Security for Sale

Amid the political and cultural upheaval that followed the September 11 terror attacks, Americans were warned repeatedly that everything would be different because a vulnerable nation could no longer afford to remain complacent, careless, and profligate. Politicians of both parties vowed discipline, self-sacrifice, and diligence. Perhaps the most ostentatious symbol of this shared national commitment was the creation of the new Department of Homeland Security (DHS) in 2003.

Less than three years later, the brief but uninspiring history of DHS proves how little has actually changed in Washington, where the institutional cultivation of influence peddling, cronyism, and waste continues to thrive unimpeded. At the bureaucracy that is supposed to protect us, Republican lobbyists bustle through the revolving door, carrying millions in contracts for their corporate clients, with all the predictable failures and cost overruns; Congressional committee chairmen collect their campaign contributions from contractors and lobbying firms, just like their counterparts on the defense committees; and even the son-in-law of the vice president benefits from a patronage appointment that leaves him overseeing his former lobbying clients.

Some of the country's largest government contractors, already fat on Pentagon pork, have retained well-connected lobbyists to win their slice of the DHS budget. Lobbyists who double as Bush Rangers and Pioneers, raising hundreds of thousands of campaign dollars, now represent some of the biggest DHS contractors. These lobbyists and their clients -- through both individual donations and those of their political action committees -- have poured still more hundreds of thousands into the campaigns and PACs of powerful Republican members of Congress who control DHS appropriations and oversight.

In the age of terror and natural catastrophe, knowing the right people is still the right way to get rich.

The Department of Homeland Security Web site includes a section -- titled “Open for Business” -- that is designed to assist companies seeking to win part of the $10 billion in procurement contracts doled out annually to enhance our security. The array of goods and services needed to protect the homeland ranges from detection equipment for explosive, radioactive, biological, and chemical agents to private security guards, surveillance, computer and telecommunications equipment, as well as port, border, railroad, and aviation security, and the management of immigration detention centers. Yet while the Bush administration has promised that good government and good old American ingenuity will yield world-class innovations, the product has been considerably less than advertised. The newest bureaucracy is not only open for business, it is wide open for business as usual. This is nothing new or different, but the same old way that Washington has worked for many, many years. The difference is in the stakes: While the politicians, contractors, and lobbyists pursue their familiar agendas, what is the cost to our safety?

The corporate exploitation of the new department became inevitable even before it was founded, during the first dark days after 9-11, when Tom Ridge was appointed to direct the White House Office of Homeland Security. With the former Pennsylvania governor came three aides who had no apparent experience in the field of homeland security but a keen understanding of the business of politics. Mark Holman, who was appointed deputy assistant to the president in the Office of Homeland Security, had been Ridge's chief of staff for 18 years, both in Congress and later in the Pennsylvania statehouse. Ashley Davis, a former lobbyist who had worked on Ridge's gubernatorial campaigns, the Bush-Cheney campaign, the Florida recount, and the Republican National Convention in 2000, became Ridge's special assistant. Joining them was Carl Buchholtz, the former general counsel to Ridge's gubernatorial campaigns and a partner in the Philadelphia-based law and lobbying firm Blank Rome LLP, who took a year away from the firm to help the White House plan the DHS. Blank Rome's chairman, David Girard-diCarlo, a former Ridge fundraiser and Bush Pioneer in 2000, is among Ridge's closest friends.

By the time DHS opened its doors in 2003, Buchholtz had returned to Blank Rome, taking Holman and Davis with him. All three quickly turned to lobbying the department whose creation they had helped to oversee. When Blank Rome signed up 18 companies as new homeland security clients that year, and added homeland security to its lobbying duties for half a dozen existing clients, no ethics rules barred Buchholtz, Holman, and Davis from lobbying the new department -- because technically, none of them had worked there. Blank Rome had just merged with Dyer Ellis & Joseph, a firm that employed several former Capitol Hill aides with ties to influential members of Congress and expertise in maritime and transportation issues -- important knowledge because DHS had absorbed the Coast Guard and the Transportation Security Administration (TSA), which are now the top dispensers of procurement dollars in the DHS.

