Report: Pentagon Adviser in Iraq Flap
Wednesday 07 May 2003
L.A. Times: Perle gave advice on making profit from conflicts.
LOS ANGELES Pentagon adviser Richard Perle briefed an investment seminar on ways to profit from conflicts in Iraq and North Korea just weeks after he received a top-secret government briefing on the crises in the two countries, the Los Angeles Times reported on Wednesday.
Perle, who until March was chairman of the Defense Policy Board, a group of outside advisers to the Pentagon, also serves on the board of several defense contractors. The revelation raises concerns about conflicts of interest.
The Times reported that Perle attended a Defense Intelligence Agency briefing in February and three weeks later participated in a Goldman Sachs conference call in which he advised investors in a talk titled Implications of an Imminent War: Iraq Now. North Korea Next?
Perle did not return phone calls or e-mails from the newspaper seeking comment.
VOCAL ADVOCATE OF WAR
One of Defense Secretary Donald Rumsfeld s closest advisers, Perle was a vocal advocate of going to war against Iraq and publicly questioned the reliability of some longtime U.S. allies, including France and Saudi Arabia.
He resigned as chairman of the Defense Policy Board on March 27 after it was reported he had worked as a consultant to bankrupt telecommunications company Global Crossing Ltd., which was trying to get Pentagon approval to be sold to Asian investors.
In offering his resignation, Perle, 61, denied any wrongdoing and said he didn t want questions about his outside interests to be a distraction to Rumsfeld. He remained a member of the board.
The guiding principle here is that you do not give advice in the Defense Policy Board on any particular matter in which you have an interest, he said at the time. And I don t do that. I haven t done that.
Rep. John Conyers Jr., D-Mich., the ranking Democrat on the House Judiciary Committee, has asked the Pentagon s inspector general to investigate Perle s business activities and any conflicts they might pose for his membership.
HALLIBURTON S EXPANDED ROLE?
The report in the Times comes amid other questions regarding the war in Iraq and possible conflicts of interest.
Documents uncovered Tuesday showed that the emergency contract that the Bush administration gave Halliburton Co. to extinguish Iraqi oil fires also gave the firm a more lucrative role in getting the country s oil system up and running.
A congressional critic of the Houston company, formerly run by Vice President Dick Cheney, said the administration was hiding the expanded role.
A spokeswoman for Halliburton said the company s initial announcement of the contract on March 24 disclosed the larger role for its KBR subsidiary.
The U.S. Army Corps of Engineers, in a letter to Rep. Henry Waxman last Friday, disclosed that the no-bid contract included not only extinguishing fires but operation of facilities and distribution of products.
Waxman, D-Calif., senior Democrat on the House Government Reform Committee, wrote Lt. Gen. Robert Flowers of the Corps of Engineers on Tuesday, saying the contract is considerably broader in scope than previously known.
CHENEY DENIES LINK
The lawmaker also said the corps proposal to replace the Halliburton contract with another long-term deal was at odds with administration statements that Iraq s oil belongs to the Iraqi people.
KBR was given the right to extinguish the oil fires under an existing, contingency contract. Cheney s office has said repeatedly the vice president had no role in the contract award.
Carol Sanders, a spokeswoman for the Corps of Engineers, said officials were reviewing the letter but had no immediate response.
Halliburton spokeswoman Wendy Hall pointed to the company s announcement of the contract in March, which she said revealed the extent of the work.
FROM THE PRESS RELEASE
The release said: KBR s initial task involves hazard and operational assessment, extinguishing oil well fires, capping oil well blowouts, as well as responding to any oil spills. Following this task, KBR will perform emergency repair, as directed, to provide for the continuity of operations of the Iraqi oil infrastructure.
Hall said KBR is assisting Iraq s oil ministry to get the oil system operating.
Waxman countered, Only now, over five weeks after the contract was first disclosed, are members of Congress and the public learning that Halliburton may be asked to pump and distribute Iraqi oil under the contract.
Waxman also has repeated the corps statement that the contract could be worth up to $7 billion for up to two years, but the corps said that figure was a cap based on a worst-case scenario of oil well fires. In fact, few wells were burning during the war with Iraq, and the corps said that by early April, the company had been paid $50.3 million.
Consulting and Policy Overlap
By Ken Silverstein and Chuck Neubauer
Los Angeles Times
Wednesday 07 May 2003
Advisor Perle has given seminars on ways to profit from possible conflicts discussed by defense board he sits on.
