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Money Machine

For Some Santa Fe Companies, War is Good for Something.

September 8, 2010, 1:00 am

This week marks the ninth anniversary of 9.11.

In that time, the focus of America’s military efforts has moved from Afghanistan to Iraq—a war whose “end” President Barack Obama announced last week—and now back to Afghanistan.

The name for the conflicts has changed, too, from “global war on terror” to “overseas contingency operations.”

Political power has shifted from Republicans to Democrats.

But in the years since 9.11, there has been one constant in the ensuing conflicts: money.

War can be good for business—not only for those who build fighter jets or sell bullets, but also for the sprawling network of civilian companies whose chief customer is the US military and for the security agencies. This is especially true in a state with as many federal outposts as New Mexico.

This state is home to some crown jewels of the military-industrial complex, including the national laboratories in Los Alamos and Albuquerque. But even the placid city of Santa Fe—more famous for oil paintings than arms manufacturing—has its fair share of wartime entrepreneurs.

To identify the local companies that have profited during this time of war and terror, SFR trolled federal spending records for clues. The results? More than 50 local companies have done business with the departments of Defense or Homeland Security in just the past two fiscal years, winning a combined $441 million in contracts.

Here, we look at the 10 biggest. For the complete list of companies, visit SFReporter.com and warisbusiness.com, a new investigative website by the author.

Who cares how these companies make their money? Whether or not one supports the reasons behind today’s conflicts, it’s clear that profits for military contracts are consuming funds that could be spent elsewhere.

Obama’s budget plans for this fiscal year call for a 7.4 percent increase to spending for defense, homeland security and the wars in Iraq and Afghanistan, for a combined total of $752 billion. At the same time, Obama wants to cut every department that isn’t related to national security by a collective 1.5 percent, or $6 billion.

As the wider economy suffers, the war business continues to grow.

1. SOC-SMG

$271,856,000 in awards since 2003

Business: Private security

Owner: Michael Anthony Janke

Santa Fe tie: The owner of this armed mercenary company had an office and owned a house in Santa Fe through 2004.

Before he hit it big in Iraq, Michael A Janke was hawking his experiences as an elite military commando to conference rooms full of corporate nobodies; a 2003 Plastics News magazine write-up of Janke’s presentation to 1,000 home remodelers at a convention in Baltimore quotes the “former U.S. Navy SEAL commando who now operates Special Operations Consulting in Santa Fe” throwing around  buzzwords like “know zone” and “5 percent predators.”

A year later, The New York Times was quoting Janke as a source of first-hand accounts of the fighting in Iraq. His corporate-warrior persona shifted to something like an action hero, the leader of a mercenary force in America’s not-yet-unpopular war in Iraq.

An archived page from an old SOC-SMG  website, dating to 2004, contains answers to some “frequently asked questions”:

“What is SOC-SMG doing in Iraq?

“We are providing security support to US Defense Contractors to recover and dispose of Captured Enemy Ammunition… As you have all probably seen on any of the major news programs the Iraqi Army under Sad[d]am Hussein has amassed a huge arsenal… This is a monumental and extremely important task that requires professional and effective security…

“What are SOC-SMG Rules of Engagement?

“We fall under the DOD Rules of Engagement. Basically, if threatened, respond with the necessary force to resolve the threat…"

“What type of weapons does SOC-SMG have available?

“Currently each security person is outfitted with an M-4 [carbine rifle], ACOG scope, surefire [tactical flashlight], and 9mm pistol. We use Squad Automatic Weapons”—mounted machine guns.

In short, Janke’s men were heavily armed and engaged in the same kinds of combat as regular uniformed soldiers. Obama’s recent speech declaring “the end” of the war in Iraq, and the removal of “combat forces,” masks a simultaneous increase in the number of private security companies like Janke’s.

Signs of trouble arose quickly—and seem all the more obvious in retrospect. In May 2004, Janke’s company, SOC-SMG, reportedly arrested an American citizen for suspected “crimes against the coalition” near Najaf; according to the Times, military officials expected the man Janke’s guards arrested to be cleared of wrongdoing. SFR could find no record that the man Janke’s men arrested—himself a subcontractor to Parsons, a construction company working for the US Army Corps of Engineers—was ever charged with a crime."