The Philadelphia-based law firm formally launched a separate lobbying arm in Washington, Blank Rome Government Relations, which included the three former White House staffers and the Dyer Ellis principals. Later that year, the firm also brought on Barbara Comstock, a former congressional staffer who had served as the chief spokesperson for then-Attorney General John Ashcroft -- after becoming notorious as the head of the opposition research team at the Republican National Committee (RNC) in 2000; The Washington Post dubbed her a “one-woman wrecking crew.” Since joining Blank Rome, Comstock also has led a public relations campaign on behalf of Tom DeLay and is spokeswoman for former Cheney aide I. Lewis “Scooter” Libby's legal defense fund.

While Blank Rome includes Democrats in its lobbying phalanx, Republicans dominate in terms of stature and fund-raising clout. Last year Girard-diCarlo moved up from Pioneer to Ranger status (meaning he had doubled the amount he raised for the Bush-Cheney campaign to $200,000), while both Holman and Buchholtz became Pioneers. Blank Rome employees were the seventh most generous contributors to the RNC in 2004, pouring in $345,000, which included contributions by Girard-diCarlo ($50,000), Buchholtz ($12,500), and partner David Norcross ($37,500), who was named to chair the arrangements committee at 2004's Republican National Convention in New York City.

Among the new lobbying clients acquired by Blank Rome were such giants as Boeing, already among the top 10 government contractors in annual revenue, and management consultant BearingPoint, which is among the top 50 contractors. Formerly known as KPMG Consulting, BearingPoint was no stranger to Ridge. When Ridge was governor of Pennsylvania, the state had used BearingPoint's software to track criminal offenders.

In 2004, after signing on with Blank Rome, the company won three major DHS deals: a $229 million contract for its “eMerge2” software, designed to integrate the financial management of the department's 22 component agencies; a $12 million contract to develop a Transportation Worker Identification Credential (TWIC) to improve security at seaports, airports, railroads, pipelines, and mass transit facilities with biometric credentialing; and an up to five-year, $30 million contract to study development of an integrated terrorist screening system for the Terrorist Screening Center, in partnership with a small business through the department's mentor-protégé program. (The mentor-protégé program benefits large companies that piggyback on the procurement advantages offered to small and minority businesses. In another familiar pattern, BearingPoint's partner on the Terrorist Threat Integration Center project is a small, minority-owned firm whose principals formerly worked at kpmg.)

While BearingPoint was landing those lucrative government contracts, the company was ladling out money to Republican causes. During the 2004 election cycle, BearingPoint's PAC donated almost $40,000 to federal candidates, of which more than 80 percent went to Republicans -- including $5,000 contributions to both Jerry Lewis, chair of the House Appropriations Committee, and Thad Cochran, chair of the Senate Appropriations Committee. In late 2003, the company's PAC paid $15,000 for membership in the RNC Majority Fund, described on the RNC's Web site as a “leadership group supporting President Bush, his bold agenda for America, and Republican members of the U.S. House and Senate.”

Within a year, the TWIC and eMerge2 contracts were drawing skeptical scrutiny. TWIC's costs had more than doubled to $24 million, provoking Republican Senator Susan Collins, chair of the Senate Homeland Security and Government Affairs Committee, to ask the Government Accountability Office (GAO) to investigate. Last summer, the eMerge2 program was put on hold, after DHS had spent $10 million on it. Trade magazines reported that by November 2004 the Coast Guard already had developed its own financial management system that potentially could be used department-wide, an effort that cost a tiny fraction of the $229 million budgeted for eMerge2.

As for Boeing -- a top government contractor and political contributor with a history of overcharging the Pentagon -- the aviation and defense behemoth won a $1.2 billion contract in 2002 from the TSA to install baggage-screening equipment in hundreds of airports. In 2004, DHS Inspector General Clark Kent Ervin found that Boeing had won that contract despite being the highest rather than the lowest bidder, and had been overpaid $49 million by the government.

Meanwhile, Blank Rome's Mark Holman had registered as Boeing's homeland security lobbyist. On the registration form he filed with the Senate clerk, Holman noted that his lobbying work would address “strategic coordination between TSA and DHS.”

