Global Policy Forum

Consulting and Policy Overlap

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By Ken Silverstein and Chuck Neubauer

Los Angeles Times
May 7, 2003
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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FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C ß 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.