WASHINGTON -- Last February, the Defense Policy Board, a group of outside advisors to the Pentagon, received a classified presentation from the super-secret Defense Intelligence Agency on the crises in North Korea and Iraq.
Three weeks later, the then-chairman of the board, Richard N. Perle, offered a briefing of his own at an investment seminar on ways to profit from possible conflicts with both countries.
Perle and his fellow advisors also heard a classified address about high-tech military communications systems at the same closed-door session in February. He runs a venture capital firm that has been exploring investments in that very area.
The disclosures in recently released board agendas and investment documents are the latest illustrations of how Perle's private consulting and investment interests overlap with his role on the board, which advises the secretary of Defense.
Perle resigned as board chairman on March 27 after published reports that he had been employed as a consultant by bankrupt telecommunications firm Global Crossing Ltd., which was trying to get Pentagon clearance to be sold to Asian investors. The reports also had him soliciting investment money from a Saudi who was seeking to influence U.S. policy on Iraq.
In a letter to Secretary of Defense Donald H. Rumsfeld, Perle said he was relinquishing the chairmanship because at a time of war, "I am dismayed that your valuable time ... might be burdened by the controversy surrounding my chairmanship." He remained on the board as a member, and denied any wrongdoing.
Perle did not return phone calls or e-mails seeking comment. He is considered to be one of Washington's most influential defense thinkers and was a leading supporter of the war in Iraq. He is close to Rumsfeld and his top deputy, Paul D. Wolfowitz, as well as to Undersecretary of Defense Douglas J. Feith, who oversees the policy board and who formerly worked with Perle as a consultant to the government of Turkey.
Perle has a broad range of business interests. He serves on the board of several defense contractors and is a lead player in Trireme Partners, a venture capital fund seeking investments in the defense and homeland security industries.
In July 2001, Perle became chairman of the 30-member Defense Policy Board, which meets regularly with Rumsfeld. The board's meetings are classified and members are allowed access to top-secret intelligence reports.
On Feb. 27, 2003, two speakers Henry D. Sokolski of the Nonproliferation Policy Education Center and Michael Pillsbury, a Pentagon advisor under Feith gave presentations to the Defense Policy Board on the risks and prospects of U.S. conflict with North Korea. The same day, the Defense Intelligence Agency, which works for the Pentagon, also briefed the board on North Korea and Iraq among other subjects, according to several people in attendance.
Three weeks later, Perle participated in a Goldman Sachs conference call in which he advised investors on opportunities tied to the war in Iraq. Perle's talk was called "Implications of an Imminent War: Iraq Now. North Korea Next?"
The New York Times first reported the conference call. But the classified briefings had not been disclosed previously.
Fred C. Ikle, who worked at the Pentagon under President Reagan and who joined the board in August 2001, said he was not troubled by Perle's talk to Goldman Sachs so soon after the board briefing. "Anyone who has been reading the newspapers for the past year knows about the crisis in North Korea," he said. "There was nothing discussed at the board meeting that was news."
But another person who attended the Feb. 27 meeting called Perle's subsequent engagement with Goldman Sachs inappropriate. "That bothered me because the title of the talk made it sound like he had the inside track on what we were going to do," said this person, who asked to speak off the record.
Retired Rear Adm. Thomas Brooks, who served on the policy board during the Clinton administration, said Perle's actions were "certainly questionable."
"It sounds like he's squeezing every nickel out of the Defense Policy Board," he said.
At the same Feb. 27 policy board meeting, Assistant Defense Secretary John P. Stenbit gave a classified presentation on "network centric efforts," which concerns emerging high-tech military communications systems. It is a fundamental component of the so-called revolution in military affairs, or RMA, which envisions battlefields dominated by precision-guided weapons wedded to high-tech communications and surveillance systems.
Berel Rodal, a former Canadian government official and defense consultant who now serves as a Trireme advisor, described the RMA as one of the areas of interest to the investment fund. Fund planning documents said the fund would be looking for communications sector investments related to the RMA, which the documents describe as "an area where the Management Group has experience and insight."
Helmut Sonnenfeldt, a former State Department counselor and current member of the policy board who attended Stenbit's briefing, said he did not think the discussion gave Perle any competitive advantage. "I'm not a technical expert but my guess is that a lot of what he said has long since showed up in congressional hearings," he said.
But Gordon Adams, a policy board member until 2001 and the director of security policy studies at George Washington University's Elliott School of International Affairs, said the similarity of the subject to the investment targets of the fund "doesn't look good."
