Contracts
with the Department of Homeland Security (DHS) are spewing billions of
dollars into private industry, largely to companies that also rely on
Pentagon military contracts. In this new variation of the
military-industrial complex a new revolving door is now in full swing.
Tom Ridge and
Michael Chertoff, the two Republican stalwarts who served as the first
two Department of Homeland Security secretaries, are now busy
attracting defense, homeland security, and intelligence contracts in
the country's rapidly expanding high-tech security complex.
Tom Ridge, former
Pennsylvania governor who was appointed by President Bush to direct the
newly created DHS, has parlayed his government service into a lucrative
career in business since he stepped down as DHS chief in November 2004.
Soon after leaving DHS, Tom Ridge became president and CEO of Ridge
Global, a global strategic consulting firm. He also has joined numerous
corporate boards and advisory groups, including major military and
homeland security contractors. (See Box: Ridge's Post-DHS Security
Businesses).
Chertoff Group Covers Homeland Security
Michael
Chertoff, former secretary of the DHS, has taken his portfolio over to
the private sector. Homeland security is business—an estimated $200
billion in annual revenues—and the newly formed Chertoff Group is
seeking a major stake in this booming industry.
As the latest
homeland security consulting firm, Chertoff Group will be competing
with two other security companies formed by top Republican Party
figures: Ashcroft Group founded by former Attorney General John
Ashcroft; and Guiliani Group, formed by former New York City mayor and
presidential candidate Rudolf Guiliani. Although not specifically
focused on homeland security, Ridge Global, formed by the first DHS secretary Tom Ridge, also has a piece of the expanding global security industry.
Chertoff Group
describes itself as "a security and risk management advisory firm that
counsels corporate and government clients addressing threats related to
terrorism, fraud, cyber security, border protection, and supply chain
security."
The Chertoff Group
has a leg up on its competitors. The revolving door between government
and industry has brought a half-dozen former high government officials
of the Bush administration into the Chertoff Group.
Not only does
it count on the political and business connections of Chertoff, the new
firm has a roster of five other former government officials that can
translate government experience and inside information into lucrative
industry contracts.
Chertoff boasts,
"Among the six of us we pretty much have all of those things in DHS, in
DOD, and the Department of Justice, law enforcement, and finally, in
the intelligence community. So we have pretty much every element of
homeland security covered."
The Faces of the New Homeland Security Complex
Chertoff's
associates who will be covering all the elements of homeland security
business include figures with long experience in intelligence, industry
contracting, and international banking.
Chad Sweet, Chertoff's chief-of-staff at DHS, cofounded the Chertoff Group and will direct the firm's operations. According to his company profile,
Sweet worked at DHS "to restructure and optimize the flow of
information between the CIA, FBI, and other members of the national
security community and DHS. Mr. Sweet also supported the Secretary
during numerous operations to detect, disrupt, and respond to terrorist
plots both in the United States and overseas."
Before joining
DHS, Sweet was a vice president at Morgan Stanley and then at Goldman
Sachs, with a special focus on international investments. Sweet came to
Wall Street after "having helped to fight the threat of Communism" at
the CIA, where he was in the agency's Directorate of Operations.
In his new
position, Sweet "utilizes his unique background in intelligence,
homeland security, and investment banking to provide M&A advice to
companies wishing to expand within the defense, aerospace, and security
industries, and to help private capital groups evaluate investment
opportunities within the sector."
Other principals
at Chertoff Group are also former government heavies, including former
CIA director (2005-2009) Michael Hayden, who also directed the National
Security Agency (NSA, 1999-2005); DHS deputy Paul Schneider (who prior
to his position at DHS was head of acquisitions for NSA and the U.S.
Navy); Ret. Admiral Jay Cohen, who was DHS director of science and
technology and previously the Navy's technology chief, and Charlie
Allen, who was the intelligence chief at DHS and, according to Michael
Chertoff, "pretty much head of everything you could be for the CIA and
head of national collections."
The New Business of Homeland Security
DHS' private
contracting provides one look at the new homeland security business. In
large part, it's an offshoot of the military contracting industry.
DHS's top 10 contractors, for example, include Boeing (ranking first),
General Dynamics, SAIC, L-3 Communications, and Lockheed-Martin.
