United Defense Industries, L.P.
by the Center for Public Integrity

Background

United Defense has manufactured armored amphibious and land vehicles since World War II. Today, the company designs and produces combat vehicles, such as the Bradley armored infantry vehicle, naval weapons delivery systems and amphibious assault vehicles, and other weapons systems. Nearly 80 percent of the company's business—$1.2 billion in sales in 2002—is generated by the U.S. government. United Defense owns Swedish weapons manufacturer Bofors Defense, Chicago-based engineering services company Barnes & Reinecke, and FNSS, a joint venture with a Turkish defense company that produced tanks for Balkan peacekeeping missions. In 2002, United Defense acquired United States Marine Repair, a ship-repair company that depends on U.S. government agencies for 90 percent of its business.

In 1997, United Defense was purchased by the Carlyle Group, a Washington, D.C., investment partnership formed in 1987 by David Rubenstein, a former aide to President Jimmy Carter; Daniel A. D'Aniello, former vice president of Finance for Marriott Inc.; and William Conway, former CFO for MCI Communications. The Group now manages more than $16 billion in investments through some 300 employees in 12 offices around the world. Investors include the government of Singapore, Kuwait Investment Authority and state pension funds of California and Florida.

Though the group's portfolio includes investments in industries like real estate and health care, much of its success resulted from the purchase of defense companies neglected by investors after the Cold War's end.

In 1994, United Defense signed a contract with the Defense Department potentially worth $1.1 billion to develop a new howitzer weapon system called the Crusader.

United Defense launched a major lobbying offensive in 1998 on behalf of the Crusader. Among the lobbyists employed by the company were former Indiana Senator Dan Coats (who sat on the Senate Armed Services Committee) and former Texas Representative Marvin Leath.

In 2001, the Pentagon modified the Crusader contract to upgrade the system. After the announcement, the Carlyle Group took United Defense public, picking up several million dollars in stock though it remained the company's primary shareholder. Five months later, however, Secretary of Defense Donald Rumsfeld announced that the contract would be canceled because of the anachronistic nature of the heavy weapon, and United Defense stock prices fell 27 percent.

Between January 2001 and July 2003, the company spent $6.7 million lobbying Congress on issues such as Defense Department appropriations bills, particularly "legislation regarding defense weapons, systems and technologies" and "provisions regarding military modernization and procurement," as well as procurement law reform.

The company's employees and its political action committees have targeted contributions toward members of Congress who sat on committees that decided military appropriations or who had defense industry plants in their districts, such as Oklahoma Republicans J.C. Watts and James Inhofe. The day following Rumsfeld's cancellation of the Crusader, Watts tried to preserve the program by inserting language into pending legislation.

Iraq contracts

In September 2003, the U.S. Army awarded United Defense a $4.5 million contract to rebuild two M88A2 HERCULES (Heavy Equipment Recovery Combat Utility Lift and Evacuation System) vehicles damaged during the war. The contract was a modification of United Defense's existing technical support contract, under which the company uses the system to evacuate heavy combat vehicles to its York, Pa., plant for repair. It was a HERCULES vehicle that toppled the statue of Saddam Hussein in Baghdad after the war's end in May 2003.

Government ties

The Carlyle Group's government ties, both domestic and international, are legion: its investors and advisers include former U.S. President George Bush, former British Prime Minister John Major and former Secretary of State James Baker. Many of United Defense's board members also have ties to Carlyle, others came from the military, and some have both in their backgrounds.

Frank Carlucci, who became a United Defense director in December 1997, is currently chairman emeritus of the Carlyle Group. Prior to joining Carlyle in 1989, Carlucci served as Defense Secretary under former President Ronald Reagan from November 1987 to January 1989. J.H. Binford Peay III became a director in December 1997. A retired general in the U.S. Army, Peay served as the Commander-in-Chief of the U.S. Central Command from 1994 to 1997 and is currently chairman and chief executive officer of Allied Defense Group, a holding company of defense and security businesses. John M. Shalikashvili, a two-term chairman of the Joint Chiefs of Staff in the Clinton administration, joined the board in 1998 after he retired from the military. Other Carlyle directors on the United Defense Board include Peter J. Clare, formerly of private investment group First City Capital, and Allan M. Holt, previously with private investors Avenir Group and MCI Communications.

Military expertise can be found in United Defense's management as well: Jay Hendrix, the vice president for business development and marketing is a retired U.S. Army general, and United States Marine Repair president Al Krekich is a former vice admiral in the U.S. Navy.

Laura Peterson

Center for Public Integrity