By 2009, Janke’s company was high on the list of private security contractors whose lucrative work in Iraq warranted a special audit, according to a May 8, 2009 report by the Pentagon’s Office of the Special Inspector General for Iraq Reconstruction.

Unlike the other companies in SFR’s list, SOC-SMG’s contracts were awarded under the somewhat opaque procedures of wartime contracting in Iraq, and so SFR was unable to determine how much money the company made from the US military in the last two fiscal years. But last year, the Special Inspector General’s Office estimated SOC-SMG had won more than $272 million in Defense Department contracts since 2003.

Records indicate Janke has abandoned the City Different. His two Santa Fe phone numbers, listed in a directory of contractors published by the US Embassy in Iraq, were disconnected when SFR called last week. Janke and his wife sold their $586,000 home near Las Campanas to another couple in 2004, Santa Fe County property records show. Janke did not return SFR’s email.

The New Mexico affiliate of his company, SOC LLC, is now registered to a Philadelphia security firm, Day & Zimmermann International. A report to the US Congress by the Defense Department Office of the Under Secretary for Acquisition, Technology and Logistics shows the military approved the acquisition of SOC-SMG by Day & Zimmermann in 2007. According to its website, SOC-SMG maintains an office and training center in Nevada.
Although this mercenary firm’s founder may have left town, the size of his business and the violent nature of its work warrant Janke’s place at the top of SFR’s list.

2. Wildflower International Ltd.

$101,754,709 in ’09-’10

Business: Computer hardware resale

Owner: Kimberly deCastro

Santa Fe tie: Headquarters on St. Francis Drive; owner is a native Santa Fean.

Santa Fe native Kim deCastro founded her computer resale company two decades ago in her daughter’s bedroom, after ditching a corporate job on the East Coast. Today, she says her company is New Mexico’s largest woman-owned business, with 43 employees in four cities and $239 million in annual revenue, most of which comes from supplying Dell computers to federal agencies.

“Dell sells boxes; we sell solutions,” deCastro tells SFR, by way of explaining Wildflower’s middleman role. “You can’t go to Michael Dell when something needs to happen [quickly].”

A printout on the wall of her clean, well-appointed office—discreetly housed in a nondescript office park—reads “Tranquility / Elegance / Eloquence.” DeCastro is a self-described American patriot with a soft-spoken, almost Southern politeness that probably serves her well in Washington, DC, where she spends much of her time.

“We’ve come through some really tough years,” deCastro says. “Tough in a good way. Last year—in one year—we grew by almost $100 million. It’s tough to be in a small organization that is going through some kind of change.”

Wildflower’s only customer is the federal government. And deCastro is fortunate that her company serves the security agencies—one of the few arms of government that is growing in this recession, as opposed to facing cutbacks.

Through most of its history, Wildflower’s top client was the Department of Energy, home of the National Nuclear Security Administration, which oversees the two national laboratories in New Mexico. Today, Wildflower’s biggest customer is the massive Department of Homeland Security and, in particular, the Bureau of Citizenship and Immigration Services.

(The New Mexico Department of Homeland Security is a separate agency reporting to Gov. Bill Richardson, although it receives funding from the federal DHS. Wildflower, like some other government contractors mentioned here, also has contracts with the state; this story focuses on the federal contracts alone.)

DHS, created by President George W Bush and Congress in 2002, was supposed to increase efficiency by combining the nearly two dozen federal agencies responsible for border security and emergency response. Opinions vary on whether it worked out that way.

“DHS is young and still struggling with a number of issues,” deCastro says. “Who’s to say if it was a good idea or a bad idea [to create the department]. I don’t think it matters. Looking back is something they can ill afford.”

DeCastro says the threat of a “cyberwar” attack on the US, much trumpeted lately by the Obama administration, is not overblown.

A recently released Pentagon report revealed that the military had unwittingly purchased an unknown number of counterfeit computers—a potential security risk, assuming hostile foreign governments or terrorist groups could access the production lines.