Also prominent
among DHS contractors are information systems and computer technology
firms, such as IBM, Accenture, Unisys, Booz Allen Hamilton, and
Siemens. Also figuring prominently among the top DHS contractors is
Wackenhut, a more traditional security industry that provides custodial
services for the Border Patrol and Immigration and Customs Enforcement
(ICE).
Intelligence
contractors represent another booming business in the new homeland
security industry. According to an estimate by the Defense Intelligence
Agency, as much as 70% of new intelligence operations by the federal
government's intelligence apparatus, including NSA, are contracted out
to private businesses.
The expanding
homeland security industry also includes biotech, electronic
surveillance, and cyber security firms—all of which are likely
prospective clients of the Chertoff Group.
Fresh from DHS,
Chertoff says that the Chertoff Group provides an especially
well-informed perspective of the character and direction of the new
homeland security industry.
HSToday, a new homeland security industry magazine, interviewed Chertoff
shortly after he founded the new firm and observed that part of
Chertoff's "new mission is to better define homeland security for the
private sector and thereby increase investment opportunities."
Chertoff concurred with the HSToday
editor's description of the firm's mission and went on to expound on
the emerging definition and dimensions of the homeland security
industry. Chertoff noted that there exists much confusion about what
homeland security really is.
Having emerged
directly from government the Chertoff Group has, says Chertoff, "a
clear vision of what homeland security is." Here is his clarification,
"It's not the same as defense, it's not the same as law enforcement,
although it partakes of elements of those, as well as things that are
neither."
Homeland security,
Chertoff explained, is a blend of the military and the police/first
responder sectors. He observed that there is a great need in the
private sector "to fill the gap and cover a system of homeland security
in a way that is end-to-end that is not covered by the defense
community or the law enforcement community."
Chertoff asserted
that there are "many great opportunities" for investment and "many
great technologies" to apply to homeland security needs. Chertoff
Group, he said, can fill the gap, define the opportunities, and pick
the best technologies. Furthermore:
"As many of the
principal architects of homeland security and the doctrine, we
[Chertoff Group] have a pretty good feel for how to look at problems
end-to-end and then to anticipate problems where there may be
technologies that fit into that problem solution …. So, working with
investors, defense contractors, and others who either want to
organically grow into homeland security or want to make acquisitions, I
think we've got a really unique value and perspective that we can add
in terms of how things fit in terms of an overarching strategy."
"What sets the
Chertoff Group apart," says Chertoff Group, "is the breadth of our
industry knowledge, the depth of our experience, and the extent of our
close contacts with industry leaders worldwide."
Chertoff Group Gets Down to Business
In a nod to the
key role of Bush administration figures in the new security company,
Chertoff Group states that it "provides business leaders and local
government officials with the same kind of high-level, strategic
thinking and diligent execution that have kept the American homeland
and its people safe since 9/11."
According to its
website, the Chertoff Group approaches the business from three angles:
risk-management and security services, crisis management, and mergers
& acquisitions (M&A).
The group's
risk-management and security services division aims to cover everything
from global strategy, border protection, infrastructure protection,
biometrics, global commerce, disaster preparedness, information
assurance, intelligence, counterterrorism, and chemical, biological,
radiological, and nuclear security. The firm promises to "guide you to
the best sources for trained personnel and security technology."
One of the firm's first contracts involves a cyber security client, according to a Wall Street Journal
article. Chertoff Group has also secured a contract with BioNeutral
Group, which hopes to commercialize a chemical-based technology that
will neutralize toxins.
"We are excited
to engage former Secretary Chertoff and his firm to assist us in our
endeavors; presenting our proprietary technology to the various markets
including health, defense, and bio security," commented Stephen J. Browand,
president and CEO of BioNeutral. "It is a privilege to have such an
elite group represent our company and we are confident that they will
play a significant role in the successful strategic introduction of our
life saving technology."
Strategic Partnership with "PR Firm from Hell"
Chertoff Group, founded by former DHS Secretary Michael Chertoff, has formed a "strategic partnership"
with the controversial public-relations firm Burson-Marsteller to carry
out the crisis-management part of its homeland security business.
"No one knows
crisis communications better than the team at Burson-Marsteller,"
states the Chertoff Group, and the partnership will "combine our
extensive crisis management expertise with their broad crisis
communications skills."
