Wednesday, March 15, 2006

Military Industrial Complex Morphs into Government Industrial Monstrosity

If President Dwight D. Eisenhower were still alive, he would find his great fear of the military industrial complex had been realized. The military general would see his modern day counterpart, General Montgomery C. Meigs updating President Bush on the Pentagon’s strategy to address roadside bombs. Retired General Montgomery C. Meigs is heading the Joint Improvised Explosive Device Defeat Task Force. In his radio address the President quickly glossed over the general’s retired status. Not mentioned by the White House, the General’s corporate connections. Convera Corporation appointed Gen. Meigs to their Board of Directors on August 4th of last year. Less than two weeks later the company announced a $2.2 million Pentagon contract.

President Bush said after the meeting “And the General has spent a lot of time thinking about the enemy's tactics and techniques, and how our military can adjust to them.” It happens the General’s Joint Improvised Explosive Device Defeat Task Force has a $3.3 billion budget. The retired General is in a position to steer a lot of military business to willing and capable contractors.

Several companies have submitted prototypes of directed energy weapons, also known as DEW, to the Pentagon. Some address the IED directly while others address crowd dispersion. To date the buzz has been over a product that sends out an electronic pulse similar to lightning. Within range the pulse fries the roadside bomb’s electronics, disabling it. Ionatron Inc.’s laser pulse equipment has been mentioned most prominently, even though the company is a relative newcomer. Two of their founding scientists served in Raytheon’s directed energy weapons systems unit until 2003. As I read, I wondered about Raytheon’s position. How do Raytheon executives feel about two key ex-employees starting their own company to develop an energy based weapon? Are they angry that Ionatron is the lead company to date in the IED disabling evaluation process?

Mixed emotions followed the puzzling question as I read further. I found it oddly disturbing that Ionatron markets their products as either lethal or non lethal energy weapons systems. They seemed to say both were a plus. If you need to kill people a directed energy weapon can do it very effectively. Or if you need to disable them or break up a crowd DEW’s are the ticket. My mind put it more crudely, “Need to kill or harm? Ianotron can DEW it for you!”

When the President met with General Meigs,. Defense Secretary Donald Rumsfeld was by their side. His spokesman seemed to go out of his way to speak to the state of technology in this area by saying “there are no new technological breakthroughs to report to the president at this time.” It was almost as if Donald’s mouthpiece said, “Hold on everyone, the Pentagon has everything under control. General Meigs is here to help us work out this issue. He is aware of the technology and there are no advancements to report.”

Whether there have been new advancements or not, these weapons seem creepy to me. They bring to mind movies like Robocop, the Terminator and the Matrixx series where evil, oppressive societies use high tech weapons to subjugate and exterminate the masses.

After processing my personal reactions, my business sense kicked in, raising even more questions. President Bush was spotlighting this issue via his meeting with General Meigs. Why this and why now? Two companies have been mentioned directly with the IED disabler, Ionatron and Extreme Alternative Defense Systems.

A closer look at both companies revealed interesting characters. Ionatron has its own retired admiral on its Board of Directors. Ret. Admiral Thomas W. Steffens was elected to board March 2004. He currently serves as Technical Director for Homeland Security and special operations for Anteon Corporation. The admiral’s employer just inked a deal to be acquired by another large defense contractor, General Dynamics.

Extreme Alternative Defense Systems is a smaller outfit. It’s CEO, Peter Bitar is of Arab descent and a Christian. In a Washington Post interview he said, "I can think the way a Middle Eastern mind thinks. I understand where they're coming from. So, we can design tactical solutions that deal with that." The Pentagon gave his company $700,000 in 2003. The Marine Corp, Navy, and economic development funds from the state of Indiana provided another $1 million through the fall of 2005.

Yet, at a military futuristic weapons trade show the Post reported Mr. Bitar looked bitterly across the field of vendors at his rivals, Raytheon and Ionatron. Extreme’s government contracts have been through competitive bidding, while Ionatron’s biggest order came via a congressional line item, which typically requires high level and high dollar lobbying.