In late 2003, after his former aides had taken Boeing as a client, Ridge appointed Rick Stephens, a Boeing senior vice president, to the Private Sector Senior Advisory Committee of the Homeland Security Advisory Council. With a membership of business executives, the Advisory Committee is “plotting the future of the agency five, 10, 15, 20 years down the line,” according to Scott Amey of the nonpartisan watchdog Project on Government Oversight; Amey believes that those serving on the committee will learn about the department's inner workings, obtaining a considerable advantage for their companies. So while his former aide's client was overbilling the DHS, Ridge was rewarding the company by giving one of its executives a plum advisory appointment.

In September 2004, Ervin urged the TSA to attempt to recoup the $49 million in overpayment to Boeing, but the agency rejected the inspector general's admonition. Instead, the TSA extended Boeing's contract through the end of the calendar year.

Ridge himself appears to have benefited from one of his Private Sector Advisory Committee appointments. He appointed an executive of Exelon, the nation's largest private owner of nuclear power plants, to the committee. (The company was already quite cozy by then with the homeland security politicos. While Mark Holman was working at the Office of Homeland Security, his wife, Sonia Holman, a lobbyist at the American Continental Group, had lobbied the office on behalf of Exelon, a job she continued after the department was formed.) After Ridge retired, Exelon reciprocated by appointing him to the company's board of directors.

Speaking on behalf of Blank Rome Government Relations, Topper Ray, a firm principal, said that the former Office of Homeland Security staffers at the firm “have adhered to all applicable government regulations on communications and representation that govern post-employment activity.” Ray dismissed suggestions that they may have received preferential treatment from Ridge or his staff, adding that all DHS contracts the firm's clients received were competitively bid, and that “everything is out in the open.” He added, “These are people of the highest integrity. They understand their responsibilities.”

Another eager client signed up by former Ridge staffers at Blank Rome was the Homeland Security Corporation (HSC), a company started in 2001 by a Tennessee businessman named Doctor R. Crants. The politically connected Crants had once headed the country's largest privatized prison firm, Corrections Corporation of America (CCA), which he established in 1983 with a former chair of the Tennessee Republican Party and modeled on the Frist family's Hospital Corporation of America, creating an industry based on incarceration-for-profit.

With his new company, Crants appears to be capitalizing on his 17-year tenure at CCA -- during which the company nearly fell into bankruptcy and became the target of lawsuits alleging gross mismanagement of the privatized prisons, and that violence, drug dealing, and mistreatment of inmates were commonplace. Through a $100 million contract with defense giant Lockheed Martin, HSC now trains thousands of security screeners at the nation's airports.

Today CCA, HSC, and CCA's closest competitor in the private prison industry, Wackenhut -- brandishing lobbyists, political connections, and lavish contributions -- have all won DHS contracts to train and supply security guards and screeners and to build, manage, and maintain detention facilities. Wackenhut and CCA both have long histories of questionable practices, ranging from general incompetence in managing government facilities to allegations of putting prisoners and the public at risk. That these firms have been hired by DHS to keep the nation safe, and are profiting handsomely from it, attests to political influence dating back two decades.

Crants, CCA, and Wackenhut were no strangers to Ridge when he assumed his homeland security responsibilities. Nor were they unfamiliar with big money gop politics or the ideological infrastructure created by “free-market” conservatives to promote industry-friendly legislation. Back when Ridge was governor of Pennsylvania, both CCA (under Crants' leadership) and Wackenhut supported the American Legislative Exchange Council (ALEC), an organization started in 1973 with the goal to push a right-wing, corporate-dominated agenda through state legislatures. During Ridge's tenure -- when Mark Holman was his chief of staff -- Pennsylvania passed comprehensive “tough on crime” legislation that had been drafted by ALEC's Criminal Justice Task Force, on which both CCA and Wackenhut served. The state, under Ridge, was “a pilot state, almost, for ALEC's three strikes, tough on crime, its whole platform,” said Ed Bender of the Institute for Money in State Politics. By paying a required fee to serve on ALEC's task force, CCA “bought a seat at the table,” said Bender.

Once Ridge became homeland security secretary in January 2003, he appointed (former) ALEC chairman, Republican Senator Jim Dunlap of Oklahoma, to the Homeland Security Advisory Council, a group of state officials designated to advise the department. Dunlap still serves on ALEC's board.