No doubt that
Burson-Marsteller has extensive experience in what the industry calls
"crisis communications"—spinning a business, government, or product
failure so as to minimize damage to a company's bottom line or a
government's global reputation.
Burson-Marsteller, now headed by Hillary Clinton's presidential
campaign pollster and strategist Mark Penn, has been called "the PR
firm from Hell" by MSNBC's Rachel Maddow,
because of the firm's long track record in representing companies
involved in major disasters. Says Madow (March 5, 2009), "When Evil
needs public relations, Evil has Burson-Marsteller on speed-dial."
According to the Guardian
in London, "The world's biggest PR company was employed by the Nigerian
government to discredit reports of genocide during the Biafran war, the
Argentine junta after the disappearance of 35,000 civilians, and the
Indonesian government after the massacres in East Timor. It also worked
to improve the image of the late Romanian president Nicolae Ceausescu
and the Saudi royal family."
A recent corporate
client of this "communications crisis" firm is AIG, the investment firm
bailed out by the U.S. government with $163 billion of taxpayer
revenues.
In the past
Burson-Marsteller has provided communications remedies: after the Three
Mile Island partial nuclear meltdown; for Union Carbide after the
Bhopal gas leak that killed up to 15,000 people in India; and for
British Petroleum after the sinking of the Torrey Canyon oil tanker.
More recently, it has represented tobacco firms, European biotech
industries that produce genetically modified food, and, according to
Maddow, for the Blackwater security services firm after reports of murders of civilians by its government-paid mercenaries in Iraq.
Chertoff Group
is also going directly to the heart of the industry with its M&A
division. "For deals in the security industry," the Chertoff Group says
it "offers unparalleled subject matter expertise and contacts to give
you the competitive advantage."
"We have overseen
billions of dollars of technology development and acquisition for the
Department of Defense, the Department of Homeland Security, the
Department of Justice, the National Security Agency, and the CIA. We
have keen insight into which new technologies are likely to transform
the landscape, and our experience allows us to predict which ones may
be headed for obsolescence."
The firm sees a
bounty of opportunities for consolidation in the new but "highly
fragmented" homeland security industry. It promises clients to "help
leverage economies of scale" and to "monitor and manage target
companies during periods of transition," reminding security companies
that "it pays to know what we know before you decide on a merger or
acquisition."
Pumping Up Homeland Security Business
Not relying
solely on its industry contracts, the Chertoff Group is also benefiting
from a trail of media interviews and media events that bring the firm's
principals to the attention of prospective clients.
Chertoff and
his DHS predecessor Tom Ridge, along with their entry into the homeland
security industry, are releasing new homeland security books in
September.
Ridge's new book is titled The Test of Our Times: America Under Siege ... and How We Can Be Safe Again. Michael Chertoff's new book, Homeland Security: Assessing First Five Years, will also likely help promote the Chertoff Group within the homeland security industry.
In his book,
Chertoff argues that the Bush administration effectively secured the
country because there haven't been any terrorist attacks on the
homeland since Sept. 11—an assessment that the Chertoff Group regularly
uses to sell itself.
But in the new
book Chertoff occasionally exhibits a foreign policy perspective that
appears dangerously aligned with the neoconservatives that drove the
Bush administration's Middle East and counterterrorism policies. He
predicts, for example, that the anti-Israeli Lebanese opposition group
Hezbollah could surpass al-Qaeda as the most serious terrorist threat
to the United States. Chertoff alleges Hezbollah is better equipped,
better trained, and better politically positioned than Osama bin
Laden's al-Qaeda.
"Having
operated for more than a quarter-century, (Hezbollah) has developed
capabilities that al-Qaeda can only dream of, including large
quantities of missiles and highly sophisticated explosives," writes
Chertoff.
Alarmism about
Hezbollah, whose principal grievance is with Israel, is a common
denominator of neoconservative ideology. Although not closely
identified with the neoconservatives, Chertoff is firmly rooted in
right-wing thinking, particularly with respect to terrorism and the
role of the judiciary. Chertoff is also closely associated with the right-wing Federalist Society.
