How US merchants of fear sparked a $130bn bonanza

The homeland security market has an army of lobbyists working for its interests in Washington

Paul Harris in New York
Sunday September 10, 2006
The Observer

Brian Lehman's farm lies down a gravel road, between two fields of swaying corn as tall as a man. It is in the middle of Indiana's rural heartland in a landscape populated mostly by bearded Amish farmers and their wives.
Horse-drawn buggies are more common than cars, roads are littered with horse manure and fields are worked by hand. It feels distant in time and place from big cities such as New York or Washington, or even Indianapolis, two hours' drive south.

Yet Lehman's farm, from which he runs a small popcorn business, was recently declared a target for terrorists. State security officials included it in a list of assets considered potential victims of attack, most likely by Islamic fanatics. That was a surprise to Lehman, who had previously never considered Amish Country Popcorn on the front line in the war on terror. But he reckons he knows why he was chosen: 'It's the money.'

Five years after the World Trade Centre fell, a highly lucrative industry has been born in America - homeland security. There has been a goldrush as companies scoop up government contracts and peddle products that they say are designed to make America safe.

The figures are stunning. Seven years ago there were nine companies with federal homeland security contracts. By 2003 it was 3,512. Now there are 33,890. The money is huge. Since 2000, $130bn (£70bn) of contracts have been dished out. By 2015 annual federal spending on the industry could be $170bn.

But state officials want in on the government handouts too. That is why Indiana ended up identifying 8,591 potential terrorism targets (including Lehman's farm) inside its Midwestern borders. But they went too far.

Indiana's total was the most of any state - twice as many as California and 30 per cent more than New York.

The reason is simple. With so much money on offer and such riches being made, there is a powerful economic incentive to exploit the threat to America. The homeland security industry has an army of lobbyists working for its interests in Washington. It grows bigger each year and they want to keep the money flowing. America is in the grip of a business based on fear.

Inside a fancy office block in downtown Washington DC lie the offices of the Ashcroft Group. It is six blocks from the imposing buildings of the Department of Justice where the head of the firm, John Ashcroft, used to be President George W. Bush's Attorney General. As Attorney General, Ashcroft controversially extended the surveillance powers of the state in order to fight terrorism. Now he lobbies and consults on behalf of technology companies seeking to capitalise on the new powers. His clients include firms such as ChoicePoint, which gathers data on individuals and sells it, and Innova, which makes software for surveillance drones and robots.

In turning from powerful official to powerful lobbyist, Ashcroft is a brazen example of what critics call Washington's 'revolving door' - a process whereby officials leave public service for the private sector, exploiting their old contacts for commerce. 'It's become the norm that senior officials open up their own shops in their old sectors. It can be incredibly lucrative for them,' said Alex Knott, project manager for Lobby Watch, part of the Centre for Public Integrity.

In the new anti-terrorism industry, centred on the sprawling Department of Homeland Security, the door is revolving faster and faster. Though the department was created only three years ago, 90 of its former officials have already left to make money in lobbying and consulting. They include Tom Ridge, the first head of the department, who - like Ashcroft - now runs his own company. It is a crowded field. In 2001 only two lobbying firms registered as homeland security consultants. By the end of 2005 there were 543. Rules limit the ability of officials to enter the private sector in their old field for at least a year, but they are easily circumvented. They do not apply to those earning less than $140,000 a year and top-ranking officials often get around that by working in the 'background' at their new firms.

In effect there has been a huge privatisation of the homeland security industry in the US. It extends from surveillance issues to developing technology to working in war zones such as Iraq and Afghanistan, where many jobs once carried out by the military are now done by private contractors. At government hearings last year ChoicePoint said it considers itself a private intelligence agency doing the government's spying. 'After 9/11 we have seen the rise of the security-industrial complex,' said Peter Swire, a law professor at Ohio State University and former Clinton adviser.

Some aspects of this new industry and its relationship with American citizens sound like science fiction. Dulles Research, another Ashcroft client, claims its software can detect terrorists by monitoring everyday behaviour such as travel schedules, credit card usage and bank transfers. It is bidding for a government contract to monitor millions of people for suspicious patterns.

That is the tip of an iceberg. The industry has the feel of a boom town where the outlandish and the mundane compete for attention. Four years ago there had not been a single business conference for homeland security firms. Now there have been 50. There is an industry newspaper, Government Security News, once a quarterly, now bi-weekly. Venture capital firms exist solely to invest in new and upcoming national security companies. Across America, universities offer courses in homeland security. 'All this money in the industry is just up for grabs. It's like a goldrush,' said Knott.

Of course, there is a real terrorist threat to America. There are many areas of the country, especially its ports and airports, where money needs to be spent to improve security and prevent a tragedy on the scale of 11 September from happening again. Private firms have a vital role to play in this. But there are grave concerns as to whether the industry has properly addressed these issues.

Instead, critics argue, it has trampled citizens' rights by invading their privacy, created an atmosphere of fear and done little to prevent a future attack. There have been many stories on the mis-spending of huge amounts of government money, from bullet-proof vests for dogs in Ohio to puppet shows in Iowa. At the same time US container ports still monitor little of what is imported through them, and a multi-million-dollar scheme for all transport workers to get a tamper-proof ID is two years late, has cost millions and still does not work. States have also fought over who should get the biggest security grants from the federal government. Midwestern states claim they are ignored and more obvious targets, such as New York, say not enough is being spent on them. All of which adds an economic incentive to play up an area's vulnerability.

This explains why Brian Lehman and his popcorn suddenly appeared on a terrorism target list. Lehman reacted with good humour. 'We've really had a lot of fun with it,' he said. It spurred a wave of interest in the company and - far from hiding away from the 'terror threat' - Lehman put up a new sign to help people find the isolated place. In the annual parade last month in Berne, the local town, his truck was painted with a target on the side as a joke. In a bizarre way, Lehman is hoping that he too can reap a bit of extra money from the boom in homeland security.