The same year, after they left the White House for Blank Rome, Davis and Holman signed up Crants' new company, HSC, as a lobbying client. For his part, Crants has remained a generous GOP benefactor; last year, for example, he gave $25,000 to the National Republican Senatorial Committee and $1,000 to Swift Boat Veterans for Truth. CCA's PAC continues to support Republican candidates, and its 2004 political donations included $30,000 to the National Republican Senatorial Committee and $30,000 to the National Republican Congressional Committee.

CCA also continues to rake in federal dollars from the Department of Homeland Security and other agencies. More than 20 years after CCA landed its first federal contract with the Immigration and Naturalization Service, federal contracts account for one-third of its revenue. CCA has several multi-year contracts for guard services with the DHS successor to the INS, Immigration and Customs Enforcement, but neither CCA nor ice would provide the dollar amount of the contracts. The government's contract database, which contained some of the contracts identified by CCA and others it did not identify, reflected a dollar value of more than $2 billion, if all options were exercised.

No doubt CCA's standing at DHS is enhanced by the fact that one of the firm's former lobbyists is not only Dick Cheney's son-in-law, but the department's general counsel. The political appointments awarded by President Bush to Philip J. Perry, who happens to be married to Cheney's daughter Elizabeth, have included jobs at the Department of Justice and the Office of Management and Budget. In 2003 Perry returned to his private law and lobbying practice with Latham & Watkins' government contracts group, only to be appointed in 2005 to the DHS post.

Perry's conduct “violates every principle the revolving door policy is supposed to [uphold],” says Public Citizen's Craig Holman (no relation to Mark Holman), who adds that Perry was “nurturing relationships on both sides” as he worked in government, returned to private practice, and revolved back into government again in “absolutely egregious abuse” of ethics standards. Not only did Perry lobby on behalf of CCA, he also was a lobbyist for Pentagon and DHS giant Lockheed Martin, which has the subcontract with Crants' HSC to train the airport security screeners. Perry's office did not return calls from the Prospect seeking his comments.

Wackenhut, part of which was acquired in 2002 by Danish company Group 4 Falck (now Group 4 Securicor) and part of which recently was renamed the Geo Group, has likewise prospered at DHS. The Geo Group, whose CEO George Zoley was a Bush Pioneer in 2004, has obtained numerous contracts with Immigration and Customs Enforcement to construct, maintain, and manage detention facilities over the next few decades. This year, Geo Group paid Blank Rome's Barbara Comstock $40,000 over a three-month period to lobby DHS to “maintain government contracts,” according to her lobbying disclosure statement. Geo has also Alberto Cardenas, the former chair of the Florida Republican Party and a Bush Pioneer, in its stable of lobbyists.

One of Cardenas' partners, Victor Cerda, left DHS last summer after serving in several posts, most recently as acting director of the Office of Detention and Removal Operations at the immigration service. Asked how he complied with federal rules that bar lobbyists from contacting their former agencies for one year, Cerda replied that he has received clearance from the ice ethics office for specific “scenarios” regarding his work for Geo. He said that he does not lobby on Geo's behalf regarding contracts over which he had decision-making authority at DHS, but that he instead provides advice “on DHS operational strategies.”

Wackenhut has a contract potentially valued at $500 million to provide guards to the Bureau of Customs and Border Protection. Its lobbying firm is Van Scoyoc Associates, whose vice president, Ray Cole, was a Bush Ranger last year. DHS continues to contract with Wackenhut, despite evidence that the company has failed to protect power plants and military bases. In 2003, the Department of Energy's inspector general found that Wackenhut, responsible for guarding half of the nation's nuclear power plants, had not provided adequate security at the Oak Ridge nuclear weapons plant in Tennessee. At the same time, under an unprecedented plan passed by Congress in 2002, the company became one of the first private contractors hired by the Pentagon to guard military bases.

Today Wackenhut, along with a prime contractor called Alutiiq Management, has contracts to guard 18 Army facilities around the country. Those deals have come under fire from the Service Employees International Union (SEIU), which published a report last September, Homeland Insecurity: How Wackenhut and an Alaska Native Corporation May Be Compromising Security at U.S. Army Bases, documenting numerous flagrant breaches of security including the hiring of convicted felons; understanding of facilities; inadequate training; poor weapons management, including weapons left unattended, rusty guns, and faulty bullets; and failure to properly use adequate equipment such as explosive detection devices, radios, body armor, and even bathrooms. Democratic Representative Lane Evans, a member of the House Armed Services Committee, has asked the gao to investigate Wackenhut's defense contracts.