Wildflower did not supply any of the counterfeit hardware, according to deCastro. However, she says, price competition has led some suppliers to look in shady “gray markets” for their equipment. “That’s a huge problem for the federal government,” she says.

Between DHS and the Defense Department, some of Wildflower’s clients are involved in classified programs, which deCastro—who says she holds high-level security clearances—declines to describe in detail.

Indeed, the 1,008 Wildflower contract summaries reviewed by SFR show references to intelligence-gathering offices and secure information facilities, along with a few references to mysterious Immigrations and Customs Enforcement code names, such as “Project Black Rain.”

Another thing Wildflower’s contracts reveal: the creaky nature of many government tech systems. The frustrations that come with sluggish hardware are familiar to pretty much any office worker anywhere in the world. When it’s the government’s hardware, however, the consequences can be more dramatic.

“ICE is unable to perform critical security monitoring…because imminent network upgrade will render the current systems obsolete,” one purchase order reads.

Another, from the Transportation Security Administration, says: “All of TSA’s computers need an increase in computer memory to increase the performance of the systems.” (Could that explain all the glitches in the no-fly list?)
The near-exponential pace of technological advancement, and the growing needs of the national security complex, suggest Wildflower has more years of growth ahead. Unless, of course, something unforeseen happens.

“We could break out in world peace,”  deCastro says.

George Rivera
Credits: George Rivera

3. Pojoaque Frontier JV, Pojoaque Pueblo Service Corp.

$28,772,535 in ’09-’10

Business: Construction and building maintenance

Owners: Pojoaque Pueblo Gov. George Rivera, James Rivera and Joel McHorse

Santa Fe tie: Offices in the county

Two tribally owned enterprises have been winners in the nationwide competition for Defense Department spending.
Pueblo leaders formed PPSC in 2002. In the past two fiscal years, the company has won dozens of building maintenance, heating, cooling and ventilation contracts, mainly at Edwards and Vandenberg Air Force bases in California.

In 2008, the pueblo established a joint venture with a non-Native company in Georgia.

The joint venture has offices in Santa Fe, but its listed phone number is in Los Angeles. The number belongs to Robert A Harding, who has registered several more joint ventures for the pueblo. (He is not the same Robert A Harding as the retired Army major general nominated by President Obama to head the Transportation Security Administration; that Harding withdrew himself from the running this year after the press picked up on how his own military contracting business had overbilled the government.)

Reached by telephone in Los Angeles, Harding refused to answer basic questions about his business.

“I don’t know if we necessarily want to be involved in [an article],” Harding told SFR. “We’re just not interested in a high profile. No offense.”

Harding also declined to explain who “we” was.

Gov. Romero and other pueblo officials who head the tribally owned defense contractors did not return SFR’s calls and emails.

Harding also owns a Los Angeles company called Federal Contracting Services, and seems to specialize in forming what are known as 8(a) corporations. Such companies are named for a federal Small Business Administration program that allows firms owned by blacks, Hispanics, Asian Americans and Native Americans to win government contracts without competitive bidding. Federal rules allow 8(a) corporations to enter joint ventures when the “disadvantaged” company “lacks the capacity” to complete the contract on its own, and will receive “substantial benefit” from the award.

The 8(a) program has been abused, with savvy legal players manipulating the special exemptions that were intended to benefit impoverished tribal communities. Earlier this year, for example, the San Francisco Chronicle and the Center for Investigative Reporting revealed an 8(a) Alaska Native company’s lackluster performance on a $54 million federal stimulus award through the US Army Corps of Engineers, and questioned its hiring of a non-Native chief executive from South Carolina. (The company, Suulutaaq, then sued those media outlets for libel, in an ongoing case observers have reported the company is likely to lose.)

Pojoaque’s contracting partner in its own military joint venture is Frontier Building Systems of Ocilla, Ga. SFR was unable to determine exactly how the two companies came to do business together. Frontier’s chief financial officer, DW Harper, did not return SFR’s call. Attempts to reach Harper through another 8(a) defense contractor he works for as vice president were unsuccessful.