"You're supposed to bend over backwards to avoid anything that has the appearance of a conflict of interest, even if it's strictly legal, because you can compromise the integrity of the panel's work," he said.
Sonnenfeldt said he has known Perle for many years, and never known him to act unethically.
"To make a hard and fast connection between Perle hearing something at the briefing and using it to further his commercial interests is a jump I wouldn't want to make," he said.
Defense Policy Board members are not paid but are subject to government ethics prohibitions that bar the use of public office for private gain. They are required to file a disclosure form with the Pentagon listing their business interests. The forms are not made public.
At the time Rumsfeld appointed him chairman of the board, Perle was just forming his new investment fund.
Planning documents from early July 2001 show that he and his partners hoped to raise $500 million, which they aimed to "invest in emerging growth companies," including defense and aerospace firms.
Perle would be "fully engaged in the investment activities of the Partnership," said the prospectus. Gerald Hillman, Perle's friend and business partner, would be the fund's "primary deal-maker." The following month, Hillman was named to the policy board.
Membership on the board, says its charter, "will consist primarily of private sector individuals with distinguished backgrounds in national security affairs."
Perle, who worked at the Pentagon during the Reagan years, is a resident fellow at the American Enterprise Institute think tank and directed its Commission on Future Defenses. He has also advised members of Congress and is frequently called to testify at defense hearings on Capitol Hill.
The biography of Hillman included in the draft prospectus lists no national security or defense qualifications. It says Hillman has "a strong background in industrial policy, corporate strategy and finance."
During a brief phone conversation, Hillman said he has known Rumsfeld for 35 years. He invited further questions by e-mail, but did not respond.
Several military experts said they had never heard of Hillman.
"He doesn't seem to have any apparent credentials for the board other than being a friend of Richard's," Brooks said. "To not see a causal relationship [between Perle being named as chairman and Hillman being named to the board] strains credulity."
In November 2001, the investment fund was incorporated in Delaware under the name of Trireme Partners.
Trireme declines to reveal its investors. Correspondence obtained by the Los Angeles Times shows that in late March, Hollinger International Inc. a company owned by media magnate Conrad Black and where Perle is a director invested $2.5 million in the fund earlier this year.
The New Yorker magazine first reported on Perle's involvement with Trireme while he was serving as chairman of the Defense Policy Board. Its story, written by Seymour Hersh, revealed that Perle had met with Adnan Khashoggi, a controversial Saudi arms dealer, and Harb Saleh Zuhair, a Saudi businessman, and sought investments in the fund from them.
A letter sent to Khashoggi by a Trireme representative highlighted Perle's position on the Defense Policy Board in selling the fund and predicted that fear of terrorism would improve the prospects of the defense and homeland security firms the fund was looking to invest in.
According to the New Yorker, Zuhair said he wanted to use the meeting to present a plan to Perle for an alternative to a U.S. invasion of Iraq. Khashoggi and Zuhair ultimately chose not to invest in Trireme. But the fund had raised $45 million from other sources, including $20 million from Boeing, a major defense contractor. A Boeing spokesman who asked to remain unidentified confirmed the investment, saying that Hillman negotiated the details.
Trireme also keeps confidential the firms it has invested in. Rodal said the fund was looking to invest in growth companies with an emphasis on technology. "In addition, we want to find commercial winners that offer value in homeland defense and security," he said in an interview.
Perle is not the only member of the policy board with business interests in the defense sector. A report by the Center for Public Integrity identified at least eight other members who have ties to major defense contractors. For example, retired Navy Adm. David Jeremiah is a director or advisor for at least five companies that received more than $10 billion in Pentagon contracts in 2002. Chris Williams, a former national security advisor to Sen. Trent Lott (R-Miss.) and Rumsfeld's former acting undersecretary of Defense for policy, is a lobbyist for a number of defense firms, including Boeing.
"People serve on the board pro bono and they have to make a living," Ikle said. "We file a disclosure form that is reviewed [by government ethics advisors], and if there's a problem it has to be taken care of."
John Conyers Jr. of Michigan, the ranking Democrat on the House Judiciary Committee, has asked the Pentagon's inspector general, Joseph Schmitz, to investigate Perle's business activities and any conflicts they might pose for his membership on the policy board.
Conyers also requested that Rumsfeld release Perle's ethics disclosure form and policy board meeting minutes, the latter which he has promised to review only with staffers who have top secret security clearances. Rumsfeld refused to turn over Perle's ethics statement, but he has told Conyers' office that the minutes will be released.
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