Wackenhut entered into partnership with Alutiiq because the smaller firm -- an Alaska Native Corporation, or ANC -- is legally entitled to government contracts without having to bid on them. Alutiiq is now flush with cash thanks to government largesse, including contracts with DHS agencies such as the Coast Guard, to repair buildings and to manage operations and maintenance of the world's largest Coast Guard base on Kodiak Island in Alaska; the Federal Law Enforcement Training Center, to build prefabricated and portable buildings; and the Bureau of Citizenship and Immigration Services, to provide administrative, logistics, assessments, investigations, and security support.

Alutiiq's lobbyist happens to be C.J. Zane, one of the Dyer Ellis principals who joined Blank Rome after the merger in 2003. In 2002, Zane had lobbied, on behalf of Alutiiq, for the change in federal law that allowed privatization of security services for military bases on U.S. soil.

Before he became a lobbyist, Zane had been chief of staff to Alaska's sole representative in the House, Don Young, who is now the powerful chair of the House Transportation Committee and the ranking Republican on the House Homeland Security Committee. Zane's lobbying roster included numerous clients with maritime and transportation interests, and several of the 13 legally recognized ANCs. ANCs have extraordinary advantages, giving them a competitive edge far beyond that given to other minority and economically disadvantaged firms. They can be awarded federal contracts of any value and duration on a sole-source basis, meaning not open to competition. They can create joint ventures and partnerships with other companies and be eligible for the sole-source advantages, if the ANC, on paper at least, has a majority of equity and managerial control over the venture.

The competitive advantage gained by some of the country's richest homeland security and defense contractors by partnering with ANCs is no secret. Press accounts have detailed billions of dollars in contracts awarded on a sole-source basis to ANCs (some of which would have lacked the expertise to fulfill contract requirements without a bigger corporate partner) for security guards, information and border security technology, airport screening, construction, and telecommunications. Akima, another ANC represented by Blank Rome, was the beneficiary of one of the well-publicized no-bid contracts awarded by DHS after Hurricane Katrina to construct portable classrooms worth almost $40 million, a price tag that the GAO is reviewing as possibly inflated.

The ANC contracting edge provoked Republican Representative Tom Davis, who chairs the House Government Reform Committee, to wonder aloud to The Washington Post last spring whether those advantages might be a “scam” on taxpayers. His committee is investigating the ANCs, and he has also requested a GAO probe.

The central goal of the ANCs -- to provide opportunities to native Alaskans who lost land due to the building of the Alaska pipeline -- is certainly laudable. Questions persist, however, about whether the program is actually functioning as intended. Danielle Brian, executive director of the Project on Government Oversight, says the program is “exploiting” native Alaskans because only “tiny amounts” from the huge profits in government contracts trickle down to the intended beneficiaries of the program. The CEO of Alutiiq, Dusty Kaser, received a $1 million compensation package in 2004, according to the SEIU report, 10 times the amount the company donated in scholarships to tribe members. Zane and his colleagues are banking a bit more than that. According to its lobbying disclosure statements, Blank Rome earned about $300,000 in fees from its ANC clients alone in 2004.

Between 2002 and 2003, the year DHS opened its doors, Blank Rome's lobbying fees almost quadrupled, from $1.1 million to more than $4 million. More than one-quarter of those revenues were attributable to clients on whose behalf the firm contacted DHS. In 2004, the firm doubled its 2003 revenues from DHS clients to reach more than $2.5 million. The firm pulled in more than $1 million in fees from its DHS clients in the first half of 2005.

Blank Rome's meteoric rise in billable lobbying hours may well be extraordinary, but it is hardly the only politically influential outfit with high-rolling homeland security clients. Playing the same game is longtime Republican strategist and Bush Pioneer Charles Black, who has been cashing in on his GOP connections since his first lobbying partnership with the late Lee Atwater two decades ago. Through his lobbying firm, BKSH & Associates (a division of the public relations firm Burson-Marsteller), Black represents Fluor Corporation, an engineering and construction firm that is one of the top contractors for post-war reconstruction in Iraq. (He also used to represent Ahmed Chalabi and the Iraqi National Congress.) Last November, Fluor agreed to pay the government $12.5 million to settle a whistleblower suit alleging that the company had knowingly overbilled the Departments of Defense and Energy on contracts for tens of millions of dollars of illegal costs, including executive bonuses, land investments, construction and building improvements, luxury condos, fine art, a Mercedes driven by the company's president, and an antique Chippendale chair. However, Fluor had already been awarded one of several $100 million no-bid contracts by FEMA to construct temporary housing in the wake of Hurricane Katrina. Although the acting head of FEMA, David Paulison, promised those highly questionable deals would be re-bid, that has yet to happen.

