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www.sfgate.com Return to regular view Army chief has many pals - David Lazarus Friday, November 19, 2004
It's nice that a local boy, Los Gatos resident Francis Harvey, received U.S. Senate approval this week to serve as Army secretary.
But his appointment -- the first of President Bush's second term to be cleared for takeoff -- raises troubling questions about private-sector influence over the military.
It also highlights the extraordinary clout of a single corporate entity, the politically powerful Carlyle Group, which now enjoys a close relationship with the overseer of nearly $100 billion in Army funds.
Harvey, 61, is former chief operating officer for a division of Westinghouse Electric, a leading defense contractor. He also serves on the boards of two Carlyle-affiliated companies, Duratek and Kuhlman Electric.
Carlyle appointed Harvey to both positions.
Duratek, which reported sales of $286 million last year, specializes in the disposal of radioactive materials. It has contracts with both the U.S. Department of Defense and the Department of Energy, which itself is one of the nation's top defense contractors.
Carlyle acquired Duratek in 1995. It has since steadily divested itself of the company's shares and says it sold off the last batch this week. However, Carlyle Managing Director Daniel D'Aniello still serves as Duratek's chairman.
Harvey also serves on the board of Carlyle-owned Kuhlman Electric, a maker of transformers. It has no apparent defense contracts.
As for Westinghouse, Harvey worked for the defense giant from 1969 to 1997. Westinghouse Electric's defense division was acquired by Northrop Grumman in 1996.
The Pentagon said in a statement that Harvey has agreed to "divest himself of certain assets and holdings within 90 days of his confirmation." It didn't specify which assets and holdings.
Harvey didn't return a call to his Los Gatos home for comment.
"It's outrageous," said Theodore Postol, a Massachusetts Institute of Technology professor of science and national security policy. "What you want is to choose people who are not only independent but who have the appearance of independence."
The Carlyle Group counts among its leaders and advisers former Defense Secretary Frank Carlucci, former Secretary of State James Baker and, until last year, former President George H.W. Bush.
In a report released Thursday, the Center for Public Integrity, a nonpartisan government watchdog group, said Carlyle was the ninth-largest U.S. defense contractor between 1998 and 2003.
The group said a dozen companies in which Carlyle owned a controlling interest earned more than $9.3 billion in military contracts during this period.
Postol likened Harvey's appointment at the Pentagon to the Bush administration awarding millions of dollars in no-bid contracts to Halliburton, the Texas company formerly run by Vice President Dick Cheney.
"It's been a problem throughout this administration," he said. "All the checks and balances have been eliminated."
I first wrote about Harvey in July, when his name surfaced as the front- runner for the Pentagon post. He was formally nominated by the White House in September and received Senate approval this week in an 85-12 vote.
The Army secretary, who reports to the secretary of Defense, oversees most noncombat operations, such as mobilizing and supplying troops. The secretary manages a budget of $98.5 billion.
Sen. Carl Levin of Michigan, the senior Democrat on the Armed Services Committee, expressed concern during the confirmation hearing that Harvey has an extensive defense-industry background but little direct experience with the Army.
"There are numerous challenges that the Army faces, and it would be preferable that the secretary of the Army be one more knowledgeable of the service that he will lead," Levin said.
Republican senators countered that Harvey's success in the business world proves him to be a capable manager.
Carlyle approached Harvey about serving on the Duratek board in 1998. He joined the company in 1999 and has been re-elected by shareholders every year since then.
Chris Ullman, a Carlyle spokesman, said there are clear rules and procedures that govern how political appointees like Harvey interact with erstwhile business associates.
"There are safeguards in place to ensure the integrity of the procurement process," he said.
Col. Gary Keck, a Pentagon spokesman, said Harvey will be bound by the Defense Department's ethics regulations, which he said prohibit conflicts of interest.
"It is expected that Mr. Harvey will honor his position and not use it to help people he knows," Keck said.
Officially, the Pentagon said Harvey "will not participate personally and substantially as a government official in any particular matter that would have a direct and predictable effect on the financial interests of the entities in which he held such positions or assets."
The Pentagon statement didn't address the possibility of favoritism being shown to companies with which Harvey enjoys personal ties.
One such company is United Defense Industries, a leading maker of combat vehicles (including the Bradley fighting vehicle), artillery and missile launchers.
United Defense, formerly owned by Carlyle, is chaired by Carlyle Managing Director William Conway. He's joined on the board by Carlucci, Carlyle's chairman emeritus, and Peter Clare, another Carlyle managing director.
In the three months ended Sept. 30, United Defense earned about $300 million from Army contracts, said Doug Coffey, a spokesman for the company.
He said the Army accounts for about half of the company's annual revenue. United Defense posted record sales of $2 billion last year.
Coffey said he doesn't think Harvey's Carlyle connections represent a conflict with United Defense's Carlyle-laden board.
"People in this town know each other," he said. "I don't see how this would give us better access than anyone else."
Well, there it is. Maybe United Defense's chairman will be able to get the new Army secretary on the phone anytime he pleases, and maybe he won't.
But do we really want this to be an issue, especially as the nation fights two overseas wars and as defense spending steadily grows?
The answer should be obvious.
David Lazarus' column appears Wednesdays, Fridays and Sundays. He also can be seen regularly on KTVU's "Mornings on 2." Send tips or feedback to [EMAIL PROTECTED]
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