Harvey to serve as secretary of the Army.

Not only has Harvey never had a military career, but he is the former chief operating officer for a division of Westinghouse Electric, a leading defense contractor, and serves on the boards of two Carlyle-affiliated firms.

Carlyle is a high-power Washington investment firm that counts among its leaders and advisers former Defense Secretary Frank Carlucci, former Secretary of State James Baker and, until last year, former President George H.W. Bush, who happens to be the father of the current president.

Most prominently, Harvey is the vice chairman of Maryland's Duratek, which specializes in the handling and disposing of radioactive materials.

Duratek, which reported sales of $286 million last year, has contracts with both the U.S. Department of Defense and the Department of Energy, which is itself one of the nation's top defense contractors.

Carlyle owns about 23 percent of the company and appointed Harvey to Duratek's board in 1998. He has been re-elected by shareholders every year since then.

Diane Brown, Duratek's vice president of investor relations, said about 3 percent of the company's revenue comes from the Army. About 10 percent is from the Department of Defense and 65 percent from the Energy Department. The rest comes from commercial contracts.

Harvey also sits on the board of Carlyle-owned Kuhlman Electric, a maker of transformers. It has no apparent defense contracts.

Chris Ullman, a spokesman for the Carlyle Group, said he's confident that Harvey, if appointed Army secretary, won't show any special favors to former business partners.

"There are government rules that dictate how people's official duties are allowed to interact with their former private-sector affiliations," he said. "There are mechanisms in place to assure that the public trust is ensured."

The secretary of the Army plays no role in combat operations. Rather, the Army secretary, who reports to the defense secretary, oversees most noncombat matters, such as recruiting and mobilizing troops, and manages a nearly $100 billion budget.

"He makes sure that soldiers have the proper training and equipment to perform their mission," said Lt. Col. Jeremy Martin, an Army spokesman.

He said that if soldiers in Iraq required more weapons, say, or new vehicles, the Army secretary would be responsible for passing the request to the office of the defense secretary.

President Bill Clinton's first appointee as Army secretary was Togo West Jr., who served previously as general counsel to the Navy and general counsel to the Department of Defense. Clinton's second appointee, succeeding West in 1998, was Louis Caldera, a former Army officer and California lawmaker.

The Bush administration's first pick for the job, in May 2001, was Thomas White, a former general who left the military in 1990 for a lucrative 11-year career with Enron.

Testifying in 2002 before a Senate committee investigating Enron's shady electricity deals, White said he had no idea that the company was manipulating power prices in California while he helped run an Enron subsidiary, Enron Energy Services.

"I am responsible for the portion of that company that I ran," he said. "The deals that we put together, within the accounting structure that was the standard in the industry, I stand behind."

It's since come to light that traders at Enron Energy Services participated in market-rigging schemes with nicknames like "Get Shorty" and "Fat Boy."

White was fired by Defense Secretary Donald Rumsfeld last year after sticking with the $11 billion Crusader artillery gun despite the Pentagon's decision to scrap the program. The Army has since been without a full-time secretary.

The primary contractor for the Crusader, by the way, was United Defense Industries, controlled during White's tenure by -- wait for it -- the Carlyle Group.

Carlyle sold its stake in the company in April, but United Defense is still chaired by Carlyle Managing Director William Conway. He's joined on the board by Carlyle's chairman emeritus, Carlucci, and another Carlyle managing director, Peter Clare.

Which brings us back to Harvey. Of all the people who could assume the long-vacant Army secretary post, it's striking (to say the least) that Bush is reportedly tapping someone with intimate ties to the defense industry.

If confirmed, Harvey would no doubt serve with distinction -- there's no reason to think otherwise. But he'll always have the cloud of his Carlyle connections hanging over his head.

A nation at war deserves better than that.


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