However the partnership came to be, Pojoaque Frontier JV has received several contracts to deliver “relocatable” trailers to Fort Benning, a US Army base 130 miles northwest of Ocilla.

4. Thermo Fisher Scientific

$15,314,686 in ’09-’10

Business: Scientific, medical and laboratory instruments

Owner: Publicly traded; Jim P Manzi is chairman; Marc N Casper is CEO

Santa Fe tie: Offices on Airport Road

Thermo Fisher’s assorted brand names supply radiation detectors to the US Navy, Coast Guard, Homeland Security Department, Secret Service and Defense Logistics Agency.

In the 1950s, a former Los Alamos National Laboratory scientist founded Eberline Instruments in Santa Fe. Thermo Electron Corp., of Massachusetts, bought the company approximately two decades later. Several mergers later, the local manufacturing company founded by Howard C Eberline is part of a $10 billion high-tech instrument conglomerate, the Thermo Fischer Scientific corporation.

In 2006, the company announced it would cease manufacturing in Santa Fe, but continue its marketing and sales
activities here.

The following year, Thermo Eberline LLC—one of the parent company’s corporate iterations—reached a settlement with the New Mexico Environment Department; according to an NMED press release, “the company failed to maintain adequate records of the receipt and transfer of radioactive materials, did not verify authorization to receive such materials and did not perform periodic inventories of radioactive materials and failed to perform leak test of sealed sources of radioactivity.”

Rather than pay a $51,000 penalty to NMED, Thermo agreed to supply radiation monitors to city governments and emergency workers around the state.

In its last annual report, Thermo says it plans further manufacturing closures in New Mexico and elsewhere; at the same time, it’s opening a new facility in Mexico. Neither the company’s foreign outsourcing nor concerns regarding its products’ effectiveness have hurt its business with the government.

Two recent Santa Fe Thermo Fisher contracts, worth $1.4 million, are related to work on the Homeland Security Department’s Advanced Spectroscopic Portal Program. The program is intended to upgrade existing radiation detectors at 1,400 land and sea ports of entry into the US, and cut down on costly, time-consuming false alarms. (Geiger counters can get set off by such innocuous items as bananas, kitty litter and ceramic tiles.)

Since its introduction in 2004, the full budget for the ASP program has tripled to $3.1 billion, according to a May 2010 report on the program by the Congressional Research Service. Costs aside, CRS cites critics who point out “that nuclear material can be shielded or divided into amounts too small to be detected.” Besides which, “detection equipment can be avoided by illegally entering the United States away from official ports of entry.”

When Butch Maki got married, his old boss, Bill Richardson, was reportedly the best man.

5. Santa Fe Protective Services

$10,777,356 in ’09-’10

Business: Security guards and investigations

Owners: Butch and Christina Maki

Santa Fe tie: Its owners live here but, despite its name, the corporate HQ is in Albuquerque.

Another 8(a) company, Santa Fe Protective Services is owned by Christina Maki of Santa Fe and her father, Butch, a prominent lobbyist, who is a close friend and former aide to Gov. Bill Richardson. The two are close enough that Richardson reportedly served as the best man at Maki’s wedding.

Over the past several years, the Albuquerque Journal has questioned whether any favoritism was shown toward SFPS security contracts with University of New Mexico and the Department of Energy’s Waste Isolation Pilot Project in southern New Mexico. Maki and Richardson have always denied any such thing.

This summer, SFR broke the news that Christina Maki’s ex-husband, Anthony Moya, is serving 18 months in federal prison after admitting to having embezzled hundreds of thousands of dollars from a Kewa Pueblo gas station in 2004 [News, July 14: “Political Plunder”]. Part of the stolen money was used to cover payroll at SFPS, of which Moya was a vice president at the time.

“Butch was not implicated in the wrongdoing, and was not convicted in the wrongdoing,” Maki’s attorney, Jason Bowles, said in a phone message left with SFR.