I was struck by the number of retired generals and admirals on defense company board of directors. I hadn’t searched far, but it seemed every board had one. I also noted there appears to be a behind the scenes controversy regarding this issue. General Meigs was not the original chair of this task force. Reports of successful tests of Ionatron’s equipment were followed by the Pentagon’s removal of the results on the Naval Surface Warfare Center Crane Division’s website. The January 6, 2006 military press release is no longer available online.

The example thus far drives home President Eisenhower’s concern about the military industrial complex, yet much more is occurring. Last week, the Internal Revenue Service announced it is contracting out collections to 3 firms. It is symbolic of a much larger shift occurring on President Bush’s watch. The new Medicare Prescription Plan is an example of such contracting, as private insurers are providing this new insurance to senior citizens.

Controlling healthcare costs is a high priority for the Bush administration and he plans to accentuate “market forces”. Several politically connected investment houses, The Carlyle Group and Welsh, Carson, Anderson, & Stowe are ramping up their health care investments. They are positioning for the opportunities ahead. The Carlyle Group just announced their plans to acquire Multiplan, the largest independent preferred provider organization in the U.S. Through its clients it serves over 70 million Americans. As Medicare and Medicaid are “modernized” how much will the federal government contract out to private sector insurance companies?

Just days ago, the Carlyle Group announced another project specializing in public/private partnerships. Their press release stated “Global private equity firm The Carlyle Group today announced it has established a team to conduct investments in the infrastructure sector, including investments in transportation and water facilities, airports, bridges, ports, stadiums and other public infrastructure.”

Other noteworthy comments include ““The proven use of public-private partnerships and concessions in the U.K. and on continental Europe is now emerging as a means of financing U.S. infrastructure. There is a dire need to bring private capital to the development and maintenance of public infrastructure throughout the U.S. and we believe this effort will be well received.”

Did the word concessions jump out at you? Translated this means the government forks over both funds for the infrastructure, while throwing in tax breaks. The State of Texas announced last year a land deal with a Carlyle affiliate, Vought Aircraft Industries. The bottom line is Texas would pay the company $65 million for land which reduces Vought’s local and state property taxes. This is in addition to the $75 million in economic development incentives given to Vought by the state and federal government since 2000. During the land deal negotiation period, Carlyle announced it distributed $2.1 billion to its investors due to the “stellar performance” of its investments.

Another telling comment was in the Carlyle Group news release “As a U.S. firm with exceptional experience in government contracting, Carlyle is now well positioned to invest in U.S. and other infrastructure either alone or as part of a consortium.” If that didn’t make you shudder, you know little about this investment house’s political contacts to the current and past administrations. Yes, they have exceptional experience in government contracting and they are rapidly building their already comprehensive portfolio.

In addition to exceptional government experience, it appears Carlyle might have exceptional government influence. The Carlyle Group closed the deal on a long term acute care hospital company, LifeCare Inc. last August. LifeCare had three facilities in New Orleans. Twenty four of their patients died after Hurricane Katrina. That LifeCare long term acute care unit was inside the flooded and powerless Memorial hospital. Memorial happens to be owned by another for profit company, Tenet Healthcare.

When the White House released their Lessons Learned report it failed to mention who is responsible for the evacuation of hospital and nursing home patients. The report’s cover letter mentions homes, schools and places of worship, but not hospitals. Deeper in the analysis it speaks to specific evacuation stories and some of the consequences. It did not analyze who was accountable nor did it assess their performance. It does represent the plight of nursing home and hospital patients that resulted in many patient deaths, often in the small print footnotes near the back of the report.

At several points it mentions the names of nursing home facilities where patients expired. Yet there was not one mention of LifeCare, Tenet or Memorial Medical Center in the 217 page report. I found it odd that a nursing home where 6 or 7 patients expired would be noted but a facility where 40 patients succumbed in the aftermath would not receive one mention. I found all of this puzzling, having helped evacuate a Texas Gulf Coast hospital prior to Hurricane Gilbert and having endured the flooding of a 725 bed hospital in southwest Virginia. A rapidly rising river left that teaching hospital in a post Katrina like state.

