William Henry Trotter Bush
The uncle to President George W. Bush made
more than $2.7 million through the sale of a company with millions in Iraq war
contracts, including some that Pentagon investigators say were wrongly won.
The company is not the only one under scrutiny - William Bush’s actions are, too. The Securities and Exchange Commission opened an investigation in 2005 into whether the company illegally postponed – for six months – giving its shareholders some bad news about one of its government contracts for six months while executives and directors, Bush included, cashed out some of their stock options. In his own transaction, Bush made $450,000.
Bush, nicknamed Bucky, is the brother of former President George H.W. Bush. He joined the board of directors of Engineered Support Systems Inc. in 2000, and almost as soon as his nephew ordered the invasion of Iraq, ESSI’s revenues jumped 35 percent. In the ensuing years, the company received several no-bid contracts to perform war services; at least one of them is under investigation.
The Pentagon Inspector General reported that ESSI received a $158 million no-bid contract to refurbish cargo loaders for the Air Force because of intervention by a procurement official who later went to prison for corruption.
That official was Darleen Druyun, who served nine months in prison in 2004 for using her position as an Air Force procurement officer to improperly steer contracts to Boeing while her daughter worked there. Druyun was also pursuing a job with Boeing at the time.
In one of her last acts before she was arrested, Druyun pushed the Air Force to give ESSI a 33-year, $1.7 billion contract; she settled instead for giving the firm $158 million, the Inspector General reported. In directing the contract to ESSI, she shut out the Marine Corps, who, the Pentagon says, could have refurbished the cargo loaders for nearly $20 million less.
Another contract for field generators has led to investigations of ESSI’s directors, including Bush.
In November 2004, the military canceled a contract with ESSI for field generators, saying the generators were unreliable. ESSI sat on that news until June 2005, and when the story broke, its stock price dropped 11 percent. By then, Bush and other directors and executives at ESSI had cashed out some of their stock options. Bush sold stock options worth $450,000 in January 2005. The SEC’s Enforcement Unit launched an investigation in 2005.
In July 2007, the SEC also charged ESSI founder and CEO Michael Shanahan and his son Michael Shanahan Jr. with stock options fraud. The SEC says the Shanahans granted stock options for themselves and other directors that had been backdated to a time before the price had rocketed to new heights. The SEC said the Shanahans doled out $20 million “in unauthorized and undisclosed compensation,” nearly $9 million of it to Shanahan Sr.
Though Bush shared in that $20 million payout and served on ESSI’s audit committee while the fraud was committed, the SEC had not charged him as of August 2007.
In 2005, ESSI’s revenues topped $1 billion, and its success attracted the interest of another military contractor, DRS Technologies, a subsidiary of the Carlyle Group. (The Carlyle Group is an investment firm with $57 billion in assets and directors who have held some of the most powerful positions in the world. Former President George H.W. Bush is an investor and former director.) Carlyle’s DRS bought ESSI for $1.7 billion in January 2006. As an ESSI stockholder and director, Bush earned $1.9 million in cash and another $800,000 in stock in the sale.
The no-bid contracts that ESSI received after Bush joined the firm include:
- $48 million to refurbish military trailers;
- $77 million in 2005 to re-armor military vehicles and equipment;
- $18 million to provide communications support to Iraq’s Coalition Provisional Authority, the U.S.-funded agency that initially coordinated the post-war rebuilding;
- $19 million in 2003 for shelters to protect soldiers from chemical or biological weapons.
- $7 million in 2005 from the National Geospatial-Intelligence Agency, for unspecified “support services” to this agency that gathers and analyzes satellite imagery and mapping for military intelligence.
- Air Force Contract Questioned, The LA Times, April 6, 2006
- Bush’s Uncle Earned Millions in War Firm Sale, The LA Times, March 23, 2006
- Company’s Work in Iraq Profited Bush’s Uncle, The LA Times, February 25, 2005:
- DRS Technologies Reports Record Fourth Quarter and Fiscal Year Results, Company filing with Securities and Exchange Commission, May 12, 2006: http://www.sec.gov/Archives/edgar/data/28630/000115752306005081/a5147195ex99_1.txt li>
- Ex-Engineered Support CFO Charged With Backdating, Reuters, March 26, 2007: http://www.reuters.com/article/sphereNews/idUSN2638494220070326?sp=true&view=sph ere
- ESSI’s revenues jump 35 percent in 1st year of Iraq war: http://www.sec.gov/Archives/edgar/data/28630/000104746905028552/a2166094zs-4a.htm#pa ge_fk8002_1_6
- Bush sells exercises stock options 01/31/06: http://www.sec.gov/Archives/edgar/data/772891/000106880006000107/xslF345/bush_ex.xml
- ESSI Profile, Hoovers.com: http://www.hoovers.com/free/co/secdoc.xhtml?ID=13312&ipage=4121344-119139-124527
- Waxman requests documents from Defense Secretary Donald Rumsfeld regarding Pentagon Inspector’s investigation of ESSI contracts: http://www.democrats.reform.house.gov/Documents/20060405104233-80957.pdf
- Bush Relatives Cashing In With Military Contracts, Washington Spectator, June 9, 2006: http://www.envirosagainstwar.org/know/read.php?itemid=4233
- Contracts: http://www.defenseindustrydaily.com/2005/08/7m-for-geospatial-intelligence-support/i ndex.php