[casi] Consulting and Policy Overlap

[Edean <edean@DELETETHIShomemadela.com>]

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http://www.latimes.com/news/nationworld/nation/la-na-
perle7may07,1,2323999.story?coll=la%2Dhome%2Dleftrail
May 7, 2003

Consulting and Policy Overlap
  Advisor Perle has given seminars on ways to profit from possible
conflicts discussed by defense board he sits on.
 
By Ken Silverstein and Chuck Neubauer, Times Staff Writers
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."

'Certainly Questionable'

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.

'A Friend'

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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