Beyond the Energy Department, SFPS’ federal work includes providing armed security guards at the National Drug Intelligence Center in Johnstown, Pa., and at the US Army Aviation Center at Fort Rucker, Ala.

6. Energy/Matter Conversion Corp.

$4,139,677 in ’09-’10

Business: Physics research

Owners: Dolly Gray-Bussard, Elise M Bright

Santa Fe tie: Offices near Rufina Street

This company, founded by the late physicist Robert Bussard, abbreviates itself EMC2. As previously reported in SFR, the US Navy is paying Bussard’s sur-viving colleagues to continue his research into fusion power—work they hope will one day mark “the end of fossil fuels” [Cover story, April 7: “The Stimulus Spin”]. Federal stimulus money is backing the research, although the complete $7.8 million award has yet to be doled out.

7. Southwest Sciences Inc.

$2,498,816 in ’09-’10

Business: Physics research

Owners: Alan C Stanton and Joel Silver

Santa Fe tie: Headquarters on Pacheco Street

This research and development company does quite a bit of advanced weapons work for the Army, Navy, Air Force and the Defense Advanced Research Projects Agency—which, back in the day, funded the research that led to the creation of the internet.

Recent Southwest Sciences contracts involve work on sensors required to develop viable “scramjet” engines, which can reach hypersonic speeds using the oxygen in the surrounding air as an element of propulsion. Theoretically, scramjets could replace traditional rockets as a means to reach orbit; an experimental scramjet-powered missile under development by the US military aims to reach some 4,000 miles per hour, and be able to strike anywhere on Earth in an hour.

Another Southwest Sciences contract involves similar work on experimental “pulsed detonation engines,” which “have the potential to operate with higher efficiency and lower operating costs than scramjets and turbines.”

8. QTL Biosystems LLC

$1,752,000 in ’09-’10

Business: ‘Biodetection’ instruments

Owners: Private investors including Eugene Bonte and Peter R Harrison

Santa Fe tie: The founders had offices on Galisteo and Agua Fria streets.

This low-profile research and instrument sales company markets handheld sensors for anthrax, ricin and other potential bioweapons. It was founded by LANL scientist Duncan W McBranch and University of New Mexico chemical and nuclear engineering professor David G Whitten in 1999.

Whitten tells SFR that he and McBranch have had nothing to do with the company since a less-than-amiable takeover by his investors in 2005, although the company did obtain US Army funding for biological sensors during their tenure.

The company is now based chiefly in Pennsylvania. Barry Johnson, a United Kingdom émigré who was among the investors who took over QTL from its New Mexican founders, says the company no longer has offices in this state; however, its chief financial officer, Elisabeth LeQuin, continues to make a home here.

Johnson says QTL’s current research contracts with the US Army have moved into new areas.

“We were initially involved in biological detection of pathogens—ricin and all those horrible things,” Johnson says. “We have, in the last two or three years, been working on medical diagnostics for detection of troponin, a protein market only present in the muscles of the heart, probably known as the gold standard for detections of heart attacks.”
Johnson says the research could help civilians who suffer heart attacks, and improve treatments for traumatic blast injuries.

In 2005, the year Whitten and McBranch left the company, QTL spent $120,000 to hire the now-defunct—but once-high-flying—PMA Group, a Washington, DC, lobbying firm owned by Paul Magliocchetti.

A 2009 report by the US House of Representatives Office of Congressional Ethics shows that QTL was among the dozens of companies interviewed in a pay-to-play investigation of US Rep. Jack Murtha, D-Pa., who died early this year. The report found QTL received $6.5 million in earmarks while it retained Magliocchetti’s firm, which was, in turn, donating thousands of dollars to Murtha and other politicians on military budget committees.

The House report cleared Murtha of outright bribery but, last month, federal prosecutors charged Magliocchetti with making illegal campaign contributions.

9. Kline Technical Consulting LLC

$858,789 in ’09-’10

Business: Computer security

Owner: Charles Robert Kline

Santa Fe tie: Corporate headquarters are here.