I found the failure to directly address this issue in the Lessons Learned report even more bizarre when the tapes and transcripts of President Bush and Mike Brown’s discussions were made publicly available. The FEMA director mentioned hospitals not evacuating the day before landfall. Two days after landfall, the President inquired as the status of hospital patients. What caused them to skirt the issue in their vaunted report? It certainly is advantageous to Carlyle and LifeCare to not have any definitive judgments from the federal government as to their actions after the storm. On September 15th The Dallas Morning News did a story on likely lawsuits for hospital and nursing home patient deaths. It would behoove the defense to have the federal government silent on the issue, should they have to go to court for any wrongful death lawsuits.

I wondered if the federal government itself messed up in some way with evacuations of hospital and nursing home patients. Testimony at an early October Congressional hearing by a representative of the state nursing home association revealed that buses chartered to evacuate nursing home patients post Katrina had been appropriated by FEMA for other purposes. Did this action contribute to unnecessary patient suffering or even premature death? That could be another reason to be silent on this issue. Does the federal government have the right to silence to not incriminate itself? I found it interesting they included some other testimony from Congressional hearings but not this bit of information.

Whether it is “exceptional” experience or influence, the Carlyle Group is prepared to serve. With investments in high tech, aerospace, defense, health care, education, telecom, media, energy, electrical power, automotive, transportation, industrial, business services, real estate, consumer and retail, the Carlyle Group can help the U.S. government which is undertaking a transformation of its own. The federal government is becoming a general contractor as it shifts previous government operations, functions, and even asset ownership to the private sector.

The belief is that companies are more efficient and effective than government. President Bush’s inept leadership and inattention to operational performance has helped anchor this assumption in the minds of many Americans. What’s lacking in government is leadership. Without it, even the best business model is empty. With leadership some of the worst organizational models can do exceptional things.

My hope is the federal government remains more than just a general contractor. Having seen that trend in hospitals in the 1980’s I was not impressed. Early on it seemed lazy administrators contracted out services like housekeeping, food services and laundry. Later, many hospital managers contracted out clinical services to brother and sister for-profit entities. They turned over part of their facility to inpatient rehabilitation, mental health and long term acute care units who were well positioned to profit given the mix of patient need and financial reimbursement.

The boards of these seemingly independent entrepreneurial companies were cross pollinated by big investment house representatives and heavyweights from their larger for profit relatives. The investment houses had a pattern. They would take the firm private or acquire a smaller closely held company. Later they would conduct an independent public offering with a portion of the available stock. Finally they would cash in their investment via an outright sale to another investment house or industry leader. It continues today, and even appears to be ratcheting up again.

As I researched several new health care companies, old and familiar names kept appearing. At one point I found myself thinking, it almost feels like inbreeding. What is being birthed is much bigger than the military industrial complex. It is the government industrial monstrosity. It is happening every day, likely another deal closed while you were reading this story. Hopefully another story that can help the American people is not being hidden.


About the author

Lantern Sodden’s 25 year background in health care administration and leadership development makes him uniquely qualified to comment on this topic. For eight months Mr. Sodden wrote an independent political blog titled “Letters to Nowhere”. He generated over 878 letters to the President on various topics. Hurricane Katrina struck during this 8 month period and Lantern devoted many pieces to the plight of the suffering, especially hospital and nursing home patients. The author had great empathy for the patients and staff as he has conducted pre-storm hospital evacuations prior to a powerful hurricane’s landfall and endured in a river flooded teaching hospital with no power.

2 comments:

Matt Hughes said...

Mr. Prest has managed to write a well documented research paper in anticipation of what hopefully will become a plethora of wrongful death lawsuits filed against irresponsible corporations who stood by while the patients in their various charges suffered and died horribly in the wake of Hurricane Katrina in New Orleans. I am not so naive as to think our government is or could ever be anything close to perfect. It nauseates me, however, to see the self serving behavior of "former public servants" facilitating lucrative government contracts for special interest corporations (who have purchased "access" through lobbying channels) using the well oiled revolving doors of government and corporate America. It might not be illegal, at this juncture, but it is so plainly immoral as to produce an unholy stench. Thank you, Mr. Prest for sharing your insights with those of us who pull our heads from the sand at least occasionally.

dusty said...

Isn't the Carlyle Group where the Shrub used to hang his hat?

Of course there is a plethora of former military giants on all these companies boards..the better to lobby for contracts!

Another well written post..thanks :)

Can I link to it?