Once upon a time, before the advent of universal suffrage, consumer rights, government in the sunshine and the Freedom of Information Acts, the primary task of public officials was to dole out public assets and resources to their supporters and friends. They accomplished this task by allocating "rights:"
grazing rights
fishing rights
water rights
mineral rights
etc.
Consequently, when the public started demanding such things as civil rights, rights enumerated in the Bill of Rights, our public officials were a bit confused. And then, just about the same time, it came to their attention that, other than development rights and air rights, the cupboard from which to dole out benefits had gotten rather bare.
So, it actually turned out to be a convenience that the public made demands for services and, mirabile dictu, was willing to pay for them, because, under the guise of efficiency and lower cost, our public officials could now hand out contracts to their supporters and friends, which, unlike the natural resources, were not likely to dry up, run out, or blow away. "Privatization" had arrived, but it was really just a new wrinkle in an old suit.
The extent to which the privatization trade was plied was always somewhat connected to the "natural" economic cycle. Or perhaps, the public trough was always considered somewhat of a back-up whenever the risks of private enterprise resulted in a crash.
In any case, despite the universal commitment to free enterprise and competition in the market, the extent to which enterprising individuals have been dependent on public assistance has waxed and waned, but never been halted entirely. Indeed, some financial managers seem to have kept their fingers in the public till just so they could be ready to jump right in when the private sector got too scary.
That, I would suggest, is what was underfoot when the Carlyle Group indicated an interest in acquiring Booz Allen Hamilton earlier this year, before their subsidiary Carlyle Capital tanked. In other words, there was a movement afoot to secure an interest in a constant stream of revenue.
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.
Spying is, of course, a perennial activity.
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 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.
No doubt, the practical argument for having these functions performed by private corporations is that they can then be terminated at the drop of a hat. Though, when gathering intelligence is on the menu, that's not likely because we can never get enough of intelligence. Right?
But, there is another reason for farming out public functions to private enterprise. Private corporations, like the private person, are entitled to do things in private--i.e. away from the surveillance of the snooping public and their FOIA hounds. You see, while the agents of government can only do what the statutes permit and require, there are no such prohibitions or limitations on the private corporation. Ergo:
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.
Nice touch that: add texture to data gathered by spies and electronic surveillance. Texture is nice.
But, what I wonder is whether the collapse of Carlyle Capital came too quickly and will put a crimp in this scheme to purchase the assets that Bush One used to control when he was still in charge of the CIA before the life of the public official got really complicated by things like FOIA.
Carlyle Capital collapses
Posted Mar 17th 2008 10:10AM by Peter Cohan
Filed under: JPMorgan Chase (JPM), Bear Stearns Cos (BSC)
Lost in the flurry of activity over the weekend surrounding The Bear Stearns Companies (NYSE: BSC) is this morning's news that Carlyle Capital, the subsidiary of the Washington-based private equity king Carlyle Group, is 'winding up.' MarketWatch reports that Carlyle Capital, 15% of which is owned by Carlyle Group partners, has more liabilities than assets.
It is interesting that Carlyle can't utter the word 'bankrupt' -- instead preferring the innocuous-sounding term: 'winding up.' But Carlyle shareholders will be left with nothing.
unlike the shareholders of Bear Stearns who are going to get two whole dollars a share.
And the other question I have is when we are going to face the fact that our economy has been running on who you know and who's being protected for so long that hardly anyone seems conversant with the production of high quality products and services that don't have to be force-fed to the public.
Perhaps just a bit more about Booz Allen is in order.
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.
Is there any doubt that these people are about sucking at the public teat without having to account for their output?
Not in my mind.
But why do I refer to it in that pejorative manner? Because I am inclined to conclude that all this electronic menagerie is a large-scale rip-off. Electrons, you see, are flighty entities, unreliable whenever the atmospherics are wrong.
The odd thing is that early on Rumsfeld suggested that the reliance on electronics for gathering information was a big mistake, responsible for 9/11 and all that and left most people with the impression that would change. But, it hasn't. Instead, linguists who happen to be gay get fired and the Air Force is dispatching drones from consoles in Denver to kill hapless Arabs with missiles.