Another BKSH client is Accenture, which, as an offshore company headquartered in Bermuda, avoids paying U.S. corporate income tax. Accenture is the prime contractor on the $10 billion US-VISIT program, which is supposed to track foreigners entering and exiting the country's borders, using digital photographs and fingerprints; the use of other biometric data in the program is under study. Before the contract was awarded, technology experts criticized the proposed technologies as unproven and costly, and congressional Democrats attempted to kill it with an amendment that would have prohibited the DHS from contracting with a company headquartered offshore. (Such a measure subsequently became law, but it does not apply retroactively.) Even after the contract was awarded, government watchdogs criticized the leeway Accenture was given in shaping the contract requirements, leading Taxpayers for Common Sense, a nonpartisan group, to liken it to a “blank check.” Black's lobbying disclosures show he specifically lobbied on Accenture's behalf on us-visit and DHS appropriations, as well as tax issues pertaining to offshore companies.

All of this legalized grifting was predictable -- and was, in fact, officially predicted. Clark Kent Ervin, who served until the end of 2004 as DHS inspector general, told the Prospect that in March 2003, he sent a memo to then-Secretary Ridge warning of the need to put procurement controls in place to avoid contracting waste and abuse. The memo never made it past the undersecretary for management because, Ervin said, she knew that the controls weren't in place and she didn't want Ridge to know they weren't. Ervin then sent a copy directly to Ridge, but never received a response. “Subsequent developments,” says Ervin, referring to reports of millions of dollars in contracting waste and abuse, “were predictable.”

The controls recommended by Ervin included hiring more procurement staff with deeper experience. The DHS procurement office, he said, had “so few people expert in contract procurement, the private sector was able to take the department for a ride.” Referring specifically to contracting abuses at TSA, Ervin added that there was a “loose attitude regarding money.”

Ervin's office did not investigate the role of lobbyists or political money in the procurement process. His opinion now is that the procurement process has improved, but he regards the “troubling” post-Katrina no-bid contracts let by FEMA as a “step backward.” While he praised Greg Rothwell, the department's chief procurement officer, he warns that structural problems in DHS have stymied real reform because each agency within the department has its own independent procurement chief. This setup is inefficient, according to Ervin, and can “lead to abuse.” Ridge refused to reform the procurement process, and thus far his successor as secretary, Michael Chertoff, has not made those changes either.

“Ridge is so nice he didn't want to alienate people,” explains Ervin, while his successor “is not afraid to knock heads” -- so the former inspector general is “surprised and disappointed” that the new secretary has yet to change practices that have proved vulnerable to abuse.

Indeed, Chertoff has shown little enthusiasm for transparency, even concerning problems that predated his arrival. When he appeared at a hearing of the House Committee on Government Reform last June, Democratic Representative Henry Waxman complained that his requests for basic information about the contracts awarded to Blank Rome's clients by DHS had been ignored for five months. Although Chertoff publicly promised that the department would release the documents requested by Waxman, the congressman's office said that as of December, DHS had still not fully responded, and had redacted portions of the Blank Rome documents provided to his investigators.

Secrecy allows abuses to flourish -- and despite the ongoing uproar over crooked lobbying and corrupt contracting, that remains business as usual in the Bush administration.

Sarah Posner is a freelance writer and a contributor to The Gadflyer blog.

Corrections/Clarifications: Originally, this article stated that Altiiq Management was a Wackenhut partner. In an effort to clarify the relationship between the two companies, the online version uses the term "prime contractor." In addition, the original version of this article stated that Alutiiq was "in bankruptcy," which is inaccurate, and quotes a Government Executive article on money received by its shareholders. Both of these references have been removed from the article.

To read Alutiiq's response, as well as Posner's defense, see here.

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