Kline is an experienced computer engineer with an extensive résumé in artificial intelligence and national security, for not only the US military, but also the governments of Israel, Russia, China, Japan, India, Korea and elsewhere. Kline also founded a small nonprofit international aid organization based in Santa Fe, Global Relief Resources. Kline did not return SFR’s phone message.

His consulting company’s latest Homeland Security contract, signed in March, involves building “security portals” for the Secret Service.

According to Kline Technical Consulting’s website, the company works on “tightly controlled programs and
projects involving corporate proprietary and government classified or sensitive information.”

Online update: Kline tells SFR his company's work falls into three areas.

"Part one, we can't talk about," he says. "Part two—the biggest part of our business, revenue-wise—is in the specific area of perimeter security for special—special meaning 'not commercial'—complexes."

As an example, Kline cites the "man traps" found at the entrances in big-city banks. A debit card swipe unlocks the outer door, giving customers access to the ATM, with the door locking behind them. Another layer of security—perhaps the help of an employee inside—is required to enter the actual lobby of the bank.

The third thing, Kline says, is work on artificial intelligence, "or the use of computers to model information. For example, it could be used for training, or it could be used for testing, or as part of a security system."

10. Mesa Photonics LLC

$339,155 in ’09-’10

Business: Laser research

Owner: Daniel J Kane

Santa Fe tie: Offices on Pacheco Street

Kane, who previously worked for Southwest Sciences (No. 7 on SFR’s list), designs “ultrafast” lasers. His company also contracts with the Army, Navy, Air Force and DARPA.

It practically takes a PhD in physics to understand the language in Mesa Photonics’ contracts. One Navy contract demands work on a “femtosecond pulse system”—a femtosecond being an imperceptible unit of time measuring one-millionth of one-billionth of a second, used in measuring chemical reactions.

Another contract, with the Air Force, has Mesa Photonics and UNM researchers developing an “Ultrashort Pulse Quantum Dot Laser”—ultrashort, as in the femtosecond range.

A contract summary describes this as an “emerging technology that can create high quality nanoscale structures through a variety of matter-light interactions.”

Yes, this is Tom Clancy-type stuff.

The new “micromachining technology will lower costs of manufacturing of semiconductors and allow for the development of new metamaterials, sensors, photonic materials for both military and consumers markets.”
In other words, Kane’s research could lead to even faster computer chips—and, eventually, some fantastical technology built on “metamaterials,” or man-made materials engineered at the near-atomic level. Some peer-reviewed studies in recent years have claimed such materials could produce—no joke—invisibility cloaks, by designing super-tiny structures that can bend the path of light.  SFR

Online extra: The dollar figures for the following Defense Department and Homeland Security contractors aggregate each company's revenue from those departments for the fiscal years 2009 and 2010.

11. Santa Fe Institute of Science Inc.: $240,000

12. Sumner and Lawrence Ltd: $144,355

13. Lodgian AMI Inc.: $121,107

14. Opus Hospitality Santa Fe LLC: $113,084

15. Deep Web Technologies LLC: $107,000

16. High Mesa Environmental LLC: $65,806

17. BSAC Billeting: $53,383

18. Trauma First Aid Associates LLC: $49,300

19. Commonwealth Loretto Operating Inc.: $44,345

20. Nambe Pueblo Development Corporation: $34,983

21. Sante Fe Picacho Hotel Management Corporation: $31,511

22. AFC-SIPEC Joint Venture LLC: $28,231

23. Nam LLC: $20,473

24. LL Renner: $20,375

25. Olds Pest Management Consulting: $18,404

26. Destination Services of Santa Fe Inc.: $14,988

27. Honstein Oil Company: $12,764

28. PrevCo Subsea LLC: $11,363

29. Photonic Associates LLC: $8,630

30. Curious Software Inc.: $7,875

31. Hilton At Buffalo Thunder Resort: $6,351

32. Car Kel's: $6,240

33. Heritage Hotels and Resorts Inc.: $5,600

34. Hotel Santa Fe: $4,984

35. Park Inn: $4,914

36. L & L Portable Toilets Inc.: $4,189

37. Mountain Air Helicopters Inc.: $3,625

38. Luna Laundry Co.: $219

 

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