Chertoff is
also speaking publicly about the government's cyber security programs
and intelligence gathering systems. During an August 7 presentation at
the Potomac Officers Club in Washington, Chertoff promoted the
deployment of Einstein III, the latest phase of a web-traffic
monitoring system sponsored by DHS to detect and deter cyber attacks.
The Obama administration has authorized the deployment of the latest
phase of the program, which will screen government traffic on private
networks and will be managed by the NSA.
Cyber security
is perhaps the most lucrative source of homeland security business,
which may explain the Chertoff Group's interest in the Einstein
project. Among the reported private partners
awarded contracts for the Einstein system (which was allocated $600
million in 2007-2008) are AT&T, which is the lead partner with NSA,
L3 Communications, General Dynamics, Sprint, Qwest, MCI, and Verizon.
The first two
phases of the Einstein monitoring program didn't measure up to
government expectations. Nonetheless, the Obama administration is set
to launch the latest version of the cyber security system—amid
widespread privacy concerns resulting in large part because of NSA's
unauthorized monitoring of private communications during the Bush
administration.
Explaining the third iteration of the system, Chertoff told the Washington Post:
"Intrusion detection is like a cop
with a radar gun on a highway who catches you speeding or drunk and
phones ahead to somebody at the other end … Einstein III is a cop who
actually arrests you and pulls you off the road when he sees you
driving drunk."
While Einstein I
and II were more protective than proactive, Einstein III rather than
looking for predetermined indicators of cyber attack is empowered to
look at the content of emails and possibly signatures including
personally identifiable data. Millions of emails that pass through
government agencies as well as any person logging on to a government
website would set off Einstein III.
Aside from
privacy concerns, the effectiveness of such electronic surveillance in
improving homeland security has been questioned by a wide range of
critics, including congressional members and employees of NSA and DHS.
Jesselyn Radack, homeland security director of the Government
Accountability Project, calls for the administration to abandon the
program, calling it "NSA's cyber overkill."
Outsourcing's New Hold on National Security
The homeland
security business not only involves protecting communications and
information systems from intrusions and attacks, it also entails
extracting intelligence from monitored electronic communications. The
Chertoff Group will likely serve these two sides of the
intelligence/security business.
On August 20
Michael Chertoff and Michael Hayden, along with former CIA Director of
Operations Jack DeVine (now president of the Arkin Group international
crisis management group), led a discussion panel at the National Press Club on the privatization of intelligence.
Neither Chertoff nor Hayden was identified in the NPC news release
about the event as private contractors themselves who benefit
financially from intelligence outsourcing.
Not
surprisingly, all three former government officials who currently are
in the private sector strongly supported intelligence and DHS
outsourcing. Chertoff explained that the outsourcing of immigrant
detention to the private sector was the largest component of DHS
private contracting, which makes good sense because of the long
time-lag in building federal facilities and because of the variable
flow of immigrants. It would be "foolish," he said, to build an
immigrant prison in western Arizona and then have empty beds if the
immigrant flow switched to the southeastern United States.
Hayden
described the CIA as a "blended team" of government employees and
contractors, noting that "we used contractors as an integral part of
our workforce."
Tim Shorrock, author of Spies for Hire: The Secret World of Intelligence Outsourcing,
says that "private contractors are operating in the most sensitive
areas of intelligence." According to Shorrock, "with the post-September
11 hikes in intelligence spending, spying for hire has become an
industry worth nearly $50 billion a year." With the Chertoff Group's
close ties to the CIA and NSA, this huge intelligence outsourcing
budget will likely form an important part of the firm's revenue stream.
The homeland
security industry is emerging as the country's fastest growing
government-industry complex. It's an industry where Chertoff and an
array of ex-Bush administration officials are playing leading roles.
While the full
extent of the influence and power of the new homeland security complex
has yet to be determined, it is worrisome to consider that the
complex's leading architects are former government officials
responsible for the USA Patriot Act, the border wall boondoggle,
massive unauthorized domestic surveillance, and disastrous intelligence
scandals of the Bush years.
The increased
outsourcing of homeland security and intelligence operations also
raises pressing concerns about who is truly in charge of our
security—industry or government. But with security being viewed as a
new profit sector, our national interests and security will likely lose
out to the interests of investors and security consultants like Ridge,
Hayden, and Chertoff.
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